Sitting of 11 July 1978

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  KENDAL MARKET BILL [Lords]
  Read the Third time and passed, with amendments.
  TAMAR BRIDGE BILL
  Read the Third time and passed.
ORAL ANSWERS TO QUESTIONS
  ORAL ANSWERS TO QUESTIONS
  Mr. Speaker: Once more, I appeal for brief supplementary questions and answers.
  ORAL ANSWERS TO QUESTIONS
    SOCIAL SERVICES

      Hospital Waiting Lists
      Dr. Vaughanasked the Secretary of State for Social Services how many patients are currently awaiting admission to National Health Service hospitals in Great Britain.
      Mr. Formanasked the Secretary of State for Social Services how many patients are currently awaiting admission to National Health Service hospitals in Great Britain.
      The Minister of State, Department of Health and Social Security (Mr. Roland Moyle): Information in the form requested is not available as each country keeps statistics in a different form. The figure for England at 30th September 1977 was 591,096, for Scotland at 31st March 1977 53,974, and for Wales at 31st December 1977 35,143. In all cases, the latest available figure is given.
      Dr. Vaughan: Has the Minister seen the article in The Sunday Times of 2nd July headed
      1224
      "Twenty heart patients die waiting for operations"?
      Will he accept the offer of help from two Merseyside private hosptals to take in one heart case a week in order to reduce the waiting list? Will he also seek other offers of help from the private sector?
      Mr. Moyle: I have seen the newspaper report. I have asked for a letter from the Liverpool area health authority. I shall consider the matter when I have received that letter. I do not take action on Press reports.
      Mr. Forman: Is the Minister aware that as recently as the end of last month admissions to 36 hospitals were affected by industrial action? Does he agree that this does not help the Health Service at a time when it is already over-administered and under-financed?
      Mr. Moyle: If the Health Service is over-administered, it is because the hon. Member for Carshalton (Mr. Forman) and his hon. Friends ensured that it would be over-administered. If the Health Service is under-financed, it is more financed than it would be if the hon. Member and his hon. Friends were in office.
      Mr. Kilroy-Silk: Is my right hon. Friend aware that many people are waiting for heart operations in Liverpool and that the facilities and resources there are nowhere near sufficient to meet the demand in the north-west as a whole? Is he aware that patients have died while they have been on the waiting list—not 20, as reported, but 10? Is he further aware that this is not a new development? Does he agree that it is scandalous when a regional health authority has to be rescued by a private, parasitic medical service? Will he now give a clear and specific assurance that no further patients will die in Merseyside while they are waiting for heart operations and that he will provide the necessary resources?
      Mr. Moyle: I am waiting for a report from the Liverpool area health authority. None of the alleged deaths was reported at the time that it occurred. I am aware that the north-west of the country is under-funded compared with the national average, although that is not necessarily so in the Merseyside area. I am aware of the concern in Liverpool. I shall pay

      1225
      attention to the problem and let my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) have an answer after I have considered the problem in detail.
      Mr. Boscawen: Is the Minister aware that since 26th June there have been no routine orthopaedic admissions to the Royal United Hospital in Bath? Is he aware that 1,500 cases are on the waiting list at that hospital? Does he know that a constituent of mine has been waiting for 18 months in great pain and has been told that the delay is due to a shortage of nurses? Is the Minister further aware that there has been a drastic cut-back in the recruiting of orthopaedic nurses to that hospital in the past few years?
      Mr. Moyle: The hon. Member has not previously drawn my attention to the problems that he has just mentioned. I shall certainly look into the problem now that he has raised the matter. I am not complacent. There is a serious problem involving orthopaedic admissions nationwide. That is because there has been tremendous progress in medical techniques in the past few years. That has been accompanied by an increase in the number of referrals. It takes at least 15 years to train a consultant to perform these operations, and there is bound to be a gap between promise and achievement.
      Mr. Grocott: Does my right hon. Friend agree that it is not just a question of the absolute numbers awaiting admission to hospital but a question of the discrepancies between hospitals which are often not far apart? What steps is he taking to ensure that general practitioners and patients are informed about hospital waiting lists so that they choose the hospital with the shortest list, even if it is further from their home?
      Mr. Moyle: I agree with what my hon. Friend says about waiting lists. The management of waiting lists is one of the problems. The National Health Service has not been good at that in the past. We are ensuring that all general practitioners are circulated with waiting lists for particular specialties at all the hospitals in their areas. They might then break past habits and refer patients to the place where they are likely to receive rapid treatment instead of following the past pattern of selecting a favourite consultant and referring patients to him, irrespective of the length of the waiting list.

      Mobility Allowance
      Mr. Newtonasked the Secretary of State for Social Services what plans he has to extend the coverage of the mobility allowance.
      The Under-Secretary of State for Health and Social Security (Mr. Alfred Morris): In reviewing their public expenditure programme, the Government keep constantly in mind all claims for extending the scope of this important new allowance. As the hon. Gentleman will appreciate, every claim for improvement in the scheme must be weighed both against other proposals for adding to the Government's present level of help for disabled people and all other proposals for increases in public expenditure.
      Mr. Newton: Does the Minister recall that less than a year ago he was writing that it would be neither consistent nor fair to let people keep the trike beyond the age limit set for the mobility allowance? Now that he has changed his mind on the trike, surely there is an unanswerable case for him to change his mind on the mobility allowance as well and let people keep it beyond retirement age.
      Mr. Morris: Right hon. and hon. Members on both sides of the House have welcomed my recent decision about invalid tricycles. We are very mindful of the strong pressures to continue the mobility allowance beyond retirement age. The resurce implications of such a move are very serious. We shall build on what we have achieved so far, as soon as we can. The hon. Member should bear in mind that we are in process of quintupling public expenditure on outdoor mobility for the disabled.
      Mr. Carter-Jones: I congratulate my hon. Friend on his tremendous efforts to improve mobility, and in view of the hon. Gentleman's observations on aid for the elderly will my hon. Friend do two things? Will he persuade local authorities to improve their schemes of free travel for the elderly? Will he do his best to improve access to buses and trains, which sometimes causes immense problems in mobility?
      Mr. Morris: I am very active in reminding public transport operators of the importance of providing access for disabled people. I am sure that local author-

      1227
      ities will note with care my hon. Friend's first point. They have powers under section 2 of the Chronically Sick and Disabled Persons Act to assist disabled people in getting to and from facilities provided outside the home. Both points are very important, and I am certain that those who can help have noted that carefully.
      Mr. Haselhurst: Not all the points raised about the mobility allowance are meant to decry the benefit of what has already been achieved. However, will the hon. Gentleman consider the case of people who are able to walk but who are not necessarily mobile and who would benefit very greatly from some small help they might get which fell short of the present level of mobility allowance? That would enable these people to be independent, which is what they are striving most to be.
      Mr. Morris: This is a very important point. It shows that there is pressure from more than one direction for increassing public expenditure in this area. Blind people argue very strongly that they should receive outdoor mobility help under this scheme. People suffering from epilepsy and agoraphobia feel strongly that they should receive outdoor mobility y help. There is much more to be done in this area. We shall move forward as quickly as resources will allow. I hope, however, that no one will underestimate what has been achieved in very difficult circumstances.
      Miss Maynard: Will my hon. Friend consider extending the coverage of the mobility allowance to blind people who, although able to walk, incur many expenses that sighted people do not? They often have to pay for home decorating, and often they have to have taxis when other people could use public transport. Frequently they have to pay for a gardener. I think that the mobility allowance should be extended to that.
      Mr. Morris: I shall keep very much in mind what my hon. Friend said. I hope shortly to be greeting the national organisations which represent blind people. I have no doubt that they will be echoing the point that my hon. Friend has made. We shall improve the present scheme as soon as resources allow.

      Hazel Road Health Centre, Knottingley
      Dr. Edmund Marshallasked the Secretary of State for the Social Services what is the present position in respect of ministerial consideration of the unused facilities at the health centre in Hazel Road, Knottingley.
      Mr. Moyle: I will be writing to my hon. Friend shortly about this matter. Knottingley is not classified as a designated area requiring additional doctors, nor am I aware of any failure to provide general medical services for patients living on the Warwick estate. Knottingley health clinic is being fully used for community health services, although a branch surgery could be accommodated if a general practitioner wished to practise from there. I have no power to direct general medical practitioners to practise in a particular locality.
      Dr. Marshall: If a qualified doctor shows an interest in holding surgeries on these premises, which have not been used for that purpose in the 10 years since they were built, will my right hon. Friend encourage the Wakefield area health authority, which owns the building, to be flexible and generous in offering the doctors terms to practise there?
      Mr. Moyle: I note my hon. Friend's interesting suggestion. I shall certainly consider what flexibility I can urge upon the Wakefield area health authority in the solution of these matters.

      Consultants (Pay)
      Mr. Pavittasked the Secretary of State for Social Services if he is satisfied that the advice given to him as a result of the ballot of consultants on the proposed new pay contract represents the real position, in the light of the evidence sent to him by the hon. Member for Brent, South; what representations he has received from the whole-time Consultants Association; and if he will make a statement.
      The Minister for Social Security (Mr. Stanley Orme): After receiving a number of representations, including a letter from the chairman of the National Health Service Consultants Association, my right hon. Friend wrote to the British Medical

      1229
      Association seeking an assurance that virtually full coverage of the doctors eligible to vote has been achieved. On the basis of the association's reply, I am satisfied that this was so.
      Mr. Pavitt: Does my right hon. Friend accept that this proposed contract is not only about consultants' salaries but can affect the whole character of the National Health Service? As the whole-time consultants see it as a charter for private practice, will my right hon. Friend ensure that before the Government take any decision they will have either separate monitoring to satisfy the doubts of the whole-time consultants that the coverage has been complete or monitoring of whatever the BMA does in this connection?
      Mr. Orme: Two-thirds of those eligible to vote did so. Of those voting, 70 per cent. were in favour of accepting the new proposals—subject to pricing—including just over 50 per cent. of all NHS contract-holders. The BMA has said that it may hold a second ballot when the new contract has been priced if it feels that the profession should again be consulted.
      Mr. Marten: There is considerable anxiety among some consultants about the pension arrangements, which are a very complicated matter. Were these covered in the contract to which the Question refers?
      Mr. Orme: No, they were not. I shall refer this point to my right hon. Friend the Secretary of State.
      Dr. M. S. Miller: Is my right hon. Friend aware that the position that he describes does not apply exactly in respect of some whole-time consultants who feel that since some consultants are not members of the BMA they were not involved in the ballot? Would it not have been better for the ballot to have been conducted by the Department and not the BMA?
      Mr. Orme: The ballot was conducted by the Electoral Reform Society on behalf of the BMA. Every step was taken to ensure that it was correctly conducted. Obviously, a minority did not get ballot papers, but I think that the fact that over 50 per cent. of the total membership voted in favour is an indication that the coverage was pretty thorough.
      Mr. Patrick Jenkin: Will the right hon. Gentleman dissociate himself from the criticisms levelled at the contract by the hon. Member for Brent, South (Mr. Pavitt)? Is it not a fact that the Government have accepted the terms of the contract and that, now that the consultants have voted in favour of it, as soon as it is priced it will be implemented and the Government will operate it according to the terms of the contract?
      Mr. Orme: There is the possibility of a further ballot after pricing, so a final decision has not yet been taken.

      Foster-children (Boarding-out Allowance)
      Mr. Andrew F. Bennettasked the Secretary of State for Social Services if he will make a statement about progress in his talks with local authorities about boarding-out allowance for foster-children.
      Mr. Moyle: I have little to add to the replies I gave to my hon. Friend on 11th April and to my hon. Friend the Member for Eton and Slough (Miss Lestor) on 27th June. I understand that detailed proposals are being prepared for consideration by the relevant committees of the local authority associations in the autumn.
      Mr. Bennett: I thank my right hon. Friend for that reply. Does he not agree that his policy of trying to lead the local authorities gently along this path is not making much progress? Would it not be better for him to give them a good, sharp kick up the backside to persuade them to implement national minimum standards of support, including financial support, for foster-parents?
      Mr. Moyle: I note that my hon. Friend is impatient. He has given a very strong lead in this matter and has made a considerable contribution. I have no power to direct local authorities. All I can do is to give them a lead, and I did that by accepting my hon. Friend's suggestion that the rates of boarding-out allowances should be published in Hansard.
      Mrs. Knight: Has the Minister considered, within the context of these talks, an extra boarding-out allowance for children who are disabled or handicapped in any way?
      Mr. Moyle: I note the hon. Lady's claim for extra public expenditure, which is contrary to the policy of her party.
      Mr. Newens: Is the case of privately fostered children also being considered? Is my right hon. Friend aware that the foster-parents of such children, in the event of the natural parents defaulting on their payments, may be denied practically all assistance from public funds? I have an example of a child in my constituency who is being denied assistance in this way and who is not even being permitted to have free school meals.
      Mr. Moyle: Fostering has not been regarded as part of this exercise, but if my hon. Friend will put down a Question on the subject I shall give him the information he seeks.
      Mr. Hodgson: I welcome the news of the terms due in October. Is the Minister aware of the unease felt by many foster-parents, as evidenced by their trip to the House of Commons, about the inequalities in the regions? Will he take a positive attitude to ensure that there will be no further delays?
      Mr. Moyle: The last time we discussed this subject, the hon. Member raised the question of fostering. It is outside the terms of the Question. If he will put down a Question about fostering, I shall endeavour to deal with it.

      Accident and Emergency Services (Mid-Sussex)
      Mr. Tim Rentonasked the Secretary of State for Social Services whether he is satisfied with the provision of accident and emergency services in Mid-Sussex; and whether the new nucleus hospital in Haywards Heath will include such services.
      The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): The South-West Thames regional health authority considers that the accident and emergency unit at Crawley hospital should provide adequate service for the Cuckfield and Crawley health district, and the authority does not, therefore, propose to include an accident and emergency department in the first phase of the nucleus hospital planned for Haywards Heath.
      Mr. Renton: Is the Minister aware that both the local community health council and the medical executive committee are unanimously opposed to the phasing out of accident and emergency services at Cuckfield hospital? Does he think that only one accident and emergency unit will be sufficient in a health district which will have a population of 400,000 by the mid-1980s and which will be growing rapidly due to the expansion of Gatwick airport? Will the Minister therefore seriously reconsider this decision?
      Mr. Deakins: The health authorities concerned in the region are planning on the basis that Cuckfield hospital will cease to provide a full accident emergency department, but this will be subject to normal consultative procedures, so that the organisation to which the hon. Gentleman has referred will have an opportunity to make its point then. For the longer-term future, the regional health authority will be considering whether to include an accident and emergency department in later phases at Haywards Heath when it comes to decide on the functional content of further development in the light of population predictions at that time.

      Fluoridation
      Mr. David Mitchellasked the Secretary of State for Social Services whether he remains satisfied with the consultation procedures of area health authorities in the light of the approval by the Hampshire area health authority, including the appointed members, of fluoridation of drinking water, though consultation indicated that the county council and 10 out of 12 district councils were opposed to the proposal.
      Mr. Moyle: Yes, Sir. The decision to seek the introduction of fluoridation of water supplies rests with the area health authorities as part of their statutory responsibility for preventive health in their areas. I am satisfied that Hampshire area health authority—teaching—took its decision after adequate consultation and after consideration of the evidence on the safety and efficacy of fluoridation in preventing dental decay in the community.
      Mr. David Mitchell: What is the point of providing for a democratic consultation process if when it produces a clear

      1233
      and decisive result, the area health authority immediately goes totally in the opposite direction?
      Mr. Moyle: Not only the views but also the reasons given for them have to be assessed, and also weight has to be given to those reasons. The Hampshire area health authority did this before taking its decision.
      Mr. R. C. Mitchell: Is it not clear that there is no pressure at all from the people of Hampshire to have fluoride added to their drinking water? Who has the final decision in this matter? Is it the Secretary of State for Social Services, the Secretary of State for the Environment or the health authority? Who has the final decision?
      Mr. Moyle: The area health authority has the final decision in these matters, although, of course, it has to operate through the local water authority. It is not true, as my hon. Friend says, that there is no desire for fluoridation in Hampshire. For example, the Winchester community health council carried out a survey of public opinion which showed a large body of support in favour of fluoridation. That was the only community health council in the area which carried out such a survey.
      Mr. Adley: Whatever one's views on fluoridation—one recognises that children are perhaps less articulate at the age of 3 than are adults at the age of 60—is the Minister aware that the information given by my hon. Friend the Member for Basingstoke (Mr. Mitchell) is factually correct and that the confidence of the general public in any remaining democracy within the Health Service is shattered when there is apparently a total dereliction of duty in the consultation process by the area health authority?
      Mr. Moyle: No, Sir. What the hon. Gentleman has to explain is that, although local councillors on local councils might be opposed to it, local councillors on area health authorities are in favour of it.
      Mr. Madden: Is the Minister concerned that the procedure which we are discussing was set up in the National Health Service Reorganisation Act 1973, put through the House by the right hon.
      1234
      Member for Leeds, North-East (Sir K. Joseph), and does he agree that these decisions would have been better taken by elected representatives in the House of Commons than by appointed members of area health authorities?
      Mr. Moyle: That would have been a very useful suggestion if my hon. Friend had been a Member of the House in 1973 and been able to put it forward. Incidentally, it was not only the right hon. Member for Leeds, North-East (Sir K. Joseph) who put through that Act; it was the entire Conservative Government at the time.

      Hospital Facilities (Hemel Hempstead)
      Mr. Corbettasked the Secretary of State for Social Services what proposals he has received for the maintenance and improvement of acute hospital facilities in Hemel Hempstead.
      Mr. Moyle: Proposals for maintenance and minor improvements are the concern of health authorities and do not come to my Department for approval. Proposals for major improvement of acute hospital facilities would await a decision on the provision of acute hospital services for the north-west district of Hertfordshire by the health authorities before being submitted to my Department.
      Mr. Corbett: Given that the chairman of the Conservative Party, Lord Thorneycroft, said in my constituency last Saturday that there was little hope of any incoming Conservative Government immediately making money available for a new hospital at Hemel Hempstead, can my right hon. Friend say exactly what the cash position is? Can he also confirm that we are talking about the development and maintenance of acute services in the area and not their destruction?
      Mr. Moyle: I am appalled at the irresponsible remarks of Lord Thorneycroft. I have visited Hemel Hempstead and have no hesitation in saying that it needs decent hospital facilities to serve it. The Health Service will make capital money available for any reasonable solution to the hospital problems of the north-west Hertfordshire district and Hemel Hempstead in particular.
      Dr. Vaughan: Does the Minister accept that there is great anxiety among people in Hemel Hempstead that their acute services are to be moved to St. Albans? This will cause great hardship for people who have to travel that distance, which is not easy.
      Mr. Moyle: The acute anxiety which exists in Hemel Hempstead has been exacerbated by the intervention of Lord Thorneycroft. I urge the inhabitants of Hemel Hempstead to pay no attention whatever to Lord Thorneycroft, because if the Labour Party remains responsible for government Hemel Hempstead will have new hospital facilities, and money is available for them. The hon. Gentleman knows a lot more than I do about what is going on in Hemel Hempstead. He says—it is totally wrong—that the hospital facilities are to move to St. Albans.

      Mobility and Attendance Allowances
      Mr. Rookerasked the Secretary of State for Social Services how many persons are in receipt of mobility allowance and attendance allowance in Birmingham and the West Midlands.
      Mr. Alfred Morris: The latest information available for the West Midlands region, which includes Birmingham, is that 6,439 people are currently receiving the mobility allowance and 27,035 the attendance allowance.
      Mr. Rooker: I thank my hon. Friend for that information, and I pay tribute to his work in bringing these figures up, but will he take it that even in the past few days I have had constituents coming to see me who have only just found out about the mobility allowance? Moreover, I have another constituent—I do not want other hon. Members to be in the same position—who has fought on for three years because she did not know about the attendance allowance, yet this constituent, Mrs. Simkins, was in touch with every statutory authority that one could think of and no one pointed it out to her, with the result that she lost three years' attendance allowance.
      Mr. Morris: My hon. Friend raises an important matter. I am very anxious to increase the take-up of all the new benefits. The additional help which this Government have made available for the dis-
      1236
      abled is wasted if people do not know of it and therefore do not claim. We have used press advertisements and press statements. We have been in touch with organisations of disabled people. The Attendance Allowance Board has been in touch with directors of social services and general practitioners. I shall do everything I possibly can to draw further attention to these new benefits, and I hope that every hon. Member on both sides of the House will do what he or she can to increase public knowledge of all that has been done for the disabled and of what is now available for them.
      Mr. MacKay: Is the Minister aware that in my Birmingham constituency there are several mothers who have sons or daughters on kidney machines who are to lose their attendance allowance later this week? This is causing great hardship and distress. What will the Minister do to alleviate it?
      Mr. Morris: The hon. Gentleman has no basis for the statement at the beginning of his supplementary question. There is a case now with the national insurance commissioner. We are not yet aware of the outcome of his consideration of that case, and we shall look with great interest at the outcome. It is the case of a constituent of my hon. Friend the Member for Derby, North (Mr. Whitehead). The hon. Gentleman can be well assured that we are giving anxious consideration to the matter and that we shall make a statement as soon as we know the outcome of the national insurance commissioner's consideration and decision.
      Mr. Litterick: The House is well aware of the Minister's efforts to increase the take-up rate of these benefits, but has he read the document "Second-class Disabled", published by the Equal Rights for Disabled Women Campaign, which shows clearly and dramatically that there are many women who are receiving both mobility allowance and attendance allowance but who cannot get the invalidity allowance, not because they do not know that it exists but because of the way in which the Act has been drafted and is now being interpreted by my hon. Friend's civil servants throughout the country?
      Mr. Morris: My hon. Friend is referring to the housewife's non-contributory

      1237
      invalidity pension. As he says, there are disabled housewives who receive both the attendance allowance and the mobility allowance but who have not sustained their claims to the HNCIP. I must emphasise that decisions are taken by the independent adjudicating authorities. I have been told by women's organisations that there is a strong case for amending the law. There will be resource implications there. Any decision in a particular case is for the independent adjudicating bodies. I am glad that my hon. Friends make their point about resources. There is no case whatever for hon. Members to ask us to cut public expenditure and then ask for more and more for their own constituents.
      Mrs. Chalker: Can the Minister explain why, in the case of the HNCIP, there are many more successful appeals after first refusal than in the case of any other benefit? Does it not strike him as an indication that there is something wrong in the way in which the benefit is first considered, and ought he not to look again at the rules about incapacity to do housework?
      Mr. Morris: The hon. Lady will remember that I consulted hon. Members on both sides about the new benefit before it was introduced. It has been put to me that there is a case for looking carefully at the number of successful appeals that there have been. I shall take great interest now in all appeals and look at the claim form for this benefit to see whether there is any further action which I should take.

      Departmental Efficiency
      Mr. Adleyasked the Secretary of State for Social Services if he is satisfied with the overall efficiency of his Department; and what proposals he has for its improvement.
      Mr. Orme: Yes, Sir; but we are constantly seeking to improve it and would welcome any constructive suggestions from the hon. Member.
      Mr. Adley: I am most grateful for that. Has the Minister listened today to the points made by, for example, his hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) and my hon. Friend the Member for Wells (Mr. Boscawen) and been alarmed at the evidence of deteriora-
      1238
      tion in the standard of the Health Service? If the Minister wants a suggestion from me, may I put one to him now? Will he take a stand against the militant trade unionism and the activities of COHSE and NUPE, which are simultaneously destroying confidence in the Health Service and reducing standards in it? Perhaps he would like to start by openly condemning the strike at the Charing Cross Hospital, where attempts are being made to deprive patients of food.
      Mr. Orme: I was wrong to ask for any helpful suggestions from the hon. Gentleman. In fact, my right hon. Friend has been conducting detailed discussions with both the medical profession and the trade unions to reach an understanding within the Health Service which will be helpful to both patients and themselves. What the hon. Gentleman has said has given no help whatsoever to that.
      Mr. Mike Thomas: Does my right hon. Friend believe that it contributes to the work and efficiency of his Department and the Health Service if multinational drug companies are still permitted to run bogus trials of their drugs in order to induce doctors to prescribe them for their patients? Is not this extremely wasteful of resources, and is it not high time that my right hon. Friend stepped in to stop it before British companies are forced to engage in the same practices?
      Mr. Orme: I cannot comment on the specific point which my hon. Friend raises, but my right hon. Friend has paid particular attention to the drug industry and to the number of prescriptions issued by the medical profession. I shall certainly draw that matter to his attention.
      Mr. Anthony Grant: May I take up the Minister's invitation and make a serious suggestion to him? Will he substantially improve the monitoring by his Department of expenditure by area health authorities, which is quite inadequate at present, and will he encourage greater use of private contractors for cleaning and ancillary services, thereby releasing a great deal of public money for such things as kidney machines and so forth?
      Mr. Orme: On the latter point there is a Question later on the Order Paper, and I shall not be drawn now, though I appreciate what the hon. Gentleman was attempting to do. As for the first point,

      1239
      there is close monitoring of public expenditure through the area health authorities. There is great difficulty in this field, and a lot of the problems lie at the door of the previous Conservative Government who implemented the reforms.
      Mr. Moonman: Would it not make good management sense and also lead to good mental health care if the medium secure unit in the north-west, an area with which my right hon. Friend is associated, was opened? May we, therefore, have an assurance that either the Secretary of State or one of his ministerial colleagues will give consideration to the possibility of conciliation in this matter, which certainly should not conflict with NUPE?
      Mr. Orme: I take that point. I have visited the unit to which my hon. Friend refers. We should certainly like to see that unit operating, and we are looking at means to try to achieve that end.
      Mr. Patrick Jenkin: May I also make a constructive suggestion, turning the Minister's attention to the press department of the DHSS? Is he aware that the Department has in the past few days put out two releases of speeches by the Minister with responsibility for the disabled, of whom we are very fond, in which he has appeared to claim the credit for the introduction of the behind-the-ear hearing aid, which was introduced by the last Conservative Government, and has claimed the credit for the exemption from vehicle excise duty, which was forced on him by the Opposition?
      Mr. Orme: The last matter was not forced on my hon. Friend by the Opposition. It is this Government who will implement the vehicle excise duty exemption. The right hon. Gentleman knows that. On the first point, my hon. Friend the Minister was drawing attention to the fact that we passed the half-million mark in hearing aids, which I regard as very creditable.

      Elderly Persons (Consultative Document)
      Mr. Arthur Lathamasked the Secretary of State for Social Services what timetable has been suggested to voluntary organisations and others for their response to the consultative document on the elderly.
      Mr. Orme: We have asked for comments by the end of October 1978. This is so that we can press on with preparation of a White Paper, which we plan to publish next year. But we are prepared to be flexible if any organisation has particular difficulty in meeting this deadline.
      Mr. Latham: I congratulate my right hon. Friend on the issue of the consultative document, but does he agree that in any consultation about the problems of the elderly the most important people to consult are the elderly themselves? Is it not a bit daft that the document should cost 95p a time, and could my right hon. Friend make arrangements for those of the 8 million pensioners who want to know what may be proposed for them to obtain copies without charge? Further, does my right hon. Friend accept that, although within 20 years poverty in old age may be abolished, there is need to divert resources with urgent priority to the present generaton of pensioners who will never benefit from those long-term proposals?
      Mr. Orme: On the second point, my hon. Friend will be aware of the measures which the Government have taken even this year to improve the lot of the pensioner and of what has been done over the past few years, for which, I think, the Government can take great credit. As for distribution, the Government have taken steps to see that these documents are available free of charge in centres which old people attend. We distributed many to leading organisations representing retired people, and we hope that that will meet the need.
      Mr. Bowden: Does the right hon. Gentleman accept that the use of the phrase "tomorrow's pensioners" in the consultative document is very misleading, because that is 20 years ahead? It is today's pensioners who matter. Is it not a fact that this coming winter millions of today's pensioners will have to choose between keeping warm and having sufficient to eat?
      Mr. Orme: When we put the uprating order through the House only recently, that meant that in the past four years this Government have increased pensions in real terms by over 21 per cent.—the largest increase for pensioners in modern times—along with heating allowances and

      1241
      other provisions. Of course more needs to be done, but we need more public expenditure for it. Perhaps the hon. Member will pay some attention to that.

      Drugs (Hospital Use)
      Mrs. Knightasked the Secretary of State for Social Services what progress has been made in the campaign to reduce wastage of drugs in hospitals.
      Mr. Moyle: Many hospitals have now established drugs and therapueutics committees whose tasks include the more economic use of drugs. Representatives of these committees met recently to discuss how best to fulfil these functions. The announcement on prescribing which the chairman of council of the BMA and my right hon. Friend issued jointly in April should have stimulated all doctors to seek ways of applying its principles to their particular fields of practice.
      Mrs. Knight: Is it not a fact that the amount of money spent on drugs in the Health Service is still rising steeply and that the most recently available figure is £87 million per annum? Is the right hon. Gentleman expecting that, as a result of the measures which he has just mentioned, that figure will be cut as substantially as those working in the NHS say that it could be?
      Mr. Moyle: I will have to have notice in order to give the hon. Lady the exact figure, but certainly the expenditure on drugs in the Health Service is higher than we should like. We expect that the measures announced will lead to economies.
      Mr. Pavitt: Why did my right hon. Friend reject the advice in the drugs therapeutic bulletin that I sent him, which would not only have saved wastage on drugs but would probably have cut the excess profits of drug companies by about £50 million to £60 million?
      Mr. Moyle: I would draw my hon. Friend's attention to the fact that the pharmaceutical price regulating scheme mechanism limits the profits which companies can make on drugs.

      European Community (Reciprocal Health Services)
      Mr. Jesselasked the Secretary of State for Social Services if he is satisfied with the provision of reciprocal health
      1242
      services in EEC countries for the children of self-employed persons.
      Mr. Deakins: We have consistently pressed for amending EEC regulations to provide this cover and they are at present under consideration within the Council of Ministers. Self-employed persons and their families are covered for immediate treatment, under bilateral agreements, when visiting Denmark and the Federal Republic of Germany.
      Mr. Jessel: Is it not nonsense that the children of employed people are covered for medical treatment when travelling throughout the Common Market but that the children of the self-employed are not necessarily so covered? Why have not the Government done more to put right this ridiculous anomaly?
      Mr. Deakins: The Government have done a great deal, but we have to operate within the framework of the Treaty of Rome, and at present the exising regulations in article 51 make it clear that they apply only to employed people. It is solely as a result of this Government's efforts in Brussels that we have got as far as we have in trying to cater for the needs of self-employed people and their families.
      Mr. William Hamilton: Is my hon. Friend aware that while 14 Questions have been answered this afternoon I have made a careful count of the number of times that the Opposition have asked for increased expenditure and that the total is 10? Does he feel as sick as I do about the organised hypocrisy of a party which does that and at the same time votes for a reduction in public expenditure of £500 million?
      Mr. Deakins: I entirely agree with my hon. Friend.

      PRIME MINISTER (ENGAGEMENTS)
      Mr. Shepherdasked the Prime Minister if he will list his public engagements for Tuesday 11th July.
      The Prime Minister (Mr. James Callaghan): In addition to my duties in this House, I shall be holding meetings with ministerial colleagues and others. This evening, I hope to have an audience of Her Majesty the Queen.
      Mr. Shepherd: During the Prime Minister's undoubtedly busy day, will he pause to reflect that during the stewardship of this Labour Government consumer prices have risen by a staggering 91·1 per cent.—the worst of seven major OECD countries—and that food prices have risen by an enormous 99·8 per cent., the next but one to bottom in the same league table? Will he make abundantly clear to the people of this country the basis upon which the inflation figures that his Government will be putting out in the next few months are calculated, so that there can be no more misleading nonsense of the type of the Chancellor's 8·4 per cent. claim in October 1974?
      The Prime Minister: I have explained to the House on many occasions, but I will continue to do so, that when the Government came into office we were faced with higher inflation than exists today. It was going up and would have continued to go up because of the indexing of wages which had been agreed under the previous Government. We have reversed that and the level of inflation is now lower than it was when we came to power. As for food prices, I wish that the hon. Member had been in the House when the previous Administration took us into the Common Market. Perhaps then he would have pressed upon his leader the necessity for negotiating a better deal than he got on the common agricultural policy.
      Mr. Hayman: Will my right hon. Friend try to find a couple of hours this afternoon to pop up to Hatfield and hear how delighted the aircraft workers are at the Government's decision to go ahead with the HS146 and how determined they are to make the aeroplane a commercial success, for the benefit both of British Aerospace and of the country as a whole?
      The Prime Minister: I know that my hon. Friend, in representing the aircraft workers, has made substantial representations on this matter to British Aerospace. It was British Aerospace's commercial decision, which it asked us to ratify, and we were very pleased to do so. It seems to me that there will be a good future for this plane. British Aerospace is being asked to make a commercial return on the substantial sums which are being invested. I am glad that it will
      1244
      provide employment for several thousand people.
      Mrs. Thatcher: Has the Prime Minister had time to consider today the latest evidence published yesterday on the people's attitude to further nationalisation? Is he aware that it showed that 80 per cent. of the people do not want any schemes of further nationalisation and that even the majority of those in the Labour Party take the same view? Why, then, do he and his party keep their commitments to extensive schemes of further nationalisation, both of whole industries and of major companies?
      The Prime Minister: Yes, Sir, I always look at all polls in the newspapers—though I do not necessarily believe all their conclusions, the right hon. Lady will be relieved to hear. As for the particular poll to which the right hon. Lady refers, I am not unaware of the feelings expressed in this matter. That is why I believe that organisations such as the National Enterprise Board have a considerable role to play. I am very glad, because it will combine private and public enterprise and private and public funds. That is why I am glad to hear that the Conservative Party seems to be seeing sense now and, according to its latest document, or the latest speech, I understand, does not propose to abolish the NEB. That will come as a considerable relief to many hundreds of thousands of workers.
      Mrs. Thatcher: As usual, the Prime Minister has inadvertently omitted to answer the question. Why do he and his party still stick to extensive commitments to further nationalisation of whole industries and of companies? Is his last reply the correct one—that for him nationalisation is never off the agenda?
      The Prime Minister: When I gave the reply that nationalisation was never off the agenda, I was thinking of what the previous Government had to do in nationalising Rolls-Royce. When they are driven to nationalisation, it shows that even they must at times face the realities of the situation. We shall continue to do so as we face the problems of these industries, whether we handle them through the National Enterprise Beard or through public ownership. I dare say, if the Opposition ever came to power

      1245
      again and were faced with another situation like Govan Shipbuilders or Rolls-Royce, that they would overcome their prejudices and nationalise once more, as they did last time.
      Mr. Kilroy-Silkasked the Prime Minister if he will list his official engagements for 11th July.
      The Prime Minister: I refer my hon. Friend to the reply which I have just given to the hon. Member for Hereford (Mr. Shepherd).
      Mr. Kilroy-Silk: Does my right hon. Friend accept that, although the Opposition seem to have nothing better to do than to stoop to personal abuse, he should instead give an assurance that he will concentrate upon policy and spend some time today outlining the Opposition's policy for increasing council house rents, increasing prescription, dental and optical charges, and imposing charges for people visiting the doctor and having to stay in hospital? The Leader of the Opposition's disgraceful suggestion—
      Mr. Speaker: Order. I made it clear the other day that the Prime Minister—or any other Minister—cannot be questioned about statements made by those on the other side of the House but only about those things for which he is responsible.
      The Prime Minister: I have noticed that the Opposition apparently will wish to keep public expenditure constant if they ever come to power. If that is so, in view of the large increase in the number of elderly people and the Opposition's proposals for additional defence expenditure, I do not see any escape from the alternative that they would have to charge very heavily for operations or for stays in hospital or for visits to the doctor. They must reconcile these things at some time.
      As for personal attacks, I have noted what was said. I was reflecting on the Chancellor of the Exchequer's remarks last week, which I thought were a little unseemly. As regards the right hon. Member for Penrith and The Border (Mr. Whitelaw), it is not so much, when he attacks me, like being savaged by a dead sheep as being nuzzled by a friendly old sheepdog.
      Mr. Watt: When the Prime Minister meets his Cabinet colleagues today, will he find time to discuss the many things that are happening in Britain's 200-mile economic zone? Is it not about time that he set up a ministry of marine affairs that will look after our fishing, our oil, our shipping and our mineral extraction? Is he aware that at present the Danes and the French are making away with our fish, the East Europeans are making away with our shipping, and the Germans, the Americans and the Italians are making away with our oil while we are nonstarters in the race for the extraction of minerals?
      The Prime Minister: As the hon. Member knows, I have considered setting up a ministry of marine affairs. It does not seem that these functions, which are so different, would be best reconciled through such a ministry, although there is a Minister who co-ordinates all these matters. The fishing problem was raised at Bremen at the weekend and I said that we were looking for a just solution to this problem. The Chancellor of the Federal Republic said that he hoped to achieve a solution during the period of the German Presidency—that is, between now and the end of December.
      Mr. Freudasked the Prime Minister whether he will publish his official engagements for 11th July.
      The Prime Minister: I refer the hon. Member to the reply which I gave earlier today to the hon. Member for Hereford (Mr. Shepherd).
      Mr. Freud: Will the Prime Minister bear in mind that today is exactly six months since the east coast floods and five months since the Government announced the criteria for paying the victims? Is he aware that no one, whether domestic, industrial or agricultural, has received a penny of any compensation or relief? Will he now set up a national disaster fund, which he might administer himself, so that people can get flood damage relief instead of promises?
      The Prime Minister: I regret to hear what the hon. Gentleman says about no payment of comp cation. I will ask the Secretary of State tor the Environment to look into it. understand that so far only four applications have been received from local authorities. It is not clear

      1247
      why this should be so, and we are waiting to see whether there will be further claims or whether local authorities are not claiming because they do not expect the expenditure to exceed a penny rate.
      We have considered the possibility of a national disaster fund, but on balance we think it is preferable that each case should be taken on its merits, and we shall continue to act in that way.
      Mr. MacFarquhar: Has my right hon. Friend in his busy day managed to read the stories about Bremen by economics correspondents in The Times and The Guardian today, apparently based on Treasury briefing? Will he say whether his own attitude towards the Bremen results is as hostile as is apparently that of the Treasury mandarins?
      The Prime Minister: I do not have to take any responsibility, thank goodness, for what appears in the press. I noticed there there was a change in attitude, but I think that on the whole they reinterpret what they themselves have said originally, rather than ascribing any difference in attitude to me.

      SECRETARY OF STATE FOR EMPLOYMENT
      Mr. Wyn Robertsasked the Prime Minister if he will dismiss the Secretary of State for Employment.
      The Prime Minister: No.
      Mr. Wyn Roberts: It is a bit late in the day to make changes. Will the Prime Minister explain why every Conservative Government since the war have left office with more people employed than when they came in and why every Labour Government since the war, without exception, have left office with fewer people in employment than when they came in?
      The Prime Minister: It is pretty generally understood that the level of unemployment is related to the world recession. That is why the Government have endeavoured to use measures that would help industry, through such devices as the temporary employment subsidy—against the wishes of the Opposition. It is also the case that there are more people in employment today, as distinct from more people unemployed, than there were in
      1248
      1973. As to how we leave office, that will not be for a long time yet, so I do not think that the hon. Gentleman needs to worry. His memory is singularly short if he does not remember that when the last Conservative Government left office there was a three-day working week in operation.
      Mr. Gwilym Roberts: Does my right hon. Friend accept that it is a reasonable statistical estimate that if all the proposals which the Opposition have supported in the House had been carried out there would be a million more people unemployed at present? Would he care to comment on that?
      The Prime Minister: I certainly agree with my hon. Friend that if the policies advocated by the Opposition were put into effect there would be a substantial increase in unemployment. I do not think that they deny that.
      Mr. Churchill: Rubbish.
      The Prime Minister: It must be clear that the removal of grants and subsidies, which is the Opposition's policy, would lead to the collapse of a number of firms in the depths of the recession. Therefore, we believe that we should continue with these policies until the world economy picks up again.
      Mr. Tim Renton: When the Prime Minister was in Bremen last week, did he notice the figures which showed that Germany's unemployment was at a four-year low in June? Does not that emphasise the tragic contrast between four years of private enterprise recovery from the oil crisis in Germany and four years of Socialist slump in Britain? Is it not because of that contrast that the German wolfhound bit the Prime Minister so hard last week?
      The Prime Minister: On the contrary. It was not like a sheepdog but it was nearly as nice. Germany, like other countries, has suffered from an increase in unemployment to a considerable extent. There are now a number of countries, I regret to say, whose unemployment levels are higher than that of the United Kingdom.
      Mr. Lawrence: Name them.
      The Prime Minister: If the hon. Gentleman will table a Question, I will

      1249
      give him an answer. [HON. MEMBERS: "Oh."] It is no use hon. Gentlemen shouting "Oh". Everyone knows that this is true. There are, I am glad to say, other countries which we must try to emulate. What is certainly true is that this Government, through their measures to contain unemployment, have done much better than a number of other countries. I shudder to think what would happen if the Opposition came back to power and reversed those policies.
      Mr. Radice: While I agree that the unemployment figures are far too high, particularly in the northern region, may I ask my right hon. Friend whether he agrees that today's inflation figures are extremely encouraging, not only in terms of what happens to inflation this year and next year but in terms of what happens to unemployment this year and next year?
      The Prime Minister: It is true that the wholesale price figures published yesterday show that there is likely to be a considerable steadiness in the inflation rate between now and the end of the year, which is as far ahead as I have always wanted to prophesy because so much depends on the next wage round. [Interruption.] Hon. Members opposite need not affect any surprise about this. So much depends on what happens in the next wage round and upon matters such as the strength of sterling, which is pretty stable at the moment, and similar issues. The lower the rate of inflation—this is what I have said 150 times and will say another 150 times—the more prospects we have of more competitive jobs and, therefore, of more employment.

STATUTORY INSTRUMENTS, &c.
Mr. Speaker: By leave of the House, and only by leave of the House, I will put together the Questions on the four motions relating to Statutory Instruments.
Ordered,
That the Building (First Amendment) Regulations 1978 (S.I., 1978, No. 723) be referred to a Standing Committee on Statutory Instruments, &c.
That the draft European Communities (Definition of Treaties) (No. 5) (Joint European Torus) Order 1978 be referred to a Standing Committee on Statutory Instruments, &c.
1250
That the draft European Communities (Privileges of the Joint European Torus) Order 1978 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Weights and Measures Act 1963 (Various Goods) (Termination of Imperial Quantities) Order 1978 be referred to a Standing Committee on Statutory Instruments, &c. —[Mr. Foot.]

CORONERS (AMENDMENT)
3.31 p.m.
Mr. Dafydd Wigley: I beg to move—[Interruption.]
Mr. Speaker: Order. Will the hon. Member wait just one moment? It appears that some hon. Members have other engagements.
Mr. Wigley: I beg to move,
That leave be given to bring in a Bill to amend the Coroners (Amendment) Act 1926, with reference to the power of removal of a body for post-mortem examination.
Last Friday at Llanberis in my constituency there was a demonstration, when 500 people walked 300 yards in a protest march. The House may not think that 300 yards is a very great distance for them to walk, but in this case the procession had to stop twice in that distance for the marchers to get their breath. These were the former slate quarry men of Gwynedd, suffering from pneumoconiosis, and the widows of those who died from this disease. This is the group of people for whom the Bill is very relevant.
There are hon. Members who represent coal mining constituencies or other areas where pneumoconiosis, silicosis and associated lung diseases are endemic. They will be very familiar with the problem which I hope can be slightly alleviated by the passing of the proposed Bill. My knowledge of the problem arises from the prevalence of these diseases in my own constituency of Caernarvon as a result of the slate quarrying industry.
At the turn of the century this industry employed about 20,000 people in the Gwynedd area. By now it is employing only 400 people, but we still live under the shadows of the effects of that industry, with middle-aged men prematurely ageing as a result of the dust, old men struggling to live, and dying from it, and widows—who gave many years of their lives, perhaps a decade or longer, to nursing their ailing husbands—now left with nothing

1251
but the miserable pittance, if they are lucky, of the additional 55p a week on their pensions.
These are the people who, unlike the coal miners, do not receive the benefits of a State-funded compensation scheme and, because most of the quarries have gone bankrupt, they have no redress to tort action through the courts.
I say this by way of background, for a Bill introduced in this way is limited in the fields it can tackle, and my Bill deals with one small but traumatic area of suffering endured by such communities, and particularly by bereaved families.
The agony which I seek to reduce by the Bill is that caused by the almost inevitability of the body of a deceased person, who had suffered industrial dust diseases, being subject to a post mortem examination. We have the experience so often of a wife being told of her husband's death and, in almost the same breath, being informed that his body will be carved up in order to "identify the cause of death". It is pouring agony on to grief, and in many cases it must seriously be asked whether a post mortem examination is really necessary to confirm the cause of death of a person who may have been visibly dying from the effects of choking lungs for weeks and months, if not years.
I should like to quote from letters from my constituents. The first reads:
"I want to draw to your attention the unfairness and insensitivity which relate to circumstances surrounding death from slate dust. This is the experience which I suffered. At 5 a.m. on Monday morning my father died in hospital from this disease, and within a short space of time I was asked to fill forms to concur to a post mortem examination. After returning home, and pondering over the matter, I recalled that the doctor had told me that a post mortem would be held, and that we had no choice in the matter; why, then, were we given these forms at a time that was so painful to us? Subsequently, the same day, a police officer came to our house for my mother to make a statement for him to take to the post mortem. The question seemed to be totally irrelevant to the inquiry; namely, how many years we had lived in the house, what insurance policies my father had, where he had been working, and many irrelevant questions. I put no blame on the policeman who was sent to ask these questions of us at such a difficult time. But can nothing be done to bring in a little sympathy for the position of a bereaved family?"
Another constituent, referring to a relative of his, writes as follows:
1252
"In 1964, he was told that he was suffering from pneumoconiosis, and was assessed at 20 per cent. disability. By 1973, he was 100 per cent. In 1974, he was confined to sitting in his corner, suffering severely from shortage of breath. He deteriorated rapidly, becoming no more than a shadow of his former self. He could not go to bed, and slept in his chair, when he could sleep, but was awake most of the night, fighting for breath. He died in December 1976. The local doctor, who treated him, said that he could not give a death certificate, because he was not allowed to put silicosis as the only cause of death. I he family were informed that a post mortem would be required. This was vociferously contested, but a policeman came to the home and announced that the coroner had directed that the body had to be taken away for a post mortem examination."
Another letter, not from a constituent, refers to the death of the writer's father in an area of Wales where pneumoconiosis was prevalent from the silica quarries. He writes:
"The cause of death was plainly obvious to everyone, and the GP had practically predicted the date and the way it would occur…. I later pursued the matter in a half-hearted sort of way and got the astounding explanation that the request for a PM had been a 'routine' one with the object of compiling statistical information. Medical science should not be unnecessarily impeded. But neither should distressed families be further pained without good reason."
It is the objective of the Bill to allow the next of kin of the deceased person to object, on grounds of conscience or of religious belief, to a postmortem examination being undertaken where the medical practitioner of the deceased is confident that he knows the cause of death. To secure this provision, the Coroners (Amendment) Act 1926 needs to be amended.
We have to go back, however, to the Coroners Act 1887 to establish the background to present requirements. That Act stipulates a general duty on coroners to hold an inquest where the person has died an "unnatural death". Death from an industrial disease is regarded as an unnatural death. The Coroners (Amendment) Act 1926 provided that a coroner could require a post-mortem examination to be carried out on a dead body if he had reason to believe that the examination might prove that an inquest might be necessary.
The Broderick committee on death certification and coroners summed up the position in law as follows:
"A coroner is required to consider in every case whether a death which seems likely to

1253
have been caused by a prescribed industrial disease is, or is not, unnatural. In practice coroners invariably have the results of a postmortem examination to assist them in this consideration."
I should perhaps at this point remind the House that it is not necessarily the cause of death found by a coroner which decides the question of entitlement to industrial death benefit. The Industrial Injuries Acts laid down an entirely separate procedure for deciding whether death was the result of an industrial disease or accident. Members will be aware of this from their own experience of the dismay that has been caused to widows when the coroner has attributed death to pneumoconiosis, but following the pneumoconiosis medical panel report, the insurance officer has decided otherwise.
It could have been argued until last year, however, that a post-mortem examination would have been necessary for the purposes of paying benefits, even if it had not been necessary under the Coroners Acts. However, the situation has changed somewhat since the passing of the Social Security (Miscellaneous Provisions) Act 1977, which, in section 9, provides that where a disablement pensioner with an assessment of 50 per cent. or more for pneumoconiosis or byssinosis dies as a result of any pulmonary disease, his death is automatically treated as due to industrial disease.
Many people have argued that 50 per cent. is too high a threshold at which to pitch this most sensible innovation, and in clause 2 of my Bill I provide for the reduction of this threshold from 50 per cent. to 30 per cent.
The overall effect of my proposed Bill is therefore as follows. When a medical practitioner notifies the coroner of a death, he will also, where appropriate, indicate that he is satisfied that he knows the cause of death. In those circumstances, the coroner shall inform the next of kin of the deceased if he still wishes to hold a post-mortem examination, and the next of kin shall have a right, within 24 hours of receiving such notification, to object to the holding of the post mortem on grounds of religious belief or conscience. In practice I hope that this will lead to a situation where a post mortem will be asked for by the coroner only in a genuine case of uncertainty as to the cause of death.
1254
I have no doubt that certain elements in the medical fraternity may object to this relaxation of the supply of bodies, and I acknowledge the needs of research. However, in all conscience, this House must agree that there must remain some sanctity and respect for a human body even after death, and that where the next of kin so desire, and where there is no good medical reason to the contrary, the wishes of the next of kin should be respected.
I acknowledge that the Broderick committtee recommended otherwise and envisaged an increase in the number of post mortems. However, as can be seen from paragraph 17·08 of its report, the reason was that the committee thought it helpful to determine claims for industrial death benefit. This is no longer so valid an argument after the 1977 Act, and would be even less so if the threshold were dropped to 30 per cent.
I have had numerous letters from constituents, and others, relating harrowing tales of anguish caused by this sloppy, callous and unnecessary law. In my office I have had widows in tears when recalling their experiences of bereavement compounded by horror. I have seen grown men cry because they knew that this would be their likely fate, and they also knew the grief that it would cause to their beloved ones.
Question put and agreed to.
Bill ordered to be brought in by Mr. Dafydd Wigley, Mr. Gwynfor Evans and Mr. D. E. Thomas.

CORONERS (AMENDMENT)
  CORONERS (AMENDMENT)
  Mr. Dafydd Wigley accordingly presented a Bill to amend the Coroners (Amendment) Act 1926, with reference to the power of removal of a body for postmortem examination: And the same was read the First time; and ordered to be read a Second time upon Friday 21st July and to be printed. [Bill 171.]

  BUSINESS OF THE HOUSE (FINANCE BILL)
  Ordered,
  That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill notwithstanding the practice of the House as to the intervals between the stages of Bills brought in upon Ways and Means Resolutions.—[Mr. Joel Barnett.]

WAYS AND MEANS

  ADVANCE CORPORATION TAX (RATE FOR FINANCIAL YEAR 1978) (No. 2)
  Resolved,
  That in the Resolution of the House of I7th April (Advance corporation tax (rate for financial year 1978)) for the words 'thirty-four sixty-sixths' there shall be substituted the words 'thirty-three sixty-sevenths'.—[Mr. Joel Barnett.]

FINANCE BILL
As amended (in the Committee and in the Standing Committee), further considered.
3.45 p.m.
Mr. Speaker: I call Mr. Jerry Wiggin, on a point of order.
Dr. Alan Glyn: On a point of order, Mr. Speaker.
Mr. Speaker: I shall call the hon. Gentleman afterwards. This is a point of order as well.
Mr. Jerry Wiggin: Thank you, Mr. Speaker. May I raise with you a point of order, of which I have given you some intimation, concerning the selection of amendments for this Finance Bill both on Report and, indeed, in Committee upstairs? I appreciate that you are not personally responsible for that. I think that today's selection of amendments contains 33 Government amendments or amendments with Government amendments contained in the group, seven amendments containing the names of my right hon. Friends on the Conservative Front Bench and only 14 others from various Back Benchers on both sides of the House, of which a number are as a result of ties in Divisions upstairs, promises from Ministers or other special priorities, of which you are bound to take notice.
It would not be in order for me to raise with you the whys and wherefores of your selection, Mr. Speaker. Indeed, I understand that. But I hope that I may expand my argument slightly over and above that, because of the massive tax legislation which this country has had put upon it in the last 13 or more years. Indeed, it was pointed out to me that in the 13 years up to and including 1964, there were just under 900 pages of Finance Acts, averaging 69 a year. In the 13 years from—
Mr. Speaker: Order. Will the hon. Gentleman put his point of order to me? It is no good giving us history. I want a point of order with which I can deal.
Mr. Wiggin: All right, Mr. Speaker. I accept that you, and indeed the House,

1257
fully understand the complexity of our tax legislation. But it is as a result of this complexity that Back Benchers find it impossible to get small points of tax law selected for debate during various stages of the Finance Bill. This is the point that I wish to put to you.
We all know that it is necessary for the usual channels to give advice to the Committee Chairmen and, respectfully, to you, as to those subjects which are of major interest to the Opposition. Of course, all Government amendments are selected automatically by you. The result of this advice is that small points of taxation, which may be immensely important to some people, are never open to debate in this House. Year after year it is quite impossible for amendments to this massive quantity of legislation—I shall not seek to make that point—to be debated.
I ask whether you would consider that this point should be referred to the Select Committee on Procedure. Although you may say to me that this point arises on any Bill—indeed, you have to use your discretion—because of the fact that the Finance Bill is an annual Bill, and because these wrongs are carried over from year to year, this is a special case. I would go further and suggest that there should be a special Select Committee on this matter, although I could not ask you to decide on that. The point is that minorities are not being heard and there is no available channel for these points to be put. Therefore, I put it to you, as a defender of minorities, that this is a point which you should consider.
Mr. Speaker: The hon. Gentleman gave me notice this morning that he would seek to raise this point. That is why I listened as carefully as I could to what he had to say. I am glad to note that he began by saying that he in no way challenged the selection that I made, because that would be out of order.
The selection of amendments is always a very difficult task for me. It would be much easier for me if I said that everything could be called—
Mr. Dennis Skinner: Hear, hear.
Mr. Speaker: But the House has given me the responsibility, apparently with the
1258
support of the hon. Member for Bolsover (Mr. Skinner), of selecting the amendments. Although I know that I cannot please everyone, I do my best. The complaint which the hon. Gentleman has raised is one that has been raised ever since I have been in this House, and every one of my predecessors gave much the same reply as I am giving today. If the hon. Gentleman remains here as long as I have been here, he will hear that point raised many times in the future.
Dr. Glyn: Further to that point of order, Mr. Speaker. While completely accepting your judgment, I should like to reinforce what my hon. Friend has said. For instance, new clause no. 1 affects a large number of people, and to my knowledge it has been on the Amendment Paper on almost every Finance Bill, although it has never been called. In fact this amendment affects all those people who travel to work and who spend over £100 a year in travel expense. Yet under the present arrangements Back Benchers seem to have no chance of debating these points on the Floor of the House.
Mr. Speaker: I listened with care to the hon. Member for Windsor and Eton.
Dr. Glyn: Maidenhead.
Mr. Speaker: Maidenhead. They are both respectable names. I am sorry that I cannot change the selection that I have made.

FINANCE BILL
  New Clause No. 50

    TAX REPAYMENTS TO WIVES
    '(1) Where in any year of assessment tax has been deducted under section 204 of the Taxes Act (pay as you earn) from the earned income of a wife and, apart from this section, a repayment of tax for that year would fall to be made to her husband in consequence of an assessment under Schedule E, so much of the repayment as is attributable to the tax so deducted shall be made to her and not to him.
    (2) The amount of a repayment attributable to tax deducted as mentioned in subsection (1) above is the excess (if any) of the total net tax so deducted in the year of assessment over the tax chargeable on the wife's relevant earned income included in her husband's total income for that year after allowing—

    (a) any relief for that year under section 19 of the Taxes Act in respect of any payment made by her of the kind mentioned in paragraph 14A of Schedule 4 to the Finance Act 1976 (retirement benefits schemes); and

    1259

    (b) any relief for that year to which her husband is entitled under any other provision of the Income Tax Acts to the extent to which it cannot be allowed because his income, exclusive of her earned income, is insufficient;

    but that amount shall not exceed the aggregate of the amounts repayable for that year in respect of the total net tax deducted in that year under the said section 204 from the income of the wife and the income of her husband.
    (3) Where in consequence of an assessment under Schedule E any amount is repayable under this section to the wife of the person on whom the assessment is made the inspector shall notify both of them of his determination of that amount and, subject to subsection (4) below, an appeal shall lie against the determination as if it were a decision on a claim.
    (4) Any appeal under subsection (3) above shall be to the General Commissioners for the division in which the spouses reside or, if they reside in different divisions, for the division in which one of them resides, as the Board may direct, or if neither resides in Great Britain to the Special Commissioners; and on any such appeal by one of the spouses the other shall have the same rights as an appellant, including any right to require the statement of a case for the opinion of the court.
    (5) Where in a case to which this section applies the amount repaid to a wife or her husband exceeds the amount properly due to that person the excess shall be recoverable from that person as if it were unpaid tax.
    (6) The Board may make regulations—

    (a) modifying subsection (2) above in relation to such cases as may be specified in the regulations;

    (b) modifying section 47 of the Finance (No. 2) Act 1975 (repayment supplement) in relation to cases in which a repayment falls to be made under this section;

    and any such regulations shall be made by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.
    (7) This section does not apply to any repayment for a year of assessment—

    (a) for which the husband is chargeable to income tax at a rate or rates higher than the basic rate; or

    (b) for which any earned income of the wife has been assessed otherwise than under Schedule E.

    (8) For the purposes of this section earned income of a wife has the same meaning as for the purposes of subsection (2) of section 8 of the Taxes Act and relevant earned income of a wife means so much of her earned income as exceeds the relief available in respect of it under that subsection.
    (9) References in this section to the total net tax deducted in any year under section 204 of the Taxes Act are references to the total income tax deducted during that year by virtue of regulations made under that section less any income tax repaid by virtue of any such regulations.
    (10) This section applies to any repayment made after the passing of this Act.'.—[Mr. Joel Barnett.]
    Brought up, and read the First time.
    The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move, That the clause be read a Second time.
    Mr. Speaker: With this we may take amendment (a), leave out subsection (7).
    Mr. Barnett: Heywood and Royton are very respectable names as well.
    This new clause extends the rights of married women to receive their own repayments of pay as you earn tax by statutory right. The new clause will give this statutory right to about 6 million earning wives at present within the PAYE system. Frankly, it is incredible that this has not been done before. I am, therefore, delighted to be able to move this new clause.
    Perhaps at the outset I should pay a tribute to the Equal Opportunities Commission, the Woman's Own magazine, The Sunday Times, their readerships, my hon. Friend the Member for Thurrock (Dr. McDonald), my PPS, who has done a great deal, and everyone else who has helped to ensure that this new clause gets on to the statute book, perhaps even including myself.
    I must make it clear at the outset that I do not pretend that the clause deals with the fundamental problem of aggregation, which has been on the statute book as long as income tax itself. It goes back to 1806. We have had aggregation all the time in our income tax system.
    The Equal Opportunities Commission recognises the major difficulties involved in changing the system of aggregation, and it looks forward, as I do, to seeing results from the replies that there are likely to be to the very interesting document which it has issued setting out the various options for dealing with the major and fundamental problem of aggregation. Arising out of the discussions on that document and discussions which we hope to have, I look forward to the widest consultations to see how it might be possible to resolve some of the inherent difficulties which we shall have in seeking to change the system of aggregation in our income tax arrangements.
    As I say, the clause does not deal with that fundamental problem. However, deals with at least one major source of complaint, which is the complaint that

    1261
    married women genuinely have that their income tax repayments frequently have been paid to their husbands—sometimes husbands who have left them at the time that they have received the income tax repayments. There have been examples of money which should have gone to those wives going to their husbands. I am pleased that this clause will go some considerable way to relieving that problem.
    The existing pay as you earn regulations already provide for repayment to a wife of pay as you earn over-payment during the course of a tax year. This clause ensures that repayments of PAYE tax will be made after the year end to the wife where previously they were made to the husband.
    There is another important change inherent in this clause for what might be called the breadwinner wife—the wife who is working and who obtains the allowances of her husband, who is not working for a variety of different reasons. In such a case, where a repayment was due as a result of the husband's additional allowances being unused, previously the repayment was made to the husband even though the husband was not working and had no income. Clearly the repayment should have gone to the wife, and that, too, will be rectified under this clause.
    As I say, the clause does not provide a complete answer. However, at the same time we are taking some administrative action which will deal with some other legitimate complaints which married women at work have had. One, for example, concerns the question of correspondence, which understandably annoys many married women; where income tax districts should be writing to wives in respect of their earned income, they have been writing to their husbands. Instructions have now been issued to income tax officers to ensure that letters go direct to the married women.
    Thene there is a tax form—form 33—which has on the back a form of words which married women find extremely insulting, and I do not blame them for feeling aggrieved about it. It is the form which says "If you are married and living with your husband, do not bother completing this form. Hand it to him." Of course, there are some people who would be only too delighted if they were
    1262
    told to hand a tax form to someone else to complete. But that form of words rightly offends many married women, and we are proposing to remove them.
    The other administrative action whereby we seek to help is where there is an option available to married taxpayers to claim separate assessments. This is quite different from separate taxation, where higher rate taxpayers earning more than a certain amount obtain some financial benefit from claiming separate taxation. A couple can claim to have their tax dealt with separately, although the fundamental problem of aggregation remains. At the moment, far too few married women are aware that this option is available to them, and we shall be issuing leaflets towards the end of this year to explain this option very clearly to married women. I hope that that will enable them to have their tax affairs handled to their better satisfaction.
    I shall be happy to answer any questions arising out of the new clause or on any matter related to it. But perhaps at this point, since it relates to provisions in the new clause, I might deal with amendment (a) which seeks to leave out subsection (7) of the new clause.
    Subsection (7) means that the relief provided here does not apply either to schedule D taxpayers or to higher rate taxpayers. I want to explain why that is, why, if anything, the amendment would make the position worse and why, therefore, I do not recommend the House to accept it.
    For schedule D taxpayers, where a husband or wife is assessed under schedule D, by the very nature of things—because of the way that schedule D works—it would be very difficult to write such a provision into the clause as it stands. Under schedule D, invariably there are very late assessments in respect of any one year. It would require complex legislation to separate the allowances between a husband and wife, and it would be extremely unclear without complex legislation whether the allowances should be allocated to the spouse who is assessed under schedule D or schedule E, PAYE.
    The amount of the repayment would depend on how those allowances were allocated to the schedule concerned. Therefore it would not only create extreme difficulty and need very complex

    1263
    legislation, but it could lead to the very reverse of what we seek to do in this clause. It could lead to awkward disputes between spouses about which of them was entitled to the allowances under schedule D or schedule E. Of course, the simplest solution would be for them to claim separate assessment, which I hope to be able to make clearer during the course of the year.
    Mr. Tony Newton: It seems to me that what the Chief Secretary is saying implies that this affects cases where the husbands have schedule D income. Subsection (7) says nothing about cases where husbands have schedule D income. It relates only to cases where the wives have schedule D income. I am not sure whether the right hon. Gentleman's remarks are strictly relevant to subsection (7) as it stands at the moment.
    Mr. Barnett: The hon. Member is quite right. The clause applies to cases where the wives have professional or business income assessed for tax under schedule D. But the principle of what I am saying is the same. Whoever has schedule D income, frequently the assessments are made very late. It would be very difficult to see where the allocation of allowances should go—whether to the husband, if he is under schedule E, or to the wife assessed under schedule D. It would mean cases arising much later than under the PAYE system, and it would create very great difficulties. I am perfectly happy to look at this to see whether we can deal with it, but it would require much more complex legislation than this already very long new clause. As I say, the simplest solution for the spouses would be to claim separate assessments. In that way, whether the wife was on schedule D or schedule E, they would be able to have the allowances allocated properly.
    On the other part of what the hon. Member for Braintree (Mr. Newton) seeks to do in respect of the higher rate, again the problem is that of splitting the higher rate liability between the spouses. In most cases where the couple have a combined income which makes them liable to the higher rate of tax they already claim separate tax assessment, so it would not apply.
    1264
    4.0 p.m.
    However, it would require somewhat complex legislation to deal with a problem which exists in very few cases. Just to leave out subsection 7 would not deal with the problem with which the hon. Member for Braintree (Mr. Newton) seeks to deal.
    The new clause is a first but a most important step along the road which I know the hon. Member for Braintree has wanted to tread for a long time—not since 1806, because he has not been around that long. However, I am bound to say that listening to him for the last four-and-a-half years in Finance Bill Committees it sometimes seems that long. I did not intend that to be uncomplimentary in any way and if it sounds like that, I apologise.
    Mr. Newton: I freely forgive the Chief Secretary because I know what a charming person he is. I can date the time of my interest in this matter—it was when my wife began to have some substantial earnings.
    Mr. Barnett: I note the hon. Member's personal interest in the matter. It is shared by many hon. Members who have not only a personal interest but an interest on behalf of their constituents up and down the country who feel very badly about the situation. I believe that this new clause does put right a very serious wrong that many married women have suffered. They have waited far too long to have it remedied. I look forward to being able to do much more in the years ahead, but meanwhile I commend the clause to the House.
    Sir Geoffrey Howe: I am glad to respond to the Chief Secretary by welcoming the new clause with a number of qualifications. I suppose like many other hon. Members I should begin by declaring an interest. I am not only in possession of—that is the wrong word; I should say that in my almost 25year-long association with my wife, she has been working for quite a lot of that time. Recently she has been deputy chairman of the Equal Opportunities Commission, so it would be more than my life is worth not to join the Chief Secretary in paying tribute to the work done by that body in creating a climate to make the introduction of this clause possible.

    1265
    I should also pay tribute to the work done in Standing Committee by my hon. Friends the Members for Braintree (Mr. Newton) and Maldon (Mr. Wakeham) who have studied this very closely and have forced the subject on the attention of the Government in this year's debates.
    The clause had about it a rather cosmetic quality, and the more we have listened to the Chief Secretary presenting it, the more cosmetic it has appeared. It seems to be a less than adequate response to the growing chorus of complaints about the way in which the present income tax system operates as between the sexes. I do not think that the new clause will go a very long way towards endearing the Chief Secretary of the present Government to the women of this country. We already know that a substantial majority of them are faithful supporters of the Conservative Party, and no doubt they will remain so. But the right hon. Gentleman must do his best. At least he has recognised that there is a problem that is causing genuine and increasing resentment, most of which is still unresolved by this proposal.
    The new clause deals with the problem of the refund—the wife's right to secure a refund of her own tax. It is a measure of our inadequacy that we have only just begun to deal with this now. However, the clause does not deal with a number of other things. It does not deal with the problem that arises where the husband is liable to tax at a higher rate, and where the wife is assessed otherwise than under schedule E.
    Is there not in the very words of subsection (7) an insight into the latent chauvinism in our system? Subsection 7(a) makes an exclusion in respect of a situation where the husband is chargeable for tax at a higher rate but not where the wife is. Subsection 7(b) makes an exclusion where the earned income of the wife is assessed otherwise than under schedule E. It is very difficult to understand why the exclusion is made only where the wife is, for example, on schedule D although the Inland Revenue is prepared and able to cope with the situation where the husband is on schedule D.
    The very fact that in a provision designed to emancipate women from the restrictions that the system imposes upon
    1266
    them we find these two qualifications lurking in terms of "the husband" and "the wife", shows how far we have yet to go.
    There are much more substantial provisions that have not been dealt with. Underpayments of tax by the matrimonial pair will still be the responsibility of the husband. Moreover, underpayments of tax for many years back, even after the wife has flown from the nest, will remain the responsibility of the husband. The wife still has to disclose to her husband her possession of an investment income. She will not be able to maintain or accumulate a secret nest egg. The husband will have to declare his wife's investment income.
    The married woman who is paying mortgage payments out of her own salary will not be able to get mortgage relief against her salary without her husband's written consent. The Inland Revenue, although it will reply to letters about the wife's income tax position direct to her, has not undertaken to initiate correspondence with her about her tax position. Thus there are many residual discrepancies in this administrative area. We deceive ourselves if we believe that these problems will go away.
    The Chief Secretary concedes that this is a modest first step. He says that any further steps that would be urged by people would be more and more complicated. We must ask ourselves whether we intend to go on adding complexities designed to offset the inherent oddity of the system, leaving the basis of it unchanged, or are to ask more fundamental questions.
    Of course the Chief Secretary is right in saying that there have been some changes to make the situation less oppressive. The right to separate taxation introduced by my noble Friend Lord Barber in 1971 and the right to separate assessment help in some ways, but the two are less than completely satisfactory. Also they are by no means widely enough publicised or appreciated for them to be enjoyed as they should be.
    The fundamental shortcoming still remains. I thought that it went back to 1799 but the Chief Secretary, with his greater access to accurate sources, takes it back only to 1806. But certainly the fundamental shortcoming in the system

    1267
    has been with us for a very long time—long before the days of a Labour Government and almost certainly in the days of a Liberal Government—
    Mr. John Pardoe: No, Conservative.
    Sir G. Howe: I think that it is one of those sins for which we must all share collective responsibility over a long period.
    It is a remarkable proposition, when one thinks about it, that a woman's income chargeable for income tax should be deemed for income tax purposes to be her husband's and not hers. We have become accustomed over the years to the understandable denunciation of the property law before the Married Women's Property Act of 1882. Therefore, it is remarkable that in tax matters this has gone on for so long.
    As long as that is the foundation of the tax regime for husband and wife, it should not surprise us that the system that results gives rise to more and more examples of discrimination that is resented, cannot be justified and makes very little sense in the kind of society in which we live. It may have been all right in 1806, 1842 or 1942, but there have since been huge changes in the nature and scale of the involvement of women in our economic life.
    In the first place, more and more women are now at work. In 1951 the percentage of married women at work was less than 12 per cent. of the labour force. The figure is now more than double—about 25 per cent. Two out of three married women between the ages of 40 and 54 are at work. Therefore, the labour force has substantially changed its nature.
    Moreover, even before the equal pay legislation arrived on the statute book, the earnings of married women rose substantially. At the same time tax thresholds have fallen. Therefore, in the last four or five years, if we take the position of a married woman manual worker in 1972, 31 per cent. of her income was in the taxable band. In 1976 it had doubled, so that 63 per cent of her income was subject to income tax.
    That is only the most recent manifestation of a much more fundamental change. If we have in mind the situation in 1938.
    1268
    I think I am right in saying that the level at which income tax began to be paid in that year was about two-and-a-half times average industrial earnings. It is now set at less than half industrial earnings.
    A huge sea change has taken place. Before the war income tax was payable by the husbands of those who inhabited the "The Forsyte Saga", so to speak. It certainly made no impact on the huge mass of women who were at work. Income tax has long since ceased to be payable only by middle-class men. It is payable by men and women of all classes. That which was designed for "The Forsyte Saga" now bites deeply into the pockets and purses of men and women in "Coronation Street"—indeed, even in Heywood and Royton. The system has been transformed.
    Women have become taxpayers on a large scale and increasingly question the basis of the system. This is not something that will go away or change. It is an inevitable consequence of social changes in the last 50 years. At the turn of the century, the average life expectation of a woman was just under 50 years, all told. It has now increased by at least 25 years, or even beyond.
    At the turn of the century the average married woman could look forward to having, if that is the right word, a very large family and a large number of children. At present, with the birth control revolution, her average family size is less than three, and nearer to two. At the same time her education has been massively increased. The average married woman now arrives in society better qualified, likely to confine her period of motherhood to a fairly small number of years, and bound to return to the labour market by the time she is 40, at the latest, seeking employment.
    Therefore, the Chief Secretary and the Inland Revenue are coping with a world inhabited by large numbers of female taxpayers. One can well understand a reluctance to make changes in the system as we have become used to it. The existing PAYE system has many conveniences for dealing with the complex changing pattern of husbands and wives both at work. As long as the married woman has her married woman's earned income allowance separate and distinct from the married allowance of the husband, she can go into employment and come out of

    1269
    it quite frequently without there being any need for changes in the code of the husband. That is a real convenience. The Inland Revenue is able, understandably and intelligently, to ignore the earnings of married women below earnings of a modest scale which are below the married woman's earned income allowance.
    But I do not believe those conveniences will in the end prove to be a sufficient justification for leaving the present system unchanged. All the developments I have referred to suggest that there is a need for a more fundamental change from the present system to take account of the changes in status which have taken place.
    4.15 p.m.
    There is a somewhat odd feature about this debate. In theory at least, our tax system, in contrast to others, is based on the concept of the family as the taxable unit—on the aggregation of husband and wife as the unit. The alternative basis which has been discussed by the Equal Opportunities Commission is that the system should be based on the individual as the unit. When we examine the practice in other countries, we see that 11 OECD countries base their tax system on the family, whereas 17 countries have moved over to taxation on an individual basis. Therefore, there has been a movement in that direction. That is an understandable response to pressure from women taxpayers to be treated as individuals by the tax system as a whole.
    The odd thing is that, although one would think that the movement from a family basis to an individual basis would damage the family and that our own system which is based on the family is beneficient in its impact on the family, that may well not be the case. A feature of our system which a number of people now notice and complain about is that with two earners in the family, the wife and the husband, both at work, their combined tax allowances are about £2,500, whereas with one earner in the family, taking the husband as the typical case, there is a tax allowance of only £1,500 available. Therefore, the married woman who stays at home and looks after the family, and preserves the family in the traditional sense, does not receive any notional tax advantage from her presence at home. In other words, the balance of
    1270
    the system favours in fiscal terms the married woman who goes out to work.
    A number of people believe that it is wrong that there is insufficient recognition for the work done by the married woman who remains at home as the home-minder, guardian of the family, and so on. Although our system is family-based, we fiscally encourage the wife to go out to work. I am not expressing a value judgment whether a mother should go out to work. It seems to me sensible and acceptable that there should be a freedom of choice. But it is open to question whether we should have a fiscal system which is not neutral in relation to that choice but which encourages the mother and the wife to go to work and which does not give comparable recognition to the part played by the mother and the wife who stays at home. That is one of the other fundamental questions we have to face.
    The introduction of child benefits—a "son or nephew" of our tax credit system—helps because child benefits are payable to the wife in relation to the number of children in her family and can be made—this applies in the French system—to some extent to recognise the importance of home care for the family. But the question still remains whether we should be doing more to provide greater recognition for the discharge of home responsibilities by the wife who stays at home.
    The Equal Opportunities Commission suggests for consideration a cash payment or tax allowance in respect of that. I am not persuaded that either is necessary or necessarily right, but certainly they are among the options that we should all study. We in the Conservative Party are studying them in the hope of bringing forward conclusions shortly.
    I am sure that the objective should be neutrality between the working wife and the non -working wife. It begins to look as though the best way of meeting this as a matter of fiscal policy would be to provide for each individual—husband or wife, or man or woman—a basic personal allowance of the same size regardless of sex or married status but claimable either against his own or her own personal income or against that of the spouse. Therefore, one would be able to aggregate two personal allowances against the combined income of husband and wife.

    1271
    if both are at work, but against the single income of the husband if he is the only wage earner at that moment. This would involve some alteration in the structure of the allowances and is not a change that could be made overnight, but it would at least achieve a situation in which husband and wife, man or woman, were being treated as individuals in their own right and in which the role of the spouse who stayed at home would be given equal value with the role of the spouse who went to work, so that the tax system would be neutral.
    As with any other change, this would involve some alteration in relativities. The two-income family would not be relatively as well-off as the one-income family. But one cannot make the one-income family relatively better off without making the two-income family relatively less well off. These are questions to which those who argue for a fundamental change must address themselves. My hon. Friend the Member for Braintree drew attention to this fact in Committee upstairs.
    I hope that it is of some value for me to indicate how far we have to go if we are to make the sort of changes that will become inevitable and are desirable. I do not mean to be too churlish in the limited enthusiasm of my response to the cosmetic of the Chief Secretary because this system has remained unquestioned for a very long time, but the right hon. Gentleman has a long way to go and he must address himself to the failure to disaggregate investment income of husbands and wives. We cannot indefinitely go on proposing changes in the tax treatment of husbands and wives without recognising the injustice of lumping them together for the purposes of taxing investment income.
    I welcome the new clause with many qualifications. I am confident that I can rely on the support of the overwhelming majority of women, who already give their support to the Conservative Party, to enable us at the earliest possible opportunity to carry forward the work on which the Chief Secretary has made such a modest start.
    Mr. Newton: I have already declared an interest indirectly during an intervention in the Chief Secretary's speech. I have an earning wife, though I stand to
    1272
    secure no financial gain from the passage of the new clause but simply a freedom from my wife's complaints about the way in which the Inland Revenue deals with her and makes repayments to her. That is a blessing to be desired.
    I welcome the new clause as a whole, but I should like to refer particularly to amendment (a). Although the Chief Secretary sought to pre-empt the amendment and any arguments that I might adduce for it, I remain more than a little dissatisfied with the arguments he put forward to defeat the point of the amendment.
    I tabled the amendment because, as the Chief Secretary acknowledged, the new clause is limited in the context of the argument as a whole, and with subsection (7) left in it, the clause is very limited even in helping those whom it seems to be helping. It clearly does not apply to any wife who is self-employed. It applies only to PAYE deductions, presumably under schedule E, from employment income. We know from subsection (7) and what has been said that it does not apply to any woman who, whether or not she is entirely self-employed, has even a little bit of self-employment. She may have a substantial income under PAYE, but if she has any schedule D income at all, she will be ruled out from the benefits of the clause.
    Similarly, if the husband has an income which takes him into the higher tax rates, the wife does not get the benefit of the new clause, but that use of the husband's income in subsection (7) begs the question. By definition, the husband's income at present includes the wife's. Does the subsection mean that where the wife's income, together with that of her husband, takes the pair of them into the higher tax bracket, the wife will be excluded from the benefits of the clause? If so, it must follow from these three exclusions—the self-employed woman, the partially self-employed woman and the couple whose income gets above the higher rate threshold—that the number of people who will benefit is quite small.
    There are very many cases where the husband is on, say, average weekly earnings and the wife has an income which may not be at all substantial but together they will be getting close to the higher tax rates. If the subsection means what I think it means, a substantial number of

    1273
    women will be excluded from the benefits of the new clause.
    I shall be interested to hear from the Chief Secretary whether he has made an estimate of how many women might benefit from the new clause as it stands and how many might benefit if the amendment were incorporated in the new clause. I appreciate that it may be impossible to make those estimates, but I suggest that the clause is much more limited than it appears and that it will not benefit anything like as many women as the Chief Secretary implied.
    I turn to the broader background of the new clause and the wider remarks of the Chief Secretary and my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). I am grateful for what my right hon. and learned Friend said about what was done in Committee, and in view of the ground covered there and the opportunity that I had to speak on this subject at that time, it would be wrong for me to take a great deal of the time of the House on the broader issues.
    We are all agreed that neither the new clause nor anything the Government have done in the past few weeks touches the fundamental problem of aggregation and the fact that legally the wife's income is that of her husband. I merely restate my view that the acceptability of that position to the majority of women in this country is rapidly disappearing. For understandable reasons, the Chief Secretary has been able to dodge dealing with the big questions this year. I am not seeking to be offensive to the Chief Secretary, any more than he was seeking to be offensive to me.
    The Financial Secretary to the Treasury (Mr. Robert Sheldon): But the hon. Gentleman is being more successful.
    Mr. Newton: I understand why the Chief Secretary has preferred not to tackle the really large questions this year, but as a House we shall not be able to continue avoiding them for very much longer.
    I welcome what my right hon. and learned Friend the Member for Surrey, East said, because I also believe that the almost inevitable way forward is that we should move to a situation in which each adult is entitled to a personal allowance of his or her own and that for
    1274
    married couples the allowances should be transferrable not simply from the wife to the husband but when the wife is the breadwinner—and not much attention has been paid to such cases so far—transferrable from the husband to the wife. One of the injustices in the present system is that a wife can get the advantage of the husband's allowances but a husband cannot get the advantage of the allowances his wife could acquire if she were at work. That is another problem that we have to consider.
    Mr. Ian Wrigglesworth: While logic and equity are on the hon. Gentleman's side, does he not agree that getting to the position that he has described will need a lot more debate and that we shall have to convince people and change attitudes throughout the country? There will be great antagonism from some people, wrongly in my view, to the position that he wants to see brought about.
    Mr. Newton: That may be true, but that antagonism is already declining steadily and the antagonism to the existing system and the inevitable humiliation it can involve for a wife in some circumstances—regardless of what the Chief Secretary is proposing—is growing very fast indeed.
    As we know from the work of the Equal Opportunities Commission, some marriages have come close to breaking up because the tax system has revealed to one spouse the unknown income of the other. Wives who have struggled to save a little on their own have found the money forcibly disclosed to the husband by the Inland Revenue with significant and sometimes almost disastrous consequences. There is no way of dealing with that sort of problem in modem marriage without tackling the fundamental problem of treating the wife's income as part of the husband's income.
    This will raise difficult questions about the reduction in the tax burden that could follow for many high income married couples. It will raise acutely difficult questions, and I suspect that it will be somewhat more difficult for Labour Members than Conservative Members when we come to decide how investment income is to be treated. A number of those who are demanding equal treatment for women run a mile as soon as it is suggested that wives should be allowed

    1275
    their own separate exemption from the investment income surcharge and, in effect, should be allowed to enjoy the benefits of their own savings. That is another difficult question and I might find it easier to answer it than some Labour Members.
    4.30 p.m.
    At least I am clear about the direction in which we should be moving. For that reason I greatly welcome the comments of my right hon. and learned Friend the Member for Surrey, East.
    I ask the Chief Secretary to say a few words about three subjects which are of special interest and importance to some groups but which are not touched on by the clause. I ask the right hon. Gentleman whether he has any ideas about how he might be able to tackle them, or how he might be able to make improvements.
    First, there is the nagging problem of tax relief on mortgage interest where the wife—the issue usually arises in this form—ex-wife or separated wife is paying mortgage interest but for many months finds it almost impossible to get the tax relief transferred from her husband to herself. It is a problem that has been drawn to our attention by a number of outside organisations. They have given case histories where wives have been put in acutely difficult circumstances because they have been repaying the mortgage and have found it almost impossible over a long period to get the Inland Revenue to allow them tax relief.
    There is a similar problem, I understand, in a mother obtaining the payment of child tax allowances when she has care and custody of the children, the marriage having broken down. It is often found that the payments are not made to her for some time after the breakdown of the marriage. Again, the problem has been drawn to our attention by outside bodies. It may be that the difficulty will disappear with the impending disappearance of child tax allowances, but meanwhile it appears to be a real problem. I am sure that there axe many who would welcome a word about it from the Chief Secretary today.
    Thirdly, there is an issue that is much canvassed by bodies such as the National Council for One Parent Families and the Child Poverty Action Group. I refer to the variation in tax treatment between
    1276
    different forms of maintenance payments and the difficulties that that can sometimes cause for those who fail to get their arrangements tied up in the best possible legal way. Often difficulties arise because they do not have good advice.
    That is a subject of some complexity and I hesitate to take up the time of the House with a long elaboration. However, it appears to be of some importance and, perhaps, of growing importance. In the context of our debate it would be helpful if the Chief Secretary said a few words about it.
    I welcome the clause as a whole. I hope that there will be support for the amendment. I hope that the Chief Secretary will give some indication of the way in which he proposes to move forward.
    Mr. Douglas Crawford: I shall speak briefly in support of what the hon. Member for Braintree (Mr. Newton) has said and in support of amendment (a) to new clause No. 50.
    We have come a long way since the days when it was the custom for a man not to tell his wife his earnings. I venture to suggest that we have not gone far enough. By the insertion of subsection (7), the Chief Secretary appears to have been a little grudging. It is a pity that the hon. Member for Thurrock (Dr. McDonald) is not present to comment on that.
    The crux of my argument is that in Scotland, and no doubt in many other parts of the country that are not as fortunate as London and the south-east, it is often the wife who is the breadwinner. There are parts of Glasgow which have about 50 per cent. male unemployment and very much less female unemployment. That is relevant to the debate. The Chief Secretary seems to be a reluctant convert from being a male chauvinist. I am reminded of St. Augustine, who said "Save me Lord, but not yet."
    I should declare an interest. My wife is self-employed. As the hon. Member for Braintree said, many women are self-employed. It seems wrong that there should be the hedging in the new clause, which states:
    "a repayment of tax for that year would fall to be made to her husband in consequence of an assessment under Schedule E, so much of the repayment as is attributable to the tax so

    1277
    deducted shall be made to her and not to him."
    By the insistence of the Treasury that schedule E be the only criterion. I believe that it is denying itself its own case.
    I am sure that the Chief Secretary is not a male chauvinist, and I hope that he may be seen not to be one. I look forward to his comments on the amendment. I accept that it may be difficult to estimate the cost, but I am sure that we shall all be grateful if the right hon. Gentleman is able to give us some broad indication of the cost of deleting subsection (7).
    Mr. Marcus Kimball: On the general principle of the new clause, which everybody seems to be endorsing with much enthusiasm, I express my personal view with a certain lack of enthusiasm for the way in which the clause is going.
    The Chief Secretary has made it clear that the clause applies only to earned income. It does not apply to unearned income. I do not believe that there is a horde of hard-working, big-earning women demanding the change that is proposed. In my experience, most women when faced with an income tax demand, or any form of taxing, shove the demand across the table to their husband, or at best pass it to their accountant. I do not believe that there is great demand for this step. I should like to think that it will be activated only by tax-conscious women who take the trouble to write to the Inland Revenue to ask that they be treated in the way that is proposed.
    I am relieved that at this stage the clause is not being extended to include unearned income. If a woman is in receipt of a marriage settlement, it seems wrong that she should get the tax repayments that are due to the husband who has probably made the marriage settlement on her. I am glad to see that the Chief Secretary is sympathetic.
    I hope that we shall not rush headlong down the slope that is before us. I do not think that there is a great undertone of demand for the step that is proposed. I regard the manoeuvre with some suspicion.
    Mr. John Wakeham: I am sure that the debate would not have
    1278
    been complete if my hon. Friend the Member for Gainsborough (Mr. Kimball) or another hon. Member had not voiced reservations about any changes that we might make in the tax system.
    Those of us who are welcoming the changes that the Chief Secretary is proposing and who would like him to go much further would be right to recognise that the overwhelming majority of taxpayers want not a complicated tax system to achieve equity between husband and wife but a simple and clear system by which they as a family may discharge their joint responsibilities to the taxman in the easiest and most practical way possible. I am certain that to achieve that is to achieve for the majority of taxpayers what they really want.
    Nevertheless, we have to recognise that for a substantial number of taxpayers the present system is grossly unfair and unjustifiable. It is right, and long overdue, that Parliament should address itself to the problem. We should pay a warm tribute to the right hon. Gentleman for having the privilege of bringing forward the new clause, even if we may question exactly what his motives were in doing so this year. I am certain that they included the highest of motives, but underneath those it may be that one or two other considerations crossed his mind.
    When the right hon. Gentleman paid tribute to all those who have pressed him to take action and have pushed him forward, I noticed that he mentioned my hon. Friend the Member for Braintree (Mr. Newton) and myself, who originally raised the matter in Standing Committee. From the silence on the Government Benches on that occasion, there was no indication that they had any plans to bring a clause forward. We chided them for not having taken action on the Equal Opportunities Commission's report, which had been available for some time.
    I welcome what is being done, and I do not want to rehearse again the points made by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) and my hon. Friend the Member for Braintree. However, it is worth stating once again in a few sentences what I see to be the fundamental problem that must be faced. It is a problem which many who are anxious to make progress in this area still will not take on board.

    1279
    I refer to the remaining problems of tax legislation.
    By and large, the family with the married woman who stays at home is badly treated under our present system. We have a system of personal allowances at approximately two and a half times the single allowance for the family where there are two breadwinners compared with one and half times where only the husband is earning.
    There is obviously the question of investment income. I do not see how we can continue much longer to treat all investment income as being aggregated between husband and wife. I recognise that under any fair tax system it will be necessary to continue aggregation for large investment income, but we should be moving towards disaggregation for the lower levels. If we ventilate and discuss the problem sufficiently, we should get the answer in the end.
    We should recognise the difficult tax position of families which have only one breadwinner. Many families have gone from a position of two people earning to a position where they have additional expenses with young children and only one breadwinner. In many instances they are some of the hardest pressed members of society. However, they are suddenly presented with a relatively higher tax bill on their income.
    In the end, I see no great problem of dealing with support for such families or for the concept that women should as far as possible be treated in the same way as men in our tax system. Each adult should he entitled to a personal tax allowance. That should be the basis of our tax system. However, I recognise that for the higher incomes aggregation will continue to be a feature of our tax system for many years to come.
    Mr. John Cronin: I think that we have had a remarkably interesting debate on this subject. I think that all right hon. and hon. Members feel that much more should be done to help women—particularly married women.
    I was somewhat astonished by the remarks of the right hon. and learned Member for Surrey, East (Sir G. Howe), because he said that the overwhelming majority of women support the Conservative Party. If he believes that, he can believe anything. It is so remote from
    1280
    the facts of life that it throws discredit on what I think was to a great extent a helpful speech.
    I congratulate my right hon. Friend the Chief Secretary to the Treasury on bringing forward the new clause. I have put some pressure on him in the past few years to induce the Treasury to take a more up-to-date view about the position of women in modern society. I am glad that this may have borne some fruit and not fallen on stony ground. The Chief Secretary is an amiable person of very wide views. He is happily married and understands these problems very well. I think that we are fortunate that he should have applied his mind to this matter.
    New clause no. 50 is admirable in every way, but I suggest that much more can be done for women than is in the new clause. I appreciate that when dealing with the Treasury, even the most enlightened of people, such as my right hon. Friend, have to cope with a great deal of uphill work. There are built-in prejudices and ideas which have gone on for hundreds of years. For my right hon. Friend to achieve reforms in the Treasury is rather like somebody wearing gumboots wading through a sea of treacle: it is hard work. Nevertheless, something has been achieved, although there is much more to do.
    4.45 p.m.
    The Treasury must accept two important and basic facts. One is that we have reached the stage in modern philosophy where women are entitled to be treated exactly the same as men for all practical purposes. Of course, they cannot he treated exactly the same as men because of their essential biological differences. My professional education has made me think in wider terms than mere figures and Treasury statistics.
    The basic problem is that reproduction, as far as the male is concerned, can take place in a very brief period. But for a woman reproduction involves about nine months plus several years of bringing up the children. The Chief Secretary is looking puzzled. I should have thought that was a truism. It is important that women, who have to go through the reproductive and bringing-up stage, should not be penalised by anyone, least of all by the Treasury. Women who are unable to go out to work, because they have to bring up children in the early stages of their

    1281
    married life, should not be penalised by taxation. They are penalised, because one earner gets tax allowances of about £1,500 whereas two earners get tax allowances of £2,500. I suggest that is a clear-cut discrimination against women when they are going through an important phase in the interests of the whole of civilisation as we know it. I suggest to my right hon. Friend that, although reforms have been made in the Treasury, there is room for much more.
    A strong case was made by the right hon. and learned Member for Surrey, East in favour of there being a difference in the treatment of investment income of husband and wife. There is no logical reason why they should be treated absolutely separately. Nevertheless, the Treasury is to a substantial extent treating them together. I suggest, that although the reforms introduced by my right hon. Friend are excellent and point the way for the future, much more progress can be made. The time has come when the idea that men and women should be treated differently on taxation matters is an absolute nonsense. I think that it should be stopped. Therefore, I suggest that, despite the excellent work done by my right hon. Friend, much more needs to be done. I am sure that right hon. and hon. Members on both sides of the House will applaud him if he achieves it.
    Mr. Joel Barnett: First, I thank my hon. Friend the Member for Loughborough (Mr. Cronin) and all right hon. and hon. Members who have spoken in the debate for their kind, though sometimes churlish, welcome to the new clause. I could not quite understand why the right hon. and learned Member for Surrey, East (Sir G. Howe) should have been churlish. I have not totted up the figures, but I think that there have been more Conservative Governments than Labour Governments since 1806 and they failed to deal with the problem. Therefore, he need not have been quite so churlish.
    I recognised at the outset of my remarks, as did the right hon. and learned Gentleman, that this fundamental problem was the cause of many of the difficulties with which the hon. Member for Braintree (Mr. Newton) asked me to deal. Although the new clause was welcomed
    1282
    by the hon. Member for Braintree, I noted that the right hon. and learned Member for Surrey, East was careful—I do not blame him for being so careful—to talk about one of the variety of options which the Equal Opportunities Commission had suggested for dealing with the fundamental problem of aggregation being a home responsibility allowance in cash or changing the tax allowance.
    The right hon. and learned Member for Surrey, East was correct to say that the major problems involved in making this fundamental change are the net gainers and the net losers that inevitably there would be in the change that he described and to which the Equal Opportunities Commission referred in its booklet. I appreciate the right hon. and learned Member's deep understanding of these matters.
    I know that the hon. Member for Braintree will claim to be innocent of being a chauvinist in this context. But the right hon. and learned Member for Surrey, East made a somewhat chauvinistic slip when he began to talk about his possession—namely, the deputy chairman of the Equal Opportunities Commission who is his wife. The right hon. and learned Gentleman quickly changed what he was about to say. I am sure that whatever he might have said he did not intend to say it. I absolve him from what he nearly said. I know the difficulties that he might otherwise encounter with the deputy chairman of the Equal Opportunities Commission.
    I do not know why he attacked the clause for what it seeks to do. He said that the clause had a cosmetic quality and that it was a less than adequate response. He said that it would not endear me to women. But that is my major objective at all times, at least to one particular woman—my wife. My wife is always at the head of the list of women to whom I wish to endear myself. By saying that this is not an adequate response, the right hon. and learned Gentleman shows that he does not understand what I said earlier.
    The new clause does not deal with the fundamental problem of aggregation. The right hon. and learned Gentleman's remarks about the days of "The Forsyte Saga", when working married women

    1283
    did not pay income tax, were remarkable. Of course they did not pay income tax. They did not have much income either. We are now in a different situation. I hope that the right hon. and learned Gentleman was not suggesting that we should go back to the position when married working women—and married working men—did not pay income tax. I am sure that the majority prefer the existing system.
    I do not wish to be as controversial as the right hon. and learned Gentleman. I recognise that there is a problem relating to aggregation. I await the results of the consultations that will arise out of the Equal Opportunities Commission document and the wider consultations that we hope to have so that we can move forward as quickly as possible.
    I turn to the case made by the hon. Member for Braintree. I am sorry that he and his hon. Friend the Member for Maldon (Mr. Wakeham) are upset because I did not pay tribute to their efforts. I included them among the etceteras. I assumed that they understood that I intended to include all those who put pressure on me to take this action.
    The hon. Member for Braintree asked some specific questions. The mortgage interest problem stems largely from the fundamental problem of aggregation. He must know that because of aggregation the husband is liable to pay the wife's tax as well as receive her repayment.
    The hon. Member tabled an amendment to clause 19 in Committee dealing with maintenance payments. The amendment was not selected. He referred to that matter in passing and the Minister of State said that we would examine the problem. We shall see whether there is any way of moving forward on this matter.
    The hon. Member for Braintree also asked about child tax allowances. Problems arise if there is a dispute, when a marriage breaks up, about who is responsible for the children of the marriage. Whenever possible, we seek to ensure that there is a split of the child tax allowances. But in the future that will not be so much of a problem as we move away from child tax allowances.
    My hon. Friend the Member for Loughborough said that he did not wish to penalise women. I am sure that I do
    1284
    not have to tell him that the last thing in the world that I would wish to do is to penalise women, or anyone else, whether married or single. The move that we have made on child benefits is a greater help to the family than child tax allowances. It is widely recognised as a move towards helping in particular those families in which the wife does not go out to work because she chooses to bring up the children herself. Child benefit is an enormous help in that direction.
    Amendment (a) would delete subsection (7). I have pointed out the problems that are created by that proposal. If the amendment were carried, the problems would be considerable. The hon. Member for Perth and East Perthshire (Mr. Crawford) asked about the cost of accepting that amendment. It is not intended to cost anything, but it is not workable. We have examined the proposition carefully to see whether it could be made workable. There is a problem in ascertaining the amount of the wife's schedule D income. In cases where the sum is small and the woman is working under PAYE it is taken into account in the code for the year in question. But there are problems involved in delayed assessments. It is difficult for the Inland Revenue to know when the schedule D tax is paid. The husband might have already paid it in his assessment for his wife.
    If subsection (7) were removed, hon. Members would not achieve their objective. They would create considerable problems and argument between spouses about where the allowances should fall. The amendment could in practice make the position worse.
    I turn to the question of the higher rate tax liability. The hon. Member for Braintree said that more couples would be brought into higher rate tax. I am sure that he recognises that the couple's joint income, even when only the personal allowances are involved, would have to be in excess of £10,000.
    The hon. Member for Braintree said that a large number of couples would be caught by subsection (7) as it stands. But that is not so. In practice all the 6 million working wives under PAYE will be able to obtain this benefit. If we remove that subsection the objective will not be achieved and the position will be made extremely difficult. However, if

    1285
    between now and next year we can move in the appropriate direction in order to help, I shall be happy to examine the matter again.
    5.0 p.m.
    Sir G. Howe: It is an unusual, not to say exhilarating experience to have absolution pronounced upon me by the Chief Secretary. Among the many roles that he has occupied, to find him in this quasi-episcopal role is unnerving. He was more true to type when he was misunderstanding my reference to "The Forsyte Saga", because I am sure that neither he nor I would wish to go back to the lower real living standards of "The Forsyte Saga" times. My point is that because of rising living standards and the rising capacity of the State to tax the citizen, a great number of women have moved into the tax net, and we need to make changes of the kind we discussed to deal with that.
    One matter that we should in some way place on the record is that in this debate, the first of the afternoon devoted to the taxation of women, and married women in particular, not surprisingly, no member of the Liberal Party has spoken, although its economics spokesman, the hon. Member for Cornwall, North (Mr. Pardoe), was here showing an alert interest in these proceedings. It is, however, surprising that throughout the proceedings not one woman has spoken or even been present to listen to the proceedings of this gallant male gathering which is seeking to do what it can to advance the condition of women in the face of the tax system. Perhaps most surprising of all is that the Scottish National Party, of which no less than 18 per cent. of its parliamentary membership is accounted for by women, has not taken part in the debate.
    Mr. Joel Barnett: Will the right hon. and learned Gentleman permit me to put on the record that my hon. Friend the Member for Thurrock (Dr. McDonald), who is my Parliamentary Private Secretary, is in a Select Committee and has apologised to me for not being able to be present?
    Sir G. Howe: The Chief Secretary's Parliamentary Private Secretary has been in a special position throughout these proceedings because in the Standing Com-
    1286
    mittee upstairs she was provoked, goaded and taunted into expressing a view on these matters. As I understand from what I have read, she was making vigorous facial expressions throughout the proceedings without actually uttering a word, and it is interesting to reflect on what must have been going on.
    It is still odd that in these proceedings today, on a day when the Government have made a move of this kind, not one woman has spoken or attended to our proceedings.
    Mr. Cronin: I understand the right hon. and learned Gentleman's point, but is it not a long-established tradition that those who have some financial advantage in a debate do not participate in it?
    Sir G. Howe: The hon. Member for Loughborough (Mr. Cronin) is always a stickler for parliamentary etiquette and protocol, but he raises his standard even higher than we previously believed possible. We all have an interest of a kind in these proceedings, but on this particular matter all that the Chief Secretary is proposing is that the money to which women are entitled from the Revenue should go back to them directly rather than through their husbands.
    We do not feel that the Chief Secretary has answered satisfactorily the point raised by my hon. Friend the Member for Braintree (Mr. Newton) in his amendment. The right hon. Gentleman said that it would not be workable to make the changes that would follow deletion of subsection (7). That is, no doubt, what previous Chief Secretaries were being told only weeks ago about the fundamental purpose of the clause. It is remarkable how unworkability can finally be overcome.
    The surprising aspect of that proposition is that it is workable to make special provision for the husband in paragraph (b) and for the wife in paragraph (a). Because we find that an unconvincing position I invite my hon. Friends to vote in support of my hon. Friend's amendment, if only pour encourager the Chief Secretary or his successors in office, who will shortly be succeeding him, to carry on the good work at which the amendment makes a start.
    Question put and agreed to.
    Clause read a Second time.
    Amendment (a) proposed to the proposed clause, in line 39, leave out subsection (7)—[Mr. Newton.]

    Division No. 254]

    AYES

    5.06 p.m.

    Adley, Robert

    Grant, Anthony (Harrow C)

    Morgan, Geraint

    Aitken, Jonathan

    Gray, Hamish

    Morgan-Giles, Rear Admiral

    Alison, Michael

    Grieve, Percy

    Morris, Michael (Northampton S)

    Arnold, Tom

    Hall-Davis. A. G. F.

    Morrison, Charles (Devizes)

    Atkins, Rt Hon H. (Spelthorne)

    Hamilton, Archibald (Epsom & Ewell)

    Morrison, Hon Peter (Chester)

    Atkinson, David (B'mouth, East)

    Hamilton, Michael (Salisbury)

    Neave, Airey

    Bain, Mrs Margaret

    Hampson, Dr Keith

    Nelson, Anthony

    Baker, Kenneth

    Hannam, John

    Neubert, Michael

    Banks, Robert

    Harrison, Col Sir Harwood (Eye)

    Newton, Tony

    Bell, Ronald

    Harvie Anderson, Rt Hon Miss

    Normanton, Tom

    Bendall, Vivian

    Haselhurst, Alan

    Nolt, John

    Bennett, Sir Frederic (Torbay)

    Hastings, Stephen

    Onslow, Cranley

    Bennett, Dr Reginald (Fareham)

    Havers, Rt Hon Sir Michael

    Oppenheim, Mrs Saliy

    Benyon, W.

    Hawkins, Paul

    Osborn, John

    Biggs-Davison, John

    Hayhoe, Barney

    Page, John (Harrow West)

    Blaker, Peter

    Hicks, Robert

    Page, Rt Hon R. Graham (Crosby)

    Body, Richard

    Hodgson, Robin

    Page, Richard (Workington)

    Boscawen, Hon Robert

    Holland, Philip

    Parkinson, Cecil

    Bottomley, Peter

    Hordern, Peter

    Pattie, Geoffrey

    Bowden, A. (Brighton, Kemptown)

    Howe, Rt Hon Sir Geoffrey

    Percival, Ian

    Boyson, Dr Rhodes (Brent)

    Howell, David (Guildford)

    Peyton, Rt Hon John

    Braine, Sir Bernard

    Howell, Ralph (North Norfolk)

    Pink, R. Bonner

    Brittan, Leon

    Hunt, David (Wirral)

    Prentice, Rt Hon Reg

    Brocklebank-Fowler, C.

    Hunt, John (Ravensbourne)

    Price, David (Eastleigh)

    Brooke, Hon Peter

    Hurd, Douglas

    Prior, Rt Hon James

    Brotherton, Michael

    Hutchison, Michael Clark

    Pym, Rt Hon Francis

    Brown, Sir Edward (Bath)

    Irving, Charles (Cheltenham)

    Rathbone, Tim

    Bryan, Sir Paul

    James, David

    Sees, Peter (Dover & Deal)

    Buchanan-Smith, Alick

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

    Rees-Davies, W. R.

    Buck, Antony

    Jessel, Toby

    Reid, George

    Budgen, Nick

    Johnson Smith, G. (E Grinstead)

    Renton, Rt Hon Sir D. (Hunts)

    Bulmer, Esmond

    Jopling, Michael

    Renton, Tim (Mid-Sussex)

    Butler, Adam (Bosworth)

    Joseph, Rt Hon Sir Keith

    Rhodes James, R.

    Carlisle, Mark

    Kaberry, Sir Donald

    Rhys Williams, Sir Brandon

    Chalker, Mrs Lynda

    Kellett-Bowman, Mrs Elaine

    Ridley, Hon Nicholas

    Channon, Paul

    Kershaw, Anthony

    Ridsdale, Julian

    Churchill, W. S.

    Kimball, Marcus

    Rifkind, Malcolm

    Clark, Alan (Plymouth, Sutton)

    King, Evelyn (South Dorset)

    Roberts, Wyn (Conway)

    Clark, William (Croydon S)

    Kitson, Sir Timothy

    Rossi, Hugh (Hornsey)

    Clarke, Kenneth (Rushcliffe)

    Knight. Mrs Jill

    Rost, Peter (SE Derbyshire)

    Cooke, Robert (Bristol W)

    Knox, David

    Royle, Sir Anthony

    Cope, John

    Lamont, Norman

    Sainsbury, Tim

    Cormack, Patrick

    Langford-Holt, Sir John

    Scott, Nicholas

    Corrie, John

    Latham, Michael (Melton)

    Scott-Hopkins, James

    Costain, A. P.

    Lawrence, Ivan

    Shaw, Giles (Pudsey)

    Crawford, Douglas

    Lawson, Nigel

    Shaw, Michael (Scarborough)

    Dean, Paul (N Somerset)

    Le Marchant, Spencer

    Shelton, William (Streatham)

    Dodsworth Geoffrey

    Lester, Jim (Beeston)

    Shepherd, Colin

    Drayson, Burnaby

    Lewis, Kenneth (Rutland)

    Shersby, Michael

    du Cann, Rt Hon Edward

    Lloyd, Ian

    Silvester, Fred

    Durant, Tony

    Loveridge, John

    Sims, Roger

    Dykes, Hugh

    Luce, Richard

    Sinclair, Sir George

    Edwards, Nicholas (Pembroke)

    MacCormick, Iain

    Skeet, T. H. H.

    Evans, Gwynfor (Carmarthen)

    McCrindle, Robert

    Smith, Dudley (Warwick)

    Ewing, Mrs Winifred (Moray)

    Macfarlane, Neil

    Smith, Timothy John (Ashfield)

    Eyre, Reginald

    MacGregor, John

    Speed, Keith

    Fairbairn, Nicholas

    Ma-Kay, Andrew (Stechford)

    Spence, John

    Fairgrieve, Russell

    Macmillan, Rt Hon M. (Farnnam)

    Spicer, Jim (W Dorset)

    Farr, John

    McNair-Wilson, M. (Newbury)

    Spicer, Michael (S Worcester)

    Fell, Anthony

    McNair-Wilson, P. (New Forest)

    Sproat, Iain

    Finsberg, Geoffrey

    Madel, David

    Stalnton, Keith

    Fisher, Sir Nigel

    Marshall, Michael (Arundel)

    Stanbrook, Ivor

    Fletcher, Alex (Edinburgh N)

    Marten, Neil

    Stanley, John

    Ftetcher-Cooke, Charles

    Mates, Michael

    Steen, Anthony (Wavertree)

    Forman, Nigel

    Mather, Carol

    Stewart, Rt Hon Donald

    Fox, Marcus

    Maude, Angus

    Stewart, Ian (Hitchin)

    Fraser, Rt Hon H. (Stafford & St)

    Maxwell-Hyslop, Robin

    Stokes, John

    Galbraith, Hon T. G. D.

    Meyer, Sir Anthony

    Stradling Thomas, J.

    Gardiner, George (Reigate)

    Miller, Hal (Bromsgrove)

    Tapsell, Peter

    Gardiner, Edward (S Fylde)

    Mills, Peter

    Taylor, R. (Croydon NW)

    Gilmour, Sir John (East Fife)

    Miscampbell, Norman

    Taylor, Teddy (Cathcart)

    Glyn, Dr Alan

    Mitchell, David (Basingstoke)

    Tebbit, Norman

    Goodhart, Philip

    Moate, Roger

    Temple-Morris, Peter

    Goodlad, Alastair

    Monro, Hector

    Thatcher, Rt Hon Margaret

    Gorst, John

    Montgomery, Fergus

    Thomas, Rt Hon P. (Hendon S)

    Gow, Ian (Eastbourne)

    Moore, John (Croydon C)

    Thompson, George

    Question put: That the amendment be made to the proposed clause:—
    The House divided: Ayes 248, Noes 259.

    Townsend, Cyril D.

    Walters, Dennis

    Wilson, Gordon (Dundee E)

    van Straubenzee, W. R.

    Warren, Kenneth

    Winterton, Nicholas

    Vaughan, Dr Gerard

    Watt, Hamish

    Young, Sir G. (Ealing, Acton)

    Viggera, Peter

    Weatherill Bernard

    Younger, Hon George

    Wakeham, John

    Wells, John

    Walder, David (Clitheroe)

    Whitelaw, Rt Hon William

    TELLERS FOR THE AYES:

    Walker, Rt Hon P. (Worcester)

    Wiggin, Jerry

    Mr. Anthony Berry and

    Walker-Smith, Rt Hon Sir Derek

    Wigley, Dafydd

    Lord James Douglas-Hamilton.

    NOES

    Abse, Leo

    Evans, Ioan (Aberdare)

    MacKenzie, Rt Hon Gregor

    Allaun, Frank

    Evans, John (Newton)

    McNamara, Kevin

    Anderson, Donald

    Ewing, Harry (Stirling)

    Madden, Max

    Archer, Rt Hon Peter

    Faulds, Andrew

    Magee, Bryan

    Armstrong, Ernest

    Fernyhough, Rt Hon E.

    Mallalieu, J. P. W.

    Ashley, Jack

    Fitch, Alan (Wigan)

    Marks, Kenneth

    Ashton, Joe

    Fiannery, Martin

    Marshall, Dr. Edmund (Goole)

    Atkins, Ronald (Preston N)

    Fletcher, Tea (Darlington)

    Marshall, Jim (Leicester S)

    Atkinson, Norman (H'gey Tott'ham)

    Foot, Rt Hon Michael

    Mason, Rt Hon Roy

    Bagier, Gordon A. T.

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

    Maynard, Miss Joan

    Barnett, Guy (Greenwich)

    Freeson, Rt Hon Reginald

    Meacher, Michael

    Barnett, Rt Hon Joel (Heywood)

    Garrett, John (Norwich S)

    Mellish, Rt Hon Robert

    Bates, Alt

    Garrett, W. E. (Wallsend)

    Mikardo, Ian

    Benn, Rt Hon Anthony Wedgwood

    George, Bruce

    Millan, Rt Hon Bruce

    Bennett, Andrew (Stockport N)

    Gilbert, Rt Ron Dr John

    Miller, Dr M. S. (E Kilbride)

    Bidwell, Sydney

    Ginsburg, David

    Mitchell, Austin (Grimsby)

    Bishop, Rt Hon Edward

    Golding, John

    Mitchell, R. C. (Soton, Itchen)

    Blenkinsop, Arthur

    Gould, Bryan

    Molloy, William

    Booth, Rt Hon Albert

    Gourlay, Harry

    Moonman, Eric

    Boothroyd, Miss Betty

    Graham, Ted

    Morris, Alfred (Wythenshawe)

    Bottomley, Rt Hon Arthur

    Grant, John (Islington C)

    Morris, Rt Hon J. (Aberavon)

    Boyden, James (Bish Auck)

    Grimond, Rt Hon J.

    Moyle, Rt Hon Roland

    Bradley, Tom

    Grocott, Bruce

    Murray, Rt Hon Ronald King

    Bray, Dr Jeremy

    Hamilton, W. W. (Central Fife)

    Newens, Stanley

    Brown, Hugh D. (Provan)

    Hardy, Peter

    Noble, Mike

    Brown, Robert C. (Newcastle W)

    Harrison, Rt Hon Walter

    Oakes, Gordon

    Brown, Ronald (Hackney S)

    Hart, Rt Hon Judith

    Ogden, Eric

    Buchan, Norman

    Hattersley, Rt Hon Roy

    Orbach, Maurice

    Buchanan, Richard

    Hayman, Mrs Helene

    Orme, Rt Hon Stanley

    Callaghan, Jim (Mlddleton & P)

    Healey, Rt Hon Denis

    Ovenden, John

    Campbell, Ian

    Heffer, Eric S.

    Owen, Rt Hon Dr David

    Canavan, Dennis

    Hooley, Frank

    Palmer, Arthur

    Carmichael, Neil

    Horam, John

    Pardoe, John

    Carter, Ray

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

    Park, George

    Carter-Jones, Lewis

    Howells, Geraint (Cardigan)

    Pavitt, Laurie

    Cartwright, John

    Hoyle, Doug (Nelson)

    Pendry, Tom

    Clemitson, Ivor

    Huckfleld, Les

    Perry, Ernest

    Cocks, Rt Hon Michael (Bristol S)

    Hughes, Mark (Durham)

    Phipps, Dr Colin

    Cohen, Stanley

    Hushes. Robert (Aberdeen N)

    Powell, Rt Hon J. Enoch

    Coleman, Donald

    Hughes, Roy (Newport)

    Prescott, John

    Concannon, Rt Hon John

    Hunter, Adam

    Price, C. (Lewisham W)

    Cook, Robin F. (Edin C)

    Irvine, Rt Hon Sir A. (Edge Hill)

    Price, William (Rugby)

    Corbett, Robin

    Irving, Rt Hon S. (Dartford)

    Radice, Giles

    Cox, Thomas (Tooting)

    Jackson, Colin (Brighouse)

    Rees, Rt Hon Merlyn (Leeds S)

    Craigen, Jim (Maryhill)

    Jackson, Miss Margaret (Lincoln)

    Richardson, Miss Jo

    Crawshaw, Richard

    Janner, Greville

    Roberts, Albert (Normanton)

    Cronin, John

    Jay, Rt Hon Douglas

    Roberts, Gwilym (Cannock)

    Crowther, Stan (Rotherham)

    Jeger, Mrs Lena

    Robertson, George (Hamilton)

    Cunningham, G. (Islington S)

    Jenkins, Hugh (Putney)

    Robinson, Geoffrey

    Cunningham, Dr J. (Whiteh)

    John, Brynmor

    Roderick, Caerwyn

    Dalyell, Tam

    Johnson, James (Hull West)

    Rodgers, George (Chorley)

    Davidson, Arthur

    Johnson, Walter (Derby S)

    Rodgers, Rt Hon William (Stockton)

    Davies, Bryan (Enfield N)

    Jones, Alec (Rhondda)

    Rooker, J. W.

    Davies, Rt Hon Denzil

    Jones, Dan (Burnley)

    Roper, John

    Davies, Ifor (Gower)

    Kaufman, Rt Hon Geraid

    Rose, Paul B.

    Davis, Clinton (Hackney C)

    Kelley, Richard

    Ross, Stephen (Isle of Wight)

    Deakins, Eric

    Kerr, Russell

    Ross, Rt Hon W. (Kilmarnock)

    Dean, Joseph (Leeds West)

    Kilroy-Silk, Robert

    Rowlands, Ted

    de Freitas, Rt Hon Sir Geoffrey

    Kinnock, Neil

    Ryman, John

    Dell, Rt Hon Edmund

    Lanbie, David

    Sandelson, Neville

    Dempsey, James

    Lamond, James

    Sedgemore, Brian

    Dewar, Donald

    Latham, Arthur (Paddington)

    Sever, John

    Doig, Peter

    Leadbitter, Ted

    Shaw, Arnold (llford South)

    Dormand, J. D.

    Lestor, Miss Joan (Eton & Slough)

    Sheldon, Rt Hon Robert

    Douglas-Mann, Bruce

    Lever, Rt Hon Harold

    Shore, Rt Hon Peter

    Dunnett, Jack

    Lewis, Ron (Carlisle)

    Silkin, Rt Hon S. C. (Dulwich)

    Dunwoody, Mrs Gwyneth

    Loyden, Eddie

    Silverman, Julius

    Eadie, Alex

    Luard, Evan

    Skinner, Dennis

    Edge, Geoff

    Lyons, Edward (Bradford W)

    Smith, Rt. Hon. John (N Lanarkshire)

    Edwards, Robert (Wolv SE)

    Mabon, Rt Hon Dr J. Dickson

    Snape, Peter

    Ellis, John (Brigg & Scun)

    McCartney, Hugh

    Spearing, Nigel

    Ellis, Tom (Wrexham)

    McDonald, Dr Oonagh

    Spriggs, Leslie

    Evans, Fred (Caerphilly)

    McGuire, Michael (Ince)

    Stewart, Rt Hon M. (Fulham)

    Stoddart, David

    Tomney, Frank

    Willey, Rt Hon Frederick

    Stott, Roger

    Torney, Tom

    Williams, Rt Hon Shirley (Hertford)

    Strang, Gavin

    Tuck, Raphael

    Williams, Sir Thomas (Warrington)

    Strauss. Rt Hon G. R.

    Urwln, T. W.

    Wilson, Rt Hon Sir Haroid (Huytor)

    Summerskill, Hon Dr Shirley

    Walker, Harold (Doncaster)

    Wilson, William (Coventry SE)

    Swain, Thomas

    Walker, Terry (Kingswood)

    Wise, Mrs Audrey

    Taylor, Mrs Ann (Bolton W)

    Watkins, David

    Woodall, Alec

    Thomas, Mike (Newcastle E)

    Watkinson, John

    Woof, Robert

    Thomas, Ron (Bristol NW)

    Weetch, Ken

    Wriggiesworth, Ian

    Thorne, Stan (Preston South)

    Weitzman, David

    Young, David (Bolton E)

    Thorpe, Rt Hon Jeremy (N Devon)

    Wellbeloved, James

    Tierney, Sydney

    White, Frank R. (Bury)

    TELLERS FOR THE NOES:

    Tiley, John

    White, James (Pollok)

    Mr, James Hamilton and

    Tinn, James

    Whitehead, Phillip

    Mr. A. W. Staliard.

    Tomlinson, John

    Whitlock, William

    Question accordingly negatived.
    Clause added to the Bill.

  New Clause No. 49

    SCHEDULE D DEDUCTION OF PAYMENTS TO TRUSTEES
    "(1) Any sum expended by the company concerned or, in the case of a group scheme, by a participating company in making a payment to the trustees of an approved scheme shall be included—

    (a) in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by that company, or

    (b) if that company is an investment company within the meaning of section 304 of the Taxes Act or a company in the case of which that section applies by virtue of section 305 of that Act, in the sums to be deducted as expenses of management in computing the profits of the company for the purposes of corporation tax,

    if, and only if, one of the conditions in subsection (2) below is fulfilled.
    (2) The conditions referred to in subsection (1) above are—

    (a) that before the expiry of the relevant period the sum in question is applied by the trustees in the acquisition of shares for appropriation to individuals who are eligible to participate in the scheme by virtue of their being or having been employees or directors of the company making the payment; and

    (b) that the sum is necessary to meet the reasonable expenses of the trustees in administering the scheme.

    (3) For the purposes of subsection (2)(a) above, 'the relevant period' means the period of nine months beginning on the day following the end of the period of account in which the sum in question is charged as an expense of the company incurring the expenditure or such longer period as the Board may allow by notice in writing given to that company.
    (4) For the purposes of this section, the trustees of an approved scheme shall be taken to apply sums paid to them in the order in which the sums are received by them.".—[Mr. Robert Sheldon.]
    Brought up, and read the First time.
    5.15 p.m.
    Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.
    Mr. Deputy Speaker (Mr. Oscar Murton): It will be convenient to take at the same time the following Government amendments:
    No. 86, in schedule 8, page 74, line 14, at end insert—
    "(1A) Where the company concerned has control of another company or companies, the scheme may he expressed to extend to all or any of the companies of which it has control; and in this Schedule a scheme which is expressed so to extend is referred to as a 'group scheme' and, in relation to a group scheme, the expression participating company' means the company concerned or a company of which for the time being the company concerned has control and to which for the time being the scheme is expressed to extend.".
    NO. 159, in clause 49, page 45, line 27, at end insert
    "'group scheme' and, in relation to such a scheme, 'participating company' have the meaning assigned by paragraph 1(1A) of that Schedule".
    Mr. Sheldon: This new clause has been tabled to make clear the situation concerning the deductibility for corporation tax purposes of money spent by companies on profit sharing under the approved schemes made available to them in the Finance Bill of this year.
    The hon. Member for Norfolk, South (Mr. MacGregor), the CBI and others have asked for clarification as to the precise circumstances under which deductions are allowable under the schedule D rules. The purpose of the clause is to make clear what the rules are.
    In subsection (2) we have specified two conditions to enable sums to qualify for deduction. First, the sums must be used to purchase shares within nine months of the end of the accounting period. Second, the amounts paid must be the amounts necessary to meet the reasonable expenses of the trustees.

    1293
    Amendment no. 86 relates to group schemes. We shall come to a number of others in due course. It provides that if a company which establishes a profit-sharing scheme controls another company or companies, its scheme or schemes can extend to all or any of its subsidiaries. This was done in response to representations in Committee and from outside. Amendment no. 159 is drafting and consequential.
    Mr. John MacGregor: I am in this somewhat unaccustomed position on the Front Bench because I handed the profit-sharing clauses for the Opposition in Committee and put forward the substance of these amendments. I am grateful to the Financial Secretary for meeting his commitments and bringing them forward. There are several other related amendments later.
    This whole scheme has been much improved by our Committee debates and by the efforts of the Conservative Party, supported sometimes by the Liberals. We should still like more generous tax reliefs, and we shall come to that matter later.
    We are pleased with the drafting of new clause no. 49. It meets our fundamental point about expenses, on which companies were in a good deal of uncertainty. The time limit also is reasonable, although we may wish later to extend the relevant period in the light of how it works. We shall want to monitor the extra nine months after the end of the financial year.
    Subsection (3) gives the Revenue flexibility to allow a longer period in notice in writing given to the company. It may not always be possible, perhaps because of market conditions, for companies to appropriate shares exactly when the trustees may wish. We may need the flexibility and I hope that the Revenue will use it.
    Amendment no. 86 meets the point made firmly in Committee and which worried many companies that might wish to introduce these schemes—that the administrative complexities would be enormous if they were to have separate schemes for every subordinate company within a holding company or group. The amendment makes possible a single scheme for a group. We are glad of these
    1294
    changes, which remove some difficulties and restrictions.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

  New Clause No. 51

    REPAYMENT OF TAX PAID UNDER POLICE REGULATIONS
    '(1) The Board shall repay to police authorities any tax paid by those authorities by reason of the regulations mentioned in subsection (2) below which required police authorities to discharge any tax liability of members of police forces arising in consequence of the provision of free accommodation); and no person other than a police authority shall be entitled to any repayment or credit in respect of tax paid as aforesaid unless he has made an application in that behalf to the Board or an inspector before the coming into force of this section.
    (2) The regulations referred to above are—

    (a) Regulation 30A of the Police Regulations 1952;

    (b) Regulation 40A of the Police (Scotland) Regulations 1956;

    (c) any regulation subsequently in force and corresponding to either of those mentioned above.

    (3) Subsection (1) above shall also apply to tax paid by the Ministry of Home Affairs for Northern Ireland or the Police Authority for Northern Ireland by reason of Article 8A of the Royal Ulster Constabulary Allowances (Rent and Compensatory Grant) Order 1963 or of any corresponding provision subsequently in force, but any tax so paid by the Ministry shall be repaid to the Authority.
    (4) This section shall be deemed to have come into force on 7th July 1978.'.—[Mr. Robert Sheldon.]
    Brought up, and read the First time.
    Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.
    This follows the decision of the High Court in 1976 in the case of Langley v. Appleby that the provision of living accommodation for police officers does not result in liability to tax. Under police regulations, the police authorities have been liable to payment of tax arising from the provision of living accommodation for their officers. Now that the court has held that such tax is not due, repayments will need to be made to those who paid the tax. It is anomalous that because the tax was paid on behalf of the police officers, it is only they, who have not

    1295
    paid the tax, who in law can claim the repayment. The clause puts right an omission in the original regulations and ensures that the tax will be repaid to those who paid it.
    Mr. MacGregor: We welcome the new clause, although it is odd that it was not dealt with earlier, since it was clear that it would he necessary. As the new clause was put down late, we have not been able to take outside representations into account. However, it seems fairly straightforward.
    Did any other groups, in the public or private sector, have to face tax on their job-related accommodation and might they need a similar provision? Or is this problem peculiar to the police because it was the local authorities which paid the tax?
    Since we were among those urging that job-related accommodation should be dealt with in this way, we have no wish to oppose the new clause.
    Mr. Anthony Nelson: I, too, welcome the new clause. Subsection (4) says that it will come into force on 7th July 1978. Has any estimate been made in the Treasury of the amount which will be repaid?
    Mr. Robert Sheldon: In answer to the hon. Member for Norfolk, South (Mr. MacGregor), a private employer obviously could provide living accommodation for his employees. What is clearly exceptional and distinguishes the treatment we seek to give the police authorities is that they were under a statutory obligation to pay the tax, and the courts have relieved them of that necessity. Our estimate is that the sum involved is up to £20 million, with possibly something extra for interest.
    Mr. MacGregor: Are there any companies in the private sector which may have had similar arrangements and whose employees therefore will not get this retrospective tax benefit? Or does this apply only to police authorities?
    Mr. Sheldon: I am sorry that I do not have any knowledge of what arrangements were made by individual companies, but that surely is not the point at issue. The police authorities were instructed by statute to act in this way. The recent court case showed that there
    1296
    was a difference between the original interpretation and what the courts actually found. Therefore, tax refunds must be made available to the police authorities. There is no comparable situation in the private sector.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

  New Clause No. 52

    DEDUCTION RATE FOR SUB-CONTRACTORS IN THE CONSTRUCTION INDUSTRY
    'Section 69(4) of the Finance (No. 2) Act 1975 (which requires deductions to be made from payments to certain sub-contractors in the construction industry) shall have effect in relation to payments made on or after 6th November 1978 with the substitution for the words "34 per cent." of the words "33 per cent.".'—[Mr. Robert Sheldon.]
    Brought up, and read the First time.
    5.30 p.m.
    Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.
    This new clause reduces the deduction to be made from sub-contractors without certificates from 34 per cent. to 33 per cent. This follows from the Committee stage amendment which reduced the basic rate from 34 per cent. to 33 per cent. The new clause is consequential on it.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

  New Clause No. 63

    VEHICLES EXCISE DUTY: GREAT BRITAIN
    '(1) For section 7(2) of the Vehicles (Excise) Act 1971 there shall be substituted—
    "(2) A mechanically propelled vehicle shall not be chargeable with any duty under this Act by reason of its use by or for the purposes of a person ('a disabled person') suffering from a physical defect or disability or by reason of its being kept for such use if—

    (a) it is registered under this Act in the name of that person; and

    (b) he has obtained, or is eligible for, a grant under paragraph 2 of Schedule 2 to the National Health Service Act 1977 in relation to that vehicle or is in receipt of a mobility allowance; and

    (c) no other vehicle registered in his name under this Act is exempted from

    1297
    duty under this subsection or section 7 of the Finance Act 1971;

    and for the purposes of this subsection a vehicle shall be deemed to be registered in the name of a disabled person in receipt of a mobility allowance if it is registered in the name of a person appointed pursuant to regulations under the Social Security Act 1975 to exercise any of his rights or powers or in the name of a person nominated for the purposes of this subsection by the disable person or by a person so appointed.".
    (2) So much of section 13 of the Finance Act 1976 as excludes a person entitled to a mobility allowance from the exemption from duty conferred by section 7 of the Finance Act 1971 shall cease to have effect.
    (3) In section 7 of the Finance Act 1971 after paragraph (c) there shall be inserted the words "and—
    (d) no vehicle exempted from duty under section 7(2) of the Vehicles (Excise) Act 1971 is (or by virtue of that provision is deemed to be) registered in his name under that Act.".
    (4) Section 26(1)(c) of the Vehicles (Excise) Act 1971 (offences in respect of licence etc.) shall apply also to any document in the form of a licence which in pursuance of regulations made under that Act is issued in respect of a vehicle exempted from duty under the provisions mentioned in subsections (1) and (3) above; and section 26(2)(a) of that Act (false declarations in connection with applications for a licence) shall apply also in relation to any declaration required by any such regulations to be made in respect of any vehicle so exempted.
    (5) This section shall come into force on 1st December 1978.'.—[Mr. Robert Sheldon.]
    Brought up, and read the First time.
    Mr. Robert Sheldon: I beg to move, That the clause be read a Second time.
    Mr. Deputy Speaker: With this we may also discuss the following:
    Amendment (b), leave out '1st December' and insert '1st September'.

  New Clause No. 64

    VEHICLES EXCISE DUTY: NORTHERN IRELAND
    '(1) For section 7(2) of the Vehicles (Excise) Act (Northern Ireland) 1972 there shall be substituted—
    "(2) A mechanically propelled vehicle shall not be chargeable with any duty under this Act by reason of its use by or for the purposes of a person ('a disabled person') suffering from a physical defect or disability or by reason of its being kept for such use if—

    (a) it is registered under this Act in the name of that person; and

    1298

    (b) he has obtained, or is eligible for, a grant under Article 30(3) of the Health and Personal Social Services (Northern Ireland) Order 1972 in relation to that vehicle or is in receipt of a mobility allowance; and

    (c) no other vehicle registered in his name under this Act is exempted from duty under this subsection or subsection (2A);

    and for the purposes of this subsection a vehicle shall be deemed to be registered in the name of a disabled person in receipt of a mobility allowance if it is registered in the name of a person appointed pursuant to regulations under the Social Security (Northern Ireland) Act 1975 to exercise any of his rights or powers or in the name of a person nominated for the purposes of this subsection by the disabled person or by a person to appointed."
    (2) So much of section 13 of the Finance Act 1976 as excludes a person entitled to a mobility allowance from the exemption from duty conferred by section 7(2A) of the said Act of 1972 shall cease to have effect.
    (3) In the said section 7(2A) after paragraph (b) there shall be inserted the words "and
    (c) no vehicle exempted from duty under subsection (2) is (or by virtue of that subsection is deemed to be) registered in his name under this Act."
    (4) Section 26(c) of the said Act of 1972 (offences in respect of licence etc.) shall apply also to any document in the form of a licence which in pursuance of regulations made under that Act is issued in respect of a vehicle exempted from duty under section 7(2) or (2A) of that Act.
    (5) This section shall come into force on 1st December 1978.'.
    Amendment (d) to new clause no. 64, leave out '1st December' and insert '1st September'.

  New Clause No. 61

    AMENDMENT OF SECTION 13 OF THE FINANCE ACT 1976
    'Section 13 of the Finance Act 1976 shall cease to have effect from such date as the Treasury may by order prescribe, being a date not later than 31st December 1978, and in section 7(2)(b) of the Vehicles Excise Act 1971 after the words "vehicle" there shall be inserted the words "or a mobility allowance under section 37A of the Social Security Act 1975,".'.
    Government amendments nos. 132 to 135.
    Mr. Sheldon: This new clause deals with Great Britain while new clause no. 64 deals with Northern Ireland; together they meet the undertaking I gave in Committee to my hon. Friends the Members for Lichfield and Tamworth (Mr. Grocott) and Rossendale

    1299
    (Mr. Noble) and the hon. Member for Braintree (Mr. Newton) to exempt those receiving the mobility allowance from the vehicle excise duty.
    The new clause also provides exemption for vehicles registered in the name of a nominee of a disabled person. Before July 1976, there was no mobility assistance except for those who ran a car, the trike. Since 1976 we have introduced improvements in mobility allowances, and as from this month the allowance is being increased to £10 a week.
    Implementation of the undertaking I gave in Committee will take effect as from 1st December of this year. I regret this delay caused by the problems faced by the Department of Health and Social Security in producing exemption certificates. These are used by disabled people in applying for the excise licence. The Department needs to identify from its computer records the names and addresses of those who receive mobility allowances. The Department has a number of other problems which have caused the delay, which I regret. I am assured by the Department of Health and Social Security that 1st December 1978 is the earliest date by which it can implement the decision I announced in Committee.
    I believe that the new clause will be well received and I ask the House to accept it.
    Mr. Newton: I was responsible for exerting some of the pressure in Committee which has resulted in this new clause being brought forward. I repeat what I said in Committee. This is a very welcome move indeed to all who are concerned with the interests and problems of the disabled. I say that without qualification. I wish to raise a number of queries and to refer briefly to my amendment (b). I ask the Financial Secretary for elucidation on some of the points arising from this proposal.
    I refer specifically to the question of the date on which the proposal comes into force. I apologise in that, because of the, speed at which the business has progressed, I did not hear the whole of the Financial Secretary's remarks. He may already have dealt with this point. I do not immediately see why this proposal should be delayed until 1st December. It does not seem to be an enormously complex administrative problem to iden-
    1300
    tify these people. After all, we have an elaborate and allegedly sophisticated computer complex at Swansea which masterminds our vehicle excise duty system. Unless it has been subject to yet another failure in addition to the many that we have already experienced, I do not believe that it would be impossible for the computer to cope with this task rather faster than the new clause provides and the Financial Secretary has suggested.
    Amendment (d) is tabled as a probing amendment but we shall certainly require considerable justification for delaying this important concession until the end of the year rather than introducing it earlier—I have suggested 1st September.
    I emphasised the importance and urgency of this new clause. The background to it is not simply a general desire on both sides of the House to be as generous as we can to the disabled. It arises, as I argued at some length in proposing my own new clause in Committee, out of the doubt whether the Motability scheme can get properly off the ground unless some additional financial support is channelled into it by some such means as this. It appears that there is virtually no car which can be put on the road for the £10 a week at which the mobility allowance now stands, even with all the advantages of the Motability leasing scheme. Unless we ensure that this scheme is fully implemented we shall not merely fail to improve the position of many disabled people who currently have trikes but are moving over to the mobility allowance, but we shall make the situation worse for those who have been mobile, because there will be an inadequate mobility allowance with which they cannot properly run, license and insure a car. These people will be driven off the road and lose the mobility which they already have. We shall require the Financial Secretary to prove that this task of implementing the new clause cannot be done before 1st December.
    There is one other major issue I wish to raise so that the Minister may give a specific assurance. I refer to the way in which this exemption will work for disabled people who are not drivers. I have had one or two letters on this point and one in particular from a constituent of my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton), which I have passed on to him. This letter is

    1301
    from a man who was given a private car allowance under one of the old schemes. He was sent a form for claiming vehicle excise duty exemption. After applying for the exemption it was made clear to him that he could benefit from it only if he was in the car on every occasion when it was used.
    This man has written to me pointing out that it seems that if he failed always to go out in the car when his wife was driving it he would not qualify for the exemption. He points out that he does not necessarily want to go out with her every time that she does the shopping. Accordingly, he reached the conclusion that the exemption was not worth applying for and would do more harm than good.
    If that is the case with the old vehicle excise duty exemption scheme, I would like an assurance that this new scheme would be a great deal more flexible. That is why I sought, in amendment (a) to new clause no. 63 which has not been selected, to insert the word "substantially" in the proposed new section 7(2) of the Vehicles (Excise) Act 1971. The purpose of the amendment was to enable me to probe this point. Can we be absolutely clear and have it firmly on the record that this exemption will apply to vehicles which are not necessarily to be driven by the disabled person, that the vehicles do not have to be used only for the purposes of the disabled person?
    Mr. Lewis Carter-Jones: New clause no. 63 makes this perfectly clear in my opinion when it speaks of a vehicle being used
    "by or for the purposes of"
    a disabled person. That does not of necessity involve the driver.
    Mr. Newton: I think that that is probably right, but in view of the correspondence that I have had, and because of the problems that have been reported to me, I can say no more at this stage. It is right that we should make sure that these points are firmly on the record.
    I rather agree with the hon. Member that it is quite clear from the clause that the disabled passenger is covered. I am less certain whether there is any risk at all of an administrative decision which says, in effect, that the car has to be used
    1302
    only for the purposes of the disabled passenger, or whether it could be argued—as apparently it has in other cases—that, if the disabled passenger is not always in the car, the exemption does not arise. That would seem to me to be an odd and, indeed, a ridiculous situation, but it has been quite specifically reported to me in relation to another aspect of vehicle excise duty exemption. I know from other letters that I have received that there is concern about disabled passengers. I feel that the Minister should be asked to make the matter absolutely and categorically clear, if only to remove any anxieties which may exist outside the House.
    That is as much as I should like to say, Mr. Deputy Speaker. It may be that other hon. Members will wish to make a broader case as to how much more we need to do even now to relieve the tax burden on vehicles for disabled people, and not least to try to remove some of the remaining problems of the Motability scheme. At least with the new clause we have gone some way. We have gained an important concession, and it is right that everyone should welcome it this afternoon.
    Mr. J. Enoch Powell: In order to avoid any separate debate on new clause no. 64, Mr Deputy Speaker, perhaps I may say in this short debate that the concession is no less welcome in Northern Ireland than in the rest of the United Kingdom. It may appear to hon. Members to be clumsy—and, indeed, it is clumsy—that we have to have a separate clause to produce the same effect in Northern Ireland, because vehicle excise was a subject on which of yore the Parliament of Northern Ireland legislated.
    I dare say, however, since vehicle excise duty must be uniform throughout the United Kingdom—and, indeed, has been kept uniform by convention—that we shall in due course get round to legislating on that subject for the whole of the United Kingdom, and that will make for avoidance of the sort of additional clause which is necessary to achieve the beneficent purpose in this case.
    Mr. Mike Noble: I intend to be very brief, Mr. Speaker. I wish to thank my right hon. Friend and his colleagues in the Treasury for carrying out

    1303
    the assurance which they gave us in Committee that a Government clause of this kind would be brought forward to deal with this problem.
    If I have a criticism of the clause, it would be with regard to the starting date. I think that it would be a shame to spoil the ship for a ha'porth of tar and to hold back this substantial benefit to many people in greatest need simply for perhaps, administrative purposes. I hope that, even at this late date, my right hon. Friend will re-examine the position and see whether there is any way in which the starting date for this benefit can be brought forward.
    I was pleased to note the comments of my hon. Friend the Member for Eccles (Mr. Carter-Jones) about the Bill. I know that he is an expert in this matter and I accept his assurances, as well as my right hon. Friend's assurances, that with regard to non-drivers the interpretation of the clause will be as wide as possible.
    I, too, have had letters about this matter, and some of my constituents have expressed some anxiety about the position of non-drivers. More requires to be done in this respect. A significant feature of the post that I have received concerning the clause has been that it has inserted the kind of boundary line that we have for old people with regard to television licences. The only way to get rid of that boundary is by constantly pushing it outwards and bringing more and more people into the net. I hope that we shall see the proposal as a start on that process rather than as an end process.
    I listened with care to the remarks of the hon. Member for Braintree (Mr. Newton). As I said in Committee, I accept entirely his sincerity in speaking on behalf of the disabled and other disadvantaged groups. I know the amount of work that he has done for them. But I am worried when I hear Opposition Members carping and saying that a £10 mobility allowance will not put a car on the road. After all, the mobility allowance was brought in by this Government, not by a Conservative Government, and £10 is a very substantial benefit indeed. It has enabled many people, who would otherwise never get out of their homes, to get outside and to take jobs and enter into the social activities of the community.
    1304
    5.45 p.m.
    As I pointed out to the hon. Gentleman in Committee, I do not doubt his sincerity, and I do not doubt that he, whether in Government or Opposition, will press the case for the disabled, but my doubt is whether his party, should it ever become the party of Government, would, despite the efforts of the hon. Gentleman, sustain the momentum in improving facilities for the disabled which has been so substantially created by this Government. But welcome the clause.
    Mr. Paul Channon: I do not want to get into an argument with the hon. Member for Rossendale (Mr. Noble) as to which party is likely to do more for the disabled. I think there is a keen determination on each side of the House to do the utmost for the disabled, and I am sure that that will be a continuing factor of our public life, whichever party is in office at any particular moment.
    I merely rise to say, Mr. Deputy Speaker, that I, too, welcome the new clause, but I have a number of queries arising out of specific constituency cases which have been put to me. I ask the Financial Secretary to give some answers, if he can, to the questions which have been put to me, because there is still a very great deal of confusion on the part of my constituents as to what is to happen.
    I should like first to deal with the point raised by my hon. Friend the Member for Braintree (Mr. Newton) about disabled passengers. I do not know what the law is at present, but, if there is any difficulty about it, this new clause will not change it, because the wording of the relevant section of the Finance Act 1972, which copies the earlier Acts dealing with this point, is precisely the is any difficulty about it, this new clause If there have been problems in the past, they are continued today, because there is no change in the wording. It would be very helpful if the Financial Secretary could tell the House what is the position in regard to disabled passengers and disabled people who on occasion do not drive the vehicle themselves.
    I should like next to deal with the point raised with me by a number of my constituents who have come to see me about it. They are at present holders of the private car allowance. On 5th July

    1305
    they will transfer to the mobility allowance. One of the features of the mobility allowance, until the new clause becomes law, is that those who receive it are not exempt from vehicle excise duty. I am told that on 5th July, therefore, about 17,000 people who change from the private car allowance to the mobility allowance will have to pay vehicle excise duty from 5th July until 1st December.
    Perhaps the Financial Secretary will tell us how this is to be operated from now on. It seems to be a ridiculous state of affairs that for a few months these people will have to pay vehicle excise duty and go through the mechanics of surrendering the discs they may have at present, paying vehicle excise duty for a number of months, and then afterwards becoming exempt.
    I understand that the issue of the order books for mobility allowance will have to be staggered—the Minister with responsibility for the disabled will know far more about this than anybody else—because it is difficult to send out 17,000 books at once. What will happen in the case of those who find it difficult to meet the lump sum payment which they will have to make in order to take out a vehicle excise licence? Am I right in thinking that they will now need to take out the licence only for the period to 1st December, and that it would be quite wrong for them to take out an annual licence? Am I right in thinking that the best advice to them is to take out a three-month licence and to renew it in October? But in any event it is asking a lot of a disabled person to go through this rigmarole when on 1st December he will be exempt from vehicle excise duty.
    Would it not be very much simpler if some mechanism could be found to enable these people to be exempted straight away? If such a mechanism cannot be found, could not the provision be made retrospective from 1st December to the relevant date? The people involved will have to go through a great deal of inconvenience, and a fair amount of cost to them will also arise. I know of some cases in which it would be very difficult for the people concerned to find the lump sum which it would be necessary for them to pay for the vehicle excise duty prior to receiving their mobility allowance book.
    1306
    It would be most helpful if the Financial Secretary could tell us what the position of these people is, how they are to be helped by the Government and what administrative action is now to be taken in the light of this new clause. I urge the Financial Secretary to heed the voices of his hon. Friends, as well as of Opposition Members, and, if he can, to introduce this exemption at an earlier date. If that is not possible, I hope that he will at least back-date the concession so that those concerned will get a refund on 1st December for the money which they will have to spend at the present time.
    Mr. Carter-Jones: I shall be brief. I should like to refer to the speech of the right hon. Member for Down, South (Mr. Powell). He pointed out that new clause no. 63 and new clause no. 64 were separate because of the Northern Ireland dichotomy. I share his concern, and I hope that all sides of the House will support the efforts to get the Chronically Sick and Disabled Persons Act on to the Northern Ireland statute book, even though it is eight years late.
    If that Act gets on to the statute book, the advantage is that with the scheme promoted by Outset, Northern Ireland will at least know how many disabled people live there. I hope that hon. Members will give this Bill a fair wind when it goes into Committee, and I hope that it gets a Third Reading on the nod. Perhaps we shall not have this dichotomy again.
    I believe that the vehicle excise duty relief is very valuable indeed. It is crucial with regard to the margin of the buying of Motability. It may assist a substantial number of people. One intriguing anomaly which arises is that when we introduced mobility allowance it was intended for people who were not mobile to use in any way that they wanted. If they wanted to take a taxi to a shop once a week, they could spend the money in that way. There was no restriction. I hope that no hon. Member will complain that the VED grant means that they are entitled to £50 a year more. This is a crucial new clause. I hope that hon. Members will combine so that it passes without a Division.
    Mr. Nelson: I should like to add my voice to the welcome which has been given to the new clause by many hon.

    1307
    Members. In doing so I should like to pay a particular tribute to my hon. Friend the Member for Braintree (Mr. Newton). He has been in the vanguard of those who have been pressing for this for some time, although I am the first to recognise that it has received a large measure of support from hon. Members on all sides of the House. I am particularly pleased to see present the Minister for the disabled to give his support to this debate, as I am sure he has done to the proposals in Committee.
    However, without in any way wishing to throw cold water on the new clause, I should like to sound one note of caution. It is important to point out that we are making a qualitative judgment as between classes of disabled people. As a general rule, I believe that we should aim to give priority in terms of financial assistance and relief to those in the greatest need. It is not clear that in providing this relief one is helping those disabled people who are most in need.
    Like many other hon. Members, I represent a constituency with a fair share of disabled people. But perhaps because I have a particularly large section of elderly people, the number of disabled is a little higher than average. In addition, because it is a rural district, in many cases not served by bus services, there is a particular mobility difficulty for many elderly people. But the severely disabled, who are unable to have their own car or to drive it, do rely on transport provided by other means, whether commercially obtained or obtained from friends or neighbours. In these situations they will not be able to benefit from this relief.
    I think I am right in saying that the cost will be about £3 million. To the extent that this is a particular relief applicable to those who will be able to use their own vehicles, and will in many cases encourage and enable them to work and provide for themselves where they might not otherwise be able to do so, I welcome the new clause. I believe that it is an exception to the general principle which I am outlining.
    When my hon. Friend the Member for Braintree suggested that we might use this as an extension of the sort of relief that we provide in various other areas, whether it is to the disabled generally or to old
    1308
    people, I think that there are dangers. If we are consistently to provide relief on the cost of various services, whether public transport, the provision of telephones or whatever, it seems to me that this is tackling the problem from the wrong end. Even though it may be a small amount of money when shared among the individuals concerned, I should like to see the help go into their pockets. Let people, whether disabled, elderly or whatever, who are in receipt of assistance from the Government of the day decide how they want to spend the money. Let them decide whether they want to spend it on an extra packet of cigarettes, on an extra bit of heating in their homes or on travel to the nearest town in order to go on an outing. I prefer to see choice resting in the hands of the individual rather than the State making the choice on his behalf.
    Mr. Carter-Jones: One of the things which worried some of us when the mobility allowance was introduced was that it would be used as income and not for mobility. There was nothing that we could do about it. The people get the money and spend it in whichever way they like although perhaps not for what we intended. But, as I said, there was nothing that we could do about it.
    Mr. Nelson: If my remarks are followed logically, that is a situation with which I do not wholly disagree. I welcome that freedom being placed in their hands. It is the selective qualitative judgment of Government or Departments in handing out reliefs of which I am suspect. I am more in favour of providing individuals, according to their disability whether age, illness or whatever, with the financial means of making the choice as to the sort of services and needs they require. Those needs will vary from area to area. I have described the special needs of the disabled in my own area.
    With that slight cautionary note, which is applicable to any arguments for extensions of relief in other areas of need, I nevertheless welcome the new clause. It will not cost a great deal of money, and it will undoubtedly assist those disabled people at a time when the absolute amount of money provided by way of mobility allowance is not as high as many of us would like to see. However, we

    1309
    recognise that it is as much as the Government of the day can afford to provide, and to that extent we welcome it.
    Mr. Peter Brooke: I rise briefly to intervene, really following the speech of the hon. Member for Rossendale (Mr. Noble) who took part in this particular debate in Committee. On that occasion he made remarks similar to those which he has made today. The hon. Member for Rossendale, and those of us who served on the Committee, will remember that his speech was preceded by one from his hon. Friend the Member for Lichfield and Tamworth (Mr. Grocott). At that stage I thought that was a disagreeable speech. I think that the hon. Member for Lichfield and Tamworth thought so, too, because he apologised for introducing a sour note. From my own experience throughout the 80 hours on which the Committee met, I thought that was the one really disagreeable moment that we had. The hon. Member for Lichfield and Tamworth was lucky that on that occasion we were seeking to make progress rapidly in order to meet our informal commitments to the Government, and as a result he got off lightly in terms of the speech which he made.
    I regret that in a way the hon. Member for Rossendale has reintroduced this note into today's debate. He referred to a comparison between the two parties and their interest in the disabled. I think I am right in saying that if one looks at the manifestos of the two major parties in the 1964 General Election, one will find that neither of them found it possible to say a word about the disabled, and that this is a cause which all of us in this House have come to much later than we should have done.
    Mr. Noble: As I tried to make clear, obviously very badly, it is not a question of an attitude towards the disabled. It is an attitude towards public expenditure. It is whether the Conservative Party, with its commitment to reducing public expenditure, will be able to maintain the momentum of increasing benefits for the disabled within that kind of general environment.
    Mr. Brooke: In that case I obviously owe a degree of apology to the hon. Gentleman. But he will know why I am
    1310
    responding in the way that I am in the light of the debate which we had upstairs.
    It seems to me very desirable, if possible, to maintain a bipartisan position in these sort of areas. When the hon. Member for Rossendale challenged my hon. Friend the Member for Braintree (Mr. Newton), I think that the hon. Gentleman should have acknowledged that my hon. Friend was genuinely seeking to improve the scheme which was under discussion.
    I realise that we cannot always be bipartisan. The Minister responsible for the disabled will remember a fairly fiery scene in Westminster Hall last year when the disabled were present in strength and when we were discussing amongst other objects the trike. Obviously there will be occasions when there is fairly violent dispute between the parties on certain issues or on certain Government decisions. But I hope that we can maintain a bipartisan position, and it is unfortunate if the motivations on either side of the House are challenged on issues which are as important as this issue.
    6.0 p.m.
    Sir G. Howe: As other right hon. and hon. Members have done, I welcome this new clause and I join those hon. Members who have paid tribute to my hon. Friend the Member for Braintree (Mr. Newton) for the commitment which he has shown to this cause and the work which he has done, with others, to promote the case which has now been accepted by the Government.
    As often happens on matters of this kind, we note the validity of the argument of my hon. Friend the Member for Chichester (Mr. Nelson), who expressed some anxiety about the value of a benefit which is tied in kind, as it were. We are always torn between the desire to increase the resources of the disabled generally and the wish to do something which is directed to a special need or qualification. Subject to that, there seems to be no one prepared to criticise this clause, and I can well understand that.
    The two matters raised by my hon. Friend the Member for Braintree in my view deserve a little more attention than we have had directed to them so far. The first is the difference in the operative

    1311
    date, which is the subject of his amendment, between 1st September and 1st December. He was supported by my hon. Friend the Member for Southend, West (Mr. Channon), who drew attention to the extreme desirability of getting the relief available as soon as possible and to the comparatively small number of people involved. The Minister told us about the administrative difficulties which would arise in several departments. I still find it difficult to believe that it is impossible to achieve a change of this kind, which has been in prospect for some time, by 1st September if it is the case that it extends to only 17,000 people. On the argument which has been presented to us so far, I shall be disposed to advise my right hon. and hon. Friends to support the amendment to advance the date from 1st December to 1st September.
    The other matter raised by my hon. Friend the Member for Braintree about the meaning of the clause may or may not have been dealt with substantially. I was not entirely convinced that his argument had been answered when he said that the phrase
    "by reason of its use by or for the purposes of a person … suffering from a physical defect or disability "
    was regarded as not being wide enough to cover some uses and would be made more secure by the insertion of the word "substantially". I know that that is not the amendment which has been selected, but it would be helpful if the Financial Secretary could deal with it. If some people have been challenged because of their use of vehicles of this kind for incidental shopping journeys without the disabled persons being present in the cars, that was not the intention of the House.
    Although the clause has been welcomed by both sides of the House, including the hon. Member for Eccles (Mr. Carter-Jones) and the hon. Member for Rossendale (Mr. Noble), both of whom have a genuine interest in this subject, I, too, join my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke) in regretting that the hon. Member for Rossendale appeared to be introducing a partisan element into the discussion of the attitude of the House towards the disabled. My recollection is that most of the new benefits which have been brought on to the statute book, especially those for the disabled, have been
    1312
    generated by one Government and introduced by another. There is a kind of rolling stream, and it is a matter of chance which Government do it. Certainly the last Government played their part in this.
    Of course, the hon. Member for Rossendale is entitled to express his view that a Government who are intent on being wise in their management of public expenditure—as he thinks—will not be able to do as well as he would like for those who are disabled and deserving of the help of their fellow citizens. The Opposition's answer to that is that only a Government who are prudent in their management of public expenditure and recognise the need to keep that under control will be able to restore economic stability, to conquer inflation and to restore the capacity of the economy to create the wealth out of which all benefits are provided. The hon. Member is entitled to his view, but he should not overlook the experience since the end of the war that there has been a 10 times larger growth in the average wealth of our citizens under Conservative Governments than under Labour Governments covering the same period. It is by adherence to that kind of sensible economic policy that we shall be able to do what we ought to do for the disabled as well as for everyone else in our society.
    Unless the Financial Secretary has a more convincing answer to the argument about the date than that which he has so far vouchsafed and which has failed to convince my hon. Friends, I shall invite the House to divide on amendment (b).
    Mr. Robert Sheldon: The right hon. and learned Member for Surrey, East (Sir G. Howe) should not be so touchy about the reasonable claim of the Government to credit for the expenditure of sums of money which the previous Government did not think fit to make available. The present Government face an Opposition who wish to reduce the level of public expenditure, and they have made no secret about it. I think that my hon. Friend the Member for Rossendale (Mr. Noble) was right to draw the distinction that he did, and I am rather surprised by the sensitiveness of the right hon. and learned Member and the hon. Member for the City of London and Westminster, South (Mr. Brooke) about what was, after all, a reasonable claim by my hon. Friend

    1313
    the Member for Rossendale in respect of what this Government had done.
    Mr. Carter-Jones: May I try to bring some peace into the Chamber? It is probably the all-party group and the Alf Morris Act which have enabled people not to oppose benefits for the disabled. I think that we could go a lot further. But the fact that we have been able to introduce a number of improvements and benefits since 1970 is due to a Private Member's Act, supported by both sides of the House, raising the expectations of the disabled.
    Mr. Sheldon: My hon. Friend is extremely active in this area, and I know the frequent representations on these matters which he makes to me. I am grateful to him, as I know the House is. I am grateful, too, for his explanation of the wording about the use of a vehicle by another person. He was quite right to draw attention to this part of the new clause which provides that a vehicle will not be chargeable with any vehicle excise duty by reason of its use by or for the purposes of a disabled person. That is a safeguard which a disabled person has in making wider use of the vehicle than perhaps the hon. Member for Braintree (Mr. Newton) had in mind.
    The wording of the new clause restricts the exemption to vehicles used exclusively by or for the purposes of a disabled person. Perhaps I can make the position doubly clear by repeating that the vehicle can be used to transport a disabled person or to do his errands. I think that that is an elaboration of the point made by my hon. Friend the Member for Eccles (Mr. Carter-Jones).
    Mr. John Cope: To take an extreme example, if another member of the disabled person's family is taken ill, will the right hon. Gentleman confirm that the car cannot be used to take him to hospital even if the vehicle is driven by the disabled driver? It will not be for his purposes. It will be for the purpose of the other sick person in the family.
    Mr. Sheldon: In such a case, the vehicle is used by the disabled person. If the disabled person is driving someone to hospital, presumably that is use by the disabled person. I do not agree with the hon. Gentleman's interpretation.
    Mr. Newton: I am sorry to pursue this point. Perhaps I might read the sentence from a letter which put the point into my mind. I received a letter from a person in Woodbridge who has recently been awarded a private car allowance and is therefore eligible for exemption under another scheme. He says:
    "I accordingly applied for this at the local licensing authority—Greyfriars Ipswich—and was informed that the vehicle could only be driven by me, and that my wife, who also drives, would be unable to do so unless accompanied by me."
    That may be wrong. But if it is right, this clause has been drawn differently from earlier vehicle excise duty exemption clauses. If I could have a categorical assurance from the Minister that this is wrong, all the problems would he solved.
    Mr. Sheldon: I cannot do any more than repeat what I have said. It is not for me to adjudicate between what has been written to the hon. Gentleman, and what has happened between the parties concerned. What I have stated is the technical position—that the vehicle can be used to transport the disabled person or to do his errands. I think that that is clear and definitive for this purpose.
    Sir G. Howe: One can well see the importance, from the point of view of the Inland Revenue, of seeing that there are some safeguards on the availability of this relief. The only thing that the House is concerned about is to be clear just how narrowly the matter is defined.
    The new clause refers to
    "its use by or for the purposes of a person ('a disabled person')".
    The Financial Secretary has said that that covers use by the disabled person driving it, or being taken as a passenger in it or it being driven for an errand on his behalf. That is a fairly narrowly confined privilege when it is being used effectively in the service of a disabled person, and could well result in the position described by my hon. Friend the Member for Braintree. The licensing office could say to the wife of a disabled person that she may not drive the vehicle save only for going about his purposes, on his behalf and in his service. If that is the intention of the clause, the House will be interested to be told that.
    Mr. Sheldon: I am not sure what the right hon. and learned Member has in mind. Exemption is provided in respect of a vehicle for the disabled person. It is not a vehicle to be used by a number of people including the disabled person. The interpretation of the use of the vehicle by the disabled person is as I have described it. I believe it meets with the demands of disabled people.
    The hon. Member for Southend, West (Mr. Channon) asked about those who are receiving mobility allowance in place of private car allowance, which carries vehicle excise duty exemption. Those people knew about the introduction of the mobility allowance and they welcomed it. We all know that from our postbags. They will be able, at 1st December, to get a refund for part of the licence if they take out a licence for a longer period than that which is required.
    6.15 p.m.
    On the implementation date—the main matter that seems to be troubling hon. Members—I was as anxious as anybody, having conceded the principle, to see implementation at the earliest possible date. We tried to get it as quickly as possible. I made some representations to the Department of Health and Social Security on this matter. The difficulty lies not with the Driver and Vehicle Licensing Centre at Swansea, but with the DHSS because it will be up to it to issue the mobility allowance recipients with certificates that will enable them to get the exemption when they send in their applications for excise licences.
    The first step by the DHSS will be to identify from their computer records the names and addresses of those who receive the mobility allowance and then to circu

    Division No. 255]

    AYES

    [6.18 p.m.

    Adley, Robert

    Bottomley, Peter

    Clark, Alan (Plymouth, Sutton)

    Altken, Jonathan

    Bowden, A. (Brighton, Kemptown)

    Clark, William (Croydon S)

    Alison, Michael

    Boyson, Dr Rhodes (Brent)

    Clarke, Kenneth (Rushcliffe)

    Arnold, Tom

    Braine, Sir Bernard

    Cockcroft, John

    Atkins, Rt Hon H. (Spelthorne)

    Brittan, Leon

    Cooke, Robert (Bristol W)

    Atkinson, David (B'mouth, East)

    Brocklebank-Fowler, C.

    Cope, John

    Bain, Mrs Margaret

    Brooke, Hon Peter

    Cormack, Patrick

    Baker, Kenneth

    Brotherton, Michael

    Corrie, John

    Banks, Robert

    Brown, Sir Edward (Bath)

    Costain, A. P.

    Bell, Ronald

    Bryan, Sir Paul

    Crawford, Douglas

    Bendall, Vivian

    Buchanan-Smith, Alick

    Crouch, David

    Bennett, Sir Frederic (Torbay)

    Buck, Antony

    Crowder, F. P.

    Bennett, Dr Reginald (Fareham)

    Budgen, Nick

    Davies, Rt Hon J. (Knutsford)

    Benyon, W.

    Bulmer, Esmond

    Dean, Paul (N Somerset)

    Biffen, John

    Butler, Adam (Bosworth)

    Dodsworth, Geoffrey

    Biggs-Davison, John

    Carlisle, Mark

    Douglas-Hamilton, Lord James

    Blaker, Peter

    Chalker, Mrs Lynda

    Drayson, Burnaby

    Body, Richard

    Channon, Paul

    du Cann, Rt Hon Edward

    Boscawen, Hon Robert

    Churchill, W. S.

    Durant, Tony

    late all of them to inquire whether they wish to claim the exemption in their own names or, as is allowed, to nominate someone else. The DHSS then has to prepare on special security paper certificates which will enable the mobility allowance recipient or the person he has nominated to claim the exemption. The time lag is caused by this process.
    I should say something about the numbers of beneficiaries because the right hon. and learned Gentleman has made an error in his calculations. There are 100,000 prospective exemptions from vehicle excise duty—that is the number of prospective recipients of the mobility allowance. Our estimate is that there will be about 70,000 who will claim VED exemption.
    There will be very substantial numbers of claims, not all in the names of those claiming the mobility allowance. It is right to take from the DHSS its assessment of the delay needed to implement the scheme. I wish the scheme could be introduced sooner, but the clause takes account of the advice that we have received. Despite pressure to introduce it earlier, the DHSS says it is unable to do so. Therefore, I ask the House to accept the new clause.
    Question put and agreed to.
    Clause read a Second time.
    Amendment (b) proposed to the proposed clause, in subsection (5), leave out '1st December' and insert '1st September'.[Mr. Newton.]
    Question put, That the Amendment be made:—
    The House divided: Ayes 256, Noes 274.

    Dykes, Hugh

    Lamont, Norman

    Ridsdale, Julian

    Edwards, Nicholas (Pembroke)

    Langford-Holt, Sir John

    Rlfkind, Malcolm

    Elliott, Sir William

    Latham, Michael (Melton)

    Roberts, Wyn (Conway)

    Emery, Peter

    Lawrence, Ivan

    Rossi, Hugh (Hornsey)

    Evans, Gwynfor (Carmarthen)

    Lawson, Nigel

    Rost, Peter (SE Derbyshire)

    Ewing, Mrs Winifred (Moray)

    Le Marchant, Spencer

    Royle, Sir Anthony

    Eyre, Reginald

    Lester, Jim (Beeston)

    Sainsbury, Tim

    Fairbairn, Nicholas

    Lewis, Kenneth (Rutland)

    St. John-Stevas, Norman

    Feirgrieve Russell

    Lloyd, Ian

    Scott, Nicholas

    Farr, John

    Loveridge, John

    Scott-Hopkins, James

    Fell, Anthony

    Luce, Richard

    Shaw, Giles (Pudsey)

    Finsberg, Geoffrey

    MacCormick, Iain

    Shaw, Michael (Scarborough)

    Fisher, Sir Nigel

    McCrindle, Robert

    Shelton, William (Streatham)

    Fletcher, Alex (Edinburgh N)

    MacGregor, John

    Shepherd, Colin

    Fietcher-Cooke, Charles

    MacKay, Andrew (Stechford)

    Shersby, Michael

    Forman, Nigel

    Macmillan, Rt Hon M. (Farnham)

    Silvester, Fred

    Fox, Marcus

    McNair-Wilson, M. (Newbury)

    Sims, Roger

    Fraser, Rt Hon H. (Stafford & St)

    McNair-Wilson, P. (New Forest)

    Sinclair, Sir George

    Galbraith, Hon T. G. D.

    Madel, David

    Skeet, T. H. H.

    Gardiner, George (Reigate)

    Marshall, Michael (Arundel)

    Smith, Dudley (Warwick)

    Gardiner, Edward (S Fylde)

    Marten, Neil

    Smith, Timothy John (Ashfield)

    Gilmour, Sir John (East Fife)

    Mates, Michael

    Speed, Keith

    Glyn, Dr Alan

    Mather, Carol

    Spence, John

    Godber, Rt Hon Joseph

    Maude, Angus

    Spicer, Jim (W Dorset)

    Goodhart, Philip

    Maxwell-Hyslop, Robin

    Spicer, Michael (S Worcester)

    Goodlad, Alastair

    Meyer, Sir Anthony

    Sproat, Iain

    Gorst, John

    Miller, Hal (Bromsgrove)

    Stainton, Keith

    Gow, Ian (Eastbourne)

    Mills, Peter

    Stanbrook, Ivor

    Gower, Sir Raymond (Barry)

    Miscampbell, Norman

    Stanley, John

    Grant, Anthony (Harrow C)

    Mitchell, David (Basingstoke)

    Steen, Anthony (Wavertree)

    Gray, Hamish

    Moate, Roger

    Stewart, Ian (Hitchin)

    Grieve, Percy

    Monro, Hector

    Stokes, John

    Hamilton, Archibald (Epsom & Ewell)

    Montgomery, Fergus

    Tapsell, Peter

    Hamilton, Michael (Salisbury)

    Moore, John (Croydon C)

    Taylor, R. (Croydon NW)

    Hampson, Dr Keith

    Morgan, Geraint

    Taylor, Teddy (Cathcart)

    Hannam, John

    Morgan-Giles, Rear Admiral

    Tebbit, Norman

    Harrison, Col Sir Harwood (Eye)

    Morris, Michael (Northampton S)

    Temple-Morris, Peter

    Harvie Anderson, Rt Hon Miss

    Morrison, Charles (Devizes)

    Thatcher, Rt Hon Margaret

    Haselhurst, Alan

    Morrison, Hon Peter (Chester)

    Thomas, Dafydd (Merioneth)

    Hastings, Stephen

    Neave, Airey

    Thomas, Rt Hon P. (Hendon S)

    Havers, Rt Hon Sir Michael

    Nelson, Anthony

    Thompson, George

    Hawkins, Paul

    Neubert, Michael

    Townsend, Cyril D.

    Hayhoe, Barney

    Newton, Tony

    Trotter, Neville

    Hicks, Robert

    Normanton, Tom

    van Straubenzee, W. R.

    Hodgson, Robin

    Nott, John

    Vaughan, Dr Gerard

    Holland, Philip

    Onslow, Cranley

    Viggers, Peter

    Hordern, Peter

    Oppenheim, Mrs Sally

    Wakeham, John

    Howe, Rt Hon Sir Geoffrey

    Osborn, John

    Walder, David (Clitheroe)

    Howell, David (Guildford)

    Page, John (Harrow West)

    Walker, Rt Hon P. (Worcester)

    Howell, Ralph (North Norfolk)

    Page, Rt Hon R. Graham (Crosby)

    Walker-Smith, Rt Hon Sir Derek

    Hunt, David (Wirral)

    Page, Richard (Workington)

    Walters, Dennis

    Hunt, John (Ravensbourne)

    Parkinson, Cecil

    Warren, Kenneth

    Hurd, Douglas

    Pattie, Geoffrey

    Watt, Hamish

    Hutchison, Michael Clark

    Percival, Ian

    Weatherill, Bernard

    Irving, Charles (Cheltenham)

    Peyton, Rt Hon John

    Wells, John

    James, David

    Pink, R. Bonner

    Whitelaw, Rt Hon William

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

    Prentice, Rt Hon Reg

    Wiggin, Jerry

    Jessel, Toby

    Price, David (Eastleigh)

    Wigley, Dafydd

    Johnson Smith, G. (E Grinstead)

    Prior, Rt Hon James

    Wilson, Gordon (Dundee E)

    Jopling, Michael

    Pym, Rt Hon Francis

    Winterton, Nicholas

    Joseph, Rt Hon Sir Keith

    Rathbone, Tim

    Wood, Rt Hon Richard

    Kaberry, Sir Donald

    Rees, Peter (Dover & Deal)

    Young, Sir G. (Ealing, Acton)

    Kellett-Bowman, Mrs Elaine

    Rees-Davies, W. R.

    Younger, Hon George

    Kershaw, Anthony

    Renton, Rt Hon Sir D. (Hunts)

    Kimball, Marcus

    Ronton, Tim (Mid-Sussex)

    TELLERS FOR THE AYES:

    King, Evelyn (South Dorset)

    Rhodes James, R.

    Mr. John Stradling Thomas and

    Knight, Mrs Jill

    Rhys Williams, Sir Brandon

    Mr. Anthony Berry.

    Knox, David

    Ridley, Hon Nicholas

    NOES

    Abse, Leo

    Benn, Rt Hon Anthony Wedgwood

    Buchan, Norman

    Allaun, Frank

    Bennett, Andrew (Stockport N)

    Buchanan, Richard

    Anderson, Donald

    Bidwell, Sydney

    Callaghan, Jim (Middleton & P)

    Archer, Rt Hon Peter

    Bishop, Rt Hon Edward

    Campbell, Ian

    Armstrong, Ernest

    Blenkinsop, Arthur

    Canavan, Dennis

    Ashley, Jack

    Booth, Rt Hon Albert

    Carmichael, Nell

    Ashton, Joe

    Boothroyd, Miss Betty

    Carter, Ray

    Atkins, Ronald (Preston N)

    Bottomley, Rt Hon Arthur

    Carter-Jones, Lewis

    Atkinson, Norman (H'gey Tott'ham)

    Boyden, James (Bish Auck)

    Cartwright, John

    Bagier, Gordon A. T.

    Bradley, Tom

    Clemitson, Ivor

    Barnett, Guy (Greenwich)

    Bray, Dr Jeremy

    Cocks, Rt Hon Michael (Bristol S)

    Barnett, Rt lion Joel (Heywood)

    Brown, Hugh D. (Provan)

    Cohen, Stanley

    Bates, Alf

    Brown, Robert C. (Newcastle W)

    Concannon, Rt Hon John

    Bean, R. E.

    Brown, Ronald (Hackney S)

    Cook, Robin F. (Edin C)

    Corbett, Robin

    Jay, Rt Hon Douglas

    Richardson, Miss Jo

    Cowans, Harry

    Jeger, Mrs Lena

    Roberts, Albert (Normanton)

    Cox, Thomas (Tooting)

    Jenkins, Hugh (Putney)

    Roberts, Gwilym (Cannock)

    Craigen, Jim (Maryhill)

    John, Brynmor

    Robertson, George (Hamilton)

    Crawshaw, Richard

    Johnson, James (Hull West)

    Robinson, Geoffrey

    Cronin, John

    Johnson, Walter (Derby S)

    Roderick, Caerwyn

    Crowther, Stan (Rotherham)

    Johnston, Russell (Inverness)

    Rodgers, George (Chorley)

    Cunningham, G. (Islington S)

    Jones, Alec (Rhondda)

    Rodgers, Rt Hon William (Stockton)

    Cunningham, Dr J. (Whiteh)

    Jones, Dan (Burnley)

    Rooker, J. W.

    Dalyell, Tam

    Judd, Frank

    Roper, John

    Davidson, Arthur

    Kaufman, Rt Hon Gerald

    Rose, Paul B.

    Davies, Bryan (Enfield N)

    Kerr, Russell

    Ross, Stephen (Isle of Wight)

    Davies, Rt Hon Denzil

    Kilroy-Silk, Robert

    Ross, Rt Hon W. (Kilmarnock)

    Davies, Ifor (Gower)

    Kinnock, Nell

    Rowlands, Ted

    Davis, Clinton (Hackney C)

    Lamble, David

    Ryman, John

    Deakins, Eric

    Lamond, James

    Sandelson, Neville

    Dean, Joseph (Leeds West)

    Latham, Arthur (Paddington)

    Sedgemore, Brian

    de Freitas, Rt Hon Sir Geoffrey

    Lestor, Miss Joan (Elton & Slough)

    Selby, Harry

    Dell, Rt Hon Edmund

    Lever, Rt Hon Harold

    Sever, John

    Dempsey, James

    Lewis, Ron (Carlisle)

    Shaw, Arnold (llford South)

    Dewar, Donald

    Litterick, Tom

    Sheldon, Rt Hon Robert

    Doig, Peter

    Loyden, Eddie

    Shore, Rt Hon Peter

    Dormand, J. D.

    Luard, Evan

    Short, Mrs Renée (Wolv NE)

    Douglas-Mann, Bruce

    Lyon, Alexander (York)

    Silkin, Rt Hon S. C. (Dulwich)

    Dunnett, Jack

    Lyons, Edward (Bradford W)

    Silverman, Julius

    Dunwoody, Mrs Gwyneth

    Mabon, Rt Hon Dr J. Dickson

    Skinner, Dennis

    Eadle, Alex

    McCartney, Hugh

    Smith, Cyril (Rochdale)

    Edge, Geoff

    McDonald, Dr Oonagh

    Smith, Rt. Hon. John (N Lanarkshire)

    Edwards, Robert (Wolv SE)

    McElhone, Frank

    Snape, Peter

    Ellis, John (Brigg & Scun)

    MacFarcuhar, Roderick

    Spearing, Nigel

    Ellis, Tom (Wrexham)

    McGuire, Michael (Ince)

    Spriggs, Leslie

    English, Michael

    MacKenzie, Rt Hon Gregor

    Stallard, A. W.

    Evans, Fred (Caerphilly)

    McMillan, Tom (Glasgow C)

    Steel, Rt Hon David

    Evans, loan (Aberdare)

    McNamara, Kevin

    Stewart, Rt Hon M. (Fulham)

    Evans, John (Newton)

    Madden, Max

    Stoddart, David

    Ewing, Harry (Stirling)

    Magee, Bryan

    Stott, Roger

    Faulds, Andrew

    Mallalieu, J. P. W.

    Strang, Gavin

    Fernyhough, Rt Hon E.

    Marks, Kenneth

    Strauss, Rt Hon G. R.

    Fitch, Alan (Wigan)

    Marshall, Dr. Edmund (Goole)

    Summerskill, Hon Dr Shirley

    Flannery, Martin

    Marshall, Jim (Leicester S)

    Swain, Thomas

    Foot, Rt Hon Michael

    Ford, Ben

    Mason, Rt Hon Roy

    Taylor, Mrs Ann (Bolton W)

    Fowler, Gerald (The Wrekin)

    Maynard, Miss Joan

    Thomas, Jeffrey (Abertillery)

    Freeson, Rt Hon Reginald

    Meacher, Michael

    Thomas, Mike (Newcastle E)

    Freud Clement

    Mellish, Rt Hon Robert

    Thomas, Ron (Bristol NW)

    Garrett, John (Norwich S)

    Mikardo, Ian

    Thome, Stan (Preston South)

    Garrett, W.E. (Wallsend)

    Millan, Rt Hon Bruce

    Thorpe, Rt Hon Jeremy (N Devon)

    George, Bruce

    Miller, Dr M. S. (E Kilbride)

    Tierney, Sydney

    Gilbert, Rt Hon Dr John

    Mitchell, R. C. (Solon, ltchen)

    Tiley, John

    Ginsburg, David

    Holloy, William

    Tinn, James

    Golding, John

    Moonman, Eric

    Tomlinson, John

    Gould Bryan

    Morris, Alfred (Wythenshawe)

    Tomney, Frank

    Gourlay, Harry

    Morris, Rt Hon Charles R.

    Torney, Tom

    Grant, John (Islington C)

    Morris, Rt Hon J. (Aberavon)

    Tuck, Raphael

    Grimond, Rt Hon J.

    Moyle, Rt. Hon. Roland

    Urwin, T. W.

    Grocott, Bruce

    Newens, Stanley

    Walker, Harold (Doncaster)

    Hamilton, James (Bothwell)

    Noble, Mike

    Walker, Terry (Kingswood)

    Hamilton, W. W. (Central Fife)

    Oakes, Gordon

    Watkins, David

    Hardy. Peter

    Ogden, Eric

    Watkinson, John

    Harrison, Rt Hon Walter

    O'Halloran, Michael

    Weetch, Ken

    Hart, Rt Hon Judith

    Orbach, Maurice

    Weitzman, David

    Havers, Rt Hon Sir Michael

    Orme, Rt Hon Stanley

    Wellbeloved, James

    Hayman, Mrs Helene

    Ovenden, John

    White, James (Pollok)

    Healey, Rt Hon Denis

    Owen, Rt Hon Dr David

    Whitehead. Phillip

    Heffer, Eric S.

    Palmer, Arthur

    Whitlock, William

    Hooley, Frank

    Pardoe, John

    Willey, Rt Hon Frederick

    Horam, John

    Park, George

    Williams, Rt Hon Shirley (Hertford)

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

    Parker, John

    Williams, Sir Thomas (Warrington)

    Hoyle, Doug (Nelson)

    Parry, Robert

    Wilson, Rt Hon Sir Harold (Huyton)

    Huckfield, Les

    Pavitt, Laurie

    Wilson, William (Coventry SE)

    Hughes, Mark (Durham)

    Pendry, Tom

    Wise, Mrs Audrey

    Hughes, Robert (Aberdeen N)

    Penhaligon, David

    Woodall, Alec

    Hughes, Roy (Newport)

    Perry, Ernest

    Woof, Robert

    Hunter, Adam

    Phipps, Dr Colin

    Wrigglesworth, Ian

    Irvine, Rt Hon Sir A. (Edge Hill)

    Powell, Rt Hon J. Enoch

    Young, David (Bolton E)

    Irving, Rt Hon S. (Dartford)

    Prescott, John

    Jackson, Colin (Brighouse)

    Price, C. (Lewisham W)

    TELLERS FOR THE NOES:

    Jackson, Miss Margaret (Lincoln)

    Price, William (Rugby)

    Mr, Donald Coleman and

    Janner, Greville

    Radice, Giles

    Mr. Frank R. White.

    Question accordingly negatived.
    Clause added to the Bill.

  New Clause No. 64

    VEHICLES EXCISE DUTY: NORTHERN IRELAND
    (1) For section 7(2) of the Vehicles (Excise) Act (Northern Ireland) 1972 there shall be substituted—
    "(2) A mechancially propelled vehicle shall not be chargeable with any duty under this Act by reason of its use by or for the purposes of a person ('a disabled person') suffering from a physical defect or disability or by reason of its being kept for such use if—

    (a) it is registered under this Act in the name of that person; and

    (b) he has obtained, or is eligible for, a grant under Article 30(3) of the Health and Personal Social Services (Northern Ireland) Order 1972 in relation to that vehicle or is in receipt of a mobility allowance; and

    (c) no other vehicle registered in his name under this Act is exempted from duty under this subsection or subsection (2A);

    and for the purposes of this subsection a vehicle shall be deemed to be registered in the name of a disabled person in receipt of a mobility allowance if it is registered in the name of a person appointed pursuant to regulations under the Social Security (Northern Ireland) Act 1975 to exercise any of his rights or powers or in the name of a person nominated for the purposes of this subsection by the disabled person or by a person so appointed."
    (2) So much of section 13 of the Finance Act 1976 as excludes a person entitled to mobility allowance from the exemption from duty confered by section 7(2A) of the said Act of 1972 shall cease to have effect.
    (3) In the said section 7 (2A) after paragraph (b) there shall he inserted the words"and (c) no vehicle exempted from duty under subsection (2) is (or by virtue of that subsection is deemed to be) registered in his name under this Act."
    (4) Section 26(c) of the said Act of 1972 (offences in respect of licence etc.) shall apply also to any document in the form of a licence which in pursuance of regulations made under that Act is issued in respect of a vehicle exempted from duty under section 7(2) or (2A) of that Act.
    (5) This section shall come into force on 1st December 1978:.—[Mr. Bates]
    Brought up, read the First and Second time, and added to the Bill.

  New Clause No. 5

    RELIEF FOR PREMIUMS SECURING PERMANENT HEALTH INSURANCE
    'If the claimant has paid any premium in respect of a policy of insurance against loss of income caused by his being unable to work through illness or injury, he shall be entitled to a deduction from the income tax with
    1322
    which he is chargeable equal to income tax at the basic rate on the amount of the premium.'. [Mr. Newton.]
    Brought up, and read the First time.
    6.30 p.m.
    Mr. Newton: I beg to move, That the clause be read a Second time.
    Mr. Deputy Speaker: With this we may take new clause no. 6—Tax treatment of income from permanent health insurance—
    'Where an individual's income for any year of assessment consists of or includes amounts paid as benefits arising from a policy of insurance against loss of income caused by his being unable to work through illness or injury, those amounts shall not be investment income for the purposes mentioned in section 32(3) of the Finance Act 1971.'.
    Mr. Newton: The new clauses originate from a recommendation put to the Chancellor of the Exchequer by the Law Society in its pre-Budget recommendations. They relate to the tax treatment of premiums on, and the income secured from, policies for permanent health insurance.
    Quite a number of people, particularly the self-employed, find it necessary and prudent to take out policies, apart from any benefits they may be entitled to under the national insurance system, to protect themselves against the loss of income which may occur if they are unable to work for a long time as a result of ill health or an accident. This seems to be a perfectly sensible, legitimate and prudent thing to do for many people, perhaps especially for those who are self-employed.
    As the law stands, if a man takes out such an insurance there is no tax relief on the premiums and, if he loses income within the terms of the policy because of ill health or accident, the benefits will be taxable not as earned income, but as investment income. That seems to be wrong.
    There appears to be one qualification which allows income to be taxed as investment income. I have a letter from the Company Pensions Information Centre which says:
    "the current situation is that for policies where the benefits are expressed as being payable to the employee (whether it is a private or a group policy) these benefits will be liable for tax as unearned income under Schedule D

    1323
    of the Income and Corporation Taxes Act 1970.
    If on the other hand the benefits under a group policy are expressed as being payable to the employer as reimbursement of wages he is paying, then tax liability does not exist as this is merely an indemnifying amount. The benefit that the employee would receive is technically wages (and not the proceeds of the policy) and would then be subject to P.A.Y.E. tax."
    There is, therefore, an anomaly under which, if a policy is more or less by chance drawn up in one way, the benefit going to the individual will be treated as investment income and may be subject to the surcharge. However, if the policy is organised through the employer and is drawn up in another way, with the money being channelled through the employer in the form of something which legally counts as wages, only ordinary earned income tax will be payable. That is an anomaly within the overall anomaly which is difficult to defend.
    Against a background in which the self-employed, who, I imagine, are likely to be among those particularly affected by the new clauses, already feel deeply aggrieved by the inadequacy of the provision for them under the national insurance system in relation to the contributions they pay, it seems to add insult to injury to deny them relief on premiums paid to secure proper protection and then to tax as investment income any benefits they may secure if they take out such protection.
    This whole matter raises wider questions of the treatment of different sorts of income as investment income, but I wish to concentrate only on the relatively narrow point contained in the new clauses, which I commend to the House.
    Mr. Percy Grieve: I support the new clause moved cogently and succinctly by my hon. Friend the Member for Braintree (Mr. Newton), who drew attention to yet one more anomaly in our overall tax system. It illustrates that the heavier and more complex taxes become, the more anomalies are created and the less just becomes the whole tax and fiscal system.
    As my hon. Friend said, the distinctions drawn in our tax law between investment income and earned income bristle with anomalies. The most striking is the distinction drawn between what hap-
    1324
    pens to the man who provides for his old age by saving or setting aside capital and the man who provides by contributing to a pension which may be treated, in whole or in part, as earned income even after he has retired.
    It is clearly anomalous that someone who has provided against blindness, sickness accident or any of the adversities which may afflict a man should find that the income that he has provided for himself is treated as investment income and may be liable to the 15 per cent. surcharge. That is grossly unjust and that is why I support the new clauses.
    On the fundamental point of whether premiums should attract tax relief, they are very much in the same class as the premiums paid for life insurance which get some relief. On that basis, I commend both new clauses to the House.
    Mr. Joel Barnett: The hon. Member for Braintree (Mr. Newton) said that it was prudent for a man to take out health insurance, and I do not necessarily disagree with that. The question at issue is whether the premiums should be allowable for tax relief. New clause no. 6 seeks to make the income from such insurance ineligible for investment income surcharge.
    The hon. Gentleman said that he had spoken briefly because it was a relatively simple matter. In fact, it is a fundamental matter for the income tax system because the hon. Gentleman is seeking to make a fundamental change. The personal tax system is related to the capacity to pay, whether through the personal allowances or through the level of income. That has been a general rule. It was endorsed by the Royal Commission and it has generally been found acceptable. Once we start on the path of allowing relief on the ground that the personal choice of an individual in one instance is good and in another is not and that we should make an allowance on that item of expenditure that is good, we are making a fundamental change.
    No matter how much we may feel that we want to exempt a certain piece of expenditure, we should not pretend that we are dealing with a simple matter. It is a matter of great importance. Apart from that, it runs directly counter to what I thought was a general view of most hon. Members in the House, namely,

    1325
    that we want a minimum number of reliefs so as to get the basic rates of tax as low as possible. The more we start extending reliefs on what we believe might be meritorious items of expenditure, the more we narrow the tax base and are required, in meeting the amount of revenue needed, to maintain tax rates at a higher level than all of us wish to see. That is not a simple matter but a fundamental change.
    New clause no. 6 seeks to turn the income from sickness benefit into earned income. We appreciate that when people are sick or have had an accident we should have a great deal of sympathy for them. We would not want to harm them in any way. However, no one can dispute that the income paid under the policy is not earned income. It cannot be under any reasonable definition of the phrase.
    In any event, I assure the House that the situation is nothing like as serious as the hon. Member for Braintree and the hon. and learned Member for Solihull (Mr. Grieve) implied because of the way in which the law now operates. The income from such a policy is now assessable under case 3 of schedule D as an annual payment. To ensure that it is an annual payment that is being taxed, the Inland Revenue issued an extra-statutory concession—28(A)—under which assessments are not made until payments have been continued for a full year. That means that in practice at least one year of such benefit under the policy would not be liable to the investment income surcharge and would not be liable to income tax at all. In practice, it will be for much longer than a year that the income will not be liable to any tax, let alone the surcharge.
    Mr. Grieve: Does not what the right hon. Gentleman has said carry the implication that for a relatively short illness a man receives more favourable treatment than for a permanent disablement?
    Mr. Barnett: The hon. and learned Gentleman is turning to an entirely different matter. He is now talking about tax benefits for someone who is permanently disabled. With respect, the clauses are not seeking to deal with permanent disablement.
    I was saying that for the policies that we are talking about in new clause no. 5
    1326
    the income arising from them for one year, and probably nearer two years, will escape tax altogether. If we legislated to remove the investment income surcharge, clearly there would need to be a review. We cannot remove the surcharge from income when we are not charging it to tax. We would have to review the whole procedure and the treatment generally. We would have to re-examine how the scheme worked.
    I believe that the present system is welcomed by the vast majority of those receiving benefit from such policies. As I have said, they are not paying any tax. As for the investment income surcharge, which new clause no. 6 seeks to deal with, there is now an exemption from the surcharge for up to £1,700 a year. As the hon. and learned Gentleman implied in his intervention, a substantial premium would have to be paid for a very long time to produce investment income in excess of that figure so as to require the surcharge, to operate. In addition, it would be well over a year—probably nearer two years—before there was any tax liability.
    6.45 p.m.
    I am always willing to examine these matters to ascertain whether there is hardship, but as matters stand there does not seem to be a hardship that needs to be met by the acceptance of new clause no. 6. As I have said, new clause no. 5 proposes a fundamental change in our tax system. I cannot recommend it to the House.
    Mr. Nigel Lawson: I must confess that when listening to the Chief Secretary I wondered who on earth had written his brief. The right lion. Gentleman's speech was not up to his usual standard.
    My hon. Friend the Member for Braintree (Mr. Newton) deserves the congratulations of the House on having brought to our attention this small but important matter. It is especially important to those who are affected by it. As my hon. Friend said, the Law Society inspired him to draft the two clauses.
    It may be helpful if I deal with the Chief Secretary's arguments in the order in which the clauses appear on the Notice Paper. I confess that I find new clause no. 5 to be not entirely as compelling as new clause no. 6. The right hon.

    1327
    Gentleman was wholly wrong to say that it proposes a fundamental change. He knows as well as everyone else in the House that there is an allowance for life assurance premiums.
    Mr. Joel Barnett: That is the only one.
    Mr. Lawson: That has been allowed. It has been an important allowance for a long time. New clause no. 5 merely proposes an extension of that aspect of our fiscal system. It proposes a small and logical extension. To say that it would make a fundamental change in our tax system is nonsense.
    The compelling argument was deployed by my hon. Friend the Member for Braintree, who extremely cogently moved the classes, and my hon. and learned Friend the Member for Solihull (Mr. Grieve) that the income arising from the policies covered by the clauses should not attract the investment income surcharge. That is right.
    The right hon. Gentleman did not rest his case on the cost of the new clause. Obviously the cost would be negligible We do not need to worry about the cost He said that the income should be charged as investment income because it manifestly is not earned income. It seems that he has forgotten that in the past few years, as a result of pressure from the Opposition Benches, the Government have conceded that maintenance payments should no longer be subject to the investment income surcharge. Maintenance payments are in the hands of the wife who receives them. They are not earned income directly, but for tax purposes they are treated as earned income rather than investment income because they approach more closely earned income than investment income. That is the case that the Government have accepted. They should also accept that income in respect of earnings that have been forgone because of extended periods of illness approximate much more closely to earned income than investment income.
    The right hon. Gentleman destroyed his case by saying. first, that my hon. Friend was making a bad point, only to say that it is such a good point that there is an extra-statutory concession that goes part of the way to meeting it. He destroyed his case by saying that if it were not that there would be considerable hardship as a
    1328
    result of the operation of the investment income surcharge there would not have been the extra-statutory concession. He tried to say that the whole issue is covered by the threshold for the surcharge. He claimed—I did not take down his words verbatim—that a person would have to pay a very high premium to obtain an income of more than £1,700 a year if he became permanently ill. Perhaps the Chief Secretary will pay attention. I know that he finds great difficulty in listening to anybody except himself. I know that he loves the sound of his own voice, but perhaps he will pay attention to this point.
    In fact, the Chief Secretary is wrong about this matter as about others. The premium payable for a permanent health insurance policy is very low. Fortunately, most people do not suffer illness or injury which requires them to be out of work for very long periods—possibly years. Therefore, the premium is relatively low. It is conceivable that, with a modest premium, people could obtain more than the £1,700 threshold.
    The Chief Secretary totally failed to meet the indefensible anomaly brought to light by my hon. Friend the Member for Braintree (Mr. Newton) who compared the situation where a company insures an individual under one of these policies and the situation where the individual takes out a permanent life assurance policy. That is the nub of the point. If a company takes out insurance and collects money from the insurance company when a worker falls ill in order to make good his wages, that is held to be earned income and there is no investment income surcharge. Yet, if the individual on his own initiative, because the company is not prepared to do that, or for whatever reason—he may be self-employed and there may be no company to do it for him—takes out a permanent life assurance policy and the same sequence of events follows—the same illness and the same payment—because the money is paid direct to him, not via a company, that is regarded as unearned income and investment income surcharge is payable.
    For that reason, if for no other. I advise my right hon. and hon. Friends to support new clause no. 6 in the Lobby. I hope that my hon. Friend the Member for Braintree will assist by seeking leave to withdraw new clause no. 5.
    Mr. Newton: I beg to ask leave to withdraw the motion.
    Motion and clause, by leave, withdrawn.

  New Clause No. 6

    TAX TREATMENT OF INCOME FROM PERMANENT HEALTH INSURANCE
    'Where an individual's income for any year of assessment consists of or includes amounts

    Division No. 256]

    AYES

    [6.54 p.m.

    Adley, Robert

    Fisher, Sir Nigel

    MacKay, Andrew (Stechford)

    Aitken, Jonathan

    Fletcher, Alex (Edinburgh N)

    Macmillan, Rt Hon M. (Farnham)

    Alison, Michael

    Forman, Nigel

    McNair-Wilson, M. (Newbury)

    Arnold, Tom

    Fox, Marcus

    McNalr-Wilson, P. (New Forest)

    Atkins, Rt Hon H. (Spelthorne)

    Fraser, Rt Hon H. (Stafford & St)

    Madel, David

    Atkinson, David (B'mouth, East)

    Galbraith, Hon T. G. D.

    Marshall, Michael (Arundel)

    Bain, Mrs Margaret

    Gardiner, George (Reigate)

    Marten, Neil

    Baker, Kenneth

    Gardner, Edward (S Fylde)

    Mather, Carol

    Banks, Robert

    Gilmour, Sir John (East Fife)

    Maude, Angus

    Bell, Ronald

    Glyn, Dr Alan

    Maxwell-Hyslop, Robin

    Bendall, Vivian

    Goodhart, Philip

    Meyer, Sir Anthony

    Bennett, Sir Frederic (Torbay)

    Goodlad, Alastair

    Miller, Hal (Bromsgrove)

    Bennett, Dr Reginald (Fareham)

    Gow, Ian (Eastbourne)

    Mills, Peter

    Benyon, W.

    Gower, Sir Raymond (Barry)

    Miscampbell, Norman

    Berry, Hon Anthony

    Grant, Anthony (Harrow C)

    Mitchell, David (Basingstoke)

    Bitten, John

    Gray, Hamish

    Moate, Roger

    Biggs-Davison, John

    Grieve, Percy

    Monro, Hector

    Blaker, Peter

    Hall-Davis, A. G. F.

    Montgomery, Fergus

    Body, Richard

    Hamilton, Archibald (Epsom & Ewell)

    Moore, John (Croydon C)

    Boscawen, Hon Robert

    Hamilton, Michael (Salisbury)

    Morgan, Geralnt

    Bowden, A. (Brighton, Kemptown)

    Hampson, Dr Keith

    Morgan-Giles, Rear Admiral

    Bottomley, Peter

    Hannam, John

    Morrison, Charles (Devizes)

    Boyson, Dr Rhodes (Brent)

    Harrison, Col Sir Harwood (Eye)

    Morrison, Hon Peter (Chester)

    Braine, Sir Bernard

    Harvie Anderson, Rt Hon Miss

    Neave, Airey

    Brittan, Leon

    Haselhurst, Alan

    Nelson, Anthony

    Brocklebank-Fowler, C.

    Hastings, Stephen

    Neubert, Michael

    Brooke, Hon Peter

    Hawkins, Paul

    Newton, Tony

    Brotherton, Michael

    Hayhoe, Barney

    Normanton, Tom

    Bryan, Sir Paul

    Hicks, Robert

    Nott, John

    Buchanan-Smith, Alick

    Hodgson, Robin

    Onslow, Cranley

    Buck, Antony

    Holland, Philip

    Oppenheim, Mrs Sally

    Budgen, Nick

    Hordern, Peter

    Page, John (Harrow West)

    Bulmer, Esmond

    Howe, Rt Hon Sir Geoffrey

    Page, Rt Hon R. Graham (Crosby)

    Butler, Adam (Bosworth)

    Howell, David (Guildford)

    Page, Richard (Workington)

    Chalker, Mrs Lynda

    Howell, Ralph (North Norfolk)

    Parkinson, Cecil

    Channon, Paul

    Hunt, David (Wirral)

    Pattie, Geoffrey

    Churchill, W. S.

    Hunt, John (Ravensbourne)

    Percival, Ian

    Clark, Alan (Plymouth, Sutton)

    Hurd, Douglas

    Peyton, Rt Hon John

    Clark, William (Croydon S)

    Hutchison, Michael Clark

    Pink, R. Bonner

    Clarke, Kenneth (Rushcliffe)

    Irving, Charles (Cheltenham)

    Prentice, Rt Hon Reg

    Cockcroft, John

    James, David

    Price, David (Eastleigh)

    Cooke, Robert (Bristol W)

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

    Pym, Rt Hon Francis

    Cope, John

    Jessei,Toby

    Rathbone, Tim

    Cormack, Patrick

    Johnson Smith, G. (E Grinstead)

    Rees, Peter (Dover & Deal)

    Corrie, John

    Jopling, Michael

    Rees-Davles, W. R.

    Costain, A. P.

    Joseph, Rt Hon Sir Keith

    Renton, Rt Hon Sir D. (Hunts)

    Crawford, Douglas

    Kaberry, Sir Donald

    Renton, Tim (Mid-Sussex)

    Crowder, F. P.

    Kellett-Bowman, Mrs Elaine

    Rhodes James, R.

    Davies, Rt Hon J. (Knutsford)

    Kershaw, Anthony

    Rhys Williams, Sir Brandon

    Dean, Paul (N Somerset)

    Kimball, Marcus

    Ridley, Hon Nicholas

    Dodsworth, Geoffrey

    King, Evelyn (South Dorset)

    Ridsdale, Julian

    Douglas-Hamilton, Lord James

    Knight, Mrs Jill

    Rifkind, Malcolm

    Drayson, Burnaby

    Knox, David

    Roberts, Wyn (Conway)

    du Cann, Rt Hon Edward

    Lamont, Norman

    Rossi, Hugh (Hornsey)

    Durant, Tony

    Langford-Holt, Sir John

    Rost, Peter (SE Derbyshire)

    Dykes, Hugh

    Latham, Michael (Melton)

    Royle, Sir Anthony

    Edwards, Nicholas (Pembroke)

    Lawrence, Ivan

    Sainsbury, Tim

    Elliott, Sir William

    Lawson, Nigel

    St. John-Stevas, Norman

    Evans, Gwynfor (Carmarthen)

    Lester, Jim (Beeston)

    Scott, Nicholas

    Eyre, Reginald

    Lewis, Kenneth (Rutland)

    Scott-Hopkins, James

    Fairbalrn, Nicholas

    Lloyd, Ian

    Shaw, Giles (Pudsey)

    Falrgrieve, Russell

    Loveridge, John

    Shaw, Michael (Scarborough)

    Farr, John

    Luce, Richard

    Shelton, William (Streatham)

    Fell, Anthony

    McCrindle, Robert

    Shepherd, Colin

    Finsberg, Geoffrey

    VlacGregor, John

    Shersby, Michael

    paid as benefits arising from a policy of insurance against loss of income caused by his being unable to work through illness or injury, those amounts shall not be investment income for the purposes mentioned in section 32(3) of the Finance Act 1971.'.—[Mr. Newton.]
    Brought up, and read the First time.
    Motion made, and Question put, That the clause be read a Second time:—
    The House divided: Ayes 239, Noes 264.

    Silvester, Fred

    Stradling Thomas, J.

    Walker-Smith, Rt Hon Sir Derek

    Sims, Roger

    Tapsell, Peter

    Walters, Dennis

    Sinclair, Sir George

    Taylor, R. (Croydon NW)

    Warren, Kenneth

    Skeet, T. H. H.

    Tebbit, Norman

    Watt, Hamish

    Smith, Dudley (Warwick)

    Temple-Morris, Peter

    Weatherill, Bernard

    Smith, Timothy John (Ashfield)

    Thatcher, Rt Hon Margaret

    Wells, John

    Speed, Keith

    Thomas, Dafydd (Merioneth)

    Whitelaw, Rt Hon William

    Spence, John

    Thomas, Rt Hon P. (Hendon S)

    Wiggin, Jerry

    Spicer, Michael (S Worcester)

    Thompson, George

    Wigley, Dafydd

    Sproat, Iain

    Townsend, Cyril D.

    Wilson, Gordon (Dundee E)

    Stainton, Keith

    Trotter, Neville

    Wood, Rt Hon Richard

    Stanbrook, Ivor

    Vaughan, Dr Gerard

    Younger, Hon George

    Stanley, John

    Viggers, Peter

    Steen, Anthony (Wavertree)

    Wakeham, John

    TELLERS FOR THE AYES:

    Stewart, Ian (Hitchin)

    Walder, David (Clitheroe)

    Mr. Spencer Le Marchant and

    Stokes, John

    Walker, Rt Hon P. (Worcester)

    Sir George Young.

    NOES

    Abse, Leo

    Douglas-Mann, Bruce

    Kilroy-Silk, Robert

    Allaun, Frank

    Dunnett, Jack

    Kinnock, Neil

    Anderson, Donald

    Dunwoody, Mrs Gwyneth

    Lambie, David

    Archer, Rt Hon Peter

    Eadie, Alex

    Lamond, James

    Armstrong, Ernest

    Edge, Geoff

    Latham, Arthur (Paddington)

    Ashley, Jack

    Edwards, Robert (Wolv SE)

    Lestor, Miss Joan (Elton & Slough)

    Ashton, Joe

    Ellis, John (Brigg & Scun)

    Lever, Rt Hon Harold

    Atkins, Ronald (Preston N)

    English, Michael

    Lewis, Ron (Carlisle)

    Atkinson, Norman (H'gey Tott'ham)

    Evans, Fred (Caerphilly)

    Litterick, Tom

    Bagler, Gordon A. T.

    Evans, loan (Aberdare)

    Loyden, Eddie

    Barnett, Guy (Greenwich)

    Evans, John (Newton)

    Luard, Evan

    Barnett, Rt Hon Joel (Heywood)

    Ewing, Harry (Stirling)

    Lyon, Alexander (York)

    Bates, Alf

    Faulds, Andrew

    Mabon, Rt Hon Dr J. Dickson

    Bean, R. E.

    Fernyhough, Rt Hon E.

    McCartney, Hugh

    Benn, Rt Hon Anthony Wedgwood

    Flannery, Martin

    McDonald, Dr Oonagh

    Bennett, Andrew (Stockport N)

    Fletcher, Ted (Darlington)

    McElhone, Frank

    Bidwell, Sydney

    Foot, Rt Hon Michael

    MacFarouhar, Roderick

    Bishop, Rt Hon Edward

    Ford, Ben

    McGuire, Michael (Ince)

    Blenkinsop, Arthur

    Fowler, Gerald (The Wrekin)

    MacKenzie, Rt Hon Gregor

    Booth, Rt Hon Albert

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

    McMillan, Tom (Glasgow C)

    Boothroyd, Miss Betty

    Freeson, Rt Hon Reginald

    McNamara, Kevin

    Bottomley, Rt Hon Arthur

    Freud, Clement

    Madden, Max

    Boyden, James (Bish Auck)

    Garrett, John (Norwich S)

    Magee, Bryan

    Bradley, Tom

    Garrett, W. E. (Wallsend)

    Mallalieu, J. P. W.

    Bray, Dr Jeremy

    George, Bruce

    Marks, Kenneth

    Brown, Hugh D. (Provan)

    Gilbert Rt Hon Dr John

    Marshall, Dr. Edmund (Goole)

    Brown, Robert C. (Newcastle W)

    Ginsburg, David

    Marshall, Jim (Leicester S)

    Brown, Ronald (Hackney S)

    Golding, John

    Mason, Rt Hon Roy

    Buchan, Norman

    Gould, Bryan

    Maynard, Miss Joan

    Buchanan, Richard

    Gourlay, Harry

    Meacher, Michael

    Callaghan, Jim (Middleton & P)

    Grant, John (Islington C)

    Mellish, Rt Hon Robert

    Campbell, Ian

    Grimond, Rt Hon J.

    Mikardo, Ian

    Canavan, Dennis

    Grocott, Bruce

    Millan, Rt Hon Bruce

    Carmichael, Neil

    Hamilton, W. W. (Central Fife)

    Miller, Dr M. S. (E Kilbride)

    Carter, Ray

    Hardy, Peter

    Mitchell, Austin (Grimsby)

    Carter-Jones, Lewis

    Harrison, Rt Hon Walter

    Mitchell, R. C. (Soton, ltichen)

    Cartwright, John

    Hart, Rt Hon Judith

    Molloy, William

    Clemitson, Ivor

    Hattersley, Rt Hon Roy

    Moonman, Eric

    Cocks, Rt Hon Michael (Bristol S)

    Hayman, Mrs Helene

    Morris, Alfred (Wythenshawe)

    Cohen, Stanley

    Healey, Rt Hon Denis

    Morris, Rt Hon Charles R.

    Concannon, Rt Hon John

    Heffer, Eric S.

    Morris, Rt Hon J. (Aberavon)

    Cook, Robin F. (Edin C)

    Hooley, Frank

    Moyle, Rt Hon Roland

    Corbett, Robin

    Horam, John

    Newens, Stanley

    Cowans, Harry

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

    Noble, Mike

    Cox, Thomas (Tooting)

    Hoyle, Doug (Nelson)

    Oakes, Gordon

    Craigen, Jim (Maryhill)

    Huckfield, Les

    Ogden, Eric

    Crawshaw, Richard

    Hughes, Robert (Aberdeen N)

    O'Halloran, Michael

    Cronin, John

    Hughes, Roy (Newport)

    Orbach, Maurice

    Crowther, Stan (Rotherham)

    Hunter, Adam

    Orme, Rt Hon Stanley

    Cunningham, G. (Islington S)

    Irvine, Rt Hon Sir A. (Edge Hill)

    Ovenden, John

    Cunningham, Dr J. (Whiteh)

    Irving, Rt Hon S. (Dartford)

    Owen, Rt Hon Dr David

    Dalyell, Tam

    Jackson, Colin (Brighouse)

    Palmer, Arthur

    Davidson, Arthur

    Jackson, Miss Margaret (Lincoln)

    Pardoe, John

    Davies, Bryan (Enfield N)

    Janner, Greville

    Park, George

    Davies, Rt Hon Denzil

    Jay, Rt Hon Douglas

    Parker, John

    Davies, Ifor (Gower)

    Jeger, Mrs Lena

    Parry, Robert

    Davis, Clinton (Hackney C)

    Jenkins, Hugh (Putney)

    Pavitt, Laurie

    Deakins, Eric

    John, Brynmor

    Pendry, Tom

    Dean, Joseph (Leeds West)

    Johnson, Walter (Derby S)

    Penhaligon, David

    de Freitas, Rt Hon Sir Geoffrey

    Johnston, Russell (Inverness)

    Phipps, Dr Colin

    Dell, Rt Hon Edmund

    Jones, Alec (Rhondda)

    Powell, Rt Hon J. Enoch

    Dempsey, James

    Jones, Dan (Burnley)

    Prescott, John

    Dewar, Donald

    Judd, Frank

    Price, C. (Lewisham W)

    Doig, Peter

    Kaufman, Rt Hon Gerald

    Price, William (Rugby)

    Dormand, J. D.

    Kerr, Russell

    Radice, Giles

    Richardson, Miss Jo

    Smith, Cyril (Rochdale)

    Walker, Harold (Doncaster)

    Roberts, Albert (Normanton)

    Smith, Rt, Hon. John (N Lanarkshire)

    Watkins, David

    Roberts, Gwilym (Cannock)

    Snape, Peter

    Watkinson, John

    Robertson, George (Hamilton)

    Spearing, Nigel

    Weetch, Ken

    Robinson, Geoffrey

    Spriggs, Leslie

    Weitzman, David

    Roderick, Caerwyn

    Stallard, A. W.

    White, Frank R. (Bury)

    Rodgers, George (Chorley)

    Steel, Rt Hon David

    White, James (Pollock)

    Rodgers, Rt Hon William (Stockton)

    Stewart, Rt Hon M. (Fulham)

    Rooker, J. W.

    Stott, Roger

    Whitehead, Phillip

    Roper, John

    Strang, Gavin

    Whitlock, William

    Rose, Paul B.

    Strauss, Rt Hon G. R.

    Willey, Rt Hon Frederick

    Ross, Stephen (Isle of Wight)

    Swain, Thomas

    Wiilliams, Rt Hon Shirley (Hertford)

    Ross, Rt Hon W. (Kilmarnock)

    Taylor, Mrs Ann (Bolton W)

    Williams, Sir Thomas (Warrington)

    Ryman, John

    Thomas, Jeffrey (Abertillery)

    Wilson, Rt Hon Sir Harold (Huyton)

    Sandelson, Neville

    Thomas, Mike (Newcastle E)

    Wilson, William (Coventry SE)

    Sedgemore, Brian

    Thomas, Ron (Bristol NW)

    Wise, Mrs Audrey

    Selby, Harry

    Thorne, Stan (Preston South)

    Woodall, Alec

    Sever, John

    Thorpe, Rt Hon Jeremy (N Devon)

    Woof, Robert

    Shaw, Arnold (llford South)

    Tierney, Sydney

    Wrigglesworth, Ian

    Sheldon, Rt Hon Robert

    Tiley, John

    Shore, Rt Hon Peter

    Tinn, James

    Young, David (Bolton E)

    Short, Mrs Renée (Wolv NE)

    Tomlinson, John

    Silkin, Rt Hon S. C. (Dulwich)

    Tomney, Frank

    TELLERS FOR THE NOES:

    Silverman, Julius

    Torney, Tom

    Mr. Ted Graham and

    Skinner, Dennis

    Urwin, T. W.

    Mr. James Hamilton.

    Question accordingly negatived.

  New Clause No. 8

    EXTENSION OF THE APPLICATION OF MAINTENANCE FUNDS FOR HISTORIC BUILDINGS
    —(1) Section 84 of the Finance Act 1976 (Maintenance Funds for Historic Buildings) shall he amended as follows.
    (2) For subsection (3)(a) substitute the following—

    "(i) for the maintenance, repair or preservation of, or making provision for public access to, property which is for the time being qualifying property as defined in subsection (5) below; or".

    (3) For subsection (5) substitute the following subsection—
    "(5) Property is qualifying property for the purposes of subsection (3)(a) above if it is

    (a) land designated under—

    (i) section 34(1)(a) of the Finance Act 1975; or

    (ii) section 77(1)(b) above;

    which comprises a garden or arboretum of historic, architectural or scientific interest with respect to which the requisite undertaking has been given under the said section 34 or section 76, 78(5) (b) or 82(3) above; or

    (b) a building, land adjacent to it or an object historically associated with such a building designated under—

    (i) the said section 34(1)(b), (c) or (d); or

    (ii) section 77(1Xc), (d) or (e) above;

    with respect to which the dequisite undertaking has been given under the said section 34 or section 76, 78(5)(b) or 82(3) above; and

    (c) tax has not (since the last occasion on which such an undertaking
    1334
    was given) become chargeable with respect to it under the said section 34 or under section 78 or 82(3) above".

    (4) In subsection (6) after the words "mentioned in subsection" leave out"(1)(c) or (d) of section 77" and insert "(5)".

    (5) This section shall have effect with respect to any settlement to which the Treasury give a direction under subsection (1) of the said section 84 after the passing of his Act.'.—[Mr. Robert Cooke.]

    Brought up, and read the First time.
    7.0 p.m.
    Mr. Robert Cooke: I beg to move, That the clause be read a Second time.
    This new clause has the support of hon. Members on both sides of the House. It provides for the income from a maintenance fund to be applied to the upkeep of gardens, arboreta and chattels associated with historic buildings. It will not of itself achieve anything at all, because it pre-supposes that an owner of a heritage property has set up a so-called maintenance fund with his own money. Only recently, in reply from the Treasury, we were told that nobody had so far done so. I suspect that this is because the provisions for so doing are so unattractive since they involve saying goodbye irrevocably to what could well be the owner's last remaining capital asset.
    However, if the Government, in their wisdom, are to make the so-called maintenance funds workable the new clause is an essential extension of the application of private resources to the public purpose of preserving an ever more accessible heritage. That is a philosophy that we on this side have for long embraced. Indeed,

    1335
    it is embraced in many other parts of the House.
    I hope that the Government will accept the new clause. I hope that they will also bear in mind that more needs to be done to extricate the heritage from the strangling coils of capital transfer tax. The Government might reflect that there are 16 other new clauses on the Notice Paper which are deliberately starred so that they do not obscure this limited debate: they prove what a mess we are in.
    The heritage, provided that it is accessible—and that is an absolute requirement for my proposition—should not be crippled by taxes. It is a solemn thought that the flood of sales of works of art and of buildings, the fates of which hang in the balance, will grow month by month unless effective action is taken soon.
    Mr. Patrick Cormack: I associate myself with the remarks of my hon. Friend the Member for Bristol, West (Mr. Cooke). The case is unanswerable. I hope that the Government will accept this all-party clause. We are not asking the Government to reverse or change their policies. We ask them to accept their own precedent and to proceed in a way which could help to save many important parts of our national heritage.
    Two matters particularly are at issue. First, we seek to safeguard the treasures within historic houses and heritage properties. Secondly, we seek to safeguard the beautiful gardens and grounds that often surround them. The Government have always accepted that these are worth fighting for and saving. They have conceded that in previous Finance Acts. We do not believe that the maintenance funds, as they are established, are sufficiently attractive. But we welcome the precedent that has been set. We hope that the Government will do something to make maintenance funds workable.
    I should like to underline what has been said repeatedly by Ministers in the last couple of years both here and in the other place. They said it at the time of the Mentmore debate, during the recent battle over the Canalettos, which we are so delighted have been saved, and during the great debates over the Stubbs pictures
    1336
    last year. They have said that the cheapest and most economic and attractive way of preserving our historic houses is to encourage the owners to remain within them. Baroness Birk has expressed that view more than once in the other place and her comments have been echoed by Lord Donaldson. The Chancellor of the Exchequer has said the same.
    In our modest proposal we are saying simply that we applaud the Government's acceptance of this self-evident truth, and we ask them to do something to make maintenance funds more workable. We ask the Government to enable these funds to embrace those particular matters about which Governmental concern has been repeatedly expressed in recent years.
    Mr. Dudley Smith: I should like to endorse what has been said. I represent a part of the country in the heart of England which contains a large number of historic buildings, ranging from one that has acquired a certain notoriety recently—Warwick Castle—down to the small and worthwhile stately home called Baddesley Clinton, which lies north of Warwick, off the 13irmingham road. The owner has experienced considerable difficulties and the future of this beautiful property is now in doubt.
    Although quite a lot has been done to assist those who try to maintain these stately homes and other historic buildings. I am sure that much more needs to be done. As my hon. Friend the Member for Cannock (Mr. Cormack) said, we need to be able to encourage more and more people to remain in these buildings where possible and to make the buildings accessible to the public. There is a great fund of good will among the general public. Regardless of political beliefs, the vast majority of people support the preservation of historic homes as part of our heritage and believe that there should be ample opportunities for the public to visit them. They regard them as an integral part of the country.
    As my hon. Friend the Member for Bristol, West (Mr. Cooke) said, this is a modest gesture which deserves support. I hope that the Government will find a IA ay of accepting it.
    Mr. Giles Radice: I have some sympathy with the clause. Clearly the contents of a great historic

    1337
    home can be a major part of the heritage. Probably, however, before we move forward on that front, we need to look rather more carefully at how we define "contents".
    The part of the clause with which I am most sympathetic concerns gardens and arboreta because clearly gardens are a major part of our national heritage. There are many beautiful gardens in this country and they are a major tourist attraction. In many case, the money paid by the visiting public does not cover costs.
    Mr. Cormack: Does the hon. Member agree that the member of the public who flock to these places—there were 15 million separate visits last year—are attracted as much by the contents of the houses as by the grounds? Is it not, therefore, important to try to preserve what we have rather than follow the example of those French chateaux which are empty shells?
    Mr. Radice: I said that I had some sympathy with the clause, but that before we supported it we should be clearer as to what we meant by "contents". The case for gardens and arboreta is much stronger in the sense that some gardens already qualify if they are attached to an historic building, whereas I understand that there are 60 outstanding gardens and arboreta which do not qualify because they are not associated with an historic building. In a sense, therefore, we are seeking to correct an anomaly by extending maintenance funds to these gardens.
    I hope that the Government can accept, if not the clause at it stands, the spirit behind it.
    7.15 p.m.
    Mr. Nicholas Ridley: I, too, support the clause. I remember the night of the Committee stage of the 1975 Act when the Government first put down the principle that certain parts of the heritage could be reserved and preserved provided they were not sold and were in trust on behalf of the owner. I remember the hon. Member for Edmonton (Mr. Graham), who is not here at the moment, who played an important part in those debates, saying that he hoped that the inmates of the historic house would be able to continue to live in modesty and comfort. As was pointed
    1338
    out by my hon. Friend the Member for Blaby (Mr. Lawson), the experience of most of these people is of immodesty and discomfort.
    I welcome this step, small though it is, and I hope that we may take it for this reason. I commend to the Labour Party that if a man inherits a Rembrandt worth £1 million, or Mentmore, worth more than £1 million, it is possible to say that he is a very rich man with possessions in excess of £1 million. He would appear under Lord Diamond's classification and the statistics that he trots out as owning a certain percentage of the wealth. If a man inherited a Rembrandt and passed it on when he died he would not enjoy or spend one penny of the money. That is the correct principle for us to follow in order to achieve some sort of common ground in the matter of capital taxation.
    The same is true of a man who inherits shares in a family business, or who inherits agricultural land or forestry. We have made concessions for these three categories in respect of capital transfer tax by way of easements for those who take up these estates and pass them on unimpaired or even improved. Surely the principle this House should seek to achieve is to move towards a disinvestment tax. Those who sell their patrimony, be it heritage, artistic, industrial, financial or whatever, should be taxed heavily upon cashing in. Those who improve and pass on these assets to future generations should be exempt from this sort of taxation.
    I believe that is common ground between the two sides of the House, which is why the hon. Member for Chester-le-street (Mr. Radice) expressed some sympathy with the small step that is now proposed. The maintenance fund which is used to keep up a good garden or to keep good chattels, pictures or possessions inside a house is of no benefit to any individual who might have owned the chattels. It is of benefit only to the millions who will see and enjoy them, and that is a better way of preserving them even if it means turning the erstwhile owner into a sort of museum keeper, whether modest or immodest, in comfort or discomfort.
    That is the best way forward and therefore I hope that the House will accept this modest clause.
    The Minister of State, Treasury (Mr. Denzil Davies): This new clause seeks to extend the benefits which apply at the moment under the maintenance fund provisions. Perhaps I can remind the House. The hon. Member for Bristol, West (Mr. Cooke), who moved the clause did not go into detail and he seemed to think that maintenance funds were not very beneficial, so perhaps I should remind the House of the considerable benefits that accrue as a result of setting up a maintenance fund. There are benefits from capital transfer tax and capital gains tax, and there are income tax benefits once a maintenance fund is set up.
    The maintenance fund provision was introduced only in the Finance Act 1976, and last year the income tax reliefs were extended. It is true to say that it has taken a bit of time, but not a very long time, for advantage to be taken of it. We know now that at least two cases are coming to fruition. The hon. Member for Blaby (Mr. Lawson) may laugh, but it takes a long time to set up a maintenance fund and do the documentation. There are two cases at the moment about to be completed and only waiting for legal formalities. There are many other cases in the pipeline of people wanting to take advantage of these maintenance fund provisions, and I think that we shall see more over the next few years.
    It is no good hon. Members opposite belittling the maintenance fund. It is an important provision of great benefit to the owners of historic houses. They are coming to recognise that benefit, which is, as I have said, the capital transfer tax benefit, the capital tax gains benefit, and the income tax benefit.
    The income tax benefit is particularly apposite to the new clause. The income tax benefit at the moment covers repairs and maintenance of historic buildings. Any repairs or maintenance get the benefit of the income tax reliefs under the maintenance fund provisions.
    The new clause has two purposes: first to extend the benefits to the contents of the house and, second, to extend the benefits to gardens and arboreta. I have great reservations about the proposed extension to contents. As my hon. Friend the Member for Chester-le-Street (Mr. Radice) pointed out, there is no tight definition
    1340
    here of contents. Presumably, any provision on the part of the owner to maintain the contents, such as turning up the central heating to keep the Chippendale at the right temperature, would come within the category of expenses which would be allowable for the income tax reliefs in the maintenance fund provision. That may or may not be desirable, but that is a benefit which, I think, would accrue. There are other cases as well which one could mention.
    Since it is very difficult to restrict of limit the benefit in relation to contents, I should be very reluctant to go along with that part of the new clause.
    As regards gardens and arboreta, again as my hon. Friend the Member for Chester-le-Street pointed out, the case is stronger. If they are adjacent, as I understand it, gardens are exempt under the existing provisions anyway. We are talking here about gardens and arboreta which perhaps are not adjacent but are some way distant or standing on their own not in relation directly to the historic house. That is the area of exemption which the new clause seeks to incorporate in the legislation.
    I am prepared to look sympathetically at the question of gardens and arboreta with a view to bringing forward legislation in next year's Finance Bill to meet the spirit of the point made, but I must make quite clear as regards contents that I do not think that the case has been made out.
    I should add, although there is considerable scepticism on the Opposition Front Bench when Treasury Ministers say that drafting is defective, that the advice I have from the Inland Revenue is that there is a technical defect in the clause. The existing provision in section 84 which gives the exemption allows people to get property designated as being of heritage quality—which is the basic requirement—even if it has not been the subject of a claim for additional exemption from capital transfer tax. There is an attempt in the new clause to keep that concession. In fact, the wording of the clause in relation to subsection (6) of section 84 would mean that that facility would not be available in future, although it is available at the moment, for buildings, land, contents and, indeed, arboreta. So through an error of drafting—I am not making

    1341
    a point about it but I must tell the House —the clause restricts the present benefit in relation to buildings and lands as regards conditional exemption. If the House were to accept the clause as it stands, there would in that respect be a restriction on the present law.
    Mr. Tam Dalyell: I agree strongly with what my right hon. Friend said, but if there is a certain sympathy as regards gardens and arboreta, is it not better to proceed through the mechanism of the Historic Buildings Council and direct grant instead of trying to do it somewhat imprecisely and with great difficulty through the tax system?
    Mr. Davies: My hon. Friend has raised an important point. There are arguments on both sides. It could be argued that one should not go along the road of tax concession, as he has suggested. However, it would be inconsistent of the Government now, having accepted that we should give some tax relief and having agreed on the question of a maintenance fund, to say that they cannot include gardens in the exemption. As I have said, gardens which are adjacent are already included.
    Mr. Ridley: As the Minister has virtually accepted the point in relation to gardens and arboreta, will the clause that he will prepare for next year's Finance Bill to cover the point be retrospective to the present date, since he has accepted the principle today? Obviously, that will make a great deal of difference to those who are affected in the ensuing financial year.
    Mr. Davies: That point will be taken into account, but I cannot say anything about it now. As I have said, we are prepared to look at the provisions for gardens are arboreta sympathetically, with a view to legislation next year, but not in respect to contents. I reiterate also that the clause is defective in that it would tighten the restrictions.
    Mr. Cormack: If the Minister is sympathetic at least to part of the case —and we welcome that—why did the Government not produce their own variation of the clause in time for today's debate? Surely, the advice which the
    1342
    right hon. Gentleman has received must have been received some little time ago.
    Mr. Davies: The Government have to consider many pressures and suggestions for changing the tax system. A vast number of new clauses are put down. I suggest to the hon. Gentlemen, especially with the powerful lobby behind them and the expert advice available to them, that they could have made sure they got their new clause right. It is no good complaining now and saying that the Government should have done the drafting for them.
    Mr. Peter Rees: We have had an extremely useful debate on an important subject, and we should congratulate, in particular, my hon. Friends the Members for Bristol, West (Mr. Cooke) and for Staffordshire, South-West (Mr. Cormack), who have laboured so assiduously in this matter.
    This is not the moment to debate the merits of capital transfer tax. That would be going too wide. We may take it as a sign of grace that in 1976 the Government for the first time recognised what we had long warned them to be the risks which they were generating for the national heritage. As a result, we coaxed out of the Government a very modest relief in the form of maintenance fund provision. Again, this is perhaps not the time to debate the limitations and difficulties inseparable from the relief as it has been introduced. I hope there will he other occasions to do so.
    I detected some diffidence in the Minister of State, who, we know, approaches these problems, when he can, with an open mind. He recognises that not very many people have so far sought to take advantage of these provisions. I must tell him candidly that the reason is that the relief is too tightly drawn. I hope there will be other occasions when we can return to that.
    Today, we are concerned merely with the scope of national heritage assets to which the maintenance fund relief, such as it is, should be extended. There seems to be a delightful degree of unanimity in the House this evening that gardens and arboreta deserve some kind of relief. I am glad that the hon. Member for Chester-le-Street (Mr. Radice) has shown that same interest, and I believe that he indicated it in Committee, too.

    1343
    7.30 p.m.
    It is not necessary to instance the kind of case that we have in mind, but I would cite only the garden at Westbury which the National Trust has recognised, or that at Sissinghurst or the arboretum at Bedgebury or that at Westonbirk. I take at random some in the ownership of the National Trust, some of the Forestry Commission and some in private hands. The Minister has recognised the difficulties of those who are still concerned in the private sector with the management and care of gardens and arboreta. They demand considerable attention and money. To use a horrible phrase, they are labour intensive.
    Therefore, it is important that they should be preserved. I like to think that the Government have recognised what an appalling burden they would have to take on if all these gardens and arboreta—there must be at least 25 or 35 of a transcendent quality—
    Mr. Radice: Sixty.
    Mr. Rees: I am happy to take that figure, but there is some imprecision here. I doubt whether any Government would want to take on the responsibility of running and caring for these properties. Some will always fall into public hands because there will not be families with the resources, the application or the interest to preserve what they have inherited. Therefore, as a last resort, the Government may have to take control, passing them on in certain cases to the National Trust or the Forestry Commission.
    We are happy that the Minister has recognised this strong case. We need not trouble ourselves with his criticisms of any technical defects. It seems that he will not willingly accept the clause. The technical defects cannot be overwhelming because they can relate only to gardens and arboreta which cannot at the moment take advantage of the maintenance fund relief.
    Mr. Denzil Davies: Perhaps I did not make myself clear. The defects would in fact then relate to the items—the house itself—which at the moment get this exemption. It would make the position worse for those objects which at present get benefit.
    Mr. Rees: I should hate to bandy words with the right hon. Gentleman on the technicalities of this provision, but he suggests that such defects as there may be would extend to cases in which gardens or arboreta are attached to a house. But the new clause is designed to relate to gardens and arboreta on their own.
    Mr. Denzil Davies: But the way in which it is drafted and the way in which it seeks to amend the original section 84 would restrict relief to what gets relict at the moment—the repairs and maintenance of the house. That is unintentional, but that is what it does.
    Mr. Rees: As I said I will not take up time on that, but I am not certain whether the right hon. Gentleman has entirely focused on the point, that the new clause as drafted is aimed at gardens and arboreta which stand on their own. There is obviously a technical point here which perhaps we should thrash out. No doubt my hon. Friend has taken the best possible advice—
    Mr. Denzil Davies: It was not good enough.
    Mr. Rees: So the Minister says, but the charge was thrown across the Committee floor so often that amendments were technically defective that I am bound to say that we look warily at those objections. But let me leave the question of gardens and arboreta with the technical defects that the Minister affects to detect.
    Let me come to the question of objects which are historically associated with buildings. Here the argument was not one of technical detail but one of principle. The hon. Member for Chester-le-Street was a little concerned that the clause was not sufficiently tightly drawn there and the Minister was disposed to say that there was some imprecision.
    I think that the clause is quite precise. It is aimed at giving relief to objects which are historically associated with buildings which would qualify for relief under maintenance funds. Of course, it must be a question of fact in any given case whether an object is historically associated, but there must be some clear examples—for instance, the relics of the Duke of Wellington at Stratfield Saye, the tapestries at Blenheim designed to commemorate the victories of the first Duke of Marlborough, perhaps the manuscripts

    1345
    of the first Lord Burghley at Hatfield. There must be many examples about which there could be no serious dispute. I wonder whether the Minister has addressed his mind to that problem.
    The Minister said that all this could have been ventilated earlier and that it is now too late for the Government to accept the new clause, but that something will be done in the next Finance Bill. I do not want to introduce a partisan note into a debate which has been notable for its bipartisan nature, but the Minister cannot assure us that he will be able to put down a new clause of any kind in the next Finance Bill. However, I do not want to open the debate.
    A new clause in precisely these terms, and several others, were on the Amendment Paper in Committee. It was the bounden duty of the Minister, if he felt that there was any merit in that new clause, to have directed his mind to it at that stage. I have no doubt, such are the friendly relations which obtain between my hon. Friend the Member for Bristol, West and the Minister, that he could have privately pointed out the defects to my hon. Friend.
    Therefore, I am not particularly impressed by those arguments. I recognise that the Minister has moved a little way down the path that we have been coaxing him down since 1976, but he will have to go a little further. I am sorry that he cannot meet us at this stage. I do not think that we are ever deterred by the technical defects that he affects to see, and I hope that my hon. Friend, to demonstrate the importance of the principle, will press the new clause to a Division.
    Mr. Dalyell: I am a member of the Council of the National Trust for Scotland, but I speak in a personal capacity and very much on the Government side of the argument. The hon. Member for Bristol, West (Mr. Cooke) spoke for example of Sissinghurst. He must know as well as the rest of us that it is expensive to keep such a garden. The impression that I got from Nigel Nicolson is that it is extremely expensive. There is a limited amount in this kitty.
    Are we to have some kind of "watering can" effect through the tax system,
    1346
    or is it better, through the mechanism of the Historic Buildings Council, to choose certain gardens which in the public interest should be maintained at a high standard? From Scottish experience, I know that it is certainly within recent recollection that when it was wished to preserve the gardens at Crathes that was perfectly well done through the HBC. The Minister of State's attitude is surely right and he is right also about the mechanism. I shall be the first into the Government Lobby to support him.
    Mr. Pardoe: Having last year moved a clause which extended the maintenance funds to take account of income tax, having had some part in wringing that concession out of the Government, I agreed with everything said by the hon. and learned Member for Dover and Deal (Mr. Rees) until his last sentence. He seemed to go completely berserk at the last minute.
    The Minister has advised us that it is the Inland Revenue's view that the clause as drafted, for a technical reason, will undo some of the good that the hon. and learned Gentleman and I did in 1976 and 1977 for maintenance funds. Does he really want to do that? The very idea of voting for a clause which sabotages what we did in the last two Finance Bills is utterly crazy. I hope that the hon. Member for Bristol, West (Mr. Cooke) will not take the advice which his hon. and learned Friend has given him.
    Mr. Robert Cooke: I am afraid that I must disappoint the hon. Member for Cornwall, North (Mr. Pardoe). I will indeed take the advice given by my Front Bench on the matter of principle. It is a matter of principle that what we intend to do in our new clause should be done. The Government have introduced a capital transfer tax in such a manner that it has attacked the heritage in every possible aspect. We now seek to unravel the knot.
    For that reason, I ask my right hon. and hon. Friends, on this matter of principle—even if on Report the detail is wrong—and whoever got a new clause right on Report except the Government—to support me in the Lobby.
    Question put, That the clause be read a Second time:—

    Division No. 257]

    AYES

    [7.47 p.m.

    Adley, Robert

    Grieve, Percy

    Nott, John

    Aitken, Jonathan

    Grylls, Michael

    Onslow, Cranley

    Alison, Michael

    Hall-Davis, A. G. F

    Oppenhelm, Mrs Sally

    Arnold, Tom

    Hamilton, Archibald (Epsom & Ewell)

    Page, John (Harrow West)

    Atkins, Rt Hon H. (Spelthorne)

    Hamilton, Michael (Salisbury)

    Page, Rt Hon R. Graham (Crosby)

    Atkinson, David (B' mouth, East)

    Hampson, Dr Keith

    Page, Richard (Workington)

    Banks, Robert

    Hannam, John

    Parkinson, Cecil

    Bell, Ronald

    Harrison, Col Sir Harwood (Eye)

    Pattie, Geoffrey

    Bendall, Vivian

    Harvie Anderson, Rt Hon Miss

    Percival, Ian

    Bennett, Sir Frederic (Torbay)

    Haselhurst, Alan

    Pink, R. Bonner

    Bennett, Dr Reginald (Fareham)

    Hawkins, Paul

    Prentice, Rt Hon Reg

    Benyon, W.

    Hayhoe, Barney

    Price, David (Eastleigh)

    Biffen, John

    Hicks, Robert

    Prior, Rt Hon James

    Biggs-Davison, John

    Hodgson, Robin

    Pym, Rt Hon Francis

    Blaker, Peter

    Holland, Philip

    Raison, Timothy

    Body, Richard

    Hordern, Peter

    Rathbone, Tim

    Boscawen, Hon Robert

    Howe, Rt Hon Sir Geoffrey

    Rees, Peter (Dover & Deal)

    Bottomley, Peter

    Howell, David (Guildford)

    Rees-Davies, W. R.

    Bowden, A. (Brighton, Kemptown)

    Howell, Ralph (North Norfolk)

    Rhodes James, R.

    Boyson, Dr Rhodes (Brent)

    Hunt, David (Wirral)

    Ridley, Hon Nicholas

    Braine, Sir Bernard

    Hunt, John (Ravensbourne)

    Ridsdale, Julian

    Brittan, Leon

    Hurd, Douglas

    Rifkind, Malcolm

    Brocklebank-Fowler, C.

    Hutchison, Michael Clark

    Roberts, Wyn (Conway)

    Brooke, Hon Peter

    Irving, Charles (Cheltenham)

    Rost, Peter (SE Derbyshire)

    Brotherton, Michael

    James, David

    Royle, Sir Anthony

    Buchanan-Smith, Alick

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

    Sainsbury, Tim

    Buck, Antony

    Jessel, Toby

    St. John-Stevas, Norman

    Budgen, Nick

    Johnson Smith, G. (E. Grinstead)

    Scott, Nicholas

    Butler, Adam (Bosworth)

    Jopling, Michael

    Scott-Hopkins, James

    Chalker, Mrs Lynda

    Joseph, Rt Hon Sir Keith

    Shaw, Giles (Pudsey)

    Channon, Paul

    Kaberry, Sir Donald

    Shaw, Michael (Scarborough)

    Churchill, W. S.

    Kellett-Bowman, Mrs Elaine

    Shelton, William (Streatham)

    Clark, Alan (Plymouth, Sutton)

    Kershaw, Anthony

    Shepherd, Colin

    Clarke, Kenneth (Rushcliffe)

    Kimball, Marcus

    Shersby, Michael

    Cockcroft, John

    King, Evelyn (South Dorset)

    Silvester, Fred

    Cooke, Robert (Bristol W)

    Knox, David

    Sims, Roger

    Cope, John

    Lamont, Norman

    Sinclair, Sir George

    Cormack, Patrick

    Langford-Holt, Sir John

    Skeet, T. H. H.

    Corrie, John

    Latham, Michael (Melton)

    Smith, Dudley (Warwick)

    costain, A. P.

    Lawson, Nigel

    Smith, Timothy John (Ashfield)

    Crowther, Stan (Rotherham)

    Le Marchant, Spencer

    Speed, Keith

    Davies, Rt Hon J. (Knutsford)

    Lester, Jim (Beeston)

    Spence, John

    Dean, Paul (N Somerset)

    Lewis, Kenneth (Rutland)

    Spicer, Michael (S Worcester)

    Dodsworth, Geoffrey

    Lloyd, Ian

    Sproat, Iain

    Douglas-Hamilton, Lord James

    Loveridoe John

    Stainton, Keith

    Drayson, Burnaby

    Luce, Richard

    Stanbrook, Ivor

    du Cann, Rt Hon Edward

    McCrindle, Robert

    Stanley, John

    Durant, Tony

    MacGregor, John

    Steen, Anthony(Wavertree)

    Dykes, Hugh

    MacKay, Andrew (Stechford)

    Stewart, Ian (Hitchin)

    Eden, Rt Hon Sir John

    Macmillan, Rt Hon M. (Farnham)

    Stokes, John

    Edwards, Nicholas (Pembroke)

    McNair-Wilson, M. (Newbury)

    Stradling Thomas, J.

    Elliott, Sir William

    McNair-Wilson, P. {New Forest)

    Tapsell, Peter

    Emery, Peter

    Madel, David

    Taylor, R. (croydon NW)

    Eyre, Reginald

    Marshall, Michael (Arundel)

    Tebbit, Norman

    Fairbairn, Nicholas

    Marten, Neil

    Temple-Morris, Peter

    Fairgrieve, Russell

    Mather, Carol

    Thatcher, Rt Hon Margaret

    Farr, John

    Maude, Angus

    Thomas, Rt Hon P. (Hendon S)

    Fell, Anthony

    Maxwell-Hyslop, Robin

    Townsend, Cyril D.

    Finsberg, Geoffrey

    Mayhew, Patrick

    Trotter, Neville

    Fisher, Sir Nigel

    Meyer, Sir Anthony

    Vaughan, Dr Gerard

    Fletcher, Alex (Edinburgh N)

    Mills, Peter

    Viggers, Peter

    Forman, Nigel

    Miscampbell, Norman

    Wakeham, John

    Fox, Marcus

    Mitchell, David (Basingstoke)

    Walder, David (Clitheroe)

    Fraser, Rt Hon H. (Stafford & St)

    Moate, Roger

    walker, Rt Hon P. (Worcester)

    Galbraith Hon T. G. D.

    Monro, Hector

    Walker-Smith, Rt Hon Sir Derek

    Gardiner, George (Reigate)

    Montgomery, Fergus

    Warren, Kenneth

    Gardner, Edward (S Fylde)

    Moore, John (Croydon C)

    Weatherill, Bernard

    Gilmour, Sir John (East Fife)

    Morgan, Geraint

    Wells, John

    Glyn, Dr Alan

    Morrison, Charles (Devizes)

    Wiggln, Jerry

    Godber, Rt Hon Joseph

    Morrison, Hon Peter (Chester)

    Wood, Rt Hon Richard

    Goodiad, Alastair

    Neave, Airey

    Younger, Hon George

    Gorst, John

    Nelson, Anthony

    Gow, Ian (Eastbourne)

    Neubert, Michael

    Gower, Sir Raymond (Barry)

    Newton, Tony

    TELLERS FOR THE AYES:

    Grant, Anthony (Harrow C)

    Normanton, Tom

    Sir George Young and

    Gray, Hamish

    Mr. Anthony Berry.

    The House divided: Ayes 222, Noes 256.

    NOES

    Abse, Leo

    Garrett, W. E. (Wallsend)

    Morris, Rt Hon J. (Aberavon)

    Abse, Leo Allaun, Frank

    George, Bruce

    Moyle, Rt. Hon. Roland

    Anderson, Donald

    Gilbert, Rt Hon Dr John

    Murray, Rt Hon Ronald King

    Armstrong, Ernest

    Ginsburg, David

    Newens, Stanley

    Achley, Jack

    Golding, John

    Noble, Mike

    Ashton, Joe

    Gould, Bryan

    Oakes, Gordon

    Atkins, Ronald (Preston N)

    Gourlay, Harry

    Ogden, Eric

    Atkinson Norman (H'gey, Tott'ham)

    Graham, Ted

    O'Halloran, Michael

    Bagier, Gordon A. T.

    Grant, John (Islington C)

    Orbach, Maurice

    Barnett Guy (Greenwich)

    Hamilton, James (Bothwell)

    Orme, Rt Hon Stanley

    Barnett, Rt Hon Joel (Heywood)

    Hamilton, W. W. (Central Fife)

    Ovenden, John

    Bates, Alf

    Hardy, Peter

    Owen, Rt Hon Dr David

    Bean, R. E.

    Harrison, Rt Hon Walter

    Palmer, Arthur

    Beith, A. J.

    Hart, Rt Hon Judith

    Pardoe, John

    Bennett, Andrew (Stockport N)

    Hattersley, Rt Hon Roy

    Park, George

    Bidwell, Sydney

    Hayman, Mrs Helene

    Parker, John

    Bishop, Rt Hon Edward

    Healey, Rt Hon Denis

    Parry, Robert

    Blenkinsop, Arthur

    Heffer, Eric S.

    Pavitt, Laurie

    Boothroyd, Miss Betty

    Hooley, Frank

    Pendry, Tom

    Boyden, James (Bish Auck)

    Horam, John

    Penhaligon, David

    Bradley, Tom

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

    Phipps, Dr Colin

    Bray, Dr Jeremy

    Howells, Geraint (Cardigan)

    Prescott, John

    Brown, Hugh D. (Provan)

    Hoyle, Doug (Nelson)

    Price, C. (Lewisham W)

    Brown, Robert C. (Newcactle W)

    Huckfield, Les

    Price, William (Rugby)

    Brown, Ronald (Hackney S)

    Hughes, Robert (Aberdeen N)

    Radice, Giles

    Buchan, Norman

    Hughes, Roy (Newport)

    Richardson, Miss Jo

    Buchanan, Richard

    Hunter, Adam

    Roberts, Gwilym (Cannock)

    Callaghan, Jim (Middleton & P)

    Irvine, Rt Hon Sir A. (Edge Hill)

    Robertson, George (Hamilton)

    Campbell, Ian

    Irving, Rt Hon S. (Dartford)

    Robinson, Geoffrey

    Canavan, Dennis

    Jackson, Colin (Brighouse)

    Roderick, Caerwyn

    Carmichael, Neil

    Jackson, Miss Margaret (Lincoln)

    Rodgers, George (Chorley)

    Carter, Ray

    Janner, Greville

    Rodgers, Rt Hon William (Stockton)

    Carter-Jones, Lewis

    Jay, Rt Hon Douglas

    Rooker, J. W.

    Cartwright, John

    Jeger, Mrs Lena

    Roper, John

    Clemitson, Ivor

    Jenkins, Hugh (Putney)

    Rose, Paul B.

    Cocks, Rt Hon Michael (Bristol S)

    John Brynmor

    Ross, Stephen (Isle of Wight)

    Cohen, Stanley

    Johnson, Walter (Derby S)

    Ross, Rt Hon W. (Kilmarnock)

    Cook, Robin F. (Edin C)

    Johnston, Russell (Inverness)

    Rowlands, Ted

    Corbett, Robin

    Jones, Alec (Rhondda)

    Ryman,John

    Cowans, Harry

    Jones, Dan (Burnley)

    Sandelson, Neville

    Craigen, Jim (Maryhill)

    Judd, Frank

    Sedgemore, Brian

    Crawshaw, Richard

    Kaufman, Rt Hon Gerald

    Selby, Harry

    Cronin, John

    Kerr, Russell

    Sever, John

    Crowther Stan (Rotherham)

    Kilroy-Silk, Robert

    Shaw, Arnold (llford South)

    Cunningham, G. (Islington S)

    Kinnock, Neil

    Sheldon, Rt Hon Robert

    Cunningham, Dr J. (Whiteh)

    Lambie, David

    Shore, Rt Hon Peter

    Dalyell, Tam

    Lamond, James

    Short, Mrs Renée (Wolv NE)

    Davidson, Arthur

    Latham, Arthur (Paddington)

    Silkin, Rt Hon S. C. (Dulwich)

    Davies, Bryan (Enfield N)

    Lee, John

    Silverman, Julius

    Davies, Rt Hon Denzil

    Lestor, Miss John (Eton & Slough]

    Skinner, Dennis

    Davies, Ifor (Gower)

    Lever, Rt Hon Harold

    Smith, Cyril (Rochdale)

    Davis, Clinton (Hackney C)

    Lewis, Ron (Carlisle)

    Smith, Rt. Hon. John (N Lanarkshire)

    Deakins, Eric

    Litterick, Tom

    Snape, Peter

    Dean, Joseph (Leeds West)

    Loyden, Eddie

    Spriggs, Leslie

    de Freitas, Rt Hon Sir Geoffrey

    Lyon, Alexander (York)

    Stallard, A. W.

    Dell, Rt Hon Edmund

    Mabon, Rt Hon Dr J. Dickson

    Stott, Roger

    Dempsey, James

    McCartney, Hugh

    Strang, Gavin

    Dewar, Donald

    McDonald, Dr Oonagh

    Strauss, Rt Hon G. R.

    Doig, Peter

    McElhone, Frank

    Swain, Thomas

    Dormand, J. D.

    MacFarquhar, Roderick

    Thomas, Dafydd (Merioneth)

    Douglas-Mann, Bruce

    McGuire, Michael (Ince)

    Thomas, Jeffrey (Abertillery)

    Dunnett, Jack

    MacKenzie, Rt Hon Gregor

    Dunwoody, Mrs Gwyneth

    McMillan, Tom (Glasgow C)

    Thomas, Mike (Newcastle E)

    Dunwoody, Mrs Gwyneth

    McNamara, Kevin

    Thomas, Ron (Bristol NW)

    Eadie, Alex

    Madden, Max

    Thome, Stan (Preston South)

    Edge, Geoff

    Thorpe, Ft Hon Jeremy (N Devon)

    Edwards, Robert (Wolv SE)

    Ellis, John (Brigg & Scun)

    Magee, Bryan Mallalieu, J. P. W.

    Tierney, Sydney

    English, Michael

    Marks, Kenneth

    Tilley, John

    Evans, Fred (Caerphilly)

    Marshall, Dr Edmund (Goole)

    Tinn, James

    Evans, Gwynfer (Carmarthen)

    Marshall, Jim (Leicester S)

    Tomlinson, John

    Evans, loan (Aberdare)

    Mason, Rt Hon Roy

    Tomney, Frank

    Evans, John (Newton)

    Maynard, Miss Joan

    Torney, Tom

    Ewing, Harry (Stirling)

    Meacher, Michael

    Urwin, T. W.

    Fernhough, Rt Hon E.

    Mellish, Rt Hon Robert

    Walker, Harold (Doncaster)

    Flannery, Martin

    Mikardo,Ian

    Watkinson, John

    Fletcher, Ted (Darlington)

    Millan, Rt Hon Bruce

    Weetch, Ken

    Foot, Rt Hon Michael

    Miller, Dr M. S. (E Kilbride)

    Weitzman, David

    Ford, Ben

    Mitchell, Austin (Grimsby)

    White, Frank R. (Bury)

    Fowler, Gerald (The Wrekin)

    Mitchell, R. C. (Solon, Itchen)

    White. James (Pollok)

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

    Mollcy, William

    Whitehead. Phillip

    Freeson, Rt Hon Reginald

    Moonman, Eric

    Whitlock, William

    Freud Clement

    Morris, Alfred (Wythenshawe)

    Willey, Rt Hon Frederick

    Garrett, John (Norwich S)

    Morris, Rt Hon Charles R.

    Williams, Rt Hon Alan (Swansea W)

    Williams, Rt Hon Shirley (Hertford)

    Woodall, Alec

    Williams, Sir Thomas (Warrington)

    Woof, Robert

    TELLERS FOR THE NOES:

    Wilson, William (Coventry SE)

    Wrigglesworth, Ian

    Mr. Thomas Cox and

    Wise, Mrs Audrey

    Young, David (Bolton E)

    Mr. Ann Taylor

    Question accordingly negatived.
    Mr. Deputy Speaker (Sir Myer Galpern): New clause no. 12—not moved.
    Mr. Newton: On a point of order, Mr. Deputy Speaker. Is it in order for any hon. Member to move the new clause?
    Mr. Deputy Speaker: Only a Member who is a signatory to the new clause.
    Mr. Newton: Is it in order for me to sign the new clause?
    Mr. Deputy Speaker: No.

  New Clause No. 20

    DEVELOPMENT LAND TAX—EXTENTION OF INTERIM PERIOD
    Section 13 of the Development Land Tax Act 1976 shall have effect and shall be deemed always to have had effect as if the date in subsection (1) of that section was 31st March 1980.'—[Mr. Ian Stewart.]
    Brought up, and read the First time.
    Mr. Ian Stewart: I beg to move, That the clause be read a Second time.
    Last year in the Committee stage on the Finance Bill the Opposition introduced a new clause which led to a major alteration in the arrangements for development land tax, in that case relating to the taxation of pre-let developments. This year in Committee I moved new clause no. 15, as it then was, which has led to a further important change in the arrangements for development land tax. The subject of the new clause—which is essentially repeated in new clause no. 20, which we are now considering—is to extend the interim period during which the rate of tax on realised development value up to a figure of £150,000 in any one year is at the lower rate of 66⅔ per cent. rather than the 80 per cent. which is the standard full rate for the tax.
    New clause no. 15, moved in Committee, suggested that a further extension of time of three years should be provided from March 1979 when, under the present
    1352
    terms of the Development Land Tax Act 1976, this interim period will expire. In our debate on this matter the Minister of State in part agreed with the case put forward, but he made two significant reservations. The first was that the extension should be for only one year, from 1979 to 1980, instead of to 1982, and secondly that the change should not be brought about until the Finance Bill in the spring of 1979.
    The purpose of new clause no. 20 is to give effect to this undertaking by the Minister of State but without an unnecessary year's delay. I shall not now repeat in detail the arguments that I put in Committee, but I think it might be right, for the record, briefly to outline the background.
    The development land tax was introduced in 1976 with this basic rate of 80 per cent., with the intention that it should rise to 100 per cent. at some future time in relation to the progress of the community land scheme, but that is probably in the far distance. In the meantime, 80 per cent. is the basic effective rate. But on the first £150,000 of development value a concessionary rate of 66⅔ per cent. was introduced for the first three years of the development land tax in operation, in order, as was explained at the time, to encourage those who owned land which might be suitable for development to bring it forward before the higher rate applied from April 1979 onwards.
    What has happened in these three years. which are so nearly up, is that there has been quite a lack of development because of the economic circumstances of the time, and also because such development as has taken place has largely been by the use of land which was held by developers before the introduction of development land tax, and which therefore was exempted from it.
    Since the collapse of the property and development market in 1974, we have some four years of backlog of development, and this backlog will need to be made up. Many bodies and developers have expressed the opinion that the high rates of development land tax are now beginning to bite seriously and to be a

    1353
    deterrent to the bringing forward of suitable land for further development projects. There was a very effective submission, from which I quoted in Committee, from the Royal Institution of Chartered Surveyors, and that body is very far from being alone in stressing the strength of the case.
    The bulk of transactions under development land tax to date have fallen within the £150,000 band, and therefore at the lower rate. I believe that to move to an 80 per cent. rate for development land tax in the near funture, whether in 1980 rather than 1979 or otherwise, would have the effect of creating an artificial shortage of building land, and would force up the overall cost of land and, as a result, also the prices of houses, factories, and so on.
    This point was partially taken by the Government in extending the concession to 1980, but why is it necessary to wait until next year's Finance Bill in order to achieve this? Surely certainty is needed in our tax legislation. Transactions of th kind which fall to be taxed under development land tax often take six months, nine months or more to organise, therefore some of those which are in hand now may not even come to completion until after the expiry date of 31st March 1979 as it stands at present in the Bill.
    If we were to have a spring Budget next year in April with perhaps the Finance Bill in April or May which was debated in June and July, and perhaps enacted at the end of July, by then it would be necessary to have a retrospective provision covering the period which had elapsed from 31st March 1979. At the time the Finance Bill was published, the rate in law for all development land tax would then be 80 per cent. By not dealing with it in this year's Finance Bill, it seems to me that we are creating a needless extra area of doubt and complexity in what is already a very difficult and incomprehensible tax.
    I suggest that the remedy lies in the hands of the Government, by accepting this new clause to this year's Finance Bill, well in advance of the time when it will have to come into operation. I therefore commend the new clause to the House.
    Mr. Denzil Davies: The hon. Gentleman correctly said that in Committee I
    1354
    had given an undertaking that the Government would introduce legislation next year to extend the period of relief for development land tax in respect of the first £150,000 for another year. The Opposition have tabled this new clause to incorporate that particular undertaking in this year's Finance Bill. As I said in Committee, it was not strictly necessary to do it until next year, but I have no objection if the Opposition wish it to be in the Bill this year. Therefore, I am very happy to accept the new clause.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

  New Clause No. 21

    CONSORTIUM RELIEF
    '(1) In section 258 of the Taxes Act (group relief)—
    (a) after subsection (2)(a) there shall be inserted—
    "(aa) where the surrendering company is a member of a consortium and the claimant company is a trading company which is owned by the consortium and which is not a 75 per cent. subsidiary of any company";
    (b) after subsection (2)(b) there shall be inserted—
    "(bb) where the surrendering company is a member of a consortium and the claimant company is a trading company—

    (i) which is a 90 per cent. subsidiary of a holding company which is owned by the consortium, and

    (ii) which is not a 75 per cent. subsidiary of a company other than the holding company";

    (c) After subsection (2)(c) there shall be inserted—
    "(cc) where the surrendering company is a member of a consortium and the claimant company is a holding company which is owned by the consortium and which is not a 75 per cent. subsidiary of any company".
    (2) In consequence of subsection (1) above, the Taxes Act shall be amended as follows—
    (a) at the end of the proviso to subsection (2) of section 258 (group relief) there shall be added the words "and provided that no claim may be made by a company which is owned by a consortium or which is a 90 per cent. subsidiary of a holding company owned by a consortium either if a profit on a sale of the share capital of the claimant or holding company which is owned by the surrendering company would be treated as a trading receipt of that company or if the

    1355
    surrendering company's share in the consortium in the relevant accounting period of the claimant or holding company is nil";
    (b) in section 259 of the Taxes Act (kinds of group relief) after subsection (8) there shall be inserted—
    "(9) In applying any of the preceding subsections in the case of a claim by a company which is owned by a consortium or by a company which is a 90 per cent. subsidiary of a holding company owned by a consortium where the surrendering company is a member of the consortium, the loss referred to in subsection (1) above or the excess referred to in subsection (2) or (3) or (6) above, as the case may be may be set off against only a fraction of the total profits of the claimant company, and that fraction shall be equal to the surrendering company's share in the consortium, subject to any further reduction under section 261(2) below.";
    (c) in subsection (5) of section 263 (exclusion of double allowances etc.) after the words "as respects a claim for group relief made by a company as a member of a consortium" there shall be added the words "or as a company owned, or a 90 per cent, subsidiary of a holding company owned, by a consortium";
    (d) in subsection (2) of section 264 (claims and adjustments) after the words "a claim for group relief by a company as a member of a consortium" there shall be added the words "or as a company owned, or a 90 per cent. subsidiary of a holding company owned, by a consortium".
    (3) In consequence of subsection (1) above the Finance Act 1973 shall be amended as follows—

    (a) in subsection (3) of section 28 (group relief: qualifications for entitlement) after the words "surrendering company" where those words first occur there shall be inserted the words "in the case of a claim for group relief made by a company as a member of a consortium, or the claimant company in the case of a claim for group relief made by a company owned, or a 90 per cent. subsidiary of a holding company owned, by a consortium" and in each of paragraphs (a), (b) and (c) there shall be inserted after the words "surrendering company" the words "or claimant company, as the case may be.";

    (b) at the end of subsection (4) of section 28 there shall be added the words "and in any case where the claimant company is a subsidiary of a holding company which is owned by a consortium, for references in subsection (3) above to the claimant company there shall be substituted references to the holding company';

    (c) in subsection (2) of section 29 (group relief: effect of arrangements for transfer of company to another group, etc.)—

    (i) in paragraph (a) after the words "the trading company" there shall be inserted the words "or a member of the consortium" and

    (ii) for the words "(as the surrendering company) fall" onwards there shall be
    1356
    substituted the words "fall within any of paragraphs (a) to (cc) of subsection (2) of section 258 of the Taxes Act (the cases where group relief is allowed for a consortium)".

    (4) This section applies to accounting periods ending after 11th April.'.—[Mr. Cope.]
    Brought up, and read the First time.
    Mr. Cope: I beg to move, That the clause be read a Second time.
    This new clause proposes to introduce a consortium group relief. It is one which was introduced in Committee in much the same form and which led to a tied vote when it was debated on 27th June. On that occasion there were 15 votes in each direction, hence the reappearance of the same new clause on Report.
    I think that it is well understood by those hon. Members who served on the Committee, but perhaps for the benefit of those who did not I should explain briefly what it is about. It emanates primarily from the shipping industry, although it does not apply only to it. The fact is that at present group relief can operate only between members of a group where there is a 75 per cent. relationship in the shareholding of the group. When it does operate, losses can be surrendered in any direction. That is to say, if a parent or subsidiary company makes a loss, whereas the others in the group make a profit, the tax which those profitable companies would make is reduced by the amount of tax which is allowed for the losses made by the other companies in the group.
    But in the case of a consortium this relief does not apply. In some cases the shipping industry uses the consortium form of organisation, and one particularly well-known example—Overseas Containers Ltd.—is mentioned in connection with this new clause. That is also the prime reason for the new clause being put forward, because it is a particularly hard case as things stand at present.
    When we discussed this matter in Committee, the Minister of State, Treasury, undertook that the Government would in due course look at this, but he did not give any undertaking as to what would happen. He emphasised the difficulties and said that they would look at it in the course of the next year in what the

    1357
    Committee took to be a rather relaxed and not very positive fashion. At the time it seemed to me, and to some of my hon. Friends, that the principal criterion to be adopted in looking at this was whether only this one company was affected or whether a large number of companies were affected. It seemed to me then, and still does now, that even if only one company is affected that in a sense emphasises the need to introduce this new clause, because it means that it is even more of a hard case than if a large number of companies were in the same position.
    Of course, if in the interval since 27th June the Treasury has discovered that a large number of companies are affected, that strengthens the argument for this provision. I accept that the interval between 27th June and now is not a very long interval. But that is not our fault. The Government have been determined to push this Bill along. That is part of the reason, but another part of the reason is the quirk of parliamentary procedure which dictates that new clauses should be taken last in Committee and first on Report. This inevitably increases the gap where two new clauses are involved by comparison with two amendments. Nevertheless, this is not a complicated matter, although the new clause appears to be complicated. I hope that we shall hear something a little more positive from the Financial Secretary—
    Mr. Cronin: As the new clause seems to affect entirely Overseas Containers Limited, will the hon. Gentleman be a little more specific, for the benefit of those hon. Members who did not serve in the Committee, and say exactly what the grievance is in regard to this company?
    Mr. Cope: I apologise if I did not explain it adequately. Let us suppose that there are two companies in a group. If one makes a loss and the other makes a profit, the two are looked at together in order to arrive at the taxation liability. In the case of a consortium, and Overseas Container Limited is one example. although there may be others, if one company makes a loss and the other makes a profit they are looked at separately and tax is payable, even though there may he a big loss. Overseas Containers Limited has been profitable and
    1358
    its parents have not always been profitable. But in other cases the reverse might apply. The difficulty of the tax law as it stands at present is that the losses cannot be offset against the profits in the other parts of what is to all intents and purposes a group, except that it is organised in a consortium.
    It is true that there may be a way out in terms of adjusting the organisation of a consortium which is affected in this way by turning it into a partnership or something such as that. But that has other consequences as well. The argument which we put forward in Committee not only on this new clause but on others as well was that the tax law of itself should as far as possible not force people to set up their businesses in one way or another in order to minimise their tax liability.
    To put it the other way round, there should be no accidental tax penalty because a business is organised in one way instead of another. Businesses should be free to take the decision about which way they organise their affairs, and which way they set up their groups, as may be best for their own commercial success. Of course, shipping companies in particular at present operate in very difficult world markets, and the last thing they need is to have behind them ail kinds of tax complications which hobble them in the way in which they can set up their structures. This is another important point which underlies the new clause.
    Therefore, I commend the clause to the House, and I hope that it will commend itself to the Government.
    Mr. Graham Page: There seems to be an injustice here between those who set up a consortium and those who merely come together in simple groups.
    We have been discussing the example of the shipping companies because this is perhaps the largest case of which we know at present and, indeed, the most successful. A consortium occurs when a number of companies, which I call the parent companies, give birth to a trading company, the consortium company, the share capital in which is owned by the parent companies but none of them owning more than 75 per cent. of the consortium company.

    1359
    If there is a loss by the consortium company, that can be transferred to the parent companies. That was very satisfactory when the consortium started. The shipping companies in the one which we are considering thought that perhaps the consortium might not be as successful as it has been, and the transfer of losses from the consortium to the parent companies was a reasonable method of grouping their trading.
    What has happened, however, is that the consortium has been extremely successful in its container traffic, whereas the business of the parent companies has dropped off. I do not say that there is failure or anything of that sort, but general shipping for the ordinary liner company is not as good as it was when the consortium was formed.
    This is of special concern in my constituency, where we have the biggest container dock in the country—the Royal Seaforth—which is proving a great success. But it would not have proved such a success, I believe, had the companies had to rely on mere grouping. In grouping, they can pass the losses one way and another without restriction. There is no question of not passing them from one company to another. They can go either way amongst the companies in the group. But the disadvantage of mere group trading is that there is not one firm company like the consortium company with sufficient resources in itself to carry on such a substantial trade and, of course, the container traffic trade is capital intensive. It has had to be to get the container traffic going.
    I cannot see that there can be an opportunity here for tax avoidance. The clause is merely recognising the movement of losses between companies which are trading very closely together. It is a recognised practice where they are merely joining in groups and carrying on group trading, and there seems no reason why that practice should not be recognised when the form of grouping is by means of a consortium in which the parent companies own the shares but none more than 75 per cent.
    There is in the clause a provision to prevent tax avoidance by the fact that the movement of losses can be only the amount of the interest of the parent companies in the consortium. I think that
    1360
    that is a complete protection against a flood of tax avoidance.
    If this consortium practice spreads amongst other trading, nothing but benefit can come of it. It is used outside the shipping world at present, but not to the extent that it is in the shipping world. If the clause is accepted, it may be that it will be of advantage to other traders to form consortia of this kind. There will be no loss to the Revenue over it, but there will be justice between the consortium system and the simple group.
    I hope that the House will accept the clause.
    8.15 p.m.
    Mr. Pardoe: The clause is identical to one which I moved in Committee. The fact that my name is not appended to it does not mean that I do not support it now. It is merely because there are six names there already, and there is no room for a seventh. I support the clause fully, and I think that the arguments for it which were put forward in Committee and those which have been adduced today are unanswerable.
    The main question which the Government have to answer is whether they want consortia to be formed and whether they believe that it is a reasonable way of conducting business. Certainly I do. Do they want to force consortia which now exist into forming partnerships or groups for the sole reason not of business efficiency or of winning more world trade but simply that they have to take advantage of existing tax provisions? That is the nub of the issue.
    If the consortium which we are discussing—and as far as I know there is only one—were to form itself into a partnership, it would have certain business consequences which might not be good for the future of British shipping. However, it may be forced to do so unless some such clause as this is put into the Bill.
    In Committee, we had a sort of half-undertaking from the Government to look at the clause again and possibly to try to meet the arguments in support of it next year. As I remember it, the Government said that the concession which this clause sought for consortia was greater than the allowances given to groups. That was never my intention in

    1361
    moving the clause. Therefore, we suggested to the Government that they should come back on Report with their own amendment to solve the problem. The Government have had to time to do that, and I hope that we shall hear a rather more forthcoming response to the clause on this occasion than we had in Committee.
    Mr. Eric Ogden: The arguments of the hon. Member for Gloucestershire, South (Mr. Cope), the right hon. Member for Crosby (Mr. Page) and the hon. Member for Cornwall, North (Mr. Pardoe) have followed each other and, as I understand them, have extended the case in support of the clause.
    The hon. Member for Gloucestershire, South concentrated almost exclusively on the shipping interests. When he used those three magic letters "OCL"—the successor to a shipping company to which I once belonged, the Blue Funnel Line of Liverpool, which will be familiar to the right hon. Member for Crosby—he did a great deal more to persuade me to support his clause than his long and complicated argument did.
    Then the right hon. Member for Crosby said that the clause was not only about shipping. He said that it was about consortia and trading companies and that perhaps it should be carried into other spheres of activity. Finally, the hon. Member for Cornwall, North said that of course it should be carried into other spheres of activity.
    The case seems to have been developed, not only as an argument for shipping, and not only as an argument for shipping and possibly for other activities, but finally, most certainly, for other activities.
    I am wholly in favour of trying to help shipping companies in this legislation. I am not certain at this stage how far that ought to go into other activities.
    Mr. Brooke: The argument deployed by my hon. Friend the Member for Gloucestershire, South (Mr. Cope) and supported by my right hon. Friend the Member for Crosby (Mr. Page) and the hon. Member for Cornwall, North (Mr. Pardoe) arose because the case for rejecting the new clause in Committee was that it applied only to shipping. Today,
    1362
    I think that we have tried to demonstrate that the case can go beyond shipping even though shipping was the example which my hon. Friend the Member for Gloucestershire, South urged most strongly.
    Mr. Ogden: That is helpful, yet unhelpful. If I could be persuaded to support a limited degree of help for shipping, I might not want to be open then to helping many other industries which did not need it so much. If I am told that there is a case for shipping, and if we can find the right form of words to help shipping but at the same time ensuring that until the following case is proved it is for shipping only, I shall be inclined to support the clause.
    Mr. Cope: I am sorry if any impression which I gave damages the hon. Member's support for the clause. I am sorry if the impression gained by the hon. Member was that I intended the new clause to apply only to shipping or to OCL. That was the example given in Committee, and I adopted that example because it was a very good one. But I do not propose this clause purely as a means of helping one company or the shipping industry as a whole. The case for the clause is a wider one than that and, if the shipping industry is in need of assistance, I should prefer it not to get assistance in this backhanded way through the tax system. I should prefer it to be done in a more direct way. However, that is another matter.
    Mr. Ogden: But the only alternative to us tonight is this way by this amendment. It is that or nothing. Shipping needs help and if the Minister possibly can I hope that he will find himself able to help it in this way.
    Mr. Ian Stewart: I do not want to repeat the points that have been made already, but we should be aware of the nature of this problem.
    It is true that in the debates upstairs in Committee one of the points that the Government made for not accepting our new clause was that only one case—that of OCL—had come to the notice of the Inland Revenue. I am advised that OCL is only one example of the need for a change in the law. I believe that there are at least four other consortia in the shipping industry in the United Kingdom.

    1363
    These encompass the entire range of the British liner fleet which is the largest and most competitive in the world. Therefore, this is of enormous importance to our economy and to us as a trading nation.
    The point of the new clause is, as my hon. Friend the Member for Gloucestershire, South (Mr. Cope) said, that of principle rather than actual cases. I believe that the CBI has also pressed this matter on a number of occasions during the past few years because it believes that the problem could apply to other industries such as oil and nuclear power. For that reason, I believe that the Government should firm up their willingness to show sympathy for this case.
    Why does a consortium of this kind come about? Probably because there have been major changes in technology and scale in the industries concerned. This makes it necessary for more than one and possibly several of the major operators in a particular field to combine their resources, experience, skills and financial backing to launch a considerable innovation. For example, the whole business of container shipping was a development from the old liner and freight operations.
    Since it is becoming more widely recognised that there is this major disadvantage to setting up consortia on this basis, it is probable that others will not come about in other industries. Consortia came about in shipping which has had a bad time, and therefore many of the parent companies have suffered losses which cannot be relieved by the profits of their common consortium.
    If there are other major changes in industries such as heavy engineering, motor cars, oil and nuclear power there could be examples of older technologies finding it more and more difficult to make profits but still having the resources to pool for a major step forward. This would be important for the economy as a whole. If this problem over taxation of consortia continues it will be a deterrent to this happening. The only other possibility would be an amalgamation of all the companies concerned which would inevitably mean a concentration of vast and sometimes disparate interests, for other purposes.
    This case is very critical for OCL. Up to now the problem affects only shipping
    1364
    and so the effect of the clause would be concentrated on shipping. However, it would be wrong to deceive ourselves that it could not be of wider application. It is hard to measure the deterrent effect of a piece of legislation which put a certain course of action out of court. Once it is noticed in industry that there are major tax disadvantages in a certain way forward, it is hardly surprising if other exemples do not come about. The limited application of the clause at the moment should not blind us to other possibilities in the future.
    Mr. Cronin: The hon. Member for Gloucestershire, South (Mr. Cope) moved the new clause most lucidly. I hope that he did not think that my intervention meant anything to the contrary.
    I am a little concerned about the new clause, and I hope that the Financial Secretary will explain its effects. Generally, corporations seem to have rather favourable taxation treatment. Certainly on this side of the House we should look with some doubt at giving corporations further tax advantages.
    The problem of consortia could be overcome by using a different method altogether—a different form of capital structure, by amalgamation. It is not necessary to have this favourable treatment. I am particularly worried that it seems to open the door to all kinds of companies to obtain tax advantages in future by using the mechanism of consortia. That would be eroding the Revenue's receipts to a substantial extent.
    If a company which is in a consortium is successful and the parent company is unsuccessful, there is no reason, either economically or in the national interest, why the parent company should be, in effect, subsidised by the Revenue. Although I would not go so far as to say that I object to the new clause, or indeed to anything that helps British shipping, I believe that OCL is a deserving case and a good example of a consortium. However, I am concerned whether this provision will be an open door to all kinds of taxation abuse.
    Will the Minister consider whether these provisions should apply only to shipping and to nothing else? Nobody has yet put forward any argument for this mechanism to be used for anything other than shipping.
    8.30 p.m.
    Mr. Arthur Blenkinsop: I intervene only briefly, and I apologise to the House for coming in late.
    In common with other hon. Members with shipping interests in their constituencies, I have had various representations on this subject. I do not wish to say that all hon. Members have been wholly convinced by the arguments advanced, but I believe that strong sympathy has been expressed in the present situation. Those affected argue that by reconstituting themselves as a partnership these benefits could be obtained in any case. Clearly, there are great disadvantages for such firms in taking this action on one side, and that has to be weighed against the loss suffered in tax terms. It would be serious if a less satisfactory way of conducting business was in a sense forced upon them against their wish and against their natural trading desire, if that could reasonably be avoided.
    On the other hand, I appreciate that we are dealing with considerable sums of money, and no doubt there will be implications in other areas. I emphasise that there is real concern on this matter and that everybody is anxious to find a satisfactory solution.
    Mr. Brooke: In responding to the remarks of the hon. Member for Loughborough (Mr. Cronin), I believe that there is a problem involving organisation. It is desirable that a company's organisation should mirror the objectives of the organisations that participate in it. The hon. Member for South Shields (Mr. Blenkinsop) said that there would be offsetting disadvantages in moving to a partnership basis. I agree with him that there are disadvantages and obviously considerable expense would result.
    It seems ironical that we should be making consortium arrangements unattractive at exactly the moment when in the Middle East we have seen how relevant consortium arrangements are in carrying out business in that area. Although the examples of consortia quoted in the shipping world may be composed of British companies, there will be other circumstances in which British companies may participate in a consortium consisting of companies of mixed nationalities. It would be a pity if British companies were put at a disadvantage in
    1366
    entering that kind of arrangement because that participant suffered from different tax arrangements compared with the other participants.
    Mr. David Hunt: I apologise for the fact that I was not in the Chamber to hear the start of the debate, but wish to make what I believe to be a few important points about a crucial new clause so far as it affects shipping.
    The anomaly created by the existing law is quite easily overcome by this clause in a most harmless way. At present the business of liner shipping is facing a number of important and strategic obstacles which are making life extremely difficult.
    In an earlier debate on shipping we had a lengthy exposition of the Russian threat as it affects liner shipping. The Minister in that debate said that firm action was now being taken to protect British shipping and in particular the liner trades. Unless this clause is passed, one of the country's major liner shipping groups, OCL, will be in a most difficult position. If the new clause is defeated. OCL will be forced to take certain steps that will be detrimental to that company. If it is necessary for OCL to become a partnership, as already mentioned, then it would not, as it does now, own its ships or have independent control of its own finances and policies.
    In the shipping industry the consortium is a vital form of organisation because it enables companies to come together with a wide variety of interests to mount a joint operation in a particular trade or trades. Yet at the same time it allows the parent companies to maintain their separate identities. When a shipping operation is beyond the resources of a single company, the consortium arrangement can provide the capital investment on the scale required. This is where Overseas Containers Limited is so important. The company was formed in the late 1960s and suddenly now finds itself in this difficult position wholly as a result of an absurd anomaly that the new clause seeks to put right.
    I do not want the House to underestimate the importance of the new clause to the liner industry and to shipping generally. Let me repeat the facts. OCL operates a fleet of 15 cellular container ships on trade routes linking the United

    1367
    Kingdom and Europe with Australia, New Zealand, the Far East and southern Africa. The fleet and its associated terminals ashore represent an investment of nearly £500 million. In fact, OCL is the largest British liner company and probably the largest ocean liner group in the world. Last year it delivered more than 250,000 containers and earned nearly £300 million in freights. It represents about 10 per cent. of the entire British fleet and 25 per cent. of the British liner fleet.
    This great company deserves support and should not have its valuable activities damaged by an anomaly that the clause seeks to put right. The proposal would be of great benefit to an important part of the shipping industry in maintaining its ability to cope with some very harsh trading conditions.
    The industry has pointed out that if the consortium group relief provisions are not altered some companies may be forced into making the arrangements to which I have referred, which would make their position more difficult and would do what this clause seeks to do in a simpler and more just way. For those reasons, I hope that the House will accept the new clause.
    Mr. Robert Sheldon: My hon. Friends the Members for South Shields (Mr. Blenkinsop) and for Liverpool, West Derby (Mr. Ogden) were concerned about the possible effect of the new clause on the shipping industry. My hon. Friend the Member for West Derby asked whether the clause would be confined to shipping. The subsequent debate has answered that question. The arrangements for tax relief for consortia would be widened as a result of the new clause and would apply generally. Shipping is the example selected because of a case in which a number of hon. Members have been taking an interest.
    My hon. Friend the Member for Loughborough (Mr. Cronin) pointed out some of the problems that might arise if consortia were to become more popular in the way that a number of Conservative Members, particularly the hon. Member for Hitchin (Mr. Stewart), suggested. The hon. Member for Cornwall, North (Mr. Pardoe) asked the direct question whether it was the Government's intention to force consortia into partnerships or groups by means of tax law. I can tell him that that is not the Government's intention.
    1368
    I shall make clear where the Government stand on the new clause and in relation to consortia generally, but I shall start by referring to groups and their relationships to consortia so that we may see the two in relation to each other.
    Group relief was brought in as a result of considerable pressure. I applied part of it myself in the 1960s because I felt that it was right that groups should be treated for many purposes as single companies. The hon. Member for Gloucestershire, South (Mr. Cope) pointed out that groups may spread relief both tip-wards and downwards. That is quite proper because, to all intents and purposes, their structures are similar to those of single companies operating by means of divisional structure.
    Consortia are quite different from groups. They are allowed a certain kind of relief because of the underlying purposes of setting up consortia. In the early years of a consortium there can be losses, but when companies come together in this way they can pool their expertise and financial strength, and provisions for tax relief for consortia therefore allow losses to be set off against the profits of the parent companies. The rule for consortium relief is that no participant can own more than 75 per cent. and that there can be up to five participants. As a result, there is no overlap between consortia, as defined for the purposes of tax relief, and groups, because, of course, the consortium is not comparable to the single company, which is the basic model for the group.
    The new clause would introduce a new principle, and it is right that, before we accept so wide ranging a principle, we should give it much closer examination than has been possible between the Committee and Report stages of this Bill. Under existing legislation, the minority shareholder in a group may own up to 25 per cent. of it and still get no group relief. Under the clause, therefore, there would be certain tax advantages for consortia as compared with groups. Clearly, groups are like single companies, while consortia are not. There would, therefore, be a major anomaly if this clause were accepted. It would lead to a need for fundamental changes in group relief to take account of the changes in consortium relief.

    1369
    We must understand that the kind of examination my right hon. Friend promised is bound to take some time. We need to consider the various ways in which companies can be linked. For example, group relief is available for participants owning more than 75 per cent., while consortium relief is available with up to five participants, none of which can have more than 75 per cent. of the shareholding; the rest of the companies must operate like ordinary shareholders.
    There are certain advantages in consortium operation, and I think that it is reasonable that it should be made easier to set up consortia with the tax advantages attaching thereto. But, as I have said, this proposal needs rather more examination than has been possible in the time available.
    Mr. Cronin: As this matter practically affects only shipping companies, will my right hon. Friend consider having legislation introduced to confine the relief to shipping companies in the same way as agriculture and forestry, for instance, have relief?
    Mr. Sheldon: I was much taken with the comments of the hon. Member for Hitchin, who rightly pointed out that there could be major moves in the direction of consortia now that expertise is often spread over new and important fields. There could be a major move in this direction in that large and powerful firms which in the past would not have needed to operate in this way may now need to do so, in the way foreseen by the hon. Member for Hitchin. If that were to become an important trend—and the hon. Gentleman used good arguments about pooling of the wide range of experience and strength of finance that would be required—there would be a great deal of validity in the case, but this whole matter then becomes quite fundamental, and I do not think that we could have considered it satisfactorily in the short period that we have had.
    Mr. Cope: The right hon. Gentleman is speaking as though this matter first appeared in Committee on this Bill. Yet I am advised that the CBI has for a number of years made this point in its submissions to the Chancellor of the Exchequer. The matter has not simply
    1370
    arisen this year. It has been put before to the Chancellor of the Exchequer.
    8.45 p.m.
    Mr. Sheldon: It is interesting that it is the only case of its sort to have come before the Inland Revenue and to show the disadvantages to which hon. Members have referred. As the hon. Member for Hitchin observed, the case may be the precursor of others. That is why I think it right to have a wider examination of the sort that I have suggested. It is not a matter that we want to consider hastily. That is mainly because of the implications for group relief. We could find ourselves accepting some anomalies because of the way in which group relief has to operate alongside consortium relief. It is a complicated area. I hope that hon. Members who have some understanding of it will accept that it is right that we carry out an investigation in the manner to which I have referred and return with some further information in time for next year's Budget.
    Mr. Ogden: Does my right hon. Friend agree that the organisation of any company, especially a shipping company, should be related primarily to its operations and practice and not to any tax advantage that a system may or may not offer? Is he talking about two inquiries, one into the effect on the industry of the clause or a similar clause—presumably he is having talks with shipping interests—and a much longer one into the possible effects of the clause throughout the whole of British industry, which we cannot expect for another 12 months? Is he thinking of any retrospective legislation? If he decides that shipping should have had help tonight, will he back-date such help until last April? What help is coming?
    Mr. Sheldon: I cannot comment on that in advance of the examination that I promise the House. I agree with my hon. Friend when he—fairly—said that taxation should not dictate the operation of the industry. Taxation should, instead. reflect the changes that are needed to make effective the operations of companies.
    Mr. Peter Rees: If hon. Members had been under the illusion that we were debating a technical matter of some complexity and little importance, that must

    1371
    surely have been dispelled by the most interesting debate that has developed.
    The Financial Secretary appeared to concede the importance of the principle even though he seemed a little doubtful about its application and how it should be clothed in legislative form. The debate has demonstrated that we are not entirely concerned with the shipping industry. Whether we should be so concerned is another matter. I do not think that we should ever entirely tailor our fiscal legislation to one industry but should be concerned with the wider principles. I hope that it has emerged with clarity that we are not concerned only with one consortium—namely, OCL.
    The Financial Secretary did less than justice to the arguments advanced by my hon. Friends when he suggested that there was only one consortium likely to be affected. The right hon. Gentleman cannot possibly say—probably none of us can say—what an inhibiting effect the provisions have had on various other companies, or groups of companies, that might have attempted to adopt a consortium relationship for a certain operation.
    Shipping is probably uppermost in our minds. We can pray in aid what was said in the Rochdale report, which suggested that consortia were a useful vehicle for the shipping industry and should be encouraged. I do not think that the right hon. Gentleman devoted any attention to the recommendations contained in the Rochdale report, to which we referred in Standing Committee.
    It has emerged clearly from the informed interventions of my hon. Friends that various types of company might well be moved to take advantage of the consortium relationship. It is because of the scale of modern industry and because of the scale of ventures that are undertaken, especially in public works, that very often no one company has the expertise or the capital resources to undertake them, especially in the Middle East. The most obvious vehicle is a consortium.
    Not ignoring the speeches made by my hon. Friends, the point was well made by the hon. Members for South Shields (Mr. Blenkinsop) and Liverpool, West Derby (Mr. Ogden) that a business organisation should not be dictated by fiscal considera-
    1372
    tions. That is the principle underlying the debate. I hope that there is common ground within the House that business organisations should be adopted that are most likely to lead to successful commercial conclusions.
    After all, we are no longer such a strong country industrially and commercially that we can afford to discard certain forms of business organisation. They must be encouraged, or at least not deterred, which is what the existing legislation does. I should point out to the Financial Secretary and, indeed, to his hon. Friend the Member for Loughborough (Mr. Cronin) that it is a question not of creating an anomaly or giving consortia special treatment, but of putting them on the same basis as group companies which have a 75 per cent. shareholding relationship. No door is being opened. It is merely, as it were, eliminating an anomaly which affects consortia at present and giving them precisely the same relief as group companies.
    The matter was put graphically by my hon. Friend the Member for Gloucestershire, South (Mr. Cope): the losses of companies in the consortium should be surrendered upwards or downwards to one consortium company just as the loss of the consortium company can now be surrendered upwards to the companies which own its shares. That is the way that the relief operates in group companies. We are asking the Government not to accept an anomaly or specially to favour consortia, but to put them in the same position as group companies.
    In effect, the Financial Secretary con ceded the principle. Therefore, I am a little surprised that he adopted such an unco-operative and unhelpful attitude. He said that there must be time to consider these matters. As my hon. Friend the Member for Gloucestershire, South pointed out, representations were made months ago. A new clause to this effect stood on the Amendment Paper in Standing Committee. There has been plenty of time had there been the will on the part of the Government.
    As we have learned to our cost in many debates, the Financial Secretary is far quicker to impose than to moderate the burden of tax. I hope that my hon. Friend the Member for Hitchen (Mr. Stewart) in order to inject some urgency into the Government's deliberations, will

    1373
    press this matter to a Division. I hope that it will command support not only on this side, but on the Government side of the House.

    Division No. 258]

    AYES

    [8.53 p.m.

    Adley, Robert

    Gow, Ian (Eastbourne)

    Moate, Roger

    Aitken, Jonathan

    Gower, Sir Raymond (Barry)

    Monro, Hector

    Alison, Michael

    Grant, Anthony (Harrow C)

    Montgomery, Fergus

    Arnold, Tom

    Gray, Hamish

    Moore, John (Croydon C)

    Atkins, Rt Hon H. (Spelthorne)

    Grieve, Percy

    Morgan, Geraint

    Atkinson, David (B'mouth, East)

    Grylls, Michael

    Morgan-Giles, Rear-Admiral

    Banks, Robert

    Hall-Davis, A. G. F

    Morris, Michael (Northampton S)

    Beith, A. J.

    Hamilton, Archibald (Epsom & Ewell)

    Morrison, Charles (Devizes)

    Bendall, Vivian

    Hamilton, Michael (Salisbury)

    Morrison, Hon Peter (Chester)

    Bennett, Sir Frederic (Torbay)

    Hampson, Dr Keith

    Neave, Airey

    Bennett, Dr Reginald (Fareham)

    Hannam, John

    Nelson, Anthony

    Benyon, W.

    Harrison, Col Sir Harwood (Eye)

    Neubert, Michael

    Berry, Hon Anthony

    Harvie Anderson, Rt Hon Miss

    Newton, Tony

    Biffen, John

    Haselhurst, Alan

    Normanton, Tom

    Biggs-Davison, John

    Hawkins, Paul

    Nott, John

    Blaker, Peter

    Hayhoe, Barney

    Onslow, Cranley

    Body, Richard

    Hicks, Robert

    Oppenheim, Mrs Sally

    Boscawen, Hon Robert

    Hodgson, Robin

    Page, John (Harrow West)

    Bottomley, Peter

    Holland, Philip

    Page, Rt Hon R. Graham (Crosby)

    Bowden, A. (Brighton, Kemptown)

    Hordern, Peter

    Page, Richard (Workington)

    Boyson, Dr Rhodes (Brent)

    Howe, Rt Hon Sir Geoffrey

    Pardoe, John

    Braine, Sir Bernard

    Howell, David (Guildford)

    Parkinson, Cecil

    Brittan, Leon

    Howell, Ralph (North Norfolk)

    Pattie, Geoffrey

    Brocklebank-Fowler, C.

    Howells, Geraint (Cardigan)

    Penhaligon, David

    Brooke, Hon Peter

    Hunt, David (Wirral)

    Percival, Ian

    Brotherton, Michael

    Hunt, John (Ravensbourne)

    Pink, R. Bonner

    Brown, Sir Edward (Bath)

    Hurd, Douglas

    Powell, Rt Hon J. Enoch

    Buchanan-Smith, Alick

    Hutchison, Michael Clark

    Prentice, Rt Hon Reg

    Buck, Antony

    Irving, Charles (Cheltenham)

    Price, David (Eastleigh)

    Budgen, Nick

    James, David

    Prior, Rt Hon James

    Butler, Adam (Bosworth)

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

    Pym, Rt Hon Francis

    Carlisle, Mark

    Jessel, Toby

    Raison, Timothy

    Chalker, Mrs Lynda

    Johnson Smith, G. (E. Grinstead)

    Rathbone, Tim

    Channon, Paul

    Johnston, Russell (Inverness)

    Rees, Peter (Dover & Deal)

    Churchill, W. S.

    Jopling, Michael

    Rees Davies, W. R.

    Clark, Alan (Plymouth, Sutton)

    Joseph Rt Hon Sir Keith

    Rhodes James, R.

    Clarke, Kenneth (Rushcliffe)

    Kabberry, Sir Donald

    Rhys Williams, Sir Brandon

    Cockcroft, John

    Kellett-Bowman, Mrs Elaine

    Ridley, Hon Nicholas

    Cooke, Robert (Bristol W)

    Kershaw, Anthony

    Ridsdale, Julian

    Cope, John

    Kimball, Marcus

    Rifkind, Malcolm

    Cormack, Patrick

    King Evelyn (South Dorset)

    Roberts, Wyn (Conway)

    Corrie, John

    Kitson Sir Timothy

    Ross, Stephen (Isle of Wight)

    Costain, A. P.

    Knight, Mrs Jill

    Rost, Peter (SE Derbyshire)

    Crowder, F. P.

    Knox, David

    Royle, Sir Anthony

    Davies, Rt Hon J. (Knutsford)

    Lamont, Norman

    Sainsbury, Tim

    Dean, Paul (N Somerset)

    Langford-Holt, Sir John

    St. John-Stevas, Norman

    Dodsworth, Geoffrey

    Latham Michael (Melton)

    Scott Nicholas

    Drayson, Burnaby

    Lawrence, Ivan

    Scott-Hopkins, James

    du Cann, Rt Hon Edward

    Lawson, Nigel

    Shaw, Giles (Pudsey)

    Durant, Tony

    Le Marchant, Spencer

    Shaw, Michael (Scarborough)

    Eden, Rt Hon Sir John

    Lester, Jim (Beeston)

    Shelton, william (Streatham)

    Edwards, Nicholas (Pembroke)

    Lewis, Kenneth (Rutland)

    Shepherd, Colin

    Elliott, Sir William

    Lloyd, Ian

    Shersby, Michael

    Emery, Peter

    Loveridge, John

    Silvester, Fred

    Eyre, Reginald

    Luce, Richard

    Sims, Roger

    Fairbairn, Nicholas

    McCrindle, Robert

    Sinclair, Sir George

    Fairgrieve, Russell

    Macfarlane, Neil

    Skeet, T. H. H.

    Farr, John

    MacGregor, John

    Smith, Dudley (Warwick)

    Fell, Anthony

    MacKay, Andrew (Stechford)

    Smith, Timothy John (Ashfield)

    Finsberg, Geoffrey

    McNair-Wilson, M. (Newbury)

    Speed, Keith

    Fisher, Sir Nigel

    McNair-Wilson, P. (New Forest)

    Spence, John

    Fletcher, Alex (Edinburgh N)

    Madel, David

    spicer, Jim (W Dorest)

    Fletcher-Cooke, Charles

    Marshall, Michael (Arundel)

    Spicer, Michael (S Worcester)

    Forman, Nigel

    Marten, Neil

    Sproat, Iain

    Fox, Marcus

    Mates, Michael

    Stainton, Keith

    Fraser, Rt Hon H. (Stafford & St)

    Mather, Carol

    Stanbrook, Ivor

    Gardiner, George (Reigate)

    Maude, Angus

    Stanley, John

    Gardner, Edward (S Fylde)

    Maxwell-Hyslop, Robin

    Steen, Anthony (Wavertree)

    Gilmour, Sir John (East Fife)

    Mayhew, Patrick

    Stewart, Ian (Hitchin)

    Glyn, Dr Alan

    Meyer, Sir Anthony

    Stokes, John

    Godber, Rt Hon Joseph

    Miller, Hal (Bromsgrove)

    Stradling Thomas, J.

    Goodhart, Philip

    Mills, Peter

    Tapsell, Peter

    Goodlad, Alastair

    Miscampbell, Norman

    Taylor, R. (Croydon NW)

    Gorst, John

    Mitchell, David (Basingstoke)

    Taylor, Teddy (Cathcart)

    Question Put, That the clause be read a Second time:—
    The House divided: Ayes 244, Noes 268.

    Tebbit, Norman

    Viggers, Peter

    Wiggin, Jerry

    Temple-M, Peter

    Wakeham, John

    Winterton, Nicholas

    Thatcher, Rt Hon Margaret

    Walder, David (Clilheroe)

    Wood, Rt Hon Richard

    Thomas, Rt Hon P. (Rndon S)

    Walker, Rt Hon P. (Worcester)

    Younger, Hon George

    Townsend, Cyril D.

    Walker-Smith, Rt Hon Sir Derek

    Trotter, Neville

    Warren, Kenneth

    TELLERS FOR THE AYES:

    van Straubenzee, W. R.

    Weatherill, Bernard

    Sir George Young and

    Vaughan, Dr Gerard

    Wells, John

    Lord James Douglas Hamilton.

    NOES

    Abse, Leo

    Ewing, Harry (Stirling)

    MacFarquhar, Roderick

    Allaun, Frank

    Faulds. Andrew

    McGuire, Michael (Ince)

    Anderson, Donald

    Fernyhough, Rt Hon E.

    Mackenzie, Rt Hon Gregor

    Armstrong, Ernest

    Fitch, Alan (Wigan)

    McMillan, Tom (Glasgow C)

    Ashley, Jack

    Flannery, Martin

    McNamara, Kevin

    Ashton, Joe

    Fletcher, Ted (Darlington)

    Madden, Max

    Atkins, Ronald (Preston N)

    Foot, Rt Hon Michael

    Magee, Bryan

    Atkinson, Norman (H'gey, Tott'ham)

    Ford, Ben

    Mallalieu, J. P. W.

    Bagier, Gordon A. T.

    Fowler, Gerald (The Wrekin)

    Marks, Kenneth

    Barnett, Guy (Greenwich)

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

    Marshall, Dr Edmund (Goole)

    Barnett, Rt Hon Joel (Keywood)

    Freeson, Rt Hon Reginald

    Marshall, Jim (Leicester S)

    Bates, All

    Garrett, John (Norwich S)

    Mason, Rt Hon Roy

    Bean, R. E.

    Garrett, W. E. (Wallsend)

    Maynard, Miss Joan

    Bennett, Andrew (Stockport N)

    George, Bruce

    Meacher, Michael

    Bidwell, Sydney

    Gilbert, Rt Hon Dr John

    Mellish, Rt Hon Robert

    Bishop, Rt Ron Edward

    Ginsburg, David

    Mikardo, Ian

    Blerkirsop, Arthur

    Golding, John

    Millan, Rt Hon Bruce

    Boothroyd, Miss Betty

    Gould, Bryan

    Miller, Dr M. S. (E Kilbride)

    Boyden, James (Bish Auck)

    Gourlay, Harry

    Mitchell, Austin (Grimsby)

    Eradley, Tom

    Grant, John (Islington C)

    Mitchell, R. C. (Soton, Itchen)

    Bray, Dr Jeremy

    Grocott, Bruce

    Molloy, William

    Brown, Hugh D. (Provan)

    Hamilton, James (Bothwell)

    Moonman, Eric

    Brown, Robert C. (Newcastle W)

    Hamilton W. W. (Central Fife)

    Brown, Ronald (Hackney S)

    Hardy, Peter

    Morris, Alfred (Wythenshawe)

    Morris, Rt Hon Charles R.

    Buchan, Norman

    Harrison. Rt Hon Walter

    Morris, Rt Hon J. (Aberavon)

    Buchanan, Richard

    Hart, Rt Hon Judith

    Moyle, Rt Hon Roland

    Callaghan, Jim (Middieton & P)

    Hattersley, Rt Hon Roy

    Murray, Rt Hon Ronald King

    Campbell, Ian

    Hayman, Mrs Helene

    Newens, Stanley

    Canavan, Dennis

    Healey, Rt Hon Denis

    Noble, Mike

    Carmichael, Neil

    Heller, Eric S.

    Oakes, Gordon

    Carter, Ray

    Henderson Douglas

    O'Halloran, Michael

    Carler-Jones, Lewis

    Hooley, Frank

    Orbach, Maurice

    Cartwright, John

    Horam, John

    Orme, Rt Hon Stanley

    Clemitson Ivor

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

    Ovenden, John

    Cocks, Rt Hon Michael (Bristol S)

    Hoyle, Doug (Nelson)

    Cohen, Stanley

    Hucklield, Les

    Owen, Rt Hon Dr David

    Coleman, Donald

    Hughes, Mark (Durham)

    Palmer, Arthur

    Concannon, Rt Hon John

    Hughes, Robert (Aberdeen N)

    Park, George

    Cook, Robin F. (Edin C)

    Hughes, Roy (Newport)

    Parker, John

    Corbett, Robin

    Hunter, Adam

    Parry, Robert

    Cowans, Harry

    Irvine, Rt Hon Sir A. (Edge Hill)

    Pavitt, Laurie

    Craigen, Jim (Maryhill)

    Irving, Rt Hon S. (Dartford)

    Pendry, Tom

    Crawshaw, Richard

    Jackson, Colin (Brighouse)

    Phipps, Dr Colin

    Cronin, John

    Jackson, Miss Margaret Lincoln)

    Prescott, John

    Crowther, Stan (Rotherham)

    Janner, Greville

    Price, C. (Lewisham W)

    Cryer, Bob

    Jay, Rt Hon Douglas

    Price, William (Rugby)

    Cunningham, G. (Islington S)

    Jeger, Mrs Lena

    Radice, Giles

    Cunningham, Dr J. (Wh teh)

    Jenkins, Hugh (Putney)

    Richardson, Miss Jo

    Dalyell, Tam

    John Brynmor

    Roberts, Albert (Normanton)

    Davidson, Arthur

    Johnson, Jamos (Hull West)

    Roberts, Gwilym (Cannock)

    Davies, Bryan (Enfield N)

    Johnson, Walter (Derby S)

    Robertson, George (Hamilton)

    Davies, Rt Hon Denzil

    Jones, Alec (Rhondda)

    Robinson, Geoffrey

    Davies, Ifor (Gower)

    Jones, Dan (Burnley)

    Roderick, Caerwyn

    Davis, Clinton (Rackney C)

    Judd, Frank

    Rodgers, George (Chorley)

    Deakins, Eric

    Kaufman, Rt Hon Gerald

    Rodgers, Rt Hon William (Stockton)

    Dean, Joseph (Leeds West)

    Kerr, Russell

    Rooker, J. W.

    de Freitas, Rt Hon Sir Geoffrey

    Kilroy-Silk Robert

    Roper, John

    Dell, Rt Hon Edmund

    Kinnock, Nell

    Rose, Paul B.

    Dempsey, James

    Lamble, David

    Ross, Rt Hon W. (Kilmarnock)

    Dewar, Donald

    Lamond, James

    Rowlands, Ted

    Doig, Peter

    Latham, Arthur (Paddington)

    Ryman, John

    Dormand, J. D.

    Leadbitter, Ted

    Sandelson, Neville

    Duffy, A. E. P.

    Lee, John

    Sedgemore, Brian

    Dunnett, Jack

    Lever, Rt Hon Harold

    Selby, Harry

    Dunwoody, Mrs Gwyneth

    Lewis, Ron (Carlisle)

    Sever, John

    Eadie, Alex

    Litterick, Tom

    Shaw. Arnold (Ilford South)

    Edge, Gerff

    Loyden, Eddie

    Sheldon, Rt Hon Robert

    Edwards, Flobert (Wolv SE)

    Luard, Evan

    Shore, Rt Hon Peter

    Ellis, John (Brigg & Scun)

    Lyon, Alexander (York)

    Short, Mrs Renée (Wolv NE)

    English, Michael

    Lyons, Edward (Bradford W)

    Silkin, Rt Hon S. C. (Dulwich)

    Evans, Fred (Caerphilly)

    Mabon, Rt Hon Dr J. Dickson

    Silverman, Julius

    Evans, Gwynfor (Carmarthen)

    McCartney, Hugh

    Skinner, Dennis

    Evans, Ioan (Aberdare)

    McDonald, Dr Oonagh

    Smith, Rt. Hon. John (N Lanarkshire)

    Evans, John (Newton)

    McElhone. Frank

    Snape, Peter

    Spriggs, Leslie

    Tinn, James

    Whitlock, William

    Stallard, A. W.

    Tomlinson, John

    Willey, Rt Hon Frederick

    Stewart, Rt Hon M. (Fulham)

    Tomney, Frank

    Williams, Rt Hon Alan (Swansea W)

    Stoddart, David

    Torney, Tom

    Williams, Rt Hon Shirley (Hertford)

    Stott, Roger

    Tuck, Raphael

    Williams, Sir Thomas (Warrington)

    Strang, Gavin

    Urwin, T. W.

    Wilson, Gordon (Dundee E)

    Summersklll, Hon Dr Shirley

    Walker, Harold (Doncaster)

    Wilson, Rt Hon Sir Harold (Huyton)

    Swain, Thomas

    Walker, Terry (Kingswood)

    Wilson, William (Coventry SE)

    Taylor, Mrs Ann (Bolton W)

    Watkins, David

    Wise, Mrs Audrey

    Thomas, Dafydd (Merioneth)

    Watkinson, John

    Woodall, Alec

    Thomas, Jeffrey (Abertillery)

    Watt, Hamish

    Woof, Robert

    Thomas, Mike (Newcastle E)

    Weetch, Ken

    Wrigglesworth, Ian

    Thomas, Ron (Bristol NW)

    Weitzman, David

    Young, David (Bolton E)

    Thompson, George

    Wellbeloved, James

    Thorne, Stan (Preston South)

    White, Frank R. (Bury)

    TELLERS FOR THE NOES:

    Tierney, Sydney

    White, James (Pollok)

    Mr. Thomas Cox and

    Tilley, John

    Whitehead, Phillip

    Mr. Ted Graham.

    Question accordingly negatived.

  New Clause No. 23

    INSURANCE COMPANIES: DISPOSALS
    '(1) This section shall apply where an insurance company so elects in relation to any qualifying assets disposed of after 5th April 1978; and for the purposes of this section—

    (a) an insurance company shall be any company falling within the meaning of that expression in section 323 of the Taxes Act and

    (b) "qualifying asset"means any asset—

    (i) to which subsection (1) of section 112 of the Finance Act 1972 applies not being an asset excluded therefrom by subsection (2) thereof and

    (ii) which the insurance company shows to the satisfaction of the inspector of taxes has both been acquired in connection with the issue of policies of insurance being policies in respect of which benefits have been paid on death of the life assured or on maturity surrender or partial surrender thereof prior to 6th April 1978 and been retained in connection with liabilities on other policies.

    (2) Paragraph 2 of Schedule 7 to the Finance Act 1965 shall apply as if all qualifying assets of the same class held by the insurance company prior to 6th April 1978 were regarded as indistinguishable parts of one single asset (in this paragraph referred to as the old holding) being a separate asset for the purposes of Part III of the Finance Act 1965 from such qualifying assets of the same class as shall have been acquired after that date.
    (3) It shall be assumed in relation to the qualifying assets so disposed of (being an asset forming part of the old holding) that it had on the happening of the event referred to in paragraph (b)(ii) of subsection (1) hereof being sold by the insurance company and immediately reacquired by it at its market value on that date and accordingly the amount of any gain on the disposal of such a qualifying asset shall be the aggregate of

    (a) the gain realised on the disposal deemed to have been made on the happening of such an event (in this paragraph referred to as the old gain) and

    1378

    (b) the gain over the period from that time to the date of the disposal (in this paragraph referred to as the new gain).

    (4) The corporation tax charged in relation to the old gain shall be computed as if the disposal giving rise to the old gain had been made in the financial year 1977-78 and shall be reduced by such a credit as would have been applicable in accordance with section 112 of the Finance Act 1972 had the disposal been made in that year and the corporation tax charged in relaion to the new gain shall be reduced by the credit applicable in the year in which the disposal actually takes place.
    (5) An election under this section shall be made by notice in writing to the inspector given within three years from the end of the accounting period in which the disposal is made.
    (6) Where a member of a group of companies of which the insurance company is one (being a group of companies for the purposes of section 272 of the Taxes Act 1970) either

    (a) acquires a qualifying asset as trading stock from the insurance company, the members so acquiring it shall be treated for purposes of paragraph 1 of Schedule 7 to the Finance Act 1965 as having acquired the asset otherwise than as trading stock in all respects as if the acquisition by the insurance company were its acquisition and immediately appropriated it for the purposes of the trade as trading stock and shall (in the absence of any election made under paragraph 1(3) thereof) have the same right to make an election under this section in relation to that qualifying asset as is given to the insurance company or

    (b) acquired a qualifying asset otherwise than as trading stock from the insurance company, the member so acquiring it shall be treated in all respects as if the acquisition by the insurance company were its acquisition and shall have the same right to make an election under this section in relation to that qualifying asset as is given to the insurance company.'.—[Mr. Ridley.]

    Brought up, and read the First time.
    Mr. Ridley: I beg to move, That the clause be read a Second time.
    First, I ought to declare an interest as a director of a life assurance company, although I am in no sense liable to benefit from this new clause if it were adopted.

    1379
    The point is fairly complex, but I shall explain it as briefly as I can. I believe that there is an injustice here. The new policy for taxing capital gains, as set out in clause 36, meets with a similar matching rough justice in relation to the taxation of gains borne by unit trusts and investment trusts in that the amount to be paid in switching is reduced from 17 per cent. to 10 per cent. of the gain. That is acceptable, and there is no problem at all for unit trusts and investment trusts in simply reducing the amount of the tax that they pay, whereas the bond holder or unit holder will increase the amount that he pays from 13 per cent. to 20 per cent. if he realises his bond.
    But in life assurance business many policies are linked to bonds, and the problem arises for the life assurance company which places the funds it has acquired from the saver into unit trusts or investment trusts of this sort. The problem is that, when paying out on a claim or a surrender to a policyholder, an insurance company does not, obviously, allocate certain units which it has purchased and sell them coincidentally with the time when it has to pay out to redeem policies. Instead, it pays out from its liquid funds, and when it has to do so it sells more investments in order to maintain its liquidity. So it can occur—indeed it will and has occurred—that although the policyholder will be expecting to have a reduced amount of capital taxes to pay, the insurance company will be lumbered with a much heavier amount of capital tax. It will, therefore, lose because the amount of tax which the insurance company will have to pay will be increased from 13 per cent. to 20 per cent., and it cannot in any sense pass this on to the existing policyholders.
    This sum has, therefore, either to be borne out of the profits of the insurance companies, or it has to be passed on to future policyholders, thereby making the burden of one man's tax fall upon another. That cannot be what is required by the Government.
    There seems, therefore, to be an injustice which we should seek to remedy. The new clause goes about it by allowing insurance companies to be deemed to have realised all their assets at the date of this year's Budget, the gain then being computed as though that part of the gain
    1380
    which had occurred before this year's Budget was taxed at the old rates, only that part of the gain occurring after the Budget being taxed at the new rates.
    That would be a considerable alleviation for insurance companies of this sort and it would meet the point of the injustice, too. I know that it is easy to look upon clause 36 as though it was purely a relief in terms of capital gains tax, and, of course, it is a relief for any individual who qualifies under the clause, but the corresponding fact is that it adds a tax burden upon insurance companies which have not realised a gain before 5th April.
    I hope that the Minister of State will look with favour on this case. I may be wrong, but I believe that the cost of the concession might be about £2 million. I have here details of one insurance company which seems to be liable to lose quite a lot—perhaps £300,000—simply as a result of a reduction in capital gains tax to the individual. That cannot be the Government's intention, and I feel sure that the Minister of State will wish to try to meet the point, complex though it may be.
    Mr. Denzil Davies: As the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) rightly said, this is a complex subject. He raised it in Committee, not, I believe, directly on an amendment, and by his new clause he seeks to pursue the point further.
    The new clause is moved for the benefit—I use that word in no derogatory sense—of life assurance companies which have invested the premiums of the life assured in unit and investment trusts.
    As the hon. Gentleman said, we have provided a certain amount of relief in what was originally clause 35 for unit and investment trusts and their investors. The rate of charge on the gains of the trust is reduced to 10 per cent., but although it follows that the matching rate of credit must also be reduced to 10 per cent., we have allowed the existing rate of 17 per cent. to continue for disposals made before 6th April 1979. This gives investors an opportunity to realise their gains to get the benefit of the old rate of credit if they wish.
    We believe that that is a simple and fair way of recognising that some part of the gain made by the investor will often

    1381
    have accrued during a period in which the trust was being assessed on its realised gains at the old higher rate. But there cannot be any exact matching between the amount of the gains made by the trusts, on the one hand, and their investors, on the other. An investor is given credit regardless of whether the trust has ever borne any tax on gains.
    What the life offices want, and what the hon. Gentleman seeks to argue for them in his new clause, is that because life offices have paid out past policy holders, as I understand it, on the basis that the investments in unit trusts will, when disposed of, attract a certain tax liability, they should be compensated tor the fact that that liability may be greater than expected. In other words, when the investments were disposed of, they thought that they would eventually attract a certain tax liability and, unfortunately for them in this case, the tax liability has changed and may well be greater or, indeed, is likely to be greater.
    That may be unfortunate for the life offices, but this is not unusual. Tax rates are changed. We are talking about an annual tax, in effect, which may be changed every year. To make this concession to the life offices would be going further than the Government would wish. We have given relief in this respect under the clause already in the Bill, and frankly, I could not recommend the House to go further on the ground that it just happens that the tax liability has changed. Businesses and individuals have to take into account in their investments the unfortunate fact that tax liabilities may change. For that reason, we could not accept the new clause.
    9.15 p.m.
    Mr. Peter Rees: I am a little disappointed by that reply. It is obvious that, with his usual assiduity, My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has uncovered an anomaly, not to say a hardship, which affects the life assurance industry and thus many of our fellow citizens. It is all very well for the Minister of State to wash his hands of this and say that there will be hardships arising from tax changes but it is the business of Government to consider the consequences of their actions.
    1382
    In this case, there has been some injustice to the life assurance industry and those who benefit from it. However, the point is complex. My hon. Friend has put the Government on notice. Although we have not received a satisfactory answer, I think that the Government appreciate that we may have to return to this matter. The Minister has been free with promises of what he will do in the next Finance Bill. If unfortunately another Finance Bill emanates from this Government, I have no doubt that my hon. Friend will be encouraged to seek to raise the matter again.
    Mr. Ridley: No doubt, in response to my hon. and learned Friend the Member for Dover and Deal (Mr. Rees), the Minister will move such an amendment from this side to the next Finance Bill. He was clearly not happy with his brief. He merely said that he accepted that life assurance companies as taxpayers had been disadvantaged and made to pay much more tax than they had expected when they entered into certain contracts It has a sort of retrospective effect. It is right, as the right hon. Gentleman said, that if tax rates go up, business has to adjust to that in the future, but if tax rates go up affecting contracts taken out up to 10 or 15 years ago, that is not such a good thing.
    I hope that the Minister will give the matter further thought. He has not given an acceptable answer. I dare say that he will be pursued by the life offices themselves for the unforthcoming and unhelpful nature of that answer. However, in the light of what my hon. and learned Friend said, I beg to ask leave to withdraw the motion.
    Motion, and clause, by leave, withdrawn.

  New Clause No. 29

    TAX AND SHORT TERM SOCIAL SECURITY BENEFITS
    'In Chapter II of Part I of the Taxes Act the following is inserted after section 27:—
    "27A.—(1) Subject to subsection (2) below, the relief to which a person would be entitled under the preceding sections of this.Act shall be reduced by one fifty-second for each week of the year of assessment in respect of which

    1383
    he has received a payment by way of unemployment benefit, sickness benefit or supplementary benefit.
    (2) Subsection (1) above shall not have effect so as to reduce the claimant's relief below that to which he would have been entitled if the Finance Act 1978 apart from section (tax and short term social security benefits) had not been passed.".'—[Mr. Ridley.]
    Brought up, and read the First time.
    Mr. Ridley: I beg to move, That the clause be read a Second time.
    This new clause relates to treatment of short-term benefits for tax purposes. I think that its form owes its inspiration to the hon. Member for Islington, South and Finsbury (Mr. Cunningham) who last year, in our Finance Bill debates, pursued this point with skill and effectiveness. We had a good debate on that occasion, but my intention now is to allow a discussion on the subject of how to treat these benefits.
    It is becoming generally accepted that short-term benefits should be taxed. Perhaps I could first consider the possible methods. It is of course possible to pay them net of tax or to ask at the end of the year for a computation of the total income of those who have been on short-term benefit, which would in due course give rise to such charge to tax as it did.
    However, the hon. Member for Islington, South, whose ideas the clause seeks to enact again, suggested that the personal allowance should, as it were, be whittled away by one-fifty-second for each week that a short-term benefit had been drawn. If a short-term benefit was drawn for a whole year there would be no personal allowance left. That has the great advantage of being easy to administer and much the most simple method from the point of view of ensuring that the tax is obtained. I will not go into the relative methods of doing this. That is, perhaps, too technical for me. I do not believe that Government advisers in high places who say that it is not possible to tax short-term benefits are right.
    The method suggested in this new clause is certainly practical, although there may be better methods for all I know. I am attracted to this method because it must mean that the value of the personal allowance on the whole, not in all cases, is fairly close to the annual value of a short-term benefit. It depends upon which short-term benefit is in ques-
    1384
    tion, the number of children's allowances, and many other factors. As a piece of rough justice it seems pretty close to the right method.
    I make it clear that in seeking to tax short-term benefits one would not tax anyone who was simply in receipt of short-term benefits for any one year. Broadly speaking, there are two groups of people who receive such benefits and who should be subject to tax on them. First, there are those who draw short-term benefits for a short portion of the year and then return, perhaps, to a high level of income. Secondly, there are those who have considerable income from, say, pensions or investments or other sources and who are able to draw short-term benefits free of tax. There are many over the age of 60 who have retired but who treat it as part of their normal income to have unemployment benefit in addition to their pension. They believe that they are entitled to that, and they may well be.
    The point is that it cannot be right in those circumstances for a substantial and continuing source of income to be free of tax. This latter matter has been dealt with on a couple of occasions by successive Governments. Both attempts were unsuccessful because there are deep and contentious political issues at stake in the taxation of unemployment benefit for those who treat it as part of their retirement emoluments. Nevertheless, I believe that both the categories I have mentioned should not be allowed to achieve those benefits tax-free. After all, a man who has £100,000 a year and is able to draw unemployment benefit is receiving, at his rate of tax, an added income supplement which would be worth, if he had to pay tax, many thousands of pounds a year.
    The Financial Secretary was good enough to answer a Question of mine in which he set out the list off these benefits. There is an enormous number but only eight are wholly taxed. There are 30 different types of short-term benefits which are not taxed. It is not a very happy situation in which some benefits are partly taxed. Apparently there is a new phrase now to the effect that some State benefits are taxable in principle but not taxed. There is considerable confusion as to which benefits should be taxed and which should not be even under the present law. This is an area where we should expect

    1385
    some clearing-up operation irrespective of what I seek to do now.
    The main non-taxable benefits are sickness, unemployment and social security. I will not go into the list of other benefits. Many seem to be benefits paid over a considerable length of time and they could be taxable. I have never believed that we should go about our affairs in the social security sphere by making some benefits non-taxable. I must confess to my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) that I was unable to support him when he succeeded in making war widows' benefits taxable only as to half. I believe that a much more satisfactory way throughout is to pay a benefit, whoever the recipient may be, which is able to provide him with a proper standard of living—depending on the circumstances, of course—and then to subject all benefits to tax.
    By this means one does not pay gratuitously large after-tax sums to people who do not need them. Equally, it is right that the tax law of the land should extend to everybody and that there should not be exceptions, because it is those exceptions which will invite people to change their particular category in order to try to get into that slot. I think that that is distorting as well.
    I do not feel that this is at all the moment at which to press the new clause, but in view of the evident and obvious change of thinking in both parties, and certainly in the country as a whole, I think that we should turn our minds to thinking of taxing short-term benefits. I hope that the Financial Secretary will be able to respond with some constructive ideas and some of those pledges from him, to which we are getting so accustomed, that he really is making progress in this direction.
    Mr. Powell: I do not think that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) need apologise—indeed, he did not—for bringing before the House in the form of this amendment a subject which in one form or another has been agitated for at least the last 10 years, and which I believe will not rest until it is properly resolved.
    Income tax is a tax which is essentially levied on an annual basis, and yet for
    1386
    almost the last 40 years an important part of the mechanism of the collecting of that tax has been upon a weekly basis. This intersection between the basis of collection of much of the tax, and the underlying principle of assessment of income for the purposes of a tax, leads to the unjustifiable inequity to which this amendment draws attention from one side.
    The present position is that two taxpayers, otherwise in identical circumstances, and receiving the same income in the course of a year, may pay substantially different tax because, in the case of one of those taxpayers, the income was partly made up of various forms of benefit. That inequity is, I think, in principle no longer seriously challenged. Indeed, in the Committee stage of the Bill the Minister, answering for the Treasury, quite candidly asserted that it was now only practicability which stood between the House and the removal of that inequity.
    It is no longer argued, as it was perhaps 20 or 30 years ago, that there was something special about these forms of income by way of benefit which justified and, indeed, required their being omitted from the computation of annual income. That point of view is no longer urged, and so we are face to face with the radical inequity of two identical annual incomes of taxpayers in identical circumstances differently dealt with.
    It cannot be brushed aside on the ground that we are dealing, in the case of persons whose annual income is partly made up of benefits, with taxpayers whose income has fluctuated in the course of the year. These are not the only taxpayers whose incomes fluctuate in the course of the year, and it is of little use for a taxpayer in other circumstances to represent to the Inland Revenue, at the conclusion of a tax year, that admittedly that is his total income, but he did not receive it uniformly over the 12 months and, therefore, he ought not to be treated like another taxpayer whose total income is the same.
    9.30 p.m.
    Quite frankly, we are now facing one barrier only between ourselves and the removal of this inequity, and that is the alleged impracticability. Fundamentally, as I said at the beginning, the impracticability derives from the weekly, or

    1387
    hebdomadal, form of collection of part of the income tax. This is an argument which is becoming less formidable as the years go by. Indeed, I thought I detected —for it is the tone as well as the words of Treasury Ministers which is informative—rather less confidence and conviction in the tone of the Minister of State when he was referring to this matter in Committee. It is becoming increasingly difficult to believe that when huge and complicated masses of statistical information can be handled by computer, there is something special about the statistics of weekly receipts adding up to annual income which is impregnable to attack by computer.
    The whole system of the social security is now widely computerised and it is time that the Inland Revenue again started upon the exercise of investigating the practicability of restoring equity by bringing into tax sums which everyone agrees ought to be, and inherently are, taxable, namely, the benefits which form part of the annual income of a taxpayer.
    As the hon. Member for Cirencester and Tewkesbury said, this is probably not a new clause to be pressed in its present form. Indeed, it may well not be in this way at all that this problem is to be approached and solved. But what ought to be forthcoming from the Government —I can tell the Financial Secretary that if it is not forthcoming this year, the year is not far ahead when it will be forthcoming., so he might step forward to pluck the fresh laurels—is an undertaking that a completely radical review of the practicability and methods which would enable these benefits to be brought into taxation will be initiated and the results will be brought forward by the Government before the next annual Finance Bill.
    Mr. Ralph Howell: I should like to support my hon. Friend's new clause. A mistake has been made in this area for a very long time. It dates from 1949 at the time of the Attlee Government. Then it was a mistake of no consequence, because at that stage the tax thresholds were well above the national average wage and so no problem was caused. But year by year, under all Governments, we have lowered the tax thresholds until instead of their being 100 per cent. of the national average wage they have now fallen to about 45
    1388
    per cent. It is an extremely serious matter with which we are dealing.
    It is costing the regular workers of this country, the people who work year in and year out, probably more than £500 million a year because of this silly mistake, which has been known in this House for the last eight or nine years. Yet no Government seem to have the courage to put it right.
    I am not enamoured by the new clause. It is messy. It is the only way in which we can bring the principle before the House and discuss it. However, I commend new clause no. 36 to the Financial Secretary, which he could introduce. It would make a clean sweep of the problem. It would mean that any amount paid out by the Government would be registered on the P45 form, just as all other income for employed persons is registered.
    I can understand why Treasury officials will not listen to my suggestion. It may be that I am a little cynical, but I believe that one reason is that it would put out of work a number of people who calculate all these tax rebates. However, it is my hope that we might rise above that.
    I want to draw attention to how serious this matter is. In the most recent figures that I have seen, it is proved that if a man with a wife and two children is in receipt of tax rebates, he has to earn more than £75 a week to equal the spending power of a person who is unemployed. If he has four children, he has to have a wage of more than £95 a week to equal the income of the man who is unemployed or sick whilst he is in receipt of tax refunds—and we must not forget that the tax refunds go on until all the tax previously paid has been refunded. That is extremely attractive to a great many people—[Interruption.] I wish that the Financial Secretary would listen to this argument. It would be a feather in his cap if he had the good sense to take on board new clause no. 36. It would help him no end. Regular workers are getting utterly sick of the existing position.
    I want to draw attention to another matter which is even worse. It concerns the position of pensioners. Pensions are taxable. Unemployment benefit, sickness benefit and supplementary benefit are not taxable. I have drawn the attention of the Chancellor of the Exchequer to a case which came to my notice the other day involving girls from EEC countries

    1389
    who were living in a YWCA hostel in Bristol and being paid £21 a week in supplementary benefit—more than a single pensioner receives. The difference between the two sums is that the £21 is not taxable whereas the pension is taxable. It is difficult to think of anything more absurd than the way in which we operate the system at present.
    I shall not waste any more time talking to the Financial Secretary. I know that I shall not get much sense out of him. However, I want to direct a few remarks to my own Front Bench and to tell them that they will be making a ghastly mistake if they go in for tax credits in the form suggested in 1972. If that happens, unemployment benefit and sickness benefit will be made taxable—although we trust that they will not be taxed because it is to be hoped that the tax thresholds will be above their levels—but supplementary benefit will still remain untaxable. This will lead to a serious discrepancy between short-term unemployment and long-term unemployment. Once a person gets into the long-term bracket and begins to receive social security, he will be in a more favourable position than before. We shall make a silly mistake if we only half tackle the problem. It could be corrected in its entirely merely by adopting the form of words that appears in the amendment in my name—
    Mr. Speaker: Order. I was very kind to the hon. Member, but his amendment was not selected. In fact it was out of order.
    Mr. Howell: Yes, I realise that. I finish by giving my fullest support to the slightly messy new clause of my hon. Friends. I wish it well and simply say that there is a better way of doing it.
    Mr. Nick Budgen: The right hon. Member for Down, South (Mr. Powell) said that it is only a matter of practicability which stands between reform of this anomaly and the present situation. Is it as simple as that? So many people are in receipt of short-term benefits in one form or another. Surely if everyone was taxed on the receipt of any short-term benefit it would not be a mere question of inconvenience for the Inland Revenue, it would
    1390
    be a question of employing very many more people.
    No doubt the figures that the Financial Secretary has extracted from the Inland Revenue and the Treasury will be exaggerated. There is no doubt that he has been given a particular range of figures on the cost and the number of people required to tax the benefits. There is no doubt whatever that the Financial Secretary will select the figures at the top of that range. It is plain that there will be a cost, and nobody in this House can say precisely what it will be.
    The real answer is that if we could ever get back to sound money, if we were able to stop increasing the short-term benefits year in year out and stop indexing them, many of the problems would go away. As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said, when these benefits were first introduced in the period immediately after the war, the gap between the earnings of a man with five children and on a low wage and the money paid to a man who was temporarily unemployed also with five children was nothing like as small as it is now. It is a combination of the year in year out wage control and persistent indexing of short-term benefits that has made the gap smaller.
    If we were able to deal with the problem of inflation, and then in happier times were able to stop indexing these benefits, it could well be that the problem of practicability would go away and we would not have to employ such a large number of extra civil servants in the Inland Revenue to deal with this grave injustice and anomaly.
    9.45 p.m.
    Mr. George Cunningham: I apologise for intervening in this debate as I was not present at the beginning of it, but it is a familiar subject. I have no intention of repeating the speeches that I made in Standing Committee last year on this matter. I hold to the view that I held then—that in principle short-term benefits should be taxed, and that the only objection is one of administrative difficulty.
    Since moving a new clause last year in Standing Committee which was substantially or completely identical with this clause, I was able with the blessing of

    1391
    the Financial Secretary to have discussions with Inland Revenue officials to clarify my mind about the exact nature of those administrative difficulties. I was persuaded that the administrative difficulties were a little greater than I appreciated last year in Standing Committee, but I was not persuaded that they were insuperable.
    Basically, the exercise is as follows. With the involvement of—I have no doubt this was an exaggeration—13,000 civil servants at a financial cost of £50 million, £500 million could be collected. The Inland Revenue may regard that as a bad bargain because that ratio is less favourable than the ratio between administrative cost and product which applies to revenue collection generally. But I do not believe that that ratio of one to ten is less favourable than any other marginal element in revenue collection. I believe that for an outlay of one an income of ten is a good bargain, especially if at a time of high unemployment one gets 13,000 paid jobs into the bargain.
    The administrative difficulty arises basically for the reason, as I understand it, that the social security offices would have to inform the tax offices of what they had paid out, or in my arrangement simply that they had paid out to individual recipients for a certain number of weeks. The Government say that the problem involved in one Government Department or network, namely the social security offices, finding out which local office in the other Government network, the tax office, is applicable to any particular member of the public is well nigh insuperable. It cannot go on in that way. We must have some system by which, on the production of a piece of paper, one can find out which tax office is handling which member of the public's tax affairs. I understand that this is already done in Scotland because there is one central register for tax matters there. But it is not done in England, and I believe it must be done.
    Already national insurance numbers are used to some extent in the registration of tax papers, and, even without the fundamental change in the administration of the tax system which many people would like, it surely must be possible by the use of national insurance numbers to find out quickly and without great cost which
    1392
    tax office is handling which member of the public's affairs.
    The Government say that there will be no incentive for the applicant for social security benefits to provide the information which would allow that office to find out which office his tax office was. In my arrangement there would be one big incentive: he would not obtain any money until he did give than information. I do not see anything hard about that arrangement. The applicant is applying for central Government funds. All one is saying to that person is that, before the money is paid out, the Government want to know which is his tax office. Until he supplies that information, one does not pay out the short-term benefit.
    We are not talking about peanuts. We are talking of £500 million. Think of all the good purposes, either by way of extra expenditure or abatement of other taxation, for which one could use that money.
    A way must be found. If we defer from year to year the taxation of short-term benefits in the hope that some day there will be a negative income tax system, we may defer it for far longer than is necessary. If it means the outlay of £50 million to gain £500 million, which can then be distributed more in accordance with needs and deserts than the present system, that would be a desirable reform.
    I hope that in the light of the resumption of the discussion that took place in Standing Committee last year the Government will re-examine this matter and conclude that the administrative difficulties are not as great as were perceived and that in so far as they exist things can be done which remove or at least reduce those administrative difficulties. I hope that some indication to that effect can he given by the Financial Secretary and that he will not simply say that for the foreseeable future we cannot touch this because the administrative difficulties are too unbearable to contemplate.
    Sir G. Howe: This is clearly an important point and its development in debates in the House owes a great deal to the assiduity of the hon. Member for Islington, South and Finsbury (Mr. Cunningham) and my hon. Friend the Member for Norfolk, North (Mr. Howell), both of whom have pursued the topic with relentless energy—intellectual and inquiring—and have made it a topic which cannot

    1393
    and should not be ignored and, interestingly, one which apparently commands universal support in the House.
    I am sure that my hon. Friend the Member for Norfolk, North will forgive me if I do not deal at length with the important point that he made about tax credits and the tax credit system. Since the scheme was originally proposed, time has moved on and there have been a number of developments. For example, child benefits have been implemented as part of such a scheme.
    We are told that the computers that will be a necessary part of a tax credit scheme are not likely to be in service until the mid-1980s. One always takes such estimates with a pinch of salt, but waiting for computers for the tax credit system is no reason for not addressing ourselves to this problem. Having to wait for computerised tax credits gives us all the more reason for addressing ourselves to this problem quickly. The point that my hon. Friend the Member for Norfolk, North made about a pattern of untaxed supplementary benefits running alongside a tax credit scheme when it arrives is also an important problem that must be taken into account.
    However, the issue is more remarkable and fundamental than that. How often do Treasury Ministers sit on the Front Bench, backed by their advisers, and witness a House unanimously crying for a tax to be imposed which would yield £400 million or £500 million? The Financial Secretary has become so inured to the experience on this matter that he may be punch drunk, but it is remarkable that Parliament has plainly come to the view that here is a pattern of income which should be taxed, in equity, efficiently and in every other way. Moreover, it was the original intention of the architects of the system in 1948–49. The system started on the basis that these benefits were subject to tax and they were being taxed. The reason that that did not continue was not a sense of revulsion among politicians at the time who thought that they had done the wrong thing. It was an administrative reason, which may have been intelligible at that time when PAYE was being run in but which has become less tolerable as time has gone by.
    1394
    There is a plain element of inequity. A person drawing £50 a week in one form of income pays tax on it and another person drawing the same amount in another form of benefit does not pay tax. That is the simplest illustration. It was much more elaborately demonstrated by the hon. Member for Islington, South and Finsbury who has pointed to the example of a man who can go out of work for the last six months of a year and remain out of work for the first six months of the next year and collect a substantial tax benefit. That is unjust and is increasingly widely seen as unjust.
    As the right hon. Member for Down, South (Mr. Powell) said, it arises from the disjointed nature of a tax system which is based on annual income and a benefits system which is based on weekly income.
    Mr. George Cunningham: The most dramatic illustration of this oddity is the case of a printer in the newspaper industry who works three nights a week for an income which is enormous compared with that received by most people in the country—so much so that it places him well above the higher tax thresholds —and who, in addition, through decisions of the independent insurance officers, is allowed to register as unemployed for the remaining days of the week, unlike most other workers, and therefore gets tax-free unemployment pay for those remaining days. He escapes not only 33 per cent. tax, but, in his case, probably 60 per cent. tax.
    Sir G. Howe: That is the most dramatic illustration of the many produced by the hon. Gentleman. The reality is that there is now no one on either side of the House, on any wing of either party, who is prepared to defend the existing system. We come back to the central point made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and the right hon. Member for Down, South—that this is an administrative problem. But it is not a problem of administration which the House will indefinitely tolerate remaining unsolved.
    The Conservative Government attempted to produce an answer, but we found it difficult. The Financial Secretary may snort at that, but we have gone beyond the point of snorting or chuckling about

    1395
    this matter. No doubt he has the same unconvincing brief as his predecessors. We have gone beyond the point of the wringing of hands and saying that it cannot be done.
    The method suggested by the hon. Member for Islington, South and Finsbury commands a great deal of respect. It appears to have greater simplicity than most others that have been offered, and it attacks the fundamentals by removing the week-by-week benefit which will accrue from the allowance when there is no taxable income coming in. If that does not work, surely it is worth looking at the alternatives again.
    I understand that the Department of Health and Social Security's computer dealing with unemployment benefit is meant to be coming into service this year. If that is so, surely it is legitimate, in respect of unemployment benefit at least, to look again at the suggestion made many times of treating the DHSS as the employer for tax in respect of unemployment benefit. When the employee shifts from employment to unemployment benefit status, why should not the Department's computer embrace, as it were, the standard PAYE procedure which would have to be applied in relation to him if he had moved from, say, Unilever to ICI, from one tax-collecting employer to another?
    Mr. Ralph Howell: All that needs to be done is that an emergency PAYE card be opened up for anyone sick or unemployed, and the amounts paid entered on to that emergency card as if he had changed jobs. It could be that simple.
    Sir. G. Howe: My hon. Friend is representing the same point in a different way. The essential point is that on transfer from paid employment to the DHSS payroll, as it were, the man becomes treated for PAYE purposes. It is an alternative approach to that suggested by the hon. Member for Islington, South and Finsbury.
    I understand that the computerisation of the sickness benefit system is more distant, and there is also the problem that in many cases the worker is effectively involved with two employers simultaneously. If he remains on the payroll of his original employer when he goes sick he draws sick pay in whole or in part
    1396
    from that employer and gets sickness benefit from the DHSS, so there are two, as it were, employers involved in paying him.
    But I understand that arrangements are made, in that kind of situation, specially for those employed in the Civil Service which may point a way through on a wider basis. The normal pattern if one goes sick is that one claims the benefit from the DHSS and then receives one's pay, if one continues to be entitled to pay less the benefit, so that one's pay is made up in that way. Within the Civil Service, I understand, the person who goes sick continues to receive his full pay, and no benefit is claimed by him or on his behalf from the DHSS, but, because part of his income has become benefit which is not taxable, the tax taken from his total income is reduced to reflect the fact that he is getting benefit rather than wages. No doubt the paying department is reimbursed by the DHSS across the accounts. A complicated series of bookkeeping transactions takes place. That has the effect of raising the net take-home pay of the man when he is sick because part of his pay is no longer taxed. Apart from that, there is an inter-departmental book-keeping transaction.
    10 p.m.
    Why should we not apply that system, but at the same time apply the principle that the sick pay will itself be taxable? On that basis all that we would need to do would be to take out the rather curious step of reducing the PAYE payable on the income that the man is receiving while he is sick. What happens is that while he is sick his employing department continues to pay him full pay less tax in the ordinary way. There is no need for him to claim benefit because it is all subsumed in the system. There is no need for his tax liability to be reduced, because he is continuing to receive taxable income. There may or may not be a reimbursement between the DHSS and the CSD.
    For those employed in the great chunk of the public service that are concerned with these transactions, once it is said that a man's sick benefit part of his remuneration in that period is taxable, there is virtually no change in the existing relationship. We have thus solved the problem in that sector. If it is possible

    1397
    to do that in that sector, surely it is possible to arrive at the same sort of arrangement with other large public sector employers, such as local government and nationalised industries, and many other large private sector employers, all of whom deal with their payroll on a computerised basis. We are achieving an extraction from the total pay that an employee receives through his employer when he goes sick to represent the continuing liability to income tax. It is a mechanical method that would seem to achieve that representation and reduce the scale of the rest of the problem to much more manageable proportions.
    It would not seem impossible to devise, or at least consider, that system as yet another alternative. As the right hon. Member for Down, South said, it is scarcely credible that at this stage of sophistication of the computer it remains impossible to tackle the problem in the way that is suggested. I know that our experience with the Vehicle and Driver Licensing Centre at Swansea tends to make us less than exhilarated with new computer equipment, but that was a particularly unhappy experiment using equipment that was outdated when the operation started.
    The Inland Revenue service in the United States, for example, is far more advanced with computerisation. It is moving into the second generation of computerisation. Many large industries in Britain and elsewhere are very far advanced in the computerised handling of the sort of data with which we are concerned. We are not dealing with complex data. It is difficult to believe that the problem remains insoluble.
    The House cannot continue to be put off. It is a matter that requires the strongest possible new application of imagination and will within the administrative departments. It is astonishing to be told that tax revenue to the tune of half a billion pounds—as the hon. Member for Islington, South and Finsbury says, it could be used for the reduction of taxation or the dispersal of benefits, although we would argue about that —remains ungetatable in defiance of all the principles of equity and the original proposals set out in 1948 merely because of administrative reasons.
    1398
    I hope that the Financial Secretary will give us the assurance that such authority is being put behind the tax collection system. It will be the task of some Government, and the sooner the better, to give the system that authority, that will and that imagination. The House demands it.
    Mr. Robert Sheldon: The right hon. and learned Member for Surrey, East (Sir G. Howe) said that it was rare for the House of Commons as a body to call for tax to be imposed. That is true. I would point out that there have been a fair number of Tory Administrations since this problem first came to light. The failure of all Governments to come up with a method of implementing the will of the House and of the Government owes much to the problems of administration. I shall need to deal with that matter and with the general principle enunciated by the right hon. Member for Down, South (Mr. Powell), who compared two taxpayers in like situations and pointed out how one had certain advantages that were denied to the other. We have accepted the necessity in principle for taxing short-term benefits and we are concerned only with the problem of implementing this taxation.
    Before going into these problems, I should like to deal with the point made by the hon. Member for Wolverhampton, South-West (Mr. Budgen) who put forward the argument—and argument that might be attractive to a number of hon. Members—that indexing was the solution.
    Mr. Budgen: No. I said the opposite.
    Mr. Sheldon: I misunderstood the hon. Gentleman. I understood the hon. Gentleman to argue—perhaps he will hear me and then correct me if I have his point wrong—that the failure to index the thresholds meant that the problems became greater than they otherwise would have been. Does the hon. Gentleman wish to intervene?
    Mr. Budgen: I was referring not to the thresholds, but to the indexing of the benefits, and simply remarking that if we ever got back to stable money it would be unnecessary to index the benefits.
    Mr. Sheldon: I think that there is common ground on this matter. The indexing of benefits is obviously less

    1399
    necessary when the rate of inflation is lower.
    I think that we owe a great deal to my hon. Friend the Member for Islington South and Finsbury (Mr. Cunningham) who went into this matter with his usual extreme thoroughness. He had a number of conversations with me in the Treasury and elsewhere as well as with officials in an attempt to find a solution to the administrative difficulties. He made valuable contributions in debates in this House as a result of his examination of the problem. As a result of the extensive research that he undertook, he found, as the Treasury and I found, particular problems concerning the number of civil servants who would be required to operate a scheme and the methods by which the paper could be transferred from within the various parts of the Goverment machine to the relevant Departments.
    I shall come on to the question of administration later. The main difference between my hon. Friend and myself is on the f50-million-cost-for-£500-million revenue argument. I do not know whether these figures have a close relationship to reality. I know that the estimates that we now have are a little more refined than those which I gave my hon. Friend when he was inquiring into this matter. We would need about 10,000 civil servants—fewer than my hon. Friend mentioned. He thought that the figure was inflated. If it was inflated by that amount, perhaps he was right. He considered that a good bargain.
    With the problem of so many people moving from manufacturing into Government service generally, I view this matter with more trepidation than my hon. Friend. I see problems not only in the increase in the numbers of civil servants, but in the bureaucracy, which would be unjustifiable. I should be prepared to look at that matter if there were not other disadvantages, to which I shall come.
    My hon. Friend mentioned that in Scotland there is the Centre 1 computer complex which makes possible certain operations which are not possible elsewhere. The taxation of short-term benefits is right in principle. I affirm that its administrative cost is high. The hon. Member for Cirencester and Tewkesbury
    1400
    (Mr. Ridley) mentioned the amounts of money that could be saved by taxing short-term benefits.
    The right hon. and learned Member for Surrey, East (Sir G. Howe) dealt with the implications for civil servants. But the important distinction is that they retain the same jobs. There is an enormous variety of job changes and changing of addresses involving the different offices of the Departments of Employment, Social Security and the Inland Revenue. That gives one some indication of the enormous paper chase that is involved in any scheme that one can devise. Such a scheme would involve the social security office notifying the tax office of the number of weeks that each claimant received benefits. In general the claimants would be unlikely to assist because that would mean that they would have to pay tax.
    Even if people were supposed to have a piece of paper before they received benefit, many people would not have that piece of paper. Even if they did have such a piece of paper, one would still be faced with the problem of the urgency with which they required the money to which they were entitled. Such matters are not sorted out quickly or easily. Most of us have had telephone calls at awkward times at the weekend as people try to make claims at short notice. If in addition to that one had to deal with the income tax office, a place that might be remote, before one could get one's money, additional problems would be caused.
    Mr. Budgen: Does the Minister agree that the piece of paper to which he referred could be some form of identity card which could be used in many other transactions?
    Mr. Sheldon: There are all sorts of ways in which bureaucracy could be more efficiently undertaken. Perhaps the House will in the future agree that there should be pieces of paper upon which many personal particulars appear. So far the House has not taken that view. I am not sure that it would approve of such a scheme if it were put to the House.
    Mr. George Cunningham: Surely the piece of paper which most people have is the coding notice which has the address of the relevant tax office stamped upon it. If people were told "Produce that or you do not get your money" it would

    1401
    be found quickly. I put that starkly, and in fact one would not be as inhuman as that. One would have to stress more the importance of keeping the coding notice and of making this use of it. Surely that is a possibility. It is absurd that a member of the public should not be able to identify quickly from a document the tax office which is handling his affairs. He ought to know that for other reasons.
    Mr. Sheldon: I agree that in many cases —perhaps in more than my hon. Friend suggests—such pieces of paper would be available. But in certain cases such a piece of paper would not show the amount of tax that was to be charged because it would not contain all the particulars.
    The problem is—how do we withdraw the deduction equal to a fraction one divided by fifty-two? The easiest way is when the person returns to work. That would be when the deduction would be made, with the effect of high deductions on return to work. As the hon. Member for Cornwall, North (Mr. Pardoe) said it is not so attractive to return to work. But there are other problems. At a time when a person might be looking towards a resumption of his earnings, that will be denied to him.
    10.15 p.m.
    The major problem is that we need a new system. We have needed it for about 10 years. The Inland Revenue was well on the way to proceeding in this direction when the last Conservative Government started down the long road to tax credits. I note what the hon. Member for Norfolk, North said in that respect. Tax credits was the wrong road because it stopped the computerisation scheme. It was bad in itself for reasons that we amply demonstrated at the time, and it prevented the fundamental changes that we are now in the process of putting forward from being implemented. It created the extensive delay that we are now having to put right.
    Mr. Ralph Howell: Why is it impossible for an emergency P45 to be issued with the amounts paid to the individual entered on it? The individual could take that back to his employer or to a new employer after sickness or unemployment. The Minister's arguments are invalid. I am sure that he accepts that. He has been brainwashed, as were the last Government, by Treasury officials into believing that it would take more people to
    1402
    operate this scheme. It would take considerably fewer.
    Mr. Sheldon: I do not believe that people would come forward with these forms in the numbers envisaged by the hon. Member. There will be a large number of cases in which the forms will not be in the right place at the right time. Even if they were, there would still be a paper chase between the various departments, which could be at any location, and the tax office. There would still need to be a deduction and notification of that, and that would have to be done at sufficient speed to prevent any undue delay in the payment of benefits. That is the major problem to which the hon. Gentleman has not addressed himself. The point is that these people, needing money urgently, could not accept that kind of delay, which would arise even if the scheme were as watertight as the hon. Gentleman suggests.
    Mr. Budgen: Will the Minister say whether any calculations have been made as to the amount of benefit paid out in response to fraudulent applications and which would be saved if everyone had to have the same piece of paper, as the right hon. Gentleman described it? I will not argue about the various types of pieces of paper. Surely that would be a major safeguard against fraudulent applications.
    Mr. Sheldon: Obviously I have no such assessment here. I am not even sure that the scheme advanced by the hon. Gentleman would assist. There may be aspects of this matter which we do not have time to examine which might make fraudulent claims more likely. I do not know. Parliament is at one in wanting to continue the operation that the previous Government stopped. It is time that that operation was resumed. The Government last year undertook a full study of the requirements so that the design parameters for dealing with the problem could be set.
    I accept the comparison that the right hon. and learned Member for Surrey, East makes between the computerisation of our taxation affairs and the position in the United States. That is certainly the road along which we wish to go. There is the allied question of self-assessment about which I have made

    1403
    announcements previously, but computerisation stands apart.
    A number of suggestions have been made in the debate. I shall be very happy to examine a number of them to see what useful information can be extracted in order to bring about the better method of operation even by the setting of certain guidelines. However, I am unable to accept the clause.
    Sir G. Howe: The Financial Secretary has talked about the impossibility of the scheme embodied in the new clause and has rehearsed the familiar reasons for its not being acceptable. He closed by saying that he would contemplate the design parameters, whatever that may mean, in order to resurrect whatever may have been going on before 1970 in the context of computerisation, which is certainly not likely to come before 1985.
    Is that what the right hon. Gentleman regards as the full, sufficient and necessary answer to the debate tonight, as in years past—that we have to wait for computerisation to be carried through in the context of the new design parameters of which he spoke? Does he have no other solution to offer? If we are left as we were last year, waiting for the ful-
    1404
    filment of computerisation, it is a wholly unsatisfactory outcome.
    Mr. Sheldon: I am sorry that the right hon. and learned Gentleman does not seem to have taken part in the debates last year when we explored the foothills, and perhaps even more as a result of the intervention of my hon. Friend the Member for Islington, South and Finsbury. There are these problems of the means of communicating a vast amount of information for large numbers of people, as well as the 10,000 civil servants whom we believe to be necessary.
    If the right hon. and learned Gentleman questions that assessment, I take it that he is studying the matter, and I shall be pleased if he can find ways of reducing the number of civil servants so that the ratio is not, as my hon. Friend the Member for Islington, South and Finsbury suggests, £50 million to gain £500 million but is a better ratio. Would the right hon. and learned Gentleman go ahead on that sort of ratio? For my part, I would not. I would wish to have something far better. If the right hon. and learned Gentleman feels that that is a satisfactory ratio on which to commence operations, let him say so, so that the House will see where he stands.
    Question put and negatived.

  New Clause No. 30

    DEATH IN PUBLIC SERVICE
    'In Schedule 7 to the Finance Act 1975 there shall be added:
    "1(a) (1) Section 22 of this Act shall not apply in relation to the death of a person in whose case it can be shown—

    (a) that he died from a wound inflicted, accident occurring or disease contracted at a time when the conditions specified in sub-paragraph (2) below were satisfied or

    (b) that he died from a wound inflicted or disease contracted at some previous time, the death being due to or hastened by the aggravation of the wound or disease during a period when those conditions were satisfied.

    (2) The condition referred to in sub-paragraph (1) above are that the deceased was or was the spouse of the holder of an office under the Crown, or a person in the service of the Crown and either—

    (a) was performing the duties of that office or employment, or

    (b) but for the holding of that office or employment by the deceased or his spouse, it would be reasonable to conclude that the death would not have occurred.

    (3) This section shall be deemed always to have had effect".'.—[Mr. Peter Rees.]
    Brought up, and read the First time.
    Mr. Peter Rees: I beg to move, That the clause be read a Second time.
    It is a long and well understood tradition that the estates of members of the armed forces and related services who are killed on active service or in comparable conditions should be exempt from estate duty and, subsequently, from capital transfer tax. For estate duty the provisions are to be found in the Finance Act 1952, and in respect of capital transfer tax they are to be found in Schedule 7 to the Finance Act 1975.
    There is relief from capital transfer tax for the estates of those members of the armed forces and a variety of related services, such as the Queen Alexandra's nurses and people in that sort of category, who die from wounds inflicted, accident occurring or disease contracted on active service or other service of a warlike nature.
    Perhaps we have a sharper perception now of this problem since the tragic assassination of Sir Richard Sharples, a much respected and much liked former
    1406
    Member of the House, when he was Governor of Bermuda, and the more recent assassination by explosives of Mr. Christopher Ewart-Biggs, who, after a distinguished career in the services, was our ambassador in Dublin. Perhaps the threat comes a little bit nearer home now, as one contemplates the tragic death of Signor Aldo Moro, a distinguished Italian politician.
    The theme underlying the new clause is that, since the area of risk has now been extended, so the relief should be extended. The new clause would extend the relief from capital transfer tax in the case of a person who dies while in the public service from wounds inflicted, accident occurring or disease contracted—it will be noted that these are precisely the terms used in the earlier estate duty and capital transfer tax legislation—while he is the holder of an office under the Crown or, if a spouse, while he or she is married to a person who is the holder of an office under the Crown, if the death can reasonably be attributed to such service.
    No doubt it will be urged that this is an extension of the principle that we have rightly accepted for so long, that it brings in a wider class of person in different circumstances. But these are people who are now shown, on sad and recent experience, to be at risk. They are people who —or this is true of their husbands or wives —are honourably serving this country, perhaps overseas or sadly in Ulster and who may be at risk by reason of their service. It is wrong that their families should suffer when they are bereaved in this way.
    One hopes that the numbers involved will not be large. If they were, that would be a sad commentary on the state of this country and the service of its representatives. It cannot be objected that this will open the door to avoidance of any kind. No one is likely to put himself or his family at risk to avoid capital transfer tax. Most people in the service of the Crown have a srong sense of public duty, but we say that no one should be looking over his shoulder at the consequences to his family of his service in a position of possible danger while a servant of the Crown.
    There are no figures that we can bandy about, but the cost cannot be great. I cannot believe that the Government's public expenditure plans will be seriously

    1407
    affected. I hope that both sides will believe, as I do, that if any revenue has to be forgone, it will be forgone in a good cause. I cannot believe that the Government will want to preserve the inviolability of the tax system at the expense of the families of those in public service who are exposed to risk. I hope that the Government will favour the new clause and that if they do not, it will command the support of the whole House.
    Mr. Powell: The hon. and learned Member for Dover and Deal (Mr. Rees) referred specifically, though by no means exclusively, to cases such as those of a former governor and a former ambassador. But it is impossible for an hon. Member representing a constituency in Northern Ireland to read the new clause without applying it to persons in Northern Ireland in much humbler situations. That is why the clause and the intention behind it certainly have the support of my hon. Friends and myself.
    I should like to refer first to one new element which the new clause will introduce into the code which at present appears in schedule 7—I think that the reference on the Amendment Paper to schedule 1 in the first line of the new clause is a misprint—of the Finance Act 1975.
    If we construe subsection (2) we arrive at
    "the spouse of the holder of an office under the Crown or a person in the service of the Crown"
    of whom,
    "but for the holding of that office or employment by the deceased or his spouse, it would be reasonable to conclude that the death would not have occurred."
    In Northern Ireland, the wives and husbands—particularly wives—of members of the security forces and of the armed forces are at personal risk. They are at sometimes equal personal risk to that of their husbands. They are at personal risk for exactly the same reasons as those which expose their husbands to the danger of mutilation and death.
    10.30 p.m.
    I have at the moment in my mind's eye a house in my constituency where I was taken by the wife of the tenant who is a regular member of the UDR. I was shown the bullet holes on the wall of her sitting room—one of which
    1408
    had gone through a devotional picture—which had arisen from the spraying of the house with bullets while the husband was away, by someone who wished to terrorise the husband into discontinuing his service as a full-time member of the UDR.
    I think also of cases where a member of the security forces has been lured into a trap or has been called to the door of his house by a combination of a telephone call and a bogus knock on the door and where the wife, being present and realising what was about to happen, has thrown herself between the assailant and her husband. It is a present fact—it is not a matter of theory—in Northern Ireland that the spouses of the members of the armed forces in the circumstances set out in Schedule 7 are at a similar kind of risk in exactly the same circumstances and for the same reasons. For that reason alone I would regard this new clause as justified and important. It is time that we recognised that the wife is in the front line just as much as the husband where the husband is in the security forces.
    There is another extension made by the new clause. No doubt it will be an extension to which the right hon. Member replying will be quick to draw attention. The present code in schedule 7 of the 1975 Act refers to members of the armed forces of the Crown, those associated with them, and certain of their—I was going to say "para-military" but I should not use that word—kindred organisations, described in paragraph 1(3) of the schedule. That is clearly much more restricted than
    "the holder of an office under the Crown"
    or being
    "in the service of the Crown."
    When the 1975 Bill was going through the House my hon. Friends and I were most anxious, although we failed in our attempt, that the Royal Ulster Constabulary and the Royal Ulster Constabulary Reserve should be included in the same manner as the armed forces of the Crown from whom, in the circumstances of Northern Ireland and in the operations in Northern Ireland, they are scarcely to be distinguished. But the matter does not stop there. No doubt the RUC would have been brought within the scope

    1409
    —[Interruption.]—of the measure by the description
    "the service of the Crown."
    I hope that that is an important conversation that is taking place on the Treasury Bench. It is certainly a loud one. I am sure that it is intended to be helpful and that I shall be grateful for the outcome of it. It is just a little difficult to make headway against the vigour with which it is being conducted. Had I been able to make headway, I would not have interrupted the conversation.
    In moving the new clause the hon. and learned Member for Dover and Deal referred to what I might call civilian and exalted civilian servants of the Crown. Here again, in Northern Ireland, the realities come home to the much more humble. Again I have in mind some active and courageous servants of the Crown who are not in uniform but who are at risk because they are in the service of the Crown.
    I think that I can now refer, without causing risk to anyone, to the occasion—it is now two or three months ago—when the head of the social security office in Newry in my constituency, an extremely distinguished civil servant and a man upon whose judgment I have come to rely, certainly a man who performed his duties without fear or favour, was very nearly deprived of his life and was certainly deprived of the full enjoyment of his health for the rest of his life by an attack upon him outside his office. There is not the slightest doubt whatsoever that that murderous attack was made upon him because he was a servant of the Crown performing a task which, although beneficial to all for whom it was performed, brought him into contact with the poplation as, in a sense, the representative of the Crown.
    He was, if I may say so, as much the representative of the Crown as Sir Richard Sharpies or Her Britannic Majesty's late ambassador in Dublin. In those circumstances, and for that reason, he was within an ace of being murdered, and I am sure that instances could be produced where those words "within an ace of" would not need to be inserted in the sentence.
    There is no doubt at all that the words in subsection (2)(b) of the new clause
    1410
    "but for the holding of that office or employment … by the deceased … the death would not have occurred".
    were fully complied with in that and in many other cases.
    It is three years since the necessity of such a code as is embodied in schedule 7 of the Finance Act 1975 was recognised by the whole House. In those three years we have, as the hon. and learned Member for Dover and Deal said, learned that the scope of this kind of risk is unhappily wider than we had feared, but the arguments are the same and the justification of the exemption is the same. I submit, therefore, that the time has come when a widening of the categories is called for in plain and simple justice and in a realistic recognition of the facts of the world in which we live.
    One does not judge these matters very precisely by cost but, of course, one is not here opening up a wide area of potential extension of exemption. The actual deferment of revenue—it is probably deferment, though maybe long deferment rather than loss of revenue—which would be involved is, I feel sure, not important. But what is important is the removal of an inequity, an injustice, as between the men and their wives who suffer in exactly the same way in the same causes and in the same service. I believe that if the principle of the new clause were accepted by the House tonight, that would be something which the public would fully understand and would welcome as right and just.
    Mr. William Hamilton: I hope that the House will look very carefully at the new clause before accepting it. I have listened to many debates in this House where we have sought to give exceptional preferential treatment to limited sections of the community, in tax matters or in other matters. I always wonder, when I listen to those debates, why we should go out of our way to single out people for this kind of special preferential treatment who happen to be, to use the term, in the service of the Crown.
    I do not think that that phrase means very much. It does not mean very much to me. People in this country who work in any job are in the service of the nation as a whole. It matters not a hoot to me whether they are serving in Bermuda, in Washington or in a coal mine in Fife

    1411
    They are all doing the job that they see fit to do in the interests of the nation.
    Let us take the example of our ambassador in Washington. Let us suppose that Mr. Peter Jay is shot in the course of duty, which is not such an improbable event. Under this clause, the estate of Mr. Jay would be exempt from estate duty and capital transfer tax. If Mr. Jay unfortunately lost his life in those circumstances, why should his estate be treated differently from that of, say, a miner in my constituency who lost his life on a rescue operation? Are his wife and dependants to be treated any differently from and less preferentially than the wife and dependants of Mr. Jay? Mr. Jay has a very handsome salary and a very handsome set of expenses. Miners all over Britain and the dockyard workers who are working on nuclear submarines in Rosyth dockyard are different, apparently. Their wives and relations are to be treated less preferentially than the people concerned in this clause.
    The argument then is adduced on the other side—and it is a well-known argument—that it will not cost very much. Always, when there is a weak case, it is said that it will not affect many people and that it will not cost very much. I can imagine, immediately after the granting of an exemption of this kind, having a mining accident in my constituency and a miner's widow writing to me saying "Willie, you are a Socialist Member of Parliament. How do you defend giving that kind of preferential treatment to that well-paid public servant but not to me?" On no grounds at all could I defend that.
    I hope that the House will look at this clause with a very jaundiced eye. Once we start exempting people from tax of any kind, we get into all sorts of anomalies. If we draw a line, someone falls just below the line and someone gets above it.
    I find this proposal particularly offensive. I am not sure whether our forces in Northern Ireland are given exemption by this or whether the colonels and brigadiers are but not the privates.
    Mr. Powell: I can help the hon. Member. Any member of the armed forces of the Crown is covered by the existing code. I do not know whether he voted against it three years ago, but it is on
    1412
    the statute book, and it was passed by this Government.
    Mr. Hamilton: That makes the anomaly even more indefensible. I have referred to dockyard workers. I think the people working on nuclear submarines in Rosyth dockyard are just as much at risk as some of the forces about whom the right hon. Member is talking. Why should they be treated any less favourably than the Ulster soldier? There is no possible reason in equity or for any other reason why that should be so. For those reasons, I hope that the House will vote against the clause.
    Mr. Graham Page: I do not see this clause as singling out people for some exceptional preferential treatment. It is a very logical and reasonable extension of principles which are recognised already in this part of the law.
    It is not necessary for a taxation system to be devoid of compassion. It is not necessary to be entirely logical in taxation. After all, the money is being collected on behalf of the public. It is right that there should be fairness between one taxpayer and another but we have recognised already that those in the service of the Crown are entitled to certain exceptions. Of course, they must be in many spheres of the law, and not only in taxation.
    If one is collecting money on behalf of the public, one should remember that the public has a soft heart. That is what I mean by taxation not being entirely devoid of compassion. The public would approve of compassionate treatment in this case. I do not want to go any further than to point out that this is a reasonable extension of something that is already recognised.
    10.45 p.m.
    Mr. Cope: I did not intend to intervene in this debate, but I have been prompted to do so by the speech of the hon. Member for Fife, Central (Mr. Hamilton). I recognise the sincerity of his views and I respect him for that. But I cannot agree with him.
    For a start there was a flaw in the example he gave. He referred to the wife of a miner who might approach him in the circumstances he outlined. But capital transfer tax would not apply in that case between two spouses. However, that is

    1413
    a technical difference, not a difference of principle.
    Secondly, there is no difference between the treatment of the private and brigadier, or between the lowest clerk in the embassy and the ambassador if they meet their deaths in the circumstances outlined in the new clause.
    I believe that there is a different degree of risk involved in relation to soldiers in the Gloucestershire Regiment, for example, who are currently in Northern Ireland, on a long tour, accompanied by their wives. Daily they are patrolling the streets in their part of Northern Ireland, and they are living in difficult conditions.
    They are in the position of many of the constituents of the right hon. Member for Down, South (Mr. Powell). I recognise that my constituents are only in Northern Ireland for a relatively short time compared with his. Nevertheless, there is a different degree of risk. All the soldiers who are there—and this applies equally to the RUC and others—are there because they are volunteers, and we need volunteers if we are to keep the peace in Northern Ireland, and win through in this difficult struggle. For that reason it is in the nation's interests that we should pass the new clause.
    Mr. Nelson: Is there not an additional difference between the two circumstances that have been described in the debate? In many cases the dependants of a deceased person killed in the civilian sector may be able to obtain civil damages, whereas in the case of service men in many theatres of war—perhaps not Northern Ireland—there is no ability to obtain recompense. The existing legislation takes account of that and the new clause simply builds on the recognition in that legislation.
    Mr. Cope: My hon. Friend makes his point extremely well. I remember that the 1975 Finance Bill would have phased out such relief as exists for the armed forces. I had the honour of putting down an amendment which led to the relief being continued. That is an episode in my parliamentary career with which I am very pleased. I would be delighted to see it extended in the way envisaged in the new clause.
    Mr. Denzil Davies: The new clause seeks to extend relief from capital transfer tax beyond the present relief which is confined to the armed services of the Crown. The right hon. Member for Down, South (Mr. Powell) mentioned Northern Ireland, and will be aware that the statutory relief for the armed services has been extended by concession in Northern Ireland to the Royal Ulster Constabulary because it is felt that its duties are inherently the same as those of the armed forces of the Crown. That is the extent of the relief. It is confined, subject to that concession, to the armed forces of the Crown.
    This is an old relief and extends back beyond capital transfer tax to estate duty. The reason is that the job of the armed forces is by its nature inherently dangerous. Indeed, its very purpose is to go into danger, whereas the other activities mentioned, although there may be incidental danger, again subject to the exception of Northern Ireland, are not inherently dangerous jobs in the same way as those carried out by the soldier.
    The new clause seeks to extend the relief. One can understand the reason for the clause. We all know of the case involving Sir Richard Sharples and also of the recent case involving the British ambassador to the Republic of Ireland. Representations have been made from time to time about cases of this kind. Governments have always examined them and have come to the conclusion that it is difficult in that area to extend the relief without creating considerable injustices, unfairnesses and anomalies.
    The right hon. Member for Crosby (Mr. Page) said that the tax system need not be logical. Perhaps one can accept that, but a tax system needs to be fair between one citizen and another whether or not that citizen is a servant of the Crown. This is where the difficulty lies in respect of the new clause. Once one looks at it, one appreciates the difficulty of trying to set some limit on the extension of the relief. The new clause seeks to extend the relief and then seeks to set a limit on that extension. It is at the point of the limit that the anomaly, unfairness and injustice come in. The limit is a servant of the Crown or a Crown servant, which is a fairly narrow description of "employment". Only those who hold

    1415
    an office under the Crown, as I understand it, would be enabled to benefit from the clause.
    Yet one could face a position at present where a collection of people could be gathered in a place which might be the object of a terrorist attack. One of those persons might be, shall we say, a civil servant in a Government Department, another might be a member of a nationalised industry, and yet another a director of BP. Two of those three would not be servants of the Crown. The civil servant would be a servant of the Crown, and yet the three people might be carrying out the same function, doing the same service in exactly the same way. But because one happened to be a servant of the Crown and the other two happened not to be, the estate of one would be free from capital transfer tax and the estate of the others would not. I cannot see the logic in deciding, for example, that where a civil servant in the Department of Energy were discussing oil matters with a director of BP, if both for some reason or other were hijacked or attacked in some way, one estate should be free from capital transfer tax and the other not free from that tax.
    Mention was made of Mr. Moro. Again, coming closer to this House, if there were some kind of attack on Members of this House, what logic or fairness is there that the estate of a Minister—if he has any estate—being a servant of the Crown would benefit from the clause, whereas that of any other Member of the House would not benefit? That also applies to the public. Therefore, there is no logic, fairness or justice, so far as I can see, about this clause.
    Mr. Graham Page: Would not the same situation arise, as the law stands at present, if there were a member of the armed forces serving alongside a policeman and they were both blown up?
    Mr. Davies: Yes, but I have tried to explain—and it is difficult to make a wholly convincing case—that the work of a member of the armed forces is inherently dangerous, but the work of a policeman, while danger is incidental to it, could not be said to be inherently dangerous. That distinction may not entirely commend itself to the House, but I believe that it is a reasonable distinction between one case and the other.
    1416
    Remembering my law studies of long ago, I. understand that policemen are not servants of the Crown and therefore they would not be covered anyway by the new clause.
    Mr. Budgen: Does the Minister not agree that we may have situations in the State, such as the continuing state of near rebellion in Northern Ireland, which mean that persons outside the immediate category of the armed services find that their work is inherently dangerous?
    Mr. Davies: Absolutely. Section 46 of the Finance Act 1941 was used after the war in certain cases in Malaya, Kenya and Cyprus, but the extension was very limited. Generally, the distinction between the armed forces and others is reasonable. The work of firemen is extremely dangerous, especially, as the right hon. Member for Down, South pointed out, in Northern Ireland, but they would not he covered by the new clause—certainly in Great Britain—because they are not servants of the Crown.
    There have been at least two hard cases, but unfortunately one cannot legislate on the basis of those hard cases because, as I have tried to demonstrate, it is practically impossible to draw the line between Crown servants and others. Once we go beyond the narrow category of the armed forces, I see no logic or justice in the new clause. It leaves out so many people who, in justice, should be included. But there lies the difficulty. For that reason, I cannot accept the new clause.
    Mr. Peter Rees: We have had a short, but important debate. Before coming to the points of substance, may I draw your attention, Mr. Deputy Speaker, to the fact that there is a printing error in the new clause as it appears on the Amendment Paper? Obviously, it is designed to be an amendment to schedule 7 of the Finance Act 1975 and not to schedule 1.
    Mr. Deputy Speaker: My attention has already been drawn to that error by the right hon. Member for Down, South (Mr. Powell).
    Mr. Rees: Since I moved the new clause, I thought it right that I should endorse the point formally in case it should be thought that I had overlooked it. But I am grateful to you, Mr. Deputy

    1417
    Speaker, for having corrected me, if that were necessary.
    I am also grateful to the right hon. Member for Down, South (Mr. Powell) for having brought the debate down from the perhaps slightly high-flown level on which I launched it to instances that occur daily in the Province of Ulster. Regrettably, they do not seem to have moved the Government Front Bench. The right hon. Gentleman has given vivid instances of the utility, good sense and equity of the new clause as it applies to hundreds, if not thousands, of our fellow citizens in Ulster, even though, in opening, I was disposed to give instances affecting servants of the Crown mainly in posts abroad.
    11.0 p.m.
    The hon. Member for Fife, Central (Mr. Hamilton) said that he looked on the clause with a jaundiced eye. I am sorry about that, because I respect his judgment in some if not all matters. I am sorry that the clause should generate jaundice on either side of the House because it is a matter of considerable importance, and I hope that we can look at it with good sense but also with compassion, without jaundice and without rancour. I hope that no partisan note will be struck, certainly by myself, in this debate.
    I reassure the hon. Gentleman that had he chosen to look back at the previous estate duty legislation and, indeed, at the current capital transfer tax legislation, which, so far as I know, he supported completely—it may well be that he recorded his dissent, but if he did I have been unable to discover it in Hansard—he would have found that there has been for many years relief from estate duty and CTT for all members of the armed forces—both for private soldiers and for general officers; rank is totally unimportant in this context.
    Beyond that, the House may recall that it relates not only to members of the armed forces. I think that it is important to read the list because, since the Minister of State has pinned his case on the practical difficulties of drawing a line, I should like to demonstrate how imprecise the line is at the moment. I shall do so by reading out the categories of persons other than those in the armed forces whose estates at the moment bene-
    1418
    fit from this concession, if that is how it should be regarded.
    I do not wish to reflect in any way on the value of their services, which I know are incomparable, but since the Minister of State says that drawing lines is a difficult operation, I would remind the House that at the moment a member of the Queen Alexandra's Royal Naval Nursing Service, or any reserve thereof, has the benefit of the relief from CTT if she is killed on active service or on comparable activities. The list goes on to include a member of the Territorial Army Nursing Service; a member of the Women's Royal Naval Service or any reserve; a woman medical or dental practitioner serving in the Royal Navy or any naval reserve.
    Mr. Pardoe: They are all armed forces.
    Mr. Rees: The hon. Gentleman, with his acute and precise mind, says that they are members of the armed services. What I am attempting to demonstrate is that not every person who advances into the breach with a rifle in his hand has his estate accorded this particular relief, and it is possible to draw a line so as to embrace a woman employed in the Royal Army Medical Corps, the Royal Army Dental Corps, the Women's Auxiliary Air Force, or women employed by the medical branch or the dental branch of the Royal Air Force, with the relative rank as an officer; a member of the Voluntary Aid Detachments employed under the Admiralty Council, Army Council, Air Council, or Defence Council. The hon. Gentleman will see from that list that the line is nothing like as precise as the Minister would have us believe.
    Mr. Denzil Davies: The hon. and learned Gentleman is making a bad point.
    Mr. Rees: The hon. Gentleman says I am making a bad point. If he is pinning his case, as he appeared to do, on the difficulties of drawing lines, all I can say is that he was not over-oppressed in 1972 by the difficulty of drawing a line in that case.
    Mr. Joel Barnett: Armed forces.
    Mr. Rees: The right hon. Gentleman raises his hand and says "Armed forces", but the principle underlying the

    1419
    new clause as it underlay the relief conceded in 1972 is that those who are exposed to exceptional risks by virtue of their service should be afforded exceptional reliefs.
    Mr. Denzil Davies: Is the hon. and learned Gentleman saying that a civil servant, perhaps in the Treasury, is in that category, subject to exceptional risks of danger? His clause would cover that kind of person.
    Mr. Rees: If it could be shown that he or his spouse were to be despatched to Ulster by virtue of his service, he would be in that category. That is the principle underlying the clause. It is that which moved us to put the clause down and to debate it tonight. If the right hon. Gentleman does not even accept the principle, a large gulf has opened between the Government Front Bench and the Opposition Benches. The Chief Secretary nods his head. It seems that he takes the view that there is a wide gulf. I am sorry that that is so. I thought that we could agree, leaving aside the hon. Member for Fife, Central, that the principle was a good one even though we might find difficulty in clothing it in statutory form.
    Mr. A. P. Costain: Are not the Government saying that if someone suffers the tragedy of dying in the service of the Crown, the Crown should tax him?
    Mr. Rees: When we analyse the arguments deployed by the right hon. Gentleman, it seems that he was constructing a good case for saying that we should not charge tax by reference to death. That would open up the debate perhaps unnecessarily wide for my purposes. I am sure that I should be in order if I were to take that course, but I do not know whether I should carry the whole House with me if I were to deploy that argument.
    I prefer to rest the case for the clause on the narrower ground that those who are exposed to exceptional risks by virtue of their office or duties should be accorded the reliefs set out in the clause.
    It could be that in the nineteenth century those in public offices were not exposed to risks, although I recall that Lord Frederick Cavendish was gunned down in Phoenix Park and that Sir Louis Cavagnari with his escort of guides was
    1420
    done to death in our embassy at Kabul. However, those were different times and before the introduction of estate duty, so it is not necessary to draw comfort from those historical instances.
    The examples that I have given indicate that we have moved into a different era where those in public offices are exposed to special risks. They are often singled out for the attention of terrorists. It is no complete answer to say that others regrettably will also be exposed to similar risks. It is regrettably true that in Northern Ireland there will be those who are not in public employment who will be exposed to risks. It may be true that those accompanying our ambassadors, and even our Ministers of the Crown, will be exposed to risks. If that is so, the Minister of State is constructing a good argument for extending the ambit of the clause. If he is prepared to say that he will consider the principle sympathetically to ascertain whether it may be embodied in statutory form in a more adroit and precise way, I for one shall not be discouraged.
    All I want the House to recognise on this occasion is that there is an old principle at stake that needs to be applied to a new situation. We have not so far extracted even a glimmer of recognition from the Minister of State. The right hon. Gentleman has dwelt, presumably with an official brief in his hands, on the difficulties of drawing the line. If he says that he accepts the principle, that he will take away the clause to ascertain whether it may be refilled and polished and will intoduce it at the next Finance Bill, if he is to introduce another, we shall be happy. For the moment I am discouraged that those on the Government Front Bench are disposed to treat this as a frivolous exercise. The right hon. Member for Down, South found it difficult to penetrate their conversations.
    I hope that Labour Members behind the Treasury team who have pondered more carefully and compassionately on this exercise will recognise that there is a point to be made. If the hon. Member for Fife, Central feels that the ambit should be extended, and if he feels that perhaps he was wrong to have supported the relief that was embodied in the 1972 Act on the ground that it was too narrowly drawn, we shall welcome his support. I hope that at the end of the day the

    1421
    House will recognise that an important principle is at stake.
    As we recognise the difficulties—I accept that there are practical difficulties we shall not be disposed on this occasion to press the clause to a Division. However, I think that the Minister of State owes it to the House to say that there is a principle at stake. Even if he finds difficulty in the way in which it has been embodied in the clause, I hope that he will accept that the great Department of State that he represents should consider the principle again and rather more carefully than hitherto.
    Although we shall not press the clause to a Division, we must put the right hon. Gentleman on notice that if he is unulcky enough to be occupying the Government Bench and to be commending to the House another Finance Bill in the future, we shall have to revert to the principle underlying the clause and on that next occasion we shall press it with a great deal of vigour.
    Question put and negatived.

  New Clause No. 34

    EARNINGS FROM WORK DONE ABROAD
    'In Schedule 7 to the Finance Act 1977 (Earnings from work done abroad) there shall be inserted:—
    "6A. For the purposes of this Schedule section 184(3)(a) (duties of any office or employment under the Crown treated as performed in the United Kingdom) shall not apply to any duties performed outside the United Kingdom if in respect of the period which those duties were performed the person performing the duties was not in receipt of an allowance to which section 369 of the Taxes Act applies. In applying this paragraph any area designated under section 1(7) of the Continental Shelf Act 1964 shall be treated as part of the United Kingdom."'. —[Mr. Wrigglesworth.]
    Brought up, and read the First time.
    Mr. Wrigglesworth: I beg to move, That the clause be read a Second time.
    As the House knows, I have an interest in this matter as an adviser to one of the Civil Service unions. The clause seeks to remove a discrimination in the opposite direction to that which my hon. Friends described in the debate on new clause no. 30.
    1422
    The Finance Act 1977 introduced changes in the rules governing the taxation of earnings of employees living in the United Kingdom but spending short periods abroad on duty. These changes gave significant relief from income tax to a wide variety of employees with jobs which involved travel, but, because of a technicality, Crown servants alone were excluded. In my view and that of the national staff side of the Whitley Council, that exclusion is both unjust and indefensible. The new clause provides the opportunity to rectify the anomaly.
    Under the provisions of the Finance Act 1977 an employee who works abroad for a total of 30 days or more in a tax year, whether continuously or in aggregate, is now entitled to a deduction of 25 per cent. from the earnings for the duties performed overseas. The anomaly that I seek to rectify occurs in the application of this 25 per cent. deduction. Because of the mistaken impression—there can be no other explanation—that all Crown servants who would otherwise have come into the ambit of the new rules were already in receipt of the non-taxable foreign service allowance, all Crown servants were excluded from the new relief when it was introduced in the 1977 Act. But in fact many United Kingdom-based Crown servants whose work takes them abroad do not receive the allowance. The object of the clause is to put this group of Crown servants on the same basis as other United Kingdom employees.
    In practice, the effect will be to extend the 25 per cent. deduction to those Crown servants who are out of the country on short visits abroad on official business which in total aggregate to 30 days or more in a tax year. Crown servants who are permanently abroad—for example, embassy staff and others—qualify for the foreign service allowance and will thus, rightly in my view, be excluded.
    I should stress, in view of the comments made by some hon. Members in the debate on new clause no. 30, that I am not asking for civil servants to be put in a privileged position. On the contrary, I am asking for equal treatment with that now numerous class of employees with jobs based in the United Kingdom which involve a significant amount of foreign travel.

    1423
    The present inequity shows itself, for example, when a joint delegation, composed of members from a nationalised industry, trade unions, the professions and United Kingdom based civil servants, attends an international conference or goes as part of a trade delegation to help boost exports from this country. All members of the delegation, except for the civil servants taking part, would have the days spent abroad counted towards the 25 per cent. deduction and get the relief. That is not fair and cannot have been intended by Parliament when the 1977 Act went through. It is discriminatory and inequitable. I hope that the Government will support my attempt to rectify this situation by accepting the new clause.
    Mr. Hal Miller (Bromsgrove and Red-ditch): I should also preface my remarks by declaring that I am the honorary consultant for parliamentary affairs to a Civil Service union, but I do not think that has unduly coloured the remarks that I am about to make on the new clause.
    This is one more example where the Government's attempts to get rid of any possible abuse relating to the taxation of earnings derived from work abroad has led to the creation of further anomalies about which the hon. Member for Thomaby (Mr. Wrigglesworth) has just spoken. I find it a matter for disbelief that people attending conferences abroad should qualify for tax relief. I had imagined that the tax relief was intended to assist and promote the activities of business men and others abroad seeking to maximise this country's foreign earnings, not those who go abroad to attend conferences.
    11.15 p.m.
    A regrettable incentive has been introduced by the Government for people to prolong their conferences and business trips. During a recent parliamentary delegation I visited an embassy and I was told that business men and others seemed to be spending rather longer than necessary abroad in order to qualify for the deduction.
    I am not wholeheartedly in favour of the present system, nor of extending it to civil servants, but there is a serious anomaly which should be considered. I am sorry that no Minister from the Civil Service Department is here today to take
    1424
    part in the debate. My suggestion is that the eligibility for foreign service allowance should be reviewed. There is a good case for that. The Think Tank report, despite its being discredited in some of its recommendations, is likely to lead, according to press comment, to an increase in home-based civil servants going abroad. This anomaly is likely to become more extensive and more resented.
    It might be better for the Government to say that the conditions of eligibility for the foreign service allowance will be reviewed, rather than that the new clause should be carried. I fear that the new clause seeks to perpetuate an unsatisfactory situation regarding eligibility for a reduction of tax merely for visits and other conferences which are not designed to promote our foreign earnings.
    Mr. John Ovenden: I support the new clause. I declare an interest as adviser to the Society of Civil and Public Servants.
    The intention of the new clause is not to place civil servants in a privileged category for taxation purposes. It is intended to place them on the same level as everybody else and to give them the advantage of the tax concessions which already apply to people in private industry. It is not our job to argue about the merits or demerits of that concession. It is on the statute book. Since that concession exists it is wrong that one group of workers should be debarred from taking advantage of that concession.
    The Government's attitude has, perhaps, been based on a misconception—that all civil servants abroad enjoy a tax-free foreign service allowance. That is true only for civil servants who spend four months or more overseas. It does not apply to civil servants who spend shorter periods abroad.
    It could be argued that the tax concession was intended to promote our export drive and to give special help to those involved in such promotions. But that is not the way in which the concession is framed. It is available to everybody in private industry involved in overseas visits. Only public servants are excluded. That is discriminatory and unjust. I hope that the Government will accept this sensible new clause.
    If the Government do not accept it I shall be interested to hear why they

    1425
    believe that this discrimination against the public sector should continue. It seems only just that a concession that exists in private industry should be extended to people in the public sector, too. People in the public sector have suffered a great deal in the past from Government discrimination on all sorts of issues, not least in pay. I hope that the Government will not continue the extension of that policy into taxation.
    Mr. Robert Sheldon: The new clause is aimed at remedying what my hon. Friend the Member for Thornaby (Mr. Wrigglesworth) sees as an injustice to civil servants. Crown servants generally obtain tax-free allowances for working abroad, and they are held to be compensation for the duties they carry out while out of this country. The clause offers Crown servants who work overseas a choice between tax-free allowances and tax relief under the Finance Act 1977. My hon. Friend was right in pointing out that the justification for excluding Crown servants was that the 1977 Act was intended to give incentives to those at the sharp end of exporting, as my right hon. Friend the Chancellor of the Exchequer put it at the time.
    My hon. Friend is proposing a broad relief which goes further than that. To extend the provision to civil servants would be quite beyond the original intention of the 1977 Act. Moreover, under the new clause Crown servants who were away from this country for a year or more would get total tax exemption on their salaries and would not be liable for taxation by the host country.
    That is the distinction between the private employee and the Crown servant. The Crown servant who was away for more than a year would get total exemption on his salary, but he would not be liable for tax to the host country. On the other hand, the private sector employee would get exemption from the United Kingdom tax for more than a year's stay abroad, but he would be liable to tax by the country in which he worked. The Crown servant, therefore, would have a distinct advantage in those circumstances.
    I believe that the distinction we have drawn is justifiable. I understand the problems concerning the reliefs given in the 1977 Act. It would be wrong to
    1426
    extend those reliefs in the manner sought, and I regret that I am unable to accept the new clause.
    Mr. Wrigglesworth: My right hon. Friend's reply has illustrated the misunderstandings which arise over this matter. The allowances to which he referred apply only to those working abroad for over four months, as I understand it. That is not the category of people we are seeking in this clause to assist. We are trying to help those who work abroad for much shorter periods. We are not seeking to help those who receive the foreign service allowance. Clearly, they are not entitled to this sort of concession. We are concerned with a different category.
    My right hon. Friend said that these provisions were introduced to assist exports. It is, however, extended to everyone, irrespective of whether they are working to assist exports, including—and here I correct a false impression that may have been given—those in both the private and public sectors who are working abroad for 30 days and may not be connected with exports.
    Secondly, there are civil servants in this category who are helping our export drive. They are going abroad to trade fairs and other such events, and one would hope, therefore, that the same sort of reliefs as are given to members of the staff of nationalised industries and private companies could apply to them, too.
    If the Financial Secretary is not prepared to accept the new clause tonight, I ask him to think about it again and consider with the national staff side, possibly through the Civil Service Department and his other right hon. and hon. Friends, whether some agreed solution can be brought forward in the next Finance Bill so that the injustice which civil servants believe to exist may be put right in 1979.
    Question put and negatived.

  New Clause No. 44

    AMENDMENT OF SECTION 20 OF THE FINANCE ACT 1974
    'Section 20 of the Finance Act 1974 shall be amended by the addition to subsection (1)(a) thereof of the words "to savings-related share option schemes approved under Part III of

    1427
    Schedule 8 to the Finance Act 1973; and" and by the addition to subsection (1)(b) thereof of the words "to savings-related share incentive schemes approved under Part II of Schedule 8 to the Finance Act 1973; and".'.—[Mr. MacGregor.]
    Brought up, and read the First time.
    Mr. MacGregor: I beg to move, That the clause be read a Second time.
    As those hon. Members who were on the Standing Committee will know, this will be a re-run of the very short debate that we had in Committee rather late at night—in fact, somewhat later than the hour at which we are to discuss the matter now.
    It is right to bring the new clause back on Report. It relates in an important way to the clauses now numbered 42 to 49, the profit-sharing clauses. The reason why it is right to bring it back again now is twofold. First, our debate in Standing Committee was brief, and, if I may say so, it seemed to me that the Financial Secretary did not take seriously the points which were then raised. I am glad to see that the Minister of State is to respond to this debate. The Financial Secretary did not reply to even one of the points which we raised, and one reason for this debate is that it gives us an opportunity to elicit from the Government a reply to the arguments in favour of the clause, since the response in Committee was wholly unsatisfactory.
    The second reason stems from what the Financial Secretary said at the end of his reply:
    "Of course, further consideration will be necessary and the matters raised by the hon. Gentleman"
    —referring to me—
    "will form part of the examination."
    Since the right hon. Gentleman clearly did not understand most of the points made in the debate, we have given him time since then to look again at the new clause, and, as I say, I am glad that the Minister of State is to reply.
    It is worth noting that on Report we have about 99 new clauses, new schedules and amendments to the Bill as a result of our debates in Committee. That shows the importance and value of our Committee process. We made many valid points at that stage, and the new clause raises yet another. A new clause of this
    1428
    kind will be important if profit-sharing schemes are to succeed at least in about 50 of our major companies.
    In Committee, the Financial Secretary made three points to show why the new clause should not be accepted, and I shall deal with those before coming to our constructive reasons for bringing it forward again. First, the right hon. Gentleman said—this will be familiar to those who took part in the Standing Committee, but perhaps not to others—that what we were trying to do was to bring back the same tax reliefs or reliefs on a somewhat equivalent basis for the SAYE share option schemes permitted under the Finance Act 1973. He gave as his first reason for rejecting that that under the 1973 share option scheme, as he put it, an employee did not necessarily get any shares at all, he may not have exercised his option, and there was no compulsion for him to do so.
    There are two answers to that. First, the employee may have exercised his option, and he may therefore have shares under the share option scheme which will get no tax advantages because of the change in legislation made by this Government in the Finance Act 1974, which removed all the tax advantages of the original 1973 scheme. Also, an employee could renounce his right under the present scheme, so that he would get no shares at all. That is not a valid objection to trying to put the 1973 scheme on the same basis.
    The Financial Secretary's second reason was:
    "In introducing the profit sharing scheme"
    —the one in this Bill—
    "we implemented what was desired by the majority of firms which made representations to us."
    His point was that, in the original Inland Revenue document, produced in December last year, which led to the current profit sharing proposals, there were three possibilities, the second of which was a share option scheme and that because the majority of firms preferred the third option—the one in the Bill—there should be no changes to put the 1973 scheme on the same basis.
    11.30 p.m.
    That is a strange argument. Although the majority of firms preferred the third option—it is the one that I myself find

    1429
    most attractive—we should not exclude the minority who originally introduced share option schemes. The Financial Secretary was basically saying, "Bad luck," to the 50 major companies which have introduced such a scheme: "Because everyone else went against you, you will be at a disadvantage compared to the many who will be allowed to introduce a scheme of their own." But that is a bad argument as well.
    The Financial Secretary's third argument was that he did not oppose share option schemes under the 1973 Act. They can continue—admittedly, without the tax advantages. He said:
    "… I see no reason why they should not fall to be considered subsequently in the light of the development of profit sharing schemes."—[Official Report, Standing Committee A; 27th June 1978, c. 1802–4.]
    The point that he has completely failed to take into account is that already many of the companies which introduced profit-sharing schemes under the 1973 Act are aware that they will be put at a disadvantage. We shall not need many years' experience of the new scheme to know that.
    I see no reason why the Financial Secretary should say that we should wait and see and that if my predictions are proved correct that can be put right in a subsequent Bill. We know from representations that they have made that the companies already feel that they will be disadvantaged. I see no difficulty in putting that right quickly, so that both sorts of scheme can go ahead on the same basis.
    So all three arguments were very weak. What is more important, he did not deal with the points we put forward to show why the companies which had already implemented share option schemes felt that they were disadvantaged.
    On that occasion, I galloped through my five arguments why the 1973 schemes should have some tax advantages restored to them. I do not intend to go on at length, but it is important that they should be restated, because they should be answered, as they were not on that occasion.
    First, it is generally conceded that now that employee share schemes are to be encouraged by all parties—we are delighted at the conversion of this Govern-
    1430
    ment to the concept—companies should be sure of a period of tax stability to enable them to introduce the schemes and encourage their employees to take them up without tax changes for a reasonable period. The Financial Secretary was not taking account of that point when he said in Committee that we could again change the tax advantages of the 1973 scheme if that proved necessary in the light of experience. He suggested that at some point we might actually do what we are asking the Government to do now. I believe that in the interests of general stability that step should be taken as soon as possible.
    The second argument is that the tax treatment of the different employee share schemes should be as equitable as possible. I repeat the point I made in Standing Committee, that it is not only illogical but biasing the argument in the wrong direction that the tax treatment of an employee who has acquired his shares through the scheme under the present Bill and to which he may not have had to contribute should be better than the tax treatment of the employee who has had to contribute his savings over a period of five years in order to acquire his shares under the original share option scheme, in that at the end of the day the employee who is given his shares finds that he is in a better tax position than the employee who has saved up over five years to acquire them.
    That is illogical and unfair. It is made doubly unfair because of the third point, which is that many employees in the companies which have already introduced 1973 share option schemes will find that they will be unable to take advantage of the profit-sharing scheme envisaged in the Bill.
    It is important to spell this out for the benefit of those who did not take part in our debates. The reason is that many of the 50 major companies which have already, without the tax advantages, decided to introduce 1973-type share option schemes will find that they are unable to participate in this type of scheme because they will already have allocated a certain amount of their equity to the previous scheme. Perhaps many of their employees will not necessarily take them up, but at this stage the companies do not necessarily know that, and

    1431
    many of their institutional shareholders may well be reluctant to see an extension of profit-sharing schemes for employees because they know that at present there is an option for a number of their own employees to take up new equity.
    I must say to the Chief Secretary, who I see is looking at the clock, that I was misled last time: I ran through these arguments but received no answer from the Financial Secretary. Therefore, I am prepared to continue tonight until I do.
    Many of these companies feel—they feel this at present, because they have made representations to us—that they will not be able to take advantage of the provisions of this year's Finance Bill because they already have a potential commitment to the extension of their equity to their employees as a result of the SAYE share option schemes. This could be a real hindrance in many major companies to the extension of this type of profit-sharing scheme.
    The fourth argument follows on directly from that. This is very unfair to the employees in these 50 companies because, as I said earlier, they will not have in the SAYE scheme they have taken up tax advantages of the sort that we see and welcome in this 1978 scheme. They will see that their companies, which in a very enlightened manner were taking advantage of the 1973 SAYE scheme, are disadvantaged simply by nature of the fact that this year's Finance Bill introduces better taxation advantages than the original 1973 Act—in fact, not the 1973 Act, for in 1974 the Labour Government removed the tax advantages given in the 1973 Act.
    The final argument, which I should have thought would appeal to the Government, is that there could well be an implication for national savings as a whole if the type of change that we advocate in the new clause is not made. As I indicated in Standing Committee, I understand that the total value of all SAYE contracts linked to share schemes so far is about £45 million to £50 million which is about 10 per cent. of all SAYE savings. It is important that it should be understood that the tax advantages now being extended to other schemes should also be available to those SAYE schemes. There is, therefore, an implication for National Savings as a whole.
    1432
    I make no apology for bringing back this new clause on Report. The three arguments we had from the Financial Secretary in Committee were inadequate. There was a total failure to deal with the five points put forward from the Opposition Benches about the disadvantages of not extending some tax benefits to the SAYE schemes introduced by the previous Conservative Government, whose tax advantages were removed by this Government. Above all, it seems to be inequitable that we should have a situation whereby, because the Government have happily changed their mind about the advantages of employee share schemes and given tax benefits, they should positively discriminate against the employees of the companies which were sufficiently enlightened earlier, before the Government's conversion, to introduce these other schemes.
    For all these reasons it seems right to press that the SAYE schemes introduced in 1973 and then hit in 1974 by the Government should as a result of the change of heart on the part of the Government, be brought into line and given the tax advantages which we welcome in this Bill.
    Mr. Denzil Davies: The hon. Member for Norfolk, South (Mr. MacGregor) has gone through the five points made in Committee, arguing for an extension of the tax reliefs under the profit-sharing arrangements in this legislation to share option schemes. He did not argue for share incentive schemes, as I understood him. I believe that there is a difference. Many of the share option schemes take advantage of the SAYE system and were originally introduced by the previous Conservative Government in 1973.
    The hon. Member asked why cannot the tax incentives in the Bill be given to the share option schemes. I am sorry to have to give the same answer as he received in Committee. I know that the hon. Member does not like it and will say that the point has not been dealt with, but it is being dealt with. It is just that he does not like the answer because it does not accord with his views. The point is that a share option scheme is different in nature from the kind of profit-sharing scheme being put forward in the Bill.
    The hon. Gentleman gave the game away because he said that in a share

    1433
    option scheme a person has to contract in to get shares. In other words, a person has to opt for his shares. He sought to draw a distinction between the present scheme in which an employee can renounce his shares. That is the basic difference. A share option scheme requires a contracting in. The scheme under the Bill requires a contracting out. It is that distinction between the identification with the company which is the basis of the Government scheme and which is different from share option schemes.
    After considerable consultation following the publication of the Government's consultative paper—and the third option in that paper was the one preferred by most people—we deliberately decided to go along that road and to give the tax relief to that type of scheme. I accept that it is galling for those who have introduced, since, 1973, other types of scheme. It is galling when tax rates change, when taxation changes. It affects property and contractual rights from time to time. But to suggest that we should look back, at those who have entered into contracts of whatever kind and try to adapt taxation for the future to bring such people into the present tax regime, is going too far and is something that cannot be done in most cases. It is not possible to go back, when tax incentives are given, and changes are made, and try to rewrite contracts for the benefit of those who introduced various schemes in the light of the prevailing tax position but which proved to be not so attractive as at first thought.
    I think that what the hon. Gentleman is asking for in this respect is unreasonable, and that is why my right hon. Friend the Financial Secretary could not accept the amendment. The hon. Gentleman shakes his head, but I should have thought that my point is a reasonably fair one. It is not possible to go back and look at all the contracts of all the people who have been affected by tax changes.
    Mr. MacGregor: That is not necessary.
    11.45 p.m.
    Mr. Davies: Of course that has to be done, because the hon. Gentleman is asking for tax reliefs in relation to other
    1434
    schemes, and we have decided that this kind of profit-sharing scheme, where the individual is indentified with the company, is the one that we favour and the one that most people favour. It is unfortunate for those firms which chose to go along another route, but it is not possible at this point of time to introduce another kind of profit-sharing scheme along the lines that the hon. Gentleman is asking.
    Mr. MacGregor: Would the right hon. Gentleman not agree that a number of companies—not all the 50 but a number of companies—introduced the SAYE scheme on the basis of the original 1973 tax advantages, and that it was this Government which came along and removed them?
    Mr. Davies: I accept that entirely. It happened in 1974. But is the hon. Gentleman saying that Governments are not entitled to change taxation or to impose taxation or to relieve from taxation? This surely is not a proposition which I would have thought he would normally put forward. It is unfortunate that this has happened, but people in business and in industry know the position very well. People who enter into commercial agreements fully appreciate that taxation and tax rates can change. This is a fact of life with which, reluctantly perhaps, they have to live, and that is the answer to the hon. Gentleman. We have introduced a major profit-sharing incentive in this legislation. We feel that this is the best way to do it. We are talking about tax relief and we think it right that tax relief at the moment should be confined to the schemes introduced in this Finance Bill.
    Mr. Nelson: I wish to intervene, only very briefly, to support my hon. Friend the Member for Norfolk, South (Mr. MacGregor), because it seems to me that, both in this debate and in the one that we had in Committee, the Treasury Ministers have been unduly obstinate.
    The case put on its five points by my hon. Friend seems to be both persuasive and powerful. The Bill seems to me to be unduly prejudicial towards the many companies which entered into the 1973 scheme. In particular, many of those companies will have been the most adventurous and the most concerned at the time to ensure that their employees had an association with and a binding

    1435
    loyalty to the companies. In many cases these are exactly the sorts of companies within which the Government should now be anxious to encourage employees to benefit under the sorts of schemes provided in the Bill.
    I think that it will be extremely difficult to dismantle the old schemes and set up the new schemes. In addition, while accepting the point about contracting in and contracting out, and the difference that this implies, there are other points as well. Clearly, under the scheme included in the present Bill, whereby shares are allocated on an annual basis to employee trusts, there will be an income in the form of dividends coming in from those shares which will be held in trust for or go to the benefit of the employee, whereas under a share option scheme there is no such income coming in until the option is exercised and the shares are required by the employee, and dividends will accrue only as from that date.
    In an additional way, the individual is prejudiced by having accepted the 1973 scheme. On top of that, insult is added to injury and he does not get the same preferential tax treatment as is provided in the Bill. It seems to me, therefore, that on the basis of equity and on the basis that the five points put by my hon. Friend have not been accepted—and above all because the Government have done a somersault on their own policy, in that they reversed their own support for such schemes and then introduced a new sort of scheme—this sort of anamolous treatment and this sort of reversal of policy acts to the prejudice of consistency on which industry should be urged to make provision for and to give encouragement to its own employees. The new clause moved by my hon. Friend is persuasive and should be supported.
    Mr. Nigel Lawson: My hon. Friend the Member for Norfolk, South (Mr. MacGregor) led the Committee through Part III of the Bill dealing with profit sharing with clarity, perspicacity and assiduity and did a service to the entire Committee. He has now added to that by his service to the House on Report in putting forward more fully than he was able to do in Committee the Opposition's argument about the treatment by the Gov
    1436
    ernment of Save-as-You-Earn share option schemes.
    I have never heard such a deplorably dog-in-the-manger attitude as that expressed by the Minister of State. The facts are that the last Conservative Government introduced an employees' share ownership scheme with a tax incentive in the 1973 Act. This was the SAYE share option scheme. The first act of the present Government was to destroy that employees' share ownership scheme. That was in 1974. Now, four years later, they come forward with a scheme of their own.
    We welcome the Government's turn round. We welcome their U-turn. We welcome their belated conversion. We do not say in a dog-in-the-manger way, as the Minister of State does, that because it is not the scheme that we devised, we are opposed to any tax incentives, tax concessions or tax remissions being attached to the scheme. We welcome the scheme that is in the Bill. But that is precisely in reverse what the Minister of State is saying. Because the SAYE share option scheme is not a scheme that this Government thought up—indeed, it is a scheme from which they removed the tax incentive—he argues there must be no tax incentive for it at all. It is a deplorable, petty and small-minded attitude, and one which does the Minister of State no credit.
    The Minister did not give the real reasons for his objection. However, the ostensible reasons which he gave rested on two different arguments. First, he drew a distinction between a scheme where the employee had to contract in to get the shares and a scheme where the employee contracted out. But this is a distinction without a difference, because it does not matter. At the end of the day, what is important is that the employee is a shareholder in the company for which he works.
    There is that distinction, but it is no distinction on the basis of which the Minister can say that there should be a tax incentive for one and not for the other. Indeed, there are many trade unionists who would prefer the scheme where the employee chose voluntarily whether to have the shares in the company for which he worked rather than those shares being part of his emoluments which he cannot take in another form very easily.

    1437
    The other objection raised by the Minister of State was even more far fetched. He implied that there was some great administrative difficulty, and that it would be necessary to go back over all the records to discover all the companies which had such schemes and for which tax concessions they would be eligible.
    Mr. Denzil Davies: I did not say that.
    Mr. Lawson: In that case, it is impossible to understand the point of that section of the right hon. Gentleman's speech, because that was the only conceivable point that he could have had.
    The 54 public companies which have since 1973 incorporated and introduced SAYE share option schemes employ about 750,000 people. Of those 750,000, more than 20 per cent have taken up voluntarily these share option schemes. The figure would have been considerably greater had not the present Government removed the favourable treatment in the 1974 Finance Act.
    Therefore, this is a very important phenomenon. It is an important and substantial development and it is not something just to be brushed aside simply because it is different from the scheme that the Government have put forward. There is no reason whatsoever why these two schemes should not sit side by side. The House does not have to decide which is the better of the two.
    The Minister of State gave a very inadequate answer, but I do not want to detain the House much longer because there are other new clauses to discuss tonight. The Financial Secretary, when he replied to this debate upstairs in Committee, said this about the Save-as-you-Earn share option schemes:
    "I see no reason why they should not fall to be considered subsequently in the light of the development of profit sharing schemes." —[Official Report, Standing Committee A, 27th June 1978; c. 1804].
    That is very interesting. It is a most obscure statement. What evidence is the Financial Secretary looking for? What is he saying? Is he saying that if the employees' share ownership scheme introduced in this Finance Bill turns out to be a lamentable failure and there is a negligable take-up, only in those circumstances will he contemplate a tax incentive for the SAYE schemes?
    1438
    Whatever the experience of the success or failure of the present scheme—and we wish it well—that is no argument one way or the other for discriminating against the SAYE share option scheme. All the evidence is already there of the difficulties companies are having in introducing this new scheme on top of their existing SAYE share option schemes. These are facts that are there for the Minister of State to see. He does not have to wait until some time in the future to discover this.
    The meaning of the Financial Secretary's undertaking is therefore totally obscure. From his remarks and those of the Minister of State, it is obvious that neither of them has really understood what this issue is about. It is about time that they applied their minds to it.
    Question put and negatived.

  New Clause No. 48

    NON-TAXABILITY OF LOTTERIES FOR CHARITABLE PURPOSES
    'The proceeds of a lottery to be applied to purposes of a society in accordance with section 5(4) of the Lotteries and Amusements Act 1976 shall not be brought into account as a receipt of trade and shall not constitute profits of trade for purposes of taxation.'.—[Mr. Newton.]
    Brought up, and read the First time.
    Mr. Newton: I beg to move, That the clause be read a Second time.
    This new clause, as will be evident from its title, concerns the tax treatment of the proceeds of lotteries. It is the second new clause today which has arisen in some measure from the interests and activities of Motability, in connection with the disabled. Motability is not merely a car-leasing scheme to turn the mobility allowance into cars on the road. It is also an organisation that is seeking and hoping to raise charitable funds to assist disabled people who would not otherwise be able to run and maintain a car.
    One of the things Motability has turned its mind to, in conjunction with professional advisers—in this case Little-woods Pools—is the possible running of a lottery within the terms of the 1976 Lotteries and Amusements Act.
    Although this point has come to my attention as a result of the concern of

    1439
    Motability, it does have much wider effects and implications. I used that illustration only as an example of the kind of organisations that could be worried about the present situation.
    The problem is that the net proceeds of a lottery are, or in many cases will be, taxable as trading profits. Motability has been advised that a lottery of the kind it is contemplating having run for is by a branch of the Littlewoods Pools firm would give rise to a tax liability—corporation tax at 52 per cent. Since there is a little uncertainty about the tax position, I see this clause as a probing one. I wait with interest to hear what the Minister has to say. Valuable and worthwhile organisations are worried about their tax position and are considering whether it will be worth while their running lotteries at all.
    12 midnight.
    Let me make clear what kind of societies we have in mind. I refer to the definition of "society's lottery" contained in the Lotteries and Amusements Act 1976. They are defined in the following terms. First, a society established
    "wholly or mainly for … charitable purposes";
    secondly, for
    "participation in or support of athletic sports or games or cultural activities";
    and, thirdly, for neither of those purposes but purposes which are not for
    "private gain nor purposes of any commercial undertaking".
    Although the word "charitable"—in the sense that one does not normally think of sporting clubs as charitable—might be taken as a little wide in this context, we are very much talking about societies and lotteries run for the purpose of societies which are in no sense conducted for private or personal gain and are for fairly broadly public purposes and for the good of a number of citizens. Therefore, we are in no way talking of commercial activities, and it is a legitimate worry if there is a possibilty of their losing a large part of the money intended for the benefit of those activities through a large corporation tax charge.
    Various schemes have been suggested to avoid this problem, including specifying a part of the ticket which is to be specifically set aside as a donation. But it has been pointed out that one conse
    1440
    quence of the earmarking of part of the ticket—even if it were accepted by the Inland Revenue as avoiding a liability to corporation tax—would be that at the same time it would create the risk, if all the tickets were not sold, that there might not be enough money to pay the prizes and to meet the expenses. Therefore, the whole operation could become impossible because clearly no promoter will want to run a lottery at a loss, having given a specific undertaking about how much will go to the charity.
    That does not seem to be a solution. Therefore, it has been represented to us that the point should be tackled by Parliament to make it quite clear and sure that there will be no substantial impost of corporation tax on the proceeds of lotteries intended for such purposes so that the charities or other bodies of a charitable kind shall enjoy the full benefits of their promotion and their work.
    Underlying this is the general agreement on both sides of the House that in the current and future context of our ability to finance out of public expenditure, we have a common interest in promoting to the maximum extent the flow of voluntary funds into activities of this kind. I hope that Ministers will share that view and will consider this point sympathetically with a view to seeing how it can most suitably be met.
    Mr. Robert Sheldon: The hon. Member for Braintree (Mr. Newton) moved the clause in a probing manner because he thought that there was some uncertainty about the position. He went into some detail about worthwhile organisations—and obviously charities are all in that category—and explained some of the anxieties which they have expressed to him about their futures. The hon. Gentleman dealt with the three categories of lottery and what he said was correct.
    Within the tax system, these categories have tax exemption under the small lotteries provisions. The profits of lotteries are normally subject to tax, but if tickets include a statement that part of the price is a donation, that element is not considered as part of the profits. The hon. Gentleman drew attention to the risk that if insufficient tickets are sold, the sponsor society will have to separate the donation element from the prizes which will have to he paid and which may amount to more than the receipts. But the hon.

    1441
    Gentleman will be aware that societies have always faced the risk that they may end up out of pocket. Nothing has been changed.
    What has altered is that some lottery organisers feel that they need to operate on a larger scale because the trend is towards higher lottery prizes and organisers feel that they must offer more attractive prizes. Once they move into that area, there are dangers for them.
    No tax has so far been imposed on the lotteries to which I have referred. It may be a problem for the future as the lotteries try to become larger and to provide bigger prizes. We shall watch that with care and with the same sort of concern as the hon. Member for Braintree has shown in tabling the new clause.
    The debate is most peculiarly timed because it comes on the eve of the publication of the Royal Commission report on gambling. We know that the report includes a detailed examination of the law relating to lotteries. We look forward to seeing what it has to say—probably on precisely the point covered by the new clause.
    Changes are obviously taking place, and because we have at heart the wellbeing of the charities that benefit from such lotteries, we shall watch the position. As I mentioned earlier, no tax has so far been imposed on the income from these lotteries. We shall see what the Royal Commission has to say and if there is a need to change the provisions in existing legislation, we shall have time to come back to it in the next Finance Bill.
    Mr. Graham Page: With respect to the Financial Secretary, he has only confused the issue. I had understood that these lotteries were free from taxation. That was the sort of statement made during the course of the legislation. The whole point of extending the freedom to undertake the larger of the small lotteries was to provide money for the sort of activity that might otherwise have to be supported by taxation. Charitable objects, cultural objects, amenities, and so on, are items which would otherwise have to be financed out of taxation in one form or another, local or central. Therefore, it seems rather foolish to tax that money and then divert what is taken in taxation
    1442
    back into exactly the same cause. Far better to leave the income from lotteries free of tax.
    The right hon. Gentleman said that so far the income has not been taxed. But he is now holding a sword of Damocles over the heads of those who have raised money in this way in that they may be liable for taxation. I do not know from his speech whether they are liable in law, or whether the law would have to be changed to make them liable.
    We know that the report of the Royal Commission is expected shortly, and it is perhaps wise to wait and see what it says and to frame legislation on it. But I hope that the Government will not be looking for revenue out of the proceeds of these lotteries. At the moment the lotteries are successfully providing amenities, cultural facilities, sports facilities, and so on, and anything which will deter those who are raising the money for such purposes would only do harm to the country and not good. I hope for some assurance that the Government will look at this very sympathetically and not seek to recover a lot of revenue out of the proceeds of lotteries.
    Mr. Nelson: I support my right hon. Friend the Member for Crosby (Mr. Page). He has been somewhat stonewalled by the Financial Secretary. As I understand it, money raised by lottery is of itself taxable in the same way as any other trading income, but if the recipient is a registered charity, or does not pay tax, it does not incur such a liability, and the provisions for apportioning an element of donation may circumvent that liability in certain cases.
    But an important point to make is that, as I understand it, the Lotteries Act enabled for the first time many local authorities to offer such lotteries—my own authority, the Chichester district council, has one every weekend to raise money. They are major recipients of income from such lotteries and pay no taxation. Other registered charities which are now enabled by legislation to use lotteries as a means of raising revenue do not have to pay tax. Yet those associations and societies with quasi-charitable or social aims, such as athletics and those described in the Act, may fall within the taxable remit. This seems to me to be unfair in that the

    1443
    Act itself set out and limited the authorisation on lotteries to those specific categories. It would seem to me to be a fairly modest but desirable confirmation of that benefit to ensure that such income was not taxable.
    It is perhaps arguing against what I have said so far to some extent, but if one is to provide tax relief for the trading income from lottery revenue for societies which are not registered charities but may have semi-charitable purpose, one is making a qualitative judgment as between different forms of trading revenue from those societies. Some society may operate certain other trading activities to raise income for its purposes—for example, for establishing a local community sports ground. In the normal course of events the trading income, if the charity is not registered, is taxable.
    However, if the new clause is accepted, any income that is gained by way of a lottery would not be taxable. Therefore, there is a qualitative judgment being made between different forms of revenue raising schemes for non-registered charities in respect of societies as are defined under the Lotteries Act. That distinction needs to be supported if we are to give full support to the new clause.
    With that reservation, my general support is for the new clause. It seems that it is the underlying intention of the Lotteries Act that a new form of revenue raising should be open for such societies. As they now have to go to the cost and complication of apportioning a donation element within their lottery ticket to circumvent tax liability, it seems easier and more equitable if we eradicate the need for that by ensuring that the revenue from lotteries is relieved of tax liability.
    12.15 a.m.
    Mr. Peter Rees: As always, my hon. Friend the Member for Braintree (Mr. Newton) must be congratulated on having forced out into the open a point of some difficulty. However, I cannot say the same about the Financial Secretary's intervention. If anything, he left the position rather more obscure than before.
    As I understand the right hon. Gentleman's reply, he said that the proceeds of lotteries have not so far been taxed as the fruits of a venture in the nature of trade but that there is a basis for so
    1444
    doing and that they might be in future. That must be cold comfort to those who may embark on such activities in future. The right hon. Gentleman mutters. It may be that he wishes to intervene to make matters plain. No, it seems that he does not wish to do so. He is a little over-confident about the clarity of his own words. We shall be studying in Hansard tomorrow exactly what he said. However, as he spoke from the Dispatch Box I was left in some doubt. I suspect that my hon. Friends were left in doubt.
    Mr. Robert Sheldon: I thought that I had made it plain. I was replying to the remarks of the hon. Member for Braintree (Mr. Newton), who accepted that the present position is that charities will not be paying tax on the lotteries because of the explicit donation element in the ticket prices.
    There are two elements in the price of a lottery ticket. One element is the donation and the other consists of the prizes and administrative costs. It is usually sensibly arranged that the donation is a considerable part while the prizes and administrative costs make up the lesser part. On that basis the charities pay no tax. As the hon. Member for Braintree observed, to meet growing competition charities could reduce the donation element. If they do that and do not sell enough tickets, they may find that they have to reduce the donation element considerably. In that way they could find themselves liable for tax in future.
    As I said, that is a problem for the future. I thought that the hon. and learned Gentleman understood that simple point.
    Mr. Rees: The Financial Secretary underestimates the problems that are faced by those who organise lotteries. I am not persuaded that there are all that number of instances where there is an explicit statement about the amount to be regarded as a donation. There may be a distinction between those who organise lotteries repetitively for their own purposes and those who do it to create funds that may be passed on to quasicharitable or public enterprises, and even for party purposes. There are many fine lines and distinctions to be drawn. The matter is nothing like as clear as the right hon. Gentleman would have us believe.
    It is not the occasion on which to press the matter to a Division. The right hon.

    1445
    Gentleman has candidly said that there may be clarification by the report of the Rothschild Commission. I know not whether he has any preview. I imagine that time will be found—I hope that it will be Government time—to debate the conclusions of the Commission so that we may be able to revert to the issue on another occasion.
    The right hon. Gentleman was rather unfair to my hon. Friend the Member for Braintree when he said that it is rather a curious moment to debate the matter. We have to take our opportunities as and when they arise in the House. We are not masters of Government time. This was a proper opportunity. I am not satisfied with or, indeed, very much enlightened by the Financial Secretary's reply.
    This should be regarded as a first instalment. We put the right hon. Gentleman on notice that we may have to return to this point either on the next Finance Bill, which we are constantly assured will be introduced by the present Government team, or when we have occasion to debate the Rothschild Report.
    Question put and negatived.

  New Clause No. 53

    AMENDMENT OF SECTION 375 OF THE TAXES ACT
    '(1) To subsection (1) of section 375 of the Taxes Act there shall be added the words "or in determining whether any person is chargeable under Chapter 2 of Part III of the Finance Act 1976 as being in receipt of a benefit for income tax purposes"
    (2) This section shall be deemed to have always had effect.'.—[Mr. Wakeham.]
    Brought up, and read the First time.
    Mr. Wakeham: I beg to move, That the clause be read a Second time.
    First, I should say that I have no interest to declare, only two sons to educate.
    The new clause seeks to amend section 375 of the Income and Corporation Taxes Act 1970. Section 375 exempts income arising from scholarships from income tax. That situation has obtained for many years, and I understand that the Government are not seeking to change it now—
    1446
    at least not directly. The Inland Revenue is seeking to tax the scholarship as a fringe benefit in the hands of the employee where it is able to contend that the scholarship was awarded by reason of his employment. The new clause seeks to put a stop to that suggestion.
    Not all scholarships will he assessed in that way. Scholarships won by children of parents whose total income is less than £7,500 will not be assessed; but, as the total value of higher employment includes benefits, not many will fail to fall into the net. The Inland Revenue is not seeking to attach the benefits-in-kind legislation to general awards which are open to the public at large, even if the child is the child of an employee of the company which set up the award.
    The first thing to be said about the Government's proposal and the new clause is that these schemes have been brought about because the direct tax rate is far too high. If the direct tax rate on earnings were lower, the advantages of these schemes would disappear. Tax schemes have grown up over the years as the direct rate of tax has been consistently high. This is all part of the squeeze on middle management as a direct result of high personal taxation.
    Why is there a change of view at the present time? There is no change of law. The present situation has been accepted and acceptable for a number of years. If the Inland Revenue has evidence that, along with everyone else, it has been wrong over the years, what is the new evidence that has made it change its mind? I do not pretend that for the Inland Revenue to change its mind on a matter of this kind is as bad as bringing in retrospective legislation, but it is unfair.
    It does not need words of mine to encourage or discourage the Inland Revenue's interpretation of this clause being tested in the courts—at least judging by the comments that we read in the press. Every citizen—that includes every taxpayer—has the right to test in the courts what the Inland Revenue is trying to do. I have no comment to make on that, except that it is not an even-handed contest at all. The cost of testing this matter in the courts would be substantial for the taxpayer, but cost is not one of the main considerations for the Inland Revenue.

    1447
    The Government and the Inland Revenue must recognise that the taxpayer is entitled to rely upon established Inland Revenue practice and to make his dispositions accordingly. One man might go to work for a company knowing that that part of his emolument is an educational scholarship for his child. Another man might go to another company without that prospect in mind. To change the rules in mid-stream is unfair.
    It is no good the Government saying that they are attempting to make scholarships taxable only from 14th April. Many people make their dispositions a long time in advance. The honourable aspirations of any man include the desire to do the best that he can for his children and to educate them in the best way that he can.
    I can imagine the problems of those parents who find having made their dispositions in a way that they thought proper, reasonable and within the law, that the Inland Revenue interprets the law differently. Such parents will face problems because the plans that they have made for their children will be thrown into jeopardy.
    I understand the terms of the trusts when awards are wide enough. When the general public is involved there will be no adverse tax consequences. Many existing trusts come into that category. But even that involves an element of unfairness. At this late hour I do not want to make a pure small business case, but it seems to me that a large company will be able to set up a trust with wide terms of reference covering many children who are not the sons or daughters of employees, whereas a small company will not be able to afford to do that for its own employees or for the public in general. I detect an element of unfairness in that.
    One can detect in the Government's proposal a Socialist desire to wipe out all independent schools, or at least an attempt to create another problem for them. The new clause seeks to put at rest the fears and anxieties about the Inland Revenue's action, not on new legislation but on existing legislation.
    I suggest that the Government proposal is of doubtful constitutional propriety. The Government are acting in an arbitrary way, they are acting unfairly and they are making another attack on
    1448
    middle management. It is bound to cause much legislation which can arise only by a degree of incompetence by the Inland Revenue. It will work harshly on many innocent people who made their own dispositions in a way which they thought were proper and within the law. It is another attack by the Government on independent schemes.
    The way to get rid of this type of scheme is not by fiddling around with the tax laws in this way but by bringing down the rate of taxation. Then we shculd not need schemes of this type.
    12.30 a.m.
    Mr. Pardoe: I begin by saying that I have no interest to declare in this matter. As far as I know, no company with which I am involved or am likely to be involved is providing any such scheme.
    I am extremely worried by what I regard as the Inland Revenue's independent decision. I do not accept the suggestion by the hon. Member for Maldon (Mr. Wakeham) that this is another attempt by the Government to have a go at independent schools. If it were, I could understand a little bettet the timing of the decision. I suspect that this is a case of the Inland Revenue being ferociously independent of Ministers and apparently going completely contrary to the known views of the Secretary of State for Education and Science.
    On 4th February last year the Secretary of State made a clear statement in answer to one of her hon. Friends. She was asked whether she would increase the amount of payments that may be made by employers to students following courses of higher education without reduction of the students' grants. She replied:
    "I propose to amend the Awards Regulations so that as from September 1977 payments by employers to students whom they wish to sponsor, or by institutions which wish to give scholarships, of up to £500 per annum will not be taken into account in the assessment of mandatory awards by local education authorities."
    She concluded:
    "I hope that employers and organisations concerned will take full advantage of this change and that as a result more students will be encouraged to choose courses of direct value to industry."—[Official Report, 4th February 1977; Vol. 925, c. 429.]
    There could not have been a more clear-cut decision to break with past practice and to try to encourage industry to do

    1449
    something about these kinds of scholarships.
    In the last week I have had the opportunity to discuss these schemes in detail with one company—Barclays Bank. In the light of what the Secretary of State said, Barclays Bank decided immediately to take up the suggestion of the Secretary of State. In 1977 it set up its student sponsorship scheme for higher education. It gave grants up to a maximum of £500, the amount mentioned by the Secretary of State. They were awarded to students by an independent panel, upon which academics outnumbered the bank's staff vote. The students had to be children of serving staff, pensioners, or widows of staff.
    Barclays introduced the scheme, not independent of the Department, not independent of the Inland Revenue. It went to the Department and asked how to operate the scheme, and it got all the advice it could. The Department actually told Barclays that it would help by intervening with the Revenue if the Revenue felt that there were difficulties. That was not necessary, because the Revenue leant over backwards to be as helpful as it could. It approved the scheme without delay or difficulty. It was agreed that the awards were not to be taxable, in the hands either of the students or of their parents.
    The scheme has operated for this academic year, but suddenly—we do not know why—the Revenue has turned a complete somersault and has determined that the awards are taxable where the parents' income exceeds £7,500 a year. Why was that not said before? Why did the Revenue not say that to Barclays when it went to the Revenue after the Secretary of State's announcement? It could have said that £7,500 was the tax-free limit, but it did not. Now it has suddenly introduced this stipulation. Barclays Bank has another scheme which is relevant in this connection.
    I come now to a point on which I differ from the hon. Member for Maldon. He said that these schemes had come in entirely because of recent high rates of tax. He knows that he and I agree about the inequity of high rates of personal taxation, but in fact many of these schemes have been going for a long time. The
    1450
    Barclays education scheme started in 1928. I was not around then, and nor was the hon. Gentleman—at least, I imagine not—but I do not think that taxation rates were all that high in 1928. So I do not believe that all these schemes have been introduced specifically for that reason.
    The Barclays education scheme started in 1928. It is open to children of staff, pensioners and widows of staff, and exemption from income tax has always been accepted. Indeed, it was confirmed by the Inland Revenue following the Income and Corporation Taxes Act 1970, of which section 375 is the appropirate section.
    Barclays Bank now fears that these awards also, which have been in operation since 1928, untaxed, will be taxed as income in the hands of parents if those parents have over £7,500 a year.
    I emphasise to the Chief Secretary that these awards have never been seen by Barclays as a fringe benefit for top paid staff. The scheme is open to children of all staff. Yet Barclays fears that the scholarships awarded under the scheme since 1928 will now be taxed. The right hon. Gentleman may say that Barclays has got it wrong and that these awards will not be taxed. But I have described in outline two schemes operated by a major bank, neither of which was introduced as a kind of income tax fiddle. One was introduced in 1928 and the other was introduced as a result of the express encouragement of the Secretary of State for Education and Science and with the connivance and acceptance of the Revenue.
    Why has the Revenue made a change now? If these schemes are an emolument—it is perfectly possible to argue that they are—they have always been an emolument. They were an emolument in 1928, and they were an emolument in 1977 when the Secretary of State and the Inland Revenue approved them.
    Why have the Government suddenly changed their mind? We shall want some firm comment about that from the Chief Secretary, because he is supposed to be in charge of the Inland Revenue—though it is a God-forsaken job to have, I must say. If the right hon. Gentleman accepts full responsibility and tells us that it was a change of policy on the part of the Government, that is one thing. I

    1451
    shall have something to say about it if he does, but I do not believe that he will. I do not think that he is in control. I do not believe that he told the Inland Revenue to do this. I do not believe that any Minister has told it to do so. I think that it is all part of the rather twisted narrow political mind of some officers of the Inland Revenue. The Chief Secretary should take them under his own wing and get some control over them.
    Mr. Christopher Price: I know that it is against all the traditions of the House for a Back-Bench Member on the Government side to speak on the Finance Bill after midnight, but since I have never spoken on the Finance Bill before in my life and I intend not to do so again, I hope that I may have a minute or two on this issue.
    The hon. Member for Cornwall, North (Mr. Pardoe) speculated whether this was a ferociously independent decision of the Inland Revenue or a Government-inspired move. I have not a clue which it is. I think it significant that the man who now runs the Inland Revenue recently moved there from being permanent secretary at the Department of Education and Science, and there may be some connection there. However it has come about, I support what I understand to be the Government's decision to oppose the new clause and I hope that they will persist in that decision.
    The hon. Member for Maldon (Mr. Wakeham) seemed to be saying that because a fiddle had been going on for years it was wrong to stop it. At a time when hon. Members on the Opposition Benches are trying to divert money from the public purse into independent education, which caters for a tiny proportion-4 or 5 per cent. at most of the higher age groups and far less of the lower age groups—we on the Government Benches should remind the Government that there is another point of view entirely and that they should not only oppose the new clause but do much more to divert this flow of £120 million a year from the independent sector back into the public purse.
    It is fashionable to refer to manifestos as one approaches a General Election, because every party is drafting a new one. One of the few clauses on which the Government have done nothing in the
    1452
    manifesto for the October 1974 election was the one in which we promised the country that we would divert the charitable and other income. Hon. Members laugh at the presence of the Chief Whip at my shoulder, but I will not be intimidated, even by good friends of mine like my right hon. Friend.
    The manifesto promised that we would divert money derived from charitable and other benefits from the public schools back into the public purse. If this move of the Inland Revenue is the first step in that direction, I welcome it. If it is not, I should like to know what the Government are doing in that regard. We want to go into an election saying that we have completed our manifesto.
    Mr. Graham Page: On a point of order, Mr. Deputy Speaker. Is it in order for a speaker to be under a threat of some sort by someone outside the Bar of the House?
    Mr. Deputy Speaker (Mr. Oscar Murton): This might be a question not of a physical threat but of some sort of moral persuasion, but it has nothing to do with the Chair.
    Mr. Price: Although there are folk whose physical proximity I would desire more than that of the Patronage Secretary, I repeat that I am not one to be intimidated. We remain the best of friends however close or distant he chooses to stand.
    Just in case hon. Members think that I might be making a party point in mentioning the manifesto, it is worth adding that in 1974 the Education, Arts and Home Office Sub-Committee of the Expenditure Committee examined the whole issue of educational charities and made some recommendations which would have ensured that a large amount of the public funds flowing into independent education as a result of charity law and the attitude of the Inland Revenue towards scholarships might flow back to the public purse.
    I realise that the Government do not take much notice of Select Committees. I was very pleased that the members of this Select Committee were absolutely unanimous. It did not have any Liberals on it, but it had Members on it from both sides of the House. Every member of the

    1453
    Select Committee, from the far Right and the far Left, voted for this proposition.
    12.45 a.m.
    Therefore, the short point that I wish to make is that although, when all oppose the new clause—I am sure it will not be necessary to vote on it—we shall be doing a great deal of good, I hope that in his very brief winding-up speech my right hon. Friend will not only give the reasons why he will oppose the new clause but will go on to detail all the other measures that the Government intend to take in future, so that this massive subsidy for private education for a tiny proportion of the people can be eroded and the money returned to the public purse, where it can be devoted to the education of the vast majority of our young people.
    Mr. Graham Page: I am sorry that the Government Chief Whip has left the Chamber—I was about to invite him to sit next to me, so that he could better hear what I have to say.
    I want to tell my hon. Friend the Member for Maldon (Mr. Wakeham) that his new clause is absolutely unneccessary. The Inland Revenue is wrong to try to enforce the tax on scholarships. There can be no doubt about the wording of section 375 of the Taxes Act 1970. It exempts scholarships from tax. Scholarships are not to be treated as income. If scholarships are not to be treated as income, they cannot be treated as benefits in kind. Benefits in kind are taxed, only because they are treated as income.
    Section 375 is perfectly clear. It was not altered by section 61 of the Finance Act 1976. Indeed, the Inland Revenue for two years thought that section 61 did not alter section 375 of the 1976 Act. We have this extraordinary press release from the Inland Revenue on 14th June 1978, headed:
    "Benefits in kind—scholarships for employers' children."
    If they are benefits in kind they are income and therefore they are relieved from tax under section 375 of the Taxes Act 1970.
    Indeed, the Inland Revenue says this in the press release:
    "Hitherto the Inland Revenue have not sought to treat as a benefit taxable under Section 61 of the Finance Act 1976 on a direc
    1454
    tor or higher paid employee, the provision by his employer of a scholarship to assist in the cost of the education of a member of his family. They have refrained from doing so on the grounds that Section 375 Income and Corporation Taxes Act 1970, which exempts from tax income from scholarships, precluded such a contention."
    There the Inland Revenue admits that up to the present it has construed section 375—as I contend—correctly. If it now seeks to construe it in some other way, I hope that the victim will proceed in the courts and defend himself against this totally wrong interpretation of section 375.
    The extraordinary wriggling of the Inland Revenue in the next two paragraphs of this press statement, where it says that it will not charge scholarship income tax in certain circumstances but will under others seems wholly discreditable in an argument from the Inland Revenue. Let me quote from paragraph 3:
    "The Revenue will not, however, contend that there is a benefit giving rise to liability under Section 61 where there is only a fortuitous connection between the identity of the recipient of the scholarship and his parent's employment, for example, where a firm sets up a scheme for awarding scholarships which is open to all, but where one of the successful candidates happens to be the child of a higher paid employee of that firm."
    Where did the Revenue get this out of the Act? Where did it find this exception? How did it construe section 61 as altering section 375 of the 1970 Act in one respect but not in another? It was said earlier that this is a fiddle that has been going on for some years. It is the proper construction of the law as accepted by the Inland Revenue for the two years since the 1976 Finance Act. If it seeks to alter it now without altering, section 375 it lays itself wide open to an action.
    I suppose that I ought to declare an interest as a solicitor and therefore, one who is interested in litigation. I hope that someone will fight the Inland Revenue if they are the victims of this change of mind.
    Mr. Peter Rees: I congratulate my hon. Friends the Members for Horsham and Crawley (Mr. Hordern) and Maldon (Mr. Wakeham) on tabling this new clause, which has enabled us to debate in a comprehensive and thorough way the rather unattractive press release which the Inland Revenue put out on 14th June

    1455
    1978. It has also enabled us to hear the first—and, he assures us, the last—contribution by the hon. Member for Lewisham, West (Mr. Price) to our debates on the Finance Bill. I cannot feel that it really will be his last, unless he has been more intimidated by the presence of the Patronage Secretary than he gave evidence of during the course of his speech.
    Why the Patronage Secretary should have taken such violent exception to his hon. Friend's intervention I cannot say. I can only assume that in the run-up to a General Election he is a little worried about the effect on the electorate of the uninhibited Socialist pronouncements of his hon. Friend. He is entitled to make that point and I have no doubt that he will be pressing for that view to be reincorporated in the Socialist manifesto. The electorate will be able to judge. It is a pure point of political principle and it is probably valuable that it should be brought out and debated in the open, even at this late hour, as I have no doubt it will be debated soon throughout the country.
    I wish to narrow my intervention a little. This press release is of a singularly confused and disingenuous kind. We are entitled to press the Chief Secretary, if it is he who is to reply on behalf of the Government. It could be that he has devolved this unattractive task to his hon. Friend the Under-Secretary of State for Transport, who is sitting beside him, or the Patronage Secretary's representative, who sat dumbly through our debates in Committee and is no doubt wanting to follow the example of my hon. Friend the Member for Norfolk, South (Mr. MacGregor), who, although carrying a comparable load of responsibility, nevertheless managed to reconcile it with grace and adroitness with some extremely felicitous interventions.
    May I be permitted to resume my argument? We are entitled to ask the Chief Secretary why it was that the Inland Revenue thought fit, presumably in the summer of this year, to take fresh legal advice on the impact of section 375 and the general liability to tax of employees whose children are fortunate enough to obtain scholarships under schemes set up by their parent's employers. Section 375 is 'lot by any means a new section. It has been on the state book certainly for 25 years and probably more. I have
    1456
    no doubt whatever that Somerset House has had occasion to examine it on many occasions.
    I am bound to say, with a little diffidence, to my right hon. Friend the Member for Crosby (Mr. Page), for whose legal judgment I have the most profound respect, that I do not find section 375 quite as clear as he would have us believe. It does not say that scholarships are not to be subject to tax; it says that they are not to be brought into computation. That is a quite different and much more refined point, but because it is a refined point one assumes—indeed, this may be inferred from the press release—that the Revenue took legal advice on the question a long time ago.
    The whole question of scholarships set up by firms for the children of their employees and others has been the subject of litigation from various angles over many years. Indeed, I have had some small part to play myself professionally in this. I do not think that I need declare it as a positive interest but there has been the Barclays Bank case, there has been the Grind lays Bank case, and there has been the Metal Box case, not precisely on this point, but it is fair to infer that since these matters have been litigated by the Revenue it has been giving very comprehensive thought to the fiscal implications of this type of scheme.
    Mr. Graham Page: I should not like to correct my hon. and learned Friend—indeed, he is perfectly right—but it so happens that I have section 375 of the Income and Corporation Taxes Act 1970 before me, and I find that the words are
    "shall be exempt from income tax, and no account shall be taken as any income in computing the amount of income for income tax purposes."
    It is exempt from income tax in the section itself.
    Mr. Rees: I do not wish to get involved in a very refined technical argument. I do not know whether I should be in order in doing so, Mr. Deputy Speaker. But the words that I find a little difficult in the section—I give this point to the Chief Secretary—are that it shall be taken into account
    "in computing the amount of income for income tax purposes."
    That is the question which may have to be litigated on some occasion. No doubt

    1457
    my hon. and learned Friend will bend his considerable professional talents to that point when a lay client approaches him, but I do not want to get involved in my right hon. Friend's professional practice or come between him and his professional or lay clients.
    The only point that I wish to make politically from the Dispatch Box is that this is obviously not a novel point to the Inland Revenue, and therefore I ask why it is that the Revenue should have thought fit to take fresh legal advice. Lord McCluskey, in another place, was asked by my noble Friend Lord Boyd-Carpenter a great number of questions on the fiscal implications and why it was that the Inland Revenue was moved to take additional advice. Lord McCluskey said:
    "The position is truly this. Schemes of this kind were really quite rare until the last year or two, when there was quite a great mushrooming of such schemes, with new varieties and new dimensions. In the light of this great growth of such scholarships, the legal advisers looked at the matter again and, on this occasion, have offered the advice which the Board of Inland Revenue are really properly obliged to take."—[Official Report, House of Lords, 3rd July 1978; Vol. 394, c. 639.]
    I hate to say this about a noble Lord who is not in a position to defend himself, but he was either very badly briefed or it was a singularly disingenuous answer. He should know exactly why it was that there was a mushrooming of schemes—
    Mr. Christopher Price: A fiddle.
    Mr. Rees: It was not a fiddle. If it was a fiddle, it was a fiddle condoned by the right hon. Friend of the hon. Member for Lewisham, West, who presently presides over the Department of Education and Science. The hon. Member for Cornwall, North (Mr. Pardoe) singled out the case of Barclays Bank. He is quite right in thinking that Barclays Bank is very exercised about this question. It is not only to the hon. Gentleman that it has drawn attention to the singular disingenuousness of the Government's position. Barclays Bank has canvassed many people. Indeed, there are many companies which are rightly exercised by this, because there is not only the effect on private education. It strikes at a legitimate provision that they were making for the children of their employees, and not necessarily their richer employees.
    1458
    I recognise that to Labour Members who, on political grounds, take violent exception to private education this is offensive, but I must refer them to what their right hon. Friend said. The answer was read out ery carefully by the hon. Member for Cornwall, North; therefore I do not need to read the whole of it again. But in case the hon. Member for Lewisham, West—now that he is free from the travail of speaking with the Patronage Secretary at his elbow—might have overlooked this point, I draw his attention to the fact that she ended by saying:
    "I hope that employers and organisations concerned will take full advantage of this change and that as a result more students will be encouraged to choose courses of direct value to industry."—[Official Report, 3rd February 1977; Vol. 925, c. 429.]
    It is plain beyond doubt and I do not think that this point is open to argument. Even the fertile and ingenious mind of the Chief Secretary will find it difficult to construe this in any other way than as a positive encouragement by the right hon. Lady to companies to set up schemes of this kind to encourage their employees, and for employees to take advantage of these schemes, as they legitimately have.
    Mr. Christopher Price: Does the hon. and learned Gentleman agree that although my right hon. Friend the Secretary of State for Education and Science talked about courses of direct value to industry, the vast majority of these schemes had nothing to do with such courses but were simply another direct subsidy to middle management with the intention of avoiding tax?
    1.0 a.m.
    Mr. Rees: The hon. Member puts the matter in a highly emotive way. I do not have the evidence, which apparently he has available to him, that all the scholarship schemes set up by companies have been of a purely academic nature and of no direct value to industry. I do not know. I cannot give him that answer. It may be that he should more properly direct the question to the Chief Secretary or to the Secretary of State for Education and Science.
    I assume that the right hon. Lady is intelligent, and she must have been aware of the implications of what she was doing. She must have realised that the encouragement would be taken as encouragement

    1459
    of a general kind. The fiscal advantages, if that is what they are, are really perhaps a form of amelioration and alleviation of the fiscal disadvantages heaped on middle, lower and upper management by the Administration which in other respects the hon. Member for Lewisham, West supports so loyally. I do not think that this should be given quite that narrow view. I do not think that the right hon. Lady will have been taken by surprise when she learned two years later that they had been more generally applied. Indeed, the three cases which I have cited demonstrate that this kind of scheme has been in operation for quite a long time. This was not some new fiddle, as the hon. Member for Lewisham, West described it. It was not some new device. It had been a legitimate way for firms to assist their employees over a considerable period of time.
    The direct question which I ask the Chief Secretary—I hope that he will not shirk it—is: why did the Inland Revenue, having countenanced these schemes and having, presumably, read the reply of the Secretary of State, choose at this late stage to take further legal advice? I hope that there will be plenty of opporunity to evaluate the well chosen words which the Chief Secretary will give us. Whether they will satisfy the Opposition remains to be seen. Whether they will impress the country outside remains to be seen.
    I leave aside the educational overtones which so agitate the hon. Member for Lewisham, West. I understand his position, though obviously I do not share it. I know the deep detestation that he and some of his right hon. and hon. Friends feel for the private sector of education. Not all of them share that feeling, because we all know that quite a lot of his right hon. and hon. Friends have chosen to patronise the private sector of education, and the Opposition, who believe in free choice, welcome and applaud their emancipation from the prejudices which affect so much of the thinking of Government supporters.
    I take the debate back to the fiscal implications and the general administrative implications of this proposal. It is wrong for the Revenue to allow a practice to grow up, to give tacit and almost overt encouragement to it, and, after it has run for a period of years, speciously to make
    1460
    the pretext of taking fresh legal advice about it. After all, we have not seen the opinion. Perhaps the Chief Secretary will place it in the Library so that we can evaluate it. I am sure that it would be of great interest to my right hon. Friend the Member for Crosby, and the House would be advantaged by his professional view of the rightness or wrongness of the opinion.
    It is quite wrong, and destructive of any certainty in this matter, to allow the Revenue do this. There have been no decisions of the courts that should have led the Inland Revenue to have doubts about the correctness of its earlier advice.
    Above all, in this matter the taxpayer is entitled to expect a measure of certainty. I do not intend to anticipate tomorrow's debates on retrospection, much as I look forward to them. This is a different point. But the same theme runs through our interventions from the Opposition Benches—that is, that the taxpayer is entitled to know where he stands, and that the Inland Revenue should not capriciously go to counsel and shop around until it finds an opinion that will substantiate what I suspect to be a change of political heart. I do not believe that Somerset House is to blame here. I suspect that there has been a nudge and a wink from on high that it might be no bad thing if the Inland Revenue started to lean on these kind of schemes.
    What this tells us about the relationship between the Chief Secretary and the Secretary of State for Education and Science I do not know. It is not for me to speculate. We shall wait for some latter-day Crossman to tell us exactly what went wrong there—or what went right. Perhaps the Chief Secretary will tell us. I am much looking forward to his intervention.
    It is wrong for the right hon. Gentleman to give this kind of a nudge and a wink. We do know that the Inland Revenue is charged with the administration of the law. We should be told if it is felt, as a matter of political decision, that this kind of scholarship scheme should be subject to fiscal impositions. This is a perfectly intelligible viewpoint, although it is not one that I share. I do not know what the Patronage Secretary feels about it. I

    1461
    wish that he could have been encouraged to step over the Bar and give us his views. He was obviously rather unsettling the hon. Member for Lewisham, West. I think that we are entitled to know why the Inland Revenue took this advice, and why, having let these schemes run for a long time, it has chosen to act in this way.
    If we are to accept this press release, as I suppose we must, in practical terms—although this is not the right way to govern this country—let us examine it a little more closely. Perhaps the Chief Secretary can give us a view about it—
    Mr. Dennis Canavan (West Stirling-shire): Get on with it.
    Mr. Rees: If I am wasting the time of the House I shall be called to order, but not by the hon. Gentleman, whose interventions in these matters have been notable by their absence, thank heavens.
    There are two points on which we are entitled to clarification. The release refers to the scholarships being made by reason of the parent's employment. What exactly is meant by that? If one of the qualifications for participation in the scheme is that the child should be the child of an employee, will these scholarships be said to be by reason of the parent's employment? As the Chief Secretary will recall, there is a certain amount of law on that, and he might care to give his view, for example, on the question whether Hochstrasser and Mayes would be relevant to this. We want to know, and so do a lot of people outside the House.
    The press release goes on to say that the Revenue will take a benevolent view of the scheme for awarding scholarships is open to all. Does it mean "all" literally? Does it mean that there should be no restrictions at all? For instance, does this mean that a scholarship cannot be limited to members of the male sex, children under 15, or—dare I say it—children who are patrials of the United Kingdom? If there is that kind of restriction, will it encourage the Inland Revenue to impose tax on the child's parent? If this is to be a substitute for legislation, we need guidance from the Chief Secretary.
    At the end of the day, I feel that this matter must be cleared up by the courts.
    Mr. Canavan: It is well past the end of the day.
    Mr. Rees: If the hon. Gentleman has a notable intervention to make, perhaps he will make it on his feet. We shall listen to him with great interest. I have heard him on a variety of subjects, but never on this one.
    Mr. Canavan: I would rather see you on your backside.
    Mr. Rees: That is the kind of intervention that leads people outside the House to wonder whether broadcasting was really worth while. It perhaps enables them to judge the hon. Gentleman in his true light, but I leave that to his own electors.
    At the end of the day I think that this is a matter that should be tested by the courts; it is a matter for litigation. When we have a definitive conclusion from the courts, we may be able to consider in a more constructive light what kind of legislation is needed—whether the relief should be extended or tightened up. As things stand, I believe that this is a quite improper and impracticable way of proceeding.
    Mr. Joel Barnett: I note the hon. and learned Gentleman's anger with my hon. Friend the Member for West Stirlingshire (Mr. Canavan) about his intervention. If we are concerned about what people outside think about interventions, let me tell the hon. and learned Member for Dover and Deal (Mr. Rees)—in the nicest possible way, because he knows of my affection for him—that over many days and long nights I have heard a lot of elegant rubbish from him, but rarely has it been so repetitive as tonight. I say that with the greatest regard for him, but he has repeated his questions interminably and in his customary elegant manner.
    Mr. Peter Rees: What about the answers?
    Mr. Barnett: I shall soon be coming to the answers. The hon. and learned Member said, in his exquisite way, that I should use my fertile and ingenious mind to defend my right hon. Friend the Secretary of State for Education and Science. Frankly, there is no need to use any fertile or ingenious mind, if I ever had one. The fact is that my right hon. Friend has made it clear that what she is concerned

    1463
    with is to encourage schemes that are open to the public and not to provide benefits that are clearly benefits to the employees—and highly paid employees—of particular firms. This is what we are talking about.
    If the hon. and learned Gentleman is seeking to pretend that these schemes are not means of providing benefits for highly paid employees, why was he so concerned to make the point that these schemes are brought about because of high levels of taxation? He well knows that these schemes are created deliberately and with the clear belief, as the right hon. Member for Crosby (Mr. Page) said, that they would not be taxable in the hands of the family of the employee.
    Let us be clear what we are talking about. It has nothing to do with the aspirations of parents, which I fully understand, to provide a decent and proper education for their children. We are talking about whether firms are giving employees a benefit which is similar to remuneration in law. New clause 53 is designed to ensure that scholarship income awarded to a director or a higher-paid employee or a member of his family by reason of that employment should not be taxed as a benefit. It is difficult to tell, but the cost could exceed £5 million, and if the new clause were accepted we do not know how many more schemes would be introduced and how much greater the cost would be.
    1.15 a.m.
    The hon. and learned Member for Dover and Deal referred to what was said in another place recently in reply to Lord Boyd-Carpenter. The hon. and learned Gentleman said that he thought that there was an element of retrospection involved. I note that the hon. and learned Gentleman looks quizzical when I use the word "retrospection". I understand his difficulty. When he speaks at length, he gets carried away with his own verbosity and is never too clear what he is saying. That is the word that he used, and I am sure that that is what Hansard will say, because I heard the word and took a note of it.
    There may have been some misunderstanding about that answer in another place. Let me make clear that in practice the change will not apply to awards before the date of the Inland Revenue
    1464
    announcement. It will apply to awards made after that date under schemes that were in existence before then.
    I was asked why the Inland Revenue sought to deal with the matter at this time. I regret that the hon. Member for Cornwall, North (Mr. Pardoe) used phrases such as "the narrow, twisted minds of some Inland Revenue officials". I would not dream of referring to some of his hon. Friends, who are now at home tucked up in bed, as having narrow, twisted minds. It is not helpful to refer in that way to officials who serve this country well in collecting revenue on behalf of the Crown.
    Mr. Pardoe: People choose their occupations. They choose whether to be tax gatherers or not. I am aware that the New Testament enjoins us to love tax gatherers, but that is a part that I have never accepted and never will.
    Mr. Barnett: I doubt whether that could be construed as an apology.
    Mr. Pardoe: It is not.
    Mr. Barnett: The hon. Member for Cornwall, North chose to be a Member of Parliament, but that does not make him a narrow-minded and twisted-minded Member. Even if we did not have a pact, I would not dream of calling him those names. I regret the name-calling in which he indulged.
    The hon. Gentleman referred to the Barclays scheme. Perhaps we should both check what the scheme involves, but if it applies only to employees and their families, in my view—and I shall return to the legal aspect of it—it is a benefit and must be a benefit for the employee who has been saved the expense of meeting the fees and the income that is provided for the member of his family.
    Section 375 of the Taxes Act exempts scholarship income in the hands of a person receiving full-time instruction in university, college, school or other educational establishment. There was a slight legalistic difference of opinion between the hon. and learned Member for Dover and Deal and the right hon. Member for Crosby about the interpretation of the words in that section. I have a lot of respect for the right hon. Gentleman on many matters and I agree with him that this is a matter that should be tested in

    1465
    the courts. He was saying that his hon. Friend did not need to move the new clause because if the matter were tested in the courts, the money would not be taxed.
    Some years ago, the Inland Revenue was advised that the exemption provided by section 375 precluded an assessment on employees as a benefit, but since then schemes have proliferated and in the last couple of years, 50 such schemes—perhaps more—have been set up.
    Mr. Pardoe: She has encouraged that.
    Mr. Barnett: I was brought up in a poor neighbourhood, where "she" was a derogatory expression. We are talking about my right hon. Friend the Secretary of State for Education. I would never refer to her as "she". She is a right hon. Lady, a Member of this House. She is not a "she". She was not seeking to encourage firms to provide benefits in kind untaxed for their employees—and high-paid employees and directors at that. She was not doing anything of the kind, as I am sure she would be the first to say to the House.
    The schemes have proliferated. The hon. and learned Member for Dover and Deal asked why the Inland Revenue had taken further legal advice at this stage. The responsibility of the Revenue under any Government is to collect taxes that it believes that it is legally required to collect, and rightly it took legal advice in this case. That advice was that it would be right now for the Revenue to contend that there is a benefit in these schemes. If the right hon. Member for Crosby is right, and the Revenue's legal advice is wrong, he or others are perfectly at liberty to test the matter in the courts, as he himself recommended.
    Mr. Graham Page: What I cannot understand is how proliferation of the schemes changed the law.
    Mr. Barnett: It did not. What changed was the advice that was received. The right hon. Gentleman disagrees with that advice. He can use the law and the appeal system to see whether he is right or whether the advice given to the Revenue is right, but I make it clear that, in the case of bona fide schemes that are open to the public generally, not just to employees—by employees I mean higher-
    1466
    paid employees—and where the salary and benefit combined is less than £7,500 a year, there is no question of the taxation of a benefit. It is awards to members of the family of the higher-paid, not awards to the employees themselves, that one is talking about. If the firm makes an award of a scholarship to an employee for, for example, post-graduate studies, that is not taxable unless it is so large as to qualify for remuneration rather than as scholarship income.
    The hon. and learned Gentleman asked me the meaning of the Revenue press release. Where awards for fees and maintenance income in private schools and universities are made—and they are limited to employees' children—I believe that that must be the same as remunerating an employee. But again that will have to be tested in the courts. If it is not the same as remunerating an employee, it is an odd situation when the employee is being saved the expense of maintaining his child in private education or university.
    Section 375 was intended to ensure that the recipient of a scholarship was not taxed, but it was never intended that it should exempt part of an employee's remuneration, and given the mushrooming of the use of what one can only consider as a device for using the provision in a way never intended, I believe that the Inland Revenue was right to take new legal advice, and that when it got the advice that it was a benefit in kind it was right to tax it.
    The Revenue announced that that was what it was proceeding to do, and that it was taxing the benefit from that date.
    Of course, some awards will be made on merit and, if they are open to the general public, will not be taxable. The award will be for the student and not because of the parents' employment. But if it is only to an employee, it is right that the employee should be taxed.
    I am bound to say that I find the arguments that have been put forward in support of the clause wholly unacceptable. I hope that the House will reject the clause.
    Question put and negatived.
    Mr. Joel Barnett: I have the feeling that the House may not want to proceed much further tonight. I am sorry about that. The hon. and learned Member for

    1467
    Dover and Deal (Mr. Rees) looks very tired. Therefore, I beg to move, That further consideration of the Bill be now adjourned.
    Question put and agreed to.
    Bill, as amended in the Committee and in the Standing Committee, to be further considered this day.

A21 (PEMBURY BYPASS)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]
1.26 a.m.
Mr. Patrick Mayhew: The A21 is the main road that runs from London to Hastings. It runs through my constituency, from the outskirts of Tonbridge to the Sussex border at Flimwell, about 15 miles away. On either side of the village of Pembury it is not unusual for the traffic to build up to a distance of more than a mile in a traffic jam. It is here that the B2015 joins the A21 from Maidstone, carrying heavy traffic from there and from East Kent and Paddock Wood. Here the A21 passes through the middle of the village of Pembury, by a carriageway all of 18 feet wide.
I am grateful for the opportunity to draw attention to the project for a bypass round this the worst bottleneck to be found on the A21, of which the Under-Secretary of State, who has always courteously received me and listened to my representations over two or more years on the subject, is aware. I submit that a wholly unnecessary delay is being imposed on the construction of the bypass for Pembury.
I refer to the fact that 44 years after the bypass was first promised, up to two years are to be spent by the Department of Transport duplicating work that has already been done by the Kent county council in selecting the line of the road. It is work that can arrive only at the the result that everybody already knows and has known for years.
When the Minister introduced the Leitch report recently he said that it was the Department's role to ensure that the right road is built in the right place to the right standards and at the right time. As for the right road, the Depart-
1468
ment knows that Kent and East Sussex, which act as a funnel for the vast majority of the United Kingdom's road-borne trade and tourism to and from the Continent, have had far less than their fair share of funds for building roads. The Department predicts growing traffic loads for the A21. Of all the trunk roads in Kent and East Sussex the A21 is the most archaic. In May 1978 the Under-Secretary of State wrote to my hon. Friend the Member for Hastings (Mr. Warren) in these terms:
"We need no traffic counts to convince us that improvements are necessary."
That is right. However there are those who now suspect that the Department is perhaps preserving the A21 under some conservation programme to take its place with the Berkshire Ridgway as a road of outstanding historic interest.
Moreover, it is now proposed that the area through which the A21 runs shall be made an area of outstanding natural beauty. Yet the sidelanes and back-doubles are used by traffic trying to avoid the jams at Pembury.
There cannot be any question but that if the A21 as a whole is not to be remodelled in its entirety, which we should all like but we recognise the financial constraints, the bypass around Pembury that has been promised for 44 years is the right road to proceed with at once.
The right place: never in the history of this project, if one can describe as history the story of something that never happens, has anyone concluded that a line other than the line to the south of the village of Pembury was a practical possibility. Thus, this line has been shown on the town map for Tunbridge Wells and Southborough since 1972, and that map was nine years in the making, with prodigious consultation along the way. The Kent county council, which for years has wanted to build this bypass, long ago concluded that the line for the road should be to the south, and that was the right place for it. If one is going to the south, the actual line chooses itself.
The right standards: to put a single carriageway road round Pembury would be absurd. The great problem which the A21 presents is the queueing imposed by—to use an expression from our last debate—its narrow and twisted nature. A single carriageway constructed on a curve

1469
would prevent any overtaking at all, so that, even on the bypass round Pembury, with a single-line carriageway, the slow vehicles would still prevent the faster ones from overtaking them. It is impossible to contemplate duplicating all these procedures of planning and construction to make a second carriageway later.
The right time: try telling Pembury that this is not the right time and one risks getting a declaration of UDI with all the traffic halted at the frontiers. Pembury has had more than enough of the dangers to life and limb presented by the traffic passing through its centre. It was the right time 44 years ago, and it has not stopped being the right time ever since.
It is against this background and these principles that the current procedures of the Department regarding the Pembury bypass fail to be judged. The Department is solemnly insisting on going through the same preliminary report procedure that would be appropriate if the Minister were suddenly to wake up one morning and say "Let us build a spaghetti junction over Canterbury cathedral."
Who is the Department asking to prepare that report, with all its investigation of alternative layouts, estimates and technical approach reports, deposit periods, exhibition periods and assessment reports? None other than the Kent county council. As a result, the Minister is not scheduled—I have the schedule here—to adopt the preferred line until a period beginning on 14th May and ending on 6th August 1979.
Let it not be supposed that all this is necessary in order to undertake at an early stage all the public consultation that will be required: not at all. I have already mentioned that the southern line is shown on the 1972 town map for Tunbridge Wells, which itself was the subject of public consultation since 1963.
A public inquiry is still scheduled to take place when? between 27th December 1982 and 3rd January 1983—into the necessary compulsory purchase orders.
Why does not the Minister come to Pembury or to Tunbridge Wells, hold a public meeting, say that he wants to void unnecessary waste of time, explain that the southern route seems to him to be the only possible one, but that he will
1470
listen to other views then and there and invite any objectors to come to visit him in London? I can assure him of a grateful welcome if he will do that. In that way he could get on with the important part of the job.
Instead, the regional controller wrote to the Pembury parish council on 25th January this year:
"The Preliminary Report is an essential and integral part of the planning processes required for any major trunk road improvement scheme. It cannot be dispensed with just because, prior to the trunking of the road, the County Council had already established the basic principles and produced a draft line. Indeed, because these principles were established many years ago, changes in traffic patterns and predicted growths may have invalidated the basic principles thus, of course, possibly affecting the conclusion that the existing line is the correct one. The Preliminary Report is therefore designed to investigate the basic principles and alternative solutions and, in the light of present conditions, to produce an efficient and economic solution. The conclusion may well be that the existing line is indeed the best solution but until the conclusions are known there is no way in which Pembury Bypass can proceed further."
He says that this will seemingly delay works by up to two years
"but before the Department commits itself to expenditure in excess of £2 million it must be satisfied that the project has been propertly investigated."
What is all this about £2 million? The White Paper "Policy for Roads", published in April puts the cost at £1 million, correct to the nearest million. I do not know who is paying directly for the unnecessary work which the Kent county council is having to do. I do not know whether it is the ratepayers of Kent or the taxpayers of the United Kingdom as a whole, including those of Kent. Whoever pays, it is a waste of money and time. No one who knows the place could suppose or ever has supposed that the line can be other than to the south.
Two steps are now urgently needed. First the Minister should, perhaps after a meeting of the type that I have suggested, adopt the southern route as the preferred route, relying upon what everybody in the district has known for donkey's years. Secondly, the Minister should not muck about; he should say that this one-mile construction shall be of dual carriageway standard.
Bearing in mind that if this opportunity is lost the later construction of a dual carriageway will cost much more in delays

1471
to traffic and ultimately higher prices, the net additional cost will be slight.
At present this project is proceeding at the pace of the traffic through Pembury on a summer Saturday morning. The duplication is having a disastrous effect upon confidence in the machinery and good will of Government. It gives no encouragement at all to those of us who urge restraint and lawful behaviour in the protests of those who consider that after 44 years, enough is enough.
With last week's example of the Penistone bypass I sincerely hope, as the sitting Member, that my constituents in Pembury do not wish that they were in the middle of a by-election.
1.38 a.m.
The Under-Secretary of State for Transport (Mr. John Horam): I am grateful to the hon. and learned Member for Royal Tunbridge Wells (Mr. Mayhew) for raising this subject, although it was perhaps unfortunate that it followed the last debate in the House. I hope that he has an opportunity to speak to his hon. and learned Friend the Member for Dover and Deal (Mr. Rees), because if he had made a shorter speech we could have come to this important subject earlier. This is more important than the matters about which the hon. and learned Member for Dover and Deal was talking.
Perhaps I can allay some of the fears and misapprehensions that have grown up in the last few months about the apparently slow progress of this road.
No one disputes that Pembury needs a bypass. That need was emphasised by our decision to make the A21 a trunk road, all the way from its junction with the A25, near Sevenoaks, down to Hastings. Thus, the responsibility for the road passed from the Kent and East Sussex county councils to my right hon. Friend the Secretary of State. The transfer took place on 1st April 1977. Trunking of the road identified it as part of the national road system linking the main centres of population to each other and to the ports.
The hon. and learned Gentleman rightly referred to the role played by Kent in taking a large part of the traffic coming to the capital from abroad. Before trunking, Kent county council in its area had done a great deal to upgrade the A21 to a standard sufficient to enable it to
1472
carry the volumes of traffic attracted to it and to bypass some of the main centres of population. It was surely right to give priority to bypassing Sevenoaks and Tonbridge, because these larger communities obviously caused the biggest delays to traffic and suffered the worst ravages because of it.
Completion of the 13-mile length of the dual-carriageway bypasses of Sevenoaks and Tonbridge has done nothing to help Pembury and has perhaps made conditions somewhat worse there, because drivers heading towards Hastings will have become accustomed to a high speed on the bypasses and will perhaps be less tolerant of more difficult conditions through Pembury.
In addition, as the hon. and learned Gentleman pointed out, there is not one problem at Pembury, but two. The second arises from the B2105, which carries traffic from Paddock Wood to the east of Pembury through and on past the village centre. Therefore, Pembury does not need one, but two bypasses, the second being the responsibility of the Kent county council.
Quite fairly, the hon. and learned Gentleman pressed me about the speed with which the Department, having taken responsibility for the main bypass, is proceeding in this matter. He has put down Questions and written me numerous letters, as have many of his constituents. I am thinking particularly of the Pembury 2000 action group, which is very active. We have also had a petition from parishioners of Pembury.
Our aim, as we have said throughout, is to finish the road eight years from its entry into the preparation pool. It entered the pool in July 1977, so we are talking of completion seven years from now, in 1985. That assumes that there are no unforeseen difficulties, such as can occur, the most notorious of which are difficulties concerning public inquiries but which can include engineering difficulties.
Though the hon. and learned Gentleman may find it hard to believe, that timetable is a considerable improvement on the average length of time taken to complete a road from its entry into the preparation pool. It normally takes 10 years to encompass the complete construction of a road to the point where traffic is running upon it, and that applies to

1473
small schemes—even smaller than the Pembury bypass—as well as to mammoth projects such as the spaghetti junction scheme to which the hon. and learned Gentleman referred.
That timetable indicates the importance and priority that we attach to completing the Pembury bypass. It is beating the average, on present plants, for the time taken between conception and admission to the preparation pool and completion. We have managed to cut the period by two years, partly because a certain amount of work has been done by the Kent county council.
That leads to one of the hon. and learned Gentleman's questions. He quite fairly asked whether we were duplicating the work that has been done by the council. The same officials are now engaged on the work as were engaged upon it when the council was in charge. However, it is hardly likely that those people will be going over the same work as they did previously. That would simply not be a rational use of time, especially since county councils have been constrained in their spending and have often therefore had to restrict the number of officials doing a particular job. In those circumstances they obviously will not duplicate work, and they are not doing so.
The work done by the Kent county council was of a very preliminary nature. It boiled down to getting some idea of the line that the road should take; it was not the detailed elaboration which is necessary in order fully to present a road scheme of this kind. Kent had not in any way begun the preparation of the statutory procedures which a road must complete, whether it is the responsibility of a county council or the Department.
I should like to give the hon. and learned Gentleman an idea of the work that has been going on in the past few months and will be continuing in the next few months to show him the sort of detailed preparation which needs to go into a scheme of this kind, wherever it may be.
First, we have been preparing the detailed environmental framework for consideration of the scheme, looking at the sort of country the road goes through, with preparation of the alignment of the
1474
road, considering whether earth mounds may be necessary in certain places, considering the detailed topography of the road, and so on, in order to get a clear view of the two alternative routes and the environmental consequences of both.
That work is necessary in any case, but it is necessary also to satisfy the landscape advisory committee, which will be visiting the site this month to look at the detailed preparations and arguments which we have been putting forward. That is the first step towards getting a clear view, as Leitch says we should, of the environmental consequences of any scheme. It is an attractive area. We do not ignore that.
Mr. Mayhew: Is it not a fact that the Kent county council has been required to assess the practicality of a scheme providing for the road to go to the north of the village under the alternative layout section of the procedure? Everybody knows that that is impractical, but I understand that the county council has solemnly to sit down and assess the technical practicalities of that. Is that not so?
Mr. Horam: Indeed. The landscape advisory committee has to be satisfied that on environmental grounds—landscape grounds and aesthetic grounds—the route that we have chosen is the best. To do that it has to compare alternative routes. If at the end of the day the committee finds the northern route is the best—whatever the practicality on other grounds—it must have an opportunity to say so. Therefore, one has to satisfy those very sensible criteria—criteria which are considered to be appropriate not only by the Department but by an independent body such as the Leitch committee. We have to approach it in a sensible way, and that includes considering a northern as well as a southern route.
Second, in many cases—notorious cases such as Archway and the M3—the Department has been castigated for not having up-to-date traffic forecasts. In the Pembury case, the traffic counts justifying the road were made as long ago as 1972. Therefore, to look at the question of the right standard, to which the hon. and learned Gentleman referred—whether it should be dual-carriageway—it is necessary to look at traffic counts which are at

1475
least of the current year when one will be considering these matters at a public inquiry as long in the future as 1982. Even then they will be four years out of date if we have a public inquiry in that year. If we stuck to the 1972 figures, they would be 10 years out of date, and objectors could well feel that that was out-of-date information. We have to have the information reasonably up to date.
There have therefore been traffic counts taking place on the road to ascertain a correct view about the standard of the road, for example, quite apart from the question whether it is absolutely necessary, which I believe it to be.
Third, we must look at an economic analysis of the road, taking into account up-to-date traffic figures. To accord a road priority over other schemes, we have to rank schemes in some sort of order to determine which should go forward first, and we can do that only by some sort of cost-benefit analysis. For that purpose one has to have up-to-date information, including the traffic counts.
All this information and analysis—environment, traffic and economic—will be ready in a few months, and we can then present the information to the public. But this work had not been done by Kent county council. It is not being duplicated by the Department. This is the necessary and inevitable next step in the preparation of the scheme, and it must be done as quickly as possible.
The hon. and learned Gentleman said that everyone knew that the southern route, was best and that we should just adopt it and cut out all the public consultation. He said that the local people had known for donkey's years that the preliminary route chosen by the county council was the right proposal. But when we finally publish the route, some people will be directly affected, some of the land will be taken. Our experience is that people will then take advantage of their right to raise objections. They may have the statutory right to raise them at the public inquiry.
It will not be sufficient for the Department to say then that it has done its calculations in a "back of the envelope" way and that the Minister has confidence in the scheme if they can prove that we have not done our calculations properly. The inspector, independently appointed by the Lord Chancellor, would say, "This
1476
is not good enough. I will quash this proposal and we shall have to look at it again". That is the kind of trouble caused by being slipshod at this stage. If we want to get through the public inquiry rapidly, we must spend some time now making the necessary calculations.
Although 99·9 per cent. of Pembury people wanted the southern route, one or two objectors could decide they had a legitimate argument and put their case forcefully to the inquiry. I imagine that plenty of people in Pembury could bring excellent professional services to bear.
Mr. Mayhew: Surely the fallacy or that argument is that the inspector does not quash the proposal, as the Minister claimed. He makes a report to the Secretary of State and it is for him to decide whether the scheme should go ahead. In the circumstances that I have described he would have to say that it should.
Mr. HoramI am not sure that one can prejudge the matter in that way. The Secretaries of State for Transport and the Environment together would have to consider the inspector's report and would have the final way. But they must pay attention to the inspector and if he finds that the case is sufficiently non-proven they must take that into account. They must rest on their final view but inquiries have been aborted in the past through difficulties of this kind. I must ask the hon. and learned Member to bear with that perhaps cautious but also sensible approach.
Let me give the hon. and learned Member a commitment. I understand the frustration when so many people want this bypass. If we find—we can ascertain this shortly now because of the work done between the middle of last year and now—that the northern route is not an alternative at all, we can short-circuit the procedure of public consultation. I am anxious to do so. I have said many times that I see no point in elaborate public consultation procedures when only one effective route is possible.
Nevertheless, under the procedures laid down by the hon. and learned Member's own party in 1973, we have to have some public consultation even if there is only one possible scheme. However, if only the southern route is viable, I shall make the consultation of the most skeletal kind. I will ask my officials to publish the fact

1477
that they have come to this conclusion and invite anyone to comment on it, but conduct no further investigation.
That could save about six months and we should then probably be talking about doing that in the early part of next year. By the end of 1979 we should have it fairly well programmed. It will then take about 18 months to two years to work it up in a detailed design stage with all the engineering consequences. The inquiry should take place in 1982, with a start in 1983 and a finish in 1985. That is rather tight, with little room for slippage, but that is the sort of time we could finish in.
It would not have been done any faster by the county council. I understand from a publication by the Pembury 2000 group that the council said that it would come after the Bluebell Hill improvement south of Chatham was completed, which under Kent's current TPP will be finished in
1478
1981–82. That means that even if the council went ahead as planned—and I doubt whether they would be able to achieve that—they could not start by 1983. With the funds available, I think that we shall be able to start this sooner than Kent could have done if it had remained a county council responsibility. At the end of the day, the people of Pembury will be getting their bypass sooner than the average time and sooner than if Kent had remained in charge, simply because the council would have lacked the financial resources—
The Question having been proposed after Ten o'clock on Tuesday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER, adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at four minutes to Two o'clock.

  SOCIAL SERVICES
    Contraceptive Services (Minors)
    Contraceptive Services (Minors)
    Children in Hospital (Visits by Relatives)
    Children in Hospital (Visits by Relatives)
    Kidney Patients (Merseyside)
    Kidney Patients (Merseyside)
    St. John's Hospital, Uxbridge
    St. John's Hospital, Uxbridge
    Supplementary Benefit (Eligibility Criteria)
    Supplementary Benefit (Eligibility Criteria)
    Hospitals (Mixed Wards)
    Hospitals (Mixed Wards)
    Disabled Persons
    Disabled Persons
    Maternity Benefit Claimants
    Maternity Benefit Claimants
    British Dental Association
    British Dental Association
    Hospitals (Cleaning and Auxiliary Services)
    Hospitals (Cleaning and Auxiliary Services)
    Attendance Allowance (Kidney Machine Patients)
    Attendance Allowance (Kidney Machine Patients)
    Hospital Consultants (Pay)
    Hospital Consultants (Pay)
    National Health Service Staff
    National Health Service Staff
    Eltham and Mottingham Hospital
    Eltham and Mottingham Hospital
    One-parent Families
    One-parent Families
    Health Authorities (Administration Costs)
    Health Authorities (Administration Costs)
    Disabled Persons (Driving Lessons)
    Disabled Persons (Driving Lessons)
    Dental Services
    Dental Services
    National Health Service (Resources Distribution)
    National Health Service (Resources Distribution)
    Death Rates
    Death Rates
    Supplementary Benefit (Consumer Consultation)
    Supplementary Benefit (Consumer Consultation)
    Hospital Waiting Lists
    Hospital Waiting Lists
    Mrs. M. Broomfield (Appeal)
    Mrs. M. Broomfield (Appeal)
    Speech Therapists
    Speech Therapists
    Death Grant
    Death Grant
    Smoking
    Smoking
    Regional Secure Units (Expenditure)
    Regional Secure Units (Expenditure)
    Pearson Report
    Pearson Report
    Hospital Resources (South East Thames Area)
    Hospital Resources (South East Thames Area)
    Retirement Age
    Retirement Age
    Nursing Profession
    Nursing Profession
    Pre-school Playgroups
    Pre-school Playgroups
    Chronically Sick and Disabled Persons Act
    Chronically Sick and Disabled Persons Act
    Disabled Elderly Persons
    Disabled Elderly Persons
    Supplementary Benefit System
    Supplementary Benefit System
    Perinatal and Infant Mortality
    Perinatal and Infant Mortality
    Personal Social Services Employees
    Personal Social Services Employees
    Royal Free Hospital, Hampstead (Neurosurgical Unit)
    Royal Free Hospital, Hampstead (Neurosurgical Unit)
    National Insurance Contributions (Employees)
    National Insurance Contributions (Employees)
    Personal Social Services (Expenditure)
    Personal Social Services (Expenditure)
    Hospital Beds
    Hospital Beds
    Homoeopathy
    Homoeopathy
    National Insurance Contributions (Married Women)
    National Insurance Contributions (Married Women)
    Elderly Persons (Consultative Document)
    Elderly Persons (Consultative Document)
    Pharmaceutical Services Negotiating Committee (Dispute)
    Pharmaceutical Services Negotiating Committee (Dispute)
    Disablement Income Group
    Disablement Income Group
    Funeral Costs (Benefit Claims)
    Funeral Costs (Benefit Claims)
    "Look After Yourself" (Health Campaign)
    "Look After Yourself" (Health Campaign)
    Hospitals (Drug Prescribing)
    Hospitals (Drug Prescribing)
    Foreign Citizens (Benefit Eligibility)
    Foreign Citizens (Benefit Eligibility)
    Diseases (Genetic Transmission)
    Diseases (Genetic Transmission)
    Spectacle Lenses (Prices)
    Spectacle Lenses (Prices)
    Junior Hospital Doctors (General Practitioner Deputising Services)
    Junior Hospital Doctors (General Practitioner Deputising Services)
    Prescription Charges
    Prescription Charges
    Drug Companies (National Health Service Payment)
    Drug Companies (National Health Service Payment)
    Motability
    Motability
    Invalid Care Allowance
    Invalid Care Allowance
    Occupational Diseases (Compensation)
    Occupational Diseases (Compensation)
    Children (Custodianship Orders)
    Children (Custodianship Orders)
    Hospital Consultants (Merit Awards)
    Hospital Consultants (Merit Awards)
    Occupational Deafness
    Occupational Deafness
HOUSE OF COMMONS
  Library (Accommodation)
  Library (Accommodation)
  Members' Salaries
  Members' Salaries
  MEMBERS OF PARLIAMENT (ACCOMMODATION)
  MEMBERS OF PARLIAMENT (ACCOMMODATION)
  SCOTTISH AND WELSH ASSEMBLIES
  SCOTTISH AND WELSH ASSEMBLIES
  EUROPEAN COMMUNITY (ECONOMIC AND SOCIAL POLICIES)
  EUROPEAN COMMUNITY (ECONOMIC AND SOCIAL POLICIES)
  SECRETARY OF STATE FOR EMPLOYMENT
  SECRETARY OF STATE FOR EMPLOYMENT
  PRIME MINISTER (ENGAGEMENTS)
  PRIME MINISTER (ENGAGEMENTS)
  INCOME SCHEMES AND WELFARE BENEFITS
  INCOME SCHEMES AND WELFARE BENEFITS
  EXETER
  EXETER
  POTT SHRIGLEY
  POTT SHRIGLEY
  HUBERT HUMPHREY AWARD (PRIME MINISTER'S ADDRESS)
  HUBERT HUMPHREY AWARD (PRIME MINISTER'S ADDRESS)
  CBI
  CBI
  CATFORD
  CATFORD
  PENISTONE
  PENISTONE
  SLOUGH
  SLOUGH
  PRESS LEAKS
  PRESS LEAKS
  PRIME MINISTER (CORRESPONDENCE)
  PRIME MINISTER (CORRESPONDENCE)
  QUESTIONS TO THE PRIME MINISTER
  QUESTIONS TO THE PRIME MINISTER
  STALYBRIDGE
  STALYBRIDGE
HOME DEPARTMENT
  Police (Complaints)
  Police (Complaints)
  Crown Court Acquitals (Midlands)
  Crown Court Acquitals (Midlands)
  Prisons (Staff Requirements)
  Prisons (Staff Requirements)
  Shoplifting (London)
  Shoplifting (London)
  Parliamentary Constituencies (London)
  Parliamentary Constituencies (London)
  Juvenile Offenders
  Juvenile Offenders
  Women Prisoners (Pregnancies)
  Women Prisoners (Pregnancies)
  Prisoners (Mothers with Children)
  Prisoners (Mothers with Children)
  Metropolitan Police
  Metropolitan Police
  Immigrants (Settlement Rights)
  Immigrants (Settlement Rights)
  Criminal Injuries Compensation
  Criminal Injuries Compensation
  Traffic Offences (Fines)
  Traffic Offences (Fines)
  Gateshead Magistrates Court (Compensation Award)
  Gateshead Magistrates Court (Compensation Award)
  Immigrants (Indian Sub-continent)
  Immigrants (Indian Sub-continent)
  Prisoners (Supervised Visits)
  Prisoners (Supervised Visits)
  Prisoners (Transfers)
  Prisoners (Transfers)
ENERGY
  Fast Breeder Reactor (Inquiry)
  Fast Breeder Reactor (Inquiry)
  Pay Settlements (Nationalised Industries)
  Pay Settlements (Nationalised Industries)
  Electricity Generation
  Electricity Generation
  Coal Imports (Poland)
  Coal Imports (Poland)
  North Sea Oil and Gas
  North Sea Oil and Gas
  CONVEYANCING CHARGES
  CONVEYANCING CHARGES
  TRIALS (GREATER LONDON)
  TRIALS (GREATER LONDON)
  LORD OF THE MANOR (FEUDAL RIGHTS)
  LORD OF THE MANOR (FEUDAL RIGHTS)
  OBSCENITY CASES (COURT COSTS)
  OBSCENITY CASES (COURT COSTS)
INDUSTRY
  Japanese Investment
  Japanese Investment
  European Community (Enlargement)
  European Community (Enlargement)
  Companies (Foreign Owners)
  Companies (Foreign Owners)
  Selective Assistance (Consett and Stanley)
  Selective Assistance (Consett and Stanley)
  Nationalised Industries (Pay Settlements)
  Nationalised Industries (Pay Settlements)
  Research (Expenditure)
  Research (Expenditure)
  Foundry Schemes
  Foundry Schemes
  Selective Investment Scheme
  Selective Investment Scheme
  European Investment Bank Loans
  European Investment Bank Loans
  British Shipbuilders
  British Shipbuilders
  National Enterprise Board (Shareholdings)
  National Enterprise Board (Shareholdings)
  Footwear Industry (Aid)
  Footwear Industry (Aid)
  Post Office Engineers (Dispute)
  Post Office Engineers (Dispute)
PRICES AND CONSUMER PROTECTION
  Service Charges (Consumer Durables)
  Service Charges (Consumer Durables)
  Company Directors (Salary Increases)
  Company Directors (Salary Increases)
TRADE
  Whisky
  Whisky
  Companies (Receivers and Liquidations)
  Companies (Receivers and Liquidations)
  Seafarers (Training and Certification)
  Seafarers (Training and Certification)
FOREIGN AND COMMONWEALTH AFFAIRS
  Suez Campaign
  Suez Campaign
  Rhodesia
  Rhodesia
  Passports
  Passports
OVERSEAS DEVELOPMENT
  Vietnam
  Vietnam
NATIONAL FINANCE
  Corporation Tax
  Corporation Tax
  Value Added Tax
  Value Added Tax
  Civil Servants (Travel Warrants)
  Civil Servants (Travel Warrants)
  European Investment Bank
  European Investment Bank
  Treasury Economic Model
  Treasury Economic Model
  Inflation
  Inflation
  Central and Local Government (Wages and Salaries)
  Central and Local Government (Wages and Salaries)
  Pay Settlements (Government Action)
  Pay Settlements (Government Action)
  European Agricultural Guidance and Guarantee Fund
  European Agricultural Guidance and Guarantee Fund
  Divers
  Divers
  Productivity
  Productivity
  Personal Tax Allowances
  Personal Tax Allowances
  Tax Evasion (Prosecutions)
  Tax Evasion (Prosecutions)
EDUCATION AND SCIENCE
  Trades Union Congress (Grant)
  Trades Union Congress (Grant)
  Export of Works of Art (Committee's Reports)
  Export of Works of Art (Committee's Reports)
  University Grants
  University Grants
DEFENCE
  Free Travel Warrants
  Free Travel Warrants
  Bentley Priory Selection Centre
  Bentley Priory Selection Centre
  Aircrew Training
  Aircrew Training
  Pilot Training
  Pilot Training
  Royal Marines Amphibious Force
  Royal Marines Amphibious Force
TRANSPORT
  London Underground (Violent Crimes)
  London Underground (Violent Crimes)
  Car Parking (Disabled Persons)
  Car Parking (Disabled Persons)
  Railway Rolling Stock
  Railway Rolling Stock
  Seat Belts
  Seat Belts
  Pay Settlements (Nationalised Industries)
  Pay Settlements (Nationalised Industries)
  A18 (Crowle Arches Viaduct)
  A18 (Crowle Arches Viaduct)
SOCIAL SERVICES
  Drugs
  Drugs
  Public Corporations (Employees)
  Public Corporations (Employees)
  Supplementary Benefit (Fraudulent Claims)
  Supplementary Benefit (Fraudulent Claims)
  War-wounded Persons
  War-wounded Persons
  Supplementary Benefit Claims (Married Couples)
  Supplementary Benefit Claims (Married Couples)
  Spectacle Frames (Children)
  Spectacle Frames (Children)
  Optical Charges
  Optical Charges
  Area Health Authorities (Expenditure)
  Area Health Authorities (Expenditure)
  Eastern Hospital, Hackney
  Eastern Hospital, Hackney
  Hospital Beds (Emergency Provision)
  Hospital Beds (Emergency Provision)
  Myolectric Hands
  Myolectric Hands
  Domestic Services
  Domestic Services
  Unemployment Benefit (Married Women)
  Unemployment Benefit (Married Women)
  Suffolk (Capital Revenue)
  Suffolk (Capital Revenue)
AGRICULTURE, FISHERIES AND FOOD
  Dairy Herd
  Dairy Herd
  Whisky (GATT Negotiations)
  Whisky (GATT Negotiations)
  Fishing Vessels and Equipment (Flood Damage)
  Fishing Vessels and Equipment (Flood Damage)
EMPLOYMENT
  Industrial Accidents (Leek)
  Industrial Accidents (Leek)
  Mothers
  Mothers
  Nationalised Industries (Pay Settlements)
  Nationalised Industries (Pay Settlements)
  International Labour Office
  International Labour Office
  Carcinogens
  Carcinogens
  Public Employees (Statistics)
  Public Employees (Statistics)
  Unemployed Persons
  Unemployed Persons
  Closed Shop
  Closed Shop
  Employment Protection Act (Wales)
  Employment Protection Act (Wales)
WALES
  Mountain Rescue Service
  Mountain Rescue Service
  National Health Service
  National Health Service
  Advance Factories (Arfon and Dwyfor)
  Advance Factories (Arfon and Dwyfor)
  Sport and Leisure Facilities
  Sport and Leisure Facilities
  Welsh Language
  Welsh Language
  Housing (Underspending)
  Housing (Underspending)
  Community Land Scheme
  Community Land Scheme
SCOTLAND
  Elderly Persons (Sheltered Housing)
  Elderly Persons (Sheltered Housing)
  Potatoes (Dundee)
  Potatoes (Dundee)
  Scottish Development Agency (Factory Construction)
  Scottish Development Agency (Factory Construction)
  Hunterston B Reactor
  Hunterston B Reactor
  Scottish Development Agency (Board Members)
  Scottish Development Agency (Board Members)
NORTHERN IRELAND
  River Faughan (Pollution)
  River Faughan (Pollution)
  Beekeepers
  Beekeepers
  Lough Foyle (Land Reclamation)
  Lough Foyle (Land Reclamation)
  Areas of Outstanding Natural Beauty
  Areas of Outstanding Natural Beauty
ENVIRONMENT
  Public Buildings (Disabled Persons)
  Public Buildings (Disabled Persons)
  Inland Waterways
  Inland Waterways
  Housing Investment (Cheshire)
  Housing Investment (Cheshire)
  Dog Licences
  Dog Licences
  Home Insulation
  Home Insulation
  Development Land (Disposals)
  Development Land (Disposals)
  Housing Reviews
  Housing Reviews
  National Insurance Contributions (Local Government)
  National Insurance Contributions (Local Government)
  House of Commons (Norman Shaw South)
  House of Commons (Norman Shaw South)
  Research (Cost)
  Research (Cost)
  Bicycle Parking (Government Offices)
  Bicycle Parking (Government Offices)

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Norwich

RHODESIA: SETTLEMENT NEGOTIATIONS
Lord BALFOUR of INCHRYE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will give some amplification of the words of the Minister of State, Foreign and Commonwealth Office, in this House on 26th June last (Official Report, col. 29),
"without the co-operation of the very substantial Rhodesian elements now outside the internal régime":
whether these words referred to elements within or without Rhodesia; and how the extent of opposition within the country can be assessed without the holding of free elections such as are proposed by the internal settlement leaders.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, in the remark quoted, I was referring to the desirability of involving all the parties, belonging both to the Patriotic Front and to the Salisbury régime, in direct talks for a negotiated settlement. The extent of popular support for each of these parties individually can only be judged in due course by free and fair elections, though I seriously doubt whether such elections can be held in the present climate within the country.
Lord BALFOUR of INCHRYE: My Lords, while thanking the Minister for his reply and the amplification of his
1430
words, may I ask him this: Does not the present policy of the Government contain a danger of losing the substance for the shadow? Is not the shadow the continuing illusion that the Patriotic Front leaders can be brought to the conference table with anything except their condition of a victory for a Marxist State in Rhodesia? Does not the substance mean greater support for those within Rhodesia who spurn warfare for political aims, who have admitted majority rule, and who have promised free elections? Is it not better to have a policy based on greater encouragement than has been given hitherto of those in the substance who have made efforts towards—
The LORD PRIVY SEAL (Lord Peart): My Lords, I hope that the noble Lord will understand that he ought to ask a direct question and not make speech.
Lord BALFOUR of INCHRYE: My Lords, I have no wish to abuse the Rules of the House, but I am putting forward the question in three forms. I could have done so in three supplementaries but I have done it in one. Is it not better to encourage the men in Rhodesia who have admitted the freedom of election rather than hang on to an illusion, which I am afraid will in the long run fail?
Lord GORONWY-ROBERTS: My Lords, I appreciate the noble Lord's concern that we should make progress to get everybody to the conference table. I should like once more to assure him and your Lordships' House that the Patriotic Front have in fact accepted the important principle of free and fair elections leading to independence, and have also indicated their readiness to attend talks with the Salisbury parties. The Salisbury parties for their part have given some indication of being ready to come to such a conference, although their vacillations have certainly been at least as strong as those of some of the members of the Patriotic Front. The Anglo-American mission is still in Southern Africa, and, without putting it too high, I think perceptible progress on those lines is being made.
Lord CARRINGTON: My Lords, for would the noble Lord not agree that the internal settlement has all the makings

1431
of a just settlement? It embodies the Five Principles, and though of course it is true that as yet the internal settlement and those running it have not carried out those principles, would it not be better for the Government to encourage internal settlement while at the same time seeking to associate others who are outside it?
Lord GORONWY-ROBERTS: My Lords, certainly we are doing everything that we can to encourage the Salisbury régime to give proof of their good intentions by coming unreservedly to a round table conference. If in addition to that they were now to implement some of the promises they made some months ago when they set up their régime, that would be a very great help indeed.
Lord WADE: My Lords, would the noble Lord agree that the practical point is the holding of free elections as soon as possible? It may be a great tragedy that they were not held long ago, but is there anything more that Her Majesty's Government can do to facilitate the holding of elections? That seems to be the vital step.
Lord GORONWY-ROBERTS: My Lords, I entirely agree that the nub of this issue is the holding of free and fair elections at which all parties will be tested as to their policies and, indeed, their good faith for the future. As to how much we can do to assist the present régime to hold meaningful and credible elections, I have very grave doubts. I hope it is within the recollection of the House that I have not been unduly critical of the efforts, wherever they have been made, to advance independence on proper lines, but I have very grave doubts indeed whether credible elections, elections that are seen to be fully participative, free and fair in the sight of everybody, can be held under the present régime. We will do everything we can of course to assist in a mutual régime agreed after a round table conference to go about its first task; namely, to prepare for such free and fair elections.
Lord BROCKWAY: My Lords, arising from the Minister's last reply, may I ask whether it is not inevitable that, if there is an election under the interim proposals, excluding the thousands of Zimbabweans
1432
who are outside, there would be a disastrous civil war? Has not Mr. John Davies on his return from Rhodesia said that the single most important point is that there should be an agreement on the lines which the Government have suggested?
Lord GORONWY-ROBERTS: My Lords, without being quite as certain as my noble friend as to the consequences of an ill-judged and improperly prepared election, I think there is a fair basis for what he has said. We all wish that this could be possible, but the situation in Rhodesia is such that I believe, without running the risk of misquoting Mr. Davies, he and others who have been there will at least agree that the circumstances and the climate now are not such that we can genuinely say we could organise free elections there. There is every chance that we could help to do that once there had been a round table conference at which all the parties had come together.
Lord SOMERS: My Lords, can the noble Lord quote any other case where an organisation such as the Patriotic Front, which has been responsible for guerrilla warfare and the deaths of thousands of innocent people, has been seriously considered as a political Party worthy of being brought to a conference table?
Lord GORONWY-ROBERTS: My Lords, I could give quite a few examples. I would only need to cross St. George's Channel, or, as we call it, the Celtic Sea and quote the eminent example of Mr. Eamon De Valera.
Lord BARNBY: My Lord, reverting to the first Answer given this afternoon and reverting also to the Minister's reply to a Question on the same date as discussion on the subject of today's Question, he said at column 27 of Hansard on 26th June:
"the possibility of a new departure is of course worth studying. I … undertake to bring the words …",
and so on. Is the Minister yet able to give any further information as regards the progress of negotiations? That is the first question. Secondly, having given the matter reconsideration, as he said in reply to a Question from the noble Baroness two weeks ago that there should

1433
be some British assistance for the elections, about which he has said a good deal today, is there nothing in progress that he has to report?
Lord GORONWY-ROBERTS: My Lords, I very much regret that I could not add to my Answer two weeks ago on the question of our being able constructively to assist the régime's proposals for elections. As to the progress of the negotiations—that is, of the inquiry and the talks held by the Anglo-American mission of Ambassador Low and Mr. Graham—as I said previously, without putting it too high I believe that perceptible progress is being made.
Lord PAGET of NORTHAMPTON: My Lords, is not the truth of the matter that Muzorewa wants—
Lord PEART: Order, please, my Lords. I thought I detected a sense of noble Lords wishing to proceed.
Lord PAGET of NORTHAMPTON: My Lords, I would agree with the noble Lord after I have put my question. Is not the truth of the matter that Muzorewa wants an election because he knows he will win it, and the Patriotic Front are determined to prevent having an election for exactly the same reason?

THE LAND FUND
2.48 p.m.
Baroness EMMET of AMBERLEY: 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 satisfied that the Land Fund is fulfilling the role it could play in saving our national heritage.
The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness BIRK): My Lords, current legislation provides only two uses for the National Land Fund: first, to pay for property accepted in lieu of tax and, secondly, to reimburse the cost of the acquisition of historic buildings by Government Departments. These two provisions have in the
1434
past contributed to the Government's efforts to help to preserve the national heritage. But, as the noble Baroness will be aware, the Expenditure Committee in another place has published a report on the National Land Fund and the heritage. The Government are considering its recommendations and criticisms, and will be responding to them.
Baroness EMMET of AMBERLEY: My Lords, while thanking the noble Baroness for that reply, may I draw her attention to pages 136–7 of the report of the Land Fund, where it says this:
"Some great national treasures have left the country and many great collections which should have been preserved intact have been broken up".
On the other page it says this:
"The reviewing committee believe that the combination of the capital transfer tax and the proposed annual wealth tax, in the form now suggested, will lead to a flood of sales which can only destroy the present system".
Perhaps the noble Baroness will realise that I am not asking for more money but for relief of taxation, in particular for the people who own these treasures and who are placed in an impossible position at the present moment.
Baroness BIRK: My Lords, this is something of which the Government and my colleagues in the Treasury are aware. I would say that is a different Question from the one which the noble Baroness is asking.
Lord ROBBINS: My Lords, is the noble Baroness aware that those of us who had the good fortune to be intimately connected with the late Lord Dalton are convinced that the interpretations which have since been placed on his ambitions by Ministers of both Parties represent a travesty of his intentions?
Baroness BIRK: My Lords, I would certainly agree that the way in which this has been implemented is very far from the intention of Lord Dalton. What happened was that his intention appeared in quite a different form in the Finance Act 1946. It is not only a question of going back through that history. It is because we want to conserve our heritage—which is what, I think, we are all in agreement about—that the Government are considering very seriously, and in depth, the recommendations of the sub-committee.
Lord REIGATE: My Lords, is it not a fact that there has been another committee set up by, I think, the noble Baroness, and which is chaired by the Treasury, which is considering this whole matter? Can we be assured that that report will be published, and can we know when it is likely to be before us?
Baroness BIRK: My Lords, I can certainly give no undertaking as to whether the report will be published or when, because that report is also being considered by the Government. As I think the noble Lord is aware, it is an inter-departmental committee report and, again, it depends on my colleagues deciding collectively what to do about it. But it is being looked at at the moment, in conjunction with the sub-committee's report.
Lord DAVIES of LEEK: My Lords, is my noble friend aware that some of us believe that the original intentions behind the National Land Fund are being thwarted? Also, can she say whether there will be an opportunity before the Recess to discuss this problem, because I am sure that from both sides of the House some constructive and valuable suggestions could be made about this Fund?
Baroness BIRK: My Lords, if I remember rightly, my noble friend raised the first part of his question when I was replying to the Question put by the noble Lord, Lord Sandys, a week or so ago. It is something which I have specifically passed on to my colleagues in the Treasury. But, of course, the question of discussing it depends on going through the usual channels in the House, though it may be wiser to wait for a Statement from the Government.
Lord GIBSON: My Lords, can the noble Baroness indicate whether the Government would allow the Fund to be used for endowment for maintenance purposes of historic buildings, instead of merely for annual maintenance grants as in the past?
Baroness BIRK: My Lords, this is one of the recommendations of the sub-committee and, again, I am afraid that I have to give the same reply, that this is under consideration with all the other recommendations.
Lord SANDYS: My Lords, will the Government at the same time consider very carefully the lessons which should have been learned from the Mentmore incident, in regard to the National Land Fund? Will the Government further consider the republication of the Gowers Report, which, the noble Baroness will recollect, was originally published about 1950, shortly after the Land Fund was brought into being?
Baroness BIRK: My Lords, to the best of my knowledge the Gowers Report is still obtainable. I do not think that it has to be republished. If there is any difficulty in getting it, I shall be grateful if the noble Lord will let me know. I am sorry, but I missed the first part of his question.
Lord SANDYS: My Lords, the Gowers Report is not available and I ask the Government to investigate the position, because it had to be reprinted in very small numbers about a year ago.
Lord SEGAL: My Lords, perhaps my noble friend will correct me on a point of accuracy. But is it not a regrettable fact that the late Mr. Hugh Dalton was not ennobled during his lifetime?

CPRS REVIEW OF OVERSEAS REPRESENTATION
2.55 p.m.
Lord BALLANTRAE: 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 their final decision will be made known concerning the recommendations made in the Review of Overseas Representation submitted by the Central Policy Review Staff in August 1977.
Lord GORONWY-ROBERTS: My Lords, it is the firm intention of the Government to publish their conclusions as soon as is practically possible.
Lord BALLANTRAE: My Lords, I thank the Minister for that illuminating reply, but may I ask him to comment on

1437
the fact that it is now 11 months since the review was published, eight months since he gave a welcome undertaking in this House that it would be commented on as soon as possible, and something like 18 months since the people in the three services concerned began to have reasonable fears about their future careers? Will the Minister also comment on the viewpoint that, while we all accept that the wheels of God grind slowly, that should not be taken by Government as a precedent for any Government action or inaction?
Lord GORONWY-ROBERTS: My Lords, it is, after all, a massive, wide-ranging report and we are hoping to come to decisions which will stand us in good stead for a considerable period to come. The noble Lord and others have rightly pointed out the uncertainty that arises on these occasions. We want to try to get it right this time, so that we do not have to pull the services up by the roots after a few years, but possibly create a system which will last for considerably longer than has proved to be the case after previous reports.
Lord CAMPBELL of CROY: My Lords, can the noble Lord not say more today, in order to reassure in the meantime those working in the British Council and the Overseas Information Services, especially in the United States, that they will not be dismissed before a final decision?
Lord GORONWY-ROBERTS: My Lords, I could not anticipate the terms of the White Paper. I can only repeat that it will be published, I hope quite soon, but certainly as soon as it is ready, and it is in a very far stage of preparation at the moment. I can certainly assure the noble Lord that the points he has raised have been given very considerable weight in the preparation of the White Paper.
Baroness VICKERS: My Lords, may I ask the noble Lord whether he realises that quite a lot of young people, men and women, are not opting to go into the Diplomatic Service or the Foreign Service, because they have no idea whether or not they will have a career? This is
1438
very unsettling for many who are now leaving the universities, and who would have liked to go into the services had they known what the future was to be.
Lord GORONWY-ROBERTS: Precisely, my Lords. I think that the noble Baroness joins the noble Lord, Lord Ballantrae, in the point that he made. It is time that we had a wide-ranging inquiry, which will result in a system which, subject to future internal adjustments—which, anywhere, are always being done—will stand us in good stead for a somewhat longer period than has proved to be the case in regard to previous inquiries.

CITIZEN BAND RADIO: PUBLIC AVAILABILITY
2.58 p.m.
Lord TANLAW: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will accept a recommendation of the National Electronics Council to improve public communications by allowing individuals access to the radio spectrum for A to B communication.
Lord WELLS-PESTELL: No, my Lords. We have given careful consideration to the report of the National Electronics Council on citizens band radio, but remain of the view that the advantages of introducing such a service would be outweighed by the disadvantages.
Lord TANLAW: My Lords, I thank the noble Lord the Minister for his reply. Has he conveniently overlooked the simple matter of physics, which is that the radio spectrum ignores all national boundaries and is governed only by the law of nature? If the noble Lord recognises this scientific fact, can he justify his reply, when there is no legal or constitutional basis for any nation State to claim a part or the whole of the magnetosphere, or to prevent an individual from having access to it? Will he then say why the United Kingdom is one of the few democracies outside the Communist

1439
bloc that has not allocated a frequency over which members of the public can communicate freely with one another? Finally, will he now confirm that it is still his Government's intention, as a matter of policy, not to provide the British public with a citizens band frequency?
Lord WELLS-PESTELL: My Lords, as I understand the position, it is the view of the Government not to provide citizens band radio for a whole variety of reasons, which, if I may say so with great respect, are far too many to go into at Question Time. The Government have taken advice and have looked at what has happened in other countries. There are many competing demands by the necessary users of radio, by mobile radio and by commercial industrial firms. There is also widespread evidence of abuse and misuse in countries that have this. Then there is the fact that it is almost impossible to effect control. If the noble Lord has read the issue of Radio Communication for July 1978, he will have seen that it includes an editorial from the March issue of Electronics Australia, in which these words appeared,
"Listen on the citizens band channels in almost any of our larger cities and you will discover what I mean by going on criticising it. You will hear everything from school kids swopping dirty yarns, to planning gang escapades, to prostitutes touting for business and, in the daily papers"—
it really is not funny, my Lords—
"stories of the abuse of citizens band radio are becoming more frequent. It seems possible that citizens band may even have played a key role in a recent murder".
The editorial goes on to say:
"In short, citizen band radio is becoming notorious, so much so that there is a growing backlash and many people are seriously suggesting that the authorities should reverse last year's decision and try to suppress it altogether".
America is experiencing this, and so also are other countries. We see no reason to introduce the possibility of that kind of thing here.
Lord TREFGARNE: My Lords, is the noble Lord aware that his answer will cause considerable disappointment? Is he further aware that it is possible to regulate the citizens band perfectly well and that this is done in many countries outside the United States, which I believe is the only country where there is unfettered use of the band? Is the noble Lord also
1440
aware that if a citizens band were to be introduced here it would bring forth a splendid industry to manufacture all the equipment for it, to the general advantage of all concerned?
Lord WELLS-PESTELL: My Lords, we would not accept what the noble Lord first said: that this can be controlled. It might be controlled in some measure but not in a satisfactory measure. I do not think one could argue—at least I hope we would not argue—that in order to produce an industry we should saddle ourselves with something that is very unacceptable.
Lord HAMNETT: My Lords, is the Minister aware of the conversational devastation caused in America on long-distance lorries by citizens radio?
Lord WELLS-PESTELL: My Lords, I could have given your Lordships a number of examples which would have justified the Government's action. I did not do so because this is merely a Question. However, I agree with what my noble friend has said.
Lord TANLAW: My Lords, is the noble Lord prepared to say that the examples which he gave do not take place over the telephone system?
Lord WELLS-PESTELL: My Lords, I do not think that the two are to be compared. I do not suggest that no improper conversations take place over telephones, but they take place between two people and are not necessarily heard by a large number of people.
Lord TORPHICHEN: My Lords, has the noble Lord considered the ill-effects on other alternative services of not allocating such a band? For instance, does the noble Lord think that it is wise that casual, would-be users of radio communications should be forced to use either the already overloaded Post Office radio telephone network or, worse, to misuse the amateur frequencies?
Lord WELLS-PESTELL: My Lords, I tried to make it perfectly clear at the beginning that the Government have to make a choice as to whether this is desirable or undesirable. They have studied very carefully citizens band radio

1441
in other countries and have come to the conclusion that the advantages are more than outweighed by the disadvantages.

IRON AND STEEL (AMENDMENT) BILL
3.4 p.m.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): My Lords, I beg to move that this Bill be now read a second time. We come today to debate a Bill to raise the statutory limit on the amount of external finance which the British Steel Corporation and its wholly-owned subsidiaries can raise by borrowing. The Bill follows on the Government's White Paper British Steel Corporation: the Road to Viability, published in March 1978.
We need this Bill to carry out the Government's commitment to retain in Britain a substantial bulk steelmaking capacity to underpin our wider industrial strategy. We shall take all the steps that are sensible and appropriate to restore BSC to viability, but we shall do so in an orderly way. By this, I mean we shall avoid unnecessary disruption of the business, we shall pay full regard to the proper interests of customers and suppliers, and we shall reduce to the minimum the social hardships inevitably involved.
When the borrowing limit was increased in July of last year, my right honourable friend the Minister of State for Industry said in another place that the limit then fixed should carry the Corporation through until Spring 1979. At the beginning of April 1978, BSC's borrowings, counting against the limit, were £3,043·5 million; this amount, together with the estimated external financing requirement of £875 million in 1978–79, suggests that my right honourable friend's estimate was about right. As announced in the White Paper, we now need to carry the Corporation through until present uncertainties in the steel market have been overcome sufficiently to determine the precise size and nature of the reconstruction needed to produce a viable, long-term capital structure.
Noble Lords may ask when the capital reconstruction will be undertaken, and I
1442
cannot give them a firm timetable. We must wait until the present uncertainties are resolved, and we can be sure that the market has stabilised and is picking up. The extended borrowing powers we are discussing today are designed to cover BSC's needs for up to three years. We need only look across the Channel to see what would happen if the reconstruction were attempted prematurely. In France only a year ago a major reconstruction of the finances of the major steel companies took place. However, the continuing world-wide steel recession has undermined this effort and the French Government is now studying further measures that need to be taken. Reconstructions are now being planned in Belgium and Italy.
As explained in the White Paper, we intend to finance BSC by subscription of capital under Section 18(1) of the Iron and Steel Act 1975. The Government have no intention of writing off any of the capital subscribed from the beginning of this financial year. All the new capital subscribed under Section 18 as from 1st April this year will have to be properly remunerated by dividends once the reconstruction has taken place, although we do not expect any remuneration in advance of this, either in respect of advances under Section 18 now taking place or in respect of public dividend capital already on BSC's books. This is a realistic method of interim financing pending the reconstruction that we all recognise will be needed. At the present time, a substantial number of overseas steel companies are receiving finance in one form or another to tide them over the current crisis. Some companies in Europe and the USA are able to keep going only because their steel operations are subsidised by their other activities to an extent which is not open to BSC.
Given the depressed state of the steel market world-wide, your Lordships may wonder when the lean years will be over. I cannot predict that with any certainty. The pattern of trade in steel has been changing, and will continue to change to the disadvantage of traditional suppliers. The EEC's share of world steel production has fallen from 23 per cent. in 1969 to less than 19 per cent. in 1977, and the United States' share has come down from 22 per cent. to below 17 per cent. Increases

1443
in capacity in the developing countries and in Eastern Europe as well as Japan are resulting in severe over-capacity world-wide and intense import pressures. In the face of this, British Steel will be concentrating its efforts on improving quality and productivity.
To this end, apart from the completion of schemes already under way, investment will be directed to replacement, the balancing of primary and finishing facilities, quality improvement, cost reduction schemes and small schemes costing under £2 million. The major schemes at Ravens-craig and South Teesside will be completed at a total cost now estimated at nearly £1,000 million. These, together with the 11 meter blastfurnace at Llanwern, itself costing £100 million, will radically overhaul the Corporation's bulk iron and steel-making capabilities, more than covering likely demand until the mid-1980s.
Success with the Thrybergh bar mill and other developments in the Sheffield area is to be reinforced with continuous billet casting at Templeborough. Now that satisfactory commitments on manning have been given, the Corporation hopes to make an early start on the installation of continuous casting facilities at Port Talbot, subject to the financial evaluation of this project. This will make an important contribution to improving quality and retaining competitiveness in strip products, which is BSC's largest business area. Schemes under £2 million which are likely to cost over £350 million in the next two years, will play a particularly important part in cost reduction, in removing bottlenecks and in improving efficiency. The full responsibility within BSC for these schemes is now at divisional level, which means that the management of what is becoming a very important part of the investment programme has been decentralised.
The Corporation has provided a good deal of detailed information on investment plans in its booklet entitled Prospects for Steel, which was made available to those noble Lords with a particular interest in steel. The Corporation has gone to considerable lengths in this informative booklet to meet the needs of Parliament and I think we should be grateful to it for this. Sir Charles Villiers made another innovation this year by inviting noble Lords and those particularly
1444
concerned in another place with legislation on the iron and steel industry, to a special meeting to discuss BSC's annual report and accounts for 1977–78. That was done on publication day, 4th July.
The booklet Prospects for Steel stresses the need for capacity to move more into line with demand. Forecast levels of production up to 1982–83, ranging between 22·2 million and 16·1 million liquid tonnes, compared with a current effective manned capacity of about 22 million tonnes, plus another 5½ million coming on stream over the next few years, make it clear that there will be ample capability to meet any likely demand. Certainly new starts on building further capacity cannot now be justified. Neither BSC nor the country can afford to maintain surplus capacity in excess of reasonable expectations of future levels of demand, even in an upturn. It costs roughly £60 million a year to maintain 1 million tonnes of surplus capacity.
The Government's present view is that further rationalisation will be necessary in future, but the Government believe that this should be considered on a step-by-step approach which will retain flexibility to adapt to unexpected changes in the situation. The Government have agreed that the Corporation should seek to negotiate terms for the early closure of the high cost plants with the TUC steel committee and with the local work force concerned. Such consultations are not easy to carry through and require both the determination and goodwill of those concerned. The Government have made it clear to the Corporation that the negotiating procedures must be closely followed—there are no short cuts. But the British Steel Corporation must shed excess capacity in order to survive, and pressure to keep one works open can only increase the necessity of shutting another.
Your Lordships will be very much aware of the penalty which closures inflict on men who have developed their skills and shaped their lives to steel and who are situated in areas of high unemployment—unemployment which will be made worse by the steel closures. It is the aim of this Government to ensure that everything possible is done to provide alternative employment in the areas affected by steel-making closures. As such closures take

1445
place, we will bring forward measures designed to alleviate the local effects on employment, as we have now done in the cases of Hartlepool, Cardiff and Ebbw Vale. The temporary loss of rate income by local authorities seriously affected by closures will be taken into account. This will be compensated for by the extra resources element when the lower rateable value figures are used in the rate support grant calculations. There has been a certain amount of criticism of the level of redundancy payments offered to steel workers faced with losing their jobs. These settlements are in the Corporation's financial interest and reflect the very special problems of the steel closure areas.
Changes to the Corporation's fixed assets by the closure of obsolete plant and by re-equipment are only part of the picture. The Government are determined to see BSC restored to lasting viability, for which the achievement of competitive cost levels through improved performance is absolutely vital. We have declared our full, sustained and public support for BSC in its efforts, including the steps needed to achieve improved productivity through reduction in manning levels, more modern working practices and better use of raw materials and energy. The Corporation has set out in Prospects for Steel the actions it is taking in these areas. We place the greatest importance on progress through negotiated productivity agreements, which must bring an adequate return to the Corporation as well as to the workers concerned, and the sustained smooth operation of plant without interruption for either technical or industrial relations reasons. We expect total commitment by everyone in the Corporation workforce and management, to the objective of restored viability and its achievement.
We want the Corporation to be an efficient and fully competitive producer, but it has to be able to secure the revenues to sustain its operations. Customers need steel at competitive prices, but these prices must be realistic. It is in this context that we have been actively supporting the measures being taken by the EEC Commission to deal with the problems of large volumes of low-priced imports through agreements with supplying countries, and by setting minimum price levels within the Community for
1446
major categories of steel products covered by the Treaty of Paris. We are also encouraging the Commission to take full account of users' interests and to deal with any special problems with which particular groups of users are faced.
The step-by-step approach which the Corporation has adopted for dealing with its problems means that it must first of all concentrate on the policies to be followed and actions to be taken during the financial year 1978–79. The Corporation has projected, on certain stated assumptions, a loss of about £400 million for the year. Since Prospects for Steel was issued, Sir Charles Villiers has said:
"Nothing has got better and one or two assumptions connected with the market look to have got worse".
Nevertheless, management action is needed in close consultation with the TUC steel committee and local workforces to improve on the projected loss in every possible way. It is unacceptable for a nationalised industry to make losses of this magnitude, even though conditions are difficult and international competition is intense. The Government will be carefully monitoring the Corporation's performance and results as they come in. We expect a substantial improvement over the year resulting from action by management and unions. We believe such progress to be desirable if a rate of break-even is to be achieved by March 1980.
To turn more closely to the Bill, the immediate £750 million increase in the borrowing limit which is provided for in this Bill is required principally to finance a capital investment programme now proposed at £500 million for 1979–80 and—based on some recovery in steel demand—a substantial increase in working capital estimated at about £300 million in the same year. If a further increase is required later on, this will fall to be considered in another place under the terms of the Bill. The actual borrowings of the Corporation will be regulated by the annual system of cash limits and Section 18 advances will be made out of voted money. The great bulk of BSC's financial requirements will be met from this source. The Corporation will continue to make partly guaranteed and partly unguaranteed short-term borrowings for working capital purposes, which are subject to a current overall limit of

1447
£325 million. My Lords, in conclusion, the Bill is essential to provide a firm financial basis for the British Steel Corporation in the face of the exceptional uncertainties of the world market. We are determined to secure the future of the Corporation, and, to this end, I move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Lord McCluskey.)
3.20 p.m.
Viscount LONG: My Lords, first, may I thank the noble and learned Lord for the kind way in which he explained these new loans provided for in the Iron and Steel (Amendment) Bill. I can assure him and others of your Lordships that I do not feel the slightest bit happy at having to agree to it or in knowing that the steel industry is in such a terrible state at the moment. But I will try my best to sound happy even if I am not. Of course, if any of your Lordships have seen what is written in the Bill your minds must be quite boggled with the enormous amount of money that is now having to be put up to save the steel industry as a whole. The fact remains that, unless we do it now, the whole of industry, not just the iron and steel industry, could possibly collapse, because all our industry bases its materials and its workings on the steel industry. So we are really virtually committed before we start.
I was interested to read in the Explanatory Memorandum to the Bill that:
"Borrowings by the Corporation against the statutory limit at 1st April 1978 are estimated to be £3,070 million and it is expected that the increased limits … will cover the Corporation's financing needs for about another three years".
And yet I have been listening to the noble and learned Lord with a great many doubts in his mind as to what the future really holds. I wonder, therefore, whether the Government have really done their sums right. I wonder whether three years is a safe period to deal with even in the Memorandum, and whether we should be looking much further ahead. I will try to show some of the problems, and your Lordships might well think that three years is definitely not the timing.
Before I go any further, I think it is justifiable to pay a tribute to the Iron and Steel Corporation, even though it has had difficulties. We have employed some
1448
of the finest craftsmen in the world in the iron and steel industry, and many of those men have gone abroad and taught other nations how to produce iron and steel and run foundries. Therefore, the industry have been extremely lucky with manpower. Equally they have always been able to produce a high quality steel, which up to the present has always been in great demand throughout the world. And, thirdly, they have always been a proud industry. The industry employs something like 168,000 people, and during this debate we might well ponder in our minds that some of these people might be in trouble during the reorganisation of the steel industry.
Last year—that is, to 1st April 1978—the industry made a loss of over £400 million. The annual report stated certain reasons why and how some of this deficit was incurred. I should like to describe a few of them now. The first reason stated in the report—this is one of the many problems—is the growing world surplus of steel capacity, leading to highly competitive conditions and a continuing high level of imports into the domestic market; second, an extremely low level of operation during the year, with high losses because of under-utilisation of capacity; third, continuation of a high cost base with too much old and overmanned plant; fourth, weaker selling prices arising from low demand, and yet steadily rising costs as a result of inflation; fifth, an interest charge of no less than £197 million, much of it for plant still under construction; sixth, some costly industrial disputes. My Lords, those are what the report explains as the deficiencies and problems.
I wonder whether we cannot add one or two more to the difficulties that the industry has had to bear. I wonder whether the Government should not have stepped in sooner. There has been the difficulty the industry has had with all the leaks that have come about, the Press reports. Those in themselves demoralise those who are trying to run the industry. Of course, the Government have found themselves falling between the two stools of ordering the industry immediately to reorganise itself, or leaving it and going for the Election without creating any problems within the industry or within the unions. They have partly gone one way—that is, making the industry reorganise itself—but not, I believe, fast

1449
enough. I would also say that not only would this present Government, when in power, be faced with the problem of the steel industry; any other Government would also have to act in the same conditions. A collapse of the steel industry, as I said just now, would certainly bring chaos to the whole of industry throughout this country. So any Government would have responsibility for keeping the industry going. The Government must act and act now to make sure of continuing progress for the future of the steel industry.
After losing £450 million last year it is claimed in the report that next year will see the Corporation breaking even. I am not at all certain about that; I am extremely doubtful. Time is almost running out. I see the Minister hoping for the best, that things will improve. I almost see him at the table with cherry stones on the plate in front of him, saying, "This year, next year, some time, never". I can see the problems he has there. Nevertheless, he has moved slightly forward in trying to get the steel industry to reorganise itself. In spite of that loss we still have construction schemes going ahead. There are two major schemes of £1,000 million each: one at Ravenscraig and the other at South Teesside. I believe the Minister in the other place, when debating this Bill, mentioned yet another plant that will have to be reorganised. I cannot mention it because I believe he withdrew, but there is doubt about that other plant.
Notwithstanding the cost of all these constructions and reorganisations that are bound to come about, we are faced with yet another problem, which is competition from the outside world. In past years we have been selling steel plants and expertise to other countries in the Third World—for example, to the smaller countries of Korea and Thailand. Now they can produce cheaper steel than we can simply because they have cheaper labour. Therefore, the Steel Corporation of the United Kingdom is faced with vast competition. It says in the Bill that these loans might help the Corporation's needs for finance over the next three years, but I still doubt whether three years is anywhere near the mark.
My remarks have been somewhat depressing, but I said at the outset that
1450
I was not happy and that I could not find any optimism. However, there must be something that we can do. I think that the Government must ensure that the Steel Corporation reorganises itself now and not just when it is given the money. It must go ahead and deal with the situation as soon as possible. I am aware that that will hurt some people and that the reorganisation of plant will probably mean a loss of jobs. That is the agony of the situation. I made reference just now to the over-manning of plant which must keep the costs up. Therefore, someone who is affected will, unfortunately, either have to go into a new factory or be rehabilitated somewhere in a different industry.
If these loans are used correctly and the Government and the Steel Corporation get down to the reorganisation, I believe that in a few years' time we shall probably witness—I certainly hope that I shall do so because I do not like to sound depressing as regards such an important industry—a new light coming through the tunnel; that the industry will begin to make its way with progress and profitability; that those who are employed in it will be happy, and that it will go from strength to strength.
Lord ROCHESTER: My Lords, before the noble and learned Lord replies to the debate I should like, with the leave of the House, to ask him one question which arises out of what he was saying regarding redundancy payments. Are the Government satisfied that the level of redundancy payments now being made in the steel industry will not prove excessively high in relation to similar payments that can be made in industries that are not subsidised by the taxpayer?
3.32 p.m.
Lord McCLUSKEY: My Lords, in replying to what has been said I should first like to thank the noble Viscount, Lord Long, for his generosity in acknowledging publicly the necessity for the Bill. That comes from him with good grace because I know that in another place the Bill was, of course, more severely criticised at this particular stage. However, now that it has arrived here I think that it is very fair of the noble Viscount to acknowledge its necessity and, indeed, to acknowledge that any Government, whatever its political

1451
complexion, would have to act upon the same conditions and face the same kind of problems and, at least in the short term, would have to approach the problem in very much the same way.
The noble Viscount suggested to me that perhaps the period which was taken into account in the Bill—the period of three years—might be too short. There are a number of points that I should seek to make in reply to that suggestion. In previous years, the British Steel Corporation has provided five-year cash flow forecasts annually on a roll-forward basis as part of its medium term plan. However, with the present uncertainties over steel, little reliability can be attached to forecasts so far ahead, so the Department is not currently looking at such forecasts. If your Lordships look at Prospects for Steel, you will see that there the British Steel Corporation indicated that realistic general indications of the financial outlook could hardly be provided for more than two years ahead—indeed, the Bill looks at such a period. When uncertainties have been sufficiently overcome for the Government to consider the precise size and nature of the reconstruction needed to produce a viable, long term capital structure for the Corporation, we shall have to look at a five year horizon and further ahead if possible. But there is no point in undertaking a reconstruction until we can be reasonably sure that it will be successful—I return to the point of the example of what happened so recently in France.
Indeed, if one goes back to 1973, at that particular time long term strategic plans were drawn up for the British Steel industry and they were very much falsified by events which were, quite naturally, not foreseen at that time. So, at present, one sees a relatively short term ahead and it is unwise, in the Government's view, to attempt to plan for any longer period than that envisaged by the Bill. It is hoped that within that period we can embark upon the necessary reconstruction—I say "necessary" because everyone is agreed that it is necessary.
The noble Viscount criticised the Government. He suggested that they should have stepped in sooner. Of course, the Government have been monitoring very closely and taking a very close interest in the steel industry for a number
1452
of years, and one would acknowledge that not all initiatives have, in fact, been successful. But your Lordships will recall the Beswick Plan and the publication of the White Paper earlier, and this Bill really follows upon that White Paper. Had the Government stepped in earlier the climate would have been no more certain, and it was not necessary to step in in these terms until the present time.
With regard to the leaks which the noble Viscount mentioned, no doubt there have been some leaks, but I do not think that these affect the substantial factors that have an effect upon demand for steel, the capacity to produce it and the long term problems of the industry. He also suggested that the Government ought to step in, as it were, now and that the reorganisation ought to proceed now. I can only revert to what I said when replying earlier to what the noble Viscount said—namely, that, in fact, the Government are endeavouring to face the difficulties in an uncertain climate and it would be wrong to attempt prematurely to reconstruct the industry.
The noble Lord, Lord Rochester, asked me a question about the level of redundancy payments Of course, one does find different levels of redundancy payment in different situations. There are the payments which are made normally under the Acts, and your Lordships have recently considered as regards shipbuilding other schemes for redundancy payment. Indeed, schemes have now been put forward and no doubt your Lordships will consider them in the reasonably near future.
It is very difficult to say that a particular scheme sets a precedent which others may not seek to follow. Plainly, they will attempt to do so. However, what the Government attempt to do and what the nationalised employers attempt to do in this kind of situation is to look particularly at the local conditions; at the earnings of those in the industry; at the prospects for the industry itself in that area; at the prospects for employment in the same area, and tragically it so happens that in, for example, shipbuilding and steel-making the redundancies tend to occur in the very areas where the prospects of re-employment are not good. So, the Government endeavour to look at each case on its merits and so do the nationalised employers.

1453
I do not think that I can go further in answer to the noble Lord, Lord Rochester, than to say that it is to be hoped that, if one faces such large scale redundancies in areas which are already affected by substantial and unduly high unemployment, each case will be considered upon its proper merits.
I should like to return to some words of the noble Viscount, Lord Long, who said that intervention by the Government may hurt some people. Of course, it will inevitably hurt some people. But people are only prepared to be hurt to a certain degree and ultimately, if the Government attempt to ride roughshod over the interests of the workforce—some even with assistance perhaps from national trade union leaders—such attempts will simply not succeed. Accordingly, one must proceed with the assistance, advice and co-operation of the local work force as well as the national trade union leaders. So, it is not a question of hurting people, but of recognising that in this kind of situation people are bound to be hurt. The Government's responsibility, like that of the Corporation, is to endeavour to ensure that that hurt is eased as much as possible. I hope that in the light of that the redundancy payments which have been made here will not be seen to be undue.
On Question, Bill read 2a; Committee negatived.

HOUSE OF COMMONS (ADMINISTRATION) BILL
3.40 p.m.
Lord PEART: My Lords, I beg to move that this Bill be now read a second time. I shall not take long over this as it is a matter for another place, but I thought that I would explain, quickly and shortly, what the Bill does.
The general purpose of the measure before us is to establish a new statutory framework for the staffing and administrative arrangements of the other place. The new House of Commons Commission, which it would establish, will supersede the present Commission established under the 1812 House of Commons Offices Act. Under the chairmanship of the Speaker the Commission is to become the single
1454
statutory employer of staff in the Departments of the House of Commons. Within the enabling provisions of the Bill, an administrative framework will be established for the development of a unified House of Commons Service.
The Bill follows recommendations made in 1975 by a Speaker's Committee under the chairmanship of Mr. Arthur Bottomley. This Committee had been asked to examine the recommendations made by Sir Edmund Compton for the reorganisation of the structure of the services and Departments of the House. It had been felt that there was a need to bring the several Departments together into a more unified structure, and so to provide the means for a more co-ordinated and flexible staffing policy. The legislation has been confined to the minimum necessary to establish the new Commission, and to enable it to consider the more detailed proposals made in the report.
I should like to turn to look quickly at some of the clauses. Clause 1 provides for the establishment and membership of the new Commission. It will have six members: the Speaker, as chairman; the Leader of the House of Commons; a Member nominated by the Opposition; and three other non-ministerial Members of the House of Commons. Clause 2 defines in general terms the Commission's functions and its responsibilities with regard to staff. Clause 3 provides, inter alia, that the Commission will in future be responsible, instead of a Treasury Minister, for presenting annual Estimates in respect of the expenses of the Departments of the House of Commons.
Clause 4 defines what is meant by "House Departments" in the Bill, and provides for the possible application of provisions in the Bill to staff, such as refreshment staff, who are employed in the House but who are not members of a House Department. Schedule 1 deals with a number of detailed matters regarding the membership and procedure of the Commission. Schedule 2 is primarily concerned with the application of employment legislation to House of Commons staff.
I referred earlier to the provision in Clause 3 of the Bill that the new Commission will become responsible for the presentation of the Estimates for the

1455
expenses of House Departments. The Parliamentary Secretary to the Privy Council Office undertook during the Report stage of this Bill in another place that a Statement would be made by the Government at a later stage to explain the significance of this.
At present the whole House of Commons Estimates are presented by a Treasury Minister. Under the provisions of the Bill, that part of the present House of Commons Estimates which covers Members' pay, allowances and pensions will be presented by a Treasury Minister as at present, but it will be the new House of Commons Commission, and not a Treasury Minister, that will be responsible, from 1979–80 onwards, for the preparation and laying before the House of Commons of that part of the present Estimate which relates to the expenses of House Departments and certain other expenses. Broadly speaking, these are staffing costs. But it is also provided that, at the Commission's discretion, this Estimate could in future cover
"any other expenses incurred for the service of the House of Commons".
It could, for example, cover items on the existing House of Commons Vote—for example, certain Refreshment Department costs—or additional matters such as House printing expenses if the Commission so decided.
Apart from this change the Estimate will not be dealt with in any special way. This Estimate will continue to be presented by command of Her Majesty. The name of a member of the House of Commons Commission will, however, replace that of the Chief Secretary to the Treasury on the presentation slip sent to the Public Bill Office of the House of Commons. The expenditure will still require the authorisation of the House of Commons in an appropriate Supply Resolution and in the ensuing Consolidated Fund Bill.
It is intended that the present procedure, whereby increases in House expenditure which would involve a grant or charge on the public revenue cannot be proposed without the agreement of Ministers, who will, of course, have regard to the public expenditure implications, will remain unchanged. House of Commons expenditure will continue to count as public expenditure within the framework of the Public Expenditure Survey. This provision
1456
in the Bill, which was initiated by Treasury Ministers, does nevertheless represent a step in the direction of greater independence for the House of Commons over its own affairs.
This Bill deals solely with staff in the House of Commons. It has nothing to do with the staff of this House. This House is entirely autonomous in this matter, and while I am sure the results of this legislation will be followed by those responsible here with great interest, there is no link between the two Houses in this respect. We have, of course, had our own inquiries here recently.
I hope that this Bill will be accepted on all sides here as uncontroversial and as being concerned with another place. While recognising that the Bill is not directly concerned with your Lordships' House, I would hope nevertheless that its aims will commend themselves to your Lordships. It is the Government's aim in this legislation to foster co-ordination of Departmental services in the House of Commons; to provide the framework for a unified staffing policy; and to assist in the development at all levels of proper staff consultative procedures. In so far as these developments will, I believe, conduce to the maintenance and improvement of the services of the other House, they will serve to promote the efficiency and good staff working relationships of Parliament as a whole. As such I commend the Bill to this House. My Lords, I beg to move.
Moved, That the Bill be now read 2a—(Lord Peart.)
3.46 p.m.
Lord CARRINGTON: My Lords, the House is grateful to the Leader of the House for explaining the provisions of this Bill. However, I do not think that it is either delicate or necessary for this House to concern itself with what goes on in the House of Commons. If the House of Commons wants to arrange its affairs like that, I should imagine that it is all right with your Lordships. We arrange our affairs differently. All I would say is that if there should ever be need for a Bill of such a character to be moved for reasons concerning this House, your Lordships will expect from the other place—though not, I think, with much

1457
confidence—the same restraint as I have shown this afternoon.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

LAND DRAINAGE (SCOTLAND) AMENDMENT ORDER 1978
3.48 p.m.
The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill)The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill) rose to move, That the draft Land Drainage (Scotland) Amendment Order 1978, laid before the House on 22nd June, be approved. The noble Lord said: My Lords, the purpose of this order is to revise to present value the maximum cost per hectare which may be specified in a draft improvement order if the Secretary of State is to make the order without the agreement of all the owners involved but with the agreement of a majority liable to bear more than half the cost of the improvement. The proposed amendment would re-establish the degree of balance between the majority and minority interests of these owners, as created under the original legislative provision, and is submitted in fulfilment of an undertaking given by the Government earlier this year that this cost figure would be reviewed.
The review, now completed, is based on the rise in the tender price index for drainage works since 1965. It indicates that the present £100 per hectare figure is now significantly out of line with present costs and should be revised to £325 per hectare so as to restore the effectiveness of the original legislation. The Scottish Land Owners' Federation and the National Farmers' Union of Scotland have been consulted and are agreeable to this revision. I beg to move.
Moved, That the draft Land Drainage (Scotland) Amendment Order 1978, laid before the House on 22nd June, be approved.—(Lord Kirkhill.)
Lord CAMPBELL of CROY: My Lords, we are grateful to the noble Lord, Lord Kirkhill, for explaining the purpose of this order and I, personally, do not see any objection to it. I am sure that noble Lords will give it their blessing.
On Question, Motion agreed to.

COMMUNITY SERVICE BY OFFENDERS (SCOTLAND) BILL
3.50 p.m.
Lord KIRKHILL: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, that the House do now resolve itself into Committee.—(Lord Kirkhill.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Baroness WOOTTON of ABINGER in the Chair.]
Clause 1 agreed to.
Clause 2 [Further provisions about community service orders]:
The Earl of MANSFIELD The Earl of MANSFIELD moved Amendment No. 1:
Page 2, line 45, at end insert ("and, where appropriate the particular days or times of day when the work is to be performed").
The noble Earl said: The Second Reading debate on this Bill was somewhat short. That was in part due, no doubt, to the fact that it is a short Bill and the principles of the Bill were agreed on all sides of your Lordships' House. A second consideration was that the hour was late. Whether in fact the House wanted to get on to other business, or I wanted to catch a night train to Scotland, I do not now recollect. Be that as it may, the debate was short, although interesting.
I regret that the noble Viscount, Lord Thurso, is not in his place—and in fact the Liberals seem to be entirely absent. I say that because what I want to discuss with your Lordships in this short Committee stage is really the philosophy behind part of this Bill and what it is likely to do for criminal justice in Scotland, and much more especially how it can be used to help offenders who otherwise would go to prison.
Why I regret that the noble Viscount, Lord Thurso, is not in his place is that when I made my comments about the Bill in general I said that to me the concept of making the punishment fit the crime

1459
was thoroughly meritorious. I could see nothing better. Of course I was only echoing, probably less eloquently, what the Under-Secretary said in another place when he came to the consideration of the principle of the Bill on 9th May in the Scottish Grand Committee. In paragraph 1, no less, he said:
"As an alternative to imprisonment, community service has indeed much to recommend it. It can be more constructive and more rehabilitative than a short prison sentence, and overall likely to prove cheaper. It offers both reparation to the community and punishment to fit the crime."
I think that nobody would quarrel with those sentiments.
The noble Viscount, Lord Thurso, in a way, did. He said that he would prefer to make the punishment fit the offender rather than the crime. That point of view was echoed by the noble Lord, Lord Kirkhill, when he replied to the debate. Of course I say to that, ça va sans dire; one cannot sentence people unless the sentence fits the offender, otherwise it is a gross miscarriage of justice. It cannot be anything else. So, in all our discussions, let us bear that in mind, and let us have in the forefront of our minds that unless a sentence fits the offender it is an improper sentence.
In the first Amendment—I shall come back to this in discussing other Amendments—what I am trying to do is to make for the maximum flexibility and the maximum harmony as between the sheriff, or the district justice who passes the sentence, and the social work department who have to provide, as it were, the work to be done and supervise its carrying out. The other place debated these matters extensively if not logically, as is their wont, and I do not believe that they paid sufficient regard to these points. It may well be that a sheriff who sentences somebody to a term of hours unpaid work may, as a professional, be completely au fait with what the social work department is doing, and the advantages, or disadvantages, of such an order in his particular part of the world. A justice of a district court is not in that happy position. He will not be nearly so close to the social work department and he will have less idea of what is going on.
The district courts, which I regard as a bold and imaginative experiment in Scotland, are sadly not being used as they
1460
should, but that is something which those of us who are keen to form an association of justices in Scotland hope to put right over the years. But I feel very strongly that the justices and indeed the sheriff should be part of the decision-making machinery as it affects these community service orders. Putting it another way, I think it would be wrong, and I think the experiment would get off to an unfortunate start and be much less likely to succeed, if the court is regarded as a judicial sausage machine which presses the community service order button and thereafter has no further part in the matter, and that the social work department will thereafter take charge and everything will be under its aegis.
I have spent a little time on this, because it is the theme of the Amendments I have drafted. What Amendment No. 1 says—and it is simple—is that the court shall be entitled, where appropriate, to fix the days or the times of day when the work is to be performed which is the subject of the community service order. Just think of this: the sort of people who, I hope, will be the subject of these orders are people who would normally go to prison, and that is the whole theme of the Bill. Clause 1 makes that plain. It is not an alternative to a fine; it is not a soft option for some other punishment—not that there are very many in Scotland; it is an alternative to imprisonment. It is the sort of sentence which many of us who have a part to play in Scotland have been longing to see applied for some time. I am thinking—perhaps for the record—of vandals or football hooligans, or people who drive their motor cars thoroughly badly.
What I am asking for is that the judge—rather than having to keep on saying "sheriff" or "justice"—should be able to say: "All right, you went to this football match and made a thorough nuisance of yourself. I am going to see to it that for the next three or four months instead of spending your Saturday afternoon agreeably on the terraces you will in fact carry out unpaid work". I anticipate that the reaction of judges to this legislation will depend in no small part on whether they think that it will have the effect that they want. If they think that these community service orders are merely a soft option to prison and that the defendant or the accused will go away

1461
and merely be allowed to work off his orders at a time when it is purely suitable and convenient for the social work department, then I anticipate that the whole system will fall into disrespect, as I said at Second Reading in derision, and I do not think that these orders will be made.
I know that the philosophy of the Government is to do just what I have said that I do not think should be done, and that the judge should be the button presser and the social work department should thereafter take over. I think that that is an unfortunate way of dealing with it. I think that in a limited way, as my Amendment implies, the judge should be able to say what he wants done and should be able, as it were, to invite the social work department to help him in that task.
I would not anticipate such an order ever being made on the first appearance of an accused person in court. I anticipate the judge continuing the case to see, first of all, whether the offender is suitable for such work and, more especially, whether the various conditions in Clause 1(2) can be fulfilled; if they cannot then the case goes no further. But if they can, when the offender next appears before the judge he can ask whether he is willing to be made the subject of such an order and make the order accordingly.
Lord KIRKHILL: I welcome what I judge by the noble Earl's remarks to be broad agreement in principle with the overall tenor of the Bill. He has an emphasis on certain points in the Bill which does not accord with the Government's view, but on Second Reading and again today he has indicated that the measure is welcome and should command, as I believe it does, fairly general support.
As he said, the Amendment would give the courts power to lay down the particular days and times of day at which the offender is required to undertake his community service. The power would be exercisable in all cases, although the court is, in effect, invited only to use it in appropriate cases. However, it is normal for the courts to be involved only in the passing of a sentence—deciding on the type of punishment and then its weight; for example, fixing the length of imprisonment, fixing the amount of the fine or, in
1462
the present case, the number of hours of community service. The Amendment would mean the courts' becoming involved in the detailed implementation of the sentence in a way which the Government regard as out of keeping with the courts' traditional role of sentencing.
The Earl of MANSFIELD: I invite the noble Lord to deal with one bit of logic there. Would he not agree that there is all the difference in the world between an order which, in effect, deprives somebody of his liberty and an order which is positive and which says, "You will perform work although you remain at liberty"? Does he not see that distinction?
Lord KIRKHILL: If the noble Earl will bear with me I will explain why the Government do not quite take that point. The punishment is, of course, the fact of having to do a fixed number of hours' work in one's own time; the precise nature and timetable of the work is subsidiary—this is where the Government do not accept the noble Earl's position—and, as such, a matter outwith the scope of the courts. Moreover, even if there were no objections in principle to the courts' involvement in the carrying out of the sentence, there are strong practical objections. Those constitute, in my mind, the nub of the argument against the clause, and again this is where the Government do not agree with the noble Earl. The courts do not possess the necessary detailed knowledge of the nature of the work available for offenders to carry out; nor do they know when the work is likely to be available. Especially, they cannot know what work will be available, say, six or nine months, or even a year ahead, and noble Lords will recall that the duration of a community service order is one year.
The Bill gives the local authority officer supervising the offender the power to specify the times at which the offender is to carry out his work and places the offender under an obligation to perform the work at those times; Clause 3(1)(b) gives effect to that. There is, thus, no question of the offender being able to suit himself. Failure to comply with the local authority officer's instructions would constitute a breach of the order and lay the offender open to action under

1463
Clause 4. The local authority officer is in the best position to judge what work the offender should carry out and he must bear in mind the work which is available, the times at which it is available and the character of the offender.
That is not to say the court cannot have any role in reaching a decision about when the offender should carry out the work. There is nothing to prevent the court, under the Bill as it stands, from recommending that the offender carry out the work on certain days of the week or at certain times; and I emphasise that. The local authority officer would, I am sure, pay very careful attention to any such comments by the court and would endeavour to meet the recommendation if that were at all possible. Such an arrangement in the view of the Government is much preferable to the sort of rigidity which the Amendment would create.
The Earl of MANSFIELD: I find the complacency of the Government little short of staggering. First of all the noble Lord, Lord Kirkhill, says the courts will not know the nature of the work or when it will be available. My answer to that is: why not? If I were in the position of considering a community service order and if I did not know what the nature of the work was and when it would be available, I would not make one.
Lord KIRKHILL: I do not want to bob up and down but, as the noble Earl is aware, I pointed out that the order can last up to one year. That is surely the difficulty.
The Earl of MANSFIELD: Of course an order can, and the noble Lord need not apologise for bobbing up and down; we are in Committee and I will bob up and down like mad if I think the debate warrants it, because this is the time when we can do that. Let me explain what worries me. Consider the case of a youth aged 21 or 22 who misbehaves, and let us keep to the football match because it is an excellent example. To such a young man, the rest of the season deprived of the opportunity of following his team on the terraces will be a very real punishment in itself: to say to that young man in September or October, "You will not follow your team"—whatever
1464
the team may be; I will not go into names—"because on Saturday afternoons you will do community service; you will help look after old folk, sweep out the hospital and do something useful".
Is the noble Lord really saying it is Government policy not to give the court that opportunity?—bearing in mind that the sheriff is employed to be a judge, to use judgment, whereas a social worker, with great respect, is not; he uses judgment but it is not of the same type. Is the noble Lord really saying that the judge is expected to give 10, 20 or 40 hours' community service, whatever it may be—I bear in mind the minimum, which I have omitted—and say, "You will do 40 hours, which is equivalent to 20 Saturday afternoons, but I do not know whether it will in fact be Saturday afternoons and it may not Saturdays at all. Therefore I make that order"?
I do not want to labour the point. I get the uncomfortable suspicion that the object of the Government is twofold. The first is to minimise the discretion of those who sit in judicial authority, and that is a pity. My second suspicion, which is rather deep, is that the Government either have not really thought out the implications of the Bill—I said that on Second Reading—or they want to make the whole scheme at the discretion of the social work department.
I quite see that social workers themselves do not particularly want to supervise young rips on a Saturday afternoon, but if a scheme like this is to have any chance of success at all so far as the community is concerned, it must be imaginative, it must provide new ways of coping with our crime rate—and I shall come back to that in my final Amendment; but if it is just to be, as I have suggested, a sausage machine, it is doomed to hopelessness. The cleavage between the Government and me is complete on this question and I do not think it would be any good for me to invite the Government to go and think again on this matter. The noble Lord sits there looking like a sphinx—if I am not being offensive—
Lord ROBERTHALL: It happens that I have recently had experience of a case of community work—in England rather than in Scotland, but perhaps the experience will be relevant. In that case

1465
a young man with whom I was very closely associated had committed a serious offence and he was sentenced to community work. But before passing sentence the judge suspended the case and took enormous trouble to consult the social authorities concerned in the place where it was proposed that he should work so that, at least in that case, the judge did get a great deal of information which he thought he needed before finalising the sentence. I must add that when the person in question came to serve his sentence the social worker in charge of him took immense trouble to find out the sort of work that he would do and to fit the hours to the job which he was fortunate enough to get. I was immensely impressed by the great trouble that was taken on both sides and I am glad to say that the experience of community work, at least for several years now, has been entirely successful.
Lord KIRKHILL: The sphinx is on his feet, to say that of course the Government would not be able to accommodate this point, as was clear, I think, from my earlier remarks. The main difference between us, in the light of what the noble Earl has just said, is that the Government believe that flexibility should be the keynote of these community orders. The best way to achieve that kind of flexibility is as we lay it down in the Bill which is being considered in Committee by your Lordships at this time.
I do not believe it is always possible to say months ahead that which is most suitable for the offender to engage in. That is something which is best left to the officer who will be supervising his activities. It may well be, so far as the question of football hooliganism is concerned, that some indeed may revert to repairing their vandalism outside the ground while the match is in progress inside. Who knows? But I cannot consider that, because a court does not say that, such a provision will not in fact be effected.
The Earl of MANSFIELD: As I have said, I think the disagreement is complete. To say that a system is more flexible because the judge has less power—and we are talking about sentencing procedure—is what, when I was taught Greek, is called
1466
a para pros dokiens. But I shall leave the matter there. If the noble Lord thinks that a pious expression on the part of a judge as to the timing of the serving of a community service order will have any weight with the social work department, then I think he is deceiving himself or is being deceived. I feel cross about this matter because we have so little opportunity for penal legislation for Scotland that the greatest opportunity ought to be taken of it. But for the present I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.15 p.m.
The Earl of MANSFIELD The Earl of MANSFIELD moved Amendment No. 2:
Page 3, line 10, at end insert—
("(2A) Upon making a community service order the court shall have regard to the desirability of relating the work to the nature of the offence.").
The noble Earl said: This is the same theme but a different aria. The question arises as to whether a court should be empowered or even encouraged to express an opinion as to what sort of work should be the lot of the accused person who is made the subject of a community service order. At one end of the sentencing scale there are those, I am afraid, like myself, who would adopt the American system and, as I tried to say on Second Reading, if somebody drove thoroughly badly I think I would say, "You can go and spend your Saturday afternoons for the next few months cleaning out the casualty ward in the local hospital to see what happens to the victims of people such as yourself who have driven naughtily". I am afraid that that is not a view which commends itself to this Government.
At the other end you have the judge who is, as I say, just invited to press the community service button and does so, and then it is the social work department which finds the work for the person concerned, allocates it and presumably sees that he does it. But I want to ask the noble Lord: what is the feeling of the Government about the form of community service work that will be available in an area? For instance, will there be the equivalent of what I might call the "municipal chain gang" which will be detailed off to paint a large section of old folks' homes, some (to quote the trendy

1467
expression) "ongoing task" which will occupy all those who are the subject of community service orders (assuming that they are reasonably fit) for a long time; or is there to be a series of smaller jobs of a very different nature, some of them involving hard manual work and others, for instance, of a much lighter type, which would be divided among the offenders according to their ages, capabilities and health? Will the social work departments use imagination? In other words, when as I anticipate there is a remand period—if I may so call it—between conviction and sentence, will they set about trying to think up schemes or a scheme which will accommodate the particular offender?
These questions are not just beating the air, because I believe very strongly that the attitude of the judges will in no small measure depend on the type of work which is available and the sort of tasks which these people will be called upon to perform. In the courts of which I have experience these days, the types of offender whom one could see would be the subject of this type of order are very much at I might call the lower scale of criminals. They are people who are not wicked but are more or less incapable of leading their lives in a useful and honest way. As things stand, there is very little that can be done with them. They cannot hold down a job and they cannot pay a fine. They cannot be the subject of a probation order because there is nothing to which they can be directed so far as their future life is concerned. But it would be of immense help if they could be made the subject of these community service orders, always pre-supposing that at the time when the judge is minded to make the sentence there is suitable work.
I know that the noble Lord said that the judge could make some sort of pious declaration of what he hoped would happen, and I assume that besides the timing of the work it would extend also to the character of the work. For myself, as I have said, such sentiments on the part of a court would be worse than useless because if they cannot be carried out, or if the social work department is in disagreement with them, it merely takes away from the authority of the court. I should not think that they would be so used; and I should be interested to hear the noble Lord's reactions to my question.
4.20 p.m.
Lord KIRKHILL: I have some sympathy with the principle underlying the noble Earl's proposal. However, he will not be surprised to hear that I will not be supporting it. This is both because I believe it to be unnecessary and because, as I was emphasising earlier, it takes the courts into the area of detailed arrangements which, in the Government's view, is not appropriate to their role. It is unnecessary because there is nothing at the moment to prevent the court, when making a community service order, from indicating a preference for the type of work which the offender should perform, or the type of work which he might be capable of doing in a reasonable manner.
The noble Earl asked me specifically what kind of work might be involved. It could include working in community centres, youth clubs, or old people's homes, doing gardening or decorating, or perhaps helping to construct or repair adventure playgrounds. There has even been a suggestion that conservation work in graveyards might be undertaken. At any rate, the list is fairly comprehensive. I consider that in appropriate cases the court will indicate a view and that the local authority officer will heed any request that the court may make. The noble Earl is doubtful of the efficacy of that kind of request, and he and I must simply disagree about that. I believe that the local authority officer will not be unmindful of an indication of the court's view.
I know that it has been argued that if a provision such as this were not included in the Bill, community service would come to be regarded as a soft option and, as a consequence, social work departments would be exposed to criticism for leniency towards offenders. I take the view that it would not be a soft option, if only because the person upon whom the order would be served can spend up to 240 hours of his own time doing obligatory work—certainly of course by consent. I agree that it is one of the virtues of community service that it provides an opportunity to make the punishment fit the crime. The noble Earl gave earlier an example of the football hooligan repairing the results of his vandalism—
The Earl of MANSFIELD: I hope the noble Lord will forgive me for interrupting, but I said no such thing.
Lord KIRKHILL: Well, in that case I misunderstood. It was the vandal repairing the results of his vandalism—
The Earl of MANSFIELD: With respect to the noble Lord, I must say that he has become muddled up on this point. I spoke about football vandals not being allowed to go to football matches on Saturday afternoons. That was the argument which I advanced in respect of timing. As to the quality of the work, I suggested that a very naughty driver might well spend his free time in clearing up casualty departments of hospitals—not repairing football stadia, or anything like it.
Lord KIRKHILL: Of course, I apologise to the noble Earl. Nevertheless the point is valid, and we are arguing only on the top of a pinhead if we are disagreeing over what I am saying.
Much will depend on the nature of the work placements which will be available at the appropriate time. If we are to attempt to fit the punishment to the crime, we shall not always be entirely successful. I do not think that that is necessarily the whole point of community service provision. As I indicated earlier when the noble Viscount, Lord Thurso, spoke, I would see merit in relating the offender to the particular work of rehabilitation. Undoubtedly, there is the case where an offender does not have the skills to undertake a particular task which may seem appropriate—an example of a simple task might be repairing a broken fence—and he might have to be directed to some other job of which he is capable. It is in order to retain that kind of flexibility that the Government wish to sustain the Bill in its present form.
The Earl of MANSFIELD: I want to come back to the noble Lord on this matter because he has not really answered what I was trying to put over, and which no doubt I failed to do. For instance, he has not mentioned anything about voluntary societies. If much use is to be made of the orders by the courts, it is extremely important to bear in mind that those who sit in the courts will want to know that there is some point and purpose to this question other than merely statistically lowering the gaol intake. I asked the noble Lord whether voluntary organisations in a particular locality were to be
1470
invited, for instance, to submit schemes. I should have thought that that would be an excellent idea, though I can see difficulties of supervision. If that is the case—and this is what happens in England, and it is, I assume, what will happen in Scotland—how will the detailed monitoring of the offender's performance be carried out, and by whom will it be carried out?
As I said on Second Reading, it seems to me that if this scheme is to become general throughout Scotland, and if it is to be of use, it will need the allocation of very considerable resources for its implementation, and I do not think that those resources presently exist. It appears to me that by using voluntary organisations of one kind or another the Government and the community can achieve what they want to do in a very cheap, yet effective, way. The noble Lord is very coy about the kind of work involved—whether it will be effective and useful work, or whether there is to be a deterrent element in it. I think there is supposed to be a deterrent element in the scheme because at column 95 of the Official Report of the Second Sitting of the Committee in the other place, on 25th May, Mr. Ewing said:
"I am not saying that the Bill will prove to be a deterrent, although I hope it will be. I think that those who have to carry out the sentences in public might well he deterred, and it will serve a meaningful purpose in deterring them from offending again".
I detect again there the nuance of the chain gang; some pillar of the local community who has got himself into trouble will be marching about with a pickaxe in full view of the local citizenry and will thereby be deterred. But I do not know what Mr. Ewing meant. Perhaps the noble Lord can tell me. I hope the noble Lord will agree that the points I have put forward are constructive and useful, and are made only because I am so determined that the sentencing procedures and what follow for Scotland should be improved.
Lord KIRKHILL: Perhaps I should have said earlier—I did not give sufficient weight to this—that in the pilot schemes which meantime exist in Lothian, Grampian and other areas, the voluntary bodies have indeed been considerably involved. As that has already taken place, I consider that an expansion of that kind

1471
of involvement will undoubtedly take place from this time onwards.
The Earl of MANSFIELD: This is a matter to which we may return at a later stage of the Bill. Meanwhile, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
Clause 3 [Obligations of persons subject to community service orders]:
The Earl of MANSFIELD The Earl of MANSFIELD moved Amendment No. 3:
Page 3, line 35, leave out subsection (3).
The noble Earl said: This is a short matter. I really want enlightenment from the noble Lord. Clause 3 (3) says:
"The instructions given by the local authority officer under this section shall, so far as practicable, be such as to avoid any conflict with the offender's religious beliefs …".
It is those latter words which I am bound to say at first blush I really find rather offensive. I ask myself: What could they possibly mean? One has visions of Hindus being made to work with greasy cartridges, or something; but there must be more to it than that. It may, on the other hand, be sloppy thinking on the part of the Government, and they do not want a Rangers supporter to have to go and paint the Celtic stand, and vice versa. But what worries me slightly, although not overmuch, is that some young gentlemen who may be reasonably ingenious, or in fact old gentlemen, for that matter, who may be old soldiers and even more ingenious, may well be able to out-manoeuvre the social workers, who are supposed to be carrying out their duties and making them work the necessary number of hours, by such a device; and I really wonder whether it is necessary to include that in subsection (3).
Putting it in another way, I entirely agree with the latter part of the subsection. I would not seek to have that cut out in any way, shape or form, and it would he a very foolish social worker who tied somebody up to undergo periods of community service when they should be either working or learning. That would be very stupid. But I wonder whether the noble Lord—perhaps he might like to
1472
consider it—really thinks that conflict with the offender's religious beliefs has any part in a Bill like this. I beg to move.
Baroness WOOTTON of ABINGER: Surely difficulty might arise in the case of somebody of the Jewish faith who was asked to perform work on the Sabbath, which would be in violation of his religious beliefs. The timing of work might be important, both in relation to work on the Jewish Sabbath and on the Christian Sunday.
Lord KIRKHILL: I think the noble Earl and I are in agreement that it seems eminently sensible that the offender should be able to continue with his employment or education. Indeed, it is possibly the greatest virtue of community service that offenders are enabled to keep their employment and thus preserve their family unit in certain cases; or to continue their education, on which, perhaps, their future as good citizens may depend. But, as my noble friend Lady Wootton has just said, I do not think we would dissent from the view that any religious views which the offender holds and which prevent him from working on particular days should be respected. That is the view of the Government: hence subsection (3).
The Earl of MANSFIELD: The noble Lord, Lord Kirkhill, has clutched with both hands at the straw which was held out to him by his noble friend; but is it necessary that this should be written into the statute? We have here a situation where judges are not going to be trusted to lay down the times of work and the type of work. We have had that debate, and I shall not go over it again. It is all to be left to the good sense of the social work departments. That is a point of view which I do not share but which I accept as being the Government's view. Whereupon, in the very next clause the Government turn the whole thing upside down by saying, "The social work department cannot be trusted, in effect, not to order somebody of the Jewish faith to work on the Sabbath, and therefore we have to write it into the Bill".
I just think that it is offensive; I think it is unfeeling; I think it shows a distinct lack of imagination on the part of the draftsman. If you are going to give the

1473
social work departments the very wide measure of latitude which they have, surely they can be trusted not to make somebody do something which his faith tells him not to do or make him do something at a time when he ought to be doing something else because of his religious conviction. But there it is; if that is the attitude of the Government, so be it. I see the noble Lord is rocking back and forth. Is it in anguish or because he wants to address the Committee?
Lord KIRKHILL: It is merely that I hope the noble Earl is emphasising the general question of religious conviction and not the particular position of anyone as it relates to an individually-held faith. It is the broad view of religious conviction which was in the Government's mind as they constructed this clause.
The Earl of MANSFIELD: I understand the noble Lord quite well. I think it is a very poor and insensitive piece of drafting, but there it is. He apparently sees some justification for it, and I beg to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
Clause 4 [Failure to comply with requirements of community service orders]:
4.37 p.m.
The Earl of MANSFIELD The Earl of MANSFIELD moved Amendment No. 4:
Page 4, line 11, leave out ("£50") and insert("£25").
The noble Earl said: I should tell your Lordships—I hope that the noble Lord the Chairman has already been told, and I certainly hope that the noble Lord, Lord Kirkhill, has been told—that there is in fact a misprint here. It should be "insert £20" and not "£25". Whether it is a misprint or whether it was that the hand that held the biro last week—to wit, mine—did not do what the brain told it to, I do not know; but that is the Amendment which I seek to write into the Bill.
The point of it is this. Under Section 186 of the Criminal Procedure (Scotland) Act 1975, failure to comply with the requirement
1474
of a probation order gives rise to a monetary penalty not exceeding £25. Here we have the Government setting up this new form of punishment and providing in Clause 4(2) that if the offender has failed, without reasonable excuse, to comply with any of the requirements of the order, the court may fine him a fine not exceeding £50. If the two methods of dealing with an offender were totally distinct, I would have no complaint. In fact, it seems to me that if a community service order is an alternative to prison, if somebody fails to comply and the court still thinks he should be kept out of prison, a monetary penalty might well be the answer. But the difficulty is that in Clause 7, to which we shall come directly, the Government have, as it were, sought to have the best of all worlds by imposing a probation order plus community service; and, as I understand the position, if I am right, the penalty can still not be more than £20.
If that is so, we have the slightly odd situation that a person upon whom there is imposed a community order simpliciter may be fined £50, whereas a person who is the subject of a probation order with unpaid work as a condition of it can be fined only £20. If I had had more time, I think I would have tried to pump probation order breaches up to £50—and I am not using very Parliamentary language when I say that. But I did not have time and I thought that for the sake of consistency it would be better to bring the penalty in respect of the community service orders to £20. I beg to move.
Lord KIRKHILL: This Amendment seeks to make the maximum fine available for breach of a community service order, if the order is to continue, £20 rather than £50. As the noble Lord has said, this would be in line with the present maximum fine for breach of a probation order, if that order is to continue. The Government consider that £20 is too low a maximum and that £50 gives the court a sufficiently severe penalty to warn offenders that they must perform the work that the court has ordered them to perform.
The £20 figure for breach of probation was fixed in 1967 and its value has since been eroded by inflation. The Government hope to take the earliest legislative

1475
opportunity to raise this fine to £50 so as to remove the anomaly to which the noble Earl has referred. This would have been done by the proposed Criminal Justice Bill which, sadly, did not go ahead this Session owing to lack of Parliamentary time. I think that that is as fair an explanation as I can give.
The Earl of MANSFIELD: I am grateful to the noble Lord. At least, it shows some consistency on the part of the Government. May I ask this? We cannot have a Criminal Justice Bill for Scotland this Session and I doubt whether we can have one this Parliament. As usual, in Scotland we are going to be left with the worst of all worlds with two parts of the same Bill which can have different penalties. That is not logical and can bring the law into disrepute. May I ask the noble Lord to go away and to consult with his advisers as to whether he could bring these penalties into line without altering the Long Title of the Bill. I doubt whether we can, but that would be more consistent than what the Government seek to do. In the meantime, I beg leave to withdraw the Amendment.
Amendment by leave, withdrawn.
Clause 4 agreed to.
Clauses 5 and 6 agreed to.
Clause 7 [Requirement that probationer shall perform unpaid work]:
4.44 p.m.
On Question, Whether Clause 7 shall stand part of the Bill?
The Earl of MANSFIELD: As your Lordships will know, community service orders of a kind have been on the Scottish penal landscape for some time. They were an unofficial, ad hoc and, probably in the strict sense, an illegal method of dealing with offenders because they were tacked on to probation orders in four areas of Scotland. It is as a result of those experiments, if I may so call them, that the present Bill emerges. The Government have not followed the procedures in their entirety which were the subject of the Criminal Justice Bill (now Act) of 1972, on which, as I said before, I made my maiden speech in this House to be followed closely by the noble Baroness, Lady Wootton, who was as always kind. I do
1476
not blame the Government for not following those procedures because there is no reason why Scotland should follow slavishly the legal procedures of England.
Nevertheless, I think the Government have got themselves into a pickle by trying to have the best of all worlds; that is, by having under this Bill community service orders simpliciter but by trying to retain probation plus community service under Clause 7. For three reasons, to which I shall come, I think this is a nonsense and I think also that it is bad law. I am fortified in this by several representations which have been made to me by persons connected with social work in Scotland.
My first argument is this. It is undesirable to have a judge in effect saying to himself: "I am minded to send somebody to prison. Have I an alternative in these circumstances?—Yes, I have! The alternative is a community service order". That, I think, is totally logical and that is what the Bill says. Where I part company with the Government is that it is illogical to say: "Can I send this person to prison?—No, I will not. I will put him on probation and have a community service order." To my mind, the probation order should mean that the full resources of the State in this connection are, as it were, beamed upon the offender to try to redeem him using all the various facilities and expertise which are available to the social work department.
I do not think it is a good idea that the people who are going to try to redeem an offender should also (even if in a different guise), be responsible for making him carry out work for which he may be constitutionally quite unsuited, which he may find most uncongenial and which he may not be fitted for—despite the efforts of the social workers to find suitable work for him. In other words, I believe that there should be a difference and a differentiation between the facilities which the probation order makes—which is not a punishment and never has been a punishment under our judicial system—and a community service order which is a punishment, is stated to be a punishment and is hoped to be a deterrent. That is my first argument. I know what the noble Lord is going to say. He is going to say that we must have extreme flexibility.
My second argument is this. It is an entirely different technical and nuts-and-

1477
bolts argument. If you have a resident in Scotland who is made the subject of what I might call a "Section 7 order", who, in other words, is put on probation with a condition of community service (unpaid work, if you like) with it, and he then moves to England, part of the probation order dealing with community service will then have to be lifted. This is because, as I understand it, and I think I am right, the two cannot go hand in hand; so that the court which has been minded to impose what was inelegantly described by one of the honourable friends of the noble Lord, Lord Kirkhill, in another place as a "beefed up" probation order will find that in fact the beef will then be removed and the emaciated skeleton of the probation order will be all that remains.
Again, one is left with an illogical situation and a silly situation. The noble Lord, Lord Kirkhill, may say it is unlikely to happen all that often. I do not believe that. Many of us Scots have had to desert our native heath in order to earn our living; and this may happen to a person who is the subject of such an order.
The third point is also technical and legal. I hope that I have got it right; but, no doubt, the noble Lord will correct me if I have not. Under Section 5 of the Rehabilitation of Offenders Act 1974, the noble Lord will know that the period after which the conviction is "spent"—if I may use that expression—starts to run one year from the date of the conviction or the ending of the order, whichever is the longer. If one is put on probation for a year, at the end of the year the conviction is spent for the purposes of the Rehabilitation of Offenders Act 1974. On the other hand, if one is made the subject of a community service order, as I understand the position, then the period is not one year or the ending of the order, whichever is longer, but five years.
We have this possibly illogical position that if the court decides to impose a community service order simpliciter, the period is five years; if the court is minded to impose what I might call a Clause 7 order, then the situation is different. So the person who is the subject of the "beefed up" order does much better under the Rehabilitation of Offenders Act than the person who is not. I wonder whether the Government intend the consequences
1478
of this, and whether they should like to consider the three arguments that I have put forward. We can, I suppose, return to this matter at a later stage.
Baroness WOOTTON of ABINGER: I think there is force in the noble Earl's technical arguments, but there is also a history behind this. I speak as the chairman of the committee which first recommended the introduction of community service in England and Wales. The committee argued for a long time whether community service should be an order in itself—simpliciter, as the noble Earl has said—or whether it should be a condition in a probation order. The committee was of the opinion that the arguments either way were very finely balanced, not having regard to the difficulties that would arise if subsequently this scheme was extended under the new Scottish Act.
Eventually, the committee recommended that it should be open for the court to do it either way. In the case of day centres, which have subsequently been introduced, the provision is for attendance at the day centre to be a condition of a probation order. It is not an independent sentence in itself. So both means have been used of occupying the time of persons who are subject to limitations upon how they spend their time. In the case of community service, the Government decided not to introduce the alternative of it being a condition in a probation order. It appears this has now been revived in the Scottish Bill as a possible alternative.
The arguments are still finely balanced and it is undesirable that the court should be bothered with having to consider which way to do it. This aspect largely determined the issue eventually with many members of the committee. Sentencing is getting so extraordinarily complicated that it might be desirable, if a community service order were to be imposed, that this should be an order in itself and there should not be yet another alternative of doing it a second way. For that reason, I have great sympathy with the technical reason which the noble Earl has produced for his Amendment.
Lord KIRKHILL: As the noble Earl anticipated, the Government believe it desirable that the courts should have the

1479
maximum possible flexibility in choosing the appropriate disposal for all of the offenders who come before them. There will be some cases in which the discipline and support provided by a probation order—which can last up to three years while a community service order lasts only one—will be needed as well as the obligation to perform work and others in which a community service order alone will be sufficient. The Bill therefore provides for both.
In addition, community service is still at a very early stage: even in England it is only now being extended to cover the whole country, and there is no conclusive evidence—as may be seen from a difference of view among social workers in Scotland—as to whether community service should be free-standing or attached to a probation order. By providing for both approaches the Bill gives the opportunity for both to be tried and I think both bodies of opinion accept that that is desirable. As is evident from the schemes already under way, we may expect that one or other approach, or perhaps a combination of the two, will be adopted in different areas, depending on the views of the courts and social workers concerned, worked out in discussion and through experience.
Additionally, noble Lords should realise that the Amendment does not succeed in what I have taken, thus far at least, to be its aim: to prevent community service requirements being attached to a probation order. At the moment the courts have the power to attach to a probation order any requirements which they consider necessary to securing the good conduct of the offender. It is this power that they use to order community service in the present pilot schemes and they could continue to use it even if Clause 7 were deleted from the Bill. The only effect of removing Clause 7 would be to take away some of the statutory limitations on such requirements; for example, the limitation to between 40 and 240 hours' of work or the precondition that the court must have been notified that arrangements exist for the offender to perform community service.
In short, the removal of Clause 7 would not stop the use of community service as a condition of a probation order; but the procedures relating to the arranging and
1480
supervising of community service orders would not apply. I understood the noble Earl in an earlier phase of his remarks to doubt the present legal validity of the experimental schemes. At the moment a court may attach to a probation order any requirement it considers "necessary" to secure the good conduct of the offender or to prevent a repetition by him of the offence or the commission of further offences. In the opinion of the Law Officers, who were specially consulted on this matter, this may include a requirement in appropriate cases to perform community service.
As to the case that probation orders with a community service condition attached cannot be "exported"—if that is the right word—to England, I am advised that, strictly speaking, this is the case. But the offender or the supervising officer could refer the case back to the court under Clause 5. The court could then, in the exercise of its powers under Clause 5(1)(d), substitute a simple community service order for the original sentence. This could be "exported". It is not expected that this situation will arise frequently.
The noble Earl pointed to the question of different rehabilitation periods for community service and community service as a requirement for probation. I can confirm that this is a slight but unavoidable anomaly. The rehabilitation period for community service in its own right is five years, while the period for community service as a requirement of probation is the same as that for a probation order: that is to say, the length of the order. This is not in itself, or even with the other main argument led by the noble Earl, an argument against Clause 7. I hope that has been of some help.
The Earl of MANSFIELD: I want to come back to the noble Lord about any necessary requirement which a court may impose on an individual when the court is minded either to make a person the subject of a community service order or to put them on probation with a condition of unpaid work. I assume that if the court is satisfied—and I do not have the full words of what the noble Lord, Lord Kirkhill, said, but I think he said this, if I may paraphrase it—the court could impose any necessary requirement in effect to prevent the offender from repeating the offence. If a judge came to the

1481
conclusion that the offender was a young man who was liable to commit offences on Saturday afternoons, he could make a condition of the probation order that he should absent himself from football grounds on Saturday afternoons and do unpaid work. If that is true it makes nonsense of a lot of this Bill, because if the judges want to specify either of the matters I suggested in my earlier Amendments they might want to do, they would adopt the flexibility which the noble Lord is so keen on and, far from making an order under this Bill, they would make an order under Clause 7. The noble Lord may like to reflect on that.
The noble Lord said that if someone decamps to England the probation order might be revoked under Clause 5(1)(d). I shall have to look that up, but unless under Clause 7 the provisions of Clause 5 are read into the original Act, then you could not revoke a probation order in those terms. That is something I should like to take up at a later stage of the Bill. I hope that the noble Lord will reflect on what I have said, because there seems to be a certain absence of logic somewhere.
Clause 7 agreed to.
Clauses 8 to 10 agreed to.
5.2 p.m.
The Earl of MANSFIELD The Earl of MANSFIELD moved Amendment No. 5:
After Clause 10, insert the following new clause:
Annual Reports to be laid before Parliament.
(". The Secretary of State shall lay before Parliament each year, or incorporate in annual reports he already makes, a report of the working of community service orders.").
The noble Earl said: This is a matter which received an airing in the other place but for all that I think it is proper that it should be raised again. The Amendment seeks to establish a duty on the part of the Secretary of State to make an annual report in effect as to the working of community service orders, either in the form of a report on its own to be laid before Parliament or as a report to be incorporated in the annual reports which the Secretary of State already makes.
I find it difficult to understand why the Government appear so reluctant to accept
1482
what seemed to me to be a very reasonable request on the part of my honourable friend when he moved this Amendment. I have attempted to find out what has happened in regard to community service orders since they first started in England and, even more so, since the pilot experimental schemes were introduced in Scotland. On the general working of the schemes in both countries, there is very nearly a deafening silence. The only report I can find—and it may be that I have not been sufficiently diligent or lucky—is the Home Office Research Study No. 39, which in its way is a helpful document, although it is not at all reassuring, may I say. I shall not go into it, but it produces some rather alarming statistics, and in particular says that the re-conviction rate of all subjects of these orders within 12 months is no less than 44 per cent.
Baroness WOOTTON of ABINGER: May I intervene just to say that that particular report related only to the pilot areas in England and Wales, as later statistics were not available.
The Earl of MANSFIELD: I am aware of that. The noble Baroness and I both know that the Home Office has nothing much to do with Scotland, and I am sure that your Lordships will take note of that also. Be that as it may, I do not think it affects the percentage of the re-convictions with which I was regaling the Committee. It is sad—
Baroness WOOTTON of ABINGER: I hope the noble Earl will forgive me for interrupting again. The point I wanted to make was that the statistics related to the first 600-odd cases in the six pilot areas. In the current year there have been 12,000 cases covering practically the whole of the country, and we have no information as to the recidivism rate among the subjects of the current community service orders.
The Earl of MANSFIELD: I am obliged to the noble Baroness; she comes to my aid in this matter. We are in the dark, and it is for that reason that my Amendment seeks to throw a little light. I hope, however, that, from what I have said this afternoon and at other times in this Chamber, noble Lords realise that I am a passionate believer in penal reform.

1483
But it is no good having penal reform unless we get the knowledge and the statistics as to what is happening and see whether it is a success and whether we can hopefully extend it into other areas or should think again and try something else. That is the burden of my argument: no more. I see, to my delight, that the noble Baroness is now smiling at me.
The effect of these orders is three-fold I think. First, it is to save people from going to prison, and we in Scotland have one of the highest prison populations in Europe. It is something to be deplored; and all of us who have any connection, in whatever capacity, with the legal system—and in my capacity with SACRO I certainly do—cannot fail to be disturbed by it. The Government have the resources to do something about these statistics, and anything that can be done should be done, I think.
Secondly, there is the fact that the community service order, hopefully, will deter people from crime and not only those who are made the subjects of orders. I am not terribly hopeful that once it gets about that this sort of sentence can be imposed by a court it will have a very salutary effect on the general population. I do not think it is realistic to believe that such would happen, but even if it has some effect it would be satisfactory and, after all, the object of bringing forward this legislation, or part of it, as the Under-Secretary said in the other place, is to deter from crime.
Thirdly, the most hopeful and likely effect of this Bill is that it will re-educate those who are made the subjects of community service orders so that they may be able to lead a better, more fruitful and certainly a happier life as a result of the voluntary or unpaid work they are ordered to do. As I have said, the very sparse statistics which are available do not show a very happy picture, but it may be that things will settle down in Scotland as the system becomes more generally applied and as people become used to working it and to working with these offenders.
All these things reinforce what I am trying to urge on the Government, namely, that there should be a duty to produce statistics and to produce them regularly, comprehensively and in a helpful form, so that all those who are interested, either
1484
because they are professionally engaged in these matters or because, for one reason or another, they have to deal with offenders at various stages, should be able to make up their minds as to how the scheme is going and, above all, how it might be improved. I know the Government say they are going to produce statistics of a sort next year, but how much better it would be to write into this Bill an Amendment such as this, which I do not think would cost very much money and which I think would have a very beneficial effect on the whole scheme. I beg to move.
Baroness WOOTTON of ABINGER: The noble Earl is mistaken, if he thinks that I am not in sympathy with the principle of this Amendment. I warmly welcome it. I wish, indeed, that such a clause had been inserted into the Bill relating to England and Wales. The only point that rather puzzles me is where this report is to come in. We now have a report from the Home Office on the Prison Department, and we also have a report on the Probation Department. But, so far as I am aware, there is no independent community service department and it does not lie properly under either of the other two. But this is obviously a technical matter which could be solved by the bureaucracy, and I very much hope that we shall have continuing reports.
Baroness WARD of NORTH TYNESIDE: I should like to support this Amendment. I was a magistrate for very many years, but I remember very well that when I was in another place there were very few magistrates there. I have no idea how many magistrates there are in your Lordships' House. But when we are introducing a new Bill, and a new idea for dealing with people who have offended against our laws, Parliament ought to know what is thought about it. Certainly, when I was a magistrate, it would have been very helpful indeed, when Bills made rather complicated arrangements, if we had been able to say "Can't we let Parliament know what our views are and then, if necessary, persuade Parliament to make an alteration in the law?" It is quite ridiculous, when Parliament is very concerned about this whole matter, that it is not to have a report. So I think that it is a most excellent suggestion that has been made by my noble friend.

1485
I do not mean to be objectionable to the noble Lord, Lord Kirkhill, because I am sure that he will be very nice about the Amendment, but it would sometimes be a good thing if, when Governments were dealing with these matters, they realised what magistrates themselves would like. I do not think that it is for Parliament to introduce a Bill without having regard to what magistrates would like. We have a perfect right to come forward, especially as, as I said, there were very few magistrates in another place when I was there. That would help the whole situation. So I hope that the noble Lord will accept this Amendment, and not just say that, for some reason or other, he does not think that it is a good Amendment.
He ought to think that it is a good Amendment, and he ought to welcome the idea that Parliament should be informed. Magistrates will then have a chance to put forward their views, if they do not like the laws or do not think that they are fair or just. They might even want something else which would make their task easier—because magistrates need quite a lot of help in these very difficult matters. So I look forward to hearing from the noble Lord, and I shall be most delighted if he says that it is a good Amendment and that he is pleased to accept it.
Baroness FAITHFULL: Very briefly, as a social worker I should like to support this Amendment. I do not see how, without figures and facts, one can carry out research and assess whether or not one is going in the right direction. f profoundly believe in community service orders, and have had personal experience of them, but we need to base our policy on facts.
5.15 p.m.
Lord KIRKHILL: I shall immediately have to disappoint both noble Baronesses by saying, in a deadpan manner, that I am unable to accept this Amendment. But perhaps I can be of some assistance by confirming that, despite the deafening silence on the Scottish scene at the moment, which the noble Earl detects or does not detect, depending on which way one looks at it, the existing experimental schemes are being monitored in considerable detail by the Scottish Office
1486
Central Research Unit, and it is expected that an interim report will be available at the beginning of next year. The Government believe that there will be continuing interest in community service, as schemes develop progressively throughout the country.
A general description of the working of community service will appear in the Annual Report of the Social Work Services Group, and detailed statistical information will be provided annually in Criminal Statistics—Scotland, published by the Scottish Home and Health Department, including a breakdown by age and sex of the offenders, by the type of court imposing the order and by the number of hours imposed. Of course, if there are other aspects which noble Lords wish to draw to my attention, the Government will be perfectly happy to examine the practicability of gathering information. But the Government do not feel that an obligation to produce a specific report on the operation of community service, as such, would be particularly helpful.
Baroness WARD of NORTH TYNESIDE: With the leave of the Committee, may I say one more word? That was a very disappointing answer, and I am surprised that the noble Lord, whom we all admire, was prepared to give such an unsatisfactory answer. Does he not realise that magistrates would like to have the opportunity of putting to Parliament what they think? I do not at all mind about this being monitored. What I want to ensure is that Parliament shall know what magistrates think of the laws that have been passed. It gives great confidence to magistrates—at least, so far as I know them—if they think that their views can be set out to Parliament, so that Parliament can then discuss them. We are always talking now about getting better contact between the community and Parliament, and here is an opportunity to do it.
It is absolutely ridiculous that someone should have advised the noble Lord to turn down this Amendment. After all, he has heard of the experience of two very well-known noble Baronesses, who know a great deal—probably, a great deal more than the noble Lord—about the difficulties in dealing with these matters. So I am absolutely horrified that the

1487
noble Lord should have been advised in that direction, and I hope that there will be an opportunity to discuss this again.
Lord KIRKHILL: The noble Baroness will realise that the report, as envisaged by the noble Earl, would come from the Secretary of State and not from magistrates as such. Perhaps I may make that distinction, although it is not perhaps very important. It is also fair for me to say that I have sympathy with the Amendment which the noble Earl seeks to make. The difficulty in accepting it that I find for my part is mostly one of the timetable, as the Bill has to go to the Commons. But I will look at the matter, and that is as much as I can say at this stage.
Lord LEATHERLAND: I suppose that there is something unholy about an alliance which finds me speaking in the same tone of voice as the noble Baroness, Lady Ward, but I feel there is a great deal in what she said. I do not support her for the reason that she gave; namely, that the views of JPs would need to be made known to the Government. I rather support her from the other angle, that JPs should learn how this scheme works. At the moment they do not know anything about it except what the Magistrates' Association has probably told them before the scheme comes into full-blooded operation. If, however, an annual report were to be issued describing the experiences of the authorities, it would be of enormous importance to magistrates who from time to time would have cases put before them which it would seem could be appropriately dealt with by this method. Although my noble friend cannot accept the Amendment at the moment, I hope that the Government will give further consideration to it and come forward with something else at the Report stage.
Lord BROWN: I am an ignoramus on this subject, and therefore a little puzzled. Perhaps the noble Earl, Lord Mansfield, could tell me, if not the rest of the Committee, why he is pressing this Amendment? I understood from my noble friend Lord Kirkhill that there will be an annual statistical report on the working of the service. I cannot see the difference between the procedure that will be operated in any case and the procedure that would
1488
emerge as a result of the Amendment. I am puzzled.
Lord LEATHERLAND: If I might be pardoned for speaking again, we are suggesting here something which is quite different from the statistical report that my noble friend has mentioned. We want a kind of essay in descriptive form which says that a particular youngster was taken and dealt with in a particular way, and that he responded to this or that kind of treatment or to this or that kind of employment to which, if I may use the word, he was sentenced. Therefore, the statistical report which is usually published in connection with the proceedings of all courts would not meet the situation. We want to know, in the form of a psychological analysis, if you like, how these youngsters have responded to the kind of treatment which has been given to them.
The Earl of MANSFIELD: This has been a useful debate and I thank the noble Lord, Lord Leatherland, for completing my task so far as the noble Lord, Lord Brown, is concerned. The purpose of the Amendment is twofold. It is to go a good deal further down the road of information than the mere gathering of statistics. Secondly, it is to embody the knowledge which is obtained from a number of different organisations and arms of the Government in one document where it can he read, digested and understood by a great many more folk than magistrates who, as some noble Lords will know, play a fairly insignificant role in the administration of justice in Scotland.
I hope that the noble Lord, Lord Kirkhill, will confer with his colleagues on this point, because he did not really say why he thought it was undesirable to have statistics in the form which is proposed by the Amendment. I know that the noble Lord said that there will be statistics and that there will also be a report of the Social Work Services Group; but he did not tell us either that it was too expensive or unnecessary or, going a little further, that it was undesirable to have knowledge which I feel would be very useful and would help along this imaginative and thoroughly praiseworthy scheme. It is a pity that it should be spoiled, if at all, by this lack of knowledge which is likely to come about. However, the noble

1489
Lord has been generous enough to say that he will look again at the matter. I do not believe that the other place will be so hectic during the next few weeks that they will be unable to consider, one hopes favourably, an Amendment such as this, or any others which your Lordships might feel should be written into the Bill at a later stage. That would be a sad argument to put forward. Having said that, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 11 agreed to.
Remaining clauses and the Schedules agreed to.
House resumed: Bill reported without Amendment.

TRANSPORT BILL
5.26 p.m.
Report received.
Clause 2 [County public transport plans]:
Lord SANDYS Lord SANDYS moved Amendment No. 1:
Page 3, line22, leave out ("1979") and insert ("1980").
The noble Lord said: My Lords, we return to Clause 2 of the Transport Bill and to a matter which I mentioned during both Second Reading and the Committee stage; namely, the preparation of a TPP. May I open my remarks by thanking the noble Baroness, Lady Stedman, for her very helpful reply to the Amendment which I moved during the Committee stage. We have studied her reply with great care. Consultation has subsequently taken place with one individual county council and with the Association of County Councils which comprises no fewer than 39 councils in England, known as the shire councils, and seven county councils in Wales. It does not, of course, apply to the Metropolitan counties.
To refer to what the noble Baroness said regarding changing the date from the timing in the Bill to the revised date, may I draw noble Lord's attention to what the noble Baroness said at col. 147 on 27th June:
"I appreciate that roughly nine months from now may seem a short time in which to consult
1490
on and produce a public transport plan, but it has been emphasised in another place that we do not expect the first public transport plan to be a perfect and finished document. TPP needed a running-in period and public transport plans need the same sort of period".
We in this House recognise what the noble Baroness has said, but it may be of interest to know the reaction of one county council—Derbyshire County Council—to what the noble Baroness said, and perhaps I may be allowed to quote from a letter dated 5th July:
"Our view is that an embryonic plan is not good enough and, further, that to prepare and publish the first plan by the 31st March 1979 and then prepare another plan by the 31st July 1979 will lead to confusion and uncertainty. Furthermore, it is believed that under these circumstances the possibility of disagreement between the parties involved will be increased, which might well be overcome or at least mitigated if one public transport plan were to be prepared in 1979, by 3Ist July, for eventual publication after undertaking the various consultations by the 31st March 1980. It is our belief that there is nothing to be lost and, indeed, everything to be gained by ensuring that the plan is properly prepared in the first instance, thus creating a firm, or at least firmer foundation on which to build future plans".
Here is a county council taking into consideration what the noble Baroness said during the Committee stage and deigning to disagree with that view.
I must confess that there is much to be said here for a pause for reconsideration. It is a complicated situation. Later in her remarks during the Committee stage the noble Baroness recognised that it was so and she said this:
"A public transport plan which took on its final form by 31st July in the year before that to which it related might be looking distinctly out of date by the following April, the beginning of the year to which it applied; or, alternatively, it might be couched so tentatively as to be of little value to operators and users".—[Official Report; 27/6/78, col. 148.]
Here we are in a dilemma on the situation and I hope the Government will be able to put this in a somewhat simpler form. Perhaps I may be permitted to make some suggestions. I suggest to the Government that the best answer is couched in the Amendment: that is, to read "31st March 1980" in lieu of 1979. There may be one further proposal, which is not in the Amendment but which I would suggest to the noble Baroness across the Table of the House. It is that it may be possible to evolve a system whereby the plans are in such a format as to be in the shape of a loose-leaf volume.

1491
There will of course be a very large number of them, one for each county in England and one for each county in Wales. If it were possible to up-date this annually by a scheme for the replacement of perhaps one or more single leaves, it would be a very much better system and would avoid a great deal of reprinting and duplication of effort. We believe that the right run-in period would be to choose the date 31st March 1980. I beg to move.
5.32 p.m.
Lord LEATHERLAND: My Lords, perhaps I may interrupt with a minor point compared with the one which has been raised by the noble Lord, Lord Sandys. I was for many years the leader of a large county council; indeed, I was the chairman of that county council. I forget the date on which county council elections were held every three years, but I have a feeling that it was in the period running up to 31st March because I remember that when we won the county council I took over on about the 1st April. If it be a fact, as apparently it is, that the election takes place in the period running up to 31st March, is it an appropriate date for us to insert in the Bill to be asking the council to draw up this plan with regard to motor transport in its county? This is a time when the political complexion of the council is in the melting pot and might suddenly change just before 31st March. I hope that point can be taken into consideration from the point of view of the smooth working of whatever scheme is adopted.
Baroness STEDMAN: My Lords, the Amendment moved by the noble Lord, Lord Sandys, in Committee, would have had the same effect as this Amendment; namely, to delay the introduction of the public transport plans. As he has quoted from me, I said on that occasion that we would view any delay with very great concern and I hoped that I had assured the noble Lord that we were not placing too great a burden on county councils by requiring the first plans to be prepared by 31st March 1979. The second plan, of course, is not to be prepared by the 31st July 1979; that is to be ready by the 31st March 1980. So they have not got this very short period between their first and second plans.
1492
The noble Lord wanted to have a running-in period for the new system. I agree with him. It is the nature of a public transport plan that it starts from where a county has got with discharging its public transport responsibilities, so that there is in any case a gradual build-up. Some counties will start with a comparatively well-developed plan of public transport policies; others, we know, have not got quite so far. But even the best plans are not going to be cut and dried proposals for years ahead. The plans are an annual statement of needs, problems, policies and objectives set against a five-year time-scale, and since public transport needs change, so too must the plans adapt to the changes that are needed.
So we have to accept that the first plans prepared by some counties will be embryonic—perhaps reflecting only a small advance on the content of their present TPPs. But in requiring an early plan we will make sure that the counties make a real start with their new duties right away. The plans that the counties publish by 31st March 1980—their second plans—will then be a better contribution towards improving pubic transport than if they were their first plans. By making the earliest practicable start county councils will begin to involve the operators, the other local authorities and the transport users that much sooner in their planning. The importance of wider consultation on public transport is something on which a number of noble Lords in this House from time to time have laid great weight. The sooner the countries start on that, the better, not least because the process of involving local people is something which obviously will take time.
I can follow that some counties might like, for understandable reasons, to have an extra year so that their first plans can be more polished. But the problems of public transport in many of our shire counties, to which the noble Lord referred, are becoming acute and we cannot afford this luxury of time. The formation of policies, as I have said, is to be an on-going process; the plan an expression of where it has reached at that particular time. We want the counties to begin their tasks right away, and indeed I believe that a number of counties have already started. The noble Lord made an interesting suggestion about using a loose-leaf volume. That is no problem

1493
at all; it is purely a matter for the counties to decide as to how they up-date their programme. It is a matter of mechanics for them, but because we want the counties to begin their task right away, I must ask the House not to accept this Amendment.
Lord LEATHERLAND: My Lords, my noble friend is being far too modest in not replying to the point I raised with regard to the inconvenience of the date 31st March, a week or two after the political complexion of the council may have changed.
Baroness STEDMAN: My Lords, with the leave of the House, may I apologise to my noble friend, while reminding him that we have had local government reorganisation and the elections are now held in May.
Lord SANDYS: My Lords, I have listened with close attention to the reply given by the noble Baroness, which follows closely on what she said at Committee stage. I believe that there is a difference of opinion which will be difficult to bridge. I think the noble Baroness is quite right when she says that there is overlapping. I do not use her exact words here but there is an overlapping of dates which will occur, whichever date we choose. Rather than go over this problem of the dates and associating it once again with the transport supplementary grant, I believe that the best solution would be for me to withdraw the Amendment and to rely upon the arrangements being made between the Department of Transport and the counties, and see what can be achieved by that method. I have pursued this matter with some diligence through three stages of the Bill and I hope the Government have taken on board the problem. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendment No. 2 not moved.]
5.39 p.m.
Viscount SIMON Viscount SIMON moved Amendment No. 3:
Page 4, line 3, at end insert—
("( ) In order to establish, for inclusion in the plan, what are the needs of the communities referred to in subsection (2)(a), the council
1494
shall ascertain, in whatever manner they consider most appropriate, the views of parish councils (or parish meetings where no parish council exists) and in Wales community councils, and shall take these views into account in preparing the plan.").
The noble Viscount said: My Lords, at the Committee stage I moved an Amendment to try to ensure that the parish councils, who are nearest to the roots, should be involved in the preparation of the plan by the counties. The noble Baroness raised certain very valid objections to that. She thought it imposed much too great a burden on the county councils. I had suggested, your Lordships may remember, ascertaining this information through the district councils. I accept that this involves a considerable amount of work. Having laid upon the county councils an obligation to ascertain the needs of the communities within the county she also thought that it was wrong to suggest how they should do it. So I have come back with the same object, but with a different method, and I think I have met the noble Baroness' objections.
The noble Baroness was good enough to call my attention and the attention of the Committee to Clause 2(2)(a). I find that this is in fact a much better peg upon which to hang my argument. Clause 2(2)(a) says that the plan-that is, the annual plan—
"shall contain a review of the county's needs, and the needs of the communities comprised in it".
In passing, the noble Baroness speaking in Committee said that the clause provided that the county councils shall "review the needs" of the individual communities. With great respect, I think she has not quite correctly read what the clause says. What is says is that the plan shall include "a review of the needs". I suggest that, in that context, the word "review" is used in rather the same sense as we talk about a naval review, where all the ships are laid out and you can see them all at a glance if you are in the right place. But what is suggested here really is that there should be a comprehensive account of the needs of the communities. Even if I am wrong on that, and she says that it does mean a reappraisal, the position remains the same. How can the county review the needs of the communities unless they know what the needs of the communities are? It is all very well to say this would be a very difficult thing to find out,

1495
but it seems to me that a duty is laid upon the councils to find it out.
In the Amendment I have now put down I have suggested that they should ascertain "in whatever manner they consider most appropriate" the views of the parish councils and the other bodies concerned. That seems to me to leave it entirely to them. If they say it is impossible to ascertain the needs by any means at all, then I would suggest to your Lordships they are really saying that it is impossible to comply with the Act, because you cannot review the needs of the communities unless you find out what those needs are. It was on those grounds that I thought I should come back with this proposition.
There has been a letter, which the noble Baroness has probably seen, from the Association of County Councils, objecting to the Amendment, and I have of course studied it with care, though in fact I received it only today; I make no complaint about that because the time has been short. There again they say that the counties will he informing themselves of the communities' views, where necessary by approaching parish councils. The only words on which I may differ from them are the words, "where necessary", because I would have thought it is necessary, if they have to ascertain the views, that they inform themselves what they are. I would hope that the noble Baroness might think the new wording I have proposed is quite harmless and that it just reminds county councils that, to get this position in proper perspective, they do really need to take account of the views of the individual communities. In this Amendment we are leaving it to them to do that in whatever way they think most appropriate. I beg to move.
5.45 p.m.
Lord CLIFFORD of CHUDLEIGH: My Lords, I wonder whether I might be permitted to support the noble Viscount, Lord Simon, in his Amendment. I should declare my interest, in that I am the president of the Devonshire Association of Parish Councils. I support this on the basis of trying to get some consultation to the grassroots in this country on this Bill, which concerns the local small isolated communities. I consider the
1496
argument of the noble Baroness in Committee somewhat invalid. My council—I am referring to the Devonshire Association of Parish Councils—should be consulted. It would only mean the county council having to consult the equivalent of one extra district council. After all, the equivalent of one extra district council is nothing. Most district councils are now urban weighted vote-wise. Therefore, to my mind it is unfair to the grassroots—that is, the isolated parish councils, or parish meetings where there are no parish councils—if they are going to be left out. Otherwise, the present district councils will give weighted urban viewpoint.
I speak also as an ex-vice-president of the erstwhile Rural District Councils Association, and these are points that we brought up time and time again in the debates on local government reorganisation; that is, that the small isolated individual rural communities were going to he left out. To my mind, it is essential that the rural view is given, and this is what I think the noble Viscount's Amendment would achieve, After all, it would only formalise a practice which good county councils have carried out for many years. The county councils are now going political. Parish councils are still independent. District councils are beginning to go political, and county councils already have, to a large extent. I could tell your Lordships one or two stories on that score, but perhaps it would not be apposite on the present Amendment. Therefore, it is even more important that the grassroots be consulted, that the isolated communities should not feel even more isolated, or driven to one or other of the Party machines to try to get what they consider fair treatment.
As I pointed out to the noble Lord, Lord Donaldson, in my Question on the grant to the Beaford (population 360) village hall, there are 400 village halls in the County of Devon. They are all fairly isolated. Something should be put in to make the county councils, who are now getting more and more enmeshed in the political machines and the urban vote, consult, not every parish council but the Association of Parish Councils—and every county has an association of parish councils, so far as I know. It might not be a quick answer. Most of the

1497
councils, I know, meet only once a month, but that is no excuse for ruling out consultation with that body. There is a national council, too. They can get an answer a, quick as a district council with its urban base.
Finally, I would ask the noble Baroness to consider the effect—and transport comes into this—of the local snow blizzard that we had in the South-West last February when so many of these outlying areas were cut off, some for a matter of weeks. If I could illustrate the point I am trying to make to the Government, at the last annual general meeting of my parish council association we had all the complaints coming in about the drought during the previous two years. We heard how the centralised water authorities all combined and we heard all about standpipes and so on. The representatives of the local parish councils came up with the same stories: "Why didn't they use the old water suppy? Why didn't they use the such-and-such leat?" The reason they did not do so was that the centralised, nationalised council bodies do not have a clue about what takes place locally. It is only the local parish councillors who know.
In my particular case—this is only an example—there was a water supply on my property which, for 70 years, had provided the village of Kingsteignton with water. Ten years ago we were told: "We don't want any small suppliers any longer", and the supply was cut off. They were only paying about £400 a year, so it did not matter much to me. They turned off the supply and that was that. Throughout the whole of the drought that small reservoir was overflowing to the same extent as before. Daily I expected someone to come and look at it, because it was only a question of turning on a pipe to put the supply into the system again. However, nobody came. I knew about that supply and so did the local people. All the people in the parish knew about the local reserve water supply which they used to have before the monolithic modernisation was introduced.
Surely when supplying to transport we can allow the Amendment to be passed which would get the centralised county councils to consult the small isolated communities. Such consultation can be
1498
done so easily by going to the centralised body: we do not need to go to every single parish council. We would receive a lot of answers. We would have had a large number of answers to the drought problems in the South-West if they had bothered to consult the local parishes. I beg the Government to allow the Amendment because, if this provision is included, county councils will have considerably less trouble as regards any problems that arise on this basis in the future.
Lord DAVIES of LEEK: My Lords, I do not wish to delay the House, but this matter is important. Many of us have had the opportunity to live and work in rural areas. I had the privilege of representing a rural area, the majority of which covered 1,000 square miles. It was situated in the North-East of Staffordshire with some 3,000 farms and with rural parishes. If a plan is being prepared by the county, the county planning authority—the centre and focus of power in the county—can be situated 60 miles away and there are people in the planning authority who do not know particular highways and by-ways. During one notorious winter bread had to be dropped in one village which had the appropriate name of Flash and Longnor, where they used to mint illegal money. People living in the area knew that, despite the snow drifts—which in some cases were 30 feet deep—a way could probably have been found to that area without the loss of life which occurred when the plane which dropped the bread crashed.
Rural areas should be consulted. What is happening to British democracy? Indeed, what is happening to local democracy? Everything is being over-centralised and in this apotheosis of the electronic computer, human beings do not seem to count any more and there is the superficial god-like attitude of the central people that the centre knows best; the centre knows what it is doing. Nine times out of 10 it boggles every plan that it embarks upon so far as rural areas are concerned—for example, in connection with the distribution of food in winter time or taking a coffin to bury the dead.
I hope that the Government will take notice of this Amendment. There are so many Members on the Opposition Benches that if they want to press this to a Division

1499
they can win without my vote. Therefore, I shall not walk in the Lobby with them. However, I hope that the Government will look at this Amendment because, in my view, this is a constructive Amendment worthy of consideration. I hope that my friend Lady Stedman will be able to say that the Government will look at this matter so that during the next stage we shall receive an answer which is more sympathetic than the Bill is at present.
Lord MOTTISTONE: My Lords, carried away as I am by the noble Lord, Lord Davies of Leek, I should still like to ask the noble Viscount, Lord Simon, if, when he comes to wind up the debate on this Amendment, he could explain why subsection (4) does not wholly meet the main sense of his Amendment. In my view, it seems to meet not only his point but that of the noble Lord, Lord Clifford of Chudleigh, and the noble Lord, Lord Davies of Leek.
Lord WIGG: My Lords, I am a little puzzled. I am deeply moved by the inefficiency that operates in the area of the noble Lord, Lord Clifford of Chudleigh, but it is understandable because there has been a Tory council there for generations. However, I must confess that it is a grave reflection upon their officials because, clearly, if there is a hardship—that is to say that when there is a drought they suffer and when there is too much water they suffer—they appear to suffer all the time. But what about the councillors whom they have elected? Do they not have a job?
We must address ourselves to the Amendment and how far it goes towards solving the problem. I am sure we should all accept that if the stories given to us are even 50 per cent. correct, something needs to be done about it. I suggest that the Bill itself imposes a duty upon district councils to consult. How many parish councils may there be in a district council's area? The Minister told us in Committee that in some areas it is quite frequent to find 30. Therefore, it seems to me that if this very woolly Amendment—woolly almost to the verge of being administratively barmy—were included in the Bill, the officials of the already inefficient councils (the centralised body of which the two previous speakers both complained, I am sure with justification), who are obviously
1500
not up to scratch, will spend the rest of their time, not putting things right when there is a drought or too much water, but in consultation.
I abhor liberalism and all that it stands for. I said that at an earlier stage and got myself into great trouble because I was specific in what I regarded as the regrettable influence of Liberalism on Toryism. I have respect for high Toryism but the wishy-washy cold cocoa version I have no respect for at all because it is basically barmy; it is verbal knitting. It does not mean a thing to impose a duty on a body to consult with a view to action as it may think appropriate. What in the name of goodness does that mean in practical terms?
Therefore, while I have the utmost sympathy with the object, this is not the way to secure it: it would be all consultation and no action. Given the choice, I prefer action to consultation. Therefore, I very much hope that without more ado we shall not waste our time on this matter, even though I am sure that all of us, however half-hearted we may be and whatever political philosophy we may have, are in sympathy with what the noble Viscount is seeking to do. However, I am completely sure that this is not the way to do it.
Lord CLITHEROE: My Lords, the noble Lord, Lord Mottistone, said that in his view the Amendment of the noble Viscount, Lord Simon, was unnecessary because of subsection (4). Subsection (4) does not mention parish meetings. Therefore, I prefer the Amendment of the noble Viscount, Lord Simon, and shall be happy to support it. I should also like to say that there are counties in England—Lancashire is one—where there is close contact between the county council, the parish councils and the district councils.
Lord SANDYS: My Lords, I should like to open my remarks by declaring an interest because, like o the noble Lord, Lord Clifford of Chudleigh, I am president of a county association of local councils, in my case Hereford and Worcester. Having discussed this Amendment with the Secretary of the National Association of Local Councils in London this morning I have come to the conclusion that, despite the fact that we have great sympathy

1501
with the noble Viscount, Lord Simon, with great respect this does not seem to be the perfect answer to this problem.
Our attention has been drawn by the Association of County Councils to a very interesting computation of the number of parishes there are in counties throuhgout England and also the community councils in Wales. The figure varies quite enormously. Nobody has mentioned specifics so far, but I think that they emphasise the argument. The county with the minimum number of parishes is the Isle of Wight, with only 16, and the county with the maximum is North Yorkshire, with no fewer than 762 parishes. Some of those parishes are, in fact, urban boroughs; some are rural parishes. One entirely accepts what the noble Viscount, Lord Simon, said earlier, that the vast majority of parishes in both England and Wales are of a rural nature, but not all.
I believe that the Bill as drafted contains grounds for thinking that the situation will be manageable. I refer, of course, to Clause 2(3) which is quite specific. It says:
"When preparing or revising the plan"—
and then there are qualifying remarks—
"the council shall enter into consultation with"—
and then it cites various bodies. It includes the district councils in the county; and it adds a further caveat in subsection (4):
"To all those mentioned in paragraphs (a) to (c) of subsection (3), and also to—
(a) the county's parish and (in Wales) community councils"
I accept what the noble Lord, Lord Clitheroe, said, that parish meetings are not included. I think it would be helpful if the Government could perhaps identify here whether the expression "parish" includes parish meetings, because in certain Acts it does. Perhaps we may be given an interpretation, because I think that it is a valuable and relevant point.
The other matter to which I must draw your Lordships' attention is, of course, that the districts, which are compelled by this section to be in consultation with the council, and the council, which is compelled to be in consultation with the districts, have the staff backup, which the parishes do not. I believe that, despite the blandishments of the noble Viscount, we should think very carefully about this
1502
matter, and I hope that he will not press the Amendment to a Division.
Baroness PHILLIPS: My Lords, I hate to take issue with the noble Lord, Lord Sandys, but I am also concerned with the Association of Parish Councils, as it was called. I think that we must concern ourselves particularly with the fact that they were the initiators of the original agitation about rural transport—it came from the grass roots. As a "townee" who lived in the country and who grew greatly to respect the strength of the parish meeting, I would certainly say that it should be included in any consultation. The noble Lord has just said—and the Minister will no doubt confirm this—that subsection (4) gives this provision. If that is so—and to take the point raised by the noble Lord, Lord Wigg, I would not like to appear barmy—why then, in one case do we get the phrase that they "discharge their responsibilities" by entering "into consultations", but in the second case we get the phrase that "they should be:
"afforded an opportunity of commenting on a preliminary draft of the plan"?
If there is a subtle difference, I am not sure what it is. However, I know from many sad experiences in towns that to comment on a plan which is already formulated means that people tell you what they will do at the point they will do it. If you are in a deputation, you are very lucky if you change the plan. On the contrary, "consultation" surely means coming in when the plan is actually being formulated.
I think that the parish is the place that knows of the difficulty of rural transport, far more than the county council or district council. Indeed, they were the first sufferers from the British Rail plan, which I think we have now forgotten. Very many villages are almost entirely cut off, except for those people who are fortunate enough either to have a car or some kind of coach to help them. Therefore, I should like to know the difference and if, in fact, there are sheep in one section and goats in the other, perhaps we could have an amalgamation in accepting this Amendment.
6.6 p.m.
Baroness STEDMAN: My Lords, the noble Viscount, Lord Simon, has given your Lordships another opportunity to

1503
debate the role of parish councils in public transport planning. I believe that this is one aspect of the wider problem of involving people in local public transport issues; I am sure that there is no difference of opinion on all sides of the House about the importance of that. The practical question is how to achieve this end: how much can be done by legislation and what must be left to the good sense and initiative of those concerned locally.
We must remember the range of circumstances for which we are legislating in this Bill. The non-metropolitan counties embrace every type of settlement from major cities to the smallest rural hamlet. In everyday terms the transport issues of local communities range from complaints about particular bus services to the fact that there is no bus service at all in another part. I do not believe that people are unaware of local authorities' responsibilities for these matters—after all, county councils have had the responsibility of co-ordinating public transport since 1974. Nor are people slow to make their views known. As my noble friend Lady Phillips said, the pressure for rural transport came from the grass roots, from the parishes.
The defect which our proposals are designed to remedy, is that there is insufficient public knowledge of how the county councils see the issues and what they propose to do about them. In other words, it is not so much opportunities to express views which are needed, but some coherent proposals to focus local debate. That is the importance of a public transport plan which will be widely available to the public. This idea of local debate also reflects the nature of the plan. As I have said, this is not to be a plan which is prepared over a long period by an elaborate procedure involving public inquiries and appeals to central Government. Equally, it is not a plan which will pretend to solve all a county's public transport problems or set them within a rigid framework for years to come. But it will be an account of the current issues the lines on which they are being tackled and the way in which these matters are likely to develop over the next few years. All this is an attempt to devise some continuing process which mirrors the changing world of public transport.
1504
It follows from what I have said about the nature of the problem and our solution that a county council must involve people at any time it is necessary and in whatever way is best. The district councils will be expected to consult with their parish councils and their parish meetings, and the parish meetings and the parish councils will be specifically asked to comment on the initial plans when they are formed. We are not thinking only of parishes, but also of trade unions, transport users and any other bodies with a special interest in transport, and, indeed, of individuals. Events are not going to fit neatly into any annual planning cycle. Services can be debated and changed, proposals for community transport or experimental services can be brought forward at any time. So we must see a development of existing contacts between the county councils, other local authorities and all those concerned with public transport. It is only by accepting that this is a developing process that we can sensibly ask for the first plans to be published as early as March next year. These may be rudimentary plans based on present knowledge and the amount of consultation which limited time allows, but they will start the whole process of building up local relationships.
The noble Lord, Lord Sandys, has referred to the communication which many of us have received from the Association of County Councils, and he quoted from it. I should like to quote further from it. They say that parish councils already have the right to comment under Clause 2(4), and that power will very adequately safeguard their position in so far as it has not already been looked after by their district council. It should be stressed that counties do not formulate their policies on transport, or on functions, on formal consultations alone. They have many specialist officers whose task it is to conduct surveys, et cetera, in the community to try to ascertain the needs of users of services. Bus operators are also increasingly becoming much more conscious of the need to find what users and potential users require, and county councillors are as much representative of the views of local people as district or parish councils, and they spend much of their time establishing what their communities require.

1505
Their last paragraph says that the Association—that is the Association of County Councils—believe that this Amendment will put an intolerable burden on the manpower resources of counties, would delay the production of plans, would result in the preparation and yearly amendment of plans as a primary activity rather than the implementation of policies. They hope that we will oppose it. Events are not going to fit neatly into any annual planning cycle, and it is only sensible that we should have as much consultation as we can at ground level.
I am sure that the noble Viscount, Lord Simon, will accept the spirit of what I have said. The difference between us is one of means and not ends. I do not believe it will help to say in legislation that county councils must formally establish each year the views of all their many parishes—or parish meetings—which amount to several hundred in some counties. Many of them will in any case be content with the services they have, or reconciled to the absence of such services. As the noble Viscount recognised in the Second Reading debate this would be an immense task, and if we set counties an impracticable administrative task they will lose heart for the prime job of planning public transport. An injunction laid upon them to collect views once a year would also be less rewarding than the process I have outlined of developing continuing contacts between county councils and everyone else concerned with public transport, backed by the provision in the Bill that parishes and other interested bodies must be given an opportunity to comment on the draft public transport plan.
In short, my Lords, the Government view is that the answer lies not in elaborating the statutory framework but in explaining to all those who will be concerned with public transport planning how we think relationships should develop to meet local circumstances. That is something we will do in the Department of Transport circular which we shall be sending to local authorities and public transport operators when the Bill has been enacted. I will undertake to this House to see that this circular takes account of the points that have been made, and I hope that with that assurance the noble Viscount will agree to withdraw his Amendment.
6.15 p.m.
Lord O'HAGAN: My Lords, before the noble Viscount, Lord Simon, decides what he is going to do about this Amendment I hope that I may be permitted to say a word. We have just heard a formidable case against the Amendment presented by the noble Baroness, Lady Stedman, with her normal grace, efficiency and charm, so that it is hard to resurrect some of the points that the noble Viscount, Lord Simon, and my noble kinsman Lord Clifford of Chudleigh, put before the House earlier in the debate on this Bill.
This Bill erects an elaborate structure, and much of the debate about the Bill has not been about its purposes or its detailed content but the manner in which the structure can be made to work most efficiently. We have looked at the relationship of the county councils to the transport commissioners, and so on. Several noble Lords and noble Baronesses have stressed the need for feeling from the lowest level being allowed to percolate up to the top when plans are being made. Living in a rural parish in a new county, the County of Avon, which is trying to concoct a structure plan from that of previous counties, I am very conscious of the technical difficulties that many noble Lords have seen in putting this additional burden of consultation upon those who have to carry out the duties of running county council work, be they councillors or be they officials. At district council level the same difficulties apply.
I do not think that this is a subject—and I hope that the noble Lord, Lord Wigg, will forgive me—on which one can take a purely Party political view. It is a matter that your Lordships collectively are particularly qualified to look at in an all round way. Here we have something that is going to affect the lives of everybody—what is the best way of making sure that the public is truly served. On the one side there is the view of the Association of County Councils and district councils, and on the other side the case that I heard this morning from a colleague in another place, Mr. Newton, about a new plan that had come out for a bus route through a particular housing estate in his area that was going to be most dangerous for children, and nobody had been consulted as to whether that route should go through that housing estate.

1507
I shall not detain your Lordships any longer. If this Amendment goes into the Bill we are doing our job, which is to give the other place a chance to look at a proposal again. If it does not, we have had a useful discussion, and the noble Baroness has already said that it will be taken into account when the circular is being drafted. I hope that your Lordships will make up your minds individually and see how the balance of argument takes you. I think that this is a most valuable point to have discussed again, and I am grateful to the noble Viscount, Lord Simon, for giving us a further opportunity of looking at it.
Viscount SIMON: My Lords, I have listened with tremendous interest to this discussion. Before I come to the noble Baroness, Lady Stedman, may I reply to the other speakers. I think that the noble Lord, Lord Clifford of Chudleigh, underlined the lack in certain cases of a proper relationship between county hall and the parishes. I am sure that in some counties it works very well; in others I suspect it is not as good. The noble Lord, Lord Mottistone, asked me why subsection (4) does not answer the question. I think that that question of his was admirably answered by the noble Baroness, Lady Phillips. Nobody can deny that the opportunity of making observations after a plan has been drafted is nothing like as good as consultation before the plan.
The noble Lord, Lord Wigg, said that he felt that this Amendment was typically liberally woolly. Well, I must say in justification of myself that it is a bit woolly but this is because the noble Baroness, on Committee stage, said that it is the county councils' responsibility and it would be quite wrong to usurp their functions by prescribing the way in which it should be done. That is why I used the words that they should do it in any way that they thought best. This covers all the different methods that have been suggested. They may use the district councils or, as the noble Lord, Lord Wigg, said, the elected representatives of the people—and I think that would be a very good way of doing it.
The noble Baroness said that many councils had specialist officers who were quite capable of finding out this position. That may be, in their case, the best way of finding it out. All I feel is that we want
1508
to say in the Bill that the needs of these communities must be found out. I should have been prepared to consider the argument that the Amendment was unnecessary, except that it seems to be necessary because of the immense amount of resistance that is given to the idea that the views of the parish councils ought to be considered. I will come in a moment to the letter from the county councils.
The noble Lord, Lord Sandys, said this was not a perfect answer, and I could not agree more. I do not know that there is a perfect answer in this field, but if he has one to suggest I hope he will table it as an Amendment for Third Reading because I think we are all agreed there is a problem here and we want to find the right solution. The noble Baroness, Lady Phillips, made an excellent point which I think dealt with the matter raised by the noble Lord, Lord Mottistone, and I will say no more on that.
I now come to the remarks of Lady Stedman. Lord O'Hagan said she made out a formidable case and I agree it sounded a bit formidable, but she was, I am sure unwittingly, doing what is an easy thing to do when making out a formidable case against an Amendment; namely, shooting down certain things which the Amendment does not say. She argued in favour of continuing discussions and said that they were much better than formal discussions once a year. The Amendment does not suggest there should be formal discussions once a year; it suggests that, by whatever means the county council think best, they will ascertain from the parish councils and small authorities what the needs are.
The noble Baroness, Lady Stedman, said the existing contacts should be developed, and I could not agree more. Where there are existing contacts with parish councils—and we have heard that in certain counties there are some, either directly or through the associations of parish councils—by all means let those existing contacts be developed, but can anybody put his hand on his heart and say there are no county councils where there are no existing contacts that enable a proper understanding of the needs of parish councils to be reflected in county hall? I accept from the noble Lord, Lord Wigg, that that shows—I will not say

1509
which Party has elected the councillors to county hall—that some Party of which he does not approve has elected them. I am sure that it happens. It seems clear that it is laid down in the Bill that councils should in some way ascertain the needs of the communities (because if they do not do so they cannot fulfil the necessary provisions), but nobody has said how they propose to do that.
The letter from the County Councils' Association does not really help us in this. They just say it will be a tremendous amount of work; they raise the point that parish councils have the right to comment under Clause 2(4)—and I have tried to deal with that—and they rightly emphasise the number of parish councils there are. As I mentioned earlier, they themselves suggested that specialist officers could conduct surveys to ascertain the needs of users. If they do that and if they think that is the best way to do it, then they are complying with the spirit, indeed the letter, of the Amendment. Because there has been this furious

CONTENTS

Ailsa, M.

Gainford, L.

Northchurch, B.

Airedale, L.

Greenway, L.

Ogmore, L.

Alexander of Tunis, E.

Grey, E.

O'Hagan, L.

Allerton, L.

Hampton, L.

Rankeillour, L.

Atholl, D.

Harmar-Nicholls, L.

Saint Brides, L.

Barrington, V.

Hatherton, L.

Seear, B. [Teller.]

Bledisloe, V.

Inglewood, L.

Selsdon, L.

Broadbridge, L.

Kimberley, E.

Sharples, B.

Cathcart, E.

Kinnaird, L.

Simon, V. [Teller.]

Chitnis, L.

Lindsey and Abingdon, E.

Strathclyde, L.

Clitheroe, L.

Lloyd of Kilgerran, L.

Swinfen, L.

Crathorne, L.

Lucas of Chilworth, L.

Terrington, L.

Daventry, V.

McNair, L.

Torphichen, L.

de Clifford, L.

Mancroft, L.

Vickers, B.

Derwent, L.

Massereene and Ferrard, V.

Vivian, L.

Forester, L.

Melville, V.

Wade, L.

Fraser of Kilmorack, L.

Monson, L.

Ward of North Tyneside, B.

NOT-CONTENTS

Abinger, L.

Houghton of Sowerby, L.

Ponsonby of Shulbrede, L

Ampthill, L.

Hylton-Foster, B.

Rhodes, L.

Bacon, B.

Lee of Newton, L.

Roberthall, L.

Blyton, L.

Listowel, E.

Segal, L.

Brimelow, L.

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

Stedman, B.

Brougham and Vaux, L.

Stewart of Alvechurch, B.

Brown, L.

McGregor of Durris, L.

Stone, L.

Caccia, L.

Maelor, L.

Strabolgi, L.

Collison, L.

Milner of Leeds, L.

Taylor of Mansfield, L.

Davies of Penrhys, L.

Mishcon, L.

Teviot, L.

Fisher of Camden, L.

Morris, L.

Tryon, L.

Garner, L.

Mottistone, L.

Tweeddale, M.

Goronwy-Roberts, L.

Northfield, L.

Walston, L.

Gregson, L.

Oram, L.

Wells-Pestell, L. [Teller.]

Hale, L.

Paget of Northampton, L.

Whaddon, L.

Hamnett, L.

Peart, L. (L. Privy Seal.)

Wigg, L.

Hanworth, V.

Pitt of Hampstead, L.

Wilson of Radcliffe, L.

Hatch of Lusby, L.

resistance—I recognise that the noble Baroness has to speak on a brief from the Ministry of Transport, which is not her Department—perhaps they have been influenced by something the county councils have said, and we do not know what that might have been.
Baroness STEDMAN: The Department of Transport is my Department, my Lords.
Viscount SIMON: My Lords, I thought the noble Baroness knew a lot about the subject, and I can only congratulate her on the way she has mastered it. Withdrawing the remark I made about it not being her Department, I still think it is right to write this consideration into the Bill.
6.25 p.m.
On Question, Whether the said Amendment (No. 3) shall be agreed to?
Their Lordships divided: Contents, 51; Non-Contents, 51.
The DEPUTY SPEAKER (Lord Segal): My Lords, there have voted Contents, 51; Not-Contents, 51. There being an equality of votes, in accordance with Standing Order No. 53, which provides that no proposal to amend the Bill in the form which is before the House shall be agreed to unless there is a majority in favour of such Amendment, I declare the Amendment disagreed to.
6.33 p.m.
Lord DE CLIFFORD Lord DE CLIFFORD moved Amendment No. 4:
Page 6, line 19, at end insert—
("(3) In considering matters to be included in the plan county councils shall consult with neighbouring county councils to ensure as a priority that standard concessionary fares are granted throughout routes which run through more than one county.").
The noble Lord said: My Lords, after that very dramatic vote of the House I should like to draw your Lordships' attention once again to the matter which I raised on Committee. During the Committee stage the noble Baroness in her charming manner told me that I was trying to make county councils spend money which they did not have. I am coming back to this subject because I am not trying to make county councils spend money which they have not got. What I am trying to do is to ensure that when county councils draw up their plans for concessionary fares there shall not be gaps in the middle of routes which make it appear that people are going from a rich land to another land, and that the people who live in that other land cannot afford to pay to help their citizens to get these concessionary fares.
One of the things about which I feel very strongly is that the people who at the moment cannot get their concessionary fares are those who need them most. The people who get concessionary fares on through routes always get them because they are living in a rich council area, and the people who do not get them on these through routes, and who feel very strongly about this matter, are those for whom the councils say they cannot afford them. What I am asking here is that when councils consider concessionary fares in their plan, they shall give priority to the routes where concessionary fares are run by other counties, so that on one route we can have one standard concessionary fare for everyone. My Lords, I beg to move.
Baroness STEDMAN: My Lords, both the county and the district councils have powers to finance concessionary fares schemes but in practice the schemes are usually operated by the district councils. We know that there is a good deal of concern because travel concessions vary from one local authority to another, and we know too that problems do arise when passengers wish to make journeys that cross local authority boundaries, into areas with different concessionary schemes or none. We have asked local authorities to look at these problems in our recent circular on concessionary fares, and where an operator runs services in neighbouring authorities we have urged all these authorities to discuss the problems jointly with the operator. There will of course be more uniformity if all authorities bring their scheme up to the minimum of the half-fare concession which we have suggested in our circular.
The noble Lord asks that county councils should consult with their neighbours as a priority about this problem. We would argue that although the problem can be a serious one where a boundary, for example, divides a housing estate from its natural shopping centre, the problem is of much more limited concern where a long cross-country journey is involved, such as I believe was mentioned by the noble Lord at Committee stage, as to how we got from Ludlow to Birmingham with concessionary fares. The prime purpose of concessionary fares must be to cover the local journeys which are necessary to meet the day-to-day needs of the elderly and the handicapped, such as visits to the shops, the doctor, the post office, the hospital and so on. To cater for these trips must be our first priority and the additional funds which Government are making available are intended for that purpose.
Concessionary fares are not really intended for long-distance travel and the law confines those concessions to an authority's area and its "vicinity". In these days when resources are tight we should be doing the elderly and the handicapped little service if funds which are intended to help with daily needs had to he spread much more thinly to cater for long-distance travel. I would regret it if the noble Lord's Amendment distracted local authorities' attention from

1513
this basic need for the elderly and the handicapped. I do not wish to play down the problem he mentions, but I do not agree with him that this should be one of the top priorities of the counties. The first priority surely is to ensure that all pensioners have satisfactory concessionary fares for their local day-to-day journeys. At present, in more than 50 district council areas there are still no concessions at all and in more than 200 other districts they have concessions which meet less than half the cost of local bus fares—and that is the standard which we have urged local authorities to adopt.
I must ask noble Lords to reject this Amendment if the noble Lord insists on pressing it, because what we want to do is to encourage local authorities to put their own house in order before they turn to the problems of the long cross-country journeys.
Lord NORTHFIELD: My Lords, before my noble friend sits down, could she not offer help in one respect to the noble Lord opposite? In some cases a situation exists where people live in the country—I am familiar with this problem in Ludlow and all that area of Shropshire and the Midlands—and the town to which they would travel daily for shopping is in another district. So they are crossing boundaries, even in a district. Would it not be helpful at least to provide for some co-ordination to meet my noble friend's own point; namely, that we should be as helpful as possible about what we might call daily travel, rather than long-distance travel, when it covers cross-border activity?
Baroness STEDMAN: My Lords, with the leave of the House, I should say that this is the problem we have asked the local authorities to consider. Where it is necessary for their people to cross boundaries, they should have consultations with the other local authorities and with the bus operators. But we cannot ask local authorities, when they are so short of finance, and when we do not have any extra finance to give them, to use resources for concessionary fares for long-distance trips to the disadvantage of the elderly and the handicapped who want to get about on their shorter, local journeys.
Lord O'HAGAN: My Lords, the Amendment raises one of the most
1514
intractable problems in the present set-up regarding transport. Indeed, concessionary fares might well be top of the list of problems which would be suitable for your Lordships to consider in a Select Committee dealing with transport. Concessionary fares involve all the most difficult problems concerning the differences between transport as a service which pays its way and local needs, whether immediate or more remote, as well as the relationships of county councils with transport undertakings.
The problem cannot be tackled piecemeal, because it goes to the heart of the manner in which we in this country administer our transport system, particularly our bus system. In previous debates on Amendments to the earlier part of the Bill we expressed concern about the extent of the bureaucracy created by the development of TPPs on the lines that the Government have suggested, and so I believe that it is very difficult to support a proposal which appears to increase the amount of burden placed on a county council without offering any commensurate amount of income to deal with the work that would be involved. Moreover, as the noble Baroness has said, there is a responsibility on district councils as well, and they are not mentioned in the Amendment.
Perhaps at some future date the inherent inconsistencies within our system of operating, concessionary fares will throw up a need to examine the present system and the way it is organised, because there are the anomalies which have been referred to by my noble friend, as well as by noble Lords and the noble Baroness on the other side of the House. I believe that while that situation exists, it would be wrong to write into the Bill a requirement that county councils, as a priority, should look at the concessionary fares anomalies that arise across borders, because I suspect that in many cases the anomalies arise because of the nature of the views of the different county councils. Different county councils take different attitudes as to what are their responsibilities in these matters, and I suspect that very often all the consultation in the world might not necessarily lead to a great change in their attitude.
This is a subject to which we can return at Third Reading. My noble friend Lord de Clifford is noted for his persistence in

1515
applying himself to any topic on which he begins to develop a line of thought. It strikes me that the present Amendment is defective because it does not include district councils, and it is rather difficult to give a precise meaning to the phrase "as a priority" which imposes on county councils an obligation which, presumably, would be answerable at law, that they might find very difficult to discharge, especially when there are other, more pressing requirements with which they have to deal. I am sympathetic towards the intention behind my noble friend's Amendment, but I am not convinced that in its present form it would make an enormous difference to the problems on which he has focused his attention in bringing the Amendment to the House.
Lord DE CLIFFORD: My Lords, I have listened with great interest to the noble Baroness, who always puts her case so charmingly. She in fact said precisely what I had in mind and the noble Lord, Lord Northfield, also drew attention to the matter. I know that my Amendments are always defective because I am not very good at drafting them, but I am trying to get concessionary fares for local traffic on through routes. In my area there are people who have to travel from the area of one district council to that of another even to attend surgeries, and it seems completely incongruous that they cannot be granted concessionary fares while other people who travel the same distances on other routes can.
I am not trying to say that there should be concessionary fares the whole way on a through route from, say, Glasgow to Land's End. I was trying to say, though undoubtedly I have failed lamentably, that the local people who have to undertake local travel on through routes should be able to obtain concessionary fares which their neighbours may have. In view of what has been said, and bearing in mind in particular what the noble Baroness has said about drawing attention to this matter in letters to the councils, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 5 [Community bus services]:
6.48 p.m.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 5:
Page 6, line 32, at end insert—
("(2A) A community bus service may extend to the provision of excursions and tours as defined by section 159 of the 1968 Act.").
The noble Baroness said: My Lords, it might be convenient to the House, especially at this late hour, if I speak at the same time to Amendments Nos. 6 to 9, 12 and 16, as well as to No. 5, because they are all concerned with the same basic point. The main purpose of a community bus is to provide a regular public transport service to meet the everyday needs of the local people. But even with the economies that are achieved by using volunteer drivers rather than paid professionals, experience shows that the revenue from these basic stage services is not enough to meet all the costs of running the vehicle, in particular the capital cost and depreciation. So subsidy from the county council will be necessary. I am sure the House will agree that it should be kept as small as possible, for the morale of the organisers, as well as for the benefit of the ratepayers. The existing community bus groups have kept their overall deficit down by operating a few excursions and tours, and by contract hire on a very modest scale. The revenue they gain from these sources helps to subsidise the less remunerative, but essential, stage services which they run.
We had thought that Clause 5 was sufficiently widely drawn to allow the traffic commissioners to authorise the community bus to run excursions and tours, and certainly this had always been out intention. However, it now appears that the drafting could be more narrowly construed, and so we propose in Amendment No. 5, which is a largely technical Amendment, to make it absolutely clear that excursions and tours are in fact covered. At the same time it is becoming increasingly clear from the evidence we are now getting about the finances of community buses, that private hire is an equally important source of finance. As the clause is drawn at present, a community bus would still need PSV licences for the vehicle itself and the driver before it could undertake contract work. This is because the exemptions in subsection (4) apply only when the bus is being used in accordance with a road service licence, or a permit; and private hire is not authorised by a road service licence or a permit, but solely by PSV licences.
Although the community bus operators could have got round this obstacle by advertising their private hire services, or by some other technical device which would have required them to have a road service licence, we think that this is an unduly bureaucratic, and almost underhand, way of proceeding. So, even at this late stage, it is better to face the problem squarely and to provide for it specifically in this Bill. This we do in the new clause, Amendment No. 9, and in Amendments Nos. 6 and 8, which are simply paving Amendments to the new clause.
The new clause provides that the traffic commissioners can authorise the community bus to do private hire work, but incorporates a number of safeguards. The primary purpose of community bus groups is to provide stage services, and anything else must be ancillary to them. So, first, the community bus can do private hire work only if it is authorised to do so by the traffic commissioners, and they have powers under subsection (1) to impose such restrictions, if any, on the private hire operation as they think fit.
Secondly, subsection (2) provides that the vehicle used must be the same one which is used on a regular basis for the community bus service itself, so that the organisers cannot employ an additional vehicle solely for private hire work. Thirdly, subsection (3) provides that the traffic commissioners have to be satisfied before authorising operations as a contract carriage that this is reasonable in all the circumstances with a view to financial support of the community bus service.
The other Amendments to Clause 5 and the Amendments to Clause 7 and Schedule 2 are purely technical. They provide, for the avoidance of doubt, that the vehicle disc referred to in subsection (5) of Clause 5 has to be issued by the traffic commissioners, and that regulations made under Section 160 of the 1960 Act can cover the procedure governing applications for and the issue of the disc. The disc is the visible sign that the vehicle is properly authorised by the traffic commissioners, and it is particularly important that there should be no doubt about its authenticity if the community bus is also to be allowed to operate for private hire. These Amendments will widen the scope of the community
1518
bus's activities and improve its viability by further relaxations from licensing restrictions, while providing the necessary safeguards for existing operators, and I therefore commend them to the House. I beg to move Amendment No. 5.
Lord LUCAS of CHILWORTH: My Lords, I am sure that one can appreciate the purpose behind this Amendment and accept it, but there are one or two points which arise on it. I cannot understand why there should be the description in Amendment No. 9, where it says, in subsection (2):
"'The community bus' means any vehicle (being adapted to carry at least 8 and at most 16 passengers) …".
When the noble Baroness winds up, could she explain the mystique of the number 16? It was not so very long ago that vehicles of this type had a carrying capacity of 14 passengers, but modern design and construction has enabled additional use to be made of space, and so one gets 16. In fact, most vehicles of this type carry 17 people if you include the driver. What actually is a passenger? Because if you have longitudinal seats, some people may say that, as they are not divided, schoolchildren may count as half, and so on.
Something else I should like to know arises on the same Amendment, in subsection (3). The noble Baroness said that there shall be provision to ensure that an additional vehicle is being used. What happens if this community bus service develops itself into something of a regular route, running operation? One can envisage three times a week shopping from an outlying village into the city. If for any reason that vehicle is off the road, does it mean that the licence-holder has to go to the commissioners and get a substitution, or will the permit be transferable to another vehicle which may be hired for the express purpose of carrying out the work which the community bus would normally do? One accepts, of course, quite easily, that there must be some provision to ensure that the licence is not extended until a whole fleet of buses is running, but there seems to be some little difficulty here and, particularly with the kind of people operating the service, this may prove too much of a drawback.
Lord TEVIOT: My Lords, I am in agreement with Amendment No. 5, but

1519
with Amendment No. 9, together with its appendages, Nos. 6 and 8, the paving Amendments, I am afraid I am not happy. It is unfortunate that an Amendment of this nature should come before your Lordships' House at this late stage of the Bill. I agree that to some extent this is the pot calling the kettle black, because I introduced some Amendments only at a late hour yeterday; so I cannot say very much other than what I have just said. I say this, not in the spirit of the Amendment, which is something with which we are all in sympathy, but because it cuts across a basic principle of licensing for public road transport. This introduces the idea of a licence for private hire work granted through the road service licensing system.
In Part III of the Road Traffic Act 1960, licensing is dealt with in two ways. First, the vehicle and its owner are approved by the means of a public service vehicle licence; but, then, if passengers are to be carried as separate fares, a superior form of licence, a road service licence, is also required. One deals with the vehicle, the other with its operation. In this Amendment we have a confusion of the two systems. It is as if the Government were to say to a motorist, "You do not need a vehicle Excise licence", which enables him to put the car on the road, "provided that your driving licence is endorsed to the effect that you have paid the equivalent duty". It seems to me that this is nonsense, but it is a close parallel to what is proposed today; that is to say, the community bus is excused from PSV licensing but can undertake the basic work of a PSV, which is private hire, provided it has a road service licence which is endorsed for that purpose.
Here, my Lords, I am going to make certain remarks which are perhaps out of character, for I feel rather strongly about what I am going to say. I submit that if I had produced an Amendment of this nature it would have been ridiculed by the Government, whose Parliamentary draftsmen seem to think that there is some special mystique (and I use that rather over-played word which my noble friend has just used) in the language they use which is not available to we lesser mortals. On the contrary, it seems to
1520
them that their words mean, like Humpty-Dumpty and Alice, just precisely what they intend them to mean—no more, no less. Here we have a good idea but a bad Amendment. More important, I suggest that the type of work which it is intended that these community buses should undertake to augment their revenue from such services is not in fact genuine private hire because it involves the payment of a contribution—in other words, a fare—by each person travelling on a journey. In truth, this is excursion travel, and it is already very well covered by Amendment No. 5, which I hope your Lordships will agree.
I submit that Amendment No. 9 and what goes with it is not necessary, and that the unsuspected implications of its devious logic require further consideration. I ask the noble Baroness to withdraw it so that we may all have the opportunity to consider the correct way to assist community buses to achieve the success that we all wish them.
Lord O'HAGAN: My Lords, I should like to give a qualified welcome to the Amendments to which the noble Baroness has spoken. On the other hand, I am pleased that she has brought them forward, because I regard them as paving Amendments to my Amendment No. 11. The logic, about which she has talked so much at various stages of this Bill, in transport and in the transport policy of the Government, which moves her to introduce these Amendments, must lead on to her acceptance of Amendment No. 11. For that reason I am delighted.
I am also pleased that the Government are looking in detail at the best way of making the system of transport that we have in this country developed and evolved to cope with changed circumstances. In so far as these Amendments represent a development of view in the Department of Transport as to how the community buses can be made viable, I welcome that attitude. But I must share with my noble friends who have spoken a concern that a new part of the Bill of this complexity and importance is introduced at the Report stage in this house, because, as my noble friend Lord Teviot has said, there are many parts of it which need detailed examination. The Association of District Councils, for example, is not happy with

1521
some of the consequences it sees as likely to flow from this group of Amendments.
I will not weary the noble Baroness or the House with details as to their anxieties, but their anxieties are voluminous and not restricted to a single point. I do not wish to detain the House at this stage. We shall study with care what the noble Baroness has said, and what she will say in a minute or two, but it is difficult for those not in Government to cope with a complex group of Amendments of this sort at this stage of the Bill; and, therefore, while accepting the principle which she has said underlies this series of Amendments as something wholly praiseworthy, I hope it will be your Lordships' view that I can reserve our position on the Amendments themselves for we have not had time to look at them properly. Whereas the noble Baroness has a battalion of civil servants, we have only the backs of envelopes.
Baroness STEDMAN: My Lords, the noble Lord, Lord Teviot, suggested that it is wrong to introduce major changes at such a late stage and that it might have been better to wait and even perhaps legislate afresh on these points. But the problems of rural areas cannot wait, and I think we would rightly be accused of doing only half our job if we were to leave these problems unattended to. The noble Lord, Lord O'Hagan, gave a qualified welcome to it as tidying up the Bill and making it workable in principle.
The provisions on private hire are fully in accordance with the principle we have followed throughout of allowing as much flexibility as possible while enduring that adequate controls remain to prevent abuse. There are safeguards which will protect existing local operators and I am sure that the traffic commissioners can be trusted to discharge their functions impartially and wisely so that no one suffers, but the community as a whole benefits.
It is surely only natural that if the local Women's Institute—who may be very much involved themselves, even as drivers of the community bus—want to go on an outing and no services are available in the area, they should use their own community bus to do so and should be able to help subsidise or finance that service. That is what we are providing for, and I think it is a totally justifiable
1522
and indeed essential extension of the provisions that are already in the Bill.
Perhaps noble Lords have fears that, if we let the community buses run what may be termed contract service without having PSV licences, we might be creating unfair competition with the regular operators. This would be undesirable and it is not what we want to do. It would be wrong to permit a free for all. That is why we put the safeguards into the new clause and ensured that the community bus can only do contract work if the traffic commissioners are satisfied that this privilege is not going to be abused. We could have encouraged the community bus groups to find a way round the problem by some technical device which might have brought them within the scope of the road service licensing. But the question of private hire ought to be considered fully and openly, as it will be under the new clause. We did not want to do anything devious or underhand, which is why we brought in the new clause.
The noble Lord, Lord Lucas, asked what was the mystique about the limit of 16 seats. It is something like the mystique of the Parliamentary draftsmen where they have their own legal language. This is the only mystique about it. So far as the limit of 16 seats is concerned, this is the same as is imposed in Section 5(2) of the Minibus Act. The basic reason for this is that vehicles which are larger than 16 seats have different handling characteristics from those of the minibus and we do not think that the licence relaxations we propose in this Bill are appropriate for the larger vehicles.
The noble Lord also asked about the question of a new vehicle to replace the community bus which was off the road for any reason. There is no reason why the local community cannot apply to the traffic commissioners for more than one vehicle to he authorised to run on a regular community bus service, the second vehicle to be a standby vehicle. The point of the restriction which is put into the new clause is to provide that vehicles are used solely for the purpose of tours and excursions and solely for private hire. It does not preclude the possibility of a standby arrangement.
We accept that the industry has grown accustomed to the established procedure

1523
whereby it is the PSV licences alone which control private hire. They may fear that these new provisions are going to create some precedent for much wider changes in the licensing system. Such fears are groundless. The provisions are quite specific for the particular circumstances of the community bus. They have no wider connotation, and no wider connotation should be read into them.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 6:
Page 7, line 5, leave out ("in accordance with this section").
The noble Baroness said: My Lords, I have already spoken to this Amendment. I beg to move.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 7:
Page 7, line 21, leave out from ("document") to ("used") in line 22 and insert ("issued by the traffic commissioners as may be prescribed for a vehicle").
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 8:
Page 7, line 25, leave out ("virtue of this section") and insert ("the road service licence or section 30 permit").
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 9:
After Clause 5, insert the following new clause:
Use of community bus for contract work
(".—(1) A road service licence or section 30 permit authorising the provision of a community bus service may be granted so as to authorise the use of the community bus as a contract carriage, subject to such restrictions (if any) as the traffic commissioners think fit to impose.
(2) "The community bus" means any vehicle (being adapted to carry at least 8 and at most 16 passengers) which, whether or not belonging to the holders of the applicable road service licence or permit, is used on a regular basis for the purposes of the service.
(3) The licence or permit shall not be granted with an authorisation under subsection (1) unless the commissioners are satisfied that it is reasonable in all the circumstances with a view to financial support of the service.
(4) Section 5(4) and (5) of this Act apply to any use of the community bus as a contract carriage in the same way as they apply to any other use of it.
(5) This section and Part III of the 1960 Act shall be construed and have effect as if this section were contained in that Part of that Act.").
Clause 6 [Car-sharing for social and other purposes]:
7.8 p.m.
Lord LUCAS of CHILWORTH Lord LUCAS of CHILWORTH moved Amendment No. 10:
Page 9, line 6, at end insert—
(" (4) Section 145 of the 1972 Act shall be amended so as to add at the end of subsection 145(4)(b) the words "other than any such liability within the provisions of section 6 of and Schedule 1 to the Transport Act 1978 relating to car-sharing for social and other purposes".").
The noble Lord said: My Lords, this Amendment takes us back into the area of the insurance provisions under the car-sharing arrangements. Your Lordships will probably recall that during the Committee stage I expressed some doubt as to the validity of the undertakings which were provided by the Motor Conference in respect of insurance in the case of car-sharing. I should say immediately that the Motor Conference have been most generous in explaining to me exactly what their undertakings meant and, to a very large extent, they satisfied me. However, probably like the noble Baroness, or somebody in her Department, I have attempted to find out what is an "element of profit".
It was upon that that I could foresee some disagreement at an unfortunate stage where perhaps a claim was made and the insurer might decide that this element of profit had been reached and therefore the insurance was invalidated. The noble Baroness probably had the same difficulty as I have. It is almost impossible to define. But, on the way, I found out that I was dealing with a very complicated matter. On the one hand, we have the insurance company's responsibility in the matter of the car-sharing insurance arrangements; and, on the other hand, we have the law.
If the local school should say to me: "Please will you take five or six children

1525
in your car to play rounders in the New Forest on Saturday afternoon? We will give you some petrol money", I am perfectly entitled to do that without breaching an element of profit. In the event of my having an accident and there being claims against me for death, disfigurement or injury to the children—which might amount to substantial sums of money which I do not have—the Motor Insurers' Bureau will cover me under their "safety net" arrangements. If my own personal policy is sufficiently wide, that may cover it also. But it is probable that my own insurance company and the Bureau may come to some arrangement.
However, suppose for example the insurance company say: "I am very sorry, Lucas, we do not think, because of the amount of money you had "—or for some other reason unknown at this moment—"that you were engaged in a proper car-sharing arrangement. Of course, we understand our responsibilities so far as third parties are concerned, so you do not have to worry about that. But, so far as you and your motor car are concerned, we are sorry but the policy is null and void". Whereupon, the policeman comes on the scene and says, "Lucas, you have caused a traffic offence. You have been involved in an accident and we are going to charge you with dangerous driving, with driving without due care and attention and, in addition, we are going to charge you with being in breach of the law in so far as you have invalidated insurance cover".
While the insurance company can be fairly generous in the attitude that they take towards any claim I may make, the policeman cannot be so generous; he has to accept the letter of the law. If I do not have an adequate insurance cover I shall have to be prosecuted and undoubtedly will be found guilty. From the information given to me and the advice that I have taken, I believe that this Amendment is intended to provide an addition to the basic requirement of insurance, in that anybody on a car-sharing arrangement, whether or not approved by an insurance company but certainly within the terms of the Bill, will be covered. That is all it attempts to do.
In some respects one can draw a parallel to the kind of discussion I imagine went
1526
on in the 1930s when the question of compulsory insurance was first discussed. Very many opinions were offered, suggestions were made, drawn and withdrawn. At the end of the day death and injury liability were the minimum that could be included. Insurance policies today are very complicated. They have changed enormously. There is little doubt in my mind that the average man or woman, on being asked one Friday night: "Could you take the kids to a party on Saturday? We will give you the petrol money", is unlikely to contact his insurance company or broker, even if he can get hold of them on a Saturday, and say, "If I take the children to a picnic am I covered under car-sharing arrangements?" Even if the answer is "No", he will still wonder whether he can do this. The majority of people will just go and do it.
This whole question of insurance was debated at great length in the other place in Standing Committee and during Report stage. I hold the view expressed by honourable friends that the Government have got themselves into something of a jam here. They have accepted the advice which the Motor Conference have given, of course, in very good faith. I do not think that they have thought the matter through. If they are going to make car-sharing arrangements, they should ensure that all those people who might reasonably expect to undertake this task should be covered by insurance. There is only one way to do it; that is, to have a statutory requirement as a basic minimum. It is upon that basis that I beg to move this Amendment.
7.16 p.m.
Lord DAVIES of LEEK: I listened with interest to the noble Lord's constructive Amendment. I grant that my noble friend, the Government and whoever may have to deal with this have a difficult problem. The insurance industry do not want to go beyond mere petrol money because they fear that there might be quasi-taxi operations with private car policies carrying passengers. Such operations might increase. Nevertheless, those operations are outside the relaxation allowed by the Amendment. They would include public service vehicles, Without knowing completely how this could be worked out, in view of the growth of the number of cars and the needs of rural

1527
areas, and the example which has been given regarding carrying children, there should be some insurance to enable an innocent person to be covered.
I do not think that this Amendment should be passed aside easily. I believe there is a reality in the enigma, conundrum or problem that is posed. I am not qualified in these matters and cannot think how we can find an answer to this problem. The last words uttered by the noble Lord, Lord Lucas of Chilworth, that the Government may have got themselves into difficulties make me think that we should restudy the problem and see whether we can get effective cover for a person who is carrying out what is often a gracious job and helping in real difficulties. In nine times out of ten it would not be undertaken with the simple objective of making money. It could easily be proved if the object was to run as a private taxi service. Consequently, I hope that my noble friend would lend a sympathetic ear to the Amendment which has been so ably tabled by the noble Lord, Lord Lucas of Chilworth.
Lord SANDYS: I should like to support my noble friend who has given us a clear illustration of the problem. I am glad that he is supported by the noble Lord, Lord Davies of Leek. This continues a theme emphasised by the earlier Amendment of the noble Viscount, Lord Simon; that is, the need for reinforcing rural transport. In committee, we listened with interest to what the noble Baroness had to say in regard to the statement made by the Motor Insurers' Bureau.
The noble Baroness set out the statement, which went a certain distance; but as with all insurance policies, there was some small print at the end. I should like to emphasise this, because it relates quite particularly to what my noble friend said. This was the note that was appended, if I may be allowed to quote it again:
"If in any doubt whether a car-sharing arrangement is or is not covered by the terms of a private car policy the policy holders concerned should make an inquiry of their motor insurance".
That is the very problem that the noble Lord, Lord Lucas of Chilworth, identified so clearly with his excellent example of an every-day occurrence. The very business of contacting an insurance broker or the company itself lays a very considerable
1528
time problem on the person who has been asked to undertake a journey, perhaps at very short notice. The Amendment of the noble Lord, Lord Lucas, will overcome this and, as he rightly said, will give statutory backing to the provisions. I believe it deserves very serious consideration.
Baroness STEDMAN: I am always willing to give serious consideration to points raised from the Benches opposite and we have given a lot of consideration since the Committee stage to this question of insurance. I was happy to learn tonight from the noble Lord, Lord Lucas of Chilworth, that he was at any rate reasonably reassured following his discussions with the Motor Conference and that he accepted our view that the proposals made do meet the need for clarification as far as private motorists arc concerned. However, I believe he is still concerned about the question that he raised at Committee stage as to what is an element of profit and how one describes it. He, as I have, has come to the conclusion that it is a very difficult thing to define and to describe.
We have given a lot of thought to it and we do not think we should be rendering any real service by seeking to insist on a very high degree of precision at the global level, as it were, as to what constitutes an element of profit. We need to look at the matter in the context of the way in which the motor insurance industry works. I am indebted to the Motor Conference for having supplied me with some information about this. It will be known already to some of your Lordships, but I think it does bear repetition because it illustrates the problems that are inherent in generalisations about insurance. Incidentally, it highlights the very considerable achievement of the insurers in coming forward at all with the undertaking about car sharing.
As I understand it, there are approximately 65 insurance companies and groups of companies transacting motor insurance business and 39 syndicates at Lloyd's. Each is an independent entity from the point of view of the rates of premium they charge, the cover given by their policies, and their methods of operation. This independence is very jealously preserved and competition between them ensures that the motoring public has an adequate

1529
choice of insurance covers at reasonable rates of premium.
Despite this independence, I understand that almost all the motor insurance companies and all Lloyd's syndicates belong to trade associations which are, in the case of companies, the British Insurance Association and the Accident Offices Association and, in the case of syndicates, Lloyd's Motor Underwriters' Associations. All motor insurers also subscribe to the Motor Insurers' Bureau, which was set up to enter into certain agreements with the Government relating to cases involving uninsured motorists and untraced motorists. The Accident Offices Association and Lloyd's Motor Underwriters' Association exist for the advancement and protection of the interests of their members on matters of common concern in relation to the technical and commercial aspects of motor insurance. While they do not encroach into the area of rates of premium or the cover given for the premiums charged by their members, they do provide a forum for the discussion of matters—such as legislation—which affect all motor insurers in equal measure. The Motor Conference acts as a market forum representing both insurance companies and Lloyd's Syndicates in the form of a Standing Joint Committee of the AOA and LMUA, much in the same way as the touring clubs come together in the Standing Joint Committee of the AA and RAC.
Noble Lords will appreciate—as I am sure the noble Lord, Lord Lucas, does—that against this background there are difficulties in drafting criteria that would be universally applicable and leave no need at all for exercise of judgment in relation to the circumstances of any one of a myriad of private contracts. As I understand it, what the insurers have therefore done is to pinpoint a factor that in a general sense would separate the typical situation, where a motorist gives people lifts from motives of neighbourliness and they contribute their share of the costs, from that where he stands to gain financially from sharing his car. As they see it, the facts of the particular case are, as always, what matters, however precise the general formula under which the question has to be posed and answered. I can see that the greater the precision, the more difficult it is to reach an equitable and commonsense
1530
answer in the marginal case—and the more marginal cases arise.
I am satisfied that the ordinary motorist will have no real problem in grasping what the undertaking is driving at, or in deciding whether he ought to have a word with his insurers to be on the safe side. I am sure that public-spirited people, like the noble Lord, Lord Lucas, do not just once in a lifetime take other people's children to play rounders in the New Forest, and this is something he will have checked with his insurers. The insurers, on their side, agree that they will tell every policy-holder about the undertaking, as their policies come up for renewal, that passengers are required by the present law to he covered by insurance against personal injury, whatever the use of the vehicle or the conditions under which people are carried. Neither the provisions of this Bill nor the proposed Amendment would have any effect upon these requirements.
I hope that, in the light of these considerations and the explanations as to how the motor insurance business does work, the formula in the undertaking will be accepted as a sensible and workable one and ought in practice to cause no difficulty to the ordinary motorist. I hope, in the light of that, the noble Lord might consider withdrawing his Amendment.
Viscount SIMON: Before the noble Baroness sits down, there is one aspect I should like to ask about. She referred to the drivers offering lifts and said that they should not gain any financial advantage. That seems to me a little different from the suggestion here that it should not contain an element of profit. After all, if someone is driving from A to B anyway, if he gives three people a lift and they contribute to his petrol, he is getting a financial advantage. He cannot avoid it.
Baroness STEDMAN: That is illustrative of the difficulties we get into in trying to define an element of profit or a financial advantage. There are marginal cases and it is very difficult. We think the motor insurers' industry have gone as far as they can in the undertaking which they have given to us, and, in fact, as I said on Second Reading, they have gone further than we had hoped in our initial negotiations with them. I hope noble Lords

1531
will accept that the Amendment would not alter the terms of the Bill, that the motor insurers are satisfied and that the Department is satisfied that they have covered the points we wanted them to cover.
Lord LUCAS of CHILWORTH: I thank the noble Baroness for her response, which I must say is perhaps a little as I would have anticipated. She is certainly right in her understanding that, to a degree, the Motor Conference had satisfied me, particularly so far as large claims for third parties were concerned. My noble friend Lord Sandys referred again to the small print—this caveat right at the end, which suggests that the insured shall check with his company. Again, the noble Baroness referred to that when she said that the insurance companies have agreed to advise their clients, on renewal or at some convenient time before, that they should check this point. However, if you did all the things that you are exhorted to do on the pieces of paper that float through the letterbox during the lifetime of an average person, concerning gas, electricity, fire insurance, theft and so on—that is a fair mouthful, without even stopping to think—you would be running round asking people things every day. No, of course, the truth is that people do not do this. The truth is that they never realise that they should have done it, until it is too late. That is what really happens.
On a rather kinder note, if I were in the insurance business I would recruit the noble Baroness as soon as she left the Front Bench—and let us hope that she and her colleagues leave it fairly shortly—into the insurance world, because I have never heard such a splendid sales pitch for the insurance industry as she has given. It was absolutely magnificent. But she did not answer, in any shape or form, the point that I made; that is, where does a man stand vis-à-vis the law, in the event of the insurance company saying "I am sorry, but you are not covered under this car-sharing arrangement, because XYZ caveat" or something else "has not been adhered to"; and if a policeman comes along and says" "I am sorry, but you cannot drive your motor car without proper insurance. I must prosecute you"?
I do not want to delay the House, but I am sufficiently confident that the
1532
Government have not thought this through. They have not even offered to give further consideration to this matter. They think that the insurance companies, through the Motor Conference, have done all that, and more than, they should be required to do, and that the average motorist would he adequately covered. I am not so satisfied, and I do not believe that my noble friends on this side of the House think so either. I suspect that there may be at least one noble Lord on the other side of the House who would like to agree with me. Therefore, I feel that I shall have to press the Amendment.
On Question, Amendment negatived.
7.32 p.m.
Lord O'HAGAN Lord O'HAGAN moved Amendment No. 11:
Page 9, line 6, at end insert—
("(4) For the purposes of Part III of the Road Traffic Act 1960 a private vehicle shall not be treated as being a public service vehicle by reason only of the carriage, otherwise than in the course of a passenger transport business, of passengers in consideration of payment in respect of, or contributions in cash or in kind towards the expenses incurred in the provision or maintenance of, or of fuel for, the vehicle.
In this subsection "private vehicle" and "passenger transport business" have the meanings given by section 2(9) of the Passenger Vehicles (Experimental Areas) Act 1977.").
The noble Lord said: My Lords, we return to the topic of car-sharing, and this time under a slightly different heading. In their White Paper (Cmnd. 6836) the present Government said that, in addition, the legislation will remove restrictions which make it illegal for car drivers,
"…to make charges when they give lifts. These restrictions have probably had little effect, in practice, on private arrangements between neighbours. Rut they prevent the taking of payment for such organised arrangements as the Women's Royal Voluntary Service social car schemes. Payments by passengers could not only help to finance such schemes but also make them more acceptable to people using them".
We are all familiar with the sight of endless queues of cars coming into major towns and cities, with one person in the driving seat and all around him vacant seats in which passengers could be sitting. It is the Government's policy that car drivers can make charges for the lifts that they give, and it is to overcome the wasted numbers of journeys undertaken by motorists, with empty passenger seats around them, causing traffic queues and

1533
congestion, that I am seeking to insert this Amendment into the Bill.
The Amendment as drafted is complex and is not at all easy to understand. I readily admit that if the mystique of the Parliamentary draftsman—as my noble friend Lord Teviot described it—had been applied to the purposes for which I am moving this Amendment, it would no doubt have been clearer. But what I have tried to do is to use the Government's language. I have used the wording from the Passenger Vehicles (Experimental Areas) Act 1977, because that is a recent Act and it is an Act which this Government introduced. By using their words, I have sought to extend their policy which I have outlined by reading from their White Paper. I want to make it possible for commercial car-sharing to be within the ambit of the Bill.
Earlier on in our proceedings, we heard from the noble Baroness, Lady Stedman, how the Government have decided that a certain amount of fund-raising activities should be permitted to community buses. They have decided that that is the right thing to do and they are doing it. We have agreed to the Amendments. On the other side of the fence, it is right that, if a new type of arrangement is to be allowed by this Bill—that is, car-sharing—as well as the statutory bodies, the local authorities and the voluntary schemes, there should be some freedom for private enterprise to experiment, to "have a go", to take on problems that have not been dealt with by the existing transport services. This is a principle in which the Government themselves believe. They introduced the Passenger Vehicles (Experimental Areas) Act. This proposal is an attempt to take that view further and to make legal car-sharing on a commercial basis. It fits in with the Bill and I hope that the Government will accept it. My Lords, I beg to move.
Lord TEVIOT: My Lords. I am extremely sorry, but I am afraid that I am unhappy about my noble friend's Amendment, as I was with the noble Baroness's Amendment No. 9, although for rather different reasons. First, it seems to me that the proposed subsection covers, and goes beyond, the remainder of the provisions in Clause 6 and Schedule 1. It
1534
offers carte blanche for a private motorist to undermine the bus and coach industry in this country, which is hardly the intention of the Bill. As I recall, the noble Baroness assured the noble Viscount, Lord Simon, in Committee that this Bill would enable people to convey their fellows to and from their work. I am not sure whether she was right, and I am still seeking further advice on this point.
Nevertheless, if the Bill were to confer this freedom, the present Amendment would enable anyone to buy an old double-decker bus in which, apart from driving himself to work, he could convey perhaps 50 or 60 of his fellow workers. It seems to me that if the noble Baroness was right in the distinction between social and business transport—and until the contrary is shown to be the case I must accept that she is right—such an operation is quite within the terms of the Amendment, though I am sure that it was not in the mind of my noble friend. The Amendment goes altogether too far and I hope that, on consideration, he will withdraw it.
Baroness STEDMAN: My Lords, the noble Lord indicated that in putting down this Amendment he was seeking to ensure that the Bill reflected what the White Paper on Transport Policy last year said as to the Government's intentions on car-sharing. The noble Lord and I must read different things in, or into, the White Paper. Paragraph 155 said,
"…the legislation that the Government will bring forward will remove restrictions which make it illegal for car owners to make a charge when they give lifts".
Lord O'HAGAN: Is it drivers or owners?
Baroness STEDMAN: I said that it was,
"illegal for car owners to make a charge when they give lifts".
It went on to explain that, in practice, these restrictions probably had little effect on private arrangements between neighbours, but did inhibit organised social car schemes such as those run by the Women's Royal Voluntary Service. As I explained during the Second Reading of the Bill in this House, Clause 6 and Schedule 1 achieve what the White Paper proposed; first, by removing the historical

1535
anomaly that forbids regular informal car-sharing for payment; and, secondly by allowing social car schemes to be advertised.
So far as car-sharing is concerned, the Bill's provisions already cover the area with which the Amendment seems to be concerned, and without the rather complex wording about contributions to expenses. They simply provide a revised set of conditions to be fulfilled in order to qualify for the exemption from public service vehicle licensing, which is conferred on smaller vehicles carrying fare-paying passengers by Section 118(1) of the Road Traffic Act 1960. As for the ordinary private motorist who wants to share his car and his costs, the conditions are: no more than seven passengers, and no advertisement to the public, except where, in the case of a social car scheme, the local authority and the traffic commissioners have given their consents.
But there is a sting in the tail of the Amendment. The noble Lord says that he has taken the definition of a "private vehicle" from the Passenger Vehicles (Experimental Areas) Act. The proposed new subsection seeks to give its own form of licensing exemption to vehicles seating up to 16 passengers. This is not something which the Government are advocating, although it is something which was urged upon us during debates on the Bill in another place.
Perhaps some noble Lords think that private vehicle size is not significant and that we ought to give the same treatment to minibuses as to cars, but there are significant differences between the two kinds of vehicles and they are, in effect, recognised by the different provisions in the Bill. Clause 5, on community bus services, deals with minibuses. So far as seating capacity is concerned, noble Lords will notice that minibuses start where the car leaves off. This is not pure coincidence. The clause recognises that minibuses, because of their size, have a far greater potential to affect ordinary licensed bus services when they are used for other than purely personal transport and must remain subject to road service licensing control. In this way, the traffic commissioners can consider on its merits the case for their use in particular circumstances where they are able to fill a need.
1536
Clause 5 also recognises that certain safety requirements over and above those that are applicable to cars are desirable, and it makes provision for standards to be prescribed for both drivers and vehicles. In a similar way, the Minibus Act 1977, which governs the use of these vehicles for specialised groups of people by voluntary bodies and such-like organisations, provides for driver and vehicle standards to be laid down. We were told in the other place that "van-pooling", which I understand is a transatlantic way of describing some applications of minibus sharing, has many virtues to commend it; but conditions in other countries are not necessarily the same as they are here, and we should be wary of drawing conclusions that take account of different circumstances. In this Bill, we must pay regard to our own situation in assessing the value of particular forms of transport provision.
I suggest to your Lordships that. this Amendment would confuse the situation in regard to car-sharing. We also think that it would destroy the concept of the community bus which is embodied in the Bill for the sake of extremely doubtful and perhaps even illusory advantages. It is not an Amendment which I can commend to the House, and I hope that the noble Lord will either take it back for further consideration or withdraw it altogether.
Lord O'HAGAN: My Lords, I think that the Government are adopting a rather blinkered attitude to this subject. When it comes to community buses, their thoughts progress and they take some note of points that are brought to their attention, but when it comes to something that is outside the public sector they shut the door much harder, fiercer and tighter. While I appreciate that whatever is contained in the Bill will have an effect on the existing transport provision and that any Amendments made to the Bill will affect the balance of advantage gained by particular types of operator, I do not think that the argument of the noble Baroness against a commercial type of car-sharing is by any means compatible with the arguments that she advanced earlier in the evening about extending community bus services. The argument which the noble Baroness is putting forward is quite plain. It is one rule for those who arc part of the existing structure of local or central

1537
Government and another for everybody else. The Government will encourage the one to experiment but not the other.
I accept that this is a bit of a late night, last minute Amendment and that it is by no means perfect; it has plenty of things wrong with it. I shall certainly take it away and have a think about what the noble Baroness has told the House tonight. However, I warn your Lordships collectively that the smoke thrown up either by existing operators or by the transport department about this subject needs to he penetrated, because it conceals an antipathy towards schemes similar to that which has already been developed by the local authority for one particular area and which is considered to be quite compatible with existing arrangements. I can tell the noble Baroness that I have no commercial interest in this scheme.
I feel that we should take the opportunity that this Bill provides to look at a whole range of new transport mechanisms to deal with new transport needs. In the meanwhile, I shall keep my temper and withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 7 [Road service licences and permits]:
7.46 p.m.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 12:
Page 9, line 12, after ("commissioners") insert ("and related matters").
The noble Baroness said: My Lords, I spoke to this Amendment when I moved Amendment No. 5. I beg to move.
Lord O'HAGAN Lord O'HAGAN moved Amendment No. 13:
After Clause 10, insert the following new clause:
National policy for inland waterway transport
". It shall be the duty of the Secretary of State to promote a national policy for the use of inland waterways for commercial transport and to devise a standard technique and standard criteria for the appraisal of all forms of transport investment, including waterways.".
The noble Lord said: My Lords, I shall be brief. Inland waterways have no friends in Government circles, to the extent
1538
that they do not fit in. They are neither transport nor environment, and they do not seem to be on the top of anybody's in-tray so far as urgent activity is concerned. This is a miscellaneous provisions Bill dealing with transport. Although its Long Title may not directly include what I have put down on the Marshalled List, there is a crying need for action, because waterway transport is still useful. An explosive report was published in another place by the Select Committee on Nationalised Industries which, so far as I can make out, is not composed entirely of Members of the Conservative Party. It made some very stringent criticisms of the use being made of waterway transport. There is, I understand, a lack of urgency on the part of the Government as to what should be done about our waterways. As long ago as June of last year there were informal discussions in Brussels about a proposal that might help the waterways in South Yorkshire, but the Government would not move. I understand that they have taken no action.
Our inland waterways still provide a very important, though minor part of our public transport system, particularly freight. They also play an important part in exports, in that many of them are used for part of the journey that certain manufactured goods take to other countries. These inland waterways are part of our transport system, but they are neglected and more attention needs to be given to them. Mr. Shore said recently in another place:
"I accept that a successful extension of the canal system would give a welcome economic boost and a psychological stimulus to the area".
He was speaking of the area in Yorkshire that I have already mentioned.
This is a general problem. We have nearly 1,000 miles of inland waterways in this country, and they seem to be in need of further attention from Parliament and the Government if they are not to fall into decay. My new clause represents a development of the thinking behind the clause which was inserted in the Bill during the Committee stage here, when an Amendment moved by my noble friend Lord Cockfield laid a statutory duty upon British Rail. My new clause would lay a statutory duty on the Secretary of State to get on with the job. At the moment there is inactivity.
A recent White Paper published in June by the Government—British Waterways Board (Cmnd. 7248)—reveals that prolonged thought regarding this same area of Sheffield and South Yorkshire has gone on in the Government, who claim to have been asking for new evidence and investigating it, but nothing has happened.
This Amendment will not solve all the problems of the waterways, nor will it find more money. However, the Amendment makes it clear that concerted thought regarding the problems with which our inland waterways are faced is a responsibility of the Government. The second part, about which I am not as happy as I am about the first part, asks for a technique to be evolved for the appraisal of transport investment to provide the Department with a tool which they can justify publicly for the amount that they invest in particular types of transport, because at the moment there is a difference between the investment in roads and the investment in water when the question of interest is considered. I understand that roads are interest free and water is not, and it is that type of anomaly that would need to be investigated under the procedure I am suggesting.
This is a declaratory clause with all the faults and virtues that such clauses have. It is an attempt to give a set of priorities to the Secretary of State. I am sure there are plenty of things wrong with its wording, but it attempts to give more support to those who are concerned about our inland wateways and feel that they should be preserved, developed and. if need be, extended. I beg to move.
Lord COCKFIELD: My Lords, should like to support my noble friend on this Amendment. The position of the British Waterways Board as a whole is not a happy one. Last year their total turnover was £10 million and on that they succeeded in making a loss of £12 million. These are not very large figures but as a rate of loss this must rank pretty high even among the nationalised industries. But if one dissects the figures one ends up with a very different picture because two-thirds of the total loss is made on what might very broadly be described as non-commercial activities,
1540
the amenity activities, the cruising waterways, and so on. If one looks at the commercial activities of the British Waterways Board one sees that these account for only one-third of the total loss and indeed in the case of their freight services—that is the actual transport, the warehousing, the provision of dock services and so forth—they actually made a small profit.
The Government's policy, as set out in the document headed The Water Industry in England and Wales: The Next Steps, dated July 1977, is apparently to transfer the activities of the British Waterways Board to a proposed national water authority. While there may be strong arguments in favour of transferring what might be described as the amenity activities of the British Waterways Board to a new water authority, it seems very strange to propose transferring their commercial transport activities, which frankly ought to be looked at in terms of part of our overall transport activities in this country and not as part of our water supply. Quite simply, the purpose of this Amendment is to direct the attention of the Secretary of State to the development of the inland waterways so far as their commercial transport aspects are concerned. Despite the fact that, looking at the commercial activities as a whole, they show a loss, I think it would be quite wrong to write them off as something which can be abandoned. It is only right that we should make every effort possible to develop a proper inland water transport system, and the object of this Amendment is to pave the way for doing just that.
Viscount SIMON: My Lords, I should just like to say very briefly, subject of course to what the noble Baroness, Lady Stedman, has to say (and this being the Report stage I think that I have to speak before she does) that if the noble Lord, Lord O'Hagan, would take his Amendment away and bring back on Third Reading only the first half of it, I would advise my noble friends to support it. But I think the second half raises such a wide issue that it is really not very suitable for inclusion in a Bill of this kind.
Lord SANDYS: My Lords, I am sorry to hear the noble Viscount, Lord Simon, make the strictures which he did only a

1541
few seconds ago because this Amendment commends itself to these Benches very considerably. I was glad that my noble friend Lord Cockfield said what he did about the need for commercial development of the waterways. From looking at the White Paper Transport Policy, Cmnd. 6836, it is quite evident what a gap there is. We turn to chapter 7, which concerns freight, and we find there is scarcely a mention of the problem of the waterways until we reach paragraph 191. In that particular paragraph the Government are in a state of apology. They have every reason to be in a state of apology because it concerns a particular case, already referred to by my noble friend Lord O'Hagan: namely, the question of the Sheffield and South Yorkshire waterway.
This is something that I think should be placed clearly on the record because here were 18 miles of viable waterway which could have been a very useful commercial undertaking. It was a situation in which funds could have been made available, and indeed lengthy discussions took place on this very matter. But ultimately it was set aside for a whole host of reasons which it would be tedious to recite now. One of the principal reasons was that the Waterways Board were asked for no less a sum than 15 per cent. on their money. This was much too great an obligation to be placed on the Waterways Board, and the project fell into disuse. It has been set aside. Exactly the same thing has happened, for somewhat different reasons, to an even more interesting project which was the British Waterways docks at Immingham, which was concerned with a project called BACAT, largely concerning a mother ship loading barges on top. This ingenious device is a method used considerably on the larger waterways on the Continent and it would have increased substantially the commercial viability of British waterways in this country and the exchange with our European partners. There is no mention of BACAT or Immingham in the freight document; nor is there in the White Paper, Cmnd. 6876, referred to by the noble Lord, Lord Cockfield, The Water Industry in England and Wales: The Next Steps. This is a pity and it is quite definitely a gap in the commercial possibilities of our waterways
1542
and the very strong need for development, and I hope that the Government will respond to this Amendment.
Lord MOTTISTONE: My Lords, I hope that my noble friend will feel disposed to press this Amendment notwithstanding what the noble Viscount, Lord Simon, has said. Surely it is a good point to have this in the Bill at this stage. There is still one more stage to go, and if the Government do not like the text they can table an Amendment to put it straight, but for the various reasons which my noble friends have advanced the principle seems to me to be unanswerable.
Baroness STEDMAN: My Lords, this Amendment raises matters which have been very much to the fore lately in another place. The Government's policy in relation to the commercial use of waterways was set out in the White Paper on Transport Policy, which we published last year, and in our observations on the Fourth Report of the Select Committee on Nationalised Industries, which was only published last month. The two issues which are referred to in the Amendment were discussed at some length in those documents. In spite of what the noble Lord, Lord O'Hagan, and other noble Lords have said we are concerned about inland waterways; we have not just abandoned them. We see them as practicable for freight transport and we are anxious to see that sort of development.
What my right honourable friend the Secretary of State is looking for now is for the British Waterways Board to bring forward its proposals for the promotion and the development of these activities, and then we shall look at them as sympathetically as possible in the terms of the responsibilities for resource allocation and investment appraisal in the public sector as a whole. The Government will clearly need to have the best possible evidence about the likely traffic for any new facility, but where we are convinced of the potential of any project and resources can be made available there will he every possibility of its gaining approval.
As to the appraisal of investment in transport, it is the Government's policy that competition between the different modes of freight transport should be fair, and that they should operate without

1543
subsidy. The application of this policy and the measurement of returns from investment must take account of the fact that the different modes pay for their infrastructure in different ways. The cost of providing and maintaining commercial inland waterways is part of the costs of the Board, who can adapt their charges to users to reflect the quality of services and facilities which they provide. The cost of roads falls on central and local government, but the taxes on road users serve in a general way as a price system for the use of the roads. Such essential differences in finance and operation mean that it is simply not possible to devise, as the noble Lord would have us do, a
"standard technique and standard criteria for the appraisal of all forms of transport investment".
We are not unsympathetic to the objects that underlie this Amendment. But hope it will be recognised, in view of what I have just said, that the first part of the Amendment would serve no useful purpose and the second part of it would impose on the Secretary of State a duty which it is not possible for him to fulfil. The British Waterways Boad have put proposals to the Government for the Sheffield and South Yorkshire Navigation and these are under fresh consideration by the Government at present. I hope the noble Lord will not feel it necessary to press this Amendment. I would suggest to him that it is perhaps not appropriate to add it to this Transport Bill. The Government did issue in 1977 a White Paper on water which covered the future of the waterways as part of the water industry. The legislation that is foreshadowed in that White Paper would I think provide a much more appropriate context for a much more detailed debate on this subject and the enactment of any suitable statutory pro-
vision that had to follow. I hope the noble Lord will think about it and might be persuaded to withdraw his Amendment.
Lord O'HAGAN: My Lords, I thank the noble Baroness for that reply, which, as always, was careful and showed every sign of deep thought given to the topic; but I thought it was the worst answer she had given us today. I admit that there is something to be said against the second part of my Amendment, and when, as I hope, shortly we pass this Amendment it will be open to noble Lords on the Liberal Benches and elsewhere to put down Amendments to alter what I have on the Marshalled List. This is my first attempt and of course it will not be perfect. But, as my noble friend Lord Mottistone said, it is much more important to stand aside from the wording and look at the principle, and the principle of the matter is quite clear. Whatever Transport Bills the noble Baroness thinks will come or may come, this is the Bill we are dealing with now. It should say something about waterways. It should impose this sort of duty. Whatever the prospects for the future may be, I do not think that your Lordships should stop and, while the inland waterways system deteriorates, stand and wait for another Bill that this Government may or may not introduce. The right thing to do is to put the provision in the Bill now, and perhaps amend the Long Title afterwards. But, first of all, let us put it in the Bill.
8.4 p.m.
On Question, Whether the said Amendment (No. 13) shall he aggreed to?
Their Lordships divided: Contents, 42; Not-Contents, 30.

NOT-CONTENTS

Bacon, B.

Houghton of Sowerby, L.

Segal, L.

Birk, B.

Lee of Newton, L,

Stedman, B.

Blyton, L.

Llewelyn-Davies of Hastoe, B.

Stone, L.

Collison, L.

Maelor, L.

Strabolgi, L. [Teller.]

Davies of Leek, L.

Mishcon, L.

Taylor of Mansfield, L.

Davies of Penrhys, L.

Noel-Baker, L.

Walston, L.

Fisher of Camden, L.

Peart, L. (L. Privy Seal.)

Wells-Pestell, L. [Teller.]

Hale, L.

Phillips, B.

Whaddon, L.

Hatch of Lusby, L.

Pitt of Hampstead, L.

Wilson of Radcliffe, L.

Hood, V.

Ponsonby of Shulbrede, L.

Wynne-Jones, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
Clause 20 [Transport supplementary grant]:
8.12 p.m.
Lord O'HAGAN Lord O'HAGAN moved Amendment No. 14:
Page 16, line 41, leave out from beginning to ("and") in line 44.
The noble Lord said: My Lords, this is merely a consequential Amendment following the Amendments that were passed during Committee stage. I beg to move.
On Question, Amendment agreed to.
Schedule 2 [Amendments about road service licences and permits]:
Lord TEVIOT Lord TEVIOT moved Amendment No. 15:
Page 20, line 13, at end insert ("but shall have particular regard to the co-ordination and efficiency of the general provision of passenger services by road and, if the applicant is not the holder of a public service vehicle licence, to the matters specified in section 35(2) of the Transport Act 1968").
The noble Lord said: My Lords, I beg to move Amendment No. 15. Although I have never been happy about new Section (2D) to Section 135 of the Road Traffic Act 1960, I have not previously found a form of words that I have felt able to suggest to your Lordships' House. That is why I have not introduced it at an earlier stage. In the present Amendment I believe that we have a practical answer.
As originally enacted, when the traffic commissioners consider whether or not to grant a road service licence of any type, be it stage, express or excursion and tour, Section 135 prescribes the same criteria. Although I believe that the Amendments to that Section contained in the Bill are largely cosmetic, possibly seeking a psychological change in attitudes, certain of the
1546
new criteria are hardly relevant to coach touring holidays. Nevertheless, merely omitting them, as compared with the present requirements, does leave something of a vacuum. Here I feel that I should explain something of the importance of licensing for coach tours and I hope that your Lordships will bear with me.
We must remember that when such massive holiday organisations as Clarksons, Court Line and Horizon Holidays crashed, misery and despair was caused to many families and individuals. At the same time many other smaller tour operators went into liquidation, without being able to honour their commitments to their clients which did not receive publicity from the media. This lack of stability in the package holiday industry, despite the efforts of its national association, led the Government to introduce statutory controls, notably the Air Travel Reserve Fund. This holiday industry was built of speculative middle men who merely arranged facilities provided by others. It was precisely that which led to their financial instability.
I should contrast that with the situation in the coach touring industry which was, after all, the effective starting point of the package holiday between the wars. Although catastrophe followed catastrophe in other branches of the package holiday operation, the coach industry experienced the failure of just one medium-sized company which sold its holidays almost exclusively in America, Australia, New Zealand and South Africa. I believe, and the industry assures me that this is so, that its stable position was built upon the road service licensing of its tours. It is for that reason that I believe that the present Transport Bill should make a reasonable provision for the protection of the British public in this area.
Your Lordships will realise that in the new subsection (2A) the main consideration is that the traffic commissioners shall

1547
have regard to the interests of the public. That is absolutely right and it is, of course, what they have always sought to do. However, these words are imprecise and I submit to your Lordships that certain further guidance is called for. In the Amendment which I commend to your Lordships there are two elements. The first, is that these coach tours should not be seen in isolation from the remainder of public passenger transport services by road. It is true that the days of cross-subsidisation within the industry have largely passed, but we should not wholly disregard the interrelationship of different aspects of the business which, together, make it viable. In many cases the suggested words may not be applicable. I only say that, where they are applicable, it is in the public interest that the commissioners should have regard to them.
The second element of this Amendment relates directly to the position I have explained in the package holiday industry in general. It considers the possibility, in the new circumstances which will be created by the Bill when it is enacted, that speculators will seek to move in on the coach tour market. They will book hotel accommodation, no doubt arrange visits to places of interest and then seek to hire coaches. The providers of all those services will be offered contracts for seemingly large amounts, but when related to the individual service given it is probable that a sorry picture of low price, low quality service, will emerge. This is not idle talk because the results of such operations have been seen in practice in continental Europe.
The operation of extended tours should be the cream of the services offered by the coaching industry. At present the operators prove their fitness and the suitability of their vehicles when they obtain a PSV licence from the traffic commissioners. Then they go through the further procedure of obtaining a road service licence. As I have said, for the extended tour one expects to find the best of all the PSV operators providing the service. If, however, as seems quite possible under the present proposals of the Bill, non-licensed tour operators seek to come into this business and use coaches provided by other firms, then I submit that they have no reasonable control of the overall operation and that there should be applied to them the same criteria as are
1548
applied to the applicant for a PSV licence; that is, that the commissioners should have regard to the previous conduct of the applicant in any business involving transport operation. Then, it is extremely relevant that the tour operator should be responsible for ensuring that the law on drivers' hours is observed. Next, which again is particularly important in connection with extended tours, the arrangements for maintenance of the vehicles should be adequate for that purpose. Finally, the commissioners consider the financial resources of the applicant. I submit that all those matters are extremely relevant to the operation of tours which can be offered to the British public with reasonable confidence. I beg to move.
Baroness STEDMAN: My Lords, I do not want to be unkind, but this Amendment is regressive, restrictive and, in my view, unnecessary. It is also inconsistent with the provisions of the Bill as it stands at present. Subsection (2D), which was inserted by a Government Amendment during the Report stage in another place—an Amendment which had the clear support of the Opposition Front Bench—provides that in considering applications for extended tours the traffic commissioners are not required to take into account those criteria in subsections (2A)(a) to (c) which are concerned primarily with the need to ensure a co-ordinated and efficient network of public transport services.
This Amendment, albeit in different words, would have the effect of bringing back those matters which it has been agreed are not relevant to the consideration of extended tours. The noble Lord has argued that there is a need for some operators to balance and to some extent finance their stage services by their extended tours and by linking up with the package holiday tours. But it cannot be demonstrated that any revenue from extended tours is being ploughed back into stage services or improving the services offered to the public in general. The holiday package tours and extended tours are quite separate and a highly specialised form of bus operation; there is no link between them and the main network of conventional stage and express services. These long-distance tours have no real bearing on the ordinary network of local services.

1549
But the Amendment goes even further. It is designed to impose additional restrictions on top of those which are already in the existing legislation. The vehicles used on extended tours must already have PSV licences and before granting such licences the traffic commissioners have to be satisfied that the operator is a fit person and that all the requirements in Section 35(2) of the 1968 Act have been fulfilled. I accept entirely that these standards are essential for the safety and comfort of the passengers. The PSV licensing system will ensure that they are still met.
But the Amendment would also provide that the person who has the road service licence to operate the extended tours has to meet the same criteria as the operator who supplies the vehicles to him. I believe that this restriction is wrong in principle. As the licensing system stands at present, the responsibility is quite clearly placed on the operator who holds the PSV licence to ensure that his vehicles conform with all the requirements. This Amendment will divide and weaken that responsibility by sharing it with the tour operator. I believe that is fundamentally wrong and that it will strike at a very important principle of the PSV licensing system. It is normal practice within the licensing system for operators who hold road service licences to hire vehicles from a PSV operator from time to time. This important flexibility which the system offers would now be curtailed by the Amendment, which imports into the consideration of an application for extended tours the question whether the applicant meets criteria which it is the responsibility of the PSV operator and his alone to meet.
I do not accept that more protection is needed for existing operators or that the very modest degree of relaxation that we have allowed in subsection (2D) will lead to any dire consequences. The noble Lord has spoken of the need to protect consumers from unscrupulous operators, and has mentioned cases where tour operators have collapsed and the public has suffered because the safeguards were not there. I accept and share his concern, but certainly no one can criticise this Government's record on consumer protection or doubt our commitment. But I suggest that the noble Lord's concern
1550
is misdirected because the safeguards are all there at present in the exiting licensing system. The provisions in Schedule 2 do not create a free-for-all for extended tours. Existing operators can still object to applications for new services and can quite properly raise the question of the fitness of the operator and his ability to provide a proper service to the public. The real question is whether we trust the traffic commissioners. As has so often been said in previous debates, there must be a limit to the extent to which we hedge the traffic commissioners about with detailed statutory requirements which, in effect, negate their independent status and go some way towards diminishing their discretion. The noble Lord has until now been a stout advocate of the traffic commissioners. I hope that he will see that what he is proposing will do nothing but undermine that independence. Perhaps on reconsideration he might withdraw his Amendment.
Lord O'HAGAN: My Lords, I am not particularly happy about having to intervene between my noble and expert friend Lord Teviot and the noble Baroness, Lady Stedman, on this highly complicated point. It is very much a matter of the balance which any Bill of this nature gives to the different aspects of the regulations which affect bus operators. I think that the noble Baroness has dealt with this complex question in a way that would repay study. Although I am sure that there are several points in her answer which my noble friend will find highly unsatisfactory, I hope that at this stage he will be prepared to look at what the noble Baroness said, and perhaps return to the matter at a later stage of the Bill.
Lord TEVIOT: My Lords, I thank the noble Baroness for giving that very explicit reply. I am afraid that I do not agree with very much that she said. I did not think that one was being over-restrictive; I thought that one was being unnecessarily restrictive, for the reasons I outlined. I think that it is still rather dangerous to leave this out. However, on the advice of my noble friend I shall not push this matter now. I shall try to consider something at a later stage, or have further consultations behind the scenes, rather than on the Floor of the House.
I am certainly not attacking the Government over their record on consumer protection

1551
because I think that the record of both sides of the House has been excellent. The Government have some stalwart Members on their Back-Benches who have upheld consumer protection for years. Also, I have no intention of undermining the traffic commissioners, whom I have mentioned both in the Scotland Bill and here. However, again on the advice of my noble friend I see no point in pursuing this now. Therefore, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 16:
Page 20, line 37, at end insert—
("4A. In section 160(1) (general power to make regulations for purposes of Part 111 of the Act), after paragraph (c) insert—
("(cc) applications for, and issue of, the disc or other document required, under section 5(5) of the Transport Act 1978, in connection with a community bus service".").
The noble Baroness said: My Lords, I spoke to this Amendment when I dealt with Amendment No. 5. I beg to move.
On Question, Amendment agreed to.
8.26 p.m.
Lord TEVIOT Lord TEVIOT moved Amendment No. 17:
Page 20, line 42, at end insert ("and in subsection (2) (requirements for grant of permit), after the words "unless they" insert "have published details of the application and not less than 14 days thereafter".").
The noble Lord said: My Lords, again I apologise for introducing this Amendment at such a late stage in the proceedings of the Bill. However, like the Government, I do not always find it easy to spot all the deficiencies in a Bill when it is first published. Neither do I have a Department to do my devilling. The proposed Amendment does not ask much of the traffic commissioners or the applicant for a Section 30 permit. I understand that purely on a voluntary basis the commissioners in at least one traffic area have already published these applications, and it is normal practice for them to publish in Notices and Proceedings before a permit is granted. The reason for asking for this to be made a requirement rather than as a
1552
voluntary move is due to the increase in the size of vehicle which may operate under a Section 30 permit, and the consequent greater possibility of abstraction from existing services.
I stress that this is merely a safeguard and its intention is to protect the majority public interest. It is possible for a new service to be introduced for the benefit of its passengers, but if it attracts even a relatively small number from some other existing service, the damage could be sufficient to jeopardise that existing service. If it is lost, the last state for the community as a whole could be worse than the first.
It is not intended that the full procedures of road service licensing should be introduced. The very reason for Section 30 permits was to allow a simplified procedure, and that is right. However, publication of a Section 30 permit application would permit an existing operator to draw to the attention of the Commissioners the possible effect that the grant of a permit might have on his operations. The commissioners may not issue a permit unless they are satisfied that there are no other transport facilities available to meet the reasonable needs of the proposed route. Publication of an application will ensure that they have the necessary knowledge to make a decision in this respect. This is significant because larger vehicles are required only if a greater number of passengers is to be carried. That implies a larger catchment area for the route and makes it all important that the commissioners should be well informed regarding the possible effect on alternative facilities. The Amendment provides a small but important section of wider public interest. I beg to move.
8.30 p.m.
Baroness STEDMAN: My Lords, this Amendment was urged upon us most persuasively and in the most reasonable terms by the noble Lord, Lord Teviot. He has suggested that existing operators are not in any sense trying to turn the clock back by returning to the full road service licensing system with its complex and time consuming panoply of objections, public sittings and so on. But we should not be under any misapprehension about the effect of this Amendment. The philosophy behind the permit system is quite

1553
simple. In return for a very tightly drawn restriction on the cases in which permits can be granted—that is, only those cases where "there are no other transport facilities available to meet the reasonable needs of the proposed route"—the permit system dispenses with all those road service licensing procedures, including prior publication of the details of the application, which are designed to provide the traffic commissioners with the means of determining applications where there is a genuine dispute about the effect of the proposed service. In effect the permit system, with all the advantages it provides in terms of simplicity and speed can only be used where the traffic commissioners have satisfied themselves that there is no risk whatever of any harmful effect to existing services. The system has worked well and almost without criticism since it was introduced in 1968.
The noble Lord has suggested that by removing the size restriction so that vehicles of any size can be granted a permit we are opening the door to possible abuse. But I cannot see that the size of vehicles is relevant. The real question is whether the traffic commissioners, with their vast experience of bus operations in their area and their reputation for fairness and impartiality, can be trusted to judge when the permit system should be used and when the full road service licensing procedure would be more appropriate. If the traffic commissioners have any doubt about the effect on existing services they will, I am sure, take steps to ensure that those doubts are resolved. They may very well decide to consult the other operators informally and they may even in some cases decide to publish the application. But in most cases there will be no reasonable doubt that the service is filling a complete void, and to impose a requirement to publish in every case makes no allowance for the commissioners' good sense and makes a system whose virtue we hoped was its simplicity and speed unnecessarily cumbersome and bureaucratic. I hope that the noble Lord will think that I have made some good points, and that he may be prepared to withdraw his Amendment.
Lord SANDYS: My Lords, before my noble friend Lord Teviot decides what to do about his Amendment, which is a well-intentioned one and moved in very
1554
reasonable terms, as the noble Baroness acknowledged, may I say that I think we are up against a particular dilemma over the role of the traffic commissioners. I hope that my noble friend will feel disposed to withdraw the Amendment. It appears that, although the Section 30 permit would give rise to some complications, so far as we can see there does seem a very strong reason for keeping a not too close bureaucratic hold.
Lord TEVIOT: My Lords, I feel less happy with those remarks of my noble friend than I did with those of my other noble friend on my last Amendment.
Lord O'HAGAN: My Lords, would my noble friend like me to speak on this Amendment as well?
Lord TEVIOT: My Lords, I should be delighted. My noble friend has not done so. This was a perfectly straightforward, simple Amendment, and I think there should be the safeguard in this Bill. The Amendment does not ask for very much. It is not very restrictive. It is not cumbersome. I know that the noble Baroness accepted the argument that I was not wishing to go back to the bad old days, but I feel that people should be aware of what is going on. Therefore, I am going to press this Amendment.
On Question, Amendment negatived.
Schedule 3 [Amendments about lorries]:
8.35 p.m.
Lord LUCAS of CHILWORTH Lord LUCAS of CHILWORTH moved Amendment No. 18:
Page 21, line 6, at end insert—
("Provided that the goods vehicle examiner or the constable in uniform before requiring any person in charge of a goods vehicle to proceed to a place more than one mile from where the requirement is made, shall first be satisfied that there are good reasons to believe that the vehicle is not in a fit and serviceable condition.").
The noble Lord said: My Lords, in moving this Amendment I return to the problem and the difficulties associated with diverting lorries. Your Lordships will recall that it was agreed during Committee stage that lorries could be diverted within up to a five-mile radius for further inspection in the event of there being a suspicion that that vehicle was badly

1555
maintained. Your Lordships will remember that the noble Baroness and I exchanged a wide variety of figures, none of which was really contested because we agreed that there were quite a large number of vehicles that were not well maintained.
I argued then that the increase in area would involve a very large number of vehicles being sent to testing stations for examination which were not defaulters. In fact, a mathematical genius has described to me that the catchment area of a one mile restriction is about 3·14 square miles; that of a five mile diversion is more likely to be a 78·53 square mile catchment area—an increase of some 25 times.
If one considers that in this increased catchment area much the same proportion of vehicles is going to be found defective out of the vastly increased number that are likely to be netted, I have arrived at a figure that suggests to me that if only double the number of vehicles were brought in for inspection—but feel that more likely 20 times as many might be brought in because the facility is that much easier for the examiner—something like 11,200, or possibly as many as 110,000 vehicles, may be sent to a testing station and found to be clear.
We described during the Committee stage the kinds of difficulties and expenses that might be involved. The noble Baroness in fact gave certain assurances that examiners would have set down in guidelines strictures advising them when they should send a vehicle to a testing station involved in the five mile diversion. I was not happy at that time with the answer, and I notice that in the House of Commons proceedings at Committee stage in March a similar Amendment to the one I have down was answered by the Under-Secretary of State who, in effect, said that he had sympathy with the intention behind the Amendment but was unable to accept it because there was a possibility that the Department might be sued.
I imagine that the expression "might be sued" could be construed in exactly the same way as we have talked about there being a claim for compensation. Surely, if a Department commits an error and a plaintiff feels it advisable to go to law and sues, that is fair and reasonable and there can be no way in which the Department of
1556
Transport can protect itself against it. However, the Under-Secretary did agree that he would give further consideration to it. My understanding is that the industry and the Department met and, to all intents and purposes, agreed a formula—agreed what common ground there was—and an Amendment was later tabled. However, that was not accepted by the Government, even though apparently the departmental advisers had suggested that it met their requirements. Instead, assurances were given.
That is all very well, and while in Committee we spent most of our time discussing those who infringe the regulation, this Amendment is designed to protect those who do not, and on the Government's figures there are more who do not than do infringe them. It seems only reasonable, therefore, that there should be incorporated in the Bill some protection for these people, and the Amendment merely provides that the examiner should first be satisfied there are good reasons to believe that the vehicle is not in a fit and serviceable condition.
As I should not like to debate exactly how one can determine whether or not an examiner is satisfied, I suggest that an Amendment of this kind puts an obligation on the examiner that a guideline does not put on him to think not once but twice before sending a vehicle on a five-mile diversion to a testing station. The Amendment could do no harm to anybody, though it could relieve what I believe will be some congestion at testing stations—and I remind your Lordships that there are only 70 of them—by ensuring that the examiner really satisfies himself that there is a defect which warrants further inspection. For these reasons—the protection of the innocent rather than providing any umbrella or cloak under which miscreants may crawl—I move the Amendment.
Lord MOTTISTONE: My Lords, the important factor to bear in mind here is the potentially greater number of vehicles that may be sent to testing stations and, as I see it, the Amendment underpins the assurance that vehicles will not be sent in except when the person authorised to send them in is really sure that he is doing something necessary. The difference between a one-mile and a 25-mile radius,

1557
as my noble friend showed through his arithmetic, is that the larger is 25 times as great. On a later Amendment we will return to a point which I raised in Committee and I can pursue it then. In the meantime, I suggest that, so far as one can gather, there could be a fair number of what one might call trivial faults capable of being repaired very quickly and easily but which could lead to lorries being sent to testing stations. I am not sure that, in order to protect the public and the rest, which is all very laudable, the Government have not worked themselves into a position of having too much power to send people away from their commercial routes without having sufficient restraint on those who exercise that power on their behalf. The Amendment would be useful in imposing that restraint.
8.44 p.m.
Baroness STEDMAN: My Lords, it would seem that in tabling the Amendment noble Lords opposite have accepted the need for goods vehicles to be diverted over distances greater than one mile to testing station for their mechanical condition to be inspected. The basic object of extending the power of diversion to testing stations is to strengthen the arrangements for enforcing the law on the mechanical condition of vehicles, and that object would be undermined if we insisted that before any diversion of more than one mile was ordered, the examiner or constable, as the case may be, should be satisfied there are good reasons to believe that the vehicle diverted is not in a sound condition.
The term "good reasons" is open to a diversity of interpretation and dispute, and in practice it is not realistic to insist in effect that before an examiner diverts a vehicle he must form a prima facie view on its fitness or unfitness. Some items or functions of a vehicle have to be properly tested before any view can be formed of their adequacy; for example, the condition of complex braking systems. The incorporation of any such formula in the statute could expose the examiner to the risk of proceedings on the grounds that he had not exercised his discretion reasonably. That possibility in turn might prove a significant deterrent to exercise of the powers at all.
Our intention is not to divert more
1558
vehicles to testing stations. What we are asking for is more flexibility and scope for manoeuvre in choosing which to divert and from where, because too many drivers are now wise to what are our checking points. It is not possible to define in the statute the considerations which would justify the examiner to order the diversion, but we have made clear our intention of issuing guidance to examiners on the use of powers to divert more than one mile. That guidance would be based on the principle of diverting vehicles where this is necessary because of conditions of weather or visibility or because of the examination thought to be necessary. And we would advise examiners that in deciding when an examination was necessary they must have in mind some factor or factors warranting further examination. A purely random diversion of vehicles would be wrong and would not be encouraged by the Department.
We certainly had some discussions and the offiicals had a suggestion for a formula with the road hauliers on the sort of criteria that might justify diversions, but having had further thoughts about it we have thought it better to do it by administrative rules and not by a formula in the Bill. We still think that all this can be best done by administrative guidance and not by inclusion in the statute. It is possible to say in an administrative note, "Don't divert a vehicle more than one mile, unless you have a suspicion that all may not be well with it", but that sort of thing cannot be converted into a statutory test and any attempt to do so would sterilise the use of the power.
The Government's view still is that it would be wrong to impose a statutory limitation of the kind proposed by the Amendment and, as we have emphasised before, the right way of securing the proper exercise of the new powers is, we think, by administrative guidance. We have already indicated the principles which would underlie that guidance and an undertaking has been given that Parliament would be told if it were proposed to depart from those principles; and we still think we have enough safeguards in those assurances.
Lord O'HAGAN: My Lords, my noble friend Lord Lucas of Chilworth, supported by my noble friend Lord Mottistone, has put forward a reasonable case

1559
and the noble Baroness, Lady Stedman, has given a reasonable answer. This is a subject on which it is possible for people with the best of intentions to hold differing views. There is an aspect of the matter, however, which causes me some anxiety. As I understand from what Lord Lucas said, at one point the Government were discussing with those most concerned the possibility of incorporating some rule in the legislation. Those being consulted presumed that there was at least a chance that this would happen. If such a course had been followed—whether it was right or wrong is irrelevant for the point I am making—it would have been discussed by Parliament: it would have been subject to detailed scrutiny; it would have been part of this Bill and we could have amended it or looked at it. What the noble Baroness is saying is that to do what my noble friend Lord Lucas of Chilworth wants to do is too restrictive. It is not flexible enough and it shifts the onus a bit too far away, although she appreciates the nature of his concern.
My noble friend has been forced to put forward his Amendment in this form because of what the noble Baroness has said seems to the Government to be the best procedure; that is, to do it by administrative means. That may well be fine for the Government but it is not very good for Parliament because "administrative means" means that Parliament cannot look at what the Government are going to do. That is something which, whenever it happens, one has to be anxious about because, however much administrative means can deal with a problem to the satisfaction of a Department, the use of that procedure does mean that it falls outside the purview of the Parliamentary procedures.
If my noble friend Lord Lucas of Chilworth withdraws his Amendment now, as I suspect might well he the best thing to do, he has no knowledge of what the Government are going to put in its place. He has had some expressions of hope that it will work out. Can the noble Baroness tell us whether the guidelines that she has been talking about are in a sufficiently advanced form of development and drafting to be sent to my noble friend so that he could study them before the Bill leaves Parliament? If that was the case, then I should have thought that
1560
most of these worries could he cleared up at least, because we could then see what was actually going to be applied by the inspectors in the particular case. Would the noble Baroness respond to that point?
Baroness STEDMAN: My Lords, we said at Second Reading that we would lay down certain principles of an administrative nature and that we would come back to Parliament if we proposed to depart from those principles. I am not in a position to say off-the-cuff just how far those concerned have got in working out what those principles will be. I will certainly make inquiries to see whether I can get any further details for the noble Lord, Lord Lucas, for the noble Lord, Lord O'Hagan, and the noble Lord, Lord Mottistone. Perhaps we have even got them. I understand we are still consulting with the road hauliers on the guidelines that we are going to put forward. They are not yet drafted, but if we have any indication of the sort of thing that is to be put in I will certainly let the noble Lords know before the next stage of the Bill.
Lord LUCAS of CHILWORTH: My Lords, time moves on, but there are one or two points which the noble Baroness mentioned, particularly this catchment area. There can be no doubt that if the catchment area is increased more motor vehicles will he stopped and, let us face it, this is something of a random exercise. Certainly the industry has a great spirit of camaraderie and it does not take very long before all and sundry know where the checking point is going to be. Quite honestly, my Lords, even if it is increased to 75 square miles it will not be too long before the knowledge filters through.
The point is that within the one-mile diversionary exercise some 5,800 vehicles last year were sent for testing for no good reason at all. Only 1,200—and these are the noble Baroness's own figures, which I have checked—out of the 7,000 that were sent were found to be defective. I do not think it is fair that 5,800 on last year's figures and an indeterminate number on next year's figures should be sent. The figure could be as high as 110,000; I do not think it is likely to be, but it could be. I suspect it could well be that some 38,000 vehicles will be sent. That is a huge

1561
number of vehicles being diverted, and it is only reasonable that when we are putting certain regulations into law we should tell the readers of those regulations exactly why things are going to happen and under what circumstances.
I am no great believer in guidelines. I do not wish flatly to contradict the noble Baroness, but certainly up to a very short while ago it was my understanding that the industry's conversations with the Department on the guidelines were at a stalemate. I do not think it is any good saying: "We are going to produce these guidelines and if we depart from them we will come and tell Parliament". I must press the noble Baroness to produce something that we can look at before the next stage, so that if it is not completely satisfactory then I would have the chance of reintroducing this protective Amendment at the later stage. Meanwhile, I beg leave to withdraw.
Amendment, by leave, withdrawn.
8.57 p.m.
Lord LUCAS of CHILWORTH Lord LUCAS of CHILWORTH moved Amendment No. 19:
Page 21, line 46, leave out from ("rates;") to end of line 47.
The noble Lord said: My Lords, I do not think I need keep your Lordships very long. This one deals with the matter that we raised at Committee when I asked about "and payment of the fee may be required to be made in advance". The noble Baroness did promise, in her response to my noble friend Lord O'Hagan, that she would write to me. She has indeed written to me and as I understand the position, payment in advance" means cash on delivery—cash being cash or an acceptable cheque. It does not mean and will not mean—and this is the question I ask—that a form will have to be filled in and payment made some days in advance. One can readily accept that if a driver arrives and he can be accommodated in an hour, or half an hour, or indeed in ten minutes, he may be required to complete a form and hand over some money. That is cash on delivery in my language, not cash in advance. If my understanding of what the noble Baroness has said in her letter to me is correct, then I shall be quite happy. I beg to move.
Baroness STEDMAN: My Lords, I can be very brief on this Amendment. "Payment in advance" means no more than that when a vehicle is presented, payment may be requested before the examination takes place—not days before, but when the vehicle is presented.
Lord LUCAS of CHILWORTH: My Lords, I thank the noble Baroness for that perfectly satisfactory answer. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord LUCAS of CHILWORTH Lord LUCAS of CHILWORTH moved Amendment No. 20:
Page 21, line 47, at end insert—
("Provided that such fees shall not exceed those prescribed for annual testing.").
The noble Lord said: My Lords, this Amendment again stems from questions raised during Committee stage about what were to be the prescribed fees. There had been no indication given, no linking the fees for a re-examination. Perhaps I should remind your Lordships that we are talking here not of the annual test or the plating test, but about a new measure, that fees shall be required on occasions when a motor lorry is the subject of a prohibition notice and it goes to the testing station with a view to having that notice removed.
My Amendment merely sets down the understanding which I have reached from the letter to which I referred earlier, that the fees will be those in line with—at any rate, certainly not exceeding—the fees charged for the annual test. I believe that if this is the case, it is quite fair because the examination for removing a GV 9 is exactly the same, and therefore a similar fee is payable. However, on the assumption that that understanding is correct, I cannot see why the amount in question, or an amount linking it to the annual test, cannot be included. Why has there to be the description of a "prescribed fee", which, it seems to me, would leave the matter open in such a way that the fee could be altered, by means of, I suppose, a Statutory Instrument or a regulation? I accept also what the noble Baroness says in her letter to the effect that it is not wished to make another punishment out of this provision; it is merely a fee for doing a job of work.

1563
There are two questions here: what is the fee to be; and why can the fee rate not be embodied in the Bill? I beg to move.
Baroness STEDMAN: My Lords, the Secretary of State has in mind that the fees prescribed for payment when a vehicle is required to be brought to a testing station with a view to the removal of a prohibition, shall be the same as those charged when a vehicle is presented for its annual test. No penal element would be included. The present level of fees is £12·50 for a motor vehicle, and £7 for a trailer; and if a re-test is needed, the figures are £7 and £4·50 respectively. We are disposed to accept the substance of the noble Lord's Amendment, but we wish to obtain further advice on the form of the Amendment. If in the light of legal advice which we are taking, an appropriate Government Amendment cannot be tabled at a later stage, I will certainly write and explain the circumstances to the noble Lord. We are looking at this question, and we are making our best endeavours to produce something for the next stage.
Lord LUCAS of CHILWORTH: My Lords, I am terribly thrilled by that kind of answer, and obviously it would be quite wrong for me to pursue any other course than to await with keen interest the response from the Government, which I hope will meet the requirement. In the meantime, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
9.3 p.m.
Lord LUCAS of CHILWORTH Lord LUCAS of CHILWORTH moved Amendment No. 21:
Page 22, line 12, at end insert ("(after the 31st December 1979, 1 mile).").
The noble Lord said: My Lords, this Amendment is a little more difficult, in that it deals with the question of vehicles diverted to a weighbridge or other suitable place for weighing on the suspicion that they may be overweight. Again I wish to use the Government's own figures. From what was said during Second Reading and reiterated at the Committee stage, it was established that last year one in four of 25,000 vehicles that were diverted were found to be overweight. This means that three out
1564
of four were not overweight. During the Committee stage I suggested that, for a variety of reasons, this particular measure was not necessary and would impose harshly upon another group of innocent hauliers.
I have been over that part of the argument in the case of the badly maintained vehicle. The same principle applies here with one distinction; namely, there has been developed the dynamic weighing machine. A number of these machines are used experimentally in the country at present, and I understand that there has been a considerable degree of acceptance of them by both the industry and the Department. It is my further understanding that as far back as 1975 the Department engaged in conversations with the industry regarding the use of these weighing machines, the idea being that up and down the country suitable lay-bys were to be constructed and connections made for a portable instrument to be plugged in so that the vehicle could be tested at the roadside. Currently examiners are very good in that they seem to have a "nose" for an over-weight vehicle, and they send it off to a weighbridge or testing station.
In Committee I described many of the difficulties regarding weighbridges, as well as many of the difficulties which hauliers face when they take vehicles off ships, not knowing exactly what the consigner had put on them elsewhere. It seems to me that if the Government are to pursue the use of the dynamic weighing machine—which, as I say, has received a wide degree of acceptance in the industry—the little pockets of objection could easily be removed, and then the five-mile diversion would not be needed.
The Amendment is intended to jog the Government to say two things: first, what they are to do about dynamic weighing machines; and, secondly—having established, as we probably will, that dynamic weighing machines are to be brought in—that there are 18 months in which to do this, from now until the end of 1979. I also hope it can be said that at that time, when there will be in various parts of the country a number of sites which can do the job, it will be no longer necessary for vehicles suspected of being overweight to be diverted in those cases

1565
for more than one mile. That is what lies behind the Amendment. I beg to move.
Baroness STEDMAN: My Lords, I accept the reasonable way in which the noble Lord has presented his Amendment, and I accept, too, his assertion that it is only a jogging Amendment. However, our need to extend to five miles the distance over which a vehicle may be diverted to a weighbridge without compensation cannot be considered as a temporary one—not at this stage; nor is it the kind of situation in which one needs a temporary trial of new arrangements before deciding whether to make them permanent. The extent of overloading and the lack of suitably sited weighbridges make it essential that the present powers should be extended.
It is true that we are in process of supplementing the facilities provided by our permanent weightbridges. We have indeed implemented a programme for the installation of transportable axle weighers. They have the following advantages. They can be established on prepared sites in very close proximity to important lorry routes, and so avoid the problems associated with diversions to weighbridges; they give a better indication than weighbridges of the axle weight actually transmitted to the road; the rate at which vehicles can be checked is higher than at weighbridges; the preparation of alternative sites enables the same equipment to be used at more than one location in response to changed traffic flows; and, perhaps even more important, they are cheaper than weighbridges.
The site preparation costs roughly £15,000 per installation, so the programme must be spread over several years. Fifty installations by 1983 will be used to plug the gaps in the present system, and we shall be concentrating first on the main ferry ports dealing with international traffic. Consequently, the main effort on enforcement weighing will have to continue to be based on weighbridges for some years to come. For this reason, a limitation of the extended power to a life of about one year, which the noble Lord is proposing, would at this point in time be totally unacceptable.
Lord LUCAS of CHILWORTH: My Lords, I quite appreciate that answer.
1566
It could not be good sense to impose a time limit. However, would the noble Baroness be prepared to say whether, on completion of the programme in 1983, which would supplement the weighbridges, it may be prudent at that time to reconsider the use of the weighbridge, which causes what I have always called the excessive diversionary power? Because if we move forward into what perhaps one might call an advanced technology in weighing, it seems rather odd to have running in tandem (or is it in parallel?) different criteria which could bear harshly on a certain section of the industry, while those surrounding, if you like, the ferry ports, who have the advantage of the dynamic weigher, are not so penalised. There must be some kind of equality. I wonder whether the noble Baroness could say anything at all about that aspect of the use of these two measures.
Baroness STEDMAN: My Lords, I am sure the noble Lord would not expect me to be in a position to commit whatever Party may be in Government in 1983. All I can say is that if my Party is in Government, as I confidently expect it will be, then, when we have reached saturation point with these weighbridges, obviously it is something we would be prepared to reconsider. But at this point of time I cannot commit either side to what will happen in 1983.
Lord LUCAS of CHILWORTH: My Lords, this is no time to conjecture upon that. Each of us has our own ideas as to what will happen and when it will happen. So far as the use of weighbridges and dynamic weighers are concerned, I think it would be best if I left the matter exactly as it is, and beg leave of the House to withdraw this Amendment.
Amendment, by leave, withdrawn.

UNIT TRUST MANAGEMENT CHARGES
9.11 p.m.
Lord TERRINGTON Lord TERRINGTON rose to ask Her Majesty's Government whether they will reconsider their recent decision to disallow an increase in permitted charges by unit trust managements bearing in mind the likely adverse implications for small private investors in British industry. The

1567
noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I think I ought to start by saying that I have a very small financial interest in this matter, as I am a member of a City partnership which manages its own "in-house" funds among its many investment activities. However, the main interest I should like to declare this evening is my membership of the Wider Share Ownership Council, and it is in that capacity that I put my Question to Her Majesty's Government.
My concern is of course for the small investor, whose traditional vehicle for investing in British industry is the unit trust movement; and I am not sure that the Government have fully reaslised the implications for him of their recent decision. As far as possible, I will avoid wearying the House with a mass of figures, but in order to present my case adequately I am afraid I must devote a certain amount of time to statistical evidence.
On 19th June last the Under-Secretary of State for Trade replied to a Question in another place from the honourable Member for Leek regarding unit trust management charges, and I should like to quote from column 14 of the Official Report:
"The evidence in my possession does not confirm the allegations that have been made by the hon. Gentleman. The evidence which is currently available overwhelmingly suggests that reasonable pre-tax profits have been made between 1970 and 1976. I do not see that the decision that I have made is in any way unfair".
My Lords, it is these pre-tax profits that I should like to discuss in a little more detail, as I am concerned as to exactly what matters are being taken into account when arriving at the evidence currently available.
I am sure that noble Lords are aware that management charges by unit trusts are restricted by the Department of Trade under the Prevention of Fraud (Investment) Act 1958. However, they may not be aware that there are two types of charge, the initial or preliminary charge and the annual management fee. These are restricted both separately and in conjunction, by which I mean that when taken together they must not exceed 13¼ per cent. Over 20 years; and within this limit the preliminary charge is restricted to 5 per cent. Of the price of the unit, while the annual charge is
1568
restricted to ½ per cent. of the value of the fund. This management charge system recognises the two distinct functions of the trust manager: one, the marketing of units; and, two, the management and administration of unit-holders' funds. This distinction is important because no manager is under any obligation to sell units but every manager has the fiduciary duty to manage the funds entrusted to him and to discharge his other obligations under the trust deed whether units are being sold or not. In my view, therefore, once a management company's trust funds have attained a reasonable size, the company should be able to provide a good service to its investors and make a fair profit quite independent of marketing or trading activities. These two activities are totally unrelated to the manager's fiduciary obligations.
Turning for a moment to some statistics, I am reliably informed that the profits and losses made by some representative companies between 1970 and 1976 on the basis of comparing revenue from annual charges attributable to each period with the expenses of management and administration are as follows: a rise from 0·035 per cent. in 1970 to 0·109 per cent. in 1973 and, thereafter, a decline to a loss of 0·047 per cent. in 1975 and a loss of 0·062 per cent. in 1976. The reason for this downtrend is, of course, that certain inescapable expenses have risen much more than income; but, if my information on these figures is correct, I find it difficult to square them with the Under-Secretary's statement unless there are some other factors in the equation which I have missed. It may be, of course, that the Department of Trade takes the view that as long as unit trusts managements are making profits in whatever way and by whatever means there is no reason to modify their restrictions and this brings me back to the question of marketing and trading activities.
I have already suggested that these activities should be excluded from the calculation of a fair profit and I believe that this is a sufficiently important aspect of the matter to spend a few minutes considering it. These activities are very properly divided into two parts: (a) profits derived from issuing new units and reselling existing units—that is, units which managers buy as they are statutorily obliged to do—from sellers; and (b) profits

1569
attributable from holding such units before resale due to rises in the market over the period. Now, so far as holding profits are concerned, these really must be considered as irrelevant because they are not assured and, in many instances, have resulted in losses. Furthermore, they are in any case profits arising from the management's investment of their own money on which they took the risk and which could equally well have been invested elsewhere. In the case of profits from trading activities, I am informed that these fluctuated between 1·39 per cent. of turnover in 1972–73 and 0·76 per cent. in 1975, with an overall percentage for the seven years of only 0·96 per cent.
Finally, I turn to what I believe are the most important set of figures which, I understand, have been agreed with the Department of Trade. These have been assembled from the records of 85 trusts representing over 50 per cent. of the industry and they show a sum of £4·66 per annum as being the cost of servicing a unit holder's account in 1976. Assuming that this sum is now, say, £5 (which is probably fair), it must be apparent that even on the maximum annual charge of ½ per cent., the minimum economic unit holding is, in fact, £1,000; even allowing for some degree of subsidy by the larger investor for the smaller, management companies cannot possibly maintain their minimum subscription at the £250 level or less—which has been fairly typical until now. Hence my concern for the small investor whose opportunities to invest directly in British industry has been steadily eroded over the years and to whom the unit trust movement has provided such an important outlet for part of his savings.
I do not think that I am being unduly alarmist in expressing my concern because, although, in fairness, I will admit that the average minimum subscription throughout the industry is still between £100 and £250, there is already evidence that this minimum is in the throes of being raised to £500. It is my belief that it will inevitably be raised still further with the object of eliminating the small and uneconomic unit holder altogether—unless of course the Government are prepared to make some concession over these charges in the fairly near future. Personally, and as a member of the Wider Share
1570
ownership Council, I view the prospect with sufficient dismay to draw attention to it this evening, and to ask the Government to reconsider their recent decision before the situation deteriorates further. I believe that a wide spread of share ownership is an important social matter in our mixed economy, as I emphasised during my noble friend Lord Baker's debate on enterprise two weeks ago. Just as on that occasion I appealed for encouragement through the tax system to bring the small investor directly into share ownership, so on this occasion I make my appeal for the indirect alternative. Having said this, I will conclude by making a positive suggestion which I believe would be acceptable to the unit trust movement and would at the same time tip the scales in favour of the small investor who is now faced with the prospect of substantial increases in minimum subscriptions.
My suggestion is that there should be no increase in the existing preliminary charge of 5 per cent., but that the limit on the annual charge should be raised from ½ per cent. to ¾ per cent., thus allowing the overall 20-year maximum to go up from 13¼ per cent. to 20 per cent. In addition, I suggest that the trustees' and the auditors' fees at present paid by the managers should be charged directly to the fund. I believe that these two suggestions are modest and reasonable, and in the best interests of the small investor. However, just in case any noble Lord takes the view that this is an excessive increase to ask for—despite a time-lag of 26 years—I should add that I am reliably informed that it is likely to take a considerable time to implement, mainly on account of the degree of competition between fund managers.
Before sitting down, perhaps I might just say this: although I have argued my case on behalf of the small investor, it is surely inequitable that the unit trust companies should uniquely be prevented from increasing revenue in the face of constantly rising costs because the scale of their charges is effectively frozen at a level set 26 years ago. I really do not think that the movement can be blamed after all this time if it now takes steps to eliminate the small and uneconomic investor; but it would be ironic indeed if a decision by the Department of Trade was to accelerate this process.
The Under-Secretary of State for Trade (at col. 14 of Hansard for 19th June), at the end of his reply in another place to the honourable member for Leek said:
"Of course, I shall consider carefully the further representations that have been made ".
I hope that the noble Baroness in her reply will be able to take us a stage further.
9.23 p.m.
Lord CULLEN of ASHBOURNE: My Lords, the House will be grateful to the noble Lord, Lord Terrington, for having raised this important subject this evening. The noble Lord has made an extremely strong case, and I trust the Government will find it as compelling as I do. Perhaps one of the most interesting observations that he made was that the unit trust charges have been frozen for 26 years. That was presumably possible for most of that time owing to the expansion that has taken place in the unit trust movement; but there is no doubt now that the rate of inflation of recent years has made it impossible to accommodate small investors if some rise in charges is not permitted.
Having spent many years as a stockbroker, I know full well how it has become progressively more difficult to be able to afford to give the service to which clients with small investments were accustomed. Noble Lords will be aware of the fact that it has proved necessary to impose minimum commissions on small bargains since the costs of administering small bargains are similar to those for large ones. The imposition of minimum commissions was imposed reluctantly. No firm wanted to increase commissions to a point where the effect was to lose part of their clientele, both from a social and an economic viewpoint. The son or daughter of an old client of the firm might become a large investor later in life, either as a result of his or her own successful efforts or from money inherited.
Let us take the case of a young person with £500 to invest. It would be unwise to invest it all in one ordinary share; yet to split the amount into, say, five different investments would be expensive, since the minimum commissions would operate harshly against him or her. The ideal way to obtain a satisfactory spread at reasonable cost has been to invest in units in a trust which itself invested in a
1572
wide variety of investments. There are a large number of quoted unit trusts from which to choose and many firms of stockbrokers have their own in-house choice. There is no doubt that for the small investor unit trusts have been a very popular investment medium over very many years.
I think at this stage I should perhaps mention, as did the noble Lord, Lord Terrington, that there is strong competition between various unit trusts. That has always been so and it explains what has always seemed rather strange to mathematically-minded noble Lords. As the noble Lord, Lord Terrington, said, the preliminary charge is restricted to 5 per cent., the annual charge to ½ per cent., and the total to 13¼ per cent. over 20 years. It is clear that if the 5 per cent. is added to ½ per cent. over 20 years, which comes to 10 per cent., the total would be 15 per cent. and thus would exceed the 13¼ per cent. permitted.
Most unit trusts do charge the 5 per cent. preliminary charge and charge only ⅜ per cent. annually, or 7½ per cent. over 20 years; so they are actually charging only 12½ per cent. overall. Others, in competing for business, drop the preliminary charge and make a slightly higher annual charge. This competition is an important point to bear in mind when considering the proposals we have just heard from the noble Lord, Lord Terrington, to which I shall refer in a moment.
It certainly seems surprising that the Government have not seen fit to permit a modest increase in unit trust charges. As the noble Lord, Lord Terrington, has pointed out, the effect is that the investor with less than £500 to invest will be shut out. Soon—perhaps very soon—the minimum will be raised to £1,000 and in due course to a higher figure, unless the out-dated charges are unfrozen. How does that accord with the Government's oft-repeated desire for investment in industry—or do they not care about the small investor? His only avenue for investment at acceptable cost will be to put his money on deposit, to invest in Government securities and in National Savings Certificates, and so on. We all know the experience of those who have relied on those forms of investment in recent inflationary times.

1573
It will not surprise the noble Baroness, Lady Birk, that we who have for long believed in a property-owning democracy have no sympathy for this attitude of the Government. Perhaps it was caused by a well-intentioned wish to protect the small investor from suspected profiteering by unit trusts. Unfortunately, all that is happening is that the opportunity for buying units is being effectively denied to the investor. It is no easier for unit trusts to overcome inflation than for any other enterprise, either in the private or in the public sector; so why should they be specially treated so that they are unable to perform the very function for which they were created? It requires no great stretch of the imagination to visualise a scene where the resources of small investors will be forced into Government securities and then perhaps channelled into the National Enterprise Board for politically selected investment in industry. This, I need hardly say, we would deplore.
I come now to the modest changes which the noble Lord, Lord Terrington, has put forward, and in case any noble Lord may think he has been painting an unduly gloomy picture, I should like to refer to the recent announcement that the well-known City house of Charterhouse Japhet arc getting out of the unit trust business altogether because the price structure is not conducive to making a profit—not, my Lords, a large profit or even a reasonable profit, but a profit. I must reinforce what the noble Lord, Lord Terrington, has said. The point of permitting an increase in charges is not so that unit trusts will make a handsome profit; the competition which I mentioned earlier will see to that. It is to prevent the small man from being unable to buy units.
Finally, the views that have been expressed by the noble Lord, Lord Terrington, which I have tried to reinforce, are shared by responsible and well-informed City editors who are well aware of the social and economic advantages of participation between investors and industry. The profit-sharing schemes in the 1978 Finance Bill appear to reflect such a philosophy and are, hopefully, a pointer to a change of mind by the Government. So I shall say no more, and look forward to hearing, the views of other noble Lords who will take part in this debate, particularly those of the noble Baroness.
9.31 p.m.
Earl GREY: My Lords, may I apologise to the House in advance for having to repeat what the noble Lord, Lord Cullen of Ashbourne, and the noble Lord, Lord Terrington, have already said this evening, much more eloquently than I, but I feel that certain points need emphasising. I have been looking into the reasons put by the unit trust managements for the need to raise their charges, and in most cases the problems arise because of inflation. I have been reading the Unit Trust Year Book for 1977 and under the heading "How a Unit Trust Works" it says:
"Running a trust involves managers in expenses. Staff has to he employed to carry out buying and selling operations, to value the fund, to prepare and send out half-yearly reports to unit holders, and of course to provide the necessary investment judgment to ensure that the fund invests in the right shares at the right time".
Other charges that have increased over the years have contributed to the dilemma of the Association. The rise in postal and telephone charges have also to he taken into account.
As has already been stated tonight, the management charge rate is restricted by the Department of Trade under the Prevention of Fraud (Investments) Act 1958 and, despite the increasing rise in inflation and higher costs, their charges are effectively frozen at a level that was set 20 years ago. The Unit Trust Association gives details of the charges that unit managers can make. First, there is an initial charge when units are purchased, which is limited to a maximum of 5 per cent. of the value of the units purchased; some charges are between 3½ and 5 per cent. Secondly, there is a yearly charge which must be fixed so that, when taken together, the initial charge and the other charges do not exceed 13½ per cent. over a period of 20 years. This means a maximum yearly charge of ½ per cent. The Association is pressing for the limit on the annual charge to be increased to ¾ per cent., resulting in the total charges over a 20-year period being 20 per cent.
The noble Lord, Lord Terrington, has forcefully mentioned the profits from 1970 to 1976, so I shall not repeat them. Because of increased costs over the years, the unit trust managers fear that the investment level of between £100 and £250 will have to be increased to a minimum of

1575
£500, and will eventually rise to £1,000. As unit trusts are designed for the smalller investor to place his money into ordinary shares, the situation is now arising where the people for whom the scheme was designed will become affected.
I have read with interest the Question that was asked on this matter in another place on 19th June. The Under-Secretary of State for Trade could not agree that profits for the years 1970 to 1976 were inadequate. Will the noble Baroness shed some light on this in her Answer? I was pleased to hear that Mr. Clinton Davis would consider again the representations that have been made, so I assume that the door has not been closed and that a further decision may be made. Will the noble Baroness also tell us whether a decision has been made on this point?
9.35 p.m.
Lord TRYON: My Lords, I, too, must thank the noble Lord, Lord Terrington, for asking this Question tonight. His recent dollar premium crusade is fresh in all our minds. It was very successful. I think that we owe the Government some thanks for that. I hope that his present crusade on this subject may also bear some fruit.
I think that the noble Lord, Lord Terrington, has very thoroughly covered the question of the small investor, but I should like to develop this debate a little further. I am a strong believer in the cause of wider share ownership; it is something which should be encouraged in any country that believes in having a successful mixed economy. Before I go too far, however, I have to declare an interest. I have been involved all my life in investment management. Several noble Lords have asked me this evening what is explosive about this; recently, I seem to have spoken to your Lordships only about firearms! However, I am also involved in investment management. I am the director of a major merchant bank, and I am fairly directly involved in the day-to-day management of the investment of some £60 million or £70 million in unit trusts. Before noble Lords think that this makes me a major figure in the unit trust industry, let me assure them that this is not so. The unit trusts with which I am concerned are not marketed
1576
to the general public. They are what are generally known as in-house funds. They tend to carry no initial charges and the management charges are well below the present permissible maxima. I hope, therefore, that your Lordships will see no special pleading in anything that I have to say.
The noble Lord, Lord Terrington, asked the Government to reconsider increasing the annual management charges rather than the initial charges. This plea I most strongly support. To increase the initial charges would encourage the extravagant promotion of funds and would benefit newspaper advertising departments more than anybody else. It would also tend to encourage the promotion of unit trusts at times when the stock markets were rather high. We have seen this in the past. It seems to be the time when unit trusts are easier to sell to the general public, and this is not something which should be encouraged.
If the Government relent and are prepared to reconsider, I, too, strongly believe that competitive pressures—and this is a very competitive industry—will prevent any rapid rise in charges to any new permitted maximum level. I believe that in the area of general funds—which is to say funds offering a general spread of investment in United Kingdom industry—the higher charges would be unlikely to stick. The competitive position would ensure that there were always plenty of unit trusts prepared to operate at not far above present levels. Where the higher permitted charges might stick—and this is where I slightly widen the debate beyond the small investor—is in the area of specialised funds and overseas funds.
Let us take, for example, a unit trust set up to give to people an opportunity to invest in the Japanese electronics industry. The cost of running such a scheme would clearly be very substantially greater than for a fund trying to invest in a broad range of United Kingdom equities. To run such a fund successfully, the managers would have to send people to Japan. They would have to spend a great deal on communications. In those instances, unit trusts also have an important part to play, in that if anybody wished to invest in the Japanese electronics industry—to use my example—I think that he would find it extremely hard to do so as a private

1577
individual. Professional management of some kind would be needed.
Overseas investment does not always receive general acclamation from all sides, but following the abolition of the dollar premium surrender, for which I have already expressed thanks, I believe that the Government may well now smile on it rather more than at times we thought they did before. The old maxim "if you can't beat 'em, join 'em" can be quite profitable.
Only this morning I was looking at the situation of a friend who in 1969 invested £2,500 in a unit trust designed entirely for investment in Japan. His holding today is worth about £16,000, something that sadly would have been very hard to achieve as a result of any investment in the United Kingdom stock market other than a few very fortunate situations. He is a very lucky man, but the country is quite lucky, too. Some time in the not too distant future he will sell that holding, the money will come back here to the general benefit of the United Kingdom, and indeed the Exchequer will get several thousands pounds in capital gains tax straight away that it might not otherwise have got. Overseas investment requires encouragement. The unit trusts have a part to play there; it is very expensive and this is an area where I think the higher charges (if they are allowed) will allow some expansion.
I have strayed some way from the exact wording of the Question, and I hope the noble Lord, Lord Terrington, will forgive me, and I hope indeed that the whole House will forgive me. But I join in hoping that the noble Baroness will give us some encouragement that the recent decision on charges will be reconsidered.
9.42 p.m.
Lord DAVIES of LEEK: My Lords, from this side of the House I should like to say that the origin of the unit trust system itself was more or less to encourage the small investor to invest—not to gamble but to invest—under the mangement of people who had the experience to put these small amounts of money to the best available investment for the investor, and originally when we looked
1578
at it we looked only at England. Since then we have joined the Common Market and it is quite obvious that this system is going to develop. We have had the concrete example from an expert speaking from the Cross-Benches of unit trusts going into Japan. I will not take any esoteric investment such as the electronic industry in Japan, but I am thinking of Third World countries that are producing agricultural and other products that are needed to feed Britain. I am thinking of the Common Market as we know it now exists, whatever attitude one might take to it. There is no doubt that as the Common Market develops so will the opportunity for the extension of the unit trust system develop within the Common Market.
When Mr. Clinton Davis answered in the other place there was, if I may use a colloquial phrase, a "spot of hope" about the answer. I think this is a worthy objective, and in these days of inflation it is common sense that if we are expanding into the Common Market it will need clerical assistance, it will need the ability to speak a couple of languages, neither of which can now be obtained at the old-fashioned prices. Consequently, there is a legitimate case for some improvement in the returns. I do not think I need delay the House for more than the one minute I intended to speak. I think I have made for my noble friend a case worthy of being looked at to see whether some type of favourable answer can be given to the House tonight.
9.45 p.m.
Baroness BIRK: My Lords, I am grateful to the noble Lord, Lord Terrington, for raising this question. It is a great pity we could not discuss unit trusts in the daylight and in daytime but that is not his fault; transport took precedence. It has been a useful discussion, and I am sure that my right honourable friend the Secretary of State for Trade will take note of the various points that have been raised. May I preface my remarks by making it clear that the Government are well aware of unit trust managers' concern about the effect on their profitability of the present restrictions on charges and are carefully considering the further representations that have been made. The Government must also, however, have regard to

1579
the interests of unit holders on whose behalf the controls on charges were instituted.
To set the background to the present situation, as the noble Lord, Lord Terrington, pointed out, the Department of Trade has discretionary power under the Prevention of Fraud (Investments) Act 1958 to authorise unit trust schemes. In the early 1950s, thinking that some managers were setting too high a price on their services, the Department made use of its powers to introduce controls on the initial charges and the annual charges they levied. In total these charges were not to exceed 13¼ per cent. over 20 years, and that remains the rule today. It is for this reason that my noble friend Lord Davies of Leek mentioned the interests of the small investors; it was in order to protect the small investors that these decisions were made.
From time to time since then unit trust managers have made representations about these restrictions. Throughout the exchanges which took place from 1971 to 1976 the question of costs and profits remained at the forefront of the Department of Trade's interest, and discussions over the last two years with the Association have focused particularly on this. It was agreed that if the industry was to substantiate its case a wide sample of management companies' accounts would need to be produced by the Association. On the basis of the survey covering the period 1970–76, produced in the second half of last year, the Association contended that it had a case for claiming an increase in charges that would permit managers to levy a total of 20 per cent. over 20 years—that is, a 50 per cent. increase on the 13¼ per cent. over 20 years at present allowed. I think it was the noble Lord, Lord Tryon, who said that competition would ensure the protection of investors. It may be true, but if this is so I find it a little strange that the UTA and their supporters are adamant that only an increase of 50 per cent. will suffice. In addition the Association revived an earlier request that trustees' and auditors' fees should no longer be borne by managers but should be charged against unit trust funds.
The Association's case was subject to careful examination by the Department of Trade, and I must say the assistance of the
1580
Association should be fully acknowledged here; they gave every assistance they could. In March 1978 my right honourable friend came to the view that, on the basis of the evidence supplied—and considering the activities of unit trust management overall—reasonable profits had been achieved, taking the review period as a whole. Central to this conclusion was the premise that profit arising from all forms of activity should be taken into account. He did not accept—and I imagine this is now common knowledge—the Unit Trust Association's argument that the annual charge alone should bring the managers adequate profits and that the profits which arise from the marketing of units should not be considered. He was also concerned about the magnitude—but not, I must hasten to say, the legality—of the discounts which many managers give to institutional purchasers of units, some of them associated life assurance companies. Substantial commissions are also apparently being given to those selling units as agents.
Given these views of the Secretary of State, he was not, at that stage, able to accept that a case existed to change the scale of managers' charges; nor did he agree that trustees' and auditors' fees should be charged against unit trust funds. However, the Association was invited to make further representations if it wished; it took up the offer and it is those representations which are currently being considered by the Department of Trade. Therefore, I should emphasise—and emphasise most strongly—that the door has by no means been finally closed; there are very complex issues here and a fresh look is being taken at the whole question without any preconceived views on the outcome.
It must be acknowledged that the present system of charging has proved to have one unforeseen defect: comparatively lean years will result for the managers in periods when steeply-rising inflation coincides with a slump in the value of securities held—the value, that is, on which the percentage charges on unit holders are based. The Department will be looking, among other things, into the method of assessing charges, bearing particularly in mind the need to recover costs. The possible impact on small investors of an increase in minimum unit

1581
holdings will also be taken into account. The aim is to ensure that the legitimate interests of both managers and unit holders are preserved by a system which aids the managers in bad years, but takes adequate account of good years. In fact, it is very difficult to get exactly the right balance here.
In his opening remarks the noble Lord, Lord Terrington, stated that managers have no obligation to sell units. It is very difficult to conceive a trust scheme operating effectively or in unit holders' best interests, if there is no marketing of its units. Indeed, the Department requires an assurance of active marketing intentions before authorising new unit trusts. So, this is part of the arrangements which have been made.
The noble Lord, Lord Terrington, also suggested, as, I think, did the noble Lord, Lord Cullen of Ashbourne, that charges have been effectively frozen for 26 years. I do not think that that is strictly accurate. The charges are levied on a percentage basis and the size of the funds under management and the level of the stock market prices have risen greatly in this time. Therefore, they have risen together.
The noble Lord, Lord Cullen of Ashbourne, commented that Charterhouse Japhet is getting out of unit trust management. I took him to be making the point that it is no longer a very profitable business to be in and therefore people are moving out of it. In fact, it is selling to another firm which presumably expects to be able to make a profit out of it, otherwise I do not think that it would have wanted to buy it. The Department of Trade has other applicants who wish to enter into unit trust management, and therefore we assume they have taken a hard look at the economics of the situation. The noble Lord did not exactly frighten me to death, but I do not think that he need be quite so worried or paint quite so horrendous a picture as he did of the future, with a general takeover and grabbing of unit trust holdings, which was the impression that I gained. I do not think that that is likely to happen.
The noble Lord, Lord Tryon, spoke about overseas funds and gave the example of Japan. My noble friend Lord Davies of Leek referred to the EEC. Overseas operations have flourished in recent years
1582
and it is not evident to the Government that the cost of setting up funds in Japan or North America has deterred their establishment. So far as the Common Market is concerned, we are actively participating in discussions there to harmonise unit trust regulations.
We expect the United Kingdom unit trust industry to be well-placed to compete when selling across frontiers becomes a practical proposition. This is, of course, when restrictions on capital movements are relaxed. It is impossible to divide one entirely from the other. I do not think that the noble Lord, Lord Terrington, or other noble Lords expected me to be able to give any definitive answer—certainly one that would have pleased them tonight. As I have said already, I hope I have made it clear that the door is not shut and that representations are being considered.
In conclusion, I should like to pay a tribute to the unit trust industry which has served investors and the nation well over the 40 years or more of its existence. The fact that it has in a way changed its character from dealing mainly with the small investment holders, the small unit holders, to the far larger institutions is part of the way in which so many aspects of our financial and economic structure have changed. The industry has played and still plays an important part in the national economy, but I recognise that it cannot, of course, live on altruism alone. The services of managers and of trustees must be adequately rewarded. Her Majesty's Government accept that, even though there may still be room for discussion as to what constitutes adequacy at any given time. This, of course, applies to so many things that it really is not saying anything new.

SHEFFIELD GENERAL CEMETERY BILL
  BRITISH RAILWAYS BILL
  Examiners Certificate that no further Standing Order is applicable: Ordered to lie on the Table.

  TAMAR BRIDGE BILL
  Brought from the Commons, read 1a and referred to the Examiners.
  ADOPTION BILL [H.L.]
  INTERPRETATION BILL [H.L.]
  NATIONAL HEALTH SERVICE (SCOTLAND) BILL [H.L.]
  Returned from the Commons agreed to.

  KENDAL MARKET BILL [H.L.]
  Returned from the Commons agreed to with Amendments; the said Amendments considered and agreed to.

  COUNTY OF MERSEYSIDE BILL [H.L.]
  Reported from the Select Committee appointed on 3rd July last with an Amendment.
  House adjourned at four minutes before ten o'clock.