Sitting of 10 May 1978

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
NEW WRIT
For Hamilton, in the room of Alexander Wilson, Esquire, deceased.—[Mr. Michael Cocks.]
PRIVATE BUSINESS
  ORKNEY ISLANDS COUNCIL ORDER CONFIRMATION BILL
  Read the Third time and passed.
ORAL ANSWERS TO QUESTIONS
  ENVIRONMENT

    Local Authority Land
    Mr. Peter Bottomleyasked the Secretary of State for the Environment if he will require local authorities to publish registers of their land holdings.
    Mr. Macfarlaneasked the Secretary of State for the Environment what discussions he has had with the local authorities regarding the problem of waste land.
    The Secretary of State for the Environment (Mr. Peter Shore): I do not intend at the present time to compel local authorities to publish registers of all their land holdings. My immediate aim is to concentrate efforts to identify and secure early development of unused land in those areas where the problem of derelict and waste land is most serious, particularly in the inner cities. To this end I have written to the chairmen of the main nationalised industries and statutory undertakers, and have asked local authorities in partnership and programme areas to bring forward proposals to bring derelict and waste land into use. The powers contained in the Inner Urban Areas Bill and the extension of the derelict land clearance areas announced yesterday will be a considerable help.
    Mr. Bottomley: Is the Secretary of State aware that his reply is encouraging in so far as it helps to put pressure on the statutory undertakers and local authorities? Will he continue to encourage them to publish land registers not only with a note of the planned use for the land but with a date when it is expected to come into development? Does the right hon. Gentleman agree that public pressure on the authorities concerned will help to get this land into use, creating jobs and industry and eliminating dereliction and eyesores which exist at the moment?
    Mr. Shore: It will encourage local authorities, where they think it appropriate, to make known as much information as possible about their holdings of unused land. I frequently talk to the local authority associations. I can say that I have

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    come under no pressure from them to make this a priority at present.
    Mr. Frank Allaun: Is not the problem very different from the one posed by the hon. Member for Woolwich, West (Mr. Bottomley)? Is it not a fact that many councils which desperately need land for housing and other purposes cannot buy it—I am thinking of disused docks and other land which may not have been used for 20 years or more—because the district valuer is placing an industrial site value upon it? Will he therefore permit local authorities to acquire the land at its current use value, which may be nil or very little, since that was the original Labour Party proposal on land acquisition four years ago?
    Mr. Shore: Local authorities have wide powers for acquiring land, and the compensation which they pay for it is laid down by statute. It varies according to the categories of land and buildings that they are acquiring. I agree that in some areas of the country and some inner city areas the shortage of land is still a major problem. Equally, there are other areas of the inner cities where the problem now is to make effective use of land for which no proper purposes can yet be found.
    Mr. Durant: Does the Minister agree that this is public land and that therefore the public has some right to know who owns it and where it is?
    Mr. Shore: Yes. The truth is that in a number of the areas with which we are most concerned the existence of such unused land is self-evident. The main problem and purpose is to find uses for it. I am strongly encouraging the local authorities, particularly in inner city areas, to pay attention to the matter now.
    Mr. Lee: Does the Minister agree that while a register is necessary, everything possible should be done to encourage local authorities to amass vast quantities of land, as did the city of Birmingham at one time, years ago? Does he also agree that everything possible should be done discourage them from selling off their portions as, alas, the city of Birmingham did under Conservative management in recent years?
    Mr. Shore: Local authorities have to take a serious long-term view of their
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    land holdings and land needs. In a number of cases, against a forecast of housing and other need, it is sensible for local authorities to be accumulating land and not disposing of it. In other areas the conditions are different.
    Mr. Heseltine: Cannot the Secretary of State understand that local authorities have been taking a serious and long-term view of their responsibilities for many years? What is needed is a new approach whereby parcels of land are put up for sale at public auction in order to give people the opportunity to develop with private money the facilities that are needed in the inner cities.
    Would not it be a gesture of enthusiasm for his partnership schemes if he were to suggest that there should be pilot disposals of land in inner city centres, of the sort that we have seen in Liverpool recently, so that there can be something to show for all the conversations that are taking place?
    Mr. Shore: I think that the hon. Gentleman is on a different point. Local councils take a long-term view of their responsibilities. However, the hon. Gentleman should be aware of how greatly circumstances have changed in a number of our major cities, and the earlier assumptions have now to be seriously revised.
    I am much in favour of testing the market price of land. I hope that local authorities and private owners of land will not be obsessed by the historic cost of the land that they bought but will realistically test what the market value is.

    Agricultural Land (Development)
    Mr. Peter Millsasked the Secretary of State for the Environment what advice he gives to city councils in connection with the need to consult the relevant district council before purchasing agricultural land for development in the areas of the latter.
    The Under-Secretary of State for the Environment (Mr. Guy Barnett): My right hon. Friend and his predecessors have stressed the importance of constructive working arrangements between local authorities.
    Mr. Mills: Does the Minister realise the serious position that has developed between South Hams District

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    Council and Plymouth City Council, namely, that the city council has bought land for building without consultation with the district council? Is not this nonsense, and will the Minister do something about it? We in the South Hams district are not prepared to see good agricultural land of grade 2 quality being used for building.
    Mr. Barnett: I am aware of the purchase of the land, but I have no knowledge of the circumstances. Any proposals for development of the land in question will need planning permission from the authority in whose area the land is situated.
    Mr. Hicks: Does the Minister acknowledge that the relationship between a large urban authority and the surrounding rural ones will always be sensitive? Does not the House have a responsibility to protect those rural authorities against possible take-overs and other such threats that occur from time to time in these circumstances?
    Mr. Barnett: I agree with the hon. Gentleman. I have already said that our advice to local authorities is that constructive working arrangements ought to exist. It would not be right for me to make a comment on this case because I do not know the details of it. However, I take the point made by the hon. Member for Devon. West (Mr. Mills) when he draws attention to the problem of agricultural land. In circular 75/76 local authorities are advised to ensure that land of a higher agricultural quality is not taken for development when land of a lower quality is available.
    Mr. Ronald Atkins: I recognise that housing and other development must be given a certain priority, but is it not alarming that since the Second World War we have been losing about 50,000 acres of farming land a year? This is unfortunate when there is still so much derelict and waste land which could be used.
    Mr. Barnett: My hon. Friend is quite right to draw attention to that point. In addition to the circular, I should mention that any proposal for development of 10 acres or more of agricultural land which is not in accordance with the approved development plans is referred to my right hon. Friend the Minister of Agriculture, Fisheries and Food for his observations.
    Mr. Alan Clark: No one would want the Minister to mediate between the city of Plymouth and South Hams District Council on this occasion, but to use language such as my hon. Friend the Member for Bodmin (Mr. Hicks) has used about protecting the inhabitants of these rural areas from the encroachment of the cities is going too far. Does not the Minister agree that if the people of Plymouth are to be decently housed, clearly there will have to be expansion outside the city limits?
    Mr. Barnett: It would be wrong for me to make any comment on either local authority. It would be wrong for me to express any opinion on whatever proposal may be made, as it could be the subject of an appeal. I repeat that a local authority can purchase land in the area of another local authority, but development is dependent upon permission being granted by the local authority in whose area the land is situated.

    Building Land
    Mr. Tim Rentonasked the Secretary of State for the Environment what acreage of building land was released in 1977, and what is his estimate of the amount to be released in 1978 by local authorities in England from acquisitions made as a result of the Community Land Act.
    Mr. Guy Barnett: A firm figure for 1977–78 is not yet available. It is not practicable to form a realistic estimate for 1978–79.
    Mr. Renton: Is it not a fact that only 33 acres were released for housing in 1976–77, whereas in that year local authorities' administrative and staffing costs charged to the community land account amounted to £3,500,000? This works out at over £100,000 per acre released. Is not that the most appalling waste of ratepayers' money in pursuit of doctrinal Socialist aims?
    Mr. Barnett: No. If the hon. Gentleman had any knowledge of running a large scheme or undertaking he would recognise that in order to operate it costs of the kind that he has described would have to be incurred at the start, in the expectation of the growth of the scheme later.
    Mr. Hardy: Cannot my hon. Friend detect an element of ambiguity in the

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    fact that some Conservative Members ardently echo the very proper demand that countryside land should be retained and the next moment appear to be demanding that the same land should be developed as rapidly as possible?
    Mr. Barnett: There could be ambiguity. In the constituency of the hon. Member for Mid-Sussex (Mr. Renton) there may be a shortage of land. I was interested to learn that the council of that authority is considering the possibility of the acquisition of land for housing under the community land scheme.
    Mr. Stephen Ross: In this area, does the Minister notice the comparative success of the Welsh Land Board? Does he think that there is an example there that could be applied to England? Could not he amend the Community Land Act to let it apply in a regional context? He might achieve more success in that way.
    Mr. Barnett: No, I think that it was quite right, in the English context, to use the local authorities as the instruments for the Community Land Act and to set up the land acquisition and management schemes which ensured co-operation between the two levels of local government. That was right in view of the English local authorities' responsibilities for structure and local planning.

    Chipping Sodbury (Quarry)
    Mr. Copeasked the Secretary of State for the Environment when he expects to announce his decision on the proposal to fill Chipping Sodbury quarry with rubbish.
    The Minister of State, Department of the Environment (Mr. Denis Howell): I hope to be able to announce a decision in about a month's time.
    Mr. Cope: Does the Minister realise that there is much more than local interest in this proposal? It involves his making a judgment on whether methods and safeguards for tipping have advanced sufficiently to put a monster tip, such as the one proposed, near a conservation area and an area of outstanding natural beauty.
    Mr. Howell: This matter requires the judgment of Solomon, and I am quite capable of exercising it.
    Dr. McDonald: Will my right hon. Friend state what the Government's plans are to deal with Thurrock's serious problems of abandoned quarries, in view of the Government's amazing refusal of derelict land clearance area status to Thurrock?
    Mr. Speaker: Order. I have allowed the hon. Lady to ask her supplementary question, but if she wants to ask about Thurrock she ought to put down a separate Question.

    Council House Sales
    Mr. Knoxasked the Secretary of State for the Environment whether he has any plans to announce measures to increase the opportunities for sitting tenants to buy their council houses.
    Mr. Shersbyasked the Secretary of State for the Environment if he will permit local authorities to increase the present rate of discount permitted on the sale of council houses to their tenants to 30 per cent.
    Mr. Shore: No, Sir.
    Mr. Knox: As there has been a substantial reduction in the number of council houses sold to sitting tenants since the Government came to power, why will the right hon. Gentleman not make it easier for tenants to buy their houses? Why do the Government adopt such a doctrinaire attitude on this matter?
    Mr. Shore: It is not the Government but the Opposition who take a doctrinaire attitude on this matter. There is still a marked shortage of rented accommodation. Some areas are worse than others. Where that shortage exists, it will not be my practice to encourage the sale of council houses. Council tenants who wish to become owner-occupiers are able to do so in other sorts of housing, are encouraged to do so, and have been doing so at the rate of about 40,000 a year since we came into office.
    Mr. Newens: Is it not a fact that the sale of council houses to sitting tenants must inevitably reduce the number of tenancies available to help those on waiting lists? Will my right hon. Friend make clear that the Government are prepared to help owner-occupiers in other ways

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    but regard it as a priority also to help those who need houses to rent?
    Mr. Shore: We have made that very clear. I have made it clear, as did my predecessor from almost the first day he took office in the circular that he issued at that time. We are convinced that where there is a shortage of rented accommodation, local councils should be encouraged to make provision for rented housing. One does not make provision by selling off what one has.
    Mr. Heseltine: Does the Secretary of State not understand that when, as is often the case, people have been living in the same council house for decades, it does not make the slightest difference to the supply of housing to give them the right to buy their property? We accept the charge that he flings at us. We are committed to the view that council tenants and new town tenants should have the right to own their own homes, and in the next election campaign we shall tell them that we shall give it to them.
    Mr. Shore: I know the hon. Gentleman's view, but in my judgment, if local authorities are to be given responsibility for looking after the housing needs of their areas, it is right for them to exercise their judgment. I do not accept that they would be able to do that if a blanket right of purchase, regardless of circumstances, were conferred on all tenants by legislation. In addition, the sort of local authority accommodation that would be the first to go would be those estates with gardens, which, for social reasons, are in short supply and for which there is very great need.
    Mr. Stan Crowther: Can my right hon. Friend recall hearing the Conservative Party propose that private landlords should be required to sell their houses to sitting tenants? If the Conservative Party is so keen on allowing tenants to buy their houses, would it not be a good idea for it to persuade its friends, the private landlords, to sell their homes?
    Mr. James Lamond: And at a substantial discount.
    Mr. Shore: The House will have noted the typically undoctrinaire contribution of my hon. Friend the Member for Rotherham (Mr. Crowther) in extend-
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    ing parity between tenants, whether private or council—as distinct from the prejudiced and one-sided view that we get from Conservative Members.

    Housing Development (Planning Consent)
    Mr. Newtonasked the Secretary of State for the Environment if he is satisfied with arrangements for ensuring adequate hospital and other public services in connection with the granting of planning consent for major housing developments.
    Mr. Guy Barnett: Yes, but the adequacy of hospital facilities is not normally significant in deciding individual planning applications. Local planning authorities are advised by DOE circular 102/72 to have regard to the adequacy of services and community facilities when considering major proposals for housing development.
    Mr. Newton: Does the Minister accept that to the people of Essex and, I should think, Kent that answer will appear to be extremely complacent and that there are no signs that these planning requirements have been tied together? Is he aware that in my constituency and others nearby there has been a huge increase in population with no additional hospital provision? Does he recognise that this has occurred, and will he take steps to get something done about it?
    Mr. Barnett: If the hon. Gentleman is referring to expansion at Braintree and Witham, this was planned expansion, which the area health authority could be expected to take into account in its plans. I understand that a major hospital development is planned at Broomfield, north of Chelmsford.
    Mr. Loyden: Is my hon. Friend aware that when new hospitals are being built in city centres away from the communities that have been moving to the outskirts, services for those communities are becoming over-stretched? Does he agree that there is a need to establish community centres and health centres in those areas, so that confidence can be restored to people living a long way from health centres that, as in Liverpool, have been built in city centres?
    Mr. Barnett: I accept a good deal of what my hon. Friend says, but my responsibility relates to the desirability of hospital facilities being taken into account in planning applications. The question of the location of hospitals is one for my right hon. Friend the Secretary of State for Social Services.

    Partnership Committees
    Mr. Arnoldasked the Secretary of State for the Environment whether he is satisfied with the operation of the partnership committees.
    Mr. Shore: The first partnership committee meeting took place only last October, and since then all the partnerships have made progress towards tackling the problems of their areas.
    Mr. Arnold: Is it really necessary to have a combination of partnership and programme authorities and designated districts? Would it not make better sense to give additional powers to the local authorities with inner urban area problems and to allocate money in response to properly prepared schemes?
    Mr. Shore: The whole inner city programme is based upon the attempt by the Government to differentiate between those areas with absolutely major problems and those with problems that, though great, are not of the same order of magnitude. We cannot concentrate on everything at the same time, but, in terms of resources, we have put special efforts into the seven major partnership areas where the inner city problems are at their worst.
    Mr. Litterick: Is the Secretary of State aware that the people of Selly Oak have informed me that they are not satisfied with the operation of the existing partnership agreement in Birmingham, for three reasons—first, because Selly Oak is not included in the partnership agreement; secondly, because my constituents feel, on the evidence, that they are not being adequately consulted by the existing partnership committee; and, thirdly, because they fear that, as a result, Selly Oak will not get its fair share of the resources that are devoted to the city of Birmingham?
    Mr. Shore: I note what my hon. Friend says and I shall see that my right hon. Friend the Minister for Housing and Construction, who is chairman of the partner-
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    committee, takes note of it. The first job of all the partnership committees was to define the areas of the partnership. If my hon. Friend's area was excluded, I am sure that he will find that there were good reasons for that joint decision.
    Mr. Skinner: Not good enough.
    Mr. Shore: My hon. Friend the Member for Bolsover (Mr. Skinner) is a great expert on Birmingham, as he is on other matters.
    Mr. Skinner: I am an expert on marginal seats.
    Mr. Shore: And on safe seats. On the question of consultation raised by my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick), we are trying to get all the committees to develop thought-out procedures for consulting the people in the areas concerned.
    Mr. Arthur Jones: Does the right hon. Gentleman see partnership agreements as an alternative to development corporations, bearing in mind the difficulty of development corporations perhaps not being acceptable to local authorities? Does he see a more appropriate relationship between central and local government, through partnership committees, than we have had hitherto?
    Mr. Shore: To some extent, yes. The circumstances in the already settled and built-up local authority areas are very different from those in the green field site areas. Not all new towns are wholly green field areas, but in the inner city areas where there is strongly established local government already and a substantial community living there, something other than the new town type of corporation is needed. The partnership committee brings local government and central Government together in a way that no other device has succeeded in doing.

    Water Charges
    Mr. Silvesterasked the Secretary of State for the Environment what representations he has received, if any, concerning the introduction of separate water charges.
    Mr. Denis Howell: A large number of representations have been received relating to the extension of direct billing of consumers by some water authorities

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    this year. However, many of these representations have arisen because it has not been understood that such bills now include charges for sewerage and environmental services, which were in previous years collected by local authorities with their rate demands.
    Other representations arose because it had not been realised that the sewerage and environmental service charges have never qualified for rate rebates and that therefore the new arrangements for payment do not represent any change in this situation.
    Mr. Silvester: Is it not the case that these combined water and sewerage charges represent a substantial part of the household budget? Will the Minister give urgent attention to the question of finding the most economical way of relating water charges to actual household consumption?
    Mr. Howell: If that is a proposal to introduce metering charges for domestic water, I am totally opposed to it. It would be a great burden on the poorer sections of society, and the cost of installing the meters and of providing meter readers would add considerably to water bills.
    Mr. Stoddart: Is my right hon. Friend aware that he would have had considerable representations from me except that I decided to send those representations to the Thames Water Authority instead, which is the proper and responsible authority for introducing direct billing? Is he aware that this has caused bewilderment and anger among ratepayers who have not understood the water reorganisation? Is there nothing that he can do to help my constituents?
    Mr. Howell: I have every sympathy with my hon. Friend's constituents. When this legislation was going through the House we persistently stated that many problems would arise as a result of the 1973 reorganisation. Those problems have now arisen in practice. I have sympathy with my hon. Friend's constituents who do not understand direct billing, but I must point out that my postbag from this House shows that most hon. Members who voted for it do not understand it either.
    Mr. Jessel: How much of the increase in water rates has been due to the high rates of interest prevailing in the middle 1970s? Many past loans taken out to aid the construction of reservoirs have now fallen due for repayment and have had to be replaced by new loans at current interest rates.
    Mr. Howell: That is an element, but it is not as important as the hon. Member thinks. If he will table a specific Question I shall try to give him an answer.
    Mr. David Young: Will my right hon. Friend indicate what steps his Department is prepared to take on behalf of householders who cannot afford to pay their water rates in a lump sum? Will he ensure that the water rates can be paid on an instalment plan in all parts of the country?
    Mr. Howell: Yesterday afternoon I met the chairmen of all the water authorities and I raised this matter with them. I am glad to tell the House that I was assured by all of them that they will make arrangements to accept instalments whenever they are required.
    I am interested in the experimental scheme in the North-West for the sale of stamps at post offices so that people can use that method of payment if they cannot afford to pay the once-a-year lump sum. I shall continue to discuss these matters with the chairmen and I shall see that instalment plans are accepted in the industry.
    Mr. Alison: Is the Minister aware that the domestic water rate in Scotland is not only included in the general rate but is eligible for rate rebate? Since the Government have been legislating for Scotland, will he now legislate for the advantage of England and include the same benefit for the English, if necessary using some of the money from the Scottish Assembly to improve matters in England?
    Mr. Howell: It is a great pity that when the hon. Member spoke for and supported the Conservative Government in 1973 he did not arrange to introduce the Scottish situation into England. We are prevented from doing so by the nature of the Act itself.

    Housing (Homeless Persons) Act 1977
    Miss Fookesasked the Secretary of State for the Environment if he is satisfied with the working of the Housing (Homeless Persons) Act 1977.
    The Under-Secretary of State for the Environment (Mr. Ernest Armstrong): Although it is less than six months since the Act came into force, it is already apparent that it has been of significant benefit to a great many homeless people. A clearer picture of its effect on the problem of homelessness generally, and of any difficulties which have been found in operating it, will begin to emerge in the coming months, particularly when the statistics for the first four months of operation have been collected and analysed.
    Miss Fookes: Would not the problem of homelessness be much reduced if people who owned houses that are much too large for them could be encouraged to take in people, instead of being deterred, as they are now, by the current legislation?
    Mr. Armstrong: I do not think that that would make a significant contribution to solving the problem of homelessness. I do not accept that people are deterred in that way because of the legislation.
    Miss Joan Lestor: Will my hon. Friend confirm that it was never the intention of the Act to enable an authority to offer homeless people coming into the borough the fare to return home, either within or outside the country? Will he therefore keep a weather eye on what the Tory council in Slough is doing, in order to see that it honours its obligations under the Act?
    Mr. Armstrong: I confirm what my hon. Friend said. We have been disturbed by some of the statements that we have read in the Press. There must be no discrimination at all on grounds of nationality or citizenship, once a person arrives in this country properly. I assure my hon. Friend that we shall keep an eye on these matters.
    Mr. Evelyn King: Does the Minister accept that however well intentioned this Act was—and it was well intentioned—
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    it can operate with grave injustice in rural and tourist areas? In these areas the summer population is often enormous and the winter population is very small. Is the hon. Gentleman aware that tourists—who are often young—come into the area, claim to be homeless, and are rehoused, which means that the residents who have been on the list for many years are put at a grave disadvantage? Is he also aware that the authority in question has to bear considerable expense, which is very unfair?
    Mr. Armstrong: We are collecting statistics, as the Act has only been in force since 1st December. Over the years the bulk of housing authorities have had to make judgments about urgency cases and people in desperate need. Homelessness is the most acute form of housing need and I hope that it will continue to be handled with sensitivity and humanity.
    Mr. Douglas-Mann: Does my hon. Friend agree that there is widespread misunderstanding about the effects of the 1974 Rent Act and of the extent to which it provides substantial security for landlords of occupied property? Will he embark on a publicity programme to encourage the owners of residential property to provide accommodation for letting in their homes, beause this could contribute to the relief of the problems to which the hon. Member for Plymouth, Drake (Miss Fookes) referred?
    Mr. Armstrong: I agree that there are some landlords who, because they have misunderstood the effects of the 1974 legislation, have been hesitant. We are doing our best to let them know their rights in these matters.
    Mr. Rossi: Does the Minister agree that particular authorities have special problems under the Act—namely, the recipient authorities of people from other boroughs and from overseas? This applies both to the Slough situation and to the tourist areas. Does he further agree that the answer is to make more resources available to those authorities with special problems? Is he not receiving representations to that effect?
    Mr. Armstrong: We are analysing the effects of the Act over the first four months. Obviously there are particular authorities that have special problems.

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    A number of enlightened authorities have, for four years, carried out the spirit of the circular that was issued in 1974. If they approach these matters with humanity they can find reasonable solutions.

    Non-metropolitan District Councils
    Mr. Grocottasked the Secretary of State for the Environment what are his criteria for establishing whether a non-metropolitan district council may be considered for increased powers in line with his views on organic change in local government.
    Mr. Shore: This is one of many questions that we are discussing with the local authority associations as part of our consideration of the case for organic change. We will report to the House in due course.
    Mr. Grocott: Bearing in mind that many of the old county boroughs—by far the best form of local government yet devised—had populations of less than 100,000, will my right hon. Friend not stop simply at the point of giving powers back to the "Big Ten" or even the "Big Forty"? Will he instead extend them to smaller district councils, such as Lichfield District Council and Tamworth Borough Council, in line with the wishes of the Labour Party in the area and those of local inhabitants?
    Mr. Shore: I can see my hon. Friend's point. Indeed, I suggested it in a speech that I made some time ago. We must consider very carefully the sensible way to proceed, given the existence of a two-tier system of local government that everybody wishes had never been established. However, given that it exists, we must look carefully at the case for changes and for bringing greater powers and responsibility to the levels nearest to the people concerned.
    Mr. Stephen Ross: Will the Minister accept the evidence of a referendum in my constituency, if it can be shown that the overwhelming support of the populace is for a one-tier authority?
    Mr. Shore: I shall bear in mind the particular position of the Isle of Wight, which everyone agrees is probably one of the most difficult and anomalous because it is the smallest local authority county
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    in the country. Nevertheless, I cannot give the hon. Member any assurance about a referendum.
    Mr. Ashley: Although my right hon. Friend can see the case and understand the point for the return of powers, he is not acting on his appreciation of the case, and many people in Stoke-on-Trent and other areas have strong feelings about the need for returning these powers. Therefore, can my right hon. Friend say whether it is now a question of "when" or "if" these powers will be returned?
    Mr. Shore: I not only understand the strong feelings, I share them. However, the present situation is exactly as it was defined by my right hon. Friend the Prime Minister when he spoke at the Bristol conference. He said that there would be a series of further consultations—first of all bilaterally, with the major Ministries concerned. I myself will co-ordinate these exchanges and we will then consider collectively, as we must, what has to be done.

    Building Societies Association
    Mr. Michael Lathamasked the Secretary of State for the Environment whether he will make a statement on his latest discussions with the Building Societies Association.
    Mr. McCrindleasked the Secretary of State for the Environment if he plans to meet the chairman of the Building Societies Association in the near future.
    Mr. Shore: I last met representatives of the Building Societies Association on 9th March and I informed the House of the outcome in my answer to my hon. Friend the Member for Leeds, West (Mr. Dean) on 10th March.
    The Government and the BSA do, of course, have regular discussions in the Joint Advisory Committee on Mortgage Finance.
    I am ready to meet the chairman of the association whenever the need arises.
    Mr. Latham: As interest rates are now once again moving inexorably up, will the right hon. Gentleman confirm that the building societies would be legally entitled to take any decisions they thought appropriate regarding their own interest rate structure, both for mortgages and for investment?
    Mr. Shore: The building societies have the legal right to make adjustments to their mortgage rates, but they take acccunt, as indeed they should, of longer-term, or at least medium-term, interest rate movements and not all the much more frequent and often much stronger movements of the MLR. We are making it easier for them to take a longer-term view by encouraging them to have stabilisation funds.
    Mr. McCrindle: Has not the time arrived when the Secretary of State should withdraw his request to the building societies to place restrictions on their mortgage lending to first-time buyers and others? Is it not nonsensical that building societies are pressing upon existing borrowers additional loans for repairs and maintenance while being obliged to refuse mortgages to people who wish to buy houses for the first time?
    Mr. Shore: What would be nonsensical would be to allow a flood of building society money to chase up the prices of housing generally and thus make it particularly difficult for first-time purchasers and people of modest means to obtain their houses.
    Mr. Joseph Dean: Will my right hon. Friend press the building societies further to make more of their funds available within the red-lined zones in some of the larger cities? There is a grave shortage of funds available for that purpose. If he does not adopt that course, will he consider the alternative of trying to make more funds available for local authorities to advance those loans themselves?
    Mr. Shore: On the issue of red-lining, we have had many conversations with building societies and with local authorities, which can play their part. There has been considerable progress in identifying the problems in certain inner city areas. I am at least hopeful that the £300 million which has been lodged by the building societies for support lending—that is to say, for nominees of local authorities—will be much more successful this year than was the earlier scheme of last year.
    Mr. Sainsbury: Does the Secretary of State accept that it would be much more helpful to people seeking to buy a home if he were to repeal the Community Land Act and thus increase the supply of land
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    and of homes for sale, rather than act to restrict the supply of funds to enable people to purchase the homes?
    Mr. Shore: That is a frivolous intervention.
    Mr. Blenkinsop: Is my right hon. Friend aware that the building societies have now established an appeal procedure to enable some of the cases of possible red-lining to be examined with more care?
    Mr. Shore: I am grateful to my hon. Friend for bringing that to the attention of the House, as it is important. I am fully aware that this is an appeal arrangement, as it were, still within the compass of the building societies themselves. Nevertheless, they have agreed to set up an appeal tribunal whose members will include right hon. and hon. Members from both sides of the House. Therefore, there will be a far greater sense of fairness in particular cases than there has been in the past.
    Mr. Heseltine: Does the right hon. Gentleman realise that if he really thinks that his reply to my hon. Friend the Member for Hove (Mr. Sainsbury) was accurate, it shows how little he understands the harm that the Community Land Act has done to the whole housing movement? In respect of the conversations that he could have with the building societies, does he understand that until he makes clear his attitude to the building societies' special deposits after the end of June he is injecting uncertainty into the house building programme, and that since house prices have increased by 16 per cent. over the last 12 months, anyway, his proposals have an element of slamming the stable door after the horse has bolted?
    Mr. Shore: That is not at all what we intend to do. We have a continuous exchange with the building societies, of course. What I announced in March, in answer to the Question to which I referred earlier, was for the coming quarter, that is to say, for the next three months. Of course we shall look at the situation again. I have no desire to retain any limitations on the building societies' lending programme, any more than they have—just as soon as we are satisfied that we are not feeding inflation in house prices.

    Council Houses (Modernisation)
    Mr. Ronald Atkinsasked the Secretary of State for the Environment what Government funds were taken up by local authorities last year for the modernisation of council houses.
    Mr. Armstrong: The final figures for 1977–78 are not yet available. In the first three quarters of that year it is estimated that expenditure by local authorities in England totalled about £242 million: judged by previous years the final quarter is likely to show a significantly higher rate of expenditure than that of the earlier quarters.
    Mr. Atkins: Although those funds are very welcome, is my hon. Friend aware that the wholesale introduction of central heating, sometimes without the tenant's consent, has in a minority of cases certain disadvantages—such as persistent condensation and fungus on walls, inability to pay bills through lack of control, and the lack of choice of alternative fuel?
    Mr. Armstrong: That is a very important matter, which has given us some difficulty in different areas. We have set up a working party and published our first bulletin. We are trying to deal with this problem.
    Sir Anthony Royle: Is the hon. Gentleman aware that there is increasing concern among residents in council houses alongside the South Circular Road? Will he give immediate consideration to the possibility of providing grants for double glazing, as provided for relief from aircraft noise, for residents in council accommodation alongside this very noisy arterial road?
    Mr. Armstrong: The general matter of council housing is one for local authorities and their use of resources. The hon. Gentleman should write to me about any special measures of the kind that he outlines.
    Mr. Madden: Does the Minister share my concern about mean councils, such as the Tory-controlled Calderdale council, which modernise properties but then give very little to tenants, including the elderly, to redecorate and carry out consequential repairs? Will he insist on a standard rate for redecoration allowances
    1178
    for tenants when modernisation takes place against their will, or, indeed, with their agreement?
    Mr. Armstrong: The relationship between central Government and local authorities is a difficult matter, but improvement grants leave a great deal of jurisdiction to local authorities. That is in accordance with general policy.
    Mr. Rossi: Will the Minister confirm whether percentage approval of local authority-planned expenditure under block 2 of the housing investment programme, which relates to improvements, compares very unfavourably with the percentage approval under block 1? Is this not contrary to the housing strategy laid down in the Government Green Paper?
    Mr. Armstrong: I do not think so. We are allowing as much flexibility as we can in respect of transfers within the blocks. We are also expanding the resources to be spent in these blocks next year. I think that the hon. Gentleman will find that local authorities will be able to cope.

    Gateshead Community Programme
    Sir W. Elliottasked the Secretary of State for the Environment what is the planned effect and cost of the comprehensive community programme now established in Gateshead; and whether that conflicts in any way with the new Government programmes for Newcastle and the surrounding area.
    Mr. Armstrong: The Gateshead comprehensive community programme was planned as a means of securing a co-ordinated approach to the problems of urban deprivation on a district-wide basis. The cost to this Department is some £35,000, a year, which is the cost of funding a small team attached to Gateshead metropolitan borough and working on the CCP. The Newcastle-Gateshead partnership has similar aims but is concerned with the problems of a defined inner area. The two approaches are complementary rather than conflicting.
    Sir W. Elliott: I accept that the two programmes are complementary, but does the Minister agree that the Gateshead scheme, although small, is still costing the taxpayer a good deal of money? Have not such schemes been superseded by the partnership arrangement?
    Mr. Armstrong: That is not my experience. I have responsibility for both the partnership scheme and the CCP. I am sure the hon. Gentleman agrees that in Gateshead there are pockets of deprivation throughout the district. The work which is being undertaken is assisting the partnership proposals and is complementary to them.
    Mr. Speaker: I call Mr. Steen, and I remind the House that the Question relates to Newcastle.
    Mr. Steen: Will the Minister explain why he is still spending so much money on research into the problems of inner cities when £100 million of Government money has already been spent on this topic? Is it not about time that he got on with a bit of action?
    Mr. Armstrong: I think that the present Government have made considerable progress in getting on with solving the problem of deprivation in the inner cities.

    New Town Housing Transfers
    Mr. Hal Millerasked the Secretary of State for the Environment what assistance he is making available to councils to reduce the financial burden of taking over from new town development corporations housing assets built at a high cost and at a time of high interest rates.
    Mr. Guy Barnett: Following agreement with the Association of District Councils on the terms of the transitional assistance for the 1978 transfers of new town housing, transfers took place in 10 of the first-generation new towns last month. We hope shortly to put forward proposals for transitional assistance for the transfers in the second-generation new towns which will take fully into account the differences between them and the first-generation towns.
    Mr. Miller: Does the Minister accept that the proposal in the case of Redditch involves a burden of £10 million, or £800,000 a year on the rates? Will he accept that there must be a different basis of calculation for the second-generation towns because of the Parker Morris standards of housing and higher interest costs?
    Mr. Barnett: I cannot confirm or deny the hon. Gentleman's figures, but I can underline the fact that we shall take into
    1180
    account in our proposals the differences between first- and second-generation new towns. I recognise that in the case of some second-generation new towns questions of higher costs and higher interest rates may be involved in the construction of houses.
    Mr. Newens: Does the Minister recognise that houses which were taken over by new town authorities and which were built 20 or 30 years ago in a period when there were low interest rates and when charges were lower in general are now old and require considerable expenditure on their maintenance? Does he also recognise that new town authorities as a whole believe that more assistance should be made available to smooth the path of the transition whereby new town houses previously managed by development corporations and the Commission have been transferred to local authorities? Does he appreciate that this feeling exists strongly in the older new towns as well as in second-generation new towns?
    Mr. Barnett: If there are fundamental design faults or other special problems, my hon. Friend will be aware that Section 10 grant is available to meet such circumstances. I cannot comment on that matter at this stage because the claim forms for Section 10 grant in respect of first-generation new towns are expected only at the end of this month. If the houses are old, presumably the outstanding loan debt is a good deal less. Indeed, the Association of District Councils agreed in the transfer arrangements that housing would be accepted, although some of them might be old.
    Mr. Rossi: Does the Minister agree that the terrible debts which these local authorities are being asked to shoulder could be considerably reduced by the Minister allowing local authorities to sell off the houses on generous terms to the sitting tenants?
    Mr. Barnett: I do not know what on earth the hon. Gentleman was talking about in the first part of his supplementary question, and I think he will recognise if he examines the matter that our policy in respect of the sale of corporation houses is eminently sensible.

    Liverpool Partnership
    Mr. Steenasked the Secretary of State for the Environment how many

    1181
    committees or working groups have been set up as a consequence of the establishment of the Liverpool partnership arrangements a year ago; how many public officials are involved in total; and how many meetings have taken place to date.
    Mr. Shore: The Liverpool partnership is preparing a programme of action to deal with the very serious problems of the inner area. Work on the programme is being processed by six sector working parties and an officers steering group before consideration this summer by the partnership committee of Ministers and members, which I chair. The partnership committee has met twice.
    Mr. Steen: Will the right hon. Gentleman explain why he favours only public officials on the partnership committee rather than the many voluntary organisations and the community groups which want to get involved in the decision-making process? Why did the Government vote down the new clause in the Inner Urban Areas Bill which would have given those who live in inner cities the chance to tackle the problem and find solutions themselves?
    Mr. Shore: The officials are not members of the partnership committee, as the hon. Gentleman ought to know. Membership relates to elected members of the city council and Merseyside. On the second point, concerning the relationship between the Liverpool partnership and the various voluntary bodies and groups in the city, the kind of arrangement that is thought most suitable in the area has already been laid down. Each of the sector working parties has established special contacts with the range of voluntary bodies in its area of activity.
    Mr. Loyden: May I sympathise with my right hon. Friend in trying to understand the comments of the hon. Member for Liverpool, Wavertree (Mr. Steen) on the subject of the inner area partnership? Is my right hon. Friend aware that the Tory Party, at a recent meeting at which he was present, extolled the virtues of inner area partnerships? May I assure my right hon. Friend that the people of Merseyside accept that this will be a contribution to the solution of their problems?
    Mr. Shore: I thank my hon. Friend for those comments. I believe that the partnership programme, particularly that in Liverpool, is shaping well. I say no more than that now because these matters must be judged after we have had longer experience of their working than we have had so far. We have been able to make a series of announcements which have been of considerable help to Liverpool in most trying times.
    Later—
    Mr. Heffer: On a point of order, Mr. Speaker. You will have noticed that there has been a very serious error on the Order Paper in that the hon. Member for Liverpool, Wavertree (Mr. Steen) is described in Question No. 18 as the hon. Member for Liverpool, Walton. I have a feeling that my constituents will not take kindly to that printer's error. May we have it corrected?
    Mr. Speaker: Yes, and I extend my humble apologies to both hon. Members.

    Rating Surcharge (Empty Offices)
    Mr. Wallasked the Secretary of State for the Environment what is the latest available figure for the yield from the rating surcharge on unoccupied office properties levied under the Local Government Act 1974 and the cost involved in collecting this surcharge.
    Mr. Guy Barnett: Details of the figures requested are not available centrally. Individual rating authorities may be able to supply figures relating to their own areas.
    Mr. Wall: Is this type of surcharge still cost-effective? Has it not now outgrown its use, and will not the Minister consider its removal?
    Mr. Barnett: I believe that it probably is cost-effective, not in terms of the sums collected but in that it is generally recognised that there was a widespread problem of commercial property being deliberately held empty in the hope of speculative gain. I believe that the surcharge has had a useful effect in helping to bring about a change.
    Mr. Fernyhough: As police protection, fire protection and every other protection that the local authority provides is expected for such properties, why should

    1183
    those concerned be excused making their contribution towards the cost?
    Mr. Barnett: I accept that there is a case for ratepaying, but the Question is concerned with the surcharge.

EUROPEAN COMMUNITY (MILK MARKETING BOARDS)
Mr. Raphael Tuck: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the fact that six Members of Parliament were prevented last Monday evening from voting on a crucial matter in the EEC by reason of the necessity of their being in the House of Commons for the vote on the Finance Bill, with the result that they were unable to prevent the Agriculture Committee of the European Parliament from voting for the disbandment of the Milk Marketing Boards in this country".
The matter is specific because it deals with the invidious position of the Member of this Parliament who is also a Member of the European Parliament. It is important, because the results of the proceedings in the Agriculture Committee of the EEC last Monday may well be disastrous and nullify all the valiant efforts of my right hon. Friend the Minister of Agriculture, Fisheries and Food to keep the Milk Marketing Boards here in being.
The matter also calls into question the whole of our pairing system—whether it is right—and whether a Member of this Parliament should also be a Member of the European Parliament, as he cannot do both his jobs effectively.
The matter should have urgent consideration because this kind of thing may well happen over and over again, and it is up to this Parliament to see that it does not.
Mr. Speaker: The hon. Member for Watford (Mr. Tuck) gave me notice before 12 o'clock today that he would seek leave to move the Adjournment of
1184
the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the fact that six Members of Parliament were prevented last Monday evening from voting on a crucial matter in the EEC by reason of the necessity of their being in the House of Commons for the vote on the Finance Bill, with the result that they were unable to prevent the Agriculture Committee of the European Parliament from voting for the disbandment of the Milk Marketing Boards in this country".
I listened carefully to the hon. Gentleman, but I cannot grant his request.
Mr. Lee: On a point of order, Mr. Speaker. As my right hon. Friend the Leader of the House is in his place, I wonder whether you would look kindly on any attempt by him to catch your eye if he can assist us in trying to avoid the kind of nonsense my hon. Friend the Member for Watford (Mr. Tuck) has been seeking to make a Standing Order No. 9 matter. My right hon. Friend may be able to assist us so that the damage done by the organisation in Brussels, Strasbourg or wherever it meets can be mitigated somewhat.
Mr. Speaker: The Lord President will have heard what the hon. Gentleman said, but this is not the moment for him to intervene.

EUROPEAN COMMUNITY (MILK MARKETING BOARDS)
  BILL PRESENTED
    EMPLOYMENT (CONTINENTAL SHELF)
    Mr. Secretary Booth, supported by Mr. Secretary Owen, Mr. Secretary Benn, Mr. Secretary Varley, Mr. Secretary Millan, Mr. Secretary Dell and Mr. Harold Walker, presented a Bill to make provision for the application of certain enactments to employment connected with the exploration or exploitation of areas of the continental shelf adjacent to areas designated under the Continental Shelf Act 1964; And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed [Bill 127].

DESIGNATION OF REGIONAL BOUNDARIES
3.35 p.m.
Mr. Robert Hicks: I beg to move,
That leave be given to bring in a Bill to provide for the designation by the Secetary of State of regional boundaries for economic planning and associated purposes.
The Bill would make Parliament directly responsible for determining the number, the extent and the boundaries of our standard United Kingdom regions. At present regional boundaries are determined by Whitehall. Therefore, the Minister does not have to obtain the prior approval of this House. I believe that as a consequence, some of our regional bonndaries take little or no account of the characteristics or needs of the regions.
Under existing arrangements the regional unit is used as the basis of functions such as regional economic planning and the collection and dissemination of a whole range of statistics, such as housing, employment, income levels and so on, as well as numerous other functions.
I believe that it is a mistake that Parliament should have no statutory part in determining the number and extent and boundaries of the regions. This means in reality that all too frequently the regional divisions are drawn up to suit the convenience of Whitehall.
In many parts of the United Kingdom there exists a distinct expression of regional consciousness. In recent years this trend of preserving or establishing a regional identity has manifested itself in a number of ways. This is hardly surprising. We live in an age that has experienced unnecessary centralisation, an over-dependence upon London and a general movement of both economic activity and people from the peripheral and more rural parts of the United Kingdom to urban concentrations, particularly London, the Midlands and the South-East.
I believe that against this background any desire on the part of regions to reestablish their own identity should be encouraged. The need to recognise the genuine aspirations of belonging to and contributing to an identifiable regional unit is very relevant in the far South-
1186
West, particularly in Devon and Cornwall. At present Cornwall and Devon are lumped together in a so-called South-West region that extends to include Bristol and Avon, Gloucestershire and Wiltshire.
The two far South-Western counties have little in common with those areas with which they are now linked. The basis of their economies differs significantly. Cornwall and Devon are far more dependent upon agriculture and fishing, tourism and the service sector. Industry is far more scattered. Apart from Plymouth, there are no major concentrations of population and economic activity. Furthermore, under the existing arrangements, Bristol, the so-called regional capital, is nearer to London than it is to Bodmin.
But the problem goes deeper than this, because the so-called South-West region is dominated by Bristol and Severnside, Gloucester and Swindon and the like. Therefore, regional statistics such as income levels and unemployment figures often make nonsense of the true position in the far South-West. Consequently, distortions abound, much to the cost of Devon and Cornwall.
I should like briefly to illustrate the point with regard to the incidence of unemployment. When officials or Ministers in Whitehall examine this, the position might not seem to be as bad as it actually is, because the current unemployment level for the whole South-West region corresponds approximately, in percentage terms, to the national average. But if we take Devon and Cornwall alone, the regional figure hides this, because the actual picture is far from satisfactory. Unemployment in the last 18 months has been consistently almost double the national average. Indeed, Cornwall has been in the unenviable position of experiencing the highest unemployment percentage figure of any United Kingdom development area for the past 15 months.
This regional imbalance is repeated in a number of circumstances, including income levels, where again, taking the South-West region as a whole, income levels approximately correspond to the national average. But again, once we go further west, in my own constituency, for example, they are 14 per cent. to 16 per cent. below the national average.

1187
There is, then, little doubt in my mind that over the years, under successive Governments, Cornwall and Devon have suffered because Ministers and Whitehall in general have tended to look at the South-West region as a whole. As a result, our problems and our needs have been sacrificed in the far South-West for the sake of administrative regional tidiness.
It is for these very practical reasons, plus the fact that Devon and Cornwall represent, in my view, a very distinctive regional identity, that I wish to introduce the Bill today. It surely would be sensible for Parliament to become involved in the drawing up of our regions and deciding these boundaries. It would also indicate to the people concerned that this House recognises in a regional context that Bodmin has very little in common with Gloucester and Swindon, even if Ministers and Whitehall do not recognise it.
Question put and agreed to.
Bill ordered to be brought in by Mr. Robert Hicks, Mr. Peter Mills, Mr. Hugh Dykes, Miss Janet Fookes, Mr. David Knox, Mr. David Mudd, Mr. David Madel, Mr. John Hannam, Mr. Robert Adley, Mr. Christopher Brocklebank-Fowler, Mr. Neil Macfarlane and Mr. Ray Mawby.

DESIGNATION OF REGIONAL BOUNDARIES
  DESIGNATION OF REGIONAL BOUNDARIES
  Mr. Robert Hicks accordingly presented a Bill to provide for the designation by the Secretary of State of regional boundaries for economic planning and associated purposes; And the same was read the First time; and ordered to be read a Second time upon Friday 14th July and to be printed. [Bill 130.]
ORDERS OF THE DAY

  FINANCE BILL
  (Clause No. 11; new clauses relating to stamp duty on house purchase, indexation for capital gains tax, deferred payment of duty on whisky or interest on repayments of overpaid tax.)
  Considered in Committee. [Progress 8th May.]
  [Mr. OSCAR MURTON in the Chair.]

  FINANCE BILL
    Clause 11

      CHARGE OF INCOME TAX FOR 1978–79
      The Chairman: I think it would be for the convenience of the Committee if I made a short statement regarding the proceedings which will take place this day.
      If Amendment No. 7 is agreed to, Amendment No. 23 cannot be called. I shall, however, call Amendment No. 20, which is consequential to Amendment No. 7, at the appropriate stage later in the proceedings.
      If Amendment No. 7 is negatived, I shall allow an immediate separate Division on Amendment No. 23, and, if that is agreed to, I shall call its consequential, Amendment No. 24, at the appropriate stage.
      3.45 p.m.
      Sir Geoffrey Howe: I beg to move Amendment No. 7, in page 10, line 17, leave out '£7,000' and insert '£8,000'.
      The Chairman: With this it will be convenient to take the following amendments:
      No. 23, in page 10, line 17, leave out '£7,000' and insert '£6,000'.
      No. 20, in page 10, line 29, leave out lines 29 to 38 and insert—

      'Part of excess over £8,000

      Higher Rate

      The first £2,000

      …

      …

      40 per cent.

      The next £4,000

      …

      …

      50 per cent.

      The next £7,000

      …

      …

      60 per cent.

      The remainder

      …

      …

      70 per cent.'.

      1189
      No. 21, in page 10, leave out lines 29 to 38 and insert—

      'Part of excess over £8,000

      Higher Rate

      The first £2,000

      …

      …

      40 per cent.

      The next £3,000

      …

      …

      50 per cent.

      The next £4,500

      …

      …

      60 per cent.

      The remainder

      …

      …

      70 per cent.'.

      No. 24, in page 10, leave out lines 29 to 38 and insert—

      'Part of excess over £6,000

      Higher Rate

      The first £1,000

      …

      …

      40 per cent.

      The next £1,000

      …

      …

      45 per cent.

      The next £1,000

      …

      …

      50 per cent.

      The next £1,000

      …

      …

      55 per cent.

      The next £2,000

      …

      …

      60 per cent.

      The next £2,000

      …

      …

      65 percent.

      The next £2,000

      …

      …

      70 per cent.

      The next £5,000

      …

      …

      75 per cent.

      The remainder

      …

      …

      83 per cent.'.

      No. 29, in page 10, leave out lines 30 to 38 and insert—

      'The first £3,000

      …

      …

      40 per cent.

      The next £4,000

      …

      …

      50 per cent.

      The next £7,000

      …

      …

      60 per cent.

      The remainder

      …

      …

      70 per cent.'

      No. 25, in page 10, line 33, leave out from beginning to end of line 38 and insert—

      'the next £1,000

      …

      …

      55 per cent.

      the next £1,000

      …

      …

      60 per cent.

      the next £2,000

      …

      …

      65 percent.

      the next £2,000

      …

      …

      70 per cent.

      the next £5,000

      …

      …

      75 per cent.

      the remainder

      …

      …

      83 per cent.'.

      No. 22, in page 10, leave out lines 36 to 38 and insert—

      'the remainder

      …

      …

      70 per cent.'.

      Sir G. Howe: The Committee will appreciate that, so far as we are concerned, there are really two amendments which march together in this debate. Amendment No. 7 seeks to raise the starting point from the 40 per cent. rate of income tax from £7,000 to £8,000 of taxable income, that is, from £140 a week to £160 a week.
      Labour Members below the Gangway have moved, rather remarkably, by way of alternative to that, to lower the figure from £7,000 to £6,000, to a figure of £120 a week. We are astonished at that, but no doubt they will press their case as they think best.
      Linked with our Amendment No. 7 is Amendment No. 20, which seeks to reduce the number of and to widen the higher rate tax bands, and to bring the top rate of tax on earned income down from 83p to 70p. The Committee will
      1190
      see that it replaces the nine existing higher rate bands, which reach a figure of 83 per cent. at £23,000 a year in the Bill, with four bands which reach the top figure of 70 per cent. at £21,000 a year.
      The third amendment which forms part of our group, Amendment No. 29, is relevant only if the first one, to raise the starting point from £7,000 to £8,000 a year, is not carried as Amendment No. 29 accepts that the £7,000-a-year figure remains the starting point but still seeks to widen the higher bands and bring down the top rate.
      The first matter on which I think there is now fairly close agreement on each side of the Committee is the cost of these two amendments, Nos. 7 and 20, in the current year, if carried. To raise the threshold from £7,000 a year to £8,000 a year for the higher rate would cost—as I think my hon. Friend the Member for Blaby (Mr. Lawson) was told yesterday—about £40 million in the first year. To widen the higher bands and reduce the top rate to 70 per cent. would cost £155 million in the current year. Taken together, the two amendments would amount to a cost of less than £200 million in the first year, and the first one, on which we shall vote first, would cost £40 million in the first year.
      To put it in perspective, that figure is less than one-third of a penny in every pound of total public spending which will take place this year. It is one-twentieth of the planned increase in public spending this year, or less than one-third of the proceeds of a single rate of value added tax of 10 per cent. The cost of these amendments, therefore, could be covered within those very modest figures and could be amply covered, more than three times over, if the Government were prepared to accept our repeated recommendation for a single rate of value added tax at 10 per cent.
      Mr. Ron Thomas: I thank the right hon. and learned Gentleman for giving way. Will he please tell the House what the Opposition proposal will mean in terms of a tax handout for someone on an income of £25,000 a year?
      Sir G. Howe: I shall deal with that in a moment. The hon. Gentleman talks about a tax handout, but the reality is that if all our amendments are carried in

      1191
      full, the gentleman of whom he speaks, on £25,000 a year, will still be bearing a higher tax burden than he was after the Budget in March 1974.
      Our figures do not go so far as to lighten the tax load back to the level to which the Chancellor of the Exchequer increased it in his first Budget in March 1974. Our figures do not lighten the real tax load to take it back to the point when the hon. Gentleman's right hon. Friend was riding high, in his howls of anguish and pip-squeaking mood. If these amendments are passed, the real burden on the gentleman about whom the hon. Gentleman is talking will still be more than it was in March 1974, as a proportion of total income. Labour Members are sophisticated enough to know that by talking about pounds as though they were still worth the same figure today as they were when the Labour Government started in office, they talk in meaningless terms. The real burden of tax, if these amendments are carried, will still be greater than it was when the Labour Government first started on their disastrous course.
      Mr. John Pardoe: May I ask the right hon. and learned Gentleman to check the figure of £40 million which he estimated will be the cost of Amendment No. 7? Both of our parties are in agreement with regard to this amendment, but I think that he has made a mis-estimate. If he looks at page 10 of the Bill, he will see that after £7,000 of taxable income the table says:

      "The first £1,000

      …

      …

      40 per cent."

      As the Bill is written, the effect of passing this amendment—which both he and I want passed—will work right the way up through the scale. The cost will not be £40 million. I think that we had better be absolutely clear about what we are doing. My best estimate is that it will cost around £105 million this year and probably £150 million in a full year.
      Sir G. Howe: The answer that was given to my hon. Friend the Member for Blaby dealt with each of these points step by step. This amendment, as it stands, operates only to raise—[Interruption.]
      The Chief Secretary to the Treasury (Mr. Joel Barnett): It would be as well to clarify this point. If the right hon.
      1192
      and learned Gentleman looks at Clause 11, he will see that if one raises the threshold to £8,000, automatically one raises the threshold of each of the other bands. The net result of passing Amendment No. 7 as it stands would be a full-year cost of £150 million and a cost in 1978–79 of £105 million.
      Mr. Robert Kilroy-Silk: The right hon. and learned Gentleman still does not understand it.
      Sir G. Howe: The Chief Secretary must notice that another amendment is to be made. The mere passing of this amendment would leave the table, as it stands at the moment, with £7,000 still in it. But in all events the Committee is in no doubt about what is happening.
      Mr. Joel Barnett: With respect, I think it is important that the Committee should know whether it is voting for £105 million or £40 million with regard to Amendment No. 7. The right hon. and learned Gentleman says that if we raise £7,000 to £8,000, it does not affect anything else. However, he must know that the first £1,000 in the table would then come after £8,000 rather than £7,000, and so on up the table. As I say, the net cost for 1978–79 is £105 million and £150 million for a full year.
      Sir G. Howe: That is right. But we must remember that we are talking about two amendments. The first chunk raises £7,000 to £8,000 and, as a result, raises each step by £1,000. The second part seeks to raise the limits of the higher rate bands and to drop the top one. The total cost of both those amendments taken together is less than £200 million. The Chief Secretary is distributing the cost in a different way, and I can follow the way in which it is analysed.
      Mr. Kilroy-Silk: If the right hon. and learned Gentleman cannot answer those difficult questions, can he answer a very simple one? It may well be that I would want to support him in the Lobby. Therefore, can he tell me the answer to the question posed by my hon. Friend the Member for Bristol, North-West (Mr. Thomas)? How much is he asking me to help to give, as a tax handout, to a gentleman earning £25,000 a year? [HON. MEMBERS: "How much do you earn?"] My income is the same as that of every other Member of Parliament.
      Sir G. Howe: I am not asking the hon. Gentleman to give anything. I am asking the Committee to authorise the Government to take less. Even when the Government are taking less, they will still be taking more in real terms than when they first started. That is the reality.
      Mr. Ron Thomas: Is the right hon. and learned Gentleman ashamed of the figures?
      Sir G. Howe: Not in the least. I shall deal with them in detail in a moment. The Chief Secretary has been advancing figures for the cost, but one important point underlies the whole matter. If the Committee agrees to pass these amendments so as to lighten significantly the burden of taxation on higher income earners, there can be no doubt in anyone's mind that as a result the yield of income tax as a whole would increase substantially because of the greater willingness to work, to increase incomes and, frankly, because of the reduced tendency towards tax avoidance.
      Certain Labour Members below the Gangway may laugh, but they should bear in mind countries which they may not have studied recently. For example, Ireland has reduced its top rate, very sensibly, from 80p to 60p in the pound in stages over the last three years. It has also recently had the good sense to abolish the wealth tax before it had hardly started. The experience of Ireland has been that within those years money is coming back into the country, investment is expanding and jobs are increasing, because it is seen to be a country which receives investment and encourages enterprise instead of one such as this country under the present Government.
      I take an even more remarkable example. Between 1973–74 and last year India had the good sense to cast off the relics of what I suspect was a Kaldoresque tax regime and drop its top rate from 97·75 per cent. to 66 per cent.—the same order of change as we are now commending. In India the yield from income tax, particularly higher tax incomes, increased substantially as a result. It is the experience, and common sense suggests it, that if the top-rate tax burden is significantly reduced, people will take more risks, invest more, work harder and will be less concerned to take themselves
      1194
      to their tax consultants. As a result, the tax collector will actually gather more.
      Quite apart from that, the administrative costs of the system would be significantly reduced because there are fewer bands. Merely raising the starting point from £7,000 to £8,000 would probably release several hundred thousand taxpayers from the higher rate bands altogether. That would be one way of saving the huge increase in Inland Revenue staff which has taken place under this Government.
      The Committee may remember the astonishing and, as it turns out, inaccurate claim made by the Chief Secretary when winding up the debate on 8th May. He told the Committee, to everyone's surprise, that the number of people employed by Inland Revenue and Customs and Excise had risen by 15,000 under the last Conservative Government and by only 13,000 under this Government. I have taken the precaution of checking the figures since then and the actual figures are as follows. On 31st March 1974, the total employed by Customs and Excise and Inland Revenue was 94,800. On the same date in 1970 the total was 86,500. There was an increase during the four years March 1970 to March 1974 of 8,300 in round figures. Almost all of that, just over 7,000, was in Customs and Excise following the introduction of VAT. From 31st March 1974 onwards, starting with 94,800 in March 1974, we had reached a total of 114,000 in the two services combined by the end of 1977. The increase under this Government from the end of March 1974 to the end of last year has been 20,000. The introduction of the reduced rate band as a result of this Budget will add another 1,000.
      I hope that the Chief Secretary will confirm these figures. They are absolutely correct, and they put wholly into the right perspective the wrong figures which he gave. There was a total of 8,300 under the previous Conservative Government and a total of more than 20,000 under the present Government.
      4.0 p.m.
      Mr. Cranley Onslow: The Chief Secretary is sitting on the Treasury Bench like a glove puppet nodding and bobbing. Would it not be much better to tell us whether he agrees with my right hon. and learned Friend's figures? If so,

      1195
      is he prepared to withdraw his stupid statement?
      Mr. Joel Barnett: The hon. Member for Woking (Mr. Onslow) is an expert on stupid matters. I am bound to tell him that I am not inclined to accept figures that are thrown at me from the Opposition Front Bench. However, I am prepared to consider them, and I shall do so.
      Sir G. Howe: A Treasury Minister speaking from the Dispatch Box does so with a certain authority. The House of Commons is accustomed to be able to take as accurate figures that are given from the Government Front Bench by a Treasury Minister. The right hon. Gentleman asserted a set of figures on Monday night. I have produced figures that I understand to be correct from parliamentary Answers. I am astonished that the right hon. Gentleman is unable to accept or refute those figures, he having produced another set of figures.
      Mr. Onslow: The House of Commons has either been told the truth or it has been told lies. Which is it? Will the Chief Secretary tell us?
      Sir G. Howe: The Committee will have to draw—
      The Chairman: Let us not mention the word "lies." It is unparliamentary.
      Mr. Onslow: Go on, tell us.
      Sir G. Howe: I am content. I am grateful to my hon. Friend the Member for Woking (Mr. Onslow) for his encouragement and help. I am content to leave the matter as it stands. It is something that follows from the casual, reckless and negligent way in which the right hon. Gentleman treated the House on Monday. However, certain other matters follow.
      On the basis of his figures the right hon. Gentleman sought to suggest that the saving achieved by reducing the army of tax gatherers would be quite modest. I think he said that it would amount to about £49 million. The average salary of those employed in the service of the Inland Revenue, based on the most recent report of the service, is £4,000 a year. If we add to that sum the cost of the service's overheads and administration,
      1196
      the average per head employed is £5,650 a year. The 20,000 extra troops recruited to the tax collectors' army by the Government are costing the taxpayer £110 million. As it happens, that is almost exactly the cost of the amendment as calculated by the Chief Secretary.
      Mr. Onslow: Now refute that.
      Sir G. Howe: If we were to get rid of the huge accretion of tax collectors, we should be well on the way to paying for the totality of the cost of the amendments.
      Let us examine the case for the amendments. We know in advance the way in which Ministers will respond to our case. They will reveal one of the two faces of the Labour Party. No doubt they will reveal its most unattractive face. There is a curious feature about the way in which the Labour Party addresses itself to this issue. On some occasions and on some platforms the Prime Minister, the Chancellor of the Exchequer and even the Chief Secretary say "Of course, we want to encourage risk taking. We recognise the importance of incentives. We recognise that the income tax burden is too high and must be reduced." However, as soon as any party comes before the House and proposes the most modest change to correct any imbalance in the smallest direction, Ministers leap to the Dispatch Box and argue exactly the opposite case.
      During Prime Minister's Questions on Tuesday, the Prime Minister—having made many speeches at dinners and conferences of managers and industrialists throughout the country to the effect that the tax burden must be lightened—took the opportunity afforded by his first appearance at the Dispatch Box following the passage of our amendments on Monday to refer to the amendments that are to be passed. He said that they
      "will increase materially the difference between the poor and the rich."—[Official Report, 9th May 1973; Vol. 949, c. 973.]
      Of course they will. How do we set about reducing the direct tax burden and moving one inch in the direction of improving incentives without increasing the difference between the poor and the rich? Indeed, the Budget increases the difference between the poor and the rich. It makes larger reductions for those at the top income levels than at the bottom

      1197
      levels. It is sheer hypocrisy for the Government and the Labour Party to continue trying to present their two arguments in the same way. The Labour Party talks with two voices and presents itself with a most unattractive face when it addresses itself to these matters.
      The reality is that in submitting these amendments we are concerned in the generality with special skills, special responsibility, managers, those with enterprise, key figures in activities of all sorts, skilled workers and enterprises that need to grow and those who can lead and command resources that will create the jobs for the employment of the British people. To have singled out those categories for the imposition of tax rates that are higher than anywhere else in the free world at lower levels of income than anywhere else in the free world is sheer lunacy. To persist in defending those tax rates, as the Government now do, is to demoralise those who are subject to the higher rates of income tax, to destroy their morale and to drive out those who are at the very heart of our economy.
      Moreover, the tax rates as they now bite have never been justified before the House of Commons. The burden that they now represent has been imposed by stealth by four years of record inflation, which has carried taxpayers into higher and higher tax rates. Inflation has served to increase the burden without the House of Commons doing anything about it.
      The Chief Secretary may have had the opportunity of listening to the interview that was given by the Chancellor of the Duchy of Lancaster to his old friend Brian Walden, who was the Member of Parliament representing Birmingham, All Saints.
      Mr. J. W. Rooker: Birmingham, Ladywood. Wrong again.
      Sir G. Howe: Yes, Ladywood. The interview was given on "Weekend World" on St. George's Day. The former Member for Birmingham, Ladywood is a man of greater insight into these matters than the hon. Member for Birmingham. Perry Barr (Mr. Rooker). The Chancellor of the Duchy said:
      "The rate of tax on salaried talent is very high in this country … The putting of this right is a massive problem that will take a
      1198
      little time, and I believe this to be a No. 1 priority in the Chancellor's mind for future action—that's my own view: it ought to be."
      The Chancellor of the Duchy went on to describe exactly how the tax came to be imposed. He said:
      "I must say that when it was put on"
      —that is the 83 per cent.—
      "it was put on at a more realistic level than now applies. It was actually inflation that really made the tax so burdensome. And I don't think any Government ever responds quickly enough to the deforming of their tax structure by inflation. And we may be open to criticism for not responding fast enough to that."
      The Chief Secretary knows perfectly well that the Chancellor of the Duchy is there acknowledging that tax rates are too high and that they have been made too high by the progress of inflation, which has dragged more and more people into destructive tax levels. In the past four years we have experienced a savage and continuing reduction of post-tax differentials. Everyone has experienced large cuts in his standard of living in the past five years. The average wage earner with a wife and two children has, on the latest figures, experienced a cut in his standard of living of just over 4 per cent. in the past four years. The man on twice the average wage has seen his standard of living cut by 7·4 per cent. The man on three times the average wage has seen his standard of living cut by 13·9 per cent. Senior managers and chief executives have seen their standard of living cut by 20 per cent. or even 30 per cent.
      That has been happening to those upon whom the Government rely for giving leadership in industry and commerce. It is absurd to expect them to be applying themselves to their work, engaging in risk-taking and gaining further qualifications with just the same single-minded energy and enthuiasm when they have been necessarily obsessed with struggling to maintain the standard of living in the face of rapidly rising tax burdens.
      I turn to the argument raised by the hon. Member for Bristol, North-West (Mr. Thomas). The 83 per cent. rate of income tax was introduced by the Government in March 1974 at a starting point of £20,000. If we take account of inflation since that date, the starting point for the 83 per cent. rate, if it is to survive at all, should now be £37,400. The Government

      1199
      are proposing in the Bill an increase to £23,000. That is equivalent to £12,300 in 1974. Therefore, the relaxation of £2,000, the raising of the threshold, the beneficent act contained in the Bill, results in the imposition of the top rate of tax at about £8,000 lower in real terms than when the Chancellor first introduced it.
      The amendments have the following effect. The higher rate threshold in March 1974, as the Committee will remember, was reduced by the Chancellor of the Exchequer in the first flush of Socialist enthusiasm. The higher rate threshold was lowered to £4,500. The starting point for the higher rate threshold today should be £8,400. We are merely proposing that it should be increased to £8,000.
      The 68 per cent. rate, which was enforced in March 1974, started at £12,000. The starting point for that rate, which is the equivalent of the 70 per cent. rate that is in the amendment, should today be £22,500. We propose that it should start at £21,000.
      Therefore, for those bands we are proposing changes that take taxpayers into higher rates of tax at lower real levels of income than when they were first introduced by the Chancellor in 1974.
      I am sure that we shall hear again today about the man on £50,000 a year to whom the Chief Secretary referred at the end of the Second Reading debate. In the jargon of the style of Socialism that the right hon. Gentleman was using, he said that our proposals would give back to that man several thousand pounds. Even a man on £50,000 a year, after these amendments are carried, will still be paying a larger proportion of his income in real terms in tax than he was in 1974.
      I am astonished—but it is a deliberate decision—at the moderation of our proposals. Even if these amendments are carried, a married man on £20,000 a year will still be paying two-fifths of his income in tax, a married man on £30,000 a year will be paying more than half of his income in tax, and a man on £25,000 a year will be paying tax at a marginal rate of 70p in the pound.
      Let us compare that with all the countries with which we have to compete. In Ireland—the highest of those in the OECD—a married man on £25,000 a year
      1200
      pays a marginal rate of 60p. In France, he pays a marginal rate of 36p in the pound. The average of the countries with which we have to compete is 48½ per cent. tax on a man earning £25,000 a year compared with the 70 per cent. which we propose, even if the amendments are carried.
      I again invite the Committee to listen to the words of the Chancellor of the Duchy of Lancaster in the interview to which I referred earlier. He said:
      "I don't deny that there has to be a move to make our tax rates, especially on earnings, comparable with what our rivals or our friendly partners on the Continent have in the way of tax rates. Of course that has to be done. Otherwise, as I said candidly, the consequences will be damaging to our economy."
      Has the Chancellor of the Duchy been expressing that view in the Cabinet? Is it a view with which the Chief Secretary has some sympathy? Does he not recognise that this is the damage being done by the taxes which the Government continue to maintain?
      Let us consider the practical effect of the extent to which the Government now have to juggle, fiddle and wriggle with their own tax system to provide licensed loopholes for people whom they regard as being unduly penalised.
      The Bill contains special provisions to deal with North Sea divers, because they are close enough to competitors in other countries to realise how savagely they are being taxed. Good luck to them. The Government are making a loophole—an escape hatch—for those people.
      Those who, under this Bill and under last year's Finance Act, are getting relief on overseas earnings are also being given a special licensed loophole from the absurd tax system which prevails in this country.
      Let us consider the damage that is being done by the outflow of talent from this country as a result of these crucifyingly high rates of tax.
      Mr. Ron Thomas: Tom Jones and Humperdinck.
      Sir G. Howe: Indeed. The hon. Gentleman quotes Torn Jones and Humperdinck. But let him harken to the roll call of people whose names are well known who have left this country because of high marginal tax rates: Tom Jones,

      1201
      David Bowie, James Hunt, Jackie Stewart, Sean Connery, Richard Burton, Marty Feldman, Len Deighton, Joe Bugner, the Rolling Stones, Englebert Humperdinek—[HON. MEMBERS "Roy Jenkins."]—All right, Roy Jenkins—Tony Jacklin, Virginia Wade, Wolf Mankowitz, Peter Sellers, David Niven, James Mason and Michael Caine. Labour Members below the Gangway may laugh, but these people form the seed bed of the expansion of our own film and entertainment business.
      Mr. Kilroy-Silk: Labour Members laugh, rightly, at the pious indignation that the right hon. and learned Gentleman displays for the kind of people about whom he is now talking. But many thousands of my constituents would give their right arms just to have the privilege of paying tax. Does he not consider them to be more worthy of his indignation than the non-patriots about whom he is now talking?
      Sir G. Howe: I do not know whether the hon. Gentleman ever reads the observations of Mr. Alan Sapper, the general secretary of the Association of Cinematograph, Television and Allied Technicians. If so, he may have noted the powerful memorandum that that trade union leader—not a subscribing member of the Conservative Party; on the contrary—sent to the Treasury two years ago in terms saying that the penal rates of taxation applying to those in the film industry were virtually destroying the British film industry. That is the reality. I just happened to choose names which were well known. For every one of these names, of whom we have all heard, there are 10,000 others with different skills—managers, engineers, doctors, physicians—who leave this country and take with them the life blood of our prosperity.
      I do not know what Labour Members find when they talk to people in leading companies in this country. I doubt whether they ever do. They are not concerned with those who provide the employment for their constituents. But they will find—I am sure that the Chief Secretary will have found this—that every major company is complaining of the departure or the impending departure of two or three key executives as a result of our penal rates of taxation.
      1202
      One example, with which the Committee may be familiar, was in evidence given to the Diamond Commission by ICI two years ago. ICI brought back on to membership of its main board in this country someone with long experience as a senior executive of one of its subsidiaries abroad. The reward for that man's arrival at the pinnacle of his industrial career was to have his post-tax take-home pay reduced by 50 per cent. That was the consequence of our tax system. It is total lunacy.
      4.15 p.m.
      Dr. Jeremy Bray: Has the right hon. and learned Gentleman ever asked the key companies the question that I have asked a number of them—whether, in the event of tax cuts of the kind that the Opposition are proposing, they would increase the salaries of their senior executives as much as those of their ordinary manual workers? The answer that I get is "No". Has the right hon. and learned Gentleman considered the after-tax position of the people about whom he is so worried?
      Sir G. Howe: I was coming to that point. One of the reasons why companies sometimes find themselves having to pay high pre-tax salaries is the huge bite made by the tax collector in those salaries. I give one example which is quite impressive and which I believe to be reliable. When British Leyland was undergoing its recent and understandable reorganisation, one of the people whom it was desired to bring back to Britain with senior management experience in North America had to consider what salary he would get post-tax in Britain if he came back. His post-tax salary in North America was £30,000 a year. For the sake of returning to the job, he was prepared to come back to Britain on a post-tax salary of £20,000 a year, but, because of our tax system, it was not possible to deliver him a post-tax salary of £20,000 a year unless he was paid £95,894 gross. That is the point that the hon. Gentleman makes.
      Dr. Bray: No.
      Sir G. Howe: It is a point which seems to follow the point that he made.
      Dr. Bray: With respect, the right hon. and learned Gentleman ignores the demand for senior executives. If he looks

      1203
      at the wage negotiations going on in Holland, he will find that companies are under pressure to set a ratio of 1:5 between the average and the maximum rate of pay in this country. There is a great change in supply and demand in terms of the greater availability of senior executives.
      Sir G. Howe: I do not understand the point that the hon. Gentleman is endeavouring to make. We have been told by Treasury Ministers in successive debates that the differentials in this country are now lower than virtually in any other country in the world. I recall the Minister of State telling us two years ago that the post-tax differentials here were now lower than they were in China.
      The reality is that companies in this country are finding it extremely difficult to bring back people with overseas experience. Once they send a man abroad to get overseas experience, it is almost impossible to get him back. Indeed, it is extremely difficult to persuade people to move within this country. A recent survey showed that one in three senior managers was refusing to move even for pre-tax increases of £5,000 a year because post-tax, after having taken on the responsibility and made the move, it was hardly worth while.
      The argument against the amendment—we shall hear it from the Dispatch Box shortly—will be that the man on £30,000 a year will be given, to use the jargon beloved of the hon. Member for Perry Barr, about £2,193 per annum. The reality is that he will still be paying more in taxes in real terms and having a substantially lower income after the amendments are passed than he would have been paying in 1974. This is an inevitaable feature. This is the oddity in the position of the Labour Party.
      Mr. Rooker: I am grateful to the right hon. and learned Gentleman for giving that figure. It is most useful. Will he give us the other figure, which is equally important—namely, the pay rise that the person on £30,000 will need to give him that net take-home increase?
      Sir G. Howe: Under the present tax regime—
      Mr. Rooker: It is £12,000 a year.
      Sir G. Howe: Under the present tax regime, it is no doubt a very large one. The hon. Member for Perry Barr and his hon. Friends must understand that if one makes a change in the basic rate of income tax of one penny, or any amount, to reduce the burden of income tax, as a matter of arithmetic those who are ridden with envy and egalitarianism such as some hon. Members are bound to be able to say that a man on £200,000 a year who gets a penny off every pound is £2,000 a year better off.
      Which is the true face and voice of the Labour Party? Is it that which says "This change will increase materially the difference between the rich and the poor"? If it is the face and voice of hon. Members below the Gangway who want to bring the top rate down to £6,000, then we are heading for disaster. Then we are heading for a society of drab, indifferent equality in which all motivation and incentive is destroyed.
      Mr. Nicholas Ridley: Is my right hon. and learned Friend aware that if he could design a tax system when he becomes Chancellor which has the effect of persuading Engelbert Humperdinck to come back here and the hon. Member for Ormskirk (Mr. Kilroy-Silk) to emigrate he would have my full support? It would be a good swap.
      Sir G. Howe: I am grateful to my hon. Friend. It is an idea that has a great deal more to commend it than the ideas of Government Members. I do not shrink from it. Dozens of names are recognisable. They are the names of those who create the talent in our film and entertainment industry. For every one of those there are tens of thousands of other people whose departure destroys the wealth of this country, and who have left as a direct result of the Government's tax policies.
      The voice of the Labour Party that one likes to hear is that of the Chancellor of the Duchy of Lancaster. Talking to his former hon. Friend the Member for Birmingham, Ladywood the Chancellor of the Duchy said
      "My own view is that a correction is now overdue, and I think that we will see one … I must be frank and say that many of these taxes owe more to a judgment of an egalitarian kind than to an economic kind."

      1205
      Mr. Walden then said
      "You say you think that a correction is overdue, and I take that to mean that you think that the higher rate of tax should be cut, and cut substantially."
      The Chancellor of the Duchy replied:
      "As soon as it is possible to achieve that … The 83 per cent. rate … is too high and has to come down as soon as we can possibly bring it down."
      Mr. Walden said:
      "It's the Labour Party that put the 83 per cent. rate on, wasn't it? It wasn't God. It didn't get there by fate. You put it on, didn't you?"
      The Chancellor of the Duchy replied:
      "Yes, that is true."
      Mr. Walden said: "Yes, well?" and the Chancellor of the Duchy went on:
      "Well, I must say that when it was put on, it was put on at a more realistic level than now applies."
      Which is the true voice of the Labour Party? Is it that of the Chancellor of the Duchy speaking like this on television hoping to catch some votes that way, or that of the egalitarians who will speak from the Dispatch Box today? If the Government are prepared always to rely on the combination of cowardice and envy of their hon. Friends below the Gangway—and they certainly do not represent the voice of the people—and if the Government always use this arithmetic to abuse sensible tax policies, common sense will never prevail. When is the time to which the Chancellor of the Duchy is looking forward? The time should be now. I invite my hon. Friends to support the amendment.
      The Minister of State, Treasury (Mr. Denzil Davies): We have heard an extraordinary speech from the right hon. and learned Member for Surrey, East (Sir G. Howe). He made some strange assertions and suggested that being taxed as self-employed was a licensed loophole. That is a strange remark to come from the Opposition Front Bench.
      One could describe these amendments, after what the right hon. and learned Gentleman has said, as the "bring back Hump" amendments. Most of his speech was concerned with the need to bring back to our shores various pop stars, artistes and sportsmen who have been driven away by tax policies.
      The Committee and the country will be grateful to the Tory Party for one thing in relation to these amendments and
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      the amendment which was carried on Monday. At least they give us an indication of how the Tory Party, if it ever came to power, would frame its Budget. The amendments are a clear indication of the Tory Party's priorities. Amendments Nos. 7 and 20 and the amendment which was carried on Monday represent the Tory Party's mini Budget. They give us an insight into the thinking of those on the Opposition Front Bench about how they would operate if they came to Government. One must look at the amendments in that context.
      Mr. Nigel Lawson: When the Minister looks at this in context, will he also look into the substantial increases in the personal allowances which we forced through last year and take those into account?
      Mr. Davies: I appreciate that the hon. Member feels that he has salved his conscience by causing the personal allowances to be increased last year. Now, he feels that he has done his little bit and he is prepared to press these amendments.
      We must look at the amendments and ask whether the present Tory leadership is less financially imprudent than its predecessors in Government. We must ask whether the amendments show that it has any sense of justice and fairness in framing a tax system. To both those questions, the answer must be "No". After Monday's debate and today's debate, if these amendments are carried, one must conclude that the present Tory leadership is financially imprudent on such matters as the public sector borrowing requirement and that it has learned nothing. One must conclude that it has an abysmal sense of justice and equity.
      Mr. Ridley: Does the Minister conclude that the tax rates in the March 1974 Budget were most unfair because the tax rates which we are proposing are more egalitarian than the rates in the 1974 Budget for which the Minister voted?
      Mr. Davies: Today's amendments show an abysmal sense of justice and fairness in relation to the tax system. I hope that I shall be able to prove that.
      The right hon. and learned Member moved Amendment No. 7 and bracketed Amendment No. 20 with it because the two go together. There has been argument and debate about costs. On our

      1207
      figures, Amendments Nos. 7 and 20—I do not think that there is any dispute—would cost £190 million this year and about £380 million in a full year. If we take the 1p reduction in the standard rate, for which the Committee voted on Monday, the consequential effect on advance corporation tax and today's two amendments, together with the proposed amendments on investment income surcharge, the total cost for this year would be £573 million. We tend to ignore the full-year cost although that is the real cost. The cost of that clutch of amendments in a full year would be £785 million.
      Today we are debating whether we should benefit certain people in a full year to the tune of £380 million. The right hon. and learned Gentleman does not like the phrase "give back", he prefers the word "benefit". The two amendments would cost more than the amendment which was carried on Monday. The Tory Party is suggesting amendments that would benefit a small number of people and would cost more than the amendment which was carried on Monday.
      4.30 p.m.
      We have still not heard from the right hon. and learned Gentleman how he proposes to finance this sum of money—apart from his foray into suggesting that the Inland Revenue staff should be reduced by 20,000 to save £110 million. He brought a little list to the Dispatch Box on Monday, but it was demolished by my right hon. Friend the Chief Secretary. Now he has returned to say that he finds the £110 million figure quite unrealistic in terms of the Inland Revenue, but he has not submitted any other list. He has not come back and said that my right hon. Friend the Chief Secretary was wrong. He has made no proposal for finding the money.
      That gives us a clue to the fact that the Opposition are not concerned about that aspect. They just do not care. Their main objective in proposing these amendments is to inflict as much damage as possible upon the economy, especially the financial economy of the country, in the hope that the opprobrium for that will fall upon the Government. That is the only conclusion that one can reach over
      1208
      the Opposition's failure to advance any programme to finance these costs.
      The Opposition adopt that attitude confident in the knowledge that those elements in the City which so piously preach financial rectitude will be quite happy to discard that principle when they see that the fat benefits that will come to them if these amendments are carried.
      Sir G. Howe: Before the Minister of State ceases his own pious preaching, will he confirm two simple facts? First, will he confirm that the cost of this amendment this year would be no more than one-twentieth of the total increase in public spending this year—£200 million being one-twentieth of £4,000 million? Second, will he confirm that the cost of the amendment would be less than one-third of the yield of going to a single rate of VAT at 10 per cent. this year? Provided we are clear about that, the Minister's preaching is put into perspective.
      Mr. Davies: The right hon. and learned Gentleman should not put forward proposals that are based on complicated fractions. The figures are quite clear. The total cost in a full year is £380 million, and the cost of Monday's amendment was about the same, producing a full-year figure of over £700 million.
      The right hon. and learned Gentleman got himself into some difficulty when he tried to explain to the Committee the cost of Amendment No. 7. It is important to make this point because, as you have indicated, Mr. Murton, there may be separate Divisions on Amendment No. 7 and Amendment No. 20. Amendment No. 7—the right hon. and learned Gentleman grasped this in the end although it took him some time, until he was assisted very ably by the hon. Member for Cornwall, North (Mr. Pardoe)—would cost £105 million this year and £150 million in a full year. The reason for that is that Amendment No. 7 is not confined to raising the basic rate threshold from £7,000 to £8,000. That £1,000 is transmitted right up the scale. It might be possible to construct an amendment merely to affect the threshold, but that would have some effect on the tax profile higher up.
      Mr. Rooker: If that is the case, and I certainly accept that it is, why did not

      1209
      the Treasury make that clear in the answer it gave to the hon. Member for Blaby (Mr. Lawson) on Monday? That answer has not only allowed the Opposition to fall into their own trap in making the point across the Dispatch Box but will create the impression outside the House that the apparent cost of the proposal would be only £40 million when it is two and a half times the amount that was given in answer to the Question.
      Mr. Davies: I had better look at the answer to which my hon. Friend refers, but it is quite clear to everyone outside the House that the cost would be £105 million this year and £150 million in a full year.
      Amendment No. 7, in effect, means that a married man earning £8,000 will get no benefit. In order to get only minimal benefit from it, a man must have gross earnings of £10,000. A person with a mortgage who is earning £10,000 would just come within the tax charge on the higher rate.
      A lot has been said about the need to help the so-called middle manager. I do not know who the middle manager is or how he is defined. There are certainly not many middle managers in Wales, although there may be some in England, who earn £10,000 a year. I stress, therefore, that Amendment No. 7 would not help anyone earning much under £10,000 a year.
      Mr. Pardoe: We had better get clear just what we mean by "middle managers". The tax correspondent of the Financial Times on 12th April referred to middle managers as being those in the area around £10,000 to £12,000 total income. The Minister of State will find that the average pay at ICI is £6,000. There are thousands of people working for ICI with incomes well above £10,000. Why is he defining middle management as being in a lower income bracket?
      Mr. Davies: I suspect that middle management varies from company to company. A middle manager in a company such as ICI probably earns more than a middle manager in a smaller company. I do not regard the term "middle manager" as particularly helpful. However, it is used just the same as the term "skilled tradesman" and various
      1210
      other descriptions of categories of people are used.
      Mr. Ron Thomas: I do not know where the hon. Member for Cornwall, North (Mr. Pardoe) gets his figures. May I suggest that he examines the new earnings survey which was published last year—the latest available—where he will see that only 13 per cent. of top managers earn more than £200 a week? Hardly any managers in the column headed "Managerial (excluding general management)" earn that figure.
      Mr. Davies: We shall not resolve this point. We would do better to talk in terms of income. Persons with gross earnings of £10,000 a year will get hardly any benefit from Amendment No. 7, especially if one takes a mortgage into account. Without the mortgage, the benefit is still very small.
      The full cost of the two amendments would be £380 million in a full year, but we ought to consider different income levels—
      Mr. J. Enoch Powell: The Minister of State has made it clear to the Committee that if Amendment No. 7 were carried by itself its first-year cost would be £105 million. He may be about to state this figure, but I wonder whether he will do it now. What would be the further additional cost if, on top of that, Amendment No. 20 were carried?
      Mr. Davies: The further additional cost in this year would be the difference between £105 million and £190 million, which is £85 million. The cost in a full year of Amendment No. 7 is £150 million, and the full-year cost of both amendments is about £380 million. The difference is because within the Amendment No. 7 area there are more PAYE cases. In the higher levels we have Schedule D and dividend income, which comes in the following year. That is why the full-year cost is greater.
      Opposition Members are not interested in a person earning £50 a week, but such a married man with two children would receive nothing from the amendments. He is not meant to get anything from the amendments. The great victory on Monday which the Opposition managed to obtain meant that he will receive an extra 2p a week. The married man earning £80 a week—whether that is the average

      1211
      wage, I do not know—receives nothing at all from the amendments. He is not meant to get anything. The famous victory on Monday gives him 33p a week, so, as a result of the Tory mini Budget, he receives 33p a week extra.
      A salary of £10,000 a year is a large sum and it brings in many, if not all, middle managers. A person earning this figure would benefit under the two amendments by £1·60 a week. That is not a large sum for a person who is in a responsible position in industry. One has to be earning £15,000 a year before one receives the real benefit from these amendments. It is those earning between £15,000 and £50,000 a year about whom the Tory Party is so concerned.
      Sir G. Howe: Does not the Minister recognise that it is precisely these people about whom the Chancellor of the Duchy is concerned? If the Minister was direct enough to accept the case put by the Chancellor of the Duchy of Lancaster, he would be supporting the amendment, as he ought to be.
      Mr. Davies: If these amendments are passed, a person on £15,000 a year will receive some £500 a year—about £10 a week. A person earning £25,000 a year will receive some £1,500 a year—about £30 a week. The man earning £50,000 a year this coming year benefits by—I shall not use the words "given back"—almost £5,000 a year. The skilled middle manager in industry earning up to £15,000 a year is not helped by the amendments. They help only the people earning more than £15,000. All these figures are in addition to the benefits received as a result of the Budget.
      Mr. Ridley: Will the Minister of State say why, in quoting figures up to £15,000 a year, he gave the benefit as a weekly amount but when he went over £15,000 a year he gave the benefit in an annual amount? Is not that typically deceitful?
      4.45 p.m.
      Mr. Davies: I am not very good at dividing. I thought that it might be clearer to the Committee and to the country if I gave the figures in annual terms. I am sorry that the hon. Gentleman does not like the figures. Only a Tory Party could propose a fiscal change which gives nothing to a man struggling on £50 a
      1212
      week and gives £5,000—25 per cent. in excess of the average national wage—to a man earning £50,000 a year. I am surprised that the Liberals are prepared to go into the Lobby with that sort of amendment. It shows the abysmal sense of justice and fairness of the Conservative Party. It is disgraceful.
      It is not as if the higher income people had not received something under the Budget. A person earning £15,000 a year benefits from the Government's Budget by £393. A person earning £25,000 a year will benefit by £663. Whatever that man is producing—whether it is goods, bits of paper or nothing at all—£663 is not sufficient according to the Tory Party. Under the amendments he must be provided with a further £1,500, presumably to make him work harder, take greater risks and benefit the economy.
      Mr. Malcolm Rifkind: If the Government think that the Budget was so satisfactory in this respect, can the Minister indicate why, 12 days after the Budget Statement, the Chancellor of the Duchy of Lancaster said:
      "A correction is now overdue and I think we will see one"?
      Mr. Davies: The hon. Gentleman has not been listening. I am saying that when any Budget or any amendment is framed, every political party with a sense of responsibility should try to achieve fairness and balance between different groups in the community. In the Budget we have tried to do so by providing a large benefit of £600 for a man earning £25,000 a year. The question for the Committee to decide is whether the benefit should be almost tripled in that case and others.
      We feel that, in terms of the financial situation and the need to have a fair Budget for all groups, the Government's Budget is fair to those people and provides them with an incentive and with the necessary rewards. The case made on behalf of the Conservative Party—we did not hear much of it in the opening speceh of the right hon. and learned Member for Surrey, East because he was concerned in the main with pop stars—is that the money should go to the risk takers. The argument was that the risk takers should receive this extra benefit to help industry. I am using the neutral

      1213
      word "benefit". An extra £1,500 in a person's pocket is a benefit. I suggest that much of this money may not go to the risk takers in industry or to the manufacturing side which is doing rather badly.
      Let me give a few figures, while expressing certain caveats in regard to them. About 40 per cent. of the benefit of the amendments is likely to be received in respect of unearned income. I know that many people have a mix of income and that it is difficult always to determine which benefit goes to which income, but, with that caveat, it is fair to say that about 40 per cent. of the benefit will be in respect of unearned income.
      It is also fair to say that much of the benefit will go to Schedule D. This is why the full-year cost exceeds the first-year cost by so much. There is nothing wrong in benefiting people on Schedule D, but the amendments would mean that much of the benefit would go to professional partnerships of lawyers, accountants and stockbrokers who have not incorporated themselves, professional groups in other areas and sole traders. They may be worthy people, but that sector of our economy, certainly the banking and financial sector, is thriving. A substantial amount of the benefit would go to those areas. Not much would find its way into manufacturing industry.
      Only 42 per cent. of the total income from higher taxes is PAYE income. That does not mean that there is not a percentage of Schedule E income on top of that, but less than 50 per cent. of the benefit under the amendments would go to manufacturing industry. Indeed, it would be far less than 50 per cent. because salary levels in banking and the financial side of the economy are higher than in manufacturing industry.
      These amendments are the sort one would expect from the Tory Party. I am surprised that the Liberal Party is supporting them. They demonstrate again that the Tory Party cannot claim to be a national party concerned with justice and fairness between all groups in our society. On the evidence of these amendments, the Tory Party is merely a pressure group for the well-off.
      The amendments would do nothing for manufacturing industry or for the areas of the country which have suffered high
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      unemployment and social deprivation. I ask the Committee to reject them.
      Mr. Marcus Kimball: The personal allowances at the bottom end of one's income have been indexed, Surely, in justice and fairness we should accept that the thresholds at which taxes start should also be related to the fall in the value of money. I am sorry that I did not hear my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) take this robust view about the value of the thresholds.
      I do not think that Labour Members will ever appreciate the disproportionate and growing burden of taxation carried by those who earn or look after their savings to get the best result from their investments.
      We can see how unnecessarily vindictive the Chancellor has become towards people who pay higher rates of tax. Let us consider his reactions to Monday's vote. He said that the cost of the amendment that we passed would have to be borne by the better-off, through a higher national insurance contribution for employers, higher company taxation or higher stamp duty. The important point about Monday's vote was that it showed the political will to cut taxes. I hope that we shall show that again today.
      We are not here to argue about exact economic judgments. If we started to look at such judgments, we would not be given a very good example from the Chancellor of the Exchequer. No one really believes that his budgeting up to 5th April 1979 is so right that £340 million will put it wrong. The Chancellor does not know what the level of wave settlements, overtime and earnings or special responsibility payments to executives will be. His 1977–78 forecast was out by £1,350 million. I doubt that he will do very much better this year.
      Let us consider the position of the better-off. My right hon. and learned Friend the Member for Surrey, East spoke about an 83 per cent. rate of tax on earned income and a 98 per cent. rate, for some people, on unearned income—compared with a European average of about 60 per cent. For most people, it is the higher rates of tax and not the top rates which matter. These higher rates range from 40 per cent. at £8,000 to 83 per cent. at just over £20,000 of earned income.

      1215
      The Minister of State mentioned the marginal relief granted in the Budget. It is only marginal because there has been no change in these thresholds since the 1973 Budget, and in that time the value of our money has halved. If the value of one's money has halved one ought to have succeeded in doubling one's income, and if one has doubled one's income and earning capacity since 1973 one will be paying far higher taxes than ever before. That is why living standards have fallen. For most people, they have fallen by 30 per cent. under this Government.
      The amendment does not go nearly far enough. The equitable and fair thing to do would be to double all tax thresholds. The same arguments as apply to personal allowances at the bottom end of one's income apply to the tax thresholds the whole way through. The 40 per cent. rate should start at £10,000—the amendment merely seeks to make the starting point £8,000—and the top rate should not apply until someone had succeeded in earning £40,000.
      The cost of cutting the top rate of tax on earned and unearned income to 60 per cent. would be £250 million in a full year. That is well within the Chancellor's miscalculation of £1,350 million of the yield from income tax last year. The cost of doubling all the thresholds, which I should like to see, would be £500 million. This would be a fair and proper thing to do. Like my right hon. and learned Friend who moved the amendment, I am convinced that much of this tax relief would be saved because the additional incentive provided would more than pay for the cost.
      Mr. Ron Thomas: I have not heard in my time in the House, which, admittedly, has been relatively short, a clearer example of blatant class interest than that which has been expressed by the Tory Party today. I am amazed that the Liberal Party can contemplate going into the Lobby to support the Tories on these amendments.
      The Liberals should look back at some of the radicals in their party, such as Lloyd George, and consider their views on trying to bring about a fairer distribution of wealth and income. If the Liberals support these amendments, they will be voting for a distribution of income
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      that will be regarded as intolerable by many of the people whom they claim to represent. That is a pure piece of blatant class interest.
      5.0 p.m.
      When the hon. Member for Gainsborough (Mr. Kimball) referred to the question of inflation and the impact that it has had on certain levels of income, he fell into a trap that he could have avoided with a little careful thought. Had he looked at the General Index of Retail Prices and the way in which it is weighted, he would have seen that it applies to what is described as "the average family". If one is earning below the average family income the rate of inflation has been higher. If one is earning above it, the rate of inflation has been much lower.
      This is one of the objections that could be made to the right hon. and learned Member for Surrey, East (Sir G. Howe), who gave figures for what tax thresholds should be today to keep the higher levels of income in line with those prevailing in 1974. But if one looks at the retail price index one sees how much people spend on food, for example. It is ludicrous to suggest that someone earning £50,000 a year needs to spend 10 times more on food than someone earning £5,000 a year. I suppose that is possible, but I would find it very difficult to believe.
      Therefore, the level of inflation has gone up more for pensioners and the lower paid, because of the large amounts that they have to spend on food, electricity and other items, than for those on £10,000, £15,000, £20,000 and £25,000 a year. Therefore, the argument that those bands of income should keep pace with inflation just does not hold water.
      The blatant class interest of the Tories can be seen by the fact that the 1p cut in income tax that was passed last Monday will mean an extra £370 million in a full year, and that these proposals in the amendment will mean another £380 million in a full year. Also the higher income surcharge relaxation will mean another £30 million. Therefore, we are talking about £780 million or £800 million worth of tax handouts, essentially to the wealthy members of our society.
      What does this mean in terms of hospitals and schools? What does it mean

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      in terms of some of the demands that the Opposition were putting yesterday for increases in public expenditure?
      If we take an individual on £25,000 a year, the Government's tax handouts will give him an extra £753·90 in a full year. This amount will come from the Government's own proposals, and assumes that that individual is married and his income is all earned. Under the proposals in the amendment, that individual will receive another £1,500 a year, making a total handout of £2,200 for a start.
      Mr. Kilroy-Silk: Will my hon. Friend take account of the fact that whereas the Opposition amendment today would give £5,000 a year to the man on £50,000 a year, I have in my hand the pay receipt of a person from the industrial Civil Service, who is among those lobbying the House today? This man has had 20 years' service, yet his take-home pay is only £43 a week. This emphasises the point that my hon. Friend made, that the Conservative Party is a class party, concerned only with the wealthy and not with the kind of people who need the help of this House.
      Mr. Thomas: I agree entirely. My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) has put into clear perspective the difference between the Conservatives and us. The Tories come to this most exclusive club in Europe to represent the wealthy sections of our society, and they care little for those who are lobbying this House this afternoon and who earn only £40 or £50 a week.
      As I was saying, people on £25,000 a year will have benefited by some £753 from the Government's proposals and another £1,500 if this amendment is passed. There is also a very good chance that they can manipulate their capital gains. Because of the relaxation of capital gains tax, it would not be very difficult for them to get another £1,200 a year out of that. Because this is retrospective over last year as well, we are talking about a total handout of the order of £3,600 for a person on £25,000 a year, if he can take full advantage of the capital gains relaxation. More than half the manual workers in this country receive less than that every year in their pay packets.
      In terms of handouts, the amendment that we are discussing affects those earning £10,000 a year plus, at the very least.
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      This cannot be emphasised enough. It is very easy to talk glibly about the £6,000, £7,000 and £8,000 bands, but it should be emphasised that these are the sums after all the allowances have been deducted. People who earn between £10,000 and £20,000 a year are able to make sure that their allowances are pretty high, whether they are for mortgages, insurance or anything else.
      According to the Department of Employment new earnings survey for 1977—I know that certain wages and salaries have gone up since then—only 0·1 per cent. of those in manual occupations earned this kind of money. Only 1·8 per cent. of those in non-manual occupations earned this kind of money. The hon. Member for Cornwall, North (Mr. Pardoe) told us how many people in ICI were getting more than £200 a week. I have an ICI plant at Severnside, and I think that my workers would be very surprised to hear that. Perhaps the hon. Member for Cornwall, North should have a word with the Department of Employment and tell it that its survey is completely wrong. There are very few people in the £200-a-week plus bracket, yet that is the bracket that the Tories want to help.
      Mr. Rooker: Will my hon. Friend reflect upon the fact that the information from the companies that is used to produce the survey figures is not transmitted to Government Departments by workers earning £50 a week? It is transmitted by those at the top end of the scale whose intention it may be to deceive the population about the extent of the high rates of pay.
      Mr. Thomas: My hon. Friend, who has often quoted those figures, may be right.
      Mr. Pardoe indicated dissent.
      Mr. Thomas: The hon. Gentleman shakes his head. Someone is wrong. Either the Department of Employment new earnings survey is wrong, or some Opposition Members have been misinformed. The survey, which I have here and which anyone can borrow from the Library, shows that this range of income includes some judges, barristers, solicitors, one or two accountants and, not surprisingly, tax consultants. But there are only between 0·1 per cent. and 0·5

      1219
      per cent. of engineers, foremen, and all these other people that we are told are holding back because they are so highly taxed.
      This list is a salutary lesson. It shows if we did not already know it, who it is that the Tory Party particularly wants to help. The right hon. and learned Member for Surrey, East told us that the only way to regenerate British industry is to call back Tom Jones and others and tell them that all is forgiven.
      There is no evidence that under the last Tory Government their tax hand, outs led to these so-called innovative entrepreneurs rushing forward to regenerate British industry. With their handouts, they engaged in property, land and commodity speculation and invested overseas.
      Mr. David Steel: Since the hon. Member has mentioned a pop singer, may I ask him to take it on board that there is considerable evidence that this country has lost a great deal of revenue in the recording field, not only from the individuals who are earning vast sums and who go overseas—
      Mr. Arthur Lewis: We know all this.
      Mr. Steel: I am asking the hon. Member for Bristol, North-West (Mr. Thomas).
      Mr. Lewis: He has heard it.
      Mr. Steel: He did not seem to have heard it.
      Mr. Lewis: He did, though.
      Mr. Steel: The hon. Member does not appear to have understood that the revenue lost is not only from the individuals but from the associated exports of records, which at the moment we are importing. That is the consequence of this policy.
      Mr. Thomas: I do not think that there is any evidence to support that. All the pop singers in the world will say that if the tax were lower they would come back, but providing there is one country left where the tax is lower, that is where they will be.
      I am surprised that the hon. Member for Cornwall, North is taken in by people
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      like Tom Jones and Engelbert Humperdinck, who say to him "If only the tax was a bit lower, I would come back to live in Britain."
      Mr. Alan Clark: Does the hon. Member agree that this country has not yet fallen so low that it has to degrade itself by arguing questions of fiscal and economic policy on the basis of the question whether the revenue from the record industry is likely to increase or decrease?
      Mr. Thomas: I entirely agree, but I suggest that the hon. Gentleman directs his question to his own Front Bench. For 20 minutes, the right hon. and learned Member for Surrey, East gaves us a list of examples of the people we were losing—these great innovators and entrepreneurs who would regenerate British industry with their pop record sales and so on if only this Labour Government did not tax them so heavily that they had to rush off to the United States or the Cayman Islands.
      Mr. Arthur Lewis: Is my hon. Friend aware that one person mentioned by the right hon. and learned Gentleman has boasted that he has never paid tax anywhere, because he always arranges to stay one or two days within the limit before moving on to the next tax haven? If someone has enough money, he can do that.
      5.15 p.m.
      Mr. Thomas: I should like now to say something about the amendments in my name and those of my hon. Friends. We believe that even the Government proposals go too far in giving tax handouts to the more wealthy members of our society. I do not accept the argument that those on higher incomes have been affected by inflation in the same way as those on average earnings and below. I see no justification for our Government raising the threshold from £6,000 to £7,000 and making other adjustments at the higher levels.
      I have already said that someone on £25,000 a year will get £750 from this Budget in any case, plus another £1,200 if he manipulates his capital gains, which will not be difficult for him. Last year, in reply to a Question by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), we learned that last year

      1221
      the tax handout to someone earning £25,000 was about £800. That is about £1,500 over a couple of years, plus the £1,200 on capital gains.
      If we intend to push up these tax bands by £1,000 every year to meet inflation, we shall still have the kind of distribution of after-tax income that we began with. That will be contrary to the Labour Party's manifesto, which talked of a "fundamental" shift in the balance of wealth and power. There has certainly been no shift in terms of power, and we can see no signs of a shift in terms of wealth. It seems that we are to have no wealth tax.
      I am indebted to my hon. Friend the Member for Perry Barr for his Questions on this subject. The answer to another revealed that in April 1977 64·6 per cent. of the total tax relief was given to those earning more than £4,000. In July 1977, the proportion was down to 61·5 per cent. It is true that in this Budget the balance has shifted back a little in favour of those earning less than £4,500, but still 57 per cent. of the total tax handouts have gone to those earning more than £4,500, which is the average wage.
      I am not as happy with the Budget as many of my hon. Friends are. Our manifesto was based on a "fundamental and irreversible shift" in the balance of wealth and power. That must include redistribution by way of taxation and a wealth tax, but there has been nothing like that approach in any Budget. Although some of my hon. Friends feel that shift has been slightly in favour of our arguments this time, and that they can support it, I urge as many of them as possible to oppose any more tax handouts in this Budget to the wealthy. We should keep the rate at which the higher level of tax is paid at £6,000 of taxable income, that is, after all allowances have been taken into account, instead of giving another £750, as the Government propose, to those on £25,000 a year and more.
      Mr. Pardoe: The hon. Member for Bristol, North-West (Mr. Thomas) can always be relied upon, at the drop of a hat, to give us a caricature of our archetypal Left-wing speech on taxation. We always know what we shall get from him, and we have certainly had it this afternoon.
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      However, although one can discount that kind of argument for some Government Back Benchers, one cannot discount the ludicrous and totally hypocritical arguments advanced by the Minister of State. He knows that he does not believe a word that he uttered today about high rates of taxation. He knows that the Chancellor of the Exchequer does not agree with him, the Chancellor of the Duchy of Lancaster does not agree with him, the Chief Secretary does not agree with him, and the majority of his hon. Friends do not agree with him.
      In any case, if the Minister is really saying that it is a monstrous piece of class legislation to increase from £7,000 to £8,000 the threshold at which higher rates of taxation come in, why was it not equally monstrous to increase the threshold from £6,000 to £7,000? Surely that put money into the pockets of these disgraceful rich people that the Labour Party is so intent on clobbering.
      The Minister had to make that speech, because he had to bind up the wounds of his party and try, somehow, to get the TUC behind the Government. But we know that the Government believe that the top rates of tax are too high. It is not just the Chancellor of the Duchy of Lancaster who believes it. The Chancellor of the Exchequer believes it, too.
      When the Chancellor of the Exchequer went to Glasgow at the beginning of this year, why did he say
      "We must lead the market instead of following it. This task, as always, will be primarily the task of alert and energetic entrepreneurs"?
      Why does he believe that those alert and energetic entrepreneurs will be able to do the job? Why are they not undertaking it? Is it not something to do with our taxation system? The tax system stops such people from taking action. [HON MEMBERS: "Incentives."] I shall come to the question of incentives shortly.
      If the hon. Member for Bristol, North-West believes that high tax is no disincentive, why not tax people at 100 per cent. on 100 per cent. of their income? Does he feel that that would be no disincentive to effort? And if we come down to 98 per cent. on 98 per cent. of income, is not that also a disincentive? Where does one reach the point where taxation is no disincentive at all?
      Mr. Ron Thomas: Is the hon. Gentleman suggesting that the people on £10,000

      1223
      per year plus are writing half a memorandum, attending half a meeting, or travelling half way to Europe and then turning back? What, precisely, are they doing?
      Mr. Pardoe: There are a whole range of occupations in our economy where, at the margin, people can be deterred from doing more in various ways. That applies not only to industry; a classic example is that of a professor who has to decide whether to contribute an article to a learned journal.
      Mr. Thomas: Come off it.
      Mr. Pardoe: I said that I would give the hon. Gentleman a range of examples.
      Hon. Members: Rubbish.
      The Chairman: Order. It is quite impossible for the Chair to hear what the hon. Gentleman is saying.
      Mr. Pardoe: I said that I would give a range of examples. The hon. Member asked for examples and he will get them, whether he likes them or not. I would have thought that he was the last person to despise the contribution of academics who give the public the benefit of their thinking.
      Let us take the case of an academic who must make a decision whether to spend the weekend writing up the results of his research or spend the time decorating his house. He knows that if he writes up the results of that research he will get another £500, or whatever it may be, but he may have to pay 70p in the pound on it, whereas if he pays somebody to decorate his house he will have to pay for it out of taxed income. Clearly, he will decide to paint his house rather than do a job from which society would gain far more benefit.
      Mr. Powell: I assure the hon. Gentleman that his first example is totally unrealistic and does not correspond to any motivation of which I have ever been aware in the academic profession.
      Mr. Pardoe: That absolutely proves my point. Until, rather late in life, the right hon. Gentleman became interested in economics, he was in the classical faculty. It may well be that classical professors do not automatically think of the
      1224
      economic facts of life, but I assure the right hon. Gentleman that many of us know of specific cases, admittedly in the sciences or economics departments—where that kind of calculation is carried out. It is nonsensical to suggest that that does not happen.
      Let me give another example. Let us take the position of an export executive who is on a bonus scheme, as many of them are. He knows that if he takes an aircraft to the uttermost ends of the earth over the weekend he may sign a contract to make some exports. He must decide whether, at 70 per cent. taxation or whatever the figure may be, the money that will be left to him as a result of the additional bonus for that export order is worth giving up four or five days with the family and the kids. Is it not better to pick up the phone and tell his secretary "Do not book the plane, but book a table for two for my wife and me at the golf club at the weekend"? Labour Members do not understand the work-creating process at this level of industry. They have never created a penny of wealth in the whole of their lives, and never will. The only thing they do is to draw wealth from the rest of us.
      Mr. John Mendelson: Perhaps I may try to help the hon. Gentleman. I do not know whether he was a Member of this House at the time when my right hon. Friend the Member for Huyton (Sir H. Wilson) once stopped a Budget debate in its tracks—a debate that was not properly continued—when the then Chancellor, Mr. Selwyn Lloyd as he then was, introduced a proposal to cut the rate on the highest income groups. The same argument was then used, namely, that the proposal would immediately put new energy into the veins of stockbrokers. My right hon. Friend said "Of course, one will now see a revolutionary change. The whole of the stockbroker belt in Surrey, instead of coming to the City on the 8·14, will in future come in on the 7·12." The hon. Gentleman gave an example about a professor writing an article because he would receive another £200. That was said by a Liberal spokesman who prides himself on speaking for the middle income group. Is that being put forward as a serious argument in this debate? We know the trickster who is proposing a Budget for those who are financed—
      The Chairman: Order. The hon. Member for Penistone (Mr. Mendelson), with his long experience, knows that the expression that he has just used is not a parliamentary one, and I ask him to withdraw it.
      Mr. Mendelson: With respect, Mr. Murton, the term "trickster" is not an unparliamentary expression and it characterises—
      The Chairman: Order. I must contradict the hon. Gentleman. If I say that it is an unparliamentary expression, it is an unparliamentary expression. I hope that the hon. Gentleman, with his customary courtesy, will take my point and withdraw that expression.
      Mr. Mendelson: With respect, Mr. Murton, we had an example only last week of an hon. Member who was persuaded to withdraw, although he had used an expression that was perfectly parliamentary. My right hon. Friend the Member for Fulham (Mr. Stewart) later pointed out that the hon. Member concerned was well within his rights. I am well within my rights. This is a financiers' proposal made by tricksters who want to mislead the electorate.
      The Chairman: Order. Let me get the matter quite clear. Was the hon. Gentleman referring to another hon. Member of this House, or was he using the expression as a generic term?
      Mr. Mendelson: I was using it as a collective term for those who would benefit by these proposals.
      The Chairman: In that case, I accept what the hon. Gentleman says, but if, while I am in the Chair, that expression is used about another hon. Member specifically, it will have to be withdrawn.
      Mr. Alexander W. Lyon: If the cap fits.
      Sir G. Howe: On a point of order, Mr. Murton. The language and style of the hon. Member for Penistone (Mr. Mendelson) hardly deserve serious attention, but it is quite clearly within my recollection that the first time he used the expression that you ruled as unparliamentary he pointed to me and spoke of the trickster who moved the amendment before the House. Since you have ruled, Mr. Murton, that that is an un-
      1226
      parliamentary expression, I think that you are entitled to ask him to withdraw it.
      The Chairman: Does the hon. Gentleman still maintain that that remark was not made in respect of an hon. Member?
      Mr. Mendelson: Certainly not. It was not.
      Mr. Powell: Further to that point of order, Mr. Murton. May I respectfully inquire of you whether your ruling in this case is covered by precedent? I think that you will accept that that which is parliamentary or unparliamentary is determined by precedent and that the precedent is binding on the Chair. I ask the question not in order to challenge your ruling but for the clarification of the ruling which you are giving to the House.
      The Chairman: I can reassure the right hon. Gentleman that the list given in "Erskine May" is not exhaustive. On the other hand, any comment made about another hon. Member, within the terms in which it is made, is for the Chair to decide on. The question of precedent in that case does not arise.
      Mr. Mendelson: I object to our being restricted in characterising proposals. The right hon. and learned Member for Surrey, East (Sir G. Howe) was not even the first to interrupt me. If I want to refer to the right hon. and learned Gentleman, he knows that I will do it without fear or favour. I have done so in the past. I was characterising a class of people who will benefit by these proposals.
      5.30 p.m.
      Mr. Pardoe: I hope that you will not add up these minutes and hold them against me, Mr. Murton.
      Perhaps we can now get away from this kind of verbiage and shouting across the Chamber. It seems to me extraordinary that the Minister of State should make the kind of speech that he has made when, if we look at the figures that the Government have already proposed, we can see that, for instance, someone with £7,000 taxable income will receive, as a result of the Government's proposals, an extra £128 a year; somebody at £10,000 will receive an extra £278 a year; somebody at £17,500 an extra £528; and somebody at over £23,000 an extra £668.

      1227
      The Government must surely believe that that money will do some good. Why else have they given it away—to use the term that they would use? Why have they made these concessions? If they do not believe that it has any effect on incentives and the economy, why did they not increase the top rate of tax from 83 per cent. to 100 per cent.?
      Mr. Denzil Davies: I think that the hon. Gentleman misunderstood my argument. I never said that it was not necessary to relieve the burden of tax on this group. I pointed out the figures that he has mentioned. My point was that the proposals in the amendment, which, unhappily, the Liberal Party seems keen on supporting, went far beyond the bounds of equity and justice, taking all priorities into account.
      Mr. Pardoe: So it is simply a question of degree between us. What the Government have done in giving £668 a year to those top people is perfectly fair and sensible and is an incentive, but what the Opposition propose to do is disgraceful and unfair and class-ridden, and all the rest of the verbiage that we have had from the Labour Party. It is absolute nonsense. The right hon. Gentleman knows it.
      What really sticks in my throat about this is that the right hon. Gentleman made the kind of speech that he did when his boss, the Chancellor of the Exchequer, wanders round the dining clubs of the City telling every stockbroker or merchant banker who will listen about the terrible top rates of tax that those people are affected by and rehearsing all the arguments that the right hon. and learned Member for Surrey, East (Sir G. Howe) used this afternoon and I have been using up to now. The Chancellor agrees with every word of the amendments. So does the right hon. Gentleman, and so do many of those behind him. The Government do, except for half a dozen people in the Cabinet. The right hon. Gentleman knows it perfectly well, and it is nonsensical to deny it.
      We are dealing with a group of amendments about those—we make no apology for this—in the upper income groups. It is true, and I accept immediately, that it is a small number of people, however one defines it.
      Mr. John Mendelson: Rentiers, financiers.
      Mr. Pardoe: However one defines middle managers, however one defines the upper income earners, this group is a minority of people. Those people paying over the standard rate this year will number around 850,000. Those are really the people whom we are considering. They are a minority, but is the Labour Party really advancing the view that minorities do not matter—that one does not have to consider minorities at all? Surely that is not the view of the Labour Party.
      We are dealing with a minority, and we recognise immediately that there is no vast number of votes in the matter. Nobody is putting forward the amendment because he thinks that there is a huge body of votes in it for him. Certainly, that is not the view of the Liberal Party. What we believe is that the tax system as a whole needs to be reformed from top to bottom, and this is a part of the reform that we have advocated.
      The Minister of State said that he was surprised that we were following the Conservatives into the Lobby. It is not a question of that. He knows perfectly well that we announced the amendments long before they did. I am not making a point about that, as to who was first. The fact is that we had the same amendments down on the original Notice Paper. Therefore, the right hon. Gentleman need not be surprised that we are following the Conservatives into the Lobby on this matter. Presumably we are both doing what we believe is right, for our own reasons.
      Why do the people with whom we are here concerned matter? Why does it make good political sense to reduce the top rates of tax? I say "political sense", because I believe that it does make good political sense. I shall take the second question first.
      It seems to be believed by some of the Labour Members who are here this afternoon, that Britain is an envious nation, that there are votes to be obtained in envy and whipping up envy about top paid people. The fact is that out "in the sticks" people are not that envious about top paid people. I represent a very low income area. I do not find council tenants tearing their hair out over the fact that somebody can afford to live in a better style of house or own a better

      1229
      car than they do. This kind of envy does not exist.
      A survey on the Budget was fairly recently carried out by MORI. I am sure that Labour Members will have read it, because it says some rather nice things about the Budget. People were asked whether they agreed or disagreed with the following view:
      "Higher paid people pay so much income tax that there is no incentive for them to work harder."
      Seventy-three per cent. of the British people agreed. That does not indicate an envious people. It does not indicate to me that they are weighed down with a feeling that the so-and-sos jolly well ought to pay that rate of tax. It indicates to me that they are somewhat sympathetic to the idea that the top rates of tax are too high.
      Mr. John Mendelson: They are earning £80 a week, not £50,000 a year.
      Mr. Pardoe: People earning £80 a week are not paying the top rates of tax, as the hon. Gentleman will no doubt know.
      Even in the D/E social class, 68 per cent. agreed with that statement. Even 70 per cent. of trade unionists agreed with it. Even, incredibly, 65 per cent. of Labour Party supporters agreed with it.
      Why do we have these high rates of tax? Why have they been imposed? We have the highest rates of tax for central Government of any industrial country in the world. If we compare this country with the other major countries we find that in France, for instance, the rate is 60 per cent. over £13,000, but the French split income between family units, so one can multiply the £13,000 by the number of people in the family and have a much higher threshold than that at which we have our top rate. In Germany, the top rate is 56 per cent. over £32,000, and for married couples it is over £65,000. In the United States, it is 50 per cent. over £51,000.
      I am aware that those are so-called federal or central Government rates. In Sweden, for example, local income tax is very high. But the rates are very high in this country upon such people's dwellings. Although they do not entirely compensate for the local income tax, a comparison of total tax rates, local and national, between this country and the
      1230
      rest of the world shows that we are well above the great majority of our major industrial competitors.
      I shall not quote the facts, but if Labour Members want them they can at least have the reference. Employment Conditions Abroad Limited published "International Comparisons of Direct Personal Taxation" last month. It gives a whole series of facts and figures, which Labour Members might do well to read. I do not suppose that they will be convinced. They are beyond being convinced, but they might at least enter into the argument.
      Presumably the top rates of tax have been brought in partly because of envy, partly because of the class war, but mainly because we must raise so much revenue from income tax for the Government's purposes that we have had to tax people at the very low level very highly.
      Mr. Mendelson: The hon. Gentleman wants to shift the burden to the poor. That is new Liberal policy.
      Mr. Pardoe: There is no question of shifting it to the poor, as the hon. Gentleman must know.
      The answer of Labour politicians to the question "Why do you tax the poor so highly?" is "Because we tax the rich even higher." That is the main political reason for these high rates of tax. The right hon. and learned Member for Surrey, East, in his speech this afternoon, did not appear to recognise sufficiently that there is a very considerable political and social problem involved in reducing these top rates of tax. It is interesting that the Conservative amendment is for a 70 per cent. top rate, but the last Conservative Government was only able to get it down to 75 per cent., which is well above the international going rate. They found it extremely difficult to do this, and I do not quite know why they think that it is so easy to do it today. This is where I part company from the right hon. and learned Gentleman, who does not seem to recognise sufficiently the political and social consequences involved.
      As Labour Members have indicated, some people will get very high after-tax increases in income as a result of what is proposed; nevertheless the right hon. and learned Gentleman and I believe that it must be done. How should it be done?

      1231
      I think it should be done by a clear statement of where we want to be in taxation over a period of years. We need to convince people at every level of income that our proposals for the reform of taxation will be good for them. It is not good enough simply to say to people at the low levels of income "We have to do this for the people at the top for economic reasons." Clearly, we have to raise the tax threshold over three years substantially above the supplementary benefit level, so that we can make income tax a tax for middle income groups and upper income groups, which is what it ought to be. It ought never to have been a tax on the incomes of the lower paid.
      Then we need to introduce a credit income tax which will give real security and a genuine equality to the tax system. We need to reduce the basic rate of tax and ought to be aiming at something between 20 per cent. and 25 per cent. over three years. We also need to reduce the top rates, as we are seeking to do today.
      I believe that it is absolutely crazy—President Carter said the same thing a few months ago—to tax people on their earned income at more than half. Everyone is entitled to keep half of what he earns. If we want to tax people in other ways, well and good. Let us have a graduated expenditure tax. Let us have a general expenditure tax à la Meade Committee at the top rates, or something of that sort. Without doing those things, I do not believe that a Conservative Government or any other sort of Government will be able to make the necessary changes, because the political consequences will be too great.
      The right hon. and learned Gentleman castigated the Government for their supposed belief in a wealth tax. My problem is that the Government do not believe in a wealth tax. I wish they did. The whole point of a wealth tax is that it would provide the political and social quid pro quo for dealing with the problem of incomes. We have possibly gone too far in trying to equalise incomes, and we should introduce a reform of our capital taxation in order to redistribute wealth, rather than to redistribute income.
      I accept to a certain extent the point made earlier that there can be an argu-
      1232
      ment both ways as to the effect on high income earners of high levels of taxation. Alexander Hamilton once noted, in a Treasury paper, that native Americans appeared to be less zealous than newly arrived immigrants, and argued for a tax upon his countrymen to get them to work harder, but I do not think that such an argument would stand up today.
      5.45 p.m.
      My belief is that the present levels of income tax are a substantial disincentive to effort, to wealth creation, and to the enterprise that the Government say they wish to introduce and encourage.
      The right hon. and learned Gentleman was absolutely right to labour the point about the "taxiles"—the tax exiles. It is not just the pop industry, as he knows and appreciates; it is an increasing array of business men and professional men. They are able, partly through the mobility of labour in the Common Market, to go abroad.
      We have in Britain probably some of the highest tax incentives for industry or corporations to come here of any industrial country in the world, but we have so many disincentives to the people who manage that industry that they are staying away for personal reasons and our own top managers are leaving. It is happening all the time.
      The one reason that Labour Members do not accept this point—and even some Opposition Members, including the right hon. Member for Down, South (Mr. Powell)—is that most of us in politics gain our satisfaction from the job we do rather than from the wealth or money we make. But outside this House, the people who have the job of running industry and taking the responsibility for it, have to get their satisfaction from making money, from the financial rewards of the job [HON. MEMBERS: "Oh."] If Labour Members think that there is anything wrong with making money, that is very strange. I understood them to want economic growth as much as anyone in this House, and if we are going for that we have to have people who will take the responsibility for running the big enterprises, whether nationalised, as they would like them to be, or private enterprises as we would have them on the Opposition side. The rewards ought to be considerable, at the present top levels

      1233
      of income tax they are simply not sufficient. That is why we are losing people. There is, indeed, a substantial disincentive to wealth creation.
      I believe that Amendment No. 7, which is really aiming at the middle managers, is the most important amendment of the group. Nevertheless, I still think that for this country to labour under a top rate of tax of 83 per cent.—even though we know that it is hedged around with a range of allowances—is wrong. It is absolutely crazy to have that rate quoted against us in the markets of the world, particularly when we remember that those top rates of tax bring in so little money to the Exchequer.
      The time has come to make the change, and we had better make it tonight.
      Mr. Kilroy-Silk: I knew that the hon. Member for Cornwall, North (Mr. Pardoe) was arrogant, but I did not know that he went as far as claiming the title of "saint". He said, in effect, that only Members of this House are motivated by other factors than money. He said that people outside this House had to have the incentive of money in order to do their job properly. There are, I assure the hon. Gentleman, many people in industry and in other occupations who get as much job satisfaction as he does, and as much as I am lucky to get. They get it from making a company work effectively and successfully, from exports, and from helping other people. They are not motivated solely and singly—as all Opposition Members seem to be—by the pursuit of money and the pursuit of profit. Perhaps there are occasional honourable exceptions, such as some of the Welsh nationalists.
      The hon. Gentleman—who now speaks as part of the apparent Lib-Tory pact—also talked about envy and class warfare. There is no envy on the Labour Benches. What we are talking about is justice and fairness. I am rather surprised that the hon. Gentleman should suggest that it is just and fair or in any way equitable to give—as he is suggesting the House should tonight—an extra £5,000 a year tax relief to a man who is already earning £50,000 a year, while at the same time another man who comes to this House as part of a deputation has a take-home pay of £43 a week.
      1234
      If the amendments moved by the Conservative Party—and supported by the Liberals—are successful, there will be a tax handout to those at the top end of the scale that will be more than the constituent to whom I have just referred earns in two years. That, I believe, is totally improper and unjust. We are talking about justice, not envy.
      As for class warfare, it has been amply demonstrated by the Opposition because every element of their amendments to the Budget has been aimed at benefiting the better-off. It happened with the penny off on Monday night, when the greatest benefit of that tax handout went to those earning £170 or more a week. If the amendment is successful tonight, the handouts now anticipated are as follows. A man earning £15,000 a year will be given £500. A man on £25,000 a year will get an extra £1,500 and a man on £50,000 a year will get an extra £5,000. That is over and above the tax benefits which they have already received in the Budget measures announced by the Chancellor.
      We have not heard a word from the Conservative Opposition about the disadvantaged, the disabled, the deprived or the unemployed. All we have heard is talk about the higher taxpayers and the need to reduce tax levels in that regard. The Conservative Opposition have clearly demonstrated that they are indeed the party of a very select, secretive and sectional class interest. If we are talking about class warfare, the class warfare has clearly been coming from the Opposition side of the Committee.
      Mr. John Stokes: If the Conservative Party is only a party of a tiny minority, how is it that it has won so many local elections and has been winning the by-elections?
      Mr. Kilroy-Silk: That has not been the case in my area. But I did not say that the hon. Gentleman's party was a minority party. I said that it represented a minority sectional interest. That has always been the case. Certainly any objective member of the public who has attended the Finance Bill Committee will see there, in all its naked glory, the Tory Party as the class party of the sectional interests which happen to be the wealthiest and most privileged interests in society. When we look at the Conservative

      1235
      amendments we see that they are all in favour of those who earn more than £10,000 a year. The major benefits go to people on £50,000 a year. Why did not the Conservative Party table amendments that would benefit the low-paid? Why are there no amendments to help that section of the community?
      What I find really extraordinary is that an alleged Shadow Chancellor of the Exchequer should make as the centre-piece of his argument a plea for the hoi polloi, odd-bod pop stars and all the rest, such as the Bugners and the Hunts. The right hon. and learned Member for Surrey. East (Sir G. Howe) produced a whole list of names of people who had allegedly left this country because they were having to pay too much tax. As his hon. Friend the Member for Plymouth, Sutton (Mr. Clark) pointed out, it seems to be an extraordinary principle that we should be framing our tax system and our Budget system simply in order to seduce certain individuals who show so little love for their own country that they are prepared to betray it for a higher amount of money which they can get elsewhere.
      The Conservative Opposition are acting like pop stars' groupies. That is perhaps another new dimension to the Conservative Party. To talk about changes in our taxation system and in the Budget measures simply in order to help a variety of pop stars, racing drivers, sportsmen, actors and actresses, seems to me to demean the whole principle of the Budget and to demean the many thousands of people in this country who are unemployed. Many thousands in my own constituency, in Kirkby and Ormskirk, would regard it as a privilege to have the right and ability to pay tax, yet the right hon. and learned Gentleman makes a most pious speech in defence of those who are already earning hundreds of thousands of pounds, who already have far more, in terms of material possessions that one could wish for—houses, cars and other consumer durables—but who are complaining because they cannot be a little richer than they already are.
      There are 1½ million people in this country who do not have the privilege of paying tax and who would give their right hands to be able to have a job and to contribute towards the running of this country. But the tax cuts are designed
      1236
      not to help any of the more unfortunate members of the community, such as the unemployed; they are designed to help the better off They will not help to create employment. They certainly will not help the very poor or the low-paid. They will not help the pensioners or the disabled. They certainly will not help to revive industry or employment prospects in my constituency. They will not even help to stimulate jobs, because we know that one-third of the money that is actually handed back in the form of tax cuts goes on imports.
      Tonight the Conservative Opposition are doing exactly what they proposed to do with North Sea oil revenues. They want to hard the whole thing over in a great tax bonanza, a great popular gesture, the effect of which could be to benefit most of our major international competitors. We all know that about one-third of all the money that goes in tax cuts goes to the sucking in of imports.
      What we should really be talking about is the devoting of far more of our resources to increased public expenditure, which would directly create more jobs. If Conservative Members are really concerned about employment, that is the way they can deal with it, certainly in areas such as my own, on Merseyside. We could use very effectively the £780 million that the Conservative Party wishes to hand over to the wealthier members of our community.
      Only one and a half years ago we had the Chancellor of the Exchequer telling the House that as a condition of getting a loan from the IMF we would have to cut essential social services and public expenditure by £1,000 million. He said that we would have to make major sacrifices, and that the quantity and quality of our welfare and social services would have to decline. Yet the Conservative Party tonight is virtually handing three-quarters of that amount not to the population at large, not to the low-paid, the poor or those on low incomes, but to those who are already wealthy, many of them inordinately wealthy—wealthy beyond the dreams of most ordinary people on average earnings and incomes. That is an extraordinary situation.
      We could easily swallow up a good portion of that £780 million on improving the public services in Kirkby. We could use it to improve housing and the

      1237
      environment, which would help to improve the community itself. It would also have a direct relationship to the creation of jobs in the largely depressed construction industry.
      Mr. Rooker: Does my hon. Friend accept that one of the reasons why the hon. Member for Cornwall, North (Mr. Pardoe) was able to quote from what I consider to be a rigged public opinion survey was that his constituents and my constituents do not believe, and cannot comprehend, the levels of earnings required to pay such high rates of tax in the first place?
      Mr. Kilroy-Silk: My hon. Friend is quite right. When they answered the questions put to them in that survey those people were, in fact saying "Yes, we do believe that the man on £50, £60 or £80 a week is over-taxed". I am sure they never imagined that a Liberal spokesman would defend people who were earning £50,000 a year and would seek to give them an extra £5,000 a year. That sort of salary is beyond their dreams. Ordinary people really do not believe that these things exist. That is the kind of attitude which we expect from the Conservative Party. It is not the kind of attitude we expect from the Liberal Party. Perhaps the hon. Member for Rochdale (Mr. Smith) will tell us that not all Liberals are like the hon. Member for Cornwall, North. It was noticeable that no other Liberal Member was in the Chamber to support the hon. Gentleman tonight in his valiant and, perhaps, ultimately successful attempt to form this new seductive alliance between the Conservatives and the Liberals.
      The hon. Member for Cornwall, North, like those in the Conservative Party, is not content with giving tax cuts and major handouts to the better-off members of our community. The hon. Gentleman, like the Tories, is not content with ignoring the plight of the disadvantaged, although he and others may well put their hands on their hearts and complain about their position when they visit other constituencies. It is on those occasions that they are concerned about the plight of the unemployed or the disadvantaged members of our community, those who are often talked about in the Chamber by the hon. Member for Rochdale.
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      6.0 p.m.
      The Tories, not content with giving tax reliefs to the wealthier and better-off members of our community, want to go further in their prosecution of the class war. They want to impose even further disadvantages on the low-paid, the pensioners and the disabled by changing the burden of taxation, shifting it away from income tax and placing it on indirect taxation. They are not content with giving more money to the rich; they want to ensure that the pensioners, the unemployed and many of those who do not even reach the tax bracket will find a larger proportion of their income going in tax because of increases in value added tax.
      I hope that my right hon Friend the Minister of State, will resist the strong pressures being put upon him and the Government by the Opposition, by some of my hon. Friends and by the media to change the emphasis from income tax to indirect taxation. He knows, as I know, that those who are hurt hardest by increases in indirect taxation are those who are most vulnerable and who can least afford to pay.
      It is not surprising that Tory Members should propose a switch in taxation from income tax to indirect taxation. However, I find it surprising that the hon. Member for Cornwall, North, who generally sees himself as a robust radical, should suddenly turn out to be a champion of the class war which has generally been prosecuted, not very effectively as it happens, by the Conservative Party.
      I ask my right hon. Friend to resist any imposition of further indirect taxation, which would hit those whom I and many of my hon. Friends represent. These are the people who never come anywhere near £50,000 a year, who may never even dream of that sort of money. Many of them are in the single-parent family category. There are many thousands who are unemployed. These are the people who would feel deeply the effect of increases in value added tax. It would hurt them far more severely than those who are being talked about by the Opposition, because any such increases would represent a larger proportion of their income.
      I make a far more confident and robust defence of the present levels of taxation. Like many of my hon. Friends,

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      I accept that the income tax level at the margin should be changed, bearing in mind the incomes of many of our constituents. Many of those whom we regard as having low incomes come into the tax net. We regard that as indefensible. However, that should not lead us to decry the general level of taxation and to assert that it should be reduced.
      If we take that approach, we forget many of the features that make this country what it is and make it a desirable, compassionate, tolerant and humane society. I refer to the various undertakings that are being built and financed from taxation. For example, there are the National Health Service, the education service, the police, law and order—of course, we hear a great deal about the police and law and order from Opposition Members—and many of the other activities and parts of life that are financed from taxation. These factors are extremely important to those whom I represent. They are important to the whole quality, ethos and tenor of the society in which we live.
      It is extremely important that we do not give in to the clamour to reduce taxation to a level that would have a deleterious effect upon the level, quality and quantity of the social welfare services that we provide. We see the hypocrisy that is exhibited every day of the week by some Opposition hon. Members, including the hon. Member for Horn-castle (Mr. Tapsell), who on 21st February said that he was in favour of increased public expenditure. When talking about public expenditure, many Opposition Members are prepared to say that they want generally to reduce it so that taxation may be reduced. That is popular and it sounds possible.
      Every individual knows what we mean when we talk about reducing income tax. He will feel that in his pocket. However, he does not know what we mean when we talk about reducing public expenditure. It is only when the result hits him that he becomes concerned about public expenditure. He becomes concerned when he has to wait in a long hospital queue, when he has to spend two or three hours in a casualty department, when the police do not come round when he reports a crime or an act of vandalism, when the fire brigade does not turn up in time,
      1240
      when the hospital is not built or becomes inadequate and when the schools are overcrowded. When those situation arise, he suddenly realises what public expenditure is all about. The individual citizen realises that, and so does every Conservative Member.
      Although Conservative Members say that generally they want to cut public expenditure, they are prepared to say in the House—they do it day after day, and they did it during Question Time today when putting Questions to my right hon. Friend the Secretary of State for the Environment—"Please may we have more public expenditure? Please will you build a hospital in my constituency?" It is always in the individual Member's constituency and nowhere else. They say "Please will you build the road? Please spend more on law and order. Please spend more on defence."
      That is the sort of hypocrisy that we expect and get from Conservative Members. It is not the sort of hypocrisy that we have ever had or anticipated from Liberal Members.
      Mr. Stan Thorne: My hon. Friend is too generous.
      Mr. Kilroy-Silk: I know that my hon. Friend's experience is different from mine. I know that he fights the Liberals hard in Liverpool.
      Mr. Thorne: I do not represent a Liverpool constituency.
      Mr. Kilroy-Silk: I know that my hon. Friend lives in Liverpool.
      I did not think that I would come across such hypocrisy from a Liberal Member.
      Mr. Pardoe: The hon. Gentleman must not accuse me of trying to finance the cuts by making cuts in public spending. I do not believe that the cuts should be financed by cuts in public spending. I have said on many occasions in the House that they should be brought about by increasing taxes on spending. More than two-thirds of the hon. Gentleman's constituents would prefer to pay tax as they spend than pay tax as they earn. Why does he not ask them for a start?
      Mr. Kilroy-Silk: The hon. Gentleman says that two-thirds of my constituents would prefer to pay lower taxes. I do

      1241
      not know where he gets that information. Let me make it clear that 58 per cent. of the council house tenants in my constituency are on social security. They are not paying tax. They will not benefit from any tax cuts. They will not benefit from the tax cuts that the Opposition parties wish to be made tonight. Of the schoolchildren in my constituency, 80 per cent. receive free school meals, while the national average is about 18 per cent.
      Do not let the hon. Gentleman tell me what my constituents think. Do not tell me about my constituents. I know what they think. I know what they want. What they do not want is to see the Tory Opposition, helped by the Liberal Party, give money away to those who already have too much. They do not want to hear a Liberal spokesman saying that he will support the Tories to introduce measures to tax the poor. That is what the hon. Gentleman is proposing by arguing that there should be an increase in value added tax. My constituents would not gain from such an increase. They will not benefit by cuts of 1p or whatever in the rate of income tax, but they would be hurt severely by the increase in value added tax that is proposed by the hon. Gentleman.
      I ask my right hon. Friend to resist the proposals of the Opposition parties and the implicit attack on our social services by the Tories. They would give £800 million to the rich, but they would be asking my constituents to pay for that by introducing increases in council house rents, increases in the price of school meals to affect the few, admittedly, who have to pay and by increases in a whole range of other social services.
      The Tory Party is showing its clear, true colours as a party that represents a select, sectional interest of the wealthy. It is propagating the class war in a way that it has never done so openly in the House. I ask my right hon. Friend to resist the amendment.
      Mr. Ian Stewart: If the hon. Member for Ormskirk (Mr. Kilroy-Silk) is typical of the people from the area that he represents, it is not surprising that they have frightened off every employer in sight. I have rarely heard such a ridiculous load of balderdash intended as a contribution to a debate in Committee or on the Floor of the House.
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      I think that it would help the Committee if we were to try to discuss this matter rationally. It is a great pity that the Minister of State allowed himself to be carried away by the sentiments of Labour Members below the Gangway.
      Mr. John Mendelson: My right hon. Friend made an excellent speech. We have not heard a speech such as that in years.
      Mr. Stewart: Therefore, he was forced, against his better nature, which I know well, to make a belligerent and irrelevant speech, which is what he does only when he does not believe in the argument that he is putting forward.
      Why are these amendments being resisted by the Government?
      Mr. Mendelson: Why?
      Mr. Stewart: I should have thought that it was clear after the rubbish to which we have had to listen about every subject except the amendments. Why have the Government—
      Mr. Mendelson: Why?
      Mr. Stewart: —gone against their better judgment that moves in this direction should now be made? Of course it is a matter of the class war, but it is an absolutely bogus class war whipped up by the bovver boys of the Red Brigade below the Gangway.
      We have heard a great deal this evening, as we often do in such debates, about fairness and justice, rich and poor. But we are talking not about wealth but about earnings.
      Mr. Mendelson: We are talking only about money.
      Mr. Stewart: Labour Members, who think that they know all about these things—
      Mr. Mendelson: Hear, hear.
      Mr. Stewart: —are determined to misunderstand the point of what we are discussing tonight. It is largely because of this ridiculous and unthinking attitude that the Committee is treated on these occasions to displays of disreputable behaviour.
      We hear a lot about handouts and favours to the rich and so on, but is it a

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      favour to somebody to take away less than 83 per cent. of £1 which he earns? Is it a handout to impose a rate of tax lower than what amounts to confiscation? Labour Members are entitled to their own opinions. However, I suggest that they are in a minority, not only in their own party and in, the Committee but in the country at large. Fortunately, most people do not believe in confiscatory rates of personal taxation. I was glad to hear the hon. Member for Cornwall, North (Mr. Pardoe), in a reasonable way, explain that the Liberal Party had a similar view to that which, I suspect, is widely held throughout the country.
      What happens if every year we use the argument that we have heard from the Labour Benches today? If differentials are always squeezed in the same direction, they will eventually disappear. If it is never right to restore the real levels of after-tax earnings at the higher rates and it is always the top priority to increase relatively the spending power at the other end of the scale, inevitably differentials will be squeezed. They will be squeezed not only by the tax system but by incomes policies which include flat-rate elements which, combined with the effect of inflation, cause the problems which we now have about differentials which are recognised by the Prime Minister, the Government and many Labour Members. But what do they do about it? They do very little. The population has suffered a decline in living standards over the last five years.
      Mr. Mendelson: On a point of order, Mr. Murton. I ask for your guidance. Is it not wasting the time of the Committee to talk about wage differentials and to pray in aid the Prime Minister when we are talking about handouts of £5,000 a year to rentiers and financiers? This is a waste of the time of the Committee.
      The Chairman: Order. That is not a point of order. The hon. Gentleman must be allowed to develop his argument in his own way.
      Mr. Stewart: Thank you, Mr. Murton. The average reduction in real earnings at the bottom end of the scale has been calculated over the last five years, after tax and with adjustments for national insurance, social security and child benefit, to be about 3 per cent. At three times
      1244
      average earnings it is about 14 per cent. At the levels affected by the amendments, in some cases it is 25 per cent. or 30 per cent.
      That may be acceptable to Labour Members. It may be what they wish. It is a strong form of egalitarianism served up under the guise of inflation. If they want that kind of society, that is fair enough, but I do not believe that the Government should pretend that they are worried about the situation and then resist the amendments.
      Amendment No. 22, in my name, would cost very little. It would merely adjust the top rate of tax from 83 per cent. to 70 per cent. That would still leave this country as one of the highest-taxed countries in Europe and the industrial world. I should have thought that, if Treasury Ministers were seriously concerned about the disincentive effects of our high marginal rates of taxation, they would willingly accept the amendment without a Division. But I do not expect that they will. Unfortunately, the belated recognition by some Members of the Cabinet—most notably the Chancellor of the Duchy of Lancaster—that this situation is now overdue for correction has not prevailed in the Cabinet. That is a matter for disgrace.
      6.15 p.m.
      If a country sets out to use its tax system to penalise the able, the skilled, the hardworking and the successful, inevitably it will end up unskilled, mediocre, idle and unsuccessful. Unfortunately, that bears a marked resemblance to what is beginning to happen in Britain today.
      No one is suggesting that altering the higher rates would bring about an immediate regeneration of British industry and commercial life. But I think that all who look at this matter objectively agree that, if we leave the rates where they are, we shall certainly bring about a further slide in the opposite direction. I echo the words of the Chancellor of the Duchy of Lancaster that this situation is overdue for correction.
      Mr. William Hamilton: I take a middle-of-the-way view on these matters. I hope that my hon. Friends in the Tribune Group will not be surprised when I say that I disagree with their views. I also disagree with the views of the Tory Opposition.

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      I think that the Government's view on the Budget was just about the right balance, given the present economic situation. But there can be no doubt in the minds of most moderate Members—I count myself as one of them—that there is something radically wrong with our tax system from the top to the bottom. It will not be undone overnight. The steps that have been taken in successive Budgets by my right hon. Friend seem to us, and I think to the country as a whole, to be eminently fair, but, they do not solve the problem.
      When I consider the speech made by the right hon. and learned Member for Surrey, East (Sir G. Howe) and couple it with the repeated remarks of the Leader of the Opposition, I conclude that they are not the best of advocates for suggesting a reform of the tax system because, rightly or wrongly, the Tory Party always gives the impression that it is concerned more with the people at the top than with the people at the bottom. Indeed, Conservative spokesman have said so in as many words. When they say, as they have said repeatedly, that these tax concessions can be paid for by slashing unspecified items of public expenditure—unspecified today, too—there can be no doubt that such cuts will affect most severely the poor and, indeed, the middle classes, because it is they who benefit most from the social services, whether in education, the National Health Service or whatever.
      In February, the Leader of the Opposition said that the Conservative Party was determined to axe tax, presumably to release energy. We have heard all these expressions before. Indeed, I have heard many similar debates over a number of years. It is said that these tax concessions at the top end of the scale will release energy, inspire initiative, stop the brain drain and all the rest of it. I say from my own experience that the people who find the tax system a greater disincentive than most are not top managers and professional people but the skilled workers at the bench and the semi-skilled workers who say that it is not worth working two hours' overtime because they are taxed on it. These are the people who need more incentive than people at the top. They are doing extremely boring and repetitive jobs. It is not worth
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      while having two more hours of that when the Chancellor takes a big slice of it.
      On the other hand, the professional man has a good deal of job satisfaction. For example, I am speaking with a heavy cold. I have no financial incentive to come here. I happen to like coming here because I like the job. We are all like that, otherwise we should not be here. The same applies to many professional people—even nurses. Nobody could say that the nurse in a hospital is induced by extra pay. She is motivated by other considerations.
      This is where we make repeated mistakes, and particularly the Tory Party. Tories give the impression that only cash motivates people in their activities. I do not say that it is irrelevant, but it is only one factor. Usually it is not the most important factor, but when it is it applies at the lower income scale rather than at the top in the professional classes. Tories use these arguments simply because they believe that there is a certain amount of political mileage to be had from them.
      The most absurd statements were made by the right hon. and learned Member for Surrey, East. He gave a long list, not of the brain drain from this country but of others. He listed James Hunt, Richard Burton, the Rolling Stones, Humperdinck and Tony Jacklin. He said that they were the seed bed of the entertainment industry. By God! If the argument is reduced to that level, I am not surprised at what the people said they thought of the Shadow Chancellor in a recent poll in The Sunday Times.
      Hon. Members will recall that opinion poll in that respectable newspaper The Sunday Times last Sunday. The people were asked about the capability and honesty of the leaders of the parties and whether they were in touch with the people. They were asked whether they were even recognised by the general public. The results were interesting.
      For capability, the people put the Prime Minister top of the pops. A total of 76 per cent. thought that he was extremely capable. Only 59 per cent. thought that the Leader of the Opposition was capable. The Chancellor of the Exchequer, trailing a little behind the Prime Minister as one might expect, was thought to be capable by 74 per cent. Where did the

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      right hon. and learned Member for Surrey, East come? He came bottom of the league with 26 per cent.
      Some 65 per cent. of the total thought that the Prime Minister was honest. That is very good for a top politician. The Chancellor of the Exchequer polled 60 per cent. and the Leader of the Opposition less than 50 per cent. A total of 49 per cent. thought that she was honest. That is a disgraceful figure. The Shadow Chancellor polled 22 per cent. My hon. Friend the Member for Penistone (Mr. Mendelson) said earlier that he was a trickster. That is too cruel a word to use. About one in five thought that he was honest. It is not for me to say whether they are right. That is what they think. Sixty-two per cent. thought that the Prime Minister was in touch with ordinary people. Fifty-seven per cent. thought that the Chancellor was in touch with them, less than 50 per cent. thought that the Leader of the Opposition was, and 15 per cent. thought that the Shadow Chancellor was in touch. He is obviously completely out of touch. He might as well go and join Humperdinck. He would never be missed. A total of 86 per cent. recognised the Chancellor and 77 per cent. recognised the Leader of the Opposition.
      Mr. Tim Renton: On a point of order, Mr. Murton. I hope that before the hon. Member finishes he will tell us where he came in this list. Is this relevant to the debate? Many hon. Members wish to speak. What have the hon. Member's remarks to do with this debate?
      The Chairman: The hon. Member for Fife, Central (Mr. Hamilton) is making comments on the first speech that was made on these amendments. He must be allowed to develop his argument in his own way.
      Mr. Hamilton: If you were not retiring at the next General Election, Mr. Murton, I should vote for you again. You are right. I was giving the public estimate of the honesty, capacity, weight and General recognition of the Shadow Chancellor, who is trying to kid people that he would do a better job than the present Chancellor.
      I return to the more serious argument about the alleged lack of incentives
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      engendered by the present tax system. I recall the speech that the Financial Secretary made on 21st February in a debate initiated by the Opposition on the general problem of taxation. The same arguments were being adduced then as we are hearing today. On that occasion my right hon. Friend recounted what happened when the then Chancellor, Mr. Selwyn Lloyd, reduced surtax on earned income by raising the starting point from £2,000 a year for a single person to £5,000. That was an enormous step and was the type of concession that is proposed by the Tories today.
      What was the result? Were there tremendous bursts of initiative and enterprise? Was there a flood of Humperdincks and the rest back to this country? I do not know who the equivalent of Humperdinck was at that time, but were such people flooding back as a result? Not a bit. We have had successive crises since then. It made not a ha'p'orth of difference except to those at the top of the salary scales who got the handouts. The exercise was repeated in 1971 by the Tory Government. More cherries were handed out to the wealthy. The top rate for earned income was cut from 88¾ per cent. to 75 per cent. The result of that was a worsening of the economic situation absolutely and relatively compared with our competitors.
      The point was further underlined in an article in The Three Banks Review of December 1977 by Sir Henry Phelps Brown, who had been professor of the economics of labour at London University. He said:
      "In its 'Programme for Action 77', the Confederation of British Industry held that 'lack of incentive has held back productivity in manufacturing industry', and advocated the cutting of taxes, especially income taxes, to restore incentives."
      That is the crux of today's argument. The article continued:
      "Those who see in the incidence of taxation a factor of sufficient strength in itself to account for much of the variations in the pace of the economy, apart from all the other circumstances of the time, should look back to the fifteen years before the First World War. Throughout those years the highest rate of income tax in this country was under 7 per cent. and from 1909 most taxable earned income paid less than 4 per cent. Yet this was not a time of vigorous enterprise responding to incentive, or of high investment in British industry: those fifteen years were a time of stagnation, with no advance in productivity,

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      no rise in real wages. The reasons for this lay in "other circumstances of the time": the example may serve to indicate how minor a role taxation may play, among other forces, in the shaping of economic performance."
      6.30 p.m.
      He went on to suggest certain other factors which might explain our unduly poor performance, not only since 1974 but even since before the war. Those explanations involve sociological factors such as the class structure which a lot of people think has disappeared in this country but which is still very much in evidence. One has only to look at the entrants to university to see how little change has taken place there. That fact permeates through to industry, the Civil Service, the political institutions and other places.
      The writer of the article referred to what he called "the adversary system"—that is to say, the "we" and "they" syndrome in industrial relations which the Leader of the Opposition seems determined to exacerbate. In every speech she makes, she indicates that she will have a confrontation with the trade union movement. Whatever one might think of organised labour in this country, one must accept that no Government, irrespective of party, can pursue any meaningful policy unless they co-operate with organised labour.
      The article goes on to say what we know to be true: that over the years we have had a pathetic output per employee-hour in almost every industry compared with our competitors the United States, Japan, Germany and France. The main constraint here is the massive resistance to change which begins in this place. It is almost impossible to change this place. I have been trying for God knows how many years, but with remarkably little success. The same situation applies in every other institution, whether it is the trade unions, the Civil Service or top management. We have failed all along the line in initiating the changes that are necessary if we are to survive as a competitive industrial nation.
      We have simply failed to change our structure to take account of the rapidly changing patterns of international world trade, upon which we so heavily depend. We have failed to change our educational system, the structure of the Civil Service and the political system. Let me use the
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      expression used by the writer of the article when he referred to the "antique inflexibility" of our trade union institutions and the inefficiency of too much of our industrial management. Hardly a word has been said about that.
      Some of the people we have been discussing who earn these massive salaries are being paid far above their worth. There is still a lot of nepotism in top management, and well the Conservatives know it. Some of those concerned are sitting on the Conservative Benches. We see them every day. We can judge them, and it makes me frightened for the future of our industrial economy when I hear top managers uttering such gibberish as we hear from the Conservative Benches day after day.
      Let us not pretend that the solution to all these problems lies simply or even mainly in restructuring the fiscal system. Those factors that I have mentioned are of far more fundamental importance than the amendments we are discussing. The Opposition are not concerned much to discuss in any great depth the maladies within our structure. They prefer the superficial vote-catching exercises such as the one in which they are engaged today.
      Let me recall what was said by the hon. Member for Horncastle (Mr. Tap-sell) in the debate on taxation on 21st February. He implied—column 1326—that the key to a dynamic economy and to international respect was a system of low rates of direct taxation. So the alleged lack of international respect from which we suffer is, according to the hon. Gentleman, due to our unfair and unjust tax system. He urged that conversely high rates of taxation existed in countries in decline. That is an absurd proposition. He said that the countries with high rates of taxation were in decline, with welfare benefits and living standards that were relatively low. I can refer the hon. Member to Sweden and Norway as good examples of where the reverse is true. They have high taxation rates and very high-quality welfare services—better than in this country.
      The latest figures I have show that in 1974 the total tax take in this country was smaller as a proportion of the GNP than in Denmark, Norway, Sweden, Canada and Austria. It is therefore idle to pretend that we are the highest taxed industrial nation.

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      According to Ecconomic Trends of November 1976, the total raised by national and local taxes, excluding capital taxes, but including social security contributions, because they are severe imposts on lower-paid workers generally, was less as a percentage of GNP at factor cost in the United Kingdom than in Denmark, Norway, Holland, Sweden, France and Canada. Excluding social security contributions, the tax take was higher in Denmark, Norway, Holland and Canada than in the United Kingdom.
      There is an undeniable case for having a fundamental and radical look at the total tax structure. That is what the Government are engaged in doing, legitimately. Conservative Members have said that the Chancellor of the Duchy of Lancaster, the Chancellor of the Exchequer, the Prime Minister and others recognise that top management must have a fairer deal than they have had up to now. I recognise that fact. My doubting friends should read the report of the Select Committee on Nationalised Industries a few years ago when it was discussing the top pay of management in nationalised industries. On that Committee were a number of so-called Lefties, and they said that we would not get the best kind of management—presumably we want nationalised industry to have the best kind of management—unless and until we faced the fact that we must pay the rate for the job.
      It is idle to pretend that nationalised industries pay salaries that will attract the best kind of management brains. From my experience in my constituency, I have found that the tax system is hitting the lower-paid people far harder than it is hitting those on higher wages. That is not a reason for not dealing with both groups of people. We should not deal with one and exclude the other. In the Budget, concessions have been given to the highly-paid, but the majority of the concessions, quite properly, have been given to the lower-paid people.
      There are other serious injustices with the income tax situation. I refer to a glaring injustice which will not meet with the approval of the Opposition. There is a landowner in this country who receives a very large income from his estate. According to the accounts that I have with me, that landowner in 1977
      1252
      received £290,605 as income from that estate. Conservative Members might say that an enormous part of that sum would be taken in tax. Not a penny of tax was taken from that landowner, because he happens to be the Duke of Cornwall, the Prince of Wales. There is no reason why anybody in this country should be allowed to escape the payment of tax.
      Mr. E. Fernyhough: The Leader of the Conservative Party said in a law and order speech last weekend that no exception should be made to any of the laws of this country. That reinforces what my hon. Friend the Member for Fife, Central (Mr. Hamilton) has said. He has the Leader of the Conservative Party on his side.
      Mr. Hamilton: I have tried for years to find out why this income is not taxed, not even at the lower rates. I can never get at satisfactory answer. We can find out the taxable income required to give a net income of £200,000-odd a year. As unearned income of more than £20,000 a year, a sum of that nature would be taxed at 98 per cent. To receive £290,000 net, he would need to have a gross income of at least £20 million. How Opposition Members can even pretend that we are moving towards a fair tax system while allowing this kind of scandal. I do not know. I am being listened to almost with incredulity. I do not think that hon. Members opposite believe the facts that I am putting forward. I have seen the accounts of the Duke of Cornwall in the Library, and I invite hon. Members to see them. The accounts show that payments made on account of His Royal Highness were £129,208 in 1976 and £209,605 in 1977. That is an approximate increase over one year of 150 per cent. There is no consideration of norms or phase 1 or phase 2. Nothing of that kind is involved. If the Government took this matter in hand, though the sums are relatively small, the psychological effect would be out of all proportion.
      6.45 p.m.
      I see that the hon. Member for Halesowen and Stourbridge (Mr. Stokes) is getting restive. I am not doing my job if he is not. The problem to which I have referred applies also to the relatives of the Duke of Cornwall. Unless the

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      Government tackle the problem, we cannot take them too seriously on other matters.
      Mr. Dennis Skinner: There is a strike taking place in one of the Temples near the Law Courts. People are squabbling about the payment of £300 a day. There is a fee of £10,000 involving two gentlemen. One gentleman is a present Tory Member of Parliament, the hon. and learned Member for Thanet, West (Mr. Rees-Davies) and the other is the ex-Tory Member for Ipswich. As a result of all the squabbling over the £300 a day—and they are the people who will benefit from changes in taxation proposed in the amendments—there is a strike in the chambers.
      Mr. Hamilton: I hope that the strike continues and that the chambers close. My hon. Friend is underlining what I am saving. These debates are concerned with who gets what out of the tax system. The impression given by the Tory Party—an impression that it intends to create—is that it is looking after the people at the top. We are creating the impression which we intend to create that our job here is to look after the people at the bottom of the income range. All of us, whether the Opposition or the Government, have ultimately to think of the national economy. I hope that my speech has been relatively balanced and moderate.
      I recognise the problems in the economy. I do not expect that they can be even largely solved by tinkering with the tax system, which the amendments are essentially doing and treating unfairly the great majority of the people represented by the Labour Party.
      Mr. Douglas Crawford: I hope that the Committee will forgive me if I do not take up the latter points made by the hon. Member for Fife, Central (Mr. Hamilton). This is not the place to discuss such matters.
      The debate is not just about the widening of the tax bands but is about tax at the higher rates. It is not only about Amendment No. 7 but is about Amendments Nos. 20 and 21. I understand that the cost of Amendment No. 7 in United Kingdom terms would be £150 million a year and the cost of Amendments Nos. 20 and 21 would be £235 million.
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      In order to put at rest The Times, which, as usual got it wrong this morning, this Bench will be voting for Amendment No. 7 and against Amendments Nos. 20 and 21. We are in favour of raising the threshold of tax for middle management but against dropping the top rate of tax for those who are rather richer. Our decision to support Amendment No. 7 was not particularly easy. It was based not on party political dogma but on pragmatism. Unfortunately, that word has been debased by one right hon. Member.
      The Minister of State said that middle managers in Wales were not in the tax bracket which would be affected by raising the threshold from £7,000 to £8,000. I should like to read into the record a letter that I have received from Mr. Michael Moran, the chairman of a company called Microwave & Electronic Systems Limited and a member of the CBI executive committee in Scotland. He said:
      "As far as MESL is concerned, our continued growth … is, and will continue to be, limited by the national shortage of a pool of talented managers, the engineering disciplines and skilled manpower who are prepared to enter manufacturing industry."
      He went on to say:
      "The multiplier effect, on mopping up semiskilled and unskilled unemployed labour, caused by the existence of such a pool of skilled labour cannot be overstated."
      The hon. Member for Cornwall, North (Mr. Pardoe) quoted some figures. Mr. Moran continued:
      "As an example to demonstrate that current taxation is a disincentive to accepting increased responsibility we can quote the salary band of MESL Divisional Managers in 1973 as £4,000 to £4,300. Today the band is £9,500 to £10,500 which just keeps ahead of the 213 per cent. inflation experienced over the same period i.e. 1973 to 1978. In 1973 the manager did not come near the 40 per cent. taxable income band which started at £5,000 … Today, 1978, the same manager after deducting, say, £2,500 in allowances enters the proposed 40 per cent. tax band which starts at £7,000 … To inflation index the £5,000 tax band in 1973 to 1978 would raise it to £10,550."
      That is one of the reasons why my party is supporting Amendment No. 7. If anything, we in Scotland have suffered even more from the emigration of our skilled people than have other parts of the United Kingdom.
      Mr. Joseph Dean: The hon. Gentleman quoted from the letter

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      instances of skilled engineers, but it is difficult to believe that the writer of the letter was being serious when the employers in recent negotiations with the engineering union on behalf of skilled engineers made an original offer of a 2 per cent. wage rise, not the 10 per cent. that other workers received. Why do they not come off it and be genuine?
      Mr. Crawford: I was simply quoting from a letter. The point is that in Scotland in particular, if we are to create the sort of industry that we need and to regain our competitive industrial edge and retain and attract skilled managers, we must have a tax system which gives them more incentive.
      I am not talking about the land speculators, the multi-millionaires, the tertiary bankers and those who would benefit from Amendments Nos. 20 and 21. I am talking about middle management—the production engineers, the marketing managers, the research managers and all those who can bring back springs of inventiveness to industry in our country. Without these people, industry in Scotland and, no doubt, other parts of the United Kingdom will continue to suffer.
      For every skilled job created or retained, several unskilled jobs are provided. Conversely, for every skilled job lost or not created, several unskilled jobs go by the board. The Government have partly recognised this but, in the view of my party, they have not recognised it enough. Hence our support for Amendment No. 7.
      Mr. Ron Thomas: The hon. Member has now switched from the example of managers to talk about skilled workers in general. May we be clear? If he is supporting the amendment, he is thinking about people on £10,000-plus a year. According to the latest survey of the Department of Employment, there are no skilled workers to speak of in that bracket. There may be one or two managers. Will the hon. Gentleman make clear that, following the Budget proposals, all he is arguing about is a top band of £1,000 of taxable income that will be taxed at 40 per cent. rather than at 33 per cent. or 34 per cent? He is talking about a quite small sum of money.
      Mr. Crawford: I am talking about giving incentives to the people in industry
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      who will create jobs for unskilled and semi-skilled people. That is where my party stands. If we give incentives to people on £7,000 to £8,000, which is, de facto, £9,000 to £11,000, they will create the jobs that we badly need in Scotland.
      I hold no brief for the CBI, but the chairman of the CBI's smaller firms working group in Scotland, Mr. Ron Lander, has said:
      "I believe that coupled with SNP proposals to reduce the basic rate of income tax by 2p, … a raising of the proposed £7,000 limit to £8,000 … will be … a move in the right direction.
      We in Scotland, more than any other part of the United Kingdom, have to rely on inventiveness for the prosperity of our economy. We have to rely on high-value, low-volume products. This means inventiveness. It means the ability to translate invention into commercial reality. It means the ability to translate commercial reality into acceptable products, and it means the ability to sell acceptable products throughout the world.
      The raising of the basic tax band from £7,000 to £8,000 means, given the allowances for wives and children, building society mortgages and so on, a de facto widening of the band from about £9,000 to £10,000, but above that level we feel that the imposition of higher rates of tax is not inequitable.
      If we are talking about differentials and the need to maintain them, I see nothing to suggest that a man earning, say, £30,000 is three times as good, three times as productive or capable of producing three times as many jobs as a successful middle manager earning £10,000. That is why we shall not be supporting Amendments Nos. 20 and 21.
      In all this, the SNP is taking a firmly pragmatic line. Without middle management and people in the earnings bracket of £9,000 to £11,000, industry in Scotland and elsewhere in the United Kingdom will suffer. Obviously the Government have recognised this, but it is essential to maintain the competitive nature of industry and stimulate the springs of industrial inventiveness. We believe that tax incentives for middle management should be enhanced, but there is no way in which we can support a reduction of the tax rates at the top end.
      Mr. John Mendelson: My hon. Friend the Member for Bristol, North-West (Mr. Thomas) interrupted the hon. Member for Perth and East Perthshire (Mr. Crawford) to suggest rather politely that he was talking about something with which the amendments do not deal. We did not get a very clear reply to that intervention.
      I counsel my hon. Friend not to be surprised that Opposition Members are talking about matters other than the burden of the amendments. With the exception of one Tory landowner who spoke earlier, they are far too ashamed to discuss the amendments. They are making high-toned speeches about wage differentials, about engineers, about skilled craftsmen—about everything but the burden and substance of the amendments and the group of people who will benefit from the vast sums that will be handed out to a tiny section of the population if the amendments are carried. Of course they are talking about other things. It is the normal classical tradition of financial hypocrisy.
      I shall not mince my words, because I believe in returning to an earlier tradition of hard hitting talk in Budget debates. That is better than maintaining the artificial high tone that some Opposition Members have introduced to cover their tracks.
      7.0 p.m.
      What we are discussing today is very much the business of the electorate, and it is something that every right hon. and hon. Member will have to defend. The Minister of State made an outstanding speech in reply to the opening remarks. I say that deliberately against some of the snide attacks that have come from the Conservative Benches, particularly in the immature speech of the hon. Member for Hitchin (Mr. Stewart), who accused my right hon. Friend of having shown prejudice. My right hon. Friend's speech, in defence of the policy that the Government feel is justified, was full of facts and information. That is just what the Opposition do not like, but what they do not like they will have to defend in the country.
      It will also have to be defended by the new spokesman on economic policy, the hon. Member for Cornwall, North (Mr. Pardoe), who makes so many high-toned speeches these days. In his speech this
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      afternoon he introduced the figure of a mythical professor and used him as a prime example to show why the Liberals will support the amendments which among other things will hand out £5,000 to men and women earning £50,000 a year.
      We were told, in the excellent speech of the Minister of State that more than 40 per cent. of the money being handed back will concern unearned income and will have nothing to do with earned income.
      Returning to the example of the rarefied figure of the professor, the hon. Member for Cornwall, North said that this man would make a basic strategic decision. He gave the impression that he would spend a sleepless night before he decided whether he should give an additional lecture. Heavens above!—no wonder British universities are not making as rapid progress as they should. Membership of the Royal Society is large. In the past 25 years we have had 17 Nobel prizewinners in natural and medical sciences alone in this country. But, of course, we would have had 34 if only the money had been handed back to them in earlier Budgets so that more professors could give more lectures, step up their research, become members of the Royal Society, and win Nobel Prizes for the United Kingdom. That is the picture that the hon. Member painted.
      I warn the Financial Secretary—I hope that he will pass this warning on to the Chancellor—that this same hon. Member for Cornwall, North, who has given this childish view, sets himself up as the Government's chief adviser on financial and economic affairs. One cannot pick up a newspaper in Yorkshire, let alone Cornwall, without seeing an announcement that the hon. Member has visited the Chancellor once again behind closed doors.
      Once I was not particularly perturbed by these visits. I know that the Chancellor receives many visitors. He has even seen me occasionally, with a deputation of my hon. Friends. I do not think that on those occasions we changed his mind, and therefore I was not particularly worried about the frequent visits of the hon. Member for Cornwall, North. However, when I heard the speech today about a profession of which I know

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      something, I felt really alarmed. I warn my right hon. Friend to cut down the number of visits made by the hon. Member. Of all the unnecessary and useless activities of recent years, this is the most useless.
      The hon. Member for Perth and East Perthshire did not talk about the burden of the amendments, Of course he did not. He was ashamed to do so. He talked about skilled men and engineers. He was pulled up, quite rightly, by my hon. Friend the Member for Leeds, West (Mr. Dean), who has had a lifetime of experience in engineering, unsurpassed by any other hon. Member. The hon. Member for Perth and East Perthshire will have to attend meetings in Perth, not far from the Salutation Hotel, and defend the handing over of £5,000 to financiers and rentiers who are earning £50,000 a year. That is what he will have to defend.
      Mr. Joseph Dean: Does my hon. Friend agree that if the hon. Member for Perth and East Perthshire (Mr. Crawford) is sincere, he should have the courage to make such an announcement during the forthcoming by-election campaign in Hamilton?
      Mr. Mendelson: Certainly, he will have to address engineers and others in Scotland, because in that country there are many skilled engineers.
      Mr. Crawford: I was not talking about people in the £50,000-a-year income bracket. I was talking about people in the £8,000 to £11,000 bracket—the people who are the creators of jobs in this country. That is why I said that we would vote for Amendment No. 7 but against Amendment No. 20.
      Mr. Mendelson: The hon. Member has given a much more specific outline in his intervention than he did in his original speech. He talked a lot about skilled engineers. I represent an engineering area. Working engineers earning between £10,000 and £11,000 a year are hard to find in Yorkshire, or anywhere else. I do not believe that the level is much different in Scotland. These are not the people about whom we are talking.
      The only Member who approached the problem honestly was the Tory landowner, the hon. Member for Gainsborough (Mr. Kimball), who criticised his
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      own Front Bench. His main attack was not against the Chancellor; it was against his own Front Bench, because they were not proposing that enough money should be handed out to the richest sections of the population.
      What we are seeing tonight must be made clear in the country, and the sooner the better as far as I am concerned. It would be a very good thing if we could start tomorrow afternoon when everything was still fresh in the memory of the electorate. We are discussing the real policy of the Tory Party. This has nothing to do with economic efficiency and strategy. It has nothing to do with the good of the country; it has to do with nothing but giving large sums of public money to those who have too much already. That is traditionally Conservative policy.
      Before we get on to the high-toned subjects of economic and financial strategy, we must nail the real attitude of the Tory Opposition. It has nothing whatever to do with any particular economic situation. It does not matter which year it is. These are proposals that the Tories put forward before 1910 and after 1920 by the hard-faced men who had done well out of the war and were always intent on looking after the tiny minority who have too much already.
      Mr. Maurice Macmillan: I though that we were debating a reduction in the tax level. The hon. Member refers to "handing out large sums of public money". We are debating the retention of more of the money that people have earned, sometimes overseas.
      Mr. Mendelson: I am grateful to the right hon. Gentleman. He could not have given me a better feed. I deliberately used the term "handing out public money" because I was comparing it with the total pool of money raised in taxation. In the mining areas in my constituency are elderly ladies, old-age pensioners, who, if they earn for additional hard work more than a certain limited disregard, immediately pay tax. They will have to make up some of the money handed back to those earning £50,000 a year. If that is not a handout, nothing ever will be.
      So, before we get to high-flown subjects like economic strategy, we must

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      establish what we are really about. There is no relevance to our economic situation in the proposals made in the amendments. The Tories judge that the time is ripe to put them forward with the chance of carrying them so as to reward their political and financial paymasters. They would not have that chance but for the Liberal Party and, in some cases, the smaller parties aiding and abetting them.
      The whole political strategy of the Cabinet is coming to grief here. All the concessions that we have been asked to make, all the long hours that we have spent passing legislation to please this group or that, are coming to nothing. When the test comes, they all join the other side. Because of this politcal constellation the Tory Party has judged it right to bring forward these selfish amendments.
      There is an argument about economic strategy, however, which can be applied to our tax system. I agree with my hon. Friend the Member for Fife, Central (Mr. Hamilton) that the system needs root-and-branch reform, but this proposal has nothing to do with that. It is intended to hand out money to small sections of the population. Other considerations apply to root-and-branch reform.
      We can see the extreme childishness of the hon. Member for Cornwall, North, who poses as economic spokesman for his party. He has argued that these incentives will mean a decisive change in our economic position. What nonsense. Half way through his argument, the hon. Member proved conclusively that he knows nothing about employers and industry. He drew himself up to his full height and said arrogantly—I choose my words carefully—"I am inspired by interest in my job and by job satisfaction." The implication of that statement is that all the employers in my constituency and elsewhere have no interest in their jobs and are inspired by no concern for their industry's prosperity and Britain's future.
      The hon. Member, apparently, is the only man who has job satisfaction and works for more than monetary considerations. Everybody in industry is completely below that level. They have to be fed with financial gain if they are to be inspired at all.
      What nonsense. I do not claim extensive knowledge of our employers and our
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      industrial management, though there are hon. Members who do, but even with the limited knowledge that I have acquired in the years during which I have represented an industrial area I know that it is a travesty of the truth to talk in that way about the people who are responsible for running many of our industries.
      Those people have their weaknesses, but the majority are at least as concerned with the future, the running of their industries, the technology involved, building up their businesses or—if they belong to a publicly-owned industry—their responsibility to the nation and their industry as they are with their immediate monetary income. To say anything else is complete nonsense. To build a taxation system on such a travesty of the truth is bound to lead to disaster.
      7.15 p.m.
      But away from all this nonsense—[HON. MEMBERS: "Hear, hear."] Tory Members are right to cheer, because they have been sitting through the same nonsense, for the same year, that I have. Tonight they will benefit from the support of the Liberal Party. They cannot shrug it off.
      The arguments of the right hon. and learned Member for Surrey, East (Sir G. Howe) were no better than those of the hon. Member for Cornwall, North. He has put forward the same argument on radio and television; it is a recurrent theme of his. He talked of the decline of Britain's culture as a result of taxation. I thought that we would hear about the decline of the novel. I thought, listening to the right hon. and learned Gentleman, that everyone was leaving Stratford, no new play was opening in London, no poetry was being published. I thought that the ballet had closed down and the opera had come to an end.
      Not one of those sections of our cultural life was taken in view by the right hon. and learned Gentleman. He was referring to an entirely different tradition. He was talking about Elton John. He had in mind none of these other flowers of our cultural life. What concerned him was that all the pop stars were leaving the country. Some hon. Members would no doubt wish that that were true, but it is not. However, those are the people that the right hon. and learned Gentleman has in mind.

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      I am not being unfair to the right hon. and learned Gentleman, because this is not the first time that he has used that argument. One might have thought that his speech today was a natural lapse, but not at all: these are the horizons of the right hon. and learned Gentleman. He regards it as the main indictment of our taxation system that some of these people should announce—as they often arrogantly do—that they have to live in Switzerland or the Canary Islands or somewhere else.
      Anyone who wants to build a taxation system on the attitudes of our pop stars is far from giving serious consideration to economic strategy. The kind of contribution that they make to our manufacturing industry is very limited, even as cheer leaders. No serious argument is being proposed today, because the purpose of the amendments is shoddy. One cannot build a serious case on a shoddy foundation.
      So the Chancellor has nothing to be afraid of. Perhaps he will ward off the assault and the amendments will be defeated, but I can say honestly, speaking entirely for myself, that although I hope that we shall defeat them—because they are inequitable, unjustified and immoral—if by chance they are carried, I shall not fear going out tomorrow into the highways and byways to tell the people what has been done today. I shall tell them how a small group of financiers and rentiers, people who are already earning too much, will have been benefited by the Tory Opposition and their allies at the expense of the people at large. Let the country judge.
      Mr. Tim Renton: The hon. Member for Penistone (Mr. Mendelson) never lets himself down. He drips egalitarian class hatred with all the pleasure and ease with which the rest of us mix milk with our breakfast cereal. He talks of us distributing vast sums to a few extremely selfish people and about how a small group of financiers will benefit tonight. The clichés drip off his tongue. When I listen to him, I realise why Britain is in such a mess, why our industrial production is still lower than it was during the three-day working week and why so many intelligent young men and women are leaving these shores to work elsewhere.
      The hon. Member talked of wealthy members of our society as though they
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      should be ashamed to be wealthy. In his Britain, there should be no Sieffs, no Leverhulmes, no Kleinworts—with all the wealth that those families made certainly, but with all that they then gave to charity and all the employment that they created.
      I wish to tell the Committee of a visit I made to a company in Norwich yesterday morning. I am a director of that company. Already the hon. Gentleman can start to be worried about that. I must tell him that I am a non-executive director. That company, which supplies products to the building industry, was started by one man 12 years ago. He started with only 10 employees in a building on Norwich airport, and he paid his rent to the Norwich local authority. He now employs between 700 and 800 people. He is one of the most successful business people in Norwich. He is planning and hoping to build a new factory in Norwich, which is not an area of high employment or an area of industrial growth. With 700 or 800 people directly working for him, I estimate that there are now between 2,500 and 3,000 people, including wives and children, who are directly dependent on that man for jobs and livelihood. It is the imagination and hard work of that man which have created that company. He still owns 75 per cent. of it, and it is his life.
      I went round the factory with that gentleman yesterday and he spoke of the new plant he hopes to build. He is, thank goodness, doing extremely well at the moment, but he said to me "What is the point of my going on?" That man earns—let the hon. Member for Penistone note this, because I have no shame in telling him—£30,000 a year before tax. He pays 83 per cent. on a large part of his earned income and 98 per cent. on his savings. Therefore, he has every reason to say to me "What is the point of my going on creating more jobs"—which is what he has done in Norwich—" and helping to build up employment in an area where there is not much employment when that amount of money is being taken from me in tax?"
      Mr. Alexander W. Lyon rose—
      Mr. Renton: I am sorry, but I cannot give way to the hon. Gentleman. Many other hon. Members wish to take part in this debate, and I shall not be long.

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      The last thing that man wants to do is emigrate. His heart is in this country, he loves it and he loves his business.
      I was remined, knowing that we were to debate this amendment, of the words of the Chancellor of the Exchequer who not long ago said that small companies were the seed bed for new techniques and new ideas. The hon. Member for Penistone, the hon. Member for Bristol, North-West (Mr. Thomas), the hon. Member for Ormskirk (Mr. Kilroy-Silk) and all the other Left-wing revolutionaries who have spoken this afternoon should remember that in those seed beds somebody has to sow the seed.
      Who is it to be? There has to be an entrepreneur to do it. There has to be one man who gives his all in time and effort to get the company going. Those people need motivation. They are not there just for the beer. They are proud of what they are creating, but as part of that pride they need to see that they are getting more earned income than others and that they are building up possessions for themselves, because without that motivation they will not do it. They will not grow and they will not start the new companies.
      That is the prospect that lies ahead of the man whose factory I visited yesterday. His view is "What is the purpose of my going on? I might just as well sell up and let a large company take on my business. I shall obtain a good deal of capital, because I have built up the business in the last 12 years, and then I shall go away. I shall emigrate or go to the Channel Islands, where the tax rate is 15 per cent. and where I shall coast along for the remaining 15 years of my life." He does not want to take that step, but why on earth should he not take it when he is taxed at a rate of 83 per cent? That man, who is a job creator, must have his incentive too.
      When such people were mentioned this afternoon, Labour Members muttered "Traitor" when there was talk of their emigrating. They are not traitors. They do not have to be sado-masochists and stay here to enjoy paying 83 per cent. in tax to a Labour Chancellor of the Exchequer when they can sell up, live in the Channel Islands and pay tax of only 15 per cent. It is human nature that such people require motivation.
      Mr. Powell: What do they do in the Channel Islands?
      Mr. Renton: I agree with the right hon. Gentleman. I have been to the Channel Islands once and I regard it as an extremely boring place. Most of the people about whom I am speaking would very much rather stay here, but to stay here they must be given incentive. That is the motive behind our amendment.
      Mr. John Mendelson: It makes one cry.
      Mr. Renton: It should make the hon. Gentleman cry. He shows a total ignorance of the situation if he does not realise the reasons why so many people are leaving Great Britain.
      The hon. Member for Fife, Central (Mr. Hamilton), in a speech that was in part reasonable—a "curate's egg" of a speech—said that income was not the only motivation. Of course the hon. Gentleman is right. But no doubt he will have seen a recent ICI report stating that the productivity of ICI labour in British plants was only half that of ICI labour in its foreign plants. It went on to talk of the demoralisation of its own top management. "Demoralisation" is a strong word but it is a good catch-all phrase. That demoralisation stems from two things. One is the sorrow of top management when they see the militants' love of interrupting production at the smallest excuse. Most top managements want to see their plants working well and output targets being beaten. They are horrified when all their men walk out of the plant, stirred up by militants, for some trivial reason.
      The second reason for demoralisation is the very high level of tax on top managements' earned income. If a man is paying tax at 83p or 80p in the £, there comes a moment when a man must say to himself "Why go on, why flog myself to death? Why work on Sundays when I might as well relax, play golf and take life a little bit easier?" Because the necessary incentive is lacking, our industrial production has fallen and the stimulus to get going again does not exist.
      The Minister of State, in an appalling speech, sounded like a young Scrooge with a Welsh voice, and it was very unpleasant to hear him. He looked with horror on the fact that our amendments would help those on unearned incomes as well. I

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      wish to remind him that in Canada, where there is not a Conservative Government but a Liberal Government, if one's sole income is from dividends—unearned income—one can receive $32,000 of dividend income without paying any individual income tax whatever. That is about £17,000 of dividend income which does not attract any individual income tax. The reason is that the authorities in Canada realise the necessity of investing in industry and appreciate that individuals will do that only if they are encouraged to do so by tax relief.
      The Minister of State said earlier that only a Tory Party can propose these changes. How right he is. It is for precisely that reason that only the Tories will get small businesses going. Only we will restore incentives to those who, through their ingenuity and hard work, have the capacity to create new employment while creating some wealth for themselves.
      7.30 p.m.
      Mrs. Audrey Wise: We on the Labour Benches have been told over and over again by Opposition Members that what we are about is the politics of envy and a taxation system based on envy. If we are exchanging this sort of pleasantry, our answer is very simple. What the Opposition are about is the politics of greed.
      When the right hon. and learned Member for Surrey, East (Sir G. Howe) talked about wanting to widen the gap between the rich and the poor, I wished that what he said could be put on placards all over the country. I hope that the debate is being broadcast. It would be great if that went out to the country as a message from the Conservative Party: "Widen the gap between the rich and the poor."
      We heard nothing about social justice or anything like that. We heard only about sheer greed. "To him who hath shall be given". That is the Tory creed. I suggest all Conservative Members say that over and over again and let the nation hear it. We could not do the job of exposing them half as well.
      The Conservatives' priorities were very well illustrated by my right hon. Friend the Minister of State, Treasury, who pointed out that to a married man with
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      children and an income of £50 a week the Conservatives on Monday, with their great generosity, gave an additional 2p a week.
      Where I come from, there is a habit of saying of a woman "She's a good manager." It means that she can make the money go a long way. It is quite a compliment to a working-class woman to be called a good manager. Such women have had lots of practice. That has now become known to the Opposition. They realise that among working-class women there are these paragons who are such good managers that given 2p a week they will make it go a long way.
      The hon. Member for Croydon, South (Mr. Clark) showed us the other side of the coin on Monday. He said:
      "We must remember that it is the £7,000-a-year man or the £8,000-a-year woman who will receive the £50 extra reduction, and they will find it infinitesimal."—[Official Report. 8th May 1978; Vol. 949, c. 863.]
      If one has £7,000 or £8,000 taxable income—not even gross income—£50 is infinitesimal, but one must be grateful for 2p a week if all one has is £50 a week. That is the Conservative creed, that is their yardstick, that is the arithmetic that they understand very well. I am very grateful to Opposition Members for spelling it out so clearly so that the population can understand it.
      I should have thought that if it was not very important to have £50 extra, the sensible thing to do was to give that extra £50 to those who would notice it, to those who need it. It is astonishing to me that Conservative Members have the brass face to get up in the House of Commons, which has some representatives of the workers, and expose themselves in this way.
      The Opposition have an excuse that they put forward. They say that the matter is all about the wealth producers, the people who will not work to the best of their ability unless they are not just given cream and candy but are stuffed with it, as geese are stuffed with food to make pâtéde foie gras. That is what has to happen to such people, using money instead as the only thing that will cause them to give of ther best, never mind the country or their own self-respect. They apparently do not understand arguments such as self-respect and

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      doing one's best. They simply have to be stuffed with money.
      I believe that wealth production is done in a rather different way. The people who are at the heart of the economy in the society that I look at are different people. I believe that it is ordinary workers who produce the country's wealth.
      Even if we accepted the Opposition's description of the mainspring of the economy, even if we accepted that after all it is the manager who is the vital person, the Opposition are not basing their claims on facts. I recommend them to study the "New Earnings Survey" 1977, which is a very interesting document. One finds in it such gems as the fact that 86·3 per cent. of managers engaged in general management earned less than £10,000 a year. It is only the people who earn more than £10,000 a year who will benefit from tonight's exercise, so 86·3 per cent. of managers will not benefit from these proposals.
      If we look at the category
      "Managerial excluding general management",
      we find that 99 per cent. will not benefit. If we look at those under the heading
      "Professional and related in science, engineering, technology and similar fields"
      we find that 98·8 per cent. will not benefit because they earn less than £10,000 a year.
      Who will benefit? It will be a very tiny minority. I would fear for the state of this country if I thought that all our fates depended on that tiny minority. But, of course, this is not true. If the hospital porters, the miners or such people stop work, we all know about it straight away. Matters of life and death hang on it. The whole running of the country hangs on it. But I suggest that we do not suffer very much from the loss of the people on the right hon. and learned Gentleman's list.
      It is a very tiny minority in Britain as a whole, but I remind the right hon. Member for Down, South (Mr. Powell) that it is an even smaller minority in Northern Ireland. I pointed out on Second Reading, but I hone that I shall be forgiven for mentioning it again because it is a significant fact and not too well known, that in the whole of Northern
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      Ireland there are only 4,500 incomes—declared incomes, at any rate—of over £10,000 a year. That is even taking husband and wife jointly.
      Therefore, I think we can take it pretty well for granted that the right hon. Gentleman will not be supporting these amendments in the Lobby. I think we can take it that he will be endeavouring to do his duty for the majority in Northern Ireland and not that tiny minority. If he and his colleagues choose to go into the Lobby in support of the amendments, I hope that he has some good answers to give to everyone in Northern Ireland who is not among the 4,500. I hope that he will be asked some questions.
      This is the most shameful group of amendments from the Opposition that one could possibly imagine. I want to refer briefly to the other side of the picture. The group also contains amendments which go in the opposite direction. The more I have heard from the Opposition, the more I have felt that we were correct to table amendments pointing out that my right hon. Friend the Chancellor of the Exchequer has already been too generous to those in the high brackets.
      I believe that it has been a mistake to give way to any degree to the cries from the Opposition for relief for those on enormous incomes. We see what happens. It is a classic case of "Give them an inch and they want a mile." By this we feed their assertions that it is only by tax relief at the top end that there can be any justice—which is the opposite of the truth.
      I believe that it is quite wrong to give any tax concessions to those on high incomes without first having achieved a level of public spending which will ensure a decent National Health Service, and without having achieved also a taxation system which means that nobody on levels of income around the supplementary benefit mark will pay tax. As long as we have anybody on such low incomes paying tax, and as long as we have anybody getting money from the State with one hand through family income supplement and handing it back with the other through tax, it is nonsense to make any concession whatever at the top end of the scale.

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      That is why I shall support my hon. Friend the Member for Bristol, North-West (Mr. Thomas) if he presses his amendment to a Division. That is why I should like the opportunity of pressing my own amendment to a Division, if necessary. My amendment is a good deal more modest and moderate than that of my hon. Friend. He wants to keep things as they are. If that does not succeed, I am even prepared, at a pinch, reluctantly to concede something, but not at levels of income such as £15,000, £20,000 and £23,000. This is quite wrong.
      I hope that we shall defeat the attempts of the Opposition tonight. If we do not, I think that they will come to rue their victory, because they will have handed us the very best arguments ever to show them in their true colours.
      Mr. Stokes: After four hours of debate I shall not speak at length—unlike some hon. Members this afternoon. I do not know whether I have learnt a great deal from listening to the debate, but I have certainly learnt a lot about the Labour Party and how it still seems to be dominated by the ghost of the class war, which most nations forgot years and years ago.
      Members on the Government side seem to have been almost wholly concerned with Socialism and egalitarianism and not with the state of the nation. Anyone would think that we were speaking at a time of great prosperity, when the only problem facing the nation was to hand out the wealth, but, alas, that is not our situation.
      Labour Members have ignored our low productivity, which is as low now as in 1974, our low earnings and our falling standard of living. We now have a standard of living that is half that of our old enemy, Germany. I cannot see, therefore, how either the speeches of Labour Members or their amendments to increase taxes can in any way help to restore the economy of this once great nation.
      I have not time to comment on all the speeches I have heard, but I will say this to the hon. Member for Fife, Central (Mr. Hamilton). He gave us a list of the popularity stakes, but I noticed that he omitted both His Royal Highness the Prince of Wales and himself. If a comparison were
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      to be made of the worth to the nation of those two people, I think I know where most of the votes would go. Certainly the Prince gives us value for money and is worth every penny.
      For months before the Budget, the Prime Minister, the Chancellor of the Exchequer and other members of the Government were constantly speaking of the need to lessen the tax burden on middle management. The Minister of State—an admirable young man of great gifts whom I personally like—seemed somewhat diffident about industry and who the middle managers were. I hope that when he ceases to be a Minister he will perhaps have time in which to learn much more about industry, which alone creates wealth in this country.
      Mr. Rooker: The hon. Gentleman is an expert.
      Mr. Stokes: I am not an expert. I have only had 30 years in industry and commerce and in personnel work dealing largely with executives and managerial staff.
      7.45 p.m.
      The taxable salary band of £7,000 to £8,000, of course, includes thousands of people whom we call middle managers, and in many ways they have suffered more than any other category of person. They do not, on the whole, take very much from the State. Usually they do not live in council houses. They do not draw benefits from the State. They often try to educate their children privately. They certainly amass savings and they are, as we all know, a vital prop in the State.
      Incomes policies over recent years have borne down hardly upon those people and held their salaries back. They do not protest—in other countries they would be marching on the streets—yet they have great responsibility. I am thinking particularly of the scores and scores of works and factories in my constituency where so much depends on the works managers and the production managers, who are playing an absolutely vital part in our economy today.
      Mr. Rooker: Will the hon. Gentleman give way?
      Mr. Stokes: No. The hon. Gentleman's constituency is near to mine and

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      he knows that I am talking of what really matters.
      If production is to be lifted off the ground, where it has lain for four years, those responsible for managing production and handling the work force must have more reward. We have heard today that many are forced to go and work abroad. Many more whom I know personally would like to do so if family and other circumstances permitted. These middle managers are grossly overtaxed and underpaid in comparison with their opposite numbers in Europe.
      I say that the Government, in spite of paying lip service to reducing the tax burdens on those in middle management, care nothing for them and know nothing whatever about them or their responsibilities or the important part they play in our vital life. We know why that is. This category of people simply does not have enough votes in the aggregate to appeal to the Government. It is a minority. Somebody said that there may be 850,000 such people. The injustice of their case must be put right, not only for the sake of the people concerned but for the future well-being of the nation.
      Including even the war years, I have never known national morale—morale in factories, morale in business and morale everywhere—to be lower than it is today. We have to ask ourselves why our old allies and ex-enemies in Europe have made such a better go of it than we have. I know that the answer is not to be found in fiscal incentives alone. Of course, we need a better lead, more inspiration and greater patriotism, but we must also have more financial incentives if we are to reduce unemployment, which is such a concern of Labour Members, and if once again we are to start to get this country on the way to its former greatness.
      Mr. Alexander W. Lyon: With his usual intelligence and insight, the hon. Member for Halesowen and Stourbridge (Mr. Stokes) pointed to the heart of the discussion that we are having today in saying that we are in a situation in which there is very little growth.
      If the wealth of the nation were being expanded rapidly and we were talking about the way in which we would share that expanded wealth, I could understand the intensity of the fever that has gene-
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      rated the call for this kind of amendment. But we are not, The parties that are associated with the proposal to pass these amendments accept that the Government have given away, in £2·5 billion, as much as they could conceivably have done in order to generate new wealth and to stimulate growth. Indeed, the City rather thought that the Government had given away too much, and it was concerned about the increase in the borrowing requirement that might be generated by what had already been done.
      The parties that are subscribers to the amendment accept that if we are to give away another £380 million of taxpayers' money it will have to be found somewhere else. It will not come out of new wealth. It will be a redistribution of the tax burden between one taxpayer and another, or it will be a reduction in the standard of services provided by public expenditure.
      We on the Labour Benches continually say that the House of Commons—and the Tory Party most of all—really has to learn that the standard of living that many of our people enjoy is heavily dependent on public expenditure. If we cut public expenditure we also cut their standard of living. I say "their", but I really ought to say "our", because there is no one in this country who is not to some extent dependent upon public expenditure.
      If, therefore, the Tory Party is suggesting that this £380 million should be paid for by a reduction in public expenditure, it will be at the cost of someone else's standard of living. Because the standard of living is disproportionately dependent upon public expenditure at the lower end of the scale, the likelihood is that this will come from the poorer members of our society. The Liberals say that they will not have that. We have heard the great radical from Cornwall, North (Mr. Pardoe). If the Liberals will not have that, it means placing the burden, through an increase in VAT, on all those who purchase goods on which VAT is charged. That means that the people for whom VAT is a signficant section of their expenditure—again, this is the poorer end of the population—will have to pay more.
      The hon. Member for Cornwall, North goes on radio and television protesting that he wants to allow people to choose what they spend and to decide whether they will drink themselves to death or smoke themselves to death. He thinks

      1275
      that it would be better if they did less. But if they did less they would frustrate the whole object of the hon. Gentleman's tax strategy. What he is saying is that the tax must come from VAT. Therefore, if we reduce consumption of those items on which VAT is charged, we reduce the tax yield. No Chancellor of the Exchequer ever increases VAT or, indeed, specific taxes to a rate at which consumption falls by more than he would gain by an increase in taxation. That is the very essence of Treasury strategy. Therefore, raising VAT or specific taxes will not reduce the price of luxuries. It is precisely because the increase goes on that part of VAT where the items must be bought that we produce a tax yield to pay for the £380 million which in this case will be given to higher income earners.
      What we are talking about is not giving something to one section of the population that will not cost anything to any other section of the community. We are only redistributing the burden, having accepted that we have already given away as much as we can this year. That is what the argument is about.
      In those circumstances I urge Conservative Members to reconsider their suggestions that we are engaged in class warfare, or that we are generating envy by questioning whether they are making the right judgment tonight. Far from it. It is they who have precipitated this change in priority. In doing so they have shown where their priority lies.
      On a number of occasions my hon. Friends have pointed out that this group of amendments will affect 0·8 per cent. of the working population—no more than 200,000. It will cost about £380 million. Therefore, the average for each taxpayer who would benefit from this group of amendments is about £1,500. But the people at the ton end of the scale would get substantially more. By what they did on Monday, the Tories can at least claim that the average worker gets £7·50 a year. One group will get £7·50 a year, yet another will get an average of £1,500.
      It does not need any class warrior brought up on Karl Marx to ask in the factory "For whom are these amendments designed?" It does not require us to stir up any degree of class envy. We
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      need only the average reader of The Sun to be able to understand the difference between £1,500 and £7·50. I can understand that Conservative Members, particularly people like the hon. Member for Halesowen and Stourbridge, might, in a period of expanding wealth, feel that one of the sections of the community that ought to get more of its take-home pay comprises people in the highest level of management. But we are not in that situation; we are in a situation in which we have nothing more to give, but what is being asked is that there should be a redistribution.
      In a situation like that it is no wonder that the kind of attitudes generated in the 1930s should be generated again. It is not we who are making the argument; Conservative Members are doing so. What are we talking about? We are talking about taxable income at £7,000 a year, which means gross earnings of at least £10,000 a year. In those terms we are talking about only 0·8 per cent. of the total population. In the non-manual sector we are talking about less than 2 per cent. of the total population. Conservative Members have talked about middle management, but we are not even in the range of middle management, as I understand it. We are not talking about people on less than £10,000 a year—and, by and large, middle management earns less than £10,000 a year. I am told that unless we make this concession we cannot have the kind of incentive that will generate growth, because these people are the risk takers, the men of initiative, and the people who create wealth.
      First of all I ask myself whether it is right that most people actually reduce the amount of work that they put into their jobs because they pay a higher rate of tax. The hon. Member for Mid-Sussex (Mr. Renton) gave a heart-rending account of a man who started a business 12 years ago and who was asking only yesterday "How can I go on?" In those 12 years that man has built up the business from nothing and is now getting £30,000 a year. In all those 12 years he has never paid anything less than 75 per cent. at the margin and has never paid much less than 90 per cent. in terms of tax on unearned income. Yet he has gone on building up that firm. He has gone on working the way he has, not because of the rate of money he was

      1277
      getting out of it but because of the job satisfaction that he was getting out of it. Of course, he grouses about the rate of tax. Of course we hear that constantly, but the fact is that very few people make a decision about the input that they put into the jobs they are doing simply on the basis of tax.
      It may be that they do not go for another kind of job. It may be that they do not take on an extra directorship. It may be that they do not take on extra commitments. But that is a quite different matter from saying that they do not put into the job they are doing the kind of incentive and effort that will create new wealth for this country.
      The truth is, if we look back over the last 15 years, that when we talk about increasing wealth we are talking about increased investment in industry. Year in year out—no matter what the tax liability, the incentives to investment or the stake given to those who have wealth to put their money into industry—the fact is that investment in industry in Britain has remained at about 4 per cent. or 5 per cent. of GNP. It has been no greater and no less throughout the whole period.
      Investment in industry goes up and down with the rates of growth. It is in no way related to levels of taxation or to levels of incentive for investment. Therefore, it is simply untrue to say that unless we give back this kind of money we shall reduce our capacity to grow. We may be losing the odd pop star, but we are not losing the real incentives for work in the areas where it matters.
      Even though we need those who have special skills, special ideas and initiative, I question whether the real wealth comes from those qualities alone. For example, it is suggested that British Leyland needs another director, who will be paid a substantial sum to put it on its feet. That suggestion questions the whole basis of a massive organisation of that sort, which depends upon the skill of all its workers.
      The truth is that we require initiative from every level of worker. That initiative is called forth not by tax cuts but by a sense of the virtue of working for the sort of society in which we are now living. The tax that we pay and our
      1278
      gross level of earnings are part of that society. Even more important is our quality of life.
      8.0 p.m.
      The hon. Member for Mid-Sussex gave the game away when he said that he would not live in Jersey. He would no do so, even though the rates of tax prevailing in Jersey are substantially lower than they are here. Why does he choose not to live in Jersey? It is because the society that he would get in Jersey is not the sort that is attractive to him. If he lived in Jersey, the quality of life would not be the sort that he wants. That is why we live in this society, and part of our society is the public services that we have created by means of the Welfare State since the war.
      It may be that in America and some other countries the rates of tax are lower than in Britain, but public services have to be paid for out of taxation. If we want good public services, we want the higher taxation that pays for them. Such services give the quality of life that we should be enjoying, and that should provide an incentive for us to work harder.
      If the amendments were tabled at a time when the rate of growth was regularly 3 per cent., 4 per cent. or 5 per cent., it might be appropriate to reconsider the levels of tax at a higher level of earnings. However, to bring the amendments before the Committee now, when we would be taking the money not out of new wealth but from other pockets of those who are poorer than those who would be affected by the amendments,is a disgrace. It is a disgrace that the Opposition parties should be ganging together to obtain concessions for a limited number of their friends.
      Mr. Rooker: I intervene only briefly. I apologise to the Committee for being absent for the latter part of the debate. However, I listened to most of the early speeches and to some of the later ones.
      This is a black day for the House of Commons. It is a black day for the Liberal Party. It is a black day in the sense that we have spent the whole of the day so far discussing the inadequate returns of those who by common consent are earning in excess of £200 a week. In reality, only those earning in excess of £300 a week will gain anything substantial or meaningful from the amendments, if

      1279
      they are accepted. That is the part of the working population that we are talking about.
      The arguments put forward by the official Opposition are disgraceful. Indeed, the hon. Member for Plymouth, Sutton (Mr. Clark), who had not heard the speech of his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), said that matters had come to a sorry pass when the House of Commons spends a day discussing the financial affairs of the nation and its financial management and we have to start relating those topics to the recording industry and pop stars.
      The hon. Gentleman was responding to an intervention made by the Liberal spokesman, the hon. Member for Cornwall, North (Mr. Pardoe). He had not heard the speech made earlier by the right hon. and learned Member for Surrey, East, who devoted a good quarter of an hour of his speech to a eulogy of those non-patriots who have taken off from these shores. There was no mention of those who have stayed here. The right hon. and learned Gentleman had a short list and he could not name one person on it who would come back if the tax rates were reduced. Indeed, he had the good sense to disappear for the latter part of the day.
      The debate has shown more than anything else—in this respect I am grateful for it—that the tax system is a social security system for the rich. It is as much a social security system for them, in the sense that it is a handout from the State, as the real social security system is to those who are disadvantaged, such as the deprived, the disabled, the unemployed and the sick. It is as much a benefit to the one section as it is to the other. However, the scale of benefit for the rich is substantially greater. There are fewer at the top end, and the spoils over which we are fighting are for them much greater.
      This is the sort of debate to which the broadcasting authorities could have devoted a full period of VHF to enable the public to listen to the speeches. I refer not to the speeches of my hon. Friends and myself but to those of Conservative Members. Not much of an argument need be advanced in opposing
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      the amendment. The argument has come out of the mouths of the Liberal Party and the Tory Party. I missed the contribution from the Scottish National Party, and we have not yet heard from the Ulster Unionists. The Tories and the Liberals are condemned out of their own mouths.
      It has not been explained how the amendments are to be paid for. In the first few minutes of his speech, the right hon. and learned Member for Surrey, East showed that he had his sums wrong. It seems that the Tories had been basing their argument on the answer given on Monday to the hon. Member for Blaby (Mr. Lawson). However, they could not grub up enough specific areas where they could say "The money could be raised in this area." We heard the hoary old arguments about jacking up prices and cutting public expenditure. The threats implicit in cutting public expenditure have been admirably set out by my hon. Friend the Member for York (Mr. Lyon). The examples that we have had have not been specific enough in the sense that the public can take on board the realities. We have heard examples of those on £50,000 a year, which is £1,000 a week. As I have said, it is difficult for my constituents to envisage anybody earning, as opposed to making £1,000 a week. It is beyond their comprehension. As such, arguments about high tax rates do not seem to be meaningful to them.
      It has been said that only those earning £10,000 a year will benefit from the Amendments. That is not strictly true. The borderline is about £9,500 a year, or £190 a week. Those with earnings at that level will start to benefit. Their benefit from the amendments would be about £70 a year, which, coupled with the amendment which was passed on Monday, would give them £133 a year. That will be the benefit to the person on £190 a week. Of course, that is chicken-feed to anyone earning that much money. However, we are at only the margin of the effect of the amendments.
      It is important to make clear—I am sorry that my right hon. Friends on the Government Front Bench have not aired the point so far—the increase in earnings that would be required to have the same effect as the tax cuts that the amendments propose. The increase equivalent to the tax deductions for the person on £9,500 a year, who will be getting an extra £133

      1281
      a year in his pocket as a result of tax deductions, would be about £200 to £210 in gross pay. That is the equivalent of a rise of about £4 a week. The person on £190 a week has already had from the Government an extra £186 per year put into his pocket, which is roughly equivalent to a pay rise of about £250 a year, about £5 a week.
      If the amendments are carried in their entirety, the person on £9,500 will have had from the Budget or Finance Bill the equivalent of a pay rise of £9 a week. My constituents will consider that to be an enormous increase. In addition, he will receive an increase of 10 per cent. on his salary. Those figures will sound enormous to my constituents, but we are still at only the margins of the amendments. It is necessary to move up the scale to see the real effect of the amendments and the benefit that will be enjoyed by those for whom the Tory Party is speaking.
      I do not want to start calling people names. However, I think that my hon. Friend the Member for Penistone (Mr. Mendelson) was correct in his analysis of the motives and the underlying trend of the speech of the right hon. and learned Member for Surrey, East. If there is anything to prove that the Tory Party has been bought by the rich, it is the amendments. Tory Members have not been bought by their constituents. The Tories have said that there are no votes in the amendments; the overwhelming majority of people will not be affected by them. That has been agreed by those on both sides of the Chamber. However, it is clear that there are those on the Opposition Benches who have been bought. I say that in its widest sense. I make no accusations about the CBI offering things and others saying that there are a few parliamentary agencies or directorships spare and that if they got together they could screw the Government and get some benefits. The benefits will go to a select bunch of people.
      I take one example. I do not take the example of the man on £50,000 a year. There are very few people on £50,000 a year. Nevertheless, an increase in take-home pay of £100 a week is a fair example for my right hon. Friend to take. I take the man on the higher rate band—the man on £23,000 a year, on which he starts to pay 83 per cent. That does not
      1282
      take account of his personal allowance of £1,300 or his mortgage or insurance relief. His actual earnings could be £30,000, to give him £23,000 of taxable income. Those in that position know that that is conceivable.
      The Finance Bill, which I support, goes some way to give tax relief to such an individual. The person on £23,000 will pay income tax of £12,730. That is my calculation. I may be a bit out, but, give or take £100 here or there, it will not make much difference to that kind of person.
      At the end of the day, if the amendments are passed, that individual, according to my calculation, will pay only £11,040. His increase is rather more than was suggested by my hon. Friend the Member for Bristol, North-West (Mr. Thomas). His increase will be £1,690. That is approximately £1,700 a year or £34 a week extra in his pocket.
      What kind of salary increase would a person earning that level of money and getting this massive tax handout from the Tories have to obtain to receive the same net increase in take-home pay? It is quite simple. He will get £1,700 if he is at the margin paying 83 per cent. at the top rate. Clearly, the £1,700 is the residual 17 per cent. Therefore, the 83 per cent. which has gone in tax is £8,300. In other words, he needs an increase of £10,000 a year and his taxable income is only £23,000. At the outside, his gross salary would be £30,000, given all the other tax reliefs and handouts at that end of the social security system. On £30,000 a year he is getting the equivalent of a salary increase of £10,000–33 per cent. That is somewhat more than the 10 per cent. Government guideline. What is more, it is inconceivable to explain it to my contituents.
      I wanted to intervene in the speech by the hon. Member for Cornwall, North but he would not let me do so. I wanted to ask a question when he referred to the public opinion survey. When people answer the question by saying "Yes, the better-paid pay too much tax", they are not talking about people earning £30,000 or £50,000 a year. They find it difficult to understand that someone can, do a job that is so important that he should get that amount in the first place.

      1283
      This is quite genuine. I have tried to explain the situation to constituents when they have come to me with their problems. Widows often find that they are heavily taxed on their earnings. I have to explain that widows' pensions are added to earnings and that that is why they seem to be paying a lot of tax.
      I have tried putting the other side of the coin. I have pointed out that some people get a lot more money and still pay only the same percentage on their earnings—perhaps 80 per cent.—but that it is done in a slightly different way. In other words, those at the lower end can pay as a percentage more than those at the top.
      People caught in the poverty trap, as the Meade Report explains, could pay 106 per cent. For every £1 increase in salary, they are 6p a week worse off in their net income. We never hear that from the Opposition. They belly-ache day in, day out in this Chamber, on radio and television about the man who is paying 83 per cent. or, when they want to use the extreme, 98 per cent. They never say—and the interviewers, including Jimmy Young, never ask them—what a person has to earn to pay that amount of tax. They never offer the fact that he has to earn nearly £500 a week before he pays 83 per cent. in the pound. The Opposition never put that point across to the public. What is more, neither do my right hon. and hon. Friends on the Treasury Bench. It always has to come from Labour Back Benchers. It is important that it comes often and that, when it comes, it comes at length.
      8.15 p.m.
      All those dinner-jacketed twits presently walking about this place who want an early Division will have to wait, because more hon. Members want to make speeches. I am glad that the hon. Member for Sutton has returned. I referred to him earlier in nice, not disparaging terms. I hope that he will make a speech before the debate is concluded, because he made some important points in his intervention following the speech by the spokesman for the Liberal Party. I thought that they were important and courageous points for a Tory Member to make.
      We have heard from the Tories today that we have to get the higher rate tax
      1284
      bands moved in line with inflation to keep things where they are. In the 1977 Budget, which did not meet with the wholesale approval of Labour Members, the percentage change in the threshold at the higher-rate bands was somewhat greater than at the lower-rate bands. My right hon. Friend has changed that situation this year. I again put on record the fact that my right hon. and hon. Friends have listened to the Labour movement and to Labour Members of Parliament.
      It is worth putting on record that last year, for those with a taxable income of, say, £10,000 and paying 60 per cent. tax, the threshold was raised by 18 per cent. For those in the next band—£10,000 to £12,000 taxable income, paying 65 per cent.—the threshold was raised by 20 per cent. At the margin, £6,500 to £7,500 the threshold was raised 23 per cent. That was more than the inflation level of 1977 and more in percentage terms than the increase in personal allowances for the lower-paid. We have that again this year, although not to the same extent. But still the Tories belly-ache about it.
      I sought to intervene in the speech by the hon. Member for Halesowen and Stourbridge (Mr. Stokes), who has left the Chamber, but he politely refused to give way. I wanted to ask him how many production and works managers in the West Midlands—the two examples that he gave—are earning more than £10,000. It is accepted that that is the minimum from which we start. At that level it is chicken-feed. It will not make an iota of difference, because they do not get paid overtime, whether they put in more or less effort. I asked how many. There are not many.
      One of the problems in manufacturing industry is that those at the sharp end of management, those running factories, working and creating wealth, are more lowly paid than the salesmen, the accountants, the lawyers and so on. I admit an interest as a former production engineer and, indeed, a former production manager. When moving, creating or setting up new factories, it never crossed my mind that I was being screwed. I thought that I was making a social contribution through income tax to the social wage of the disadvantaged. I deeply resent that the Tories, aided by the Liberals and others, wish to ensure that the social wage for the disadvantaged is actually

      1285
      paid by the disadvantaged. That is the effect of the amendments.
      The money has to come from somewhere. We cannot afford £300 million one day and £300 million the next over and above the Chancellor's figures. I make that point again because it needs to be put on record. Last year the change was within what the Chancellor said he had available. My hon. Friends and I were not seeking to increase the total amount given away in tax reliefs. But these amendments—both Monday's and today's—are to increase those amounts. There is £750 million involved.
      The average general hospital costs, I think, about £40 million. We could have quite a large hospital for £40 million. It is easy to see how many hospitals we could get for nearly £800 million. We need more public expenditure. At Social Services Question Time, my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) was arguing for more public expenditure on behalf of his constituents, and other hon. Members do the same. I understand that the same case was made to Ministers at the Department of the Environment today.
      I think that this is a black day, and I am sorry that the House of Commons has spent so long on these amendments. But our debate will give my hon. Friends and myself some very useful and effective propaganda when the next General Election comes—when the call comes, as the Prime Minister put it yesterday. It will be wonderful propaganda. The Opposition have condemned themselves out of their own mouths. They have condemned themselves as being opposed to the vast majority of working people in this country.
      The Opposition make their specious claim to be in favour of skilled craftsmen, but skilled craftsmen will not benefit one iota from their amendments today, just they will not benefit one iota from Monday's changes, as I pointed out then. Monday's changes give maximum benefit at £170 a week and there are not many skilled craftsmen on £170 a week, even with overtime. Today's changes start at about £190, but they begin to be really effective at about £300 a week.
      Thus, we can see the sort of people who will benefit. They must have very large pockets, because they have the
      1286
      whole of the Tory Party in their pockets. They must have purchased every man-jack of the Tory Party, lock stock and barrel, so that the Opposition would have the effrontery and nerve to put forward these amendments, knowing full well that, with the Liberals, they might be carried.
      This is financial irresponsibility of the most stupid kind that we have seen in the past four years, or, rather, in the past six years, in fact, as the Chancellor said yesterday, since probably nothing can surpass the financial irresponsibility of the Tory Party in the years 1972–74. But they are coming very close to that tonight, and it is up to all hon. Members who wish to show themselves as honourable Members to vote against these amendments. There will be no honourable Members in the Aye Lobby tonight. It is up to those who wish to retain that title to ensure that the amendments are defeated.
      Mr. Fernyhough: With 99·9 per cent. of what my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) had to say I entirely agree. It was very much in keeping with what I said over 30 years ago in my non-controversial maiden speech.
      We on the Government side have been accused of being nothing but rabid Socialists. We are called egalitarians, and all sorts of other descriptions have been applied to us. What did I come here for? On what basis have I constantly appealed to the people who sent me here, except on the basis of Socialism, of more egalitarianism? I spell it out to the Opposition.
      I have repeatedly tried to explain to people that the conflict in any democratic society is the eternal conflict between the ever-increasing demand for personal consumption and the ever-increasing demand for collective consumption. There is this dichotomy. People want more in their pockets, but at the same time, as is demonstrated at Question Time after Question Time when hon. Members raise matters on behalf of their constituents, they want more public expenditure as well.
      It is necessary, therefore, that those of us who believe in a high rate of public expenditure should point out that the collective demands which our people make

      1287
      can be met only by sacrifices in personal appetites.
      I ask hon. Members to imagine what would happen if there were a referendum tonight on the question whether the Committee should pass these amendments or should vote for spending the money on reducing the 600,000-long waiting list for hospital beds about which, a fortnight ago last Monday, right hon. Members on the Opposition Front Bench were shedding crocodile tears. I have no doubt what the answer of the British people would be, for they are a fair-minded and compassionate people. At bottom, they hate greed and selfishness.
      What has been put to us this evening, on the other hand, is an appeal to greed and selfishness. The people who would benefit from these amendments are not people on the breadline. They are not the homeless. They are not people who are going without anything that really matters. They have already got plenty. They are not waiting for hospital beds. They are not waiting for council houses.
      I do not envy such people. I was brought up to believe that if one's wants in life are small one is a rich man, and I have been a rich man all my life because of that. Anyone can see my income tax figures. I have them here. I always carry them. I take them out in the pubs and say "Here are my figures. Let me see yours." That is the best argument.
      I am not, therefore, envious of those people, but I am angry with them, or, rather, angry with those who support them. At Question Time or on Supply Days the Government are attacked for not doing enough in this direction or that, and in every case such demands would require more public expenditure. Those who make those attacks, however, then come to this Committee and table amendments that would deny the Chancellor £380 million. I know how right hon. and hon. Members on the Opposition Benches feel. I feel deeply about schools, about homes, and about hospitals, so I do not want the Chancellor to be denied this revenue, since I want more spending in those directions.
      I wonder what the Tory reaction would be if the Chancellor said "All right—I shall make this concession, but I shall take it off the defence budget." He must
      1288
      either reduce his public expenditure or increase his public borrowing. I hope, therefore, that if he has to decrease public expenditure by £380 million, whoever is to wind up for the Opposition will make clear where the saving of £380 million is to come from—unless, of course, the argument is that the Chancellor should again exceed his borrowing limit and go more into debt.
      We are living in what I would call a convulsive time throughout Europe. I believe that we are the most peaceable nation in the whole of Europe. I am one of those who preach day in and day out, to the lads who think that there is some swift way of changing our society, that over the years, because of our national temperament and regard for debate, we have fashioned an instrument by which we can change our society through the ballot box rather than on the barricades, by counting heads rather than by breaking them.
      8.30 p.m.
      It is important that men such as I are listened to by other elements in the country. I tell right hon. and hon. Members on the Opposition Benches that those who want to change our society can do it only by counting heads, not by breaking heads. They can do it only through the ballot box, not through the barricades. If they lose faith in fellows such as I, if they no longer listen to our message, then, however unfair they think this Budget is, Heaven help them if those who are likely to succeed me take over.
      Even at this last minute I ask those who are responsible for the amendments to reconsider their position. They should realise that when we have to explain to the men in the fields, factories and mines that we want them to be responsible and to understand something of the difficulties that the Government face, they will say "Did the Tory Party do that when they were seeking £380 million for those who are already well off?" Unless they can give an answer to that they are unworthy of being Members of the House of Commons.
      Mr. Stanley Newens: I did not intend to intervene in the debate, but I have been sitting here for a considerable time. I listened carefully and I felt that having waited for the vote I could not allow the opportunity to speak to pass by.

      1289
      This afternoon I attended a lobby of a number of industrial civil servants in the House of Commons. They came here to present their case to hon. Members. I regret that no Opposition Members were present. If I am doing anybody an injustice I hasten to withdraw, but when I went to the lobby all the hon. Members present were from this side of the Committee.
      Mr. Peter Rees: For the record, I at least went to see a delegation from my constituency. I am sure that many of my hon. Friends did the same.
      Mr. Newens: I am prepared to accept that many Opposition Members received representations. Some of them may have met deputations from the industrial civil servants. What I say is a fact. When I was there a considerable number of my hon. Friends were present but not one Opposition Member was there. I do not wish to cast aspersions on any hon. Member who may have received a deputation earlier.
      My point is that those who lobbied us today sometimes take home as little as £32 a week. In those circumstances I feel deeply ashamed that we should have spent most of the day discussing how we can redistribute money to the tiniest and most affluent minority in the nation.
      Make no mistake, the object of the Opposition is to transfer wealth from the type of people who came to the House of Commons today to lobby us, and many others in similar circumstances, to those who are earning more than £200 or £300 a week.
      Not only Conservative Members have taken this stand. Members of the Liberal Party are also involved, although they claim to speak for more egalitarianism in our society. If the moneys that will be deducted from the revenue by this amendment had to be raised from other sources, they could be raised only from those whom the Liberal Party says it wishes to help. If the money had to be raised through VAT or the other direct tax bands it would be paid predominantly by those on the lower levels of income.
      The proposal might have some merit if those who support it could argue that it was justified because it would induce people to work harder. The Opposition have referred to business men who, they
      1290
      say, feel that there is no point in going on because of the level of tax. Those business men will certainly not work any harder if the amendment is made tonight. If they worked harder it would be a condemnation of the whole basis of their motivation.
      I have sufficient faith in human beings to believe that they are not solely motivated by greed and the hope of gain. I believe that many of them are motivated by other objectives. I am surprised that the Liberal Party seems to believe that the only possible incentive is hope of gain, which means greed. I can see the hon. Member for Rochdale (Mr. Smith) nodding his head in agreement with that statement. I disagree with him profoundly on this. As my hon. Friend the Member for Fife, Central (Mr. Hamilton) said earlier, we come to work in this place not because we are motivated solely by the desire to gain but because we get job satisfaction.
      I believe that for the most part, our people, including many of the business men cited by the Opposition as examples to support their case, are motivated by job satisfaction and by the desire to do a good job and to do something for their country, as well as hoping to gain.
      In those circumstances the amendment is a disgrace. We should be spending our time considering how we can redistribute income to help people such as the industrial civil servants and those who are disabled and unable to work and enjoy a better standard of living. Like many of my hon. Friends, I hope that the electorate will see the report of this debate and realise where the clear division runs in this House between thoses of us who are Socialists and proud of it and those who support a different system, including the Liberals. I believe that it will be clear that the Opposition side stands for greed and for rewarding those who have the most. I believe that most of the people in this country, if the issue is put clearly to them, will see that the Labour Party stands far more for their interests than the Opposition could ever hope to do.
      Mr. Peter Tapsell: Although it was not obvious from most of the speeches that we have heard from the Government Benches today, there is now a wide understanding in this country

      1291
      that we are burdened with the heaviest weight of direct taxation in the civilised world and that this has been a significant factor in our lamentable economic performance in recent years, our very high level of unemployment, and our poor social services, by comparison with those in most of the other countries in Western Europe.
      The powerful national recognition of these facts was significantly expressed on Monday evening when the Committee, by a decision unprecedented in our fiscal and parliamentary history, voted to reduce the basic rate of income tax. By so doing and by long-established parliamentary convention, it unmistakably declared its lack of confidence in the Chancellor's Budget judgment and in the Government's whole fiscal policy of excessively high direct taxation.
      Most people outside the House appreciate that our income tax structure, bad at every level, is, as the hon. Member for Fife, Central (Mr. Hamilton) said, at its very worst at the bottom and at the top. Many of us in past debates have drawn attention to the poverty trap and the harsh tax treatment of the lower paid. Tonight, in speaking to these amendments, we are concentrating attention on the more highly paid. Labour Members who would have us believe that there is no broad-based national understanding of the significance of the problem of the over-taxed highly paid are wrong. The British people have a far greater political wisdom and economic good sense than some Labour right hon. and hon. Members seem to comprehend.
      This was confirmed again recently by the public opinion poll on taxation quoted by the hon. Member for Cornwall, North (Mr. Pardoe). That was a public opinion poll conducted by MORI, published in the Business News section of The Sunday Times on 16th April. A total of 73 per cent. of those polled—an exceptionally high figure to hold a definite opinion on any subject—agreed with the statement:
      "Higher paid people pay so much income tax that there is no incentive for them to work harder."
      Only 23 per cent. positively disagreed with that proposition.
      Since, by definition, only a minority of people are among the higher paid, the
      1292
      damaging effect on national prosperity of excessive tax disincentives at the top is clearly understood by the great majority of people in this country. This is also a view held privately by many Government Members and publicly expressed recently before a mass audience on the "Weekend World" television programme on 23rd April by a senior member of the Cabinet, the Chancellor of the Duchy of Lancaster, who is, after all, the special economic and financial adviser to the Prime Minister and therefore speaks on all these matters with special authority. The Chancellor of the Duchy said:
      "The 83 per cent. … rate is too high and has to come down as soon as we can possibly bring it down."
      The right hon. Gentleman is absolutely right. He went on, wisely, to place the matter in its international context. Despite this Chancellor of the Exchequer, we are still a great trading nation. The standard of living of all the people in the country depends to a great extent on our international competitiveness. On this television programme, watched by millions the other day, the Chancellor of the Duchy said:
      "I don't deny that there has to be a move to make our tax rates, especially on earnings, comparable with what our rivals, or our friendly partners, on the Continent have in the way of tax rates. Of course, this has to be done. Otherwise, as I said candidly, the consequences will be damaging to our economy."
      Listening to almost all the speeches from the Government side today, it is extraordinary that that statement should have been made by a member of the Cabinet who has not been repudiated by the Prime Minister or his party. It suggests that members of the Labour Party talk with very different voices.
      8.45 p.m.
      The amendments are entirely in keeping with the sensible views expressed by the Chancellor of the Duchy of Lancaster. He rightly drew the nation's attention to the fact that our top rate of direct taxation on earned income, at 83 per cent., is far higher than that of our friendly rivals on the Continent. In France, the top rate is 54 per cent. In Germany it is 56 per cent. If we stay within the OECD group of countries, but move further afield, we find that the top rate in the United States is 55 per cent. and that while the top rate in Japan is 67 per cent., that rate applies only to incomes over the

      1293
      equivalent of £200,000 a year. Here, our top rate of 83 per cent. starts at £23,000 a year.
      If our amendment to reduce the top rate of tax on earned income in this country from 83 per cent. to 70 per cent., is carried tonight, as I hope it will be, Britain will still have a top tax rate which is significantly higher than that of Germany, France, the United States, or Japan. What is true of the top rates of tax in each of those countries—our direct industrial competitors in the markets of the world—is also true of their intermediate higher rate bands.
      Our tax bands start at lower levels and rise more rapidly and more steeply to greater heights than those anywhere else in the civilised world. That may sound like a mediaeval curse, but it is a plain statement of Socialist fact.
      Not surprisingly, our 83 per cent. rate has commanded the most international attention because of its obviously sensational economic stupidity, but the greatest damage to our economy is done by the middle ranges of the higher tax bands. Our amendments on the threshold, rates and bands, taken together, would cost £190 million this year—just one-twentieth of the increased rate of public expenditure upon which the Government are embarked this year and against which we voted in the debate on the public expenditure White Paper.
      The situation is a great deal worse than is revealed simply by international comparisons confined to top tax rates, because all our higher rate bands come into effect at so much lower levels than those in competitor countries. Even after the modest improvements proposed in the Budget, the 83 per cent. top rate of tax will become payable after the first £23,000 of taxable income which, in practice, probably often means a gross income of about £25,000.
      In France, the very much lower top rate of 54 per cent. does not become payable until a gross income of £53,000 a year is reached. In Germany, top rates are reached only on incomes over £65,000 a year. In Belgium, the figure is £66,000 a year, and in Italy £374,000 a year. In each case, those top rates are also much lower than ours.
      When we consider that our competitor countries have lower rates of direct tax
      1294
      at every level of income and higher starting levels at every stage and higher overall salary scales, the daunting extent of the handicap under which success labours in Britain stands fully revealed.
      There is a further consideration: not the X factor associated with Service pay, but what might be called the D factor—D for disincentive, or even despair. The disincentive effect of taxation lies far more in high marginal rates of taxation—the proportion lost of the next additional pound one earns—than in the actual amount of tax levied overall.
      That is my answer to the interesting points made by the hon. Member for Fife, Central. That is why the disincentive effect of high taxation in the United Kingdom is greater than in the other countries that the hon. Member mentioned. To be fair, there are some countries where the overall burden of tax is not significantly different from ours, if one includes employers' social security contributions in the figures and expresses the result as a proportion of gross domestic product. That is a fair point, but it is the psychology of taxation which deserves greater attention than it has received tonight.
      A comparison of the British and German tax structures is very interesting in this context. Whereas the overall burden of taxation—if one includes employers' social security contributions—is not dissimilar, as a percentage of GDP, the Germans' marginal rates of direct taxation are very much lower.
      A married couple on £25,000 a year of earned income pay a marginal income tax rate of 70 per cent. in Britain, while in Germany they pay only 47½ per cent. In France, the marginal rate is only 36 per cent.—almost exactly half the British marginal rate. That is the direction in which we should be steering our tax system, and we should start doing so tonight.
      Recently I was talking to the chairman of a successful group of companies. He has built up these companies himself and they now provide employment for 6,250 people in this country. The group has an exceptionally fine export record and has established seven subsidiary companies abroad, not exporting jobs but helping to secure and expand those in the United Kingdom.

      1295
      The chairman told me that the young Englishman who manages his subsidiary company in France, employing only 100 people, receives a gross salary which is two-thirds of that received by him as group chairman. After paying tax that young Englishman receives 50 per cent. more net pay than does his chairman in Britain. That means that the chairman is working for his family for four months of the year and for the Inland Revenue for the other eight months.
      By contrast, the young Englishman working in France works for the French Inland Revenue for two and a half months and for himself and his family for nine and a half months. It is not surprising that that young man recently refused a post of higher responsibility which would have required him to return to Britain.
      That sort of situation is familiar to any fairly successful business man in this country. It is a cautionary tale for the ruination of Britain, and our amendments would help to make this a little less prevalent.
      Consider next the comparative positions of two senior airline captains—one with British Airways and one with Air France. Both are flying Boeing 747s—the jumbo jets—which are the bread and butter aircraft of the two national airlines. These are not the kind of people who have ben described by hon. Members on the Government Benches below the Gangway. They are chosen on merit and experience, and no one would suggest that inherited wealth or family connections have anything to do with their appointments. International competition with one another is great, as is their responsibility. In fact they have, on occasions, even had responsibility for the lives of hon. Members below the Gangway. They fly the same aircraft over similar routes for about the same number of hours.
      What is their respective treatment by their two countries, by which we can measure that international comparability of tax treatment towards which the Chancellor of the Duchy of Lancaster tells us we must aim? The French pilot gets £45,000 a year, of which 17 per cent. is taken in tax. The British pilot gets £17,500, of which 31 per cent. is taken in tax. In most other occupations,
      1296
      the rate of tax would be higher, but he has certain tax-free overseas allowances. If the British pilot were paid as much as the French pilot, his marginal rate of tax would be 70 per cent., and 60 per cent. of his earnings would be taken from him.
      When that personal situation is projected—as it has to be because it exists—over every aspect of competitive international activity, it is astonishing that our share of world trade has not fallen even further and faster than it has. Little wonder that the Cambridge Group of economists is predicting 5 million unemployed for this country if present policies are not changed, or that 73 per cent. of the electorate readily agree that higher-paid people pay too much income tax.
      The Chancellor of the Duchy also said that the deforming of the tax structure by inflation was something to which the Government had been far too slow to respond and that the Labour Party was open to critcism on those grounds. That is undoubtedly true. Our amendments would by no means make good the ravages of inflation over the past five years, but they are a start.
      The starting point for the higher rates in 1973–74 was £5,000. If that was appropriate then, the starting rate for the first higher rate band now should be more than £10,000. But our amendment suggests only £8,000, so we are a long way from getting back to the level of Conservative tax rates.
      Even if Labour Members want nothing to do with Tory tax rates and accept that they can never hope to get back to Tory tax levels, even if we take the first Budget of this Chancellor, when he was still in his "howls of anguish" policy mood, in the March 1974 Budget when he reduced the starting rate of the first higher band to £4,500, today's equivalent, after a rise in the RPI of 87 per cent., would be £8,400. Again, we suggest only £8,000.
      It is difficult to understand the stream of speeches for hour after hour by Labour Members saying that our amendments are absolutely intolerable when they are not even as generous as the proposals introduced by their own party when they came to power in 1974 and lowered the tax bands.
      In a letter dated 3rd May, the British Institute of Management said that the real value of the earnings of senior

      1297
      executives on £15,000 a year had fallen since 1973 by 33 per cent. This amendment will be only a modest start towards recovering some of that lost ground.
      In every case, it is clear that our present tax system is impoverishing not just the individuals in the higher salary brackets but the whole community, which could and would benefit from their wealth-creating activities if only they could be unshackled.
      My right hon and learned Friend the Member for Surrey, East (Sir G. Howe) made plain our position on the public sector borrowing requirement, and I shall not at this hour repeat what he said. If our amendment is carried, we shall look to the Government to make compensatory reductions in their own overblown proposed public expenditure of £67,000 million this year, by comparison with the cost of £190 million of our amendments.
      There could be no better value for money in bringing back prosperity to the British people than a shift of priorities away from bureaucrats in favour of business men. I urge my right hon. and hon. Friends to vote for the amendments.
      9.0 p.m.
      Mr. Denzil Davies: I have already had one opportunity to address the Committee, and because I feel that most hon. Members wish to see this matter decided rapidly one way or the other, I shall be brief.
      I wish to deal with one or two points raised in this excellent debate. I do not think that my remarks will reconcile the conflicting arguments. I wish to refer to what was said by the hon. Member for Halesowen and Stourbridge (Mr. Stokes). He chastised me for not knowing what a middle manager was. I think I can be excused for not knowing, because it is not a precise term. The hon. Gentleman, with his great experience of these matters, said that a middle manager usually earns between £7,000 and £8,000 taxable income. If we take into account allowances, that puts the middle manager up to a figure of between £9,500 and £10,000 a year. The point that I was trying to make was that Amendments Nos. 7 and 20 do very little for the middle manager, even within the definition laid down by the hon. Gentleman, who understands these things.
      1298
      The Committee should be clear that we are not voting tonight to benefit the middle manager, who is a person with great responsibility, who has to run a factory, and who may well feel that in the last few years he has been hard pressed on income. I emphasise that these amendments do little or nothing for the middle manager. Opposition Members appear to disagree, but a man with gross earnings of £10,000 will receive little or no benefit from these proposals. That will happen because of the allowances in question, quite apart from mortgage interest. That is an incontrovertible fact.
      These amendments will start to benefit people earning salaries of £15,000 upwards. The total cost of the amendments in a full year will be £385 million. The question we must decide is how that figure of £385 million is to be found. I do not know where it is to be found. The Tory Party wants to cut public expenditure, but will not tell us where.
      Mr. John Moore: Earlier in the debate my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) emphasised a specific point in regard to members of the Inland Revenue. We have now had a debate lasting five hours and two minutes. Has the Minister of State been given the information that will allow him to apologise on behalf of his right hon. Friend the Chief Secretary for the mistake that he made on Monday night?
      Mr. Davies: My right hon. Friend will deal with these figures next Tuesday in Committee. [HON. MEMBERS: "Oh."] If my right hon. Friend was wrong he will no doubt, with his customary graciousness, apologise to the Committee. On the other hand, if the right hon. and learned Gentleman was wrong, he also, with his customary graciousness, will apologise.
      I repeat that the two amendments will cost £385 million in a full year. The Tory Opposition want to cut public expenditure but do not know where to cut it, except by sacking 20,000 Inland Revenue staff. That was the only suggestion they could make. There was very little concern about the public sector borrowing requirement, financial rectitude, M3, or any of the other matters on which they have preached to us from time to time.

      1299
      The Liberal Party wants to find the money by increasing VAT. In other words, the majority of the population will have to pay more in price increases to provide £385 million to those earning £15,000 a year and more. I regard that as unfair and unjust. I am surprised that a party such as the Liberal Party should seek to ally itself with the Tories on such a proposition.
      If a sum of £385 million were available, it would be our desire to use that money to benefit those in the tax system who suffer most. I suggest that there are some people who suffer more from the
      tax system than those who earn £15,000 or £25,000 a year.
      If this extra money were available, it should go to those in the poverty trap, those on low pay, those who have suffered most as a result of inflation over the past few years. That is the choice of priorities that we make. The Tory Opposition clearly prefer to help their rich friends, and will try to do so with the amendment. I ask the Committee to reject it.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 288, Noes 286.

      Division No. 202]

      AYES

      [9.5 p.m.

      Adley Robert

      Drayson, Burnaby

      Howe, Rt Hon Sir Geoffrey

      Aitken, Jonathan

      du Cann, Rt Hon Edward

      Howell, David (Guildford)

      Alison, Michael

      Dunlop, John

      Howells, Geraint (Cardigan)

      Amery, Rt Hon Julian

      Durant, Tony

      Hunt, David (Wirral)

      Arnold, Tom

      Dykes, Hugh

      Hunt, John (Ravensbourne)

      Atkins, Rt Hon H. (Spelthorne)

      Eden, Rt Hon Sir John

      Hurd, Douglas

      Awdry, Daniel

      Edwards, Nicholas (Pembroke)

      Hutchison, Michael Clark

      Bain, Mrs Margaret

      Elliott, Sir William

      Irving, Charles (Cheltenham)

      Baker, Kenneth

      Emery, Peter

      James, David

      Banks, Robert

      Eyre, Reginald

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

      Beith, A. J.

      Fairbairn, Nicholas

      Jessel, Toby

      Bendall, Vivian (Ilford North)

      Farr, John

      Johnson Smith, G. (E Grinstead)

      Bennett, Sir Frederic (Torbay)

      Fell, Anthony

      Johnston, Russell (Inverness)

      Bennett, Dr Reginald (Fareham)

      Finsberg, Geoffrey

      Jones, Arthur (Daventry)

      Benyon, W.

      Fisher, Sir Nigel

      Jopling, Michael

      Berry, Hon Anthony

      Fookes, Miss Janet

      Joseph, Rt Hon Sir Keith

      Biffen, John

      Forman, Nigel

      Kaberry, Sir Donald

      Biggs-Davidson, John

      Fowler, Norman (Sutton C'f'd)

      Kershaw, Anthony

      Blaker, Peter

      Fox, Marcus

      Kimball, Marcus

      Body, Richard

      Fraser, Rt Hon H. (Stafford & St)

      King, Evelyn (South Dorset)

      Boscawen, Hon Robert

      Freud, Clement

      King, Tom (Bridgwater)

      Bottomley, Peter

      Fry, Peter

      Kitson, Sir Timothy

      Bowden, A. (Brighton, Kemptown)

      Galbraith, Hon T. G. D.

      Knight, Mrs Jill

      Boyson, Dr Rhodes (Brent)

      Gardiner, George (Reigate)

      Knox, David

      Bradford, Rev Robert

      Gardiner, Edwards (S Fylde)

      Lamont, Norman

      Braine, Sir Bernard

      Gilmour, Rt Hon Ian (Chesham)

      Langford-Holt, Sir John

      Brittan, Leon

      Gilmour, Sir John (East Fife)

      Latham, Michael (Melton)

      Brocklebank-Fowler, C.

      Glyn, Dr Alan

      Lawrence, Ivan

      Brooke, Peter

      Godber, Rt Hon Joseph

      Lawson, Nigel

      Brotherton, Michael

      Goodhart, Philip

      Lester, Jim (Beeston)

      Bryan, Sir Paul

      Goodlad, Alastair

      Lewis, Kenneth (Rutland)

      Buchanan-Smith, Alick

      Gorst, John

      Loveridge, John

      Buck, Antony

      Gow, Ian (Eastbourne)

      Luce, Richard

      Budgen, Nick

      Gower, Sir Raymond (Barry)

      McAdden, Sir Stephen

      Bulmer, Esmond

      Grant, Anthony (Harrow C)

      MacCormick, Iain

      Burden, F. A.

      Gray, Hamish

      McCrindle, Robert

      Butler, Adam (Bosworth)

      Griffiths, Eldon

      McCusker, H.

      Carlisle, Mark

      Grimond, Rt Hon J.

      Macfarlane, Neil

      Carson, John

      Grist, Ian

      MacGregor, John

      Chalker, Mrs Lynda

      Grylls, Michael

      MacKay, Andrew (Stechford)

      Channon, Paul

      Hall-Davis, A. G. F.

      Macmillan, Rt Hon M. (Farnham)

      Churchill, W. S.

      Hamilton, Archibald (Epsom & Ewell)

      McNair-Wilson, M. (Newbury)

      Clark, Alan (Plymouth, Sutton)

      Hamilton, Michael (Salisbury)

      McNair-Wilson, P. (New Forest)

      Clark, William (Croydon S)

      Hampson, Dr Keith

      Madel, David

      Clarke, Kenneth (Rushcliffe)

      Hannam, John

      Marshall, Michael (Arundel)

      Clegg, Walter

      Harrison, Col Sir Harwood (Eye)

      Marten, Neil

      Cockcroft, John

      Harvie Anderson, Rt Hon Miss

      Mates, Michael

      Cooke, Robert (Bristol W)

      Haselhurst, Alan

      Mather, Carol

      Cope, John

      Hastings, Stephen

      Maude, Angus

      Cormack, Patrick

      Hayers, Rt Hon Sir Michael

      Maudling, Rt Hon Reginald

      Costain, A. P.

      Hawkins, Paul

      Mawby, Ray

      Craig, Rt Hon W. (Belfast E)

      Hayhoe, Barney

      Maxwell-Hyslop, Robin

      Crawford, Douglas

      Henderson, Douglas

      Mayhew, Patrick

      Critchley, Julian

      Heseltine, Michael

      Meyer, Sir Anthony

      Crouch, David

      Hicks, Robert

      Miller, Hal (Bromsgrove)

      Crowder F. P.

      Higgins, Terence L.

      Mills, Peter

      Davies, Rt Hon J. (Knutsford)

      Hodgson, Robin

      Miscampbell, Norman

      Dean, Paul (N Somerset)

      Holland, Philip

      Mitchell, David (Basingstoke)

      Dodsworth, Geoffrey

      Hooson, Emlyn

      Moate, Roger

      Douglas-Hamilton, Lord James

      Hordern, Peter

      Molyneaux, James

      Monro, Hector

      Rhodes, James R.

      Stradling Thomas, J.

      Montgomery, Fergus

      Ridley, Hon Nicholas

      Tapsell, Peter

      Moore, John (Croydon C)

      Ridsdale, Julian

      Taylor, R. (Croydon NW)

      More, Jasper (Ludlow)

      Rifkind, Malcolm

      Tebbit, Norman

      Morgan-Giles, Rear-Admiral

      Rippon, Rt Hon Geoffrey

      Temple-Morris, Peter

      Morris, Michael (Northampton S)

      Roberts, Wyn (Conway)

      Thatcher, Rt Hon Margaret

      Morrison, Charles (Devizes)

      Rodgers, Sir John (Sevenoaks)

      Thomas, Rt Hon P. (Hendon S)

      Morrison, Hon Peter (Chester)

      Ross, Stephen (Isle of Wight)

      Thompson, George

      Mudd, David

      Ross, William (Londonderry)

      Thorpe, Rt Hon Jeremy (N Devon)

      Neave, Airey

      Rossi, Hugh (Hornsey)

      Townsend, Cyril D.

      Neubert, Michael

      Royle, Sir Anthony

      Trotter, Neville

      Newton, Tony

      Sainsbury, Tim

      van Straubenzee, W. R.

      Nott, John

      St. John-Stevas, Norman

      Vaughan, Dr Gerald

      Onslow, Cranley

      Scott, Nicholas

      Viggers, Peter

      Oppenheim, Mrs Sally

      Shaw, Giles (Pudsey)

      Wainwright, Richard (Colne V)

      Page, John (Harrow West)

      Shelton, William (Streatham)

      Wakeham, John

      Page, Rt Hon R. Graham (Crosby)

      Shepherd, Colin

      Walder, David (Clitheroe)

      Page, Richard (Workington)

      Shersby, Michael

      Walker, Rt Hon P. (Worcester)

      Paisley, Rev Ian

      Silvester, Fred

      Wall, Patrick

      Pardoe, John

      Sims, Roger

      Walters, Dennis

      Parkinson, Cecil

      Sinclair, Sir George

      Warren, Kenneth

      Pattie, Geoffrey

      Skeet, T. H. H.

      Watt, Hamish

      Penhaligon, David

      Smith, Cyril (Rochdale)

      Weatherill, Bernard

      Percival, Ian

      Smith, Dudley (Warwick)

      Wells, John

      Peyton, Rt Hon John

      Smith, Timothy John (Ashfield)

      Welsh, Andrew

      Pink, R. Bonner

      Speed, Keith

      Whitelaw, Rt Hon William

      Powell, Rt Hon J. Enoch

      Spence, John

      Whitney, Raymond (Wycombe)

      Prentice, Rt Hon Reg

      Spicer, Michael (S Worcester)

      Wiggin, Jerry

      Price, David (Eastleigh)

      Sproat, Iain

      Wilson, Gordon (Dundee E)

      Prior, Rt Hon James

      Stainton, Keith

      Winterton, Nicholas

      Pym, Rt Hon Francis

      Stanbrook, Ivor

      Wood, Rt Hon Richard

      Raison, Timothy

      Stanley, John

      Young, Sir G. (Ealing, Acton)

      Rathbone, Tim

      Steel, Rt Hon David

      Younger, Hon George

      Rees, Peter (Dover & Deal)

      Steen, Anthony (Wavertree)

      Rees-Davies, W. R.

      Stewart, Rt Hon Donald

      TELLERS FOR THE AYES:

      Reid, George

      Stewart, Ian (Hitchin)

      Mr. Spencer Le Marchant and

      Renton, Rt Hon Sir D. (Hunts)

      Stokes, John

      Mr. Michael Roberts.

      Renton, Tim (Mid-Sussex)

      NOES

      Abse, Leo

      Colquhoun, Ms Maureen

      Ford, Ben

      Allaun, Frank

      Concannon, J. D.

      Forrester, John

      Anderson, Donald

      Conlan, Bernard

      Fowler, Gerald (The Wrekin)

      Archer, Rt Hon Peter

      Cook, Robin F. (Edin C)

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

      Armstrong, Ernest

      Corbett, Robin

      Freeson, Rt Hon Reginald

      Ashley, Jack

      Cowans, Harry

      Garrett, John (Norwich S)

      Ashton, Joe

      Cox, Thomas (Tooting)

      Garrett, W. E. (Wallsend)

      Atkins, Ronald (Preston N)

      Craigen, Jim (Maryhill)

      George, Bruce

      Atkinson, Norman

      Crawshaw, Richard

      Gilbert, Dr John

      Bagier, Gordon A. T.

      Crowther, Stan (Rotherham)

      Ginsburg, David

      Barnett, Guy (Greenwich)

      Cryer, Bob

      Golding, John

      Barnett, Rt Hon Joel (Heywood)

      Cunningham, Dr J. (Whiteh)

      Gould, Bryan

      Bates, Alf

      Davidson, Arthur

      Gourlay, Harry

      Bean, R. E.

      Davies, Bryan (Enfield N)

      Graham, Ted

      Benn, Rt Hon Anthony Wedgwood

      Davies, Denzil (Llanelli)

      Grant, George (Morpeth)

      Bennett, Andrew (Stockport N)

      Davies, Ifor (Gower)

      Grant, John (Islington C)

      Bidwell, Sydney

      Davis, Clinton (Hackney C)

      Grocott, Bruce

      Bishop, Rt Hon Edward

      Deakins, Eric

      Hamilton, W. W. (Central Fife)

      Blenkinsop, Arthur

      Dean, Joseph (Leeds West)

      Hardy, Peter

      Boardman, H.

      Dell, Rt Hon Edmund

      Harrison, Rt Hon Walter

      Booth, Rt Hon Albert

      Dempsey, James

      Hart, Rt Hon Judith

      Boothroyd, Miss Betty

      Dewar, Donald

      Hattersley, Rt Hon Roy

      Bottomley, Rt Hon Arthur

      Doig, Peter

      Hayman, Mrs Helene

      Boyden, James (Bish Auck)

      Dormand, J. D.

      Healey, Rt Hon Denis

      Bradley, Tom

      Douglas-Mann, Bruce

      Heffer, Eric S.

      Bray, Dr Jeremy

      Duffy, A. E. P.

      Hooley, Frank

      Broughton, Sir Alfred

      Dunn, James A.

      Horam, John

      Brown, Hugh D. Provan)

      Dunnett, Jack

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

      Brown, Robert C. (Newcastle W)

      Eadie, Alx

      Hoyle, Doug (Nelson)

      Buchan, Norman

      Edge, Geoff

      Huckfield, Les

      Buchanan, Richard

      Ellis, John (Brigg & Scun)

      Hughes, Rt Hon C. (Anglesey)

      Callaghan, Rt Hon J. (Cardiff SE)

      English, Michael

      Hughes, Robert (Aberdeen N)

      Callaghan, Jim (Middleton & P)

      Ennals, Rt Hon David

      Hughes, Roy (Newport)

      Campbell, Ian

      Evans, Fred (Caerphilly)

      Hunter, Adam

      Canavan, Dennis

      Evans, Gwynfor (Carmarthen)

      Irvine, Rt Hon Sir A. (Edge Hill)

      Cant, R. B.

      Evans, Ioan (Aberdare)

      Irving, Rt Hon S. (Dartford)

      Carmichael, Neil

      Evans, John (Newton)

      Jackson, Colin (Brighouse)

      Carter, Ray

      Ewing, Harry (Stirling)

      Jackson, Miss Margaret (Lincoln)

      Carter-Jones, Lewis

      Faulds, Andrew

      Janner, Greville

      Cartwright, John

      Fernyhough, Rt Hon E.

      Jay, Rt Hon Douglas

      Castle, Rt Hon Barbara

      Fitt, Gerard (Belfast W)

      Jeger, Mrs Lena

      Clemitson, Ivor

      Flannery, Martin

      Jenkins, Hugh (Putney)

      Cocks, Rt Hon Michael (Bristol S)

      Fletcher, L. R. (Ilkeston)

      John, Brynmor

      Cohen, Stanley

      Fletcher, Ted (Darlington)

      Johnson, James (Hull West)

      Coleman, Donald

      Foot, Rt Hon Michael

      Jones, Alec (Rhondda)

      1302

      1303

      Jones, Barry (East Flint)

      Morris, Rt Hon J. (Aberavon)

      Stallard, A. W.

      Jones, Dan (Burnley)

      Moyle, Roland

      Stewart, Rt Hon M. (Fulham)

      Judd, Frank

      Mulley, Rt Hon Frederick

      Stoddart, David

      Kaufman, Gerald

      Murray, Rt Hon Ronald King

      Stott, Roger

      Kelley, Richard

      Newens, Stanley

      Strauss, Rt Hon G. R.

      Kerr, Russell

      Noble, Mike

      Summerskill, Hon Dr Shirley

      Kilroy-Silk, Robert

      Oakes, Gordon

      Swain, Thomas

      Kinnock, Neil

      Ogden, Eric

      Taylor, Mrs Ann (Bolton W)

      Lambie, David

      O'Halloran, Michael

      Thomas, Dafydd (Merioneth)

      Lamborn, Harry

      Orbach, Maurice

      Thomas, Jeffrey (Abertillery)

      Lamond, James

      Orme, Rt Hon Stanley

      Thomas, Mike (Newcastle E)

      Latham, Arthur (Paddington)

      Ovenden, John

      Thomas, Ron (Bristol NW)

      Lee, John

      Owen, Rt Hon Dr David

      Thorne, Stan (Preston S)

      Lestor, Miss Joan (Eton & Slough)

      Padley, Walter

      Tierney, Sydney

      Lever, Rt Hon Harold

      Park, George

      Tilley, John (Lambeth, Central)

      Lewis, Arthur (Newham N)

      Parker, John

      Tinn, James

      Lewis, Ron (Carlisle)

      Pavitt, Laurie

      Tomlinson, John

      Litterick, Tom

      Pendry, Tom

      Tomney, Frank

      Lomas, Kenneth

      Perry, Ernest

      Torney, Tom

      Loyden, Eddie

      Phipps, Dr Colin

      Tuck, Raphael

      Luard, Evan

      Price, C. (Lewisham W)

      Urwin, T. W.

      Lyon, Alexander (York)

      Price, William (Rugby)

      Varley, Rt Hon Eric G.

      Lyons, Edward (Bradford W)

      Radice, Giles

      Wainwright, Edwin (Dearne V)

      Mabon, Rt Hon Dr J. Dickson

      Rees, Rt Hon Merlyn (Leeds S)

      Walker, Harold (Doncaster)

      McCartney, Hugh

      Richardson, Miss Jo

      Walker, Terry (Kingswood)

      McDonald, Dr Oonagh

      Roberts, Albert (Normanton)

      Ward, Michael

      McElhone, Frank

      Roberts, Gwilym (Cannock)

      Watkins, David

      McGuire, Michael (Ince)

      Robinson, Geoffrey

      Watkinson, John

      MacKenzie, Rt Hon Gregor

      Roderick, Caerwyn

      Weetch, Ken

      Mackintosh, John P.

      Rodbers, George (Chorley)

      Weitzman, David

      Maclennan, Robert

      Rodgers, Rt Hon William (Stockton)

      Wellbeloved, James

      McMillan, Tom (Glasgow C)

      Rooker, J. W.

      White, Frank R. (Bury)

      McNamara, Kevin

      Roper, John

      White, James (Pollock)

      Madden, Max

      Rose, Paul B.

      Whitehead, Philip

      Magee, Bryan

      Ross, Rt Hon W. (Kilmarnock)

      Whitlock, William

      Mahon, Simon

      Rowlands, Ted

      Wigley, Dafydd

      Mallalieu, J. P. W.

      Ryman, John

      Willey, Rt Hon Frederick

      Marks, Kenneth

      Sandelson, Neville

      Williams, Rt Hon Alan (Swansea W)

      Marshall, Dr Edmund (Goole)

      Sedgemore, Brian

      Williams, Alan Lee (Hornch'ch)

      Marshall, Jim (Leicester S)

      Selby, Harry

      Williams, Rt Hon Shirley (Hertford)

      Mason, Rt Hon Roy

      Sever, John

      Wilson, Rt Hon Sir Harold (Huyton)

      Meacher, Michael

      Shaw, Arnold (Ilford South)

      Wilson, William (Coventry SE)

      Mellish, Rt Hon Robert

      Sheldon, Rt Hon Robert

      Wise, Mrs Audrey

      Mendelson, John

      Shore, Rt Hon Peter

      Woodall, Alec

      Mikardo, Ian

      Short, Mrs Renée (Wolv NE)

      Woof, Robert

      Millan, Rt Hon Bruce

      Sillars, James

      Wrigglesworth, Ian

      Miller, Dr M. S. (E Kilbride)

      Silverman, Julius

      Young, David (Bolton E)

      Mitchell, Austin

      Skinner, Dennis

      Molloy, William

      Smith, John (N Lanarkshire)

      TELLERS FOR THE NOES:

      Moonman, Eric

      Snape, Peter

      Mr. James Hamilton and

      Morris, Alfred (Wythenshawe)

      Spearing, Nigel

      Mr. Joseph Harper.

      Morris, Charles R. (Openshaw)

      Spriggs, Leslie

      Question accordingly agreed to.
      Mr. Peter Rees: I beg to move Amendment No. 9, in page 10, line 20, leave out from 'exceeds' to 'of' in line 22 and insert
      '£2,000 at the additional rates of 10 per cent. for the first £500'.
      The Temporary Chairman (Mrs. Joyce Butler): With this we may take the following amendments: No. 10, in page 10, line 21, leave out '£1,700' and insert '£2,000'.
      No. 11, in page 10, line 21, leave out from 'cent.' to end of line 22.
      No. 12, in page 10, line 22, leave out '£550' and insert '£500'.
      No. 18, in page 10, line 26, leave out from second 'the' to end of line 27 and insert
      'reference to £2,000 of a reference to £3,000'.
      Mr. Rees: This is a modest amendment. After the traumas of the last five hours and the debate on Monday, that is perhaps as well. It will give the Government a chance to collect themselves, to reconsider their position and to view for the first time in their career a little more dispassionately than they have been used to doing in the past the whole question of investment income.
      When I consider the amendment, to echo the words of Lord Clive in rather different circumstances, I am astounded at my own moderation. It is perhaps important to give the Government a chance to calm themselves and to consider again this whole question.
      The amendment is designed to raise the threshold for investment income surcharge for those under the age of 65 from £1,700 to £2,000 and for those of 65 and over from £2,500 to £3,000. As I said, I

      1305
      hope that it will enable us to debate calmly and dispassionately the weight of tax which we feel should be imposed on investment income.
      I know that the whole question of investment income, at least in public if not in private, touches a raw nerve in the Labour Party. Investment income conjures up for Labour Members, particularly those below the Gangway, vast plutocratic wealth which deserves to be taxed into the ground. But we know that, in private at least, the Government Front Bench take a slightly different view. We wish to probe the sincerity of their approach to the role of private capital in a mixed economy.
      Even if one felt that investment income as properly defined was deserving of the particularly harsh imposts which have been heaped upon it since 1974, it must almost be a matter of common ground that the definition is extremely haphazard. Indeed, the anomalies have been pointed out from an early stage. Mr. Gladstone in 1853, as you will recall, Mrs. Butler, in an epic debate—I am not suggesting that you personally were presiding over our debates in those days, but I know of the close attention that you pay to all debates on financial and fiscal matters—attempted to draw a distinction between what he called lazy income and hard-won income. At the end of the day he admitted that it was impossible to draw a very clear line. In a, memorable debate, Mr. Gladstone—I know that the hon. Member for Cornwall, North (Mr. Pardoe) will be treading in Mr. Gladstone's footsteps tonight because of the support he will be giving to the amendment—recognised that there was no clear, decisive, practical distinction between the two categories of income.
      Perhaps the debate has not moved on a great deal since then. The anomalies are too glaring to admit of this sharp distinction. I am sure that the Financial Secretary, if and when he catches your eye, Mrs. Butler—or it may be the Chief Secretary—will attempt to deal with this matter. We always welcome the Chief Secretary's interventions, particularly because in his professional capacity he has such a keen and expert knowledge of the distinctions between the various categories of incomes. I have no doubt that we shall have a notable and sympathetic contribution to the debate. It will
      1306
      give him a chance to re-establish his self-esteem after the disasters which have struck him and his team just recently and on Monday.
      9.30 p.m.
      But we bear the right hon. Gentleman no ill will. I do not know whether his heart is in the right place, but his head is in the right place provided that he is given the chance to exercise it. We know also, however, that he can be a little intimidated by his right hon. and hon. Friends below the Gangway. There have been moments when I have detected even that bold spirit quail before the glances of his hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) or those of his hon. Friend the Member for Coventry, South-West (Mrs. Wise). There is only one of them in the Chamber at the moment, so perhaps we can encourage the right hon. Gentleman to flights of unaccustomed valour.
      I wish to focus the Committee's attention on some of the categories of income which by no stretch of the imagination can be called, in Mr. Gladstone's phrase, lazy income. First, I take the case of the shopkeeper and the farmer, people who by any standards work hard all their lives but whose efforts may not produce very large incomes, so that they cannot take advantage of the retirement annuity provisions. When they come to take an easier role in life and sell their shops or farms, they realise a small amount of capital and invest it.
      Is the income from those investments to be treated more harshly than, for example, the income of a civil servant—I pick a category at random—who has an inflation-proof pension which, under the rather bizarre rules by which the Inland Revenue operates, is regarded as earned income?
      Next, I take the case of people who have had to save for their retirement. The Committee will recall that prior to 1956 it was not possible for the self-employed or even for those who were not in pensionable employment to make provision out of gross income for their retirement annuities. There must be many people today who are subsisting on savings income who could not make that provision. Are they to be singled out for harsher treatment? I am sure that the Chief Secretary, with his compassion—if he can for a moment break off his

      1307
      conversation with the Financial Secretary—will agree, and when he speaks later he will, no doubt, endorse what I say. Perhaps, even if he is not able to go all the way with us on these amendments, he will be prepared to commit the Government to look a little more closely at the definition of earned and investment income.
      Next, let us take the case of a person who has bought his own house but who, through the demands of his employment, has to move to another part of the country. He retains his house and lets it. Is the income from his house to be regarded, in Mr. Gladstone's phrase, as lazy income?
      The fact that these anomalies occur has been practically conceded by the Government, first in the provision introduced in this year's Finance Bill to treat maintenance payments exclusively as earned income. There is an anomaly which has been corrected, against—I draw the Committee's attention to this—the statements in Labour's 1976 manifesto which described maintenance payments as a rather virulent form of tax avoidance. I am happy to see that the Chief Secretary has escaped from the thrall of Transport House and has taken a rather more generous view of maintenance payments. I am sure that the Gingerbread group and others outside who follow our debates will give him full credit for that. I am now asking him to extend his horizons a little and see whether he can accord the same kind of treatment to other forms of income.
      Next, what about annuities to retired partners of professional firms? A small measures of relief has been conceded in past Finance Acts for income of this kind. When we go into Standing Committee we shall press the Chief Secretary to look at this matter further. He may have to declare a personal interest, but we shall respect him all the more for that. It will demonstrate that he has a warm personal and enduring interest in these problems.
      Even if the definition of earned and investment income could be accurately and comprehensively drawn, what case is there for singling out investment income—to spare the susceptibilities of Labour Members, let me call it savings income
      1308
      from now on—for the special treatment which it now receives?
      When Mr. McKenna was defending the decision of the Liberal Administration in 1907 to introduce the earned income relief, he rested his case on the argument that income from employment was of a precarious nature. Since then, times have changed and a little has been done to make employment less precarious. We have had the Employment Protection Act and redundancy payments. I do not mean to say that income from employment is necessarily of the same quality or on the same basis as savings income which is perhaps derived from capital. But the contrast is not as stark as it was in 1907. Some would say that the balance has tilted the other way.
      Mr. Ridley: Hear, hear.
      Mr. Rees: My hon. Friend will no doubt enlarge on that later. One could make an eloquent case. The fluctuations of the Stock Exchange and the ravages of inflation have meant that the return on many fixed income stocks has been a negative return after tax. This is a matter to which the Chief Secretary must address himself if he is to do justice to the debate.
      I turn to the question of dividend control and the rentier class. That is a highly emotive phrase which I use to galvanise and evoke a spark of interest from the Chief Secretary, who seems to be singularly detached from our debate. I hope that he will deal with this matter, however ineffectively. Perhaps he will be a little more forthcoming on the question of dividend control. At Chancellor of the Exchequer's Question Time recently we had occasion to press the Minister of State, but there was no firm indication of the Government's plans. This is a factor which has militated against savings income.
      I wonder whether the Government will put up a substantial opposition to these amendments. After the traumas of the last five hours, they may collapse. Perhaps the walls of Jericho are lying in ruins. Perhaps the trumpet blasts of my hon. Friends have demolished them. Perhaps we shall find that from now on it is plain sailing and that it will now be not a Cornish Budget but possibly a Conservative Budget.

      1309
      Much work has to be done, and we shall carry this on not only in the Chamber but in Committee upstairs. We shall see with keen interest what happens. I know that the Patronage Secretary's representative has a difficult task. He has done his best to weed out his team, and, I have no doubt, with a certain amount of disloyal support. We shall comment on that performance later. It appears that he has effectively cleared the Chamber after the last debate, Mrs. Butler—I apologise: I should have said Mr. Godman Irvine. My eyes were so riveted on the Treasury Front Bench that I momentarily failed to observe that you were adding grace and distinction to our debate.
      I suspect that the case that we shall have to meet from the Treasury Bench is encapsulated in a quotation from Mr. Brian Walden, whose contributions to our debates I for one miss. But he is doing a useful job in interviewing the Chancellor of the Duchy of Lancaster. May there be many more such cross-examinations, because they provide us with an insight into at least part of the Cabinet's thinking.
      The phrase which Mr. Brian Walden used to quote was attributable to Mr. Joseph Chamberlain. It was "What ransom should property pay for the security that it enjoys?" That is a telling phrase. I do not know whether Mr. Chamberlain would have repeated it these days. The proposition is readily answered. First, I doubt whether property or private capital could be said to enjoy much security, certainly not under an Administration where the Treasury is in the hard, rapacious hands of the Chancellor of the Exchequer.
      The Chancellor of the Exchequer (Mr. Denis Healey)rose—
      Mr. Rees: I am flattered that the Chancellor cowers under my lash. If he must, he must leave the Chamber. I have the great privilege of sharing the Chancellor's kisses with the hon. Member for Coventry, South-West. I should prefer the Chancellor's fiscal concessions to his kisses. But perhaps I am not in a position to choose. We have to wring the concessions out of him by hard verbal argument and by votes. It is not the Chancellor's good will that lies behind
      1310
      such concessions as we have extracted so far.
      The question I put to the Committee is "Does capital in the United Kingdom pay its fair share of taxes?" One has only to study the question to see that it answers itself.
      Mr. Robert Hughes: The answer is "No".
      Mr. Rees: Perhaps the hon. Member for Aberdeen, North (Mr. Hughes) has not been paying close enough attention to our debates. Perhaps he does not study the Finance Acts. Has he considered the rates of stamp duty here, which are higher than in any other country in the EEC? Take capital transfer tax. Can he mention any other of our competitor countries in the EEC with tax on the transmission of capital at anything like the same rates? Can he mention a country in the EEC that imposes a charge on capital gains at the same swingeing rates as here?
      One of the Chief Secretary's most revealing asides in our debates on the Budget was when he revealed that, of a forecast yield of £390 million from capital gains tax, £340 million of £350 million would derive from inflationary gain. In other words, the real gain of the tax yield is only £40 million or £50 million. That gives one a measure of the impost on capital. If I may, therefore, echo what Mr. Joseph Chamberlain said 70 or 80 years ago, yes, the ransom that capital pays in the United Kingdom is far beyond the ransom exacted by any other civilised Western European Government. One has only to study the statistics to see that capital taxes in the United Kingdom are far higher than those levied by any of our European competitors.
      The consequences are inevitable. There is a slow but steady seepage of private capital, and that is why the Labour Party in its ineffable wisdom has sent two of its most distinguished Back Benchers to spy out the land in the Channel Islands. What comfort they have brought back, I do not know. Perhaps the Chief Secretary will tell us that something is to be incorporated in the next manifesto. It may be that the Government will revoke the constitution of the Channel Islands and that the Duchy of Normandy is to be once more incorporated totally and irrevocably under the

      1311
      British Crown for all purposes. I do not know. It will be interesting to follow out this theme. If my fancy takes me too far, perhaps the Chief Secretary will correct me. Perhaps he will say that the Channel Islands and the Isle of Man are to enjoy inviolate their present fiscal systems.
      At the end of the day, notwithstanding the exchange control system which has been so laboriously and painstakingly erected, it will not be possible to confine private capital within this country if we are to endure taxation such as we now have. The fundamental question that the country will ask is whether the Government are serious about a role for private capital in our mixed economy. There have been glib statements about an investment strike. Labour Members may wish to develop that theme. Perhaps that is something upon which the Wilson Committee will produce words of consummate wisdom. If there has been an investment strike—and I do not know that I necessarily go along with that proposition—it is not hard to find one of the reasons for it. If in an era of inflation a person is receiving a negative return on his capital, he will find rather curious forms of investment to preserve such wealth as is left to him.
      I assume that the Government are serious and that they are not as frivolous as their Back Benchers, particularly in the last five hours, would have had us believe. I believe that the Government see a modest role for private capital, and the earnest of that is the provision for share incentive schemes encapsulated in the Bill. I and some of my right hon. and hon. Friends feel that these provisions need fairly dramatic improvement. But it is the first indication we have had that the Government believe that capital should be diffused among the country's taxpayers.
      If that is the Government's aim and object, all sorts of questions arise for our consideration. I ask the Chief Secretary whether the dividends paid to employees who participate in share incentive schemes are to be treated as earned or investment income. It is an interesting question. We shall be glad to have the Chief Secretary's views on the matter. If his view is that in the hands of an employee dividends will be treated as earned income, what
      1312
      happens in the case of a retired employee? Will he, on retirement, when he has greater need of that income than ever before, be subject to the investment income surcharge?
      9.45 p.m.
      I sense that the Government must be a little uneasy about this position, and rightly so. Although one might not guess it from the expression on the Chief Secretary's face, the Government are proposing an increase in the threshold for the 10 per cent. band both for those under and for those over the age of 65. All we are doing, in a modest way, is suggesting that possibly those thresholds could be raised a little higher. If the Chief Secretary wants an argument that might impress even his hon. Friends below the Gangway, it is the ravages of inflation since my noble Friend Lord Barber set the threshold in 1973–74 at £2,000. Merely to index that would probably increase it to £4,400.
      If the Chief Secretary attempts to dazzle us with the cost of that, and we doubt some of the figures that have been produced particularly on his costings and his enumeration of the employees of the Inland Revenue, we have the advantage of the letter written by the Financial Secretary in April which tells us how modest the cost will be. The Chief Secretary will no doubt tell us about the bachelors with £50,000 of investment income. That has been a mythological figure trotted out in our debates since the late Hugh Gaitskell addressed the Committee on these matters.
      Leaving aside those rare creatures—they become rarer under a Labour Administration—I ask the Committee to consider the case of a married couple over the age of 65 whose entire income consists of the old-age pension and savings income of £2,500 per annum—in other words, a gross income of just over £4,000, or £80 a week. That is slightly under the average industrial wage. Even with the benefit of the Government's proposals, that couple will be paying a marginal rate of tax of 33 per cent. basic rate and 10 per cent investment income surcharge, amounting to 43 per cent.
      Let us assume that that couple have invested their modest capital wisely and have increased their savings income by £500 to £4,600—a weekly income of £92

      1313
      a week. By no stretch of the imagination in the present circumstances is that the income even of someone in middle management. They will be paying a marginal rate of 48 per cent. As the Chief Secretary can readily calculate, to produce an income of £2,500 to £3,000 a year would need capital of only £30,000. All we are asking of the Chief Secretary is a little imagination and generosity.
      The amendments tabled by myself and my right hon. and hon. Friends are designed to raise the threshold from £2,000 to £2,500 for people under the age of 65 and to £3,000 for those over the age of 65. As to cost, we are deeply conscious of our responsibilities. We have been consistently reminded of them by the Treasury Front Bench. The Financial Secretary has told my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) that our proposals would cost £5 million this year and £30 million in a full year. Will the Chief Secretary really try to tell us that it is beyond the wit of him and his colleagues to find £5 million this year or that their control of Government expenditure is so lax that they cannot even find cuts of £5 million out of a Budget of about £60 billion? I do not think that that argument will run.
      It is a question of nerve and generosity—nerve so that the Chief Secretary can face the accusing eyes of his hon. Friends and of Mr. Jones and Mr. Scanlon, though they no longer preside in such an omnipotent way over the affairs of the Labour Party, and generosity to recognise a real case and that many of those who would benefit from the amendments are in retirement. It may even be that if the Chief Secretary searches in his constituency he will find some people who would benefit from the amendments.
      In coaxing the Treasury team along this line which should not be a difficult line for them to follow, I urge them to recall the entrepreneur under the railway arch who proved so dear to their right hon. Friend the Chancellor of the Duchy of Lancaster on the last day of the Budget debate. We owe a great deal to the contributions of the right hon. Gentleman, because it is clear that his heart is in the right place and that often his head is in the right place. It is unfortunate that he seems to be a lone voice in the Cabinet. His vote is too often in the wrong place, but we all know of the compelling fascina-
      1314
      tion of Patronage Secretaries and, alas, the Chancellor of the Duchy is not immune from that.
      We ask the Chief Secretary to accept the amendments on the basis that they would afford a measure of ease to the entrepreneur under the railway arch in his old age, a measure of security to his widow and perhaps a stimulus to his children to follow in his footsteps. On that modest, circumscribed basis, I commend the amendments.
      Mr. Joel Barnett: It might be helpful if I said a word or two now about the speech of the hon. and learned Member for Dover and Deal (Mr. Rees). In view of the hour, I hope that the Committee will forgive me if, rather than following the hon. and learned Gentleman into the speeches of Gladstone and Chamberlain, or travelling to the Isle of Man and the Channel Islands, I seek to deal with the amendments.
      The costs of the Conservative amendments, which are partially supported by the Liberals, are broadly in the area that the hon. and learned Gentleman suggested. He complained about the figures that we have given to the Committee, but on the last group of amendments his right hon. and learned Friend thought that the amendment that he was moving would cost £45 million and found that it would actually cost £150 million. Yet he still pressed it to a vote. I am surprised that the hon. and learned Gentleman should complain about the figures that we have provided.
      In Amendment No. 11, the Liberal Party, as ever, seeks to do rather more, namely, to abolish the 15 per cent. rate altogether. That would cost £120 million, compared to the fairly modest cost of the Conservatives' amendments.
      I agree that small investment income should be helped, though there is some disagreement in the Committee on the definition of "small" in these matters. I accept that small investment income should be exempt from the investment income surcharge. We have helped those with small investment incomes in the amendments that we proposed in the Budget, which are now part of the Finance Bill.
      There are 600,000 people liable to investment income surcharge; 91 per cent. of those with investment income pay no surcharge. Only 2 per cent. will be liable

      1315
      at the 10 per cent. rate and 7 per cent. at the 15 per cent. rate. By any definition, we have exempted the vast majority of those with investment incomes, and certainly all those with small investment income.
      I am surprised that the hon. and learned Member for Dover and Deal should have made so much of this. A person over 65 can have £30,000 of capital, allowing the equivalent of building society gross rate, without being liable to investment income surcharge. Those under 65 can have capital of £20,000, taking the same building society interest rate. I know that these sums are nothing to Opposition Members, who think that they are still far too low, but to the vast majority of ordinary people in this country these are still very large sums of money. We have exempted these incomes from the surcharge and, in addition, we have done what no previous Conservative Government ever did—we have wholly exempted maintenance income from the surcharge.
      Mr. Anthony Nelson: Perhaps the Chief Secretary could help me. When he talks about the multiple of this investment income and totals it into a gross capital value, does he take into account the fact that many people receive investment income by way of life interest on capital on which they have no chance of getting their hands? To talk of capital values in such cases is totally meaningless. All these people will have for the whole of their lives is income from the capital amount which will not belong to them.
      Mr. Barnett: I do not dispute that. I have not covered every conceivable form of investment income. All I am saying is that for the vast majority of people there will be exemptions from investment income surcharge. This will apply to a capital sum of £30,000 for those over 65 and £20,000 for those under. I do not dispute the hon. Member's point about life interests and trusts of this kind, but they are not quite as common as he thinks. I suppose that I have some people in my constituency with life interests in trusts, but they would not be all that many.
      The question raised by the hon. and learned Member for Dover and Deal was whether there should be a distinction be-
      1316
      tween investment income and earned income. The previous Conservative Chancellor, Lord Barber, said there should be such a distinction. He said:
      "it will still be necessary to retain the distinction between earned and investment income."—[Official Report, 31st March 1971; Vol. 814, c. 1387.]
      The hon. and learned Member for Dover and Deal says that there should be no distinction at all. Apparently the Conservative Opposition agree with him, because a week ago they voted to abolish the investment income surcharge on a Ten-Minute Bill. They have changed their view. Apparently they do not agree with Lord Barber. There is no great virtue in consistency and I do not complain about their change of view, but let us remember that it was a Conservative Government that introduced the investment income surcharge, with the unification of the tax system.
      10.0 p.m.
      Mr. Peter Rees: Does the right hon. Gentleman feel that the investment income surcharge could ride very easily with a wealth tax? Does he see a case for both?
      Mr. Barnett: I shall deal with that question now, although I do not like my remarks being taken out of order. Of course, if there were a wealth tax it would depend where the threshold was fixed and whether and to what extent there was in investment income surcharge. However, I concede that with a wealth tax with the kind of threshold envisaged by the hon. Member for Cornwall, North (Mr. Pardoe), it would not be reasonable also to have a surcharge. But we are not talking about that, because we do not have a wealth tax.
      The hon. and learned Member for Dover and Deal says that there should be no distinction between earned and what he called savings incomes. Not all investment income is necessarily savings income, of course. Some is inherited income—some is even income stolen in years past. The simple definition of savings is an exaggeration and an oversimplification. But we know what we mean. We are talking about the difference between income earned in a job or a business and income received from rent or investment.

      1317
      The Opposition apparently now believe that there should be no distinction. What has happened since 1972, when the then Conservative Government introduced the distinction, to change the principle? I know the arguments about where the line should be drawn, but what has changed the principle? The hon. and learned Gentleman did not tell us anything that has changed.
      Last year, the hon. Member for Cornwall, North, while saying that he did not necessarily accept the arguments for the distinction, gave many reasons for it. He said:
      "When we introduced our system, we did so on the basis that the investment income conferred on the beneficiary some advantage over and above the advantage conferred upon him by income from work."
      He went on to say that
      "in distinguishing between these two sorts of income an investment income confers a benefit because it is more permanent than income from work. A job could cease, or a man could become sick, or his working life could end. Income from investment would continue through all those circumstances."—[Official Report, 10th May 1977; Vol. 931, c. 1205.]
      In fairness, the hon. Gentleman said that he no longer accepted those arguments, but he did not say why.
      In the same debate, the hon. and learned Member for Dover and Deal, as he has done today, but not to the same degree, listed a series of anomalies within the system. But they all existed when Lord Barber introduced the distinction. What has changed?
      Mr. Alan Clark: One thing that has changed is that we have suffered inflation rates unprecedented this century.
      Mr. Barnett: With respect, that is a question of where the line should be drawn; it does not answer the question whether there should be a distinction. The answer could be simple—that the Conservatives are now in opposition.
      There is a distinction not just in this country or under the previous Conservative Government. There is a distinction in many other countries, whether by means of a wealth tax or by giving extra relief to earned income, as we used to do before the Conservatives introduced the unified tax system. There was such a distinction in this country, and the Conservatives who introduced it favoured its maintenance. The very foundation of
      1318
      the unified tax system envisaged that some investment income should attract surcharge.
      What has happened to change that distinction? We are entitled to be given the answer by the Opposition. They voted en bloc on a Ten-Minute Bill to abolish the surcharge. Tonight they are attempting to be a little more responsible. In view of their irresponsibility in the last two votes in Committee, it is somewhat surprising that they are now seeking to be more responsible. Obviously they agree in principle with the abolition of the surcharge. When it does not matter, on a Ten-Minute Bill, that is all right, but when it matters, such as in this debate, they are not prepared to advocate it.
      Certainly the hon. and learned Member for Dover and Deal this evening did not advocate abolition. I do not understand why he did not advocate it. Perhaps he still has some lingering sympathy with what was said by Lord Barber on 21st March 1972. The noble Lord then said that
      "One of the foundations of the unified tax system is that only the larger investment incomes should attract the surcharge."—[Official Report, 21st March 1972; Vol. 833. c. 1386.]
      I concede that he had in mind a higher figure, but he maintained a distinction that is now no longer accepted by the Opposition.
      I believe that the exemption of 91 per cent. of those with investment income goes a long way to meet the question where the line should be drawn. The other argument that the hon. and learned Gentleman did not deploy today relates to the disincentive to savings.
      Mr. Terence Higgins: Since the right hon. Gentleman appears to be prepared to consider where the line should be drawn, will he say where the line he is drawing compares in real terms with the line that was drawn by Lord Barber when we first introduced this concept?
      Mr. Barnett: I am happy to concede that it is drawn lower. I accept that the point at which I consider the line should be drawn is different from the Opposition's view. But what the Opposition have not argued is whether there should be a distinction at all. I have said that we have exempted from investment

      1319
      income surcharge the vast majority of people on small incomes. I concede that I would draw the line at a lower investment figure and a lower capital figure than would the Opposition. [HON. MEMBERS: "Why?"] Because I consider that we have done enough in terms of equity so far.
      The hon. and learned Gentleman also mentioned what is known as the investment strike. The argument is that because of the level of taxation on investment income, people will not save. In other words, there is a disincentive to save. No doubt the hon. and learned Gentleman did not make that point because he has probably seen the figures; he mentioned the matter in passing. I am glad that he did not make that point, and I shall make the position clear in case other Members wish to deal with it. In 1973 the personal savings ratio under the Conservative Government was 11·6 per cent.; in 1977 it was 14·6 per cent. One can do almost anything with figures, and I have probably done a fair bit in my time. But one thing that one cannot do with those figures is to prove that there is an
      1320
      investment strike or a disincentive to save because of the point at which the line has been drawn on the investment income surcharge.
      I believe that where we have drawn the line now ensures that 91 per cent. of people with investment income will not pay the surcharge, and that is a not unreasonable line. To answer the hon. Gentleman, I accept that people with investment incomes have made some sacrifices over recent years because of the levels of inflation. I do not deny that at all. But many people with earned incomes have also made sacrifices—people with very low levels of earned income.
      We in the House of Commons must draw up our priorities on levels of income and how and where we help particular levels. Having helped so large a proportion of those with investment income, I cannot believe that the Committee would now want, in a full year, to forgo approximately another £30 million, on the Opposition amendment, or certainly the £120 million of the understandably more extravagant amendment of the hon. Member for Cornwall, North. I therefore ask the Committee to reject both amendments.
      Mr. Paul Dean: The Chief Secretary has made a very disappointing response to the powerful case made by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) in moving this modest amendment. The right ron. Gentleman did not address himself at all to the anomalies and unfairnesses that exist in the present arrangement. He relied almost wholly on the negative argument that the investment income surcharge exists and, therefore, should continue to exist.
      I want briefly to put to the Chief Secretary one or two points which strongly suggest to me that the present position is very inequitable as between various people, particularly those who are retired.
      I think one can fairly say that, whereas in earlier debates on the Bill we talked about the poverty trap and the disincentive effect for those on middle incomes of the tax they are paying on their incomes, we are now talking about the savings trap, which catches people when they are most vulnerable. It catches them when they are retired and have lost their earning capacity. Many of them are on fixed incomes which are being eroded year by year by inflation. They are finding that the thrift and the saving in which they engaged, in many cases over a long working life, are turned into tax penalties as a result of the present arrangements.
      The taxation on savings is riddled with anomalies, and the investment income surcharge as at present applied makes those anomalies a great deal worse. I do not want to go into them in great detail at this hour of the night. I hope to catch the eye of the Chair shortly to move another amendment which has been selected.
      However, I want to give two examples. The worst example of unfairness is to be found among pensioners. Nearly half of those who pay the investment income surcharge are pensioners. There is a marked difference between the tax treatment of the retired person with a private occupational or public service pension and the retired person with savings income subject to investment income surcharge.
      1322
      At one extreme there is what might be described as the first-class pensioner, with an occupational pension at the maximum allowed by the Inland Revenue and with inflation-proofing. This pension is charged for tax purposes as earned income. At the other extreme there is what I describe as the second-class pensioner, with no occupational pension of any kind, through no fault of his own. He has to make do on his private savings, and he is charged on those savings as so-called unearned income. He is charged at a higher rate on an income which is less secure and which is not inflation-proofed. This is grossly unfair.
      10.15 p.m.
      Both the occupational pensioner and the person who has his savings in a private investment have in many cases saved all their working lives. In the case of the individual who does not have an occupational pension, it may very well be that the company which employed him did not have a pension scheme. It could be that he was working abroad and was ineligible as a result. It could equally be that he was self-employed or running a family business, and that all his resources during his working life were ploughed back to ensure the success of that business.
      It is people of this sort who are suffering, through no fault of their own, as a consequence of their not having occupational pensions. The Chief Secretary in his speech totally failed to address himself to the discrimination which occurs year by year between one type of pensioner, with an occupational pension and all the security which comes from that, and the other type of individual who, through no fault of his own, does not have this type of provision. The result of that is tax at a far higher rate, and in many cases at a lower level of income.
      Investment income surcharge bites at a very modest level of income. It should be recognised that 160,000 of those who are liable for the investment income surcharge have incomes below £4,000 a year. Many of these people must be pensioners, with incomes below the average wage, but in all too many cases they find that they are paying a very high rate of tax, which can very quickly reach a marginal rate of 49 per cent.
      I shall quote one typical example. I have a constituent who retired some years

      1323
      ago after a working life of 48 years. He has an income, from pension and from investment, of £4,100 a year. He reckons that last year he and his wife paid in tax over £4 a week more than a married man earning the same amount would pay. I simply do not believe that distortions of this kind in the tax system can any longer be defended. It is for these reasons that I shall support my hon. and learned Friend in the Division Lobby.
      Mr. Pardoe: I want to take up some of the points made on these amendments by the Chief Secretary. He said that the Liberals were partially supporting the Opposition amendments. In fact we are wholly supporting the Opposition amendments, because they are very nearly identical to those that we tabled. In addition we are, as the right hon. Gentleman pointed out, supporting an amendment which seeks to reduce the top rate of investment income surcharge from 15 per cent. to 10 per cent.
      I agree immediately that in the Budget the Government have made moves in the right direction on investment income surcharge and that those moves are very welcome, but I do not believe that they go far enough and I shall try to spell out my reasons for that view. We support Amendments Nos. 9 and 10, and we shall be seeking to persuade the Government also to reduce the rate of investment income surcharge.
      It is absolutely right, as the hon. and learned Member for Dover and Deal (Mr. Rees) said, that investment income surcharge should come in at a higher threshold. Even if we went back to the 1973–74 figure of £2,000, it would now be very much higher than the figure which the Government have proposed in the Bill. It is especially true that this threshold should be quite substantially higher than the Chancellor's boost in the Budget for the retired. It is the retired who draw the major part of investment income.
      The Chief Secretary has quoted my previous speech in regard to the theory of investment income surcharge, and there is no need for me to repeat it because the arguments are fairly simple. The hon. and learned Member for Dover and Deal indicated that it came about in 1907 as a result of a need to give earned income relief, but it was renewed only
      1324
      fairly recently by a Conservative Government when they brought in the unified system of taxation in the early 1970s.
      The Chief Secretary, not unnaturally and perfectly legitimately, asked the Conservative Opposition what has changed since then. The hon. and learned Member for Dover and Deal is much more positive, and has been for some time, against investment income surcharge than we hear from other spokesmen on the Conservative Front Bench. What has changed? I suspect that part of what has changed is that the hon. and learned Gentleman served his apprenticeship, as I did, on the Select Committee on wealth tax. On that occasion we listened to the arguments that were advanced ad nauseam and we had to go through the matter in incredible detail. The hon. and learned Gentleman was probably convinced, as I was, that the arguments today for the distinction between one form of income from investment and another form of income from earnings are far less than they were in 1907, for a variety of reasons.
      Although the Chief Secretary has not yet got an answer from the Conservative Party as to what has changed, I shall try to spell out some of the arguments. I think that things have changed very substantially. First, why was investment income surcharge introduced? As indicated, it was introduced because it was thought that there was a clear distinction between income from work and income from investment, largely because it was thought that income from investment was more permanent and secure. For example, if one went sick one lost one's earnings from one's work. In 1907, if one became incapacitated for some other reason—industrial injury and so on—that was virtually a catastrophe because one lost almost every part of one's income from earnings. Similarly, income from investment went on after retirement. There again, it was more secure because it went on beyond the work period of one's life.
      Does this still apply? My answer is that it does not really apply to anything like the extent as it once did. It is impossible to say that income from investments on the Stock Exchange today is more secure than, say, the income of a permanent secretary to the Treasury. I take that example at random. It is perfectly

      1325
      true to say that income from investments on the Stock Exchange is more secure than a salary of a Member of Parliament. In general, however, it would be difficult to argue that income from employment is now as insecure as it was in 1907. Certainly, with inflation and all that has happened since, income from investments is not as secure as it was in 1907.
      The difference has been blurred very substantially, although I accept that it certainly existed until quite recent times. In any case, it seems to me that the introduction of the investment income surcharge by the Conservative Party and the original introduction of the differential by a Liberal Government in 1907 were fundamentally misconceived. It was fundamentally conceived because it was an attempt to distinguish one form of wealth and another. I think that that is the fundamental mistake which was made in 1907. In other words, we tried to say that we could tax the income from wealth but that we would not tax wealth in any way that did not produce an income.
      That distorted the system in favour of the holding of wealth which did not produce income. I suppose that we may have still felt in 1907 that we were so far ahead of the rest of the field in international competitive terms that we could afford to have the loss of wealth lying around idle and not being used to its most productive effect.
      I know that this is a difficult subject for many Labour Members. I understand their reasons, and many of their prejudices in this issue I have shared in former periods. It is difficult for some of the so-called Left of politics to understand how anyone can make an argument against investment income surcharge.
      I give one illustration of why it is clearly crazy to have it now. It is clearly crazy as between the wealth that a person might have invested in industry and the wealth that he might have decided to put in to the purchase of a Rolls-Royce motor car. If he decided to buy a Rolls-Royce motor car for £20,000 and sold shares in industry worth £20,000 to do so, presumably he would forgo an 8 per cent. return on £20,000, amounting to about £1,600 a year. However, if a person is paying investment income surcharge at the top rate of 98 per cent.—that is quite possible at that level of wealth—the
      1326
      actual return is 2p in the pound. From a return on the investment of £1,600 there is a net return of only £32. The net cost of transferring £20,000 of investment in industry to consumption in a Rolls-Royce is only £32 a year. That illustrates how crazy investment income surcharge is in present circumstances.
      The real distinction is not between one form of income and another but between wealth and income. That is why it is far preferable to abolish the surcharge and to get on with reforming capital taxation. That is not the view of someone who does not care about investment in British industry. Interestingly enough, in the most definitive study of small businesses by Graham Bannock, entitled "The Smaller Business in Britain and Germany", produced under the auspices of the Anglo-German Foundation, it is stated:
      "Capital Transfer tax and the proposed wealth tax are causing great concern among small business owners. Our research, however, suggests that concern over the effects of capital taxes upon the small business sector as a whole may be exaggerated. The problem in the United Kingdom appears to be one of low birth and growth rates in the small business sector, not of high death rates."
      It continues:
      "If it is true, as it appears to be, that there is more public concern over the qualities of wealth and opportunity, including opportunities to participate in the control of the work situation, than of income, then economic and social interests might well both be served by a shift from the taxation of income to that of consumption and wealth."
      I agree entirely with that view. I think that it would fit in with the Government's industrial strategy.
      We have the factor that the present investment income surcharge is out of date. In my view, arguments that once applied in its favour no longer apply and we can well look forward to its abolition. That is what the House of Commons should do in its regard for the totality of tax reforms.
      We also have the distorting effect of the investment income surcharge between one form of investment and another. The right hon. Member for Down, South (Mr. Powell) said in the debate on Second Reading that income tax is a splendid tax in so far as any tax is splendid—I enter that caveat immediately—because it has a less distorting effect than other taxes. However, it seems that it

      1327
      has a distorting effect in many ways, especially between one form of investment and another.
      We have the fact that investment income, if one invests privately in industry, in a small business, on the Stock Exchange or wherever, is taxed at extremely high rates, whereas if the money is invested in a pension fund through institutional means the surcharge is escaped and there is a host of other tax advantages built into the whole pension fund system. For that reason, far too much of the high savings ratio—the right hon. Gentleman perfectly fairly quoted that—is going into Government stock and far too little is going into the growth sector of industry. That means the generation and birth rate of small businesses. That is the answer to the Chief Secretary.
      10.30 p.m.
      It is not that we have too few savings. The savings ratio is high. I do not go along with the idea that there is an investment strike. But a distortion is built into the investment income surcharge against investment in industry. I believe that industrial strategy requires that we move towards the abolition—not just changing the thresholds—of the investment income surcharge over three years.
      The Chief Secretary will say that it is very expensive and that the Liberals are going to give away another £100 million. But he knows that he has been virtually guaranteed, in so far as it is within the power of anyone in the Committee to guarantee anything, the votes of the Liberal Party for the introduction of a wealth tax. The Liberal Party has not stopped the Government from introducing a wealth tax. I have begged the right hon. Gentleman on bended knee to introduce a wealth tax—[HON. MEMBERS: "Oh."]—as a substitute for the investment income surcharge and the top rates of income tax above 50 per cent. If the Government had introduced a wealth tax as a quid pro quo for those two things—the abolition of investment income surcharge and of all rates of income tax above 50 per cent. on earned income—we would have a much more sensible income tax system than we have today.
      Unfortunately, the right hon. Gentleman will now hope to get a majority to introduce some ghastly abortion of a
      1328
      wealth tax dreamt up by the Labour Party executive committee. It will be a horror. It will be imposed on top of all other forms of income tax and so on. It will destroy all the entrepreneurial flair which still exists in British industry. I beg the right hon. Gentleman again to consider that this is the right way to proceed. Even now it is not too late to introduce a wealth tax. There is time between now and July or October or whenever it is. It would be a far better thing to do. The Chief Secretary should not come at me about the amendment costing the Government another £100 million. We shall replace every penny of this investment income surcharge revenue with a wealth tax, and we shall be better off for it.
      Mr. Higgins: I am glad to have the opportunity of supporting the amendment moved by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees). It would have the effect of raising the figure at which investment income surcharge becomes effective from £1,700 to £2,000 for those under 65 and from £2,500 to £3,000 for those over 65.
      I am particularly anxious to support the amendment because it is a matter of great concern to my constituents, especially those over 65. The only point that worried me in my hon. and learned Friend's remarks was his reference to Mr. Hugh Scanlon. I discovered earlier today, somewhat to my surprise, that in Worthing town hall Mr. Scanlon and his members were having a discussion in one room while I and members of the Worthing Conservative Association were having a discussion in another room. It was perhaps a shame that some of my members did not have the opportunity of speaking to Mr. Scanlon and his colleagues and stressing how much those who are retired and living on fixed incomes have suffered from inflation and the taxation policies of the Government. I do not believe that if they had had such an opportunity they would have found so unsympathetic a response as we have had from the Chief Secretary this evening.
      The right hon. Gentleman's argument was so weak that he concentrated largely on the principle of whether there should be an investment income surcharge. I should be happy to debate that matter with him at great length if he cared to persuade the Leader of the House to

      1329
      provide time to do so. But that is not what we are debating this evening. The fact that the Chief Secretary, with his customary skill, found it necessary to produce a red herring of that kind showed how weak his argument was.
      Looking at the recent history of the matter, one sees that the fact is that one of the Government's first actions was to lower the rate at which investment income surcharge became payable, particularly for pensioners, thereby making it a much harsher tax and far less favourable to those living on investment income than the proposals that were put forward, as the Chief Secretary said, by the present Lord Barber in his 1972 Budget. When I intervened, the Chief Secretary suggested that what is now proposed by the Government is as equitable as they can make it.
      The truth is that even what is proposed in the Finance Bill is significantly harsher than the harsh measures that the Chancellor himself introduced in his first Budget when he came into office. In real terms, he would have to raise the limit, as my hon. and learned Friend suggested, to about £4,400, and still that would put these people back only to the position they were in in 1972.
      The question has been asked: what has changed since then? Of course, those living on fixed incomes and those paying investment income surcharge have experienced an appalling rate of inflation, which has probably affected their real incomes more than it has affected the incomes of any other group in the country. The problem for them is that, although the national insurance pension may be raised perhaps faster than the rate of inflation, their overall income, including the investment income which they derive from their savings, has declined.
      There are very few ways in which any Government can help people in this group. It is a difficult thing to do. But one of the few ways in which it can be done is the way in which the previous Conservative Government did it, that is, by making a concession—that is not really the right word—by making an allowance which will give some relief to pensioners, in particular, on their investment income. Even if the figure were raised to £4,400, it would still be inadequate to prevent the fall in their real incomes, but it would do something to help them.
      1330
      But the Chief Secretary is not even prepared to go that far. He is prepared only to make a very moderate concession, which is quite inadequate to compensate for the ravages which have been wrought on those on fixed incomes by the present Government. In this case "ravages" is the right word, because the effect has been traumatic. People who retired perhaps 10, 15 or 20 years ago, believing that their savings would keep them in a reasonable standard of life for the rest of their time, have been appallingly penalised by this Government. I therefore support these amendments.
      The Chief Secretary made no attempt whatever to justify the harshness of what he is proposing and the inadequacy of the change that he is putting before the Committee. He specified the figures in terms of £5 million in a part year and £30 million, I understand, in a full year. But to suppose that those figures would have the slightest significance in terms of economic management, in terms of what the effect would be, for example, on Table 5 in the Red Book, is utter rubbish. It is pure prejudice which leads the right hon. Gentleman and his hon. Friends to refuse to give an adequate allowance, or some small allowance, to compensate for some of the effects of inflation.
      I hope that we shall carry this amendment as we carried the earlier one. It is beyond my comprehension that anyone who has said that he is in opposition to the present Government would not support it. But, taking all the measures which have been carried by the Committee so far, I hope we shall not merely say that it is up to the Government to suggest what should be done to offset the changes. It is for the House of Commons, having carried the amendments, to choose among the various courses open to us. Certainly, it would be wrong to seek to do so by increasing employers' national insurance contributions.
      My firm view is that the right course is to raise the standard rate of value added tax to 10 per cent. If we do that, no charge of irresponsibility can be levelled against us by the Government in these debates.
      I wish to approach the matter now from the precise record of what the Chief Secretary said in the Budget debate. It is extraordinary to discover that, weeks later, the right hon. Gentleman's speech

      1331
      has still not been printed in the Official Report. The right hon. Gentleman suggested that we on this side were in some sense suffering from schizophrenia. I suggested that the Government themselves were very much suffering from schizophrenia, because what they were doing was cutting taxes at the same time as they were putting up interest rates.
      The Chief Secretary was inclined to pooh-pooh that idea. Since then, however, the Government have had a further massive increase in interest rates. The reality is that they are seeking to finance their tax cuts by borrowing and they have had to put up interest rates. It is high time that we had a clearer estimate from the Government—in the light of the amendments which have been carried—of how much of the borrowing requirement they expect to borrow from the non-bank public.
      The passing of these amendments would do something to encourage savings and to suggest to people that in the longer term savings will yield a return which at least does something to compensate for postponement of consumption. In that context, it is important to define saving in that way. It is a postponement of consumption.
      The amendment should be carried because it would go a little way to compensate for the effect which Government measures have had on those on fixed incomes. It would do something to help those who have saved and who must go on saving if our economy is to be put on a sound footing. I support the amendment, which I hope will be pressed to a Division.
      Mr. Powell: The hon. Member for Cornwall, North (Mr. Pardoe) referred, as others have done, to my almost celebrated laudation of income tax as a tax—laudation which was based, among other things, upon the contention that it is inherently more neutral than most other forms of tax. I did not, of course, mean that income tax as at present levied in all its aspects is neutral, and certainly the Committee has before it one of the distortions in the levying of income tax which, if ever it was justified, has in my opinion ceased to be justified.
      The Chief Secretary was unreasonable in making it the chief basis of his reply
      1332
      to the hon. and learned Member for Dover and Deal (Mr. Rees) that the Opposition showed a strong disposition to resile from the position taken up in the revision of income tax in 1972 and to move towards the view that the distinction between earned and unearned income for purposes of tax was no longer justified.
      I believe that there are cycles through which some form of taxation enjoys first an irrational popularity and then afterwards, and only gradually, we come to perceive that the supposed arguments are unsound. If that process is of a gradual and hesitating character, and if it is going in the right direction, it can be supported. My right hon. and hon. Friends will certainly support the amendment before the Committee on that ground. But it would be much easier, logically, to argue for the entire abolition of the distinction between the two forms of income than for alteration in the thresholds or modalities with which that distinction is made.
      The reasons which were given at the inception of the distinction—admittedly in the reverse way by a preference for earned income in 1907—and which were examined by the Royal Commission on the Taxation of Profits and Income some 40 years or more later were probably never seriously meant. My guess is that the Chancellor of the Exchequer in 1907 wanted to make a remission of income tax in what he judged in the political circumstances of the time to be the most popular form and that he thought up a rationale to fit what he was in in any case intending to do. If the rationale would bear examination in the circumstances of 1907, it certainly does not bear examination in the circumstances of 1978.
      10.45 p.m.
      The basic argument advanced is that there are hidden costs and uncertainties attached to earned income which do not attach to unearned or investment income. I doubt whether that was ever valid. The argument originally was that a person dependent upon earned income had nevertheless to take measures to protect himself against loss of that income through sickness, unemployment, retirement and other eventualities. But presumably, if he was to charge his income in order to protect himself against those eventualities, he must have done so by savings. He must have done so with the intention of

      1333
      living upon the yield of his savings. Therefore, it was inherently contradictory to make an allowance for earned income and then tax the produce of the savings which were supposed to be one of the grounds for making that allowance in favour of earned income.
      I would not have thought that it was seriously considered to be possible in the circumstances of the late 1970s to pretend that less uncertainty attaches today to the sources of investment income than to the sources of earned income, as earned income is now classified and defined, including, of course, many forms of pension, which are much more secure than income derived from investments. It is simply not true that an investment can be left to produce an assured income year after year. Quite apart from inflation, investments have to be looked after and turned over and changed in relation to the economic changes. A considerable responsibility attaches to those who have the duty of maintaining a given income from investment. Therefore work, responsibility and uncertainty attach to the income derived from investment, quite apart from inflation.
      The fact of inflation, however, on the scale we have known it, which would have seemed unimaginable and crazy before the First World War, has made nonsense of the claim that investment income has some peculiar degree of security. Inflation has hit different forms of investment arbitrarily and differentially, and it has removed any foundation which could exist for treating investment income as such as superior to other forms of income in its security.
      Therefore, I believe that we are moving—I would sense, with the acquiescence of both sides of the Committee—towards abolishing what has now become an obsolete distinction between two forms of income. As a move in that direction, my right hon. and learned Friends and I welcome the amendment.
      Mr. Giles Shaw: I wish particularly to support the amendment concerned with the elderly retired. A Mr. A. V. Duncan is running a campaign in my constituency. He has written to practically all those on the Treasury Bench and most members of those on my own Front Bench in support of the campaign for the elderly retired. His point
      1334
      is that when we talk about income surcharge on the retired we are talking of a group so many of whom are in the 80-plus age group. Mr. Duncan is in his eightieth year.
      These persons had no alternative but to save and invest for their retirement. The group is decreasing in number. It can hardly come outside the competence of the Government, given that the Chief Secretary has spoken of equity in this matter. I ask him to remember the 80-plus age group when he replies to the debate.
      Mr. Peter Rees: We have had a short but important debate. In the course of it, particularly from the Opposition side, there has been a careful examination of some of the fundamental questions which are posed by our tax system.
      I found myself in some sympathy with the approach of the right hon. Member for Down, South (Mr. Powell), who said that, logically, we are being driven away from an investment income surcharge and from the distinction between earned and unearned income. The difficulty is that it is hard to detect much logic in our existing system of direct taxation. That is why we have put down amendments which are not of quite so fundamental a nature. How far we can take them on another occasion remains to be seen.
      The hon. Member for Cornwall, North (Mr. Pardoe) has looked beyond Mr. Asquith, who bears responsibility for the introduction of earned income relief, to Mr. Gladstone, whose views in 1853 deserve reading and rereading. I commend them in particular to the Chief Secretary, who might be disposed to follow his example, particularly in the care of the candle ends of public expenditure.
      The Chief Secretary flinched from all the serious points put to him from this side of the Committee and asked a little plaintively—and uncharacteristically, because he is normally more buoyant in his arguments, but perhaps he was sobered by the happenings of today and Monday—what had changed since Lord Barber introduced the investment income surcharge. A number of my hon. Friends have pointed out that it was only a reversal of the earned income relief and that it was not, perhaps, such a novel concept.

      1335
      Alas, a great variety of things have changed since 1973–74. Even after the glorious events of Monday, we are dealing with a basic rate of 33 per cent. We are not dealing with the same higher rates as those introduced by the noble Lord. We have had to endure the introduction of capital transfer tax and the Chief Secretary and his right hon. Friends have presided over unprecedented inflation. This has entirely transformed the fiscal scene.
      My hon. Friends the Members for Pudsey (Mr. Shaw), Worthing (Mr. Higgins) and Somerset, North (Mr. Dean) have drawn attention to categories of taxpayer who are suffering acutely from the tax regime in general and the rates of investment income surcharge in particular.
      The Chief Secretary did not condescend to deal with any of the anomalies, because they defeat even his oratorical ingenuity. The substance of his argument was that he and right hon. Friends had been sufficiently generous and that a cost of £30 million was more than he could support.
      A cost of £30 million when the yield of income tax—at least, before Monday—is likely to be £19 billion this year does not strike me as a convincing, profound
      or cogent argument. The Chief Secretary has shown himself, uncharacteristically perhaps, to be niggardly and ungenerous.
      The philosophy underlying the tax system as the right hon. Gentleman and his right hon. Friends, though perhaps not his hon. Friends below the Gangway, see it is that it is all right, as the Chancellor of the Duchy of Lancaster reminded us, for those with £10 million because they can afford to dispense with their income. The rest of us are of no concern to the Treasury Front Bench.
      Mr. Dennis Canavan: Hear, hear.
      Mr. Rees: The hon. Member for West Stirlingshire (Mr. Canavan) remained silent during this debate, but I have no doubt that there will be other occasions when we can hear his special contributions. He has confirmed our suspicions.
      Those are sentiments with which we can have no truck. We find the Government to be cold and repellent. I invite my right hon. and hon. Friends to support the amendment.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 275, Noes 289.

      Division No. 203]

      AYES

      [10.54 p.m.

      Adley Robert

      Carson, John

      Fookes, Miss Janet

      Aitken, Jonathan

      Chalker, Mrs Lynda

      Forman, Nigel

      Alison, Michael

      Channon, Paul

      Fowler, Norman (Sutton C'f'd)

      Arnold, Tom

      Churchill, W. S.

      Fox, Marcus

      Atkins, Rt Hon H. (Spelthorne)

      Clark, Alan (Plymouth, Sutton)

      Fraser, Rt Hon H. (Stafford & St)

      Atkinson, David (Bournemouth, East)

      Clark, William (Croydon S)

      Freud, Clement

      Awdry, Daniel

      Clarke, Kenneth (Rushcliffe)

      Fry, Peter

      Baker, Kenneth

      Clegg, Walter

      Galbraith, Hon T.G. D.

      Banks, Robert

      Cockcroft, John

      Gardiner, George (Reigate)

      Beith, A. J.

      Cooke, Robert (Bristol W)

      Gardner, Edward (S Fylde)

      Bell, Ronald

      Cope, John

      Gilmour, Rt Hon Ian (Chesham)

      Bendall, Vivian (Ilford North)

      Cormack, Patrick

      Gilmour, Sir John (East Fife)

      Bennett, Sir Frederic (Torbay)

      Costain, A. P.

      Glyn, Dr Alan

      Benyon, W.

      Craig, Rt Hon W. (Belfast E)

      Godber, Rt Hon Joseph

      Berry, Hon Anthony

      Critchley, Julian

      Goodhart, Philip

      Biffen, John

      Crouch, David

      Goodlad, Alastair

      Biggs-Davidson, John

      Crowder F. P.

      Gorst, John

      Blaker, Peter

      Davies, Rt Hon J. (Knutsford)

      Gower, Sir Raymond (Barry)

      Body, Richard

      Dean, Paul (N Somerset)

      Grant, Anthony (Harrow C)

      Boscawen, Hon Robert

      Dodsworth, Geoffrey

      Gray, Hamish

      Bottomley, Peter

      Douglas-Hamilton, Lord James

      Griffiths, Eldon

      Bowden, A. (Brighton, Kemptown)

      Drayson, Burnaby

      Grist, Ian

      Boyson, Dr Rhodes (Brent)

      du Cann, Rt Hon Edward

      Grylls, Michael

      Bradford, Rev Robert

      Dunlop, John

      Hall-Davis, A. G. F.

      Braine, Sir Bernard

      Durant, Tony

      Hamilton, Archibald (Epsom & Ewell)

      Brittan, Leon

      Dykes, Hugh

      Hamilton, Michael (Salisbury)

      Brocklebank-Fowler, C.

      Eden, Rt Hon Sir John

      Hampson, Dr Keith

      Brooke, Peter

      Edwards, Nicholas (Pembroke)

      Hannam, John

      Brotherton, Michael

      Elliott, Sir William

      Harrison, Col Sir Harwood (Eye)

      Bryan, Sir Paul

      Emery, Peter

      Harvie Anderson, Rt Hon Miss

      Buchanan-Smith, Alick

      Eyre, Reginald

      Haselhurst, Alan

      Buck, Antony

      Fairbairn, Nicholas

      Hastings, Stephen

      Budgen, Nick

      Farr, John

      Hayers, Rt Hon Sir Michael

      Bulmer, Esmond

      Fell, Anthony

      Hawkins, Paul

      Burden, F. A.

      Finsberg, Geoffrey

      Hayhoe, Barney

      Butler, Adam (Bosworth)

      Fisher, Sir Nigel

      Heseltine, Michael

      Hicks, Robert

      Mayhew, Patrick

      St. John-Stevas, Norman

      Higgins, Terence L.

      Meyer, Sir Anthony

      Scott, Nicholas

      Hodgson, Robin

      Miller, Hal (Bromsgrove)

      Shaw, Giles (Pudsey)

      Holland, Philip

      Mills, Peter

      Shelton, William (Streatham)

      Hooson, Emlyn

      Miscampbell, Norman

      Shepherd, Colin

      Hordern, Peter

      Mitchell, David (Basingstoke)

      Shersby, Michael

      Howe, Rt Hon Sir Geoffrey

      Moate, Roger

      Silvester, Fred

      Howell, David (Guildford)

      Molyneaux, James

      Sims, Roger

      Howells, Geraint (Cardigan)

      Monro, Hector

      Sinclair, Sir George

      Hunt, David (Wirral)

      Montgomery, Fergus

      Skeet, T. H. H.

      Hunt, John (Ravensbourne)

      Moore, John (Croydon C)

      Smith, Cyril (Rochdale)

      Hurd, Douglas

      More, Jasper (Ludlow)

      Smith, Dudley (Warwick)

      Hutchison, Michael Clark

      Morgan, Geraint

      Smith, Timothy John (Ashfield)

      Irving, Charles (Cheltenham)

      Morris, Michael (Northampton S)

      Speed, Keith

      James, David

      Morrison, Charles (Devizes)

      Spence, John

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

      Morrison, Hon Peter (Chester)

      Spicer, Michael (S Worcester)

      Jessel, Toby

      Mudd, David

      Sproat, Iain

      Johnson Smith, G. (E Grinstead)

      Neave, Airey

      Stainton, Keith

      Johnston, Russell (Inverness)

      Neubert, Michael

      Stanbrook, Ivor

      Jones, Arthur (Daventry)

      Newton, Tony

      Stanley, John

      Jopling, Michael

      Nott, John

      Steel, Rt Hon David

      Joseph, Rt Hon Sir Keith

      Onslow, Cranley

      Steen, Anthony (Wavertree)

      Kaberry, Sir Donald

      Oppenheim, Mrs Sally

      Stewart, Ian (Hitchin)

      Kershaw, Anthony

      Page, John (Harrow West)

      Stokes, John

      Kimball, Marcus

      Page, Rt Hon R. Graham (Crosby)

      Stradling Thomas, J.

      King, Evelyn (South Dorset)

      Page, Richard (Workington)

      Tapsell, Peter

      King, Tom (Bridgwater)

      Paisley, Rev Ian

      Taylor, R. (Croydon NW)

      Kitson, Sir Timothy

      Pardoe, John

      Tebbit, Norman

      Knight, Mrs Jill

      Parkinson, Cecil

      Temple-Morris, Peter

      Knox, David

      Pattie, Geoffrey

      Thatcher, Rt Hon Margaret

      Lamont, Norman

      Penhaligon, David

      Thomas, Rt Hon P. (Hendon S)

      Langford-Holt, Sir John

      Percival, Ian

      Thorpe, Rt Hon Jeremy (N Devon)

      Latham, Michael (Melton)

      Peyton, Rt Hon John

      Townsend, Cyril D.

      Lawrence, Ivan

      Pink, R. Bonner

      Trotter, Neville

      Lawson, Nigel

      Powell, Rt Hon J. Enoch

      van Straubenzee, W. R.

      Lester, Jim (Beeston)

      Prentice, Rt Hon Reg

      Vaughan, Dr Gerald

      Lewis, Kenneth (Rutland)

      Price, David (Eastleigh)

      Viggers, Peter

      Loveridge, John

      Prior, Rt Hon James

      Wainwright, Richard (Colne V)

      Luce, Richard

      Pym, Rt Hon Francis

      Wakeham, John

      McAdden, Sir Stephen

      Raison, Timothy

      Walder, David (Clitheroe)

      McCrindle, Robert

      Rathbone, Tim

      Walker, Rt Hon P. (Worcester)

      McCusker, H.

      Rees, Peter (Dover & Deal)

      Wall, Patrick

      Macfarlane, Neil

      Rees-Davies, W. R.

      Walters, Dennis

      MacGregor, John

      Renton, Rt Hon Sir D. (Hunts)

      Warren, Kenneth

      MacKay, Andrew (Stechford)

      Renton, Tim (Mid-Sussex)

      Weatherill, Bernard

      Macmillan, Rt Hon M. (Farnham)

      Rhodes, James R.

      Wells, John

      McNair-Wilson, M. (Newbury)

      Ridley, Hon Nicholas

      Whitelaw, Rt Hon William

      McNair-Wilson, P. (New Forest)

      Ridsdale, Julian

      Whitney, Raymond (Wycombe)

      Madel, David

      Rifkind, Malcolm

      Wiggin, Jerry

      Marshall, Michael (Arundel)

      Rippon, Rt Hon Geoffrey

      Winterton, Nicholas

      Marten, Neil

      Roberts, Wyn (Conway)

      Wood, Rt Hon Richard

      Mates, Michael

      Rodgers, Sir John (Sevenoaks)

      Young, Sir G. (Ealing, Acton)

      Mather, Carol

      Ross, Stephen (Isle of Wight)

      Younger, Hon George

      Maude, Angus

      Ross, William (Londonderry)

      Maudling, Rt Hon Reginald

      Rossi, Hugh (Hornsey)

      TELLERS FOR THE AYES:

      Mawby, Ray

      Royle, Sir Anthony

      Mr. Spencer Le Marchant and

      Maxwell-Hyslop, Robin

      Sainsbury, Tim

      Mr. Michael Roberts.

      NOES

      Abse, Leo

      Brown, Hugh D. (Provan)

      Crawshaw, Richard

      Allaun, Frank

      Brown, Robert C. (Newcastle W)

      Crowther, Stan (Rotherham)

      Anderson, Donald

      Buchan, Norman

      Cryel, Bob

      Archer, Rt Hon Peter

      Buchanan, Richard

      Cunningham, Dr J. (Whiteh)

      Armstrong, Ernest

      Callaghan, Rt Hon J. (Cardiff SE)

      Davidson, Arthur

      Ashley, Jack

      Callaghan, Jim (Middleton & P)

      Davies, Bryan (Enfield N)

      Ashton, Joe

      Campbell, Ian

      Davies, Rt Hon Denzil

      Atkins, Ronald (Preston N)

      Canavan, Dennis

      Davies, Ifor (Gower)

      Atkinson, Norman

      Cant, R. B.

      Davis, Clinton (Hackney C)

      Bain, Mrs Margaret

      Carmichael, Neil

      Deakins, Eric

      Barnett, Guy (Greenwich)

      Carter, Ray

      Dean, Joseph (Leeds West)

      Barnett, Rt Hon Joel (Heywood)

      Carter-Jones, Lewis

      Dell, Rt Hon Edmund

      Bates, Alf

      Cartwright, John

      Dempsey, James

      Bean, R. E.

      Castle, Rt Hon Barbara

      Dewar, Donald

      Benn, Rt Hon Anthony Wedgwood

      Clemitson, Ivor

      Doig, Peter

      Bennett, Andrew (Stockport N)

      Cocks, Rt Hon Michael (Bristol S)

      Dormand, J. D.

      Bidwell, Sydney

      Cohen, Stanley

      Douglas-Mann, Bruce

      Bishop, Rt Hon Edward

      Coleman, Donald

      Duffy, A. E. P.

      Blenkinsop, Arthur

      Colquhoun, Ms Maureen

      Dunn, James A.

      Boardman, H.

      Concannon, Rt Hon John

      Dunnett, Jack

      Booth, Rt Hon Albert

      Conlan, Bernard

      Eadie, Alex

      Boothroyd, Miss Betty

      Cook, Robin F. (Edin C)

      Edge, Geoff

      Bottomley, Rt Hon Arthur

      Corbett, Robin

      Ellis, John (Brigg & Scun)

      Boyden, James (Bish Auck)

      Cox, Thomas (Tooting)

      English, Michael

      Bradley, Tom

      Craigen, Jim (Maryhill)

      Ennals, Rt Hon David

      Bray, Dr Jeremy

      Crawford, Douglas

      Evans, Fred (Caerphilly)

      1338

      1339

      Evans, Gwynfor (Carmarthen)

      Lomas, Kenneth

      Sandelson, Neville

      Evans, Ioan (Aberdare)

      Loyden, Eddie

      Sedgemore, Brian

      Evans, John (Newton)

      Luard, Evan

      Selby, Harry

      Ewing, Harry (Stirling)

      Lyon, Alexander (York)

      Sever, John

      Faulds, Andrew

      Lyons, Edward (Bradford W)

      Shaw, Arnold (Ilford South)

      Fernyhough, Rt Hon E.

      McCartney, Hugh

      Sheldon, Rt Hon Robert

      Fitt, Gerard (Belfast W)

      MacCormick, Iain

      Shore, Rt Hon Peter

      Flannery, Martin

      McDonald, Dr Oonagh

      Short, Mrs Renée (Wolv NE)

      Fletcher, Ted (Darlington)

      McElhone, Frank

      Silkin, Rt Hon S. C. (Dulwich)

      Foot, Rt Hon Michael

      McGuire, Michael (Ince)

      Sillars, James

      Ford, Ben

      MacKenzie, Rt Hon Gregor

      Silverman, Julius

      Forrester, John

      Maclennan, Robert

      Skinner, Dennis

      Fowler, Gerald (The wrekin)

      McMillan, Tom (Glasgow C)

      Smith, John (N Lanarkshire)

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

      McNamara, Kevin

      Snape, Peter

      Freeson, Rt Hon Reginald

      Madden, Max

      Spearing, Nigel

      Garrett, John (Norwich S)

      Magee, Bryan

      Spriggs, Leslie

      Garrett, W. E. (Wallsend)

      Mahon, Simon

      Stallard, A. W.

      George, Bruce

      Mallalieu, J. P. W.

      Stewart, Rt Hon Donald

      Gilbert, Rt Hon Dr John

      Marks, Kenneth

      Stewart, Rt Hon M. (Fulham)

      Ginsburg, David

      Marshall, Dr Edmund (Goole)

      Stoddart, David

      Goldlng, John

      Marshall, Jim (Leicester S)

      Stott, Roger

      Gould, Bryan

      Mason, Rt Hon Roy

      Strauss, Rt Hon G. R.

      Gourlay, Harry

      Meacher, Michael

      Summerskill, Hon Dr Shirley

      Graham, Ted

      Mellish, Rt Hon Robert

      Swain, Thomas

      Grant, John (Islington C)

      Mendelson, John

      Taylor, Mrs Ann (Bolton W)

      Grocott, Bruce

      Mikardo, Ian

      Thomas, Dafydd (Merioneth)

      Hamilton, W. W. (Central Fife)

      Millan, Rt Hon Bruce

      Thomas, Jeffrey (Abertillery)

      Hardy, Peter

      Miller, Dr M. S. (E Kilbride)

      Thomas, Mike (Newcastle E)

      Harrison, Rt Hon Walter

      Mitchell, Austin

      Thomas, Ron (Bristol NW)

      Hart, Rt Hon Judith

      Molloy, William

      Thompson, George

      Hattersley, Rt Hon Roy

      Moonman, Eric

      Thorne, Stan (Preston S)

      Hayman, Mrs Helene

      Morris, Alfred (Wythenshawe)

      Tierney, Sydney

      Healey, Rt Hon Denis

      Morris, Rt Hon Charles R.

      Tilley, John (Lambeth, Central)

      Heffer, Eric S.

      Morris, Rt Hon J. (Aberavon)

      Tinn, James

      Henderson, Douglas

      Moyle, Roland

      Tomlinson, John

      Hooley, Frank

      Mulley, Rt Hon Frederick

      Tomney, Frank

      Horam, John

      Murray, Rt Hon Ronald King

      Torney, Tom

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

      Newens, Stanley

      Tuck, Raphael

      Hoyle, Doug (Nelson)

      Noble, Mike

      Urwin, T. W.

      Huckfield, Les

      Oakes, Gordon

      Varley, Rt Hon Eric G.

      Hughes, Rt Hon C. (Anglesey)

      Ogden, Eric

      Wainwright, Edwin (Dearne V)

      Hughes, Robert (Aberdeen N)

      O'Halloran, Michael

      Walker, Harold (Doncaster)

      Hughes, Roy (Newport)

      Orbach, Maurice

      Walker, Terry (Kingswood)

      Hunter, Adam

      Orme, Rt Hon Stanley

      Ward, Michael

      Irvine, Rt Hon Sir A. (Edge Hill)

      Ovenden, John

      Watkins, David

      Irving, Rt Hon S. (Dartford)

      Owen, Rt Hon Dr David

      Watkinson, John

      Jackson, Colin (Brighouse)

      Padley, Walter

      Watt, Hamish

      Jackson, Miss Margaret (Lincoln)

      Park, George

      Weitzman, David

      Janner, Greville

      Parker, John

      Wellbeloved, James

      Jay, Rt Hon Douglas

      Parry, Robert

      Welsh, Andrew

      Jeger, Mrs Lena

      Pavitt, Laurie

      White, Frank R. (Bury)

      Jenkins, Hugh (Putney)

      Pendry, Tom

      White, James (Pollok)

      John, Brynmor

      Perry, Ernest

      Whitehead, Philip

      Johnson, James (Hull West)

      Phipps, Dr Colin

      Whitlock, William

      Jones, Alec (Rhondda)

      Price, C. (Lewisham W)

      Wigley, Dafydd

      Jones, Barry (East Flint)

      Price, William (Rugby)

      Willey, Rt Hon Frederick

      Jones, Dan (Burnley)

      Radice, Giles

      Williams, Rt Hon Alan (Swansea W)

      Judd, Frank

      Rees, Rt Hon Merlyn (Leeds S)

      Williams, Alan Lee (Hornch'ch)

      Kaufman, Gerald

      Reid, George

      Williams, Rt Hon Shirley (Hertford)

      Kerr, Russell

      Richardson, Miss Jo

      Wilson, Gordon (Dundee E)

      Kilroy-Silk, Robert

      Roberts, Albert (Normanton)

      Wilson, Rt Hon Sir Harold (Huyton)

      Kinnock, Neil

      Roberts, Gwilym (Cannock)

      Wilson, William (Coventry SE)

      Lambie, David

      Robinson, Geoffrey

      Wise, Mrs Audrey

      Lamborn, Harry

      Roderick, Caerwyn

      Woodall, Alec

      Lamond, James

      Rodgers, George (Chorley)

      Woof, Robert

      Latham, Arthur (Paddington)

      Rodgers, Rt Hon William (Stockton)

      Wrigglesworth, Ian

      Lee, John

      Rooker, J. W.

      Young, David (Bolton E)

      Lestor, Miss Joan (Eton & Slough)

      Roper, John

      Lever, Rt Hon Harold

      Rose, Paul B.

      TELLERS FOR THE NOES:

      Lewis, Arthur (Newham N)

      Ross, Rt Hon W. (Kilmarnock)

      Mr. Joseph Harper and

      Lewis, Ron (Carlisle)

      Rowlands, Ted

      Mr. James Hamilton.

      Litterick, Tom

      Ryman, John

      Question accordingly negatived.
      Mr. Pardoe: I beg to move Amendment No. 13, in page 10, line 23, after 'who', insert 'either'.
      The First Deputy Chairman (Sir Myer Galpern): With this amendment we are to take Amendment No. 16, in page 10, line 25, after 'more', insert
      1340
      'or who proves that at any time in the year of assessment—

      (a) that he has living with him a child of his with respect to whom the conditions set out in section 10(2) of the Taxes Act 1970 have been fulfilled, or

      (b) has custody of and maintains at his own expense a child (other than a child of his) provided that the said conditions have been fulfilled, and

      1341

      (c) is a person coming within the definition set out in subsection (1) of section 14 of the Taxes Act 1970'.

      Mr. Pardoe: Everyone in the Committee accepts that there is a difference in the threshold at which we pay investment income surcharge according to whether we are over or under retirement age. The Bill provides that those under retirement age start paying the surcharge above an investment income of £1,700 while those over retirement age start paying it at an investment income of £2,500.
      The whole point of the amendment is that there are other groups in society, apart from those over retirement age, who are equally entitled to this kind of distinction. The amendment refers to single-parent families, who have many of the same sort of disadvantages as the retired. [Interruption.]
      The First Deputy Chairman: Order. There is far too much conversation going on in the Chamber. I am having great difficulty in hearing the hon. Gentleman.
      Mr. Pardoe: Single-parent families might well be said to have disadvantages over and above those suffered by people over retirement age. In particular, such parents cannot necessarily work full-time and, therefore, may have to rely to a greater extent on income from savings. They may incur additional expenses in having a child looked after while they are working. Normally the husband would have the assistance of a wife, and vice versa, in looking after a child or children.
      The amendment simply seeks to apply the retirement threshold for investment income to single-parent families. I hope that the Government will be prepared to accept the argument for that.
      The Financial Secretary to the Treasury (Mr. Robert Sheldon): The amendment provides that those with a higher tax threshold because they are over 65 will find that the same provisions apply to those eligible for the additional personal
      allowance. The amendment is designed to assist single-parent families. But it is a rather surprising amendment that seeks to produce, in an investment income surcharge that has certain specially advantageous rates only for the elderly, an extension to those who qualify for the additional personal allowance.
      The Government have implemented the Finer Report, which produced the proper way to handle these problems. That means giving the additional personal allowance, and this year we have increased it to £550 a year. This is clearly a much better way of helping those with single-parent responsibilities.
      If we were to accept the amendment, it would mean that we would help the minority of single parents who have investment income. Those with investment income based on a capital of about £20,000 at present have relief from the surcharge. Those with a capital of less than £20,000 pay no investment income surcharge. I find it an odd provision to assist those single-parent families with rather more than £20,000. These are considerable sums of capital, and considerable sums of unearned income arise from them.
      If the amendment were accepted, it would do nothing for single parents who rely on their earnings to support their children and nothing for those who, because of their family responsibility, have to rely on their pensions. The proper way to help such people is through the additional personal allowance, giving them special reliefs for taxation on earned income; and for those who are not able to earn their living, because of their responsibilities, to give further assistance by way of pensions. This is how the Government have proceeded to provide help, and this is how I believe help should continue to be provided.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 101, Noes 277.

      Division No. 204]

      AYES

      [11.15 p.m.

      Adley Robert

      Bell, Ronald

      Clark, William (Croydon S)

      Aitken, Jonathan

      Bottomley, Peter

      Clarke, Kenneth (Rushcliffe)

      Amery, Rt Hon Julian

      Braine, Sir Bernard

      Cormack, Patrick

      Arnold, Tom

      Brotherton, Michael

      Crawford, Douglas

      Awdry, Daniel

      Burden, F. A.

      Dodsworth, Geoffrey

      Bain, Mrs Margaret

      Canavan, Dennis

      du Cann, Rt Hon Edward

      Banks, Robert

      Channon, Paul

      Dunlop, John

      Beith, A. J.

      Clark, Alan (Plymouth, Sutton)

      Durant, Tony

      Eden, Rt Hon Sir John

      Lawrence, Ivan

      Scott, Nicholas

      Evans, Gwynfor (Carmarthen)

      Lewis, Kenneth (Rutland)

      Shaw, Giles (Pudsey)

      Fell, Anthony

      Loveridge, John

      Shelton, William (Streatham)

      Fookes, Miss Janet

      MacCormick, Iain

      Shersby, Michael

      Fox, Marcus

      McCrindle, Robert

      Sims, Roger

      Fraser, Rt Hon H. (Stafford & St)

      Macfarlane, Neil

      Skeet, T. H. H.

      Freud, Clement

      McNair-Wilson, M. (Newbury)

      Smith, Dudley (Warwick)

      Galbraith, Hon T.G. D.

      Maudling, Rt Hon Reginald

      Speed, Keith

      Glyn, Dr Alan

      Maxwell-Hyslop, Robin

      Steel, Rt Hon David

      Goodhart, Philip

      Miller, Hal (Bromsgrove)

      Steen, Anthony (Wavertree)

      Goodlad, Alastair

      Miscampbell, Norman

      Stewart, Rt Hon Donald

      Gower, Sir Raymond (Barry)

      Mitchell, David (Basingstoke)

      Thomas, Dafydd (Merioneth)

      Gray, Hamish

      Morris, Michael (Northampton S)

      Thompson, George

      Harvie Anderson, Rt Hon Miss

      Morrison, Charles (Devizes)

      Thorpe, Rt Hon Jeremy (N Devon)

      Haselhurst, Alan

      Mudd, David

      Townsend, Cyril D.

      Henderson, Douglas

      Onslow, Cranley

      Wainwright, Richard (Colne V)

      Hodgson, Robin

      Page, John (Harrow West)

      Walters, Dennis

      Holland, Philip

      Penhaligon, David

      Warren, Kenneth

      Hooson, Emlyn

      Price, David (Eastleigh)

      Watt, Hamish

      Howells, Geraint (Cardigan)

      Reid, George

      Welsh, Andrew

      Hunt, John (Ravensbourne)

      Renton, Rt Hon Sir D. (Hunts)

      Wigley, Dafydd

      Irving, Charles (Cheltenham)

      Renton, Tim (Mid-Sussex)

      Wilson, Gordon (Dundee E)

      James, David

      Roberts, Wyn (Conway)

      Winterton, Nicholas

      Johnston, Russell (Inverness)

      Ross, Stephen (Isle of Wight)

      Jones, Arthur (Daventry)

      Rossi, Hugh (Hornsey)

      TELLERS FOR THE AYES:

      Kimball, Marcus

      Royle, Sir Anthony

      Mr. John Pardoe and

      King, Evelyn (South Dorset)

      St. John-Stevas, Norman

      Mr. Cyril Smith.

      NOES

      Abse, Leo

      Davies, Denzil (Llanelli)

      Horam, John

      Allaun, Frank

      Davies, Ifor (Gower)

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

      Anderson, Donald

      Davis, Clinton (Hackney C)

      Hoyle, Doug (Nelson)

      Archer, Rt Hon Peter

      Deakins, Eric

      Huckfield, Les

      Armstrong, Ernest

      Dean, Joseph (Leeds West)

      Hughes, Rt Hon C. (Anglesey)

      Ashley, Jack

      Dell, Rt Hon Edmund

      Hughes, Robert (Aberdeen N)

      Ashton, Joe

      Dempsey, James

      Hughes, Roy (Newport)

      Atkins, Ronald (Preston N)

      Dewar, Donald

      Hunter, Adam

      Atkinson, Norman

      Doig, Peter

      Irving, Rt Hon S. (Dartford)

      Bagier, Gordon A. T.

      Dormand, J. D.

      Jackson, Colin (Brighouse)

      Barnett, Guy (Greenwich)

      Douglas-Mann, Bruce

      Jackson, Miss Margaret (Lincoln)

      Barnett, Rt Hon Joel (Heywood)

      Duffy, A. E. P.

      Janner, Greville

      Bates, Alf

      Dunn, James A.

      Jay, Rt Hon Douglas

      Bean, R. E.

      Dunnett, Jack

      Jeger, Mrs Lena

      Benn, Rt Hon Anthony Wedgwood

      Eadie, Alx

      Jenkins, Hugh (Putney)

      Bennett, Andrew (Stockport N)

      Edge, Geoff

      John, Brynmor

      Bidwell, Sydney

      Ellis, John (Brigg & Scun)

      Johnson, James (Hull West)

      Bishop, Rt Hon Edward

      English, Michael

      Jones, Alec (Rhondda)

      Blenkinsop, Arthur

      Ennals, Rt Hon David

      Jones, Barry (East Flint)

      Boardman, H.

      Evans, Fred (Caerphilly)

      Jones, Dan (Burnley)

      Booth, Rt Hon Albert

      Evans, Ioan (Aberdare)

      Judd, Frank

      Boothroyd, Miss Betty

      Evans, John (Newton)

      Kaufman, Gerald

      Bottomley, Rt Hon Arthur

      Ewing, Harry (Stirling)

      Kerr, Russell

      Boyden, James (Bish Auck)

      Faulds, Andrew

      Kilroy-Silk, Robert

      Bradley, Tom

      Fernyhough, Rt Hon E.

      Kinnock, Neil

      Bray, Dr Jeremy

      Fitt, Gerard (Belfast W)

      Lambie, David

      Brown, Hugh D. Provan)

      Flannery, Martin

      Lamborn, Harry

      Brown, Robert C. (Newcastle W)

      Fletcher, Ted (Darlington)

      Lamond, James

      Buchan, Norman

      Foot, Rt Hon Michael

      Latham, Arthur (Paddington)

      Buchanan, Richard

      Ford, Ben

      Lee, John

      Callaghan, Rt Hon J. (Cardiff SE)

      Forrester, John

      Lestor, Miss Joan (Eton & Slough)

      Callaghan, Jim (Middleton & P)

      Fowler, Gerald (The Wrekin)

      Lever, Rt Hon Harold

      Campbell, Ian

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

      Lewis, Arthur (Newham N)

      Cant, R. B.

      Freeson, Rt Hon Reginald

      Lewis, Ron (Carlisle)

      Carmichael, Neil

      Garrett, John (Norwich S)

      Litterick, Tom

      Carter, Ray

      Garrett, W. E. (Wallsend)

      Lomas, Kenneth

      Carter-Jones, Lewis

      George, Bruce

      Loyden, Eddie

      Cartwright, John

      Gilbert, Dr John

      Luard, Evan

      Castle, Rt Hon Barbara

      Ginsburg, David

      Lyon, Alexander (York)

      Clemitson, Ivor

      Golding, John

      Lyons, Edward (Bradford W)

      Cocks, Rt Hon Michael (Bristol S)

      Gould, Bryan

      Mabon, Rt Hon Dr J. Dickson

      Cohen, Stanley

      Gourlay, Harry

      McCartney, Hugh

      Coleman, Donald

      Grant, George (Morpeth)

      McDonald, Dr Oonagh

      Colquhoun, Ms Maureen

      Grant, John (Islington C)

      McElhone, Frank

      Concannon, J. D.

      Grocott, Bruce

      McGuire, Michael (Ince)

      Conlan, Bernard

      Hamilton, James (Bothwell)

      MacKenzie, Rt Hon Gregor

      Cook, Robin F. (Edin C)

      Hamilton, W. W. (Central Fife)

      Maclennan, Robert

      Corbett, Robin

      Hardy, Peter

      McMillan, Tom (Glasgow C)

      Cowans, Harry

      Harper, Joseph

      McNamara, Kevin

      Craigen, Jim (Maryhill)

      Harrison, Rt Hon Walter

      Madden, Max

      Crawshaw, Richard

      Hart, Rt Hon Judith

      Magee, Bryan

      Crowther, Stan (Rotherham)

      Hattersley, Rt Hon Roy

      Mahon, Simon

      Cryer, Bob

      Hayman, Mrs Helene

      Mallalieu, J. P. W.

      Cunningham, Dr J. (Whiteh)

      Healey, Rt Hon Denis

      Marks, Kenneth

      Davidson, Arthur

      Heffer, Eric S.

      Marshall, Dr Edmund (Goole)

      Davies, Bryan (Enfield N)

      Hooley, Frank

      Marshall, Jim (Leicester S)

      1344

      1345

      Mason, Rt Hon Roy

      Roberts, Albert (Normanton)

      Thorne, Stan (Preston S)

      Meacher, Michael

      Roberts, Gwilym (Cannock)

      Tierney, Sydney

      Mellish, Rt Hon Robert

      Robinson, Geoffrey

      Tilley, John (Lambeth, Central)

      Mendelson, John

      Roderick, Caerwyn

      Tinn, James

      Mikardo, Ian

      Rodbers, George (Chorley)

      Tomlinson, John

      Millan, Rt Hon Bruce

      Rodgers, Rt Hon William (Stockton)

      Tomney, Frank

      Miller, Dr M. S. (E Kilbride)

      Rooker, J. W.

      Torney, Tom

      Mitchell, Austin

      Roper, John

      Tuck, Raphael

      Molloy, William

      Ross, Rt Hon W. (Kilmarnock)

      Urwin, T. W.

      Moonman, Eric

      Rowlands, Ted

      Varley, Rt Hon Eric G.

      Morris, Alfred (Wythenshawe)

      Ryman, John

      Wainwright, Edwin (Dearne V)

      Morris, Charles R. (Openshaw)

      Sandelson, Neville

      Walker, Harold (Doncaster)

      Morris, Rt Hon J. (Aberavon)

      Sedgemore, Brian

      Walker, Terry (Kingswood)

      Moyle, Roland

      Selby, Harry

      Ward, Michael

      Mulley, Rt Hon Frederick

      Sever, John

      Watkins, David

      Murray, Rt Hon Ronald King

      Shaw, Arnold (Ilford South)

      Watkinson, John

      Newens, Stanley

      Sheldon, Rt Hon Robert

      Weitzman, David

      Noble, Mike

      Shore, Rt Hon Peter

      Wellbeloved, James

      Oakes, Gordon

      Short, Mrs Renée (Wolv NE)

      White, Frank R. (Bury)

      Ogden, Eric

      Silkin, Rt Hon S. C. (Dulwich)

      White, James (Pollock)

      O'Halloran, Michael

      Sillars, James

      Whitehead, Philip

      Orbach, Maurice

      Silverman, Julius

      Whitlock, William

      Orme, Rt Hon Stanley

      Skinner, Dennis

      Willey, Rt Hon Frederick

      Ovenden, John

      Smith, John (N Lanarkshire)

      Willams, Rt Hon Alan (Swansea W)

      Owen, Rt Hon Dr David

      Snape, Peter

      Williams, Alan Lee (Hornch'ch)

      Padley, Walter

      Spearing, Nigel

      Williams, Rt Hon Shirley (Hertford)

      Park, George

      Spriggs, Leslie

      Wilson, Rt Hon Sir Harold (Huyton)

      Parker, John

      Stallard, A. W.

      Wilson, William (Coventry SE)

      Parry, Robert

      Stewart, Rt Hon M. (Fulham)

      Wise, Mrs Audrey

      Pavitt, Laurie

      Stoddart, David

      Woodall, Alec

      Pendry, Tom

      Stott, Roger

      Woof, Robert

      Perry, Ernest

      Strauss, Rt Hon G. R.

      Wrigglesworth, Ian

      Phipps, Dr Colin

      Summerskill, Hon Dr Shirley

      Young, David (Bolton E)

      Price, C. (Lewisham W)

      Swain, Thomas

      Price, William (Rugby)

      Taylor, Mrs Ann (Bolton W)

      TELLERS FOR THE NOES:

      Radice, Giles

      Thomas, Jeffrey (Abertillery)

      Mr. Ted Graham and

      Rees, Rt Hon Merlyn (Leeds S)

      Thomas, Mike (Newcastle E)

      Mr. Thomas Cox.

      Richardson, Miss Jo

      Thomas, Ron (Bristol NW)

      Question accordingly negatived.
      Mr. Paul Dean: I beg to move Amendment No. 14, in page 10, line 25, leave out "sixty-five" and insert "sixty".
      The First Deputy Chairman: With this we may take the following amendments: No. 15, in page 10, line 25, after "more", insert
      "or in the case of a single woman that her age was sixty years or more".
      No. 17, in page 10, line 25, leave out from "shall" to end of line 27 and insert "not apply".
      Mr. Dean: At this hour of the night I do not have time to do full justice to the importance of the amendment. Therefore, I intend to be extremely brief.
      The intention of the amendment is to soften the effect of the savings trap on those who are forced to retire between the ages of 60 years and 65 years. These are the people who are the in-betweens. They are retired, they do not get a national insurance pension, and they are not treated as retired by the tax system. They get no age allowance for income tax, and they have the investment income surcharge levied on them at the higher rate applying to those over the age of 65 years. The proposal in the amendment
      1346
      is that the lower rate of the surcharge should apply from 60 years instead of 65 years. I realise that it is not an ideal amendment, and it is designed primarily as a peg on which to hang an argument on behalf of this section of the community.
      There are two main propositions that I put briefly to the Government. The first is that there is a great disincentive to saving as well as earning with the present arrangements. It used to be possible to talk about the rewards of thrift and the security built up for retirement by saving during working life. There was the concept of the family nest egg salted away. All too often today thrift and saving mean not rewards but tax penalties. In too many families the lesson of experience is that it is a mug's game to save. It is often considered far better to blue the lot, spend up to the hilt and rely on the State. What will become of family responsibility and the moral fibre of Britain if we allow that to continue?
      My second main proposition is that those who are the hardest hit are often the in-betweens, those who are forced to retire early before the State retirement age. In some cases this is a welcome relief from work, and it can assist the promotion ladder in the firms concerned

      1347
      and ease the problems of unemployment. But in all too many cases it is a great shock to the people concerned. It means that their purpose in life can disappear, and that they can feel rejected and unwanted. This is a growing problem. Each year there will be a larger number of people who are in this position. At present, the tax system does not recognise it, and it must do so.
      11.30 p.m.
      On the pension side there are many arrangements working towards flexible retirement ages. I welcome these. The miners' early retirement scheme is one example in the public sector, and there are many others that could be quoted. But there is a rigidity in the taxation system. It is not responding to the greater flexibility that is now being introduced into pension arrangements. The financial effect on people who retire before the age of 65 can be very severe. They usually suffer a drop in income; they probably have a scaled-down pension because they retire early; they get no national insurance pension until they are 65; they have little or no prospects of earning; in many cases they have financial commitments which are geared to retirement at the age of 65 and which it is not possible to alter; they get no age allowance for income tax purposes; and they are subject to the higher rate of surcharge on their investment income.
      I want to quote very briefly a typical example of a constituent of mine. He was forced to retire at the age of 60 after 38 years' service. He has no hope of another job. On his early retirement he received a lump sum from his pension scheme and also a severance payment. As a result of investing these lump sums he is now being clobbered by the investment income surcharge. In other words, he has lost his job; he has lost his earning capacity; he has a lower income, at a higher tax rate. He cannot even invest his lump sums and his severance payments in the retirement issue of national savings certificates. Here is the savings trap with a vengeance.
      I suggest that if flexible retirement is to work effectively the tax system must respond in a way in which it is not doing now, and that if a person is genuinely retired the tax system should treat him as such. What I am in effect suggesting
      1348
      is that there should be a retirement allowance for income tax purposes rather than the existing age allowance operating from the age of 65. I am also suggesting that the lower rate of investment income surcharge should operate from the date of genuine retirement.
      I realise that there are difficulties in this proposal. Above all, there is the question how one defines bona fide retirement. It is for that reason that I suggest a compromise in this amendment, and if the Government are not prepared to consider reducing the age limit to 60 at least they should seriously consider reducing it to the age of 64, because they are advocating that, if possible, people should retire one year early.
      This amendment, then, is a modest step to try to deal with a problem which will affect a growing number of people over the years, in view of the present high level of unemployment and the tendency towards earlier and more flexible retirement.
      Mr. Robert Sheldon: Under the Bill there is a higher threshold of £2,500 for investment income surcharge for those taxpayers and their wives who are over 65 years of age compared with the level of £1,700 for those under that age. The amendment seeks to reduce the qualifying age for investment income surcharge.
      The reason for the higher threshold for investment income surcharge is that, as one gets older, one's taxable capacity is diminished due to the disabilities of various kinds that come with age. That is recognised in both the investment income surcharge and the age allowance. The question is: what account should be taken of the disabilities of the elderly?
      The age criterion has been selected for the higher investment income surcharge thresholds. It is not a question of retirement. The thresholds are determined by reference to taxpayers' ages. But now and more likely in future there is and will be a wide range of different ages for retirement. If we were to award the higher thresholds at the age of retirement, we could find ourselves facing arguments in favour of extending the higher thresholds to those under 65 years of age.
      I accept that the ages of 65 and 60 are not sacrosanct, but a decision has to be made about what ages should be chosen.

      1349
      These are the ages that have been selected, for different reasons, for retirement, but they are not related to the disabilities of people as they get older and have increasing problems in coping with the normal operation of running their homes.
      Nowadays we have the young and the old retired. An interesting feature of our community today is that the retirement age spans a considerable number of people with different levels of ability to conduct their affairs. The only sensible way to make the decisions as to where the cut-off should come for tax purpose is on the age of the person, not on his retirement.
      Unfortunately, our tax system cannot be refined to cope with individual problems in the way that the social security system can be operated. We believe that 65 years of age—obviously this will change with time as circumstances generally change—is the right age to give assistance in this way to the elderly. We believe that what we have done for the elderly this year, both in the age allowance and in the improvements in the investment income surcharge, as well as in
      the pension payments that we make available, is the right way to proceed. I believe that this is the way that we should continue to act. I urge the Committee to reject the amendment.
      Mr. Paul Dean: In view of the lateness of the hour and the fact that there is a lot of business still to be proceeded with, I shall content myself by saying that I am very disappointed with the Government's response to this matter. I intend to return to the subject at the earliest possible moment. But now I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Amendment No. 20 proposed, in page 10, line 29, leave out lines 29 to 38 and insert—

      'Part of excess over £8,000

      Higher Rate

      The first £2,000

      …

      …

      40 per cent.

      The next £4,000

      …

      …

      50 per cent.

      The next £7,000

      …

      …

      60 per cent.

      The remainder

      …

      …

      70 per cent.'.

      —[Sir G. Howe.]
      Question put, That the amendment be made:—
      The Committee divided: Ayes 278, Noes 284.

      Division No. 205]

      AYES

      [11.39 p.m.

      Adley Robert

      Churchill, W. S.

      Galbraith, Hon T. G. D.

      Aitken, Jonathan

      Clark, Alan (Plymouth, Sutton)

      Gardiner, George (Reigate)

      Alison, Michael

      Clark, William (Croydon S)

      Gardiner, Edwards (S Fylde)

      Arnold, Tom

      Clarke, Kenneth (Rushcliffe)

      Gilmour, Rt Hon Ian (Chesham)

      Atkins, Rt Hon H. (Spelthorne)

      Clegg, Walter

      Gilmour, Sir John (East Fife)

      Atkinson, David (Bournemouth, East)

      Cockcroft, John

      Glyn, Dr Alan

      Awdry, Daniel

      Cooke, Robert (Bristol W)

      Godber, Rt Hon Joseph

      Baker, Kenneth

      Cope, John

      Goodhart, Philip

      Banks, Robert

      Cormack, Patrick

      Goodlad, Alastair

      Beith, A. J.

      Costain, A. P.

      Gorst, John

      Bell, Ronald

      Craig, Rt Hon W. (Belfast E)

      Gow, Ian (Eastbourne)

      Bendall, Vivian (Ilford North)

      Critchley, Julian

      Gower, Sir Raymond (Barry)

      Bennett, Sir Frederic (Torbay)

      Crouch, David

      Grant, Anthony (Harrow C)

      Benyon, W.

      Crowder F. P.

      Gray, Hamish

      Berry, Hon Anthony

      Davies, Rt Hon J. (Knutsford)

      Griffiths, Eldon

      Biffen, John

      Dean, Paul (N Somerset)

      Grimond, Rt Hon J.

      Biggs-Davidson, John

      Dodsworth, Geoffrey

      Grist, Ian

      Blaker, Peter

      Douglas-Hamilton, Lord James

      Grylls, Michael

      Body, Richard

      Drayson, Burnaby

      Hall-Davis, A. G. F.

      Boscawen, Hon Robert

      du Cann, Rt Hon Edward

      Hamilton, Archibald (Epsom & Ewell)

      Bottomley, Peter

      Dunlop, John

      Hamilton, Michael (Salisbury)

      Bowden, A. (Brighton, Kemptown)

      Durant, Tony

      Hampson, Dr Keith

      Boyson, Dr Rhodes (Brent)

      Dykes, Hugh

      Hannam, John

      Bradford, Rev Robert

      Eden, Rt Hon Sir John

      Harrison, Col Sir Harwood (Eye)

      Braine, Sir Bernard

      Edwards, Nicholas (Pembroke)

      Harvie Anderson, Rt Hon Miss

      Brittan, Leon

      Elliott, Sir William

      Haselhurst, Alan

      Brocklebank-Fowler, C.

      Emery, Peter

      Hastings, Stephen

      Brooke, Peter

      Eyre, Reginald

      Havers, Rt Hon Sir Michael

      Brotherton, Michael

      Fairbairn, Nicholas

      Hawkins, Paul

      Bryan, Sir Paul

      Farr, John

      Hayhoe, Barney

      Buchanan-Smith, Alick

      Fell, Anthony

      Heseltine, Michael

      Buck, Antony

      Finsberg, Geoffrey

      Hicks, Robert

      Budgen, Nick

      Fisher, Sir Nigel

      Higgins, Terence L.

      Bulmer, Esmond

      Fookes, Miss Janet

      Hodgson, Robin

      Burden, F. A.

      Forman, Nigel

      Holland, Philip

      Butler, Adam (Bosworth)

      Fowler, Norman (Sutton C'f'd)

      Hooson, Emlyn

      Carlisle, Mark

      Fox, Marcus

      Hordern, Peter

      Carson, John

      Fraser, Rt Hon H. (Stafford & St)

      Howe, Rt Hon Sir Geoffrey

      Chalker, Mrs Lynda

      Freud, Clement

      Howell, David (Guildford)

      Channon, Paul

      Fry, Peter

      Howells, Geraint (Cardigan)

      Hunt, David (Wirral)

      Moate, Roger

      Shelton, William (Streatham)

      Hunt, John (Ravensbourne)

      Molyneaux, James

      Shepherd, Colin

      Hurd, Douglas

      Monro, Hector

      Shersby, Michael

      Hutchison, Michael Clark

      Montgomery, Fergus

      Silvester, Fred

      Irving, Charles (Cheltenham)

      Moore, John (Croydon C)

      Sims, Roger

      James, David

      More, Jasper (Ludlow)

      Sinclair, Sir George

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

      Morgan, Geraint

      Skeet, T. H. H.

      Jessel, Toby

      Morris, Michael (Northampton S)

      Smith, Cyril (Rochdale)

      Johnson Smith, G. (E Grinstead)

      Morrison, Charles (Devizes)

      Smith, Dudley (Warwick)

      Johnston, Russell (Inverness)

      Morrison, Hon Peter (Chester)

      Smith, Timothy John (Ashfield)

      Jones, Arthur (Daventry)

      Mudd, David

      Speed, Keith

      Jopling, Michael

      Neave, Airey

      Spence, John

      Joseph, Rt Hon Sir Keith

      Neubert, Michael

      Spicer, Michael (S Worcester)

      Kaberry, Sir Donald

      Newton, Tony

      Sproat, Iain

      Kershaw, Anthony

      Nott, John

      Stainton, Keith

      Kimball, Marcus

      Onslow Cranley

      Stanbrook, Ivor

      King, Evelyn (South Dorset)

      Oppenheim, Mrs Sally

      Stanley, John

      King, Tom (Bridgwater)

      Page, John (Harrow West)

      Steel, Rt Hon David

      Kitson, Sir Timothy

      Page, Rt Hon R. Graham (Crosby)

      Steen, Anthony (Wavertree)

      Knight, Mrs Jill

      Page, Richard (Workington)

      Stewart, Ian (Hitchin)

      Knox, David

      Paisley, Rev Ian

      Stokes, John

      Lamont, Norman

      Pardoe, John

      Stradling Thomas, J.

      Langford-Holt, Sir John

      Parkinson, Cecil

      Tapsell, Peter

      Latham, Michael (Melton)

      Pattie, Geoffrey

      Taylor, R. (Croydon NW)

      Lawrence, Ivan

      Penhaligon, David

      Tebbit, Norman

      Lawson, Nigel

      Percival, Ian

      Temple-Morris, Peter

      Lester, Jim (Beeston)

      Peyton, Rt Hon John

      Thatcher, Rt Hon Margaret

      Lewis, Kenneth (Rutland)

      Pink, R. Bonner

      Thomas, Rt Hon P. (Hendon S)

      Loveridge, John

      Powell, Rt Hon J. Enoch

      Thorpe, Rt Hon Jeremy (N Devon)

      Luce, Richard

      Prentice, Rt Hon Reg

      Townsend, Cyril D.

      McAdden, Sir Stephen

      Price, David (Eastleigh)

      Trotter, Neville

      McCrindle, Robert

      Prior, Rt Hon James

      van Straubenzee, W. R.

      McCusker, H.

      Pym, Rt Hon Francis

      Vaughan, Dr Gerald

      Macfarlane, Neil

      Raison, Timothy

      Viggers, Peter

      MacGregor, John

      Rathbone, Tim

      Wainwright, Richard (Colne V)

      MacKay, Andrew (Stechford)

      Rees, Peter (Dover & Deal)

      Wakeham, John

      Macmillan, Rt Hon M. (Farnham)

      Rees-Davies, W. R.

      Walder, David (Clitheroe)

      McNair-Wilson, M. (Newbury)

      Renton, Rt Hon Sir D. (Hunts)

      Walker, Rt Hon P. (Worcester)

      McNair-Wilson, p. (New Forest)

      Renton, Tim (Mid-Sussex)

      Wall, Patrick

      Madel, David

      Rhodes, James R.

      Walters, Dennis

      Marshall, Michael (Arundel)

      Ridley, Hon Nicholas

      Warren, Kenneth

      Marten, Neil

      Ridsdale, Julian

      Weatherill, Bernard

      Mates, Michael

      Rifkind, Malcolm

      Wells, John

      Mather, Carol

      Rippon, Rt Hon Geoffrey

      Whitelaw, Rt Hon William

      Maude, Angus

      Roberts, Wyn (Conway)

      Whitney, Raymond (Wycombe)

      Maudling, Rt Hon Reginald

      Rodgers, Sir John (Sevenoaks)

      Wiggin, Jerry

      Mawby, Ray

      Ross, Stephen (Isle of Wight)

      Winterton, Nicholas

      Maxwell-Hyslop, Robin

      Ross, William (Londonderry)

      Wood, Rt Hon Richard

      Mayhew, Patrick

      Rossi, Hugh (Hornsey)

      Young, Sir G. (Ealing, Acton)

      Meyer, Sir Anthony

      Royle, Sir Anthony

      Younger, Hon George

      Miller, Hal (Bromsgrove)

      Sainsbury, Tim

      Mills, Peter

      St. John-Stevas, Norman

      TELLERS FOR THE AYES:

      Miscampbell, Norman

      Scott, Nicholas

      Mr. Spencer Le Marchant and

      Mitchell, David (Basingstoke)

      Shaw, Giles (Pudsey)

      Mr. Michael Roberts.

      NOES

      Abse, Leo

      Buchanan, Richard

      Davies, Bryan (Enfield N)

      Allaun, Frank

      Callaghan, Rt Hon J. (Cardiff SE)

      Davies, Rt Hon Denzil

      Anderson, Donald

      Callaghan, Jim (Middleton & P)

      Davies, Ifor (Gower)

      Archer, Rt Hon Peter

      Campbell, Ian

      Davis, Clinton (Hackney C)

      Armstrong, Ernest

      Canavan, Dennis

      Deakins, Eric

      Ashley, Jack

      Cant, R. B.

      Dean, Joseph (Leeds West)

      Ashton, Joe

      Carmichael, Neil

      Dell, Rt Hon Edmund

      Atkinson, Norman

      Carter, Ray

      Dempsey, James

      Bagier, Gordon A. T.

      Carter-Jones, Lewis

      Dewar, Donald

      Bain, Mrs Margaret

      Cartwright, John

      Doig, Peter

      Barnett, Guy (Greenwich)

      Castle, Rt Hon Barbara

      Dormand, J. D.

      Barnett, Rt Hon Joel (Heywood)

      Clemitson, Ivor

      Douglas-Mann, Bruce

      Bates, Alf

      Cocks, Rt Hon Michael (Bristol S)

      Duffy, A. E. P.

      Bean, R. E.

      Cohen, Stanley

      Dunn, James A.

      Benn, Rt Hon Anthony Wedgwood

      Coleman, Donald

      Dunnett, Jack

      Bennett, Andrew (Stockport N)

      Colquhoun, Ms Maureen

      Eadie, Alx

      Bidwell, Sydney

      Concannon, Rt Hon John

      Edge, Geoff

      Bishop, Rt Hon Edward

      Conlan, Bernard

      Ellis, John (Brigg & Scun)

      Blenkinsop, Arthur

      Cook, Robin F. (Edin C)

      English, Michael

      Boardman, H.

      Corbett, Robin

      Ennals, Rt Hon David

      Booth, Rt Hon Albert

      Cowans, Harry

      Evans, Gwynfor (Carmarthen)

      Boothroyd, Miss Betty

      Cox, Thomas (Tooting)

      Evans, Ioan (Aberdare)

      Bottomley, Rt Hon Arthur

      Craigen, Jim (Maryhill)

      Evans, John (Newton)

      Boyden, James (Bish Auck)

      Crawford, Douglas

      Faulds, Andrew

      Bradley, Tom

      Crawshaw, Richard

      Fernyhough, Rt Hon E.

      Bray, Dr Jeremy

      Crowther, Stan (Rotherham)

      Flannery, Martin

      Brown, Hugh D. Provan)

      Cryer, Bob

      Fletcher, Ted (Darlington)

      Brown, Robert C. (Newcastle W)

      Cunningham, Dr J. (Whiteh)

      Foot, Rt Hon Michael

      Buchan, Norman

      Davidson, Arthur

      Ford, Ben

      1352

      1353

      Forrester, John

      MacCormick, Iain

      Sever, John

      Fowler, Gerald (The Wrekin)

      McDonald, Dr Oonagh

      Shaw, Arnold (Ilford South)

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

      McElhone, Frank

      Sheldon, Rt Hon Robert

      Freeson, Rt Hon Reginald

      McGuire, Michael (Ince)

      Shore, Rt Hon Peter

      Garrett, John (Norwich S)

      MacKenzie, Rt Hon Gregor

      Short, Mrs Renée (Wolv NE)

      Garrett, W. E. (Wallsend)

      Maclennan, Robert

      Silkin, Rt Hon S. C. (Dulwich)

      George, Bruce

      McMillan, Tom (Glasgow C)

      Silverman, Julius

      Gilbert, Rt Hon Dr John

      McNamara, Kevin

      Skinner, Dennis

      Ginsburg, David

      Madden, Max

      Smith, John (N Lanarkshire)

      Golding, John

      Magee, Bryan

      Snape, Peter

      Gould, Bryan

      Mahon, Simon

      Spearing, Nigel

      Gourlay, Harry

      Mallalieu, J. P. W.

      Spriggs, Leslie

      Graham, Ted

      Marks, Kenneth

      Stallard, A. W.

      Grant, George (Morpeth)

      Marshall, Dr Edmund (Goole)

      Stewart, Rt Hon Donald

      Grant, John (Islington C)

      Marshall, Jim (Leicester S)

      Stewart, Rt Hon M. (Fulham)

      Grocott, Bruce

      Mason, Rt Hon Roy

      Stoddart, David

      Hamilton, W. W. (Central Fife)

      Meacher, Michael

      Stott, Roger

      Hardy, Peter

      Mellish, Rt Hon Robert

      Strauss, Rt Hon G. R.

      Harrison, Rt Hon Walter

      Mendelson, John

      Summerskill, Hon Dr Shirley

      Hart, Rt Hon Judith

      Mikardo, Ian

      Swain, Thomas

      Hattersley, Rt Hon Roy

      Millan, Rt Hon Bruce

      Taylor, Mrs Ann (Bolton W)

      Hayman, Mrs Helene

      Miller, Dr M. S. (E Kilbride)

      Thomas, Dafydd (Merioneth)

      Healey, Rt Hon Denis

      Mitchell, Austin

      Thomas, Jeffrey (Abertillery)

      Heffer, Eric S.

      Molloy, William

      Thomas, Mike (Newcastle E)

      Henderson, Douglas

      Moonman, Eric

      Thomas, Ron (Bristol NW)

      Hooley, Frank

      Morris, Alfred (Wythenshawe)

      Thompson, George

      Horam, John

      Morris, Rt Hon Charles R.

      Thorne, Stan (Preston S)

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

      Morris, Rt Hon J. (Aberavon)

      Tierney, Sydney

      Hoyle, Doug (Nelson)

      Moyle, Roland

      Tilley, John (Lambeth, Central)

      Huckfield, Les

      Mulley, Rt Hon Frederick

      Tinn, James

      Hughes, Rt Hon C. (Anglesey)

      Murray, Rt Hon Ronald King

      Tomlinson, John

      Hughes, Robert (Aberdeen N)

      Newens, Stanley

      Tomney, Frank

      Hughes, Roy (Newport)

      Noble, Mike

      Torney, Tom

      Hunter, Adam

      Oakes, Gordon

      Tuck, Raphael

      Irving, Rt Hon S. (Dartford)

      Ogden, Eric

      Urwin, T. W.

      Jackson, Colin (Brighouse)

      O'Halloran, Michael

      Varley, Rt Hon Eric G.

      Jackson, Miss Margaret (Lincoln)

      Orbach, Maurice

      Wainwright, Edwin (Dearne V)

      Janner, Greville

      Orme, Rt Hon Stanley

      Walker, Harold (Doncaster)

      Jay, Rt Hon Douglas

      Ovenden, John

      Walker, Terry (Kingswood)

      Jeger, Mrs Lena

      Owen, Rt Hon Dr David

      Ward, Michael

      Jenkins, Hugh (Putney)

      Park, George

      Watkins, David

      John, Brynmor

      Parker, John

      Watkinson, John

      Johnson, James (Hull West)

      Parry, Robert

      Watt, Hamish

      Jones, Alec (Rhondda)

      Pavitt, Laurie

      Weitzman, David

      Jones, Barry (East Flint)

      Pendry, Tom

      Wellbeloved, James

      Judd, Frank

      Perry, Ernest

      Welsh, Andrew

      Kaufman, Gerald

      Phipps, Dr Colin

      White, Frank R. (Bury)

      Kerr, Russell

      Price, C. (Lewisham W)

      White, James (Pollock)

      Kilroy-Silk, Robert

      Price, William (Rugby)

      Whitehead, Philip

      Kinnock, Neil

      Radice, Giles

      Whitlock, William

      Lambie, David

      Rees, Rt Hon Merlyn (Leeds S)

      Wigley, Dafydd

      Lamborn, Harry

      Reid, George

      Willey, Rt Hon Frederick

      Lamond, James

      Richardson, Miss Jo

      Willams, Rt Hon Alan (Swansea W)

      Latham, Arthur (Paddington)

      Roberts, Albert (Normanton)

      Williams, Alan Lee (Hornch'ch)

      Lee, John

      Roberts, Gwilym (Cannock)

      Williams, Rt Hon Shirley (Hertford)

      Lestor, Miss Joan (Eton & Slough)

      Robinson, Geoffrey

      Wilson, Gordon (Dundee E)

      Lever, Rt Hon Harold

      Roderick, Caerwyn

      Wilson, Rt Hon Sir Harold (Huyton)

      Lewis, Arthur (Newham N)

      Rodgers, George (Chorley)

      Wilson, William (Coventry SE)

      Lewis, Ron (Carlisle)

      Rodgers, Rt Hon William (Stockton)

      Wise, Mrs Audrey

      Litterick, Tom

      Rooker, J. W.

      Woodall, Alec

      Lomas, Kenneth

      Roper, John

      Woof, Robert

      Loyden, Eddie

      Ross, Rt Hon W. (Kilmarnock)

      Wrigglesworth, Ian

      Luard, Evan

      Rowlands, Ted

      Young, David (Bolton E)

      Lyon, Alexander (York)

      Ryman, John

      Lyons, Edward (Bradford W)

      Sandelson, Neville

      TELLERS FOR THE NOES:

      Mabon, Rt Hon Dr J. Dickson

      Sedgemore, Brian

      Mr. Joseph Harper and

      McCartney, Hugh

      Selby, Harry

      Mr. James Hamilton.

      Question accordingly negatived.
      Sir G. Howe: On a point of order, Sir Meyer. The Committee will recollect that we voted earlier on Amendment No. 7, the first of the group of amendments dealing with the starting point of the higher rate bands of income tax. In that vote, the Committee decided to replace the figure of £7,000 by £8,000. We have just voted on Amendment No. 20, which was designed to replace the table
      1354
      setting out those rates and starting at £8,000. We have not been able to carry that amendment. [HON. MEMBERS: "Resign."] We are not the Government yet, though it will not be long before we are.
      It follows that we ought to have an opportunity of carrying an amendment that I think should be consequential—if, indeed, it is necessary at all—to change the title of the table from
      "Part of excess over £7,000"

      1355
      so that it reads:
      "Part of excess over £8,000".
      It is not entirely clear whether an amendment is necessary for that purpose or not. I think that it follows from Amendment No. 7 which was carried. In order to set that matter beyond doubt, if it is necessary to do so, I have here a manuscript amendment, in Clause 11, page 10, line 29, leave out '£7,000' and insert '£8,000'.
      The effect of the amendment is simply to carry into the second part of the clause the principle in favour of which the Committee has voted. If it is necessary, and so that we may vote on it now, I table it at once.
      Mr. Joel Barnett: Further to that point of order, Sir Myer. It is remarkable that the right hon. and learned Gentleman should be asking the Committee to vote on an amendment which none of us has seen. He is not sure that it is necessary or that the drafting is right. He is not sure that it is needed. In those circumstances, I should have thought it would be much better to report Progress and see the manuscript amendment in print in good time for when we come back to the Committee on Tuesday.
      I beg to move, That the Chairman do report Progress and ask leave to sit again.
      12 midnight.
      Sir G. Howe: In any normal Parliament, and in a situation where we were not faced with a Government struggling to hang on to power by any means open to them, this amendment would have been consequential and therefore accepted without hesitation or demur by the Chancellor. On that basis it should be accepted and voted upon, if necessary. It follows as a consequence of the vote that took place earlier when the Committee decided the principle.
      Mr. Joel Barnett: The right hon. and learned Gentleman has created a shambles. It is absurd that the Committee should be expected to vote on an amendment that it has not even seen.
      The First Deputy Chairman: The Chair has a very distinctive duty in the situation that has arisen. The manuscript amendment is consequential on a
      1356
      decision already reached by the Committee. In these circumstances it is the duty of the Chair to select the manuscript amendment. Similarly, I am prepared to accept the motion to report Progress.
      Mr. Lawson rose—
      Hon. Members: Sit down, sit down.
      The First Deputy Chairman: Order. I am sure that not all hon. Members are Liverpool supporters. The motion is debatable—I have no option.
      Mr. Lawson: I am grateful for your ruling, Sir Myer. It is a disgrace that the motion should have been put in the first place. The Chancellor and his hon. Friends knew perfectly well that our amendment was consequential on the decision already taken by the Committee.
      The Minister of State, Treasury, opposing the amendment, gave as the cost of the amendment an amount which related to the consequential amendment as well. However, later the Chancellor of the Exchequer thought that cheating was the only way out of the corner in which he found himself. He thought that he had to be a trickster and in this way he is trying to wriggle out of the jam in which he finds himself—[Interruption.]
      The First Deputy Chairman: Order. There is far too much noise, and during the course of the noise some unparliamentary language was used. I must call upon the hon. Member for Blaby (Mr. Lawson) to withdraw the words "cheat" and "trickster".
      Mr. Lawson: If I may quote the hon. Member for—
      Hon. Members: Withdraw.
      The First Deputy Chairman: I must ask the hon. Member for Blaby to withdraw the terms.
      Mr. Lawson: I was quoting the hon. Member for Penistone (Mr. Mendelson), who used the term "trickster" earlier in the day.
      Hon. Members: Withdraw.
      The First Deputy Chairman: Order. Let us end the proceedings on a peaceful note. I have acted strictly according to the duties of the Chair. A manuscript

      1357
      amendment has been presented and I have selected it. Similarly, the motion to report Progress is equally in order. The hon. Member for Blaby has used certain unparliamentary terms and I must call upon him to withdraw them.
      Hon. Members: Withdraw.
      Mr Lawson: May I ask you, Sir Myer, why the hon. Member for Penistone was able to use these terms much earlier in the debate but I am not permitted to do so?
      The First Deputy Chairman: I was not in the Chair when that incident occurred, but I know the arguments which arose as to whether it was applied to an hon. Member or to a group of people. The hon. Member for Penistone (Mr. Mendelson) insisted that it was not applied to an hon. Member, and in that respect it was not withdrawn and was not unparliamentary. The hon. Member for Blaby (Mr. Lawson) has made a definite accusation against a member of the Government Front Bench. I must ask him to withdraw it, and I hope that he will do so.
      Mr. Lawson: I will withdraw, in the same terms as the hon. Member for Penistone used: it was applied not to an individual Member but to a group.
      The First Deputy Chairman: I appeal to the hon. Gentleman to withdraw the accusation that he hurled at the Chancellor, of being a cheat and a trickster, and I hope he will do so.
      Mr. Lawson: As I said, I will withdraw it in the same way as the hon. Member for Penistone withdrew, and say that it was not applied to any individual Member.
      It would be disgraceful for the Committee to report Progress now. This debate must be brought to a conclusion. It has been agreed that it should go to a conclusion and that is what should be done.
      Question put, That the Chairman do report Progress and ask leave to sit again:—
      The Committee divided: Ayes 273, Noes 280.

      Division No. 206]

      AYES

      [12.06 a.m.

      Abse, Leo

      Colquhoun, Ms Maureen

      Forrester, John

      Allaun, Frank

      Concannon, Rt Hon John

      Fowler, Gerald (The Wrekin)

      Anderson, Donald

      Conlan, Bernard

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

      Archer, Rt Hon Peter

      Cook, Robin F. (Edin C)

      Freeson, Rt Hon Reginald

      Armstrong, Ernest

      Corbett, Robin

      Garrett, John (Norwich S)

      Ashley, Jack

      Cowans, Harry

      Garrett, W. E. (Wallsend)

      Ashton, Joe

      Cox, Thomas (Tooting)

      George, Bruce

      Atkinson, Norman

      Craigen, Jim (Maryhill)

      Gilbert, Rt Hon Dr John

      Bagier, Gordon A. T.

      Crawshaw, Richard

      Ginsburg, David

      Barnett, Guy (Greenwich)

      Crowther, Stan (Rotherham)

      Golding, John

      Barnett, Rt Hon Joel (Heywood)

      Cryer, Bob

      Gould, Bryan

      Bates, Alf

      Cunningham, Dr J. (Whiteh)

      Gourlay, Harry

      Bean, R. E.

      Davidson, Arthur

      Graham, Ted

      Benn, Rt Hon Anthony Wedgwood

      Davies, Bryan (Enfield N)

      Grant, George (Morpeth)

      Bennett, Andrew (Stockport N)

      Davies, Rt Hon Denzil

      Grant, John (Islington C)

      Bidwell, Sydney

      Davies, Ifor (Gower)

      Grocott, Bruce

      Bishop, Rt Hon Edward

      Davis, Clinton (Hackney C)

      Hamilton, W. W. (Central Fife)

      Blenkinsop, Arthur

      Deakins, Eric

      Hardy, Peter

      Boardman, H.

      Dean, Joseph (Leeds West)

      Harper, Joseph

      Booth, Rt Hon Albert

      Dell, Rt Hon Edmund

      Harrison, Rt Hon Walter

      Boothroyd, Miss Betty

      Dempsey, James

      Hart, Rt Hon Judith

      Bottomley, Rt Hon Arthur

      Dewar, Donald

      Hattersley, Rt Hon Roy

      Boyden, James (Bish Auck)

      Doig, Peter

      Hayman, Mrs Helene

      Bradley, Tom

      Dormand, J. D.

      Healey, Rt Hon Denis

      Bray, Dr Jeremy

      Douglas-Mann, Bruce

      Heffer, Eric S.

      Brown, Hugh D. Provan)

      Duffy, A. E. P.

      Hooley, Frank

      Brown, Robert C. (Newcastle W)

      Dunn, James A.

      Horam, John

      Buchan, Norman

      Dunnett, Jack

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

      Buchanan, Richard

      Eadie, Alex

      Hoyle, Doug (Nelson)

      Callaghan, Rt Hon J. (Cardiff SE)

      Edge, Geoff

      Huckfield, Les

      Callaghan, Jim (Middleton & P)

      Ellis, John (Brigg & Scun)

      Hughes, Rt Hon C. (Anglesey)

      Campbell, Ian

      English, Michael

      Hughes, Robert (Aberdeen N)

      Canavan, Dennis

      Ennals, Rt Hon David

      Hughes, Roy (Newport)

      Cant, R. B.

      Evans, Gwynfor (Carmarthen)

      Hunter, Adam

      Carmichael, Neil

      Evans, Ioan (Aberdare)

      Irving, Rt Hon S. (Dartford)

      Carter, Ray

      Evans, John (Newton)

      Jackson, Colin (Brighouse)

      Carter-Jones, Lewis

      Ewing, Harry (Stirling)

      Jackson, Miss Margaret (Lincoln)

      Cartwright, John

      Faulds, Andrew

      Janner, Greville

      Castle, Rt Hon Barbara

      Fernyhough, Rt Hon E.

      Jay, Rt Hon Douglas

      Clemitson, Ivor

      Flannery, Martin

      Jeger, Mrs Lena

      Cocks, Rt Hon Michael (Bristol S)

      Fletcher, Ted (Darlington)

      Jenkins, Hugh (Putney)

      Cohen, Stanley

      Foot, Rt Hon Michael

      John, Brynmor

      Coleman, Donald

      Ford, Ben

      Johnson, James (Hull West)

      Jones, Alec (Rhondda)

      Moyle, Roland

      Stewart, Rt Hon M. (Fulham)

      Jones, Barry (East Flint)

      Mulley, Rt Hon Frederick

      Stoddart, David

      Judd, Frank

      Murray, Rt Hon Ronald King

      Stott, Roger

      Kaufman, Gerald

      Newens, Stanley

      Strauss, Rt Hon G. R.

      Kerr, Russell

      Noble, Mike

      Summerskill, Hon Dr Shirley

      Kilroy-Silk, Robert

      Oakes, Gordon

      Swain, Thomas

      Kinnock, Neil

      Ogden, Eric

      Taylor, Mrs Ann (Bolton W)

      Lambie, David

      O'Halloran, Michael

      Thomas, Dafydd (Merioneth)

      Lamborn, Harry

      Orbach, Maurice

      Thomas, Jeffrey (Abertillery)

      Lamond, James

      Orme, Rt Hon Stanley

      Thomas, Mike (Newcastle E)

      Latham, Arthur (Paddington)

      Ovenden, John

      Thomas, Ron (Bristol NW)

      Lee, John

      Owen, Rt Hon Dr David

      Thorne, Stan (Preston S)

      Lestor, Miss Joan (Eton & Slough)

      Park, George

      Tierney, Sydney

      Lever, Rt Hon Harold

      Parker, John

      Tilley, John (Lambeth, Central)

      Lewis, Ron (Carlisle)

      Parry, Robert

      Tinn, James

      Litterick, Tom

      Pavitt, Laurie

      Tomlinson, John

      Lomas, Kenneth

      Pendry, Tom

      Tomney, Frank

      Loyden, Eddie

      Perry, Ernest

      Torney, Tom

      Luard, Evan

      Phipps, Dr Colin

      Tuck, Raphael

      Lyon, Alexander (York)

      Price, C. (Lewisham W)

      Urwin, T. W.

      Lyons, Edward (Bradford W)

      Price, William (Rugby)

      Varley, Rt Hon Eric G.

      Mabon, Rt Kon Dr J. Dickson

      Radice, Giles

      Wainwright, Edwin (Dearne V)

      McCartney, Hugh

      Rees, Rt Hon Merlyn (Leeds S)

      Walker, Harold (Doncaster)

      McDonald, Dr Oonagh

      Richardson, Miss Jo

      Walker, Terry (Kingswood)

      McElhone, Frank

      Roberts, Albert (Normanton)

      Ward, Michael

      McGuire, Michael (Ince)

      Roberts, Gwilym (Cannock)

      Watkins, David

      MacKenzie, Rt Hon Gregor

      Robinson, Geoffrey

      Watkinson, John

      Maclennan, Robert

      Roderick, Caerwyn

      Weitzman, David

      McMillan, Tom (Glasgow C)

      Rodgers, George (Chorley)

      Wellbeloved, James

      McNamara, Kevin

      Rodgers, Rt Hon William (Stockton)

      White, Frank R. (Bury)

      Madden, Max

      Rooker, J. W.

      White, James (Pollock)

      Magee, Bryan

      Roper, John

      Whitehead, Philip

      Mahon, Simon

      Ross, Rt Hon w. (Kilmarnock)

      Whitlock, William

      Mallalieu, J. P. W.

      Rowlands, Ted

      Wigley, Dafydd

      Marks, Kenneth

      Ryman, John

      Willey, Rt Hon Frederick

      Marshall, Dr Edmund (Goole)

      Sandelson, Neville

      Willams, Rt Hon Alan (Swansea W)

      Marshall, Jim (Leicester S)

      Sedgemore, Brian

      Williams, Alan Lee (Hornch'ch)

      Mason, Rt Hon Roy

      Selby, Harry

      Williams, Rt Hon Shirley (Hertford)

      Meacher, Michael

      Sever, John

      Wilson, Rt Hon Sir Harold (Huyton)

      Mellish, Rt Hon Robert

      Shaw, Arnold (Ilford South)

      Wilson, William (Coventry SE)

      Mendelson, John

      Sheldon, Rt Hon Robert

      Wise, Mrs Audrey

      Mikardo, Ian

      Shore, Rt Hon Peter

      Woodall, Alec

      Millan, Rt Hon Bruce

      Short, Mrs Renée (Wolv NE)

      Woof, Robert

      Miller, Dr M. S. (E Kilbride)

      Silkin, Rt Hon S. C. (Dulwich)

      Wrigglesworth, Ian

      Mitchell, Austin

      Silverman, Julius

      Young, David (Bolton E)

      Molloy, William

      Skinner, Dennis

      Moonman, Eric

      Smith, John (N Lanarkshire)

      TELLERS FOR THE AYES:

      Morris, Alfred (Wythenshawe)

      Spearing, Nigel

      Mr. Peter Snape and

      Morris, Rt Hon Charles R.

      Spriggs, Leslie

      Mr. James Hamilton.

      Morris, Rt Hon J. (Aberavon)

      Stallard, A. W.

      NOES

      Adley Robert

      Bulmer, Esmond

      Eyre, Reginald

      Aitken, Jonathan

      Burden, F. A.

      Fairbairn, Nicholas

      Alison, Michael

      Butler, Adam (Bosworth)

      Farr, John

      Arnold, Tom

      Carlisle, Mark

      Fell, Anthony

      Atkins, Rt Hon H. (Spelthorne)

      Chalker, Mrs Lynda

      Finsberg, Geoffrey

      Atkinson, David (Bournemouth, East)

      Channon, Paul

      Fisher, sir Nigel

      Awdry, Daniel

      Churchill, W. S.

      Fookes, Miss Janet

      Bain, Mrs Margaret

      Clark, Alan (Plymouth, Sutton)

      Forman, Nigel

      Baker, Kenneth

      Clark, William (Croydon S)

      Fowler, Norman (Sutton C'f'd)

      Banks, Robert

      Clarke, Kenneth (Rushcliffe)

      Fox, Marcus

      Beith, A. J.

      Clegg, Walter

      Fraser, Rt Hon H. (Stafford & St)

      Bell, Ronald

      Cockcroft, John

      Freud, Clement

      Bendall, Vivian (Ilford North)

      Cooke, Robert (Bristol W)

      Fry, Peter

      Bennett, Sir Frederic (Torbay)

      Cope, John

      Galbraith, Hon T. G. D.

      Benyon, W.

      Cormack, Patrick

      Gardiner, George (Reigate)

      Berry, Hon Anthony

      Costain, A. P.

      Gardiner, Edwards (S Fylde)

      Biffen, John

      Crawford, Douglas

      Gilmour, Rt Hon Ian (Chesham)

      Biggs-Davidson, John

      Critchley, Julian

      Gilmour, Sir John (East Fife)

      Blaker, Peter

      Crouch, David

      Glyn, Dr Alan

      Body, Richard

      Crowder F. P.

      Godber, Rt Hon Joseph

      Boscawen, Hon Robert

      Davies, Rt Hon J. (Knutsford)

      Goodhart, Philip

      Bottomley, Peter

      Dean, Paul (N Somerset)

      Goodlad, Alastair

      Bowden, A. (Brighton, Kemptown)

      Dodsworth, Geoffrey

      Gorst, John

      Boyson, Dr Rhodes (Brent)

      Douglas-Hamilton, Lord James

      Gow, Ian (Eastbourne)

      Braine, Sir Bernard

      Drayson, Burnaby

      Gower, Sir Raymond (Barry)

      Brittan, Leon

      du Cann, Rt Hon Edward

      Grant, Anthony (Harrow C)

      Brocklebank-Fowler, C.

      Dunlop, John

      Gray, Hamish

      Brooke, Peter

      Durant, Tony

      Griffiths, Eldon

      Brotherton, Michael

      Dykes, Hugh

      Grimond, Rt Hon J.

      Bryan, Sir Paul

      Eden, Rt Hon Sir John

      Grist, Ian

      Buchanan-Smith, Alick

      Edwards, Nicholas (Pembroke)

      Grylls, Michael

      Buck, Antony

      Elliott, Sir William

      Hall-Davis, A. G. F.

      Budgen, Nick

      Emery, Peter

      Hamilton, Archibald (Epsom & Ewell)

      1360

      1361

      Hamilton, Michael (Salisbury)

      Marten, Neil

      St. John-Stevas, Norman

      Hampson, Dr Keith

      Mates, Michael

      Scott, Nicholas

      Hannam, John

      Mather, Carol

      Shaw, Giles (Pudsey)

      Harrison, Col Sir Harwood (Eye)

      Maude, Angus

      Shelton, William (Streatham)

      Harvie Anderson, Rt Hon Miss

      Maudling, Rt Hon Reginald

      Shepherd, Colin

      Haselhurst, Alan

      Mawby, Ray

      Shersby, Michael

      Hastings, Stephen

      Maxwell-Hyslop, Robin

      Silvester, Fred

      Hayers, Rt Hon Sir Michael

      Mayhew, Patrick

      Sims, Roger

      Hawkins, Paul

      Meyer, Sir Anthony

      Sinclair, Sir George

      Hayhoe, Barney

      Miller, Hal (Bromsgrove)

      Skeet, T. H. H.

      Henderson, Douglas

      Mills, Peter

      Smith, Cyril (Rochdale)

      Heseltine, Michael

      Miscampbell, Norman

      Smith, Dudley (Warwick)

      Hicks, Robert

      Mitchell, David (Basingstoke)

      Smith, Timothy John (Ashfield)

      Higgins, Terence L.

      Moate, Roger

      Speed, Keith

      Hodgson, Robin

      Monro, Hector

      Spence, John

      Holland, Philip

      Montgomery, Fergus

      Spicer, Michael (S Worcester)

      Hooson, Emlyn

      Moore, John (Croydon C)

      Sproat, Iain

      Hordern, Peter

      More, Jasper (Ludlow)

      Stainton, Keith

      Howe, Rt Hon Sir Geoffrey

      Morgan, Geraint

      Stanbrook, Ivor

      Howell, David (Guildford)

      Morris, Michael (Northampton S)

      Stanley, John

      Howells, Geraint (Cardigan)

      Morrison, Charles (Devizes)

      Steel, Rt Hon David

      Hunt, David (Wirral)

      Morrison, Hon Peter (Chester)

      Steen, Anthony (Wavertree)

      Hunt, John (Ravensbourne)

      Mudd, David

      Stewart, Rt Hon Donald

      Hurd, Douglas

      Neave, Airey

      Stewart, Ian (Hitchin)

      Hutchison, Michael Clark

      Neubert, Michael

      Stokes, John

      Irving, Charles (Cheltenham)

      Newton, Tony

      Stradling Thomas, J.

      James, David

      Nott, John

      Tapsell, Peter

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

      Onslow, Cranley

      Taylor, R. (Croydon NW)

      Jessel, Toby

      Oppenheim, Mrs Sally

      Tebbit, Norman

      Johnson Smith, G. (E Grinstead)

      Page, John (Harrow West)

      Temple-Morris, Peter

      Johnston, Russell (Inverness)

      Page, Rt Hon R. Graham (Crosby)

      Thatcher, Rt Hon Margaret

      Jones, Arthur (Daventry)

      Page, Richard (Workington)

      Thomas, Rt Hon P. (Hendon S)

      Jopling, Michael

      Paisley, Rev Ian

      Thompson, George

      Joseph, Rt Hon Sir Keith

      Pardoe, John

      Thorpe, Rt Hon Jeremy (N Devon)

      Kaberry, Sir Donald

      Parkinson, Cecil

      Townsend, Cyril D.

      Kershaw, Anthony

      Pattie, Geoffrey

      Trotter, Neville

      Kimball, Marcus

      Penhaligon, David

      van Straubenzee, W. R.

      King, Evelyn (South Dorset)

      Percival, Ian

      Vaughan, Dr Gerard

      King, Tom (Bridgwater)

      Peyton, Rt Hon John

      Viggers, Peter

      Kitson, Sir Timothy

      Pink, R. Bonner

      Wainwright, Richard (Colne V)

      Knight, Mrs Jill

      Prentice, Rt Hon Reg

      Wakeham, John

      Knox, David

      Price, David (Eastleigh)

      Walder, David (Clitheroe)

      Lamont, Norman

      Prior, Rt Hon James

      Walker, Rt Hon P. (Worcester)

      Langford-Holt, Sir John

      Pym, Rt Hon Francis

      Wall, Patrick

      Latham, Michael (Melton)

      Raison, Timothy

      Walters, Dennis

      Lawrence, Ivan

      Rathbone, Tim

      Warren, Kenneth

      Lawson, Nigel

      Rees, Peter (Dover & Deal)

      Watt, Hamish

      Lester, Jim (Beeston)

      Rees-Davies, W. R.

      Weatherill, Bernard

      Lewis, Kenneth (Rutland)

      Reld George

      Wells, John

      Loveridge, John

      Renton, Rt Hon Sir D. (Hunts)

      Welsh, Andrew

      Luce, Richard

      Renton, Tim (Mid-Sussex)

      Whitelaw, Rt Hon William

      McAdden, Sir Stephen

      Rhodes, James R.

      Whitney, Raymond (Wycombe)

      MacCormick, Iain

      Ridley, Hon Nicholas

      Wiggin, Jerry

      McCrindle, Robert

      Ridsdale, Julian

      Wilson, Gordon (Dundee E)

      Macfarlane, Neil

      Rifkind, Malcolm

      Winterton, Nicholas

      MacGregor, John

      Rippon, Rt Hon Geoffrey

      Wood, Rt Hon Richard

      MacKay, Andrew (Stechford)

      Roberts, Wyn (Conway)

      Young, Sir G. (Ealing, Acton)

      Macmillan, Rt Hon M. (Farnham)

      Rodgers, Sir John (Sevenoaks)

      Younger, Hon George

      McNair-Wilson, M. (Newbury)

      Ross, Stephen (Isle of Wight)

      McNair-Wilson, P. (New Forest)

      Rossi, Hugh (Hornsey)

      TELLERS FOR THE NOES:

      Madel, David

      Royle, Sir Anthony

      Mr. Spencer Le Marchant and

      Marshall, Michael (Arundel)

      Sainsbury, Tim

      Mr. Michael Roberts.

      Question accordingly negatived.
      Sir G. Howe: I beg to move, in accordance with the wish of the Committee, the consequential amendment, in page 10, line 29, to leave out '£7,000' and insert '£8,000'.
      Amendment agreed to.
      Clause 11, as amended, ordered to stand part of the Bill.
      To report Progress and ask leave to sit again.—[Mr. Frank R. White.]
      Committee report Progress; to sit again this day.

    COMMUNITY SERVICE BY OFFENDERS (SCOTLAND) BILL
    Order for Second Reading read.
    Motion made, and Question put forthwith pursuant to Standing Order No. 67 (Public Bills relating exclusively to Scotland), That the Bill be committed to a Scottish Standing Committee—[Mr. Frank R. White.]
    Question agreed to.

    COMMUNITY SERVICE BY OFFENDERS (SCOTLAND) [MONEY]
    Queen's Recommendation having been signified—
    Resolved,
    That, for the purposes of any Act of the present Session to make provision as respects the performance of unpaid work by persons convicted in Scotland, it is expedient to authorise any increase attributable to any provision of the said Act in the sums payable out of money provided by Parliament—

    (a) under the Social Work (Scotland) Act 1968 in making grants to local authorities in respect of expenditure incurred by them in providing services for persons subject to community service orders or probation orders which include a requirement that the offender shall perform unpaid work;

    (b) by way of rate support grant.—[Mr. Frank R. White.]

  NATIONAL HEALTH SERVICE (NORTH-WEST REGION)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Frank R. White.]
  12.24 p.m.
  Mr. Walter Clegg: I am very grateful to be given the opportunity, at this early hour of the morning to be able to discuss some of the problems of the National Health Service in my constituency. I have given the Minister a rough indication of the areas which I shall be covering. I do not expect any off-the-cuff replies. I am merely bringing these matters to his attention.
  The first question I should like to discuss with regard to the problems of the National Health Service in the Wyre
  1364
  District, which is coterminous with my constituency, is the casualty facilities at the Fleetwood Hospital. As the Minister will no doubt know, Fleetwood Hospital is a small hospital, and at the moment casualties are directed to the Victoria Hospital in Blackpool, some nine miles away. Victoria Hospital has much better facilities than Fleetwood Hospital for dealing with casualties.
  The people of Fleetwood fear that the lack of facilities at Fleetwood Hospital, even though it be a small one, could lead to danger, and to possible maiming and injuring, because people's needs are not met straight away. The problem is that Fleetwood, quite unlike any other part of the Fylde Coast, is an industrial town. It is both a fishing port and a general cargo port. It is a roll-on, roll-off port which has heavy industries in the shape of ICI. It also has innumerable light industries. These industries give rise to possible accidents at work. I know that some of the firms in the town are perturbed that the basic facilities are as far away as the Victoria Hospital in Blackpool.
  The Fleetwood Civic Society has carried out a survey of the problem, and I shall be sending the Minister some of the material which it has provided to me. As well as being an industrial town, Fleetwood is also a holiday resort. We have the problem in the summer of thousands of visitors coming to the town. This is also a problem for the Victoria Hospital in Blackpool, a town which has about 16 million visitors a year. This puts a tremendous strain on the hospital, especially on its casualty service. If facilities were to be given in Fleetwood, that would lighten the load on the Victoria Hospital casualty service.
  It is not only firms that have expressed concern about the lack of facilities at Fleetwood Hospital. Concern is also shown by schoolmasters who are worried about their pupils being injured during school time. Concern has also been expressed by landladies as well as visitors to the town. I shall send these facts to the Minister so that he may consider them in due course.
  The second general point I wish to raise concerns a remarkable constituent, Mrs. Pat Seed, who suffers from cancer and who about a year ago started out to raise £750,000 for the installation of an

  1365
  EMI scanner at the Christie Hospital in Manchester. I have an interest in the Christie Hospital, not only because of Mrs. Seed, but because it is the cancer hospital for the North-West area.
  When I first met her about a year ago and she told me what he target was, I thought that she was taking on an impossible task. But the response has been quite remarkable, and the fund now stands at about £800,000. This has been achieved without any great organisation and at very low cost. Mrs. Seed has had a tremendous amount of help from ordinary people throughout the North-West area. It is remarkable how spontaneous the reaction has been. I can scarcely open a newspaper in my constituency without reading about some group that has been formed. For example, a small schoolboy made a boat which he will sell and the proceeds will go to the fund. We have also had the help of famous characters from the North-West, such as Ken Dodd and Red Rum. It is, however, quite remarkable that this lady, with all the odds against her, has raised such a vast sum in a short time.
  Here I must pay tribute to the Minister of State. When we had a debate on the NHS in the North-West upstairs in Committee, to a certain extent he relaxed the rules about hospitals taking part in fund raising. I must tell the Minister that Mrs. Seed informs me that the relaxation of the rules at the Christie Hospital has helped the fund. Bearing in mind the success of the fund and the help that it has given at a time when funds for the NHS are restricted, I ask the hon. Gentleman to reconsider the rules to ascertain whether they can be further relaxed. There is a need to bridge the gap between public spending limitations and what people are prepared to give. There is no more remarkable example of what can be done than Mrs. Seed's example. People in other parts of the country have taken an example from Mrs. Seed's activities and have started their own funds. That is something from which we can learn and which can benefit the NHS generally.
  I turn to a more personal matter that is of concern to my constituents as well as myself, namely, the pacemaker. I have a pacemaker myself. It was first inserted in December 1974. I am now on my third pacemaker. I am told that basically there are two forms of pacemaker that
  1366
  are being fitted under the NHS. One form of pacemaker is powered by a mercury zinc battery and the other by a lithium battery. The mercury zinc battery is cheaper to insert initially, but the lithium battery has a longer life.
  I understand that practice varies from region to region in the NHS. However, I ask the Minister to consider the figures to which I am about to refer, which have been supplied to me, which relate to the long-term effect of using the shorter life battery as against the longer life battery. I am advised that over eight years the cost of installing a mercury zinc battery, taking into account hospital costs and loss of earnings, would be on average £7,196. For the same period the cost of the lithium battery, which would last longer, would be £2,971. That is a saving of about £4,000. That saving arises because over eight years the cheaper battery would have to be replaced three times against once for the dearer battery. The patient would have to undergo three operations for the cheaper battery to be inserted against one for the dearer battery.
  I understand that the length of time spent in hospital for the replacement operation is five days. In the long run, the cheaper battery costs more because of increased hospital costs. However, there are other factors, too. I am told that, over four years, the patient has to attend 15 clinics as opposed to five clinics with the dearer battery. Again, there is a saving of hospital time.
  Not only the economics of the situation are in question. There is a risk when a general anaesthetic has to be given, especially if the patient suffers from bronchitis or something connected with that. If the number of operations can be reduced, fewer lives are at risk.
  There is also the human problem. A patient prefers to know that over eight years he will have to face only one operation as against three. It is much better for the patient to know that he has a long-life battery and that he will not have to keep on coming back.
  There is another factor to be considered when taking into account the economics, although it is one that I find bizarre. It is said that there is an argument for inserting a short-term battery when the patient is an older man or older

  1367
  woman. However, I gather that the long-life battery should be and is recovered from the body in the event of a cremation and that it is used again.
  I ask the Minister to give consideration to these matters to ascertain whether the use of the long-life battery would in the end be less costly to the NHS, be of greater benefit to the patient, and cause less anxiety.
  Those are the matters that I wanted to raise. I do not expect replies immediately. If the Minister considers the points that I have raised, I shall be grateful.
  12.35 a.m.
  The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): First of all, Mr. Deputy-Speaker, I should like to say how glad I am that the hon. Member for North Fylde (Mr. Clegg) has taken this opportunity to raise some special problems affecting the National Health Service, both personally and in Wyre, which forms part of the Blackpool health district, which is in the Lancashire health area. I should like to express my personal thanks to the hon. Member for having given me notice of the special points that he wished to raise.
  I should like to start with a few basic facts. I think that it is important, because the hon. Gentleman is representing one section out of three in the Blackpool health district.
  The population of the Blackpool health district totals about 320,000 people, and is concentrated along the coast, where the major hospitals are situated. The district general hospital is the Victoria Hospital, in Blackpool, and in addition to meeting the needs of the residential population the hospital services have to cope in the summer months with a large influx of holiday visitors and in the winter with conference-goers. The coastal area also attracts a large number of retired people, who have often moved away from their families and may well impose a further strain on the health services.
  The Wyre sector—to whose problems the hon. Member has referred—has no major hospital of its own, and therefore looks outside the sector for most hospital services. The hon. Member referred to a feeling among his constituents that a
  1368
  casualty unit capable of dealing with emergency treatment should be provided at Fleetwood Hospital, a 31-bedded cottage hospital in which general practitioners provide day-to-day medical care.
  I am aware that this issue has a long history. In 1974 representatives of the trades council met the Blackpool district management team to discuss the situation at Fleetwood. The trades council representatives at that meeting accepted that it was impracticable to provide a full accident service at Fleetwood Hospital. Then, as now, all major accident cases were referred directly to Victoria Hospital for treatment in the accident department, 10 miles from Fleetwood.
  This arrangement of accident and emergency services in Blackpool health district is in accord with the recommendations of the Platt Report on accident and emergency services. The Government's policy on these services is that they should be concentrated to provide a pattern of accident and emergency units staffed and equipped to deal immediately with major injuries and other emergencies at any time of the day or night. The aim is to ensure the availability of all the medical and nursing skills, supporting services, and the equipment needed for expert diagnosis and immediate life-saving treatment for injured patients and other emergency cases.
  It is not possible for every hospital to be staffed and equipped to the necessary high standard to deal with emergency cases. Concentration of services is therefore in the best interests of patients with serious injuries or other emergency conditions. It also benefits such patients to be taken direct to a major department where the necessary skills are available, even though this may involve a longer ambulance journey, rather than being taken to a hospital which does not have those facilities and then being transferred elsewhere. Health authorities have to balance ease of local access against the advantages of concentrating resources in a fully staffed and equipped unit which can cope with any emergency. If, through dispersing these resources, a less effective service was provided, it could be that lives would be lost.
  It is true that if a patient presents himself at a hospital which is not providing

  1369
  an accident and emergency service, health authorities have been advised that essential first aid should be given by the staff available. In such circumstances it is in general unlikely that medical staff or experienced nurses will be available to deal effectively with patients attending casualty, particularly out of normal working hours. Therefore, it may fall to other members of the staff to advise these patients on the whereabouts of the nearest accident and emergency department and of the alternative possibility of contacting a general practitioner.
  When immediate first aid can be provided this will usually be no more than can be given by a lay person with first aid training—in other words, placing unconscious patients in a position in which they can breathe freely, or bandaging wounds.
  This brings me to the second part of the district's problems, which has a bearing on the hon. Gentleman's first point. It is not only the influx of visitors in the summer who place a strain on the health services, but the high percentage of elderly people living in the district. This section of the population tends to make increased demands on the district general hospital in the winter months so that it is working at full stretch throughout the year.
  In the Blackpool health district 21 per cent. of the residents are aged over 65 as against a national figure of 16 per cent. The figure for Wyre alone is 19 per cent. For the health district as a whole it is estimated that the proportion of people aged over 65 will have increased to 29 per cent. by the 1980s. The Blackpool Victoria Hospital already provides 60 geriatric assessment beds, and I am told that there are plans—admittedly at a very early stage—to provide a further 144 geriatric beds at the hospital by the end of the 1980s. The health district also has 112 beds for the elderly at Rossall Hospital, Kirkham—in the Fylde sector—and 315 beds at Wesham Park Hospital near Fleetwood—in the Wyre sector. There are schemes in the capital programme to provide 48 beds and associated day places by 1981 at South Shore Hospital in Blackpool, a further 48 beds at a new community hospital in Poulton-le-Fylde and 96 beds at Devonshire Road Hospital, Blackpool. This is, I think, an encouraging picture and there
  1370
  will be benefits for all the parts of the health district, including Wyre. I might also add that the regional health authority's capital programme includes a proposal to build a unit for the elderly severely mentally infirm at Fleetwood Hospital. This will provide 56 beds and 50 day places. The authority hopes that building will start in 1979–80.
  The North-Western region, of which Blackpool health district and the Wyre sector are part, is recognised to be a needy region. This Government are the first to have recognised this and have started to put this right. The revenue growth rate for the region in 1977–78 was 3·2 per cent. and in 1978–79 it is 4 per cent. The regional health authority has worked out the extent of deprivation in its areas according to the principles defined by the Resource Allocation Working Party. Lancashire has been identified as one of the needier areas and the Blackpool district is also one that is relatively deprived. In practical terms, this means that the health district has received an above average rate of growth in its revenue allocations. I know it will be some time before anyone can say that the health service available to the people living in the Blackpool health district is all it could be, but progress is being made. The North-West Region is not ignored by Whitehall and Westminster. Our policy is designed to come to its relief, and we shall do our utmost, so long as we have power, to keep faith with the people in the North-West, including the hon. Gentleman's constituents.
  I should like at this point to return to the problem mentioned earlier—that is, the influx of holiday visitors in the Blackpool health district each year. I understand that a survey carried out by the British Market Research Bureau for the Blackpool Corporation and the English Tourist Board in 1972 estimated that about 3 million visitors stayed in Blackpool each year. I do not have figures for coastal districts in Wyre, but holiday visitors there would, when ill, go to the Victoria Hospital in Blackpool.
  While this tourist industry is no doubt beneficial to many of the people living in the district, it presents problems to those responsible for planning and managing the health services, particularly the hospitals. I understand that the regional health authority, in calculating both the

  1371
  funds which are distributed on a population basis to the AHAs and then to districts and in deciding what population figure to use for planning purposes, makes allowance for the fact that so many people holiday in the Blackpool health district. There is no doubt, however, that the great number of holidaymakers places a burden on the health services. The problem inevitably centres on the acute hospital services. When people fall sick on holiday, that is where they go. It is nearly always an emergency.
  The district management team has carried out research which reveals that between June and September one in four of the people attending the Victoria Hospital's accident and emergency department are visitors. One in six of those admitted as emergency in-patients between June and September were also visitors, and extra beds are put up to cope.
  The health authorities have identified this problem and have given priority to the need to develop the Victoria Hospital, Blackpool. The regional health authority is proposing in phase IV of the development of this hospital—which is in the capital programme to start in 1982–83—to provide more acute beds, intensive care units and more theatres. There are also plans for a possible phase V towards the end of the 1980s, and this will include more acute beds and more theatres as well as a geriatric unit and rehabilitation unit.
  I turn now to the second matter that was raised. The hon. Gentleman has rightly praised the courageous efforts of Mrs. Pat Seed and the appeal fund Committee in raising money for an EMI body scanner at the Christie Hospital, Manchester. I have unqualified admiration for the success which Mrs. Seed and her appeal fund committee have achieved. This equipment is, I understand, still at an early stage of development as a clinical tool. It is not yet clear what difference detection of cancer by one of these highly sophisticated machines makes to patient management and recovery compared with detection by other cheaper and readily available diagnostic scanning procedures.
  A number of hospitals and medical education establishments are at the moment carrying out research in the
  1372
  hope that the clinical role of body scanning will be more clearly established. The hon. Gentleman may not know that there is already a body scanner at the Manchester University Medical School which is partly funded by the North-Western Regional Health Authority and which provides a service for some patients from the Christie Hospital.
  We all know that health authorities have to make difficult choices in setting priorities for spending the funds available to them—and these are necessarily limited. These body scanners are very expensive, not only to buy—they cost about £400,000—but also to run. Current estimates suggest that running costs covering medical, technical, nursing and other staffing needs, consumable items, servicing contracts and so on can come to over £50,000 a year.
  I know that both the North-Western Regional Health Authority and the Manchester Area Health Authority (Teaching)—the area responsible for the Christie Hospital—have a great deal of admiration for Mrs. Seed and her efforts. But in accepting the gift from the fund they have had to stipulate—I am sure that it was done with reluctance—that the capital and running costs should be met from private funds.
  There is in this country a well-established tradition of co-operation between the statutory authorities and voluntary initiatives, and these bodies often supplement the services provided by statutory authorities such as the NHS. I think that this sort of initiative is very valuable to the NHS as a whole and to the local communities. In this connection, I shall look at the point made by the hon. Gentleman and write to him in due course.
  I now turn to the subject of pacemakers, on which the hon. Gentleman asked about our policy. Two types of pacemaker, as he said, are at present supplied by the National Health Service. The difference between them is the type of battery; one is lithium battery powered and the other is mercury battery powered. Mercury batteries are considerably cheaper than lithium ones. A mercury battery powered pacemaker costs £380, while a lithium battery powered pacemaker costs about £700. It is true to say however, that in the long run the lithium battery powered pacemaker may be cheaper, since the life

  1373
  expectancy of a mercury battery is two to three years, while a lithium battery is believed to last between five and 10 years.
  There is no central policy saying which type of battery should be preferred, although I understand that there is often a clinicial preference for the lithium battery powered pacemaker, very properly, for the reasons the hon. Gentleman outlined. But it is a matter for health authorities to decide, in the light of their available resources.
  I shall conclude with one further comment which may help the hon. Gentle-
  1374
  man. Hopes have been placed upon the isotope powered pacemaker, which would have a much longer life span than either the lithium battery or the mercury battery. The isotope powered pacemaker is still at a very early stage of development in this country, and its effectiveness is still being evaluated. It would, however, undoubtedly be considerably more expensive than the two existing types of pacemaker, which is obviously a consideration to be taken into account.
  Question put and agreed to.
  Adjourned accordingly at thirteen minutes to One o'clock.

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

LORD HATCH OF LUSBY
John Charles Hatch, Esquire, having been created Baron Hatch of Lusby, of Oldfield in the County of West Yorkshire, for life—Was, in his robes, introduced between the Lord Brockway and the Lord Balogh, and made the solemn Affirmation.

THE TACHOGRAPH: USE IN LORRIES
2.48 p.m.
Baroness VICKERS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in view of the recommendation of the Prices and Incomes Board in 1965 that tachographs should be placed in the cabs of lorries to protect the drivers from having to work unsocial hours and against exploitation, they will now bring in a regulation to implement this recommendation.
Baroness STEDMAN: My Lords, in recommending that the use of tachographs should be jointly discussed by both sides of industry, the Prices and Incomes Board in 1965 were concerned with increased productivity rather than protecting drivers against exploitation. The Government are happy to see the voluntary use of the instrument for domestic journeys and have already made the regulations necessary to permit such use.
Baroness VICKERS: My Lords, in view of the fact that Section 97 of the Transport Act 1968 states:
"… no driver shall drive a vehicle to which this Part of the Act applies unless … there is installed
970
in the vehicle in the prescribed place and manner equipment for recording information as to the use of the vehicle",
and as I think I heard the noble Baroness say that regulations had been made—Section 1(3) says that the Minister "may make regulations"—may I ask the noble Baroness why, if regulations have been made, this Act has not been carried out?
Baroness STEDMAN: My Lords, the regulations have been made to allow tachographs to be used on a voluntary basis. There is still opposition among drivers against the use of tachographs; it is a matter for voluntary agreement between employers and employees whether they are used. The new lorries which are now provided have the tachograph built into them, unless the person purchasing the lorry specifically asks for it to be replaced with an ordinary speedometer. In the meantime, we still have very stringent control over drivers' hours and distances by means of the log books that have to be kept and are regularly inspected.
Viscount TRENCHARD: My Lords, would the noble Baroness agree that her Answer tends to confirm a feeling that the Government believe in an extension of the principle of non-applicability of the law to powerful trade unions? Would she say why the Government continue to support such a policy, in view of the evidence of nearly all public opinion that that is not in accord with the wishes or the interests of the public, including trade union members?
Baroness STEDMAN: My Lords, I did not accept that we were encouraging people to go against or not to observe the law. We have ensured that lorries which are taking loads into Europe are and must be equipped with the tachograph, which they must use. It is still a question of voluntary agreement between the firms and the employees as to whether the tachograph is used, even if it is installed in the lorry, but we are satisfied that we have considerable and stringent tests and that our drivers are subject to inspections as to whether they are keeping their log books, and action is taken if they are not carrying out the law.
Lord MOWBRAY and STOURTON: My Lords, I fully understand the position

971
stated by the noble Baroness about the unions not liking the tachograph, but are the Government themselves not aware of the great value of the tachograph in giving information on so many matters, including safety? Following from that, I should like to repeat the question I asked the other day. Why do the Government not do more in the way of educating the public about what the tachograph is? Has the noble Baroness read the article by Mr. Bernard Levin which appeared in The Times a few weeks ago? Why is there not a little educational encouragement from the Government about this?
Baroness STEDMAN: My Lords, there have been many articles, not only from Mr. Bernard Levin, on the value, or otherwise, of the tachograph. The Government have done what they can to persuade our drivers and the employers of drivers who are operating in this country only, to use the tachograph. We are told—but we have no firm evidence of our own—that there are certain advantages to both the drivers and the employers if the tachograph is used. However, at this time—and we have advised the EEC of this—we believe that if we were to impose the compulsory use of the tachograph on domestic traffic, it would provoke severe and serious industrial dislocation in many sectors of the economy. We think that it would probably involve unacceptable wage demands without necessarily resulting in any offsetting gains in productivity, and we do not think that we can accommodate that in our vital counter-inflationary measures that we are enforcing at the moment.
Lord PAGET of NORTHAMPTON: My Lords, is not Europe basically the trouble here? Has Europe not convinced the British working man that this is a gadget which it proposes to impose upon him, whereas he feels that it is b. well not going to happen?
Baroness STEDMAN: My Lords, I do not know that Europe has tried to impose anything on the British working man. Some sources tell us that the West German drivers find that the tachograph is to their advantage, and that they have been able to improve productivity. However, we have not enough evidence to be
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able to persuade our own domestic drivers at the moment, and we cannot risk any dislocation in our transport system at the present time.
The Earl of ONSLOW: My Lords, is it not a statement of fact that the tachograph should now be imposed by law under our Treaty obligations, and that we are ratting on our Treaty obligations by not imposing it? Furthermore, are we not doing this because Mr. Law of the Transport and General Workers' Union in Birmingham says so?
Baroness STEDMAN: No, my Lords. The Commission has submitted to us its reasoned argument as to why we should go in for compulsion and we have given our reply. We are told—although we have not yet been informed officially—that the matter is to be referred to the European Court. We must now wait until that has taken place—or rather until we know officially that that is to take place. We have given our reasoned response to the Commission's argument. A copy of that response is in the Library, and any noble Lord can see it. I should have thought that, upon reading it, noble Lords would see that it makes sense.
Lord ROBBINS: My Lords, would the noble Baroness deny that innocent, and perhaps valuable, lives might be saved by the universal use of this instrument?
Baroness STEDMAN: My Lords, we have no evidence to support such a statement at the moment.
Lord DAVIES of LEEK: My Lords, is my noble friend aware that this eulogising of the tachograph and productivity is nothing compared with the safety of the British lorry driver? He is still one of the finest in the world. Statistics on road accidents in West Germany, and indeed in Europe in general, compared with those in Britain, will show clearly that the tachograph has not solved the European problem (outside Britain) of death on the roads? I should rather play softly, softly, than try to impose upon the British lorry driver something to which he already objects.
Baroness STEDMAN: My Lords, my noble friend is quite right.
Lord ORR-EWING: My Lords, the noble Baroness has said that she has no evidence either way on this. Therefore, how can she agree with statistics quoted by the noble Lord behind her? Either she has evidence that the tachograph saves lives, or she has not. If we are to run against the general rule of law in the EEC, would it not be a good idea to start collecting evidence on whether or not there is a case for tachographs in this country?
Baroness STEDMAN: My Lords, what I was saying was that we have no evidence. We are told by the West German people that there is a saving and that it is to the drivers' advantage to use the tachograph. We have not been convinced by any evidence that has been put forward and we do not know that there is necessarily any saving of life. We have no statistics to prove whether or not the use of tachographs has saved lives.
Lord LEATHERLAND: My Lords, is my noble friend aware that many of us still believe—
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, it is eight minutes since we embarked on this Question. The House is obviously very interested in this matter, but I think I detect a feeling that we have perhaps had enough of it.

EMPLOYMENT SUBSIDIES: COST
2.56 p.m.
Baroness SHARPLES: 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 make available a breakdown of the total sums paid out by way of temporary employment subsidies during the financial years 1975–76 and 1976–77 to (a) nationalised industries, (b) quoted public companies, and (c) independent businesses.
Lord WALLACE of COSLANY: My Lords, I regret that the information is not available in the form requested, and could be obtained only at disproportionate cost. The nationalised industries
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generally are excluded from the temporary employment subsidy scheme, which is available to registered companies throughout the private sector of industry and commerce. No distinction is made between quoted public companies and independent businesses.
Baroness SHARPLES: My Lords, I thank the noble Lord for that reply. I regard it as rather unsatisfactory, but I appreciate the cost involved. Does the noble Lord appreciate that, while we all want unemployment to be reduced, independent unquoted companies require at least two days a week to fill in the five extremely complicated forms, plus the other correspondence with which they have to deal, and sometimes they then have to wait many months for the temporary employment subsidy to arrive? Surely it was not the original intention of Her Majesty's Government to deal with the temporary employment subsidy in this way.
Lord WALLACE of COSLANY: My Lords, I would agree with the noble Baroness that that was not the intention of the Government. If the noble Baroness will give me some concrete instances, I shall certainly have them investigated. I quite agree with her that there should not be this unnecessary delay.

CONCORDE SERVICE TO SINGAPORE
2.57 p.m.
The Earl of KIMBERLEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking with the Malaysian Government in order to ensure that British Airways' Concorde service to Singapore may be reopened as soon as possible.
Baroness STEDMAN: My Lords, we have provided the Malaysian Government with full information to meet their concern that Concorde might affect their environment, and we have urged them to allow the service to restart. Malaysia is sending a delegation to London for a general

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review of air services. This will start shortly, and the opportunity will be taken to press for the service to restart.
The Earl of KIMBERLEY: My Lords, I thank the noble Baroness for that Answer, and it is perhaps encouraging that the Malaysians are coming here. Is she aware that the service started on 9th December, ran for exactly one week and therefore has now not been working for five months? Is she further aware that without Singapore the whole of the Far Eastern routes for Concorde cannot be opened up? Can she confirm whether it is true or false that in many ways the Malaysians feel that they have been taken for granted and have therefore lost face? Can she also confirm that, when they come here in the latter part of this month, they will be seen by senior Ministers and not junior Ministers?
Baroness STEDMAN: My Lords, in reply to the last part of the noble Earl's supplementary question, I should say that I am sure that when they come here the Malaysian delegation will be met by the appropriate Ministers. I cannot guarantee who will meet them, but they certainly will be met by an appropriate delegation from the United Kingdom. What they are really concerned about in Malaysia is that Concorde might damage their environment. However, when travelling at supersonic speed the aircraft would be well away from the Malaysian territory. It would fly over only two miles of Malaysian territorial water, which would be further away than when it flies over the territories of Italy and Yugoslavia. But the Malaysians are still concerned about the environmental risks from the noise of Concorde. We have submitted certain statements in evidence to them, and no doubt this will all be discussed at the forthcoming meetings.
The Earl of KIMBERLEY: My Lords, I should like to ask the noble Baroness one more supplementry question. Does she not agree that the matter is no longer in British Airways' technical hands, but is entirely a diplomatic matter between the two Governments? Can she give an assurance that Her Majesty's Government will do everything possible to reach a satisfactory conclusion to this problem.
Baroness STEDMAN: My Lords, I would not have thought it to be necessary to ask Her Majesty's Government to do everything possible to solve this problem. We want Concorde flying, not only to Malaysia but to other places as well. We shall certainly give all the assurances that the noble Lord wants, that we will do our best to bring this to a happy conclusion.
The Earl of SELKIRK: My Lords, may I ask the noble Baroness whether she has thought of the possibility of the Concorde landing, alternatively, in Kuala Lumpur and Singapore?
Baroness STEDMAN: Not without notice, my Lords, hut I shall certainly inquire about that and write to the noble Earl.
Lord GRIDLEY: My Lords, when the Malayan delegation come here, would it not be appropriate to remind them of the great affection which this country has for Malaya and also for Singapore, and that the delay in arranging for this British aircraft to fly to that territory is causing quite a lot of unhappiness to people in this country?
Baroness STEDMAN: My Lords, I am sure that those who meet the Malaysian delegation will be aware of all the points that the noble Lord has made, and I am quite sure that they will make those points to them, also.

THULE ISLAND AND THE ARGENTINE
3.1 p.m.
Lord CARRINGTON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether it is true, as reported in the Observer on Sunday, 7th May, that 40 Argentinians are occupying Thule Island in the Falkland Dependencies, and if so, what action they propose to take.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, we have

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protested to the Argentine Government about these activities, which we understand are in support of the Argentine Antarctic research programme. The Argentinians can be in no doubt that we consider Southern Thule to be British territory. We are pursuing the issue.
Lord CARRINGTON: My Lords, while thanking the noble Lord for that Answer, may I ask him whether it is true that the Argentinians have been on this island for nearly 18 months, and will the House not be astonished to learn that the Government seem to have been suppressing this information from the British public? Will he also bear in mind that, while all of us would hope that the relations between Britain and Argentine will improve, occupation of a British island by the Argentine Government, and the apparent acceptance of this by Her Majesty's Government, is not a firm basis for such a friendship?
Lord GORONWY-ROBERTS: My Lords, it would be incorrect to assume that these activities were in any way concealed from public knowledge. I understand that they were reported at the time in the news media; that is, towards the end of 1976. As to the other two points made by the noble Lord, I entirely agree. It is the fact that we are pursuing negotiations across the board on all outstanding issues, including the general issue of the future of that part of the world, with the Argentinians. Indeed, we expect that the two working groups on political and economic matters will reconvene this summer, followed by a ministerial meeting. It is in that context that an incident or a situation like this—which, again, I agree is a serious matter and should not be allowed to prejudice the success of the larger negotiations—will be viewed.
Lord WADE: My Lords, is it understood that this occupation is temporary and for the purpose of research only? Has that been made clear in the argument on the part of the Argentinians?
Lord GORONWY-ROBERTS: Yes, my Lords. The Argentinians established a research station on Thule Island some time in 1976. We protested, and in that way protected our legal claim to sovereignty. We understood that the
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residence, if I may call it that, was to be temporary; and it is a fact that, because of climatic conditions, seasonal adversity, it is practically impossible to be there all the year round. In that sense, it is a non-continuous residence. However, it is important, in the context of the larger negotiation now proceeding, in which we are seeking general accord and general co-operation for the development of the South-West Atlantic area, to the mutual benefit of all three countries—the United Kingdom, the Falkland Islands and Argentina—that incidents or situations like this, whether temporary or not, should not be allowed to grow out of proportion and imperil those larger and vital negotiations.
Lord HOME of the HIRSEL: My Lords, do I understand, though, that there was no request of the British Government before the Argentine Government put their station on Thule Island, and that therefore this is an illegal occupation? Is it not very dangerous to leave that sort of situation hanging in the air for 18 months or longer, and would it not really encourage the Argentine Government to try something more ambitious, and even more dangerous? Ought they not to be given a time in which to get out?
Lord GORONWY-ROBERTS: My Lords, it is quite true that there was no application to us for permission to land on this island, which is certainly British territory. It is equally true that we are prepared, in the larger context of agreement, to co-operate in research across the whole area, and that is the way in which research in seismology, meteorology and other departments can best be conducted. I am more doubtful of the noble Lord's suggestion that we should try something, as he said, which is more positive. We have in fact not left the matter suspended. We have taken the diplomatic and political action which secures our position legally, and we have left the Argentinians in no doubt whatsoever how we regard sovereignty. We regard this island as being British. Against that background of insisting on sovereignty, we are prepared to continue with the negotiations. I and, no doubt, my right honourable friend would have to consider very carefully indeed the implications of the latter part of the noble Lord's supplementary question.
Viscount THURSO: My Lords, can the noble Lord tell us whether this island belongs to anybody other than to Her Majesty's Government or the Crown—for instance, does it belong to the Falkland Islands Company—and, if so, whether the owner has made any protest about this, or whether there is any suggestion that a negotiation might be made with the object of establishing a trespass or some matter in civil law?
Lord GORONWY-ROBERTS: My Lords, I would prefer, and I am sure Her Majesty's Government would prefer, to rest on the firm fact that this island, and indeed the South Sandwich Islands, of which it is part. is within British sovereignty. On that we do not move. We are prepared, without prejudice to that fact, to negotiate, as I have said, on every other matter of mutual concern. As to the ownership within that sovereignty, I have no information, but I should like to look into this and perhaps inform the noble Viscount of the position.
Lord SHACKLETON: My Lords, could my noble friend arrange for a map to be made available, so that noble Lords who may think there is some value in this island will see that there is none? Further, in supporting the purpose behind the Question from the noble Lord, Lord Carrington, would he take the opportunity to point out to the Argentine Government that this concerns not only harmonious relations in regard to the Falkland Islands but the whole of the future of co-operation under the Antarctic Treaty? Because, although this is outside the Antarctic Treaty area, I understand, nonetheless it is a very damaging move by the Argentinians at this moment.
Lord GORONWY-ROBERTS: My Lords, I think I agree with everything my noble friend has said. He has unrivalled knowledge of this area, which is not very accessible to most of us. It lies 1,200 miles to the South of the Falkland Islands, and only some 60 miles to the North of the Antarctic Treaty line. Anything below that line, as noble Lords will know, is subject to the 1959 Treaty. In actuality it is demilitarised, and in effect internationalised. As to the condition of the island, I am told that it is quite barren; is normally uninhabitable; and, indeed, as I pointed out in answer to the noble
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Lord's supplementary, is habitable for research purposes only for parts of the year.
Lord MORRIS: My Lords, would not Her Majesty's Government agree that the fact that the Argentinian Government, totally out of character, have made no political capital whatsoever out of their presence on Southern Thule, in the light of Her Majesty's Government's tacit and somewhat tardy acceptance of their presence, points to Her Majesty's Government's opinion that their presence there has no sinister implications whatsoever?
Lord GORONWY-ROBERTS: My Lords, we do not assume sinister implications, especially in the middle of what we cautiously hope will be productive negotiations. In that respect I welcome the noble Lord's intervention. We shall certainly continue talking to the Argentinians in that sense, but I should like to make it clear once more that there is absolutely no doubt about the sovereignty of these islands. On that we rest. There is, equally, no doubt about our genuine intention to pursue the negotiations which are now on course with a view to attaining general accord and a system of general co-operation for the benefit of everybody in that area.
Lord CARRINGTON: My Lords, since the Argentine Government have been advertising for tenders for fishing the territorial waters around the Falkland Islands, and since increasingly fishing is becoming important in that part of the world—and round the Island of Thule as well—and since there may also be oil on the Falkland Islands, will the noble Lord assure the House that the Government will robustly defend our commercial interests?
Lord GORONWY-ROBERTS: Certainly, my Lords. This lies very much at the heart of the present negotiations. In robustly defending our own interest and that of the Falkland Islanders, whose interests must be paramount throughout, in this matter, we shall, I believe, be defending and expanding the interests of all concerned in that area. There is plenty for everybody to do peacefully in the South-West Atlantic, and the only

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condition for that is political agreement as to general co-operation for proper exploitation on land and sea in this area.
Lord WIGG: My Lords, would the Minister be good enough to ascertain from the Opposition what they mean by the word "robust", having regard to the fact that we have spent over £80,000 million on defence since the end of the war? Does "robust" mean asking the Chief of the Defence Staff to make a speech promising undying friendship with the Argentine for ever?
Lord GORONWY-ROBERTS: My Lords, I imagine that my noble friend's supplementary question is directed in part to the noble Lord, Lord Carrington, who first used the word "robust". I hesitate myself to intervene in a war between "Whigs" and Tories. On the other hand, I take on board everything that has been said and particularly the points made by the noble Lord, Lord Home, the former distinguished Secretary of State for Foreign Affairs, whose words and views will be very carefully considered, not only in this country but in the other countries concerned. Equally I note what my noble friend Lord Wigg has said.
Baroness WARD of NORTH TYNESIDE: My Lords, will the noble Lord put on the record the number of protests we have made on behalf of this Government and country in all sorts of episodes which seem to be occurring throughout the world, so that the country will know when to question how these protests have been dealt with?
Lord GORONWY-ROBERTS: My Lords, I will consider how to satisfy the curiosity of the noble Baroness about the persistence with which we have put our point of view to the Argentinians. We have done so consistently and frequently and they are under no illusions at all as to how the United Kingdom regards this particular situation and the general question of sovereignty in the Falkland Islands.

SOLOMON ISLANDS BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

SCOTLAND BILL
3.15p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.(The Lord Chancellor.)
The LORD CHANCELLOR: My Lords, before we proceed to discussions on the Scotland Bill, in which the noble and learned Lord, Lord Hailsham, played such a conspicuous part, I should like on my own behalf, and, I am sure, on behalf of the whole House, to express our grief at the tragic loss which the noble and learned Lord has suffered and to convey to him and to his family our deepest regrets.
Lord CARRINGTON: My Lords, if I might be allowed to do so, may I say how much everybody in the House appreciates the fact that the noble and learned Lord the Lord Chancellor has said what he has. May I suggest that we confine ourselves at this moment to sending our very deepest sympathy and affection to my noble and learned friend Lord Hailsham.
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
Schedule 10 [Matters within Legislative competence of Assembly, and within powers of Scottish Executive]:
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey)The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey) moved Amendment No. 261:
age 53, line 6, leave out ("or to a person") and insert (",including a person of a description").
The noble and learned Lord said: This is a drafting Amendment which clears up two minor points of possible doubt on paragraph 23 of Schedule 10. If paragraph 23 is read in isolation there is an inference to be taken, perhaps, from line 6 of page 53 that a person designated under Clause 62(5) could be a person other than a civil servant. Clause 62 itself makes it clear that this could not be the case, but the Amendment clarifies the

983
point and removes the inference so far as paragraph 23 is concerned. By adding the words "of a description", the Amendment also makes clear that the reference to persons designated is not construed as reference to persons as individuals but to persons described by reference to the capacity in which they perform services. Amendments Nos. 286 and 287 to Clause 62(5), to which we shall come in due course, also deal with the same point in the same way. I beg to move.
The Earl of SELKIRK: This is decidedly embarrassing for we have not yet reached Clause 62 of the Bill. I understand this Amendment to mean that anyone appointed, not a member of the Home Civil Service can, in fact, he put in the same position as a member of the Home Civil Service in so far as salaries and conditions of service are concerned. That means that any one of the people appointed by the Secretary of State can be brought in (as the noble and learned Lord has said) not personally, but in a general class. Am I correct in this? I should like to mention that there are some curious words in the Schedule we are dealing with. It speaks of the Home Civil Service "of the State". Is it really right to call it "of the State"? I have an Amendment down on this to be dealt with presently, but draw attention to it because it is a curious phrase which I do not recall having seen before. I think we should examine whether it should not be "of the United Kingdom". Could the noble and learned Lord give us clarification on this? This means that anyone appointed by the Scottish Secretary can be brought in on terms similar to those of the Home Civil Service.
Lord McCLUSKEY: As the noble Earl has said, he has an Amendment down in relation to the second matter that he spoke of, and I should like to postpone my answer to that until we reach that Amendment. In relation to the other, it will arise also on Clause 62(5); and again I apologise for not being able to offer an answer at this stage. I did not expect the point to arise. It is something we do not expect to reach until next week, and I am sure we shall get a more satisfactory answer if I give it then.
The Earl of SELKIRK: I asked whether that meant that any appointment by the
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Scottish Secretary could in fact be brought in on ordinary Civil Service terms. Is that the purpose of this Amendment?
Lord McCLUSKEY: I should like to leave it, if I may, until we reach Clause 62. Quite honestly, I am not prepared to answer it at the moment, simply because I have had a fairly full day preparing for the questions I expect to he asked in the course of the afternoon.
Lord CAMPBELL of CROY: I am sorry that the noble and learned Lord cannot answer my noble friend straight away, but I hope we can revert to this question when we reach these points later—probably next week—because it is important to know to what extent Part II of the Schedule exempts powers and functions which are otherwise to be devolved in Part I. Furthermore, from the point of view of the public service it is important to know what categories of persons are to be within the control of the new Executive and what categories of persons will continue to be operating as civil servants in the Home Civil Service as we now know it. On the understanding that we can revert to this later when we reach the connected points, I hope that my noble friend and others will allow this Amendment to he made.
On Question, Amendment agreed to.
3.21 p.m.
Viscount THURSO Viscount THURSO moved Amendment No. 379:
Page 53, line 21, leave out ("except for the powers to fix estuarial limits").
The noble Viscount said: This Amendment is not intended to extend the devolved competence of the Assembly, and indeed I do not think it does. Yesterday, we discussed Group 14 in Part I of this Schedule, where your Lordships agreed that up to a distance of three nautical miles from the low-water mark or where an estuarial limit under the Salmon Fisheries (Scotland) Acts extended further would be the limit to which the devolved competence of the Assembly would extend. Therefore, I think we have agreed the seaward limit of competence of the Assembly in relation to salmon fisheries.
I do not think that my Amendment would alter that in any way, and it is not

985
intended to. But I should like to take a moment to explain to your Lordships that estuarial limits, so far as salmon fisheries are concerned, are not merely a measurement from the mouth of a river to the limit of territorial waters. They are in fact areas of inshore sea into which a river discharges, which allow a different form of management of fisheries and allow forms of fishing to take place different to those that take place in adjacent parts of the inshore sea. These estuaries are described in the various Salmon Fisheries (Scotland) Acts not only in relation to the rivers of which they are estuaries and in relation to the distance which they extend seaward; they are also described on either side by reference to fixed points. Those fixed points produce lines which eventually cut the seaward limit of the estuary and draw on the map a square or rectangle, or some other shape, within which certain rules of fishing and of management apply.
This is a very valuable management tool, and if we were to ask the Scottish Assembly to manage the inshore salmon-fishing industry of Scotland, then it should have control over this management tool. I can perhaps explain one obvious instance in which it would be positively necessary to move the estuarial limit, and that would be if a combination of winds, tides and floods caused a sand-bar to build up at the mouth of a river and cause that mouth to change its geographical position. Not only can that happen but it has happened; and a river could then be discharging outside its estuarial limits. It would obviously be only common sense that the estuarial limits should then be moved to embrace once more what one would normally understand to be estuarial waters.
Also, your Lordships may remember that a very deeply researched report was produced in Scotland, called the Hunter Report on Salmon Fisheries. It perhaps went further than most people were prepared to go in suggesting changes in the laws and the methods by which salmon should be caught in our inshore waters. But it would have relied upon completely changing estuarial limits and in fact would have put all the salmon fisheries, if possible, within an estuary and perhaps stopped salmon fisheries outside estuaries. So clearly the ability to move the estuary
986
limits sideways or to re-define the limits of estuarial fishing, is a management tool which the Assembly would wish to have in order to manage Scottish inshore salmon fisheries in a competent fashion.
I do not think that my Amendment, which simply proposes to leave out of Part III the words,
"except for the powers to fix estuarial limits",
relating to the Salmon Fisheries (Scotland) Acts 1928 to 1968, would in any way extend the devolved competence of the Assembly. I think it would give the Assembly the powers which they require in order to carry out the job we have already decided they should have. I think it would be a cumbersome nuisance if they had to refer to Westminster every time they wanted to move an estuarial limit and therefore I commend this Amendment to your Lordships. I beg to move.
Lord McCLUSKEY: I think I should give a brief explanation of the provisions in the Bill. Group 14 of Part I of Schedule 10 devolves salmon and freshwater fisheries up to a seaward limit of three miles or, if further, up to any estuarial limit fixed under the Salmon Fisheries (Scotland) Acts 1928–1968. This is not an arbitrary limit, but one which has proved practical in its application to the district boards which administer freshwater fishery matters. It is sensible that the extent of the Assembly's competence should reflect existing administrative arrangements.
Estuarial limits are fixed by byelaws under the 1928–1968 Acts. Several have been fixed, principally by commissioners established under the 1862 Act. In most cases they do not exceed the three-mile limit. But if, as the Amendment proposes, the power to fix the limits was devolved, the Scottish Executive could, if it so wished, substantially extend them; and because Group 14 of Part I of Schedule 10 devolves all freshwater fisheries matters within estuarial limits, the Executive would effectively have the power to extend devolved competence. The Government believe it is quite wrong, as a matter of principle, that any power to alter the frontier of devolution in this way should be devolved. Moreover, there could be undesirable complications for international territorial fisheries agreements.

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However, having listened to the noble Viscount, I do not understand him to be challenging the principles upon which the Bill has been based, and he has certainly persuaded me that there is a case for re-examination of the matter in relation to what he has called sideways or lateral movements of the estuarial limits within the three-mile limit. If it will satisfy the noble Viscount I will first of all undertake to consider the matter; and, secondly, in the light of our consideration of what he has said, we should like to discuss it with him and if we can agree that some alteration of provisions in the Bill is desirable, I hope we can bring forward an agreed Amendment to cover the matter.
Lord CAMPBELL of CROY: Noble Lords will welcome what the noble and learned Lord has said in reply to this Amendment. Following the debate we had, I think, yesterday on a previous, similar Amendment concerning the limit of three miles from the shore, I agree with the noble and learned Lord that there would be international difficulties if the Assembly and its Executive appeared to be given powers and jurisdiction beyond the three-mile territorial limit. I mentioned during that debate that the Law of the Sea Conference is now virtually agreed upon extending that to 12 miles, so that in a year or two to come we are likely to see the territorial limit extended. While we recognise the three-mile limit, it would be giving the Assembly and its Executive powers to legislate or use their executive powers in international waters, and I think we have all been agreed in principle that that is not the intention of the Bill.
The noble Viscount, Lord Thurso, has pointed out that a great deal can and needs to be done within three miles sideways from estuaries. I hope, there fore, that it will be possible for the Government to come forward with provisions to provide for that. The noble Viscount mentioned the Hunter Report, but I would remind him that that had very extreme recommendations. It suggested that all commercial fishing in Scotland should be carried out by a system of one single trap in each river. That would virtually abolish all the netting systems and commercial fishing as it is now known by fixed engines, as they are technically
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called, in the estuaries and at the river mouths, and quite apart from anything else would put about 2,000 men out of jobs. Therefore, I would not follow the Hunter Report too far because at least that part of the report proved not acceptable in Scotland.
The Earl of PERTH: In the debate yesterday on Clause 14 I asked a question of the noble and learned Lord, Lord McCluskey, and he said he would try to deal with it today. My question is just for elucidation. What happens if, as a result of the conference, the limit is extended from three to 12 miles or the estuarial limits are extended. Does it automatically then mean that the Assembly has powers on these extensions, or how does it change the present situation?
Lord McCLUSKEY: Looking at the provisions of the Bill, the position is that under the Bill the competence of the Assembly relates to the situation which is established by the existing statutory regime, and if there were to be any alterations resulting from the conference referred to by the noble Earl that would have to be done, so far as the Bill is concerned, by a further United Kingdom Statute.
The Earl of PERTH: That would happen in each case? If there were a change on estuarial limits there would have to he a special Bill to that effect? or could we not have something which would ensure that, if there were a change, the change could automatically apply to the Assembly's powers? It would seem to me very clumsy otherwise.
Viscount THURSO: Perhaps I could say a word on this point. We are really talking about an inshore fishery. Coastal netsmen, estuarial fishermen for salmon, are an inshore fishery and their engines do not operate beyond the sort of distance that would be enclosed by a three-mile limit. Once you go beyond the three-mile limit you are talking about what we call high seas fisheries. This is a horse of a different colour—or a salmon of a different colour, if you like to put it that way. This is something entirely different and something which naturally would concern people interested in salmon, but concern them for different reasons and in different ways. This is a matter which I think can

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properly be left to the United Kingdom Government; in fact it would be very much better to leave this to the United Kingdom Government to deal with rather than to a devolved Assembly. I do not envisage that the Assembly would ever wish to extend its influence beyond the three miles. It might well wish to pressurise the United Kingdom Government to take action beyond the three miles to obtain international agreement on how salmon were to be treated on the high seas, but that is a different matter altogether. I do not see anybody wanting to fiddle about with estuarial limits in order to deal with salmon on the high seas. They may very well want to do not frequent but occasional adjustments to estuarial limits in order to deal with day-to-day matters that affect inshore netsmen and coastal fishermen.
The Earl of PERTH: I do not think that the noble Viscount, Lord Thurso, quite takes my point. He himself asked what happens if the rivers change somewhat and therefore you go sideways. My point is this: let us suppose for some reason which is not easy to forecast estuarial limits are changed. Does the Assembly just stick at what is laid down here or do they in their turn get increased powers with the change in estuarial limits? I am not trying to get much further for the Assembly or to get anything else, but I just raise it as a practical matter. If the estuarial limits are changed, does the Assembly have that power or are they stuck with what is fixed under Group 14 which is the position at the present time?
Lord McCLUSKEY: If the noble Earl looks at page 53 of the Bill, at lines 21 and 22, he will find the words which are the subject of this Amendment. Those words make it plain in Part III of Schedule 10 that the Assembly has no competence to fix estuarial limits. Their competence, put positively, is contained in Group 14, and their competence in relation to the improvement and maintenance of salmon and freshwater fisheries in any waters extends up to the estuarial limit. At the moment the estuarial limits are fixed under the Salmon Fisheries (Scotland) Acts 1828–1868. If these Acts fell to be amended so as to allow the estuarial limits to be extended outwards, then without doubt, if it were desired to extend the competence of the Assembly
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to larger estuarial limits, there would have to be an amendment of the provisions of the Scotland Act, particularly in Group 14, to make that plain.
The Earl of PERTH: Is that not a large sledgehammer to crack rather a small nut, or rather a small change in the estuarial limits? Could something not be introduced so that, in the event of there being a change in the estuarial limit, the powers of the Assembly would automatically apply to those?
Lord McCLUSKEY: I have undertaken to consider the matter raised in the Amendment. At the same time I think I shall consider writing a letter to the noble Earl, with copies to the noble Lord, Lord Campbell of Croy, and to the noble Viscount, Lord Thurso, and hope to deal with the matter then.
The Earl of ONSLOW: As someone who has been rather critical of this Bill, may I say how very nice it is to have the noble and learned Lord, Lord McCluskey, being so constructive on an Amendment like this. He tried yesterday to give me an undertaking to talk about what I believe is a fiendish complication about drift netting. Has he now got the answer? I think the Committee might he quite interested. The point I raised yesterday was on drift netting for salmon—the Scots have done it by renewable order, in England it is done by licence. Has the noble Lord got the answer? If he does not, I quite understand.
Lord McCLUSKEY: I have an answer. The answer is that the matter is, indeed, fiendishly complicated. I was advised that I should not speak ad lib about the subject, and that I should write to the noble Earl. If he then judges that the Committee ought to know the answers, then he can take steps to see that the Committee is informed.
Viscount THURSO: I am most grateful to the noble and learned Lord, Lord McCluskey, for the generous way in which he has looked at this Amendment. It has been extremely helpful to receive his assurance, and it is one which I am very happy to accept. Therefore, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
3.41 p.m.
The Earl of SELKIRK The Earl of SELKIRK moved Amendment No. 179:
Page 55, line 47, column 2, leave out ("Not").
The noble Earl said: The purpose of this Amendment is to ascertain whether clean air is a devolved subject, and, if so, to what degree, and whether it is necessary to omit Section 2(1)(d). The first thing to do is to find out whether clean air comes in the correct place. There is no mention of clean air in Part of Schedule 10. The nearest I can get to it is pollution, which comes in Group 7. I then have to look at Part II and see whether it is delegated, Indeed, it is delegated, and I find, "control of pollution as respects motor vehicles", which presumably means internal combustion engines, but not motor bicycles. It then mentions aircraft. Presumably, in regard to pollution, aircraft is a reserved subject, but not in regard to noise, which apparently is a devolved subject. It then refers to hovercraft and, apparently, anything that a hovercraft does in the way of making itself a nuisance is a reserved subject. Dumping at sea is the same. We then come to ships. It appears that this is a rather complicated subject and, in so far as there is any increase in the standard required from ships, that will be a reserved subject. But if the pollution is no higher than the existing standard, that will be a devolved subject. It is a fascinating point for the Judicial Committee of the Privy Council to examine on some future occasion. It therefore seems to me that, in some respects, clean air is probably a devolved subject.
I turn to Schedule 16 and find that there is no amendment of any Act there. So I then turn to Schedule 11, which deals with powers, and in Group E your Lordships will find there are devolved powers on such things as the Alkali etc. Works Regulation Act 1906, the Control of Pollution Act 1974 and the Health and Safety at Work etc. Act 1974. However, the Clean Air Act is not mentioned. I have tried to examine the position, and it appears that clean air is probably a devolved subject. If this is so, is it necessary that Section 22(1)(d) should be excluded ? That is said not to be devolved.
It is worth looking at Section 22. It states that local authorities may report to
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the Minister any smoke coming from a Government Department, smoke in smoke controlled areas and smoke which constitutes a nuisance. But they may not report smoke from the Royal Navy. I am not at all sure that I was not at the Admiralty when this Act was passed. But, be that as it may, I cannot see why this paragraph of a subsection should be left out. In any case, what can the Minister do? Furthermore, I am not sure whether the Minister is a Minister of the Crown or a Scottish Secretary. This is not at all clear to me. All he can do is to inquire and take practical measures to abate and prevent a recurrence. In these circumstances, I think that the noble and learned Lord could let this paragraph in a subsection of a Section go, and include the Clean Air Act in the devolution. I beg to move.
Lord MOTTISTONE: I should very much like to support my noble friend. When I looked at Part II, it seemed to me that there were just two paragraphs which were out of context from all the others. One was paragraph 22, which we debated last night, and which I shall not pursue further, and the other was paragraph 7, for just the reasons that my noble friend has mentioned. All the other paragraphs fit a kind of logic of the law, of finance or of public health. But this seems to me to be the odd one out, and I am sure that the Government need to look at this problem again in the way that my noble friend has suggested.
Baroness STEDMAN: By his Amendments Nos. 179 and 180 the noble Earl is seeking clarification on the purposes of the entry, and he has put his finger right onto one of our difficulties. In general, pollution by smoke is devolved by Group 7 in Part I of Schedule 10. If it were not qualified in some way, the effect of the group would be that the whole of the Clean Air Act 1956 was within the legislative competence of a Scottish Assembly and the powers of a Scottish Executive. Section 22(1) of the 1956 Act provides that a local authority should report any pollution from Crown buildings or ships to the responsible Minister, and that the Minister should take action to rectify the matter if, after he had conducted an inquiry, he considered that there was just cause for complaint.

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The Government's policy in relation to Section 22(1) of the 1956 Act is that it should be devolved, in so far as it relates to Crown premises owned by the Scottish Assembly or Executive, or held for devolved purposes, but that it should be reserved in so far as it relates to "reserved" Crown premises, including Crown ships. Therefore, if a local authority complained about smoke from a "devolved" building, it would be for the Scottish Secretary concerned to take any necessary action, and the Scottish Assembly would have legislative competence to change the existing procedures in respect of such buildings.
The intention behind the Bill is that in so far as Section 22(1) relates to Crown buildings, the policy is achieved by silence, but that a special safeguard is required in relation to Crown ships. It is true that Schedule 6 to the Bill would require the Assembly to get Government consent for any legislation affecting premises, including ships, now vested in a Minister of the Crown, or imposing duties on members of the Forces of the Crown. But there is no similar safeguard, nor is one needed in the Bill as it stands, for any visiting Forces. So the noble Earl's Amendment, as it stands, would give the Scottish Assembly legislative competence in respect of all smoke pollution, including smoke pollution from, say, the Russian Navy on a courtesy visit to Scotland!
Having said all this, the Government accept that it is not entirely clear whether the present entry in Part III of Schedule 10 for the Clean Air Act achieves their policy intention. It certainly does what is required for pollution from Crown ships. This is clearly reserved, legislatively and executively, by the entry in Part III of Schedule 10. But the Bill's silence on Section 22(1)(a) to (c), which deals with smoke pollution from other Crown premises, might not do what is required. So it is arguable that, as the Bill stands, the Scottish Executive would become responsible for putting a stop to pollution not only from "devolved" Crown premises, but also from premises which are "reserved".
This, as I have explained, is not the intention and would make little sense, since the purpose of Section 22 is that it should be the Minister responsible for the pollution who has to take the
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remedial action; and, in practice, of course only he has the means to do so. But the Government are very grateful to the noble Earl for drawing our attention to this difficulty, and we should like to review the entry for the Clean Air Act to see just how far it achieves the intended policy. If Amendments are required, then we shall table these on Report for your Lordships to consider further.
The Earl of SELKIRK: This is the first time that the Government have ever been grateful to me for anything, and I am deeply honoured. But I must confess that when one gets to the stage of devolved smoke and non-devolved smoke, one understands why the Faculty of Advocates said that there is no traceable distinction, in principle, between devolved and reserved subjects. I shall not press the matter any further, and I accept completely what the noble Baroness has said. I beg leave to withdraw the Amendment.
Lord SHINWELL: At this stage I may he wrong and, if so, I shall be corrected. But it occurs to me that what we are now debating are items which all come within the ambit of the fundamental principle, namely, what are to be the competent items within the jurisdiction of the proposed Scottish Assembly? On three of the items we have already had answers which indicate that the Government have not fully seized the purpose of those Amendments, and it is obvious that few of them, if any, were debated in another place.
A vast number of Amendments appear on the Marshalled List. If we are to debate every one of them—and some of the debates may be prolonged—we shall find ourselves quite unable to finalise the provisions of the Bill. Alternatively, Members of your Lordships' Committee will be called upon to sit up right through the night in order to satisfy the incompetence of those in another place who did not, apparently, exert sufficient pressure on the Government to enable the other place to discuss these Amendments.
I am going to make a suggestion which follows on from what my noble friends have both said in reply to the Amendments which have already been moved; namely, "The Government will give further consideration", or "The matter is complicated", or "The noble Member of

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your Lordships' Committee who has raised the matter will be written to", et cetera. My suggestion is that, instead of going through all of these Amendments one by one and having debates on every specific item, at some stage my noble and learned friend the Solicitor-General for Scotland should make a general statement indicating which items are within the competence of the proposed Scottish Assembly and which items are not. This might require a rather long speech, but, if I may use the term, I think we could tolerate it. I do not say that in any offensive spirit. Perhaps I ought to say that we should listen attentively and with interest to a long speech from my noble and learned friend outlining what the proposed Scottish Assembly will be empowered to undertake and what it will be precluded from undertaking.
I believe that suggestion would be agreeable to the Members of your Lordships' Committee. I can understand that certain very important items appear so complicated to Members of your Lordships' Committee that special and singular reference may be required, but generally speaking we are discussing throughout practically the same principle. In other words—I repeat myself and I ask forgiveness for so doing—we are discussing what are to be the responsibilities of the proposed Scottish Assembly.
I hope that my noble and learned friend the Solicitor-General for Scotland will take note of what I have suggested and consider whether or not it is possible to adopt that device rather than go through prolonged debates on every specific item.
3.55 p.m.
Lord CAMPBELL of CROY: While the noble and learned Lord is considering that point, may I say that I sympathise with the situation which the noble Lord, Lord Shinwell, has described. This is an exceedingly complicated part of the Bill, and I can tell the noble Lord that pages of this schedule were not discussed at all in another place. We are now on Part III, which the noble and learned Lord, Lord McCluskey, described as "fine tuning". It seeks to be a guide, in chronological order, through the Statutes, trying to indicate what is a devolved subject and
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what is reserved; and reservation is indicated by silence.
If the noble and learned Lord were to make a speech setting out every subject which to be reserved, as the noble Lord, Lord Shinwell, has suggested, it would probably take us until midnight tonight, and it would be exceedingly difficult. Therefore, I would not recommend that course. As I have said before, we do not seek in any way to defend the system which the Government have adopted. It seems to us to be a very odd system. I would not commend the system which the Government have adopted of putting into Part I what is devolved, of putting into Part II those matters which are not devolved, and of putting into Part III references to the Statutes, leaving the reserved subjects silent. However, it is the system which the Government have adopted.
The noble Lord, Lord Shinwell, has intervened at a very appropriate point, because we are discussing the question of smoke from chimneys. The answer which my noble friend Lord Selkirk has received indicates that the subject is devolved or reserved, depending upon the type of building in Scotland from which the smoke has emerged. I can imagine that in Edinburgh, for example, where there are tall and very complicated buildings, one might even need to have a helicopter in order to identify where the smoke was coming from, and from which chimney of which building. Therefore the answer, illustrates the kind of fine tuning to which the noble and learned Lord referred. However, the noble Lord, Lord Shinwell, has shown, first, how exceedingly complicated this Bill is and how very difficult it will, if it is enacted, be for those concerned to interpret it and, secondly, that another place has had no opportunity to discuss these matters.
Lord McCLUSKEY: As my name was mentioned, perhaps I should say something. First, the Amendments which have been put down have, almost without exception—indeed, I might say without exception—been regarded by the Government as helpful. Although they are not necessarily Amendments which we can accept, it is right that the Bill should be exposed to the kind of scrutiny to which

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the Amendments expose it. In discussing the Amendments, the Committee has given and continues to give to the Government the immense benefit of that kind of criticism. We welcome it, and even if it were within my power I should not want to alter the procedure of Parliament to avoid the kind of scrutiny which is what the Committee stage of a Bill like this is about.
Secondly, I have tried to make one or two general statements, and I hope that they have been of some value to the Committee. However, at the end of the day the provisions have to be contained in what goes on to the Statute Book. For all purposes of the courts of law, my speeches are written on water. It is what is ultimately printed by Her Majesty's official printer which counts. Therefore it has to be made as clear as it can be in the Bill and not in any statement that I may make.
Thirdly, as I have said on more than one occasion, we have made excellent progress, and I do not believe that there will be any need to invite noble Lords to sit all night on any occasion during the Committee Stage.
Lastly, criticism has been made of what happened in another place. It is not for me to criticise any person in another place, but I will say this, for it is right that the Committee should know it: in another place the Government moved, and the House accepted, a timetable Motion. Under that timetable Motion, the House proceeded to consider certain provisions of the Bill and failed to consider many others. We have considered every Amendment that has been put down, and we are almost exactly following the timetable that the Government provided in another place. In fact, during the course of the eleventh day we are about five hours behind the timetable.
Amendment, by leave, withdrawn.
[Amendment No. 180 not moved.]
4 p.m.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 381:
Page 55, line 50, at end insert—
("The Opencast Coal Act 1958 (c. 69), section 2. Not included.").
The noble and learned Lord said: This is an Amendment which is technical. It is to ensure the reservation of Section 2 of the Opencast Coal Act 1958 and Section 5 of the Pipe-lines Act 1962. They involve no changes in policy and the reasons for the Amendment are the same in each case. I should explain that Section 1 of the Opencast Coal Act provides that the National Coal Board may not carry out any opencast coal works without the authorisation of the Secretary of State for Energy. Section 2 of the Act provides that the Secretary of State may, in granting such an authorisation, direct that the authorisation constitutes deemed planning permission for the purposes of the Town and Country Planning (Scotland) Act 1972.
Deemed planning permission is a system whereby a Minister in authorising development may at the same time direct that it has planning permission so that it is not necessary to seek this separately from the local planning authority. The Government's approach is that the granting of deemed planning permission should be executively devolved where the development concerned is one which is authorised by a Scottish Secretary, and otherwise reserved. The Bill already achieves this policy for Section 37 of the Town and Country Planning (Scotland) Act 1972, under which deemed planning permission may also be granted; and the relevant entries may be found in Part III of Schedule 10 at lines 16 to 19 on page 62, and in Schedule II at lines 30 to 32 on page 68.
Section 2 of the Opencast Coal Act is concerned with planning permission for development, the authorisation of which is reserved. The granting of deemed planning permission should therefore also be reserved. However it is doubtful whether the Bill would at present achieve this. The authorisation of opencast coal mining falls clearly outside devolved matters and hence is reserved by silence. But the granting of deemed planning permission in respect of such mining, although in an Act dealing otherwise with reserved matters, is a planning power coming within the scope of Group 6 of Part I of Schedule 10. It is therefore necessary to reserve Section 2 explicitly in Part III of Schedule 10 to put it beyond any doubt that the Secretary of State for

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Energy alone will continue to have the power of granting deemed planning permission for opencast coal mining. This is achieved by the first Amendment.
The position for Section 5 of the Pipelines Act 1962 is analogous. In this case the power to grant deemed planning permission is in respect of the construction of cross-country pipe-lines. The power to authorise such construction is safely reserved by silence, but it is necessary to ensure that the power to grant deemed planning permission is similarly reserved. This is what is sought to be achieved by the second Amendment. Where deemed planning permission is granted by Government Departments after devolution, it is important that they should notify the Scottish Executive in advance, as it will have general responsibility for planning matters and might wish to make representations to the Department concerned. The Bill already establishes such a notification procedure for deemed planning permission granted under Section 37 of the Town and Country Planning (Scotland) Act 1972. This is achieved by paragraph 34 of Schedule 16 on page 86 of the Bill. Amendments tabled by the Government to Schedule 16 are to provide similar procedures under Section 2 of the Opencast Coal Act 1958 and Section 5 of the Pipe-lines Act 1962. I beg to move.
Viscount COLVILLE of CULROSS: I think the noble and learned Lord, Lord McCluskey, has probably not had the opportunity of being involved in a contested opencast authorisation because there has never been one in Scotland. But there have been a great number of them in England and Wales, and I am not at all sure that this matter has been thought through. The noble and learned Lord makes it sound as though the deemed planning permission which follows the authorisation is simply a consequential piece of paper. It is not. I do not know whether the noble and learned Lord knows the procedure for the documentation in these matters, but if he does not, I will tell him. After the application for the authorisation has been considered, the first document which is produced is a very simple letter which provides for the authorisation itself under the Opencast Coal Act, and that is indeed done by the Secretary of State for Energy and I think
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almost entirely by him and his Department. But in the course of making the application there is an extremely complicated set of papers which has to be presented, which provides a great deal of information, particularly about working conditions and restoration proposals. These are set out at great length and are before the Secretary of State, and if there is an inquiry they are before that inquiry and are discussed by it.
If there is a contested case all these matters are open for discussion and very often, certainly South of the Border, not only the county council, which is the general planning authority, but the district council, which is the environmental health authority concerned with things like noise and dust, are hotly involved in saying what they wish to ensure by way of conditions. I would think that the same position probably applies in Scotland as between the regional council and the district council.
After the basic authorisation is given, and a good deal later, there also emerges a formal document which contains all these conditions. I think probably it is technically the authorisation itself in all its details but, as the noble and learned Lord has said, it acts as a deemed planning permission; and then we go on to the point which I do not think he has taken into account. The conditions that are imposed by the authorisation then operate as planning conditions. They are therefore enforceable by the planning authority, whichever it may be—I would think the regional planning authority—as is the case with all other planning conditions.
So there is a situation where, in the ultimate, supposing that there is a breach of one of these conditions, the enforcement authority will act under the ordinary planning powers, and I think —and the noble and learned Lord will tell me if I am wrong—that it' there is a dispute the matter will then have to be sorted out by the Scottish Secretary because that will then be a planning matter which would have been devolved to him. In any case, even if I am wrong, it is highly unsatisfactory to have this being done in London—and the Pipe-lines Act will be the same because I have no doubt the same sort of conditions arise on it. If this is the only sort of enforcement procedure where the regional authority will he taking action

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with an ultimate appeal to London, in the town and country planning world, they will be dealing with an authority in London which increasingly will be poles apart from the way in which planning practice is evolving in Scotland.
Take, for instance, one of the most complicated and difficult current subjects; namely, noise limit. It is difficult enough to get the local authority, which is the mineral planning authority, to deal with noise levels because they are not the environmental health authority and they have neither the staff nor the expertise. Occasionally they go to the Secretary of State to get levels of noise laid down or schemes prescribed. That is something which ordinarily would be dealt with in Scotland by the Scottish Secretary, but in this one case they will have to go to London. I do not think that the problem of the deemed planning permission and its details has been thought through. The noble and learned Lord will see the sort of thing that I am concerned about. I should have thought that before this is taken away from the Scottish Secretary finally, as this Amendment would do, we should think again how this would be worked out in practice. I do not know whether any of that has occurred to the noble and learned Lord before, but I suggest to him that it raises some severe practical problems which ought to be further discussed.
Lord McCLUSKEY: Let me express my gratitude to the noble Viscount for his assistance in this matter. I will confess that this is not a matter upon which I claim the kind of expertise which he obviously brings to it. We come to planning at a later stage and many questions will arise in relation to planning, and I have no doubt that the noble Viscount will further assist us when we reach that part of the Bill. In the meantime, I will make quite certain that what he has said is brought to the attention of those who are advising me on this matter and we shall see whether we can provide an adequate answer. If we cannot, then of course we must make sure that the Bill provides an adequate answer.
On Question, Amendment agreed to.
4.10 p.m.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 263:
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Page 56, line 18, leave out from ("chairman") to end of line 21.
The noble Lord said: I beg to move Amendment No. 263 on behalf of my noble friends Lord Morris and Lord Teviot and myself. This part of Schedule 10 states that the Road Traffic Act 1960 is not to be included in devolved subjects except for certain matters which are set out in column 2. I will start by saying that I think it is sensible that that Road Traffic Act should not be devolved, because the road system is on a United Kingdom basis and the development of fast trunk roads between England and Scotland has been very important and significant for Scotland in recent years, especially for industry, commerce and tourism.
Our Amendment would retain a further reserved subject. It seeks to delete
"road service licences or permits under section 30 of the"
1968 Act, mentioned in column 2. Section 30 of the 1968 Act refers to special licences for buses, and it is associated with the question of road passenger licensing. Road service licensing is the basis of the whole British public road passenger transport system, and we believe that there is a need for uniformity throughout the country. We believe that there should be no possible reason—it should not be contemplated—for the Border becoming an obstacle of any kind. At present there is an increasing flow of traffic across the Border, both north and south. Scotland, I believe, would suffer more than England if a different system of conditions were to be produced on one side of the Border. This would cause discouragement to road passenger transport travelling north and south.
I would say a word on Section 30 of the Transport Act 1968. The section provides the law governing the issue of special permits for buses. For those who wish to look it up, it is three pages of detailed provisions. It does lay down the conditions for the issue of those permits for the whole country, and operators know where they stand; they know where they stand in Scotland as well as in England and Wales It is in the best interests of the passengers, too, that there should be uniformity of approach to these matters. Yesterday we heard words of that kind from the Government Front Bench on

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several occasions, when the Government were defending parts of the Bill which were reserving subjects and stating that they were subjects not suitable to be devolved. I would refer in particular to what the Government spokesman said in reply to the Amendment about industrial relations and disputes, which was put forward by my noble friend Lord Mottistone.
The same considerations apply here. The Confederation of Road Passenger Transport feel very strongly that these matters should not be devolved because it is essential that there should be uniformity over the whole country. I and my noble friends entirely agree with them. I beg to move.
Lord MORRIS: In speaking to this Amendment standing in my name and that of my noble friends Lord Campbell of Croy and Lord Teviot, I will, with your Lordships' leave, speak also in principle to Amendment No. 267, although I will not confuse your Lordships, or indeed myself, by dealing with the minutiae of that Amendment at this juncture. I feel sure that your Lordships will join with me in expressing the ever-growing admiration which I have for the courageous, courteous, erudite and witty way in which Her Majesty's Solicitor-General for Scotland, the noble and learned Lord, Lord McCluskey, has handled his thankless, arduous, and all too often lonely task. It is in this spirit that I rejoice that I now find myself in a position to assist the noble and learned Lord and, with due humility, to put right a little oversight in the Bill which the noble and learned Lord indicated in his answer to a probing Amendment only a few hours ago—namely, yesterday afternoon.
I, and several noble Lords, asked the noble and learned Lord yesterday afternoon what was the significance of the addition of the words "provision of" to the passenger transport services clauses of this Bill. The noble and learned Lord said—and I quote from cols. 819 and 820 of yesterday's Hansard:
"These words are important; they make it clear that we are concerned with transport as a service, or rather an aggregation of services, and not as an industry. There will be no devolution as to, for example, construction requirements for vehicles. If you simply devolved 'transport' you might find that that was included in the matters devolved, so there is no devolution in relation to that; there is no devolution in relation
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to safety requirements or working conditions, which relate to transport as an industry rather than the provision of transport services".
If I may say so, with the greatest respect, the noble and learned Lord, Lord McCluskey, put it so very well. I entirely agree with him that what he said should be so. However, it is not surprising, and wholly understandable, in a Bill as complicated as this that the Government appear to have overlooked the fact that they have in fact, no doubt in error, devolved, albeit indirectly, construction requirements for vehicles, safety requirements and working conditions, which relate to road passenger transport as an industry.
What this Amendment does, in conjunction with Amendment No. 267, is to remove from this Bill the granting of legislative competence to the Scottish Assembly over matters concerning the control and maintenance of construction design standards for passenger transport vehicles, the safety requirements, the comfort, cleanliness and noise, and thus the working conditions of passenger transport vehicles, by means of the road service licensing laws and those enabling laws which set up those bodies which monitor the working of such laws, to the benefit of the industry as a whole and to the many millions of passengers.
I feel confident that it is not in the nature of the noble and learned Lord, Lord McCluskey, to spurn this modest championing of the Government's declared policy on this matter, for I feel sure that he will agree that it is vital that the Government should incorporate in this Bill the view of the whole of the British road passenger transport industry, including the unions involved, that the present common national approach to the licensing and maintenance of standards in the industry be maintained. It is as a result of the excellent working of the road service licensing laws, dating from 1930, that the United Kingdom can boast a bus and coach network more comprehensive and carrying more passengers than any of its European neighbours or even the United States of America.
It cannot be stressed too strongly that the whole of the industry, throughout the United Kingdom, is of one mind in advocating that the present common national approach to the licensing of

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passenger transport road operations should retain uniformity throughout the United Kingdom. Indeed, my noble friend Lord Campbell referred to the fact that, in rebutting an Amendment tabled by my noble friend Lord Mottistone, the noble and learned Lord put the uniformity argument most eloquently when he stated last night:
"Let me make it quite plain that the Government's policy is to retain uniformity throughout the United Kingdom".
I entirely agree with the noble and learned Lord, especially in the light of the statement made in the Government's transport policy White Paper of June 1977, which says:
"The proposals in this White Paper will give the bus industry an assured future as the main provider of local public transport services countrywide, complementing the railways in their national role, and where they provide essential local services".
In that context, I feel it is important to remember that the national railways, which are not a devolved matter, are complementary to passenger road transport services, for, in 1976, the passenger road transport services provided nearly double the amount of passenger kilometres provided by British Rail—some 53 million kilometres as opposed to 33 million kilometres, to be precise.
If artificial boundaries are to be created by permitting the evolution of a separate system in one part of the United Kingdom in defiance of the trend in Europe, this valuable network will be threatened. Indeed, the Government confirmed their common international approach in paragraph 19 of the Transport White Paper of June 1977, when they stated:
"But we must take account of the work done in the Communities on various aspects of transport and of the international obligations involved. The time has come for a reconsideration of certain of the objectives of a common transport policy and the United Kingdom intends to play a full part in the discussions. It will be our continued objective to seek to ensure that decisions made by the Council of Ministers are acceptable in terms of our national policy".
The volume of such services is by no means insignificant. In excess of a quarter of a million vehicles operating under road service licences cross the border every year. Indeed, the annual reports of the traffic commissioners over the past 10 years indicate that 25 per cent. of all services in Scotland operated under road service licences involve a border crossing.
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At this moment, judged on figures for 1975–6, and 1976–7 (road service licences being normally valid for three years) one third of all services are cross-border traffic.
For cross-frontier services of the EEC, it has been accepted that licensing should follow a common pattern throughout the communities, where frontiers create great obstacles to the free flow of transport. It is thus even more necessary that these matters should follow a common national pattern in the United Kingdom. It is in the best interests of passengers generally that there should be a uniformity of approach to these matters throughout the United Kingdom.
In conclusion, may I reiterate the ringing words of Her Majesty's Solicitor-General for Scotland, the noble and learned Lord, Lord McCluskey, when he said
"Let me make it quite plain that the Government's policy is to retain uniformity throughout the United Kingdom".
I feel sure that the noble and learned Lord, Lord McCluskey, will once again make manifest his undoubted intellectual integrity by deploying with his characteristic consistency of approach and argument the same principle as regards this Amendment.
4.24 p.m.
Lord TEVIOT: There is very little for me to add to the Amendment, which has been so well moved by my two noble friends. In particular, my noble friend Lord Morris gave us a meaty and weighty exposition of the problem. He has also told me several things—as I am sure that he has told your Lordships, as well—of which I was not aware.
What has emerged is that the whole question of passenger road transport is much better left alone. I say this almost, but not quite, lightheartedly, because I was involved in passenger road transport ten years ago. There is an incredible network of services of all kinds, providing not only stage services but express services which are of the greatest use to the not-so-well-off people in the community who wish to travel from A to B, whereas the railway services have been cut to blazes. One may travel in all parts of the country on cross-express coach services, at about 55 per cent. of the cost of rail. At

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weekends one may take the railway bargain breaks. I do not want to slate the railways. But on the whole one does very nicely, thank you, on the express coach services, and this especially is true of elderly people visiting far-off relations and friends, as well as large families going on holidays.
One point that I should like to make fairly strongly is that the subject of public road passenger services or buses sometimes become emotive. Everyone considers himself expert on the subject, as people do with the weather, football, the upbringing of children, and several other matters. People seem to know exactly that if the bus does not come along precisely when they are at the bus stop, it is late. If two or three buses come along at the same time they are bunching—I prefer the word "stair-casing"—and people say that the drivers have done it on purpose, disregarding the fact that there may have been difficult traffic conditions and other factors, and that some people drive fast and others are slow.
It has been put forward by my noble friends that in this country we have the licensing authorities, the traffic commissioners, the people who know what they are doing. Please let them go on. Let us leave it at that.
I did not realise that so many services crossed the border every day. In the 1968 summer Recess I was involved for a fortnight in one important service from Glasgow to Corby. My family come from Scotland but that taught me a lot about the Scots. Corby is a strongly Scottish place in Northamptonshire. There are many of these "hidden" services. We are interested to know what the noble and learned Lord will tell us.
4.28 p.m.
Baroness STEDMAN: I am sorry to disappoint noble Lords opposite. It is not the noble and learned Lord, Lord McCluskey, whom they will hear again. On the first Amendment moved by the noble Lord, Lord Campbell of Croy, we have said several times that what we want to do is to devolve to the Scottish Assembly responsibility for matters that are of close everyday concern to the people living and working in Scotland
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but which have little or no impact on those in the South. I should have thought that the bus services were clearly such a matter. It would be a lame Assembly which did not have competence in respect of them. The reservation of the bus services is not consistent with any form of devolution which is going to be of help to the people in Scotland.
Group 14, in Part I of Schedule 10, together with paragraph 8 of Part II of that Schedule, define in general terms the legislative powers of the Assembly, and the executive powers of the Scottish Secretary in respect of transport as a whole. The Assembly will have powers in respect of the provision of all passenger transport services, except for those such as British Rail and British Airways which form a part of the wider Great Britain network. That is not to say that they will actually provide such services themselves any more than the Government do at present.
The nationalised Scottish Transport Group does, I believe, provide some coach services, but it will be able to regulate the provision of services by others. However, it will be for the Scottish Assembly to do this regulating. As part of this competence the Assembly will be responsible for road service licensing, under which the fares and the frequency of bus services are controlled through the traffic commissioners. But it will not have powers in respect of public service vehicle licensing, which is also controlled by the traffic commissioners—normally by the chairman sitting alone—or in respect of freight operators' licences, for which the chairman of the traffic commissioners is the authority. These matters have been reserved because of their implications, as the noble Lord, Lord Morris, reminded us, for safety standards and trade and industry, both of which need to be considered on a Great Britain basis.
The entry in the Bill for the Road Traffic Act 1960—lines 14 to 21 on page 56 —makes it clear that road service licensing is devolved, but the other duties of the traffic commissioners are not. It takes account of the dual role of the commissioners by reserving the appointment of the chairman, who acts largely in respect of reserved matters, and devolving that of

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the other two members for the Scottish Assembly to appoint. They are concerned primarily with the devolved road service licensing system.
The noble Lord, Lord Morris, also referred briefly to Section 30 of the Transport Act, and later this afternoon he will no doubt talk to us about the Minibus Act as well. However, because Section 30 is concerned with a simplified alternative to road service licensing, it is devolved. The traffic commissioners will be responsible to the Scottish Secretary in respect of the permits they issue. The Minibus Act, when we come to it—and this perhaps illustrates the point —is concerned with the relaxation of both public service vehicle licensing and road service vehicle licensing, and the entry for that Act accordingly devolves only those aspects which will provide an alternative to road service vehicle licensing.
We believe that our treatment of transport in the Bill will allow the Assembly the full powers in respect of the provision of bus services, while we ensure, in response to the fears which noble Lords have expressed, that the construction and the safety standards of the vehicles will continue to be dealt with for Great Britain as a whole. However, the Scottish Assembly will have devolved powers for its own bus services.
Lord DE CLIFFORD: I am not clear how the noble Baroness has worked this out. The Scottish Assembly is to have powers to organise the internal bus systems within Scotland. However, then she added a remark which gave me the impression that it was also to have the power to control the number of national coaches which came in from outside. Am I correct?
Baroness STEDMAN: No. I said that the nationalised Scottish Transport Group already provides some coach services. It will be for the Assembly, with its devolved powers, to do some regulating of other coach services that come in, to ensure that there is a proper network of coach services.
The Earl of SELKIRK: Does the Assembly have power to abolish the traffic commissioners? The noble Baroness said that the Assembly can
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control the traffic, but that is really done through the traffic commissioners. Can it abolish them?
Baroness STEDMAN: No, it cannot abolish them.
Lord MORRIS: I should like to thank the noble Baroness very much indeed for her answer. She referred to Section 30 of the Transport Act 1968. That section draws in Part III of the Transport Act 1960, it is of course, the enabling section for the whole of the licensing procedure for the rest of the public passenger transport service vehicles.
Baroness STEDMAN: Yes, but it is the Bill's treatment of Section 30 of the Transport Act 1968 that is consistent with our approach to what shall be devolved and what shall be reserved. It is Section 30 which is concerned with the simplified alternative to road service licensing. Therefore, that is the part that we are devolving to the Assembly, and the traffic commissioners will be responsible to the Scottish Secretary in respect of the permits they issue, so far as that is concerned.
Lord MORRIS: I have not made myself clear. By devolving Section 30 we are also devolving Part III of the 1960 Act.
Baroness STEDMAN: I do not think so. I should like to take advice on that matter.
The Earl of ONSLOW: Perhaps the noble Baroness might like to comment on this: If, as I understand it, the Scottish Assembly will be able to give a licence to a coach company in, for example, Oban, and that coach company runs trips across the Border, that coach company could be under a different licensing system from a coach company in the noble Lord, Lord Teviot's Corby. In those circumstances, there will he two internal coach companies running under different sets of rules. Shall we not come up against a European Economic Community Treaty of Rome obligation in that regard? Is this not hampering free movement of trade and vehicles between Community countries and intra-Community countries? That is something that I should like the noble Baroness to think about.
Baroness STEDMAN: I do not think so. We are not envisaging that Scotland will be a separate part of the Community. It is still part of the United Kingdom.
The Earl of ONSLOW: Of course, I realise that. The point is that if there are two different sets of rules, or two different sets of licences, it will not provide uniformity within the EEC. Surely it is just as wrong to have a difference between France and England as it is to have one between Scotland and England? Of course I realise that this Government are not going to cede Scotland to Brussels.
Baroness STEDMAN: The traffic commissioners in the rest of Great Britain have the same rights about giving or withholding licences as will traffic commissioners in Scotland. We shall not be working under two different systems.
Lord TEVIOT: There is one point which has been left out. All members of the Confederation of British Road Passenger Transport Limited, which I believe contributes about 88 per cent. of the industry, and consists of members of the National Bus Company together with independent operators, were unanimous in their view that this should not be a devolved matter. Not only was that the view of the operators who operate on the Border and go across the Border, but it was also the view of operators in the Highlands and Islands who were not really concerned.
Baroness STEDMAN: Surely the services that are provided within Scotland are a matter of primary concern to the people who are living in Scotland. The whole object of devolving powers to them is that they will know what is required within their areas by the people who live in those areas. Surely that is what we are trying to do?
4.38 p.m.
Lord CAMPBELL of CROY: We are grateful to the noble Baroness for her reply. Again, we do not know whether she has had to answer at short notice. However, she rather spoke as though we were discussing only a town bus service or some very localised service of that kind because she said that people will be
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concerned about conditions and the bus services in their own areas. However, that is only a part of the passenger transport system which we are considering.
I thought that I had made it clear in my opening remarks—of course I tried to keep them brief—that I was concerned about the increasing long-distance passenger traffic. I am very glad to see that the noble Lord, Lord Kirkhill, is back again today. I understand that he is not fully recovered; I hope that he will be soon. However, he having been a very distinguished Lord Provost in Aberdeen, where his home is, knows that there is an overnight coach service from London to Aberdeen. I may say that members of my family have used it because it is about half the price of the train service. I am not doing a commercial; I have absolutely no interest, but when one travels 500 miles one knows whether there are very good road services.
There are also long-distance coach services across the Border and, because of the improvements in roads and motorways such as the M6, the M1 and the A74, we expect to see increases in the long-distance passenger transport services. Therefore, the noble Baroness in her reply was really addressing herself to only a small part of this matter, such I might describe as a town bus system. I entirely agree that somebody living in a medium sized town in Scotland is concerned about his local bus service, but we really ought not to deal with this important subject, which involves this country's whole road network, on that very parochial basis.
The noble Baroness also raised another important matter; namely, the Government's intention that road operators' licences and similar matters affecting construction and safety of vehicles would not be devolved; they would be reserved. That certainly confirms what I thought was the intention of the Bill. My noble friend Lord Morris said that if one looks very carefully at the Bill as now drafted it may be that this intention will not he carried out. The noble Baroness said that she would look at that because it is clearly a drafting matter. We know what the Government intend, even though the effect of the Bill as now drafted may not carry out that intention. But the very reason that the noble Baroness gave for stating that virtually all the rest

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of the road transport licensing system would be reserved and that the Traffic Commissioners would have nothing else devolved—that is, they would have to go to the Assembly for nothing else, except the matter of road service licensing— applies to this as well. It is most confusing to think that the whole of the rest of this road transport licensing, including operators licences, will not be devolved and yet this little bit will. We believe that this is just as important as the rest.
I should like to ask the Government whether they agree that it has been accepted that matters of this kind should follow a common pattern throughout the EEC. That is our understanding, and I
see that the noble Baroness, Lady Stedman, is nodding. When advances are being made toward uniformity in the EEC it is certainly a retrograde step to make provisions here for breaking up the already existing uniformity in the United Kingdom. I and my noble friends certainly feel strongly about this, and we believe that a decision should be taken by the Committee.
4.42 p.m.
On Question, Whether the said Amendment (No. 263) shall be agreed to?
Their Lordships divided: Contents, 93; Not-Contents, 79.
Resolved in the affirmative, and Amendment agreed to accordingly.
4.50 p.m.
Lord DRUMALBYN Lord DRUMALBYN moved Amendment No. 264:
Page 57, line 45, leave out from beginning to end of line 49.
The noble Lord said: This is a small and simple Amendment, on page 57 to leave out from the beginning of line 45 to the end of line 49. Her Majesty's inspectors of schools are appointed by Her Majesty the Queen, and they are very proud of it. The effect of this Amendment would be to remove the necessity for the Secretary of State to recommend to Her Majesty the appointments of Her Majesty's inspectors of schools. I quite see the difficulty about this.
The point I want to put—and I put it shortly—is this: Here we have a Scottish Secretary responsible for education in Scotland. Her Majesty's inspectors of schools are an important part of the system. To say the least, it seems anomalous that Her Majesty's inspectors of schools should be recommended by somebody other than the Scottish Secretary. I am asking how this difficulty will be overcome. I quite understand that the Bill does not seem to provide any means for the Scottish Executive, the First Secretary, or anybody else, to have direct access to Her Majesty to make such recommendations as this. On the other hand, it seems unreasonable that the Secretary of State, having devolved education entirely, should make this off his own bat, so to speak. What is the answer to this? Can the noble Lord tell me? I beg to move.
The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill): As the noble Lord, Lord Drumalbyn, has just said, responsibility for education is devolved by Group 3 of Part Ito Schedule 10. Of course this includes responsibility for the
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school inspection system. If I can be of some help to the noble Lord, and I hope I can, the reason for the reservation of the power under Section 145 of the 1962 Act to recommend to Her Majesty the appointment of inspectors of schools is simply that it is not proposed that the Assembly should have direct access to Her Majesty. Access to the Crown will only be—and this is consistent throughout the Bill—through the Secretary of State.
The fact that the formal appointment of inspectors is reserved does not mean, in practice, that the devolved Administration will be precluded from the process of appointment. Indeed, on the contrary, it is my considered view that the first moves in making recommendations for appointments will rest with the Scottish Executive. I think it is fair to say that it is difficult to visualise a set of circumstances where that would not happen. I do not see the Secretary of State making a suggestion to Her Majesty which was not in accordance with the Scottish Secretary's views.
Of course, as the noble Lord is fully aware, the inspectors of schools are civil servants and, as with other staff of the Scottish Office who will transfer after devolution to the Department of the Scottish Executive, their conditions of service will in no way be affected. I think I can fairly say that it is envisaged that their role will continue to be the same then as it is now. I hope that that is of some help to the noble Lord.
Lord DRUMALBYN: I am much obliged to the noble Lord. I was concerned with the future appointment of Her Majesty's inspectors. The noble Lord has reassured me that in his view the initiation of the recommendations will come from the Scottish Secretary. With that I am content, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord KIRKHILL Lord KIRKHILL moved Amendment No. 382:
Page 57, line 49, at end insert—
("The Pipe-lines Act 1962 (c. 58), section 5. Not inclued.").
The noble Lord said: Amendment No. 382 was spoken to with Amendment No. 381 and, accordingly, I move it formally.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 265:
Page 58, leave out lines 36 to 44.
The noble Lord said: This is an Amendment which was discussed with the Amendment on forestry last night, and in consequence of the decision taken to take forestry out of the Bill, this Amendment is one that is consequential. I therefore beg formally to move Amendment No. 265.
4.54p.m.
Baroness STEDMAN Baroness STEDMAN moved Amendment No. 266:
Page 58, line 44, at end insert—

("The Parliamentary Commissioner Act 1967 (c. 13).

Included (subject to section 71 of this Act).")

The noble Baroness said: With the leave of the Committee, I should like at the same time to speak to Amendment No. 289. These two Amendments taken together clarify the capacity of the Assembly to legislate for maladministration. The Assembly will have legislative competence in relation to devolved matters. It will, if it wants, be able to legislate across the board on any particular aspect of several devolved matters or even all devolved matters. So it could legislate about maladministration in matters which are devolved matters in relation to the Assembly. But it must also be able to legislate about maladministration in matters which are devolved matters only in relation to a Scottish Secretary—as we can see in Clause 59(3)(b) and (c). Otherwise any such maladministration would remain within the jurisdiction of the Parliamentary Commissioner for Administration—which is not what we intended.
We deal with this omission by including the Parliamentary Commissioner Act 1967 in Part III of Schedule 10, so that all
1018
matters which are now within the Parliamentary Commissioner for Administration's jurisdiction but which are going to be devolved matters, whether in relation to the Assembly or to Scottish Secretaries alone, are duly picked up. The cross-reference to Clause 71 warns of the special provision added to that clause by Amendment No. 289. Clause 71 provides for the—
Viscount COLVILLE of CULROSS: I am sorry to interrupt the noble Baroness but, with respect, I do not think it is at all convenient to deal with the substance of Amendment No. 289 at this point. I have an Amendment which bears on a word which has been inserted in Amendment No. 289. I think it would be much better to discuss the substance of that clause when we get there. It is all very well to have the paving Amendment, but then we have the substance when we get to Clause 71.
Baroness STEDMAN: I am in the hands of the Committee and I am happy to deal with it in that way. In that case, I have finished what I was saying about Amendment No. 266. I beg to move.
The Earl of SELKIRK: May I ask one question on this Amendment? This deals with the Parliamentary Commissioner Act 1967. It is a United Kingdom Act. The Assembly have power to amend it as they like. The United Kingdom Westminster Parliament have power to amend it. You have therefore two Acts flowing in opposite directions. All legal libraries ought to be warned that they may have to arrange their books differently. It raises the problem that you may well have two separate Acts dealing substantially with the same subject, with perhaps different references, but falling from one Act. I want to be quite certain that I have got this right.
Baroness STEDMAN: I think the noble Earl has it right. It is a complicated matter and perhaps he will permit me to look into it and write to him in due course.
5 p.m.
Lord MORRIS Lord MORRIS moved Amendment No. 267:

1019
Page 59, line 45, leave out from ("sections") to ("34,") in line 47.
The noble Lord said: This Amendment would delete Sections 9 to 19. Section 20(1), (5) and (8), Sections 21 to 23 and Section 30 of the Transport Act 1968. Its purpose is to remove from the matters to be devolved to the Scottish Assembly and Executive the existing powers of the Secretary of State for Scotland to designate passenger transport areas and to establish transport authorities and executives as well as granting permits under Section 30 of the Transport Act 1968, which was referred to in discussing the previous Amendment on this subject.
The process of establishing passenger transport authorities and executives includes the option of giving powers to remove the licensing of stage and express services from the traffic commissioners, substituting consents by the executives and the power compulsorily to acquire the services of State-owned and independent operators. It is therefore of considerable significance, when viewed against the desirability of maintaining a common transport policy—to which I referred in principle when moving my previous Amendment—throughout the United Kingdom, that authority to introduce relevant secondary legislation should be retained by the central Government.
Baroness STEDMAN: It is a complex Amendment and a complex subject with which we are now dealing, and I am sure that if the draftsmen of former years had anticipated devolution we should find our task today much simpler; but we must take the structure of the Transport Act as we find it and try to weave in and out of it, and what appears complex on the Statute Book sometimes also proves quite simple in practice. What would the noble Lord's Amendment reserve and why do the Government believe it right that the matters he wants to reserve should be devolved? First and most important, the Amendment would reserve responsibility for passenger transport authorities and passenger transport executives under Section 9 to 23 of the 1968 Act, and noble Lords who have been brave enough to read those provisions will have been confronted by a mass of small print and detailed provisions, including one section which, if my memory serves me right,
1020
covers six or seven whole pages. I wish to draw the attention of the Committee only to the following words which appear in Section 9 of the Act because they are the key to why we propose to devolve these matters:
"… it shall be the general duty …of the Passenger Transport Authority … and the Passenger Transport Executive … to secure or promote the provision of a properly integrated and efficient system of public passenger transport to meet the need of that area with due regard to the town planning and traffic and parking policies of the councils of constituent areas and to economy and safety of operation".
Therefore the passenger transport authorities and executives are concerned with local transport matters and with the policies of the local authorities concerned, so we do not see how the reservation of those matters could really be justified. They are of close concern, indeed of everyday concern, to those people who live and work in the areas concerned, although they have little or no impact on people living South of the Border, and they form an important part of the Scottish Assembly and Executive's wider competence for the provision of transport services. To reserve those particular aspects would weaken their ability to pursue a co-ordinated and integrated transport policy and would prove to be administratively awkward, though that does not necessarily mean it should not be done; but we do not think it would lead to efficiency.
At present there is in practice only one PTE in Scotland; the one for Greater Glasgow, whose activities include the operation of the Glasgow bus and Underground systems and the provision of subsidies to British Rail for otherwise unremunerative local rail services. The PTA for the area is the Strathclyde Regional Council, and I am sure it would be wrong for those bodies to look to Westminster, rather than to the devolved Administration in Edinburgh, for their dealings with central Government.
The Amendment would also reserve Sections 30 and 34 of the 1968 Act. Section 30 concerns road service licensing, on which we have already had a debate, and it provides for relaxation in licensing procedure for certain minibuses and school buses where the local circumstances can justify that, and I am sure it is correct that that should be devolved. Section 34 concerns assistance for rural buses or

1021
ferry services. Local councils can make grants, which the Government may reimburse, for services which are,
"… for the benefit of persons residing in rural areas".
Again, that is surely a provision of local concern and one that is right for devolution.
I have not dealt with all those parts of the Transport Act which the Bill anyway reserves, or with those parts of the Act which are to he devolved but which the Amendment would leave untouched. The responsibility for the Scottish Transport Group is devolved, and that for the National Freight Corporation, British Railways Board and National Bus Company are very much reserved. The key throughout is that we have devolved transport matters of local Scottish concern and we have reserved those which have the wider implications. I am convinced that this policy is sound and I hope the Amendment will be withdrawn.
Lord TEVIOT: I should have thought that if the last Amendment were acceptable, this one would seem to go with it. The noble Baroness, Lady Stedman, said so nicely that she thought that, as this was a Scottish matter, Scottish people should decide it. The operators in Scotland like the situation as it is, and one must remember that on this subject one finds many differing opinions. Apart from the passenger transport executive for Greater Glasgow there are the other three regional councils of Tayside, Grampian and Lothian, and in all the various areas one could find a number of people with a number of different ideas all wanting to put those ideas into practice.
As I said earlier, people get tremendously emotive on a subject like public transport, all feeling they are experts; they will take on things about which they know nothing, even to the point of disregarding the operator who is in the business, who knows how to make it pay and who has the people's interests at heart. For those reasons, it seems a pity to devolve this matter, although I agree that the noble Baroness, Lady Stedman, put forward a convincing argument. It is all rather touch and go, so to speak, which is probably a good reason for resuming one's seat.
5.8 p.m.
Lord CAMPBELL of CROY: My name is also attached to this Amendment and I was interested to hear what the Government would say in reply to it. I agreed with the first remark the noble Baroness, Lady Stedman, made when she referred to this as a highly complex matter. The Committee may be interested to know that I suffered the fate of being on the Committee in another place on the Transport Bill which became the Transport Act 1968. That Committee had many all-night Sittings and it broke the then record for the length of time and number of Sittings of any Standing Committee in another place. During the course of it we arranged for 23 pages of the measures to be dropped, so it was not altogether art unhelpful exercise. I therefore understand the complexities of which the noble Baroness, Lady Stedman, spoke, and her remarks reminded me of those discussions nearly 10 years ago.
As the noble Baroness, Lady Stedman, said, there is only one passenger transport executive in Scotland and one passenger transport authority. I was involved in setting it up because I happened to be Secretary of State at the time, and it is the Secretary of State for Scotland as well as the Secretary of State for Transport who can initiate these. Like my noble friend Lord Teviot, I am worried that, if this is devolved, the idea of PTEs as they are now understood within the United Kingdom could be changed. The Assembly might try to set up a dozen or more in different parts of Scotland, which would transform what the intention was in the 1968 Act, because there is really only one area in Scotland where such a system is needed, certainly at present.
There is the complication that, under the Amendment which we have already made to the Bill, we have taken the question of permits under Section 30 of the Transport Act out of the devolved subjects, whereas if this Amendment is not made, that would still be within the powers of the PTE and therefore be devolved. Having listened to what the noble Baroness has said, and having been reminded that a PTE is responsible, among other things, for some rail services, which are also not devolved in other respects—British Railways is very firmly

1023
a reserved subject—I would suggest to my noble friends that perhaps this is a matter which we ought to consider and study again, rather than take a decision on it today.
I see that there is at the moment this discrepancy on Section 30 relating to the 1968 bus arrangements. However, because it brings in so many other items of transport, including railways, I should prefer not to press the Amendment today; but I should like to make it absolutely clear that we should like to return to this matter at a later stage of the Bill. Perhaps, in the meantime, the Government will consider what has been said, and they may themselves have some changes to bring forward.
There is a danger that the whole concept of PTEs and PTAs might be changed if they were to be handed over to the Assembly and its Executive as a devolved subject. They cover many different forms of transport. Therefore, while I am not at all happy with the Bill as it stands, I would suggest to my noble friends that this question needs further study and thought before a decision is taken.
Lord HUGHES: I should like to intervene very briefly. I am glad of the advice which the noble Lord, Lord Campbell of Croy, has given his noble friends. I should like to suggest to the noble Lord and his colleagues that if they come back to this matter at the next stage, they ought not to include in any subsequent Amendment a proposal which would result in the Glasgow transport system having to look to Westminster instead of to the Assembly. As the noble Lord, Lord Teviot, has said, this may be what the operators have wanted, but I am quite certain that the people of Greater Glasgow would take an exceedingly dim view if theirs was the only local public transport in Scotland which was so operated. I hope that if, in considering this matter, the noble Lords find that they would like to look at Section 30 again, they will forget about the previous sections.
I know that the noble Lord, Lord Campbell of Croy, has expressed the possibility—I would hesitate to say the fear, because I do not think that he would fear this for one moment—that the Assembly may multiply the number of
1024
PTAs and PTEs. There has been only one since the Act was set up. Up to the present no one has shown any enthusiasm for having another one, and I should be astounded if the Assembly wanted to set up any more.
Lord CAMPBELL of CROY: I agree with the noble Lord. In my remarks I was indicating that I am sure that only one PTE is required in Scotland in present circumstances. However, if a new body or a new executive is given the kind of powers we are discussing, it may say that it would like to use them and would like to start setting up some more PTEs—not looking at the matter in a United Kingdom context. I was interested to hear the noble Lord, Lord Hughes, suggesting that the people in Glasgow may wish to look to Edinburgh for advice and instruction here, because there are very few other subjects on which the two cities have that kind of relationship.
Lord HUGHES: The noble Lord, Lord Campbell of Croy, is forgetting that the most frequent argument from his friends in another place has been that this operation is to be run by Glasgow.
Lord MORRIS: I am always very happy to take the advice of my noble friend Lord Campbell of Croy, and I am sure that as usual his advice is correct. In the light of what he has said, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
5.15 p.m.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 383:
Page 61, column 2, leave out lines 4 to 17 and insert—
("Included, so far as relating to the Scottish Tourist Board and hotels and other establishments in Scotland, except that—

(a) the matters dealt with in section 1(2) and paragraph 18 of Schedule 1 are not included;

(b) the matters dealt with in sections 19 and 20 are not included so far as they relate to grants or loans made under Part II.").

The noble and learned Lord said: This is a technical Amendment, and does not represent a change in policy. Tourism is a locally-based industry, and the Government believe it right that the main responsibility for its development in Scotland

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should be devolved to the Scottish Administration. Accordingly, the development of tourism is listed as a devolved matter on page 49, in Group 18 of Part I of Schedule 10. The Assembly will be able to legislate on this subject, and the Executive will assume existing ministerial functions, for example, relating to the Scottish Tourist Board and hotels and other establishments in Scotland. It may be that we will come to a larger debate on tourism later.
However, Part II of the Development of Tourism Act 1969 promoted a scheme for the making of grants or loans to encourage hotel building. These grants or loans are made through the National Tourist Boards. It is a finite scheme in that, except in quite exceptional circumstances, work must have begun before 31st March 1971, and been completed not later than 31st March 1973. All grants and loans eligible under the terms of the scheme have already been made in Scotland. But although the scheme is in effect completed, the repayment of grants and loans will continue for some years after the devolution of responsibility for the Scottish Tourist Board. As the original grants and loans were paid out of the Consolidated Fund, and there are no further loans or grants to be trade, it is more straightforward for the repayments also to be channelled directly into that fund, rather than into the Scottish Consolidated Fund when that comes into being. After devolution, the Government believe the Scottish Assembly should be free to legislate to bring in a new scheme, or schemes, of their own to encourage hotel development if they so desire, but they are to have no powers in respect of the almost expired existing scheme.
The present entry for the Development of Tourism Act 1969, on page 61, in Part III of Schedule 10, does not, I fear, achieve this desired result. When it was inserted in the Scotland Bill it was thought that there might be one or two exceptional loans or grants still to be made after devolution, and it was felt that for purely administrative convenience it would be best for the residue of the scheme to remain with the Government. Consequently, the entry on page 61 excludes from the competence of the Assembly Sections 7 to 16 and Schedules 2 to 4 (so far as they relate to Sections 7 to 16) of the 1969 Act. This is
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no longer necessary. Moreover, to exclude these sections casts doubt on the Assembly's competence in Group 18 over the matter of giving grants or loans to encourage hotel developments, because that is the matter contained within the sections concerned. The existing entry also has the effect of making repayments payable into the Scottish Consolidated Fund because Sections 19 and 20 of the 1969 Act (which deal with the giving of general directions to the Scottish Tourist Board about the scheme in Part II of the Act, and the channelling of repayments into the Consolidated Fund) are specifically devolved.
The Amendment has been put down, therefore, to achieve these objectives. To summarise, it will ensure that outstanding grants and loans will be paid not into the Scottish Consolidated Fund, but into the United Kingdom Consolidated Fund, and that the Scottish Assembly will have full legislative competence over the matter of grants or loans to encourage hotel development in the future. I beg to move.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 384:
Page 63, leave out lines 48 and 49.
The noble and learned Lord said: This, too, is a technical Amendment. It concerns the National Water Council, which is established under Section 4 of the Water Act 1973. The National Water Council has a number of functions, but only two extend to Scotland. These concern the establishment of a scheme for testing and approving water fittings (Section 4(5)(d) of the Act); and the establishment of a scheme for training and education in connection with water services (Section 4 (5)(e) of the Act). The Government propose that the water industry in Scotland should be devolved; and this is generally achieved by Group 16 of Part I of Schedule 10, which devolves the "matter" of "supply of water". We also propose that, so far as the National Water Council operates in Scotland, it should be responsible to a Scottish Secretary, not the Secretary of State. This we believe to be sensible and practical because water fittings and training clearly come within devolved matters.
Accordingly, the Council is listed in Part II of Schedule 13 to this Bill, so that an order is made in respect of it under Clause 64. Your Lordships will recall that we discussed how Clause 64 works when we were talking about aerodromes. The order would be made only at the request of a Scottish Secretary and after consultation with the Council. It would provide for matters such as appointments to the Council by the Scottish Administration, and for the Council to report and account to them in respect of its Scottish activities.
The Bill also provides that, when an order is made under Clause 64, legislative competence passes to the Scottish Assembly in respect of the particular body, in this case the National Water Council in Scotland. There is no reason to suppose that the Assembly would not want to continue to make use of the Council, but, as it will have legislative competence over the matter of water, it makes no sense for water fittings and training to be reserved. For example, if the Council's terms of reference on these matters need to be altered, the Assembly should have the power to do so. It would be wrong for Westminster to have to continue to legislate upon such matters. However, the entry for the Water Act in Part III of Schedule 10, at the foot of page 63 of the Bill, has the effect of depriving the Assembly of such legislative competence. The Amendment, accordingly, would delete the entry, thus giving the Assembly full competence in the same way as on other matters covered by Group 16 in Part I of Schedule 10. This is only a minor Amendment, but I hope it makes for greater tidiness in the Bill and I trust it will be acceptable. I beg to move.
5.23 p.m.
Lord TEVIOT Lord TEVIOT moved Amendment No. 268:
Page 67, line 40, leave out from (" included ") to end of line 48.
The noble Lord said: I beg to move Amendment No. 268, which stands in my name and in the name of my noble friend Lord Morris. This Amendment is complementary to those already moved in Committee in respect of transport, which have recognised the need for
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uniformity of control throughout Britain. The Minibus Act, which, incidentally, was, on the whole, the well-behaved child of the noble Baroness, last year created, as it were, a second-class public service vehicle, though a very important one. It exempts from public service vehicle licensing certain vehicles used by bodies concerned with education, religion, social welfare and other activities for the benefit of the community; but it provides that the Secretary of State may, inter alia, make regulations prescribing the conditions to be fulfilled by the drivers of such vehicles and by the vehicles themselves. These provisions are important in relation to the safety of the public, and they relate to a part of the public transport system as it has been constituted since the Minibus Act 1977.
As originally drafted, the Bill would have devolved the Minibus Act in its entirety to the Scottish Assembly and Executive, but in the other place the extent of the devolution was restricted to three powers: first, to give directions, general or specific, to the traffic commissioners in relation to their discretion to issue permits for the use of these vehicles under Section 1(2); secondly, to make orders designating bodies which may, in addition to the traffic commissioners, grant such permits, and to whom they may grant them, and imposing restrictions with respect to such granting under Section 1(3); and, thirdly, to prescribe matters of which account is to be taken in determining the conditions of such permits, other than the limitation of passengers to specified classes of persons, under Section 3(1)(a).
It might be thought that the Government were seeking to retain from this Act a few crumbs which could be graciously distributed to give an impression that they still seriously believe in devolution. In this case, all that is left is indeed a few crumbs, and it would be unrealistic to think that they have significance. Therefore, in the genuine interest of maintaining consistent standards, it is submitted that the Minibus Act should be removed entirely from the matters to be devolved to the Scottish Assembly and Executive. That is the effect of the Amendment. I beg to move.
The Earl of ONSLOW: I hesitate to disagree with my noble friend Lord

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Teviot on this, but it would seem to me that minibuses are literally par excellence local vehicles. If we are going to have this wretched Bill, as it appears we are, then on this occasion I would hesitate to agree with my noble friend, for I think that minibuses are so local that they ought to be dealt with at as local a level as possible.
Baroness STEDMAN: I almost wonder whether I need get up after that intervention from the opposite Benches. The noble Earl, Lord Onslow, is quite right: this is essentially a local matter. When we were looking at the earlier Amendment, on the Road Traffic Act, I tried to explain the Government's general approach to the devolution of road service licensing. This Amendment is concerned, much more narrowly than that, only with the Minibus Act, and, rather than go over the same ground again, perhaps I could explain how our general approach to road vehicle licensing is applied to this particular enactment.
The Minibus Act was introduced as a Private Member's Bill, but, as the noble Lord, Lord Teviot, has said, I had the opportunity to watch its progress through your Lordships' House from the Government Benches. It is one of several recent measures aimed at providing greater flexibility than was allowed by the original road service licensing provisions under Part III of the Road Traffic Act 1960. The trend towards greater flexibility started first with Section 30 of the Transport Act 1968. Last year we had not only the Minibus Act, but also the Passenger Vehicle (Experimental Areas) Act; and further progress will be made in a Transport Bill which is shortly to come before your Lordships' House. All these measures are particularly important in the remoter rural areas, where the conventional bus service is uneconomical to run; and it is right that the necessary powers should be devolved to the Scottish Assembly and Executive so that they are in a position to tackle the special transport problems of areas of that sort.
It is the Minibus Act which provides that permits rather than road service licences may be issued in respect of certain minibuses—those carrying up to 17 passengers —which are not being used by the public at large or run for profit. The procedure for the permits is much simpler and speedier than it is for road service
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licences. The Act also provides for exemption from public service vehicle licences, and therefore requires special treatment in the Bill. Although road service licensing matters are to be devolved, public service licensing is to be reserved because it is concerned with safety standards, as I explained earlier, which we think ought to be the same throughout the whole of Great Britain. The entry for the Act, on page 67 of the Bill, accordingly devolves only those aspects of the Act dealing with road service vehicle licensing. In the other place an Amendment was tabled by the Government to ensure that this was what we got.
The Amendment that we are discussing seeks to reserve the Act outright. I am sure that this is not sensible. The road service licensing aspects of the Act are essentially concerned, as the noble Earl, Lord Onslow, has said, with local matters; for example, with whether a local community organisation can run a minibus service to and from a remote village or villages. Such matters, I should have thought, were obvious candidates for devolution; and I hope that, in the light of that, the noble Lord will see fit to withdraw his Amendment.
Lord MACKIE of BENSHIE: I should like to support the noble Baroness in her plea, and indeed the noble Earl, Lord Onslow, This is unusual, and made me wonder, but I have come to the conclusion that it is still right to do so. As probably everyone here knows, the situation in the country is quite extraordinary. The old days of the buses running full and profitably have gone for ever. A large number of people have motor cars, which has made the position of the few who do not, of the few who cannot drive and of the mother with young children whom she has to control extraordinarily difficult in the country; and the only way to solve this problem that one can see must be for a highly individual local enterprise such as can he licensed by the Assembly or, indeed, by the local authorities under delegation. I must say that I agree that it is very much a question for the Scottish Assembly, particularly as the problem in Scotland with our vast empty areas, is very much greater than it is in most parts of England.
Lord TEVIOT: I shall not disappoint anybody; I shall withdraw the Amendment. I do not entirely agree with all

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that has been said and I shall look at it carefully, although there is quite a lot in what was said by my noble friend, by Lord Mackie and by the noble Baroness. I agree that minibuses are local affairs but there should be what one might call a little bit of consistency in local affairs, and there should be some common denominator. However, for the purposes of this Committee, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
5.30 p.m.
On Question, Whether Schedule 10, as amended shall be a Schedule to the Bill?
Baroness ELLIOT of HARWOOD: May I raise a small matter? On page 57 in the right-hand column there is an exemption, quite correctly, for
"any provision relating to the Carnegie Trust".
There are three Carnegie Trusts. The one that I think this applies to is the Carnegie United Kingdom Trust. I have been a member of it since 1939 so I have a fairly good idea of it. Of the other two, one is the Carnegie Universities Trust and one is called the Carnegie Dunfermline Trust. I suppose that this one must be the United Kingdom Trust. Perhaps the noble Lord will check on that. I am giving him accurate information and, if this is the Trust that he wants to refer to, perhaps the provision should read: "any provision relating to the Carnegie United Kingdom Trust" or, if it is not desired to specify which trust, "Carnegie Trusts". The Dunfermline Trust operates purely in Dunfermline. The University Trust is a trust of the Scottish universities. If you want to make it accurate, then either add an "s" or put in the Trust that you want which, I think, would be the United Kingdom one or the universities one.
Lord WIGG: Betting, gaming and lotteries fall within the scope of Schedule 10 and Group 21. I did not put down an Amendment seeking to delete it, not even for the purpose of obtaining information. I preferred to wait until "Schedule stand part"; but, having waited, I do not expect the Government to give any informed reply this evening to the questions I am about to put. I say that this is another aspect of this whole Bill where it
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is as plain as a pikestaff that it has not been thought through. The references in the Bill are to be found in Schedule 13, which deals with public bodies: the Gaming Board, the Horserace Totalisator Board and the Horserace Betting Levy Board, are the public bodies which are concerned. The sections of the Gaming Act and the Betting, Gaming and Lotteries Act to which reference is made are concerned with, on the one hand, appointments to the Gaming Board, the Horserace Totalisator Board and the Horserace Betting Levy Board. Nowhere else is there the slightest indication of how these powers are to be used in Scotland; nor has there been any indication anywhere from any inquiry I have made in relation to the Bill that any thinking has been done along these lines.
The responsibility for betting, gaming and lotteries in the United Kingdom as a whole rests with the Home Office which is, I would claim, if not the worst Department in Whitehall, very nearly the worst—and I am now referring not only to the Ministers but to the civil servants as well; and not only in relation to this subject. This is a Department which touches on every aspect of our national life and it does it through other agencies. When you question them, they disclaim all responsibility. I have rarely, of recent years, ever got an intelligent reply to any questions I have put. I do not, therefore, expect one tonight; although I am sure that, if a brief had been available, the Ministers on the Front Bench would have given me an intelligent reply and I might have paid tribute to the way they have handled this Bill. They have been extremely forthcoming in supplying us with all the information; but here I do not believe that the information is available.
Let me not rely only on the crystal ball; let me turn to the form book. Recently, the Secretary of State made a speech in which he said that when expert opinion was supplied to him he did not listen to it. That is very obvious! He said he sought his information by going down at a week-end and having a half-pint of bitter with his constituents and talking over the subject with them. Again, judging by what conies out of the Home Office, I think that his visits to his constituency are very rare. There seems to be no contact and no thinking.

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On the question of horse racing, there are few, if any, aspects in which the people of Scotland are not interested. They are far more interested in what is going to win the Scottish Grand National or, (may I say?) the Derby, than they are in this Bill. Also, there is an aspect of the betting industry which grew up in Scotland. While it is true that I have detained the House on a previous occasion with this story, I think it illuminates the situation and, therefore, I hope I do not bore your Lordships by telling it again.
It was the practice of respectable working-class and middle-class people who had not gone to Eton, who did not have accounts with Ladbrokes and who were therefore not members of the Jockey Club, but who wanted to bet within the law, to send their bets to Switzerland or Holland. It was called, "having a bet over the water"; and it may be that some thought this was a reference to a Jacobite restoration; but in fact it was "having a few bob each way" including a postal order to Douglas Stuart who operated, I think, in Holland or in Geneva. But, come the war, this practice was brought to a halt; because there was the possibility of espionage, of censorship and of restrictions on getting money out of the country. A new way had to be found or one of the main roots of the betting industry would have been severed.
What happened was this. The big bookmakers went off to Scotland and bribed the police—it was not a difficult operation, I gather; and I hope that the asking price was a little higher than it was immediately after the war. I remember driving a Scottish bookmaker back from Goodwood early in the week and I asked, "Have you had a bad week?" He replied, "No, but I have to be back on Friday to pay the police their wages." At that point, what happened became clearer. They bribed the police and built up their public relations department with the story that betting through the post was legal in Scotland but not in England. It was for that reason that one found that, until the 1960 legislation, the postal order businesses were all carried on in Glasgow. They were carried on in Glasgow in defiance of the law for, as I understand it, the Scots law was not different from the English. They carried on the postal order business in Scotland because it
1034
was an effort that had to be made at the start of the First World War to carry on the business that had been commonplace before.
I mentioned that to show that Scotland was interested in the betting industry. A considerable part of the postal business in relation to football is still carried on in Scotland and this is a hangover from the past. I am not suggesting that anything is happening illegally today. Those days have gone through the genius and, I may say, courage of Lord Butler, to whom I often pay tribute in this field and through the courageous action of the Conservative Government in 1960 in introducing legislation that has cleaned that up.
We now have the Gaming Board which certainly functions and has an interest in what happens in Scotland. I do not believe that the Gaming Board knows what is going to happen under this Bill. It certainly looks as though, under Clause 64, it will be possible for a Minister to make an order adding a member or members to the board. What difference that will make I do not know! It may be that the Scottish people after devolution and under the impulse of this wave of nationalism, which may be accompanied by a certain degree of puritanism, will want to put a stop or a limit to gaming in Scotland. But merely putting a member on a gaming board in England will add nothing to their powers in connection with doing whatever the Scottish people as a body want to do, or even to tackling their problems and trying to find new leases of life and release new forms of activity by means of which the Scottish people spend their spare time.
When we come to the Totalisator Board, that Board as such is appointed by the Secretary of State and he, too, will have powers under Section 64, it seems to me, provided the Minister makes an order, to add to this Board. But, again, what difference that will make to the Totalisator Board and its operations in Scotland I do not know. Yet, of course, this is vital to the wellbeing of Scottish racing. Racing is very important north of the Border. There is no better racecourse and no better-run racecourse in the United Kingdom than that at Ayr. The Western Meeting is certainly a very important meeting. I am very glad to

1035
say that I once won a race there at one of its jumping meetings—I wish it had been more, but I did win a race there. My gratitude and my tribute to it, however, do not stem from that fact but from the work of Mr. McHarg and his colleagues and because I noticed, when chairman of the Levy Board, the work that was done to get Scottish racing on the right lines. All the Scottish racecourses are important in Scotland, and the question of whether they are to be retained and how they are to be run is a matter for the Scottish people. This Bill does not help because all it would do, it seems to me, after an order is laid, is to add a member to the Levy Board.
Again, speaking on the Question, Whether the clause shall stand part enables me to pay a tribute to the work of a Scottish member of the Horserace Betting Levy Board when I had the honour to be its chairman. I refer to the work of the late Mr. Grant Munro. The noble Lord, Lord Kilmany, and I sat with him, and there was no more public-spirited and informed man, from the point of view of racing as a whole. There was nobody quicker to defend the interests of Scotland, but not at the expense of the greater good. Certainly Scotland was very lucky indeed to find a man of the quality of Mr. Grant Munro. But if you add one, two, three or four more members, it will not really help if the problems have not been thought out and it has not been decided how the resources should be apportioned.
I shall not detain your Lordships any further, therefore, but shall only say that the references to betting, gaming and lotteries here are inevitable, I suppose, because of the form the drafting takes. However, I do think that at some stage the Government should inform your Lordships of what is intended. I regret that it did not happen in another place. But I, for one, would feel, despite the jibe of the Home Secretary that he does not listen to anyone who knows anything about the subject, that I should not be performing my public duty if I did not take a few minutes tonight to say to the Government: "Please, I do not expect a detailed answer, but I do expect a Government spokesman to indicate that the Government are going to take an opportunity, before the conclusion of the
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Committee stage, to indicate the Government's thinking in relation to the Gaming Board, the work of the Totalisator Board and the Horserace Betting Levy Board" If they do not, I shall seek to put down Amendments on the Report stage, if necessary, to ask your Lordships to vote against the Government on this subject.
Lord KILMANY: It is always a pleasure to me, having served for several years under the chairmanship of the noble Lord, Lord Wigg, as a member of the Horserace Betting Levy Board, to hear him talk about racing because it has been my experience to hear him talk a great deal of sense about that subject. When he saw fit to mention Ayr racecourse as an example of a well-run course, both for flat racing and steeplechasing, I could not have agreed with him more.
We now have the opportunity of seeing the noble Baroness who represents racing interests at the Home Office sitting on the Government Front Bench. Like the former speaker, I do not want to be unfair and expect a complete answer to the questions that arise from gambling, betting and lotteries being included in Group 21 among the devolved subjects, but I think it would be fair to ask the noble Baroness whether she consulted the Horserace Betting Levy Board as to what would be the possible reactions to these subjects being included. Again, I should like to ask the noble Baroness whether she consulted the Tote Board and also the Gaming Board, because it would seem to me that all these three institutions would certainly have an opinion as to whether it would facilitate their business or whether it might make an absolute mockery of it.
Then we go further. There is a Royal Commission sitting now, I think, on the whole subject of gambling. Is evidence being put before the Royal Commission to justify this proposal? Surely we do not want the Royal Commission making its recommendations on the understanding that there is to be no Scottish Assembly or, equally, on the understanding that there is going to be a Scottish Assembly. Surely the twin possibilities should be put before that Royal Commission, because gambling is a very fundamental subject in the British way of life. I should like to ask the noble Baroness, when she responds to the request that has been made of her, to produce some

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facts and some policy that we, in considering further stages of this Bill, can take into account in deciding whether or not we should oppose it.
5.47 p.m.
Lord BURTON: I apologise for not having put down an Amendment on this point, but unfortunately it came to my attention only yesterday and I hastened to give a note on the point to the noble and learned Lord, Lord McCluskey, so I hope he is au fait with the matter. It concerns Group 21, which devolves the handling of the sale of venison to the Assembly. I hope the Government will look at this again. There have been difficulties over the export of venison. Some months ago the Germans imposed import regulations which were impracticable to implement. I understand they did that because they had received some very unfit kangaroo meat from Australia and, as a result, they imposed regulations on other things as well.
Since then the Swedes have been considering regulations which are contrary to the German regulations in certain respects. It has therefore become necessary for this country to try to draw up regulations of its own which could be accepted by the Germans, the Swedes and any other country to which we might wish to export. The handling of this matter has for some time been in the hands of the Ministry of Agriculture—I would emphasise "Ministry", not "the Department of Agriculture". It has been a United Kingdom Committee, even though it has been sitting in Edinburgh.
When deer are mentioned, many people think immediately of Scotland, but I believe there are more deer in England than in Scotland, and certainly more roe deer are shot in England than red deer in Scotland. This is therefore a United Kingdom matter. If one looks at Part II of the Schedule which specifically excludes certain items from being devolved, one finds in paragraph 1 the word "food". If food is to be excluded, I am not quite sure how the sale of venison can be included, because I should have thought that venison was food. There certainly seems to be a contradiction of terms here.
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Again, if one looks at paragraph 12 of Part II one sees that it specifically includes control of the diseases of animals. This ties in fairly strictly with the inspection of carcases, where one can see whether there is any disease in them. Carcases are inspected by veterinary officers. It seems highly appropriate that this sale of venison should not be one of the devolved subjects.
Last night the noble and learned Lord, in refusing an Amendment moved by my noble friend Lord Mottistone, argued the difficulty of dividing industrial relations. If it is impossible to divide industrial relations I really cannot see how on this matter you could put venison on one side of the Border or the other. It seems even more impracticable. The argument we had over the doctors, the dentists, aerodromes and forestry, all apply even more forcefully in this comparatively small matter. This is not a political but a practical point, which I hope will be looked at again by the Government before Report, and I hope that at that stage we can amend this part of the Bill.
While I am on my feet may I once more make a plea to the Government. They must bear in mind that this Schedule was scarcely discussed in another place, and, after all, this Schedule is substantially the main guts of the Bill. Will the Government please try to make alterations to the Schedule which will clarify these matters, which the Minister has admitted are complicated and which are obviously obscure? Perhaps I could ask for one explanation in Part III. Some enactments are shown as included, some as not included; powers under other enactments which are clearly to be devolved are not shown; other enactments are reserved by silence. What criteria are there for including or excluding an Act in this Schedule?
Lord DE CLIFFORD: Like the noble Lord, Lord Wigg, I would not ask the Government to give me an answer tonight to what I am going to say. I am talking about Group 21:
"Licensing of dogs and keepers of dogs".
We appear here to be introducing a totally new principle into one part of the United Kingdom. As your Lordships are aware, at the moment there is not a dog licensed in the whole of the United Kingdom;

1039
it is only the keepers of dogs who are licensed. If the Assembly takes the view that it can licence dogs we could have the situation where somebody going from England to Scotland with a gun dog could take a perfectly honest dog out of England which will instantly become dishonest as it crosses the Border.
May I also ask the Government whether this reference to licensing of dogs and keepers of dogs is an indication that we might have an alteration in the English law which would allow us to do this very thing? Apart from that—as I say I do not want an answer tonight—may I also ask whether the licensing of keepers of dogs affects the Guard Dogs Act, which was initially started because of what happened in Scotland, the Breeding of Dogs Act and perhaps even the Animals Act?
The Earl of ONSLOW: I, too, would like to ask about the licensing of dogs. As I understand it, the fee is 35p and has been static since about 1870, or whenever the Act for the licensing of dogs was passed. Schedule 2, paragraph 4, reads:
"A provision is not within the legislative competence of the Assembly if it would impose, alter or abolish any tax".
I would assume that the dog licence is a tax. Therefore how would one devolve the licensing of dogs? That is the first point. The second point is that I think there was a draft EEC Directive on venison. I wonder—perhaps the noble Lord can tell us; I did try to give him advance warning—(a) whether it has come into force, and (b) whether with the sale of venison and Scotland licensing we are not going to clash with EEC treaties and laws?
5.54 p.m.
Lord McCLUSKEY: May I seek to answer the points, so far as I can, in the order in which they were put to me. First, the noble Baroness, Lady Elliot, asked about the Carnegie Trust. I am advised that the position here is that the Carnegie Trust is the one referred to in the Education (Scotland) Act 1962. The appropriate reference will be found in Section 118(4) and (5), and the Carnegie Trust referred to is the Carnegie Trust for the Universities of Scotland.
Baroness ELLIOT of HARWOOD: I am glad that the noble and learned Lord said that because it is a much smaller trust than the Carnegie United Kingdom Trust, which operates in Scotland too, but also operates throughout the United Kingdom. It think it would be as well to put in the University Trust if that is the one referred to.
Lord McCLUSKEY: I think it will be clear from the entry, which contains a reference to the Act of 1962, that that is the trust; but certainly, in the light of what the noble Baroness has said, I will look to see whether it is necessary to clarify it.
With regard to the various points made by the noble Lord, Lord Wigg, I regret that he should say what he has said about the Home Secretary, who is not here to defend himself, and made observations of this kind of which he has given us no notice whatsoever. That is all I can say in relation to that. I do say that Clause 64 and Schedule 13, and particularly Clause 64, contain very much wider powers than simply the appointment of additional members to the Betting and Gaming Board. Under Clause 64 and Schedule 13 action which may be taken under the clause will not lead to the fragmentation of any of the bodies referred to in Part If of Schedule 13. Such bodies will, after action has been taken under Clause 64, report separately to the Executive for their activities in Scotland. As I have explained on more than one occasion previously, after an order has been made under Clause 64 it will be possible for the Scottish Assembly to legislate about the bodies concerned. In other respects also the Assembly will be able to legislate on betting and gaining in Scotland—a matter primarily of interest to the Scottish people. I cannot recall whether the noble Lord, Lord Wigg, was here at the time, but we have on two previous occasions debated betting and gaming and various aspects of them.
The noble Lord, Lord Kilmany, asked whether certain bodies had been consulted. They certainly were not consulted by my noble friend Lady Stedman, who is not with the Home Office but with the Department of the Environment; but all the bodies in this field were consulted, and indeed most of them commented

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upon the scheme of devolution. Your Lordships will recall that at the end of the year, when the 1975 White Paper, to which we have frequently made reference, was published, invitations were sent out to people to comment, and all these bodies were consulted, including the bodies mentioned by the noble Lord.
The noble Lord, Lord Burton, talked about a great many matters in the Schedule that were not discussed in another place. I have already made plain that in another place the Government provided time under the Business Motion which the House accepted. In fact the other place spent more time on this Schedule than we have spent on it. If matters were not discussed, that was not the fault of the Government who provided, or sought to provide, the time. It was the fault of the opponents of the Bill who insisted upon making Second Reading speeches on every possible occasion. There was time provided for discussing these matters, as we have demonstrated by taking less time to get through this Schedule than was allocated for the Schedule in the other place.
The noble Lord, Lord Burton, gave me notice very precisely—and I am deeply indebted to him for it—in relation to the point about the sale of venison, and I must confess that I shared his difficulty. But may I just explain the matter in this way? As the noble Lord pointed out, control of food is reserved by the entry in paragraph 1 of Part II of Schedule 10, and this exclusion derogates from the subject deer and the sale of venison, which appear in Group 21. The effect of this is that the food standards aspect of the sale of venison is not within the legislative competence of the Scottish Assembly, or the powers of the Scottish Executive. That is what the noble Lord took from his study of the Bill.
The United Kingdom Government will therefore remain responsible for any regulations controlling the sale of venison. The Scottish Administration will be responsible for matters such as those contained in the Sale of Venison (Scotland) Act 1968, which provides for the registration of dealers in venison, for the keeping of records by such dealers and for other connected matters. The distinction is, therefore, between the sale of venison as an activity in the market place which is
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to be devolved, and the food standards which are to be applied to that venison which will be non-devolved. The Bill, as it is drafted, achieves this distinction.
If any EEC regulations or Directives were to apply to devolved aspects of venison, or indeed, for that matter, to any other devolved matters, then the Scottish Executive could be obliged, under various provisions in different clauses of the Bill, to implement the Community obligations, in the same way as the United Kingdom Government are obliged to observe them.
Certain questions were asked about the licensing of dogs. I am happy that the noble Lord, Lord de Clifford, should say that he does not want an answer tonight, because that is not a point which was raised by means of an Amendment. So I am indebted to him for allowing me that laxity. What I shall do, if it will be to his convenience, is write to him and he can exercise his judgment as to whether, on some future occasion, he wishes to put the matter on the record in the Official Report in some way. I shall he happy to assist him in that.
The noble Earl, Lord Onslow, asked whether a dog licence is a tax. One does not necessarily have to pay a fee or any money in order to obtain a licence. Accordingly, the mere devolving, of the licensing power does not mean that the Assembly will necessarily raise money by the issuing of licences. A licence is not itself a charge, although a fee may be charged for the issuing of the licence, and I suppose that it really becomes a question about the character of a charge that is sought to be imposed. If a licence is issued, and some charge is made which is properly attributable to the cost of issuing the licence—administrative costs and matters of that kind—then that can hardly be regarded as taxation. I think that one would look at the respection of the legislation that related to the licensing.
Lord HARMAR-NICHOLLS: May I ask a question? I am interested in the noble and learned Lord's point that a licence is not necessarily a tax, because you can have a licence without having to pay for it. I wonder whether he can bring to mind any licence issued by any United Kingdom Government that does not carry

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a fee with it, because if it automatically carries a fee—a rose by any other name can smell as sweet—then it is a tax.
Lord McCLUSKEY: It is quite common, for example—I am not talking about the United Kingdom, because an example does not spring to mind—for a country to demand a visa before you can enter it. You do not necessarily have to pay for it. That is a similar case. I cannot think of another example, but the point is quite plain. The power to licence enables the Assembly to issue and refuse licences, without making any charge.
Lord HARMAR-NICHOLLS: I pursue this point, because I foresee that this is the kind of way in which the Assembly can get around not having powers to levy a tax. I do not think that a visa can be looked upon as a licence. A visa does not mean that you are in a kind of business. I merely make the point that this is a possible loophole, which ought to be borne in mind when we are thinking that we have not devolved the right to levy taxes.
Lord McCLUSKEY: It could only be an Englishman who would think of a point like that.
Lord LLOYD of KILGERRAN: May I interpose—?
Lord McCLUSKEY: I shall be delighted to have the noble Lord's assistance, when I have finished with the point. If a Scottish Assembly sought to introduce punitive licence fees for dogs in Scotland, we should end up with very few dogs there.
Lord LLOYD of KILGERRAN: I am trying to help the noble and learned Lord in regard to free licences. If I may introduce the esoteric matter of patents, the Government give licences as of right and they are free licences. I am sure that that is of no help to the noble and learned Lord.
Lord McCLUSKEY: I should have remembered that from many long hours spent on the Patents Bill on a recent occasion. There is one matter that I should like to add to this ragbag of matters that we have been looking at, on the Question, Whether this shall be the
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tenth Schedule to the Bill? I have on a number of occasions spoken about the legislative competence of the Assembly and, in the course of some exchanges with the noble Earls, Lord Ferrers and Lord Selkirk, I made certain observations relating to private legislation, which the noble Earl, Lord Selkirk, may recall. They took place on Monday, 24th April, and they appear in column 1577 of the Official Report and in subsequent columns. What I said on that occasion may have obscured certain matters in relation to private legislation. I was talking about the present system of private legislation, and it is right that I should make it clear.
I explained, in reply to the Amendment that we were then discussing, that Clause 28 related to the adaptation of the existing Westminster procedure for private legislation in Scotland as a result of devolution, so that private legislation relating wholly or in part to devolved matters might continue to be passed at Westminster, which must continue to be the case, given the overriding sovereignty of Parliament. I explained, however, that it is possible that in the future the Assembly will produce a scheme to facilitate the passing of private legislation, relating to devolved matters, by the Assembly.
Lest it be taken that the Assembly could not legislate to provide a system of private legislation, and that in no sense at all, therefore, is private legislation devolved, let me explain that the devolution of any subject area, such as Group 5, local government and local finance, to the Assembly necessarily enables the Assembly to legislate on such a matter, and such legislation may be what in Westminster terms would be described as public, private or hybrid. Private legislation is not, therefore, a "subject", in the sense in which I sought to explain that word earlier, which is capable of being a devolved matter. It is essentially a question of legislative procedure.
While, therefore, the legislative procedure and conventions relating to the handling of Scottish private legislation at Westminster will continue in respect of legislation introduced there, it will be open to the Assembly to formulate its own conventions and procedure with

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regard to the way in which it categorises legislation; whether it adopts or adapts the Westminster practice regarding the distinction between the various categories of legislation, and the procedure by which different categories of legislation are handled by the Assembly. These are, in effect, inherent powers of the Assembly as a law-making body. I hope that that amplification clarifies what I said on the previous occasion. We have been through Schedule 10 in very great detail, and I trust that your Lordships will agree to the Question, That this Schedule shall be the tenth Schedule to the Bill.
The Earl of SELKIRK: May I thank the noble and learned Lord for what he has said on that point? I am most grateful. He said that all bodies would be consulted, but "consultation" has many different meanings. I feel that I must, in fairness, repeat what the Faculty of Advocates have said on this matter. The Faculty normally comments on proposed legislation, in response to an invitation from the Department responsible:
"The Faculty has not been invited to submit comments on the devolution Bill, but it seemed to the committee to be desirable that the Faculty should make its views on the Bill known".
I have no doubt that the Government have their views, but that is the view which the Faculty took, and one sometimes wonders how broad and thorough the consultation has been.
6.9 p.m.
Lord McCLUSKEY: I am sorry that that should have been said. I personally went to the Dean of the Faculty, before the November White Paper was published in 1975, and I said to him that this would be a very considerable document and it was very probable that the Government would invite comment at an early date. I know the way in which the Faculty works. It has a very small but active membership of people who are available to give time to these matters. I suggested to the then Dean of the Faculty that he should set up a committee straight away to look into these matters. I do not know how consistent this was with my ministerial responsibilities, but I said that there were a number of subject areas which a committee might begin to think about, even before the White Paper was published.
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The Dean of the Faculty then set up a very considerable committee. That was the committee which produced the reports which subsequently went to the Government. Furthermore, in the light of the representations made by the Faculty of Advocates and the Law Society of Scotland, Ministers in Scotland—including myself, the Lord Advocate, the Minister of State at the Privy Council Office and the Parliamentary Under-Secretary, Mr. Harry Ewing—met the Faculty and the Law Society representatives and discussed these matters with them. There were also informal meetings in which I took part. Of course, consultation takes many different forms, but in respect of the Faculty and, indeed, the Law Society, we have consulted as well as might reasonably be expected.
Lord WIGG: I repudiate entirely the point made by the Government spokesman. If what I said constitutes an attack upon the Minister, all I can say is that I was not trying very hard. When I do make an attack it will be more specific than that. I referred to a public speech which was made by the Home Secretary, in which he said that he did not listen to expert opinion; he went down to his constituency at the weekend, had a pint with his constituents and talked it over. That is a perfectly valid point to make. If the Minister tells the Committee that there have been consultations with statutory boards, all I can say is that these would be of a confidential character. I am wondering in what depth these consultations were held, and why it is that those whose livelihoods are involved in the betting, gaming and lotteries industry do not know anything about it. I certainly made detailed inquiries of those whose interests are affected, and so far as I could ascertain I found that there was absolutely no reaction at all to the impact that this Bill will have on betting, gaming and lotteries in Scotland. This is a two-way business. Ultimately it is a matter which affects the Revenue. It is also a fact that these industries, at least on the racing side, receive considerable grants from the Horserace Betting Levy Board.
The reference in the Bill itself is to the sections which appoint the boards. All that one is able to ascertain for certain is that it will be possible, by means of a Statutory Instrument, to

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appoint people to the boards. I thought that it was perfectly legitimate to point to the magnificent work of the late Mr. Grant Munro who was put on to the Horserace Betting Levy Board to represent Scottish interests and the Scottish point of view. He carried out that job magnificently. However, I do not see that adding another member, adding powers, will help matters forward. I wanted to give the Government—and I chose this method of doing it—an opportunity not to educate me about this (I do not matter because I am out of it) but to consider the interests in both Scotland and England which will be vitally affected by decisions which are yet to be taken and which will also be vitally affected by continuing and growing areas of uncertainty.
When it reaches the Statute Book I should have thought that the Government would like this Bill to work, and that depends upon building up an informed public opinion. That is what I have tried to do. I am sorry that I have wasted my time. On a subsequent occasion I shall endeavour to put more of a cutting edge on to both what I do and what I say. I repudiate entirely the mood in which the Government spokesman opened his remarks.
The Earl of PERTH: Before we decide whether Schedule 10 shall be agreed to, may I ask the noble and learned Lord about a statement that he made earlier this afternoon. He said how important it is that we should get the Bill right, because any statements that he might make will have no standing in relation to judgments made by courts of law. That I well understand. However, it is a different matter when the noble and learned Lord makes statements about how Government Departments will behave. I have in mind in particular that last night we discussed the museums, galleries and libraries. The noble and learned Lord then made a point which we were very glad to hear: that special grants or money from the National Land Fund will be made available in the ordinary way to those bodies. I am sure that kind of statement has standing and that we can count upon it. However, I should like the noble and learned Lord to confirm that this is so.
Lord McCLUSKEY: I am happy to acknowledge the distinction drawn between the two kinds of statement. I am also happy to confirm precisely what the noble Earl understands. When we speak about the Government's intention in relation to such matters as the noble Earl has mentioned, such statements will, I trust, be relied upon; and they can be relied upon.
Lord BURTON: May I thank the noble and learned Lord for his answer to my question. He has admitted that there are grounds for some confusion. Instead of putting in the words "Sale of venison", may I ask him whether or not it would be better to insert the words: "Registration of venison dealers"?
Lord McCLUSKEY: I should have thought that those words might be too restrictive. However, we are looking at a number of matters, so—again without commitment—I shall bring what the noble Lord has said to the attention of the draftsman.
Lord HARMAR-NICHOLLS: May I make just one point on the statement from the Box and upon what will be adjudged to be the facts if the matter ever goes in front of judges? I have tried to say throughout the Committee stage that what we ought to keep in mind is this. It is perfectly true that in the formulation of legislation the courts cannot be bound by explanations given at the Box. However, the referendum decision will be affected by what is said at the Box. If what is said at the Box cannot be confirmed in the courts—if it comes to that—because of the wording, the point which we have tried to make in so many of our Amendments is emphasised: that it is vital that we should try to spell out in the Bill itself words which are likely to mean what we are saying now and which are likely to be supported by the courts. The noble and learned Lord, who is a genuinely persuasive person, can give an impression which may affect the referendum decision, and it may not be fair to the people who take part in it. Therefore we ought, if we can, to try to get the two moving together.
Schedule 10, as amended, agreed to.
Schedule 11 [Matters within the powers of Scottish Executive but not within legislative competence of Assembly]:
6.18 p.m.
Lord DRUM ALBYN Lord DRUM ALBYN moved Amendment No. 269:
Page 69, leave out lines 4 and 5.
The noble Lord said: When I first put down this series of Amendments I did so with the object of obtaining information about them. I made it clear in my Second Reading speech that one, if not the most crucial, point in the Bill, so far as I was concerned, was the arrangements to be made over industrial development. The more I looked at these Amendments the more I became disposed to put them down not just to obtain information but because I began to have more and more misgivings about the system which is proposed. If I were to take these nine Amendments separately, it would take much longer, although that is not to say that I shall be brief. However, shall be as brief as possible. I cannot, in any case, be brief because of the excruciatingly obscurantist way in which the Bill is drafted.
To the ordinary person reading it, this paragraph means nothing whatever, but I believe that it means a great deal to the economic unity of the United Kingdom. This inscrutable paragraph gives legislative authority for the transfer of powers at present held by the Secretary of State in relation to the Scottish Development Agency to a Scottish Secretary.
It may be helpful if I go a little back into the past so that one can see how this matter has developed. The last Secretary of State set up the Highlands and Islands Development Board with the object of taking the special measures needed by this particular area of the United Kingdom which is unique in its extent, its geographical features and its problems, not the least of which is that it lost so much of its population in the last century and that so many of those who remain are unemployed. That he did in 1965 and there was little opposition. I remember him saying in the early 1970s that he would set up a similar, though not identical, body for the rest of Scotland. That he did in 1975 in the form of the Scottish Development Agency Act.
That Act and the accompanying administrative changes brought together
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under the Secretary of State the powers under the Industry Acts to promote industrial development, together with the powers of the Scottish Industrial Estates Corporation, to which I shall refer in a moment. The administrative changes included the transfer of power from the Department of Industry to the Secretary of State. These were the powers under Section 7 of the Industry Act of 1972 to give selective financial assistance to particular undertakings and to participate in the exercise of the distribution of industry powers so far as Scotland was concerned. How far-reaching these changes were is indicated in the opening words of the Annual Report of the Scottish Development Agency for its first complete year; that is, the year ended 31st March 1977. This is how it opens:
"The Agency's powers and purposes involve it actually or potentially in the whole range of the Scottish economy and the Scottish environment",
The report of the Comptroller and Auditor General on the Scottish Development Agency's report for the year ended 31st March 1977 says—and I quote—
"The Scottish Economic Planning Department base their continuing oversight of the Agency's activities on an annual plan prepared by the Agency, setting out its industrial strategy, covering also its industrial estates and environmental development functions".
Those are the two sides of the functions—
"The Agency also prepares a five-year forecast for its investment and expenditure programme. The Department consider these planning documents at an annual review and in consultation with the Treasury set a ceiling on the amount of Government funds to be provided in the following financial year by way of grant in aid, public dividend capital or national loan fund advances. The Department also monitors out-turn under all heads on a monthly basis. During the year the Agency consults with the Department on major opportunities for investment as they arrive".
I think that encapsulates better than anything else that I have seen written anywhere exactly what are the functions and I am sorry that I had not come across them earlier in the proceedings on this Bill. So the monitoring and planning functions in the economic sector rest with the Scottish Economic Planning Department. That Department publishes an excellent quarterly report. In its autumn report last year, it gave an account of the work in 1975–77 and this is what it said:
"The Secretary of State has become, in the truest sense, an economic Minister with a much

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strengthened ability to influence Scottish industrial activity and with a full and important part to play in the direction of the Scottish and United Kingdom economies".
Perhaps at this point I may comment that it is no wonder the Secretary of State is anxious to devolve some of his many other functions. The report goes on to say:
"Scotland remains economically integrated with the rest of the United Kingdom and the Scottish Economic Planning Department continues to work closely with other Scottish Office Departments and United Kingdom Departments and the various regional agencies to promote industrial growth and investment in Scotland".
These are the important words:
"Scotland remains economically integrated with the rest of the United Kingdom".
For how long under the régime proposed in paragraph 7 of this Schedule?
The functions of the Secretary of State are to be divided in an almost biblical writing on the wall. The Scottish Development Agency has two main roles: first, the role it inherited from Scottish Industrial Estates, a greatly expanded environmental role, land acquisition, construction of advanced factories, running their industrial estates, modernising factories, land renewal, urban renewal, development in conjunction with new towns, and so on. The other main function is the furthering of economic development and the safeguarding of employment in industry. The first role is devolved to the Assembly under Schedule 10, Part III (that is, at pages 66 and 67 of the Bill), and the Scottish Executive will be answerable to the Assembly. I see no objection to that. The second role is transferred to a Scottish Secretary under paragraph 7—the one we are discussing—and is not to be within the legislative competence of the Assembly.
Is the Scottish Economic Planning Department to be under the Secretary of State or under a Scottish Secretary? It ought not to be both. Who is to be responsible for setting out the industrial strategy? Who is to be responsible for monitoring the Scottish Development Agency's performance month by month? Apparently, to judge by Clause 22, both the Secretary of State and the Scottish Secretary: the Secretary of State to Parliament and the Scottish Secretary to the Assembly. It may conceivably be
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possible to maintain the economic integration of the United Kingdom in this way, though in my submission it is not worth the risk. But it is unlikely to maintain its political integration under these provisions. I invite your Lordships to look at the powers transferred under this paragraph, and I invite the noble Lord who is to reply to justify it. I am glad to see him here; I am sorry that he is not in such good voice or good health as we would wish, but I hope he will be able to deal with some of the points.
Amendment No. 269 is to leave out lines 4 and 5, but perhaps I may first be allowed to mention sub-paragraph (i) taken together with (x). These transfer to a Scottish Secretary the power to appoint the members of the Agency and to fix their remuneration and pension with the approval of the Minister for the Civil Service. At any rate that is clear, and accordingly I have not tabled an Amendment to sub-paragraph (i), though I have tabled an Amendment to sub-paragraph (x) to enable the Minister to explain how a Scottish Secretary will consult the Minister for the Civil Service. Also, I wish to ask the noble Lord this: It was stated in Cmnd. 6348 that the members of the Agency would be appointed as to half by the Secretary of State and as to half by the Scottish Executive. Perhaps he can confirm that that is still the intention, and also tell us where it appears in the Bill.
Turning to Amendment No. 269, subparagraph (ii) is far from clear; it could hardly be more obscure. Let me go into it, because not all noble Lords have the papers in front of them; I may be able to make it clear. Do not lose heart at the start, it comes out all right in the end. It relates to Section 2(6) of the Scottish Development Act:
"the powers under section 2(6) so far as exercisable in relation to the functions specified in section 2(2)(c)".
That is the power of the Secretary of State to approve the exercise of the Agency's functions under (4)(a) to (e) in relation to 2(2)(c), which in turn relates to the Agency promoting or assisting in the establishment, reorganisation, modernisation or development of industry or any undertaking in an industry, otherwise than providing or assisting in the provision of finance to persons carrying on or intending to carry on an industrial undertaking

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or carrying on or establishing an industrial undertaking whether by the Agency themselves or jointly with any other persons. In other words, this is relating to powers other than the financing or the carrying on of an industrial undertaking. The effect of this is to transfer to a Scottish Secretary this power of approval. I ask the noble Lord to explain what is meant by this. What exactly are the functions envisaged in Section 2(2)(c)? It is all very well to read them out from the Bill, but what are they? What is it that the Scottish Minister will have power to approve under this provision?
Amendment No. 270—that relates to sub-paragraph (iii)—transfers to a Scottish Secretary the power to consent or give general authority to make grants to persons carrying on or intending to carry on undertakings whether independently or jointly with the Scottish Development Agency. Amendment No. 271—that is sub-paragraph (iv) —transfers to the Scottish Secretary the powers to give the Scottish Development Agency directions in relation to financing the carrying on of undertakings.
Amendment No. 272—sub-paragraph (v) —transfers the power to give to the Scottish Development Agency directions in relation to the acquiring, holding and disposing of securities forming bodies corporate or partnerships, making loans and guaranteeing obligations. Amendment No. 273—sub-paragraph (vi)—transfers the power to give directions of a general or specific character to the Scottish Development Agency in relation to the powers under Section 3 of the Act, which enables the Scottish Development Agency to make charges for any of its services and to accept gifts or grants—resumably among others from the EEC—and carry out or commission inquiries, investigations or research for the purpose of its functions.
The Earl of PERTH: I do not want to upset the flow, but I think the noble Lord has got some of his signals mixed. I think we are now talking about Amendment No. 274.
Lord DRUMALBYN: The noble Earl is right; I am sorry that I have got it wrong. Anyway, Amendment No. 274, which is sub-paragraph (vii), transfers to the Scottish Secretary the power to determine various financial duties of the
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Scottish Development Agency in relation to its different functions and activities.
I did not propose an Amendment to sub-paragraph (ix), but it would be a pity not to refer to it, because it transfers the power to consent to any new town corporation acting as agent for the Scottish Development Agency outwith their designated area for any of the functions referred to in Section 2(2)(c), which is the subparagraph about which I have been asking questions. The sub-paragraph (xi) transfers powers in relation to the financing of the SDA by way of public dividend capital, and to borrowing by the SDA, lending to the SDA, the SDA's capital debt, and the form in which the SDA are to submit their annual statement of accounts. In almost every case Treasury consent is required, but that does not mean that economic integration is maintained thereby.
Incidentally, as Section 18, as amended by the Bill, now stands the Scottish Secretary is to transmit the Statement of Accounts to the Comptroller and Auditor-General and not to the Scottish Comptroller and Auditor-General. The only significant function which is not transferred is the power to give selective financial assistance under Section 7 of the Industry Act 1972. That is the power taken over by the Secretary of State from his colleague in the Department of Industry in 1975.
As I see it, Members of Parliament for Scottish and other constituencies will not be precluded from asking Questions about, or debating in Parliament, any of these matters because they are not devolved matters. Equally, Assembly Members will he able to ask Questions because the Scottish Secretary to whom the powers are transferred by paragraph 7 of this Schedule is answerable to the Assembly. This is a recipe for confusion, not for maintaining the economic integrity of the United Kingdom.
In addition, the annual report of the Scottish Development Agency under a provision in Schedule 16 will be laid before Parliament by the Secretary of State and before the Assembly by a Scottish Secretary complete with notes appended by the Secretary of State and the Scottish Secretary about any directions given by one or other regarding the terms of particular loans made by one or the other to

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the Scottish Development Agency. If it were a question of the Scottish Development Agency being supervised by one Minister, whether the Secretary of State or a Scottish Secretary, in regard to both promotion of industry and their industrial estates and environment functions, I might be less concerned about the transfer of these powers; that is to say, if they were all transferred. But it is not. The Secretary of State is going to be involved in the affairs of the Scottish Development Agency as the Bill stands, so the Scottish Development Agency is going to serve two masters in any case. Further, the economic planning department will have to be divided. If this is not so, the whole arrangement seems, to say the least, highly artificial and not likely to be effective.
There is a wonderful subsection in the Scottish Development Agency Act, Section 5, practically the only section under which powers are not transferred under the Bill. It says in subsection (14)
"In exercising their powers under this section the Agency shall not be regarded as the servant or agent of the Secretary of State".
Yet under the section the Agency can only act on directions of the Secretary of State and the Secretary of State pays the bill. I am wondering whether that is not very similar to the role the Scottish Minister is going to play. Here we have powers being transferred from the Secretary of State to a Scottish Secretary, but the Secretary of State may at any time direct the Scottish Secretary not to do something he proposes to do or to do something he does not intend to do. In addition, the Scottish Secretary will need Treasury approval for the exercise of any of the powers this paragraph transfers. Can the Minister give any good reason why these powers in paragraph 7 should be transferred, especially as they are not to be devolved to the Assembly? The Assembly will debate these matters whether or not the powers are transferred. But this paragraph will do no good for either economic or political integration.
Finally—and I, like other noble Lords, breathe a sigh of relief—what about the financing of these activities? The Comptroller and Auditor-General says:
"During the year the agency consults with the Department on major opportunities for investments as they arise".
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Am I right in thinking that this acknowledges that the ceiling of Government funds may have to be exceeded? Such opportunities are fleeting and cannot wait. The tempo at which they will arise will necessarily vary with economic circumstances. Where the ceiling is exceeded, will the excess have to come out of the block grant, involving consequential economies in other activities of the Assembly? It would be more sensible, surely, to have a special allocation of funds for the economic development activities of the Scottish Development Agency, quite apart from the block grant.
Who will consult the Treasury? Most of these powers transferred involve consultation with the Treasury. Will the Scottish Secretary consult the Treasury direct, or are all contacts with the Treasury to be made through the Secretary of State? If so, the whole exercise of transferring these powers seems a sham. The real control will be exercised by the Secretary of State and not by the Scottish Executive, especially as the Secretary of State may at any time intervene. If the Scottish Secretary deals direct with the Treasury on these issues, how can anyone say that the Secretary of State will remain, in the truest sense, an economics Minister? Does anyone think that his status in the Cabinet as Scotland's Secretary of State will be enhanced by such transfers of powers? Does anyone imagine that this will contribute to the economic integration of the United Kingdom? I am far from convinced that all this is in the interests of either Scotland or the United Kingdom, or that it is either necessary or desirable. I beg to move.
The DEPUTY CHAIRMAN of COMMITTEES (Baroness Wootton of Abinger): Does the noble Lord wish to move his Amendments en bloc or put them individually?
Lord DRUMALBYN: I thought that it was customary to discuss one in association with others, but I am open to what the Committee may desire. As I said, the purpose of my putting down my Amendments was so that they could be considered separately. That does not mean that they should be voted on separately.
The DEPUTY CHAIRMAN of COMMITTEES: The noble Lord is entitled, with the leave of the Committee, to put them en bloc as they all relate to the same Schedule, but he would like them put individually?
Lord DRUMALBYN: I said that I should like them considered individually, but I am prepared that they should be put together. I beg to move the first of my group of Amendments.
Lord HARMAR-NICHOLLS: My noble friend has done a great service to the Committee tonight. He has done the homework which all of us, if we did our duty to the full, would have done ourselves. He has done it effectively. When we read it in Hansard I am certain that it will save us a great deal of time and give us an important guide as to how we should deal with this matter on Report.
There is no doubt that paragraph 7, page 69, as he has been able to explain it, is significant. I shall not attempt to continue with the details, as my noble friend did. However, when I saw his Amendment in the Marshalled List I thought it was right to find out what was being devolved. I made a start for about an hour. I gave it up in the end because it was time-consuming and very detailed indeed. I should like to thank my noble friend for the way in which he obviously kept to his task and for the way he has been able to sort out the matter for us.
The reason why I support my noble friend in underlining the importance of this matter is this. It fits in again with a theme that we should always keep in mind. This will go some way to making a eunuch of the Secretary of State for Scotland. I refer to the powers that he has at present, and the Scottish Development Agency. The same will apply under the Community Land Act, which is dealt with in the next paragraph. If powers are taken away from the Secretary of State, it will mean that his influence in getting things to Scotland and working in Scotland's interests with all his Cabinet connections will be so much weaker. We fed hormones to him in the development of the Scottish Development Agency, in order to make him stronger and more able to bring things to Scotland out of the general United Kingdom pool. This Bill will remove one of his testicles—
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at least in terms of his being able to be a potent and effective operator. I do not think that it is in Scottish interests to reduce the power of the Secretary of State for Scotland in this way.
It is not in Scotland's interests that their representation to the Secretary of State and the Cabinet should have access to the whole of the United Kingdom funds and powers. It is a mistake to weaken the powers of the Secretary of State by devolving so much of his strength to the Assembly or the Scottish Secretary in the way that will happen if paragraph 7, page 69, is allowed to go unaltered. I hope that my noble friend will continue his research and find ways and means of implementing on Report what he implied in his speech. I do not think that we should allow this to stand. It is not in Scottish interests. Neither is it in the United Kingdom interests, for this reason.
I should like the attention of the noble and learned Lord, as I should like a specific answer, or at least his reaction, to the next point that I shall make. I have argued that it is not in Scotland's interests to remove the power from the Secretary of State. It is not in the interests of the United Kingdom because the way in which it is being done is likely to bring about the conflict that I have suggested is there in the Bill from the very first. The conflict arises for this reason. As it says in paragraph 7 of Schedule 11, we shall take these powers from the Secretary of State and give them to the Scottish Secretary or to the Assembly. But we shall retain with the Secretary of State the great financial power. He retains the power as to what finances will be allocated to the Assembly in carrying out the devolved powers. I know this will happen. I have seen it in local government. I have seen it in national Government.
The people who must implement the powers that we are devolving to them will want to do things which will he more expensive than the normal finance allocated to them will allow. We shall once again be in a position where the representatives of the Scottish Assembly will present themselves as people who want to do good, generous things for Scotland, and it will be Westminster Parliament, or the Secretary of State, who will prevent that happening as they will hold the

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financial strings. I see great danger—quite apart, in terms of administration, of it being a nonsense—in the problems that will flow, even from good administration. There are dangers here that we should not let happen now that my noble friend has been able to draw our attention to them so specifically.
In a word, this is what I am putting to the noble and learned Lord who will reply. Is it not a fact that where one strengthens parts of the Assembly and the Scottish Secretary, to that extent we shall weaken the powers of the Secretary of State? So far as Scotland is concerned, the power may be the same, but it is put in a vehicle which is less likely to produce good results than the one in which it is already.
The second question that I want to put is this: Is it not a fact that the Secretary of State, with whatever connection he retains with the Westminster Government, will be that much less influential in being able to get from the United Kingdom coffers the necessary help that Scotland must have to make this Bill look anything like worth while? Thirdly, is it not obvious that, if we give powers to the Assembly to do things, but give the powers as to what money will be allocated to them to two different people, there is bound to be a conflict? In the context of my argument, the conflict will be between the Assembly in Scotland and Westminster, London. It is there where there will be the beginnings of a confrontation, and the bitterness and conflict of nationalism which I believe to be the fundamental danger behind the whole of this Bill.
I congratulate my noble friend for spelling out these very difficult details so clearly. I hope that when we reach the stage where we can do something about it —the Report Stage or whenever—we shall give some effect to the clear warning that my noble friend has given.
Lord WILSON of LANGSIDE: The Committee is surely profoundly indebted to the noble Lord, Lord Drumalbyn, for raising this matter. I very much doubt whether I am adequately informed to express any concluded view or, indeed, any even half-formed view as to the impact of these provisions on the industrial and economic life of Scotland. However,
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the noble Lord, Lord Drumalbyn, is not inclined to exaggeration. If the noble Lord says that he is far from convinced that these provisions will improve the prospects for the conduct of the economic and industrial strategy of Scotland, then I am profoundly disturbed about their implications. I certainly hope that the Government's answer to the point that he has raised will be convincing.
The Earl of LAUDERDALE: The Committee is indebted to the noble Lord, Lord Drumalbyn, for his homework and his research. In making some observations I should like to apologise for the fact that due to the arrival of some American visitors who rejoice in the name "Lauderdale", of which I am very proud, I shall presently have to except myself from the Committee. However, I shall look forward to reading the reply that is given from the Front Bench.
What has emerged from the speech of the noble Lord, Lord Durmalbyn, is that, on the one hand, the Scottish Development Agency has an enormous range of very disparate activities. There are relationships, of course, with industrial estates and with the powers of the new town corporations. There are also questions concerning financial loans to industry. As regards every one of those there is bound to be, as my noble friend Lord Harmar-Nicholls has said, tension both ways. There will be pressures in the Assembly to push for more and more. On the other hand, there will be a prudent concern for the interests of the United Kingdom as a whole which may say or may need to say, "enough is enough".
Let us consider some of the matters which are, at present, in everyone's mind or which have arisen in recent years. First, what about the struggle to get what is now British Leyland to Scotland? That was achieved, I think we can say, thanks entirely to the Board of Trade. What about the efforts to build up and hack up Chrysler to stay in Scotland when it was tempted to pack up and go? The success that was achieved in keeping Chrysler in Scotland was very largely attributable to the powers of the Secretary of State on the one hand, and the support that he had in the Cabinet on the other.
What about some of the other matters which are arising all the time?—for

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example, the location of industry cannot be further advanced in Scotland without continuous reference to the transport infrastructure. We are all aware of the struggle that has been waged in this House and in another place to get the A.9 to Inverness "dualled". At last it is largely on the way. I merely quote that as an example, but it became urgent thanks to the development of the oilfields. It was under the pressure for the development of the oilfields that we managed to get it pushed ahead.
There will be other developments in the future which cannot now be foreseen. They too w ill make requirements as regards infrastructure development. When that is needed for Scotland and for Britain, will it simply come out of a block grant or will it be something extra? I cite that as a general theoretical example. But what about the development of Hunterston? That has been under discussion, negotiation, promotion and, one might say dispromotion, for nearly 15 years. It has got so far. There is now an ore terminal. Who will decide? Who will take the final, important, critical decisions about the allocation of one or more small steel plants? We know that the Assembly will press one way, but do we know that, within the context of the British economy as a whole, it will be prudent to site there what many of us want in our hearts, and what the Assembly will press for? Will it be prudent in terms of our relations with the European Community? I do not know; none of us knows. But there will be tension as regards that matter.
What about refinery problems? At present there is already tension between the United Kingdom Government and the European Community about policy in regard to oil refineries. There is an endeavour by the Commission making a recommendation to the Council, that there should be a virtual ban on further refinery development. The United Kingdom Government are taking the opposite view and saying, "The more refinery development there is in Britain, the better. We want to take crude oil ashore, refine it and export it as white products". There are issues of policy here, whichever way one comes down, that are not simply decided. If the Assembly pushes one way for more refineries—as I am sure it will—and, shall we say, the Secretary of State, supporting
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a United Kingdom approach, pulls the other way, there will be tension, confusion, argument, bitterness, misunderstanding and controversy.
What about pipelines, the gas distribution network and the conversion of the gas pipelines later on to the diffusion of power by oil? All sorts of problems can arise. Finally, what about the allocation of finance, whether to infrastructure or to individual companies? The Assembly will press one way and the Secretary of State, with necessary regard for the balance of the United Kingdom economy as a whole, will press the other way. They will pull in opposite directions. It is that tension, that dichotomy, that pulling both ways that causes some of us to fear, along with my noble friends Lord Drumalbyn and Lord Harmar-Nicholls, that the end result will damage Scotland and, indeed, Britain.
The Earl of PERTH: We owe a debt to the noble Lord, Lord Drumalbyn, for drawing attention to what is referred to under all the powers in relation to the Scottish Development Agency. I do not think that we should be surprised. We have already had a debate on this subject earlier when we discussed Clause 38. In fact, as I read it, what is in the Schedule that we are discussing at present gives effect to Clause 38.
When we discussed Clause 38 I thought that the trouble was that the Scottish Secretary was not being given enough power. Indeed, I introduced a new clause for the purpose of giving him more power in relation to the Scottish Development Agency and other bodies. However, that is, in a sense, water over the dam, but not entirely, because, as I read it, what we are discussing now gives in more detail what arose under Clause 38. For my part I was upset that we could not get more financial power for the Scottish Secretary or the First Secretary, whoever it might be.
The clause states:
"The Secretary of State shall with the approval of the Treasury prepare guidelines"
within which the Scottish Secretary will act. All the various matters are set out. The Scottish Secretary has no financial powers except under the Secretary of State and with the approval of the Treasury.

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However, it is important, when considering this matter, to realise that, in a sense, we have discussed it all before and that this is merely explaining in detail—and it is important that it should be explained in detail—what is laid down in Clause 38.
The noble Earl, Lord Lauderdale, referred to such things as pipelines. They are not related to the Scottish Development Agency at all. They come under quite different powers. However, the noble Earl was illustrating a point and perhaps we should not take it all too seriously. As I say, the noble Lord, Lord Drumalbyn, has done us a service, but much of the debate so far has been a rehash of the debate on Clause 38. If I had to make a comment it would be that at that time I felt—as did other noble Lords—that, rather than going too far, we had not gone far enough for the Assembly or for the Scottish Secretary.
Lord HARMAR-NICHOLLS: Before the noble Earl sits down perhaps I could comment on his contributions from the Cross-Benches, because, with his interests, they are very important. He is saying that if the Assembly had the financial powers and if the conflict referred to was not present it would be better. However, it is this Bill that we are examining and in the Bill they do not have the financial powers. Much as he would like them to have the powers to make it worth while, as they do not have them, should not his testimony be that this is a bad thing?— because the conflict remains in the absence of what he wants.
Lord DRUMALBYN: Surely the guidelines are the limitations on the exercise of the powers about which we have been talking. This time we have been talking about the powers; last time we were talking only about the limitations on the exercise of the powers.
The Earl of PERTH: In reply to the noble Lord, Lord Harmar-Nicholls, I would certainly rather have more financial power for the Assembly or for the Scottish Secretary of State. If we cannot get that, then what we have is at least something and, with goodwill on both sides, it should not he a cause—
Lord HARMAR-NICHOLLS: Ah!
The Earl of PERTH: The noble Lord says "Ah". My hope is that there will be goodwill; but we shall try to make it work in what is a very important area—in fact, the most important area in the Bill. I take the point made by the noble Lord, Lord Drumalbyn, and I pay tribute to the work he has done. All the same, I think that the one and the other have to be related and cannot each be taken on their own.
7.2 p.m.
Lord KIRKHILL: I know that the noble Lord, Lord Drumalbyn, will not mind me saying to him that, unlike a number of other noble Lords who have recently spoken, I cannot exactly say that I thank him for his most excellent dissertation. I can agree with him that from my point of view this Part of the Bill appears to be somewhat obscurantist, although I would not disagree with what seemed to me to be a most reasonable historical analysis by the noble Lord. However, I—like the noble Earl, Lord Perth—in my innocence thought that we had been over much of this ground already. Nevertheless, it might be helpful if I summarised the position again.
These Amendments have to be considered against all the provisions in the Bill affecting the functions and powers of the Scottish Development Agency. The SDA carries out functions which straddle important areas of policy which are to be devolved—as I indicated in an earlier debate, land use and environment are prime examples—and other important areas which are to be reserved. In that same debate I suggested that the encouragement of industrial development was worthy of your Lordships' attention in this regard; and the reservation of employment and industrial democracy is obvious. Therefore, it is necessary for the Bill to make special arrangements in relation to the Agency to secure a proper balance between devolved and reserved interests in its future control.
The Government originally proposed in Cmnd. 6348 Our Changing Democracy, that the Agency might be responsible separately to them and to the Scottish Administration in relation to the two different types of matters—with appointment of Members divided. As noble Lords

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will be aware, this arrangement was widely criticised as being impractical. On reflection the Government concluded that it was feasible to provide for executive and not legislative devolution of the industrial functions of the Agency, and at the same time to protect the reserved interest by guidelines prepared by the Secretary of State.
Schedule 11—and I shall return to the point of paragraph 7—accordingly devolves executively powers in relation to the industrial activities of the Agency. As we have said before, the environmental functions are fully devolved by Schedule 10. That is not to suggest that the Scottish Executive will be involved any more than the Government are now in the day-to-day running of the Agency, but it will take over existing powers, such as that of direction under Section 4 of the Scottish Development Agency Act. The Assembly will not be able to legislate to add to or alter these powers—and I shall speak again on paragraph 7, but these powers relate to paragraph 7 of Group D; this contrasts with the position regarding the environmental activities of the Agency, for which the entries in Schedule 10 on pages 66 and 67 of the Bill rightly give the Assembly full legislative competence. The Scottish Executive will not be able to exercise its industrial powers in a way which would dislocate the overall regional and industrial policy of the Government. I said that in a previous debate and I reiterate the point this evening. The Secretary of State is required to prepare guidelines on such matters under Clause 38(1) of the Bill. We gave adequate discussion to that point in our previous debate.
To paraphrase the noble Lord, Lord Harmar-Nicholls, from that point he went on to speak of the unity of the United Kingdom, and I quite see the point he made. I would respond by saying that the industrial interests of the Government are additionally protected by the outright reservation of two important matters, to which I would direct the noble Lord's attention. First, all powers in relation to the Agency's duty to promote industrial democracy are reserved—I referred to that a few moments ago. Secondly, and very importantly, the power under Section 5 of the Scottish Development Agency Act to direct the Agency to exercise powers
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under Section 7 of the Industry Act 1972 —that is the question of selective financial assistance—is entirely reserved. Had the noble Earl, Lord Lauderdale, been present, I would have made a further specific reference to direct his attention to that. So also is the related power under Section 20 of the Scottish Development Agency Act to appoint the Scottish Industrial Development Advisory Board.
The Government believe that the combination of Executive-only devolution guidelines and specific reservations strikes the right balance between devolved and reserved interests. They are confident that it is a more practical and sensible solution than the much criticised splitting of the two sides, to which I earlier referred and to which I would now refer by suggesting that that would be the effective outcome of the proposed Amendments if they are carried. Indeed, the effect of the Amendments would be to involve the Secretary of State directly in many matters of purely local concern within Scotland, and in the Government's view would greatly complicate the demarcation between his responsibilities and those of the Scottish Administration. However, as many noble Lords have said, the noble Lord, Lord Drumalbyn, has—by very careful scrutiny of the Schedule—pointed in detail to a number of specific questions to which, in so far as it is possible, I should like to reply. I may not take these in exactly the order in which they were placed before your Lordships' Committee, but I hope that in replying to them as best I judge the reply will at least be coherent.
The noble Lord, Lord Drumalbyn, mentioned the question of the appointment of members of the Agency. Section 1 of the Scottish Development Agency Act 1975 provides for the setting up of the Scottish Development Agency. There is common ground on that. In particular, it specifies the size of the membership and provides that the chairman and other members of the Agency shall be appointed by the Secretary of State. That is at Section 1(2) and (3), but under Paragraph 7(i) of Group D of Schedule 11, the powers—that is the ministerial powers —of Section 1 of the Scottish Development Agency Act 1975 are to be executively devolved. Therefore, the appointing power of the Secretary of State will pass to the Scottish Secretary.

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The noble Lord, Lord Drumalbyn, particularly directed the Committee's attention to Paragraph 7. He posed a question in regard to its implementation as to how long the economic unity of the United Kingdom can obtain in these situations. As I have explained, this group in Paragraph 7 devolves executively powers in relation to the industrial activities of the Agency. The industrial activities of the Agency are the functions conferred on the Agency by Section 2(2)(a), (b) and (c) of the Scottish Development Agency Act 1975. That is on Page 2 of the Act.
May I take an example. Section 12 of the Scottish Development Agency Act 1975 determines the financial duties of the Agency. Subsection (1) reads:
"After consultation with the Agency, the Secretary of State may, with the approval of the Treasury, determine the financial duties of the Agency, and different determinations may be made in relation to different functions and activities of the Agency".
If it is of help to the noble Lord, Lord Drumalbyn, and indeed other noble Lords, Clause 22 will, when implemented, mean that the Secretary of State becomes the Scottish Secretary, and the Treasury becomes the Scottish Secretary. I think that that is perhaps a useful explanation of an example that I have just given.
Lord DRUMALBYN: Is not that rather peculiar? In that case the Scottish Secretary would be consulting himself if the Treasury became the Scottish Secretary.
Lord KIRKHILL: It is an example of the real authority which the devolved Administration is to have for those aspects which stand to be devolved before them. Paragraph 7(vii) devolves this power executively in so far as it relates to the industrial investment functions of the Scottish Development Agency. Your Lordships might also note that Part III of Schedule 10 devolves these powers both executively and legislatively in relation to the environmental powers of the Scottish Development Agency. I have drawn your Lordships' attention to this in the past. There are, therefore, two entries: one in Schedule 11 and one in Schedule 10, and they complement each other as they relate to the functions and powers of the Scottish Development Agency.
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The question of the financing of the activity of the Agency has been spoken about tonight. It might help if I were to point out to your Lordships that all the work of the Scottish Development Agency under the 1975 Act, apart from those functions which are reserved and to which I have made reference, will be financed from the Scottish Consolidated Fund post-devolution. The Scottish Administration will therefore decide how much is to be pumped into the activities of the Scottish Development Agency. Also the Scottish Secretary and the Scottish Assembly will become responsible for the limits set in Section 13(2) of the 1975 Act. But any borrowing by the Agency will come within the total borrowing limits set by order by the Secretary of State under Clause 48 of the Scotland Bill.
I should also add in response to the additional point made on that by the noble Lord, Lord Drumalbyn, that, in dealings with the SDA on the Agency's industrial investment activities, the Scottish Secretary will need to keep within the guidelines set down by the Secretary of State under Clause 38. That is a point that the noble Lord, Lord Harmar-Nicholls might care to notice.
At present, the financial activities of the Scottish Development Agency are as Lord Drumalbyn explained, monitored —in my view, most carefully and thoroughly—by the Scottish Economic Planning Department on behalf of the Secretary of State for Scotland. The accounts of the SDA come under the scrutiny of the Exchequer and audit department and the Comptroller and Auditor General. Again the noble Lord, Lord Drumalbyn, drew your Lordships' attention to this. If, however, overspending by the Scottish Development Agency seems to be in prospect, this would be identified at an early stage and the necessary corrective action taken. If necessary this might take the form of a supplementary estimate by the Secretary of State for the work of the SDA.
Post-devolution, the arrangements will remain exactly the same with, in my view, the same checks and balances and degree of control. The Agency will operate exactly as before. The Secretary of State will he replaced by the Scottish Secretary; Parliament will be replaced by the Scottish Assembly; the Comptroller and Auditor

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General will be replaced by the Scottish Comptroller and Auditor General; and the Exchequer and Audit Department will be replaced by the staff serving the Scottish Comptroller and Auditor General. The solutions to any difficulties which might arise in the future will be exactly the same as the solutions to similar problems should they arise at the present time. The SDA cannot spend money it has not got, either before devolution or post-devolution.
I should say in passing to both the noble Lord, Lord Drumalbyn, and the noble Earl, Lord Lauderdale—who regrettably is no longer with us—that it is important to keep the industrial function of the Scottish Development Agency in reasonable proportion. It will not be the only influence and spearhead of industrial development on the Scottish scene. It is not that at the moment; it will not be that in the future. It is important to bear in mind that it is an important industrial arm of Government policy in Scotland, but it is by no means the only point of influence.
The noble Lord, Lord Drumalbyn, posed the question as to the position regarding pay and pensions of the staff of the Scottish Development Agency. I can say to the noble Lord that the Scottish Secretary will become wholly responsible for the pay and pensions of the staff of the SDA. The powers of the Secretary of State to administer the civil service convert to the Scottish Secretary under Clause 22, as I was suggesting earlier.
In his wide-ranging remarks, Lord Drumalbyn posed the question: what will happen if the SDA infringes the guidelines? The Scottish Secretary, or, in practice, I suppose the staff of the Scottish Secretary, will monitor the activities of the Scottish Development Agency in exactly the same way as the Secretary of State—in fact, it is the Scottish Economic Planning Department—does at the moment. Any infringements would be identified and the necessary corrective action, as now—I can assure the Committee that that is the case—would be taken. There is also open to the Secretary of State the reserve power under Clause 36.
Lord HARMAR-NICHOLLS: The noble Lord says that "as now" matters
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would be vetted and controlled. Is not the difference that whereas now there is only one person responsible, the Secretary of State, and through him Westminster, if this measure becomes an Act we will have in future an elected Assembly's spokesman differing with whoever it may be? It is this conflict between two elected Assemblies and their representatives which is the danger which the noble Lord seems to overlook.
Lord KIRKHILL: I quite understand that that is the main theme and part of the criticism of this part of the Bill, which the noble Lord has expressed not only this evening but on previous occasions. I have been attempting to explain that the SDA has a totally devolved environmental function. It has, as it were, under the Scottish Executive, a function so far as industrial activity is concerned; it has a totally reserved function so far as the attraction, for example, of new industry is concerned. It is obvious that the noble Lord can argue his position, and I do not dispute that it is a point of view. It is not, however, one with which I am in sympathy because I believe that the new system will work. I believe it matches the political reality of the Scottish scene today, and while the noble Lord may not be with me on that, I do not think I can add to what I have said.
Lord Drumalbyn also asked me how I might envisage consultations proceeding with the Treasury. I touched on this subject in my earlier remarks, by pointing out that consent will not be needed after devolution. Once the power is transferred to the Scottish Secretary, he does not have to get Treasury consent; and I think the noble Lord on that point asked me whether the Scottish Secretary would be consulting with himself.
Lord DRUMALBYN: What I really want to know is how it appears in legislation. All the powers that appear in legislation prescribe that the Treasury's consent shall be obtained.
Lord KIRKHILL: My advice is that Clause 22 will have that effect in operation. I believe I have covered all the major points raised in what has been a wide-ranging discussion of the guidelines. The noble Earl, Lord Lauderdale, asked a

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specific question, and I can respond by saying that the Scottish Development Agency does not concern itself with a situation like Chrysler, which of course was operated on a United Kingdom scale; most of us would know that and it is probably self-evident. I hope that my reply, if it may not have convinced, may at least have the merit of having been as detailed as I could have made it.
7.25 p.m.
Lord DRUMALBYN: I am grateful to the noble Lord, Lord Kirkhill, for making the effort to give such a detailed reply; I hope he has not overstrained himself. He is right in saying that I am not wholly convinced about the situation. We must face the fact that in half of its functions the SDA will be supervised by the Scottish Secretary, who will be under the control of the Assembly, but the Assembly will have devolved powers. On the other half of the activities —and they will be roughly that—on industrial development subjects, the Scottish Secretary will be under the control of the Assembly in quite a different sense. He will be subject to guidelines from the Secretary of State but, apart from that, he will be in a very peculiar position indeed, and what the noble Lord has not made out is that he will be performing any real function at all on the industrial development side.
I have been arguing that this has been doing very well under the Secretary of State, and I see no reason why it should be delegated to the Scottish Secretary. It must impair the economic unity of the United Kingdom, and that is the difference of view between us. I do not intend to press the Amendment to a Division because Amendments to clauses which we have already passed would be necessary to make sense of this one. However, I propose to look carefully at the whole situation to see what has to be done at the next stage. Meanwhile, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 270 to 277 not moved.]
Schedule 11 agreed to.
Lord WALLACE of COSLANY: I beg to move that the House do now resume.
House resumed.

SCOTLAND BILL
House again in Committee.
Clause 60 [Reservations]:
Lord HARMAR-NICHOLLS Lord HARMAR-NICHOLLS moved Amendment No. 316:
Page 29, line 32, at end insert ("and neither the Assembly nor the Executive shall have any role, formal or informal, in the determination of British foreign policy").
The noble Lord said: During the adjournment I have been wondering how it is that the Government have been able to have such an easy passage against the very formidable arguments that have been put up on the various Amendments, and I suddenly discovered the reason. In this Chamber we have something on the Government Front Bench that they do not have in the other place. Here we have a team who are able to show honest innocence and charm, and that is a secret weapon that will get people over all sorts of problems.
In a way, I think that my Amendment and the arguments that go with it follow on from the last Amendment which was moved and then withdrawn by my noble friend. It will be within the recollection of some of your Lordships that I tried to
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save time by talking on this Amendment along with my Amendment No. 307 which was tied up with a group of Amendments put by my noble friend Lord Drumalbyn. But he objected to that, and so I half presented my argument on this, and then ceased because it was not the general wish. However, I think it was perhaps tentatively agreed that I would use the No. 307 arguments on this Amendment, No. 316. They do run together and it might be helpful to do that, particularly as there is no question of my even contemplating pressing it to a vote. However, I should like to see the reaction to what I think are fundamental points behind it, so that one can consider what one might do when we come to the Report stage, when I hope there will be a fair amount of voting. I believe that we have a duty to send this Bill back to another place with enough "hooks" on it to hang some of their hats, which the guillotine prevented them from doing before.
I think this particular Amendment, No. 316, comes very much into that category. The objective here is not simply to keep the Assembly in its place. All my arguments so far have been intended to let it be known what the Assembly is going to be and what its powers are, so as to avoid any risk of conflict later. Not only that, but my main purpose in moving this Amendment is to protect the position and rights of Scotland's Members of Parliament; that is to say, the Members who sit in the Westminster Parliament and whose role is likely to be very much damaged by this Bill.
My Amendment No. 307 provided that no powers, rights or duties, whether legislative, executive or representative, shall be exercisable by a Scottish Secretary or by any Members of the Assembly if they relate to matters which are not devolved or which are properly the province of a Minister of the Crown or of Members of Parliament representing Scottish constituencies. That was on the general proposition, which I think is sound, that Members of Parliament are very jealous of their rights, and rightly so, and they are very jealous of their prerogatives, and rightly so. Those of your Lordships who have served in another place will know that on the occasions when someone has raised perhaps even a very small matter which relates to somebody else's constituency the sitting Member

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in question has resented very much what he considers to be an instrusion into his territory and his powers.
There is a real risk that you will have a fighting conflict between elected Members of the Assembly and elected Members of the Westminster Parliament. I am myself convinced that if this Bill ever becomes an Act the intrusion that is being allowed—shown very forcibly in the last group of Amendments we discussed—will bring about a reaction from the Westminster Members of Parliament in a way that may well injure the working of Parliament so far as it affects Scotland.
The Amendment I am now moving proposes, at the end of line 32, on page 29, insertion of the following words:
"and neither the Assembly nor the Executive shall have any rúle, formal or informal, in the determination of British foreign policy".
When I tried to present part of this argument earlier in regard to another Amendment the noble and learned Lord said—and here I shall paraphrase him—that he had not such grandiose ideas as I had as to what this Bill would do. Obviously what he meant was: "The very idea! How ridiculous to talk about foreign policy coming within the powers of this delegated Assembly". On the face of it, it is rediculous. I hope it is ridiculous, and I hope we can amend this Bill in order to demonstrate that it is ridiculous; but as it stands at the minute, and according to the mouths of some of the senior Ministers of the Government, room is left for doubt.
I find that the Foreign Secretary, a colleague of the noble and learned Lord the Lord Chancellor, in the Cabinet with a rank which I suppose is in the top four in terms of importance and priority, speaking in Edinburgh on 25th November 1977, said something to the effect that the Assembly should be consulted, as an Assembly, in respect of the United Kingdom's relations with the European Community. I would commend your Lordships to column 324 of Hansard of another place, on 29th November last, where the honourable Member for West Lothian, Tam Dalyell, reacted in a fighting way. Indeed, it is on the record that he spoke to the effect that when he heard the report of this speech by the Foreign Secretary, in which he was
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virtually saying that the Assembly would have power to go direct to Europe and have something to do with influencing our policy vis à vis the Brussels decisions, he almost cut himself while shaving. He was very disturbed about that, and the column that I have mentioned will show your Lordships how he reacted.
With such words as that on the record from someone as important as the Foreign Secretary, I believe it is important that in this Bill we should spell out beyond any possible doubt that there can be no opportunity for the Assembly to go direct to Europe or to deal with any of the other matters that come under the wide umbrella of foreign affairs. When one looks at my Amendment alongside that speech made by the Foreign Secretary, one sees that it is not quite so ridiculous or scaremongering as it might appear, standing on its own on the Marshalled List. However, a broader principle is at stake here.
As I said, Amendment No. 307, which I take along with this, takes care of the residual rights of Members of Parliament as regards their perks and the formulation of foreign policy or on matters of State. We have not seen that it is expressly excluded from the Bill as it now stands. I have no doubt that the noble Lord who will reply will say that Clause 60(2) as it now stands is enough. The words are:
"To the extent that a matter involves the conduct of relations with any country outside the United Kingdom it is not a devolved matter".
He would say that you could not have clearer words; but there is a little doubt about whether you could have clearer words. The corresponding clause, Clause 29, in the Wales Bill, which we shall have before us in the near future, going through a rigmarole rather similar to this, reads—
"The Assembly shall not in the exercise of its functions conduct relations with any country outside the United Kingdom".
Different words. If they are intended to mean what I have no doubt I shall be told that they are intended to mean, that it excludes any possibility, why different words? I shall have to ask the noble and learned Lord to explain the distinction between the two.
It ought to be noted that in the Scotland and Wales Bill, the first Bill to be brought forward, the words used were the same as we have in this Bill now. Why were

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different words brought out? When one is arguing the necessity for spelling this out to make quite clear that there is no question of their infringing the rights of the Government in the case of foreign affairs and of Members of Parliament in relation to all other matters, one ought to remember —and I paraphrase, as I gather one cannot quote them—the words of John Mackintosh when he was speaking on 11th January. As a Scots spokesman, and one who has a lot of sympathy with devolution, he was saying something to the effect that the whole future of the Secretary of State is in a most unsatisfactory position. He said that his guess was that if this Assembly is in any way successful and develops political power and punch of its own—which I have no doubt it will—whoever is the First Secretary will be called, and will call himself, Prime Minister of Scotland.
These are the words of the Scottish Member, and I am inclined to agree with him. He said that he will want to get the powers that go with this sort of thing. He said that similarly Sir Brian Faulkner in Northern Ireland had claimed that he ought to have such powers when he was the Chief Executive and looked upon there and reported in newspapers as Prime Minister. All sorts of influences went with that title which no doubt were not intended but which developed and which actually existed.
One can well imagine that if there is a crucial shut-down of a major industrial plant in Scotland, the Secretary of State, acting as a sort of Prime Minister, will not be satisfied with wanting to make his case to the Secretary of State for Scotland. At any rate, as I said on the last group of Amendments, the powers of the Secretary of State for Scotland are being reduced so much by the various clauses which we have already passed in this Bill that he is going to be much of a eunuch when compared with his situation today.
One can see that the Assembly, which would claim that it was an elected Assembly, with the Secretary of the Assembly deemed to be almost the Prime Minister, will want to by-pass all the normal things. He will so claim, and he will have a good case in the eyes of the ordinary people of Scotland who would be concerned if this major industrial plant was shut down. I do not think you will
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find that the Scottish Secretary will walk over the street to the Secretary of State; he will be making his way to No. 10, and the crutch that he will have with him from the elected Assembly will eventually mean that it will garner all sorts of powers which I believe will interfere with the relationship which Members of Parliament in Westminster have always had, and ought to have, if we are to have the sort of Government which is free from the conflicts which nationalism brings with it.
If the Assembly is allowed to go to Brussels, as the Foreign Secretary said he could envisage, why, when it is having some problem over agriculture in Scotland, will it not want to go direct to the Minister of Agriculture in Westminter, again bypassing the Secretary of State? If it has views as to where the nuclear plants are going to be, there again it will find itself taking on the powers of a Government which perhaps are not intended in this Bill, but where the wording is so loose that, bearing in mind the realities of the situation, this will grow up.
There is another example that clearly demonstrates that the Government's acceptance of the Scottish Administration, as we envisage it from the words in this Bill, may interfere with British foreign affairs, certainly informally, because we have Mr. John Smith, the Minister of State at the Scottish Office, when he was answering John Mackintosh on 11th January in another place, saying this at col. 1727:
"If we devolved agriculture, the Minister of Agriculture would be representing the Scottish Assembly's interests when matters were discussed in the EEC. He might take with him a representative from the Scottish Administration, but that would be on a grace and favour basis rather than because the Scottish Administration had a right to be represented,".
But Members of this House were not horn yesterday. We know from experience that what becomes a practice very soon becomes a right, and this grace and favour accompanying a Minister would very soon, with the punch that the elected Assembly gives it, mean that it was taking it on, or if it was not allowed to take it on, the very fact that you were refusing it the right to do things which by practice had become almost a right, would be adding to the conflict which I expressed when this Bill first came before your Lordships' House.
In any case if an Assembly representative is to be taken to Brussels for agricultural talks, why cannot he be taken for defence talks? Why are the representatives not going to be taken to Strasbourg where the political talks go on? They can argue that politics in Strasbourg affect us. Why cannot they be taken to Luxembourg when the Coal Community questions are being discussed? Scotland has a great interest in coal. Once it is admitted that they may be taken to Luxembourg because of agriculture, the door is being opened for it to come much within the remit that is included in my Amendment.
However much your Lordships may have smiled at what seems to be the size of my Amendment in relation to what the Bill intended, when it is examined and when you put alongside it the words used by the Foreign Secretary and the words used by the Secretary of State for the Scottish Office; when you put alongside that your own experience in politics, where you see that a thing which starts as grace and favour develops into a right and becomes accepted, and bearing in mind that these things are not dealt with smoothly, that the conflict because of nationalism that can be built up behind them is so immense, you may realise how vital it is that we do not put on one side this sort of Amendment. We should give some thought to it with a view to writing into the Bill before it becomes an Act something that will prevent this happening without causing acrimony to those who may well be refused the power. So I should like to hear the noble and learned Lord's reaction.
I suppose that my argument is addressed just as much to my noble friends on the Opposition Front Bench as it is to the Government, because I have not seen any sign that they recognise the risk behind a possible extension of the Assembly's powers. So my appeal to them, when they are considering which of the Amendments will be submitted, voted upon and, I hope, carried, in order to give the other place a chance of having another look at them, is that the kind of argument that I have used and the kind of subject that I have chosen should commend themselves to them.
We know that our decision will make this Bill an Act. We know that the most
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we can do is to make suggestions and to give time to another place to do something about them. I believe that on this topic the elected Chamber at the other end of the corridor ought to give a considered view before we allow a semi-open cheque which carries so much danger to go through. I beg to move.
8.51 p.m.
Lord MACKIE of BENSHIE: In spite of the fact that there are important and serious Amendments waiting to be discussed, I feel that I must say something about this incredible extension of the concerns of the noble Lord, Lord Harmar-Nicholls. The Amendment itself is quite impossible. If you are to exclude all informal interest in foreign affairs, you will need to have control over the thoughts and dreams of the Assembly, which will be a little difficult to apply. I should like to treat the Amendment, and the fears of the noble Lord, Lord Harmar-Nicholls, seriously because he is a kind of embodiment of the doubts which many people in England have about this Bill. He extends them too far, but his doubts are very real and they are felt by a great many people who have not thought about this subject as much as some others.
It is perfectly true that, as soon as you provide an Assembly for Scotland, you provide a focus for Scottish interest in a great many matters outside those which are devolved. There is no question at all in my mind that, from this rather muddled Bill, we shall progress to some form of federal system which will be logical and reasonable, although I do not say that the whole of this Bill is logical and reasonable. But it is a necessity that we should try, in a British kind of way, to start the devolution process. The noble Lord's feelings are natural in someone who believes deeply in the unity of the kingdom, and who perhaps does not have enough knowledge of the feelings of the Scots—I do not say that in any derogatory manner at all—about this matter.
The best example that we have before us is Northern Ireland. I am not prigging —I hope that your Lordships understand that word—the noble Lord, Lord O'Neill, to speak. But that example is before us and he is here, and I hope that your Lordships will hear him speak. He will have to do so after that. But it is a fact that there

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we had a focus in a country of high feeling, which is very conscious of its own identity, and which seemed to operate—as I have said many times during this Committee stage—in a very competent manner in the field for which it had legislative and executive responsibility. Only the noble Lord can say how their proper feelings about foreign policy should be expressed.
Nobody can stop an Assembly, or any individual, from thinking about foreign policy in relation to the country as a whole. What we must eventually arrive at is a federal system which will properly give expression to that, and that is what I hope will come out of this Bill. Many people on the Conservative Benches have said to me—
Lord ROBBINS: I wonder whether the noble Lord can inform the House of any federal system where the states debate foreign affairs.
Lord MACKIE of BENSHIE: I do not quite understand why the noble Lord should put that question, but I do not know of any. But the federal system is how the states, and the electors therefrom, take an interest in foreign affairs. I have no doubt that members of states' legislatures will have an interest, but it will be expressed through the federal Members of Parliament. What I am saying is that you cannot stop this interest by writing anything into the Bill. The only way of stopping it is by giving expression to people's interests in a proper federal system, and that is what we shall eventually work towards in our British way.
I have great respect for the noble Lord—although I must say that, at times, I could hear him less—and for his long experience and his genuine feelings. But what I say to him is that his fears are exaggerated, and that there is no question but that the majority of Scots—quite apart from how they feel—appreciate with their heads that the United Kingdom must be one.
Lord WILSON of LANGSIDE: The noble Lord, Lord Mackie of Benshie, expressed a reluctance to speak for too long, because of the important and serious Amendments which follow this one. I share his reluctance, but I am bound to say that I regard this Amendment as
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one of equal importance and seriousness. The noble Lord, Lord Mackie of Benshie, referred rather patronisingly—if I may say so, with no unkindness or asperity—to the noble Lord, Lord Harmar-Nicholls, as expressing some of the doubts that people in England, these lesser breeds, feel about this subject. I can assure your Lordships that the noble Lord, Lord Harmar-Nicholls, shares the doubts and reservations of many people in Scotland. I, too, live in the countryside and I know of many people, not only industrialists, who are seriously and gravely concerned about the implications of this measure. Their concern is very widespread indeed. So let no one imagine that the noble Lord, Lord Mackie of Benshie, is well founded in suggesting that the people of Scotland who are aware of the implications of this measure are wholeheartedly behind it.
We come back to the same point every time. The noble Lord, Lord Mackie of Benshie, referred to this rather muddled Bill. That is not the way to make successful Constitutions. How often do we need to say this? In some ways—again, I say this without asperity of language or unkindness—the noble Lord, Lord Mackie of Benshie, reminds me of the other Alice—not Lewis Carroll's Alice, but the Alice of the late Mr. Noel Coward, who was always "at it again". He referred, again, to what he acknowledges to be a muddled Bill, and he does not seem to appreciate that that is the worst possible way of going about the successful rearrangement of the conduct of our constitutional affairs. All the experts are agreed about this. I am not one always to accept the views of experts, but in this context I think that they are right.
The noble Lord, Lord Harmar-Nicholls, referred to the concern which he felt, and which lay behind this Amendment, for the feelings of the Members of the other place. This is rather diverting, because they do not express any great concern for our place in the state of the nation. Nevertheless, it shows a proper Christian charity that he should feel that we ought to have this in mind. But having said that, this is a very serious point which will undoubtedly cause great conflict.
The only point about the Amendment that I regret is that defence was not also included. It has been admitted in this

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Committee that committees may be formed by the Assembly to discuss these matters. I cannot see how that will contribute to the better government of this country in relation to foreign affairs or in relation to the nation's defence. I support this Amendment.
9 p.m.
Lord O'NEILL of the MAINE: I had no intention of taking part in this little debate, but from time to time people speak with great knowledge about Northern Ireland. My noble friend and colleague Lord Drumalbyn was telling your Lordships' Committee the other night about the annual wrangles which take place with the Treasury over Northern Ireland finance and, as somebody who had been Minister of Finance for seven years in Northern Ireland, I had to intervene to tell him that this is completely and utterly untrue. It was just something which came into my noble friend's speech.
Tonight we have been told about Sir Brian Faulkner. There was, of course, nobody who was called Sir Brian Faulkner. It was Mr. Faulkner who was Prime Minister of Northern Ireland for one year. After Stormont was dissolved by the Conservative Government, an Assembly came into existence later on, and Mr. Faulkner became the Chief Executive. While Mr. Faulkner certainly may have had ambitions to become Prime Minister again, he loyally observed his new title as Chief Executive of the Assembly. This is one of the reasons why during the Second Reading of the Bill I suggested that the term "Chief Executive" would be more appropriate for the head of the new Executive and Assembly in Edinburgh.
However that may be, might I repeat once again what I said earlier when we were discussing the terrible possibility which the noble and learned Law Lords were discussing—a discussion in which I was quite unfit to take part—that the Assembly might pass a measure which was ultra vires. I mentioned at the time that no Bill was ever introduced into the Northern Ireland Cabinet unless it had a certificate from the Northern Ireland Attorney-General to say that it was intra vires. In just the same way, I am in no doubt whatsoever that if a Member of the Scottish Assembly puts down a
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measure with regard to foreign affairs or defence, the head clerk, or whatever he may be called in the Assembly, will say, "You can't discuss defence ". In my 25 years as a Member of the Northern Ireland Parliament I never remember defence or foreign affairs being discussed. In a sense, they would be ultra vires. Therefore, I beseech noble Lords to believe that some of the fears which have been expressed during the passage of this Bill are not realities.
We have been discussing also the great powers and the great success of the Secretary of State for Scotland. I remember that at one time there was a movement among my Back Benchers to have a Secretary of State for Northern Ireland. This was at the time when the Parliament of Northern Ireland existed. I always maintained, and I always told them, that it was far better that we should be represented in the British Cabinet by the Home Secretary, who is, after all, one of the most senior Members of the Cabinet, rather than that we should have a Secretary of State for Northern Ireland who would be junior to and less important than the Secretary of State for Scotland. In just the same way, if one looks at Canada one finds that Ontario does not have a Secretary of State for Ontario in the Ottawa Parliament. The idea that Scotland can be represented only by a Secretary of State in London and that this is the way to run Scotland is not, if one looks at federal systems around the world, really necessary.
I believe that a Scottish Assembly will work. I believe also that it will stick to the rules—I am sure Scottish people will support that statement—and that the Assembly will work. Rather than that there should be this niggling away all the time, if only this Parliament could be generous and set up the Assembly in a spirit of generosity, I believe that it would be repaid one hundredfold. I say this in all sincerity. I did not vote yesterday on the question of forestry because Northern Ireland forestry has been absolutely magnificent; it has been superior to anything in the rest of the United Kingdom. However, generosity is what should be exercised, for I believe that it would be repaid one hundredfold.
Lord WILSON of LANGSIDE: I acknowledge the great wisdom of every-

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thing that the noble Lord has said in relation to Northern Ireland. However, I wonder whether he would acknowledge that the political make-up of Stormont is a little different from that which at one stage, at any rate, might have been anticipated for the Royal High School under the Calton Hill in Edinburgh, where it might be more difficult to persuade people that it would not be in the national interest to discuss the Polaris base at Holy Loch? The noble Lord will perhaps take my point. I imagine that it would be easier to suppress in Stormont any discussion of the circumstance that at one time at least Northern Ireland was the north-west flank of NATO. The constitution of the Scottish Assembly might be such as to raise questions which would be against the public interest. They can be discussed in the Westminster Parliament and they are discussed here, certainly, but I do not believe that they should he discussed in the Scottish Assembly.
Lord O'NEILL of the MAINE: While I accept to some extent the noble and learned Lord's remarks, may I return to what I said earlier: that nothing will defuse the Scottish National Party more than the generosity of Westminster.
Lord CAMPBELL of CROY: May I say something on that point? I think that we are indebted to my noble friend Lord O'Neill of the Maine for the advice he has given us about how things work in Northern Ireland. Certainly the Kilbrandon Commission spelled out the arrangements which were made in the early 1920s for Northern Ireland and then described what happened, because the situation changed. Those arrangements were made on the basis that Northern Ireland was going to remain as prosperous —as it was at that time—as any other part of the United Kingdom. Unfortunately, that position changed. However, the Kilbrandon Commission pointed out that the people of Northern Ireland were determined to make sure that the union worked.
It was and still is quite clear that the principal political aim of the majority of people in the Assembly, or whatever body may in the future take the place of the Northern Ireland Parliament, is to remain part of the United Kingdom. Therefore, they are determined to make sure that the
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arrangements work. I can absolutely understand, without him telling me, that when my noble friend Lord O'Neill of the Maine was Minister for Finance he would have had no difficulty at all in dealing with Ministers in London, because he was absolutely determined, like his colleagues, to make sure that the arrangements worked, even though they were quite different from the original arrangements which had been laid down in the early 1920s.
What we have to be certain about in making provisions in this Bill is that we ensure that a Party does not take power in Scotland, or get a majority in the Assembly there, which is dedicated to becoming an independent Scotland and is absolutely determined in every statement it makes that it wants to go a hundred times further than anything in this Bill. So what my noble friend Lord O'Neill of the Maine has said about constitutional arrangements and how they can work is absolutely right and the advice that he has given is exceedingly good.
However, the situation is quite different, as I think the noble and learned Lord, Lord Wilson of Langside, was pointing out, because, in Scotland, my own home, my livelihood, my work, are in an area which is represented by four constituencies whose Members of Parliament come from a Party which is dedicated to complete independence and nothing short of that. It is the possibility of the majority of them taking over the Assembly which means that we must make sure that the rules are understood and that things are properly divided if the Assembly is to be brought into existence, because there will be people who are trying to go ultra vires. If they get advice from an official that something is ultra vires they will just tear it up because they do not want the arrangement to work.
I am not saying that this will happen; I believe that 80 per cent. of the people in Scotland now do not want independence, but that does not mean that about 30 per cent. of the population in Scotland may not vote and produce a majority of Nationalists (especially if there is not proportional representation) in the new Assembly. So I would say to my noble friend Lord O'Neill that we are grateful for his advice on the arrangements and how they have worked but I should like

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to warn those who do not live in Scotland, right among what is to us a very serious problem, that we are having to deal with something quite different.
Lord MACKIE of BENSHIE: Before the noble Lord sits down has he not missed the point of the advice given by the noble Lord, Lord O'Neill of the Maine ? It was that if you are generous you will ensure that the 30 per cent. will not come to power and that the 70 to 80 per cent. of the Scots people who have said that they want to keep in the United Kingdom but that they want to have an Assembly will see that the 30 per cent. do not come to power.
Lord CAMPBELL of CROY: I did not deal with that point but I am glad that the noble Lord, Lord Mackie of Benshie, has raised it because this is where I disagree with my noble friend. I do not think that in the situation of Scotland one can just say, "Oh yes, we will make life very difficult for the forestry industry, we will make it impossible for the transport industry in Britain, we will make life very difficult for the doctors because they do not know what their pay will be—we shall do all that in order to be generous; we will give away a whole lot of other things and we shall devolve agriculture and things which the Government do not want to devolve now because this will defuse the SNP situation ". I should be delighted if I could be confident about that but I cannot because I do not think it will have that effect at all. If it had any effect it would be a minimal one.
Lord MONSON: I support this Amendment which I believe to be an extremely important one, and for additional reasons to those put forward by the noble Lord, Lord Harmar-Nicholls. We must not forget that, in contrast to what prevails in, say, the GLC and similar bodies, the proceedings of the Assembly, if it comes into being, will be absolutely privileged, under the terms of Clause 15. Following on from what the noble Lord, Lord Campbell of Croy, has been saying, this factor of privilege could be an extremely dangerous weapon in the hands of anyone seeking, for whatever reason, the break-up of the United Kingdom. One only has to look at the naming of Colonel B by no
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fewer than four Members of Parliament in the House of Commons the other day to realise the sort of thing that might happen if the Assembly were given any foreign policy role. If the noble Lord, Lord Harmar-Nicholls, decides to press his Amendment to a Division, whether tonight or at a later stage, I shall certainly follow him into the Division Lobby.
9.13 p.m.
The LORD CHANCELLOR: May I say at the outset that it is the view of the Government that the determination and the formulation of British foreign policy is a matter for Her Majesty's Government and, in so far as the purpose of the noble Lord, Lord Harmar-Nicholls, was to protect and ensure that proposition, my view is that his Amendment is wholly unnecessary. I repeat, this Amendment is unnecessary to maintain the purpose that he and I apparently have in common. The formulation of foreign policy is, as is also the case with defence policy, reserved by silence in the provisions of the Bill, but, for the avoidance of doubt, a reservation is expressly included in Clause 60(2) of the Bill—namely,
"To the extent that a matter involves the conduct of relations with any country outside the United Kingdom it is not a devolved matter".
It is quite true that in terms of words, and really words only, there is a difference between that provision and the provision in the Wales Bill, but the difference flows solely from the fact that the Scottish provisions deal with devolved matters, the Welsh Bill with functions, and that flows in turn from the granting of legislative competence to the Scottish Assembly but not to that of Wales. But the effect and meaning of both formulations are exactly the same.
Indeed, the Amendment is rather worse than unnecessary, although its construction is not entirely clear. The reference to an informal role could be held to debar and prohibit consultation between the United Kingdom and the Scottish Administration about, for example, a draft EEC Directive which might impinge in whole or in part on a devolved matter. This, of course, would be an absurd restriction. I am sure the noble Lord agrees with that—and I see he nods his head; but preventing that could well be the result of his Amendment.

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The Scottish Administration are, under the terms of the Bill, to be responsible for the implementation of Community and other international obligations related to devolved matters, with the United Kingdom Government certainly retaining concurrent powers. Really it would make no sense to introduce a statutory bar on the United Kingdom discussing such matters with the devolved Administration. Indeed the effect of the proposal to debar an informal role in the determination of foreign policy could be just that, and could indeed be a recipe not for control and co-operation but for conflict.
The noble Lord, Lord Harmar-Nicholls, and I were together in another place for a great many years, and I fully understand the importance of maintaining the role of Members of Parliament, here as well as in another place. But I do not believe that the provisions of the Bill will in any way prevent, pre-empt, inhibit Members of Parliament from not only discussing foreign policy but bringing their influence and their powers to bear upon policy, upon international relations. The mere fact that an aspect of foreign relations—and it would principally arise in the field of European Community relations—may have been discussed with the Scottish Executive and debated in the Assembly in no way, in my submission, would take away from the role and functions of Westminster. Indeed, it would seem to me to be highly unlikely that the Scottish Assembly will wish to debate foreign policy, except in the narrow field relating to implementation of obligations. But it is a democratic Assembly, and it will certainly need to discuss and to consider, as I have said, the implementation of Community and other international obligations in relation to devolved matters, because it will be competent to implement those obligations.
The noble Lord, Lord Harmar-Nicholls, expressed concern as to the envisaged relationship between the devolved Administration and the organs of the European Community in Brussels. But I do not think I can emphasise too much that participation in meetings of the Commission and of the Council of Ministers, where the decisions will be made, is a matter for Member States, and so far as this country is concerned will be a matter for the United Kingdom Government. Accordingly, without wishing to prolong
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this discussion further, I respectfully agree with the view that was expressed by the noble Lord, Lord O'Neill of the Maine, and the noble Lord, Lord Mackie.
I fear that the noble Lord, Lord Harmar-Nicholls, is really inventing tigers in the pass, creating fears which are without foundation. I respect his concern for the maintenance of the unity of the United Kingdom and the sovereignty of Parliament. This devolution proposal, so far from hindering that, will maintain it. But that is to debate a subject that we have traversed so many times that I do not want to repeat it. In my submission, what is proposed in this Amendment is unnecessary and could indeed be extremely damaging in reasonable relationships between Parliament and the Assembly, and Her Majesty's Government and the Scottish Executive.
9.20 p.m.
Lord HARMAR-NICHOLLS: On the actual wording of my Amendment, I am inclined to agree with the noble and learned Lord the Lord Chancellor. I see the possibility that the word "informal" may well be construed in a way that would preclude sensible consultations on matters that must be discussed. Although I did not have that point in mind, nevertheless I said at the beginning that I did not want to put this to a vote tonight, whatever the response from the Government Front Bench, but that I would take into account what was said. I shall take this matter into account, if, in spite of what the noble and learned Lord the Lord Chancellor has said, we come back to this on Report, as indeed we must. I would want to find other words rather than "informal".
The noble and learned Lord Chancellor did not comment upon the evidence that I produced on the need for something like that. I quoted the Minister of State for the Scottish Office answering officially in another place, when he said that he might take with him to Europe a representative from the Scottish Administration to speak and make a contribution. It could well be that those words from the Minister could mean only that if one takes someone to a negotiation or official assembly, that person is not taken just to sit in the gallery. He is taken to make a contribution because of his expertise that you admit. In this case it would be the expertise from the Assembly. There should be something

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in the Bill to show that that development—a representative to go with the official Westminster spokesman—will take place.
Similarly the Foreign Secretary said in Edinburgh that the Assembly should be consulted as an Assembly. The noble and learned Lord the Lord Chancellor did not say that when he criticised my word "informal". He said if they wanted to consult—something I concede—he would want to share their minds. But would he go to the Assembly, put his case, ask for their response, as an Assembly, before he took whatever line he intended to take ? I do not think that all the ambiguity is in the words of my Amendment.
The LORD CHANCELLOR: As I understand it, what my right honourable and honourable friends in another place were saying was that consultation would take place. That is obviously right. Persons might go with them to Brussels in consultation on questions affecting, for instance, devolved matters. It is perfectly proper that that should be done. There would be nothing irregular in the Scottish Executive having somebody actually in Brussels. Many organisations have just that. Companies and organisations have representatives there for information. However, the actual negotiation, the carrying out and formulation of policy within the EEC is a matter in the sole responsibility and charge of the Government.
Lord HARMAR-NICHOLLS: The noble and learned Lord the Lord Chancellor knows, as I do, that from little acorns mighty oak trees grow. If it is conceded that the Assembly is consulted on these matters which have to do with Europe, which is verging on foreign affairs, the Assembly is being recognised in one field. I gathered that the noble and learned Lord did not want that. When the Minister of State says that not only will he consult them but that they will be taken along with him, that is going a long way, in my experience, towards what may develop. I believe that the preservation of the unity and the recognition of the authority of the Secretary of State as a member of the Cabinet—if indeed after he has had his powers reduced he is still allowed to remain a member of the Cabinet—is where the conflict will come.
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The other evening, when discussing another Amendment, the noble Lord, Lord O'Neill, made a contribution and I said—and I repeat it again—that I believed that my noble friend's contribution was the most dangerous because it was the most effective. He speaks from practical experience and we ought to heed his evidence. However, I echo what my noble friend said so admirably. His evidence was from another age and another time and related to circumstances quite different from those which exist today.
The noble and learned Lord the Lord Chancellor said that I was producing a tiger from the past. My noble friend produced a dove from the past. There is all the difference in the world between a situation where the Party with the overwhelming majority is for religious and other reasons, likely to remain in overwhelming majority and wants to retain its unity with the United Kingdom, and a situation where opinion is more evenly divided, and where there are people who want to break away and who will only use this Bill as a stepping stone in order to break away.
My noble friend spoke about the tranquil arrangements but when the crunch came things became difficult. It did not go on. People walked out of Stormont and at the end of the day we saw the end of it. I do not believe that the noble and learned Lord the Lord Chancellor has given an answer which will mean that he has heard the last of this for evermore. Certainly, however, he has heard the last of it tonight so far as I am concerned, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 60 agreed to.
Clause 61 agreed to.
Schedule 12 [Legal proceedings involving devolution issues].
9.28 p.m.
Viscount COLVILLE of CULROSS Viscount COLVILLE of CULROSS moved Amendment No. 181:
Page 71, line 27, after ("Act") insert ("or any instrument made by a Scottish Secretary under any Act of Parliament or Scottish Assembly Act").
The noble Viscount said: We now move back across the frontier to the land

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of lawyers. I hope that my noble friend Lord O'Neill, who I understand has just left, will not think that this is just a niggle. We are, of course, now discussing the situation where, after Scottish legislation or Scottish executive action has taken place, the question arises in the courts whether that legislation or action was intra vires.
The whole of Schedule 12 deals with the methods of reaching a decision on a question of that sort. My Amendment—I hope that it is not too disingenuous—draws attention to what appears to me to be a lacuna in the provisions. Let us go back for a moment to the provisions under which we have powers in the United Kingdom Government to override what is done in Edinburgh, that is to say Clauses 35 to 37. We have powers in Clause 35 to override Scottish Assembly Bills; in Clause 36 to override executive action or to insist upon executive action which has been omitted to be taken; and in Clause 37 to override subordinate legislation.
In the preliminary part of Schedule 12 there is a definition of the devolution issue to which the whole of the rest of the Schedule relates, which includes the Scottish Assembly Act or any provision of it and also the exercise of the executive power by a Scottish Secretary. However, nothing whatever is said about the subordinate legislation. I am bound to say that I wonder why. I wonder why, from whichever quarter I am going to get an answer.
We have no parallel under the existing Constitution because, of course, with the sovereign power of the Westminster Parliament and no written Constitution, there is no way in which anybody can challenge an Act of Parliament. One cannot say that it is ultra vires in the way, for instance, one can in America say that it contravenes the provisions of the Constitution. But certainly one can say that subordinate legislation is ultra vires. Within the last 10 years I can think of two examples—to which perhaps I may return in a moment on another Amendment—when the courts have held that subordinate Instruments were outside the powers of the enabling Act under which the Minister making the subordinate Instrument purported to act; and they have held therefore in, I think, both cases,
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that the Instrument was not legitimately able to levy money from the citizen in the way that the Minister and the body levying the money had hoped.
I should have thought that similar justiciable issues could easily have arisen on Scottish subordinate legislation. It could easily be found not only that they might be outside the powers of the enabling Act—that is to say, this Bill—hut also that internally they may be ultra vires. There may be two sources of the ultra vires: first, this Bill and, secondly, perhaps a Scottish Act itself. But there is no provision in the Bill for dealing with them.
If the noble and learned Lord, Lord McCluskey, would answer what is probably not a matter of very great difficulty, I should be very grateful. However, it occurs to me that if in Schedule 12 we provide that the courts may deal with ultra vires in terms of a Scottish Assembly Act and in terms of executive action by the Scottish Secretary, but not in terms of subordinate legislation, are we not by implication saying that this question cannot be raised in the courts at all? The noble and learned Lord shakes his head. If not, why on earth do we not simply say so in some simple phraseology, which I am sure is not the same as mine, but which could easily be included in the Bill? This is just as likely to he an area of conflict with the powers that arise under this Bill. I should have thought that we would have been very wise to spell it out in the sort of terms that I have attempted to set out in Amendment No. 181, and in No. 182, which is consequential. I beg to move.
9.33 p.m.
Lord McCLUSKEY: In the Government's view this Amendment and Amendment No. 182 are misconceived. Both Amendments are unnecessary in so far as they relate to devolution issues as regards Instruments, because Instruments are covered by paragraph 1(b) of Part I of Schedule 12. The Amendments are also misconceived because there is no need to have such an exercise of powers by a Scottish Secretary decided as a devolution issue. The existing law is perfectly capable of dealing with subordinate Instruments made by a Scottish Secretary which are not within his powers.

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I was asked: Are we not, by implication—that is to say, by silence—saying that somehow the courts are excluded from dealing with an excess of internal powers? I really do not follow that argument at all. If a Scottish Secretary makes an order purporting to exercise powers which have been conferred upon him by an Act of the Assembly and, in fact, the exercise of those powers is attacked as ultra vires that Act of the Assembly, then there can be no difficulty in the courts looking at that matter. But I do not think that we need to make specific provision for that.
So when a Scottish Secretary makes a subordinate Instrument under an Act of Parliament the question that will arise is whether the Instrument is ultra vires of the Act of Parliament in the normal way, as if the Instrument had been made by the Secretary of State. The powers conferred by an Act of Parliament will not be different because of devolution. The questions to be asked in relation to them will still be the same, and the courts are long accustomed to deciding these questions.
Similarly when a Scottish Secretary makes a subordinate Instrument by virtue of a power conferred by a Scottish Assembly Act, as I have just indicated, the question to be asked will be whether the Instrument is ultra vires of the Assembly Act. Again, in order to have this question answered, there is no need to have it treated as a devolution issue as that issue is defined in Schedule 12. In other words, neither question requires the court to determine the meaning and ambit of "devolved matter" in Schedules 10 or 11 to this Bill. Therefore, neither question raises a true devolution issue, properly so called. For these reasons, I would invite the noble Viscount to reconsider the matter and not to press this and the related Amendment, No. 182.
The Earl of SELKIRK: Why should not the Scottish Secretary exceed his powers under Schedule 11? I cannot see what could stop him from doing so. Conceivably he might do so. The noble and learned Lord pushed this aside as though it did not matter, but it seems possible that he could do so.
Lord McCLUSKEY: A devolution issue properly arises when the court has
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to construe what is within the vires of the Scotland Act. If, under Schedule 11 and one of the Statutes listed there—the Education (Scotland) Act, or the Highlands and Islands Development (Scotland) Act, or something of that sort—the Scottish Secretary purports to exercise powers, then the question that arises is, has he properly exercised the powers conferred upon him by the Education (Scotland) Act; has he properly exercised the powers conferred upon him by the Highlands and Islands Development (Scotland) Act?
These are not devolution issues. They do not touch on the question of the construction of the devolution statute. That is the distinction. When we talk about a devolution issue, we are talking about what powers are conferred, and what competence is conferred by this statute; not by one of the other statutes which appear in Schedule 11.
The Earl of SELKIRK: In point of fact, the powers which the Scottish Secretary gets under Schedule 11 are a devolution issue. That is a perfectly clear statement in Clause 59.
"In relation to the powers and duties of a Scottish Secretary, a devolved matter is—

(b) any matter with respect to which powers within the Groups in Schedule 11 to this Act are exercisable".

It is a devolution issue, and it could well then be exceeded in its use. That seems to me to be a justiciable matter which could well come before the courts. I think this is one of the issues that my noble friend is raising.
9.38 p.m.
Viscount COLVILLE of CULROSS: I hesitate to take issue with the noble and learned Lord because he seems so certain about this. The difficulty about this Bill, as I come to consider it, is that there does not seem to be any way in which one can be quite certain how things are going to work out. I entirely follow that if the issue is whether the subordinate Instrument made under the Scottish Assembly Act turns out to be ultra vires, the Scottish courts will of course have no difficulty in dealing with it under existing rules and practice that they are very familiar with. I do not think it is so simple if the Scottish Assembly Act in itself appears to be perfectly all right and, within the

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terms of this Bill not to have been ultra vires, though the way in which it has been interpreted by the Scottish Secretary goes beyond the way in which the Act, as it originally appeared to be, was put on the Statute Book.
I think it could happen that, although the Act appears to be right, the subordinate Instrument is taken further than the Act intended. In those circumstances, is the citizen supposed to impugn the Act under which the Instrument has been made, as well as the Instrument?—because that is what he would have to do if the noble and learned Lord is right. Or is he supposed just to impugn the Instrument and, if so, is the Schedule, as it stands, adequate to deal with it?
There is yet another possibility. As I understand it—and the noble and learned Lord will correct me if I am wrong—some of the matters that are being devolved are powers to make subordinate instruments under existing United Kingdom statutes. There is no question about those statutes being ultra vires. There is no question about their being ultra vires even as regards Scotland, because it is only bits of them that will be devolved, and they will therefore be exercisable by the Scottish Secretary in so far as they relate to Scotland. One cannot attack the statute in those circumstances. All one can do is say that, so far as the Scottish Secretary has gone in making subordinate Instruments under that United Kingdom statute, he has gone outside the powers given in the Bill.
The noble and learned Lord says that that is covered by paragraph 1(b). Very well, but why need we leave a doubt? Why cannot we refer to the Instruments? One can look at the Bill as a pattern—noble and learned Lords on the Cross-Benches will immediately tell me if I am wrong—and if one is in doubt one is allowed to look at other parts of the Bill to see whether the argument one is putting forward fits into the pattern. In the rest of the Bill, the Government provide for three separate matters—for Acts, for executive actions and for subordinate Instruments—yet in this schedule they provide for only two of them. Why cannot the draftsman spell this out? What would be the harm in doing so ? The noble and learned Lord and I are trying to achieve the same thing, but he insists on
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making it obscure when my Amendment or something like it would make it clear. Is that an unreasonable thing to ask the noble and learned Lord to look at again?
Lord McCLUSKEY: In relation to the second point raised by the noble Viscount and the wording of paragraph 1(b), when we are talking about the exercise of a power, there I should have thought it was plain that it includes the exercise of a power to make a subordinate Instrument which the Scottish Secretary is competent to make, and therefore there is no dubiety about it. It is already plain and, despite the noble Viscount appealing to the noble and learned Lords on the Cross-Benches, I should have thought that was reasonably evident.
In relation to the first matter he raised, either the question is one of the competence of the Assembly to pass its own Act, in which case it is a devolution issue that is so under paragraph 1(a)—or, alternatively, it is a question whether the Scottish Secretary has power within the terms of the measure which has been passed by the Assembly.—
Viscount COLVILLE of CULROSS: No.
Lord McCLUSKEY:—in which event it is a question of a kind with which the courts are well accustomed to dealing.
Viscount COLVILLE of CULROSS: Unless I am wrong, there is a third point; he can make subordinate legislation under United Kingdom legislation.
Lord McCLUSKEY: I was coming to that. If he makes subordinate legislation under a United Kingdom Statute of the kinds listed in Schedule II—as I sought to make plain when I was answering the noble Earl, Lord Selkirk—there is no difference between the exercise by a Scottish Secretary of powers which he claims to have under a United Kingdom Act of Parliament and the exercise by a Secretary of State or other Minister of powers which he claims to have under such an Act of Parliament. That is an ordinary matter; it is not a devolution issue. It is an ordinary vires matter, and it is the kind of matter with which the courts are accustomed to dealing in the ordinary way.

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We do not need to create, as we are doing in Schedule 12, a special system, a special routing, as it were, for dealing with problems which relate to devolution issues, being issues arising out of the competence conferred by this Statute. When I talk about the "competence conferred by this Statute ", the question which is raised by a devolution issue is this: What is the true meaning of the Scotland Act in this context ? The question which arises when the Scottish Secretary purports to exercise powers which have been conferred upon him under a United Kingdom Statute is this: What is the true construction of that United Kingdom Statute?
Lord ROBBINS: May I ask a simple-minded and perhaps idiotic question? What if the Scottish Secretary, in pursuance of powers conferred on him by the clause we were discussing before dinner, seeks, outside the guidelines which he has been given, to issue a bond for a long-term loan? He is permitted to run an overdraft under Clause 46, but supposing he seeks to raise money by issuing a long-term loan? Clearly that is contrary to the spirit of the measure. But what are the sanctions which apply to him in that case?
Lord McCLUSKEY: I am sorry; I do not follow the reference by the noble Lord, Lord Robbins, to guidelines in this context in relation to the clause that we were discussing before dinner.
Lord ROBBINS: I will not go into details about what we were discussing before dinner. Let us suppose that a financial operation of the kind that I have been describing is indulged in by the Scottish Secretary, and this is outside the guidelines which have been furnished. What sanctions apply?
Lord McCLUSKEY: If the noble Lord will direct me to the clause containing the reference to the guidelines which he has in mind, perhaps I can attempt to answer that question. I am afraid that at the moment I do not understand the question.
A noble Lord: Clause 38.
Lord McCLUSKEY: But Clause 38 concerns the preparation of guidelines by the Secretary of State, as to the exercise
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by a Scottish Secretary of powers under the Scottish Development Agency Act, or matters of that kind.
Lord FRASER of TULLYBELTON: I am afraid that I have not taken the opportunity of considering this Amendment before now, but having listened to the noble Viscount, Lord Colville of Culross, I am impressed by his argument to the extent that it seems to me by no means clear that there is not a need for the Amendment. I believe that it merits a little further consideration. I am not sure that it can be brushed aside quite so quickly as the noble and learned Lord has done.
Viscount COLVILLE of CULROSS: I am very grateful to the noble and learned Lord. I do not want to prolong this matter, but I should like to try just once more with the noble and learned Lord, Lord McCluskey. He has had a very long and very hard-working day, and I may not have made myself clear. May I try to take an example. There must be legislation under Group E of Schedule 11 which enables somebody to do something about effluent. There is no doubt that within the total terms of the United Kingdom Statute a Statutory Instrument could be made which dealt with effluent in rivers. Nobody could complain that that was ultra vires the United Kingdom Statute. That is the first stage.
A Scottish Secretary using his Schedule 11 powers makes a subordinate Instrument which in terms of the United Kingdom Statute is totally intra vires, but he applies it by mistake to the English side of the Tweed as well as to the Scottish side. An argument arises as to whether that is within his powers under Schedule 11. There is nothing wrong with the basic powers. He has not infringed the United Kingdom Statute. The question is whether, within the terminology of the Scotland Bill, he has gone too far in impinging upon the English side of the river.
That is the devolution issue to which I am drawing attention. That is a matter which could arise in the courts. I think that the noble and learned Lord must conceive that this kind of thing could happen. Perhaps he would indicate that

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he would consider this point again. It is not a frivolous matter, but one which I genuinely believe ought to be considered, and I am grateful for the support that I have received from the Cross Benches.
Lord McCLUSKEY: I am sorry to have to say something more on this. I shall certainly consider what has been said. In relation to that particular example, I certainly have in mind Clause 20 subsections (3) and (11) as they stand at present, which restrict the Scottish
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Secretary to the exercise of powers in, or as regards, Scotland.
Viscount COLVILLE of CULROSS: That is exactly the point—the citizen argues that he has not. Therefore, the Instrument is ultra vires and he wants to challenge it in the courts. It is a devolved matter. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendment No. 182 not moved.]
9.50 p.m.
Viscount DILHORNE Viscount DILHORNE moved Amendment No. 183:
Page 71, line 35, at end insert ("or when a devolution issue falling within sub-paragraph (a) above has been decided by the Judicial Committee on a reference under section 19 or on an appeal.").
The noble and learned Viscount said: It was, I think, exactly three weeks ago when we discussed, and had a fairly lively debate on—
The Earl of LAUDERDALE: Hear, hear!
Viscount DILHORNE: I do not know what that means: whether it is hoped that it will be lively again tonight or that we shall have a more peaceful time.
The Earl of LAUDERDALE: For the entertainment.
Viscount DILHORNE: I cannot promise any entertainment tonight for my part, but I have no doubt that the noble and learned Lord the Lord Chancellor will make his contribution.
The LORD CHANCELLOR: In very good entertaining style.
Viscount DILHORNE: At any rate, what we were discussing then was the effect of a decision of the Judicial Committee on a reference under Clause 19. It seems a very long time ago, and the Committee has been considering a wide variety of subjects since then, so I hope I shall be forgiven if I take a few moments in reminding the Committee of the course of that discussion. The noble Earl, Lord Mansfield, had moved an Amendment to provide that a decision of the Judicial Committee of the Privy Council on a reference should not bind any court in any subsequent proceedings. At the time we discussed that Amendment we also discussed an Amendment in the names of myself and of my noble and learned friend Lord Diplock, to precisely the opposite effect; namely, that a decision of the Judicial Committee on a reference should not be challengeable in any subsequent legal proceedings. At the end of that discussion both Amendments were
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withdrawn, in the hope that the Government would think again about what was said and also to give us further time for reflection.
As this Bill stands, if on a reference the Judicial Committee decides that a Bill, or a provision in it. which has been referred to the Judicial Committee is ultra vires, that Bill cannot then be submitted for the Royal Assent. So both Amendments were concerned with the position which would arise if the Judicial Committee, on a reference, decided that the Bill submitted, or the particular provision submitted, was intra vires. In the course of that discussion it emerged quite clearly that some of my noble and learned friends thought that the Amendment which I had tabled went too wide. There are some, I know, who do not think it did; but those who thought it went too wide thought that it might have this effect: A reference was made of a Bill as being ultra vires on a particular ground; the Judicial Committee decided that it was not ultra vires on that ground; and so it received the Royal Assent. They thought, if I understand their views correctly, that it would be wrong, that decision having been arrived at on that ground, to shut out any subsequent challenge of the validity of that Bill on some other ground.
Viscount COLVILLE of CULROSS: Hear, hear!
Viscount DILHORNE: The noble Viscount, Lord Colville, agrees that that is putting the position quite accurately, though I was unable to refer to any observations of his in the course of the debate on that Amendment. I am grateful to him, but I am putting it that way, I think and I hope, rightly. I think there was force in those views. Now we are on Schedule 12, and Schedule 12 defines with great precision what exactly is a devolution issue.
The Amendment I am moving, to paragraph 2 of that Schedule, has this object. It is to ensure that a decision of the Judicial Committee on a particular issue referred to it shall not be challenged in any subsequent litigation. It is much narrower than the Amendment that we considered before. It means that the

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decision on the particular question that the Judicial Committee has considered and decided shall be final and not challengeable in any subsequent litigation. It may be that the wording of this Amendment is open to criticism. I should not be in the least surprised at that. Indeed, I have to admit that I put in the words at the end:
"or on an appeal",
and I cannot remember for one moment now why I did so. So that I should be very content to move this Amendent without those words. I have often tried to draft Amendments to the satisfaction of Parliamentary Counsel. I have seldom succeeded; and, really, I do not try very hard now. I am perfectly happy to be told that this Amendment is not satisfactory in form and could be better drafted. I should be grateful for the help of Parliamentary Counsel.
Let there be no mistake about it! All that this Amendment seeks to do is to ensure that the question, and only the question, actually decided by the Judicial Committee shall not be challengeable again. As the Bill stands, one can have this position. The Judicial Committee decides a particular question referred to it, and says that that is not a ground for saying that this provision is ultra vires. The Bill gets the Royal Assent. Later—and it may be years later—some litigant, despite the decision of the Judicial Committee on that particular question, puts forward the argument that that decision of the Judicial Committee on that particular ground was wrong—and he can do so. He may be able to persuade some court or tribunal in the land—it is not impossible—to say that the Judicial Committee was wrong.
Then what happens? There can be an appeal up through the courts, ultimately coming to this House. That will take some time. During all that time, there will be uncertainty because of two conflicting decisions: the decision of the Judicial Committee on this particular point on a reference, and a decision of some other court. It may come, ultimately, after the lapse of a long time, to this House and, under paragraph 23 of the Schedule, what can happen then? This House can refer the very same question which the Judicial Committee decided on a reference, perhaps two or three years before, or it
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may be longer, back to the Judicial Committee, which has to decide that very same question again.
Is that not a nonsense? But that is what this Bill provides as it now stands. And this Amendment is directed to preventing that from happening. It is to ensure not that anyone will be prevented from challenging the vires of a Bill or a provision on any ground not considered by the Judicial Committee, but to prevent the very same point which has been decided from being raised again, with the possibility that it will ultimately, after a long time, come back to the very same body which decided it on the reference.
I am sorry to disappoint the noble Earl, Lord Lauderdale, but I think that on this occasion all the noble and learned Lords who sit on these Benches are in agreement. I hope so. At any rate, I am confident of having the agreement of my noble and learned friend Lord Fraser of Tullybelton because, on the last debate that we had—if I may quote his words with him sitting beside me—he said that he agreed:
"that if the Judicial Committee at the pre-enactment stage has decided that a particular provision is intra vires, then there is much to be said for the view that that must be settled once and for all; because it is difficult to see a useful purpose in allowing people to re-open that normally fairly narrow issue."
Whatever may be the defect in the wording of this Amendment, it is intended to do just that—to prevent a particular issue, a particular question, considered and decided by the Judicial Committee on a reference, from being raised again. There are some, I think, who feel that does not go far enough. The Amendment we discussed three weeks ago went further and some of my noble friends, despite what was said on that occasion, still think it should go further. But speaking for myself, if the Government were prepared to accept this Amendment, which at least would make this part of the Bill more sensible, I should be content.
I shall wait with interest to see what the noble and learned Lord the Lord Chancellor has to say with regard to this. I find it difficult to visualise what cogent arguments he can produce in defence of the present measure, but before deciding what course subsequently to take I will, of course, await his answer. I beg to move.
10.2 p.m.
Viscount COLVILLE of CULROSS: May I just say from this side of the Committee the reason why the noble and learned Viscount, Lord Dilhorne, is unable to quote me on this subject is that unfortunately I was not there at the time. But he did in fact very accurately express what I think we on this side thought about it, and now that he has explained this Amendment I am wholly content with it. Indeed, I should have thought that his words "or on an appeal" were useful because they appear to me to take into account the case where, under one of the subsequent provisions of this Schedule —for instance, under paragraph 22—there is an appeal to the Judicial Committee of the Privy Council against the decision of a subordinate court upon a devolution issue; the decision of the Privy Council on that matter, having been raised on an appeal to it, should equally be binding and should not be questioned anywhere else again. Indeed, I have another Amendment down to that effect.
Viscount DILHORNE: If I might interrupt the noble Viscount, that would be so if subsequent Amendments which are tabled in my name and in those of my noble and learned friends to replace the appellate tribunal of the Judicial Committee by the House of Lords are not accepted. But if those Amendments are accepted, the words "or on an appeal" can only cause confusion.
Viscount COLVILLE of CULROSS: Yes; that I entirely agree with, but I thought that if we took these things one by one there was merit in the words "on an appeal". As the noble and learned Viscount has now explained it, we have a situation where a Scottish Assembly Bill as a whole which has been passed, on the issues that were argued before the Judicial Committee on that occasion as being intra vires, can subsequently still be questioned on some other detailed point which arises in subsequent legislation and which was never considered by the Judicial Committee at the pre-Assent stage. If that is what the words mean, they seem to me to be wholly satisfactory and certainly would avoid double litigation on the same point. I am not entirely sure that it is wholly
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clear, if I may with very great respect say so—at least, it certainly was not to me when I first read it—that that was what was intended. But now that the noble and learned Viscount has explained it, I shall be very happy indeed to support him.
Lord FRASER of TULLYBELTON: As my name was mentioned by my noble and learned friend, I think it is right I should say that I was one of those who thought his original Amendment went too wide. As I understand it now, I think I agree with him on principle. I am not attempting to resile from what I said three weeks ago but my reaction is, subject to this, still a slight doubt. I think this Amendment would require to be very much more carefully drafted than it has been so far. The anxiety in my mind is this. Supposing that the issue referred to the Privy Council at a pre-enactment stage were simply to be: "Is this Bill, as a whole, valid?" I think it could be under Section 19. I would not accept that as precluding shutting out further litigation which in a sense would be contrary to that decision. If, as I said before, it was a fairly narrow issue, as it usually would be on a remit, then I would accept the position as my noble and learned friend has said, but it would need to be defined in such a way as to shut out that sort of wide general remit. Subject to that, I agree with it.
The LORD CHANCELLOR: This matter was canvassed and discussed at an earlier stage of our deliberations, and on that occasion I undertook on behalf of the Government, in the light of the debate that we had on Clause 19, to consider whether decisions of the Judicial Committee that an Assembly Bill or any specified provisions of it is within the legislative competence of the Assembly, should be binding on all courts following enactment of the Assembly Bill. The view seemed to crystalise in the course of the discussion that while there should be objection still, as the noble and learned Lord, Lord Fraser of Tullybelton, has just said, to an adjudication about the vires of a whole Bill being perhaps questionable, in so far as it was thought to make final and binding that decision of the Judicial Committee, opinion seems to be moving very strongly in support of

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the principle which the noble and learned Viscount, Lord Dilhorne, has just adumbrated, that if at any rate the pre-enactment decision of the Judicial Committee was directed to a particular provision in an Assembly enactment, or related to a particular vires issue which it was sought to re-open in subsequent legislation, the earlier decision of the Judicial Committee should be binding.
Having given thought to the discussion, I am now disposed to agree with the two propositions, that the binding quality should not be too wide; on the other hand, it should be sufficient to prevent the absurd duplication of litigation. The difficulty is to define what is to be final and to specify with sufficient drafting particularity what it is that, once decided by the Judicial Committee, should have finality. I assure the noble and learned Lord that we have been giving continous thought to this. I am comforted with the feeling of the noble and learned Lord, Lord Fraser, that at any rate the draft now before us is not perfection and totally convincing to all of us; but, in the light of the undertaking that I have given that I am ad idem with the noble and learned Viscount on the board intention of the matter, and if he agrees to withdraw the Amendment in those circumstances, I hope to satisfy him in due course, and perhaps there may even be consultation between us between now and the subsequent stage.
Lord DIPLOCK: I wonder whether I may suggest to my noble and learned friend the Lord Chancellor that when these consultations take place it may well be that the appropriate place for this Amendment would not be in this particular Schedule but would be in Clause 19. I think in the way that it is drafted at the moment it would apply only to the reference procedure and not to the ordinary procedure by which it might go through the courts.
The Lord CHANCELLOR: I had that exactly in mind when I spoke. I spoke in relation to the debate that we had on Clause 19, and obviously it goes in there and it is not necessary to worry about it in Schedule 12.
Viscount DILHORNE: I tried to disarm criticism, and to protect myself
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from an attack on my drafting, by saying at the start that it was bad. But that has not stopped it being criticised, and I did not really expect to avoid criticism on that account. I am indeed grateful to the noble and learned Lord the Lord Chancellor for what he has said. I recognise that this is not something which is easy to draft. It has to be precise, clear, easily understood and effective, but I think that it can be done. Parliamentary counsel have great skill and, if I can give any help to them in the drafting, I shall do so, but I do not expect it to be wanted. But, in the light of what the noble and learned Lord the Lord Chancellor has said, and with thanks to the noble Viscount, Lord Colville, and my noble friends who have supported this Amendment, I now beg leave to withdraw it.
Amendment, by leave, withdrawn.
10.11 p.m.
Viscount COLVILLE of CULROSS Viscount COLVILLE of CULROSS moved Amendment No. 184:
Page 71, line 35, at end insert—
("(2A) Where it has been determined in any legal proceedings that

(a) any Act or provision of an Act is outwith the legislative competence of the Assembly, or

(b) any instrument is outwith the powers of the Scottish Secretary, or

(c) the Scottish Secretary has exercised or proposed to exercise a power in respect to a matter which is not a devolved matter,

that determination shall not adversely affect or prejudice any person who before the determination has done or omitted to do any act where such action or omission would otherwise have been lawful.").
The noble Viscount said: This is a purely probing Amendment, which follows a discussion in another place on what was, broadly speaking, this topic, which I found very difficult to follow. I should be grateful for an explanation from one or other noble and learned Lord as to how it will work. If I may now revert to the original debate on this Schedule about the devolution issue without quarrelling any more with the noble and learned Lord, Lord McCluskey, let us assume that we may have a situation where an Act, a subordinate Instrument or an executive action can, under the Bill as it is drafted, be found to be ultra vires. The question is, what happens then?
There have been two recent examples of a similar state of affairs in the United Kingdom Legislature. One of them related to an industrial training board levy, and it was held that the subordinate Instrument subjected to the imposition of the levy a wider collection of people than should have been so subjected. The second case was one which I am not sure will be far from the memory of the noble and learned Viscount, Lord Dilhorne, and relates to the general service charge for sewerage under the Water Act. In both of those cases, the vires of the Statutory Instrument came to this House, sitting in its judicial capacity, and it was held that the Statutory Instrument was bad.
The result in the case of the industrial training board was that a new Instrument was laid which redefined the group of people who were required to pay the levy, so as to omit people who might be found to be outside the powers of the Minister to tax in this way. In the second case, a new subordinate Instrument was laid and passed which provided an exemption from most of the general service charge for those properties which were not attached to a sewer. Of course, in the second case there was an added satisfaction to those who had sought to challenge the vires of the Instrument, because they had all their money paid back.
What I really want to know is this. We have a situation here where not only the subordinate Instruments are capable of being found to be ultra vires, but the Acts of Parliament themselves. Very often, it will be the case that, upon a Scottish Act and a Scottish Instrument passing and taking effect, people will alter their position, because they will assume that the Act is the law and that there is nothing wrong with it, so that some time may pass by before the matter is challenged and finally determined in the courts. By that time, people will have been acting on the basis that the Act was correct, only to discover subsequently that they were wrong. The person who was brave enough or wise enough to challenge it would obtain a benefit which, under the law as it stands at the moment, none of the rest would obtain.
It is about the remedies that I should like the noble and learned Lord to speak.
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I suppose that there could be no remedy at all—it would probably be a political decision—and one would get a situation where the loss would fall where it lay and, if there were no change in the law, it would just be a matter of bad luck for those who had suffered. I suppose that it would be possible for the Scottish Assembly or a Scottish Minister to pass amending legislation by a new Statutory Instrument. I also suppose that it would be possible for the United Kingdom Parliament, if it thought that the Scottish Assembly had been acting in a monstrous way in refusing to put right what was a blatant wrong, to take the necessary powers to remedy the matter itself and to override the inaction in Edinburgh. That, I should think, would be an extreme case. However, I should like the noble and learned Lord very briefly to discuss this matter; I believe that it was left in a rather unclear situation in another place. Perhaps it would be an advantage if we could have as definitive a statement as possible about what would happen. I beg to move.
10.15 p.m.
Lord McCLUSKEY: I am asked for a definitive statement and I will endeavour to give one to the Committee, although it will of course be for the Committee to judge. I should say, first, that the Government's expectation is that the provisions regarding pre-Assent scrutiny will prove to be a net with a sufficiently fine mesh to catch the vast majority, if not all, of the measures which may be ultra vires. But we accept that it is at least conceivable that some may slip through. Indeed, if it were not so, we should not need a post-Assent judicial review. Therefore it is common ground that the citizen should have the right to make a post-Assent challenge of the vires of Assembly legislation, just as he has the right at the present time to challenge the vires of subordinate legislation—as indeed was done in the two cases mentioned by the noble Viscount, and there have been others, including Scottish cases.
This is an important point which I want to emphasise. The Assembly will be a creature of Statute and its capacity will be limited by the four corners of the Scotland Act. It will, in principle, be in exactly the same position as a Minister of the Crown who is given powers by Statute. The Assembly's Acts are liable to be struck

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down by the courts if it exceeds its powers, just as are Instruments made by a Minister of the United Kingdom Parliament.
As the noble Viscount has made clear, the Bill is silent about the wider consequences of a successful challenge. There are two reasons for this. First, the possible circumstances with which any express provision will have to cope are quite innumerable, and I believe that no statutory formula such as the one contained in the Amendment could cover them all. Secondly, we believe that the law itself is well accustomed to providing answers to exactly this kind of question.
It will be convenient if I deal separately with civil and criminal law. So far as the civil law is concerned, the proposers of the Amendment wish to ensure, as I read it, that those who have acted or failed to act in a particular manner, on the basis that an Assembly Act was valid will not be adversely affected or prejudiced by any decision that the Assembly Act was ultra vires. This is an unexceptionable aim and one which the existing law, we believe, achieves.
Perhaps it would be best if I were to illustrate this by an example. In preparing to meet this Amendment, I had in mind the discussion which took place in another place, and perhaps it would assist the noble Viscount, the Committee and those in another place if I were to pick up the particular example which was mentioned there. This is the case which Mr.Taylor put in another place to my right honourable and learned friend the Lord Advocate:
"Let us suppose that the Scottish Assembly had altered industrial derating from 50 per cent. to 55 per cent. and that at the time that alteration was not challenged as being ultra vires. It will be understood, of course, that if this were done the industrialists would thereafter pay less in rates and the non-industrial ratepayer would pay correspondingly more. And let us further suppose that for some years the non-industrial ratepayers had been paying the increased rates which had been imposed upon them in consequence of the alteration to industrial derating. What would happen if after some substantial time it was held by the court that the Assembly's alteration of the industrial derating was ultra vires? Would the people who had been paying extra rates be entitled to recover the sums that they had paid, and what would happen to the shortfall that would be thus created?"
We believe that the answer is to be found in two legal principles. The first is the well-established and important fiction that everyone knows the law, including
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what the courts are at some future date going to decide the law to be, or always to have been. So the people who have been paying extra rates should, in strict legal theory, have realised that the derating was illegal, being ultra vires.
The second legal principle is that money paid as a result of an error in the construction of a public general Statute is not recoverable. Anyone who had paid extra rates because of this misconception of the Assembly's powers would not be able to recover the money which he had expended. The application of those principles would therefore, in my submission, adequately protect, from the moment of the decision, the interests of those whom the movers of the Amendment wish to protect, because it should be noted that the Amendment does not require the repayment of money paid under error of law in the past, nor does it seek otherwise to restore in integrum the position of those who have altered their position on the basis of the ultra vires measure. The industrial ratepayers in this example who might otherwise have been obliged to find the missing revenue would not have to do so, and it could not be said that those who had been paying extra rates would be any worse off as a result of the determination. In fact they would be better off because they would not require to continue paying the higher rates, nor could it be said that the decision would adversely affect the industrial firms who had received the benefit of industrial derating.
I will now turn to the connected question, which I think is really the question that the noble Viscount has in mind, that of remedies for what has happened in the past. I think he would agree with me that the Amendment does not seek to solve it. This is the question of trying to restore the position of those who have, prior to the court's determination, received benefits or made payments which would not have been received or made if the court's determination had been made earlier. I can perhaps best illustrate this by referring to a Scottish case of 1959. In 1959 Glasgow Corporation, in a case in which I think the noble and learned Lord, Lord Fraser of Tullybelton, acted as counsel, took the view that they were paying too much purchase tax, and they asked the court of session for a declarator, first, that they were in fact paying too

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much purchase tax and, second, they asked the court to tell the Inland Revenue to pay back the purchase tax which they had, in their view, not been obliged to pay in the first place. The court, in what is I think the leading case in Scotland and the most recent one of its kind, held, first, that the corporation were not bound to pay the purchase tax about which they were complaining but, secondly, they were not entitled to recover the purchase tax which they had already mistakenly paid. The noble Viscount mentioned the two cases which he described briefly, but I do not think that in either of those cases the court ordered any repayment of monies.
Viscount Colville of CULROSS: No.
Lord McCLUSKEY: In the second case money was paid back—and I will come to that—because it is always open, of course, particularly to a public authority, to make repayments ex gratia. But I would invite your Lordships to consider the decision in the case which I have mentioned, reported in the 1959 Session Cases, because off hand one would have said that there could not really be a clearer case for rectifying the position. Here is a Government Department which had been mulcting the taxpayer unjustifiably, and surely it should pay him back what had been unjustly taken from him. That would be the prima facie view, but your Lordships will find that in reading the Opinion of Lord President Clyde, the reasoning there founds upon the great difficulty in successfully unravelling all the transactions which may have taken place and which may be interconnected, one with the other, in some attempt to achieve what might be thought to be a perfect equity.
I would submit to your Lordships that the present law certainly achieves the result which the proposers of the Amendment seek, in the terms of the Amendment. So far as the criminal law is concerned, it is difficult to see how anyone could be adversely affected by a decision that an Assembly Act which created a crime was ultra vires. Thereafter, of course, no one would be prosecuted for breach of the ultra vires measure. But let me turn to consider the position of those who have
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been adversely affected by the operation of the Assembly Act as, for instance, where people have been convicted of offences under an Assembly Act which turns out to be invalid.
In that case the position would be similar to that which occurs quite frequently when some subordinate legislation of the United Kingdom Parliament is found to be invalid and as a result persons are found to have been wrongly convicted. While I cannot say what the Assembly would do, there would be scope for administrative and executive action which might take the form of granting pardons or making ex gratia payments of the kind that were made in the second case brought to our attention by the noble Viscount. The prerogative of mercy is, of course, available; it is in fact a non-devolved matter under Clause 60, and that could be used if it were desirable.
So far as civil cases are concerned, we believe it would be highly dangerous to depart from the well-known and well settled rules which I have outlined above. It would really be quite impossible to work out all the permutations that might result if one attempted to deal with all the various inequities which would be thrown up by an attempt to restore to his previous position everyone who had acted on the faith of a valid Scottish Assembly Act. Noble Lords may well consider that the present law achieves a broadly equitable result and that it would be dangerous to meddle with it.
If I can just draw one analogy in concluding, from time to time the courts have to decide the difficult question of which of two innocent parties should bear the loss caused by the fault of neither of them. This is an analogous type of question, and I believe that this is the kind of matter which is best left to the courts to solve in accordance with principles which they have been applying for many years. It is for these reasons the Bill is silent. I would certainly foresee that if the consequences were such that they could be put right by some form of administrative action, then that kind of action would be considered and taken in a case where that was suitable, particularly, for example, in a case where the beneficiary of some payment which should not have been made, because the measure under which it was made was ultra vires, was a public body.
Viscount COLVILLE of CULROSS: I would think that not only this Committee but anybody else who is interested in the Bill will be very grateful for that explanation. It is something that we have so far waited for in vain in the course of this Bill as regards this particular point, though, if I may say so, it is in line with many other admirable explanations that have come from noble and learned Lords opposite. I do not suppose for one moment I would wish to take it any further. The noble and learned Lord has now clarified some things which I believe have worried a number of people. I would say: "Thank you very much", to the noble and learned Lord, and beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
10.28 p.m.
Viscount COLVILLE of CULROSS Viscount COLVILLE of CULROSS moved Amendment No. 185:
Page 72, line 9, after ("Advocate") insert ("or any person who can show that he would be directly affected if such issue were not determined").
The noble Viscount said: This is a slightly different point. I think it probably raises the same point that my noble friend Lord Selkirk raises in Amendment No. 186, or a very similar point, and it certainly goes also with Amendments Nos. 193 and 197; though 197 is wrongly drafted, it raises a slightly different but connected issue. The Bill at present provides that when a devolution issue arises for determination on the question whether or not it is within the powers of the Act the person who can institute proceedings is the Lord Advocate in Scotland and the Attorney General in England and Wales. It so happens that nobody can do it in Northern Ireland at all; I do not know why, and although Amendment No. 197 is not correctly drafted, the point of it is to discover who is supposed to do it in Northern Ireland and why nobody is provided for in the Bill.
I should have thought that it was probably the case that not only would the Lord Advocate or the Attorney General be allowed to institute proceedings of this sort—I imagine by way of an action for a declarator in Scotland or by way of judicial review in England and Wales —but that anybody who was directly interested or directly affected by the point
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that was ultra vires would also be able to do so. My difficulty is that once again the Bill only provides for the specifically named individual to institute these proceedings, and, as I said, there is no provision for anybody in Northern Ireland to do so.
1 believe that the new rules of the Supreme Court for judicial review in England and Wales would certainly enable a person who was directly interested, rather on the analogy of public nuisance, to have a locus standi to bring an action for judicial review by way of declaration in the High Court. I am afraid that my knowledge of the Acts of Sederunt is not sufficiently good to know whether a similar situation would prevail north of the Border. We also have Northern Ireland.
Could the noble and learned Lord say whether, if there was a situation that did not involve any other course of action, there is no question of damages, for instance, at that stage? The private citizen who is specially interested, in all three parts of the United Kingdom concerned, may himself institute these proceedings in order to get an action for the decision whether or not the matter is ultra vires on its feet. It was for that reason that I put down these Amendments. I am quite sure that he should be able to do so and not have to leave it to the Lord Advocate or the Attorney General. I beg to move.
10.31 p.m.
Lord McCLUSKEY: Perhaps I may address myself particularly to the Amendment which relates to paragraph 4 of Schedule 12, although I realise that there are slightly different issues which arise in relation to the connected Amendments and to the corresponding paragraphs in the other parts of the Schedule.I think that I correctly noted the noble Viscount as saying something to this effect: the Bill provides that the person who can raise proceedings is the Lord Advocate. With respect, I would suggest to him that that is not quite accurate. The whole context of Schedule 12 is that there may be proceedings, and these will be ordinary proceedings. If in the course of the ordinary proceedings a devolution issue, as defined, arises, then certain consequences follow. That is the scheme

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of Schedule 12. Paragraph 4 begins with the words:
"Without prejudice to any power exercisable apart from this paragraph, proceedings for determination of a devolution issue may be instituted by the Lord Advocate and defended by any person who, as a Scottish Secretary…performs functions corresponding to those performed by a Law Officer of the Crown."
In our view these Amendments are unnecessary. It may be that doubts have been raised in the minds of those who put down these Amendments by the inclusion in paragraphs 4, 12 and 19 of Schedule 12 of specific provisions to which I referred, authorising the institution of proceedings for the determination of devolution issues by the Lord Advocate, the Attorney General, and the Attorney General for Northern Ireland respectively. These provisions were considered necessary, having regard to the unique status accorded to devolution issues by the provisions of Schedule 12, to ensure that no possible doubt could arise as to the powers of these Law Officers to act on behalf of the Government, or, in the case of the defender, on behalf of his administration, in bringing the challenge before the courts whether or not they otherwise have title or interest to sue. The same considerations do not however apply in the case of proceedings instituted by any other person. There is no more a restriction on the right of any person to raise proceedings to have a devolution issue determined than there is in relation to any form of vires challenge to subordinate legislation and the like, or indeed any other form of legal proceedings.
It is of course necessary for a person who has instituted proceedings to be able to show that he has a valid interest and a title to do so. If he cannot discharge this duty the court will not entertain his action. In Scotland, proceedings raised without a valid interest being shown would in practice be met by the plea of no title to sue. In England I am advised that there is the need to show locus standi. In the latter connection the right of any person to institute proceedings will of course be more secure where he is able to show that the provision to which his challenge is directed affects him in a particular way and not merely in common with, for example, all other persons, when his locus standi might be affected by the extent to which his challenge raises an
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issue of public interest. That consideration may, however, not be relevant to the same extent in relation to proceedings instituted in Scotland, where it appears likely that proceedings under Schedule 12 of the Bill will, for the most part, arise.
We believe that the Amendments as framed would effectively restrict the right to institute proceedings. As the Bill stands, anyone could institute proceedings if he has a valid interest. But the Amendments provide that the person has to be "directly affected". They would therefore seem to remove the right to sue from the person who has a valid interest but who is only indirectly affected by the devolution issue in question, and that could unduly narrow the scope for instituting proceedings.
The Amendment of the noble Earl, Lord Selkirk, which was mentioned, may be an attempt to go much wider and to enable anyone to institute proceedings whether or not he has a valid interest. If that is the intention then it would seem to be an unnecessary widening of the general provision that unless a person can show that he has a valid interest to institute proceedings the court will not entertain his action.
In summary, I ought simply to say that the proceedings, which form the subject matter of this Schedule, will come before the court when a person can qualify a title to sue or an interest in bringing the action. Paragraph 4 in Part II and the related paragraphs in the other Schedules are simply there to make it quite clear that, even if he cannot otherwise and under the ordinary law, qualify an interest which would give him a right to sue, or, indeed, in the case of the defender, qualify an interest which would give him a right to appear and maintain a defence, this paragraph puts that matter beyond doubt. Accordingly, the Lord Advocate on the one hand in Scotland, and the Scottish Secretary on the other, also in Scotland, can be parties to proceedings even if they cannot pass the normal test.
The Earl of SELKIRK: I thank the noble and learned Lord for his comments. I take it that Schedule 12 would be unnecessary if one did not want to bring in the Lord Advocate. It says:
"Without prejudice to any power exercisable apart from this paragraph".

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In other words, the private individual, provided he had an interest in it, would be fully entitled to sue, even if paragraph 12 was not there. I understand that that was substantially what the noble and learned Lord said. The purpose of paragraph 12 is to bring in the Lord Advocate and the Solicitor General in Scotland and England.
Lord McCLUSKEY: Does the noble Earl mean Schedule 12 or paragraph 4?
The Earl of SELKIRK: I mean paragraph 4 of Part II of Schedule 12. This is brought in, but the right to sue, for anyone who has an interest, would be valid even if that Schedule was not there at all.
Lord McCLUSKEY: I was seeking to make clear, although I am not at my best at this time of night, that one could, in effect, take out paragraph 4 altogether and Schedule 12 would still work perfectly well and perform its proper function, which is to provide the machinery for determining devolution issues and channelling devolution issues in particular directions. Paragraph 4 makes clear beyond doubt that the Lord Advocate, on the one hand, and the Scottish Secretary, who is the Law Officer, on the other hand, can be parties to a litigation to determine such a question even if they cannot pass the normal test, which the court requires of them, of demonstrating that they have an interest which would justify the raising and defence of an action.
Viscount COLVILLE of CULROSS: Again I am grateful to the noble and learned Lord for that full and helpful explanation. May I come back to Northern Ireland on Amendment No. 197? In the meanwhile, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 186 and 187 not moved.]
10.40 p.m.
Lord DIPLOCK Lord DIPLOCK moved Amendment No. 188:
Page 72, line 39, leave out ("Judicial Committee of the Privy Council") and insert ("House of Lords").
The noble and learned Lord said: I beg to move Amendment No. 188. This Amendment can, I think, be discussed with Amendments Nos. 190, 192, 194, 196, 198 and 200, because they stand or fall together. Amendment No. 201 is also closely connected and, I would suggest, should be discussed at the same time, but it does not necessarily stand or fall with the others.
Even at this late hour I hope that I may be pardoned for spending a few minutes in explaining what I understand to be the scheme of Schedule 12. I shall no doubt be corrected if I am wrong because it is not all that simple. It deals with two matters: first, with post-enactment challenge to the validity of Acts of the Assembly which have got through the Section 19 sieve. I think that very rarely will that challenge be made, because one would expect the sieve to be an effective one. The other matter it deals with is challenge to the exercise of executive functions by the Scottish Executive, and also possibly with challenge to subordinate legislation. But that is a matter that will be looked into. That will be the common case of a devolution issue which comes within Schedule 12.
Such a challenge may arise in legal proceedings in two ways. First, there may be a direct challenge in Scotland or in England or Wales—but not in Northern Ireland—by an action between the appropriate Law Officers of the United Kingdom —the Lord Advocate in Scotland, the Attorney General in England and Wales, and the equivalent of the Law Officer of the Scottish Executive. That challenge —the action in that form—will go in Scotland, in the first instance, to the Court of Session, or in England, in the first instance, to the High Court. The only issue in that action will be a devolution issue.
The other and, I suspect, commoner route by which a devolution issue arises in litigation will be in civil or criminal litigation by or against private individuals or local authorities, or the like. When it arises in that form it is unlikely that it will be the only issue in the litigation. There will generally, and almost always in criminal proceedings, be issues of fact to be decided, because issues of law arise, and arise only, out of facts. There may well be other points of law

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and of construction in the litigation, and a devolution issue may arise as one of the issues in any court, civil or criminal, and in England in any tribunal, whether it be from the magistrates upwards. In all those cases the Lord Advocate in Scotland, the Attorney General and the Scots Law Officer have to be notified.
We have got in each of these cases proceedings started in a court of first instance—you cannot start anywhere else —probably in Scotland, and maybe in England and Wales or in Northern Ireland. It is most likely that this kind of litigation will start in Scotland. If the ordinary course is taken, and there is nothing in the Schedule which prevents the ordinary course from being taken, the issue or issues in the action, including the devolution issue, will be decided in the first place by the court of first instance, and on appeal to an appellate court (the Inner House in Scotland, or the Court of Appeal in England) with a final appeal ending up, with leave from both those jurisdictions, in the Appellate Committee of the House of Lords, with one exception: that a criminal case from Scotland does not come on appeal to the House of Lords but stops in the High Court of Justiciary. That would be the ordinary course taken in post-enactment litigation in which a devolution issue arises as one of the issues in the action.
The Schedule provides for an alternative course. The court of first instance may —not must; it has a discretion to do so or not —refer the devolution issue, and nothing else, to an appellate court without deciding it itself. In Scotland, in civil cases it would refer it to the Inner House of the Court of Session without deciding it itself; in England it would refer it to the Court of Appeal without deciding it itself; and in criminal cases in Scotland it would go to the High Court of Justiciary —to a court, in fact, of three judges of that body.
So the devolution issue gets to the same place, the same appellate court, in each of these jurisdictions, as it would upon an ordinary appeal, but it conies there on one of the issues only. Except where the devolution issue is decisive of the whole proceedings— as it would be, for instance, in the inter-Government action, the inter-Law Officer action where the devolution
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issue is the only one—it is unlikely that the court of first instance would use the reference procedure at all.
It inevitably involves delay if the case has to come back afterwards for decision of the other issues, as nearly always there would be. Experience has shown, and certainly it has demonstrated to me over many years, that except where the decision of a particular issue of law is decisive in the case, whichever way that issue is decided, the only effects of reference of a particular issue (which is the alternative procedure provided for in the Schedule) are expense and delay—expense to the litigants and delay to the litigants.
Therefore most cases in which a devolution issue arises would take the ordinary route; that is to say, a decision on all issues at first instance, followed by appeal if the parties so desire, appeal to an appellate court, the Inner House of Session, and a further appeal to the House of Lords. So, by either route, and generally by the second and ordinary route, it comes to the same appellate court at the intermediate stage; the Inner House in the case of Scotland and the Court of Appeal in England.
When the other route is taken, as I say, it comes to the same place. But, when we get to the further appeal from the Inner House or from the Court of Appeal, if it has taken the ordinary route it comes to the Appellate Committee of the House of Lords; if it has taken the reference route it comes to the Judicial Committee of the Privy Council. I ask myself and, having asked myself and found no satisfactory answer, I ask my noble and learned friend on the Woolsack: why?
So far as I can see, there is no conceivable legal reason for it. The composition of the Judicial Committee of the Privy Council and the Appellate Committee of the House of Lords, as it is generally constituted, is almost identical. Each consists of the Law Lords, ex-Lord Chancellors and retired Law Lords. In the Judicial Committee of the Privy Council an ex-Lord Justice of Appeal and, for a few weeks in the summer, a distinguished member of the High Court of Australia or the Supreme Court of New Zealand may from time to time come and join us, but otherwise the composition of the Judicial Committee and of the House of Lords is the same day in and day out.
I was sitting this morning in the Judicial Committee. I was sitting with the same people a fortnight ago in the House of Lords. When I say that the composition is the same, I should perhaps add that there are those who are qualified to sit in the Judicial Committee who are not qualified to sit in the House of Lords. All Lord Justices of Appeal in England are Privy Councillors and are so entitled to sit, and there are I think one or two Members of the Scots Judiciary who are Privy Councillors, and the Lord President of the Council.
The LORD CHANCELLOR: There is an old convention that he does not sit, so I hope we shall not have that red herring drawn across the path.
Lord DIPLOCK: Having searched my mind to see if I could find some legal reason for this curious divergence, I then wondered whether there was a Scottish reason or some sensitivity, because there is no right of appeal in criminal matters from Scottish courts to the House of Lords; I wondered whether they felt sensitive if there were a reference to the House of Lords, instead of the same people labelled as the Judicial Committee of the Privy Council.
I took the occasion to consult the Lord President of the Court of Session on the matter, to see whether my suspicions of sensitiveness (which I had rather gathered from my noble and learned friend Lord Fraser of Tullybelton) were generally shared among the Scottish Judiciary. I was assured that the consensus of opinion among the Scottish Judiciary coincided with mine, that it would be much more sensible to go to the House of Lords, instead of having these alternative labels to the people with the same heads.
Finally, I asked myself whether there could be a political reason behind this matter—a desire, perhaps, to pack the court to which the reference was made, in order to achieve the result desired. If I found no conceivable legal reason, I found it quite impossible to concede that there was that political reason, because the suggestion that their decision upon what is a question of pure law could be influenced by the selection of the persons likely to get the right result, would be a slur upon the Judiciary. It
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would involve a gross injustice to the subjects, the private litigants, who would be the persons ordinarily concerned.
So with no legal reason, no reason of Scots sentiment, no political reason, I asked myself again, why should it be that through one route the question goes to the Judicial Committee, and by the other route goes to the House of Lords? The matter becomes most ludicrous when one gets to the House of Lords itself by the ordinary procedure, and one looks at paragraph 23 of the Schedule, which says that,
"If a devolution issue arises in judicial proceedings in the House of Lords"—
which is where it will arise when the ordinary route is taken—
"it shall be referred to the Judicial Committee of the Privy Council, unless the House considers it more appropriate, having regard to all the circumstances, that they should determine the issue."
Speaking for myself, I should, I think, always regard it as more appropriate in the Appellate Committee that we should decide the issue there, rather than going through the solemn farce of getting into the Daimler car (which was described a fortnight ago) and moving over to the Privy Council and listening to the arguments there. It would be a little more than a solemn farce, because one would have to give the parties an opportunity of making representations to us as to whether or not we should refer. We should, I suspect, have to get another set of documents and the like. The farce would be not only solemn but expensive and dilatory. Again, I ask my noble and learned friend the Lord Chancellor: Why this proposal for having the same people but with two different names dealing as alternative bodies with exactly the same question? I beg to move.
11 p.m.
The LORD CHANCELLOR: We had a dress rehearsal of this debate, if I may so call it, when we had the discussion, on that spirited, memorable occasion, about the proposed setting up of a Constitutional Council. I think that what emerged from our earlier debates was general acceptance, though I agree it was not unanimous, that at any rate pre-Royal Assent references under Clause 19 should go to the Privy Council.

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Though there was not totally common ground, the noble and learned Viscount, Lord Dilhorne, and perhaps one or two others, were, if I may say so, in a minority.
If that is the procedure to be followed —that is to say, that is the route which devolution issues arising at the pre-Royal Assent stage are to follow—then, in the view of the Government, it is entirely consistent and sensible that that same body should have responsibility, not only for pre-Assent references but also for post-Assent references. I recollect the noble and learned Lord, Lord Wilberforce, saying in that earlier debate:
"Even for the United Kingdom, which has lived on anomalies and eccentricities for a great many years, this seems a very strange and illogical set-up to have one body doing the pre-enactment and another doing the post-enactment".—[Official Report, 18/4/78; col. 10921.
I think there is merit in consistency.
It is common ground that the Bill we are discussing raises very important constitutional issues, and in the view of the Government it makes good sense to introduce a special procedure for devolution vires questions, which we are considering in dealing with Schedule 12—and they are there described as "devolution issues"—to be dealt with by the Judicial Committee of the Privy Council. That has traditionally had responsibility for considering constitutional matters, and in those proceedings not only could there be present, and no doubt would be present, Scottish members of the Appellate Committee, but from time to time the Scottish Lords of Session who are Privy Councillors could be invited to attend.
We have been told by the noble and learned Lord, Lord Diplock, what the composition of the Judicial Committee is. Its composition for particular issues, as has been conceded on other occasions, has never been criticised; and I was glad to hear that during the present occupation of the Woolsack, or indeed any apprehended one hereafter, it is unlikely that there would be any fear of a special "packing" for the purposes of considering a devolution issue.
The standing of the Privy Council in this constitutional field is very high. The argument that the Judicial Committee experience has been gained largely in relation to the Colonies and Dominions
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and therefore is not, perhaps, wholly relevant to the appropriate relation to the Scottish Assembly is, in my respectful submission, something of a non sequitur since the problems of legislative and executive competence which could arise are not unlike those which have arisen in earlier federal and devolved Constitutions. I submit that it is entirely of a piece with the historic and existing pattern for the Judicial Committee to be given similar responsibilities in relation to the Scottish Assembly; and, as the noble and learned Lord, Lord Hailsham, said on an earlier occasion, there is certainly nothing unconstitutional in relation to Scotland in what is proposed.
Schedule 12 itself, in paragraph 10, provides for what is to happen when what the noble and learned Lord, Lord Diplock, so conveniently called the ordinary route other than the reference route is followed. When the case comes to the House of Lords through the ordinary route—and there could, even in respect of that kind of case, have been frequent occasions on which as a preliminary point of law the vires question could be referred; and I am sorry to hear that his experience is that preliminary issues or points of law very rarely determine the decision in case; sometimes it does have that effect, but that may be by the way—paragraph 23 of the Schedule provides a discretion for the House of Lords to deal with the matter. It will be for the House itself then to decide how the discretion is to be exercised in practice.
The Government consider that the test proposed—namely, what is appropriate according to the circumstances—should be a workable one; and the Appellate Committee, or the Appeal Committee, will take into account not only the preference of the parties that will be concerned but also the possibility of saving time and expense by adopting the course of the House of Lords itself dealing with the devolution issue or transferring it to the Judicial Committee. But there will be some cases, I submit, which are more likely to be referred to the Judicial Committee than to be kept in the House of Lords itself. If, for instance, the only point of law certified on a criminal appeal from the Court of Appeal in England and Wales was a devolution issue, then a reference to the Privy Council might well be made. The same could

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well be true of a civil appeal from the Court of Session or a Court of Appeal where it was plain from the documents that were to be considered on appeal that the only point involved was a devolution issue.
But if there were a number of intertwined matters to be argued—the facts of the case, the merits of the case—in addition to the devolution issue, the House might well find that it would not be to the convenience of anyone concerned to make a reference to the Judicial Committee. So it seems to me that any mischief that may exist in the following of the two routes can really be disposed of in respect of the cases going by the ordinary route, by the determination by the House of Lords itself, by the exercise of the discretion that is given to it as to how the case should proceed. Accordingly, in accordance with what I submit is precedent, and indeed principle, what is proposed in the Bill would seem to meet the circumstances of the case in dealing with devolution issues.
Lord WEDDERBURN of CHARLTON: Having ventured to intervene in this Chamber at 11 o'clock last night, I intervene again tonight at 11.10 p.m., and promise to detain your Lordships for not very long. The noble and learned Lord the Lord Chancellor, I am sure, is aware that there are some behind him who will be voting for this measure as it stands with some reluctance, in the respect which he has described, that is, that in paragraph 23 of the Schedule the House of Lords is given a discretion as to whether or not it should refer a devolution issue to the Judicial Committee of the Privy Council. The noble and learned Lord the Lord Chancellor stands in the middle and has all the virtues of the middle course, being pressed on the one side by those who wish to retain a complete jurisdiction for the House of Lords, and by his noble friends who perhaps, if they dared to do so, would urge that that jurisdiction should be removed in devolution issues.
Why do I say that when the noble and learned Lord, Lord Diplock, in the two types of legislation he described, has so persuasively advanced reasons why matters should rest with the House of Lords? I say it because I take issue with the noble and learned Lord, Lord
1138
Diplock, as to whether there is an issue of pure law. In appellate jurisdictions there is always a high content of policy. If we are setting up—and let there be no mistake that we are setting it up, apart from our EEC European Court obligations —within this jurisdiction, something of the nature of an embryonic constitutional court, then, in the applications and interpretations of the law, which today are infused with policy, without detraction from the rule of law in every court in the land, and in particular in the appellate courts and in the House of Lords, that element of policy, which every noble and learned Lord who sits in the Appellate Committee knows exists, but which we lawyers sometimes dare not talk about, contrary to our American brethren, will be there in a broader and more fulsome form. For my part, I would wish to see a court which could develop.
I am sorry that the noble and learned Lord, Lord Diplock, spoke about "packing" any court, because naturally no Administration in this land would do so. But, if I say that, my embryonic constitutional court will have to develop, it will have to be flexible and, in the best traditions of the common law, pragmatic, it will have to understand the Brandeis brief on the constitutional issues of the day, it will have to be supple, bring in new people and bring in those who are Privy Councillors who perhaps today do not take part in the proceedings of the Judicial Committee of the Privy Council.
If I think of that as my embryonic constitutional court, I see great merit in saying not what the Government have said—that it may go through one of the two procedures to the Judicial Committee of the Privy Council—but in saying even more; that is, that it must go to one body and one body alone. That is a body which will develop and which Privy Councillors, perhaps as yet undreamt of by the noble and learned Lord, Lord Diplock, might well attend and which will, perhaps in the year 2000, produce a better constitutional court and constitutional jurisprudence than some other quasi-federal or federal jurisdiction. It is for that reason that I would urge your Lordships not to do what I would wish—namely, insist that the matter goes to the Judicial Committee—but to take the middle road which the noble and learned Lord the Lord Chancellor has suggested.

1139
Thus, it may go there at least, and we will see how we go, and we shall not agree to Amendments which would insist on the House of Lords having a final and determining voice in such a matter.
Lord FRASER of TULLYBELTON: We have been over this ground before and I do not want to detain your Lordships longer at this time of night; but I think it is of some importance to set out the position which, I am afraid, differs from my noble and learned friend Lord Dip-lock's. We start from the position that it seems to be agreed, or at any rate accepted, that for pre-Assent references the Judicial Committee is the appropriate body to give an advisory opinion. The Judicial Committee having, so to speak, got off to a flying start, the onus is rather on those who would give the later stages of adjudication to some other body, so that the Judicial Committee starts off with an advantage in that respect. At an earlier stage, I think the noble and learned Lord, Lord Wilson of Langside, suggested that it was in some way offensive to Scottish sentiment to allow these matters to be dealt with by the Judicial Committee, and that Scotland or the Scottish Assembly was being put in the power of some colonial Legislature. I do not see him here tonight and I understand that that point may have been dropped. In any case, I must say with all respect that I think it is obviously a bad point because the Judicial Committee would be dealing with devolution issues arising in Scotland or in England or in Northern Ireland. It is not the place that it comes from that matters; it is the class of litigation of this very special kind which would go to the Judicial Committee. That point does not really arise.
It seems to me that the importance of using the Judicial Committee for this purpose is that it marks it off as a new tribunal for this purpose dealing with a special and quite novel class of litigation—constitutional litigation within the United Kingdom which has hitherto been unknown since there has never been an opportunity for it. I find myself very much in agreement with the noble Lord who has just spoken, that we have here a kind of embryonic constitutional court which seems to me to be desirable in order to mark the importance of this kind of
1140
litigation. For that reason, in addition to the fact that the pre-Assent of adjudication is for the Judicial Committee, it seems to me that this is the appropriate body for dealing with post-Assent devolution issues.
There is one other matter that I should like to mention. My noble and learned friend Lord Diplock said that he had been informed by the Lord President that there was no support among Scottish judges for my view that criminal appeals should not find their way to the House of Lords at all. That may be so; I am afraid I am not well placed to take a canvass of my friends in Scotland. All I know is that in the early stages of this Bill the Lord President, I think, made some representations to the Government about it, in the course of which he said that in his view it was hopeless to attempt to achieve unanimity among Scottish judges on it. Having seen the degree of unanimity that prevails between the Law Lords, your Lordships may think there is some force in that. I still adhere to the view that it would be a pity, for historical and constitutional reasons, that any criminal appeal originating in Scotland should ever come to the House of Lords. I would prefer to see it go to the Judicial Committee. As I said in an earlier debate, it is not a matter on which I can work up any enormous passion.
The last point I want to mention is this: it arises on paragraph 23—the power suggested to the House of Lords to remit the matter to the Judicial Committee unless it sees reason to the contrary. Of course it is very easy to make fun of five old gentlemen going in a taxi from here to Downing Street. I do not think that one should allow oneself to be diverted by that kind of consideration. Nothing is easier than to make fun of innumerable parts of our Constitution which are respectable and admired and, on the whole, to be preserved. Nothing can be more ridiculous than the giving of a formal judgment in this House in the morning by the five old gentlemen we have just heard about. If you want to make fun of it, nothing would lend itself to fun more than that, far more so than getting into the Daimler car. I do not want to be disrespectful, but it could be thought to be absurd.
There are many other parts of our constitutional arrangements, which will

1141
be present in your Lordships' minds, which it is easy to make a guy of. But it is important to me, and I imagine to most of my noble and learned friends, to preserve proper forms of constitutional order in dealing with legal matters. That is what the law is all about. If it involves people going from here across to Downing Street, it may be a little inconvenient but, if it is otherwise appropriate and proper, we should accept the inconvenience, go through the proper constitutional forms and do things decently and in order. So that I am quite unmoved by the fun that has been poked at paragraph 23. For all these reasons, the Judicial Committee remains the proper body for dealing with constitutional issues under this Bill, and I hope that will be the decision of your Lordships.
11.21 p.m.
Lord KEITH of KINKEL: I regret very much that what I shall say will expose an even wider rift in the ranks of the Law Lords, and between my noble and learned friend Lord Fraser of Tullybelton and myself. I support this Amendment and the reason why I do so I shall try to state quite briefly. Post-devolution issues, unlike pre-enactment issues, will be issues that involve the rights of individual citizens. It is not a matter of constitutional theory at that stage; it is a matter of whether some subordinate legislation, which affects the rights and obligations of citizens, is or is not valid. The kind of issue which will arise, as I see it, is no different in principle from the kind of issues that arise in connection with the subordinate legislation with which we are already familiar.
For the most part, these issues, affecting the rights of citizens arising after enactment, will be dealt with by the ordinary courts of the land. They may be decided in Scotland in the sheriff courts, and that may be an end of them, or they may go to the Court of Session or may, conceivably, go right up to the top. What is proposed when an issue goes right up to the top, instead of its proceeding through the whole of the normal courts of the land, is that at that stage it will be diverted off the normal rails to which we are accustomed into the Judicial Committee of the Privy Council.
1142
I believe that, in any matter that affects the rights of citizens, they should have recourse right up to the top through the ordinary courts, and the House of Lords is the appropriate tribunal to be the final Court of Appeal. I cannot see that any adequate justification has been shown for changing the direction of the rails at that stage. It is fair to say that the status of the decisions of the Judicial Committee of the Privy Council is a very high one, but it is also fair to say that it is not quite such a high one as that enjoyed by decisions of the Appellate Committee of this House. So I think, in a sense, that it is a little derogatory to submit these issues to the Judicial Committee.
It is asked: Whereas the Judicial Committee is to decide pre-enactment devolution issues, is it reasonable that some other tribunal should be the final Court of Appeal on post-enactment issues? But, in my submission, there is reasonable logic in that and some historical justification. The function of the Judicial Committee has been, heretofore, advisory, and it is reasonable that it should act in an advisory capacity in pre-enactment devolution issues. But when it comes to the actual decision of these issues post-enactment, when the rights of citizens are affected, then I believe it is right that the final decision should lie in the Appellate Committee of the House of Lords.
Viscount COLVILLE of CULROSS: If I may say one word, we on this side sadly miss on this Amendment my noble and learned friend Lord Hailsham, and I wish that he were not suffering his tragic affliction on the other side of the world at this moment. But departing from the aspirations and hankerings of the noble Lord, Lord Wedderburn, which might very well have been backed up by the noble and learned Lord, Lord Seaman, had he been here, and assuming for the moment that the personnel will be the same in either place, what really worries me is the question of delay and expense. After all, we are not doing this for fun. We are doing it to deal with active litigation which is going on, usually between parties. Even if the Lord Advocate is on the one side, there could easily be an ordinary citizen as the party on the other. If the process which we are inserting into this legislation were to involve extra stages and, therefore,

1143
extra expense and extra delay, that would be my reason for trying to make it more simple. I should have thought the course of simplicity would be to stick to the ordinary procedures of appeal which are those which the noble and learned Lord, Lord Diplock, is trying to insert.
The Earl of SELKIRK: I hesitate to express a view on this Amendment, but I should like to make three points. I believe that I am correct in saying that the Judicial Committee is not a part of the judicial system of this country. Secondly, with the noble and learned Lord, Lord Diplock, I would say that there are always other parts which enter into the question. There will never be an absolutely pure devolution issue; other issues will require to be decided. Thirdly, the noble Lord opposite said that this brings politics into the question, and that it is easier to bring it to the Judicial Committee than it is to bring it to the House of Lords. I believe that it is better to have an established system which we know thoroughly. If any element of politics were to enter into it, the confidence of Scotland in the system would be broken.
Lord WEDDERBURN of CHARLTON: The word I used was "policy", not "politics".
The Earl of SELKIRK: The noble Lord used two words, "policy" and "politics". But if he meant to say, "policy", I readily accept that word. Policy, however, does not enter into the question. It is law which has to be decided. For that reason, I come down on the side of the noble and learned Lord, Lord Diplock.
Lord DIPLOCK: In answer to my invitation, the noble and learned Lord the Lord Chancellor sought to explain to me why. May I deal with the suggestions which he made. The first was that because I had accepted that a reference to the Privy Council in pre-enactment proceedings was appropriate, it therefore followed that it was appropriate in the ordinary process of appeal. The Privy Council has power, if it is exercised, to give advisory opinions which the Appellate Committee of the House of Lords, at any rate, has not. Under Clause 19, advisory opinions go direct to the Privy Council as the court of first and only instance, and
1144
it gives its opinion on the matter. Finally, in Northern Ireland, under the Government of Ireland Bill, one had the precedent of advisory opinions going to the Privy Council but the ordinary process of appeal going to the House of Lords, and that had worked perfectly well.
Secondly, the noble and learned Lord said that the Privy Council had experience of deciding constitutional matters. The experience of the Privy Council is the experience of the members of that Council; it is not a disembodied institution. The experience of the Privy Council in constitutional matters is identical with the experience of the members of the Appellate Committee of the House of Lords, because they are the same chaps. And if it is suggested that policy ought to come into what I consider to be a question of law, they are still the same chaps so far as policy is concerned.
It was not my noble and learned friend on the Woolsack but the noble Lord, Lord Wedderburn, who indicated that the Judicial Committee would be a better body to do it, because one could get on to the Judicial Committee people who would have the right ideas on policy. That was what I meant when I talked of "packing" a court but regarded it—as I still regard it—as being inconceivable while the present Lord Chancellor is responsible, as Lord Chancellors are, for selecting those who sit on the Privy Council as well as in the Appellate Committee. But whether all future Lord Chancellors would take the same view I began to have some faint glimmers of doubt as I listened to the noble Lord, Lord Wedderburn of Charlton.
Finally, as a matter of consistency, under this Schedule when the matter comes through the appellate procedure it is more likely to go to the House of Lords and be decided there whenever there is any other issue apart from a devolution issue. So we are not getting any particular consistency, either in form or in substance, by having these alternate routes for the same people under different names to decide the same matter.
11.32 p.m.
On Question, Whether the said Amendment (No. 188) shall be agreed to?
Their Lordships divided: Contents, 27; Not-Contents, 28.

CONTENTS

Ailsa, M.

Ellenborough, L.

Northchurch, B.

Alexander of Tunis, E.

Elliot of Harwood, B.

Nugent of Guildford, L.

Amherst of Hackney, L.

Elton, L.

Onslow, E.

Ampthill, L.

Emmet of Amberley, B.

Orr-Ewing, L.

Atholl, D.

Exeter, M.

Polwarth, L.

Auckland, L.

Faithfull, B.

Porritt, L.

Avon, E.

Ferrers, E.

Rankeillour, L.

Balerno, L.

Fortescue, E.

Rawlinson of Ewell, L.

Berkeley, B.

Fraser of Kilmorack, L.

Rochdale, V.

Bourne, L.

Gisborough, L.

St. Aldwyn, E.

Burton, L.

Glenkinglas, L.

St. Davids, V.

Campbell of Croy, L.

Greenway, L.

Sandys, L. [Teller.]

Carrington, L.

Halsbury, E.

Selkirk, E.

Chelwood, L.

Hankey, L.

Sempill, Ly.

Clancarty, E.

Hylton-Foster, B.

Sharples, B.

Clitheroe, L.

Ilchester, E.

Skelmersdale, L.

Clwyd, L.

Jeffreys, L.

Somers, L.

Cockfield, L.

Kilmany, L.

Spens, L.

Colville of Culross, V.

Kilmarnock, L.

Strathclyde, L.

Cottesloe, L.

Kinnaird, L.

Strathcona and Mount Royal, L.

Craigavon, V.

Long, V.

Strathspey, L.

Cromartie, E.

Lucas of Chilworth, L.

Swansea, L.

Cross, V.

Lyell, L.

Teviot, L.

Cullen of Ashbourne, L.

McFadzean, L.

Thorneycroft, L.

de Clifford, L.

Marley, L.

Vickers, B.

Denham, L.

Montagu of Beaulieu, L.

Vivian, L.

Digby, L.

Morris, L.

Ward of North Tyneside, B.

Drumalbyn, L.

Mottistone, L.

Westbury, L.

Dundee, E.

Mowbray and Stourton, L. [Teller.]

Wilson of Langside, L.

Ebbisham, L.

Wolverton, L.

Effingham, E.

Newall, L.

Young, B.

NOT-CONTENTS

Amherst, E.

Davies of Penrhys, L.

Henderson, L.

Amulree, L.

Donaldson of Kingsbridge, L.

Houghton of Sowerby, L.

Aylestone, L.

Douglas of Barloch, L.

Hughes, L.

Banks, L.

Dowding, L.

Jacobson, L.

Birk, B.

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

Jacques, L.

Boston of Faversham, L.

Fisher of Camden, L.

Janner, L.

Brockway, L.

Foot, L.

Kaldor, L.

Byers, L.

Gaitskell, B.

Kirkhill, L.

Caccia, L.

George-Brown, L.

Leatherland, L.

Champion, L.

Gordon-Walker, L.

Lee of Newton, L.

Chitnis, L.

Goronwy-Roberts, L.

Listowel, E.

Collison, L.

Hale, L.

Llewelyn-Davies of Hastoe, B.

Cooper of Stockton Heath, L.

Hamnett, L.

McCluskey, L.

David, B.

Hampton, L.

Mackie of Benshie, L.

Davies of Leek, L.

Harris of Greenwich, L.

MacLeod of Fuinary, L.

McNair, L.

Shinwell, L.

Wallace of Coslany, L.

Maelor, L.

Simon, V.

Walston, L.

Morris of Borth-y-Gest, L.

Snow, L.

Wedderburn of Charlton, L.

Murray of Gravesend, L.

Stedman, B.

Wells-Pestell, L. [Teller.]

Northfield, L.

Stewart of Alvechurch, B.

White, B.

Norwich, V.

Stone, L.

Wigg, L.

Pannell, L.

Strabolgi, L. [Teller.]

Willis, L.

Platt, L.

Tanlaw, L.

Winstanley, L.

Rhodes, L,

Taylor of Mansfield, L.

Winterbottom, L.

Roberthall, L.

Thurso, V.

Wootton of Abinger, B.

Rochester, L.

Wall, L.

Wynne-Jones, L.

Sainsbury, L.

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

CONTENTS

Campbell of Croy, L.

Gridley, L.

O'Hagan, L.

Clitheroe, L.

Harvington, L.

Rankeillour, L.

Colville of Culross, V.

Keith of Kinkel, L.

Robbins, L.

Denham, L.

Long, V.

Sandford, L.

Dilhorne, V. [Teller.]

Lyell, L.

Sandys, L.

Diplock, L. [Teller.]

Monson, L.

Selkirk, E.

Dundee, E.

Morris, L.

Strathcona and Mount Royal, L.

Elliot of Harwood, B.

Mowbray and Stourton, L.

Tweeddale, M.

Ferrers, E.

Nunburnholme, L.

Wilberforce, L.

NOT-CONTENTS

Champion, L.

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

Stedman, B.

David, B.

Stone, L.

Davies of Penrhys, L.

McCluskey, L.

Strabolgi, L. [Teller.]

Donaldson of Kingsbridge, L.

McGregor of Durris, L.

Tanlaw, L.

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

Mackie of Benshie, L.

Thomson of Monifieth, L.

Fraser of Tullybelton, L.

Morris of Borth-y-Gest, L.

Wallace of Coslany, L.

Gaitskell, B.

Parry, L.

Wedderburn of Charlton, L.

Hood, V.

Perth, E.

Winstanley, L.

Kaldor, L.

Ponsonby of Shulbrede, L.

Winterbottom, L.

Kirkhill, L.

Sainsbury, L.

Resolved in the negative, and Amendment disagreed to accordingly.
11.39 p.m.
Baroness LLEWELYN-DAVIES of HASTOE: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

WALES BILL
Brought from the Commons; read 1ª, and to be printed.

INSURANCE COMPANIES (AUTHORISATION AND ACCOUNTS: GENERAL BUSINESS) REGULATIONS 1978
7.29 p.m.
Lord WALLACE of COSLANY Lord WALLACE of COSLANY rose to move, That the draft Insurance Companies (Authorisation and Accounts: General Business) Regulations 1978, laid before the House on 4th April, be approved. The noble Lord said: My Lords, these draft regulations are designed to fulfil an obligation to the EEC to introduce into our domestic law provisions implementing the requirements of the European Communities' First Council Directive on the Co-ordination of Laws, Regulations and Administrative Provisions Relating to the Taking-up and Pursuit of the Business of Direct Insurance Other than Life Assurance, usually referred to as the Non-Life Establishment Directive. They represent the third major step necessary to bring our law into line with that Directive. This process was begun by the two sets of regulations made under Section 2(2) of the European Communities Act 1972 on 29th September last year, which modified the Insurance Companies Act 1974.
The first of these—the Insurance Companies (Classes of General Business) Regulations 1977—came into operation on 1st January 1978. They brought about almost entirely technical changes, and will have no direct effect on the operation of existing companies. The second set—the Insurance Companies (Solvency: General Business) Regulations 1977—will introduce modifications to the solvency requirements contained in the Insurance Companies Act 1974 as they apply to general business covered by the Directive, when they come into operation on 31st July 1978: the same date as this draft Instrument is intended to take effect.
The draft regulations before noble Lords this evening are concerned with the question of authorisation to carry on general business and related matters. They therefore supplement and modify the provisions of Part I of the Insurance Companies Act 1974, and introduce consequential modifications to Part II of the Act, but only with respect to those insurance businesses to which the Non-Life Establishment Directive applies. The 1974 Act will continue to apply in its existing form to all life assurance business, and to certain types of non-life business which are excluded from the Directive.
Apart from Lloyd's, which is subject to special provisions in the 1974 Act, the most significant category of non-life insurance which will be not subject to the conditions in these regulations is that of companies applying to carry on reinsurance business only. The regulations themselves do not introduce any fundamental change to the procedures for authorisation which are already followed under the powers contained in the Insurance Companies Act 1974. They do, however, set out in greater detail the conditions which must be met before authorisation can be granted, and they impose some new requirements both on the Secretary of State and on insurance companies carrying on business here.
Noble Lords may find it helpful if I confine my remarks to those regulations which introduce significant changes. Regulation 3 implements specific provisions of the Directive allowing authorisation for only part of a class of insurance business and requiring an additional authorisation before a company can extend its existing business to further classes of insurance business. It will take the place of Section 8 of the 1974 Act which, by virtue of paragraph 3 of the Schedule, ceases to apply to companies covered by the Directive. Regulation 4 imposes new requirements on the Secretary of State to come to a decision on an application from a body with its head office within a Member State of the EEC within six months and in the event of a refusal, to give the applicant the reasons for the refusal.
Regulation 5 introduces a major change. It sets out the main conditions which must be met before an authorisation to carry
1074
on a general insurance business can be granted. Henceforth these conditions will vary according to whether the applicant has its head office within Great Britain, within another Member State of the Community or outside the Community. In each case however, the conditions include the submission to the Secretary of State of a scheme of operations giving the information specified in Regulations 6 and 7 about the business that it is intended to carry on. This is designed to enable him to form a judgment about the viability of its proposed operations. It is already the practice of the Department to request business plans from applicants for authorisation, and in implementing this provision of the Directive we are therefore doing no more than formalising an existing procedure.
For the rest, the House will note that, while the conditions applying to United Kingdom applicants and applicants from outside the Community include provisions relating to a minimum margin of solvency, those relating to applicants from other Community countries do not. This is because, under the terms of the Directive, the solvency of a Community insurance company as a whole is a matter for the supervisory authority of the Member State in which its head office is situated. Such a company wishing to set up an agency or branch here must, however, produce a certificate from its head office supervisor of the kind specified in Regulation 8. This must confirm inter alia that that company can meet the solvency requirements of the Directive. In reverse, United Kingdom companies wishing to establish an agency or branch elsewhere in the Community can take advantage of reciprocal arrangements. Supervisory authorities in other Member States will thus accept certificates relating to solvency issued by the Secretary of State.
I will mention specifically only one other of the conditions imposed by these regulations, which is the requirement set out in Regulation 9 for overseas companies—whether their head office is elsewhere in the Community or outside it—to appoint and maintain a resident general representative in the United Kingdom. This is a provision which is new to our legislation. It implements specific provisions of the Directive and will ensure that there shall always be a legally responsible person here representing the

1075
company concerned. This requirement will apply from 31st July to companies already carrying on general business through an agency or branch established here, as well as to new applicants for authorisation.
I now come to a point that the noble Lord, Lord Cullen of Ashbourne, has already mentioned to me. I should mention that concern has been expressed in the Joint Committee on Statutory Instruments, and in another place, about the use of the term " private law " in Regulation 5(1)(a)(iii). The expression is taken from Article 8(1)(a) of the Directive, where it is considered that it is used in the sense normal in Continental Europe; namely, as meaning law dealing with those relations between those individuals with which the State is not directly concerned. Our law does not have this fundamental distinction between public law and private law, but it is nevertheless necessary to give effect to the words of the Directive. The Government considered that the likelihood of this terminology giving rise to practical difficulties in insurance is remote, but, in view of the views expressed, intend to examine the possibility of introducing a short amendment order seeking to define the expression.
I hope that I have shown that these regulations, however complex they may appear in detail, have a logical and consistent basis. The Government have consulted closely with the British Insurance Association and other interested bodies in drafting them. We are now entering a period of increasing co-operation between the supervisory authorities in the countries of the Community in order to reduce the unnecessary barriers, while continuing to take the necessary steps to safeguard the position of policyholders. I believe that our industry readily accepts the challenge and the opportunity that this presents, and has the underlying strength to take advantage of it to the benefit of our economy and prosperity generally. It is in this spirit that I recommend the regulations to the House. I beg to move.
Moved, That the draft Insurance Companies (Authorisation and Accounts: General Business) Regulations 1978, laid before the House on 4th April, be approved. —(Lord Wallace of Coslany.)
7.38 p.m.
Lord CULLEN of ASHBOURNE: My Lords, I am grateful to the noble Lord, Lord Wallace of Coslany, for having gone through the regulations so very carefully and in such detail. As the time is getting late, I do not propose to refer to them myself, as they have been so very carefully explained to us. However, I can confirm from inquiries that I have made that the insurance industry has been fully consulted —and this is clearly a most important part of this matter. While we welcome these regulations as a further positive step towards an EEC common market in insurance, there is no gainsaying the fact that progress has been disappointingly slow. I am very grateful to the noble Lord for what he has told us about the Government intending possibly to make an amending order on the subject of public law and private law.
There was one other question I was going to ask the noble Lord, and it is this. There is no provision for a right of appeal to the courts from a refusal by a Secretary of State to grant an application for authorisation, notwithstanding that Article 12 of the EEC Directive provides that
"any decision to refuse an authorisation shall be accompanied by the precise grounds for doing so and notified to the undertaking in question. Each Member State shall make provision for a right to apply to the courts should there be any refusal".
In the opinion of witnesses from the Department of Trade, this provision in the Directive did not require the conferring of a right of appeal on the ground of merit, and it was consistent with the Directive to allow an appeal where it was alleged that the Secretary of State had mis-directed himself in law or been guilty of a breach of the rules of natural justice. I should be grateful if the noble Lord would give the Government's views on that point when he comes to reply.
Freedom of establishment is certainly important, but it is to some extent of limited value to us because most British insurance companies have been long established in the other Member States. What would be far more beneficial would be a real freedom of services. By this I mean freedom to cover the risks of one country by insurance contracts in another country, without having a place of business in the country where the risk is situated.

1077
This is what is really needed if we are to have a meaningful common market in insurance. But here we run into a serious difficulty. We in the United Kingdom have for many years been transacting a greater volume of insurance business outside this country than domestic business. In the EEC the conception is quite different, and insurance control legislation is usually rigid and restrictive, being designed to protect their national insurers, who mainly work within national boundaries, and also their domestic interests.
There are two ways of instituting freedom of services: legislation, either of the country in which the service is rendered or of the country from which the service is provided. The former, known as "country risk control", is generally preferred by the other Member States, while we advocate the latter, "head office control". This would suit United Kingdom insurers, and it is imperative for Lloyd's, who operate only through brokers. Fortunately, our approach is pretty well in tune with the aims of the EEC. Consumers in all countries are in favour of head office control. It was chosen by the Commission Services in 1975, and has been accepted by the European Parliament. It is now in the hands of the Council of Ministers' Working Party, who I gather are not renowned for speed. But even when this conundrum is finally solved the question will arise as to whether to defer the freedom until everything is harmonised, which we would deplore, or whether to grant freedom without harmonisation of business where the policy holders do not need the protection afforded by Continental legislation, such as marine and aviation business and the larger commercial and industrial risks.
There are, I understand, other encouraging moves afoot. Recently the EEC Finance Ministers approved in principle a Directive which will eliminate many of the obstacles to cross-frontier insurance in the Community, but it will not take effect for two years. Furthermore, they have agreed to consider next month a proposal granting life insurance companies the right to establish themselves anywhere in the EEC. All this is very welcome, however overdue. The slow progress towards the removal of legal and technical barriers to expanding EEC business has been extremely frustrating, as the insur-
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ance industry was expecting to be a major beneficiary of our entry into the EEC. Perhaps we are on the move at last, however slowly.
My Lords, while giving the Government full credit for their co-operation with the insurance industry in their efforts, I must warn them that it will be unavailing if the threat to nationalise the seven largest insurance companies is not withdrawn. I gladly pay tribute to the decision of the Government not to follow, at least not yet, the nationalisation proposals accepted by the Labour Party at its 1976 Conference and not reversed at the 1977 Conference. There is in my opinion nothing that the noble Lord, Lord Wallace of Coslany, could say which would be more beneficial to the future of this industry than that the Labour Party is irrevocably opposed to such a policy. I previously told the noble Lord that I was going to raise this matter, and I sincerely hope that he will be in a position to make a categorical statement to this effect.
In conclusion, my Lords, I have said little about the regulations that we are considering this evening as I knew the noble Lord would give us such a meticulous explanation of them. I have, instead, taken the opportunity to widen the scope of the debate, as it is but rarely that this subject comes before your Lordships, who will need no reminder from me of the vital contribution that is made to our invisible earnings by this industry. The regulations we are debating today need to be followed up by many others at an accelerating pace, so that a Common Market insurance industry is soon achieved, and not nine separate markets.
7.46 p.m.
Lord WALLACE of COSLANY: My Lords, I am very grateful indeed to the noble Lord, Lord Cullen, for his remarks, including his question on nationalisation, though I do not know that I can give satisfaction on that. This is a very important order, and the whole question of our insurance business is of course of vital importance to the economy of Britain, because it is one of the greatest outside interests that we have. The noble Lord made one or two points, and I am grateful that he gave me notice of them.

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On appeals, which is a very important point, it is true that these regulations do not make specific provision for appeals against any decision by the Secretary of State to refuse an application for authorisation to carry on insurance business. This matter was considered by the Joint Committee on Statutory Instruments, and I understand it was also considered in another place. Article 12 of the Directive requires that,
"in the event of a refusal there should be provision for a right to apply to the courts".
It was explained to the Joint Committee that recourse to the courts is available already by means of an application for a declaration. This could be sought if the applicant considered that the Secretary of State's decision was unreasonable, contrary to natural justice or based on an error in law.
The existing right is considered by the Government as meeting the requirements of the Article. The Joint Committee has accepted the view in its Twentieth Report. The Committee noted that it accords with the view already expressed by our Select Committee on the European Communities in relation to another Directive. However, I would add that my right honourable friend in another place undertook to draw the attention of the Attorney-General to this matter and to the views expressed there; and I give an undertaking to the noble Lord that the views expressed by him in this House tonight will also be drawn to my right honourable friend's attention.
Then there is the general question of our attitude to the development in the EEC of insurance, freedom and the other points which the noble Lord made. Every country expects that its membership of the Community will result in benefits for certain of its industries and problems for others. Certainly many industries in other Member countries have already begun to enjoy benefits from our membership. One of our industries which we expected to benefit was insurance. So far the benefits to us have been limited because of the slow progress in negotiating Directives and in removing existing national restrictions to new competition. This is disappointing to us, but I believe there is a wider Community interest in a true common market in insurance. There
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are growing opportunities to provide insurance services to the world at large. In seeking to take these opportunities we are in competition with others, particularly the highly-developed insurance industries of the USA and Japan. If it is to make full use of these world-wide possibilities, the Community as a whole must marshall its strength, which it can do through creating a liberal internal market, and deploy a united strength.
So far we have had one major directive, the Non-Life Establishment Directive, to which the regulations under consideration are related. The Council of Ministers are about to adopt a new Directive on co-insurance which represents another useful step forward. It has a Life Establishment Directive in draft on which much work has been done. At an earlier stage is a Non-Life Services Directive which is of crucial importance to a true Common Market. It is the desire of the Government to see a truly liberal Directive in this latter field. We appreciate the difficulties which some Member States see in allowing free services in those areas where the mass consumer is involved. Each Member State is anxious to preserve what it regards as an adequate protection for the consumer. However, it is in the big commercial risk field that freedom is most important and the Government are pressing hard for a major breakthrough in this area.
The noble Lord has referred to the need to make progress here in advance of full harmonisation of the law. The Government fully accept this view, and will continue to make their view known in the Brussels negotiations. The noble Lord referred also to head office control of companies engaged in service business in other Member States. I can assure the noble Lord that this also is a point to which the Government attach great importance.
Now, my Lords, comes the key question of nationalisation. This is a ticklish one for me to deal with and noble Lords will not expect any stirring statement to hit the headlines in the Press. The noble Lord expressed some concern, rightly expressed some concern—I will be fair and make that point—on threats of nationalisation of the insurance industry. In answering him I do not think I can do better than to draw attention to what the Prime Minister has already said on this

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subject. First, the Government do not intend to introduce legislation on this matter in the lifetime of this Parliament. Secondly, the Prime Minister will not be able to recommend proposals which others have made for such nationalisation in the next Election Manifesto of our Party. I can give this assurance to the noble Lord, but I do not think he can expect me to go further than I have already done. I thank the noble Lord for his patience. We have had, at least, a little company in our debate.
Lord STRABOLGI: My Lords, I beg to move that the House do now adjourn during pleasure until half-past eight.
[Sitting suspended from 7.53 p.m. until 8.30 p.m.]

  DANCERS: EMPLOYMENT STATISTICS
  DANCERS: EMPLOYMENT STATISTICS
  MUSICIANS: EMPLOYMENT STATISTICS
  MUSICIANS: EMPLOYMENT STATISTICS
  ENTERTAINMENT INDUSTRY: EMPLOYMENT STATISTICS
  ENTERTAINMENT INDUSTRY: EMPLOYMENT STATISTICS
  WAGES COUNCIL ACT
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  CANADA/UK: GARMENT IMPORT DUTY