Sitting of 3 July 1979

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

    Handicapped Children
    Mr. Hooleyasked the Secretary of State for Education and Science what effect the cuts in expenditure on schools for handicapped children will have on the number of new places provided in 1979–80 and 1980–81.
    The Secretary of State for Education and Science (Mr. Mark Carlisle): There should be no effect on the numbers of new places completed since, in making savings on capital expenditure in 1979–80, I have maintained the level of resources available for starting projects providing essential new places for handicapped children in schools.
    Mr. Hooley: Is it not correct that the provision for special schools has been cut from £2·7 million to £1·7 million? How will this cut in no way affect the provision for handicapped pupils? Will the Minister explain the discrepancy between what he has just said and the published report of his intentions?
    Mr. Carlisle: The building programme for special schools and all other schools is in two halves. One is for basic needs, namely, the provision of new places, and the other relates to the improvement of existing places.
    As for special schools, I wish to inform the House that the total building programme was for £6·7 million, £4 million of which is for the provision of new places. The cut of £1 million comes off the improvement of existing places.

    Parents' Charter
    Mr. John Huntasked the Secretary of State for Education and Science when he expects to introduce a parents' charter, incorporating a local appeals system for those dissatisfied with secondary allocations.
    The Under-Secretary of State for Education and Science (Dr. Rhodes Boyson): My right hon. and learned Friend hopes to introduce, before the end of the year, legislation to ensure that parents' wishes are a major factor in the choice of schools for their children, and that there is a local appeals system.
    Mr. Hunt: That is very good news. However, will my hon. Friend acknowledge that this period of secondary allocation is a traumatic time for many parents and children? Although some schools are always more popular than others, does my hon. Friend agree that there will always be disappointment among parents? Is it not important that such disappointed parents should have the right of appeal which is now to be set up? Will he go a little further and ensure that such appeals machinery contains representation which is independent both of teachers and local education authorities?
    Dr. Boyson: I thank my hon. Friend for his comments. It is most important, particularly at the time of allocation of children to secondary schools, that Patents should be assured not only that the first allocation is carried out properly but that there is an independent appeals system. We are taking into consideration in drafting our second education Bill, which we hope to introduce before the end of this year, representations made to us which will strengthen that independent element.
    Mr. Stan Thorne: In view of the dissatisfaction with secondary education, will the Minister use his influence with his Treasury colleagues to make resources available to build new schools, including nursery schools, to provide better book facilities in school libraries and to extend laboratory facilities in secondary schools?
    Dr. Boyson: The popularity of a school is often not linked with its age. Indeed, some of the older schools are the

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    most popular. The hon. Gentleman must remember that the allocation of books comes within the rate support grant and is under the control of the local education authority.
    Mr. Peter Bottomley: Would it not be sensible for local education authorities to inquire of parents, not in the last year of their child's primary school education but in earlier years, what their preferences are likely to be, and to give this information to school governing bodies and head teachers in secondary schools? The appeal procedure can deal only with a limited number, and I believe that many secondary schools could make many more parents happy with the secondary school choice for their children.
    Dr. Boyson: My hon. Friend makes an interesting suggestion. The only trouble is that one may disturb the primary school in question if in the penultimate year one discusses the schools which the pupils are to attend. This could lead to the pupils concerned being somewhat unsettled. Surely it would be better for selection arrangements to be undertaken earlier in the year, which would point to a time between September and December. The initial desires of the parents could then be taken into account in good time, before allocations were made.

    Religious Instruction
    Mr. Lathamasked the Secretary of State for Education and Science whether he will issue new advice to local education authorities on carrying out their responsibilities regarding religious instruction and collective acts of worship under the Education Act 1944.
    The Under-Secretary of State for Education and Science (Mr. Neil Macfarlane): My right hon. and learned Friend will be consulting local education authorities, teachers and others about the position in religious education—as in other matters—in the light of the report on the authorities' curricular arrangements which will be published later this year. We continue to lay great emphasis on the need for religious education in schools.
    Mr. Latham: Is my hon. Friend aware that the law in relation to this matter, which has wide and strong support from parents, is far from universally applied in
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    practice? Will he endeavour urgently to achieve agreement between teachers and churches on new and up-to-date agreed syllabuses?
    Mr. Macfarlane: I am anxious to achieve full agreement with the various parties. The agreed syllabuses are subject to local determination and, therefore, can vary in emphasis to reflect local circumstances. Replies to our circular 14/77 indicate that more than half of the local education authorities are considering or have considered arrangements for reviewing the syllabus. We hope to achieve that co-operation by the end of the year.
    Mr. Kaufman: There is a large Muslim school population in this country for which no proper provision has yet been made. Will the Minister consider holding consultations to ensure that Muslim children have the opportunity of receiving proper religious instruction? Will he also consider extending the provisions for denominational schools to the Muslim faith?
    Mr. Macfarlane: I understand the problem to which the hon. Gentleman refers. I agree that religious education should help to prepare children to take their place in a multi-racial society. I take note of what the right hon. Gentleman has said, which will form part of the negotiations and discussions to take place later this year.
    Mr. Sims: Is my hon. Friend aware that parents expect teachers to be qualified in the subjects that they teach? Is he aware that in a number of schools there are no teachers who are qualified to teach religious education? Will he take steps to remedy that position?
    Mr. MacFarlane: I am aware of that problem, but I cannot give a guarantee that it will form an integral part of our discussions between now and the end of the year.

    Examinations
    Mr. Chapmanasked the Secretary of State for Education and Science if the Schools Council has put any proposals to him for new examinations to replace A-levels; and if he will make a statement.
    Dr. Hampsonasked the Secretary of State for Education and Science when he expects the Schools Council to report to

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    him on the N and F examination proposals.
    Mr. Mark Carlisle: The N and F examination proposals, on which Schools Council working paper 60 invited comments, have encountered opposition from a wide range of interests. It is clear that there is considerable support for retaining the present A-level examinations. I have written to the chairman of the Schools Council informing him that I share the view of those who believe A-levels should stay. I shall set out the full text of my letter in the Official Report.
    Mr. Chapman: Is my right hon. and learned Friend aware that his statement will be widely welcomed, particularly in the universities, where the maintenance of the A-level system—with its established, recognised and widely respected standards—is the best guarantee for the continuation and success of three-year degree courses?
    Mr. Carlisle: I am aware that support for the retention of A-levels came from a wide spectrum of opinion, and, as my hon. Friend says, particularly from the universities and those involved in higher education. I believe that my announcement will be welcomed generally.
    Dr. Hampson: While my right hon. and learned Friend's statement is welcome, may I ask whether he accepts that there has been a call from many to broaden the education of sixth-formers? Will he review that position, in terms of the curriculum, to ensure in particular that science and technology is understood by the majority of sixth-formers?
    Mr. Carlisle: My hon. Friend is right and I fully recognise that A-levels do not meet the needs of all sixth-formers. The paper by the Schools Council to which I referred sets out various alternative examinations. I have asked the council to let me have a copy of the comments that it received on the N and F proposals. I shall then consider those, together with the report of Professor Keohane, who is due to report later in the year on the matter of a certificate of extended education.
    Mr. Christopher Price: The House is grateful for the right hon. and learned Gentleman's recognition of the fact that A-levels are appropriate only to a
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    minority of sixth-form pupils. However, when will a statement be made about his views on the CEE or the development of the N and F proposals? The consultations on N and F have been continuing for the past 15 years and it would be a pity if all the work by teachers, administrators and others towards creating a broader sixth-form curriculum were to be torn up and wasted.
    Mr. Carlisle: Perhaps the hon. Gentleman did not fully understand my reply to my hon. Friend the Member for Ripon (Dr. Hampson). I accept that the A-level is appropriate for those who are going on to courses of higher education. Nevertheless, I have stated that I have invited the Schools Council to let me have the comments which it has received on the N and F proposals. I accept that the A-level is not necessarily the appropriate examination for every sixth-former. As for the CEE, the hon. Gentleman will know that my predecessor in the previous Parliament set up the committee under Professor Keohane. That committee has not yet reported, but when it does I shall consider its report.

    Day Release
    Mr. Gwilym Robertsasked the Secretary of State for Education and Science what plans he has for expanding day release.
    Mr. Macfarlane: This is one of the topics which falls to be considered in the Government's review of the relationship between schools, further education and training.
    Mr. Roberts: Does the hon. Gentleman accept that this is an urgent matter? The rate of progress in the expansion of day release is lamentably slow. Will he consider looking, in particular, at the problems which women face in obtaining day release?
    Mr. Macfarlane: I agree with the hon. Gentleman's latter point. That will be included in the review we are now considering. The uncertainty about the expansion of day release does not mean that there is indifference to the needs of young people in work for systematic education and training. The Department has discovered that there are other approaches—for instance, off-the-job education and training which can be

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    organised in the place of work. Further education staff can offer their skills outside colleges as well as inside them.
    Mr. Wigley: Does the Minister accept that, whereas day release is useful in educating those at work, another advantage is the release of pupils from schools to experience work? Does he accept that there is considerable room for improvement in the careers advice and in the experience available to pupils in formulating careers decisions? Will the Government give special attention to the development of that service?
    Mr. Macfarlane: The Government acknowledge the point that the hon. Gentleman makes. One problem that has contributed to the slow growth in day release has been that neither young people nor their employers have accepted its value and relevance. A major purpose of the experimental programme of unified vocational preparation has been to develop courses that are attractive to young people and their employers. Useful progress has been made since the inception of the programme in 1976. It has a further two years to run until July 1981.
    Mr. Nicholas Winterton: Will my hon. Friend tell the House what contact he has made with industry, commerce and the trade union movement about the expansion of day release? Does he agree that if industry and commerce could meet more of the cost of further education it would be beneficial to the Exchequer? Would it not encourage more young people to be positively involved in day release, which would be good for employment generally in the country?
    Mr. Macfarlane: I agree that such involvement might be to the ultimate benefit of the Exchequer. However, it is part and parcel of the review that the Government axe currently undertaking to find out how day release can be improved. We hope to report to the House later in the year.

    Primary Schools (London)
    Mr. Thomas Coxasked the Secretary of State for Education and Science what discussions took place with the Inner London Education Authority before he approved the financial reduction in expenditure on primary school improvement.
    Dr. Boyson: My right hon. and learned Friend had no prior discussion with the ILEA.
    Mr. Cox: Is the hon. Gentleman aware that his reply is disgraceful? Does he realise that in the borough of Wandsworth, and in many other ILEA divisions, a number of improvements are needed in primary schools? Many of the school toilets still in use were built 80 or 90 years ago. If the work is to take place, is it not the height of stupidy to cut expenditure now when the work needs doing? When the work is eventually carried out the cost will have escalated to far more than the present cost.
    Dr. Boyson: The House should understand that Ministers cannot have discussions about the Budget before the Statement by my right hon. and learned Friend the Chancellor of the Exchequer. The expenditure cuts in the improvement programme for 1979–80 in England amounted to 40 per cent. but in ILEA they were only about 6 per cent. That represents £200,000—basically the allocation for improvements to the Thomas Calton school, which may be closed within two or three years.

    Independent Schools (Aided Places)
    Mr. Armstrongasked the Secretary of State for Education and Science what communications he has had concerning the provision of aided places in independent schools; and what will be the criteria for selection of pupils for such places.
    Mr. Mark Carlisle: I have had letters from parents and from a number of schools. I shall shortly be consulting the direct grant and independent schools' associations and other bodies about the assisted places scheme. The arrangements for the selection of pupils will be among the matters I shall want to discuss.
    Mr. Armstrong: Is the Secretary of State aware that at a time when schools are being denied basic textbooks, when teachers are threatened with redundancies, and nursery schools are being closed, it is inexcusable to set aside public money in favour of a very small minority? The right hon. and learned Gentleman has not told me how he will select pupils. There is no fair, accurate basis of selection. When he is demanding cuts across the board in education, how can he justify

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    this expenditure on a very small, already privileged minority?
    Mr. Carlisle: I do not accept the right hon. Gentleman's grossly exaggerated account of the effects of the cuts announced by my right hon. and learned Friend the Chancellor of the Exchequer in his Budget Statement. We have been committed throughout to the introduction of the assisted places scheme. We believe that the expenditure on it is well justified by the benefit and the reward that it will bring to the children involved.
    Mr. Beith: Is the Secretary of State aware that in some areas there are no schools of the kind he wants to assist within travelling distance? If some authorities, such as Northumberland, decide that they would rather use the money to improve their own schools, will the right hon. and learned Gentleman give them the money?
    Mr. Carlisle: I am aware that if we start with the existing direct grant schools we do not, at present, have a general geographical spread of those schools throughout the country. It is true that the North-East has few of those schools. But I hope that as the scheme expands we shall be able to bring in an adequate number of schools to provide a good geographical spread.
    Mr. Stokes: Is my right hon. and learned Friend aware that the independent schools are a most important part of our education system, and that the more children who can go to them the better, particularly because of those schools' emphasis on high moral standards and on leadership?
    Mr. Carlisle: I am aware that the independent schools are a necessary sector of our education, providing the opportunity for parents who wish to do so to send their children to them.
    Mr. Kinnock: Further to the answer which the right hon. and learned Gentleman gave my right hon. Friend the Member for Durham, North-West (Mr. Armstrong), has he not heard of the demolition of the nursery school programme in some counties, as a direct consequence of the Chancellor of the Exchequer's Budget measures? Does he not know that peripatetic education is about to cease in many of those areas?
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    Will he take this opportunity to confirm or deny the press reports that he will set aside £50 million for the programme of assisted places? Is not this simply a back door method of subsidising schools that are already well-endowed?
    Mr. Carlisle: It is true that one of the cuts I made in the education budget was in the school building programme for nursery education. But I should make it clear that, far from reducing the number of nursery school places available, as the hon. Gentleman and his right hon. Friend the Member for Durham, North-West (Mr. Armstrong) have suggested, the effect of that cut is to provide for an additional 4,000 places to be started in this year rather than an additional 6,000 places. Therefore, it is not a reduction; it allows for an increase.
    Secondly, the scale of implementation of the scheme is still being considered by my Department. Clearly, it is dependent on the economic situation.

    Further Education
    Mr. Flanneryasked the Secretary of State for Education and Science what progress he has made in his review of education and training for 16- to 18- year-olds.
    Mr. Kilroy-Silkasked the Secretary of State for Education and Science what progress he has made in his review of education and training for 16- to 18- year-olds.
    Mr. Macfarlane: The Government are taking stock of the response from outside bodies to the consultative paper issued on 5 February 1979 by the previous Administration. I am also in the course of meeting various interested parties. An announcement about the two consultative papers issued on 5 April 1979 will be made before the recess.
    Mr. Flannery: Large numbers of young people between the ages of 16 and 18 will be leaving school to go straight on to the scrap heap. The cost of that, although it is far less than they would receive if they were working, is great. Has the Minister given consideration to providing any inducement to those young people to stay on at school? Is he, for example, thinking out

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    some form of educational maintenance allowance to keep the young people in education?
    Mr. Macfarlane: The hon. Gentleman is right to highlight some of the problems that the country will face in the next few months in this respect. We do not underestimate them. The review is being conducted by the Departments mainly concerned—the Department of Education and Science, the Department of Employment, the Scottish Office and the Welsh Office. I can give the House the assurance that there will be the fullest possible consultations before any conclusions are reached.
    Mr. Thornton: Does my hon. Friend agree that the problem is not confined to the 16–18 age range? Should we not be attacking it and the relevant problems of youth unemployment at a much earlier age, improving careers guidance and curriculum input from the age of about 12 or 13?
    Mr. Macfarlane: I cannot disagree at all with my hon. Friend's comments. My right hon. and learned Friend and other Ministers are reviewing the matter very closely.
    Mrs. Ann Taylor: The previous Government gave a commitment that every school leaver would have a job or be in training by Easter of the following year. Are the present Government willing to stand by that commitment?
    Mr. Macfarlane: May I first welcome the hon. Lady to her rightful position on the Opposition Front Bench? The three programmes which the previous Government announced earlier this year were acknowledged by the present Government at the earliest opportunity, soon after the general election. But the reports resulting from the various consultations that will now take place will not be acknowledged until the autumn of this year. We intend to maintain that timetable, and then we shall be in a position to report to the House.

    Selection
    Mr Meacherasked the Secretary of State for Education and Science if he will publish a White Paper on his policy on educational selection.
    Mr. Mark Carlisle: No, Sir. Our policy is to restore to local education authorities the freedom they had before the passing of the Education Act 1976 to determine the best pattern of secondary provision for their own areas.
    Mr. Meacher: In order to test the system of retained selection that the right hon. and learned Gentleman is now implementing, will he institute research to compare the educational and social performance of pupils in the secondary modern schools that he is now keeping on with those of equal ability in the comprehensive schools? Or is the right hon. and learned Gentleman's ideological commitment to parental choice—that is, class choice—so great that no amount of empirical evidence will dissuade him?
    Mr. Carlisle: I cannot see the connection that the hon. Gentleman attempts to make between class choice, as he calls it, and parental choice. Our desire is to extend parental choice as widely as possible to parents of all classes, as he would say. I do not think that it is necessary to do the research for which the hon. Gentleman asks. There is considerable evidence now available about the various schools. Certainly, I shall consider evidence from the hon. Gentleman if he puts it to me in writing.
    Mr. Gummer: Does my right hon. and learned Friend agree that many local authorities, such as my own in Suffolk, which are in favour of comprehensive education and have a fully comprehensive system still welcome the fact that he is returning to local authorities the right to decide what is the best system for their own areas, rather than be dictated to by his Department?
    Mr. Carlisle: I am grateful to my hon. Friend for his comment. As he rightly says, there are many areas that have a fully comprehensive system or wish to go comprehensive and to remain so. That in no way argues against the reason for our Bill, which is to return to local education authorities the right to choose.
    Mr. Kinnock: Was that what the right hon. and learned Gentleman's hon. Friend the Member for Eye (Mr. Gummer) really asked, or was the implication that where established comprehensive systems existed

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    there could be a prospect of, and provision could be made for, the revocation even of those established systems?
    Mr. Carlisle: The hon. Gentleman will have to ask my hon. Friend the Member for Eye (Mr. Gummer) what he meant by his question. I thought that his question was clear and that its implication was clear. I gather that the hon. Gentleman is asking something wider, using my hon. Friend's question as a basis for asking whether local authorities will be able, if they wish, to change their present systems if they are now comprehensive. The answer to that in general terms is "Yes", in that local education authorities will be free to submit any form of section 13 proposals that they wish, and those proposals will be considered on educational merits.

    Nursery Education
    Mr. Charles R. Morrisasked the Secretary of State for Education and Science what proposals he has had from the Oldham local education authority for improvements in the provision for nursery school education in the Failsworth area of the Oldham local education authority.
    Mr. Macfarlane: The Oldham local education authority has not yet submitted a bid for resources under my Department's 1979–80 nursery education building programme. However, I understand from the authority that it is planning to provide a new nursery unit at St. Mary's R.C. infants school, Failsworth, out of resources made available under the 1979–80 urban aid programme.
    Mr. Morris: Is it not appalling that provision of nursery school education in the Failsworth area should depend on the incidental availability of inner city funds? Bearing in mind the contribution that nursery education makes to the future academic well-being of all children, will the Minister encourage his right hon. and learned Friend the Secretary of State to re-think the appalling statement made this afternoon with regard to nursery school provision generally?
    Mr. Macfarlane: If the previous Administration had left this country in some economic shape the programme could, perhaps, proceed within the resources we would like to see made available. I tell the right hon. Gentleman, before his synthetic indignation goes further, that statistics
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    show that 16·5 per cent. of 3-year-olds and 4-year-olds within the Oldham local education authority are receiving nursery education. The equivalent percentages are 12·5 per cent., for all non-metropolitan boroughs, and 17 per cent. for England as a whole.
    Mrs. Kellett-Bowman rose—
    Mr. Speaker: Order. I shall call the hon. Lady, but she should realise that her question must relate to Oldham.
    Mrs. Kellett-Bowman: It is adjoining, Mr. Speaker. I intended to ask—
    Mr. Speaker: Order. There is yet another area adjoining that.
    Mrs. Kellett-Bowman: Does the Minister agree that the most cost-effective way of providing nursery school places in Oldham, as in other areas, is by the addition of nursery classes to primary schools rather than by building new nursery schools? As rolls are now falling, particularly in the North-West, will he encourages local education authorities to do just that?
    Mr. Macfarlane: This subject was touched upon at Question Time in May. It is one of the matters that the Department of Education and Science is currently considering. This is undoubtedly an area at which we could look to try to ensure that local authorities and schools can convert existing places in primary schools into nursery classes.

    Warnock Committee
    Mr. David Atkinsonasked the Secretary of State for Education and Science what consultations he has had with local education authorities on the recommendations of the Warnock committee.
    Dr. Boyson: Under the consultative arrangements made by the previous Administration, written comments have been received from the national organisations representing local education authorities in England and Wales and 16 individual authorities.
    Mr. Atkinson: Does my hon. Friend agree that the utmost priority must be given to satisfying the educational needs of handicapped and disabled children? When can we expect the White Paper on the Warnock report?
    Dr. Boyson: Consultations have already been very wide. Six thousand copies of the consultative document were sent out and over 300 replies received, all of which must be examined. Many came from associations that have made a great voluntary effort on behalf of children who are handicapped, mentally or physically. It is our intention to look at all the comments and contributions coming back to us and then to decide, within the financial resources available, what we can do to put into practice the 225 recommendations—quite a lot—in the Warnock report.
    Mr. Frank Allaun: Will the Minister firmly deny that there is any proposal to reduce the school leaving age of 16?
    Dr. Boyson: I have never heard or taken part in discussions over the past six weeks regarding the reduction of the school leaving age. We indicated before the election that we would look favourably at the proposal that pupils could leave in their sixteenth year when they had jobs involving some form of further education, including apprenticeships and the boys' Services. As this will require legislation, it is not an immediate project.
    Mr. Sims: In considering the implications of the Warnock report, will my hon. Friend take into account the fact that conventional age limits are not relevant where mentally handicapped children are concerned? Such children often need education after the usual school leaving age. Local authorities may need assistance for this purpose.
    Dr. Boyson: I take the point of my hon. Friend. The previous question was not related to the Warnock report. My hon. Friend makes the point that it is normal for children suffering physical and mental handicap to stay one or two more years at school. This is a matter that I believe all local authorities and the Government will encourage to enable those children to obtain some form of useful employment.
    Mr. Cryer: Does not the Minister's wet verbiage indicate that behind his utterances lies the fact that the money for special schools will be reduced, along with that for nursery schools? Is he aware that today is the NUT's day of action on nursery schools? Will he accept that his actions and his words will
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    be shown to be those of a class Government, prepared to produce £50 million for the independent, privileged sector of education for the sons and daughters of the better-off? This is the action of a class Government riddled with class attitudes.
    Dr. Boyson: If I may reply to the longwinded and dry verbiage of the hon. Member for Keighley (Mr. Cryer), my hon. Friend has indicated that there is no reduction in the nursery programme. There is only a reduction in an increased nursery programme. [Interruption.] The literacy of Labour Members may be low but the figures indicate that more children will be in nursery schools and nursery classes at the end of this year than now. Within the money available, there is no doubt that we shall do our best for children below the school leaving age, and also for children of school leaving age and over, who are mentally or physically handicapped.

    Staffing Ratios
    Mr. John Evansasked the Secretary of State for Education and Science whether the effects of the Budget will mean a rise or fall in education standards and staffing ratios in primary and secondary schools.
    Mr. Mark Carlisle: The effects will depend mainly on decisions to be taken by individual local authorities.
    Mr. Evans: Will the Minister accept that his answer is appalling? He has surely heard statements by a number of directors of education to the effect that retiring teachers will not be replaced, that nursery schools will have to close, that specialist posts will not be filled and that, in some cases, new textbooks will not be purchased. Does he agree that the effect of the Budget will be a reduction in education standards?
    Mr. Carlisle: My original answer was accurate. It is for the local education authorities to decide what is the effect of the reduction of £300 million in the rate support grant. The need for the £300 million cut in the rate support grant was due to our inheritance from the present Opposition. Since over 50 per cent. of local expenditure goes on education, I accept that education is bound to share some part of that cut. I accept

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    that this is bound to have some effect on education. What the exact effect will be I cannot, at this stage, say. It is for the local education authorities to decide their own priorities.
    Mr. John Townend: Is my right hon. and learned Friend aware that in many areas there is considerable scope for economies in non-teaching staff—particularly among cleaners and school meals staff—which would not affect education standards?
    Mr. Carlisle: I am fully aware that the types of economies made by different local education authorities will vary from place to place.
    Mr. Newens: Does the Secretary of State recognise that reductions in the number of staff which will inevitably follow Government policy will greatly reduce the choice of subjects open to pupils, particularly in comprehensive schools? If schools are obliged, for example, to cut out two languages in the sixth form, will not this amount to a reduction in standards in comprehensive schools, against which Conservative Members have been clamouring?
    Mr. Carlisle: I recognise that there will be some reduction in the number of staff. The effect of that will depend upon the deployment of existing staff. In view of the tenor of many of the questions from Opposition Members, I remind them that they are being somewhat hypocritical, because in one year the Labour Government cut £900 million off the proposed education budget.

    Nursery, Primary and Special Schools
    Mr. Beithasked the Secretary of State for Education and Science what restriction of facilities and services in the nursery, primary and special school sectors he expects to result from the cuts that he has proposed.
    Mr. Mark Carlisle: This will depend mainly on decisions on current expenditure taken by individual local authorities. In addition, there will be fewer resources for the provision of new nursery places and for the renovation of old primary and special schools as a result of reductions in capital expenditure approved by my Department.
    Mr. Beith: Does the Secretary of State envisage that local authorities will take the sensible step of using unwanted classroom accommodation in village schools for nursery classes since the rate support grant cuts will bear heavily upon education expenditure?
    Mr. Carlisle: I hope that as the numbers in primary schools fall there will be better opportunities to take more of the rising fives into the primary schools. It is cheaper to convert existing primary school accommodation into nursery classes than it is to build nursery schools. I hope that such conversions will take place on a greater scale.
    Mr. Barry Jones: Will the right hon. and learned Gentleman get back to the Cabinet and fight for more money for our schools? Has he heard of the disgraceful proposal by my local education authority to close 52 nursery units and nursery schools? Is it not most unjust that rich people should prosper from the Budget when youngsters do not have the chance to go to a nursery school?
    Mr. Carlisle: I have never denied that cuts in education expenditure are bound to have some effect on education provision. The hon. Member should keep the matter in perspective. There is a reduction in capital expenditure on nursery education from £5·9 million to £4 million. That will still allow for the provision of 4,000 additional places. That figure must be compared with the previous Government's expenditure on nursery school building programmes. The expenditure in 1978–79 was £4 million, but it was only £2·7 million in 1977–78.
    Mr. Nicholas Winterton: When the Secretary of State discusses with the local authorities the effects that public expenditure cuts will have on education, will he impress upon them the need to try to minimise the effect of the cuts on the special provision for the handicapped, particularly in secondary education? I refer specifically to units for those with partial hearing, one of which is provided at a school in Cheshire.
    Mr. Carlisle: I am aware that there is a school for those with partial hearing in my hon. Friend's constituency. This is a matter for local education authorities. I must leave it to them to decide their priorities.

    Overseas Students
    Mr. Christopher Priceasked the Secretary of State for Education and Science what estimates he has made of future numbers of overseas students at institutes of higher education in the United Kingdom, in the light of the recent increases in fees.
    Dr. Boyson: The current estimates of future numbers of overseas students at institutions of higher education have not been revised as a result of the recent increase in fees.
    Mr. Price: Is the Minister aware that the massive increase in fees will almost inevitably mean more empty places in polytechnics and other institutes of higher education? Is he aware that students from the Third world will go to other European countries, where no fees are charged, instead of coming to Britain? Does he accept that the increase will result in higher education facilities in the United Kingdom being used less efficiently? What will the Minister do about it?
    Dr. Boyson: I disagree with the hon. Member. In 1977–78, when the Labour Government increased fees by between 40 per cent. and 100 per cent., the number of foreign students coming to this country for higher education did not decrease. That increase in fees stabilised the numbers. The number of foreign students attending higher education establishments increased from 24,000 in 1970–71 to 57,000 today. All foreign students attending our universities are subsidised by at least 60 per cent. by the British taxpayer.
    Mr. Kershaw: Is it not unfair to make the increase retrospective or even immediate? Will my hon. Friend consider the hardship that the increase will cause?
    Dr. Boyson: There is a hardship fund which will be used in the universities. Similar provision will be made through the rate support grant for the polytechnics. This will assist those students for whom my hon. Friend expressed anxiety.

  PRIME MINISTER (ENGAGEMENTS)
  Mr. Brothertonasked the Prime Minister if she will list her official engagements for Tuesday 3 July.
  The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. After Question Time I shall be making a statement about the Tokyo economic summit and my subsequent visit to Australia. Later today I shall be meeting President Turbay of Colombia and this evening I shall be the host at a dinner for him.
  Mr. Brotherton: May I be the first to welcome my right hon. Friend on her safe return and to welcome her remarks about sanctions, made in Australia? Will my right hon. Friend give further thought today to the question of Rhodesia and muse on the speed with which the Government recognised the new Government in Ghana compared with their failure to recognise the Government in Rhodesia? Can it be that we consider that Flight Lieutenant Rawlings is more acceptable to the people of Ghana than the bishop is acceptable in Salisbury?
  The Prime Minister: I can give my hon. Friend a reply, but I am not certain whether he will find it entirely satisfactory. The two situations are different in that when it comes to a new Government in an independent country such as Ghana—which received independence many years ago—the only question is whether one recognises the new Government. That depends upon certain accepted criteria. When considering Rhodesia, the question is not one of recognition of the regime but of returning it to legality. It is that which takes longer.
  Mr. Faulds: Will the Prime Minister find time to contemplate the wisdom of listening to the advice of her Conservative colleagues, such as the Prime Minister of Australia, who wish to restrain her impetuosity in recognising an unacceptable and fake Smith-Muzorewa set-up in Rhodesia?
  The Prime Minister: The hon. Member cannot have listened to what I said. The question is of returning Rhodesia to legality. It is our objective to do that with as wide international recognition as possible. That is why so much activity

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  is taking place. Lord Harlech is visiting many countries to see how best we can proceed with that objective.
  Mr. Aitken: When thinking of recognising new Governments, will my right hon. Friend give some thought to changing what she described as the accepted criteria? Does my right hon. Friend agree that when any Government are embarked upon a wide campaign of brutal executions—whether in Iran, Ghana or anywhere else—it is wiser and more acceptable to the British people at least to withhold recognition?
  The Prime Minister: We are certainly prepared to consider the criteria for recognition. There was considerable concern about the recognition of Ghana. The recognition was made just a few hours before all those terrible executions which I have continued totally and utterly to condemn.
  Mr. Skinnerasked the Prime Minister what are her official engagements for 3 July.
  The Prime Minister: I refer the hon. Member to the reply which I have just given to my hon. Friend the Member for Louth (Mr. Brotherton).
  Mr. Skinner: Is the Prime Minister aware that after about only two months in office she has fallen victim to the dreaded Leaders' disease known as "summititis" and preaching policies abroad which she is not prepared to practise at home? Is it not true that, while she has been giving a nod and a wink to the world's leaders about international planning on energy, dole queues and other matters, at home she is on the side of the oil barons, the petrol suppliers and all those who are profiteering at the expense of the motorist? Will the real Tory stand up and answer today?
  The Prime Minister: May I assure the hon. Gentleman that my pithy comments do not change whether I make them at home or abroad.
  Mr. David Price: Will my right hon. Friend take time today to discuss with her Private Office the acceptance of questions to the Prime Minister of a general nature, as used to be done by her predecessors? It was not the practice when the previous Labour Government were in power, and consequently there
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  have been nothing but questions with regard to her engagements. Will she revert to the practice of answering general questions about Government policy?
  The Prime Minister: I am prepared to consider any complaints put to me and I am quite prepared to answer any questions.
  Mr. Whitehead: Reverting to the question of Zimbabwe—Rhodesia, as the Prime Minister thought aloud, in her after-dinner diplomacy, about the question of raising sanctions, is she also prepared to say what concessions she would require from the Muzorewa regime before she would consider it to have returned to legality.
  The Prime Minister: Lord Harlech is discussing with the Muzorewa regime today just those issues. I believe it would be premature to make any statement about them.
  Mr. George Gardiner: The Prime Minister will doubtless have given some thought today to the question of the safety of Her Majesty the Queen when she attends the Lusaka conference. Though nobody would expect an answer on this matter in the context of Prime Minister's questions, will my right hon. Friend take into account the fact that the anxiety of the British people is not confined to Her Majesty's planned presence in Lusaka but extends to her tour of the African States starting on 19 July? The tour includes three of the States involved, quite openly, in hostilities with the Government of Zimbabwe—Rhodesia.
  The Prime Minister: Let me make it quite clear that the Queen will go unless advised not to. In tendering that advice I obviously have to wait for the latest up-to-the-minute reports. We are very anxious that the Queen should be able to undertake these visits and we shall weigh our judgment and our advice very carefully.
  Mr. James Callaghan: May I revert to the question of the lifting of sanctions on Rhodesia? Will the Prime Minister explain further what she means by saying that it is premature to make a judgment or any statements on Lord Harlech's visit? Has she not already done so in Australia—or was she incorrectly reported—when we understood her to

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  say that sanctions would have to be lifted in November because the Conservative Party would not stand for it? Whatever her views about that, was that not, in fact, foreclosing on Lord Harlech's visit?
  The Prime Minister: As I understood it, the question asked by the hon. Member for Derby, North (Mr. Whitehead) was about a return to legality. The hon. Gentleman will correct me if I am wrong. The question I was answering was about sanctions and I made the very realistic observation that there was very considerable doubt about whether an order for the renewal of sanctions would go through this House in November.
  Mr. Callaghan: As regards the question of voting, may I say to the right hon. Lady that she will have the full support of the Labour Party if she introduces an order to continue sanctions? Concerning the more general point was it not a great mistake on her part, before she actually goes to Lusaka to give an indication of that sort, in view of the fact that, if she is not very careful, she will find herself isolated, Britain will find itself isolated, and the interests of this country will be put at great risk as a result of what she calls her "pithy comments?"
  The Prime Minister: The right hon. Gentleman will not be surprised if I disagree with him completely. That is why we are making such strenuous efforts now to consult other countries, in order to try to bring Rhodesia back to legality. If we are successful, of course, the basis of sanctions will go. If we are not successful, we shall face a very difficult situation in November to which I referred, accurately and realistically, in answer to a similar question in Canberra.
  Mr. Mellor: Will my right hon. Friend find time today to read the report by the right hon. Member for Huyton (Sir H. Wilson) which called for tax concessions for film stars and others in the film industry? Is the Prime Minister at all concerned as to the correctness of our policy on tax cuts, having regard to their apparent endorsement by the right hon. Gentleman.
  The Prime Minister: I did read some comments by the right hon. Member for Huyton (Sir H. Wilson) during the general
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  election and I thought they were extremely good.
  Mr. John Evansasked the Prime Minister if she will list her official engagements for 3 July.
  The Prime Minister: I refer the hon. Member to the reply I gave earlier.
  Mr. John Evans: Will the Prime Minister give a little thought, during her busy schedule, to the accelerating rate of inflation which is so worrying the British people? Will she confirm that, because of her Budget measures and her failure on European farm prices, and as a result of the latest oil price rises, inflation in Great Britain will be running at 20 per cent. by Christmas?
  The Prime Minister: I cannot confirm any particular figure, but I would remind the hon. Gentleman that, because of the butter subsidy, there will be a very considerable reduction in the price of butter.
  Sir Nigel Fisher: Following the question raised by my hon. Friend the Member for Reigate (Mr. Gardiner) about the Queen's visit to Lusaka, will my right hon. Friend consider following the precedent set by the Queen's visit to Ghana in 1961? Under similar circumstances the then Mr. Macmillan sent out the Commonwealth Secretary, now Lord Duncan-Sandys, to Ghana to check personally on the security arrangements there and report back to the Cabinet with his advice. Will the Prime Minister consider sending the Foreign Secretary to Lusaka with the same objective, to assess the situation personally?
  The Prime Minister: I shall, of course, consider the suggestion of my hon. Friend. I think that perhaps the situation is just a little different in Zambia now from what it was in Ghana. I recollect the arrangements that were made then. The decision I have to make is a very different one because one must satisfy oneself about the security arrangements right up to the time just before Her Majesty leaves and the likelihood of safe security arrangements during the whole of her stay. I shall take all possible measures to see that they are secure enough so that I may advise Her Majesty to go.
  Later—
  Mr. English: On a point of order, Mr. Speaker. I am sorry that I have been unable to give you notice of my intention to raise this point of order, but the matter with which it is concerned has only just arisen. There is a well-established constitutional convention that Her Majesty takes the advice of the Commonwealth Government within whose territorial jurisdiction she will be. In the light of the Prime Minister's answer, if the Zambian Government said one thing and the right hon. Lady said another, I am not clear what Her Majesty would be supposed to do.
  Mr. Speaker: Quite clearly, that is not a question that I can answer. We must move on to the private notice question.
  Mr. Stallardasked the Prime Minister if she will list her official engagements for 3 July.
  The Prime Minister: I refer the hon. Member to the reply which I have given previously.
  Mr. Stallard: Will the right hon. Lady find time today—it will not take too long—to visit the Elizabeth Garrett Anderson hospital, which is not very far from here, to meet the staff there, who will tell her of their very grave concern at what appears to be collusion between officials of the DHSS and the area health authority to thwart the right hon. Lady's firmly-held conviction, stated in the debate on the Gracious Speech, that this hospital should be saved and remain a viable unit?
  The Prime Minister: As the hon. Gentleman knows, I am very anxious that the Elizabeth Garrett Anderson hospital should continue. The plan was that it should continue as a specialist hospital for disorders affecting women. There are a number of other small specialist hospitals which continue, and it is absolutely vital that these specialist hospitals should have the back-up of a nearby general hospital. We had hoped in this case that that would be University College hospital. There now seems to be some doubt about that, and my hon. Friend the Minister for Health will certainly consider the matter with it. It has put up an alternative plan, but I must make it quite clear that I wish the Elizabeth Garrett Anderson hospital to continue.
  Mr. Onslow: If my right hon. Friend has not had time to do so already, will she make time today to study the comments on output and productivity, and the proper role of trade unions in this country, made by Mr. Joe Gormley in her absence?
  The Prime Minister: I shall certainly look at them. I have heard about them and they seem to be eminently sound in that a rising standard of living will come only from increased output. We should have as high output per person as any other country.
  Mr. Grimond: As the most frightful barbarity going on in the world today is the behaviour of the Vietnamese Government, can the Prime Minister give us any hope that some notice will be taken of her pleas to the United Nations that the nations of the world should do something about it? Has she any reason to suppose that the Communist nations of the world are bringing any pressures to bear on the Vietnamese or are taking any of the refugees?
  The Prime Minister: I wholly agree with the right hon. Gentleman that Vietnam should be condemned totally and utterly for its appallingly inhuman and callous conduct in expelling these people. I have said that wherever I have been in the world. As the right hon. Gentleman will hear in a moment, I mentioned it to Mr. Kosygin when I saw him, but I am bound to tell the right hon. Gentleman that I got precious little encouragement for my views when I urged him to bring pressure to bear on Vietnam to cease to expel these people.

NICARAGUA (AID)
Mr. Shore(by private notice) asked the Lord Privy Seal what further aid he proposes to make available to Nicaragua through the International Committee of the Red Cross in the light of grave and worsening food shortage.
The Minister of State, Foreign and Commonwealth Office (Mr. Neil Marten): As the right hon. Gentleman will know, we provided £50,000 for the local purchases of relief supplies in September 1978. We are now urgently considering, in the light of the most recent reports from Nicaragua, the question of further aid.
Mr. Shore: I am most grateful to the Minister for that reply, as will be my right hon. Friend the Member for Lanark (Dame Judith Hart), who would have been here to ask the question had she been able.
Can the Minister confirm the report of the Red Cross in Managua that at least 100,000 refugees in the capital alone are now being supported by the IRC and that supplies of food and medicine are exhausted? Have approaches for food and, above all, for air transport to carry it, been made to the Government? If so, what response has the Minister made? Finally, since all these events are the direct consequence of a civil war which has been waged with great brutality by the Somoza forces, what discussions has he had with the United States and other Governments about such steps, including withdrawal of credits, as are needed to bring about a change of Government and an end to the fighting?
Mr. Marten: I am afraid that I cannot confirm the Red Cross reports which were in the papers today. We have no resident mission in Nicaragua, it having been closed in 1975. We therefore have no first-hand information, but we certainly do not dispute the gravity of the situation.
On air transport, we understand that the International Committee of the Red Cross, while it has not specifically appealed for food, has chartered two aircraft for at least one month. British aircraft are in the area, and we are considering using them. The question of discussions with the United States and the International Monetary Fund is one for my right hon. Friend the Chancellor of the Exchequer.
Mr. John Wells: How many British subjects are there in the country, and what steps are being taken for their safety?
Mr. Marten: As we have no mission there, it is extremely difficult to say how many British subjects are in the country. I understand that the number is very few. I understand, too, that three or four technical co-operation officers have recently been withdrawn.
Mr. Newens: I fully recognise the desirability of giving aid to the victims
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of this terrible civil war, but will the Minister make clear that, given the appalling record of torture and repression of the Somoza Government, the British Government will give them no aid whatever to remain in power?
Mr. Marten: Her Majesty's Government deplore President Somoza's inhuman actions and hope that a truly democratic Government will be installed quickly in Nicaragua.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call the four hon. Members who have been rising to speak.
Mr. McCrindle: Will the Minister say how many international organisations have condemned the present regime in Nicaragua? How many of those organisations have been prone to follow that through by offering international support and succour to the people in that country?
Mr. Marten: The European Economic Community made a declaration calling for an end to the fighting and the installation of a democratic Government. The United Nations condemned the flagrant abuse of human rights in December, and the United Kingdom supported that resolution. The Organisation of American States passed a resolution on 23 June calling for the immediate and definitive replacement of the Somoza Government, the installation of a democratic Government including the main Opposition groups, and free elections to be held as soon as possible.
Mr. Maclennan: In countries where Britain is not represented with a diplomatic mission it is normal to have our affairs looked after by some other mission. Is that the case here? If so, which country is looking after British interests in Nicaragua? Has the Minister had contact with any other diplomatic mission, particularly about the interests of British residents?
Mr. Marten: I feel sure that there are contacts, although I cannot directly answer that question. The new ambassador in Costa Rica, which is practically next door to Nicaragua, was appointed in May 1979 but has not been accredited to Nicaragua.
Mr. Kershaw: Is my hon. Friend aware that, in spite of having no regular diplomatic representation, the British honorary consul in Managua has been doing sterling work? Is he further aware that Nicaragua has about the size and population of a normal English county? Surely the international brotherhod ought to be able to get together to deal with a problem of that size.
Mr. Marten: The International Committee of the Red Cross is trying to deal with exactly that situation.

TOKYO SUMMIT MEETING
The Prime Minister (Mrs. Margaret Thatcher): With permission, Mr. Speaker, I will make a statement about my visits to Tokyo and Canberra.
On the way to Tokyo we refuelled in Moscow and the Soviet Prime Minister, Mr. Kosygin, came to the airport to meet us. We had about one-and-a-half hours' discussion, during the course of which I impressed on him our deep concern about refugees from Vietnam and asked him to intervene with the Government of Vietnam. He did not give us much encouragement in this respect, but I remain firmly of the view that the refugee problem must be tackled at its source as well as by resettlement. I also told Mr. Kosygin that Her Majesty's Government hoped that SALT II would be ratified.
The Tokyo summit met against a background of rising inflation and higher oil prices, and this was underlined by the decision which OPEC made during the course of the Tokyo summit to raise oil prices still further. I am glad to report that the summit faced this situation realistically. We were all determined not to print money to compensate for the higher oil prices and we were united in feeling that if we were resolute in restraining demand for oil in the short term we had all the skills and incentives to enable us to reduce our dependence on uncertain sources of supply in the longer term.
We welcomed and took full account of the decisions reached by the European Council in Strasbourg the previous week, and we agreed upon action designed to align the decisions taken at Strasbourg with corresponding decisions taken at Tokyo by the United States, Japan and Canada.
The United Kingdom, France, Germany and Italy agreed to recommend to their Community partners that each member country's contribution to the Community objective of maintaining oil imports between 1980 and 1985 at an annual level not higher than in 1978, should be specified. The United States took as a goal its import level for 1977, and Japan and Canada goals relating to their particular supply position. There was also general agreement that domestic oil prices should be at world market levels.

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We agreed on a number of measures to ensure that we are better informed about operations in the oil markets.
The summit made it clear that the industrialised countries are ready to co-operate with oil producers in defining supply and demand prospects in the world oil market. I believe that such discussions could make a valuable contribution to the future stability of the oil market. We also discussed the position of the non-oil developing countries, which will be hardest hit by rising oil prices.
Finally, we stressed the importance of developing to the full existing and new sources of energy as alternatives to oil. We saw a special need to expand, with safety, nuclear power generating capacity. Without this, the prospect for growth and employment would be bleak.
The summit also issued a special statement about the plight of Indo-Chinese refugees.
This was rightly a summit which concentrated mainly on energy, and I believe that the fact that we could take these decisions together will contribute significantly to achieving our objectives in both the short and longer terms.
Apart from the formal business of the summit, the presence of the seven Heads of Government in Tokyo provided the opportunity of more informal discussions on matters of mutual concern. I had bilateral meetings with President Carter and with the new Prime Minister of Canada. There were also discussions between the European Members of the summit.
From Tokyo I went to Australia for two days and had talks with Mr. Fraser and his colleagues. The last time a British Prime Minister in office had paid such a visit was in 1958, and I was particularly glad to be able to visit Australia so soon after becoming Prime Minister myself. I was able to give Mr. Fraser an account of the Tokyo summit and we discussed a number of other matters of mutual concern.
During my return journey from Canberra to London, I stopped at Bahrain and had a valuable discussion at the airport with the Prime Minister, Sheikh Khalifa, who welcomed the declaration on the Middle East issued by the Nine EEC countries on 18 June.
Mr. James Callaghan: May I welcome the right hon. Lady's return after what has been an arduous journey—despite the fact that she deprived me of a visit to Australia this year? [AN HON. MEMBER: "Let us have a whip round."] Well, there may still be an opportunity.
Concerning the proposals to restrain demand for oil, I note from the Prime Minister's statement that different countries are taking a different base year. They are taking a different end year. Some countries are not stating their targets for the intervening years. It is a rather peculiar form of alignment. Will the Prime Minister explain to us a little more in what way the decisions have been aligned?
Secondly, may I ask the Prime Minister whether the Heads of Government were all exhausted at the end of this alignment? It is clear from the statement that there are no practical proposals for the consequential effects that will come to the world, and particularly to this country, as a result of the Government's policies. Whether they are right or wrong, the Government's policies will, during the next 12 to 18 months, lead to higher unemployment, less investment, no growth, as far as one can see, and higher inflation. The Government were not elected to achieve all that.
In view of the additional burden that the world now has to bear, may I ask the right hon. Lady what the Government's polices are to overcome these difficulties in the short run? Or are the Government just proposing to sit back and allow these things to happen during the next 12 months, with the consequential divisions?
My next question concerns the Government's proposals on oil tax. The position has been altered drastically by the decision of the OPEC countries. Do the Government propose, despite that, to continue with the Excise duty and the VAT that they are now putting on in the Budget, which I am told will amount to another 10p a gallon? That is surely a self-inflicted wound. Will the Government reconsider that?
I want to ask the right hon. Lady next about coal and nuclear power. We have a massive reserve in our energy supplies at present, probably amounting to up to 30 per cent. May I therefore urge the right hon. Lady and the Government to

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proceed with caution and to emphasise the need for safety, despite the pretty successful operation of the PWR system, and to moderate her enthusiasm for going ahead with large-scale development of nuclear energy, in view of the substantial reserves that we have? We must, of course, proceed at a steady pace, but there is no need for a rush programme on this.
Finally—[Interruption.] It is all very good stuff. Finally, I note the right hon. Lady's words and the words of the communiqué to the effect that
"We are deeply concerned about the millions of people still living in conditions of absolute poverty. We will take particular account of the poorest countries in our aid programmes".
What did the right hon. Lady feel like when she signed that, in view of the £50 million cut in our aid programme?
The Prime Minister: May I try to reply to the right hon. Gentleman's live points? First, I am sure that he will have an opportunity to go to Australia. The Leader of the Opposition there will be very pleased to see him.
Secondly, with regard to aligning the import targets, yes, it is difficult, for the simple reason that different countries have separate difficulties and different base years. The right hon. Gentleman will remember, for example, that at the Bonn summit Germany was advised by the other countries represented there to expand. That gave her larger oil imports in order to carry out the expansion. Other countries had particularly cold years. One of the difficulties of defining specific import targets is that to do so effectively and to take into account the different countries' needs they may well have to choose different base years, and they did.
Countries also have different problems in meeting the targets. This is a target for imports of oil. Some can meet their targets more easily, as we can because we have a new source of supply. Others can meet it more easily by a certain amount of switching to coal. Others have no indigenous sources of oil and therefore they are in more difficulty. We aligned the targets as far as we could. One must be realistic about these things. We should not have got that kind of agreement unless we were able to take into account the interests of different countries.
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Thirdly, on oil tax, I am not certain what the right hon. Gentleman is proposing. If he is suggesting that we should lower the tax on petrol, it seems to me that that would be the most rapid way of increasing the demand for oil.
Fourthly, concerning coal and nuclear power, the right hon. Gentleman and I would agree on the excellent performance of our nuclear inspectorate. This country has always given top priority to safety. I do not think that any lives have been lost, either here or overseas, as a result of the generation of electricity from nuclear power. I entirely agree that top priority must be given to safety. I disagree with the premise of the right hon. Gentleman if he is saying that we can get through without having a much larger nuclear energy programme. Out supplies of oil will not last indefinitely, and I believe that we shall have to have a larger nuclear energy programme.
Finally, with regard to poverty, we issued a statement, which was part of the communiqué, deploring the increase in the OPEC prices, because it will hit the developing countries particularly badly. Perhaps the right hon. Gentleman will remember that the previous Government also cut the overseas aid programme by about £50 million. That was a larger percentage cut of the aid programme than we have made.
Mr. David Steel: Given the restraints on oil supplies mentioned in the statement, how did the Prime Minister explain to her colleagues what merit there was in the decision of the United Kingdom Government to allow British Petroleum to export North Sea oil to South Africa under a swap arrangement which will inevitably lead to increased supplies to Rhodesia? Does she agree that it is difficult to think of any one decision that runs counter to so many policies of British interests at one go?
The Prime Minister: That is a swap arrangement in circumstances that ensure that the swap oil will not go to Rhodesia, and that was made very clear.
Mr. Haselhurst: Was there any discussion in Tokyo about the nuclear fusion project? In the light of recent events, should not more resources now be devoted to that as a matter of urgency?
The Prime Minister: On the nuclear fusion project, no, there was no particular discussion, but we agreed generally that because twice in a decade the world had been vulnerable to sudden sharp increases in oil prices we must do everything that we could to release ourselves from that vulnerability by finding alternative sources of energy. We all came to the conclusion that, much as we would like solar energy projects, tidal energy projects and various other things, nuclear energy was the answer.
Mr. Molyneaux: Does the Prime Minister agree that the problems that she describes make it all the more necessary to ensure that the resources of the United Kingdom, particularly North Sea gas, are available in all parts of the United Kingdom?
The Prime Minister: It would obviously help very much if they were so available, but we have to consider the cost of making North Sea gas available against the cost of providing alternative sources of energy.
Mr. Grylls: Since, during her visit to the Far East, my right hon. Friend quite rightly called for international pressure to stop the abhorrent policies of the Vietnamese Government over the boat people, does she not think it right now to cancel the deal set up by the previous Labour Government, whereby Britain is to give the Vietnamese three cargo ships, paid for by £4½, million out of the British overseas aid budget?
The Prime Minister: I looked at that matter when we first had the problem with the boat people. The British taxpayer is paying towards those ships for Vietnam. What I found was that it would cost us more to cancel those contracts than to continue them. In the circumstances, therefore, I thought it best to go ahead. There will be no more aid to Vietnam so long as the present circumstances continue.
Mr. Robert Sheldon: Is the Prime Minister aware that the Financial Times has reported her as saying that the increase in oil prices will lead to a reduction in the standard of living of everyone? Is she further aware that later this afternoon we shall be debating the Budget proposals to improve the standard of living
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of those best off in our society? Does she not think that the timing of these proposals is particularly unfortunate?
The Prime Minister: Any country that has to pay a substantially larger sum for one particular commodity that it cannot do without obviously faces a reduction in standard of living unless it can compensate for that reduction by the inventiveness and resourcefulness of its people elsewhere. The tax reductions that will be discussed later today are designed to help people to start up new businesses and to expand old ones—in other words, to use their resourcefulness in a way that will enable us to grow elsewhere.
Mr. Maurice Macmillan: I welcome my right hon. Friend's decision to go ahead with the nuclear programme of building thermal reactors. However, in view of the fact that we cannot export the advanced gas-cooled reactor, will she consider making an early decision to build a prototype commercial fast-breeder reactor at Dounreay, to see whether we can develop that in the same time span as developing the coalfields, to have something to export as well as generating our own electricity?
The Prime Minister: As my right hon. Friend knows, we are pledged to have an inquiry before we go ahead with building a main fast-breeder reactor. I hope that that will get under way without too much delay. It is right that we should have that inquiry in order to reassure people about the project. As my right hon. Friend knows, France has already gone ahead with one—the Phoenix. Perhaps we shall also be able to learn from the experience that France has before we go ahead with one of ours, if the inquiry comes out with such a recommendation.
Mr. Jay: Are the Western countries still pressing for the recycling of OPEC oil balances—for instance, loans from the OPEC Governments to the World Bank and the IMF—which might limit somewhat the threatened deflationary effects on the rest of the world?
The Prime Minister: We recognise that there are very large sums—they are even larger now—to be recycled, and the best way for those sums to be used would be in direct aid to the developing countries, not necessarily through any intermediary. I doubt whether that will occur

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except through an intermediary, but we are very much aware of the point that the right hon. Gentleman raises.
Mr. Tapsell: Could Governments perhaps usefully re-examine the possibility, which has been sympathetically studied in the past by certain member countries of OPEC, of linking the price of oil to an internationally agreed index of manufactured goods prices, so as to avoid, for both, increases in price that are sudden, extreme and disruptive?
The Prime Minister: I think that the main big increases in prices that we have had have occurred because of political events in the Middle East. The first one, the fourfold increase, was because of the Yom Kippur war, and this one was because of a sudden interruption of supplies from Iran. I doubt very much whether my hon. Friend's proposals would deal with those situations. It is ironic that although one experiences severe economic effects from these situations, the cause is not economic but political. It emphasises the need to try to get political stability in the Middle East.
Mr. James Callaghan: Will the Prime Minister please explain what she means when she says that these recycled dollars that arise from OPEC's greater receipts must go to the developing countries? As we shall be one of the largest recipients of these recycled dollars, how does she align this with cutting the aid programme?
The Prime Minister: It would help if those who have enormous increases in income because of the increase in prices gave top priority to letting those increases go to the underdeveloped countries.
Mr. Skeet: Does my right hon. Friend agree that the key to the summit is the control of imports of oil by the United States, and that if the United States does not control it below 8½ million barrels a day there could be disaster for the West? In view of the long lead time necessary to build and commission nuclear power stations, will my right hon. Friend ensure that the Secretary of State for Energy formulates a comprehensive plan now?
The Prime Minister: I agree with my hon. Friend that anything that the European countries could do together could have been cancelled out if it had not been accompanied by the target, to which
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my hon. Friend referred, on the part of the United States, That was why it was so important to get a specific target by the United States and, because she is also a big consumer, by Japan. The nuclear programme takes a long time to bring to fruition. As my hon. Friend knows, the Heysham station has just been ordered, and there is another one at Torness.
Mr. Skeet: They take 10 years to build.
The Prime Minister: I hope that Heysham will be on stream rather before that. We hope that it will first be commissioned in 1986. Of course we are considering future programmes, but we have no statement to make as yet.
Mr. Palmer: The right hon. Lady makes constant references, in a generalised form, to the expansion of the British nuclear power programme. When may we have some firm details? This matter is of great interest to the electricity supply industry, and particularly to the electricity supply trade unions.
The Prime Minister: And of great interest to many of the rest of us, as well. There are no firm details and there can be none before we have properly considered the matter and before we have had an inquiry about the possibility of a commercial fast-breeder reactor. As the hon. Gentleman knows, the two new power stations have just been ordered—one by the previous Government and one by us—to keep the nuclear power industry active. We have not yet come to any decisions about further stations.
Mr. Eldon Griffiths: Does not the disappointing attitude of Mr. Kosygin on refugees make a travesty of the Soviet Union's acceptance of the human rights aspect of the Helsinki Convention? Secondly, while I welcome President Carter's energy target, may I ask my right hon. Friend what chance she gives him, in the present circumstances of the United States, of actually hitting it?
The Prime Minister: My answer to my hon. Friend's first question is that I accept entirely what he says. The attitude towards Vietnam is very revealing, in terms of what Russia meant when she signed the Helsinki accord. The Russian attitude seems to be totally contrary to

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the accord. That is why I believe that we must do all that we can to show that what is happening in Vietnam is Communism in practice.
On my hon. Friend's second point, we felt that if we were very firm at the Tokyo summit it might assist President Carter in trying to get his plans through Congress.
Mr. Geoffrey Johnson Smith: My right hon. Friend told the House that she was fully aware of the fact which I think most of us accept, that any expanded nuclear programme will take time to make its impact. Will she assure the House that she attaches a similar priority to the encouragement of investment in fuel efficiency and conservation programmes that will help to reduce more immediately our dependence on oil?
The Prime Minister: Yes, in the medium term and in the long term I think that that is vital. It is an essential part of any programme to reduce our dependency on oil between now and 1985, and even further on than that.
Mr. Ennals: Further to what the right hon. Lady said about refugees from Vietnam and the condemnation of the Vietnamese Government, can she say a little more on the question whether there were constructive proposals in Tokyo for the settlement of the Vietnamese refugees? At the same time, will she say whether she showed that the British Government would be a little more open and generous in their admission of refugees if it were part of an international settlement?
The Prime Minister: That matter will be left to the conference that is to be convened, through the United Nations, on the problem of the settlement of these refugees. I can make no promises about taking a bigger proportion of Vietnamese refugees into this country. As the right hon. Gentleman is aware, we have already taken in over 1½ million immigrants from New Commonwealth countries. That is a factor that we must take into account when deciding whether we can take any more Vietnamese refugees.
Dr. Bray: Does the Prime Minister agree that the Tokyo summit marked only the first stage in the development of international energy policies? Can she
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say what was agreed to monitor, update and follow up the agreements? In particular, can she elaborate on her remark about better information on the operation of oil markets?
The Prime Minister: The monitoring of the European performance will be done through the Community, and it was understood that the other monitoring would be done through either the International Energy Agency or some other appropriate body. On the question of more information about oil markets, as the hon. Gentleman will be aware, the EEC is conducting an exercise for the product spot market. It is much more difficult to get information about the operation of the crude oil market, but we shall try to get as much as we can.
Mr. Cormack: Reverting to the interesting question asked by my hon. Friend the Member for Surrey, North-West (Mr. Grylls), may I suggest to my right hon. Friend that many people would think it appropriate to cancel the order for the Vietnamese ships, even if we did not save money in the process? That would he one way of demonstrating tangibly our utter abhorrence of the attitude of the Vietnamese regime.
The Prime Minister: I should be very reluctant to do that, because it would mean breaking a contract. In the longest run, we ought to keep to that contract. I also think that it would not be very favourably received by those who are working on the ships if we were suddenly to cancel all work. I give my hon. Friend an assurance that there will be no further aid so long as the present conditions obtain, and the European Economic Community, which gives some food aid to Vietnam, is switching that to helping the Vietnamese refugees.
Mr. Jim Marshall: Will the Prime Minister understand that she besmirches the honour of this country by relating the legal obligation that we carried out to accept British passport holders into this country to the moral obligation that we have to the Vietnamese refugees? Will she further understand that her views on this subject would be accepted more seriously abroad if she and her Government were prepared to be more compassionate and immediately announced that they were prepared to increase the number of

1123
refugees permitted to come into the United Kingdom?
The Prime Minister: As the hon. Member knows, we have met our obligations wherever we have found refugees in boats where they were in danger of losing their lives. Our ships have picked them up. We have taken the refugees from the "Sibonga", the "Roachbank" and another very small vessel. What I am concerned about is that we have already taken over 1½ million immigrants, and that factor must be taken into account in determining whether we can take any more refugees, and, if so, how many. I must also point out that we are one of the most densely populated countries in the world, and that, too, must be taken into account.
Mr. Michael Morris: On the question of oil consumption, is not the biggest worry the true commitment of the United States and whether it will stick to any form of target?
Secondly, is there not now a strong case for Her Majesty's Government to make an early statement that there is really no need for a third London airport?
The Prime Minister: I hope that the enunciation of a target will, indeed, make it the more likely that the United States, or any other country, will stick to it.
On the second question, I congratulate my hon. Friend on his ingenuity in getting that point in, but I prefer not to comment on it now.
Mr. John Home Robertson: The Prime Minister referred to the realistic approach in Tokyo to the oil crisis. Would she like to take this opportunity to explain the realism of pretending that fuel prices are not part of the cost of living, in view of the fact that it has been reported that a suggestion has been made that increases in fuel prices should not be regarded as part of the retail price index? Before the Prime Minister goes overboard in favour of nuclear power, would she like to take all reasonable steps to persuade my constituents in the Torness area that the advanced gas-cooled reactor is not an unacceptable safety hazard?
The Prime Minister: I am grateful to the hon. Gentleman for raising that first point. I want to make it clear that I
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never made any suggestion that energy prices should not be taken into account in the retail price index. Such a suggestion was made, but not by me. Any suggestion made about excluding energy prices from the RPI seems to me totally and utterly ridiculous. I am delighted to condemn such a statement.
On the question of nuclear power, some AGRs are already on stream and I believe that they will be perfectly safe. Indeed, neither Government would have given permission to go ahead unless they were convinced of that.
Several Hon. Members rose—
Mr. Speaker: I propose to call three more hon. Members from either side, because we have been on this subject for a long time.
Mr. Latham: As Vietnam is effectively a client State of Russia, did my right hon. Friend made clear to Mr. Kosygin, in the strongest possible terms, that while the West can and will accept its humanitarian obligation, the real solution lies with Vietnam not sending hundreds of thousands of men, women and children to their deaths in open boats?
The Prime Minister: Yes, I made that clear to Mr. Kosygin, in the strongest possible terms. But, as I said in the statement, I did not meet with much response from him, which was particularly disappointing in view of the Helsinki accord previously reached.
Mr. Healey: Will the right hon. Lady clear up two areas in which she has left us confused? First, she told us a few days ago that the European Community could agree to a net oil import saving for the Community as a whole. She has told us today that each individual European country will have its own target. Can she tell us what the target is that she accepts on behalf of the United Kingdom for saving on oil imports?
The other area, of confusion arises from the fact that the right hon. Lady said that she thought that the only way of dealing with the problem of those countries that will have to carry the deficit that is the counterpart of the £50 billion surplus held by the oil producing countries as a result of the recent increases in oil prices will be through overseas aid. As she has already told us that we shall

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not suffer from any additional deficit, because of our good fortune in having North Sea oil, is she now proposing to reverse the decision to cut overseas aid by £50 million?
The Prime Minister: In reply to the latter question, the answer is "No." In reply to the former question, we agreed to recommend to the Nine that we resolve the total target into individual targets. Of course, in about 1981, we shall not have any net import at all.
Mr. Healey: What about the target?
The Prime Minister: We are agreeing to resolve it into targets within the total commitment, and we are agreeing to resolve it into targets at Dublin. [Interruption.] I do not think that the right hon. Gentleman has quite got the point. The target for Europe as a whole is not to import any more in 1985 than in 1978. We were importing in 1978, but we shall not be importing, net, from about 1981. That means that there will be a certain amount of latitude for the other members of the Community, because some of them will be able to import a little more than they did in 1978 as a result of the margin from us. For example, some of those nations that responded to the right hon. Gentleman's injunction at Bonn to expand, and which did expand, will need the extra.
Mr. Kilfedder: Does the Prime Minister realise that in Northern Ireland oil price increases are already creating, and will continue to create, grave problems? The cost of living will rocket in an area where average wages are lower than the rest of the United Kingdom, and unemployment will rise to even more disgraceful heights. Will she, therefore, substitute for price increases a policy of rationing in such areas on the periphery of the United Kingdom, where people do not have the money to buy themselves these supplies? Will she also forge ahead with the exploration of oil in the Province and offshore?
The Prime Minister: In fact, rationing will not reduce prices. If oil is short, prices are bound to rise, even in this country. We export most of our oil because it is high quality, and we must buy back high-price oil. So, inevitably, our
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oil must follow that general price. As to exploration for more sources of eneregy, I am wholly in agreement with the hon. Gentleman, but I do not think that the Government themselves can make more resources available. If sources are believed to be there, it is usually the oil companies which will explore for them.
Mr. Abse: At the same time as the Tokyo communiqué indicated the need to minimise the risk of nuclear proliferation, the Prime Minister will be aware that a breach of security within URENCO has brought much nearer the possibility of an Islamic bomb. What further belated steps will the right hon. Lady take to prevent nuclear proliferation, bearing in mind that the sinister consequences, among others, of such an Islamic nuclear bomb would be to subvert the negotiating strength of the West with all the Arab oil-producing countries?
The Prime Minister: We did not discuss nuclear proliferation at the Tokyo summit. It was not our breach of security that caused that incident.
Mr. Nicholas Winterton: Is my right hon. Friend aware that some of the countries with which she was in discussion at Tokyo showed a decided bias in favour of their own industry—I refer particularly to the United States—over the duality of oil prices, which gives their industry considerable advantage? Will my right hon. Friend ensure that our industry has the advantage of North Sea oil and that, if necessary, certain limits on the export of North Sea oil will be advised to the petroleum companies?
The Prime Minister: My recollection is that the United States has already made a statement that it agrees to come to world price parity, I think by the end of 1981. Unless it does so, there will be considerable problems and a tremendous effect upon world oil prices, because it will pay more for the world price oil, and the price will then rise.
Mr. Alexander W. Lyon: In Australia, the Prime Minister said that the Queen would not go to Lusaka except on her advice. Today, she indicated that it was a decision for the Queen to take. Is it not constitutionally correct that the Queen,

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as Head of the Commonwealth, is entitled to take advice from any Prime Minister in the Commonwealth, and that the right hon. Lady, as Prime Minister of Great Britain, is not the only person who can decide that issue?
The Prime Minister: As a matter of practice, the Queen would take advice from other Prime Ministers about the Commonwealth conference. Constitutionally, the advice whether the Queen should leave this country has to come from the British Prime Minister, because constitutionally we are the only country which has to make alternative arrangements, namely, to have a Regency Council in the Queen's absence.

STATUTORY INSTRUMENTS, &c.
Mr. Speaker: By leave of the House, I shall put together the Questions on the three motions relating to statutory instruments.
Ordered,
That the draft Carriage by Air Acts (Application of Provisions) (Second Amendment) Order 1979 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Air Navigation (Noise Certification) Order 1979 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Assistance for House Purchase and Improvement (Variation of Subsidy) Order 1979 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Wakeham.]

ORDERS OF THE DAY

  FINANCE BILL
  Considered in Committee.
  [Mr. BERNARD WEATHERILL in the Chair]
  Ordered,
  That the order in which proceedings in Committee on the Finance Bill are to be taken shall be clauses 1 to 11, schedule 1, clause 12, schedule 2, clause 13, schedule 3, clauses 14 to 23, schedule 4, clause 24, new clauses, new schedules and schedule 5.—[Mr. Biffen.]
  4.18 p.m.
  Mr. Norman Buchan: On a point of order, Mr. Weatherill. I wish to raise a question relating to the provisional selection of amendments. May I ask that this be reconsidered in relation to amendment No. 18, which raises the question of VAT as applied to the theatre? I understand the difficulties of trying to make exclusions or inclusions. However, may I point out that amendment No. 5 is already selected for independent debate? That amendment refers to thoroughbred horses and bloodstock in relation to racing, and therefore there is a sport and arts analogy there. I presume that that amendment has been selected because of its economic significance. May I point out that the arts, in particular the theatre, are of immense economic significance, especially from the point of view of tourism? The second analogy concerns amendment No. 37 which relates to buildings of architectural and historic importance. By direct analogy, the question of the arts and the economy in relation to tourism is brought into sharp focus.
  Since we do not want to be regarded as mean-minded in respect of the arts—I am sure that the Government would not like to be so regarded—may I suggest that they would welcome the opportunity to cut VAT in relation to the theatre, if amendment No. 18 were included in the provisional list of amendments?
  The Chairman: It is a hideously difficult task to select amendments to the Finance Bill. I am sorry that I have not found it possible to select amendment No. 18, but I have grouped amendment No. 37 with amendment No. 20.
  Mr. Buchan: Further to that point of order, Mr. Weatherill, I understand the grouping with amendment No. 37. However, amendment No. 5 has been taken separately. Would it be possible to group the amendment with either amendment No. 20, so that it can be brought up in relation to amendment No. 37, which concerns matters of specific architectural and historic importance, or even amendment No. 5, where there is a vestigial relationship between sport and the arts with both to be argued on economic merits? That is the case that I am putting in relation to tourism. If the amendment has to be on economic merits, we should prefer it to be connected with artistic matters. The Government Front Bench might even support me.
  The Chairman: I repeat that I should have liked to select all the amendments, but that is not possible. If the Committee agrees, we should proceed with the amendments that I have selected and see how we get on.

  FINANCE BILL
    Clause 1

      INCREASE OF VALUE ADDED TAX
      Mr. Denzil Davies: I beg to move amendment No. 34, in page 1, leave out subsection (1).
      The Chairman: With this we may take the following amendments:
      No. 1, in page 1, line 21, leave out "fifteen per cent." and insert "12½ per cent.". No. 10, in page 1, line 21, leave out "15 per cent." and insert "10 per cent.".
      No. 11, in page 2, leave out subsection (2).
      No. 14, in page 2, leave out subsection (3).
      Mr. Davies: We have put down amendment No. 11 because we are seeking information as to what subsection (2) means. Amendment No. 14 deals with subsection (3) and I am intrigued by the reference to the district council of Kingston upon Hull running its own postal service. That may be a manifestation of the rather frenzied thinking of the Secretary of State for Industry or it may be quite a separate matter. Perhaps the Minister will explain what is meant by that subsection and why that reference is there?
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      Amendment No. 34, the main amendment, seeks to delete subsection (1) of the Bill. That subsection puts up the rate of VAT to a uniform 15 per cent. from the present 8 per cent. and 12½ per cent. We shall seek to press the amendment to a Division because we see no justification, especially at this time, for the substantial increase in prices that it will cause.
      Apart from the effect of VAT, the Budget has put prices up by at least 1 per cent. The oil price rises resulting from the OPEC meeting will probably put prices up by at least a further 1 per cent. On top of all that, it is complete madness for the Government to increase prices by 3 per cent. The effect on the economy will be disastrous, and the resulting inflation will reflect on employment. Inflation affects investment in the economy as a whole and in turn results in unemployment. The Government are deliberately putting up prices by 3 per cent., while keeping the monetary targets virtually the same as under the previous Administration. That cannot continue and something has to give. When between 3 and 4 per cent. of the inflation rate of 20 per cent. is directly attributable to the Government, we cannot have monetary targets of 9 per cent., as stated by the Financial Secretary. The crunch will come in terms of high unemployment, high interest rates and high inflation.
      As we argued on Second Reading, we believe that the main priority must be to defeat inflation. It was the priority of the Labour Government and should be the priority of this Government. In opposition the Conservative Party expressed fine sentiments and great concern about inflation, but the Government have abrogated their responsibility about prices. Their first priority is tax cuts, and tax cuts in the main for the better off, who will be the only people to benefit from the Bill. That subsection provides the money for considerable income tax benefits for the richer members of our community.
      Anyone earning less than £5,000 a year will be worse off as a result of the Bill. I have received some figures from the Inland Revenue in the past few hours, and although most of them are out of date they are an indication. About 20 million of the 25 million wage earners in this country earn less than £5,000 a year.

      1131
      Twenty million people will get hardly any benefit from the Budget and will have to pay most of the VAT to provide the tax cuts for perhaps fewer than 5 million people. The earnings table shows that only about 25,000 people earn more than £20,000 a year, and they will get the greatest benefit from the Finance Bill. The Government strategy appears to be to make the majority pay by higher VAT for income tax cuts for a small number of people. Those tax cuts could have been provided for in no other way. There is no growth in the economy and no additional wealth being created. The Bill will redistribute money from the majority who are less well off to the few who will benefit considerably.
      With the Bill and the VAT increase the Government have sown the seeds of another inflationary spiral. Having done that, they are seeking ways to change the base of the retail price index.
      Mr. John Garrett: Fiddling.
      Mr. Davies: I did not use that word, because it is unparliamentary. I would rather put it as changing the base of the RPI by withdrawing certain items. The right hon. Lady the Leader of the Opposition said that she did not say that and has no intention of taking the cost of oil products out of the RPI. I wonder who said it—perhaps it was the Chancellor of the Exchequer. The newspaper briefings are clear that someone from the British delegation suggested, perhaps in the late evening or early morning in Tokyo, that a way of getting round the problem was to take out the price of oil. Perhaps the Chancellor will tell us whether he said it?
      Before the Tokyo summit there were press briefings, and a Whitehall source indicated that perhaps increases in indirect taxation should be taken out of the RPI. That is the mark of a Government who are getting worried, having created an inflationary situation, and casting around frantically to pretend that they have not and that inflation is not as bad as it is. Will the Chief Secretary make a clear statement that increases in indirect taxation will not be taken out of the retail price index and that there is no intention of fiddling in any way the retail price index in relation to VAT?
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      We had a clear statement from the right hon. Lady.
      The question of RPI and indexation is extremely important. There is the argument that the VAT increase is a one step increase. We have recently read in the newspapers that there is a proposal to index capital gains tax. Again, we wish to know more about this. Do the Government intend that those who make capital gains should have their gains indexed to the cost of living? Apparently those who make income gains are not allowed to have their earnings indexed. I do not believe that the Government will favour the indexing of wages to the RPI, and thus to the increase in indirect taxes.
      4.30 p.m.
      We wish to delete subsection (1) because the Government's strategy is that the 20 million or so people who earn up to average incomes should pay for the tax benefits for the better off, and pay for them through the VAT increase. If the Government wish to have a uniform rate of VAT—I can see the argument for this on grounds of simplicity, although simplicity is not the only argument—I do not believe that that rate should have gone any higher than 10 per cent. If one looks for simplicity, one cannot go any further than 10 per cent.
      I refer here to a point raised by the Minister of State, who picked up a newspaper article in The Guardian by Mr. Peter Jenkins, who suggested that the Labour Government, had they been returned to office, would have had a 12½ per cent. rate of VAT. But Mr. Peter Jenkins has since written to my right hon. Friend the Member for Leeds, East (Mr. Healey) making clear that there were no grounds for the suggestion in the article, and admitting that he was was completely misinformed. We do not believe that it is right to unify harmonised VAT above a rate of 10 per cent., because this is the highest possible rate conducive to keeping down the rate of inflation.
      The Minister of State, Treasury (Mr. Peter Rees): I accept the assurance of the right hon. Gentleman and of Mr. Peter Jenkins. But the right hon. Member has not explained how his right hon. Friend would have achieved a public sector borrowing requirement of £8·5

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      billion had he been speaking from this side of the Committee.
      Mr. Davies: The hon. and learned Gentleman should know the answer to that. We would not have proceeded with the tax cuts, apart from indexing personal allowances. We would not have had higher rate tax cuts or 3p off the standard rate which are only being paid for by 15 per cent. VAT. This is the dilemma in which the Government find themselves. I hope that the hon. and learned Gentleman will not ask any more silly questions.
      The Opposition are not the only people arguing against the increase in VAT. The other day I read a splendid document from the CBI. I am sure that Conservative Members approve of documents from the CBI—
      Mr. Nick Budgen: It is sound advice.
      Mr. Davies: I am glad that the hon. Member has said that, because I was about to read from this document. The CBI, in its representations before the last Budget, said that rates of VAT should be standardised at 10 per cent., and then the system would be simpler.
      It then said:
      "Our judgment is that to go further than this, for example, standardising VAT at 12½ per cent. … would be too sharp a change, causing problems both in terms of the rate of price increases and for the businesses whose trade would be mostly directly affected."
      That is very good advice. I agree with the hon. Member for Wolverhampton, South-West (Mr. Budgen) and I hope that he will support us in the Lobby on the basis of this excellent advice. The Government should tell us whether they agree with the CBI or whether they think it is wrong. Do they think that 15 per cent. is too sharp a change? We have heard nothing from the CBI since the Budget. There has not been a peep out of it, and clearly its economic judgment has been bought for 30 pieces of silver by the Government's tax cuts.
      I am told by the Treasury that the VAT increases—quite apart from the petrol increases—will add about £2·50 to the family budget. But the Government should realise that there is also considerable rounding up occurring. It is not just a question of 15 per cent. VAT. Traders are putting 15 per cent. on top
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      of the existing 8 per cent. In other words, the existing prices, which include 8 per cent. or 12½ per cent. VAT, are being increased by a further 15 per cent. Is that legal, and are there any powers to stop it? That kind of practice will push the cost of living up even more than the 3 per cent. which the Government mentioned in the Budget.
      The philosophy behind the VAT increases was described by the Prime Minister as the philosophy of freedom of choice. We all remember the famous broadcast of the right hon. Lady during the election campaign when she held up a pound note—that pound note is disappearing fast with inflation on the way up—and told the citizen that she would give him a choice. She said that if he had his pound note back as a result of income tax cuts he could choose whether to spend it, save it or bury it in the garden.
      That argument of freedom of choice shows the complete unreality of this Government's operations. For most people, certainly for those earning up to £100 a week there is very little freedom of choice in their spending. It is only someone who is earning £20,000 a year or more who could possibly put up that kind of argument. Only he has the freedom of choice as to whether he buys goods. For most people the pattern of expenditure is set and in modern society it is very difficult to change.
      What choice does the young mother have on whether to buy a push-chair for her baby? Of course she has no choice, and now she must pay the increased VAT. What choice does a disabled person have if he wishes to buy a spare part for his converted motor car? There is no freedom of choice there, except the freedom to choose to stay at home and look at the walls. This shows the complete unreality of the Government's strategy and their lack of understanding of the lives of ordinary people. What freedom of choice do I have if my roof starts leaking? Do I allow the water to come in? Of course there is no freedom of choice—I must pay the 15 per cent. By putting up the rate to 15 per cent. the Government are hitting essential expenditure.
      A uniform rate of VAT is too blunt an instrument when it is too high because

      1135
      it has a very hard effect on different industries and organisations. Once one exceeds 10 per cent., one must have a separate system with separate rates. It is not possible to have a 15 per cent. rate and not damage various industries and charities. This is why on the Continent there are, in most countries, different rates of VAT. In our last debate the Chief Secretary tried to anticipate this argument, but his case was not really worthy of him. He tried to average it out. He looked at our zero rating, our exempt goods and services and our 15 per cent. and said that we paid less overall than was paid on the Continent. That is not a sensible argument. The 15 per cent. rate might be borne quite easily by some industries and businesses, but it will hit others hard, especially those under pressure from imports.
      Why should charities such as the Save the Children Fund have to pay the same high rate as someone who buys an expensive piece of jewellery or a fur coat? Why should repairs to my house be charged at 15 per cent. when repairs to an expensive sailing boat are also charged at the same rate? There is no logic or justification in that. Once we get above a rate of 10 per cent., we have to make those choices and they have to be made on economic grounds.
      There will be debates on later amendments concerning the clothing and footwear industries, which are under considerable pressure from imports from developing countries. Those industries will be put under even greater pressure because the 15 per cent. rate of VAT will make their products more expensive in comparison with imports.
      The Government have gone blindly ahead without thinking out the economic consequences of their actions. They have tried to carry out their irresponsible pledge to reduce taxes for the better off by making most people pay the extra VAT.
      The Government have made a major error of judgment by putting up VAT to 15 per cent. Apparently they were intoxicated by the election victory and the heady air of the corridors of power. It looks as though the air is not so heavy for the Minister of State.
      Mr. Denis Healey: He is fast asleep.
      Mr. Davies: I do not think that he is quite asleep.
      Mr. Healey: Just catatonic.
      Mr. Davies: The Government rushed headlong, as new Governments tend to do, into their Budget proposals without understanding the consequences.
      Those consequences were summed up in The Guardian this week by the ITEM team, which uses the Treasury model to provide economic forecasts. The team said:
      "At a time when inflation was accelerating; into double figures, the Budget put up prices. At a time when industry was being squeezed by rising costs and weak demand, the squeeze has been made worse by the withdrawal of Government support. With unemployment already over one million, job creation projects are to be axed."
      That is a summary of the Government's ridiculous attempt to rush into policies without thinking about the real problems of the British economy.
      It is not too late for the Government to repent. There can be forgiveness for even the worst sinners—provided that repentance takes place before the Finance Bill becomes law. The Bill does not have to become law until four months after the passing of the Budget resolutions. The Government have up to four months to repent of their folly and they can do that by thinking again about the VAT increase, by deciding that the inflationary pressures are too great and that the problems with OPEC and the oil increases have overtaken events and by thinking again about the problems of the economy and by accepting amendment No. 34 before they create irreparable damage to the British economy which will not be put right for a long time.
      4.45 p.m.
      Mr. T. H. H. Skeet: I should like to make one or two brief observations on amendment No. 34, though I concede that they may be more relevant to amendment No. 20. They are appropriate at this stage in our debate because of the increase in VAT from 8 per cent. to 15 per cent.
      A letter was sent by Customs and Excise to the Harpur Trust school in Bedford

      1137
      outlining the current law. For the demolition and new construction of a building, no VAT is charged because that work is zero rated. However, if a building is burnt down and is reconstructed within the old shell—it may be a listed building—VAT at 15 per cent. will apply.
      The significance is that VAT is no longer 8 per cent., but is to be 15 per cent. The rate is to be increased before any of the serious anomalies are removed.
      When a building is damaged by fire, but is not razed to the ground, and a new building incorporates the residue of the old by reinstatement, the work is regarded as standard rated work of repair. The new building may differ considerably from the old, but it is still taxable at the standard rate.
      If, on the other hand, there is reinstatement with another room attached, the building that has been reinstated will have the full rate of VAT applied to it, but the attached room will be zero rated.
      I understand that the problem has been referred to the law in two cases—Thomas Briggs (London) Limited at the London tribunal in 1977 and St. Luke's Church, Greater Crosby, at the Manchester tribunal in 1978, reference 78/59. There is a possibility that the latter case went to appeal. I hope that we can have an indication from the Government about what occurred there.
      I should like to make one recommendation. Where a building has been listed and the owner has no right to pull it down and must restore it after damage to its previous condition, it might be reasonable to say, in the case of charities, that if the building is destroyed by fire, perhaps by arson, the rebuilding work should be zero rated. That could be done through a procedure similar to that contained in schedule 1 of the General Rate Act 1967, which provides that no rates shall be payable if an empty property is subject to a building preservation notice as defined in the Act.
      The Government should consider that recommendation, because not only are charities and churches involved: any owner-occupier will probably find that it is better to raze his property to the ground, because no VAT will be charged. If he carries out repairs he will have to pay a large sum in VAT. In the case
      1138
      of Bedford school the cost of restorations may be in the vicinity of £2 million. The VAT charged will therefore be £160,000. My remarks are relevant to amendment No. 34, but I hope that they will also be taken into account in relation to amendment No. 20.
      Mr. Barry Sheerman: Rising for the first time in the Chamber, I am conscious that hon. Members have heard many maiden speeches in the past few weeks, and I have no intention of being the straw that breaks the camel's back. Having glanced over a number of eminent first contributions in the House over the past 100 years, I am also aware that a standard has been set which I have little hope of achieving. However, my first few weeks as an hon. Member have convinced me of one thing, if nothing else, and that is that the House tends to be kind in respect of the performance of novices.
      It is both my good fortune and a daunting task to follow in the footsteps of the former Member for Huddersfield, East, J. P. W. Mallalieu, whom so many hon. Members will know as a friend and former colleague. Many will know him affectionately as "Bill" or "Curly". That physical attribute seems to be a necessary condition of being the hon. Member for Huddersfield, East.
      As a Member "Curly" was assiduous in safeguarding the interests of Huddersfield, and since his adoption by the Labour Party as early as 1936 and his election in 1945 he won the respect and affection of the folk of the town and was close to their hearts. As a Member, sailor, author and journalist and as a Minister, he carried out his duty in serving his constituency, his party and his country well. I was pleased to see recently that his contribution in all these areas of activity has been suitably rewarded.
      Having been the recipient of great kindness from my predecessor, I read with a feeling of pride his first speech to the House, delivered in October 1945. Coming to the Chamber fresh from the war, he began by proposing stricter taxes on inheritances and he said:
      "I cannot expect hon. Members opposite to approve of that, for it is curious that they who in their public speeches, demand that people shall stand upon their own feet, that they shall not be spoon-fed, seem to be the very first

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      people who demand that their children shall be silver-spoon fed."—[Official Report, 24 October 1945; Vol. 414, c. 2042.]
      That is an appropriate sentiment in the context of the present Finance Bill and in the wake of the recent Budget and the VAT increases that are before us today. It is a view that strikes a chord with my constituents in Huddersfield and Kirk-burton.
      The town that I am privileged to represent in this House is a classic example of what can be achieved when the natural beauty and resources of this country are married to an intelligent and enlightened attitude and a belief in planning. As we know to our cost, many of the most beautiful parts of Britain were turned by market forces of Victorian capitalism into ugly, insanitary towns notorious for their overcrowding, squalor and disease. However, Huddersfield, in the foothills of the Pennines, was described by—among others—Friedrich Engels in the nineteenth century as
      "the most beautiful of all the factory towns in Yorkshire and Lancashire"
      Unlike those towns, dominated in their infancy by market forces, Huddersfield was an example of what an industrial town could be if a little enlightenment, thought and planning were involved in its creation.
      Today, my constituency appears fairly prosperous, with an economy resting on four pillars: textile mills producing fine worsteds; engineering of diverse types; chemicals of increasing sophistication; and, like so many other towns, the ever-expanding service sector. However, Huddersfield, like most of the towns in West Yorkshire, faces serious and fundamental problems. As my hon. Friend the Member for Batley and Morley (Mr. Woolmer) pointed out in the debate on the Gracious Speech, the textile industry has been in long-term decline and is a much smaller employer than in the past. If it had not been for the Labour Government's programme on industrial and regional aid in the shape of the temporary employment subsidies and the like, many more jobs would have vanished and been lost to an industry which makes a vital contribution to the export trade.
      Engineering is also in need of reinvestment and diversification if it is to prosper. Although chemicals as an
      1140
      industry is increasingly capital-intensive, it employs expensive capital equipment and many computers but fewer and fewer men. The service industries have provided jobs to replace many lost in the traditional sectors, but this Budget and Finance Bill do little to ensure that this will be an expanding area of employment in the future.
      In my constituency we have the problems of the United Kingdom in microcosm—a desperate need for the massive reinvestment which private capital has been notoriously unwilling to undertake. Indeed, the evidence goes to show that textiles and engineering have suffered from the failure of private owners to reinvest in their businesses even when profits were consistently high.
      When I hear the economic doctrines expounded by the right hon. Member for Leeds, North-East (Sir K. Joseph), I find it difficult to believe that he can have any real knowledge of the facts of industrial and economic life in his constituency, an area that is not so far from mine. Both of us represent regions that have all the potential for continuing vigorous industrial enterprise—a highly skilled work force, superb industrial relations and excellent communications. Yet private capital is still reluctant to invest in its future and the tax changes which are now before us will do nothing to change that situation.
      Frankly, I do not believe that the proposals in the Finance Bill as a whole, in the Budget or in the overall Conservative strategy—if one can dignify it by that name—will produce one pennyworth of new investment in the region that I represent. Indeed, on the contrary, the grey or intermediate areas are to be penalised in the Budget and are to lose most of the pitifully few aids and incentives that exist to attract industry. I have long had doubts about the wisdom of regional industrial policy and development under successive Governments, but at least the Labour Government in latter years have tried to do something about the intermediate areas and the black areas.
      In my opinion, it is clear that the present criteria for determining aid to an area—relating to rates of unemployment—are far too unsophisticated and blunt in assessing needs. Because of this, the intermediate regions have long suffered.

      1141
      Surely the crucial task of economic industrial aid is to prevent the disease of industrial decline and decay before that process has gone too far. One hopes that the intention is to cure the disease rather than to treat the symptons. Much of Yorkshire needs help and investment now, not when unemployment statistics equal those on Merseyside and the North-East. Unless Governments recognise this fact and move to prevent it, there will be many more Merseysides in the near future.
      The task of anticipating decline and at moving to prevent it early enough is clearly recognised in the new ideas emanating from the EEC. If Conservative Members had seized their opportunity, they might have had the chance of designing a new and more flexible policy for regional development. Yet I fear, that with their well-known political blinkers, they would prefer to leave us, as the world economic crisis deepens, to sink or swim in the market forces. Alas, I fear that many of their constituents and mine will be in grave peril of drowning.
      I speak of economic aid to the regions in no sense as one who believes that there is a God-given right for one region to benefit at the expense of another. However, as a member of the third largest party in this House, the Co-operative Party, I have an unshakable faith in the principle of investing wealth created in the community back into that community. So often the wealth created by our people in our towns flows out of them never to return in the form of new jobs and new industries vital for their future.
      It is a fact that the wealth of the country is created by the working people of the country, and in my opinion it is their right to ensure that the wealth that they create remains in their community and under their control. However, the Budget, and the Finance Bill if passed, will accelerate the process whereby our people's wealth will be redistributed more unfairly than before. That is what this VAT provision and the shift from direct to indirect taxation mean. That shift means simply that the well off benefit at the expense of the poor and the less well off. Furthermore, it will be very much more easy for the wealth of this country
      1142
      to flow abroad into investment and jobs abroad—for example, office sites in Brussels.
      The Secretary of State for Trade could see nothing wrong with that. In the view of that right hon. Gentleman and the Prime Minister, capital will be allowed to flow where it will and to where it can reap the fastest profit regardless of the national interest—or perhaps they believe that the two are always coterminous.
      Looking back on Budgets and Finance Bills in previous years, I believe that what marks this one off and why it stands out is the way in which the philosophical element has played such a large part in all our debates. Even when we are discussing, as today, the increase in value added tax from 8 per cent. to 15 per cent. it is the underlying philosophical differences between Government and Opposition to which reference is constantly made.
      I conclude by saying that I think I discern on the Conservative Benches two major concerns at the deeper level. One is with freedom or liberty, which is a proper concern for any Member of this House. In the late twentieth century I share with Conservative Members the feeling that liberties of the individual—namely, our basic freedoms—are threatened. Unlike the right hon. Member for Oswestry (Mr. Biffen) I do not see that liberty menaced by the immense power of the centralised Western industrial State.
      5 p.m.
      The right hon. Member for Oswestry and the right hon. Member for Down, South (Mr. Powell) are forever on their guard against the State. They see it as a threat to liberty. However, in my opinion that liberty is being filched by organisations that were unknown to the political and economic theorists of the eighteenth and nineteenth centuries. Today, liberty in the Western world is under threat not from Governments who accrue too much power but rather from Governments who have not the courage to use that power to protect their citizens from the international corporations whose size, growth and power are a growing menace to liberty.
      Secondly, I recognise among Conservative Members a desire to halt the

      1143
      long-term economic decline from which the country has suffered for over 100 years. I believe that it is a genuine desire. However, since 1945 we have been guilty of a tendency to search for and seize upon cure-alls and panaceas that will stop the rot once and for all and put the country right. As a student of ideas. I have detected a series of such fashions, cure-alls and fake remedies for the salvation of our nation since the end of the Second World War. They range from a naïve belief in the efficacy of centralised planning—sometimes Labour Members are guilty of that, too—through an enthusiasm for business efficiency and business schools to the revolutionary changes that we thought could be brought about by an expansion in higher education. In the 1960s there was a general commitment to the wonders that might be wrought by the benefit of large-scale enterprise, whether in public or private industry, local government or the National Health Service. None of these solutions worked and we then threw ourselves into the greatest cure-all or panacea of the century—the European Common Market.
      I am afraid that Conservative Members are now totally committed to the latest panacea, the latest fake medicine—the return to the incentives of the market economy and the real competition that we knew in the Victorian period. This represents the worship of inequality, and the move from direct to indirect taxation is at the heart of that move. I am afraid that it has as much relevance to the problems that the country faces at the end of the 1970s as do any of the other panaceas that I have listed.
      All the solutions put off the day when we must begin the task of rebuilding the British economic and social structure on a democratic, equal and efficient basis—and the three go together. I hope that I shall be able to contribute a small part to that process.
      Mr. Patrick McNair-Wilson: It is my great pleasure to congratulate the hon. Member for Huddersfield, East (Mr. Sheerman) on his excellent maiden speech. In the 14 years that I have spent in this place I have listened to a number of maiden speeches. His independence of approach to the
      1144
      difficult subjects that we are discussing was most refreshing and his beguiling description of his constituency and the tribute that he paid to his distinguished predecessor will be welcomed by his constituents.
      When I made my maiden speech in 1964 I was told that it would be like being sick and that I would feel better afterwards. In the case of the hon. Member for Huddersfield, East, his confident delivery and demeanour lead me to believe that he will not need to worry about his future speeches. We all look forward to hearing further contributions from him.
      I believe that the debate honours a pledge but misses an opportunity. That pledge was given by the Conservative Party—the switch of taxation from direct to indirect. I have always supported that policy. I further supported the belief that we should move away as quickly as possible from multi-rates of VAT. I believe that they are confusing and that they create serious difficulties for small shopkeepers and others who deal with the paperwork that is involved. Nevertheless, on this occasion we have missed what could have been an opportunity for improvement in a narrow area but one that has become significant in recent weeks. In the debate on the Loyal Address I said that I was concerned that we should avoid taking action that would hit too hard at transportation. The amendment before us does not deal with oil tax. However, in the first part of the Bill, we shall be increasing taxation on certain aspects of transportation. I believe that those aspects require further examination.
      There has been a tendency to regard taxation, as it affects transportation and the motorist, as a blunt instrument which can be used to solve the energy problem. One of the faults with that argument is that it is always the travelling public who are hit the hardest. In my rural constituency some form of personal transportation is essential. It is not enough to rely on rural bus or train services, many of which have been axed over the past few years.
      I would have hoped that when the Chancellor drew up his VAT proposals he would exempt bicycles. We were informed yesterday that about 70 per cent. of all the new motor cars in

      1145
      the country are owned by individual companies. When a company buys a vehicle for an employee the fuel consumption and the initial purchase price are probably not considered. However, when motor cars are used in cities they tend to be more thirsty than when they are on the open road. Therefore, it is in the city that the bicycle can play an important role in our transport system. I ride a bicycle around London as a member of the House of Commons cycling club. Indeed, if my right hon. and learned Friend the Chancellor exempted bicycles from VAT as a result of my intervention I might even be persuaded to buy a new bicycle.
      If there is to be the energy conservation that the Prime Minister and others have pleaded for, small forms of encouragement should be used to change the attitude to energy. For example, hon. Members arrive at the Palace of Westminster in motor cars when they could improve their health, save money and save energy by using two wheels instead of four. I hope that my right hon. and learned Friend will examine that matter. I hope that when he reviews VAT in the future he will look seriously at my suggestion that bicycles should be exempted altogether.
      Mr. Alexander W. Lyon: I have no doubt that we shall discuss the general effect of the Budget on the economy when we come to a later clause. Of the switch from direct to indirect taxation, which the hon. Member for New Forest (Mr. McNair-Wilson) welcomed, I say only that it will depress living standards of average workers throughout the country. That is bound to have a repercussive effect on the cost of living and the settlement of wages in the coming year.
      I have listened with interest to the arch-apostle of monetarism, the right hon. Member for Down, South (Mr. Powell), explaining how the switch has no effect upon inflation. That increases my scepticism about the monetarist analysis of our present economic difficulties. It will of course have a substantial impact on the retail price index, and through it upon wage claims in both the public and private sectors. In so far as the Government have no tool to deal with claims in the private sector, and may find it increasingly
      1146
      difficult to deal with claims in the public sector, it seems to me that it cannot be argued that the clause is anything other than inflationary.
      However, it is not so much that that concerns me. What concerns me is the inequity of the burden put on the part of our population least able to bear it. In that respect, it is not enough for Conservative hon. Members to argue that there are exemptions from the tax. I hope that in the course of the debates on the amendments the Government will recognise that the burden upon low-paid families, particularly those which are working but do not pay tax, will be so heavy in the coming year that a degree of amelioration, particularly at this stage, is not unwelcome.
      In particular, I again draw attention to the fact that it is not that more money will be left in the pockets of the average worker, or indeed of the country as a whole. What the Government have done is to withdraw from the pockets of the taxpayers £500 million more tax. The Government argue that that is necessary in order to help them to reduce the public sector borrowing requirement. Nevertheless, the Budget's overall impact is to create a situation in which we are more heavily taxed than before. We go up the league table of those who are heavily taxed, rather than down. In those circumstances, now is the time to look carefully at any anomalies in VAT that have been argued over the years, and to consider sympathetically opportunities to remedy them. We shall be coming to some of those in this debate.
      In relation to the amendment, I wish only to refer to one anomaly, which I hope also to raise on Report. I refer to the position of confectionery—sweets and chocolate—and similar foods. Value added tax was not levied on them when it was introduced in 1972. It was first levied on them in 1974–75 and has been levied on them ever since.
      If it is to be alleged that the Government are not taxing food, they should make an exception here as well. I do not accept the argument put forward so often by those on the Treasury Bench that they have great concern for the health of our people, that chocolate, other confectionery, crisps and similar foods are in some way damaging to the nation's health, and

      1147
      that therefore they are helping us to have fitter children by taxing those foods. The same could be said of much else that comes in the category of food, and in any event it is hotly disputed by those who can assess the value of those foods.
      I accept that I am making a constituency point. I see that my hon. Friend the Member for Fife, Central (Mr. Hamilton) looks askance. I have heard him make constituency points in a heated manner. I had always thought that that was one of the reasons why we were sent here. In York I rejoice in having—I dare say that most others do not—the title of "citizen in Parliament". I regard that as a high prize. My object is to express here the concerns of my constituents.
      5.15 p.m.
      About 25 per cent. of my working population work in the making of confectionery. If VAT on the items they make is increased, the effect is bound to be to hit sales, and through sales to hit employment. Some of my hon. Friends jeer, but I see no reason why my coming here to express my concern about the employment of my constituents is more to be criticised than another hon. Member's coming from Glasgow, Govan, Liverpool or anywhere else to express concern about the employment of his constituents.
      What I have to say makes a substantial point about the effect of the Budget. If indirect taxation is increased and sales decrease as a result, as they are bound to, the effect must be bad for employment. One effect of the Budget is that it will hit employment hard. Assessments made since the Budget indicate a far more depressing picture than that shown in the Red Book. There was a report in The Guardian recently that one institute expected a decline in living standards of 4 per cent. over the next 12 months.
      In 1968 the then Chancellor argued for a decline in living standards of 1 per cent. He never got it, because the unions would not let him. We had a decline of about 4 per cent. in the second stage of pay policy, but only through an agreement with the trade unions. The idea that we can bring about a 4 per cent. decline in the standard of living without raising hostility from all the organisations that represent working class interests is poppycock. Therefore, the Government
      1148
      must reconsider their position in relation to employment, particularly with the added difficulties thrown upon us by the new increase in oil prices.
      This is not the time at which the Chief Secretary should pursue his monetarist theories, ignoring all the warning signs. There is nothing but theology behind the Bill, nothing but aspirations to a kind of spiritual enlightenment for the whole of the British people as a result of going through the travail of wearing a worse hair shirt than they have worn in the past. It has not worked in the past and it will not work in the future.
      All the indicators are that even the Government's friends, even the people in business, even those who have been calling for tax changes of the kind introduced in the Budget, are worried about the future. It is coming to something when Sir John Methven of all people, the Tory spokesman in opposition, has to send round to all his mates telling them that they must take advantage of the tax changes, because this is the last opportunity, and if they do not do it now they may suffer an awful fate. I can only say that I welcome his assurance that the Labour Party will return to office at the next election.
      Equally, I share Sir John's concern that the cost of the Budget will be so immense in terms of jobs. Therefore, I hope that the Chief Secretary will look more carefully at the proposals in the amendments to the clause, particularly the amendment before us. This is not the time to put such a heavy burden on the British people.
      Mr. William Clark: I listened with interest to the hon. Member for York (Mr. Lyon). He has missed the whole point of the tax changes. The strategy is to relieve taxes on incomes, wages and earnings and to swap more to spending taxes. All tax on income is a compulsory tax. There is an element of choice in a spending tax or VAT. Everyone can make various cases. The hon. Gentleman made a case for York and for the confectionery industry. We could all make claims for exceptions. But if the strategy is to swap from a tax on income to a tax on spending, the tax on spending must go across the whole board. I hope that my right hon. Friend

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      the Chief Secretary will not weaken the strategy by accepting this amendment.
      We have tried in the past a policy of high taxation. A rate of 83 per cent. and, in some cases, 98 per cent. has not worked. We now have a new and different approach to taxation. I would have thought that the strategy should remain to see what happens. I do not accept that there will necessarily be a decrease in demand for confectionery. The demand is elastic. I should not have thought there would be a decrease in the confectionery and crisps trade.
      In urging my right hon. Friend to resist the amendment, I leave him with one thought. All of us want to help new businesses and new inventions. The one moiling of our tax structure is its treatment of new businesses and new inventions. To give free depreciation and capital allowances is acceptable provided that the new business generates profits straightaway. To give free depreciation is a promise for the future, if that business gets off the ground and profits are generated.
      I should like my right hon. Friend to consider, not for this Budget but for the next, whether VAT could be used in a more flexible way to help new inventions. One way to generate a number of new businesses and new inventions would be to declare a VAT tax holiday. The system would become more flexible. It would provide a greater benefit for people with new inventions to get the business off the ground.
      A tax holiday would have to be for a limited period. I am not suggesting one, two or three years. Each would have to be decided on the merits of the case. Many countries use indirect taxation in this way. I would like my hon. Friend to keep this suggestion at the back of his mind and consider whether VAT can be made more flexible. He will be pleased to know that I am not suggesting an alteration to the present Finance Bill, but this is an area of taxation where VAT, in future Bills, could be made more flexible to create more new businesses and more employment.
      Mr. Richard Wainwright: I endorse the congratulations already accorded the hon. Member for Huddersfield, East (Mr. Sheerman) on
      1150
      his maiden speech. His constituency immediately adjoins Colne Valley. In those parts, the tradition of political argument is robust, sophisticated and honest. It will be a strenuous occupation for those of us who have to take on the hon. Member for Huddersfield, East.
      I am speaking solely to amendment No. 1 in the name of Liberal Members. It is scarcely necessary to point out that the amendment has no connection with that moved from the Labour Front Bench. It is a matter for congratulation of the Government that we have at least got back to one, and only one, positive rate of VAT. The argument of the Opposition Front Bench that many things can be labelled luxuries while others are necessities is wildly out of date with the modern variety of lifestyles and the condition of society. I am particularly optimistic that the Government will have no truck with the astonishing arguments adduced by the hon. Member for York (Mr. Lyon). It was no wonder that he had a smile on his face. He argued that in some way according to a wholly false doctrine of nutrition, people should be encouraged fiscally to munch boiled sugar rather than to get out and use sports equipment. The hon. Gentleman was dealing with the dangerous end of a stick of dynamite.
      The day will come when this most useful, but abused, word "food", which is employed by the industry to secure zero rating for a vast number of rather disgusting and unhealthy commodities, will be carefully scrutinised by this House. The fact that bread, milk and Yorkshire pudding should be free from VAT for all time does not mean that a lot of confectionery that masquerades as food should also be free.
      Mr. Denzil Davies: The hon. Gentleman said that bread and milk should be free of VAT and yet argued that it was wrong to divide categories of goods into essentials and luxuries. How does he therefore justify his argument that bread and milk should be zero rated?
      Mr. Wainwright: I say that only because, unfortunately, there are some conventions, deeply rooted in the British mind, which it is not possible to roll back. The cry of cheap food which derives from the epic period of the Corn Laws is a matter I am not prepared to take on.

      1151
      The objection encapsulated in this amendment relates to the sharpness of the rise in the rate of VAT. In the opinion of Liberal Members, it is out of all reason. Before one can take VAT to these heights, which are not necessarily objectionable in themselves, if reached in the proper way, it is necessary to adopt certain precautions. It is necessary to attend properly to social security benefits through some kind of negative income tax or tax credit scheme. It is particularly inappropriate that this savage increase in VAT should be contained in a Budget that makes no provision for increase in child benefits and does nothing to fulfil the specific promise in the Conservative Party election manifesto to introduce a tax credit scheme. There is no safety net to protect the lower paid and those in receipt of State benefits from the effects of this sudden increase.
      Secondly, there is, as yet, no minimum earnings legislation, which means that the lower paid are not protected. Nor is there an incomes policy to ensure a reasonable distribution of national earnings. Without those protective measures, it seems to Liberal Members very unfair to have put up the rate as sharply as has happened in the Budget. As the CBI has pointed out, it is also very dislocating for many of the industries involved. There have been many serious debates in this Chamber about the appalling effect on some of our industries caused by rapid changes in indirect taxation in the past. To court further disasters by virtually doubling the general rate of VAT will have a very unfortunate effect on some consumer industries.
      For that reason, and not for any reason connected with the Opposition amendment which appears first on the Notice Paper, we believe that an increase to 12½ per cent. was far enough for the Government to have gone this year.
      5.30 p.m.
      Mr. Tam Dalyell: My hon. Friend the Member for Huddersfield, East (Mr. Sheerman) made an outstanding maiden speech. He made a kindly reference to his predecessor, the friend of many, "Curly" Mallalieu. He was an extraordinarily gifted sportswriter for the Spectator. He persuaded a whole generation that it was Huddersfield Town's
      1152
      destiny, not Liverpool's or Manchester United's, to be the football team of the 1950s, 1960s and 1970s. He was a brilliant writer. He was a great friend to many of us, and we appreciated the tribute paid to him by my hon. Friend.
      I wish to ask a series of questions of the Chief Secretary. The first arises out of the speech made by the hon. Member for New Forest (Mr. McNair-Wilson). He referred to the difficulties experienced by garages. What do the Government think it is their duty to say to people such as Dr. Pearce of Esso and to the leaders of Shell and BP about the petrol supply to small garages in rural areas? I represent a fairly wide rural area. Almost all the small garages complain bitterly that they are not receiving anything like the allocation they need and to which they feel that they are entitled.
      Whatever the merits or demerits of the policy adopted by oil companies it does not save fuel. In a country area it is ridiculous to have people swanning and cruising round for miles trying to find oil and petrol at the bigger pumps because the small garages are deprived. The Government have some locus in this matter. My first question is: do the Government accept responsibility? Are they talking to the oil companies for the reasons expressed by myself and the hon. Member for New Forest?
      We were not jeering my hon. Friend the Member for York (Mr. Lyon) when he spoke of sweeties; we were interested in the price of Smarties. My right hon. Friend the Member for Llanelli (Mr. Davies) said that not only was VAT being increased but there was a great deal of topping up in the price of confectionery. Not only is VAT given as a reason for increased prices but it is being used as an excuse to increase prices of confectionery.
      As the Government are dismantling the Price Commission and a number of other institutions do they intend to develop an antenna which they expect to do good? Do the Government feel that they have any responsibility for ensuring that traders do not suddenly, at whim, dollop on a price increase and use VAT as an excuse rather than a reason? Such practices are fuelling inflation in a dangerous and often rather wicked way.
      My third question involves the unselected amendment no 6. I have discussed

      1153
      the matter with my hon. Friend the Member for Edinburgh, Central (Mr. Cook), who tabled another amendment. The hon. Member for New Forest mentioned bicycles. My question is more general. Do the Government have any view in relation to strategy about helping through the tax system those parts of the economy that can be expected to be energy saving? My amendment involves recycling. Some thought went into this. There is a strong argument that I shall deploy at length if necessary after the Chief Secretary has spoken.
      Is the Treasury thinking about giving financial incentives to those who are prepared to produce recycled goods which save scarce materials or energy? What is the Government's general philosophy towards recycling and energy saving?
      By what rationale should the price of bicycles be increased when surely it is to the advantage of society that as many people as possible should use bicycles? This is not a matter for ribaldry or laughter. We would not expect our constituents to cycle 20 miles on a necessary journey, but relatively more fuel is used by the short, often less than necessary journey in town. Such a journey can be made on a bicycle. The stops, the starts, the lights and traffic jams and all the other difficulties of urban motoring do not apply in the country areas.
      One might argue that provision would have to be made for bicycle lanes. That might be expensive, as some new towns have discovered. Is it really sensible to increase through VAT the price of bicycles?
      One must bear in mind that not only a financial question is involved. It is a bit of a symbolic question—it is a bit of a totem pole question. In a crisis it is not too naïve to think that many people would try to do something about it. It may not make all that much difference to the fuel situation, but it could make a difference to society's approach to energy saving. Surely it is up to Governments to set an example through the tax system, even if it is, in the view of those at Great George Street, a propagandist point rather than a suggestion that would save many millions of pounds.
      I do not believe in long speeches in Committee on the Finance Bill. I believe
      1154
      in speaking again if I do not receive a satisfactory answer. I hope that the Chief Secretary will answer my questions.
      Mr. Percy Grieve: I did not intend to speak, but I was tempted to interrupt the hon. Member for West Lothian (Mr. Dalyell). I hope that my speech will be almost as brief as any intervention that I might have made in the hon. Member's speech.
      We have heard a number of pleas for special exemptions or reductions in the rate of VAT. I have no doubt that such demands for special cases and reductions can be made with good conscience by an enormous number of people.
      The hon. Member for West Lothian referred to bicycles, as did my hen Friend the Member for New Forest (Mr. McNair-Wilson). The hon. Member for York (Mr. Lyon) talked about confectionery. Perhaps I should not say that he spoke with his tongue in his cheek, because he has a strong constituency interest. He made a plea for a reduction of VAT on confectionery. Many people have made strong cases for a reduction in VAT as it affects the theatre and the arts generally.
      If these special cases were to be hearkened to, and we had a whole spectrum of varying rates of VAT, we would greatly increase the complexity of the tax and be acting clean contrary to the policy behind the increase in indirect taxation and the reductions in direct taxation. The purpose of the reductions in direct taxation and the increases in indirect taxation is to free the individual and give him a far greater choice of what he spends his money on.
      If my right hon. Friend listens to special pleading, the whole policy will be undermined. The great merit of the Budget has been to increase the freedom of the individual. That cannot be done without increasing taxes on expenditure, if these cases, good as some of them may be and bad as some undoubtedly are, were to be listened to by my right hon. Friend, it would cut at the root of the policy.
      Mr. Jim Marshall: The hon. and learned Gentleman has made the point that the Budget increases personal freedom. I put to him a case from my own constituency which concerns a man who operates personal

      1155
      weighing machines. I understand that that man has written to the Chancellor of the Exchequer about how he operates these machines with a 2p coin. Inevitably he is not able to collect the VAT, which is, therefore, charged on his gross takings as distinct from the confectionery trade. As a consequence, over the past few years, he has seen his profit margins decline and has had to reduce the number of his staff. In view of the increase in VAT from 10 per cent. to 15 per cent.—which further diminishes his gross takings—that firm is likely to close and four or five people will lose their jobs. Can the hon. and learned Gentleman explain to me how the loss of those four or five jobs increases the personal freedom of the people who have lost them?
      Mr. Grieve: The hon. Gentleman has put a very special case. It is quite obvious that where people are using slot machines in trade difficulties are presented. Changes in tax law are not made without difficulty. The hon. Gentleman's observations will no doubt be listened to by my right hon. Friend, who perhaps will be able to suggest ways in which the machine operator referred to may be able to solve his problems. Hard cases make bad law, and I cannot think of a better example of the merit of that axiom than the case just quoted by the hon. Gentleman. We all receive in our postbags every day pleas for special cases. If we listened to them, we would have a whole range of value added taxes, costing an enormous amount of money to administer, cutting at the whole root of this Budget.
      Mr. Alexander W. Lyon: Does not the hon. and learned Gentleman recognise that the difference between himself and most of his constituents is that there is a much greater percentage of his total pay over which he has the freedom to decide how it will be spent? The great majority of his constituents, and certainly the majority of mine, do not have that choice. The bulk of their income is already allotted to essential items. They have no alternative. They do not have freedom, simply because of indirect taxation.
      Mr. Grieve: I do not accept for one moment the distinction that the hon.
      1156
      Gentleman seeks to draw between his constituents and mine. I find that my constituents are pleased to have the greater choice which the Budget gives them. There is a great deal of grousing in the community because VAT is being increased when people have not yet had the full benefit of direct tax reductions. When they have felt the full benefit, they will welcome the changes which the Government have made.
      5.45 p.m.
      Mr. William Hamilton: I have in front of me the Treasury "Economic Progress Report Supplement" for June 1979 on the Budget. It is true, as hon. Members on the Tory Benches have been saying, that the report sets out four objectives: first, the strengthening of incentives. That means, I presume, for people at the top and bottom of the wage scale. Secondly, a greater freedom of choice in spending one's income rather than giving it to the Inland Revenue—one goes into the shops and is robbed there rather than by the Treasury or the Inland Revenue. Thirdly, a reduction of the Government's borrowing requirements, which, bluntly, means public expenditure cuts. Fourthly, bringing inflation under control by suitable fiscal and monetary disciplines.
      Let us look at those objectives and see how they measure up to the real world as we know it. When the Budget was being introduced I was at Bridlington attending the conference of the Confederation of Health Service Employees, which is my sponsoring union. There I listened to ambulance men, to mental health and other nurses and to ancillary workers of all kinds in the Health Service. Their reaction was immediate and bitterly hostile to the whole concept behind the Budget. They sat at once, and passed a resolution condemning the inequity of the Budget, in that it seemed to give them, who perform vital services, absolutely nothing, or only a few pence a week. At the top end of the wage scale they quickly worked out that the man on £25,000 a year was getting at least £60 a week back in tax concessions. That man was getting back in concessions the living wage of £60 a week for which they went on strike last winter. They wanted a living wage of £60 a week and were roundly condemned by the then Tory Opposition for being so greedy as to ask for that

      1157
      sum. The present Conservative Government, in May, gave £60 a week back in tax concessions to those at the top.
      I do not know whether hon. Gentlemen on the Tory Benches move in the same circles as I do. They probably do not, but if they had talked to housewives and ordinary working people they would have found that those people object very much to the gross inequity of the Budget proposals. I think that there is a case for examining the proportion of tax collected by direct and indirect methods. There is a case to be argued that if one can give the taxpayer a greater margin of choice in how he pays his whack, one ought to examine it. I say no more than that, so long as we make sure that the direct tax system is fair and progressive right along the line, and that we ensure, at the other end, that we are taxing indirectly only inessentials. That immediately raises the question of what is essential and what is not.
      The paper from the Treasury makes the point that
      "this will enlarge the scope for further cuts in income tax later on."
      Therefore, an additional purpose of the VAT increase was to put taxes on the ordinary people who were not paying high rates of income tax in order to give tax benefits to those at the other end of the income scale. The document goes on to say that the increase in VAT" has the immediate effect of raising the retail price index by 3½ per cent. but VAT does not apply to necessities such as food, heating, lighting, house prices, rents and public transport, all of which are zero rated."
      That is what the document states, but it fails to state that virtually all those commodities are being increased in price by other factors.
      Of course food is zero rated, but the Minister of Agriculture, Fisheries and Food made an agreement in Luxembourg that put up precisely the food prices that the Government argue are not affected by VAT. They are not affected by the increased VAT, but they are affected by the Minister's sell-out in Luxembourg. Conservative Members may quote the butter subsidy at me, but that is a lot of nonsense. I hope that housewives will note that the 6p will not come off butter, that there will be no 6p a pound reduction. After
      1158
      allowing for the two devaluations of the green currency and the rest of the package that the Minister brought back, the overall effect on the retail price index will be an increase, in spite of the alleged 6p reduction for butter. The Consumers Association will carefully watch the price of butter, but I assure hon. Members that it will not drop by 6p a pound next week or the week after.
      I normally read The Daily Telegraph—
      Mr. Skeet: Hear, hear.
      Mr. Hamilton: I like to see what the Tory Party leadership and readership are thinking. It is a well-known Tory rag. On 29 June it showed that the increased VAT had sent up the number of price increases recorded by The Grocer to more than 1,000 that week. More than half the 1,037 price increases were VAT impositions on confectionery, ice cream, chocolate biscuits, crisps, nuts, some milk products, pet foods and toilet and household items. Other price rises included honey, spices, sauces, meat extracts, breakfast cereals and cake mixes.
      I then turned to The Daily Telegraph of 18 June and discovered a record fit for the Guinness Book of Records. I have never known one issue of The Daily Telegraph to contain five letters bitterly complaining about the wickedness and inequity of the VAT imposition. One was from a fellow who was self-employed. One said that VAT applied to the costs of funerals and that the Government not only refused to increase the death grant but were pushing up the cost of a funeral. One was from a schizophrenic patient talking about prescription charges, which are going up in addition to the VAT. One was from a woman working in an animal sanctuary. They all complained about the VAT increase.
      However, only the day before those letters appeared that Tory Party hack and apologist Patrick Hutber, writing about the VAT increases in the Sunday Telegraph of 17 June, said
      "It is of course absolute nonsense to say this increases the inflation rate".
      I wonder what he was talking about. The man must have taken leave of his senses. However, one would expect that from that gentleman. He went on to

      1159
      say something a little nearer the truth when, quoting from The Economist, he said that
      "a full year of the new VAI rate will give him"—
      that is, the Chancellor—
      "plenty back for further tax cuts next year."
      So the Government are taking the cash out of the pockets of ordinary working people to redistribute next year to the people at the top.
      Worse than that, all kinds of traders are taking advantage of the Government's policy of abolishing the Price Commission and all forms of price control by putting up their prices far more than the VAT increase. Leaving Edinburgh airport at the weekend I came up against one of the biggest swindles in Britain—National Car Parks, which takes money out of people's pockets at the airports. Its charges were 10p for under an hour. Last Sunday the sum had increased to 13p, a rise of 30 per cent. For one to two hours the charge had been 22p. Now it is 27p, an increase of 20 per cent. or more. That is barefaced robbery, and it is happeninig all the time. The Secretary of State for Energy sits on his fat backside—well, on his backside—in the Department doing nothing and saying "That is my policy". The oil companies can do exactly as they like. They put up the oil prices, and VAT is 15 per cent. of what they charge. There is therefore a double fiddle going on with the energy and petrol charges. All working-class folk have to pay them. There is no element of choice there, because old folk must have heat.
      This is all done in the name of competition. Competition, we are told, will solve all these problems. If the Government think that the imposition of VAT and of all the other price rises, including prescription charges, will help to modify the claims of the trade unions this winter, they had better think again. There will be an extremely violent reaction in the course of this winter to the impositions that are being made upon ordinary working people.
      A recent independent estimate shows that in a few weeks the Government have taken £850 million out of the pockets of British housewives as a result of the agricultural deals in the Common Market. That is equal to £15 a head for every man, woman and child in the country. If
      1160
      the Government think that the people will sit back and accept that just to show that they are being patriotic and to get the country out of its difficulties, they had better think again. No working-class man, woman or child in this country will put up with that kind of imposition.
      6 p.m.
      Mr. R. B. Cant: I had rather hoped that my hon. Friend the Member for Fife, Central (Mr. Hamilton) would get to the fourth point that he threatened to raise, namely the public sector borrowing requirement. However, I am not prepared at this stage to sit down so that he can resume his speech.
      We have had an interesting discussion so far, although it has been enormously varied. I am only sorry that my hon. Friend the Member for Huddersfield, Fast (Mr. Sheerman) is not here, because I should have liked him to hear me add my congratulations to him on what I thought was an extraordinarily good maiden speech. He not only dealt with the particular problems of Huddersfield and the character of Mr. Mallalieu, but said much on regional policy with which I agree and to which I hope the Government will pay attention.
      I want to depart from some of the details that have been mentioned concerning value added tax, although I am carefully considering the proposition that I should buy a bicycle, or perhaps join the club. We ought, I believe, to consider precisely why the Budget took this form, with increases in taxes of various kinds and the reduction of others. We ought to consider why the Budget has taken this form rather than having a rather different pattern.
      In putting forward my own belief about it, I am not claiming to be saying anything original. There has been reference to this in the press on several occasions. I believe that the balance of the argument between value added tax and income tax reflects the views of the Prime Minister. The Chancellor of the Exchequer is really too gracious a gentleman to have wished to introduce a Budget of this sort, which has really appalled sections of the community which, one would have thought, would welcome it with open arms because of their political convictions.

      1161
      I should like to say in parenthesis, as we are in Committee and can linger for quite a long time on our deliberations, that I was shocked to read in the Sunday Telegraph—the brother of the rag to which my hon. Friend the Member for Fife, Central referred—that the right hon. Lady is known in Whitehall as Attila the Hen. If civil servants are not making such statements, I hope that their unions will put out a disclaimer.
      I think that the right hon. Lady was determined that there should be substantial reductions in income tax, come what may, and that the Chancellor of the Exchequer, having looked at the books—as he kept on telling us—had found that compensating action of some other kind would have to be taken. If it had been left to the Chancellor he would not, I think have raised value added tax to 15 per cent. I believe that he was told that the standard rate of income tax must be reduced from 33p to 30p, and he may have felt that his options had become somewhat circumscribed.
      I should like to discuss the public sector borrowing requirement at some length, because it is of some importance. As I said earlier, I am sorry that my hon. Friend did not dilate on this theme. But of course, he can speak again. I still cannot become quite acclimatised to the fact that this is a Committee sitting in the Chamber of the House. If we accept that the classical doctrine of today is that the public sector borrowing requirement must be of a magnitude that will enable the Chancellor of the Echequer to impose some control on money supply, we have to take this seriously. Money supply, monetarism, is the fashion, and I am glad that it is. My hon. Friend will no doubt be shocked to hear me say that I made a speech in this House in, I think, 1968–69, and that the late Iain Macleod interrupted his dinner to come and hear me make it. It got me into much trouble because my local press reported that Iain Macleod had paid a great tribute to me because he thought that I was a very sensible man. Indeed, from that moment onwards he called me the hon. Member for Chicago.
      Everyone—apart from a few eccentrics on the Labour Benches—is a monetarist now. My own feeling about monetarism is not one of passionate dedication, but
      1162
      I believe that money matters. In this context, I think that M3 and even M5 have some significance and that attention must be paid to them. If the Chancellor of the Exchequer felt that he had to hold the public sector borrowing requirement to, say, £8¼ billion, because this was the acceptable figure—not, of course, to Members of this House but to the young lads who write the brokers' pamphlets and circulars, and things of that sort—no doubt this presented something of a constraint to him.
      I think that the Chancellor of the Exchequer cheated, because what he said, in effect, was "Let us have the sale of the century, let us sell off a billion pounds' worth of assets". It has not been done yet, but I have no doubt that the Chancellor is a man of conviction and determination and that he will do it—if the City agrees. There is a long queue of people wanting to place rights issues, and it may be that they cannot fit BP in at an appropriate moment. Having said "We will sell these assets", the Chancellor was able to exercise an extra degree of control by, in effect, cheating over the money supply.
      I believe that every serious commentator on the Budget would say that what the Chancellor has really done is to give us a public sector borrowing requirement of £9¼ billion, which is in excess of what my right hon. Friend the Member for Leeds, East (Mr. Healey) had promised to do. That is the rub. If the right hon. Lady had given notice that the top rates of tax had to come down and that the standard rate had to be reduced by 3p, how was the Chancellor—even taking into account the fact that he intended to flog these valuable assets—to get the public borrowing requirement down to £8¼ billion?
      One can lean on Government Departments, but I do not know whether this will be a serious business in terms of cash limits. One can lean on local authorities. I am a member of a local authority and I know what is taking place at present. Only time will tell how far one can take that course. We were in a situation in which the Chancellor simply had to get money from elsewhere. This terrible increase in VAT, up to 15 per cent., is the price that Britain is paying for the determination to get a PSBR of this size.

      1163
      I shall not go into the implications for monetary policy or money supply, although it has been suggested that these are slightly horrific. If one reduces the money supply target to 11 per cent. and if one has inflation rates that are greatly in excess of those that one anticipated, real money supply figures become ridiculous. Therefore, this is somethting to which I hope the Chief Secretary, who is interested in these matters, will apply himself. Otherwise, the estimated negative growth in the economy of minus 1 per cent. may well become, as one forecast says, minus 4 per cent.
      As one or two of my hon. Friends have said, we are now being ruled by a group of politicians who are consumed with a brand of ideology. [An Hon. Member: "Greed."] I would not say that. I would rather say "This brand of ideology". I do not use words such as "greed".
      Mr. Robert Kilroy-Silk: Take "avarice".
      Mr. Cant: Avarice, yes, but this is not precisely the point I am trying to make. I am merely saying that, whatever their inner motivation, Conservative Members are dedicated to certain principles, whether one describes those principles as market principles or in any other way, and that we are going ahead, come what may, in a way which worries me. I am not worried so much by the Chancellor. He is a reasonable man, but I think that he is under great pressure.
      The Secretary of State for Industry, the right hon. Member for Leeds, North-East (Sir K. Joseph), really frightens me. I saw him on television looking at a shipyard, wearing his tin helmet. The yard manager was discussing the yard's future in very practical terms. He asked the Secretary of State what his policy was likely to be. The Secretary of State's eyes fell to the floor and he began grinding out these simple principles and platitudes just as though he were at a seminar at All Souls College once again. That might be all right, but it will not get the country far.
      The implication in practical terms is quite serious. Not only do we have what has happened regarding the reduction of income tax and its implications for VAT, but the Chancellor had to take
      1164
      a step further and raise the rate of interest. He said "Having had to reduce these direct taxes on income by this amount, having clawed back a certain amount through VAT, I still have problems with the financing of the deficit." We remember the gasp that greeted that announcement and when he said that he proposed to increase the minimum lending rate to 14 per cent.
      6.15 p.m.
      My hon. Friend the Member for Fife Central said that he read The Daily Telegraph because it gave him an insight into Tory thinking. The Daily Telegraph is getting a lot of free publicity this afternoon. For the first time in my reading of it, I found that The Daily Telegraph even came out against the Government last Friday or Saturday, saying that increasing the MLR was the Tories' first big mistake. [An HON. MEMBER: "Poetic licence."] Perhaps it was trying to be loyal. You are putting me off.
      This is the second consequence of the determination to reduce the Government's income by reducing direct taxes: first, VAT increasing costs; secondly, the MLR. It was a totally unnecessary gesture. But no doubt there are reasons for it. One does not want to upset civil servants, but I think that what happened was that they felt that they had so little control over the gilt-edged market and over these vast pension funds and insurance companies, and so litle control over what happens in the foreign exchange market, that they had better play safe. Lo and behold—
      The Temporary Chairman (Sir Stephen McAdden): Order. The hon. Gentleman has already accused me of putting him off. I have done nothing of the kind. It is his colleagues who have done that. The hon. Gentleman is going rather wide. He is almost making a Second Reading speech I hope that he will confine his remarks to the amendment.
      Mr. Cant: I certainly accept that criticism, Sir Stephen. However, although the consequences of the shape that the Budget has taken have been quite broad, I shall concentrate on VAT.
      I have always felt—this is just a piece of straightforward common sense—that if one is fighting a battle against inflation

      1165
      what one should not do is to add to inflation. How does one put out a fire? If one wishes to do so, does one do it by sprinkling paraffin on it? As my hon. Friends have said, how can one hope to persuade people to reduce their wage claims if one increases VAT in this draconian way? In our present circumstances, I suspect that the Government will begin to wonder whether they have taken the right step. As time goes on, without doubt—partly because of the increase in prices—wage earners will say "If this is what is happening, we want increased wages".
      There is another aspect to this problem. When one redistributes taxes in this way, what one is doing is taking money out of the handbag and putting it into the wallet. I have the highest regard for my sex, in the sense that I think that all husbands are dedicated to the welfare of their wives and families and that all single men like to look after their mothers. If they see the cost of living rising, in all probability they will make some sort of adjustment, but it might be an almost irresistible temptation on the part of a number of wage or salary earners to say "I have the money and I am not prepared to finance the increase in my wife's and family's cost of living". From the point of view of simple psychology, I think that the increase in VAT is a disastrous move.
      If on the other hand, one were to be persuaded that all the good things that the Chancellor said about reducing income tax—the new motivation to business men, incentives and so on—were to take place and Britain really got moving again, one could say "This increase in VAT was justified. It has been worth while". However, I think that one of the biggest pieces of mythology that I have encountered for a long time is the idea that, having stunned people with increases in VAT, one will suddenly motivate them by reducing their income tax and that somehow the really fundamental problems that face this country, such as the restructuring of British industry, will be solved.
      This is a wide-ranging subject, and it is one to which we might wish to return. However, in conclusion, having listened to Budget speeches in this House for 14 years, I say that this one will
      1166
      prove—in particular through this one item, the increase in the rate of value added tax—to be one of the most disastrous. I hope that it will not be so, because this country could do with a period of stability and good industrial relations. As a consequence of the decision that has been taken by the Government, unless they respond to some of the amendments that have been put down we shall get a great deal of economic instability and social aggro, which we could well do without.
      Mr. Robin F. Cook: As my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) said, we shall have a lengthy and wide-ranging debate on this amendment, which gives us a valuable opportunity to probe some of the central assumptions of the Budget of which this clause is an integral part. I am sure that my hon. Friend will understand that I mean it in all friendship when I say that for some of us it is, perhaps, easier to support this amendment and oppose the clause because we regard the tax to which it relates as being, in itself, fundamentally daft. That, of course, is exactly why we end up with so many anomalies and special cases such as those produced in the course of this debate.
      This is a tax which does not start from the question "Which goods would it be sensible for us to tax?" This tax starts from the presumption that all goods will be subject to tax and only then asks the question "For which goods can we make such a compelling case that we can exempt them from tax?" That is why, time and again, subjected to this tax there are goods which, had we sat down and thought about it with a blank sheet of paper, we would never have dreamed of making subject to tax in the first place.
      The hon. and learned Member for Solihull (Mr. Grieve) referred to letters raising, special cases which hon. Members receive every week. I had one two weeks ago from a small company in my constituency which manufactures organ pipes for churches. It is a small craft industry which sells to a single market. That market has a particularly low income and is therefore unable to afford high prices.
      In that letter, the company made a general case against any VAT being

      1167
      applied to its industry and, in particular, indicated the disastrous impact of a 15 per cent. rate of VAT on its product. I took that matter up with the Treasury and I say to the Chief Secretary, whom I see on the Front Bench, that I was gratified for the speed with which I received a reply. The terms of that reply are worth sharing with the Committee. They do not explain why it is sane, sensible and rational that organ pipes should be subject to VAT and make a contribution to the economy through taxation. The reply states:
      "There would also be real difficulty in granting special relief in one area such as pipe organs without giving rise to increased pressure from other groups who might claim to be equally deserving."
      In other words, pipe organs cannot be exempted because, if they were, there is such a wide range of other goods that are equally deserving, where it is equally daft to subject them to tax, where there would be an equal effect on a craft industry and where there would be an equal benefit to a rather poor market which cannot readily pay this tax into our national coffers. That is the reason why the Government cannot do it.
      I was surprised when the hon. and learned Member for Solihull, for whom I have great respect, chose to place such great weight on the argument that if tax is transferred from income tax to indirect taxation, the range of choice is increased. That is absolute nonsense. The ordinary wage earner, who is also the ordinary consumer, can no more avoid this tax by choice than he can avoid paying income tax by so arranging his salary that it stays below a particular threshold level. That choice exists, but it is not one that any income earner would choose to exercise. Equally, no consumer—who is also the same income earner—will be able to avoid this tax by the way in which he spends his money.
      Let us consider the products which are not zero rated. Let us consider those products which have this tax imposed upon them. They include a wide range of goods which I believe every member of this Committee will concede are necessities. They include clothing—not children's clothing, but all other types of clothing. They include house repairs, and I am bound to say, as an hon. Member who has spoken on many occasions
      1168
      about housing policy, that I cannot think of a more idiotic decision than choosing to tax repairs on housing when we are all very conscious of the need to maintain the present housing stock. Furniture and cookers will also be taxed.
      Returning to the point made by the hon. and learned Member for Solihull about special cases, I received one such letter only this week. It referred to one particular product which is subject to this tax and which is an undeniable necessity. The matter raised with me by my constituent referred to sanitary towels, on which she will have to pay 15 per cent. tax as a result of the Budget. I do not think that any right hon. or hon. Member, even allowing for the biased sex distribution in the Committee, would be prepared to stand up and say that that product was not a necessity, or to take the point made by the hon. and learned Member for Solihull about special cases and suggest that my constituent, in any meaningful way, has a choice in the way that she distributes her income in order to avoid that tax.
      The case for some of the special exemptions proposed in the amendments is made in the background notes to the Bill provided by the Treasury. I must confess that I could not understand the meaning of subsection (2). I think that any hon. Member not on the Front Bench who refers to subsection (2) will find that its meaning is not apparent to the uninstructed reader.
      In the background notes, I find an explanation of subsection (2) that provides for the continued exemption from VAT of the insurance of pleasure craft. It also ensures that those fur garments for young children which previously were higher rated become standard rated. Such is my antipathy to this general tax that I do not begrudge the insurance industry its freedom from it. Nor would I begrudge the manufacturers of fur garments for children their exemption from this tax. But if we are to exempt that category of goods, the case for exemption of some of the greater necessities referred to in the amendments is overwhelming and compelling.
      On a number of occasions the Government have said that although they will double the rate at which this tax is

      1169
      applied, and although it will result in doubling the proportion which most consumers pay in taxation through VAT, it will not have an inflationary effect, because there will be more pounds left in the pockets of those who go out to the shops to buy goods. I find that a very doubtful concept. I do not believe that there are many significant groups of wage earners who will fail to look at the impact of the RPI because they are told that they must look at their net take-home pay.
      6.30 p.m.
      If the Chief Secretary consulted his colleague the Leader of the House about what happened to him when he went before the 1922 Committee, I suspect he would discover that the arguments about the pay of hon. Members related not to their take-home pay but to the extent that it had fallen behind movements in the RPI. If hon. Members are to behave on that basis, it is not at all surprising that people outside will behave on a similar basis.
      The fact is that this Budget will not put more pounds in the pocket of the average wage earner. It is quite apparent that if one deducts the uprating in the tax threshold from the increases that have been provided in this Budget, most wage earners will pay more in tax, through increased VAT, than they will gain from the reduction in direct taxation.
      I should like to take up the point made by my hon. Friend the Member for Fife, Central (Mr. Hamilton), who said that it was at least arguable that direct taxation had become too heavy a burden and that there might be a case for switching some of that burden on to indirect taxation. I counsel my hon. Friend to be very careful about what exactly has been happening over the past two decades. There has not been a switch in the tax burden from indirect to direct taxation.
      Indeed, if my hon. Friend consults the figures in the Library, he will find that 49 per cent. of the tax take comes from indirect taxation, which is exactly where it stood in 1959–20 years ago. There has been no shift in the burden from indirect to direct taxation. What has happened—and this is a factor which is
      1170
      frequently ignored when we consider taxation matters—is that there has been a shift in the burden of direct taxation among those who are paying direct taxation. It is a shift that has occurred for two reasons. First, corporation tax has been virtually abolished by the number of exemptions that we have passed in previous Finance Bills. Secondly, within the income tax sector the growth in allowances, particularly for mortgage payments and insurance premiums, has been so great that it now accounts for one-third of the total take in income tax.
      Those two factors—the collapse of corporation tax and the growth in tax allowances—have resulted in so many ordinary income tax payers, who do not have any shares in companies subject to corporation tax or mortgage repayments or substantial insurance premiums, now finding that they have to pay increased income tax. Therefore, it would have been quite simple to meet the central objective that we were told was the aim of this Budget by tackling the problem of tax allowances, mortgage payments and insurance premiums and by tackling the exemption from corporation tax, which now spreads right through British business and industry.
      Had the Government chosen to do that, they could have produced a Finance Bill in which there was indeed substantial relief from taxation for the ordinary wage earner, which was not recouped by even greater increases on indirect taxes, which will be regressive. We would then have had a Finance Bill that we could all have supported, and which we could have passed without the need for debates as long as this one will clearly be.
      Mr. Kilroy-Silk: I first congratulate my hon. Friend the Member for Huddersfield, East (Mr. Sheerman) on his maiden speech. It is a long time since we were both students together at the London School of Economics. His eloquence—I think that I can say this quite freely in his absence—seems to have increased in the intervening period.
      Like my hon. Friend the Member for West Lothian (Mr. Dalyell), I was particularly pleased with the gracious words that my hon. Friend had to say about his predecessor, "Curly" Mallalieu. Although I have not been in the House for as long as my hon. Friend the Member

      1171
      for West Lothian, I came to know and had a great deal of affection and respect for "Curly" as he was known. I therefore pay tribute to my hon. Friend the Member for Huddersfield, East for the gracious way in which he alluded to his predecessor.
      Before turning to the specific matters relating to this series of amendments I should like to follow one of the points made by my hon. Friend the Member for Edinburgh, Central (Mr. Cook). He referred to the anomalies that occur in a tax such as VAT, and he referred specifically to the kinds of things that ought to be exempted from the tax but which are included in its wide net. He mentioned the fact that women's sanitary towels now attract a VAT rate of 15 per cent. I should like to endorse and support the points that he made. I hope that the Chief Secretary will refer to this, because I do not think that anyone can argue that sanitary towels are in any sense a luxury, or are not a burden, especially on large, working-class families, in the context of the age at which girls now mature. This is an important point to which the Chief Secretary ought to pay attention. To be fair, the Chief Secretary of the previous Government ought to have paid attention to it, but repeatedly he refused to do so in spite of numerous requests and delegations over the past five years. This is an important matter, and in justice the Government ought to do something about it.
      Mr. Christopher Price: Is my hon. Friend aware that the feeling on this matter is very widespread indeed? I was visited by a delegation last Saturday, and one mother put to me the problem of a single-parent family on social security, with three teenage girls between 12 and 15. She outlined the quite appalling financial burden that she had to bear as a single-parent mother because of this violent and vicious increase.
      Mr. Kilroy-Silk: I entirely accept what my hon. Friend says. As he knows, I have had exactly the same representations. I happen to represent a constituency which has many large families. The same kind of problems and difficulties are encountered there. A tax on that kind of commodity is totally indefensible and cannot be justified.
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      However, I turn to what the hon. and learned Member for Solihull (Mr. Grieve) said. He seemed to be defending the underlying strategy behind the Budget and, indeed, the increase in VAT with which we are confronted today.
      Mr. Grieve rose—
      Mr. Kilroy-Silk: I have not yet started on the hon. and learned Gentleman, and he refused to give way to me. He said that the switch from direct to indirect taxes would set people free and widen their freedom of choice. He is right. It does extend the freedom of the individual and widen the freedom of choice, but only for the rich, the wealthy and the already privileged and powerful. The hon. and learned Gentleman must surely know—the Chancellor has said it time and time again—that the whole burden of VAT and the Budget measures will have the effect of imposing a greater proportionate burden on the low-paid, the unemployed, the sick and pensioners in order to give massive tax handouts to the already rich and wealthy.
      Mr. Grieve: I was not defending, but extolling, the policy of the Budget. Secondly, the number of people who will benefit from cuts in direct taxation is, as the hon. Gentleman surely knows, vast indeed, and it is nonsense to say that it is only the rich who will benefit.
      Mr. Kilroy-Silk: It is the rich who benefit most. How can the hon. and learned Gentleman extol or defend a situation in which, as a result of the Budget, the chairman of one company will receive a tax handout of over £1,000 a week, and where the chairman of ICI will receive a tax handout of £400 a week, but where the vast majority of my constituents will get no tax relief because they are unemployed, pensioners, sick, disabled or low-paid? How can anyone on the Tory Benches defend a situation in which we are taking money from the most deprived, vulnerable and disadvantaged members of our community in order to give extra money to those who are powerful, rich and privileged?
      The Temporary Chairman: I hope that the hon. Member will not insist on trying to persuade hon. Members on the Government Benches to make speeches

      1173
      on income tax reductions. The House is supposed to be discussing this particular form of tax.
      Mr. Kilroy-Silk: We are in Committee, and we are talking about increases in value added tax. As part of the Budget strategy those increases are linked to income tax. With the deepest respect, Sir Stephen, one cannot talk of one without talking of the other. I should like to get hon. Members on the Government Benches to speak. I want to hear a definitive defence of the Budget. We have not had that from the Chancellor, the Chief Secretary or the Prime Minister. We have not heard it, because it is not there. The Budget cannot be defended.
      These rash promises were made by the Tory Party during the election, but there is no way in which they can be defended. No one can defend the Chancellor's saying three times during his Budget Statement that direct taxation was being reduced so that people would have more money in their pockets to pay for the increases in value added tax. That is a laughable justification. The Chancellor repeated it three times in case we missed it the first time.
      The vast majority of my constituents do not benefit from that promise of more money to pay for the increased value added tax. They are paying for the increased value added tax, and will continue to do so day in and day out, week in and week out, until the life of this Government comes to an end. Not one of those people will receive the income tax benefits that the rich friends of the Tory Party are receiving. It is incomprehensible and inconceivable that hon. Gentlemen opposite can extol—to use the word of the hon. and learned Member for Solihull—still less defend such a situation, and they have not put forward any defence.
      The Government say that it does not matter, because the increase in VAT will not hurt the low-paid, pensioners, the disabled or unemployed, because they are not ordinary people. They say that those people do not buy all the things on which the increased value added tax will be imposed. They say that it does not affect food, clothing and transport. The whole argument is superficial. Should those people not buy electrical goods? Do they
      1174
      not have televisions? Are they not allowed radios, washing machines, refrigerators or irons? Conservative Members may say that they should not have these things or not have them repaired, but they do have them and they are not regarded as luxuries. They are necessary and essential. Those articles and others mentioned by my hon. Friend the Member for Edinburgh, Central form part of the cost of living of ordinary people who will not receive any benefit from the tax handouts.
      The repercussions of the Budget go further than that. The Government are not only discriminating callously and brutally against those who cannot defend themselves or make convenient arrangements with accountants or financial advisers to escape the worst impost of the Budget. They are also increasing unemployment. They are raising the retail price index by 3 per cent. and pushing it up to an unexpected 17½ per cent. by the end of the year. In the context of nearly 1½ million unemployed the Government, through increased VAT, will raise that figure by hundreds of thousands. The Chief Secretary sits there calmly and complacently with the threat of over 2 million unemployed hanging over him.
      That is the real tragedy of the Budget. We are already in a deflationary situation. It is intolerable and indefensible that so many people have to waste their lives, lose their self-respect and the opportunities that should be open to them because the economy cannot find a use for their abilities. The action of the Government in deliberately, wholeheartedly and callously adding to that burden cannot be defended.
      6.45 p.m.
      Areas such as my constituency will suffer considerably. The rate of unemployment on Merseyside is well above the national average, with about 120,000 people unemployed. There will be many more when we face the full effects of world recession. exacerbated by the rise in oil prices. In that context the Government should take all possible action to bring down the level of unemployment. They should certainly not increase it. Instead of trying to reduce unemployment, or at least maintain it at its present level, the Government's actions, taken deliberately and in full knowledge

      1175
      of their consequences, will have a calamitous effect on employment throughout the economy, and disproportionately so in the depressed areas of Merseyside and the North-West. In those areas the rate of unemployment over the next few months, and especially during the winter, is likely to be severe, yet the Government offer nothing but platitudes, notions of having to take strong medicine and the necessity for strong measures to deal with the problem.
      The Government talk in a nebulous way about the need for an incentive economy and greater opportunities. For whom are the incentives? For whom are the opportunities? They are only for that privileged, select band that the Tory Party has always represented, favoured and been quick to repay with largess after winning an election. [Interruption.]
      The hon. Member for Yarmouth (Mr. Fell) frequently mutters inaudibly, indistinctly and ineffectively from a seated position. He knows full well that this Government have favoured, as have previous Tory Governments, the wealthy at the expense of the deprived and vulnerable. We are in the relaxed atmosphere of Committee and have the entire night before us. If the hon. Gentleman wishes to defend the position and prove me wrong, I shall give way. He knows full well that it is the low-paid, the unemployed, the sick and the pensioners who will bear the burden of the Government's economic strategy.
      Those people are being forced to comply with higher rates, prices and value added tax in order to give a £400 a week handout to the chairman of ICI. Will that chairman work one jot harder as a result? Will the chairmen of other companies put in longer hours and will we have increased productivity? Of course not. The Chief Secretary and the Chancellor know that. It is a con trick to disguise their political dogma and class prejudice.
      I knew that that statement would bring chortles from Tory Members. They are fond of throwing that allegation at us, and they enjoy referring to the Labour Party as a class party, but theirs is the party engaged in class warfare. Within two or three weeks of the election they laid the groundwork and set up the
      1176
      battle standards. They say that they do not want confrontation with the trade unions or ordinary working-class people, and I do not doubt their sincerity. The Prime Minister is already retreating from her previously entrenched position on trade union reform. The surest way to get into confrontation with ordinary working men and women, however, is to impose increased rates of value added tax.
      I do not want a winter of discontent. I do not want my constituents to be involved in strikes and industrial action. I do not want to see the effect that that will have on them and their families. I do not want this situation for the country, and I am sure that no one else in this House wants it, yet that is what the Government have almost made a certainty by increasing VAT in this way. Every man who has the privilege of a job—and there are not many in my constituency who have that privilege—will say, in response to this, that if the Government deliberately jack up prices and raise the rate of inflation to 17 per cent. or more, he will ensure that he gets a comparable amount in his wage negotiations this year. That is a sensible and reasonable proposition. If workers did not do that they would not be looking after their own interests or those of their families.
      The Government are doing what they said they would not do. They are guaranteeing a great deal of industrial strife in the coming winter and the months beyond. They are guaranteeing rip-roaring inflation as a result of the wage increases that will be conceded and the unemployment that will follow. I believe that we shall have a rate of inflation well in excess of the 20 per cent. that the Government expect. There can be no more disastrous commentary on the effects of the return of a Conservative Government and the Budget that they have presented to us.
      Mr. Andrew F. Bennett: I do not want to follow the line of my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk). I shall concentrate on a much narrower point. I was disappointed that the amendment on bicycles standing in my name and that of my hon. Friend the Member for Edinburgh, Central (Mr. Cook) was not selected.

      1177
      The central strategy of the Budget is designed to try to change human behaviour in this country, but it tries to change it in relation to a problem that does not exist. The Budget would have been much better had the Government turned their attention to the energy crisis and tried to change human behaviour in relation to the consumption of energy rather than concentrating on a change from direct to indirect taxation.
      We use energy very wastefully in this country. Faced with all the pressures from international oil prices, the Government's response is merely to increase the price of petrol and ration it through hitting the pocket. In doing this, they are deliberately making sure that increased petrol and fuel prices will hit those people who are least able to protect themselves. It is the pensioner who uses his car occasionally and who has little alternative transport who will find that the increased petrol prices make his life that much more difficult.
      Again, pensioners, if they use paraffin or oil, will find that their winter fuel costs will go up enormously and will find it difficult or complicated to change over to gas. There is a strong argument for the Government taking positive measures to encourage people to economise on the amount of fuel they consume and to encourage them to make economies in those areas that would cause them least difficulty and trouble.
      Far too many fit, healthy people take their cars out to slip round to the shops less than a mile away. They would be far better off using a bicycle. It would be better for their health and there would be a considerable saving in fuel. This would be very worth while. Therefore, the Government should consider a positive policy to encourage people to substitute use of the bicycle for the car wherever possible. Yet on the whole they seem completely indifferent to encouraging cycling.
      The Government should exempt the bicycle from the VAT increase or, even better, exempt it from VAT altogether. That measure would draw attention to the bicycle. It would be seen as a sensible alternative, good for health and economical in saving energy. I appeal to the Government to look at this carefully.
      1178
      Could they not introduce a reduced rate of VAT for bicycles, or exempt them altogether? Then they could continue with a positive campaign, encouraging people to use bicycles rather than cars, especially for short journeys. They could also encourage local authorities to make cycleways and take other steps to make the cycle much safer, particularly in urban areas.
      The more people who substitute bicycles for cars, the more room there will be on the road. This will cut down the number of traffic jams and the amount of time that is wasted by people sitting in their cars hardly moving but still consuming valuable petrol. Therefore, I urge the Government to look sympathetically at the case for the bicycle and to reduce the VAT on it.
      Mr. Alfred Dubs: I agree fully with the point raised by my hon. Friend the Member for Stockport, North (Mr. Bennett) although I do not wish to pursue his argument. I agree also with my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) about the increased burden of VAT hitting the less-well-off members of society. Tonight, however, I wish to talk about other implications of the increase in VAT.
      I am conscious that the world economy has taken a distinct turn for the worse, even since the time when the Budget was planned. I wonder whether some aspects of the Budget proposals would have seen the light of day had they been planned with present difficulties in mind. I know that Conservative Members are extremely nervous about the high-risk strategy in the Budget, of which the VAT measures form an important part.
      In an answer from the Chancellor of the Exchequer recently, I was given figures for the all-items retail price index and the changes that have taken place in it over the past 15 years, compared with those for the RPI for spirits, wines, tobacco and oil. The various indices changed little between 1965 and 1970 but thereafter they diverged markedly. The all-items RPI increased the most between 1970 and May 1979 compared with that for the other categories I have mentioned. Spirits, wines and tobacco have lagged behind significantly. The VAT measures will not in any way affect this.

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      There is a certain element of injustice in increasing VAT on basic necessities which less-well-off people must buy, and allowing other more discretionary items, such as wine and tobacco, to trail far behind.
      I turn to an even more significant aspect of the proposed changes. We are aware that the poorer members of the community will have to bear a disproportionate share of the burden of the VAT increase. But this burden will be felt elsewhere—a fact that has not been mentioned widely. There will be an extra burden borne by the National Health Service, particularly the area health authorities and the local authorities. They will face a major burden because of the policy of cash limits, which will mean that there will have to be cuts in health spending of local authorities, brought about by the VAT increases. Will the Government explain how this reduction in NHS expenditure tallies with their promise to make no cuts in that service?
      7 p.m.
      I recently spoke to representatives of the Merton, Sutton and Wandsworth health authority and they were most concerned about the burden of VAT on their budget. In this year alone that authority, because of the increase in VAT, will have to pay an extra £750,000, and in a full year the sum would be £1 million. That is a hefty burden for the NHS to bear. It is a direct cut in the NHS. If the Government wish to continue with this increase in VAT, they should take steps to compensate the NHS for the extra burden.
      It is surely unjust that many of these hard-pressed services will have to make further cuts to meet this extra burden. The point will apply equally to local authorities throughout the country. They have already been hit by cash limits and the plan to reduce the rate support grant settlement will now have to face these extra burdens. The effect of the increase in VAT will inflict damage throughout the country, and I hope that the Government will think again.
      Mr. Buchan: The first and most obvious point to make in this discussion is that we are discussing a class Budget in structure, in its fiscal proposals and in its political intentions. The nature of this class Budget has quickly been realised
      1180
      by people throughout the country. No Government in recent years have shown a quicker decline in popularity than have the present Government. Hitherto Governments have been returned, they have enjoyed a honeymoon period and their popularity has increased. It is normally only after a period has elapsed that a decline in governmental popularity has been illustrated. However, the popularity of the present Government has had an immediate and sharp reverse.
      This is a class Budget in another respect. The Tories, as they always do, underestimated the intelligence of the ordinary people. That is the final indictment of the Budget. A double analysis needs to be made of any Budget. The first thing that must be asked is whether the Budget is fair and, secondly, whether it will secure economic benefits for the country as a whole. On both grounds this Budget must be condemned.
      The matter of fairness is of particular relevance on the subject of VAT. My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) was rebuked for relating the increase in VAT to the cuts in direct taxation. He correctly said that the one was the corollary of the other. The unfairness develops when one examines that corollary. A direct tax, by definition, whatever other faults or merits it may have, is a fair tax. An indirect tax, by definition, is an unfair tax. An indirect tax takes a heavier proportion of the income of the poorest. This is a simple proposition. If one slaps a pound of indirect tax on to the purchase of a pair of shoes, it does not cost Sir Charles Forte or Mr. Thatcher very much as a proportion of income. However, it costs an old-age pensioner a considerable amount. Therefore, almost by definition there can be no defence from the other side of the argument on the basis of fairness.
      We must then examine the effect on the economy. That effect has been based on the concept of incentive. It is said that if direct taxation is cut an incentive will be given. That is palpable nonsense. It was defended by the Prime Minister on the ground that the people voted for that concept. However, they did nothing of the kind. People voted to get some money for themselves, not so that they would then have to work harder to obtain

      1181
      that money. In fact, such an incentive does not work. What does it profit a man if he works harder for his 40 hours a week but at the end of the day has to pay more for his goods? Such an incentive cannot act as a carrot, though possibly it can be defended because it acts as a stick. In other words, putting up the price of goods compels people to work harder. That is not an incentive but a punishment.
      That is another reason why this is a class Budget. In its economic effect it will be seen only as a punishment rather than an inducement. The value added tax is unfair. Furthermore, it will fail to secure the economic effect of releasing more resources for production because its basic economic effect is directly inflationary.
      One can make an easy equation by balancing the figures. I shall not use the figures, because they have been employed often enough in the past few weeks. I tried to analyse the position during the election, and I concluded that people who earned over £8,000 a year would benefit from a direct tax cut and the increase in VAT. I was completely wrong. The figure is much closer to £10,000. A married man would need to earn over £10,000 a year before, in terms of fairness, he profited from direct tax cuts.
      Mr. Grieve: Does the hon. Gentleman think that the 1,300,000 people who were taken out of this direct tax altogether have not benefited from the Budget?
      Mr. Buchan: That is exactly what I am saying, because they have had to pay a great deal more on everything else. I am saying that far from their having been taken out of one form of taxation, they have been plunged into another. If the hon. and learned Gentleman does not know that, he does not know what the argument is about. That was the most stupid intervention I have heard for a very long time.
      Mr. Cook: Surely my hon. Friend will agree that one of the effects of the Budget is not that 1,300,000 people have been taken out of tax but that as a result of increases in VAT a substantially greater number of those who are on pensions will fall into a form of tax as a result of this clause.
      Mr. Buchan: My hon. Friend is right, and that deals with the hon. and learned Gentleman's point. That is yet another aspect of this class Budget.
      The reason one picks a figure of about £10,000 relates partly to the VAT increase and partly to the concomitants of the Government's economic policy. The increase in MLR was not an accident. Its effect on house prices and mortgages immediately clobbers those who live in suburbia—the very people whom the Conservatives claim voted for them in the election. What a compensation for those voters. It is no wonder that the Government's popularity has decreased so rapidly. It was a dishonest and bogus prospectus, and the Government have been found out. Therefore, along with the increases in VAT and the minimum lending rate, to make quite sure, on one of the few commodities that is left out of taxation, food, the Tories have surrendered a 5 per cent. devaluation in food to the Common Market. That represents an increase in tax because it is related to Common Market taxation.
      Indirect taxes are unfair, almost by definition, and the Budget has exemplified that. The increase from 8 per cent. to 15 per cent. on a range of necessary commodities is a gross imposition. We all remember the Prime Minister and other Conservative Members saying throughout the election that they had no intention of doubling VAT. That commitment has been honoured. Doubling would have meant 16 per cent. and they have pushed it up to 15 per cent. It was a dishonest and bogus statement.
      The second main argument in favour of the Budget is the question of freedom of choice. This Government are ideological and I welcome that. There has been a poverty of political argument and discussion and over too many years economism has taken over the role of politics in our discussions. The Government represent a restoration of ideology from the Right. The challenge will be taken up from where it properly springs—the working class movement. It is nonsense to suggest that the cuts in direct taxation enhance freedom of choice. If I pay no or little tax but immediately lose money from my pocket because of necessary goods being taxed at a higher rate, that reduces my freedom in other directions.

      1183
      It is nonsense to suggest that the cuts in direct tax put 80p in the pocket of a man who earns £5,000 per year and that it represents a vast enhancement of his freedom. That is refuted because that 80p worth of freedom is immediately subtratced when he pays for his necessities—health, repairs, equipment and so on—on which VAT is applicable. Some local health boards believe that the increases will cost them—1 million extra per year. If the cost of necessities such as health, education, clothing and shoes is to be increased, the amount of money released by the cuts in direct taxation with which that freedom is exercised is compressed. Therefore, there is less freedom as a result of the balance of unfairness.
      It is nonsense to say that freedom in the twentieth century consists of freedom of the individual conscience only. Even if that argument were true in figures, it is wrong in theory. Freedom exists in having a proper health service, in proper education and in having a job. But there will be a clobbering on the price of necessities and the concomitant will be 2 million unemployed by the end of the year. There is no freedom for a man to choose if he is unemployed. What freedom exists for him to exercise choice? There is no choice. Let us have an end to the nonsensical statement that the Tory Government have brought back freedom. On the contrary, the freedom of choice has been diminished. That is the final reason why I believe that we are concerned with a class Budget.
      I should like to give one example of unfairness in the higher paid sector. I note that my hon. Friend the Member for Edmonton (Mr. Graham) wishes me to speed up. One should always pay attention to one's Whips. Even Whips may be a freedom-enhancing body from time to time. I do not know why judges require a tax cut to give them an added incentive. Is it suggested that justice will be better meted out if the judges are given an incentive and have more money in their pockets? Is it suggested that more criminals will be paraded through the Old Bailey and that there will be a higher rate of productivity? That is nonsense. I do not know what sort of incentives judges require—surely not higher sentencing. However, their salaries were increased from £20,000 to £25,000 and, as
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      a result of the changes in income tax, they will be able to keep £4,300 of that £5,000. That is considerably more than most people in my constituency earn.
      I believe that the Chancellor of the Exchequer argued that the number of exemptions that existed in value added tax meant that the 15 per cent. tax was not regressive. He said that many of the commodities which came into the budget of old-age pensioners and lower paid workers were exempted. I have never seen a clearer definition of a Budget that is based upon a two nations concept than that statement. What a contemptuous treatment of the lifestyles of an old-age pensioner! The Government are 100 years behind the times. Disraeli pointed out the dangers of the two nation concept. It is a ghetto Budget and a two-nations Budget, and it must be rejected.
      7.15 p.m.
      The Tory Party has changed. At one time it was the party of paternalism. The landowner would send down a bowl of soup for the crofter.
      Mr. Michael Welsh: Today he would charge him 15 per cent.
      Mr. Buchan: He would remove the lentils and the barley from the broth, too.
      The sense of home-based patriotism and the connection with the force of wealth production has gone. When I first came to this place there were a number of Tory industrialists and producers. Those hon. Members have now largely disappeared. The Tory Party is now connected with money—cash, finance and the exchange of paper. There are tax accountants and lawyers who have associated with the assistance of developers.
      Much as I might reject the paternalism of the previous Tory attitude, at least the industrialists and landowners had some relationship with those who worked for them. Now there is a disrelation, and the Tories are concerned with money and profits only. That is what the new Tory Party represents. There has been a change in the main incentive and drive of British capitalism, and the Tory Party accurately reflects that change. Therefore, it is content to accept that position, looking forward with complacency

      1185
      to the prospective increase in unemployment this year and a drop in production of 1 per cent. It is a complacency that we can do without.
      If the wealth of the land and industry are not to be increased, the Tories will create wealth in another way—by the exchange of paper and cutting income tax at the higher level. The Budget epitomises the nature of the present Tory Party.
      Another example of the Tory Party being divorced from its past history is that the 15 per cent. increase on VAT will be applied to the arts. At least the Tory landowners and industrialists were philanthropists. If it were not for them, there would be no theatres in half our cities and no public libraries. It would be odd to imagine the present Tory Party proclaiming the idea of installing books in city buildings that could be read free of charge. Thank goodness for the Victorian philanthropists.
      Mr. Kilroy-Silk: My hon. Friend should not be surprised by the philistine nature of the present Government.
      Surely it was demonstrated when the now Prime Minister, then Secretary of State for Education and Science, imposed charges for admission to museums and art galleries.
      Mr. Buchan: Indeed, and I think that it was I who fought on the Opposition Front Bench against the imposition of those charges. The Government have done a similar thing in the Budget.
      There are exemptions to VAT—for example, the insurance of power boats. All my constituents own power boats! But there is no exemption for the live theatre, which is the glory of England. I say "England" deliberately. The glory of Scotland is its song and music.
      The Government do not care whether the theatre lives or dies. I appeal to their sense of greed, which they define as incentive, and remind them that the theatre brings money into Britain, because it attracts tourists. If I can appeal on no other basis to the philistines on the Conservative Benches, I appeal to them to exempt the live theatre from VAT, or, if not, to put the rate back to 8 per cent. instead of 15 per cent. for
      1186
      theatre tickets. They should at least try to salvage something from their philistine, stupid, reactionary and class Budget.
      Mr. K. J. Woolmer: One of the assumptions behind the cut in the standard rate of income tax seems to have been that it would provide a greater incentive to work. As I understood the argument, at least before the election, it was that a reduction in income tax would be made in such a way as to increase incentives.
      As a number of my hon. Friends have said, we cannot look at the VAT proposals without examining what is intended on the income tax side. Before the election the emphasis on incentives was the promise of a cut in the rate of income tax. It made a great deal of sense to people, as I found in my constituency, to be told by the Conservatives that if the standard rate were cut that would give people more money in their pockets as a reward for working and would thus increase their incentive to work. What was not said so loudly before the election was that the reward for working the extra hour would depend not only on a cut in income tax but on what happened to VAT, that it would depend not only on the amount that one would keep after paying income tax but on what one could buy with the money left in one's pocket.
      It is clear that the pre-election promises to increase incentives to work by cutting income tax have not materialised, because for the person paying the standard rate of income tax the reward for doing an extra hour's work is virtually nil. Anyone who does even a "back of the envelope" calculation sees that the real value of an extra hour's work to a person paying the standard rate remains virtually unchanged.
      As I went round the factories in my constituency during the election campaign I found that many skilled workers, encouraged by the now Prime Minister, were grumbling about the disincentive to work overtime. They said that it was not worth doing because they paid so much tax on the extra earnings. The truth is that the real amount that they can buy is completely unchanged as a result of the Budget.
      Since the election I have heard no mention of the impact on the incentive

      1187
      to skilled workers to work overtime. The reason is that there is no impact in the Budget. I raise the matter now because the clause virtually doubles VAT. It gives the complete lie to the proposal to increase incentives. Because of the VAT increase, the person paying the standard rate of income tax has no more incentive to do an extra hour's work than he had before the Buudget. If there is any incentive effect, which is a matter of dispute, the reward for working an extra hour goes to those earning more than £10,000 a year. I imagine that no skilled worker in the whole of my constituency will earn anywhere near £10,000 a year, even with overtime. Therefore, certainly for my constituency, and I imagine for constituencies throughout the country, this was not an incentive Budget. That is an important message to put across.
      Mr. Cant: Would my hon. Friend be surprised to hear that at the other end of the spectrum a brilliant business man in my constituency receives an extra £28,000 a year as a consequence of the Budget, but has stated that it offers him no incentve to work harder, and he does not see the point?
      Mr. Woolmer: My hon. Friend does not surprise me. The reality is that overtime is often worked by people whose hourly rate is so low they must work it if they are to take a reasonable wage home. That is often why the housewife goes out to work, certainly in my constituency. For those who have low earnings and are on the lower band of taxation, the Budget provides, on the very argument of the Government, a disincentive to work.
      It is common knowledge that the person with a high income is already working as hard as he wants to. The extra money that he receives will go on more frills and the extra benefits of life. I wish such people good luck, but more of my constituents in the textile areas will find that, far from having the incentive of being better rewarded, they have a return to the old Tory incentive of having to work harder because they have been made worse off. They must work harder to afford furniture, clothes and other items. Therefore, it is not an incentive Budget, unless we believe in making people work harder by making them worse off.
      1188
      The only basis on which we can assume that an increase in VAT from 8 per cent. to 15 per cent. can give an incentive to work harder is to assume that working people are impressed by 3p off the standard rate of income tax and that a working man will tell his wife how much more money he has in his pocket to spend, while being totally unaware of the effect of the increased VAT on his real living standards. We therefore have to assume a remarkable kind of person. It may surprise Conservative hon. Members to learn that people are not fools who are impressed by 3p off the standard rate and having more money in their pocket, while being totally unaware that prices have gone up. To believe that they are is nonsense.
      In fact, over the past two or three weeks people have been outraged by what is happening to prices. The impact of the VAT increase has shocked the average working man and woman. By its timing, any incentive effect for which there might have been hope will be swamped by the expectation of inflation and high wage increases in the autumn. I do not relish the prospect of further industrial problems and further wage and price spirals.
      I suppose that many hon. Members would regard me as a person of the moderate middle. I see a serious prospect of this increase in VAT and the deliberate pushing up of the inflation rate being remembered and becoming an integral part of the wage round this autumn. We should be fooling ourselves if we imagined that the wage earner on the shop floor and those at shop steward level will allow negotiations to proceed on the wild hope that this is a once-and-for-all increase, not to be made up through wage rises. That is pie in the sky. That may be regretted, but it is the truth of the matter.
      Not only has this not been an incentive Budget, but the proposal that we are discussing has set in train a series of events on the shop floor that will cause serious problems this autumn. The benefits of 3p off the standard rate of income tax will be long forgotten, even by those who receive it, in the travail that we face. I do not relish making such a statement. It is a statement of industrial and trade union facts of life.

      1189
      7.30 p.m.
      I want to turn to the question of freedom of choice. I have argued that the Budget does not have an effect on incentive. I have waited to be told, but have not heard yet, although I may have missed it, how the Budget will make people better rewarded for overtime. That argument was heard among the skilled workers of Yorkshire and the Midlands, but it is now forgotten.
      One area in which the Budget will take away choice is public services. A corollary to the proposals before the House is that public services will be cut back. In many areas the choice of nursery education, books in schools and libraries will be taken away. It cannot be argued that the proposal to put money in people's pockets through income tax cuts and by an increase in VAT provides a wider choice if some of those things for which people want to express a choice are not available and have been taken away as a consequence of the Budget strategy. The choice of clean and well-maintained streets is rapidly disappearing. The choice of having one's dustbin collected weekly or every 10 days will not be a choice for which the public can opt. I regret that that should be happening.
      There is also the choice exercised by local and health authorities. Choice is exercised not simply by individuals but by important bodies acting on our behalf. Whereas individuals may have some income tax cuts to pay for the VAT, as the Chancellor so charmingly put it, local and health authorities will have less to spend at a time when they are called upon to pay more in VAT. Is not the irony that local authorities and health authorities will not even have more in their pockets to pay for VAT? They will have less. Those authorities and important bodies that help grace our lives will have less choice and less money.
      What is the choice for the unemployed and those who pay no tax? It cannot seriously be argued that no extra money in the pocket and raising VAT is increasing the choice of those people. For the unemployed, those paying no income tax, and for local and health authorities, there will be no serious question of improved choice. Is not the irony that the big increases in VAT will be applied to the products on which people would like
      1190
      to exercise a choice if they had more money in their pockets? People who want to spend money on furniture and such-like products will find them pushed up in price. This is why there is already a backlash in the country. One has only to remember the rush to the shops when VAT was going up. When people have more money in their pockets, they know what they would like to buy. In the months ahead, as people get more money in their pockets, they will find that the products that they want to buy, with the choice given to them, have gone up the most. The real value of those increases will have been demolished.
      I would like to return to the serious effect of higher VAT on prices. If we could all agree in the House that there is no incentive effect and no widening of choice in the Budget or even if we beg to disagree, I would suggest that, in the light of the worsening world oil situation and the worsening inflationary spiral, it is madness to double VAT at this time. Even if there had been a good preelection argument about incentives and freedom of choice, which I dispute, the Government must, surely, stand back and say that now is not the time to risk a 4 per cent. or 5 per cent. increase in inflation when people's living standards are already being depressed by the oil and world trade crisis.
      If for no other reason, I hope that the Committee will accept the amendment to show people that we want to moderate the inflationary problem and make sure that we keep industrial and wage harmony in getting through an exceptionally difficult two or three years in terms of standard of living and inflation.
      The Chief Secretary to the Treasury (Mr. John Biffen): I should like to indicate that I shall seek to move amendment No. 47 when it is called and to say how pleasant it is to have a Finance Bill considered in Committee of the whole House when practically every amendment becomes a Second Reading debate. We have had a great tour d'horizon this afternoon.
      I should like to make one or two comments on amendments Nos. 11 and 14 before reverting to the debate that has taken place from the Back Benches, and then turn to the substantive amendment No. 34 for what will pass as a peroration

      1191
      I deal first with amendment No. 11, which probes the mysteries of clause 1(2). The right hon. Member for Llanelli (Mr. Davies) confirmed that this was a probing amendment, and the hon. Member for Edinburgh, Central (Mr. Cook) expressed an interest in it. The amendment is designed to deal with insurance for certain types of boats and other craft and with children's clothing which is made of fur. But for this wise provision they would be zero rated.
      As a consequence of the provision, there will be an exemption on the insurance of certain types of boats and other craft which will continue as before. Children's clothing which is made of fur, which otherwise would have been zero rated, is to be charged at the standard rate.
      I must confess that if that was hatched at the Tokyo summit, the original Japanese would be clearer.
      Another matter which caused anxiety was the problem at the Hull telephone office. That is dealt with in amendment No. 47. It is needed to meet the special problems of the Kingston upon Hull telephone service, the tariff structure and billing of which differ from those of the Post Office. Because of the constraints involved in Budget secrecy it was not practicable to consult Hull in detail about the provisions of clause 1(3).
      It was understood that the provision would cover Hull's position. However, after careful study it was found that although the provision would cover adequately the majority of subscribers, some serious problems would remain if an amendment were not made. The Government amendment covers that.
      About 16 Back Benchers took part in the debate. The Committee was in traditional form. It is appropriate to express my warm personal congratulations to the hon. Member for Huddersfield, East (Mr. Sheerman) on his remarkable maiden speech. It was received kindly on account of his references to "Curly" Mallalieu. I speak not only for myself but for a wider audience which may tactfully wish to remain quiet. The hon. Member's speech was splendid. It was lucid and sharply argued, downright controversial and exactly the type of speech that one would like to hear repeated word
      1192
      for word so that it could be subject to immediate cross-examination and scrutiny. The speech had all the signs of being up to the best House of Commons tradition. The hon. Member is in his place, and I repeat my warm personal congratulations.
      My hon. Friend the Member for Bedford (Mr. Skeet) was worried about the problem of repairs. I suspect that he has a constituency matter in mind. We shall take note of his argument, but it falls within the ambit of amendment No. 20.
      My hon. Friend the Member for New Forest (Mr. McNair-Wilson) was lucky to catch the Chairman's eye and so beat the hon. Member for Stockport, North (Mr. Bennett) to his subject—the desirability of exempting or zero rating bicycles. That topic will be discussed in later debates.
      7.45 p.m.
      I cannot hold out any hope to my hon. Friend the Member for New Forest or other hon. Members that special arrangements will be made either for zero rating or for reducing the rate of VAT on bicycles. That would infringe the basic principle under which this tax has been prosecuted under successive Governments.
      The debate demonstrates another traditional aspect. Opposition Back Benchers make powerful arguments about why a central principle should be breached, the Opposition Front Benchers keep their heads down, and the Government of the day stoically reject the humanitarian arguments. I promise the hon. Member for Birmingham, Perry Barr (Mr. Rooker) that he will become a gamekeeper in less time than he thinks.
      The hon. Member for York (Mr. Lyon) asked for a special concession for confectionery. I have to give him the same answer. Of course I am sensitive to the transitional problems experienced by several industries. There is certainly a marked elasticity of demand in the confectionery industry. All that I can offer is sympathy. I know that Treasury sympathy is a weak brew.
      Mr. Alexander W. Lyon: The Chief Secretary does not have to give the same answer. When his Government introduced VAT they did not put VAT on the foods to which I referred. The Labour Government did that. He could argue that now a Conservative Government are back

      1193
      in office they can return to their original opinion.
      Mr. Biffen: When I am trying to establish a degree of bipartisanship, under the benign eye of the hon. Member for Colne Valley (Mr. Wainwright), who always regretted that we did not have a more stable tax structure, I am in danger of inviting the wrath of two Yorkshire-men rather than one. I shall stick closely to my brief.
      My hon. Friend the Member for Croydon, South (Mr. Clark) suggested that VAT could be used as a regulator tax to assist small businesses. I am sure that the Government will wish to consider the whole question of small businesses in the light of the Wilson report findings and to fashion a tax policy accordingly. Nothing that I can say this evening can anticipate what that tax policy will be.
      VAT is the least suitable instrument for a regulatory device designed to produce certain desirable patterns of economic behaviour. I am glad to have the assent of the hon. Member for Batley and Morley (Mr. Woolmer), because I am sure that I shall need friends when adopting this line of argument.
      The hon. Member for Colne Valley said that a 15 per cent. rate for VAT was not necessarily objectionable in itself. I was pleased to accept that. His only anxiety was that the Treasury had not adopted a holus-bolus, Liberal Party policy to sustain it. Perhaps that is where we shall end, but I have doubts.
      The hon. Member made many interesting suggestions, but I am sure that he will agree that they should not make our task much easier. He will recognise that there is a genuine disagreement, but we believe that there is an overwhelming advantage in having a single positive rate of VAT and that the indirect rate of taxation must provide an increasing share of our total revenue.
      I come to a more difficult hurdle to surmount, although I do not wish to underrate the hazards of the Liberal Party. I turn to the stony glare of the hon. Member for West Lothian (Mr. Dalyell), who asked me three questions. Two of them do not fall within the ambit of the Treasury. If any directives have to be issued to the oil companies about their methods of distribution, they will
      1194
      be issued under the Energy Act and be the responsibility of the Department of Energy. I shall ensure that the hon. Member's speech is drawn to the attention of my right hon. Friend the Secretary of State for Energy.
      Provided that the retail trade is operating within the law there is no responsibility on the part of the Treasury for prices charged by a retail confectioner. The hon. Gentleman may wish to refer his comments to the Department of Trade as the matter is not within the bailiwick of the Treasury. The hon. Gentleman is right in believing that the use of the VAT system is a legitimate Treasury consideration when it has as its objective the promotion of either energy saving or recycling.
      There are problems of definition of what constitutes recycling. I return to the point I adopted earlier in respect of my hon. Friend the Member for Croydon, South, when I said that I did not believe that VAT was the appropriate tax to deal with the sort of problems that the hon. Gentleman had in mind.
      No doubt over the next few months there will be growing anxiety that all sectors of Government should address themselves to the central problem of energy conservation. Energy conservation is the most tangible short cut when trying to bring about a better balance in energy supply and demand. The Treasury, along with other Government Departments, will be deciding what action it thinks is appropriate. Value added tax is not likely to be used as a means of promoting that end.
      Mr. Dalyell: I accept the Chief Secretary's reply to my first question and thank him for bringing the matter to the attention of the Department of Energy.
      On the second point, he will recollect that my right hon. Friend the Member for Llanelli (Mr. Davies) and other speakers have brought to his attention the brutal fact that VAT increases are being used nationwide as an excuse for topping up prices. Surely that is a matter central to economic management and must be the concern of the Treasury.
      On the third point, it is neither the time nor the occasion to argue about bicycles. Indeed, £5 or £10 on the price of a bicycle is not the basic fact that concerns us. What concerns many of us

      1195
      is that in the new situation—and we would have had the same attitude had the Labour Party been in government—a totem pole has to be established to show that there is a link between the fiscal system in general and energy saving. That is why we are so uptight about bicycles.
      Mr. Biffen: I thank the hon. Gentleman. What better occasion could there be to display the totem pole than the Committee stage of the Finance Bill? It is a perfectly legitimate exchange, and the point has been made. No doubt it is a point to which the hon. Gentleman will return again and again, using all the facilities that Parliament provides. He is a proven campaigner. I have noted his point and have given him the defensive reply. I look forward to joining battle with him on future occasions.
      My hon. and learned Friend the Member for Solihull (Mr. Grieve) intervened to suport the Budget, and that was most welcome. The hon. Member for Fife, Central (Mr. Hamilton), notwithstanding the benefit of The Daily Telegraph, concluded that it was a class Budget, and that it was regresive in its tax policy. That view was shared by the hon. Members for Ormskirk (Mr. Kilroy-Silk) and Renfrewshire, West (Mr. Buchan). No doubt we would be able to exchange league tables over the alleged progressiveness or regressiveness of the Budget until we had bored each other and left the British public bemused.
      I do not believe that the clause embodying the VAT increase is regressive. The points made about the impact of the exemptions on the effect of VAT and the impact of the Budget on the poorer sections of the community are valid.
      I was fascinated by a question put to the right hon. Member for Leeds, East (Mr. Healey) in the last Parliament by Mr. George Rodgers, who was then the hon. Member for Chorley.
      Mr. J. W. Rooker: He was a good bloke.
      Mr. Biffen: Mr. Rodgers put the sort of question that the hon. Member for Birmingham, Perry Barr would expect of him. The then Chancellor of the Exchequer replied:
      "My hon. Friend will know that VAT, for instance, covers only 45 per cent. of all goods
      1196
      consumed by the average person and that the goods that are zero rated appear more frequently in the spending patterns in the poorer sections of the community".—[Official Report, 24 February 1979; Vol. 926, c. 1621.]
      Whatever arguments we may have about how regressive the Budget is, they are not most appropriately raised on the amendment before us.
      The hon. Member for Stoke-on-Trent, Central (Mr. Cant) said that monetarism was the fashion and he was glad that it was. He said that many members of the Labour Party were, more or less, acquiescent monetarists. I was not certain about the truth of that remark and I certainly disagreed with the hon. Gentleman's assertion that the late Iain Macleod was an acquiescent monetarist.
      I should like to discuss the hon. Gentleman's serious point that the present monetary targets depend upon a high level of revenue and that if any of the amendments are carried so that the Government are deprived of revenue the monetary strategy will be severely imperilled.
      The hon. Member for Edinburgh, Central objected that VAT was a broadly based tax. That is true, and its breadth has been defended tenaciously by successive Governments. That has meant that articles of personal hygiene have not been zero rated despite many demands in the past.
      The hon. Member for Battersea, South (Mr. Dubs) offered as an alternative to at least part of the VAT revenue an increase in the duties on alcohol and tobacco. That was a fair option to present, and I am sure that the Committee will not wish to close that option, but I must point out to the hon. Gentleman, in the context of our debate, that expenditure on those products is borne much more heavily by poorer sections of the community than is VAT. The hon. Gentleman looks a little uneasy. I should be prepared to debate the matter in detail, though I cannot do so today. Revenue raised from those products bears more regressively than does money raised from VAT, as currently constructed.
      The hon. Member for Batley and Morley suggested that skilled workers would be little better off as a result of the Budget. My right hon. and learned Friend the Chancellor of the Exchequer

      1197
      has given the House his calculations, and I have no doubt that they will be debated again on later clauses. It must be a matter of judgment, but the Government's belief is that the skilled worker will certainly be better off, to a degree, as a result of the measures in the Budget.
      Mr. Dubs: Will the Chief Secretary comment on the extra burden that area health authorities will have to bear as a result of the increase in VAT?
      Mr. Biffen: That is a legitimate point. The costs of health authorities are bound to rise, to some degree, as a result of the increase in VAT. I cannot give a more specific answer, but if the hon. Gentleman tables a question I shall do my best to ensure that it is answered.
      We are debating principally amendments Nos. 34, 1 and 10. The carrying of amendment No. 34 would deprive the Government of more than £4,000 million of revenue in a full year. Amendment No. 1 in the names of Liberal Members would if carried, deprive the Government of about £1,500 million in a full year, and amendment No. 10 would deprive the Government of around £3,000 million in a full year.
      8 p.m.
      The Government cannot accept any of these amendments. They would blow open completely the whole of the Budget strategy. The public sector borrowing requirement of £8,000 million needs every penny of revenue indicated in the Budget. The alternative would be a major alteration in the tax reforms suggested by my right hon. and learned Friend. That would take us back to the rather uninspired fiscal and monetary stance of the previous Government. It would, to all intents and purposes, completely undermine the policy of the Government and undo everything that the Chancellor sought to present on Budget day. I believe that that is exactly what is intended by the Opposition. I am not sure that after a thorough debate a great deal of knowledge would be added to our respective positions if I elaborated the position of the Treasury Bench in this respect. I believe that my right hon. and learned Friend is set on an adventurous course and that this is not the moment to turn back.
      Mr. Denzil Davies: We have had a full debate, and I shall not detain the Committee for long, having already had one bite at this cherry. I add my congratulations to those offered to my hon. Friend the Member for Huddersfield, East (Mr. Sheerman) on what everyone has agreed was a marvellous and excellent maiden speech. I am sure that he will make substantial contributions to debates in future. As the Chief Secretary said, hon. Members will have opportunities in future to cross-examine him, but on the evidence of his speech today he is well able to look after himself.
      The Chief Secretary said that amendment No. 34 would blow open the Budget strategy. He recognises that that is the whole object of the amendments. I am not surprised, therefore, that he has not been persuaded by our advocacy and oratory to accept them.
      I am grateful to the Chief Secretary for explaining clause 2, though I am still not clear—I do not criticise him or ask for an answer—whether children's clothes made from fur, which used to be zero rated, are now rated at 15 per cent. We do not need to join issue on that, however. I am also grateful to see that the Revenue has finally got the clause about the Kingston upon Hull telephone service correct. I hope that this does not make the Bill a hybrid Bill. I would hate to be here dealing with the Bill until September or October. I have no doubt that that point has been checked by Treasury lawyers.
      The debate has boiled down to the point we made that the Bill enables the Government, in the main, to provide tax cuts for those who are better off. The low paid, those who do not pay tax, and those earning average incomes will be paying the bulk of the increased VAT. At the end of the day the money goes not to them but to those who are much better off and who at the moment are enjoying a fairly high standard of living. That is the Budget strategy and it seems to be the philosophy of the Tory Party these days. Clearly we shall not convince them otherwise.
      It is all very well for the Chief Secretary to say that 45 per cent. of expenditure falls within the zero rated area, but most of the remaining expenditure falls on items subject to the 15 per cent.

      1199
      VAT. Most of that is essential expenditure—we are not talking about luxuries. Very little of this expenditure is not essential. The debate has shown how many organisations, charities, theatres and such items as sanitary products and many essential goods and services are hit hard by VAT at 15 per cent.
      That is why the Opposition argue that a 15 per cent. rate is too blunt an instrument. In my opinion, we can go no higher than 10 per cent. without being forced to decide whether we should have a multiplicity of rates. That must be done. It is done on the Continent, and I see no reason why we should not do it in this country.
      The Conservative Party, in the general election campaign, said that it would not double VAT. I suppose an increase from 8 per cent. to 15 per cent. is not doubling VAT, but it is getting pretty close to it. That was one of the dishonest statements made during the Conservative Party's election campaign.
      We say that there is no economic case for the increases in VAT. They are inflationary. In my opening speech I quoted the CBI. Now I do better and quote a paper which perhaps appeals even more to the Chief Secretary. It is called "The Free Nation". The Chief Secretary shakes his head, but this is the fortnightly paper of the National Association for Freedom. It even has a photograph of the Chief Secretary on the front page. He clearly does not like that, but I should have thought that this kind of document, representing freedom,
      would appeal to the right hon. Gentleman. I quote:
      "But the near doubling of value-added tax was a blunder conceptually as well as politically, for the majority of the population will spend most, or all, of their earnings. Taxes on spending are just as onerous as taxes on income. The experience of 1972–73"—
      I hate to raise it again in this Committee—
      "ought to have warned the Chancellor not not expect reductions in income tax to cause corresponding reductions in wage claims. Even savers are not immune from taxes on spending since these taxes increase the price level and thus reduce the value of savings."
      I have quoted from the CBI and from the National Association for Freedom. That is a fairly wide spectrum, from Right to Left, of those who criticise this Budget and maintain that the VAT increase was a gamble. The Chief Secretary called it an inspiration. I prefer to use the word madness. It was a mad gamble with the British economy, and no doubt it will fail like all previous mad gambles by Tory Chancellors. Not only is there no economic case for these increases; there is no case in social justice for them. Perhaps that is an even greater condemnation of the Government, because the poor, the disabled, and those least well off will bear most of the burden. The better off will get the benefit.
      For those reasons, I ask my right hon. and hon. Friends to support the amendment.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 232, Noes 301.

      Division No. 36]

      AYES

      [8.7 p.m.

      Abse, Leo

      Campbell-Savours, Dale

      Davies, Ifor (Gower)

      Adams, Allen

      Canavan, Dennis

      Davis, Clinton (Hackney Central)

      Allaun, Frank

      Carmichael, Neil

      Davis, Terry (B'rm'ham, Stechford)

      Anderson, Donald

      Cartwright, John

      Deakins, Eric

      Archer, Rt Hon Peter

      Clark, Dr David (South Shields)

      Deer, Joseph (Leeds West)

      Armstrong, Ernest

      Cocks, Rt Hon Michael (Bristol S)

      Dempsey, James

      Ashton, Joe

      Cohen, Stanley

      Dewar, Donald

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

      Coleman, Donald

      Dixon, Donald

      Bagier, Gordon A. T.

      Concannon, Rt Hon J. D.

      Dobson, Frank

      Barnett, Guy (Greenwich)

      Conlan, Bernard

      Dormand, J. D.

      Barnett, Rt Hon Joel (Heywood)

      Cook, Robin F.

      Douglas, Dick

      Bennett, Andrew (Stockport N)

      Cowans, Harry

      Douglas-Mann, Bruce

      Bidwell, Sydney

      Cox, Tom (Wandsworth, Tooting)

      Dubs, Alfred

      Booth, Rt Hon Albert

      Craigen, J. M. (Glasgow, Maryhill)

      Duffy, A. E. P.

      Boothroyd, Miss Betty

      Crowther, J. S.

      Dunlop, John

      Bradley, Tom

      Cryer, Bob

      Dunnett, Jack

      Bray, Dr Jeremy

      Cunliffe, Lawrence

      Dunwoody, Mrs Gwyneth

      Brown, Hugh D. (Provan)

      Cunningham, George (Islington S)

      Eastham, Ken

      Brown, Robert C. (Newcastle W)

      Cunningham, Dr John (Whitehaven)

      Edwards, Robert (Wolv SE)

      Brown, Ron (Edinburgh, Leith)

      Dalyell, Tam

      Ellis, Raymond (NE Derbyshire)

      Buchan, Norman

      Davidson, Arthur

      Ellis, Tom (Wrexham)

      Callaghan, Jim (Middleton & P)

      Davies, Rt Hon Denzil (Llanelli)

      Evans, Ioan (Aberdare)

      Campbell, Ian

      Davies, E. Hudson (Caerphilly)

      Evans, John (Newton)

      Ewing, Harry

      McCartney, Hugh

      Rowlands, Ted

      Field, Frank

      McDonald, Dr Oonagh

      Ryman, John

      Fitch, Alan

      McElhone, Frank

      Sandelson, Neville

      Flannery, Martin

      McKay, Allen (Penistone)

      Sever, John

      Fletcher, Ted (Darlington)

      McKelvey, William

      Sheerman, Barry

      Ford, Ben

      MacKenzie, Rt Hon Gregor

      Sheldon, Rt Hon Robert (A'ton-U-L)

      Forrester, John

      Maclennan, Robert

      Shore, Rt Hon Peter (Step and Pop)

      Foster, Derek

      McMehon, Andrew

      Slikin, Rt Hon John (Deptford)

      Foulkes, George

      McMillan, Tom (Glasgow, Central)

      Silkin, Rt Hon S. C. (Dulwich)

      Fraser, John (Lambeth, Norwood)

      McNally, Thomas

      Silverman, Julius

      Freeson, Rt Hon Reginald

      McWilliam, John

      Skinner, Dennis

      Garrett, John (Norwich S)

      Magee, Bryan

      Smith, Rt Hon J. (North Lanarkshire)

      George, Bruce

      Marks, Kenneth

      Snape, Peter

      Gilbert, Rt Hon Dr John

      Marshall, David (Gl'sgow, Shettles'n)

      Soley, Clive

      Ginsburg, David

      Marshall, Dr Edmund (Goole)

      Spearing, Nigel

      Golding, John

      Marshall, Jim (Leicester South)

      Spriggs, Leslie

      Gourlay, Harry

      Martin, Michael (Gl'gow, Springb'rn)

      Stewart, Rt Hon Donald (W Isles)

      Hamilton, W. W. (Central Fife)

      Mason, Rt Hon Roy

      Stoddart, David

      Hardy, Peter

      Maxton, John

      Stott, Roger

      Harrison, Rt Hon Walter

      Maynard, Miss Joan

      Strang, Gavin

      Hart, Rt Hon Judith

      Meacher, Michael

      Straw, Jack

      Haynes, David

      Mellish, Rt Hon Robert

      Summerskill, Hon Dr Shirley

      Healey, Rt Hon Denis

      Mikardo, Ian

      Taylor, Mrs Ann (Bolton West)

      Heffer, Eric S.

      Millan, Rt Hon Bruce

      Thomas, Jeffrey (Abertillery)

      Hogg, Norman (E Dunbartonshire)

      Miller, Dr M. S. (East Kilbride)

      Thomas, Mike (Newcastle East)

      Home Robertson, John

      Mitchell, Austin (Grimsby)

      Thomas, Dr Roger (Carmarthen)

      Homewood, William

      Mitchell, R. C. (Soton, Itchen)

      Thorne, Stan (Preston South)

      Hooley, Frank

      Molyneaux, James

      Tilley, John

      Horam, John

      Morris, Rt Hon Alfred (Wythenshawe)

      Torney, Tom

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

      Morris, Rt Hon Charles (Openshaw)

      Urwin, Rt Hon Tom

      Hughes, Mark (Durham)

      Morton, George

      Walker, Harold (Doncaster)

      Hughes, Robert (Aberdeen North)

      Moyle, Rt Hon Roland

      Watkins, David

      Hughes, Roy (Newport)

      Newens, Stanley

      Weetch, Ken

      Janner, Hon Greville

      Oakes, Gordon

      Wellbeloved, James

      Jay, Rt Hon Douglas

      O'Halloran, Michael

      Welsh, Michael

      John, Brynmor

      O'Neill, Martin

      White, Frank R. (Bury & Radcliffe)

      Johnson, James (Hull West)

      Orme, Rt Hon Stanley

      White, James (Glasgow, Pollok)

      Johnson, Walter (Derby South)

      Owen, Rt Hon Dr David

      Whitehead, Phillip

      Jones, Alec (Rhondda)

      Palmer, Arthur

      Whitlock, William

      Jones, Barry (East Flint)

      Park, George

      Wigley, Dafydd

      Jones, Dan (Burnley)

      Parker, John

      Willey, Rt Hon Frederick

      Kaufman, Rt Hon Gerald

      Pendry, Tom

      Williams, Rt Hon Alan (Swansea W)

      Kerr, Russell

      Powell, Rt Hon J. Enoch (S Down)

      Williams, Sir Thomas (Warrington)

      Kilfedder, James A.

      Powell, Raymond (Ogmore)

      Wilson, Gordon (Dundee East)

      Kilroy-Silk, Robert

      Prescott, John

      Wilson, Rt Hon Sir Harold (Huyton)

      Kinnock, Neil

      Race, Reg

      Wilson, William (Coventry SE)

      Lamborn, Harry

      Radice, Giles

      Winnick, David

      Lamond, James

      Richardson, Miss Jo

      Woolmer, Kenneth

      Leadbitter, Ted

      Roberts, Ernest (Hackney North)

      Wrigglesworth, Ian

      Leighton, Ronald

      Roberts, Gwilym (Cannock)

      Wright, Miss Sheila

      Lestor, Miss Joan (Eton & Slough)

      Robertson, George

      Young, David (Bolton East)

      Lewis, Ron (Carlisle)

      Rodgers, Rt Hon William

      Lofthouse, Geoffrey

      Rooker, J. W.

      TELLERS FOR THE AYES:

      Lyon, Alexander (York)

      Roper, John

      Mr. James Hamilton and

      Lyons, Edward (Bradford West)

      Ross, Ernest (Dundee West)

      Mr. Ted Graham.

      Mabon, Rt Hon Dr J. Dickson

      Ross, Wm. (Londonderry)

      NOES

      Adley, Robert

      Body, Richard

      Chapman, Sydney

      Aitken, Jonathan

      Bonsor, Sir Nicholas

      Churchill, W. S.

      Alexander, Richard

      Boscawen, Hon Robert

      Clark, Hon Alan (Plymouth, Sutton)

      Alison, Michael

      Bottomley, Peter (Woolwich West)

      Clark, William (Croydon South)

      Ancram, Michael

      Bowden, Andrew

      Clarke, Kenneth (Rushcliffe)

      Arnold, Tom

      Bright, Graham

      Clegg, Walter

      Aspinwall, Jack

      Brinton, Timothy

      Cockeram, Eric

      Atkins, Robert (Preston North)

      Brittan, Leon

      Colvin, Michael

      Atkinson, David (B'mouth, East)

      Brocklebank-Fowler, Christopher

      Cope, John

      Baker, Kenneth (St. Marylebone)

      Brooke, Hon Peter

      Cormack, Patrick

      Baker, Nicholas (North Dorset)

      Brotherton, Michael

      Corrie, John

      Banks, Robert

      Brown, Michael (Brigg & Sc'thorpe)

      Costain, A. P.

      Beaumont-Dark, Anthony

      Browne, John (Winchester)

      Cranborne, Viscount

      Beith, A. J.

      Bruce-Gardyne, John

      Critchley, Julian

      Bell, Ronald

      Buchanan-Smith, Hon Alick

      Crouch, David

      Bendall, Vivian

      Buck, Antony

      Dean, Paul (North Somerset)

      Bennett, Sir Frederic (Torbay)

      Budges, Nick

      Dickens, Geoffrey

      Benyon, Thomas (Abingdon)

      Bulmer, Esmond

      Dodsworth, Geoffrey

      Benyon, W. (Buckingham)

      Burden, F. A.

      Dorrell, Stephen

      Berry, Hon Anthony

      Butcher, John

      Dover, Denshore

      Best, Keith

      Butler, Hon Adam

      Dunn, Robert (Dartford)

      Bevan, David Gilroy

      Cadbury, Jocelyn

      Durant, Tony

      Biffen, Rt Hon John

      Carlisle, John (Luton West)

      Dykes, Hugh

      Biggs-Davison, John

      Carlisle, Kenneth (Lincoln)

      Eden, Rt Hon Sir John

      Blackburn, John

      Carlisle, Rt Hon Mark (Runcorn)

      Edwards, Rt Hon N. (Pembroke)

      Blaker, Peter

      Chalker, Mrs. Lynda

      Egger, Timothy

      1202

      1203

      Emery, Peter

      Lee, John

      Ridsdale, Julian

      Eyre, Reginald

      Le Merchant, Spencer

      Rifkind, Malcolm

      Fairbairn, Nicholas

      Lennox-Boyd, Hon Mark

      Roberts, Michael (Cardiff NW)

      Faith, Mrs Sheila

      Lester, Jim (Beeston)

      Roberts, Wyn (Conway)

      Farr, John

      Lewis, Kenneth (Rutland)

      Ross, Stephen (Isle of Wight)

      Fell, Anthony

      Lloyd, Ian (Havant & Waterloo)

      Rossi, Hugh

      Fenner, Mrs Peggy

      Lloyd, Peter (Fareham)

      Rost, Peter

      Finsberg, Geoffrey

      Loveridge, John

      Royle, Sir Anthony

      Fisher, Sir Nigel

      Luce, Richard

      Sainsbury, Hon Timothy

      Fletcher, Alexander (Edinburgh N)

      Lyell, Nicholas

      Scott, Nicholas

      Fletcher-Cooke, Charles

      McCrindle, Robert

      Shaw, Michael (Scarborough)

      Fookes, Miss Janet

      Macfarlane, Neil

      Shelton, William (Streatham)

      Forman, Nigel

      MacGregor, John

      Shepherd, Colin (Hereford)

      Fowler, Rt Hon Norman

      Mackay, John (Argyll)

      Shepherd, Richard (Aldridge-Br'hills)

      Fox, Marcus

      Macmillan, Rt Hon M. (Farnham)

      Shersby, Michael

      Fraser, Peter (South Angus)

      McNair-Wilson, Michael (Newbury)

      Silvester, Fred

      Fry, Peter

      McNair-Wilson, Patrick (New Forest)

      Sims, Roger

      Galbraith, Hon T. G. D.

      McQuarrie, Albert

      Skeet, T. H. H.

      Gardiner, George (Reigate)

      Madel, David

      Speller, Tony

      Gardner, Edward (South Fylde)

      Major, John

      Spicer, Jim (West Dorset)

      Garel-Jones, Tristan

      Marlow, Anthony

      Spicer, Michael (S Worcestershire)

      Glyn, Dr Alan

      Marshall, Michael (Arundel)

      Sproat, Ian

      Goodhart, Philip

      Marten, Neil (Banbury)

      Squire, Robin

      Goodlad, Alastair

      Mates, Michael

      Stainton, Keith

      Gorst, John

      Mather, Carol

      Stanbrook, Ivor

      Gower, Sir Raymond

      Maude, Rt Hon Angus

      Stanley, John

      Grant, Anthony (Harrow C)

      Mawby, Ray

      Steel, Rt Hon David

      Gray, Hamish

      Mawhinney, Dr Brian

      Steen, Anthony

      Grieve, Percy

      Maxwell-Hyslop, Robin

      Stevens, Martin

      Griffiths, Eldon (Bury St Edmunds)

      Mayhew, Patrick

      Stewart, Ian (Hitchin)

      Griffiths, Peter (Portsmouth N)

      Mellor, David

      Stewart, John (East Renfrewshire)

      Grist, Ian

      Meyer, Sir Anthony

      Stokes, John

      Grylls, Michael

      Miller, Hal (Bromsgrove & Redditch)

      Stradling Thomas, J.

      Gummer, John Selwyn

      Mills, Iain (Meriden)

      Tapsell, Peter

      Hamilton, Hon Archie (Eps'm&Ew'll)

      Mills, Peter (West Devon)

      Taylor, Robert (Croydon KW)

      Hamilton, Michael (Salisbury)

      Miscampbell, Norman

      Tebbit, Norman

      Hampson, Dr Keith

      Mitchell, David (Basingstoke)

      Temple-Morris, Peter

      Hannam, John

      Monro, Hector

      Thomas, Rt Hon Peter (Hendon S)

      Haselhurst, Alan

      Montgomery, Fergus

      Thompson, Donald

      Havers, Rt Hon Sir Michael

      Morgan, Geraint

      Thorne, Neil (Ilford South)

      Hawkins, Paul

      Morris, Michael (Northampton, Sth)

      Thornton, George

      Hawksley, Warren

      Morrison, Hon Charles (Devizes)

      Townend, John (Bridlington)

      Hayhoe, Barney

      Morrison, Hon Peter (City of Chester)

      Townsend, Cyril D. (Bexleyheath)

      Heddle, John

      Mudd, David

      Trippier, David

      Henderson, Barry

      Murphy, Christopher

      Trotter, Neville

      Hicks, Robert

      Myles, David

      van Straubenzee, W. R.

      Higgins, Terence L.

      Neale, Gerard

      Vaughan, Dr Gerard

      Hill, James

      Normanton, Tom

      Viggers, Peter

      Hogg, Hon Douglas (Grantham)

      Nott, Rt Hon John

      Waddington, David

      Holland, Philip (Carlton)

      Oppenheim, Rt Hon Mrs Sally

      Wainwright, Richard (Cohie Valley)

      Hooson, Tom

      Osborn, John

      Wakeham, John

      Hordern, Peter

      Page, John (Harrow, West)

      Waldegrave, Hon William

      Walker, Rt Hon Peter (Worcester)

      Howe, Rt Hon Sir Geoffrey

      Page, Rt Hon R Graham (Crosby)

      Walker-Smith, Rt Hon Sir Derek

      Howell, Ralph (North Norfolk)

      Parkinson, Cecil

      Wall, Patrick

      Howells, Geraint

      Parris, Matthew

      Waller, Gary

      Hunt, David (Wirral)

      Patten, Christopher (Bath)

      Walters, Dennis

      Irving, Charles (Cheltenham)

      Patten, John (Oxford)

      Ward, John

      Jenkin, Rt Hon Patrick

      Pattie, Geoffrey

      Watson, John

      Jessel, Toby

      Pawsey, James

      Wells, John (Maidstone)

      Johnson Smith, Geoffrey

      Penhaligon, David

      Wells, P. Bowen (Hert'rd&Stev'nage)

      Johnston, Russell (Inverness)

      Percival, Sir Ian

      Wheeler, John

      Jopling, Rt Hon Michael

      Pink, R. Bonner

      Whitelaw, Rt Hon William

      Joseph, Rt Hon Sir Keith

      Pollock, Alexander

      Whitney, Raymond

      Kaberry, Sir Donald

      Porter, George

      Wickenden, Keith

      Kellett-Bowman, Mrs Elaine

      Price, David (Eastleigh)

      Wiggin, Jerry

      Kershaw, Anthony

      Prior, Rt Hon James

      Wilkinson, John

      Kimball, Marcus

      Proctor, K. Harvey

      Williams, Delwyn (Montgomery)

      King, Rt Hon Tom

      Raison, Timothy

      Winterton, Nicholas

      Kitson, Sir Timothy

      Rathbone, Tim

      Wolfson, Mark

      Knox, David

      Rees, Peter (Dover and Deal)

      Young, Sir George (Acton)

      Lamont, Norman

      Rees-Davies, W. R.

      Younger, Rt Hon George

      Lang, Ian

      Renton, Tim

      Langford-Holt, Sir John

      Rhodes James, Robert

      TELLERS FOR THE NOES:

      Latham, Michael

      Rhys Williams, Sir Brandon

      Lord James Douglas-Hamilton and

      Lawrence Ivan

      Ridley, Hon Nicholas

      Mr. Tony Newton.

      Lawson, Nigel

      Question accordingly negatived.
      Amendment proposed: No. 1, in page 1, line 21, leave out 'fifteen per cent' and insert 'twelve-and-a-half per cent'.—[Mr. Richard Wainwright.]
      Question put, that the amendment be made:—
      The Committee divided: Ayes 17, Noes 276.

      Division No.37]

      AYES

      8.21 p.m.

      Canavan, Dennis

      Lamond, James

      Steel, Rt Hon David

      Clark, David (South Shields)

      Mitchell, Austin (Grimsby)

      Wainwright, Richard (Colne Valley)

      Evans, Ioan (Aberdare)

      Penhaligon, David

      Wigley, Dafydd

      Fitch, Alan

      Powell, Raymond (Ogmore)

      Hamilton, W. W. (Central Fife)

      Roberts, Gwilym (Cannock)

      TELLERS FOR THE AYES:

      Howells, Geraint

      Ross, Stephen (Isle of Wight)

      Mr. A. J. Beith and

      Kilfedder, James A.

      Skinner Dennis

      Mr. Russell Johnson.

      NOES

      Adley, Robert

      Dunn, Robert (Dartford)

      Kitson, Sir Timothy

      Aitken, Jonathan

      Durant, Tony

      Knox, David

      Alexander, Richard

      Dykes, Hugh

      Lamont, Norman

      Alison, Michael

      Eden, Rt Hon Sir John

      Lang, fan

      Ancram, Michael

      Edwards, Rt Hon N. (Pembroke)

      Langford-Holt, Sir John

      Arnold, Tom

      Eggar, Timothy

      Latham, Michael

      Aspinwall, Jack

      Emery, Peter

      Lawrence Ivan

      Atkins, Robert (Preston North)

      Eyre, Reginald

      Lawson, Nigel

      Atkinson, David (B'mouth, East)

      Fairbairn, Nicholas

      Lee, John

      Baker, Kenneth (St. Marylebone)

      Faith, Mrs Sheila

      Le Marchant, Spencer

      Baker, Nicholas (North Dorset)

      Farr, John

      Lennox-Boyd, Hon Mark

      Banks, Robert

      Fell, Anthony

      Lester, Jim (Beeston)

      Beaumont-Dark, Anthony

      Fenner, Mrs Peggy

      Lewis, Kenneth (Rutland)

      Bell, Ronald

      Finsberg, Geoffrey

      Lloyd, Ian (Havant & Waterloo)

      Bendell, Vivian

      Fisher, Sir Nigel

      Lloyd, Peter (Fareham)

      Bennett, Sir Frederic (Torbay)

      Fletcher, Alexander (Edinburgh N)

      Loveridge, John

      Benyon, Thomas (Abingdon)

      Fletcher-Cooke, Charles

      Luce, Richard

      Benyon, W. (Buckingham)

      Fookes, Miss Janet

      Lyell, Nicholas

      Berry, Hon Anthony

      Forman, Nigel

      McCrindle, Robert

      Best, Keith

      Fowler, Rt Hon Norman

      Macfarlane, Neil

      Bevan, David Gilroy

      Fraser, Peter (South Angus)

      MacGregor, John

      Biffen, Rt Hon John

      Fry, Peter

      Mackay, John (Argyll)

      Blackburn, John

      Galbraith, Hon T. G. D.

      Macmillan, Rt Hon M. (Farnham)

      Blaker, Peter

      Gardiner, George (Reigate)

      McNair-Wilson, Michael (Newbury)

      Bonsor, Sir Nicholas

      Gardner, Edward (South Fylde)

      McQuarrie, Albert

      Boscawen, Hon Robert

      Garel-Jones, Tristan

      Madel, David

      Bottomley, Peter (Woolwich West)

      Glyn, Dr Alan

      Major, John

      Bowden, Andrew

      Goodhart, Philip

      Marlow, Anthony

      Bright, Graham

      Gorst, John

      Marshall, Michael (Arundel)

      Brinton, Timothy

      Gower, Sir Raymond

      Marten, Neil (Banbury)

      Brittan, Leon

      Grant, Anthony (Harrow C)

      Mates, Michael

      Brooke, Hon Peter

      Gray, Hamish

      Mather, Carol

      Brotherton, Michael

      Grieve, Percy

      Maude, Rt Hon Angus

      Brown, Michael (Brigg & Sc'thorpe)

      Griffiths, Eldon (Bury St Edmunds)

      Mawby, Ray

      Browne, John (Winchester)

      Griffiths, Peter (Portsmouth N)

      Mawhinney, Dr Brian

      Bruce-Gardyne, John

      Grist, Ian

      Maxwell-Hyslop, Robin

      Buchanan-Smith, Hon Alick

      Grylls, Michael

      Mayhew, Patrick

      Buck, Antony

      Gummer, John Selwyn

      Mellor, David

      Budgen, Nick

      Hamilton, Hon Archie (Eps'm & Ew'll)

      Meyer, Sir Anthony

      Bulmer, Esmond

      Hamilton, Michael (Salisbury)

      Miller, Hal (Bromsgrove & Redditch)

      Burden, F. A.

      Hannam, John

      Mills, Iain (Meriden)

      Butcher, John

      Haselhurst, Alan

      Mills, Peter (West Devon)

      Butler, Hon Adam

      Havers, Rt Hon Sir Michael

      Miscampbell, Norman

      Cadbury, Jocelyn

      Hawkins, Paul

      Mitchell, David (Basingstoke)

      Carlisle, John (Luton West)

      Hawksley, Warren

      Monro, Hector

      Carlisle, Kenneth (Lincoln)

      Heddle, John

      Montgomery, Fergus

      Carlisle, Rt Hon Mark (Runcorn)

      Henderson, Barry

      Morgan, Geraint

      Chalker, Mrs. Lynda

      Hicks, Robert

      Morris, Michael (Northampton, Sth)

      Chapman, Sydney

      Higgins, Terence L.

      Morrison, Hon Charles (Devizes)

      Churchill, W. S.

      Hill, James

      Morrison, Hon Peter (City of Chester)

      Clark, Hon Alan (Plymouth, Sutton)

      Clark, William (Croydon South)

      Hogg, Hon Douglas (Grantham)

      Mudd, David

      Clarke, Kenneth (Rushcliffe)

      Holland, Philip (Carlton)

      Murphy, Christopher

      Clegg, Walter

      Hooson, Tom

      Myles, David

      Cockeram, Eric

      Hordern, Peter

      Neale, Gerard

      Colvin, Michael

      Howe, Rt Hon Sir Geoffrey

      Normanton, Tom

      Cope, John

      Howell, Ralph (North Norfolk)

      Nott, Rt Hon John

      Cormack, Patrick

      Hunt, David (Wirral)

      Oppenheim, Rt Hon Mrs Sally

      Corrie, John

      Irving, Charles (Cheltenham)

      Osborn, John

      Costain, A. P.

      Jenkin, Rt Hon Patrick

      Page, John (Harrow, West)

      Cranborne, Viscount

      Jessel, Toby

      Page, Rt Hon R Graham (Crosby)

      Critchley, Julian

      Jopling, Rt Hon Michael

      Parkinson, Cecil

      Dean Paul (North Somerset)

      Joseph, Rt Hon Sir Keith

      Parris, Matthew

      Dickens, Geoffrey

      Kaberry, Sir Donald

      Patten, Christopher (Bath)

      Dodsworth, Geoffrey

      Kellett-Bowman, Mrs Elaine

      Pattie, Geoffrey

      Dorrell, Stephen

      Kershaw, Anthony

      Pawsey, James

      Dover, Denshore

      Kimball, Marcus

      Pink, R. Bonner

      Pollock, Alexander

      Spicer, Michael (S Worcestershire)

      Waddington, David

      Porter, George

      Sproat, Ian

      Wakeham, John

      Price, David (Eastleigh)

      Squire, Robin

      Waidegrave, Hon William

      Proctor, K. Harvey

      Stainton, Keith

      Walker, Rt Hon Peter (Worcester)

      Raison, Timothy

      Stanbrook, Ivor

      Walker-Smith, Rt Hon Sir Derek

      Rathbone, Tim

      Stanley, John

      Wall, Patrick

      Rees, Peter (Dover and Deal)

      Steen, Anthony

      Waller, Gary

      Rees-Davies, W. R.

      Stevens, Martin

      Walters, Dennis

      Renton, Tim

      Stewart, Ian (Hitchin)

      Ward, John

      Rhodes James, Robert

      Stewart, John (East Renfrewshire)

      Watson, John

      Rhys Williams, Sir Brandon

      Stokes John

      Wells, John (Maidstone)

      Ridsdale, Julian

      Stradling Thomas, J.

      Wells, P. Bowen (Hert'rd&Stev'nage)

      Rifkind, Malcolm

      Tapseil, Peter

      Wheeler, John

      Roberts, Michael (Cardiff NW)

      Taylor, Robert (Croydon NW)

      Whitehead, Phillip

      Roberts, Wyn (Conway)

      Tebbit, Norman

      Whitney, Raymond

      Rossi, Hugh

      Temple-Morris, Peter

      Wickenden, Keith

      Rost, Peter

      Thomas, Rt Hon Peter (Hendon S)

      Wiggin, Jerry

      Sainsbury, Hon Timothy

      Thompson, Donald

      Wilkinson, John

      Shaw, Michael (Scarborough)

      Thorne, Neil (Ilford South)

      Williams, Delwyn (Montgomery)

      Shelton, William (Streatham)

      Thornton, George

      Winterton, Nicholas

      Shepherd, Colin (Hereford)

      Townend, John (Bridlington)

      Wolfson, Mark

      Shepherd, Richard (Aldridge-Br'hills)

      Townsend, Cyril D. (Bexleyheath)

      Young, Sir George (Acton)

      Sheraby, Michael

      Trippier, David

      Younger, Rt Hon George

      Silvester, Fred

      Trotter, Neville

      Sims, Roger

      van Straubenzee, W. R.

      TELLERS FOR THE NOES:

      Skeet, T. H. H.

      Vaughan, Dr Gerard

      Lord James Douglas-Hamilton and

      Speller, Tony

      Viggers, Peter

      Mr. Tony Newton.

      Question accordingly negatived.
      Amendment made: No. 47, in page 2, line 9, leave out from 'which' to end of line 11 and insert—

      '(a) the Post Office issue a tax invoice which includes a rental charge for a rental quarter beginning before 1st November 1979; or

      (b) the Council issue a tax invoice which includes a rental charge for a rental period beginning before that date or charges for calls made in a period ending before 1st September 1979.'.—[Mr. John Stradling Thomas.]

      8.30 p.m.
      Mr. Rooker: I beg to move amendment No. 3 in page 2, line 13, at end insert—
      '(3A) As from the passing of this Act subsection 1(B) does not affect the rate of tax on any supply to a registered charity of equipment for use by the National Health Service'.
      The Temporary Chairman (Mr. Michael English): With this we may take the following amendments:
      No. 2, in page 1, line 21, at end insert:
      'provided that this shall not apply to repairs to wheelchairs or any other equipment designed to assist the mobility of the disabled.'
      No. 4, in page 2, line 13 at end insert—
      '(3A) Subsection 1(B) above does not affect the rate of tax on any goods or services supplied to or by registered charities'.
      No. 13, in page 2, line 13, at end insert—
      '(3A) As from the passing of this Act subsection 1(B) does not affect the rate of tax on any goods or services supplied to or by the Youth Hostel Association.'.
      1208
      No. 17, in page 2, line 27, at end add—
      '(6) As from the passing of this Act subsection (1) above shall not apply to any supply of goods or services made to any person in receipt of mobility allowance.'.
      No. 19, in page 2, line 27, at end add—
      '(6) As from the passing of this Act subsection (1) above shall not apply to any supply of goods or services made to or by a registered charity.'.
      No. 40, in page 2, line 27, at end add
      '(6) As from the passing of this Act subsection (1) above shall not apply to any supply made to or by any youth club whether such club is included in the registration of a local authority or not.'.
      Mr. Rooker: We now come to what the Chief Secretary called in the previous debate the "special pleading" provision on value added tax, when we shall debate a string of special pleas for exemption from the massive increase in VAT imposed in the Budget. Contrary to what the Chief Secretary said, some of the special pleading will come from the official Opposition and not merely from Opposition Back Benchers.
      Later in the debate my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) will seek to catch your eye, Mr. English, in respect of amendment No. 17, which deals with people who are in receipt of mobility allowance.
      I hope that we shall now have a proper debate, because during the last two or three hours we have not had a real debate. Members of the Tory Party were conspicuous by their absence in defending the increase in VAT from 8 to 15

      1209
      per cent. Clearly they are under instructions not to come to the Chamber and make speeches. I know that we—and the public outside—would like to hear how Conservative Members of Parliament can possibly support the imposition of this increase in VAT. More particularly, if they could not find time to do it in the previous debate, we should like to hear them arguing the case against some of the amendments proposed by Opposition Members.
      In places such as Italy, which is a good example, when extra facilities are needed for the community, such as an extra classroom or an extra wing for a hospital, it is not unknown for industrial workers to take industrial action to seek those benefits. It is quite a well-known form of action in countries such as Italy.
      In this country we tend to set up a committee, and the committees to which I wish to refer specifically when speaking to amendment No. 3 are the leagues of friends of hospitals. In the United Kingdom there are about 2 million members of hospital leagues of friends, and I am told by the National Association of Leagues of Hospital Friends that approximately 90,000 of them are active members. There are 1,117 separate leagues of friends in hospitals covering 75 per cent. of all the beds in the National Health Service.
      The remarkable thing is that the contributions made by the leagues of friends to the various hospitals by way of gifts of equipment and facilities for patients and staff amount to no less than £
      million. Our amendment seeks to relieve from the VAT imposed by the Budget the gifts and purchases made by the leagues of friends with the money that they collect. There is no procedural way for us to cancel our VAT, as no doubt the Minister of State will tell us.
      We want to relieve the leagues of friends from paying what is, in effect—let us not beat about the bush—a doubling of VAT. That is what it really amounts to. I know that the Minister will, quite rightly, refer to The Value Added Tax (Donated Medical Equipment) Order 1974, but that order does not relieve from VAT all gifts provided by leagues of friends or by anyone else who gets money together to donate gifts to
      1210
      hospitals. There are certain areas in which Customs and Excise are vigorous in not allowing VAT exemption under that order. For example, I draw the attention of the committee to the fact that Customs and Excise count as ineligible items such as hoists, wheelchairs, patient trolleys and stretchers. Any of those items of equipment that are presented to a hospital by a group of people—be it leagues of friends or any registered charity—carry the full rate of VAT. I am told that orthopaedic beds are not exempted from VAT either when they are donated by leagues of friends.
      It would be very interesting and useful if the Minister of State could tell the Committee whether there is any possibility of the Government seeing their way to accepting amendment No. 3 and bringing forward an amendment order to extend the scope of the existing VAT order dealing with donated medical equipment. The Government must realise the massive burden that this increase in the rate of VAT will put on these charitable bodies.
      I should like to give two examples, both in the city that I have the honour to represent in this House. I know that many right hon. and hon. Members on both sides of the Committee will give further examples. In 1978 the league of friends of Birmingham accident hospital purchased gifts to the value of ₣40,000. Those gifts attracted VAT, although extra gifts did not. Out of that money, which was raised by jumble sales or public subscription, ₣3,200 went straight back to the Treasury. If the amendment is not carried tonight, £6,000 out of a total of £40,000 will be lost to the Treasury and will not go where those who donated it intended.
      Another example concerns Highcroft hospital in Birmingham. In 1977–78 the league of friends had taxed expenditure of £1,753, on which it had to pay VAT of £162. We believe that that is a large slice of voluntary effort, which should go not to the Treasury but to those for whom it was intended.
      The Government will know that three years ago a report entitled "Charity Law and Voluntary Organisations" was published. It was produced by what was known as the Goodman committee. Even I was astonished to find that there was

      1211
      another walk of life in which Lord Goodman has a finger in the pie. However, this was an independent committee set up by the National Council for Social Services. The Government will know that one of the recommendations in that report was that:
      "all charities should be enabled to reclaim VAT in excess of £25 a year on their expenses",
      and that
      "for the purpose of output tax, no activity in furtherance of a charity's primary purpose should be considered as a business for VAT".
      I made representations to the previous Government about that recommendation. The point is that when I and my hon. Friends made those representations, VAT was 8 per cent. We are now talking about a doubling of the tax burden. That is the point that we are arguing. It is not possible for Labour Members to move an amendment to go back to square one, but what we are legitimately, rationally, morally and logically bound to do is to oppose the doubling of VAT on these charities. We do so without any apology whatever to Conservative Members. We make no apology at all for bringing forward these amendments.
      We do not accept or advocate, as we believe some Tory Members would, that public expenditure in the NHS should be cut and should be made up by voluntary organisations. That is not our aim. We are not ashamed to advocate a publicly funded NHS, out of high taxation if need be. That has been the rationale behind the existence of the Labour Party over many years.
      That is not to say that there is no scope for people collectively to form a charity around a hospital which may be local to a community and where loved ones may be looked after, because those people know that by their efforts extra comfort and equipment can be provided for such a hospital. What they do not want is for their effort to be nullified by the Government imposing a 15 per cent. rate of VAT.
      We want to encourage the work of leagues of hospital friends. In fact, it rings a little hollow for Conservative Members to try to argue against us tonight, because throughout the general election campaign and the Budget debate they claimed that Health Service expenditure
      1212
      had been protected. We know that that is not true.
      In the previous debate one of my hon. Friends raised the general issue of VAT on the NHS in so far as it related to equipment purchased by area and regional health authorities. That point was not answered by the Chief Secretary. The fact remains that if the cash limits are maintained, expenditure on the Health Service will be cut because of the imposition of VAT. It will be cut further by imposing a doubling of VAT on NHS charities. Given that the rate of inflation will be 17·5 per cent. by November, it is axiomatic that such charities will have great difficulty in raising further funds to take account of inflation next year. Even if they can maintain the status quo, the increased VAT will mean that they will lose an extra 7 per cent. of what they raise.
      Those charities cannot make good the cuts imposed by the Government or make up for the extra tax that they will have to find. It is not fair to kick these voluntary bodies in the teeth. In opposition the Tories went on about encouraging voluntary effort. Every time that Labour Members pressed the previous Government for increased public expenditure, and every time that a problem arose the Tories mentioned voluntary effort, but within weeks of coming to power they are kicking in the teeth 2 million voluntary workers in the National Association of Leagues of Hospital Friends by the imposition of increased VAT. The Minister of State has much to answer for during the debate.
      8.45 p.m.
      The National Association of Leagues of Hospital Friends has told the Chancellor of the Exchequer that it is horrified by the increase. Its main objection is to VAT on donated items, and it asks for further consideration of the recommendation in the Goodman report. What is the Government's response to that? The Minister of State cannot say that they have not had time to consider the matter. They have doubled VAT without considering the consequences for charities working in the National Health Service.
      I have referred to the VAT exemption order. There must be a widening of the

      1213
      scope and interpretation of that order so that it is not operated rigidly by Customs and Excise. I am not talking of exemption for manufacturers who donate expensive capital equipment to health authorities in the hope that when it wears out the authority will order new equipment. Great disquiet has recently been expressed about donations and fund-raising efforts for body-scanners for the NHS. Just before the election it was claimed that local appeals for body-scanners for hospitals were stimulated by manufacturers who hoped for a new order when the equipment needed replacing. We are opposed to large capital donations by businesses unless the capital expenditure is planned with the revenue expenditure. Such large donations will only prompt revenue expenditure in the NHS.
      We are not looking for a loophole for big business to circumvent the general imposition of VAT. We are concerned with registered charities working within the NHS, but there may be wider implications. At present, in Birmingham, a public subscription is being organised by the local evening paper for the general hospital similar to that for the accident hospital. That money will be channelled through the league of friends at the hospital so that it can claim any possible VAT exemption. It will not, however, be able to claim exemption on a sufficient number of items, and it will have to pay 15 per cent. on others. That is not good enough. The Government should have taken into account such matters in framing the Budget, and we must have some answer tonight.
      Mr. Cranley Onslow: The hon. Member for Birmingham, Perry Barr (Mr. Rooker) told us that this provision was an opportunity for special pleas. It is none the worse for that. I admit freely that I am making a special plea on behalf of one of my constituents. Since constituents often express themselves a great deal better than their Members of Parliament, perhaps I should read the letter which I received from an elderly lady in my constituency. She said:
      "When an Act was passed allowing electrically driven wheelchairs on public roads and paths my doctor made application to the Department of Social Welfare at Kingston for me to have one. This they confirmed, but would not let me have the type I could use
      1214
      here on the grounds that I was too old, so I withdrew some of my savings and bought a suitable one for myself. I was exempted from VAT on the price on a medical certificate. When I needed repairs and replacements I found to my amazement that I had to pay VAT on them. I wrote to Mr. J. Ashley, and the Minister for the Disabled, but got no satisfaction. It seems all wrong that I, and many others like me, should be penalised because of our age. We get no mobility allowance either, because we are old. What are we supposed to do? Sit about like cabbages for the rest of our lives?"
      That is quite an effective special plea. It pinpoints the situation with which the previous Government were unable to deal. I share my constituent's hope that this Government will deal with it more effectively. If people are to be penalised because they are too old to receive mobility allowance, the other amendments that we shall hear about later in the debate will not help them at all. I do not find it congenial to have to argue that the rate of VAT on repairs and replacements to this wheelchair should remain at 8 per cent. I want to see it removed altogether.
      I turn to the plea made by the hon. Member for Perry Barr. I am sorry that he did not find time in his opening speech to refer to the other amendment—No. 19—which is in this group. This amendment, in the name of the official Opposition, calls for the exemption from the increase in VAT of any supply of goods and services made to or by a registered charity. As a governor of two independent schools, both registered charities, I hope that Labour Members will not take offence when I say that it is good to see their new-found enthusiasm for the cause of independent education.
      Mr. Rooker: I did not say that.
      Mr. Onslow: Perhaps I am putting words into the hon. Gentleman's mouth. Perhaps he chose not to use such words. But it will be interesting to know whether independent schools which are charities are excluded from the Opposition amendment.
      I have considerable sympathy with the aims of the hon. Member for Perry Barr in this respect. He wants to ensure that money which individuals wish to give for charitable purposes actually reaches the individual charity and does not stick in the Chancellor's palm on the way. Anybody who contributes to a charity does

      1215
      not want to be in the position inadvertently of having to pay tax. I am not certain that this is the right way or the appropriate occasion to amend the law as it applies to charitable donations in the most effective manner.
      I suggest that there is a better course which the Government could explore. They could stimulate charitable donations by extending tax exemption to them up to a certain limit of allowance. In saying that, I declare another interest in that my wife is a trustee of a well-known national charity.
      It may seem strange to argue that certain expenditure should be exempted from taxation, but under tax covenants this effectively is so provided that an individual is prepared to bind himself, notionally or actually, to make payments over a period of seven years. I see no reason why that period should not be reduced to one year. Why should not the taxpayer be given an allowance, whatever it may be, which he can use to satisfy his natural and commendable desire to give to good causes of all kinds—for example, to charities dealing with overseas aid?
      We should not allow ourselves to be persuaded by the hon. Gentleman's powerful oratory that hospital leagues of friends are the only cause to which people may want to contribute, although I know that a great many people are willing to give money to support their local hospitals. We should seek to harness that attitude. However, I believe that the method which the hon. Gentleman chooses on this occasion is not necessarily the best or the most effective means of achieving that end.
      I do not believe the hon. Gentleman shares my aspiration as much as I should like. He admitted—and it was honest of him to do so—that his party was the party of high taxation. He will not be wholly surprised that I find that a repugnant philosophy.
      Mr. Rooker: The Tory Government are proposing 15 per cent. VAT.
      Mr. Onslow: Does the hon. Gentleman take the view that, when comparing like with like, he sees the Labour Party as being so much more generous in the matter of taking people's money away
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      from them by one means or another and spending it on causes which he and his colleagues regard as being good for them?
      Mr. Stanley Orme: The hon. Gentleman should say that to his own Front Bench.
      Mr. Onslow: Uncomfortable though the occupants of the Opposition Front Bench may find my remarks, I wish to address my comments to them.
      The attitude of the Socialists, of whom the hon. Member for Perry Barr is such a splendid example, has a practical effect. He and his party say to the taxpayer "We shall take away from your earnings all the money that we think is needed to provide a standard of service which we think is adequate for you. You must not quarrel about that. It is a judgment we make because we are in power." They then say "All the money which you have left"—if they have any left—"you can do what you like with. We are not too bothered about that. It is pocket money." But who gets pocket money? Children get pocket money. The trouble with the Socialists, and the reason why they lost the last election, is that they insist on treating grown people as though they were children.
      9 p.m.
      Mr. Welsh: I speak in support of amendment No. 4. I wish to ask the Minister to exempt charities from the VAT increase. I do not know whether the Chancellor of the Exchequer is aware how charities will suffer as a result of his proposals. A 1 per cent. reduction in direct taxation loses £1 million for charities in this country. I received that information from the Charities Trust Aid Foundation in a recent letter that it wrote to me. Charities are even worse off after the increase in VAT.
      I am not a full supporter of charities because I believe that they are based upon fear. People go to charity organisations throughout the world because they are afraid of dying and starvation and the charities help them. The charities provide a bed at night. Statesmen throughout the world should put something in place of fear, and it should have been done many years ago. However, because that has not been done, we should accept that the charities exist and that they do

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      a good job. I do not believe that that job should be hindered.
      The first charity organisation was started in this country. There were religious charities and others which carried out good works before charities such as Oxfam came into being. Sterling work has been done, and it should not be hindered by any Chancellor of the Exchequer.
      The amendment proposes that the increase in VAT should not apply to charities. That can be done. In most European countries there are differentials, and I see no reason why there should not be a differential in VAT so that charities would pay only 8 per cent. I am aware that in Committee we cannot ask for the zero rate for charities because I am reliably informed that we cannot legislate in retrospect. However, we could stop that extra burden.
      The increase in VAT will mean an extra payment of £1 million from charities, yet they will have the same turnover. By the stroke of a pen they lose
      £1 million. That information came from the Treasury, and no doubt it is to be believed. Charities deal with many zero-rated commodities. However, there are as many commodities that are not zero rated. Christmas cards may not be zero rated, charity shops are not forced to be zero rated and poppy wreaths—to my amazement—are also not zero rated. If a charity puts a greeting in a newspaper containing the words "John's Butchers, High Street" that advertisement will not he zero rated and VAT will apply—even though the charity organisation may be seeking to raise money for the needy.
      I see no reason why money should be taken from the poor. Taking money from the charities is taking money from the poor—sometimes the really poor in the rest of the world who are dying of starvation. That is a crime of the first order. No matter which way the sums are weighed up, the fact cannot be escaped that for the same turnover as last year charities will lose £1 million to the Chancellor of the Exchequer.
      I remind the Minister that in 1863 when Gladstone introduced his charities Bill it was dropped. I became acquainted with that fact many years ago when I
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      had the pleasure of studying at the small Oxford college of Ruskin. I thought that it deserved to be dropped. During the debates on the same Budget, Bagehot sent a letter to Gladstone saying that indirect taxation very much cramped trade.
      If the Chancellor of the Exchequer was aware of the results for charities of his increase in VAT, we can only assume that his actions were mean, short and brutish. I believe that he was not aware of the spin-off effect on them.
      We seem to have two sets of principles, two different methods of taxation. First there is national taxation, which the Bill is about. We accept the need for it in order to provide certain services. Secondly, there are the local rates. Here charities receive a mandatory 50 per cent. reduction, which was ordered by the House. I believe that we were right to order someone else to give a reduction to charities, but we are wrong not to be doing the same.
      It is said, at least in my neck of the woods, that it is a wise man who can change his mind, and that only a fool cannot. I ask the Minister to change his mind and accept the amendment.
      Mr. Martin Stevens: I am very pleased that the hon. Member for Don Valley (Mr. Welsh) spoke with such warmth about the charitable desire to give, which is human and correct, because it has sometimes seemed to me over the years that the Labour Party is fundamentally opposed to that aspect of human freedom which shows itself in charitable giving.
      I must declare an interest, as chairman of the national appeals committee of the Cancer Research Campaign, one of the top four or five charities in the country. I do not wish in any way to upstage the hon. Member for Birmingham, Perry Barr (Mr. Rooker) when I say that this year we shall spend on cancer research more than double the total funds made by hospital leagues of friends, to which he referred. Like the hon. Gentleman, I take part in the work of the leagues of friends and recognise their tremendous value.
      While the previous Government were in office, the Cancer Research Campaign's income from donations, legacies and investments more than doubled, but its

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      spending power remained static. It is a harsh fact of life that with the reduction in the level of income tax made in the Budget the incomes of all charities, large and small, are likely to suffer, because those who signed deeds of convenant will not remit through tax rebates the same amount as they have in the past.
      The concept that the amendments collectively put to the Committee is that charities should stand in a special relationship to VAT, both in what they buy and in what they sell. The hon. Member for Perry Barr spoke persuasively on the basis of the report of the Goodman committee. We must recognise that its report is now somewhat out of date.
      In the last couple of years, the face and practice of major charities in this country have substantially changed. Many are now extremely active in the commercial field, from Christmas cards—a traditional field of charitable fund raising—to all manner of buying and selling. My Cancer Research Campaign is involved in selling second hand motor cars, in selling wine and hampers—
      Mr. John Home Robertson: And cigarettes?
      Mr. Stevens: Not cigarettes. I am sure the hon. Gentleman will be glad to hear that it is not long since we discontinued the practice of smoking at our meetings. It would be unrealistic, even if the Committee so wished, to treat charities in a special way in regard to VAT. They are involved, and will be involved increasingly, in the normal day-to-day commercial life of the country on a surprisingly large and growing scale. I believe, however, that the Committee may properly on a future occasion consider the whole question of the financial status of charities.
      My campaign spends more on cancer research than any other body, including the Medical Research Council, and I have no doubt we shall continue to do so. The right way to aid the growth of charities and, at the top end, to play a vigorous national role is surely to encourage and reward the giver. Some steps have been taken in that direction in the past. But more could be done on the lines of the tax pattern in the United States. That would be a topic for a future debate.
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      The distinction between the commercial activities of charities and the commercial activities of non-charities in regard to VAT seems both an impracticable exercise for the Treasury to contemplate, which I regret, and a growing discrimination that would be highly unfair to the commercial sector of society as a whole. If charities that are trading were given the advantage proposed by the hon. Member for Perry Barr this would build in an increasing unfairness to the commercial sector as a whole.
      I hope that the amendment will not be approved by the Committee.
      Mr. Alfred Morris: My purpose in intervening is to commend to the Committee on behalf of the Opposition amendment No. 17. This is a highly important amendment on which, with your consent, Mr. English, if the Government cannot concede, the Opposition will seek a separate Division.
      After the Budget and in direct consequence of its provisions, a very sad thing happened. I refer to the decision to cease trading by Motability—the organisation that exists to improve the mobility of disabled people by leasing cars not only to disabled drivers but also to disabled people who are so severely disabled that they have to be driven.
      That was grave news for many disabled people. To some other people, not least those who did well out of the Budget, the effect of major increases in VAT and in the minimum lending rate may not seem serious. However, the effect of the increases on Motability faced many disabled people with personal catastrophe.
      Not only did disabled people feel strongly, but I am sure that we shall hear about their anxieties from right hon. and hon. Members on both sides of the House.
      9.15 p.m.
      Jeffrey Sterling, the vice-chairman of Motability, said to those who take a special interest in the problems of disabled people that Motability's
      "decision to cease trading for the present is causing severe disappointment, distress and anger to hundreds of our customers."
      It was a body-blow for an organisation which gave special help to large numbers of disabled people.

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      George Wilson, the director of the Royal Association for Disability and Rehabilitation, sent a letter to the Prime Minister on 20 June. It said:
      "I feel that I must write to express the Royal Association's concern and dismay that the recent changes in VAT and the increase in Minimum Lending Rate have compelled Motability to suspend operations.…I can but refer to the promises made when you were in opposition that full support be given to improving the mobility of severely handicapped people. … We would be failing in our responsibilities if we did not draw to your attention the present concern of many disabled people and the nagging fear of what the future may hold. For this group it has every sign of being a budget of ' to him who hath it shall be given and to him who hath not it shall be moved further away.'"
      That was an important statement.
      After the Budget there was sustained pressure from both sides of the House to mitigate the effects of the increase in VAT for Motability. It was decided to make a concession. We welcomed the decision to refund VAT to Motability in respect of its purchases of cars for disabled people. The Minister of State seems to take satisfaction from that decision. It was welcomed on both sides of the House, but it was not all that Motability asked. VAT will still be applied to the leasing of a car to a disabled person.
      The decision to refund VAT on the purchase of cars by Motability is a step forward, but I emphasise that the claim was for VAT to be removed from all the operations of Motability. VAT was being paid twice by Motability. First, on the purchase of its vehicles, and secondly on the leasing of them.
      None of us should underestimate the gravity for disabled people of the decision taken by Motability to cease trading after the Budget. Recently I asked the Chancellor of the Exchequer how much he would receive back in taxation of various kinds from the recipients of the mobility allowance who leased cars from Motability. I asked first about car tax, secondly about VAT on the purchase of a car by the lessor, thirdly about value added tax on the leasing rental, and fourthly about the excise duty and the value added tax on petrol, assuming a usage of 150 gallons a year. Lastly, I asked about income tax on the mobility allowance.
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      Even allowing for the effect of the Government's decision to refund VAT paid by Motability on the purchase of its cars, the reply I received shows that many clients of Motability will still pay back to the Treasury £358 of their mobility allowance of £520 a year. I hope that that convinces anyone who is in doubt that any further help that can be given to Motability, and to the disabled people that it exists to help, will not be excessive.
      The reply to my parliamentary question came yesterday from the Minister of State, Treasury. It was a reply that flouted, in the most flagrant way, a clear and important decision of this House. My question was tabled, for ordinary written answer, on 14 June. Thus it took the Minister of State nearly three weeks to reply. The Select Committee on Parliamentary Questions said, in paragraph 28 of its report of 17 July 1972:
      "Your Committee consider that Ministers should endeavour to answer ordinary written Questions within a working week of their being tabled, and in any case provide a holding answer within that period."
      On 18 December 1972, on a motion of the present Secretary of State for Employment, then the Leader of the House, it was resolved:
      "That this House doth agree with the Select Committee on Parliamentary Questions … in the recommendation contained in paragraph … 28 of their Report."
      The Minister of State gave me neither a holding answer nor an answer of any kind for nearly three weeks. In so doing, he flouted not only a recommendation of a Select Committee but also a clear resolution of the House which was, as I have said, tabled by his own right hon. Friend the Secretary of State for Employment.
      My hon. Friends have referred to this inexcusable delay as outrageous. I am sure that I speak on behalf of right hon. and hon. Members on both sides of the Committee when I say that this is a House of Commons matter and that the behaviour of Treasury Ministers was just not good enough. It is a very serious matter.
      Mr. A. P. Costain: Can the right hon. Gentleman put his hand on his heart and say that when he was a Minister he always replied

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      within the time specified? I have not got the facts before me, but I well remember an occasion when he took longer than that.
      Mr. Morris: If the hon. Member can quote an example of any of my right hon. or hon. Friends taking three weeks without giving a holding reply, we shall be glad to make the kind of apology for which we are asking in this debate. The hon. Member has a great deal of experience of the House and he knows that I am speaking of an important House of Commons matter. He knows that I am not speaking in any party sense when I say that Treasury Ministers should not treat right hon. or hon. Members in this way.
      This is a very serious matter which amounts almost to a contempt of procedures that were considered carefully by the Select Committee and subsequently approved by the House. I trust that not only will the Minister of State apologise to the House but that all other Ministers will be told by the Prime Minister to take note of what has happened in this case. I hope that the Prime Minister will also make sure that a resolution of this House is never flouted so outrageously again.
      Will the Minister of State say whether the concession made to Motability to refund all VAT on the purchase of a car by Motability will apply to cars bought by that organisation for its proposed hire-purchase scheme? The reply to that will be of great importance both to Motability and to large numbers of disabled people.
      Some right hon. and hon. Members will think that the effect of VAT on disabled people will be confined solely to their mobility. Mavis Hyman undertook a study of the cost of disabled living, and I have used this for the purpose of calculating the amount of VAT paid by disabled people in meeting the extra costs of disabled living. I shall quote only two examples from my findings.
      The first concerns a 63-year old man, a double amputee, living with his wife in their owner-occupied home. I find that their total VAT bill simply on the additional costs imposed by disability will now be £170 a year. The second case is of a 42-year old woman teacher suffering from myasthenia gravis who lives with her mother and a friend. The
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      disabled woman and her friend own the house jointly. In that case the VAT bill simply on the additional costs imposed by disability will now be £250 a year. Therefore disabled people can very well do without the extra costs that have been imposed by the increases in value added tax in the Budget.
      There has been reference to what was done by the then Opposition when we were the Government, but I take some pride in the achievements of my Government in improving the mobility of severely disabled people. In 1973–74, expenditure on outdoor mobility for disabled people was £11·2 million. By the current year, the estimated expenditure will be £90 million. That figure is based on policy decisions announced before the previous Government left office.
      By 1980–81, again on the basis of policy decisions taken before the last Labour Government left office, expenditure on mobility for the disabled will be £98 million. I do not say that that is enough. Many hon. Members on both sides of the House would have liked faster progress in this respect.
      There has not normally in our debates been a great deal of party animus. I hope that hon. and right hon. Members on the Conservative Benches will consider our amendment sympathetically. If carried, it will give great happiness to many disabled people. Some hon. Members may think that it is very wide ranging in effect. The effects of the swingeing increase in VAT are also extremely wide ranging on disabled people. Therefore, I commend the amendment to the Committee as an attempt to improve the lives of disabled people.
      9.30 p.m.
      Dr. Oonagh McDonald: I wish to speak to amendment No. 40, standing in my name. The amendment has only very recently become necessary in view of a change by Customs and Excise in the interpretation of the rules concerning VAT. It appears that Customs and Excise has since April approached a number of local authorities—and no doubt expects to approach all of them—with a view to suggesting that some of the activities of youth clubs and youth and adult centres should be included in the councils' registration for VAT. This has already happened in Essex and affects

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      youth clubs and youth centres in my constituency.
      The problem is twofold. First, youth clubs were formerly exempt from VAT and were not counted as part of the councils' registration for those purposes, because all their activities counted as educational activities and as such were not subject to VAT. But youth clubs engage in sports, in the provision of sports facilities, in providing discos or dances, in organising jumble sales to fund some of their activities, and in providing coffee bars and canteens. The Customs and Excise has suddenly cast its beady eyes upon these activities and decided to regard them as subject to VAT. The result is to increase the cost of membership of a youth club for young people, at a time when many young people will be facing increasing unemployment and will find it difficult to meet the cost involved in belonging to a youth club, and also precisely at a time when they need to be engaging in activities of this sort.
      From what Conservative Members have said, particularly when in opposition, I should have thought that this was precisely the kind of constructive activity that they would wish to support for young people. Yet these measures—and in particular the increased cost of VAT following the Budget proposals—will make it very much more difficult for young people to join youth clubs and to participate fully in all the activities offered there. Not only has VAT been imposed on them, but now the tax has been virtually doubled by the Government, whose other actions will increase unemployment among young people and curtail their funds available for activities of this kind.
      A second effect has been to increase the administrative burden on wardens and their clerical assistants and staff at youth clubs. The Government believe that one of the reasons for which they were elected to office was that they attacked bureaucracy. If the Government fail to accept my amendment they will be imposing bureaucracy quite unnecessarily on groups of people who are not really equipped to deal with VAT, and who will be distracted from the work for which they were appointed.
      Youth clubs are finding that they suddenly have to deal with all the paper
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      work involved in VAT, and this at a time when their clerical staff have already been cut back to a minimum. They are not trained or equipped to deal with VAT. The amounts of goods and the sums of money involved are often quite trifling. Wardens of youth clubs are also finding that they have to do this work, and are having to give up the work for which they have been appointed and for which they are paid, namely, caring for the young people who attend their youth clubs and youth centres.
      I ask the Government to reconsider the new interpretation of the rules which Customs and Excise has made, and to ensure that the wardens of youth clubs will have all their time free to carry out their task of looking after the young people. In an area such as Thurrock these activities are desperately needed. I ask the Government to look sympathetically at my amendment so that the cost of joining a youth club and engaging fully in its activities will be reduced for young people this year and in coming years.
      Mr. Geoffrey Dodsworth: The tenor of this debate makes clear the wide range of human emotions and concern about the effects of tax changes of any nature. The right hon. Member for Manchester, Wythenshawe (Mr. Morris) made a very moving and personal appeal, drawing on his past experience, which clearly showed his deep concern. He is respected on all sides of the House for his constructive contributions on matters of that nature.
      In this group of amendments, one finds amendments referring to the disabled, the National Health Service, charities, youth hostels, mobility allowance, and youth clubs. All these make it clear that we have a difficulty in deciding on exemptions. It reminds me of a very early debate in which I took part. I think I was aged 8 years. The question was put: where should the line be drawn? That is exactly what this debate is about. It is about where the line should be drawn, if it is drawn at all.
      On each side of a decided line, there will always be an area of friction, discontent and anomaly. This debate underlines these difficulties only too clearly. But that does not mean that we should have laws which are in doubt, especially tax laws.

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      I think I am right in saying that if our present VAT were to be applied over the whole range of consumer expenditure, we should have an average rate of tax of 8 per cent. instead of 15 per cent. That illustrates, perhaps, the effect of ranges of exemptions. There must be an obligation on the Treasury to say that there has to be a certain yield from a particular tax. In the past I have sought to prove cases for areas of exemption. However, if one seeks to extend areas of exemption, it follows necessarily that the yield of the particular tax is likely to change and that that tax revenue will have to come from elsewhere. Alternatively, if one increases the areas of exemption, or if it is suggested that there should be more than one rate, one has to collect some of the tax in a different way from other people.
      We have debated the economic choices which are being made between direct taxes and indirect taxes. If one increases the range of exemptions from VAT, one is merely saying that the tax burden will be transferred into another area.
      I understand fully the desire to see justice between particular sectors of interest and activity. Indeed, the past record of the Treasury is clear. It goes rather like the old jingle—this year, next year, some time, never. It is pretty well always never, because there is the need to maintain a clear demarcation line on how taxes should be drawn. What becomes apparent is the need for a clearly defined set of rules on how this matter should be reviewed. That is a matter to which we should address ourselves in the future.
      In debates of this nature we are accustomed to the detailed discussion of particular matters. That is proper, and it will no doubt continue. However, it may be helpful to review the rules on how decisions on these matters are arrived at. There should be a review of VAT categories. We have to consider our relationship with the rest of Europe. It is clear that there are matters which must be taken into account in enlarging the areas of exemptions from VAT.
      Mr. Rooker: We are actually in the middle of reviewing the imposition of VAT and deciding where the line should be drawn. If the hon. Member for Hertfordshire, South-West (Mr. Dodsworth)
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      supports the Opposition tonight, next week he can join us and get the money by stopping the massive tax handouts to the well-off that have been granted by his Government.
      Mr. Dodsworth: I am obliged to the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I listened to his special pleading earlier in the debate, and I congratulate him on the case that he put forward on behalf of the interest he represented. I am seeking to point out that I think that this must be done on a wider and more rational set of views rather than by individuals jostling for position between one set of pleading and another.
      I recognise the difficulty that that may present to Ministers, but I am suggesting that it may be better done on a more long-term basis with a proper review procedure. I am quite sure that we must look to the future operation of VAT. I personally applaud the actions of the Government in recognising the need to encourage wealth creation, and I believe that this is part of that process.
      This debate is designed to draw attention to the needs of special interests, and I welcome that. But I recognise—as I think all right hon. and hon. Members should—that it is not desirable to implement special exemptions without paying proper regard to the knock-on consequences of such a decision.
      Mr. Andrew F. Bennett: I support most of the points made by my hon. Friends, particularly those in relation to charities and the disabled.
      I want to draw attention to amendment No. 13, which is concerned with the Youth Hostels Association. The YHA has made representations to Ministers over a long time to the effect that the imposition of VAT has been unfair and rather harsh on it. The association has on many occasions sought concessions which would make the operation of its hostels easier.
      The imposition of purchase tax caused no problems to the YHA, but once VAT was introduced it presented problems, similar to those probably presented to the small business man. Each hostel must be run by a warden who has the responsibility of administering the hostel and keeping its accounts. That task was made considerably more difficult with the

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      imposition of VAT, yet the total turnover of many youth hostels is very small. Therefore, VAT produced many administrative burdens for the YHA and caused it a great deal of concern.
      One complication which arises is the provision of overnight accommodation and meals. If meals are consumed in the hostel, they are subject to VAT and the cost of those meals had to be increased recently to take into account the higher rate of VAT. If the meal is taken out as a packed lunch, it is not subject to VAT. When the bread is taken into the hostel and the making up of the meals is begun, there are complications in working out which part of the food is to be consumed on the premises and which is to be taken out. These problems have always existed because of the type of tax that was imposed, but they have been made worse by the VAT increase to 15 per cent.
      Just under 50 per cent. of the membership of the YHA is made up of people under 21. If we were to look at the number of nights people stay in youth hostels, we would probably find that the younger membership stays more nights than the older membership.
      It may be true that five or six years ago, when VAT was introduced, one could argue that the youth of this country who had left school and started work were amongst the most affluent citizens, but that is no longer true. The number of young people who are unemployed and can be said to have too much leisure but not enough money has increased, and it seems to me that this enhances the case for youth hostels catering for these young people receiving some concession.
      It is worth remembering that the YHA grew rapidly during the 1930s, when there was a period of considerable youth unemployment and many problems. The popularity of the use of the countryside has grown steadily ever since, but in recent years the YHA has not been able to benefit quite so much, and many young people now prefer to rough it in the countryside rather than to take advantage of the YHA.
      9.45 p.m.
      Part of the reason is the increasing expense and charges incurred by the YHA. Therefore, this extra increase in charges due to VAT is one which the
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      YHA should not have to bear. Of course, the YHA encourages an attractive use of leisure, through people walking, cycling and so on. Many of these people have limited means. If they have to pay extra charges as a result of increased VAT, I doubt whether many of them will stop fewer nights. It is much more likely that they will skimp on other things.
      I think particularly of mountain walking. The Committee ought to be concerned about mountain safety, because there is a lot of evidence that young people still go out ill equipped partly because they cannot afford the increasingly high cost of equipment. If their accommodation were a little cheaper, they might have a little more money to spend on being well equipped, which might well reduce the number of mountain accidents, which can prove to be extremely expensive in terms of the resources that the State has to provide in getting people off mountains by the use of Army or RAF helicopters. Purely from the point of view of mountain safety, there ought to be some consideration given to making sure that we do not put undue financial pressure on the YHA.
      My main point is that the YHA, as a charity, does a great deal of work for young people. It encourages them to have a care and respect for the countryside as well as a care and respect for a useful means of leisure. Instead of penalising the YHA by increasing VAT, I believe that we ought to be looking at ways in which it can be exempted from it.
      Mr. Robert C. Brown: I rise to support amendment no. 17. I want to quote a letter from a disabled constituent of mine, because I think that he makes his case far more eloquently than I could. Lest anyone should accuse me of quoting selectively, let me assure the Committee that Mr. Ferguson, whose letter I quote, is one of my most persistent correspondents. I can assure the Committee that he gave me more than my fair share of stick when I sat on the Treasury Bench. He writes to say:
      "I will await, with interest, the reply from the Secretary of State for Energy but frankly I am not expecting much understanding from that quarter. Mr. Howell's big idea to solve the shortage seems to be rationing by price—not a good idea for the disabled who must use their own transport to get to work, etc."

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      I am quite sure that all my right hon. and hon. Friends will agree that it is not a good idea for anyone, certainly not those at the lower end of the incomes scale, to be rationed by price. My constituent goes on to say:
      "I would like to say a few words about the Budget however, and say that it was a disastrous affair for the disabled motorist. The further increase in the price of petrol, and the increase in the VAT rate to 15 per cent., were body blows indeed. I know we were promised £2 increase in the Mobility Allowance in the autumn. After taxation this may be worth about £1·30 to £1·40—but as petrol has risen now about 35p a gallon this year"—
      incidentally, this letter is now nearly three weeks old, so the 35p a gallon increase is well out of date—
      "we are having to pay somewhere about £2·50 a week extra in petrol costs alone".
      I am sure that the Committee will agree that it is absolutely disastrous that the disabled should have such swingeing increases in their necessary travel costs imposed upon them. My constituent goes on:
      "It seems to me that the rise of £2 a week may be based in some way on the increased cost of living, as are the other pension increases, but surely a mobility allowance should be based on the cost of mobility, which must have risen more than the ordinary price index in the last few years".
      Here again, I am sure that no one will disagree, because it is a valid point. He adds:
      "I was hoping to change my car some time soon but the increase in VAT has put this idea further away. Surely it should be possible to give a concession on car purchase for the disabled in say the special car tax, which appears to be a tax on a tax. The original justification for this tax was that when VAT was made at 8 per cent., and the previous purchase tax on cars had been approximately 15 per cent., the difference of 7 per cent. was then made up by the special car tax so that the price of cars would not go down. Now that the Government in their wisdom have made the VAT rate 15 per cent., surely the special car tax should be scrapped, especially so for the disabled. A reliable car is a necessity for them, but what with ordinary price increases of 5 per cent. every three months or so and now this monstrous tax increase, it is a terrific job to save enough to buy a new car. To sum up, therefore, I think that mobility allowance should either be untaxed or based on the cost of mobility, and at least some thought should be given to a concession on the large amount of tax to be paid in the purchase of a car—approximately £600 tax on a £3,000 average car."
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      My constituent's point is fair. The concession on the purchase of a car through Motability applies only to those under that scheme. People such as my constituent who have always bought a car direct will get no concession. If those in the Treasury team have hearts, they must think again about that.
      The Minister of State may not be impressed by my appeal on behalf of the disabled. As a fair minded person, I must say that amendment No. 17 is wide in scope and I should be surprised if the Government accepted it. Nevertheless, I hope that before Report the Treasury will have considered the suggestion of my constituent and will bring forward proposals to ease the lot of Mr. Ferguson and thousands of other disabled people who are worried sick by the additional burdens placed on them by this iniquitous Finance Bill. I appeal to the Treasury earnestly to consider the problem so that on Report we can consider proposals to alleviate it.
      On amendment No. 3, which was moved so eloquently by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), at least a registered charity has the advantage of getting the full benefit plus the tax that would have been paid on that sum in a donation by covenant. I am concerned about the many people in my constituency who raise funds for special pieces of equipment for hospitals in Newcastle. No one is more generous than the members of working men's clubs. If there is an appeal for a body scanner or breast scanner at the local hospital, these clubs raise many thousands of pounds. It is iniquitous that the voluntary efforts of such individuals are being penalised in that they have to find £7 more on every £100 to buy specialised equipment. It is sad that this Government should discourage that kind of effort.
      Mr. Iain Mills: I came into the Chamber tonight because I considered that the amendments deserved some support. I still consider that the basic philosophy behind them deserves some support. However, what offends me is that so many Labour Members have whipped themselves into a state of false frenzy and indignation. They are trying to suggest that this Budget invented VAT. I remind them of the views of the

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      disabled in my constituency about the right hon. Gentleman who actually stopped the manufacture of the trike. I also remind them that the last Government taxed mobility allowances and charged VAT on all the things that they are now complaining about.
      I shall be very brief because the real problem before us tonight is not the amendments or the request that VAT should be continued at 8 per cent. but that on all these meritorious items there should be zero rating. If we look on these amendments as a real way of correcting wrongs, we should consider the discrimination that is created by VAT. What about the many women who write to me about the iniquitous VAT on women's sanitary products? What about the many housewives and hundreds of thousands of working people who do not believe that VAT should be put on washing powder and other similar items? Can we really take out, for political reasons, a few apparently heart-rending items and put them forward as genuine amendments?
      If these amendments were to zero rate these items and to review a lot of the problems caused to the disabled and the working people of this country, they would have my support. As it is, they are highly unsatisfactory.
      Surely what charities need is not the move suggested here, but zero rating and a tax allocation system such as has been tried in the United States. Also there should be reduced restrictions and covenants. Are we not just fiddling and playing when the real measures that are needed are far more fundamental? We need fundamental changes to both the economic operation of charities and the tax implications upon them. We need fundamental changes to the costs of mobility. The removal of the trikes, for example, meant a great deal to many seriously disabled people and young people particularly, for whom Motability is not really viable.
      If these amendments were to zero rate for the disabled or for charities, I would support them. I suggest that they do not go far enough, and that they have been put down for the wrong reasons.
      The Second Deputy Chairman (Mr. Richard Crawshaw): Before I call the
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      next speaker, I wish to tell the Committee that the Government do not wish to move at 10 o'clock the motion standing on the Order Paper. Therefore, there is no need for me at 10 o'clock to interrupt the proceedings of the Committee by moving it from the Chair. We shall continue straight through.
      10 pm
      Mr. Dalyell: If the hon. Member for Meriden (Mr. Mills) had been present for any of the last four Finance Bills and had heard some of the speeches made by his Conservative colleagues, he might well have taken a different view. However, he was not here in earlier years and he may be forgiven.
      I wish to ask a factual question of the Minister of State. What advice has been given on the sheer mechanics of introducing a differential rate of VAT? In these discussions we often forget the sheer difficulty, first, of collection and, secondly, of definition.
      My hon. Friend the Member for Stockport, North (Mr. Bennett) asked whether a packed lunch was subject to tax. Surely when we get down to discussing whether packed lunches attract tax we are returning to the kind of anomalies which were thrown up by the late Sir Gerald Nabarro in his battles against purchase tax. There are great problems of definition. Although Sir Gerald was my political opponent, I was an admirer of his ribaldry and persistence in seeking to remedy a wholly unsatisfactory position. Perhaps on VAT we are returning to the same kind of anomalies as attached to purchase tax. One remembers the occasions on television some years ago when the late Alistair Sim dealt with definitions of an archaic nature.
      The truth is that the system is riddled with anomalies which take up a great deal of time and which are a gift to the lawyers. The VAT tax set-up is continuing to drive people around the proverbial twist. Many accountants are at the end of their tether. One wonders whether there is a better way of allowing money to be allocated for charitable purposes. If people are aware that money given to charity will be taxed, the charities themselves may suffer fundamentally in the amounts that they raise.
      This brings me to an interrelated matter which relates to the definition of

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      a charity. Is the Treasury setting up any kind of inquiry into the definition of what is and what is not a charity? I make it a rule never to say anything in this Chamber that I am not prepared to say outside. Although there are some reasons for privilege, one is careful not to abuse it. I do not propose to name any particular organisation which is defined as a charity, but there are certain organisations which attract the benefit of a charity about which hon. Members in all parts of the Committee must have some qualms. I see that the Under-Secretary of State for Health and Social Security is nodding in agreement.
      It brings the whole system into disrepute if we allow charitable benefits to accrue to certain organisations, whose names I am not prepared to give, because if one goes outside the House one finds oneself involved in the courts in endless arguments. Unless one has the whole Civil Service machinery at one's disposal, it is difficult to know the exact facts. The subject has to be examined.
      It would be unrealistic to ask the Minister for an off-the-cuff reply and I shall not do so. However, is the Minister prepared to make a statement on Report promising an inquiry inside the Treasury or a public inquiry? I am loath to ask for a public inquiry, but as a basis for factual information it would assist. It may be that nothing can be done before next year's Finance Bill, but I shall look forward to the Minister's comments and I hope that they will be in the spirit in which I have put the questions.
      Mr. Eric S. Heffer: I shall not detain the Committee for long, but I should like to address some remarks to the hon. Member for Wallasey (Mrs. Chalker). I have listened to the many pleas made by the hon. Lady on behalf of those for whom she and I are concerned, the disabled and others. She has made brilliant and eloquent speeches on the subject and I have always regarded her as one of the more enlightened members of the Conservative Party. There are not many, but there are one or two, and the hon. Lady is among that number. However, I assume that she will vote with her Government for the increase of VAT from 8 per cent. to 15 per cent. and I assume that she will not agree to
      1236
      the various amendments that have been put forward.
      I wish sometimes that Conservative Members would have the same sort of courage, honesty and determination as we so-called Labour rebels have on specific issues about which we feel deeply and strongly. My hon. Friends and I are often prepared to take a stand when we do not agree with our Front Bench. I should like to see the day when Conservative Members make such a stand on issues of this sort. Unfortunately, they seem never to do so. Therefore, the hon. Member for Wallasey will vote tonight with her Government and not support the sort of ideas that she has put forward so eloquently in the past.
      We are discussing a basic change in the direction of taxation. Most Labour Members are not in favour of high indirect taxation. It is a pernicious taxation which affects the lower paid, the working people and the poor much more than it affects those who are well-heeled and rich. We believe in direct taxation. Those who can afford to pay should pay. My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) was cheered when he intervened to say that that is what it is all about—that is what we are discussing. I see no reason why Conservative Members should not support some of the amendments that have been put forward.
      All over the country working people in factories collect money to help raise cash to purchase items such as kidney machines to help hospitals and the sick.
      Mr. Anthony Fell: Not only working people.
      Mr. Heffer: Yes, working people. Those people whom Conservative Members are so keen to attack when they strike collect thousands of pounds for hospitals and the sick. Therefore, if Conservative Members want to ensure that workers in factories continue to help in that way they should support the amendments. I fear that they will not.
      I have one slight reservation about amendment No. 4, which is similar to amendment No. 19. My hon. Friend the Member for West Lothian (Mr. Dalyell) talked about some charitable organisations that should not be so regarded. I

      1237
      am not sure what he was talking about, because he was not prepared to name them. I shall name some organisations that should not be charitable organisations—the public schools. I have never been in favour of exemptions for them. I have never considered them to be charitable organisations. I hope that if my hon. Friends vote for amendment No. 4 they will do so with that reservation.
      I hope that Conservative hon. Members will be more than sympathetic to the amendments. We shall finish this sitting a little earlier than expected if the Government accept the amendments and we do not need to vote on them.
      Mr. Dennis Canavan: I should like to speak briefly to amendment No. 17, which was supported by my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris). I begin by declaring an interest, in that I am the parliamentary spokesman for the Scottish committee on mobility for the disabled. It is not a post for which I am paid, but it is one that I am very honoured to hold.
      I know from my frequent meetings and correspondence with disabled people in Scotland and elsewhere that there was a general welcome for the Motability scheme, introduced by the Labour Government in conjunction with the mobility allowance, which they also introduced. Now the savage increase to 15 per cent. in VAT will mean that Motability may cease trading unless something is done by the Treasury, or by the possibly more enlightened Ministers in the Department of Health and Social Security, even at this late stage.
      When the Budget announcement of an increase in VAT to 15 per cent. was made there were gasps of astonishment, not only on the Opposition Benches but throughout the country. Even though people had realised that an increase in VAT was almost inevitable, to judge from some of the Conservatives' preelection announcements, nobody even in his worst nightmares thought that it would be as much as 15 per cent.
      We rightly described the increase as a savage attack on the living standards of many people. We said that those who would offer most were those most in
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      need. Here we have the proof, because we see the increase being levied on the disabled. The Tory Party has reached its nadir when it is taxing the disabled in order to pay for massive income tax handouts to its rich friends. That is its philosophy—taking most from those most in need in order to give it to those who are least in need. It is the very opposite of the kind of fair society that we on the Labour Benches have been trying to build.
      Mr. Barry Henderson: I note that the hon. Gentleman is particularly addressing himself to amendment No. 17, but he is talking about discrimination, and I hope that he has drawn to the attention of his right hon. and hon. Friends who tabled other amendments that we are debating at the same time that they are discriminatory in favour of English charities and would not apply to charities in Scotland.
      10.15 p.m.
      Mr. Canavan: That is a fair point, although it was not a point that I particularly intended to address myself to. It does not matter to me whether disabled people are in Scotland, England or anywhere else. As a legislature, this place should be doing its best to look after all the disabled and see that, despite the economic difficulties, the most resources go to those most in need. Here we have a typical example of the Government's taking most from those most in need in order to give income tax handouts to their rich friends.
      This is combined with other inflationary aspects of the Budget. There were reports in the House yesterday that petrol in some areas was already £1·40 a gallon. Those disabled people, particularly in rural areas, who are fortunate enough to have a motor car, must pay such prices to these pirates. The Tory Government are not only refusing to intervene to bring prices down; they are actually intervening to increase prices. Levying this extra VAT on top of the petrol duty in the Budget will be very inflationary and will have a detrimental effect on the interests of the disabled.
      Combined with the public expenditure cuts that will affect services to the disabled, this sort of measure will be very regressive. I am surprised that the right hon. Member for Daventry (Mr. Prentice) is absent. Where is he? He is the great

      1239
      man of principle who was elected on a manifesto in 1974 which he abandoned to cross the Floor of the House of Commons in order to get himself appointed to the Government. He gets himself appointed as the Minister responsible for the disabled. When we are discussing the first attack by his Government on the disabled he is conspicuous by his absence. It will no doubt be left to his hon. Friend, his former opponent, the hon. Member for Wallasey (Mrs. Chalker) to put up a defence for him explaining his absence and his radical change of policy.
      Like my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) I recall the hon. Member for Wallasey, during his lifetime of the last Parliament almost with tears in her eyes, defending the needs and interests of the disabled. She pleaded for amendments similar in some respects
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      to the amendments before us tonight. Let her prove that those tears were not crocodile tears by joining us in the Lobby tonight and voting with people who are genuinely interested in the needs of the disabled and others most in need.
      I accept that the Minister, in his reply, may say that the wording of amendment No. 17 is imperfect. As worded, it would mean that any goods or services provided to anyone receiving mobility allowance would be exempt from VAT. That was not perhaps in the mind of the sponsors of the amendment. But the spirit of the amendment is good and sincere. I hope that the Minister will say that, although the Governmnt may not be able to accept the wording of the amendment, they will propose an appropriate amendment on Report.
      Mr. Peter Rees: I rise with a certain diffidence. I feel as if I am intercepting the blandishments offered to my hon. Friend the Member for Wallasey (Mrs. Chalker) by the hon. Members for Liverpool, Walton (Mr. Heffer) and for West Stirlingshire (Mr. Canavan). I hope, however, that I can do my poor best to answer points made in the debate. We are debating an important series of amendments, moved with considerable eloquence and great warmth. They raise important issues.
      If at the conclusion of the debate I invite hon. Members to reject the amendment perhaps, as one hon. Member said, I am a fool and not a wise man and cannot change my mind in spite of powerful arguments. However, it is not because I have a hard heart. It is because certain general principles are at stake. There is always a piquancy in such debates, particularly after a change of Government. The arguments that I shall advance would with equal if not greater facility have been expressed by the Labour Party spokesman had the situation been reversed.
      I shall begin by canvassing the general considerations. We appreciate that the amendments are designed to ease the position of many worthy causes. There is no monopoly of compassion on the Opposition side of the Committee in such a debate.
      We must take into account some general considerations when discussing a broadly based tax such as VAT. I am certain that those considerations led the previous Administration to resist similar suggestions put to them in the past five years.
      Perhaps because of the delicacy of the Opposition's situation so soon after a general election the hon. Member for Birmingham, Perry Barr (Mr. Rooker) was invited by his right hon. Friends to open the debate. I congratulate him on his first appearance at the Dispatch Box.
      Mr. Rooker: It is my third.
      Mr. Rees: I apologise. I had not appreciated that the hon. Gentleman had appeared at the Dispatch Box before. I think that this is his first appearance at that Box in a fiscal debate. I have often listened to him and admired his eloquence.
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      There were flashes of the hon. Gentleman's old fire, particularly when he referred to tax handouts to the rich. I have no doubt that when he is let off the leash in debates on more general matters we shall again see the old fire which characterised his contributions to our debates.
      If we accept the amendments, we shall seriously erode the tax base of VAT. It would then have a narrower base and there would be several consequences. I appreciate that the Opposition are not enamoured of the cuts in direct taxation and that there is a fundamental divide between us, but in order to balance the books we are compelled to raise the rates of VAT on a narrower base.
      With his customary clarity, the hon. Member for West Lothian (Mr. Dalyell) said that the problems of definition which the late Sir Gerald Nabarro exposed with devastating wit and candour would arise. I have no doubt that they would be exposed with equal precision, wit and force by the hon. Member for West Lothian. That would be an additional difficulty in the way of any Administration, whether Labour or Conservative, accepting such amendments.
      Mr. Dalyell: Many of us are curious to know what has happened to Lord Goodman's report on the definition of charities and the report of the Expenditure Committee, based on the Sub-Committee under the chairmanship of the hon. Member for Plymouth, Drake (Miss Fookes), on which my hon. Friend the Member for Fife, Central (Mr. Hamilton) played an active part and which dealt with the same subject. They seem to have disappeared.
      Mr. Rees: That question should have been addressed to the hon. Member's right hon. Friends. I have equipped myself and read the Goodman report. I am grateful for the concern of the hon. Member for West Stirlingshire as to my self-defence. I hope that I am able to undertake that even against his punishing personal attacks. I always quail when I see the hon. Gentleman in his seat because I know that I shall have a rough ride. However, I wonder whether the hon. Gentleman's right hon. Friends have read the Goodman report. It was published in 1976. We might have asked

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      the previous Administration what they did about that report. We shall give most careful consideration to the report, which raises a host of issues, not only on fiscal matters.
      The hon. Member for West Lothian asked what were my views about the definition of charities. I am not certain that it is for me, with my present responsibilities, to give him a view because the issue is somewhat wider than that. But, drawing on my previous experience as a member of the Bar, may I remind him that this problem was first tackled by a statute of Queen Elizabeth I. There have been subsequent cases as late as 1893—for example, Pemsle's case—endeavouring to elucidate this difficult point. The problems of definition in this difficult context have eluded many Administrations and I am not overoptimistic that they will not elude this one.
      But we shall look at the Goodman report in its various facets. I see the right hon. Member for Manchester, Wythenshawe (Mr. Morris) moving uneasily in his seat. Perhaps he feels that he might have played a more positive role in the matter. We shall look at the report, but it covers a wider range of responsibilities than those for which I answer tonight. Therefore, I wonder whether we should isolate and debate one aspect of it, namely, the imposition of VAT on charities and bring it to a conclusion tonight. Perhaps this Committee, and indeed the whole House, might be better advised to debate it in a broader context. The right hon. Member for Salford, West (Mr. Orme) obviously has a different view.
      I come back to the third general consideration that leads me to invite the Committee, with a certain regret, to reject these amendments. I know the constraints on the Opposition. A Ways and Means resolution perhaps does not permit them to put down amendments seeking to zero-rate these particular activities, I appreciate that. But the arguments they have advanced all concern zero rating or exemption. That is the substance of them and I think I would be entitled to ask, sotto voce perhaps, what the previous Administration did about it during the past five years. However, I do not pursue that theme.
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      If we were to accept these amendments, the objective of a unified rate of VAT would elude us. The hon. Member for West Lothian asked me what advice we had received about the practicability or otherwise of having various rates. I will not give him the details, but the tenor of that advice was that it would complicate the administration of VAT enormously, not only for Customs and Excise but also for registered traders. All the representations, as my hon. Friends, if not right hon. and hon. Gentlemen opposite, will recall, have been from small businesses asking that we simplify the administration of VAT by establishing a unified rate. That too is a general consideration which leads me to invite the Committee to reject these amendments. Indeed, dare I remind the hon. Member for Perry Barr that on 21 February 1978, when he was in one of his more reflective moods, he admitted there was a case for a single rate.
      Mr. Rooker: I said a rate of 10 per cent.
      Mr. Rees: We can argue about the rate, but the general considerations and the administrative point which no doubt led the hon. Gentleman to come to that tentative conclusion—I do not say that it was a hard and fast conclusion—I suspect led the hon. Member for West Lothian to the same conclusion. They have also led us, with a certain regret and reluctance, to invite the Committee to reject these amendments.
      The hon. Member for Perry Barr, in his extremely eloquent intervention when moving amendment No. 3, raised the question of leagues of friends. His hon. Friend the Member for Walton broadened the question, saying that many members of the working class contributed to all kinds of funds to provide equipment for hospitals. I hope that we shall not encounter a class issue in this debate. There cannot be one right hon. or hon. Gentleman who does not have a league of friends in his or her constituency. We all do our best to support them in our constituencies and in our ministerial roles.
      The hon. Member for Perry Barr has perhaps got the problem a little out of perspective. As he will recall, reliefs were to be found in item 3 of group 16 in schedule 4 of the Finance Act 1972,

      1245
      as subsequently amended, of which leagues of friends or comparable organisations can take advantage. They can, by careful arrangement with the National Health Service, buy zero-rated goods and donate them to the Health Service or to private hospitals. The hon. Gentleman raised the specific case of orthopaedic beds. The best advice I have received is that orthopaedic beds are and always have been zero rated. We must therefore keep this problem in perspective.
      Mr. Rooker: What about wheelchairs?
      Mr. Rees: Even probably wheelchairs, too.
      Mr. Rooker: They are on the list.
      10.30 p.m.
      Mr. Rees: Yes.
      The hon. Member also raised some rather emotive points about what the Department of Health and Social Security had done for voluntary organisations. The Department has this year promised to increase the grants to voluntary organisations, and, as the hon. Gentleman may recall, the budget for voluntary organisations was underspent in the last year by £800,000 in this respect. We are therefore not being ungenerous in that direction either.
      My hon. Friend the Member for Woking (Mr. Onslow) read a very important and poignant letter from one of his constituents. We have taken full account of that. He will recall that the mobility allowance has been raised by 20 per cent. to £12, and he will recall, too, what we proposed for the Motability scheme. However, since that issue was touched upon with a wealth of eloquence and example by the right hon. Member for Wythenshawe, I shall come to it in due order.
      My hon. Friend raised the interesting point that we should stimulate charitable donations by tax allowances. I hope that he will allow us to consider that suggestion when we consider the Goodman report and that whole area generally. Obviously it does not arise on the question of VAT, but we have certainly taken the point on board.
      Mr. Onslow: I am most grateful to my hon. and learned Friend and I am encouraged to hear what he says. May I remind him that my constituent in
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      question does not get a mobility allowance and therefore is in a small but important category and is correspondingly more deserving of consideration? If some way can be found of exempting from VAT repairs to wheelchairs, whether or not they are used by people who get mobility allowances, I do not suppose that the skies will fall.
      Mr. Rees: I am sure that, like me, my hon. Friend the Member for Wallasey will take full note of what my hon. Friend has said.
      The hon. Member for Don Valley (Mr. Welsh) appeared to be a little ambivalent in his approach to charities. I was not certain whether his heart was entirely with them. He made the interesting point about the reduction in income tax not favouring charities. That is a matter that we can consider on another occasion—perhaps in our debates on this Bill. I remind him that it was the late Hugh Dalton who first restricted the relief for charitable convenants to income tax at the standard rate. The hon. Member also raised the question of charity shops. I think that this arises on his amendment No. 4 by which he wants to provide relief for any goods or services supplied to or by registered charities. I think that he will accept that charity shops, operating in a purely commercial field, however the net profits will ultimately be applied, are competing with perfectly straightforward commercial organisations. It is worth considering, therefore, whether they should be put in a favoured position in that regard.
      I come now to the right hon. Member for Wythenshawe. I am profoundly sorry that he did not receive as promptly as he would have wished an answer to his question. I have had the position checked. His question was not marked as a priority question, although whether or not it was marked "priority" it deserved the most urgent consideration.
      Mr. Alfred Morris: My point was not that the reply was not given as promptly as I should have liked. The hon. and learned Gentleman was in breach of the finding of a Select Committee, a finding that was endorsed by a resolution moved by his right hon. Friend who is now the Secretary of State for Employment. He flouted, by delaying the reply for nearly three weeks, that finding and that resolution.
      Mr. Rees: I cannot do more than repeat my profound apology. The reason for it was that I had sent back the draft answer—and the right hon. Gentleman, having been in government, will appreciate this—to have all the figures checked again, because I knew the fastidious regard of the right hon. Gentleman for these matters and I wanted to be absolutely certain that the figures were correct. If the right hon. Gentleman is still not satisfied with the position, no doubt, Mr. Crawshaw, you will accept a motion to impeach me from the right hon. Gentleman in due course.
      I come to the right hon. Gentleman's interest in Motability, which is also shared by various of my hon. Friends and Opposition Members, including the hon. Member for West Stirlingshire. I am not certain, though, whether the hon. Member for West Stirlingshire has kept himself quite abreast with the tide of events. I know that he has other matters to occupy him. However, the right hon. Gentleman has been following matters, although it was not entirely apparent until we came to the very end of his intervention that he had appreciated what had happened on this front.
      Motability was, like any other leasing organisation, due to a blocking order that was introduced only recently, in 1977, by the right hon. Gentleman's own Administration—although I appreciate that it has an earlier history than that—not able to set the input tax, the VAT charged on the vehicles which it acquired, against the VAT on the leasing. That is a situation that obtained under the right hon. Gentleman's Administration. I concede at once that the rate of VAT then was only 8 per cent.
      We are acutely aware of, and very sensitive to, the points which Mr. Geoffrey Sterling made. What I hope that the right hon. Gentleman will accept is that we on the Government Benches are as entirely concerned as, if not a little more than, he is and was for Motability. After all, Motability was floated by private enterprise, and what it had to offer was very gratefully accepted—I entirely concede this—by the right hon. Gentleman and his Friends. We were deeply concerned. Also, I remind the Committee that two of the patrons of Motability are my right hon. Friends the Prime Minister and the Secretary of State for Social
      1248
      Services. Therefore, there is no want of concern on the Government Benches.
      Because we appreciated the difficulties in which Motability might be put, we have undertaken—this was made clear by my right hon. Friend the Secretary of State for Social Services—to lay an order very shortly to lift the blocking order as it applies to Motability and similar organisations so that they will be able to set the 15 per cent. VAT charged on the purchase of the cars against the leasing. We understand that that will meet this point fairly and squarely. I shall not claim that it will necessarily improve Motability's position, although some might even say that it would. But there is no question, therefore, of the Budget and this Bill prejudicing Motability.
      I hope that this will reassure the right hon. Gentleman. He seemed to leave the Committee in a little uncertainty, until almost the very end of his speech, as to whether anything had been done. As I have said, the point was made very properly a week or so ago, and we shall be laying the order very shortly.
      Mr. Alfred Morris: I said that the concession that has been made was welcomed but that it does not meet the whole of the claim from Motability. I hope that the hon. and learned Gentleman will not try to underestimate the gravity of the decision by Motability to cease trading because of the increase in VAT and in the minimum lending rate. That was a very grave decision for many disabled people, and the hon. and learned Gentleman must not try to make light of it.
      Mr. Rees: Certainly I do not make light of it. I hope that nothing I have said has indicated that I treat this subject with levity. I treat it completely seriously. That is why I have said that we have undertaken that an order will be laid as shortly as possible.
      The right hon. Gentleman raised a specific point about whether the unblocking order would apply to hire purchase transactions. On the best advice I have received, I understand that the original blocking order never did apply to hire purchase, so there should be no worry on that score. I hope that that reassures the right hon. Gentleman.
      The hon. Member for Thurrock (Dr. McDonald) spoke to an amendment which has special regard to youth clubs.

      1249
      I appreciate that she has very much in mind the various youth clubs which have been found to be under, as it were, the aegis of the Essex county council. She has corresponded with me on this subject. I appreciate that this has created certain difficulties, because had they been treated individually they could have de-registered. I am sure that the hon. Lady will wish to take this matter up with the Essex county council to see whether a more convenient form of organisation can be found. If they can be, as it were, disaggregated they will probably be eligible for deregistration.
      Dr. McDonald: This certainly has applied to youth clubs in the Essex county council area but it applies in other areas also. I understand that Customs and Excise is seeking to interpret the rule in this way so that youth clubs become subject to VAT. This is quite widespread, and I think that the matter should be very carefully considered and that Customs and Excise should withdraw this requirement.
      Mr. Rees: The hon. Lady will, of course, realise that Customs and Excise is bound by the law of the land. If it should unfortunately emerge that any group of youth clubs has to be considered as one group which takes its turnover above the £10,000 a year mark, I appreciate that difficulties will follow. But that point would not be entirely resolved by the hon. Lady's amendment.
      Dare I also remind the hon. Lady that there is a specific exemption for the output of youth clubs, if not for their input? I am sure that the hon. Lady will accept—as I am sure will the whole Committee—that the vast majority of youth clubs are treated individually, are usualy far below the £10,000 a year turnover mark and possibly are not as widely prejudiced as she might suspect.
      I turn briefly to the individual amendments, although I have perhaps touched on them in passing. I hope that I have dealt with amendment No. 3 that was moved so eloquently by the hon. Member for Perry Barr and with the amendment of my hon. Friend the Member for Woking. The hon. Member for Don Valley moved a general amendment—amendment No. 4—to take registered charities totally outside VAT. I do not
      1250
      wish to come between him and his hon. Friend the Member for Walton, but it would have the effect of totally exempting public schools, which may be a matter for domestic debate on the Opposition Benches. I am sure that on reflection the hon. Member for Don Valley will realise that his amendment goes a little wide though there are a number of specific exemptions for charities which I hope do much to ease the position which he outlined with such force.
      The hon. Member for Stockport, North (Mr. Bennett) spoke to amendment No. 13 which covers goods and services supplied to or by youth hostels. He will appreciate that, although youth hostels deal with a rather specialised section of the community and do very good work which we entirely appreciate, they are, in a sense, providing accommodation and are in competition with boarding houses and hotels. [HON. MEMBERS: "Oh".] Hon. Members are apt to use emotive language and perhaps I used language that offended the hon. Member for Stockport, North. I shall try to rephrase it, but it is difficult always to satisfy his fastidious sensibility. It may be that success will elude me tonight.
      If there are administrative burdens on youth hostels, they should have been as apparent when the rate of VAT was 8 per cent. as they are when we propose to raise it to 15 per cent. I make the same point to the hon. Member for Stockport, North as I made to his hon. Friend the Member for Thurrock: if the turnover of youth hostels is less than £10,000 a year—and for most of them it probably will be—they should be outside the VAT net anyhow.
      The right hon. Member for Wythenshawe dealt mainly with Motability, and I hope that I have reassured him on that point. But amendment No. 17, which he was ostensibly moving, was designed to take out of the charge to VAT any supply of goods or services made to any person in receipt of mobility allowance. The right hon. Gentleman will probably realise—as did his hon. Friend the Member for Newcastle upon Tyne, West (Mr. Brown), who perceptively remarked on it—that that probably goes a little wide, and I hope that the Committee will allow me to suggest that the amendment should be rejected on that ground. It would cover a whole range of things such as suits, theatre tickets and catering.
      Mr. Robert C. Brown: It is true that I suggested that it was on the cards that the Minister would invite the Committee to reject amendment No. 17, but I also suggested that he might have a little heart and discuss with the rest of the Treasury team between now and Report what he could do to improve the lot of the disabled.
      Mr. Rees: I take careful note of what the hon. Gentleman says. Constant discussions obviously go on with my hon. Friends in another Department. [Interruption.] I do not think that the hon. Member for West Stirlingshire did himself justice when he made a particularly unpleasant personal attack on a right hon. Gentleman who was not here to defend himself. Perhaps he ought to have given notice to the right hon. Gentleman. I do not want to introduce a note of controversy into the debate, which until now has been good humoured. However, I take note of what the hon. Gentleman said.
      10.45 p.m.
      Mr. Dalyell: Some of us were surprised to hear the Minister say that apparently Treasury Ministers are not responsible for the definition of a charity. Who is responsible? Is it a Home Office responsibility? This is a matter of some importance.
      Mr. Rees: The hon. Gentleman is quite right. It is a matter of considerable importance. I merely said that it was not the exclusive responsibility of the Treasury. Of course, it has considerable fiscal and rating implications. It even has implications with regard to the law on perpetuity. It covers a wide range of Departments. I was merely saying that the task of defining a charity had eluded many previous Administrations. I am sure that in the course of such a short debate the hon. Gentleman did not expect me to proffer a cast iron definition. However, I take his point. I do not shelve any personal responsibility. I merely say that it covers a wider range of responsibilities than mine.
      I took note of what the hon. Gentleman said about various individual charities. It is primarily the responsibility of the Charity Commissioners, at least south of the border, to consider whether a charity that has previously been registered
      1252
      conforms with the definition and is being properly administered.
      It would not be right to detain the Committee further, both on the general grounds that I advanced and on the specific grounds that I advanced when dealing with the individual amendments. It is, therefore, through no want of heart that I invite the Committee to reject these amendments if they are pressed to a Division.
      Mr. Denzil Davies: Perhaps I can briefly go back over some of the amendments. They are designed to show that there has been a substantial increase in the burden of indirect taxation on many bodies which I am sure the Committee would agree are worthy. They are often under considerable pressure for money and often find it difficult to make ends meet. As a result of the Budget and the Finance Bill, their taxation has been increased at a stroke from 8 per cent. to 15 per cent. These amendments are designed to reduce that burden back to 8 per cent.
      As I have said, there is no justification whatever why there should be just one uniform rate once the rate of VAT becomes 15 per cent. Once we have one uniform rate at 15 per cent., we have the problem of bodies such as charities, the leagues of hospital friends and the Youth Hostels Association being put under considerable pressure as a result of this increase in taxation. That is what the amendments are about. They seek a reduction in tax back to the position at which these bodies were taxed before the Chancellor introduced his Budget.
      Perhaps I can go through that list again in order to make quite clear what the Government are doing. My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) moved—[Interruption.] The hon. Member for Staffordshire, South-West (Mr. Cormack) finds this very amusing. We shall soon be debating one of his amendments relating to repairs to historic buildings. That is something which is close to the hon. Gentleman's heart. The league of hospital friends has problems too, as do the YHA and many worthy charities. In fact, they are the same problems about which the hon. Gentleman will be arguing in relation to historic houses.
      Instead of rushing into the decision to double VAT, the Government should

      1253
      have considered these problems. It was only after the effect on the disabled was pointed out and the Motability scheme was suspended that the Government became aware of the problem. The Government rushed into that proposal to raise revenue to provide income tax relief for the better off. It is such bodies as the National Association of Leagues of Hospital Friends and the Youth Hostels Association and the disabled who are paying part of that tax. That is why we tabled the amendments. Treasury Ministers should attempt to meet us in some respects and keep the rate of VAT at its previous level.
      The Minister of State, reading from his brief, said it was a broadly based tax. Of course it is. But once we get beyond the level of 10 per cent. other factors must be considered. There is the effect on the economy as a whole and the effect on charities. The blunt instrument of an overall rate of 15 per cent. VAT is no good, and that is why we moved the amendment.
      These worthy organisations have to cope with a doubling of VAT. When the Tories were in opposition they championed
      voluntary organisations and charities, but, apart from a few speeches from them to the effect that they preferred zero rating and because there is no zero rating they can not support the amendments, there has not been a murmur about charities. That is the sort of hypocritical argument we have come to expect from the Tories in financial debates. When we introduced the 25 per cent. rate of VAT there was still an 8 per cent. lower rate. Once it goes beyond 10 per cent., there must be more than one rate. An exemption for small businesses and new inventors has been suggested so why not exempt the National Association of Leagues of Hospital Friends?
      We shall vote on amendment No. 3 and we wish to have a separate vote on amendment No. 17, which involves the disabled. I ask my hon. Friends to vote for amendment No. 3 and against the iniquitous burden that the Government are placing on charities and voluntary organisations.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 239, Noes 299.

      Division No.38]

      AYES

      [10.35 p.m.

      Abse, Leo

      Cunliffe, Lawrence

      Fraser, John (Lambeth, Norwood)

      Adams, Allen

      Cunningham, George (Islington S)

      Freeson, Rt Hon Reginald

      Allaun, Frank

      Cunningham, Dr John (Whitehaven)

      Garrett, John (Norwich S)

      Anderson, Donald

      Dalyell, Tam

      George, Bruce

      Archer, Rt Hon Peter

      Davidson, Arthur

      Gilbert, Rt Hon Dr John

      Armstrong, Ernest

      Davies, Rt Hon Denzil (Llanelli)

      Ginsburg, David

      Ashton, Joe

      Davies, E. Hudson (Caerphilly)

      Golding, John

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

      Davies, Ifor (Gower)

      Gourlay, Harry

      Bagier, Gordon A. T.

      Davis, Clinton (Hackney Central)

      Graham, Ted

      Barnett, Guy (Greenwich)

      Davis, Terry (B'rm'ham, Stechford)

      Hamilton, James (Bothwell)

      Barnett, Rt Hon Joel (Heywood)

      Deakins, Eric

      Hamilton, W. W. (Central Fife)

      Bennett, Andrew (Stockport N)

      Dean, Joseph (Leeds West)

      Hardy, Peter

      Bidwell, Sydney

      Dempsey, James

      Harrison, Rt Hon Welter

      Booth, Rt Hon Albert

      Dewar, Donald

      Hart, Rt Hon Judith

      Boothroyd, Miss Betty

      Dixon, Donald

      Hattersley, Rt Hon Roy

      Bradley, Tom

      Dobson, Frank

      Haynes, David

      Bray, Dr Jeremy

      Dormand, J. D.

      Heffer, Eric S.

      Brown, Hugh D. (Provan)

      Douglas, Dick

      Hogg, Norman (E Dunbartonshire)

      Brown, Robert C. (Newcastle W)

      Douglas-Mann, Bruce

      Home Robertson, John

      Brown, Ronald W. (Hackney S)

      Dubs, Alfred

      Homewood, William

      Brown, Ron (Edinburgh, Leith)

      Duffy, A. E. P.

      Hooley, Frank

      Buchan, Norman

      Dunlop, John

      Horam, John

      Callaghan, Jim (Middleton & P)

      Dunnett, Jack

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

      Campbell, Ian

      Dunwoody, Mrs Gwyneth

      Huckfield, Les

      Campbell-Savours, Dale

      Eastham, Ken

      Hughes, Mark (Durham)

      Canavan, Dennis

      Ellis, Raymond (NE Derbyshire)

      Hughes, Robert (Aberdeen North)

      Carmichael, Neil

      Ellis, Tom (Wrexham)

      Hughes, Roy (Newport)

      Cartwright, John

      Evans, Ioan (Aberdare)

      Janner, Hon Greville

      Clark, Dr David (South Shields)

      Evans, John (Newton)

      Jay, Rt Hon Douglas

      Cocks, Rt Hon Michael (Bristol S)

      Ewing, Harry

      John, Brynmor

      Cohen, Stanley

      Field, Frank

      Johnson, James (Hull West)

      Coleman, Donald

      Fitch, Alan

      Johnson, Walter (Derby South)

      Concannon, Rt Hon J. D.

      Flannery, Martin

      Jones, Alec (Rhondda)

      Conlan, Bernard

      Fletcher, Ted (Darlington)

      Jones, Barry (East Flint)

      Cook, Robin F.

      Foot, Rt Hon Michael

      Jones, Dan (Burnley)

      Cowans, Harry

      Ford, Ben

      Kaufman, Rt Hon Gerald

      Craigen, J. M. (Glasgow, Maryhill)

      Forrester, John

      Kerr, Russell

      Crowther, J. S.

      Foster, Derek

      Kilroy-Silk, Robert

      Cryer, Bob

      Foulkes, George

      Kinnock, Neil

      Lambie, David

      Oakes, Gordon

      Spearing, Nigel

      Lamborn, Harry

      Ogden, Eric

      Spriggs, Leslie

      Lamond, James

      O'Halloran, Michael

      Stallard, A. W.

      Leadbitter, Ted

      O'Neill, Martin

      Stewart, Rt Hon Donald (W Isles)

      Leighton, Ronald

      Orme, Rt Hon Stanley

      Stoddart, David

      Lestor, Miss Joan (Eton & Slough)

      Owen, Rt Hon Dr David

      Stott, Roger

      Lewis, Ron (Carlisle)

      Palmer, Arthur

      Strang, Gavin

      Lofthouse, Geoffrey

      Park, George

      Straw, Jack

      Lyon, Alexander (York)

      Parker, John

      Summerskill, Hon Dr Shirley

      Lyons, Edward (Bradford West)

      Pendry, Tom

      Taylor, Mrs Ann (Bolton West)

      McCartney, Hugh

      Powell, Rt Hon J. Enoch (S Down)

      Thomas, Jeffrey (Abertillery)

      McDonald, Dr Oonagh

      Powell, Raymond (Ogmore)

      Thomas, Mike (Newcastle East)

      McElhone, Frank

      Prescott, John

      Thomas, Dr Roger (Carmarthen)

      McKay, Allen (Penistone)

      Price, Christopher (Lewisham West)

      Thorne, Stan (Preston South)

      McKelvey, William

      Race, Reg

      Tilley, John

      MacKenzie, Rt Hon Gregor

      Radice, Giles

      Torney, Tom

      Maclennan, Robert

      Richardson, Miss Jo

      Urwin, Rt Hon Tom

      McMahon, Andrew

      Roberts, Allan (Bootle)

      Walker, Harold (Doncaster)

      McMillan, Tom (Glasgow, Central)

      Roberts, Ernest (Hackney North)

      Watkins, David

      McNally, Thomas

      Roberts, Gwilym (Cannock)

      Weetch, Ken

      McWilliam, John

      Robertson, George

      Wellbeloved, James

      Magee, Bryan

      Robinson, Geoffrey (Coventry NW)

      Welsh, Michael

      Marks, Kenneth

      Rodgers, Rt Hon William

      White, Frank R. (Bury & Radcliffe)

      Marshall, David (Gl'sgow, Shettles'n)

      Rooker, J. W.

      White, James (Glasgow, Pollok)

      Marshall, Dr Edmund (Goole)

      Roper, John

      Whitehead, Phillip

      Marshall, Jim (Leicester South)

      Ross, Ernest (Dundee West)

      Whitlock, William

      Martin, Michael (Gl'gow, Springb'rn)

      Ross, Wm. (Londonderry)

      Wigley, Dafydd

      Mason, Rt Hon Roy

      Rowlands, Ted

      Willey, Rt Hon Frederick

      Maxton, John

      Ryman, John

      Williams, Rt Hon Alan (Swansea W)

      Maynard, Miss Joan

      Sandelson, Neville

      Williams, Sir Thomas (Warrington)

      Meacher, Michael

      Sever, John

      Wilson, Gordon (Dundee East)

      Mellish, Rt Hon Robert

      Sheerman, Barry

      Wilson, Rt Hon Sir Harold (Huyton)

      Mikardo, Ian

      Sheldon, Rt Hon Robert (A'ton-u-L)

      Wilson, William (Coventry SE)

      Milan, Rt Hon Bruce

      Shore, Rt Hon Peter (Step and Pop)

      Winnick, David

      Miller, Dr M. S. (East Kilbride)

      Short, Mrs Renée

      Woolmer, Kenneth

      Mitchell, Austin (Grimsby)

      Silkin, Rt Hon John (Deptford)

      Wrigglesworth, Ian

      Mitchell, R. C. (Soton, Itchen)

      Silkin, Rt Hon S. C. (Dulwich)

      Wright, Miss Sheila

      Molyneaux, James

      Silverman, Julius

      Young, David (Bolton East)

      Morris, Rt Hon Alfred (Wythenshawe)

      Skinner, Dennis

      Morris, Rt Hon Charles (Openshaw)

      Smith, Rt Hon J. (North Lanarkshire)

      TELLERS FOR THE NOES:

      Moyle, Rt Hon Roland

      Snape, Peter

      Mr. Thomas Cox an

      Newens, Stanley

      Soley, Clive

      Mr. George Morton

      NOES

      Adley, Robert

      Buck, Antony

      Fairbairn, Nicholas

      Aitken, Jonathan

      Budgen, Nick

      Faith, Mrs Sheila

      Alexander, Richard

      Bulmer, Esmond

      Farr, John

      Alison, Michael

      Burden, F. A.

      Fell, Anthony

      Ancram, Michael

      Butcher, John

      Fenner, Mrs Peggy

      Arnold, Tom

      Butler, Hon Adam

      Finsberg, Geoffrey

      Aspinwall, Jack

      Cadbury, Jocelyn

      Fisher, Sir Nigel

      Atkins, Robert (Preston North)

      Carlisle, John (Luton West)

      Fletcher, Alexander (Edinburgh N)

      Atkinson, David (B'mouth, East)

      Carlisle, Kenneth (Lincoln)

      Fletcher-Cooke, Charles

      Baker, Kenneth (St. Marylebone)

      Carlisle, Rt Hon Mark (Runcorn)

      Fookes, Miss Janet

      Baker, Nicholas (North Dorset)

      Chalker, Mrs. Lynda

      Forman, Nigel

      Banks, Robert

      Chapman, Sydney

      Fowler, Rt Hon Norman

      Beaumont-Dark, Anthony

      Churchill, W. S.

      Fox, Marcus

      Beith, A. J.

      Clark, Hon Alan (Plymouth, Sutton)

      Fraser, Peter (South Angus)

      Bell, Ronald

      Clark, William (Croydon South)

      Fry, Peter

      Bendall, Vivian

      Clarke, Kenneth (Rushcliffe)

      Galbraith, Hon T. G. D.

      Benyon, Thomas (Abingdon)

      Clegg, Walter

      Gardiner, George (Reigate)

      Benyon, W. (Buckingham)

      Cockeram, Eric

      Gardner, Edward (South Fylde)

      Berry, Hon Anthony

      Colvin, Michael

      Garel-Jones, Tristan

      Best, Keith

      Cope, John

      Glyn, Dr Alan

      Bevan, David Gilroy

      Cormack, Patrick

      Goodhart, Philip

      Biffen, Rt Hon John

      Costain, A. P.

      Goodlad, Alastair

      Biggs-Davison, John

      Cranborne, Viscount

      Gorst, John

      Blackburn, John

      Critchley, Julian

      Gow, Ian

      Blaker, Peter

      Crouch, David

      Gower, Sir Raymond

      Body, Richard

      Dean, Paul (North Somerset)

      Grant, Anthony (Harrow C)

      Bonsor, Sir Nicholas

      Dickens, Geoffrey

      Gray, Hamish

      Boscawen, Hon Robert

      Dodsworth, Geoffrey

      Grieve, Percy

      Bottomley, Peter (Woolwich West)

      Dorrell, Stephen

      Griffiths, Eldon (Bury St Edmunds)

      Bowden, Andrew

      Douglas-Hamilton, Lord James

      Griffiths, Peter (Portsmouth N)

      Boyson, Dr Rhodes

      Dover, Denshore

      Grist, Ian

      Bright, Graham

      du Cann, Rt Hon Edward

      Grylls, Michael

      Brinton, Timothy

      Dunn, Robert (Dartford)

      Gummer, John Selwyn

      Brittan, Leon

      Durant, Tony

      Hamilton, Hon Archie (Eps'm&Ew'll)

      Brocklebank-Fowler, Christopher

      Dykes, Hugh

      Hamilton, Michael (Salisbury)

      Brotherton, Michael

      Eden, Rt Hon Sir John

      Hampson, Dr Keith

      Brown, Michael (Brigg & Sc'thorpe)

      Edwards, Rt Hon N. (Pembroke)

      Hannam, John

      Browne, John (Winchester)

      Eggar, Timothy

      Haselhurst, Alan

      Bruce-Gardyne, John

      Emery, Peter

      Havers, Rt Hon Sir Michael

      Buchanan-Smith, Hon Alick

      Eyre, Reginald

      Hawkins, Paul

      1256

      1257

      Hawksley, Warren

      Mawhinney, Dr Brian

      Shepherd, Colin (Hereford)

      Hayhoe, Barney

      Maxwell-Hyslop, Robin

      Shepherd, Richard (Aldridge-Br'hills)

      Heddle, John

      Mayhew, Patrick

      Shersby, Michael

      Henderson, Barry

      Mellor, David

      Silvester, Fred

      Hicks, Robert

      Meyer, Sir Anthony

      Sims, Roger

      Higgins, Terence L.

      Miller, Hal (Bromsgrove & Redditch)

      Skeet, T. H. H.

      Hill, James

      Mills, Iain (Meriden)

      Speller, Tony

      Hogg, Hon Douglas (Grantham)

      Mills, Peter (West Devon)

      Spicer, Jim (West Dorset)

      Holland, Philip (Carlton)

      Miscampbell, Norman

      Spicer, Michael (S Worcestershire)

      Hooson, Tom

      Mitchell, David (Basingstoke)

      Sproat, Ian

      Hordern, Peter

      Monro, Hector

      Squire, Robin

      Howe, Rt Hon Sir Geoffrey

      Montgomery, Fergus

      Stainton, Keith

      Howell, Rt Hon David (Guildford)

      Morgan, Geraint

      Stanbrook, Ivor

      Howell, Ralph (North Norfolk)

      Morris, Michael (Northampton, Sth)

      Stanley, John

      Howells, Geraint

      Morrison, Hon Charles (Devizes)

      Steel, Rt Hon David

      Hunt, David (Wirral)

      Morrison, Hon Peter (City of Chester)

      Steen, Anthony

      Jenkin, Rt Hon Patrick

      Mudd, David

      Stevens, Martin

      Jessel, Toby

      Murphy, Christopher

      Stewart, Ian (Hitchin)

      Johnson Smith, Geoffrey

      Myles, David

      Stewart, John (East Renfrewshire)

      Johnston, Russell (Inverness)

      Neale, Gerard

      Stokes, John

      Jopling, Rt Hon Michael

      Newton, Tony

      Stradling Thomas, J.

      Joseph, Rt Hon Sir Keith

      Normanton, Tom

      Taylor, Robert (Croydon NW)

      Kaberry, Sir Donald

      Nott, Rt Hon John

      Tebbit, Norman

      Kellett-Bowman, Mrs Elaine

      Oppenheim, Rt Hon Mrs Sally

      Temple-Morris, Peter

      Kershaw, Anthony

      Osborn, John

      Thomas, Rt Hon Peter (Hendon S)

      Kimball, Marcus

      Page, John (Harrow, West)

      Thompson, Donald

      King, Rt Hon Tom

      Page, Rt Hon R Graham (Crosby)

      Thorne, Neil (Ilford South)

      Kitson, Sir Timothy

      Parkinson, Cecil

      Thornton, George

      Knox, David

      Parris, Matthew

      Townend, John (Bridlington)

      Lamont, Norman

      Patten, Christopher (Bath)

      Townsend, Cyril D. (Bexleyheath)

      Lang, Ian

      Patten, John (Oxford)

      Trippier, David

      Langford-Holt, Sir John

      Pattie, Geoffrey

      Trotter, Neville

      Latham, Michael

      Pawsey, James

      van Straubenzee, W. R.

      Lawrence Ivan

      Penhaligon, David

      Vaughan, Dr Gerard

      Lawson, Nigel

      Percival, Sir Ian

      Viggers, Peter

      Lee, John

      Pink, R. Bonner

      Wainwright, Richard (Colne Valley)

      Le Merchant, Spencer

      Pollock, Alexander

      Wakeham, John

      Lennox-Boyd, Hon Mark

      Porter, George

      Waldegrave, Hon William

      Lewis, Kenneth (Rutland)

      Price, David (Eastleigh)

      Walker, Rt Hon Peter (Worcester)

      Lloyd, Ian (Havant & Waterloo)

      Prior, Rt Hon James

      Wall, Patrick

      Lloyd, Peter (Fareham)

      Proctor, K. Harvey

      Waller, Gary

      Loveridge, John

      Raison, Timothy

      Walters, Dennis

      Luce, Richard

      Rathbone, Tim

      Ward, John

      Lyell, Nicholas

      Rees, Peter (Dover and Deal)

      Watson, John

      McCrindle, Robert

      Rees-Davies, W. R.

      Wells, John (Maidstone)

      Macfarlane, Neil

      Renton, Tim

      Wells, P. Bowen (Hert'rd&Stev nage)

      Mackay, John (Argyll)

      Rhodes James, Robert

      Wheeler, John

      Macmillan, Rt Hon M. (Farnham)

      Rhys Williams, Sir Brandon

      Whitelaw, Rt Hon William

      McNair-Wilson, Michael (Newbury)

      Ridsdale, Julian

      Whitney, Raymond

      McNair-Wilson, Patrick (New Forest)

      Rifkind, Malcolm

      Wickenden, Keith

      McQuarrie, Albert

      Roberts, Michael (Cardiff NW)

      Wiggin, Jerry

      Madel, David

      Roberts, Wyn (Conway)

      Wilkinson, John

      Major, John

      Ross, Stephen (Isle of Wight)

      Williams, Delwyn (Montgomery)

      Marland, Paul

      Rossi, Hugh

      Winterton, Nicholas

      Marlow, Antony

      Rost, Peter

      Wolfson, Mark

      Marshall, Michael (Arundel)

      Royle, Sir Anthony

      Young, Sir George (Acton)

      Marten, Neil (Banbury)

      Sainsbury, Hon Timothy

      Younger, Rt Hon George

      Mates, Michael

      St. John-Stevas, Rt Hon Norman

      Mather, Carol

      Scott, Nicholas

      TELLERS FOR THE NOES:

      Maude, Rt Hon Angus

      Shaw, Michael (Scarborough)

      Mr. David Waddington and

      Mawby, Ray

      Shelton, William (Streatham)

      Mr. John McGregor.

      Question accordingly negatived.
      Sir Timothy Kitson: I beg to move amendment No. 5, in clause 1, page 2, line 13, at end insert—
      '(3A) As from the passing of this Act subsection 1(B) above does not affect the rate of tax on thoroughbred horses and bloodstock'.
      This amendment stands in my name and in the names of Members on both sides of the Committee.
      Since 1973 the racing industry has made a series of submissions to the Treasury about the treatment of VAT on bloodstock in the United Kingdom
      1258
      compared with our major competitors in the rest of Europe. The racing and bloodstock industry in the United Kingdom has traditionally been held in high esteem throughout the world because of the high quality of its bloodstock. Indeed, British racehorses and the thoroughbred breeding industry are recognised for the standards which had been maintained over the years. It is not insignificant that last year our exports of bloodstock amounted to some £24 million.
      Since the introduction of VAT the British industry has had to compete at

      1259
      a disadvantage with our major competitors, and this threatens our ability to maintain the standards of racing and breeding in the United Kingdom. The problem occurs because when horses are purchased, imported or transferred into training from the stud farm VAT is levied on the owner. The problem facing English racing has been virtually doubled by the increase in VAT from 8 to 15 per cent.
      The bloodstock industry is international and it is sensitive to fiscal arrangements in other countries. Despite our membership of the EEC, the treatment of horses in the United Kingdom is out of line with other European countries. In the United Kingdom 15 per cent. is to be charged on the full value of horses. In France VAT is paid on only the carcase value, which works out at about £50 per horse. If that position is compared with that of a British horse which has cost between £100 and £100,000, when the charge of 15 per cent. is added the British racehorse is at a great disadvantage.
      In Ireland horses are exempted from VAT altogether. That treatment applies to imports as well as sales, although in all three countries, France, the United Kingdom and Ireland, exports of blood-stock are zero rated. Because of the increase in VAT, the United Kingdom bloodstock industry now trades at a serious disadvantage. The incentive for United Kingdom or foreign residents to export animals and avoid the burden of the VAT that is detrimental to the racing industry is further increased.
      Trainers, their staff and the breeding industry will also suffer. Owners who import high quality horses from overseas to train them in this country and then return them to stud are now encouraged to send their animals either to France or Ireland.
      I spoke recently to one of the leading owners in British racing. He has 20 yearlings in Kentucky at his stud and he spends annually between £3 million and £5 million on young stock. Most of his horses would be trained in Newmarket or Lambourn but because of the adverse conditions in British racing all of his horses will be trained in Ireland or France. That is a pattern that will be followed by many owners.
      1260
      It is even more extraordinary that a British national is treated differently from an overseas owner, who is exempted from VAT for 12 months on any animal that he imports or buys in England. If that horse stays in training in England for another year he has to pay the VAT. One Californian owner imported 12 horses last year, none of which has run because of a virus infection in his stables. It is possible that none of the horses will see an English racecourse this year. That owner has to decide whether to leave them in this country to be trained and consequently pay a bill of about £25,000 or send them to Ireland or France for training. The VAT that he would pay would pay for the training costs for the next two years. Therefore, he has little incentive to leave his horses in this country.
      Assurances have been given that the Treasury will try to help in the matter. However, the situation has been aggravated by the increase in VAT from 8 per cent. to 15 per cent. In the debate on the Finance Bill in 1977 the Financial Secretary referred for the first time to the sixth directive on harmonisation of VAT as a possible solution to the problem. But, it has been discovered that Ireland has made special arrangements and that country will be excluded from VAT payments on racehorses until the end of 1982. There is little chance of the French being persuaded to alter their position in view of the advantage that they hold over the British owner, trainer and breeder.
      I spoke on Monday to the owner of the English and Irish Derby winner. He stated that it would be impossible to syndicate that horse in this country with VAT—
      The First Deputy Chairman (Mr. Bryant Godman Irvine): Order. There appear to be a number of urgent conversations taking place. It would be of convenience to the Chair and other hon. Members if those conversations took place outside rather than inside the Chamber.
      11.15 p.m.
      Sir T. Kitson: It was pointed out to me that there was no way in which the horse which won the British Derby and the Irish Derby could be left in this country, because of the VAT charges, when it could go to Ireland, France or the United States and there would be

      1261
      no VAT on its stud servicing or any of its yearlings that would be put into the sale rings in those countries. Therefore, it is likely that one of our leading sires will yet again go overseas. It is probably destined for France or the United States.
      We are not asking the Government for any special consideration for racing. We are simply asking that the industry should be put into a fair and competitive position as compared with Ireland and France. Of course, at the end of the day we should like to remove VAT on racehorses altogether, but an amendment on those lines would have been out of order.
      Last year at Newmarket more than 150 horses were sold at between £25,000 and £150,000. All of them could be trained for two to three years overseas on the tax that would be paid on them if they remained in this country. If they went to Ireland or France they would have their training fees paid out of the amount that the owner would have had to pay in tax. Therefore, we are clearly simply handing the trade to the French and Irish.
      Some Labour hon. Members are slightly scornful about this, but there are many stable lads working in Newmarket, Mal-ton and Lambourn whose jobs are at risk. Any trainer in Ireland or France will say that he is being approached by English operators who say "We shall send our horses to you, and we shall not go on supporting the British racing scene."
      We must recognise that racegoers, trainers, owners and breeders all have a major interest. Unless we can encourage the ordinary racegoers to go onto the racecourses to see the spectacle of good horses and good jockeys, they will not go. If they do not and the Horserace Betting Levy Board does not receive the tax, the racing industry is bound to decline.
      Racing is a spectator sport. We have a duty to ensure that the best horses remain in this country. Lord Rothschild suggested in the report of the Royal Commission on gambling that VAT should be abolished in this instance. We should eventually accept that recommendation. At least for the time being we should not increase the standard rate of VAT
      1262
      on the British bloodstock industry. If we raise it from 8 per cent. to 15 per cent., much of our best bloodstock will leave the country, and many jobs will be lost.
      Mr. Robert Mellish: I support the amendment, which has been ably moved by the hon. Member for Richmond, Yorks (Sir T. Kitson). He has great knowledge of the subject, and I pay tribute to him. This is not an argument that has suddenly begun today because a Conservative Government are in power and they have raised VAT to 15 per cent. The argument has been raging for months and indeed years. I ask my hon. Friends to take it seriously.
      We are not saying, and the hon. Gentleman did not say, that VAT should be removed, that there should be a special concession for the racing industry whereas we do not give such a concession for social services and the rest. Of course we are not talking such rubbish. We are asking for equality of treatment with our foreign competitors. That introduces—and this should excite all my hon. Friends—the issue of the Common Market. My right hon. Friend the Member for Battersea, North (Mr. Jay) should leap to his feet. Those involved in the breeding of horses find that VAT is imposed.
      We made a complaint when the last Government were in power and went to see the Financial Secretary to the Treasury, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). We were received with great courtesy. Our case was understood and its importance recognised. It was clear to me and to the hon. Member for Richmond, Yorks that, while the position remained the same in the Common Market, nothing could be done unless there was agreement on harmonisation. I am not arguing a party political case that has occurred only because the Tories are in power. As the hon. Member for Richmond, Yorks, indicated, France and Ireland are virtually exempt from VAT in their bloodstock dealings. Unless the position is changed, the industry in this country has no future. That cannot be right. With the VAT rate up from 8 per cent. to 15 per cent. the position is now much worse.
      I am not asking that the Minister should give an immediate indication that

      1263
      he can solve the problem. There are difficulties in dealing with the Common Market. I have had some experience of the difficulties. For months, the leather industry in my constituency has been trying to get some understanding and agreement on leather imports. One is trying to get unanimity within the most frightening bureaucratic machine ever invented by man.
      Neither the hon. Member for Richmond, Yorks, nor myself expects any special concession from the Minister for this industry. We ask only that the industry should be given an equal chance with France and Ireland. If that is not done, untold millions of pounds will be lost to this country. My hon. Friends may sneer at talk of racing bloodstock, but in every constituency, thousands of people are interested in the subject. We must not walk away from the issue. If we are to have the sort of industry that some of us want, equality of treatment is necessary.
      I do not want the Minister to defend the position. I ask him to give some indication of the chance of reaching some agreement with the other countries involved. If at the end of the day we cannot get agreement with France or Ireland because it suits them to retain the present situation—and my right hon. Friend the Member for Battersea, North will be delighted to hear this—it is about time that Britain stood up for the British and told the French and the Irish what to do and how to do it.
      Mr. Paul Hawkins: I want briefly to support the right hon. Member for Bermondsey (Mr. Mellish) and my hon. Friend the Member for Richmond, Yorks (Sir T. Kitson), who so ably moved the amendment. The issue concerns not only the bloodstock market at Newmarket and elsewhere, but the ordinary man, woman or child who rides a good pony or a horse in the countryside. They have to pay the increased VAT and are also taxed differently from those in France and Ireland. Thousands of people who earn their living looking after horses and ponies, show them and deal in them will be badly hit by this extra tax.
      Mr. Dalyell: Some of us know little about racing. Will the hon. Gentleman
      1264
      enlighten us about what sums of money are involved?
      Mr. Hawkins: I am sure that my hon. Friend the Member for Richmond, Yorks can talk in terms of between £20,000 and £100,000. But when discussing children's ponies we are talking of between £300 and £500. Hunting horses probably involve between £1,500 and £2,000.
      Mr. Mellish: May I help the hon. Gentleman to help my hon. Friend the Member for West Lothian (Mr. Dalyell)? The agriculture export committee said that a minimum of £24 million was involved. We are, therefore, discussing something that is worth while, in addition to the value of the bloodstock which is in danger of being lost to the country for ever if this problem is not dealt with.
      Mr. Hawkins: I thank the right hon. Gentleman. That figure was given by my hon. Friend the Member for Richmond, Yorks, when he moved the amendment. Figures can vary. We are talking about unbroken ponies and trained hunters. It is a big business in which many people are involved. Many people derive enjoyment from it. All hon. Members have constituents who take an interest in it or who own ponies or horses. I have been approached by many constituents about this issue. I support the amendment.
      Mr. John Golding: I understand the cynicism of my hon. Friends. But I ask them to understand that the proposal would benefit not only the rich and owners of horses. We are talking about an industry. Some of my hon. Friends said "Rubbish" when reference was made to stable boys. But many stable lads are members of the Transport and General Workers' Union, which is worried about security of employment and about the low level of pay in the racing industry.
      When I was a member of the Government I became aware of the acute unemployment problem in rural areas. I became aware that the countryside had to provide employment for young people if they were to escape a life on the dole.
      I support the amendment because it is designed to help the industry. Owners will not suffer without the amendment. They will not be prepared to pay the

      1265
      £3,000 or £30,000 involved because they will be able to send their horses to Ireland. When the horses are sent to Ireland for training—with non-payment of VAT—some jobs will be transferred to Ireland. That is the reality of the situation. If the industry is to be allowed to run down, and if it is further hurt by this tax, we will suffer a loss of jobs.
      In addition, it will be increasingly difficult for those in the racing industry, at the lowest levels, to be paid reasonable wages. I should not have thought that anyone on the Labour Benches would want to make it more difficult for those workers to achieve a right level of remuneration and security from their jobs.
      11.30 p.m.
      Mr. Eldon Griffiths: My constituency includes Newmarket and, with the possible exception of the constituency of my hon. Friend the Member for Richmond, Yorks (Sir T. Kitson), I suspect that there are more thoroughbred horses in the Bury St. Edmunds constituency than anywhere else in the country. Long may it remain so.
      At any time there are several thousand magnificent horses either at stud or in training and, as the hon. Member for Newcastle-under-Lyme (Mr. Golding) has said, it is by any measure a major industry. It provides jobs that are very hard to find in a rural area. It provides exports which amounted to some £25 million last year. That must be seen as the dimension of many a middle-sized firm in our engineering industries.
      Racing also provides immense entertainment to tens of millions of people in this country and provides, through the various taxes on betting, a very substantial revenue to the Treasury. I therefore suggest that this is an industry that the Government would wish to treat in a fashion that would secure its future.
      In his last speech before the election of 1970 the late Iain Macleod gave an undertaking that if he became Chancellor he would do something to help the racing industry. I had the pleasure of speaking with him during the last debate in which he took part as Opposition spokesman on financial matters.
      When the Conservative Government of 1970 were established and Iain Macleod
      1266
      became Chancellor, I for one was confident that he would redeem that promise. Unfortunately, as the House knows, it was not possible for him to continue in his post. I believe that if he had continued he would, in one way or another, have eased the burden on the racing industry.
      It is in that spirit that I put this plea to my hon. and learned Friend the Minister of State. I believe that the most important thing that the Chancellor of the Exchequer has done in his Budget is to reduce the upper level of tax on income to the mean average that exists in other Common Market countries. I ask him to do the same for the racing industry in respect of VAT. He well knows that in France the racing industry is greatly advantaged by a rate of VAT which amounts to only £50 per head. He well knows that in Ireland there is no VAT. I ask him to try, on grounds of competition policy if nothing else, to ensure that the British racing industry, the best I believe in the world, is not worse treated than similar industries in other EEC countries.
      I understand the difficulties faced by my hon. and learned Friend, but the request from both sides of the Committee is, as the right hon. Member for Bermondsey (Mr. Mellish) said, not for special treatment for one industry. It is simply for the harmonisation of the treatment that is available to an industry that has to compete internationally. It has to compete internationally on the tracks, in the studs, in training and, above all, in the selling of racehorses.
      I ask my hon. and learned Friend to accept at least the spirit of the amendment and give us some hope that racing in Britain will be treated fairly.
      Mr. Arthur Davidson: I know very few racehorse owners, if any, though I should always be more than happy to meet any of them who desired to talk to me. I intervene, therefore, not because I feel sorry for racehorse owners but because of my concern as a simple punter that British racing should survive and prosper.
      The racing industry has added a great deal of lustre to the country's prestige. If any other industry had to compete at such an obvious disadvantage when

      1267
      compared with its two main competitors, this whole Committee would unite behind it.
      I agree with my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) that the industry provides useful jobs at all levels, though I knew very little about this subject until this week. But I was astonished to learn about the disadvantages that owners in this country suffer compared with their two main competitors in France and Ireland. That cannot be right. My hon. Friend was right when he said that in the long run the owners would not suffer financially because, if it became too great a financial burden for them to import horses and to keep and breed them here, they would have them trained elsewhere. But that would be a mortal blow to racing.
      There is no doubt that the VAT increase from 8 per cent. to 15 per cent. will add substantially to the burdens which already are threatening to cripple the racing industry. I hope that the Minister of State will understand the injustice of the system and realise that right hon. and hon. Members are supporting this amendment not with a view to any party advantage but merely because they have an interest in and perhaps affection and respect for the racing industry. It is on that basis that I am happy to support the amendment.
      Mr. Edward du Cann: The hon. and learned Member for Accrington (Mr. Davidson), like my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths), the hon. Member for Newcastle-under-Lyme (Mr. Golding) and the right hon. Member for Bermondsey (Mr. Mellish), did the Committee a great service by pointing out clearly that we were discussing the future, and the immediate future, of a great British industry. It is one in which there is intense popular interest, and it is of the greatest possible benefit to the Exchequer.
      My hon. Friend the Member for Richmond, Yorks (Sir T. Kitson) moved the amendment against a background hubbub, and unfortunately right hon. and hon. Members may not have heard all that he said, but he made one comment which shocked me profoundly. He said that representations had been made to the Treasury continuously by right hon.
      1268
      and hon. Members on both sides ever since 1973. In other words, this discussion has continued over many years.
      My hon. and learned Friend the Minister of State has great experience of tax matters and good judgment besides, but I must warn him that right hon. and hon. Members will be more than a little worried if he suggests that perhaps this can be looked at again and that the Treasury Bench will do its best. I mean no disrespect to my hon. and learned Friend when I say that. We have a new Government and they will need time to consider a matter as important as this. It is significant to bear in mind that this is a great British industry because the breeding of bloodstock is an international business. As such it is highly competitive and highly price sensitive. If, as so many hon. Members have suggested, something is not done in this matter the whole industry will undoubtedly largely disappear to Ireland, to France or to wherever. That would be bad enough, but I guess that it would be unlikely to return promptly, if ever.
      Therefore we are discussing a matter of the greatest significance. As my hon. Friend the Member for Richmond, Yorks, said in moving the amendment, we have heard about harmonisation for a number of years. My impression of harmonisation is that it is a most lengthy and complex process. It seems clear that the Irish have negotiated a special arrangement for themselves and that the French, hardly the most altruistic of business managers, will not harmonise.
      Take the case of a particular horse which costs, say, £10,000. In this country the tax would amount to £1,500. In Ireland there would be none. In France there would be tax only on the carcase value—say £50 or so. That is a measure of the disadvantage under which those who keep their horses here are trading. That disadvantage is intolerable and unacceptable. If my hon. and learned Friend says that he will look at harmonisation, I must tell him that this matter is now so serious that it is essential that we have a forthright declaration from the Dispatch Box that we are prepared to act unilaterally in order to put this great British industry in a position to trade on equal terms with its competitors.
      Mr. Bernard Conlan: I should not like the Minister to think that, because seven hon. or right hon. Members have spoken for the amendment, the Committee necessarily agrees with it. Personally I do not, and I shall say why.
      We have heard tonight a classic example of special pleading. I can understand my right hon. Friend the Member for Bermondsey (Mr. Mellish), my hon. and learned Friend the Member for Accrington (Mr. Davidson) and my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) making a case for a reduction in VAT. They disagree with the increase in VAT in the Budget. I admire the audacity of Conservative Members taking that line. They fought the election campaign on the basis of income tax cuts that could have been paid for only by large increases in VAT. They have sown their seed. Now they are reaping the whirlwind.
      The Minister will say that in order to pay for the tax concessions the Government have had to increase VAT to the astronomical level of 15 per cent. They will say that they must do this in order to meet the demands of the higher paid in industry and this country generally, and of the brewers, who must be paid. Yet this is the sort of policy that the proposers of the amendment—and I exclude my misguided hon. Friends—[HON. MEMBERS: "Why?".] Because they have been misled. It is as simple as that. My misguided hon. Friends have appended their names to the amendment supporting Conservative Members who got elected on 3 May on the ticket that the Tories were supporting reductions in income tax.
      11.45 p.m.
      Mr. Mellish: I find my hon. Friend's argument a little odd. If I remember rightly, when he was the secretary of the all-party racing committee, he, too, protested with me, when a Labour Government were in power, at the 8 per cent. VAT. I am not sure what my hon. Friend is trying to argue now. I thought that I had made it clear in my speech that I am not asking for the abolition of VAT. I am asking that our contribution be equal to the French and the Irish contributions in order to allow for what I call equality of treatment, which other hon. Members
      1270
      are also arguing for. Only the other day it seemed that my hon. Friend was agreeing with me and with others that VAT at its present rate was very unfair.
      Mr. Conlan: Perhaps my right hon. Friend has not been listening to my argument.
      Mr. Mellish: I have been listening.
      Mr. Conlan: When my right hon. Friend refers to "the other day", he is not referring to any date following 3 May. A complete transformation has come over all these issues since the Budget.
      I cannot countenance or condone special pleading for racehorse owners when ordinary working-class people are expected to pay increased VAT on washing machines, cookers and household goods of all kinds and when motorists are expected to pay increased VAT on petrol. No, I cannot reconcile these things, and neither should my right hon. Friend. I was advocating a reduction in VAT for these reasons before the Budget, but I cannot reconcile an increase of this sort for ordinary people at the same time as accepting special pleading from people who got their seats as a result of pleas for reductions in income tax.
      This is a phoney amendment and I very much hope that the Minister will reject it.
      Mr. Maurice Macmillan: The hon. Member for Gateshead, East (Mr. Conlan) is under a total misapprehension. He has performed that curious feat which I had hitherto believed was only possible for lawyers: he has misdirected himself.
      We are not asking for special treatment for the owners of racehorses, or for the trainers or breeders of racehorses. We are not asking that they should be exempted from the higher rate of VAT on their normal purchases. We are not seeking to take them out of the tax system. What we are saying is that the Government should take measures, rapidly, urgently and effectively, to see that the impact of VAT, at whatever level it may be as compared with its impact in other countries which also operate the VAT system, does not put the British racing and bloodstock industry at a disadvantage. It is as simple as that.

      1271
      It is nothing to do with the wealth or otherwise of the owners. Indeed, the richer the owner, the easier it is for him to send his horses to be trained elsewhere. It is perhaps true to say that the less well off will suffer, those whose employment will be damaged because more horses are trained, held at stud and raced abroad because of this—
      Mr. Eldon Griffiths: Exporting jobs.
      Mr. Macmillan: As my hon. Friend says, exporting jobs.
      It is worth considering that the valuation put on a racehorse for tax purposes is a speculative valuation. One of the peculiarities of the British tax is that it arises on the transfer of a horse to training. That horse has not raced. It is valued on its breeding and on the expectation the owner has of what it will and can do. Many horses that are well bred and for which people have paid a great deal of money do not live up to those expectations and do not succeed on the racecourse.
      In this particular case, therefore, quite apart from the impact of the tax when compared with our European competitors, there is the question of valuation. The French got over this difficulty by valuing all horses at carcase value because that is the only definite value they have.
      This problem can be looked at in a different form. As a publisher I buy paper and that paper has a definite value until it is printed when it may be worth a great deal more than it was as plain paper. But it might be worth a great deal less if no one wants to buy the book. Therefore, printing and publishing is, to some extent, a speculative activity and yet until the paper is printed it is not valued as if it were a book. It is not taxed when it is in the warehouse on the basis that it might become a Latin primer or a mathematical textbook, or on the basis of the number of those books that we hope to sell. Yet a horse is valued, for the purposes of VAT, when it comes into training and before it has proved that value by racing.
      Although we are not making a special plea on behalf of the bloodstock and racing industry but are seeking equality of treatment for that industry with our
      1272
      competitors overseas, there is a case for looking into the methods of valuation and not relying quite so heavily on the potential of a horse rather than its actual value.
      I should like to remind my hon. and learned Friend the Minister of State and, in his absence, the Financial Secretary to the Treasury of a report of which they were part authors and which was presented to the House on 11 November 1975. My hon. Friend the Member for Norfolk, South (Mr. MacGregor) was a co-author of the report. Paragraph 86 of it reads as follows:
      "We wish to draw attention here to the blood-stock industry which is, we believe, unique in that it is the abnormally severe effect on their industry of Value Added Tax that makes them particularly vulnerable to any additional taxation. We suggest that, in considering their position vis-a-vis a wealth tax, further consideration be given to the application of VAT to this industry. We understand that their present problems "
      —this is in 1975—
      "are leading to the loss of a pre-eminent position of British breeders and so damaging export earnings."
      That was at a time when VAT was lower, when we had not yet made any attempt to harmonise with our competitors overseas.
      I beg my hon. and learned Friend to assure the Committee that the Government not only have this problem under urgent consideration but will also take action in one form or another very quickly. As has been already said, once people start keeping and racing their horses abroad, a great deal will be lost not just for a year or two but for good, partly because the rewards overseas to successful owners are so much greater than they are in this country.
      There is already a strong temptation, particularly for small owners, to race their horses in France. Now there will be an even stronger temptation to keep and train them there, and only to send them to this country in order to win the bigger prizes. By doing so they will take part in the loss of jobs and the loss of an industry, which is not only of great economic value to the country but which has given enormous pleasure to people from every walk of life in every part of the country, and which is probably one of the most popular sports today, as it has been for centuries.
      Mr. Harry Ewing: I suspect that, after the Minister has had to suffer his own words, he is now looking for some support to sustain him as he prepares to reply to the debate.
      I shall maintain the consistency that I maintained when I was a member of the Labour Government. I supported the application of the 8 per cent. VAT to the sale of racehorses when in government, and I shall not go into the Lobby tonight to support the amendment which, as the right hon. Member for Taunton (Mr. du Cann) said, would give this great British industry, as he called it, some special treatment. I shall come later to the point made by my right hon. Friend the Member for Bermondsey (Mr. Mellish) about equality of treatment between France, Ireland and the United Kingdom in relation to this industry.
      It is at moments such as this that 'the great British public misunderstands, and rightly so, the House of Commons. We have spent a great deal of time going through parts of the Finance Bill, and applying 15 per cent. VAT to item after item. Now, when it is approaching midnight, all sorts of hon. Members are on their feet making all sorts of passionate pleas for one particular industry, and we are told that preferential treatment is not being sought.
      Let there be no doubt that great British industry—I use the words of the right hon. Member for Taunton—after great British industry has been damaged by this Budget. Whether or not the right hon. Gentleman likes it, he is asking for preferential treatment for the bloodstock industry.
      It is not in my nature to be patronising, and I have the greatest admiration for my right hon. Friend the Member for Bermondsey. However, my right hon. Friend, supported by Conservative Members, said that he was asking for equality of treatment between France, Ireland and the United Kingdom. I must tell the Committee that our constituents will not understand that. The equality of treatment that they see is the equality of treatment between the washing-up liquid that has to get used every hour of the day and the sale of bloodstock. They will compare the equality of treatment between a cooker and other items in daily use and the sale of bloodstock.
      12 midnight
      Mr. Eldon GriffithsIf an engineering item exported from the hon. Gentleman's constituency has its VAT rebated because it is an export, why does he object to VAT being rebated on a racehorse that has raced in this country and then been exported? It is another export.
      Mr. Ewing: The next amendment to be moved will ask for the £1 million paid for Laurie Cunningham by Real Madrid to be zero rated. Football transfer fees are not zero rated. They are subject to VAT, but if I am wrong in that the Minister will correct me. The logical conclusion of the argument on racehorses would extend to transferring football stars out of the country.
      We should deal with human beings and their feelings. The 15 per cent. VAT will damage great British industry after great British industry, and in the process will damage British people.
      Mr. Mellish: My hon. Friend is implying that I am not protesting about the effect of the 15 per cent. increase on the essential purchases of poor folk or on the social services. I have been a Member a long time and I have a lot of tolerance, but I resent that implication. Perhaps I did not make myself clear. There must be harmonisation within the Common Market that gives British industry an equal chance. That has nothing to do with the effect of 15 per cent. VAT on anything else. I am asking what the Government can do about the impact in regard to the Common Market. I am not making any party political point, and the matter has been argued month after month. If I had my way, there would be no VAT on anything, but I am a realist.
      Mr. Ewing: I apologise if my right hon. Friend feels that I am accusing him of all people of not being concerned about the 15 per cent. VAT on items in daily use. I know that he is as concerned as we all are on the Labour Benches. As politicians we must make the people understand the decisions reached in this Chamber. We should find it impossible to explain why VAT on racehorses should be held at 8 per cent. while applying 15 per cent. to essential items, domestic heating and other aspects of daily life that have been mentioned. Despite what has been said about the thousands of

      1275
      jobs at stake, the people will not understand such a decision. They will not understand why Members should concern themselves with this aspect of the 15 per cent. VAT when there are so many more important matters.
      Sir Timothy Kitson: If the hon. Member walked into any club or pub in Newmarket, Malton, Richmond or any other racing centre, or any betting shop in the country, or if he read the front page of The Sporting Life either yesterday or today, he would find that people are not so stupid that they do not recognise that our best bloodstock is liable to leave this country. They also recognise that jobs are at stake. The hon. Member does less than credit to the majority of people if he really thinks that we are arguing for anything more than a comparable situation to that which exists in Ireland and France. Why should any Englishman go to a sale in this country at a 15 per cent. disadvantage to anybody who is prepared to buy and send the animal overseas to be trained? The Englishman is at a disadvantage of 15 per cent. when he starts in the auction. If the hon. Member does not recognise the problems that that causes in the bloodstock industry, he cannot have followed the arguments in the Committee tonight.
      Mr. Ewing: I admit freely that I suffer from the distinict disadvantage of never having been to Newmarket, Ascot or Goodwood. I am like the other 99 per cent. of working people in this country. I have to go to work every day, so I suffer from the disadvantage of never frequenting the salubrious places that the hon. Member mentioned. Whether the hon. Gentleman likes it or not, the working people of this country will not understand the kind of thing we are discussing tonight.
      My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) mentioned that the stable lads are poorly paid, and that they are members of the Transport and General Workers' Union. I hope that it is not part of his argument that if we rebate this part of the VAT the magnanimous racehorse owners will suddenly find it in their hearts to pay their stable lads better wages than they have paid for the last 15 or 20 years. If that were the case, I should be tempted to support the amendment, but I know
      1276
      that that simply will not happen. I am not surprised by the attitude of Conservative Members. In a sense, they have been consistent in appealing for special treatment for this industry. Their only fault is in claiming that what they are demanding is not special treatment. But I take issue with my hon. Friend in saying that the poor pay of stable lads is an argument for this amendment, in the belief that racehorse owners will increase their wages overnight.
      Mr. Golding: I do not suggest that. It is not part of my case to suggest that the increase in VAT has not done great harm to many industries. That is why I have voted against 15 per cent. VAT consistently during these debates. At the same time, I believe it is illogical not to vote against this increase knowing that in this case it will be harmful to jobs. On the specific question of pay, I believe that the more horses sent out of this country for training, the worse will be the bargaining position of the workers in the industry. That is inevitable. Whenever there is a reduction in the profitability or the work done in any industry, the bargaining position of workers in that industry is made more difficult.
      Like me, my hon. Friend has represented Post Office workers and he knows that what I am saying is true. Of course we are in the dilemma of seeming to give something to the very rich, but we know that jobs and the standards of living of many in the rural areas depend on a thriving and profitable bloodstock industry. It cannot help the workers for us not to support the amendment.
      Mr. Ewing: My hon. Friend fell into the same trap at the end of his intervention as he fell into at the end of his speech. He argues that stable lads are poorly paid and that if we do not increase the rate of VAT they will be better off. He claims that having a viable industry will strengthen the bargaining power of stable lads. I take my hon. Friend's word for that because I do not know the industry, but their bargaining power was not all that great when the industry was strong and was competing on equal terms with the French and Irish industries. I am as anxious as any other hon. Member to ensure that stable lads get a decent standard of living, but I do not believe that the amendment will bring about an

      1277
      improvement or strengthen their bargaining power.
      On the question of consistency, when I was in government I supported the application of 8 per cent. VAT to the sale of horses and I would be inconsistent if I voted for the amendment. No hon. Member has suggested where the additional revenue that would be required in order to balance the Chancellor's books if the amendment is passed should be found. It is claimed that only a small amount of money is involved, but all these small amounts add up to a large amount. Until we hear from where that additional revenue is to be found, the Committee has no right to approve the amendment, and I shall certainly not vote for it.
      Mr. Charles Morrison: My conclusion from the speech of the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) is that it would be useful to have set up not only an all-party racing committee but a Labour Party racing committee so that the right hon. Member for Bermondsey (Mr. Mellish) and some other Labour Members could instruct their colleagues in the realities of the situation facing the industry.
      We are protesting not about the application of the 15 per cent. rate of VAT to the industry but about the inequitable consequences of the method of application of VAT—at 8 per cent., 15 per cent. or any other rate—in comparison with the methods adopted by other countries. The amendment does not specifically seek a reduction in VAT or special treatment. It looks for equality of treatment in respect of VAT on the owners and breeders of horses in the United Kingdom compared with owners and breeders in other countries. We are concerned not only with the future of a great British industry, the interests of the punters, or the entertainment of a huge number of people, but with the quality of the industry and its horses.
      12.15 a.m.
      Perhaps I should declare an interest because, for the first time in my life, I have become the owner of one-quarter of a racehorse. I shall be able to tell hon. Members at a later date whether it is
      1278
      worth putting their money on it. Perhaps I should add that I managed to purchase the horse at the old VAT rate rather than the new one.
      The important point to be borne in mind is that the bloodstock industry is international. Consequently, the owner of bloodstock, whether breeding or racing, has a choice as to where the blood-stock should be established. If there is a free choice—as there is, and as I hope there will continue to be—between keeping a horse in one country and another where there are differential rates of VAT, I believe that over a period an increasing number of owners and breeders will ensure that they keep their horse or horses in the country in which the cheapest rates of tax exist. Certainly the cheapest rates are not to be found in this country at present.
      It appears that in the short term there is likely to be some effect, and an increasing effect, because of the inequitable treatment of the quality of racing in the United Kingdom. In the short term there will be some effect on employment in the racing industry, and in the long term there is an increasing likelihood that there will be a loss of the best bloodstock from this country, with the result that the export value of bloodstock sales will steadily decrease.
      I am asking the Government to ensure that the position of the owner or breeder in this country is fair and competitive in relation to owners and breeders in other countries, and particularly in other EEC countries. I hope that the Minister will be able to say that we are trying to attain harmonisation, and also that he will say how we hope to ensure harmonisation of treatment of owners in this country in comparison with others. If harmonisation does not take place fairly soon, I believe that the consequences to which so many hon. Members have drawn attention will come to pass.
      Mr. Frank Haynes: I shall be as brief as possible. I have been surprised by some of the remarks that have been made in the debate.
      I believe that our priorities are wrong. Earlier on I listened carefully to my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), who appealed for a reduction in the VAT that has been

      1279
      imposed by the Conservative Government on the people of this nation, especially on those in need. I am referring to those who work for voluntary organisations—for example, the league of friends, which helps those who are really in need. At that time there were fewer than 10 Conservative Members in the Chamber. There are more than 50 now and we are talking about horses. Conservatives have got their priorities wrong.
      I agree with a number of contributions that have been made by Labour Members. I shall tell you something else—[HON. MEMBERS: "Who?"] I apologise, Mr. Godman Irvine, for not speaking through the Chair, but I am a new boy. I am learning and I am not afraid to admit my mistakes.
      Not long ago I worked in a pit. From time to time, some of the men that came on the afternoon shift, who had been watching Ascot, Goodwood and Epsom on television, talked about the men they had seen dressed in top hats and tails while they were working at the coalface and slogging out their insides. They are the very people who have been hit by the increase in VAT.
      We should get down to basics. How hypocritical are Conservative Members! They have put a fair amount of emphasis on the loss of jobs, but they have got it wrong. What they are talking about is the loss of profits. If they spoke to the working-class people in their constituencies they would hear some of the comments that I am making now. Conservative Members should remember whom they represent. From my experience of working in a pit, I could understand it if the concern had been about football, cricket, the cinema or the theatre. But, no, we are talking about horses. The priorities are wrong.
      I am opposed totally to the increase to 15 per cent. in VAT. I believe that it should have remained as it was before the general election. We should be fair to those whom we represent. We should not pander to the millionaires. But I am afraid that that is the direction that the debate has taken and will continue to take until the vote.
      Many working-class people are suffering because of the increase in VAT and the sooner we are sensible about that the better it will be for all of us. I represent
      1280
      a constituency with people who need much help. That is why I now seize the opportunity to express that view on their behalf. I hope that all hon. Members will vote against the amendment.
      Mr. W. R. Rees-Davies: I should like to reply briefly to the three Opposition hon. Members who were against the tenor of the debate. I think that they were completely sincere and meant every word. I entirely appreciated what they said, but I believe that they are wrong, for reasons that I shall give.
      I have had a life time of experience of the turf. I know many hundreds of people connected with it, including owners and those in the Racecourse Association, which I have had the honour to advise. We see no chance that the rich will keep their horses here if the VAT remains. There will be no VAT receipts, because the rich gentlemen will suffer no disadvantage. I could give the names of half-a-dozen big owners who, if the tax remains, will leave for Ireland or France to have their horses trained there.
      It now costs £3,000 a year in this country for training and entry fees for a first-class horse. If an owner's horse is valued at £20,000, he must pay the VAT at 15 per cent. It is plain that he will not do so, that he will not keep the horse training in this country. The horses will go abroad. They are already moving, to Eire and France, and they will remain there. Horses will be bred and trained there. Those big owners who are at present bringing horses into this country and training them here have no intention of continuing to do so. There is no reason why they should.
      Our amendment is in no way a rich man's amendment. It will not assist the rich at all, because they will be able, as always, to move their horses out of this country without any difficulty. The only people to suffer will be the trainers, the jockeys and others. Therefore, I say to Labour hon. Members "Please do not think that we are doing this to help the rich." We are not. We are doing it to help the industry, including the trainers. I can give the assurance, based on a lifetime's experience, that there is no question that in the amendment we are doing anything to help some of the rich owners, whom we may know well and respect, and who do a great deal for this country.

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      They will simply go elsewhere if the amendment is not made.
      The Treasury will not gain a penny piece, because there is no VAT in Eire. Therefore, someone with a couple of horses can have his training free there as against the VAT he would have to pay here. In France, the owner has to pay only on the carcase values.
      As the right hon. Member for Bermondsey (Mr. Mellish) correctly said, we are aiming to have fair treatment. This is not a debate about Omo. It may rightly be felt that 15 per cent. is too much VAT to pay on Omo. But training horses has nothing to do with Omo. They are not washed with Omo. Training horses is a service—the service of our unique trainers. It is the service of great trainers, who are renowned all over the world. It is the British racing industry which is regarded as the greatest in the world.
      When debates began in this Chamber about the money that would be produced by betting tax, I said that the figure would be £60 million to £70 million. I was derided and told that the figure would be £30 million. We get £100 million. Will we continue to get those millions of pounds if we deride the racing industry and treat it as the poor man, totally different from the industries in Eire and France? We should pass the amendment and ask Roy Jenkins and the European Commission to harmonise the situation in Europe. It is a damned scandal that it has not already been done.
      12.30 a.m.
      Mr. Conlan: Are not the words of doom that the hon. and learned Gentleman is expressing exactly the same words of doom as were expressed on innumerable occasions in objecting to the 8 per cent. level? Horses were not taken out of the country, in spite of our prognostications. Why on earth should anyone believe that it will happen now?
      Mr. Rees-Davies: That is a fair point to make. The fact is that large numbers of horses were taken out of the country. I could give the figures, but I do not want to name individuals. About half moved their horses to Eire. Many horses are in France. Some people decided to give the 8 per cent. rate a run. With the rate at 15 per cent., none of them
      1282
      will give it a run. There will not be a penny.
      It is fair to ask the Treasury what we have to lose. The answer is next to nothing. They will move. For unlike Omo, they can move. One is not testing a commodity that is saleable here. One is testing an international movement of racehorses that can be moved to many other countries, particularly to France and to Eire. We must also face the fact that France pays extremely good prize money. They also pay the breeders.
      It is my opinion, which may be wrong, that we do not need to deal with this issue as a matter of law. It is my opinion that the Customs and Excise can follow the directive which the French have chosen to follow. I may be told by the Minister of State, who is a very good tax lawyer, that he is not prepared to accept the same kind of ruling as the French have accepted. The French lawyers have said that they are prepared to treat the whole matter as one where VAT is charged on the carcase of the horse. The French have not yet been challenged on that ruling.
      Why do we not accept the precedent that the French have adopted? It can be done at the stroke of a pen by my hon. and learned Friend. He can say that we will adopt for the present the same ruling as the French. If the EEC takes the view that this is wrong, I would agree with hon. Members who oppose this amendment provided that the same VAT rate applies in France, Eire and here.
      This is an intolerable imposition which does not affect Omo and other such products. It is intolerable that we have to adopt a standard which the French have managed to get round and out of which the Irish have negotiated themselves.
      At least until the EEC decides on the negotiating terms and on whether the tax will be imposed on the carcase or the value of the horse, we should adopt the amendment. What is the value of the Derby winner? Is it £2 million or £3 million? What will be paid for a first-class yearling? And 15 per cent. has to be paid on top of that. As much as £100,000 will be paid. That is big money. Nobody will pay £15,000 VAT on a horse which still has to be trained. It will be sent to be trained elsewhere.

      1283
      When I walked into the Chamber I said to myself "I bet that somebody says that we have turned down a reduced VAT rate for the disabled, so why in the name of heaven should we do something for the rich bloody horse owners? "But I thought that somebody had to explain why it is right to do that. I hope that I have explained the argument.
      Mr. Kilroy-Silk: I do not know whether the hon. and learned Gentleman has explained, but perhaps he can explain why not one of his hon. Friends spoke in the debate on exempting VAT for the disabled and why the Government Benches were empty during that debate when on this subject we have heard a string of speeches and the Government Benches are full.
      Mr. Rees-Davies: It is not my responsibility to explain what happened in an earlier debate, but it is my responsibility to explain that this is a different argument. All the other countries are treating the matter differently. We are dealing not with Omo but with an important service and the maintenance of an important industry.
      I hope that the Committee will recognise what is at stake and give an opportunity to the Treasury to make an immediate concession. If we wait nine or 12 months, we shall lose this business. It will go abroad and it will be difficult for it to return.
      Mr. Nick Budgen: I declare a romantic interest since I rode and trained racehorses all my adult life until I entered the House of Commons.
      I regret that I cannot support the amendment. I know little about the rich people who own expensive flat race horses, but I know something about stable lads and those who are intimately involved in the industry. They are badly paid. The reason for that is that they are not motivated by material gain. They are attracted to the industry for romantic reasons, because they love horses, enjoy the danger of riding horses and the excitement of the turf. We are all anxious to give them equality of competition with the Irish and French.
      But that cannot be achieved fairly by the amendment. The Irish have, perhaps
      1284
      by sleight of hand, obtained a legal derogation which allows them to apply a nil level of VAT within the EEC structure. That is only a temporary derogation, and we should strive to ensure that they compete on equal terms with us in future.
      The position in France is different. The French apply VAT on carcase value. It is doubtful whether that is legal within the laws of the EEC. If it is legal, let us apply VAT on the same basis. If, however, it is held to be illegal, let us apply the robust Gaullism for which the Chief Secretary is rightly famed. Let us say to the French "Stop the fiddle. We want to compete on equal terms with you and if necessary we will play it as rough and as tough as you". That is the view of the Chief Secretary that ought to come out tonight.
      Let us be plain. To give, as would appear, a special concession to the racing industry would not be fair in relation to those who are, for instance, buying washing machines with an increased rate of VAT. To have a reduced rate of 8 per cent. in relation to the racing industry would make nonsense of the whole structure of VAT. It would prevent us from having the uniform level of VAT which everybody in the Committee knows we strive for. It would also, if I may respectfully say to my hon. Friend the Member for Norfolk, South-West (Mr. Hawkins), be unfair to those persons for whom he pleaded, because the exact terms of his amendment do not apply to all horses. They apply only to the thoroughbreds and the bloodstock industry. It would create yet another anomaly.
      Let us appeal not to this amendment but to the robust Gaullism which still lingers here on the Tory Benches and which is most of all perhaps represented by my right hon. Friend the Chief Secretary.
      Mr. John Farr: I support most hon. Members who have spoken in favour of this amendment. Two main points have been made. The first is whether the industry is a major one in Britain. Surely an industry which employs about 100,000 people and whose exports are worth nearly £40 million a year can be valued and welcomed. The second point which has concerned many

      1285
      Members—only two or three hon. Members have objected to this amendment—has been whether there has been unfairness to this industry. Quite plainly there has been great unfairness compared with countries such as Ireland and France.
      My right hon. Friend the Member for Farnham (Mr. Macmillan) quoted an article published in 1974 by my hon. Friends on the Treasury Bench. In it they pointed out how unfair the application of VAT was to people engaged in the British racehorse industry. What he does not know but what I can tell him is that since 1974 the situation has declined markedly. My hon. and learned Friend the Minister of State may not be aware of the figures of the latest December bloodstock sales in Newmarket. For the first time ever, of the top 10 money-earning studs at Newmarket, six were registered in Ireland and only four in Britain. That is a radical change in a situation which has steadily deteriorated over the years. Unless the present tax arrangements are changed, and it is made possible for the British racing industry to compete with the French and the Irish, it will get much worse.
      My hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies) said that he did not wish to mention names of people who had left Britain to race abroad. On the other hand, surely it is no use referring to people unless we can give statistics. I can mention one man, Mr. Robert Sangster, who has a racehorse farm in Britain from which he has removed all his stallions. He has removed 13 stallions to Ireland and other stallions to race in the United States of America. He now has no stallions left in Britain. In both France and Ireland, a person engaged in the bloodstock industry has a much easier time in terms of taxation.
      I refer briefly to the recent report of the Royal Commission on gambling, which recommended that VAT in Britain should fall into line with that in Ireland. Reporting only last year, the Commission said that the loss of revenue to the Exchequer would be, at 1977 prices, only between £1·5 million and £2 million a year, but that the concession might do something to halt the process by which foreign and British breeders had been
      1286
      moving their stud operations to Ireland and elsewhere.
      In 1974, my right hon. and hon. Friends saw the writing on the wall. In 1978, at the latest sales, more than half the top selling studs at Newmarket were based in Ireland. How much more evidence does the Treasury want before it acts?
      12.45 a.m.
      Mr. Peter Rees: This is a most important amendment, and it has generated a most important debate. My hon. Friend the Member for Richmond, Yorks (Sir T. Kitson) moved it with his customary lucidity and command of the facts, and he was supported vigorously by right hon. and hon. Members on both sides of the Committee, especially by the right hon. Member for Bermondsey (Mr. Mellish).
      Since there was a singular unanimity of view, I do not think that I need go through the various speeches in the debate. However, I emphasise from the Dispatch Box on behalf of the Government that we regard racing as a most important British sport. We recognise that it gives amusement to every stratum in our society and that certainly it is not a rich man's sport. It also provides a wide range of employment, as my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) pointed out, and that was corroborated by the hon. Member for Newcastle-under-Lyme (Mr. Golding), if it was necessary to corroborate it.
      I emphasise again that we recognise the need to keep the best British blood-stock in this country. We recognise that it should be trained, bred and raced here. We recognise that the British thoroughbred is now a national institution, from wherever the original stallions may have come. They may have been an original OPEC export.
      Although it is not for me to make the case for the amendment, perhaps the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) did not address himself to the crucial issue. The question is not whether we should give relief to a particular industry. It is whether a prime British industry is being put at a disadvantage against its foreign competitors. The hon. Gentleman said that he had never been to Ascot, Goodwood or Epsom. However, if he visited the working men's clubs in his constituency, he might discover that their members

      1287
      patronised the courses at Musselburgh and Hamilton. They would understand if they were told that the British racing industry was not being allowed to compete at level weights with its foreign competitors. Given the high degree of mobility that there is in racing, this must cause concern.
      The technical reasons why the British racing industry is at a disadvantage have been canvassed so thoroughly and expertly by various of my right hon. and hon. Friends—
      Mr. Harry Ewing: The men who go to the working men's clubs in my constituency have been much more concerned in recent weeks about the way in which the shipbuilding industry on the Clyde and in Scotland generally has been put at a disadvantage, with the Government doing nothing to help it.
      Mr. Rees: I think that the hon. Member will find, on analysis, that that is not a precisely similar situation in that British Shipbuilders is not disposed to move its operations to the Continent because of the existence of a different tax structure.
      Mr. Buchan: It will just close down.
      Mr. Rees: That is a different point that I should be happy to debate with the hon. Member on some other occasion. The hour is late, however, and I shall concentrate on the essential issue in this case.
      We are debating whether the British racing industry is at a disadvantage and we recognise that it is due to the quirks of the VAT systems operating in two other EEC States. I am, I hope, as convinced an adherent of the Common Market as the right hon. Member for Bermondsey. That sentiment may not be shared throughout the Committee, but it must be an essential principle of the EEC that there should be no distortion in competition for a variety of reasons. There is a distortion, as we recognise, due to the differing interpretations and applications of VAT in three countries—our own, Ireland and France. The question is how to put British racing in the position that it can compete at level weights.
      Various ingenious suggestions have been made, particularly by my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies), whose knowledge and expertise in this field is recognized
      1288
      by the whole Committee, and by my right hon. Friend the Member for Farnham (Mr. Macmillan). I found his speech compelling. He quoted not precisely the words of my hon. Friend the Financial Secretary and myself but a report that may have been penned by his own agile hand and to which I and my hon. Friend put our names. I would not wish to withdraw at all from that. I always find my own arguments particularly compelling, even when recited back to me after a lapse of years.
      If my right hon. Friend will consider section 10 of the Finance Act 1972 he will see the difficulty that we face. It is that VAT is to be charged on the price at which goods and services are to be provided.
      My hon. and learned Friend the Member for Thanet, West made an interesting point, but I am not sure whether it takes full account of the sixth directive. Certainly the advice we have received, which I am not disposed to reject, is that we would be in breach if we were to value racehorses on some speculative or carcase basis.
      Let me at this point reassure the hon. Member for Stirling, Falkirk and Grangemouth on the question of footballers.
      Mr. Dalyell: If we are in breach of the directive, why are not the French?
      Mr. Rees: The hon. Member clearly has not followed my argument. I agree that the hour is late and that I may not be as lucid as I should be. We are not in breach of the directive, but we suspect that our French friends are.
      Mr. Budgen: Is it not possible for a case to be taken to the European Court testing this issue and, if necessary, forcing the French to comply?
      Mr. Rees: I am grateful to my hon. Friend, who made a powerful intervention and spoke with a direct personal knowledge of certain aspects of racing. Naturally I listened to his views with particular respect.
      Let me, however, turn for a moment to the football field. I do not know whether that grips my hon. Friend's attention—
      Mr. Budgen: What about the European Court?
      Mr. Rees: The hon. Member for Stirling, Falkirk and Grangemouth wanted to know about football transfers.
      Mr. Budgen: Will my hon. and learned Friend please answer the question? Do the Government intend to take the French to the European Court if they believe that the way in which they tax bloodstock is illegal?
      Mr. Rees: My hon. Friend is normally extremely courteous and I can only conclude that it is getting rather late and that perhaps he is—[Interruption.] If my hon. Friends will allow me to make my speech in my own way, I shall deal specifically and precisely with the points that my hon. Friend has put to me. I was in the middle of discussing the intricate and difficult question of football transfers. Before I conclude, I should like to offer the hon. Gentleman, and other hon. Members who may be following this point, an explanation, although I know that the hour is late.
      Football transfers are subect to VAT. This will cause the Committee concern. But if a footballer is transferred to an overseas club, the supply is zero rated—presumably because he counts as an export. Conversely, however, if a foreign footballer is transferred to a United Kingdom club, the supply is liable at the standard rate, but the United Kingdom football club will probably be registered for VAT and will be able, therefore, to claim an input tax deduction.
      Going on to transfers between VAT registered clubs in the United Kingdom—I must put this absolutely in the round in case any hon. Member is tempted to interrupt me—transfers between VAT registered clubs produce no net revenue because of the input tax mechanism.
      Finally, I assure the hon. Gentleman that there is no VAT calculated on the carcase of footballers.
      Mr. Peter Hardy: We should return to the question of the French arrangement. A couple of years ago, the Labour Government sought to be of assistance to pig farmers by making a special arrangement, to which the French and other Europeans objected, and we were taken to the European Court and the scheme had to cease. Since we eat pigs and the French eat horses, would not the hon. and learned Gentleman suggest
      1290
      that we ought to take action similar to that which was taken against us?
      Mr. Rees: I know that the hon. Gentleman was endeavouring to be constructive, but when he started to compare bloodstock with pigs I felt a certain frisson. I knew that my hon. Friends would not perhaps take it kindly if I were to pursue that analogy too closely.
      Mr. Denzil Davies: This is an important point. If the French are in breach of their obligations, about which there is considerable suspicion, why cannot we take some action—indeed, take them to the European Court—to protect our own industry?
      Mr. Rees: I know that the right hon. Gentleman is intending to be helpful, but he may not have heard that I said to my hon. Friend the Member for Wolverhampton, South-West that I would come to that point in due course. If I am allowed to do so, I shall now come to those points. However, I am a little surprised that the right hon. Gentleman should take these points. After all, this whole delicate issue is generated by the sixth directive. I cannot recall whether it was the right hon. Gentleman or his right hon. Friend the then Financial Secretary who was engaged in the negotiations, but, anyhow, this is now water under the bridge.
      Let me tell the Committee, however, that in the month of May, quite soon after the present Government took office and long before this amendment appeared on the Notice Paper and, indeed, before the Finance Bill was even published, I caused inquiries to be made of the EEC Commission in Brussels as to what view it took, because I was profoundly unhappy about the present position. The Commission is looking into the question—whether or not with sufficient urgency I leave the Committee to decide—but I now give the Committee two assurances.
      In view of what has been said tonight, to which I have listened with close attention—and I have been impressed by the arguments from both sides of the Committee; there have been very few partisan overtones in this debate—I undertake that we shall write to the President of the Commission to find out what is happening and how promptly we can expect a view from the Commission on this point.

      1291
      It may well be that the Commission will form the view, as the right hon. Gentleman and my hon. Friend the Member for Wolverhampton, South-West pointed out, that the French are in breach of their obligations. The Irish are a slightly different case because they were astute enough to negotiate a derogation. I leave it to the right hon. Gentleman to explain why we did not do that. At any rate, it will then be up to the Commission, if its advice is in accord with ours, that our French friends are in breach—indeed, it will probably be the Commission's bounden duty—to take this matter to the European Court to obtain a definitive ruling.
      Mr. Budgen: Is it necessary to have this preliminary statement from the Commission before taking the French to the European Court? We have been waiting since 1973. If our legal advice is that this is an illegal action by the French, why cannot we go straight to the European Court?
      1 am
      Mr. Rees: My hon. Friend is a lawyer, as I was until 8 May. On reflection, perhaps he will remember that it is not for us to initiate litigation of this kind. It is for the Commission to do that. That is the reason.
      I shall now give my second assurance, which is that if the Commission decides to take no action, or should the European Court rule that our French friends are not in breach of the sixth amendment, certainly this Administration will be ready to review the position to see how the disadvantages under which the British bloodstock industry is labouring can, in the long run, be eliminated.
      I hope, therefore, that on the basis of these two assurances my hon. Friend the Member for Richmond, Yorks, will feel able to withdraw his amendment.
      Mr. John Gorst: Does my hon. and learned Friend agree that the time that all this will take will be sufficient for the bloodstock industry to have bled to death before anything happens?
      Mr. Rees: This point has been put very forcefully from these Benches and to me in representations. We are acutely aware of it. It would not be our intention
      1292
      to drag our feet, but obviously these matters must be cleared up first.
      Mr. Rees-Davies: Can my hon. and learned Friend give us a timescale? It is a matter of great urgency. If there is not a satisfactory reply from Roy Jenkins and the European Commission in a short time, may we have an assurance that, say by October, when the House resumes, we shall have a definitive statement?
      Mr. Rees: I certainly undertake to see that we keep hon. Members closely informed. The difficulty about pinning ourselves to any precise time is that should the European Commission take action before the European Court, as my hon. and learned Friend will understand, it is difficult to forecast on what basis and over what period litigation will proceed.
      On the basis of those two assurances, I hope that my hon. Friend the Member for Richmond, Yorks, will be able to withdraw his amendment.
      Sir Timothy Kitson: I am grateful to my hon. and learned Friend for his reply and for the assurances that he has given to the Committee, but I must stress, as so many right hon. and hon. Members have said this evening, that time is running out. I hope that some noises will be made in the House, even before we adjourn at the end of July, to indicate that at least the Commission is making some moves.
      I very much hope that my hon. and learned Friend will keep the House informed about any progress that is made, because, if nothing can be done by the Commission, I believe that he and the Government will have to act.
      Amendment negatived.
      Mr. Edward Rowlands: I beg to move amendment No. 15, in page 2, line 27, at end add:
      'as from the passing of this Act and not-withstanding the provisions of subsection (1) above value added tax shall be charged at 12½ per cent. on the supply of washing-machines.'.
      The Second Deputy Chairman (Mr. Richard Crawshaw): With this we may discuss amendment No. 21, in page 2, line 27, at end add—
      '(6) As from the passing of this Act subsection (1) above shall not apply to the supply of laundry services.'.
      Mr. Rowlands: I wish to remark on something which the hon. Member for Bury St. Edmunds (Mr. Griffiths) said in the previous debate, when he spoke of a major industry in an area where it is hard to find jobs. In that case the hon. Gentle man was referring to bloodstock and stables. This amendment also relates to a major industry in an area where at present it is hard to find jobs, and I propose to relate my remarks to the proposed level of VAT on washing machines.
      It was four or five years ago that we last debated at any great length the subject of VAT on automatic washing machines. Then my right hon. Friend the Member for Leeds, East (Mr. Healey) treated them as items of luxury, and raised the level of VAT in the 1974–75 Budget. However, considerable representations were made by the work force of Merthyr Tydfil employed in the Hoover, Servis and other washing machine factories. They were supported by the management and by hon. Members both within and outside the Government. Within 12 months my right hon. Friend had accepted the basic claim made in those representations that washing machines were never a luxury and should be seen as a basic and fundamental item in any household.
      Following those representations, the rate of VAT was reduced to 12½ per cent. within 12 months. It was a demonstration of the willingness of my right hon. Friend to listen to the representations made to him by the work people and management of the areas concerned in the manufacture of washing machines, and reflected a wider consumer demand and need.
      I would happily withdraw the amendment and not pursue the argument if we could have an assurance from the Chief Secretary that within the next 12 months—we do not expect him to be able to overturn the decision immediately—the rate of VAT will be reduced. If the Chief Secretary was willing to do that, I would happily sit down and we could then debate some of the other amendments. If the Chief Secretary is unable to do that, I shall briefly reiterate the arguments raised. They are equally as valid now.
      A washing machine is not an extreme luxury, like a piece of jewellery. It is
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      an intrinsic part of every household. I regret that it was not rated at 8 per cent. like other basic household requirements, but we accepted the 12½ compromise. There is no case for a washing machine or any other household item to be rated at 15 per cent. To justify the massive basic increase in VAT, the Chancellor has developed the myth that VAT does not have a great effect on the ordinary working household. If members of the Tory Party do not believe that working folk buy shoes, clothing and automatic washing machines, they do not live in the same world as most of us. A washing machine is a basic household requirement to remove the drudgery of the housewife's work.
      Equally important is the effect of VAT increases on the washing machine industry and the jobs in those manufacturing areas. That aspect made a deep impression on my right hon. Friend the former Chancellor when we made our representations. It was a major factor in his decision to halve the 25 per cent. rate of VAT to 12½ per cent. That was at a time when the British washing machine industry was being badly squeezed by growing foreign competition and especially by the growth of Italian imports. The position has deteriorated since 1974–75. Almost half our washing machines come from Italy, and that has enormous consequences in certain areas, including my constituency. Merthyr Tydfil already suffers from high unemployment, and the manufacture of washing machines is the major industry of our community. Over 5,400 people used to work in the Hoover factory. There are now only 4,200, and we are still facing enormous problems as a result of intense competition.
      There is the same level of VAT on Italian-produced machines, but we must consider how the market operates. It is not a constituency boast to say that Hoover is the leader in the domestic washing machine market and produces the Rolls-Royce of washing machines in the United Kingdom. It is a high-priced, high-quality machine compared with the Italian machine which is £20 to £30 cheaper. An addition of £20 to £30 on a machine costing £150 to £200 makes all the difference to any industry trying to compete in present economic conditions.
      The increase from 12½ to 15 per cent. will hurt the higher-priced washing

      1295
      machines much more than those at the bottom end of the market. United Kingdom manufacturers have concentrated on the higher end of the market. Hoover now has plans to drop its standards and produce a more competitive machine, comparable with the Italian imports, because of the impact of these cheap imports. Incidentally, these imports are often sold and promoted through the electricity boards, under brand names which make it difficult to find the country of origin. Also, the electricity boards are processing some machines under their own name in order to reach the British consumer.
      1.15 am
      The impact of the proposed alteration in VAT will hit the higher end of the market correspondingly harder. This will exacerbate matters. Because of the price war, margins have been cut to such an extent that there is almost no profitability for distinguished firms such as Hoover, Hotpoint and Servis.
      An increase of 2 per cent. or 3 per cent. on an item costing £200 may seem small, but it hits the individual consumer. In fact, in present circumstances these new margins could be the deciding factor to a person about to buy a new washing machine.
      Mr. Michael Morris: Is the hon. Member saying that a consumer will switch brands simply because of a £2 or £3 price difference?
      Mr. Rowlands: It is not a margin of £2 or £3. It is a margin of 2 to 3 per cent. on higher priced machines. Also, the effects of the price war mean that profit margins have been cut, and this could lead to a decline in output. These factors, together with the gloomy forecasts about expenditure on consumer durables, and the lower purchasing power of many people, mean that the outlook is gloomy for those areas which manufacture British domestic washing machines.
      This is a straightforward constituency point for me. We have the largest washing machine factory in Europe in Merthyr Tydfil, an area which has already seen one major process of deindustrialisation. We could now be faced by a severe economic and unemployment problem.
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      The confidence and ability of the domestic washing machine industry has been sapped by the VAT changes and other market conditions. That is why I make my plea to the Government. I do not expect them to change the Bill, but we managed to persuade the previous Chancellor, by reason and argument, of the need in household and personal terms for washing machines and the importance for employment of a major domestic industry, and I hope that the Government will reconsider the matter with a view to reducing the rate of VAT on washing machines in the next financial year.
      Miss Jo Richardson: I should like to speak to amendment No. 21 which is linked with No. 15, which I wholeheartedly support. We move from washing machines to launderettes, which is not so far, and I shall seek to press amendment No. 21 to a Division.
      The VAT on launderettes is 8 per cent. and I should like them to be zero rated because they provide a service which ought not to attract VAT. Hands up those hon. Members who use launderettes every week. I see that seven hon. Members have raised their hands, and I doubt if there are many more who use launderettes regularly.
      As my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands) said, washing machines are not a luxury, but they are, nevertheless, out of the range of about 2½ million families—mainly the needy minority of large families at the lower end of the income scale who cannot afford machines or whose accommodation does not have room for one. I live in a flat and I do not have a washing machine because I have nowhere to put one. My kitchen, for example, is minute.
      Large families, students and the elderly need launderettes and they are also used, indirectly, by local authority social service departments because many of our excellent home helps pop down to the launderette with the washing of the elderly people for whom they care. In addition, many old people's homes are not modern enough to have washing machines and therefore launderettes are important to them.
      This increase will put about 10p extra on a load of washing. That may not seem a great deal of money to some, but when added to the other VAT increases it

      1297
      might make it impossible for low-paid families to continue to use launderette facilities.
      We hear a great deal from the Government about the tax cuts evening out VAT increases. Even if that were true—and it is not true of people at the lower end of the income scale—I must emphasise that the VAT increases already apply in shops and launderettes, and nobody has yet seen a penny of the promised tax cuts because they have not yet come fully into effect.
      Recently, during Prime Minister's Question Time, I was able to draw attention to the need for the zero rating of launderettes. The following day the Sun carried a story featuring the launderette nearest to the home of the Prime Minister. The owner told the newspaper that there would be no increase in his charges because he was a one-shop unit and did not fall within the VAT classification. The implication of the story was that launderette users were making a mountain out of a molehill and that most launderettes would not have to increase their prices because of the increase in VAT.
      I made some inquiries and was told that the one-shop unit is the exception rather than the rule. The little launderette around the corner is often one of a chain of two or three and in some areas of 20 or 30 launderettes. I was told that in Liverpool one chain of launderettes is 100 strong. Therefore, the majority of launderettes will be subject to VAT.
      If we allow this increase in VAT to operate without protest, we shall run the risk that some launderettes will have to close because people will not be able to afford even the extra 10p per washing load and will go back to washing at home. Do we want to force families to go back to the old days of hand washing at home? I remember when I, as one of three children, dreaded Mondays because they were wash days. When we came home from school, the kitchen was full of steam and dripping washing. Poor mum had been at the scrubbing board all day—and that happened every Monday because there were no proper drying facilities and no modern appliances such as we have today.
      Let us consider the position of students, many of whom live in single rooms rented
      1298
      perhaps from a family. Students are not the best-off section of the community. Are they to be told that they will have to wash their clothes in their rooms so that their clothes will be festooned around their bed-sits? It is not healthy and it causes condensation. The modern equipment of today and the launderettes have made a vast improvement.
      1.30 a.m.
      Every local authority used to have municipal wash houses—some still do. But many local authorities have found that launderettes have provided the service and used those wash houses for other purposes. Is it suggested that the local authorities, which would have a duty to provide some form of service, would have to rethink about the wash houses and provide them anew? In these days of public expenditure cuts, I can hardly believe that many local authorities will be able to afford to do so. I should not object if modern-day launderettes were run by local authorities but in the absence of that provision we should ensure that the existing ones provide the best service to the community.
      I remind the Committee that during the three-day week in the winter of 1973 and 1974, under the Conservative Government, as we all well know, launderettes were excluded from the obligation to open on three days of the week only. They were regarded in that dismal, dark period as being such an essential service that they were allowed to remain open for the full six-day week. If they were essential at the time of that crisis, why are those who use them now being penalised?
      As my right hon. and hon. Friends constantly point out, Conservative Members do not give a jot about the difficulties of the families who use launderettes. They are not interested in making life any easier for those to whom 10p really means 10p. To those families the extra 10p will make a tremendous difference.
      At some future stage, as we cannot ask for zero rating in the Finance Bill, I hope that the Government will think about the possibility of zero rating launderettes. In the meantime, if they have any sense of decency and concern for those families to whom I have referred. I beg them to consider seriously reducing

      1299
      the 15 per cent. VAT rate to the former rate of 8 per cent.
      Mr. Biffen: After discussing the exhilaration of the turf on the previous amendment, we have moved to a more prosaic subject, but it is one of importance. The hon. Member for Merthyr Tydfil (Mr. Rowlands) reminded the Committee that washing machines are essential to the economy of Merthyr Tydfil. It is immensely debilitating to see the infrastructure of the first industrial revolution decaying only to be replaced by what was hoped and believed to be an industry which would last for the second half of the twentieth century but which is withering before our eyes. That has affected a number of south Wales valleys.
      I have every sympathy with the points made by the hon. Member for Merthyr Tydfil. He commented upon the difficulties that were created for the washing machine industry when VAT was rated at 25 per cent. He spotlighted dramatically the problems that are associated with a multi-rate form of VAT. Immense problems flow from the essentially human and political judgments about what constitutes a luxury when that luxury becomes a popular necessity within four or five years. That matter is very much in the Government's mind in seeking to have a single positive rate.
      Amendments Nos. 15 and 27 would infringe our dedication to the single positive rate, which is one reason why I must appear less generous than I would wish towards the points argued by the hon. Gentleman. He said that it was essentially a probing amendment, and that he did not expect a volte face by the Treasury Bench. I can assure him that there will be no volte face. We are by nature almost congenitally open-minded, but I cannot anticipate what will be our view this time next year. The judgments reached in framing the Budget and the present form of VAT were not reached lightly, and they are unlikely to be changed easily. I must say that, because I do not wish to mislead the hon. Gentleman in any way.
      Mr. Rowlands: I am grateful for the sympathetic way in which the right hon. Gentleman is replying and for his valid point about the problems of a multiple
      1300
      rate of VAT. He will find in France and Germany an enormous complexity of multiple rates. I do not know whether he can give any information on how washing machines are rated in France and Germany. I had to plough through great tomes to find that the Italians had rates of 6 per cent., 9 per cent., 12 per cent., 18 per cent. and 35 per cent. I gather that the standard rate in Italy is 14 per cent., which may well be the rate paid on washing machines by the Italians, who are our chief competitors in this area. Having multiple rates of VAT is quite a European habit. I know that that will not endear it to the right hon. Gentleman.
      Mr. Biffen: The hon. Gentleman could not be more correct. The Committee would be well advised to disabuse itself of the habit of always looking across to continental Europe to seek tuition on how it should behave. We should try to fashion our own laws as best we can, in consort with those with whom we are in treaty alliance, rather than slavishly to ape them.
      I believe that the Commission has recommended that a single positive rate of VAT would be preferable to the multiplicity of rates which apply in a number of the continental European countries. I understand that among the Community countries VAT is less than 15 per cent. only in Germany, Luxembourg and Italy. Therefore, it is not true that the washing machine industry in the United Kingdom is at a disadvantage in terms of the rate of VAT compared with the span of the European Community countries.
      There is another consideration that I put to the Committee, but I do not wish to make it imperative because the House is jealous of its own law-making prerogatives. If we were to accept the amendment, that would certainly call our actions into question under the Community's sixth directive.
      I think that the hon. Gentleman's central concern is the impact that the increase will have on the industry. Clearly the industry's main fortunes will be related to the level of consumer demand in the United Kingdom and the competitive challenge that has been mounted from overseas, particularly Italy. The raising of VAT from 12½ per cent. to 15 per cent. will increase prices by about 2 per cent.

      1301
      I do not decry the importance of that in such a price-sensitive industry as the washing machine industry. But the increase will also be applied to machines in competition with those produced in Merthyr Tydfil. The increased tax will raise the price of the £200 machine by about £5 and the price of the cheaper machine, marketing at, say, £150, by £3·75. I engage in these statistics not to undermine the hon. Gentleman's argument but to point out that the tax adds only modestly to the difficulties of the industry.
      I turn to the remarks of the hon. Lady the Member for Barking (Miss Richardson), who spoke to the amendment on launderettes which was essayed by one not called in the name of my hon. Friend the Member for Leek (Mr. Knox). Again, for many of the reasons I have portrayed, I am unable to accept the amendment, although I appreciate that the hon. Lady felt strongly about the issue and will wish to call a Division. One of the central objections is our anxiety to avoid a multiple rate value added tax. She was fair in saying that at heart she would like to exclude services from the operation of the tax. Undoubtedly, if she was successful in getting zero rating for launderettes, there would be a logical case for extending zero rating to a whole range of other services.
      Veterans of past Parliaments will recollect the time that was spent in the days of purchase tax trying to find some tax that could apply to services—a search that culminated in the selective employment tax. The Committee should therefore be careful before treading any steps which would have the consequence of taking taxation away from services.
      One of the problems that the Committee will find again and again is the narrowing of the tax base. That is true whether we are talking of income tax or indirect taxes. The more one narrows the base by exemption, the greater is the burden thrown on those items that remain taxable. It is in that spirit that I recommend the Committee to reject the amendment.
      Mr. Dalyell: I understand perfectly well the argument about purchase tax. I referred earlier to the performance of Sir Gerald Nabarro in bringing out all
      1302
      the anomalies of that tax. But the point raised by my hon. Friend the Member for Barking (Miss Richardson) makes launderettes a special case. Hon. Members representing small towns or urban areas know of the problem of condensation. Twenty or 30 years ago the problem was not so acute. Today, with the modern buildings in our constituencies, it is one of the most difficult problems. Is it not extremely unwise to make people face all the problems of condensation, with the costs involved, when it would be relatively simple to exclude certain services? In the case of launderettes, it is a very simple line to draw.
      I am not convinced by the Chief Secretary's argument, and I will go into the Lobby with my hon. Friend the Member for Barking.
      Mr. Rowlands: I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Mr. John Garrett: I beg to move amendment No. 16, in page 2, line 27, at end add:
      '(6) As from the passing of this Act subsection (1) above shall not apply to any supply of clothing or footwear.'.
      The purpose of the amendment is to exclude clothing and footwear from the proposed increase in VAT from 8 per cent. to 15 per cent. The case for the removal of clothing and footwear from the increase is exceptionally strong and is based on three main grounds. First, there is the significance of items of clothing and footwear in the household budget, particularly for low-income households and the consequent hardships for poor families—those who benefit least from the income tax proposals in the Budget.
      1.45 am
      Secondly, there is the condition of the clothing and footwear industries and the damage that is likely to be caused to domestic producers by the price increases resulting from the VAT increase coupled with our other inflationary factors. Both industries have stabilised after years of decline and need confidence in the home market to support their investment and expansion plans. The Government are still underwriting those plans with grants.
      Thirdly, some children require sizes of clothing and footwear which are larger

      1303
      than those sizes covered by VAT regulations? The clothing of many school-children of 12 and over will now be subject to 15 per cent. VAT. This is a long-standing problem, which is made worse by the VAT increase on clothing and footwear. It will impose a new strain upon families. This alone is a good reason for continuing with the 8 per cent. rate on such items.
      We are talking about industries which, directly and indirectly, employ about 500,000 people. Their products are essentiol to all families. I hope that this question will engage the attention of Conservative Members as closely as the horse racing industry. I am sure that their constituents will thank them for paying as much attention to this topic as they did to the bloodstock industry.
      About 8 per cent. of the average family's household expenditure goes on clothing and footwear. Today, that amounts to over £6 a week. These items represent the third biggest spending element—after housing and food—for a two-parent, two-child family. It is clear that the £60 a week family will receive income tax relief of a little over £2 a week from the Budget.
      At least one-third of the increase in disposable income will be swallowed up because of the increase in VAT on clothing and footwear alone. It is estimated by footwear manufacturers that the retail price of shoes will increase, as a result of the runaway rise in world leather prices and the VAT increase, by 20 per cent. this autumn. The price of a medium range pair of shoes for a 15-year old girl, for example, will reach £18 this autumn. That is an intolerable price for an ordinary family to bear.
      It is not as if clothing and footwear were discretionary items and there was freedom not to buy them. They are essential. This increase is unjust. It hits the poorest hardest and demonstrates the Goveerment's blind lack of concern for the effects of their doctrinaire attitude on those who are least able to cope with inflation.
      The amendment involves the effect of a VAT increase on two important industries which have suffered decline for decades. That decline is so serious in terms of employment that both industries were singled out for help by the previous
      1304
      Government after repeated requests from the industries.
      The clothing industry has suffered a steady fall in employment in the last decade from over 360,000 employees to under 320,000 today. Domestic sales amount to £2,000 million a year. Import penetration has risen from 18 per cent. to 23 per cent. in the last five years. The future of the industry and its export success depends upon a secure home market base. The VAT increase and the general increase in inflation, to which the Finance Bill will contribute, will weaken that home market base.
      Consumers are likely to turn to cheaper clothing where imports predominate. Import penetration in men's and boys' outerwear is about 50 per cent. That comes almost entirely from developing countries and low-cost sources such as Greece, Portugal and Spain. An overall increase in price caused by VAT and the consequent retail mark-up will cause purchasers to switch to lower priced imported goods at the expense of the already debilitated domestic industry.
      The condition of the home industry led the previous Government to produce a scheme of assistance in 1975, extended in December 1976, making up to £15 million of public funds available for re-equipment and management improvements. The Government also negotiated import controls under the multi-fibre arrangement. After 1976 the clothing industry entered a period of stability, according to the clothing little NEDC in its 1979 report, which, I may say, declared its support for the industrial strategy of the previous Government.
      The industry needs a period of stability so that it can modernise itself and build a strong home base for an export drive. This enforced price increase will weaken demand. The extra purchasing power of tax reliefs will soon be swallowed up by food and housing cost increases, because the switch in demand to imports will threaten employment in a large industry spread throughout the country.
      When we come to consider the effect of the proposed VAT increase on footwear, I have to declare a strong constituency interest. The city that I represent, Norwich, is a main centre of the footwear trade. The footwear industry at the time of the previous Government's

      1305
      footwear study, in 1977, was the fastest declining industry in the country.
      Employment in the industry is now down to 74,000, with 4,000 on short-time working. Thirty-six thousand jobs have been lost in the industry since the late 1950s. A further 25,000 workers in supplying industries depend on this industry.
      Since 1973 demand has been virtually static and imports have risen from insignificant levels in the 1950s to over 40 per cent. of sales today. The greatest problem facing the industry is the rising, and accelerating, increase in the cost of leather. The leather price index has risen by 35 per cent. in the past year alone, and the VAT increases, superimposed on the inevitably higher prices in the shops, will act as a specific check on sales, according to the British Footwear Manufacturers' Federation. The likely retail price increase by the end of the summer is put at 20 per cent.
      In 1976 the Government set up a footwear study group to report on the condition of the industry. That group included members both from the present Government Benches as well as from the Opposition Benches. It also included industrialists and trade unionists from the industry. The report was unanimous in calling for help for the industry, and the Government allocated £4·5 million for a scheme of assistance. There have been 260 applications for assistance under the scheme so far, and the response is the highest of all such schemes in existence. Since 1977 the industry has shown a good recovery, and its decline over two decades appears to have been halted.
      Now it is to be hit by this VAT increase, which will stop any growth in domestic sales and lead to a trading down to imports, which will have a far lower unit value than home-produced goods. Those of us who are interested in and concerned about this industry had thought that it had reached a period of stability and modest growth after years of effort. The proposed increase in VAT will cast it into uncertainty again.
      Both the clothing and footwear industries need a secure and stable home market to support the design and development costs of new products if they are to compete in markets overseas. This enforced
      1306
      home market price increase will severely damage their competitiveness.
      Finally, we have the problem of the VAT level of 15 per cent. on many items of clothing and footwear for children. The VAT regulations which zero rate children's wear have, I understand, not been reviewed for four years. I ask the Government to undertake a review immediately. Boys' and girls' footwear will now jump from zero rating to 15 per cent. at a size five and a half shoe; that is to say at about age 13 or 14. Boys' and girls' outer clothing will go from zero rating to 15 per cent. on an anorak, or blazer, size of 37 or 38 in. chest; that is to say at age 13 or younger.
      This is clearly an abrupt increase in the burden on parents who will not be getting any increase in child benefit this autumn when prices are rising fast and when they have to buy winter clothing at the new prices. On the grounds that the proposed VAT levels on clothing and footwear place a heavy burden on the family budget, cause a scandalous increase in the cost of children's clothing and footwear and do great damage to domestic industries to which confidence had begun to return after decades of decline, I believe that the amendment deserves the support of the Committee.
      There cannot be another Government in the world who, faced with accelerating inflation, rising unemployment and, for all but the most wealthy, falling living standards, would increase taxation on clothes and shoes, which are essential items in the family budget, so as to drive down the living standards of ordinary people still further. The VAT rate of 15 per cent. on clothing and footwear is wilfully inflationary, damaging to home industry and socially unjust.
      Mr. Kilroy-Silk: I know that the Chief Secretary prefers to have a uniform rate of value added tax, and I go along with most of his arguments, because it simplifies the application and collection of the tax.
      However, I think that the right hon. Gentleman will accept the case made by my hon. Friend the Member for Norwich, South (Mr. Garrett) that for the low-paid, especially those with large families, the provision of clothing and footwear represents a considerable expense. The burden is particularly heavy on a family with a

      1307
      number of children of school age and beyond school age but of a size for whom only clothing to which VAT is applicable is suitable.
      The town of Kirkby, in my constituency, contains a large number of Catholic families and, therefore, a considerable number of large families. Because of a succession of Labour Governments, most of their children are very large for their age and for them the only suitable clothing is well beyond what is defined in the regulations as school clothing.
      For those families, the cost of a pair of shoes, unimaginable though it may be to Government supporters, or the cost of a dress for a girl still at school but which is rated for VAT, is large and often prohibitive. Many of my constituents come to my surgeries asking how they can possibly afford the kind of clothing which is not in any way extravagant, glamorous or in ordinary terms expensive but which is nevertheless necessary, when its cost is prohibitive in terms of their family budgets.
      To raise the rate of VAT from 8 per cent. to 15 per cent. will have a very damaging impact upon the budgets of those families. Of course, that applies especially to those who will not benefit from the other measures in this Budget. Many of our constituents who are unemployed, sick, low-paid or pensioners, and who therefore will not get any tax relief from the Chancellor of the Exchequer, re obliged to pay the increased cost of goods resulting from the higher rate of VAT.
      The most significant proportion of that cost will be borne by the increase in VAT on footwear and clothing. For that reason alone, although I go along quite openly with the Chief Secretary in not wishing to see a multiplicity of VAT rates, I argue that in this area there is a strong case and a powerful justification for zero rating.
      That justification was added to very powerfully by my hon. Friend the Member for Norwich, South when he referred to and gave figures of the decline in our footwear and clothing industries. He pointed out that the previous Government, and no doubt in future months the present Government will do likewise,
      1308
      had given a great deal of financial assistance to these two rapidly declining industries. It seems paradoxical that the Government should be giving financial assistance to try to maintain and sustain two precarious industries, only to jeopardise at one blow their future prospects and the employment prospects of all those working in them and in jobs related to them by increasing VAT so dramatically and by such a huge amount.
      This will not only make the commodities produced by the domestic footwear and clothing industries more expensive. Much more importantly, it will make them more expensive in relation to imports. The import penetration in the British market in both footwear and clothing is already significantly high. My hon. Friend the Member for Norwich, South gave the figures. Presumably, we should not seriously take any steps which are likely to increase that import penetration. For those two reasons alone, apart from all the others adduced in support of the amendment by my hon. Friend, I ask the Chief Secretary to think very deeply about increasing VAT in these two areas. I ask my hon. Friends to support my hon. Friend in the Lobby if the Chief Secretary is not prepared to give the sort of assurances that we seek.
      2 am
      Mr. David Stoddart: Anyone reading the proceedings of this Commitee could not help but contrast the concern shown by Conservative Members for the bloodstock industry with their apparent lack of concern for families, particularly families with children, who will be adversely affected by the swingeing increase in VAT. Many Conservative Members do not understand how difficult it is for families, particularly large families, with restricted incomes to manage their budgets.
      Many hon. and right hon. Members have children, but are not forced to live on a restricted budget as are many families in this country. This Budget is notable in that it affords the least tax relief to the lowest paid and to those on average earnings. People with children will do worst out of the Budget, yet their expenses will increase proportionately to a greater extent than will those of any other section of the community.

      1309
      Let me deal with the question of clothing. I shall come to children's clothing in a moment. Clothes are essential, yet they are to be subject to this swingeing 7 per cent. increase in VAT. They are not, as some Conservatives appear to believe, a luxury. They do not regard them as a luxury for themselves, but they see them as such when an ordinary work-ink man wants to dress decently.
      We hear the Conservatives talk about long-haired young people walking about in jeans and a sweater, but they are positively encouraging that practice. I like to see people decently dressed in a suit—I have on a decent suit, and it is made in England—or in slacks and a sports jacket, but the Government are driving people into cheaper garments of which so many Conservatives appear to disapprove.
      Families with children will be hit by the 7 per cent. increase in VAT, and they are also being hurt because many shopkeepers are taking advantage of the situation to raise prices by even more than the 7 per cent. increase in VAT. I recently did a local broadcast in my constituency. A listener telephoned and said "Mr. Stoddart, I went to the shops on Saturday and saw a pair of shoes which, before the increase in VAT, had been price at £8·95. I was horrified to note that the price had risen not by 7 per cent., which would have put the shoes at £10·60, but to £12·90." The shopkeeper was taking advantage of the Government's swingeing increase in VAT to profiteer out of ordinary working people. Therefore, by their action, the Government have encouraged and stoked up inflation by imposing this awful increase in the price of essential family commodities.
      My hon. Friend the Member for Norwich, South (Mr. Garrett) noted that children's clothes up to a certain size were zero rated. They became zero rated after a fight. The previous Tory Chancellor took a lot of convincing that children's clothing should be zero rated, but eventually he relented. At that time there were sufficient people on the Opposition Benches who were concerned about family expenditure and the standard of living of ordinary working people.
      I have a son who is 13 years old. It is no good my trying to buy him children's clothes. He is my height and almost my build, and he takes size 9 shoes, but
      1310
      he is only 13. What is more, I have had to buy him adult clothes since he was aged about 11½. That means that I have had to renew his clothes and shoes about every six months. This will continue to happen with this boy, and it will happen with the second child, too. I shall now have to pay not only the adult rate plus 8 per cent. VAT for his clothes, but we shall be loaded with an additional 7 per cent. in VAT. From my example, from which I am now suffering, one can appreciate the effect upon ordinary working people.
      Let hon. Members make no mistake about this. Ordinary working people will be hard hit. As my hon. Friend the Member for Norwich, South noted, children's clothing is a big item in the family budget, particularly for large families. To add insult to injury, instead of trying to assist families by increasing child benefit, the Government decided not to increase that at all. It remains at £4. Had they made a gesture in that direction and increased that benefit, it would have assisted families with children to meet the additional cost which has been put on the family budget by the VAT increase.
      This is a very bad tax indeed. In the light of everything that has been said tonight I hope that the Government will have second thoughts about this increase in VAT on clothing, which will hit people hard. This is the Government's opportunity to show that they have some heart.
      Mr. Ron Leighton: I should be most grateful if the Chief Secretary would clarify one matter. I got the impression from his remarks on the previous amendment that he was doubling the rate of VAT on some of the items about which we have been talking not because he believes in the intrinsic merit of doing so, or because he does not believe that there would be a good case for exempting some of them from this tax, but because there are other complications which make it necessary in order to harmonise and comply with EEC regulations and policy. We all know that it is the long-term aim of the Common Market to harmonise VAT, and I think that the average rate is 18 per cent. at present. I should like the Chief Secretary to clarify that point.
      Mr. Dalyell: I am against repetitious speeches. However, I raise the same

      1311
      point as my hon. Friend the Member for Swindon (Mr. Stoddart), which I shall put to the Chief Secretary in question form. As my hon. Friend said, and as everyone knows, it is not only that shopkeepers are raising the price of their goods to meet the increase in VAT. The truth is that many shops are either making hay while the sun shines or—putting it rather better from their point of view—adopting a preemptive strike by increasing prices by 20 per cent. or 25 per cent. over the weekend. That is a fact of life.
      Are the Government monitoring the situation? My understanding is that much of the machinery that was set up by my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) has been quickly dismantled. Have the Government any means of knowing precisely what is happening? If not, do they not think that they should conduct some kind of inquiry into these rocketing increases, where VAT changes have been used as an excuse for much more substantial changes?
      Mr. Frank Dobson: It may be that my memory is failing me at this hour of the morning, but I seem to remember the Prime Minister talking about the creation of a land of opportunity in which children would grow, and some would grow taller than others. It is clear that the message from the recent VAT increases is that children should not grow taller, because the taller and the faster they grow, under the system that the right hon. Lady has initiated, the more their parents will have to pay to clothe and keep them in footwear.
      This and previous Governments have shied away from the problems that parents face when clothing their families and having to pay VAT on clothing for teenagers. The penal rate of VAT which the Government are in the process of introducing has accentuated the problem. It is made worse by the fact that the Government are not proposing to introduce compensating increases in family benefits.
      With regard to expenditure on education, it is unlikely that the Government will introduce some form of compulsory—if that is the right word—or mandatory system of grants for children of the age of 16 and over, as has been introduced
      1312
      by the Inner London Education Authority—to its credit. I regret to say that it is to the discredit of the Labour Government that they did not introduce such grants nationally before they went out of office in May of this year.
      I hope that the Chief Secretary will do something about the severe problem that will be faced by ordinary families which do not benefit in any significant way from income tax reductions. Such families will be faced with a roaring rate of inflation and a severe imposition in the form of this new rate of VAT. That will strike hard at those families with children who are attempting to do what the Prime Minister proclaims they ought to do—grow tall.
      2.15 a.m.
      Mr. John Sever: I am anxious to ask Treasury Ministers what they propose to say to two or three groups of people to whom they made somewhat extravagant election promises a few weeks ago. The first of these groups consists of the families and average income earners to whom the Conservative Party put forward the prospect of being able to have a greater degree of choice than the Labour Government ever allowed. I want to know whether, within that element of choice, we are now giving people the choice of buying essential clothing and footwear.
      One of the arguments put forward was that if, in some magical way, we were able to shift the taxation burden on families and alter income and purchase tax levels in the form of VAT, we would be able to bring about a more equitable society. That was the sort of argument being put forward in the election campaign.
      We must now be worried whether the choice that is being offered to families and average income earners is really there. We find that these are the very groups of people who are now being asked for more money, in the form of VAT, for what are essential things. Therefore, for so many families the choice must be whether or not they can afford to buy basic essentials.
      If measures were being brought forward to make life easier for such families it would be unnecessary to decide whether clothes, footwear and essential

      1313
      commodities should be among those things most easily acquired by families in need. Yet, in the first few days of the new Conservative Government, measures are being introduced that will make those very things more difficult and expensive to acquire. The budget which the average family is trying to control is a very difficult matter, yet such families are getting no assistance whatever from this Administration. That seems to be one election pledge gone out of the window.
      Another pledge that was made was the desire to help the small business man. The Conservatives said "This is the man we must look after. It is the fellow in the workshops up and down the country, in places such as central Birmingham, whom we must assist in order to get our manufacturing industry right, to get our production increased, and thereby to improve the wealth of the nation"
      The very businesses that were growing until recent times, certainly in constituencies such as mine, were the small, two- or three-man businesses in the clothing industry, especially in the ethnic minority communities. People who were trying to make their way in a new society, with all sorts of difficulties placed upon them, were beginning to find that they could establish themselves in the clothing and allied textile industries. So many small business men were in that category. They were engaged in small businesses, sometimes with very modest capital, and making them work. They were providing relatively cheap, serviceable clothing for people of modest incomes who could not afford very much better.
      Even that kind of venture is being jeopardised by the champions of free enterprise. Those who are trying to promote small businesses, provide a service, take on more labour and make sure that the economy is vibrant and expanding will be disappointed. They, too, will be in the category to which the election pledges look thin. What will Treasury Ministers say to these groups, who will be sadly disappointed?
      I urge my right hon. and hon. Friends to support the Opposition amendments. They are designed to protect those who will be worse off in our society once the right hon. Gentleman and his colleagues have finished with it.
      Mr. Biffen: The debate has ranged widely around the central proposition that the proposed rate of VAT of 15 per cent. should not apply to clothing and footwear and that they should continue to be taxed at their previous rates.
      I warmly congratulate the hon. Member for Norwich, South (Mr. Garrett) on his maiden appearance on the Opposition Front Bench. I am sorry that it had to be at an inhospitable hour, but that is the fate of all who perform in this circus. To learn that early on is perhaps valuable experience.
      The theme that ran through speeches subsequent to that of the hon. Gentleman was anxiety about the present regulations for the zero rating of children's clothing and footwear. That was referred to by the hon. Members for Ormskirk (Mr. Kilroy-Silk), for Swindon (Mr. Stoddart, and for Holborn and St. Pancras, South (Mr. Dobson). Customs and Excise are currently carrying out a review of how that relief has worked since its introduction in 1973, and they hope to complete it by the end of the year. It will take into account criticism of the way in which the relief operates and the views of the clothing and footwear trades. At the same time, Customs and Excise are considering ways in which the existing guidance on the operation of relief can be improved and the viability of possible alternative methods of providing relief.
      The hon. Member for Birmingham, Ladywood (Mr. Sever) asked how we could explain our current performance. We said that we would increase indirect taxes, and we have. We said that we would reduce direct taxes, and we have. He referred to the small business community. I once lived in Birmingham and I know Ladywood fairly well. Broadly speaking, I believe that the package of taxes presented in the Budget will be generally well received by the small business community in Ladywood.
      VAT will have a marginal initial impact on the level of sales, not just in the clothing and footwear trades but right across industry. It would be foolish to deny that, but it would be equally absurd to exaggerate it as a major shadow across the commercial prospects for this country. The level of world trade and all that will flow from the considerable oil price increases are more tangible threats to the

      1315
      level of domestic activity than is the rate of VAT.
      I turn to the point made by the hon. Member for Newham, North-East (Mr. Leighton). The European Community's sixth directive lays down the ground rules within which we seek to operate, but I said earlier that the House was jealous of its legislative authority. This is worth saying every time, rather than being told at the end of the day that it is an empty formality and that there is not much that we can do. Once this House has become supine enough to accept that, it will cease to be the House of Commons as it is traditionally known.
      The hon. Member for West Lothian (Mr. Dalyell), who effectively lived up to his promise to be brief, and who was certainly to the point, was anxious about the alleged trading practices of retailers who use the changes in VAT to test the market and charge considerably more than the alteration justifies. Within the Treasury we have no competence or authority to carry out the kind of checks that he has in mind. I shall refer his comments to the Secretary of State for Trade, but I doubt whether one could carry out an exercise on such a vast scale, checking the total activity of the retail trade. It would be a massive exercise.
      Mr. Roger Stott: The Minister made the point about not having the mechanism to detect whether my hon. Friend the Member for West Lothian (Mr. Dalyell) has a valid case. The mechanism was there in the form of the Price Commission, but now that the Price Commission is not there the Government are not in a position to deal with the matter as a consequence of their own actions.
      Mr. Biffen: At 2.30 a.m. one must move carefully lest contention should flare up in place of a constructive exchange of views. The Price Commission produced reports—some valuable and some not so valuable. Those that were less valuable were so because of the inadequacy of the work that went into them. A check of the kind referred to by the hon. Member for West Lothian—not just the window dressing of half-adozen spot checks—would be a massive undertaking, and I doubt whether the staff or the logistics of the Price Commission
      1316
      would be such that it could carry out such a task.
      I turn to the main amendment moved by the hon. Member for Norwich, South. This is a profoundly significant amendment. In the comments that I have made about Back-Bench speeches I have indicated some of the anxieties that the Treasury has. One of our major difficulties is that the amendment would mean a return to multirate VAT. As the hon. Member for Ormskirk pointed out, he, too, would prefer zero rating and a standard positive rate, rather than a proliferation.
      Much of the argument, leaving aside the question of children's clothes and footwear, is that clothing is a basic and essential commodity and therefore we should have a social attitude towards it. It would be very difficult to try to disentangle essential spending and discretionary spending on clothing, and the same is true of footwear. My observations lead me to believe that an immense amount of spending, particularly on clothing, is discretionary.
      The case that is most convincing to me as Chief Secretary is the cost of the amendment. It would be £500 million, which is a massive sum for so modest an amendment, and on that basis I ask my hon. Friends to ensure that it is rejected.
      2.30 a.m.
      Mr. Stoddart: I was interested in the Chief Secretary's comments, particularly those about children's clothing. Can he give us a little more information? Is the whole method to be reviewed? Will account be taken of the fact mentioned by a number of hon. Members that many children have to wear adult-sized clothes? Have suggestions been made to Customs and Excise about how to overcome that problem and so help the families concerned?
      The right hon. Gentleman reiterated his party's election pledge that it would increase indirect taxes and reduce direct taxes—both of which the Government have done. But did the Conservatives tell the electorate that they would almost double the rate of VAT? Does the right hon. Gentleman think that he would be sitting on the Treasury Bench if his party had told voters that it would increase VAT by 7 per cent? It is not good

      1317
      enough tor him to reiterate a so-called pledge which was dishonest because the cost was not spelt out to the electorate.
      The Chief Secretary dismissed out of hand the suggestion that the Price Commission would have been able to examine every price increase imposed by traders, but he and his party overlook the deterrent effect of the Commission. Make no mistake, it was a deterrent for traders to know that customers who believed that prices had been increased unduly had a body to which they could make a complaint which would be investigated. If the voters had understood that the removal of that right of complaint was part of Conservative policy, the Chief Secretary would still be in opposition.
      Mr. John Garrett: My hon. Friends the Members for Ormskirk (Mr. Kilroy-Silk), for Swindon (Mr. Stoddart), for Newham, North-East (Mr. Leighton), for Holborn and St. Pancras (Mr. Dobson), for Birmingham, Ladywood (Mr. Sever) in their speeches, and my hon. Friend the Member for West Lothian (Mr. Dalyell) in a perspicacious question, fully made the case for the amendment. But what a silence from the Conservative Benches—even from hon. Members with clothing and footwear constituency interests—on a subject which affects every family's budget. What a change from the packed Conservative Benches when we were discussing horses.
      Mr. Kilroy-Silk: Does my hon. Friend agree that there has not been a greater demonstration of a Member of Parliament's neglect of his constituents than that demonstrated by the hon. Member for Northampton, South (Mr. Morris) in this debate?
      Mr. Garrett: Conservative Members must live with their consciences and
      account to themselves—and, I hope, to their constituents—for refusing to take part in this debate on an item which will affect every family in the country.
      I am grateful to the Chief Secretary for his kind words. He has a job which dries up kindliness, so I might as well bask in it while I have the brief opportunity to do so. I am pleased to hear that Customs and Excise will examine the limits on the zero rating of children's clothing and footwear. It is clear what will be the effect on the 12- to 13-year-olds. A sudden jump to 15 per cent. will be an unbearable burden for many families.
      The right hon. Gentleman said that these increases would not greatly affect the domestic industry, but I must point out that the proposed VAT increase on footwear casts a shadow over an industry that has suffered a great deal of decline. It will be an added burden on leather prices, which are rising at about 5 per cent. a month.
      I was interested to hear the Chief Secretary say that too much money was being spent on discretionary clothing. One might pursue that point further, because it opens an interesting vista. Clearly, the Treasury view is that we should all wear simple and monk-like habits. No doubt many of us would be willing to do so if the right hon. Gentleman would promise to have them zero-rated.
      In view of the unsatisfactory reply on this important amendment, I recommend my right hon. and hon. Friends to press this matter to a vote.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 155, Noes 237.

      Division No. 39]

      AYES

      [2.38 a.m.

      Adams, Allen

      Carmichael, Neil

      Cunningham, Dr John (Whitehaven)

      Archer, Rt Hon Peter

      Cartwright, John

      Dalyell, Tam

      Armstrong, Rt Hon Ernest

      Clark, Dr David (South Shields)

      Davidson, Arthur

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

      Cocks, Rt Hon Michael (Bristol S)

      Davies, Rt Hon Denzil (Llanelli)

      Barnett, Guy (Greenwich)

      Coleman, Donald

      Davies, E. Hudson (Caerphilly)

      Bennett, Andrew (Stockport N)

      Concannon, Rt Hon J. D.

      Davis, Clinton (Hackney Central)

      Bray, Dr Jeremy

      Conlan, Bernard

      Davis, Terry (B'rm'ham, Stechford)

      Brown, Hugh D. (Provan)

      Cook, Robin F.

      Deakins, Eric

      Brown, Ronald W. (Hackney S)

      Cowans, Harry

      Dean, Joseph (Leeds West)

      Brown, Ron (Edinburgh, Leith)

      Cox, Tom (Wandsworth, Tooting)

      Dempsey, James

      Buchan, Norman

      Craigen, J. M. (Glasgow, Maryhill)

      Dewar, Donald

      Callaghan, Jim (Middleton & P)

      Crowther, J. S.

      Dixon, Donald

      Campbell, Ian

      Cryer, Bob

      Dobson, Frank

      Campbell-Savours, Dale

      Cunliffe, Lawrence

      Dormand, Jack

      Canavan, Dennis

      Cunningham, George (Islington S)

      Dubs, Alfred

      Duffy, A. E. P.

      McElhone, Frank

      Roper, John

      Eastham, Ken

      McKay, Allen (Penistone)

      Ross, Ernest (Dundee West)

      Ellis, Raymond (NE Derbyshire)

      McKelvey, William

      Rowlands, Ted

      Ennals, Rt Hon David

      Maclennan, Robert

      Sever, John

      Ewing, Harry

      McMahon, Andrew

      Sheerman, Barry

      Field, Frank

      McWilliam, John

      Shore, Rt Hon Peter (Step and Pop)

      Flannery, Martin

      Magee, Bryan

      Silkin, Rt Hon John (Deptford)

      Fletcher, Ted (Darlington)

      Marks, Kenneth

      Silkin, Rt Hon S. C. (Dulwich)

      Foot, Rt Hon Michael

      Marshall, David (GI'sgow, Shettles'n)

      Silverman, Julius

      Forrester, John

      Marshall, Jim (Leicester South)

      Skinner, Dennis

      Foster, Derek

      Martin, Michael (Gl'gow, Springb'rn)

      Smith, Rt Hon J. (North Lanarkshire)

      Garrett, John (Norwich S)

      Maxton, John

      Soley, Clive

      George, Bruce

      Maynard, Miss Joan

      Spearing, Nigel

      Golding, John

      Mikardo, Ian

      Stallard, A. W.

      Hamilton, James (Bothwell)

      Millan, Rt Hon Bruce

      Stoddart, David

      Hardy, Peter

      Miller, Dr M. S. (East Kilbride)

      Stott, Roger

      Harrison, Rt Hon Walter

      Morris, Rt Hon Alfred (Wythenshawe)

      Strang, Gavin

      Hart, Rt Hon Dame Judith

      Morris, Rt Hon Charles (Openshaw)

      Straw, Jack

      Hattersley, Rt Hon Roy

      Morton, George

      Summerskill, Hon Dr Shirley

      Haynes, Frank

      Moyle, Rt Hon Roland

      Taylor, Mrs Ann (Bolton West)

      Healey, Rt Hon Denis

      Newens, Stanley

      Thomas, Mike (Newcastle East)

      Hogg, Norman (E Dunbartonshire)

      O'Neill, Martin

      Thomas, Dr Roger (Carmarthen)

      Home Robertson, John

      Orme, Rt Hon Stanley

      Urwin, Rt Hon Tom

      Hooley, Frank

      Owen, Rt Hon Dr David

      Varley, Rt Hon Eric G.

      Horam, John

      Palmer, Arthur

      Welsh, Michael

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

      Park, George

      White, James (Glasgow, Pollok)

      Huckfield, Les

      Pendry, Tom

      Whitehead, Phillip

      Hughes, Robert (Aberdeen North)

      Powell, Raymond (Ogmore)

      Williams, Rt Hon Alan (Swansea W)

      Janner, Hon Greville

      Prescott, John

      Wilson, Rt Hon Sir Harold (Huyton)

      John, Brynmor

      Price, Christopher (Lewisham West)

      Winnick, David

      Jones, Rt Hon Alec (Rhondda)

      Race, Reg

      Woolmet, Kenneth

      Jones, Barry (East Flint)

      Radice, Giles

      Wrigglesworth, Ian

      Kaufman, Rt Hon Gerald

      Richardson, Miss Jo

      Wright, Sheila

      Kilroy-Silk, Robert

      Roberts, Allan (Bootle)

      Young, David (Bolton East)

      Lamborn, Harry

      Roberts, Ernest (Hackney North)

      Leighton, Ronald

      Robertson, George

      TELLERS FOR THE AYES

      Lofthouse, Geoffrey

      Rodgers, Rt Hon William

      Mr. Ted Graham and

      McCartney, Hugh

      Rooker, J. W.

      Mr. John Evans.

      NOES

      Alexander, Richard

      Cormack, Patrick

      Grist, Ian

      Alison, Michael

      Costain, A. P.

      Grylls, Michael

      Arnold, Tom

      Cranborne, Viscount

      Gummer, John Selwyn

      Aspinwall, Jack

      Critchey, Julian

      Hamilton, Hon Archie (Eps'm&Ew'il)

      Atkins, Robert (Preston North)

      Crouch, David

      Hannam, John

      Baker, Nicholas (North Dorset)

      Dickens, Geoffrey

      Haselhurst, Alan

      Bendell, Vivian

      Dodsworth, Geoffrey

      Havers, Rt Hon Sir Michael

      Benyon, Thomas (Abingdon)

      Dorrell, Stephen

      Hawkins, Paul

      Berry, Hon Anthony

      Douglas-Hamilton, Lord James

      Hawksley, Warren

      Best, Keith

      Dover, Denshore

      Heddle, John

      Bevan, David Gilroy

      du Cann, Rt Hon Edward

      Henderson, Barry

      Biffen, Rt Hon John

      Dunn, Robert (Dartford)

      Heseltine, Rt Hon Michael

      Biggs-Davison, John

      Durant, Tony

      Higgins, Rt Hon Terence L.

      Blackburn, John

      Eden, RI Hon Sir John

      Hogg, Hon Douglas (Grantham)

      Blaker, Peter

      Edwards, Rt Hon N. (Pembroke)

      Hooson, Tom

      Body, Richard

      Eggar, Timothy

      Hordern, Peter

      Bonsor, Sir Nicholas

      Emery, Peter

      Howe, Rt Hon Sir Geoffrey

      Boscawen, Hon Robert

      Eyre, Reginald

      Hunt, David (Wirral)

      Bowden, Andrew

      Fairbairn, Nicholas

      Jenkin, Rt Hon Patrick

      Boyson, Dr Rhodes

      Faith, Mrs Sheila

      Jessel, Toby

      Bright, Graham

      Farr, John

      Johnson Smith, Geoffrey

      Brinton, Tim

      Fell, Anthony

      Jopling, Rt Hon Michael

      Britten, Leon

      Fenner, Mrs Peggy

      Joseph, Rt Hon Sir Keith

      Brown, Michael (Brigg & Sc'thorpe)

      Finsberg, Geoffrey

      Kaberry, Sir Donald

      Browne, John (Winchester)

      Fisher, Sir Nigel

      Kershaw, Anthony

      Bruce-Gardyne, John

      Fletcher, Alexander (Edinburgh N)

      King, Rt Hon Tom

      Buck, Antony

      Fletcher-Cooke, Charles

      Kitson, Sir Timothy

      Budgen, Nick

      Fookes, Miss Janet

      Lamont, Norman

      Bulmer, Esmond

      Forman, Nigel

      Lang, Ian

      Butcher, John

      Fowler, Rt Hon Norman

      Langford-Holt, Sir John

      Butler, Hon Adam

      Fox, Marcus

      Latham, Michael

      Cadbury, Jocelyn

      Fraser, Peter (South Angus)

      Lawrence, Ivan

      Carlisle, John (Luton West)

      Galbraith, Hon T. G. D.

      Lawson, Nigel

      Carlisle, Kenneth (Lincoln)

      Gardiner, George (Reigate)

      Lee, John

      Chalker, Mrs. Lynda

      Garel-Jones, Tristan

      Lennox-Boyd, Hon Mark

      Chapman, Sydney

      Goodhart, Philip

      Lester, Jim (Beeston)

      Churchill, W. S.

      Goodlad, Alastair

      Lloyd, Peter (Fareham)

      Clark, Hon Alan (Plymouth, Sutton)

      Gorst, John

      Loveridge, John

      Clark, Dr William (Croydon South)

      Gow, Ian

      Lyell, Nicholas

      Clarke, Kenneth (Rushcliffe)

      Gower, Sir Raymond

      Macfarlane, Neil

      Clegg, Walter

      Gray, Hamish

      MacGregor, John

      Cockeram, Eric

      Grieve, Percy

      MacKay, John (Argyll)

      Colvin, Michael

      Griffiths, Eldon (Bury St Edmunds)

      Macmillan, Rt Hon M. (Farnham)

      Cope, John

      Griffiths, Peter (Portsmouth N)

      McNair-Wilson, Michael (Newbury)

      1320

      1321

      McNair-Wilson, Patrick (New Forest)

      Pattie, Geoffrey

      Steen, Anthony

      McQuarrie, Albert

      Pawsey, James

      Stevens, Martin

      Madel, David

      Percival, Sir Ian

      Stewart, Ian (Hitchin)

      Major, John

      Pollock, Alexander

      Stewart, John (East Renfrewshire)

      Marland, Paul

      Porter, George

      Stokes, John

      Marlow, Tony

      Price, David (Eastleigh)

      Stradling Thomas, J.

      Marshall, Michael (Arundel)

      Prior, Rt Hon James

      Taylor, Robert (Croydon NW)

      Maude, Rt Hon Angus

      Proctor, K. Harvey

      Tebbit, Norman

      Mawby, Ray

      Raison, Timothy

      Temple-Morris, Peter

      Mawhinney, Dr Brian

      Rathbone, Tim

      Thompson, Donald

      Maxwell-Hyslop, Robin

      Rees, Peter (Dover and Deal)

      Thornton, Malcolm

      Mayhew, Patrick

      Rees-Davies, W. R.

      Townend, John (Bridlington)

      Mellor, David

      Renton, Tim

      Townsend, Cyril D. (Bexleyheath)

      Meyer, Sir Anthony

      Rhys Williams, Sir Brandon

      Trippler, David

      Miller, Hal (Bromsgrove & Redditch)

      Ridley, Hon Nicholas

      Trotter, Neville

      Mills, Iain (Meriden)

      Rifkind, Malcolm

      Viggers, Peter

      Mills, Peter (West Devon)

      Roberts, Michael (Cardiff NW)

      Waddington, David

      Miscampbell, Norman

      Roberts, Wyn (Conway)

      Wakeham, John

      Mitchell, David (Basingstoke)

      Rossi, Hugh

      Waldegrave, Hon William

      Monro, Hector

      Rost, Peter

      Waller, Gary

      Montgomery, Fergus

      Sainsbury, Hon Timothy

      Ward, John

      Morgan, Geraint

      St. John-Stevas, Rt Hon Norman

      Watson, John

      Morris, Michael (Northampton, Sth)

      Shaw, Michael (Scarborough)

      Wells, John (Maidstone)

      Morrison, Hon Charles (Devizes)

      Shepherd, Colin (Hereford)

      Wells, Bowen (Hert'rd & Stev'nage)

      Morrison, Hon Peter (City of Chester)

      Shepherd, Richard (Aldridge-Br'hills)

      Wheeler, John

      Mudd, David

      Shersby, Michael

      Whitney, Raymond

      Murphy, Christopher

      Silvester, Fred

      Wickenden, Keith

      Myles, David

      Sims, Roger

      Wilkinson, John

      Neubert, Michael

      Skeet, T. H. H.

      Williams, Delwyn (Montgomery)

      Newton, Tony

      Speller, Tony

      Winterton, Nicholas

      Normanton, Tom

      Spicer, Jim (West Dorset)

      Wolfson, Mark

      Page, John (Harrow, West)

      Spicer, Michael (S Worcestershire)

      Young, Sir George (Acton)

      Page, Rt Hon R. Graham (Crosby)

      Sproat, Iain

      Parkinson, Cecil

      Squire, Robin

      TELLERS FOR THE NOES:

      Parris, Matthew

      Stanbrook, Ivor

      Mr. Spencer Le Merchant and

      Patten, Christopher (Bath)

      Stanley, John

      Mr. Carol Mather.

      Patten, John (Oxford)

      Question accordingly negatived.
      2.45 a.m.
      Amendment proposed: No. 17, in page 2, line 27, at end add—
      '(6) As from the passing of this Act sub-section (1) above shall not apply to any supply of goods or services made to any person in
      recipt of mobility allowance.'.—[Mr. Alfed Morris.]
      Question put, That the amendement be made:—
      The Committee divided: Ayes 156, Noes 236.

      Division No. 40]

      AYES

      [2.48 a.m.

      Adams, Allen

      Davies, E. Hudson (Caerphilly)

      Hogg, Norman (E Dunbartonshire)

      Archer, Rt Hon Peter

      Davis, Clinton (Hackney Central)

      Home Robertson, John

      Armstrong, Rt Hon Ernest

      Davis, Terry (B'rm'ham, Stechford)

      Hooley, Frank

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

      Deakins, Eric

      Horam, John

      Barnett, Guy (Greenwich)

      Dempsey, James

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

      Bennett, Andrew (Stockport N)

      Dewar, Donald

      Huckfield, Les

      Bray, Dr Jeremy

      Dixon, Donald

      Hughes, Robert (Aberdeen North)

      Brown, Hugh D. (Provan)

      Dobson, Frank

      Janner, Hon Greville

      Brown, Ronald W. (Hackney S)

      Dormand, Jack

      John, Brynmor

      Brown, Ron (Edinburgh, Leith)

      Dubs, Alfred

      Jones, Rt Hon Alec (Rhondda)

      Buchan, Norman

      Duffy, A. E. P.

      Jones, Barry (East Flint)

      Callaghan, Jim (Middleton & P)

      Eastham, Ken

      Kaufman, Rt Hon Gerald

      Campbell, Ian

      Ellis, Raymond (NE Derbyshire)

      Kilroy-Silk, Robert

      Campbell-Savours, Dale

      Ennals, Rt Hon David

      Lamborn, Harry

      Canavan, Dennis

      Evans, John (Newton)

      Leighton, Ronald

      Carmichael, Neil

      Ewing, Harry

      Lofthouse, Geoffrey

      Cartwright, John

      Field, Frank

      McCartney, Hugh

      Clark, Dr David (South Shields)

      Flannery, Martin

      McDonald, Dr Oonagh

      Cocks, Rt Hon Michael (Bristol S)

      Fletcher, Ted (Darlington)

      McElhone, Frank

      Coleman, Donald

      Foot, Rt Hon Michael

      McKay, Allen (Penistone)

      Concannon, Rt Hon J. D.

      Forrester, John

      McKelvey, William

      Conlan, Bernard

      Foster, Derek

      Maclennan, Robert

      Cook, Robin F.

      Garrett, John (Norwich S)

      McMahon, Andrew

      Cowans, Harry

      George, Bruce

      McWilliam, John

      Craigen, J. M. (Glasgow, Maryhill)

      Golding, John

      Magee, Bryan

      Crowther, J. S.

      Graham, Ted

      Marks, Kenneth

      Cryer, Bob

      Hamilton, James (Bothwell)

      Marshall, David (GI'sgow, Shetties'n)

      Cunliffe, Lawrence

      Hardy, Peter

      Marshall, Jim (Leicester South)

      Cunningham, George (Islington S)

      Harrison, Rt Hon Walter

      Martin, Michael (Gl'gow, Springb'rn)

      Cunningham, Dr John (Whitehaven)

      Hart, Rt Hon Dame Judith

      Maxton, John

      Dalyell, Tam

      Hattersley, Rt Hon Roy

      Maynard, Miss Joan

      Davidson, Arthur

      Haynes, Frank

      Mikardo, Ian

      Davies, Rt Hon Denzil (Llanelli)

      Healey, Rt Hon Denis

      Millan, Rt Hon Bruce

      Miller, Dr M. S. (East Kilbride)

      Rodgers, Rt Hon William

      Summerskill, Hon Dr Shirley

      Morris, Rt Hon Alfred (Wythenshawe)

      Rooker, J. W.

      Taylor, Mrs Ann (Bolton West)

      Morris, Rt Hon Charles (Openshaw)

      Roper, John

      Thomas, Mike (Newcastle East)

      Morton, George

      Ross, Ernest (Dundee West)

      Thomas, Dr Roger (Carmarthen)

      Moyle, Rt Hon Roland

      Rowlands, Ted

      Urwin, Rt Hon Tom

      Newens, Stanley

      Sever, John

      Varley, Rt Hon Eric G.

      O'Neill, Martin

      Sheerman, Barry

      Welsh, Michael

      Orme, Rt Hon Stanley

      Shore, Rt Hon Peter (Step and Pop)

      White, James (Glasgow, Pollok)

      Owen, Rt Hon Dr David

      Silkin, Rt Hon John (Deptford)

      Whitehead, Phillip

      Palmer, Arthur

      Silkin, Rt Hon S. C. (Dulwich)

      Williams, Rt Hon Alan (Swansea W)

      Park, George

      Silverman, Julius

      Wilson, Rt Hon Sir Harold (Huyton)

      Pendry, Tom

      Skinner, Dennis

      Winnick, David

      Powell, Raymond (Ogmore)

      Smith, Rt Hon J. (North Lanarkshire)

      Woolmer, Kenneth

      Prescott, John

      Soley, Clive

      Wrigglesworth, Ian

      Price, Christopher (Lewisham West)

      Spearing, Nigel

      Wright, Sheila

      Race, Reg

      Stallard, A. W.

      Young, David (Bolton East)

      Radice, Giles

      Stoddart, David

      Richardson, Miss Jo

      Stott, Roger

      TELLERS FOR THE AYES:

      Roberts, Allan (Bootle)

      Strang, Gavin

      Mr. Tom Cox and

      Roberts, Ernest (Hackney Ncrth)

      Straw, Jack

      Mr. Joe Dean.

      Robertson, George

      NOES

      Alexander, Richard

      Farr, John

      Lloyd, Peter (Fareham)

      Alison, Michael

      Fell, Anthony

      Loveridge, John

      Arnold, Tom

      Fenner, Mrs Peggy

      Lyell, Nicholas

      Aspinwall, Jack

      Finsberg, Geoffrey

      Macfarlane, Neil

      Atkins, Robert (Preston North)

      Fisher, Sir Nigel

      MacGregor, John

      Baker, Nicholas (North Dorset)

      Fletcher, Alexander (Edinburgh N)

      MacKay, John (Argyll)

      Bendell, Vivian

      Fletcher-Cooke, Charles

      Macmillan, Rt Hon M. (Farnham)

      Benyon, Thomas (Abingdon)

      Fookes, Miss Janet

      McNair-Wilson, Michael (Newbury)

      Berry, Hon Anthony

      Forman, Nigel

      McNair-Wilson, Patrick (New Forest)

      Best, Keith

      Fowler, Rt Hon Norman

      McQuarrie, Albert

      Bevan, David Gilroy

      Fox, Marcus

      Madel, David

      Biffen, Rt Hon John

      Fraser, Peter (South Angus)

      Major, John

      Biggs-Davison, John

      Galbraith, Hon T. G. D.

      Marland, Paul

      Blackburn, John

      Gardiner, George (Reigate)

      Marlow, Tony

      Blaker, Peter

      Garel-Jones, Tristan

      Marshall, Michael (Arundel)

      Body, Richard

      Goodhart, Philip

      Mather, Carol

      Bonsor, Sir Nicholas

      Goodlad, Alastair

      Maude, Rt Hon Angus

      Bowden, Andrew

      Gorst, John

      Mawby, Ray

      Boyson, Dr Rhodes

      Gow, Ian

      Mawhinney, Dr Brian

      Bright, Graham

      Gower, Sir Raymond

      Maxwell-Hyslop, Robin

      Brinton, Tim

      Gray, Hamish

      Mayhew, Patrick

      Brittan, Leon

      Grieve, Percy

      Mellor, David

      Brown, Michael (Brigg & Sc'thorpe)

      Griffiths, Eldon (Bury St Edmunds)

      Meyer, Sir Anthony

      Browne, John (Winchester)

      Griffiths, Peter (Portsmouth N)

      Miller, Hal (Bromsgrove & Redditch)

      Bruce-Gardyne, John

      Grist, Ian

      Mills, Iain (Meriden)

      Buck, Antony

      Grylls, Michael

      Mills, Peter (West Devon)

      Budgen, Nick

      Gummer, John Selwyn

      Miscampbell, Norman

      Bulmer, Esmond

      Hamilton, Hon Archie (Eps'm & Ew'll)

      Mitchell, David (Basingstoke)

      Butcher, John

      Hannam, John

      Monro, Hector

      Butler, Hon Adam

      Haselhurst, Alan

      Montgomery, Fergus

      Cadbury, Jocelyn

      Havers, Rt Hon Sir Michael

      Morgan, Geraint

      Carlisle, John (Luton West)

      Hawkins, Paul

      Morris, Michael (Northampton, Sth)

      Carlisle, Kenneth (Lincoln)

      Hawksley, Warren

      Morrison, Hon Charles (Devizes)

      Chalker, Mrs. Lynda

      Heddle, John

      Morrison, Hon Peter (City of Chester)

      Chapman, Sydney

      Henderson, Barry

      Mudd, David

      Clark, Hon Alan (Plymouth, Sutton)

      Heseltine, Rt Hon Michael

      Murphy, Christopher

      Clark, Dr William (Croydon South)

      Higgins, Rt Hon Terence L.

      Myles, David

      Clarke, Kenneth (Rushcliffe)

      Hogg, Hon Douglas (Grantham)

      Neubert, Michael

      Clegg, Walter

      Hooson, Tom

      Newton, Tony

      Cockeram, Eric

      Hordern, Peter

      Normanton, Tom

      Colvin, Michael

      Howe, Rt Hon Sir Geoffrey

      Page, John (Harrow, West)

      Cope, John

      Hunt, David (Wirral)

      Page, Rt Hon R. Graham (Crosby)

      Cormack, Patrick

      Jenkin, Rt Hon Patrick

      Parkinson, Cecil

      Costain, A. P.

      Jessel, Toby

      Parris, Matthew

      Cranborne, Viscount

      Johnson Smith, Geoffrey

      Patten, Christopher (Bath)

      Critchey, Julian

      Jopling, Rt Hon Michael

      Patten, John (Oxford)

      Crouch, David

      Joseph, Rt Hon Sir Keith

      Pattie, Geoffrey

      Dickens, Geoffrey

      Kaberry, Sir Donald

      Pawsey, James

      Dodsworth, Geoffrey

      Kershaw, Anthony

      Percival, Sir Ian

      Dorrell, Stephen

      King, Rt Hon Tom

      Pollock, Alexander

      Dover, Denshore

      Kitson, Sir Timothy

      Porter, George

      du Cann, Rt Hon Edward

      Lamont, Norman

      Price, David (Eastleigh)

      Dunn, Robert (Dartford)

      Lang, Ian

      Prior, Rt Hon James

      Durant, Tony

      Langford-Holt, Sir John

      Proctor, K. Harvey

      Eden, Rt Hon Sir John

      Latham, Michael

      Raison, Timothy

      Edwards, Rt Hon N. (Pembroke)

      Lawrence, Ivan

      Rathbone, Tim

      Eggar, Timothy

      Lawson, Nigel

      Rees, Peter (Dover and Deal)

      Emery, Peter

      Lee, John

      Rees-Davies, W. R.

      Eyre, Reginald

      Le Merchant, Spencer

      Renton, Tim

      Fairbairn, Nicholas

      Lennox-Boyd, Hon Mark

      Rhys Williams, Sir Brandon

      Faith, Mrs Sheila

      Lester, Jim (Beeston)

      Ridley, Hon Nicholas

      1324

      1325

      Rifkind, Malcolm

      Stanbrook, Ivor

      Wakeham, John

      Roberts, Michael (Cardiff NW)

      Stanley, John

      Waldegrave, Hon William

      Roberts, Wyn (Conway)

      Steen, Anthony

      Waller, Gary

      Rossi, Hugh

      Stevens, Martin

      Ward, John

      Rost, Peter

      Stewart, Ian (Hitchin)

      Watson, John

      Sainsbury, Hon Timothy

      Stewart, John (East Rentrewshire)

      Wells, John (Maidstone)

      St. John-Stevas, Rt Hon Norman

      Stokes, John

      Wells, Bowen (Hert'rd & Stev'nage)

      Shaw, Michael (Scarborough)

      Stradling Thomas, J.

      Wheeler, John

      Shepherd, Colin (Hereford)

      Taylor, Robert (Croydon N W)

      Whitney, Raymond

      Shepherd, Richard (Aldridge-Br'hills)

      Tebbit, Norman

      Wickenden, Keith

      Shersby, Michael

      Temple-Morris, Peter

      Wilkinson, John

      Silvester, Fred

      Thompson, Donald

      Williams, Delwyn (Montgomery)

      Sims, Roger

      Thornton, Malcolm

      Winterton, Nicholas

      Skeet, T. H. H.

      Townend, John (Bridlington)

      Wolfson, Mark

      Speller, Tony

      Townsend, Cyril D. (Bexleyheath)

      Young, Sir George (Acton)

      Spicer, Jim (West Dorset)

      Trippier, David

      Spicer, Michael (S Worcestershire)

      Trotter, Neville

      TELLERS FOR THE NOES:

      Sproat, Iain

      Viggers, Peter

      Lord James Douglas-Hamilton

      Squire, Robin

      Waddington, David

      Mr. Robert Boscawen.

      Question accordingly negatived.
      Mr. John Horam: I understood that the Government were to move to report progress. Since that is not so, I beg to move amendment No. 20, in page 2, line 27, at end add—
      '(6) As from the passing of this Act subsection (1) above shall not apply to any work of repair or maintenance of a building.'.
      The Second Deputy Chairman: With this we may discuss the following amendments:
      No. 36, in page 1, line 21, at end insert—
      'Provided that after the passing of this Act these changes shall not apply to insulating materials and other products which can be shown to conserve energy.'.
      No. 37, in page 2, line 27, at end add—
      '(6) As from the passing of this Act subsection (1) above shall not apply to any repairs to buildings listed as of historic and architectural importance.'.
      Mr. Horam: The amendment deals with the repair and maintenance of buildings. We are talking about the repair and maintenance of a building, not improvements. As anyone who is familiar with the arcane intricacies of VAT will know, improvement is not the same as repair and maintenance.
      3 am
      The effect of the increase in VAT from 8 per cent. to 15 per cent. is nearly to double the cost of repairs and maintenance. The first effect of this will be to increase the bills for work undertaken on our homes. We are talking about large bills. Repairing a house is not something which, these days, can be undertaken for less than £100. We are talking about £200 or £300, for repairs and maintenance.
      1326
      Repair bills have risen astronomically during the past few years. We are talking of regular increases of about 15 per cent. over any year in comparison with the previous year. This is a particularly unfortunate time for the Government to bring in an increase in VAT which will affect this work. It is an increase which comes immediately after the most severe winter that we have had for many years, and one which obviously had its effects. Many people have had to repair gutters, roofs and parts of the structures of buildings. They will pay the higher rate of VAT if they have not been fortunate enough to get repairs done before the increase comes into effect. That means a substantial increase in the cost of living of a householder.
      Perhaps the Government intend people to go in for more do-it-yourself. I had the impression that the Government wanted to galvanise the entrepreneur. That is one of the phrases which tripped so lightly off the tongue of the Minister of State. He always relished such phrases, and a number of hon. Gentlemen on the Government Benches used that phrase.
      Shall we galvanise the entrepreneur by presuming that he will get up half an hour earlier in the morning to go to work to galvanise his employees into working harder than they already do? If, at the same time, we expect him to pay higher bills for home repairs and also to do more work himself at weekends because he can no longer afford to pay the increase in VAT we shall drive him, under the stress, to an early coronary, not to producing a galvanising effect on his company. All this will prove too much for hon. Gentlemen who, naturally enough, wish to devote the best hours of their day to their businesses. At the weekends they will have to go around with their Black

      1327
      and Decker gadgets because they cannot afford to pay for repairs to their homes.
      This curious combination of tax changes will, I suggest—though one understands the rationale behind the theory—work out quite differently in practice. I do not know whether the Minister owns an old house or a new house. I know that the hon. Member for Blaby (Mr. Lawson)—whom I cannot see on the Government Front Bench at the moment, and who may have escaped from this particular travail—lives in an old rectory. Perhaps they drew for it and, unfortunately, the Chief Secretary got the short straw. I cannot imagine an old rectory not needing repairs to guttering and roofs, and all the other items of expenditure that accumulate over the years. This is something which, in practice, will bear heavily on hon. Gentlemen on the Government Benches, and ourselves if we own our own homes.
      If it is the Government's intention to encourage do-it-yourself, I must point out to them that for many people the scope for this sort of activity is limited severely. I have in mind the elderly, many of whom will not be able to undertake this sort of repair work themselves. They will have to employ others to do it, and the cost of doing it will increase. Many of my constituents are elderly and are living on pensions. But still they own their homes and hoped to live out their lives with fairly minimal costs of this kind. Following a bad winter they face big bills, and now they face virtually doubled VAT on the sums that they will have to hand over to their local builders to make these repairs.
      3.15 am
      We should consider the position of elderly people who have to look after their houses. Perhaps it is thought that they should move. It may be that the economics of the situation suggest that they should move into smaller modern properties. Some of them may do that in the course of time if the current tax position continues, but many of them wish to stay where they are, for very good and sentimental reasons, and they should be allowed to stay if that is the case.
      This sort of increase in VAT will make life much more difficult for them. It will be more difficult to spend their final years in their homes, simply because the
      1328
      burden of keeping those houses going will become far too great for those with modest means who are of an age which makes it impractical for them to consider doing their own repair work.
      This element, plus the mortgage increase which is likely to result from the increased minimum lending rate, sounds not like an encouragement for the property owning democracy but more like the death knell of it. It is a subject which Government supporters will find cropping up increasingly in their postbags and increasingly occupying their attention. Bills for property repairs of this kind will increase, and the blame for the increase will lie on the Government.
      The second effect of an increase of this kind will be on older buildings, especially heritage buildings and churches. In this respect the Government's decision is even more absurd and even more damaging. The hon. Member for Staffordshire, South-West (Mr. Cormack) has tabled an amendment which is being taken in this group. He is an acknowledged expert on matters concerning heritage buildings and churches, and I shall listen with interest to what he says. Therefore I shall curtail my own remarks on this subject, though not too much because the Committee should know what is happening to our heritage under the axe of this Government.
      I know that many Government supporters are concerned about heritage properties and feel that more should be done for them. I share that view. I am not an active member of the all-party heritage group, but over the course of years on Finance Bills I have put forward one or two amendments which have succeeded in helping the owners of heritage properties. Their cause demands our attention and deserves our support, and I am glad to have played a small part in improving the tax regime facing those who own our stately homes.
      I take the view that the heritage business is an important part of our general tourist industry. Earlier, the hon. Member for Richmond, Yorks (Sir T. Kitson) spoke about the bloodstock industry, and I take his point that it is an important national industry. But the heritage industry is also an important national industry which, if properly developed, could be a continuing national asset financially as well as aesthetically. There

      1329
      is an aesthetic reason for maintaining heritage houses, properties and gardens, but there is also a pure economic case in terms of the tourist industry.
      The real case for helping the stately home owner is not based on the tourist industry, however. The very large property, such as Blenheim, Chatsworth or Woburn, is a good business which largely supports itself. It attracts the bulk of the tourists. But we are discussing the smaller property which is not on the tourist map but which is visited by local people on a day out. It thus earns a living and provides jobs. Conservative Members have referred to the importance of rural prosperity, and one remembers how strongly they made that point in the debates on rate support grant. They should be as concerned as I am about providing jobs in rural areas. These properties provide small-scale continuing employment. Today, small is beautiful. We are all in favour of it, just as once we favoured largeness. This continuing commitment to a local community, which is implicit in a heritage property employing perhaps six people to keep it going, is vital. There are countless examples of this source of jobs in rural areas.
      About 6,000 properties are currently regarded as of special historic interest, less than half of which are open to the public. About 2,500 properties of all classes come into the category of which I am speaking. They will be adversely affected by the Government's proposals.
      Mr. Walter Harrison: Keep talking.
      Mr. Horam: I assure my right hon. Friend the Deputy Chief Whip that I can keep talking on this subject for a very long time.
      Repair bills on these large properties are extremely high. They also come at awkward intervals. I know Rockingham Castle quite well, and I should think that the owner of that property has pure overheads of £200,000 a year. In any one year probably the biggest single item will be repairs, but every so often extensive structural work is required, perhaps because of the activities of deathwatch beetle or some other apparition. That will mean a much larger bill in that year. So that is a continuing source of extra
      1330
      cost, and it comes in large lumps at any one time. That means that the owner faces bills often of £20,000 or £30,000 for a particular repair.
      As we know, the Department of the Environment's Historic Buildings Council has funds for this situation. Very often, the stately home owner can apply for a 50 per cent. grant to meet the repair bill with which he is faced. On the other hand, however, if the Historic Buildings Council's funds are limited, any increase in VAT which is covered by the 50 per cent. grant is, in effect, a reduction in the funds that it has available. That is the situation that will face the Historic Buildings Council when it comes to meeting bills which are enlarged as a result of increased VAT.
      Therefore, what we are really talking about is reducing the available funds for the provision of extra facilities for the repair of stately homes. That is a situation that we would all regret, and I am sure that it will lead to further decay in this quite important sector of our economy, and particularly—I stress this point—in local economies around the country.
      The second situation which we can look at here—not only the question of the Historic Buildings Council and what it may provide for a landowner or a stately home owner—is the fact that in some instances the landowner or stately home owner may be able to set repairs and maintenance against his costs. But again, all those who over the years have followed the debate about the heritage will know that the situation is even more arcane than usual in this area. The Inland Revenue allows the stately home owner to set his repairs and maintenance against his costs only if he is running his stately home as a business. Then comes the question: what is a business?
      A business is an enterprise which has some prospect of making a profit. That is the definition of a business. But many stately home owners are not in the business of making a profit. They are in the business of keeping revenue reasonably high, keeping the place going, and doing a public service by opening it to the public. That is all that they want to do. They want to offset some of their legitimate costs. They are not interested in making a profit. They have no prospect

      1331
      of making a profit. Therefore, they are not a business. Therefore, they cannot set against their total revenue the costs of repairs and maintenance.
      It is a bizarre Alice-in-Wonderland situation that we face. The Minister of State knows that as well as I do, from having discussed it over the years. No doubt he has made his criticisms of it in the past. I hope that he will retain those critical faculties which we know him to possess now that he is in his present job. This is an absurd situation. It is something that all Governments, of whatever political complexion, should examine closely, because it does not make sense. We should have a bit of common sense in this area.
      Finally, on the question of heritage, what we need—I hope that here I shall carry Conservative Members with me, as well as my hon. Friends—is some sense of strategy. Up to the present, it has been far too much at the whim of the capital transfer tax, VAT and all the other items of taxation which have impinged on the heritage business. We have not thought it through. Therefore, we need to examine the problems in a sensible way and devise a regime for the heritage business which really makes some sort of sense in economic terms and not simply in terms of the fiscal wisdom of the Inland Revenue or whatever a particular Chancellor may devise for some other purpose, which has consequences for the heritage business. We need to plan for the heritage business directly.
      Perhaps this is not the most important thing in the world, but it is a vital part of our economy. Both sides of the House have an interest in doing something about it, because in the final analysis it provides local employment as well as being a boost to our tourist industries.
      I now turn to the question of churches. We must not forget that as part of our heritage we have not only some splendid country homes but some splendid and ancient churches, of all denominations, in our towns and villages. It is here that we enter a world, if anything, of even greater fantasy than we have observed in the case of stately homes.
      Special provision was made by the previous Government in 1977 for additional funds to be made available for preserving the fabric of church buildings.
      1332
      Additional grant-aid was made available by my Government. The total amount of grant-aid available, roughly speaking, is £2 million. That is the total amount from the Government that goes to the repair of church buildings.
      We now have £2 million coming direct from the Government as a grant, and the Churches pay £1·7 million in VAT. What the State gives with one hand it takes away with the other. Apart from that, the £1·7 million, which almost balances the £2 million, was the amount of VAT that was due at the old rate of 8 per cent. Presumably with VAT at 15 per cent. the amount will be nearer £3 million, so we are giving the Churches £2 million to spend on their buildings, which is a small enough sum, and taking back £3 million in VAT. Those right hon. and hon. Members on the Government Benches who vote against the amendment must agree that that is what they are voting for. That is an absurd situation, which cannot be defended by any rhyme or reason, whether it is simple taxation or general economics. I. should like to see a clearer indication from the Government of what their strategy will be. Do they intend this absurd situation to continue as a result of the changes in VAT, or do they not?
      I should like the Minister to deal with this point. It seems to me nonsensical that all those who spend their time organising bazaars, whist drives, coffee mornings, sales of work and concerts—no doubt many hon. Members in the House have attended some of them—are simply paying the Inland Revenue the VAT. They are raising practically no thing towards helping their churches.
      I must make the point—no doubt others speaking to their own amendments will wish to make it also—that there is not only a problem for the private householder whose bills will be increased by the near doubling of VAT, but there is this special problem for stately homes and churches. Both these problems would be changed if the Committee were to accept the amendment, which would reduce the 15 per cent. rate to the existing 8 per cent. rate. That would be a small help, but I go beyond that and say that we need a more sensible strategy for this whole business of heritage, churches, and so on, if we are ever to tackle the problem in an economic way

      1333
      and ask for the sort of contribution to our economy which I am sure it is capable of making.
      That is sufficient on that subject. I could extend these remarks to cover other items under the heading of repairs and maintenance. It is possible that we shall need to return to this debate tomorrow. [Hon. Members: "Today."] Today, indeed. For the moment, having introduced this topic, having given the Minister, or whoever is to reply to the debate, a reasonable opportunity to comment on some of my points, and having recognised that the mood of the Committee is that I should curtail my speech—though I reserve the right to return to the matter if I feel that the case has not been answered or that some points have not been covered in the debate—I leave the matter there.
      To report Progress and ask leave to sit again.—[ Mr. Biffen.]
      Committee report Progress; to sit again this day.

  STATUTORY INSTRUMENTS, &c.
  Ordered,
  That the Order of the House of 28 June, that the Customs Duty (Personal Reliefs) (No. 1) Order 1975 (Amendment) Order 1979 be referred to a Standing Committee on Statutory Instruments, &c., be discharged.—[Lord James Douplas-Hamilton.]

  EUROPEAN PARLIAMENT MEMBERS (FACILITIES)
  Motion made, and Question proposed, That this House do now adjourn.—[Lord James Douglas-Hamilton.]
  3.26 a.m.
  Mr. Edward du Cann: I am grateful for the opportunity to raise tonight the important subject—which to me seems to have constitutional implications—of the provision of facilities in the Palace of Westminster for newly elected Members of the European Parliament. It must be a matter of concern that neither the British Government—either this one or their predecesors—nor the British Parliament have made proper and known preparations for them to do their work.
  Governments and Members of Parliament may hold differing views about the
  1334
  value of the EEC, or, as I would prefer to call it, the "European Political Community," for obviously its final purpose is political. People may question the wisdom of the United Kingdom's accession. I have been an opponent of this proposal continuously. I have always believed, and still do, that there are alternative economic and political strategies for the United Kingdom. None the less, the EEC is a fact. This House voted in its favour, and so did the nation. It seems to me that our duty now, as practitioners of democracy, is to make it work and succeed and to do our best in that endeavour—as, indeed, every other national Parliament is doing.
  On 7 June last we elected 81 Members to join their colleagues in the European Parliament, so it is a fact of life. I believe it to be essential that there should be carefully structured institutional contacts between national Parliaments and the European Parliament if sterile conflict between them is to be avoided; for example, if we are to prevent the European Parliament from trying to assert itself at the expense of our domestic Parliament, or vice versa.
  The reality is, or should be, that they are, or must become, complementary. Indeed, I would argue that a co-operative attitude towards each other might well enhance the degree of parliamentary control which I believe to be necessary over Community business. There can be no sphere in which this is more necessary, in order to examine this question of parliamentary control and to see that proper arrangements are structured.
  In practice, an effective liaison will be indispensable, as will mutual support, whether we speak of the smooth passage of Community law through national Parliaments or of the agreement by national Parliaments to constitutional amendments to the treaties; for example, to increase the European Parliament's powers, which I am sure will be a subject that will be much discussed in the years immediately ahead.
  The proponents of the United Kingdom's entry into the EEC argued with passion that our 700 years experience of parliamentary and constitutional government were invaluable. Our methods and constitution have stood the test over the years and enabled us to evolve our system

  1335
  of government and democracy sans revolution and serious discord. That is undoubtedly a priceless possession and an example to the youngest Parliament in Europe. Those proponents argued that we should demonstrate leadership, but we are not doing so. At present, perhaps inadvertently, we are barring Members of the European Parliament from our advice and experience.
  Our British Members of the European Parliament feel confused and let down. There are three areas that we might discuss together. First, there are matters that are for hon. Members and not for the House as a whole or for parties. We can do much to establish local liaisons with Members of the European Parliament across party boundaries, as with local authorities in our constituencies. We also have a duty to become better informed about the EEC structure. Here is an instrument that we must learn to play, and play well.
  Secondly, we need to integrate European Members of Parliament into our party work, give them the opportunity to play a part in our parliamentary Committees and allow them to attend as a normal practice.
  Mr. Nigel Spearing: No.
  Mr. du Cann: I believe that the 1922 Committee is already agreeable to that. It should also be a normal thing for hon. Members to attend parliamentary committees in the European Parliament. If the venture is to succeed we must be in the habit of thinking together, debating together, discussing together and formulating policy together. The key word is "together".
  Thirdly, there are the parliamentary matters—the matters that are for us all to decide in this House and in this Parliament. The principle under which we should operate is clear. Members of the European Parliament must be integrated into our work. Exchange of information should be routine. To that end I have a series of practical suggestions. I put them in no particular order. Some are important, and others minor.
  The most formal derives from the work of the House of Lords Select Committee, which has considered the links between
  1336
  Westminster and the European Parliament. It has recommended that a Grand Committee be set up consisting of members of the Scrutiny Committee of both Houses and Members of the European Parliament. It is suggested that it should meet two or three times a year to discuss European affairs in general, with a small steering group meeting more often to take up minor issues. These ideas are manageable and effective. We do not know the view of the Government or of the House, and it is time that that matter was decided. There is the proposal that Members of the European Parliament, or some of them, should be members of the legislative Scrutiny Committees of both Houses. I warmly support that because it would be conductive to their effective working.
  It is perhaps the more informal matters, the many smaller essays that we can make, that will be effective in the aggregate in making a reality of co-operation. We have The House Magazine, of which I have been a supporter from the beginning, under the command and invention of the hon. Member for Newcastle upon Tyne, East (Mr. Thomas). I hope that that will be distributed to Members of the European Parliament and contain accounts of their work.
  I believe that official papers should be made available to Members of the European Parliament as they are to us, and I am astonished that that has not already been done. This Parliament must be the focus, and I hope that arrangements for expenses for Members of the European Parliament will soon be settled so that they will have the ability to travel here without difficulty.
  I turn to the question of access. Too many persons who are not Members wander around these corridors of power. Access for Members of the European Parliament should be limited. They are not Members of this House or of the House of Lords. They should not have the privilege to speak in this Parliament, but there should be a room for them here, and working facilities with a telephone and a Telex. They should be given passes analogous to those issued to members of the Lobby to promote access to certain parts of the building. It is degrading that Members of the European Parliament should be obliged to go to the Strangers Lobby and send in a green card if they want to see a Member

  1337
  of this House. I would give them access to the Galleries to listen to the debates, afford them other facilities, such as parking—there is plenty of room—and give them some part in the entertainment facilities. One could add to or subtract from these categories, but at present nothing is being done, and that is wrong.
  The reason why I raise this matter tonight—and I am grateful to the Leader of the House for being here to answer this Adjournment debate—is that there is a feeling among Members of the European Parliament that we are stonewalling on this business. It is our duty to be helpful if we can. I suggest that this matter could be considered by a small committee of Members of this House—perhaps the Leader of the House and his opposite number, two representatives from the European parliamentarians, perhaps the chairman of the parliamentary affairs committee of the Labour Party and an equivalent representative from this side, a representative from the PLP and one from the 1922 Committee.
  We must deal with this matter somehow. The sooner we begin this constructive process, the sooner public opinion will be reassured, and the sooner Members of this new Parliament, to whom we wish success in their heavy labours, will be assured of the guidance and experience of this House, which is so much in their interests.
  3.38 a.m.
  Mr. Jim Spicer: I intervene briefly to thank my right hon. Friend the Member for Taunton (Mr. du Cann), on behalf of those elected as Members to the new European Parliament, for offering a helping hand to them by providing the services which they desperately need in this House. In doing so he has performed a great service to this House and to the newly elected European Members.
  We begin with a great fund of good will from those 81 Members. We could very easily fall into sterile conflict between this House and the new Members if we are not careful. My right hon. Friend has outlined so many ways in which we can help, but the most pressing and urgent need is for access to the House on the same terms as Lobby correspondents have already. If we grant that sort of access, it follows that we must
  1338
  grant access to our parking facilities. Hon Members know that it is unusual for the lower floors of our car park to be full and if we wish to encourage Members of the European Parliament to come to the House and play their part alongside hon. Members there is no reason why our parking facilities should not be made available to them.
  The new Members of the European Parliament wish to work with, and learn from, the House. Many have not been involved in politics in the sense that hon. Members are involved, and the sooner that we take them on board as friends, the sooner they will carry the message of democracy to the European Parliament. Many in Europe have looked to us for that message in recent years, but we have not had the right message to give. I hope that, as a result of the co-operation that will be built up between hon. Members and the Members of the European Parliament, that message will go out from the House.
  3.41 a.m.
  The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): I am pleased to be able to reply to this short and important debate on the relationship between Members of this Parliament and Members of the European Parliament.
  The issues that my right hon. Friend the Member for Taunton (Mr. du Cann) has raised about facilities and access clearly form part of a wider framework, which is bound to become of growing importance and concern to the House, namely, the whole future relationship between Westminster and the directly elected European Parliament and its Members. I congratulate my right hon. Friend on raising the issue and so adding to the considerable services that he has rendered to the House. I am also delighted that my hon. Friend the Member for Dorset, West (Mr. Spicer) was able to join in and speak from the point of view of Members of the European Parliament.
  I find myself in broad agreement with the approach of my right hon. Friend and my hon. Friend. Future relationships, whether formal or informal, administrative or procedural, will have major implications for the future workings of both Parliaments. It is the Government's

  1339
  aim that the relationship should be both cordial and constructive. If we do not grow together we shall grow apart, and that would be to the loss of both Parliaments.
  Important preliminary work on the way in which the relationship may develop has already been done. In particular, there has been a valuable report from another place's European Communities Select Committee. Some matters were also touched on in the third report of this House's Select Committee on Direct Elections to the European Assembly.
  The Government are fully alive to the major importance of the proposals made in those reports, including, for example, the suggestion mentioned by my right hon. Friend of a Grand Committee of both Houses to promote discussion between Members of the two Parliaments in matters of mutual interest.
  Other matters were also considered by the Lords Select Committee. The right of directly elected Members to attend meetings of the Westminster Scrutiny Committees on Community legislation was a suggestion supported by the Committee. It examined the need for a European Parliament London office near to the Palace of Westminster, the question of the servicing of directly elected Members, the question of access of such Members to the Palace of Westminster, and the question of the availability of parliamentary papers.
  In the Government's view, which I hope the House will share, it is essential, before coming to final conclusions on these issues and related ones, to seek to establish as wide a basis of common ground as possible—not only among Members here at Westminster but among the newly elected United Kingdom Members of the European Parliament—about what these links and facilities should be.
  It is, in our view, also necessary for enough time to elapse to enable some practical experience to be gained in the actual working of the directly elected Parliament. As the Select Committee on Direct Elections to the European Assembly put it in its third report:
  "it would be damaging to the whole concept of good relations between Government and the European Assembly if some machinery
  1340
  were to be established immediately after direct elections which subsequently turned out to be ineffective."
  Experientia docet—and we want to have some experience of the working of this great new enterprise of the European Parliament before coming to conclusions.
  We have already undertaken in our election manifesto to discuss these questions with other parties. What we are now considering is within what framework these consultations could most appropriately take place; and in what way the wishes of the directly elected Members themselves can be established and taken into account.
  My right hon. Friend suggested a form of working party, and we shall consider that proposal. But at this stage I wish to assure the House that there is no question of any of the proposals that we have heard in this debate—relating to such domestic matters as access to the Library or to the Refreshment Rooms or, more fundamentally, to the possible establishment of procedural links between the two Parliaments—being brought forward by the Government without prior consultation.
  Mr. Spearing: Will the right hon. Gentleman acknowledge that the Parliament of which he speaks does not exist, and that it is an Assembly? Secondly, does he agree that there are many hon. Members in this House for whom what has been said in this debate is highly contentious? They felt so strongly on the matter that they disapproved by voting not only against the Assembly and adherence to this organisation but against direct elections and the election of representatives. Will he undertake to go even more slowly in view of the doubts felt on this subject and the manner in which it is being dealt with in this debate?
  Mr. St. John-Stevas: I listened with interest to the hon. Gentleman's intervention. Of course, there are diverse views in this House on a matter of this importance. Indeed, they have been adequately represented here this evening. My right hon. Friend the Member for Taunton has represented one view and the hon. Gentleman in his intervention has represented another. We have heard the views of the members of the European Parliament. Everyone has had his say.
  Mr. Spearing: The right hon. Member for Taunton (Mr. du Cann) has had his say.
  Mr. St. John-Stevas: I agree that my right hon. Friend had more time in which to speak. Perhaps he does not possess the ability of the hon. Gentleman to condense his remarks into one sentence. It is no surprise to me that the hon. Gentleman has issued a manifesto. He is assiduous as he has every right to be, in propagating his views. However, I do not wish to enter into too metaphysical a discussion about the European Parliament.
  Mr. Spearing: European Assembly.
  Mr. St. John-Stevas: We must use our own words. The European Parliament—or Assembly as the hon. Gentleman oddly calls it—is a directly elected body that is unique in the history of parliamentary institutions, and it would be churlish to deny this important body the name of Parliament. We in this House have made a great contribution to parliamentary government, but we are not the Mother of Parliaments. England is the Mother of Parliaments, and I shudder every time I hear the misquotation. I hope to correct it when it occurs, and I hope, too, that tonight's select audience will observe that John Bright's phrase was about England and not about this House. No doubt we shall hear Westminster called the Mother of Parliaments again before too long.
  The matters that we have debated are of importance to individual Members as well as to the House. The Government fully recognise the need to establish the views of the House—possibly through the establishment of an appropriate Committee or, perhaps, a joint inquiry with another place—before decisions are taken. I believe that the matter is progressing at a reasonable pace.
  As regards access for directly elected Members of the European Parliament to facilities here—to which my right hon. Friend particularly referred—these could involve, of course, such matters as access to amenities such as bars, restaurants and libraries. The Select Committee on Direct Elections to the European Assembly favoured making available to directly elected Members some of the amenities that are available in Parliament to Members of both Houses. The House may
  1342
  recall that that Committee considered that informal links like this might be the best way—initially, at least—for relations between the two Parliaments to develop. I suppose that another alternative might be to consider joint facilities—common meeting places, and so on—outside the Palace of Westminster. These are no doubt matters which the House and the Services Committee may wish to consider further.
  Apart, however, from questions affecting the relationships between the two Parliaments, there are a number of other aspects of assistance to United Kingdom Members of the European Parliament in which the House is less directly concerned, but to which it may be helpful if I refer briefly. There is, for example, the need for accommodation—temporary and permanent—for the London office of the European Parliament. There is the matter of secretarial support services for individual United Kingdom Members. Directly elected Members may wish to have available departmental briefing, if required, and to have ready accessibility to parliamentary papers.
  The Government have all these matters under consideration. My right hon. Friend the Lord Privy Seal will shortly be getting in touch with the leaders of the parties represented in the European Parliament on briefing arrangements.
  We believe that as a matter of general principle the European Parliament will itself provide any necessary accommodation and services from its own resources, but, as I have said, our aim is to be as helpful and constructive as possible. We shall do all that we can to assist United Kingdom Members of the European Parliament to carry out their important duties. We recognise that in the case of accommodation it may be necessary to bridge the gap until the European Parliament authorities can complete their arrangements. We should be prepared, if appropriate, to put forward proposals to the Services Committee.
  I hope that I have indicated enough to show that the Government are fully aware of the need to establish effective and mutually beneficial co-operation between Parliament and the United Kingdom Members of the European Parliament. No doubt it may be some little time before the new, directly elected Members

  1343
  can reach a view on what they need at Westminster. When the position has crystallised a little more we shall be able, I hope, to find the appropriate forum in which these views can be expressed and considered in a way that is generally acceptable, so that the mutual interests of both Parliaments can be furthered.
  To achieve that it will be necessary for all questions of relationships between the two Parliaments, whether in terms of facilities, procedural relationships or administrative support, to be examined in a constructive way. I am extremely grateful to my right hon. Friend for the excellent
  1344
  example that he has set tonight. His views will certainly be taken into account in the Government's consideration of the proposals, which, as appropriate, we shall in due course bring before the House. We shall also consider the views—the minority views—of other hon. Members, such as those of the hon. Member for Newham, South (Mr. Spearing), who has intervened in this debate. All must be taken into account to reach a happy conclusion.
  Question put and agreed to.
  Adjourned accordingly at four minutes to Four o'clock a.m.

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

PAY BEDS IN NHS HOSPITALS
The Earl ALEXANDER of TUNIS: 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 how much of the taxpayers' money will be saved in the next 12 months by their policy of having pay beds in National Health Service hospitals.
Lord CULLEN of ASHBOURNE: My Lords, the provisional estimate of income received in 1978–79 from private inpatients in NHS hospitals in England is £29·7 million. We do not know how many pay beds would have been withdrawn over the next year if the previous Government's policy had continued, nor to what extent these withdrawals would have affected the level of income. Nor do we know how many pay beds there will be under our policy. I should point out that the Health Services Board, who have the job of making proposals for the withdrawal of beds, have just submitted proposals for the withdrawal of a further 58. My right honourable friend the Secretary of State for Social Services is obliged by law to implement these by 30th September. The board will be making further proposals in September for subsequent implementation. My right honourable friend will introduce legislation as soon as he can but I cannot of course say when this would come into effect.
Earl ALEXANDER of TUNIS: My Lords, I thank the Minister for his reply. Can he tell the House what is Her Majesty's
220
Government's policy on private practice in National Health Service hospitals?
Lord CULLEN of ASHBOURNE: My Lords, the Minister of Health, Dr. Gerard Vaughan, has recently issued a consultative letter on the Government's proposals for legislation on private hospital practice and the future of pay beds. A copy of this letter has been placed in the Library, and all noble Lords who are interested in this subject would be well advised to read it. The detail of the proposals is in the letter, but, briefly, the proposals for pay beds are that the Secretary of State's power to allow NHS facilities to be made available for private patients will be restored and compulsory phasing out will end. It will be for individual health authorities to decide the extent to which facilities will be made available.
Lord WELLS-PESTELL: My Lords, will the noble Lord be good enough to inform the House how much of the tax-payers' money is lost every year as a result of people who use pay beds and do not pay their bill, and even bilk on their surgeon's and physician's fees?
Lord CULLEN of ASHBOURNE: My Lords, I have a feeling that the noble Lord knows the answer to that question, but unfortunately I do not.
Lord WELLS-PESTELL: My Lords, may I ask the noble Lord the Minister to accept the fact that I am satisfied that he acknowledges that this sort of thing does go on?
Lord HARMAR-NICHOLLS: My Lords, in order to help future decisions that will have to be made, would it be possible for the Official Report to record what has happened to the pay beds already phased out? How many have in fact been used as hospital beds? How many have been used for administrative offices, and how many are left empty?
Lord CULLEN of ASHBOURNE: My Lords, I am not sure that I have got all the answers there. I can tell the noble Lord that there were originally 4,444 pay beds before the phasing out began, and the present number that will be phased out is about 1,700 of those pay beds.
Lord HARMAR-NICHOLLS: My Lords, what has happened to them?
Lord CULLEN of ASHBOURNE: My Lords, I am afraid that I cannot answer that question, because many of those pay beds were underused at the time. Most of the pay beds which have been phased out were phased out on account of the fact that they were little used.
Lord WALLACE of COSLANY: My Lords, the noble Lord said that so much money would be lost if pay beds were abolished. Could he tell the House how much the average pay bed costs the country in provision of staff, nurses, doctors, facilities, and what have you?
Lord CULLEN of ASHBOURNE: My Lords, I am afraid I cannot. I can say that, of the £29 million-odd that the NHS received, a good deal would of course go in providing the service. There would be some profit on it, but not a very great one. On the other hand, if all the pay beds were phased out, those beds would have to be otherwise financed.
Lord ORR-EWING: My Lords, may I ask my noble friend to press the Government to proceed with legislation? It seems ridiculous to continue with an old, out-of-date policy which is against the present elected Government's Manifesto, particularly denying the money which comes from pay beds when modern equipment such as body scanners have to be closed down and sold off because hospitals do not now have the money to keep them equipped. This is a waste of effort and is totally unnecessary. Will legislation be coming forward fairly soon to reverse the policy of getting rid of pay beds?
Lord CULLEN of ASHBOURNE: My Lords, consultation is now going on and we are awaiting publication of the report of the Royal Commission on the National Health Service which is due to come out this month. Before that is seen and consultations have taken place no further decisions will be taken.
Lord WELLS-PESTELL: My Lords, the Minister said that £29 million would have been the figure to be received by the Government. Would he agree that it
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would be dependent on whether the pay beds in existence at that particular time had been in full use?
Lord CULLEN of ASHBOURNE: That is correct, my Lords.

RELATIONS WITH ARGENTINA
2.44 p.m.
Baroness EMMET of AMBERLEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what progress is being made with the normalisation of our diplomatic representation with the Argentine.
Lord TREFGARNE: My Lords, we are actively considering the level of our relations with Argentina. Our decision will be announced in due course.
Baroness EMMET of AMBERLEY: My Lords, may I suggest to the noble Lord—
Several noble Lords: No!
Baroness EMMET of AMBERLEY: My Lords, may I ask the Minister to consider that while there are certain differences between the Argentinians and ourselves, those difficulties would be much better handled and solved if we had an ambassador there who would give us a certain status which at the moment we do not have?
Lord TREFGARNE: I think my noble friend is quite right, my Lords, and that is why we are actively reconsidering our policy in this matter.
Lord GORONWY-ROBERTS: My Lords, may I ask the Minister to accept from this side of the House—perhaps I might put this in an interrogatory form—the full support of the Opposition for the earliest possible resumption of normal diplomatic relations with a country with which we have had for some centuries ties of close friendship, both commercial and cultural? Perhaps from this House might go to our Argentinian friends, as proof

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of our desire to resume these relations, the fact that the ambassador designate in Buenos Aires is an officer of the highest credentials, of great experience of Latin America and of great personal friendship for the Argentine itself.
Lord TREFGARNE: My Lords, I am much obliged to the noble Lord for that helpful observation. I think we are actually continuing the policy of the previous Administration in this matter.
Lord MORRIS: My Lords, may I ask the Minister to be good enough to confirm that approaches were made by the Argentinian Government as long ago as February/March of this year, and would he further confirm that the reason for the delay can in no way be attributed either to the Argentinian Government or to Her Majesty's Government using the appointment of an ambassador as a bargaining counter?
Lord TREFGARNE: My Lords, of course we already have diplomatic representation at a lower level in Buenos Aires, but the appointment of an ambassador is an important matter and not to be rushed.
Lord AVEBURY: My Lords, is the Minister aware that on 19th June Members of both Houses received a deputation of the mothers of the Plaza de Mayo who were here to plead on behalf of the 15,000 persons who have disappeared in Argentina since the coup of March 1976 and whose relatives have been kept in ignorance as to what has happened to them? Would the Government, notwithstanding any change in the level of diplomatic representation in Buenos Aires, press for this matter to be laid before the United Nations Commission on Human Rights under the Article 1503 procedure as a gross and persistent violation of human rights? Will the Minister assert on behalf of the Government that the restoration of diplomatic representation at ambassadorial level is in no way to be taken as a derogation of the horror that the British people feel at the continued atrocities committed against the people of Argentina by the State?
Lord TREFGARNE: My Lords, our approval or disapproval of human rights considerations in various countries of the
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world does not necessarily affect our decision to appoint or otherwise the ambassador. If we took that as a criterion we should have hardly any ambassadors anywhere.
Viscount MONTGOMERY of ALAMEIN: My Lords, would the noble Lord not agree that the fact that there are more than half a million citizens of British descent living in Argentina, who are all God-fearing citizens, and the fact that there is great opportunity for trade and investment in the revived economic climate, give added reason to have an ambassador at an early date?
Lord TREFGARNE: That is certainly a special consideration, my Lords, but it is perhaps relevant and right for me to point out that the Argentine Government last year issued a decree calling on all religious organisations to register. Organisations which are considered a threat to public order, national security or Argentine morals or traditions may be refused registration and thus denied permission to practise. We are not very happy with that decision.

CHANNEL TUNNEL PROJECT
2.48 p.m.
Lord SWINFEN: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are giving any consideration to the construction of a Channel Tunnel.
The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Lord Bellwin): My Lords, as noble Lords will be aware, a report prepared by the British Railways Board setting out the results of preliminary studies undertaken in conjunction with the French railways for a single-track rail-only Channel tunnel was published in February last. At the same time, the chairman of the board asked for an early indication of the Government's attitude. The Government are giving careful consideration to the board's proposals, but it is too early to say what view the Government will take of this new project.
Lord SWINFEN: My Lords, while thanking the Minister for his reply, may I ask whether he is aware that I would be grateful to know—and I am sure the House would as well—if any request has been made to the EEC for grants or loans to be forthcoming for such a project?
Lord BELLWIN: My Lords, a request as such has not been made, but discussions are taking place at the present time as to the commission's proposals for aiding transport infrastructure investment; but I understand that is still in the initial stages.
Lord GLADWYN: My Lords, have the Government ruled out any possible consideration of the construction of a Channel bridge?
Lord BELLWIN: My Lords, at the moment the Government are looking into the present scheme that has been put forward. They are not looking into the matter of a Channel bridge, and I should imagine that that would be done only if the present scheme were found to he not viable and if there were sufficient interest in a bridge, as such, being constructed.
Lord SEGAL: My Lords, we have been told that it is too early for the Government to reach a decision on this matter, but bearing in mind the fact that the earliest date by which even only a single track tunnel could be completed is the year 1985, is it not about time that the Government reached a decision, especially in view of the fact that the longer a decision is delayed the more the costs of the tunnel will mount up?
Lord BELLWIN: My Lords, I should have thought that that was a matter which the noble Lord might have taken up with the previous Administration, who were in office for a number of years and who presumably did not take further the matter as it then was.
Lord MERRIVALE: My Lords, can the Minister clarify a point for me? Am I not right in assuming that discussions were held yesterday, and are probably continuing today and for a few days more, with French experts and with representatives of the Ministry of Transport? Can the Minister say what exactly was the purpose of the discussions?
Lord BELLWIN: My Lords, at present the French Government's attitude is illustrated by the fact that the SNCF has joined with the British Railways Board in carrying out studies, and I understand that the French Government have given their blessing to the SNCF's continued involvement in the studies.
Lord SEGAL: My Lords, is the noble Lord aware that the present issue of a single-track tunnel was never put forward to the previous Government for consideration? It has been raised only since the present Government were elected.
Lord BELLWIN: My Lords, I did not know the extent of the previous discussions, but it is interesting to note that the present proposals are to be discussed and taken forward in the way that is now being proposed.
Viscount SIDMOUTH: My Lords, in considering the revised scheme, will the Minister bear in mind that eliminating the Cheriton complex as well as the direct London rail link has met most of the objections which sank the previous scheme; that is to say, financially and environmentally? Will the noble Lord also bear in mind that by doing this the revised scheme becomes more specifically a rail link, as opposed to a rail-road link (which the previous scheme was) and that this might very well fit in with the present energy situation?
Lord BELLWIN: My Lords, I thank the noble Viscount for that observation. I am quite sure that it is that consideration which has encouraged the institution of the studies that are taking place at present.

MERCHANT SHIPPING ACT: REGULATIONS
2.53 p.m.
Lord SHINWELL: 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 the regulations embodied in the Merchant Shipping Act are to be published, and, if so, when.
Lord TREFGARNE: My Lords, the Merchant Shipping Act 1979 is largely an enabling measure. I envisage that we shall make the first orders or regulations under this Act well before the end of this year, and that we shall continue to use these powers for many years to come. All these orders and regulations will be published as Statutory Instruments.
Lord SHINWELL: My Lords, bearing in mind that he informs your Lordships' House that these regulations will be made before the end of this year, is the noble Lord aware that this matter was about to be raised just as the dissolution occurred, and that we were prevented from raising it because of that? Is it not important that the regulations be published immediately, in view of the fact that there has been ample time to consider them? Bearing in mind the Merchant Navy's somewhat precarious situation at the moment, is it not important to allay discontent, particularly among the navigating officers, who have been waiting for the regulations for quite a long time? Is it not possible to expedite the regulations, so that this matter can be disposed of?
Lord TREFGARNE: My Lords, the Merchant Shipping Act was not passed by Parliament until the closing days of the last Administration. It was hastened through on, I think, the very day that Parliament was dissolved, as noble Lords will recall. However, the new disciplinary arrangements were brought into operation on a voluntary basis from the beginning of this year, under the aegis of the National Maritime Board. It will take some time to work out the details of how best to extend the arrangements to cover the entire industry on a statutory basis.
Lord SHINWELL: My Lords, is the noble Lord aware that, at the time that this matter came before your Lordships' House just before the dissolution, I was about to raise the whole subject of the regulations and intimate what particular regulations were desirable immediately in order to allay discontent? Is there any reason why there should be any delay at all?
Lord TREFGARNE: My Lords, the bulk of the regulations are in fact already in force on a voluntary basis. We con-
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sider that it would not have been possible to make the regulations immediately the Act became law. They could not have been made before the Act became law because they are made under the Statutory Order procedure which requires, among other things, that the Statutory Order has to be laid before Parliament and must remain before Parliament for a number of days—40 days, if I remember rightly—before it comes into force. While the voluntary arrangements are continuing—and these cover at least 85 per cent. of the British merchant fleet—we are content to continue negotiations leading to the final adoption of the regulations.

THE TOKYO SUMMIT
Lord DENHAM: My Lords, with the leave of the House, my noble friend the Leader of the House will repeat a Statement being made in another place on the Tokyo Summit, at a convenient moment after 3.30.
IPSWICH PORT AUTHORITY BILL
Read 3a, and passed.

CRIMINAL INJURIES COMPENSATION BILL [H.L.]
2.57 p.m.
The Earl of LONGFORD: My Lords, I beg to move that this Bill be now read a second time. I rise to move the Second Reading of the Criminal Injuries Compensation Bill fortified by the attendance of so many noble Lords and, in particular, by the presence of so many right reverend Prelates; that is very encouraging. This must not be regarded as a solo effort on my part. It is the outcome of the work of a fairly small, but widely representative, committee that laid its findings before the House last year. We all worked hard, but we owed special inspiration to the work of Mr. Michael Whittaker, whose own daughter was foully murdered a good many years ago. We owed much to the assistance given during the research by the Dulverton Trust and the Matthew Trust. We had the advantage of the services of a

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former Government draftsman. I am told that his draft is a beautiful piece of work. If anyone questions that, he has only to look at the second page of the Bill and see whether he can make head or tail of the definition of " violence " that is given there. That is the essence of drafting—that one has everybody working it out, with some difficulty. At any rate it is a very professional job, though of course we must not hold him responsible for the final outcome.
The noble Lord, Lord Belstead, whom I welcome to office with even more than usual cordiality, will no doubt later be explaining the attitude of the Government. However, I take the liberty of quoting an extract from a letter written to me by the Home Secretary, Mr. Whitelaw, in reply to a letter of mine enclosing a copy of the Bill. The Home Secretary wrote:
" Your Bill will undoubtedly influence our consideration of the subject. But all I can say at present is that I fully share your sympathy with the victims of crime and particularly those who suffer injury through criminal violence ".
I am sure that that sympathy with victims of criminal violence is echoed in every quarter of the House, and indeed throughout the country.
My Lords, I go further. I submit that all of us, or almost all of us, would agree that, of the many categories of people who need assistance from the State, the victims of crime are the most neglected. There is something of a paradox here. Everyone says that we ought to do much more for victims. They say it particularly to so-called penal reformers, like myself, but they say it all over the place—" We ought to do much more for victims ". But in practice nothing, or hardly anything, is done. I pointed out last year, when I initiated the debate on the report of our working party on victims, that the last systematic debate here—also, incidentally, initiated by myself—took place 16 years earlier. That was in 1962—shortly before the present provisions for compensation were introduced. In the years between, the years 1962 to 1978, there was a steady and massive increase in crime, particularly violent crime. During those years the House discussed every topic under the sun, including all the main social issues, repeatedly. But, alas!, in regard to victims there was a deafening silence. It is worth thinking about that for a
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moment and then deciding that that silence should be terminated.
In one translation of the Gospels—I do not know which one is preferred by most of the right reverend Prelates with us today—a distinction is drawn between respectable people and outcasts; and, obviously, we ought to do what we can to be of assistance to both. The extraordinary thing about victims is that they are innocent people, respectable by definition, and yet we treat them, and force them to see themselves, as outcasts. Certainly that is how they do see themselves at the present time. None of us can be happy with that situation. We are often told in connection with, for example, penal reform that public opinion would not allow a Government to show much sympathy for criminals. No one will tell me that in regard to victims. No one will get up today and say, " I am afraid the public are rather anti-victim; I am sorry, you have chosen the wrong cause ". We cannot be told that this afternoon. I am sure that no other social improvement would arouse more general approval than fair play for victims.
I said in our debate last year that our report did not provide a complete charter for victims. To do so, as I pointed out then, would involve far-reaching improvements in our arrangements for law and order, for the prevention and treatment of crime. I repeat those observations today. But for reasons that will be readily understood, the scope of the Bill before the House this afternoon is not even as wide as the scope of that report. Nor, in the nature of things, does it contain various additional suggestions made in the debate last year by the noble Lord, Lord Mishcon, and other speakers. Nor does it try to settle numerous points of detail which are properly dealt with by administrative action. Of course, it is open to your Lordships, if this Bill gets a Second Reading, to put in various recommendations which would apply the principles laid down in this Bill rather more closely; but on the face of' it this Bill could be accepted as it stands and then the details could he worked out by administrative action.
A few more words must be said about what the Bill does not do; in other words, about its limitations. In the first place, compensation is still confined to victims

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of violence. Secondly, the Bill does not attempt to extend the whole principle, to which many of us are dedicated, of reparation to the State and to the victim in our sentencing policy. We discussed that at some length last year. But the question of a new sentencing policy, or an adaptation of our existing sentencing policy, is not dealt with here. Thirdly, this Bill does not set out to provide support for the invaluable work being done by the growing number of victim support schemes. I will not set out to defend those exclusions. I think, however, that most noble Lords will agree that the present Bill puts enough on our plate for the moment. But if this Bill does not in itself provide an adequate charter for victims, it is the second major step taken in that direction. The first major step was the establishment of the Criminal Injuries Compensation Board in 1964, with power to make ex-gratia payments to victims of violence.
I have mentioned some of the things that the Bill does not do: let me mention some of the things that the Bill does do. In the first place, it puts the present scheme on a statutory basis. I will come back to that in a moment, if I may. In the second place, it makes the provisions which now exist on paper far more accessible in practice; much more likely to be used, and used effectively. For this purpose, Clause 2 is the most significant. At present, a claim made by a victim is considered on paper in the first place. If the victim appeals against the finding, he has a right of personal appearance before a tribunal of three persons; but I should emphasise that legal aid is not available, as I know from first-hand experience lately, for the purpose of this appeal.
I will not take the House through the Bill in detail, but I will quote a few sentences from Clause 2. Clause 2(2) runs like this:
" On receipt of such application—

(a) the tribunal shall refer such claim to a local board for hearing before which the applicant will have the right of personal appearance or representation.

(b) The applicant shall have a right of appeal to the main tribunal from such local board, and thence to the Court of Appeal as set out in Schedule …

(c) Legal aid shall be available to applicants for all these purposes "

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and at all these stages. Then:
" (d) It shall be the duty of the local Board as far as possible to call the attention of victims in their area to the existence of the machinery for obtaining criminal compensation ".
When I say, therefore, that compensation will be far more accessible in practice, I have in mind particularly, first, much greater publicity; secondly, personal access to local tribunals instead of correspondence with some remote head office in London; and, thirdly—and this is, of course, of the first importance—legal aid at all stases.
Moreover, my Lords—and this is the third main benefit—the Bill provides certain new rights. One is solatium: the right of a relative to compensation for loss of society, as in Scotland. I am sure that the noble Lord, Lord Home of the Hirsel, will approve this attempt to bring us into parity with Scotland. At any rate, in Clause 13 of our Bill there is a list of relatives, which is almost entirely taken from the list which is used in Scotland, who might qualify under this head. The House must not jump to the conclusion that all these relatives—and there seem to be rather a lot of them if you look at Clause 13—would normally qualify. Whether they did or did not qualify for this solatium, this compensation, when some relative had been killed, would be for the tribunal to decide. In Scotland at the present time a parent who lost a dearly-loved child on whose earnings he was in no way dependent would qualify for compensation; that is, in Scotland at the present time, but not in England. In our Bill we seek to introduce the Scottish principle.
Secondly, at the present time victims of family violence are excluded. There seems to be general agreement in principle that they should now be included in the scheme, although an inter-departmental committee which looked into this and reported in that sense felt it necessary to make various qualifications. At any rate, in our Bill victims of family violence will qualify for the first time in this country. Then, thirdly, victims of violence will be able to secure compensation by instalments instead of, or in addition to, the present lump sum, if the tribunal orders it. Fourthly, victims with a criminal past will not be automatically excluded,

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as is more or less the case now. We shall exclude them in future only if the conduct of the victim contributed to the violent assault.
I think I am right in saying that when the leader of one IRA gang received a large sum in compensation because some other rival gang had given him severe maltreatment, there was a protest at the payment of that sum to someone living outside the law. Our rule would be that you would be excluded in this way not on the strength of your criminal past or just because you were, say, a prostitute—your way of life might be thought unsatisfactory—but because you had yourself contributed to the violent assault.
The Bill points the way to a new therapeutic treatment for victims. Much sympathy was aroused last year, not only in this House but outside, by the proposal in our report for therapeutic centres for victims. As I understand it, it would not be appropriate to set up these centres under the present Bill, but the Bill paves the way for their establishment. Ultimately, here and generally, the treatment of victims, including the levels of compensation, will depend on the concern of society as reflected in public and private action. This is true, mutatis mutandis, of all social services. The level provided rises as time goes on. But we see our Bill as a vital move if victims are not going to be left behind hopelessly as they are today.
I must return now to the fact that the Bill puts criminal injuries compensation on a statutory footing. It has always been assumed in my understanding that this would be done as soon as reasonable experience had been gained of the so-called ex-gratia arrangements. Fifteen years have passed since the ex-gratia arrangements were introduced. It would be difficult to claim that insufficient time for judgment has elapsed. The Welfare State as we know it today has been built up within a statutory framework and deserving persons of all kinds have been enabled in this way to receive State assistance.
Why should victims be treated differently? Why should they be discriminated against and allowed only an ex-gratia scheme? Why should they be treated for this purpose as second-class
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citizens? Is it because we do not take their plight quite seriously; that we think they are border-line cases who are not quite worthy of a full statutory scheme? I cannot believe that we would wish this to be said of us. If not, then the time has come to suit the action to the words and to put victims on the same footing as all the others who benefit, rightly, from our social services.
The interdepartmental working party which reported last year was working on the assumption (to quote its words) that:
" the scheme would be placed on a statutory footing ".
It was set up on that assumption. It came to the conclusion that most of the changes which it recommended—and I must say that they were very limited changes and certainly could not be said to cover the whole field—could be made within the framework of continuing the non-statutory scheme, the present ex-gratia scheme. But it clearly left it to others, its political masters, to decide whether legislation should or should not be introduced at an early date to place the scheme on a statutory footing.
The Pearson Royal Commission on Civil Liability and Compensation for Personal Injury, of which the noble Lord, Lord Allen of Abbeydale, was a distinguished member—and I am glad to see that he is to speak today—
Lord ELWYN-JONES: My Lords, the man himself, the noble and learned Lord, Lord Pearson, is here.
The Earl of LONGFORD: Yes, my Lords. I was referring to the noble Lord, Lord Allen of Abbeydale, and to his taking part in the debate. I hope that the noble and learned Lord, Lord Pearson, will himself feel drawn to take part.
What I was saying was that the Pearson Royal Commission on Civil Liability and Compensation for Personal Injury, which reported at about the same time as the Interdepartmental Committee last year, recommended in unequivocal language that the scheme should be made statutory. They say in their report that that is usually the situation in other countries. Their findings cannot, surely, be lightly put aside—and, certainly, not by me, with the noble and learned Lord,

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Lord Pearson, sitting within a yard or so of me.
The most obvious advantage of a statutory scheme would be that in the last resort there would be an appeal to the courts and much of the mystery that inevitably attaches to a bureaucratic scheme of the kind that we have today would be dissipated. Today there is much that we cannot discover, including, of course, the reason why claims are turned down. I went as a claimant's friend (the claimant was not allowed legal aid) before an appeal tribunal not long ago. The claim had already been turned down once after it had been examined on paper without the applicant being seen by anyone. This time a high official of the board (who must be deemed to have had a good deal to do with turning down the original claim) appeared in person against my friend. The result seemed like a foregone conclusion, and certainly the verdict went against us. No reasons were given. There was no appeal to the courts. Under a statutory scheme it would be more likely that justice would be done, and far more likely that it would be seen to be done.
In wider terms, the establishment of a statutory system would command much more confidence among victims, and certainly could be used to promote much more effective publicity. As time went on a statutory board would no doubt be better placed to exercise influence on behalf of more generous treatment for victims. I hope that I do not seem to disparage the devoted work of the officials of the Criminal Injuries Compensation Board from whom I have always received complete courtesy. They would be invaluable whatever form was taken by the new arrangements.
I shall naturally be asked how much this is going to cost. The change from an ex-gratia to a statutory basis would, as such, cost little. The main difference is the introduction of an appeal to the courts. Our own recommendations of local tribunals and legal aid at all levels would cost a little more, but the sum involved would still be minor. Our intention, however, that considerably more victims will receive compensation than do so at the present time would admittedly involve rather more expense. There is no use my saying that more people would get
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compensation and then saying that it would not cost any more. But how much more that would come to in money terms, nobody can say.
The board themselves, in reply to questions, feel unable to make any estimate of the proportion of those who could not claim and do not do so; and still less are they able to make an estimate of the people who might succeed if they were given legal aid and so on. We, the promoters of this Bill, cannot say how many people we are talking about when we refer to new claimants and to claimants who now fail to make good their claim and who, under our scheme, would succeed. But let me give some idea of the order of magnitude. According to the last published report of the board, £10 million was paid out in claims. Whatever percentage increase would take place under our Bill, the figures involved—the percentage increase on £10 million—ar relatively small compared with the total amount spent—and I am not saying for a moment that it is too much—on law and order, not to mention the other social services. Even in these times of stringency, we are surely not going to say that no expansion of any kind whatever in the social services, however urgent, can be permitted; that this great—and, may I say, wealthy—country cannot afford these few million pounds for people with their crying need.
It may well be that my commonplace words have not been able to bring home to everyone the widespread and often lifelong suffering that exists today among the many innocent victims of criminal violence. They are indeed a forgotten army. Moreover, they feel collectively that they are a humiliated army on whom society has deliberately turned its back through shame or embarrassment. The last thing I would claim for the present Bill is that it is in any way complete or perfect. If I were told that it is too modest I might be inclined to agree; but if that is the case, then the argument becomes all the more irresistible for doing at least this belated measure of justice.
Of course one will welcome suggestions from the House and, it may well be, additions and amendments to this Bill. I come before the House in no kind of dogmatic spirit but I beg the House to rise once again to a great opportunity.

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It would not be the first time—whatever our critics might think or say—that we should have given a lead to the heart and mind of the nation. I implore this House, respectfully but firmly, to give this Bill a Second Reading this afternoon. I beg to move.
Moved, That the Bill be read now 2a.—(The Earl of Longford.)
3.22 p.m.
Lord BOSTON of FAVERSHAM: My Lords, it gives me great pleasure to commend my noble friend Lord Longford most warmly for giving us the chance to debate this topic and for moving the Second Reading of his Criminal Injuries (Compensation) Bill. By doing so, he has underlined the importance of not forgetting the victims of crime, and especially those who suffer personal injury at the hands of the criminal. My noble friend has long been widely known as a fighter for the rights of prisoners, for penal reform and for safeguards for the accused. What is perhaps not widely known—particularly outside your Lordships' House—is that for quite some time he has also been working behind the scenes supporting the cause of victims of crime.
Before coming to my noble friend's proposal, I want to mention briefly the background. Your Lordships will know that there are already several measures providing for compensation for victims of crime. There is the provision for compensation orders under Section 35 of the Powers of Criminal Courts Act 1973, as amended by the Criminal Law Act 1977, Section 60, under which magistrates' courts may award up to £1,000 and the Crown Court an unlimited amount. There is the power under Section 28 of the Theft Act 1968 to make restitution orders for property. There is Section 7 of the Criminal Justice Act 1972 relating to bankruptcy orders in criminal cases. There is the criminal injuries compensation scheme itself to which my noble friend has already referred, a non-statutory scheme providing a system for ex-gratia payments, as he has said; and there are of course civil remedies.
During the period of the last Government, my noble and learned friend the former Lord Chancellor, Lord Elwyn-
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Jones, was most anxious that the powers, particularly of the magistrates' courts, to order compensation to be paid by the defendants on conviction should be used to the full, and in fact he went round the country urging justices to do just that. Not only is it important from the victim's point of view that he should be compensated, but we are also strongly of the opinion—and my noble and learned friend was at pains to point this out previously—that the offender should be made to face up to his victim and face up to his responsibilities towards his victim. I believe that the more effectively these powers are used, and the more that the criminal comes to know that he will have to pay for his crimes in that way, the more chance there is that this will itself help to act as a deterrent.
I feel that at this early stage I should say that I will not go along with my noble friend in what he has suggested about nothing having been done for the victim. He has himself already referred to the existing non-statutory scheme, and he has quoted a set of figures about the amount paid out in compensation in the past year of the criminal injuries compensation board's work. We see from the 14th Report up to 31st March 1978 that in the years 1975 to 1976 there was a total of 16,690 claimants. In the following year, 1976 to 1977, it was 20,400; and in the year after that, 1977 to 1978, 20,826. Of course, the scheme covers both England, Scotland and Wales. The board said in that report that they were budgeting for 22,100 applications in the year 1978 to 1979.
Since the scheme began on 1st August 1964, as the report points out, over £502 million has been paid out. In the past three reported complete years-1975–76, 1976–77 and 1977–78—the amounts were £6,476,000-odd; £9,677,000-odd; and in the year which my noble friend quoted, £10,106,513. So not only have sizeable sums been paid out, not only have sizeable numbers of unfortunate victims been compensated and cared for by the board in what I venture to submit is a very humane way, but these numbers and the amount paid out have been going up all the time as well. We are now talking in terms of a scheme which costs in excess of £14 million. Of course we can expect its work to increase as time goes on, whether or not it is turned into a

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statutory body. I go along with my noble friend completely in this matter: there is room and need for improvement in the scheme for compensation. For that reason, among others, I should have liked to be able to give a warm and unqualified welcome to my noble friend's Bill. While I applaud many of his objectives and wholeheartedly support his concern for the victims of violence, as I am sure all of your Lordships do, I much regret not being able to support this particular means of securing improvements.
I shall come in a moment to ways of improving the scheme. First, I should like to deal with some specific points about the Bill. My noble friend has already explained the purpose of his Bill, to make statutory provision for the payment of compensation for injury directly attributable to an act of violence by someone else. There would be a criminal injuries compensation tribunal together with local boards to work out and make the payments. Under the present scheme we have the criminal injuries compensation board, set up in 1964, which makes the ex-gratia payments that we have heard about to those who suffer injuries arising from another's crime. The scheme itself and the detailed basis on which awards are made are clearly set out by the board. On the whole, the system has worked very well indeed. In fact, as a recent report indicated, there has been no major criticism of the way that the work has been carried out. So far as my noble friend's Bill is concerned—and he has made the point himself—this does not appear to alter substantially the circumstances in which compensation would be paid, for those eligible to receive it, nor the amounts to be paid, with perhaps some exceptions.
There is a further point I should like to make about the circumstances in which a claim for compensation might be entertained. In the actual definition of those circumstances there is in fact no mention in the Bill of " crime " or " criminal " but only of " an act of violence ". A reference is made to " a malefactor ". Under the existing scheme—and here I draw on Paragraph 5, D.3 of the statement of the Criminal Injuries Compensation Board's own interpretation of the scheme, and I quote—
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" A claim must be founded on a crime of violence and no matter how careless are the acts of the person who inflicts the injury, no award will be made unless they constitute a crime ".
I am not sure whether the absence of any reference in this context in the body of the Bill to " crime " or " criminal " is inadvertent or not, and of course it is true that the Long and Short Titles of the Bill do themselves contain the word "criminal "; so I assume that that is what is intended.
I should also mention that my noble friend's Bill does not include any reference to the need to report an incident involving violence. At present, the circumstances of the injury should have been the subject of criminal proceedings or have been reported to the police or, exceptionally, in some other way clearly defined, such as to an employer, without delay, although the board may at its discretion waive that reporting requirement.
The main changes the Bill would make would be in the administrative machinery, and I think my noble friend has made that clear. This would undoubtedly cost substantially more than at present, although we do not have any figures to go on. I must confess that I am very doubtful whether the Bill would confer material additional advantages upon the victim of violent crime. Costs would also go up considerably as a result of the provision in the Bill for legal aid. Of course, I can see that this has been included from the best of motives and I must also confess to being somewhat torn about this provision.
Here I had better declare an interest: I practise at the Bar and the prospect of more work for my profession is, to say the least, not an unattractive one. Far be it from me to want to deny my learned friends a feast—indeed, I do not know quite what is going to happen to me after this when I get back to my own chambers! But, in all seriousness, I wonder whether, in this particular sphere, legal representation is really necessary generally, and whether the cost of it can really be justified. There is already provision for a friend or representative to go along, as my noble friend has already pointed out. One of the great advantages of the present scheme is its comparatively informal procedure, and I think it works efficiently as well as reasonably economically. Under the Bill, legal representation would be bound to

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become normal practice, but I doubt whether this would be justified.
Again, on the administrative side, there are a number of features missing from the Bill which would seem to be essential for a statutory scheme. For example, the Bill does not lay down the constitution nor the functions of the local boards which would consider the initial applications; nor does it define their procedures or include powers to make rules laying down those procedures. It gives no indication of the basis on which compensation should he assessed and there is no clear rationale for including in the Bill some aspects of the tribunal's work while leaving other aspects to rules to be made by the noble and learned Lord the Lord Chancellor.
A great deal of work has obviously gone into the drafting of this Bill, and that is highly commendable; but one is bound to conclude that the Bill, as drafted, contains substantial defects and, although it is always possible to carry out a tidying-up operation in Committee, I fear I am very doubtful whether it would be possible to remedy these in that way.
There is one other matter which should be considered before deciding whether the time has come to put the scheme on a statutory footing. That is that certain quite significant changes were announced recently in the present non-statutory scheme, following a thorough review of the scheme. On 19th March this year, my right honourable friend the then Home Secretary, Mr. Merlyn Rees, announced in another place that the then Government intended to extend the Criminal Injuries Compensation Scheme to victims of violence within the family—they had been ineligible before—and several other improvements were proposed too. That followed the last Government's consideration of the report of an interdepartmental body, which I think was referred to by my noble friend. It was set up in 1973 by the then Home Secretary, now the noble Lord, Lord Carr of Hadley. That report, Review of the Criminal Injuries Compensation Scheme: Report of an Interdepartmental Working Party, was published in March last year. I believe it was a model of clarity and presentation. The investigation itself was systematic and the findings were set out in a way which made for ease of reference.
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In his announcement, my right honourable friend the then Home Secretary said:
…in view of the considerable public concern over ' battered ' women and cnildren, the Government have decided to extend the scheme to victims of violence within the family, subject to the safeguards recommended by the working party and on an experimental basis in the first instance.
" The proposed safeguards are that applications should normally be considered by the board in cases of family violence only where the offender has been prosecuted for the relevant assault, that the injuries should be sufficiently serious to justify compensation of at least £500, and that the board should he satisfied that the offender would not benefit from the award.
" A revised scheme will be brought into effect as soon as the necessary administrative arrangements have been made. The scheme will remain non-statutory until there has been sufficient experience both of the revised provisions and of the operation of the extension to victims of family violence, to enable a statutory scheme to be drafted without any risk of a need for early amendment. Legislation to put the criminal injuries compensation scheme on a statutory basis will then be introduced when a suitable opportunity occurs ".
My right honourable friend also announced the Government's acceptance, subject to minor modifications, of the Working Party's other recommendations, most of which related to administrative improvements in the scheme; and he said the Government accepted those recommendations of the Royal Commission on Civil Liability and Compensation for Personal Injury, chaired by the noble and learned Lord, Lord Pearson—that is the Pearson Commission--relating to the Criminal Injuries Compensation Scheme itself.
The Earl of LONGFORD: My Lords, may I intervene? He did in fact make some very ambiguous remarks about the report in that statement quoted by the noble Lord, Lord Boston, about the findings of the Pearson Commission. The fact is that the Pearson Commission unequivocally said that the scheme ought to be made statutory. The Home Secretary said that he accepted the Pearson Commission. I am afraid I found a complete contradiction between those points of views.
Lord BOSTON of FAVERSHAM: My Lords, as has happened on previous occasions, my noble friend has, with his customary expertise, anticipated passages in my speech. Also this afternoon we may be privileged to hear—if he will forgive the expression—from the horse's

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mouth something about these recommendations themselves. My right honourable friend indicated that he accepted those recommendations relating to the scheme, including—this was the point I was about to make before my noble friend's intervention—the suggestion that it be made statutory. That was made clear not only in another place on 19th March but also in a Press statement which was released by the Home Office jointly for my right honourable friends the then Home Secretary and the then Secretary of State for Scotland. The working party made 52 recommendations and your Lordships will be relieved to know that I shall not go through them all. Some were far more far-reaching than others. For example, No. 7 said that there should be a formal avenue of appeal to the courts from decisions of the board on points of law, and No. 9 said that the administrative aspects of the work of the board and its staff should be subject to the supervision of the Parliamentary Commissioner for Administration: quite a significant recommendation.
I have just one question to put to the Minister, the noble Lord, Lord Belstead, who will be replying to this debate, about those recommendations and the announcement of my right honourable friend. I wonder whether he can say whether the Government intend to go ahead with the changes announced in March. I realise that there might not yet have been time to decide finally, but I hope he may be able to give some indication of how things stand tonight.
It is important to press ahead with improvements to the scheme, and my noble friend Lord Longford is to be complimented most warmly for seeking further reforms. That, too, was the precise and practical purpose of the last Government's recent decision, which included changes, some on an experimental basis, and the need to see how those worked out, before putting the whole scheme into legislative form. That decision prepared the ground for the period ahead for very valuable and, indeed, significant advances to continue and to increase the care provided for victims of crime. So our advice would be, as it was in March, to speed ahead with the reforms proposed and then see how those work out before embarking on legislation.

TOKYO SUMMIT
3.40 p.m.
The Lord PRESIDENT of the COUNCIL (Lord SOAM ES): My Lords, with the permission of the House, I will now repeat a Statement being made in another place by my right honourable friend the Prime Minister about her visits to Tokyo and Canberra. The Statement is as follows:
" On the way to Tokyo we refuelled in Moscow, and the Soviet Prime Minister, Mr. Kosygin, came to the airport to meet me. We had about one-and-a-half hours' discussion, during the course of which I impressed on him our deep concern about refugees from Vietnam and asked him to intervene with the Government of Vietnam. He did not give me much encouragement in this respect, but I remain firmly of the view that the refugee problem must be tackled at its source as well as by resettlement. I also told Mr. Kosygin that Her Majesty's Government hoped that the SALT II Treaty would be ratified.
" The Tokyo Summit met against a background of rising inflation and higher oil prices: and this was underlined by the decision which OPEC made during the course of the Tokyo Summit to raise oil prices still further. I am glad to report that the Summit faced this situation realistically. We were all determined not to print money to compensate for the higher oil prices and we were united in feeling that if we were resolute in restraining demand for oil in the short term, we had all the skills and incentives to enable us to reduce our dependence on uncertain sources of supply in the longer term.
" We welcomed and took full account of the decisions reached by the European Council in Strasbourg the previous week: and we agreed upon action designed to align the decisions taken at Strasbourg with corresponding decisions taken at Tokyo by the United States, Japan and Canada.
" The United Kingdom, France, Germany and Italy agreed to recommend to their Community partners that each member country's contribution to the Community objective of maintaining oil imports between 1980 and 1985 at an

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annual level not higher than in 1978 should be specified. The United States took as a goal their import level for 1977, and Japan and Canada goals relating to their particular supply position. There was also general agreement that domestic oil prices should be at world market levels.
" We agreed on a number of measures to ensure that we are better informed about operations in the oil markets.
" The Summit made it clear that the industrialised countries are ready to co-operate with oil producers in defining supply and demand prospects in the world oil market. I believe that such discussions could make a valuable contribution to the future stability of the oil market. We also discussed the position of the non-oil developing countries who will be hardest hit by rising oil prices.
" Finally, we stressed the importance of developing to the full existing and new sources of energy as alternatives to oil. We saw a special need to expand, with safety, nuclear power generating capacity. Without this, the prospect for growth and employment would be bleak.
" The Summit also issued a special statement about the plight of Indo-Chinese refugees.
" This was rightly a Summit which concentrated mainly on energy, and I believe that the fact that we could take these decisions together will contribute significantly to achieving our objectives in both the short and longer terms.
" Apart from the formal business of the Summit, the presence of the seven Heads of Government in Tokyo provided the opportunity of more informal discussions on matters of mutual concern. I had bilateral meetings with President Carter and with the new Prime Minister of Canada: there were also discussions between the European Members of the Summit.
" From Tokyo I went to Australia for two days and had talks with Mr. Fraser and his colleagues. The last time a British Prime Minister in office had paid such a visit was in 1958 and I was particularly glad to be able to visit Australia so soon after becoming Prime Minister
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myself. I was able to give Mr. Fraser an account of the Tokyo Summit and we discussed a number of other matters of mutual concern.
" During my return journey from Canberra to London I stopped at Bahrain and had a valuable discussion at the airport with the Prime Minister, Sheikh Khalifa, who welcomed the Declaration on the Middle East issued by the Nine EEC countries on 18th June."
My Lords, that concludes the Statement.
3.45 p.m.
Lord PEART: My Lords, I thank the noble Lord the Leader of the House for repeating that very important Statement in this House today. First, I would refer to the question of the Vietnam refugees, and especially the talk with Mr. Kosygin. I am very glad that we impressed upon Mr. Kosygin our concern about the refugees, and I am sure that the Government have the support of the Opposition on this question. I was also glad that the Prime Minister told Mr. Kosygin that Her Majesty's Government hoped that the SALT II Treaty would be ratified—quite a contrast to some of the attitudes and views which were expressed in our recent defence debate by some noble Lords.
However, I want quickly to deal with the energy matter, because that is the importance of the major Statement today. May I just speak about Britain's commitments and ask a few questions? Because of the increasing production of North Sea oil, the Summit commitment to restrict United Kingdom imports of oil to 1978 levels over the next few years should be easily achieved. However, it is not clear whether the Government have entered into any firm commitments about the United Kingdom's oil consumption. I should like to know whether we are really to restrict consumption, perhaps in conjunction with other members. Are we to have concerted action with our colleagues in the European Community? If so, how will this restriction be achieved? Do the Government have any intention of introducing a comprehensive plan for energy conservations; for example, speed limits and generous tax incentives for improved insulation?

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Again, in the short term, over the next few months a continuing oil shortage seems inevitable. Are the Government to rely on the price mechanism to allocate supplies, as the Minister implied yesterday? Many of us saw his broadcast and he seemed to be firmly supporting an entire reliance on the price mechanism to allocate supplies. It may be right and it may not be; we should like to know more details. Have the Government any contingency plans for priority allocation, if the situation gets worse? After all, there are many sections of the community—for example, the farming community—which could be badly hit. Will there be some preparation for contingency plans? Also, why do the Government not stop profiteering, by controlling the price of petrol?
Again, in the longer term, over the next few years Britain's energy strategy will need to enable us to have enough North Sea oil sold on the home market to meet the United Kingdom's needs. This is most important. I understand that, while the home market goes short, Britain is exporting about half of its oil production, mainly to Europe and the United States. Can we defend this? I should like to know what is the Government's attitude. Even South Africa is receiving a small amount of oil from the North Sea. What steps do the Government intend to take to ensure that North Sea oil can be more easily diverted to the home market in any future shortage? Again, can the Government give the House a categorical assurance that none of the oil supplied to South Africa will reach Rhodesia? This could harm attitudes in the forthcoming conference in Lusaka.
I now come to coal, which is so important. Already today there is a very important discussion going on in the miners' conference just outside our national boundaries in Jersey.
The Lord Bishop of WINCHESTER: My Lords—
Lord PEART: What is the Government's position on coal? The 1978 Green Paper on energy aimed for 170 million tonnes of coal production in the year 2000. Do the Government support this? If so, will the Government give an unequivocal endorsement of the invest-
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ment programme in A Plan for Coal? I have asked a lot of questions. They are very important ones. I hope that I shall get as good answers. Finally, on nuclear power, I know that the Government are reported as saying that they wish to be in this field, and I understand that there will be five new nuclear power stations by the early 1980s. Is there any truth in these reports?
Lord BYERS: My Lords, I would only say to the noble Lord, Lord Peart, that perhaps he ought to go back to university and look at those examination papers which state that candidates need not attempt more than seven out of 10 questions! However, there is much in the Statement which we welcome unreservedly, particularly the references to the appalling problem of the refugees. We are particularly glad to know of the reassurance which was given regarding SALT II.
Turning to the question of oil, may I ask Her Majesty's Government whether they will clarify the phrase in the Statement which relates to co-operating,
… with oil producers in defining supply and demand prospects in the world oil market ".
Is that really enough, confronted as we are with a world crisis in energy? Do we not need something much more positive? Do we not need to set up machinery for discussing with the OPEC countries the whole question of trade between OPEC and the West? There are many items which many of the OPEC countries need from the West—for instance, grain, high technology and armaments. Do we not need to adopt a much wider concept and much stronger machinery in order to set going the negotiations and the dialogue?
Lord SOAMES: My Lords, may I thank both the noble Lord the Leader of he Opposition and the noble Lord, Lord Byers, for their questions. The noble Lord the Leader of the Opposition touched on a number of topics relating to what is going to happen internally in this country. Although I did not, as the French say, hold the candle in Tokyo, I doubt very much whether those topics were a feature of the discussions there. However, the noble Lord touched upon some very important questions, which showed me quite clearly that soon there will be a need for a general energy debate in this House, when matters of this character can be discussed.
Several noble Lords: What about tomorrow?
Lord SOAMES: Yes, my Lords, we are going to have a debate tomorrow, and it will be a good opportunity for these matters to be raised and also, hopefully, answered. Turning to the allocation of supplies, the noble Lord is quite right in saying that it will be comparatively easy for us, compared with other countries less fortunate than ourselves so far as energy supplies are concerned, to live up to our commitment not to import a greater quantity of oil than we did in 1978. It will be harder for some countries than for others to live up to that commitment. At the moment we do not see the need, nor do we think it would be wise, to think in terms of rationing or allocating supplies.
The noble Lord referred to the exports of oil from this country. We must remember that we live in a world which is very short of oil. Although we are surrounded by a moat which is full of oil and although we can have all the supplies we want, we must not take the view that nobody else can have any of it. There must be trade in oil. There is a shortage of oil in the world. Therefore, countries such as ours which are well endowed with oil supplies must reflect this in their economies. Perhaps our economy will be less badly affected than those of other countries; our oil supplies will probably help us. However, I do not envisage a situation in which we would say that we were not going to export any oil anywhere but were going to keep it all for ourselves. This is quite apart from the fact that we ourselves do not want to use a great deal of this oil; we want to swap it for other kinds of oil.
I am glad that the noble Lord supported Mrs. Thatcher over what she said to Mr. Kosygin. I do not believe that the Prime Minister could have said more than she did. At least, however, she had the opportunity to do what I think the House will agree was very necessary; namely, to bring to the mind of the Russians the extent to which they carry a responsibility for what is being done in Vietnam. It is not only the Vietnamese Government. If the Russian Government could be persuaded to try to bring some pressure to bear upon the Vietnamese Government, this would be a matter not only of great
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importance but also of humanitarian importance to us all.
The main point which was made by the noble Lord, Lord Byers, related to cooperation with the oil exporting countries. He asked whether or not there could be greater co-operation and collaboration between the industrialised countries on the one hand and the OPEC countries on the other. In principle, the noble Lord is right; this would be very nice. It is not only the machinery—would that it were. We have tried this before, and we have seen how difficult it is, when the industrialised countries get together, to speak about energy. We have also seen how difficult it is for the OPEC countries to talk among themselves and reach agreement on energy. For the two to reach agreement together would be very nice, but one must remember that energy is to nations what bread is to individuals. When nations start to run short of energy, they sometimes, as when men run short of bread, react in a manner which is not wholly expected of them. Their reactions are not always what one would expect. Efforts have been made on previous occasions. I participated in the Euro-Arab dialogue, which barely got off the ground. Of course the noble Lord is right in principle; how lovely it would be in a perfect world. But there is not, alas! the machinery. And it is not just a question of machinery; it is a question of political will.
Lord WIGG: My Lords, there is one curious omission from the Prime Minister's Statement about which I should be very grateful to have the comments of the noble Lord the Leader of the House. Mrs. Thatcher spoke in Canberra—it was featured on television news on Sunday night—about Her Majesty's visit to Lusaka. The Prime Minister ventured to say that her advice had not been given to the Sovereign. It appears from the statement which has now been issued by Buckingham Palace that Mrs. Thatcher did not consult the Sovereign before she made that statement and it looks as though the Prime Minister, who is new to the job and who is still rather an apprentice, has not yet appreciated, in relation to Lusaka, that the Sovereign does not speak as Queen of England but as Head of the Commonwealth. Therefore, may I ask the noble Lord whether, before Mrs. Thatcher made that statement, which

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could be very damaging to Commonwealth relations, she took the precaution of consulting the Sovereign and also the precaution of consulting the other 40 members of the Commonwealth?
Lord SOAMES: My Lords, I can reassure the noble Lord, Lord Wigg, that if the Prime Minister is an apprentice she is doing pretty well as an apprentice. That is all I can say. As to the statement which the Prime Minister made about whether or not Her Majesty would visit Lusaka, she said that a decision would be taken when the time was right as to whether or not advice should be given to Her Majesty. The Commonwealth Conference is going to take place in Lusaka, and at the moment the position is that Her Majesty will be going there. Whether or not the position will change before that time, I do not know. Of course the Prime Minister is well aware of the fact that it is not only the Prime Minister of this country who has a say in this matter. On the other hand, it is the Prime Minister of the United Kingdom who must, when the Queen is in the United Kingdom, take the final responsibility for the advice which is given to Her Majesty. I have no doubt that this advice would not be given without the full and proper consultations which are constitutionally laid down.
Lord WIGG: My Lords, would the noble Lord the Leader of the House be good enough to confirm the point he is now making: that the final decision will be taken by the Prime Minister? Surely that is not so. The decision that the Sovereign will take will be her decision, upon the advice of the 40 other countries which are members of the Commonwealth.
Lord SOAMES: My Lords, the advice will be given in whatever form represents the proper constitutional practice.
The Lord Bishop of WINCHESTER: My Lords, I apologise to noble Lords that my earlier intervention was premature. However, I felt that I needed to point out to the noble Lord the Leader of the Opposition that the Island of Jersey is not only a deanery within the diocese of Winchester but that it is within a most loyal bailiwick which lies inside and not outside the national boundaries. If we continue in this vein, 40,000 Jersey-
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men will want to know the reason why—and I know a little bit about what that entails! Having said that, may I endorse what the noble Lord the Leader of the Opposition has said in his questions, though I would that he had reflected a little more stringently upon the growing minority of people who feel the deepest dismay at the tendency to put all our future eggs into the nuclear basket.
Lord SOAMES: My Lords, I do not think anyone is thinking of putting all the eggs into nuclear baskets, as the right reverend Prelate said, but I think the hard fact is that unless we prepare ourselves to be able to produce nuclear power in the world, this country and many other countries will fall seriously short of energy in the latter part of this century and the first decades of the next, so I think a lot of effort must be made. Of course all safety precautions must be taken and various points of view must be taken into account, but the hard fact is that the future of 60 million people living in these islands will depend very largely at the turn of the century upon the extent to which we have succeeded in bringing nuclear energy to an advanced stage.
Lord JANNER: My Lords, may I ask the noble Lord first a question on the refugees? While I appreciate—and I am sure everybody here appreciates—the approach that has been made to the USSR, the fact still remains that there are very many refugees who unhappily are without any place of refuge at all. Will the Government consider approaching the various Governments of the world with a view to doing what Israel, for example, has done—a small State like that—to look after a proportion of the refugees who are still in dire peril on the seas?
My other point is this. The noble Lord made a comment about the resolution that was passed at the EEC some little time ago in relation to the negotiations which are taking place at the present time in respect of the agreement between Egypt and Israel. Does he not think that it was a disgraceful thing that a one-sided Statement should have been issued while these negotiations were taking place? Does he not think that that in itself is likely to cause differences

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—I am speaking of the Statement made at the EEC—and does he not realise that motions of this sort are really interfering with the negotiations which are taking place between two parties who at long last are prepared to come together and discuss matters in a reasonable way between themselves? Will the Government please look at this again and see whether they can influence other members of the EEC not to disturb the position by intervening at a critical time, or if they do intervene at least to present the definite decision they have themseves considered, that at long last these two parties getting together is something of infinite importance in so far as the Middle East is concerned?
Lord SOAMES: My Lords, in answer to the two questions, first on the question of the Vietnamese refugees I think the noble Lord, Lord Janner, will be aware that the Prime Minister took an initiative some weeks back with Mr. Waldheim, the Secretary-General of the United Nations, pressing for an international conference on this matter because it is of enormous proportions. We are speaking about a million—or even 2 million—persons of Chinese ethnic origin with nowhere to go and no one to accept them. First, the best thing would be to stop it, but if we cannot do that we must react as best we can. This is an international problem and the noble Lord may rest assured that Her Majesty's Government will continue to play their part in trying to get other countries to take this view. The trouble is that everybody tends to agree with this but when it comes to where the refugees shall go there are rather fewer candidates to take them in.
As to the second part of the question, the Statement issued following on the political co-operation meeting of the Nine on the Middle East, I agree with the noble Lord that the agreement between Egypt and Israel is an important step but it is by no means the only step which is needed in the Middle East. There are certain things happening out there and it would be much better if they did not happen in the longer-term interests of wider agreement. I myself believe and it is the view of Her Majesty's Government that this was a right and proper Statement for the European Community to make.
Lord GLADWYN: My Lords, no doubt rightly the noble Lord does not like machinery, but might it not be desirable for the nations represented at the Tokyo Summit to appoint some committee of deputies or officials simply to follow up the decisions taken there and to see whether it might be desirable to have another Summit Conference on the subject?
Lord SOAMES: Yes, my Lords. Steps are in fact taken to monitor the decisions taken at these Summit meetings.

CRIMINAL INJURIES (COMPENSATION) BILL [H.L.]
4.6 p.m.
Second Reading debate continued.
The Lord Bishop of NORWICH: My Lords, in returning to the Criminal Injuries (Compensation) Bill I should like to begin by saying how much I believe all of us stand in debt to the noble Earl, Lord Longford, for the steady, plodding way in which he has kept at this question of compensation for injuries for those who have suffered violence. I am glad that he reminded us that right back in 1962 as well as in 1978 he was seeking to bring this subject to us.
I must confess to not fully understanding the minds of noble and learned Lords. I was excited to discover, in the first half of the speech made by the noble and learned Lord, Lord Boston of Faversham, that he appeared to be wholly in support of all that the noble Earl, Lord Longford, was doing. However, half-way through I began to realise that he was not exactly saying what I thought he was saying and by the end I gathered that he was not as enthusiastic as I had imagined him to be at the beginning. Being a simple Prelate of optimism, I prefer to listen to the first part of what he said rather than the second, but I noticed the point made by the noble Lord when he said that there were about 20,000 claimants to the Board and that at the moment the figure concerned was about £10 million. Whatever else this says, I believe it says one thing clearly to the conscience of the nation, that it is a much larger problem than perhaps appeared to us when we first began to read and study this Criminal Injuries (Com-

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pensation) Bill. I believe we might have thought that it was a large Bill for a small problem. It appears to me now to be only a complicated Bill for a large problem.
I have been a little helped by the ordinary newspapers, who summed it up rather well in one of their leaders this week, when they made two points. First, that this Bill aimed: (1) to put the present scheme for compensation on a statutory basis, allowing legal aid for claimants and permitting future victims to go to court to establish their rights; and (2) if it became law it would give relatives the right to be paid compensation from public funds and allow victims of family violence to be included for the first time. I gained some encouragement from that, and I looked at the report of the debate which your Lordships will remember we had in July of last year when the late right reverend Prelate the Lord Bishop of Leicester spoke. On all sides of the House I believe we mourn his passing; he was a great figure here and all of us younger Prelates learned much from him in this House. As I remember, he made two points. The first was that of course in court the question should be asked, how can we obtain the maximum possible contribution towards reparation from the offender? And, lest that should appear to be a narrowly reparation-centred view, he went on to speak about how he favoured the widening of the present Criminal Injuries Compensation Scheme to include damage in the domestic scene generally, to curb malefactors, and to take more compassionate care of those who were in need through violence.
Your Lordships will know of the Bristol pilot scheme in 1974, of the victims' support scheme which began there, which is now working and has been copied in many places. But I think we must recognise that that pilot scheme is patchy and it depends on three things; on police help, on a national network of volunteers, which is very hard to find in certain areas, and on an information centre. All these three are useful and helpful, but are palliatives and partial rather than firm and nationwide. I hope very much, therefore, that the present Government will give, if not full-blooded support, at least encouragement and benevolent neutrality to this particular Bill, though I reckon that in a Bill as complicated as this there may well be need for
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suitable and even substantial amendments. I believe that, if your Lordships give a Second Reading to this Bill today, though of course it will be right and proper for amendments to follow, it will give immense encouragement to the not inconsiderable number of people who are hurt, harmed and scarred by being victims of violence, or members of families who are victims.
That figure of 20,000 claimants a year to the board shows something of the magnitude of the problem. I take comfort from the fact that the sub-committee of the Council of the Magistrates' Association, chaired by Professor McClintock of the Department of Criminology in the University of Edinburgh, when reporting on the compensation orders and the need for a central fund, recommended that the question of an adequate compensation scheme for victims of crime, whether or not the offender is brought to court, should be given further consideration by central Government. Therefore, I believe that the tide is running, if not quickly, steadily in the direction of this Bill, and I hope that much will come from this day's debate.
I must confess to a deep personal concern in this matter. In fact the late Bishop of Leicester hinted at it in the July debate. The main author of this report of the working party, who has already been named by the noble Earl, Lord Longford, Mr. Michael Whittaker, is a member of our own family circle, and when his small daughter of eight was dreadfully murdered 10 years ago I realised how deep can be the scars and the pains and the emotional and psychological and indeed spiritual hurt that can touch any member of a young family facing such a tragedy; and I am amazed at the compassion for other victims which positively has stemmed from that tragedy in the work of this working party.
I cannot, of course, argue the legal niceties. I believe that is something which more learned people than I must speak to, and there are plenty of noble and learned Lords who can do this. But I believe that living victims need continuing care and support, and families who are themselves within the circle of those who have been violently hurt need support and care, as your Lordships will remember we were doing only a fortnight ago in this place, in the judgments given by the Law Lords

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in the case of Dr. Lim Po Chou in a different way. I do believe that victims of violence and their families need a special caring, and I think it very proper that such a Bill as this should be discussed solemnly, seriously and unhurriedly in your Lordships' House. I believe it is the right place for such a Bill to start. Surely all Members of your Lordships' House, both temporal and spiritual, would feel that the passing of this Bill is in direct line with the long Christian heritage of our country. When all is said and done, the best known parable is probably the good Samaritan. We cannot bring the dead back to life, but we can necessarily seek to help to heal the scars, emotional and spiritual as well as physical, in such problems of violence and we can with the good Samaritan come close to the victim, however assaulted. By the action of giving a Second Reading to this Bill we can do what the good Samaritan did, which was to draw close and with sympathy and sensitivity, and incidentally with financial help also, if you read the parable closely; he poured in oil arid wine and sought to care for the victim of violence. I hope, therefore, that your Lordships will give a Second Reading to the Criminal Injuries (Compensation) Bill.
4.17 p.m.
Lord ALLEN of ABBEYDALE: My Lords, as the noble Earl said in introducing this interesting Bill, it is often said that those who are interested in questions of crime and punishment tend to forget about the victims of crime. I do not in fact think that that is true, but the noble Earl certainly continues to deserve our thanks for giving us this further opportunity of talking about this topic, following the debate he introduced rather less than a year ago. I fear that, like the noble Lord, Lord Boston, I do not go along with the noble Earl when he says that hardly anything has been done in this country to help victims of crime. I believe that this country does rather more than most to provide help for victims of crime, although certainly no one would for a moment claim that we have achieved perfection, or anything like it.
The noble Lord, Lord Boston, outlined some of the measures that have been taken, but I suppose that the most important single step was when in 1964 we decided to follow the example of New Zealand
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and set up the Criminal Injuries Compensation Board, to which all previous speakers have referred, a step, incidentally, which has since then been copied in quite a few other countries. Those who set up this scheme would, I think, have been surprised if they had known at the time that fifteen years later, and some tens of millions of pounds later, it would still be functioning on a non-statutory basis. I fear that the noble Earl's Bill does not, as he rather indicated in his speech, give statutory force to this existing scheme, indeed far from it. I think I must say a few words about that scheme if my comments on the Bill itself are to be intelligible.
The original concept, as I understand it, when the scheme was prepared, was that the ordinary processes of the civil courts for awarding damages against a person who injured another were simply not appropriate for crimes of violence because the perpetrator, even if he was caught and was, as it were, available, would normally have no funds. From that it followed logically that when the new scheme was set up, it was based, so far as possible, on the system of tort damages administered by the civil courts.
The Royal Commission on Civil Liability and Compensation for Personal Injury had a pretty close look at the scheme. I am not sure that I can respond entirely to the description of being " the horse's mouth " and I certainly speak with some diffidence in the presence of the noble and learned Chairman of the Royal Commission who I am very pleased to see here. However, may I briefly say that in its report the Royal Commission commended the scheme; agreed that it was right that the scheme should continue to be based on tort damages, but naturally taking account of any changes which were made in the operation of the courts themselves in the light of the Commission's findings; and recommended quite firmly that the scheme should be made statutory.
The Royal Commission was in touch with the official working party to which reference has been made and, as the noble Lord, Lord Boston, has explained, that working party did, in its turn, come up with certain recommendations for altering the scheme—notably, alterations affecting victims of family violence. As I under-

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stand it, the last Government, with those two reports before t hem, decided two matters which do not seem to me to be inconsistent with each other. First, they accepted the view of the Royal Commission that the scheme should continue to be based on tort damages; but, secondly, they decided against legislation until there had been a period of experimentation with the working party's suggested changes. We have not yet heard whether the present Government go along with those conclusions, but I hope that we may hear later this evening. What is clear is that the noble Earl's Bill does not go along with them.
The existing scheme spells out the procedures to be followed by the board in some detail, and I would not have been surprised by a Bill which set out these procedures and perhaps provided for the relaxation of some of them—for example, by raising the present limitation that compensation for loss of earnings is not to be more than twice average industrial earnings. However, as I read it, the Bill does not seem to do anything of the kind. It sets up a tribunal which I suppose is intended to replace the existing compensation board. But it says nothing about the tribunal being required to follow, with or without modifications, the principles and practices of the civil courts, but under the existing scheme there is a plain obligation on the board to do just that.
My basic difficulty is that neither does the Bill say what principles and practices the tribunal should follow. Perhaps I may illustrate the point that I am trying to make by calling attention to the provisions of Clause 6 which has the marginal note:
" Reduction in compensation where certain other payments are made to a claimant ".
Subsection (1)(a) of that clause makes no provision at all for deducting social security benefit from compensation awarded to the claimant himself. That means a complete departure from the present practices of the courts and from the practice of the board, and still more from what the Royal Commission thought appropriate for the courts. As noble Lords will probably recall, the Royal Commission recommended a complete offsetting of social security benefits against tort awards. However, the provision in
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the Bill would mean that the community could be paying, from public funds, to the same individual two separate and cumulative amounts for the same incident—one, calculated according to the detailed social security rules and the other calculated, I do not know how.
Even subsection (1)(b) of the clause, which chooses to treat the dependant differently if the individual dies, has its own problems. For example, the power to make deductions for pensions and social security benefits is permissive and not mandatory. Moreover, the definition of " dependant "—I think that it comes under Clause 13—goes extraordinarily wide and, as I recall my Scottish law in which I do not claim to be an expert, goes a good deal wider than the definition of " dependant " used for " loss of society "—
The Earl of LONGFORD: My Lords, it does not go very much wider. Only part of the clause goes wider. By and large it was copied directly from the Scottish rule.
Lord ALLEN of ABBEYDALE: My Lords, I stand corrected on that point, but it is news to me that a Scottish provision could go as far as to cover a sister's illegitimate child or an aunt's stepson. However, these are comparatively detailed points which we can leave aside for the moment.
The award and calculation of damages in the civil courts constitute a skilled task and the members of the present board, which has to follow the courts, are all legally qualified. But, when we look at the Bill, the only person who must be a lawyer is the chairman of the tribunal. Nothing is said about the make-up of the local boards and although I listened carefully to the noble Earl I did not hear too much information about their composition. The local hoards are very important and if one looks at the very last paragraph of the schedule one sees that their findings are binding on the tribunal and the tribunal cannot interfere with them unless the claimant or the victim appeals to the tribunal. I suppose that as there is no requirement on the tribunal and the boards to follow the procedures of the civil courts, it is natural enough that there should not be any detailed provision about lawyers. However, I

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wonder why, if so, the chairman himself must be a lawyer. And I wonder, again, what are the principles on which awards are to be based.
There are one or two other points about the Bill which surprise me a little. For example, it is silent on whether the tribunal comes within the jurisdiction of the Ombudsman. The provision about legal aid, which has been discussed by previous speakers, is certainly not free from controversy and would, I think, be the first occasion on which legal aid would be made available for proceedings before a tribunal—of which there are very many. Clause 1 distinguishes, in a way, between pecuniary and non-pecuniary loss. However, when one comes to read Clauses 4 and 6 the draftsman seems to have forgotten all about non-pecuniary loss. Clause 9, which is concerned with the Secretary of State recovering compensation when other payments have been made, does not, in fact, provide any machinery for the Secretary of State to discover when these payments are made.
However, in the end, I come back to my main difficulty; that is, the silence of the Bill on the principles which the tribunal and the local boards are to follow, granted that the Bill is drafted in such a way as to sever the connection between the tribunal and the civil courts. I very much hope that the debate will elicit some statement of policy from the new Government. I think that both the noble and learned Lord, Lord Pearson, and I would regard it as a bonus if we were given some indication of the Government's thinking on the recommendations of the Royal Commission as they affect the courts.
I hope, too, that the day will not be too distant when the Government themselves introduce a Bill to put the present Criminal Injuries Compensation Scheme on a statutory footing. However, I am sorry to say that I fear that the provisions of this Bill are so far remote from what I think would be appropriate and from what the Royal Commission thought would be appropriate that it simply would not be possible to put it right by amendments at a later stage. Grateful though I am to the noble Earl for raising this topic, and sympathetic though I am to his general aim, I fear that I for one cannot support the Bill.
4.32 p.m.
Lord JANNER: My Lords, noble Lords present will have realised by now that there are some difficulties in regard to this Bill. However, in the main, we should consider what the effect of the introduction of the Bill will be, whether or not it passes its Second Reading. I am bound to say that, as someone who has been involved in this matter for some sixty years, I find it difficult to make a final decision on the Bill. Let me say at once that I can think of no one who has been in any way connected with this problem and who has not felt that the victims should certainly be entitled to proper compensation. I have never heard anyone say such a thing.
We are grateful to the noble Earl, Lord Longford, for having introduced the Bill and for his remarks on it. We know what a deep anxiety he has for humane and decent treatment of people who have been victimised. Everyone would accept that. I shall have difficulty in making up my mind on the timing. It may well be that the Bill passes its Second Reading and goes on to the Committee stage; it may be that the problems which have been raised, for example, by my noble friend Lord Allen of Abbeydale, will be sufficiently debated and, as a result, the Bill may proceed.
The right reverend Prelate the Lord Bishop of Norwich referred to what the Magistrates' Association has done. It follows, and has followed, the feelings of the noble Earl and others who are interested in this subject. It would be useful to refer in a little more detail to what that Association says about the present situation. Its sub-committee states:
" The number of compensation orders made by magistrates' courts has been increasing annually and now amounts to approximately ninety thousand each year, and more than 1 in every 5 sentenced for indictable offences at magistrates' courts were ordered to pay compensation. Furthermore, in almost a quarter of the cases in which a fine was imposed by magistrates for an indictable offence it was combined with an award of compensation payable to the victim. It is suggested that if the courts make more frequent use of their powers to order compensation in criminal cases, in due course a multiplication of the occasions on which requests would be made by the executive to cancel compensation orders might end in undermining the authority and prestige of the courts ".

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Briefly, I should like to dwell on a point that was considered very carefully by the Association. At the time a person is sentenced to imprisonment, orders are made which encourage him and, indeed, allow him to be freed from the compensation claim. Obviously, that is an absurd position and ought to be remedied; there is no question in my mind about that. Incidentally, the Magistrates' Association has made a thorough investigation into compensation. It is certainly not happy about the lack of certain provisions which ought to be included. I agree that it has been a tremendously long time since the suggestion of statutory provisions was made. Consequently, one wonders—and perhaps the Minister will be able to offer an explanation—why the submission of statutory provisions has been delayed in that way. I gather that this was still under consideration by my noble friends—Ministers at the Home Office and so on. I hope that it is under very careful consideration by the Government at present.
I do not want to delay the House for long, because others want to speak. To a considerable extent I agree with much that was said by the noble Earl. Incidentally, the Magistrates' Association has issued to magistrates guidelines in respect of this matter and the necessity of paying compensation, which are of a very strong nature. The sub-committee states:
" In its interim report the Magistrates' Association proposed that there should be some guarantee, when a court has made a compensation order, that the victim actually receives the sum awarded even though the offender defies the order, or is unable to meet the obligation due to drastic change in circumstances. It was suggested that a victim should be able, on hardship grounds, to apply to a central authority for payment of outstanding compensation, and in such cases the central authority would then be responsible for the recovery of the money from the offender (a procedure comparable to Social Security officers paying maintenance orders and where possible recovering payments made) The proposal was based on the view that through compensation greater attention by magistrates' courts should be directed towards helping the victim, and that victims should not suffer loss where an offender does not meet the obligation placed on him by the court ".
I am sure that my noble friend would agree that the authorities, the people who have been dealing with this matter, have done their best to meet the situation. The only question that really arises now—and there are many points I should have to raise myself on a Committee stage—is
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whether the Committee stage, in itself, would meet the case of those who feel like the noble Lord who spoke before me, or whether we should press the Government to introduce a Bill taking into consideration the arguments which are being used here.
4.41 p.m.
Lord MISHCON: My Lords, your Lordships' House, with its usual tolerance, listened to me making my maiden speech on the very matter we are discussing today. It was made in fact on the Unstarred Question on 18th July last which dealt with compensation for victims and aid to victims, then raised before this House by my noble friend Lord Longford. Often if one looks back on a speech previously made one regrets many things that one said. But I must say that, on looking back at least at the opening of the speech I then made, and which your Lordships, or some of you, were good enough to listen to, I certainly do not regret the opening remarks, which I should like to repeat.
" My Lords, I hope that my noble friend Lord Longford will not think me presumptuous if, when for the first time I address your Lordships' House … I pay him a tribute for bringing this urgent matter to the attention of the House tonight and for the usual humanity with which he has done so. Many of us who admire the noble Earl for the fervour of his spirituality and social work find it somewhat difficult at times to follow him down all the mental paths through which he would, with his gentle eloquence, beckon us. But none of us has the slightest doubt about the physical position of his heart. It is very much in the right place ".—[Official Report, 14/7/78; col. 265.)
I should like to re-echo those words now. In doing so I should like to be one of those who, without equivocation, would wish to support the Second Reading of this Bill. I say " without equivocation " because of the principle of the Bill before us. I share with other noble, and very much more learned, Lords who have spoken, doubts about some of the provisions; and I recognise the need for correction in regard to some of the clauses, but those are very much matters that can be dealt with on the Committee stage.
Many remarks have been made this afternoon about whether or not it is a good idea to include legal aid. My noble friend Lord Boston raised that point That is debatable. It does not go to the heart of this matter, but some of us find it

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a little Gilbertian that legal aid is available for the criminal who caused damage to the victim, whereas when the poor victim turns up before the board in order to argue a case—which I assure my noble friend is not as simple as he thinks—he finds himself of necessity often without any legal assistance at all. If one follows the recommendation, as I hope we shall, of the Pearson Committee—chaired, as has already been mentioned, by the noble and learned Lord who is with us this afternoon—and one has to award damages according to the law of tort, I pity the poor victim who has to read up the law of tort, and the various principles of damages which apply, in order to make his case for the damages to which he is entitled. But these are matters of detail.
I could add to them, if your Lordships will have the patience to allow me to do so for a moment, by saying that I am delighted to see—and other noble Lords have said so—that another recommendation has been carried through. I believe that, too, was in the Pearson Report. If it was not, it was in the inter-departmental working party's report. I forget for the moment which it was. It is that wives and relations should be brought into this scheme. While welcoming that, it is obvious that some sort of provision must be put in to ensure that either the matter has been dealt with before the courts or some finding has been made. One can well see that, be it a tribunal or a board, one will find that there are matrimonial matters of a type which are not really appropriate to a board or tribunal of that nature to be gone into, as to whether husband hit wife first, or wife hit husband, or whether indeed the wife fell over a chair in the course of a dispute. These things will have to be looked at.
However, what we are discussing this afternoon is whether we are doing justice by victims of crime at the present moment; whether we ought to be doing something more; and whether the setting up of a tribunal—which would, in the course of things, make this scheme a statutory scheme—is the proper way to do it. That is the principle: questions of details can be dealt with at a later stage. I hope, therefore, that no one will fail to support this Second Reading merely because of some learned, or indeed practical, point that has been put to your Lordships'
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House as to where this Bill, as drawn at the moment, may be defective.
Other noble Lords have talked about the sympathy shown to criminals, and the lack of care for the victim. It is quite wrong to think, even at the present moment (whether or not this country does better, as I believe we do, than many countries or most countries) that enough is being done for the victim when you have a voluntary scheme—forget for a moment the question of quantum—based upon the exercise of prerogative.
Obviously the first step must be—and this has been said for quite a long time; the word " experimentation " has been used, and we have had enough experimentation and experience—that this should be embodied in our legal system on the statute book as a statutory right. If ever there was a time when we ought to be thinking of making it a statutory right, it is a time when all of us, with great regret and pain, find the number of crimes of violence rising around us. If we grapple with that and say that it has to be a statutory scheme, we then go on to ask, " How do we make it properly a statutory scheme? Is it all right to have the present board a statutory scheme that that board will administer, or do you need a tribunal? " As soon as the board is given a statutory scheme, it will, within the normal way we work, become in essence a tribunal.
Again it is a little laughable to think in terms of someone who suffers the wrong of being unfairly dismissed from his employment finding himself before a tribunal—which tribunal, if it decides that unfair dismissal has taken place, is obliged, within certain rules, to award damages—but to say to the victim of a crime ," Well, you have to go before a board, and you have to submit your claim to a hoard. You have no statutory right. It is perfectly true that the board is accustomed to administer its jurisdiction with great mercy and with great understanding, but you have no rights at all. You cannot argue as of necessity that you are entitled. You cannot even say that this will remain as a board with rights for many years to come; other governments may take a different view."
Let us at this moment pause, as the noble Earl asked us to do, and say that we must carry this measure forward at

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least to see whether this Bill, improved as it may be in Committee, will give proper rights to those who are victims of crime. I believe we should be failing in our duty and the Government would be failing in their duty to our fellow citizens if either the Bill were not given a Second Reading or there was not a clear statement from the Government that they felt, having listened especially to this debate and to their advisers, that there were better ways of bringing this matter on to the statute book and that they were going ahead to do so.
4.52 p.m.
Lord SOPER: My Lords, I came to your Lordships' House this afternoon with the intention of thanking the noble Earl for proposing the Second Reading of this Bill and with an equally firm intention of voting for it if necessary, and nothing that has transpired over these hours has in any way disturbed that conviction. Indeed in some ways it has reinforced it.
I approach this problem from two angles which are perhaps not quite so acute as has already been demonstrated by noble Lords, first in the matter of an equivalence between an interest in and concern for those who are malefactors and those who are the victims of malefactors. Only a few days ago we were engaged in your Lordships' House in a debate on prisons and at one stage, I think quite properly, the interjection was made that nothing had been said about the victims, that we had been totally concerned with the welfare of prisoners. I think that was justified to the extent that our total attitude to those who are involved in illegality and wrongdoing, both the victims and the perpetrators, should be seen within a general area of justice and equality of perception, and indeed a realisation that they both belong to the same community, and to ignore either party is to distort the processes of such justice as is expected of such laws as can be formulated.
There is, I think, a perceptible danger that the interests of prisoners will not be safeguarded unless we take greater care to concern ourselves with the sufferings of victims of violent crime, and it is for that reason that I welcome the Bill, which seems to me to set the balance right or to set it within perceptible distance of
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being regarded by ordinary people as a correction of what they perhaps erroneously assume to be too much concern for those who are the evil-doers and too little regard for those who are its victims. Indeed, out of my own experience, which is long if not deep in this field, how many are those victims and how desperately do they need far more efficient protection and far more efficient machinery whereby something can be done to abate the misery they suffer and to recover them to some reasonable standard of wellbeing!
But there is another aspect, and it has been ventilated with great care this afternoon. It is the question of the legality, the jurisdiction, the statutory nature of what should be done for those who are the victims of violent crime. The one word that has not been mentioned today is the one which immediately leaps to my mind when I think of this matter, and it is the difference between charity and justice. For weird and wonderful reasons of psychological processes, it has been my experience that many people who are entitled to benefactions on the part of a civilised government seem to think it an abasement of their own personality and an insult to their own integrity if they avail themselves of what they conceive to be charity. It is in many cases not charity; it is in many cases a legitimate provision made on their behalf.
However, we are dealing with human beings and not with lawyers and people who can make rational judgments when they are afflicted by suffering of one kind or another. The thing that has stuck out in my experience is that in a previous debate in this House not long ago it was asserted that, for some of the benefits available in the Welfare State, fewer than 28 per cent. of those entitled to the benefits actually claimed them. There is a world of difference in the psychological reaction to a statutory provision and to any ex gratia payment—which does not necessarily suffer because it is in Latin but which very often attracts the assumption, however ill-based, that it is awarded not on the premises of justice but on the premises of pity or some kind of superior care.
Therefore, in my judgment, there are very good reasons for giving this Bill,

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which, as has already been advocated, provides a statutory basis for what has been the intention of previous Governments but which needs to be more fully undertaken, a Second Reading. It may well be that after that Second Reading there will be ample opportunity to deal with the highly complicated and comprehensive matters which have been raised by noble lawyers and on which, I am well aware, it is far beyond my competence at the moment to settle a judgment, but I see no reason, having some experience of your Lordships' House, why those matters should not be fully undertaken in Committee: they should not cripple the Bill but enlighten it.
I would add a few contributory reasons why I give support to the Bill, and the first belongs to the realm of personal and family violence. Again, if I may presume to talk about the psychological effects, it is a most curious and yet damnable thing that violence produces in those who suffer from it not necessarily resentment but, quite often, acceptance. And one of the most disheartening and desolating experiences of those who endeavour to deal with violence in the family is that so often those who suffer it become conditioned to its experience.
That is why I welcome with open arms the provision in the Bill for therapy as well as for the kind of financial payments which are obviously necessary and required. Therapy is part of the normal process of recovery and is inevitable if such process of recovery is to be extended and fulfilled. For that reason, I welcome the introduction of the principle that reparation by the community must include the continuous process of recovery of those who have been injured, not only in pocket or in person but in their whole psychological and spiritual make-up. It is for that reason that I believe the Bill is invaluable and is entirely right.
The Welfare State, in my view, is about the most Christian thing that has happened in my lifetime, but it has suffered from a kind of political skateboard experience—enthusiasm and rapture almost, followed by disenchantment and cynicism. Disenchantment with skateboards is entirely agreeable to me, but there is a deplorable impression abroad today that the Welfare State has been tried and found wanting. It has not. It has been found incomplete
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and difficult but not tried, or not tried in its sufficiency. One of the ways in which we can rehabilitate the whole concept of the Welfare State is to care for those who are in greatest need—to go to those who need you, as John Wesley said, and especially to those who need you most. I can think of no more pitiable group in the community today than those who are, in some cases, the accepting victims of prolonged periods of violent treatment, to say nothing of the violence of the street corner, the pub and the various other open spaces in which violence tends to take place.
I am not competent to speak at all about the niceties that belong to the Bill, but I have heard nothing that can disturb my own conviction that here we have a long-awaited and much belated expression of the statutory right, which ought to be encapsulated within a civilised community, to care for those who are victims, particularly of violence. I hope that the day will come when many a prisoner will be given the opportunity of making personal reparation to those whom he has so grievously harmed. Is it not obvious that when compensation is specified, stratified, and set within a statutory provision, it will become much clearer to many a criminal as to what that kind of reparation may be, and when once it is set before him, is it not much more likely that opportunities will be available and that we shall have opened the door to an even better form of rehabilitation and punishment than hitherto? It is for reasons like that that I invite your Lordships to subscribe to the Second Reading of the Bill, to amend it, if necessary, in Committee, and to set it upon the statute book; and I believe that the community will be grateful.
5.2 p.m.
Lord PEARSON: My Lords, may I add a few words in view of the fact that I was chairman of the Commission on Civil Liability and Compensation for Personal Injury. I am sure that everyone would agree it is quite right that the victims of criminal violence should be adequately compensated for the injuries which they have suffered. I believe it is also plain that the action of tort for damages is not adequate for that purpose for the obvious reason that the persons who commit these acts of violence very

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often have no money or other resources, and of course they are not insured. So unless there is some provision for State compensation, the victims will not get compensation.
For quite a long time now there has been the method of compensation on an ex-gratin basis by the existing Compensation Board. I should have thought that to date the board has worked fairly well, but I would also agree that at the appropriate time the right to compensation should be recognised as a statutory right and should be put on a statutory basis. Indeed, that is what we said in our commission report. For that reason one is glad that a Bill has been brought forward for that purpose, but my worry is whether or not the present Bill will be helpful, because there are very difficult problems of co-ordinating the different systems of compensation. I can think of at least four, and there might be several others.
One is the system of social security benefits whereby injured people receive industrial injury benefit, or if they do not qualify for that in a particular case, they may receive the other benefit, which is sickness benefit. That is one system. Another system is that the courts, when they adjudicate on the criminal offence that has been committed, can award compensation to be paid by the malefactor to the victim. Again, there is the question of whether the malefactor will have sufficient funds to pay any substantial sum which is involved. Thirdly, there is the existing system of damages in an action for tort. That has been in existence and in full play for a very long time, and an elaborate system of practice and procedure has been introduced.
Now comes the Bill, adding a further complication to an already very complicated set of subjects. I would not at the moment agree with the way in which the new system has been set up. It seems to me that the provisions are incomplete. The easiest example of this is in Clause 1(4), which defines the meaning of the expression " loss " in the case of loss to the victim, but it says nothing about what " loss " means in the case of dependants of the victim. That is an obvious loose end.
I entirely agree with what my noble friend Lord Allen of Abbeydale said with
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regard to Clause 6. It is not in accordance wih the present system by which tort damages are assessed, nor is it in accordance with the system which we believe to be better, which was recommended by the Royal Commission. It is a new and different system now being set up; and how does one co-ordinate the two? There is an attempt at co-ordination in Clause 9, but I repeat the very acid question which my noble friend Lord Allen posed: How is the Secretary of State to know whether or not damages have been obtained? We received evidence from the insurers that an enormous proportion of claims for tort are settled by agreement out of court between the insurance company, on the one hand, and the advisers of the person who is claiming, on the other. There is no provision for the Secretary of State to find out. There is no obligation placed upon the victim who is receiving, prima fade, double compensation to disclose that fact to the Secretary of State.
For those and other reasons I feel considerable doubt as to whether the Bill is a very convenient method of giving statutory force. I observed the suggestion that it might be desirable to keep the present scheme of ex-gratia compensation on foot for a little while longer in order to try out some new developments which are being introduced. I should not agree with that if it were to postpone for a long period the introduction of a proper statutory basis, but if it is designed as an experimental measure to see how the developments work in a way that can easily be altered, and that the intention is after that to introduce a statutory right, I should think it entirely reasonable that those experiments be tried. So at the moment I am in a state of considerable doubt as to whether or not I welcome the Bill as it stands. I entirely agree that there should be some such Bill and that the statutory right should be created. I shall listen with interest to what the final speakers have to say.
5.7 p.m.
Lord REDCLIFFE-MAUD: My Lords, I hope that your Lordships will allow me to speak; I gave an indication that I would be speaking, but the list of speakers had already been stencilled. I will detain your Lordships for only a few moments. I speak as a layman in every sense of the

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word, and not as a lawyer. I was relieved to hear the noble and learned Lord who has just sat down describe himself as being in some doubt. I have listened most carefully to the whole of the debate and I, too, find myself in some doubt as to how I hope the House will determine this matter. There is no doubt that we are all indebted to the noble Earl, Lord Longford, for having brought the matter to our attention this afternoon and for all the trouble that he has taken over many years—and not only in respect of this Bill—on behalf of the victim as well as the malefactor. That is no news to me; since we were at school together he has always treated me with equal courtesy and compassion in whichever capacity I happened to find myself in relation to him.
But I was deeply disturbed by the speech of the noble Lord, Lord Allen of Abbeydale, for whom I have the greatest respect which goes back not as long as my respect for the noble Earl, Lord Longford, but certainly for a long time. It seemed to me that we were in a real difficulty, not as to the principle that sooner or later we must have a statute, as the Royal Commission itself recommended, but as to the timing. I should like to take this opportunity of saying how glad I am, as we all are, that the noble Lord, Lord Belstead, is seated on the Government Front Bench and that he will be replying to the debate. I hope that the noble Lord will be able to give us the indication which was sought by the noble Lord, Lord Boston of Faversham, in his most valuable speech, as to what the Government's intentions are, quite apart from their attitude to this Bill.
It seems to me that, ideally, the Government should take very serious account of this Bill as it stands, and should see whether they wish to make amendments which would bring it nearer to the recommendations of the Royal Commission and more consistent with what the late Administration set in hand in the light of the interdepartmental working party to which reference has been made. We should then indeed find that, at the end of the day, in this House a Bill would become an Act which would represent the wisdom, not only of this House and of the previous Administration but of the present Government. It seems to me impossible at this stage, with my limited legal knowledge, to say whether, out of this Bill, it is going to
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be possible to find a structure which can be so amended and improved as to meet both what the Royal Commission wanted and the widsom that has come from that interdepartmental working party.
On the other hand, I must confess to your Lordships that, in my experience, no time is ideal for reform. There are always good reasons for further experiment, or for giving the latest working party's report a chance to work itself out; and those of us who have been interested in local government or, indeed, in support for the arts I think would all agree that the present is never suitable, is never ideal, for a forward move. Therefore, my own very strong feeling is that, unless the noble Lord, Lord Belstead, tells us things which make us change our minds, at this point in time we should definitely give this Bill a Second Reading, in the determination that we can improve it and, in that way, can prove not only that in some things we are ahead of another place but also that this is a very valuable part of Parliament.
5.13 p.m.
The PARLIAMENTARY UNDER-SECRETARY of STATE, HOME OFFICE (Lord Belstead): My Lords, those of your Lordships who have spoken in the debate this afternoon will be familiar, I think, with the report of the working party on victims, which was chaired by the noble Earl, Lord Longford, last year. Your Lordships will know, therefore, that the noble Earl would doubtless have wished to have incorporated some more sweeping changes than have been included in the Bill which is before your Lordships' House this afternoon. I should like to express my gratitude to the noble Earl for, as I see it, his realism in assessing the extent to which money can be devoted even to this cause—a cause for which there must be widespread sympathy. Indeed, in the letter from which the noble Earl had the kindness to quote, my right honourable friend the Secretary of State made his concern for the victims of violence crystal clear. I would also, if I may, congratulate the noble Earl on the drafting of a Bill which I am sure, if I may say so, Parliamentary counsel would be happy to claim as his own.
The introduction of a Bill on this subject reminds us, I think, of the consequences of

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violent crime and the shock and distress which can be caused to the victims and to those who are near to them. We cannot be reminded of these things too often. But there is a very real stumbling block in the path of this Bill. The noble Lord, Lord Boston, in his speech at the beginning of the debate, explained it, and, if your Lordships will forgive me, at the end of this debate I should like briefly to repeat it. It is this. In 1973 the then Home Secretary appointed an interdepartmental working party to review the working of the Criminal Injuries Compensation Scheme. The working party reported in March 1978, and on the 19th March of this year the previous Home Secretary, Mr. Merlyn Rees, accepted the working party's recommendations and announced in another place that a revised scheme would be introduced as soon as possible, that a trial period for the revised scheme should ensue, and that that should ail be followed by legislation, as has been recommended by the noble and learned Lord, Lord Pearson, who of course was chairman of the Commission on Civil Liability and Compensation.
The Earl of LONGFORD: My Lords, may I interrupt the noble Lord? The noble Lord will agree, I hope, with what I said earlier, that the working party themselves did not pronounce on the question of whether legislation should follow immediately. They left that to their political masters. That was not part of their findings.
Lord BELSTEAD: That is quite right, my Lords; I confirm what the noble Earl has said. My answer to the noble Lord, Lord Boston, and indeed to other noble Lords who quite rightly want to know the Government's position in this matter, is that although the recommendations are being considered urgently—and when I use the word " urgently " I mean urgently—certainly it is the case that we have not yet been able to give our response to the recommendatons of the working party. But today I am in a position to say that undoubtedly there will have to be a revised scheme in which the Government will be accepting certainly the more detailed administrative improvements recommended by the working party, but it would obviously be wise to have a trial period before moving to legislation. But I join
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with the noble Lord, Lord Redcliffe-Maud, in saying that, for the reason that I have just given—simply that, although we are looking at the matter very urgently indeed, we have not been in time to make a pronouncement on this matter before the Second Reading of this Bill—I think the timing of this Bill is difficult.
I have to add that I think the content of the Bill also presents difficulty, because I am bound to say that the working party's recommendations, based upon the existing scheme, are different in several respects from the Bill which is before the House today. That working party may not have been right in all of the 52 recommendations which it made, but it was a working party which had the advantage of a wide range of official advice, and it took evidence from more than 50 people and organisations which had special knowledge of the law relating to compensation, to the problems experienced by victims of crime, and to the way in which the Criminal Injuries Compensation Scheme works. The report was widely circulated; comments were received; and, finally, the previous Secretary of State accepted the recommendations. Thus it is that the working party's report is crucial to a consideration of the noble Earl's Bill; and, briefly, I should now like to compare the main provisions of the Bill with the recommendations which were made by the working party. In doing so, I am concerned to explain, not only to the noble Earl but also to the right reverend Prelate the Bishop of Norwich, that it is the terms of the Bill and not the noble Earl's objectives with which the Government do not agree. I am also concerned to seek to explain to the noble Lord, Lord Mishcon, the position in which I am, which is that I believe that the differences of view on this Bill are fundamental differences, and not just Committee points.
The two major changes which the Bill makes in the way that the Criminal Injuries Compensation Scheme operates are, first, to make the initial decision on the amount of compensation payable rest on a personal hearing before a local board; then, the applicant shall have a right of appeal to a compensation tribunal, and one member of that tribunal has to be medically qualified.
Because the noble Earl spoke a long time ago, may I give a brief indication of

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how the existing board works? In the first instance, the victim makes a written application which is referred to a single member of the board for a decision. The applicant is involved in no expense except for the stamp that he or she places on the letter. Each board member is a lawyer and each decision of a single member is made on the basis of common law damages. If the applicant is not satisfied with the decision of the single member, he or she has the right to a hearing before a panel of three other board members; and the single member has the right, an important right, to refer a case to the panel if he considers that he cannot alone reach a just and proper decision. Then the applicant and a member of the hoard's staff have the right to call and examine and cross-examine witnesses; but the procedure is kept completely informal, a matter which the noble Lord, Lord Boston, commended.
What is the result of this? During the financial year 1977–78, 16,432 cases were resolved; but only 1,356 went before a hearing. Nearly 15,000 cases, therefore, were resolved by single members of the board without a decision being queried by the applicant. The noble Earl and the noble Lord, Lord Mishcon, were right to draw attention to the fact that legal aid is not available in these cases. I should like to say that since the introduction of the Legal Aid and Advice Act in 1972, limited legal advice and assistance has been available to applicants of limited means. This can cover advice on whether to make an application at all or whether to accept the single member's decision, and can include legal aid and assistance with the application form. The absence of legal aid all through the process does not seem to have inhibited applicants from being represented at hearings. In 1977–78, 48 per cent. of those appearing at hearings were legally represented and only 33 per cent. represented themselves. The fact is that legal aid is not generally available for administrative tribunals. When the relevant provisions of the Legal Aid Act 1979 come into effect, provision will be made for regulations specifying proceedings before tribunals, in relation to which legal aid and representation may become available. It is at that moment that legal aid for criminal injuries has to be re-considered.
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The working party considered whether the initial decision of a single member of the board should be replaced by the decision of full-time assessors, but considered—and it is important that your Lordships should be reminded of this—that the existing arrangements were effective and economical. More important, the working party took the view that if compensation was to continue to be based on common law damages, it was essential that the decisions should be made by lawyers, who should have the benefit of advice from doctors where necessary.
I was interested in and listened carefully to the noble and learned Lord, Lord Pearson, and the noble Lord, Lord Allen, who was a member of the Pearson Commission. Both, in essence, said to your Lordships that it is not clear from the Bill what the basis for assessment is to be or whether, as I understood the noble and learned Lord, an unscrupulous victim could obtain what, in effect, would be double compensation. For myself, I am certain that, in general, it would be wrong for the scheme to pay either more or less than an individual might expect to obtain at a civil action.
I find it difficult to see how one can disagree with the working party's conclusions that decisions should continue to be made by fully-qualified lawyers—which is not the effect of this Bill—who are currently engaged in the assessment of common law damages. That is not the effect of the Bill either. What the Bill is doing is to provide for local boards. I thought that the noble Earl was going to propose that these local boards would be manned in some particular way. Because no particular mention was made either in the Bill or in the noble Earl's speech of the extra money which will be needed for manning the boards all over the country, I assumed that the noble Earl would recommend that the boards should be manned by volunteers. If that is the case, I wonder, speaking for myself, how volunteers can be expected to plunge into the intracacies of tort, how they could achieve consistency of decisions; how such a new system could do other than lead to an ever-increasing number of appeals, which Clause 2 provides are to go to the main tribunal and then on to the Court of Appeal.

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I accept that it is the noble Earl's intention to make this scheme as accessible as possible; but I venture to suggest that the noble Earl's proposals might have an opposite effect. I would guess that victims do not want publicity and that many would shrink from the idea of having their cases heard locally. I would also guess that most people would find it easier to have their applications decided on a written basis in the first instance than to have to take the time off work and travel to what—
The Earl of LONGFORD: My Lords, I do not see any reason why anybody who preferred it to be handled on paper should not do it in that way. There is nothing in the Bill which compels one to be represented.
Lord BELSTEAD: My Lords, I am delighted to hear that. The fact is that if the noble Earl is going to the trouble of setting up boards around the country, he is, in fact, jettisoning the very cheap, economical, straightforward and informal system existing at the present time.
Your Lordships might be interested to hear that, if the 1977 figure can be used as a guide, if they were not able to write a letter to a single member, nearly 15,000 people would have need to go off to attend a hearing. I would emphasise also that, in 1977, less than one-third of the hearings were in London: the other two-thirds of the board's activities were held in different parts of Great Britain. The noble Earl suggests also that local involvement would mean that more people would become aware of their right to apply for compensation. Once again, there is nothing between the Government and the noble Earl in that objective; but I venture to suggest that the expense involved in servicing local boards in meeting the cost of applicants and witnesses involved in local hearings and in paying for the increased number of second-round hearings (which undoubtedly would be caused by local variations in the amount of compensation awards) would pay for national publicity on a much larger scale than anything which could be envisaged by our most competitive commercial firms.
During the course of each year, the board despatches some 65,000 items of
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informative literature concerning its functions to the public and voluntary bodies which offer to provide information to inquiries on the board's behalf. The board believes—and I share their view—that the most effective way of ensuring that victims are aware of their rights is to see that information is in the hands of each victim as quickly as possible. Therefore, the board is currently considering the distribution of a revised version of the information leaflet to go to hospitals, victim support schemes, the DHSS local offices, the WRVS, citizens advice bureaux, police stations, magistrates' courts, probation officers and public libraries. And do not let us underestimate the publicity of the noble Earl's own action in initiating this debate today.
My Lords, may I finally turn to the actual payment of compensation. The noble Lord, Lord Soper, referred, as did other noble Lords, including the noble Earl, to the fact that family violence will be brought within the scope of this piece of legislation. It is recommended—and this was particularly picked up by the previous Government—that family violence would be brought into the scope of the scheme as recommended by the working party. I am sure that your Lordships in all parts of the House will support that general intention. The noble Lord, Lord Soper, made the point in his speech that he was particularly glad that this Bill brought within its scope the giving of therapy (I think it is in Clause 3) to victims. Noble Lords will wish to know that the giving of payments for therapy already falls within the scope of the Criminal Injuries Compensation Scheme. The existing Criminal Injuries Compensation Board has complete discretion to pay compensation for any expenses incurred as a direct result of the injury, and this would include any therapy or treatment considered necessary.
On the question of the actual payments of compensation, I am worried that some clauses in the Bill appear to have an adverse effect on the rights of applicants to compensation. The existing scheme, for instance, allows applications to be made in respect of any incident occuring since 1st August 1964; the interdepartmental working party recommended that applications should normally be made within three years of the incident; but the noble Earl's Bill requires applications to

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be made within one year of the incident or six months of the death of the applicant, whichever is the longer.
In saying that, I am beginning to go into detail. The point I am trying to make is that the stumbling block to the further progress of the noble Earl's Bill is of this nature. We have a Criminal Injuries Compensation Scheme which has worked effectively for 15 years; we have the recommendations of the working party, as the result of a lengthy and well-informed review which recommended modifications to the scheme. The previous Government accepted this policy just over three months ago with a view to legislation after a trial period. If this is to be the way forward, there would be some substantial differences between the provisions recommended by the working party and the provisions which are to be found in the noble Earl's Bill.
The noble Earl may well say that he does not wish to wait. I am not asking for lengthy delay; my right honourable friend is now receiving advice about the working party's report and should be in a position to give his conclusions soon. Obviously, there are still decisions which have to be taken. For instance, it is not so easy as may appear from the noble Earl's Bill to determine what should properly be set out in substantitive legislation on this subject and what can reasonably be included in subordinate legislation, such as the rules suggested in Part I of the Schedule to the Bill. Therefore, if your Lordships were to be asked to take this Bill through Committee and Report stages now, it would be against the view which the previous Secretary of State expressed as recently as only just over three months ago: namely, that a trial period should elapse in order to evaluate changes to the scheme before further legislation is attempted.
Today's debate has been valuable because it has afforded an opportunity for the plight of victims of crime to be drawn once again to public attention. I am not just being polite when I say that I am sure that in considerating the recommendations of the working party on the Criminal Injuries Compensation Scheme the Government will take account of the particular concerns that have prompted the noble Earl's Bill, and that both the Bill and this debate will very much
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influence the Government's thinking. Meanwhile, I seriously ask the noble Earl not to proceed this afternoon with this Bill, which in important respects departs from the way in which the scheme should be administered, as recommended by the noble and learned Lord's Commission and the interdepartmental working party as well.
The Earl of LONGFORD: My Lords, may I interrupt?
Lord BELSTEAD: I will give way in a moment. If the noble Earl will agree to do this, his Bill will have helped in a practical way the victims of violence.
The Earl of LONGFORD: My Lords before the noble Lord sits down and before I attempt to reply, may I ask him in what way our Bill differs from the findings of Lord Pearson's Royal Commission?
Lord BELSTEAD: My Lords, on the assessment how compensation is to be paid.
The Earl of LONGFORD: My Lords, we do not deal with that explicitly so I am afraid that I do not accept that particular correction.
Lord BELSTEAD: My Lords, if the noble Earl will forgive me, it is absolutely fundamental.
5.35 p.m.
The Earl of LONGFORD: My Lords, may I explain to the noble Lord that we are all grateful to him. He has been very kind to me and I shall be kind to him back. I do not share his view of working parties as though they deliver the Tablets from Sinai. For many years I have been a member of lots of working parties, some official and some unofficial, and I have never heard them treated as quite such sacred cows as they have been treated this afternoon. I will come back to that in a moment. I am deeply grateful to noble Lords, beginning with the noble Lord, Lord Belstead, and all other speakers who have taken part in this debate, for their contributions. Naturally the speeches of those who supported the Bill in principle, the right reverend Prelate the Lord Bishop of Norwich, the noble Lords, Lord Soper, Lord Mishcon and

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Lord Redcliffe-Maud, are the speeches which appealed to me. The other speeches made me think the harder because obviously they cannot be passed over lightly.
I am very glad that on the whole we have not heard much about cost this afternoon, although the noble Lord, Lord Belstead, touched on it. I had thought that we should be told that in these stringent times any advance of this sort was impossible. That has not been the argument which has been raised against us, so I will not dwell on that now. I knew we should have something about timing, because the noble Lord, Lord Boston of Faversham—inevitably, perhaps—quoted what was said by the former Home Secretary, Mr. Merlyn Rees, that a period of time should elapse before we could introduce a statutory scheme; that we had to see how the scheme, as amended, would work. This scheme has been going on for 15 years.
In 1973 the working party was set up with the explicit instruction of proceeding on the assumption that we were going to have a statutory scheme. That was six years ago. The idea that we need a further period because of some relatively minor changes which are being suggested I find a feeble argument. The noble Lord, Lord Belstead, spoke most charmingly, but I did not interpret Lord Redcliffe-Maud's speech in this way. Lord Belstead felt that Lord Redcliffe-Maud said that this was a difficult time. I think the noble Lord was speaking with a touch of irony; but the noble Lord, Lord Belstead, took it literally. However, we can discuss that at some other time.
One is bound to take very seriously—as one does any of his remarks—the speech made by the noble Lord, Lord Allen of Abbeydale. He brings to this topic, as he does on many matters, a special expertise and, in particular, the expertise of someone who was a member of the Pearson Commission. Some of his points were minimal and were obviously points which could clearly be improved in Committee. I do not doubt for a moment that there are many such points, as I said when I was speaking. He raised one important issue which the noble Lord, Lord Belstead, also touched upon. In drawing up a plan of this kind it is no
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I doubt difficult to say what should go into the main scheme and what should be left to administration. I realise that that is an important point. If I am told that our scheme is too exiguous, that it does not go exhaustively enough into a lot of questions, then I am bound to admit that argument. Those matters in so far as they must be incorporated in the Bill, can clearly be added at the next stage. So I would not accept that as a fatal obstacle.
May I go back to this working party? The working party were all very well; they were human beings, not any more expert in these matters than noble Lords; they are well-meaning people. The idea that I in one or two respects ventured to differ from them leaves me unextinguished. I am not worried by that particular argument. There we are. There are people who have spoken in favour of the Bill much more eloquently than I can. If we feel an obligation to victims and if we feel that a big step forward should be made, there has been no argument brought forward this afternoon which says that it should not be made now. Therefore I say that we should be betraying victims if we did not seize this opportunity. I venture, therefore, to ask the House to give this Bill a Second Reading.
The DEPUTY SPEAKER (Lord Der-went): My Lords, I could not quite hear the last words of the noble Earl.
The Earl of LONGFORD: My Lords, I venture to ask the House to give the Bill a Second Reading.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

LAW REFORM (MISCELLANEOUS PROVISIONS)(SCOTLAND) BILL [H.L.]
5.41 p.m.
The MINISTER OF STATE, SCOTTISH OFFICE (The Earl of Mansfield): My Lords, I beg to move that this Bill be now read a second time. This is the second Bill dealing with reform of Scots law to be introduced by the Government this Session. The other Bill, the Bail etc. (Scotland) Bill, was introduced in another

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place last month. The two Bills together, I would submit, indicate that the Government are determined to push forward with law reform.
Clauses 1, 2 and 3 and Schedule 1 are concerned with the qualifications of persons to serve on juries in Scottish courts. The existing legislation, dating from 1815, which regulates the qualifications of jurors for jury service in Scotland, is scattered across the statute book. The most important of the statutes on the subject is the 150-year-old Jurors (Scotland) Act 1825, which has undergone numerous amendments, many of which are now as out of date as the parent Act. This Bill consolidates and updates the existing legislation on the qualifications of jurors, their duty to attend in response to a summons and their right to be excused from service. It also sets out in specific terms the penalties for jurors who fail to attend when summoned or who serve on a jury knowing that they are in one of the two categories specifically excluded from serving.
The present law regarding qualification for jurors was criticised by the Thomson Committee on Criminal Procedure in its Second Report, which was published in October 1975. At present the minimum age at which a person may serve on a jury in Scotland is not 18, as it is for other civic duties, and for jury service in England, but 21; and jurors are in theory required to own heritable property to the value of £5 per annum or movables worth £200. The Thomson Committee recommended that there should be a general provision making all persons between the ages of 18 and 65 registered as parliamentary or local government electors and resident in the United Kingdom for five years eligible to serve as jurors. They also recommended that there should be set out in statute the classes of persons who were ineligible for service; disqualified for service; and entitled to claim exemption as of right on specific occasions. Clauses 1, 2 and 3 and Schedule I carry out these recommendations.
I do not think that I need say much about Clauses 4, 5 or 6. Under Sections 8 and 9 of the Succession (Scotland) Act 1964, the husband or wife of a person dying intestate has a prior right to certain sums from the estate. Until those sums are paid, he or she is entitled to receive interest on them, but only at the rate of
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4 per cent. per annum. This is clearly not realistic when interest rates generally are high, and leaves the spouse in an unfavourable position if payment of the balance of the estate cannot be made quickly. Clause 4 therefore enables the rate of interest to be altered by an order made by the Secretary of State. This order, like those enabling the Secretary of State to alter the amount of the prior rights themselves, is to be made by Negative Resolution procedure.
Clause 5 has been included in the Bill to rectify an anomaly created by the Succession (Scotland) Act 1964, and which came to light in a recent court case. Until 1964, the heir of the last surviving trustee in any trust could establish his own right to act as a trustee by proving himself to be the legal heir of the last trustee. However, the 1964 Succession Act repealed the provisions of the Titles to Land Consolidation (Scotland) Act 1868 which allowed this, and there is now no form of machinery by which an heir's character as trustee can be recognised. This clause fills the gap in the law by reviving the provisions of the Titles to Land Consolidation (Scotland) Act 1868.
Clause 6 removes the duty of the Registrar, Capital Taxes Office, Edinburgh, to preserve inventories of the estates of deceased persons without limit of time. Clauses 7 to 12 continue, and substantially complete, the task commenced by the previous Conservative Government when it passed the Sheriff Courts (Scotland) Act 1971, of implementing those organisational and civil law recommendations which require legislation, contained in the report, published in 1967, of the Grant Committee on the sheriff courts.
Clause 7 makes clear that the power given to the Secretary of State by Sections 10 and 11 of the Sheriff Courts (Scotland) Act 1971 to authorise a sheriff principal to act in another sheriffdom or to appoint a temporary sheriff principal enables the Secretary of State to make such an appointment where a sheriff principal, for some particular reason, is unable to take a case, although he is able to do the rest of his duties fully. Clause 8 provides that the sheriff court has concurrent jurisdiction with the Court of Session in both ordinary and summary Acquestrations.

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Clause 9 gives the sheriff court concurrent jurisdiction with the Court of Session to appoint a trustee under Section 22 of the Trusts (Scotland) Act 1921 or to authorise completion of title in a lapsed trust under Section 24. Clause 10 provides that the sheriff court has concurrent jurisdiction with the Court of Session to appoint judicial factors. Clause 11, by removing the present financial limit of £50, enables the sheriff court to deal with all the comparatively rare actions for suspension of charges.
Clause 12 substitutes for the present rather narrow provisions relating to the remitting of actions from the sheriff court to the Court of Session a general right on the part of either party to apply to the sheriff for a remit on cause shown. It also gives to the sheriff a power to remit to the Court of Session of his own accord actions relating to the custody and adoption of children. This clause departs from the recommendation of the Grant Committee in so far as that committee recommended that the application for the remit should be considered by a Lord Ordinary. In the course of consultations on this matter it was suggested that the sheriff who has dealt with the case up to the point when an application for a remit is made would be in the best position to decide whether an application for a remit is justified, and this clause provides for the application to be considered by the sheriff.
Clauses 13 to 18 are concerned with a variety of matters. Clause 13 meets a need in our present arrangements for resolving disputes by arbitration by empowering a Court of Session judge to act as an arbiter in commercial cases.
Clause 14 fills a gap in the powers of the Lands Tribunal for Scotland. At present some statutes laying down that compenastion can be awarded by the Lands Tribunal state that the Lands Tribunal can award interest on whatever award of compensation they make. An example of this is the Lands Clauses (Consolidation) (Scotland) Act 1854, as read with the Land Compensation (Scotland) Act 1963. However, there is no general power given to the Lands Tribunal to award interest, which means that when the Lands Tribunal, for example, makes an award of compensation for
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revocation of planning permission under Part VIII of the Town and Country Planning (Scotland) Act 1972 it cannot award interest. This clause gives the Lands Tribunal the necessary general power.
Clause 15 deals with vexatious litigants. I think it might assist the House if I explain a little about the law regarding vexatious litigants. Under the Vexatious Actions (Scotland) Act 1898, the Lord Advocate may apply to the Inner House of the Court of Session to declare that a person is a vexatious litigant: that is, a person who has habitually and persistently instituted legal proceedings without any reasonable grounds. When a person is declared to be a vexatious litigant he can always apply to a Lord Ordinary of the Court of Session for permission to raise specific legal proceedings. At present that person can appeal again to the Inner House of the Court of Session against the decision of the Lord Ordinary refusing him leave to institute these new legal proceedings. This clause provides that the decision of the Lord Ordinary is to be final
Clause 16 makes general the power which the Court of Session has at present to entertain an action of reduction of a decree granted in any consistorial proceedings, whether or not the court would have jurisdiction under other grounds. An action of reduction is used where a party wishes to annul a decree granted by a court, when that decree has been obtained by fraud or when there was some other fundamental nullity. The present situation is that such a decree must remain in being simply because the parties to the action are no longer subject to the jurisdiction of the Scottish courts and the clause removes the jurisdictional requirement.
Clause 17 remedies certain defects in the Licensing (Scotland) Act 1976. Under that Act it was intended to impose liability for offences relating to clubs upon persons who were the official members of the committee of management or governing body at the time of the contravention. It was thought that these persons could be identified by reference to the register of clubs kept by the registrar under Section 102 of the Act, but one of the subsections of that section provides that the only official or member of the committee of management or governing body of a club

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whose name appears in the register is the secretary. This situation is now remedied by Clause 17 which amends the 1976 Act by requiring that a list containing the name and address of each official or member of the committee of management or governing body of the club is to be lodged with the registrar of clubs, either along with the application for certification of registration under Section 103 of the Act, or when changes are subsequently made to the previous list.
Clause 18 is a simple removal of doubt measure. On one reading of the Marriage (Scotland) Act 1977 it might be thought that if a registrar issues a marriage schedule within 14 days of a marriage notice, or issues a marriage schedule more than seven days before the date of the intended marriage, the subsequent marriage shall be void. It would be rather harsh for such a consequence to flow from the administrative failure of the registrar, and the provisions of the 1977 Act are amended to make sure that it could not happen. This provision is made retrospective to safeguard the validity of all marriages solemnised under the 1977 Act.
These then, in broad outline, are the matters dealt with in this rather technical Bill. I hope that I have been able to give your Lordships a reasonable explanation of them, though I fully appreciate that in a Bill dealing with so many different subjects as this one it is difficult to cover every item fully in a Second Reading speech, unless one were to enter into the type of detail which is more appropriate to the Committee stage of the Bill. My Lords, I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2.a—(The Earl of Mansfield.)
5.53 p.m.
Lord HUGHES: My Lords, may I start by extending my congratulations to the noble Earl, Lord Mansfield, on occupying the position which he now does occupy, and by expressing my condolences with him on the fact that he may be embarking on an experience which fell to me over many years, of finding that the Law Reform (Miscellaneous Provisions) (Scotland) Bill was something which cropped up with monotonous regularity. However, he has an advantage that I did not have, in that he is a lawyer and there-
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fore, probably, approaches these measures with a greater degree of enthusiasm than I was able to muster.
I must say that in the remarks which he has just made in explaining the Bill, he has removed many of the items about which I was far from clear in reading the Bill, even when I referred to the previous Acts which are being amended. So I must thank the noble Earl for making the provisions of this Bill much clearer to your Lordships.
If I may just touch on a very few of the items, it seems to me in regard to Clause 4 that, particularly at a time when minimum lending rate has reached a figure of 14 per cent., there could hardly be a better time to remove from the Statute Book a permanent provision that a spouse should be entitled only to interest. Through no cause of her own, this might cover a fairly extensive period, and 4 per cent. seems nowadays to be a rather niggardly basis of giving help. On Clause 6, I cannot imagine why it should have survived so long that there should be a necessity to preserve in perpetuity inventories of the estates of deceased persons. I cannot imagine that any of your Lordships would want to disagree with the removal of that obligation.
When I looked up the Act of 1971, I could not understand exactly what was the difference between what was in the Act and what is in the present Bill. However, I gather from what the noble Earl has said that the difference is confined to the possibility that a sheriff principal might regard himself as not being qualified to conduct a particular part of his duties at a certain time, rather than the previous provision which enabled another appointment to be made because of the illness of the sheriff principal, or because for some other reason he was unable to perform his duties. The noble Earl has made that aspect of the matter perfectly clear to me.
He referred to those clauses which continue further the provisions of the 1971 Act, and which give concurrent jurisdiction to the sheriff court on a variety of matters. It has become clear to me on the Royal Commission on Legal Services in Scotland that there are mixed views about the desirability of concurrent jurisdiction. But I must say that I cannot

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find any reason for disagreeing with the extension of the concurrent jurisdiction which these clauses include.
After what the noble Earl has said, there are no doubts in my mind about any of the other items which I had marked. However, before leaving the Bill I should like to refer to something which is not necessarily in the Bill itself, but about which I ought to say something. Clauses 1 to 3 relate to jurors. One of the things which have emerged in recent weeks is the difference in the practice in Scotland and in England about the way in which juries are expected to operate. We have had the spectacle of a jury down here considering their verdict over a period of two and a half days, while almost at the same time a jury in Scotland was out for, I think, some 10½ hours.
As I understand the position, a Scottish jury is not allowed to stop its deliberations until it has reached its decision, which might he regarded as a hardship in itself. One must, of course, remember that a Scottish jury is entitled to come in with a simple majority verdict, and, presumably, one of the reasons is that at some point, perhaps during a lengthy absence, they will come to the conclusion that they cannot get any nearer unanimity and will come in with their majority verdict. But, whether or not that is reasonable, what I think—and I had not realised this until reading what happened in recent weeks—is that a jury is not even entitled to get any food sent into them during that period. While it may be that there should be every encouragement given to a jury to reach a verdict as speedily as possible, I doubt very much whether in existing circumstances it would be regarded as reasonable that they should be starved into an agreement.
I do not know whether this Bill would be an appropriate one for amending this situation, and perhaps making more reasonable provision for the comfort of the jury during their absence to consider the verdict. Perhaps the noble Earl could give me some guidance on that. But in a Bill which is laying down the duties of a juror, the obligations of a juror and the penalties to which he may be subjected, it might be regarded as a reasonable quid pro quo that we should give some consideration to the comfort of jurors while they are deliberating on a case.
Lord CAMPBELL of CROY: My Lords, before the noble Lord leaves that point, I wonder whether he would also comment on the fact that perhaps there is an association between what he has said and the fact that a jury in Scotland can bring in a verdict of not proven.
Lord HUGHES: My Lords, whatever the verdict that they arrive at may be—guilty, not guilty, or not proven—it ought not to be one to which, at the end of the day, they have been driven by the pangs either of hunger or of thirst.
The Earl of MANSFIELD: My Lords, may I begin on a personal note by thanking the noble Lord, Lord Hughes, very much for his kind remarks. He sat in this position, if I may so call it, for longer than most, with great distinction, and he knows precisely what the job entails. Of course, the noble Lord perpetuates the popular myth that lawyers of any sort can deal with anything. However, let me tell him that it is no asset, in my particular circumstances, to be a lawyer, because I am a lawyer in the wrong country. Therefore, the language is even worse than it would otherwise be, and I start, in fact, from a subordinate position.
I am very glad that the Bill as a whole commends itself both to the noble Lord and to the House. When one looks at the matter, it represents a tidying up of what probably has been ripe for some kind of reform for quite a long time. I very much take the point which the noble Lord expressed about jurors and their duties and comforts. As I understand it, the rights—or, rather, the lack of them—of a Scottish jury stem from an Act of 1587 which in 1979 could, I suppose, be considered to be rather archaic.
The position is that modern trials have become increasingly lengthy and, indeed, complex. I do not suppose that this situation caught up with Scotland as quickly as it did with England. However, I know from my own professional past that even 10 years ago the position had been reached, partly because the Crown now likes to get so many people together in the dock, that juries had to turn their attention to all manner of difficult assessments of fact before reaching their conclusion. Even if they addressed their minds to their task with all speed, it took a

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great deal of time. It may be—I am only speaking personally now—that this is beginning to catch up with the Scottish legal system, too.
The Government will have to consider, therefore, whether amending legislation is necessary. Having, in the words of the noble Lord, had help from the Box, I can go so far as to say that is even now being considered. Whether it can be considered in this Bill I just do not know. The Long Title is one of the longest which I have ever seen, but whether we can slip something in I do not, as I have said, know. If I may, I will take counsel about the matter and communicate with the noble Lord in some way, because I agree wholeheartedly with him that this is something which needs to be amended, and amended fairly quickly. However, I am not sure whether it will be possible to do anything about it in this Bill.
Lord HUGHES: My Lords, one advantage of having such a Long Title is that anything which had to be added to it would, on a percentage basis, be very small.
The Earl of MANSFIELD: Yes, my Lords, but so far as jurymen and their refreshment is concerned it is very important that we should get it right. Having said that, I am glad that this large and somewhat cumbersome but nevertheless useful Bill apparently commends itself to the House.
Baroness WARD of NORTH TYNESIDE: My Lords, before the noble Earl sits down, may I ask him whether there is likely to be a Bill relating to English juries, or whether England is supposed to be perfect while Scotland needs a new Bill?
The Earl of MANSFIELD: My Lords, even though I am an English barrister, I would not say that the criminal law of England is perfect. However, I shall bring my noble friend's observation to the attention of my right honourable friend and point out to him that it appears that in certain directions the law of Scotland has now advanced further and in a better direction than that of England.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

PUBLIC RECORDS AMENDMENT BILL [H.L.]
6.5 p.m.
Lord TEVIOT: My Lords, I beg to move that this Bill be now read a second time. In doing so, I have to declare two interests. One is that I obtain my living very largely as a genealogical record agent and the second is that I have had the privilege of serving as a member of the noble and learned Lord the Lord Chancellor's advisory council on public records for some years.
There must not be thought to be any reflection on either the importance or the interest in this Bill in the fact that only the noble Lord, Lord Boston of Faversham, is sitting on the Front Bench opposite. I am very glad that he is to speak. I sympathise with the noble Lord in having to make two speeches in one afternoon, and also with my noble and learned friend who is going to be kind enough to reply.
The Long and the Short Titles of the Bill look rather vague, so I shall begin by explaining them. Basically, this Bill would make the registers of births, marriages and deaths in the custody of the Registrar General into public records when they become 100 years old. This means that these records would be transferred to the Public Record Office, where they could be seen on microfilm. At the moment, all registers of births, et cetera, are specifically excluded from the Public Records Act 1958.
Noble Lords may be wondering why I am persisting with this Bill, considering the present economic climate. They may remember the Second Reading during the last Parliament, in November, when the noble and learned Lord raised doubts as to the validity of the cost involved. That occasion was unfortunate, in as much as it was heard one and a half hours before it was forecast, much to the consternation of myself and the then noble and learned Lord the Lord Chancellor.
The situation regarding costs is now much more restrictive than it was then. At one time I was diffident about reintroducing the Bill. However, this Session is to be much longer than usual, which gives more hope for Bills of this kind surviving. I was advised that not even to proceed with a Second Reading would be

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unnecessarily reticent, because implementation is carefully safeguarded in Clause 3 of the Bill which seeks only to remove a legal obstacle.
On the last occasion, I gave noble Lords a brief history of general registration which I hope they will forgive me for not repeating, although I wish to add a little more in order to explain the current situation. However, may I refresh your Lordships' memories by saying that general registration began in the year 1837. This was the start of the Office's long and distinguished history which, among many other things, has produced so much essential statistical information, including the 1861 and subsequent decennial censuses.
Public access has always been allowed in the search rooms, and until 1898 members of the public were allowed to inspect the register themselves. Incidentally, this rule remains in Scotland. Since then, members of the public have been permitted to inspect only the indexes. In order to obtain any more information they have to purchase a certificate. This charge remained for many years at 3/9d. The current charge for obtaining the same information from the public search room, in person, is £2·75 and by postal application £6·50.
Apart from the obvious need for persons wanting copies of birth and marriage certificates, and death certificates for their immediate forbears, for legal and other purposes, there has been a steady increase in the last decade—very sharp indeed in the last year or so—in the number of people having a desire to trace their family history. This interest has grown in people who come from all walks of life and not only, as some noble Lords may think, from those who have pretensions. It is a genuine and natural interest, and I must admit that it has also been encouraged by the media. Last year it was encouraged by the American television programme " Roots " and, more recently, by the BBC television series presented by Mr. Gordon Honeycombe. I gather that the BBC have had no fewer than 10,000 letters arising from it and have thought it fit to repeat the series.
All this has produced an intolerable burden on the General Register Office and has produced a crush of people in
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the search room at St. Catherine's House, which is often unbearable, without exaggeration, not only during the summer but the whole year round. This congestion is especially bad during school holidays and half terms and again between the hours of 12 and 2, when many more people rush in and pursue their hobby instead of taking lunch.
Genealogy, family history, or call it what you will, plays a great part in the field of tourism. Many people visit this country from the United States of America, Canada, Australia, New Zealand and from Southern Africa specifically to discover their origins. The Tourist Board are fully aware of this and have published a pamphlet called Tracing your Ancestors. When and if this Bill becomes law, members of the public will be able to consult microfilms of the original registers. The microfilming is still in progress but is well on the way to completion for the period concerned. Births and marriages are almost finished and there only remain the deaths to be done.
Here I must take the opportunity of saying that the explosion of genealogical interest has had repercussions not only in the search room at St. Catherine's House, but also in the Census Room at the Public Record Office, which I believe is causing much concern to the keeper there. At busy times that room is full to overflowing and I think I am right in saying that there were no fewer than 750 readers in the four days following the Whitsun Bank holiday, and on one day there were no fewer than 200 readers. It is a situation that cannot be allowed to continue. Also I think I can speak for the office, but anyway for the Advisory Council, who are alarmed at the present position regarding the economic cuts. The under-manning of staff could well lead to a serious deterioration of services at present offered to the public.
I am sure that my noble and learned friend will explain the financial implication of this Bill and this being the case I will touch on it only briefly, while not belittling its importance since it is the whole crux. Since the last Bill there have been meetings with the Treasury, the Civil Service Department and the Property Services Agency. While this operation was under way the extra costs could be quite small. I will not say

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minimal, but small. I believe it is the instituting and installing of equipment and the accommodation, the costs of which are quite high, which cause the real problem.
I now come to the Bill itself. Clause 1 amends the Public Records Act of 1958 to include registers of births, marriages and deaths where they were previously excluded, where they have been in existence for 100 years or less, deposited in the General Register Office under or in pursuance of any enactment. There are numerous minor consequentials covered by this with which I need not bother your Lordships, except to give one or two examples—namely, the consular returns; regulations made under the Civil Aviation Act as regards births, deaths and missing persons on hovercraft, which might sound rather bizarre; the Moscow marriages from 1826 to 1856 and the Ionian Islands Acts from 1816 to 1858. There are many extraordinary matters like that.
Your Lordships will notice that registration of adoptions and stillbirths is still excluded. You will appreciate that the nature of those documents makes them particularly sensitive and that the registers started only in 1927, so even if they were not excluded they would not become available until 2027 or 2028.
So far I have not mentioned that there is a great deal of important historical and demographic work proposed to be done on these registers. Some economic and social historians are disappointed that the period will remain at 100 years. I have discussed this matter with many groups but have come to the conclusion that it is better, because of the sensitive nature of these records, that the 100 year rule should remain. However, subsection (3) allows for this period to be shortened should the climate of public opinion change and should it be thought to be desirable without resorting to further legislation. Here I can say that the Public Records Committee are currently looking into the changing use of records such as that by demographers, whose branch of history has grown, having been previously left out of account by the Grigg Committee of 1954.
In conclusion, the preparation of this Bill has been most agreeable. It has been drafted by a distinguished and well-known Queen's counsel and I am very grateful
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for the co-operation that I have received from both the Government Departments concerned and other interested persons. This Bill has the backing of the Advisory Council, because its chairman, namely, the Master of the Rolls, the noble and learned Lord, Lord Denning, would have been here in person today if he were not a spectator at an annual sporting event in South-West London, which no one could deny him the pleasure of attending.
I appreciate that my noble and learned friend cannot give me a very encouraging reply, in which case I should like to have his advice on how to proceed. I had hoped that the Bill could be accepted as there is a commencement clause, namely Clause 3 and thence after the Bill had passed through all its stages here I would try to find a Member of the other place to take it on there. If that is not acceptable I should like to know of an alternative, otherwise this little Bill will become a hardy perennial and will get nowhere. Perhaps my noble and learned friend may suggest that the Government would like to take it over at a suitable time. I am open to offers, and therefore I beg to move.
Moved, That the Bill be now read 2a.—(Lord Teviot.)
6.17 p.m.
Lord BOSTON of FAVERSHAM: My Lords, the noble Lord, Lord Teviot, is to be congratulated on having lost no time in introducing his Bill into this Parliament. His previous Bill, which received a Second Reading in your Lordships' House on 23rd November last year, was a victim of the Dissolution and now remains a matter of what might indeed be called in the current context " historical public record ". But now the noble Lord's speedy action has brought the Bill forward again. I was not able to be present on the last occasion, but I have read that debate and it is clear that, just as it did then, the House has again benefited from the noble Lord's knowledge and expertise in these matters.
There is no doubt that people are showing increasing interest in public records and in tracing their family history. On the last occasion the noble Lord referred to the " regulars " who go to consult records at St. Catherine's House and elsewhere, and although it is not perhaps something on which an interest has to be

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declared, I must confess that my wife is one of the fairly frequent customers. As a fourth generation Australian she is keen to trace her forbears. Although she has not actually said so, I suspect she is secretly hoping that one day some public record or another will bestow upon the family what is, to an Australian with origins in this country, the ultimate accolade in family history terms and reveal that one of her ancestors went to Australia as a POHM—a prisoner of His Majesty, as it then would have been. But I am afraid it is a forlorn hope since what they actually did was to go there and help to found the Methodist Church in Victoria.
The subject of public records is one in which my noble and learned friend the former Lord Chancellor took a close interest, as indeed does the noble and learned Lord the present Lord Chancellor. My noble and learned friend took part in that capacity in the last Second Reading debate and he is sorry not to be able to take part today. As he pointed out then, two main issues arise in considering this Bill: whether it is right in principle and whether the proposals are practicable. On the point of principle, the effect of the Bill will be to give the public free access, as we have heard from the noble Lord, to all the births, deaths and marriges registered over 100 years old, and that certainly seems to be desirable. My noble and learned friend went on to explain that acceptance of the principle would mean splitting those registers into two categories, with those over 100 years old going, under the Bill, to the Public Record Office while those under that age would be in the care of the General Register Office. He acknowledged that the merits of the principle may outweigh the possible disadvantages of splitting the registers into two groups.
On the second issue, whether these proposals are practicable and can be given effect to now so that it would be appropriate now to legislate, my noble and learned friend mentioned that there are plainly considerable administrative and financial implications in what is proposed. It is perhaps not necessary for me to spell out the administrative aspects. It is probably quite sufficient simply to recall that my noble and learned friend said that he had suggested that the administrative difficulties could be resolved. But he was
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less sanguine about the early resolution of the financial implications. Again, I will not detain your Lordships by going over the details, but noble Lords will recollect that my noble and learned friend Lord Elwyn-Jones pointed out that the Bill would involve additional burden on public funds and added that these funds had not yet been authorised, and could not be, because they could not be quantified at that time. It may be that the noble and learned Lord the Lord Chancellor may wish to say something further about this tonight.
My Lords, I ought also perhaps to mention very briefly three other reservations that my noble and learned friend expressed in the last Second Reading debate. The first was on whether or not there should be an appointed day provision in the Bill. There is a temptation, as we know, sometimes, for instance, when the money cannot be found immediately to do something, to put a measure on the statute book but to delay its entry into force until an appointed day. He was not at all keen on that idea. Again he confessed that he was not at all happy about the Short Title of the Bill, and the noble Lord, Lord Teviot, has referred to that in his speech today. It was not, and indeed is not,—and I think the noble Lord accepts this, too—very revealing, and perhaps a more precise and informative title might be the one which was suggested during the course of the last debate, something like the Births, Marriages and Deaths Registers (Public Access) Bill, or something similar to that. I do know, and the House knows, of course, that the noble Lord, Lord Teviot, has had the guidance of learned counsel on this point.
Finally, my noble and learned friend raised a reservation about Clause 1(b) which would enable the 100 years' period to be reduced. It was reassuring, I think, to hear the noble Lord, Lord Teviot, agree that the 100 years rule should be maintained, and certainly it remains our view that a firm decision now on the appropriate period would be better than having the period altered from time to time.
My Lords, while we are still unable to give full support to the Bill at the moment because we feel it is somewhat premature, we hope that it will not be too long before it is possible to achieve what the noble Lord seeks, and I would join in commending him for the way in which he has presented this proposal to your Lordships.
6.23 p.m.
The LORD CHANCELLOR (Lord Hailsham of Saint Marylebone): My Lords, I congratulate both noble Lords on two admirably succinct speeches about this little Bill. In particular, I am sure the House is fascinated on this occasion, as I expect it was on the last although I had not the good fortune then to be present, by the expertise shown by my noble friend in discussing this rather recondite subject, on which he is a much greater expert than I am. He disclosed two interests. He really only needed to disclose the first, but he did disclose the second. I should like to take the opportunity of thanking him for the public work he does on the advisory committee. We are very glad to have him there and we are grateful for what he does. It is not in the technical sense an interest, but I am sure the House was glad to know from his own lips as well as from mine of his service in that respect.
He also is entitled to claim, and he did claim, the support of the Master of the Rolls, who I think is the chairman of that committee but who is otherwise occupied at this moment. He has not been very well lately; he had a slight accident to his knee about a month ago, so I think none of us would grudge him a little relaxation before he resumes his full parliamentary duties. I am sure the House is very glad to know that he is sufficiently well to be able to take that relaxation on this particular occasion.
My Lords, the actual subject matter of the Bill was so fully and accurately dealt with by my noble and learned predecessor so recently that I think it really would be a work of supererogation on my part to repeat what he said. With his customary geniality, he concealed what was really rather a dusty answer behind a friendly and forthcoming manner. My Lords, I took the precaution of seeking to soften the blow to my noble friend by indicating to him that too, am driven by the force of circumstances and against my natural generous inclinations to give him an answer which is only marginally, if at all, less dusty than that of the noble and learned Lord, Lord Elwyn-Jones, a few months ago.
Of course, my noble friend has put his case not only with clarity but, as one would expect, with perfect fairness. First,
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perhaps I should say, although readers of Hansard will already know from my noble and learned friend's utterance, that this Bill has nothing whatever to do with open government. The registers of births and so on which are dealt with in the Bill are in the general sense open to inspection. That is to say, the public are entitled to look at the index and are then entitled to demand and receive, on payment of a small fee, a certified copy of the entry in the original register. For obvious reasons, they are not entitled to handle the registers themselves as of right. Obviously the originals are of great importance and one does not want them either disfigured or damaged in any way.
The public are, as it is, entitled to a certified copy of the register once they have inspected the index. At the moment the index and the register are not under the general tutelage of my department—it is that of the Registrar General—and they go to a place called St. Catherine's House, which I think might well be described as a sort of annexe to Somerset House, to inspect the index and get their certified copies. Owing to the great increase in custom, the space available, I believe, is both inconvenient and over-crowded, and that, I gather from my noble friend's description, is a perfectly fair criticism to make of it.
If this Bill were to be passed and implemented—and they are two quite separate processes—what would happen would be that registers under 100 years old would continue (if I have got it right, which I hope I have) where they are, subject to exactly the same rules as at present and subject to whatever fee the Registrar General, under pressure from the Treasury or elsewhere, would impose. On the other hand, those which are over 100 years old would be transferred to the Public Record Office, which for this purpose is not in Chancery Lane but at Kew.
Therefore, if someone wanted to look at a number of records for the purpose of tracing his own or someone else's ancestry, he would have to go to two places instead of one. He would have to go to St. Catherine's House and pay a fee there and then go to Kew and look at the older one. Whether that would be quite as convenient as my noble friend thinks, I do not know enough about the subject to say. Obviously certain people

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who wanted to inspect a number of entries would find it less convenient because they would have to go to two places and be under two entirely separate jurisdictions. As I understand it, when they arrived at Kew they would not get quite the type of certified copy that they get now, but they might get what was marginally more valuable to them—at least my noble friend would know better than I whether it would be marginally more valuable to them: they would get a microcopy of the original register.
Lord TEVIOT: My Lords, I hesitate to interrupt my noble and learned friend. If they went to Kew, what in fact would happen is that they would be able to inspect the register themselves and obtain the information there without having to buy a certificate which they do not necessarily want.
The LORD CHANCELLOR: My Lords, I am grateful to my noble friend. They would not have to buy a certificate, but if they wanted to take anything away with them they would have to get a microfilm. Whether that would be a preferable process to looking at the index and then getting a certified copy, is a question which only experts can answer. Some might argue one way and some might argue the other.
I do not think that there can be any objection in principle to splitting the records—if that is what people want—and making them go, according to when the register was filled in, to an annexe of St. Catherine's House or to Kew. I have heard some rumours and I do not know whether they are true or false. If St. Cathe ine's House were to be moved under the decentralisation programme, which previous Administrations have had—and I have heard rumours that it was to be moved to Stockport or somewhere—I think that the disadvantages of a split register might be rather bigger than they would he as between central London and Kew. But that again is something which only those who use this kind of documentation could find out.
Personally, I am not at all hostile—and hope that I have made that plain—to my noble friend's suggestion. I like to think that the Record Office is a more attractive place to him. I am responsible for the
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Record Office and I like to think of it as being slightly more attractive to him and to others than that which is presided over by another department. I am complimented, or rather on behalf of the Public Record Office I am complimented, by this preference, but it would, of course, depend on the accommodation and the service which we could provide.
Here I am sorry to say that I come to the same awkward fence at which the noble and learned Lord, Lord Elwyn-Jones, shied when he came to go round the course on behalf of the last Government, and that is the well-known fence called "expense". I am told that the capital cost of doing what my noble friend wants would be £300,000—a small figure when one is dealing with £70,000 million or whatever figures are now dealt with from the Treasury Bench. However, to a humble little department like mine, and especially to one of its outstations like the Public Record Office, it is a tidy sum. It is a sum for which I would have to fight tooth and nail and which—under the unaccountable method of accountancy which successive Governments have pursued for over 100 years (and who am Ito question either tradition or matters of high finance?)— would have to be voted in whole in one financial year if the work were to be undertaken. Frankly, I do not have that money for the current financial year and I shall not have it for the next. That puts a very serious bar against my noble friend's legitimate ambitions, if they be legitimate.
Moreover, to that £300,000—and I am told that the figure may be larger than £300,000 and will certainly not be smaller than £300,000—one would have to add what I am advised would be an annual increased cost of £105,000 a year. Again, it is a trivial sum in comparison with those of the great spending departments, but unfortunately my outstations are not great spending departments. Indeed, one of them, the Land Registry, is able to hand over to the Treasury a modest profit every year, so I appear with some degree of sanctity when I come to deal with these matters. However, I would still have to find what I have not—namely, £300,000, minimum, of capital expenditure and an additional expenditure on servicing of £105,000.
I think the argument might be that that could be found by charging fees. It will

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be said, " After all, the Registrar General charges a fee at present in St. Catherine's House. Why should not the official at Kew charge a fee? " I am told that that shakes the Public Record Office to the core because it gives its services free. The idea that it should charge a fee is rather like suggesting that people should be charged a fee for entering a public museum. I remember only too well at the beginning of the last Administration in which I served in this House, what a row there was about that. I am told that there would be very great political difficulties in altering the policy.
Personally, I must say to my noble friend that I sympathise with the desire to charge fees, but it would raise what the Treasury calls with a shrill cry of alarm " repercussions ", if I were to do it in my own department. Therefore, I cannot make many promises about that. More-over, my initial briefiing was that the fees, if charged, to pay back according to the unaccountable system of accountancy, would be prohibitive in the sense that the humble genealogist, freed no doubt from the inconveniences, jostling and smells of St. Catherine's and admitted to the enlarged and fresh air of Kew, would none the less find the cost when he got there prohibitive—indeed, so prohibitive that he would not be able to pursue his inquiries. I am not altogether convinced by that argument, but that is what I am told might be the case.
That means that there is really rather a lot of difficulty about accepting my noble friend's suggestion. Very thoughtfully—and I admit that it was very thoughtful of him—he has included a type of commencement provision saying that it will only come into operation when the Lord Chancellor of the day (remembering as I do that the lives of Lord Chancellors, like the natural life of man, are " solitary, poor, nasty, brutish, and short ") begins to bring it in by some form of Statutory Instrument. That is all very well, but I think that a point of principle arises here. Unless one promises to do so within a rational period of time—that is to say this year, next year, but not some time or never—I do not think that one ought to do that kind of thing. I think that that is bad legislation. I have hideous recollections of my deceased and much beloved noble friend Lord Merthyr, I think it was, every
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year asking about the Easter Act 1928—which has still not been brought into effect after 51 years. Therefore, I resist on principle the idea that I could accept a Bill simply because it has a commencement date which I could not promise to implement within the foreseeable or definite future.
My noble friend asked me what he should do next. Again, I do not want to hold out any promises and I do not want to lead him in any way up the garden path. However, I hope that I have given him a sufficiently dusty answer not to have done that. I should like to assure him that beneath this rather unusual costume there beats a warm and loving heart, which will pursue this matter with colleagues in one way or another. If he withdraws the Bill, I shall see what I can do for him; I might even see what I can do for him if he does not. However, he should consider that with the expenditure of public money involved and the fact that when the Bill reaches another place the Government can ensure that it founders, he ought not to inflict on this House an undue Committee stage.
Of course, I congratulate my noble friend on having obtained professional assistance in the drafting of his Bill. It is no kind of criticism of his professional assistant in this matter. On the contrary, it is a beautiful little piece of work. I must remind him of a sad experience once had in another place when I, personally, drafted a Bill of one clause. I won the Ballot for the Private Member's Bill, and in those days I flattered myself on being an expert legal draftsman. On that occasion the Government accepted my Bill. It did not cost them any money; it only cost money to putative fathers and deserting husbands; so the Government were quite pleased to accept it. However, they handed my Bill over to the parliamentary draftsmen. The only words which remained in the little one-clause Bill which I had drafted were the Short Title, and that was only because the parliamentary draftsman was not free to alter it under the conventions which afflict another place. Therefore, I am afraid that the Committee stage could not be regarded as a complete formality. On the whole, I hope that my noble friend, having got the better of the argument—as I frankly admit he probably has—will now be a generous opponent and withdraw his Bill, trusting to

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the loving heart rather than to the for-bidding exterior.
6.43 p.m.
Lord TEVIOT: My Lords, this has been a most enjoyable experience this afternoon. I shall take with me to the grave the memory of my noble and learned friend's loving heart. I will deal very briefly with the matters which he raised. On the question of open government, I did not mean what he said at all. He can have my assurance that my views are very conservative. On the question of the two locations instead of just the one—that is, St. Catherine's House at the Aldwych and the location at Kew at the other end of the Richmond branch of the District Line—they are rather a long way away from each other, and it would be inconvenient for people to travel from one to the other. But people would be prepared to go there, pay a modest fee and be able to look at microfilms. They would not have to buy the microfilm; they would put it on a reader and then write down the details. That would be a very great advantage. Most of the functions of the General Register Office are being transferred to Southport—that was the subject of another of my little battles some years ago with other noble Lords—but the Public Search Room will remain in Central London.
I turn to the question of costs. I gather that the cost of £300,000 has increased in the last few months, but that is due to the necessity to strengthen a certain building by the Property Services Agency. However, the annual extra cost of £105,000 greatly alarms me, because the last time I heard about it, it was between £40,000 and £50,000 for being at Kew, and, if in Central London, between £70,000 and £80,000. However, one has to expect figures of that kind.
I should like to thank the noble Lord, Lord Boston of Faversham, for his interesting intervention. I look forward to talking to him later or at some suitable time about Australian genealogy, in which I am no great expert. Sometimes I look up transportation records to trace ancestors, although it is rather a social cachet in Australia to have been descended from such a person.
I turn now to what I shall do. The best thing for me to do is to withdraw
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the Bill, but I do so very reluctantly. I shall simply wait for some joy to come at some time from my noble and learned friend. I do not see any point in battling on. I also hope that pressure may he brought to bear from the Department of Health and Social Security, of which the Office of Population Censuses and Surveys is an out-station, so that it may be included in one of its Bills. I thank noble Lords very much for a pleasant afternoon, and I especially thank my noble and learned friend. Therefore I beg leave to withdraw the Bill.
Motion for Second Reading, by leave, withdrawn.
Bill, by leave, withdrawn.

MEDICAL EDUCATION IN LONDON
6.46 p.m.
Lord ANNAN Lord ANNAN rose to ask Her Majesty's Government whether they are satisfied with the provision for medical education in London and whether the policies of the Department of Health and Social Security and the University Grants Committee could be further co-ordinated to meet the needs of the London Medical Schools and Institutes.
The noble Lord said: My Lords, as a Vice-Chancellor of the University of London, I must immediately declare an interest, because London is the largest centre for educating doctors and dentists. It possesses 12 general medical schools and five dental schools, which teach both undergraduates and post-graduates. There are two schools which teach solely postgraduates and there is also a federation of 13 research institutes of post-graduate medicine and dentistry. These schools and institutes educate one-third of all medical students in the United Kingdom. Indeed, because Scotland is somewhat over-generously provided with medical schools for its population, London University educates one-half of all the future doctors in England and Wales. The new provincial medical schools are, of course, developing fast, but the Department of Health and Social Security is still asking London to provide the same number of doctors annually. What is more, London's post-graduate reputation makes it the Mecca of medical scientists from all over

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the world and in a very real sense the secular Mecca of our friends in the Arab States who come to London to obtain medical treatment.
Yet this inevitable concentration of medical talent in the country's capital is now in a desperate state. Why is this? There are five reasons: first, the misguided criteria applied by the Resource Allocation Working Party, which is called, in the jargon, RAWP; second, the erroneous principles used in calculating the special increment for teaching, called in the jargon, SIFT; third, the 1974 reorganisation of the National Health Service, which caused the mismatch of the four Thames regions then established to the brute facts of the location and the number of teaching hospitals. The fourth reason is the failure in reorganisation to recognise the inevitable conflict between the needs of medical research and health care. The final reason is a certain inability of the right-hand of Government, the DHSS, to inform its left-hand, the DES and the UGC, what it was doing.
The proposition from which RAWP started was as follows. It assumed that London tries to educate too many medical students in relation to the available population. That is not so. In fact, London has a better ratio of students to population than any of the cities where new medical schools have been established. Even the ratio in Inner London, from which population has been draining, is more than adequate compared to that of other cities. I ask the noble Baroness, Lady Young, to consider the following figures. Cambridge has 250 potential patients per student; Oxford, 400; Southampton, 750; Bristol, 1,100; Leeds, 1,200; and London 2,000. Only Greater Manchester has more than Greater London, with 3,500. But if you compare Inner London and Inner Manchester, Manchester has 700 and London 750. The point is that the provincial medical schools rely on their regional rather than their city populations.
RAWP is a battlefield upon which many battles have been fought over the past four years. It is littered with the corpses of memoranda, and the combatants upon it stand dazed and deafened by the volley of reports. I shall not weary your Lordships' House by deploying élite troops of arguments which have made no
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impression as yet on the enemy's position. No one in London for one moment denies, or contests, the democratic fact that population is leaving London and that the new schools in the provinces need funds. But the Department of Health and Social Security seems to be under the impression that the teaching districts in London receive allocations in excess of the health services they provide.
May I take just one example to refute this. Would your Lordships consider the figures for the area health authority in which you are at this moment sitting? In 1977–78 the revenue allocation was 23 per cent. compared with hospital expenditure of 25 per cent. The deaths and discharges of patients stood at 23 per cent. The accident and emergency attendance stood at 25 per cent., and the total outpatient attendances 28 per cent. Those figures show that these hospitals are doing more work than they are given funds for.
The trouble is that according to the RAWP formula they are said, these medical schools, to be over-funded. Why is this formula wrong? RAWP insists that allocations should be based on standardised mortality rates as well as on population. This almost suggests that we are dealing with a national death service rather than a National Health Service. But this formula of SMR fails to take into account illness, disablement, loss of working time by ill health, social deprivation, and, above all, the commitment to commuters who use the London teaching hospitals rather than their home hospitals. These factors too ought to be taken into account, and they are not taken into account because they are so difficult to quantify.
RAWP fires with two barrels. It takes money out of London to finance teaching hospitals in the Midlands and the North. It also takes money out of the London teaching hospitals to finance hospitals in the home counties. Because money is needed in Bedfordshire and Hertfordshire, Charing Cross Hospital today faces an immediate cut of £660,000. If inflation rises at 15 per cent. it will face a cut of £1 million. The same fate, I would guess, would face St. Mary's, Hammersmith and the Middlesex in that region. It will also probably affect all the schools in the North-East and the South-East regions.
What will happen? Wards will be closed. The day unit, surgery and investigation, could be closed. The baby care unit could be closed. So could the rehabilitation unit. The cervical cytology service could be halved. There could be a 50 per cent. reduction of out-patients. Of course there is an alternative. The alternative is simply to close down the whole accident and casualty service. That would be a radical step. But whatever happens there will be fewer beds and medical students will just not be taught some subjects.
Now for the effect which the reorganisation of the Health Service has had on the medical schools. That reorganisation took no account of the peculiar situation in London. Of course there were consultations. In 1970 the noble Baroness, Lady Serota, was chairman of a London working group set up by Mr. Crossman to advise on the way in which the boundaries for health care in London might be drawn. Yet at the very first meeting, despite the pleas of my predecessor, Sir Brian Windeyer, the chairman ruled that London could be treated no different from any other part of the country. Although he and the deputy chairman of the UGC pointed out the absurdities that would result, I am afraid that no change took place. Nor, I regret, did any change take place after the change of Government in that year. I am afraid that the noble Lord, Lord Aberdare, was equally inflexible.
What are these absurdities that I alluded to? The national pattern is to allot one medical school per region. But in London there are two area health authorities which contain three general medical schools and their hospitals, and there are three other areas with two medical schools in them. Only the South-West Region conforms to the national pattern, and even that has an additional so-called university hospital at Roehampton which is concerned with the Westminster Medical School.
This rigidity in the way in which the regions were planned means that, whereas in the provinces the region tends to regard the facilities and expertise of its medical school as a special asset to be supported and encouraged, in London the regions and the authorities take the medical schools for
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granted. For it is at area health authority that the real damage occurs. However, many medical schools there are in the area, they are allowed only one representative, whereas if there are several local authorities each nominates to the authority. A health authority has to consult very many organisations before it can change the use of the facilities of a hospital—and one body can stop it making the changes it thinks necessary. That body is the community health council which, by definition, represents purely local interests. It does not even represent the interests of the users of the hospital, because the users often come from other districts, and in, the case of London, from other regions in the Home Counties. You cannot close a single ward without consulting the community health council. But the area authority has no obligation whatever to consult the university or medical schools, even though its action could make it impossible for a school to teach some subjects in the curriculum.
Under the present set-up there is bound to be a hopeless conflict between the London teaching hospitals and the area authorities and community health councils. How can one reasonably expect local councillors and deeply concerned members of the public who know the deficiencies in their local mental hospitals, or geriatric treatment centres, not to take funds for these admirable causes from what seem to them well-provided teaching hospitals? The present National Health Service structure prolongs this hopeless conflict of loyalties. It is exactly like asking Balham how much our country ought to spend on defence. How can these participatory bodies recognise the long-term national interest and the responsibility for teaching the new generations of doctors? There is no longer any direct allocation to teaching hospitals; they have to fight for their share from the regions. So I beg the Government, when the Royal Commission on the National Health Service reports, to reconsider the regional boundaries in London and the whole of the substructure.
Someone at this point may be asking under their breath, " What about SIFT? "—the special increment for teaching. It is claimed that SIFT covers 75 per cent. of the median observed additional costs per student in the teaching hospitals due to teaching. I am very much afraid it does nothing of the sort. The additional costs

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in a teaching hospital arise not only from its undergraduate but from its postgraduate commitment. SIFT entirely ignores research. The additional costs arise from the inevitable expense of everything in London. They arise from the cost of dental schools, which carry an enormous load of service work—for instance, urgent dental treatment, radiology, and orthodontic appliances. Yet SIFT covers only a quarter of dental costs. SIFT recognises only local authority boundaries and it ignores demographic facts. So far from the London teaching hospitals being short of patients, patients come to them in droves because they have heard of the quality of the treatment there.
I can, naturally, understand the argument which runs, " The University Grants Committee gives the University of London a block grant and if its medical schools are suffering, it is the fault of the university, not of the Government ". The non-medical schools in the University of London and their institutes have over 36,000 students. The medical schools and their institutes have 9,000 students. Medicine takes 40 per cent. of the university's budget. We really cannot afford to give it more without gross injustice, yet there is no doubt in the minds of everyone that our medical schools and institutes are suffering from malnutrition.
That is why last autumn I asked Lord Flowers, who, as the Rector of Imperial College has no attachment to any medical school, to be chairman of a small working party which would have on it clinicians from outside London University and the chairman of a provincial regional authority. I asked Lord Flowers how we were to maintain the present standard of medical and dental education and research in London and meet UGC targets for student intake. I then told him that he should he prepared if necessary to recommend the closure or radical reorganisation of one or more medical schools or institutes and, if so, which those institutes and schools should be. I leave your Lordships to imagine the dismay that this has caused throughout the medical staff and the courage which the deans of the medical schools and their senior academic colleagues have shown in accepting the need for such surgery.
I shall not guess what Lord Flowers and his colleagues will recommend, but this
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I do know: to economise, you always need to spend additional sums initially. If we are to help the DHSS, we need their financial help, and we need them to co-ordinate that help with the UGC. It has not always been easy to get that help in the past, but matters have improved greatly this year and I want publicly to thank Mr. Parkes, the chairman of the UGC, for getting a settlement on a matter which has dragged on for three years—namely, what costs and what arrears the University of London should pay for the maintenance of the medical schools embedded in the newly-built hospitals.
I shall not drag your Lordships through that Serbonian bog, except to say that we now have a settlement, a rough and tough settlement which of course I shall contest, but nevertheless I am grateful indeed to the UGC and, I am sure, to the DHSS for any help they have given in this matter. But I must warn them that the UGC has told us that of the additional £4 million it is going to give London to settle its £9 million arrears, leaving us to pay £5 million, that £4 million will be paid at only £1 million a year. I shall find it very difficult to advise the University of London that they should pay the hospitals more than £1 million a year. We pay what we get.
There are two other public servants I should like to thank in the DHSS. One is Sir Patrick Nairne, the Permanent Secretary, and the other is the Chief Medical Officer, Sir Henry Yellowlees. I very much thank them for giving us such help as they have given over the setting up and work of the Flowers Working Party. Medical education is, after all, really financed from two sources, the UGC and the DHSS; the UGC through the block grant which the university receives, and the DHSS through the teaching which the National Health Service consultants and registrars provide. The closer we in the UGC sector can work with the DHSS the better we like it.
But let me say this to the noble Baroness: I am blamed by many of my medical colleagues in London for setting up this working party. They believe that if it does recommend the phasing out or reorganisation of one or more medical schools, the DHSS will once more reduce the student targets for London-trained doctors and force us then to close a

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couple more medical schools, and so on. I therefore urge the noble Baroness to explain to her right honourable friend the Secretary of State that, in the Flowers Working Party, London is giving a hostage to fortune, and that, if that hostage were shot at the Elephant and Castle, it would create a bitterness in the medical schools which would not only cripple the schools but bring an end to all co-operation with the DHSS. I ask the noble Baroness to remember how doctors can on occasions be roused, as they were when Mrs. Castle was Secretary of State for Health and Social Security.
There are a number of things the Government could do to restore the morale of the medical schools, and I shall list them. Naturally, I do not ask the noble Baroness to give an assurance on any of them, but perhaps I may give her a shopping list: abolish Area Health Authorities; re-examine the powers of community health councils; recognise that in medicine consensus management is the enemy of standards and progress; re-establish the old authoritative collaboration between the management of the hospital and the dean of its medical school so that decisions, and above all quick decisions, can be taken; give teaching hospitals the same exemption from the fight for priorities within the region as has been given to the postgraduate institutes—at the very least, can we not devise a better means of protecting their research and teaching budget by, say, the device of top-slicing so that whatever level of health authority makes the decision is not being asked to choose between national and local needs?
These medical schools, dating back, as Bart's does, to the reign of Henry I, are still (my pride must make me say this) the head and the heart of British medicine—acknowledging of course, as I do, the admirable standards set at Edinburgh, Birmingham, Leeds and the other medical schools outside London. It is inevitable that London will be the centre of medical education and research. It always has been and I like to hope it always will be. But it will not be if its blood supply is diverted by pouring money into small hospitals and participatory administration, with its proliferating committees. And, if the heart can no longer pump blood to the head, medical research and medical
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teaching are doomed in this country. I say to the Government: reform, reform, reform!
7.8 p.m.
Baroness ROBSON of KIDDINGTON: My Lords, I rise with great trepidation to follow that speech by the noble Lord, Lord Annan, on medical education; I am not a medical educationalist. I have to admit my interest in this debate as the regional chairman of the only London region that has only one teaching hospital in it, and therefore no doubt has less problems than some of the others. I could have wished that Lord Annan had phrased his Question slightly differently. I agree with him 100 per cent. that co-operation between the DHSS and the University Grants Committee on medical education is tremendously important, but he left out what it is all about, and that is the service we jointly give to the patient. I wish that would have been in the Question, though I know it was in the back of his mind.
I speak as a regional chairman and much of what Lord Annan said I agreed with completely, but he was, in my view, talking basically about undergraduate medical education in London and the undergraduate medical schools. As a regional chairman, I am responsible for providing in my region—this applies to all the London regions—not only the facilities for undergraduate teaching but also all the facilities for post-graduate teaching, which in many ways is one of the most important things that the region has to do.
The noble Lord, Lord Annan, very carefully explained the problems that face all the London regions under RAWP, and spoke of how we find difficulties in funding the increase of students in the medical schools in London as proposed by the DHSS. He touched upon the cost allowance per student that is given under SIFT for undergraduate education, which, as lie said, is 75 per cent. of the median cost between the teaching hospitals and 45 other hospitals taken at random in the country. Even if that calculation were correct—and it never can be—it still leaves an enormous sum of money to he found by the regions.
Apart from that, since reorganisation, the region is responsible for major capital development within its region, and my

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region happens to be one of the regions that is building a new teaching hospital, in our case at Tooting. Although the DHSS makes a 35 per cent. contribution to the cost of the building of that hospital, the cost bears no resemblance to the building of an ordinary DGH, and as a result there is an enormous and severe drain upon the capital resources which are at our disposal in the South-West Thames region; and the same applies to all the other London regions.
So we have this problem under RAWP. The noble Lord, Lord Annan, is quite right to point out that there are 12 medical schools here, that one-third of the medical students are trained in London, and that the London regions represent four of the five " losing " regions in RAWP. This will inevitably create problems because the money is just not there.
As a regional chairman, I am committed to medical education because, like all your Lordships, I believe that without medical education there is no future for medicine within this country. I am not saying that we are necessarily right in the way in which we are going, and before I sit down I should like to mention one complaint that I have against the DHSS and one that I have against the medical people in this country. It is desperately important that we should not let the standards drop, but in view of the fact that we have 12 teaching hospitals in London we cannot under RAWP keep up the standards. It is impossible under our financial allocation. To put it mildly, feelings of envy are created in the other Thames regions; they claim that too much money is going into teaching.
Although the Thames regions are considered to be rich regions, within those regions there are very poor areas. I hope that the Government will remember this and will take it on board. Our problem as administrators is almost insoluble. I believe that there will be an increasing trend to out-post medical students from the London hospitals into non-teaching hospitals within the region. The Government should be aware of this because the moment it happens there will be tremendous demands from the other hospitals for the upgrading of their facilities in order to be able to take care of medical education; and they would need those facilities so as to be able to educate the future doctors of
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our country. So because we have the 12 teaching hospitals (due to events in history) we are faced in the London region with an impossible situation.
Apart from undergraduate medical education, the regions are responsible for all post-graduate medical education, and that is funded solely out of the regions' normal allocation. It is true that most of the post-graduate hospitals are in London, but within the hospital service itself the amount of post-graduate education that we can afford to give is of the utmost importance because medicine is advancing at such a rate nowadays that five years after a person has qualified as a specialist in any discipline he needs more education; the science has moved forward.
So there is here a tremendous drain on the finances of the Health Service, and I believe that it is here that perhaps the DHSS, and the National Health Service as a whole, have made a mistake. We have tried to provide too much expert treatment at people's front doorsteps. In many ways we have gone too far in developing a large number of regional specialities, and as the noble Lord, Lord Annan, indicated, we should look at the whole of the Thames region. We should have fewer specialised centres, but at the same time ensure that it is easy for patients to get to them. This would have enormous advantages, particularly for medical education. First, the NHS could make the optimum use of all the expensive equipment that goes into a specialised unit. A much larger number of patients could be treated at such centres than can be treated in the smaller units around the country. This would have the greatest impact on medical education because it would mean that the clinicians, the consultants, and the students, in the form of senior and junior registrars, would have enough material in order to develop their expertise. I believe that this is an area where the NHS has fallen down— particularly since reorganisation—because of the demand for specialist centres everywhere.
In London we have 12 undergraduate medical schools, and I believe that in view of the financial constraints under which we live, these medical schools can no longer demand local access to all specialities. The medical schools must co-operate and set up London centres

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where the 12 medical schools can gain expertise.
The other day the Director of the Office of Health Economics, George Teeling-Smith, said:
" There is a clear balance in which convenience and economy play a relatively minor role and the issues of safety and efficiency are paramount. On this basis there seems to be a clear-cut case for highly specialist units covering very large areas ".
This is where the DHSS has fallen down in many ways and has not provided what is needed in medical education, despite having the best intentions in the world towards serving the patients.
I also believe that perhaps the medical schools themselves have not helped the DHSS as much as they should. As a regional chairman I often receive complaints that there are not enough senior registrar posts and that there are too many students chasing too few jobs. That is not true. In my opinion such complaints arise because the medical schools tend to turn out many students who want to become surgeons or physicians. We are living in a world where what we are going to need are a lot of other specialties. We need consultants in mental handicap, in child and adolescent psychiatry, in anæsthetics, in geriatrics, in radiology, in community medicine and in some sub-specialties of pathology. I can advertise for a consultant in mental handicap, for which I have seven vacancies in my region. I can advertise three times, and I get no applicants.
It seems to me that the whole attitude of medical education has to change, because what we are facing in the future is an aging population. We need people who will concentrate on these specialties, and they are not coining forward. I believe, not only that the Department of Health should look at the encouragement we can give—it may have to be financial—to get people to concentrate on these specialties, but also that the medical educators of this country have to accept that these specialties are interesting specialties, and must try to enthuse their students to go into them. They must become academically respectable, which so far they have not been. There are departments of social medicine and general practice in most teaching hospitals, but there is still a need to convince the clinician
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of the value of these departments, and really to integrate them into the training and into medical education.
Lord ANNAN: My Lords, may I interrupt the noble Baroness simply to say that the applications I receive from medical schools requesting the creation of posts in community medicine, in geriatric care, in radiology and in matters of that kind which the noble Baroness has just mentioned are innumerable. The trouble is that I have not got the funds to give to the medical schools to create these new posts.
Baroness ROBSON of KIDDINGTON: I am sorry, my Lords; therefore, let us ask the Department of Education and Science to produce the funds for that particular kind of education. But, on the whole, the balance is in favour of surgery and medicine, and I believe that in medical education we must look towards the future, where the needs in these unpopular specialties are enormous. For instance, when I talk to consultants in mental handicap they admit that it is because there is a resistance to accepting them on the same level as consultants in other specialties; and I believe that we might need to use financial encouragement. I should think that that was the tragedy. I believe that a change of attitude in the whole of undergraduate and postgraduate medical training could create the right possibilities.
7.23 p.m.
Lord COTTESLOE: My Lords, we must all be grateful to the noble Lord the Vice-Chancellor of the University of London for initiating this debate and for developing his theme so clearly and so forcibly. I suppose nearly everyone concerned in the administration of the Health Service would agree that, whatever it merits, the reorganisation of 1974, like the simultaneous reorganisation of local government, was an expensive mistake. Developed from a Green Paper by Mr. Kenneth Robinson and brought into effect by a Conservative Government, it was in general a bipartisan measure of entirely excellent intentions. But in practice it resulted in the introduction of an additional administrative tier that, in a service already short of funds, ate up monies which should have gone to modernising and rebuilding the hospitals;

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while the doctrinaire decision of the last Government to close paybeds gratuitously forfeited many millions of pounds while doing nothing to shorten waiting lists, which have increased.
In particular, administration by the Department, with an overriding emphasis, in itself laudable enough, on the district service, and a passion for egalitarianism which regards " centres of excellence " as a dirty phrase, has resulted, not in a levelling up but in a levelling down which has had deplorable effects, in particular on the teaching hospitals, whose morale and high standards are of vital importance to the wellbeing of the service. I speak as a layman but with some knowledge and experience of these matters, having been, like the noble Baroness, chairman of a regional hospital board administering 150 hospitals; having been, for more than a quarter of a century, on the board of governors of Hammersmith Hospital, the only general post-graduate teaching hospital in the country, and latterly, until the reorganisation, its chairman; and having been chairman for a decade of years of the Royal Postgraduate Medical School and of the British Postgraduate Medical Federation, a highly important school of the University of London, of which the school at Hammersmith is the largest constituent part.
Hammersmith Hospital is unlike the great and historic undergraduate teaching hospitals in having no substantial endowment funds to mitigate the effects of inadequate finance from Government sources. It was a poor law hospital. I had in my office there the last survivor of the original crockery, a saucer with the inscription, " Hammersmith Parish Workhouse ". That is what it was. Although Hammersmith Hospital and the Postgraduate Medical School there have a worldwide reputation; although they attract for specialist and consultant training qualified doctors from every country in the world to the number of 700 or 800 at any one time; although their work is so widespread that a few years ago there were no fewer than 50 consultants practising in the city of Melbourne alone, on the other side of the world, who had received their consultant training at Hammersmith; although the Postgraduate Medical School at Hammersmith is housed in fine modern buildings built by the school itself with monies raised from every part of the
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Commonwealth—in spite of all these things the hospital on which the school depends is still housed in the old poor law buildings, of which the most modern is 75 years old and the greater part very much older than that.
I hope my noble friend on the Front Bench, when she comes to reply—and I feel rather apologetic, for I know that hospitals do not themselves fall within her parish—will be able to tell us when we may hope for a start on the rebuilding of that hospital, the plans for which were agreed and approved, the necessary demolitions carried out and the decanting buildings set up before the reorganisation of 1974, when, overnight, reorganisation brought everything to a standstill. I hope she may be able to tell us how soon this most urgent rebuilding, without which the work of the school cannot be fully effective, will be able to go forward. Meanwhile, the effect on the morale of the staff and the handicaps under which they work are utterly deplorable.
There is one other facet of the existing arrangements to which I should like to refer. I think my noble friend who speaks from the Front Bench for the health services has a note of it, with a particular instance of its effect. It is the anomaly by which area or regional special services, which are inevitably expensive, are financed out of district allocations so that either the district service suffers disproportionately or these services cannot be adequately financed at all. Being area or regional special services, they ought to be financed out of area or regional allocations, if, indeed, they are not the subject of special allocation from central funds, as I think they should be. I hope that the Minister may be able to tell us that this very necessary change will be made.
What I have said may sound rather like a despairing bellyache, but before I sit down I must express my unqualified admiration for the staff who work unremittingly to overcome the ill effects of the unfortunate administrative set-up and the inadequacy of funds and who, in spite of everything, give a magnificent service to the public. For their work, no praise can be too high.
7.31 p.m.
Lord GREENHILL of HARROW: My Lords, it is an unusual thing for me to

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intervene in a debate on a subject of this kind. I do it with great diffidence, especially after the vigorous and expert speech of the noble Lord, Lord Annan. My interest arises from my chairmanship of the King's College Hospital Medical School. This school, as your Lordships will know, is acknowledged to be one of the leading institutions of its kind in the country. I must admit from the outset that my knowledge of these subjects falls far short of that of others who have spoken and who will speak in this debate and who have spent their lifetime in medicine and university administration.
In considering Lord Annan's Unstarred Question, I should like to make five short and rather elementary points. First, London has an enviable reputation for its medical schools. I know this very well from my experience in the Foreign Office. There were several times in our foreign relations when almost the only friendly link which existed between this country and certain other countries was the professional medical link based for the most part on long-established contact with our London medical schools and hospitals.
Anyone who has lived in the Middle East and the Far East could not fail to be aware of this. In my view, it would be a great pity if the Government adopted policies which had the effect of diminishing the reputation of London as a highly respected centre of medical education. I am in principle sympathetic to provincial claims, but not at the expense of accepted and acclaimed institutions at the centre. This country, I believe, is small enough in size for us not to find it necessary to indulge the provinces beyond a certain point.
The second point that I wish to make is that there can be no doubt that the cuts imposed by the Resources Allocation Working Party will result in a reduction of beds in the London teaching hospitals, with an inevitable reduction in the facilities for teaching. This is a serious matter. There is undoubtedly a fall in the population in the centre of London although, in the King's College health district, we find it very difficult to reconcile the Government figures with what is happening on the spot. Moreover, will not the fuel situation also delay, if not reverse, the movement of population from London? Furthermore, King's College Hospital accepts regional and supra-regional commitments to the
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tune of nearly £3 million per annum, for which we receive inadequate financial recognition.
Thirdly, the noble Lord, Lord Annan, looks for further co-ordination between the Department of Health and Social Security and the University Grants Committee. If I do not know much about medicine, I nevertheless know a little about bureaucracy and the ways of Whitehall. I have an instinctive sympathy for the excellent civil servants of the Department of Health and Social Security and the members of the University Grants Committee who know that a call for co-ordination is more easily heard than acted upon; and, from my short experience it seems to me that the present organisational machinery of the Health Service is at fault and is certainly an impediment to proper co-ordination. I hope that the Royal Commission will propose reforms and revisions which will remove the inevitable conflict of interests between too numerous authorities.
Fourthly, may I make a special plea on behalf of my own medical school? I am advised that since the re-organisation of 1974 there is in practice great difficulty in financing capital schemes, the cost to be shared by the Department of Health and Social Security and the University Grants Committee. We have plans for the extension of the dental school in King's College Hospital and the need for it has the full support of the University Grants Committee and of the regional health authority. Yet there appears to be no means by which the apportionment of the cost can be defined; and progress is consequently held up. I would ask the Minister to look at this particular case to see whether we can proceed with what is an accepted and agreed requirement for enhancing the facilities at the medical school.
Lastly, any newcomer entering this particular field of activity cannot fail to be impressed by the zeal of the majority of people who work in it. At this moment of time they are a little bewildered by the number of committees considering it: the Royal Commission, the Flowers Committee and what I believe is known as the London Consortium. The sooner these uncertainties come to an end, the easier the co-ordination for which the noble Lord, Lord Annan, looks can be achieved.
7.39 p.m.
Lord HUNT of FAWLEY: My Lords, when I received a month ago an invitation from the noble Lord, Lord Annan, to speak in this debate, I wrote to the deans of our 12 London medical schools, to the deans of our 13 institutes of the British Postgraduate Federation of the University of London, to the Presidents of the Royal Colleges and to several others. All of them kindly replied almost at once and at length. Some were kind enough to invite me to go and speak with them. My remarks this evening will he based on some of the points that they have made and I hope that they may be of some little use to the noble Lord, Lord Flowers, and his Working Party on Medical and Dental Teaching Resources. I shall not mention many names, either of individual deans or hospitals or of the post-graduate institutes.
First of all, may I say something about the problems of our medical schools. Not all the deans agree with the reason that has been given by many for the need for some of the schools to be closed down. That reason is that so many people have left London, that there has been a movement of residents out of London, and that has left too many medical schools for the remaining population. One dean has suggested that London has in fact as favourable a population/clinical student ratio as had any of the other cities in which new medical schools have been established, indeed as have many other cities. Medical schools outside London rely to a large extent on regional rather than city populations, so it is asked: " Why cannot London do this, too? "
Another important development is that because of daily travelling difficulties and the expense of getting to and from work, more and more people are now coming back to live in Greater London. Points which suggest that a medical school might be moved, combined with another, or even closed, include: How many patients will live in or near its drainage area? Has it a pre-clinical school? What is the range of its clinical and academic departments and how good are they? Has it a department of general practice and community medicine? How old are its buildings? Will they have to be rebuilt in the near future? How much strain will be put on one medical school by the entry of a
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number of students from another who may join it? How much money will have to be spent on such a change? All these and many other points will need to be taken into consideration, including an intangible factor such as the tradition of public service which the school has given to the community and for how long, and how many people will be badly upset if it is swept away?
We are assured that, whatever schools are affected by these changes, the total output of doctors in medical schools will not be changed and we are also told that the total funding of schools after the changes have been made will be the same as it is now. We are told that the cost of producing a doctor in London is very much less than it is in the provinces. Many of the deans and members of the medical school staffs feel very strongly indeed about much of this. One of them, writing about the proposed move of St. Bartholomew's and the London Hospital's medical schools to Queen Mary College, said that in his opinion: " It will be an incredible waste of money ".
It has been asked: " Should the number of post-graduate institutes of the British Postgraduate Medical Federation of the University of London be reduced perhaps from as much as 13 (that includes the Institute of Dental Surgery) to about seven? Should some of them move? Should any of them join up with a medical school or with another institute? These institutes have been playing a unique and magnificent pioneering role in post-graduate medical education and research in Britain. Of the doctors who attend them, about 55 per cent. are from London, about 35 per cent. from the rest of Britain and about 10 per cent. from overseas. They are highly thought of in the Commonwealth and other places overseas. They may well give us an opportunity to exercise leadership in the European Community. Every effort should be made to preserve them.
One dean tells me that he could fill his course at any time with doctors from the Arab countries alone. But the institutes have recently been asked by the Government to reduce their intake of overseas doctors by 7 per cent. on the 1976 figure. One dean writes that it is incomprehensible that any Government should take such a step.

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We have read and heard a great deal about these institutes and their possible reorganisation, rationalisation, absorption, co-ordination, phasing out, abolition, amalgamation, incorporation, redeployment or relocation. We have even heard about integration which is a term that I do not like. Integration is what the cat offered the canary! That is not really a suitable term in this context. It is the earnest wish of all the institutes I think that, whatever changes are made and wherever they go, they must retain their identity and autonomy. They must keep their own management structure—with their boards of governors or their possible replacements—and must remain independent in deciding how they should spend their money in allotting priorities for research and so on.
If a post-graduate institute is absorbed into a medical school many people think that its important contribution to its special subject would almost certainly be reduced. On the other hand, the impact of a large and busy institute might easily unbalance a general medical school; the work the institute does may not be really suitable for teaching undergraduates or for general professional education.
Ideally such an institute should be based on a single site with room for expansion and with minimum travelling requirements for its staff. A good point was made to me by one dean: too much or too frequent reorganisation tends to lower the morale of a staff and impairs recruitment. For its research work an institute may need a considerable amount of laboratory space and expensive equipment. One dean suggested: " Small units cannot do epoch-making research I replied that Dr. William Harvey carried out his experiments which led to his discovery of the circulation of the blood 400 years ago by himself in a small room, and much of Charles Darwin's thinking and work on the origin of the species took place while he was sharing a cabin in the small ship, HMS " Beagle ".
Post-graduate institutes are very keen, naturally, on their own precious basic scientists who help them enormously, and the academic and scientific teaching of young doctors after vocational training is one of their main jobs. A leavening of academic work and some active research
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will help a young specialist, they say, quite rightly, to " think scientifically " and to encourage his critical faculties, especially during the first 10 years of his career. One dean wrote that he felt that in time this highly academic involvement, even if it takes an extra year of training, should be an obligatory part of the post-graduate teaching of all doctors. I would query this. For young general practitioners there is much learning to do to prepare them for their future jobs, and much of this is non-academic.
Some of the institutes have made a definite point—already touched on by the noble Lord, Lord Annan, and by the noble Baroness, Lady Robson—about co-ordination between the UGC and the DHSS. At present the division of financial responsibility between the two bodies is governed by a paper, HM(73)/2, allocating to the UGC support of undergraduate teaching schools and post-graduate courses up to Ph.D and M.Sc, while the courses organised by the university are regarded as those initiated by the regional postgraduate committees and should be funded by the DHSS. This has led to difficulties, the UGC feeling that it is not responsible for the support of those units for which the major undertaking is specialist post-graduate medicine, while the DHSS is naturally reluctant to take over anything more than it has at the moment. Some deans feel very strongly about much of this. One of them said to me: " To move this institute and to amalgamate it with an undergraduate medical school would be an unmitigated disaster ".
The noble Lord, Lord Flowers, asked for evidence from general practice. During the last few years there has been a swing towards a broad approach to medical care, both in hospitals and in the community, and an appreciation that this is becoming increasingly critical in a society where many opportunities for prevention lie outside hospitals and are related to the behaviour of our patients in their environments. I, and many others, hope that the Flowers Working Party, when looking at our diminishing educational resources and at what will be needed in future in London, will consider carefully and favourably those medical schools which are fostering this modern approach.
About half our medical students still go into general practice. When there, they treat about 90 per cent. of the medical

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problems of the population without sending them to hospital. What they need most in the later stage of their medical education is preparation for their own subject. Most of those who want to go into general practice have decided to do that by the end of their general professional training. They do not want highly academic teaching or to spend too much time with basic scientists or in being taught about highly complicated pathological processes or various specialised surgical, electronic or other super-specialist techniques: nor do they want to be involved in other highly academic exercises or in research, however much all this may be advantageous to the young specialist. Clinical competence is acquired by participation in medical care in the branch of medicine which a doctor chooses.
In their vocational training they want to be given expert advice from experienced general practitioners on all the community and behavioural aspects of their future work and on how they can care properly for the multiplicity of organic and psychological illnesses that they will meet later in their practices. These will set them thousands of problems, starting with the care of young children at home and ending with the proper care of the elderly, the dying and the bereaved.
Departments of general practice, which I was very pleased to hear mentioned by the noble Baroness, Lady Robson, with full-time staff, have been founded in five of the twelve London medical schools, with a full-time professor in charge of two of them. There are also sub-departments of general practice, with full-time staff, but without a professor, in all but one of the others. The two Chairs of General Practice in London are paid for at present not by the University Grants Committee or by the DHSS, but through private benefactions. These departments of general practice have a most beneficial effect on the standards of general practice in the districts around them. They are connected with one or more local general practices, all of them in poor districts; and, in these, members of the department work and take an active part in the practices, supporting the local community services. They have done in the past, and can do in the future, a considerable amount of useful research into the problems of their special branch of medicine.
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Medical schools in the United Kingdom outside London have done even better in this respect. They train about two-thirds of our doctors. The four medical schools in Scotland, one in Wales and one in Northern Ireland, all have full departments and professorial chairs of general practice. In England, the 12 medical schools outside London have 11 departments of general practice and five professorial chairs. In Canada, every one of its 12 medical schools has a full department of family medicine. London schools might well follow their example.
In conclusion, may I say that the attitude of most of the deans and others from whom I have heard about these possible changes has been very reasonable. One of them said to me: " If we are told we should go, we shall of course go; but we shall want to be shown very clearly that such a move is essential ". From a careful study of their reports I have begun to realise what an enormous and far from simple problem this is, and how some traditions must surely be broken and several people hurt and upset. But the matter is urgent and must be clarified very soon. The noble Lord, Lord Flowers, and his working party have an extremely difficult job. We look forward to reading their report, and I am sure that we all wish them well.
7.57 p.m.
Lord AUCKLAND: My Lords, the country as a whole should be grateful for the existence of your Lordships' House at the present time, if only because it has enabled the noble Lord, Lord Annan, in his customary forceful manner, to initiate a study of very great importance. His cohorts, if I may so call them, are Peers and Peeresses of enormous distinction in the medical field, in the social field and in senior positions of administration. Fools rush in where angels fear to tread, and I feel that in intervening here with my own somewhat limited experience of only having served on the house committees of a mental hospital and a children's hospital makes my qualifications on the subject of this debate perhaps a little suspect.
A short time ago I received an invitation to visit Hammersmith Hospital to spend a long time, and a very fascinating time, in their renal dialysis unit. I should like particularly to pay a tribute to the Dean of the Hospital and to Professor Peters, the

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Director and Professor of Medicine, for having been so helpful and having explained matters to a layman in as simple terms as possible during that particular visit. From the relatively little I saw there, I should like to bear out all that my noble friend Lord Cottesloe, with his distinguished associations with that fine hospital, has said.
Certainly some of the buildings are anything but conducive to the very fine work which is carried out. I think that is particularly true of the research laboratory departments, where I noticed three of four young men carrying out what were undoubtedly experiments of extreme importance in the kind of conditions which even those of us who work in Parliament would complain about most bitterly. Our working conditions in either House of Parliament are nothing to shout about, but those people were working in the most cramped conditions that one could imagine. One wonders how this work is carried out in some of our smaller hospitals. I find the position frightening, because I have seen some of it for myself.
The renal dialysis unit works quite wonderfully. I was fortunate enough to sit in on three or four case studies and noticed a lot of very long words, many of which I would not begin to comprehend, but I did, at least, manage to comprehend to a very large extent what was going on. Certainly, the presentations, not only from doctors from this country but from doctors from as far afield as India, Australia, the Commonwealth and other countries, were masterly.
I should like to quote the example of one young New Zealand girl who was over here on holiday. She is, in fact, a nurse by profession, but she took a job manning a petrol pump. I do not know whether it was due to that job, or whether the job exacerbated her condition, but the fact is that at the moment she has acute renal failure. Her kidneys are not working and she is receiving a very long period of dialysis. I shudder to think what might have happened to that girl, and I wonder whether she would be alive today, if she had not been discovered by a quite junior registrar in a large hospital near Slough and taken immediately to Hammersmith Hospital. If, as one must hope, she pulls through and is fit enough
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to have a kidney transplant in due course, much if not all of the credit must go to those who work very long hours at that great hospital at Hammersmith. That will not have been the first such case and it certainly will not be the last.
It impels me to ask my noble friend whether funds could he set up for round the clock renal dialysis, especially for young people who could do what is more or less a full job of work if they were able to have dialysis outside working hours, and whether the increased amount of work which they might manage to do at their own jobs would offset the cost of the necessary skilled labour.
We all know that just about every department in this country has to cut its budget. This would have happened which-ever Government had been returned a short time ago. But there must be priorities here and this is the kind of thing which could be very usefully done. Charitable foundations have shown enormous generousity and have given much to these hospitals, but at the moment they have more and more calls on them, so that funding for the schemes inherent in this Question, and in making the implications of the Question work, will undoubtedly have to come from central Government. There may be delays in the implementation of some of these schemes, but I hope that the Government will bear in mind the fact that those who work in these hospitals, in whatever capacity—whether as consultants, registrars, laboratory technicians or nurses—are those who ensure the health of people in this country.
The most valuable premium that one can pay for a healthy country, and a country which can increase productivity which is so badly needed not only in this country but the world over, can be paid only if we get the best possible medical results. In hospitals such as Hammersmith and the London teaching hospitals, we have the personnel and the equipment. As has been said by people who know more about this subject than I do, we need more buildings and more upgradings, and this is a priority which no Government, no matter how stringent the times may be, can afford to overlook.
8.8 p.m.
Lord GARNER: My Lords, in common with others, I express my gratitude to the

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noble Lord, Lord Annan, for initiating this debate, and particularly for the eloquent and forceful way in which he made his case. It is a subject that is near to my heart, not because I have any extensive experience of it, but because for the last seven years I have been connected with one institution; namely, the Royal Postgraduate Medical School at Hammersmith, about which the noble Lord, Lord Cottesloe, and the noble Lord, Lord Auckland, have already spoken.
At this stage, I fear there are few new points that can be made, and therefore I shall try to be very brief. I can only hope to underline some of the points already made, but I start with a general proposition. It seems to me that in the post-industrial age, when Britain is really looking for a new role, one of the major contributions that we can make is by using our skills and our experience, particularly in the arts, in literature, in the sciences and in education generally. Indeed, the Government have recognised this for some time; for example, in the assistance which they have given over the last 10 years to the Commonwealth Scholarship Commission, which has brought hundreds of outstanding candidates from Commonwealth countries for general training here. In this field, only the highest quality is good enough. I believe we have that, but we must concentrate on what we do really well and go for excellence.
I believe that nowhere is this more true than in the field of medical education, and particularly of that education in London. The Royal Postgraduate Medical School is an essential constituent in the complex of London's medical education. Indeed, in my view, it is really uniquely qualified to provide postgraduate medical education and to develop research on the basis of clinical practice, because of three things. First, the variety of the skills practised and the tradition of multidisciplinary co-operation which has been established; secondly, the very special and close links with Hammersmith Hospital, because the majority of the consultants are academic employees of the school; and, thirdly, the high quality of the staff which it has always been fortunate enough to attract.
The noble Lord, Lord Cottesloe, gave an account of the record of the school.
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I would add to what he said only one statistic; namely, that since 1970 the school has provided 55 professors, 58 readers and 83 lecturers. Those are quite remarkable figures and emphasise the importance of the role of the school in training teachers. And, of course, its record in heart research, in cancer research and in other fields is well known. Indeed, I recall very clearly that in the 1960s, when I was in Canada as High Commissioner, the reputation of the school throughout all the Provinces stood very high. Students from the school were practising throughout Canada. However, as we have heard this evening, present realities bring some chill winds. Most of the difficulties have already been mentioned and I have no desire to add to the gloom. The problems centre around organisation and finance, and finance is the pervading anxiety.
The reduction in real terms of the grant which the Postgraduate Medical School has received from the university since 1974 has involved drastic and continuing economy measures. It has led to the freezing of academic and technical staff posts, with, obviously, a serious effect on research work. At the same time, many of the policies of the Department of Health and Social Security have also had harmful effects. The implementation of the resources reallocation policy, when there has been no decline in the hospital workload, has this year seriously restricted patient services. That is serious enough in itself, but the long-term effects of the resources reallocation policy, if carried through, mean that development money would not be available to translate research into clinical practice.
Secondly, the reorganisation of which we have already heard and about which I strongly agree with the noble Lord, Lord Annan, means that there is an inevitable conflict between the national and long-term needs of training and research and the immediate short-term needs of patients which it is almost impossible for the area health authority to reconcile. Indeed, it is an unfair question to put to them. I believe that this presents a very real problem, and it is one which ought to be tackled very soon.
There are a host of other problems which affect medical schools. Some of them are, in my experience, quite new in degree. They stem from the growing

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complexity, in recent years, of administration and from the multiplicity of bodies which are concerned. It is not only a question of central government and local government; local government health services, universities, the University Grants Committee are also concerned. On top of all that, the maw of the investigatory process are quite insatiable. Committee follows on committee; working party follows on working party. And all the time there is a Royal Commission brooding over us so that our future is uncertain. The multiplicity of committees which senior staff have to attend, and the mass of memoranda produced, so alarm me that I cannot understand how any work gets done.
Underlying all this are the various constraints of our present discontents. At Hammersmith there is in particular the problem to which the noble Lord, Lord Cottesloe, referred of the constant delays over rebuilding the very old buildings at that hospital. There is also the disruption caused to work by the working out of what is at present euphemistically termed " the industrial relations position ". All of these things inevitably have an effect on morale, so it is obvious that a great deal needs to be done if we are merely to maintain our present standards, let alone advance them as we should hope to do.
It does not seem to me that anybody can be satisfied, in the terms of the Unstarred Question tabled by the noble Lord, Lord Annan, with the present state of the provision of medical education—least of all, perhaps, the Government. Equally, we all recognise the tremendous constraints imposed by the present state of the economy and the overriding needs in the financial sphere. Unless, however, the economy picks up, to the extent that considerably more finance can be made available for the kind of things which have been outlined, it seems to me that we shall indeed have to reconcile ourselves to being a second-class nation. And that, I am sure, is something none of us wants.
I do not wish to end on a negative note. Instead, I want to confirm what was said by the noble Lord, Lord Cottesloe: that those who are engaged in this work at the Postgraduate Medical School are
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men and women of determination, of imaginativeness and sometimes of brilliance. During a recent visit to the school I was delighted to hear one of them say that despite all the frustrations, difficulties and troubles, it is an exciting place to work in because something new happens every day. That, my Lords, is surely the spirit that we need. I am sure that the Government will agree with that, and I hope that they will go as far as they can to encourage it.
8.17 p.m.
Lord RICHARDSON: My Lords, the Unstarred Question which the noble Lord, Lord Annan, has asked the Government has two parts to it. First he inquires whether satisfactory provision has already been made for medical education in London. I agree most strongly with the noble Lord, Lord Annan, and the noble Lord, Lord Garner, that the Government cannot but feel that the provision is inadequate.
As a doctor, I was delighted to hear noble Lords so distinguished for their knowledge of medical matters speak so well of medical education in this city. The second part of the noble Lord's Question concerns co-ordination. I wish to speak about the co-ordination of education in the medical sphere and to confine myself to that point, because this is my present interest.
We all know that the practice of medicine, and its learning, has become increasingly complex. Everybody recognises that medical education is now a continuum. There has to be co-ordination between undergraduate, postgraduate and continuing education. In recent years, the concept of the university hospital has become manifest. It is the concept of a centre where education is given in basic matters which will equip a doctor to follow whatever bent he mazy have in his postgraduate period. It is essentially an educational period in the life of a young doctor at his medical school.
Those regions which have only one medical school are fortunate, in that their hospital can clearly be a university hospital. In those regions where there are many medical schools, they are under grave difficulties. This point was made by the noble Lord, Lord Annan. He also touched upon the difficulty of the

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coterminosity of medical services and local government services, distorting and twisting the natural spheres of medical educational interest that are required for the medical schools. This is surely a matter that should be looked into very carefully and one where co-operation and agreement could be reached if the principle could be conceded that the boundaries of the two interests need not necessarily correspond.
The noble Baroness, Lady Robson of Kiddington, rightly pointed out the necessity for academic training in the unpopular specialties. She suggested that they should be made academically respectable. That is clearly a function of the university hospital. She went on to suggest that there should be centres of excellence; they should be large, they should be adequate but they should not be numerous. This is a point that is clearly highly sensible, but there is an educational consideration here, particularly—I feel almost exclusively—in the undergraduate part of education, and that is that, if you have to move students a distance to go to these centres of highly specialised or highly expert training, time is spent, and their time is valuable. Equally, if you bring the experts to the teaching hospitals you infringe what is now regarded as n important educational principle of participation, of learning in groups and learning by discussion and you risk a didactic approach that is out of date.
Co-operation and co-ordination are absolutely essential now that general practitioners have accepted that they must have a proper training if they are in fact to become principals in the National Health Service. Here the institutes in London University have a great part to play, as indeed does the postgraduate hospital with its more general aspects. In particular, I think the institutes are of the greatest importance because they have three distinct spheres of activity and influence on the medical world—and I use the word " world " advisedly. Their international effect on our reputation and our fame is beyond question. Their part in London and London University medical life is also beyond question, but they have, too, a United Kingdom significance that is very considerable. It is this: they play—and in my view will play—an ever-increasing part in continuing education—the absolutely essential education for all
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doctors throughout the whole of their careers—and in so doing they can play a greatly significant part in helping to solve one of the great difficulties of this day, namely the assessment of competence to practice in a technical sense rather than the competence to practice in a medical sense, by which I mean illness or deterioration in the capacities of the doctor. It is extremely difficult to know how to do this and the one clear guiding line is postgraduate and continuing education.
These institutes and postgraduate education in general can have another very significant effect on one of the great problems of medicine at the present time; that is the imbalance between the number of young men and women in training and the number of posts and opportunities of a permanent career nature at consultant level that are available. One way in which that could be helped—not entirely solved, but significantly helped—would be to get these young men and women into permanent consultant posts with full inical responsibility at an earlier age. This could be done if it was accepted that, given a proper, adequate and efficient training, the great expertise that may be required of those particular persons to fill the job to which they are appointed, could be acquired in the post-appointment period—in other words, from continuing education. Here, in a national problem that worries us all greatly for the future of medicine, and indeed the Health Service, the institutes and post-graduate activities of London would play a national as well as a local part. For this reason, I beg that the Government and the noble Baroness, Lady Young, will consider that these institutes should have a national element as a part of their funding, because this does exist and it could exist very much more.
My last point is again on co-ordination. It was illustrated to me the other day by an interesting arrangement that has recently been achieved. The Camden and Islington Area Health Authority have succeeded in converting a geriatric consultant post into a university post, tenable at University College Hospital, by providing the money for a senior lectureship at University College Hospital, to be held in the department of geriatrics. In fact, the money has come from the Inner City Partnership Organisation but the principle is there of National Health money being

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used to fund and to supply a senior lectureship, held at University College Hospital but in fact service given at the Whittington Hospital, a district general hospital. The results are a higher quality candidate, a higher quality consultant, than would otherwise have been obtained for the care of the geriatric patients in the Whittington district. Another result is that the students of University College Hospital see practical geriatrics being tackled in the more real and usual setting of a district general hospital and at the same time there is close liaison with the academic centre of University College.
This is not a single or a unique example. There are others going on in London at the present time. I am told, however, that financial stringency will make this increasingly difficult, that, at any rate at the present time, it is a slow process, and that to embark upon the arrangement concerned means the expenditure of time and some delay. Here is, manifestly, co-operation between the UGC interest and the National Health Service interest, profitable to both, both gaining from it. Surely there should be some system whereby such co-operation can be facilitated and made quicker, more efficient and more usual; some means by which the real advantages to both sides can be discussed. I know little or nothing of the workings of bureaucracy; I cannot express a view as to how much co-operation there is over the big matters that the noble Lord, Lord Annan, and other noble Lords have been discussing, but over this beginning, this thing that already exists in the field of co-operation, I feel there is a great future. I hope that, when the report of the noble Lord, Lord Flowers, the Royal Commission report, comes out, and all the discussions take place, great thought will be given to this word " cooperation ".
8.31 p.m.
Lord HUNTER of NEWINGTON: My Lords, I also would like to pay a tribute to the noble Lord, Lord Annan. I sincerely believe that if this question can be resolved or alleviated he is the person to do it. We have to recognise that the relationships between London medical schools and their university was entirely different from relationships elsewhere between universities and medical schools. Medical educa-
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tion in London was for many years centred on the voluntary hospitals, and as some were founded well before the university they only came slowly to accept or even recognise university attitudes and ideas. Whereas in Birmingham the medical school functions as an integral part of a multi-faculty institution, and is indeed the university's faculty of medicine, this is not true of London. Under these circumstances, and I quote from the Royal Commission on Medical Education:
" It is not surprising that each of the independent medical schools in London have found great difficulty in attracting financial support comparable with that made available to other medical schools in Britain ".
This puts me in mind of the fact that between 1947 and 1952 there were earmarked UGC medical grants, and I just wonder whether in the circumstances the channels of communication in provincial medical schools were better and more of that earmarked money went there than into London. I suspect there were difficulties in London.
The Royal Commission also said that the situation should not be allowed to continue. It expressed the view that the general pattern of London medical schools was no longer satisfactory and would become increasingly less so in the future. They believed the time had come to forge stronger links with the university in order to give the medical schools access to the expanding world of scientific knowledge. They recommended that in future each medical school should aim to become an integral part of a single multi-faculty institution, similar, in other words, to other university medical schools.
Curiously enough, in all this detailed consideration the Royal Commission on Medical Education managed to complete its examination without considering the question of the delivery of medical care to the people of London, and gave no consideration, so far as I can determine, to the fact that the population of London has since the First World War markedly altered and is now substantially reduced. The population now has fallen to a little greater than it was in 1921, and the 1981 projection anticipates a further 10 per cent. reduction. The reasons the Royal Corn-mission recommended that the number of undergraduate medical schools should be reduced to six were primarily academic ones.

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The noble Lord, Lord Annan, has referred to the London situation and the funding of teaching hopsitals and medical schools by the Department of Health and Social Security and by the University Grants Committee. May I also say straightaway that there is no doubt about the very great contributions that London medical schools and teaching hospitals have made, not to British medicine, but to world medicine. They are world-important institutions.
At the end of World War I, of the returning medical students, half went to Scotland and the other half came to London, and even today London trains nearly 40 per cent. of undergraduate medical students, though they go far and wide to get their clinical experience. Following the Royal Commission's Report in 1968 there was an increase in the University of London medical school's intake. More places were immediately required so that the programme of expansion in training medical students could achieve the recommended target. Whether this should continue now that the new provincial medical schools are well under way is one of the problems facing those who are inquiring into such matters. Already, in fact, the figures in London are tending to exceed the Royal Commission's projections against the background of a falling population.
Until 1948 those teaching hospitals were voluntary hospitals, and one important effect of the 1946 Health Services Act was that they came under central Government control through the board of governors system. The emergency medical services of the war had laid the foundations for such a change, which was inevitable, because the hospitals would have been quite unable to raise the necessary funds for their continuance in any other way.
The period 1948 to 1968 was the period of hospital development in the National Health Service and a substantial part was focused on London. But by 1968 important changes were in the offing. The plans for a hospital-based Health Service were in doubt. Moreover, an examination of the changes in the Health Service in that period showed that the development of the existing medical schools and teaching hospitals, our centres of excellence, to keep up with the advances in clinical medicine, had resulted in a situation where the rich became richer and the poor and under-provided remained so. Staff would not go
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to these areas. Some preferred to emigrate. Other major changes were taking place also. There was the growing realisation that so many illnesses were due to specific environmental factors at work or at home, and the realisation that preventive medicine and health education were necessary, desirable and also cheaper.
There were other changes. One was the development of the social services and the need to integrate them with the health services on a number of levels. Another was the complex nature of the provision for, and the delivery of, modern medical care. A whole range of professions, new and old, are now involved in this. The co-operative effort of a large and varied team is required. People have to be trained to do this vital task. The day of the doctor and the nurse acting substantially alone are over.
Views about medical education were also changing. Medical education had been traditionally divided into two parts, undergraduate medical education and professional training. The first was the prime responsibility of the university medical schools, the second increasingly part of health service provision, and depending very substantially on in-service training and maintenance of standards by the Royal Colleges. The Merrison Report of the Committee of Inquiry into the regulation of the medical profession recommended that medical education should be a continuum; there should he no artificial division between undergraduate and professional training. This view has now been accepted by the profession and we can look forward to radical changes, I hope, under the guidance of the noble Lord, Lord Richardson. Perhaps even the opportunity will occur of shortening the period from undergraduate to fully-trained specialists.
There is another change which is related to cost but has a much wider significance and is central to the London problem. That is the need to align medical teaching developments with clinical developments. We can no longer afford to create small inefficient units at high cost for the purposes of teaching medical students. Medical students in the future will have to go to those areas of the Health Service where the principal activities they are studying are centred. That, as the noble Lord, Lord Richardson, has

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said, means complicated and difficult changes in the teaching curriculum, but personally I think that it must come. And, of course, in those Health Service centres undergraduate and professional training could be seen as a continuum. Many long-established teaching hospitals which have become centres of specialist medicine—and thereby enormously expensive—are not very suitable anyway for the training of the medical student, and the costs can no longer be justified unless professional training is continuous in the same place and the centre is cost-effective from the Health Service point of view.
One feature about doctors is that they tend to settle where they are trained and there are large parts of the United Kingdom—including large centres of population—which are under-doctored. The situation in the East Midlands is being substantially rectified by the setting up of the Nottingham and Leicester medical schools. Scotland has four medical schools. The West Midlands, with a population similar to that of Scotland, has one of moderate size. The West Midlands is under-doctored and medically deprived. There are areas within it that cannot recruit doctors. It requires one, or perhaps two, more medical schools and clinical teaching centres. These are required for Health Service reasons to create and maintain quality medical care in the region. I believe that the public will demand the increased allocation of resources to make that possible.
London is a national centre for postgraduate and continuing specialist training. Should the undergraduate population here be cut, certainly some of the smaller, isolated, specialised institutions should be rehoused with the larger institutions. The constructive redevelopment of London medicine, in the light of the factors mentioned, is of the utmost importance to the whole country. However, the bill for doing that is so large that it will have to be phased, I believe, over a quarter of a century and the Health Service and education Votes at present cannot do that. There will continue to be demands for large provincial medical schools. They are essential regional centres for the development of the Health Service. London should concentrate on what is does best and is uniquely placed to do.
18.45 p.m.
Lord SEGAL: My Lords, I had not intended to participate in this debate and I must apologise for not having put my name down on the list of speakers. However, I confess that I was stung into speech by listening to the eloquent plea of the noble Lord, Lord Annan, about the starvation of our London medical schools. I was filled with horror when he spoke of the threatened closure of one of them. Previous speakers have emphasised, I cannot help feeling almost inadequately, not only the national standing of our London medical schools, but their international status as well. That is why I view with alarm the statement made by some of our legislators that London is over supplied with hospital facilities and that the crying need is to reduce those that exist in London and to siphon them off to those parts of the country which are under-doctored.
One can destroy a hospital overnight. However, to create a hospital—which, after all, in some cases is the work of centuries of successive outstanding figures in the world of medicine—takes decades, and perhaps even centuries. The tradition that attaches to the London medical schools all over the world is something that one cannot create easily in the provinces.
Others have spoken of the trememdous international reputation of our London medical schools. Of course, our provincial medical schools are also institutions of national standing, some even of international standing. However, London is fortunate in having its 12 medical schools centralised in a small area where there is close inter-communication and exchange of ideas which is of enormous value in terms of medical effort and clinical research.
Our main aim must be to maintain at all possible cost the excellence of our teaching and research. There is a real danger in reducing the annual intake of medical students. Various committees have been appointed and have reported from time to time estimates that vary enormously in their assessment of the future medical needs of our country. I believe that this is a subject which is totally irrelevant. Our duty should be to maximise the intake of medical students as much as we possibly can, and I say that for at least two

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reasons. The greater the number of medical graduates, the greater the pool of medical ability that can be creamed off in the directions of medical research. That is why it is of the utmost importance to try to increase, wherever possible, the number of medical students admitted each year into our various teaching hospitals.
It is a truism that no medical education is ever wasted. Even those doctors who have given up practising medicine and have gone into other fields have enriched their careers and the resources of our country through having received a medical education. In industry, law, literature, and even poetry, doctors' names stand out among the great figures of our time.
Equally, it is true to say that a nurse's education is never wasted. I am told that nurses make wonderful wives and marvellous mothers. Therefore, any type of higher education is bound to be of enormous value to the country. There are many instances that one can give of people who have abandoned medicine, but they are none the worse for that, although medicine itself may have suffered.
Another reason why we should maximise our medical intake is that there is no real danger of this country having too many doctors. Doctors can be useful in areas outside this country. They can, of course, serve in under-doctored areas within our midst, but there are so many under-doctored countries all over the world where a medical education in this country can be of enormous benefit. It is a two-way traffic. Other speakers have referred to the large number of English medical graduates to be found in the universities of the Commonwealth and other countries throughout the world.
With all the medical facilities in this country, with all the development that has taken place under the National Health Service, we find people from other countries who can afford to do so still gravitate to London for medical treatment. We know of vast new hospitals that have been built in the Arab sheikhdoms. But the fact remains that those who are able to obtain the benefits of medical treatment in this country will leave their own countries in the Arabian Gulf and come to receive their medical treatment here in England.
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We must ask ourselves what has happened to private benevolence. Other speakers have referred to endowments which our hospitals have received over the centuries. But now, under the National Health Service, apparently the flood of private benevolence has almost dried up. Many hospitals now obtain help from patients who have benefited by their services, and made voluntary contributions to the friends of the hospital. Many hospitals, including my own, have founded a trust for medical research in connection with their own medical schools. Surely there must be thousands of grateful patients, who now receive medical services free, who would like to show their gratitude in some outstanding manner and contribute in some way, I would hope, to the field of medical research and clinical excellence.
The other point which I should like to drive home as forcefully as I can is that this craze for economy can so easily be overdone. If we continually persist in parading our poverty, we are in danger of generating poverty. Money spent, perhaps on a somewhat lavish scale, in the field of medical research is not money that is ever wasted. One example of false economy may be cited in the story of a medical specialist who was said to have combined in himself the speciality of geriatrics with the speciality of paediatrics. It might be a form of economy perhaps, but it was said of him that he was born senile. In other words, senility is a disease which can easily afflict our legislators just as it has afflicted our hospital buildings. One would wish that our legislators might also be immune from the on-going process of senility, or, if not immune, one hopes that it will not afflict them too obviously.
8.54 p.m.
Lord WELLS-PESTELL: My Lords, it is not my intention to take issue with my noble friend Lord Annan because I am not unmindful of the strength of his case and his reason for addressing your Lordships in the way he has. I cannot help but believe that we must pass this way again in the not too distant future when the Royal Commission reports and when the Flowers Working Party, set up by my noble friend Lord Annan, also reports. It may be that the noble Lord felt that he ought to get in the first stone. Perhaps I ought to qualify my statement that I do

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not intend to take issue with him tonight by saying that, with some of my friends, I might well join him in seeking to abolish the area health authorities. However, I can assure him that he will be in for a great deal of opposition if he attempts to abolish the community health councils, which, for many of us, are the only safe-gards for the users and which represent the consumer.
Having said that, I find myself—at least, I think that I shall do so—in sympathy with the Government. For we are living in a fool's paradise if we think that in the immediate future there will be anything like the amount of money we need to put the National Health Service on the level which I believe everyone in your Lordships' House would like to see. There will certainly not be an inexhaustible source that will be able to supply money for new buildings. Unless we accept that as a fact of life, we shall be living in a fool's paradise.
I do not want to say anything about the Resource Allocation Working Party—commonly known as RAWP—because my noble friend Lord Annan dealt with it. But it is a factor. It was designed to try to give a fair and reasonable amount of money to the various regions. We may differ—as I am sure we do—in the actual amount. However, let us keep in the forefront of our mind one important fact; it is that the duty of every Government is to ensure that there is an adequate coverage of all medical services throughout the country—not a greater coverage in one area and little in another. I believe that that is the main task of Government in relation to medical services.
Time and time again, the noble Baroness, Lady Ward of North Tyneside, asked me when I was a Minister what we were going to do for the North-East. She was right to do so, because many areas were the poor relations of the big cities, and money from the better-provided areas had to be diverted to the North, to the Midlands, to the North Midlands and particularly to the North-East.
Reference has been made to the fact that here in London we have 12 teaching hospitals, two postgraduate medical schools and 13 medical institutes. It may be that I am naïve; it may well be that I
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really do not have a grasp of some of the situations. But it seems to me that there can be no justification at all for having 12 teaching hospitals in London, 11 of them until quite recently within a stone's throw—albeit a pretty long throw—of your Lordships' House. They are Westminster, Middlesex, St. Mary's, St. Thomas', Bart's, Guy's, London, University College, St. George's and, until recently, Charing Cross and the Royal Free. Can we really justify 12 medical schools of the calibre of each one of those—and I acknowledge their calibre—here in London within such a short distance of each other? I remember Aneurin Bevan saying as far back as 1948 that St. George's should go out of London. Half of it has gone to Tooting or Wimbledon (I am not sure which area) within the last two years, but the other half remains.
I believe that, deep down, the noble Lord, Lord Annan, realises that something has to be done about this. If you look at the terms of reference of the Flowers Working Party, you will see that they are to consider: the redevelopment of resources available for medicine and dentistry; in the event of closure, or radical reorganisation, of one or more medical schools or institutes, which these should be; and how you transfer students and staff to other schools without reducing overall student numbers.
I believe it is recognised that we in London are over-serviced. I do not think that there can possibly be any sound or reasonable argument for maintaining so many centres of medical excellence—and I accept that they are centres of medical excellence—or showplaces of high medical technology in so small an area. It is for that reason that I welcome the Flowers committee. Having listened to the noble Lord, Lord Hunter of Newington, I am sorry that he was not put on the committee. I found myself warming very much towards some of the things he said, and which I felt need careful consideration.
The terms of reference of the Flowers Working Party certainly envisage closure and reorganisation of some of the existing teaching hospitals. The argument about the effectiveness of our teaching hospitals, particularly those in the London area, has been going on, as every noble Lord

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in the medical profession knows, for some considerable time. But there has been no real attempt to research into the scope and function of teaching hospitals. It may well be that the Royal Commission will do it for us. It may well be that the Flowers Working Party will do it. But the sum total of the complaint made tonight by most, if not all, speakers points to the need for a re-evaluation of what is being done. The sooner that it is done, the better.
We have a situation in which a large number of teaching hospitals are each providing similar specialties. I am not, as is all too apparent to your Lordships, a member of the medical profession. My only interest in it is a long one: that of the working of the National Health Service, and the time that I had as a Minister in the Department of Health and Social Security. But I believe that providing such a large number of teaching hospitals in the London area, each offering similar specialties, is wasteful in time and money, and it is doubtful whether full use is being made of all those facilities.
I may be open to a good deal of criticism in saying that, but I know that three years ago, when it was important that I should be X-rayed urgently, living in Oxford, I could not get it done for seven weeks notwithstanding the urgency. But I was told that I would get it done in a London hospital immediately. So I brought my letter from my GP, not wishing to have any special treatment, took it to a London teaching hospital and was X-rayed immediately. Now perhaps I am drawing too much from that. We need to look at the needs of the country as a whole; the real need in particular areas. I believe there are large parts of this country starved of teaching hospitals. We ought to be thinking of opening teaching hospitals in areas where I believe there is a very real need. I am told that the London teaching hospitals draw 80 per cent. of their people from South-East England, 15 per cent. only from the rest of the country, and 5 per cent. from abroad.
Local residents in London must suffer, I believe, to maintain the teaching and research which is being done in our
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London teaching hospitals. The patients are not presenting medical problems and difficulties which would come under the heading of high technology. I am talking about patients generally. I am concerned at the number of beds teaching hospitals claim to be necessary in their discharge of the responsibilities of a teaching hospital. I think that there is too much weight given to specialisation and research in what is a belt of medical schools situated closely together. In fact, hospital beds for specialisation are rarely those needed by a population which is using resources increasingly as a result of age and psychiatric illness. Can we be sure that local residents do not suffer in order to maintain this teaching and research?
I am glad that one of the tasks of the Flowers Working Party, as I understand it, is to inquire into the commitment to academic work, its present form, and its present level. The point may be raised that if bigger but fewer units were established for training it would involve students in extra travelling. But would this really cause any hardship in view of the closeness of the existing teaching hospitals? I understand that already half the clinical teaching at the Middlesex Hospital is done at the Central Middlesex Hospital in Harlesden. I understand that that presents no problem at all.
It must be at least 10 years ago that it was proposed that the Middlesex and St. Mary's hospitals should be combined. The real question is whether it is right, having regard to the needs of the country as a whole, to have so many centres of excellence and medical high technology in London. I cannot think that it is right, and I hope that the Flowers Working Party will approach and carry out their task without fear or favour.
I look forward, as I am sure a large number of people do, to their findings and I look forward with some confidence to the recommendations of the Royal Commission on the National Health Service. I say sincerely that Lord Annan has raised this subject at a moment when we should begin thinking about the future and, if he has succeeded in doing nothing more, he has caused us to prepare our minds for the bigger discussion which is to come, and I hope it will come fairly soon.
9.9 p.m.
The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Baroness Young): My Lords, I am sure the whole House is grateful to the noble Lord, Lord Annan, for introducing this debate and indeed to the entire galaxy of experts who have taken part. Speaking as one of the non-medical people present, I can only say I feel like that thoroughly unpractised tennis player who has been knocking a ball about in the garden and suddenly finds herself on the centre court at Wimbledon—a somewhat alarming experience. However, I hope that whatever else I may do or not do, I will take to heart the words of the noble Lord, Lord Hunt of Fawley, and not use the word " integration " at all, and I shall use his nice little analogy of the cat and the canary in some other speech; I am sure it will come in handy.
It goes without saying that my department and my colleagues will study this debate closely and it will of course also be studied by my right honourable friend the Secretary of State for Social Services, Mr. Patrick Jenkin. Lord Annan, in introducing the debate, made five important points and at varying times all the other noble Lords who have taken part in the debate have either raised them in similar form or have further elaborated on them. I shall try to refer to them all in the course of my remarks.
The subject which Lord Annan has raised is of course of great importance to the country. The significance of the role of the University of London in medical education and research, both in the United Kingdom and internationally, cannot be over-emphasised, a point to which the noble Lord, Lord Greenhill, with his vast experience at the Foreign Office, drew our attention, as did the noble Lord, Lord Garner. It is currently responsible for the education of almost one-third of the country's medical students and has a great tradition and fine reputation to preserve. Her Majesty's Government recognise both this and the problems that now face the University's medical schools and institutes, which this debate has illustrated.
The noble Lord asked whether the Government are satisfied with the provision for medical education in London. It is clear, listening to the debate, that the situation which has been described
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is a difficult one and that a great deal of co-ordination will be needed to find solutions to the problems which have been discussed. I should like to record at the beginning of my remarks that I do not consider that these problems spring from a lack of liaison between the University Grants Committee and the Department of Health and Social Security. This was the fifth point made by Lord Annan. My understanding is that there is a great deal of co-operation between the two departments. But what is unfortunately a far more intractable problem is that there is a very real conflict of interest between the needs of medical education in London and the wider needs of the National Health Service, a point well brought out by the noble Lord, Lord Wells-Pestell. Although I would not follow him in all his remarks, I was grateful to him for drawing our attention to the very real economic problems that underlie the difficulties of the National Health Service. I hope therefore that noble Lords will agree that the Government must give consideration to finding a balance between these interests and to trying to seek a solution to the problems now facing the University, and perhaps I may enlarge on that.
For mainly historical reasons, the London teaching hospitals are concentrated in a relatively small area. Many people from outside London are admitted to the teaching hospitals, but the majority of their patients come from inner London. The population of this area has been declining for a long time and trends show that this decline is likely to continue as more people move out to the surrounding counties. But there has not been a corresponding movement of acute hospital services; the concentration of hospitals in Central London still exists but new hospitals have not been built fast enough in the surrounding areas. As a result, there is a comparative over-provision in Central London—even when allowance is made for the specialist services provided by the teaching hospitals—and under-provision in places like Kent and Essex. The health authorities have a duty to build up the levels of provision in these areas so that people can get the general hospital treatment they need nearer to where they live.
At the same time, there are parts of the Health Service which are poorly provided

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for in London—a matter to which the noble Baroness, Lady Robson of Kiddington, drew attention. Services for the elderly, the mentally ill and the mentally handicapped in inner London leave much to be desired. These services, too, need to be developed and improved. Indeed, the noble Lord, Lord Richardson, drew attention to this point. I was very glad that the noble Lord, Lord Hunt of Fawley, said (I think I am quoting him correctly) that departments of general practice had been founded in five of the hospitals in London. This seems to me to be the kind of way forward which the noble Baroness, Lady Robson, would welcome, and which I am sure is welcomed by us all.
The task facing the Thames Regional Health Authorities, which have to plan the health service in London and the surrounding Home Counties, is therefore a difficult one. It is made more difficult by the fact that these regions already have more than their share of the funds available. The policy for the distribution of resources to health regions is based on the recommendations of the Resource Allocation Working Party. It aims, over a period of time, to move towards a distribution of resources based on relative need, and regions are encouraged to adopt the same approach in allocating funds to Area Health Authorities.
I am sure that noble Lords recognise the fairness of this policy in terms of the access which people throughout the country should have to health care. But, because of the low rate of growth which we are able to give the National Health Service at present, the amount of money available for development in the Thames Health Region is not as high as we would like. The health authorities have, therefore, to look to the over-provided acute services in London to solve their problems; and it is only by rationalisation of these services that the shift of resources from acute to chronic care in central London can be achieved.
These changes are essential from the health service point of view but, as I said earlier, they may pose serious problems to the medical schools. While these schools would all wish to see better facilities for non-acute patients and would wish to improve the experience their students get
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of such cases, their main need for teaching purposes is for acute hospital facilities.
The problem is to find a balance between these conflicting interests. One suggestion has been that provision for medical education should be moved out of inner London. There are strong arguments for distributing medical education more widely across the country. The problems of conflict between health service needs and medical education which arise in London are less apparent in the provinces, and the existence of a new teaching hospital is bound to improve services in an area which is currently poorly served; and doctors who are trained in an area are more likely to continue to work there afterwards. The new schools which were established in Nottingham, Leicester, and Southampton in the 1960s are now beginning to produce results and will, in time, develop reputations and traditions to match those of the London schools. But there is a major stumbling-block. The building of a new teaching hospital and medical school involves expenditure in the region of £60 million, and we are simply not living in a financial climate where such sums will be readily available.
Ways of reorganising existing provision must also be considered. Many of the existing schools in London have taken steps to adapt to the movement of population and services. They are increasingly using hospitals away from central London to augment the clinical facilities available to them. But there are limits to this. The medical students must still be able to continue their academic work within the medical school environment, and this will be more difficult if their practical training takes place at a distant hospital.
It may also be possible to improve the use of educational facilities within central London. Concentration in fewer schools and larger units might lead to more economic use of both health and educational resources. Such a rationalisation of existing provision need not mean that the current level of entry would have to be reduced. We are still pursuing the national target of a student entry of about 4,100—this will be achieved soon—and London's intake is an important part of that total. But decisions about the long-term future will then have to be taken and, in view of the problems in London, any

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reduction in the overall total might well apply to London. Certainly if the overall total were to be increased, it seems unlikely that anyone would wish to add further to London's problems by increasing its intake. But in saying this one must recognise the points that have been made in the course of the debate, particularly the point by the noble Lord, Lord Hunt of Fawley, about the human problems which arise when we are actually talking about rationalisation and reorganisation of hospitals.
I have attempted to summarise the problems facing London's medical schools and some of the solutions that have been suggested. What, then, should be done? As several noble Lords pointed out, all these matters are currently under consideration by a number of different bodies and committees, and I sympathise with the noble Lord—I think it was Lord Richardson—who said that this really was a very complicated situation.
The university itself, as the noble Lord, Lord Annan, has explained, has set up a working party, under the chairmanship of Lord Flowers, to examine the use of resources for medical and dental education in London, and to see what redeployment is necessary to maintain standards of teaching and research. The Government welcome this, and will study very carefully the implications of the working party's report.
On the health service side, the London Health Planning Consortium has been set up by the Thames Regional Health Authorities, the University Grants Committee, the University and the Department of Health and Social Security. It is a planning body which is examining these and other major strategic problems to identify the options for achieving change. One of its main tasks has been to study the imbalance between the hospital facilities required to meet, on the one hand, the needs of a reducing population and, on the other hand, undergraduate medical teaching needs. The consortium proposes to issue a consultation paper later in the year which will identify and quantify the options for resolving this imbalance in order to seek the views of the University, the University Grants Committee, the health authorities and others. The consortium has a rather different standpoint
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in considering these problems from Lord Flowers and his colleagues. but I am glad that the two bodies have common membership and that Lord Flowers will be able to take into account the work which the consortium has been doing.
I should like to mention two other points which have been raised and which are said to contribute to the problems facing medical education in London. The first is the question of funding the teaching hospitals. I have already referred to the method by which resources for the National Health Service are distributed. I do not think there is any disagreement about the fairness of the principle that money in the National Health Service should be distributed according to relative need, but there are arguments about the pace at which it should be done, and we must give proper consideration to the costs of medical education and specialist services. The central problem here has nothing to do with the Health Service; it is simply our poor economic performance in recent years. The National Health Service has been able to grow only very slowly. As a result, efforts to redistribute funds to deprived areas have led to a sharp brake on development and something of a squeeze on those places, such as London's teaching hospitals, which had previously been accustomed to steady expansion. Her Majesty's Government believe that a levelling up of standards and provision is what is needed, but this will be dependent on our producing greater wealth to support it.
Following on that point, the noble Lord, Lord Cottesloe, and the noble Lords, Lord Auckland and Lord Garner, all mentioned the future of the Hammersmith Hospital. The North-West Thames Regional Health Authority, which is responsible for the Hammersmith Hospital, has included in its present plans provision for a major redevelopment scheme to improve poor facilities at that hospital, and the project is programmed to start in 1985–86. I hope this will be of some help to the noble Lord, though I am sure we would all wish that resources would allow us to do more, more quickly. The noble Lord, Lord Greenhill, raised a point about the dental school attached to King's College Hospital. I regret that I have no information available this evening, but if the noble Lord. Lord

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Greenhill, will bear with me I will write to him on this matter when I have an answer for him.
Finally, my Lords, there is the question of the National Health Service reorganisation, which, it is said, has made life more difficult for the medical schools. The arrangements which existed before 1974, under which the teaching hospitals were administered by boards of governors directly accountable to the Secretary of State, may well have had advantages for the medical schools. The teaching hospitals did not have clear service responsibilities, and could adjust the pattern of their work more easily to fit in with the needs of medical education. But this independence caused serious problems for the then regional hospital boards, which had the statutory responsibility for the provision of service. Many of the services which were needed, including particularly the more specialised services, were outside the control of the regional hospital boards. The proper planning and co-ordination of services and the control of development in the Health Service in London—and the teaching hospitals are primarily part of the Health Service—was much more difficult to achieve. The reorganisation of the National Health Service has overcome some of these difficulties, but not all of them. The Government, however, recognise that there are many shortcomings in the reorganised Health Service which have tended to produce an unnecessarily bureaucratic structure. Once the report of the Royal Commission on the National Health Service is available, we shall be looking for ways of simplifying the system and returning operational control to the lowest possible level. The Royal Commission's report may also have a bearing on many of the other issues raised in this evening's debate.
I hope that I have said enough to make it clear that the Government are fully aware of the real problems involved in this difficult area and of the important part that London and its hospitals play in the Health Service and in medical education in the country as a whole. In view of all the developments which I have outlined, I am not unhopeful that solutions will be found; but I should not like to pretend at this stage to be able to say what they will be. I should like to give
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the noble Lord, Lord Annan, the reassurance that the Government will be ready to play their part in bringing about the necessary changes; but I am afraid this will not be an easy process.

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