Sitting of 3 June 1980

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

PRIVATE BUSINESS
SCOTTISH WIDOWS' FUND AND LIFE ASSURANCE SOCIETY BILL
STANDARD LIFE ASSURANCE COMPANY BILL
Orders for Third Reading read.
To be read the Third time upon Thursday.

ORAL ANSWERS TO QUESTIONS
  SOCIAL SERVICES

    London Hospitals (Advisory Group)
    Mr. Neil Thorneasked the Secretary of State for Social Services whether, further to his reply to the hon. Member for Ravensbourne (Mr. Hunt)Official Report,
    The Secretary of State for Social Services (Mr. Patrick Jenkin): I have asked the London advisory group to give priority to advising on the restructuring of the National Health Service in London, and on the pattern of acute and specialist hospital services in the light of the reports of the London health planning consortium.
    Mr. Thorne: Will that not be too late for London university to take into account with the Flowers report, the consideration of which must be completed by July? If that is the case, will my right hon. Friend be prepared to allow Westminster hospital to continue until the advisory group's report is available and can be taken into consideration?
    Mr. Jenkin: As my hon. Friend knows, there is a later question on the Order Paper about Westminster hospital. I gain the impression that my hon. Friend may not appreciate the relationship of the London advisory group with the Flowers report, which is concerned with medical schools. The Flowers report is a report to London university. It will be for the university to reach conclusions on the proposals put forward by Lord Flowers. That will be one of the inputs into the London advisory group, which will then advise me on the best way in which to deal with the services in London, in the light of all the facts.
    Mr. Orme: The Secretary of State said that the advisory group's report would deal with restructuring. That will involve medical staff, not least nurses, many thousands of whom are employed within the London area. May I take this opportunity to ask the right hon. Gentleman when we will have a report on the recent negotiations with the nurses about their pay, and the recent meeting——
    Mr. Speaker: Order. The right hon. Gentleman has stretched the question beyond measure.
    Mr. Orme: On a point of order, Mr. Speaker. I was making the point that the London nurses, of whom there are many thousands, will be affected by any pay structure that is decided——
    Mr. Speaker: Order. That may be so, but there should be a question on the Order Paper on that matter. This question does not deal with it.

    Christmas Bonus
    Mr. Cryerasked the Secretary of State for Social Services if he will increase the 1980 Christmas bonus payment for retirement pensioners to make up any shortfall in pension increases.
    The Minister for Social Security (Mr. Reg Prentice): The question of making good a shortfall in the November 1980 uprating would have to be considered if it arose. But an increase in the 1980 Christmas bonus would not be an appropriate way to make good any shortfall.
    Mr. Cryer: Is it not true that the Department has legislated to create a 54-week year, which means that there

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    will be a fortnight's delay in the payment of the increased pension, which in turn means that there will be a shortage in payment to a married couple, for example, of over £12? Does the Minister agree that if he broke into a pensioner's house and robbed him of £12 he would rightly be sent to gaol? Is it not legislative robbery from millions of pensioners that the Minister and his cronies are putting into effect?
    Mr. Prentice: No, Sir, it is nothing of the kind. It is a necessary reining back of public spending, to fight inflation. In fighting inflation we are doing the best possible service that we can for the pensioners of Britain.
    Mr. Garel-Jones: Will my right hon. Friend confirm that the Christmas bonus, in spite of its extreme unpopularity among Opposition Members, is a popular and much appreciated benefit? Will he assure the House that he will bear in mind that the value of the bonus has not changed from £10 since its inception, and that as soon as economic circumstances permit he will seek to increase it?
    Mr. Prentice: I agree with my hon. Friend. The pensioners of Britain will be aware that one of the first measures brought forward by the Government when they took office was to make the Christmas bonus a permanent payment.
    Mr. Barry Jones: Does the Minister agree that he has adopted a miserable device with which to diddle vulnerable pensioners?
    Mr. Prentice: No, Sir.
    Mr. Peter Bottomley: Will my right hon. Friend tell us for how many years the Christmas bonus was not paid by the Labour Government, and what that represents?
    Mr. Prentice: For two years, which happened to be early in the Parliament, and they took care to start paying it again as the election approached.
    Mr. Crowther: Is the Minister of State saying that an appropriate way to rein back public expenditure, as he calls it, is to rob old-age pensioners? Is it not an example of almost incredible meanness, even for this Government, to make the pensioners pay for their Christmas bonus?
    Mr. Prentice: No. I do not accept the word " rob ". These matters were fully debated during the long debates on the Social Security Bills, Nos. 1 and 2. We are hearing the usual performance of the Labour Party fighting yesterday's battles.

    Social Security (No. 2) Bill
    Mr. William Hamiltonasked the Secretary of State for Social Services what representations he has received in the last month from outside organisations on the provisions of the Social Security (No. 2) Bill; and what steps he intends to take to satisfy their requests for amendments to the Bill.
    Mr. Patrick Jenkin: I have received representations on the Social Security (No. 2) Bill from 23 organisations, many of which were concerned about the impact of the Bill on the long-term sick. I have already undertaken that, subject to the availability of resources, invalidity benefit and unemployability supplement will be realigned with retirement pension when they are brought into taxation. I believe that this and the Government's acceptance of the amendment to clause 3 of the Bill proposed by my hon. Friend the Member for Exeter (Mr. Hannam) will have helped to allay the fears of the organisations concerned.
    Mr. Hamilton: Does not the right hon. Gentleman feel thoroughly ashamed of a Bill that does not have the support of one voluntary organisation that is interested in these matters? Why did he refuse to meet these organisations whilst the Bill was going through Committee, as the organisations told us was the case? What further progress has been made in his consultations with the NUM and the NCB so far as the Bill affects them?
    Mr. Jenkin: First, I believe that the Government were right to have the courage to bring forward the necessary measures to bring public expenditure under control. I have not refused to meet organisations. I have now met every organisation that has asked for a meeting. Some of those which asked earlier had meetings with my officials, and in view of what they heard, and the representations that they made, they did not feel it right to ask for another meeting.
    The National Coal Board and the National Union of Mineworkers schemes

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    are matters for my right hon. Friend the Secretary of State for Energy.
    Mr. Paul Dean: I accept that the Social Security (No. 2) Bill represents a sensible allocation of priorities in difficult circumstances, but will my right hon. Friend assure the House that it is the Government's firm intention, as soon as resources become available, to resume progress in providing both cash benefits and services for the disabled?
    Mr. Jenkin: I am grateful to my hon. Friend for his kind words. The Government's whole strategy is designed to create an economy that will provide the resources to enable us not only to raise our standard of living generally but to afford a proper level of social services. The more we are successful in that object, the more quickly we shall be able to resume the kind of benefits for these people that we want to see.
    Mr. Ennals: Has the Secretary of State had representations from organisations representing war pensioners? Is he aware that the announcement by the Minister for Social Security over the weekend of an increase of 16½ per cent. for war pensioners in November will be viewed by both war pensioners and organisations representing them as an absolute betrayal of commitments by successive Governments to give proper protection to those who were wounded as a result of war service? Is he aware that 16½ per cent. in November will be much less than the rate of inflation? Is this not grossly unfair to war pensioners, apart from any others?
    Mr. Jenkin: My right hon. Friend was well received by the war pensioners' organisations which he met in Scotland over the weekend. The right hon. Gentleman implied that we were in bad odour, but that is not so. My right hon. Friend was well received.
    Recent rates of inflation are not expected to continue. We expect a fall in the rate of inflation in the coming months. The forecast at the time of the Budget was of a 16½ per cent. increase in prices between November 1979 and November 1980, the uprating date for the increase. On that basis, an increase of 16½ per cent. in war pensions, as in other long-term benefits, will restore the value of those benefits.
    Mr. Orme: Is the Secretary of State aware that as people become knowledgeable about the Social Security (No. 2) Bill they become appalled that the earnings-related benefits of the sick, the unemployed and those suffering from industrial injury are to be drastically affected? What has the right hon. Gentleman got to say about bringing those benefits into line in 1982?
    Mr. Jenkin: As I said in the debates on clause 4 of the Bill, if, after the earnings-related benefit has been phased out under the Bill, additional resources become available for the improvement of social security generally, a decision will have to be taken whether those resources should be used to restore the earnings-related benefit, but many people could point to higher priorities than that.

    Pensions
    Mr. Hooleyasked the Secretary of State for Social Services what is the approximate saving in public expenditure by delaying for two weeks beyond the normal date the payment of the annual increase in pensions.
    Mr. Stallardasked the Secretary of State for Social Services what representations he has received from the National Federation of Old Age Pensions Associations about the contents of the Social Security (No. 2) Bill.
    The Under-Secretary of State for Health and Social Security (Mrs. Lynda Chalker): If the rates of benefits proposed for the week commencing 24 November were to be paid two weeks earlier, the additional expenditure in 1980–81 would be about £125 million, of which about £65 million would be on retirement and supplementary pensions.
    As to representations from the National Federation of Old Age Pensions Associations, it wrote to my right hon. Friend about the date of this year's uprating, but not about the contents of the Social Security (No. 2) Bill.
    Mr. Hooley: Is the Minister aware that this is a peculiarly squalid manoeuvre, even by the standards of this Government? Is it now the Government's intention to calculate year by year a 54-week year for pensioners, so that eventually their uprating arises in the year after next?
    Mrs. Chalker: The answer to the second part of the hon. Gentleman's question is " No ". Under the Social Security Act 1980 the uprating cannot be later than the week commencing 23 November 1981. Therefore, the situation envisaged by the hon. Gentleman is avoided.
    Mr. Garel-Jones: Will my hon. Friend confirm that, despite the fact that the increase is to be delayed, it is the greatest increase ever given to old-age pensioners by any Government?
    Mrs. Chalker: Yes, in cash terms, it it the greatest increase. I should point out that the increases are still a substantial and welcome help to pensioners.
    Mr. Frank Allaun: Will the Minister confirm her colleague's admission a few minutes ago that this is a deliberate intention to reduce public expenditure? Is she aware that this saving is exactly one-twentieth of the increase in arms spending this year—in a single year?
    Mrs. Chalker: I should point out that an unintentional effect of the provisions of the Social Security Act 1975 has been that the date for increasing benefits has been creeping forward. Any responsible Government would have had to tackle that matter. That is the cause of one week's delay. The second week's delay is to reduce public expenditure.
    Mr. William Hamilton: Does the hon. Lady recollect that in Committee she admitted that this robbing of old-age pensioners was designed to cut public expenditure? Will she now say that she is thoroughly ashamed of what she is doing?
    Mrs. Chaiker: As I said to the hon. Member for Salford, East (Mr. Allaun), one week's delay in the uprating is to prevent the creeping forward, which any responsible Government would have had to deal with. I have said that the second week's delay in the uprating is, indeed, to hold back public expenditure.

    Renal Dialysis
    Mr. Dalyellasked the Secretary of State for Social Services what are the most recent figures he has conveniently available for the costs of a patient on renal dialysis; and what figures he has conveniently available for the costs of a kidney transplant.
    Mr. Patrick Jenkin: The capital cost of a kidney machine and associated equipment is approximately £6,000. The annual running costs for a patient on dialysis can be as much as £8,000 if he is treated at home, and £12,500 if he is treated in hospital. The cost of a kidney transplant and subsequent treatment during the first year varies greatly according to the type of treatment and the success of the operation, but it is likely on average to be about £5,000.
    Mr. Dalyell: Do those figures mean that if significantly more matching tissue was available that would shorten waiting lists, ease suffering, and help the scarce resources of the Health Service?
    Mr. Jenkin: That is right. I hope that more and more people will use the new kidney card system that was launched last week by my hon. Friend the Minister for Health so that in the event of an accident it will be possible for their kidneys to be made available for transplant purposes. These cards are now widely available, and I hope that the hon. Gentleman's persistence in this mattter—which I greatly applaud—will lead the public to make more and more use of them.
    Mr. Alfred Morris: Is the Minister aware of the estimate that over 1,000 people will die this year from kidney failure, simply because of inadequate staffing? What urgent action is the Secretary of State taking to tackle this problem? If the Government can give huge sums in tax cuts to the fit and fortunate, how can they possibly deny a lifeline to people who are desperately ill and in need?
    Mr. Jenkin: We should not be too apologetic for the progress that has been made in recent years to enable additional numbers of people to receive the benefit of renal services. Between 1971 and 1978 the number of patients starting treatment annually rose from 589 to 1,156, and the number of transplants, including live donors, rose from 318 to 930. The number of patients on renal replacement therapy—functioning transplants, kidney machines, peritoneal dialysis—rose from 1,816 at 31 December 1971, to 5,273 at 31 December 1978. That was an average rise of about 16

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    per cent. a year. If we are to do more—and we all want to do better—the nation must first earn the resources to pay for it. That is what the Government's strategy is all about.
    Mr. Gwilym Roberts: Does the Secretary of State agree that while the new kidney card system is welcome, the whole system could be made more efficient and be revolutionised if a central computerised bank of donors were made available? That would eliminate many of the existing problems.
    Mr. Jenkin: I am aware of the proposals in that regard. However, such a system would be very expensive to set up. In 1978–79, the estimated costs of setting up such a system were put at £5 million, and it would cost £1½ million a year to run and keep up to date. I suggest that it might be valuable only if we were to use the system advocated by the hon. Member for West Lothian (Mr. Dalyell)—an opting-out system. That raises difficult, sensitive and emotive questions, which no doubt will continue to be debated.
    Mr. Donald Stewart: In view of the Secretary of State's desire to make more money available for those benefits, and since the EEC is permitting Britain to keep some of its own money, will he say that he will seek to divert some of that money to these benefits?
    Mr. Jenkin: As the Minister in charge of a major spending Department, I wish that that were right, but no extra money will come back to Britain until the next calendar year. The overriding nature of the Government's obligation to reduce the public sector borrowing requirement must take precedence. We have published our public spending programmes for four years ahead, and our highest priority is to stick to them.

    Child Benefit
    Mr. Peter Bottomleyasked the Secretary of State for Social Services if he will make a statement on the future relationship between increases in prices and changes in child benefit.
    Mr. Patrick Jenkin: I am required, under the Child Benefit Act 1975, to review the rate of the benefit each year having regard to the national economic situation as a whole, the general standard
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    of living and other relevant matters. Of course we must take into account changes in price levels, but they are not the only factors.
    Mr. Bottomley: I am grateful to the Secretary of State for that answer, but I am more interested in the political side of the matter. Would it not be a good idea for my right hon. Friend and the Cabinet to announce a year in advance their intentions about child benefit, so that people with children will know whether they have an interest in keeping down the rate of inflation or helping it to continue on its present course?
    Mr. Jenkin: That is an ingenious suggestion. Factors governing decisions on increases in the rate of child benefit are considered regularly by the Government, but we have no proposals to change the statutory obligations.
    Mr. Stoddart: Is the Secretary of State aware that the child benefit is already way behind the increase in the cost of living? Is he aware also that families with children are the poorest in our community? Far from announcing an increase a year in advance, the Secretary of State should announce an increase immediately.
    Mr. Jenkin: That depends on the point from which we take the base rate. If we start from the last year when there was a mixture of child tax allowances and family allowances, on reasonable assumptions, by next October the great majority of families with children will be better off than if they had remained on child tax allowances and family allowances, adjusted for increases in the cost of living. That is a fact. In addition, the Government have taken particular care to increase the amount and entitlement of family income supplement, which is designed particularly to help those families on very low incomes—families about whom the hon. Gentleman is concerned.
    Sir Brandon Rhys Williams: Does my right hon. Friend agree that when increases in prices place pressure on family budgets it is better for the economy to relieve that pressure by increases in child benefit than by blanket increases in wages that are bound to be inflationary?
    Mr. Jenkin: I am sure that my hon. Friend is right, but we would need a fairly cast-iron guarantee that if the level of child benefit were increased to achieve the objective that he is seeking, that would be matched by a corresponding reluctance on the part of trade unions and those for whom they bargain to press for higher wages—for which they would press in any event.
    Mr. Freeson: As a result of the failure of the Government to uprate child benefit in April, there has already been a loss on each child benefit of £1.35 in relation to the rate of inflation. What do the Government intend to do to restore the real value of child benefit, which since April 1979 has dropped to such a degree, and is continuing to drop as the rate of inflation increases?
    Mr. Jenkin: As the right hon. Gentleman knows, it makes sense in every way to announce increases in the rate of child benefit at the same time as tax changes are announced in the Budget, and for the increases to take effect at the normal uprating date, so that they can be moved in parallel with the corresponding adjustments in the social security and national insurance child dependency additions. That is the sensible and logical way to proceed. This year the increase in child benefit on an annual basis was the same in percentage terms as the increase in personal allowances for income tax. On an annual basis, they moved in parallel.

    Pensions
    Mr. Rookerasked the Secretary of State for Social Services if he remains satisfied with his forecast of price increases for November on which he based the retirement pension increase.
    Mr. Prentice: Yes, Sir.
    Mr. Rooker: Does the Minister accept that in Committee recently the Secretary of State cast doubt on his forecast of 16½ per cent? Will he accept that if an allowance were made for the shortfall that occurred last November under a law that was not changed until last week, if an allowance were made for the 54-week change, and if an allowance were made to take account of an inflation rate of 24 per cent. in November, a married couple should receive £2.20 a week more
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    in November than they will receive under the Government's proposals?
    Mr. Prentice: Most of the hon. Gentleman's supplementary question included a series of rapid-fire questions. I shall look at the figures and see whether I can do the arithmetic. With regard to the first part of the hon. Gentleman's question, I have checked on what my right hon Friend said in Committee. In dealing with the rate of inflation he said that we would have to wait and see. He said earlier today—and I endorse it—that we expect the rate of inflation to slow down between now and November.
    Mr. Peter Bottomley: Is it not correct that the rate of inflation will be at 20 per cent. in November only if people at work press for large pay increases on a continuous basis? Those who would like the rate of inflation to be at 16½ per cent. in November will do everything that they can to keep down the rate of pay increases.
    Mr. Prentice: I agree with my hon. Friend. The best service that hon. Members can perform for pensioners and other recipients of national insurance is to argue strongly for restraint in wage and salary claims in the coming year.
    Mr. Andrew F. Bennett: Does the Minister agree that if he has got the inflation rate right at 16½ per cent. in November, he can give a categorical assurance now that if there is a shortfall the Government will make it up, because there would not be any shortfall? If he is not prepared to give that assurance, that must mean that he has no confidence in his estimate of the inflation rate in November, and that all that he wants to do is to delay letting pensioners know by just how much more he will rob them by not raising the rate in line with inflation.
    Mr. Prentice: No, Sir. No Government can be absolutely certain in June what the inflation rate will be in November. No Government would make a hypothetical assumption that the existing estimates are wrong, and therefore they must make firm statements about what will happen if they turn out to be different.
    Mr. Orme: Is the Minister not aware, however, that there was a shortfall last

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    November of 1·6 per cent., that the Government are robbing pensioners of two weeks' justifiable increase this year, and that if the rate of inflation is over 16½ per cent. pensioners will be hit again? My hon. Friends are right to press the Government, in view of the treatment that they are giving to pensioners.
    Mr. Prentice: Pensioners will be aware that last November we uprated pensions and other benefits by almost 2 per cent. more than the statutory obligation, in order to make good a shortfall that had occurred under the Labour Government's arrangements, so our record on this matter is good. These matters are never the subject of categorical assurances in advance. If there is a shortfall, the matter will be considered when we know about it. We shall know about it by about the middle of December, when we shall have the November RPI figures.

    Community Health Councils
    Mr. Rentonasked the Secretary of State for Social Services what role he sees for community health councils in the future of the National Health Service.
    Mr. Patrick Jenkin: I am considering with care the many comments we have received on paragraph 26 of " Patients First " about the future of community health councils, and I shall announce my decision next month.
    Mr. Renton: I thank my right hon. Friend for that answer. Does he not consider that even if, at times, they have been a bit cumbersome, CHCs have played a useful role in involving local people in local health and hospital decisions? When the area health authorities disappear, will not this neighbourhood participation in local decisions become even more important?
    Mr. Jenkin: I am in no doubt that many CHCs have made a constructive and helpful contribution to their local health services. In " Patients First " we acknowledged—indeed, we are grateful for it—the time and energy that many CHC members have devoted to their role. Whether this role remains as valid as it is now, given the proposed changes in the general structure of the NHS, is something that I am considering, and on which I shall announce a decision next month.
    Dr. Roger Thomas: Will the Minister consider ameliorating the rather ominous and loaded emphasis in the consultative document " Patients First " on the costs of CHCs?
    Mr. Jenkin: The point has been made on behalf of CHCs that if they did not exist many of these costs would be incurred by health authorities because they would have to deal with the public and provide information and engage in consultations in the way that the CHCs do. That is a point of which I take note, and it is among the matters that I am considering.
    Mr. Paul Dean: I accept that some community health councils have been more satisfactory than others. However, will my right hon. Friend take account of the fact that, possibly suitably reformed, they could be a valuable bridge between patients and the NHS, and that there is a good case for their retention?
    Mr. Jenkin: I am grateful for that expression of opinion from my hon. Friend, of which I certainly take note. Among the comments that we have received about CHCs there has been general agreement on the importance of the members appointed by the voluntary sector. It may well be that CHCs would stand to gain and that their work would be more relevant if they had among their membership a higher proportion of people from the voluntary sector.
    Mr. James Hamilton: Will the right hon. Gentleman accept that, as the hon. Member for Somerset, North (Mr. Dean) said, there is a strong case for the retention of CHCs? Is the right hon. Gentleman aware that the view is that at least the patient has the right to go to his CHC, and that on that basis there is direct consultation? If we lose that, patients will feel that they have lost everything.
    Mr. Jenkin: I take note of that expression of opinion as well. The CHCs were set up not primarily to be patients' friends, but to represent, as it were, the public collectively in relation to the health authorities whose districts they cover, and that function has grown. Many patients have difficulty in finding their way around the administrative system in the NHS, and the CHCs have been valuable

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    in helping them to put forward their complaints.

    Hospital Waiting Lists
    Mr. Edwin Wainwrightasked the Secretary of State for Social Services how many persons are on the waiting list requiring surgical treatment at each of the area health authorities in the South Yorkshire district; and what were the comparable figures for the previous three years.
    The Under-Secretary of State for Health and Social Security (Sir George Young): I shall circulate the information requested in the Official Report. The latest centrally available routine return shows that on 30 September 1979 about 20,000 people were waiting for admission to surgical departments of hospitals in South Yorkshire.
    Mr. Wainwright: Are the figures improving? Secondly, will the right hon. Gentleman take into account the fact that many people on these waiting lists are suffering pain and inconvenience while waiting to enter hospital? When will the Government do something to ensure that patients are taken off the lists in rotation, instead of allowing some doctors, as some are doing now, to recommend to patients that they see a consultant and say that for a sum of between £700 and £1,000 they can have an immediate operation for arthritic hips?
    Sir G. Young: The answer to the first part of the hon. Gentleman's question is

    NUMBER OF PEOPLE AWAITING IN-PATIENT ADMISSION IN SURGICAL SPECIALTIES ON 30 SEPTEMBER

    Area Health Authority

    1976

    1977

    1978

    1979*

    Barnsley

    …

    …

    …

    2,181

    2,594

    3,077

    3,966

    Doncaster

    …

    …

    …

    3,497

    3,659

    4,412

    4,689

    Rotherham

    …

    …

    …

    2,510

    2,013

    2,600

    2,962

    Sheffield

    …

    …

    …

    7,748

    7,845

    8,350

    8,887

    * Provisional figures.

    Westminster Hospital
    Dr. Mawhinneyasked the Secretary of State for Social Services if he has any plans to reduce the number of beds at the Westminster hospital.
    Sir George Young: No, Sir.
    Dr. Mawhinney: I thank my hon. Friend for that reply. Is he aware that a senior member of London university and a Member of the other place is claiming that the decision in the Flowers report
    that the waiting list in England for inpatient admission in December 1974 was 517,000. By March 1979 it had risen to 752,000. The latest available figures show a fall of about 50,000, to about 700,000 last year.
    On the hon. Gentleman's specific question, the Trent regional health authority has now determined a target waiting list for each specialty, in order to achieve the Department's targets. The achievement of the target in surgical specialties will require a substantial increase in admissions and operations over the next few years.
    Mr. Crowther: Is the hon. Gentleman aware that the Trent region, which includes South Yorkshire, is at the bottom of the league in the allocation of Health Service resources? Is he further aware that the equalisation process begun by the previous Government has come to a stop? What will he do about an area that desperately needs these services, but does not happen to return many Conservative Members to this place?
    Sir G. Young: When my right hon. Friend made the allocations to the regions a few months ago he managed to get a larger-than-average increase to those regions, such as Trent, that were underfunded. If we are to make real progress in the equalisation of Health Service resources throughout this country, we must generate some economic growth with which to pay for it.
    Following is the information:
    to do away with the Westminster medical school was based on a decision, reputedly from his Department, to reduce the number of beds in Westminster hospital? Because of that, will my hon. Friend take steps today to write a full response to the university, embodying the reply that he has just given to me?
    Sir G. Young: I think that my hon. Friend is referring to a consultative report by the London health planning consortium. Those views are not the views

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    of Ministers. If and when the consortium's proposals are submitted to us, after consultation we shall ask the new London advisory group, under Sir John Habakkuk, to consider them and any other proposals affecting the level of acute services in central London. Until we have Sir John Habakkuk's advice later in the year, we have no intention of forming a view on any of these issues.
    Mr. James A. Dunn: Will the Minister undertake a review of the circumstances surrounding the recommendations that have been made? It would appear that this is confusion confounded. Indeed, if one were to take note of the various inputs one would finish up absolutely confused on all the relevant facts. In those circumstances, will he make a fuller statement to the House?
    Sir G. Young: We had a full Adjournment debate on this subject a few weeks ago, when the matter was ventilated by a number of hon. Members. The London health planning consortium was set up two years ago by the previous Government, and it was the consortium's report to which I think the hon. Member was referring.
    Mr. Mellor: With the greatest respect to my hon. Friend, will he please make it clear that if it is not the Government's view that the consortium's report is right, that fact should be given the widest publicity? London university is acting on the assumption that it may be the Government's policy, and it is taking its decision in July. It is disgraceful that it should still be under this misapprehension.
    Sir G. Young: Ministers have not yet come to a conclusion on the various issues that my hon. Friend has raised. The views of the London health planning consortium are the views not of Ministers but of the officials who compiled the report.
    Mr. Ennals: Will the Minister confirm that the vice-chancellor of the university said, within the hearing of hon. Members from all parties, that it was clear that there would have been no proposal to close Westminster medical school, had it not been assumed that there would be a cut of 400 beds? Does the Minister agree that it would be appalling if the university were to make a decision about the medical school, based on an assumption
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    which he has confirmed has no foundation?
    Sir G. Young: The University of London should be under no such illusion. It should make the changes that it thinks right, in the light of the Flowers report. Both my right hon. Friend and I have made clear that the Secretary of State will not prejudge the proposals for changes in the pattern of hospital services until he has heard from the London advisory group.

    Day Nurseries
    Mr. Dubsasked the Secretary of State for Social Services how many day nursery places for under-fives there are in England and Wales; how many new places will be provided in 1980–81; and how many places will be lost through closures.
    Sir George Young: On 31 March 1979 there were 28,700 places in local authority day nurseries in England and Wales, and private premises were registered to provide all-day care for up to 22,600 children. Information is not available on the number of new places to be provided in 1980–81, or on the number of places to be lost through closures.
    Mr. Dubs: Does the Minister accept that there is an urgent need to provide more day nursery places? Is he aware that Wandsworth council has recently decided to close a day nursery in an area in which more places are needed? Will he urge local authorities not to close day nurseries, but to provide more care for the under-fives?
    Sir G. Young: No, Sir. In general, I do not accept that it is the State's job to provide day care to enable the parents of young children to go out to work. I understand that Wandsworth council has made arrangements for those children who were attending the Nightingdale Lane day nursery. Under a recent phase of the urban programme, several latchkey children's schemes have been put forward by Wandsworth council, and have been approved.
    Mr. Thompson: Is there any cooperation between the Department of Health and Social Security and the Department of Education and Science on this issue?
    Sir G. Young: I hope that I shall not be misunderstood when I say that I keep in very close touch with Lady Young, Minister of State, Department of Education and Science. She is no relation. I have regular meetings with her about provision for the under-fives. Last autumn we jointly met a delegation from the Pre-School Playgroups Association. Later this month we shall make joint visits to schemes for under-fives in Hounslow and Haringey.
    Mr. Moyle: Given the Minister's decision to abolish the Personal Social Services Council with effect from tomorrow—despite its excellent record of advice to Governments and despite savage cuts in personal social service budgets—is not the only way that he can maintain credibility to admit that such services will deteriorate steadily under this Government?
    Sir G. Young: With great respect to the Personal Social Services Council, it has not provided any services for the under-fives.
    Mr. Soley: Does the Minister agree with the National Society for the Prevention of Cruelty to Children that the best way to reduce the incidence of child cruelty and abuse is to provide adequate day-care provision? If he agrees with the NSPCC, will he ensure that all local authorities provide adequate facilities?
    Sir G. Young: The Department will shortly issue a circular that will indicate how the register might be put to more effective use to reduce the tragic incidence of child abuse.

    Paul Hardman
    Mr. Spriggsasked the Secretary of State for Social Services if he has received the details about Paul Hardman, who has suffered as a result of vaccine damage for a number of years; and what steps has he taken to advise the hon. Member for St. Helens about the parents' right to claim payment under the Vaccine Damage Payments Act 1979 on behalf of their son, Paul.
    Mr. Patrick Jenkin: I have received those details. I share the hon. Gentleman's distress that Paul should be so severly disabled. I have replied to the hon. Gentleman's letter. A particular difficulty
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    affecting the case is that many of the medical records are difficult to decipher.
    Mr. Spriggs: I thank the right hon. Gentleman for his letter, which I received at 2 o'clock this afternoon. Is he aware that the information contained in the letter is not very helpful in a case in which a child has been severely damaged for the rest of his life, and in which there is no hope of his regaining normal health? A claim is being made under the Vaccine Damage Payments Act 1979, but it is said that the claim will hang on the question of probability. In a case such as this, where there is some doubt, should not the child be given the benefit of any doubt, and receive damages?
    Mr. Jenkin: I assure the hon. Gentleman that this case has been dealt with precisely in accordance with the Act passed by the last Parliament. The Bill was introduced by the right hon. Member for Norwich, North (Mr. Ennals). First time round, on the balance of probability, the authorities were unable to conclude that Paul's disabilities were due to vaccination. His parents have a right of appeal and they are pursuing that. I hope that it will be heard as soon as possible.

  LARKHILL, STOCKPORT
  Mr. Andrew F. Bennettasked the Prime Minister if she will pay an official visit to Larkhill, Stockport.
  The Prime Minister (Mrs. Margaret Thatcher): I have at present no plans to do so.
  Mr. Bennett: From Larkhill the Prime Minister would be able to see four old council estates in Stockport that are in desperate need of modernisation and repair. What advice would she give to the elderly and to those on low incomes living in those houses about how to modernise their homes, in view of the drastic cut back in Government spending on housing and the increasing number of unemployed in the building trade in Stockport?
  The Prime Minister: With regard to expenditure on housing, it is for the local authority to determine its priorities. I share the hon. Gentleman's disappointment that after quite a long period of Labour government, he must indicate that position.

  PRIME MINISTER (ENGAGEMENTS)
  Mr. Peter Bottomleyasked the Prime Minister if she will list her official engagements for 3 June.
  The Prime Minister: In addition to my duties in this House I shall be having meetings with ministerial colleagues and others.
  Mr. Bottomley: How does my right hon. Friend intend to deal with the reduction in the United Kingdom contribution to the EEC? Am I right in thinking that a good part of it will be put towards the public sector borrowing requirement and so lead to lower interest rates? Is not that the key to future progress?
  The Prime Minister: My hon. Friend is right. One of our greatest problems is high interest rates. It is vital that the refunds that we have secured from the European budget should go to reducing the public sector borrowing requirement and, therefore, interest rates.
  Mr. David Steel: Since the purchasing power of the pound has continued to fall steadily under this Government, so that the value of the 50p piece introduced in 1969 is now only 13½p, will the right hon. Lady consider commemorating the first year of this Government's term of office by introducing a £1 coin?
  The Prime Minister: I have not considered that. The greater part of the reduction did not occur under this Government.
  Mr. John Carlisle: Will my right hon. Friend take time off today to send a message of support to the British Lions rugby team in South Africa, to encourage it in its games against multi-racial teams in front of multi-racial crowds? Is it not time that we tore up the Gleneagles agreement?
  The Prime Minister: I am sorry to disappoint my hon. Friend. We advised the British Lions that to go to South Africa would be contrary to the Gleneagles agreement. We also said that when sufficient advances had been made in the present arrangements in South Africa for races playing together we would consider revising the agreement. That time has not yet arrived.
  Mr. Bagier: Does the right hon. Lady appreciate that the treatment that she received from some people during her recent visit to Sunderland was less than the courtesy normally given to VIPs visiting the area?
  Mr. William Hamilton: It served her right.
  Mr. Bagier: What will she do to alleviate the tremendous problems of Sunderland and similar areas?
  The Prime Minister: I do not agree with the hon. Gentleman's assessment. I had a very enjoyable and valuable visit to Sunderland and Durham. I hope to return to the North-East again. I learnt a good deal about their problems. One problem in Sunderland is persistent unemployment, which results from the great difficulties of the older industries. The hon. Gentleman is aware that subsidies are being given to help shipbuilding. We shall do all that we can. He will also be aware of the proposal in the Budget for enterprise zones. Many people are applying for those zones. I hope that decision will be made within about six weeks on who shall have them.
  Mr. Mellor: Has my right hon. Friend had an opportunity to study the new policy document to which the Labour Party has apparently committed itself? Does she agree that it appears to be nothing short of disgraceful that the Labour Party's policy-making has been taken over by the Trotskyite militant faction?
  The Prime Minister: I have not considered it, but I am sure that what my hon. Friend has said is true, and therefore the document will not be among my top priorities for reading.
  Mr. Stephen Rossasked the Prime Minister if she will list her official engagements for 3 June.
  The Prime Minister: I refer the hon. Member to the reply which I gave a few moments ago.
  Mr. Ross: If the Prime Minister meets the Chancellor of the Exchequer some time before the end of the day, I hope that they will do something to help manufacturing industry in this country. Are we now positively to discriminate in favour of the producers in our society, or

  1243
  is the right hon. Lady prepared to go down in history as the Prime Minister who allowed more bankruptcies and more closures to take place than at any other time in the last 100 years? What does she intend to do to help our manufacturing industry, faced with an over-valued pound and high interest rates?
  The Prime Minister: I have already seen my right hon. and learned Friend the Chancellor of the Exchequer today, and we discussed just these problems. The greatest help that can come about for manufacturing industry is for wage increases to be related to productivity increases. That is a matter for employees and management to discuss together.
  Mr. Gummer: Will my right hon. Friend take time today to ensure that the public are aware of the fact that during five years' of Labour Government no kind of rearrangement with the EEC was achieved, whereas in one year of this Conservative Government a major change has taken place—and the right hon. Member for Stepney and Poplar (Mr. Shore) was ungenerous enough to carp even at that great success?
  The Prime Minister: I am grateful to my hon. Friend. The one thing that the right hon. Member for Stepney and Poplar (Mr. Shore) forgot was the Labour Government's lamentable record on this front.
  Mr. James Callaghan: Would the right hon. Lady care to take into account that in two years of Labour government we made a surplus in our dealings with the EEC, which is more than her Government have done? With regard to the general position—with which the question by the hon. Member for Isle of Wight (Mr. Ross) is concerned—why does the Prime Minister propose to wait until mid-July to get her Cabinet together to consider the failure of these economic policies? Ought they not to be reversed immediately?
  The Prime Minister: Any years in surplus must have been arranged by the previous Government. The White Paper on public expenditure demonstrates the actual transfers of funds over the past years, which were enormous during the latter part of the Labour Government's term of office and were enormous this year. What has been negotiated now is a
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  refund of some £710 million this year and a refund of some £860 million next year, which is an excellent result, and of course we shall continue with the restructuring of the common agricultural policy and of the EEC budget. Meetings of the Cabinet on economic policy are regular.
  Mr. Callaghan: What is the status of this Cabinet meeting to be held on 16 July? Is it to reverse these dreadful polices which, after 13 months of Conservative Government, have led to a high rate of inflation and the threat of even higher unemployment? The right hon. Lady knows also that the output of manufacturing industry is going to decline. When will she adopt policies that will reverse these disasters?
  The Prime Minister: The right hon. Gentleman is trying very hard. We have regular Cabinet meetings on economic policy. We do not reveal the agendas. Nor did he reveal the agendas of his Cabinet.
  Mr. Callaghan: In that case, the right hon. Lady need not wait for Cabinet meetings in order to reverse these policies. It is the disaster that is overtaking Britain and its people that we are concerned about. What is she going to do about it?
  The Prime Minister: One relevant matter that has come up today is that the refund will go towards reducing expenditure, which will help to reduce interest rates. I shall, of course, be very grateful for any help that the right hon. Gentleman sees fit to give in encouraging wage increases to keep step with productivity increases, but I do not expect such assistance from that quarter.
  Mr. Brinton: During the course of her busy day, will my right hon. Friend spare a moment to reflect on the sad events at the CEGB power station at Grain, in my constituency, last Tuesday, not in any sense to crow that right thinking overcame violence, but to look at the deeper implications? Does my right hon. Friend agree that the 1,600 people who were in work wish to continue working? If the trade unions involved can cobble up their differences, will she please encourage the CEGB to go ahead and complete that power station, thus giving those loyal people the work that they want?
  The Prime Minister: I am glad to respond to my hon. Friend. I think that the state of affairs at the Isle of Grain power station shows two things. The first is the lamentable relationship between the unions concerned, which I hope they will be able to sort out in the interests of all who work in the industry and of trade unionism itself, and the second is the lamentable state of affairs for the people of this country who have put an enormous amount of investment into that power station, which is reflected in their electricity prices. I hope that the power station will be completed and produce the electricity for which it was designed.
  Mr. Canavanasked the Prime Minister if she will list her official engagements for 3 June.
  The Prime Minister: I refer the hon. Member to the reply which I gave a few moments ago.
  Mr. Canavan: Will the right hon. Lady find time to make a statement about reports of Government contingency plans for the use of the Armed Forces in Scottish hospitals in the event of industrial action by hospital workers? Why not avoid the possibility of industrial disputes by giving the Health Service workers a decent wage increase instead of using troops as scab labour to do a job for which they are not trained?
  The Prime Minister: I hope that satisfactory agreements will be concluded, because, after all, those who work in the Health Service serve the people of this country, including Scotland, and I hope that that will be their top priority.
  Mr. Cadbury: Will my right hon. Friend find time today to take account of the anger felt by many people in Birmingham over the recent decision by the Labour-controlled council to end the sale of council houses? Will she give an assurance that when the Housing Bill becomes law no council will be allowed to deny tenants the right to buy their houses?
  The Prime Minister: I am not certain whether that decision is final. If it is, I very much regret it, as do many of the people who live in those council houses. When the Housing Bill becomes law people will have the right to purchase their council houses, and hundreds of thousands of them will take up that right.
  Mr. English: Has the right hon. Lady considered the possibility that one policy of the Chancellor of the Exchequer might be absolutely right if only he continued with it? Is she aware that the exchange rate would now probably be higher than it is had he not abolished exchange controls? Will she now suggest to her right hon. and learned Friend that he should carry on with his policy and reintroduce exchange controls in reverse, so that without increasing the money supply he can lower the exchange rate?
  The Prime Minister: Of one thing I can assure the hon. Gentleman—[Interruption]. My right hon. and learned Friend—[HON. MEMBERS: " Answer "]. I am trying to.
  Mr. Speaker: Order. The noise only takes away from the Prime Minister time for answering questions and makes it harder for her to answer.
  The Prime Minister: I assure the hon. Member for Nottingham, West (Mr. English) that my right hon. and learned Friend will carry on with his present policies.
  Mr. Ancram: Is my right hon. Friend aware that despite continuing Soviet aggression in Afghanistan a number of Labour-controlled councils in Scotland are giving large sums of ratepayers' money to support the Olympics? Does she regard that as a scandalous abuse of ratepayers' money at a time of restraint?
  The Prime Minister: I am aware of that decision. I join my hon. Friend in thoroughly deploring it.
  Mr. Ogden: Will the right hon. Lady realise that this is a comparatively simple question? Will she inform her hon. Friend the Member for Edinburgh, South (Mr. Ancram) that many councils, both Labour and Conservative, that might, for their own reasons, want to sell council houses will be unable to do so because funds for mortgages are being denied to those councils by her right hon. Friend the Secretary of State for the Environment?
  The Prime Minister: But the funds for the building of the houses have already been borrowed and are then repaid. It is not impossible to transfer that loan to the tenant.

NEW HEBRIDES
The Minister of State, Foreign and Commonwealth Office (Mr. Peter Blaker): With your permission, Mr. Speaker, I shall make a statement on the New Hebrides.
As the House is aware, the condominium of the New Hebrides is the joint responsibility of Britain and France. Yesterday evening in Paris I met my French colleague, M. Dijoud, the Secretary of State for Overseas Departments and Territories, to review recent events on the island of Espiritu Santo.
M. Dijoud and I agreed that we must discharge our joint responsibility to maintain law and order in the territory. We agreed that we must re-emphasise our joint support for the democratically elected Government of the New Hebrides our commitment to the independence constitution agreed by all parties in Vila last year, and our determination to safeguard the territorial integrity of the condominium.
We further agreed that the authority of the legitimate Government must be restored on the island of Santo as soon as possible, and condemned the actions of those responsible for the armed insurrection on the island.
We agreed that we must jointly make one further effort to persuade both sides to renew, in a true spirit of compromise, the discussions begun in London in March and which have continued until recently, in order to find a peaceful solution to their differences.
In making this appeal, and in urging the Chief Minister to pursue a policy of national reconciliation, we recognised that an essential prerequisite of constructive negotiations must be the reimposition of the authority of the legitimate Government on the island of Santo. In short, those responsible on Santo must agree to return to the legal and administrative position obtaining before the insurrection of 28 May.
M. Dijoud informed me that France was now prepared to agree to the 30 July independence date proposed by the New Hebrides Government. In accepting this date, which is a mere two months away, we recognised that the present problems must be urgently resolved. If no progress is made towards reconciliation,
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Britain and France will decide jointly on what further action to take.
Mrs. Dunwoody: Is the Minister aware that this weak and vacillating statement is in total contradiction to the pledges that he has given to the House to maintain law and order, which he has undertaken to do on behalf of the British Government? The Minister said that the Government are prepared to take all necessary steps to preserve the peace of the New Hebrides. He said that a joint force of police mobiles was ready to take action is necessary. What has happened to that undertaking?
Have the French Government made it clear to those of their nationals who are reported to be supporting this shabby little manoeuvre that they will not in any circumstances allow them to carry on with this open flouting of the central Government? Is he aware that the Chief Minister has more than once offered talks to the people on Espiritu Santo and that his offers have been openly spurned? Why have the Government climbed down, and what do they intend to do to maintain the peace of the New Hebrides?
Mr. Blaker: I totally repudiate the tone of the hon. Lady's question. The main criticism that I have heard in the past two months about the action of the French and British Governments has been that the independence constitution that M. Dijoud and I worked out together last autumn has worked in such a way as to favour the anglophone Government of the New Hebrides. My French colleague and I issued a statement in January in which we clearly stated our support for the legitimate Government of the New Hebrides and our determination to reject any movement towards secession. If the hon. Lady studies the statement that M. Dijoud made with me yesterday, she will find that it is a very strong statement. I assume that M. Dijoud can be taken at his word.
If the hon. Lady is asking for the use of military force, I must tell her that I agree with my French colleague that for the moment the right course is to make a further attempt at negotiation. As recently as 28 May the Chief Minister called for further negotiation. However, the Government have sent to the New Hebrides two military advisers. They are

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there now, and they will be able to advise the Government what steps may be necessary, in a military sense, if, regrettably, the peaceful negotiations that we have proposed do not succeed.
Mrs. Dunwoody: This is a total contradiction of the undertaking that the Minister gave to the House. He said that a police mobile force was available, which would take action, if necessary, to restore law and order on Santo. He now says that they are offering military advisers. Will he please give us a clear explanation, or has he backed down in the face of the attitude of the French Government?
Mr. Blaker: No. I repeat that we have not backed down. I have taken the same view as my colleague, M. Dijoud, namely, that for the time being the right course is to press both sides for further negotiations. I remind the hon. Lady that when there were disturbances on the island of Tanna a few days ago we took action with the police mobile forces. That action was successful. Before we go in for military action, we must be careful to ensure that such action will be effective. That is one of the matters on which we shall have advice from the two military advisers. For the time being, we believe that the right course is negotiation, which Father Lin was supporting on 28 May.
Mr. Kershaw: Does my hon. Friend agree that he is wise to proceed slowly and cautiously in this particular and peculiar part of the world? Secondly, what is the attitude of Her Majesty's Government to the Phoenix Foundation?
Mr. Blaker: I find it somewhat surpriing that the Opposition should be calling, apparently, for military action in such a hurry. It is something that we will wish to remember on future occasions. It contrasts with some attitudes that they have taken in the past.
It is clear from the Phoenix Foundation's own admission that it has been involved in the insurrection. I have agreed with M. Dijoud that we should take action to eliminate the meddling of the Foundation on Santo. At our request, the United States Government have agreed to see whether any United States laws have been violated by the involvement of United States citizens. Yesterday, the State Department issued a statement that
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it was its intention to prosecute should there be any violation of United States law.
Mr. Heffer: Send in an assasination squad.
Mr. Christopher Price: Will the hon. Gentleman tell us in rather greater detail why the Government have decided to renege on their absolute pledges in the House, on three occasions, to take whatever measures were necessary to restore law and order, and why they have allowed M. Dijoud to issue a statement that only negotiations—that is, ruling out force, as we did over Rhodesia—can solve the problem?
Will the hon. Gentleman confirm that, although there is a duty to consult in the treaty, as in the Cyprus treaty, there is nothing to preclude the British Government, if necessary, taking unilateral action if they decide that that is proper? Finally, can the hon. Gentleman give an absolute assurance that if Mr. Oliver, any other member of the Phoenix Foundation, or any member of the French interests in Paris involved in the coup against the legitimately elected Government of the New Hebrides arrives at Port Vila, he will be sent home on the next plane?
Mr. Blaker: The Government are not reneging on any of their undertakings. I repeated those undertakings in my statement today. We did not say that in the event of the threat of secession, or secession, our first step would be to take military action. We said that we would sustain the integrity of the New Hebrides. Powers exist to keep Mr. Oliver and the other members of the Phoenix Foundation out of the New Hebrides. I have my French colleague's assurance that such powers will be used if necessary. The nature of the condominium is such that it is assumed that the two metropolitan Powers will always act together. The basic constitutional document, which is the document of 1914, is silent on the possibility of unilateral action. I believe that it is essential for Britain and France to act together. That way we have the best chance of success.
Mr. Philip Holland: As one who was recently airwrecked in the New Hebrides, may I ask my hon. Friend to congratulate warmly the authorities in Port Vila for their prompt action in removing from

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the area of insurrection people who might have been at risk? Can my hon. Friend assure us that, if necessary, further support will be given immediately to the authorities in Port Vila to mount a rescue operation and put down the insurrection promptly?
Mr. Blaker: I am grateful for my hon. Friend's remarks about the British authorities' actions in Port Vila in rescuing people from the island of Santo. I shall see that those remarks are passed to our resident commissioner. They are well deserved. I do not believe that he requires further help at present to continue the rescue operation. I have nothing to add to what I said with regard to the use of force.
Mr. Russell Johnston: As all the problems that we are now concerned with were ventilated in debates in this House, and, I presume, were equally well known to the French Government, how on earth have two such widely experienced colonial Powers got themselves into such an enormous mess?
Mr. Blaker: I do not accept that it is the two colonial Powers that have got themselves into an enormous mess; nor would I describe the situation as an enormous mess. It is a problem. I am sure that the hon. Gentleman understands that a condominium is not the easiest arrangement to manage. The problems of a country coming to independence from condominium status are greater than those of a country that has been ruled by only one country.
Mr. Cormack: Does my hon. Friend agree that it is revealing that the Opposition are anxious to use force only when the enemy is armed with bows and arrows?
Mr. Blaker: I have noted the interesting development of the Opposition calling for the use of force. However, the House should not assume that bows and arrows are the only weapons with which the rebels are armed. They have other weapons. The House should also not assume that a bow and arrow is not a lethal weapon.
Mr. Speaker: Order. I propose to call those hon. Members who have been rising throughout questions on the statement.
Mr. Dalyell: Are senior advisers in the Foreign Office in any way haunted by the rotten advice about Anguilla that they gave to my noble Friend Lord Stewart of Fulham—then Mr. Michael Stewart—when he was Foreign Secretary? If not, they should be. In terms of force, what does the Minister mean by his reference to the Government's determination to safeguard the territorial integrity of the condominium?
Mr. Blaker: I do not believe that a valid comparison can be made between the New Hebrides and Anguilla. We are dealing here with a minority group that lost the regional election in Santo last November. Having lost that election, that group is attempting to gain control by the use of force. The meaning of my statement is perfectly clear. I have already dealt with the hon. Gentleman's point.
Mr. Paul Dean: Will my hon. Friend accept that I welcome his statement that it is the joint responsibility of the British and French Governments to ensure that law and order are restored? Does he agree that it is essential for the future viability of the New Hebrides that its territorial integrity is maintained and fragmentation is avoided?
Mr. Blaker: I entirely accept my hon. Friend's point. A matter also understood by the Chief Minister and hon. Members who know the New Hebrides as well as my hon. Friend is that it will continue to be dependent on France and Britain after independence, as it will require aid from both countries. That is an important factor in the future life of the New Hebrides, and one reason why I believe that it is important for Britain and France to act together.
Mr. Hooley: Is the hon. Gentleman aware that the French Government appear to be following the same dubious policy in the New Hebrides as that which they followed in the Comoro Islands, which led to international friction? Is he also aware of the involvement of the squalid American business interests in the episode? If so what formal representations have been made to the American Government?
Mr. Blaker: There is no comparison between the situation in the New Hebrides and that in the Comoro Islands.

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Perhaps the hon. Gentleman was not in the House when I answered a question about the American business interests a few months ago.
Mr. Biggs-Davison: How many people have been evacuated or rescued from Espiritu Santo, and how are they being looked after?
Mr. Blaker: According to the latest information that I received this morning, a total of about 1,400 people have been evacuated from Santo. Among them are 104 people of non-New Hebridean origin, including 21 British subjects. To our knowledge, a few people are left, including one Briton who has chosen to remain, and about 30 other non-New Hebrideans. The people evacuated are being looked after under emergency arrangements. I have had no complaints about difficulties.
Mr. Ogden: Will the Minister now accept that the Melanesian way includes the use of force, as he has been warned on more than one occasion in past weeks? Will he further accept that either local French officials have been misleading the French Government, the French Government have been misleading the hon. Gentleman, or the hon. Gentleman has been inadvertently misleading the House? Will he please check his information? Does he believe that Mr. Jimmy Stevens will take notice of the statements that he, the Minister, makes in this House?
Mr. Blaker: We have agreed that the French and British Governments will do their utmost to persuade both sides to agree to the negotiations that we have proposed. I believe that there is evidence that some officials employed by the French sector of the New Hebrides Government have acted in an improper manner. I make a distinction between their actions and those of the French Government. M. Dijoud agreed yesterday to the communiqué contained in my statement. I believe that I am entitled to take him at his word.
Mr. Gummer: Does my hon. Friend agree that the future of the New Hebrides depends on the English—and French—speaking people getting on together? It is therefore most important that the two countries act together and are not seen to be divided. Will my hon. Friend
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accept that the House does itself no credit by trying to drag anti-French feeling into this serious situation?
Mr. Blaker: I entirely agree. It is very much in the interests of the New Hebrideans that Britain and France should act together. However, I emphasise that the action agreed on yesterday was taken on its merits and on no other criteria.
Mr. Christopher Price: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
" the reneging by the Government on their absolute pledge in the House of Commons to take all necessary measures to preserve law and order in the New Hebrides and their failure to defend those islands' territorial integrity ".
I gave you notice, Mr. Speaker, before noon today that I might seek to move the Adjournment of the House to discuss this matter.
Hon. Members will remember the three recent occasions when the question of the New Hebrides has been discussed on the Floor of the House. The first occasion arose from a private notice question by my hon. Friend the Member for Eton and Slough (Miss Lester) on 22 November last year. In response to that the Minister of State, Foreign and Commonwealth Office—the hon. Member for Cirencester and Tewkesbury (Mr. Ridley)—said that he would use the police, and added:
" We shall go further than that if events prove that further action is necessary."
In answer to a later question the hon. Gentleman said that if the police
" are inadequate, further forces will be sent."—[Official Report, 22 November 1979; Vol. 974, c. 561–2.]
I initiated an Adjournment debate on 7 December and the Minister of State, Foreign and Commonwealth Office—the hon. Member for Blackpool, South (Mr. Blaker)—said:
" I can assure the House that we are prepared to take all necessary steps to preserve the peace of the New Hebrides as long as we are responsible for it."—[Official Report, 7 December 1979; Vol. 975, c. 885.]
We heard the hon. Gentleman's statement today alongside a statement by the French Minister, M. Dijoud, which appeared on the Press Association tapes saying exactly

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the opposite. He ruled out any form of force and said that only peaceful negotiations could solve the problem.
In stressing the urgency of the matter I put it to you, Mr. Speaker, that an issue of confidence in pledges given to the House is at stake. It is clear that law and order have broken down and that the territorial integrity of the New Hebrides has been breached.
I remind the House that UDI has been declared on the island of Santo and new documents have been issued to everyone who wishes to remain there. The power of the British half of the condominium has been eliminated, while French policemen on the island are allowed to go about unmolested.
Secondly, it is well known that not only American interests, through the Phoenix Foundation, of Carson City, are involved in the ownership of land in the New Hebrides. That has been confirmed to me in a letter from the Minister of State about the extent of the ownership of land on the island. A total of 3,498·5 hectares of land is owned by the Foundation. On top of that, French interests, which are particularly voluble in the French Senate, are making it impossible for M. Dijoud, the responsible Minister, to take any decisions on his own account. He has to refer everything to President Giscard d'Estaing, because of the French commercial interests that are involved.
There are two issues at stake—absolute pledges given in absolute terms on the Floor of the House and British responsibilities to a condominium for which we still have responsibility. I urge on you, Mr. Speaker, the fact that the Minister
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of State's statement represents a breach of faith with the House on pledges given to it. For that reason, an emergency debate is justified.
Mr. Speaker: The hon. Member for Lewisham, West (Mr. Price) seeks leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
" the reneging by the Government on their absolute pledge in the House of Commons to take all necessary measures to preserve law and order in the New Hebrides and their failure to defend those islands' territorial integrity ".
Mr. Skinner: Now read it in French.
Mr. Speaker: The hon. Member for Bolsover (Mr. Skinner) should not tempt me. I might go into Welsh, though that would not be very successful.
The hon. Member for Lewisham, West and the House know that when an application for an emergency debate is submitted to me I have to take into account the several factors set out in the Standing Order but to give no reason for my decision. The House knows that I do not decide whether the matters that the hon. Member has raised should be dabated, but merely whether they are of such a character that our business should be changed tonight or tomorrow night to allow an emergency debate to take place.
Having listened with care to the hon. Member, I must rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.

NUCLEAR POWER STATIONS SITES
3.57 pm
Mr. Bob Cryer: I beg to move,
That leave be given to bring in a Bill to provide for local voting on the siting of nuclear power stations, the conduct of that vote, the allocation of press space and television time during the campaign; and for connected purposes.
Nuclear power provides 12 per cent. of electricity generated in the United Kingdom, part of the CEGB's 28 per cent. total generating capacity above the forecast of future winter demand. Nuclear power comes from a variety of nuclear power stations, all of which have the common characteristics of widespread technical difficulties and delay in being brought into operation. All Magnox reactors have been downrated and the AGRs have suffered immense delays in being brought into use—Dungeness B 10 years late, Hartlepool eight years late, Heysham A six years late.
Two further power stations of the AGR pattern have been approved and three are close to becoming operational. It seems sensible, therefore, to consolidate our position and improve our existing techniques and safety and evaluate the existing nuclear stations rather than to embark, as the Government propose, on a further programme from 1982 onwards of 10 pressurised water reactors of the same family as the Three Mile Island type in America. It is especially disturbing that the type of reactor favoured is the one in which the GEC has a commercial interest. If that type is chosen, it will give that company an enormous commercial advantage.
It is especially absurd for the United Kingdom to embark on such a programme when we are rich in coal reserves, with at least 300 years' supply, and oil reserves which will make us self-sufficient for at least 20 years.
However, it is also true that fuel is finite. The proposition is put that only nuclear energy can help us to provide the necessary amount of energy resource that we need, but Professor Joseph Rotblat, writing in The Guardian on Thursday 29 May, with a comprehensive estimate of the calculations ascribed to nuclear energy, took a different view. He said:
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" Straightforward calculations can show that we have been misled about the potential of nuclear power and that in reality it can make only a small contribution to the world's energy needs over the next 50 years."
The article was a learned and comprehensive exposition of that point of view. If Professor Rotblat is right, by embarking on further new sites we are possibly endangering present and future generations for no possible purpose. My proposed Bill would enable these arguments and those of the proponents to be deployed in a referendum across an area about 30 miles in diameter, and provision would be made for the Home Secretary to accept representations for a larger area to be involved in the referendum.
In my view, referenda should apply only to unusual and special circumstances. Going nuclear in such a massive way is certainly unusual and constitutes special circumstances that demand special consideration. The immediate effect of leaks of radioactivity in the air or on the ground, as at Windscale, is in the area adjacent to the power station. In the Windscale leak, there was a precautionary ban on the consumption of milk within a radius of several miles of the power station. It is in the area in proximity to the nuclear power station sites that there would be the greatest loss of civil liberties due to the movement of nuclear fuel and spent material in the area.
Legislation already gives wide powers to special police supervising the movement of radioactive materials to carry and use firearms. To emphasise further the special nature of the position of people living in the area of a proposed PWR, the notes prepared by the Department of Energy for the Library contains the following comments:
" The possibility of a serious accident involving a release of radioactivity capable of affecting the nearby population is considered extremely remote. Nevertheless, it is prudent to have measures for the protection of the local community ready against such an eventuality. The operators of nuclear installations are therefore required by the conditions of the nuclear site licences to make preparations for dealing with emergencies.
Emergency arrangements are set out in a site emergency plan which each licensed operator is required to submit to the Health and Safety Executive. The plan covers: (a) on site organisation and arrangements; (b) off site arrangements in an emergency, for example, the evacuation of the neighbouring population, and the monitoring of radioactive levels, and (c) arrangements with outside

1259
bodies, such as local authorities, emergency services and Government departments. The local emergency services would be able to call on such national bodies as the National Radiological Protection Board and the Health and Safety Executive for help and advice."
It is clear that there is in people's minds the possibility of a very real and serious emergency affecting the local population surrounding the site of a nuclear power station. That is made clear by the comments of the Department of Energy. It is interesting that so much responsibility lies on the shoulders of the Health and Safety Executive, which currently has 17 vacancies out of a total staff of 104 at the end of a recruitment drive prompted by shortage of inspectors which led in 1979 to the lowest average number of inspectors per nuclear installation for seven years. At the same time, the Health and Safety Executive faces cuts as part of the public expenditure cuts imposed by the Government.
All these disturbing factors could be made clear during the referendum campaign, which, under the Bill, would last no more than a month. A scheme would be produced by the Home Secretary to provide for fair coverage in newspapers and on television. Newspapers would be controlled in much the same way as television is controlled during a general election campaign in their use of referendum material. This would help to stop the bias and distortion that occurs in the press during a general election campaign familiar to all hon. Members.
A fair allocation of space for each side would prevent any advertising pressure producing bias. Advertising itself in support of a particular view would be curtailed by limitations on expenditure that the scheme would place on the campaigning organisations registered under the scheme. Expenditure outside the registered organisations would be illegal for the period of the campaign.
It may be argued that planning procedures can take care of the views of a locality without the need for a referendum, but planning inquiries are in variably weighted in favour of the Establishment. The Government have enormous financial facilities as do the various nuclear organisations such as the CEGB and the Nuclear Power Corporation. They can afford to employ specialist lawyers
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and specialists to present the case. Ordinary citizens in the locality have to raise their own money and obviously have difficulty in doing so. Ordinary people feel that inquiries tend to be weighted in favour of the decision made by the Government or the planning body making the application. The referendum would give them a direct and clear voice. Although such referenda are advisory to Parliament, it would be impossible, in practice, for Parliament to ignore the views of the people so expressed.
The Government have expressed the view that for the establishment of trade union closed shops there should be a vote of 80 per cent. in favour among those eligible to vote. I do not share the Government's view of the importance of trade union closed shops, nor do I endorse their determined attack on them. I take the view, however, that nuclear power stations represent a real and continuing potential danger to present and future generations under the wrong combination of circumstances.
Because of the great importance of the issue, I have decided that the voting pattern must demonstrate overwhelming support that a new nuclear power station is desirable. The criterion would be that adopted in the Employment Bill promoted by the Government—that is to say, 80 per cent. of those eligible to vote must vote in favour of a nuclear power station site for it to be approved. People would thus have an opportunity fairly to argue the merits of the case. If the arguments for a new PWR station are overwhelming, the vote would follow. If people have reservations, if they are wary of experts such as those who assured local authorities about Ronan Point-type flats or those who assured the people living near Three Mile Island, and if they do not want to risk radioactive leaks, contamination, genetic damage to themselves, their children and their neighbours, they should have an opportunity, in the absence of conviction to the contrary, to vote " No ". My proposed Bill would give them that opportunity.
4.7 pm
Mr. Robert Maclennan: I rise to oppose the Bill. I recognise that the custom of the Ten-Minute Bill is to give hon. Members an

1261
opportunity of raising an issue that they consider to be important. Frequently, they do so in the expectation that their legislation will not progress very far. That is not universally the case. Having successfully piloted a Ten-Minute Bill through all its stages to the statue book, I take the view that one should regard an occasion of this kind not as a mere propaganda occasion but rather as the initiating of legislation. It is, therefore, right that the House should refuse to give permission to what I venture to describe as a somewhat mischievious attempt to put forward a view about the nuclear industry that perpetuates popular misconceptions and does nothing to enlarge the understanding of the British people of the great issues at stake in providing for our power needs in an age when fossil fuels are no longer available.
I also oppose the Bill on the ground that a local referendum of the kind advocated by my hon. Friend is a profoundly undemocratic procedure, which in any event would prove unworkable and create considerable anomalies. The fanciful notion that the people who happen to live within 30 miles of a power plant are the only people who would necessarily be affected by it, or should be given a right to pronounce whether or not the plant is to be located there, is one that, on reflection, I believe the House would not wish to support.
The proposition gives further support to the idea that popular local agitation should be encouraged to lead to decisions that may have national importance being overridden. That is in line with the policy that was espoused in Scotland

Division No. 331]

AYES

(4.12 p.m.

Allaun, Frank

Flannery, Martin

Marshall, Jim (Leicester South)

Alton, David

Fletcher, Ted (Darlington)

Meacher, Michael

Benn, Rt Hon Anthony Wedgwood

Foot, Rt Hon Michael

Mikardo, Ian

Bennett, Andrew (Stockport N)

Ford, Ben

Mitchell, Austin (Grimsby)

Booth, m Hon Albert

Foster, Derek

Morris, Rt Hon Alfred (Wythenshawe)

Brown, Hugh D. (Provan)

Freeson, Rt Hon Reginald

Morris, Rt Hon Charles (Openshaw)

Brown, Ron (Edinburgh, Leith)

Freud, Clement

O'Halloran, Michael

Callaghan, Jim (Middleton & P)

Garrett, John (Norwich 8)

O'Neill, Martin

Carmichael, Neil

Graham, Ted

Parry, Robert

Carter-Jones, Lewis

Grant, George (Morpeth)

Penhallgon, David

Coleman, Donald

Haynes, Frank

Price, Chrstopher (Lewisham West)

Cook, Robin F.

Homewood, William

Race, Reg

Crowther, J. S.

Hooley, Frank

Richardson, Jo

Davies, Rt Hon Denzll (Lianeill)

Hughes, Roy (Newport)

Roberta, Allan (Bootle)

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

Johnson, Walter (Derby South)

Roberts, Ernest (Hackney North)

Deakins, Eric

Kerr, Russell

Roberta, Gwilym (Cannock)

Dean, Joseph (Leads West)

Lestor, Miss Joan (Eton & Slough)

Robinson, Geoffrey (Coventry NW)

Dixon, Donald

Litherland, Robert

Rooker, J. W.

Dubs, Alfred

Lofthouse, Geoffrey

Ross, Ernest (Dundee West)

Eastham, Ken

McDonald, Dr Oonagh

Sheerman, Barry

English, Michael

McKay, Allen (Penistone)

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

Ennals, Rt Hon David

McKelvey, William

Skinner, Dennis

Evans, loan (Aberdare)

McNamara, Kevin

Stallard, A. W.

last week by the Scottish National Party, which proclaimed at its conference in Rothesay that a campaign of civil disobedience should be initiated against the decision of successive Governments to locate a nuclear power station at Torness.
Calls for civil disobedience are, in any language, calls for breaches of the law. I do not believe that breaches of the law should be advocated by any democrat. Equally, I believe that those of us who believe in parliamentary democracy take the view that Parliament is the right place to make decisions of this kind and that Governments must be accountable for these major decisions in this place. Those decisions should not run the risk of veto as a result of agitation in a particular local community.
Local community interests are well protected by the planning laws that this House has passed. Where wider considerations are involved, it is open to Governments to set up inquiries that are analogous to that which was held in the case of Windscale, allowing full considerations of local and national interest to be properly canvassed at great length, and giving local people a full opportunity to express their views on these issues.
My hon. Friend's suggestion is nonsense, and I hope that it will be resoundingly rejected by the House.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
The House divided: Ayes 75, Noes 188.

Stewart, Rt Hon Donald (W Isles)

Wilson, William (Coventry SE)

TELLERS FOR THE AYES

Welsh, Michael

Winnick, David

Mr. Dennis Canavan and

Wilson, Gordon (Dundee East)

Thomas, Dr Roger (Carmarthen)

Mr. Bob Crver

NOES

Adley, Robert

Grist, Ian

Pege, Rt Hon Sir R. Graham

Altken, Jonathan

Gummer, John Selwyn

Page, Richard (SW Hertfordshire)

Alexander, Richard

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

Parkinson, Cecil

Amery, Rt Hon Julian

Hamilton, Michael (Salisbury)

Parrls, Matthew

Arnold, Tom

Harrison, Rt Hon Walter

Patten, Christopher (Bath)

Aspinwall, Jack

Haselhurst, Alan

Patton, John (Oxford)

Baker, Nicholas (North Dorset)

Heddle, John

Percival, Sir Ian

Bell, Sir Ronald

Hicks, Robert

Pink, R. Bonner

Benyon, W. (Buckingham)

Higgins, Rt Hon Terence L.

Powell, Rt Hon J. Enoch (S Down)

Berry, Hon Anthony

Hill, James

Prentice, Rt Hon Reg

Best, Keith

Holland, Philip (Carlton)

Price, David (Eastleigh)

Bevan, David Gilroy

Howell, Ralph (North Norfolk)

Proctor, K. Harvey

Biggs-Davison, John

Howells, Geraint

Rhodes James, Robert

Blackburn, John

Irving, Charles (Cheltenham)

Rhys Williams, Sir Brandon

Blaker, Peter

Janner, Hon Greville

Ridsdale, Julian

Boscawen, Hon Robert

Jenkin, Rt Hon Patrick

Rifkind, Malcolm

Bottomley, Peter (Woolwich West)

Johnson Smith, Geoffrey

Roberts, Michael (Cardiff NW)

Boyson, Dr Rhodes

Johnston, Russell (Inverness)

Robertson, George

Brinton, Tim

Jopling, Rt Hon Michael

Robinson, Peter (Belfast East)

Brocklebank-Fowler, Christopher

Kellett-Bowman, Mrs Elaine

Sainsbury, Hon Timothy

Brooke, Hon Peter

Kershaw, Anthony

Scott, Nicholas

Brotherton, Michael

Kilroy-Silk, Robert

Shaw, Michael (Scarborough)

Brown, Michael (Brigg & Sc'thorpe)

Kitson, Sir Timothy

Shelton, William (Streatham)

Browne, John (Winchester)

Lambie, David

Shepherd, Colin (Hereford)

Bryan, Sir Paul

Lamont, Norman

Shepherd, Richard (Aldridge-Br'hills)

Budgen, Nick

Lang, Ian

Shersby, Michael

Bulmer, Esmond

Lawson, Nigel

Sims, Roger

Cadbury, Jocelyn

Lee, John

Skeet, T. H. H.

Carlisle, John (Luton West)

Le Marchant, Spencer

Speller, Tony

Carlisle, Kenneth (Lincoln)

Lennox-Boyd, Hon Mark

Spence, John

Chalker, Mrs Lynda

Lewis, Kenneth (Rutland)

Spicer, Michael (S Worcestershire)

Channon, Paul

Lloyd, Pater (Fareham)

Squire, Robin

Clark, Dr David (South Shields)

Loveridge, John

Stanbrook, Ivor

Cockeram, Eric

Luce, Richard

Steel, Rt Hon David

Cocks, Rt Hon Michael (Bristol S)

McCrindle, Robert

Stewart, Ian (Hitchin)

Cope, John

Macfarlane, Neil

Stewart, John (East Renfrewshire)

Corrle, John

MacGregor, John

Stradling Thomas, J.

Costain, A. P.

MacKay, John (Argyll)

Taylor, Teddy (Southend East)

Dickens, Geoffrey

MacKenzle, Rt Hon Gregor

Temple-Morris, Peter

Dormand, Jack

McNair-Wilson, Patrick (New Forest)

Thomas, Rt Hon Peter (Hendon S)

Douglas-Hamilton, Lord James

McQuarrie, Albert

Thompson, Donald

Duffy, A. E. P.

Major, John

Thorne, Neil (llford South)

Eden, Rt Hon Sir John

Marlow, Tony

Thornton, Malcolm

Elliott, Sir William

Marshall, Michael (Arundel)

Townend, John (Bridlington)

Evans, John (Newton)

Mates, Michael

Trippier, David

Fairgrieve, Russell

Mather, Carol

Viggers, Peter

Faith, Mrs Sheila

Mawby, Ray

Waddington, David

Fell, Anthony

Mawhinney, Dr Brian

Wakeham, John

Fenner, Mrs Peggy

Mellor, David

Walker, BilI (Perth & E Perthshire)

Finsberg, Geoffrey

Miller, Hal (Bromsgrove & Redditch)

Walker-Smith, Rt Hon Sir Derek

Fisher, Sir Nigel

Mills, lain (Menden)

Wall, Patrick

Fitch, Alan

Mitchell, David (Basingstoke)

Walters, Dennis

Fookes, Miss Janet

Moiyneaux, James

Ward, John

Fox, Marcus

Moore, John

Warren, Kenneth

Fraser, Rt Hon H. (Stafford & St)

Morgan, Geraint

Wheeler, John

Gardiner, George (Relgate)

Morris, Michael (Northampton, Sth)

White, Frank R. (Bury & Radcliffe)

Garel-Jones, Tristan

Morrison, Hon Peter (City of Chester)

Wickenden, Keith

Glyn, Dr Alan

Morton, George

Wiggin, Jerry

Goodhew, Victor

Mudd, David

Winterton, Nicholas

Goodlad, Alastair

Murphy, Christopher

Wolfson, Mark

Gorst, John

Myles, David

Gow, Ian

Needham, Richard

TELLERS FOR THE NOES:

Gray, Hamish

Neubert, Michael

Mr. Robert Maclennan and

Griffiths, Eldon (Bury St Edmunds)

Newton, Tony

Mr D. N. Campbell-Savour

Question accordingly negatived.

ORDERS OF THE DAY

  FINANCE (NO. 2) BILL
  (Clauses Nos. 10,17,18, 20, 23, 53, 68 and 91)
  Considered in Committee. [Progress 2 June.]
  [Mr. BERNARD WEATHERILL in the Chair]

  FINANCE (NO. 2) BILL
    Clause 18

      CHARGE OF CORPORATION TAX FOR FINANCIAL YEAR 1979
      Question proposed, That the clause stand part of the Bill.
      4.23 pm
      Mr. John Garrett: The debate on the question whether clause 18 shall stand part of the Bill enables us to consider the taxable capacity, the profitability and the cash liquidity of the corporate sector at a time when we are peering into an industrial abyss.
      The profitability of British companies is so rapidly in decline as to cause near panic in industrial management. Every day, in every company report, we can read of the concern of company boards of directors for the future of their enterprises. Even those who in theory support the medium-term economic strategy of the Government are worried about how to get through the next six months.
      The exceptions to this, of course, are the banks and the oil companies, and in discussion of a later clause we shall consider the profitability of the oil companies. I hope that during the debate on this clause some of my hon. Friends will raise the question of the taxation of bank profits.
      It is said that Ministers wish to see the odd exemplary bankruptcy to frighten both sides of industry into pay restraint. Today we have had the announcement of the liquidation of Bamfords, the agricultural engineers, established for over 100 years, after the firm got its workers to accept a 4 per cent. wage increase. Already company liquidations have reached a three-year peak, and the squeeze is tightening every day.
      Gross trading profits are expected to collapse from £15 billion in 1979 to £2½
      1266
      billion this year. That will mean that the non-oil corporate sector will need to borrow at least £10 billion in the fiscal year 1980. We are, therefore, entering a cyclical downturn, on which has been superimposed a squeeze on companies directly due to Government fiscal and monetary policy, which will further force up the bankruptcy rate and cut investment. It has already been established that investment in manufacturing industry will fall by up to 12 per cent. this year and by the same percentage next year, thus increasing unemployment.
      Already this year 123,000 redundancies have been announced. That figure is higher than at any time since 1971. Today's papers have announced a redundancy programme for a further 2,500 workers at Lucas Electrical. The theorists who always tell us that reducing the quantity of money will reduce the rate of inflation usually neglect to explain the mechanism by which this will happen.
      That mechanism is simply to force companies out of business. As the New Statesman observed on 14 March:
      " Getting at the workers by ruining a substantial number of bosses is one of those theories that does not seem so attractive in practice "
      or, as The Financial Weekly said in an editorial:
      " We, and a good part of British business with us, we have seen enough."
      The chairman of ICI, Sir Maurice Hodgson, in an interview with The Director, said:
      " I am afraid that some companies are so sick that the dose may be too strong—some of our own companies are being damaged in this way."
      The Economist summed up the situation on 29 March, saying:
      " The object of a stern Budget is presumably to allow room for new sorts of entre-preneurship. This Budget does not allow big companies to show it Most of them face an intensification of their grinding liquidity and profit squeeze."
      In a later clause we shall consider the Government's aid to small companies. However, that aid to small companies is trivial compared with the crushing effect on all companies of high interest rates and a deflated home market. To small companies it is rather like throwing a small handful of fertiliser on to seedlings that will find themselves under a foot of snow in the near future.

      1267
      Since Second Reading, official figures have been released showing that in the first three months of this year industrial production fell by 2·2 per cent. and that the rate of fall in industrial production is accelerating. The Financial Times business opinion survey for April showed the lowest level of business confidence for six years. More than 40 per cent. of respondents expected to reduce employment to cope with the severe corporate squeeze. One-third of respondents thought that their liquidity was dangerously low. The developing recession will be the worst since 1945.
      Cambridge Econometrics forecasts imply that engineering output will fall by 20 per cent. over the next three years and that industrial investment will fall by 32 per cent. between 1979 and 1982. The most comprehensive survey of business prospects was the industrial trend survey carried out by the CBI in April. Of the 1,843 companies surveyed, 47 per cent. said that they were less optimistic about business prospects than they were four months earlier. A total of 70 per cent. of respondents were already working below capacity. About 57 per cent. had below normal levels of order books and 30 per cent. said that they expected a decline in output and employment.
      4.30 pm
      Companies' liquidity was under such acute pressure from high interest rates that the CBI revised upwards the £6·7 billion financial deficit that it predicted for the financial and commercial companies sector. The largest companies, employing over 5,000 workers, were faring the worst, according to the survey. That was particularly so in the metal-working industries and consumer goods-producing industries. Such companies felt that they would have to cut back sharply on stocks, investment and employment. The real profitability of companies fell from 4¾ per cent. in 1978 to 3½ per cent. in 1979. The CBI expects a fall to 2 per cent. in 1980.
      That is the consequence of a Government who are pursuing a monetary policy that clearly is excessively tight and that is forcing up the value of the pound and making export orders more difficult to win. It is forcing a reduction in new investment that might be impossible to reverse.
      1268
      I doubt whether the agriculture machinery capacity of Bamfords, for example, will be re-created once the company goes into liquidation.
      The excessive squeeze is felt at all stages of distribution and production. Retail sales have started to turn down and retailers' margins are being reduced to vanishing point. A wave of retailer bankruptcies is imminent. Industrial destocking—a classic symptom of the early stages of recession—has developed far faster than the Government forecast. The fall in stocks for the first quarter of this year was worth £570 million. A few months ago the Government forecast a £250 million drop for the first half of the year.
      A recent survey by the Chemical Industries Association shows that capital spending will fall by 30 per cent. in the next three years. The chemical industry has been the biggest investor in British manufacturing and in recent years it has accounted for 90 per cent. of our trade surplus in manufacturing.
      The short-term trends working party for mechanical engineering found that investment in that industry will fall by over 10 per cent. this year because of poor liquidity and the high cost of borrowing. It predicted a fall in orders in 1981 of between 10 per cent. and 20 per cent. below the 1979 level.
      The construction industry is at an all-time low. The Federation of Civil Engineering Contractors says that the public sector investment in construction is now half the level of similar industries abroad. It says:
      " A large part of the nation's vital capital structure is ageing deteriorating and not being built or enlarged."
      In this key industry unemployment is running at 16 per cent. and involves 200,000 workers. The Government simply cannot ignore the contrary and counter-productive effects of their monetary obsession on manufacturing industry.
      I have quoted surveys and opinions from representatives in industry, but we all know the effects from our constituencies. Every day in our local papers we read of lay-offs, warnings about layoffs, or closures. The strategy is supposed to be that reducing the PSBR should lead to a fall in interest rates and an increase in business investment. However, cuts in public expenditure directly affect the

      1269
      private sector. As the private sector continues its heavy bank borrowing, interest rates will stay at a punitively high level for as far ahead as we can see.
      Strict monetary targets mean high interest rates. Industry cannot live with both high interest rates and a high value for the pound. All that industry can look forward to is an absolute decline in gross domestic product and a shrinking home market, with intensified competition from imports.
      The Treasury and Civil Service Select Committee report shows that the liquidity squeeze on companies will persist into the medium term. The Committee believes that the deficit in the non-oil sector will be a minimum of £6 billion in 1980. Some people giving evidence to the Committee made forecasts of a deficit as high as £13 billion in the corporate sector. The report states:
      " the economic environment as described above will provide little help to the corporate sector—rather the reverse. The advice the Committee has received suggests that the cash squeeze on industry will not be a short-term phenomenon given the medium-term financial strategy. Indeed, it may well be that the corporate sector has to bear a large proportion of the overall burden of adjustment in order to meet the targets proposed in the financial strategy. In particular, the adverse corporate sector deficit likely to be experienced this year may well persist, if not grow, over the medium-term … In general, we are convinced that the Government should not only take a very active interest in what is happening to the corporate sector, but should have measures ready to relieve what could become a very damaging deficit."
      I hope that the Treasury Minister will tell us what measures, by taxation or otherwise, the Government have in mind to reverse that damaging situation. The Committee's advisers thought that the decline in manufacturing output this year could be between 6 per cent. and 8 per cent. After four years of this Government we shall barely recover the output lost in their first year.
      There are other contradictions in the Government's policies towards companies. Trade Ministers are trying to promote a new export drive, yet cuts in official export services mean that official trade missions will be halved. The funds available to the British Overseas Trade Board have been cut by £14 million. Assistance for market research in Europe has been ended. Charges for firms exhibiting overseas have been raised. Trade
      1270
      associations have complained that the Government's cuts will dissuade potential exporters. The London Chamber of Commerce has said that the level of Government support for exports is minimal compared with that given by the Governments of our trading competitors.
      In all, aid to industry will be cut by £1·2 billion, or 45 per cent, in the next four years. The cuts fall on sectoral schemes of assistance for modernising industry and include, for example, halving the money available to the national computer centre, our only independent centre for developing computer expertise and training. The CBI has already asked for cuts to be deferred until corporate profitability has improved.
      Meanwhile, the Secretary of State for Industry told an audience in Chicago last week:
      " I bring you good news. Britain, pioneer of the industrial revolution, is beginning the process of turning away from stagnation. The relative decline associated with the bindweed of State power, which has afflicted Britain for several decades, is being stemmed."
      I always thought that bindweed gave stability to otherwise shifting terrain. The Secretary of State might have got his metaphor wrong, as well as his facts. He went on:
      " Britain is in transition. Before very long, the thousands of healthy, successful businesses will no longer be overloaded. Britain will be on its way again."
      One sometimes feels that one is intruding in a private dream world.
      Let us examine the £2·7 billion turnaround required in the nationalised industries—from an external financing requirement of £2·3 billion in 1979–80 to a net repayment of £400 million in 1983–84. The whole medium-term strategy rests on this revolution in the financial performance of these industries, and yet they all need to plan huge new investment in gas gathering, nuclear power, new coalfields and new equipment for the benefit of their private suppliers.
      The corporate sector is being bled to death by high interest rates, falling demand, rising exchange rates, cuts in Government support and cuts in public sector orders. The damage is incalculable. Our manufacturing industry will collapse in a welter of bankruptcies and unemployment. The squeeze on companies is a crude measure to frighten them into low

      1271
      wage settlements, and it is doomed to failure. It is a policy of unbelievable crudeness and unfairness. The debate gives the Minister the opportunity to justify the Government's actions in regard to the liquidity and cash position of the corporate sector. Before long help will be too late.
      Mr. Tarn Dalyell: I have given Treasury Ministers notice of the main topic which I wish to raise—the effect of corporation tax on sport. I rang the Minister of State's office and contact was made with lawyers attached to the Central Council of Physical Recreation. I have given notice of the detailed points that I wish to raise.
      Before doing that, I wish to endorse what my hon. Friend the Member for Norwich, South (Mr. Garrett) said about the Federation of Civil Engineering Contractors. This morning Duncan Mac-Kenzie, the secretary of the Scottish section of the federation, contacted us formally and drew our attention to a statement by James Stevenson, the chairman of the Scottish section.
      I do not wish to detain the Committee by reading at length from the statement However, it is a serious statement, which should be drawn to the attention of the Government. It states:
      " Finally, the other great problem to which I must refer and which haunts many of our smaller members is that of Government's insistence on firm price tendering for public contracts of up to one year's duration. It is quite inconceivable to me how it can seriously be thought by people who should understand our industry that this policy is in the national interest and anti-inflationary. In my view, nothing could be further from reality."
      I gave that quotation to support the point that was made so eloquently by my hon. Friend the Member for Norwich, South.
      I wish to support my hon. Friend on one other issue, namely, the question of bank profits. There is great resentment in all our constituencies about the level of profits made by the Bank of Scotland, the Royal Bank of Scotland, the Clydesdale Bank or, south of the border, any bank that one might choose. At the same time, industry is faced with high interest rates and a home market that is so deflated that it is causing more worry than I have ever known during my public lifetime. It is no good saying that we go through ritual worries and ritual groans.
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      We are faced with far more than a ritual worry. Indeed, some of us would not confess to having ever indulged in ritual worries.
      I wish to return to the specific issue of taxation of sport, of which I gave the Minister notice. Whether a body is corporate, perhaps as a company limited by guarantee, or an unincorporated association, it makes no difference for tax purposes. For income and corporation tax purposes, a company means a body corporate or unincorporated association. A company resident in the United Kingdom is subject to corporation tax on its total worldwide profits, which comprise both income and gains. A company is resident in the United Kingdom if that is the place where the central management and control of the company is exercised, regardless of the place where it is incorporated or legally constituted. To ascertain where the central management and control of an association is exercised, the Inland Revenue would have regard to where management meetings were held, and the residence of those who would be regarded as directors if the association were a corporate body.
      There are no special rules or concessions for bodies that promote sport or recreation unless they are charities. Sports bodies may, therefore, receive Government grants from the Sports Council and at the same time pay corporation tax on their income. Is not that a classic case of robbing Peter to pay Paul? It is a question of swings and roundabouts. Given the serious financial condition of many sports bodies in an inflationary position, it is a little rough that they must pay corporation tax.
      Foreign income is taxed as it arises in a similar way to United Kingdom income, but a credit against corporation tax payable is allowed for foreign income taxes paid limited to the United Kingdom tax actually charged on that foreign income. Corporation tax is charged at the rate of 42 per cent. for profits of up to £60,000, with marginal relief for profits between that figure and £100,000, above which level the full rate of 52 per cent. applies. A deduction of 11/26ths is allowed from capital gains, and the balance is charged to corporation tax at the full rate of 52 per cent., producing an effective rate of tax on gains of 30 per cent. The effective rate of tax on gains is 30 per cent.,

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      whether or not the lower corporation tax rate applies to other profits.
      4.45 pm
      Corporation tax is normally payable nine months after the end of the accounting period or, if later, 30 days after the issue of an assessment. Associations established prior to 1965 may have a longer interval between the end of their accounting period and the normal corporation tax due date of payment. Interest on overdue tax is currently charged at 12 per cent. per annum, and the interest is not tax-deductible.
      Associations that carry on trades to finance other activities are liable to corporation tax on the profits from trading. They are also liable to tax on interest and investment income. Dividends from United Kingdom companies are not subject to corporation tax, because they are paid out of income that has already been charged to corporation tax. Income from land is also assessable, as are gains on disposals of investments and other chargeable assets.
      That has a considerable consequence for sport. In normal circumstances, if I had just risen to my feet I would not ask the Minister to reply to these complex matters. But as he has had at least two weeks' warning, and as the Treasury Ministers have contacted the Central Council for Physical Recreation lawyers, I think that I am justified in asking for some comment from the Minister about corporation tax on sport.
      Mr. Denzil Davies: My hon. Friend the Member for Norwich, South (Mr. Garrett) mentioned the problem of profits in relation to corporation tax. I wish to raise the problem of bank profits. In his Budget Statement the Chancellor of the Exchequer acknowledged that there was such a problem. He said:
      " In recent weeks there has been a good deal of comment about the profits declared by the clearing banks. Some represent a ' windfall ' to the banks, which arises from the combination of high interest rates and the fact that interest is not paid on current accounts."—[Official Report, 26 March 1980; Vol. 980, c. 1466.]
      He went on to say that some people would argue that, in principle, the profits should be subjected to an excess profits tax.
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      When the Financial Secretary replies, will he say what the Government are doing about that matter? We have been told that some research is being carried out by the Treasury into the question of bank profits. I hope that the hon. Gentleman will be able to enlighten the Committee about the Government's attitude towards bank profits.
      I remind the Committee that bank profits over the past year have been enormous. For the year ending 31 December 1979, the National Westminster Bank declared a profit of £441 million; Barclays Bank a profit of £529 million; the Midland Bank a profit of £330 million; Lloyds Bank a profit if £280 million, and the Scottish clearing banks correspondingly high profits.
      We do not know what part of the profits are United Kingdom profits and what part are world profits. That often depends on the accounting procedure that is adopted. However, the United Kingdom profits of two of the clearing banks have been increased by 90 per cent. in one case and 70 per cent. in the other. We are talking about large increases in profits both by the London clearing banks and by the Scottish clearing banks.
      The point is put very clearly in a recent editorial in The Scotsman. I deliberately choose The Scotsman because we are talking not only about the London clearing banks but about the Scottish clearing banks. The Scotsman states:
      " For the most part profits made by our leading banks are a function of Government policy. The higher interest rates are set then the better off become the banks. There is no question that the yearly reports recently published illustrate this relationship, with bank profits leaping by up to 90 per cent and more … Basically, the banks did nothing to earn such bonuses but carry on business as usual. They must be the envy of many a vexed entrepreneur "——
      and the Government who apparently favour entrepreneurs are killing them off rapidly——
      " borrowing money from them at over 20 per cent to attempt to raise his company's efficiency. They are also a source of potential embarrassment to the Government."
      They are indeed a source of embarrassment to the Government.
      That sums up the problem clearly and well. The banks are benefiting—I do not criticise them, because it is not their fault—from a monetary policy which is a consequence of the rate of inflation.

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      The Government having set the rate of interest at 17 per cent., the banks are lending at that level, or higher, and making vast profits at the expense of industry, especially manufacturing industry.
      The reasons for increased bank profits are clear. The first is the high interest rate. We understand from what the Chief Secretary said last night that high interest rates will continue for some time. The Financial Secretary shakes his head. That means that they will not continue for some time.
      The Financial Secretary to the Treasury (Mr. Nigel Lawson): I am confident that my right hon. Friend the Chief Secretary was not so unwise as to offer a prediction of either nature.
      Mr. Davies: He was very melancholy. He is always melancholy, except when he is aggressive, and he got aggressive towards the end of his speech. That led me to think that perhaps he was not on very firm ground. He was very melancholy at the beginning about interest rates. If one reads the newspapers, as I do, one finds that the gilt market has fallen this morning. People who understand these matters obviously do not see much chance of interest rates falling, despite the £750 million from the EEC. This is nothing to do with the borrowing requirement; it is all to do with bank lending and interest rates. Therefore, we shall not see a fall in interest rates for some time. Indeed, over the whole period of this Government's tenure of office we shall not see much of a fall in interest rates. Even in four years they will not get inflation down much below 15 per cent. Therefore, we shall have very high interest rates for the next two or three years.
      This is a problem not only of interest rates but of the banks not paying interest on current account deposits. The banks try to tell us that it costs them about 8 per cent. to collect money on deposits. That is because they are terribly inefficient. They have not even bothered to make themselves efficient. I think that they could probably reduce that cost well below 8 per cent. But let us take the figure at 8 per cent. It is costing the banks about 8 per cent. or 8½ per cent. to borrow this money and now they are lending it at 20 per cent. They are involved
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      in a marvellous business. They are making enormous profits and showing very little expertise for it. The high interest rates are the result of the Government's monetary policy.
      Mr. James Dempsey: I am interested in the point that my right hon. Friend has made. I have had discussions with industrialists in my constituency. The banks close their eyes to any possible extension of industry in the hardest-hit unemployment area on the mainland of Scotland because the interest rate being demanded from industrialists is 22 per cent. Of course, 22 per cent. on a trading account year after year until the premium has been repaid is an extremely exorbitant charge for industry to survive. In consequence, unemployment is unfortunately roaring in my constituency.
      Mr. Davies: My hon. Friend is quite right. If industrialists have to pay 22 per cent., why should they invest in plant and machinery? What sense does it make to build up a business when an industrialist can get 17 per cent. or 18 per cent. by leaving his money on bank deposit? Industry is borrowing not to expand or to invest but to stand still or to stop itself from going downwards and backwards. We are talking about lending at more than 17 per cent.—20 per cent., 21 per cent. and 22 per cent.
      The problem is partly high interest rates, caused by the Government's neglect of inflation, and partly because the banks do not pay interest on current account. The combination of the two has created these vast profits. As I said, current account deposits cost the banks only 8 per cent., so they make a vast profit on the difference.
      If interest were paid on current account, we would not have this problem. If interest were paid on current account, people would get that interest and presumably it would be subject to tax. The root of the problem is not only that high interest rates are afflicting the economy but that the banks are not prepared to pay interest on current account.
      The Financial Secretary gave an interesting answer during Treasury Question Time recently which I thought was sympathetic. He admitted that the banks

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      were making a windfall profit. I accept his answer; it was very sensible. But what are the Government doing? The Chancellor of the Exchequer said that they were looking at it in some kind of way.
      I do not suggest that it is easy to bring in an excess profits tax. The Financial Secretary is not a tax expert, but he is an expert on many other things. However, the Minister of State is a great tax expert. I do not know what Lord Cockfield is doing in this non-interventionist Government, but I am sure that he is doing something. [Interruption.] If not, I do not understand what five Ministers are doing in this non-interventionist Department. On the other hand, he is sitting in the House of Lords, no doubt thinking about these things Buddha-like and working out these schemes.
      I am sure that it is possible for Treasury Ministers—the Minister of State with his great expertise, the Financial Secretary with his feeling for the financial sector from his background in financial journalism, and Lord Cockfield with his great expertise, having been in the Inland Revenue, Boots and everywhere else—to work out some kind of taxation system. The Financial Secretary should tell us how the Government intend to tax the profits of the banks. It will not happen just for this year; it will happen next year and the year after, as I shall discuss later.
      Perhaps I may give the Financial Secretary a few suggestions. The Opposition do not have the expertise and learning that he has, but perhaps we may throw out a few suggestions. Why not start with an excess profits tax? It is not unknown in British Revenue law procedure to have an excess profits tax. No doubt it would have to be related to some kind of formula—deposits on current account, the amount lent by banks and the cost of collecting money. A formula could be devised.
      I believe that the British Gas Corporation is now contributing to the Treasury's coffers some kind of tax on its profits. It is a kind of excess profits tax. If the British Gas Corporation has to pay an excess profits tax, partly as a result of Government policy because the Government have put up the price of gas to a greater extent than the level of inflation
      1278
      for reasons best known to themselves, why should not the banks pay an excess profits tax? There is the example of the Independent Broadcasting Authority and the levy that is placed on independent television companies. Governments of both parties recognised that profits were made in excess of a certain level and a specific levy was placed on the Independent Broadcasting Authority.
      I suggest that the Financial Secretary should also look at the petroleum revenue tax, because that is an excess profits tax. I know that the Inland Revenue will not agree. It gets upset if it is described as an excess profits tax, but it is one. It is an attempt to isolate a sector of the economy—the North Sea—and to say that over and above corporation tax it shall pay extra tax in respect of profits.
      I know that this is a complicated tax to administer—I do not suggest that it would be easy—but why not isolate the profits from the banking community and subject them to a tax over and above corporation tax in the same way as profits from North Sea oil are subjected to a tax over and above the level of corporation tax?
      It is possible to draw a ring fence round British banking. I do not mean British companies; I mean banking receipts in this country. I might include foreign banks as well. However, the Bank of England would get very upset. It does not like to do anything to upset foreign banks. But, leaving that aside, it is possible to use the analogy of the petroleum revenue tax to tax the banks.
      My next suggestion might not appeal to the Government or, indeed, to the Labour Party, but why not tax lending? The Government are concerned about bank lending. That seems to suggest that bank lending—the credit supply—is now the real problem. Apparently, we have got the money supply under control, although some people do not believe it; but the Government believe it. The banks are lending money and the Government cannot reduce the interest rate, so why not tax lending? Paul Volcker, of the Federal Reserve Bank, has done so. He has imposed a tax on lending by banks which subscribe to the Federal Reserve Bank. Lending money at an interest rate of 22 per cent. and collecting money at 8 per cent. makes the profits. Why, then,

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      not kill two birds with one stone? The Chief Secretary to the Treasury is interested——
      5 pm
      The Chief Secretary to the Treasury (Mr. John Biffen): I am interested only because such an argument is being deployed from the Opposition Front Bench. Will the right hon. Gentleman share with the Committee his thoughts one degree further? In suggesting a tax on bank lending, would he vary the tax according to the designation of the lending?
      Mr. Davies: Yes. Lending in the personal sector and lending through credit cards could be taxed. That would release a certain amount of money at a lower rate of interest to manufacturing industry. I am surprised that the Government have not considered that possibility. One reason why the Government are failing with their monetary policy is that they do not have a monetary policy. They have a credit policy. They raise interest rates to 17, 18 or 19 per cent. regardless of the borrower. Why not restrict personal lending? Bill Simon, the former United States Secretary of the Treasury, said that he would take away his wife's credit card so that she could not borrow money on it. Why not restrict personal lending so that there is money available at lower rates for manufacturing industry? Manufacturing industry is suffering from the Government's policies.
      Let there be direct control over bank lending. The Chief Secretary should not appear as frivolous as he tried to appear when he intervened. There is a distinction to be drawn. The Government should look again at the question of credit cards. The people who will suffer from any restrictions on credit cards will be those who voted for the present Government. They are not suffering from the present monetary squeeze because they are borrowing at 17, 18, 19 per cent. or more on their American Express, Access or other credit cards. They are benefiting from the tax deductions and the tax reductions. Industry is suffering. The Government should shift their emphasis, control lending in the personal sector, and allow industry to borrow at lower interest rates.
      There should be a tax on lending in those areas of the economy which are not
      1280
      productive. The Federal Reserve Bank taxed lending, and interest rates have been brought down in the United States. The Bank of England will not like a tax on personal lending. The Governor will be very upset, and he will argue against it because he will not wish to upset the banks, and he tries to keep the Government and the banks happy. But the Government should look at this suggestion.
      The reason why we feel that bank profits should be taxed on an excess basis, whether through a petroleum revenue tax or excess profits tax, is that we are entering an era in which banks and the financial sector will make a lot of money. Manufacturing industry will decline and there will be massive profits in the financial sector. That will probably not upset Conservative Members, because some would like to see this country as a sort of mini- or maxi-Switzerland. They would like the financial sector to expand, and they would not be too unhappy if the manufacturing sector declined.
      The Government wish to reduce the public sector borrowing requirement. The Chief Secretary said recently that the Government's policy was to bring down the PSBR. But where will all that money go? It will not go to British industry. It will be invested in the financial sector. That means that over the years major profits will be made by the financial sector, and the manufacturing sector will decline more and more. As part of a larger issue, the Government should look at the development and increase in profits in the financial sector, and perhaps they should tax those profits at a higher level and use some of the money to try to save manufacturing industry. If they do not do so, it will go to the wall.
      The National Westminster Bank now has so much money that it has decided to invest in the North Sea. It is to buy North Sea licences. Under the previous Conservative Government, the National Westminster Bank brought properties and got into terrible difficulties, and it had to be bailed out by the Bank of England. Now it has so much money that it cannot lend—because the Government do not wish it to do so—that it is investing in the North Sea. Perhaps the North Sea is not as speculative as property, but that is not the proper function of the bank, and that is why there is distortion

      1281
      in the financial sector—caused by the high interest rates and by the fact that banks do not pay interest on current accounts. I ask the Government to look at the question of the banks. I hope that the Chief Secretary will tell us what the Government intend to do.
      The stockbrokers' reports talk about mergers and more activity in the financial sector in the next few years because more money is being put into the financial sector. The split between the manufacturing sector and the financial sector is important, because not only is it a split between two sectors of industry; it is a split between one half of the country and the other half. In the main, the financial sector is concentrated in the South-East and the manufacturing sector is in the West Midlands, the North, Scotland and in Wales. This is a real problem.
      Mr. Lawson: There are banks in Scotland.
      Mr. Davies: Indeed, there are a few banks in Scotland. I accept that Edinburgh is a sort of secondary banking area. But in the main—and the Financial Secretary knows it—the financial sector of industry is in the South-East of England, and the manufacturing sector is in the North. Manufacturing industry will suffer while profits are being piled up in the financial sector.
      The problem goes deeper than the question of the banks, and I hope that the Government will say what they intend to do. Some of the profits from the financial sector should be channelled to the manufacturing sector. The Bank of England did so in the case of Stone Piatt Industries. In its wisdom, it decided to use some of its money to rescue manufacturing industry.
      I say to the Government " Tax the banks. Look at the financial sector. Use that money to save our manufacturing industry. Otherwise, we shall destroy our manufacturing industry, and we cannot live on banks, insurances and financial services."
      Mr. Lawson: The right hon. Member for Llanelli (Mr. Davies) got a little carried away towards the end of his speech, as he usually does. I was particularly interested, and I am sure the whole Comittee
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      will be interested, to learn that the official Opposition are now committed both to a tax on bank profits and to a discriminatory tax on bank lending.
      Mr. Denzil Davies: I am familiar with the hon. Gentleman's style. It is not the first time that we have met across the Dispatch Box. I am prepared to give him suggestions. One suggestion was a tax on bank lending. However, my main point was that there should be an attempt to tax bank profits. Does he intend to do that?
      Mr. Lawson: Perhaps, having sat down, the right hon. Gentleman is having second thoughts. Perhaps the Opposition should try to come together—in the spirit of Wembley, or in any other spirit—to decide whether they are in favour of a discriminatory tax on bank lending. When they have made up their minds, perhaps they will be kind enough to tell the Committee so that we all may know where we stand.
      The right hon. Gentleman asked me a straight question about where the Government stand on bank profits. I shall deal with that. Discussion of this question—and I know that it has aroused a great deal of interest on both sides of the House of Commons and of this Committee—has tended to focus on the profits of the big four clearing banks. This is almost inevitable, given both their size and the fact that their profits tend to be more cyclical than those of the banking sector as a whole because of their large numbers of current accounts, on which, as the right hon. Gentleman pointed out, no interest is paid.
      The fact that last year, 1979, the four big banks together made total profits of £1½ billion before tax has inevitably caused a great deal of comment. But this must be seen in perspective. The clearing banks are very large businesses indeed, with world-wide deposits of over £70 billion, and employing—[Interruption.] I hope that the right hon. Member for Llanelli will listen, following his absurd remarks about these banks being only in the South-East. They employ a quarter of a million people throughout Britain. It is easy, therefore, to be mesmerised by their profits figure of £1½ billion and to see them out of the context of the huge scale of their operations as a whole.

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      Moreover, if the clearers' profits are adjusted for inflation, the picture becomes somewhat different. Historic cost accounting conventions in this respect inevitably give a misleading picture, as I am sure the hon. Member for Norwich, South (Mr. Garrett) will acknowledge, of profitability in an inflationary environment—particularly for banks, whose assets are very largely fixed in money terms. On a current cost basis, the big four clearing banks' profits were around £1 billion in 1979, which is less than two-thirds of the historic cost figure and, incidentally, represents a rate of increase substantially less than was achieved by them in any of the three previous years, when the right hon. Gentleman's party was in office. Moreover, the pre-tax current cost profit, expressed in real terms, was lower in 1979 than in 1973. The Labour Government, when they came to office in 1974, did not see fit to impose a special tax on bank profits.
      So the big four banks' profits for 1979 need to be seen both against the size of their businesses and after making a proper allowance for inflation. At the same time, as I mentioned earlier, the cyclical nature of bank profits must not be overlooked. The peaks and troughs of the clearers' profits seldom if ever coincide with those of industrial and commercial activity as a whole.
      When seen in perspective, therefore, the profits of the clearers are not as large as they seem at first sight. There is no doubt, however, that they remain substantial. I assure the right hon. Gentleman that I am not trying, and would not wish to try, to pretend otherwise. Nor do I come to this Committee as an apologist for the banks. There is no doubt, as I have said in answer to Treasury questions, to which the right hon. Gentleman referred, that part of the profits represents a windfall for the banks—arising from the fact that interest is not paid on current accounts, and, therefore, the high interest rates mean that the clearers can employ their current account balances much more profitably. This windfall element is not a sign of the clearers' enterprise or of their efficiency. Nor, of course, on the other hand, is it a sign of exploitation. It is merely adventitious.
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      5.15 pm
      In part, these windfall profits reflect the cyclical nature of the clearers' profits. When interest rates are high, they make larger profits, which fall as interest rates fall. The right hon. Gentleman's confidence that interest rates will remain high for some time is not one that I share. I have confidence that they will come down.
      These windfall profits can, however, be regarded in part as a by-product of the Government's determination to root out inflation by monetary policy, which necessarily involves high interest rates for the time being. As my right hon. and learned Friend the Chancellor said in his Budget Statement, there could, therefore, be a case in principle for a special tax related to the windfall element in the banks' profits. But a number of practical considerations have to be borne in mind. One of them is the enormous complexity of any attempt to define the windfall element.
      The right hon. Gentleman said that there have previously been excess profits levies in British history. Indeed, there have been. The first of these in recent times was that introduced by the Conservative Government in 1952, which took no fewer than 35 pages of legislation. It is not a matter of a simple amendment to a Finance Bill. The right hon. Gentleman also referred to the petroleum revenue tax. That could not be embodied in a Finance Bill. It was a highly complex, technical, lengthy piece of legislation on its own.
      Mr. Denzil Davies: Excuses.
      Mr. Lawson: Another factor which must be borne in mind is that the prime use that the clearers have made of their profits is to strengthen their reserves. Nearly £900 million—almost three-fifths of total pre-tax profits—has been transferred to reserves. A sound banking system, as even Opposition Members will, I hope, acknowledge, is essential to a healthy economy. There is no doubt that by 1973–74 the clearers' reserves had fallen to dangerously low levels. Since then, they have slowly been rebuilding their reserves to satisfactory levels. With the additions to reserves for 1979, the clearing banks have achieved a ratio of free capital to deposits of around 1:20.

      1285
      While this is relatively high by recent historical standards, banks are facing increased domestic and international risks in current turbulent economic conditions. This points to a need for the banks to maintain higher capital reserves. It is entirely desirable that bank's reserves should be built up now—in the phase of their cycle suitable for such a build-up.
      Moreover, the banks have sustained a large and fast-growing volume of leasing business, which has done a great deal to support investment in manufacturing industry, especially in the large number of cases in which companies have insufficient taxable capacity to enable them to take immediate advantage directly of first-year allowances designed to support their investment in plant and machinery.
      Overseas, too, the increased risks of international banking business are apparent, perhaps especially in the Eurocurrency markets. The huge OPEC surpluses are a further potential destabilising factor on world financial markets, and the banks inevitably need strengthened reserves to assist in the recycling of these surpluses, which is of the first importance.
      All these developments, in their different ways, are likely to provide calls on the banks' reserves, which have been significantly strengthened by the 1979 profits.
      Last, but not least, I should like to mention the contribution to the economy which is made directly by the banking system. It has been one of the most successful industries in terms of invisible earnings. Its strengthened reserves should enable this success to be maintained and, indeed, expanded and its contribution to the economy to be increased.
      But, as I have said before, and as I say again now, I accept in principle that there could be a case for the special taxation of the part of bank profits resulting from high interest rates. It is undoubtedly true that there is an element of quasi-monopoly in the clearers' position. Against this, there is the fact, as I have already explained, that clearing bank profits, are not as high as they appear when adjusted for inflation. The clearers have used these profits to strengthen their reserves, which is in the interests of the economy as a whole—enabling them to support domestic business, including their leasing operations,
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      to compete internationally, to invest in future technology, and to cope with the increasing risks of both international and domestic business.
      The present Government's policies are directed to getting inflation down and getting Government borrowing down, and thus getting interest rates down, so that the immediate cause of the exceptionally high clearing banks' profits will be removed. To introduce a discriminatory tax on the profits, legitimately earned, of one particular sector of the economy requires a very strong case to be made. In my judgment, that case has not been made in the case of the banks this year.
      We have had two other contributions to the debate. The hon. Member for West Lothian (Mr. Dalyell) raised the question of sporting bodies and their tax. I think that he has been in correspondence with my hon. and learned Friend the Minister of State about this matter. The hon. Gentleman is a member of the Standing Committee on the Finance Bill and I understand that he intends to raise this matter on numerous occasions throughout the course of the Bill both in Standing Committee and on the Floor of the House. I am sure that he will get a fuller answer from my hon. and learned Friend.
      However, let me say this relatively briefly. I accept that there is a problem. Indeed, this was accepted right at the beginning of the introduction of corporation tax. The Select Committee on Corporation Tax recognised that there was a problem and that some way of alleviating it should be sought. But there is a serious difficulty of definition. A consultative document was issued in August 1972. There were discussions with all sorts of representative bodies at that time, and the matter was raised in Parliament then and has been raised on a number of subsequent occasions.
      No formula has yet been devised to discriminate satisfactorily between those cases that deserve tax relief and those that do not. The position remains that charities get concessions which bodies that are not charities, such as the sporting organisations to which the hon. Member for West Lothian referred, do not. I admit that there is a problem; he was right to refer to it Since 1972 successive

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      Governments have faced that problem, but no answer has been found.
      Mr. Dalyell: That is a fairly reasonable reply. It is a pity that, apart from our discussions on the Finance Bill, the House has not had an opportunity, as was promised, to debate the Goodman report on charities and to go into the definition of a charity. Let us leave out of this debate the special needs of the British Olympic Association. When discussing tax on the sporting bodies, I hope that we shall not delve too deeply into the differences of opinion now revolving round the British Olympic Association. An argument can be made for designating bona fide sporting organisations as charities. In Committee upstairs, I shall ask why the Government's lawyers are reluctant to do that. I recognise that there are problems, but they are not insurmountable. At present the situation of the sporting bodies is parlous.
      Mr. Lawson: The hon. Member for West Lothian has made that point several times. As he is a persistent parliamentarian, I know that he will continue to make it in Committee. If he succeeds in catching your eye, Mr. Weatherill, he may be able to discuss charities when we debate clause 53. I wish him the best of British luck.
      It is not for the Treasury to define a charity. Still less is it for the Treasury to decide whether a debate should be held on the Goodman report. I am sure that my right hon Friend the Leader of the House will read in Hansard the hon. Gentleman's request. He will then decide whether time can be given for a debate.
      The hon. Member for Norwich, South went over the top when he spoke about the plight of the corporate sector. I am sorry that he did so, because there are genuine difficulties. There was no need to exaggerate those difficulties. It is absurd to suggest that the problems are new and that they are solely the present Government's responsibility. He knows that the profitability of British industry has been declining steadily for the past 20 years. If he wishes to make party points, I could point out that the biggest decline occurred under the previous Labour Government. During their period of office profitability—in percentage terms—was halved compared with the period of office
      1288
      of the previous Conservative Administration. The fall will be much less now.
      The problem of the corporate sector is inevitable if we are to cure inflation. There must be a period of squeeze, when interest rates are high. That period should not last any longer than is necessary. The United States Government have been trying to cure inflation, and they have had to allow their economy to go into recession. Similarly, the British economy is going into recession. No one wants a recession, but it is inevitable if inflation is to be squeezed out of the system. It is an illusion to think that the war against inflation can be won without any casualties. We hope that there will be as few casualties as possible. To ensure that that is achieved, wage negotiations must lead to results that are as moderate as possible. Rising wage bills, more than any other factor, are squeezing profitability out of British industry.
      The gloom that the hon. Member for Norwich, South seemed to exude from every pore should not be shared by the Committee. Our policies will succeed. Many people outside this Chamber hold that view. I shall refer to a more acceptable source than the section of the report by the Treasury and Civil Service Select Committee, to which the hon. Member alluded. I should like to quote from an article in the current issue of Barclays Review, written by Professor Harold Rose. He states:
      " The deceleration of wage increases is likely to be only slow in 1980. But from now on rising unemployment is likely to be accompanied by a falling inflation rate; the effect of the switch from direct taxation to VAT will pass, and, because of the high level of interest rates throughout the world, commodity prices are at last declining. The result, if the Government holds to its course, should be a sharp downwards revision of price expectations in Britain from 1981, thus laying the foundation for renewed economic growth. The Government's second Budget will then have proved to have been a turning point ".
      I believe that judgment to be correct.
      I commend the clause to the Committee.
      Mr. John Garrett: I have been disappointed. The Financial Secretary has done no more than read badly a press handout from the Association of Clearing Banks. He had notice that we intended to raise this question. It is clear that no action is being taken on bank profits. It is also clear to all hon. Members that the windfall profits of banks are so great that they do not know

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      what to do with them. The Financial Secretary did not answer the questions that I raised on corporate liquidity. This is the first time that he has attended or spoken in Committee. Perhaps he should get together with the Chief Secretary and the Minister. We have become accustomed to fuller and more detailed answers.
      The Financial Secretary said that the corporate squeeze would continue, because it was necessary. He said that casualties were inevitable. He does not seem to realise that the casualties of the war being fought by the Treasury are deprived families. There have been over 123,000 redundancies this year and each redundancy means misery to a family somewhere. I thought that his final point was the height of arrogance. He found the review of Barclays Bank more acceptable than the report of the Treasury and Civil Service Committee, under his right hon. and most distinguished Friend the Member for Taunton (Mr. du Cann). No doubt the Treasury and Civil Service Committee will bear that in mind when it cross-examines the hon. Gentleman during its future deliberations.
      Mr. Dalyell: With a smile, the Financial Secretary wished me the best of British luck. Am I to interpret that as meaning that he knows that the sporting organisations have a just case? It was not much use asking him to do anything. However, I understand his predicament. Some of my hon. Friends and I, together with the right hon. Member for Worthing (Mr. Higgins), have asked the Leader of the House time after time for a debate on this issue. We know that the definition of a charity is not the responsibility of the Treasury. The Home Office is responsible. However, there is a hybrid situation in which various responsibilities straddle Government Departments. It is high time that the House of Commons sorted out this issue. The sporting organisations are desperate for a solution. Heaven knows when it is proper to raise the question of corporation tax on sport.
      The Financial Secretary airily said that I would have several opportunities to raise this issue in Committee. I shall ask his advice as to when one might properly raise this question during discussion of the Finance Bill. I ask the Chief Secretary and the Financial Secretary to talk
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      seriously to the Leader of the House. Before we get round to the Finance Bill next year, let us have behind us, out of season, a proper discussion of charity provisions.
      Question put and agreed to.
      Clause 18 ordered to stand part of the Bill.

    Clause 20

      CORPORATION TAX: SMALL COMPANIES
      Question proposed, That the clause stand part of the Bill.
      5.30 pm
      Mr. John Loveridge: The smaller business community is glad to welcome the encouragement of clause 20, which widens the differential rate of corporation tax so that smaller companies pay 40 per cent. while larger companies pay 52 per cent. Like other provisions affecting the smaller business sector, clause 20 must be seen in relation to the whole package of measures that the Chancellor of the Exchequer has put forward and that have given so much encouragement to that sector.
      The Committee will have seen that a number of amendments to the Finance Bill have been tabled in the names of myself and some of my hon. Friends, the officers of the Conservative smaller businesses committee, and in that of my hon. Friend the Member for Surrey, North-West (Mr. Grylls). The amendments dealt with a wide range of matters; from the work of the jobbing gardeners at the small end of the small business structure to major provisions related to medium-sized firms. The fact that it was so easy to put down so many amendments demonstrates that many burdens remain for the small business sector.
      We are anxious to relieve the small business sector because it is our belief that every small firm in the kingdom is a potential jobcentre for a return to full employment. We believe that the small business sector is the only clear way to such a return. Large firms will shed men and women as advanced technology develops. The whole economy suffers from a world depression related to oil price rises and to the continuing purchase of oil at high prices by United States firms for stockpiling.

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      This gloomy outlook is relieved to some degree by measures such as clause 20. The small business sector can lead the resurgence and recovery of the economy. In the United States two-thirds of all new jobs created over a period of years have come from firms with less than 20 staff. We know that four-fifths of those firms are younger than five years old. That shows what the small business sector can do. But is our small business sector strong enough? There is much evidence that it has been weakened over many years, especially at medium size or take-off point.
      Let us compare the proportion of small and medium-sized businesses in the United Kingdom with the proportions in France, Germany, Japan and in the United States. In those countries we find that the small business sector is proportionately much stronger than in our own kingdom. Our small business sector is beset by many technical ambiguities. One example can be seen in clause 20. The purpose of this clause is to widen the gap from 10 to 12 per cent. so that small firms pay proportionately less tax and are thus encouraged to create growth in the economy. Yet built into the clause is the most extraordinary anomaly. At a certain rate of profit at the threshold, the tax leaps from 40 per cent. not, as one might suppose, to 52 per cent., but to a rate of 66 per cent! The first £70,000 of profits are chargeable at 40 per cent. This fulfils the Chancellor's intention to create growth. But the treatment of the next £60,000 of profits does not fulfil his intention. This is a " no-man's-land " of exceptionally high corporation tax!
      What can and does happen in practice is that a director takes his money out of the business to spend rather than leave it in, because by taking it out he cannot have to pay more than his own maximum threshold, which would be at most 60 per cent. on earned income, or less for many directors. Thus, there is clear encouragement to take the money out and spend it rather than to leave it in the business for the purposes of investment, because if it were left in the business the charge would be 66 per cent.
      That situation in fact defeats the Chancellor's object in putting his improvements into clause 20. I do not blame the Chancellor for this—it is part of one of
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      the ridiculous elements built into our tax system, which grow as Budget and Finance Bills follow each other in turn year by year.
      The reason is plain. It is to make a sliding scale work, so that there will be a merger of the small business rate with the general rate when the £130,000 figure of profit is reached. That is a reasonable thing which ought to be attempted by the Government. What is not reasonable is the way in which it is done, which defeats the purpose by making a sudden segment of exceptionally high tax just at the point where the small firm is likely to grow into a medium-sized firm, just at the point where we want to encourage it most of all.
      I hope that the Government will look at this situation again at a later stage to see whether there is not some way in which they can bring this nonsensical situation to an end. The costs of doing so would not, I understand, be very large, and in no single case could the improved relief be greater than about £7,000—in most cases much less than that. But it would create a sense of encouragement that is badly needed for growth.
      This is just one example of so many situations in our system which hinder growth due to technical reasons, I believe that the Chancellor has thought of and has mentioned the possibility at some stage of bringing in an autumn Finance Bill in order to deal with technicalities. I do not know whether he has that in mind for this year, but I hope so because it would be an opportunity for him to deal with the many hindrances to the growth of the smaller business sector at one fell swoop.
      There is one particular aspect about which small business men are concerned—the price of money. Every increase in interest charges paid by the business man enters into the costs of production and adds to sale prices. High interest rates are themselves, in this aspect and sense, inflationary. I know that it is dear to my right hon. and learned Friend's heart to bring them down when possible. It is particularly urgent to do so for small businesses even more than others. There is evidence that many small businesses are distressed because, instead of getting their money from bigger suppliers in 30 days' time, they have to wait 90 days,

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      and that in itself is a grave danger to small firms that are expanding, particularly those that do not have a substantial capital base.
      Most British firms set their prices on a cost-plus basis, so that we find the high interest rates in particular affecting those which wish to sell their goods abroad at a time of general deflation and falling sales. It is important, therefore, if the Government decide for other reasons that it is imperative to keep these high interest rates for the time being, that they should work with the banking system to ensure that the banks help bolster up small firms that are particularly damaged by these interest rates through no fault of their own, so that they can be ready for the expansion in the economy when it comes.
      The situation, though, is not as bad in 1979 as it was in 1976, when there were more bankruptcies recorded. However, there is danger ahead in the vastly reduced profits forecast for the next one or two years. Fears induced by cash flow problems may frighten many firms away from expansion not for months but for years to come. My hon. Friends who are the officers of the smaller businesses committee believe that if full reign is given to that sector now it can lead the way in conquering unemployment and all the attendant distress, in human terms, that goes with it.
      We believe that it will take three or four years for the uptake of the encouragement to take effect. Therefore, the Government must act as they are doing with the encouragement in clause 20, but much more widely as well. They should act now so that the small business sector is ready to meet the demands of an improved economy.
      I hope that the Government will pay heed to the heartfelt wish that I am expressing on behalf, not only of the officers of the committee, but of the small business sector throughout the kingdom. Those engaged in that sector can do the job that is required of them but they urgently need every help that they can be given. In that sense I am glad to welcome the clause. It is but one step, but it is a helpful one and it should stand part of the Bill.
      Mr. Geraint Howells: Many hon. Members on both sides of the Committee
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      are worried about the plight of small businesses and the self-employed. When the newly elected Government took office in May 1979, my right hon. and hon. Friends were disturbed when they learnt that there was not to be a special Cabinet Minister to represent the small business community and the self-employed. It is a great pity that we do not have a Minister of Cabinet rank to represent the sector that we are discussing. Unfortunately, we have only an Under-Secretary of State holding special responsibilities to represent those in a small way of business. In my view, that is not enough. My right hon. and hon. Friends have always held the view that a Minister with full responsibility for small firms and the self-employed is essential.
      Since the Government took office last year the small business sector has had to face vast problems. The problems have been far more difficult than was foreseen. There had to be a revival of interest in independent businesses. They were seen as a means of securing more employment and encouraging enterprise that would revitalise an important sector of the economy. I have always believed the small business man to be the backbone of rural communities in Wales, Scotland and England.
      As a result of a great deal of Liberal pressure, the previous Labour Government made certain concessions that made life easier for small businesses and reassured them that at last a British Government were prepared to take their existence seriously and to appreciate their role in the economy. Since that promising beginning to what we all thought would be a new era for small businesses, the economic climate has deteriorated dramatically.
      In many ways the small business has probably suffered more severely than the big business. That is because small businesses have smaller assets and inevitably feel more keenly the effects of a recession. In my conversations with small business men in past months, they have said that their chief worry is the rate of inflation, which has an effect on goods and services, and the crippling high interest rates that inhibit all their activities. Many flourishing businesses have seen their profits disappear. Many of them have been forced into liquidation.

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      6.45 pm
      The Government do not appear to encourage the banks to give overdraft facilities, loans or even risk capital to those operating small businesses, especially if they are starters. A great deal has been said about bank profits and two-tier bank interest rates. There are many in this place who represent rural areas. I and many others wonder whether the Government will reconsider our proposal to set up a land bank, or a business bank, to help youngsters who are willing to have a go on their own in rural areas. If we had a bank of the sort that we proposed two years ago, help could be made available to small farmers and to those willing to start on their own. Risk capital should be given to genuine people.
      There is no hope that British Leyland, ICI or Courtaulds will come into the rural areas. Therefore, such areas are dependent on small businesses. If an opportunity were given to those who wish to start on their own by the provision of risk capital, a step would be made in the right direction.
      The Government must meet their election promises for small businesses or stand condemned. They must help the self-employed and the small business man and not hinder them in any way. Will the Chief Secretary, when he replies, that bank interest rates are to be lowered in the near future? That is the greatest problem facing business men, especially those in the small business sector. Will the Government consider introducing a two-tier system of bank rate—a special rate to help the small business man and the self-employed to start, and another rate for those who enter into personal borrowing to help themselves? If the reassurance were given to those who are willing to start on their own that the Government were prepared to consider a two-tier bank rate system to help them, they would be greatly encouraged. Against that background, the confidence of many business men would be restored.
      I hope that the Government will be able to announce in the near future that the bank rate will come down. The survival of the small business sector is essential. I accept that the clause is a step in the right direction, although it does not go far enough. At times my right hon. and hon. Friends have felt like voting against
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      it, but having considered it positively we shall accept it. I hope that it will turn out to be a benefit to all concerned.
      Mr. A. P. Costain: It is interesting to hear the Liberal Party's attitude towards small businesses. It was fascinating to hear that it feels that all would be well if only we had a Cabinet Minister responsible for small businesses. I thoroughly disagree with that. We have a first-class junior Minister responsible for small businesses. He is able to concentrate on that sector. If he were of Cabinet rank, he would have many other matters to worry about. It must be better for him to remain in his present position. The Liberal Party's spokesman, the hon. Member for Cardigan (Mr. Howells), shakes his head. It is obvious that he disagrees with me. Hon. Members in the Liberal Party have never been in the Cabinet. They do not know the amount of time that a Cabinet Minister has to spend outside his Department. I was parliamentary private secretary to a busy Cabinet Minister, and I know how Cabinet affairs occupy a Minister's mind.
      Mr. Geraint Howells: Why then are the Secretary of State for Industry and the Minister of Agriculture, Fisheries and Food in the Cabinet?
      Mr. Costain: Funnily enough, there has to be a Cabinet and therefore Ministers in a Cabinet. If the Secretary of State is in the Cabinet and he has an efficient junior Minister, his Department can get on with its job while the Cabinet gets on with its job.
      I entirely agree that the country depends on small industries. There cannot be a large industry existing today that did not start as a small industry. Private enterprise depends on small industries. I welcome what the Government propose in the clause to encourage small businesses.
      It was fascinating to hear the hon. Member for Cardigan talking about two-tier interest rates. Does he advocate a Government Department to decide who shall pay what interest rate? The banks assess interest rates against the profitability or viability of a business. The hon. Gentleman advocates that, where there is more risk in a business, there

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      should be a lower interest rate, which is contrary to banking practices.
      I welcome the clever and clear proposal in the Bill that risk capital put out to encourage small businesses shall not be subject to interest. It takes its chance in the success of a company by being invested in ordinary shares. Money that is used to buy ordinary shares will pay no interest, because it anticipates the overall profitability of the company. That proposal is far more preferable than fiddling about with interest rates, which would require a large bureaucratic organisation.
      I am also fascinated to learn that the Labour Party believes that the best way to bring down interest rates is to tax lending. Do the Opposition really believe that taxing interest will bring down interest rates, and that if there is a super tax on banks they will decide not to make so much money?
      Mr. John Garrett: That is a gross misrepresentation of the argument of my right hon. Friend the Member for Llanelli (Mr. Davies). My right hon. Friend was asking only for a tax on the windfall profits of banks, which is clearly justified.
      Mr. Costain: I am sorry that the hon. Gentleman feels that I have misrepresented his right hon. Friend. Let me put it this way. Is it not good Socialist policy to penalise the successful? The successful are helping British industry. Britain is an international banking force. Do we want to inhibit our banks from being able to compete world-wide? The Opposition should think again if they want to help the country get back on its feet.
      I welcome the clause.
      Mr. Garrett: I understand that the debate was asked for by the Government Back Benchers to demonstrate their care for small businesses. I look forward to some hours of their advocacy. Perhaps hon. Gentlemen will flood into the Chamber after their tea break.
      I remember the hon. Member for Upminster (Mr. Loveridge) as a colleague on the Expenditure Committee with a wide experience of small businesses. He made a plea for the small business community, which I hope the Government will consider.
      Clause 20 embodies a relief in corporation tax for small businesses which was made much of by the Chancellor of the Exchequer in presenting his so-called enterprise Budget. The Government talk of assisting and encouraging small businesses but offer only modest help in the Finance Bill and in this clause.
      The small business sector is being severely damaged by Government fiscal and economic policies in three main ways. The first is by high interest rates. They are of particular importance to a seedling company trying to raise capital for plant, equipment, stocks and work in progress. It is clear from the report of the Treasury Committee on the public expenditure White Paper, the medium-term economic assessment included in it and speeches by Treasury Ministers, that we cannot look forward to a substantial reduction in interest rates in the foreseeable future. High interest rates are an integral part of the monetary monomania that has seized the Government.
      The second way in which small businesses have been hit by the Government's policies is through cuts in public expenditure—for example, the cuts in schemes to assist industries, which were a successful element in the Labour Government's industrial policy. Selective assistance schemes for the footwear industry in my constituency were aimed specifically at small companies. There was a size limit above which a company was not eligible. That assistance made a great deal of difference to the footwear industry in my constituency. The bulk of the selective assistance for the foundry and textile industries also went to small businesses.
      Cuts in public expenditure have also affected purchasing by public corporations. The Association of Independent Businesses is urging the Government to expand public sector purchasing. The turn-around required by nationalised industries will lead to no signficant increase in business for small businesses.
      There is then the direct effect of cuts in public expenditure on small builders. About 290,000 of the 1·3 million small busineses in this country are in the building trade, which will be decimated by cuts in public expenditure, such as the ending of all local authority new house building within the period of the public expenditure White Paper. The building

      1299
      trade is one-quarter of the small business sector, and the result will be enormously damaging.
      The third effect of the Government's economic polices on small businesses is through deflation and falling demand. Manufacturing output is expected to decline by 6 per cent. to 10 per cent. in a single year, which is unprecedented. Small businesses will be least able to survive. Taxation relief of the order proposed in the clause, amounting to about £20 million a year, is nothing compared with the loss of markets and the level of interest rates.
      In this small business man's Budget, the assistance is also pretty small and largely cosmetic. On 29 March The Economist summed up the situation when it said:
      " Small businessmen are aided not just because they are beautiful, but because aid to them is cheap. The word ' negligible ' features heavily in the tables of the financial statement and budget report (the ' red book ') which quantify the impact of company tax reliefs."
      If one looks at those tax reliefs through the financial statement in the Red Book, one finds that they are so small that they are not worth registering in the criteria of our system of national accounts.
      6 pm
      On 2 May the Small Business Guardian summed up the situation with regard to these enterprises by saying:
      " The ability of small firms to do any of the things expected of them will be severely curtailed if the numbers going out of business as a result of that aspect of Government policy "—
      monetarism—
      " exceeds the number being created through the Government's other policies aimed at encouraging the formation of new firms."
      It went on:
      " Already there is concern at where help for firms in difficulty may come from as the Government insists that it is committed to a policy of non-intervention in the workings of the market place … Some banks are already beginning to put up the shutters to further lending to smaller firms, a sector far more heavily dependent on loans than others. As a result, with interest rates showing little sign of falling, more and more companies will find themselves paying more on their borrowed capital than they are earning on marginal capital employed, severely undermining their ability to meet their short-term commitments. An indication of how the situation is developing is given by the dramatic increase in business failures in the first quarter of 1980…
      1300
      Dun and Bradstreet point out that small firms are particularly vulnerable as not only can they least afford the high cost of borrowing, their sales are often tied to the fortunes of one market. While the loss of a single major contract may be damaging to a large company, for a small one it can mean the difference between solvency and bankruptcy. At present costs are rising in a declining market, which could mean disaster for many a small firm as there is no immediate relief for anyone relying on high interest loans for survival. Rising costs do not only cause bankruptcies, of course, they can also mean that projected and much needed new jobs fail to materialise."
      At the same time as being regarded as one of the main engines for regenerating the economy and alleviating the unemployment problem, small businesses are being hammered by the Government's policies and the effects of high inflation and high interest rates. Those are the conscious policies of a Government who pursue the teaching of Professor Friedman in economic affairs. If one reads his books, one can see that the consequences are inevitable. The problem is exemplified by the complaints of small business men, which were spelt out in an interesting letter to The Times on 20 March headed:
      " ' Silly monetarism ' hurts the small businessman ".
      That sums it up. Mr. Edward Frewin said in that letter that he and his wife run a small business. They started in 1967 and now employ nine people, five of whom had been taken off the dole queue. He finds his business crippled by:
      " 1. Usurers' interest rates, making our £50,000 overdraft virtually impossible to service and creating the unbelievable rent of £3.47 per sq. ft. for warehousing. 2. An overstrong pound preventing us from selling into many countries but particularly North America. 3. Increased VAT which caused a dramatic collapse in the home market. 4. Increased national health contributions to add to our already rapidly increasing wages bill caused by 19 per cent. inflation. 5. 20 per cent. increases in office and factory rates. 6. Further increases in our overheads from electricity, telephone and the amazing postal charges. 7. Now, past and planned increases in petrol prices puts our representatives jobs in jeopardy. These items were all directly caused by this Government's silly monetarist policy. I, in common with most of the business community in this country, cannot wait for the return of the sensible politics of maintaining the delicate balance between monetarism and planning the economy."
      That is not the only source. I am quoting not Tribune but impeccable small business sources. Mr. E. A. Naptin, the regional chairman of the Association of Independent Businesses, has drawn

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      hon. Member for Upminster drew his remarks, which may not be relevant to British experience.
      and increases in rates. He said in a letter to The Times that in our large cities small firms had seen a decline in the volume of local authority housing available for staff and the refuse collection service available for industrial waste, together with cuts in main and secondary road provision and education. He said:
      " All these features represent cost constraints to the development of locally based industry and employment which many authorities "—
      he might have added the Government—
      " claim to want."
      Record rate rises this April will hit the small business sector, which is already suffering from high increases in rents, electricity and interest charges.
      The London Chamber of Commerce and Industry, in its fifteenth report on manufacturing industry of 21 April, referred to a frightening decline in small businesses and showed that 35 per cent. of companies were facing falling domestic orders. It said that an erosion of the capital base was gathering momentum at a frightening rate and added:
      " Without an upturn in demand, the heart of our manufacturing industry will be eaten away."
      Thirty per cent. of companies surveyed reported falling production. The percentage of businesses reporting a scaling down of their investment plans had more than doubled in a year. There was also a fall in the number of businesses investing in job-creating capacity.
      Nobody would deny that we need a thriving small business sector in Britain if we are to have a secure and growing industrial base. I assume that that is common ground between us. It is also true, and has been shown over many years, that the rate of small business formation in Britain is lower than in other comparable countries. That should concern us all.
      However, there is a tendency by the Government to inflate the importance of small businesses in job creation, particularly when the corporate sector is being reduced to rubble by all their other policies. Most of the evidence of the value of small businesses is based on an American study at the Massachusetts Institute of Technology, from which the
      1302
      A recent study by Dr. David Storey attention to the damage caused to small businesses by cuts in public expenditure, particularly local authority expenditure for the Centre for Environmental Studies, an institution which itself is being savagely cut in size and scope by the present public expenditure cuts, concludes that
      " even raising substantially the rate of new firm formation can have only a minimal impact on manufacturing employment, at least for a decade "
      and that its impact will not be primarily felt in the depressed regions of the country. He concludes also that changes in the rate of income tax do little to encourage new firm formation.
      There is little point in producing largely cosmetic changes to stimulate small companies when both large and small companies are being driven out of business by monetarist policies of high interest rates and cuts in public expenditure. The most important determinants of the formation and survival of small firms are demand and the price of capital.
      What the clause does is rather like attending to the woodworm when the house is on fire. Like much of the rest of the Bill, the clause is totally overshadowed by the cult of monetarism—a death cult for all businesses, small and large. The Government's policies are pouring loot into the coffers of the banks and the oil companies—the big, powerful allies of the Tories—and starving the small businesses that they affect to support. The small business sector is becoming a wasteland through which is wandering a tribe of loony monetarists doing nothing more than gibbering slogans and keeping their fingers crossed in the hope that eventually the cult will deliver.
      Mr. Richard Page: I said on Second Reading that, with the valuable political attribute of hindsight, the Budget might be viewed as the first real commitment by any Chancellor of the Exchequer to the small business sector. I believe that that is the case, and I reject the cynical remarks of the hon. Member for Norwich, South (Mr. Garrett). I believe that my right hon. and learned Friend the Chancellor of the Exchequer has taken the first step in a series of commitments to the smaller business sector.
      I did not specifically refer to clause 20 in my Second Reading speech, but I

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      believe that the raising of the qualifying limit for smaller businesses from £60,000 to £70,000, with the additional marginal relief, is a further illustration of the Government's commitment. Unlike the hon. Member for Norwich, South, I do not reject it out of hand.
      I shall not presume on the Committee's patience by talking about the importance of the smaller business sector to our economy. My hon. Friend the Member for Upminster (Mr. Loveridge) has already done that, and I have no doubt that over the years my hon. Friends and I will continue to plug the importance of that sector to our economy. We have to see this corporate tax relief as part of a package aimed at the retention of capital within smaller businesses, not only in their formative years, when they need help to expand and grow, but in the difficult transitional period that the whole country is going through.
      One of the more illuminating events during discussions on the Bill has been the series of economic theories that have been paraded back and forth as providing a solution to our economic ills. I am reminded of the truth of the saying that if one takes six economists and one problem, one will end up with seven solutions.
      As such, I admire the refreshing candour of the hon. Member for Kettering (Mr. Homewood), who said yesterday that when he was elected to Parliament he found that other hon. Members who spoke about economics knew as little as he did. However, despite all the theories advanced and all the speculation put forward, it seems a brutal fact that if the Government spend more than is earned the seeds of further inflation are laid, with all that it entails. The problems that flowed from Mr. Micawber being unable to balance his £1 budget in the days of Dickens is relevant today on a national scale. The only difference is that everyone suffers rather than one hapless individual.
      Despite their breastbeating, Opposition Members must surely now start to recognise that there is growing evidence that the level of PSBR, coupled with a flat GNP in real terms, has a definite relationship to the rate of inflation. One has only to look back over five or six years of the previous Labour Government and note their public service requirement in relation to the level of inflation to see
      1304
      how genuine that evidence is becoming. My fear is that public expenditure, especially that earmarked for revenue rather than capital projects will ultimately work into the system, to hit everyone, but more especially the small business sector—a sector that, because of its size and characteristics, is ill-equipped to look after itself.
      The clause goes part of the way down the road towards protecting the retention of capital that is so necessary to combat the effect of inflation and to help future investment. While the clause will help, it is obvious that a reduction of MLR will come as a major boost. I shall net be as prudently gloomy as my right hon. Friend the Chief Secretary to the Treasury was yesterday, in a most powerful contribution to the debates in Committee, because I take considerable heart in the trend downwards in the money supply over the past few months and the difference in the calendar rate of PSBR in 1979 and the rate of PSBR in the fiscal year. I hope that with honour and with that sense of conviction that my right hon. Friend mentioned, steps can be taken in this direction in the near future if—I underline the word " if "—that trend of reduction in the money supply continues to take place. It will bring a boost to industry and to smaller businesses to create a lesser fall in our gross national product in real terms, and will more readily help close the expenditure gap. The clause is a considerable recognition of the contribution of the small business to our economy. I welcome it.
      Mr. J. Grimond: Like other hon. Members, I stress the importance of small businesses to the economy. In many areas they are our main hope for creating new jobs. They are the one lively and expanding part of the economy in many parts of the country. It is not wholly true to say that the House of Commons has ignored them. Ever since I have been an hon. Member there have been constant speeches about them. Often, these excellent admonitions have not led to action or this has been cancelled by other factors. There is a danger of that happening again.
      I welcome what the clause proposes. I reiterate a question that has already been asked. Why cannot a sliding scale be

      1305
      introduced? It has been suggested that a figure might be put forward in an autumn Budget. I am not sure whether that is the right course. I do not think that Chancellors of the Exchequer need encouragement to introduce new Budgets. It is, however, right to stress the uncertainty and sharp increase that occurs after £70,000.
      Small businesses groan under the amount of documentation that they are forced to undertake, particularly in relation to VAT. I wonder whether the Government have anything to say about that situation. The atmosphere has been against small businesses. It has been a far better bet for someone to go into part of the public service and obtain security and a pension. A small business man can look forward to nothing like that, although his life at times may be more agreeable.
      6.15 pm
      The most serious factor is the question of interest rates. Is it impossible to have a two-tier interest structure? I appreciate that this is difficult and could lead to a great increase in administration. I would, however, like the Government to examine the matter. I understand that the Swiss have a two-tier system, although not for this purpose. It cannot be impossible. It is known that the Swiss are expert in financial matters. If a two-tier system is out of the question, the outlook for small businesses is poor. Whatever is done under this clause will be more than offset by the high interest rates that those businesses have to pay.
      I wonder whether the Government are examining the role of the savings banks. I constantly raise this matter, and equally constantly it is ignored. The savings banks in many parts of the country accumulate large quantities of local savings that are then removed from the local economy. Is it not possible to have some form of bank that would plough back some of this local money into productive enterprise in the areas where it is collected? I have persuaded the building societies to lend in Orkney and Shetland. For many years, the societies took money out of the area and put nothing back. Now they have agreed to put money back. I am still struggling, however, with the savings banks, which are inhibited by their statutory
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      duties. In other countries there are various forms of co-operative banks and other banks that do far more to mobilise local saving and lend to small-scale local industry. In spite of the efforts made over the years to fill the gap, that gap still exists in the financing of small scale industry at a reasonable rate. The joint stock banks and some merchant banks are excellent in many ways but I do not feel that they have yet grappled with this problem. I should like the Government to comment on the possibility of widening the scope of savings banks into new productive investment. I recognise that there is a savings bank unit trust, but that is not the same thing. I wonder also whether the Government can hold out hope for lower interest rates and some reduction in documentation.
      The Government have been told that many small businesses find difficulty in getting payments from large businesses and public authorities. I wonder whether the Government can say whether their influence on the matter has had any effect. This is a constant and justifiable cause of complaint. I am sure that all hon. Members are on the side of small businesses. I hope that as a result of the debate they gain some practical advantage from these sentiments.
      Mr. John Townend: I am a small business man. Listening to the hon. Member for Norwich, South (Mr. Garrett), I began to think that I must be operating in business in a different country. My experience and that of many small business men in the area that I represent,—an area with a level of unemployment of over 10 per cent—is one of optimism. There are difficulties, but for the first time in a long period there is a new move of realism that at last there is a Government in power sympathetic to the interests of small businesses, lifting the shackles of taxation off those in businesses and starting to lift a little of the bureacracy off their backs.
      Opposition Members may laugh, but the reductions in direct taxation in the Government's first Budget have had an effect. A small developer in my constituency who specialises in building new nursery units for small businesses said that when he had made sufficient money to attract 75 per cent taxation he stopped work. Now that the top rate has been

      1307
      reduced to 60 per cent., there is an incentive. That person is going round looking for development sites, building small units and letting them. There can be no doubt about the change of mood that has occurred.
      One aspect with which the Government have not yet fully dealt—I trust that my right hon. and learned Friend the Chancellor will do so at the next Budget—is capital taxation on small businesses.
      I welcome the clause. The reduction is modest, but it is as much as we can expect in a difficult year for the economy. I trust that it is only a start. Next year I should like to see a substantial reduction in mainstream corporation tax. That could quite easily be paid for by ending stock relief and reducing other reliefs. That would be particularly advantageous to small businesses, because the small business man, not having the advice of the sophisticated accountants who serve the large companies, often may not appreciate that if only he built up his stock in the few weeks before the year end he could reduce his tax burden. It is clear that the efforts by the large and medium-sized companies to get the benefit of stock relief is putting up the amount of borrowing from the banks and is helping to make it more difficult for the Government to control the money supply.
      One important aspect for small businesses—I do not think that the average small business man feels that the Government have done enough in this direct-tion—is raising from their backs the dead hand of bureacracy. There have been modest changes in the Employment Bill, but the small business man is looking for many more reliefs from punitive legislation, which is aimed at large companies rather than small ones.
      I accept the comments by Labour Members that the present level of bank rate is weighing down heavily on small businesses. That is part of the medicine that we have to take for living beyond our means in the past decade. However, small business men are particularly irritated when they have to make their contribution towards overcoming our economic difficulties but see the reduction in bank rate that they desperately await delayed because of the high level of public sector pay in the past year. They feel that they are making a sacrifice and that
      1308
      it is wrong that public sector employees should be given 100 per cent. protection from the economic facts of life.
      The Government's policy is beginning to work. Some of us think that if we had been a little harsher and tougher to begin with it would have worked sooner. However, everyone in the small business sector agrees that it is better to go slowly and bring interest rates down steadily and progressively than to reduce them prematurely in a way that may mean their being raised yet again.
      Labour Members seem to ignore one factor in their discussion of the problems of small businesses—the factor of trade disputes. Small businesses often depend on sub-contracting. In the Midlands the small business sector has undoubtedly suffered because of the problems of the motor car industry. Those problems have not been of this Government's making; they are problems of weak management, bad industrial relations, too many strikes, bad productivity, and too many restrictive practices over a decade. In my area two moderately sized firms have had to lay off substantial numbers of workers in the past two or three weeks because of the drop in orders from the motor industry. There is a knock-on effect, because those firms will in turn reduce their orders to smaller contractors and sub-contractors.
      Let us consider the plight of the building industry. Talking to small builders, I have been surprised to find that they are still short of good men. They could still get plenty of work if they could get the men. My area suffers from high unemployment, but one cannot without difficulty obtain the services of a plumber to deal with burst pipes. Equally, it is difficult to get a window cleaner. Labour Members who, judging from their comments, cannot possibly talk to small business men, blame all this on the Government. If there has been a reduction in local authority work that is in part because pay has pre-empted too large a proportion of local government's cash resources. As a result, capital expenditure and spending on maintenance have had to be reduced.
      The small business sector is in good heart. It is more optimistic over the medium term to long term than are many of our big firms. The message that I am receiving and which I pass on to my

      1309
      right hon. Friends is that the Government should remain determined to continue with their policy, because it is the only policy that is in the long-term interest of the small business sector.
      Mr. D. N. Campbell-Savours: I shall endeavour to be brief in this debate, Mr. Godman Irvine, because I hogged the Floor a little yesterday and I shall want to catch your eye again later this evening.
      Clause 20 seems to be a little strange in the context of what is happening in the country. It concerns a reduction in the corporation tax burden on smaller companies. We on the Labour Benches are endeavouring today to talk more about the problems that smaller industries have in reaching the threshold at which they will enjoy the lower tax burdens that the Government are proposing. Conservative Members seem to have overlooked that point in their speeches.
      I speak with a somewhat explosive background, because I was a small business man and entrepreneur before being elected to Parliament.
      Mr. John Townend: Why did the hon. Member make the change?
      Mr. Campbell-Savours: Because I believed that there was room on both sides of the Chamber for people who understood the problems of smaller businesses. I do not necessarily accept that Conservative Members have a monopoly of understanding small business, or of the right to be involved in it. It is the prejudice of Conservatives that leads them to the wrong conclusions about the Labour Party on the question of entrepreneurs in society.
      At the general election last year the Conservatives gave firm pledges to small business men and industrialists that they would create conditions in which those businesses would find it easy to operate. Yesterday I received a letter from a company in Lancashire. I do not intend to name the company, because it is located in another hon. Member's constituency, but I knew of this company some years ago. The letter sums up the position of small manufacturing industry today. The company produces moulded polythene containers. The letter states:
      " We as a company should like to bring to your attention the critical state of industry in
      1310
      general and, more particularly, our own. Since commencing business in 1974 we have enjoyed moderate success expanding slowly, purchasing our own factory and giving a reasonable service in the container field to industries including chemicals, textiles, tobacco, meat and many others. We have built up a small labour force over this time "—
      if I am correct it is about 30—
      " and in our opinion contributed to the well being of the county. Since September 1979 the availability of work is such that at this level we are becoming non-viable. Is it not time for a certain amount of purchasing power to be put back into the economy? Is it not time VAT was reviewed and the subsequent cash flow difficulties removed? Is it not time for interest rates to be reviewed and once again make it attractive to manufacture than to bank cash. We are in a battlefield but we cannot fight and survive if the economy is stagnant."
      The interesting thing about that letter is that it comes from an industrial estate in Lancashire, and when I was last there half the companies on it were on short-time working. When one speaks to industrialists in that part of Lancashire they talk of the grim future that they believe they face in terms not only of the activities of central Government but of the international recession. Though they may accept that the international recession was partly responsible, they also believe that there is a duty upon the British Government to react to that recession by introducing measures which will have an impact and give them some protection during these days of considerable difficulty.
      I am sure that Conservative Members will understand what I mean when I talk about the people on the road. They are the representatives who go out from door to door, from shop to shop, from factory to factory and from warehouse to wherever, selling on behalf of British industry and producers. Wherever one goes, one hears the depressing message that representatives cannot find the orders. I am sure that Conservative Members who have had a close relationship with representatives in industry will be aware that even those companies in which they have a secondary interest outside this Chamber are feeling the pinch of Government policy. Today. it has been recognised that orders are simply not there, particularly in small manufacturing businesses.
      6.30 pm
      It is unfair for the Financial Secretary to the Treasury to make repeated

      1311
      statements on behalf of the Prime Minister and his hon. Friends, as he did yesterday, to the effect that the country must wait until the end of the Government's period of office for an upturn in the economy, because in the meantime jobs are being lost, as are the small businesses which are vital to the future of our national economy.
      It is not this Government who have taken major initiatives in dealing with small businesses. It was the last Government who in 1974 appointed Ministers in the Department and introduced the stock relief scheme which, if Conservative Members were honest—if the hon. Member for Bridlington (Mr. Townend) had done his homework and asked manufacturers in his own constituency he would have discovered this—they would admit was the vital component in preserving the future of many companies.
      I think that this Government's attitude to stock relief has, in the main, been fairly responsible, in that they have retained the scheme, pending the introduction of new forms of inflation accounting which will have a major effect in preserving smaller companies. Last year I wrote to my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) about stock relief. He pointed out the great benefits of stock relief to industry and said that over four and a half years industry had been able to avoid paying £6,150 million that might have been spent by a Labour Administration in areas such as the social services. That money was given back to many smaller industries to assist them.
      Mr. Loveridge: I wonder why the hon. Gentleman feels that the Labour Party did so much for smaller businesses when in 1974 there were 3,720 company liquidations and when by 1976 that figure had risen to 5,939. Stock relief was indeed necessary, because the Labour Administration were driving the smaller business sector into the ground with multiple bankruptcies.
      Mr. Campbell-Savours: I take the word of the hon. Member for Upminster (Mr. Loveridge), but if so many businesses were going bankrupt in 1974 I can only assume that the preceding years of Conservative Government must have been particularly difficult. I can assure the
      1312
      hon. Gentleman that it is impossible for a Government to come into office and, within a few months, so transform the economy that 5,000 business men can suddenly disappear from the scene. When we deal with statistics on bankruptcy we should always grade companies according to the operations in which they are involved. I suggest that certain companies should not be in business at all. I would press for the expansion of smaller manufacturing industry.
      I turn now to an area of particular interest to me, as a former small business man. I have raised the issue before and I shall raise it repeatedly in future. It concerns the establishment of a regional bank. I cannot understand why it is not possible for the Government to subsidise interest rates. Industry is saying that it needs subsidies, particularly in certain areas.
      I believe that there is a strong case for regional subsidies to be paid and regional interest rates to be established in various parts of the United Kingdom. Such mechanisms would entice companies to come to the regions and also help smaller companies in setting up. Smaller companies find it difficult to start up, particularly in the regions, because of smaller markets.
      Obviously, in areas of smaller population, smaller companies find it difficult to operate. In the larger areas and the conurbations, which have greater populations, smaller businesses find it easier to proliferate. Why do not the Government introduce some form of incentive to smaller company operation where, in particular areas—perhaps on the basis of a turnover ceiling—money could be allocated to companies through a clearing bank organisation? That would help such companies with cash flow difficulties.
      The main problems of smaller companies, as was pointed out by my hon. Friend the Member for Norwich, South (Mr. Garrett), relate first to the market but, more importantly, to cash flow. If we set up a system whereby people in the regions have access to what I call cheap money, we shall in part resolve the problem, particularly if the money is advanced on the basis of discounted or factored invoices. That would mean that goods could be shipped by a company that would be allowed to convert the value

      1313
      of those goods into cash for investment. However, the cash would have to be borrowed at sensible interest rates. That is a proposition that I have previously advanced, and I believe that it would have an immeasurable effect upon the possibility of developing, in the regions, the companies about which I have spoken.
      Mr. Michael Shersby: I was surprised to hear the hon. Member for Workington (Mr. Campbell-Savours) praising the expertise of the Minister with responsibility for small businesses in the previous Labour Government. I seem to recall that the Minister concerned resigned from the Government because of the refusal of the then Prime Minister to channel more money into a bankrupt co-operative. That Minister was not replaced by the former Prime Minister. We do not retain good memories of the success of the hon. Member for Keighley (Mr. Cryer) who, fortunately for us, held that post very briefly.
      I welcome clause 20 because it is an important contribution towards the Government's enterprise Budget. I believe the clause is in the Bill because the Chancellor has listened to small business men and to the views of his colleagues in the House, particularly Conservatives, who interest themselves in these matters. During my time in the House no Chancellor has been more receptive to the views of colleagues on both sides of the House about the problems of small business men and no Chancellor has responded in such a way.
      We are all deeply grateful for the Chancellor's magnificent Budget, which is widely appreciated despite the fact that business men in both small and large enterprises face difficulties in a world which is in the midst of a recession. It is clear that the Chancellor has also paid special attention to the views of my hon. Friend the Member for Upminster (Mr. Loveridge), who is noted for his extensive knowledge of the problems facing small firms. I hope that the Minister will give a warm response to my hon. Friend's speech. I hope that he will be able to give an assurance that the Government will tackle the problem caused by the sliding scale for corporation tax. It is vital that we eliminate the sudden jump to 66 per cent. It is a serious hurdle which deserves to be tackled.
      1314
      We have heard much in the debate about small business men obtaining bank loans. There has been much discussion inside and outside the House since the Budget about the desirability or otherwise of small business men having access to loans which are guaranteed or made available at differential interest rates. Partly as a result of that, and partly because of the initiative taken by my hon. Friend the Member for Upminster in Back Bench Committees and outside the House, important initiatives are being taken by the big banks, particularly by Barclays and the Midland. There might be others. They are doing everything possible to channel more funds to small firms which need them to start. There is no doubt that the banks are acutely aware of the need to help small firms wherever possible.
      It is clear that the banks are willing to consider the possibility of selling back equity to small firms which are successful after a couple of years and after they have got off the ground with the help of venture finance.
      Mrs, Elaine Kellett-Bowman: Does my hon. Friend agree that, although his constituency cannot take advantage of it, the European Investment Bank, with its steady and low rates of interest, is of immense value to small firms, which can borrow as little as £17,000 under an agency agreement?
      Mr. Shersby: I am grateful to my hon. Friend. I agree that the European Investment Bank can play an important part. Small business men are not as aware as they should be of the facilities available. I hope that the bank will take an early opportunity to publicise its activities and the funds which are available.
      The debate has ranged wide. Because of that, I should like to tackle one or two of the issues which have been raised by Opposition Members. One of the factors to which reference was not made in the long catalogue of rising costs was the enormous burden of rates. Rates have to be paid by small business men. Generally, rates in Labour-controlled authorities are higher than in Conservative-controlled authorities. Nothing will close down a small firm more quickly, or make it move to another area more certainly, than the imposition of crippling

      1315
      rate charges. It has happened in one local authority after another. I warn the Committee that if the Labour Party persists in its spendthrift policies in local government, some areas will be denuded of small firms.
      Of the 20 real big spenders in local government, 19 are Labour-controlled. One has only to examine the differences in rates between Lambeth and Wandsworth to recognise the different circumstances that firms in those two boroughs face.
      The relief in clause 20 is of vital importance. With the other measures announced by the Chancellor in his Budget, particularly the introduction of enterprise zones, it will have a powerful effect on stimulating small business activity throughout the country. I welcome the clause as part of the package.
      6.45 pm
      My hon. Friend the Member for Bridlington (Mr. Townend) spoke about the mobility of labour and the difficulties which small firms experience in his constituency because of the lack of accommodation. The Government introduced shorthold tenancies in the Housing Bill as part of the enterprise package. When that Bill becomes law, many people, including council tenants, will be able to offer accommodation—or digs—to people who want to move from an area of low employment to an area such as Bridlington or Uxbridge, where there is employment. That is another important part of the total scene. Britain has not been noted for its mobility of labour. Clause 20 is welcome, but we hope that its provisions will be improved still further in the next Budget by particular attention being paid to the points raised by my hon. Friend the Member for Upminster and the 66 per cent. problem.
      Mr. Dalyell: It is not very profitable to swap " yah-boos " across the Committee about whether one party's ministerial arrangements are better than another's. Those who remember my noble Friend Lord Lever when he was Minister will be under no illusion that he carried considerable weight in the previous Government. I leave it at that. I am not saying whether it is better or worse to have a Minister outside the Cabinet, but he might have more time to meet delegations. There are swings
      1316
      and roundabouts. One cannot accuse the previous Government of being uninterested in small businesses.
      I agree with the right hon. Member for Orkney and Shetland (Mr. Grimond) in one matter. From our constituency experience, we can be in no doubt that many small businesses suffer from the tardy payments by a number of big enterprises, both public and private. I am not sure what Governments can do to ensure that big organisations pay their bills on time. However, the lag in payment is a real and practical problem.
      I should like to engage the Chief Secretary's attention on three issues. The first is the chartered accountants' issue. They say that the marginal rate of tax on profits between £70,000 and £130,000 is 66 per cent. and that it increases to almost 76 per cent. where the 15 per cent. profit restriction for stock relief purposes applies. The Scottish chartered accountants believe that in the interests of simplicity the system of marginal relief should be replaced by one where the various bands are taxed at flat rates. I do not know how much the Exchequer would lose, but it seems that there is a prima facie case for simplicity. I wonder what the Government's reaction is to that. Perhaps a flat rate would be sensible, taking into account the equity and efficiency of collection.
      The second issue arises from correspondence from the Conservation Society to the Chancellor of the Exchequer. Copies were sent to the hon. Member for Carshalton (Mr. Forman) and myself. I have taken a sustained interest in the society's activities. On 23 January, it said:
      " We wish to put forward again a proposal which we made last year, modified to meet the objections then made to it. We suggest that no Corporation Tax should be charged where a company's profits are less than say £10,000, with a marginal relief system designed to run out at say £20,000. This could be easily combined with a ' small companies rate ' system of the present type for higher profits. One advantage of having an exempt band would of course be a great saving in time and resources for the Inland Revenue as well as the small businessman."
      The Conservation Society's case then is that
      " If the concept of total exemption is not acceptable, we would nevertheless submit that the present differential between the rate for small companies and that for other companies—a mere 20 per cent. of the normal rate—is so small as to be no more than an ineffective

      1317
      ocmplication and that the small companies rate should be no more than half the normal rate."
      I have asked various people who know about these things what the sense of that proposal is, and I gather that it is in fact quite sensible.
      On 13 May the Chancellor replied along the following lines:
      " You make alternative suggestions for easing the corporation tax rate for small companies. One trouble with these is that they involve such a very high rate of tax on each additional £ of income in the marginal bands—over 80 per cent. in either case; and if one tries to get round this by extending the marginal bands, the cost increases."
      I do not quite see why that should necessarily be so, or by how much. The Chancellor went on to say that he had considered
      " how far it would make sense to help companies generally with their liquidity problems by major tax reductions, but this could be provided only at the expense of much higher personal taxation or higher borrowing and so higher interest rates. I decided that the best service I could perform for business was to give priority to reducing the burden of financing the public sector and so get down interest rates. But within the constraints I have also brought forward a long list of measures which will assist small businesses in particular and encourage those who run them. The major changes are the easements in capital taxation which complement last year's reduction in income tax; but in addition I am bringing forward a number of other measures. These do in fact include help in the area that you "—
      that is, the Conservation Society—
      " identified; the small companies rate of corporation tax is going down a further 2 points to 40 per cent., and the limits for the relief are being increased to £70,000 for the full relief and £130,000 for the marginal relief."
      Yes, but, with respect, I do not see that that answers the perfectly sensible case that was made in the first place, and I should like the Chief Secretary, either now or at some later date, to give his mind to the case that was made by the Conservation Society. It may be possible to come back to it on Report if it is thought that that case is well founded. It does not seem to me to be all that costly; it seems sensible in terms of efficiency and it is certainly sensible in terms of the costs of collection.
      The third issue that I wish to raise with the Chief Secretary is one that he may say he can do little or nothing about, but it concerns a problem that many of us are facing. I refer to the problem of
      1318
      the independent garage that retails petrol in country areas such as the one that I represent.
      The truth is that the pressures from the petrol supplying companies on these small garages selling petrol are now extreme. I suppose that what I am asking is that the Government as a whole should make contact with those who run Esso, Shell and BP to ask them what the policy should be, since overall it cannot be energy-saving-effective or, I suspect, cost-effective to put out of business many of the small garages in country areas. We all know that in the country areas of West Lothian and, doubtless, in the constituencies of all other hon. Members who represent rural areas, these businesses serve an important function for the community. If people have to go into towns to get petrol, it must be obvious—though I do not make too much of it—that quite considerable quantities of fuel may well be wasted through the very fact that there is no petrol point in the country areas themselves.
      This issue has been raised by the Scottish Motor Trade Association and by a number of constituents. I shall spare the Committee any of the letters that I have received from constituents, but the motor trade representatives make this point:
      " A considerable number of rural communities rely on personal transport for mobility. The ' Gas bar ' policy of Esso may in certain urban sites be beneficial but not in a rural situation where the present petrol station repairs vehicles, performs MoTs and generally provides an overall service to the community. Many of the sites which the oil companies allow to remain open will be redeveloped to ' pump gas ' with not other services provided other than a shop with Esso recommended goods on sale.
      " In the short term, petrol prices remain competitive, but are they so on motorways—apart from the M8 which is a special case—where it is a distress purchase? Is it not a fair analogy to suggest that when rationalisation is complete the urban communities will be in a distress purchase situation? Already in Edinburgh, for instance, 57 per cent. of sites are owned by oil companies which account for 69 per cent. of sales. Admittedly at present prices are highly competitive, which is benefiting the Edinburgh motorist, but what is it doing to the already dwindling gallonage of, say, the independent retailer in the Borders or, for that matter, the tenant of a small site "—
      in, say, West Lothian or East Lothian?
      " It is, we feel, a deliberate creation of a whirlpool effect by oil companies capable of manipulation of prices. The end result will be to polarise gallonage and as a by-product

      1319
      carve up Edinburgh into trading areas dominated by one or other of the major oil companies. This latter point is vehemently denied by the oil companies, who claim that they merely wish to retain their share of the market and to control retail prices."
      The motor trade is aware from discussions with other bodies that its concern is not, as has been suggested, an " in-house " trade problem, but it concerns many others.
      I put it to the Treasury that no Government can quite pass by this problem, as the Levite did, on the other side of the road, for the truth is that only Governments can do something about it. It is no good rural Members of Parliament going along in dribs and drabs and tackling Dr. Pearce or any other head of an oil company. There is some Government moral responsibility in this matter, and when we are discussing small businesses I must ask what is to happen.
      Do the Government view with equanimity the prospect that a great number of small garages that could not remain as garages without the sale of petrol should be driven out of business by a policy that, so far as we can see, is determined by the major oil companies in competition one with the other rather than, in this case, by any advice from the Government? I hardly think that this Government—and rightly so—will give oil companies advice along the lines that they should put small rural garages out of business.
      I state the problem. I do not want to impinge upon the patience of the Committee, but it is a real problem, it is urgent, and I ask that there be some comment on it.
      Mr. James Hill: I wonder whether, when they pick up Hansard tomorrow and read this debate, our small business men will draw any crumb of comfort. There have been a lot of platitudes, and there has been a tugging across the Floor, with a " yah-boo " sort of attitude—" I can protect small business men better than you ". What the small business man needs, instead of a very low key debate, is real confidence. He lacks confidence today.
      The small business man is under extreme pressure. He works long hours. I am talking about the small business, the business with the man who runs it and
      1320
      three or four, or perhaps five or six, employees. Apart from working extremely long hours, he is the last in the pay queue. In some weeks, indeed, he will not be able to pay himself because he has not made ends meet. He is ploughing every possible penny back into his business. He is proud that he is a small business man. He is proud that he controls his own destiny under the umbrella of the State, but he is very hard pressed.
      When the small business man reads the detailed series of letters just read out by the hon. Member for West Lothian (Mr. Dalyell), he will realise that this place is just a sounding box. We do not seem to have Members who understand the real trials of the small business man. We can only reflect the views of associations and large groups which write in. The small business man is the man one can go and meet in any pub in the evening and talk over his problems. He is willing to talk. He will not get any sustenance or delight from the debate today. What ideas have been suggested? The suggestion of a two-layer interest rate is unworkable. It is bureaucratic nonsense.
      7 pm
      Mr. Dalyell Mr. Dalyell rose——
      Mr. Hill: I shall not give way to the hon. Gentleman, because he is a constant interrupter in debates. In another Committee we had trials and tribulations with the hon. Gentleman. I shall not give way. I have only a few minutes in which to speak. There should be a form of justice in debate. I am making a few minor points. I am not trying to annoy any hon. Member, but I am definitely going to make my points.
      The small business man will be depressed when he reads Hansard tomorrow. He will be depressed also because the procurement programmes of some of our nationalised industries are not aimed at buying British. They buy radar for British airports from American sources. A system is being established within the Inland Revenue whereby PAYE will be dealt with by computer. There is some doubt whether we should buy British for that. It is the same with everything that one could mention. We are about to split the Post Office. The telecommunications section, which will be under a new chairman, will have a tremendous purchasing bill.

      1321
      In France, industries buy French equipment. President Giscard d'Estaing agreed that the French Post Office should buy for the Paris area 5,000 television screens to computerise the telephone directory. That process will be continued throughout France. We must begin to support the small business man in Britain.
      Mr. John Garrett: I am sorry to interrupt the hon. Gentleman, but I am sure that he will give way to me.
      Mr. Dalyell: The hon. Member for Southampton, Test (Mr. Hill) gives way to my hon. Friend only because he is an anti-vivisectionist.
      Mr. Garrett: In view of the remarks of the hon. Member for Southampton, Test (Mr. Hill) about the need for public enterprises to buy British, I am sure that he would wholeheartedly support the important innovation introduced by the previous Labour Government, namely, the Offshore Supplies Office, which managed within three or four years to raise the proportion of North Sea oil equipment purchased from British sources from about 25 per cent. to more than 50 per cent. That is an example of Government intervention with which I hope he will fully agree.
      Mr. Hill: I did not have the pleasure of being in the House when the previous Labour Government were taking such wonderful steps into the future. Unfortunately, one of those steps led them to the edge of the cliff. Had I been in the House, I would certainly have supported any suggestion to buy British. As long as there is a comparable product, and a way through the purchasing bodies of the nationalised industries, we must support the small business man. At the end of the day he is the man who receives the orders for small components. He can survive only on orders from above. It is only with high productivity that Britain can make the goods to sell to the outside world. I am sorry that I mentioned those one or two odd little matters, which are outside the power of the Chief Secretary—and quite rightly so. He does not want to direct any nationalised industry to buy British.
      One of the most serious aspects for the small business man—once again outside the interests of the Committee—is the national insurance surcharge, which has
      1322
      a most frightening effect. Although there is a great deal of force in the argument for reducing the minimum lending rate, one of the most traumatic experiences for any small business man is when, at the end of the month, he has to put together the PAYE and the national insurance cheque for the collector of taxes. That is most disheartening for all small busineseses.
      As has already been said, there are the problems of rates, taxes—which are being reduced, for which every small business man is grateful—and the general overheads. The small business man can survive only in good premises with a good work force and a full order book. He needs the confidence that can be given to him only by the House. The sooner that we get down to making it possible for the small business man to gain that confidence after a debate in the House, the sooner Britain will become more productive, and the sooner it will become a prosperous nation once again, and not number seven or eight in the European league.
      Mr. Biffen: We have had a most entertaining and ambitious debate on clause 20. We have been graced by the presence of my hon. Friend the Under-Secretary of State for Industry. His presence is a courtesy to the Committee and an indication of the Government's commitment to the small business sector.
      I wish to speak briefly on the clause. When I have performed that role, and paid my toll to enter into the wider debate, I shall seek to deal with some of the points that were raised in speeches from both sides of the Committee and to comment upon the role of small businesses within our national economy.
      The purpose of the clause is to set the rate of corporation tax for small companies. It contains two significant changes. The rate is cut from 42 per cent. to 40 per cent., and the profits limit is raised from £60,000 to £70,000, broadly in line with inflation. The corresponding marginal relief applies up to a figure raised from £100,000 to £130,000.
      My hon. Friend the Member for Upminster (Mr. Loveridge), who initiated the debate, was joined by the right hon. Member for Orkney and Shetland (Mr. Grimond) and the hon. Member for

      1323
      West Lothian (Mr. Dalyell) on the question about the smoothness with which the tax proceeds from £70,000 to £130,000. There is a formula, which I cannot commend for its simplicity, which, when applied to profits, effectively produces a sliding scale from £70,000 to £130,000. Most of the objections to that are based on the belief that the sliding scale should start at a lower figure, but the whole principle of the tax is not to apply a lower rate of tax to the first £70,000 of profits but to provide that the lower rate shall be available only for profits that are earned up to £70,000. It has been skewed to benefit small companies rather than the first tranche of profits of companies of whatever size.
      The 40 per cent. small company rate compares with a 52 per cent. standard corporation tax rate. Clearly the Government believe that the measures should aid the cash flow problems in the small business sector, and help to solve its difficulties in raising finance. The cost to the Exchequer during 1980–81 will be £20 million, and for a full year it will be £35 million.
      I wish to turn to the general debate which preceded my contribution——
      Mr. Loveridge: Before my right hon. Friend does so, I hope that he will give us an assurance that the Government will carefully consider the matter of the scale at the point where the jump in tax is from 40 per cent. to 66 per cent., which has a sharply disincentive effect. I hope that the Government will think again on this matter.
      Mr. Biffen: I hope that my hon. Friend will read carefully what I said a few moments ago, explaining why the formula that we have employed in the Bill was chosen.
      In answering the general debate, I refer first to the speech by the hon. Member for West Lothian, partly because I want to perform the blessed role of peacemaker. A misunderstanding arose about the respective merits of former Ministers with responsibility for small businesses. My hon. Friend the Member for Uxbridge (Mr. Shersby) had in mind the hon. Member for Keighley (Mr. Cryer), not Lord Lever.
      Mr. Dalyell: Ah!
      Mr. Biffen: " Ah! ", says the hon. Member for West Lothian. Whether or not one agrees with the sentiment, one can understand how easily confusion could arise unless one were clear about the person at whom the remarks were directed.
      I shall give my mind to the comments made by the hon. Member for West Lothian arising out of correspondence with the Conservation Society. It was the first that I had heard of this problem. However, I see no reason to suppose that I would be foolhardy enough to disagree with the recorded judgment of my right hon. and learned Friend the Chancellor of the Exchequer. None the less, having said that I shall give my mind to that point I shall do so.
      The hon. Gentleman then raised the wider issue of the independent garage in rural areas. Inasmuch as there is a Government responsibility in this matter, it is more likely to fall within the ambit of the Department of Trade than of the Treasury. The best that I can do is to refer the hon. Gentleman's remarks to my right hon. Friend, so that he may make his assessment.
      The hon. Member for Workington (Mr. Campbell-Savours), standing as a self-confessed entrepreneur—a fairly provocative description at this stage of our debates—proceeded to devise suggestions for the Government which I think would be absolute heaven to the entrepreneur—namely, a system of subsidised interest rates on a regional basis. I say in all seriousness to the hon. Gentleman, because we are going to be locked in comradely war——
      Mr. Campbell-Savours: Coexistence.
      Mr. Biffen: All right, coexistence—over the coming evenings——
      Mr. Campbell-Savours: Mornings.
      Mr. Biffen: Promises, promises. The position is that in the prosecution of regional policy we have had the payment of grants on physical assets. I note the presence of my hon. Friend the Member for Folkestone and Hythe (Mr. Costain). The Public Accounts Committee can provide no end of evidence of the difficulty of ensuring that those physical assets attracting grant were actually used in the areas that had been designated. How much more difficult it would be if we

      1325
      designated financial assets. I can see endless scope for the nimble-minded in this whole area. I am not commenting on the theological acceptability of the proposition; I am merely saying, in hard practical terms, that I do not believe that this kind of proposition is a starter.
      7.15 pm
      The same consideration leads me to be sceptical about the time-honoured Liberal proposal for differential interest rates. At least it can be said that the Liberal proposition was almost born of the pre-1914 days—the land on which we stand God gave to the people. But we have moved on. I see no effective likelihood in the sophisticated society in which we live of having two-tier interest rates or, indeed, an effective tax on bank lending, which was the great offering to our public debate this afternoon by the right hon. Member for Llanelli (Mr. Davies), who asked us to study it with very close care.
      The debate has thrown up this itch for mistaken intervention on the part of the Opposition. It is a Lib-Lab coalition in this instance, but it is not dignified by that passing alliance. It takes us again more and more to the broad divide in approaching the problems of business: whether we believe that we can help by constant Government involvement on a discriminatory basis or whether we should proceed on the basis of trying to withdraw Governments successively from their present degree of involvement.
      The hon. Member for Cardigan (Mr. Howells), besides referring to two-tier interest rates, suggested that I might like to enliven our proceedings by indicating when the minimum lending rate would fall. I have nothing to add to what I said last night. Indeed, the right hon. Member for Llanelli said that what I said last night moved the market. It is a great temptation to see what goes up come down, and whether one can manipulate two ways, but I shall be immensely responsible. I say that I have nothing to add.
      I note that my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) said that he was travelling happily—that was the impression that I got—with regard to the prospect of a fairly early fall in the minimum lending rate. I always have a cheery wave for such a pilgrim, but again I cannot reasonably go beyond what I have already said.
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      The hon. Member for Norwich, South (Mr. Garrett), coming to the Opposition Dispatch Box, treated the Committee to a litany of gloom that would almost have been worthy of myself. One learns that paste is no substitute for pearls. I felt that, somehow or other, the whole thing was just that much overdone that it had become something of a caricature.
      When the hon. Gentleman referred to small businesses as a wasteland, he showed a total misunderstanding of what was happening in the economy. Of course small businesses have their full share of problems. There is not the slightest prospect of sheltering the small business sector of the economy from the general buffets that we shall encounter over the coming 12 months or so. Nobody would be so foolish, so facile or so patronising as to suggest that. But at least we are enabled to believe that there is about the small business sector an innovative characteristic—a reaction, an aptitude, an ability to weather storms a great deal more successfully than do some of the giants. I should think that that is the story of what is currently happening.
      In contrast to what was offered by the hon. Member for Norwich, South, I turn to the speech made by my hon. Friend the Member for Bridlington (Mr. Townend). He showed just the kind of robust optimism that is needed to wither the contrived gloom of the Opposition Front Bench. My hon. Friend made a point that will increasingly lie at the heart of the debate. He said that if we have the interests of the small business sector at heart we must secure an early and substantial reform of capital taxation. That will be the real test. What is the degree of bipartisanship on the whole issue of small businesses, whether or not the Opposition will join us in prosecuting the passage of a substantial reform of capital taxation?
      The right hon. Member for Llanelli said that we have not done anything yet. That should be written into the record, as should his pledge on a tax on bank lending. It is a clear indication by the Opposition Front Bench that we should get on with the question of reforming capital taxation. In this area I shall also travel happily.
      My hon. Friend the Member for Uxbridge said that he believed that the banks wanted to help small firms. That

      1327
      is true. The whole area of the financing of small companies is one that is engaging the anxieties of the financial community on a scale that has hitherto been unparalleled. It knows perfectly well that small businesses have become politically very topical. I do not blame it on that account. I also believe that it is a matter of good, sound business instinct. The financial community knows that this is an area that will allow the deployment of our asssets to produce a profit and secure livelihood.
      My hon. Friend the Member for Southampton, Test (Mr. Hill) enjoined us to realise—I thought splendidly—that a large number of small companies prefer to proceed invisibly. They are not interested in joining trade associations. They are a part of the great unorganised army. That is partly why they are resented by those who have a vested commitment to centralised planning in the economy. The small business sector is full of people who are monumentally and temperamentally unfit to be members of a sector working party, and long may that remain so. They are part of the free enterprise sector of the economy that we need so much.
      I turn now to the speech of my hon. Friend the Member for Upminster, who introduced this debate and who speaks with the authority of the office that he holds with the small business committee of the Conservative Party. I thank my hon. Friend for initiating a debate that has ranged widely. The longer it proceeded the more it vindicated the role of small businesses in our economy. My hon. Friend drew upon American experience—which is as good a guide as we have—indicating the importance of small businesses for the whole process of renewal in our economy.
      The hon. Member for Norwich, South sits on the Opposition Front Bench, taking a slightly sniffy attitude. I heard all his words and the mild barracking from the Opposition Front Bench throughout the debate. I am not complaining, so the hon. Gentleman must not get too upset.
      There is no harm whatever in quoting from the American experience. Of course, our economy does not slavishly follow that of North America, but I believe that the experience there is a good general guide as to the importance of small businesses
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      in securing the renewal and change that must be essential if our economy is to prosper.
      This clause is a modest indication of the Government's commitment to provide a better tax framework for small businesses. I make no great claims, but at least it is better than nothing, and its value is increased when it is taken in conjunction with other tax changes, both in the previous Budget and in this Budget. There is also a commitment to ensure that there are better ways of providing venture capital for the small business sector. On this, we are well advised to await the final outcome and judgment of the Wilson committee. It will be a matter of major continuing debate.
      Finally, we have a commitment to keep off the grass, which is not an attitude congenial to our opponents. We believe that the small business community needs significantly less government rather than more regulation. This clause is part of a general approach that is being deployed by this Government in their policy towards small businesses. I recommend it to the Committee and I hope that it will receive its authority.
      Question put and agreed to.
      Clause 20 ordered to stand part of the Bill.

    Clause 23

      INDEXATION OF INCOME TAX THRESHOLDS AND ALLOWANCES
      Mr. Denzil Davies: I beg to move amendment No. 17, in page 13, line 34, leave out ' Parliament ' and insert ' the House of Commons '.
      This amendment relates specifically to the procedure laid down in the clause for the application of an order should the Government wish to resile on the indexation provisions of the clause. I hope that when we reach clause stand part we shall discuss the merits of the clause. This amendment is concerned merely with the procedure under which the clause is to operate. Unless we receive strong assurances from the Government, we shall probably wish to oppose the clause when it is put to the Committee.
      The clause seeks to extend the indexation provisions. It is a sort of extension of Rooker-Wise to Lawson—if I may

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      put it in that way. Clearly the Financial Secretary has derived great pleasure from the clause. Under the original Rooker-Wise amendments to the ordinary personal allowances, if I may so describe them, there was a procedure whereby the Government, by means of an order, could resile from or not follow through the indexation of allowances. They are incorporated in the procedure in this clause. This amendment seeks to put pressure upon the Government not to provide that that order can be brought forward in the House of Lords. Subsection (4) states:
      " Unless Parliament otherwise determines ".
      The order under this clause would prevent indexation on the basis of an increase in the retail price index. According to the arguments that this Government put forward when they were in opposition, if there is no indexation link to the retail price index or a link to inflation, that is, in effect, an increase in taxation. We heard cynical and perhaps hypocritical speeches from Conservative Members in opposition about the need for truth in taxation. They pressed upon us the point that if we did not index allowances—whether personal allowances or the higher rate band with which we are really concerned—that was, in effect, an increase in taxation. To some extent, it was.
      The Government are now saying that to allow that increase and to negate the provisions of the clause there should be an order in the House of Lords, I do not understand that. I understood that the Upper House—it is clearly written into statute—does not have anything to do with taxation. I should like the Financial Secretary, who is clearly in favour of indexation, to tell us why the Government may move an order in the House of Lords. It may be theoretical, but for the first time we have a Treasury Minister sitting in the House of Lords.
      Why is it necessary to include the word " Parliament " in the clause? The words " the House of Commons" are more appropriate. The House of Commons is the arbiter of taxation, and the House of Commons imposes taxation, and should relieve taxation if necessary. This order is directly relevant to the levels of taxation when they are related to the levels of inflation. I hope that when we debate the clause we shall debate
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      it on the basis of indexation. I hope that the Financial Secretary will say why we are allowing the House of Lords the privilege of the power to bring forward this order.
      7.30 pm
      Mr. Lawson: The right hon. Member for Llanelli (Mr. Davies) has not been as careful as he usually is, as a lawyer by profession—not to mention a former Treasury Minister—in reading the clause. There is no question of any order in the House of Lords for the simple reason that there is no question in the clause of any order-making power. What the right hon Gentleman is getting confused with is the procedure which has existed since section 22 of the Finance Act 1977, when, as a result of my amendment to the so-called Rooker-Wise amendment, it was laid down, to show that there was no automaticity of the indexation, that an order could be introduced which would make the allowances less than they would otherwise be.
      Under the new procedure there is no such order-making power. The making of the allowances, personal allowances or whatever they are, less than would be indicated by indexation would be done in the Finance Bill itself. Therefore, since the Finance Bill has to be approved by Parliament, that is why the words are as they are in the clause. I hope that the right hon. Gentleman will be satisfied with that explanation.
      Mr. Denzil Davies: I am grateful to the Financial Secretary. I entirely accept what he says. Clearly, if this is to be done by statute, as he says, I accept that the word has to be " Parliament ". If there were a specific order, we would expect the term to be " the House of Commons ".
      This shows the virtue of what was said by my hon. Friend the Member for Gateshead, West (Mr. Horam) in Standing Committee. He said that there should be available to this Committee notes on clauses explaining fully the purpose of this clause. This point was not made clear in the puny little note from the Treasury that we got in the Vote Office. It is expecting a lot of the Opposition to ask us to pick up all these particular points.
      It is only right that when we see the word " Parliament " in a taxation

      1331
      measure we should question it. We have had experience of this in Standing Committee, where we were faced with an amendment whereby the House of Lords was to be given powers in relation to the Road Traffic Acts and the road fund licence—powers in relation to taxation. It is only right that we in this House should jealously guard our powers over taxation. When we see the word " Parliament " in a clause of the Finance Bill, we must be very careful.
      However, I am satisfied and I accept entirely the explanation. On that basis, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Question proposed, That the clause stand part of the Bill.
      Mr. Denzil Davies: Perhaps the Financial Secretary will tell me again whether I am wrong, in which case I shall be prepared to admit it, but to me the clause looks like a major extension of the——
      Mr. J, W. Rooker: It is.
      Mr. Davies: It is. My hon. Friend is an expert in these matters. I believe that he was the man who moved the original indexation amendment to the personal allowances. I have some quotations with me to show that.
      The clause is a major extension of the indexation provisions, which were contained in what was called the Rooker-Wise amendment—or the Rooker-Wise-Lawson amendment, if the Financial Secretary wishes to add his name to it, as I am sure he does. Therefore, we have here an attempt by the Government to extend indexation from the ordinary personal allowances to the higher rate bands or thresholds, to people who earn £11,250 a year and upwards, and to the investment income surcharge, as I understand it, under subsection (2)(b). So we have a major extension of indexation to two groups who pay tax at these higher rates—the old surtax rate, now the higher rate, and the investment income surcharge.
      It seems that these groups are to be given priority in protection from the effects of inflation. They are to be indexed and protected. No matter how
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      much their salaries increase, the tax advantage will follow, because the tax advantage will be increased more or less in line with the increase in their salaries. The Government will be doing this to those groups who, I should have thought, by and large, are quite capable of looking after themselves and who have benefited enormously—they are the only groups that have benefited; as far as I can see, no one else has—from the last two Finance Acts. If there is to be hyper-inflation, as there will be under the present Government for some time, the surtax payers will be protected from that, come what may, under a Tory Government.
      The Government would argue—I suppose that this is the kind of argument that we shall have from the Financial Secretary—that this is an extension of the Rooker-Wise-Lawson amendment and that, as a result, it is nothing to get too concerned about. I do not wish, especially as my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) is present, to go back over those indexation debates. My views on indexation are on record. They may be wrong; they may be right. Those who attend or read our debates will know my views on the subject.
      I believe that indexation is generally a bad thing, although I accept entirely that there are certain groups who must be protected from the ravages of inflation, and they are the people who cannot protect themselves and who are in the worst position in society. But basically my view is that indexation is not a good thing. It helps to build inflation into the system and, as such, as a general principle, I would object to indexation. I do not want to pursue that debate this evening. We have had that debate on a number of occasions.
      I know that the Financial Secretary takes a different view. I think that it could be said of the hon. Gentleman that his view is " If it moves, index it ". He is the great indexer. He shakes his head now, but in his time he has been—and in this clause with which he is personally concerned on the Front Bench—the great indexer. He is the man who believes, with Sam Brittan, that one indexes everything and then one solves the problems of inflation.

      1333
      Of course, one cannot index everything. That is the problem. One can index only some things. No Government will index everything. That is where the difficulty comes with inflation. However, under this clause indexation is given to some in our society—the managers, lawyers and accountants, the opinion formers—who will then have no incentive. Why should they worry about inflation? They can have their 20 per cent. wage increases. They can have a 20 per cent. increase in their fees if they are self-employed lawyers or accountants. None of that will be eroded by inflation, because the Financial Secretary has introduced indexation for them and everything is fine and rosy in the garden and they still get the full benefit. So why should they worry about inflation?
      The poor may suffer from inflation. The unemployed may be de-indexed, as has been done under the present Government with unemployment benefits. But that does not matter. The company director, the lawyer, the accountant and the stockbroker are all right. They can raise their fees and get their increases. They can get their wage increases if they work in companies, and if they are self-employed they can get their increases merely by raising their fees to take account of inflation. There is no deterrent in the tax system. The Financial Secretary says " We shall index your allowances and you will not come back into the basic rate of income tax. Do not worry. You will not fall down into the next band. You will stay in the band in which you are ". That is the real mischief in the clause, and that is why we oppose it.
      Leaving aside the general question of indexation, I believe that it is a bad thing for another reason, which I have touched upon, namely, that since everyone cannot be protected there is the question of the pressure group which is the strongest and which has the most influence on the Government. If one has influence on the Government and the Treasury, if one is a higher rate taxpayer, one can get one's income indexed. But people who are unemployed, or disabled, or on social security, under the present Government, are not strong enough as a pressure group.
      1334
      That is the iniquity of indexation. It is only those who can bring pressure and influence to bear on the Government, whatever party is in power, who get the indexation. Under the present Government we have seen that it is the better-off who get the benefits of indexation and it is the poor and unemployed who are deprived of the benefits of indexation. That is another reason why we oppose the clause.
      The Financial Secretary will use those various debating points against me. His general views on indexation are strange for a Financial Secretary in a Conservative Government. There are quite a few Conservative Members on the Government Benches. I should have expected some of them not to believe in indexation. As the Conservative Party is in Government, Conservative Members must support the clause and may have changed their views. I would have expected some Conservative Members to believe in sound money. The Conservative Party used to believe in that. However, that was a long time ago, when the Conservative Party was in Opposition. There is no sound money any more, with inflation at 22 or 23 per cent. However, rates are indexed for the better-off.
      No doubt the Financial Secretary will say that this provision is an extension of the Rooker-Wise amendment. My hon. Friend the Member for Perry Barr played a major part in that amendment. He will no doubt argue in favour of his amendment. However, this provision is more than an extension. From reading the reports of the debates on the so-called Rooker-Wise amendment in that famous Committee upstairs, it is clear that the amendment was introduced to protect the weakest in society and those within the poverty or surtax trap. The Financial Secretary did not like the words " surtax trap." The amendment had something to do with the " why work? " syndrome; the gap between those who do not have a job and those who work and are taxed because we could not increase the allowances.
      I am sure that the Financial Secretary will be interested to hear some quotations from that debate. No doubt he has got the quotations in his brief. The Financial

      1335
      Secretary played a leading part in those debates along with my hon. Friend the Member for Perry Barr. The Financial Secretary said:
      " Nevertheless, it means that an increasing number of people find themselves better off not working than working—or very little better off."
      That is the " why work? " syndrome. It was his rationale for introducing the amendment. He continued:
      " the average man gets 80 per cent. of what he would get working if he is not working. That is a very substantial amount."
      The issue arose because unemployment benefit was not taxed. It was indexed under the Labour Government. Our record was fairly good, but the problem may have arisen because we were unable to index personal allowances entirely to the cost of living. As a result, the gap narrowed between the net income of a man who was unemployed and the net income of a man who was employed. That was the Financial Secretary's argument. That is why he moved the amendment. He then said:
      " Therefore, even for the average man the difference between working and not working is rather marginal. Of course, for a number of people who are below the average there is no encouragemnt to work at all. I believe that this is economically, socially and morally destructive."—[Official Report, Standing Committee D, 14 June 1977: c. 449–50.]
      That was the basis on which the Financial Secretary moved the amendment and argued for an indexation provision.
      At that time Mrs. Audrey Wise was a Member of Parliament. She made the same point. She said:
      " What is the logic of a taxation system whereby people are taxed on exactly the amount decreed to be the official poverty line? "
      A credible argument was put forward. Why should people work when they are taxed on the poverty line? That argument is related to the fact that personal allowances were not completely indexed to the cost of living. Mrs. Wise continued:
      " So people on low incomes who were not embroiled in the tax system now are embroiled in it and the poor, in fact, are paying the cost of their own Welfare State."—[Official Report, Standing Committee D, 14 June 1977; c. 456–57.]
      My hon. Friend the Member for Perry Barr made a speech in a similar vein.
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      7.45 pm
      I disagree with the general principle of indexation. However, I understand the desire to index personal allowances to prevent such a situation. The amendment sought to protect the least well-off. If the Financial Secretary wishes to argue glibly that he is extending that amendment to the man earning £10,000, £15,000 or £20,000 a year, he will be making a cheap debating point, which will not impress the Committee. I hope that we shall not hear that argument. I hope that the hon. Gentleman will base his argument on the merits of the case and not pretend that the provision is an extension of an amendment that was designed to protect the weakest and poorest people from the effects of inflation.
      The Financial Secretary may say that an order can negative indexation. However, he has told me that I am wrong. Apparently it must be done through a Finance Bill. That is a technical point. The hon. Gentleman may say that if the Government do not wish to go through with indexation they can ask the House for its authority not to do so. He is in agreement with that proposition. Treasury Ministers may come to the Dispatch Box and say that they will deny indexation to a man on £10,000 or £11,000 a year. Those people are supporters of the Conservative Party. Treasury Ministers may accept that they will have to put up the cost of living by 23 per cent., or perhaps 30 per cent., next year. They may say that they will not give their natural supporters—those entrepreneurs who make the economy tick and who rejuvenate the economy-indexation. They may say that they will move an order or a clause in the Finance Bill. I must tell the Financial Secretary that they will not do that. It is a figment of his imagination.
      I cannot believe that a Conservative Financial Secretary will come to the Dispatch Box next year or the year after and say " Sorry boys, you may want £15,000 a year, but we shall not give you the benefit of indexation." The Government have not said that they will not index personal allowances this year in accordance with the Rooker-Wise amendment. They have said that they will abolish the reduced rate band. They seek to pretend that they have indexed the personal allowances by 17 or 18 per cent. They have got rid of the reduced rate band.

      1337
      I accept that there are arguments both for and against the reduced rate band. The Financial Secretary should not mutter from a sedentary position.
      Mr. Lawson: Who is talking?
      Mr. Davies: The arguments are fairly balanced. The Government have avoided the need to put forward an order or clause not to index personal allowances. They will not be able to do that next year. However, they will do something else. They will cut public expenditure a little more. I can hear the Financial Secretary saying " Of course " from a sedentary position. Of course the Government will do that.
      Mr. John Bruce-Gardyne: I hope so.
      Mr. Davies: The pressure groups are already building up. No doubt the hon. Member will go to see his hon. Friend the Financial Secretary if he sees any danger of indexation being abrogated by a clause. As we cannot have any other devices, we shall have cuts in public expenditure. It will cost a lot of money next year if we index higher allowances at a time of hyper-inflation.
      The Financial Secretary will have to look around for money. He may cut unemployment benefit a little more. He may reduce the indexation on unemployment benefit from 12 per cent. to 10 per cent. He may reduce capital spending in the National Health Service. The Financial Secretary and the Chancellor of the Exchequer can choose from a range of options. Next year we shall see full indexation of the higher rate bands. That will be paid for mainly by those who cannot afford to do so. It will be paid for by reduced public expenditure. Those who will benefit from the clause will not suffer. They never suffer under a Tory Government. Treasury Ministers would not dare to de-index personal allowances. Pensioners, the unemployed and the disabled may suffer, but not those who stand to benefit from the clause. That is why we oppose it. Indexation is a slippery road. The hon. Member for Knutsford (Mr. Bruce-Gardyne) believes in it.
      Mr. Bruce-Gardyne: No, I do not.
      Mr. Davies: I thought that he believed in it. I thought that I heard him say from a sedentary position that the Financial
      1338
      Secretary should continue indexation next year.
      Mr. Bruce-Gardyne: The right hon. Gentleman is under a misapprehension. I was referring to his immediately previous comment—the suggestion that there would be a need for further economies in public expenditure.
      Mr. Davies: Yes, but that was related to my comment that the Financial Secretary would not have enough money to index without cutting public expenditure. I am glad to know that the hon. Member for Knutsford does not support the clause. No doubt he will support the Opposition when we vote against it. It is gratitfying to know that at least some Tories believe in the principle of sound money and do not believe in the drug or palliative of another shot of indexation every time there is an increase in inflation. Those who benefit from that approach are at the upper end of the scale. The poor do not enjoy the benefit.
      My personal view is that indexation is bad. I understand that others do not accept that view. However, why should we give indexation to the better-off when inflation is raging at over 20 per cent.? The better-off do not need this form of indexation. The Government propose to take away from the poorer groups in our society—especially from the army of unemployed that has been created in a large part by the Government—to give to those who do not need it.
      The clause is not an extension of the Rooker-Wise amendment, which was designed to protect the worst-off in the community. For the reasons that I have outlined, we shall oppose the clause unless we receive convincing answers from the Financial Secretary.
      Mr. Bruce-Gardyne: The right hon. Member for Llanelli, (Mr. Davies) reminded me of the sort of chairman who introduces a visiting speaker and says " Our speaker today needs no introduction " and proceeds with an introduction that lasts half an hour. The right hon. Gentleman said that he did not intend to go back over the general arguments on the merits or demerits of indexing, but he made a good attempt at doing precisely that. I make no apology for following briefly down that path. I did not have the privilege of serving in the previous Parliament and of participating in the

      1339
      arguments that proceeded on what has gone down in history as the Rooker-Wise-Lawson amendment.
      I confess that I broadly share the right hon. Gentleman's distaste for the concept of indexation. Some of those for whose opinions I have the greatest possible respect—the right hon. Gentleman referred to Sam Brittan, and I think that my hon. Friend the Financial Secretary is identified with that school of thought—hold that indexation is a wise and sensible method of rendering a high level of inflation tolerable. On the whole, I object to it precisely for that reason. The theme seems to be that we should lie down and enjoy it.
      Inflation is the greatest enemy of our society. We should not willingly take measures that are designed to anaesthetise our society against it. In some respects, great crimes have been committed in the name of indexation. For instance, I learnt today that hundreds of employees of the industrial training boards are apparently on index-linked salaries as well as being on index-linked pensions. We have seen a gradual extension of the principle in a manner that gives cause for genuine concern.
      I admit that I did not find it quite as easy as the right hon. Gentleman appeared to to reconcile past support for the Rooker-Wise amendment with opposition to the clause. As the right hon. Gentleman clearly recognised himself, the two are logically interdependent. The distinction that he attempted to make was one without a difference.
      The right hon. Gentleman said that if the clause is approved as it stands the higher rate taxpayer could have his income indexed. That is rubbish. We are not talking about the indexation of incomes. The right hon. Gentleman shakes his head, but that was precisely the phrase that he used. I took a note of it. If he checks the record tomorrow, he will find that that is precisely what he said.
      Mr. Denzil Davies: The hon. Gentleman knows exactly what I meant. I was referring to tax thresholds and tax allowances. The indexation of those elements helps to increase the income of the higher rate taxpayer.
      Mr. Bruce-Gardyne: I listened carefully to what the right hon. Gentleman
      1340
      said. It was not a slip of the tongue. The emphasis and the gravamen of that part of his speech was that there is a body of high income earners who somehow will be enabled to secure indefinite security against the ravages of inflation. That is a disputable proposition in itself. There are many senior managers in many parts of manufacturing industry who would be only too delighted to receive increments this year that could anything like compensate them for the implications of inflation. That part of the right hon. Gentleman's argument is nonsense. The purpose of the clause is the indexation of taxation and not the indexation of incomes.
      For the reasons that I have outlined, if that were the sole content of the clause I should have considerable reservations about supporting it. However, it contains a crucial element which the right hon. Gentleman more or less ignored. Subsection (4) states:
      " If the retail prices index for the month of December preceding a year of assessment is higher than it was for the previous December, then, unless Parliament otherwise determines, subsection (1) of the said section 32 shall apply ".
      That, to my mind, is the crucial distinction.
      This is not a matter of semantics. The justification for the Rooker-Wise amendment was not the argument that the right hon. Gentleman advanced. I know what my hon. Friend the Financial Secretary said on this issue and in general I do not agree with his contentions on it. The purpose of the amendment was to deal with the so-called poverty gap. The only serious justification for the Rooker-Wise amendment, as for the clause, is that it was designed to introduce honesty into taxation.
      If the Chancellor wishes not to adjust allowances and tax rate bands in line with inflation, he will have to come before the House to explain what he is doing. The serious defence for the Lawson-Rooker-Wise amendment, as for the clause, is that we have for too long had appalling headlines in the press about the Chancellor giving away £3,000 million when in reality he has done no such thing. In fact, he has merely been compensating for the ravages of inflation.
      The consequence of the Rooker-Wise amendment, and similarly the consequence of the clause, was to ensure that

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      the House of Commons knew what it was doing, knew what the Chancellor was doing, and was not bamboozled by a claim of vast generosity that merely reflected the reimbursements of the ravages of inflation. It is only on those grounds that I find it reasonable to support the clause.
      The time is fast approaching, if it has not already come, for us to look again at the gamut of indexation. It is a method of constantly accelerating the ratchet of inflation as it spreads in wider and wider circles.
      I understand that the clause is to ensure that Parliament knows what it is doing, and that if the Chancellor seeks to compensate on the higher rate band, for the effects of inflation as under Rooker-Wise with regard to allowances, he will not be in a position to claim that he is performing a wondrous act of generosity to benefit the taxpayer. On those grounds only, I am prepared to support the clause.
      8 pm
      Mr. Rooker: I have a vested interest in opposing clause 23. I do not believe that the hon. Member for Knutsford (Mr. Bruce-Gardyne) was in the House in 1977. He may have read our Standing Committee debates on 14 June 1977. If he has not, he must take it from me that it was not the central part of our case that the Rooker-Wise amendment should be made for the sake of truth in taxation. That was a subsidiary issue.
      Mr. Bruce-Gardyne: I understood that the amendment introduced in Committee at that time did not require the Chancellor, if he was not complying with the provisions in the amendment, to report the fact to the House. Therefore, the hon. Gentleman's amendment had nothing to do with truth in taxation. It was the amendment applied to that amendment by my hon. Friend the Financial Secretary that had that effect.
      Mr. Rooker: That is correct. Our amendment did not have an escape clause for a Government. The allowances had to be raised. Had our amendment stood without the other amendment attached to it providing that gateway for a Government, the position would have been the same as under this Bill. We have to have a Finance Bill each year. A Government
      1342
      would have been able, in the Finance Bill, to amend that amendment and not put up the allowances. A debate would have been necessary if a Government wanted to depart from our amendment. The Opposition would have ensured that. However, that was not written into our original amendment.
      Our main case was simple and narrow. There were two opportunities to discuss the matter in that week, both in Standing Committee and in a day-long debate on poverty on Friday, initiated by the hon. Member for Norfolk, North (Mr. Howell). As Back Benchers, and within the limitations of the rules of the House, we aimed to do all that we could to protect the low-paid and those on average earnings. We did not put the case for general indexation, and I should not do so today. My right hon. Friend the Member for Llanelli (Mr. Davies) and I are not that far apart, but in 1977 Mrs. Wise and I felt forced to make a decision. We were put on the Committee to argue the case for the low-paid. There was little that we could do. As I said last night, we could not raise other people's taxation to help the low paid. We managed to increase personal allowances on another amendment. As a fail-safe device, we then tried to make sure that the Government would not increase the burden of tax on the low paid in succeeding years.
      I read the debates yesterday on the train, which was something of a chore. We stated that we were out to increase the Government's popularity. I can speak only for 50 per cent. of the electorate in my constituency—and the matter was raised with me during the last election at 6 am in a bus queue—but the workers understood what we had done and why, even if they did not understand the technical procedures of the House that forced us to take such a big step. I have the press cuttings from that week. According to the Sunday Mirror, we were saboteurs for taking action to protect the low paid.
      We never denied, as was pointed out by my hon. Friends a few days later, that the effect of the Rooker-Wise amendment was to put more money in the pockets of those paying tax at higher rates. Lifting the basic personal allowance automatically raises the level at which the higher tax bands come into operation. However, the tax cut—and that is not the

      1343
      right expression—benefited the family income of the low-paid more than the rich. In the end we were able to get the point across to my right hon. Friends. They accepted the amendment, with all its faults.
      The First Deputy Chairman (Mr. Bryant Codman Irvine): The hon. Gentleman has got his point across to the Committee once again. Perhaps he will now address himself to the clause.
      Mr. Rooker: Clause 23 does not make sense if the original amendment remains on the statute book. However, it does not. In schedule 18 there is a line that repeals the words in the 1977 Act resulting from the Rooker-Wise amendment. I prefer my name to be totally dissociated from what this Tory Government are now doing. This clause will benefit only a married man who earns over £265 a week. The workers on average earnings and the low-paid would have benefited in any case under our original amendment.
      As a result of this clause and the subsidiary effect of repealing our original amendment, those in higher tax groups will benefit twice over. That is my overwhelming objection. My hon. Friend the Member for Thurrock (Dr. McDonald) will give us more details, if she catches your eye, Mr. Godman Irvine. However, the people who will benefit under the clause are those with a taxable income of over £11,250, which means a married man earning in excess of £13,400, taking into account personal allowances. They will benefit in any case from indexation of the basic personal allowance. By passing this clause and indexing the gap between the basic personal allowance and the higher rate bands, those people will have a double benefit. The House should not pass such a measure in silence and without making clear that the Government are benefiting only married men earning more than £265 a week. I do not want my name attached to that. Nor, I suspect, does Audrey Wise.
      The Government are in the process of indexing the well-off while de-indexing the poor and needy. In the Social Security (No. 2) Bill they have de-indexed invalidity, unemployment and industrial injury benefits. They will not
      1344
      rise in line with inflation, and those with an annual income below the tax threshold will have their benefit cut even though their total income is less than the personal allowances set out in the Bill. If the benefit were taxed, they would pay no tax on it.
      While the Government are doing that, they have the brass face to push through clause 23. It is not good enough. When the point gets across to those outside—as we shall ensure that it does—Conservative Members in marginal seats will reap the result in the next election.
      The Minister may say that the Government's proposal represents fairness between taxpayers and that since the 95 or 97 per cent. of basic rate payers benefit from what was the Rooker-Wise amendment, the other 3 per cent. should benefit similarly. I do not accept that. Those paying higher rates are already earning enough. Most do not pay the top rates, which have already been reduced by the Government from 83 to 60 per cent. They have also concertinaed the higher rate bands.
      We should not accept the Minister's arguments. We know what the Financial Secretary will say. He has only one speech on this subject. I had to read it recently and I shall have to listen to it again shortly. When it had the chance in Opposition, the Tory Party did not table such an amendment to the 1977 Finance Bill. Conservatives knew that they would not have got my vote. There was no warning that it was to be done in this Bill. An obscure reference on page 9 of the Red Book deals with the extension of indexation provisions and " no cost " is shown against forgone revenue for 1980–81. The Government do not know what the cost will be. More important, they are frightened to give a forecast of the rate of inflation. They are scared stiff of putting in a cost on the basis of current inflation rates. By the end of the year they will reap the whirlwind when we see what higher rate taxpayers will get next year as a result of the clause.
      I do not want to carp about the form of words in the clause just because the words that I helped to draft no longer appear. However, the wording is imprecise and the appropriate words are in the wrong place. They hang in suspension, not attached to any part of the clause,

      1345
      because of some faulty draftmanship. The parliamentary draftsmen have used about 1,000 words to do what we did in 50. Their productivity is obviously not good.
      I was surprised to see the retail price index mentioned in the clause. I thought that we were to be fobbed off with the taxes and prices index. That was supposed to be the real rate of inflation. Of course, that has got worse. It was all right for only a few months in 1979, when the Government wanted to sell a false prospectus caused by the VAT changes. We have not heard anything about that index since then. If it were any good, it would be in the Bill. The Government know that it is a sham. The only Minister who ever pushed the index was the Financial Secretary to the Treasury, who was accused at the time of peddling a false prospectus.
      8.15 pm
      Mr. Lawson: We are always open to suggestions. Is the hon. Gentleman suggesting that the clause would be more acceptable to him if the taxes and prices index were included instead of the RPI?
      Mr. Rooker: Of course not. That is the whole point. I was surprised at the inclusion of the RPI, even though to the public, that index, with all its faults, warts and imprecisions, is the cost of living index. We may argue about how it is made up, but the public knew that it was being sold a pup with the taxes and prices index. It was a con trick, following the increase in VAT last year bumping up the RPI. The message has obviously got home. A Cabinet Committee must have approved clause 23 and it knew that it could not sell it with the taxes and prices index included. It is probably in the Government's interest to use the RPI.
      I am not here to barter. There were no deals on the original amendment and there will be none now. I want to distance myself from the clause as much as possible. We have made the point. It is known outside that the original help for the low-paid was given because Labour Back Benchers convinced their own Government that a change was right. There was some credit for the Labour Party in that change, but I want nothing to do with the new change.
      1346
      The Government's proposal is like the change that we debated last night on the abolition of the lower rate tax bands. Such amendments are shovelled on to the Government by disreputable fringe banks, such as Rossminster, which operate on the fringe of the law with the sole job of assisting the high-paid.
      Mr. Nick Budgen: The most important point that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) indicated was the ratchet effect of indexation. In general, he does not approve of indexation, but in 1977 he jumped on the bandwagon—I do not intend to be offensive—in order to achieve what he would describe as greater justice for the poorer sections of the community.
      In a sense, the hon. Gentleman's position is similar to that of my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne), who says that he does not like indexation but will nevertheless go along with this example. The danger of going along with indexation is that it takes us yet a further step.
      The hon. Member for Perry Barr said that he would go along with indexation as long as it benefited the poorest members of the community. However, my hon. Friend the Financial Secretary to the Treasury, who is a supporter of indexation on a much wider front, says that if we are to have indexation of personal allowances we must have a balancing indexation of the higher rate bands—a necessary symmetry of indexation in this area.
      The hon. Member for Perry Barr must understand that if we accept his argumen there may be a logical case for indexing, for example, capital gains tax. My hon. Friend the Member for Knutsford must accept that the further we go along the path of indexation, the more we build it into our system.
      I agree with the general observations of my hon. Friend the Member for Knutsford when he says that he fears indexation because it takes away the pain of inflation. I do not think that people react to social conditions out of altruistic ideas about what is good for society. On the whole, they react to social conditions because of the way those conditions affect them.

      1347
      The idea of indexing the higher rate bands of income tax is extremely dangerous. There may have been an argument for what the Rooker-Wise amendment did for the lowest-paid in our society, although, I would say it was, most of all, the Lawson amendment. It is possible to argue that inflation hits the poorest hardest and that the poorest have the least means of avoiding the effects of inflation. That argument cannot be extended to the rich.
      One of the constraints felt by the Government in imposing a gradual monetarist policy is the fact that the very rich and even the medium-rich can mitigate or even take advantage of the effects of inflation. If one already has substantial capital assets, it is much easier to make substantial borrowings that are still at negative interest rates. It is no good pretending that in a period of inflation everyone is a loser. Many of those who, by virtue of this clause, would be effectively indexed in their income tax are people who can avoid the effects of inflation. I say to my hon. Friend the Member for Knutsford: " Beware of this." Once one steps on this ladder, it is difficult to get off.
      I understand the general arguments that are put forward by my hon. Friend the Financial Secretary. I recall them well from 1977. That was the first and last time that I was allowed to sit on a Standing Committee of the Finance Bill. I am a member of it this year and I suppose that I shall not be again in future. I had the misfortune in 1977 to disagree with my hon. Friends on this clause. My hon. Friend, the Member for Blaby, as he then was, by some splendid footwork, got me paired at one stage. That resulted in the passing of the Lawson amendment, as I think it should be called. My hon. Friend was, at that time, an advocate of general indexation.
      My hon. Friend the Member for Knutsford should understand the way along which our hon. Friend the Financial Secretary wants to take the economy of this country. He wanted, as he put it at the time, what he called honesty in taxation in all taxes. We were to have indexation of capital gains taxes. We were to have indexation of capital transfer tax. There was to be generalised indexation of all
      1348
      taxation. We must understand what the consequences would be.
      Mr. Bruce-Gardyne: The conclusions that my hon. Friend draws are his affair. I submit that we are not arguing about the philosophical approaches of my hon. Friend the Financial Secretary but about clause 23. The crucial element in that clause, to my mind, is the requirement imposed upon the Chancellor that if he does not, in any year, decide to accommodate the bands that we are discussing to the effects of inflation, he shall come before Parliament and explain what he is doing. It is that proposition, and not the generalised proposition that my hon. Friend is arguing, that I am prepared to support.
      Mr. Budgen: I listened to my hon. Friend's distinction based upon subsection (4). I do not think that it is a good distinction and a proper argument. What is being done is to give the richest members of society the general impression that their tax rates will change according to inflation every year. My hon. Friend is right in saying that subsection (4) gives Parliament a let-out. But the assumption, if I may express it in legal terms, is that the rates will be indexed. The rich are, of course, subject to changes in the law like everyone else but they will, nevertheless, be able to say to themselves that in general they can expect these higher tax rate bands to be indexed. That is an extremely dangerous thing for any section of the community to be able to say to itself. It is a particularly dangerous thing for the richest and most influential sections of the community to be able to say.
      This is particularly unfortunate at a time when the Government are striving to de-index many areas of the benefits system. Hon. Members have spoken about some areas of de-indexation but I remind my hon. Friend the Member for Knutsford that he and I, on many occasions, have had something to say about the indexation of pensions in the public sector. What is the difference, in principle, between this sort of indexation and the indexation of public sector pensions to which we, in my opinion, rightly take exception? I hope that my hon. Friend, at some stage, perhaps privately, will explain what is the distinction in principle.

      1349
      I believe that the cure for inflation is extremely painful. I hope that it will be carried out quickly. I am, on this subject, a Hayekian and not a Friedmanite. I believe that the people of this country do not respond to abstract principles. They respond to economic situations when they pinch upon them. The more that we work indexation in to the system the more difficult it becomes to encourage popular support against what I regard as the greatest social evil. There may have been a case in the past for easing the shoe where it pinched for the weakest sections of the community. I find it difficult to apply indexation where it pinches upon the richest sections.
      Dr. Oonagh McDonald: I have listened with interest to the debate so far, and particularly to the remarks of the hon. Member for Knutsford (Mr. Bruce-Gardyne), who said that he was prepared to go along with indexation, and in particular the indexing of tax thresholds for the higher rate bands, because he thought that it would prevent the Chancellor from pretending to be particularly generous to certain groups of taxpayers. He thought that it would lead to honesty in taxation, just as indexing the tax thresholds for the basic rate taxpayers had.
      It would have been much more honest and truthful if the Chancellor had presented the indexing of the higher rate band and the raising of the tax thresholds in this Budget as an act of generosity to higher-rate taxpayers, because that is what it is. It turns out to be that when one assesses the impact of the Budget, perhaps taking into account last June's Budget as well, on families of various income levels. One can then see that it is particularly generous to those who would otherwise be liable to pay tax at the higher rate, and that to continue to index it in future will be even more generous to those same taxpayers.
      8.30 pm
      Let us consider the overall effect of the Budget. The basic changes that have already been considered—the increase in personal allowances, the abolition of the reduced rate band and the increase in the thresholds and bands of the higher rate taxes—have had a different impact on various families. The net effect of the tax changes has been to reduce the
      1350
      tax bill of a married couple on £40 a week by 55p a week. Most couples have had a tax reduction of £1·18 a week. Those on £250 a week have had their income tax bill reduced by £3·46 a week. Those on £500 a week will pay £10·22 less in tax and those on £600 a week £13·18 less. That is simply taking account of the incresase in personal allowances and the higher rate band adjustments.
      Most families, on the basis of those tax changes, will face increased taxes and will be worse off as a result of the Budget. For most families the reduction in income tax will be inadequate to offset the increases in the other taxes that were made at the same time. If we include national insurance contributions, excise duties and the taxes on tobacco and petrol, we find that only those with weekly incomes above £300 will have enjoyed an income tax cut sufficient to offset the increase in other taxes.
      By the autumn families will receive a child benefit increase of 75p per child, but that is not enough to maintain the value of the benefit against inflation. The other increased charges that families will have to bear—prescription charges, housing costs, fuel bills and dearer school meals—mean that only those with a weekly income of £500 and above will be better off by the end of the year. Therefore, when one sets the total impact of Government policies and the Budget changes against the incomes of the various families considered in clause 23, one sees that to alter the higher rate bands in this way and to promise to index them in the future is quite simply an act of generosity to those who do not need it.
      The Budget has virtually abolished the higher-rate taxes. The Treasury estimates that only 730,000 people will now pay tax at any of the higher rates, whether on earned or unearned income. That number will constitute about 2 per cent. of all taxpayers. That means that 98 per cent. of taxpayers simply will not benefit from the changes in the clause now or in the future.
      Let us further consider how few people will benefit from the clause. The Treasury estimates that 3,020,000 people will earn more than £10,000 a year in the current financial year. Admittedly, not all of them would be eligible to pay tax at the higher rate anyway. A single person, assuming only basic allowances, would not be

      1351
      eligible to pay the higher rate of tax until he or she earned about £11,000 a year. A married man would have to earn about £13,500 a year before he was liable to tax at the higher-rate band. Even if we reduced that number of 3 million-odd considerably, to find that only 730,000 people will pay a higher rate of tax this year is to see how the Chancellor has benefited a tiny number of people at a fairly high cost. He estimated that cost as £100 million in his Budget Statement.
      The changes are an act of generosity concentrated on a tiny number of those who earn enough to pay taxation. For that reason there is no justification, either, for the present changes in the higher-rate band. The Chancellor said that he had limited resources available and that there must be cuts of all kinds in public spending. There were to be increased prescription charges, and the charge for school meals would increase considerably.
      The Chancellor said that he found that he could no longer afford to index unemployment benefit, invalidity benefit and social security benefits of all kinds, yet he can squander £100 million on a small number of people who already earn at least three times the average income for males. A small proportion of the population now receive enormous benefit by the Chancellor's act of generosity, and that act of generosity is to continue in the financial years ahead by an unjustified and gratuitous indexing of that benefit.
      At the same time the Chancellor, by way of changes in family income supplement during the current financial year, has increased the number of families caught in the poverty trap. He has increased the numbers for whom the marginal rate of taxation would have been, in some cases, much higher than any of those marginal rates of taxation liable to be faced by a higher-rate taxpayer. The marginal rate of taxation for many low-income families could be over 50 per cent. and there are families who could face rates of 100 per cent. or even more.
      Therefore, at the cost of £100 million, the Chancellor is benefiting a tiny number of families. Meanwhile, the numbers caught in the poverty trap will increase and will probably constitute about 90,000 families this year. That is an increase of 5 per cent. on last year and it has been brought about by a Government
      1352
      and a Chancellor who claim that they are concerned with incentives to work and who say that they are worried about the disincentives of high social security and unemployment benefits. They are so concerned that they have introduced the first steps in the current social security legislation towards taxing such benefits.
      The resources gained by the Government as a result of the changes are wasted upon those who cannot and do not need them. It is a totally unjustified squandering of the nation's wealth on a tiny number of people whose incomes are already above the majority of incomes. There can be no justification for the changes introduced for this year. Still less is there justification for their continuing in the years to come. The top earners in the population have received gratuitous handouts while the Government have increased the burden of poverty for very many families.
      Mr. Lawson: All indexation debates——and we have had a number of them in the past few years—have a certain similarity. That has to be admitted. Even the cast has a remarkable similarity. I warmly welcome one newcomer to the debate—my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne).
      Before I reply to the points raised in the debate, it might be helpful to the Committee if I were to state clearly what the clause does. It provides that for each tax year the single and married allowances, the additional personal allowance, the age allowances, the age allowance income limit, the higher rate thresholds and the investment income surcharge threshold should, unless Parliament decides otherwise, be increased by the same percentage as the increase in the RPI over the year ending in the previous December.
      Thus, for the new tax year 1981–82—the first year in which the new indexation provision will operate—the allowances and thresholds, unless Parliament decides otherwise, will be increased in line with the rise in the RPI between December 1979 and December 1980. Each year's indexation adjustment will start from the allowances and thresholds in force for the previous year, whether they were arrived at by the indexation formula or by a discretionary change in the annual Finance Act.

      1353
      The indexation formula provides for the figures to be rounded up to the nearest £10 in the case of allowances and to the nearest £100 in the case of rate thresholds and the age allowance income limit. Each year the index figures are to be set out in a Treasury order. In a year when the indexation adjustments are not overridden this order will show clearly the new figures for allowances and rate bands. In a year when the Chancellor proposes different figures in either direction, the index figures in the order will provide a basis for comparison.
      Mr. Denzil Davies: If the clause is approved, what will be the cost next year of its provisions?
      Mr. Lawson: If the right hon. Gentleman had read the Red Book he would have seen that there is no cost for 1980–81 for, as footnote (a) says, the change is effective only from 1981–82. He would also have seen that, for 1981–82, footnote (b) states:
      " The cost will depend on increases in prices; and implementation will be subject to review by Parliament."
      To the extent of 90 per cent.—and I use that figure advisedly—it is essentially a redrafting of section 22 of the Finance Act 1977 provision. It is an extension of the same type of indexation to the investment income surcharge, the higher rate thresholds and the higher rate bands. The question whether a real or a nominal cost is involved is important, but I shall not go into that now. When we talk about cost, we talk in terms of the extra revenue as a result of inflation which would have ensued if the changes had not been made.
      Of that " cost ", 90 per cent. comes from the indexation of the various items on which the hon. Member for Birmingham, Perry Barr (Mr. Rooker) was so keen in 1977. Only 10 per cent. comes from the extension of indexation that we are incorporating in the Bill. If the hon. Member for Perry Barr seeks to vote down the clause, he will be voting as to 90 per cent. against what he fought so hard for in 1977.
      Mr. Rooker: That is ludicrous. If I vote against the clause, I shall be voting against the repeal of the provisions in my amendment in schedule 18. I shall vote against the clause if my right hon. Friend calls for a Division. There is no argument about that.
      1354
      The Minister has said that 90 per cent. of the " cost " is to what was there already and that 10 per cent. is to the addition. Is he saying that 10 per cent. of the extra cost—10 per cent. of the tax give-away—is to the 2 per cent. of taxpayers referred to by my hon. Friend the Member for Thurrock (Dr. McDonald)? Is that where the 10 per cent. is to go? Is not that unfair?
      Mr. Lawson: It is not unfair. But, in any event, the hon. Gentleman's figures are not correct. I said that 10 per cent, arises as a result of the higher-rate tax and investment income surcharge threshold provisions together, the second of which was not included in the 2 per cent. referred to by the hon. Member for Thurrock (Dr. McDonald).
      8.45 pm
      I shall tell the Committee why I think that this is fair, but before doing that I ought to reply to another point made by the hon. Member for Perry Barr. The hon. Gentleman said that what he found particularly objectionable in the clause was the fact, as he claimed, that the higher-rate taxpayers would benefit twice—I think that that was his phrase—because of the indexation of the basic personal allowance thresholds and also the higher rate thresholds.
      I see the right hon. Member for Llanelli (Mr. Davies) nodding at that, and I am surprised. It should be clear at least to the right hon. Gentleman, and possibly also to the hon. Member for Perry Barr—although I must say that, thinking of him and his former companion, Mrs. Wise, in those days in 1977, I am inclined to believe that they knew not what they did.
      Nevertheless, it should be clear to the right hon. Gentleman and to the hon. Member for Perry Barr that what we are talking about here is a change in the value of money, and that applies to all the monetary amounts in the Finance Bill—all the allowances, whether the basic personal allowances, the investment income surcharge thresholds, the higher rate thresholds, or whatever. Therefore, if these are adjusted by the same amount, there is no double benefit. I hope that that is clear. I see, however, that it is not, so let me give an example, since it is important that the point should be established.

      1355
      Let us suppose that this year there is a man with an income of £20,000 and, for the sake of simplicity, let us assume that he has a personal allowance of £2,000, with a basic rate of 30 per cent. on the first £10,000 of taxable income and 50 per cent. on the remainder. His tax bill will then be £7,000—30 per cent. of £10,000 and 50 per cent. of £8,000. I hope that the hon. Gentleman is with me so far. Thus, the proportion of that man's income which is going in tax is 35 per cent.
      Let us next assume one year on that there is a rate of inflation of 10 per cent.——
      Mr. Rooker: Oh!
      Mr. Lawson: I hope that the hon. Gentleman will follow this example, since his accusation that there is double benefit is a serious one. Let us assume also—though it is not necessarily the case, as my hon. Friend the Member for Knutsford rightly pointed out—that the man's income also goes up by 10 per cent. with inflation from £20,000 to £22,000, so that he has no increased income in real terms.
      If the personal allowance only were to be indexed, that man's tax bill would be as follows. He would pay £3,000 on the basic rate band as before, because there is no increase there. But on the higher rates he would pay £4,900, that is, 50 per cent. of £9,800, which is the £22,000 new income less £2,200 personal allowance less the £10,000 basic rate band. So in those circumstances his total tax would be £7,900—or 35·9 per cent. of £22,000. In other words, the burden of tax on an income which was not being increased in real terms would have risen by almost 1 per cent.
      But if the personal allowance and the higher rate threshold are both increased by 10 per cent., the tax on the new income of £22,000 is calculated as follows: £3,300 of tax is paid at the basic rate—30 per cent. on £11,000 in the basic rate band, the basic rate band having been extended by the increase in the higher rate threshold under the clause—plus £4,400 at the higher rate, which is 50 per cent. of £8,800, the £8,800 itself being £22,000 less the £2,200 personal allowance less the £11,000 basic rate band.
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      The hon. Member for Perry Barr will be able to read this in Hansard and check it. He has told us how much he enjoys reading the reports of debates of this Committee on his train journeys, so he can do that on this occasion.
      In the circumstances which I have set out, the tax bill would be £7,700, which is precisely 35 per cent. of £22,000. In other words exactly the same percentage of that man's income would go in tax next year as this year.
      I quite understand that the hon. Gentleman might wish such a person to be worse off, but that is a separate point. To ensure that somebody is no worse off—and no better off, either, in real terms—the personal allowances and the higher rate threshold both need to be fully indexed in line with inflation. There is no double indexation. I hope that the hon. Gentleman will read that in Hansard tomorrow, and satisfy himself that this is so.
      Mr. Rooker: It does not matter how many figures the Minister produces, because they do not hide the fact that raising the basic personal allowance and not changing the thresholds creates a spillover effect from one band to another. People in the higher rate bands benefit in cash terms more than someone who is not in those bands. If the bands are indexed, they have a double spoon out of the pot. They have gained twice. No amount of clever and sophisticated figures or presentational points will alter that fact.
      Mr. Lawson: I hope that the hon. Gentlemen will pay attention. It is clear that someone on a higher income—leaving aside the question whether he is in the higher rate bands—will receive a larger cash benefit if allowances are increased. That is necesarily so as a result of the indexation provision for which the hon. Gentleman fought. I do not know what he is arguing about. Under this provision, if somebody is paying a certain amount of tax on his income in one year, that burden will not change in real terms simply and solely as a result of inflation. It will not go up or down. That is the effect of the clause.
      Mr. Budgen: Will my hon. Friend tell the Committee about the Government's general position on indexation? When

      1357
      the Tory Party was in Opposition, the general cry of the majority of the party was " Truth in taxation " which, as I understood it, meant the advocacy of indexation over a wide tax area. Are we to understand that indexation is now only to be advocated in this sphere, or is it to be widely extended?
      Mr. Lawson: We are debating clause 23, which is concerned with the indexation of income tax. It will be helpful if we confine ourselves to that. I have debated the matter with my hon. Friend up hill and down dale for many years. He knows that I have always drawn a clear distinction between different forms of indexation and different contexts for indexation. I have always repudiated the suggestion that all forms of indexation are alike. I do not think that they are.
      Mr. Budgen Mr. Budgen rose——
      Mr. Lawson: I shall give way to my hon. Friend for the last time.
      Mr. Budgen: My hon. Friend has always said that there is a proper distinction to be drawn between the indexation of the taxation system and indexation in other areas of the State's activities. I do not remember his ever having drawn a distinction between the various forms of taxation. I should like him to comment on that.
      Mr. Lawson: The only comment that I can make is that my hon. Friend must know that my right hon. and learned Friend the Chancellor of the Exchequer puts forward tax proposals to the House in his annual Budgets. Each year my hon. Friend is able to see the proposals of my right hon. and learned Friend for that year and for the future. It is not the custom for Treasury Ministers to predict the contents of future Budgets.
      My hon. Friend said that he found the clause objectionable. I think he understood that there was an argument in equity in saying that if there were to be indexation of the income tax system it should apply equally to people at all levels. But he felt that it was appropriate that the rich should be especially highly taxed.
      The Committee will recall—and this is germane to the debate—that the taxation of the better-off increased substantially as a result of inflation under the previous
      1358
      Labour Government. I see the hon. Member for West Lothian (Mr. Dalyell) in his place. In the previous debate, he was commending the sagacity of Lord Lever. I share that judgment. It was Lord Lever who, in a television interview in 1978, when asked by Mr. Brian Walden about the iniquity of the then 83 per cent. top rate of income tax, said:
      " Well, I must say that when it was put on, it was put on at a more realistic level than now applies. It was actually inflation that really made the tax burdensome. And I don't think that any Government ever responds quickly enough to the deforming of their tax structure by inflation. And we may be open to criticism for not responding fast enough to that."
      That is exactly what happened. Therefore, I do not think that my hon. Friend should consider it perfectly all right to see the tax scales at the higher levels—which my right hon. and learned Friend the Chancellor of the Exchequer in his first Budget properly and deliberately introduced—progressively eroded by the effect of inflation unless Parliament clearly and openly decides that that should be so.
      My hon. Friend the Member for Knutsford said that he felt there to be a distinction between my approach to this matter and his, because his approach was based on the principle of honesty in taxation. That is precisely the same as mine. It is a distinction without a difference. The phrase that I used with which I wearied many hon. Members on both sides of the Committee was " truth in taxation." I think that the distinction is very small.
      The whole purpose of this provision—a purpose which commanded not only my support, but the support of pretty well the whole of the then Conservative Opposition in Standing Committee in 1977 when the earlier provision was introduced—is that there should be truth in taxation; that there should be openness. If we decide to tax people more heavily, fair enough, let us come to Parliament and say that we want to do that, and let us justify it to the House of Commons. If we wish particularly to tax the rich more heavily, as does the right hon. Member for Llanelli, let him come before Parliament—if he is ever given the opportunity to do so—and do it openly and explicitly and justify it.

      1359
      What is objectionable is allowing inflation steadily, by stealth, to increase the tax burden—without any explicit changes in law and without any changes in the allowances—and to erode the value of those allowances. That was the argument time and again. That was why I introduced my amendment to the so-called Rooker-Wise amendment in 1977, making it absolutely clear that this was not mandatory and that the Government had the opportunity to put before Parliament a different figure if they wished to do so. That is why the clause is drafted with the phrase " unless Parliament otherwise determines ".
      The right hon. Member for Llanelli, in opposing the clause, emerged not merely as a class warrior—which we know is one of the guises that he likes to put on from time to time, saying that the rich must be taxed more heavily and that it is monstrous that this provision will allow the rich to be taxed not so heavily—but as a cowardly class warrior. He is saying " I am fearful of coming to the House of Commons and saying openly that this index figure is not what the higher rate threshold should be. It should be at some lower figure. The rich should be taxed more heavily." The right hon. Gentleman did not want to do that. He wanted to clobber the rich by stealth. He wanted inflation to do the dirty work for him.
      I suggest that the Committee should have no truck with that whatsoever. There is nothing in this clause that prevents him and his party—if the nation is ever unfortunate enough to have them in government again—from making the tax allowances, tax rates, tax thresholds or whatever they wish to suit their malice. It simply obliges them to do so openly. I commend the clause to the Committee.
      9 pm
      Mrs. Kellett-Bowman: By indexing these allowances, my hon. Friend the Financial Secretary destroys much of the Budget's buoyancy and, therefore, he is striking a strong blow at inflation and making taxation infinitely more honest than it has been in the past.
      Mr. Lawson: This clause does indeed make taxation more honest than it has been in the past. Since my hon. Friend has mentioned the question of inflation,
      1360
      I should like to say that I agree with the right hon. Member for Llanelli that in past the buoyancy of revenue, due not to economic growth but solely to inflation, enabled the Government who were responsible for inflation to get more money in by stealth and, therefore, to spend more money and to increase public expenditure. That was one of the evils of the unindexed system, and it is a further reason why I commend this clause to the Committee.
      Mr. David Penhaligon: I suppose that with this new edict of honesty in taxation the Minister now admits that he has increased taxation. It is a pity that he did not attend yesterday's debate, when we discussed the abolition of the narrow tax band. The Government then argued that they had reduced taxation for the lower-paid, but today, in the new edict of honesty in taxation, the Government have admitted that taxation has been increased, and that is an improvement.
      Having listened to the Minister describing how easy it is to avoid the provisions of the clause, I wonder whether it is worth including it. He outlined how easy it would be for the Government to do more or to do less. I shall tell him now precisely what will happen over the next few years. We have been down this path before. As long as we are in a period of rising inflation the Government will index the tax allowances, because even that saves them money, when, in effect, they can claim that it does not. By that I mean that if we have a rate of inflation of 10 per cent. one year, and we then enter into a 20 per cent. inflation year, on the historic index about which the Minister has spoken, if it is indexed on last year's inflation rate of 10 per cent., it has saved the Government money. I remember that happening with regard to pensions when the Labour Party was in Government. We went through a period of rising inflation, and then the jackpot year arrived.
      What will the Government do if ever the day should arrive when there is a substantial reduction in inflation? Let us pretend that somehow the Government can move from the present level of inflation of 21 per cent. to the level that existed when the Lib-Lab pact ended. Let us pretend that they can manage as well as that within the next 12 months.

      1361
      Is the Minister really telling the House that he will index the thresholds for tax next year by 21 per cent. in a year when inflation is running at 8 per cent? We all know that he will not, because he will not be able to find the money to do so. The Labour Government did not do so on pensions. They carried out one of the greatest money-saving fiddles of all time. They indexed the pension year after year in a period of rising inflation. When the year arrived when we fell off the edge and started getting back to more rational levels of inflation in the year when pensioners should have had a rise of 18 per cent. in a period of about 10 per cent. inflation the Government could not find the money to give the increase.
      Precisely the same will happen to this clause if ever we should get back to saner levels of inflation. I suspect that the Financial Secretary and at least the Minister of State, who is notorious these days for being honest, know that that is so.
      The argument between the hon. Member for Birmingham, Perry Barr (Mr. Rooker) and the Minister on the question whether the highest income groups were helped twice was interesting. I suspect that technically the Minister is right, because he ends up arguing that in a period of 20 per cent. inflation the poor man who is earning £20,000 a year has in effect received a reduction in income of £4,000 a year, whereas the man earning only £2,000 a year has received a reduction in his income of only £400. Therefore, clearly, we must have far greater sympathy for the man on £20,000 a year, because he has received a far larger reduction in his income in real terms. I know which of those two people I would rather be in a period of inflation.
      The fact that the non-indexing of the threshold has put the squeeze on take-home incomes for some of those earning between £15,000 and £20,000 a year, from now on, given the adjustments in recent years, causes me no anguish whatsoever.
      Therefore, I shall vote against the clause not least on the basis that I believe that it takes up a couple of pages of the Bill which are of no value.
      Mr. Budgen: Will the hon. Gentleman be good enough to tell us what the Liberal Party's view is on indexation?
      1362
      As I recollect it, Mr. John Pardoe was one of the first to be in favour of general indexation. I think that we need a much more comprehensive statement from the Liberal Party, particularly as it is presumably preparing itself for another period of office with the Labour Party.
      Mr. Penhaligon: I am quite convinced that our stand on indexation is every bit as united and common as were the arguments advanced from the Conservative Benches during the previous debate. All that I can say is that in the Liberal Party there are not more than 11 views. There appear to be far more views on the Conservative Benches. [HON. MEMBERS: " Answer."] Given the chance, we shall vote against the clause, because it is giving money to those on levels of income that mean that they do not need help. If the Government can increase their thresholds, they can do it anyway.
      Mrs. Kellett-Bowman: Answer.
      Mr. Penhaligon: Finally, I believe that the whole clause is of very doubtful value indeed, because as we enter a period of falling inflation the Government will renege on the indication of a promise that they are making now.
      Mr. Denzil Davies: I think that the Financial Secretary gave the game away in his final sentence. He accused Opposition Members of wishing to increase taxation by stealth so that we could use that money for public expenditure. The corollary of that is exactly what the Financial Secretary is doing. He is doing the best that he can within his power, within the limits of Parliament, to put this money outside the possibility of it being spent on public expenditure. In other words, by having this clause and by making it necessary to come to Parliament to change it, money which otherwise would have been taken by taxation from the better-off and which could be used for public expenditure and for the worse-off in the community, is taken outside that area as far as the hon. Gentleman can do it.
      That is the burden of the hon. Gentleman's argument. I think that that is what he always meant to do with the Rooker-Wise-Lawson amendment. I think that he made it clear in the statement at the end of his speech.

      1363
      As in all debates on indexation, we have had some interesting views. The hon. Member for Knutsford (Mr. Bruce-Gardyne), who is not now present, tried to draw a distinction. I agree with the Financial Secretary here. The hon. Member for Knutsford tried to reconcile the purity of his views on sound money and inflation with the desire to see the higher income groups being indexed. To put it kindly, he made a very ambivalent speech trying to reconcile the two, and he failed.
      The hon. Member for Wolverhampton, South-West (Mr. Budgen) made a very honest speech. I hope that he is not paired this evening, because I have heard him making an honest speech such as that before in Committee, and he was paired for some reason. I hope that this evening he will come into the Lobby with us. He is an honest man.
      Mr. Budgen: I am not paired.
      Mr. Davies: Perhaps that escape route is not open to the hon. Gentleman this evening.
      The Financial Secretary tried to argue this matter away on the basis that the clause deals with the personal allowances of 90 per cent. of the people. But as my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) pointed out, it is not necessary to have this clause to deal with those. Schedule 18 does not have to be repealed. The drafting of the original Rooker-Wise amendment might not have been as good as the parliamentary draftsmen might have liked. However, it was perfectly all right. The courts would have known what it meant. There would not have been any problem

      Division No. 332]

      AYES

      [9.11 pm

      Alexander, Richard

      Brinton, Tim

      Critchley, Julian

      Ancram, Michael

      Brecklebank-Fowler, Christopher

      Dean, Paul (North Somerset)

      Arnold, Tom

      Brooke, Hon Peter

      Dickens, Geoffrey

      Aspinwall, Jack

      Brown, Michael (Brigg & Sc'thorpe)

      Dorrell, Stephen

      Atkins, Robert (Preston North)

      Browne, John (Winchester)

      Douglas-Hamilton, Lord James

      Baker, Nicholas (North Dorset)

      Bruce-Gardyne, John

      Dover, Denshore

      Bendall, Vivian

      Bryan, Sir Paul

      Dunn, Robert (Dartford)

      Benyon, Thomas (Abingdon)

      Bulmer, Esmond

      Dykes, Hugh

      Berry, Hon Anthony

      Cadbury, Jocelyn

      Eden, Rt Hon Sir John

      Best, Keith

      Carlisle, Kenneth (Lincoln)

      Fairbairn, Nicholas

      Bevan, David Gilroy

      Carlisle, Rt Hon Mark (Runcorn)

      Faith, Mrs Sheila

      Biffen, Rt Hon John

      Chalker, Mrs Lynda

      Farr, John

      Biggs-Davison, John

      Clark, Sir William (Croydon South)

      Fenner, Mrs Peggy

      Blackburn, John

      Clarke, Kenneth (Rushcliffe)

      Fisher, Sir Nigel

      Blaker, Peter

      Cockeram, Eric

      Fletcher, Alexander (Edinburgh N)

      Body, Richard

      Cope, John

      Forman, Nigel

      Boyson, Dr Rhodes

      Corrie, John

      Fowler, Rt Hon Norman

      Braine, Sir Bernard

      Costain, A. P.

      Fox, Marcus

      Bright, Graham

      Cranborne, Viscount

      Fraser, Rt Hon H. (Stafford & St)

      of interpretation. There is no need to repeal that provision.
      The Government are using the amendment as an excuse to enable the Financial Secretary and his colleagues to extend indexation to the higher paid. He will not get away with that type of debating trick. He should not argue that a vote against the clause is a vote against indexation for the lower paid, Indexation for that group is safeguarded, even if the clause is defeated. The Government believe in indexation for the group for whom they feel responsible. That group—the better off—voted for the Conservative Party. It will get indexation. The unemployed, the disabled and those on invalidity benefit will not get indexation.
      The Financial Secretary said that I wanted to increase the taxation of the rich. Why do not the Government provide the same type of indexation for the unemployed as they are providing for the rich? Why not provide the same indexation for the rich as they are providing for the unemployed? The Government are not doing that. The Financial Secretary is giving the rich an indexation rate of 21 or 23 per cent. However, the unemployed will be given an indexation rate of 11 or 12 per cent., perhaps less. Ultimately we are discussing social justice. The clause may be a small clause in the Finance Bill, but once again we see the Government's priorities. The rich benefit. The rich get richer and the unemployed and the weak suffer under a Tory Government.
      Question put, That the clause stand part of the Bill:—
      The Committee divided: Ayes 185, Noes 146.

      Fraser, Peter (South Angus)

      Madel, David

      Rossi, Hugh

      Gardiner, George (Reigate)

      Major, John

      Rost, Peter

      Goodlad, Alastair

      Marlow, Tony

      Royle, Sir Anthony

      Gorst, John

      Mates, Michael

      Sainsbury, Hon Timothy

      Gow, lan

      Mather, Carol

      St. John-Stevas, Rt Hon Norman

      Gower, Sir Raymond

      Maude, Rt Hon Angus

      Shelton, William (Streatham)

      Gray, Hamish

      Mawby, Ray

      Shepherd, Colin (Hereford)

      Green way, Harry

      Mawhirnney, Dr Brian

      Silvester, Fred

      Griffiths, Peter (Portsmouth N)

      Maxwell-Hyslop, Robin

      Sims, Roger

      Grylls, Michael

      Mellor, David

      Skeet, T. H. H.

      Gummer, John Selwyn

      Meyer, Sir Anthony

      Speller, Tony

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

      Miller, Hal (Bromsgrove & Redditch)

      Spence, John

      Hannam, John

      Mills, Iain (Meriden)

      Spicer, Michael (S Worcestershire)

      Hawksley, Warren

      Mills, Peter (West Devon)

      Squire, Robin

      Heseltine, Rt Hon Michael

      Miscampbell, Norman

      Steen, Anthony

      Hicks, Robert

      Mitchell, David (Basingstoke)

      Stewart, lan (Hitchin)

      Higgins, Rt Hon Terence L.

      Moate, Roger

      Stewart, John (East Renfrewshire)

      Hill, James

      Morgan, Geraint

      Stradling Thomas, J.

      Hogg, Hon Douglas (Grantham)

      Morrison, Hon Charles (Devizes)

      Taylor, Teddy (Southend East)

      Holland, Philip (Carlton)

      Morrison, Hon Peter (City of Chester)

      Thatcher, Rt Hon Mrs Margaret

      Hooson, Tom

      Mudd, David

      Thomas, Rt Hon Peter (Hendon S)

      Hunt, John (Ravensbourne)

      Murphy, Christopher

      Thompson, Donald

      Hurd, Hon Douglas

      Needham, Richard

      Thornton, Malcolm

      Johnson Smith, Geoffrey

      Nelson, Anthony

      Townend, John (Bridlington)

      Jopling, Rt Hon Michael

      Newton, Tony

      Trippier, David

      Kaberry, Sir Donald

      Page, Rt Hon Sir R. Graham

      Viggers, Peter

      Kellett-Bowman, Mrs Elaine

      Page, Richard (SW Hertfordshire)

      Wakeham, John

      King, Rt Hon Tom

      Parris, Matthew

      Waldegrave, Hon William

      Kitson, Sir Timothy

      Patten, Christopher (Bath)

      Walker, Bill (Perth & E Perthshire)

      Langford-Holt, Sir John

      Patton, John (Oxford)

      Walker-Smith, Rt Hon Sir Derek

      Lawrence, Ivan

      Pattie, Geoffrey

      Wall, Patrick

      Lawson, Nigel

      Pink, R. Bonner

      Waller, Gary

      Le Marchant, Spencer

      Pollock, Alexander

      Ward, John

      Lennox-Boyd, Hon Mark

      Porter, George

      Watson, John

      Lester, Jim (Beeston)

      Prentice, Rt Hon Reg

      Wheeler, John

      Lloyd, Peter (Fareham)

      Price, David (Eastleigh)

      Whitney, Raymond

      Loveridge, John

      Proctor, K. Harvey

      Wiggin, Jerry

      Luce, Richard

      Rees, Peter (Dover and Deal)

      Williams, Delwyn (Montgomery)

      Lyell, Nicholas

      Rees-Davies, W. R.

      Wolfson, Mark

      McCrindle, Robert

      Renton, Tim

      Young, Sir George (Acton)

      Macfarlane, Neil

      Rhodes James, Robert

      MacKay, John (Argyll)

      Rhys Williams, Sir Brandon

      TELLERS FOR THE AYES:

      McNair-Wilson, Michael (Newbury)

      Rifkind, Malcolm

      Mr. John MacGregor and

      McNair-Wilson, Patrick (New Forest)

      Roberts, Michael (Cardiff NW)

      Mr. David Waddington

      NOES

      Allaun, Frank

      Douglas-Mann, Bruce

      Johnston, Russell (Inverness)

      Alton, David

      Dubs, Alfred

      Jones, at Hon Alec (Rhondda)

      Archer, Rt Hon Peter

      Duffy, A. E. P.

      Jones, Dan (Burnley)

      Armstrong, Rt Hon Ernest

      Dunn, James A. (Liverpool, Kirkdale)

      Kerr, Russell

      Ashley, Rt Hon Jack

      Dunwoody, Mrs Gwyneth

      Kilfedder, James A.

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

      Eadie, Alex

      Lambie, David

      Bagier, Gordon A. T.

      Eastham, Ken

      Leighton, Ronald

      Beith, A. J.

      Ewing, Harry

      Lewis, Ron (Carlisle)

      Bennett, Andrew (Stockport N)

      Field, Frank

      Litherland, Robert

      Booth, Rt Hon Albert

      Fitch, Alan

      Lofthouse, Geoffrey

      Bottomley, Rt Hon Arthur (M'brough)

      Flannery, Martin

      Lyons, Edward (Bradford West)

      Bray, Dr Jeremy

      Fletcher, Ted (Darlington)

      McCartney, Hugh

      Brown, Hugh D. (Provan)

      Foot, Rt Hon Michael

      McDonald, Dr Oonagh

      Brown, Robert C. (Newcastle W)

      Forrester, John

      McKay, Allen (Penistone)

      Buchan, Norman

      Foster, Derek

      MacKenzie, Rt Hon Gregor

      Callaghan, Rt Hon J. (Cardiff SE)

      Freeson, Rt Hon Reginald

      Maclennan, Robert

      Callaghan, Jim (Middleton & P)

      Garrett, John (Norwich S)

      Marshall, Dr Edmund (Goole)

      Campbell-Savours, Dale

      Grant, George (Morpeth)

      Mason, Rt Hon Roy

      Canavan, Dennis

      Grant, John (Islington C)

      Maxton, John

      Carmichael, Neil

      Hamilton, James (Bothwell)

      Mellish, Rt Hon Robert

      Clark, Dr David (South Shields)

      Hamilton, W. W. (Central Fife)

      Mikardo, lan

      Cocks, Rt Hon Michael (Bristol S)

      Harrison, fit Hon Walter

      Millan, Rt Hon Bruce

      Coleman, Donald

      Hart, Rt Hon Dame Judith

      Mitchell, Austin (Grimsby)

      Concannon, Rt Hon J. D.

      Haynes, Frank

      Mitchell, R. C. (Soton, ltchen)

      Conlan, Bernard

      Hefter, Eric S.

      Morris, Rt Hon Alfred (Wythenshawe)

      Cook, Robin F.

      Hogg, Norman (E Dunbartonshire)

      Morris, Rt Hon Charles (Openshaw)

      Cowans, Harry

      Holland, Stuart (L'beth, Vauxhall)

      Moyle, Rt Hon Roland

      Crowther, J. S.

      Hooley, Frank

      Newens, Stanley

      Cryer, Bob

      Horam, John

      O'Halloran, Michael

      Cunliffe, Lawrence

      Howells, Geraint

      O'Neill, Martin

      Dalyell, Tam

      Hudson Davies, Gwilym Ednyfed

      Palmer, Arthur

      Davies, Rt Hon Denzll (Llanelll)

      Hughes, Mark (Durham)

      Parry, Robert

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

      Hughes, Robert (Aberdeen North)

      Penhaligon, David

      Dempsey, James

      Janner, Hon Greville

      Prescott, John

      Dewar, Donald

      Jay, Rt Hon Douglas

      Richardson, Jo

      Dixon, Donald

      John, Brynmor

      Roberts, Albert (Normanton)

      Dobson, Frank

      Johnson, James (Hull West)

      Roberts, Ernest (Hackney North)

      Dormand, Jack

      Johnson, Walter (Derby South)

      Robinson, Geoffrey (Coventry NW)

      1366

      1367

      Rooker, J. W.

      Strang, Gavin

      Williams, Rt Hon Alan (Swansea W)

      Ross, Ernest (Dundee West)

      Thomas, Dafydd (Merioneth)

      Wilson, Gordon (Dundee East)

      Sever, John

      Thomas, Jeffrey (Abertillery)

      Wilson, William (Coventry E)

      Silkin, Rt Hon John (Deptford)

      Thomas, Dr Roger (Carmarthen)

      Winnick, David

      Silverman, Julius

      Tinn, James

      Woodall, Alec

      Skinner, Dennis

      Varley, Rt Hon Eric G.

      Woolmer, Kenneth

      Snape, Peter

      Watkins, David

      Wrigglesworth, lan

      Spriggs, Leslie

      Welsh, Michael

      Young, David (Bolton East)

      Steel, Rt Hon David

      White, Frank R. (Bury ft Radcliffe)

      Stewart, Rt Hon Donald (W Isles)

      Whitehead, Phillip

      TELLERS FOR THE NOES:

      Stoddard, David

      Whitlock, William

      Mr. John Evans and

      Stott, Roger

      Wigley, Dafydd

      Mr. George Morton

      Question accordingly agreed to.
      Clause 23 ordered to stand part of the Bill.

    Clause 53

      CHARITABLE DISPOSITIONS FOR PERIODS WHICH CANNOT EXCEED THREE YEARS
      Mr. Denzil Davies: I beg to move amendment No. 18, in page 36, line 17, at end add
      ' but so that this section shall not apply to any charity which exists for the advancement of education and where 75 per cent. or more of the gross receipts of such a charity is derived from money payable under the deeds of covenant and payments made by the pupils or by individuals on their behalf.'.
      This clause deals with deeds of covenant in favour of charities. The law has always been that a deed of covenant that enabled the payer to deduct the amount from his tax had to be for a period of six years or more and generally seven. The clause reduces the period to three years or more. As the Chancellor said in his Budget Statement, there will therefore be a greater incentive to make payments by deed of covenant. Under the clause, payments go to charities. The amendment seeks to prevent the benefits of the clause going to certain educational establishments.
      One of the difficulties with charities is the statute of Elizabeth I, which provides that any foundation or institution for the advancement of education is a charity. We therefore have the extraordinary situation of Eton college being a charity because of the anomaly of an Act passed in 1601 or thereabouts. We have not been able to find a more sensible or more modern definition of charities. We could go into the recommendations in the Goodman report, but they do not help all that much. It is a difficult problem. The drafting of the amendment may be somewhat convoluted, but I hope that the Minister of State will not nit-pick at it and will consider the amendment in the spirit in which it was drafted.
      1368
      It is a rather good amendment, because it seeks to isolate the public school element in education from some of the institutions that exist as the result of he payment of fees, perhaps from local authorities. Schools for the mentally handicapped are, in the main, supported by local authorities who pay the fees of the pupils. The amendment does not seek to strike at those schools.
      We seek to deny the benefits of the clause to schools where 75 per cent. of the gross receipts are made up of fees paid by individuals or by deeds of covenant. Most public school receipts are made up of fees paid by individuals and not by deeds of covenant. We say that it is not right that taxpayers should subsidise Eton. The deeds of covenant provision means that the general body of taxpayers subsidises institutions such as Eton out of the general body of taxation. I do not know, any more than do the Government, what proportion of the gross receipts of public schools are made up from deeds of covenant, but there is no case for saying that the general body of taxpayers should subsidise such institutions.
      The Government deny subsidies to industry, saying that it must stand on its own feet. Yet the clause gives tax benefits for deeds of covenant for three years-or more which can and will benefit educational establishments that ought to stand on their own feet.
      Mr. A. J. Beith: The right hon. Gentleman was fearful of the Minister nit-picking on the clause, but he must accept that crucial to whether we can support such an amendment is the question whether a clear line can be drawn between Eton college and, for example, a school in my constituency that provides education for autistic children, most of the fees for whom are paid by their parents, with some being; paid by local authorities. How does the 75 per cent. formula, which includes both money under deeds of covenant and

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      tuition fees, in no particular balance, distinguish between schools, particularly as the right hon. Gentleman does not know the proportions in some of the major public schools?
      Mr. Davies: That is a fair point. It is the problem that faces us in such circumstances and it is not one to run away from. I believe that in most cases the kind of schools mentioned by the hon. Gentleman would probably be outside the ambit of the clause because 75 per cent. of the gross receipts would not have come from payments by individuals. Much of the income of those schools is made up increasingly by payments from local authorities because parents cannot afford to send their children to these schools. If hon. Members wish the 75 per cent. to become a higher figure, I am prepared to accept such a proposal.
      9.30 pm
      Mr. Beith: I am trying to find out what the amendment means. I understand that payments made by or on behalf of pupils—which would surely cover those made by local authorities—contribute to the achievement of the 75 per cent. figure. The only kind of institution that could readily be exempt from the provision would be one that had a substantial income from endowments, the very kind of institution that the right hon. Gentleman may be anxious to exclude.
      Mr. Davies: The last few words of the amendment show that the payments are made by the pupils or by individuals on their behalf. The word " individuals " is chosen with some care to exclude fees paid by local authorities. The 75 per cent. figure may not be the right one. That is why I argue that this clause would not take into account the kind of school to which the hon. Gentleman referred. I chose the word " individuals " deliberately. The payments have to come from individuals and not from local authorities or institutions. The Minister will no doubt say whether the 75 per cent. is too low or too high a figure. If the hon. and learned Gentleman wishes to bring forward an amendment on Report to increase it, we shall examine such a proposal.
      We are not debating whether there should be public schools. We are debating the principle whether deeds of covenant that are a form of subsidy should
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      be allowed as a deduction from income. Why should someone be allowed a deduction from his income for tax purposes through making a deed of covenant? Why cannot there be a deduction to make other payments? What is so special about an annual payment or a deed of covenant? It is anomalous that, because someone makes payments from his income, not for any trade or business purpose but under a silly little legal document stating that payments must be made for three years or more, he should be allowed a deduction. If I pay for food with my income I am not allowed a deduction.
      Mr. Chris Patten: It may be an anomaly, but it has existed in one form or another since 1803.
      Mr. Davies: It is because it has existed since 1803 that it is increasingly becoming an anomaly. The present position arises from the framework of the 1803 legislation and subsequent taxation decisions. It makes no sense in present legislation. A person who makes a covenant for two years does not get the tax deduction. If it is made for three years, he gets the tax deduction. If one forgets to put a piece of candlewax on a piece of paper, although it is for three years, there is no deduction. That shows the ridiculous anomaly.
      There are charities that one would wish to support. I am merely saying that this is a subsidy given by the general body of taxpayers. It will go not only to Oxfam and to the Save the Children Fund—one would not wish to do anything to prevent giving to these worthy charities—but to institutions such as public schools that do not need the money and should not have it. Why should they be supported by the general body of taxpayers? If parents wish to send their children to public schools, that is another question. We argue that there should not be this extension on deeds of covenant. It will benefit institutions that do not need such benefit. We do not believe that the general body of taxpayers should subsidise these institutions, as would happen under these deeds of covenant.
      Mr. Beith: I listened with some care to the right hon. Member for Llanelli (Mr. Davies) because, as he said, it is not a problem that we ought to run away from. We must consider carefully whether it is right that the covenant system should

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      benefit to a considerable extent the private sector of education.
      I became more and more worried, however, as the right hon. Gentleman seemed to expound a policy of general hostility to the principle of the covenant that has been of immeasurable value to the Churches, to the relief organisations, and to charities for which, in an afterthought, the right hon. Gentleman said he welcomed support. He spent a considerable amount of time ridiculing the process by which individuals indicate by means of a document that they will make regular payments over a period of years to benefit a charity and, as a result of that, find that the taxes that they pay on those moneys are reimbursed to those charities. He may find that anomalous. but it has been of considerable benefit to a wide range of charitable organisations.
      Mr. Denzil Davies: The hon. Gentleman is being unfair to the argument. I made it quite clear that we are not objecting to the clause. I said that it was anomalous that someone can give away part of his income and get a deduction merely because he does it under a three-year covenant. There may be social cases in which we may wish that to be done. My argument was that we do not wish it to be done in favour of institutions such as the public schools, which neither need nor deserve the money.
      Mr. Beith: I appreciate the right hon. Gentleman's specific argument about public schools, but listening with an open mind to what he said I formed the opinion that he viewed the whole principle of the covenant with considerable scepticism and perhaps disapproval. He says now that there may be social grounds upon which some organisation should benefit, but the whole sphere of charity law has presented us with many problems of definition and it is far from satisfactory now. There are some bodies that do not benefit from covenants which I should like to see benefit. There are bodies that are denied charitable status, particularly in the area of world development and aid—there is the United Nations Association—which put forward causes and therefore fall foul of the present legal definition of " charity ". Nevertheless,
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      they would be regarded by most hon. Members as desirable organisations.
      Our present charity law is full of anomalies. It seems to be generous to some groups, which exist mostly for private and limited benefit, and is rather ungenerous to other groups simply because they have to carry their convictions into general public discussion. That is regarded as a political activity. I believe, as the Goodman committee believed, that we ought to have a general review of the law of charities and the various kinds of institutions that should benefit from them.
      I am not sure that the amendment carries us far along that road. It seems to be a limited stab at a principle to which the Labour Party has firmly nailed its colours, that charitable reliefs should be withdrawn from the private education sector generally. There are quite respectable arguments for doing so. I have always found it difficult to avoid penalising the giving of money for educational purposes while continuing to encourage, by reliefs, the giving of money for other purposes. We could find ourselves in the ultimate absurdity where a major philanthropist who proposed to give substantial annual donations to an educational body that was recognised as having great value was not given the benifit of a covenant, whereas if he gave the same sums of money to a theatre trust, an orchestra, or any of a number of other organisations, he would get the full benefits of relief. The amendment does not solve many of these problems.
      I am anxious to protect the principle that the means by which we encourage private donation in this country should not be pushed out of education altogether. I want to encourage more private donation and support in the State education system. I do not want to replace the essentials that the State system should provide, but I want to give to State schools some of the private benefaction benefits enjoyed by the private sector. That already applies in our universities and some of our polytechnics, as well as in some of those schools whose history has meant that they have moved over the years from private foundations to being part of the State school system.

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      Many of those schools enjoyed particular benefits and endowments which allowed them to provide extra facilities. I wish to encourage that. I would not like to see it discouraged.
      I am not happy that we should use this device to try to change the law on this subject. I was more impressed by the approach recommended by the old Education, Arts and Home Office Sub-Committee—a voice from the past Select Committee system of the House—which produced a detailed report on charities. That Sub-Committee suggested that in order to overcome the problem we should apply a new test to charitable status in education. That test would involve purposes beneficial to the community.
      That also presents difficulties and problems, but I think that that is a more fruitful approach than simply saying that now that the Government have decided to broaden the covenant provision we shall create a type of second-class charity that will receive covenant benefits but not on the more extended scale as now proposed by the Government.
      That is all that the amendment does. It does not wipe out covenant benefit for public schools; it simply means that they will be on the seven-year covenants that prevail today while other organisations and benefit from the four-year convenant system. It is not even the case that the change from seven to four years will necessarily increase the amount of money paid over by the Exchequer in the form of reimbursed covenants. That will depend on whether individuals take advantage of the new scheme to renew their covenants more regularly.
      What, after all, is the purpose of what the Government are doing by this clause? I presume that it is partly to overcome the problem that has made small covenants almost valueless to charities, because by the time the fourth and fifth year are reached inflation has raised the subscription for the people who are still paying on the ordinary basis far above the level of applying to the individual who has covenanted, and above the combined level of the covenant and his subscription and the returned tax that the covenant system provides.
      This is a small measure of reform. It is not one to which we can readily attach
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      a major change in the category of bodies that are entitled to the benefits of charity law relief. For those reasons, I am not at all happy about the amendment.
      Mr. Douglas Hogg: I listened with great interest, as I always do, to the speech by the right hon. Member for Llanelli (Mr. Davies). However, I must tell him that I disagree considerably with what he has said to the Committee tonight.
      Perhaps I should declare an interest. It will not surprise any hon. Member to know that I went to a fee-paying school or that I intend to send my children to a fee-paying school. If that be an interest, I declare it.
      I think that the amendment proposed by the right hon. Gentleman is misconceived. His principle objective is, as I understand it, to isolate the public school element from other classes of charities of an educational nature. I think that that is an extremely dangerous principle to adopt. There is no doubt that the public schools are properly defined as charities within the Act. They fulfil all the essential criteria and the opposition to their inclusion within the scope of charities for the purposes of tax concessions and covenants is largely subjective. I do not mind the right hon. Gentleman opposing the public schools but I dislike his attempt to introduce his particular prejudice into legislation.
      Once we decide to make a distinction between charities on the grounds of personal prejudice we establish an extremely dangerous principle which may be followed by others less worthy than the right hon. Gentleman.
      Mr. Denzil Davies: Nobody is seeking to deny charitable status to any of the schools. What I say in the amendment is that tax relief shall not be given to someone who pays money to that particular body. Taxation is always about prejudice or priorities, however one may wish to describe it. That is what taxation is about. It is about choice.
      Mr. Hogg: The right hon. Gentleman cannot have thought deeply before he made that intervention. The purpose of his amendment is to make a distinction in law and in fact between classes of institutions which otherwise would qualify as charities. He is saying " Because you

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      do not satisfy my personal prejudices, for these purposes you will not rank as a charity, but other charities will." That distinction is not based on law but on subjective prejudice. The Committee should not accept that.
      I welcomed what the hon. Member for Berwick-upon-Tweed (Mr. Beith) said. He made two important points. He said that the amendment will catch Eton but that it will also catch the specialist schools. That might be a result of unhappy drafting—
      Mr. Denzil Davies: Can the hon. Gentleman explain which schools will be caught by the amendment?
      9.45 pm
      Mr. Hogg: Once again the right hon. Gentleman did not think carefully before he made an intervention. Clearly, he did not listen to the hon. Member for Berwick-upon-Tweed. He was talking about specialist schools for autistic children. Frequently in our constituencies—although apparently not in the constituency of the right hon. Member for Llanelli—we are involved with specialist schools. I am sorry if the right hon. Gentleman does not know about them, but the rest of the Committee does.
      The rationale and justification for the covenant system is important. When somebody puts a portion of his income out of his own disposition for a prolonged period it is wrong that that portion of income should attract tax. That is an important proposition, which has proved highly beneficial to many charities throughout the land. Once again, prejudice comes into the argument. The right hon. Member for Llanelli says that as a general proposition it is jolly good but when it comes to public schools, of which he happens to disapprove, it is jolly bad. The principles basically are indivisible. Once they are weakened in respect of one class of institution or charity, they are weakened in respect of them all.
      One can always argue with a degree of respectability that institutions such as public schools should not receive concessions. Such arguments would be more attractive if they were advanced from a party other than the Labour Party. On
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      this matter its prejudice and inherent hostility is well known and, in effect, it disqualifies members of that party from expressing a rational view on matters of some importance.
      Mr. Campbell-Savours: The comments by the hon. Member for Grantham (Mr. Hogg) are understandable. He comes from a family of substance, which has sent generations to public schools. He probably feels a family requirement to defend the privileges and the extension of privileges that the public schools seek.
      The Newsom report, published in 1968, recommended that action be taken to terminate the fiscal and summary reliefs on schools that are charities but that do not serve a truly charitable purpose. The all-party House of Commons Expenditure Committee which considered the question of charities was chaired by the hon. Member for Plymouth, Drake (Miss Fookes). The Committee's unanimous report of 1975 states:
      " Charitable status should be given to only those institutions which manifestly devote the education they provide towards meeting a clear range of educational needs throughout the whole community."
      In my view, that is hardly in accordance with the case advanced by the hon. Member for Grantham. I cannot think that he was suggesting—or perhaps he was—that the schools that he was seeking to protect would fall within the criteria laid down in that statement.
      A committee on charities under the chairmanship of Lord Goodman, reporting in 1976, subscribed to the view that in some cases charitable status should not be granted. It said that there was considerable feeling in the committee that a point might be reached when facilities offered by an educational establishment were so expensive or in some other way so exclusive that only a tiny fraction of the community could enjoy those facilities. In such cases there is a strong argument for saying that charitable status should not be granted.
      The widespread feeling that that point of exclusivity was already reached many years ago was pointedly expressed by a member of the Goodman committee—a former Member of the House, Mr. Ben Whitaker—when he said in his minority report:
      " I fail to see why the community should be compelled to support financially exclusive

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      schools which are restricted largely to those families who are already privileged."
      I think that, in moving the amendment, my right hon. Friend the Member for Llanelli (Mr. Davies) was trying to produce a form of wording which, prior to a review of charity law, would have the effect of preventing some of the benefits that exist at the moment going to certain educational establishments. I feel that all this begs the question. Although my right hon. Friend felt it necessary to confine himself to the fine print of the financial nature of the amendment, I feel that we should in some way be allowed to widen the discussion a little—perhaps not going into the merits of the public schools but certainly commenting on the reason why certain of us would wish to support the amendment tonight.
      In my constituency there is a long tradition of objection on this matter. In 1958 Mr. Fred Peart, now my noble Friend Lord Peart, moved a resolution at a national conference of the Labour Party calling for local authorities
      " to take over all the direct grant schools in their areas, for the abolition of fee paying in any school and the integration within the State education system of all those independent schools which could be made available as part of the general education plan."
      That resolution on behalf of the Workington constituency Labour Party was defeated by approximately ½ million votes, with a vote against of 3½ million. But why did that resolution come from the Workington constituency Labour Party?
      I think that it might be in order to trace some of the origins of the so-called public schools. I have done a little research, and my information is that they were never devised for the so-called affluent in society. On the contrary, they were devised for poor families in given localities where there were problems in education. For example, Eton, which, if my information is correct, was set up in 1440, under Henry IV, was established specifically for young boys of good character but poor—note " poor "—and needy. I wonder how many hon. Members on the Conservative Benches, and, indeed, a few on these Benches, could be said to be——
      Mrs. Kellett-Bowman: The excellent grammar school that I had the privilege of attending comprised a very high proportion
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      of precisely those youngsters to whom the hon. Gentleman is referring, until the Labour Party insisted on comprehensivisation, in which event, although it was founded only in 1936, it became the exclusive property of those who could pay. In my view, that is totally wrong.
      Mr. Campbell-Savours: I do not know about the educational problems of Lancashire. The hon. Lady will recall that on one occasion I was tempted to table a number of questions on the problems of Lancashire. I ask her not to tempt me again with the offer to table more questions on matters relating to her constituency.
      The character of the schools has changed. Over the past 70 or 80 years there has been almost a social revolution in Britain in terms of class. With the development of a strong semi-professional nouveau riche class, of which a number of hon. Members are no doubt the products, considerable pressure has been exerted on the institutions of private education to accept the public school as a ladder for social aggrandisement, if that be the word. I think that it was R. H. Tawney who said that the rising middle class, if often uneducated itself, was not unaware of the advantages of education, nor was it lacking in ambition. It looked to the schools to provide an addition to a moral intellectual discipline, a common platform enabling its sons to associate on equal terms with those families who, if increasingly outdistanced in income, still diffused a faint aroma of social security.
      It seems that the schools provided for a booming nouveau riche class—the mechanism by which they would clamber in their lust to surface at the top. It was a public schools commission report in 1968 which, commenting on the divisiveness of public school education, said:
      " The public schools are not divisive simply because they are exclusive. An exclusive institution "—
      Mr. John Townend: Will the hon. Gentleman tell the Committee of his personal experience of public schools?
      Mr. Campbell-Savours: I shall willingly tell the hon. Gentleman about my personal experience. I attended a direct grant boarding school, and my sister attended a public school. But that does not detract from the fact that we hold

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      certain views, and were elected to the House to express them. I intend to do so. I object to the system. I would like to see the whole system abolished. It is appalling that we perpetuate a system of social divisiveness, and divide children so early in life into divisions that often last for the balance of their lives.
      The report went on to state:
      " An exclusive institution becomes divisive when it arbitrarily confers upon its members advantages on a arbitrary selected membership, which starts with an advantageous position in life. There is no sign that these divisions will disappear if the schools are left alone."
      That is at the heart of the objection of Socialists to the system. It is a privileged system. It is built for people who believe in privilege.
      I congratulate my hon. Friends on tabling the amendment. It shows that there is unity of opinion on these Benches that we wish, by one means or another, to phase out these iniquitous institutions to which we positively object. [Interruption.] By the noise coming from Conservative Members, we realise how keen they are to defend those rather ridiculous institutions.
      Conservative Members argue that it is a question of freedom. It is an argument about freedom, but freedom in this case is exclusively the ability to pay. It is like saying to people in the Third world that they have freedom in the area of access to health, in the event that doctors are available.
      That freedom in this instance is dependent on the size of their pockets and whether they can afford the health care that is available.
      10 pm
      Over the years the Tories have backed the public schools with financial concessions.
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      What we must do and what I hope we shall increasingly do over the years—I much regret the lack of willingness by the previous Labour Government in this respect—is to intervene in the area of public schools and to introduce changes in taxation and in other areas to phase them out in line with the aspirations of the national Labour Party conference.
      Statistics show that with the entry of large numbers of direct grant schools into the public school system as a result of the option offered by the previous Labour Government, an increasingly larger number of children today attend public schools than was the case as little as four years ago.
      The charitable status benefits are considerable. They offer a 50 per cent. reduction in rates, and tax exemption which is calculated to be worth £25 million a year. The Independent Schools Information Service—ISIS—assessed that the loss of charitable status and of revenue to the schools which may stem from the loss of such status could lead to an increase of perhaps as little as 5 to 7 per cent. in the fees of those schools. Still, it is a small chip. Eventually the objective will be realised.
      I firmly believe that one of the reasons why we have problems in secondary education is that great numbers of people in the army of the British middle class, by buying their way out of the education problems which confront 95 per cent. of the British people and the need to consider such problems for their children, have removed themselves from the central and important area of argument. I hope that when we finally phase out these schools we shall have the pleasure of the company of the British middle class in the secondary education lobby and in our demands for reform in that area.
      The Minister of State, Treasury (Mr. Peter Rees): The right hon. Member for Llanelli (Mr. Davies), in moving the amendment, was not his usual robust self. He did it with his characteristic charm but he seemed uncertain about the scope and depth of his amendment. Indeed, he encouraged me—these are his words, not mine—not to pick nits over it.
      Even accepting that the amendment is perhaps only a peg for a debate—highly charged at times but, on the whole, fairly good-humoured—as it stands it is ineptly drawn. It perhaps reveals some of the difficulties of the problem to which the Labour Party—not so much my right hon. and hon. Friends—should address itself.
      The Labour Party has been in technical difficulties both today and last night. Last night we found that we were debating an Opposition amendment designed—although they had not appreciated it until halfway through the debate—to abolish the investment income surcharge. After a perceptible pause, we were told that it was a probing amendment. T think that it is more important for us to probe the intentions of the Labour Party than for the Opposition to probe the Government's intentions, which are clear for all to see.
      I should like to correct one or two misconceptions. First, the right hon. Member for Llanelli ridiculed the whole concept of deeds of covenant. He talked in accents that I found a little curious from one who has had a distinguished legal background. He referred to silly little documents with drips of candle grease. It is not for me to speculate on the difference between a document under seal and a document under hand. I know that my hon. Friend the Member for Grantham (Mr. Hogg) would be happy to enlighten me on that matter. I have momentarily given up these arcane pursuits.
      The whole concept of deeds of covenant is deeply embedded in the legal system, quite apart from our fiscal system. The fiscal consequences have been recognised for well over a century and a half. In my view, and, I hope, in the view of many hon. Members on both sides of the Committee, the mere fact that a concept has persisted for 150 or
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      180 years does not of itself mean that we should necessarily scrutinise it censorially with a view to pulling it apart. Of course, we should review these concepts from time to time, but if a person, by some permanent mechanism, disposes of part of his income, perhaps different tax consequences should obtain if he merely gives it away and is able to retract his generosity at any time.
      The right hon. Member for Llanelli may have misled himself and the Committee by saying that it was merely some accident of a statute of Queen Elizabeth I—in fact, it was a statute of 1601—that clothed educational establishments such as Eton—I cannot remember whether it was the right hon. Gentleman who singled out that great establishment of learning—with charitable status. The whole question of charitable status has been reviewed consistently by the courts and refined and enlarged over the centuries. [Interruption.] The right hon. Gentleman correctly murmers " Pemsel's case ". It was a great authority at the end of the last century. But we do not always have to return to the statute of Elizabeth I.
      I remind the right hon. Gentleman and the Committee that these establishments should not provide purely for the advancement of learning; they should also provide for the benefit of the community. There cannot be too narrow an establishment. It must be shown to have a broad social purpose if it is to achieve charitable status. The right hon. Gentleman took too narrow and too partisan a view of the problem.
      I turn now to the particular difficulties of the amendment. I accept the right hon. Gentleman's disclaimer, but I hope that he will recognise that the difficulties that I and other hon. Members—in particular the hon. Member for Berwick-upon-Tweed (Mr. Beith)—identified show that this is a difficult and delicate area, and that one cannot blunder in in the way—dare I say it—that the hon. Member for Workington (Mr. Campbell-Savours) did. I recognise the deep emotions that gripped him as he spoke, but it is not for this Committee to speculate on the reason why he should have been so moved by this problem. It must lie deeply in his past, and it would probably be indelicate of me to speculate. I do not wish to encourage my hon. Friends to probe the

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      hon. Gentleman's past. I am sure that it is an honourable and decent past; nevertheless, he seemed to indicate moments of personal distress and anguish, which I shall not dwell on now.
      I should like to draw attention to some of the problems of the amendment that we are being asked to debate. It may be a useful peg for a general debate, but from time to time we are obliged to apply ourselves to the words of these amendments. This amendment would strike a far wider group of establishments than merely those that the right hon. Member for Llanelli and his hon. Friends, presumably, would describe as elitist schools in the private sector. It would hit at and disadvantage those who wish to covenant in favour of denominational schools. That is a perfectly intelligible position, but the Labour Party should make it clear if it wishes to attack denominational schools and those who wish to be generous to them. That is not something that has been borne out in speeches from the Opposition Benches.
      It would also disadvantage schools supported by the great livery companies in the City of London, many of which are under the general supervision of ILEA and are not designed to benefit children of the more privileged classes. Since the definition of the advancement of education has been considered by the courts to be wide, it would perhaps discourage covenants in favour of some learned societies—for example, the Royal Institution. I do not know. It is not for me to probe the individual circumstances of individual taxpayers and individual bodies. Again, it might even affect certain private libraries, some of which will no doubt come to mind on both sides of the Committee.
      Finally, and perhaps most movingly of all—it was the point so ably made by the hon. Member for Berwick-upon-Tweed—it would affect the independent schools for the handicapped. The same point had occurred to me. I had a little research done. The hon. Member mentioned a school in his constituency. Hon. Members on both sides of the Committee will no doubt, with a little thought, call to mind similar schools in their constituencies.
      I give some examples: the Lord Mayor Treloar college at Alton, in Hampshire;
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      Penshurst school; Worcester college for the blind; the Royal West of England school at Exeter for deaf, blind and handicapped children; the Royal Victoria School, Newcastle, for the blind; the Sunshine nursery school for children under 7 years old, blind and handicapped; and the Royal school at Margate for the deaf and handicapped.
      I do not know whether each or any one of those has applied for charitable status. I do not happen to know exactly how they would measure up to the rather stringent tests imposed in the amendment.
      Mr. Denzil Davies: The hon. and learned Gentleman does not know?
      Mr. Rees: Of course I do not know, because it is not for me. This is the kind of confidential information that the right hon. Gentleman, as a former Treasury Minister who has spoken from this Dispatch Box, well knows it would be quite improper for me, unless invited by the school, to ask the Revenue authorities to give me. Like the hon. Member for Berwick-upon-Tweed, I wondered whether the Opposition had seriously thought about the scope of the amendment. Therefore, I searched around to consider the kind of school that would be affected. Perhaps I make the right hon. Gentleman a little uneasy. I hope, therefore, that having considered the arguments, he will not feel obliged to press the amendment to a Division.
      The first point that I make to the Committee, and particularly to the hon. Member for Workington, who I know is moved by generous sentiments, is that hon. Members may consider that if they were disposed to support this amendment they might be affecting the prospects of children who attend that class of school.
      Mr. Campbell-Savours: Such schools could find a good tax lawyer to get the money back.
      Mr. Rees: Perhaps, with a certain amount of professional advice—I shall come to this matter—the effects of this rather ill-judged amendment, if it were to be carried into law against the advice that I shall tender to the Committee, could be mitigated. I shall come to such matters shortly. However, it would be a little haphazard in its operation.

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      Attention has been drawn to the fact that the older esablishments, which on the whole—one is, of course, generalising—perhaps have larger endowments and greater dependence on investment income and less, perhaps, on covenanted income, might be taken outside the scope of the clause. That is a very curious position. The right hon. Member for Llanelli and his hon. Friends may be able to defend it, but they certainly have not attempted to do so up to now.
      Since the hon. Member for Workington draws attention to this point, obviously he has focused his mind on it. It could be circumvented to a degree, because, for instance, as I understand it, not many of the denominational schools have covenants made out in their favour. The covenants are usually made out in favour of the diocesan authorities, and therefore the diocesan authorities could perhaps channel the money to the schools without being caught. [Interruption.] The right hon. Gentleman is now indicating that that point had occurred to him all along, but that is a little disingenuous, because if that were so he would doubtless have made the point, with his customary eloquence, at an earlier stage.
      Mr. Denzil Davies: The hon. and learned Gentleman is making very heavy weather of the point. The amendment is drafted, quite clearly, with that in mind, as I pointed out to the hon. Member for Berwick-upon-Tweed (Mr. Beith). That is why the words " by individuals " are specifically included—to exclude payments from a diocesan body and payments from other religious bodies to the schools. This covers only payments specifically made by individuals, and most of the schools that the hon. and learned Gentleman has mentioned would not be caught by the amendment.
      Mr. Rees: Let me develop my argument a little further and see whether the right hon. Gentleman has thought of this point. Let us suppose that the hon. Member for Workington, moved by a passion for the poor scholars of Eton college—and I know, therefore, that the hon. Member would be totally disinterested on this point—were to decide that he wanted to make a covenant that would only just exceed three years in favour of the poor scholars of Eton college. He
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      could probably circumvent the amendment by making the covenant in favour of a general educational trust. The trust could then make a subvention to Eton. The hon. Gentleman encouraged me to speculate on the type of advice that he might receive should he wish to advantage such schools. I think that I am not overstating the case when I say that, in practical terms, the amendment is a little inept.
      10.15 pm
      The Labour Party has given vent to deplorable prejudices. I had hoped that those prejudices were worked out of the party long ago. I do not know whether this subject was debated at Wembley. A wide range of subjects was covered. If it was not discussed, the Labour Party will no doubt consider it later. We shall then discover how far its thinking on this subject has developed. If the Labour Party adopts a prejudiced attitude instead of a dispassionate, public-tude instead of a dispassionate, public-to draw the Committee's attention to a certain aspect.
      The right hon. Member for Llanelli said that if the amendment were carried subsidies would be given to the private sector of education by the taxpayer. That is a misuse of the word " subsidy ". The right hon. Gentleman said that the Government did not give any subsidies to industry. If tax relief is regarded as a subsidy, subsidies are given to industry. Industry gets capital allowances and stock relief. Both this Government and the previous Labour Administration have reserved fiscal subsidies for industry. However, I think that " subsidy" is a misnomer. Tax relief should not be regarded as a subsidy. It provides relief for those who wish to be generous to charity as a whole.
      The right hon. Gentleman and his hon. Friends wish to delineate a small area of charity and to deprive donors of tax relief. However, they should reflect on the fact that private schools save the Exchequer £150 million a year, and probably more. Perhaps the right hon. Gentleman is a little reeptical about my figures. Indeed, I see that the hon. Member for Workington is about to leap to his feet. I derived that information from an answer to a parliamentary question given by a member of the previous Labour Administration.
      Mr. Campbell-Savours: The issue depends on how that question was phrased.
      Mr. Douglas Hogg: An answer is an answer.
      Mr. Campbell-Savours: Does that figure take account of the large contribution that is made to public schools on behalf of the children of members of the Diplomatic Corps and those of Service personnel overseas? If it does not, it is not a fair reflection.
      Mr. Rees: It is not for me to reflect exactly how the previous Labour Administration constructed that figure. I know why the hon. Member for Workington raised those points. I have also read the articles in the New Statesman. I do not have a reference for the figure. However if the hon. Gentleman wishes to follow up that point I shall write to him and give him the reference. He can then study the question. I cannot recall whether the right hon. Member for Llanelli or the hon. Member for Newcastle-under-Lyme (Mr. Golding) answered the question. No doubt the hon. Gentleman is on intimate terms with whoever was involved and he can ask how the answer was constructed.
      The Goodman report has also been invoked by at least one Opposition Member. I derived some support for my propositions from it. I shall paraphrase page 25 of the report. It states that if the private sector of education is abolished, it should be abolished by a clear political decision, not by nibbling away at its charitable status. That is precisely what the amendment seeks to achieve.
      I am a little saddened by the prejudices of the Labour Party. Two out of the four leaders of that great party since the war were educated at public schools. It is not for me to compare them with their successors. However, Lord Attlee, who was a distinguished public servant, was proud to have been educated at Haileybury. As far as I know, Mr. Gaitskell was proud to have been educated at Winchester. It is not for me to speculate, but in a matter of months the Labour Party may be led by the prime flower of Westminster school, no less a person than the right hon. Member for Bristol, South-East (Mr. Benn). That is the delightful prospect for Labour Members.
      1388
      This is an ill-conceived and prejudiced little amendment. All that we seek to do by clause 53 is to offer a modest measure of encouragement to those who wish to be generous to charities. I believe that we deserve the support of the Committee. I am sure that we shall have the support of the country.
      Mr. Denzil Davies: The hon. and learned Gentleman's reply was not up to his usual standard. He began by pretending that there was a technical defect in the amendment. However, his reply consisted mostly of knock-about stuff. He could not find a technical defect. He said that some schools would be caught by the amendment. I waited for the long list. He refered to denominational schools. I shuddered slightly, because there are many such schools. However, he could give me no evidence that they would be caught. Bearing in mind the way in which the amendment is drafted, it is unlikely that any of them would be caught by it. I have referred to the let-out for individuals.
      The Minister passed from denominational schools to livery schools in the City. He mentioned the Royal Institution and one or two schools. He was never able to substantiate his argument. He was never able to break down the basis of the amendment. The amendment contains two safeguards, namely, 75 per cent. of gross receipts and the gross receipts received by individuals. Those safeguards take out most of the schools for the mentally handicapped and the religious schools.
      Mrs. Kellett-Bowman: And Eton.
      Mr. Davies: Indeed. I should say that 75 per cent. of Eton's income comes from the fees paid by parents. However, the hon. and learned Gentleman listed only a few schools and he has not been able to break down the basis of the amendment on technical grounds.
      Mr. Beith Mr. Beith rose——
      Mr. Davies: The hon. Member for Berwick-upon-Tweed (Mr. Beith) made a long speech on the amendment. He initially said that he was in favour of the spirit of the amendment. He subsequently said that he did not like it at all. If the Liberal Party is concerned about this issue it has a good opportunity

      1389
      to table an amendment on Report for the House to discuss and debate.
      Mr. Beith: On the point that the right hon. Gentleman has just made, which is not the one on which I sought to intervene, I advocated that we should follow up the recommendations made by the Home Office Sub-Committee of the Expenditure Committee. Those recommendations involved far wider considerations, which could not have been dealt with by the Bill. The Minister and I are concerned about schools that have endowment income exceeding 25 per cent. of total income. The strongest endowed schools would be most likely to be excluded from the penalties contained in the amendment.
      Mr. Davies: There may well be schools with that high endowment income. I accept that entirely. However, that argument was not really advanced by the Minister. He has all the assistance of the Inland Revenue behind him, but he did not make that point. That is a difficulty that can be overcome.
      The amendment covers most public schools. It does not catch denominational schools, religious schools, or most of the schools for the mentally handicapped and disabled, because of the let-out. The Minister was not able to break down the amendment. Therefore, he resorted to the familiar tactics of Treasury Ministers in this Government when they have a weak case, namely, to utter some good knock about stuff about leaders of the Labour Party special conferences, and the various ancillary matters.
      Mrs. Kellett-Bowman: But all true.

      Division No. 333]

      AYES

      [10.26 pm

      Allaun, Frank

      Cowans, Harry

      Fitch, Alan

      Archer, Rt Hon Peter

      Crowther, J. S.

      Flannery, Martin

      Armstrong, Rt Hon Ernest

      Cryer, Bob

      Fletcher, Ted (Darlington)

      Ashley, Rt Hon Jack

      Cunliffe, Lawrence

      Foot, Rt Hon Michael

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

      Dalyell, Tam

      Forrester, John

      Bagler, Gordon A. T.

      Davies, Rt Hon Denzll (Llanelli)

      Foster, Derek

      Bennett, Andrew (Stockport N)

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

      Freeson, Rt Hon Reginald

      Booth, Rt Hon Albert

      Dempsey, James

      Garrett, John (Norwich S)

      Bray, Dr Jeremy

      Dewar, Donald

      Grant, George (Morpeth)

      Brown, Hugh D. (Provan)

      Dixon, Donald

      Grant, John (Islington C)

      Brown, Robert C. (Newcastle W)

      Dobson, Frank

      Hamilton, James (Bothwell)

      Buchan, Norman

      Dormand, Jack

      Hamilton, W. W. (Central Fife)

      Callaghan, Rt Hon J. (Cardiff SE)

      Douglas-Mann, Bruce

      Harrison, Rt Hon Walter

      Callaghan, Jim (Middleton & P)

      Dubs, Alfred

      Haynes, Frank

      Campbell-Savours, Dale

      Duffy, A. E. P.

      Heffer, Eric S.

      Canavan, Dennis

      Dunn, James A. (Liverpool, Kirltdale)

      Hogg, Norman (E Dunbartonshire)

      Carmlchael, Neil

      Dunwoody, Mrs Gwyneth

      Holland, Stuart (L'beth, Vauxhall)

      Clark, Dr David (South Shields)

      Eadie, Alex

      Hooley, Frank

      Cocks, Rt Hon Michael (Bristol S)

      Eastham, Ken

      Horam, John

      Concannon, Rt Hon J. D.

      Evans, John (Newton)

      Hudson Davies, Gwllym Ednyfed

      Conian, Bernard

      Ewing, Harry

      Hughes, Robert (Aberdeen North)

      Cook, Robin F.

      Field, Frank

      Janner, Hon Greville

      Mr. Davies: This is a modest clause and a modest amendment. There is nothing grand about them. The hon. Member for Grantham (Mr. Hogg) became terribly excited. We are saying that there can still be deeds of covenant, and that they can still be made to Eton. All that we are saying is that there cannot be tax relief.
      We are talking merely of tax relief on deeds of covenant. Why should there be tax relief? The hon. and learned Gentleman spoke of permanent dispositions of income, but three years is not a long time. There was some rationale for seven years. Perhaps the period should be 10 years. However, having reduced it to three years, the Government may further reduce it to two next year. The hon. and learned Gentleman cannot shield behind a bogus argument about permanent dispositions of income.
      A deed of covenant is merely a technical matter. Why should a person who makes a deed of covenant under seal receive tax relief when a person who makes a deed of covenant not under seal does not?
      The amendment covers most of our points. We are not debating the virtues of public school education. We merely argue that the taxpayer should not help support such organisations. Let them stand on their own feet, as the Government keep telling everyone else to do.
      Question put, That the amendment be made:—
      The House divided: Ayes 129, Noes 177.

      Jay, Rt Hon Douglas

      Morton, George

      Strang, Gavin

      John, Brynmor

      Newens, Stanley

      Thomas, Dafydd (Merioneth)

      Johnson, Walter (Derby South)

      O'Halloran, Michael

      Thomas, Jeffrey (Abertillery)

      Jones, Barry (East Flint)

      Palmer, Arthur

      Thomas, Dr Roger (Carmarthen)

      Jones, Dan (Burnley)

      Parry, Robert

      Watkins, David

      Kerr, Russell

      Prescott, John

      Welsh, Michael

      Kilfedder, James A.

      Richardson, Jo

      White, Frank R. (Bury & Radcliffe)

      Lambie, David

      Roberts, Albert (Normanton)

      Whitehead, Phillip

      Leighton, Ronald

      Roberts, Ernest (Hackney North)

      Whitlock, William

      Lewis, Ron (Carlisle)

      Robertson, George

      Wigley, Dafydd

      Litherland, Robert

      Robinson, Geoffrey (Coventry NW)

      Williams, Rt Hon Alan (Swansea W)

      Lyons, Edward (Bradford West)

      Rooker, J. W.

      Wilson, Gordon (Dundee East)

      McCartney, Hugh

      Sever, John

      Wilson, William (Coventry E)

      McKay, Alen (Penistone)

      Silkin, Rt Hon John (Deptford)

      Winnick, David

      MacKenzie, Rt Hon Gregor

      Silverman, Julius

      Woodall, Alec

      Maclennan, Robert

      Skinner, Dennis

      Woolmer, Kenneth

      Marshall, Dr Edmund (Goole)

      Snape, Peter

      Wrigglesworth, lan

      Mellish, Rt Hon Robert

      Soley, Clive

      Young, David (Bolton East)

      Mikardo, Ian

      Spriggs, Leslie

      Millan, Rt Hon Bruce

      Stewart, Rt Hon Donald (W Isles)

      TELLERS FOR THE AYES:

      Mitchell, Austin (Grimsby)

      Stoddard, David

      Mr. John Coleman and

      Morris, Rt Hon Alfred (Wythenshawe)

      Stott, Roger

      Mr. James Tinn.

      Morris, Rt Hon Charles (Openshaw)

      NOES

      Alexander, Richard

      Garel-Jones, Tristan

      Mitchell, David (Basingstoke)

      Alton, David

      Goodlad, Alastalr

      Moate, Roger

      Ancram, Michael

      Gorst, John

      Molyneaux, James

      Arnold, Tom

      Gow, Ian

      Morrison, Hon Charles (Devizes)

      Aspinwall, Jack

      Gower, Sir Raymond

      Morrison, Hon Peter (City of Chester)

      Baker, Nicholas (North Dorset)

      Gray, Hamish

      Mudd, David

      Beith, A. J.

      Greenway, Harry

      Murphy, Christopher

      Bendall, Vivian

      Griffiths, Peter (Portsmouth N)

      Nelson, Anthony

      Benyon, Thomas (Abingdon)

      Grylls, Michael

      Page, Rt Hon Sir R. Graham

      Benyon, W. (Buckingham)

      Gummer, John Selwyn

      Page, Richard (SW Hertfordshire)

      Berry, Hon Anthony

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

      Parkinson, Cecil

      Best, Keith

      Hannam, John

      Parris, Matthew

      Bevan, David Gilroy

      Haselhurst, Alan

      Patten, Christopher (Bath)

      Bitten, Rt Hon John

      Hawksley, Warren

      Pattie, Geoffrey

      Biggs-Davjson, John

      Heseltine, Rt Hon Michael

      Penhaligon, David

      Blackburn, John

      Hicks, Robert

      Pink, R. Bonner

      Blaker, Peter

      Higgins, Rt Hon Terence L.

      Pollock, Alexander

      Boyson, Dr Rhodes

      Hogg, Hon Douglas (Grantham)

      Porter, George

      Braine, Sir Bernard

      Holland, Philip (Carlton)

      Price, David (Eastleigh)

      Bright, Graham

      Hooson, Tom

      Proctor, K. Harvey

      Brinton, Tim

      Howells, Geraint

      Rees, Peter (Dover and Deal)

      Brocklebank-Fowler, Christopher

      Hunt, John (Ravensbourne)

      Rees-Davies, W. R.

      Brooke, Hon Peter

      Hurd, Hon Douglas

      Renton, Tim

      Brown, Michael (Brigg & Sc'thorpe)

      Johnson Smith, Geoffrey

      Rhodes James, Robert

      Browne, John (Winchester)

      Johnston, Russell (Inverness)

      Rhys Williams, Sir Brandon

      Bruce-Gardyne, John

      Jopling, Rt Hon Michael

      Rifkind, Malcolm

      Budgen, Nick

      Kellett-Bowman, Mrs Elaine

      Roberts, Michael (Cardiff NW)

      Bulmer, Esmond

      King, Rt Hon Tom

      Rossi, Hugh

      Cadbury, Jocelyn

      Kitson, Sir Timothy

      Rost, Peter

      Carlisle, John (Luton West)

      Langford-Holt, Sir John

      Royle, Sir Anthony

      Carlisle, Kenneth (Lincoln)

      Lawson, Nigel

      Sainsbury, Hon Timoihy

      Carlisle, Rt Hon Mark (Runcorn)

      Le Marchant, Spencer

      St. John-Stevas, Rt Hon Norman

      Clark, Sir William (Croydon South)

      Lennox-Boyd, Hon Mark

      Shelton, William (Streatham)

      Clarke, Kenneth (Rushcliffe)

      Lester, Jim (Beeston)

      Shepherd, Colin (Hereford)

      Cockeram, Eric

      Lloyd, Peter (Fareham)

      Silvester, Fred

      Costain, A. P.

      Loveridge, John

      Sims, Roger

      Critchley, Julian

      Luce, Richard

      Skeet, T. H. H.

      Dean, Paul (North Somerset)

      Lyell, Nicholas

      Speller, Tony

      Dickens, Geoffrey

      McCrindle, Robert

      Squire, Robin

      Dorrell, Stephen

      Macfarlane, Neil

      Steal, Rt Hon David

      Douglas-Hamilton, Lord James

      MacGregor, John

      Steen, Anthony

      Dover, Denshore

      MacKay, John (Argyll)

      Stevens, Martin

      Dunn, Robert (Dartford)

      McNair-Wilson, Michael (Newbury)

      Stewart, Ian (Hitchin)

      Dykes, Hugh

      Madel, David

      Stewart, John (East Renfrewshire)

      Eden, Rt Hon Sir John

      Major, John

      Stradling Thomas, J.

      Fairbairn, Nicholas

      Marlow, Tony

      Taylor, Teddy (Southend East)

      Faith, Mrs Sheila

      Mates, Michael

      Thatcher, Rt Hon Mrs Margaret

      Farr, John

      Mather, Carol

      Thompson, Donald

      Fenner, Mrs Peggy

      Maude, Rt Hon Angus

      Thorne, Nell (llford South)

      Fisher, Sir Nigel

      Mawhinney, Dr Brian

      Thornton, Malcolm

      Fletcher, Alexander (Edinburgh N)

      Maxwell-Hyslop, Robin

      Townend, John (Bridlington)

      Fletcher-Cooke, Charles

      Mellor, David

      Viggers, Peter

      Forman, Nigel

      Meyer, Sir Anthony

      Waddington, David

      Fowler, Rt Hon Norman

      Miller, Hal (Bromsgrove & Redditch)

      Wakeham, John

      Fraser, Rt Hon H. (Stafford & St)

      Mills, lain (Meriden)

      Walker, Bill (Perth & E Perthshire)

      Fraser, Peter (South Angus)

      Mills, Peter (West Devon)

      Waller, Gary

      Gardiner, George (Reigate)

      Miscampbell, Norman

      Ward, John

      1392

      1393

      Watson, John

      Wiggin, Jerry

      TELLERS FOR THE NOES

      Wheeler, John

      Wolfson, Mark

      Mr. John Cope and

      Whitney, Raymond

      Young, Sir George (Acton)

      Mr. Tony Newton.

      Amendment accordingly negatived.
      Clause 53 ordered to stand part of the Bill.
      To report Progress and ask leave to sit again.—[Mr. Biffen.]
      Committee report Progress; to sit again tomorrow.

      ADJOURNMENT
      Resolved, That this House do now adjourn.—[Mr. Waddington.]
      Adjourned accordingly at twenty-two minutes to Eleven o'clock.

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  EDUCATIONAL ACTIVITIES (ORCHESTRAS)
  EDUCATIONAL ACTIVITIES (ORCHESTRAS)
HOUSE OF COMMONS
  Annunciators
  Annunciators

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

THE BBC EXTERNAL SERVICES
Lord BUXTON of ALSA: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in order to allay anxiety later in the year, they will indicate now how they intend to finance the BBC external radio services in 1981 and 1982, thus ensuring that there is no diminution of the British voice and influence abroad.
Lord TREFGARNE: My Lords, the BBC external services will be financed by grants in aid in 1981–82 and 1982–83. The grants will be based on estimates to be submitted by the external services in due course; they will be subject to the usual Treasury and parliamentary approval.
Lord BUXTON of ALSA: My Lords, in thanking my noble friend for that reply, which is not dissimilar from the reply which he gave to the debate on this subject which I introduced last year, may I ask my noble friend and the Government whether they are aware (as they must be) that something critical has happened since that similar statement was made— that is, the invasion of Afghanistan? Are they aware of their own policy and their own reaction and the effect it is having on the world, and do the Government now understand that they are marching in opposite directions on the one hand on policy and on the other hand on finance— and I am purposely not referring to the domestic economy or any issue of that sort— where overseas matters of a comparatively fringe nature are concerned? May I ask the Government now to update
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their policy on finance so that it co-ordinates with their policy on foreign affairs? The Prime Minister herself has called—
Several noble Lords: Speech!
Lord BUXTON of ALSA: I am sorry, my Lords, I have to ask my noble friend whether he recalls that the Prime Minister has called for more broadcasts to Russia and for considerable expansion, and with your Lordships' approval I ask him to respond about this matter.
Lord TREFGARNE: My Lords, we certainly accept that the invasion of Afghanistan created something of a new situation in that part of the world and that is why we increased the broadcasts in Russian and in Farsi, which is the language spoken by the majority of the people of Afghanistan, but the external services as a whole cannot be exempt from the Government's general scrutiny of public expenditure.
Lord TAYLOR of BLACKBURN: My Lords, is the noble Lord aware that the external services of the BBC are strongly favourable to British business interests in creating a climate which is helpful to British exporters? Will he use his best efforts to prevent the extremist monetarists in his own party from damaging British interests in pursuing that party dogma?
Lord TREFGARNE: My Lords, I think that the economies that we have inevitably been forced to make in the external services of the BBC are fairly modest by all standards and I am quite satisfied that the external services will remain as effective as ever.
Lord GLADWYN: My Lords, would not the noble Lord recognise that the external services in practice represent our first line of defence and that in the Government's own estimation defence is excluded from the cuts?
Lord TREFGARNE: My Lords, that is a fairly high-powered theoretical argument, but I certainly accept that the external services are important, and that is why, as I said, we have been able to prevent the worst effects of our cuts falling on them.
The Earl of KIMBERLEY: My Lords, bearing in mind what the noble Lord, Lord Gladwyn, has said, will my noble friend agree that, as this is perhaps one of our first lines of defence, some of the budget might possibly come from the Ministry of Defence?
Lord TREFGARNE: My Lords, whichever Government department is responsible for the external services, the money still has to come from the same place.
Lord CHELWOOD: My Lords, does my noble friend accept that wavelengths lost are almost certainly lost for ever, that audiences lost are very hard indeed to recapture, and that therefore it would be quite wrong to describe any cuts that are made as "temporary"?
Lord TREGFARNE: My Lords, I am speaking from memory in this matter, but I think I can recall telling my noble friend on a previous occasion that no frequencies are to be vacated.
Lord AIREDALE: My Lords, can we be assured that the sweeping economies which the BBC is having to pursue, such as the disbanding of orchestras, are in no way due to any financial strain on the BBC resulting from having to maintain their external services?
Lord TREFGARNE: Yes, my Lords, I can assure the noble Lord that the BBC external services are quite separately funded from the BBC domestic services.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, would the noble Lord agree that many people on this side, and I think in many parts of the House, would strongly deprecate any suggestion that money should come from the Ministry of Defence for the external services of the BBC, because their strength throughout the world is their known impartiality?
Lord TREFGARNE: My Lords, I absolutely agree with the noble Baroness, to the extent of course that the BBC external services enjoy total editorial freedom— and long may it so remain.
The Earl of ONSLOW: My Lords, is the noble Lord aware that a vast amount of the fighting in Afghanistan is
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going on around Kabul and Kandahar where they speak Pushtu and I believe there is no broadcasting in Pushtu, and it would be most important to inform the people there of what is going on in the outside world?
Lord TREFGARNE: My Lords, I was not aware that that particular language— which I confess I do not think I have even heard of— was not in the repertoire of the BBC external services, but I will consider that matter.
Lord BUXTON of ALSA: My Lords, is my noble friend aware that at this time Russia is installing 43 new 500-kilowatt shortwave transmitters, that the Voice of America and West Germany have numerous shortwave transmitters under construction and that many other countries— the Netherlands, Norway, Yugoslavia, Iraq, India, Nigeria and South Africa— are all marching forward with expansionist programmes on shortwave transmitters and only Britain is either static or going backwards? Will the Government please give urgent attention to the fact that we are losing our way?
Lord TREFGARNE: My Lords, I think that in these matters we have to distinguish between quality and quantity. The quantity pumped out by the Soviet Union is in no way comparable to the quality of our services.
Lord FERRIER: My Lords, would the noble Lord agree that on all sides of the House there is a strong view that, far from just continuing the level of our present broadcasts, they should in fact be increased?
Lord TREFGARNE: My Lords, I am aware of that view.
Baroness ELLIOT of HARWOOD: My Lords, if broadcasting is one of our methods of defence, which I think the noble Lord has said, surely it is the very cheapest kind of defence we can possibly engage in— far better than building expensive weapons?
Lord TREFGARNE: My Lords, nothing, alas, is cheap in this world; and the financial provision for the External Services is something in excess of £ 40

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million a year, which still has to be found from somewhere, whether the Ministry of Defence or the Foreign Office.

LOCAL GOVERNMENT: EXPENDITURE AND STAFF
2.44 p.m.
Lord ORR-EWING: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what legislative, financial and persuasive powers they have to encourage local authorities to contain their spending and start reducing their staff.
The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Lord Bellwin): My Lords, Her Majesty's Government influence the level of local government expenditure, including manpower, through the annual Public Expenditure White Paper, through the annual rate support grant settlement, and by the operation of the capital borrowing consent powers. Ministers also regularly discuss these and related matters with the local authority associations and the leaders of individual local authorities. In addition, legislative proposals for the control of total capital expenditure, and for a new method of grant distribution which will not reward overspending, are before Parliament at present and will be brought to your Lordships' House shortly. Local authorities are employers in their own right and make there their own decisions on staffing. However, my right honourable friend has frequently stressed the need to reduce local government manpower and has encouraged the regular publication of detailed figures.
Lord ORR-EWING: My Lords, while thanking my noble friend for that reply, may I ask whether he is aware that the central Government, and therefore the taxpayers of this country, foot 60 per cent. of the local authority bill? Would it not therefore be of some advantage if the Government published the list of local authorities who are big spenders with increasing staff and those who are eco-
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nomical spenders with decreasing staff? May we not see the different amounts of money spent on local authority services so that we can have a comparability chart and see where local authorities are getting good value for money?
Lord BELLWIN: My Lords, this whole area of accountability and publication of information is something which the Government are most anxious to encourage. Indeed, recently we have for the first time had published certain statistics regarding manpower levels in different authorities. That in turn should lead ultimately, through the Local Government Bill which will be coming to your Lordships' House in due course, to other information and other publication, which I hope will assist everyone in making their own decisions and in coming to their conclusions about levels of spending between authorities.
Baroness BIRK: My Lords, does the Minister agree that the local authorities are not achieving these cuts, and that in fact the majority of them are Conservative controlled? Does he further agree that, since, presumably, Conservative councils are anxious to support Government policy, this must indicate that cuts of the order demanded by the Government cannot be obtained only by streamlining administration but must be made at the expense of crippling crucial services, on which, in the words of the Secretary of State in Scarborough last September, the framework of our society depends?
Lord BELLWIN: My Lords, the situation in individual authorities varies very much indeed and it will be for each authority to decide what it can and cannot do. But the basic presumption must be an understanding of the reality of the national situation. There is a responsibility upon local government, just as there is upon every other spending point, to make its contribution. What each authority does will be for it to decide in the light of its own circumstances, but at the end of the day local government must make its contribution to helping to solve the grave national problem.
Baroness BIRK: My Lords, is the noble Lord saying that at no point will central Government give an indication of

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the priority in which they hold the various services which are suffering so badly, and which will suffer even more in the future?
Lord BELLWIN: My Lords, if the Government wished to tell an individual authority what it should be providing by way of levels of service in each separate instance, in the first place it would be totally impossible to do, and in the second place it would be so resented by local authorities that it just would not make any sense. With great respect to the noble Baroness, we are now entering into a realm of very great sensitivity where the problem is by no means as simple as she would seek to intimate.
Lord HALE: My Lords, I venture respectfully to say that it is now my turn. If the noble Lord the Leader of the House says that I am wrong, I will sit down immediately. I understood the the noble Lord to say that the Government were introducing a Bill. Will he bear in mind that there are many people now living on a fixed income, many retired people who find that their rates have gone up to the tune of hundreds of pounds a year? Under the Government's policy their heating costs will increase by a similar amount and they have no other resources but their fixed income, which will no longer enable them to meet these costs. I should like to postpone the question of rents until next week.
Lord BELLWIN: My Lords, I confess that I am not sure of the precise question which the noble Lord has put; but if he is trying to indicate the hardship that can be caused by high rates, then I entirely accept that and hope that it will be brought to the notice of every authority that was responsible for fixing rates in the first place. I think that it should also be said that those who really encounter hardship in paying rates have access to the rate allowances which are available. However, in the main I entirely accept the point which the noble Lord has made about high rates.
Viscount AMORY: My Lords, in view of the importance of examples as regards these matters, I should like to ask my noble friend whether it is true, as reported in The Times today, that, while the Government have reduced the
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strength of the Civil Service, quite rightly, by 4 per cent. during the past year, the total number of Ministers remains the same, at 106? Will my noble friend bear in mind the importance of keeping the ratio between Ministers and civil servantsnot widely different in that respect? What is sauce for the goose must be sauce for the gander, must it not?
Lord BELLWIN: My Lords, as to that, I can only say that I would have to refer my noble friend to the Prime Minister.
Lord CLEDWYN of PENRHOS: My Lords, while everyone agrees that good husbandry in local government is absolutely essential, is the noble Lord aware that there are areas of the country, like the rural areas of Wales— the provinces of Gwynedd and Powys— where unemployment is unacceptably high, running at the rate of 15 per cent. to 20 per cent., and where local government is a major and essential employer of labour in addition to being a provider of services? Will the noble Lord and the Government bear that in mind when they talk about reducing manpower in local government?
Lord BELLWIN: My Lords, one of the best contributions that local government can make in individual circumstances to retaining employment and not to driving it out, is to keep rates at a level which will not force people to move to other areas where rates are much lower.
Lord CLEDWYN of PENRHOS: My Lords, they are doing precisely that.
Lord GRIDLEY: My Lords, as regards the responsibility of local authorities, can the noble Lord confirm the statement made in the Unstarred Question last night, that the local authorities in Fife made a gift of ratepayers' money of £ 1, 000 to the Russians in support of the Olympic Games?
Lord BELLWIN: My Lords, I cannot confirm that that is so. I do not know. If it is so, then there are many who would deplore it.
Lord MONSON: My Lords, given that those who are liable to pay rates in full form only a minority of local government electors, would the noble Lord perhaps agree that ratepayers ought to be protected from the excesses of the more extravagant

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councils by some legislation which would limit the annual permissible increase in rates to a maximum of, let us say, 25 per cent?
Lord BELLWIN: My Lords, I trust that the noble Lord appreciates the significance of the suggestion he has just made, because its implications for the whole relationship between central and local government are very great. All that I would say on the point is that it is not the Government's intention at present to contemplate having a cash limit or a limit of the kind that the noble Lord suggests. There are certainly those who would have sympathy with his point of view, but I would have to say again that the implications are very far-reaching indeed.
Lord ALEXANDER of POTTERHILL: My Lords, would the noble Lord agree that since 1958 the situation which obtains as regards the relationship between central and local government is one in which the only matters over which central Government have any influence are expenditure and the function of local authorities to provide services? I can cite not one, but many examples where the Government of the day have deliberately provided moneys for a particular service, but, of course, those moneys have been spent on other services.
Lord BELLWIN: My Lords, Governments do have an influence on expenditure, in the main through the rate support grant, but they do not have the last word at all on it. The last word lies with the locally elected members. They decide what they will spend. What the Government decide is what they will contribute by way of grant and how that grant will be distributed. However, we are getting into a very broad area of discussion and debate which I am sure will take place in your Lordships' House at great length before too long.

FIVE-STAR OFFICERS' RETIREMENT REMUNERATION
2.56 p.m.
Lord CLIFFORD of CHUDLEIGH: 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 retirement remuneration of Admirals of the Fleet, Field Marshals and Marshals of the Royal Air Force is less than the pensions for officers of the immediately inferior rank, and if so whether they were warned of the fact before accepting promotion.
The MINISTER of STATE, MINISTRY of DEFENCE (Lord Strathcona and Mount Royal): My Lords, at the time when they cease active duty, the retirement remuneration received by five-star officers (calculated and known as half-pay) exceeds that of any officer junior to them retiring during the same year. Half-pay is increased in line with full pay and full pay has not in recent years kept pace with inflation. On the other hand, service pensions in general have been increased in line with price inflation and thus 28 four-star officers out of some 120 who retired in the years 1971–77 at present receive retired pay greater than the five-star half-pay. A similar phenomenon of "overtaking" has occurred throughout the public service and at all levels. Since it is impossible to foresee at any given moment what will be the relative movement of salaries and prices in the future, no specific warning can be given.
Lord CLIFFORD of CHUDLEIGH: My Lords, if the noble Lord will allow me to say so, that is not an entirely satisfactory Answer. Is he aware that, as an impoverished farmer, I have no sympathy for these highly-paid index-linked pensioners of the State? However, is there not some moral or even trade union principle being broken in a case like this, where a five-star officer is getting up to £ 6, 000 a year less "pension" than a four-star officer? Can my noble friend also say whether this differential— or perhaps I should say, differential in reverse— also applies to those officers' widows?
Lord STRATHCONA and MOUNT ROYAL: My Lords, I cannot answer the last part of the noble Lord's question, but I shall write to him on the matter. As regards the general principle, it is, of course, true that the system of linking the retirement remuneration of five-star officers to half-pay rather than a pension arrangement is an added complication,

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but it must be pointed out that it has at times worked to their advantage as well as to their disadvantage. However, we have decided that in future five-star officers ceasing active duty will receive retired pay linked to prices on the same basis as the rest of the armed forces, and all five-star officers have been given the opportunity to change if they so wish.
Lord HILL-NORTON: My Lords, I should declare a personal interest in this matter, and I think that I am the only one of your Lordships here today who has this personal interest. It is, if I may say so— and I am not making a speech— a monstrous injustice which the noble Lord the Minister has tried to slough over by quoting a phenomenon called the "overtaking" phenomenon which applies to permanent civil servants, but not to the officers who were previously the professional heads of their armed forces.
I wish to ask the Minister two questions. How much would it cost annually to bring the half-pay of the only 20 people in the United Kingdom so concerned, up to the same as the best of their erstwhile subordinates? Secondly, how much more would it cost to restore the 20 per cent. advantage— which the Government of the day, when five-star half-pay was first established in 1949, deemed to be right, proper and just— to the most senior officers in the land?
Lord STRATHCONA and MOUNT ROYAL: My Lords, I do not think I should add very much to the letter the noble Lord received from the Prime Minister back in May. That was a private exchange. But perhaps I can do my best. First, it would be anomalous to single out a small group, even of the most senior officers and (dare I say it?) the most highly respected officers. Anomalies, if indeed they are anomalies— and I accept that many people perceive that they are— are regrettably exceedingly widespread. It is estimated that it would cost something of the order of £ 100 million a year to rectify them all.
Lord HILL-NORTON: My Lords, will the noble Lord be kind enough to answer one or other of my questions?
Lord STRATHCONA and MOUNT ROYAL: My Lords, I shall have to write
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to the noble Lord about the detailed questions that he has asked me because at the moment I do not have the answers.
Lord HILL-NORTON: My Lords, I would much rather their Lordships were informed, as well as myself.
Viscount AMORY: My Lords, will my noble friend accept that I am a little perplexed at the answer he gave, in view of the importance which the present Government, rightly, attach to incentive for effort and initiative? But I was slightly comforted by the last part of his first answer. Will my noble friend also accept that this confirms my own prescience, when I was temporarily in the Army during the war, in not having made a greater effort to become a Field Marshal? That is the reason— because of the application of what my noble friend called the "overtaking" phenomenon.
Lord STRATHCONA and MOUNT ROYAL: My Lords, the country would, perhaps, have been deprived of the services of a very distinguished ex-Minister had this particular development taken place. I think that I should make the point that Field Marshals and five-star officers are, to some extent, in the forecasting business, and part of the original Question was whether they needed to be warned of the consequences of their promotion, and I should not have thought that they did.

HOOLIGANISM AND SPECIAL COURT SITTINGS
3.2 p.m.
Lord ORR-EWING: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether courts will sit over holiday weekends so as to dispense summary justice to those arrested for hooliganism.
The PARLIAMENTARY UNDERSECRETARY of STATE, HOME OFFICE (Lord Bel stead): My Lords, it is for magistrates' courts themselves to decide whether circumstances justify arranging special weekend sittings.
Lord ORR-EWING: My Lords, is my noble friend aware that a Saturday sitting can often be arranged at short notice on the telephone? But that now that hooligans visit seaside resorts on Monday bank holidays, that it is much more difficult to get a court together in those circumstances? If we are to continue to have very large numbers of police deployed, and very large disturbances at some of the seaside towns on bank holiday Mondays, cannot the Home Office look at this problem?
Lord BELSTEAD: My Lords, I agree with my noble friend that Saturday sittings and bank holiday sittings can be arranged at short notice, but as my noble friend is very probably aware, they are arranged at the discretion of the court, very often at the request of the police, and not least when hooliganism appears to be likely. I agree with my noble friend that when this happens it reduces the number of offenders who, for instance, the police would be required to hold in custody, and is, therefore, desirable. However, this is not a situation in which the Home Office would be giving directions to the courts.
Lord ELWYN-JONES: My Lords, when the noble Lord is asked, as the Question asks, whether courts will administer summary justice— whatever that may mean— to alleged hooligans, will be agree that even hooligans are entitled to the same standards of justice as any other accused person?
Lord BELSTEAD: My Lords, I certainly agree with the noble and learned Lord that there are many cases which simply cannot be dealt with by holding courts called together at very short notice.
Baroness MACLEOD of BORVE: My Lords, is my noble friend aware that throughout the country magistrates are used to sitting on Saturdays in an emergency, but that bank holidays are rather different because bank holidays are a holiday for court staffs? Magistrates, being unpaid, would of course always be willing to come into a court at any time and on any day, but court staffs are entitled to their holidays as well as anybody else.
Lord BELSTEAD: My Lords, I am grateful to my noble friend Lady Macleod of Borve for what she has said. Perhaps I may just add one matter which arises from my noble friend's Question. The point made by the noble and learned Lord, Lord Elwyn-Jones, is important for me to take on board. Clearly, there are cases which cannot be dealt with in any courts— the magistrates' court is the subject of my noble friend's Question— when the courts are called together at short notice. Like my noble friend Lord Orr-Ewing, we are all concerned that hooliganism should be contained and reduced, and I suggest to your Lordships' House that there are other ways of looking at this. Your Lordships might be interested to hear that the number of attendance centres throughout the country, which are a way of instilling some discipline into the lives of some young people, has been very considerably increased during the period of the last year.

BUSINESS
Lord DENHAM: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m. my noble friend Lord Trefgarne will repeat a Statement being made in another place on the New Hebrides.
It may also be for the convenience of your Lordships to know that dinner will be available this evening at the usual time. The Committee stage of the Employment Bill will be adjourned at about 7.15 p.m. for about three-quarters of an hour.

SOLICITORS (SCOTLAND) BILL [H.L.]
THE LORD ADVOCATE (Lord Mac-kay of Clashfern): My Lords, I beg to move that this Bill be now read a second time. It is a consolidation measure. It consolidates certain enactments relating to solicitors and notaries public in Scotland. It is pure consolidation and is intended to make no change in the existing law. If your Lordships approve, it will be referred to the Joint Committee on Consolidation Bills, which will consider it and make its report to the House in due course. My Lords, I beg to move.

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Moved, That the Bill be now read 2a.— (Lord Mackay of Clashfern.)
On Question, Bill read 2a, and referred to the Joint Committee on Consolidation Bills.

EMPLOYMENT BILL
3.7 p.m.
The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.— (The Earl of Gowrie.)
On Question, Motion agreed to. House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 1 [Payments in respect of secret ballots]:
Lord MCCARTHY Lord MCCARTHY moved Amendment No. 1:
Page 1, line 9, after ("unions") insert ("within the provisions of their rules").
The noble Lord said: In rising to move the first of the 100 or so amendments in the names of my noble friend Lord Wedderburn of Charlton and myself, it struck me that it might be a good idea if we were to seek to classify these in some way. In this respect this particular amendment falls into classification ' C'. Some of our amendments seek modifications in the Bill, particularly modifications of the consequences of the Bill as we see it. Some of our amendments seek clarification in areas where we believe that the Bill is confused in its wording and where we wish to know what the Bill means. Some of our amendments— and this is one of them— seek to make clear and to specify what the Government say is already the case. I suppose that the argument for that is to reassure those who might otherwise feel that that is not the case. Therefore, this amendment seeks to insert in line 9 the words;
"within the provisions of their rules".
In another place the spokesman for the Government said that amendment
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along similar lines to this was unnecessary because, of course, the Bill already intends that these trade union ballots should be conducted within the provisions of the rules. Of course, there are indications to this effect in the body of the Bill itself. In Clause 1 (1) it says quite clearly:
"providing for payments by the Certification Officer towards expenditure incurred by independent trade unions in respect of such ballots …".
One might say that by "independent trade unions"— if they are to have access to this part of the Bill— one must mean those individuals, groups, committees or executives as specified in the rules who have the authority to stand, as it were, as an independent trade union and to speak with the authority of an independent trade union.
If we look at other provisions in the clause we see that many of the purposes referred to— for example, in subsection (3) — clearly derive from the rules of trade unions. We have the carrying out of elections referred to in subsection (3) (b) as provided for by the rules of a trade union; amending trade union rules; obtaining a decision in accordance with the Trade Union (Amalgamations, etc.) Act 1964, on a resolution to approve an instrument of amalgamation or transfer. All trade unions, so far as I am aware, specify quite clearly in their rules how they would go about facilitating an amalgamation. One might therefore say that in all these respects— indeed, this was said in another place— it is clear by implication in the Bill that the Government do not intend funds to be made available outside the provision of trade union rules.
Nevertheless, I suggest that there are certain aspects of the clause which give cause for concern. First of all, it is clear what is said at the end of subsection (3) (e):
"and such other purposes as the Secretary of State may by order specify".
I shall be told that Bills of this kind usually have catch-all clauses of that kind, but
"and such other purposes as the Secretary of State may by order specify ",
raises the possibility that the Secretary of State may by order specify that certain ballots should be held in relation to trade unions or that certain funds should be given to those who wish to hold ballots concerned with trade unions that are not specified in the rules, in particular in ways

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that are not specified in terms of those authorised to run ballots under the rules. When we turn to the Notes on Clauses which the Government have been good enough to provide, we find that, when the Government are talking about what they might do about shop stewards' ballots, they actually envisage a situation in which something might be done outside the rules, because they say:
"As worded, the sub-clause permits elections to all posts or bodies for which the rules of the union provide and for the election of shop stewards, whether this is required by the rules of the union or not".
That is quite true; many unions do not prescribe in their rules for the election of shop stewards. Some do and some do not. Some provide for the election of shop stewards in a very general way. In others the practice is that, whatever the rules may say, the way in which shop stewards are elected is provided for in the shop stewards' handbook. Thus, the question arises: are we to be told that the Secretary of State may by regulation provide expenditure not necessarily prescribed by the rules but prescribed by the shop stewards' handbook?
To us, this is not a technical amendment, nor is it a small matter. I suggest that it has to be taken in the context of other aspects of this debate. Some of those aspects we shall be discussing when we come to the Question, That the clause stand part. The general context in which this trade union ballot provision is put forward is that of a Bill which the overwhelming majority of trade unions and their executives and officials believe is an anti-trade union Bill, so that provisions which might be acceptable or which might be looked at in a rather relaxed way are bound to be regarded suspiciously when they come as a trailer at the beginning of a Bill of this kind.
Noble Lords will know from reading the Marshalled List that we have subsequently today amendments which are intending to take these provisions much further and which represent a very real stream of thought in the party opposite. People want to make compulsory ballots and people want to make them when they are quite outside the rules of a union, where dissident groups can demand public funds to run counter-ballots, even in circumstances in which there have already been ballots which have gone in a particular
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direction. I stress that the Government seem to be saying— they said it in another place, and I apologise if I have got this wrong— in effect, "What we are proposing is unnecessary. It is merely declaratory because it is there already, and nothing in the Bill would ever make the Secretary of State make regulations outside the rules of a union, with the people in the union authorised to hold ballots giving access to this part of the Bill ". If that is the case, there is no reason to resist this amendment.
In another place when dealing with other parts of the Bill the Government said, quite reasonably from their point of view, that they wanted to put things in which were there already. We shall be coming to those matters— for example, the question of the onus of truth, on which they said, "The tribunals do it already, but, to make it clear and for psychological reasons, for small businessmen and so on, we want to reassure these people ". We are saying that a very good start to this debate would be for the Government to accept this amendment and reassure the unions. I beg to move.
Lord SHINWELL: My noble friend Lord McCarthy has dealt with this matter with exceptional clarity and ability, and of course we are aware of his vast knowledge of the subject, so I hope it will not be regarded as an impertinence if I intervene. I do so because it seems to me that this part of the Bill is much more important than its wording indicates. It will be, if passed, an intervention in the affairs of the trade unions of this country in a fashion which is reminiscent of what some of us had to endure in the years before the First World War, when the courts were fully occupied in determining whether the status of the trade unions of the time was legal; but that is a subject so wide that I do not propose to develop it, at any rate not at this stage.
It will be noted that the Government propose here that they should determine regulations, and at first sight that seems quite a simple affair, except that regulations are to be determined by the Government on a variety of matters concerning the trade union movement; for example, how they should amend their rules if they desire to amend them and who should represent them in negotiations— matters which are contained in the latter part of

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the clause. Although there is provision here, which I recognise, that no definitive action could be taken without a resolution having been passed by either House of Parliament— which of course would enable those concerned to take part in debates on the subject— there is no indication that before regulations are devised the persons concerned will be consulted. What is to be the content of the regulations? That is a matter of extreme importance. I believe that we must be assured about this point before we allow the clause to pass not only without comments but even without opposition, though that is a matter for my noble friends on the Front Bench.
I ask the noble Earl not to content himself merely with the first part of the amendment, but to recognise that we are here dealing with a scheme— and it is no simple scheme— concerned with one small part of the operation of the trade union movement. It covers the entire ramifications, and I believe that in those circumstances we are entitled to complete clarification about the regulations. We want to know what is intended and, in particular, whether those who will be primarily concerned— namely, the trade unions— will be consulted. If the matter is to be left merely to either House of Parliament, then, bearing in mind the possibility, not, I hope, probability, that both Houses of Parliament will consist of a majority of Members who are not very happy about the trade union movement— I put it very mildly; some of them are very much opposed to it— I believe that the trade unions must have in advance some indication that they will not be prejudiced by regulations upon which there is no consultation.
Lord ROCHESTER: With due respect to the noble Lord, Lord Shinwell, I hope that on this and other amendments we can confine ourselves to the substance of the amendments with which we are dealing, rather than speak on more general matters which, the Committee may agree, are better dealt with when we consider the question whether a particular clause shall stand part.
With regard to this particular amendment, personally I can see no objection to it. I understand that it is laid down in Clause I that the Secretary of State may by regulations provide for payments
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towards expenditure incurred by trade unions holding secret ballots for certain purposes. Subsection (5), as I understand it, deals with the safeguards which the regulations will prescribe before payment is made. In that subsection there is no mention of union rules as such, but, since ballots will be initiated by trade unions, one factor which the certification officer will presumably have in mind is that they should not take place in contravention of union rules and that any union rules relating to ballots are complied with.
The purpose of the amendment as I see it is to require the certification officer to satisfy himself that these particular safeguards are met before payment is made, so that what is now permissive becomes mandatory, and on the face of it that seems to me to be reasonable enough. Furthermore, I suppose that if a union has no rules at all concerning ballots, it will still be eligible for payment should the amendment be accepted, but I should welcome clarification on that point.
Lord BOYD-CARPENTER: May I ask the noble Lord on the Bench opposite whether he will clarify a little what he intends to be the effect of the amendment? Let us take the case touched upon by the noble Lord who has just resumed his seat, of a union that has no rules in respect of ballots. The question I wish to ask the noble Lord opposite is whether it is his intention, and the intended effect of the amendment, that in the case of such a union the clause simply would not operate, but would be excluded.
I should like to follow that up with a kind of supplementary question. If the noble Lord's answer to my question is yes, would it not mean that any union which very much disliked this particular proposed amendment of the law in the clause itself would simply have to amend its rules so as to leave out any specific reference to ballots in order to exclude the operation of the clause? I should like to know whether in the view of the noble Lord that would be the effect of his amendment, and whether that is his intention.
Lord NUGENT of GUILDFORD: I should like to say a few words on the amendment, and in particular may I correct an impression which the noble

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Lord, Lord Shinwell, left on my mind and perhaps on the minds of some other Members of the Committee?— namely, that the clause is hostile to trade unions. I do not think that it is at all hostile. I cannot help thinking that secret ballots, which are of course used by some unions, can but be helpful to the life of unions, and if Government are prepared to provide finance for the holding of these secret ballots, that seems to me entirely beneficial to the life of the unions and the life of the country. The way that the clause is drafted seems to me to be right. I do not know what answer my noble friend is to give to the amendment, but the clause as I see it is drafted in terms of leaving the initiative regarding the holding of secret ballots in the hands of the unions, and this is very much to my taste. I think that it is the right way to do it.
I know that I differ from some noble friends of mine sitting on the Benches here with me. They would like to introduce a rather stronger note, which appears in a later amendment: that a number of trade unions who got together could insist on a secret ballot being held. Personally, I think that would be a mistake. I consider that the right way to proceed with this matter— and which would be a measure entirely beneficial to trade unions generally and to the life of trade unions— is to leave the initiative with the trade unions, to make it possible for my noble friend and his colleagues in Government to provide the money by means of a set of regulations that they must make; and that is all that the regulations will apply to. This would seem to me to be helpful in every way.
Lord DAVIES of LEEK: The matter is not quite as easy as that. There is a definite purpose here in that we are asking that this action should be taken within the rules of the union, because we have here a logical clause which barristers, judges and lawyers can play with. On the next page of the Bill there is a reference to regulations which may be made for
"such other purposes as the Secretary of State may by order specify ".
In the name of heaven! This is all indicative of the rapidity with which this vital legislation has been drawn up. There is this loose, semantic phrase about other regulations. Who is to make the decision?
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The noble Earl, Lord Gowrie, is a very capable Minister and I pay tribute to his ability. I do not make my point in any derogatory fashion because I know that the noble Earl takes trouble and that he has ability, but later I should like him to tell me whether I am incorrect in my analysis of this situation. My noble friends wish to insert the phrase
"within the provisions of their rules "
and so I think that for a moment we should have a little historical survey, though without wandering into a general debate on the question of whether the clause should stand part— to refer to the point made by the noble Lord who spoke a few moments ago. All this emanates from the 1971 Heath regulations which were changed in 1974 when your Lordships' House carried five amendments in a vicious campaign against the Act, introducing criminal law into trade union activities. Such a possibility exists within the phrase that we are now considering. I do not want to debate minutiae with regard to where criminal law is being applied, but we are here placing a derogatory effect on trade unionism. To be fair to the trade union movement, may I point out that although everybody goes blue in the face about strikes, only about a tenth of 1 per cent. of industrial production has been lost through industrial strikes in Britain, and that compares favourably with production lost due to colds, pneumonia, and other sickness. So let us get the effects of strikes into balance if we talk about striking as though it were the biggest evil in this country.
The General Council when looking at the Donovan Report welcomed its considerate view and rejection of suggestions that criminal law should be brought into the field of industrial relations— and that was accepted. So the Donovan Report was dead against the kind of broad meaning as contained in the clause. Consequently, I wholeheartedly support the amendment of my noble friends.
Lord HOUGHTON of SOWERBY: I would not myself have thought that this amendment was really necessary. I cannot imagine any trade union holding a ballot which was not provided for under the rules or under the law. This clause does not require trade unions to hold ballots: it is permissive, as is the case now. All that this subsection does is to

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provide money for financing ballots if unions decide to hold them for purposes specified in the clause. If your Lordships look, on page 2, at subsection (3), you will see that paragraphs (a) (b) (c) and (d) are non-statutory ballots; but paragraph (e) is a statutory ballot, and this amendment does not provide for that. Nor, of course, does the subsection provide for a ballot to be taken under the Trade Union Act 1913 for the introduction of political objects into the objects of the union. That, presumably, has been purposely left out. So although a ballot for amalgamation purposes will be paid for and that ballot is required by the 1964 Act whether or not it is in the rules, the other paragraphs, paragraphs (a), (b), (c) and (d), are optional matters upon which, if it is provided for in the rules, the union may hold a ballot.
In my experience— and I have had a good deal— if an executive committee, for example, takes a ballot of the members which is not provided for in the rules, it runs a serious risk of being repudiated by the annual delegate conference. I had practical experience of this when my own organisation took fright at the disruption and dissention inside the organisation at the time of the General Strike of 1926. We were affiliated to the Trades Union Congress, and the executive committee held a ballot of members to decide whether or not we should stay in. The result happened to be unfavourable to remaining in the TUC, but it was promptly repudiated by the annual delegate conference which followed a few weeks afterwards. They said that there was nothing in the rules to allow the executive committee to take a ballot on this subject without the authority of the annual delegate conference.
So I come back to my first point. If the rules do not provide for a ballot, a ballot cannot be held. That seems to me to be the law of the matter, and certainly the rule of the matter; and, therefore, the amendment is probably not absolutely necessary. I see no objection to it. I think it is obvious that ballots will have to be taken within the rules if they are to be validated at all within the constitution of the union concerned. But what I would point out is that subsection (3) (e) provides for payment to be made for a ballot which is held under statute law, which is the Trade Union (Amalgamations, etc.) Act
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1964. It seems to me, therefore, that this amendment may be defective in not also providing for ballots taken under the law as well as for those taken under the rules. This is probably too fine a point to worry about; but I would have thought that either the amendment does not matter because it is unnecessary or it can go in if it comforts anybody to see it there.
The Earl of GOWRIE: The Statement having been cleared in another place, I beg to move that the House be resumed to hear the Statement.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

THE NEW HEBRIDES: INSURRECTION ON ESPIRITU SANTO
3.34 p.m.
Lord TREFGARNE: My Lords, with your Lordships' permission, I shall make a Statement on the New Hebrides.
As the House is aware, the Condominium of the New Hebrides is the joint responsibility of Britain and France. Yesterday evening in Paris my honourable friend the Minister of State (Mr. Peter Blaker) met with his French colleague, M. Dijoud, the Secretary of State for Overseas Departments and Territories, to review recent events on the island of Espiritu Santo.
M. Dijoud and my honourable friend agreed we must discharge our joint responsibility to maintain law and order in the territory. They agreed that we must re-emphasise our joint support for the democratically-elected Government of the New Hebrides, our commitment to the independence constitution agreed by all parties in Vila last year, and our determination to safeguard the territorial integrity of the condominium.
They further agreed that the authority of the legitimate Government must be restored on the island of Santo as soon as possible, and condemned the actions of those responsible for the armed insurrection on the island.
M. Dijoud and my honourable friend agreed that we must jointly make one

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further effort to persuade both sides to renew in a true spirit of compromise the discussions begun in London in March and which have continued until recently, in order to find a peaceful solution to their differences.
In making this appeal, and in urging the Chief Minister to pursue a policy of national reconciliation, it was recognised that an essential prerequisite of constructive negotiations must be the reimposition of the authority of the legitimate Government on the island of Santo. In short, those responsible on Santo must agree to return to the legal and administrative position obtaining before the insurrection of the 28th of May.
M. Dijoud informed my honourable friend that France was now prepared to agree to the 30th of July independence date proposed by the New Hebrides Government. In accepting this date, which is a mere two months away, it was recognised that the present problems must be urgently resolved. If no progress is made towards reconciliation, Britain and France would decide jointly on what further action to take.
Lord GORONWY-ROBERTS: My Lords, we are grateful to the noble Lord for making that Statement, but we have to say, of course, that the situation which has developed in Santo, in the New Hebrides, must fill us all with profound concern. Here we have a dependency on the verge of independence, by agreement and having followed the proper constitutional procedures, now with its integrity effectively breached by an indigenous maverick backed by the most obnoxious and predatory interests in America and France. The Statement is of course full of good intentions as to what the condominium is going to do, what the Governments of France and Great Britain would like to do, but surely it is time that effective action was taken. The threats to the integrity of this dependency date back a number of years, and we have been aware of them. Jimmy Stevens and his backers have signalled their intentions for quite a long time; and, indeed, Ministers assured Parliament as early as last November, if my memory serves me rightly, and certainly as recently as March, that effective action would be taken if the integrity of this dependency, on the eve of independence, was seriously threatened.
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My Lords, it has been more than threatened; it has been breached.
Espiritu Santo (and, for all I know, in the next few days Tana) may well be in the hands of the usurpers. In the meantime, the Statement said that we shall have another talk with Jimmy Stevens. I wonder whether the advice that Ministers are getting meets the gravity of the situation. While we talk, he takes over; and the time has come when we and the French must fulfil our clear obligations to the United Nations to preserve the integrity of a dependency in the process of handing it over to independence.
Finally, may I make the very strong suggestion (no doubt Ministers have considered it, and may be acting on it) that we should have very serious talks, not only with the Government of France, with whom we are acting very closely as part of the condominium, but with the American Administration, and that we should ask them effectively to take action in Washington to restrain the activities of those elements in the United States which are intervening in the New Hebrides for the worst of possible reasons, in so doing not only shattering the territorial integrity of this new, almost independent country, but, it may be, imperilling the broader interests of the West in the security of the area.
Lord GLADWYN: My Lords, I should like to thank the noble Lord for repeating that Statement. Following upon what the noble Lord, Lord Goronwy-Roberts, has said, may I take it from the Statement— I think it is a legitimate inference— that if shortly before 30th July, which is the date that we, the French and the local Government have decided will be the date for the declaration of independence for the whole of the New Hebrides, the island of Santo is still in a state of rebellion, the Governments of the United Kingdom and of France will take all suitable steps to suppress the revolt including, if necessary, physical force? Secondly, is there reason to believe press reports that this revolt has been primarily fermented by financial interests in America whose chief object is to create a tax haven?
Lord TREFGARNE: My Lords, I am obliged to both noble Lords for their response to the Statement. The implication of the remarks of the noble Lord,

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Lord Goronwy-Roberts, was, why were we not using force now? In answer to him and to the noble Lord, Lord Gladwyn, I want to say that we and our French colleagues are loath to contemplate the use of force except in the last resort. Even after the insurrection had taken place on 28th May Father Lini, the Chief Minister, appealed for new negotiations with those responsible; but if his efforts to achieve reconciliation are ignored, we and the French will have to consider what steps we shall take to restore the authority of Father Lini's Government on Santo. It will have to be long before 30th July if that date is to be achieved for independence, as I know it will.
On the position of the American interests, it is clear by the Phoenix Foundation's own admission that it has been involved in the insurrection. Indeed, at our request the US Government have agreed to investigate whether any US laws have been infringed by involvement of United States citizens. Yesterday the US State Department issued a statement signifying their intention to prosecute should there be any violation of American laws, making it clear that they do not condone the reported interference by US citizens in the internal affairs of the New Hebrides in support of these secessionists.
Lord GORONWY-ROBERTS: My Lords, we should be most loath to make the Government's task more difficult than it is. Nobody knows better than I how difficult can be the operation of a condominium even with one's best friends. But the situation is beyond the last resort. From the facts that have come to me in the last few minutes and from new evidence, I think that we are faced with the possibility that this territory may be so shattered by the actions of the authors of this takeover in Santo that long before the date agreed for independence we may be faced with total disarray. What I think the noble Lord, Lord Gladwyn, and I would jointly urge in the most co-operative and friendly way is that action should be taken quickly. The American assurances are gratifying. One would hope that they would add to a study of the legal implications of this action the immediate possibility of political action among their own nationals where they are involved in this operation.
Lord TREFGARNE: My Lords, we certainly agree that the situation is very grave. But, all the same, the use of force would be a regrettable step that we could only contemplate as the very last resort. That last resort is not quite with us yet but will be very soon.
Lord DE LA WARR: My Lords, would the noble Lord agree that, although we should not like to see the use of force, except as a last resort, it would be prudent to be ready to the extent of having perhaps a British and a French frigate ready on the spot to deal with this matter immediately? Would it not help to influence these brigands in the negotiations that we are about to have with them if we produced a little display of good old-fashioned force just a few miles out to sea?
Lord TREFGARNE: My Lords, I am reluctant to embark upon a new policy of gun-boat diplomacy, but I can tell the House that contingency plans are fully prepared.
Lord BROCKWAY: My Lords, I tabled a Private Notice Question yesterday on this subject but gladly withdrew it when I heard that a Statement was to be made today. May I say how totally I welcome the Statement made from the Conservative Front Bench, not only the original Statement, but also the statement about the American interests which the noble Lord added. Is it not a sad comment, after 76 years of administration by Britain and France, that this situation should have arisen in the New Hebrides within three months of its independence? Have not both Governments failed in seeking to reconcile the divisions which exist— even separate jurisdictions, even separate education, even separate control of the police? The statement from the Government Front Bench is so welcome because the party led by Father Lini has had massive majorities in the two last contested elections. Is it not the case that the plantation owners on the island of Santo and the American business interests behind them are fearful because the new party has declared that it will end the privileges of the old colonialists on the island? I hope that discussions will go on between the French and British Governments and the Administration in the New Hebrides and those who are in

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rebellion, so that force will not be necessary. But I welcome the forthright statement of the Government that they are behind the legitimate, elected Government on this issue.
Baroness WOOTTON of ABINGER: My Lords—
Lord TREFGARNE: My Lords, may I respond to the noble Lord, Lord Brock-way, before dealing with any other points The noble Lord referred to the root causes of this problem. I fancy that they are rather simpler than the noble Lord suggested. The constitution was agreed, the elections were held; and we seem to have a disgruntled man who lost the elections. That is perhaps the distinction (if I may mention it to your Lordships) between the condominium and Anguilla, which has so often been referred to as a similar case. This man lost the elections, his supporters did not gain the acclaim of the electorate, and that is why he must not be allowed to succeed.
Baroness WOOTTON of ABINGER: My Lords, may I remind the House that under Standing Orders a debate on a Statement may not take place unless the House has so resolved. I am not aware that any such resolution has been put.
Lord SHEPHERD: My Lords, may I pose one question to the noble Lord? There are a number of territories in the South Pacific that are in a similar situation in the sense that they are countries made up of many islands, with many tensions. May I ask the noble Lord, in the light of the situation in the New Hebrides, and while the responsibility is that of Her Majesty's Government and of the French Government, whether there is consultation with the Governments of Fiji, the Solomons, Gilbert and Ellice— although their names have been changed? I am concerned about consultation with the Governments and the peoples within the Commonwealth in the South Pacific.
Lord TREFGARNE: Yes, my Lords, the other countries in that part of the world have a deep interest in this matter and are being kept fully informed.

EMPLOYMENT BILL
3.50 p.m.
House again in Committee on Amendment No. 1.
Lord LYELL: We have had a free-ranging debate and the Committee are grateful to the noble Lord, Lord McCarthy, for spelling out the terms of his amendment so very clearly and at some length. I think the clearest and simplest reply that the Government can make about the amendment— and we believe the best answer that can be given— has already been given very, very clearly by the noble Lord, Lord Houghton of Sowerby. As the Government see the amendment, it has been drafted in such a way that its effect is still somewhat uncertain and that particularity is in itself a major reason for caution.
The Government feel that the intention of the amendment would be to narrow— I think the noble Lord, Lord McCarthy, called it "clarify"— the possible impact of the scheme to be made under Clause 1 of the Bill. As the Committee will be aware, the main purpose of the clause and the scheme is to encourage the wider use of secret ballots where unions are entitled and wish to act in a way which is not contrary to their rules to conduct secret ballots. Many unions do not make any specific provision in their special rules for strike ballots but may under general executive powers conduct them. It is perfectly right and proper that where general powers extend this far, and they conceive it in the interests of their members to do so, they should conduct secret ballots. For myself, I wish they would do so more often before embarking on industrial action which can be damaging.
If the intended effect of the amendment is that ballots which are not contrary to rule but which are not specifically provided for by rule should not qualify for inclusion in the Clause 1 scheme, that would be most undesirable in the Government's view. Many unions would, unless they amended their rules, be prohibited from applying for reimbursement of the costs of carrying out ballots that they wished to conduct or had conducted. The prime object of the Clause 1 scheme is not to prompt unions to change their rules, but

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is far more permissive: it is to encourage them to hold more secret ballots should they wish, and the amendment would detract from this primary aim.
I would give a specific assurance to the noble Lord, Lord McCarthy, that the Secretary of State would not add to the purposes which the noble Lord, Lord McCarthy, pointed out in Clause 1 (3) in such a way that any unions would be able to obtain reimbursement under the scheme for actions that would be contrary to their own union rules. The Secretary of State certainly would not have that in mind. Nothing that the noble Lord, Lord McCarthy, has said, or that has been said very eloquently by the noble Lords, Lord Shinwell and Lord Davies of Leek, has convinced any of us that there is real justification for what we call "fettering"union executives in this way. On this side of the Committee, we expect union executives to behave responsibly. Certainly I have no doubt that this expectation is shared by the noble Lord, Lord McCarthy, and indeed by the whole Committee. Therefore I ask the Committee not to accept this particular amendment.
Lord MCCARTHY: I must thank the noble Lord for the additional assurances that he has given in replying to this amendment. If I may say clearly again what it is that we are concerned about, it is, in the light of other amendments and of other statements and in the general context of the Bill, the possiblity that this clause might be used in order to have ballots outside the provisions of union rules and, in particular, outside the provisions of those authorised under the rules of the union to conduct such ballots. That is really what we are talking about.
The answer to the noble Lord, Lord Boyd-Carpenter, if I may say so, is "Yes ". If there are no rules in the union regarding ballots then we would say that the Secretary of State may not make regulations because there are no rules about ballots in the union. The trouble with Members of the Committee opposite—
Lord BOYD-CARPENTER: Will the noble Lord allow me to intervene? Can he amplify that a little? Does that mean that, where a ballot is not contrary to union rules but the subject is simply not
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dealt with by the rules, the adoption of his amendment would exclude the operation of the clause?
Lord MCCARTHY: I am afraid that the noble Lord does not understand much about union government. For a ballot to be held in a union, whether it specifies in terms that ballots can be held, there must be some body in the union— normally the executive council or it could be the annual conference of the union— which has under the general provisions of the rules the kind of authority which enables ballots to be held.
It may not be prescribed in terms how that ballot will be conducted, but if there is in the rule book reference to someone who is entitled, for example, to consult members or to have ballots, to ask branches or to have any one of a whole range of systems of consultation and participation in the union, my reading of this clause is that it would be permissible for the Secretary of State to make regulations. What is important— and I think that the noble Lord, Lord Lyell, is agreeing with me on this, but we may raise this again on Report when we have read carefully what he has said— is that the persons involved in the union with general responsibility for deciding things of this kind should be the people who are allowed to go to the Secretary of State and ask for regulations, and ask for assistance. If this is the case then I am satisfied with this particular aspect of the Bill.
What we are trying to oppose, both in this amendment and subsequently, is the notion that dissident groups, groups with no authority in the rule book, groups with no right whatever under the general provisions of the rules to consult the members, should be allowed to come to the state and ask the Secretary of State to help them to disrupt union government. With that general understanding, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.58 p.m.
On Question, Whether Clause 1 shall stand part of the Bill?
Lord MCCARTHY: I want to oppose the Motion that Clause 1 shall stand part of the Bill, on three grounds. This is the occasion on which we want to develop

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our arguments against the general notion of the Secretary of State's involvement in trade union ballots.
First of all, we must take notice of the fact that these proposals for trade union ballots are in this Bill. Once upon a time, a very long time ago, the late Labour Government was about to introduce in the ill-fated In Place of Strife a trade union development agency. It was perfectly possible that as a part of the functions of the trade union development agency there might have been assistance given to trade union ballots or to other aspects of trade union activities. The late Labour Government have given assistance to trade unions, for example, in relation to their education activities. I understand— and I am very pleased to see this— that the present Government, at this moment at least, have no proposals to curtail these provisions in any way.
We are not saying that the state should not help trade unions. We are not saying that under no circumstances, in no conceivable way, should there be support for the trade union movement in its everyday activities under the provisions of its rules. But we have to say that to put this as a need, as a kind of loss-leader at the beginning of a Bill of this kind, is bound to make the trade union movement pause and think and ask themselves what is behind such a provision. It is particularly likely to do this if we know that in another place and indeed in the House of Lords subsequently we shall have other amendments which seek to take the Government far beyond this point and introduce compulsory ballots at the behest of dissident groups in the union.
Therefore, our first objection is that it is in fact in a Bill of this kind; but— more importantly, I think— the wording is ambiguous. If we look at the wording of this clause, we have already spelt out the fact that we are not fully satisfied with the control of the authorities in the unions over the monies which are to be injected as a result of this provision. I will set that one aside; but we are also not satisfied at the reference to,
"… and such other purposes as the Secretary of State may by order specify ".
That seems to me to be a rather dubious and doubtful phrase to be inserted in a trade union ballot provision, where it would be quite simple for the Secretary of
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State to begin with a number of specific desires and areas where he wanted to introduce controls and assistance of this kind, without finishing up with such a general provision as this. We do not like Section 1 (5) which refers to circumstances and conditions "as may be prescribed "for the scheme. We feel that here is an indication that the Secretary of State is trying to find some universal way of conducting ballots. The fact is that unions differ in very wide ways as to how they make use of ballots, and the introduction of a general provision of this kind, we think, is not reassuring.
We are also concerned about the provisions in subsection (5) which says,
"… the ballot is so conducted as to secure, so far as reasonably practicable, that those voting may do so in secret".
I emphasise this is not because we are in favour of"unsecret "ballots, but the fact is that when you look at what the Government have already issued on the proposed provisions for the scheme and when you look at the explanatory notes of the intentions of this clause, it is quite clear that as a result of this clause we are going to drag the certification officer, as the previous Conservative Government dragged the registration provisions and the registrar, into a highly contentious area in which he will be required to say whether or not ballots are being conducted secretly or according to the rules. Indeed, it says in one section of the proposed provisions that he can in fact say that, even if the rules of the union have not been fully observed, he is of the opinion that failure to comply with the requirements referred to therein has had no significant effect on the proper conduct of the ballot.
Frankly, I feel that a clause of this kind is an invitation to drag trade union democratic processes into an endless series of legal wrangles, and it is based upon a doctrine which I am afraid noble Lords on the other side on the whole tend to hold; that what one needs in trade union government is ballots— ballots, ballots, more and more ballots— all the time ballots. That is based upon their mistaken belief that if you have ballots you get moderates coming to victory. All the evidence of the Donovan Commission, the American experience and the experience of this Government in their own ballot provisions, indicates that this is at best a crude and even a bizarre view.

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The fact is that ballots are a very crude way of consulting trade union members. No trade union leader worth his salt would use a ballot if he could use something else. If you can get people involved— the noble Lord may laugh, but that is because he knows nothing about it— in any issue, as we are in this Chamber, in a room and you can argue with them and they can answer back, they can propose amendments and suggest alternatives so that the debate can continue until some kind of collective will arises, no democrat would prefer the crude alternative of a ballot. One uses a ballot when it is a relatively simple issue, something on which you can answer "Yes"or "No", and when the question to be put cannot be manipulated and determined by the precise form of words (as it very often can be) and when it is important to get and to register a final answer. Many trade union leaders have been caught up in the consequences of ballots. I could quote names— but I will not— of unions that have been crucified by too great an addiction to ballots, whose executives have decided over the years that the only way they can exercise control, regulation and effectiveness over their organisation was to find other and more sophisticated ways of consulting the membership. The crude notion that all we need is ballots, ballots and ballots comes from those who know nothing whatever about the trade union movement.
Finally, it must also be said— because this is the occasion in this Bill when we can say it— that there is something bizarre and indeed, if I may be allowed to say so, there is something rather cheeky in people trying to insist on improving the provisions of trade union democracy in 1980. God knows! I know more about the bends and shifts of trade union democracy than most people, and I say to your Lordships that the processes of trade union democracy are infinitely superior to the processes by which firms consult their shareholders or directors consult their employees or political parties, including my own, collect the opinion of the mass of their membership and, if we are allowed to say so, the way in which chairmen and leaders of political parties emerge— strange weird ways indeed. Trade union democracy, for all its weaknesses and imperfections, is the most systematic and consistent way of consulting more people than any other
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institution we have in this country. Therefore, it does not need a clause of this kind or provisions of this sort, and we ask your Lordships to oppose them.
Lord MORRIS: I think it is a very nice irony for the noble Lord, Lord McCarthy, on more than one occasion when referring to the vocal minority in a union— no doubt reflecting the views of the non-vocal majority— should use a term which is so often used by his colleagues in the Soviet Union; namely, "the vocal dissidents ". I think this is the key to the whole attitude of the noble Lord opposite, in that what the executives of unions really do fear is the voice of the rank and file.
Viscount CALDECOTE: The noble Lord, Lord McCarthy, is really rather unduly suspicious and seems to me to be making the issue unduly complex. This is a very simple issue. The fact is, as all of us know who have anything to do with trade unions and industrial relations in industry, that sometimes— sometimes— ballots, and particularly secret ballots, are very valuable. It is also perfectly well known, and the noble Lord knows it as well as any of us, that in the past when the trade unions have been pressed to have ballots, and particularly secret ballots, they have said, "We are very sorry; we should like to hold ballots but we cannot afford it". This clause gets over that difficulty. It is a very simple point. It enables trade unions, when they wish, to have the cost of their ballots, and particularly secret ballots, paid for. It is therefore a good clause and should stand Part of the Bill.
Lord LEE of NEWTON: I thought my noble friend Lord McCarthy was right in many of the points he was making about the reasons for ballots. One of the things he did not mention was the enthusiasm of the convert. The Tory Party never had ballots until a few years ago and they now want to feel that they are going to pioneer the idea of ballots, to the degradation of those backward proletarian institutions such as the trade union movement.
I thought the noble Lord, Lord Boyd-Carpenter, made a point one wanted to follow up. I want to see every trade union having secret ballots whenever they can. Indeed, the vast majority of the

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big trade unions do have secret ballots on almost every issue. My own union, the engineers, ballots for everything and everybody at enormous cost. I am not at all averse to Governments assisting financially in that process. Indeed, it struck me, when the noble Lord was asking his question of my noble friend, that it could be the case that if those unions which do not have ballots within their rule book wish to qualify for financial assistance, this may assist in getting them to change their rule book in order that they can have secret ballots. In that sense, I welcome it. It would be a good thing if we could do that. On the other hand, we must look at the problems which arise with some trade unions, as against others, in trying to take secret ballots.
I was in charge of about 30, 000 people in one big place and I could hold ballots on anything, at any time, relatively easily. But I ask your Lordships to think of the Merchant Navy. How does the seamen's union hold secret ballots when, at any one time, a huge percentage of their members is scattered throughout the world? It just is not possible, with all the goodwill in the world, for them to do it. Noble Lords opposite were talking about being afraid of the rank and file decision, but it is not true. There is no organisation in Britain which takes more notice of rank and file decisions than the trade union movement. It seems to me that it creates the wrong atmosphere when we are told that kind of nonsense.
There is one issue, again within Clause 1, that I should like the noble Earl to tell me about. The Government talk in terms of expenditure incurred by independent trade unions. What do they mean by "independent trade unions "? If they are saying that they do not count company unions as independent, then I am happy about that. But I can recall, some years ago, when a number of breakaway unions, whose members had been dilutees of the engineering industry, christened themselves "independent trade unions". Independent of what? Independent of whom? The answer is that they were independent of the TUC. I am not trying to bring any Machiavellian intent into this, but I should like the noble Earl to tell me why it is necessary to have the word "independent"in Clause 1. Would not the point be covered just as well without the word
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"independent"? Or are the Government trying to make sure that company unions do not qualify for this kind of assistance?
4.12 p.m.
Lord BOYD-CARPENTER: I found the speech of the noble Lord who has just sat down much more reassuring, in his attitude towards ballots, than that of the noble Lord, Lord McCarthy. I do not know whether the noble Lord, Lord McCarthy, purports to be speaking for the trade union movement. I think he does, because on several occasions he observed that he knew much more about trade unions than anybody else. No doubt, therefore, he claims to be speaking with some authority. But if he is, he might like to know what effect his speech had on, at any rate, one Member of this Committee.
Throughout his speech there was an ill-concealed, a hardly concealed, antipathy to the holding of ballots by unions on matters of major importance. Certainly, the effect of that on my mind, I must tell the noble Lord, was to incline me much more than I was before he spoke to the view of those of my honourable friends who think that legislation might go further than the present Bill in making provision for ballots. If the noble Lord really speaks for the unions, and if that is really their attitude, that could have a very considerable effect on the judgment of many of us. I think that the noble Lord should know that.
Lord HOUGHTON of SOWERBY: I shall not oppose this clause standing part of the Bill. I think that it has had the blessing of too many people in too many parties for us in your Lordships' House to discard it, after it has been included in the Bill by the House of Commons. This idea of ballots attracts a great many people, mostly those outside the trade union movement and not in it. But this clause is dealing only with public money being spent on trade union ballots, which are held permissively under the rules of the unions concerned, or obligatorily under the rules of the unions concerned, or by Act of Parliament on matters which fall within the itemised purposes of ballots on page 2. That is all this clause is about— whether we shall spend public money in this way.

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I do not think it is necessary to do that. Most unions which have provision for ballots are themselves able to pay for them. This, presumably, is to encourage unions to hold ballots which otherwise would be too expensive for them to undertake with their own money. So I do not think it is of great importance, though it is a substantive clause of the Bill and it was part of the outline of the legislation which the present Government announced they would introduce into Parliament. So from that point of view, I do not think that we need make heavy weather on trying to delete the clause from the Bill.
I would make just one or two comments on this question of ballots, because it is important, especially in view of what may follow. The law provides for ballots to be held in unions for only two purposes. One is for the introduction of political objects into the objects of the union, and that is provided for in the Trade Union Act 1913. The other is that where amalgamations or mergers are in contemplation, it is necessary to hold a ballot to authorise the necessary legal transfers that will consummate the amalgamations or mergers. Why is it that those two matters are required by law to go to ballot in a union? It is because both of them can be acutely contentious and may divide the union and may not be soluble by an executive committee.
Why did we have a referendum on the Common Market? It was because Parliament was thought to be not strong enough, or representative enough, to decide for itself. Why was there recently a referendum in Quebec? It was because the Government in Quebec, although it had less than 50 per cent. of the votes cast at the last election, held a majority of the seats but was still not regarded as sufficiently strong or representative to carry through what was put to the referendum and was defeated.
Those are occasions when it is necessary to hold ballots. None of the purposes in this clause fall into that category. You do not have to have ballots to elect an executive committee. You do not have to have ballots for an amendment of the rules, unless a union has decided in its rules to hold ballots; and most unions do not hold ballots for those two purposes. They have other safeguards,
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such as a two-thirds majority, for example, at an annual general meeting or an annual delegate conference being required to pass constitutional amendments.
Ballots are called for by people outside the unions. At the present time, there is no great pressure inside the trade union movement to hold ballots on matters on which ballots are not already held. What, then, is the purpose of those who want ballots? I think that they want them as a measure of restraint. They advocate ballots, not because they are really in favour of more democracy, but because what they want to do is to put the skids under a militant executive committee. It is believed that a ballot will enable the silent majority to express its view, which otherwise would not be heard inside the union.
I think that there is a lot of nonsense talked about the silent majority. Why is it silent? I do not think that one should provide forms of mandatory democracy merely to excuse or to condone the laziness of the silent majority. Why are they not at meetings? The vocal minority are always at the meetings, and that is why unions get run by Leftists when, very frequently, the majority of the members of a union are Rightists. It is not because the Leftists have a majority; it is because they exercise their democratic rights, where the silent majority is the lazy majority as well. I think that one can talk about ballots unrealistically; they are not the answer to all problems. There is little point to be served by the provisions of this clause.
As I said at the beginning, the question is whether the clause is to stand part of the Bill. Since so many people want it— they are mesmerised by the good that it will bring— ali right. If this is how the public think that they ought to spend their money to help the trade union movement, who am I to say that they should not? I say, though, that this has introduced a new measure of authoritarianism inside the TUC, because the TUC is saying, "No union affiliated to the TUC is to avail itself of the provisions of this section ". So a new factor is introduced into the trade union movement which need not be there and which should not be there, merely because we are proposing that there should be this state bounty for the

1289
conduct of ballots by trade unions under prescribed circumstances. It would have been much better to leave it alone.
The trouble, however, is that ballots have been bandied about and public expenditure to finance them has been proposed by so many people on so many occasions that we have come to think that it is a form of worship and that we must do something about it. It is not a form of worship. It is just a silly idea that somebody thought of; it has been the subject of propaganda over the years and people have come to believe in it. But it is here. The House of Commons has put it here. It is a substantive clause of the Bill, and I do not think that it is the role of your Lordships' House to take it out of the Bill. That is all I have to say about it and I shall abstain if there is a vote on the matter.
Earl DE LA WARR: I entirely agree with my noble friend Lord Boyd-Carpenter in the way that he interpreted what the noble Lord, Lord McCarthy, said about ballots and the way he dealt with them. Clearly he thoroughly dislikes them. I found it quite amazing and horrifying to hear the pious way in which the noble Lord dealt with the question of trade union democracy. He even went so far as to compare the operation of trade union democracy with the operation of your Lordships' House.
The noble Lord knows as well as I do that one of the things that got him and his party into trouble at the beginning of last year was that the British public as a whole have seen too much "trade union democracy "at work. To them it means— and in many cases they are right— a mass meeting where a fellow is not too well advised on occasions to hold up his hand lest he be called a "scab "and treated accordingly. Does the noble Lord, in these generally pious things he said, really want to talk about trade union democracy just in those broad terms, and not admit that there are many cases in which it is wise to have a ballot instead of the horrifying mass meeting tactics to which this country is so often subjected?
4.23 p.m.
Lord WEDDERBURN of CHARLTON: If I may intervene very briefly in your Lordships' debate on this clause,
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may I preface what I am about to ask the noble Earl with the comment that I have great sympathy with what was said by the noble Lord, Lord Houghton of Sowerby: that the current worship of ballots will surely in a few years be seen to be a passing phase, just as was the worship in 1970–71 of the marvellous results that would occur if only we had a presumption of binding collective agreements. Of course there is a situation where you have a ballot, and there are many trade unions that adopt the use of ballots. As noble Lords opposite are well aware, our trade unions are various and frequently complex. Many of us on this side also wonder at the multi-unionism that we have. And they have various practices.
The idea that one should go down the road of forcing everyone to have a ballot, which is beginning to be the implication, is as silly as the old idea of binding collective agreements. That there are malpractices inside trade unions from time to time I have no doubt, just as there are in the City, and just as there are in other organisations. So far as the TUC is concerned, which was the question to which the noble Lord, Lord Houghton of Sowerby, addressed himself, a family quarrel inside the trade union world as to whether or not to take this rather unusual sudden burst of public expenditure, increased by the Government, is a matter for the trade unions themselves. However, there are problems about this clause. It seems to me that my noble friend Lord McCarthy highlighted many of them which require further answer, and I should like to put to the noble Earl just a few more.
The clause itself, we have had explained to us, will normally operate— and we hope that it will— within the rules of the unions. But the person who has a very important role to play— and I am sure that noble Lords who want to take it further have got this point in mind— is the certification officer. He has a number of roles which are not explained in the clause itself. However, they are filled out a little in the document to which my noble friend Lord McCarthy referred; namely, the very preliminary suggested draft of the scheme which has been around now for a few weeks.
In paragraph 8 of the first draft of the plan, the certification officer is to be satisfied that certain conditions have been

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met. Among those conditions it is said that in a ballot containing a question to ascertain the views of members about calling or ending a strike—I am glad to see that a balance is kept between calling and ending a strike and this is another reason why this is perhaps not a wise way to proceed, thinking that ballots can solve everything, because once you have a strike called by ballot, it is very difficult, as a rule, to get it called off by ballot— the certification officer has to go on and see that so far as is reasonably practicable the ballot is conducted so as to ensure that all members likely to be instructed or advised to participate in the strike, or participating in the strike or other industrial action, as the case may be, are entitled to vote (I am sure that we shall have some regulation of that sort) and that they can vote without interference or constraint. The certification officer has to be satisfied about that before he pays over the money. We have a number of precedents for this.
But officers having statutory duties of that kind will fairly quickly find themselves challenged, especially with a difficult matter of judgment of that sort, about the vires of their decisions. They will find that they are in the High Court for judicial review. We have seen it with the Advisory Conciliation and Arbitration Service in respect of its recommendations for recognition under Sections 11 to 16 of the Employment Protection Act 1975. We have even seen it with the registrar, as he was, but now the certification officer in respect of his administration of the political fund rules where he has the job of making certain decisions under Section 3 of the 1913 Act. He has, on occasion, been called to account by appeal or judicial review. It is understandable that the 1913 Act is not in the list for public funds because the public funding of a union to ballot its members to spend its funds on political purposes for one party or another would perhaps be slightly strange. However, there is the precedent of judicial review.
What is the Government's expectation about this? One of the criticisms of the recognition provisions of the 1975 Act was that nobody had really thought through the problem of what would happen when somebody went to the High Court, then to the Court of Appeal— it is, with no disrespect, not very difficult to foresee
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what would happen when one reached the Court of Appeal— and then to your Lordships' Appellate Committee, after long-drawn-out proceedings. Whether or not this is part of the step down the road towards controlling trade unions and forcing ballots upon them—which is a very great fear in part of the trade union movement and is the point about it being in the Bill; what a pity that the Government did not put this clause into a separate Bill, when it would not, as it were, have been infected with the anti-trade union spirit of the rest of the clauses— is it not the case that there is very likely to be a great deal of argument about the certification officer's administration of the scheme? And is it not also the case that the regulation drafts that we have seen are the sort of thing that we are inevitably going to end up with? If that is the case, then more and more trade union affairs will operate by means of judicial review in the High Court.
It is a fact that the trade unions in this country, and many managers in this country, do not wish to see broken the tradition of not taking industrial relations disputes to the High Court. There are those who sue for injunctions, there are trade unions sued by their members, but by and large it has been a good tradition to manage things between management and trade union members and officers without such litigation. Is this not a clause which is bound to give rise to a lot of disputes which, once they get into the hands of lawyers, are highly likely to end up in the High Court?
Lord DAVIES of LEEK: While I regret delaying the committee a little, nevertheless I think it is of importance to remember that there is much more in this clause than appears on the surface. I was glad that the noble Lord, Lord Houghton of Sowerby, at the end, with his usual vigour, demonstrated what he thought to be an essential part of this— a delaying tactic. Despite the repeal of the 1971 Industrial Relations Act the present Government, in this clause and subsequent clauses, show that they are committing themselves to reducing the bargaining power and the rights of trade unions. Sensible people in the CBI and everywhere else have already warned the unions of these possibilities. The Employment Secretary said that, unlike the 1971 Act, this Bill:

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"Is not a measure designed to change the whole structure of the unions. It is not a measure to clobber the unions ".
I sincerely hope that to be true, because it would be a most insensible thing, and I believe in the main they hope that will happen. But will it? All I can say from this side of the Committee is that not only do the changes proposed in the Bill, and particularly in this clause, represent a major attack on the unions, but if we are not careful the man-to-man approach which has been worked out over a considerable number of years, of the CBI and the TUC as instruments of common sense in an apparent jumble of industrial relations, will be destroyed. On both sides, both in the CBI and the TUC, there is an appeal for common sense and not for hysteria in this approach. The Government, by refusing to talk with union leaders, for instance, are acting blindly and foolishly. The winds of change can become a destructive hurricane in the trade union movement and we can have in the future, on top of employment, together with the new technology, an industrial wilderness that we would not understand.
The law, too, has been changed. The lawyers will know that the labour injunction battle has now been reopened, and in my estimation this clause is an addition to the famous labour injunction battle. A weapon which in recent years has been used to great effect in trade unions by employers and judges working together has been the interlocutory or interim injunction. This clause is aiding that. What are we going to do with a union which has only 12 members, such as the Jewish garment workers or the jewellers? The law is not making any allowances for these different types, and the union with 12 members could hold up a factory of 12, 000. That figure may be exaggerated, but certainly they could hold up thousands because they are key skilled people. How are we to deal with that problem?
I propose to finish with just one further point. It is not so long ago that the noble and learned Lord, Lord Denning, created a new point of law out of this labour injunction issue, when he said:
"It is not sufficient that there should be an intent alone to further advance, help or encourage the union side of a trade dispute. There has to be a reasonable prospect of advancing the cause for it, to be given immunity".
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In other words, something entirely new has been introduced into a trade union dispute. If I start a discussion with my employers, unless in the eyes of the law there is a reasonable chance that I shall win, the Government have now made a completely new point of law. I consider that this clause is, in its own devious way, creating a new point of law in trade unionism.
4.34 p.m.
The Earl of GOWRIE: The message which I should like to convey to the Committee, and particularly to the noble Lord, Lord Davies of Leek, and to his noble friend Lord Wedderburn of Charlton, is that this particular clause is in fact full of stuff that meets the eye. They keep wishing to find things in it which will not meet the eye. Of course, the days are past when classical quotations were bandied around your Lordships' House, but they must have in mind the famous line about being suspicious of Greeks when they bear gifts, because all that this particular clause does is to enable the Secretary of State to give public money to unions to pay for ballots, if they so wish.
Echoing my noble friend Lord Boyd-Carpenter, I would say very sincerely to the noble Lord, Lord McCarthy, that when in an exchange with my noble friend Lord Orr-Ewing he said that my noble friend Lord Orr-Ewing knew nothing about union matters so what was he doing uttering about them, I do not think at the beginning of what will probably be a long and, I hope good-tempered Committee stage, that was a sensible remark. Industrial society is now very large, we are all intimately involved in it and many of us on this side of the Committee are involved with the unions, one way or another. I have paid tribute at this Dispatch Box to the academic and other expertise of the noble Lords, Lord Wedderburn and Lord McCarthy, and none of us doubts that, but they should not pull rank in this way if the Committee stage is going to be conducted amicably, as I am sure it will be.
The noble Lord, Lord McCarthy, was answered most brilliantly by my noble friend Lord Caldecote when my noble friend said that the noble Lord was suspicious of the Secretary of State's interference— I think that was the word he

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used— in trade union ballots, when in fact all that my right honourable friend was doing, of course, was paying for them. A certain amount of dismissive language was used in the debate about ballots. The noble Lord, Lord McCarthy, was rather fearfully dismissive of them and the noble Lord, Lord Houghton, was perhaps rather warily dismissive of them saying that he did not think they were either here nor there very much, while the noble Lord, Lord Wedderburn, spoke about the current worship of ballots. That phrase reminded me rather of the late Evelyn Waugh— no figure of the Left— who spoke about "the present craze for equality."T do not think it becomes noble Lords opposite to speak in a somewhat aristocratic and dismissive way like Mr. Waugh about democratic practices of which we do not expect too much but certainly do not wish to see not taking place at all.
A point was made about the involvement of the certification officer and I shall be arguing a little later, when we deal with the debate on the issue of compulsory or mandatory secret ballots, that we do not want to over-involve the certification officer but it is clearly necessary to have some independent figure to look after the scheme where the disbursement of public money is involved. I am sure noble Lords opposite would be very suspicious if the Secretary of State handed it out at whim, individually. In the vast majority of cases where a responsible union conducts a normal ballot, no problems will ensue.
The noble Lord, Lord Lee of Newton, was suspicious of the phrase "independent trade unions ", but we take this phrase from the previous Government's legislation— from the Trade Union and Labour Relations Act 1974, and as amended in 1976. It seems to be a good workable definition and it is used also throughout the Employment Protection Act, and there is nothing more sinister in it than that. I am sure noble Lords opposite will have plenty of meat to get their teeth into as we progress with this Committee stage, but they are starting with an air of somewhat
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unwarranted suspicion. There is wide public support, as noble Lords opposite have said, for the more extensive use of secret ballots in unions, and a growing recognition within the union movement itself that ballots on important matters are desirable.
We are not naive; we do not think that a ballot always results in a strike being postponed or called off or not held. But we are concerned, as the noble Lord, Lord Houghton, acknowledged, about occasions when there is a gap between members and their representatives. But that concern notwithstanding, this clause, as my noble friend Lord Lyell spelled out very clearly in respect of the first amendment, does not impose a mandatory requirement on the unions to hold secret ballots. The Government have made clear their strong support for wider use of secret ballots before industrial action and in the case of election of union officials. But of course we feel that these ballots should be voluntary, and they should be encouraged to take place in a way that fortifies existing good practice and existing responsible behaviour. We believe that the clause is a significant step to this end, and that is why I commend it to the Committee.
Lord MCCARTHY: I am afraid that we cannot agree not to vote against the clause standing part. I simply want to say that I had no intention of suggesting that I knew more about industrial relations than anybody else in this House. What I was trying to say— I think Hansard will bear me out— was a confession, that I thought that I probably knew more than most people about some of the bends and shifts of trade union democracy. That was all. It is because I consider that I know something about the bends and shifts of trade union democracy that I am not an unreserved, unthinking ballot man. We press this to a Division.
4.42 p.m.
On Question, Whether Clause 1 shall stand part of the Bill?
Their Lordships divided: Contents, 155; Not-Contents, 72.

CONTENTS

Ailesbury, M.

Ellenborough, L.

Masham of Ilton, B.

Airedale M.

Elliott of Harwood, B.

Middleton, L.

Airey of Abingdon, B.

Elton, L.

Milverton, L.

Alport, L.

Emmet of Amberley, B.

Monson, L.

Ampthill, L.

Enniskillen, E.

Morris, L.

Amulree, L.

Evans of Claughton, L.

Mowbray and Stourton, L.

Auckland, L.

Evans of Hungershall, L.

Newall, L.

Balfour of Inchrye, L.

Exeter, M.

Nugent of Guildford, L.

Banks, L.

Faithfull, B.

Onslow, E.

Bellwin, L.

Falkland, V.

Orkney, E.

Belstead, L.

Ferrers, E.

Orr-Ewing, L.

Berkeley, B.

Ferrier, L.

Pender, L.

Bessborough, E.

Forester, L.

Piercy, L.

Boothby, L.

Fortescue, E.

Porritt, L.

Boyd-Carpenter, L.

Fraser of Kilmorack, L.

Rawlinson of Ewell, L.

Bradford, E.

Gainford, L.

Redmayne, L.

Bridgeman, V.

Gibson-Watt, L.

Reigate, L.

Caccia, L.

Glendevon, L.

Robbins, L.

Cairns, E.

Glenkinglas, L.

Roberthall, L.

Caithness, E.

Gore-Booth, L.

Rochdale, V.

Caldecote, V.

Gowrie, E.

Rochester, L.

Campbell of Croy, L.

Gridley, L.

Romney, E.

Cathcart, E.

Grimston of Westbury, L.

St. Aldwyn, E.

Chalfont, L.

Haig, E.

Salisbury, M.

Chelwood, L.

Hailsham of Saint Marylebone,

Sandford, L.

Chesham, L.

L. (L. Chancellor.)

Sandys, L. [Teller.]

Chitnis, L.

Hampton, L.

Seebohm, L.

Clancarty, E.

Hankey, L.

Sempill, Ly.

Clifford of Chudleigh, L.

Hanworth, V.

Simon, V.

Clwyd, L.

Harmar-Nicholls, L.

Skelmersdale, L.

Cockfield, L.

Henley, L.

Soames, L. (L. President.)

Colville of Culross, V.

Hill of Luton, L.

Somers, L.

Cork and Orrery, E.

Hillingdon, L.

Spens, L.

Cottesloe, L.

Hives, L.

Stamp, L.

Craigavon, V.

Home of the Hirsel, L.

Strathclyde, L.

Crathorne, L.

Hood, V.

Strathcona and Mount Royal, L.

Croft, L.

Hornsby-Smith, B.

Strathspey, L.

Cromartie, E.

Hylton-Foster, B.

Torphichen, L.

Cullen of Ashbourne, L.

Keith of Castleacre, L.

Tranmire, L.

Daventry, V.

Kilmany, L.

Trefgarne, L.

Davidson, V.

Kimberley, E.

Trenchard, V.

De Freyne, L.

Kinloss, Ly.

Trevelyan, L.

De La Warr, E.

Lauderdale, E.

Vaux of Harrowden, L.

De L'Isle, V.

Lindsey and Abingdon, E.

Vernon, L.

Denham, L. [Teller.]

Long, V.

Vickers, B.

Derwent, L.

Lucas of Chilworth, L.

Vivian, L.

Digby, L.

Lyell, L.

Ward of Witley, V.

Dormer, L.

McAlpine of Moffat, L.

Watkinson, V.

Dowding, L.

Mackay of Clashfern, L.

Westbury, L.

Drumalbyn, L.

Mackie of Benshie, L.

Wigoder, L.

Eccles, V.

Macleod of Borve, B.

Winstanley, L.

Effingham, E.

Marley, L.

Young, B.

On Question, amendment agreed to.

NON-CONTENTS

Allen of Fallowfield, L.

Davies of Penrhys, L.

Listowel, E.

Ardwick, L.

Elwyn-Jones, L.

Llewelyn-Davies of Hastoe, B.

Bacon, B.

Fisher of Rednal, B.

[Teller.]

Balogh, L.

Gaitskell, B.

Lloyd of Hampstead, L.

Barnby, L,

Gardiner, L.

Lovell-Davies, L.

Birk, B.

Glenamara, L.

McCarthy, L.

Blease, L.

Goronwy-Roberts, L.

Maelor, L.

Blyton, L.

Gosford, E.

Melchett, L.

Boston of Faversham, L.

Hale, L.

Milford, L.

Bowden, L.

Hatch of Lusby, L.

Oram, L.

Brimelow, L.

Henderson, L.

Parry, L.

Brooks of Tremorfa, L.

Irving of Dartford, L.

Peart, L.

Bruce of Donington, L.

Janner, L.

Phillips, B.

Cooper of Stockton Heath, L.

Kaldor, L.

Pitt of Hampstead, L.

Darling of Hillsborough, L.

Kilbracken, L.

Plant, L.

David, B.

Leatherland, L.

Ponsonby of Shulbrede, L.

Davies of Leek, L.

Lee of Newton, L.

[Teller.]

Rhodes, L.

Stedman, B.

Wallace of Coslany, L.

Ritchie-Calder, L.

Stewart of Alvechurch, B.

Walston, L.

Ross of Marnock, L.

Stone, L.

Wedderburn of Charlton, L.

Salisbury, M.

Strabolgi, L.

Wells-Pestell, L.

Sefton of Garston, L.

Strauss, L.

Whaddon, L.

Segal, L.

Taylor of Blackburn, L.

Willis, L.

Shackleton, L.

Taylor of Mansfield, L.

Wootton of Abinger, B.

Shinwell, L.

Underhill, L.

Resolved in the affirmative, and Clause 1 agreed to accordingly.
4.52 p.m.
The EARL of GO WRIE The EARL of GO WRIE moved Amendment No. 2:
After Clause 1, insert the following new clause:
("Secret ballots on employer's premises
. — (1) Subject to subsection (3) below, where an independent trade union proposes that a relevant ballot be held and requests an employer to permit premises of his to be used for the purpose of giving workers employed by him who are members of the union a convenient opportunity of voting, the employer shall, so far as reasonably practicable, comply with the request.
(2) A ballot is a relevant ballot for the purposes of this section if—

(a) as respects the purpose of the question (or one of the questions) to be voted upon, the ballot satisfies the requirements of a scheme under section 1 of this Act, and

(b) the proposals for the conduct of the ballot are such as to secure, so far as reasonably practicable, that those voting may do so in secret.

(3) Subsection (1) above shall not apply where, at the time the request is made, —

(a) the union is not recognised by the employer to any extent for the purpose of collective bargaining, or

(b) the number of workers employed by the employer, added to the number employed by any associated employer, does not exceed twenty.

(4) A trade union may present a complaint to an industrial tribunal that it has made a request in accordance with subsection (1) above and that it was reasonably practicable for the employer to comply with it, but that he has failed to do so.
(5) An industrial tribunal shall not entertain a complaint under this section unless it is presented to the tribunal before the end of the period of three months beginning with the date of the failure, or within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of the period of three months.
(6) Where a tribunal finds that a complaint under this section is well-founded, the tribunal shall make a declaration to that effect, and may make an award of compensation to be paid by the employer to the union which shall be of such amount as the tribunal considers just and equitable in all the circumstances having regard
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to the employer's default in failing to comply with the request and to any expenses incurred by the union in consequence of the failure.
(7) An appeal shall lie to the Employment Appeal Tribunal on a question of law arising from any decision of, or arising in proceedings before, an industrial tribunal under this section.
(8) The remedy of a trade union for a failure to comply with a request made in accordance with subsection (1) above shall be by way of a complaint under this section and not otherwise.
(9) Expressions used in this section and in the 1974 Act have the same meanings in this section as in that Act.")
The noble Earl said: Before I move the new clause I should like to point out that a really historic occasion has just taken place, and it should not pass without remarking that the Labour Party in Committee in the House of Commons did not oppose the provision of public funds for secret ballots, but the Labour Party in the House of Lords has just done so— although happily it has been defeated. That seems to me to be a really remarkable turn up for the books, and what sociologists of the future will make of it, of course, I do not know.
Although this amendment, this new clause, appears in my name and therefore appears as a Government amendment, it is right that I should acknowledge straight away that it is, in a sense, an amendment with a strong connection with a Member of your Lordships' House. I must acknowledge the role which the noble Lord, Lord Robens, has played in its conception. The noble Lord has, over the years, been a consistent advocate of secret workplace ballots and has urged through the CBI and also personally that the Government should amend the Bill as I shall set out. I should like to pay tribute to the noble Lord and to thank him for his help.
The Government regard the wider use of secret ballots for decision-making throughout the trade union movement as being vital to the improvement of industrial relations. We do not, as we have sometimes been accused— indeed, as we were accused when we debated the last amendment— regard secret ballots as an auto-

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matic passport to good industrial relations, and nor do we have unrealistic expectations that they will inevitably produce results which are easy for Governments to live with. But we do think it right that more democratic decision-making should be encouraged within our trade unions and that unions should be given every encouragement to involve their individual members in decisions which affect them.
Our approach, which was foreshadowed in our manifesto, is to provide voluntary encouragement through the provision of public funds for union elections and other important issues, and that is what, as we have just seen, Clause 1 of the Bill sets out to do. We believe that in removing the financial constraints on unions it will provide an important incentive for them to encourage the more widespread use of ballots.
The Government are already consulting on the proposals for the scheme to give effect to Clause 1 and a copy of the proposals is in your Lordships' Library. As soon as possible after the Bill becomes law, we intend to lay a scheme before Parliament so that it can start to operate quickly. The scheme is an innovation with few even remote parallels elsewhere in the world. We are proposing that the scheme be drawn initially to concentrate public funds on those areas where the financial burdens on unions are potentially heaviest, where ballot arrangements most need to be encouraged, and where the independent certification officer, who is to operate the scheme, can most easily be assured that the essential conditions relating to secrecy have been met. In short, it is proposed that in the first instance the scheme should cover postal ballots dealing with trade union elections, calling or ending a strike or other industrial action, union amalgamations, and changes to union rules.
It is not the intention that the scheme should cover from the outset workplace ballots. The Government believe it desirable and necessary, especially in view of the possible public expenditure considerations, to gain some practical experience of the scheme as proposed before we go any further. However, this is not to say that we do not wish to see unions conduct more secret workplace ballots as well as secret postal ballots. On the contrary, we feel that both are desirable. It is
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wrong, it seems to us, that votes on strike action, for example, should be taken at mass meetings where the individual has no opportunity to cast a vote privately, and may be overtly, or covertly pressured to vote one way or another.
From the Benches opposite the noble Lord, Lord Wallace of Coslany, said on 6th December, 1978 on behalf of the last Labour Government, that even his Government had reservations about union decision-taking at mass meetings, and I think that those sentiments would be endorsed by noble Lords on all sides of the Committee. Indeed, we heard them expressed from the Cross-Benches during the debate on the previous amendment.
The Government have been addressing themselves to the question of how they might encourage secret workplace ballots in a simple way. In our consideration of this question we have had the great benefit of the views of the noble Lord, Lord Robens, with all his experience of these matters, and he has put forward the idea which now finds concrete expression in the new clause which I now commend to your Lordships concerning secret ballots on employers' premises. I beg to move.
Lord MCCARTHY: I have no desire to rehearse the arguments that we have discussed previously, about ballots. I think that, within the context of clauses dealing with ballots, it is probably more sensible to have a secret ballot on the employers' premises than— as I had thought, under the Notes to Clauses which the Government published— to confine the ballots to postal ballots. I think that ballots on employers' premises are often more effective, particularly if those ballots can go along frankly with mass meetings.
Again, the noble Earl has made sweeping remarks about mass meetings. Mass meetings are very often an essential part of putting to a workforce the issues about to go to ballot. Very often it takes great courage to face mass meetings. Nevertheless, trade union officials frequently have to do that in order to put the unpopular policies of their executive council which subsequently go to ballot. So, although we continue to have a number of reservations about this clause, which has many of the defects and ambiguities which were spelt out earlier by my noble friend Lord Wedderburn of Charlton, we do not intend to divide on it.
5 p.m.
Lord WIGODER: We, on these Benches, welcome this new clause and hope that it will be incorporated in the Bill in due course. It is in no critical spirit that I venture to make two observations to the noble Earl, Lord Gowrie, in the hope that, if the amendment is incorporated, he might consider them when we come to the next stage in this Bill.
First, there is the question raised by subsection (3) (b), whereby there is excluded from the operation of this clause any concern where:
"the number of workers employed by the employer, added to the number employed by any associated employer, does not exceed twenty ".
I am not aware— but it may be my ignorance— of any definition of the term "associated employer". On the face of it, it seems to me that it may give rise to a little difficulty.
But, rather more significantly, I find it difficult at first sight to see why the comparatively small business should be excluded from the operation of this clause. In many ways, it is even easier for the small firm than it is for a larger firm to comply with any request that there should be a ballot on the premises. The noble Earl might think that either there is a clear explanation as to why that subsection is included or, alternatively, the matter might be looked at again in the light of those observations.
The other matter to which I would draw the noble Earl's attention is contained in subsection (6) where, in order to enforce the new clause, if there is a breach by the employer, a tribunal can make an award of compensation. I quite see that the award of compensation should be as set out at the end of subsection (6); namely:
"any expenses incurred by the union in consequence of the failure ".
In other words, the union might say that it had to rent a local village hall to carry out the ballot, or whatever it may be. That I can fully understand. What troubles me a little are the other words in the subsection, that the tribunal is required to make an award
"of such amount as the tribunal considers just and equitable in all the circumstances having regard to the employer's default in failing to comply with the request",
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those words obviously being quite a separate consideration from consideration of what expenses were incurred by the union in consequence of the failure.
Again, at first reading it seems that that puts an impossible task upon any tribunal I find it very difficult to see how it could set about assessing any measure of compensation, bearing those matters in mind. Indeed, I can see very real problems arising, where a union might say that because of the employer's failure it was caused to embark upon some course of action upon which it might otherwise have not embarked if the employer had complied with his obligations under the clause. Some vast and un-quantifiable measure of damages might be claimed by way of outcome. Again, it appears that the wording in subsection (6) might be tightened up in order to eliminate that possibility.
Lord BOYD-CARPENTER: I should like to say how glad I was to hear the noble Earl's tribute to the noble Lord, Lord Robens. I happen over many years to have seen some of the noble Lord's work— quiet, unostentatious, enormously effective— in the cause of good industrial relations in this country. It is right that from that Box at this stage of our proceedings my noble friend should put on record the great debt that this House and the country owe to the noble Lord.
The Earl of GOWRIE: I am grateful to the Committee for the relatively popular reception that the new clause has had, and to the noble Lord, Lord McCarthey, in particular for undertaking not to divide against it. As my noble friend has just said, I am sure that it was perhaps the potent name of the noble Lord, Lord Robens, which might have made the noble Lord, Lord McCarthy, think twice rather than the way in which I introduced the clause. I would simply say to the noble Lord, Lord McCarthy, that it is quite wrong to say that we are against mass meetings. Of course we are not against mass meetings, but we have serious reservations— as I understand did the last Government— about any public votes which are taken at mass meetings. A distinction must be made there.
I think that the noble Lord, Lord Wigoder, was quite right in saying that subsection (3) (b) needs some further

1305
qualification or explanation. The Government do not believe that the new obligation which my new clause lays on employers will be particularly onerous or unreasonable for them to undertake. The CBI has advocated a measure of this kind, in agreement with the noble Lord, Lord Robens, and it agrees with us there. But we feel— and I think that it would be reasonable to expect the Liberal Party in this regard also to feel— that it would be wrong at this juncture in time to put any new obligations of any kind— where they could be avoided— on very small employers, because to do so would be to run counter to our general aim, which the Liberal Party certainly shares, of trying to lighten the weight of employment legislation on very small employers and of reviving encouragements to enterprise. But I think that I can reassure the noble Lord that in practice common sense would suggest that where a very small firm is involved the management will have a fair idea of the feeling of its workforce, and in any case where a union is recognised in very small firms, it should have no real difficulty in making arrangements to take members' views by a secret ballot.
On the point about unreasonable expense or the difficulties that may be experienced by a tribunal over awarding costs, I do not think that in the kind of instance envisaged by the new clause the costs would pile up in the way that seems to alarm the noble Lord. However, I may not have his remarks quite right. I shall undertake to look at what he said, and write to him, and if he does not think that the point is met, perhaps he would like to return to it at a later stage.
Lord WEDDERBURN of CHARLTON: Before the noble Earl resumes his seat, there is perhaps one slightly technical point in the clause which I should like to raise. We on this side of your Lordships' Committee have noticed with interest that it applies to firms where there are 20 "workers ". That is a very different term from "employees", of course; it is much more widely defined in the 1974 Act, and includes contracts of service and for services, including people working on, for example, the Lump in a construction firm. If you take 20 workers employed by an employer and his associated employer— that is, any other company in the group— as the 1974
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Act in effect defines it, that is a very different cut-off point from what we find elsewhere in the Bill.
If we are to have a clause to this kind, about which I am very doubtful, at least in those terms it seems a very sensible clause. I take it that the Government mean what it says there, and that they will not confine it to 20 employees, which we find later in the Bill and about which in later clauses we shall have some criticisms to make.
The Earl of GOWRIE: "Workers"is the operative word.
Lord WIGODER: In relation to the observation made by the noble Earl, Lord Gowric, I am not concerned about the provision that costs might be awarded; I am concerned about the provision that a tribunal may make an award of compensation, which seems to me to go far beyond the question of costs.
5.8 p.m.
Viscount COLVILLE of CULROSS Viscount COLVILLE of CULROSS: moved Amendment No. 3:
After Clause 1, insert the following new clause:
("Secret ballots on strikes and industrial action
.— (1) Members of a trade union may, in accordance with the provisions of this section, require there to be held a secret ballot for either of the purposes mentioned in subsection (2) below.
(2) The purposes referred to in subsection (1) above are: —

(a) determining whether the members wish to comply with a call or instruction by the officials or committee of management of the union that the members shall take part in a strike or other industrial action; or

(b) requiring the officials or committee of management to issue an instruction that a strike or other industrial action then in progress shall be ended.

(3) A ballot under this section may be required by the members of the union directly affected being five hundred in number or fifteeen per cent of those so affected whichever may be the less, by means of their giving notice in writing, indicating the matter upon shich they wish a ballot to be held, to the Certification Officer, or to the committee of management of the union or to the employer who shall forthwith transmit it to the Certification Officer.
(4) Upon receipt of a notice under subsection (3) above the Certification Officer shall, subject to subsection (5) below, ensure that a

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ballot is conducted in accordance with the following provisions: —

(i) he shall appoint himself or any other person or boyd whom he considers to be independent to be the ballot officer to conduct the ballot;

(ii) the ballot officer shall determine whether the persons who gave the notice satisfy the relevant provisions of subsection (3) above;

(iii) the ballot officer shall specify the terms of the question to be answered by the ballot, and the persons who shall be eligible to vote;

(iv) the ballot officer shall make arrangements for a free and fair ballot to be held, wherever practicable in the time when those eligible to vote would otherwise be engaged in the employer's employment, and shall announce the result of the ballot as soon as may be.

(5) The Certification Officer may refuse to conduct a ballot if within twenty-eight days prior to the receipt by him of a notice under subsection (3) above another such notice shall have been received by him indicating a matter which is similar or substantially similar to that indicated upon the second occasion.
(6) It shall not be lawful for any employer, his servant or agent, any employers' association or trade union or any member or official of that association or trade union to obstruct the ballot officer in the performance of any of his functions under subsection (4) above, and in the event of any such obstruction the ballot officer may apply to the county court for such order or declaration as the court may think fit to grant, but he shall have no other remedy.
(7) If after the result of the ballot is announced the officials or committee of management of the union fail to take such steps as may be requisite to comply with that result, the ballot officer may apply to the countty court for such order as the court may think fit to grant to compel such compliance.
(8) In any proceedings under subsections (6) or (7) above the court may order the costs of the proceedings to be paid, in such proportions (if any) as it thinks fit, by any person or body as it considers to have been in default.")
The noble Viscount said: On Clause 1 we had a most instructive— at least to me— discussion about the provisions in the Bill as to ballots. I listened with interest to everything that was said. As I think the noble Lord, Lord McCarthy, prophesised, it is perfectly true that this amendment suggests to your Lordships that we should take these provisions a little further. First, let me explain to the Committee why I seek to trouble the Committee with a discussion upon this subject at all.
In another place— and far be it from me to breathe a word of criticism about the way in which the procedure is there conducted— what happened was that their
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were no fewer than four new clauses relating to this general area, all of which were— I suppose for the sake of expedition— discussed together and upon which there was a general debate. There was a vote on one of them, which was overwhelmingly rejected, but there were, it seemed to me, a number of matters left unresolved, in that after all the criticisms had been brought forward there still seemed to be room for a provision which could be discussed, but which was not, and which would aviod a great deal of the difficulty that was there described. It therefore seemed to me and some of my noble friends that it would be wholly right for your Lordships to look at this again but to look at it on the basis of an amendment which I hope at least has succeeded in filing down the point at issue and avoiding a great number of the criticisms that were made.
The point to which I believe a number of people wish to apply their minds is exactly that which my noble friend Lord Gowrie has just mentioned, and I entirely understand the reservation that the noble Lord, Lord McCarthy, had about it. It is the question whether the decision about the initiation or continuation of a strike should be left to a mass meeting— not the instruction about what the issues are but the decision-taking exercise— or whether, in the case of unions which do not provide for it (and a number of them do), there should be a provision whereby those affected should be allowed to ask for a ballot. They are, after all, those whose wages are at stake, and I suppose in some cases, if the strike or industrial action goes on for long enough, their very jobs are at stake.
What, therefore, I seek to draw to the Committee's attention is the possibility that, where union rules do not provide for it as a matter of course, we should seek some machinery whereby those who would like to put the matter to the test should be able to do so, and I imagine that this would chiefly apply on those occasions already discussed by the Committee, where the unions do not provide expressly in their rules for this one way or the other.
I must deal first with the points that arose in another place, and I shall do so quickly. It was suggested there that there were a number of circumstances where

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ballots by the members of the union in relation to suggestions of official action would be both unlikely and inappropriate, because of the psychology of what was going on. Very well, but under the proposal I put forward there would be no requirement for any ballot to take place, because it lies entirely in the hands of the union members whether or not to take advantage of it. In other words, to pick up what the noble Lord, Lord Houghton of Sowerby, said, if the vast majority wish to remain silent, silent they may remain; there is nothing imposed on them in that respect.
Then it was objected in another place that the machinery being proposed was compulsory. It is here that I think I shall have terminological difficulties with my noble friend Lord Gowrie and perhaps with noble Lords opposite because I do not conceive that the proposals I put forward can in any proper sense of the word be called compulsory. They would be exercised only when a substantial number of members of a union of their own volition decided to exercise them. To have any ballot, you must have some machinery whereby it is started. If it is an official ballot, the decision is no doubt taken by the proper officers of the union. If it is a ballot of the sort I am suggesting, my proposal is that it should be started off by the requisite number— and there is a minimum— of the members of the union. So although I know I shall be told, for reasons that I frankly cannot understand, that this is a compulsory ballot, I do not agree with that point of view.
On the drafting of the clauses that were before another place, there was a criticism that ballots could prolong strikes or enable militants to cause disruption. If the Committee looks at the two limited purposes for which alone this clause is designed, the Committee will see that in subsection (2) there is very little chance of that taking place because it operates only for union members to prevent their official authorities, whether national or local, from either calling them out on strike or industrial action or prolonging it; it does not give an opportunity for people to initiate strikes if they are militant and wish to do so, and therefore I hope that is cured.
It was further suggested in another place that provisions of this sort would
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encourage unofficial action and undermine the authority of trade union leaders. I am anxious to hear what noble Lords have to say about that. It would seem to me inherently unlikely. If there is a piece of machinery whereby trade union leaders know that the voice of their membership can be made known to them— and be made known compulsively to them— then they are likely to be even more careful to make sure they are in tune with the vast majority of the union members concerned. That would seem to me to indicate that they are likely to take a more, rather than a less, responsible attitude towards their responsibilities and towards their members.
Of course, in particular the criticism that arose on this score in another place derived from the fact that the proposals were such that the sanction would be the loss of the trade unions' immunities. I have been very careful to avoid that and there will therefore be no danger of that particular encouragement being given to unofficial action. Indeed, I concede that I have not dealt with unofficial action, because having read with great care the speech of my right honourable friend the Secretary of State, I was very much persuaded by the difficulties which, he explained, lie in the way of that course.
I hope the drafting of the new clause is fairly clear. I have been most careful, as I said, not to put forward any sanction in the way of loss of immunities but, rather, a very simple one for the person who is running the ballot. There is recourse to the county court, which has powers to make the necessary orders and which of course is local and can operate very quickly. It has been the experience in recent years— and I think of Duport Steels v. Sirs — that the unions obey orders of the court, and indeed I know that every encouragement has been given to individual unions by the union movement as a whole so to do. Therefore, there seems little difficulty, at any rate for the moment, in trying it on the basis of that sanction.
There is the Green Paper to come and I do not wish in any way to forestall what the Government may suggest in that. There are also costs, which are dealt with in subsection (8), and those can be imposed on anybody in default. It is impossible for a Member of your Lordships' House to impose the cost of these proceedings

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on public funds— it is also, I understand, impossible for a Back-Bench Member in another place— but if some machinery of this sort should find favour with my noble friend and his colleagues on the Front Bench, they, and they alone, would be able to put that right. What I am putting forward, drafted as best I can, is an opportunity for those whose livelihood is in danger, and only for them. This gives a chance to have the ballots for which their union rules do not appear— or at any rate do not appear clearly— to provide and which the union of its own motion will not provide for them. I think that the new clause meets all the objections raised in another place, and I am very anxious indeed to hear what noble Lords in the Committee have to say about it.
The noble Lord, Lord McCarthy, has made clear his approach to our proceedings here, and I shall be particularly glad to have guidance from his great experience about practical difficulties that would arise, because this is the attitude that I put forward to the Committee: we ought to try to discuss this matter on a pragmatic basis to see whether there is some scintilla of machinery which could be devised and which would fit into the existing philosophy of the trade unions and the practices and indeed the diversities that we have all heard about.
Therefore I invite the Committee to engage on a constructive debate, though I hope not a very long one, to see whether after all we can provide for a small extension to what is already included in the Bill without in fact doing any very great harm to the underlying philosophy of the measure. I beg to move.
5.21 p.m.
Lord SPENS: I rise to support the amendment. I consider that it answers some of the points made by the noble Lord, Lord Houghton of Sowerby, earlier this afternoon when he spoke about ballots being necessary only when the important matters appear to be contentious. In this case we consider that the members of a union should be given the opportunity of testing the strength of feeling inside the union for a decision which has already been taken by their leadership to call a strike, or, later after the strike has started, to see whether the feeling of the member-
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ship is that the strike should be ended. Those are the only two occasions on which this machinery would come into operation, and I believe that it gives what the noble Lord, Lord Houghton, described as the silent majority— and why are they always silent?— an opportunity of not remaining silent without prejudicing their livelihood by appearing to dissent at an open mass meeting from suggested decisions put to them from the platform.
I believe that we should look at this matter in a very similar light to the provisions which already exist for shareholders in a company who, if a sufficient minority of them so desire, have the right to call an extraordinary general meeting of the company and to test the decisions of the board. I am quite sure that the noble Lord, Lord McCarthy, will tell me that this would be disruptive of the trade union leadership, but that right given to shareholders is not disruptive of the boards of companies. They continue to direct the affairs of the companies, and only very occasionally do they have to alter a decision because their membership, their shareholders, think otherwise. Therefore, I commend the amendment to the Committee.
Lord ALPORT: I should like to make one remark with regard to the amendment. I think that the noble Lord, Lord Spens, is wrong in trying to draw a parallel between the position of shareholders in a company and the position of trade unionists in a trade union movement. I think it an absolute fallacy to suppose that what can apply to a public or private company can apply to the very often highly charged political situations in which trade union leadership finds itself. I believe that the amendment, if accepted by your Lordships' Committee, would in fact go far to act against the interests of what we require in the trade union movement, which is strong leadership. It would undermine the position of the leaders, and, what is more, it would I believe assist the militants.
The speech of my noble friend Lord Colville of Culross was based on the assumption that the rank and file trade unionists are usually in favour of ending the strike, whereas the leaders and the shop stewards are in favour of its continuing, but that is not always the case by any manner of means. I believe that what is important now is to take the Bill

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only as far as is intended at the present time, to see how it goes, and not to try to add to it, particularly after it has been considered carefully by another place.
Therefore, I very much hope that my noble friends will not press this matter to a Division. Obviously there is everything in favour of a discussion of it, but I very much hope that we do not try to take the Bill farther than is intended at the present time, because we know very well the problems that have arisen on earlier Bills dealing with this subject. The policy that we should follow here, so far as the Government are concerned, is to try to make some progress along the lines towards better industrial relations, see how successful that is, and then, if necessary, think again in the light of the experience of (he working of the Bill when it becomes law.
Lord WEDDERBURN of CHARLTON: The remarks of the noble Lord, Lord Spens, require one of those of us who sit on this side of the Committee to comment. I hope that we are not to have the debates on this Bill against the background of the claim that the avenues of democracy in the trade union movement are so closed, as the noble Lord suggested. I agree with my noble friend Lord McCarthy: the avenues of democracy in the trade union movement in Britain today are more effective and wider than those in almost any other institution in our society. It really will not do to ignore the fact that trade unionists spend much of their time voluntarily administering their union on a democratic basis in the branch, the regional committee, the district committee, the specialised committees and groups, annual conferences and special rules revision conferences. It really will not do for a Chamber of this authority to approach trade union affairs in that manner.
I agree with the noble Lord, Lord Alport, that trade unions are not like companies. It is one of the assumptions of those who speak to amendments of this kind that they are organisations of people, rather than for people. The noble Viscount, Lord Colville of Culross, moved what is in my opinion a rather extreme amendment in a very moderate manner, but I suggest that it needs to be looked at with care, especially— if the noble Earl, Lord Gowrie, can be persuaded to consider this point—
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because it is along the road that the Government's own logic is pointing.
The amendment— though, with respect to the noble Viscount who moved it, I think it is very badly drafted— is rather like the logic of the noble Earl's own Government position, f cannot quote his exact words, but I hope that I do not misrepresent him when I say that in one of our earlier debates he suggested that the wider use of secret ballots was regarded by the Government as an answer to many industrial relations problems. We have not had them specified very well in this Chamber, but the use of, and belief in, ballots is of course exposed here in a very wide form.
When the noble Earl comments that we on this side of the Committee divided against Clause 1 here when that was not the case in Committee in another place, first, he omits to notice that on5th February, as reported at column 210 of the Commons Official Report, our honourable and right honourable friends made very clear that they did not like the clause, particularly in relation to its practicalities, and that certain matters were to be considered in that place later on Report.
Secondly, in so far as he accuses us of being more affected by the classical concept (which I will dare to put, as he did not) of timeo Danaos et dona ferentes, he must remember that it was he who presented the Bill as a gift wrapped in five parcels at Second Reading, and it may be that by now we have been able to see Clause 1 in its context rather better than our honourable and right honourable friends could when they saw it in another place. It is all part of the plan; and the plan, I suspect, causes the Government some embarassment when it comes to this amendment, because, of course, if you are going to have ballots curing industrial relations problems, although you do not say what they are, then I suppose logically you ought to consider (and, indeed, I wonder whether the noble Earl will give us a guarantee that the Government will not consider in their Green Paper) going further down the road towards this type of amendment. The noble Earl shakes his head; I will get no such assurance. In that case, we must look at this very carefully, because this may be what comes next year. This may be only the precursor

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of what comes next year, and the Government will be looking at the problems, of course.
The first problem in the clause is that members are to be balloted as to whether they
"wish to comply with a call or instruction"
to take strike action. There is nothing in the clause saying that those members who wish to have an instruction should be able to ballot to demand such an instruction; but, of course, any even-handed Government would have to give the chance of that question as well. Then there is to be a ballot on the requirement that the committee of management issue an instruction that strikes be ended. There is no reference to strikes continuing. It would be difficult for the Government to resist the view that the members should have the right to vote on the issue, not merely on loaded questions.
Of course, that is one of the problems, because the Government know very well, as my noble friend Lord McCarthy suggested, from the experience of the compulsory ballots of 1972 under the Industrial Relations Act, from the experiences in the United States and Canada and from various types of experience with compulsory ballots, that the problem is that you cannot rely on the result that you arc going to get, because workers are rather independently-minded people. They are particularly independent and rather "bloody-minded ", if I may use the phrase, when they are forced into certain situations that they do not want to be in; and if you force them to vote on an inflamed industrial situation they are very likely to take a very sharp and acid attitude to the matter and, if they are compelled to vote, they are much more likely to vote to continue the action than to end it, in many situations. Experience throughout the world shows that is so.
We are told that this will make union leaders more responsible. Trade union leaders are in a situation of making democracy work by that delicate complex of the two facilities and faculties required— leadership, on the one hand, and response to the genuine feelings of the movement at grass roots level, on the other. The trade union leader has a much greater difficulty than any politician in bringing those two faculties together in responsible
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leadership. He will not be helped by clauses of this sort, on which I make only two other remarks because, again, they are relevant to what may come next. If you are going to have compulsory ballots, you arc going to have to decide certainly three things— and a lot more, of course. You have to decide to give the county court jurisdiction, and then to have the disobedience of its orders made into some kind of contempt of court.
The noble Viscount, Lord Colville, suggested that trade unions will always obey the orders of the ordinary courts. On Second Reading I had occasion to say, and I say it again, that neither this Government nor any other should be so confident at squandering the capital of the ordinary legal system of this country that they use it for purposes which trade union members and their leaders may not accept. It is not a capital to be squandered lightly on unwise legislative measures; and if the noble Viscount quotes the recent case of the steelworkers' leaders accepting an injunction until it was reversed, of course, by the House of Lords four days later, nevertheless he will also have noted that in the "Day of Action"injunction one of the printing unions decided democratically not to accept the injunction, and in fact defied it. I hope there will not be many more of those occasions, but it depends on the Government and on those who put measures like this before legislatures how many there will be.
Then you have to look at some other features of the road down which the Government measures point. First, you have to say, "Who can demand the ballot?"Here, it is 500 members or 15 per cent. Surely, anybody who knows anything about trades union affairs knows perfectly well that this would be a recipe for every dissident group, be it militant or be it moderate, be it up or down, Left or Right. Every group would then demand its ballot, and you would not keep it to strikes. Why should you keep it only to strikes? If you believe in having compulsory ballots, why keep it to strikes or industrial action? There are many other very important things.
Then you have to say, "Who is going to decide the question?". You take that, and you give it to the certification officer. Down the road you go to the

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law overriding the rules of the trade unions, and the trade unions are picked on, as they are in later clauses of this Bill in other ways. This is a quite logical clause in many respects in regard to the later clauses of the Government's Bill, however moderate Clause 1 may have been. You go to the certification officer and you say, "No, the union cannot choose the question; the certification officer shall choose the question". What is more, although it is put in terms of a prohibition the clause would in fact allow him to insist upon a ballot every 28 days. So every 28 days there would be the workers voting on a question made up by the certification officer! I can only think that the noble Viscount's experience of trades union affairs has got to such a despairing pitch that he feels he can only keep the workers out of trouble by keeping them constantly voting at the ballot box. It is an extraordinary picture to put before your Lordships' Committee.
Finally, I comment on a matter which will come before your Lordships' Committee in connection with a later clause. When ballots are discussed they are always discussed, and quite rightly discussed, against the phrases, "secret ballots" and "free and fair"; and certainly later in this Bill we shall want to question the concepts and the meaning of "free and fair ballots ". Very little thought has been given to this in this country, but other countries have experience of discussions on this matter. We are entering an era of ballots because they are fashionable. I suspect they will solve far fewer problems and may do a lot of harm if this road is proceeded with, compared with the ideas of those who now sponsor them, just as it would have done harm to insist upon the binding nature of collective agreements which British management did not wish but which was so fashionable in 1970, on equally bad grounds.
Then, if you proceed on this road you are in fact taking away from the union its democratic processes. Noble Lords who put forward viewpoints of this sort, as the Government do later in the Bill, are in fact taking away from the trade union movement, and are singling out the trade unions as bodies which shall not be allowed to decide certain matters for themselves, including even their own
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rules at democratic annual or other conferences. That is what this clause means, and that is what some later clauses of the Bill mean; and in that respect noble Lords on this side of the Committee could have nothing to do with a clause which would be very likely to give a great deal of difficulty and trouble to those managers and trade union leaders, shop stewards and works line managers, who actually have to do the work after the legislatures and the judges have packed up and gone home.
Baroness GAITSKELL: If the noble Lord will allow me, may I add two sentences, not only as a non-lawyer but as someone ignorant of the law? One thing that worries me— and I am not going into this amendment at all— is the fact that through this Bill there is a spread of secrecy which slightly alarms somebody who is not familiar with all the ins and outs of the law. It has really become an obsession with noble Lords on the other side— this secrecy which is stalking the whole of trade union law. Finally, may I say what a pleasure it is to see the noble Viscount, Lord Colville, speaking from the opposite Benches again after being a long time absent.
Lord HANKEY: I should like to intervene at this point to say that I hope the Government will think rather seriously about this amendment. I do not really agree with the noble Lord, Lord Alport, for whom I have the highest respect and to whom I always listen with the greatest attention. I think that Parliament is really faced with the absolute necessity of dealing with the trade union situation as we find it today; and, looking back over the last two years, I find that it has done really enormous damage to our industrial relations, spurred on by inflation, for which I blame successive Governments, which has a disastrous effect on industrial relations.
I should like to say this. Looking back at some of the trouble we have had in these two years, it is apparent that the measures in the present Bill do not really go far enough to deal with it. I think seriously that Parliament has an obligation to take these practical considerations into account and to deal with them effectively. I am sorry that this Bill did not reach this House last year. I am sorry that, now it has come, it is not considerably stronger; but I shall support it all the way through.

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I should like to ask the Government to think seriously about this amendment. I should like to give the reasons. Let us think back to British Leyland. Look at the trouble there was there about the shop stewards who obviously did not represent the membership of the unions. They obviously did not. Eventually, the management of the company called a ballot and the ballot warmly espoused the company plan by a huge majority— against the advice of the shop stewards and, I presume (although I do not know whether my memory is at fault), against the advice of the trade unions. I am as keen as anybody that we should have effective, responsible and strong trade union leadership. I am one of those who think that the legislation we have had has taken power out of the hands of the leaders of the trade unions. I believe that we have a great many good ones and I have often said so. This was not the case with British Leyland.
I recall that there was a good deal of to-ing and fro-ing. The AUEW approved the dismissal, eventually, of Mr. Robinson. The TGWU tried to call a strike about it and eventually changed their minds; and it is apparent that if there had been a ballot that would have had the effect of settling the matter. They would easily have found 500 members of that company, or of either union, who would have pressed for it and got it and the matter would have been settled with less disruption to production— and that is the important thing; we must have production not disrupted by these constant troubles.
I should like to say to the Labour Party that there is a very sound principle in Left-wing thought: that is, never separate yourselves from the masses. A system of ballots would help the leadership keep in touch with the masses in the unions. It ought to be a good thing and it ought to be welcome to them. I should have thought that it could be recommended on that ground alone. I hope that on both sides of the Committee your Lordships will think again more seriously about this amendment. It does not go very far. It is a very moderate amendment and I believe that it would be useful in the light of the history of the last two years.
Earl DE LA WARR: I should like to ask my noble friend Lord Colville one or two
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questions about his amendment. The first is a fundamental question. He has said that he believes that his amendment does not produce a mandatory result. I hope that we shall learn a little more from him about that. It seems to me that it is not, as he said, a question of semantics; it is absolutely mandatory, doubly mandatory— 15 per cent. of the work force make it mandatory on the certification officer to make it mandatory to have a ballot. I am sure that I am being over-simplistic about this, but I can see no shadow of doubt about it.
My noble friend Lord Colville and I have worked together in different circumstances for many years. No doubt he will explain to me kindly why this reasoning is at fault. If I am right that this is mandatory, I shall not detain your Lordships because I have two other matters to raise as to why I oppose it, other than to say that I believe that, in the long run, if the Government make ballots mandatory the effect will be counter-productive and the workers are going to respond in the wrong way and psychologically take offence which they would not take otherwise.
The two other matters are these. My noble friend used in subsection (2) (e) the phrase "or other industrial action ". I know that that was in the amendment on Report in the other place, but it does not appear to me to be a very precise phrase. Knowing how precise my noble friend is, I wonder whether he can help us with that. Does it mean, for instance, an overtime ban or going slow or having what some of us know about, which is an unofficial sickness roster, whereby only three out of five turn up each day? I think that he must be more precise about that phrase if this amendment is to be looked at seriously. Finally, and I think it is a lesser matter, in subsection (6) he refers for the first time to the county court and says that there shall be no other remedy than that. I should be interested to know what he has in mind on that score.
Lord UNDERHILL: I am pleased that the noble Lord who has just spoken has picked up some of the points on the amendment. I should like to do that rather than to speak on generalities. Taking up some of the points in the amendment, I should like to ask how the 500 members or the 15 per cent. will actually give the notice

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in writing. Do they all have to sign the notice? Do they all have to give their names and addresses? Do they all have to give their union numbers? It is said that I know a little about dissident groups. As has been suggested, this would give opportunities for little groups all over the place. How do we satisfy the certification officer that all this number of members has genuinely decided to make this written request? I cannot find that in the amendment. The certification officer will presumably have a letter saying that 500 members request this. How are we going to satisfy the certification officer that 500 members have made this request? Also, I cannot see clearly in the amendment whether it is the 500 members or the 15 per cent. in one workplace only or whether they can request a ballot of the entire union. That is not clear in the amendment; so that we must ask that question. The noble Viscount, Lord Colville, put forward his amendment in a very dispassionate and clear manner, but he said that this was directed at those unions who do not have strike rules— but it is not in the amendment.
Viscount COLVILLE of CULROSS: The noble Lord will forgive me for intervening. I did not say those that have no strike rules, but those that have no ballot rules.
Lord UNDERHILL: That is not in the amendment, either. I am not a lawyer, but my reading of the amendment is that if the certification officer receives this written request he must conduct a ballot, whether the union has ballot rules or not. That is a recipe for trouble; not for industrial order but for disorder. Let us say that at the time he receives this request— which he must carry out; and I agree that it seems to be mandatory— the question that he will decide (and there is no suggestion that' he will consult the union about this question) is very embarrassing to the situation of negotiations that are taking place and that publicity on this matter would be extremely harmful; the certification officer must conduct the ballot. He has no option; he will decide the question. It seems to me that, although there may be good intentions behind the amendment, it is highly dangerous and, far from helping the situation, will make it more inflammatory.
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My last point is that it is also proposed, not that union officers will be compelled to conduct the ballot but that an outsider will do so. Those who know anything about workpeople will realise that it will certainly inflame them that somebody else should come in and administer their organisation for them. Not only are they going to be told that they must have a ballot, but somebody else will conduct the ballot for them. For all these reasons, I hope that the amendment will be resisted.
5.50 p.m.
Lord ROCHESTER: Those of us who wish to speak must do so as individual Members of this Committee, and I should like briefly to do that on the basis of such industrial experience as I have had. In this matter, it seems to me that the secret ballot will prosper more by way of encouragement than compulsion so there can be no possible grounds for a feeling on the part of trade unions that their leadership is being undermined. I know that the noble Viscount, Lord Colville of Culross, claimed that there was no compulsion about this; but I respectfully suggest to him that in so far as a particular number or proportion of the workforce affected by potential industrial action may express the wish for a ballot, then, as the noble Lord, Lord Underhill, correctly said, ballots there must be, and to that extent the position is surely a mandatory one. I will not say the purpose but certainly an effect of this new clause is understandably to take away power from union leaders in certain circumstances and give it to people on the shop floor.
As I sought to make plain on Second Reading, I am troubled by what seems to me to be the negative attitudes which have been struck recently by certain trade union leaders; but I do not feel— and here I must part company from the noble Lord, Lord Hankey— that it will contribute to the development of the more positive and responsible attitudes that all members of the Committee will wish to see if such leadership as is now being given is— I will not say again "undermined "— certainly threatened, as threatened it will seem to be by many within the trade union movement should this amendment be passed.
It may also be, as a number of Members of the Committee have suggested, that

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there are certain technical defects in this amendment. For my part— and I think I speak also for my noble friends— we welcome any comments on that point which the noble Earl may feel able to give.
Lord HOUGHTON of SOWERBY: I will not detain the Committee for more than a moment or two. This amendment has been torn to ribbons by my noble friends Lord Wedderburn and Lord Underhill. There are other desperate weaknesses about it which I will not trouble to explain to the Committee, but I say in brief that this amendment would be a prescription for anarchy at the beginning, chaos at the end, with the certification officer driven round the bend, even if he were not driven out of the works. The truth of the matter is that this is just impracticable. I wish some solution to this underlying problem could be found. As the noble Viscount who introduced the amendment said, this problem was not resolved in another place. The truth of the matter is that in legislative terms it is almost insoluble. Bear in mind also that we are dealing with part of our institutional life, which of itself has democratic principles and democratic experience.
We are trying to impose upon the trades union movement a degree of democracy which we fear they do not have and which we think they ought to have. We hope that, as a result of imposed democracy, more sober counsels will prevail in the decisions of the union. Where statutory democracy can be justified, where contentious decisions may have to be taken relating to the policy of the union, one has not the time to carry out this procedure of balloting when the occasion for a strike call has already arisen. This is the problem. The amendment is dealing with the call that has been made as to whether the members shall respond to it. Imagine in those circumstances what would happen if a large section— probably the majority— of the members of the union decided to respond to the call before the 15 per cent. had put their application in or, having done so, before it could be acted upon. There is nothing in the amendment which deals with the situation which would arise if a large number of members in that particular union were already on strike before the ballot had had time to operate.
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I want to leave that and come to what I think is the fundamental issue here. Not all is well with democracy in the trades union movement. We know that. We also know that these amendments— and proposals like them— do not arise only from a desire to restrict the power of trades unions. They arise because there is considerable public disquiet about the way the unions are using their power. We must face this. What I regret about the trades union movement at the present moment is how lacking it is in self-analysis. All repositories of power should have some capacity for self-analysis: the way they use it, from where they get it and whether they are justified in all that they do. This is human behaviour to some extent, and when I look round the House of Lords— courteous, well behaved, brought up in a proper manner, distinguishable in many respects from another place where they indulge in a little more vitality and make a little more noise— I wonder sometimes whether we are fit and proper persons to deal with the turbulence of collective activity. We do not understand it, and I do not think we can control it. We sit here calmly trying to prescribe a law which will deal with a volume of human behaviour which is puzzling everybody in the body politic today.
This is what the trade unions should be examining in their own interests at the present time as well as other members of society applying their minds to this problem. I wish that the trade union movement would not think that all criticism is "union bashing "and hostile. It is not. I speak from 10 years' membership of the general council myself and 38 years as a secretary of a national trade union. The only thing that I have never done in my 38 years' experience— and I have done everything trade unionists do— is call people out on strike. It was never necessary to have a ballot in my union as to whether they should respond to a strike call. I feel this problem remains. It is scarcely rewarding enough for us to go on with it very much longer in dealing with this Bill. It has profound implications for the whole of our future. We have to look at it in relation to industrial policy, industrial relations, Government policy— all is involved here.
I say one thing in conclusion. I believe that our trades union movement has a greater responsibility for the welfare and

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future of Britain than so far they have shown evidence of acknowledging. That is something that they ought seriously to consider.
Lord HARMAR-NICHOLLS: The last part of Lord Houghton's speech was very helpful indeed; and it was based upon some experience. What he did was describe that a vacuum exists and he suggested that it was a dangerous vacuum. I agree with him. I look upon this amendment as an attempt to fill that vacuum with something that is likely to leave us with a better situation than we have at the moment. The part of Lord Houghton's speech which I think was wrong was where he said that the noble Lord, Lord Underhill, had torn this amendment to shreds. The noble Lord, Lord Underhill, did not do that. Indeed, he did not attempt to do that.
Several noble Lords: Lord Wedderburn!
Lord HARMER-NICHOLLS: The noble Lord, Lord Underhill, is one of the experts on this and we must listen to him with care because he has something to contribute. The noble Lord, Lord Underhill—
Several noble Lords: Lord Wedderburn!
Lord HARMAR-NICHOLLS: The noble Lord, Lord Houghton of Sowerby, said both. He said Lord Wedderburn and then he also said Lord Underhill. I noted it particularly.
Lord HOUGHTON of SOWERBY: They each had their ribbons!
Lord HARMAR-NICHOLLS: I am simply talking about the speech of the noble Lord, Lord Underhill, at this point because it was made only a few minutes ago and it did not at all fit in with tearing the amendment to shreds. He was using the Committee stage of a Bill going through Parliament absolutely correctly. I heard nothing in what he said which undermined the principle behind what my noble friend is hoping to achieve. Indeed, he said on several occasions that it was well intentioned and that he could well understand the feeling behind it and what flowed from that was that he thought perhaps to some extent something like that would perhaps fill the vacuum which
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the noble Lord, Lord Houghton, said existed. What did the noble Lord, Lord Underhill, say? He said "I am not attacking the principle "— at least he did not in that speech: I hope I am not encouraging him to get up and do so now.
A noble Lord: You are!
Lord HARMAR-NICHOLLS: I am sorry, but I am talking about the first one and we will take that as the authentic one, I think. What he said was that this is impracticable. He asked: "How are you going to arrive at these 15 per cent.? How are you going to check up whether the 500 really need it? Who is going to decide that and set the ball in train?" Those are very proper questions to direct against an amendment during the Committee stage of a Bill. If we use Parliament correctly we shall use the Committee stage to find out the sort of weaknesses he described so very well, and we still have time at Report stage and later to put those weaknesses right so that the main principle, which has not been questioned by the noble Lord, Lord Underhill, so far, can still be put into operation to fill the vacuum that was so eloquently described by the noble Lord, Lord Houghton.
I hope the way we can approach this amendment is by not necessarily voting on it at this stage. I hope that the Government will take into account the sort of evidence they have had from the noble Lord, Lord Underhill, with his experience of this, to see whether they can find some way of meeting the practical points which he has very properly put in front of us. If at a later stage there is an amendment which embodies the principle, which has not been questioned and which was supported to some extent by the very excellent speech of the noble Lord, Lord Houghton, it may well be that we can remove the practical problems described so graphically by the noble Lord, and still retain the principle which I think is so right.
Therefore, what I urge your Lordships to do at this stage is to have the expert advice that is gathered from all quarters and for it to be taken into account by my noble friends on the Front Bench. I hope that they are not going to be stiff-necked about this and that they will use parliamentary procedures in the way they ought to be used. Whatever is done in

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another place has nothing whatever to do with what we honestly believe ought to be done in this place. We are part of Parliament: we have an experience in this Chamber which perhaps they may not have in the other place, although they may have qualities that we cannot hope to have. But I believe that if we use the system as it was intended on this particular amendment, the principle has got enough in it to be pursued further.
I believe that the principle behind the amendment, with the improvements that can arise from the criticisms we have heard, may well be put and that this House can give good service to the union movement— to give them, if you like, encouragement to put their house in order, as the noble Lord, Lord Houghton, said ought to be done. It could well be that we shall be placing on the statute book something that will relieve this country of one of the real obstacles in the way of being able to make use of our skills and industry to re-establish our true position in the world as it was once and as it ought to be now.
Lord UNDERHILL: If I may have the indulgence of your Lordships, I should like to make sure that the official record is absolutely clear, because it would be wrong if I remained silent and gave the impression that I was completely in favour of the principle behind this amendment. I am not. I said that my remarks were not to be generalities. I believe the best way to destroy an amendment is to attack the actual wording of it and what is proposed. That is what I attempted to do, but basically I am opposed to the principle. I said it would be a disaster to industrial relations.
Lord ORR-EWING: I must confess I thought I was living in Cloud Cuckoo-land when I heard the noble Lords, Lord McCarthy and Lord Wedderburn, describe the trade union movement as providing the best democratic organisation in the country. That is not what the country think. They did not think that after the winter of discontent. They did not think it last May, and in the last Gallup poll I saw on the trade union movement something like 60 per cent. of trade unionists thought it desirable that there should be this Bill in order to set the parameters and to set down, in what I
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hope would be more easily-read law, the facts of the situation. Incidentally, 67 per cent. of trade unionists, when asked, said they did not like the closed shop and wanted that to be attended to, too.
Last weekend— if this is this perfect democracy we saw— the Labour Party and the trade unions went into conference to decide their future policy. If I read my newspapers correctly and if they were accurate in their reporting, towards the end of the day the moderates sloped off, leaving behind a few people led by Mr. Wedgwood Benn to propagate the Left-Wing policies. They then cast some votes. I think one chap cast one and a quarter votes. That does not seem to me a very sensible way of winning a democracy. Incidentally, of course, they expressed the belief that they should carry on with nationalisation, and if that is not a dead duck among most of the voters in this country, I should be amazed. Other things also were mentioned, such as the abolition of this House—
Lord WEDDERBURN of CHARLTON: The noble Lord makes an interesting point. Is he, in speaking to his amendment now, advocating compulsory ballots within the Labour Party if 500 members or 15 per cent. demand it? There is a distinction, of course, between the Labout Party and the trade union movement.
Lord ORR-EWING: I am really drawing attention to the statement the noble Lord has made. He said he thought that democracy in the trade union organisation was among the most perfect in this country. It is not the view which— yes, I have the note here and I took it down carefully, and Hansard will show it tomorrow. I should like also to remind him that the trade union leaders get out of touch with the rank and file. That is quite understandable at district level, area level and national level, just as professors get out of touch with the thinking of trade unionists, as we shall learn before this Bill gets very much further.
Nor do I accept the idea that this is a charter, though I deeply respect anything that the noble Lord, Lord Underhill, says in this area because he is very wise and speaks with a great deal of experience, apart from the fact that he is a very likeable chap! He said this was a recipe

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for the dissidents. I think we have to remember that the signatures of 500 people means quite a lot of people to get around to. That is why my noble friend has set it rather on the high side, exceeding the 10 per cent. of company law by making it 15 per cent. In a small works of 200, that is 30 people— still quite a lot of people to find to stand up and say they want a ballot to be taken. I do reflect that we have in some of my works members of the International Socialist Workers' Party. They are not in tens and twenties but in ones and twos. Trotskyists also come in ones and twos but, by God! they are extremely disruptive and very effective. But it is not in numbers like 500 or 15 per cent. that they exist. I reflect on the fact that Lenin said he created his Communist revolution with 2, 000 dedicated Communists— 2, 000 out of the whole population of the USSR. So it is not the large numbers who provide the leadership of the dissident groups within the trade union movement. It is the small, effective, dynamic and hard-working ones.
I would have thought that my noble friend's amendment, which he moved in such carefully chosen terms and such well-argued phrases, would have strengthened the confidence of the local trade union leadership in the local works— "Have I got the lads behind me, or haven't I?" If a local leader gets an endorsement that he has, then he can go on with greater confidence. Is there anything wrong in democracy in consulting those you are trying to lead and offering facilities to which my noble friend's amendment refers? I cannot help reflecting that had poor Mr. Len Murray been more in touch with the thinking of trade unionists, the 14th May fiasco would not have taken place: it was the fact that he had grown so far out of touch. We are seeking, in a quite simple, all-party amendment, to give them the opportunity of keeping in closer touch when there is a sizable minority desiring it. That is all.
I hope that my noble friend Lord Gowrie will not pick on the wording. It is very difficult for Back-Benchers, even those as adept as my noble friend Lord Colville, to phrase an amendment correctly. It is just as difficult, by the way, in the House of Commons. We do not have the resources of the Front
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Benches on either side. But I cannot help feeling that the instinct is right. Let us give the opportunity to people in small businesses, as in large, when they are a sizable minority, to ask for a vote. I hope that my noble friend will deal with the amendment in that spirit, and perhaps come forward at Report stage with some thing constructive on his own account, which will make this Bill a better one.
6.11 p.m.
The Earl of GOWRIE: We have had an extremely lively and good debate on this issue. I hope that on one matter the advice of the noble Lord, Lord Houghton of Sowerby, is not taken, and that your Lordships will not resist discussing what he called the turbulence of collective activity, because it seems to me that we discuss it informedly and well. A very clear division exists between the noble Lord, Lord Houghton of Sowerby, and the noble Lord, Lord Wedderburn. I highlight that, not in any sense to embarrass either of them, but because it sheds some genuine light on the difficulties inherent in the debate and indeed, perhaps, in the clause of my noble friend Lord Colville.
The noble Lord, Lord Houghton of Sowerby, said that not all is well with democracy in the trade union movement. He said— I think I am not misrepresenting him— that it is, in some way, lacking in self-analysis. That was certainly not the picture of the trade union movement that came from the speeches of the noble Lord, Lord Wedderburn, or indeed of his noble friend Lord McCarthy. Because the trade union movement is so important, and because modern industrial society is so interwoven, there is no such thing as somebody who can be indifferent to union democracy, or not have a view about it or not, in some way, be affected by it. Therefore, of course, we are right to debate it. We are in no sense cheeky (I think that was the word used by the noble Lord, Lord Wedderburn) to do so— I should have said the noble Lord, Lord McCarthy. I must not treat them as coterminous. It was the noble Lord, Lord McCarthy, who used the word "cheeky ".
I do not agree that my noble friend's amendment was torn to ribbons— far from it— and, though I have considerable

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misgivings and anxieties about it, I should like at the beginning to emphasise the broad common grounds that exist betweeen my noble friend and me on this matter. Of course, the Government strongly favour secret ballots within the trade union movement. We have made that quite clear throughout the proceedings on this Bill in Parliament, and also this afternoon in the previous debate. We intend to provide public funds for postal ballots for union elections and for other important issues. There is a widespread public view that unions make insufficient efforts in this area, and when I say "a widespread public view" I include all tests of opinion within the trade union movement itself, and not merely outside the movement.
We are all anxious that strikes and other industrial action should not begin without clear evidence that those concerned have freely decided to take such actions. The last Government showed their concern on this issue, as indeed the TUC did in its guide, during the period of office of the last Government, on the Conduct of Industrial Disputes. In the joint statement by the then Government and the TUC in February last year, the Government endorsed the TUC's,
"strong recommendation that union rules should provide for strike ballots to be held at the discretion of the union ".
Our hope is that unions will increasingly take up that advice, and that strike ballots will increasingly be held when strike action is proposed.
But the need for secret ballots is not limited, as many noble Lords have said, to the area of proposed industrial action alone. We place great emphasis on the need for secret ballots for the election of officers at national level. Of course, this will not always lead to moderate, responsible or favourable union leadership to one Government or another. We are not so naive as to believe that. But we do believe that strong and moderate union leaders, supported by the broad base of their members, can best come to the fore through the secret ballot and that, in the long run, this is the most effective way for the union movement itself to allay some of the public anxiety and disquiet, including disquiet among its own members which the noble Lord, Lord Houghton
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of Sowerby, eloquently brought to your Lordships' attention.
Of course, as I have said, you do not always get the results that you want' You do not always get the results that you want at a general election, as noble Lords on both sides of the House know very well. But we do not sneer at ballots, as I think the noble Lord, Lord Wedder-burn, has done from time to time, simply because they do not always turn out to provide the results that you want. Like my right honourable friend the Chief Secretary of the Treasury said in respect of tax cuts, it was not so much their incentive effects that he approved of. He thought they were good in themselves, and I certainly agree with that.
Lord WEDDERBURN of CHARLTON: Perhaps I misphrased what I said, and the noble Earl is unable to understand the point. Ballots are not to be sneered at. Ballots are a good method of testing the opinion of members when a union wants to use them, and in the way that a union decides to use them. There are faults in union democracy— we said so— but what the noble Earl has not explained, and perhaps he will now explain it since he is favouring this clause so much, is exactly what industrial problems will be solved by enforcing ballots upon the unions, as this clause wants to do.
The Earl of GOWRIE: The noble Lord must not anticipate me in what I am going to come to in respect of the clause itself. I do not think it is an unfair representation of the general tenor of his remarks about ballots so far, to say that he was— let me amend the word "sneering "— expressing very conspicuous scepticism about their virtues.
Thereare encouraging signs that a change in attitudes is coming about, that the movement towards secret balloting is growing and that militant and irresponsible union leaders can less easily dragoon members into taking action in which they have had no say. I would say to the noble Lord, Lord Hankey, that I agree with him that there are signs that that tendency is coming to the fore. His noble friend on the Cross-Benches, the noble Lord, Lord George-Brown, wrote an eloquent article in, I think, last Sunday's Sunday

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Express, to that effect and advised the Government to ride with this movement rather than, as it were, to seek to interfere with it or to resist it. That we are certainly determined to do.
We need to stimulate and give further momentum to this encouraging trend. We want our actions to flow from our understanding of the delicacy of the process, and of how easily that process may be upset and thwarted. In what I am coming to say in the next few moments to my noble friend Lord Colville, I hope he will take it from me that we are being sensitive towards the delicacy of a trend which we think is there, and which must be encouraged if our industrial society is to improve.
We feel that the danger in proceeding down the road advocated by my noble friend is that it might harm the chances of the ultimate success of our approach of encouraging voluntary action in this arena. No one could seriously accuse us, in introducing the Clause 1 scheme which we debated earlier, or in putting a new obligation on employers to provide premises for ballots when requested by unions, of unwarrantedly interfering in internal trade union affairs.
But because of this, it has been easier for those in the union movement who want to make use of the Government scheme, to put a case which cannot be emotively repudiated by their colleagues. That is all part of riding with this new spirit that we find abroad, which I think is so important. The full benefits will not be felt overnight. Experience shows us that instant panaceas in industrial relations are not available, but I do believe that this will give strong support to progressive and democratic trends over the full range of major issues which crop up in the movement.
I should like to say to my noble friend Lord Colville that it is not quite so much the issue of compulsion which bothers me, though I do think that in practice his provisions would be taken to be compulsive. What bothers me is that his provisions would arm those in the union movement who are against what we are trying to achieve. They would be presented with an argument loaded with emotional appeal which goes back, as we well know, to the days of 1971 and which
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can be expressed roughly as follows: "Here we go again, back to 1971 and the Industrial Relations Act. The Government are meddling again in our internal affairs and we must struggle against any attempt to shackle trade union activists ".
The interesting thing is that the noble Lord, Lord Wedderburn, is seeking, through this House and elsewhere, to try to persuade a sceptical, in respect of his advice, trade union movement that that is exactly what this Employment Bill is seeking to do. But he is not getting very far, in my opinion and with respect to him, in this campaign. I simply fear that there would be considerable shot given to his locker and to those of his colleagues who feel the way that he does, if we proceeded down the road that my noble friend is suggesting.
We in this Bill as a whole, and on secret ballots in particular, have tried to adopt what I think even our political opponents and supporters acknowledge to be a balanced approach. In industry this is vital if we are going to translate what we do in legislation into practical and pragmatic, tolerant and flexible behaviour on the shop floor itself. We must not alienate moderate opinion on the shop floor, which is with us at the moment on this issue, or give it impossible odds to overcome. I think it is right to add at this point that in the context of secret ballots Parliament cannot by itself give moderate unionists a voice. Some onus must rest upon them— upon the lazy, as I think the noble Lord, Lord Houghton of Sowerby, said— to ensure that their unions are organised and operated as they would wish.
May I turn quickly to the details of the amendment standing in the names of my noble friends and in the name of the noble Lord, Lord Spens, on the Cross-Benches. They followed in the steps, as my noble friend Lord Colville acknowledged, of Members of another place in proposing that the Bill be amended to provide for mandatory secret ballots. Five such new clauses, with wide differences of principle, emphasis and effect, were put down in another place, and each was rejected on the advice of my right honourable friend the Secretary of State. The proposal we are considering today is a further variant, and clearly my noble friends have sought to deal with defects which

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they very fairly recognised were inherent in the other clauses in another place. I think that the variety of proposals we have had illustrates the great complexity and sensitivity of the subject. I wish I could say that my noble friend's proposal resolves all the difficulties, but alas! I do not think this is the case. It does skirt some problems, but in doing so it runs into others.
I do not wish to lay any emphasis upon any drafting deficiencies of the new clause. Just a few moments ago I myself moved an amendment amounting to a page and a half which gave effect to a thoroughly simple proposal. I think it was my noble friend Lord Orr-Ewing who said that Back-Benchers have difficulty over the drafting of clauses. So, my Lords, do Front Benchers! It is an extremely difficult and sensitive issue. My noble friend Lord Colville is a very experienced lawyer, and though there are drafting deficiencies it would not be beyond his wit or mine— or, perhaps I should say, my advisers— to amend them. Nevertheless, what I want to emphasise is not any technical deficiencies in his amendment but deficiencies and weaknesses within the idea of the clause itself.
First, it does not, as my noble friend acknowledged very fairly, deal with unofficial strike action, and that is the most prevalent form of industrial action in Britain. By not doing so, it effectively gives a status and a premium to unofficial action which we would wish to see denied to unofficial action. And that, we find, is a singularly unfortunate effect.
Secondly, and related to the first point, the clause could quite well unintentionally give strength to the militants and undermine responsible union leadership. I have touched on this point before, but in the debate it was made most clearly and eloquently by my noble friend Lord Alport. I hope that any of my noble friends who were rather wavering in their views about this Bill will look tomorrow at what my noble friend said. The leadership would be presented as being hamstrung by the need to hold a ballot, and by the risk that a ballot would be triggered at an inconvenient point in negotiations. It would be argued that to act through official procedures might in the end result in union funds being put at risk, indirectly
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if not directly. Indeed, union leaders themselves might well judge it sensible and expedient not to give a strong lead and to let unofficial militants in certain situations make the running.
Thirdly, there is the difficult position of the independent certification officer. I do not want to rehearse all these points and difficulties for him because I had something to say about them on the previous amendment and because, though I hesitate to call him in aid in this excited and highly charged atmosphere, the noble Lord, Lord Underhill, made very sensible points about the difficulties which the certification officer would face. We are determined not to forget the practical realities and difficulties of the job which we would be giving him or any other body charged to conduct the ballot.
I am glad that, unlike his noble friend Lord Wedderburn, the noble Lord, Lord Underhill, to whom I have paid some tribute, did see good intentions, as I certainly do, in my noble friend's amendments rather than malign ones, but I think that this would be a very difficult and impractical way of proceeding. It is a bad habit to quote oneself. Nevertheless, in the interests of time I would refer your Lordships to something that I said at Second Reading which underscores this difficulty. In col. 741 of the Second Reading debate I said:
"In the second place, ballots inevitably involve procedural matters and delay. A strike ballot held at the wrong time due to an inflexible statutory provision could strengthen and prolong a strike against the wishes of both the union and the employer. It would assist militants who want to see an early strike, at a time of maximum solidarity of feeling, as against moderate leaders who might still have hopes of a reasonable settlement being reached. [Official Report; 20/5/80.]
I take my noble friend's point that there is initially a voluntary element in his amendment but it would soon gell into compulsion, sanctions and all the rest that would be involved.
May I say lastly to my noble friends that I take no pleasure at all in drawing attention to the fundamental difficulties which I see in this clause and in their ballot proposals generally. If it were possible to introduce more effective union democracy by statute in this area, in a way which does not present a gift to the militants, I of course would be for it. If it were possible, and if it did not discourage

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the use of official procedures, it would look very attractive. If it could be done in a simple, practical way without fatally wounding our approach of riding with the new spirit and the new interest in democracy in the union movement, we would of course embrace it. But I cannot see, in spite of the lifeline thrown to me by my noble friend Lord Harmar-Nicholls, how the broad objectives of the Bill and the broad objectives of my right honourable friend the Secretary of State's approach could be achieved by going down the road of my noble friend. I do not see how they could be achieved, therefore, if we adopted a requirement for union ballots as he has presently proposed in this clause.
6.30 p.m.
Viscount COLVILLE of CULROSS: I do not think I shall be the most popular member of the Committee if I attempt to answer all the points that were made. I would just say this to the noble Lord, Lord Underhill, and to my noble friend Lord De La Warr: I think I could quite quickly darn the ribbons which they seem to have detected but, if they are interested, I shall reserve the pleasure of doing so until I can do it in private afterwards. For instance, the question raised by my noble friend of there being no other remedy in the county court was simply an attempt to avoid a breach of statutory duty which would get the trade union into court in tort in another fashion from that from which it is normally immune.
We really have had a debate which I hope has cleared a number of different problems that relate to this subject. I am genuinely grateful to those who have taken part in it and the advice that I am going to give to my co-sponsors— and I hope other noble Lords will agree, — is that we should certainly not pursue the matter this evening. There are two reasons for this, and they relate to the two roads down which noble Lords respectively have been travelling. The noble Lord, Lord Wedderburn of Charlton, tried to pretend that this debate was leading those who sit on this side of the Committee down exactly that road that my noble friend Lord Gowrie described so lucidly a moment ago. I wholly deny that this amendment was in any sense an attempt to induce those who sit on this side of the Committee— or anywhere else— to go down a road which
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would enable the noble Lord, Lord Wedderburn, to generate the sort of suspicions and underlying motives which he attributed to me and others who agree with me. If there was any question of my pressing the amendment and thereby incurring the accusation that I was pursuing that course, that in itself would be quite sufficient to make me suggest that the matter should not be pursued this evening. But there is a much more constructive atmosphere in the debate, as I detected it.
My noble friend Lord Gowrie spoke of a trend towards moderation. Perhaps if I have done one thing of real service to your Lordships it was to give the noble Lord, Lord Houghton of Sowerby, an opportunity to make the speech he did— a speech which, if I may say so, seemed to me to echo almost exactly the trend to which my noble friend Lord Gowrie was referring. That is the trend which seems to me to be infinitely preferable. I shall never agree with the noble Lord, Lord Wedderburn, that the law cannot improve the position about trade union law and that it is perfect as it is after he finished with it— or that is how I read his Second Reading speech. However, there may be circumstances— and I must bow to the noble Lord, Lord Houghton, on this— where it is very difficult for the law to do so. It certainly seems to me that those who wish to pursue this in a legislative field have a great deal upon their plate this evening which they should digest and, as my noble friend Lord Orr-Ewing said, I suggest that we might leave this matter. If your Lordships will agree, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 [Issue by Secretary of State of Codes of Practice]:
6.33 p.m.
Lord MCCARTHY Lord MCCARTHY moved Amendment No. 4:
Page 2, line 44, after first ("of") insert ("extending collective bargaining and ").
The noble Lord said: This might be said to be one of our clarificatory declaratory amendments, and therefore I hope that the Committee will receive it in a mild, unsneering and cheery way. What we are really arguing here is that we feel that Clause 2 containing the

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provisions for the new Code of Practice would be more reassuring and more acceptable if the Government could see their way to introduce in to Clause 2 (1) the phrase in our amendment "extending collective bargaining ".
We would argue this for two main reasons: the first reason is that the intention of the clause is to authorise the Secretary of State to issue codes of practice and, if we are to go on what has been said in another place, those codes of practice will contain regulations concerning picketing and the closed shop, and of course codes of practice concerned with picketing and the closed shop undoubtedly are going to affect collective bargaining.
More importantly, if we look at Clause 2 (7), it is clear that the Secretary of State is given the power in that subsection to issue codes of practice in whole or in part which may supersede codes previously issued by the Advisory Conciliation and Arbitration Service. Therefore we are entitled to look at the codes which have so far been issued by ACAS.
We find that each one of these three codes concerns collective bargaining. The Code of Practice No. 1, Disciplinary Practice Procedures in Employment, specifies how disciplinary procedures should look, says that trade union officials should be involved in these procedures and provides in particular in paragraph 15 for a special way of dealing with disciplinary action against a trade union official. So we would say that Code of Practice No. 1 undoubtedly affects collective bargaining.
It is even more clear, I should have thought, that the ACAS Code of Practice No. 2, Disclosure of Information to Trade Unions for Collective Bargaining Purposes, must affect collective bargaining. Indeed this is the code of practice which spells out the rights of trade unions under present legislation for disclosure of information. Similarly, Code of Practice No. 3. Time Off for Trade Union Duties and Activities, very clearly affects collective bargaining.
So here we have provisions in the Bill for the Secretary of State to issue codes of practice over a wide range of issues which in themselves are already likely to affect collective bargaining and the extension and
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practice of collective bargaining, but more particularly are able to cancel out and totally wash away the provisions of established codes of practice issued by ACAS. We should have thought that it would assist in that respect if the Bill made it quite clear that there was no desire to turn away from the twin responsibilities of ACAS for improving industrial relations and developing collective bargaining.
It may be said, and indeed it has been said in another place, that similar proposals to these— similar provisions to those that we find in the clause— were included in Section 6 of the 1975 Act in respect of ACAS itself. So, where ACAS issues its codes, it does so under a provision which is virtually the same, word for word, as the provisions of Clause 2 (1). Against that we would argue two things. The first is that ACAS at the present time, before the passage of this Bill, has a particular provision for extending collective bargaining as a result of Sections 11 to 16 of the 1975 Act-that is to say, the recognition provisions— and it is the proposal of the Government that the clause is included in this Bill to repeal Sections 11 to 16 of the 1975 Act.
Moreover the general provisions of the 1975 Act make it quite clear that ACAS shall be charged with a responsibility for collective bargaining which is in many ways similar to the kind of general statement, if we may refer at this stage to the 1971 Act, in the provisions of the 1971 Act itself. I am quoting now from Section I of the 1971 Act, which says that:
"The provisions of this Act shall have effect for the purpose of promoting good industrial relations in accordance with the following general principles, that is to say, —

(a) the principle of collective bargaining freely conducted on behalf of workers and employers and with due regard to the general interests of the community ".

We are not saying that those are better words than ours. We are not sticking, as other members of the Committee have said tonight, on our words: what we are saying is that it would be of assistance and it would be only fair following statements which have been made so far in another place if the Government could agree on this modest amendment to place collective bargaining inside the specifications about codes of practice. I beg to move.
6.40 p.m.
Lord MACKAY of CLASHFERN: It is true, as the noble Lord, Lord McCarthy, has pointed out, that Section 1 of the 1975 Act did include in ACAS's terms of reference the duty in particular of encouraging the extension of collective bargaining and the development and, where necessary, reform of collective bargaining machinery. It is perhaps all the more striking, against that background, that when we come to Section 6, the power to issue codes, that the power was in almost exactly the same terms as we are proposing here. Indeed, he has illustrated very clearly that ACAS, in issuing codes under that power, have dealt with aspects of collective bargaining. So the power in our Clause 2 will by no means prevent the Secretary of State from referring to collective bargaining.
But in general, while the Government recognise the value of orderly collective bargaining, they do not believe that improved industrial relations will always depend on its extension, or even that its extension is necessarily always good for industrial relations. It is an important principle to be kept in mind but it is only one factor to be kept in mind. Surely it is much better that the leading principle of the code should be the principle we have set out; namely, for the purpose of promoting improvement in industrial relations. The difficulty of joining collective bargaining as a separate principle has been illustrated in a number of cases; I will not trouble your Lordships with them. I think it is fairly plain that the correct and leading principle should be improvement of industrial relations, and it is on that that we take our stand. I would invite your Lordships not to agree to this amendment.
Lord HOUGHTON of SOWERBY: Perhaps the question I am about to ask can be answered later if it is not relevant to this particular point in time, but why are we discussing this clause at all? There are several amendments to it and the first of those is under consideration now. But there is a code of practice already there; this clause authorises the Secretary of State to issue another draft, and to indicate, under subsection (7), what parts of it are already in the code, which are new and so on. Then the most astonishing thing of all is that in
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Clause 18 (a), in a line and a bit, the notorious code relating to freedom of the press is quietly buried. Do not we all recall the hours and hours we spent, with the assistance of the noble Lord, Lord Goodman, in finding the answer to the problem of industrial relations in Fleet Street, the freedom of the press and editorial discretion and responsibility? All that is buried in one line and a bit at the end of this Bill. Yet here we have a whole clause, Clause 2, which really traverses the ground which is already there, and things are growing on it; there is a code already growing on this ground. Why do we have to bother with all this? It seems to me to be only repetition of what we have gone over before.
This started in the 1971 Industrial Relations Act. That part of it was embodied in the Labour Government's subsequent legislation, and has been kept there all the time, and it is still there. I do not understand why we are considering a whole new clause going over the same ground we have been over twice before.
Lord MACKAY of CLASHFERN: I do not think I have yet seen the code promulgated under the section being repealed by Clause 18 (a), but others may have the advantage of me in that. So far as this clause is concerned, the intention is to give power to the Secretary of State to issue a code of practice. Industrial relations are developing things and it seems right that he should have power to issue codes as may be required from time to time in parallel with ACAS. I would, therefore, submit to yout Lordships that this is a very desirable clause, and that the amendment which has been proposed to it should not be approved.
Lord MCCARTHY: I do not want to press this amendment to a Division, but I simply say this. Perhaps the noble Lord could tell us a little more about his intentions when we come to the Question, That the clause should stand part. To answer the noble Lord, Lord Houghton, the reason why we have the whole of this clause is because the Secretary of State knows only too well that ACAS as presently constituted will not issue the kind of codes which the Government want issued on picketing and the closed shop. Therefore, somebody else has to have the job, and the job is given to the Secretary of State.

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My question, which I hope the noble Lord will answer in his speech on whether the clause shall stand part, is, what is the status of the three codes of practice already issued by ACAS? This is our concern, and it is the reason for the amendment. The power exists under this clause for the Secretary of State to cancel those codes. Indeed, curiously enough— and I shall be coming to this on clause stand part— there is power for ACAS to cancel the codes of the Secretary of State. But let us leave that. The power exists to cancel the existing codes. My question is, what is wrong with the ACAS codes thus far published'? Will the Government give an undertaking that they have no intention of cancelling any of them? On that, I will withdraw the amendment. I am saying that if the Minister could very kindly answer this question on the debate that the clause stand part, I am at this moment withdrawing this amendment.
Amendment, by leave, withdrawn.
6.46 p.m.
The Earl of GOWRIE The Earl of GOWRIE moved Amendment No. 5:
Page 3, leave out lines 1 to 4 and insert—
("(2) The Secretary of State shall after consultation with the Advisory, Conciliation and Arbitration Service (whether carried out before or after the passing of this Act) prepare and publish a draft of any Code of Practice that he proposes to issue under this section ").
The noble Earl said: The effect of this amendment is to enable consultation by the Secretary of State with ACAS, conducted before the passing of the Act, about the Government's proposal to issue a code of practice, to count for the purposes of the statutory consultation required by Clause 2 (2) of the Bill. This amendment is in effect minor, and I will be very brief in explaining its purpose. Clause 2 (2) requires the Secretary of State, where he proposes to issue a code of practice, to consult ACAS before preparing and publishing a draft of the code.
I am sure there is agreement on all sides of the Committee that this is a desirable preliminary before firm steps are taken to produce a code. Even if there were no statutory provision to this effect the Secretary of State would of course be anxious to consult ACAS before proceeding. As noble Lords will know, my
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right honourable friend has already announced the Government's intention to produce a code of practice on the closed shop, and, in the absence of satisfactory voluntary guidance, also on picketing. These are not codes which I envisage ACAS would wish to produce, or which, given the questions of public policy concerned, it would be right to ask ACAS to produce. It is clearly desirable that the Secretary of State makes all reasonable speed in proceeding to issue a draft code. It is important that these should be in place as quickly as possible after the passing of the Act. We need to provide guidance on good practice without delay.
The Bill as presently drafted would cause doubt as to whether consultation by the Secretary of State with ACAS before the passage of the Bill into law would qualify as consultation within the meaning of the Bill. Yet if statutory consultation with ACAS has to wait until after Royal Assent valuable time will be lost, especially since the holiday period will slow up ACAS's response. The amendment is, therefore, designed to overcome this timing difficulty. Its effect is wholly administrative, and I commend it to the Committee.
Lord DAVIES of LEEK: May I ask the noble Earl a question? Will the Central Arbitration Committee— which is a permanent arbitration body established under Section 10 of the Employment Protection Act 1977, and is independent of ACAS and the Department of Employment— be brought in in circumstances that are difficult: to use the term used not very long ago, mediation as a step towards understanding. I presume this clause would make no difference to the position as it is now so far as the Central Arbitration Committee's powers exist?
The EARL of GOWRIE: That would not be affected at all.
6.50 p.m.
Lord WEDDERBURN of CHARLTON Lord WEDDERBURN of CHARLTON moved amendment No. 6:
Page 3, line 37, at beginning insert ("Subject to subsection (9) below, ").
The noble Lord said: I beg to move Amendment No. 6. This amendment takes us to an important matter in the

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Bill; namely, the effect of the Bill in the area of the criminal law. I hope that the noble Earl will not think that in moving it I am advancing some mythical campaign which he seems to think that I am carrying on. I am trying to examine the provisions of the Government's Bill and the problems.
There is a very big problem in relation to the criminal law. I must ask the Committee's leave to speak to Amendment No. 9 because that, of course, is consequential upon this amendment. Moreover, with the leave of the Committee, I shall also speak to Amendments Nos. 7 and 8 which I shall not move separately. However, that means that the territory is somewhat wide and of great importance. We know that the codes of practice which are to be issued will include a code on picketing, and indeed from the amendment which has just been introduced by the Government there may already be consultation because they are obviously very anxious to get their codes out into the light of day.
It was said by the right honourable gentleman the Secretary of State in the Second Reading of this Bill in another place, on 17th December, at column 67 of the Official Report:
"The Bill does not create any additional burden on the police because it does not create any new criminal offence. We are proposing simply to restore the right to take civil proceedings where secondary picketing induces a breach of contract".
When we come to Clause 15 it is our intention to examine the Bill very carefully against that statement of objective and, at present, as we have shown from the amendments that we have put down, we think that the Government's objective of not affecting the criminal law is not achieved by the Bill at that point.
However, equally important to the question whether Clause 15, which severely limits the rights of workers to picket, affects the criminal law, is the question whether there is a likelihood or possibility of the code of practice applying to criminal proceedings in such a way as in reality to affect the application, administration and ambit of the criminal law. One of the major new features of Clause 2 compared with previous legislation is, of course, to be found in subsection (8) where a failure on the part of any person to observe the provision of a code of practice is not to
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render him liable, but shall be admissible in evidence and will be relevant then to any question arising in a court, tribunal or the Central Arbitration Committee. It is the word "court", of course, which introduces the novelty, because in the previous legislation in the Employment Protection Act 1975, Section 6 (11), the code is admissible in the industrial tribunals in proceedings before the Central Arbitration Committee and ACAS. So, once it is admissible before the courts, which it plainly is said to be— both civil and criminal, for no distinction is made— then it is to be taken into account in interpreting the criminal law.
It is, of course, important that the code, as has been pointed out by my noble friends already under this clause, will not be a code issued by ACAS, but by the Secretary of State, albeit that it has to achieve a parliamentary approval under subsection (4). It is true, of course, that the court in civil proceedings at least, and to some extent in criminal proceedings, can in any event take account of matters of this kind. But subsection (8) makes it admissible in evidence under the Bill, and therefore introduces the novelty in the criminal proceedings in criminal courts.
It may be said that that will not have very much effect except to clarify matters. It is as regards the central question of clarifying the law that my contention, and the contention of my noble friends, is that the clarification of the criminal law will lead to changes in its effect and administration, and that this amendment is therefore required if the Government's intention is to be achieved.
There are two essential facts about the criminal law and picketing which it is necessary to establish in order to take the argument for this amendment further. First, it has been made quite clear by the chief constables who gave evidence to the Select Committee in another place that the existing criminal law is quite adequate to deal with malpractice of a criminal kind on the picket line. Indeed, I would say, as I said on Second Reading, that that evidence as a whole to the Select Committee of another place also makes it clear and confirms the fact that picketing in Britain is very largely very peaceful, and what one of the chief constables called the "jaundiced view", which is sometimes presented to the public, is not at all the

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"norm", as he put it, of picketing in this country as it is in some other countries where picketing is far more violent than it is here.
Nevertheless, the fact that offences occur on the picket line is, of course, undeniable. They occur in all walks of life, but the chief constables were clear that the existing criminal law is adequate to deal with the matter. At paragraph 49 of the evidence to the Select Committee the Chief Constable of South Yorkshire was asked whether the existing laws on picketing gave the police adequate power to maintain order, and the answer was, "Yes ". Of course, these offences cover a very wide area. I shall not give any0thing like a comprehensive list but shall merely mention some of them: the crimes of riot; affray; unlawful assembly, of which some of the Shrewsbury pickets were convicted; various forms of violence; assault; threat of force; breach of the peace; threatening words or behaviour; offences under Section 7 of the Conspiracy and Protection of Property Act 1875, including watching and besetting; persistent following under the same section; wilful obstruction of the highway; and obstructing the police in the execution of their duty. Those are the offences which can usually be relevant, but of course others may arise.
It is very easy for a picket to be made liable within the confines of those somewhat obscure criminal provisions. I shall return to their obscurity in a moment. The famous prosecution, which was upheld on appeal in 1960, was that in a case where there were three pickets on the back gate of a small firm and a policeman came up and said, "Two is enough. One of you move on ", whereupon the Law Report reveals that the third picket said, "I know my rights ", and gently pushed past the constable, whereupon he was gently arrested. The conviction was upheld because he was obstructing the police in the execution of their duty, there being some grounds— and reasonable grounds— on which the policeman thought three pickets were too many to avoid obstruction or future offences. So the existing criminal law is very wide and the evidence of the chief constables themselves is that it is adequate to deal with existing conditions.
The second essential fact is that, because of the width and to some extent the grey areas of the criminal law regarding these offences, picketing in this country takes place very largely at the discretion of the police. Very often there are technical obstructions, and when we come to Clause 15 it will be a matter of concern to discuss how far the existing law relating to picketing under the Trade Union and Labour Relations Act actually gives an excuse or justification for a technical obstruction. But frequently there are obstructions which are at least sufficient to amount to wilful obstruction of the highway, even for a brief few minutes, or civil nuisance, but the police do not prosecute any more than the employer sues for an injunction as regards the nuisance
The balance of law enforcement— of keeping order and of sensibly managing the community in which the local police force work— is something at which the British police are experienced. As the South Wales chief constable put it at page 42 of the evidence to the Select Committee of another place:
"On many occasions the police negotiate with responsible members of unions as to what might be the number of pickets to fulfil a particular role. On many occasions they abide by that because they want to be helpful and not go outside the law; and above all they have limited numbers when they work out 24-hour coverage ".
Then later on, having discussed the way in which such negotiations occur, he says:
"Merely to come to a stricter enforcement situation can create enormous difficulties unless the real need is there. When you have arrested 44 people, what do you do? Arresting 44 people takes a lot of policemen especially when people realise they will be arrested and have decided not to leave. If they decide to be difficult what do the courts do? Are they going to come back to the scene and make the situation much worse? It is a matter of judgment and in my mind the judgment works fine".
The evidence of the other chief constables was not materially different.
In that light the desire to make it plain that neither in Clause 15 nor by way of a code shall this Bill affect the criminal law, becomes a real and pressing problem. It is true that the issue of clarifying the criminal law in relation to picketing was discussed by the chief constables in evidence to the same Select Committee and, if I may use the phrase used by the

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Chief Commissioner of the Metropolitan area, Sir David McNee, he said:
"Clarification would be difficult but not impossible".
I accept that as being a correct estimate— difficult but not impossible.
However, the working paper on picketing which preceded the Bill suggested that the purpose of the code would be to make the enforcement of the criminal law on picketing give rise to a more consistent interpretation of the law by the police and the magistrates. When we come to the Attorney-General's statement in another place in the Standing Committee on the Bill on 18th March, at column 1352 he said:
"May I now deal with the effect of the forthcoming code of practice on picketing and the role and powers of the police, again in general terms, because it has not been finally fixed. It is a matter which has caused anxiety. The code has not been drawn up and the responsibility for what is in it lies not with me but with my right honourable friend the Secretary of State. Therefore, I cannot deal with it in detail ".
A little later on he says:
"It will be of assistance to the police to the extent that it indicates the scope of peaceful picketing, although it cannot change the law on picketing. Another important object will be to provide guidance to those who organise picketing so that they may ensure that they keep within the law ".
I may say that the TUC guides already give a considerable guidance to pickets, but I shall not draw any parallel between the TUC guides and this sort of code, and I hope that none will be drawn, because a voluntary code issued by the TUC is a different animal; indeed, it is in a completely different area altogether from this kind of statutory arrangement. But the Attorney-General's estimate of what the code will do is clear in that passage.
When one turns to the practicalities of it, what will it do? Will it give some indication of how many pickets ought to be at a particular kind of place of work? That would be very difficult to estimate. Will it talk to the police about their discretion whether or not to prosecute and arrest, in that matter of judgment which the Chief Constable of South Wales put so well? It has been said that the police will have to take the names and addresses of people who are picketing, otherwise than at their own place of work. That has been denied both in another
1350
place and by the police chief constables themselves. The police have made it clear that they will not take names and addresses in aid of the civil action which the Government envisage employers and others bringing against pickets who will no longer be licensed to picket under the new restrictions of Clause 15.
In the same debate in the House of Commons on 18th March the Attorney-General agreed that names and addresses would not be taken for that purpose. But, of course, if there is an obstruction the police will take the name and address of anyone against whom they wish to enforce the law. Will the code tell the police, "You must not ask him whether he works here?" I very much doubt it. If the code does not, what will it say? Will it tell the police that they have to tread this extraordinary line between not asking for a picket's name and address if they suspect that he does not work there, but doing so if there is an obstruction and then not passing it on?
What about the new controls over trade union officials in the new subsection (4) of Clause 15, which now limits the licensed trade union official picket to someone who represents the members involved in the very restricted definition of the new subsection (4)? It may be, as was done in another place, that the Government make a resemblance between their codes and the Road Traffic Act Highway Code, which, like this code, could be relied upon in proceedings as evidence to establish or negative a liability. But in doing so in the criminal area, surely the code will have to indicate the meaning of various of the crimes, which I have rehearsed as the list, which are relevant to picketing. If it does not, the picket who is arrested and then charged with unlawful assembly will say, "Unlawful assembly?— that is not in the code". Or, if he is charged with affray, which few will be but some have been, although they were acquitted, he will ask, "Where do I find affray in the code? "In other words, in order to clarify, the code must first cover the area, otherwise it is unfair to the pickets unless we keep the criminal law out.
Then again, with wilful obstruction of the highway there is great doubt about the extent of Section 15 of the Trade Union and Labour Relations Act 1974, and the sections which preceded it which, in effect,

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have been the same since 1906. It has been a matter of doubt and remains a matter of doubt and argument between two different views— perhaps the noble Earl has one too— about whether or not merely to attend creates an obstruction which goes beyond the legalised area of picketing attendance for the purpose of persuading people not to work.
When we come to Clause 15 I shall wish to refer to the judgments of the noble and learned Lords, Lord Reid and Lord Salmon in the leading case of Hunt v. Broome in 1974 in the Industrial Cases Reports, because they set out so very clearly the area where one might have doubt. It is arguable that the existing immunity protects against a slender area of criminal liability. I think that I would take that view. It is arguable that there is, in effect, no right to picket because every picket is technically a nuisance. I, personally, would not now adopt that view. But the code presumably will resolve that issue.
If it is to clarify the law, the code must resolve an issue left open by two of the noble and learned law Lords in the House of Lords and, with great respect to the Secretary of State, my contention would be that he is not the right person to do that via a code of practice, albeit that it comes through both Houses. Either that should be done by judicial interpretation or— as I would prefer— by a statutory amendment. If that is true of obstruction of the highway under the Highways Act, it is even more true of watching or besetting. I invite whoever is to reply for the Government to say what their advice or their view is on what the code will say about watching and besetting, which is unlawful under Section 7 of the Conspiracy and Protection of Property Act 1875. One of the leading authorities is still The King v. Wall in 1907 at the Irish Assizes, where Chief Baron Palles said that watching involves persistent watching. Will, in fact, the code clarify the difficult area of whether a temporary or a persistent watching is or is not unlawful? If it does not, what will it say about watching or besetting?
Noble Lords on the Front Bench opposite are, I think, disturbed about the time. I understand the problem, but I wish to make the case I am putting, and
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since, so I understand, we are to adjourn at 7.15 for dinner for three-quarters of an hour, I will, if I may, make what I feel is a very important case for excluding the criminal law from the area of codes. If the code is to clarify the criminal law, the code will have to take it on its back to write a textbook of clarification on hundreds of issues in the area of obstruction, watching, besetting and so on. This is not a debating point. There are areas where the code could be helpful in terms of practice and, for example, say, "Have a reasonable number of people there and you are less likely to commit a criminal offence. "If that is all the code is going to do, very well, and you might as well exclude it from the area of the criminal courts because it will not be of any use to anyone in evidence anyway. If it is going to do that, which would not enter the area I have described, it will be no use in the criminal courts.
If it is going to do something which will be of importance in the criminal courts, then my submission is that it is not the right instrument to use for such a job, because the job is very great. The areas of doubt regarding certain crimes are very great indeed, for the very simple-reason that the police rarely use them in relation to picketing. The police rarely use watching or besetting; there has not been such a case, so far as I can discover, for very many years. They sometimes use wilful obstruction of the highway, but, although the leading case is on that subject, they rarely use it. It is where there is something in the nature of a technical assault that it is used, as in the 1960 case where a picket gently pushed a policeman. Then there is an arrest— in many cases it is for technical assault or something of that kind, or perhaps threatening words and behaviour— but that is different. Many of these crimes have lain shrouded in some mystery through no one's fault but for the simple reason that the police, using their discretion, as well described by the chief constable of South Wales, tend not to use them.
But a code cannot overlook them, and therefore, when one comes to the Secretary of State's code in the criminal law area, I would commend this amendment to your Lordships on the simple ground that this is not the right way to clear up areas which need to be cleared up, probably by

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fresh legislation which can, as Sir David McNee put it, do it with difficulty, but it is not impossible. One could clear up a number of these crimes, if that was thought necessary, and I have not by any means listed all of them. However, if the code is going to do it, it will have to do it completely and comprehensively because otherwise it would be unfair to the pickets; it would be totally unfair for the code to try to list the criminal liabilities.
Of course, the civil liabilities are easier, and the reason why, to save the time of the Committee, I have been speaking also to Amendment No. 7 is because that raises the issue of the admissibility of the code in the civil courts. I should be grateful if the Minister, when replying, would give some examples of the kind of criminal cases outside the ambit of the Bill in which the code might be used in evidence. That was to have been the subject of a separate amendment, but if I can sweep it in with the others as a separate point I will do so. The essential point here is that the amendment must surely be right because the code is taking on an impossible job, or will be unfair to pickets in not describing the criminal law properly. Alternatively, it will be something in the nature of an amending and consolidating statute, and that cannot be right. On those grounds I commend Amendment No. 6 with its linked Amendment No. 9.
[The Sitting was suspended from 7.14p.m. to 8 p.m.]
Debate on Amendment No. 6 resumed.
Lord MACKAY of CLASHFERN: The clause of the Bill to which these amendments relate gives the Secretary of State power to produce such codes, after appropriate consultation and with the approval of both Houses of Parliament, as he deems necessary for the purpose stated in the Bill itself. The function of the Secretary of State under this clause is not to write a new textbook on the criminal law, or to resolve all outstanding matters related to the kind of offences to which the noble Lord, Lord Wedderburn of Charlton, referred, but to issue such codes as he thinks desirable for the purpose of promoting good industrial relations; and obviously he must take account of the civil law and the criminal law in so doing.
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The Secretary of State has indicated that he proposes to produce a code on the closed shop and, in the absence of satisfactory voluntary guidance, on picketing from the point of view of course of good industrial relations.
The effect of the amendments, in particular Amendment No. 6, which has been proposed, would be to remove the requirement in Clause 2 (8) that codes of practice issued by the Secretary of State shall be admissible in evidence in proceedings before a court, and particularly, as I understood the noble Lord, to prevent a code being admissible where a court is determining some question of criminal liability.
I would strongly urge the Committee to reject these amendments. The clause in question simply establishes the status of any code produced by the Secretary of State and approved by Parliament. It ensures that such a code shall be admissible in evidence and, where appropriate, taken into account by a court, tribunal, or committee in determining any question arising in proceedings before it. That does not seem to me to be an unreasonable requirement. In the Government's view it is entirely appropriate that where it is relevant a court should be able to take into account a document which Parliament has approved as being a sensible and practical guide on industrial relations in some aspect.
As I think the noble Lord, Lord Wedderburn, said, to a considerable extent the courts already take into account any evidence that is available to them, including codes of practice, and these amendments would not prevent them from doing so. As my honourable friend the Parliamentary Under-Secretary said in another place, the courts cannot be prevented from taking into account any code of practice, guideline or document of that kind. He also remarked that these days the courts take a slightly less rigid view than perhaps once they did about the kind of documents to which they can have regard.
As the noble Lord, Lord Wedderburn, has pointed out, Section 6 of the Employment Protection Act 1975 contains similar provisions to Clause 2 of this Bill, but it does not require the courts to take the codes into account in any proceedings

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before them; it refers only to tribunals and committees. This is because by their nature codes produced by ACAS are more relevant to industrial tribunals or Central Arbitration Committee proceedings. However, it is possible that a code on picketing, for example, produced by the Secretary of State might have relevance to ordinary courts handling actions arising either as a result of the amended section 15, or in a prosecution for an alleged public order offence, such as one of the offences to which the noble Lord referred. It would be neither sensible nor logical not to recognise this fact in our Clause 2.
There is no question— 1 emphasise this strongly, since noble Lords opposite appear to have fears in this regard— of a code produced by the Secretary of State creating new civil or criminal wrongs or offences. The code will give guidance on good industrial relations practice, but it does not affect the duty of the courts to interpret the law on the basis of statute law and existing authorities, as they have always done; and as has been pointed out, it is expressly provided that the provisions of the code by themselves do not constitute any new offence.
Therefore, we believe that the concerns expressed by the noble Lord, Lord Wedderburn, about this particular provision are misplaced. After all, what is the alternative? As the noble Lord said— and I think that in this connection he was referring in particular to the law of England and Wales— the alternative is that there are many grey areas in the law in relation to public order offences. Does he prefer that the courts should deal with these grey areas by closing their eyes, blinding themselves, to what Parliament has approved as a document of guidance on good industrial relations?
I have heard it suggested in some other quarters that the judges are not particularly good at dealing with these matters. Well, why deny them the benefit of this guidance? They would of course make proper use of it. It would be stretching imagination to believe that our judges will take a code of practice issued by the Secretary of State under this clause, assuming it becomes law, as being definitive of the criminal law. In my submission there is no question of that happening.
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It is simply guidance on good industrial relations practice in the spheres covered by the codes, and I submit that the courts would have regard to that. It is a proper matter to which they should have regard. They would have regard to it in the proper way, making the proper use of it. I would invite the Committee to reject the amendment—
Lord ELWYN-JONES: Before the noble and learned Lord sits down, may I ask what part the code of practice would have in criminal proceedings? Would it be usable in evidence in criminal proceedings, in submissions in criminal proceedings? That I fear was not made clear by the noble and learned Lord's observations, and I am very much in the dark about it.
Lord MACKAY of CLASHFERN: I am sorry that the noble and learned Lord should be in the dark. I had rather assumed that he had in fact read the provision which it is sought to amend. The provision which we are seeking to include is that
"any such Code shall be admissible in evidence, and … "
"any provision of the Code which appears to the court, tribunal or Committee to be relevant to any question arising in the proceedings shall be taken into account in determining that question ",
Therefore, the answer to the noble and learned Lord's question is that the code would first of all be admitted in evidence, and then presumably, in so far as is relevant, it would form part of the submissions, and the court would be entitled to have regard to it—
Lord ELWYN-JONES: With great respect, admissible in evidence in regard to what issue in a criminal case? This is what we are really concerned about. One thinks of the parallel with the Highway Code which is of course admissible in evidence in civil actions, but so far as I know is not at all admissible in evidence in criminal proceedings. Therefore, I am very surprised that in this case the code should be admissible in evidence, and if that is so, I ask in regard to what issue is it admissible in a criminal trial.
Lord MACKAY of CLASHFERN: First, I think that the Highway Code is admissible in evidence in criminal proceedings. For example, in relation to a charge of careless driving criminal liability

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is expressly mentioned in Section 37 of the Road Traffic Act 1972 which gives statutory authority to the Highway Code and mentiones criminal liability. I suppose it is simply an indication, on a charge of careless driving, for example, of what amounts to carelessness. If one has ignored some indication in the Highway Code about how one should drive, then it is not by itself an offence to breach the Highway Code but it may well be evidence of careless driving. Similarly, a code which deals with matters in relation to picketing, for example, could be evidence of what is good industrial relations practice in a matter which touched upon the areas to which the noble and learned Lord referred.
Lord WIGODER: As I imagine the noble and Learned Lord, Lord Elwyn-Jones, last appeared in a magistrates' court even longer ago than I did, I think that perhaps I might venture to say that the Highway Code is frequently relied upon in criminal proceedings as supporting or negativating allegations of, for example, careless or dangerous driving. But what I wanted, if I may, to ask the noble Lord, Lord Wedderburn, was this. Would he not agree that the whole theme of his observations was that a code of practice agreed by the Secretary of State after consultation with ACAS always operated to the detriment of the trade unionist; and is this really a very fair assumption? Will there not be many occasions on which the individual trade unionist will wish to rely upon the code of practice in a criminal court in order to show that his behaviour is reasonable— for example, in his use of the highway— and would not the effect of the observations of the noble Lord, Lord Wedderburn, if they were in fact carried out, be to deprive the trade unionist of the right to rely upon something which he could use in his defence?
Lord MCCARTHY: Would the noble Lord not agree that, in the case of the codes of practice that he is talking about, these are codes of practice which derive from ACAS, which is a joint body on which sit representatives of the TUC and representatives of the CBI? What we are bothered about is the code of practice which emerges from this Government, given this Government's attitude to picketing and the closed shop.
Lord WIGODER: Perhaps I can give a specific example. Let us suppose that consideration is given to the difficulties which sometimes arise upon picket lines in distinguishing between pickets who are members of the union concerned and those people who are of the Socialist Workers' Party who have turned up in the hope of having a good "punch up" with the police; and let us suppose that the code of practice indicated that the union picket in those circumstances might wear an armband. This is not to the detriment of the unions in any way. Let us suppose that a trade unionist, wearing his armband on picket, was arrested for wilful obstruction of the highway, and the issue therefore arose in court as to whether he was lawfully and reasonably using the highway. Would not the effect of the amendment moved by the noble Lord, Lord Wedderburn, be to deprive the trade unionist picket from relying on the code of picketing in his defence?
Lord DAVIES of LEEK: What I am trying to get clear as a layman is the semantics or the words of this, and the English language and its meaning. As we now see ACAS, it is the only body empowered to issue codes of practice on industrial relations, roughly. The Secretary of State is here saying that he intends to introduce all sorts of further codes, and a code on union membership agreements, for instance, may well include a proposal which can have a bad effect and a non-peaceful effect.
Let me give an example which is hidden from us, and that is the issue of a particular and, I think, a sinister development in the use of the offence of conspiracy in industrial disputes. The lawyers know more about the law of conspiracy and will try to explain it more clearly than others who use the English language. There was a notorious case in Shrewsbury decided by a court of appeal in 1974. What is conspiracy? So far as I understand it, the offence of conspiracy is committed when two or more people agree to do an unlawful act, or to do a lawful act by unlawful means. In the code of practice that the Minister could introduce, he might introduce another extension that would bring the law of conspiracy on to me myself if I suggested to the 12 members of my union— and there are only 12 of us— that we gang up together to ask for a 30 per

1359
cent. increase in wages. You might have a new code of practice pushed in which could say that I was conspiring by even suggesting that. I still see this as a way (if I can put it in colloquial language) of bashing the unions with verbiage.
On the other hand, I will not go into it at this point— it will come later— but we have fought for the right to picket, and at different times in history both sides of your Lordships' House have agreed with it. In the last analysis, whatever one may say, under the common law there is a right to picket. The question is: Where are we going to introduce criminality? Or is it going to be introduced if we leave the codes of practice outside of ACAS, or as well with the Minister? I leave it at that, because there is no need to try to extend the discussion, but I should like to know whether the law of conspiracy, or the possibility of action under it, is going to be increased by this clause.
Lord MACKAY of CLASHFERN: It is very plain from subsection (8) of this clause that:
"A failure on the part of any person to observe any provision of a Code of Practice issued under this section shall not of itself render him liable to any proceedings ",
so there is no question of the code of practice creating any new offence or making some new extension of the offence of conspiracy. I think I should point out that the present power to which the noble Lord, Lord Houghton of Sowerby, referred, to issue a fresh charter under the 1974 Act (which has not, so far as I know, yet been implemented by any Secretary of State), is a power to issue a code which is not in ACAS but in the Secretary of State. The last Government saw plainly, as we see, that there are some areas in which it is appropriate for the Secretary of State to issue codes of practice, and that happens to be one of them. This clause, too, indicates that there are areas where the Secretary of State should issue the code, and that is what we are doing in parallel with the corresponding power to ACAS.
Perhaps I might take this opportunity to answer a question which the noble Lord, Lord McCarthy, put earlier about the existing codes issued by ACAS. There is no present intention on the part of the Government to interfere in
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any way with these codes. As I said earlier, industrial relations is a developing matter and it is quite reasonable that these provisions should be flexible and that, as time goes on, ACAS should introduce codes which might supersede in part a code issued by the Secretary of State, and conversely. But there is no present intention to do that so far as the existing ACAS codes are concerned. I hope that I have been able, at least to some extent, to relieve the anxieties of the noble Lord, Lord Davies of Leek.
Lord WEDDERBURN of CHARLTON: I appreciate the spirit in which the noble and learned Lord, the Lord Advocate, has responded, and I understand his argument, but we do not share his view and perhaps very briefly I might put the case why we feel we must press these amendments. But, first, in relation to the press charter and the existing code, of course what he says is absolutely right but there is no question of it being adducible in evidence in any court under the existing section. So far as the example suggested by the noble Lord, Lord Wigoder, is concerned, if the code said that pickets should wear armbands it might or it might not be to the advantage of a particular defendant, be he a trade unionist or not; but it highlights the question which my noble and learned friend Lord Elwyn-Jones put, as to what criminal issue the wearing of the armband will relate. It is in that respect that, in the criminal law, the code is bound to do rather more than it does in the civil law. If I may take the example to which the noble and learned Lord, the Lord Advocate, was obviously, I take it, referring when he said that the civil courts can refer to anything, he had in mind, I am sure, the case of United Biscuits v. Wall in 1979, where Mr. Justice Ackner referred to the TUC guide in reaching his decision on the granting of an interlocutory injunction.
Lord MACKAY of CLASHFERN: If I may interrupt, I agree that it is one illustration. There are others.
Lord WEDDERBURN of CHARLTON: In that kind of case; but that is a case of a discretionary civil remedy as between the law of Scotland and England, and I think there is not a great deal of

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difference (as Lord Fraser has recently made clear in the House of Lords) between the granting of an interim interdict and an interlocutory injunction. Where you have a discretionary remedy, the court can take account of various kinds of evidence in a civil action, but that does not answer the question put by my noble and learned friend as the, as it were, rolled-up argument of this amendment to exclude criminal jurisdiction. The noble and learned Lord the Lord Advocate said that the amendment was to exclude particularly the criminal court. The amendments we are pressing are Nos. 6 and 9 which exclude criminal jurisdiction.
The Highway Code, as noble Lords have suggested, is taken into account. When one asks, "To what issue?"— it is always something like the standard of care in relation to careless driving or dangerous driving. Where you have a discretion whether to grant an injunction, the court may take account of various things. Where you have a criminal case involving a level or standard of care, I can see how a Highway Code or a code of practice may be taken as a guide for the court.
I have yet to hear the answers to two of my questions. First, as regards what issues in the criminal law in relation to picketing would the code be used in a similar way? I accept the noble and learned Lord's reading of the section. It says what it says. It is not creating new liabilities; it shall be admissible in evidence and when it appears to the court to be relevant, the court shall take it into account.
Here is the code of practice: pickets must wear armbands and stand in certain positions and so on. To what issues will those go? The noble Lord, Lord Wigoder, came close to suggesting that it would be almost the same as asking, "Do you work here?". The Socialist Worker gentlemen or ladies who come along are from somewhere else; they are not valid pickets under Clause 15. Yet we have been told by the Secretary of State and by the chief constables that the police will not ask, "Do you work here? "— because the code will not trespass in that area for the purpose of criminal law. If you ask what kind of issue the code is going to in a criminal prosecution, I cannot think that there is much differ-
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ence between Scotland and England in this. The noble and learned Lord the Lord Advocate did not give an example in the law of Scotland. I do not know. There may be one and, if there is, perhaps he will give it. The sort of issue will be the issue that I put: the crime of unlawfully and without authority watching a place, under Section 7 of the 1875 Act, the crime of unlawfully and without authority besetting a place, the crime of wilfully obstructing the highway.
When a code of practice comes in to illuminate the grey areas of those crimes, it is not going to a standard of care or a discretion for injunction or interdict, but to an area of the law where, if there is uncertainty, that should be decided by a statute properly considered in Committee. I expressed my preference for that method. If Parliament is not wise enough to go through that procedure, it will have to be left to the judges. With respect to the judges, I pefer it to be by statute. There are various crimes, not just about public order. Watching and besetting is not a public order crime; even wilful obstruction of the highway is frequently only on the boundary of a public order offence. There are various crimes where, if the code is to be taken into account, it will be either useless— and the noble and learned Lord has said that it would not be so— or the issues to which it goes will in fact either extend or narrow (and, as my noble friend Lord McCarthy has said, we suspect that it will extend, because of the attitude of the Government; and that seems reasonable) areas of liability which at the moment are arguably in a particular area which, after the introduction of the code, when the court will have to take account of it, will be wider in area than many lawyers say now.
Finally, there is the point on which no assurance is given— one of the most compelling reasons for keeping the criminal law out— the point in respect of the discretion of the police at local level being in any way affected by the code. If we are moving via the code, even by a centimetre, towards a national direction of the discretion of the police— the local police who know the people, as the chief constables so graphically described to the Select Committee of the other place— that will be a retrograde step. That is a further reason, the third reason, why we feel that we must press these amendments.
Lord HANKEY: It surprises me that the lawyers go on about this and about how complicated it becomes. One can imagine any number of situations where it would be complicated. May I draw noble Lords' attention to the fact that subsections (2) to (6) provide an elaborate procedure whereby any code of practice will come before Parliament? Everybody is going to be consulted, from ACAS down. I should have thought that we could rely upon the common sense of those people to see that we do not get into

CONTENTS

Allen of Fallowfield, L.

Goronwy-Roberts, L.

Plant, L.

Ardwick, L.

Gregson, L.

Ponsonby of Shulbrede, L.

Bacon, B.

Hale, L.

[Teller.]

Balogh, L.

Hatch of Lusby, L.

Rhodes, L.

Birk, B.

Houghton of Sowerby, L.

Ross of Marnock, L.

Blease, L. [Teller.]

Irving of Dartford, L.

Stewart of Alvechurch, B.

Boston of Faversham, L.

Janner, L.

Stewart of Fulham, L.

Bowden, L.

Jeger, B.

Stone, L.

Brockway, L.

Kaldor, L.

Strabolgi, L.

Cledwyn of Penrhos, L.

Lee of Newton, L.

Strauss, L.

Collison, L.

Llewelyn-Davies of Hastoe, B.

Taylor of Gryfe, L.

David, B.

Lovell-Davis, L.

Taylor of Mansfield, L.

Davies of Leek, L.

McCarthy, L.

Underhill, L.

Donaldson of Kingsbridge, L.

Maelor, L.

Wallace of Coslany, L.

Elwyn-Jones, L.

Oram, L.

Wedderburn of Charlton, L.

Gaitskell, B.

Parry, L.

Winterbottom, L.

Glenamara, L.

NOT-CONTENTS

Auckland, L.

Fortescue, E.

Mowbray and Stourton, L.

Bellwin, L.

Glenkinglas, L.

Norfolk, D.

Belstead, L.

Gowrie, E.

Nugent of Guildford, L.

Boothby, L.

Greenway, L.

Orkney, E.

Bradford, E.

Gridley, L.

Orr-Ewing, L.

Brougham and Vaux, L.

Grimston of Westbury, L.

Robbins, L.

Buxton of Alsa, L.

Haig, E.

Rochdale, V.

Cairns, E.

Hailsham of Saint Marylebone, L.

Rochester, L.

Caithness, E.

(L. Chancellor.)

Romney, E.

Caldecote, V.

Halsbury, E.

St. Aldwyn, E.

Chelwood, L.

Hankey, L.

Sandys, L. [Teller.]

Clifford of Chudleigh, L.

Hanworth, V.

Sempill, Ly.

Cockfield, L.

Harris of High Cross, L.

Simon, V.

Cork and Orrery, E.

Henley, L.

Skelmersdale, L.

Cottesloe, L.

Hives, L.

Spens, L.

Crathorne, L.

Hornsby-Smith. B.

Stamp, L.

Cromartie, E.

Hylton-Foster, B.

Strathcona and Mount Royal, L.

Cullen of Ashbourne, L.

Keith of Castleacre, L.

Sudeley, L.

De La Warr, E.

Kimberley, E.

Swansea, L.

De L'Isle, V.

Kinnoull, E.

Swinfen, L.

Denham, L. [Teller.]

Lauderdale, E.

Torphichen, L.

Digby, L.

Long, V.

Tranmire, L.

Dormer, L.

Lyell, L.

Trefgarne, L.

Drumalbyn, L.

Mackay of Clashfern, L.

Trenchard, V.

Ellenborough, L.

Macleod of Borve, B.

Trumpington, B.

Elliot of Harwood, B.

Mancroft, L.

Tweeddale, M.

Elton, L.

Marley, L.

Ullswater, V.

Evans of Claughton, L.

Massereene and Ferrard, V.

Vaux of Harrowden, L.

Faithfull, B.

Merrivale, L.

Vivian, L.

Falkland, V.

Middleton, L.

Ward of Witley, V.

Ferrers, E.

Montgomery of Alamein, V.

Wigoder, L.

Ferrier, L.

Morris, L.

Young B.

Forester, L.

Mottistone, L.

all the difficulties which can be imagined. And if we did, subsection (6) provides that the Secretary of State can amend it. I should have thought that the text as it stands provides adequate safeguards.
8.26 p.m.
On Question, Whether the said amendment (No. 6) shall be agreed to?
Their Lordships divided: Contents, 48; Not-Contents, 97.
[Amendments Nos. 7, 8 and 9 not moved.]
8.35 p.m.
On Question, Whether Clause 2, as amended, shall stand part of the Bill?
Lord MCCARTHY: We do not wish to make a great deal of this at this time of night, but there are one or two points that we should like to raise. We are not satisfied, obviously, with what has been said about the objects of the code of practice, particularly in relation to criminal liability and to the role of the police. We have had a Division on that and we may raise it again on Report. There are two other issues I should like to raise on this Motion, That the clause shall stand part of the Bill, and I hope that the noble and learned Lord may answer subsequently.
The first consists of the point that I made earlier, of the power of the Secretary of State to cancel the ACAS codes. We have been told that the Government have no intention at present— and I am thankful for that assurance— to change or, as I wrote it down, to interfere with the existing ACAS codes. My question is therefore quite simple: Why, then, take the power to do so? If there is no intention to do so, why take powers? My second question relates to the rather strange statement in the Notes on Clause 2, codes of practice, because it does not appear in terms in the clause itself. I should like to ask for clarification of what is said on the second page, that there will be a reciprocal ability for the new ACAS code to supersede any previous codes in whole or in part, including any previously issued by the Secretary of State under this clause. This will be given by an amendment to Section 6 of the 1975 Act and will be achieved by paragraph 4 of Schedule 1 to the Bill.
I say this in all innocence: this seems to me to project us into a situation in which we could have two sources of codes each firing them in different directions at each other. On one side there is the Secretary of State cancelling the ACAS codes. On the other side there is ACAS cancelling the Secretary of State's codes, all going backwards and forwards. One could say that the ACAS codes cannot really cancel out the Secretary of State's
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codes because the ACAS codes are subject in a sense to the Secretary of State's veto. He has to put their codes to the House. In that case, why do we have ACAS with this power to cancel out the Secretary of State's codes? Any clarification which we could have at this time on the backwards and forwards of these different cancelling out processes we should much appreciate.
Lord MACKAY of CLASHFERN: The matter is one of convenience. The idea is that these codes should deal with subjects under the general power which is contained both in the ACAS power and in the present clause giving power to the Secretary of State. It might well be that the Secretary of State's code will contain material which might impinge on the ACAS code; and conversely, as I said earlier. Therefore it seems appropriate to have this dual possibility, so that the codes would not come into conflict but the latter would supersede the earlier one so far as necessary. After all, industrial relations is a developing subject. One hopes indeed that it will develop further over the years. In order not to cramp the style of development, clauses of the sort contained in Clause 2, so far as the ACAS codes are concerned, and contained in Schedule 1, so far as the Secretary of State's codes are concerned, are appropriate.
It is also worth saying that Parliament will have to approve the codes, and therefore the joint efforts of ACAS and the Secretary of State as two different sources of enlightenment will both have to be approved by Parliament before they become effective. So I would regard this simply as a useful piece of machinery. I do not see any difficulty in it whatsoever.
Clause 2, as amended, agreed to.
Clause 3 [Unreasonable exclusion or explulsion from trade union]:
Lord MCCARTHY Lord MCCARTHY moved Amendment No. 10:
Page 4, line 7, leave out ("or is seeking to be "and insert ("offered employment or is").
The noble Lord said: We should like to take with Amendment No. 10 Amendments Nos. 11 and 17, and to speak on all three because they are connected. The object of these amendments is to try to

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clarify a confusion, as we see it, between what the Bill says and what the Bill intends, or what the Government intend, in so far as what the Government intend is stated in the Notes on Clauses. In subsection (1) in the Notes on Clauses we read as a description of what Clause 3 (1) does, that it limits the application of the right provided by subsection (2) to persons who are, or who would be if offered employment, employed where there is a union membership agreement in force. I will say that again because it is critical: to persons who are, or would be if offered employment, employed where there is a union membership agreement in force. If that statement were in the Bill then there would be no need for this amendment.
When we turn to the Bill we find in Clause 3 (2):
"Every person who is, or who is seeking to be, in employment ",
which suggests it does not have to be somebody offered a job, but somebody who is seeking to be offered a job. Therefore, we have our three amendments which are all related, where we are trying at page 4 line 7 to leave out "or is seeking to be "and to insert "offered employment or is". That I would say is in line with the Notes on Clauses. Subsequently, we are trying to change Clause 3 (4) so that at the end of line 24 we insert:
"and that employment with a particular employer has been refused or lost as a consequence of such refusal or expulsion ".
That makes the point that the job must be, as it were, offered and lost as a result of the applicant being in a union. The last amendment is to page 5, line 6, after "union" to insert:
"made by a person who has obtained or who has been offered employment to which this section applies ".
Unfortunately, the Notes on Clauses, on Clause 3, do not say— and it was not said in another place— why the Government should want to do one thing or the other; that is to say, why they should want to widen the ambit of Clause 3 so that it includes every person who is, or who is seeking to be, on the one hand, or why they should prefer to narrow it to those who are offered employment. I have to say a little about why we would consider the second a much preferable policy to adopt than the first.
What we have here are a set of provisions which are to regulate unreasonable exclusion or expulsion from a trade union, and the whole purport and drift of these sec-lions of the Bill are, I understand, to deal with a situation in which a union membership agreement is cither in existence or in prospect, or is de facto in operation. There may or may not be a case— we shall be arguing that later— for having legal regulation of unreasonable exclusion or expulsion from a trade union within the context of a union membership agreement. But it seems to me that it is quite different to say that unions that in no way get themselves involved in union membership agreements or in areas where there are no such agreements or in areas which are entirely voluntary from the point of view of trade union entry and trade union exclusion should be governed by this part of the Bill.
This would greatly increase the case-load on tribunals. It would mean that everybody who felt he had been offered a job, might be offered a job or would like to have a job could come along and use the provisions in the Bill. To take an extreme case, which is not all that extreme, one could have a man who felt he would like to get into NATSOPA or the AEWU or Equity— all unions which from time to time have had restrictions. We are asking: why should there be this very general provision in the Bill in which every person who is, or is seeking to be, in employment in an area of a union membership agreement, whether or not he is going to be given that employment by the employer himself, is covered by this Bill?
Clearly, if an employer is prepared to take somebody into a job and the reason he is not permitted to take that job is because he cannot get into a union or has been excluded from a union, then here we have a specific example of the union membership agreement in operation. But I suggest that until an employer offers the prospect of a job and says that a job is on offer, we cannot say that we are in an area where a union membership agreement is in operation from the point of view of the individual worker. For that reason, we would suggest that your Lordships should accept these amendments. I beg to move.
Lord MOTTISTONE: Surely the answer to the question of the noble Lord,

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Lord McCarthy, is that this clause as it stands is giving the widest possible opportunity to people who are seeking jobs. If it so happens that there is a closed shop or a union membership agreement, however you care to describe it, already in existence, they cannot even seek and they are not even going to be offered a job if they come forward or if they even make enquiries and say, "I don't belong to the appropriate union for this."
This is surely trying to break a log jam and to give an opportunity to a wider list of people. We are told there are a lot of people unemployed and that there are a lot of people who are wrongly trained for a particular job. People might seek to get training and they might go to a Government skillcentre and obtain the necessary qualifications; but, if they are not even allowed to seek, they still could not go and perform the new task for which they were qualified in a firm which had a rigid closed shop.
This is surely the basis of the matter. I am not going to underline all that implies, and I hope that your Lordships are with me on that point. The point is that there may be people who want to seek a job and if they cannot even do that they are not going to be offered one. It seems to me that the various amendments are ail restraining the ability of people to get jobs when they are qualified for them, in circumstances in which the closed shop is a barrier to them.
Lord MCCARTHY: If I may just intervene, I do not want the noble Lord to misunderstand. Our amendment is not suggesting that anybody cannot seek: of course they can seek. We are saying that, if a person seeks and then is offered a job and is refused that job because he cannot get into a union, then the Bill should apply. Nobody is saying, "You can't seek."
Viscount CALDECOTE: The noble Lord, Lord McCarthy, will be aware that there are certain union membership agreements which are pre-entry, and if a chap is not a member of the relevant union before he seeks a job he has not got a ghost of a chance of getting the job. It is all wrong, but that is the position. Why does he want to discriminate against a
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person in that position by not giving him the right to join a union before applying for the job? I cannot see why he wants to discriminate against those people. I wish we had not got pre-entry closed shops, but as long as we have them surely people have to be protected in this way. I cannot see the logic of his argument.
Earl DE LA WARR: I very much doubt whether the noble Lord, although he obviously thinks he is, is really talking on behalf of all unions. I entirely agree with the arguments my two noble friends have just put forward; but is the noble Lord quite sure that a non-craft union is going to want this sort of restriction applied? I cannot believe it. Many unions are looking hard for members. That is one of the things we deal with in connection with the whole closed shop argument. I should like his assurance, because I know how close he is to the unions, that they think this is sensible. I should have thought that they thought of it just as we do on this side.
Lord WEDDERBURN of CHARLTON: One feature which has been mentioned is the question of why the clause, if it has any logic— and we shall argue later that it has not— should apply only to someone who has lost either a job or an offer of a job. Even in the pre-entry situation there could be an offer from the employer saying: "If you get into the union then I will take you ". That is a well-known situation. As regards seamen, if the union will take him in the man may be put on the register, which is perhaps the tightest of all. The reason we say that this clause, if it is to apply at all— which we shall resist— must logically apply where a man has lost a job prospect or an actual job. This is related to admission to unions and several speakers have referred to unreasonable admission and it is much more relevant to that particular point.
The clause does not give anybody any right when he is unreasonably refused employment by an employer. He can be in the union or anything else and the employer can say, "I don't want you ", and there is nothing now or in the Bill to give a man who is on a black list— and there are organisations, as will be known to noble Lords opposite, which

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circulate black lists of people that you really should not take on— any recourse to a tribunal.
We say that if— which we deny— there is a case for giving a man or a woman a remedy in a tribunal for unreasonable exclusion and refusal of admission to a union, at least that must be a case where he or she could show a job loss or a job prospect loss. Otherwise the tribunals will be cluttered with people who are sent to try it on against a union, simply wanting to get into a union, when they have no prospect of being employed in the relevant industry. It may be said that that will be taken into account in terms of the compensation, but that is a different point which has not yet been made. But the compensation, even if it is very small, will nevertheless trouble the tribunal with a case which should never have been brought. The cases, if they are to apply, should apply to job loss.
Earl DE LA WARR: Is there not a difference in this case between a craft union and a general union?
Lord MCCARTHY: The point is that we are not saying that anybody should be refused entry into a union. Of course, there is a difference between a craft union and a general union. Indeed, the general unions will take anybody who will come and they are keen for members. We are not trying in our amendments, nor are the Government, to affect that in any way. What we are saying is that if, for some reason, a non-craft union refuses entry or exercises its right of expulsion under the rules, from our point of view, it is more sensible that this Bill should begin to apply from the point where the individual in those circumstances has the prospect of a job loss, than that anyone who says he cannot get into the T and G or into Equity, whether or not there is any prospect of a job, can allege that there is a prospect of a job and that he is seeking a job in what is, in the case of Equity, an entirely closed shop area, and can go along to the tribunal on what we would regard as not being the purposes of this clause.
Earl DE LA WARR: As I suspected, this is angled towards protection of the craft unions. I think that the noble Lord has proved the point.
Lord TORPHICHEN: I still have not been convinced by either the noble Lord, Lord McCarthy, or the noble Lord, Lord Wedderburn. May I preface my remarks by saying that I am probably the only Member of your Lordships' House who could possibly find himself at the wrong end of a closed shop agreement and liable to lose his job thereby. I have just changed my job from one firm which contemplated using the closed shop, to one where there is a multipicity of unions on one site and no possibility of a close shop ever being in sight.
The argument that I have heard from the Front Bench opposite appears disreputable, since noble Lords wish to build a Catch 22 clause into the Bill, in that if you fill in your application form for a job and put the wrong answer at the bottom of the form where it asks "Do you belong to a union and, if so, which? ", then the union which has what is euphemistically termed a union membership agreement can say to the employer, "That is the wrong union and we do not want people who are not members of our union to join you ", and the employer will quite happily not consider offering you a job. That is what will happen if you have put on your application form that you do not belong to a union or are a member of the wrong union. By that means, it seems that the Front Bench opposite wish to change the responsibility neatly from the union to the employer and thus avoid the effects of this clause.
Lord ROCHESTER: To put it in another way, which I hope may be even more succinct, is not the noble Lord seeking to deny these rights to people who, while neither in employment nor having the offer of a job, are nevertheless seeking one? Surely, that is the effect of what he is trying to do, is it not?
8.55 p m.
The Earl of GOWRIE: I am beginning to feel rather redundant, because my noble friend Lord Torphichen and the noble Lord, Lord Rochester, seem to me to have put their fingers on the enormous weakness in these amendments. But I do not want simply to leave it at that, impressed though we are by the noble Lords' contributions, because I want to say something about Clause 3 since it

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is so critical to our whole approach in the Bill, and provides one of the most important elements of our proposed reforms of the closed shop.
It is one of the most unacceptable features of the closed shop that a union may be able to pressure individuals into taking industrial action— for instance, against their better judgment— by the threat of the removal of their union cards. In some disputes, pickets have threatened other workers with the withdrawal of their union cards if they refused to cooperate. The law must surely be changed, because where there is a closed shop— and we accept that this is a feature of British industrial society, regardless of whether one thinks that that is a regrettable development— therefore, no union card can mean no job. We would say that events in recent years have made very clear to us, and have reinforced our conviction of the need to reform here and to provide redress for individuals who are affected.
However, in seeking reforms we have tried to deal with the practical realities of our industrial society. Our intention is to make the limited, but vital, changes in the law, as I said on Second Reading, which will reinstate the protection which individual employees and workers need against the abuse of trade union power. So here is the new right against unreasonable exclusion or explusion from a trade union applying only where the employment in question is covered by union membership agreement or closed shop, for short. That is, obviously, because, for the reasons I have given, the threat of exclusion or expulsion always carries the most force where there is a closed shop and no card means no job.
Earlier legislation of the last Wilson Government after the General Election of 1974— Section 5 of the 1974 Act-provided a general right against unreasonable exclusion or expulsion from a union. As your Lordships will remember, that was when the Government of the day were in a minority position and, in my view, to their lasting disgrace in this area, the moment they achieved a majority position very briefly, in 1976, they actually got rid of that totally unexceptionable right, the general right against unreasonable exclusion or expulsion from a union.
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I really cannot see what set of industrial circumstances, or union circumstances, could have justified that 1976 repeal. The net result of the 1976 repeal of the previous Government's own legislation is that there is now no current statutory protection whatsoever, though I of course acknowledge that there is a common law right not to be expelled contrary to rule or to natural justice.
These amendments seek to impose a further and, in our view, altogether unacceptable limitation on the right to complain of unreasonable exclusion or expulsion, by insisting, as the noble Lord has told us, that effectively a job must actually be lost before there can be a right of complaint. By doing things in that way, they remove the assistance offered by the clause to those who feei that they are being pressured into some form of action— some form of strike, let us say— for fear of loss of their union card.
They also remove the protection offered to those threatened with dismissal, and I should have thought that the threats make the issue even more intolerable. Noble Lords opposite— in particular the noble Lords, Lord McCarthy and Lord Wedderburn, who have served with great distinction on the TUC's Independent Review Committee— will not need to be reminded that that committee deals with such complaints as well as with cases of actual dismissal following exclusion or expulsion. That is right because, as the IRC itself has said, most applicants are interested principally in securing their jobs. Its terms of reference are,
"To consider appeals from individuals who have been dismissed or given notice of dismissal from their jobs as a result of having been expelled from or refused admission to a union in a situation where trade union membership is a condition of employment ".
But, as I believe the independent review committee discovered as its work progressed, it is far more difficult to gain reinstatement once a job has been lost. It is therefore important that the new statutory right ensures that you can make an appeal before a threat of dismissal results in the loss of your job.
A number of examples exist of circumstances in which it is essential to be a member of a union before the question of application for a particular job can

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arise. For instance, in order to be offered employment in the Merchant Navy, one has got to be on the register of seamen, and one cannot get on to that register unless one holds a union ticket. So denial of union membership means denial of the prospect of employment just as surely as if the applicant were refused a particular job. These amendments would deny redress in those kinds of circumstances and they are therefore completely unacceptable.
Perhaps rather more frequently a complainant will have to show that a particular job was available and that he himself was deprived of it because of his unreasonable exclusion or explusion. He would, for example, have to show that he was genuinely seeking employment and not complaining speculatively with the intention of causing disruption, or seeking damages, or whatever. Industrial tribunals are very experienced in similar matters relating to unfair dismissal, and our view is that they are perfectly competent to decide whether a particular complainant was genuinely seeking relevant employment or whether, as it were, in colloquial language, he was "trying it on."
I shall not deal with the question of compensation because we come to that in Clause 4 of the Bill. But, if a union is found to have acted unreasonably, any compensation awarded would of course be affected by whether there was an actual dismissal or job loss. In many cases, without evidence of imminent employment but for the union exclusion, not much by way of compensation could be expected. This should cast even further doubt on arguments that the provision could be used speculatively by anti-union troublemakers.
I hope that, in the light of what I have said, noble Lords will not press their amendments, but if they do I must ask the House to reject them.
Lord MCCARTHY: I find it difficult to know how to react to what the noble Earl has just said. For part of the time he was saying that where there is a closed shop there is no union card, and therefore no job, and that that is bad. That would be covered by our amendments. We are not suggesting that this should not be
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covered by our amendments. For part of the time the noble Earl referred to what happened between 1974 and 1976. In those three years there were four successful cases. Then for part of the time the noble Earl spoke about the Independent Review Committee, to which I did not wish to refer. However, the noble Earl has raised the issue and says that he is concerned with just that area. But just the area of the independent review committee is the area which would be covered if these amendments were accepted.
Right at the end the noble Earl told us that industrial tribunals could be seen, and would undoubtedly be seen, to take into account whether or not people were genuinely seeking employment. If the Bill said, "Every person who is or is not genuinely seeking to be in employment… ", the noble Earl might have a case, but such a phrase as "genuinely seeking employment" is not in the Bill. It is late at night. We do not want to withdraw this amendment, nor do we want to divide the House, but we do want to express our opposition, and this I am told is the third choice.
On Question, amendment negatived. [Amendment No. 11 not moved.)
9.5 p.m.
Lord MCCARTHY Lord MCCARTHY moved Amendment No. 12:
Page 4, line 28, after ("case) insert (" having regard to any relevant agreement or arrangements made between one or more employers or employers' associations and one or more independent trade unions or between independent trade unions connected with membership or non-membership of a trade union").
The noble Lord said: This is the amendment about Bridlington. The amendment suggests that the clause should include a reference which says that the tribunal should have
"regard to any relevant arrangement or agreement made between one or more employers or employers' associations and one or more independent trade unions or between independent trade unions connected with membership or non-membership of a trade union".
This is necessary because it is possible to argue, as a result of 3.11, that some union rules which make provision for this, or some union agreements which make provision for this, or some collective agreements between employers' associations

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and unions might be void because they could be said to exclude or limit the operation of this clause. Therefore we would argue— and we should like to know whether the Government argue, because there is a certain amount of confusion in our mind as a result of something which was said in another place— that unless the Bill is amended in this way at this stage there is a danger that the extremely important Bridlington Agreement, which I am afraid I shall have to go into in a little detail, could be undermined and be regarded as void because of the Bill.
I say that there is some doubt about this matter because in another place a Member asked the Minister responsible whether the Government were satisfied that this clause would provide safeguards of that sort and that it would not undermine the Bridlington procedures. The Minister's answer was that they were satisfied, but he said that he would like to explain why the Government took that view. Then he said that the key to that clause was the concept of what is reasonable and what is unreasonable. In other words, what is being said is that we can rely upon the tribunal to say that, despite the provisions of 3.11, the Bridlington procedures, or their associated procedures, would be regarded as reasonable.
Therefore, if a union should say they cannot recruit somebody because they have an understanding with another union which is not in their recruitment area, then that would be regarded by the tribunal as reasonable. If there was an appeal to the EAT that would be reasonable, and if there was an appeal to the Court of Appeal, the Master of the Rolls, for example, would say it was reasonable; and if, for example, a union inadvertently (as does happen) recruits somebody and then says, "You have been inadvertently recruited and therefore we put you (as is provided in the rules; because they could not do it if it was not provided in the rules— that would be unlawful) into a temporary membership category, and then we discover through representations being made from other unions that in fact we were not entitled to recruit you, that in order to uphold the principles of Bridlington, while we are very sorry we have to exclude you, as we are entitled to do under the rules of our union ". Unless there were such a rule and it was quite clear and
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precise, and unless they carried out that rule, very clearly and observing natural justice in its exercise, that would be unlawful and they would not be able to do it. But at the moment the common law says, if they have such rules, "That is all right"; and then we are told, as it were, by the debate in another place, that that will be all right. The tribunals would say, "That is reasonble ", and the EAT would say, "That is reasonable ", and the Court of Appeal would say, "It is perfectly reasonable for a union to exclude somebody in order to uphold the Bridlington Agreement".
We are saying that we are not convinced and we should like something put into this Bill to make it clear that the relevant agreements or arrangements between employers' associations and trade unions, and particularly the agreements in the TUC's Bridlington rules, would in fact be able to be embodied and accepted by a tribunal as being reasonable.
Sometimes one hears a considerable amount of talk about the Bridlington procedures, as though people would argue that there is something particularly crude or disadvantageous to the average trade union member or to the organisation of collective bargaining about them. In fact the Bridlington procedures are quite simple. They aim to spell out certain spheres of influence between trade unions; they aim, for example, to ensure that if someone wants to move from one union to another, someone who has recently been a member of an affiliated union, he should specify, if he wants to resign, why he wants to resign, and he must state that he is clear on the books and another union, before it takes him in, should ask him to fill in a form to show that he is clear on the books and that he is not under any discipline or penalty from that union. In fact it is specified under principle 5 that unions are entitled to organise themselves in such a way that they can allocate areas of organisation.
Indeed, in many ways the Bridlington principles are the foundation upon which the TUC seeks to establish a certain degree of regulation and order out of the chaos of the British trade union structure. It is principle 7 of the Bridlington principles which enables the TUC to do its inter-union disputes demarcation work. It is

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principle 8 which enables it to deal with unauthorised stoppages. These, incidentally, are principles of the TUC which derive in their developed sense from the much despised In Place of Strife.
Nevertheless, the fact is that the Bridlington principles are the foundation of clarity and order, in so far as it exists. I am very happy to accept the statements which have been made from the other side of the Committee that the British trade union movement is not very clear, not very coherent and rather chaotic, but such clarity and consistency and order as there is exists because of the commitment of the Trades Union Congress and its members to the Bridlington principles, and anything which undermines the operation of those principles— and I say this with very great respect to this Committee— does even more harm than would be done by this Bill. Therefore we are suggesting that on this occasion the Government should make it clear beyond peradventure that despite the statements of the Minister in another place they will be precise and clear and admit these amendments into this part of the Bill. I beg to move.
9.12 p.m.
Lord MACKAY of CLASHFERN: The noble Lord, Lord McCarthy, has described the Bridlington procedures as an attempt to bring order into the chaos of the British trade union structure. Certainly the Government strongly support action which has that desirable effect and they believe that the Bridlington procedures have a great part to play in that operation. Therefore they see great value in them, and I give the unreserved assurance that there is no intention whatsoever in this Bill on the part of the Government to undermine those procedures.
However, having said that, these amendments which are now proposed, and particularly Amendment No. 12, are not necessary to protect actions properly taken in accordance with the Bridlington arrangements. A tribunal, under the provisions of Clause 3, and particularly Clause 3 (5), will have to determine whether, in all the relevant circumstances, a trade union has acted reasonably in excluding or
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expelling a person. The tribunal, therefore, will of course include in its consideration the question whether the action was taken in pursuit of the Bridlington procedures or similar arrangements.
It is worth noting that in the one relevant case taken under Section 5 of the 1974 Act, which was not a closed shop case, the expulsion of two members, on the grounds that a Bridlington award would, if sought, have required this action, was found reasonable. The Government have considered most carefully the TUC's representations on this point and have concluded that there is no need for a special provision in the legislation to cover these matters, because the consideration of all relevant circumstances in determining the matter,
"in accordance with equity and the substantial merits of the case "
will cover that.
My right honourable friend the Secretary of State proposes to issue a code of practice after consultation with ACAS on the operation of the closed shop, and that code will certainly be expected to contain practical guidance as to the importance and significance of the Bridlington procedures. As we know from the earlier debate, such codes will be taken into account by tribunals and any courts before which such cases have to come.
These amendments are also undesirable because special provision drawing particular attention to certain activities or deeming certain actions reasonable or unreasonable would add to the complexity of the legislation, making the task of tribunals more difficult and the rights of individuals less easy to comprehend. Extensive lists of criteria would not seem suitable for this legislation. Surely it is much better to allow the tribunals to weigh up each case on its merits and assisted in that task by the guidance set out in the relevant code of practice. Although we have every sympathy with the basic principle to which the noble Lord, Lord McCarthy, was referring, we consider that it is sufficiently protected by the words of the clause, and I would invite your Lordships not to support this amendment.
Lord MCCARTHY: In the light of the assurances given by the noble and learned

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Lord, I am happy to beg leave to withdraw this amendment.
Amendment, by leave, withdrawn.
9.17 p.m.
Lord MCCARTHY Lord MCCARTHY moved Amendment No. 13:
Page 4, line 3), at end insert—
("() On a complaint under this section whereby the complainant alleges a contravention of subsection (2) (a) above, the tribunal shall determine that the trade union has acted reasonably if it proves that its refusal to admit the complainant was substantially caused by: —

(a) the fact that members of the trade union are without employment and that no adequate opportunities for their employment exist in the trade or industry, or section or district of trade or industry, in which the complainant would be likely to seek employment; or

(b) the fact that the complainant lacks the qualifications skills or capacities which are, according to its rules, appropriate and necessary for membership of the trade union, or of the branch or section of it, to which the complainant seeks admission; or

(c) the implementation of an agreement or arrangement (whether legally binding or not) between that trade union and another, where both are independent trade unions, or of an award or decision made under any such agreement or arrangement, concerning the admission or non-admission of members to one or both of such trade unions; or

(d) the fact that the complainant has committed acts within the period of three years before the complaint was presented to the tribunal which, had he been a member, would have given the trade union reasonable cause for his explusion in accordance with its rules, or, where the complainant has been a member of the trade union, the fact that he was so expelled during that period.").

The noble Lord said: This is a complicated amendment and the reason why we have put it down is that we felt that it was worth placing on record what we regard as the proper grounds and the reasonable grounds on which unions could both admit and refuse to admit, and even to exclude members. Indeed, we would go so far as to say that the great majority of unions actually operate these principles. We are not saying that these principles in an ideal world should be embodied in a Bill, but this is not an ideal world; we have this Bill, and therefore it seems to us incumbent upon us to say what we believe, if we are to have unreasonable exclusion and expulsion from trade unions as an item in a Bill of this kind, the kind
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of criteria should be. We have set out paragraphs (a) (b) (c) and (d) These seem to us to be the kind of criteria which a tribunal could use to determine that the trade union had acted reasonably in the circumstances of the case. The first of our paragraphs states:
"the fact that members of the trade union are without employment and that no adequate opportunities for their employment exist in the trade or industry, or section or district of trade or industry, in which the complainant would be likely to seek employment".
In other words, we are saying that trade unions, like professional associations, like all kinds of vocational associations if they are in a position to do so, are entitled to exercise a reasonable degree of entry control.
This takes me back to the point which was raised on the other side of the Committee a little while ago about the pre-entry question. Where pre-entry closed shop exists its objective is entry control. It exists in those industries where at the moment there are, or in the past there have been, very considerable influxes of labour and where it has been essential for the trade union, in order to maintain effective collective bargaining, to exercise an element of entry control.
For example, the entertainment profession: the Musicians' Union, Equity and NATTKE could not operate today effective collective bargaining without the entry control function, because the great majority of musicans and actors are not on standard contracts at all: they are on night contracts, week contracts, run of the mill contracts, or run of the show contracts. They are on Equity contracts and without the union card as a ticket to the job these people could not operate effective collective bargaining. Therefore, we say that that is a perfectly reasonable criterion for a union in that situation to take into account.
Similarly, there are unions such as NATSOPA, which at present has almost as many members out of trade— that is to say, unemployed— as it has in trade. If that union were to continue to admit people into its organisation it would, in fact, become bankrupt, because out of trade benefit has to be paid to people who are out of trade. Therefore, if unions are to work effectively they must

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have an entry control function. We are saying that that is a perfectly reasonable thing to insert in a qualification.
Secondly, we are saying under paragraph (b):
"the fact that the complainant lacks the qualifications, skills or capacities which are, according to its rules, appropriate and necessary for membership of the trade union ",
should be a perfectly reasonable argument for excluding someone— that is, if one finds that someone has wrongfully claimed to have qualifications. Again, I would say that there is a quite straight parallel between what trade unions do and what professional associations do. Qualifications, skills, and capacities in craft unions and occupational unions are a perfectly reasonable objective criterion for exclusion or, in particular, for non-admission.
Thirdly, we are saying— and this goes back to the amendment which we have just moved— that, in broad terms, Bridlington is the purpose of paragraph (c). Bridlington, in broad terms, is a perfectly reasonable reason for excluding somebody in this case or refusing to recruit someone.
I suppose that the controversy in most people's minds would arise as regards the final provision, and I am bound to say that we spent some considerable time deciding how to put the point. The fact is that trade unions, like social clubs, like military organisations and like political parties have to have penalties for people who do not observe the rules. Usually those penalties are phased penalities: they begin with something like a £ 5 fine or a £ 10 fine or something of that kind. In the overwhelming majority of cases those who are excluded from a union for some offence against the rules of the union which would fall under category (d) are, in fact, people who have originally been visited with a far less severe penalty and they have refused to pay that penalty.
The idea that people become expelled from unions for not going on strike is an idea of ignorance. If people refuse to go on strike they are "branched" and when they are "branched" they are asked whether they have reasons. If they have no justifiable reason they are asked to pay a fine. If they refuse to pay the fine
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and to subject themselves to the authority and discipline of the union, they can find themselves in a situation where they are eventually expelled.
I stress to the Committee that all of these matters are subject to common law review. Anyone who feels that he has been unjustifiably expelled from a union can go before a common law court and can say that that is so. The court will interpret the union's rules and interpret them very narrowly. These days no union can get away with a general rule rather like the old Section 40 of the Army Act which says that conduct prejudicial to good order and military discipline can visit the most fearful things upon one. The courts are very rigorous in the way that they interpret union rules, particularly union rules affecting explusion.
Nevertheless, the courts have accepted in principle the idea that unions are entitled to ask for discipline; that they are entitled to ask for obedience under their constitutional rules; and that they are entitled, in the last analysis, to expel people who systematically break those rules. Therefore, in paragraph (d) we have tried to set out the kind of way in which we would say that reasonable cause could be given for expulsion.
Finally, it will be said, "But, of course, the tribunal will take all this into account". It will be said that the tribunal is composed of reasonable men and that we are talking about unreasonable exclusion and expulsion, and all this is reasonable. Later on in other parts of the Bill— unfortunately, we have not yet reached them— the Government will come before us, if they reflect what was said in the other place (especially, for example, in relation to small businessmen) and say, "These things are clear; they will be done; they are there already ". But for psychological reasons, for reassurance reasons, we ought to give people some indication of what we intend. We are saying that something should also be done for trade unionists. We are saying that these provisions are reasonable and it would be an act of some faith and understanding if the Government were prepared to put them into the Bill tonight.
Lord ROBBINS: I have listened with growing amazement to the vindication of

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Lord McCarthy's amendment, which in the end seemed to me to constitute a vindication of all restrictive practices without exception. It would be very interesting to hear how the noble Lord divides justifiable restrictive practices from unjustifiable ones in the light of what he has said and what may be read by your Lordships in Hansard tomorrow morning.
Lord MCCARTHY: I am tempted to say to the noble Lord that justifiable restrictive practices are mine and unjustifiable restrictive practices are yours. But I shall not say that. I am not talking about restrictive practices; I am talking about entry control. The fact is that a large number of unions that practice entry control are not doing it for reasons of restrictive practices. They are very often doing it with the condonation, admission and encouragement of the employer himself. They are doing it as labour agents to regulate entry to the trade. It is not the same as a restrictive practice.
Lord MOTTISTONE: Although I understand completely what the noble Lord Lord McCarthy, has said and that there are bodies, such as clubs, to which people have their own rules for entry, there is one essential difference between a trade union and a club. If one does not belong to a club, one does not lose the opportunity to earn one's living; whereas under certain circumstances, with which this clause deals, it is possible to lose the opportunity to earn one's living if one does not belong to an appropriate trade union.
It seems to me that that puts it in a different class and that in considering this one therefore not only has to look to the interests of the trade unions in order to have a reasonable control, as they see it, but one should also look to the rights of the individual and the opportunities he or she has for getting employment in jobs for which he or she might be skilled. I jotted down and read this amendment. It seems to me that the whole of it narrows the exclusive-ness of the trade unions and enables them to restrain people from joining for no particular reason except that they think that it is a good thing. I believe that that is wrong when we are talking about people's ability to earn their living.
Lord DAVIES of LEEK: I shall be brief. I want to ask a question. If these four paragraphs— and I shall not go through them because of the time— are not introduced, I truly believe that we could have organisations which can exploit this situation and make a bonanza for lawyers or sea lawyers to have a continuous representation. Clause 4 contains a particular phrase and I want to know whether I am correct in my understanding. Perhaps the two Ministers will listen for a moment because this is a serious question. I may be completely wrong and, if so, it is right that I be corrected. From Clause 4, which could result in appeals for compensation, I understand that the compensation could go as high as £ 8, 000 odd. Unless the Bill is amended in the way my noble friends are suggesting, "wide boys "of all types will have a grand opportunity.
9.30 p.m.
Lord HOUGHTON of SOWERBY: When I heard the noble Earl, Lord Gowrie, read out the terms of reference of the Independent Review Committee established by the TUC, I noticed how brief they were, and it surprises me that anybody who has served on tribunals, on committees of inquiry or on adjudicating authorities should want to press for harness to be put on members of those bodies. This is a question of trustworthiness and confidence in a tribunal, and the amendment is a proposed extension of the question whether a trade union has acted reasonably or unreasonably, as shall be determined in accordance with equity and the substantial merits of the case; and it goes on to say that in the discharge of that responsibility the tribunal shall have regard to four matters which must guide their judgment. One is:
"the fact that members of the trade union are without employment and that no adequate opportunities for their employment exist in the trade or industry, or section or district of trade or industry, in which the complainant would be likely to seek employment ".
One wonders how a tribunal is to follow that in literal terms. I should have thought that here again we have all the factors of particular cases to be considered by a tribunal which can look at them all and relate one consideration to

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another without being told directly that they must have special regard to the matters enumerated in paragraphs (a) to (d) of the amendment.
I do not like the bias against people who have complaints. Surely Parliament exists to see that people with complaints have remedies provided and justice meted out to them, and it is a mistake to presuppose that people who have complaints must have the dice loaded against them. There are many genuine cases where a person is suffering a sense of injustice, is put to come degree of hardship and is seeking some remedy for his condition. I do not believe there is any serious risk of these provisions being exploited by many people. There may be individuals pursuing cases which are not perhaps worthy of favourable consideration, but that is for the tribunal to sort out.
I am, therefore, strongly in favour of getting the tribunal right and then giving them the discretion and right to exercise their judgment on the facts, circumstances and person brought before them. That is exactly what the Trades Union Congress have done with their own independent review body; they have not tied the hands of the noble Lords who serve on it. Why, then, should it be assumed that other tribunals must have their hands tied because they are less trustworthy? If this is being done for psychological reasons, then it seems that almost every tribunal in the land would need to have their hands held by statute law or by codes of conduct or by guidance given to them in order that they should satisfy their statutory responsibilities. I do not feel that all this is a desirable extension of the clause under consideration.
There are so many indefinable factors which are difficult to establish as matters of fact under these proposals that the position of the tribunal would be made much more difficult than it need be. Most of the question rests on what one might call the common sense of tribunals and their sense of responsibility and judgment, and for my part I should be prepared to leave it there.
9.35 p.m.
Lord MACKAY of CLASHFERN: I should like to express hearty appreciation
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of the excellent intervention of the noble Lord, Lord Houghton of Sowerby. It is notable that when the noble Lord, Lord McCarthy, went through the various paragraphs of his amendment he sought to justify each paragraph by the very criterion of reasonableness which is set out. So what is the point? If the whole matter is comprehended in terms of reasonableness, why not leave the statute as proposed?
Paragraphs (a) to (c) of the amendment contain matters which might well be the subject of a code of practice on the closed shop. I am not nearly so certain about paragraph (d) which appears to have taken some time for the noble Lord to put together. It refers to conduct which would have been reprehensible had the person been a member of the trade union. I am not sure, for instance, how the noble Lord would deal with the situation of a man who was not a member and therefore did not pay the union dues for the three years. If he had been a member, presumably he should have paid; and if he had not paid, he would have been reasonably expelled. So to me paragraph (d) does not appear to make much sense. However, I concede that the general subject matter of paragraphs (a) to (c) would have a bearing on the decision to which the tribunal might come. But our view is that this matter is best left on the basis of the simple test of the tribunals to apply to the individual case, and I would ask your Lordships to accept that view.
Lord MCCARTHY: I am afraid that we cannot agree to withdraw the amendment. The noble and learned Lord said— as I predicted he would, and as indeed he was bound to say— that the Bill concerns itself with the notion of reasonableness; and why not leave it all to the tribunals to be reasonable. Well, I tried to state the reasons why we do not think that that is an acceptable answer. All I can say in addition is that in the first place, if this were to be the case, not all tribunals would come to the same decision. Probably various tribunals would come to quite different decisions, some of which would be appealed against and some of which would not, and to some extent whether the tribunals came to one particular decision rather than another would depend on the side members.

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One issue that we have not debated this evening, but which I presume we shall be debating subsequently, concerns the risk which the Government are running in bringing collective issues of this kind into the tribunals. I am one who passionately hopes that the existing members of the tribunals will continue to serve on those tribunals. I believe that they give great service, that the combination of a trade union representative and an employers' representative sitting under a legal chairman is a very good one and has worked extremely well.
Let us look back to the unfortunate time of the 1971 Industrial Relations Act when, for reasons that it considered to be good at the time, but which I personally did not support, the TUC took its members off the tribunals. I consider that that seriously undermined the operation of those tribunals at that time, and I passionately hope that nothing of this kind will happen again on this occasion. However, the Government must be aware
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that the more the tribunals are asked to consider collective issues of this kind, the more these unique institutions are put at risk. As I said, it depends on the side members. For that reason, if for no other, in regard to this highly contentious area I should like the Government to see the point of having some guidelines, and not leave the matter to be decided in terms of reasonableness or unreasonableness.
Finally, the tribunals will not be the end of the affair. Those who are not satisfied with the reasonableness of the tribunal can take the issue to the EAT. Indeed, they can take it up through the ordinary courts. I am not convinced that without the presence of the side members we shall in this context get the kind of interpretation of reasonableness that we should like to see, and for that reason I find myself unable to withdraw this amendment.
On Question, amendment negatived.
9.40 p.m.
Lord ELWYN-JONES Lord ELWYN-JONES moved Amendment No. 14:
Page 4, line 39, at end insert—
("() When a tribunal finds that a complaint arises from facts in respect of which the complainant has commenced proceedings in the High Court, the tribunal shall not proceed with the complaint until those proceedings have been determined.").
The noble and learned Lord said: I think this is an amendment which can be taken shortly. It is intended to prevent contradictory or merely duplicated decisions in cases of unreasonable exclusion or compulsion from emanating in the High Court, on the one hand, and in industrial tribunals, on the other, in relation to what in effect will be the same matter. An aggrieved union member could well, on expulsion, challenge the rules of the union in the High Court as invalid because they are unreasonable or ultra vires, or constitute an infringement of the rules of natural justice. Clause 3 appears to give the complainant two bites at the cherry. Although the grounds of complaint are wider under Clause 3, the applicant may prefer to sue in the High Court rather than go to the industrial court because the latter may declare the expulsion void.
The scheme proposed in Clause 3 could easily lead to contrary decisions as between the High Court and the industrial tribunals, and since the clause directs the industrial tribunal to take into account the rules of the union it is, I submit, essential that in the case of doubt the High Court should rule on that issue first. I hope, accordingly, that this very sensible suggestion will meet with the approval of the Government and that at last we shall see some concession to what is being submitted from this side of the Committee. I beg to move.
Lord MACKAY of CLASHFERN: The end which the noble and learned Lord's amendment is designed to serve is, we agree, likely to be the end which would be reached, but we do not think the amendment is necessary in order to reach it. Regulations governing the tribunal's procedure presently give the tribunal discretion to stay proceedings, and certainly this would apply if the High Court was being asked to determine the
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same question. This discretion has been used under the current legislation when analogous questions of possible overlap between wrongful dismissal at common law and unfair dismissal under statute have arisen, and there is authority supporting the view that the line taken in this amendment was a proper line for the tribunal to take. Accordingly, our view is that the present discretion which the tribunal has to deal with the matter is adequate for this purpose, and it is not necessary to make a special rule to deal with this situation. In the light of that, I would ask the noble and learned Lord to be good enough to withdraw this amendment.
Lord ELWYN-JONES: Of course, I take the point that has been made by the noble and learned Lord the Lot d Advocate. I understand that the industrial tribunal regulations arc being revised now, and I hope that my intervention on this matter will at any rate draw attention to the importance of maintaining the point I was endeavouring to make. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.45 p.m.
Lord ELWYN-JONES Lord ELWYN-JONES moved Amendment No. 15:
Page 5, line 2, leave out ("or fact ").
The noble and learned Lord said: Section (8) of Clause 3 provides:
"An appeal shall lie to the Employment Appeal Tribunal on any question of law or fact arising from any decision of, or arising in any proceedings before, an industrial tribunal under this section ".
My amendment is to leave out the words "or fact" from subsection (8). It is very rare in employment law to find an appeal on a point of fact going from an industrial tribunal to the Employment Appeal Tribunal. I think the reason for that is that the industrial tribunal, comprised, as my noble friend Lord McCarthy said a moment ago, of two laymen with considerable industrial experience on both sides of industry, with a lawyer as chairman presiding over it, has proved to be a very effective and reliable body. It also has experience of the local situation. It has been thought, at any rate until now, that this is the best tribunal to determine facts in this field. The industrial tribunal is commonly described (and, I think,

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rightly so described, in the Court of Appeal and elsewhere) as the "industrial jury ". Industrial tribunals in the course of 1979 adjudicated in as many as 35, 253 cases of unfair dismissal. It is an important and well-tried jurisdiction.
Appeals from industrial tribunals can be made only on a point of law. I read with interest that when the Minister in another place, Mr. Mayhew, dealt with this point, he sought to justify provisions for a complainant complaining of unfair dismissal different from those for a complainant complaining of exclusion or expulsion from a trade union, in this way. He said:
"Is there any reason why we should say to such a chap,"
the "chap "being the complainant under the provisions of Clause 3—
"' Sorry, you have to put up with what the industrial tribunal says, like it or not'? We came to the conclusion that there was no good reason and we could not justify it ".
This is very strange language, indeed. It was apparently good enough for the 35, 253 cases of men complaining of unfair dismissal. Are those to be regarded as unworthy matters, not worthy of a serious tribunal? It is a most distressing depreciation of industrial tribunals that that should be put in this way. I hope that there will be some opportunity for some Minister to denounce such folly as was uttered in another place; because it may well disturb the whole attitude of those who loyally and so effectively serve on industrial tribunals.
At present, with very limited exceptions, the Employment Appeal Tribunal deals solely with questions of law. As a result, it has not run into the serious trouble into which the National Industrial Relations Court ran between 1971 and 1974, in part, at least, because it had jurisdiction over questions of fact and of law. The Employment Appeal Tribunal now has very high standing both among employers and unions, and I should have expected that the Government would want to make sure that nothing was done to damage its standing and acceptability.
So far as I have been able to discover, the only provision allowing for an appeal to the EAT on the ground of fact is found in Section 136 of the Employment
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Protection (Consolidation) Act 1978, but that deals with appeals not from industrial tribunals but from the certifying officer under the Trade Union and Labour Relations Act 1974 regarding the registration of trade unions and Section 8 of the 1975 Act regarding the certification of independence of trade unions. That is a very different set-up indeed from an industrial tribunal. The certification officer is not a judicial body; he is an administrative officer of ACAS, not a lawyer. It is right, I venture to think, that his decision should be capable of appeal to a judicial tribunal both on grounds of fact and on grounds of law. It is already possible to appeal on the ground that an industrial tribunal has reached a conclusion which no tribunal properly instituted could have reached on the facts, so that particularly egregious cases of misapprehension of the facts and perversity in the decision can be dealt with in an appeal on a point of law. That would be retained if what I am moving in this amendment were to continue to exist.
The only analogy of appeal on fact, and one relied on by the Minister in another place, came from the criminal law in appeals from magistrates' courts to the Crown Court. But in the criminal law we are dealing with the liberty of the subject; and, quite rightly, safeguards are attached to criminal proceedings which are not thought apt in regard to civil matters. In industrial tribunals, we are dealing with civil claims decided by specialist tribunals. My submission is that the industrial tribunal is far more suitable to be the sole judge of facts in this field. Industrial tribunals, for instance, looking at it merely from the point of view of convenience and cost, sit in 70 centres spread around the country. They can take more account of local conditions in a particular factory than can the EAT, which rarely sits outside London. Access to the industrial tribunal is less expensive both for parties and for witnesses than travel to the EAT in London.
In any event, in my submission, there are strong grounds for saying that the EAT should not have jurisdiction over facts in this field. The charged atmosphere which is likely to surround these cases under Clause 3 could well lead to appeals on a large number of cases if appeal was allowed to the EAT on

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questions of fact. I believe that to be regrettable in principle, especially as it would multiply the at present largely unrecoverable costs of both sides, but also as a matter of practice.
We need to reduce the amount of litigation taking place and not to multiply it. Indeed, there have recently been many judicial pronouncements deprecating the multiplication of appeals in employment law cases, particularly on the grounds that issues of fact were being dressed up as questions of law. I shall not weary the Committee with the cases. They may be familiar to noble Lords who are accustomed to considering these matters. My submission is that subsection (8) of Clause 3, as it now stands, would be a recipe for far more appeals, for a multiplication of proceedings. I find it difficult to think of a proceeding which may serve the worthy purpose of providing more work for lawyers but can have no other conceivable useful purpose. I beg to move.
Earl De La WARR: The noble and learned Lord— and I am a little surprised that he has lent himself to this, although he has done it on the best legal grounds— is once more nibbling away at personal rights in favour of something which is protective towards the trade unions. This is something which is running right through the Opposition amendments. The industrial tribunal has a great reputation. Let us remember that we are seeking to protect the jobs of men whose livelihood will be at stake. I suggest that there can be very little wrong in leaning over backwards to make sure that justice is done. After all, there may be cases— I do not think this is too fanciful a suggestion— where further facts might come to light after the hearing by the industrial tribunal. I would suggest it would be right and in the spirit of this Bill to leave in the words "or fact ".
Lord WEDDERBURN of CHARLTON: Before the noble Earl resumes his seat, would he take his logic to extending the very unusual appeal on a question of fact from the tribunal to the appellate body, the Employment Appeal Tribunal, in cases of unfair dismissal by the employer'.' There, too, there might be a
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rare, or perhaps not so rare, case of injustice to an individual, an employee who has lost his livelihood through dismissal. Would he then extend his logic perhaps to an amendment that the finding of the industrial tribunal should be reviewed on fact in unfair dismissal cases? Why do these provisions always apply only to trade unions?
Earl De La WARR: I do not think they necessarily do, but we are not dealing with that particular issue at the moment. I should like to confine myself to the particular issue at stake, which was making sure that the individual who is in danger of losing his job had every opportunity of protection. The noble Lord may well be right: that his suggestion follows from what I have said. So be it, but that is not part of my contention at this time.
Lord MACKAY of CLASHFERN: I think I can say with the fullest possible conviction that the reason the Government proposed that there should lie an appeal on fact to the Employment Appeal Tribunal in these cases was not in order to provide work for lawyers but rather because they thought these particular cases were of sufficient importance to merit a special appeal procedure. As has been said, there were 35, 253 cases of unfair dismissal before the tribunals in 1979. It would obviously be impracticable for a rehearing to be available in the Employment Appeal Tribunal in such a tremendous number of cases, but one hopes that the cases under Clause 3 would be very much smaller in number even though they are potentially of great importance. As the noble Lord, Lord Wedderburn, has just said, in an unfair dismissal case if one has lost one's job it may have very serious continuing effects, depending on the situation. But the cases with which Clause 3 is concerned are cases in which people may well face the loss of their whole career or their chosen trade because of their exclusion or expulsion from a trade union in an industry or trade which is highly organised by the union concerned.
These cases appear to us to be of the greatest potential importance to the individual affected by the decision and

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also— surely this also is important— to the trade union as well. Indeed, the very emphasis which has been put on it from the other side shows how important it is from the trade union point of view. Accordingly, it seems to us that it is feasible in this case to give an opportunity for a re-hearing on fact. As the noble and learned Lord, Lord Elwyn-Jones, has pointed out, the distinction between law and fact in this area is not as clear-cut as one might think at first sight. He referred to cases where appeals on fact were in essence dressed up as appeals on law.
However, we think that these cases to which Clause 3 applies are of sufficient importance to permit of the possibility of a rehearing, and of course the rehearing would be presided over by a senior court judge with senior and expert lay assessors. It is not as though it is passing out of the hands of industrial tribunal laymen to the lawyers only, There are expert lay assessors taking part with the judge in the Employment Appeal Tribunal.
Perhaps it would not be out of place for me, since the noble and learned Lord mentioned the Employment Appeal Tribunal sitting only in London, to say that I think it sits in other parts of the United Kingdom, as well. It sits fairly regularly in Glasgow. So the answer we have to this is that, in our view, there are a small number of cases here affected, which are of particular importance to the individual on the one hand, and the union on the other, and the opportunity of a rehearing in the senior appeal tribunal is highly appropriate. Accordingly, I invite the noble and learned Lord to withdraw his amendment.
Lord ELWYN-JONES: I confess that I am deeply disappointed by that response to the serious case that I put. What is proposed in this part of the Bill is a vote of no confidence in industrial tribunals, an i I hope that that will become known, unless the Government are prepared to give way on this, The devastating question by my noble friend Lord Wedderburn to the noble Earl, Lord de la Warr, produced a very significant response. If an appeal on a question of fact is desirable for a man who is expelled
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from, or not allowed admission to, a union, might it not, in degree of gravity of consequence, be said to be equally desirable in the case of the man who has been sacked in circumstances where he, too, may never get another job? There are such things as black lists and other matters.
I implore the Government to look again at this, because it will become known up and down the country that there is this gross inequality between the treatment of those whom trade unions affront, or deal with unjustly, and employers who sack a man. This is such a blatant piece of Tory philosophy that I am amazed that it should be persisted in. I am always reluctant to embark on party politics in regard to matters of this kind, but I warn the Committee that unless something is done in this field the consequences could be very serious. I was hoping on this matter that, at the very least, there might be some undertaking to look at it again, because it is a very serious matter indeed. We have not yet had any concession from the Government Front Bench, even to consider these matters between now and Report stage.
Lord MACKAY of CLASHFERN: I think it is right that I should make it absolutely plain that the Government have every confidence in industrial tribunals. The fact that in certain cases of particular sensitivity there should be allowed a rehearing is in no way an insult to the industrial tribunals. The Employment Appeal Tribunal would have the tremendous advantage of having the views of the industrial tribunal before it. The Government have every confidence in industrial tribunals and consider that they are doing an excellent job. But we consider that in a case where the unions may have very important issues at stake, as would arise under Clause 3, it is right that they should have an opportunity of a rehearing, just as the individual would have in such cases.
10.3 p.m.
On Question, Whether the said amendment (No. 15) shall be agreed to?
Their Lordships divided: Contents, 42; Not-Contents, 90.
Resolved in the negative, and amendment disagreed to accordingly.
10.12 p.m.
Lord MCCARTHY Lord MCCARTHY moved Amendment No. 16:
Page 5, line 5, leave out subsection (9).
The noble Lord said: This is by way of being a probing amendment and if one looks at subsection (9) one sees that it is a rather strange provision which deals, as it were, with automatic refusal or automatic expulsion assumed on delay. What the subsection says is,
"if an application for membership of a trade union has been neither granted nor rejected before
1400
the end of the period within which it might reasonably have been expected to be granted if it was to be granted, the application shall be treated as having been refused on the last day of that period, "—
that is, so far as admissions are concerned. Then it continues:
"if under the rules of a trade union any person ceases to be a member of the union on the happening of an event specified in the rules, he shall be treated as having been expelled from the union".
That is so far as expulsion is concerned.
What we are seeking to ask the Government is whether they can give us any indication as to what they mean by the words,
"reasonably have been expected to be granted"
and not giving a sufficient time for ceasing to be a member of the union. We are dealing here with voluntary organisations in the sense that the great majority of the people who carry out the business of trade unions are volunteers, doing it part-time, and it is perfectly normal for there to be some delay, particularly in relation to exclusion, and especially, of course, if we are to include in this clause— and we have tabled an amendment to deal with this but unfortunately at this stage we do not know what the Government arc going to say about it— the normal circumstances of lapsing.
The fact is, as we shall be arguing on a subsequent amendment, that the overwhelming majority of people who leave trade unions cannot be said to have been expelled from those unions; in effect they lapse from a union. So under the rules of a trade union according to subsection (9) (b) they cease to be a member of the union, in the curious phraseology of the Bill— and I take it that is what it means— on the happening of an event specified in the rules, and the event specified in the rules will be exclusion on grounds of lapsing. The provisions of this Part of the Bill say that anyone who is excluded on grounds of lapsing shall be treated as having been expelled from the union. We wish to raise that subsequently as a separate issue but in the meantime on this Part of the Bill we are saying that it is unreasonable of the Government to put in here a clause of this kind which does not specify any period, any time, and which is bound to be interpreted in different ways by different tribunals.
I do not want to go through and rehearse the arguments that we have had previously about appealing to the courts, and so on, but we feel that if the Government cannot give us some undertaking as to what this means— it may be they are going to issue instructions— our amendment ought to be accepted. I beg to move.
Lord LYELL: We can very well understand the reasons which led the noble Lord, Lord McCarthy, and his noble friends to table this particular amendment. When we look at subsection (9) of Clause 3, and if we look particularly at paragraph (b) , it does seem a trifle arbitrary, but far from this paragraph being arbitrary we believe
1402
its removal would result in an arbitrary effect; it would do just the opposite and create a great deal of uncertainty.
The amendment moved by the noble Lord seeks to remove that particular paragraph. The removal of that paragraph would have the effect, through the consequent removal of paragraph (a), that it would be possible for an applicant to apply to join a union and, despite the lack of any response whatever from the union within any reasonable time, to have no right of complaint of unreasonable exclusion. This amendment would also have the effect, through the removal of paragraph (b), that where for any reason an individual's membership were to lapse without positive expulsion there would not be any right of complaint of unreasonable expulsion.
In general, the deletion of paragraph (b) would seem to raise the possibility that unions could amend their rules to expand the circumstances in which there was deemed (that is always a fascinating word to your Lordships, and particularly to the noble Lord, Lord McCarthy) to be an automatic cessation of membership without positive expulsion, which in this case would not create jurisdiction under the clause. This, of course, would defeat the whole object of the clause. In this particular clause we are speaking only about the jurisdiction of the tribunal, and, although the jurisdiction will arise in the way I have just suggested under subsection (9), it does not follow that tribunals— and I would remind your Lordships that these are experienced and respected bodies— will find that expulsions are unreasonable where, for example, a member has deliberately refused to pay his union dues. We think that is going a bit far. For these reasons, I would not be able to recommend this amendment to your Lordships.
Lord MCCARTHY: We are not satisfied by the reply of the noble Lord, but I do not want to press this to a Division. I think we want to record our disapproval in the usual way.
On Question, amendment negatived.
[Amendment No. 17 not moved.]
10.19 p.m.
Lord WEDDERBURN of CHARLTON Lord WEDDERBURN of CHARLTON moved Amendment No. 18:
Page 5, line 11, after ("period ") insert ("provided that the applicant proves that he is qualified to be a member of that trade union in accordance with its rules ").
The noble Lord said: I will move this amendment very briefly. This amendment relates to the situation where the tribunal is instructed by Clause 3 (9) to treat an application for admission as a refused application where a reasonable time has run and no reply has been made. The case for the Government for subsection (9) has already been made, and even upon that basis I would hope that they would accept an amendment along these lines or give some assurance at Report stage.
When my noble friend or I, or anyone on this side, has suggested that some standards should be laid down so that trade unions know the basis upon which this very new jurisdiction operates in this more politicised area in which the tribunals have to operate than any in which they have operated before, the argument has always been that we do not need that standard or that guideline, it will all be judged according to what is reasonable; we do not need any guidelines at all.
In the particular case under consideration, surely that argument cannot apply because it is not a question of the reasonableness of the evidence. The only evidence to establish the refusal is the lapse of time. The submission in this amendment is that it surely cannot be right that the trade union should be open to a judgment against it only on that ground. If I take one case as an example it will be said to be a special case. I have a whole list of cases but, in view of the hour, I shall choose one and hope that the noble and learned Lord will not say that it is a special case.
The case that I take concerns the Amalgamated Union of Engineering Workers where, to enter the apprentice section one must, under the rules, prove that one has a three-year period of apprenticeship as the qualification. Were someone to apply for membership of that section of the union, and were it to happen through some mischance or negligence on the union's part that no reply was received, and it was adjudged that that was a refusal,
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surely it should not even be open to the tribunal to award compensation in favour of the claiment where he has not shown that he is even basically qualified to be a member of the section into which he claims admission.
The noble and learned Lord will no doubt tell me that in such a case the tribunal could be relied upon to be reasonable. However, I must say to him that passions are aroused in situations of this sort, in a closed shop situation, where it may be that the tribunal in some part of the country says, "Well, we don't think that this is a reasonable rule; we believe that what are called ' dilutees' should be allowed into the union against this rule ", and there may be a judgment of compensation merely on the fact of a lapse of time and no reply from the union.
This is, as it were, the ultimate amendment in the sense of testing the Government in terms of how far they are putting aside trade union rules and leaving the matter at large to the tribunals and— to repeat what my noble friend Lord McCarthy said— not merely to the tribunals, but also to the Employment Appeal Tribunal. As the noble and learned Lord then said, since any question of fact can, by many of us, easily be made into a question of law, surely we shall soon see a case in the Court of Appeal or in the House of Lords.
Whether the union wins or loses that case, it seems to me quite unjustifiable to put the union into this position, when all that has been proved against it is the lapse of a certain amount of time and it has not replied to the application for admission by someone who is manifestly totally unqualified to enter that area of the union. The noble and learned Lord will probably say that this is unnecessary and that we should leave it to the tribunal. Surely we have heard that so often this evening. There must come a point at which the Government are willing to tell the tribunals, "We know that you will do this anyway, but this is what we all want you to do."I beg to move.
Lord TORPH1CHEN: Is the noble Lord, Lord Wedderburn, saying that a union is incapable of looking at a man's application form, turning it down and writing a "Dear John" letter to the man?
Lord MACKAY of CLASHFERN: I should be glad to try to assist in this matter if I could, but I regret to say that I find it hard to understand the place of this proviso in this clause. The reason for the clause is to deal with the situation where no reply is received. This proviso seems to me to raise the kind of classical situation in which it would be very easy to give a reply. I find it difficult to know why the clause about time should be qualified by this proviso, as regards which it is easiest of all to give a reply because the person apparently, on the face of the matter, is not qualified. One would expect the union in that case to reply by return. So I find it very hard to see what this has to do with the subject matter of the clause.
If the noble Lord were suggesting some fixed time or something like that, I could see the point. But, with the greatest possible respect, this sort of proviso appears to me to be altogether out of place in this context. I am extremely sorry that I cannot see the matter more clearly from his point of view. I cannot advise the Committee to accept this amendment.
Lord WEDDERBURN of CHAR-TON: I always appreciate debating the amendment with the noble and learned Lord because, contrary perhaps to some earlier amendments, we come straight to the point and see where we disagree. In reply, I should like to put two points. First, it would not necessarily be a case where no reply had been received. The words of the clause are:
"where an application is neither granted nor rejected".
There may well be a case where the union, perhaps because of the inquiry forms that have to be filled out and sent from union to union under the Bridlington procedures— and what the noble and learned Lord says is good law, but with respect I suggest that there is also good industrial common sense here— would not wish to grant or reject because it does not know what to do. It does not know whether the man is in arrears in the union which he has left; it does not know whether one of the other Bridlington principles will apply. However, it is true that there may be a case where no letter is sent in reply.
Therefore, there are many reasons why this clause might well come into play.
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I appreciate that the amendment which I move is one that relates to the reasonableness of the refusal and, therefore, conflates, as it were, the facts of refusal and the grounds of refusal. I am saying that, because of the industrial realities, there may be a case where, if a person is not qualified, someone could go to the High Court and obtain an injunction.
One of the extraordinary things about this clause, if I may say so with respect to those who drafted it, is that there is no correlation at all between the two jurisdictions. The union might be liable to compensation in the tribunal and, therefore, to that extent, be forced to take someone in who was an unqualified member under the rules, which would be a breach of the rules, and another member could then go and obtain an injunction in the High Court. It is a most extraordinary situation.
The complainant does not have to do much under this amendment. He has only to show that he is basically qualified to be a member in order to proceed with his case, and if the union does nothing then, perhaps it will lose the case. But for it to lose the case when he has not even shown that he is qualified within the rules, tests the Government. In a situation where the complainant is capable— the noble and learned Lord the Lord Chancellor corrects me, and I stand corrected— of winning the case, where the trade union is capable of losing the case; in a situation where he has not even shown, and is not called upon to show, that he even falls within the rules at all— how can noble Lords expect the trade union movement to accept that its rules are being treated seriously when even the small and tiny ledge of a platform of this kind is not built into the Bill? I shall not press a Division in view of the hour but, unless we can have some assurance on this, it is a matter to which we must surely return on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
10.27 p.m.
Lord McCARTHY Lord McCARTHY moved Amendment No. 19:
Page 5, line 14, after ("rules ") insert ("other than the non-payment of any subscription owing and due to the union.").
The noble Lord said: This is the last of this particular group of amendments in which we have tried, without success, to convert the Government to our idea that there ought to be some kind of specification in this part of the Bill concerning the area in which the tribunals are to work. This I say without fear of contradiction is the single strongest limb of our argument. In this amendment we are saying that page 5, line 14, should be added to, so that the assumption of automatic exclusion after a period of time, which is the result of subsection (9), should not apply to those who have been excluded by trade unions for the non-payment of subscriptions. In other words, in simple terms, we are suggesting that the nonpayment of subscriptions— what is known in the trade union world as "lapsings"— should be allowed a different category from other forms of exclusion.
It is the most facile of legalism to argue that exclusion on grounds of non-payment of dues is the same as expulsion. Expulsion occurs for some offence under the rules of the union, or because of wrongful recruitment, or for some other reason. It is not an automatic affair. But every trade union has provisions for automatic exclusion.
There are of course procedures governing automatic exclusion, and the most famous of all trade union cases, Bonsor v. The Musicians'' Union, made it clear that trade unions are not entitled, even under lapsing circumstances, to bring about lapsing without carrying out the full rigour of the rules; so the branch secretary who cancelled Mr. Bonsor's subscription was not entitled to do so because the court took the view that that could be done only by the branch committee.
So we are not going outside the realm of the law here. We are saying that lapsing is a special case. We are saying that every organisation is entitled to cancel subscriptions when people do not keep up their subscriptions. We are saying that to introduce a special provision whereby somebody who has lapsed automatically by failure of subscriptions will legally be assumed to have been expelled from the union is a violation of the realities of industrial life which will be deeply resented by rank and file trade unionists, and for that reason I would press the amendment very strongly on the Government.
Lord TORPHICHEN: Perhaps I may jump in briefly with both feet, probably putting them right in it, and ask the noble Lord, Lord McCarthy, how he would judge a case in which the union dues were paid intermittently. For example, if a man was at sea five years ago, being a member of the National Union of Seamen, and had been ashore for a time and had not paid his subscription— because he was in a shore job— could he return to sea without having to pay five years' back subscriptions without being caught by the amendment?
Lord MCCARTHY: The noble Lord has chosen a rather poor example; we have here a pre-entry closed shop where there is a check-off. If such a man ran out— which is the term used— he could, by the payment of two weeks' subscription, re-enter the union.
Earl DE LA WARR: I feel inclined to advise my noble friend to consider the amendment sympathetically. The case for it has been well enough argued for me simply to add that the amendment seems to be all right and should be examined by the Government.
Lord LYELL: The noble Lord, Lord McCarthy, opened his presentation of the amendment with real fire and vehemence but lost me when he described this as a different category. He did not say whether the man had been expelled, but seemed to leave the poor person in limbo. He referred to inexact legalism, which I would describe as a sort of interesting ritual dance, but it still seemed to leave the unfortunate person, through the lapsing of the payment of his subscription for what might have been very valid reasons, in a sort of limbo, and let us not forget that that is the person who is the subject of grievance.
Nevertheless, we believe there could easily be a loophole here and, thus, a problem. It seems that the noble Lord has found what I would call a limbo or no-man's land where somebody has ceased to be a member of a union through the non-payment or lapsing of subscriptions, although I wonder whether the noble Lord thinks that in most cases somebody who has lapsed through non-payment of subscriptions can rejoin simply by the payment of two or four weeks'— or, for that matter, any arbitrary number of

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weeks'— contributions. I wonder whether it is as simple as that. However, reservations have been expressed all around the Chamber, in particular by my noble friend Lord De La Warr, and for that reason we shall take away the amendment and consider it, with the hope of having something to submit on Report.
Lord MCCARTHY: I am very glad that the noble Lord, Lord Lyell, is to take away the amendment and consider it. I hope that when he considers it he will read what I have said and will understand the difference between lapsing and expulsion. That is the issue that we are talking about. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of GOWRIE: I do not know whether this might be a convenient moment for us to break the Committee stage. So if it is your Lordships' wish, I would beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

  THE "PALESTINE FOLKLORE" EXHIBITION
  THE "PALESTINE FOLKLORE" EXHIBITION
  SANCTIONS: PENALTIES FOR CONTRAVENTION
  SANCTIONS: PENALTIES FOR CONTRAVENTION
  TRADE PROMOTION AND UK EMBASSIES
  TRADE PROMOTION AND UK EMBASSIES
  NHS: IN-PATIENTS AND OUT-PATIENTS
  NHS: IN-PATIENTS AND OUT-PATIENTS
  NHS CONSULTANTS: PRIVATE MEDICAL EARNINGS
  NHS CONSULTANTS: PRIVATE MEDICAL EARNINGS
  SPEECH THERAPISTS
  SPEECH THERAPISTS