Sitting of 6 April 1982

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

  PRIVATE BUSINESS
  EAST LINDSEY DISTRICT COUNCIL BILL[Lords]
  Read a Second time and committed.

Oral Answers to Questions
  SOCIAL SERVICES

    Supplementary Benefit
    Meacherasked the Secretary of State for Social Services how many persons are now in receipt of supplementary benefit; and how many he estimates are eligible for benefit, but are not claiming it.
    Mr. Winnickasked the Secretary of State for Social Services how many (a) persons of working age and (b) pensioners receive supplementary benefit; and how many did so in May 1979.
    The Under-Secretary of State for Health and Social Security (Mr. Tony Newton): In December 1981, 3·7 million people were receiving supplementary benefit, of whom 2 million were below retirement age and 1·7 million were supplementary pensioners. The present total is probably nearing 4 million. In May 1979 there were 1·2 million beneficiaries below retirement age and 1·7 million supplementary pensioners.
    On the second part of his question, I refer the hon. Member for Oldham, West (Mr. Meacher) to my written reply to my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) on 5 April 1982.
    Mr. Meacher: Those are significant figures. Is the hon. Gentleman aware that there are now about 6½ million people, including dependants, living on the supplementary benefit poverty line? Is he further aware that, including those entitled to but not claiming supplementary benefit, according to official figures, there are now nearly 9 million people living in poverty—about one in seven of the entire population—mainly because of the huge increase in the number of long-term unemployed created by the Government?
    Is the Minister aware that, while the Government have made the rich richer, they have reintroduced means-tested poverty on a massive scale as in the 1930s? Is he not ashamed—[Interruption.]
    Mr. Newton: I am not sure that the hon. Gentleman's first figure should be as high as 6½ million. My
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    information is that it is a little more than 6 million. There has undoubtedly been an increase in the number of people receiving supplementary benefit. I do not doubt that that reflects the economic problems that the country faces. However, we are undoubtedly beginning to get on top of those problems. Meanwhile, we have been able to bring significant extra help to quite large numbers of the population, including the disabled.
    Mr. Winnick: Is the hon. Gentleman aware that the substantial increase in the number of people receiving supplementary benefit is undoubtedly due to the return of mass unemployment and the abolition of the earnings-related supplement? Do the Government not accept some responsibility for the numbers who have been driven to the poverty line as a result of Government policies? What action will the Government take to rescue those people from poverty and the difficult surroundings in which their chilren are being brought up?
    Mr. Newton: The figures undoubtedly reflect the rise in unemployment. There is no mystery about that. The increase in the number receiving supplementary benefit reflects the extent to which the supplementary benefit system is performing its proper task of helping people in short-term difficulty. It remains the Government's determined aim to solve the problems on which the hon. Gentleman touched by resolving the underlying economic problems. I am determined that my Department will play its part in that process.
    Mr. Peter Bottomley: Is my hon. Friend aware that I fully support the Department's aim to help people in need? Will he emphasise that keeping up the level of supplementary benefit will make more people eligible for it?
    Mr. Newton: I am grateful to my hon. Friend for his observations.
    Mr. Ashley: How many people entitled to supplementary benefit are not claiming it? When does the hon. Gentleman propose to set up the advice and information centre that was recommended by the advisory committee?
    Mr. Newton: The right hon. Gentleman will, of course, have read the advisory committee's report. I was pleased to note its compliment about the work that the Department is carrying out to introduce computer processes into the business of giving advice and information. We are proceeding with that task. I was grateful for the committee's complimentary observations upon it.
    Mr. John: The hon. Gentleman will know from an answer in another place that 1¼ million people who are eligible for supplementary benefit do not claim it. Does he agree that £6 million per week is therefore not being claimed by persons entitled to supplementary benefit? What does he intend to do to make that money available?
    Mr. Newton: Had the hon. Gentleman studied the figures that I published yesterday, he would have seen that there is special cause for concern about take-up by the sick and the disabled. I announced yesterday that, as part of our attempt to tackle that problem, we intend to issue leaflet SB1 automatically to all sickness benefit claimants when they have received benefit for eight weeks. I believe that that will help. The hon. Gentleman also knows that we are taking other steps to improve take-up. We shall continue to do that to the best of our ability.

    Road Accidents
    Mr. Greville Jannerasked the Secretary of State for Social Services how many victims of road accidents were treated in United Kingdom hospitals during the last full year for which records are available.
    The Secretary of State for Social Services (Mr. Norman Fowler): The latest figures are for 1979, when it is estimated that about 80,200 patients completed inpatient treatment in hospitals in Great Britain for injuries received in road accidents. Information for Northern Ireland is not held centrally, and figures are not collected centrally for treatment given in accident and emergency or out-patient departments.
    Mr. Janner: How many people included in that awful toll were involved in accidents in which drink played a part or in which one or other driver was smoking at the wheel when the accident occurred?
    Mr. Fowler: As the hon. and learned Gentleman will know, and as I know from my experience as Secretary of State for Transport, a considerable number of accidents in this country are caused by excessive drinking. That is why, for the first time in many years, the Government have introduced legislation to tackle that problem.
    Mr. Greenway: Does my right hon. Friend agree that although it is tragic that hospitals are under such pressure from road accidents, they do a remarkable and at times exceptional job in caring for people who suffer such accidents, some of which are appallingly bad?
    Mr. Fowler: Yes. My hon. Friend is absolutely right. He may also be interested to know that we have set up a Rayner-style scrutiny of the collection of payments by health authorities from insurance companies, which will add to the total resources of the Health Service.

    Early Retirement
    Mr. Skinnerasked the Secretary of State for Social Services what is the total number of persons at work who are eligible for early retirement schemes; and if he will make a statement.
    The Minister for Social Security (Mr. Hugh Rossi): In 1979, the latest date for which information is available, at least 5·6 million members of occupational pension schemes—almost half the total membership—were in schemes with provision for early retirement on grounds other than ill health. Furthermore, my right hon. Friend the Secretary of State for Employment advises me that there will be just over 500,000 persons eligible to apply for the job release scheme by mid-1982.
    Mr. Skinner: Does the Minister agree that it would be a good idea if the upper limit in early retirement schemes for men were reduced from 65 to 60, which would put them on a par with women workers and release more jobs for boys and girls leaving school and for middle-aged people who have been made redundant and cannot get back into work?
    Will he take account of the fact that many years ago the miners introduced a scheme, which was criticised at the time, to bring the retirement age down to 60 on a voluntary basis? The scheme was so good that more than 90 per cent. of the miners took it up, and the scheme has worked so admirably——
    Mr. Speaker: Order. The hon. Gentleman is making a speech.
    Mr. Rossi: The miners' scheme is an occupational pension scheme. These are, of course, private arrangements between employers and employees in respect of terms and conditions of service. Many private occupational schemes make provision for an earlier retirement age. With regard to the State pension scheme, the Government's position remains as stated in our White Paper "Growing Older". In the longer term, we are looking towards greater flexibility in the retirement age between the ages of 60 and 70, together with progress towards a common pension age for men and women. The precise arrangements will depend upon the resources available when it is decided to introduce the changes.
    Mr. Paul Dean: Does my hon. Friend agree that a blanket reduction in the retirement age will not solve the problems of unemployment or of those nearing retirement? Does he further agree that what we need, as he has just announced, is maximum flexibility to suit the needs and conditions of individuals?
    Mr. Rossi: I am grateful to my hon. Friend. As usual, he has hit the nail right on the head.
    Mr. Rooker: Does the Minister accept that some of the 5·6 million people are in compulsory early retirement schemes? Since the passing of the Social Security (No. 2) Act, what action have the Government taken to inform people who will be compulsorily retired early, often against their wishes, that in many cases they will be ineligible for unemployment benefit although they genuinely seek to continue in employment?
    Mr. Rossi: I do not think that the hon. Gentleman is quite right with regard to private occupational schemes. Most of those schemes provide for early retirement by agreement between employer and employee. With regard to the State scheme, certainly in the Civil Service the usual retirement age is 60. It has been extended to 65 as a matter of practice in the past. Now, due to the present conditions, recruitment and so on, the age is being lowered to 60 for those in the higher income group, but for clerical officers, for example, the retirement age will remain as of grace at 65.
    Mr. Adley: I do not disagree with what has been said by my hon. Friend the Minister or by my hon. Friend the Member for Somerset, North (Mr. Dean). However, does my hon. Friend agree that people regard the option of early retirement—albeit with flexibility—as sensible in the medium term in an increasingly technological age? Therefore, could greater priority be given by the Department to the earlier provision of this opportunity?
    Mr. Rossi: I agree that the majority of people want freedom of choice and flexibility in their retirement arrangements, and we wish to work towards that. Nevertheless, it will cost a great deal of money, certainly in public sector pensions. The resources for a very ambitious scheme are not available and are unlikely to be available for some time.

    NHS (Management Costs)
    Mr. Beithasked the Secretary of State for Social Services how much management costs in the National Health Service have increased since May 1979.
    The Minister for Health (Mr. Kenneth Clarke): The cost of managing the National Health Service as a proportion of total resources fell by 1·2 per cent. between March 1979 and March 1980 and will be reduced by a further 10 per cent. by March 1985.
    Mr. Beith: Is the Minister confident that he can achieve the 10 per cent. reduction from the recent changes, when he has imposed a number of additional duties on health authorities, such as the questioning of overseas patients about payments, the new financial directives and the decision to increase upwards accountability for decision-making in the Health Service? Will not all of those factors add to management costs?
    Mr. Clarke: One immediate effect of the recent changes is that 58 management teams no longer exist, saving more than 200 senior posts. We are now beginning to set up the new management structures for district health authorities. The regions will have the first reports on those new structures by July this year, and we intend to ensure that the target of 10 per cent. by 1985 is achieved. With regard to the other matters to which the hon. Gentleman referred, if they raise any extra administrative costs at all, it will be to a trivial extent.
    Mr. Blackburn: Will my hon. and learned Friend accept the congratulations of the House on the figures that he has given, with the reduction of 1 per cent. in administration charges, especially as since 1979 21,000 more nurses have been employed in the Health Service?
    Mr. Clarke: I am grateful to my hon. Friend for his observations. Inasmuch as we can save administrative costs, more resources can be devoted to the care of patients. If staff increases are to be made, we must ensure that they are nurses and doctors who are at the sharp end of the provision of treatment to patients.
    Mrs. Dunwoody: Why does the Minister persist in saying that there are 21,000 more nurses when he knows that they are whole-time equivalents and that he is really just fudging the figures? Secondly, will not a further 10 per cent. cut in management costs fundamentally damage the service?
    Mr. Clarke: Because there are part-time nurses, the figures can only be presented on the basis of whole-time equivalents. Otherwise, I should have to say that there are 34,000 more nurses. I am glad to say that staffing increases in the Health Service are heavily concentrated on improved care of patients. That is a measure of the extent to which the Government are devoting more resources to the Health Service. That is what we have done for the past three years and shall continue to do for the remainder of our period in office.

    Overseas Visitors (Charges)
    Mr. Jim Marshallasked the Secretary of State for Social Services whether he will list the organisations which were asked to participate in the working party on charges for overseas visitors but who declined to do so; and what were the reasons given for their refusal.
    Mr. Clarke: Only the Joint Council for the Welfare of Immigrants declined to serve on the working party, because it was concerned with the implementation of a policy to which it was opposed.
    Mr. Marshall: When will the Government and the Minister realise that, under this scheme, the black community in Britain will pay a heavy price for saving an unspecified amount of money? Inevitably and invariably it will be the black community that will have to prove its residence status.
    Mr. Clarke: The working party contained representatives of community relations councils and of the Commission for Racial Equality as well as overseas doctors. They were particularly asked by Ministers to concentrate on arrangements that were fair to all patients and did not disadvantage ethnic minorities. We believe that that will be the effect of our proposals. We shall produce a manual of guidance that will make it clear that there should be no racial or ethnic discrimination in the arrangements. We shall consult all the bodies involved, including the Joint Council for the Welfare of Immigrants, which has said that it is happy to be involved in consultations, even if it does not wish to serve on the working party.
    Mr. Latham: Is my hon. and learned Friend aware that Conservative Members do not consider the scheme to be racist in any way? We believe that foreigners should have to pay for treatment here, just as we have to pay when N; e visit other countries.
    Mr. Clarke: I am grateful to my hon. Friend for those comments. It is estimated that the new arrangements will raise £6 million extra for the National Health Service. Most of that money will come from tourists. There is no reason why they should not insure against ill health before visiting Britain, just as we have to do when we visit other countries.
    Mr. Freeson: Does the Minister realise that there have been cases—and he is doing nothing to prevent there being more cases——
    Mr. Robert Atkins: Under the old scheme.
    Mr. Freeson: I accept that, but the Minister is doing nothing to prevent an increase in the number of those who should not be questioned from being questioned. What will be the administrative cost?
    Mr. Clarke: The right hon. Gentleman has answered his own question. As the working party discovered, there were cases of racial discrimination. If we had continued with the old arrangements, the risk of racial discrimination would have remained. However, we are introducing arrangements that will be accompanied by a manual of guidance that instructs the staff not to continue with those old and unfortunate practices. The working party contained people who knew more about administrative costs than the right hon. Gentleman or I know. It described the increased administrative costs as absolutely insignificant. The right hon. Gentleman is scratching about to find absurd reasons for resisting an extra £6 million for the National Health Service.
    Mr. Robert Atkins: Does my hon. and learned Friend recognise that I have received nothing but support from administrators, doctors and nurses within the NHS, whatever their country of origin or colour? When will he be able to curtail the abuses that remain after his most excellent proposals?
    Mr. Winnick: What about all those phoney letters?
    Mr. Clarke: We shall have to introduce the new arrangements before we can tell whether they will curb—as we hope that they will—the limited abuse of present arrangements. As my hon. Friend knows from all the examples that he has obtained, the present abuses annoy doctors and nurses within the NHS. They cannot understand why we waive potential income to the NHS, which most tourists would be happy to provide through insurance.

    Optical Charges
    Mr. Haynesasked the Secretary of State for Social Services what representations he has received about the increase in optical charges.
    The Under-Secretary of State for Health and Social Security (Mr. Geoffrey Finsberg): I have received representations from about 20 organisations and individuals about the increase in optical charges.
    Mr. Haynes: Is the Minister aware that there have been regular exhibitions at the Dispatch Box of compassion for the less well off? I am prompted to ask: is the Minister aware that the Government have failed miserably? Does he support the Government's promises—which have been broken—not to increase charges faster than inflation?
    Mr. Finsberg: The hon. Gentleman seems incapable of understanding White Papers. If he understood them, he would realise that they referred in detail to the current year's expenditure.
    Mr. Peter Bottomley: Does my hon. Friend agree that we cannot be satisfied with the level of optical charges levied by the NHS until competition in the private sector has reduced those charges to the levels operating in the United State of America?
    Mr. Finsberg: As my hon. Friend knows, the Office of Fair Trading is investigating certain aspects relating to opticians. We hope that the report will be ready in the autumn, and we shall study it as a matter of urgency.
    Mr. Terry Davis: Will the Minister confirm that the increase in charges is greater than the increase in costs?
    Mr. Finsberg: Yes, Sir.

    Pensioners (Unclaimed Benefits)
    Mr. Bowdenasked the Secretary of State for Social Services what is his latest estimate of the amount of money remaining unclaimed by pensioners able to claim supplementary and other benefits.
    Mr. Newton: For pensioners the problem of non take-up of benefits is largely confined to supplementary pension. As to estimates of the amount unclaimed, I refer my hon. Friend to my reply to him yesterday.
    Mr. Bowden: Is it not tragic that nearly 1 million pensioners do not receive or claim their full entitlements? Does that not mean that they must be suffering hardship and deprivation? Will my hon. Friend give the maximum priority to ensuring that that number is substantially reduced?
    Mr. Newton: I hope that my hon. Friend will not overstate the case. According to my information, the amount involved is less than £2 a week for about half of
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    those who do not take up their full entitlement. Nevertheless, I accept that we should do everything possible to reduce that number and to increase the take-up. As my hon. Friend knows, we are issuing to all new retirement pensioners claim forms with their new order books. We are specifically drawing their attention to that matter. Quite a lot of unclaimed benefit is due to the confusion caused by the problem of deciding whether to claim rent rebates or supplementary pension. That problem will be considerably eased by the transition to housing benefit. We are actively working with local authorities to ensure that those who still retain an entitlement to supplementary benefit are identified and advised.
    Mr. John: Will the Minister shed his complacency? One in three pensioners entitled to supplementary benefit do not claim it. By any standards that is a high figure. In addition, the average weekly loss is £3·10 per week. That is a sum that those pensioners can ill afford. Will the Minister do something instead of waffling complacently at the Dispatch Box?
    Mr. Newton: I reject the charge of complacency. Within the past few days I have announced further steps that are designed to help the take-up problem. Having introduced a scheme that will prove of significant help—the housing benefit scheme—we are actively working to build on it and to reduce the problem still further.
    Mr. Eastham: The Minister consistently expresses a desire for people to take up their benefits. Is he aware that in my constituency we printed a card, at our expense, to encourage people to claim? The cards had "Freepost" printed on them, but they were rejected by the Department of Health and Social Security. Is it not right and proper to encourage such people to claim?
    Mr. Newton: Perhaps the hon. Gentleman will write to me about that specific case. We seek to co-operate with local authorities in well-aimed schemes to improve take-up. We are keen to co-operate in that respect. We are worried about blanket operations, because they may raise hopes that cannot be fulfilled and can easily greatly overload the local office.

    Supplementary Benefit
    Mr. Knoxasked the Secretary of State for Social Services what representations he has received about the proposed increase in the capital limit for supplementary benefit.
    Mr. Fowler: I have received a number of responses but to date only one written representation, from the Child Poverty Action Group, which has given a qualified welcome to the proposed increase.
    My hon. Friend may like to know that I am today making available in the Vote Office and placing in the Library copies of the supplementary benefit policy inspectorate's report on the operation of the capital rule. We shall welcome observations on it. As the House knows, we are in any case proposing to increase the disregard from £2,000 to £2,500 in November.
    Mr. Knox: Is not the figure of £2,500 absurdly low and a disincentive to thrift? Should not the figure be nearer

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    £5,000? Does not my right hon. Friend agree that, even if a person has more than £5,000, he should not lose all entitlement to benefit?
    Mr. Fowler: I am sympathetic to the general point. However, we have just increased the disregard to £2,500. We shall continue to keep the level under review, but I cannot give any further commitment at this stage.
    Mr. Mike Thomas: Does the Secretary of State believe that it is right that terminally ill patients should be asked to surrender their life insurance policies, which are to provide for their dependants after their death, as a condition of receiving supplementary benefit?
    Mr. Fowler: When the hon. Gentleman has had a chance to look at the supplementary benefit policy inspectorate's report, he will realise that life assurance policies are covered by it. I should welcome the hon. Gentleman's views, and the views of other hon. Members, on that matter.
    Mr. Neubert: Would my right hon. Friend be prepared to consider the possibility of giving added weight to the age factor in the assessment? Is he aware that the present system tends to penalise the elderly, who belong to a generation for whom thrift has always been a characteristic and commendable virtue?
    Mr. Fowler: I shall consider that point. Again, I ask my hon. Friend to read the inspectorate's report, which, as an exceptional measure, we are making public and making available in the Library. The report shows that there is no evidence of significant personal hardship, but I shall consider all representations on the matter.
    Mr. Campbell-Savours: How does the Minister respond to the suggestion by the Child Poverty Action Group that there is no substantial national guideline laid down whereby the treatment of people in one part of Britain is the same as in another?
    Mr. Fowler: I have asked for a report on the case that the Child Poverty Action Group put before us. I await the outcome of that report.
    Mr. Hicks: In addition to the thrift argument, does my right hon. Friend agree that too rigid an application of the present capital regulation leads to a host of unpleasant circumstances in individual families?
    Mr. Fowler: We have made the change to a cut-off. The reintroduction of a tapered system would be a complicated and costly measure, and the inspectorate's report does not make a case for it.
    Mr. John: Does the right hon. Gentleman accept that the capital limit for a single payment is only £300 and was not raised in the Budget? The report of the Social Security Advisory Committee recommends an increase. What do the Government propose to do about it?
    Mr. Fowler: I am conscious of that recommendation. We shall keep the matter under review.

    Benefits (Entitlement Regulations)
    Mr. Rookerasked the Secretary of State for Social Services if he will make a statement about the reinterpretation of regulation 7(2) of the condition of entitlement regulations.
    Mr. Newton: As the hon. Member knows, the Government are reviewing the details of the 21-hour rule
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    in the light of the chief supplementary benefits officer's recent guidance on the interpretation of this regulation. Our aim is to secure that the 21 hours covers classroom instruction only, subject to the introduction of additional safeguards to ensure that people who have withdrawn wholly from the employment field to pursue their studies are not entitled to benefit. The details are still under consideration, but I hope to be able to make an announcement shortly.
    Mr. Rooker: I welcome the first sentence of the Minister's answer. Everyone who has been concerned about the matter will be very grateful for that. In the meantime, before the instruction is changed, will the Minister ensure that no more local DHSS offices send inspectors round to check whether students are doing their homework? Does he accept that, as we have heard today about millions of pensioners not receiving their proper banefits, it is nothing short of a scandal that civil servants' time at local offices has been used in recent months for that purpose?
    Mr. Newton: I am grateful for the first part of the hon. Gentleman's supplementary question. I, too, have been glad to make this—admittedly not detailed—statement today. As to the second part of the hon. Gentleman's supplementary question, if he wishes to let me know of a case, he must do so, because we have not set in hand, nor have we any intention of setting in hand, the sort of investigations that he describes.
    Mr. Maxwell-Hyslop: Does my hon. Friend accept that it is widely believed that the regulations count homework as work done at school? Will he take steps to correct that impression, even if it is not his Department that is responsible, but a commentator on radio who is not a spokesman for the Department? It is just as important.
    Mr. Newton: I was especially concerned to say what I have today because there is uncertainty about the position arising from the new guidance issued by the chief supplementary benefits officer. As to the precise position on the rule, I hope that my hon. Friend will understand that I am in a little difficulty because an appeal case on the point is now before the Social Security Commissioners. We must await the outcome of that, apart from anything else, before deciding what to do.
    Mr. Race: Will the Minister ensure that all current claims are re-assessed by the DHSS and that not only is homework excluded from consideration, but travelling time?
    Mr. Newton: I cannot insist on the re-assessment of claims that fall to be judged under the current guidance as to the interpretation of the rules. I am sure that the House will understand that it is not up to Ministers in this Department to overrule the advice of the independent adjudicating authorities. It is up to us to decide whether, if the meaning of the regulations turns out to be unsatisfactory, we should change those regulations. That is what we are considering at the moment.
    Dr. Hampson: Is my hon. Friend aware that there will be much gratitude for the speed with which he has recognised the foolishness of the judgment on this matter? Will he ensure that, when he is drafting the new regulations, his officers in the various local offices encourage young people who have been genuinely unemployed for some time, but who could benefit

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    immensely from either remedial or craft courses, to take those up, because there has been widespread disparity in the way that the rule has been operated by local DHSS offices?
    Mr. Newton: We are keen to do nothing to inhibit unemployed youngsters from using their time usefully. I take my hon. Friend's point. I thank him and other hon. Members who have played an important part by making representations to us in the past few weeks.

    Death Grant
    Mr. Canavanasked the Secretary of State for Social Services whether he will now make a statement about the level of the death grant.
    Mr. Rossi: I refer the hon. Gentleman to my statement to the House on 30 March 1982.
    Mr. Canavan: Bearing in mind that the current maximum grant of £30 would pay for only about 10 per cent. of the costs of a simple funeral, is it any wonder that the Government's consultative document is seen as an absolute sell-out? Instead of introducing a means-tested grant and applying it to a much reduced number of people, why not have a general uprating of the grant to at least the original 1949 level, which would be about £200 in today's money—or is it now official Tory Government policy to increase the cost of dying as well as the cost of living?
    Mr. Rossi: If we were to increase the death grant to its 1949 value universally, to about £200 per death, it would cost us £115 million, and the resources are not available for that. If I had that sort of money, I would have better uses for it than to pay a large death grant to each family.
    Mr. Grieve: Will my hon. Friend bear in mind that it is essential to give benefits where they are needed and not where they are not needed?
    Mr. Rossi: I am grateful to my hon. and learned Friend. That is entirely the policy behind the consultative document.
    Mr. Freud: When it was leaked that the Government were to introduce a substantial increase in the death grant and claw back such money from those who had means, the House generally welcomed the idea. What has gone wrong and why is it now so complicated?
    Mr. Rossi: I am not responsible for the leaks and I do not know their source, but they are obviously inaccurate.
    Mr. Stallard: May I remind the Minister of the reply that he gave me yesterday to a written question? I asked what would be the necessary increase in the national insurance contribution to raise the death grant to £200. His reply was that if the increase were borne totally by the employer it would cost the employee about 15p a week. Why has that not been included as one option available to the Government during the consultation process?
    Mr. Rossi: Clearly, the matter is on the table. We must await the results of the consultation document. However, we must be careful before we make any increases in national insurance contributions, because they are not popular.

    NHS (Finance)
    Mr. William Hamiltonasked the Secretary of State for Social Services if he will make a statement on the future financing of the National Health Service.
    Mr. Fowler: In 1982–83 we shall be spending over £12 billion on the NHS, which, with savings through increased efficiency, is planned to provide growth of over 6 per cent. since 1978–79. The provisional plans for 1983–84 and 1984–85 were included in the expenditure White Paper published on 9 March.
    Mr. Hamilton: Is the Minister aware that that is not an answer to the question on the Order Paper? Is he aware of a working party document that has been in his possession for months that deals with alternative ways of financing the National Health Service, including the principle of private individual insurance? Will he assure the House that, he will publish that document and, secondly, will he tell us now that he has abandoned all intentions of financing the Health Service by that means?
    Mr. Fowler: With respect to the hon. Gentleman, the reply that I gave was the exact reply to the question that he asked and shows the priority that the Government are giving to the National Health Service. With regard to alternative finance, the hon. Gentleman is right. A review has been set up. It is based on the premise that adequate standards of health care will be provided for all, regardless of means. That has not yet been considered by Ministers. I cannot make any statement.
    Mr. Archie Hamilton: Does my right hon. Friend accept that Britain spends a smaller percentage of its gross national product on national health than most other countries in the West, but that at the same time this country is highly taxed and it would be wrong for any further sums to come from general taxation? Will my right hon. Friend therefore consider encouraging all forms of private investment in the National Health Service so that provision can be improved from which everyone, whether rich or poor, can benefit?
    Mr. Fowler: The Government are committed to there being a private sector inside the National Health Service. That remains our commitment. The Government are also committed to making the National Health Service work at maximum efficiency. I hope that my hon. Friend will recognise that the Government have provided the finances that have made employment available for 34,000 extra nurses and midwives and 2,000 extra doctors.
    Mrs. Dunwoody: Will the Minister find a way of explaining to the regional health authorities how they are to find the money for the increases in pay that he is still supposed to be talking about with the staff side?
    Mr. Fowler: I have talked with regional health authorities on that matter. They need no instructions or advice from me.
    Mr. Paul Dean: As the Government have an excellent record in making more money available to the National Health Service in real terms, will my right hon. Friend continue to encourage the growing contribution from the independent sector, which is helping to relieve pressure on the National Health Service and making more money available for health care as a whole?
    Mr. Fowler: We are entirely committed to the private sector in health. It makes a substantial contribution to health care. We shall continue to stand by that commitment.

    District Health Authorities
    Mr. Hoyleasked the Secretary of State for Social Services what plans he has to meet the chairmen of the new district health authorities to discuss their budgets.
    Mr. Kenneth Clarke: A date has yet to be fixed for my first meeting with district health authority chairmen. As far as allocations to DHAs are concerned, this is primarily the task of regional health authorities.
    Mr. Hoyle: Will the Minister bear in mind under-funded district health authorities such as Warrington, which is £3 million down, when the budgets are being prepared? If he finds that those authorities are under-funded, will he make available extra cash to them?
    Mr. Clarke: I accept that Warrington has been under-funded. I am glad to say that it has had the lion's share of growth in health service resources in that area over the last few years. Spending in Warrington has gone up by 9·6 per cent. over the last three years, whereas the Government have increased expenditure nationally by 3·5 per cent. in real terms. The new regional health authorities are planning to increase resources for Warrington by 2 per cent. each year as long as their planned growth is provided for.
    Mr. Latham: In answer to question No. 4 my hon. and learned Friend announced welcome cuts in staffing costs and numbers. Will he ensure that new district health authorities continue to show substantial reductions in numbers of administrative staff?
    Mr. Clarke: The Mersey regional health authority and the Warrington district health authority will be given express targets for reductions in mangement costs. The money that they save in that way can be added to the growth money that we are proposing for the improvement of health care and facilities for patients.

    Optical Charges
    Mr. Douglasasked the Secretary of State for Social Services what effect he expects the rise in optical charges to have on the numbers of people using the optical services.
    Mr. Geoffrey Finsberg: On past experience, I would expect there to be a small initial drop in the number of sight tests and dispensings, followed by a resumption in the underlying upward trend.
    Mr. Douglas: Does the Minister accept that he is driving people away from a service that is concerned with optical health in relation to total health and towards a service that is related purely to market considerations?
    Mr. Finsberg: No, Sir. I remind the hon. Gentleman that, even with the new charges, the contribution from charges will be less than one-third of the total costs.
    Mr. Ward: Does my hon. Friend agree that he could do something to help in the matter of increased optical charges if he removed the present monopoly from the optical profession?
    Mr. Finsberg: As my hon. Friend knows, the Office of Fair Trading is investigating certain commercial aspects of that matter. We hope to have its report by the end of the year, when we shall consider it.
    Mr. Terry Davis: When will the Government do something to publicise the circumstances in which people can claim exemption from optical charges?
    Mr. Finsberg: As the hon. Gentleman knows, each year we publish a helpful leaflet. Already about 1·2 million people are either exempt from those charges or have partial rebates. We shall consider whether we can do something better.
    Dr. M. S. Miller: Is the Minister satisfied that people are getting a fair deal in respect of optical services?
    Mr. Finsberg: As someone who had a new pair of glasses two weeks ago on the National Health Service, yes.

  PRIME MINISTER

    British Leyland
    Ql. Mr. Dalyellasked the Prime Minister if any new proposals for additional investment funding have bee n made to Her Majesty's Government by British Leyland.
    The Prime Minister (Mrs. Margaret Thatcher)rose——
    Mr. Canavan: Resign.
    The Prime Minister: The Government have not received from BL any proposals for funding in addition to those contained in the company's 1982 corporate plan. The Government announced their approval of that plan on 22 December 1981.
    Mr. Dalyell: Ought not the Public Accounts Committee to have access to British Leyland's books.
    The Prime Minister: I am grateful to the hon Gentleman for having had the courtesy to write to me in detail about his problem over the Bathgate plant and for indicating to me the nature of the supplementary question that he might ask. The Government's view is this. The PAC has access to all those papers to which Government Deparments have access and for which Ministers are responsible to Parliament. It is our present view that if the PAC were able to call for all papers in respect of public enterprises in regard to commercial contracts or commercial details, that would make it difficult to make those commercial decisions. It would also be extremely difficult to get anyone to run those undertakings.
    Mr. Maxwell-Hyslop: Will my right hon. Friend confirm that successive Governments have insisted that British Leyland must generate internal funding to match that which it asks taxpayers to provide? Does she agree that if it fails to do so, that sum cannot be made up out of the taxpayers' pocket instead?
    The Prime Minister: It is certainly true that eventually British Leyland is expected to have enough money from internal sources both for working capital and for expenditure on new capital requirements. At the moment the Government have provided £970 million of taxpayers' money to British Leyland.
    Mr. Archie Hamilton: Does my right hon. Friend accept that before any further tranches of taxpayers'

    823
    money go to British Leyland, it should raise what money it can by selling any parts of the group that people are prepared to buy?
    The Prime Minister: There is a view that the company should continue some of its policy of selling assets in order to provide capital from internal sources.

    President Reagan
    Mr. Cryerasked the Prime Minister if she will make a statement on the progress of Her Majesty's Government's arrangements for the visit to the United Kingdom of President Reagan.
    The Prime Minister: President Reagan is to be the guest of Her Majesty the Queen at Windsor Castle. As was announced on 25 March, he is to be invited to address Members of both Houses of Parliament in the Royal Gallery. The programme is still under discussion and further details will be announced when it has been approved.
    Mr. Cryer: Does the Prime Minister accept that her attempt to use the visit of President Reagan to chore up her failing position is widely regarded as an abuse of the House? Has she noted that even President Reagan has called for a peaceful solution to the Falkland Islands crisis, without bloodshed? Does she not accept that, as she is responsible in the final analysis for the conduct of her Government, she should consider an early resignation and allow someone else to meet President Reagan on his visit?
    The Prime Minister: We shall welcome President Reagan as the President of our senior NATO ally, the most powerful defender of liberty in the West and throughout the world. I understand that President Reagan, like most of us, would wish a peaceful solution to the crisis in the Falkland Islands. We shall be happy if anyone is able to secure the withdrawal of the Argentinines from the Falkland Islands, the restoration of British sovereignty and the respecting of the wishes of the people to live under British sovereignty without a drop of blood being shed. If anyone can do that, we shall warmly welcome his cooperation. With regard to resignation—no. Now is the time for strength and resolution.
    Sir John Biggs-Davison: Whole warmly welcoming what my right hon. Friend has said, the personal charge that she is taking over these affairs and all that President Reagan can do to help bring about restoration of British sovereignty in the Falkland Islands, may I ask whether she—and all of us—should not keep in mind in this difficult matter the prayer by Sir Francis Drake that she and many of us heard yesterday in Westminster Abbey?
    The Prime Minister: I think that the prayer to which my hon. Friend must be referring is:
    "There must be a beginning of any matter, but the continuing unto the end until it be thoroughly finished yields the true glory."
    That is an apt quotation under the circumstances.

    Engagements
    Mr. John Browneasked the Prime Minister if she will list her official engagements for Tuesday 6 April.
    The Prime Minister: This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall have further meetings later today.
    Mr. Browne: Does my right hon. Friend accept, with regard to her action over the Falkland Islands issue, that she has the overwhelming support of the House and the nation? Can she confirm that our mission is to destroy the Argentine invasion fleet? If my right hon. Friend cannot confirm that, will she say whether she believes it either possible or desirable in the long term security interests of the Falkland Islands, and to protect the exposed southern flank of NATO, that a NATO base should be established in the Falkland Islands?
    The Prime Minister: Our mission is to restore British sovereignty to the islands and to give the people what they want—the right to live under British rule and to owe allegiance to the British Crown. That is our task. I do not think that the idea of a NATO base in the Falkland Islands would be well received, because the islands are far out of the NATO area.
    Mr. Foot: Has the right hon. Lady been able to study this morning the reports in many newspapers, such as The Daily Telegraph and The Times, that the information about the attack was known in London 10 days before the invasion? Is the right hon. Lady aware that this is claimed to be on unimpeachable sources and that, if that was true, it would have been possible for action of interception to have been taken? Will the right hon. Lady say whether that information is correct and, if it was received, what action was taken by the Government?
    The Prime Minister: There are two points that need to be made. I told the House on Saturday that even if action had been taken—[HON. MEMBERS: "Oh".] Will the House let me answer the question in my own way, giving information that I am certain is accurate, as I try to do and try to check these matters?
    As I told the House on Saturday, even if we had known at the time of 19 March, when there was the landing at South Georgia at Leith—which is a long time before the 11 days to which the right hon. Gentleman was referring—we could not have got ships of the Fleet there in time.
    With regard to the second part of the right hon. Gentleman's question, I think that he will find a certain amount of confusion in the reports. I therefore stand by what I told the right hon. Gentleman on Saturday—that the first time we had precise information was on Wednesday. If the right hon. Gentleman looks at his copy of The Times he will see that there is a phrase to the effect that they knew there were ships but did not know their intent. [Interruption.] I am telling the right hon. Gentleman with the greatest possible accuracy, as information came to me.
    The first information that I had was on Wednesday of last week, when we took action. Previously, we had been very worried about the situation in South Georgia, where HMS "Endurance" had been, and it was suggested that she take off the Argentines by force. We had understood that there were ships on the way for that and when we understood that we also took certain dispositions.
    Mr. Foot: Will the right hon, Lady now answer the immediate point that I put to her? Questions of British intelligence are concerned in these matters and the House has the right to judge whether British intelligence was operating properly and if so what action was taken. Can the right hon. Lady now tell us whether the information stated in these reports was received? Whenever she may

    825
    have been informed, surely she has had the chance to look at such accusations today and can tell the House and the country whether such information as this was received at the time stated.
    The Prime Minister: I have tried to help the right hon. Gentleman. I think that, if he looks at the report on the front page of The Times he will find that it says that there were ships in the area but their intent was not known. [Hon. Members:"Oh".] That is what I understand The Times to say. We knew there were problems and of course we were dealing with them on South Georgia. The precise time that we had information that it was an invasion fleet and that it was on its way was Wednesday evening. We took action then. [Interruption.] I am trying to give the right hon. Gentleman accurate information. Previously, because of the situation in South Georgia, we had also made certain other dispositions.
    Mr. Foot: If the right hon. Lady cannot give us and the country an accurate answer on the matter now, will she study the matter further and make another statement to the House tomorrow, as many of her Ministers have had to do before?
    Mr. Ashton: Come clean.
    The Prime Minister: I have given the accurate information—[Interruption.]—that I myself know and the action that I myself took at the time when I received it.
    Sir Paul Bryan: Is not my right hon. Friend encouraged by the support that the country has received at the United Nations and throughout the free world for the stand that her Government have taken on the Falkland Islands?
    The Prime Minister: Yes. There was a forceful resolution moved at the United Nations Security Council calling upon the Argentines to withdraw and we received support in the vote that was passed from the United States, France, Ireland, Japan, Zaire, Togo, Uganda, Guyana and Jordan. Those were the countries that voted for us. The Soviet Union, China, Poland and Spain abstained and Panama voted against.
    Mr. David Steel: Did the Prime Minister hear the interview at the weekend with the hon. Member for Shoreham (Mr. Luce) before he resigned as Minister of State, Foreign and Commonwealth Office? In that he said quite clearly—and I heard the interview—that the Government had no warning of any attack or threat to the Falkland Islands until about a fortnight ago. A fortnight is a great difference from 48 hours or 24 hours. Will the right hon. Lady try to clear this matter up?
    The Prime Minister: As I have been trying to indicate, there were problems, as the right hon. Gentleman knew, on South Georgia. The problems there were that if HMS
    826
    "Endurance" proceeded to take off the 10 Argentines who had landed at Leith and who refused to leave although they did not have proper immigration papers—[Interruption.] We were in touch with Buenos Aires and we said that the men must go or get the proper clearance to be on our territory. We knew that there was a threat that if we took them off by force HMS "Endurance" might well have been stopped, and that there were ships about that could do the stopping.
    The precise nature of the threat to Port Stanley and to that part of the Falkland Islands came to me, as I told the right hon. Gentleman, on Wednesday. I do not believe that there was a precise threat to Port Stanley as long before as the right hon. Gentleman indicated.
    Mr. Higgins: As the United Nations Security Council resolution on the Falkland Islands is mandatory and the Argentine Government have not complied with it, will my right hon. Friend consider tabling a further resolution enforcing economic sanctions against the Argentine Government?
    The Prime Minister: I think that if we were to table a further resolution about economic sanctions we should not have quite such a successful conclusion as we had to the resolution that we have already tabled.
    Mr. Allan Roberts: Will the Prime Minister consider the consequences of the Government's mishandling of the Falklands crisis for quite a number of my constituents? Is she aware that 50 per cent. of the trade with Argentina goes through Liverpool docks, and that that trade is likely to stop as a result of military action or sanctions., which I would support? If that trade is stopped, will the right hon. Lady make sure that Merseyside docks, which are already in a state of crisis, receive Government assistance to compensate, so that unemployment does not increase as a result of the mishandling of the Falklands crisis by this Government?
    The Prime Minister: The extent of our exports to Argentina is, and has been, comparatively small in relation to our total exports. Therefore, I cannot give the hon. Gentleman the answer that he seeks. However, I can tell him, as a matter of information, that we have decided to impose an embargo on the imports of all goods from Argentina from midnight tonight.
    Several Hon. Members rose——
    Mr. Winnick: On a point of order, Mr. Speaker. In the exceptional circumstances of a national crisis, as this undoubtedly is, may I ask you to give careful consideration to extending Prime Ministers Question Time, because it is the only way that hon. Members have——
    Mr. Speaker: Order. I do not decide the length of Prime Minister's Question Time.

Hedgerows
3.31 pm
Mr. Peter Hardy: I beg to move,
That leave be given to bring in a Bill to protect hedgerows.
This Bill is designed to protect the more important hedgerows left in our countryside. They are usually the older hedgerows which form farm and parish boundaries or which border the highways and byways of Britain. Many of them are a thousand years old or more. It is unfashionable to refer to the classics, although the disposition of the House in recent days might make it more likely, but it is certain that Caesar referred to the hedgerows of Britain during his excursions to our country 2,000 years ago.
The Bill that I propose could not be seen as standing in the way of progress, although sometimes that progress is questionable, but it is designed to contribute to the maintenance of an attractive landscape and to provide an essential skeleton of conservation in these islands. Across our country, from the tall hedges beside the sunken lanes of the South-West to the more stunted hedges of the exposed northerly areas, hedgerows have shaped our landscape. They continue to provide the definition of direction of that most popular of British pursuits—walking in the countryside. Increasingly, however, they offer an economic advantage, since tourists visit Britain today as much to see our landscape as to observe anything else. That offering must remain attractive.
There are traditional benefits, too. Hedgerows were designed to enclose stock and provide them with shelter. They may do so still, and there may be only a temporary superfluity in some areas. They also offer their useful products of fruit and coppice.
However, my argument is not entirely an economic one. The hedgerow is important, above all, as the provider of habitat. Indeed, 250 British wild plants grow only in hedgerows. Numerous bird species depend upon them for their existence. Without the hedgerows, winter visitors such as the redwing and the fieldfare would scarcely survive. Without the hedgerow, many resident species of birds would be imperilled. The incidence of birdsong and the useful contribution that birds make in pest control would be much less frequent if the current rate of hedgerow clearance continued.
This is described as the year of the butterfly. It is worth noting that 20 species of British butterfly rely on hedgerows for their breeding habitat. As far as insects are concerned, the hedgerow could be described as the harbour for the crop pollinators, for many hedgerow insects are beneficial.
It could be argued that the continuing agricultural revolution means that the hedgerow is no longer either necessary or desirable. Certainly, modern agricultural
828
methods have proved disastrous for miles of hedgerows in many counties. Large-scale mechanisation and the transition from traditional rearing of stock to concentration on arable production has impelled that destruction.
There can be argument about the actual pace of current change, but it is clear that hedgerow destruction has been extensive. It is estimated that one fifth of our total hedgerows have gone in recent years, and in some counties the destruction has been colossal. In Huntingdonshire, 88 per cent. of the hedgerows have been lost.
There have been some astonishing examples of destruction in the last few months. Last year, while the Wildlife and Countryside Bill was being considered in Committee, one fanner in Nottinghamshire created a 320-acre field, and had his local authority not drawn attention to the existence of tree preservation orders, the field would have been much larger than that. On one estate in Northamptonshire, the hedgerow has been completely cleared to allow ploughing to go right up to the road. The hedgerow has gone along a one and-a-half mile stretch of highway. In my area, a small minority of farmers seem to have been particularly ruthless. One removed his farm's hedgerows, and after the removal asked that the footpaths be realigned. Many constituents have complained and expressed regret, and that regret is not restricted to South Yorkshire.
The House, of course, recognises that food production is important. As I said, the Bill does not seek comprehensive protection. However, if we acknowledge that life without food is impossible, we may also agree that life has to be worth while, and, in the living, the landscape and the natural heritage of are important. This suggests—a suggestion that would be endorsed by many millions of people, including many farmers and rural residents—that a measure of protection is now necessary. Therefore, before it is too late, the House should recognise that this additional conservation proposal is much to be desired.
I should add that I present the Bill not as a publicity stunt but because I am led to the firm view that the measure is now extremely necessary. There should be a still significant place for beauty and the retention of our natural resource, even in a power-driven landscape.
Question put and agreed to.
Bill ordered to be brought in by Mr. Peter Hardy, Mr. Andrew F. Bennett, Mr. Sydney Chapman, Mr. Alan Clark, Dr. David Clark, Mr. Jack Dormand, Mr. David Ennals, Sir Marcus Kimball, Mr. Kenneth Marks, Mr. Charles Morrison, Mr. John Parker and Mr. Stephen Ross.

HEDGEROWS
Mr. Peter Hardy accordingly presented a Bill to protect hedgerows: And the same was read the First time; and ordered to be read a Second time upon Friday 23 April and to be printed. [Bill 103.]
Orders of the Day

  Finance Bill
  Order for Second Reading read.
  3.39 pm
  The Chief Secretary to the Treasury (Mr. Leon Brittan): I beg to move, That the Bill be now read a Second time.
  The Chancellor of the Exchequer presented his Budget to the House four weeks ago today. We had three days of debate on it, and to print all the comment and analysis that has appeared about the Budget in the press it must have been necessary to fell a Norwegian forest.
  When all the commentators have had their say, what really matters is what the Budget eventually achieves. It is clear what it set out to do. It aimed to help restore the balance between the personal and business sector. It aimed to help bring down inflation and restore jobs on a sustainable scale, and it aimed to do all this by means of responsible fiscal and monetary policies. In all these respects it was a Budget which continued the strategy which the Government initiated in May 1979. As a Government we are determined to continue the policy of fighting inflation, which is the heart of that strategy.
  We meet today under the shadow of other events, and our thoughts are naturally with the naval task force in the Atlantic. We wish them god-speed. But those events have in no way altered our resolve to continue with our basic economic strategy; nor is the scale of our effort in relation to the Falkland Islands, substantial as it is, such as to require any change in that strategy. There is no question of that. The policies embodied in the Budget and in the Finance Bill stand unchanged.
  Let us look at what has happened since the Budget. The Budget, of course, was aimed primarily at industry and business, and there can be no doubt that it has been favourably received in those quarters. Surveys of opinion indicate that most businesses expect it to have a favourable effect on output and investment. The recently published CBI inquiry for March, though it should not perhaps be linked too closely to the Budget measures themselves, shows improving prospects for output, orders and price increases. The Financial Times business opinion survey released earlier this week corroborates these trends, and, in addition, shows a further continuation of the improvement in business optimism.
  Government policies are being well received in financial markets too. The decline in United Kingdom interest rates continued through February into March. Most rates have come down by 1½ to 2 per cent. since the new year. Not surprisingly, it was just after the Budget that banks and building societies announced their latest reductions in base rates and mortgage interest rates. Can anyone seriously believe that we would have had the benefit of those lower rates if we had accepted the advice of those who called for massive increases in the level of borrowing?
  Of course, not all the recent news about the economy has been uniformly encouraging. For example, we have had some disappointing industrial production figures over the winter, though output in many industries was clearly affected by very severe weather and industrial disputes;
  830
  but I am pleased to say that preliminary indications—such as car production and steel output—show that there should be some bounceback in industrial production in February.
  The depressed output figures of course also largely account for the rise in manufacturing unit wage and salary costs between December and January. Despite this, the trend in unit wage and salary costs remains very favourable. In the three months to January, they show a rise of about 3 per cent. compared with a year earlier, which is well below the international average and comparable with the best—Germany and Japan.
  The latest figures for exports also show some fall off in volume from the encouraging levels recorded in the previous four months. But the very uneven distribution of the fall, with exports of semi-manufactured goods and basic materials showing a rise, suggests that the severe weather up to mid-January had a depressing effect. If that is so I expect there to be some improvement in the February figures.
  The general picture of the economy is an increasingly encouraging one. All three measures of GDP now confirm that a turning point in activity was reached last spring since when GDP has risen by about 1 per cent. Industrial and commercial company profits, excluding North Sea oil, are now recovering strongly—they rose by a quarter in the second half of 1981. That should encourage investment and make it easier to finance.
  The Central Statistical Office index of longer leading indicators has been picking up strongly since the autumn in response to lower interest rates, stronger share prices and improved business confidence. Retail price inflation has fallen to 11 per cent., half the rate in the spring of 1980.
  Mr. Arthur Lewis: The right hon. and learned Gentleman has given us information that we are all pleased to hear. If things are going so well, will he explain why it was reported in the press yesterday that officially there are more bankruptcies, more receiverships and more voluntary liquidations than at any time in the history of the country? If things are going so well, why is everyone going bankrupt?
  Mr. Brittan: The events that the hon. Member has described are the product not of the present, or of the future that I am describing, but of a period some time ago. One does not become bankrupt overnight. The hon. Gentleman referred to a report that he had read in the press yesterday. No doubt his reading of the press has taken him forward to today. He will have read that prices paid by manufacturers for raw materials and fuels fell by 2 per cent. in March, so that the annual increase is down to 8 per cent. That reflects a further easing of the cost pressures on industry.
  Although not too much should be read into the exceptionally low increases in the adult seasonally adjusted figures for unemployment in February and March of about 5,000 each month, they, too, clearly provide evidence of a further slowing in the rate of increase. In the past three months the increase in unemployment, which has averaged about 20,000 a month, has been a quarter of that in the same period a year ago.
  The outlook for 1982 and 1983 is encouraging. Of course there are uncertainties—for example, those associated with developments in the United States—but

  831
  we expect output to continue its recovery, on a more broadly-based front than last year with industrial investment, for example, showing some recovery. All of the outside forecasters considered by the Select Committee on the Treasury and Civil Service in its report published yesterday see output growing by about 1½ per cent. in 1982, a continued healthy surplus on our balance of payments current account, and inflation falling into single figures before the end of the year.
  If we look at the overall position, it is possible to see that the longer-term effects of our strategy are working through. The signs of improvement and the tax reductions which the Chancellor announced in his Budget result not so much from this particular Budget, but from the strategy as a whole reflected in the Chancellor's previous Budgets. We can all remember with what scorn the last one was greeted with by Labour Members and how it was going to lead to slump and disaster. It did nothing of the kind. This Budget and this Finance Bill continue the same steady strategy, which is already beginning to ensure that the process of recovery proceeds on a sound basis.
  Before going on to some of the particular provisions of the Finance Bill, I wish to comment briefly on one crucial matter relating to the general impact of the Budget—its effect on unemployment. I think that it is worth nailing two canards now. First, contrary to what the right hon. Member for Stepney and Poplar (Mr. Shore) contended in his Budget broadcast, the Government are not planning on unemployment at over 3 million over the next three or four years. Let me read to the House exactly what we said in the public expenditure White Paper. The figures in paragraph 12 of vol. I have been used by the Opposition to support their arguments. It states:
  "This is not a forecast or a prediction. If developments on pay and the world economic recovery are favourable, there is a reasonable prospect that unemployment levels in the later years may turn out to be somewhat lower than has been assumed."
  The second point that I wish to make is more than a canard. It is absurd to suggest that this Government or any Government have the slightest interest in keeping up the level of unemployment. If it were possible sustainedly to reduce the level of unemployment rapidly and dramatically, this Government, and any Government, would jump at the chance of so doing. However, there is no such route and it is self-deluding to think that there is. This was a Budget for jobs, because only industry can provide jobs. It was a Budget that was designed specifically to help industry. It was a Budget that was designed to provide jobs on a sustainable basis. That is a slow—indeed, painfully slow—process, but one that can be achieved given continued sensible moderation on the pay front.
  Mr. George Foulkes: I think that the Minister said that the prospects were based on unemployment figures that were somewhat lower than assumed. What exactly does he mean by "somewhat lower", and what were the figures that he assumed?
  Mr. Brittan: I follow what the hon. Gentleman is trying to say. I have made it clear that the figure which appears and to which reference has been made by the Opposition is an assumption. I have quoted from the public expenditure White Paper a passage which makes clear the nature of developments which would render the levels somewhat lower than those that have been achieved. The
  832
  hon. Gentleman asks "How much lower?" The answer depends on the extent of the factors that will operate. At the end of the sentence during which the hon. Gentleman indicated that he wished to intervene, I referred to one of the factors that will operate, and that is pay. Obviously we are talking about a scale. The answer, in short, is that the more progress that is made on pay moderation, the more it will be possible to proceed below the assumptions that appear in the White Paper.
  Mr. Foulkes: Does the right hon. and learned Gentleman agree that, on the figures that he has described, we must assume that the Government's policy is working. Assuming that the policy is in fact working, what is the lower amount that he describes as "somewhat lower"? Let us assume that the strategy is successful. If that is so, by how much will the amount change?
  Mr. Brittan: It seems that I have been unable to make matters clear for the hon. Gentleman. The assumption is stated clearly in the White Paper—it is one that has been relied upon by the Opposition—as are the circumstances in which the outcome will be more favourable than the assumption assumes. The extent to which the outturn proves to be more favourable than that stated in the White Paper must depend on the extent of the developments in pay and the world economic recovery, which are stated to be the factors that could lead to a better outturn. The hon. Gentleman may shake his head, but it seems reasonable to say that that is the case. The extent of progress is infinite and the degree of success depends upon that extent.
  Finally, before coming to the specific provisions of the Bill, I shall refer to yesterday's report of the Select Committee on the Treasury and Civil Service, which many hon. Members will have read with interest. The House will not expect me to agree with all that the report states. However, I am glad to note its welcome of the reforms in the taxation of capital gains and the way that the extension of indexed-linked gilt-edged securities will mean that the Government will no longer be taxing the interest needed to maintain the real value of capital.
  On other aspects of the Budget, the Committee has pointed to some changes in the way in which the medium-term financial strategy has been presented this year. I emphasise to the House that to a large degree these are more a matter of presentation than of substance. Of course, changes have to be made from time to time. Circumstances change; for example, the new monetary ranges allow for changes in the banking system. But for the most part the new presentation is designed to conform more closely to the way in which policy has been operated. It does not represent a departure to any extent.
  The monetary path accords with the fiscal policies in the Budget and the measures reflecting them in the Finance Bill. But the most important measure of all to help industry in the Budget does not actually appear in the Bill. It is the decision to restrain our borrowing requirement, in order to keep down the burden of interest on industry. That is what really counts when it comes to recovery.
  The most important specific measure that appears in the Bill is the reduction in the national insurance surcharge. It is the widely disliked tax on jobs, which was first imposed, and then increased, by the Labour Party. We propose to reduce it, a step which has been welcomed by the CBI and industry in general. Of course it would have been nice to go further, but the reduction proposed will

  833
  provide a significant boost to industry without placing a strain on the PSBR and interest rates. And we are ensuring that the benefit will be concentrated entirely on the productive private sector. In all, the reduction should cut the cost of employing labour in the private sector by some £640 million in 1982–83.
  Moreover, this reduction in the surcharge comes on top of our decision to shield employers from any increase in their national insurance contribution rates for two consecutive years. As my right hon. and learned Friend said in his Budget Statement, if we had not protected businesses, and so employment, in this way employers would have had to find nearly £1 billion more in the coming year than will actually be the case. Those who call for a larger reduction in the surcharge should compare this record with that of our predecessors. In their last two and a half years in office they were responsible for increasing the combined charge on employment—the employers' national insurance contribution and the national insurance surcharge—from 8½ to 13½ per cent., an increase in the charge of some 60 per cent.
  In addition to the reduction in the national insurance surcharge, the Bill contains a wide range of measures to assist particular sectors of business and to encourage enterprise.
  The measures to assist industrial innovation announced by my right hon. and learned Friend are mainly on the expenditure side, but the tax component consists of the change in capital allowances for rented teletext televisions. Teletext is a leading product of British information technology. The extension of the 100 per cent. first-year capital allowances for rented televison sets equipped to receive teletext provided by clause 62 should encourage wider use of this product and assist British manufacturing output.
  Mr. Tim Eggar: I welcome the assistance that will be given to teletext receivers, which will be of great assistance in my constituency, where British manufacturers make many such sets. However, is it not unfortunate that one of the by-products of what has been proposed will be an incentive to rent teletext sets as against outright purchase? Will my right hon. and learned Friend give an undertaking that consideration will be given to encouraging consumers to purchase these sets?
  Mr. Brittan: I am sure that we shall have an opportunity further to explore whether that consequence follows when we debate the specific clause. I am not in a position to give a specific undertaking at this stage.
  Several measures in the Bill will assist the construction industry. The increases in the stamp duty thresholds in clause 113 should give some encouragement to house construction for purchase by owner-occupiers, while the introduction of capital allowances for new housing to be let under assured tenancies should help to increase the supply of rented property. Both measures should increase job mobility. There is also further assistance for industrial buildings, including the extension of the small workshop scheme until March 1985 for very small workshops. This scheme has proved extremely successful in increasing the availability of workshops suitable for small businesses, and its extension for very small workshops will not only provide additional work for the construction industry but also assist the small firms sector.
  A somewhat larger number of clauses relate to small firms and enterprise. These include several measures
  834
  designed to encourage equity investment in small and family companies. The business start-up scheme is to be improved by increasing the limit for investment qualifying for relief from £10,000 to £20,000 for 1982–83 and 1983–84, and clause 45 also contains a provision to allow any unused balance of the 1981–82 £10,000 limit to be added to the £20,000 limit for 1982–83. This enables tax relief of up to £22,500 for 1982–83 for people investing in new trading companies, so that an already generous scheme has been made still more so. The Bill also provides new arrangements to help the purchase of own shares by unquoted trading companies, so removing obstacles to their raising equity capital.
  Clauses 36 and 37 provide improvements to the existing tax relief for employee profit-sharing schemes, together with the new relief that we are introducing for those exercising share options outside approved schemes. I hope that these changes will ensure that use of these arrangements continues to increase. These schemes increase employees' identification with their firms, which can only contribute to the success of an enterprise and the job security of those who work in it.
  Among the other measures in the Bill to assist both new and existing small businesses are the increase in the profits limits for the "small companies" rate of corporation tax in clause 21; the extension of the period for income and corporation tax relief for pre-trading expenditure from one to three years in clause 44; a further increase in the VAT registration limit in clause 12; and relief for VAT paid on supplies of services before registration in clause 13. In addition, clause 42 provides a new relief for businesses' contributions to certain local enterprise agencies, a change which meets widespread representations and has been warmly welcomed.
  Individually, measures such as these are not substantial, but collectively they add up to a great deal. They continue the improvement in the tax environment of small businesses that we began in 1979, thereby materially improving prospects for growth and employment in this sector.
  The Bill also takes a stage further the reform of the capital taxes begun in 1979. These have a profound effect on motivation, in that they can reduce the willingness to save and invest, out of all proportion to their yield. We have always made it clear that there is a proper place for capital taxes in this country's fiscal regime. But it is vital that they should not destroy enterprise and endeavour.
  Undoubtedly the unfairest aspect of capital gains tax has been the way in which it has been levied on paper gains. By providing in clause 71 for an indexation allowance based on future inflation, the Bill sets about remedying this injustice. In so doing it will also make investment in equities more attractive. In turn this will have a beneficial effect on company finances and, therefore, on jobs. The increase in the capital gains tax exemption to £5,000 proposed in clause 65 will go some way towards compensating——
  Mr. D. N. Campbell-Savours: Disgraceful.
  Mr. Brittan: —those with gains affected by past inflation. The exemption will itself be indexed to protect its value against any further falls in the purchasing power of money.
  The increase in the capital transfer tax threshold to £55,000 and the reform of the rate bands in clauses 75 and

  835
  76 and schedule 10 are also in the nature of an adjustment for inflation. I should perhaps point out that the increase in the CTT rate bands does not fully compensate for inflation since the levels were originally set by the right hon. Member for Leeds, East (Mr. Healey).
  Mr. Robert Sheldon: The right hon. and learned Gentleman has claimed credit for the reduction of inflation to low levels. Why, under these circumstances, has he brought forward the greatest measures of indexation that we have seen?
  Mr. Brittan: I was about to come to the general question of indexation and say it was appropriate to do that. In view of the Budget changes it was reasonable to ask, as I knew the right hon. Gentleman would, what view the Government had on the role of indexation in the economy generally.
  There are two important points to have at the forefront of any consideration of this question. First, the impact of indexation will vary enormously. Therefore, it is a mistake to be generally in favour or generally against. Secondly, there is a major difference between automatic indexation provisions and "truth in taxation" provisions, which do no more than ensure that the impact of taxation cannot change drastically as a result of inflation without any express parliamentary decision that this should happen.
  Examples of completely unindexed economies and completely indexed economies are both rather rare. Indexation of social security benefits is widespread among industrial countries. In our case this has existed for over a decade. Looking abroad, one will find numerous combinations of indexation of benefits, wages, taxes and financial instruments.
  In this country, successive Governments have been anxious to avoid indexation of wages: first, because this would prevent necessary readjustments in real wages from taking place; secondly, because it makes the economy vulnerable to external price shocks; and, finally, because it is usually unnecessary. Unlike, for example, financial contracts, wage bargains are usually renegotiated every year anyway. With the exception of the unhappy experience of threshold agreements, we have prevented the adoption of widespread wage indexation and the problems that it has brought to a number of European economies.
  Parliament has decided that, unless it votes otherwise, the thresholds and bands for income tax should be raised in line with inflation, so that it is clear whether a real increase or reduction is being proposed, and that it does not just go by default.
  Mr. Campbell-Savours: Disgusting.
  Mr. Brittan: The Bill extends this principle to capital transfer and capital gains taxes. Furthermore, it will largely eliminate the injustice of levying taxes on future paper gains. These are important changes, but they are, in my view, entirely consistent with our previous approach.
  Mr. Campbell-Savours: During the debates in the Standing Committee considering the Finance Bill last year, the Minister kept telling us that he needed the money. I remember that he coined the phrase "We need the money". Why is it that this year, when the country faces greater difficulties, the right hon. and learned
  836
  Gentleman is giving money back to the better off in society? He knows that the Government need the money even more than they did last year.
  Mr. Brittan: The hon. Gentleman says that we are in greater difficulties this year and that we need the money more. That is strangely inconsistent with the general fiscal position of the Opposition, who call for massively increased borrowing. Therefore, it appears that the hon. Gentleman has been inconsistent. The fact that last year it was not possible to do what this year is possible is to be welcomed rather than deplored.
  Mr. Douglas Jay: As the right hon. and learned Gentleman has talked about indexation, perhaps he will answer this question: if the Government think that it is right—as they apparently do—to index future interest payments on some gilt-edged securities, is there not an equally strong case for indexing salaries and wages in the public sector.?
  Mr. Brittan: I do not think that that is so. I gave the reasons only a moment ago why it is dangerous to do that. I am sure that the experience of other countries indicates that. On gilt-edged securities, one is not on all fours with that idea.
  Mr. Jay: Why?.
  Mr. Brittan: The right hon. Gentleman asks "Why?" I shall tell him. When offering gilt-edged securities that are indexed, one is not providing an entitlement. One is offering a variety of Government securities and not covering the field exclusively by that means. Therefore, the right hon. Gentleman is not comparing like with like.
  Mr. Jack Straw: Before the right hon. and learned Gentleman leaves this matter, can he say what the eventual full-year cost of this change will be? Pages 10 and 11 of the Red Book state that the cost for the first year will be £150 million. That will be 25 per cent. of the yield. However, a footnote states that the eventual effect is likely to be substantial. Will the full-year effect be £300 million or £400 million? If not, what will it be?
  Mr. Brittan: I cannot give the hon. Gentleman a fuller figure now. I shall endeavour to give all the available information during the course of our debates.
  Mr. Joel Barnett: What is the Government's position on indexation? Is the right hon. and learned Gentleman saying that the Government are not in favour of general indexation and are doing it only to have truth in taxation?
  Mr. Brittan: No, I am not saying that there is an absolute general rule. I have clearly said that circumstances vary and that it is unwise and contrary to what every other country is doing to say that there will be general indexation and that we shall switch to an indexed society. I have said why I believe that indexation of wages is undesirable, whether in the public or the private sector. I have also said that both on truth in taxation grounds and on more general grounds it is desirable to do so for certain taxes. I have supported the inclusion of an index-linked element in the range of Government securities offered to the public.
  Mr. K. J. Woolmer: As by far the largest source of long-term funds is pensions savings,

  837
  does that mean that the Government are in favour of index-linked pensions? That, surely, is one of the major reasons for holding index-linked bonds.
  Mr. Brittan: It is true to say that the range of opportunities offered to the pension industry has been substantially increased by the Government's change in funding arrangements. It is for the industry to assess the extent to which it can avail itself of the change that has taken place.
  Sir William Clark: Does my right hon. and learned Friend agree that only Denmark has index-linked bonds? No other Western country has them.
  Mr. Brittan: If my hon. Friend says so, I am sure that that must be right.
  Returning to the specific provisions of the Bill, I should like to say a word about North Sea oil taxation. Its structure must be appropriate for conditions of both rising and falling prices. We said last year that we were very willing to consider alternatives to the present structure consistent with our objectives. We have since carefully considered the views put to us by the industry. The changes to the structure proposed in the Bill take account of the industry's strong opposition to a separate tax based on gross revenues rather than profits. We are therefore abolishing SPD.
  At the same time, we are introducing a system of advanced payments of PRT which will ensure that the Exchequer continues to receive some take from larger fields at the start of field life. In most cases, these advanced payments will be completely set off against ordinary PRT liabilities within a few years. For the exceptional minority it will be repaid at the end of field life.
  The changes that we are making do not greatly affect the overall tax burden on the industry, but they will reduce it slightly. We do not believe the size of that burden will discourage exploration or development, or deprive the industry of a reasonable return. The new structure will provide a firm basis on which the industry can plan for development. Oil companies face many uncertainties—they are in a risky business. The Government cannot change that, and to a considerable extent carry their share of the risk. But what we have done should ensure that returns will be commensurate with risks.
  Mr. Dick Douglas: There are two aspects that I wish to raise. The first relates to the clause dealing with the taxation of ethane. Why does it deal only with ethane, and not propane and butane? Secondly, in referring to the taxation of North Sea oil, and oil generally, there seems to be little incentive for the marginal fields—the 50 million to 100 million barrel fields—or for the deeper fields. There is no incentive. The Government's proposals are distinctly detrimental to the development of some fields.
  Mr. Brittan: On the hon. Gentleman's first point, we are looking more widely at the case for an extension to other feedstocks and at the problems of the petrochemical industry, but I am not in a position to say more at this stage.
  On the hon. Gentleman's second point, I am not sure that I agree with his view of the consequences. No doubt we shall have ample time to explore who is right.
  838
  I deal next with excise duties, which are dealt with at the beginning of the Bill. Once again, industrial considerations influenced our decisions.
  As my right hon. and learned Friend said in his Budget Statement, a sensible presumption has grown up that these duties—which are levied in money terms—should be adjusted in line with inflation. This year's increases broadly compensate for inflation over the past year, but within this general approach we have tried to act flexibly to take account of special factors where they exist. We have increased the tobacco duty by a smaller amount to take account of the two increases last year. We have treated the spirits duty in the same way because of the particularly difficult position of the Scotch whisky industry.
  We have imposed a smaller increase on derv than on petrol. As virtually all derv is used by businesses, this should help keep their costs down. On petrol, where there was a strong case for an increase in the duty in real terms, we have borne in mind the importance of the car in rural communities and confined the increase to one that is broadly in line with inflation. Of course, no increase in these duties is ever popular, but to have allowed them to fall appreciably in real terms would not have been justified, and would have had unacceptable implications for the PSBR.
  Most of the measures that I have described aim more or less directly to assist business, but individuals, too, have been assisted. The Bill proposes an increase of about 14 per cent. in the income tax, personal allowances and rate bands. That is 2 per cent. more than the increase needed to compensate for inflation in 1981 as required by the statutory indexation provisions. About 1·2 million people who would have paid tax next year if there had been no increase will not now have to do so. These are people on the very lowest incomes, and they have been kept out of tax altogether.
  Mr. Foulkes: Some provisions have not been included in the Bill. Proposals to deal with company residences, tax avoidance and upstream loans were all included as draft legislation in the Inland Revenue document "Tax Havens and the Corporate Sector". Why are the Government not proceeding with those proposals? Are they no longer interested in dealing with tax avoidance by such companies, and interested only in pursuing the poor on social security matters?
  Mr. Brittan: The hon. Gentleman has not given his normal attention to the Budget Statement, because those matters were explained.
  Before concluding, I should point out that there are a number of matters, not in the category to which the hon. Member for South Ayrshire (Mr. Foulkes) referred, on which we have announced proposals but which do not appear in the Bill. As the Bill progresses we shall bring forward new clauses to deal with these matters including the capital allowances for housing let under assured tenancies, which I mentioned earlier. I am sorry that that is the position, but it is necessary to proceed in this way if we are to consult the parties concerned and ensure that the legislation is sound.
  Mr. Richard Wainwright: The right hon. and learned Gentleman has admitted that there are large gaps in the Bill compared with the intentions announced in the Budget. Why has he reversed the usual

  839
  order, so that the public expenditure White Paper will not now be debated until after the Finance Bill? He would have been able to fill these gaps if he had not been in such a hurry to debate the Bill today.
  Mr. Brittan: As the hon. Gentleman will appreciate, I am not responsible for the order in which business is taken on the Floor of the House.
  We naturally look forward with great relish to the many hours that we shall spend in discussion of the detailed provisions of the Bill. Obviously the House will want to examine each proposal in detail. I am delighted that the relish on the Conservative Benches is matched, if not exceeded, by the relish on the Opposition Front Bench.
  Mr. Arthur Lewis rose——
  Mr. Brittan: I am sorry, but I shall not give way.
  Naturally, the House will want to examine each proposal in detail. As we do so, I hope that hon. Members will bear in mind the broader context in which we should see the Bill. It represents a continuation of the long-term strategic objectives of the Government to bring down inflation, restore prosperity and reduce unemployment on a sustainable basis. It is in that spirit that I commend the Bill to the House.
  4.20 pm
  Mr. Peter Shore: The Chief Secretary was right to refer at the beginning of his speech to the events that have engaged the attention and anxieties of hon. Members since the dramatic announcements last Friday. That, indeed, overshadows our Second Reading debate on the Finance Bill.
  I would go further. It will, of course, have some implications for the whole course of the economy as it develops during the coming year. In the most obvious context, it will have some clear reflection in the public expenditure totals for 1982–83. I am not sure whether the hon. Member for Colne Valley (Mr. Wainwright) was right to suggest that it would have been better to consider that first, before Second Reading. I am glad that the matters have been separated, but perhaps we shall have more material to assist us with our discussion of the public expenditure White Paper—given the way in which events have unfolded—when we consider that matter after Easter.
  Mr. Arthur Lewis: I tried to interrupt the Chief Secretary, but he did not give way. Surely the right hon. and learned Gentleman should have given us some information about the likely cost. We do not blame anyone, but the fact is that we shall be in great financial difficulties as a result of the Falklands dispute, whichever way it goes. The Minister did not attempt to give any idea at all about the effect on the economy. He did not say a word about what would happen. I hope that my right hon. Friend will press the Chief Secretary on this matter, because surely he ought to have given us some information about the economic costs.
  Mr. Shore: My hon. Friend will understand that, while I fully share his wish for the kind of information for which he has asked, it is not within my ability to supply the answers. Nevertheless, I hope that the Chief-Secretary will reply now, or have a word with the Minister who will reply to the debate to see whether a more ample reply can be given then.
  Mr. Brittan: Perhaps I can be forgiven for not anticipating that the right hon. Gentleman would raise that point, as I dealt with it much earlier in my speech. It is of considerable importance. It is obviously quite impossible at this stage to give any estimate of the cost of the action that is being taken in response to the Falklands crisis. However, the cost of that expenditure will be met in a way that is consistent with the Government's economic strategy.
  Mr. Shore: I shall have a word to say—[Interruption.]
  Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. I wish to listen to the debate.
  Mr. Shore: I shall have a word to say later about the studied ambiguities of the Chief Secretary's response, but let us explore the matter further just for a moment. There will clearly be implications, at any rate for the cash limits applied to the Ministry of Defence and perhaps to one or two other Departments as well. As I said earlier, there will clearly be an overall effect on the public expenditure totals. Certain costs will arise from consequential measures affecting our visible and invisible trade. All that will affect the national accounts, but, of course, it is too early to give any measure of this because events are only now beginning to unfold.
  At this stage, we can, and should, note that the first substantial claims on the 1982–83 contingency reserve have already been made. Secondly, if the implication of what the Chief Secretary said is that, regardless of the costs involved—we simply do not know—he is determined that other Government spending Departments should be affected, and given that we now have an economy with such under-used resources, that will be totally unacceptable, at least to the Opposition.
  On Second Reading of the Finance Bill, it is right to look first at the Budget measures in the context of the prospects and of the Government's overall economic strategy. The Government's view was set out in the 1982–83 Red Book which was published the moment the Chancellor sat down on 9 March. Since then, as the Chief Secretary reminded us, the Treasury and Civil Service Select Committee has conducted its examination of the Chancellor together with officials from the Treasury, the Bank of England and the Inland Revenue. It also considered evidence from a number of non-governmental bodies, including the CBI and the TUC. It helpfully published its report yesterday.
  It is worth looking at what the Select Committee said. The outlook for 1982, as the Select Committee sees it, is not substantially different from that reflected in the main categories in the Red Book. It is worth noting that the Select Committee says:
  "The main feature of the change in GDP between 1981 and 1982 remains the end of destocking accompanied by a very rapid growth of imports".
  As for the medium term, the Select Committee notes:
  "The assumption of 2½ per cent. growth in 1983–84 and 1984–85 is … at the top end of the range of the 'rise in the supply potential of the economy' … that is, it is enough to hold unemployment roughly constant given demographic changes and changes in productivity."
  As the Select Committee points out, the unemployment implications are that in the three years 1982–83 to 1984–85, unemployment, excluding school leavers, will remain constant at just about 3 million registered unemployed. I am sure that the House will agree with its concluding sentences:

  841
  "That the assumed rate of growth over 4 years of a cyclical upswing is insufficient to reduce unemployment significantly is clearly disturbing as it suggests a trend of increasing unemployment over the cycle as a whole. It is all the more disturbing when that rate of growth is based on precarious assumptions".
  It is important to note the short term and medium term forecasts of the consequences of the Government's budgetary and other measures. To put the matter bluntly, the evidence is now plain—I heard what the Chief Secretary said and shall comment on it in a moment—in support of the change that I made during the Budget debate, namely, that the Government proposals are built upon an assumed unemployment level of just over 3 million. I suspect that that is the new norm in the minds of Treasury Ministers—the new regulator for the economy.
  The human, social and economic implications of a permanent army of unemployed of 3 million and a rate of output no greater than at best what is necessary to keep that figure constant have yet to be understood by the electorate, but understand it they will and accept it they will not.
  I understand the sensitivity of the Chief Secretary and his colleagues to that charge. That sensitivity has been revealed by the number of occasions on which he has sought deliberately and repeatedly to refute it. His arguments in defence are not strong. All he keeps saying is that, although the Government do not actually want 3 million unemployed, they do not believe they can do anything about it. The moment that we make the assertion that the factors that affect the economy and its output are susceptible, though imperfectly, to deliberate Government intervention by demand management, he says "No, you cannot do that at all because, as we all know, there is no such thing as reflation. You cannot reflate; you can only inflate." With one sweep of his arm the whole post-war history up to 1974 disappears. We do not accept that. Those who assert that and supinely accept 3 million unemployed simply show their own unfitness to hold office and their lack of will.
  Mr. Ralph Howell: The right hon. Gentleman makes great play with the unemployment figure. How does he explain that the confidential internal Labour Party report forecast in 1977 that there would be 2½ million unemployed by 1980? That report was remarkably accurate.
  Mr. Shore: The hon. Member for Norfolk, North (Mr. Howell) should not repeat such rubbish. First, I know of no such report. Secondly, I know of no status of any such report. Thirdly, far more persuasive and important: what was the level and trend of unemployment when the Labour Government left office? We do not have to argue about the matter; the facts are on the record.
  I want to turn to the Government's economic strategy and major objectives as they define them. The Chief Secretary, in what I thought even by his standards was a remarkably complacent speech, repeated what he and others have said every year since they came to power—that the major objective is to reduce inflation. It was not given quite the same emphasis as before, but it is there and he seems to believe that he has done pretty well.
  Our critique on that aspect of the policy remains clear and consistent. First, the Government have persistently chosen the wrong means of pursuing a shared end. I have in mind both the ineffectiveness of the policies they have pursued and the consequences to output and employment
  842
  that their counter-inflation policies have directly entailed. The ineffectiveness can be judged by the fact that their actions, particularly the virtual doubling of VAT in their first Budget and their persistent and enforced increases in public sector prices, the charges made by nationalised industries, the increases in local authority rents and the inevitable increases in rates, have contributed to the increase in the retail price index which it was their proclaimed aim to avoid.
  During the Government's first year, inflation rose dramatically from the 10·3 per cent. which they inherited to 18 per cent. During their second year it was reduced to 12 per cent. at which it remained during their third year. The Government maintain that inflation is now likely to show a fall. They hope that the elusive single figure target will be achieved during this financial year. I believe that could be the case, and if during the course of the fourth year they regain the level from which they started I shall willingly concede the success they have achieved.
  I doubt whether there will be any significant fall below 10 per cent. As I remember it, the rate dropped to 7·5 per cent. or 7·8 per cent. in October 1978. I suspect that much will depend upon interest rates and oil prices over which the Government control is inevitably limited, partly due to their own folly in dispensing with exchange controls over capital movements.
  Sir William Clark: Does the right hon. Gentleman not agree that, when the present Administration took over, inflation was rising rapidly and that in an economy where the rate of inflation is increasing rapidly it is extremely difficult to stop that rate of growth? Does he agree that when this Administration took over it also took over overseas debts that his Government had incurred?
  Mr. Shore: The Government took over the overseas debts that the previous Labour Government had incurred, but they also took over the enourmous new earnings that the self-sufficiency in North Sea oil, with its prices doubled in 1979, gave them. As for his other point, I am inclined to believe that the hon. Gentleman is mixing up 1979 with 1974. In 1974 there was a built-in accelerating rate of inflation, which was part of the law of the land with every month that went by—precisely that indexation of incomes to which the Chief Secretary referred. No such excuse is available to the right hon. and learned Gentleman.
  Mr. John Browne: Will the right hon. Gentleman not admit that the inflation rate in April 1979 was false for two reasons? The first is that prices had been unfairly kept down. Gas prices had been frozen. Secondly, it was the beginning of a trend. Will the right hon. Gentleman not admit that the inflation rate of today is the first true indicator since the war with no dividend controls, no foreign exchange controls, no price controls and that sort of thing. In talking of unemployment a few moments ago, the right hon. Gentleman said that the rate was 1·5 million when his Government left office. Will he agree that the extent of overmanning was between 2 million and 3 million?
  Mr. Barry Sheerman: Mostly in the City.
  Mr. Shore: If the hon. Gentleman could say to me and to the House that this country was still producing the same amount of GDP with a smaller labour force as a result of

  843
  three years of Conservative control, I would have to listen to him. An interesting argument would arise over whether our labour resources were being used more productively. Unhappily for the hon. Gentleman, what he has to say to me is not that at all. Not only are about 150 per cent. more people unemployed than two or three years ago, but our industrial output is also about 14 per cent. lower. That is the folly. That is the failure. That is the answer to the hon. Gentleman.
  Mr. Browne rose——
  Mr. Shore: I am not giving way twice. I wish to move to slightly more controversial matters. I do not believe that there is serious dispute over what I have stated so far. I turn to the other consequences of this all-too-modest improvement in the rate of inflation. No one can doubt the price that has had to be paid not by the Government but by the nation, by industry and by our people. The fall in GDP has been the sharpest in the Western world. The increase in unemployment puts us into the top position of major industrial nations in that wretched league.
  Almost in anticipation of the question I was asked, I looked up the statistics. We are one of the seven major countries—Japan, Italy, France, Germany, Canada, the United States and ourselves—that have their summit meetings on an annual basis. I shall compare the second quarter of 1979 with the last quarter of 1981, the latest figures available. Since the second quarter of 1979, when the Conservative Government became responsible for our affairs and during a period of growing recession following the second oil shock, Japan has increased its industrial output in volume terms by 14·2 per cent., Italy by 7·5 per cent. and France by 1·7 per cent. Germany is down by 1·7 per cent., Canada by 3·7 per cent., the United States by 3·9 per cent. and the United Kingdom by 11·9 per cent. We are bottom of the league. The same applies to manufacturing industry.
  I turn now to the other side of the question, which is unemployment. In the second quarter of 1979, Britain occupied fourth place. I should like to have seen us bottom of that league. The unemployment rate was 5·7 per cent. Top of the league was Italy with 7·6 per cent. In the fourth quarter of 1981, all seven nations show an increase. Unemployment in Italy, which now occupies second place, has risen from 7·6 to 8·9 per cent. Top of the league is Britain with 12·3 per cent. All the rest are well below that figure, including France and Germany and those countries that have suffered seriously from the second oil shock about which we hear so much.
  The last point is one that I have made repeatedly but which I make again. The one difference between Britain and all these countries is that we alone have been self-sufficient in oil during this period.
  Mr. John Townend: Does the right hon. Gentleman not consider as significant and one of the principal causes of the statistics that he gives the fact that British industry has been losing its relative competitiveness for over two decades? Is the right hon. Gentleman really trying to tell the House that overmanning, restrictive practices and the refusal to accept new technology have not had a significant impact? Will he deny that, in the last year, British Leyland, for example, has produced approximately the same number of cars with 30,000 fewer workers?
  Mr. Shore: If we are being serious with each other—I hope that occasionally we can be—we will agree that there are deep-seated problems in our economy that have existed over the years and under successive Governments. There is much to put right. I would, however, implore Conservative Members to think seriously why the country has suffered not a setback but something approaching a disaster in precisely the three years during which the Conservative Government have pursued policies that they believe are radically different from the policies pursued by all previous post-war Governments.
  I hope that the Government have reflected on this experience, although I see no sign of ft. I hope, however, that they will do so. It is a great irony that one of their many charges against the Opposition and against the policies of demand of reflation that we urge is that any increase in money supply will lead not to an increase in real demand for goods and services but simply to higher costs and prices. We contest this. We are prepared to resume the argument at any time. The irony is, surely, that the Government have demonstrated the truth of the very opposite proposition. The policies that are aimed at reducing the money supply and, according to the Government's reasoning, inflation have mainly had the effect not of reducing the rate of inflation but of reducing output and employment. That is the logical consequence.
  The House will note that I referred to policies "aimed at reducing the money supply". The reality has been very different, as those hon. Members who served on the treadmill of the Select Committee will be only too willing to confirm. The cornerstone of the Government's counter-inflation policy, the setting of monetary targets in the medium-term financial strategy, has fallen out. In the first year, the range of 7 to 11 per cent. achieved an outturn of 19 per cent. In the second year, the figure of 6 to 10 per cent. ended up as 16½ per cent. This year, of course, the Government have given up the ghost. There is an 8 to 12 per cent. target that we are asked this year not to take too seriously and we are asked to judge it simultaneously with no fewer than four other targets. The whole process has become meaningless. The Opposition note that.
  I hope that hon. Members will note the extent to which the Government have failed to achieve a reduction in the money supply sterling M3. According to Treasury Ministers 18 months ago, money supply was the one thing that was really and truly under Government control. Let us not forget those words. In the past two-and-three-quarter years, since the Tories came to power, money supply has risen by no less than 55 per cent. If there was anything in the money supply theory, the implications for inflation in 1983–84 and 1984–85 must be truly terrifying.
  Mr. Brittan: Is the right hon. Gentleman complaining that there has been insufficient monetary growth or too much?
  Mr. Shore: The right hon. and learned Gentleman will never find a quotation in which I have subscribed to or supported the doctrines of money supply targets, either in Opposition or in Government. I am afraid that he cannot get me on that one. It is a completely misconceived way of tackling the problem of inflation.
  Mr. Eggar: As the right hon. Gentleman regards it as a matter of no importance, why is he wasting the time of the House on it?
  Mr. Shore: As the House will know, I normally spend virtually no time on the matter—I simply brush it aside. Money supply is not a meaningful economic indicator. I have maintained that view from the first time that I spoke on these matters from the Dispatch Box. I have said that I am extremely interested in the problem of inflation and in dealing with the problems of the balance of payments and the rest, but I am not at all interested in so-called intermediate targets such as money supply, which is supposed to affect inflation, and others such as the public sector borrowing requirement.
  Mr. Brittan rose——
  Mr. Shore: I have spent my time, quite exceptionally, assisting Conservative Members who have believed in this nonsense and who, if their original beliefs were correct, must be facing the prospect of complete disaster in the next few years. I want to give them a little encouragement.
  Mr. Brittan: Does the right hon. Gentleman believe that the Government of which he was a member and in which the right hon. Member for Leeds, East (Mr. Healey) was Chancellor were mistaken to have money supply targets? If so, what harm does he believe they did?
  Mr. Shore: The rightful charge against my right hon. Friend the Member for Leeds, East (Mr. Healey) is that he adumbrated the target for money supply. But he was not a true monetarist, in the sense that he did not——
  The Financial Secretary to the Treasury (Mr. Nicholas Ridley): He did not believe them.
  Mr. Shore: My right hon. Friend adumbrated them as did many other European Governments, but he absolutely did not try to make money supply growth targets the major regulatory factor of the British economy. Nor did he seek to make the PSBR the overriding regulator of the British economy. He was far too interested in common-sense matters such as how the balance of payments was doing and what was the state of employment.
  I turn to what I understand to be the second plank of the Government's policy. The one of which we have heard is the control of the money supply.
  Mr. Ridley: Are we to understand that when the right hon. Member for Leeds, East (Mr. Healey) agreed to money supply targets at the request of the IMF the Labour Government had no intention of doing anything other than adumbrate them and that they did not intend to stick to the targets at all?
  Mr. Shore: The basic reason why the IMF came into our affairs then, as on previous occasions, was that we were in serious balance of payments difficulties. We had to borrow internationally to manage our current and other accounts. If the House is in the least rational, it will well understand that with the quadrupling of oil prices, minimal reserves and an ordinary current account deficit of more than £1,200 million in 1973, it is remarkable that we were not driven to international borrowing much earlier. Money supply targets were all part of the IMF rigmarole and one of the matters to which the IMF attached importance.
  Mr. Brittan rose——
  Mr. Shore: The basic role of the IMF was to get its money back, and that, of course, was what we were prepared for.
  Mr. Brittan rose——
  Mr. Deputy Speaker: Order. The right hon. Gentleman is not giving way.
  Mr. Brittan rose——
  Mr. Shore: It is quite exceptional for the right hon. and learned Gentleman to seek to enter into major debate about 1976 in the middle of the Second Reading of the 1982 Finance Bill. I have answered his point three or four times. I have given him my view of the irrelevance and absurdity of money supply figures. I have told him what I think about them. I have also pointed out the results of his attempt to apply them and the fact that he has failed to apply them in spite of his best endeavours. I have tried to educate the Tory Party out of the nonsense that it has pursued and to guide it into wiser paths for the future.
  Mr. Arthur Lewis rose——
  Mr. Shore: I must proceed. [Interruption.] I shall deal with a second matter on the supply side of the economy. [Interruption.] The Government's doctrine on the supply side has always been ill defined and at times I have thought it even mystical.
  Mr. Lewis: Matters are——
  Mr. Shore: What the Government seem to say——
  Mr. Lewis: Matters are a bloody sight worse. Let the Tories answer that.
  Mr. Deputy Speaker: Order. It is one thing to ask a Minister or Shadow Minister at the Dispatch Box a question but quite another to have a conversation across the Chamber.
  Mr. Lewis: I owe you an apology, Mr. Deputy Speaker. Conservative Members were casting aspersions. Whether my right hon. Friend is right or wrong, the Tory Party do nothing right and matters are a bloody sight worse now than they were under the last Labour Government.
  Mr. Shore: The Government's strategy, if their mix of polices can be dignified with such a term, has rested not only on their attempt to control inflation but on what they describe as improvement in the supply side of the economy. By that, they seem to mean that if the inflation rate is reduced, provided that the Government lift the burdens of taxation from the people and remove the disincentive effects of high personal taxation, British industry will bound forward like a prisoner released from his chains, or, in the unforgettable phrase of the then Secretary of State for Industry, British industry will be galvanised.
  I shall have something further to say about that later. Suffice it for the meantime to note that, far from reducing the burdens of taxation, the Government have markedly increased them. Although those with the highest incomes—unearned just as much as, or perhaps even more than, earned incomes—have benefited from taxation cuts, the great bulk of the British people, far from experiencing the stimulus of a reduction in direct taxation, have experienced a substantial increase in it.
  That brings me to the second leg of the Government's supply side policy. Time and again, the Government have emphasised the importance that they attach to the reduction of interest rates. On Second Reading of last year's Finance Bill, a reduction from 14 per cent. to 12 per cent. minimum lending rate was presented to the House as the most significant component in an otherwise pretty

  847
  horrendous Budget package. The Government clearly believed that that would be followed by further reductions in the course of the year, but events soon put a stop to that and by last autumn short-term interest rates had risen to 16 per cent. They are still 13 per cent. today, which is hardly the cause for celebration that the Chief Secretary sought to imply.
  As we all know, every 1 per cent. in interest rates imposes a heavy additional cost on British industry. As my hon. Friend the Member for Newham, North-West (Mr. Lewis) suggested, it is not in the least strange that the figures for company liquidations are so wretched. The 19 to 25 March issue of British Business showed that company liquidations in February were 13 per cent. up on the figure for February 1981, which was itself 74 per cent. up on that for February 1980. Like the Chief Secretary, I am always sceptical about figures for one month, so I shall offer him figures for the last quarter. According to Trade Indemnity, the credit insurance underwriters who keep a special watch on company liquidations, business failures increased by 15 per cent. in the first quarter of 1982 compared with the same quarter of 1981. The problem is therefore very great.
  I offer one last reflection on this. It must surely be plain that whatever contribution inflation makes to our difficulties—there is no doubt that it contributes—the conquest of inflation is no guarantee that the problem of unemployment has been solved. Last weekend, some of us attended a conference with German politicians and leaders. The interesting fact emerged that despite an inflation rate of only 4 per cent. to 5 per cent., Germany is nevertheless suffering a marked increase in unemployment. Despite the removal of many guest workers back to their countries of origin, unemployment in Germany is approaching 2 million. Clearly inflation is not causing the problem or getting in the way of a solution. The only possible explanation is lack of demand. Lack of effective demand, not only in Britain and Germany but throughout the Western world, is the central problem that we have to face and which the Government will not face and will not devise policies nationally or internationally to combat it. So much for supply side policy.
  The Government would like to believe that interest rate policy will be more successful in 1982–83 than it was last year. Given the continuing uncertainties of American interest rate policy and the continuing orthodoxies about the overriding importance of the money supply, the continued free movement of British capital and, above all, as I understand it, the Government's adoption of an exchange rate target, I am far from confident that we shall sustain even the present high short-term interest rates in the coming year.
  While I contemplate the economic problems that this country faces and the Government's failed strategy, which is still substantially in place, I can only view the prospect ahead with the gravest concern. The fundamental flaw in the Bill is that too much money is being taken out of the economy in taxation. We all know that the Government do not believe in fiscal stimulus, and there is almost none in the Bill. Once national insurance is brought into the reckoning, as it must be, the volume of taxation on incomes has not lightened this year. Indeed, it has slightly increased. At the same time, there are continued efforts to cut public expenditure. Despite the smokescreen that the
  848
  abandonment of volume targets has put around the totals, it is clear that the only increase in public expenditure planned for this year will be in the payment of benefit to still greater numbers of people out of work.
  The end of de-stocking occurred in 1981, so there is no evidence that any substantial forces of recovery will be operating on our economy in 1982–83. I well understand that the short-term effects of the welcome downward movement of oil prices will assist expansion in the world economy, but in considering the year as a whole my optimism about oil prices does not extend that far.
  We believe—I shall return to this—that a substantial stimulus is needed through an increase in public expenditure and other means. We also believe that the competitiveness of the economy can be assisted by changes in taxation and the lightening of the tax burden.
  The only measure to which I can offer support is the reduction in the national insurance surcharge, which I have been urging upon the Government for a year or more, and which will reduce costs particularly in manufacturing industry and thus of increasing the competitiveness of British products in both export and domestic markets. Nevertheless, I must tell the Chief Secretary that it is an extraordinary procedure not merely, as it were, to adjust the rate support grant to local authorities in respect of that part of the national insurance surcharge which they would otherwise have paid, but to charge them with the total amount so that they suffer a reduction in rate support grant greater than the saving in cost brought about by the reduction in national insurance surcharge. In other words, yet another disguised cut is being inflicted on every town hall and county hall in the land.
  Leaving that aside, the tax burden remains too heavy. Not only is it too heavy overall, but once again it is grotesquely tilted in favour of those who have and totally unhelpful to those who have not. Here, my first concern is the treatment of the unemployed, who are to be brought into taxation for the first time in July this year. We were led by ministerial statements to believe that the sharp cut of five points in the uprating of unemployment benefit as compared with other social security benefits two years ago would be restored when unemployment benefit came into the tax net, but that is not so. Unemployment pay is to be taxed, but its value is not to be restored. It is amazing that the Government should fail to make good that shortfall in unemployment pay, as it is only from 1 January this year that earnings-related benefit, which gave such considerable assistance to the unemployed in the first six months of their unemployment, has been phased out.
  The difference in the financial situation of a newly unemployed man on average earnings with an average size family this year, compared with what it was last year and when the Labour Party was in office three years ago, is about £13 a week. On fair and relevant calculations—which we will get before the House in the form of a written question and answer—there is a much greater loss once one takes into account the charge to taxation of people who become unemployed within a year, and, further, the postponement of their tax refunds to the end of the financial year when they become unemployed.
  Mr. Campbell-Savours: My right hon. Friend's fundamental criticism of the Budget is that it fails to reflate. Is not another major criticism of this Budget that it has handed out several hundreds of millions of pounds to the better-off in society in the form of capital gains and

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  capital transfer tax concessions? At the same time, the same Budget is imposing a tax burden on the unemployed. Is not that one of our major objections?
  Mr. Shore: I strongly agree with my hon. Friend. If one was to bring a double-barrelled shotgun against the Finance Bill, the first of my bullets would be the one that I have fired and the second would be the charge that my hon. Friend has made, which I intend to develop.
  Government policy has directly contributed to the growth of unemployment. It is outrageous that those who have been directly affected by that policy, and who are unemployed through no fault of their own, should be singled out for such exceptional and severe penalties.
  The Government have not grown weary of ill-doing. Only this week they have made an administrative decision which will further damage unemployed people. Their tax refunds will not be paid before the end of the tax year.
  Let me turn to the great body of taxpayers. True, the Government have indexed tax allowances this year. That is expressed in some of the clauses of the Finance Bill. The Rooker-Wise-Lawson amendment has been honoured by the Chancellor in the 1982 Budget. However, as we all know, he dishonoured it completely by making no allowance in last year's Budget. Now he has made a modest step in conceding a 2 per cent. additional allowance to taxpayers. However, he has a long way to go, and he knows it—13 per cent.—before he restores the situation to what it was up to the 1981 Budget.
  The results of all this are now well known to the House and to the country. It took the Chancellor and the Chief Secretary quite a time to reveal—or was it to learn?—the fact that when income tax and national insurance were taken together no one on incomes up to 150 per cent. of average earnings failed to be worse off this year than they were even in 1981–82. Their position compared to what it was in 1980–81 is markedly worse. A married couple with two children on three quarters of average earnings paid 40·7 per cent. of their income in taxes of all kinds in 1980–81. The same family, on 75 per cent. of average earnings in 1982–83, will pay no less than 43·4 per cent. Those on average earnings paid 42·7 per cent. in 1980–81 and will pay 45·2 per cent. in the coming year. Those on 150 per cent. of average earnings in 1980–81 were levied 43·9 per cent. of their income in taxation. This year they will pay 46·5 per cent. Only those with incomes several multiples in excess of average earnings have found their situation improved. Yet it is that relatively small group of people on high earned and unearned incomes, including the owners of property, who have been singled out this year for specially favourable treatment.
  The Chancellor has virtually demolished the capital gains tax. He has raised the exemption level to £5,000 in a single year. He has indexed the £5,000 threshold, and he has introduced the principle of indexing into the capital sum.
  For those paying capital transfer tax, the treatment has been no less generous. Here, too, the thresholds have been increased, the bands changed, and both have been indexed.
  As my hon. Friend the Member for Workington (Mr. Campbell-Savours) said, the costs are considerable. I will not try to bring together the vast sums which are the cumulative total of the Government's concessions to those who are affected by these taxes. As this year's Red Book indicates, the cost in this financial year of the changes in
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  the capital gains and capital transfer taxes will be £35 million and in a full year no less than £270 million. When the answer comes to the question of my hon. Friend the Member for Blackburn (Mr. Straw), we shall find out that the bill is substantially larger than that.
  I find it extraordinary that the Chancellor should see fit to introduce this substantial indexing of threshold rate bands and capital sums in the interests of those who are substantial property owners, while at the same time he has done so little to assist those with little capital at the ocher end of the incomes scale.
  I am sure that many hon. Members will agree that it is a disgraceful feature of the present supplementary benefit regulations that no payment of supplementary benefit can be made to anyone who has a capital sum of £2,000 or more. In November this year that figure is to be raised to £2,500. There is no proposal for indexing VAT, and in any event it is plainly too low, particularly for those people with redundancy and severence lump payments who are obliged to dispose of their compensation before they become entitled to supplementary benefit.
  I conclude on my main charge against the Bill——
  Dr. Jeremy Bray: My right hon. Friend has made a devastating attack on the Government's fiscal policy. Will he not agree that the before-tax pay of manual workers in Britain has fallen by 5 per cent. relative to average earnings? Therefore, even before the tax position, the Government have hammered the least-well-off.
  Mr. Shore: That is perfectly true and I am grateful to my hon. Friend for pointing it out. The only reason why the impact of Government policy on pre-tax earnings—and therefore on ordinary spending—has not been felt so far is that people have been drawing on their savings. I believe that we will now see a considerable contraction, not merely in pre-tax and post-tax earnings but also in the consequent demand for goods and services throughout the economy. That is a further source of worry for the future.
  The Budget and the Finance Bill do nothing to reduce the great evil of unemployment in Britain. Nor do they—apart from the small-scale assistance to bulk users of energy and the cut in the national insurance surcharge—do anything to improve the competitiveness of British industry.
  A week before the Chancellor's Budget I urged a different strategy, comprising a substantial increase in public expenditure, a cut in interest rates and in our present unrealistic exchange rate and a package of tax reduction measures to start the economy on the path to recovery.
  Now that our money GDP has risen to over £280 billion a year, the £9 billion involved amounts to just over a 3 per cent. increase in demand. Given the vast under-used capacity of British industry, that is in no sense a massive and, as the Government would like to think, irresponsible increase in demand. The increase in the PSBR associated with that increase would be substantially less—some £5·5 billion—giving a PSBR equal to just under 5½ per cent. of our GDP, slightly less than the 5·7 per cent. PSBR which the Government achieved in 1980–81.
  But the difference in the outlook for the British economy would be immense, and the outlook would be immensely improved. Instead of the continued 3 million-plus unemployed, there would be a reduction of at least 500,000. We should, moreover, increase our gross

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  domestic product not by the precarious 2 per cent. that appears in the Red Book, but by some 5 per cent. Lack of foresight, grievous errors in strategy and stubbornness in error have characterised many aspects of Government policy. At the moment, it is in defence and foreign policy that those criticisms are most vividly demonstrated. However, taking the past three years as a whole, and taking account of the prospect that lies before us until the next general election, there can be little doubt that it is precisely in the central management of the economy that the Government's errors and failures have been the most damaging of all.
  We shall, of course, debate and seek to change many aspects of the Bill. But the Bill—which embodies, once again, an economic strategy of disaster and decline—is what we shall vote against later today.
  5.20 pm
  Sir William Clark: The right hon. Member for Stepney and Poplar (Mr. Shore) was hard put to it to make out a case against the Budget, despite the invaluable help that he received from the hon. Member for Newham, North-West (Mr. Lewis).
  It is the height of hypocrisy for any Opposition Member to criticise the Government's economic strategy. The Labour Government, who left us with overseas debts, had to go to the International Monetary Fund. When the Conservative Party took over from that Government, unemployment and inflation were rising, production was falling and so on. However, the Government have begun to repay the overseas debts. I can well understand the right hon. Gentleman's irritation. The Government's policies appear to be working. Production is increasing and inflation is falling. Wage claims are more realistic and exports have improved. Therefore, any fair-minded person will accept that the Government's policies are working. I am delighted that the Budget continues something that we started two and a half years ago.
  In Committee, we shall have quite a lot of fun and debate on the Bill's 139 clauses and 17 schedules. The general reaction to the Budget in industry, in the City, and in the street is that it is to be welcomed. It has helped business. This year, the reduction in taxation is just short of £2 billion. In a full year it is just short of £3·5 billion. That must be good. The right hon. Member for Stepney and Poplar failed to refer to the world recession. However, that recession has been deeper than any of us imagined.
  I shall concentrate on indexation. Clause 65 refers to capital gains tax. I know that this subject is anathema to some Opposition Members, but capital gains tax is a tax on inflation. Like most people, I am delighted that the threshold has been increased to £5,000. Indexation will continue under a sort of Rooker-Wise formula. That applies from 6 April 1982. However, with respect to my right hon. and learned Friend the Chief Secretary, the Treasury has created too many complications. The system could have been much simpler. Many of my hon. Friends and I would have preferred the tax to be phased out by reducing the amount of tax levied from 30 per cent. after one year, to 25 per cent. after two years, to 20 per cent. after three years and so on. That would phase out capital gains tax if an asset were held for six years.
  That might be felt to be too generous. Alternatively, the percentage could be reduced every two years and capital
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  gains tax could be phased out over a 12-year period. That would be rough justice for inflation. As the Bill stands, there is no relief for the high inflation that we have suffered between 1965 and 1982—a period of 17 years.
  Hon. Members will recall that 5 April 1965 is the effective date for asset valuation. Let us consider the example of an asset bought for £10,000 in 1965. If the asset has not increased in real value since 1965, but has merely increased in line with inflation, it is worth—in 1982—£43,000 without there having been any increase in the asset's value but with a total rate of inflation since 1965 of 430 per cent. If the asset is sold, there is a nominal profit of £33,000 from which we should deduct the £5,000 threshold. That gives a £28,000 liability for capital gains tax, which would be £8,400 at 30 per cent.
  Unless my right hon. and learned Friend changes clause 65, that position will remain, because, with the indexation of that hypothetical asset in 1982, the £5,000 threshold will increase—if inflation stands at 10 per cent.—by 10 per cent. of the original cost price. An anomaly remains, and I hope that my right hon. and learned Friend will consider it in Committee. Everyone agrees that the £5,000 threshold is rough justice for inflationary tendencies. However, as there is to be no carrying forward, the so-called bed and breakfast sale of shares at the end of the fiscal year should be allowed.
  I turn to clause 76 and capital transfer tax. I welcome the indexation. Capital taxes are certainly different from revenue taxes. One's revenue goes up and down every year. Indeed, one hopes that it will increase each year. There is an annual adjustment. However, with capital taxes the capital remains. Meanwhile, inflation continues. That means that indexation is a good thing.
  We are told that the public sector borrowing requirement will amount to about £9,500 million. How are we to finance it? Last year, the Chancellor of the Exchequer introduced index-linked bonds. They were issued only to pension funds. The first tranche of £1 billion went all right, as did the second tranche of £1 billion. However, the third tranche of £750 million did not go. About 60 per cent. was left with the underwriters. Consequently, my right hon. and learned Friend announced in the Budget that he would extend the holding of index-linked bonds to everyone.
  As opposed to equities, the gilt market enjoys many privileges. If one holds gilts for a certain period, the capital profit is exempt from capital gains tax. No matter which party is in office, that gives the Government of the day an advantage when borrowing on the market. I understood my right hon. and learned Friend to say that the Treasury and Civil Service Committee believed that index-linked bonds were all right. It did not say that at all. In page 19 of the fourth report, it said:
  "We believe that the Treasury's consultations with outside interests on these matters before the Budget were of a very limited nature. The Committee therefore intend to conduct an enquiry into the implications of the extension of indexation in financial markets."
  I should not have thought that was agreement that index-linked bonds were good.
  The Committee went on to say that index-linked bonds would affect the equity market, which in turn would affect investment in business and, as a sideline, building societies and house purchase.
  In page 19 of the report the Committee says that an index-linked bond offers an investor the protection of

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  capital against inflation. Everyone would agree with that. But how can it be done? It is done only by saddling the taxpayer with the cost of inflation. Last year the total amount of gilts sold on the market was about £7,500 million. Of that, one-third—worth £2,500 million—were index-linked. The Select Committee is to reconsider the matter.
  One matter that I do not care for in relation to index-linked bonds is that, if one takes the effect not only on the building societies but on pension funds, there will be more and more pressure on the index-linked pensions enjoyed by some civil servants and others in the public sector but which the private sector cannot afford. I refer to the Scott report. I know of no private British company with a guaranteed index-linked pension scheme. The normal pension scheme probably has a 2 per cent. or 3 per cent. escalating clause each year. Depending on the profitability of a company, the board of directors may decide to put more money into the pension fund so that, instead of a 3 per cent. increase, there will be a 10 per cent. increase. Sometimes people have been fortunate enough to receive a pension that is nearly index-linked, but it is not a statutory or legal responsibility of the employer.
  The only reason why index-linked pensions are paid in the public sector is that they are not funded. No one could fund index-linked pensions in the private sector, which is why there has always been resistance towards them. Many of us would now agree that it was a mistake for a previous Conservative Administration to introduce index-linked pensions in 1971–72, because it is a millstone round the necks of future taxpayers. The indexation part of public sector pensions alone costs between £250 million and £300 million, which must be borne by the taxpayers.
  If one considers the effect of an extension of index-linking, one must examine the position of pension funds. At the moment, the portfolio of the pension fund extends over many investments, including overseas investment, property, equities and gilts. In those circumstances, no pension fund manager could guarantee an index-linked pension. It will mean that more and more pension funds must lend their money to the Government under index-linked bonds. Eventually, the future taxpayer will be taking on the responsibility of the index-linked pension not only in the public but in the private sector.
  Indexation was only touched upon by the Treasury and Civil Service Select Committee. There is great difficulty and danger in pension funds going into the hands of the Government. One issues an index-linked bond today with a 2 per cent. to 2·5 per cent. real rate of interest, plus inflation-proofing. If one assumes that the rate of inflation is a constant 10 per cent. and that it is a 10-year bond, the Government of the day can borrow 100 units, but, at the end of the 10 years, they must repay £236. I do not object to that as yet, but how do the Government account for the £136? They could set up a sinking fund during the 10 years to pay for that, as any business would. However, the Government are not doing that, as is clear from the Red Book. The storing up of capital appreciation by any Government is dangerous. I urge my right hon. and learned Friend to cancel index-linking, but, if he is to continue, he must set up a sinking fund.
  It is said that companies could borrow money on index-linked bonds. That is true, but it would be a very stupid financial director who did so, because he has no control over the rate of inflation. In any case, if he were foolish enough to do it, he would borrow £100, set up a sinking
  854
  fund and set aside so much cash each year so that, at the end of the 10 years, he would have the capital to repay the debt. Private industry cannot possibly do that at the moment, because our tax laws are such that the company can charge only 2·5 per cent. interest per annum. It cannot charge the capital appreciation or increment during the 10 years. What company will issue bonds if, first, the financial director does not know what the rate of inflation will be and, secondly, he cannot charge the extra against his profit?
  The right hon. Member for Stepney and Poplar was keen before the Budget, as were some of his colleagues, that it should be reflationary. That would be easy with index-linked bonds. If the right hon. Gentleman wished to spend another £9,000 million, he could issue index-linked bonds at 2 per cent. to 2·5 per cent. Instead of the going rate of 12 per cent. that he would normally pay on that borrowing—namely, £1,080 million—he need only pay £180 million while storing up the repayments for future taxpayers.
  Mr. Shore: I have paid great attention to the hon. Member for Croydon, South (Sir W. Clark). I ask him in all seriousness not to confuse a figure for the increase in general stimulus to the economy with an increase in the PSBR, which I gave as 0·5 billion. Secondly, in the context of his interesting remarks about sinking funds—which is a splendid eighteenth century concept that I can well remember—surely the modern equivalent of that is to have a growth policy. Unless we have a regular growth in the GDP, shall we not be in trouble?
  Sir William Clark: I agree with the right hon. Gentleman that reflation of £9 billion would probably add only £5 billion to £6 billion to the PSBR. However, my argument remains the same. I had worked out the interest on £9,000 million, but we could work it out on £6,000 million. It still shows that, with an index-linked bond in the year that one borrows the money and in subsequent years, the servicing of that debt is very much less. Of course, a sinking fund is an old-fashioned concept, but it is fairly sound. If one knows that one is building up a debt that must be paid in future, one can take action so that money is available to repay the debt at the end of the period. No Government can guarantee growth. It does not matter how successful they are.
  Mr. Campbell-Savours: The Government did at the general election.
  Sir William Clark: One cannot guarantee growth. No Government, including this Government, have been foolish enough to say that they could.
  At the moment the national debt is £120 billion. This is a purely hypothetical example, but if the national debt could be converted into index-linked bonds, it would not cost about £15 billion to service. That adds to the figure of the public sector borrowing requirement. If there were a 2 per cent. or a 2½ per cent. coupon, we could reduce the servicing cost from £15 billion to £3 billion, because we would not be doing anything about capital appreciation. Therefore, there would be no public sector borrowing requirement. Anyone in his right mind must realise that——
  Mr. Straw: Even the Opposition have spotted that.
  Sir William Clark: Indeed. Anyone in his right mind must see that that is absolute folly.

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  I hope that my right hon. and learned Friend the Chief Secretary will think again. It is all right to talk about index-linked bonds and to say that the Government's objective is to reduce inflation. I go along with that, although the Government cannot guarantee it. No one can guarantee that. However, we are not doing too badly at the moment. In any case, we cannot always guarantee that the economy will be under sound and good management. It is possible that the Opposition may come to power some time. Let us just think of what would happen and of the bonanza that any politician or Government could have with index-linked bonds.
  As I said in an intervention in the speech of my right hon. and learned Friend, only one other country in the Western world has any index-linking—Denmark. I do not think that I would go along with what the Danes do. It is folly for the United Kingdom——
  Mr. Ridley: If there were a large amount of indexed stock extant at some hypothetical time in the next century when the Oppostion take office, might that deter them from incurring too much inflation because of the need to redeem the stock during their time in office?
  Sir William Clark: I agree. My hon. Friend knows this as well as anyone else. The issue of index-linked bonds fudges the national figures. I draw my hon. Friend's attention to the Red Book. In page 33, line 13, it gives-the cost of servicing the PSBR as £15,411 million. That evidence came from the Select Committee. That includes the inflationary element of the index-linked bonds that have been issued. Line 30 refers to a deduction of £518 million, which took out the inflation-proofing.
  I say in all sincerity that to put that weapon in the hands of any politician is saddling future taxpayers with a millstone that we cannot afford. Following the Scott report, we already have the albatross of the index-linked pension. It would be folly to go on with index-linked bonds. It would mean that future taxpayers would be taking on the responsibility of index-linked bonds not only for the public sector but for the private sector. I urge my right hon. and learned Friend to think again.
  5.44 pm
  Mr. Richard Wainwright: I do not share the depth of concern of the hon. Member for Croydon, South (Sir W. Clark) about an organised approach to indexation, but Liberal Members do share the concern that he has eloquently voiced about the Government's disorganised indexation this year, which shows every sign of being improvised, imperfectly coordinated with the Bank of England and not sufficiently thought through.
  I experienced one small symptom of that when, in preparation for today's debate, optimist that I am, I tabled a question for priority answer by the Chancellor of the Exchequer. I asked for the cost that had been entered into the public expenditure White Paper for the indexation of Government securities already in issue and how that had been computed. I knew that that was buried somewhere in a great amalgamated total in the public expenditure White Paper so the answer must be at the top of someone's desk, ready to be flicked out and sent back. Not at all. A Treasury Minister replied that he would let me know as soon as possible.
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  Treasury Ministers are not in control of the obligations that they hand on to later Governments. One thing is certain from the way in which they behave over the indexation of Government securities—they do not expect a Conservative Government to be there to reap the harvest of these ill-advised issues. It is no wonder the concluding sentence of the report of the Select Committee of the Treasury and Civil Service on the Budget reads thus:
  "We consider that there is a need for the Government to spell out their long-term objectives for the indexation of the financial and tax systems."
  I hope that the Financial Secretary will be good enough to do just that for us.
  The Chief Secretary's usual bland complacency seemed to have been nourished from two sources this afternoon. The first was the release of his boss from the thraldom of the old medium-term financial strategy, which has dropped away in tatters. I can imagine the relief that must give to Treasury Ministers. Secondly, the Chief Secretary seemed to be deriving enormously disproportionate satisfaction from the inevitable, but tentative, cyclical recovery of some selective parts of our sad economy. The Finance Bill will do nothing seriously to nurture that modest recovery, of which there are a few signs here and there.
  The right hon. Member for Stepney and Poplar (Mr. Shore) referred to procedure. There has been a reversal of our usual procedure in the House—that is, to debate the public expenditure White Paper a short time before we debate the Second Reading of the Finance Bill. This year the Finance Bill is being taken first. It was published in great haste, and with many gaps, so that it could be taken first. In his usual grandmotherly way, that reversal of order is meant to try to make the Chancellor of the Exchequer's point that, as he says in his book—and what a slender book it is proving to be—
  "finance determines expenditure and not expenditure finance."
  Therefore, he says that to teach the children a lesson we shall debate the Finance Bill first, which will rub in his slender and shaky point.
  The results are not a credit to Treasury Ministers. As the Chief Secretary admitted, the Bill is full of gaps compared with the intentions for legislation announced in the Budget. That does not help any part of the financial or business community or other taxpayers. It means that these major matters will be slipped in by way of amendment during the long, weary passage of the Bill through Committee. It has been deplored many times that the Government, not being able to make up their minds when they present a Bill to the House, should come along with afterthoughts, to the great inconvenience of hon. Members. Also, there has been barely time for the Treasury and Civil Service Committee to report. The Chairman of the Select Committee properly apologised, when he published the report, for the improvised appearance of the document. There has not even been time for a respectable printed document to reach the hands of hon. Members. There were various inquiries that we on that Committee would have liked to pursue before making that report.
  I hope that hon. Members will not dismiss this next point as trivial. The Bill was published in such haste that Her Majesty's Stationery Office ran out of stock after supplying the Vote Office and one or two favoured London customers. Perhaps because I am an accountant I have been sent serious complaints from accountants in two big

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  provincial cities that it was well into the following week, after all possible efforts that they made, before they were able to come by a copy of the Bill because the Stationery Office could not supply them.
  That is a hindrance to our procedures in the House, because, hon. Members will agree, we rely upon expert comments from people whose professional expertise enables them to understand this appalling reference by legislation. We have not as much of that expertise as we should have had because of the haste in getting the Bill together.
  I return briefly, but sorrowfully, to the extraordinary copybook maxim that the Chancellor parades again and again. I have to repeat it. It is that
  "finance determines expenditure and not expenditure finance".
  I do not know what his Front Bench colleagues will say on this basis when they come to the House for Supplementary Estimates to pursue the results of their negligence about the Falkland Islands—that is a matter for speculation—but I know that this absurd maxim does not tie up with the solemn British commitment to NATO, which is expressed solemnly in real terms. We cannot be excused for reneging on that by saying that there is not enough cash in the kitty.
  And how do Treasury Ministers reconcile keeping their solemn election commitment about maintaining the Health Service and providing in real terms enough for its maintenance year by year with their dictum that everything must be subject to the financial criteria? This childish maxim is based on the false analogy that the Exchequer is a retail shop writ large. Or perhaps, as the Prime Minister often has it, an ordinary household budget writ large.
  We all know that the Government, with their power to organise the money supply and control over borrowing, are in a completely different position. Homely little comparisons with the retail trade and the rest are misplaced. They also reflect the ancient heresy, which some of us hoped had been blown away at the end of the middle ages, that there is a fixed store of wealth in the world and no way of rapidly increasing it.
  In fact, very often it is expenditure that increases finance. If one is not prepared to put expenditure first in some important cases, there will not be the finances. I have no wish co reverse the Chancellor's maxim and say that expenditure must always determine finance, but anybody ought to know that it is a circular process. To try suddenly to cut the circle and say that finance must be the determining factor is a heresy.
  On balance, the Bill will offer no real stimulus to industry or to our exports. I wish that the Chief Secretary would pay a little more attention in these matters to his learned and skilful brother. Writing in the Financial Times, Mr. Samuel Brittan exposed the hollow centre of this year's Budget, and now the Finance Bill, when he pointed out that the Chancellor was placing all his reliance for an improvement in the economy on managing reduced interest rates.
  Mr. Sam Brittan went on to say that the Chancellor
  "made this claim even though no one knows how interest rates are going to behave or how the Government will react when there are conflicts between the vaguely drawn criteria for settling interest rates set out in the Red Book."
  One realises how wise and far-sighted Mr. Sam Brittan was when one examines the tapes today. They contain serious indications that the Government may have to move
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  to get the banks to increase interest rates if the falling pound is to be sustained in line with the Government's policy for sterling.
  As to growth, the right hon. Member for Stepney and Poplar dealt faithfully with the Government's pretensions on that point, but I should like to add one further shot from the same source used by the right hon. Gentleman, that of the report of the Select Committee on the Treasury and Civil Service. In casting justified and serious doubt on the growth forecasts in the Red Book, the Committee said in paragraph 34:
  "A further contributor to forecast GDP growth is the assumed reduction in the Treasury's 'statistical adjustment': this contributes nearly a half of the forecast 2½ per cent. GDP growth between the second half of 1981 and the first half of 1983".
  I have known of Conservative Governments relying upon frail supports, but when they have to rely on a statistical adjustment for about half of their forecast improvement in GDP they are losing whatever touch they once had.
  The Bill reflects a bankrupt strategy. I do not pretend for a moment that any of the amendments that the Liberal Bench and our allies on the SDP Bench will push in Committee will be able to rescue this strategy. We shall have to try. For instance, we shall move for the abolition of the employers' national insurance surcharge, because if there is merely a reduction it will not be enough. Small business people, who are crippled by the cost of taking on extra workers, especially young people, do not trust the Government, and a Government who reduce the surcharge one year are capable of putting it up again in the following year or two. So we should like to strike the Act off the statute book, and shall move for its repeal in Committee.
  We also intend to go considerably further, through amendment, with the process of recovering the Chancellor's lapse of 1981, when he failed to index the personal allowances. A mere token 2 per cent.—and one cannot take tokenism much further than 2 per cent.—as a genuflection in repentance for last year's failure is far too little. We shall move to increase substantially the income tax personal allowances, merely to keep up with inflation.
  We also believe that there is a serious defect in the Bill with regard to the Government's promotion of index-linked gilt securities in the general money stock market. The terms of competition for borrowing by the private sector—I hope that the Financial Secretary will note this—are grossly weighted in favour of the State. If a private business, no matter how large it is, decides to compete with the Tory Government in issuing index-linked securities it is crippled from the start, because it is not allowed, as the law stands, to charge as a business expense the cost of making those indexed capital repayments on the bonds. How unfair can one get?
  Mr. Ridley: There is a point of fact here which I should not like the hon. Gentleman to get wrong. If a company borrows on an index-linked bond and rolls up the interest until the bond reaches maturity and then pays that interest, it is deductible against corporation tax.
  Mr. Wainwright: That does not help at all. I am not talking about interest, any more than the Government talk about interest when they issue a prospectus for an index-linked gilt. I am talking about index-linked capital payment at the end of the life of the bond. That, without any doubt, is treated by the Revenue—correctly, as the law now stands—as a capital item which the company is

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  not allowed to deduct. [Interruption.] I am glad to see that experts on the Conservative Back Benches are nodding in agreement with me. We intend to try to repair the defect in Committee, and I hope that in that respect, if in no other, we shall have support from hon. Members on both sides.
  As a whole, the Bill is a vehicle for an increasingly shaky and uncertain financial policy. Although for a few months longer the Government may clothe it with the new "in" word "pragmatism", in the end it will be shown to be bankrupt.
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  Mr. Chris Patten: I want to take up later some of the remarks of the hon. Member for Colne Valley (Mr. Wainwright), particularly in connection with the national insurance surcharge, but I shall start with the speech of the right hon. Member for Stepney and Poplar (Mr. Shore). I had feared that, for tragic reasons outside the Chamber, there would not be much interest in today's debate on the Finance Bill, but the right hon. Gentleman, to his great credit, brought it bounding to life with his description of the Labour Government's attitude to monetarism, and particularly with his statement, which we all enjoyed, that his right hon. Friend the Member for Leeds, East (Mr. Healey) was not really a monetarist because, although he adumbrated monetary targets, he did not actually stick to them.
  Mr. Robin F. Cook: He did.
  Mr. Patten: Clearly an important theological argument is going on on the Opposition Front Bench. Perhaps the hon. Member for Edinburgh, Central (Mr. Cook) will sort out the matter with his right hon. Friend the Member for Stepney and Poplar and then tell his right hon. Friend the Member for Leeds, East whether or not he was a monetarist.
  In view of what the right hon. Member for Stepney and Poplar said about monetary policy, it would be interesting to know what he now thinks about the charges made by him and his colleagues in 1975 and 1976 and, I am afraid, by the Secretary of State for Education and Science, that inflation rates in those years were entirely the result of what the previous Conservative Government did to the money supply in 1972 and 1973. Presumably the charges that were made by Labour Ministers at the time—that the previous Conservative Government were entirely responsible for the rate of inflation—did not have the right hon. Gentleman's approval, and he would now take full responsibility for the rate of inflation in 1975 and 1976. I am sure that he will give us that assurance.
  Mr. Shore: I do not want to spoil the hon. Member's fun and games, but let me put him on the right lines. If he looks at the record he will find that the vast majority of those of us who criticised that previous Conservative Government were concerned, above all, about the effect of the indexation of pay in the extraordinarily explosive cost-inflationary circumstances of 1975. Certainly, to that extent, we thought that that Government had contributed greatly to inflation. Beyond that—it is a perfectly fair point to make—there was the particular and unusual effect of the secondary banking proliferation of credit that took place in 1972–73, which was due to very special
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  circumstances, and which I hope has been dealt with in subsequent legislation. None of us took the view—certainly I did not—that there was a direct connection between the money supply, in the sense in which it has been talked about recently, and the rate of inflation.
  Mr. Patten: In that case, the right hon. Gentleman was in a small minority during those years of the Labour Government. We know from the recent admirable book written by his right hon. Friend the Member for Heywood and Royton (Mr. Barnett), the former Chief Secretary, precisely how the right hon. Gentleman used to pursue his own economic arguments with great force and skill at that time, but I do not recall him detaching himself from his colleagues' views in the way that he now suggests. I do not recall, for example, the Labour Party voting against the threshold agreements that he now denounces.
  Mr. Ridley: I gather from the extraordinary explanation that we heard just now that the reason for inflation in 1975–76 was apparently the high pay settlements. The first election in 1974 was fought on the question whether the miners should have more pay—as the right hon. Member for Stepney and Poplar thought—or less pay—as was thought by my right hon. Friend the Member for Sidcup (Mr. Heath). This is a new departure. It is the second new doctrine that we have had from the right hon. Gentleman—first, that monetarism does not matter, and, second, that the excessive pay rises in 1974 were the causes of the inflation of 1975.
  Mr. Patten: I thank my hon. Friend. I seem to have brought many people into the discussion of these matters. The views of the right hon. Member for Stepney and Poplar on pay are clearly enormously flexible. We not only have his attitude to pay bargaining and the miners' strike in 1974, but we have the whole question of NEA, the national economic assessment, which he did not even flirt with today. I shall come back to the matter later in my speech, because it is the hole in the right hon. Gentleman's doughnut.
  I want to deal with three matters which arise in the Finance Bill before coming to the Bill's impact on the economy as a whole. The first matter concerns the Customs and Excise clauses in part I. A number of hon. Members have mentioned indexation, and it was mentioned in the speech of my right hon. and learned Friend the Chief Secretary to the Treasury. I welcome the moves that were made by both the Labour Government and this Government to introduce greater indexation into our taxation and financial systems. In my view, indexation is the basis of an honest tax system. I also welcome what the Treasury and Civil Service Select Committee said about indexation, particularly its invitation to the Government to express a view on their long-term objectives for indexation. It is important that the Government should do that, and I am not sure that the remarks of the Chief Secretary in that connection today entirely fill the bill.
  In practice, we have introduced indexation into a number of our direct taxes, but we have not really introduced it into our indirect taxes, except loosely. As the Chief Secretary said, my right hon. and learned Friend the Chancellor of the Exchequer attempts to raise each year the same amount through indirect taxes in real terms as he raised in the previous year. However, there is a scatter of percentage increases which is quite wide and seems to me to be rather random. This year, for example, there was a

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  14¼ per cent. increase in car licences, a 13¼ per cent. increase on beer, an 8½ per cent. increase on cigarettes and a 6½ per cent. increase on spirits. In some years the duty is held down because of political pressures, and in the next year it is allowed to increase substantially because those political pressures have lessened.
  That approach distorts the market. It is hit and miss and it is unfair. It leads to all sorts of nonsense. We see how beer has been treated over the past two years, as compared with the treatment of spirits. I have no particular axe to grind—if that is the right expression to use about beer—on behalf of the brewing industry, but it seems to me unfair to treat beer in that way, after the 38 per cent. increase in the duty last year.
  We know perfectly well that that happens because of the political pressures for Scotland, which this year were particularly acute. I should have thought that by now Ministers would have learnt that however they respond to those political pressures for Scotland makes no difference. That happened with the last Government with devolution—a far more important constitutional matter—and it has happened with this Government with the balance between beer and claret, on the one hand, and spirits on the other.
  That is all nonsense. It would be far more sensible for the industries concerned if we had valorisation of duties—if they increased automatically each year in line with the rate of inflation. One could still alter the relationship between the taxation of different products and commodities. It could be done by allowing the duty on them to increase by slightly more than the rate of inflation. The valorisation approach would enable one to operate on far more logical grounds, and political pressures would not produce as many absurdities as at present.
  Secondly, I turn to capital gains. I wish to declare an interest. Anyone with a private pension or an interest in private insurance could equally declare an interest. I am employed part time as a consultant to a firm of stockbrokers. Therefore, it may be thought that capital gains tax has a particular interest for me. The Government have been right to index gains on disposals. In doing so, they have removed the injustice of the taxation of inflationary gains.
  The move will make it more attractive for individual investors to hold equity. That should mean that companies do not find it as expensive to raise equity capital, and find it easier to issue indexed corporate debt. Companies may therefore be less dependent on borrowing from the banks than they are at present. Those moves are sensible but I cannot see why, in principle, if we index the gains we do not index the losses. It would be far more sensible administratively. The present proposals are exceptionally complex. I hope that hon. Members who are fortunate enough to be conscripted to serve on the Standing Committee will examine the indexation of losses as well as the indexation of gains.
  I turn to the national insurance surcharge. I have rarely made a speech in the House on the economy without referring to the surcharge. I welcome the 1 per cent. reduction in the surcharge in clause 128. It is a small step towards abolition, which I hope we shall manage before the next election. I should have like the Government to do more in the Budget on this. A 2 per cent. reduction would have been preferable.
  The argument that is customarily adduced against a reduction in the surcharge is particularly absurd. It is
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  argued that the national insurance surcharge cannot be reduced any further because of the possible feed-through into wages. In other words, such a reduction would have an inflationary effect on wage settlements. Yet at the same time we are told that Government strategy is inducing greater realism in pay bargaining, and in attitudes to productivity. If that is the case, we should not be too concerned about the effects of a reduction in the national insurance surcharge. Indeed, as I have been arguing for some time, we should use reductions in the national insurance surcharge to underpin and to reward more responsible pay bargaining. I agree with my right hon. and learned Friend the Chief Secretary about the importance of responsible pay bargaining, particularly if we are to stand any chance of substantially reducing unemployment in the next few years. That is particularly important.
  I am not sure whether that is a point of view that is held by the right hon. Member for Stepney and Poplar, even though he has lifted the hem of his skirt in relation to the national economic assessment, and even though he has occasionally mentioned the importance of pay bargaining in the context of his enormous reflationary package. The right hon. Gentleman has mentioned pay bargaining on previous occasions but when he had the opportunity to do so today, when his right hon. Friend the Leader of the Opposition was out of Chamber, he was not prepared to say anything about it.
  We have heard about the animal called the national economic assessment but we still do not know how many legs it has. We still do not know any more about it. We look forward to hearing in due course from the right hon. Gentleman, from one of his right hon. Friends, from one of his hon. Friends, from the national executive committee or from a spokesman of the trade union liaison group exactly what the Opposition have in mind for pay, or for the reform of industrial relations, to underpin a more responsible approach to pay bargaining.
  Mr. Straw: Will the hon. Gentleman say what he has in mind to secure responsible pay bargaining other than the fear of unemployment?
  Mr. Patten: The hon. Gentleman has done me the courtesy of occasionally listening to some of my speeches and he will know that I take a view on pay bargaining that is heretical on the Government Benches and heretical on the Opposition Benches. I happen to think that it is difficult to run a responsible economic policy in Britain without an explicit pay policy. I believe that we cannot control public expenditure unless we have a public sector pay policy. We cannot have a public sector pay policy without an understanding on pay in the private sector.
  In the longer term it is impossible to reform collective pay bargaining, or monopoly pay bargaining, without making a fundamental change in trade union law, and that is to introduce legally enforceable contracts. There will have to be wider constitutional changes and wider changes in the ownership of industry to sustain this. I am grateful to the hon. Member for Blackburn (Mr. Straw) for giving me the chance to set out some of my heretical views on this subject. I am glad that the hon. Member for Gateshead, West (Mr. Horam) appears to agree with me.
  The 1 per cent. cut in the national insurance surcharge, the measures that the Government have taken on energy and their measures to help the construction industry should all assist in job creation over the next year or so. However,

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  as the right hon. Member for Stepney and Poplar has reasonably said, the excellent report of the Select Committee on the Treasury and Civil Service makes it clear in paragraph 37 that with present policies it is unlikely that we shall see any substantial decrease in unemployment over the next three or four years. That should worry us all, especially when we consider the increase in long-term unemployment. There are now over 1 million people who have been out of work for over a year and a quarter of those are in the 18 to 24 age bracket. It is particularly disturbing that unless we can make fundamental changes in the next few years some of those people will never work. That should worry all hon. Members. It is a factor that has an impact on many features in our society, including the rate of crime, and we must recognise it.
  I was pleased that my right hon. Friend the Secretary of State for Employment introduced a new training initiative before Christmas to deal with the problem of unemployment. I was pleased that in the Budget my right hon. and learned Friend the Chancellor of the Exchequer announced his community work scheme. That was a modest start and it is one that my right hon. and learned Friend should be prepared to carry a good deal further later in the year. It is similar to the scheme produced by Professor Layard. I hope that he will take another leaf out of the professor's book and introduce a job subsidy scheme as well.
  If we press forward on those lines, we can do something to cut unemployment levels over the next year or so. This would not fundamentally undermine the Government's strategy of abating inflation and making British industry more competitive. We can do something to curb and reduce unemployment if we press forward on those Layard or similar schemes in the next few months. Many hon. Members will be looking forward to the Government bringing their proposals back to the House along those lines perhaps before the Summer Recess, and certainly before next winter.
  6.21 pm
  Mr. Stan Thorne: I am sure that my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) was not surprised that Government Front Bench Members failed to answer a number of his questions. Indeed, the Chief Secretary's comment about the Budget being a month ago raises—as my right hon. Friend said—some serious questions about whether amendments are necessary because of subsequent events.
  For example, one might suggest that the PSBR is likely to be somewhat different due to the expenditure that we may have to enter into if we are to reach a satisfactory conclusion. The Prime Minister put forward values in terms of protecting the Falkland Islanders. There may be massive inputs because of that situation, which could affect the PSBR over the next few months.
  In addition, the question arises whether the Government are having second thoughts on making financial judgments vis-a-vis Trident as against conventional weapons. Because of Britain's unpreparedness for the Argentine events, the Government might do better to consider expenditure on conventional weaponry as against the £10,000 million that Trident is likely to cost.
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  A pertinent question arises in my constituency with regard to design engineers, draughtsmen and the highly skilled work force employed by British Aerospace. They are rightly asking whether this is the time to consider the development of the P110. Should that not form part of any financial policy presented by the Government? That issue is not irrelevant to the whole question of employment. Indeed, many hon. Members have said that they tend to judge the benefits of the Government's financial policy by the extent to which it is making an impact on the unemployment situation.
  Mr. Straw: My hon. Friend's point about the British Aerospace work force in Preston is important. Does he accept that representatives of the work force, who have seen himself and myself, made it clear that their deep anxieties were over the wasteful expenditure on Trident and earlier developments towards Trident? That has caused them much anxiety over their job prospects in working on conventional weaponry.
  Mr. Thorne: I accept my hon. Friend's point. That is not irrelevant, but is directly relevant to judgments involved on the Second Reading of the Finance Bill.
  Is the Government's planned expenditure likely to be beneficial in the long term? On the one hand, that must be considered in terms of our ability to defend ourselves or to protect those in need of protection in other parts of the world. On the other hand, using the Falkland Islands as an example, that also means where we have a measure of British sovereignty.
  Only this morning I had a telephone message raising this point with me. Is not now the time to try get from the Government a financial commitment to the development of the P110? I hope that the Government will take this matter on board within a few weeks. Various figures are presented on the cost of unemployment. I do not pretend to have an accurate method of determining those figures. I am prepared to accept—as there seem to be suggestions of £13 billion, £14 billion or £15 billion—a mean of £14 billion. If unemployment is costing the British people such a sum, one is entitled to expect clear indications from the Finance Bill of how the Government intend to attack that problem.
  Reference has been made over the past few weeks, at Question Time and on other occasions, to the 400,000 construction workers lying idle in Britain and the 500 million brick stock. I recently raised this question with Government Front Bench Members and I was told that the criterion was that customers' needs were met by producers' decisions. If that is so, clearly the customers, in this sort of situation, are homeless people, desperately in need of housing. There are many of those people in the West and East Lancashire areas.
  This is an excellent opportunity for the Government to kill two, three or four birds with one stone—reduce unemployment, put public investment into needed houses and prevent a whole range of social deprivations stemming from the lack of decent housing. The Finance Bill must always consider where it would seek to discriminate in favour of depressed areas. I see below the Gangway the hon. Member for Bebington and Ellesmere Port (Mr. Porter), who comes from Merseyside, which is clearly a depressed area. However, there is no mention of action in the Bill to solve such problems.
  At constituency level, the Preston dock is to be developed. To do that, the local authority was forced to

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  go out to private speculators. It had to invite them to put forward proposals to enable that dock to be developed. Unemployment is clearly relevant on this aspect of the matter. There could be a major upsurge for the West Lancashire area if that development went ahead. Public investment would be highly preferable to private speculation which will flow from Preston dock.
  The Central Lancashire Development Corporation is to be wound up in 1985 on a decision by the Secretary of State for the Environment. That is happening when we should be seeing more public investment to develop the works of that corporation. It is doing a valuable job in building certain factories and encouraging small businesses. However, much more could be dome to raise the level of demand so that some of those factories, which are presently empty, could be occupied.
  Of course, absent from the Bill is any attempt to control or restrict the outflow of capital, which runs at several thousand million annually. We are apparently prepared to allow that to occur at the expense of British employment. That outflow of investment invariably results in productivity in various parts of the world, with imports flowing from it. That enables the monopolies or the multinational companies operating in Britain to close British factories in the interests of maximising profits. There is no attempt in the Bill to control that.
  Reference has been made to the whole question of pay and inflation. It is the responsibility of those who argue that there is a close relationship between pay and inflation to show clearly how pay determines price levels. There is tremendous evidence to suggest that oligopolists and monopolies determine the price of goods, often on the basis of restrictive practices and what is likely to be beneficial in the market to the main operators.
  If prices rise as a result of supply adjustments made by the few firms that control a market, it cannot possibly be argued that those price increases stem from wage increases. Often the same firms that pursue those policies are the least likely to provide the wage levels that I would consider appropriate. One needs only to look at the Financial Times to see that big business in Britain, generally speaking, is making good profits. Certainly the banks have made remarkable profits in recent months—indeed, for the last year or two.
  The Budget, as has been said, through capital gains changes and various other mechanisms, provides another opportunity for the wealthy to grow even wealthier. However, that is not the case for the poor. Unemployment benefit is to be taxed.
  Recovery has been mentioned. That strikes me as remarkable in the extreme, immediately following a Select Committee report which shows, on very good grounds, that unemployment in Britain is likely to continue to rise into 1985. How can we possibly talk about recovery when unemployment is rising? If unemployment rose by only a few hundred it would still be completely wrong to describe that as recovery.
  I accept that unemployment arising from technological advances is likely to occur in the not-too-distant future. There are signs of that already. That raises very serious questions. In the late 1980s it will be virtually impossible to provide full employment on the basis of a seven-hour day, five-day working week. We are more likely to be talking about a three-day working week.
  From that, serious questions of investment for diversification arise; for example, investment in the
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  leisure that will result from the increased number of hours during which people are unemployed. That, in turn, brings us to the question of Government policy on educational and cultural institutions. Here again, all we have had is talk of cutbacks in various parts of the system, not only at primary and secondary school levels.
  We are still failing to provide adequate nursery education, and we are cutting courses in polytechnics and universities at a time when, as a result of growing technological unemployment, we should be thinking about making available to an increasing number of mature students—in many cases, mature people who have changed their lifestyle—the opportunity for advanced and higher education.
  This is not surprising. It is typical that we yet again face a Budget produced by a Conservative Administration who have indicated their class interests as clearly as they have ever done in the past. This is a Budget for big business. It has nothing to offer the working people of Britain except increased exploitation within a capitalist system.
  6.36 pm
  Mr. Ralph Howell: I shall not attempt to follow the arguments of the hon. Member for Preston, South (Mr. Thorne), who spent a long time talking about the problem of unemployment.
  Let me first put the record straight with regard to my intervention in the speech of the right hon. Member for Stepney and Poplar (Mr. Shore). I was drawing attention to the fact that, while the right hon. Gentleman was criticising forecasts of 3 million unemployed, a Labour Party committee looked into this problem in 1976. The right hon. Gentleman attempted to disclaim any knowledge of that document. I have it in my hand. It was produced by a joint committee of the Home Policy Committee and the Finance and Economic Affairs Sub-Committee in November 1976, and was headed "Medium Term Prospects of the United Kingdom Economy, 1976 to 1980".
  One of its principal findings was:
  "Thus, if the past trends 1964–1973 are projected into 1976–1980, and allowance is made for the different stance of government policy, unemployment would be of the order of two to two and a half million in 1980."
  Thus, the Labour Party came up with a true forecast, because that was just about on target. The underlying trends of unemployment have been rising for the last 30 years at an ever-increasing rate. Therefore, it is sheer hypocrisy for the Labour Party to pretend that this increase in unemployment is the fault of the present Government.
  Unemployment doubled while Labour was in power, and it has doubled again since we have been in power. There is an underlying trend, and I think that the hon. Member for Preston, South fully understands the problem. The level of unemployment is due more to the fact that petrol pumps are no longer manned as they once were and also to the fact that modern aids and inventions are causing an increase of unemployment, not only here but throughout the Western world.
  I generally approve of the main thrust and judgment of the Budget. I was delighted that our Treasury Ministers were not persuaded to relax, and I am glad that they are sticking to their firm monetary policy. I congratulate them on being able to satisfy those Conservative Members with slightly different views by giving away so little. Therefore, in the main, I fully support the general thrust of the Budget.

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  I am extremely disappointed that we could not fulfil our election promise of substantially cutting the burden of income tax. I believe that that is something to which we must apply our minds urgently, because the present situation is totally absurd. I am not asking for any giveaway. The Government should reduce income tax dramatically and continue the present balance in the Budget by reducing public sector spending. Only by doing that and reducing the bureaucracy can we get the economy right.
  We have not made up for the failure to index to the extent of Rooker-Wise last year, and therefore widows and other pensioners will continue to pay income tax on their pensions. That is totally absurd and wrong. One of my constituents who receives a pension of under £30 a week and who has £197 per year from her late husband's ocupational pension is taxed at the rate of 55 per cent. on that pension. She pays £108 a year in tax out of an income of about £35 a week and we have the audacity to take £2 a week from her. We force many people to rely on means-tested benefits to supplement their income after we have taken money in tax. That must be wrong.
  It also adds to the unemployment problem, as there are many hundreds of thousands of people who cannot find a job where they will be better off than if they remain unemployed and rely on supplementary benefit. That is because our tax thresholds are much too low and our initial tax rates are much too high. The Government should concentrate on solving that problem. The Prime Minister was fully aware of the "why work?" problem two years ago. since then we have not heard much about it. I believe that we should solve that problem in order to restore work incentives.
  Mr. Cook: The hon. Gentleman began his speech by propounding the view that there had been a greater increase of unemployment in this country than in other countries because of the introduction of devices such as automatic petrol pumps reducing work. Would he like to explain, while he is still obsessed with the "why work?" syndrome, how he can propound the view that jobs have disappeared?
  Mr. Howell: The hon. Gentleman may laugh, but there are two sides to the problem. Automation causes unemployment, but there are also many people locked into unemployment because it is more profitable not to work than to work, and to ignore that factor is absolute folly. I should have thought that I might have had some support from the hon. Gentleman on that matter.
  The Government are locked into a situation where they cannot cut taxation, and the reason is that they spend too much on the public sector. Overmanning in the public sector is the principal cause of our difficulties. The Government quite rightly applaud all that they have dome to reduce overmanning in the private sector, which is healthier and more efficient as a result. What have they done about overmanning in the public sector? Their performance is abysmal. They may have cut the Civil Service by 56,000, but at the same time they neutralised that by increasing the National Health Service by 67,000. They have reduced local Government manpower by only 67,000 out of a total of 3 million people.
  Mr. Derek Foster: Will the hon. Gentleman address his mind to the report published yesterday by Her Majesty's Inspectorate, which said that
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  educational standards may have been permanently damaged as a result of the cuts in public expenditure, which he is praising? Where is the overmanning in the education service?
  Mr. Howell: I shall gladly tell the hon. Gentleman where the overmanning in the education service is. I believe that when there were 600,000 people employed in education in 1960 as opposed to the 1·2 million today, educational standards were much higher than they are now. Throwing extra money and people into education achieves nothing.
  All that we have done in almost three years is to reduce by 0·9 per cent. the 5 million employed in the National Health Service, Civil Service and local government. When one makes allowances for the fact that most of those people have index-linked pensions and incremental pay increases, one sees that the cost of the public sector is greater than ever before. We must recognise that to be the principal cause of our difficulties.
  I should like to compare that with what happens in France. In the three sectors that I have mentioned, the French employ 3 million people where we employ 5 million. This is why French cars are so numerous on our roads and why there are so few British cars on French roads.
  I urge the Government to find a way to reduce public sector manpower. I have said not mentioned overmanning in the Post Office and in the other nationalised services and industries. I believe that the only effective way to reduce public sector manpower is to impose a moratorium on recruitment. Nobody need be sacked. In one year we could reduce public sector manpower by more than half a million. Had we done that when we came to power, we would by now have reduced public sector manpower by more than 1 million. I hope that the Government will take on board the fact that a moratorium must be imposed immediately after they are re-elected. I believe that public sector overmanning places us in a position where we cannot afford the things that we shoud be able to afford. There have been arguments about Trident and the reduction of the Navy, but we could afford proper and adequate defence, both nuclear and conventional, if we were to stop the appalling wastage in the public sector.
  There are restrictive practices galore in the public sector. Does it make sense that if a light bulb burns out in a primary school in my constituency someone has to travel often 10 or 12 miles from Cromer to replace it? That is absurd. The restrictive practices that occur within the education system, the National Health Service and other areas of the public sector are paid for to a large extent by those taxpayers to whom I have referred—the low-paid, and pensioners, who are forced to carry an impossible burden of taxation. I hope that the Government will take note of this message and will make amends in the next Budget.
  6.50 pm
  Mr. K. J. Woolmer: The Budget and the Finance Bill are not to be judged in isolation. The judgment must be based on the fact that this is the fourth major Budget to be introduced by the Government. I recall the waving of Orders Papers of 1979. In 1980 and 1981, Order Papers were not visible. This year, however, Order Papers were waved again. I could not help thinking about the reaction of the 3 million unemployed had they seen

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  Tory Members waving their Order Papers so furiously in appreciation of a Budget that will go down in history as the Budget in which the Conservative Government accepted mass unemployment as a feature that they did not intend to reduce or eliminate. That is the truth of the 1982 Budget. The wets on the Tory Benches now accept that they cannot achieve a change in policies and that 3 million unemployed will be a plank in the election platform.
  The sight of Order Papers being waved was a disgrace to the nation. It does not hurt to reiterate in the Chamber the appalling cancer of unemployment in our society. To those hon. Members who grimace when faced with this problem, I say only that the House should at no time debate financial or economic policy without considering the effect on the people of this country. I never fail to remind myself that the aim of all policies at all times should be to strive to get rid of the evil of unemployment. When we are told that the alternative policies of the Labour Party would pose certain problems, I wonder what problems Conservative Members think that the unemployed face as a consequence of the Government's policies.
  There are two underlying strategies behind the unfolding economic policies of the Government. Both are based on divisive theories—that greater inequality will somehow lead to a better society. On the one hand, there is the strategy based consciously on deflation and the theory that greater effort and improvement will emerge from the suffering, necessity or fear of unemployed people and failed businesses. On the other, there is the belief that an increase in inequality will bring about more incentives through the need or the desire to work harder. Those underlying views are behind many of the Government's policies.
  The Government have encouraged people to support certain deeply divisive myths that appeal to individuals. Three years ago they argued that the unemployed had no incentive to work. That view was expressed again by the hon. Member for Norfolk, North (Mr. Howell). Yet the hon. Gentleman was unable to supply any instance of anyone who would prefer to be on the dole than in work. We know the truth. If a job is advertised, there are hundreds, not dozens, of applications. Employers are saying to jobcentres "For goodness sake, do not send everyone. You sort out a short list for us."
  A public employment service is being carried out for employers because so many people apply for individual jobs. To dress up the position as one in which the unemployed have no incentive to work is to be remote from reality. It is a sickening disgrace that such words should be uttered in the Chamber. I apologise to the hon. Member for Norfolk, North for saying that in his absence. However, I think that hon. Members will understand that, his speech having preceded mine, the hon. Gentleman should have been present to hear any ensuing remarks.
  The Government have deliberately penalised the unemployed. They have taken away unemployment pay for the second year of unemployment. They have taken away the earnings-related rule. It makes me sick to hear talk of the unemployed preferring to be unemployed. It has been argued that the highest paid have no incentive because they pay high taxes. A succession of Budgets has given the greatest benefit to the highest paid.
  The argument has also been deployed that companies pay too high taxes, too high wages or that they are confronted by too many Government restrictions. As a
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  result, the Government have introduced a series of measures aimed at weakening the trade unions and reducing controls on businesses. Foreign exchange controls were lifted. Was the result more investment in British industry and greater incentives? Investment has fallen. Between £8 billion and £9 billion a year has gone out of the country.
  There was also the argument that public spending was excessive and that a bloated bureaucracy could be cut without damage. What is the truth? As my hon. Friend the Member for Bishop Auckland (Mr. Foster) remarked, our education service is suffering from deeply damaging cuts. Morale in the Civil Service is the lowest for many years. There has been an obsessive attack on the public services. That has not produced a fraction of 1 per cent. of additional growth in the economy.
  What has been the result of the three-year attack on equality and upon a social, caring society? Unemployment has not fallen. It has risen by 1·7 million. Industrial production is not higher. It is not even stagnant. It is 10 per cent. or 20 per cent. lower. That is the truth of the greater incentives to the unemployed, the higher paid, the businesses and the local authorities. Living standards are not stagnant. They are falling.
  The Treasury and Civil Service Select Committee points out in its report that the Government's policies make sense—they were not spelt out in the Budget speeches—only if one assumes that public sector workers on average will have a fall of 4½ per cent. in real terms in living standards this year and a 3 per cent. fall next year—a total of 7½ per cent.
  There are those in the private sector who have accepted not only stagnant but, in some cases, cuts in wages in the last year. As a result of incentives, they will be rewarded by not a growth, but a fall in living standards. In addition to falling living standards in the last quarter, business failures have been at a record high. For Conservative Members to wave Order Papers in delight and pleasure at a record that has led to such disasters is plainly nonsense.
  When the Labour Party puts forward alternatives, Conservatives attack them as unworkable saying that there are problems and difficulties. When the Labour Party suggests that there should be an increase in spending so that workers and firms can sell what they could produce if only they had work, we are told that that would present problems—as if 3 million unemployed and 20 per cent. lower industrial production are not a problem. When the Labour Party says that we must ensure that most of our increased spending creates jobs for British workers and that means examining how we plan trade, we are told that it entails problems—as if the existing situation does not also have problems.
  When the Labour Party says that exchange controls make sense and that millions of pounds of savings should be invested in British jobs rather than abroad, we are told that that would create problems. But what sense does it make to the 3 million unemployed for millions of pounds to be diverted to foreign stock exchanges rather than to our industries?
  When the Labour Party says that, as part of its alternative, there should be a national investment bank to channel some of our long-term resources into industry as part of industrial planning, Tories say that there are difficulties. Of course there are difficulties. But surely those are honest attempts to advance policies which, in the

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  Opposition's view, will help the country back towards full employment and growth. Existing policies have manifestly failed.
  Mr. Chris Patten: The hon. Gentleman is speaking in all honesty, but does he agree with what his right hon. Friend the Member for Stepney and Poplar (Mr. Shore) said a few weeks ago about the national economic assessment? Will he spell out in a little more detail the relationship between his views on pay bargaining and the type of reflationery package that is being advocated by the Opposition Front Bench?
  Mr. Woolmer: I believe that if we are to make any progress, some way must be found to get workers and businesses to agree to recognise the relationship between demands on the economy and what is produced in it. One of the biggest warning shots across the Government's bows is that they have done nothing to change the climate of industrial relations and pay bargaining. All the signs are that, with the slightest move towards a reduction of unemployment, pay and prices will rise. Indeed, I understand that, even in the present depressed state of the economy, businesses have increased prices, although wage costs have not been the cause. In other words, when businesses have the opportunity, they will go for price increases and workers will tend to demand wage increases.
  My view is entirely consistent with my right hon. Friend's. I have held that view since I first came to the House. The Government, trade unions and businesses must find a way to establish a relationship between production and wage claims. The Government have manifestly done two things. First, they have tried to overcome the problem by mass unemployment. Secondly, there is not the slightest sign of a change in approach, view or attitude towards price or wage setters.
  In this Finance Bill, as in its predecessors, the Government have given to the wealthy and taken away from the majority of people. That is not a statement of class view. It is a fact. It must be agreed that that is what has happened. The Government are obsessed not with fairness, as the Chief Secretary to the Treasury alleged, but with giving to those who are already wealthy and own capital.
  Mr. Barry Porter: The hon. Gentleman has wriggled away from the point made by my hon. Friend the Member for Bath (Mr. Patten). He may have done so to his own satisfaction, but not to mine or that of the House. He says that there must be some way in which we can establish an understanding between employers, employees, the Government and trade unions on how wages should be related to the demands of the economy.
  If the hon. Gentleman does not accept the example that has been taken, which he says has clearly failed, will he cast his eye across the Irish Sea where there has been an understanding between the wise men and suchlike? The hon. Gentleman should examine that economy. Perhaps he will then say whether he believes that he can find a way. If so, will he please tell us what it is?
  Mr. Woolmer: If a supporter of the Conservative Government, who, for their own policy purposes—and good luck to them—have consciously increased council
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  house rents significantly as a proportion of earnings and deliberately increased energy prices, talks disparagingly about agreements on prices and wages, all I can say is that he should carefully examine the Government's policies.
  It falls ill from Ministers' mouths to say that Government policies on taxation are fair. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) referred to those who have been unemployed for more than a year and have saved small sums of money during their working life. I remind the House of the effects of unemployment on people. There are now nearly 1 million people who have been unemployed for more than a year. People who have worked for 30 years and saved a pittance, by the standards of most hon. Members—say, £3,000 or £4,000—find that after one year's unemployment they cannot receive one penny of help for their household.
  The hon. Member for Norfolk, North has much to answer for. What does he think about the plight of those who have saved small sums during many working years and now find that they have no income? People are amazed how hard it is to be out of work. The overwhelming feature of my experience during the past two or three years is of people saying to me "I never realised how hard it was to be out of work, financially, spiritually and emotionally." That is the truth of unemployment.
  Mr. Ralph Howell: I share the hon. Gentleman's concern for any persons who are out of work. I realise that there are great problems for them. However, he is misleading the House by implying that unemployment benefit is withheld because people have savings. That is not so. Only supplementary benefit is withheld.
  Mr. Woolmer: I have just made that point. After a year, unemployment benefit ceases as a result of Government policy.
  Mr. Howell: No.
  Mr. Woolmer: Supplementary benefit is then withheld because a person has saved a small sum of money. I was comparing that with the Finance Bill——
  Mr. Howell rose——
  Mr. Woolmer: —which makes concessions in capital transfer and capital gains legislation to those who already earn hundreds of thousands of pounds. The Government give concessions to people earning hundreds of thousands of pounds, but they will not give a small concession to those who are out of work and have no means——
  Mr. Howell rose——
  Mr. Woolmer: I shall not give way. I have given way several times.
  Finally, I comment on one feature which I was disappointed to find was again omitted from the Budget and also from the Minister's speech today, although perhaps for more understandable reasons. I share the concern of my right hon. Friend the Member for Stepney and Poplar that the Western world has increasingly fallen into a recession brought about and increased by cumulative deflationary policies. That is producing a genuine and worrying threat in the form of counter-productive protectionist policies. That is a matter of concern throughout the world, to which the House does not afford recognition comparable with the size of the problem.
  I refer to the appalling situation suffered by the Third world in the 1970s and now in the 1980s due to increases

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  in the price of oil and the depressing effect of policies adopted by the industrial nations. I suspect that the Western nations will not solve the serious unemployment problem that they face unless there is agreement on how to overcome the difficulties. I hope that in winding-up or in the debates after Easter the Government will give a far clearer statement of their thinking in terms of international economic policy.
  I hope that the House will reject the Bill. The Government's policies have brought nothing but industrial decline and misery in living standards. The Budget is no more and no less than an attempt to give to those who have and to take away yet again from the majority of people. It is a divisive Budget from a divisive Government. I hope that the Bill will be rejected.
  7.12 pm
  Mr. Richard Page: I do not propose to become embroiled in arguments about the virtues or otherwise of money supply, indexation and so on, because I know that if I give an economic problem to five economists I shall probably end up with six solutions. I merely put it to the House that inflation costs the lives of more companies and thus more jobs than anything else. Every year the relationship between the size of the PSBR and inflation is reinforced. All the fancy theories and ideas cannot get away from that.
  Mr. Foster: Will the hon. Gentleman elaborate on that clear relationship between the size of the PSBR and inflation? It has certainly defeated the rest of us, and I understand that it has defeated the Select Committee, members of which are present today.
  Mr. Page: When I came to the House in 1976, the rate of inflation was 20 per cent. and rising, and the Labour Government were borrowing £1 in every £6 or £7 that they spent. Inflation is now 11 per cent. and falling, and we are borrowing about £1 in every £11 or £12 that the Government spend. Moreover, the Governmnt are carrying the interest charges on the vast increase in the public debt. To me, that is incontrovertible proof.
  I do not wish to become embroiled in all that, however. I wish to deal with the effects of the Bill on the small business sector. I believe that it can almost be described as a tombola Bill, with a little bit of something for every section of industry. I welcome that, because in the past we have learnt to be excellent spenders and consumers, but we have been less good at earning and not quite so hot on producing. Naturally, therefore, I am pleased that the Government have yet again produced a Budget to support the small business sector. Over the past three years, we have achieved about 90 measures to aid the small business sector. I am pleased to see that in this Budget some of those measures have been updated—for example, by the increases in the VAT threshold and the loan guarantee scheme.
  In the Budget debate, the right hon. Member for Down, South (Mr. Powell) said that the solution to the country's problems lay with the people. I echo that sentiment. There has been an apparently widespread belief, which the Opposition seem still to echo, that the Government can solve all the country's problems without there being any individual effort or involvement. That is patently wrong. Of course the Government can remove the barriers, provide a little more opportunity and make effort a little
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  more attractive, but basically it is the efforts of the people of this country that can bring about the improvements. That is especially true in the small business sector.
  In the past, whenever I have spoken of the small business sector, I have ended up like Oliver Twist, asking for more and more. I shall probably do the same today. If I do, however, I do not wish to give the impression that I am dissatisfied with what the Government have done. I ask for more because I believe that the small business sector—and probably only that sector—has the ability to adapt to changing circumstances and the speed of reaction necessary to provide growth and employment in our economy.
  I must tell the Opposition that Conservative Members are equally concerned about unemployment. We are desperately worried about it. The Government's scheme for the young, which begins in 1983 and is the first coherent training programme in this country, must be evidence of that desire to try to help.
  Mr. Campbell-Savours: The hon. Gentleman draws our attention to the scheme for young people. Will he address himself to the problems of business people in his previous constituency of Workington? [HON. MEMBERS: "Oh".] Yes, I invite the hon. Gentleman to comment on a problem in my constituency, which he knows well. The other day, 460 men—not 16 to 18-year-olds, but mature men, the working population—turned up to apply for one job. Will he comment on the opportunities provided by the Government for the 459 who were rejected?
  Mr. Page: I do not think that it is right for me to discuss the hon. Gentleman's constituency problems in the House.
  Mr. Campbell-Savours: The hon. Gentleman is most welcome to do so.
  Mr. Page: When I had the privilege to serve the constituency of Workington, I was extremely concerned about the restrictive practices and the overmanning, which caused so many problems in producing the right product or service at the right price and at the right time. I refer the hon. Gentleman to a specific example. When the management at the rail-producing plant at Workington wished to install a rail-straightening machine so that rails could be produced more cheaply and quickly, they met with desperate resistance. Yet only through genuine orders will real employment rise and not be whittled away by the need for more and more and more public money and more borrowed money, which must eventually be paid back. So let no one say that Conservative Members do not care about unemployment. We are desperately concerned, but we want the solution to be based on real jobs, real opportunity and real growth and not artificially subsidised by more and more borrowed money which the taxpayer must ultimately pay back.
  I apologise for having been somewhat diverted from what I wished to say about the small business sector. I support all the efforts being made to help that sector, not just because of its speed of reaction and its ability to seize new ideas and new opportunities, but because I believe that it has a political stability. I make the point about political stability deliberately.
  It is well known that the Continental and industrial countries which compete with us in the export world support their small businesses. They give them a lot more money and opportunities than we do. They do so not only

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  for their economic growth, but for political stability. They broaden the economic base and provide a buttress against political extremes.
  One has only to compare the strike rates, walk-outs, and aggravations in public industries with the record of small businesses to see that the genuine work relationships exist there, rather than in the highly artificial and stylised manoeuvrings of some of our trade unions.
  Turning to specific measures in the Bill, my right hon. and learned Friend the Chancellor has provided the necessary tax changes to the measure allowing companies to buy in their own shares. I am especially delighted that he is going down the capital gains route and not down the advance corporation tax or the income tax route. The House knows from the Companies Act, which was brought into operation on 26 February of this year, that those tax proposals will complete the whole operation. A great deal has already been said about the virtues of allowing a company to buy in its own shares. I still do not think that it has been fully appreciated just what an effect it will have on encouraging investment, and just what a restriction has been removed from our private companies.
  Over the years, more and more people will be prepared to invest in private companies, knowing, and possibly planning with the directors from day one, that they will be able to reclaim their investment at the end of the day without forcing a sell-out of the company or accepting a very much reduced price from the other shareholders. I am sure that the measure will give a steady and sustained boost to companies' investments over the years.
  I can appreciate the Inland Revenue's desire to ensure that a genuine share sales takes place and that this measure is not used to avoid tax on the traditional dividend route. However, I should like to see the present proposals defined so that if a genuine disposal of a smaller part of a shareholding takes place tax will still be levied on a capital gains basis. The company may want to purchase those shares in small parcels to ensure that its cash flow is not unduly affected.
  When the start-up scheme was introduced last year, my right hon. and learned Friend the Chancellor made a clear statement on how it would operate. He said:
  "It will be a striking new incentive to channel investment into small businesses."—[Official Report, 10 March 1981; Vol. 1000, c. 781.]
  Alas, when the proposals finally came out they were so hedged around with restrictions and caveats that the confidence of the accounting profession in promoting such a new idea was severely weakened.
  We must accept that the person who will invest in such a scheme will already have placed his financial affairs in the hands of an accountant to guide him in the taxation labyrinth. If that accountant feels that the scheme will be too restrictive, too complicated, the advice will be "Hold back. Do not go ahead". We must now win back the confidence of those accountants. I welcome the increase up to £20,000 in one year. I hope that it will encourage more people to take the plunge. However, I put forward the plea that when this measure emerges from Committee it should be taken up extensively and not ignored, as I fear is happening at present.
  This is not the time to go through all the reasons why the start-up scheme is being ignored at present. However, it is odd that employees in a firm are unable to take
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  advantage of this particular measure. They can invest in other firms, but they cannot invest in their own. Therefore, that change should be introduced.
  I remember when the industrial buildings allowance was introduced in 1980. I very much welcomed the 100 per cent. allowance that was to be given for the construction and conversion of small workshops. During the past two years many companies have taken advantage of that. However, it has become obvious that the distinction between industrial and service use precludes many would-be occupiers. I do not know why, but the impression has been gained that manufacturing industry is good and that service industries, while not exactly bad, are not quite in the same class, which is strange in a country that earns more per head from its services than most of its competitors do.
  I am delighted that certain service operations will now qualify, but—in life there is usually a "but"—I am still worried that the service activities permitted will be too restrictive. Therefore, I plead with the Treasury not to make sheep or goats out of the small firms that would like to get started in small business workshops.
  I deal next with the £130 million innovation package. I pay tribute to the Under-Secretary of State for Industry, my hon. Friend the Member for Norfolk, South (Mr. MacGregor), for the work that he has done in the business opportunities programme and for the visits that he has made round the country, telling business men what the Government are doing to help small businesses. I also pay tribute to the Minister for Industry and Information Technology, my hon. Friend the Member for St. Marylebone (Mr. Baker), for his work on information technology. Such technology will increasingly dominate our lives. My hon. Friend's efforts to make the nation aware of the earnings and employment potential of information technology are most welcome. I know that foremost in his mind is the knowledge that the Japanese believe that in the next decade information technology will provide more jobs and opportunities than any other business sector.
  Perhaps I might now mention one item away from the small business package. In last year's Budget my right hon. and learned Friend the Chancellor of the Exchequer announced a new tax, the supplementary petroleum duty. He said that it would last only until June 1982. One of the reasons given was that it had not proved possible to carry out a thorough reform of petroleum revenue tax in the time available. Immediately after last year's Budget there were warnings that the addition of supplementary petroleum duty to the existing North Sea oil tax regime would severely reduce the development rate of the North Sea oilfields. I accept that the oil companies can rightly be accused of often crying wolf, but the introduction of that tax last year was one tax step too far and it placed a definite brake on the North Sea's development rate.
  Obviously I welcome the announcement that the tax regime is to be reformed. I hope that the details of that reform will reveal that the incentive to explore and to develop has been restored, especially in the marginal fields where the production profile makes them extremely vulnerable and where secondary and even tertiary recovery methods will have to be brought into play at an early stage.
  I wish to thank my right hon. and learned Friend for resisting the siren voices calling for vast reflation on borrowed money, without any attendant demands on productivity. He has provided an increase in the incentives

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  to companies to improve profitability and productivity without sucking in vastly increased imports, which has happened so many times in the past. I am sure that he has laid the basis for recovery of business confidence in 1982, which will lead to an increase in consumer spending in 1983.
  7.30 pm
  Mr. John Horam: I was interested in what the hon. Member for Hertfordshire, South-West (Mr. Page) said about small businesses, because he reflected accurately the mood of small business men who are, in my experience, impatient with the red tape, small print, general rules and regulations and the timidity of the Government's schemes, valuable though they are and fundamentally right though they are.
  That brings home the important lessons of the failure of successive Governments. If we have a good idea we must go hard for it. Very often Governments have not taken a sensible idea and given it the right sort of approach. They have been too suspicious that industry and business, both small and large, will take the Civil Service for a ride. That must be stopped at all costs. If we can change that suspicion, which is endemic in all ranks of the Civil Service, we shall have done a great deal. I am sorry that the Treasury Bench has not done more to meet this general but important point.
  I do, however, disagree with the hon. Member for Hertfordshire, South-West about the level of borrowing and the public sector borrowing requirement. The Chief Secretary to the Treasury said that the public sector borrowing requirement is the heart of the Government's strategy. They have consistently taken the view that if we keep a small, absolute amount of public borrowing and a reducing amount of public borrowing in terms of the gross domestic product, we can have lower interest rates, lower rates of inflation and increasingly, as industry runs into employment and output difficulties, we can help with industrial costs.
  The problem is that that view is fundamentally flawed. Like the M3 and other monetary targets, the PSBR is an intermediate target. It is not an ultimate objective of Government economic policy such as price stability, employment levels, output growth or the general objectives in which we have been used to seeing Government policies stated for many years. It is a means to an end. The Government have tried to operate on the intermediate targets because the general objectives have been difficult to control. As the Government said in their memorandum to the Treasury and Civil Service Committee as long ago as 1980, they have deliberately not set their targets in terms of the ultimate objectives of high price stability, output and employment, because those are not within their direct control. Instead, they set a target for the money supply, which is more directly under their influence.
  As we have seen all too readily in the past few years, the indicators on which the Government chose to rely turned out to be more difficult to influence than they could have foreseen. As the right hon. Member for Stepney and Poplar (Mr. Shore) said, at no stage have the Government met their money supply targets. He produced a figure of a 55 per cent. growth in the money supply since the Government came to power.
  It may be that the so-called Goodhart law is correct. This states that, as soon as one selects an indicator upon
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  which to concentrate, it immediately becomes erratic and perverse in its behaviour, because it was not designed to carry the weight that the Government put on it. However, faced with that, the Government have tried not to improve the accuracy of their aim but, quite logically, to increase the number of their targets, in the hope that they hit something, even if it is not M3. We now have four additional targets at which the Government can aim, so perhaps they can achieve some consistency in what they say.
  Mr. Eggar: I am sure that what the hon. Member for Gateshead, West (Mr. Horam) is saying is true, but does he not welcome the increasing flexibility and the move towards pragmatism that the Government showed in the Budget and in the Red Book? Does not his party believe that control of the monetary aggregate is a necessary, even if not a sufficient, tool of economic management?
  Mr. Horam: I agree that it is not a sufficient means to achieve the objective of price stability to concentrate simply on narrow monetary dogma. I welcome the more relaxed approach that the Government, under pressure of events and total failure to meet the tighter objectives that they originally set themselves, have pursued during the past few months. The fact is that they should never have gone for such narrow selective targets. The hon. Member for Enfield, North (Mr. Eggar) would probably agree with me on that.
  The business of following such intermediate targets, whether money supply or the PSBR, is not only fundamentally intellectually suspect but counterproductive. It leads to the Government taking measures that will have a favourable effect on the PSBR or the money supply, although they palpably have an unfavourable effect on the real economic objectives. Thus we have them nearly doubling VAT, raising nationalised industry prices, cutting the rate support grant so that rents and rates rise, and many other such actions, in the name of price stability. We had the extraordinary spectacle of the present Secretary of State for Defence, in his previous incarnation as Secretary of State for Trade, maintaining week by week at the Dispatch Box that doubling VAT did not increase inflation because it reduced the PSBR. It also substantially increased prices in the shops for ordinary people. That is the sort of nonsense that the Government's policy has produced.
  The Chief Secretary's brother would probably agree that we must return to examining economic policy in terms of ultimate objectives and adopting a view about the desirable real growth output and the desirable level of inflation. We must try to consider those intermediate targets in that light and settle, in a relaxed way, how we can meet those larger goals.
  Quite apart from the inherent merits and common sense of such an approach, we might also reduce the economic jargon that proliferates our debates. If we can get away from sterling M3 and PSBR, we might begin to conduct a debate in which ordinary people can take an interest. It is a matter of profound importance that trade unionists, employers and politicians, as well as City commentators, should understand our economic debates. Ernest Bevin said, before the Second World War, that the members of the Transport and General Workers Union would make only such progress as they were allowed to by their own

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  understanding of economic reality. If we wrap it up with jargon such as M3 and PSBR, they will never understand economic reality.
  That point applies forcefully to the debate about the nature of the PSBR. The Government's central point is that they wish to reduce the PSBR both absolutely and as a percentage of GDP step by step and year by year. That policy profoundly misconceives what is necessary at this point in the economic cycle. I have no doubt—several Opposition Members have made the point—that we must now improve demand in industry.
  I had a meeting today with some representatives of the chemical industry, who told me that they could increase production by 30 per cent., if there was demand, with no increase in manning or other overheads. The absence of that 30 per cent. represents a massive loss, if one adds up the loss made by the chemical industry during the past 12 months compared with the profits made in previous years. That is the marginal effect that they need to make a profitable business. They must take measures, which we would all regret, as a result of the difficulties in which they have been placed by the Government's failure to sustain demand at a reasonable level. To do that we will probably need a higher nominal PSBR.
  The Government ought to set out clearly some of the effects and consequences of looking at PSBR in the way they do. First, the way in which the Government set out the PSBR takes no account of the effects of inflation. Inflation massively erodes the real value of debt. We all know that in times of rapidly rising inflation it is better to be a debtor than a creditor. We know that from our personal experience. That is equally true for the Government.
  In its quarterly bulletin of June 1981 the Bank of England made an estimate of the effects of inflation-proofing the nominal PSBR. At that time the PSBR in nominal terms was over £12 billion. In real terms that became £0·2 billion. A 6·2 per cent. PSBR percentage of gross national product in nominal terms became a PSBR of 0·1 per cent. in real terms.
  If one does the same calculations for the present level of PSBR, one finds that it was negative in 1981–82, that it will be negative in the current financial year, and I have no doubt that in the two years to come outlined in the Red Book the Government will do no real net borrowing defined in those terms.
  The total national debt is a much larger figure. Its percentage of GDP was no less than 85·3 per cent. in 1964. We did not hear much about that at the time. That percentage has come down steadily and now is about 48 per cent. Our economic fortunes have declined almost in parallel with that steady reduction in the total national debt as a percentage of the GDP.
  Secondly, as set out by the Government, the PSBR figures take no account of the state of the economic cycle. However, that has an enormous effect. We know that each person who is unemployed adds £5,000 to the PSBR. There are about 3 million people unemployed. Therefore, about £12 billion is added to the PSBR, which is larger than the target for which the Government are aiming this financial year. If one begins trying to do something about unemployment by cutting taxes or increasing spending,
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  one will reduce the PSBR. That is a major factor in the vicious circle that the Government have entered in the last few years.
  Finally, the PSBR, as it is presented by the Government in all the economic documents, tells us nothing about what the borrowing is for. It makes no distinction between whether the borrowing is for current or capital expenditure. If the figures were divided, one could see readily that the PSBR is less than the gross capital formation in the public sector.
  If we looked at the figures in that way, we would be looking at them in a straightforward, businesslike way, which even the most conservative financier could understand. No one would lose by that. It is a pity that the Treasury Ministers are stuck with out-of-date fashions that conceal more than they reveal about the true nature of public finance.
  The Government's final argument is that it is all very well to talk about distinctions—which are sensible public accounting distinctions—but at the end of the day the Government must find the money. They borrow, the PSBR increases, the Government have to sell more gilts, which means that interest rates generally will rise. Unfortunately, that is as equally untrue as all the other simplistic assertions that have been made by the Government in connection with the PSBR.
  The assertion blurs the distinction between the behaviour of gilts, which are long-term debt, and money market rates, which are short-term debt. Money market rates are what matter to the industrial borrower. They behave independently of gilts. Often gilts follow the money market rates rather than the other way round, which one must accept if one believes the Government's view of those matters.
  That is why there is no correlation between the PSBR and the level of interest rates. There has been no correlation over the past 10 years. There was a high PSBR in 1974, 1975 and 1976, when it was running at about 10 per cent. of GDP. Interest rates were roughly the same as they are today. Often they were lower than they are at the moment—at levels such as 7 per cent., 8 per cent., 9 per cent., or 10 per cent. That shows that there is no correlation between those two variables, on which the Government have staked their all.
  Mr. Richard Page: Surely the hon. Gentleman is ignoring the other side of the equation, which is the exchange rate. During the period to which the hon. Gentleman refers, the exchange rate of the pound against the dollar was going down like a stone.
  Mr. Horam: That is not relevant when the Government are proclaiming from the rooftops that what matters in keeping down interest rates is the level of PSBR. That is the fundamental point. It was as true at that time as it is now.
  Apart from the level of money market rates, it is open to question whether gilt yields rise if the PSBR rises. It all depends on the way in which the Government of the day present their case. If the Government go round saying that they will not pay any attention to inflationary consequences of their policies and that the only important thing is to reflate the economy, that will affect sentiment in the market, gilt yields will rise and there will be higher interest rates. That is the danger in the Labour Party's position. The right hon. Member for Stepney and Poplar

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  said that he did not care much for money supply—I forget the exact exclamation or gesture that he used. That showed his fundamental approach to the aggregates.
  If one adopts that approach, and if that is widely known, one will take the consequences in the market. That is inescapable. However, if one has a clear policy about containing the rate of inflation, but one is prepared to reflate, that will probably have a more favourable effect on the market. We all know that to be so from the way in which the market behaves.
  Therefore, it is possible, by means of a skilful approach to the aggregates, to pursue a policy which, on the one hand, contains inflation, and, on the other, gives industry some hope. The tragedy is that the Government have never tried it.
  7.47 pm
  Mr. John Browne: In general I strongly support the Government and their economic policies. Therefore, in general, I strongly support the Budget and the Finance Bill.
  In particular I support the increased allowances that will boost employment in the construction industry and therefore encourage private investment in construction. I support the help for distressed areas—the £70 million urban aid programme. I support the innovation package for space technology, robotics and teletext. I also support the exemption of mobility allowance from tax for charities and the needy.
  I strongly support the completion of the move to allow companies to buy their own shares. I agree with my hon. Friend the Member for Hertfordshire, South-West (Mr. Page). I heartily support what he said about small business in general, particularly what he said about videotex or the information technology industry. I agree with many of the remarks that were made by the hon. Member for Gateshead, West (Mr. Horam) on that subject. He is absolutely correct.
  I note the freeze on gas prices. I ask my hon. Friend the Financial Secretary to consider whether the prices of all State-owned monopolies should be subjected to the Monopolies and Mergers Commission. If we are to have State-owned monopolies, which I believe are damaging to the economy, and which exist because it is difficult to sell them—because of the index-linked pension fund nobody can buy them—their prices should be submitted to the Monopolies and Mergers Commission, as they would be if such a monopoly existed in the private sector.
  Mr. Straw: Is the hon. Gentleman not aware that it was not the British Gas Corporation that forced up gas prices but the Government?
  Mr. Browne: I was not saying that. Gas prices had been frozen to cook the books of inflation for several years. This Government said that prices should reflect the real gas price plus 10 per cent. I do not go wholly along with that because I think that the gas price should not just be set by the Government but submitted to the Monopolies Commission.
  Mr. Sheerman rose——
  Mr. Browne: I should like to give way but I shall not because Mr. Speaker will not let me speak again for ages if I speak for too long.
  On monetary targets I noted with interest what the hon. Member for Gateshead, West said. I agree with him partly
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  on that as well. The Government were correct to de-emphasise the high profile of monetary targets. This is a much more realistic approach. Monetarism, as I understand the definition of the word—and I am a monetarist—is that it is all about Government spending. It is the control of Government spending that is critical, not the control of money supply.
  I have never believed that money supply, if there are free exchange controls and a free banking system of credit, is in any way in the control of the central bank or the Treasury. I cannot follow a Government policy which fixes a Government target for money supply in such a free market. I heartily approve of the de-emphasising of the targets.
  For instance, the money supply responds—rises or falls—merely in relationship to the demand for credit. If a manufacturer or a wholesaler wishes to build a new warehouse for £5 million and he borrows £4 million on an equity of £1 million to build the warehouse, then money supply—M3, or if he borrows it in sterling, sterling M3—will rise by £4 million. If he does not make that investment decision, at the margin, sterling M3 stays at the same level. Therefore, the Government directly are not in any way in control of money supply, but their policies influence the growth or fall of money supply.
  Governments are responsible for, although not always in control of, Government spending. This is the most important point that I should like to bring out and that is why I heartily approve of the de-emphasising of monetary targets.
  Mr. Campbell-Savours: The hon. Gentleman says he is a monetarist?
  Mr. Browne: I say I am a monetarist because in my view monetarism is about Government spending, not monetary targets.
  Mr. Campbell-Savours: Move with the tide.
  Mr. Browne: I should like to refer to two remarks made by the right hon. Member for Stepney and Poplar (Mr. Shore) when he opened the debate for the Opposition. First, he made a great point of illustrating how our country was so much worse in terms of output than competing countries in the OECD. I should agree with that but it is not a fair statistic and it is not fair to blame the Government for that.
  Mr. Austin Mitchell: Why is output down by one fifth?
  Mr. Browne: I shall try to explain to the hon. Gentleman if he will let me have the time.
  The United Kingdom was far less competitive than other nations. This was because we had inflated our economy and accepted overmanning to a grotesque degree.
  Mr. Mitchell: Especially in the City.
  Mr. Browne: This was a result not just of two or three years but of 30 years' decline, with accumulated overmanning and increasing inflation. This is a false argument because output is not a basic statistic. Output reflects another basic statistic and that basic statistic is sales.
  It is no use producing if one is not selling one's product. Therefore, sales are the key. They reflect the competitiveness within a given level of world demand. If

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  overmanning and inflation are rife then we are less competitive. If we are less competitive we achieve fewer sales, regardless of the world recession. In a deep recession the fall in sales is magnified. If there are fewer sales a wise business man has less output because he does not want to finance endless inventory. So the key is competitiveness. That is what the Government have set about increasing. That is the key to their policy. They want to improve our competitiveness by reducing inflation and overmanning. Therefore, it was unjustified of the right hon. Member for Stepney and Poplar to level the charge that our output fall is related to the performance of the Government.
  Secondly, the right hon. Member for Stepney and Poplar mentioned a fall in world demand and blamed it on Governments. He asked why they were not boosting their economies to take care of it. This was easy to do a few years ago when one started from a relatively stable world OECD economy, but the root cause of the present severity of the world recession is that we are reacting to the synthetically over-stimulated economies of the 1960s and the 1970s. It is the past excessive inflation policies of OECD Governments that have increased the severity of the present world recession.
  This brings me to the question of inflation and indexation. In the old days we used to have rotten boroughs in which politicians paid for votes.
  Mr. Mitchell: And rotten politicians.
  Mr. Browne: At least, they paid with their own cash. They bought those votes with their own money. Today and in recent history politicians have used our cash to buy votes. They have done it by over-taxing and then borrowing, with a net result of inflation. Inflation has been used by Governments over the past 20 years to buy votes. That is why it has been so popular.
  Inflation is the second greatest economic con trick and I hope that I have shown that responsibility for it lies mainly with Government. It lies not with the unions, or trade union members, or business, or management, but with Governments. The greatest economic con trick of all is indexation, particularly indexation that is itself indexed to inflation. I should accept indexation if it were indexed to productivity or the gross national or the gross domestic product, but I have grave disagreements with the Government on their policy of indexation. Indexation to the rate of inflation is merely an aspirin or a painkiller. It tends to dull our minds to the pain of inflation.
  Indexation merely makes inflation easier to live with because it insulates everyone that benefits from it, either completely or partially, from inflation. With pay, tax, social security, and pensions indexed inflation is easy to live with. If a person is fully insulated from inflation he has a vested interest in the continuation of inflation. If part of a society is index-linked and part is not, then there is a huge economic benefit to those who are index-linked if inflation continues.
  Such people will then vote for any politician who comes along with inflationary policies. The fundamental danger to which my right hon. Friends are exposing the country is that by extending indexation linked to inflation we are diminishing the will—it is hard enough anyway—to reduce inflation by a painful reduction at the grass roots
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  level. If 60 per cent. of the country is index-linked, which party will ever be voted in again if it wants to come in on a policy of reducing inflation?
  Mr. Sheerman: The hon. Gentleman is preaching the wickedness of indexation, but will he allow me to ask whether his fees as a consultant to the Midland Bank—I think—are index-linked or whether they are a flat fee?
  Mr. Browne: I had not expected to have the opportunity to say anything on this subject. I have declared my interest in the Register of Members' Interests as a consultant to Barclays Bank. It is a flat fee, and it has not been raised since I have been in Parliament, let alone index-linked, because it is a flat contract.
  The real evil of indexation is that it cements inflation into the economy. It is for that reason that I believe that the Government should reappraise their present strategy. Instead of rolling back indexation and inflation, the Budget and this Finance Bill are extending indexation, thereby building in inflation.
  I may be asked "What about the indexation of capital gains? Surely that is a good thing." If we are to have indexation, then we must have the indexation of capital gains—but why not all capital gains? Why just this year? Why have capital gains tax at all? It is a low yielding tax—it yields 1 per cent. of the revenue—and it involves an enormous amount of wasted mental energy on the part of individuals, companies, stockbrokers, lawyers and accountants. It is a totally unproductive tax, it creates a great deal of aggravation, and it discriminates against investment in British industry.
  In my humble opinion, the extension of indexation, especially to the gilt-edged market, is outrageously irresponsible. The argument that indexation will encourage financial responsibility would apply only if indexation were linked to the gross domestic product. Frankly, the reverse will be true if indexation is linked to the rate of inflation. I agree that index-linked gilts offer a Government a new source——
  Mr. Straw: Does the hon. Gentleman appreciate that in the last two years that would have meant a substantially increased tax burden on capital gains tax payers—not a decrease in their burden?
  Mr. Browne: Yes, of course. It is an interesting point. However, it will not apply, because the indexation is starting only from now. That is the point. If we go back two years, why not go back to 1965 and take the genuine case? Why take two isolated statistics, to give the lie to the point? What the hon. Gentleman says does not help the discussion.
  Index-linked gilts offer the Government a new source of relatively low-cost funding. A huge amount of money can be raised, at a nominal rate of perhaps 2½ per cent. to 3½ per cent., but who will pay the bill when those gilt-edged securities come to maturity in 1988? That is the real problem. On the surface, it looks like cheap and ready money for the Government, but who will pay, in the absence of a sinking fund? If the Government intend to have index-linked gilts, they are morally bound to provide a sinking fund that adjusts with the rate of inflation for repayment at maturity.
  All hon. Members know that I am an ardent supporter of the Government. It therefore hurts me greatly to have to say that I can accept indexation of gilts only if a sinkng

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  fund is provided. I can accept the extension of indexation only if I am genuinely convinced of its advantage in the national interest, as opposed to the Government's interests. If I am not convinced of that, it is unlikely that I shall support the Government on the Third Reading of the Bill. Meanwhile, I shall support Second Reading in the hope that my right hon. Friends will accept amendments, either in Committee or on Report, that will render the Bill financially responsible and in the long-term interests of the nation.
  8.7 pm
  Mr. Derek Foster: I am glad to follow the speech of the hon. Member for Winchester (Mr. Browne). I enjoyed his entertaining, creative and interesting analysis of our economic problems. I enjoyed, too, his repeated statements of how ardently he supported the Government, and then proceeded to demolish the main leg of their financial strategy.
  There seem to be few defenders of the Government's financial strategy, although we may hear one shortly. No respectable economic opinion seems anxious to sustain the strategy. We have witnessed the final discrediting of that strategy in the Budget Statement and in the Finance Bill.
  In the early months of this Government, we were sickened by being told that inflation could be defeated simply by controlling the money supply and that inevitably—perhaps after 12 months, 18 monts or two years—there would be a reduction in inflation. The experience of the last three years has denied that proposition. The hon. Member for Winchester welcomed the Government's change in emphasis, saying that he welcomed the present flexibility. He defined monetarism as the will to cut public expenditure. He said that it had nothing to do with controlling the money supply. I do not know whether the Government feel comfortable when they hear that.
  Mr. John Browne: I did not say that it had nothing to do with the money supply. I said that the money supply was not under the Government's control and that therefore the Government should not imply that it was.
  Mr. Foster: I thank the hon. Gentleman for reminding us that the money supply is not under Government control. We have certainly had plenty of experience of that.
  What was initially put forward as a new and radical financial strategy has turned out to be good, old-fashioned deflation. The emphasis has been more and more on reducing wages and the power of the unions so that real wages can be forced down. We shall see more of this anti-trade union legislation, and we shall hear more Government statements about how important it is to restrict pay increases. Initially, there were no statements about the need to control pay increases—it was purely the money supply that would achieve that. It did not even matter whether wages in the public sector were controlled—the money supply was sufficient to do the whole job.
  I am sorry that the hon. Member for Bath (Mr. Patten) has left the Chamber. He has been here for most of the debate. The hon. Gentleman made an interesting and constructive speech. It was interesting to observe the animation in his speech when he talked about pay bargaining and unemployment. I could not help but reflect that it was sad that he and his fellow wets sold their
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  birthright for such a small mess of potage at the time of the Budget. They were bought off at a small price to accept what they previously claimed was the need to reflate the economy, and what we now know to be at least a neutral if not a further deflationary Budget.
  The Guardian report of the report of the Select Committee on the Treasury and Civil Service, which was published yesterday, states:
  "The Government's forecast of 2½ per cent. a year economic growth is based on 'precarious assumptions' and could involve unemployment rising above three million during the cyclical upswing."
  The Select Committee underlined what we said at the time of the Budget—that the Government were assuming that unemployment would rise by a further 300,000. The Government have denied that that was a forecast or a prediction. Nevertheless, it is an assumption on which public expenditure—certainly on the social security Vote—is based. No one can deny that. The Select Committee emphasised that the Government's present policies may result in an increase in unemployment beyond 3 million.
  The Select Committee report also states:
  "That the assumed rate of growth over four years of a cyclical upswing is insufficient to reduce unemployment significantly is clearly disturbing, as it suggests a trend of increasing unemployment over the cycle as a whole."
  Unemployment is the greatest moral, political and economic challenge of our time. We shall be judged harshly by history as the complacent men and women of the 1980s, just as we regard those who handled our affairs in the 1930s as failing to tackle the problem. The Government have created a no-hope and a no-future society for many of our young unemployed. Of the under-25s who are now unemployed, 440,000 have been unemployed for more than six months. An increasing number of under-25s have now been unemployed for more than a year. Once they have exhausted their entitlement for consideration for special programmes, they are propelled on to the dole. There is seething anger, bitterness and disillusionment. The thin veneer of civilisation that covers our society was brittle under the weight of rioting that occurred in our inner city areas last summer. We must warn again that, unless the Government accept their responsibility for 3 million unemployed and begin to act, we—society—will hold them responsible. We expect them to act. It is no longer sufficient to say that nothing can be done. We shall be condemned by history if we do not tackle this problem.
  All we have done for the 3 million unemployed so far is to reduce their benefits and hound them with the DHSS fraud squad. If the Government insist on taxing the unemployed, they must restore the 5 per cent. abatement. I know that this is a matter about which a number of Conservative Members feel strongly. I hope that in Committee there will be amendments by Conservative Members that the Opposition can support on the restoration of the 5 per cent. abatement.
  The North of England has suffered greatly under the Government's economic policies. We were looking for a stronger regional policy, but the Government have made industrial development certificates completely ineffective. Ministers have confessed with disarming frankness that they expect new industries to bypass the old industrial areas. Where does that leave the North of England? If we

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  are not to benefit from new industries, must we look to small business development alone for the regeneration of jobs in the region?
  I am keen on small business development. I have welcomed most of the measures that the Government have introduced to assist such development. However, the Government have destroyed more small businesses than they have created. I shall produce evidence from the Department of Industry to support that contention. The Government must recognise that in the North of England it will be extremely difficult to generate small businesses. The Government introduce one or two tax incentives and, lo and behold, small businesses flourish in the South. That does not happen in the North of England. For example, only about 3 per cent. of all the applications for loans under the loan guarantee scheme have been taken up in the North of England. When we begin to look behind that fact, it becomes clear that the infrastructure for small business development in the North of England does not exist. It will have to be recreated, and that will have to be done by more Government intervention. There lies the Government's fundamental mistake.
  A report that appeared in the Financial Times on Friday showed that more than 35 per cent. of the companies set up in 1980 were based in the South-East, whereas poorer areas, such as Northern Ireland, East Anglia and the North of England, had about 3 per cent. each. The greatest proportional loss was in the Northern region, comprising Teesside, Durham, Northumberland and Cumbria. There were 5,500 company deaths and 4,200 births, which resulted in a net loss of 1,200—about 2 per cent. of the total stock of companies. That is a serious state of affairs. I hope that Ministers will listen to my plea. If they are looking to small business development in areas such as the North of England to generate more jobs, they should take note that the region is losing them faster than they are being created. The Government must do something about that problem.
  In spite of all their boasts about reducing taxation, the Government have increased the burden of taxation. My hon. Friend the Member for Blackburn (Mr. Straw) rightly said that before the Budget the average family in receipt of average income was paying about £29 more per week in taxation than in 1929. The Government have clearly increased the burden of taxation. In spite of all their feverish attempts to reduce public expenditure, we find that they have increased it as a percentage of gross domestic product.
  It often seems to the Opposition that these feverish attempts have simply meant that public expenditure on essential services has been reduced and that the money has been diverted into funding unemployment. About £15 billion has been spent in funding unemployment. That is more than the PSBR and about double the North Sea oil revenues. What a waste of financial as well as human resources.
  My hon. Friend the Member for Blackburn stated that we had lost about one-fifth of manufacturing output in a slump which has been more severe than that between 1929 and 1931. I understand that we are now producing about one-fifth less than during the three-day week imposed on us by the previous Conservative Government. What a disastrous record. Yet the Government have been allowed to get away with it. It has taken the Falkland Islands crisis
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  to bring the Government to their knees. However, the 3 million, or perhaps 4 million unemployed, have made little or no impact on the Government.
  Our complacent acceptance of mass unemployment is a severe condemnation of the whole of society. I hope that in the next Budget and Finance Bill the Government will come to terms with the greatest problem that we face.
  8.22 pm
  Mr. Anthony Beaumont-Dark: Much has been said about the reports of the Select Committee on the Treasury and Civil Service. These reports are wheeled out in every Budget debate as though they were some sort of Holy Grail or shibboleth to bash the Government with, or to lend prejudice or support.
  One sits on that Committee for many hours. The most important things that come out are the evidence that the Committee takes and the answers that it gets. Many comments have been passed on the 1982 Budget document. The Committee cross-examined witnesses, including the Chancellor of the Exchequer, Treasury officials and Gordon Richardson. When one reads the evidence and answers given to some questions about the PSBR, M3 and so on, one finds that comments made in the House, and often in the press, are more concerned with people's prejudices and the criteria which they wish to set than with those tightly set by the Government in the shape of the Chancellor.
  If anybody bothers to read the reports, he will find—as some of my hon. Friends might agree—that we go into the MTFS, FSBR, PSBR, and all other "BRs" ad nauseam. In the last debate on this issue the hon. Member for Colne Valley (Mr. Wainwright) cross-examined the Chancellor at some length on the Government's strategy. The Chancellor has not laid down one sheer guideline that one factor must be taken into account. The hon. Member for Colne Valley was puzzled about what criteria the Government were adopting. The words "training" and "hybrid" came into the matter. In answer to a question, the Chancellor said that there was not one "friend" among all the factors, but that there were three well-known friends among a number of friends.
  The Chancellor was trying to say that he was attempting to find a way—as everybody in a sensible frame of mind was trying to—of reading what the monetary aggregates really were. I served for almost two and a half years on that Committee. The Chancellor has not been trying to set a firm target, but has been trying to get a sense of reality into what the vast sums circulating in our economy and in world economies meant in the sense of value and of trying to keep a balance between inflation and what should be good for Government and private expenditure.
  Economics is not an exact science. Indeed, it is not a science at all. It is basically an art. It would be far better if, in writing about these things, people did not automatically assume, as some econometricians do—and as a member of our Committee obviously thought—that if one could get figures together and feed them into a computer, all the answers would come out and all would be perfect.
  The great problem with which any practical Chancellor must deal is the great imponderable of people's expectations. In the end it depends upon the changing face of people's expectations. The hon. Member for Batley and Morley (Mr. Woolmer), who was a valued member of the Treasury and Civil Service Committee for some time

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  before he became a shadow spokesman, made one or two points that do not have a basis in reality. He talked about the Western world deflating, so causing the problem, as if there were some great capitalistic or governmental conspiracy to deflate by cutting Government expenditure so that people would be brought to the harsh realities of the world in which we live.
  On pages 16 and 17 of the Red Book, there is no sign of Government expenditure being cruelly cut. The only figures that I see are that Government expenditure will grow from £107·9 billion in 1980–81 to £119–5 billion for 1981–82, and from £131·5 billion for 1982–83 to £148 billion in 1984–85. It has been said that inflation makes the PSBR negative in real terms. The point was made that volume growth can be nil. However, in the end the world pays its debts in cash. It is no good assuming that, somehow or other, like indexing, one can index something away by saying that it does not exist, because in the end cash does exist.
  The one thing that we cannot index away, or keep in line with all our hopes of indexing this and volume terms that, is growth. There is no automatic balance. There is no automatic growth, whether it is Guest Keen and Nettlefold or the shop on the corner. The only automatic aspect is the Government asking people for money that they have not earned. That is what causes the imbalance. If some great guru could produce the idea that companies could somehow or other index their sales, that would be true, but in the real world, with all this talk about volume, inflation-adjusted costing and the idea that somehow inflation is a miracle that negatives the PSBR, it is not. If one owes £10,000 million, one still owes £10,000 million whatever terms apply.
  The Budget rightly makes no false promises. The hon. Member for Bishop Auckland (Mr. Foster) made the point that growth assumptions are precarious. Of course, Government assumptions are precarious. They are based upon a precarious world and there is nowhere more precarious than the United States at the present time. In the end, all the Western economies' hopes depend upon that country. If America goes sour, one may assume that the rest of the world will go sour with it. The problem in the United States is that real interest rates are higher than they have ever been in its history.
  Mr. Straw: They are following Britain's monetarist experiments.
  Mr. Beaumont-Dark: The hon. Member says that that is because America is following Britain's monetarist experiments, but it is not. The Americans had a budget deficit of $58 billion in 1981. It will be $109 billion in 1982, and the forecast is that it will be $157 billion in 1983. That assumes that the American economy grows by 4½ percent.
  Many people say that unless America follows a more sensible policy and reduces the extraordinary high level of real interest rates, there will be bankruptcies on a scale that will test America's financial credibility to withstand them. Therefore, America is not a country that is following a hard monetarist policy. It is spending too much.
  In following a sensible public expenditure policy the British Government are trying to make sure that interest rates really come down. We must change people's expectations that, somehow or other, the Government can
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  index everything away and that, as long as inflation continues, by sleight of hand the Government do not have to pay money back.
  Obviously the pound is under pressure at this stage. It always is whenever there are international imponderables. To the financial world, a fleet setting out for foreign waters is not the best news that it could ever think of. Because the £ sterling is now falling, the worst response that the Government could make would be to adopt a rigid policy of adjusting interest rates to bolster the pound.
  It is important that industry should not suffer at a time when the fragile growth that is so necessary and vital—and based on excellent figures that show that inflation is falling—is beginning to appear. It would be a cruel blow if we used interest rates precipitably to defend a pound that does not need defending, because basically it has a great strength behind it.
  Certainly the figures show that what has happened to the pound could be good news for industry. Every percentage point decline in interest rates is meant to mean about £250 million to the corporate sector, yet responsible people have calculated—and I agree with them—that every 1 per cent. decline in the exchange rate yields the corporate sector up to five times more. Some people say that if the level of the pound falls too much it will cause inflation. My view is that at this kind of level the pound will cause growth. Therefore, good can come from that.
  I hope that the Government will press ahead with their policies. They have been painful and have caused some of the unemployment from which we are now suffering, but the idea that Government policies have caused 3 million unemployed is not borne out by reality, because even the best pundits have suggested that if we spent another £2,500 million we might just reduce unemployment by 150,000. It is a difficult policy on which to be steadfast.
  Too many Governments have always gone for the short-term advantage and forgotten the long term, which we are now picking up. I believe that this is the right strategy. The Government are showing a pragmatic reality that one should not stick rigidly to a doctrine, but should keep firmly in mind that we must not spend what the country has not earned. It is difficult to get that balance right, but I believe that the Government are doing it in the right way and at the right time.
  8.34 pm
  Mr. D. N. Campbell-Savours: The debate has been marked by two distinct strains. The first has been the view expressed by Conservative Members and their reservations about the principle of indexation. I see that as a defeatist view of economic policy. Where wealth is being developed and the Government promise to expand output and create jobs indexation should be afforded. When I hear hon. Gentlemen express those reservations it is as if they accept that it is impossible for Governments to deal with the problems of falling output and increasing unemployment.
  The second thing that I recall tonight is the brilliant contribution—I can only describe it as that—of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) when, in the middle of his contribution, over a space of ten minutes he demolished the Government's position. It was a sheer demolition job. I only wish that the people could have heard what he said when he outlined the disaster of the Government in output and the effect of that strategy on unemployment and then compared our

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  record with those of our competitors abroad. Unfortunately, as we know, thanks to the media the people will not know what he said and we shall have to look forward to another day and opportunity to say the same again.
  I recall, too, the Government's euphoria and indeed, perhaps, the popular euphoria outside this Chamber, when the Government's budgetary measures were introduced. Many people believed that the Budget would be beneficial. Anyone who examined the national newspapers the following morning, who understood what was happening, would have been horrified because of the reservations that were to be expressed and had been expressed by the right hon. Member for Chesham and Amersham (Sir I. Gilmour), that unless the Government conceded the case for reflation, there would be no material effect on unemployment. Unless people heard that contribution and understood it they would have been fooled. Even today there are people who believe that the Budget will be beneficial.
  I have a list of all the measures that have been introduced over the past couple of years, as Government Members go into their arguments about the need to expand and develop small businesses and other forms of enterprise: the new enterprise programme, the business opportunities programme, the enterprise zones business start-up schemes, the small company innovation fund, the loan guarantee for small businesses, business counselling, tendering for Government contracts, advice for small businesses, business incentives and loan finance arrangements for small companies. All those measures, many of them excellent and supported by us in Standing Committee debates on successive Budgets over the past three years, are worthless unless the Government are willing to reflate.
  That is the message that comes to every Member of the House when he goes into his constituency and talks to representatives of manufacturing industry. They know the truth. The Confederation of British Industry knows the truth. The Institute of Directors proposed higher inflation than was involved in the Budget, which was not reflationary. My right hon. Friend the Member for Stepney and Poplar at the beginning of the Budget debate pointed out not only that the Budget was deflationary but that if one took the year-on-year position the Government would have had to increase expenditure by £5 billion to bring public expenditure up to the volume that it was at April 1981.
  Over the past 12 months there has been a severe deflation of the economy which, according to the report of the Select Committee on the Treasury and Civil Service, is perpetuated in this Budget. According to that Committee, the truth is that Government spending today under those proposals will remain roughly what it was in 1981 and the Government's revenue raising will be roughly what it was last year. Therefore, the flexibility that has been shown in the medium-term financial strategy will have little impact on the economy.
  I wish to refer to crucial words contained in the report that many outside the Chamber will use in coming months. It said that the growth rate
  "suggests a trend of increasing unemployment over the cycle as a whole. It is all the more disturbing when that rate of growth is itself based on precarious assumptions".
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  To hon. Members representing constituencies like those in the Northern region with high levels of unemployment, that statement, according to my understanding, means that we shall have to live with those high levels of unemployment until the Government are removed from office. It means that my constituency in Workington has to live with nearly 5,500 people out of work because the Government have built into their financial strategy and their economic programme no measures that can help to relieve those high levels of unemployment. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) may shake his head. The hon. Gentleman will perhaps indicate what measures in the Budget strategy may put those 5,500 people in my constituency and the 22,000 people out of work in Cumbria back to work.
  Mr. Beaumont-Dark: The main strategy is surely to get inflation properly and permanently down from the rocketing levels that were previously seen. The decision over national insurance surcharge is meant to help to put the money back into industry that the Labour Government originally took away. It is also meant to change people's expectations and the idea that one can have what has not been earned. When that is right, the people of Workington and Birmingham will go back to work in permanent and sensible jobs. The Government are not planning for high unemployment.
  Mr. Campbell-Savours: The hon. Gentleman will have heard my hon. Friend the Member for Bishop Auckland (Mr. Foster) point to a 2 per cent. contraction in the number of companies in the Northern region. Nearly 40 per cent. of the new firms that have been set up during the Government's period of office have been established in the South-East. The hon. Gentleman fails to represent the interests of his constituents in Birmingham if he is willing to sit back and watch the free market strategy of this Government create jobs in the South-East at the cost of jobs in Birmingham and to an even greater extent in the Northern region. That is the practical reality of the application of this policy. There is no evidence to suggest that any jobs have been, or will be, created. I again invite Conservative Members to tell me how 5,500 people in my constituency will be put back to work.
  Mr. John Spence: I happen to know the Workington area reasonably well. It is not dissimilar to my own area in East Yorkshire. There has been a considerable take-up of vacant factories in places such as Malton. Most of the pre-built factories in Malton have been spoken for. In Pickering, the nearest town to where I live—it is not in my constituency—all the factories have been spoken for. There has also been a considerable uplift in Thirsk. I should have thought that the small business start-up schemes about which the hon. Gentleman has been cynical and critical have proved of considerable assistance to areas such as his and mine. Has he not found this to be the case in Workington?
  Mr. Campbell-Savours: The hon. Gentleman talks about the use of industrial factories. I can take him to parts of my constituency where whole industrial estates are empty and where factory shells stand empty because there are no takers. This is because the Government are unwilling to reflate and so create precious manufacturing jobs. Some small firms have set up but this has not occurred on anything like the scale needed to solve unemployment in the Northern region.

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  I believe that the economy is moving out of equilibrium and out of balance. One of the most distorting factors has been the exploration of oil in the North Sea in recent years. It seems that oil, by boosting the balance of payments, has somehow given the country a grossly misplaced judgment of the real wealth being generated by active people. It has created two types of person in society. That is certainly the case in my constituency. There are the relatively well-paid industrial workers and those who are not well paid or who are unemployed and have no chance of employment. Opposition Members wish to promote not an oil-based economy that leaves 3 million or indeed 4 million people to languish in unemployment but one which uses precious human resources and what people have to offer the economy.
  During the past 15 years, under successive Governments, there has been a period of decline. To some extent, I include the last Labour Government. The Labour Party was in power only until 1976. Thereafter we were compromised by an alliance such as many people and some hon. Members now wish to recreate. That form of alliance politics fails to understand the deep and clear decisions that must be taken by Government. That is why I strongly advocate the alternative economic strategy advanced by the Labour Party both in the House and outside. It provides solutions to longstanding problems. It will enable the next Labour Government to take decisions which the last one and successive Governments since the mid-1960s have failed to take.
  I shall agree with much of what Tory Members say when I see them chart the slow decline of the British economy. They fail to realise that the compromise politics of the early 1970s and the late 1960s will not resolve the problem. That can be achieved only by the new politics of the 1980s which casts aside the dogma of the 1960s and the 1970s and demands the necessary intervention to resolve the country's problems.
  One major reason for that decline is that successive Governments have failed to intervene in the class divisions in British society. Society is divided by privilege in education, in health and in the rights of people at their place of work as a result of the complete unwillingness to introduce measures in industrial democracy. That society will not grapple with the problems of the 1980s and 1990s. Class, and the failure of Government to intervene in privilege, is at the heart of the problem that now exists. If the next Labour Government fail to intervene in those areas, they will be equally unsuccessful. At the heart of our analysis and our resolution of the problem in the future will be our willingness to intervene in areas where, historically, Governments have feared to tread.
  The lack of investment in manufacturing stems from the dogma of parties that are unwilling, for whatever reason, to take, for example, banks into public ownership. That would remove many of the restrictive practices in the way in which they lend money. If I had more time, I could cite substantial evidence given by representatives of 16 companies in my constituency who attended a meeting sponsored by the Department of Industry in a local hotel. That was only a few weeks ago. Many of them referred to the problems that I now describe and said that they were at the heart of the companies' difficulties. Representatives of manufacturing industry in my constituency at that meeting said that they believed that the banks should be taken into public ownership as the banks were incapable of responding to the problems of those companies.
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  Successive Governments have not cared to intervene in that area. I believe that we must intervene. We must cast aside our prejudices about public ownership and bring it about when it can be seen to be in the interests of industry. Many other countries have been willing to intervene in very Socialist ways, but have not sought to identify their approach in terms of Socialism. The Japanese do not call it Socialism when they take their banks into public ownership, any more than the French do. They simply do it because they believe that it is in the national interest. Yet whenever the Labour Party puts forward propositions that the Conservative Party can label Socialist in some derogatory way, Conservative Members merely undermine the case of the people whose interests they are sent here to represent.
  As the system increasingly fails them, the people of this country realise that the only reasons why they are out of work is that international bankers are trying to balance their books after the oil price increases of the past eight years. Millions of jobs are being lost and companies are closing simply to fulfil the requirements of the bankers to reduce consumption. The free banking system is imposing on the British working man a demand and a price that he cannot pay. The accession of the next Labour Government is the only way in which his problems will be resolved in his best interests.
  8.51 pm
  Mr. Bowen Wells: The Government were elected to change radically the attitudes of people to their work and to their responsibilities to their families and friends. The Government started out to try to change the way in which we saw ourselves and the way in which we could help ourselves. They are doing what needed to be done many years ago. We depend upon ourselves on our initiatives and on the way in which we work at our workplace. The fundamental base of all economics is people and the way in which they work and are encouraged to work. Over the years we have learnt that for the State to try to take care of people from the cradle to the grave simply means that we take care of nobody. We lose self-respect, dignity and the ability to create the very wealth on which ordinary people must depend for their progress and their hope.
  Today, I wish to speak about unemployment. I and many of my hon. Friends give quarter to no one in our concern about unemployment and the great difficulties that it involves, not just in the South-East, in which I have the privilege to represent a constituency, but throughout the country. I believe that the Budget and the Finance Bill radically increase and improve our ability to provide work, to enable individuals to use their ingenuity and enterprise to start new companies and to make a greater contribution to their existing companies to expand production and to be more productive. That is the Government's great achievement. They have changed attitudes to work in the workplace.
  On taxation, I shall deal first with personal reliefs. I do not hide the fact that I believe that personal reliefs should have been indexed last year, but this year we have done it. This gives people an incentive to work. Many examples could be given. I cite the case of an unemployed girl in Stevenage, who is living on social security. Prior to this Budget and the changes in personal reliefs, she found that

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  she was better off staying at home than going to work at the McDonald's hamburger place in an adjoining town. She will be better off working under these personal reliefs.
  I hope that the Government will make it their ambition to raise the personal reliefs, not just this year, but next year and always, when inflation is eating away at real value. That measure is designed to increase the incentive for people to look after themselves when they are able to do SO.
  Clause 42 deals with contributions to local enterprise agencies. We must seek ways in which we can find some kind of cure and hope for those who are unemployed. The hon. Member for Workington (Mr. Campbell-Savours) listed, and threw the papers on to the Benches in a dramatic fashion, a large number of excellent enterprises and initiatives that have been taken to encourage businesses. He has dismissed them as irrelevant. The hon. Member for Bishop Auckland (Mr. Foster) did likewise.
  Consett, for example, was totally destroyed by the closure of the steel mill because it was a one-industry town. However, with the assistance of the special British Steel company designed to set up new businesses in Consett, there has been a mushrooming of small businesses and an enormous increase in employment. That has come about as a result of the combined efforts of the local authority, the former employer, British Steel, and the various Government taxation enterprises. That British Steel enterprise has introduced 29,000 new jobs into former rundown steel areas. This is another example of contributions to local enterprise agencies under clause 42.
  It is said that all the unemployment is in the North. However, my constituency has 12·6 per cent. unemployment, and that is likely to rise to 15 per cent. The new attitude that the Government have been engendering means that Stevenage has to help itself. This clause will enable existing companies to assist new companies to set up business.
  Stevenage is fortunate in having the Control Data Company. Its proprietor, Mr. Norris of Milwaukee, saw precisely the same de-industrialisation process taking place there. It is the Government's philosophy that those of us who are employed, and those companies that are prosperous, have a responsibility to try to help those who are not employed and to bring new enterprises forward. The Control Data Company has indentified 900 new areas of business and has put together the basic data needed to start such new businesses.
  By setting up a new local enterprise agency and attracting money in the way that the British Steel Corporation managed to do to Consett, we will be able to create new industries and put in new money. One hears talk about banks not assisting in such matters, but I have had promises of money from banks for unemployed people for an interest-free period, without personal security. That is the way in which businesses will be created. That is the only true way to mop up the unemployment and provide hope for our people. It is no good thinking that large corporations will do it. As has been demonstrated by speaker after speaker tonight, large corporations are generally trimming back and reducing their work forces considerably.
  Clause 59 deals with the industrial buildings allowance for small workshops. That is precisely what is needed for those wishing to start small business. Workshops of 500
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  sq ft will be set up at low rentals. I agree that we need a certain amount of governmental intervention to provide small workshops at the lowest possible rental. In that way firms will be able to use proper premises with the right health and work standards, and they will get off to a good start. Railways arches are one thing, but they do not offer the right means for starting a modern industry.
  Even further assistance is given in clause 113, which reduces duty on conveyances and leases. Again, that will help small businesses. Clause 128 provides for a reduction in the national insurance surcharge. That will reduce the costs not only of small businesses but of large companies. I am parliamentary consultant to International Distillers and Vintners, and I wish to make a plea to the Treasury. The manufacturers of Scotch whisky have to pay duty three or four months before it is restored via the purchaser of that spirit. For many years that has been on the Treasury's agenda for Finance Bills. Five years ago, a compromise was reached with the Labour Government. The industry was to be permitted to delay the payment of duty for six months. I hope that the Government will give that matter serious consideration.
  Ludicrously, it has been decided that Outward Bound schools must pay VAT. That will inhibit the training given and will hinder those who attend the schools from gaining the self-confidence and dignity that they need when setting out on the difficult tasks in life, particularly in an era when unemployment is rife and when they are being asked to go courageously into their own small businesses. That is much more difficult than joining a large enterprise.
  The Finance Bill takes us another step along the road to a self-reliant Britain which, through its enterprise, initiative and the ingenuity of its people, set free, will begin the slow task of mopping up unemployment and producing a country of which we can all be proud.
  9.3 pm
  Mr. Robert Sheldon: We are coming towards the end of our debate on the Second Reading of the Finance Bill. In the Bill we have seen the fine detail—the legislative precision that will implement the Chancellor of the Exchequer's Budget decisions.
  In the Budget the Chancellor of the Exchequer dreams his dreams of the sunlit upturns, where small businesses start and thrive and economic miracles blossom in the happy air of the Candy mountain. However, the Finance Bill shows where the money really goes.
  Year by year, during the Government's lifetime as Finance Bills follow one another, we have seen a clear shift of direction. As a result of the Government's policies, more than 95 per cent. of taxpayers are paying a higher proportion of their income in income tax. Only those with the very highest incomes are paying less. There has been a clear shift of direction out of the pockets of many of people into the portfolios of the wealthy. That has been the pattern of the four Finance Bills that have been introduced by the Government. My hon. Friend the Member for Batley and Morley (Mr. Woolmer) drew attention to that aspect.
  We started with the Finance Act 1979, which doubled VAT and introduced reliefs, especially for those with higher incomes. In 1980, we removed the lower rate band of 25 per cent., which applied to the first £750, and increased reliefs on the taxation of capital, with great relief on capital gains tax and capital transfer tax. The Finance Act 1981 dismembered capital transfer tax, raised the

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  bands of taxation and every 10 years wiped the slate clean for those paying capital transfer tax. Furthermore, it failed to index the Rooker-Wise personal allowances. It also brought about the sequestration of tax on the unemployed and those on strike. When one compares that with what has happened under schedule D, where people pay tax up to one year or even more years later, that was a severe imposition on those least able to defend themselves.
  In the light of those precedents, this fourth Finance Bill is fully comparable to the previous three. It continues the emasulation of the capital transfer tax and the work of converting it into what The Sunday Times has called a voluntary tax. The Bill also starts the work of demolition on the capital gains tax—a matter to which my hon. Friends the Members for Workington (Mr. Campbell-Savours), Bishop Auckland (Mr. Foster) and others referred.
  By introducing indexation as well as all the other reliefs, a tax which at present produces £600 million will reduce in the first full year to a revenue of £350 million. The further costs of indexation, as it is stated in the Red Book, are said to be "substantial". It is clear that, with the high costs of administration of this tax, its long-term future will not be in doubt because it has no future. So small would be the revenue and so high the administrative expenditure that it would shortly be on its way out. That is the position that the hon. Member for Winchester (Mr. Browne) considered.
  Taxation must apply to capital as it applies to income, because there are two different forms of investment. One has the intention of obtaining a capital gain and the other has the intention of obtaining a considerable income. Capital gains have a low rate of tax at 30 per cent., while investment incomes have a higher rate up to 75 per cent. For example, if I lend £100 to my local authority, I should receive about £14 interest each year. The reason that I get so great an interest is that next year the value of my £100 will decline. With inflation running at 10 per cent., my £100 capital, on which I obtain £14 interest, will decline to about £90 in real terms. The reason for the £14 interest is to compensate for the decline in my capital.
  The indexing provision of the Bill does not apply to such capital. Not only does it not apply, but I pay income tax upon the notionally high income from it. For as long as capital gains tax remains in existence, I shall be taxed on the income on my loan to the local authority or, if I go for capital gains tax advantages, I shall be taxed on some alternative asset that I would have bought at the level of the capital gains tax.
  There was some rough balance between the sorts of investment that I made, whether for high levels of interest—as in the local authority example—or for some other capital-producing asset. By introducing partial indexation, that balance has now been shifted.
  Mr. Ridley: In that case, why did the Labour Government, of which the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was a member, issue a Green Paper suggesting either tapering or indexation for capital gains tax? Did they mean not to implement it even if they found a way of doing it?
  Mr. Sheldon: The Financial Secretary is wrong. There is a case for indexation, to which I shall refer. I am objecting to the partial indexation that the Government have introduced. They have said that there is a particular
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  sort of asset or income-producing asset that should be indexed. They have chosen the assets that they believe qualify. I believe that the range can be wider. I shall try to explain that.
  We must ask why the Government have produced the bias between the income-producing asset and the capital-producing asset. If the Government believed that indexation was right and that it should be based, as all indexation is, not on a particular asset, but on the declining value of the pound, which is always altering, they could have proceeded in that way. It is peculiar that a Government who claim that they are conquering inflation should be so concerned about the consequences of inflation that they claim to have overcome.
  The motives that the Government have expressed are lofty, but the consequences of the policies are predictably selective. They are to assist the holders of wealth and to assist greatly the holders of great wealth. If the Government are so convinced about the fairness of indexation, why have they turned their attention only to the capital taxes? In his Budget Statement, the Chancellor of the Exchequer, in introducing this indexation, talked about the injustice to taxpayers. That is not the only injustice in the tax system as a result of the failure to index. Why has the right hon. and learned Gentleman picked on capital gains tax and capital transfer tax? There are other injustices. The problem is that someone can ask: why should a person who buys a house in Spain or in the West Indies receive an allowance for capital gains tax based on the United Kingdom retail price index? What has that to do with the asset that that person might want to buy?
  As a result of the shameful 1981 legislation, the tax refund for a person who becomes unemployed is not payable until he is fortunate enough to obtain another job. If he does not, the refund will not be made up until the end of the financial year. We must ask ourselves the important question: will that amount be indexed? It could be £1,000 or £2,000 for a person who has been unfortunate enough to become unemployed. That sum could be critical to the life of the family. Not only is that his money, but it is withheld and it is not indexed. The Chancellor of the Exchequer said that he could not allow the injustice to capital gains tax holders to continue; he found it intolerable. What about the injustice to the unemployed?
  Apart from the reduction of 5 per cent. that has been filched from the unemployed in lieu of taxation, they suffer the injustice of becoming unemployed. They suffer the injustice of having their tax refunds withheld. They suffer the injustice of their tax refunds being repaid up to a year later in debased currency. They suffer injustice upon injustice. If anyone's conditions are intolerable, those of the unemployed certainly are. It seems as if the Government will do nothing about them.
  Before the Government index capital taxes they jack up exemptions so that, before they take account of inflation, they start from a high base. We can spot a number of anomalies in the actions taken by the Government. We know that wealth is eminently suitable for taxation. It provides assured income, and it is taxed in nearly all European countries. This indexation is not being provided for fairness. If that were so, we could think of many others who have greater claims. We have to look for some other motive—possibly an economic motive.
  Do these taxes impose restraint upon our economy? This question can rightly be placed before the Chancellor. If we reduce taxes on capital and convert them into minor

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  optional taxes, will our industrialists bound forward in the way they did when the highest rates of tax were reduced to 60 per cent. in 1979? The answer is that, if they believed that, the Government would be concerned to lighten the burden on those who could create fortunes but not on those who inherited them. A number of studies have pointed out quite unequivocably that inheritance is the major determinant of wealth inequality. In the great majority of cases the large fortunes of one generation belong to the children of those who possessed the large fortunes of the previous generation.
  The proposals on capital transfer tax have been designed to assist in the maintenance of such fortunes. No other reason can be put forward for the provision last year to wipe the slate clean of the capital transfer tax provisions every 10 years. The measure enacted last year benefits those who have wealth at an early age and can take advantage every 10 years to pass it on.
  We have had capital taxes since 1894. It was expected that over a number of decades the great accumulations of wealth would gradually decline and the differences that remained would become socially and politically acceptable. Those great fortunes have not declined. Whereas there is general bipartisan agreement that taxes should be effective—that is seen year by year in amendments to the Finance Bill to make our taxes effective—in the matter of capital taxes there is no such unanimity. The great estates continue in existence because, when the Conservatives are in power, the integrity of the capital tax structure crumbles. The ghostly fingers of the landed dukes guide the Treasury pens that bring about the emasculation of this legislation before the House.
  The giant family fortunes continue. Families with names such as Beaufort, Devonshire, Lonsdale and Northumberland have lands worth hundreds of millions of pounds each—quite apart from the stocks of art treasures and other investments. There are other names with similar estates in the centre of this great metropolis of ours where the sums involved are ever larger.
  We have to examine why this is happening. When we consider the way in which this comes about, we have also to consider the way in which the Treasury and the Treasury Ministers have gone about their legislation. We know that the noble Lord Cockfield has been the Minister responsible. If we examine the lists of ministerial responsibility within the Departments, every year we see the name of Lord Cockfield. He was appointed on 6 May 1979. The other two Treasury Ministers were appointed about six or seven months ago. It is Lord Cockfield who deals with major policy questions on income and corporate taxation and casework on capital taxation. He is responsible for this legislation. I understand that he has now been transferred to another Department. I heard that about half an hour ago.
  I hope that this will be the last time that a Minister of State in the House of Lords is responsible for legislation. He cannot be brought before the House to answer for it, although he is primarily responsible here. Lord Cockfield has expertise that outmatches that of his colleagues. I am not denigrating his right hon. and hon. Friends on the Front Bench. It is clear that his knowledge, experience and background make him far more expert than anybody else. He devised this legislation, and he is the only Minister in
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  the Treasury who is answerable for it to Parliament. It is a wholly unsatisfactory situation. I hope that it will not recur. The Opposition should ensure that it does not.
  Many of these debates have echoed uncannily and eerily debates which took place on unemployment in the House 50 years ago. It is almost as though a number of actors here were reading the parts devised at that time. The problems are the same, and the arguments about them are the same. The record of our times—the most accurate of our country's chronicles—is to be seen in the bound volumes of Hansard, which fill many of the shelves outside the Chamber. There we read about Sir Stafford Cripps confronting Neville Chamberlain in 1933. In a debate on unemployment, he said:
  "If it is desirable for private enterprise at this moment to build houses … it is just as desirable for municipalities to build houses. It does not matter two pins whether the bricklayer is employed by a contractor who is working for private enterprise or by a contractor who is working for a municipality. It can make no difference."
  In the same debate, Harold Macmillan, as he then was, pointed out that the key to the problems of unemployment
  "lies, not in South Wales or in Durham, but in Downing Street and Threadneedle Street."
  Even more topically, because it is an echo of what the Chief Secretary to the Treasury said today, the Board of Trade said that the actuarial calculation of unemployment was based on 2½ million souls. It was not a forecast; it was an actuarial calculation.
  What was said in those debates was as little believed then at it was when the identical claim was made by the Chief Secretary to the Treasury today. It is all there in these debates—gloomy, threatening, with the blinding memories of the First World War unable to avoid the Second World War. In unemployment it seemed that one disaster was enough, and that a second catastrophe might be avoided. However, it seems that there is a maximum period in which the memory stays green. When such time is exceeded, a fresh reminder is necessary so that the lesson may be learned afresh. That is what is having to be rediscovered at great expense to us all.
  The Government, by their unemployment policies, will create a new and debilitating pessimism which, to our nation, is grievously dangerous and should never exist. It is only by having some confidence in our future that we as a people can ever regain our proper industrial place in the world. But how can confidence be acquired when 3 million able and employable citizens lie hidden away in their homes each day, or wander the streets with their thoughts and frustrations and, finally, their anger? The real wealth of our nation—it has nothing to do with the PSBR—lies in the talents, abilities and character of our people, and it is being squandered by the Government.
  In the precipitous decline of British industry over the past three years, we have seen manufacturing output drop by 18½ per cent., we have seen manufacturing investment drop, and we have seen company liquidations increase by 139 per cent. The Government believe that only the useless industries are closing. They point to the good ones which survive.
  What dismays us is that the Government are wholly unaware why that has happened. If a pestilential wind is sent through the factories and work places of our country and starves them of their livelihood, of course only the best and the fattest will survive. However, that is no reason for sacrificing one-fifth of our manufacturing firms—good firms, firms which may be in temporary difficulties as a

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  result of the Government's policies, firms which in any other country would have a future, and firms which are valuable and should be respected.
  Much is made of industry in Japan and Germany. We understand their pre-eminence in electronics and machine tools, but those are not their only industries. I hear of no international prizes being given to the German shoe industry, for example. There is no admiration for Japanese furniture manufacturers. These industries and many others are not world beaters. Their products appear indifferent and rather expensive. However, the companies that engage in such industries form a large part of the total industry of each of those countries, and they expect to continue and obviously hope to improve their products.
  It is time that we adopted a similar attitude to such industries in Britain. In Tameside a survey was undertaken two and a half years ago and a check was made to see how many were in existence in October 1981. It was found that one in four had gone. These were small firms in highly skilled sectors of manufacturing. They were engaged mainly in engineering. On the whole, they were not world beaters, but some of them were extremely good. They had an honoured and respected place in the industrial life of the area. Given suitable conditions, they could have advanced in their particular spheres. They feel, and the whole community feels, that the Government have closed them down. It is prosperity, wealth creation and the subdivision of that wealth with which we are concerned.
  The Government's economic strategy is based upon inflation as being the barrier to break, and that, once inflation is under control, growth can be resumed. I am not sure how that process works. Any Government who inflict such lasting misery upon so many and who are willing to accept the unemployment of 3 million as the necessary industrial dereliction through which we must pass on the road to prosperity must have a corresponding certainty that that road is the right one. The "certainty" that we have to endure now will produce, so we are told, the eventual success that will justify the agony, but that "certainty" does not exist. However, it is claimed to justify the temporary, but continuing, agony. The report of the Select Committee observes:
  "the assumed rate of growth … is insufficient to reduce unemployment significantly is clearly disturbing, as it suggests a trend of increasing unemployment … It is all the more disturbing when that rate of growth is itself based on precarious assumptions."
  About a year ago we heard of the famous 364 economists. There were many in the House—I suppose that I was one of them—who had a hearty chuckle at the thought of 364 economists jointly writing a letter. The Government and most of the House seem to have accepted the first four recommendations of the economists. First, the economists claimed that the Government's policies would deepen the depression. No one can doubt that now. Secondly, they claimed that the Government's monetary policies should be rejected and that money supply did not lead to the control of inflation. That is agreed. Everyone agrees with that now. Thirdly, they said that there were alternative policies. I do not seem to hear much about TINA now. Fourthly, they claimed that there was no basis for the Government to believe that deflating demand would bring inflation under control.
  That is exactly what the Prime Minister's advisers are now telling her. Some of them are telling her that deflating demand will not necessarily result in inflation coming
  902
  under control. Professor Hayek, in effect, says that monetarism is not enough or, alternatively, that deflation is not enough. He claims that the fault lies with the unions. He is, in effect, saying "Control them, legislate against them and restrict them." That is the alternative economic policy advanced by the good professor, whom God preserve.
  We are now on familiar ground. We do not need to rely on economists, however distinguished or numerous. We certainly do not need to rely on Professor Hayek. On these matters, the House of Commons knows as much or as little as anyone else. Our experience tells us that when demand starts to pick up, any trade unions' weakness, any humiliation they have suffered or any pay claims they have forgone—or those that they think they have forgone—will be made up to reverse the loss.
  There will be nothing permanent as a result of this policy. Trade unions feel that their time will come. The economists are right. Deflating demand does not mean that inflation will be brought under permanent control. That simply creates a contest. That contest will take place later, and there will be great bitterness. That ranks among the greatest errors in peace time.
  The Government have introduced misery into millions of homes. They have lost great national industrial assets. They have been losing the cohesion of the nation—probably our most valuable asset. They have done all that to bring about a temporary decline in inflation. That is not an economic policy. It is economic nonsense, and tonight we should show it up for what it is.
  9.32 pm
  The Financial Secretary to the Treasury (Mr. Nicholas Ridley): I shall try to emulate the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and pick up the many points made in the debate. I shall try to refer to speeches of my hon. Friends and Members of the Opposition.
  I shall start with the theme that seems to have come through about the Bill—taxation. The theme of indexation is about whether what the Government are doing is good or bad and the Government's long-term intentions. The Select Committee on the Treasury and Civil Service asked us to do that.
  I shall divide my remarks into four parts. First, there is a tendency to index the thresholds of taxation—to "Rooker-Wise" them. The right hon. Member for Heywood and Royton (Mr. Barnett) referred to that as the "truth" in taxation. It was suggested that the rate bands for capital transfer tax and the exemption limit for capital gains tax should also be indexed. It is helpful to consider tax problems, in inflationary times, each year from the basis of new indexed thresholds. That is just a starting point for considering what should be done. That is what the Government do and I suggest that the House and country would also like to do that.
  The second part of the argument is what we do about thresholds. Parliament has often been asked to, and has, overridden the threshold. It did that last year. The Bill increases all income tax allowances by more than inflation would have required us to do. In parenthesis, I tell my hon. Friend the Member for Norfolk, North (Mr. Howell) that the Government put a high priority on raising thresholds. As he knows, it is simply that the economic circumstances must make enough money available before more can be

  903
  done. It is always a regret to the Government if they cannot get the thresholds higher. I pay tribute to all that my hon. Friend has done.
  Mr. Ralph Howell: Does my hon. Friend accept that we could raise tax thresholds if we reduced public sector spending, and that overmanning is a principal problem in this area?
  Mr. Ridley: Of course I accept that, but we have done a lot to reduce manning levels. We have achieved a reduction of 57,000 in the Civil Service, which is not a bad contribution from the Government. We also look for contributions from local authorities and nationalised industries. We did not revalorise excise duties. They are 3½ per cent. less on tobacco and 5½ per cent. less on spirits than was necessary. Some thresholds have increased by more. For example, the supplementary capital disregard has gone up from £2,000 to £2,500—more than revalorisation.
  Stamp duties have also gone up by more than revalorisation, but there are many thresholds that we have not increased—for example, the £25,000 ceiling for mortgage interest relief, the £8,500 fringe benefit level and the DLT threshold of £50,000. In practice, the two main things that we have moved exactly in accordance with this year's index are wine and petrol duties. That is because every Chancellor wants flexibility. My hon. Friend the Member for Bath (Mr. Patten) may wish to deny that, but I believe that we must retain some flexibility. After what I have said, I think my hon. Friend the Member for Winchester (Mr. Browne) will appreciate that we have not done quite so much indexing as he might have thought.
  The third way in which we have looked at indexing is in relation to the new index-linked bonds. I want to say something to my hon. Friends the Members for Winchester and for Croydon, South (Sir W. Clark) about how these are accounted for in the Government's accounts. There is no sinking fund anywhere for the Government, because the Government account entirely on cash annually. They do not have any balance sheet or provision of that sort. They run all their accounts on the pay-as-you-go basis.
  The same is true of index-linked pensions in the Civil Service. Although they entail a liability at some stage in the future, there is no sinking fund to cover that liability. It is not, as it were, funded, because the Government cannot fund their own obligations. There is nothing wrong with that. Even if one considers the issue of ordinary non-dated high coupon stock, the mere obligation to pay interest is a future liability, as are many other Government liabilities, which at some stage will have to be met.
  Fourthly, there is the indexation of capital gains tax.
  Sir William Clark: My hon. Friend says that there is no Government funding of any pension fund. However, I think that there is a fund, which is actuarially sound, for teachers' pensions.
  Mr Ridley: That may be an exception, but of course that is partly a local authority responsibility as well.
  Mr. Richard Wainwright: Will the Minister respond to the Treasury and Civil Service Select Committee comment that private industry is at a disadvantage when competing with index-linked gilts, because of tax considerations?
  Mr. Ridley: Perhaps we can explore that in depth in Committee, because a lot can be said about it. In some cases it is not so. It depends on whether one goes the income route or the capital route. If one goes the income route, it is perfectly possible for the advantages to be equally matched with the private sector. If one goes the capital route, there are advantages in the Budget to the lender but not to the borrower. Perhaps we can explore this matter in greater depth at some other time.
  As to the indexing of capital gains, it will cost £150 million in a full year to index the price of acquisition. The hon. Member for Blackburn (Mr. Straw) asked what it would cost eventually. It depends entirely on the rate of inflation. The higher the rate of inflation, the higher the paper gains made by people and the higher the tax that could be charged on those paper gains. Therefore, by indexing, one loses more tax. I do not know whether that satisfies the hon. Gentleman, but it just proves what a bad tax it is.
  Mr. Straw: Will the right hon. Gentleman accept that since the real rate of return over inflation for the past 15 years has been 2 or 3 per cent. the bulk of the yield of capital gains tax, now about £600 million, arises from inflationary gains, and therefore it is highly probable that the bulk of that yield, once this change is fully operational, will be lost to the Treasury?
  Mr. Ridley: I would not entirely accept that. I have given the hon. Gentleman the figures. It depends upon the rate of inflation. If it is true that the bulk of the yield of the tax arises on inflationary gains, the hon. Gentleman makes my case that we should not really be in the business of charging it.
  It is difficult to know what the Opposition are getting at. I remember the paper of 14 July 1977, published by the Labour Government. When we were debating that paper the right hon. Member for Llanelli (Mr. Davies) said:
  "We recognise that there is a problem here and I hope that in next year's Finance Bill we can bring in something along the lines of this kind of relief."
  That was indexing or tapering. They did not do it. They hoped and wanted to do it and they tried to sell their own Green Paper. I hope that we shall not now have a volte face, with the Opposition Front Bench trying to say that we should never have done what they themselves sought and failed to do. I believe that the problem will be much more for my hon. Friends—whether we have done enough.
  My hon. Friend the Member for Bath asked whether we should allow losses to be set off. My right hon. and learned Friend the Chancellor has made a big and expensive change and we cannot have everything. We should have liked to do something retrospective about gains, but the cost would have been more than twice the cost of that particular relief. I think that my hon. Friend will agree that that would be unfair to those who have made their gains and paid their taxes.
  Mr. Jay: Can the right hon. Gentleman explain whether, under the Bill, if in the relevant year or years the RPI fell, that would mean that the tax charged would be correspondingly increased?
  Mr. Ridley: I believe that the cost of acquisition of the asset would be reduced by the fall in RPI. As there would therefore be no gain, no tax would arise. I do not see how

  905
  there could be a capital gain when the RPI fell—yes, there could be. The tax base would be reduced by the fall in the RPI, but I speak subject to correction.
  Some of my hon. Friends have proposed that we should index down the sales price, but I suggest that if one does the calculations for indexing down the sale price and then converts the gain into current money value terms, one will find that it makes no difference to the gain. That calculation is just more complicated without producing a different result.
  It has been proposed by some hon. Members that indexation of existing assets should be by reference to the 1982 market value and not original acquisition costs. That would increase the cost of indexation beyond what the Chancellor considered could be afforded this year. It would also increase administrative costs. It is a matter that we can debate in greater detail when we come to those clauses in Committee.
  I say only one thing to my hon. Friend the Member for Croydon, South about "bed and breakfasting". The Bill does not make that impossible. It merely requires that it be done across the Stock Exchange account instead of within it. That is necessary with regard to the year's delay before uplift starts.
  The Opposition have sought to suggest that the changes that we have made in the capital gains tax will be of considerable benefit to the better off. That argument needs examination. First, the Opposition are in favour of indexing capital gains tax. Secondly, it is not always the better off who pay either of these taxes. There are many people who would not consider themselves among the better off but who pay capital gains tax.
  I wish to refer to capital transfer tax. The cost of the changes in this Budget, as opposed to making no change over 1978–79 when the Government came to office, is an extra yield of £5 million. If one compares the yield of capital transfer tax in the coming year with 1975 rates, when the tax was introduced, one sees that the extra yield is £90 million a year. That is made up of £ 190 million extra tax from the bigger estates, less £100 million which is remitted to the smaller estates. The actual effect of my right hon. and learned Friend's proposals on capital transfer tax is to take another £190 million a year from the bigger estates. I suggest, therefore, that we hear no more of this silly argument from Opposition Members, who have not done their homework.
  Mr. Robert Sheldon: Has the hon. Gentleman taken account of the 10-year wiping clean of the slate, when it was stated that this amount would not be known for years to come?
  Mr. Ridley: I advise the right hon. Gentleman to do a little homework. I am talking of the yields. I shall give him some of the rates. The equivalent today of the 50 per cent. rate brought in by the right hon. Member for Leeds, East (Mr. Healey) at £100,000 to £120,000 would be £260,000 to £315,000. My right hon. and learned Friend proposes in the Bill figures of £165,000 to £200,000. The equivalent of the top 75 per cent. rate, brought in at £2 million, would be £5·25 million. My right hon. and learned Friend is proposing only £2·5 million. So that piece of nonsense from the Opposition has to be dropped.
  Mr. Straw: The hon. Gentleman is surely not trying to pretend that the Government have not given away hundreds of millions of pounds of tax benefits to the rich.
  906
  through income tax, capital transfer tax and capital gains tax. This amounts to £2,600 million in the last three Budgets and £555 million in this Budget, at a time when the Chancellor refuses to find £60 million to repay the 5 per cent. cut in unemployment benefit when it was to be introduced with taxation.
  Mr. Ridley: The hon. Gentleman would have done better to keep his mouth shut. One of his main wickets has been destroyed. I shall now destroy another. A useful little book, a new "Bible" for Finance Bill debates, has been written by the right hon. Member for Heywood and Royton. Every hon. Member serving on the Finance Bill Committee should have a copy beside him. One quotation from "Inside the Treasury" reads:
  "I also wanted to reduce the ridiculously high top rate of 83 per cent. on earned income and 98 per cent. on investment income, but to no avail. It was thought to be psychologically the wrong time for the TUC and the Labour Party"
  That is what the Chief Secretary to the Treasury in the Labour Government thought.
  I should like to refer to other matters that I regret are not included in the Bill. The first relates to agency workers. They are not included in the Bill because we are not going to do anything in legislative terms. I have today answered a written question that makes it clear that we shall try to make sure that tax is properly collected from agency worker companies by means of existing powers under section 16 of the Taxes Management Act. These will enable the Revenue to seek regular returns from agencies of payments made to agency worker companies. The returns will allow systematic monitoring of the position and an opportunity to improve tax compliance. That is clearly an area that needs to be kept under review, and this will be done.
  I deal next with a point raised by the hon. Member for Colne Valley (Mr. Wainwright). The new clauses to be moved in Committee include four important new clauses dealing with tax avoidance, as I think I should call it, by the banks. The reason why the four clauses are not yet in the Bill is that they are complicated and require consultation with the industries and interests concerned. In each case, we thought it better to ensure that that consultation was properly carried out. Nevertheless, the draft new clauses will be published in good time and will, of course, be dealt with at the end of the Committee stage.
  The first new clause relates to international leasing. We need to act, because well over £500 million worth of international leasing was done in 1981, most of it foreign to foreign leasing. In other words, there was a United Kingdom Exchequer subsidy for a lease by a company in one foreign country of equipment made in another foreign country. In 1980 we reduced the rate of capital allowance for international leasing from 100 per cent. to 25 per cent., but even that has not significantly reduced the incentives. It is therefore proposed to reduce it to 10 per cent., which I believe will remove any investment incentive in foreign to foreign leasing.
  The position with regard to ships is complicated, but it is similar, in that our concession last year to allow time chartering abroad to assist the United Kingdom shipping industry to escape the reduction from 100 per cent. to 25 per cent. capital allowance has also been exploited. I shall not go into details now, but large amounts of tax are at stake and it is potentially possible to wash the whole world shipping fleet through the United Kingdom corporation tax. We must take steps to deal with that. We are

  907
  discussing it with the industry. It is likely that it will be proposed to reduce the rate for time charters to 10 per cent. except in cases of genuine United Kingdom shipping companies.
  The same is true of films. There has been a growing tendency for foreign film industries to wash their films through London to obtain corporation tax relief even though the films are for overseas showing. The Exchequer subsidies here have been frightening. We propose to end the first-year allowance for films and to provide a new regime under which United Kingdom films are written off in a way that more accurately reflects their income-producing life, and at the same time to bring in transitional protection for genuine United Kingdom film industry products.
  Finally, there will be legislation in Committee to deal with the problem of double taxation relief when banks lend overseas. I shall not go into details, but conversations are still taking place with the banks. I hope that the House agrees that that should be done.
  I shall deal with one other matter as it appears in clause 52. The Government will deal with what are known as section 233 loans. That is a form of avoidance of corporation tax that has been growing considerably. It has, at the same time, been used by some banks to start small business start-up schemes and to provide loans for small companies.
  Judging from the kind remarks made by my hon. Friends the Members for Hertford and Stevenage (Mr. Wells) and for Hertfordshire, South-West (Mr. Page), they appreciate all that we have been trying to do for small companies. We can exempt existing loans under £100,000 from the new arrangements. That will include the Barclay start-up scheme. The exemption will also apply to cases where firm negotiations for a small start-up loan had begun but had not been finalised before Budget day. In those cases, it will be a condition that the loan is completed before 30 June 1982. An appropriate amendment will be tabled in Committee.
  Mr. Woolmer: Before the Minister leaves those matters that are not contained in the Bill, will he explain why no steps were taken to deal with international tax avoidance by British companies? Will next year's Finance Bill do something about company residences, tax avoidance havens and upstream loan avoidance schemes?
  Mr. Ridley: My right hon. and learned Friend the Chancellor of the Exchequer dealt with that matter in his Budget speech. We want to get things right. We are determined to do that, but only when the details are right. The hon. Gentleman would not wish us to damage British industry.
  I remind the right hon. Member for Stepney and Poplar (Mr. Shore) that he will not gain the confidence of the House by abandoning money supply targets. He should remember that in 1977 he was a member of a Government who were encouraged to adopt such targets by the IMF. That Labour Government reduced the rate of inflation from 23 to 9 per cent. It was only when they let go of their control over the economy—just before the election—that inflation took off again, reaching, at its peak, 21·9 per cent. We had to turn the situation round and reduce inflation.
  908
  The right hon. Gentleman operated the money supply targets that reduced inflation in the mid-1970s. However, this afternoon he told the House that the right hon. Member for Leeds, East merely adumbrated money supply targets and did not intend to follow them. He said that they were merely a piece of IMF "rigmarole". In other words, he said that the letter of intent was a fraud and that the Government did not believe in it.
  The right hon. Member for Stepney and Poplar now talks about a £9 billion reflation. One of his predecessors, Hugh Gaitskell, was called a desiccated calculating machine. The right hon. Gentleman is not desiccated, but dripping wet. He cannot calculate. He does not know what the result of that reflation would be. There is no need to speculate on what such a massive reflation would do. Why look into the crystal ball when one can read the book?
  Let us consider what has happened in France since the launching of the Socialist programme of reflation. Do we see evidence of the promised return to strong growth and an end to rising unemployment? By no means. The spurt of increased activity in France in the second half of last year has faltered. The underlying trend in unemployment still points inexorably upwards. Perhaps it is no coincidence that in one week in which interest rates in Britain fell to 13 per cent. they rose to 20 per cent. across the Channel. Therefore, we need not take too much notice of the right hon. Gentleman's calculations.
  The plans that my right hon. and learned Friend the Chancellor of the Exchequer set for himself, on behalf of the Government, four years ago involved bringing Britain back from inflationary habits to a point at which we could begin to see that fruit was being borne. The retail price index has fallen to 11 per cent., and in March the wholesale price index stood at 9·5 per cent. Output has begun to recover. Confidence is improving. Therefore, I ask my right hon. and hon. Friends to accept the Bill.
  Question put:—
  The House divided: Ayes 301, Noes 235.

  Division No. 122]

  [10 pm

  AYES

  Adley, Robert

  Brooke, HonPeter

  Aitken, Jonathan

  Brotherton, Michael

  Alexander, Richard

  Brown, Michael(Brigg & Sc'n)

  Alison, Rt Hon Michael

  Browne, John(Winchester)

  Amery, Rt Hon Julian

  Bruce-Gardyne, John

  Ancram, Michael

  Bryan, Sir Paul

  Arnold, Tom

  Buchanan-Smith, Rt. Hon. A.

  Aspinwal, Jack

  Budgen, Nick

  Atkins, Rt Hon H.(S'thorne)

  Bulmer, Esmond

  Atkins, Robert(PrestonN)

  Burden, SirFrederick

  Atkinson, David (B'm'th,E)

  Butcher, John

  Baker, Nicholas (N Dorset)

  Butler, Hon Adam

  Banks, Robert

  Cadbury, Jocelyn

  Beaumont-Dark,Anthony

  Carlisle, John (Luton West)

  Bendall, Vivian

  Carlisle, Kenneth(Lincoln)

  Benyon, W. (Buckingham)

  Carlisle, Rt Hon M. (R'c'n)

  Best, Keith

  Chalker, Mrs.Lynda

  Bevan, David Gilroy

  Chapman,Sydney

  Biffen, Rt Hon John

  Churchill, W.S.

  Biggs-Davison,SirJohn

  Clark, Hon A. (Plym'th, S'n)

  Blackburn,John

  Clark, Sir W. (Croydon S)

  Blaker, Peter

  Clarke,Kenneth(Rushcliffe)

  Body, Richard

  Clegg, Sir Walter

  Bonsor,SirNicholas

  Cockeram,Eric

  Bottomley, Peter(W'wich W)

  Colvin,Michael

  Bowden,Andrew

  Cope,John

  Boyson,DrRhodes

  Cormack,Patrick

  Braine,SirBernard

  Costain, SirAlbert

  Bright,Graham

  Cranborne,Viscount

  Brinton,Tim

  Critchley,Julian

  Brittan, Rt. Hon. Leon

  Crouch,David

  909

  Dean, Paul (NorthSomerset)

  King, Rt Hon Tom

  Dorrell,Stephen

  Kitson,SirTimothy

  du Cann, Rt Hon Edward

  Knight, MrsJill

  Dunn, Robert (Dartford)

  Knox, David

  Durant, Tony

  Lamont, Norman

  Dykes, Hugh

  Lang, Ian

  Eden, Rt Hon Sir John

  Latham,Michael

  Edwards, Rt Hon N. (P'broke)

  Lawrence, Ivan

  Eggar, Tim

  Lawson, Rt Hon Nigel

  Elliott,SirWilliam

  Lee,John

  Emery, Sir Peter

  LeMarchant,Spencer

  Eyre,Reginald

  Lennox-Boyd,Hon Mark

  Fairgrieve, SirRussell

  Lester, Jim (Beeston)

  Farr,John

  Lewis,Kenneth (Rutland)

  Fell, Sir Anthony

  Lloyd, Ian (Havant & W'loo)

  Fenner, Mrs Peggy

  Lloyd, Peter (Fareham)

  Finsberg,Geoffrey

  Loveridge,John

  Fisher, Sir Nigel

  Luce, Richard

  Fletcher, A. (Ed'nb'gh N)

  Lyell, Nicholas

  Fletcher-Cooke, SirCharles

  McCrindle,Robert

  Fookes, Miss Janet

  Macfarlane, Neil

  Forman, Nigel

  MacGregor,John

  Fowler, Rt Hon Norman

  MacKay, John (Argyll)

  Fox, Marcus

  Macmillan, Rt Hon M.

  Fraser, Peter (South Angus)

  McNair-Wilson, M.(N'bury)

  Fry, Peter

  McNair-Wilson, P. (NewF'st)

  Gardiner, George(Reigate)

  Madel, David

  Gardner, Edward (S Fylde)

  Major,John

  Garel-Jones, Tristan

  Marland, Paul

  Gilmour, Rt Hon Sir Ian

  Marlow, Antony

  Glyn, Dr Alan

  Marshall, Michael(Arundel)

  Goodhart,SirPhilip

  Marten, Rt Hon Neil

  Goodhew, SirVictor

  Mates, Michael

  Goodlad, Alastair

  Mather, Carol

  Gorst,John

  Maude, Rt Hon Sir Angus

  Gow, Ian

  Mawby, Ray

  Grant, Anthony (Harrow C)

  Mawhinney, DrBrian

  Gray, Hamish

  Maxwell-Hyslop, Robin

  Greenway, Harry

  Mayhew, Patrick

  Grieve, Percy

  Mellor, David

  Griffiths, E. (B'ySt.Edm'ds)

  Meyer, Sir Anthony

  Griffiths, Peter Portsm'th N)

  Miller, Hal(B'grove)

  Grist, Ian

  Mills, Iain(Meriden)

  Grylls,Michael

  Mills, Peter(West Devon)

  Gummer, John Selwyn

  Moate, Roger

  Hamilton, Hon A.

  Monro, SirHector

  Hamilton, Michael (Salisbury)

  Montgomery, Fergus

  Hampson, Dr Keith

  Moore, John

  Hannam, John

  Morgan,Geraint

  Haselhurst,Alan

  Morris, M. (N'hampton S)

  Havers, Rt Hon Sir Michael

  Morrison, Hon C. (Devizes)

  Hawkins, Paul

  Morrison, Hon P. (Chester)

  Hawksley, Warren

  Mudd, David

  Hayhoe, Barney

  Murphy, Christopher

  Heddle, John

  Myles, David

  Henderson, Barry

  Neale, Gerrard

  Heseltine, Rt Hon Michael

  Needham,Richard

  Hicks, Robert

  Nelson, Anthony

  Higgins, Rt Hon Terence L.

  Neubert, Michael

  Hill, James

  Newton, Tony

  Hogg, Hon Douglas (Gr'th'm)

  Normanton, Tom

  Holland, Philip (Carlton)

  Nott, Rt Hon John

  Hooson, Tom

  Onslow,Cranley

  Hordern,Peter

  Oppenheim, Rt Hon Mrs S.

  Howe, Rt Hon Sir Geoffrey

  Osborn,John

  Howell, Rt Hon D.(G'ldf'd)

  Page, Richard (SW Herts)

  Howell, Ralph(N Norfolk)

  Parkinson, Rt Hon Cecil

  Hunt, David (Wirral)

  Parris, Matthew

  Hunt, John (Ravensbourne)

  Patten,Christopher (Bath)

  Hurd, Rt Hon Douglas

  Patten,John (Oxford)

  Irving,Charles (Cheltenham)

  Pawsey, James

  Jenkin, Rt Hon Patrick

  Percival, Sir Ian

  Jessel, Toby

  Pink, R. Bonner

  JohnsonSmith,Geoffrey

  Pollock,Alexander

  Jopling, Rt Hon Michael

  Porter, Barry

  Joseph, Rt Hon Sir Keith

  Prentice, Rt Hon Reg

  Kaberry, SirDonald

  Price, Sir David (Eastleigh)

  Kellett-Bowman,Mrs Elaine

  Prior, Rt Hon James

  Kershaw,Sir Anthony

  Proctor, K. Harvey

  Kimball, SirMarcus

  Pym, Rt Hon Francis

  910

  Raison, Rt Hon Timothy

  Tebbit, Rt Hon Norman

  Rathbone,Tim

  Temple-Morris, Peter

  Rees, Peter (Dover and Deal)

  Thatcher, Rt Hon Mrs M.

  Rhodes James, Robert

  Thomas, Rt Hon Peter

  RhysWilliams,SirBrandon

  Thompson,Donald

  Ridley, Hon Nicholas

  Thorne, Neil(IlfordSouth)

  Rifkind, Malcolm

  Thornton, Malcolm

  Rippon, Rt Hon Geoffrey

  Townend, John(Bridlington)

  Roberts, M. (Cardiff NW)

  Townsend, Cyril D, (B'heath)

  Roberts, Wyn (Conway)

  Trippier,David

  Rossi, Hugh

  Trotter, Neville

  Rost, Peter

  van Straubenzee, Sir W.

  Royle, Sir Anthony

  Vaughan, Dr Gerard

  Sainsbury, HonTimothy

  Viggers, Peter

  St. John-Stevas, Rt Hon N.

  Waddington, David

  Scott, Nicholas

  Waldegrave,Hon William

  Shaw, Giles (Pudsey)

  Walker, Rt Hon P.(W'cester)

  Shaw, Michael (Scarborough)

  Walker, B. (Perth)

  Shelton, William(Streatham)

  Walker-Smith, Rt Hon Sir D.

  Shepherd, Colin(Hereford>

  Wall, Sir Patrick

  Shepherd, Richard

  Waller, Gary

  Shersby, Michael

  Walters, Dennis

  Silvester, Fred

  Ward,John

  Sims, Roger

  Warren, Kenneth

  Skeet, T. H. H.

  Watson,John

  Speed, Keith

  Wells, Bowen

  Speller, Tony

  Wells, John(Maidstone)

  Spence, John

  Wheeler, John

  Spicer, Jim (West Dorset)

  Whitelaw, Rt Hon William

  Spicer, Michael (S Worcs)

  Whitney, Raymond

  Sproat,Iain

  Wickenden, Keith

  Squire, Robin

  Wiggin,Jerry

  Stainton, Keith

  Wilkinson, John

  Stanbrook,Ivor

  Williams, D. (Montgomery)

  Steen, Anthony

  Wolfson, Mark

  Stevens, Martin

  Young, SirGeorge (Acton)

  Stewart, k.(E Renfrewshire)

  Younger, Rt Hon George

  Stewart, Ian (Hitchin)

  Stokes, John

  Tellers for the Ayes:

  Stradling Thomas, J.

  Mr. Robert Boscawan and Mr. Anthony Berry.

  Taylor, Teddy (S'endE)

  NOES

  Abse, Leo

  Cowans, Harry

  Adams,Allen

  Cox, T. (W'dsw'th,Toot'g)

  Allaun,Frank

  Craigen, J. M. (G'gow, M'hill)

  Alton, David

  Crawshaw, Richard

  Anderson, Donald

  Crowther, Stan

  Archer, Rt Hon Peter

  Cryer, Bob

  Ashley, Rt Hon Jack

  Cunliffe, Lawrence

  Ashton, Joe

  Cunningham, G.(Islington S)

  Atkinson, N.(H'gey,)

  Cunningham, DrJ. (W'h'n)

  Bagier, GordonA.T.

  Dalyell, Tam

  Barnett, Guy (Greenwich)

  Davidson, Arthur

  Beith, A.J.

  Davies, Rt Hon Denzil (L'lli)

  Bidwell, Sydney

  Davies, Ifor (Gower)

  Booth, Rt Hon Albert

  Davis, Clinton (Hackney C)

  Bottomley, Rt Hon A.(M'b'ro)

  Davis, Terry (B'ham, Stechf'd)

  Bradley, Tom

  Deakins, Eric

  Bray, Dr Jeremy

  Dean, Joseph (Leeds West)

  Brocklebank-Fowler, C.

  Dewar, Donald

  Brown, Hugh D. (Provan)

  Dixon, Donald

  Brown, R. C. (N'castle W)

  Dormand, Jack

  Brown, Ronald W. (H'ckn'y S)

  Douglas, Dick

  Brown, Ron(E'burgh,Leith)

  Dubs,Alfred

  Buchan, Norman

  Duffy, A. E. P.

  Callaghan, Rt Hon J.

  Dunn, James A.

  Callaghan, Jim(Midd't'n & P)

  Dunnett, Jack

  Campbell,Ian

  Dunwoody, Hon Mrs G.

  Campbell-Savours, Dale

  Eadie, Alex

  Canavan, Dennis

  Eastham, Ken

  Cant, R. B.

  Edwards, R. (W'hampt'n S E)

  Carmichael, Neil

  Ellis, R. (NE D'bysh're)

  Carter-Jones, Lewis

  Ellis, Tom (Wrexham)

  Cartwright, John

  English, Michael

  Cocks, Rt Hon M. (B'stolS)

  Evans, Ioan (Aberdare)

  Cohen, Stanley

  Evans, John (Newton)

  Coleman,Donald

  Faulds,Andrew

  Concannon, Rt Hon J. D.

  Field, Frank

  Cook, Robin F.

  Fitch, Alan

  911

  Flannery, Martin

  Jones, Barry (East Flint)

  Fletcher, Ted (Darlington)

  Kaufman, Rt Hon Gerald

  Foot, Rt Hon Michael

  Kilfedder, James A.

  Ford, Ben

  Kilroy-Silk,Robert

  Forrester,John

  Lamborn,Harry

  Foster, Derek

  Leadbitter, Ted

  Foulkes, George

  Leighton,Ronald

  Fraser, J. (Lamb'th, N'w'd)

  Lewis,Arthur(N'ham NW)

  Freeson, Rt Hon Reginald

  Litherland, Robert

  Freud,Clement

  Lofthouse, Geoffrey

  Garrett, John (Norwich S)

  Lyons, Edward (Bradf'dW)

  Garrett, W. E. (Wallsend)

  McCartney,Hugh

  George,Bruce

  McDonald,DrOonagh

  Gilbert, Rt Hon Dr John

  McGuire, Michael (Ince)

  Ginsburg, David

  McKay, Allen (Penistone)

  Golding, John

  McKelvey, William

  G rant, George (Morpeth)

  MacKenzie, Rt Hon Gregor

  Grant, John (Islington C)

  Maclennan, Robert

  Grimond, Rt Hon J.

  McNally, Thomas

  Hamilton, James (Bothwell)

  McNamara, Kevin

  Hamilton, W. W. (C'tral Fife)

  McTaggart,Robert

  Hardy, Peter

  McWilliam,John

  Hart, Rt Hon Dame Judith

  Magee, Bryan

  Hattersley, Rt Hon Roy

  Marks, Kenneth

  Haynes, Frank

  Marshall, Jim (Leicester S)

  Healey, Rt Hon Denis

  Martin, M(G'gowS'burn)

  Heffer, Eric S.

  Maynard, Miss Joan

  Homewood, William

  Meacher,Michael

  Hooley, Frank

  Mikardo,Ian

  Horam,John

  Millan, Rt Hon Bruce

  Howell, Rt Hon D.

  Miller, Dr M. S. (E Kilbride)

  Howells, Geraint

  Mitchell, Austin (Grimsby)

  Hoyle, Douglas

  Mitchell, R. C. (Soton Itchen)

  Huckfield, Les

  Morris, Rt Hon C.(O'shaw)

  Hughes,Mark(Durham)

  Moyle, Rt Hon Roland

  Hughes, Robert (AberdeenN)

  Mulley, Rt Hon Frederick

  Hughes, Roy (Newport)

  Newens, Stanley

  Janner, Hon Greville

  Oakes, Rt Hon Gordon

  Jay, Rt Hon Douglas

  Ogden, Eric

  Jenkins, Rt Hon Roy (Hillhead)

  O'Halloran, Michael

  John, Brynmor

  O'Neill, Martin

  Johnson, Walter (Derby S)

  Orme, Rt Hon Stanley

  Johnston,Russell(Inverness)

  Owen, Rt Hon Dr David

  Jones, Rt Hon Alec (Rh'dda)

  Park, George

  912

  Parker,John

  Strang, Gavin

  Parry, Robert

  Straw, Jack

  Pendry, Tom

  Summerskill, Hon Dr Shirley

  Powell, Raymond (Ogmore)

  Taylor, Mrs Ann (Bolton W)

  Prescott,John

  Thomas,Jeffrey(Abertillery)

  Race, Reg

  Thomas, Mike (Newcastle E)

  Radice, Giles

  Thomas, Dr R.(Carmarthen)

  Rees, Rt Hon M (Leeds S)

  Thorne, Stan (Preston South)

  Richardson,Jo

  Tilley,John

  Roberts, Albert(Normanton)

  Tinn, James

  Roberts, Allan(Bootle)

  Torney, Tom

  Roberts, Ernest (HackneyN)

  Varley, Rt Hon Eric G.

  Roberts, Gwilym(Cannock)

  Wainwright, B.(DearneV)

  Robertson, George

  Wainwright, R. (ColneV)

  Robinson, G. (CoventryNW)

  Walker, Rt Hon H.(D'caster)

  Rooker, J. W.

  Watkins, David

  Roper,John

  Weetch, Ken

  Ross, Ernest (Dundee West)

  Wellbeloved,James

  Rowlands,Ted

  Welsh, Michael

  Ryman,John

  White, Frank R.

  Sandelson, Neville

  White, J.(G'gowPollok)

  Sever, John

  Whitehead, Phillip

  Sheerman, Barry

  Whitlock, William

  Sheldon, Rt Hon R.

  Wigley, Dafydd

  Shore, Rt Hon Peter

  Willey, Rt Hon Frederick

  Silkin, Rt Hon J. (Deptford)

  Williams, Rt Hon A.(S'sea W)

  Silkin, Rt Hon S. C. (Dulwich)

  Wilson, Gordon (DundeeE)

  Silverman,Julius

  Wilson, William (C'trySE)

  Skinner, Dennis

  Winnick, David

  Smith, Rt Hon J. (N Lanark)

  Woodall, Alec

  Snape, Peter

  Woolmer,Kenneth

  Soley, Clive

  Wrigglesworth Ian

  Spearing, Nigel

  Wright, Sheila

  Spriggs, Leslie

  Young, David (BoltonE)

  Stallard, A. W.

  Steel, Rt Hon David

  Tellers for the Noes:

  Stewart, Rt Hon D. (W Isles)

  Dr. Edmund Marshall and Mr. George Morton.

  Stoddart,David

  Stott, Roger

  Question accordingly agreed to.
  Bill read a Second time.

  Finance Bill (Committal)
  Motion made, and Question proposed,
  That Clauses 18, 22, 29, 65, 71, 75, 117 and 128 and Schedule 10 be committed to a Committee of the whole House:
  That the remainder of the Bill be committed to a Standing Committee:
  That, when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Mr. Ridley.]
  10.14 pm
  Mr. Austin Mitchell: We should pause before rushing to pass this motion impetuously. We should ask ourselves whether the specific clauses mentioned in it—clause 18,
  "Charge of income tax for 1982–83",
  22, "Personal relief'; 29, "Social security benefits"; 65,
  "Increase and indexation of annual exempt amount"
  on capital gains tax; 71,
  "Indexation allowance on certain disposals",
  75, "Reduction of tax"; 117,
  "Increase of petroleum revenue tax and ending of supplementary petroleum duty";
  128,
  "Reduction of national insurance surcharge";
  and schedule 10 should be dealt with on the Floor of the House, in Committee of the whole House, because they are matters that we should consider carefully before impetuously rushing into a decision about what to deal with here and what to deal with in Standing Committee upstairs.
  In this Finance Bill we are dealing with the Cockfield memorial Budget. He is the noble Lord who provided most of the Budget but who has now fled the scene, leaving this honourable House to clear up the debris which he left, before going on to rather lusher pastures. If we pass the motion to send the remaining clauses to the Finance Bill Committee upstairs, it will be our task to labour over them from dawn to dusk on many occasions. There, we shall face the same situation that the Government face, because the whole purpose of the Finance Bill is to distract attention from the economic situation and the mess that have been created by the simple technique of moving furniture, while at the same time slipping more of that furniture out in the direction of the country houses. We now have a bigger economic mess than ever, and the furniture-moving in a number of clauses in the Bill has become more and more frenetic. This Finance Bill is the biggest that we have had since 1970. It is a huge document. Last year's Bill was enormous, but this one is 13 clauses longer, and as such I think that it is the longest Finance Bill since 1970. I admit that it has five fewer pages than last year's Bill, but it is nevertheless an enormous document.
  We therefore have to make a weighty decision about which clauses to deal with on the Floor of the House, in Committee of the whole House where all right hon. and hon. Members can pay attention to it and it can be fitted into the context of the Government's overall economic policy and what should go upstairs to the select band of people who will devote most of May and June to labouring over the Cockfield vineyard. It is crucial that that work be done with great attention and diligence, because the
  914
  Finance Bill is essential to the Government's economic strategy. We have a Government who have turned Micawberism into a system of Government——
  Mr. D. N. Campbell-Savours: I thank my hon. Friend for giving way. Is there not a danger that if the clauses that we want the country to know about—those which add substantially to the wealth of a few people in society and take it away from the people whom we represent—go to Standing Committee upstairs they will not be drawn to the attention of the country in the way that we want? Are not two of those clauses those which deal with capital transfer tax and capital gains tax, whereby again this year the Government are giving substantial amounts of money to a very few——
  Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. The hon. Gentleman is making an intervention, not a speech.
  Mr. Campbell-Savours: My hon. Friend will understand that what I am saying is very important. The Government will again arrange the Bill in such a way that clauses which are uncontroversial are heard on the Floor of the House, unlike the controversial clauses on capital transfer tax and capital gains tax. The Government have come forward with concessions in these areas for the fourth year running. My hon. Friend is trying to get these matters debated on the Floor of the House so that the country may know what is happening.
  Mr. Mitchell: I am grateful to my hon. Friend for his telling intervention. He and I laboured last year for many hours while considering the Finance Bill in Standing Committee. We warned the country of exactly what is involved in the process of chipping away at capital taxation, which is becoming under the Government largely a form of voluntary taxation. That is being taken further in the Bill. Index-linked gilts should be referred to as index-linked guilts in the Bill. The guilt lies with the Government, who are giving to their wealthy friends in some clauses while treating the rest of the population in the mean, Gradgrinding fashion that is set out in other clauses.
  We wish to show the Government in their full colours by dealing with the Bill on the Floor of the House. Extremely important principles are involved, especially in the form of handouts to the wealthy and in the ways in which the economy and the Bill will interact. The Government were seeking restlessly last year for swallows and silver linings in every cloud that passed overhead. None of them materialised and we now have a Finance Bill that is incapable of improving a situation that is becoming economically disastrous.
  The Government are merely moving the furniture around in minor clauses and amendments to distract attention from the major problems in the economy. Part I consists of 11 clauses on Customs and Excise. They are all of great significance and we wish to deal with them on the Floor of the House in appropriate detail. My hon. Friend the Member for Workington (Mr. Campbell-Savours) and I are well aware from our experience last year that what is said in Standing Committee when considering a Finance Bill does not reach the country in the way that words uttered on the Floor of the House come to the attention of the people.
  The Government have cut industrial production, through their economic policies, by one-fifth. They have

  915
  caused every fifth job in British industry to be lost in three years. They have brought British industry to its knees. The Bill will do nothing to change or improve that situation. It will not regenerate the economy. That being so, it is important that the words of condemnation are expressed on the Floor of the House. It is especially important that that happens when we bear in mind what members of the Government said when they were in Opposition.
  I have a copy of a lecture that was given by the present Chancellor when he was a member of the shadow Cabinet. He addressed the Addington Society at the London School of Economics in February 1977. That was a long time ago, when monetarism was young and the present Chancellor was naive. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who is now the Financial Secretary to the Treasury, was lively, exciting and stimulating in Standing Committee when considering Labour Finance Bills. Tonight we had a Mogadon performance from the hon. Gentleman. It seems that Mogadon takes over everyone who becomes a member of the Treasury team.
  The world was young in those days. The present Chancellor of the Exchequer was telling us extremely important things about the way in which Finance Bills should be treated by the House of Commons. I shall draw attention to what he said in 1977 and contrast his words with the way in which this year's Finance Bill is being treated by the same right hon. and learned Member for Surrey, East (Sir Geoffrey Howe). Of course, five years have passed and he is now holding office. His lecture at the LSE was given shortly before the Grimsby by-election. he said;
  "The one certainty about our tax system is that what the Government gives it must first take away. The archaic ritual by which Parliament decides how this shall be done is about as appropriate to a modern industrial democracy as stylistics to the international money market."
  He might have added "or as monetarism to the complex workings of a modern economy". He then described how we should treat the Finance Bill in the House, and said that the Chancellor comes to the House and:
  "Included in his proposals are the broadest brush-strokes of economic policy, embracing whole new tax systems"—
  in this case, whole new give-aways——
  Mr. John Wells: I was under the impression that the clauses that are to go to Committee were agreed between the two Front Benches. I was also under the impression that the hon. Gentleman was an Opposition Whip. Therefore, I find his speech difficult to follow.
  Mr. Mitchell: There were long and complex negotiations, and it would not do for me to reveal the context of those. Of course, the Opposition asked for a considerably greater amount of time on the Floor of the House. It is the Opposition's duty and responsibility to draw the country's attention to what the Government are doing in the Finance Bill. The Government effectively decide these things and not the Opposition. We requested substantial time. The hon. Gentleman obviously does not like being reminded of what was said in 1977. The Chancellor comes to the House with the
  "broadest brush-strokes of economic policy … rubbing shoulders with the minutest reform of administrative machinery, demanding but not deserving equal attention."
  916
  He could certainly say that again about this Finance Bill, which is Cockfield's dustbin, as far as most hon. Members are concerned. It is the debris of three years devoted attention to the minutiae of tax legislation. The present Chancellor, having drawn attention to those problems, continued:
  "Publication of the Bill is the cue for massive far-reaching and multitudinous amendments, which tumble out like lemmings."
  That was the compelling literary gift of the Chancellor in opposition. How dull he has ecome in power. "Tumble out like lemmings"—what vivid imagery.
  Mrs. Elaine Kellett-Bowman: Reading badly.
  Mr. Richard Page: Is the hon. Gentleman saying this with the approval of his Front Bench, or is it just a UDI on his own behalf?
  Mr. Mitchell: The principle is important and is not helped by minor arguments of that nature. The Chancellor's lecture in 1977 stated an important principle. He continued:
  "There follows the by now traditional struggle on Finance Bill Standing Committee. Both sides arrange themselves in an adversary relationship with the Opposition attacking the Treasury and the Treasury defending. Because of the debating nature of the proceedings, the Minister often feels no compunction about glossing over questions that are beyond him."
  He was obviously considering the arrival of that Finance Bill and the Financial Secretary to the Treasury in Committee the following year. It is sad that all the natural humility that comes to the hon. Gentleman from an education at Balliol and Eton will almost certainly not be shown on this Finance Bill in Committee.
  Mr. Jim Spicer: My goodness, what a mistake the hon. Gentleman has made. As I understand it, he has talked about the effect of this on those with high incomes. Where does he place himself in that bracket? Does he place himself at the upper or lower end? Is he prepared to accept the consequences of all his remarks? He has spoken in strict defiance of his Front Bench and the agreement that it made. What the devil does he think he is playing at?
  Mr. Mitchell: I cannot be sidetracked by that sort of irrelevance. I am making an important point and quoting from the Chancellor. I was talking about capital taxation. It is fair and reasonable, since the question was asked, that capital should bear its share of the burdens of Britain and not be treated in the way that the Government have treated it.
  As a believer in public spending and the benefits of public spending, I am certainly more than prepared to bear a share of taxation to maintain it at a level appropriate to stimulate the economy, and to deal with the burden of unemployment that the Government have created.
  Mr. Deputy Speaker: Order. I allowed the hon. Gentleman to answer the question, but I remind the House that we are discussing whether certain clauses should be taken on the Floor of the House or in Committee. We should confine ourselves to that argument.
  Mr. Mitchell: Thank you, Mr. Deputy Speaker. I shall now confine myself to that by returning to the Chancellor's remarks in 1977. He warns about the way in which the Finance Bill Committee has to proceed. He talks about the

  917
  internal mechanics of the Household—something about which I do not know—and says that this is called the "nocturnal tug of war". He adds
  "As the tug of war progresses, nocturnalisation takes over. Few people are at their most receptive to the intricacies of sale and leaseback provisions explained at 3.30 in the morning. Small wonder that many Government Members of Parliament take to their beds in the corridors"——
  and presumably dream of bombing Argentina, as they almost certainly will this year. That is a telling indictment of the Committee to which this Finance Bill is in major part being relegated. The Chancellor continues:
  "But the harsh judgment remains. This is a crude way in which to proceed and leads to even hastier consideration of possible remedies to problems that have been raised. It is left to Government, and not to the Committee, to choose which problems (if any) to solve, and which to ignore … Eventually the Bill reaches the Statute Book, with all its errors and loopholes, to await real life illustrations".
  That is a powerful indictment of the procedures that we are being asked to accept tonight. He goes on:
  "During the whole weary, yet far too hasty, procedure, there has been far too little opportunity for outside experts—lawyers, accountants, industrialists—to give the benefit of their advice, either on the broad economic measures or the practicality of operating the more detailed provisions."
  That is another important point. We have an opportunity to make history in this year's Finance Bill Committee by examining exactly the kind of witnesses that in 1977 the Chancellor wanted us to examine. We can look at the detailed nature of this Finance Bill and how it affects people, particularly the unemployed, those on benefit and the less well-off. That is what we should be examining in preliminary hearings. We should not treat it in this brusque fashion.
  Mr. Richard Page: I apologise for interrupting the hon. Gentleman earlier, because I understand that this is his resignation speech as a Whip.
  Mr. Mitchell: I am sure that comment is humorous, and perhaps I can have it explained later. It is more characteristic of the Standing Committee on the Finance Bill at 3.30 in the morning than of the House of Commons at 10.30 at night.
  The Chancellor continued:
  "Effectively this has given Parliament about 18 days a year, on average, in which to consider all fiscal change. This contrasts sharply, for example, with the much more leisurely timetable followed in the United States Congress, which normally fills several months for the House Ways and Means Committee; and is accompanied by continuous consideration by the Joint Committee (of House and Senate) on Internal Revenue Taxation."
  Now that America is running into the same economic difficulties through "Reaganomics" as we have through "Thatchernomics", we should bear in mind the way in which America treats its financial legislation. It has a much more effective procedure for unveiling its inadequacies.
  We then skip through a large chunk of quotations from Swift. I shall not repeat them, because Swift has been nationalised by the Labour Party. I come to another extremely telling point made by the Chancellor on the procedure that we are being asked to adopt tonight. He says:
  "But it is the politician who must bear the principal responsibility for improving the system … It is we who have the highest responsibility for securing the survival and acceptance of our parliamentary system of government. And it is Parliament, and democracy itself, that suffers most from the universal scorn that greets the legislative output of our present system."
  918
  Here the Chancellor is talking about the Finance Bill and what should go to Committee. He went on:
  "I have called often enough for its reform. So have many others. Yet, judged by our record we can hardly complain if commentators react with scepticism to our promises to `do better next time'."
  That Chancellor said that they would do better next time, but what changes have we seen in the procedures? They are still the same old Finance Bill procedures. We are still not examining witnesses and looking at it in the detail we should with the benefit of expert advice. He says:
  "The main budgetary provisions of the Fiannce Bill might usefully be detached from matters relating to machinery and technicalities."
  This year we have more provision for machinery and technicalities than we have had in a Finance Bill since 1970. It is the most detailed piece of legislation, with more machinery and technicalities crammed in with what the Chancellor calls the "broadest brush-strokes of economic policy". They require more leisured scrutiny and should be taken at another time in the parliamentary year and be incorporated in the Taxes Management Act. He then says:
  "There was no reason why financial legislation should be treated as a rare species with an almost permanently closed season.
  We must strive to escape from the adversary relationship of Standing Committees and draw more from the pattern established for Seclect Committees."
  That is something like the impatience we have heard tonight, not to hear what their own Chancellor told them when they were in Opposition in 1977.
  They are swatting flies and making gestures, but it is that adversary relationship that the Chancellor criticises as not the kind of atmostphere in which we should deal with such complex matters. There should be some hearings about the technical aspects of any Finance Bill.
  Mr. Deputy Speaker: Order. The hon. Member is straying from the motion. The motion deals with which clauses should be taken on the Floor of the House and which should be on the normal Standing Committee upstairs. The hon. Member must keep to the motion.
  Mr. Mitchell: Thank you, Mr. Deputy Speaker, for bringing me back to the point. The speech given by the Chancellor in February 1977 is rather long, but he was making the point about the balance between the clauses taken upstairs in Committee and those taken on the Floor of the House and the amount of time with which we have to deal with the Bill on the Floor of the House. This Finance Bill falls in an odd way into two halves. There are major financial proposals, particularly an innovation such as the index-linking of gilts, but there is a whole heap of detailed legislation, and we do not have the allocation of time right on the floor of the house.
  I will conclude——
  Mrs. Kellett-Bowman: Do not conclude.
  Mr. Mitchell: I will conclude, despite the interruptions begging me to carry on, with just one more brief quotation from the Chancellor's speech to the Addington Society in February 1977, which illustrates the theme of what I say.
  "Parliament is judged, amongst other things, by the quality of the laws that we produce. And by that standard we deserve to be harshly judged."
  We could be harshly judged about the allocation of time on the Floor of the House.
  The right hon. and learned Gentleman then said:
  "Ministers and Shadow Ministers of both parties have often declared, and sometimes fulfilled, the best of intentions: but not

  919
  often. If the bridge of confidence between politics and people is to be rebuilt, then this is an area where Parliament itself can act to set standards and design machinery which will secure more consistent virtue."
  That was five years ago, but there has been no change. All those promises so lavishly held out about a changed pattern of behaviour and more detailed consideration of the Finance Bill, about separating the minutiae of tax legislation and the broadest brush-strokes of fiscal policy have not been kept. It is our responsibility to put all that in the context of an economy which has been in almost consistent decline since that Chancellor took office, which is not recovering and which the Finance Bill will in no way stimulate. It will simply maintain the pressure of economic decline. That is the context in which we have to look at the complex clauses on the Floor of the House and in the Finance Bill Committee upstairs.
  10.38 pm
  Mr. Bob Cryer: I should like to spend a few moments talking about the need to have more of the Bill discussed on the Floor of the House and criticising the arrangement of clauses that have been put down for hearing in Standing Committee.
  I feel that there is clear evidence that the Government are seeking to remove the focus of attention from the House. The appointment, for example, of a Member of the House of Lords as Secretary of State for Trade is——
  Mr. Deputy Speaker: Order. The hon. Gentleman must confine himself to the motion.
  Mr. Cryer: Indeed, Mr. Deputy Speaker. I am doing just that. The motion selects only eight clauses and one schedule to be debated on the Floor of the House from a Bill that contains 17 schedules and 139 clauses.
  That is only a tiny amount of a massive Bill. I am sure, Mr. Deputy Speaker, that you will agree that it is important to focus attention on the Chamber. I was saying, by way of passing reference and illustration and not as the main content of my remarks, that it seems concomitant with the desire to put a great deal of the legislation in Committee to appoint the Secretary of State for Trade from the House of Lords when the matters relating to that Department are dealt with in the Chamber in the ordinary course of events. I say no more about the issue except to remark that the textile industry will be outraged by such an appointment.
  The Bill totals 17 schedules and 139 clauses—an enormous amount of legislation. Only a small proportion—eight clauses and one schedule—are to be debated on the Floor of the House. One recognises that the Committee contains a number of hon. Members, especially on the Opposition Benches, who are punctilious and diligent in getting through the work. But there is no doubt that there is not the focus of attention in the Committees of the House——
  Mr. Austin Mitchell: Will my hon. Friend give way?
  Mr. Cryer: I should be grateful to my hon. Friend if he would allow me to finish this point. Much more importance is attached to the House sitting as a Committee than to a Committee of the House sitting upstairs.
  Mr. Mitchell: I am grateful to my hon. Friend. He makes an important point partly in relation to the hours that the Finance Bill Committee works. On many occasions,
  920
  it works all night. The pleasure of watching the dawn come up over the Thames is not exactly the most exciting intellectual experience or the best climate in which to consider detailed legislation. I should be interested to hear my hon. Friend's reaction to the suggestion put forward by the Chancellor in his Addington lecture and urged in the Finance Committee last year that the Committee should devote three days as a prelude to its discussions examining witnesses and hearing evidence. I accept my hon. Friend's point about the diligence of Opposition Members, but it is difficult for the Opposition to match the back-up available to Government——
  Mr. Deputy Speaker: Order. The hon. Gentleman has already made a speech. His intervention deals again with the form of interrogation in the Committee and not with the issue whether clauses should be debated here or upstairs. The hon. Gentleman must stick to the motion.
  Mr. Cryer: I am grateful to my hon. Friend. If the motion was worded in a different fashion——
  Mr. Campbell-SavoursOn a point of order, Mr. Deputy Speaker. In the light of the judgment you have given, will you say what Standing Orders affecting the operation of business in Standing Committee prevent us from taking evidence in the manner that my hon. Friend suggests? In the event that such evidence could be taken under the Standing Orders that exist, it must surely be in order for both my hon. Friends to raise the matters that they have sought to raise.
  Mr. Deputy Speaker: The hon. Gentleman knows that one cannot take evidence in an ordinary Standing Committee. We are discussing whether clauses should be taken in a normal Standing Committee or on the Floor of the House.
  Mr. Cryer: That is correct. Evidence cannot be taken. In view of this and the fact that no provision has been made for taking evidence upstairs, there seems to be an even stronger reason for taking much more of the Bill on the Floor of the House. There is no question that the focus of attention in the House has been shifted due to the development of Select Committees. To put more of the Bill on the Floor of the House would shift the focus back to where it belongs, on the Floor of the House.
  The Finance Bill used to be taken on the Floor of the House, when the Committee sat as a Committee of the whole House. Because of the enormous amount of time and the intricate detail involved, the House decided to section the Bill out and to discuss parts of it in Standing Committee.
  That was for the convenience of the House but it is clear that in the intervening years the emphasis and burden have shifted the wrong way. From being a convenience for the House, it has become a convenience for the Government to put matters into Standing Committee and out of the way, as my hon. Friend the Member for Grimsby (Mr. Mitchell) said. That is quite the wrong focus of attention. Although the Government have a clear majority, Parliament should be able to exercise its scrutiny sitting as a Committee of the whole House. The House should be wary of any manoeuvres by Government to take that focus of attention away.
  If we do not take care to preserve the Chamber as the focus of attention, its importance as a debating chamber will be diminished. It would therefore be open to a

  921
  Government to manoeuvre in that way and to shift embarrassing clauses into Standing Committee, where the attention cannot be given by the press and constituents as Committee Rooms have far less accommodation for the public to come in and listen. They would be interested to see the way in which the tax lawyers on the Government Benches work so scrupulously to feather the nests of their friends in the Conservative Party.
  Mr. Campbell-Savours: My hon. Friend will recall the row in the Finance Bill Committee last year when opposition Members objected because Conservative Members moving amendments refused to declare their interests to the Committee. Because that major row did not break out on the Floor of the House, the country never knew what was happening.
  Even today, the public do not realise that Tory Members on that Committee moved amendments which, had they carried Government support, would have cost the Exchequer millions of pounds. They did so because they were paid lobbyists for industries outside. Is that not disgraceful?
  Several Hon. Members rose——
  Mr. Cryer: Conservative Members are suddenly eager to participate in a debate to which they showed antagonism at the beginning. I shall just answer my hon. Friend's point.
  While Standing Committees, are, of course, run properly in accordance with Standing Orders, much more attention is given to this Chamber. If hon. Members fail to declare a financial interest here, that fact is known to more hon. Members and therefore closer scrutiny is given to it. The press is in attendance here more regularly. That type of slipshod declaration, or lack of it, cannot happen so easily in the Chamber.
  Dr. Brian Mawhinney: The hon. Gentleman suggests that the Government move clauses into Standing Committee to avoid embarrassment. We recognise that for what it is—a manifestly stupid claim. Let us suppose, however, that some Labour Members do not think in the same way as Conservative Members. As clauses that go to Standing Committee have been agreed to by the Opposition Front Bench, are we to assume that the hon. Gentleman is accusing his own Front Bench of conniving with the Government?
  Mr. Cryer: Not at all. The Government decide the number of available days on the Floor of the House. It therefore follows, as night follows day, that the number of clauses available for debate on the Floor of the House is determined by the Government, not by the Opposition.
  The Financial Secretary to the Treasury (Mr. Nicholas Ridley): Perhaps I may help the hon. Gentleman further. The number of days were agreed by the party of which he is a member in the person of the hon. Member for Grimsby (Mr. Mitchell), who agreed both the clauses and the days. We merely complied with what he asked for.
  Mr. Cryer: I am most grateful. Is the Financial Secretary now offering more time to debate this measure on the Floor of the House? If he wishes to intervene to offer more days, I shall be pleased to give way and to learn how many more days he intends to offer.
  Mr. Ridley: I am sure that the Government will be happy to withdraw the motion if the hon. Gentleman does not like it.
  Mr. Cryer: I wish to be clear about this. Is the Financial Secretary offering more time to debate this measure on the Floor of the House? If he is, he should say so clearly because we would welcome more days on the Floor of the House.
  Sir Timothy Kitson: One of the reasons advanced against holding the Committee upstairs was that there was no room for a large number of the public or the press to listen to the debate. Since the hon. Gentleman started to speak, he has cleared the Strangers Gallery to such an extent that all the remaining members of the public could be accommodated in any Committee Room.
  Mr. Deputy SpeakerOrder. The hon. Gentleman knows that it is out of order to refer to the Strangers Gallery.
  Mr. Cryer: The hon. Gentleman's eyesight is certainly not so good today as when he is watching the gee-gees of which he is so fond.
  I wonder why the Government have not joined the Opposition in insisting that certain items be debated on the Floor of the House. For example, clauses 18 and 22 are listed in the motion for debate and discussion by the whole House, but clause 21, which deals with tax rates for small companies, is not. I wonder why the Government have not insisted that that be dealt with in the full light of this assembly. They could then put forward their claims about helping small businesses.
  In fact, of course, if that clause were debated on the Floor of the House, the Opposition could demonstrate that, far from benefiting small businesses, the Government have actually hammered them. The liquidation rate is at an all-time high and the concessions and grant aid that the Labour Government provided to assist small businesses have been cut. The Government's tax concessions merely keep up with inflation. I suspect that the reason behind the Government's reluctance to discuss clauses of this kind on the Floor of the House is that it would give the lie to their claim that they are trying to encourage small businesses in order to reduce the incredible total of 3 million that their policies have put on the dole.
  If, as the Government claim, the Budget is so beneficial to industry, it is legitimate to ask why they are so shy about their financial provisions and why they are consigning so little of the Bill to the Floor of the House for debate. If the Government had told my hon. Friends that they wanted not just two or three days but three or four times that number of days to be spent debating these matters on the Floor of the House, it is beyond question that the Opposition would have been willing to accommodate the Government's aims by providing time for such debate. We are driven to the conclusion that in curtailing the amount of time for debate on the Floor of the House, the Government have deliberately pushed much of the Bill into Committee upstairs, thus diminishing its importance rather than debating it here as the Opposition would certainly wish.
  For that reason, I believe that this represents a generally undesirable trend. What years ago was a useful trend is now shifting the balance away from the debating Chamber and towards greater convenience not for the House but for the Government of the day. I therefore believe that this marker should be put down for the future. We can then see what balance is achieved when the next Finance Bill is debated.
  10.54 pm
  Mr. D. N. Campbell-Savours: This is the fourth Finance Bill to be considered in the House since I have been a Member. I have been on three Finance Bill Standing Committees. What is most notable about this Finance Bill is that it is the largest one. It has 139 clauses and 17 schedules.
  I can well understand that my hon. Friends on the Front Bench would have been led into making an arrangement with the Government whereby few clauses could be dealt with on the Floor of the House. The Government allocate the number of days, as I understand it. They tell us what time is available.
  If I had my way, we would discuss the whole Bill on the Floor of the House. A great many of the clauses that we will be required to discuss in the coming weeks—certainly clauses 23 to 58—in the main relate to special concessions that are being given to those people who are in work as against those people who are without work.
  Anyone looking at the Finance Bill will be struck by the amount of money that is being given away to a small number of people. Labour Members represent a greater number of people who are unemployed and we believe that a greater proportion of this Bill should be discussed this year on the Floor of the House than last year because a greater proportion of it is beneficial to a small number of people.
  Of the 10 clauses—clauses 65 to 74—in the capital gains section we are being allowed to debate only one clause in Committee. I believe that every one of those clauses should be debated on the Floor of the House so that the British people can be quite clear about the unmistakeable objective of the Government. [AN HON. MEMBER: "Hear, hear."] The hon. Gentleman says "Hear, hear". It seems that he firmly endorses my statement that it is the Government's objective to insulate the better-off
  924
  in society against the problems which the worse-off in society are not to be insulated against. The great majority of people in my constituency will not gain any benefit from the proposals on capital gains tax and capital transfer tax.
  It is a disgrace that the House has refused to discuss these matters on the Floor. For three of my four years here, I and my hon. Friends have objected to this section in the Finance Bill.
  It was noticeable that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), the Financial Secretary to the Treasury, made a special point tonight of trying to refute my and my hon. Friend's suggestions that major concessions were being given to the better-off in society, yet, in his gross distortion of the statistics, he clearly revealed an even greater area for debate when this matter is taken up again. That debate should take place here on the Floor and not upstairs where it can be hidden away from the general public.
  I was not here when my right hon. Friend the Leader of the Opposition—the then hon. Member for Ebbw Vale (Mr. Foot)—took part in discussions on the formation of departmentally related Select Committees. He objected to them on the basis that Select Committees would take away from the Floor of the House its special responsibility for debating issues publicly——
  It being after Ten o'clock, and the debate having continued for three-quarters of an hour, MR. DEPUTY SPEAKER put the Question, pursuant to order this day.
  Question agreed to.
  Resolved,
  That Clauses 18, 22, 29, 65, 71, 75, 117 and 128 and Schedule 10 be committed to a Committee of the whole House:
  That the remainder of the Bill be committd to a Standing Committee:
  That, when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.

  Bowes Bypass
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Mather.]
  10.59 pm
  Sir Timothy Kitson: I apologise to my hon. Friend the Under-Secretary for having to raise the problem of Bowes bypass with her. I realise that she has been at the Department for only a few weeks and that all the decisions on the road improvement were taken before she came to the Department.
  The A66 between Scotch Corner and Penrith is a notoriously difficult road, partly because of the terrain, as it runs over the Pennines. It is also of great importance, as it is one of the few major roads running east to west across the country in the North of England. It runs through the three counties of North Yorkshire, Durham and Cumbria.
  Over the past few years many improvements have been made to the A66. Indeed, I think that it is true to say that the only village of any size that has not been bypassed so far is Bowes. Bowes bypass has been under consideration for 30 to 40 years. The village's inhabitants have taken all sorts of unusual steps to draw the Department's attention to their plight. In recent years they have even blocked the road for a short time. They raised their own 30 mph signs to demonstrate the problems from which they suffer.
  The heavy traffic rumbling through the village in the past few years has weakened the foundations of many properties. The conditions for those living in the village have almost been intolerable. That is partly due to the steep downhill section of the road that runs through the village. Heavy lorries increase speed to take a run up the village. Alternatively, running down the village and along the little bit of flat they have enough impetus, when they meet the rising ground at the southern end of the village, to tackle a fairly substantial hill. For many years they have been using the village as a race track.
  Several sections of dual carriageway have been constructed on the road to bypass the villages and towns of Brough, Appleby and Greta Bridge, and to bypass the difficult section of the road just to the west of the old North Yorkshire-Durham boundary, known as Stainmore pass. A long section of dual carriageway was put in to cope with the difficult hill that runs up to the highest point of the road.
  Of the Bowes bypass, 2·2 miles will be dual carriageway and 1·9 miles will be single carriageway. I cannot understand how the Department took the decision to build 1·9 miles of single carriageway when it has justified dual carriageways for the rest of the bypasses on the road. That is very poor planning indeed. The 1·9 miles—the section of the road that passes behind the village—is nearly all on rising ground and therefore heavy vehicles will go fairly slowly up that section of single carriageway.
  The average daily flow of traffic shows that in August 1981, on the A66 west of the intersection that runs into the A67 at Bowes and on the western side, there were about 8,500 vehicles a day. On the eastern side of the road, there were about 6,500 vehicles per day. About 1,600 of the vehicles running to the west were heavy goods vehicles, which gives a heavy goods vehicle content of 19 per cent. When we compare that with the national average of 13 per cent., we see that it is very high.
  926
  To the east there were about 1,400 heavy goods vehicles, which gives a heavy goods vehicle content of about 20 per cent. Therefore, the pattern of traffic on the road is very often in almost convoy conditions. I know that the Patronage Secretary, who uses the road regularly, has suffered from following large convoys of heavy traffic travelling up the A66. They run closely behind one another because of the hills and the difficulty of one large vehicle overtaking another on steep inclines.
  It is a notoriously difficult road to keep open in bad weather conditions. This winter it was closed on no fewer than eight occasions for more than 24 hours, and on one of those occasions for over five days. It is also well known that it is much easier to keep open a dual carriageway than a single carriageway in bad weather conditions. It only adds to the difficulties of keeping the A66 open when one builds a single carriageway bypass for a road which so often suffers in that way.
  I expect that the Department of Transport's answer to the fact that it will be single carriageway for 1·9 miles is that it does not justify a dual carriageway because of the traffic flow. However, it seems strange that the section of dual carriageway will be to the east of the A67, where there are about 2,000 fewer vehicles a day than on the west section of the A66, where we shall have a single carriageway. The Department's planning in this matter is almost total madness.
  There were 25 serious, reportable accidents during the past three years on the road from Scotch Corner to the Durham boundary, and 54 from the Durham boundary to the Cumbria boundary. There were also six accidents in Bowes village itself. I know that that is not very high when compared with the national average, but it is bad enough.
  Through the unsatisfactory planning of the new bypasses, further accidents will occur because of the extraordinary position that has arisen at one point. I wish to deal with Mr. Dobinson of Stone Bridge farm, on the east side of Bowes. The farm is 90 acres in size, and before the road improvement scheme he had 44·5 acres on one side of the road and 44·5 acres on the other. It is a grass farm, where he milks 65 cows and has a small flock of 30 ewes. During the summer months he crosses his cows four times a day over the A66 to the grass land on the north side of the road. He is a tenant farmer of the Bowes and Romaldkirk charities, which do not pay much attention to the design of the new road.
  There are three other farms sited on the edge of the bypass that will be dissected by the new road. On those three farms, underpasses have been constructed at a cost of about £300,000. One farm, Mr. Tunstall's, has 45 acres on the north side of the road and 3·5 acres on the south side. That has had a cattle pass, or bridge, constructed at a cost of about £90,000.
  If the Department of Transport had had its wits about it, it could have purchased the 3·5 acres for much less than the cost of building a bridge, satisfied the farmer and disposed of the land on the south side of the road without any major difficulty.
  On another farm, that of Mr. Sayers the land has been let for eatage for the last seven to 10 years. Therefore, with 85 acres in all, only 11 acres are on the south side of the road. There are another 11 acres in the village, which are accessible from the A67. Again, an underpass has been constructed at a cost of about £120,000.
  I very much doubt whether that underpass will ever be used. Certainly it will not be used under the present

  927
  ownership, because the land is let for eatage each year. The grass was advertised in the Darlington and Stockton Times only this week. It will be let. Cattle are unlikely to pass under the road, even on the odd occasion, during the summer months.
  Thirdly, there is Mr. Allison's farm at Bowes Hall. He has 22 acres on the south side of the road, and there are 150 acres on the north side of the road. An underpass has been built at the cost of nearly £100,000.
  I do not in any way object to the arrangements made for those three farms, but I am not sure that they have been dealt with in the most economical way when we consider the amount of land that has been dissected by the new bypass. Farmers might have been better off if a higher compensation figure had been paid and the land purchased. That procedure would have been more economical for the Department of Transport.
  However, we now have the ludicrous situation that Mr. Dobinson's cattle will cross the A66, 200 yds from where the dual carriageway runs into single carriageway. That is at a point where traffic will be travelling very fast to overtake heavy lorries that will be going into risating ground to climb upwards on the Bowes bypass single carriageway.
  I have been pressing the Department of Transport to look again at this matter. Its arguments are that because Mr. Dobinson's farm was dissected prior to the building of the new road, he has no right to expect to have an underpass constructed to get his animals across the road. I cannot think of a more hazardous situation being created. Where a single carriageway runs into a dual carriageway, 120 yds from a fairly sharp bend, those animals will cross the road, which at that point will be about 50 yds across, against what was a 15-yd crossing on the old road.
  In the past, during the Glasgow holidays, up to two miles of traffic was held up by that procedure. What will happen when cattle are wandering across a road of much greater width I shudder to contemplate.
  We did not ask for an expensive bridge to be built, but just for a cattle run, which would cost about £50,000 to £60,000, which would be little out of a road improvement programme with a cost of about £7 million, which includes the contract value and the purchase of land and other utilities.
  Having talked to the police about this matter, I know that they are not happy with the present proposal. There is a suggestion that traffic lights, or flashing lights, should be put up to help Mr. Dobinson to get his animals across the road. However, on the section of the road from Scotch Corner to Penrith—about 50 miles—to have one set of traffic lights, or flashing lights, would be total madness and a serious traffic hazard. That section of road is notorious for fog. We probably get more fog up there than on most other roads in the United Kingdom.
  From his farm gate to the field the distance that Mr. Dobinson will drive his cattle is about 300 yards. Anyone who knows anything about farming will know that a herd of cattle, which know where they are going, and amble happily up the road, can take a considerable time to cross the road. There will be a great deal of frustration for motorists who are held up by that procedure.
  I beg my hon. Friend to examine the problem again. If we are carrying out a road improvement, just because this farm was dissected by the old A66 is not a reason for
  928
  getting these animals on to a fast section of the new road. It cannot make road safety sense. Three underpasses have been provided at a cost of about £300,000 and will not be used a great deal, so surely a cattle run costing about £50,000 would be worth justifying when it is recognised that the cattle will otherwise cross the road about four times a day.
  What is more, because of the drainage problems on the northern side of the new road a major cut will have to be put through the road to put the matter right, and it would be possible to put the cattle run in at the same time. I hope that my hon. Friend will examine the matter again. If we are to make road improvements, for goodness sake let us not allow existing hazards to continue just because they were there in the past.
  I stress again that this road is notoriously bad, and the siting of the cattle crossing will be at a low point coming down from the west and also from the east into a position where traffic will then be going uphill in both directions. Therefore, people will be overtaking to try to pass heavy vehicles that are running into single line traffic—certainly the traffic running to the west. Late in the day as it is, every attempt must be made to rectify this ridiculous situation.
  I might just make one other point. In the construction of this road, five weeks ago a section of the A66 was burnt off. New tarmac was placed on the road at a cost of about £10,000. The road was then used for about 14 days before it was transferred to the new road that has been built. Can it make sense that this work was carried out for only 14 days' use at a cost of about £10,000? This was done at what is known as Boldron Road End. I do not expect my hon. Friend to answer this point, as it has only just been raised with me, but I should be grateful if she will look at the problem. It is ludicrous that this sort of thing should have taken place, and a road used for only 14 days before the traffic was transferred to the new road.
  11.17 pm
  The Under-Secretary of State for Transport (Mrs Lynda Chalker): I thank my hon. Friend the Member for Richmond, Yorks (Sir T. Kitson) for raising the matter. On the last point that he made, I assure him that I shall look into the matter with great care tomorrow morning. I share his concern and outrage about road safety—of that he need have no doubt. One of my Department's prime objectives is to increase road safety, reduce road accidents and ensure the free flow of traffic on our trunk roads.
  I am concerned that we have only found it possible to provide a single carriageway by providing a much needed bypass for a village that needs that relief from heavy traffic. I am also concerned to hear about the driving of cattle across a busy trunk road and I shall deal with this first.
  My hon. Friend described the plight of Mr. Dobinson, who seemed to have told the Department that his problems have been worsened by the construction of the new bypass. I must say at the outset that the facts as they have been explained to me show that this is not quite the case. My hon. Friend has, quite fairly, said that Mr. Dobinson's land was already, and always has been, severed by the A66, the point being that it was a rather slower A66 in the old days. It may be that, when traffic comes off the dual carriageway part of that road and on to the single carriageway part, that is the actual bypass round Bowes.

  929
  The construction of the bypass and the improvement of the existing trunk road eastwards from the farm will alter the road layout, but I am not convinced that the cattle crossing problems will be dramatically more difficult. As far as I am aware, not a single accident has, thankfully, been recorded that involved cattle on this stretch of road in recent years. We do not want to see any such accidents, but I want to put the matter into proper perspective.
  I should also explain to my hon. Friend that we consider the provision of agriculture underpasses or over-bridges on those occasions where cattle have not hitherto had to pass a major traffic way. This is not quite the case with Mr. Dobinson. It does apply to some of his neighbours. My hon. Friend cited the costs of providing underpasses for some of the neighbouring farms. However, the cost of providing an underpass at the place which would assist Mr. Dobinson would not be £50,000 but £140,000, because of the terrain there. Therefore, I have to consider the economic cost as well as the safety needs, and weigh one against the other.
  Sir Timothy Kitson: My hon. Friend is comparing this with a bridge under the road. Mr. Dobinson does not require a bridge. He requires a cattle run, which is a tube like a drain through which the cattle run, and it costs about £50,000 to £60,000. The bridges that have been built cost about £120,000 to £130,000.
  Mrs. Chalker: Perhaps this is not the hour to tangle with my hon. Friend on the matter, but I am told that the terrain at the point in question would require us to make a more substantial structure than has been used in some other cases for cattle to go through.
  The best way to solve the problem is to have an on-site meeting with my hon. Friend, if he can possibly be there, and Mr. Dobinson, to look at the matter in greater detail. However, it is important to note that we had an inquiry in 1978 into the Department's proposals, which was held by an independently appointed inspector. Prior to that inquiry, full details of the proposals were publicised to all concerned, and everyone was given the opportunity to lodge objections or otherwise to make representations, either in writing or verbally, at the inquiry.
  Because of Mr. Dobinson's strong view on this matter, I find it a little surprising that at no time in the period leading up to the inquiry, nor at the inquiry itself, did the owner of the farm, or Mr. Dobinson, the tenant, seek to have a cattle underpass provided. Therefore, my Department had no reason to suppose that Mr. Dobinson or his landlord would be unhappy with the arrangements proposed for taking his cattle across the new road.
  I have mentioned the cost of providing the cattle underpass. Clearly, the pass has to be large enough to encourage the willing use by livestock, but it must also be adequate to support the road and the traffic on that road, considering the type of traffic which my hon. Friend described.
  We have already considered a suggestion that we should make a cattle pass for Mr. Dobinson in the land under the road, which is already being excavated to accommodate drainage work, but my officers have investigated that possibility, and I am told that the cost would be very much higher because of the relative level of the new road, and the drainage difficulties at that point.
  I turn now, not to the provisions that we have already made for other cattle crossings, which my hon. Friend
  930
  mentioned, but to the fact that we must work within financial restraints. I am sure that he would not wish me to divert from a policy of sensible money management. If funds were available for unlimited road works, we should avoid the need to drive the cattle across the road by providing underpasses or bridges everywhere where they were needed. However, in the current economic climate, the funds that are available are not unlimited, and such a solution is not feasible. We have to stick to the rules, because my hon. Friend is not the only hon. Member in the House, of any party, who has a farm which has been severed by the existing road and which continues to be severed by the building of a new road. However, that does not militate against the offer that I made that he, if he is available, and Mr. Dobinson should meet my officers at the site and look at the problems that are likely to arise as a result of the building of the Bowes bypass.
  My hon. Friend is right to be concerned about the volume and speed of the traffic on the new A66, and, in particular, the possible effect of vehicles seeking to overtake before they approach the hill which is, indeed, single carriagway.
  There is one good reason why we have chosen, at the point where the dual carriageway is planned, to build what could be described as a second strip—it is more economic at that point to provide a second strip than to do some deep gullying. If we were to go single at that point on the A66, we would have to go down much deeper, which would be more costly. We shall examine the stretch of road from the county boundary to the west of Bowes where we are anticipating building the short lengths which are only single carriageway.
  My hon. Friend poured cold water on the idea of warning signals, but I should like to say something about them. We have an experimental system of warnings which can be activated by farmers who wish their cattle to cross a road. It is a warning system to oncoming drivers. We are monitoring the success of such warning signals. I shall be prepared to try out that idea if it appears to be one of the feasible ways of solving Mr. Dobinson's problem of getting his cattle across the A66. That is a matter which can be considered at the site meeting. I shall discuss it h my hon. Friend between now and that site meeting.
  It would be helpful to say a few words about the proposed bypass. I am convinced that it will bring enormous benefits to the local people. The village has a population of about 400. It attracts tourists in considerable numbers because of local places of historical interest. The A66 is the main street in the village and it is built up on both sides. The environment is seriously damaged by traffic noise and exhaust fumes. Parked cars frequently create hazards for road users. The road through the village has a bad accident record and, regrettably, a number of fatal accidents have occurred in recent years. There has been strong local pressure for the construction of a bypass but there were a number of objections to the scheme. All but one of those were from landowners who would be affected directly.
  The inspector who conducted the inquiry in 1978 noted that not one voice had been raised against the principle of the construction of a new length of trunk road to bypass Bowes, and that the construction of such a road and the improvement of the A66 east of the village was overdue. He considered that the route proposed was eminently suitable and while he sympathised with those objectors who would lose land or who would suffer intrusion, he was

  931
  satisfied that, subject to a few minor modifications, the proposed acquisition of land rights was unavoidable and that the order should be made.
  In contrast to the accident record for that length of the A66 which runs through the village, the section of trunk road which passes through Stone Bridge farm has a relatively good accident record. That is the way we want to keep it. I assure my hon. Friend that the Bowes bypass will be a great boon. It will inevitably create problems on entry and exit as many bypasses do. The provision of such
  932
  bypasses is an important part of the Government's programme to relieve villages from heavy goods vehicles. At the same time, I have a good deal of sympathy for Mr. Dobinson in that he has to take cattle across a main road. We shall do everything that we can to minimise the inconvenience which he feels that he may suffer. I look forward to the meeting on site between my hon. Friend, Mr. Dobinson and my officials.
  Question put and agreed to.
  Adjourned accordingly at twenty-nine minutes past Eleven o'clock.

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  Foreign Affairs and Defence (Debate Statistics)

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

The Palestinian Problem
Lord Mayhew: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they are now taking to promote a just and peaceful settlement of the Palestinian problem.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Lord Trefgarne): My Lords, we remain committed to the principles of the Venice Declaration, which calls for the acceptance of the right of the Palestinian people to self-determination and Israel's right to live in peace and security. We are continuing to keep in contact with all the parties concerned.
Lord Mayhew: My Lords, is the Minister aware that his Answer will give great reassurance? Would he agree that in recent years, no one has worked more patiently and positively for a settlement in Palestine than the noble Lord, Lord Carrington? The Minister's statement indicating a continuity of policy will be warmly welcomed.
Lord Trefgarne: My Lords, I am grateful to the noble Lord for his kind words, and I am certain that my right honourable friend the new Secretary of State for Foreign Affairs will also be reassured by them.
Baroness Gaitskell: My Lords, despite what the Minister said and while I, like many Israelis, have grave reservations about what is happening on the West Bank, may I inform the noble Lord that I have recently read again the covenant of the PLO, from which I quote three sentences which tell us what they feel? Would the Minister agree that when the PLO say:
"Peace for us means the destruction of Israel",
and,
"The destruction of Israel is the goal of our struggle",
and,
"We are the sole legitimate representatives through the mouth of the gun",
those are not words to make peace in the Middle East?
Lord Trefgarne: My Lords, I certainly agree that some of the things the PLO have said, and some of the things they say they stand for, are not likely to contribute to a settlement in the Middle East. But the
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fact remains that they represent an important segment of Palestinian opinion and it therefore seems inconceivable that a settlement in that area could be reached without taking their views into account.
Lord Chelwood: My Lords, arising out of that last supplementary question, may I ask if my noble friend recollects that Mr. Begin has said on a number of occasions that the PLO will disappear? Should Mr. Begin and his Foreign Minister not be reminded, as former chiefs of the Irgun Zvei Leumi and the Stern Gang, that they disappeared only after the Jews had obtained what they had longed for, a national home in Palestine as a result of the partition of that country? Is it not asking far too much that the PLO should disappear until such time as the Palestinian people again have the right to have their own home in their own country, at least up to the pre-1967 armistice lines?
Lord Trefgarne: My Lords, my noble friend and the noble Baroness, Lady Gaitskell, put their fingers in their different ways on the essence of the problem in the Middle East, and I do not think it would be appropriate for me at Question Time to expand on what they said.
Lord Glenamara: My Lords, will the Minister bear in mind that the PLO, which the noble Lord on the Liberal Benches has supported for the past 25 years, is an international terrorist organisation which has sworn in statements, up to the present time and over the years, to the destruction of Israel—the only democratic state in the Middle East—by force of arms? In view of our experience in recent days in another part of the world with another country which is trying to get its way by force of arms, may I ask the Government to be very wary indeed before having anything to do with the PLO?
Lord Trefgarne: My Lords, I fear I cannot go further than I have, both today and on other occasions, from this Box, when I say for all their failings, and failings they indeed have, the PLO represent an important segment of Palestinian opinion and their views must be taken into account when we get nearer to a settlement than we are at the present time. But, as I said, some of the things the PLO have said, some of the things they have done and some of the things they stand for, are clearly not compatible with a settlement anywhere.
Lord Byers: My Lords, will the Minister recognise on behalf of the Government that the PLO is nothing but a terrorist organisation?
Lord Trefgarne: The PLO is actually an umbrella organisation, my Lords, and a large number of subsidiary organisations are affiliated to it. It is certainly the case that some of those affiliated organisations have, in accordance with their own admissions, been responsible for some appalling acts of terrorism.
The Earl of Onslow: My Lords, is it not true that the Israeli Government are annexing the Golan Heights and are kicking people and settlers out of the West

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Bank in a way which is very similar to that of the Argentine Junta in the Falkland Islands?
Lord Trefgarne: It would probably not be helpful to draw parallels between the two, my Lords, but it is certainly the case that recent acts by the Israeli Government have caused the greatest anxiety among some of their western friends, not least the Government of the United Kingdom, and I certainly include among those acts what has happened recently on the West Bank and Golan Heights.
Lord Paget of Northampton: My Lords, since for the time being our search for a peaceful and just settlement looks to be directed elsewhere, would not we be well advised, rather than to seek to advise the Israelis, to ask them if they would come and advise us on how we should protect our own territory where it is threatened? They have proved rather better at it than we have.
Lord Trefgarne: My Lords, I wish to reassure the noble Lord that Her Majesty's Government are determined, and have no doubts, as to the validity of our position with regard to the Falklands, to which I presume the noble Lord is referring, and we shall certainly restore that country to our own control in due course.
Lord Morris: My Lords, is my noble friend aware that the very language that he used—namely, the PLO" for all their faults"—is precisely the same language as the Government of the day used when referring to Germany between 1933 and 1939?
Lord Trefgarne: My Lords, I was not responsible for what was said between 1933 and 1939, but I think that the position with regard to the Middle East is certainly different from the position with regard to the various countries and events to which my noble friend refers. We think that a settlement in the Middle East will be achieved only by means of a consensus, and not by the use of force.
Lord Wells-Pestell: My Lords, will the noble Lord agree that there can be no meaningful discussions with the PLO regarding peace in the Middle East until the PLO recognise the existence of Israel, its right to exist, its right to independence, and its right to be able to exist as a state?
Lord Trefgarne: My Lords, I certainly agree that the PLO will have to change their position on a number of matters before a settlement can be agreed, but it will also be important for the Israelis to have a dialogue with the PLO to achieve that change.
Lord Mayhew: My Lords, is it not perfectly plain that on both sides there are strong elements whose views are quite incompatible with a peaceful and just settlement? Is it not quite plain that the literal interpretation of the PLO charter and the literal interpretation of resolutions of the Knesset and declarations
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from the Prime Minister of Israel would make a peaceful settlement entirely impossible?
Lord Trefgarne: My Lords, I am afraid that the only deduction that could properly be drawn from what the noble Lord says would be that the only possibility of achieving a settlement in the Middle East would be by some force of arms, and the Government do not accept that position.
The Chancellor of the Duchy of Lancaster (Baroness Young): My Lords, I think that the noble Lord, Lord Brockway, has been trying to get in for a very long time. May I suggest to the House that we take his supplementary question, and then move on to the next Question.
Lord Brockway: My Lords, may I ask the noble Lord whether he will suggest to the Foreign Secretary that, when he is free from his present heavy responsibilities, he considers preparing a renewed United Nations international conference on this subject?—in view of the breakdown of the Camp David agreement, the unrest not only on the West Bank but in Israel itself, and the hopeful proposals that are made by Saudi Arabia.
Lord Trefgarne: My Lords, the proposal which the noble Lord puts forward is one which has in fact been put forward by the Soviet Union in recent months. That is not to say that we dismiss the proposal because of that, but any such conference would certainly need to be very well prepared if it were to make any progress in the present circumstances. As to the proposals of Saudi Arabia, they are certainly important proposals, which indeed have a good deal in common with the Venice Declaration of the European Community last year, and certainly together with that declaration they might form the basis for further progress.

University Teachers' Pensions and War Service
2.47 p.m.
Baroness Wootton of Abinger: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are satisfied with the allowances for years of war service, as at present included in the calculation of the retirement pensions of university teachers.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Elton): My Lords, for those university teachers whose careers were interrupted by the war, or who entered university teaching within 12 months of demobilisation, their war service counts in full for pension purposes. For others who became teachers after service in the armed forces of the Crown, and before 30th June 1950, their war service counts at half-rate. Her Majesty's Government are satisfied that the war service of university teachers

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ought to be recognised for pension purposes on terms broadly comparable with those for all other public servants; and that is the present position.
Baroness Wootton of Abinger: My Lords, I thank the Minister for his Answer, and I wonder whether he will allow me to ask him two further questions. Is he really satisfied regarding the deprivation that is now suffered by senior academic personnel who at the beginning of the war were preparing for academic posts, threw up everything to join the forces, served throughout the war, and often suffered delayed demobilisation, with the result that they could not comply with the requirement that they should obtain a new academic post by June 1950? Secondly, is he aware of the extraordinary anomalies that are arising under the administration of the present rules? For instance, when a conscientious objector registered, he was directed to alternative service and received full credit for his years in that service, while a senior professor, who was a Fellow of the Royal Society, served for four years as a volunteer in the Navy, and, through being four months too late in obtaining an academic appointment, received nothing.
Is the noble Lord aware of an even more extraordinary example? We have on record a case concerning a person, now a British citizen by naturalisation, who was a citizen of an enemy country during the war and was engaged in armaments research in that country. He has been credited with those years of service, while a university teacher in this country—
Several noble Lords: Speech!
Baroness Wootton of Abinger: My Lords, I am merely asking whether the Minister is aware of this. This is the last example that I should like the Minister to note. Is the Minister aware that the case to which I have just referred is contrasted with the case of someone in this country who was in university employment, was drafted to the Ministry of Supply to do research on armaments, and receives no credit at all?
Lord Elton: My Lords, by way of preface to my reply I ought to explain that the provision in the scheme was intended by Parliament to apply to those people whose chosen career was either interrupted or deferred involuntarily by service in the armed forces of the Crown during the Second World War. A chosen career can be identified only when a person becomes committed to it, and the first hard evidence of such commitment is normally the first job in it. However, there are occasions when the preparation for a career can be directed only to that career and commitment to a career starts with a preparation for it. But you cannot say that of a university teaching career because there is no training which is specific to the career of being a teacher in a university and which cannot be otherwise employed.
The noble Baroness cited a series of cases which have been raised outside this Chamber. It is not proper for me to reply to individual cases, but I can say that university teachers are in the same position as members of other public service pension schemes. No conscientious objector can receive the half-rate war service credit as a post-war entrant to university teaching
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because he has not been in the armed forces. The conscientious objector in question would either have been in university teaching before the war or would have entered such teaching immediately afterwards on the basis of qualifications obtained during the war. He would thus have had his career interrupted or deferred. In such circumstances he would receive a full war service credit only if he had been directed to work of national importance contributing to the war effort.
To pick only one other of the noble Baroness's illustrations, I know, and the department knows, of no evidence that any enemy armaments worker, as she termed it, is in receipt of this pension, and cannot conceive how that could be. We have searched for evidence, and if the noble Baroness has it I should like to see it. Otherwise, I shall treat the case as apocryphal.
Lord Mackie of Benshie: My Lords, does the noble Lord not negate his own argument by allowing half-service for war years pre-training entry? Surely, if you do that the noble Baroness's argument applies. They did not waste but lost those very valuable years just as much as people who interrupted their university teaching.
Lord Elton: My Lords, as I said in my original Answer, the scheme is intended to be on all fours with schemes for other people serving in the public service. That condition applies to them, and was extended to the university teachers last year.
Lord Ashby: My Lords, is the noble Lord aware that this cut-off date of 1st July threatened also the opportunities for some school teachers to receive the benefits of their war service? Is he further aware that in order to meet that circumstance in 1975 the cut-off date for those who were intending to become schoolteachers but who were not yet in jobs because they do not begin until September, was changed to the 30th September? Would the noble Lord agree that an advance of no more than 24 hours in that cut-off date to the 1st October 1950 will go a long way towards resolving this disgraceful lack of appreciation of the war service done by a good many university teachers?
Lord Elton: My Lords, the distinction between the training of a teacher who takes a certificate of education, as it was, or a diploma of education and a teacher in a university is that the certificate or diploma is of use to him only in teaching, and he has therefore been committed to a career in teaching from the beginning of his training. A university teacher with a university degree can apply it in a whole spectrum of other employments. That is why there is that distinction. As to the question of moving the date by 24 hours, that is an interesting proposition which I shall look at.
Lord Ashby: My Lords, I hope that in doing this the noble Lord will also bear in mind, if I may ask him to do so, the fact that not everybody who takes a course in teacher training becomes a teacher, just as not everybody who gets a higher degree becomes a university teacher.
Lord Elton: Indeed, my Lords, but a certificate or diploma of the ability to teach is not as widely useful

117
in seeking employment as a degree of bachelor or master of the arts, for instance.
Baroness David: My Lords, would the Minister not agree, though, that there is discrimination? There are other professions which have advantages that universitity teachers do not have. Under local government and the National Health Service superannuation schemes, staffs still in training for those services at the 30th June and subsequently entering the appropriate service were eligible for concessionary war service arrangements towards pensionable service. Why is there not a similar arrangement for university teachers?
Lord Elton: My Lords, the same applies to them as applies to teachers. In local government it is a qualification for this exemption for public health inspectors to have taken training for the Royal Sanitary Institute Diploma. It is to those, I presume, that the noble Baroness refers. Similarly, in the National Health Service specialist training courses for qualification in medicine and dentistry, including courses for professions supplementary to medicine, clearly qualify people to pursue only those professions.
Baroness Wootton of Abinger: My Lords, may I ask the Minister whether he would look into similar provisions that are made in a number of friendly countries in the EEC, which I think he will find are a great deal more liberal?
Lord Elton: My Lords, I am not answerable for what happens abroad but I am interested in what the noble Baroness says.
Lord Balogh: My Lords, does the Minister realise that the repudiation of tenure introduces into our universities a totalitarian scheme which ought to be resisted?
Lord Elton: My Lords, I much regret that I could not get the drift of the question that the noble Lord was asking me.

Air Safety
2.57 p.m.
Lord Whaddon: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what proposals they have for improving the safety of passenger aircraft.
Lord Trefgarne: My Lords, the statutory responsibility for air safety lies with the Civil Aviation Authority. The authority keeps under review the requirements governing the design and construction of passenger aircraft and the standards to which they are operated. This is a continuing process involving discussion with a wide cross-section of the aviation industry, including
118
research organisations and other airworthiness authorities.
Lord Whaddon: My Lords, is the noble Lord aware of the report on cabin safety in large transport aircraft recently issued by the United States National Transportation and Safety Board? Is he aware that in that survey of survivable crashes of passenger aircraft there was a most lamentable failure of cabin fittings, some 60 per cent. of these crashes showing serious failures—50 per cent. showing seat or seat belt failures, some 45 per cent. showing overhead racks coming down and some 35 per cent. showing galley equipment crashing all over the place? Is he aware that some 40 per cent. of the passengers involved became casualties? Will the Government consult with the United States authorities on the necessity to tighten up these regulations and reduce the hazards?
Lord Trefgarne: My Lords, I certainly agree that the report to which the noble Lord refers provided some interesting food for thought in these matters, but it is perhaps worth saying that the problems are not as simple as some of the commentaries on that report made out. I particularly noticed the article in the Observer on the 14th March, I think it was, which perhaps drew the attention of the noble Lord to the report in the first place. For example, if you strengthen an aircraft seat in the way that some people would have us do, then you almost certainly ensure that the accident is not survivable so far as the passenger is concerned because it is his spine which takes the shock rather than the collapsing seat.
Earl Grey: My Lords, is the noble Lord aware that decisions that some of these measures be incorporated in regard to safety were taken 30 years ago, and is it not about time that these measures were up-dated?
Lord Trefgarne: My Lords, the noble Earl is wholly mistaken in that view, if I may say so. For the record, the Civil Aviation Authority has introduced 23 amendments to its airworthiness requirements in the past 12 months, which have been aimed at improving the safety of civil transport aircraft. It has planned a further 47 amendments, which it hopes to introduce during the next few years. It has also issued nine airworthiness notices during the last 12 months dealing with the raising of safety standards.
Lord Glenarthur: My Lords, does my noble friend not agree that the use of flight simulators has contributed significantly to our flight safety over recent years? Does he not agree that the United Kingdom has been pre-eminent in the development of flight simulation? Can he say whether the Government will continue to give every encouragement to the further development of flight simulators, not only for flight safety but in development flying?
Lord Trefgarne: My Lords, I certainly agree with my noble friend in that matter, and I can certainly give him the assurance for which he asks. There is none better than he, if I may say so, to comment on these things.

Racial Discrimination: Professional Partnerships
3 p.m.
Baroness Sharples: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will introduce legislation to ensure that advertisements for a partner (in particular by doctors and dentists) will not be treated as discriminatory under the Race Relations Act 1976 simply because they seek applicants with particular religious beliefs.
The Parliamentary Under-Secretary of State, Home Office (Lord Belstead): My Lords, the Government have no present plans to amend the Race Relations Act 1976. Discrimination on the grounds of religious belief is not unlawful in Great Britain, unless it constitutes indirect racial discrimination under the Race Relations Act. Even then, an advertisement imposing a requirement that prospective partners in, for example, a medical partnership must belong to a particular religious faith may not be unlawful if that requirement can be justified.
Baroness Sharples: My Lords, while thanking my noble friend for that reply, which will be of help to those who have inserted these advertisements and who are disturbed at having been reported to the Race Relations Board, could my noble friend say how partnerships are affected by the Race Relations Act in matters other than advertising?
Lord Belstead: My Lords, I should like to make it clear that partnerships of less than six partners generally do not come within the scope of the Race Relations Act 1976. The advertising provisions, however, apply as far as indirect discrimination is concerned.
Lord Molloy: My Lords, is the noble Lord aware that in the history of this country we have never bothered too much about religion intervening in the practice of medicine and that I believe we ought to keep it that way? Is the noble Lord further aware that, nevertheless, there might be a need in some parts of the country to advertise for a specialised knowledge of a certain language and that should be helped in preference to any religious form of discrimination or acceptance only because of what a doctor might practise as his religion?
Lord Belstead: My Lords, I will take account of what the noble Lord has said about the need in some cases for a specified knowledge of a particular language. So far as religions are concerned, I think the noble Lord would accept that there has been a very long history of the close relationship between Christianity and the practice of medicine.
Lord Campbell of Alloway: My Lords, would my noble friend agree that in this instance the Act gives rise to a curious and unwelcome consequence; for although under Section 10 it is a firm of less than six partners—that is, a firm where the partners, say,
120
hold the same religious beliefs—that cannot commit unlawful discrimination if they advertise for another partner of the same religious belief, they are liable to commit the offence of unlawful advertising under Section 29? Would my noble friend not agree that this is a slightly unsatisfactory and anomalous situation?
Lord Belstead: My Lords, I think my noble friend puts his finger on a point which is more apparent than real. My noble friend might agree that it is sensible under Section 10 of the 1976 Act to except the smaller partnerships from the scope generally of the 1976 Act. But the advertising provisions of the Act in Section 29 apply to all partnerships of whatever size, on the ground that a partnership, large or small, ought not to be free to publicise feelings which would be contrary to the intentions of the Act.
Lord Morris: My Lords, would my noble friend consider asking Her Majesty's Government to promote a religious discrimination Act which, with the Sex Discrimination Act and the Racial Discrimination Act, could be consolidated so that there is only one statute to ignore rather than three?
Lord Belstead: No. my Lords,

Business: Civil Aviation Bill [H.L.]
Lord Denham: My Lords, noble Lords will see that the Committee stage of the Civil Aviation Bill, which is a consolidation Bill, is on today's Order Paper in the name of my noble and learned friend the Lord Chancellor. No amendments have been tabled to the Bill and in the normal way a Motion to discharge the Committee stage should have been tabled. I apologise to the House for there being no such Motion on the Order Paper, but, if your Lordships will agree, my noble and learned friend does not propose moving his Motion today but will do so tomorrow instead.

Iron and Steel Bill [H.L.]
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I beg to introduce a Bill to consolidate certain enactments relating to the British Steel Corporation and the Iron and Steel industry. I beg to move that the Bill be now read a first time.
Moved accordingly, and, on Question, Bill read a first time, and to be printed.

John Francis Dare and Gillian Loder Dare (Marriage Enabling) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Hugh Small and Norma Small (Marriage Enabling) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Social Security and Housing Benefits Bill
Lord Elton: My Lords, I beg to move that this Bill be now read a second time. The Bill which I bring before your Lordships today is rather more than the routine document which social security measures are apt to be. It contains two important and beneficial social reforms. The first affects payments to people who fall sick, and whose sickness prevents them from working. The second affects the way in which we give help to those people who need it in order to meet the cost of their housing.
The Bill may be different from other social security legislation by reason of the effects which it has upon practices to which we have long been accustomed. In another important respect, however, it resembles other social security legislation rather closely. In parts, it is, unavoidably, rather a complex document. I am therefore arranging for notes on clauses to be available to your Lordships in the Printed Paper Office and for those to include a note describing the way in which it is intended that the power to make regulations shall be used in respect of both the statutory sick pay and the housing benefit schemes. I am also arranging for a note on the financial effects of statutory sick pay to be made available in the same way at the same time. I hope that these will be of use to your Lordships.
The principal change which we propose to the delivery to the recipient of payments during sickness has a history going right back to 1948. It was the intention, even under the Beveridge scheme, that sickness benefits should rank for taxation. It was rapidly discovered, however, that the administrative difficulties of doing so were insuperably complex and it was taken out of taxation. However, the idea was not dropped. It was not merely that to have one sort of income taxed and another untaxed was an untidy anomaly; it was also a matter of the effects which this anomaly had in individual cases and particularly where employers had (as increasingly they have) their own schemes of sick pay running alongside that provided by the state.
One important effect of this was that the gap between the value of income received while sick and that which was earned at work was reduced. In some cases, it was reduced to a point where the incentive to return to work became marginal. In an increasing number of cases where the employer gives full pay to employees who go sick, or full pay less national insurance benefit, employees actually get more when sick than when they are working. As early as 1974, this applied to no fewer than 66 per cent. of all full-time employees, so that we have what I might call an ailment trap built into the system. The attraction of living on an income that is both unearned and untaxed is, to say the least of it, considerable.
The extent to which employers provide their own sick pay schemes alongside those of the state is now very considerable. Almost 90 per cent. of all full-time employees are covered by such schemes. The disadvantage of this does not consist only of the obvious anomaly that for a lot of people it is more profitable to be off work sick than to be at work earning. At present when any one of those people falls sick two quite separate bureaucracies spring into simultaneous and parallel action: the employer and the state both have to
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record the fact of his sickness. Both have to assess his eligibility for sickness payments. Both have to calculate the amount due. Both have to make payments. Both have to record his return to work.
The virtue of the change proposed in this Bill is that for the first eight weeks of sickness it disposes simultaneously of both the ailment trap and the duplicated clerical work. Statutory sick pay will be paid by the employer through the normal PAYE system, thus both bringing it into tax and cutting the workload of the Civil Service, enabling us to reduce its size by around 3,000. This reduction will be an important contribution to the overall reduction of our national bureaucracy to a level appropriate to our needs. There will also be a net financial gain to public funds of up to £90 million.
The idea of statutory sick pay is not something which has been sprung upon the public without warning nor is it something which has been adopted by the Government without consultation. We published a Green Paper in 1980: Income During Initial Sickness: A New Strategy. In June 1981 we published a second consultative document called Compensating Employers for Statutory Sick Pay. As a result of this consultation we made a number of changes to our original proposals and, as your Lordships will know full well, a number more were made as the Bill now before the House made its way through another place. In this lengthy process we have taken on board the views of both employers' and employees' representatives, and the Bill we now have before us contains the wisdom distilled from two years of careful consultation, reflection and debate.
For those of your Lordships opposite who may, none the less, have a few lingering doubts or suspicions about the measure, I have one final word of comfort. It was a Labour Government which argued the case for statutory sick pay in its White Paper on social insurance of 1969 and concluded that,
"the Government will later explore the possibility of introducing a statutory scheme which would provide a minimum of sick pay for all employees".
We shall, of course, be dealing with the technicalities of what is proposed in some detail during the Committee stage and I think your Lordships will therefore wish me to deal with the provisions of individual clauses only briefly. They are as follows: The first four clauses—together with Schedule 1—explain when an employee is entitled to receive statutory sick pay and when an employer is liable to pay it. I shall here deal with only one point which I know has caused some concern, namely, the linking rule for statutory sick pay.
Under the existing national insurance scheme, the linking period is eight weeks, and we have no intention of changing that. In essence, the rule means that two spells of sickness separated by eight weeks or less are treated as one. This means, in turn, that the individual does not need to serve waiting days on the second spell. The purpose of this rule is to protect the position of someone who has a relapse, perhaps because he returned to work too soon, and is in effect suffering from no more than an extension of his original indisposition. That is how it works with sickness benefit under the national insurance scheme and there is no intention to

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change that. Under the statutory sick pay scheme there will also be a linking period, but it will be shorter.
The linking period between two spells will be two weeks. There are two reasons for that. First, it will make administration much simpler for employers. Secondly, statutory sick pay is designed principally to make payments during short illnesses. The long-term sick, for whom a longer linking period is desirable, will be the state's responsibility. Statutory sick pay will, in general, cover minor ailments—colds, 'flu, strains et cetera—for which a two week linking period seems more appropriate. We accept, however, that the linking period is a matter of judgment and we shall be keeping a close watch on its effect when the scheme is introduced. My honourable friend the Parliamentary Secretary for Health and Social Security has undertaken that we will be monitoring the effect.
Clauses 7 and 8 deal with the rates of statutory sick pay and various other provisions relating to payment. Clause 7 establishes the three rates at which statutory sick pay is to be paid. The rate to be paid depends upon the amount of the employee's normal weekly earnings. The top rate is set, initially, at £37. That is for those normally earning at least £60 a week. The bottom rate is to be £25 per week. That is for those normally earning less than £45. The middle rate was introduced as an amendment in another place. It covers those earning from £45 to £60 per week and amounts to £31. That change, made in another place, will give some 1 million employees an extra £6 per week in statutory sick pay. The result is, I think, a reasonable rate at each level, though it can of course be varied by order in the years to come. Your Lordships will know that the method by which employers were to recover their expenditure on statutory sick pay was a matter of considerable concern and some initial controversy. The Government have, however, taken great care to get the views of those concerned and to meet them. It became quite clear that the overwhelming preference of employers, both large and small, was for recovery by deduction from their monthly national insurance contributions. This is what the Bill provides.
Clauses 11 to 18 set out the administrative provisions and the rights of employees and employers. Essentially, they provide that where there is doubt about title to statutory sick pay, the national insurance adjudicating authorities can determine the question. I should also mention Clause 23 which, your Lordships will know, caused some controversy when the Bill was discussed in another place. It creates a liability for national insurance contributions to be paid on statutory sick pay. There have been objections that this is placing a financial burden on those businesses with no existing sick pay provision, which will be slightly out of pocket because of this provision. I have some sympathy with the argument but we can see no easy way round the problem. The solution put forward in another place—that employers (but not employees) should be exempted from paying contributions on statutory sick pay—would have been an administrative nightmare for both employers and the state. That I am glad to say was recognised by industry.
The effect of Clause 23 is mainly on small businesses, and your Lordships will know that this Government
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have done a great deal to help small businesses—not least the measures announced by the Chancellor in the Budget. These measures are selective, whereas the solutions put forward to get round the Clause 23 problem would have been indiscriminate. They would in fact have given most help to large firms, most of whom are already gaining under the compensation provisions.
Before leaving the sick pay scheme, I should like to say something about the position of disabled people. The present Minister for Social Security and his predecessor both took a close interest in the effect of the scheme on disabled people. Both sought to ensure there would be no adverse effect on the employment prospects of disabled people. A 100 per cent. self-deduction will go a long way to ensure this. As I have already mentioned, most employees are already in occupational sick schemes and most of these schemes pay more than the statutory minimum. We have found no evidence that this has led to a squeeze on disabled people's job prospects. Finally, the message of recent campaigns is beginning to get through: many disabled people do not have worse sickness absence records than their colleagues. Indeed, many of them are away from work less often than their non-handicapped, able bodied colleagues.
The position of the long-term sick has also been protected. Under our proposals someone who is sick for more than eight weeks in any tax year becomes the state's liability and he will stay with the state for as long as his illness lasts. I should stress that the national insurance 8-week linking rule applies to these cases. Furthermore, people transferred to the state will need only to receive a further 120 days of sickness benefit before they qualify for invalidity benefit. This concession will safeguard the position of the chronically sick. I turn now to Part II of the Bill. This is difficult ground over which my noble friend Lord Bellwin will lead your Lordships, with his usual assured and competent manner, in Committee; and it is particularly fitting that he should reply to this debate this evening.
Part II is concerned with the second major innovation to which I referred in my opening sentences, and once again we are looking at a problem that has been with us for a considerable time. It has been the subject of many comments—particularly from the former Supplementary Benefit Commission—drawing attention to waste and duplication in the present system.
At present a person not in full-time work and in need of assistance with his or her housing costs can turn in either of two directions. He can turn either to the Department of Health and Social Security and seek supplementary benefit or he can turn to the local authority for rebates or allowances against rent and rates. Even if a person's circumstances were not liable to change it is really far from easy to determine which of these mutually exclusive schemes would benefit him most. But circumstances do change for all of us, and very often the choice which proves right in the first instance may prove entirely wrong later on.
A further drawback to the system is that here once again we have two competing bureaucratic systems. By unifying the two systems the Government will obtain a further contribution towards their campaign

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to reduce the Civil Service to a reasonable size. There will be a saving, in this instance, of 2,000 posts. That will represent a net cash saving of up to £10 million. But this will not be applied to reducing the public sector borrowing requirement. It will be applied in extra benefit payments. Economic circumstances made it necessary to make this a "nil cost" change and that seemed a proper way of achieving it. The new scheme will be based on the local authority rebate and allowance schemes, simplified where possible, and supplementary benefit claimants will be entitled to full rebates of rent and rates without further income assessment. Local authorities can provide housing assistance to supplementary benefit claimants more efficiently than the Department of Health and Social Security.
Baroness Jeger: My Lords, can the noble Minister clarify one point? He refers to the number of civil servants who are to be reduced and he has just told us that the town halls will have to deal with more of these cases, so does it not mean that while he reduces Civil Service staff he has to increase local government staff?
Lord Elton: My Lords, I was about to touch on that. There will be an increase in the workload for local authority staff, but not by any means commensurate with the loss of workload by the department. At present the Department of Health and Social Security can give cash to claimants for them to pay rent and rates to the local authority officials the noble Baroness asked about, and they have to deal with that. There is also a large exercise each year to revise individual rent and rates to help to take account of increases. Under housing benefit all that goes. For the large majority of supplementary benefit claimants, authorities will not have to collect rent or rates. They will simply rebate them, although cash payments will continue to be made to private tenants. We recognise that local authorities will need some extra staff to cope with the extra volume of work and the Government have promised that these extra administrative costs—this is what the noble Baroness has been waiting for—will be met in full. There will, nonetheless, be overall administrative savings of up to £10 million, and, as I have said, this will be transferred to benefit expenditure.
Your Lordships will realise that very detailed provisions will be needed in order to introduce this scheme. Moreover, experience has shown that relatively frequent and minor adjustments will be needed to keep it in tune with the evolving needs of the community. For both these reasons it is apparent that it would not be appropriate for the detail of the scheme to be embodied in primary legislation. It would be far too costly in terms of parliamentary time—not merely at the point of introduction but on the frequent occasions for adjustment. The Bill therefore provides enabling powers for the introduction of the scheme by means of regulations. If I may summarise the salient points rather briefly: the provision for the power to make regulations governing the national statutory rebate and allowance schemes lies in Clause 28. Clause 29 was inserted by the Government in another place. It places a statutory requirement upon the Secretary of State to review the value of
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the needs allowance each and every year. The provision for the power to make regulations governing the local authority schemes lies in Clause 30. It will allow authorities, as at present, to improve on the statutory schemes, using their own resources to do so.
Clause 31 provides for publicity and Clauses 32 to 34 for the financial arrangements. Again, these build on the arrangements in the current rebate schemes, with the important additions that the local authorities will be compensated in full for additional benefit and administrative costs of giving rebates and rent allowances to supplementary benefit claimants. Finally, Clauses 35 and 36 deal with interpretation and supplementary provisions.
This change has also been preceded by publicity and consultation. The Government's proposals for housing benefits were outlined in a consultative document, Assistance with Housing Costs, published by the Department of the Environment, the Scottish Office and the Welsh Office last year. Since then, of course, responsibility for housing benefit has been transferred to the Department of Health and Social Security, which explains the anomaly. In the process of consultation it was established that there was a wide measure of support for the need to rationalise the existing provisions along the lines the Government proposed.
But there was also concern that the need to provide a nil cost solution produced a significant number of losers. Government have tried to reduce these; but I must make clear that the resources are not available to ensure there are none. However, it is important to realise that the Government proposals, as they stand, ensure that no supplementary benefit claimant will lose weekly benefit from the change; and that over 1 million of the poorest rebate claimants will gain. We did this by improving the rebate tapers for the poorest pensioners, with income below the needs allowance, and increasing the needs allowance for all pensioners by 75p a week. This means that 850,000 pensioners below the needs allowance and 220,000 just above it will gain on average by about £1 a week. These are significant improvements for very poor claimants. We were able to protect non-pensioners below the needs allowance, but these improvements had to be balanced by reducing help to the better-off rebate claimants. Overall, about 2 million will lose by an average of 50p a week—but the size of the loss is related to the amount of income, and nearly half lose 25p or less a week. Taper losses will also generally be limited to 75p at the start of the scheme.
We have striven throughout to improve our proposals and to produce the best scheme possible that circumstances allow. I should also add, with no little gratitude, that we have been greatly helped in this by the co-operation and expertise provided by the local authority associations. They have worked very closely with officials to produce workable and sensible procedures; they also suggested some improvements while the Bill was still in the other place and my honourable friend the Minister for Social Security was happy to accept them. This augurs well, I think noble Lords will agree, for the inauguration of the scheme when we come to it.
There are, of course, other important provisions in the Bill, but I think your Lordships will wish me to deal with them rather more briefly. Clause 38 removes

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the requirement that an unemployed person who claims supplementary benefit must be registered for work at a Jobcentre. (There is a corresponding requirement for unemployment benefit, but this is incorporated in regulations and not in the main legislation.) By enabling Jobcentres to concentrate on those who really need their services, this change will improve the service both to employers and to unemployed people. At the same time, it will achieve substantial staff savings. There will be no loss of control, since the availability for work of those concerned will continue to be tested when they make their claims at unemployment benefit centres.
Clause 39 is the first step in restructuring the industrial injuries scheme. The clause abolishes injury benefit—the short-term incapacity benefit payable to those injured at work or suffering from an industrial disease. Instead of this, those who are industrially injured will get statutory sick pay or national insurance sickness benefit. The money saved by this measure is being used to make disablement benefit—the scheme's long-term benefit—available from a fixed date in all cases. This will be 15 weeks after the accident or the incidence of the prescribed disease. These changes will bring substantial benefit to the more seriously disabled, and that is one of the principles underlying our proposals for the reform of the industrial injuries scheme as a whole.
Clause 43 rectifies certain defects in war pensions law and validates past awards made without adequate legal backing. It also contains provision for the Secretary of State to determine the commencing date of past awards in certain special categories of case. Hitherto, pension has generally been awarded from the date on which a claim was revived, but the clause makes provision for the payment of up to six years of arrears.
An underlying object of the Bill, complex as its drafting must be, is to achieve simplicity. Both its major proposals will abolish wasteful duplication of administrative work. Both, therefore, eliminate substantial amounts of unproductive employment that can be paid for only out of tax on productive work. The change in housing benefit, moreover, will remove entirely a very difficult dilemma that at present faces, in particular, many pensioners in need of help with their housing costs. These are objectives which will be welcomed by the country as a whole, and I commend the Bill to the House. My Lords, I beg to move.
Moved, That the Bill be now read a second time.— (Lord Elton.)
3.32 p.m.
Baroness Jeger: My Lords, I regret that this side of the House cannot commend the Bill to your Lordships, for many reasons which I shall try to set out as briefly as possible, because I accept that this is a Second Reading debate and this is very much a Committee Bill, as it is very detailed and technical and we shall want to come back to many points at Committee stage. I would not want your Lordships to think that we on this side are taking an old-fashioned Luddite view of national insurance, because national insurance must be an evolving sector in our society. We can go back to
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the Poor Law, to Lloyd George, and also to Churchill saying—and I have every sympathy with him—that he did not want to be shut up in a soup kitchen with Beatrice Webb. We can then go on to Beveridge and can work out how society has tried to come to terms with poverty, with illness and with chronic sickness, and has attempted to deal in a community spirit with the welfare of our citizens.
So we do not say that there should be no changes in social security. On the contrary, we want to join in any progressive measures which will change these arrangements for the better. But I have to ask several questions. First, this Social Security and Housing Benefits Bill must be seen in context with the present situation. Noble Lords will remember that the Social Security (No. 2) Act was very disadvantageous to many of the poorest people in our country; that we are in a situation where the number of people on supplementary benefit is increasing; and that, whatever is happening at the moment, there seems to be no underlying improvement in the unemployment situation. Yet we are bringing in a system whereby the poorest, the out of work and the sick people in our society will be disadvantaged.
They will be disadvantaged because the national insurance contribution is to be increased, because charges for dentistry, ophthalmic services and prescriptions are to be increased, and now we have to face a situation where there is to be a change which seems very onerous to some of us. I know that the question of unemployment pay is not included in this Bill, but as a former Member of another place I seem to recall that on Second Reading it is quite proper to refer to what should have been in a Bill, as well as to what is in it. But it seems absolutely outrageous that the sick pay that is to be brought in under this Bill is to be subject to income tax, and the fact that there is no provision for unemployment pay to be exempt from income tax is grossly unfair.
It was the understanding of many Members in both Houses that when benefits were brought into taxation they would at least then be brought up to the rate of inflation. But now we have a situation where it is admitted by the Government that unemployment pay is 5 per cent. below the rate of inflation and yet that benefit is to be taxed. I think that that is grossly dishonourable on the part of the Government.
I say that, because I have with me a copy of the Finance Bill dated 15th July, 1981, together with the Official Report of the sitting of Standing Committee B of 1st May, 1980, and at column 684 the Minister said:
"I do not, therefore, anticipate any difficulty in meeting the obligation to restore the benefits into tax and fulfilling the pledge that I have given. When the benefits come into tax the revenue will be there".
Many Members of both Houses took that as a pledge on the part of the Government, but that is a pledge which seems to have been broken. I hope that the Minister who is to reply will explain why the Government, at the same time as admitting that there is a 5 per cent. shortfall in unemployment benefit, are bringing that benefit into taxation.
This is a very difficult Bill and I have every sympathy with Ministers opposite. There really should have been two Bills. The question of sick pay should have been separated from the housing implications of this Bill. I

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have referred to the taxation of unemployment benefit but, of course, we now have to face the fact that, for the first time, sick pay is to be taxed. I correct myself, my Lords. It is not the first time, because the Labour Government tried to tax sick pay from July, 1948, to April, 1949. They then gave it up as a bad job, because it seemed that they were having to collect income tax from two different sources and that really was not practical.
One of the main accusations that we have against this Bill is that it is so full of regulations. I prefer legislation to regulation. I think that that is how this country wants to be governed. This is a Bill which will affect the living standards and lives of practically every family in this country. When people ask us about it, we are going to have to say, "Wait for the regulations". Any legislation which depends upon regulations is, I feel, deficient.
I want to ask the Minister several questions. Many of the points which we on this side of the House want to raise will be raised in Committee. However, I should like today to give notice to the noble Lord of some of our problems. First, what is to happen about employers who are slow to pay? I am thinking of the slightly sickly worker who is not very well. I am not talking about the registered disabled because there is a special attitude towards them. I am talking about a man or a woman who is not very well and who perhaps has more time off than his fellow workers. What is to happen if an employer refuses to make the payments? And what delay are the Government going to accept? We are speaking about people who might be very low paid and quite poor. How long can an employer hang about not giving them their money, when they have got the landlord knocking on the door for the rent?
Turning to housing, I refer to col. 649 of Hansard of another place of 23rd November 1981, when the Minister said that these changes would take place "without any increase of expenditure on housing assistance". This means that no extra assistance will be going into the housing accounts of this country at a time when many of us feel that there needs to be additional help with housing costs for everybody in the country. Can the Government ensure that under the Bill nobody loses? The Minister said in another place at col. 650 on 23rd November 1981 that nobody would lose more than 75p a week. I am old-fashioned enough to think of 75p as the good old 17s. 6d., and 17s. 6d. is not a sum to be—have I got it wrong?
Lord Elton: My Lords, the noble Baroness is apparently not fully metricated; 75p is in fact 15s.
Baroness Jeger: I thank the noble Lord. That is why I put it in an interrogative form. I cannot add up; I am totally innumerate. Nevertheless, I do not think that fifteen "bob" is to be entirely disregarded. The point I raised when I interrupted, I hope not discourteously, the noble Lord the Minister is that the reduction in the number of civil servants might well be balanced by the increase in local authority staff. If you say to people that they cannot ask for housing help from the DHSS and that they must go to the town hall, the town hall will have to provide for their reception. At least, I hope the town halls will.
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However, we certainly know from experience (having been chairman of a housing committee in Camden, I certainly know from experience) how patchy the provision is which town halls make for dealing with these problems.
I want to ask the Minister whether the Government have thought through the abolition of short-term industrial injury benefits. For many years there has been an agreement between the Government and the trade unions that people who suffer as a result of injury at work should receive special consideration.
My next question is this: how are the Government going to work out the needs basis? Some time ago it was said (I remember the debates on the Social Security (No. 2) Bill in which I took part) that the Government were interested in having a tax-related index which would be separate from the RPI. My research shows, (though I am open to correction, as ever) that the tax-related index shows an inflation rate of 14·9 per cent., which is more than the RPI index shows. This is relevant. If the Bill is connected with the levels of assistance and how we are to work out the amount of assistance, then we must reach some agreement about how we do the arithmetic.
It has often been said that the RPI does not do justice to the poorest people in our society. The poorest people obviously pay a higher percentage of their income on housing, fuel, food. Many items which come into the RPI are not relevant to them. They do not buy diamonds, cars, fur coats. They do not buy many of the things which are included in the RPI. When the Government agreed to bring in this new tax-related index we thought that it would have some relevance to benefits, but I have to say to your Lordships that we have not heard much about this lately; and the uprating of benefits certainly does not reflect the uprating of costs in the tax-related index.
I have to say to your Lordships that the very fact that in the Bill there is supposed to be a topping-up arrangement means, in our view, that the Bill is a failure. We all want (I hope I am not speaking at the moment in a partisan way) to get this question straight. However, when a Bill is introduced and the Government have to say that it will be a bit rough on a lot of people so there will have to be a topping-up, it means that the Bill is wrong. Topping-up means more bureaucratic work. It means that more and more people will not know about their right to benefit. The small take-up at the moment of many of these benefits indicates this.
When the Government say, "Never mind; we'll top-up anyone who is having a rough deal", I have to say to them that this is not good enough. Who are these people who are having a rough deal? They might be the illiterate; they might be people who do not speak English very well; they might be people who do not stand up for themselves very well. The Government are putting the responsibility on the poorest people and saying, "You will have to come along and ask for a topping-up". Instead of that, the whole trend of our national insurance policy should be to wipe out those kinds of applications. We want people to get their benefits as of right and not to have to go, cap in hand, to the town hall and say, "Can you top me up?" That is a backward step.

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May I also ask the noble Lord the Minister about the levels of assistance. Will there be any built-in index-linking of benefits? I have read the Bill as carefully as I can—I admit that not only am I not very numerate but perhaps I am not very literate—and I cannot find anything there which suggests that there should be index-linking of these benefits. In fact, it seems to be a Bill which will make the poor pay for the poor. The philosophical difference between us is that while we want a redistribution of wealth, the Government want a redistribution of poverty. The fact that they have to bring in this topping-up mechanism seems to be emphasising that point.
I want to ask the Minister also about Clause 35. This removes the need for registration of the unemployed. We believe that that is a great pity, because the unemployed are mostly in a situation of isolation and depression, and the fact that they do not even have to go down to register is not, we feel, a good thing socially. It seems to reject them from society, implying that nobody wants to know about them and that they need not even tell anyone that they are unemployed. This seems to us to be emotionally and politically a very bad thing.
I apologise for asking these questions now, but my hope is that doing so will save some time at Committee stage. The Government have reduced the number of inspectors for wages councils and the number of factory inspectors and health and safety inspectors. What are the Government going to do to ensure that this Bill is properly policed? How are the Government going to ensure that employers—and I refer in particular to small employers who have many difficulties with cash flow at the present time—will send the money to the man or woman who is off work for a week`? How many inspectors is the Ministry going to appoint to deal with this work? What is going to happen to workers who have been sick for more than eight weeks? What is the Government's answer to that?
Then I have to ask the Minister about the level of benefits. I understand (although, as always, I am subject to correction) that sick pay is to be calculated by reference to 1981–82 benefit figures; a sum of £22.50 for a single person plus £13.09 for a dependant adult, and 80p for each child. From those sums national insurance was not deducted, but now national insurance is to be deducted. Not only that, but income tax is to be payable on those figures.
Lord Elton: My Lords, either I have misunderstood the noble Baroness, Lady Jeger, or she has misunderstood the Bill. She mentioned the rate at which statutory sick pay was to be calculated. Has the noble Baroness perhaps overlooked Clause 7, where the actual figures (which are different from those she has just given) are set out? If that is the case, and the noble Baroness has not noticed those figures, then there is the answer. If she has noticed those figures, then will she rephrase her question so that my noble friend can answer it properly?
Baroness Jeger: My Lords, I have noticed the figures in Clause 7 because I have been living and sleeping with this Bill for the past week or two, as I am sure the noble Lord has. I was referring to the present
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payments and not to the payments under the Bill. It seems to me that a couple with two children will receive about £3.87 less under the new arrangements and this will be of some disadvantage to the family. My reading of this Bill and of all the deliberations in another place indicates that anyone who is receiving between £34 and £44 a week will be worse off. Then there is a cut-off of benefit at £60 a week. In case any of your Lordships imagine that no one earns less than £60 a week nowadays, may I say that, according to figures which were given in another place, more than 750,000 people in our country earn less than £60 a week. It seems to me, and again I am being interrogative, that there is a proposed flat rate of £37 benefit for people who earn more than £60 a week but that for people who earn less than £60 a week the benefit will be £25 a week. This is something we cannot accept.
Anyone who is trying to live on £60 a week or less already has no fat to cut into, and will already be having a very difficult time. Such people do not have a lot of savings, and are likely to be living on the edge of proverty all the time. To say to these people, who probably have no savings, that because they earn only £60 a week when they are at work they will get only £25 a week when they are sick, despite the extra expenses which any sickness brings, is totally unacceptable.
Lord Hawke: My Lords, I am very interested in what the noble Baroness is saying, but who exactly are these people in whole-time work who are earning less than £60 a week?
Baroness Jeger: My Lords, I thank the noble Lord, Lord Hawke, for that intervention. I do not know who these people are but the official figures show that there is this number of low earners in our country. This may come as a surprise to the noble Lord.
Lord Hawke: My Lords, are they not all in part-time employment?
Baroness Jeger: Not necessarily, my Lords. They may be in part-time employment because they are single parent families or people who cannot otherwise work full-time. That does not mean that they should be discriminated against when they are sick.
I also wish to ask the noble Lord, what additional rate burden is involved? The Government are boasting that the change in housing benefit—and we accept that there needed to be a change in these provisions—should be transferred to town halls. At a time when the Government are trying to squeeze towns halls to reduce their expenditure, what provision are the Government making to ensure that when a person in this situation is told by the DHSS that he had better go to the town hall because his housing has now been taken out of the RPI, there will be someone to see him? Will letters be written to that person? Will there be sympathetic officials able and waiting to talk to him? This is a very important question. The Government are boasting about the reduction in civil servants, yet they will have to face up to an increase in local authority staffing. As I said before, I have found the system all

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over the country to be very patchy in respect of the helpfulness or unhelpfulness shown towards people who have housing difficulties.
I wish to ask another question. Is it a fact that a low wage earner with a wife and two children will get around £13 a week less than sickness benefit if he was unemployed? That is a very important point, because once the Government make it more remunerative for people to stay at home than to go to work they really are on the wrong track. I must repeat our regret at the fact that there is nothing about uprating written into the Bill and nothing about index linking either. We must again ask about self-deduction. Employers are supposed to undertake 100 per cent. self-deduction. How is that going to be enforced? What is going to happen if an employer sends one or two people home because it will be cheaper for him to send them home and claim 100 per cent. back from the Government than to pay their wages? Unless there is a very adequate and expensive system of policing, the savings which the Government boast about will not be made. We are also worried about the abolition of industrial injury benefit because this was of special concern to the Labour Government; we would like to know more about the present Government's intentions in this respect.
The next and perhaps the last question I want to ask the noble Lord is this. I apologise, but this affects so many millions of people in our country that I do do not think we ought to deal with it in a casual way. Why are the Government apparently making this flat rate sick benefit and not taking into account the family circumstances of those concerned? Are the Government saying that, for example, a 19 year-old typist who lives at home is to be rated the same as a married man with three or four children? I know the answer the noble Lord the Minister is going to give me, that child benefit will take care of that. But if child benefit is going to take care of that then child benefit has got to be much uprated; it has really got to play a major part in the budgeting of the families of this country. So far there seems to be no indication that the Government are going to use child benefit in the further way that we want to see, to eliminate family poverty in this country. There seems to be in this Bill no reference to the family circumstances of a man or woman who is on sick leave. So this again makes me repeat that it is a redistribution of poverty.
Very briefly, I hope the Minister will be able to tell us something about the housing position and the help given to private tenants and people with mortgages, because the scheme seems to be very neat and tidy so far as council tenants are concerned—they should go along to the town hall and ask for this or that—but there are millions of people in this country (certainly in my old constituency there were thousands living, not at their own wish, in what was called furnished accommodation, which was often a sort of Rachman set-up) who will not be sure of their rights under this Bill.
In column 700 of the Commons Official Report the Minister admitted that 2 million householders would be worse off as a result of this Bill. It cannot be expected that this side of your Lordships' House could give its approval to a Bill which has that effect on the poorest people in the country. Therefore, because of
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all the difficulties and all the disadvantage that is encompassed by this Bill we cannot give it our support.
4.3 p.m.
Lord Banks: My Lords, I should like to begin by thanking the noble Lord, Lord Elton, for his very clear and thorough explanation of what he himself called a complex subject. The Bill, like Gaul, is divided into three parts: the statutory sick pay scheme, the unified housing benefit and the miscellaneous provisions. I think it will be generally agreed that the first two of those are the most important.
We on these Benches oppose the statutory sick pay scheme; we support the concept of a unified housing benefit, but we are not happy with the scheme as proposed. Our reasons for opposing the sick pay scheme are these. First, we are not in favour of fragmenting the national insurance system. We believe that the income maintenance system is best administered by the Government, and we do not agree with hiving off part of that system to employers to administer separately on behalf of the Government. We favour an integration of the tax and social security systems in a tax credit scheme, and under that there would be one benefit for inability to earn which would cover sickness, among other situations. We fear that the proposed system will be an uneven one which will have very differing standards of administration by different employers. Smaller employers cannot be expected to be uniformly efficient, and we feel there are bound to be some doubts about whether claimants are getting their proper entitlement, a point raised by the noble Baroness, Lady Jeger. We are not surprised that it is going to be necessary to appoint some 2,000 fresh inspectors to supervise the administration by employers of this inevitably complicated scheme.
As the noble Lord, Lord Elton, explained, the Government have put forward various suggestions as to how this scheme should be financed, but eventually they have come round to accept the view that employers should be recompensed 100 per cent. for what they pay out in sickness benefit over the first eight weeks. We welcome that as far as employers are concerned, but it does have certain implications, and those implications were clearly set out by the Government in their document Compensating Employers for Statutory Sick Pay, published in June of last year. This is what they then said:
"With 50 per cent. self-deduction employers would have a direct financial interest in controlling absenteeism and ensuring that they had properly applied the rules of the statutory scheme. One hundred per cent. self-deduction (that is what is now proposed) would not have this built-in control. Even if the number of visits to employers by DHSS inspectors were increased substantially, it is probable that some monies would be withheld from the National Insurance Fund, either erroneously, fraudulently or in respect of malingering. The inevitable consequence would be an increase in the employers' contribution rate. In effect a 100 per cent. self-deduction scheme would end up with the honest, efficient employer subsidising the dishonest, inefficient one. For these reasons the Government remain strongly opposed to this approach".
In the meantime, the Government have overcome their opposition to the 100 per cent. self-deduction scheme, but I am not convinced that they have overcome their own arguments.

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That it is going to be a complicated and difficult burden on employers, and particularly on small employers, was confirmed by Mr. Rossi, the Minister for Social Security, in the House of Commons during the Committee stage on 28th January 1982, when he said:
"We expect that an additional workload is bound to accrue during the early years of the scheme, when employers, especially small employers, who do not have the assistance of accountants and professionals to help them get their records right, will need assistance in operating the scheme and dealing with complicated matters such as waiting days and linking periods".
We are worried about the burden on small firms, for while there is to be recoupment for benefit paid out there is no compensation for administrative expenses. We feel also that there is a possibility of discrimination against those with a history of sickness, just as the noble Lord, Lord Elton, said about those who are disabled. We would agree that 100 per cent. recoupment does make that less likely, but the possibility is there.
There are some details about the scheme with which we are not happy. One of those is the lower rate to which the noble Baroness, Lady Jeger, referred. If we regard £37 as being fixed as the subsistence level, it is difficult to accept the lower rates of £31 and £25 which are to apply to people earning between £45 and £60 and people earning under £45. I think this is probably the answer to the point raised by the noble Lord, Lord Hawke, who intervened earlier. At present, if full contributions are paid, then full benefit is paid.
The second point of detail on which we are unhappy is the fact that national insurance contributions will now have to be paid on sick pay, thus reducing the net amount. I point out that I am talking about national insurance contributions and not about taxation. As I understand it, a sick married man in the highest bracket will receive £34.13 a week after insurance contributions, as against £36.40 at the moment, not subject to insurance contributions. I think that in this context it is important to bear in mind that about half of all males in receipt of sickness or invalidity benefit have an adult dependent.
The third point has been referred to by the noble Baroness, Lady Jeger, and it is the fact that there are no additions for children. The Government are already reducing the present additions for children faster than they are increasing child benefit. In fact, in the present year, they are reducing child additions, although child benefit is only increased to take account of inflation in the past year. We agree with the principle of replacing child additions by child benefit, but as we reduce the child additions we must increase, in our view, the real value of child benefit to compensate; and, as we understand the position, the Government are not doing that.
If there are these drawbacks to the scheme which the Government propose, why do they want to proceed with it? One of the reasons advanced—and it was advanced by the noble Lord, Lord Elton, this afternoon —is that a very large number of employees are now covered by occupational schemes. The noble Lord mentioned the figure of nearly 90 per cent. The figure more often used in this connection is 80 per cent., although that is based on a survey eight years ago, in 1974. But I wonder whether the figure is 80 per cent. or nearly 90 per cent. when one bears in mind that
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many of these schemes do have a waiting period, a qualifying period, during which people would not be covered by them although it might be thought that, since they were employees of a firm which had such a scheme, they were so covered. Of course the numbers covered vary enormously from industry to industry. It is not uniformly 80 per cent., or whatever, throughout the whole of industry, and one-third of manual workers are not covered in this way at all.
It is the view that this is an easy way of bringing the sickness benefit into taxation. That, of course, is true. But I do not believe that it is the only way in which we can bring sickness benefit into taxation. I do not believe that that in itself is a sufficient reason for putting forward a scheme of this kind. I think that the Government's main reason for putting this forward was that originally it was to save £400 million a year and 5,000 Civil Service jobs. That was before they accepted 100 per cent. recoupment. The £400 million has now disappeared and, as I understand it, the administrative savings are somewhere in the region of £30 million. I think that the noble Lord, Lord Elton, mentioned the figure of £90 million earlier; the figure which I have is £30 million, but no doubt that will be sorted out during the course of our debate. However, it is a very much smaller figure than that which was originally envisaged. The number of Civil Service jobs saved has been reduced from 5,000 to 3,000 by the need to appoint some 2,000 inspectors. I do not feel that these estimated savings justify changing to a system with the drawbacks which I have outlined.
Let me turn briefly to the unified housing benefit. We certainly agree in principle that many people have to choose between rent and rate rebates and supplementary benefit, and it is estimated the 400,000 people are making the wrong choice and choosing a course of action which is less beneficial for them. As the noble Lord, Lord Elton, pointed out, this is a reform which was advocated by the Supplementary Benefit Commission in the years before their demise. But they always advocated that there should be additional resources. The noble Lord, Lord Elton, made it clear that the Government are not providing additional resources, and he made it clear that this meant that there must be losers as well as gainers, or, rather, that if there are to be gainers then there must be losers. I think that the estimate—certainly the original estimate—was that 800,000 would gain but 2 million would lose. I think that that still stands. Certainly it was the original Government estimate.
In the consultative document, the Government estimated that 74,000 current recipients of supplementary benefit would be worse off on rebates, and so provision was made for the "topping-up" payments from the DHSS to which the noble Baroness, Lady Jeger, referred. But I wonder whether this joint system will be administratively feasible for both administrators and claimants. There are many people who think that it will not be. I wonder, too, whether we can be told who will identify those entitled to topping-up payments. Can we be certain that no pensioner, whether reliant on supplementary pension or not, will lose out? I am not convinced that it is right to put this additional burden on local authorities. Will it not merely multiply the number of offices with which some claimants have to deal?

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Again, I am not happy about the decision to exclude housing costs from the retail price index when adjusting supplementary benefit for inflation. There is some logic in this because there is what has been described as "double counting". But our supplementary benefit rates are not over-generous and in my view should not be reduced in real value. If there is to be a differential, then I should have thought that it should not be introduced until it is possible to increase the real value of supplementary benefit levels generally.
In accordance with convention we shall not oppose the Second Reading of this Bill this afternoon, although that was the course taken by my right honourable and honourable friends in another place. But we share their dislike of the sick pay provisions and will continue to express our misgivings about certain aspects of the unified housing benefit.
4.18 p.m.
Lord Boyd-Carpenter: My Lords, I should like to join the noble Lord, Lord Banks, in thanking my noble friend on the Front Bench for a remarkably clear exposition of what he himself rightly described as a highly complex measure. I am sure that the House, whatever views we may take on the merits of the proposals, is really indebted to my noble friend for a quite masterly display. I would agree on one point, too, with the noble Baroness, Lady Jeger, on the Bench opposite, when she said that basically this is a Committee Bill. I agree that it is a Bill on which our best discussions are likely to take place in Committee and perhaps at the Report stage.
I would venture none the less to quarrel with the noble Baroness when she diverted from a very interesting and agreeably expressed analysis of the provisions of the Bill, into one of those outbursts of what I can only describe as "party passion" to which she is so susceptible. I was so moved by this that I took down what the noble Baroness said. She said:
"While we want to see a redistribution of wealth, what the Government want to see is a redistribution of poverty".
That is a splendid rounded phrase, which I am sure would bring echoes of applause in Camden or some such place. But it does not, of course, stand up to analysis. Nor, if she will allow me to say so, is it fair to attribute motive of this kind. In this House we very much criticise—I, for one, am certainly guilty of it—the arguments and views of those who sit opposite us, but, on the whole, I do not think that we criticise their motives. On reflection, the noble Baroness may feel that that kind of remark, though it no doubt eases her feelings to make it—and that is no doubt a good reason for doing it—does not really make for clarity in this debate.
However, I want to follow it up, because I think that she there disclosed one of the reasons why in recent years Labour Governments have been such a disastrous flop. The concept is the simple one of a large cake which a benevolent Government cut in such slices as they think appropriate for different sections of the community to have on their plate. Of course, in fact, that is basically the communist approach, except that it is to be noted that in communist countries the Government—the people on top—receive an enormous slice, disproportionately far
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larger than the wealthy in this country receive, and the people at the bottom of the scale receive a minute slice.
However, with respect, it is a wrong concept, because a Government should be concerned, not about the redistribution of wealth, but about its maximisation. It is in that way, if you so manage the economy that you get an increase in wealth generally, that you improve the position of everybody. I do not speak without having facts in my mind. This is precisely what happened in what is now called the Macmillan era, when, because the national wealth, under wise policies and good administration, was growing year by year, the standards of life at every level of our community improved. What is more—and I can bear very direct witness of this—the funds available for our great system of social security were increased every year by successive Chancellors of the Exchequer.
From the diverting subject of the noble Baroness, I should now like to return to the perhaps more austere outlines of the Bill. I agree with the proposal to transfer to employers the responsibility for the payment of short-term sickness benefit, provided that it is so arranged—as the Bill now arranges it—that no additional financial burden is imposed on employers. I put that proposition not, I hope, in any selfish sense, but simply because at this moment, with the unemployment figures that so concern us all, it is folly to add anything to the cost of employing people. Indeed, it must be the object of Government to lessen the charge on an employer who gives employment.
That is why, unlike the noble Lord, Lord Banks, I welcome this 100 per cent. deduction. As I understood it, a 50 per cent. deduction would have landed employers with some additional cost. I do not want to weary the House with it, because this is perhaps more appropriate to an economic debate, but the whole problem of getting the economy going again and of tackling unemployment is so much aggravated by the existing heavy burdens that fall on employers—national insurance contributions, (even with the employer's surcharge to be reduced in August by a certain amount), rates and corporation tax. All the burdens placed on those who provide employment are one of the major handicaps to British industry and, therefore, the recovery of the British economy. If we had not had this 100 per cent. deduction, I, for my part, would have found it extremely difficult to support my noble friend on this Bill.
But now that that has been decided upon, I think that there are very considerable advantages. It is, of course, the fact—I think that my noble friend mentioned it in passing—that as many good employers continue full pay during at any rate a period of sickness. Where it has been possible on top of that to draw sickness benefit, with tax and national insurance contribution free, people have been distinctly the better off for being off sick. My noble friend coined a rather nice phrase; I think he called it the "ailment gap". But it must be wrong to have such a situation. When one adds to that the very real saving in bureaucratic manpower that can result from this, it seems to me that this proposal, which no one can accuse the Government of rushing—it has been put forward in Green Papers, White Papers, and papers tinged with white and green, and has been

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very widely discussed with all the organisations concerned in industry—is a progressive scheme which I think it is right to enact, and I, personally, welcome it.
There are one or two questions which I should like to ask my noble friend who is to reply to clear up. How will this apply to the very small employer—literally to the employer (and there are quite a number) who employs one person? Let us suppose that that one person is away sick. If the employer has to pay at the rates laid down in the Bill, that person's equivalent to sickness benefit, with no deductions for the future that he can make—because, ex hypothesi, that person is away—will he not be put in some difficulty? The sums involved in individual cases are small, but so are the employers concerned. What is the position? It is not uncommon, particularly in the countryside, for a person to have just one employee. Let us remember that where you have one employee and that employee is away sick, you are minus 100 per cent. of your manpower, and you are already in a very considerable difficulty. I wonder whether some alleviation for that situation is contemplated.
Secondly—and it may be that my reading of the Bill has been insufficient—what is the position in respect of employers whose employees are abroad? There are different categories. There are those who work for a British company and who are stationed abroad, perhaps in the Gulf, for four or five years. Then there is the case of the employee sent on a short mission who goes sick abroad. What is the position in respect of them?—because there are many in one category or the other, and, hopefully, as our policies of opening up overseas activity go ahead, there will be more. I am sure my noble friend will agree that it is very important not to make it more difficult for British firms to have their employees abroad.
I do not propose to comment, at any rate at any length, on the other main aspect of the Bill, the housing benefits. The subject is a complex one and I am not without some sympathy for the noble Baroness on the Benches opposite, having doubts about the efficiency of a good many local authorities' administrative systems and their ability to cope adequately with what I understand will be additional burdens put upon them. I think that this is a matter which we shall need to analyse rather carefully in Committee.
In this connection I should like to ask a question which I hope your Lordships and the Minister will not think funny, but it is a question arising on Clause 29. There, when prices rise, provision is made for the Minister either to increase the benefit figure or to lay a statement as to why he is not doing so. As I read that clause, there is no provision to deal with the situation if prices fall. It is within living memory—in the 1930s—that the index of prices fell consistently for a number of years. When one is legislating in an uncertain future, is it wise to exclude the possibility that the Government's measures may be so successful that inflation will not only be contained but reversed?
By way of warning, let me remind my noble friend, who may well be aware of it, of the error which the ex-service organisations made in the 1930s. They had pensions then linked to the index of retail prices. As that index fell as we got into the late 1920s and early 1930s those pensions were reduced. The ex
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service bodies formed up to the Government of the day and persuaded them to break that link. Needless to say, within another six months prices started to rise again, but that is an indication—perhaps an illustration—of the unwisdom of not catering for that situation. It may be that I have misread the Bill and there is machinery to deal with this. I should be interested when my noble friend replies to hear what he has to say.
I rather share sentimentally the noble Baroness's nostaligia over the passing of the industrial injuries payments. They are historical. I myself often wondered why there was the distinction between the person who got hurt at work and the person who became sick elsewhere. It was sometimes difficult to deal with because there were always the difficult questions about the person hurt on the way to work. I think he got industrial injuries benefit if he was in his employer's transport, but not if in his own.
One got these tiresome distinctions affecting quite appreciably the benefit obtained. It is logical to bring them together, and I suppose it is really due to history that industrial injuries took priority, going back early into this century, over the general national insurance sickness benefit. Many people have given a good deal of their lives, particularly many noble Lords on the Benches opposite and in another place, to an understanding of this scheme, and to appear before the tribunals that deal with it. One perhaps feels a little inclined to be sad at the passing of what was quite a considerable landmark.
On the other hand, I am delighted, assuming I understand it, which is by no means to be taken for granted, by the provisions in respect of war pensions in, I think, Clause 43, for loosening and making more flexible, as I understand is their purpose, the capacity of the war pensions scheme to deal with unusual cases. May I illustrate the importance of that by a reminiscence of a case which it was my duty to handle when I was Minister of Pensions and National Insurance a good many years ago.
There was, and I believe still is, an important war pension benefit called unemployability supplement. As its name suggests, it went to the war pensioner so badly disabled that he could not work. The case was that of a pilot in the RAF who lost both arms—ghastly mutilation. He of course was entitled, among other 100 per cent. disability and the rest, to unemployability supplement. A little after his accident it was brought to my attention at the Department that this man, because he had taught himself to paint pictures with a brush held in his teeth or his toes, was earning between £2,000 and £3,000 a year which, in those days, was something like two to two and a half times the average wage. It was therefore represented to me that I had no power to go on paying him the unemployability supplement.
I told my Permanent Secretary that I would not withdraw it in that case. My Permanent Secretary then told me sadly that in accordance with his duty as accounting officer he would have to submit a formal minute which would land us both in front of the Public Accounts Committee. Having cleared the air with these opening salvoes, we then got round to it and produced an entirely new regulation enabling the payments to be made, and this extremely gallant pilot

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himself obviously never knew what had happened behind the scenes. That is an illustration of the need in war pensions, which is essentially a benevolent, if you like almost patriarchal system, to have the utmost flexibility. If I understand Clause 43 aright, it is designed to increase the already considerable degree of flexibility that there is in that system. If that be so, I welcome it particularly.
As I said, and the noble Baroness said, this is a Committee Bill, and no doubt there will be quite a lot of discussion on it, but in general it seems a progressive move forward which I welcome and I believe a great many Members of your Lordships' House will welcome. As the noble Baroness said, national insurance and social security systems are not a beautiful object preserved for all time in the form in which they were originally evolved. They are a living and growing organism; and it is perhaps significant of the drive, vigour, and flexibility of mind of those at present in charge of the department that we get a Bill of this kind. I welcome it.
4.35 p.m.
Lord Kilmarnock: My Lords, I too should like to thank the noble Lord, Lord Elton, for his—I think Lord Boyd-Carpenter's word was—masterly introduction of this Bill. The noble Lord is always magisterial. The two principal schemes introduced by this Bill are the new provisions for statutory sick pay and those relating to housing benefits. I shall begin with the housing benefits, with which we do not disagree in principle, pass then to the sick pay arrangements on which we have very serious reservations, and then touch briefly on an important opportunity the Bill has missed.
The principle of a unified housing benefit is welcome. The present overlap of two schemes for housing assistance—one through the rent and rate rebates or allowances and the other through supplementary benefit payments—is confusing. If a tenant is eligible for both types he may choose to apply for whichever helps him most, but even professional advisers find it hard always to advise him correctly. Many people must have claimed the wrong benefit and lost out financially. I think that the noble Lord, Lord Banks, mentioned the possible figure of £400,000.
On these grounds we welcome the principle. At the same time we are concerned about who will meet the costs of administering the unified scheme. The enabling proposals transfer the responsibility for means-tested supplementary benefit support from the Supplementary Benefit Commission to a local authority rebate scheme. I understand that this change is estimated to yield a reduction in DHSS staff of some 2,300, at a saving of £25 million, but to require an increase in local authority staff of about 1,500 or 1,600. How is the increased local authority responsibility to be funded?
All local authorities today, as the Government well know, have great difficulty in budgeting their expenditure within the cash limits imposed by central Government. Are the Government going to accept 100 per cent. liability for the proposed transferral of costs which are estimated in the financial effects of the Bill at £15 million to £19 million? The noble Lord, Lord Elton, spoke about co-operation with the local authorities. My information is that some are still extremely worried
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on this score and fear that the increased costs, or part of them, will land on the local rate fund. Are the Government in close consultation with local authorities on this question, and can the noble Lord, Lord Bellwin, allay their outstanding fears when he winds up later this evening?
Turning to sick pay, one of the main aims of the new scheme is to tidy up the anomaly that someone whose pay is fully guaranteed by his employer when he is sick may receive more when sick than at work, because sickness benefit is not at present taxed. Sick pay, by contrast, like other short-term benefits, is to be brought into tax. Both major parties have, of course, entertained this idea from time to time, as the noble Lord, Lord Elton, pointed out; but it should not be forgotten that people's expenses also frequently rise during illness owing to such things as increased fuel bills and prescription charges. I rather wonder whether the Government have taken such additional outgoings into account in the minimum flat rates they have set.
The next main claim for the scheme is that it will cut out duplication of administrative effort. On the face of it, there may well be an argument for making employers the Government's agents for statutory sick pay up to a limit of eight weeks, and giving them the right to 100 per cent. reimbursement, though in fact it is not quite 100 per cent. as they will now have to pay national insurance contributions. This requirement was removed in the Standing Committee but has now been reinstated in the Bill at Report stage in another place. It certainly sounds a great deal cheaper administratively, and at Second Reading in another place the Government claimed a net saving over the two schemes of 4,700 public sector staff. But I am not clear whether their calculations of the financial effects of the Bill take into account this not insignificant number of redundancies. Perhaps the noble Lord will enlighten me when he comes to wind up.
There are other things here which worry me. First, there is the effect on small businesses, on which the noble Lord, Lord Boyd-Carpenter, also touched. Small businesses employ 16 per cent. of the workforce, a lesser percentage than in other European countries but still a large number of people. Will the small employer be as well equipped as the large corporation to comply with the new law?
If the method of reimbursement is to be by self-deduction by the employer from his national insurance liability, what happens if he has only a few employees and several of them go sick at the same time—for example, in a 'flu epidemic—and his liabilities under statutory sick pay exceed his liability to national insurance contribution? His cash flow may be seriously affected, particularly if he must take on temporary staff. Have the Government thought of that?
Other reservations are expressed by the Social Security Advisory Committee—which, it will be recalled, has replaced the Supplementary Benefits Commission—in their excellent first report which I have with me and which I recommend to those of your Lordships who are interested in these matters. While reserving their judgment on the desirability of SSP, the committee called for safeguards that would, to quote from their paragraph 2.52:
"help to ensure that employers administer SSP as efficiently, fairly and speedily as sickness benefit".

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That concern was also shared by Members of various political hues in another place, where worries that the expense of monitoring the scheme might make some of the savings illusory were expressed, a point mentioned by the noble Baroness, Lady Jeger, and the noble Lord, Lord Banks. Earlier in their report, at paragraph 2.51, the Social Security Advisory Committee said they were.
"glad that it is intended to maintain the value of SSP in real terms subject to economic circumstances. But we would have liked to see the real value of SSP and sickness benefit fully protected by a statutory guarantee. The Bill requires the Secretary of State to review the SSP rates each year to see if they have retained their real value, but it does not require him to make the necessary increases to restore the rates to their former values".
The relevant section and subsections of the Bill are Section 7(3) to (10). In subsection (4) the Secretary of State is allowed the extraordinary licence of estimating the general level of prices in such a way "as he thinks fit", though he must lay his reasons before Parliament. That is perhaps something one could accept as a sufficient safeguard if the Government's record in these matters were better, but it has not been good and therefore it is a subject to which we may want to return in Committee.
I come briefly to the general framework of social policy in which the Bill has been introduced. It follows the Social Security Act 1980, the Social Security (No. 2) Act 1980 and the Social Security Act 1981, all of which whittled away benefits in one form or another. In this measure, the Government have missed an important chance of improving their record and saving their social security policy from falling into disrepute. These are all portmanteau Bills. It would therefore not have been inappropriate to have included a clause, as was proposed and narrowly defeated at Report in another place, to make good the 5 per cent. abatement in unemployment and other short-term benefits made by the 1980 Act, on the understanding that it was in lieu of taxation and would be made good as soon as these benefits were brought into tax, which I understand will happen in June of this year. There is also the question of the 2 per cent. shortfall as a result of the under-estimate of the rate of inflation for 1981, making altogether a 7 per cent. downgrading of these benefits from the level at which they should, in equity, stand.
In another place there was a heated debate on whether the Government had given a cast-iron undertaking to restore the abatement, as claimed by the principal Opposition spokesman, or whether it was merely a conditional undertaking, as claimed by the Government. I shall not pursue the niceties of which type of announcement, and by whom, takes precedence in committing a Government. I would much rather stick to the principle and be guided, once again, by the Social Security Advisory Committee, in whose report it was estimated (in chapter 1, table 5) that the savings which would be effected in social security expenditure in 1982–83 through the various Bills to which I have referred and the measures now in prospect would be a whacking £1·856 billion. Even if we accept that the saving on SSP is not £400 million, as was originally intended, but only £90 million, we still get a whacking £1½ billion.
In a letter of 27th October to the Secretary of State
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—published in appendix 2 on page 69—the chairman of the committee stressed the importance of sustaining the real value of supplementary benefit, a timely reminder when one thinks of the increasing number of people becoming wholly dependant on supplementary benefit when their unemployment entitlement runs out. He went on to express special concern about the impact of the 5 per cent. abatement. The improvements sought by the committee are:
"equal to just a small proportion of the large savings, of nearly £2,000 million, already achieved or in prospect".
Elsewhere the committee estimated the cost of restoring the abatement at £50 million. On 22nd December last, the chairman felt it necessary to write again to the Secretary of State when it was announced by the Government that the additional 2 per cent. shortfall in current short-term benefit rates might not, after all, be made good in November 1982. In their chapter on priorities and recommendations (chapter 3, paragraph 2) the committee pointed out that if those cuts were not made good, it would amount to,
"double taxation of a severely disadvantaged group"
—"double" in the sense that the diminished benefits would also be subject to income tax.
The Social Security Advisory Committee described the social security system as a vital safety net. I would go further and say it is the cement of a civilised society. It has been calculated by the Child Poverty Action Group that one in four of our whole population is living in conditions of, or bordering on, poverty. That, combined with the inactivity and purposelessness imposed by unemployment, can only lead to severe cracks in the social fabric, and we have detected some quite alarming ones already. The social security system provides the essential mortar required for the preservation and maintenance, in reasonably good order, of the whole edifice of our society.
The Social Security Advisory Committee's report is very fair to the Government, chiding where chiding is deserved, warning where warning is required and giving credit where credit is due. Having appointed an advisory body with a wider remit than the old Supplementary Benefits Commission, the Government would do well to pay close attention to its advice.
4.47 p.m.
Lord Pitt of Hampstead: My Lords, I shall not delay your Lordships for long because I wish to comment only on Part II of the Bill. My understanding is that 3½ million people will be affected by the proposals on housing benefits and that 2 million, or more than half, will be affected adversely. However strongly one wishes to support the principle of the Bill, those consequences cannot be accepted. Because the Government's insistence on there being no increase in public expenditure is responsible for the fact that 2 million of the 3½ million people affected will be adversely affected, it is up to the Government to face up to that fact and try to do justice to those people.
We must remember that in the last three years rents have increased tremendously; in fact, they have more than doubled, and I am speaking of local authority rents. Therefore, the rent rebates about which we are speaking have assumed a greater significance, simply because of the sharp increases in rents. From the

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information I have received, it would cost only £30 million to introduce a package in which there would be no loser. I accept that £30 million is a lot of money, but in the context of the totality of expenditure on housing and supplementary benefits, it is not a large percentage. Moreover, the Government are planning a revision of the supplementary benefit re-rating, so there will be savings there in addition to the savings to be made on manpower as a result of the changes in the payment of sickness benefit.
If we are dealing with the matter in totality, there is a saving which could enable the Government to introduce a "no loser" package, and so avoid what I gather is the only real criticism that is being made of the scheme. I seriously appeal to the Government to reconsider their stand and see in what way they can introduce a scheme in which no one will be on the losing end.
The other matter which has attracted criticism is the fact that there will be no appeal. At present people who receive housing benefits can appeal to the supplementary benefit appeals tribunal. They will lose that right of appeal through this Bill. I should have thought that we ought to extend, rather than restrict, people's right of appeal. Therefore I suggest—and again I hope that the Government will think seriously about it and act on it—that people who are dissatisfied with decisions on their applications for rent rebates should be able to appeal to the supplementary benefits appeals tribunal. That would not create much more expenditure for the Government, and I hope that despite their wish not to increase expenditure, they can see their way to taking up that suggestion.
As many other speakers have said, this is really a Bill for Committee rather than for Second Reading, and I do not intend to go further into it than the points that I have made. I have made them at this stage because I want the Government to think about them before Committee. This is a Bill that we shall have to go through very carefully in Committee and endeavour to improve. In the meantime we shall give it a Second Reading.
4.53 p.m.
Baroness Lane-Fox: My Lords, T should like to refer to Part I, Clauses 1 to 4 of the Bill. When I was engaged in remunerative employment of various kinds it was always a great surprise to find that national health insurance operated in what seemed to me a strangely inexplicable manner. Fortunately, like most disabled workers, I was off work through illness on only few occasions, but each time I was amazed to discover that while my employer continued to pay me in full, he refused to accept from me the national health payments that I received. I still believe that those payments had to belong to him, or at least to someone other than me. Accountants and establishment officers argued with me and did their best to try to convince me that this strange performance was perfectly in order, that the labyrinthian ways of insurance required this to happen.
It was puzzling to be paid almost double just because you were off sick, and it seemed a remarkable temptation to those who realised that it paid handsomely to be sick. Other workers told me that this was recognised practice, and it seemed pedantic for me to make
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a fuss about it. In self-defence I must remind your Lordships that that all occurred before the days when there was any mobility allowance, or attendance allowance, when as a disabled person it cost money to go out to do a job. So I was one of the many who accepted, without too much difficulty, what was clearly a wrongly directed bonus.
For years this bad practice has gone through on the nod. Unlike the noble Lord, Lord Banks, and the noble Baroness, Lady Jeger, I congratulate my noble friend the Minister on the courageous Part I, Clauses 1 to 4 of the Bill. Generally we disabled people are seen, justifiably, to be asking for more. Now perhaps by way of retaining our credibility and clarity I should like to applaud this long overdue tidying up of a wrongly directed payment. Nevertheless I welcome the questions about cash flow involving small employers posed by my noble friend Lord Boyd-Carpenter.
With due respect for a scheme that has done so much for disabled people in the past, I should like, very briefly, to turn to Part III and the clause which refers to those who are incapable of work due to industrial accident. I should have thought that it is a substantial improvement for persons to qualify for sickness benefit without having to satisfy the contribution conditions. The fact that the clause also makes the long-term industrial benefit payable after a fixed period of 15 weeks must be beneficial.
It is so important at the beginning of a period of disablement to have made known to one all available helpful advice, so that as far as possible a sensible reassessment of everyday living can be made at such a traumatic time. I wish my noble friend the Minister well with the Bill, in particular on both the counts that I have mentioned.
4.56 p.m.
Lord Wallace of Coslany: My Lords, I am afraid that I cannot follow the noble Baroness in congratulating the Minister on the Bill, or in welcoming it. I enjoyed the noble Baroness's reference to the good old days when some generous employers did not deduct one's sickness benefit; but a tremendous number did, and if one was out for more than about a fortnight, one was out on the dole queue; and that was the end of that.
There does not appear to be an overwhelming interest in the Bill, but I believe that the interest remains outside, in the country. I should like to thank the noble Lord, Lord Elton, for his detailed outlining of the Bill's provisions, given in his usual, gentle, bedside manner, which he has cultivated to great success. But although he clothed to an extent the skeleton of the Bill, clearly this is an enabling Bill, and the House will have to await a series of regulations, which will have to be seriously considered and debated.
I listened with interest to the noble Lord, Lord Boyd-Carpenter, and gained an impression about the financial advantages of being sick. I could not quite agree with him, since being sick is bad enough without being accused of taking financial advantages; and there are other problems, as other noble Lords have pointed out.
My noble friend Lady Jeger certainly went to town and asked so many questions that I am sure that the Minister will not be able to answer them all this

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evening. However I think I am correct in saying that we do not expect all the answers this evening, but we are giving the Government a reasonable opportunity to appreciate some of the points on which we shall base our—I shall not say attack—constructive approach in Committee.
This is yet another social security Bill, and if there is a note of weariness in my voice, it is because from this Dispatch Box I have been involved in so many such Bills. This is one of a number of similar Bills which the Government have brought forward since they took office, and, in one degree or another, all of these Bills have undermined the fabric of the welfare state. Some one has estimated that so far we have had 10 Bills with the same objective. I have lost count; it might be 10, it might be nine.
The theme of this Bill, as with all the others, is financial saving, with the side effect (in this Bill) of a further addition to the ranks of the unemployed by abolishing some Civil Service posts. There is some difficulty here as to the actual numbers. The Minister mentioned 3,000, but I think that the total number will be in the region of 6,000 civil servants. At the same time the Bill will place additional pressures and work on employers and local authorities. I accept that there will be a measure of financial assistance to employers and local authorities, but the pressures remain, and they will place a considerable burden on the small employer so far as the sick pay proposals are concerned.
I go back with a certain amount of sentimentality to during the war, when I was serving in the Royal Air Force and when the main topic of conversation apart from when we should get out of the war was the Beveridge Report. There is no argument about that; and I profoundly believe it had a significant effect on the result of the following election. It heralded to us in the forces a new dawn. Today, this Bill moves away from the comprehensive and unified welfare structure that we have had since Beveridge. One of the principles basic to that was the unification of responsibility, a single insurance fund and a single Ministry, and this Bill, among others, disrupts that principle.
No mention is made in this Bill about restoring the 5 per cent. cuts in unemployment and invalidity benefits. It is coincidental, incidentally, that the Social Security Advisory Committee issued its first report a few days before this debate. Some measure of the Government's attack on the social services is that it would cost £686 million to restore social security benefits to the level that they were when the Conservatives came to power in 1979. I hope that in due course we can debate this report.
The proposals in the Bill to put the payment of statutory sick pay on to employers is likely, in my view —and I have said this before—to cause a degree of industrial unrest. It is claimed that 90 per cent. of employees are covered by union agreements on occupational sickness schemes. I think that this seems to be a high figure, and could well be over-estimated. Even so, there are at least 10 per cent. of workers without union protection, mainly engaged in small business concerns. One or two speakers have mentioned their concern over that 10 per cent. not getting union
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protection, and it is welcome to hear some support for union activities.
My Lords, the Government are setting up a task force (which is a new and popular phrase at the moment) of inspectors to check on employers' actions. I must say that that is a complete change from the last Bill, when we had a large task force of inspectors to check up on so-called scroungers. So benefits are now being challenged in another direction: we are now checking on employers as well as claimants— "Ah, well! Life goes on under a Conservative Government in a way that we have never had before".
I believe that employers running small businesses get the worst possible treatment under the Bill. The big boys (and many noble Lords associated with them know this) are well able to take care of themselves, but the small employers will have to carry a very heavy burden that they are least able to bear. They will be out of pocket immediately, and will have to wait for financial refunding. Most small employers are reasonable and fair, and, as I have some contact with them, perhaps I may say that relations with the employees are, in the main, almost paternal in these smaller businesses. But the unrepresented 10 per cent. of employees mainly work in this field and severe difficulties must arise on both sides. The 10 per cent. are mainly low wage-earners, and the sick pay scales mentioned in the Bill for them are the lowest.
Now I come, not to Clause 35 but to Clause 38. I think that the Bill has been amended, and it is now Clause 38 which raises the debatable issue of registering for employment on a voluntary rather than a compulsory basis. This is indeed a very bad clause, and ought to be removed. I do not claim, as some have claimed, that it is an attempt to "cook" the employment figures. I do not think the Minister or his colleagues would countenance that for one moment. But it will mean a reduction in the usefulness of job centres in placing people in employment, and will substantially undermine the work of the Manpower Services Commission.
Turning to rents, the Government have already forced up rents to record heights. I think the rise is now some 78 per cent. and in the very near future is very likely to be about 140 per cent. Under the Government's proposals in the Bill there will be, on the Government's own admission, 2 million worst-off losers under the scheme. When we talk about 2 million worst-off losers, we are talking about 2 million households at the very least. It is not just one loser; it is a whole family, a household. The housing scheme, as has already been stated, is very complicated, to say the least; and it is absulutely vital—and here I agree with other speakers, particularly the noble Lord, Lord Pitt, who spoke a few minutes ago—that there should be a right of appeal to an independent body.
Local authorities will take over an increased burden, and, with all the good will in the world, mistakes will be made. I have worked with local authorities as a councillor, and I know that they do a good job, but the human element comes in and mistakes will be made. With all the good will in the world, you will not get perfection. It means one thing: if you do not introduce appeals, local Members of Parliament are going to be absolutely inundated. It was bad enough being a Member of Parliament in the past, because

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half of the cases that came up at what they call "surgeries" (I hate the word; I always use "interviews") were housing cases; now this will introduce a further factor. With all sincerity, I say to the Government, in order to give them an opportunity to think about this before we get to the Committee and Report stages, that the Government must introduce an appeals machinery in the interests of justice and of a fair deal to those worse off and affected so seriously by the Bill's proposals
To revert to the sickness benefit proposals, it is the workers who are married and with dependants who suffer most. If they are on the highest rate of sickness benefit they will be worse off by about £4 a week, and if on low pay they will be penalised by £13 a week. This fact constitutes a vicious attack on the family, and it should be remedied. I underline—and other speakers have already mentioned this—that when the wage-earner is sick, extra expenses increase; it is not all financial advantage. Take prescription charges. We know how they have risen by about 400 per cent. since the Government took office. In some cases additional heating may be needed, special diets and many other things. The wife who remains at home to care for the family and does not go to work by that fact penalises the wage-earner and his family under this pernicious Bill. The situation which I have illustrated is far worse for the low wage-earners, most of whom have few extra resources, including savings, because if you are on a low wage, even with all the scrimping and saving in the world it is a very difficult job to accumulate a few pounds—and I speak with some degree of experience in that matter in my early days.
With my noble friend Lady Jeger I am all for streamlining Government administration to create efficiency in social security services, provided that it gives a fair and reasonable deal to those whose circumstances call for help and assistance. This Bill does nothing of the sort. It is a mean and vicious measure, which means that in both the social security and housing fields many vulnerable and poor people will be worse off if this Bill proceeds unchanged. Of course, we must all recognise that we are still facing a serious economic situation and a situation which will get worse due to the present international situation. But that is no reason whatever why the poorest sections of our community should suffer from having to make a sacrifice, for in their case it is already being done. If sacrifices have to he made, and they do have to be made, then let them be made by those better off and not by the poorest of the community: the sick, the disabled and the unemployed. As has been indicated—and we on these Benches are not alone in the matter—we shall strongly contest this Bill in Committee. Unfortunately—and I feel this very much at the moment—we cannot by custom and usage vote against a Bill which has received a Second Reading in another place. However, I do not commend this Bill to the House. I regret bitterly that the Government ever introduced it.
5.11 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, it has become something of a tradition in this House for debates on social security Bills to be informed and interesting, and no one will suggest that this one has
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been less than interesting, although I am sure that noble Lords opposite, and especially the noble Lord, Lord Wallace of Coslany, would not expect me to agree with the sentiments that have been expressed and least of all those of the noble Lord in his last remarks. I endorse what everyone has said, that this is a Committee type Bill and it is there that we should be getting to the nuts and bolts. Also, clearly, in winding up I cannot and would not try to cover all the points made. Neither is it expected of me. Nevertheless, I will refer to some of them. I assure all noble Lords who have spoken that not only will we deal with their matters in Committee but in many instances we will be in communication with them before then so that we can either clarify for them points which they may find it useful to have in mind at Committee stage, or in some instances give them information that they ought properly to have.
I think I should begin by saying to the noble Lord, Lord Wallace of Coslany, because he implied that this was an attempt to reduce the welfare state, that I repudiate that absolutely. At present anyone who falls sick is entitled to sickness benefit from the state if he meets the qualifying conditions. Once the statutory sick pay scheme is introduced, anyone falling sick will be entitled to statutory sick pay if he meets the qualifying conditions. If he does not, he still may be entitled to state benefit. All that the scheme does is to substitute in respect of short illnesses one statutory right for another. People will be afforded the same protection after April 1983 as now.
It has been argued that it will be more difficult for an employee to get his statutory rights from his employer than from the state. That claim overlooks the fact that the vast majority of employees already get occupational sick pay from their employers. There is no evidence that this gives rise to problems, despite the fact that in most cases occupational sick pay is worth a lot more than the statutory minima laid down in the Bill. If an employer proves difficult, there are procedures to ensure that the employee gets his entitlement and penalties for the employer who has been acting in a dilatory and obstructive fashion.
The noble Baroness, Lady Jeger, criticised the scheme (as did others) as switching resources from the family to the single person. That is not the overall effect. What the scheme does financially is to divert money from those in good sick pay schemes to those with little or no occupational provisions. Why, we have been asked, is the statutory sick pay to be paid at a flat rate? The main reason is that SSP is a payment by employers and such payments do not take account of family circumstances. To compel employers to change long-standing practice would be wrong. It would be equally wrong to put employees in the position of having to give the employer personal information in order to get money. I take the opportunity to stress that someone who is sick and has insufficient resources will be able to claim supplementary benefit, so that the safety net for the family still exists.
The rates of SSP have been discussed. Some have criticised them in another place and elsewhere as too low. I am tempted to say that even if the Government had come forward with a proposal to pay full wages during sickness some noble Lords would have criticised that as being too little. I suspect that we shall come

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back to that particular matter on another occasion so I will not labour it. The noble Lord, Lord Wallace of Coslany, and others specifically said that they were concerned that the low-wage earners were being treated harshly. We thought long and hard about how to treat the low paid under the scheme and we concluded, after consultation, we should not compel employers to pay full wages to the low paid when they are sick. Many will choose to do so but they will have the discretion not to.
Therefore, we have set the middle rate and the lower rate at such a level as to provide incentives to return to work and to leave it to the employer who knows best in the circumstances to decide whether an incentive is necessary. Even after tax and contributions have been paid, someone receiving only the lower or middle rate of SSP will still get more than a single person gets by way of sickness benefit.
The noble Lord, Lord Banks, touched on the point of the hidden tax of the national insurance contribution. This Bill has been different from most other social security Bills in that the concerns expressed have not been solely about the claimants but also about the employers. It is true that employers are being asked to take on a new task. It is our objective to minimise the additional administrative burden on them. The gains to the economy through reduced bureaucracy and reduced PSBR are worth a great deal and will improve the environment in which the employers operate.
It is argued that there is a hidden tax in this, that employers have to pay national insurance contributions and the surcharge on the SSP. It has been clear since the Green Paper was published that this liability would exist. Employers cannot and I think will not complain now that they did not know of this. Taken overall, the compensation to employers under self deduction is greater than their costs by around £80 million My noble friend Lord Boyd-Carpenter stressed the importance of there not being an additional burden on the employers, least of all at this time—although some would say at any time. The point is taken and is satisfactorily covered by the proposals in the Bill. Should some of the other points he raised lead us to think that this is not so, we will look carefully at what he said. That is an overall equation.
No doubt some companies will gain from the arrangements; others will lose financially, but to a small extent. The latter group will be firms without existing sick pay schemes. They could have to find up to £5 extra for each £37 of SSP they pay out. The average sickness per employee per year is just over one week; so taking into account the waiting days, the average extra cost per employee per annum will be about £3. To excuse employers that very small sum would involve them in an administrative nightmare in calculating what they owed by way of national insurance contributions. I respectfully submit that that extra burden would more than outweigh the very small cost that they might—only that they might—have to bear. Even so, I still take the point that my noble friend made and I will deal with it as I said I would.
A point to which I would specifically like to respond which the noble Baroness, Lady Jeger, made was that unemployment benefit should not be taxed. It has been agreed on both sides of both Houses that benefits which replace income should be taxed.
Baroness Jeger: My Lords, may I make my position perfectly clear? I was not saying that the benefit should not be taxed. I was saying that benefit should not be brought into taxation while there is this 5 per cent. shortfall in the payment of unemployment benefit.
Lord Bellwin: My Lords, whether or not that point was also dealt with in another place, I am not aware. But this was discussed elsewhere and accepted in the way that I suggested. Perhaps I could move on to another point that the noble Baroness made. There is some reason to quarrel with some of the figures that the noble Baroness quoted regarding what it will cost to restore the abatement of unemployment pay; but, on reflection, that is something we had better take up on another occasion.
On housing benefits, I would remind the House that we have achieved two important policy goals. First, we have resolved the "better off" problem. The noble Baroness in her opening remarks at least acknowledged that this was a problem—and a real one— for many people. At present, many claimants are faced with the difficult decision of choosing which of the two current schemes providing help with rent and rates will give them the greater assistance. Housing benefits remove this "better off" problem. In future, claimants will receive help with rent and rates from their local authority only. Secondly, we shall be able to get the work of providing rent and rates assistance for supplementary benefit claimants done more efficiently by giving the job to the local authorities.
It always amuses me that in the many debates in which I am involved on local authorities sometimes both my noble friends and noble Lords opposite speak with such pleasure about the achievements of local government and local authorities, and sometimes they clobber them so hard that it is not to be believed. I am always faced with the dilemma on one hand of remembering that it is from there that I came, seeing some of the problems that face them, and at the same time recognising that there are shortcomings. Anyone who has their interests as much at heart as I have is the first to acknowledge that there are shortcomings. We want them to be better; we want them to be good. Everyone wants that.
Surely the noble Lord, Lord Wallace, when he expressed his dislike of the Bill in such emotive tones, must accept that if one can take £10 million of costs and translate that into the same £10 million of benefits to people, that is what I would have thought it was all about. I see on reflection that the noble Lord is nodding his approval. The DHSS will require, as has been said, 2,000 fewer staff from the change and that is a useful contribution to what the Government are seeking to do.
As the noble Baroness pointed out, although there will be the extra costs for the local authorities, and of course it will involve extra manpower, nevertheless there is a significant net gain—if I may use the term—and we have undertaken that we will fully reimburse that extra cost—and I mean fully, 100 per cent.—to local authorities. I know from conversations with the local authority associations that they have no anxieties or fears about that, as I hope that the noble Baroness does not on that point. In another place, my honourable friend the Member for Acton said—and I just

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quote briefly—that the additional costs which fall on local authorities as the result of the new scheme will be met in full by Exchequer funds. I hope that that covers that point well enough.
The noble Lord, Lord Pitt, and the noble Baroness, Lady Jeger, expressed concern at the number of losers under our proposals. It was suggested that this would have been avoided if we had put more resources into the scheme instead of introducing it on a nil-cost constraint. I think that the noble Lord mentioned a figure of £30 million. I cannot comment on that figure. I am sure he has it on good advice. I used to get the same advice. I suspect it comes from the same source and it was usually—but not always—good. One would want to check that out very carefully.
I must say that the Government do not have additional resources to spare for housing benefits. The Government's central aim must be to put the national economy straight, not least after several years of its being directed in very much an opposite direction. We believe, as I have said from this Dispatch Box so many times in the past three years, that we have to live within our means and decide our priorities on that basis.
Our overall priorities mean that we have no extra money for housing benefits. We can use the resources within the scheme to best effect, and we can use efficiency savings for benefit. But I am afraid that we cannot bring in resources from outside the scheme—whether it be new resources or savings in other areas such as that from taking the housing element out of the index used for uprating supplementary benefit.
The noble Lords, Lord Pitt and Lord Wallace, were concerned very much about the right of appeal to independent bodies. I ought to comment at least upon that because I recognise that that is a very reasonable concern to have. The Government totally support the need for review arrangements for claimants to challenge the decisions of local officers who have considered the case. But it is in the interests of everyone that these arrangements are as speedy and as direct as possible, especially as housing benefits will be a weekly benefit. The Government believe that our proposals are the most effective way of achieving that goal. I understand what the noble Baroness said about regulations and her reservations. I have had it on so many Bills now and I clearly understand what the point is.
Even so, so far as these proposals are concerned, we are intending to set out in regulations—and doubtless we shall come back to that later on—provisions whereby all existing housing benefits claimants would have the right to a review of their housing benefits determination by a committee of councillors. The Committee's decision, with reasons, would have to be given to the claimant in writing. Thus, for the first time all rebate and rent allowance claimants will be assured of a decent and detailed review if they are dissatisfied. There will also be the additional safeguard that Ministers will be keeping a close watch on this part of the scheme. We will be asking authorities to provide the DHSS with information about the number and kinds of reviews they undertake and the outcome.
I assure noble Lords that if we see particular problems arising, we shall be able to amend the regulations
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to ensure that equity prevails. There I would have thought is one instance where regulations can be advantageous rather than something which is set down firmly and finally once and for all on the face of a Bill. If we see particular problems arising, we shall be able to amend the regulations, to ensure that equity prevails.
We studied alternative proposals but found them more cumbersome or, in the case of supplementary benefit appeal tribunals, requiring significant changes in the operation and outlook of the appeal body concerned. On the other hand, our proposals offer claimants the most direct and speedy means of securing a review of their housing benefits claim from the body that can best help them—their local council. The proposals are based on ideas which have been tried and tested in some local authorities, none of which has been proved to be found wanting. They are also based on the fundamental principle, with which I hope noble Lords will agree, that councillors are best placed and must be ready and willing to intervene on behalf of their constituents to review certain decisions taken in the name of the council. The noble Lord, Lord Pitt, specifically referred to the fact that supplementary benefit claimants will lose some of their appeal rights from the introduction of housing benefits. I would argue instead that our proposals give them rights to seek a review from the most appropriate people to investigate their housing benefit entitlements; namely, the local elected members.
We shall be coming back to many of these matters before too long, but to conclude, the new scheme will involve new procedures and will require local authorities and the Department of Health and Social Security local offices to liaise more closely than hitherto. Again, discussions between the department and Local Authority Association officials have been fruitful, and the necessary procedures are being developed. I hope that I have covered at least the major points raised today, but I repeat the assurance I gave at the beginning that we will very carefully check over everything that has been said and I will have regard to the points I have not covered.
I should like to conclude by saying just a word about the merits of the measures in this Bill. As my noble friend Lord Elton said earlier, they are aimed at reducing wasted effort. The sick pay scheme will cut dramatically the overlap of work between employers and the state when someone is sick for short periods. The housing benefit scheme will not only remove a lot of confusion and unnecessary work from staff but it will also reduce the confusion for claimants by replacing two schemes for financial help with housing costs by one scheme. The overall effect of the Bill is to reduce civil servant manpower by around 6,000, and that is an important contribution to the Government's objective of reducing the size of the bureaucracy.
I conclude by saying that, despite the real concern expressed by noble Lords opposite, I hope that as we go through this they will recognise many parts of the Bill which even they will feel are an advance on present procedures. The Government think so—as your Lordships might expect. I believe myself that this is a fine measure and a good Bill. It will take us much

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further along the road towards doing things in these areas better than we do them today.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Industrial Relations (Northern Ireland) Order 1981
5.33 p.m.
Lord Elton: My Lords, in the absence of my noble friend Lord Gowrie, I beg to move that the House do approve the draft Industrial Relations (Northern Ireland) Order 1982, which has been laid before the House under the Northern Ireland Act 1974. Many in this House will recognise the subject matter of the order, which largely enacts the provisions of the Employment Act 1980 in Northern Ireland. It is now a year and a half since we debated the Employment Bill in this House and noble Lords will no doubt be relieved to hear that I intend to be considerably more selective in my comments tonight than it was possible for my noble friend to be on the earlier occasions.
Industrial relations is a transferred matter. The separate body of legislation on this subject which existed before direct rule has been added to since then by orders-in-council. Historically, the Northern Ireland legislation in this field has been basically similar to that in Great Britain and it is Government's view that Northern Ireland industrial relations legislation should continue to reflect Great Britain's advances. We are, however, fully conscious that all the local Northern Ireland considerations are taken into account and, in discussions with the Province's industrial relations partners, made that point clear. In pursuance of this policy the Government fully consulted on its proposals in Northern Ireland. Perhaps the most significant result of these consultations is the decision to retain statutory provisions relating to the recognition of a trade union. We have accepted the argument that the Northern Ireland provisions incorporate greater flexibility and have not proved as unsatisfactory as the Great Britain provisions now repealed by the Employment Act 1980. In addition this Order carries amendments to the Wages Council Act (Northern Ireland) 1945.
I now propose to review briefly the main provisions of this order. First, as to trade union ballots and codes of practice which are covered by Articles 3–5, in recognition of the Government's view that greater use should be made of ballots in conducting trade union affairs, these provisions enable the establishment of a scheme for the reimbursement to independent trade unions of the cost of secret ballots and require employers to provide facilities for the conduct of ballots in certain circumstances. It is currently envisaged that the reimbursement scheme will be administered by the Labour Relations Agency.
Article 5 enables the Department of Manpower Services, after consultation, to issue codes of practice containing practical guidance for promoting the improvement of industrial relations. Noble Lords will be aware that two such codes of practice on picketing and on the closed shop have been issued in Great
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Britain. Consideration is being given to similar action in Northern Ireland, but no decision will be taken until full local consultations with the Labour Relations Agency and others have been completed.
Articles 6 and 7 contain provisions on exclusion from trade union membership. These articles provide protection for employees in situations where the closed shop operates by enabling them to seek compensation through the industrial tribunals should they be unreasonably expelled or excluded from membership of a trade union. In addition, under the heading of "unfair dismissal", Article 8 widens the grounds on which dismissal from employment for non-membership of a trade union is unfair where a closed shop agreement exists. In particular, dismissal would be automatically unfair where the individual generally objects to membership of any union, or a particular union, on the grounds of conscience or other deeply held personal convictions. At this point I should like to mention that Article 17 provides employees with similar rights where action short of dismissal is taken against them aimed at compelling them to join a trade union. Should an employer feel that he was induced to dismiss a complainant for non-membership of a trade union then that employer, under provisions of Article 12, may join as a party to unfair dismissal proceedings a person, union or contractor whom he claims is responsible.
The remaining provisions under the "unfair dismissal" heading—that is Articles 9, 10 and 11—amend the requirement concerning the onus of proof in unfair dismissal cases. They provide that in deciding whether dismissal was fair a tribunal should take into account the size and administrative resources of the employer, they ease the burden on small employers by exempting firms with less than 20 employees for two years and make certain changes to the basic award element in assessing compensation for unfair dismissal. As a result of representations made during the consultations in this legislation we have taken steps to exclude the employees of small voluntary schools from the small firms exemption in order that they might have parity with their colleagues in the controlled sector.
Articles 13–15 are concerned with maternity rights. Article 13 amends the existing provisions about giving notice of absence for maternity and exercising the right to return. Article 14 relieves employers of five or fewer employees, with the exception, again, of voluntary schools, of the obligation to reinstate an employee after maternity leave, and that relief is extended to all employers where it is not reasonably practicable to reinstate the woman in her original job and an offer of suitable alternative employment is made. I am particularly pleased that Article 15 of this draft order introduces a new right for pregnant employees to have reasonable time off with pay to receive ante-natal care. I know that it has been the practice of many good employers to provide such a facility in the past, and we sincerely hope that its extension to all employees will be of advantage to them.
Article 16 amends the calculation of guarantee pay by changing from fixed calendar quarters to a more sensible system, under which there will be entitlement during a rolling period of any three months. The provisions in Articles 18 to 21, falling under the heading of Restrictions on Legal Liability are concerned with

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limiting secondary industrial action. The purpose of the Articles is to limit the immunity from actions in tort granted to individuals to those situations in which they have a direct interest. Article 18 therefore provides a new definition limiting lawful picketing in contemplation or furtherance of a trade dispute to a person picketing at or near his own place of work. While providing safeguards in respect of trade union officials, the provision will give employers afflicted by the "flying picket" the ability to seek an injunction to stop such picketing.
Article 19, which I admit is rather complex, in essence limits lawful secondary action to action taken within a cordon of first suppliers and customers of an employer in dispute. Where secondary action not falling within the definition of lawful secondary action takes place, then, once again, an employer may seek an injunction or damages in the Court where the action complained of brings about a breach in a commercial contract. Nothing in these provisions is aimed at removing the accepted right of trade unions to take industrial action in support of members directly affected in a dispute with their employers.
Article 21 has no counterpart in the Employment Act, but is in response to representations made in Northern Ireland to bring the wages councils legislation there more into line with Great Britain. There are three main amendments. First, wages councils will be empowered to make their own wages regulation orders, which in the past have been made by the Department of Manpower Services. This will bring wages councils into line with their Great Britain counterparts and with the Agricultural Wages Board. Secondly, the amendments will enable such wages regulation orders to become effective immediately upon the expiry of a statutory 21-day objection period, even if this involves an element of retrospection. Finally, the Department of Manpower Services will be enabled to refer questions about the operation of individual wages councils, or the system as a whole, to the Labour Relations Agency for a report and recommendations. Articles 22 and 23 provide for repeals of Northern Ireland legislation analogous to the repeals made by the Employment Act with the one notable exception which I have already drawn to the attention of noble Lords; that is, that we shall retain the statutory trade union recognition provisions in Northern Ireland.
Before closing, I should like to acknowledge that one of the many attractive features of Northern Ireland for potential investors is a proven record of good industrial relations. I do not believe that the changes envisaged in this legislation will in any way affect that situation, as it seeks to deal only with the most damaging abuses which may occur. It also is the Government's view that it would not be in the interests of any of the industrial relations partners in Northern Ireland to have significantly different basic rights and responsibilities in these matters from the rest of the United Kingdom. I, therefore, on behalf of my noble friend Lord Gowrie, who will reply to this debate with much greater facility than I could, commend these proposals to the House. My Lords, I beg to move.
Moved, That the draft order laid before the House on 20th October be approved.—(Lord Elton.)
The Minister of State, Northern Ireland Office (The Earl of Gowrie): My Lords, before the noble Lord, Lord Blease, gets up, I should like to apologise to the House for not being in my place as I should have been. I was advised that this order would come on substantially later. But it was my responsibility and I am most sorry. I should also like to congratulate my noble friend on the brio and clarity with which he delivered the brief at very short notice.
5.45 p.m.
Lord Blease: My Lords, may I thank both the noble Lord and the noble Earl for their explanatory outline of this order. I join with the noble Earl in complimenting the noble Lord, Lord Elton, on his versatility in stepping into the breach. As the noble Lord has indicated, this order will introduce into Northern Ireland's industrial relations legislation the main provisions of the Employment Act, which was enacted in 1980 for Great Britain. The noble Earl and the Northern Ireland Secretary of State, Mr. James Prior, in their previous ministerial offices, both played leading parts in steering the Employment Act 1980 in its passages —rough passages, in my opinion—through both Houses.
Since the noble Earl's appointment as deputy Northern Ireland Secretary of State, he will be aware of the separate and distinctive features of trade union structures and organisation in the Province, and the marked differences in industrial relations procedural arrangements. The noble Earl will also be aware of the considerable concern about the order which has been expressed by many in Northern Ireland who are directly involved in manpower matters and industrial relations, and especially the pronounced opposition to the order which has been repeatedly made during the past 12 months by the central trade union organisation; that is, the Northern Ireland Committee of the Irish Congress of Trade Unions.
Noble Lords will have noted that this order was debated in another place in the early hours of Wednesday, 24th March, when, after a Division, it was approved. Therefore, for the reasons which I have outlined I do not propose to raise in detail the contentious issues which are contained in the 23 Articles and 3 Schedules of this order, and which are well-known to the Government as they have already been debated at some length. Therefore, I propose to confine my remarks to a few pointed, but not argued, comments and questions which should make clear our views and the reasons why we on these Benches are opposed to the order.
I repeat that Northern Ireland has its own separate legislative and administrative framework of industrial relations. The record of good industrial relations in the Province has been widely referred to by Ministers, and by others directly concerned in promoting Northern Ireland's industrial development interests throughout the world. Even within the last few days, the Northern Ireland Secretary of State, Mr. James Prior, referred to this record when he spoke at St. Anne's Cathedral, Belfast, on 31st March. Mr. Prior was speaking to the subject, "Our responsibility to our community" and he was dealing with a number of matters, including the economy, social welfare and politics. During his

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address, he stated—and I quote directly from a paragraph in the text of the address—
"I have a number of things in mind. The first is industrial relations, which is something I have been concerned with for very many years. Industrial relations in Northern Ireland are by no means perfect and there is much which can be done to improve them. But that said, the truth is that Northern Ireland has one of the best records of industrial relations of anywhere in Europe. Its record is certainly much better than that for the rest of the United Kingdom. This does not mean that one side has managed to dominate the other. It means that there is a degree of understanding of the nature of the problems, and a willingness to work constructively for their resolution, which is all too often lacking in other places. The way in which people learn to co-operate together at their place of work is one measure of the maturity and tolerance of a community. People who criticise Northern Ireland for its violence, or because they believe that it is peopled only by bigots, would do well to note this and perhaps to learn from it".
I have never held that Northern Ireland trade unionists, or management, are any more industrially virtuous than trade unions and management in other parts of these islands, but I am convinced by experience that the lines of communication in Northern Ireland, and the industrial procedures, enable manpower and industrial relations matters to be dealt with more speedily, effectively and efficiently, not only because the lines of communication are much shorter and more direct but also because we rely much more on the good sense, knowledge and expertise of the practitioners than on legal sanctions and edicts of law.
I would not detract one word from the statement of Mr. James Prior which I have quoted. He re-echoes the views expressed by many in Northern Ireland commercial and industrial life, including civil servants—persons who are knowledgeable about modern industry and dynamic and positive management-trade union relationships. Northern Ireland has many real attractions and incentives for industrial investment. Good industrial relations is one of them, upon which we should attempt to capitalise at every turn and at every event.
It is my opinion, and I believe it is the opinion of many others, that it would be disastrous if this record of good industrial relations were to be tarnished or impaired as a result of the introduction to Northern Ireland of legislation which is neither indigenous nor necessary. Past experience in Northern Ireland indicates that it is best that the various industrial interests should be enabled to work out the industrial procedures appropriate to the needs of the Province. Many of the provisions in the order are irrelevant to Northern Ireland's needs. Some of them could be seriously harmful. Perhaps I may quote a few examples. The balloting provisions could be used to further sectarian ends. This is particularly true of ballots on union constitutions and on the elections for officials and committees. The trade union movement has been an oasis of tolerance in a desert of sectarianism. It is, I believe, up to everybody, including the Government, to preserve and nurture this oasis.
In over 40 years of trade union activity in Northern Ireland I have not experienced or heard of a single case of a worker being dismissed as a result of a closed shop agreement. Now we are legislating for a closed shop and for compensation. Could we be tempting fate unnecessarily? Could we be in some way encouraging a way of stepping out of the existing relationship that obtains in Northern Ireland so far as
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closed shop arrangements and agreements are concerned? The picketing law in Northern Ireland has been for some time different from that of Great Britain. Two recent cases prove that any problem of illegal picketing, including flying pickets (which are not a feature of Northern Ireland industrial life), can be quickly remedied by the courts under existing Northern Ireland statutes.
I should like to put a few questions to the Minister which I believe are relevant to the attempt to legislate in this particular field. May I ask the noble Earl whether this order will contribute one iota to a much needed investment programme? Will one extra job be created by the implementation of this order? Are there not already signs that the implementation of this order as it stands will have a disruptive and a negative influence on industrial relations in the Province? May I ask the Minister whether it is a fact that the Government have recently agreed to set up a joint working party, representative of employer organisations, the trade unions, the Department of Manpower Services and the labour relations agency? If this is so, surely this body should be given every opportunity to examine Northern Ireland's industrial relations needs before any new legislation is put into effect.
Finally, may I say that, along with the noble Earl yesterday, we attempted to bring forward a step in the political development of Northern Ireland. The United Kingdom Government are adjuring politicians to come together and tackle Northern Ireland's serious industrial and economic problems. Along with others I have publicly supported and worked for these declared aims. Surely it would be in keeping with this approach to encourage employers and trade unions to get together and work out an industrial relations strategy which would help to attract new industry and assist existing industry.
May I invite the noble Earl the Minister to continue to use his good offices and his influence, even at this stage, towards the particular ends which I have mentioned. Even at this stage I believe that it is possible in some way to put a moratorium on the legislation as it is and to move forward in a co-operative way towards producing in Northern Ireland dynamic, positive industrial relations procedures applicable to the needs of Northern Ireland. As I have already indicated, we on these Benches are opposed to the order. However, in upholding the conventions of this House we do not propose to divide the House on the Motion to give approval to the order.
Lord Hampton: My Lords, I was going to thank the noble Lord, Lord Elton, for so ably introducing the order and welcome him back to the Dispatch Box, but he has disappeared. Nevertheless, we are grateful to the noble Lord for introducing the order in the noble Earl's absence.
Whatever else may be wrong in Northern Ireland, it seems to be accepted on all sides that industrial relations are generally very good. Unfortumately, the high level of unemployment may have a lot to do with this. It is tragic that when employment is easy to come by a mad scramble for higher wages is apt to develop. When the recession ends I am not clear how the Government will deal with this in the United Kingdom as a whole, but that is outside today's debate.

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I believe it makes sense that the law in Ulster should in general be brought into line with the situation in the rest of the United Kingdom, as it has been since the enactment of the Employment Bill in 1980. I have noted what the noble Lord, Lord Blease, has said, but I do not agree with the argument that this order may lead to a deterioration in industrial relations. My party largely supported the Government over the Employment Act 1980, guided by common sense together with a desire, as always, to protect the liberty of the individual. I will briefly run through the provisions of the order.
The arrangements for trade union ballots remove a financial burden without in any way making ballots compulsory. I cannot see any grounds for complaint here, despite what the noble Lord, Lord Blease, said about sectarian problems. The codes of practice to be issued by the Department of Manpower Services are described as "containing practical guidance for promoting the improvement of industrial relations". Nobody could, surely, disagree with at least this aim.
Then there is the ending of the closed shop and the threat of dismissal for not joining a union. This is a potential subject for major debate. I will just submit that in principle the individual should be allowed to decide for himself. It seems to be eminently reasonable that pregnant women should be allowed paid time off to undergo ante-natal treatment, though it is perhaps sad that such a provision has to be enacted.
Lastly, in this brief survey, we have the measures to deal with the problems of secondary picketing, flying pickets and secondary industrial action. The winter of discontent under the Labour Government showed a considerable abuse of powers by some of those organising either official or unofficial strikes.
Lord Blease: My Lords, not in Northern Ireland.
Lord Hampton: My Lords, I am talking about this country at the moment. I do not oppose the provisions in this order to check such action. At the same time, I am sure it is vital that rewards for labour are fairly distributed and are seen to be so. That also, of course, can be the subject of a further major debate. In summary, I repeat that we believe this order is reasonable.
Lord Donaldson of Kingsbridge: My Lords, from this Bench we have never yet differed on a vote with my old friend and colleague Lord Blease. I am very glad that he is not taking this to a vote because, if he did, I should have to differ from him. The only objection to this order that I can see is the objection held that any legislation about trade unions must be wrong. We do not share that view. We believe that trade unions should be as near as possible to the same position as other people with certain well-established exceptions which no one is trying to alter—such as the right to strike, and so on.
To take these matters one by one, there is the assistance to trade unions to ballot, there is some reservation about the closed shop, there are the fairly generous arrangements about unfair dismissal, and there are the excellent arrangements for maternity. These are all things which cannot be objected to by
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anyone. The picketing laws may possibly be objected to by some but they are not objected to by us. We are very happy to support the order and are very glad that there is to be no Division on it.
6.2 p.m.
The Earl of Gowrie: My Lords, may I make a general welcome to the way in which the order has been received. It is with a very peculiar sense of déjà vu that I am here at this Dispatch Box on matters such as secondary action, secondary picketing, secret ballots and the rest, and in a Chamber graced at the moment by the presence of my noble and learned friend on the Woolsack and also the noble Lord, Lord Wedderburn, on the Labour Back-Benches. One might almost be sleep-walking back into the dear, dead days of 1981.
I would like to clear up one thing. As the noble Lord, Lord Blease, very fairly pointed out, the Government have always emphasised the great strength of the industrial relations tradition in Northern Ireland. I might just say to the noble Lord, Lord Hampton, that industrial relations, measured in terms of the number of strikes or stoppages, were considerably better in Northern Ireland than on the mainland, even during periods of far fuller employment. There is a different tradition—and, in fairness, there are altogether different problems—in Northern Ireland.
Taking up a remark made by the noble Lord, Lord Donaldson of Kingsbridge, we are concerned in this legislation—as we were concerned in the parent legislation, if I may so put it, a year or more ago—with common sense and the liberty of the individual. I do not believe that even our sternest critics, who are at any rate professionally disinterested, have thought that the Employment Act 1980 was especially draconian. The great question this evening is not the principles of the Employment Act 1980, but whether it is wise that there should be a divergence between legislation in this field which is on the statute book for the United Kingdom as a whole and that which applies in Northern Ireland.
It is the view of the noble Lord, Lord Blease (and he is very experienced and respected in this field in Northern Ireland), that we could bring down a guillotine or moratorium to "freeze" things there for a time and perhaps examine the question. This is just the kind of action that a devolved Assembly could put to the Government to take. The Government believe that it is much better that the law in both parts of the Kingdom should be in line. No one should read into my remarks that we are setting up this legislation in Northern Ireland in order to encourage people in Northern Ireland to try to dissemble or undo it. We are not thinking of that at all. But it is interesting that given the different traditions of Northern Ireland there could be opportunities for dealing with the transferred matter in this way.
The noble Lord, Lord Blease, made, with great respect, the old point about whether any jobs would be created by this kind of legislation. I do not believe that jobs are exactly the issue here. I go back to the phrase used by the noble Lord, Lord Donaldson of Kingsbridge, about common sense and the liberty of the individual. Northern Ireland has a very grave unemployment problem and the noble Lord will know that we are trying all we can to improve the situation substantially, but that will take a lot of time. There

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could be difficulties though, particularly in terms of our attempts to attract external investment there, in having to deal with a totally different set of industrial relations, laws and procedures than apply in the rest of the Kingdom.
In closing, I would like to repeat my apology at the outset for my blunder in not being able to introduce this matter into your Lordships' House. With the caveat given to us by the noble Lord, Lord Blease, which I have to reject but which could be taken up in the Province itself at a later stage, if the appropriate structures were there, generally, I welcome the way in which the order has been received and recommend that it move through your Lordships' House.
Lord Wedderburn of Charlton: My Lords, while welcoming back the noble Earl, whether with a sense of déjà vu or not, I wonder whether he would care to add any remarks that might reassure the trade union movement in Northern Ireland that, although this parent legislation had to be spawned across the sea, the Government foresaw no future course of action of that kind?
The Earl of Gowrie: My Lords, I missed the last part of the noble Lord's question. What was it that "the Government foresaw"?
Lord Wedderburn of Charlton: That you will not do it again, my Lords.
The Earl of Gowrie: My Lords, I will not give any hostages to fortune in general, and to the noble Lord, Lord Wedderburn, in particular.
On Question, Motion agreed to.

Administration of Justice Bill [H.L.]
6.8 p.m.
The Lord Chancellor: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(The Lord Chancellor.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD AMPTHILL in the Chair.]
Clauses 7 to 8 agreed to.
Clause 9 [Services to injured person's relative]:
The Lord Advocate (Lord Mackay of Clashfern)The Lord Advocate (Lord Mackay of Clashfern) moved Amendment No. 18:
Page 8, line 1, leave out ("subsection (2)") and insert ("subsections (1) and (2)").
The noble and learned Lord said: This is a minor drafting amendment which is needed to reflect the fact that subsection (3) is applicable to both subsection (1) and subsection (2) of this clause. I beg to move.
On Question, amendment agreed to.
Clause 9, as amended, agreed to.
Clause 10 [Assessment of damages for personal injuries]:
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 19:
Page 8, line 32, leave out ("section 8") and insert ("section 81").
The noble and learned Lord said: This is another small drafting point to correct the reference in the Bill to the Employment Protection (Consolidation) Act 1978. If the amendment is not made, instead of referring to the right to redundancy payments, as is the intention, the subsection will refer to every employee's right to have a wages slip—or more properly, an itemised pay statement—showing detailed deductions and gross and net pay. I beg to move.
On Question, amendment agreed to.
Clause 10, as amended, agreed to.
Clauses 11 to 13 agreed to.
Clause 14 [Amendment and repeal of enactments]:
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 20:
Page 10, line 33, at end insert (",and—

(a) in section 4 of that Act the words "but this section is without prejudice to section 5 of this Act" shall cease to have effect, and

(b) in section 6 of that Act—

(i) in subsection (1) for the words "section 5 of this Act" there shall be substituted the words "this section", and
(iii) after subsection (2) there shall be inserted—
"(3) This section applies to any action in which, following the death of any person from personal injuries, damages are claimed—

(a) by the executor of the deceased, in respect of the injuries from which the deceased died;

(b) in respect of the death of the deceased, by any relative of his.".").

The noble and learned Lord said: This is a moderately complex drafting amendment to ensure that the repeal of Section 5 of the Damages (Scotland) Act 1976 is properly reflected in Sections 4 and 6 of that Act. It first removes a redundant reference to Section 4 and then also takes the two categories of action specified in subsection (1) of Section 5—namely, where damages are claimed by the executor of the deceased in respect of the relevant injuries or in respect of the death of the deceased, by any relative—and incorporates them as a separate subsection of Section 6. It should then be clear that the provisions in the section limiting the total amount of liability relate only to the categories in the new subsection. In effect, the amendment does no more than restate Section 5(1) of the 1976 Act in Section 6. I beg to move.
On Question, amendment agreed to.
Clause 14, as amended, agreed to.
Clause 15 [Interest on debts and damages]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 21:
Page 10, line 36, leave out ("sections") and insert ("section").
The noble and learned Lord said: If I may, I will speak to Amendments Nos. 21 and 22 and Nos. 58 to

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70A inclusive. It is rather a formidable list, but really there is nothing much in them. The amendments to Clause 15 and Schedule 1, to which I am speaking, shorten and clarify the new scheme for awards of interest in the High Court and the county courts. As regards the amendments to Clause 15, these are consequential upon the changes made in Schedule 1, whereby one section is inserted in the Supreme Court Act 1981 and one in the County Courts Act 1959, instead of two in each, as at present.
The amendments to Schedule 1 on page 40, at lines 6, 9 and 31, produce a very much simpler and shorter version of subsection (1) of the new Section 35A which is to be inserted in the Supreme Court Act 1981.
The amendments on page 40 at line 34 and on page 41 at line 14 incorporate the substance of Section 35B within the body of Section 35A in a much simpler, shorter and clearer form. Page 41, lines 17 to 38, which are taken up with Section 35B, are then ommitted.
The amendments starting at Page 41 at line 42 and ending with page 43 at lines 4 to 27 remodel the new Section 97A which is to be inserted into the County Courts Act 1959, so as to give it the same shorter, clearer and simpler form as is given to Section 35A of the Supreme Court Act 1981 by the amendments I have already referred to. I beg to move Amendment No. 21.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 22:
Page 11, line 1, leave out ("sections") and insert ("section").
On Question, amendment agreed to.
Clause 15, as amended, agreed to.
Clause 16 [Interest on lump sums in matrimonial proceedings]:
On Question, Whether Clause 16 shall stand part of the Bill?
Lord Renton: I have a very short point. I wonder whether my noble and learned friend can help. Clause 16 deals with the interest which is payable on sums which the court orders should be paid into court. They would be lump sums. I believe it has always been the practice so far that only simple interest should be paid, but, in these days when interest rates are fairly high and when the sums are quite considerable, and there may be a delay in the payment into court, I am wondering whether there is not a case for payment of compound interest.
The Lord Chancellor: This has been considered, and I think I am right in a saying that we thought there was not a case for the payment of compound interest.
Clause 16 agreed to.
Lord Stanley of Alderley Lord Stanley of Alderley moved Amendment No. 23:
After Clause 16, insert the following new clause:
(Certain contract debts to carry interest.
STATUTORY INTEREST ON CERTAIN CONTRACT DEBTS
.—(1) A relevant contract debt shall carry simple interest by virtue of this section and in accordance with sections (Relevant contract debts etc.) to (Assignments etc.) below.
(2) In this Act "statutory interest" means interest carried by virtue of this section.").
The noble Lord said: With the permission of the Committee, I should like to speak to Amendments Nos. 23 to 31. Last week, I felt rather like Daniel having a look at the lion's den of noble and learned Lords. I was prevented from plunging in by my noble and learned friend the Lord Chancellor. Today I intend to go in, because I hope very much that—like Darius, I think—the Government will be converted to my views on the merit of my amendment, which I must tell them has much more logic and lies much more easily in the Bill than the one I moved last Tuesday. I think my noble and learned friend was saying last Tuesday that my amendments then did not lie very easily in the Bill, with which I have partly to agree.
The purpose of this amendment is two-fold: first, to place the small trader on more equal terms with the large or multinational firm with regard to interest on debts; and, secondly, to keep the courts empty or at least free them from having to deal with endless cases of debt. The Law Commission in its Report No. 88 on interest in June 1978, suggested this course of action, and I was interested to read my noble and learned friend's speech at Second Reading, when he referred to the problem of interest in column 30. He said that the Bill would, "remedy what I regard as a serious injustice".
However, for reasons that are not apparent—they may be apparent to my noble and learned friend and other noble Lords—the Bill in Schedule 1, Parts I and II goes only half way to implementing the Law Commission's report. The result of this half-baked approach, which is very common with any half-baked approach in life, will be to place the small trader in a worse position than he was before, in that he will have to take his debtor to court to get payment of interest on his overdue account. This will put more people before the courts—a bad idea, as I am sure my noble and learned friend would agree. Worse still, the large company is much happier in court, with all its legal resources at its disposal, than I am with none, and with no time and no experience anyhow. I go so far as to say that if the Government cannot go along with the whole of the Law Commission's report, which is what my amendment achieves, we should be better off scrapping Clause 15 altogether. We may have to think about that later if my noble and learned friend cannot help me.
At this stage, I will not bore the Committee with the details of my amendments. I know that my noble and learned friend understands them so much better than I. I truly hope that the Government will accept in principle my case, if not my particular amendment. My amendment would mean that there would be a statutory right to interest on overdue accounts without the need to appear before the court. The length of the amendment is due, if I may say so, to the lawyers having a field day over what is to me a comparatively simple point. The amendment ties up the knots. For instance, it spells out, among other points, what contract debts are covered, the position of the debt where there is a statutory provision, the position of tenants under leases, the position of bills of exchange, the tax provision problems, how why and at what rate interest shall be charged. On that matter, I should say to my noble friend Lord Renton that we have gone for simple interest and not compound

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interest, though we have argued this on compensation and, sadly, have always lost it.
I referred earlier to the amendment correcting the Bill's half-baked approach to the problem. It might have been better if I had said that it appears to me that my noble and learned friend started darning this particular sock, but then left a gaping hole like a potato in it. Therefore, I very much hope that my noble and learned friend will be encouraged by my amendment to take up again his needle and thread and accept the principle of my amendment which, at the end of the day, would help me as a farmer and small trader to be more efficient and effective by giving me—I repeat—the right to interest on overdue accounts, and prevent me from filling his courts in order to get it. I beg to move.
Baroness Sharples: I also should like to draw the Committee's attention especially to the section of our amendment under which the right to statutory interest on unpaid contract debts would he treated as if it had been provided by the contract. That should, as my noble friend has said, help the small trader who very often has great difficulty in obtaining payment, especially from large companies and understandably, as my noble friend has said, they are very reluctant to go to court. They simply do not have the time. They cannot afford it. This amendment would help them and it seems fair to all concerned, because very many debtors do not settle their accounts before 90 days. That is quite intolerable because it affects the small trader's cash flow.
At the moment there are a number of small traders who, on their invoices, state that a surcharge of 2½ per cent. per month may be added to overdue accounts. I happen to know that that produces results—I have heard from people who have been in touch with me. However, it has no standing in law. I believe that our amendment would assist small traders and, as my noble friend said, the more people we can keep out of the court seeking redress, surely the better?
Lord Renton: I should like to give a brief word of support to my noble friends. There is no need for me to repeat the arguments which they have put forward. However, I should just like to add that there has been very careful consideration of this matter by the Law Commission presided over by one of Her Majesty's judges. I think that we are entitled to know why it is that, in producing this Bill, my noble and learned friend has been somewhat selective and has not accepted the whole of the package which the Law Commission put forward. There may well be a good reason for that, but, unless there is, I would have hoped that this is a matter that perhaps my noble and learned friend would wish to consider further.
Lord Mishcon: I wonder if, before the noble and learned Lord deals with the arguments, I may add just a word in regard to this amendment which certainly we on this side would be happy to support? We have in mind the small trader and we know of conditions which have existed over the past few years—and which certainly are current—where, of course, the cash flow is life and death very often to the small trader. All of us have looked with the greatest of apprehension at the
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number of failures that there have been of small companies and small businesses. Many happen, of course, every week. The statistics from the beginning of this year are especially alarming in that connection.
This does seem to be a non-controversial item and one bears in mind with the greatest of sympathy and understanding what the noble and learned Lord said about the hoped for passage of this Bill which might be interfered with if we dealt with controversial matters. I cannot conceive with respect—if I may repeat myself —that this is a controversial item. It seems to clear up the matter of interest. if I may say so, as any decent practising lawyer would, we sympathise completely as a profession with those who wish to keep out of the courts, and a decent practising lawyer sees that that happens if ever he can.
Lord Monk Bretton: I should like to say a few words in support of the amendment because I believe that this matter needs the most careful consideration of the Committee. I think that the smaller firms will always remain afraid to sue in any case and, therefore, they will be afraid again to sue for interest under the clause that is in the Bill, as my noble friend Lord Stanley pointed out, because they fear for their loss of goodwill and loss of customers. I also believe that this is a bad thing for the public because, faced with those who do and do not pay, what does the trader do?—he covers himself. The good payer in the end has to pay for the bad payer. For that reason I believe that it would be very much better for there to be statutory interest on debts. I know that there is, of course, a vested interest—the vested interest of those who do not pay. But it cannot be said that this is good for efficient trade.
I understand that in the United States they have statutory interest on debts and that that is also the case in most European countries. So, bearing in mind the inflationary experiences which we have had, it seems that this matter is rather overdue for remedy and should be dealt with. I think that it is the job of the Committee to consider supporting the smaller firms as regards this matter. Let us now, if we possibly can, make some progress for the good of all because so many other countries have this law. Finally, I should like to raise one other matter because we are dealing here with a long series of amendments. I wanted to hasten to say that I believe that it is much simpler in practice than it looks and that in fact it could work well.
Lord Hylton: If it were helpful I could provide evidence, given a certain amount of notice, of both large commercial companies, whose names are very well known to the public, and of Government departments, who regularly take 90 days and sometimes a little more to settle their accounts. On those grounds I should like to support the amendment and I very much hope that the Government will take it very seriously and give it their full consideration.
6.29 p.m.
The Lord Chancellor: My noble friend Lord Stanley of Alderley likened himself to Daniel in the lions' den. I am afraid that I am cast for the role of Darius. If my noble friend will recollect, Daniel emerged unscathed from the lions' den. He emerged unscathed because the king on the following morning said, "Daniel, come

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forth". I am afraid that I am cast for the role of saying to Daniel, "Come forth". I must tell my noble friends that I have given the most careful consideration to all these permutations and combinations of what I might and might not have put into the Bill. I got the maximum out of my colleagues on the terms which it is now becoming rather wearisome to repeat. But the fundamental condition upon which I got anything was that I should not generate too much controversy either between parties or between vested interests of one sort or another.
There are, in fact, as we have heard, a number of quite powerful arguments for the provision of interest on simple contract debts. The draftsmanship, of course, is impeccable because I think it comes from the Law Commission and not from my noble friend. But I cannot take carriage of it on this Bill, and I really must appeal for support to the Committee about the line of policy which I have been trying to carry through because I do need this law reform. I say this particularly to the noble Lord, Lord Mishcon, but I say it also to my noble and learned friends and my noble kinsman on the Cross-Benches. Being the guardian and the trustee, as I think I am, of the work of the Law Commission, I always try to see what I can do to legislate on Law Commission reports. Naturally enough, the matter was processed through various departments and various consultations.
The fact is that a number of institutions—and I shall enumerate them—were very much against the idea. Others were very much in favour of the idea, and neither would yield to the other. Very much against the idea were the CBI—and it would take a great deal more than me to overcome them (under their leadership, we hear that they are always spoiling for a fight with the Government)—the National Chamber of Trade, the Federation of Civil Engineering Contractors and accountancy bodies. The same was true of most, though not all, of the consumer organisations.
That is what I should have to face if I were to include this particular set of provisions in the Bill. If I had to face that, in my opinion, I should quite certainly lose the Bill. I do not in the least take sides in this matter—at least, I may do, but I shall try to conceal the side that I take.
On the other side there are, equally, a number of very powerful and very reputable bodies: the National Farmers' Union—and I rather fancy that my noble kinsman may have been stimulated into oratory from that quarter—the Association of British Chambers of Commerce and, as the noble Lord, Lord Mishcon, probably knows, the Law Society. They were all very much in favour of the Bill.
It is perfectly fair to say there are very powerful arguments on both sides. But, having put it to my colleagues and taken their advice, the Government's decision was that I could not include this, at any rate in this Bill. As a matter of fact, as long ago, I think, as 1980, there was a public announcement by the Government that the policy could not be accepted. But I do not want to dogmatise on this subject, because my humble function in promoting this Bill has been to get the maximum amount of law reform that will go into the quart pot that I was given. This enormous set of amendments, which will be very highly controversial
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—though not, I think, on party lines at all—will, in fact, overload it.
I am sorry to have to say that to my noble friend, because I know how very unsatisfactory this sort of answer is when it comes from Government Ministers. But it is given in good faith; it is given firmly, and I must say that I am not prepared to accept the theory that this is in any way half-baked. We have taken the proposals of the Law Commission, in so far as they deal with the subject of the Law Reform (Miscellaneous Provisions) Act 1934, and sought to implement them. It is true that we have not accepted the other and controversial proposals, the size of which can only be seen by looking at the Marshalled List, because it is quite clear as a matter of parliamentary fact that, if you put these enormous clauses in this Bill, the opportunities for those who dislike them to delay the Bill by amending them and resisting them, stage by stage and line by line, will be almost insuperable.
Therefore, I say to my noble friend, "Daniel, come forth. You may have another day, but please don't stay in the lions' den and blame me entirely for not accepting this very formidable additional burden to this already monstrously long and complicated Bill". I say that without passion because it may be that at some stage or another I have shown a degree of sympathy with the thinking behind the amendments, but I simply cannot do it. So far as I am concerned, that is all I can tell the Committee. I can only apologise for being so intransigent, but there it is.
Lord Renton: I am sure that we sympathise with my noble and learned friend and are grateful to him for his explanation of his own problems. But, speaking for myself, my sympathy would be very greatly increased if he could tell us, in broad terms, what were the grounds of objection on the part of the CBI and others whom he named who did object. I would just add the relevance of our knowing that: it is because, although the matter was considered rather controversial outside Parliament, I tend to agree with the noble Lord, Lord Mishcon, who indicated that in your Lordships' Committee that it would not be controversial to accept these amendments, and I find it very hard to believe that it would be controversial in another place. If my noble friend has to accept clauses which occupy another page or two and it is found that they are not controversial, I should have thought that he would be doing his Bill no harm, nor spoiling its chances of getting onto the statute book.
The Lord Chancellor: I do not want to enter into a long argument about the desirability or otherwise of charging interest on simple contract debts. But, broadly speaking, the departments of Government sponsor these various bodies and put forward the arguments which those bodies themselves have already embraced. I can assure my noble friend that the result of pressing this would be exactly what I have said, neither more nor less.
But the charging of interest, where you have not agreed to pay it or where terms have been that you pay a given sum of money, and not more, obviously presents difficulties of principle, as it always has all the way through history. The fact that a certain number

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of my noble friends, my noble kinsman and the very eloquent spokesman from the Labour Party Front Bench—who also is not uninfluenced by the opinions of the Law Society—take a contrary view, I am afraid cannot move me in what is a firm and careful decision after estimating the degree of controversy that there would be.
I am bound to say to my noble friend, while I am still asked, that the theory that you bring fewer people into court by charging them more before they get there, is not one to which, as a somewhat experienced practitioner in the county court, one might immediately assent. It may be true, but I do not think that it is self-evidently true, and I am bound to say that I am not sure that you will assist the small trader quite as much as he thinks. My experience, certainly since I have been Lord Chancellor, is that the small trader is complaining that he cannot enforce even the judgments that he gets. This is one of his principal woes when it comes to sending in the bailiffs on a county court judgment. The fact that they are sent in for a little bit more will not, I think, assist him, unless there are the assets to support the judgment debt. But I must firmly say to the Committee that I cannot do it for them. It is no good my pretending that I can, because I cannot.
Lord Mishcon: I add one more plea to the noble and learned Lord, and, if that plea fails, then I, personally, do not intend to worry him further. If I may say so, I do not think that it is merely a question of small businesses and small creditors finding themselves in difficulty in enforcing judgments. I think that it will be a very salutory deterrent to debtors in regard to delaying the payment of their due obligations if they know that they are running up interest—and at the moment they have no such deterrent at all—and that they will have to go to a solicitor, or try to fill up the form themselves, and then go through the process, as the noble and learned Lord knows so very well, of obtaining a judgment before interest under this Bill falls.
I make two other quick observations to the noble and learned Lord. First, he knows so much better than I ever shall that, if one is trying to get an Administration of Justice Bill through Parliament, one will always be told that the difficulty will be there if there is anything controversial in it. What frightens me is the fact that if an opportunity is not taken this time the noble and learned Lord's eloquence will be repeated on another occasion, not because he wants to say these things, but because one has to say these things. Alteration of our law and our procedures does not have a high priority in the normal government programme.
The final thing I say in an endeavour to persuade the noble and learned Lord along the lines that the noble Lord, Lord Renton, mentioned, is this: if the Committee showed its support of this amendment would it be so terribly difficult if, in another place, some very definite opposition was voiced, to allow the Bill to progress by a withdrawal at that stage of this clause? I personally feel with the noble Lord, Lord Renton, that it is not likely that, although there may be opposition outside, there would be parliamentary opposition of any worthwhile force. I would appeal to the noble and learned Lord to see whether this is not a proper
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way of dealing with it. He compared himself with Darius. I would call him a most friendly lion, who growls but does not like hurting anybody, and it is in that sense that I appeal to him.
Lord Lloyd of Kilgerran: May I presume, in effect, to thank the noble and learned Lord for being so frank with the Committee on the difficulties that are facing him. May I ask whether the noble and learned Lord would take this matter back and reconsider the eloquent speech made by the noble Baroness, Lady Sharples, a few minutes ago? She directed her attention to the serious matter of small arms, and the noble Lord, Lord Mishcon, has rightly said that it would be a deterrent to the particularly large firms who do not in practice pay up their debts to the small firms.
The noble and learned Lord referred to the difficulties arising in the county court on the enforcement of directions given by that court. That is not the matter that the noble Baroness raised; it is the general question that small firms do not want to go to court for various reasons, but that the introduction of some kind of measures of this kind for the small firms would act as a deterrent to the larger firms who, as we all know in business practice, are very dilatory in paying their bills.
The Lord Chancellor: I can only say I may be a friendly lion, but my family coat of arms is three boars, and I fancy that this may be the third time that I may be speaking in this debate. I am sorry to say that I have absolutely no room for manoeuvre at all. If it is any comfort to the noble Lord, Lord Mishcon, this is not the first time I have held this debate. The other debates have all been in private. I, of course, am simply the guardian, as it might be, of the Law Commission's reports and I should like to legislate them. This is my general policy, and I do not conceal my desire to do so. But the departments whose business it is to represent businesses take a very different view from the Law Commission about the popularity or feasibility of this move.
If I thought there was any chance of getting my colleagues to alter a decision, which is a Government decision, I would promise to take this back, and of course I shall communicate with other departments and other colleagues as to the views expressed. They have their sympathies too with small businesses which have always been close to the heart of the party of which I am a member, but I assure the Committee that I have no room for manoeuvre here at all.
Therefore, I stand, a friendly lion or the third of three boars heads erased, which I am afraid is what they are called by the heralds, and say that I simply cannot do very much about it. But I will, of course, report to my colleagues and see if there is any sort of consensus behind it, but I can assure the Committee that what I have said is the whole truth so far as I can see it.
Lord Stanley of Alderley: I shall not be able to answer all the questions. Probably in any event I would not know the answers. However, I shall try to answer some of them. First, the whole Committee is agreed that the present state of the law makes it look an ass in so far as there is vagueness in it. The noble Lord, Lord Mishcon, brought this out, and so did my noble friend Lady Sharples.

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Like the noble Lord, Lord Mishcon, I have to say that this problem is not going to go away. I can assure my noble and learned friend that it will come up in another place. Perhaps I could suggest that it might be nicer and kinder if he accepted it in principle here, on the principle that perhaps the devil you know, or the lion you know, or the Daniel you know, is better than the one you do not know, because it is not just going to disappear like that.
My noble and learned friend referred to his colleagues not being convinced that this is the right course. I have great sympathy when colleagues do not agree with you—I am not saying that the noble and learned Lord had a different view—but they were supporting a lot of rather extraordinary people from what I could understand: among other people, the Consumers' Association, the large institutions, and the CBI. For what it is worth, I tried to get through to the CBI to ask what would they think about it and whether they would appear. I have not heard one word in your Lordships' House. At the end of the day, it is surely our job, as Parliament, to decide and not the Consumers' Association, or whatever.
The other point, which it might be unkind to make, is that when it comes to matters mercenary, I have no faith in the Government—not this particular Government, but any Government in matters mercenary. This is a mercenary matter. It is probably why I am rather excited about it. There is nothing like a bit of gold to get a farmer going. This is in our court and not the Government's court.
I am not quite sure what I am going to do. Would my noble and learned friend say again that he would pass on these remarks that have been made in the Committee today about the reservations on this Bill and the support that the amendment has? I have not heard one person speak against my amendment except the noble and learned Lord. I am so tempted to divide the Committee today. I have a feeling I might win. I have seen that happen before, but I have accepted an assurance from the Front Bench that they will look at it again and I have come back later and lost it. It was probably my fault. Before I make up my mind, would my noble and learned friend mind saying just once again that he would put these points very forcefully to his colleagues? Then, perhaps, I would feel inclined to withdraw it at this time.
The Lord Chancellor: I thought I had said exactly that: that I would report the views which have been so eloquently expressed both by my noble friend and from other quarters in the Committee. I am less impressed than he is by the fact that other people who take the opposite point of view have not been so forceful or so eloquent, because they have got exactly what they want, and they know that the Government have come to the conclusion that this Bill cannot contain this particular provision.
I will, of course, do exactly what my noble friend has asked me to do. I will pass it on. But I think that they must take it that at the moment I am not making any other promise than that. I will say frankly to the Committee that of course if another place takes identically the same view as my noble friend, it may be that the Government would yield to the elected Chamber, I do not know, but I would ask for the support
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of the Committee. I am trying to pilot this rather monstrous piece of legislation through. I have applied my mind as honestly as I can to the problems involved. Having said that, I would do just what my noble friend has asked me to do without any further commitment; I hope Daniel will come forth and emerge from the lion's den unscathed.
Lord Stanley of Alderley: I am obliged to my noble and learned friend for that reply and if he puts his case so charmingly and forcefully to his colleagues, I am sure that by Report or Third Reading he will have something more pleasant to tell me and I shall not have to take up the cudgels again. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 24 to 31 not moved.]
Clause 17 [Relaxation of formal requirements for making wills]:
6.51 p.m.
The Lord Chancellor The Lord Chancellor moved Amendment No. 32:
Page 11, line 42, at end insert—
("(aa) it appears that the testator intended by his signature to give effect to the will; and").
The noble and learned Lord said: This amendment introduces an additional formal requirement for the making of a valid will. In accordance with the recommendations of the Law Reform Committee, which are not fully implemented in the present clause, the amendment makes it clear that the will should be admitted to probate only if it is apparent on its face that the testator intended his signature to validate it. The point was well raised by the noble Lord, Lord Mishcon, on Second Reading and it has, I am told, the support of the Law Society, so I am grateful to the noble Lord for raising it and I have done my best to give effect to what was said.
Lord Mishcon: I, in turn, am most grateful to the noble and learned Lord.
On Question, amendment agreed to.
Lord Mishcon Lord Mishcon moved Amendment No. 33:
Page 12, leave out lines 4 to 6 and insert—
("(c) in the presence of the testator each witness attests and signs the will or acknowledges his signature,").
The noble Lord said: This is a probing amendment. I am not sure—indeed, some of my professional colleagues are not clear—whether paragraph (c) of the new Section 9 allows one witness to sign and the other to acknowledge a previous signature. Only so that it is realised by the Committee that this is a very real point I shall read from paragraph 2.11 of the 22nd Report of the Law Reform Committee on the making and revocation of wills, where the case was cited of re Coiling:
"We would however like to prevent the recurrence of a case such as re Coiling [1972] 1W.L.R. 1440. In that case the testator, who was a patient in hospital, asked a nurse and another patient to witness his signature but, while he was signing and before he had completed his signature, the nurse was called away to attend to another patient. The testator nevertheless continued signing and

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the other witness then signed. When the nurse returned, the testator and the other witness both acknowledged their signatures and the nurse then added her signature. The will was held to be invalid and some have thought that the invalidity resulted from the failure on the part of the testator to sign in the simultaneous presence of the two witnesses. However, in our view, it was not the requirement of simultaneity which invalidated the will in re Coiling because in that case the testator did acknowledge his signature in the presence of both witnesses. What invalidated the will was the requirement that both the attesting witnesses must subscribe after the operative signature or acknowledgement of the testator".
The real purpose of this probing amendment, therefore, is to see whether re Coiling is covered and whether the wording of the clause, in the view of the noble and learned Lord, allows one witness to sign and the other to acknowledge, if that be necessary.
The Lord Chancellor: I can undertake to consider the point. The text as it stands is probably ambiguous in the sense implied by the noble Lord, Lord Mishcon and his reference to re Coiling is entirely apt. I am told that the amendment does not carry matters much further and itself appears to be ambiguous. But I think that both the text and the amendment could be improved by careful drafting and if the noble Lord would agree to withdraw the amendment, I will try to see whether I can come back with something better on Report.
Lord Mishcon: In view of that reply, I most willingly beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 17, as amended, agreed to.
Clause 18 [Effect of marriage or its termination on wills]:
Lord Mishcon Lord Mishcon moved Amendment No. 34:
Page 12, line 38, at end insert ("or as executor and trustee of the will").
The noble Lord said: This, too, is in the nature of a probing amendment. The new Section 18A which is inserted by Clause 18(2) is obviously designed to cut the former spouse out of the will as a beneficiary or executor. Presumably it is not the intention to cut out other references to the former spouse; for instance, an appointment of him or her as trustee or guardian, or a provision giving him or her power of appointment, although it may be for consideration whether a distinction should be drawn between a general and a special power of appointment, as the former could be equated to a beneficial interest.
A will creating a trust normally provides not only for the appointment of executors but the appointment of executors and trustees of the will, and that is done at the same time. In such a case, one feels there may be some doubt about the position of a former spouse appointed, for example, as an executor or trustee if the marriage is terminated. Perhaps the noble and learned Lord could explain the thinking behind the drafting of the provision. That is why I tabled the amendment: is it intended that an executor and trustee—I give that merely as an example—by way of an appointment of a former spouse would mean that she would, under the clause, drop both appointments, or would it be only that of executor and not of trustee?
The Lord Chancellor: The best and shortest thing I can say to the noble Lord is that I accept the amendment.
Lord Mishcon: I, in turn, am most grateful.
On Question, amendment agreed to.
Clause 18, as amended, agreed to.
Clauses 19 to 22 agreed to.
Clause 23 [Deposit and registration of wills of living persons]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 35:
Page 15, line 29, after ("below") insert ("(a)").
The noble Lord said: I will, with permission, speak at the same time to Amendment No. 36. These are minor technical amendments which place the registering authorities under a duty to register not only wills which have been deposited with them but also wills in respect of which registration is requested under Article 6 of the Registration Convention. Thus, a small omission is repaired.
Lord Mishcon: While I have nothing to say about the amendment, perhaps the Committee will permit me to comment—it will save time if I make the point now—that I happen to know that the noble and learned Lord's department has received some submissions on all the clauses relating to wills from the Law Reform Committee of the Holborn Law Society and a memorandum from the Law Society itself. Instead of reading out memoranda and referring to technical points which might make me look much more learned than I am, it would be more sensible if I asked the noble and learned Lord whether his department has received the memoranda and whether, in his kindness, he is giving consideration to the points that have been raised, and perhaps they can be dealt with between now and Report.
The Lord Chancellor: I have received memoranda. They are under consideration and I will write to the noble Lord about the results of the lucubrations of those who know more about these things than I do.
Lord Mishcon: I am most grateful.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor: moved Amendment No. 36:
Page 15, line 30, at end insert—
(";and
(b) any other will whose registration is requested under Article 6 of the Registration Convention.").
On Question, amendment agreed to.
Clause 23, as amended, agreed to.
Clause 24 [Designation of Principal Registry m national body under Registration Convention]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 37:
Page 16, line 12, leave out from ("Registration") to end of line 21 and insert ("Convention, and shall accordingly have the functions assigned to the national body by the Registration Convention including, without prejudice to the general application of

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the Convention to the Principal Registry by virtue of this section, the functions—

(a) of arranging for the registration of wills in other Contracting States as provided for in Article 6 of the Convention;

(b) of receiving and answering requests for information arising from the national bodies of other Contracting States.").

The noble and learned Lord said: This is a technical amendment, which substitutes a wider definition of the functions of the national body for the narrower one presently found in Clause 24. Clause 24 designates the Principal Registry of the Family Division as the national body under the Registration Convention, and provides that it is to have the functions assigned to that body by Article 3 of the convention. However, the description of the functions presently found in subsection (2) is far too narrow, as other actions apart from those specified will need to be performed by the Principal Registry. The amendment therefore introduces a more widely drawn definition of these functions. I beg to move.
On Question, amendment agreed to.
Clause 24, as amended, agreed to.
Clause 25 [Regulations as to deposit and registration of wills etc.]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 38:
Page 16, line 26, leave out from ("conditions") to end of line 31 and insert ("for the deposit of a will;
(b) as to the manner of and procedure for—

(i) the deposit and registration of a will; and

(ii) the withdrawal of a will which has been deposited; and

(iii) the cancellation of the registration of a will; and").

The noble and learned Lord said: In moving Amendment No. 38, I should like to speak to this amendment and Amendment No. 39 together. These are technical amendments consequential on the amendment to Clause 23, which places the registering authorities under a duty to register wills deposited abroad where registration is requested in this country under Article 6 of the convention. Clause 25 provides for the making of regulations as to the deposit and registration of wills. As it is drafted at present, it does not allow for the making of regulations governing the registration of wills in this country which have, in fact, been deposited abroad. The rule-making powers have therefore been re-cast to take this into account and have also been simplified. I beg to move.
Lord Mishcon: I appreciate, as will the Committee generally, the force of the convention, but will the noble and learned Lord in his kindness consider the whole advisability and inadvisability of the registration of wills made by testators in this country?
The Lord Chancellor: I shall certainly take back that point and write to the noble Lord. I thought that it was now rather the popular thing to think that it was advisable, but I shall certainly consider it.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 39:
Page 16, line 34, leave out from ("Convention") to end of line 37.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 40:
Page 17, line 1, leave out ("Regulations as to the deposit and registration of wills") and insert ("Any such regulations").
The noble and learned Lord said: This is another technical amendment. It removes the apparent distinction presently drawn by Clause 25(3) between regulations as to the deposit and registration of wills and some other, unspecified, type of regulations. Clause 25 provides for the making of regulations as to the deposit and registration of wills. The opening words of subsection (3) appear to draw a distinction between two different kinds of regulation. No such distinction is in fact made in the Bill. All regulations made under this clause will be concerned with the deposit and registration of wills, and the amendment makes that quite clear. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 41:
Page 17, line 17, leave out ("under subsection (3)(c) above") and insert ("for Northern Ireland").
The noble and learned Lord said: This is another technical amendment. It corrects the mis-statement in Clause 25(6) that regulations in respect of Northern Ireland are made under subsection (3)(c) of the clause. Subsection (6) of the clause provides that regulations in respect of Northern Ireland shall be statutory rules for the purposes of the Statutory Rules (Northern Ireland) Order 1979. All regulations made under the clause are in fact made under subsection (1), not subsection (3)(c). Furthermore, subsection (6) is concerned with Northern Ireland and it is therefore correct to replace the reference to subsection (3)(c) with a reference to Northern Ireland. The amendment has that effect. I beg to move.
On Question, amendment agreed to.
Clause 25, as amended, agreed to.
Clause 26 [Fees as to registration in Scotland]:
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 42:
Page 17, line 38, after ("Registers") insert ("of Scotland").
The noble and learned Lord said: This is a minor amendment to correct the reference to the Keeper of the Registers of Scotland, so that he is given his full and proper designation. I am sure that your Lordships' Committee will be glad to do that. I beg to move.
On Question, amendment agreed to.
Clause 26, as amended, agreed to.
Clause 27 agreed to.
Clause 28 [International wills—procedure]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 42A:
Page 18, line 18, leave out ("made in accordance with") and insert ("certified by virtue of").
The noble and learned Lord said: This is a minor technical amendment correcting the mis-statement made in Clause 28(3), as now printed, that international wills are made in accordance with subsections (1) and (2) of the same clause. They are in fact made in accordance

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with the annex set out in Schedule 2 to the Bill. I beg to move.
On Question, amendment agreed to.
Clause 28, as amended, agreed to.
Clauses 29 to 31 agreed to.
Clause 32 [Jurisdiction in relation to counterclaims etc.]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 42B:
Page 19, line 40, leave out ("this") and insert ("that").
The noble and learned Lord said: This amendment is consequential. It corrects a mistaken reference to the new Section 75D, which is inserted by Clause 32, by changing it for a reference to Section 75C(1)(c). The error came about because Section 75D was originally a subsection of Section 75C. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 42C:
Page 20, line 2, leave out second ("the") and insert ("and").
The noble and learned Lord said: This amendment corrects a small slip. The Bill refers to "set-off the counterclaim". It should read, "set-off and counterclaim". I beg to move.
On Question, amendment agreed to.
Clause 32, as amended, agreed to.
Clause 33 agreed to.
Clause 34 [Transfers from High Court to county court]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 43:
Page 20, line 37, leave out from ("amount") to ("after") in line 38 and insert ("exceeding £5,000 must be enforced in the High Court)").
The noble and learned Lord said: I think that I can describe this amendment as being purely drafting. It corrects the description, given in Clause 34(3) of the effect of Section 1(2)(c) of the Charging Orders Act 1979. I have a slightly longer explanation if it is demanded. I beg to move.
On Question, amendment agreed to.
Clause 34, as amended, agreed to.
Clauses 35 to 38 agreed to.
Clause 39 [Investment of money transferred to National Debt Commissioners]:
7.10 p.m.
The Lord Chancellor The Lord Chancellor moved Amendment No. 44:
Page 23, line 28, leave out ("section 38") and insert ("subsection (1)").
The noble and learned Lord said: This amendment corrects another erroneous reference. It is a reference in subsection (2) of Clause 39, which refers to Section 38 of the Bill, and it inserts instead the correct reference, which is to subsection (1) of Clause 39. I beg to move.
On Question, amendment agreed to.
Clause 39, as amended, agreed to.
Clauses 40 and 41 agreed to.
Clause 42 [Common investment schemes]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 45:
Page 24, line 43, at end insert ("and money held by any person authorised under subsection (5) below to hold shares in common investment funds").
The noble and learned Lord said: This amendment makes it clear that the Lord Chancellor may continue to make common investment schemes establishing common investment funds for the investment of funds by a person authorised by the Lord Chancellor as well as the investment of funds in court. I do not think anything is likely to turn on this, so I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 45A:
Page 25, line 44, after ("this") insert ("Part of this").
The noble and learned Lord said: This amendment narrows the extent of subsection (10) of Clause 42 of the Bill so that it extends only to Part VI, which deals with funds in court. It will ensure that the intention of the clause is clearly expressed. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 46:
Page 26, line 14, leave out ("under subsection (11) above") and insert ("in respct of the running of the scheme").
The noble and learned Lord said: This amendment extends the scope of subsection (12) to cater for the possibility that the Lord Chancellor might in due course appoint a private manager of the common investment schemes. I do not think I need elaborate on that unless the Committee requires me to do so. I beg to move.
On Question, amendment agreed to.
Clause 42, as amended, agreed to.
Clause 43 [Provision for making good defaults]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 46A:
Page 26, line 26, leave out ("scheme") and insert ("fund").
The noble and learned Lord said: This amendment substitutes the word "fund" for the word "scheme" so as to bring the terminology used in this clause into line with that used through the rest of Part VI. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 46B:
Page 26, line 27, leave out ("funds in court") and insert ("money for which he is responsible under this Part of this Act").
The noble and learned Lord said: This amendment makes it clear that the Lord Chancellor may certify that the manager of a common investment scheme has been guilty of a default in relation to any funds for

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which the manager is responsible, and not just for funds in court. I beg to move.
On Question, amendment agreed to.
Clause 43, as amended, agreed to.
Clauses 44 to 49 agreed to.
Clause 50 [Orders for the maintenance of wards of court]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 47:
Page 30, line 10, leave out ("(3)(a) and insert ("(2)(b)").
The noble and learned Lord said: In moving Amendment No. 47 perhaps I may speak also to Nos. 48, 80 and 81. These are linked amendments and are designed to show that a court ordering maintenance to be paid directly to a ward of court can make such an order against both the parents instead of only one of them, which might be appropriate in a case where the child is living with neither parent and they both have means. There are parallel amendments to Schedule 6, Amendments Nos. 80 and 81, to which I am also speaking, but these only make the same changes for Northern Ireland. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 48:
Page 30, line 12, leave out from beginning to ("there") in line 14 and insert ("parents of a ward of court to make periodical payments towards the maintenance and education of the ward) after the words "the ward"").
The noble and learned Lord said: This is a consequential amendment. I beg to move.
On Question, amendment agreed to.
Clause 50, as amended, agreed to.
Clause 51 [Remission of arrears of maintenance]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 49:
Page 30, line 16, leave out ("At the end of section 31(1)") and insert ("The following subsection shall be inserted after subsection (2) of section 31").
The noble and learned Lord said: This and the next amendment, No. 50, to which also I would speak in moving No. 49, confine the scope of Clause 51 so as to limit the new power to remit arrears to orders for periodical payments. As it stands, Clause 51 gives the divorce courts a new express power to remit arrears in all cases where the court has power under Section 31 of the Matrimonial Causes Act 1973 to vary orders for financial relief after divorce, nullity or judicial separation proceedings. Section 31 of the Act of 1973 applies only to certain classes of order; namely, orders for periodical payments, orders for payment of a lump sum in instalments and certain orders for settlement of property or a variation of settlement after a judicial separation, though the latter are not really relevant because in such cases, of course, no question of arrears arises. It is the application of the new power to lump sum instalment orders that these amendments would correct. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 50:
Page 30, line 21, leave out ("there shall be added the words "or") and insert—
("(2A) Where the court has made an order referred to in subsection (2)(a), (b) or (c) above, then, subject to the provisions of this section, the court shall have power").
On Question, amendment agreed to.
Clause 51, as amended, agreed to.
Clauses 52 to 54 agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 51:
After Clause 54, insert the following new clause:
("Attachment of debts
.—(1) The section set out in Part I of Schedule (Attachment of debts) to this Act shall be inserted after section 40 of the Supreme Court Act 1981.
(2) The section set out in Part II of that Schedule shall be inserted after section 143 of the County Courts Act 1959.").
The noble and learned Lord said: This amendment—I should like, if I may, to speak to Amendment No. 75 in the schedule—applies to the administrative expenses and the clerical expenses of a garnishee. The purpose of new Clause 54A and new Schedule 3A is to enable provision to be made for the expenses incurred by financial institutions in complying with garnishee orders. Part I of Schedule 3A makes such provision for the High Court and Part II makes similar provision for the county courts. Clause 54A(1) provides for the insertion of a new section in the Supreme Court Act 1981 and subsection (2) provides for an insertion in the County Courts Act 1959.
The new section to be inserted in the Supreme Court Act 1981 is set out in Part I of new Schedule 3A. The new Section 40A(1) of the Supreme Court Act 1981 enables a sum to be prescribed which may be deducted by a garnishee from money which would otherwise be attached by a garnishee order, as a contribution towards the expenses of complying with the order. The modern jurisdiction of the High Court to attach debts exists by virtue of rule (Order 49 of the RSC) rather than statute.
Accordingly, reference is made to Section 40(2) of the 1981 Act which does not itself create the jurisdiction to attach debts but provides a description of that jurisdiction. The institutions who are to have the benefit of the new provision are limited to those set out at (a) and (b) of the new subsection (1). The expression "deposit-taking institution" is defined in subsection (3), with a reference to Section 40(6) of the 1981 Act, which itself contains a reference to the Banking Act 1979, the effect of which is to include banks, building societies and certain other financial institutions within the definition. There is power at subsection (1)(b) to limit the benefit of an order under the provision to institutions with a minimum number of branches. The power to make an order under the new clause is exercisable by the Lord Chancellor.
On Question, amendment agreed to.
Clauses 55 to 60 agreed to.
7.22 p.m.
Lord Gifford Lord Gifford moved Amendment No. 52:
After Clause 60, insert the following new clause:
"Documents disclosed in litigation
.The obligation to protect and maintain the confidentiality of the contents of a document dislosed to a party to litigation or his solicitor shall terminate if and to the extent that the contents

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of the document are read aloud in open court in proceedings which are not subject to any limitation on reporting."
The noble Lord said: This amendment is similar to an amendment which I moved on two occasions during the passage of the Contempt of Court Bill. On the second Marshalled List, there has crept into the amendment an Americanism, the word "perty", which is a misprint. During the Contempt of Court Bill, the case of the Home Office v. Harman was passing through various stages of its way through the courts and on the Report stage of that Bill the amendment was not pressed to a Division because the House of Lords had yet to rule on the matter. The noble and learned Lord the Lord Chancellor promised that when the House of Lords had made a ruling he would look at all the implications of the issue which was raised.
The House of Lords delivered judgment on 11th February 1982 and, by a majority of three to two, gave judgment in favour of the Home Office. Now the noble and learned Lord can, I feel, delay no longer in addressing himself to the issue raised in that case. I am grateful that the broad terms of this Bill allow me to raise it so soon after the House of Lords delivered judgment.
May I briefly explain what the point is and in doing so may I emphasise that we should try to stick to the point of issue in this amendment rather than rehearse the rights and wrongs of the Harriet Harman case. The point is that when parties are in litigation they are under a duty to hand over, to disclose, to the other side all the documents which are relevant to the issues in the case. It is a duty which is of great value and helps the courts to deal justly and gain access to the truth. Because the documents are usually private documents, the litigant and his legal advisers are under a duty not to disclose them for purposes other than the purposes of litigation. That, again, is a valuable duty because it preserves the confidentiality of the documents for so long as they are not needed publicly in the litigation. If and when the case comes to court, the documents if they are relevant may be read out, questions may be asked about them, witnesses may be asked to explain why they wrote them and the whole case may turn on them and on what they mean. Above all, the public hear their contents and in a number of courts, including the High Court, a transcript is made of the publicly-heard proceeding.
One would think in those circumstances that the documents would no longer be confidential and that there would no longer be a duty not to disclose them. But it is not so. The law is that a litigant or his solicitor is not permitted to inform other people of the contents of the document. The law in so ruling, I suggest, is absurd and dangerously so.
The public may, on payment, obtain a transcript, if there is one, and find out what was in the document. The public, if they happened to have been in court, may take down in shorthand the document and its full contents; but those who are parties to the litigation are not allowed to tell anybody else, however much in the public interest it may be for them to write about or talk about the document, because that same duty of confidentiality is said still to remain against it. It is wrong headed in the extreme. What is even more absurd is that if the litigant were to give the document
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to a law reporter or to what was described by one noble and learned Lord, the noble and learned Lord, Lord Roskill, as a day-by-day reporter, it would not be a contempt. But if he gives it to the writer of a feature article, it is a contempt.
It is a distinction which those involved in the press and the media find quite unacceptable and quite unreal. I was glad to hear, as no doubt others have heard, that the Press Council have pronounced themselves very much in favour of the move by this amendment to change this wrong-headed law. As well as being absurd, it is serious. It strikes at the principles of free communication and creates barriers to the public being informed about what has gone on in a public court and, yet again, it puts this country in danger of being in breach of the European Convention of Human Rights which, in its article on the right to free expression, lays down clearly the right to impart and receive information.
The case of the Home Office v. Harman went through three courts and one could say that the law in those courts showed itself to be bearing the head, body and legs of an ass. But it was not wholly an ass because it had the tail of a robust British lion in the persons of the noble and learned Lords Lord Scarman and Lord Simon of Glaisdale. They in a joint judgment delivered themselves of what amounts to an essay on human rights, from Milton through the American Constitution down to the European Convention on Human Rights. I cannot do better in commending this amendment to the Committee than read one passage of their joint judgment. They said this:
"the common law by its recognition of the principle of open justice ensures that the public administration of justice will be subject to public scrutiny. Such scrutiny serves no purpose unless it is accompanied by the rights of free speech, i.e., the right publicly to report, to discuss, to comment, to criticise, to impart and criticise and to receive ideas and information on the matters subjected to scrutiny. Justice is done in public so that it may be discussed and criticised in public. Moreover, trials will sometimes expose matters of public interest worthy of discussion other than the judicial task of doing justice between the parties in the particular case. It cannot be desirable that public discussion of such matters is to be discouraged or obstructed by refusing to allow a litigant and his advisers who learnt of them through the discovery of documents in their action, to use the documents in public discussion after they have become public knowledge.
"We believe the true path forward is to ensure that our law develops in a way which is consistent with the obligations accepted by the United Kingdom in the European Convention and with the development of the common law achieved in America".
I urge the Committee, by accepting the amendment moved today, to uphold the wisdom of those two noble and learned Lords. I beg to move.
Lord Rawlinson of Ewell: It is impossible to consider this new clause without reflecting again upon the case of the Home Office v. Harman—a case in which very murky circumstances arose which I think aroused grave suspicion of professional conduct in that particular case, smacking of a maneouvre being employed whereby if documents could by a strategem—that is, a longwinded opening—be read in open court, then those documents, which had been obtained by the process of discovery, could be shown to somebody totally outside that case but who was planning to write some politically sympathetic article attacking one of the parties to that litigation.
It was the circumstances of a disclosure then to a journalist, not on the instructions of the client whom

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this particular solicitor represented, who was going to write this particular article after a case in which counsel had seen fit to open the case for five days, reading—or purporting to read—800 pages, or the material part of those 800 pages, and appeared, as I said, to employ a tactic to promote some interest which was collateral to the actual issues of that case attacking in fact a party to the litigation in respect of matters not concerned with the action as such.
Beneath the formality of the judgments of the Court of Appeal and the speeches of the Judicial Committee of this House, and apart from the distinguished speeches —an extract of one of which has been quoted to this Committee—there comes a suspicion of some unattractive, strange practice. Whether it was contempt or not, there is little credit to the professional people engaged in it. Of course, it served to increase suspicion and doubt over the aims and practices of the National Council for Civil Liberties, with its very high-sounding title. If it should live up to that title, it should certainly never stoop to any questionable tactics.
The process of discovery is an onerous invasion of people's private rights. It means that documents can be disclosed to somebody else which otherwise hitherto are privately in the possession of a particular person. It should and ought to be jealously guarded and properly applied. Anything smacking of a trick reflects very ill of any practitioner who stooped to it. It is the duty to refrain from using the advantage of discovery, which is obtained purely because one is a party in a particular suit, for some ulterior purpose. As a result, practitioners would have much greater difficulty in getting discovery from, for instance, departments of the Crown. Often it is difficult to get documents and sometimes it is very important to get them. But if there is going to he the suspicion that the documents are going to be used not in the action but for some totally different political purposes, then departments would rightly fight every case of discovery.
Such conduct therefore inclines, and will incline, parties, whether they be departments, large corporations or ordinary parties, towards far greater reserve and caution. Public policy demands that an undertaking given by a solicitor to the court when obtaining the private documents of the adversary not to take advantage of the possession of those copies, to use for a collateral purpose, is essential. In my view, it should not end when the document is actually read in open court. Otherwise, one can use a ploy, the trick—if a professional advocate stoops to it—of being able then thereafter to use these documents. Discovery is a unique part of the common law system and it requires safeguards against abuse.
I also—unlike the noble Lord—can accept that there should be a distinction between the situation where counsel—as they often do—shows, for instance, to an accredited law reporter a document which has been used in the course of proceedings and/or to a reporter who has been in court and is proposing to afford for the public a proper contemporary record. I can sec the distinction between that and a deliberate showing to a commentator not interested in the particular case in which the document has been read and who is known to be going to use it not to report that case but to mount an attack on an opposing party.
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Therefore, I agree with the judgment of the noble and learned Lord, Lord Diplock, in this particular case that it was nothing to do with the freedom of speech or the freedom of the press. I do not think that we should be misled by such assertions. I do not think that the press can have examined this carefully enough. The noble Lord referred to the Press Council. The Press Council could not have looked at it very carefully and very closely because they even muddled up which judge in the House of Lords gave judgment in a particular way. I do not think that they or their advisers have applied their minds very closely to it.
Lord Mishcon: Will the noble Lord give way?
Lord Rawlinson of Ewell: Well, if I may just finish—
Lord Avebury: Very discourteous!
Noble Lords: Order !
Lord Mishcon: I was only about to correct—
Lord Rawlinson of Ewell: If the noble Lord on the Liberal Benches will wait a moment, it is my habit to give way and I will give way when I have completed my sentence. I really do not need—if the noble Lord will accept it—instructions from him about courtesy. All I wished to say was that I do not think that the Press Council had examined this matter sufficiently carefully for them to consider it had this attack, as it were, upon freedom of the press, the freedom of speech, which they purport to do.
Lord Mishcon: The noble and learned Lord is, as always, very courteous and I am obliged to him. I am sorry if I interrupted him in the middle of a sentence, but I know that he is, as always, anxious to be fair. The Press Council issued a statement almost within a matter of hours—I certainly received it—apologising for their error in quoting the wrong Lord of Appeal in Ordinary and putting themselves right. Therefore, since that statement was issued to every noble Lord who had the original statement, the noble and learned Lord would not want to be unfair in making the point that the fact that they quoted the wrong judge showed that they had not considered the matter.
Lord Rawlinson of Ewell: I certainly do not want to be unfair; but let us just recollect that here was the Press Council, over that important signature, setting out their argument in favour of this particular amendment and referring us to the particular case and to the particular speeches or judgments. All I can say is that the person dictating the statement may have got it wrong and the mistake was not noticed; but I could not help feeling, a little wryly, that sometimes the press can get things wrong, and they got it very wrong in this particular case. However, they have corrected their mistake and they have set out their basic belief—that this is a grave infringement, as they believe, upon the liberty of reporting and of the press, and they have urged noble Lords to support this amendment.

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However, I believe there is a superior interest, which is that of the maintenance of the discipline which there ought to be when you give to parties this particular power of discovery. Therefore, I believe that to use it in a way such as it was used in that case was a wrong thing to do and I would not like to see any extension or any ability for anybody to be able to do that again.
Lord Avebury: I very much deplore the language which the noble and learned Lord has seen fit to employ in his discussion on this matter and the personal attack he has made on Miss Harriet Harman, whose case has given rise to this amendment. I agree with the noble Lord who moved this amendment in saying that it would be far better if your Lordships were to address your minds to the merits of maintaining confidentiality of documents in cases similar to the one in question, rather than to personalise the issue, as the noble and learned Lord has done in his speech.
He made it absolutely clear that what was concerning him was not so much the question of the amendment itself but the use that might be made of documents that were disclosed in court, and whether that use was politically acceptable to him or not. The fact that an attack was launched by the author of the offending article, Mr. David Lee, on the practices of the Home Office, is enough to make the noble and learned Lord say that the decision of the Judicial Committee was the correct one and it was the political issue which was uppermost in his mind, so it appeared from his speech, in reaching that decision.
But the amendment deals with the treatment of documents read out in open court generally, where the court itself has not imposed any restriction on the reporting of those documents. I think it is worth making the point that the court does have the power to order that a particular document should not be referred to or that a document should he read silently or that when a document is being read the court should sit in camera. Therefore, when the court thinks that confidentiality is of overriding importance, outweighing the principle that justice should he open and public, it has the means to give effect to that view; but in all other cases the rule should be that a document, once read out, should be in the public domain.
I make this answer to the noble and learned Lord when he says that were the judgment to be reversed it would make it far harder to secure discovery from public departments, because if the courts have this power to order the documents to be read silently or in camera then where disclosure is committed but the document nevertheless should not he in the public domain, the court has the means of taking the necessary action. I think I am right in saying that the position was always thought to be that a document read out in open court was thereby placed in the public domain: I did not think there was ever any doubt on that matter until recently. Indeed, I believe that was the opinion of the Attorney-General, as was said in another place, but the Home Office, I understand, did not take the advice of the Attorney-General and sought to clarify the law—or, as some would think, to create a new law to suit their own purpose.
The Judicial Committee declared in their judgment that they were deciding a major new point of law and,
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by a majority, they came down on the side of the Home Office and against what everybody else had thought the law to be until that particular time.
Parliament did not make that law; the judges made it. Parliament has never had an opportunity of pronouncing on that matter because, as the noble Lord, Lord Gifford, has already mentioned, while the Contempt of Court Bill was under consideration the Harman case was still subject to appeal, and so it was not until February 1982, when the Judicial Committee found against Miss Harman, that the opportunity came for your Lordships to consider this matter. This is the first occasion on which it has been possible to arrive at a conclusion on it without running foul of the sub judice rule.
I think it is essential that Parliament should now take a view on the issue because I agree with the noble Lord who moved the amendment that it raises major questions relating to freedom of expression and particularly to the freedom of the press to report what is said in the courts of law. I received a letter only yesterday from the Press Council, saying that at their meeting last week the council had unanimously supported the amendment now before your Lordships. They had arrived at that decision with the benefit of mature consideration, and I think the noble and learned Lord was being very unfair to them in the point he made just now about the confusion in regard to the name of the judge. That did not alter the substance of the matter. What the Press Council thought about the ruling when they first issued their press statement is what they still think, and it made no difference to the view that they took that the name of the judge in their original press statement had to be amended—and was indeed amended, as the noble Lord, Lord Mishcon, has said. I thought that was an argument which, if I may say so, was totally unworthy of the noble and learned Lord—that because a mistake had been made in the name of the judge the worth of the statement originally made by the Press Council was thereby destroyed.
But the Press Council is not the only body concerned with the freedom of the press which has expressed an opinion on this matter. The Guild of Newspaper Editors and the National Union of Journalists, of which I have the honour to be a member, have said that the ruling will make it far more difficult to report court proceedings accurately; so we are not just dealing with some mysterious legal technicality but with something which will adversely affect the freedom of newspapers to report what is said in court.
There is one other point which I think should be made, and that is that the Law Commission in its report on confidentiality, in considering the case of the Home Office against Miss Harman emphasised that that case related to liability not for a breach of confidence but for contempt of court, and that was not the concern of the report. Nevertheless, having gone on to consider the implications of the Harman case, they concluded:
"We do not think that civil liability for breach of confidence should persist after the information to which the relevant obligation of confidence related had been published in open court".
A little later on they say:
"In the interests of the free circulation of information we think everyone ought to be able to rely, so far as any civil liability for breach of confidence is concerned, on the fact that the information in question has been published in open court".

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Is it not an additional absurdity, to add to what has already been mentioned by the noble Lord, that the law of confidentiality, as it should be according to the Law Commission, will not be compatible with the law of contempt? It seems to me that the two should march hand in hand, but they will not if this judgment is allowed to stand.
The noble Lord has already mentioned the problem of the European Commission for Human Rights. One would have thought that we were in enough trouble with that body already without allowing further ammunition to be given to those who would seek to raise cases against the United Kingdom in that forum. There is no doubt at all, when one looks at it, that the European Commission would come down against us if a case were brought in respect of this matter.
In conclusion, I also should like to refer to what was said by the noble and learned Lord, Lord Scarman, in his remarkable judgment which has already been quoted by the noble Lord who moved the amendment. He pointed out that no one disputed that once documents had been read aloud in open court,
"and were not subjected to any specific lawful direction prohibiting publication, they entered the public domain".
They were no longer confidential. Privacy had been stripped from them.
The noble Lord who moved the amendment has pointed out that, in the case of any other person except a solicitor, no breach of contempt could be alleged. If I were in the court and either was able to take a shorthand note of the proceedings or happened to have a very good memory, I could go out and repeat to my friends everything that had been said there. If, as the noble Lord has pointed out, a solicitor were to divulge what had been said to anybody except a feature writer, no contempt would be committed.
So I really think that, as the noble and learned Lord, Lord Scarman, and his colleague in the dissenting judgment have shown, we should be getting into a real muddle if we allowed this to stand. I very much hope that your Lordships will take this opportunity of putting right something which will severely inhibit the newspapers, and which will bring us into possible conflict with our obligations under the European Convention if it is allowed to stand.
7.53 p.m.
Lord McGregor of Durris: This amendment provides an apt illustration of the platitude that rights can be enjoyed and protected only if they are restricted. The difficulties of making a wise accommodation between freedoms and responsibilities are sharply clarified in the relations between the press and the institutions of justice. A free press and a fair and honourable administration of justice are among the bases of democracy. To the extent that this amendment hears upon their relationship, it has an importance which goes far beyond the case from which it stems, the details of which I intend to ignore.
The voice of the layman ought to be heard alongside that of the lawyer in this discussion, but even the lawyers and the judges do not agree what the significance of the case of the Home Office v. Harman is. I am referring not to the domain of the professional lawyer,
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which I am not competent to discuss, but to the broad concerns of all citizens. If the layman turns to the judgments, he finds that the noble and learned Lord, Lord Diplock, said—and in quoting him I am following what seem to have been laid down as the proprieties of the discussion of this amendment—
"In a case which has attracted a good deal of publicity, it may assist in clearing up misconceptions if I start by saying what the case is not about"—
the "not" is italicised—
"It is not about freedom of speech, freedom of the Press, openness of justice or documents coming into the public domain".
On the other hand, the noble and learned Lords, Lord Scarman and Lord Simon of Glaisdale, declared:
"Since the question before your Lordships falls to be answered on the basis of principle, we do not think that the nature and the duration of the obligation can be determined by reference merely to the requirements of the law relating to discovery of documents. Regard must also be had to the requirements of the general law protecting freedom of communication".
It does not matter for my purpose which of these views is correct. What does matter for laymen is that some lawyers and many laymen believe that we are discussing an issue which affects the freedom of communication. As the clause stands, every newspaperman and editor to whom I have spoken feels that it restricts unreasonably their freedom of reporting and imposes the distinction of the noble and learned Lord, Lord Diplock, between law reporters and other sorts of reporters, which would be impossible to maintain in the world of newspapers.
This is the view of the Press Council, and I did not find acceptable the suggestion of the noble and learned Lord, Lord Rawlinson, as to the inadequacy of the consideration which that body had given to this matter, because I recall that the chairman of the Press Council is a distinguished practitioner, and I am certain that proper consideration was given both to the professional implications of the amendment and to its effect upon the conduct of newspapers.
Editors find the possibility that documents may not cease to be confidential even if read in open court, and that quoting from them may prejudice the administration of justice, so puzzling as to be almost incomprehensible. On this matter, I think that it is clear that respect for the present clause has been withdrawn, because it strikes an unwise and impractical balance between the values of freedom of reporting and of the proper administration of justice. This is bad for the law and it is bad for the press.
Historically, the law and the press have, through open reporting since the end of the 18th century, been one of the important guarantees of the independence of the judiciary and of securing fair and effective administration of justice. The volume of opinion that regards this clause as bad in its effects upon this vital area of public policy is so great that I would ask the noble and learned Lord to accept the amendment proposed by the noble Lord, Lord Gifford.
8 p.m.
Lord Wedderburn of Charlton: I apprehend that the noble and learned Lords, the Lord Chancellor and the Lord Advocate, will, in their good nature, say something to accept the principle of this amendment, whether or not the precise wording.

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May I briefly suggest to the noble and learned Lords why I feel that, and I hope that I am not mistaken. It is because the principle is now established, as principles are in the Judicial Committee, at three votes to two. I wonder what the position would have been if the majority had gone the other way. I wonder whether the noble and learned Lord would be promoting a Bill to establish by statute the position that we have now. And if he were not, then I wonder what ground there would be for opposing the principle, at least, of my noble friend's amendment. It would be a most extraordinary Bill. It would be a Bill which said that once documents were read out in court where there were no restrictions on reporting and all the other provisos which my noble friend has made, they entered the public domain, except for the litigant and the solicitor.
To take the absurdity from the judgments, which is discussed by the noble and learned Lord—I refer to the particular judgment in the Harman case, though not to refer to it in terms which T would not use outside the privilege of this House—the position now is, and would be under the Bill promoted by the noble and learned Lord, that the solicitor, after the document had been read out, would not offend against the law if he handed to the journalist the transcript of the proceedings but that he would offend against the law and would be guilty of contempt under the legislation if he gave the documents themselves to the journalist. Then the Bill would go on to define the journalist as against the law reporter. I do not believe that the noble and learned Lord would advance such a Bill in your Lordships' House.
I thought, again: if the next Government, when the noble and learned Lord's distinction is placed on the Opposition Bench, advanced a Bill to put these principles into practice, he would come down to this House, raise an enormous majority and correctly defeat any Government who tried to enact such principles. I believe he would feel that this is right.
Therefore, taking into account all the fundamental principles which my noble friend Lord McGregor has suggested are at stake, taking also into account the European Commission on Human Rights to which the matter may well be taken (and before which I agree with my noble friend the Government would lose if they defended the present law), and taking into account, further, the Law Commission and the logic of both the noble and learned Lord, Lord Scarman, and the noble and learned Lord, Lord Simon of Glaisdale, I entreat the noble and learned Lord at least to accept the principle of this amendment, which is so clearly right.
8.3 p.m.
Lord Hutchinson of Lullington: I support this amendment as a practising lawyer. I would urge that the amendment raises a fundamenal question of principle and of common-sense. I am very sad that the noble and learned Lord, Lord Rawlinson, should have dealt with this amendment on a personal basis and, if I may say so, on a political basis. On that matter, Miss Harriet Harman, to my own knowledge, is a most honourable and upright solicitor who would not have dreamt of doing anything, as an officer of the court, if she had not considered that what she was doing was perfectly within the law. It is only right
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to say in that context that every one of the learned judges who dealt with this matter, below and above, went out of their way to say that the court did not in any way impugn the bona fides of Miss Harriet Harman. I think that that should be said.
This matter raises once again in your Lordships' House the question of the law of contempt. This is a sensitive area which may guarantee that the stream of justice runs clear and unsullied. On the other hand, it may fundamentally interfere with freedom of expression and freedom of communication. The majority speeches in the Judicial Committee, I would suggest, obviously do so interfere. If one takes the case of the advocate in court, the situation now is Gilbertian in its idiocy. In fact, I should declare an interest in this matter, in that I swore an affidavit in that case in order to assist the court as to what the procedure is in the criminal courts. Throughout my experience in the criminal courts, if a reporter came up to me at the end of the day in court and said, "I did not hear the contents of exhibit 47", or,"You referred to exhibit 47 but did not read it out; could I have a copy of it?"I considered it to be my duty, even if my own client might not wish for the publicity which inevitably follows from court reporting, to show him anything that had come into the public domain during the course of the case. And, as I say, I swore an affidavit to that effect.
What is the situation now? A gentleman comes up and says, "May I see the document you referred to in your opening?" "Who are you, sir?" "I am a law reporter". "Oh, certainly; here is a copy of it". Another gentleman comes up. "Who are you, sir?" "I am a court reporter". "Oh; are you intending to give a fair and accurate report of what I said?" "Oh, yes, of course I am". "You are quite sure that you are?" "Yes". "Very well, here is a copy". A third gentleman comes up and says, "I am the home affairs representative of The Times newspaper. This case has all sorts of interesting implications and I want to write an article about it next week for The Times. Could I have a copy of the document referred to?" "But that is comment, Mr. Jones. That will be comment, won't it?" "Yes, it will". "Oh, no, I can't possibly show it to you". He will then say, "Can I ask my colleagues, to whom you have just given copies, for a copy?" "Well, that is a matter for you, Mr. Jones. I don't know what will happen, of course. The judge may have you, or him, up for contempt". The whole thing is quite chaotic, but that is the situation, the realistic situation, now in court and I would suggest that it is quite ridiculous.
The rule enshrined in this amendment is perfectly simple and follows the speeches of the noble and learned Lord, Lord Scarman, the noble and learned Lord, Lord Simon of Glaisdale, and the Law Commission's draft Bill which has already been referred to. It says quite simply that once documents enter the public domain the contents become public knowledge and that then the obligation of confidentiality ceases. This is the point which was ignored by the noble and learned Lord, Lord Rawlinson. It does not matter, and it is totally irrelevant, what use is made of the document once it comes into the public domain. Its use may be good, bad or indifferent. The point

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that has to be made is that confidentiality perfectly properly applies to the private litigant and to the solicitor and counsel concerned until that moment is reached. When that moment is reached there is nothing to be confidential about. There cannot be any obligation of confidentiality. And, once it enters the public domain, then of course the other great principle applies: that it then no longer continues to be the private right of the litigant but becomes the public's right to freedom of comment, information and ideas.
A little time ago, during the passage of the contempt Bill your Lordships will remember that, despite the very strong and exhilarating opposition of the noble and learned Lord who sits on the Woolsack, your Lordships passed an amendment to the contempt Bill which guaranteed the freedom of the public when serving as members of a jury not to be molested and not to be put under pressure as to what went on in the jury room. That amendment enshrined the freedom of every person in this country who does that job to be free of that kind of pressure and molestation. Here, I would venture to say, is the other side of the coin. Here is the guarantee of public freedom of comment and expression which should be guaranteed to the public, as opposed to the sectional interest and protection of the Minister, or of the civil servant, or of whoever it may be who would be embarrassed to have a matter commented upon.
Over and over again when I have appeared for a shoplifter or a gentleman who has unfortunately found himself in a public lavatory charged with a wretched offence, the accused has said to me,"I shall be fined £5 if I am found guilty. Some 99 out of 100 of these cases are never published in the newspapers. How am I going to keep my name out of the press? I happen to be captain of the cricket XI of the local village. I shall get publicity and I shall be completely ruined, whether I am found guilty or not guilty." One has to reply, "No, alas for you, but not for everybody else, matters which are pursued in the courts of law in this country are public and the public have a right to know what goes on. They are entitled to comment on and write articles about what goes on in the courts." So why should the Home Office or a mere Minister be placed in a better position than the ordinary member of the public who unfortunately finds himself in a situation which, for him, is far more dreadful than the one facing the persons involved in the Harriet Harman case? I strongly urge your Lordships to support this amendment.
Lord Gardiner: As it was through no fault of my own that I was unable to be present at the Second Reading of the Bill, I hope that your Lordships' House may forgive me if I congratulate most warmly the noble and learned Lord the Lord Chancellor on this splendid Administration of Justice Bill. It is the usual way of trying to keep the law up to date. It is always very varied in its contents. I believe that I had such a Bill in most years, but I never attempted one so ambitious as this. Its size is enormous and must have involved an enormous amount of work both for the noble and learned Lord and for many members of his staff. I warmly congratulate him on it.
As the noble and learned Lord the Chancellor has said, one of the difficulties there always is about
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Administration of Justice Bills is that, on the one hand, because such a Bill's contents are so varied, the long Title has to be very wide, so it is almost impossible to say that any amendment proposed dealing in any way with the administration of justice is out of order. On the other hand, the Lord Chancellor has always had to promise his colleagues that the Bill is not going to take up a great deal of time. Obviously, this creates a great number of difficulties; not, I hope, in the case of this Bill because the noble and learned Lord has undertaken (as the Attorney General repeated on 25th February in the other place) that after the judgments had been given in the Harman case he would review this point.
I, too, for reasons which have been given already, find the present position really absurd. As the noble and learned Lords, Lord Scarman and Lord Simon of Glaisdale, said in their judgment:
"A distinction between use of a transcript containing the documents and the documents themselves would be absurd. Take the present case. Miss Harman could be sitting at her desk with the copy bundle of disclosed documents by her left hand and a transcript of the trial proceedings by her right hand".
If I may say so in parenthesis, although the noble and learned Lord, Lord Rawlinson, talked about tricks and questionable practices, it should, I think, be emphasised that all parties have agreed throughout that Miss Harman acted with complete integrity. The judgment goes on:
"She would not offend if she handed the journalist the transcript containing the record of the documents as and when read out in court, but would be guilty of contempt of court if she gave him the self-same documents extracted from the bundle of documents made available on discovery. A guilty left-hand and an innocent right hand? Rights and duties in the field of fundamental freedoms cannot depend upon such distinctions".
I wish to take a rather different point in the main, and that is the difficulties I believe we are getting into about the European Convention. I know that the noble and learned Lord the Lord Chancellor has always said that if we enter into an international treaty we are morally bound to comply with its terms, and the European Convention is such a treaty. Indeed, when opening the Second Reading of the Contempt of Court Bill on 9th December 1980, the noble and learned Lord the Lord Chancellor said (Official Report; col. 660.):
"There are three main purposes in the first six clauses: first, to implement the main recommendations of the Phillimore Report with what I hope to persuade the House are minor deviations; second, to harmonise the law of England and Wales with the majority judgment of the Strasbourg court in the Sunday Times case".
The noble and learned Lord's closing words before the Bill went to another place on 17th February 1981 (Official Report, col. 592.) were:
"I regarded it as a matter of enormous importance that we should legislate Phillimore now at last after 10 years, and that we should conform with the European Convention as it was decided by a majority of 11 judges to 9 to be the law of the European Convention".
As both the noble and learned Lord, Lord Scarman, and the noble and learned Lord, Lord Simon of Glaisdale, pointed out, it is at least doubtful whether, in our present law, we do not contravene the provisions of that convention. They said:
"We confess that we find none of the grounds adduced in aid of the alleged exception sufficient—alone or cumulatively—to justify what appears to us to be a discriminatory and unnecessary

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exclusion of the litigant and his solicitor from the exercise of a right which is today a fundamental freedom recognised by the common law and required by the European Convention to be secured to everyone within the United Kingdom".
Later, they had said:
"If English law should recognise this exclusion, it might well be inconsistent with the requirements of the European Convention".
I hope that we are not going to get into the practice of having to pass legislation to overrule the House of Lords in its judicial capacity in order to comply with the terms of the European Convention. I should have thought that if you have the state of affairs which you certainly have here, where, putting it at its lowest, it is very doubtful whether it does not contravene the European Convention, then when we have to consider this question today, that at least is a factor we ought to take into account.
8.18 p.m.
Lord Hunt: Having read the judgment of your Lordships' Appeal Committee on the case in question and having listened very carefully to the arguments, and particularly the arguments advanced by noble and learned Lords this evening, I should like to tell your Lordships that I propose to vote for this amendment and to explain very briefly why. One abiding conviction which has remained with me during the five years since the Royal Commission on the Press reported to the Government in 1977 has been the key position, in all our freedoms, of the freedom of the press, despite its manifold imperfections. Whatever the substance of the conclusion reached by the noble and learned Lord, Lord Diplock, in the majority judgment of the legal committee as to the relevance or otherwise of the freedom of the press to that particular case (and I am persuaded that it was entirely relevant), this amendment —and surely this is the point that we are discussing this evening—is about the freedom of the press.
Nothing can alter my conviction that, when a document has been read out in open court without any restrictions on reporting, three things should follow: the public has a right to know the contents of that document, the press has a duty to make its contents known to the public, and those who hold the documents should be entitled to make them availabe to the members of the press to make quite certain of the accuracy of their reporting.
As to the arguments in support of the law, as I understand the judgment, as it stands, and those arguments which seek to draw distinction between the permissibility of quoting from a transcript and the impermissibility of quoting from an original document, I would just say, without any personal intention to cast aspersions, that it is just arguments such as those which make the law an ass in the public eye. I would go further and say that it is arguments such as those which risk bringing the judiciary themselves into contempt.
I regard this amendment as important, and I think it is an amendment which is necessary to pre-empt, to obviate the danger of further damage being done to the high repute of the law; and Heaven knows that is very important today in respect of those people who are only too anxious to seize on opportunities such as this to bring the law into contempt and the judiciary into disrespect!
Lord Jacobson: May I declare a three-fold interest; I am a life member of the National Union of Journalists, a former member of the Press Council, and an ex-editor. It is in the last capacity that I want very briefly to stress what some of my noble friends on this side have said, that the attempt to draw distinction between court reporters and news reporters and feature writers or leader writers, is so totally artificial and irrational that it simply will not work. I am quite sure that the press itself will find ways of making it unworkable and what will happen, unless this amendment is accepted, as the noble Lord, Lord Hunt, has just said, is that it will make the law and those who have to administer it look very foolish indeed.
Lord George-Brown: May I just ask this? Why should it be that if you draw a distinction between those who report what is happening, what has happened, and those whom my noble friend calls feature writers, people who are paid to make fun of the thing, that makes the law an ass? It seems to me that what you do is to draw attention to the instinctive desire of some who want to sell newspapers to make the law look an ass. We are, many of us, accustomed nowadays to some journalists who gain spurious repute and Oscars for writing what are supposed to be rather amusing columns in the Daily Telegraph and in the Guardian on the proceedings of this House. There is a very great difference between what they write and what the reporters of this House write.
With the greatest respect to my noble friend Lord Jacobson, he is asking us to act as though those differences do not exist. Making fun of the law, making fun of this House, is one thing; straight reporting is another. Unless I misunderstand the point of this amendment, its effect would be to distinguish the Gilbert and Sullivan writers and diminish those who do straight reporting.
I frankly confess my view. Straight reporting is one thing, straight reporting I will defend, but the right of people just to make fools out of everything is one of those things which help to diminish the whole morality of today. With great respect to Lord Jacobson—my noble friend, as in days before either of us was ennobled—I do not think that really can stand any defence at all. Reporting is one thing; diminishing, destroying is quite another thing altogether. This is the news that was not. It is quite different from presenting this is the news. I hope this amendment will be rejected.
Lord Jacobson: My noble friend Lord George-Brown has suffered at the hands of the press in the past, and I think this has given him a rather jaundiced view of the whole of the newspaper profession. I was not trying to suggest that giving feature writers access to documents that had already been declared in court, and to which law reporters and news reporters have access, should be made fun of. The point is this. Where a matter of serious public interest, as in the Harman case, arises, access to such documents will help to preserve the accuracy of writing which seeks to comment on and to analyse that particular case. It has nothing to do with light-hearted columns about Parliament or anything else.
Baroness Jeger: I put my name to this amendment because I think it is fundamental to the freedom of the press in this country. I should like to start by saying that there would have been more Members of your Lordships' House on these Benches tonight had it not been that in another part of the Palace of Westminster at this very time there is a memorial meeting going on to our late friend Lord Ritchie-Calder. I know he would have supported this amendment tonight, because I discussed it with him not many sad weeks ago. I felt that I should be here rather than attending the meeting, at which I would have very much liked to be present.
I must declare an interest as a life member of the National Union of Journalists; and I am very grateful for what the noble Lord, Lord Jacobson, has said, because it seems to me that, especially from the speech of the noble and learned Lord, Lord Rawlinson, some of your Lordships do not know how newspapers work. I speak with trepidation with my old editor, Lord Ardwick, at my side but I can recall, in the great and glorious days when the Manchester Guardian was the Manchester Guardian and we had only a small office in London, that he would send me to do a court report in the morning, to go and see what was happening to a cat up a tree in Golders Green in the afternoon, and to review a play in the evening.
I am sure that the idea that it is possible in law to discriminate between the law correspondent, the court correspondent and the general reporter, or the feature writer, is totally unreal. I must explain and emphasise that if it is unreal on national papers, it is certainly quite unreal on local papers. Local papers, working with a small staff, will send a reporter to do all sorts of jobs, and they will say to him in the evening,"Goodness! There is nothing for that page 3 feature tomorrow. Will you knock out something?"The idea that it should be entrenched in the law that one type of reporter is different from another, is quite impractical and quite unacceptable. I speak as a layman, but I think that if the law does not make sense to laymen then the law cannot command public respect.
Lord George-Brown: With great respect, the noble Baroness does not speak as a layman: the noble Baroness speaks with a privileged interest. What I do not understand is why the self-declared 100 per cent. members of the National Union of Journalists—I speak as a 100 per cent. fully paid up member of the Institute of Journalists—come along with a party position and then try and address us as though they are laymen. Of course all of us who earn the whole or part of our living by journalism know the difference between straight reporting and commentating. May I ask the noble Baroness why it should be so difficult for anybody engaged in journalism to distinguish between straight reporting and commenting?
The Lord Chancellor: May I say something? I have such fun being on this Front Bench and not over there. I did think that the noble Baroness, Lady Jeger, was making a speech and when the noble Lord intervened I was wondering who was making a speech about what, to whom. I wonder if perhaps the Committee would let the noble Baroness get on with it?
Baroness Jeger: As we are in Committee I was speaking to an amendment to which I have put my name. I think that I must be in order. It may be that other Members of your Lordships' Committee are not in order, but I cannot see how I am being disorderly in what I am saying. I shall not take up the Committee's time by going into detail in answering what the noble Lord, Lord George-Brown, has said because of course we all know that there is this type of all-round reporting—the odd job that anyone who works on a newspaper has to do. It is quite impossible in law to make these differences apply.
I cannot help but wonder whether, if the article about the Home Office in this case had been favourable to the Home Office, the case would have ever been brought. This is what gives all of us who care about the freedom of the press a reason to feel very concerned about the situation in that case. We see this amendment tonight as a way of putting things right. We are really talking about shorthand. We are talking about how good is a reporter's shorthand. We are saying to a reporter"If you take this down verbatim with your splendid shorthand in your shorthand notebook"—and mine is very rusty—"and go back to your newspaper and type it out", then"that is all right"; but if a journalist goes up to one of the people who has the documents and says,"Look, my shorthand is a bit rusty, can I check what I have got against the documents?", then that is illegal. My friends, that does not make sense to ordinary people. I am only concerned about what makes sense to ordinary people.
Therefore, I very much hope that this amendment will be accepted tonight because I know that there is a great deal of anxiety in all quarters of the Committee about the present ruling. I would only like to add that I think that it was a question of public importance for the case to go to appeal. But I think that it is very unfair that the very heavy costs are having to be borne by the National Council for Civil Liberties, because if it was a matter of public interest for this problem to be sorted out, then I do not see why the Home Office should not have made some contribution to the expenses in this case. For those reasons I shall not delay your Lordships any further. I very much hope that the amendment will be accepted.
The Lord Chancellor: I do not know whether it is time for me to say something or not, but I hope that I may be forgiven if I do so. I venture to think, with great respect, that this is a little more difficult than some people have thought. Everybody who has spoken has said, "I am not a lawyer, I am only a journalist" or "I am not a journalist, I am only a lawyer". They all have various coloured axes to grind. I am always frightened of disagreeing with the noble Lord, Lord Gifford. I always feel that if I disagree with anything that he says, somebody like Jupiter above the ceiling will drop a thunderbolt on my head, because the noble Lord is always so passionately attached to his causes.
I have always wanted all my life to sit on a jury. But, of course, when the noble Lord, Lord Hutchinson of Lullington, addresses the House he always addresses us as if we were all jurors and so I now know exactly what it is like to be at the receiving end of the noble Lord, Lord Hutchinson of Lullington, when he is at

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the Old Bailey. But the fact of the matter is that he was wrong about two or three things which he said and I think that I must try to put him right.
First of all, the noble Lord is one of the most distinguished, if he will allow me to say so—and I declare an interest of which he knows—criminal practitioners at practice in the English Bar. But this case about Harman, the Home Office and Williams was not at all about criminal law in the first place. There is no such thing as discovery in the criminal law. It was basically a case about the use which solicitors make of documents which are extracted from the other side on discovery. So I think that we can forget about that.
Secondly, he appeared to be under some kind of illusion that the Home Office was claiming a special kind of privilege. Of course the Home Office was claiming at an earlier stage when it appeared before Mr. Justice McNeill a special kind of Crown privilege, but in fact the amendment—which is, after all, what we are supposed to be talking about—is not concerned with Crown privilege at all. It could he as applicable to a case between John Smith and Rupert Brown as between the Home Office and Miss Harman on the information of the Attorney-General.
I think that all the journalists and lawyers who have been talking should realise that what is really at stake is ordinary litigation between ordinary people in the way that it is carried on in the civil and not the criminal courts. A great deal of the argumentation which has been presented about this is based on a totally fallacious idea about what it is. With great respect, to the noble Lord on the Cross-Benches, I am not going to enter into the argument as to whether there is a difference between a feature writer and a court reporter. I think that there is a distinction, but for the purposes of what I want to say we can forget about that.
Supposing in the course of litigation—and I put this to the lawyers and not to the journalists for a reason that I shall give—something extremely unpleasant between two absolutely ordinary private citizens is read out in court about an innocent third party? Curiously enough this is one of my preoccupations about the matter. Supposing the press does not take it up at all so that no journalist is even involved in it? But supposing somebody for the purpose of harassing that third party, happens to have got a confidential document in the course of discovery? I am not making any allegations against poor Miss Harman and I hope that the noble Lord, Lord Gifford, will not throw his thunderbolts at me for that or, indeed, my noble and learned friend. In fact, almost everybody who has taken part in this case has appeared for me at one time or another. But I hope that your Lordships will realise what this amendment would do. It would mean that if it were read out in open court, the confidential document could be used six months later for any purpose, however malicious and however ruinous to the innocent third party.
Lord Avebury: Will the noble and learned Lord give way?
The Lord Chancellor: Yes, I shall in a moment. The point I am trying to make is that you do not realise that this is a little more complex than you think, and that it has nothing necessarily to do with the
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freedom of the press. What it has to do with is the use you make of documents extracted on discovery.
Lord Avebury: Does the noble and learned Lord agree that this is how the law was sought to be until the decision to which we are now addressing our minds and, therefore, because the specific evil which he mentions to your Lordships has never, in fact, arisen, the danger is non-existent?
The Lord Chancellor: I do not think that the danger is non-existent. I have perhaps a wider experience of litigation than the noble Lord, and I have known it exist. Since I have been Lord Chancellor I have had to address a seminar of judges on this kind of problem. Therefore, I do not agree about that at all.
Perhaps I may continue to make my own speech in my own way. You must realise that the privileges of the press are very precious to them, and quite rightly, but they are only the privileges, such as they are, of the ordinary individual. Misconduct by the press may be more ruinous than misconduct by a humble individual like myself, but, in fact, we are talking about the use made of documents. The amendment, of course, deals with information, but the case of Harman was actually about the use made of documents extrinsic to litigation; about possibly innocent third parties who may not be able to defend themselves at all.
I hope that that indicates that the problem is perhaps a little more complex than these enthusiasts have been trying to make it appear. It is not only to do with the freedom of the press. I do not want to be accused by the noble Lord, Lord Gifford, of having done the very thing of which I have accused him, but I think that he was being a little cavalier when he referred to a decision made by Mr. Justice Park, three Lord Justices of Appeal, including the Master of the Rolls, and three Law Lords, as having the head and ears of an ass. I shall not say that it is disrespectful; he is entitled to be as disrespectful as he likes in this place, fortunately for both of us. But I think that he was being a little arrogant, if he will forgive me for saying so. These people are not asses. They are, in fact, people who have given the whole of their lives to the administration of justice. One is entitled to say that they are wrong. I must say, I doubt whether the noble and learned Lord, Lord Scarman, and my noble and learned friend Lord Simon of Glaisdale would have been particularly pleased to be called the lion's tail. I am a great admirer of lions, but I think that the tail is the last part of the lion that I would glorify. Therefore, I do not think that they are complimented either.
I should like to thank in particular the noble and learned Lord, Lord Gardiner, for the kind things that he said about this very long, complicated and technical Bill. I am trying my best to get through it, an aspect which people have rather lost sight of in some of the va et vient of this particular debate, which has now been going on for 71 minutes. However, I think that the general even-handed way in which I have proceeded has been to say that no hobby-horses ought to be ridden in this Bill, excellent as some of them are and less excellent as some of the others are.
I should like to return the discussion to what the noble Lord, Lord Gifford, said almost at the opening.

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He reminded me of a promise that I made on the Contempt of Court Bill. To quote my own words:
"All I can say is that when this question of appeal is out of the way one way or another, which will be long or short according to what happens, I will put it to my Department and discuss it with colleagues, but without any undertaking as to what may emerge". —[Official Report, 10/2/81; col. 181.]
That undertaking stands. I gave that undertaking to the noble Lord and I am a man who tries to be a man of his word. I intend to abide by that promise both in the spirit and in the letter. I do not want to take very violent sides about this. I want to disabuse some people of some fallacies, but I mean what I say. I repeat that promise. Perhaps I can say, without a breach of confidence, that only today I spoke to the noble and learned Lord, Lord Scarman, about it. He is the chairman of the Law Reform Committee. He would not, of course, like to preside at this particular inquiry, for reasons which may occur to those who have read the judgments in the case, but he did put certain ideas before me and I should like to have this matter properly investigated. That promise stands irrespective of the merits or otherwise of the amendment.
However, I venture to think that this is a little more difficult than is thought. Persons not party to the litigation may be seriously prejudiced by the use of information disclosed about them on discovery. That was not a point raised in the Harman case but it was a point raised in the case of the Church of Scientology. It is all very well for the noble Lord, Lord Avebury, to tell me that I am tilting at windmills with imaginary fantasies, but this is one of the things that can happen. It was precisely the point that was raised in the Scientology case.
There is, of course, the importance which the noble Lord, Lord Gifford, rightly attached to the rather delicate business of extracting confidential documents out of one's own client on discovery, to which the legal profession attaches the very greatest importance. I know that I shall be borne out in that by at any rate every civil practitioner at the moment in the Committee. It is very difficult to persuade a commercial firm for which one is appearing that one is not really betraying its interests when one tells it that the damaging documents which one found in its secrets files have ultimately to appear in its affidavit. I think that the Law Society and the legal profession—and I thought that my noble and learned friend Lord Rawlinson was probably speaking for a majority of them—doubted whether the amendment as at present conceived could be reconciled with the importance of maintaining the rigour—and it must be rigorous—of discovery in respect of confidential documents.
The question of confidentiality is one of very considerable public interest and I am bound to say that I agreed with a document from the Law Society which commented on this particular amendment but in the context, not of the Law Committee's Report, but of the Law Commission's Report No. 110 on Breach of Confidence, which was published in October 1981, and on which the Government have not yet taken a line and upon which public comment is still open. The document itself is very much too long for me to quote, but I should like to quote a slightly long passage because, if I may be forgiven for saying so, I am talking to this audience of enthusiastic lawyers and journalists and I am trying to represent, for once, the common man.
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I thought that the Law Society made some rather shrewd remarks about the so-called Harman amendment. It said:
"…it is not clear that it hits the target of altering the law of contempt of court as declared by the majority of the House of Lords in Home Office v. Harman. It seems to us that it needs to be considered in the context of the present study of the Law Commission's Report and draft Bill, whether or not this further step ought to be taken".
It went on:
"The question is put in the minority opinion of Lord Scarman and Lord Simon whether it can be good law that the litigant and his solicitor are alone excluded from the right to make that use of the documents which everyone else might now make, namely, to treat them as matters of public knowledge".
"It seems to us that, whether it is regarded as a matter of breach of confidence or of contempt of court, the answer to this question must probably be "No," but before the law is altered to this effect the consequences for the conduct of litigation need to be carefully considered. May it not inhibit disclosure by parties in the first place? Might a court not be influenced against ordering disclosure of sensitive documents by the consideration that they could subsequently be used for other purposes in this way?"
We know that Mr. Justice McNeill in the Harman case did say that he was influenced because he thought that he could trust the parties who had the documents not to use them in this way.
"Would it be necessary, for instance, for solicitors preparing lists of documents for affidavits or giving discovery to consider on each occasion whether a special order should be sought effectively restoring the present implied undertaking not to use documents otherwise than for the purpose of the litigation? Would an incentive be created for counsel or litigants in person to read out documents in open court for the sole purpose of removing them from the scope of the implied undertaking? There is also the point made by Lord Diplock that, although the contents of a document once read out in open court are technically in the public domain, the litigant or solicitor in possession of the document itself is at a considerable advantage over those who merely had access to notes or transcripts of what was said. We suggest that these matters should be considered in the course of the current study of the Law Commission's report and draft Bill, on which there appears to be a reasonable prospect of early legislation".
Those are very shrewd words by the Law Society. They are pretty good stuff. When I am threatened with the European Convention I cannot complain of course because I did exactly the same to the noble and learned Lord, Lord Elwyn-Jones, over the closed shop, and it turned out I was correct in my prognosis. I cannot predict what the Strasbourg court will say, but I must say this at any rate that Article 10 of the convention expressly protects the disclosure of information received in confidence, or for maintaining the authority or impartiality of the judiciary. I would not be even so doubtful as the noble and learned Lord, Lord Gardiner, about what the Strasbourg court might say if in one form or another—it may be in this or in some other form—they should attempt to litigate if this point were brought to them.
The amendment does not apply to Scotland in terms, but would it not be a good thing to consider whether, and to what extent, the Scottish law should be the same as ours in that respect? It does emphatically apply to criminal proceedings, but it is just there that it would, in my judgment at any rate, be least valuable because there is no discovery in criminal proceedings.
What I should like to say to the noble Lord is that it is pretty clear to me that this is a fairly difficult matter. I had promised to look into it when the litigation was over, and it has been over for only six weeks

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or so. The chairman of the Law Reform Committee is none other than one of the two noble and learned Lords who were party to the dissenting judgment. I really think that I am not going too far when I ask the Committee, now having spoken for some time myself—it is now 81 minutes since we started—to allow me to keep my promise and not to pass an amendment which will prevent me from keeping it.
Lord Mishcon: We have had an example tonight, if I may say so, of the loss to the Bar when the noble and learned Lord decided to leave the arena and grace the Woolsack. He accused—I do not think it was meant really as an accusation—the noble Lord, Lord Hutchinson, of addressing this Committee as though it were a jury. But I have never heard such a magnificent jury display in my life, coupled with the fact that the noble and learned Lord did something that many advocates cannot do; he made his jury laugh in the course of a serious speech.
However, we have to get back to the reality of this amendment. The noble and learned Lord pleaded for time in order that he might consider whether the law of England and Wales and Northern Ireland should become the same as the law of Scotland. When I was begging of him a week ago in regard to another Bill for which he was responsible to please consider that the law of Scotland was rather different and was in accordance with my amendment, with great fortitude and terrific eloquence he persuaded the House that it was a nonsensical point; that Scotland kept their own law and it was right that they should, and it was quite ridiculous for me to assume that the law of Scotland should be the same as the law of England in this respect. So you see yet another example of a wonderful advocate and what he can do from week to week in regard to the arguments that he presents.
If I may, as the time is late, I should like to emphasise the points that are made here. It is not a question of the sensitivity of Mr. Smith and Mr. Robinson in any proceedings. Indeed, their sensitivity is unfortunately outraged at the present moment in civil litigation because if a reporter happened to be in court, as has been mentioned, and takes down the confidential document, he is at perfect liberty to print what he likes, publish what he likes, subject obviously to what he may say and the law of defamation. If, however, he is not quite certain that he has got it accurately and goes up to the solicitor and says, "Your counsel read out in open court a document. I like being an accurate journalist; I like being a truthful man. I do not want to be unfair. Could I please check the contents of this document with you?" He cannot do it. Hardly in protection, you may think, of either Mr. Robinson or Mr. Smith, or the great idol of truth and accuracy that we all try to worship in our profession of the law and I hope in the ordinary conduct of our business.
It is even absurd to this extent, if I might make the point that I do not think has been made before—I am not going through the various parties who might come up by way of newspaper people to the advocate—if the solicitor happens to have a transcript subsequent to the court proceedings, because you cannot imagine that he has got the transcript in front of him at the court proceedings unless it be in respect of a previous day's
204
hearings, and if he shows the transcript which quotes the document, he is in accordance with the law—I am sure that the noble and learned Lord would confirm this —and is doing something that is absolutely in order. But if he does not take it from the transcript but refers to the bundle of correspondence in the case, then indeed he is doing something according to the majority decision of the House of Lords sitting in the Committee of your Lordships' House in their judicial capacity.
It is not by way of being offensive to any judges who have looked at this matter; it is not in the case of Harman that we are talking about this amendment tonight; that is purely a case that happens to have highlighted something that needs reform. The noble and learned Lord will go down in history as a great Lord Chancellor and as somebody who, I am sure, likes to have the law in a state which commands the respect of everyone, and he wants to put a house in order. Sometimes he finds it difficult with his colleagues to let him have the amount of time that he ought to have in order to amend the law when it needs amending. I suggest to your Lordships that tonight we assist the noble and learned Lord by passing this amendment, and seeing to it that his glorious history is carried one stage further to put the law right as I know he would want it to be.
9 p.m.
Lord Gifford: My first and least pleasant task at the end of this excellent debate is to answer the extraordinary attack made by the noble and learned Lord, Lord Rawlinson, on those who had conduct of the case against the Home Office out of which the Harman case arose. His attack was launched principally against the advocate who read out the documents in the case and it was implied that that barrister was guilty of tricks and manoeuvres in order to get into the public domain things which otherwise would not have been. The noble and learned Lord knows full well that the trial judge in any case has the right and duty to exclude from public hearing—to exclude, be they in the form of questions or documents—matters which are irrelevant to the issues in the case.
Is the noble and learned Lord aware that no protest was raised by the Home Office that irrelevant documents were being read out and that no attempt was made by the trial judge in the Williams case to stop Mr. Sedgeley, the barrister, opening it, from reading the documents which later became the subject of the Harman case? In the light of that, I invite him to withdraw the allegation he made against that counsel. I see that the noble and learned Lord remains in his place, and I continue only to answer one other matter which he raised about Miss Harman, implying that her disclosure of the documents was without any authority. That is not the case. She, like any other solicitor, had no business to be talking to the press unless she had her client's authority, and she had it; so that attack also was unfounded and should be withdrawn.
The main point made by the noble and learned Lord the Lord Chancellor in answer was that the process of discovering documents leading to publication in a court of law could be damaging to people's privacy and feelings. Of course, it can. So can the evidence which comes out in a court of law. But what those of us who support the amendment are defending is the

205
public quality of trials in courts, and we cannot allow some kind of censorship to operate between matters which can be disclosed once they have been published in a court of law and matters which cannot be.
Many noble Lords have made play of the different kinds of law reporter, and perhaps a further example is relevant from my responsibility and experience. As the Lord Chancellor knows, I am chairman of a group called the Legal Action Group, which publishes a bulletin. It has grey pages, which seek to edify the legal profession by reporting on the law, and it has white pages, in which there are feature articles about the law. If the Legal Action Group reporter were in court it would be difficult, even for the noble Lord, Lord George-Brown, to say whether he was a law reporter or feature writer when he was listening to the trial.
The main point that has come out of this debate is that many of your Lordships are deeply worried about the image of a law as it has emerged from the House of Lords on this issue, and I do not repent having made disrespectful comments about the quality of judgment of those judges and noble and learned Lords who found for the Home Office. I am heartened by the sense that many noble Lords feel—for example, the noble Lord, Lord Hunt, and my noble friend Lady Jeger—that the judges really have made an ass of themselves in this case and brought the law into disrepute. That is why those of us who support the amendment wish to have the issue overturned with the minimum of delay.
Having said that, I come to the plea of the Lord Chancellor that he would wish to have time to look at all the implications of the issue. Of course, he should look at all those implications, but let him look at them, we having passed the amendment as if the minority in the House of Lords had been the majority, and then let him and us see whether any change in the law is needed. With an amendment which is clear in its terms and which nobody has denied would have the effect of putting the law into the position which the minority in the House of Lords would wish to see it put, let that be the law and then, if there be any further need for examination, let that be done thereafter. There is no need for delay. The issue is not obscure and I ask your Lordships to vote for the amendment.
9.5 p.m.
On Question, Whether the said amendment (No. 52) shall be agreed to?
Their Lordships divided: Contents, 44; Not-Contents, 44.

DIVISION No. 1

CONTENTS

Airedale, L.

Glenamara, L.

Amherst, E.

Hacking, L.

Ardwick, L.

Harris of Greenwich, L.

Avebury, L.

Houghton of Sowerby, L.

Aylestone, L.

Hunt, L.

Bishopston, L.

Hutchinson of Lullington, L.

Blease, L.

Jacobson, L.

Boston of Faversham, L.

Jeger, B.

Brockway, L.

Jenkins of Putney, L.

Collison, L.

John-Mackie, L.

David, B. [Teller]

Lee of Asheridge, B.

Davies of Leek, L.

Llewelyn-Davies of Hastoe, B.

Gardiner, L.

Gifford, L.

Lockwood, B.

206

McGregor of Durris, L.

Sefton of Garston, L.

McNair, L.

Stewart of Alvechurch, B.

Mishcon, L.

Stewart of Fulham, L.

Monson, L.

Underhill, L.

Ogmore, L.

Wade, L.

Oram, L.

Wedderburn of Charlton, L.

Pitt of Hampstead, L.

Wilson of Langside, L.

Ponsonby of Shubrede, L. [Teller]

Winstanley, L.

Wynne-Jones, L.

NOT-CONTENTS

Airey of Abingdon, B.

Hylton-Foster, B.

Aldenham, L.

Inglewood, L.

Avon, E.

Lindsey and Abingdon, E.

Beloff, L.

Long, V. [Teller]

Belstead, L.

Lyell, L.

Cathcart, E.

Mackay of Clashfern, L.

Cockfield, L.

Macleod of Borve, B.

Cork and Orrery, E.

Mansfield, E.

Cullen of Ashbourne, L.

Marshall of Leeds, L.

De La Warr, E.

Mersey, V.

Denharn, L. [Teller]

Monckton of Brenchley, V.

Drumalbyn, L.

Monk Bretton, L.

Elton, L.

Mottistone, L.

Ferrers, E.

Murton of Lindisfarne, L.

Fortescue, E.

Newall, L.

Gainford, L.

Rawlinson of Ewell, L.

George-Brown, L.

Renton, L.

Glanusk, L.

Rochdale, V.

Glasgow, E.

Sandys, L.

Glenarthur, L.

Skelmersdale, L.

Grimston of Westbury, L.

Stanley of Alderley, L.

Hailsham of St. Marylebone, L.

Trumpington, B.

The Deputy Chairman of Committees (Lord Hayter): There have voted, Contents, 44; Not-Contents, 44.
There being an equality of votes, in accordance with Standing Order No. 53, which provides that no proposal to amend the Bill in the form in which it is before the Committee shall be agreed to unless there is a majority in favour of such amendment, I declare the amendment disagreed to.
9.13 p.m.
Clauses 61 to 64 agreed to.
Clause 65 [Transitional provisions and savings]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 53:
Page 35, line 19, after ("or") insert ("paragraphs 2 to 10 of").
The noble and learned Lord said: This is a drafting amendment to resolve an inconsistency between subsection (1) of Clause 65 and subsection (9) of the same clause. I beg to move.
On Question, amendment agreed to.
Lord Mishcon Lord Mishcon moved Amendment No. 54:
Page 35, line 21, leave out ("above").
The noble Lord said: I feel it almost impertinent to put this amendment to the Committee, but do we need the word, "above"? It is most unusual (is it not?) when referring to a section of an Act; it obviously is above. I beg to move.
The Lord Chancellor: I had better read out my brief. I hope it will make the noble Lord laugh, because it makes me laugh. This is a drafting amendment suggested by the Law Society, which claims that

207
"above" in Clause 65(2) is superfluous. The use of the expression "Section 6 above" is a standard draftsman's device. Practice in this respect varies between draftsmen, and some no longer use "above" and "below", which is the more traditional method. If the present amendment were made to Clause 65(2), similar amendments would have to be made throughout the Bill; for instance, in Clause 39(2) and (5), Clause 40(1), Clause 42(3), Clause 44(1), and so on. Such an exercise would be pointless.
That, I think, is all I need read. I do not think the Government will fall if this amendment is passed, but I hope the noble Lord will withdraw it.
Lord Mishcon: My Lords, having proposed this earth-shaking amendment and having heard the earthshaking reply, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.15 p.m.
Viscount Long Viscount Long moved Amendment No. 55:
Page 35, line 37, after ("Act") insert ("other than the repeal of section 5 of the Damages (Scotland) Act 1976").
The noble Viscount said: This amendment gives effect to a subsidiary recommendation of the Scottish Law Commission Report No. 64. The new rules of court which will replace Section 5 of the 1976 Act will come into operation immediately this Act comes into operation, even in relation to those actions which are in progress and have been started on the basis of the present Section 5. It has been considered that, since the proposed reform is purely procedural, the usual rule, that actions which are in progress should be completed under the old law, is not appropriate.
The amendment will mean, moreover, that a good deal of abortive work can be avoided. I daresay solicitors faced with the formidable task of tracing relatives under Clause 5 will breath a sigh of relief when the commencement date of the new rules of court is announced. I beg to move.
On Question, amendment agreed to.
Clause 65, as amended, agreed to.
Clause 66 agreed to.
On Question, Whether Clause 67 shall stand part of the Bill?
Lord Renton: At this stage I apologise for uttering a word at all, but, even though I cannot expect a reply, I should like to draw attention to the really rather unsatisfactory method of bringing so many different provisions of the Bill into operation in so many different ways. This clause seems to me to be an unnecessarily complex one, and I hope that on future occasions, at any rate, Parliamentary Counsel will endeavour to advise Ministers to bring their Bills into operation in a less complex manner.
The Lord Chancellor: I thank my noble friend. I am sure Parliamentary Counsel will take to heart his wise and prudent remarks, but, as he rather anticipated, I cannot go into any detail at this moment.
On Question, Motion agreed to.
Clause 68 [Extent]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 56:
Page 38, line 21, at beginning insert ("Subject to subsection (6) below,").
The noble and learned Lord said: This is a very minor drafting amendment, which makes it clear that Clause 68(1) is subject to Clause 68(6). I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 57:
Page 39, line 4, leave out from ("or") to ("extends") in line 5 and insert ("amended or instrument revoked by this Act extends to any part of the United Kingdom, the repeal, amendment or revocation").
The noble and learned Lord said: This is a drafting amendment to prevent any ambiguity. I beg to move. On Question, amendment agreed to.
Clause 68, as amended, agreed to.
Clause 69 agreed to.
Schedule 1 [Citation]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 58:
Page 40, line 6, leave out ("where there are") and insert ("in").
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 59:
Page 40, line 9, leave out from beginning to ("for") in line 28 and insert ("there may be included in any sum for which judgment is given simple interest, at such rate as the court thinks fit or as rules of court may provide, on all or any part of the debt or damages in respect of which judgment is given, or payment is made before judgment,").
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 60:
Page 40, line 31, leave out second ("the") and insert ("any").
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 61:
Page 40, line 34, at end insert—
("(1A) In relation to a judgment given for damages for personal injuries or death which exceed £200 subsection (1) shall have effect—

(a) with the substitution of "shall be included" for "may be included"; and

(b) with the additon of "unless the court is satisfied that there are special reasons to the contrary" after "given", where first occurring.").

On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 62:
Page 41, line 14, at end insert ("and personal injuries' includes any disease and any impairment of a persons' physical or mental condition.").
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 63:
Page 41, leave out lines 17 to 38.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 64:
Page 41, line 42, leave out ("where there are") and insert ("in").
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 65:
Page 41, line 45, leave out from beginning to ("for") in page 42 line 18 and insert ("there may be included in any sum for which

209
judgment is given simple interest, at such rate as the court thinks fit or as county court rules may provide, on all or any part of the debt or damages in respect of which judgment is given, or payment is made before judgment,").
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 66:
Page 42, line 21, leave out second ("the") and insert ("any").
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 67:
Page 42, line 24, at end insert—
("(1A) in relation to a judgment given for damages for personal injuries or death which exceed £200 subsection (1) above shall have effect—

(a) with the substition of "shall be included" for "may be included"; and

(b) with the addition of "unless the court is satisfied that there are special reasons to the contrary" after "given", where first occurring.").

On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 68:
Page 42, line 40, leave out ("included") and insert ("calculated").
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 69:
Page 42, line 45, at end insert ("and personal injuries' includes any disease and any impairment of a person's physical or mental condition.").
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 70:
Page 43, leave out lines 4 to 27.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 70A:
Page 43, line 33, leave out from ("words") to ("of") in line 34 and insert (""Section 35A of the Supreme Court Act 1981 and section 97A").
On Question, amendment agreed to.
Schedule 1, as amended, agreed to.
Schedule 2 agreed to.
Schedule 3 [Monetary limits of county court jurisdiction]:
The Lord Chancellor The Lord Chancellor moved Amendments Nos. 71 to 74:
Page 47, line 40, leave out ("county court costs in High Court") and insert ("costs of actions in High Court for small claims").
Page 47, line 41, leave out ("no costs in High Court") and insert ("costs of actions in High Court to recover goods of small value").
Page 49, line 4, leave out ("(c)").
Page 49, line 5, after (""section"") insert (",in the first place where it occurs,").
The noble and learned Lord said: I wish to move Amendments Nos. 71 to 74. They are all drafting amendments to correct minor inaccuracies. I beg to move.
On Question, amendments agreed to.
Schedule 3, as amended, agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 75:
After Schedule 3, insert the following new schedule:
("Administrative and clerical expenses of garnishees

SCHEDULE
  ATTACHMENT OF DEBTS

    PART I
    SECTION INSERTED IN SUPREME COURT ACC 1981
    40A.—(1) A sum may be prescribed which, before complying with an order made in the exercise of the jurisdiction mentioned in section 40(2) —

    (a) any deposit-taking institution; or

    (b) any such institution of a prescribed description or with not less than a prescribed number of branches,

    may deduct, subject to subsection (2) below, towards the clerical and administrative expenses of complying with the order, from any money which, but for the deduction, would be attached by the order.
    (2) The prescribed sum may not be deducted or, as the case may be, retained in a case where, by virtue of section 40 of the Bankruptcy Act 1914 or section 325 of the Companies Act 1948, the creditor is not entitled to retain the benefit of the attachment.
    (3) In this section—
    "deposit-taking institution" has the meaning assigned to it by section 40(6); and
    "prescribed" means prescribed by an order made by the Lord Chancellor.
    (4) An order under this section—

    (a) may make different provision for different cases; and

    (b) without prejudice to the generality of paragraph (a) of this subsection, may prescribe sums differing according to the amount due under the judgment or order to be satisfied.

    (5) Any such order shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

PART II
SECTION INSERTED IN COUNTY COURTS ACT 1959
143A.—(1) A sum may be prescribed which, before complying with an order made in the exercise of the jurisdiction mentioned in section 143(2) of this Act—

(a) any deposit-taking institution; or

(b) any such institution of a prescribed description or with not less than a prescribed number of branches,

may deduct, subject to subsection (2) below, towards the clerical and administrative expenses of complying with the order, from any money which, but for the deduction, would be attached by the order.
(2) The prescribed sum may not be deducted or, as the case may be, retained in a case where, by virtue of section 40 of the Bankruptcy Act 1914 or section 325 of the Companies Act 1948, the creditor is not entitled to retain the benefit of the attachment.
(3) In this section—
"deposit-taking institution" has the meaning assigned to it by section 143(6) of this Act; and
"prescribed" means prescribed by an order made by the Lord Chancellor.
(4) An order under this section—

(a) may make different provision for different cases; and

(b) without prejudice to the generality of paragraph (a) of this subsection, may prescribe sums differing according to the amount due under the judgment or order to be satisfied.

(5) Any such order shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.").
The noble and learned Lord said: I spoke to this amendment with Amendment No. 51. I beg to move.
Lord Mishcon: I wonder whether the noble and learned Lord has any idea yet of the sums that may be prescribed?
The Lord Chancellor: I could not recite them at this

211
moment, but I will try and let the noble Lord know.
On Question, amendment agreed to.
Schedule 4 agreed to.
Schedule 5 [Damage for personal injuries etc.—Northern Ireland]:
The Lord Chancellor The Lord Chancellor moved Amendments Nos. 76 to 79:
Page 53, line 23, leave out ("substituted for the proviso to") and insert ("inserted after").
Page 53, line 25, at end insert ("(actions to survive death)").
Page 53, line 26, leave out from ("(1A)"to the end of line 29 and insert ("The right of a person to claim under Article 3A of the Fatal Accidents (Northern Ireland) Order 1977 (bereavement) shall not survive for the benefit of his estate on his death.".").
Page 54, leave out line 27.
The noble and learned Lord said: I spoke to these amendments with Amendments Nos. 8, 9 and 10. I beg to move.
On Question, amendments agreed to.
Schedule 5, as amended, agreed to.
Schedule 6 [Amendments of Judicature (Northern Ireland) Act 1978]:
The Lord Chancellor The Lord Chancellor moved Amendments Nos. 80 to 81A:
Page 55, line 12, leave out ("(a)") and insert ("(b)").
Page 55, line 13, leave out from ("requiring") to ("there") in line 16 and insert ("parents of a ward of court to make periodical payments towards the maintenance and education of the ward) after the words "the ward"").
Page 56, line 6, leave out from ("court") to ("and") in line 8.
The noble and learned Lord said: I spoke to these amendments with Amendments Nos. 47 and 48. I beg to move.
On Question, amendments agreed to.
Schedule 6, as amended, agreed to.
Schedule 7 [Repeals and revocations]:
The Lord Chancellor The Lord Chancellor moved Amendment No. 82:
Page 58, line 33, at end and insert—

("24 & 25 Geo.5. c. 41.

Law Reform (Miscellaneous Provisions) Act 1934.

In section 1(1), the Words "or seduction".

1 Edw. 8 & 1 Geo. 6. c. 9(N.I.).

Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1937.

In section 14(1), the words "or seduction".").

The noble and learned Lord said: I spoke to Amendment No. 82 with Amendments Nos. 8, 9 and 10. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 82A:
Page 59, line 11 at end insert—

("1969 c. 46.

Family Law Reform Act 1969.

Section 16.")

The noble and learned Lord said: Amendment No. 82A is a minor technical amendment consequential on Clause 19. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 83:
Page 59, line 23, column 3, at end insert—
("In Schedule 1, in paragragh 2(2) the entry relating to the Deposit of Poisonous Waste Act 1972.")
The noble and learned Lord said: This amendment repeals an obsolete statutory provision. I beg to move.
On Question, amendment agreed to.
Schedule 7, as amended, agreed to.
House resumed: Bill reported with the amendments.

Reserve Forces Bill [H.L.]
Returned from the Commons agreed to.
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