Sitting of 13 July 1982

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

Royal Assent
Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Iron and Steel Act 1982.

2. Food and Drugs (Amendment) Act 1982.

3. Civil Jurisdiction and Judgments Act 1982.

4. Taking of Hostages Act 1982.

5. Supply of Goods and Services Act 1982.

6. Local Government (Miscellaneous Provisions) Act 1982.

7. Firearms Act 1982.

8. Local Government Finance Act 1982.

9. Cinematograph (Amendment) Act 1982.

10. Forfeiture Act 1982.

11. Copyright Act 1956 (Amendment) Act 1982.

12. Feltham Station Area Redevelopment (Longford River) Act 1982.

PRIVATE BUSINESS

  BRITISH RAILWAYS (LIVERPOOL STREET STATION) BILL (By Order.)
  Order for Third Reading read.
  To be read the Third time upon Thursday.

Oral Answers to Questions
  SOCIAL SERVICES

    Community Health Councils
    Mr. Nicholas Bakerasked the Secretary of State for Social Services when he expects to conclude his consultations in respect of the future of community health councils.
    The Under-Secretary of State for Health and Social Security (Mr. Geoffrey Finsberg): We have not commenced any such consultations, but we shall be considering the case for retaining community health councils in the longer term.
    Mr. Baker: Does my hon. Friend agree that there is a good case for retaining community health councils where they are low cost, local and their object is to look after consumer interests? Is my hon. Friend aware of the general view that the Association of Community Health Councils for England and Wales is nothing more than a great sneeze? Thirdly,—
    Mr. Speaker: Order. This is the first question. It is a bad way to begin.
    Mr. Finsberg: As you have applied the handkerchief, Mr. Speaker, I shall deal only with the first of my hon. Friend's questions. We deliberately decided not to take that view at present. The new locally based district CHCs are settling in. We want to give them time to see what their experience is with the new districts before we look at them further.
    Mr. Freud: Will the Minister consider with his right hon. Friend the Secretary of State for Defence the provision of facilities for a CHC for the 100,000 dependants of soldiers serving in the British Army of the Rhine, who are currently unrepresented as to their needs or desires?
    Mr. Finsberg: I am sure that my right hon. Friend will be made aware of what has been said, but I shall pass that suggestion to him.
    Mr. McNally: The Minister said that he would allow adequate time for the CHCs to work with the new district authorities. Does "adequate time" mean one, two or three years? Is the hon. Gentleman aware that in areas such as Stockport chiropody and physiotherapy posts are left unfilled, and that there is a need for the CHC to argue the consumer's case?
    Mr. Finsberg: Before I came to this place I knew the meaning of "shortly", "soon" and "at an early stage". All I can say, after some years, is that we have said that we shall look at it "in the future".
    Mr. Terry Davis: Has the Minister seen the statement by the new chairman of the Association of Community Health Councils, that, in his opinion, the Government intend to erode the powers of CHCs? Will the hon. Gentleman give an assurance that that is not the Government's intention? Does the Minister have any doubts that CHCs are an essential part of the National Health Service?
    Mr. Finsberg: I have seen the statement. Like many other statements, if it is looked at in context it will be realised that it refers to legislation. Had the Government taken such a decision, they would have announced it. We have firmly said that we shall look at the matter in due course. I stick to that.

    District Health Authorities (Building Grants)
    Mr. Hooleyasked the Secretary of State for Social Services if he will consider the allocation of non-recurrent earmarked grants to district health authorities to deal with arrears of building maintenance and renovation.
    The Minister for Health (Mr. Kenneth Clarke): No, Sir. Health authorities are responsible for carrying out their own maintenance programmes from within the resources allocated to them. As local needs vary greatly from district to district, it is sensible for individual health authorities to determine their own priorities.
    Mr. Hooley: By setting cash limits that do not accord with the rate of inflation, have not the Government put district health authorities under such severe pressure that they cannot keep up with the necessary repairs and maintenance? Would not an ad hoc grant here and there greatly help?
    Mr. Clarke: The allocation of moneys to the National Health Service generally has gone ahead of inflation. A considerable amount of growth money has been allocated to the Trent region, of which the hon. Gentleman's constituency is a part. Within that money it is for local authorities to determine their priorities. I am sure that they will give to building maintenance the priority that it justifies.

    National Health Service (Finance)
    Mr. David Atkinsonasked the Secretary of State for Social Services if he will make a statement on the financing of the Health Service.
    The Secretary of State for Social Services (Mr. Norman Fowler): Between 1978–79 and last year we provided for 5 per cent. growth in NHS services. This year we shall be spending over £12 billion, which represents a further planned increase in real terms, although we are again asking authorities to make a contribution towards service growth through increased efficiency.
    Mr. Atkinson: I thank my right hon. Friend for that encouraging reply. Would he care to comment on the report on the front page of The Guardian today that suggests that he is scrapping a circular to health authorities on the privatisation of hospital services?
    Mr. Fowler: The report's author is set fair to become one of our leading imaginative writers. We remain committed to more contracting out where that saves the NHS money. That is not a doctrinaire policy; it is common sense.
    Mrs. Dunwoody: As even the Minister's wholly inadequate pay offer will take 34 per cent. of the finance away from the RHAs, how does he reconcile the figure that he gave with his pledge that new money will go into the Health Service? Is he not cutting the finance available?
    Mr. Fowler: Typically, the hon. Lady has it wrong. The amount of new money going into the Health Service will be reduced, but that is the inevitable consequence of the pay offer, for which she is doing nothing to secure a settlement.
    Mr. Forman: In the sensible and generous funding of the National Health Service, will my right hon. Friend confirm that he has set his face against the expensive use of the insurance principle, in view of evidence from the Continent that that would make the service more expensive and less good value?
    Mr. Fowler: My first aim is a partnership between the private and public sectors.
    Mr. Ennals: As an increase of nearly 1 per cent. a year is required to cope with the ageing population and to keep pace with modern developments, is not the proposal for the next two or three years of a 0·5 per cent. increase a cut in NHS revenue?
    Mr. Fowler: We have gone over this matter in the Select Committee, and the right hon. Gentleman knows that the figure is subject to review. The 0·5 per cent. planned increase, which comes from increased efficiency, is reasonable and is accepted by the regional chairmen.

    Tinnitus
    Mr. Knoxasked the Secretary of State for Social Services what is the value of grants from his Department for research into tinnitus.
    Mr. Geoffrey Finsberg: The Department is currently funding an exploratory project into psychological aspects of adjustment to subjective tinnitus and the effectiveness of tailored masking at a cost of about £40,000 over a three-year period.
    Mr. Knox: Does my hon. Friend believe that enough money is being spent on research into this distressing condition?
    Mr. Finsberg: I agree that it is a distressing condition. One problem is that we are not receiving sufficient suggestions for research. If anyone has a suggestion, we shall see that it is carefully considered for grant purposes.
    Mr. Straw: Is the Minister aware that tinnitus is terrifying for many sufferers?
    Mr. Race: My hon. Friend should declare his interest.
    Mr. Straw: I declare my interest. Is not £40,000 for research over three years derisory compared with the size of the task? Should not the importance attached to and the funding of the research be greatly increased?
    Mr. Finsberg: As I said, one problem is that few projects for research come forward. I shall gladly listen to any ideas that the hon. Gentleman might have and put them to my experts.

    Non-contributory Invalidity Pension
    Mr. Ennalsasked the Secretary of State for Social Services when he now expects the review of the household duties test for housewives' non-contributory invalidity pension to be completed.
    The Minister for Social Security (Mr. Hugh Rossi): The review is almost ready, but I cannot at present give a date for its completion.
    Mr. Ennals: Why has the review taken so long, thereby creating frustration for tens of thousands of disabled housewives? Is the Minister aware that the Labour Government made plans to finance an improve-ment and that the National Insurance Advisory Committee put forward proposals over two years' ago?
    Mr. Rossi: It does not lie in the right hon. Gentleman's mouth to quote the previous Government's record. They were forced to include married women in non-contributory invalidity pensions. It then took two years before they brought forward regulations to include them, which included the household duties test. They found that the test was being interpreted too widely, and, in four days in the parliamentary recess, they tabled regulations tightening up the test. Their record is disgraceful. The right hon. Gentleman, from his own unhappy experience—he was in charge for part of the time—knows that it is a complex matter.
    Mr. Maxwell-Hyslop: Will my hon. Friend put in the Library a list of the questions to which he needs answers to formulate the review so that, before the House rises for the Summer Recess, hon. Members who are interested can write to him with such advice as may be within their power and observation?
    Mr. Rossi: I am grateful to my hon. Friend for that suggestion. We intend to publish the results of the review and then to invite consultation.
    Mr. Ashley: Is the Minister aware that the household duties test is not only offensive, as it discriminates against married women, but is the most unfair way of deciding a social security benefit, as each applicant has a different disability, every household is different and the equipment is different? Is it not time to abolish the test, especially as so many people are suffering from the results?
    Mr. Rossi: I am aware of the many complaints about the test. We are not responsible for it being there. We are trying to grapple with the problem. To abolish the test completely would mean an additional net public expenditure of about £250 million.
    Mr. Alfred Morris: Is it not at the very least disquieting that a report presented to the Government in July 1980 still has not been acted upon? Is the Minister aware that present Ministers, when in Opposition, argued as long ago as 1979 that the issue was straightforward and urgent? When will a decision be announced and will there be action in the next Session on the National Insurance Advisory Committee's report?
    Mr. Rossi: The 1980 report asked the Government to carry out a review and to examine the position in other countries. We have been doing both those things. It has taken so long because of the nature of the inquiries and the complexity of the matter. As I said, the review is nearly complete and we hope to make an announcement in the near future.

    National Health Service (Dispute)
    Mr. Hoyleasked the Secretary of State for Social Services what is the proportion of new money that is being made available to the regional health authorities to enable them to meet the current pay offer to National Health Service staff.
    Mr. Hal Millerasked the Secretary of State for Social Services what effect the pay offer has had on the finances available to health authorities for capital works.
    Mr. Fowler: As my hon. and learned Friend indicated on 8 July, health authorities in England will be required to meet £32·2 million or 43 per cent. of the cost of the latest offers from within existing revenue allocations. With the additional money made available in March, the Government have provided a total of £161 million extra for pay, of which health authorities will meet £58 million or 36 per cent. The capital cash limits of regional health authorities will not be revised as a result of the pay offers, but authorities may need to review both their capital and revenue spending plans in order to meet their contribution to the costs of these pay offers, and authorities are able, within agreed limits, to switch funds from capital to revenue and vice versa.
    Mr. Hoyle: Does the Secretary of State accept that the true cost is probably £59 million and that that will have a disastrous effect on patient care? If and when he gets down to meaningful negotiations on the pay claim, instead of political smears, so that patients do not suffer, will he ensure that it is funded from national resources, not from regional health authority budgets?
    Mr. Fowler: I totally reject the hon. Gentleman's comments. The Government are spending more on the National Health Service in real terms than any Government have done in the history of the NHS. On meaningful talks over pay, I remind the hon. Gentleman that the Government have moved not once but twice, while the unions have remained inflexible on a completely unrealistic demand.
    Mr. Miller: Does my right hon. Friend agree that it is not sensible to take resources from capital projects to defray increased salaries? Will he reconsider the position whereby regional health authorities are allowed to use funds in this way? Will he confirm, in particular, that the start on the long-delayed district general hospital in my constituency will not be further delayed as a result of these wage negotiations?
    Mr. Fowler: I understand my hon. Friend's concern. These are some of the problems that we have sought to set before the public over the past two months.
    As regards what my hon. Friend said about his own area, I gather that the West Midlands regional health authority will be holding a meeting to review its capital programme in a few days' time and that no decision has yet been taken to amend the capital programme.
    Mr. Pavitt: Will the Secretary of State confirm that in the North-West Thames region the present growth is 0·03 per cent., and that, when the share of the £34 million extra wage costs goes to that region, there will be a decline, in real terms, in the money that is available? Will he have another look at the idea of switching from one budget head to another? As the year is already one-third of the way through, it will be impossible for district health authorities to do that. How, therefore, will he cope with the overspending which is inevitable in the North-West Thames region?
    Mr. Fowler: The hon. Gentleman's premise depends upon how the share is worked out. I hope to make an announcement on the matter during the next few days. I think that the hon. Gentleman will find that his fears are not proved.
    Mr. Dover: If some of the hospital staff on the medical side work normally in the first half of next week, will the Secretary of State, together with the regional health authority chairmen, look more favourably at the reallocation of any possible capital funds to those areas in future?
    Mr. Fowler: At the moment, most people, including all medical staff, most nurses and many other staff in the Health Service, are working normally, and I pay tribute to their work. They are keeping the Health Service going in the most difficult circumstances. I have nothing further to add on capital resources.
    Mrs. Dunwoody: Will the Secretary of State tell the House plainly why ACAS has decided that it has no role to play in talking to the Health Service unions? Is it because the Secretary of State refuses to put any new money on the table and that he is really talking about a direct cut in patient care?
    Mr. Fowler: The Government have already put substantial new money on the table. The hon. Lady may shake her head, but the fact is that the Government have moved twice on this matter. The Health Service unions

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    have remained inflexible throughout. They remain committed to an unrealistic claim of 12 per cent., which in fact means 20 per cent.
    Mrs. Dunwoody: When did the Secretary of State last speak to the Health Service unions? Is it not true that so far all the talks have been conducted by civil servants who have had a tight brief and have therefore not been able to do the job properly?
    Mr. Fowler: The hon. Lady should start to read the newspapers. I spoke to the Health Service unions over two days of meetings about two weeks ago. I have told the unions—and the hon. Lady should take this on board—that if they want to come and talk to me about new arrangements for pay, my door is open and the talks can start immediately. If the hon. Lady is asking for more money, the answer is "No".

    "University Grants Committee Cuts and Medical Services" (Report)
    Mrs. Renée Shortasked the Secretary of State for Social Services when he expects to give his response to the report from the Social Services Committee entitled "University Grants Committee Cuts and Medical Services".
    Mr. Kenneth Clarke: We are urgently considering the recommendations that the Committee made in its report. We hope to lay our response before the House shortly.
    Mrs. Short: Assuming that the Minister has read the report by now, is he aware that the cut in the University Grants Committee resources to medical schools and universities is causing considerable anxiety in the medical schools? About 300 academic posts are frozen, affecting not only teaching but the research and patient care that academic staff carry out in National Health Service hospitals. Will he be able to find the £10 million that is required by the end of 1983–84 to put the matter right?
    Mr. Clarke: I have, of course, read the Select Committee's report. With respect, the Committee has drawn some dramatic conclusions from some of the evidence that it received. My inquiries reveal—and we have had a survey—that so far 35 hospital posts with a substantial clinical content have been withdrawn, and that, of those, six have been taken over by the National Health Service. Those figures should be seen against a total of 35,000 hospital doctors throughout the country and an increase of more than 1,500 hospital doctors during the Government's period of office.
    Mr. Andrew F. Bennett: Is it not regrettable that the Government imposed cuts on the universities in the first place, and deplorable that those cuts should find their way through to the Health Service? Is it not unfortunate that they will have an impact on the specialist shortages, particularly for the elderly, psycho geriatrics, and so on? Does the hon. and learned Gentleman agree that the Government should now reverse their policy of cutting money for universities and make good the necessary money both for the Health Service and education services in general?
    Mr. Clarke: My right hon. Friend the Secretary of State for Education and Science has explained that university spending cannot be exempt from the restraints to which all public spending is subject. Medical education
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    is the most expensive form of higher education, and in the past it has been exempted from all cuts. This time it has not been singled out for special treatment; it is having to bear its share. However, we are concerned about the possible risk that might arise in the shortage specialty services. We have already drawn the matter to the attention of the University Grants Committee and the universities so that they can draw up their own priorities and decide where to make economies.
    Mr. Rees-Davies: I agree with much of what my hon. and learned Friend said on this matter. However, does he agree that he should make an early response, because there is a good deal of misunderstanding about the extent of the cuts? Cuts there undoubtedly are, and cuts were expected. I hope that my hon. and learned Friend will make the matter plain as soon as possible for the reasons that I have given.
    Mr. Clarke: I accept my hon. and learned Friend's advice that it would be as well to make an early response, because it is important to get the impact on the Health Service into perspective. For the reasons that I have given, I think that the impact on patient care is comparatively slight.

    Elderly Persons (Home Care)
    Mr. Freudasked the Secretary of State for Social Services if he will give the latest estimate of the numbers caring full-time for elderly and handicapped people in their homes; and how many of these carers are married or cohabiting women.
    The Under-Secretary for Health and Social Security (Mr. Tony Newton): There is insufficient information available on which to base a reliable estimate.
    Mr. Freud: Does the Under-Secretary accept that carers are saving the country millions of pounds, often at great financial cost and personal sacrifice? Is it not time that his Department turned praise for carers into hard cash? Will he now extend the invalidity care allowance to married and cohabiting women?
    Mr. Newton: I accept that we all owe a debt of gratitude to these people. We should like to extend invalidity care allowance as and when resources are available, but to carry out such an extension would, according to the last estimate—it was pretty rough and ready and was made two years ago—cost about £100 million gross. We think that that is probably an underestimate. Therefore, the hon. Gentleman will understand that there is a problem in moving as fast as we should like.
    Mr. Alexander: Is not the purpose of the invalidity care allowance to compensate those who cannot work, while relieving the State of burdens? If so, while accepting the financial constraints, may I ask whether there is any reason why it should not be extended to people regardless of sex, whether they be cohabiting women or not, who relieve the State of the same burdens?
    Mr. Newton: I accept that there is strong argument for moving in that direction. However, like all Ministers in the Department, I have the problem of where to find the resources.
    Mr. Carter-Jones: The Minister was a member of the Committee that passed the ICA and HNCIP in the hope

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    that the weak in our society would be cared for. That applies to women and men equally. Why do we have we got the household duties test?
    Mr. Newton: The hon. Gentleman is surely referring to the HNCIP in mentioning the household duties test, whereas the main thrust of questions has rightly been concerned with the invalid care allowance. That was formerly confined to relatives. We have now extended it to non-relatives. We should like to extend it further, but we are not able to do so at this precise moment.
    Mr. John: Will the Minister take this opportunity to deny that, in an attempt to buy off the revolt in the House later this afternoon, he said that the refusal to make good the 5 per cent. shortfall would be diverted to that end? Does he regard that, as I do, as wholly unacceptable both to the unemployed and to those who are caring for sick relatives?
    Mr. Newton: I have not said that, nor has my right hon. Friend the Secretary of State, to whom the hon. Gentleman may be referring. No one can make decisions about social security matters on any one front without recognising that there must be decisions on priorities. Money that is spent in one area literally cannot be spent in another.

    Private Practice
    Mr. Teddy Taylorasked the Secretary of State for Social Services if he will make an estimate of the current cost benefit to the Health Service of the existence of private practice.
    Mr. Fowler: In 1981–82, income for the National Health Service from private patients treated in NHS hospitals in England was about £52 ½ million. Substantially more than that is spent on health care within the independent sector. The main benefit of private health care is that it adds to the total resources available and offers patients a wider range of choice.
    Mr. Taylor: Does the Minister agree that the increasing complexity and cost of hospital treatment, and the substantial increase in percentage of elderly people in the population, make it difficult for any Government to find the resources to maintain a universal free service? In those circumstances, will the Minister do all in his power to encourage organisations such as BUPA, so that resources can be directed into the Health Service and existing strains upon it reduced?
    Mr. Fowler: I agree with everything that my hon. Friend has said. We must achieve a partnership between the provision of private health care and the National Health Service. That is the aim of Government policy and could lead to good results for the public.
    Mr. Cryer: Will the Minister set against that £52·5 million the costs arising from private patients? Can he quantify the cost of the use by consultants of National Health Service facilities for private purposes? Can he also quantify the cost of the training, using National Health Service facilities, of the people who enter the private sector, which provides no training whatever?
    Mr. Fowler: The contributions are made by the private health service direct to the regions involved. To repeat
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    what I said earlier, in addition to our private health policy we are increasing our pro vision to the public Health Service.
    Mr. Bill Walker: Does my right hon. Friend agree that those who make use of private health facilities in Britain have already contributed through the Exchequer to any share of health services that they enjoy?
    Mr. Fowler: That is right. I believe that it is the overwhelming view of hon. Members that the public should have a right to pay insurance for their health care.
    Mr. Terry Davis: Will the Secretary of State now answer the question? If he is claiming a revenue of £52½million for the National Health Service, what is the cost of providing those services?
    Mr. Fowler: There is no neat answer to that. [Interruption.] There are costs involved. Money goes direct to the regions and is in addition to the regional funds.

    Chronically Sick and Disabled Persons Act
    Mr. Homewoodasked the Secretary of State for Social Services if he is taking further action to ensure full enforcement of the Chronically Sick and Disabled Persons Act; and if he will make a statement.
    Mr. Litherlandasked the Secretary of State for Social Services if he will be taking any action in the light of the seminar held on 20 May by the Royal Association for Disability and Rehabilitation on the results of the project to achieve full enforcement of the Chronically Sick and Disabled Persons Act.
    Mr. Rossi: The implementation of section 2 of the Chronically Sick and Disabled Persons Act 1970 is a matter for the local authority in any particular case, but if I am provided with evidence that a local authority may not be performing its statutory duty I am ready to make inquiries about the position, as I have done in several cases, with gratifying results. No report of the RADAR seminar has been received by my Department and I am not aware of any firm conclusions reached.
    Mr. Homewood: Has the Minister seen the reply to my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) of 8 June, which said that hospitalisation in Britain is costing about £26,000 per year per person? The disabled persons' entitlement under the 1970 Act does not remotely approach that figure. Therefore, is it not in the interests of Britain, and certainly in the interests of the disabled, that the Minister should ensure that the full benefits of the 1970 Act are applied? Is it not inhumane that he has not done so?
    Mr. Rossi: As I have already said, whenever cases of breach of statutory duty are brought to my attention they are fully investigated. There have been several such cases investigated with gratifying results. Of course, rehabilita-tion rather than perpetual residence in hospital, and trying to move the mentally handicapped out of institutions, are desirable objectives which we are attempting continually to achieve.
    Mr. Litherland: Will the Minister explain why his Department was not represented at the conference held by the Royal Association for Disability and Rehabilitation on

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    20 May? Does he not think that that absence was scandalous and that it highlights the Government's complete indifference?
    Mr. Rossi: As far as I am aware, no invitation was received to attend the seminar. We received the report that preceded the seminar and that was debated in an Adjournment debate in the House on 26 April, when I gave the Government's reactions to it.
    Mr. Rees-Davies: I congratulate the Minister on the excellent work that he has done for the disabled. Would he be good enough to draw the attention of those local authorities which are not carrying out their duties effectively to the excellent work done by other local authorities and thus, by precept, give them an incentive to improve their work?
    Mr. Rossi: I believe that local authorities are aware of what is and what is not being done. The matter must be considered in the light of the report to which I have just referred. Tens of thousands of people are helped under the Act every year by local authorities. RADAR identified about 1,000 cases of those tens of thousands which it felt required investigation, and of those 1,000, 13 were referred to my Department for investigation.
    Mr. Skinner: Is not the truth of the matter that the Government have deprived local authorities of sufficient money to carry out the Chronically Sick and Disabled Persons Act to the extent that they would like? Does he recall the recent answer to the parliamentary question which showed that the number of telephones going to old and disabled people under the Chronically Sick and Disabled Persons Act had dropped from 16,000 to 8,000 since the Government came into power? If the Government want to do something about it they should give authorities the money.
    Mr. Rossi: Since the Government came into office there has been growth in real terms in expenditure on personal social services.
    Mr. Alfred Morris: Will the Minister make a statement to the House about the leak in The Guardian last Thursday on the report of the expenditure steering group for personal social services to the effect that local authorities now face a cut of a further 28,000 jobs in their social services departments? How can the Minister possibly justify depriving 70,000 elderly and disabled people of their home helps? May the House now have a full statement instead of newspaper leaks?
    Mr. Rossi: It is clear that the right hon. Gentleman did not see the rejoinder the next day by my hon. and learned Friend the Minister for Health, who made it plain that the report was totally inaccurate.

    Home Helps
    Mr. Gwilym Robertsasked the Secretary of State for Social Services if he will take steps to ensure that the number of home helps available is adequate to meet the future needs of long-term sick and disabled people.
    Mr. Kenneth Clarke: Responsibility for ensuring that the number of home helps available is adequate to meet the needs of a particular area rests with the local social services committee.
    Mr. Roberts: Does the Minister accept that cuts in the rate support grant make it impossible for the great bulk of
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    local authorities to comply with the Government's guidelines for home help provision? Is it not deplorable and hypocritical that the Government set down fictitious guidelines and deliberately go out of their way to make sure that local authorities cannot comply with them?
    Mr. Clarke: The hon. Gentleman's question enables me to underline the gap between hypothetical guesses based on the sort of reports that have been referred to and what is happening on the ground. It is not true that there has been a reduction in home help services. There has been a steady increase in the services under this Government and latest figures show that there is still a steady increase in the number of hours of home help provided.
    Mr. Hannam: In considering any changes in the structure of social service workers, will my hon. and learned Friend have regard to the pre-Seebohm system, under which visitors gave the sick and disabled specialist advice, rather than a general provision of services, as is given by social service workers at present? Will my hon. and learned Friend consider returning to the system under which health visitors and home helps give that specialist advice?
    Mr. Clarke: I can see difficulties in trying to go back to the pre-Seebohm organisation, but these matters need review from time to time and I will look at my hon. Friend's ideas.
    Mr. John: Can the Minister explain why, as he announced earlier this year, the Government have ceased to collect home help statistics?
    Mr. Clarke: Because the Government collect far too many useless statistics on one thing and another.
    Mr. J. W. Rooker: Useless?
    Mr. Clarke: In this case, perfectly adequate figures are collected by CIPFA. They show that the number of hours of home help provided is increasing. I am not guessing; I am merely not collecting two sets of figures to prove the same good news.

    Peterlee (Community Hospital)
    Mr. Dormandasked the Secretary of State for Social Services if he will take steps to expedite the provision of a community hospital in the new town of Peterlee.
    Mr. Kenneth Clarke: This is a matter for the Northern regional health authority to decide in the light of local priorities and available resources.
    Mr. Dormand: Is the Minister aware that there has been a great deal of talk but no action on this matter for several years? Is he further aware that the excellent site for the hospital which has been reserved by Peterlee new town development corporation may not be kept for much longer? As the overwhelming case for the hospital was accepted a long time ago, will the Minister stop giving bland answers and exert his power on the Durham health authority and the regional health authority to get an early priority for the hospital so that building can start soon?
    Mr. Clarke: I hope that my answer was not too bland. The regional health authority has to do the difficult job of deciding its priorities in the region, within the available resources. It has to decide how early in the queue it can

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    put the Peterlee community hospital, which, I accept, everyone has been planning on for some years. Meanwhile, the hon. Gentleman's constituency is being served, because the second phase of the Hartlepool district general hospital, which serves his constituents, will be completed next year.

    Disablement Cost Allowance
    Mr. Parryasked the Secretary of State for Social Services whether he has given further consideration to the issuing of a discussion document on the establishment of a disablement cost allowance.
    Mr. Rossi: My right hon. Friend has no plans to issue such a discussion document at present.
    Mr. Parry: Why did the Government in 1979 give massive tax handouts to the wealthiest 5 per cent. of the population while immediately breaking up the DHSS team that had been working on the establishment of the new benefit with my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris)? Is the Minister aware of the growing anger of the disabled and their organisations throughout the country at the indolence of the Government and the cynical neglect of the needs of the disabled?
    Mr. Rossi: The hon. Gentleman has got his facts wrong. The previous Administration made no public statement that they intended to issue a Green Paper on provision for the disabled, as has been hinted from time to time. In addition, no financial provision for further assistance to the disabled had been made in the public expenditure White Paper that this Government inherited.
    Mr. Ashley: I thought that the Government were committed to the principle of a cost allowance. If the Minister is not prepared to give us even a discussion document, will he tell us when the allowance will appear?
    Mr. Rossi: We have made it clear that our first priority is to strengthen the economy. I regret that until that has been achieved no progress can be made towards our objective of a coherent system of benefits for disabled people, which will cost thousands of millions of pounds. Despite the restraints on public expenditure, we have made limited improvements in benefits, notably in the mobility allowance.

    National Health Service (Dispute)
    Mr. Canavanasked the Secretary of State for Social Services whether he will make a statement about the Health Service workers' dispute.
    Mr. Fowler: Since my statement to the House on 23 June announcing the Government's final decisions on the resources available for this year's pay round, detailed offers have been made by the management sides of several Whitley councils, including the nurses and midwives and the ancillary staffs council. On average the offers range between 6 and 7·5 per cent. and are in line with what several million people in both the public and private sectors have already accepted. The Health Service unions should now return to the negotiating table. There can be no justification for the industrial action, which is damaging the Health Service and harming patients.
    Mr. Canavan: What reply has the right hon. Gentleman sent to the doctors in the Medical Practitioners
    850
    Union who fully support the 12 per cent. claim and state that any risk to patients as a result of next week's three-day strike will clearly be the fault of the Secretary of State? In view of the billions of pounds of military expenditure, will the right hon. Gentleman explain why the Government place more emphasis on the manufacture of weapons of death than on ensuring a decent living wage for people who are concerned with the saving of life?
    Mr. Fowler: The organisation that the hon. Gentleman mentioned does not represent the great body of the medical profession. The hon. Gentleman would do himself, his party and the country much more good if he would condemn industrial action in the NHS, which harms patients.

  PRIME MINISTER

    Engagements
    Mr. Roy Hughesasked the Prime Minister if she will list her official engagements for Tuesday 13 July.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today. This evening I am presiding at a dinner for the Prime Minister of Singapore.
    Mr. Hughes: Amid the dying embers of the Falklands euphoria, will the Prime Minister spare a moment to look around at the real state of Britain today under her Administration? Two major industries are disrupted and there are rumblings in several others. Between 3 million and 4 million people are unemployed. Is the Prime Minister aware that production is stagnant and that investment is largely going overseas? Is it not time that the Government introduced some bridge building to try to bring all sections of the community together? Does she agree that the best means of doing that would be to put people back to work?
    The Prime Minister: The hon. Gentleman mentioned two industries that are on strike. I hope that he will condemn those strikes, so that the train drivers will go back and the railways may become modern and efficient, which they can do only if British Rail's proposals are accepted. Secondly, I hope that the Opposition will condemn the strike in the NHS, because it is causing harm to patients, who are suffering.
    The hon. Gentleman will have seen the production figures out today. The all-industries index for May is provisionally estimated at 1 per cent. higher than April and the manufacturing index recorded an increase of 1½ per cent. With regard to investment: going overseas, the hon. Gentleman will probably also have seen that it is providing a good deal of invisible income for this country, which we need to cover the interest and dividends going out on inward investment here.
    Mr. Greenway: While I appreciate the independent mind that Assistant Commissioner Dellow will bring to the inquiry that he has been asked to undertake into the grave state of Buckingham Palace security, will my right hon. Friend consider the establishment of a long-term inquiry by a few people, comprising a detective, a representative of the Army and perhaps a representative of the police, to

    851
    take a deep and long look into the security of the Palace, the person of the Queen and other Royal establishments and personages?
    The Prime Minister: I hope that we shall receive the Dellow report next week and that it will give a thorough review of the security matters surrounding the Queen and other members of the Royal Family. There are clearly at least two major points to be inquired into: first, whether the systems themselves were adequate for protection; and, secondly, whether those systems were properly operated by the people at the time. I hope and believe that the inquiry will be very thorough. When we have received the report we shall certainly consider my hon. Friend's proposal.
    Mr. David Steel: Will the Prime Minister tell the House what advice the Secretary of State for Transport gave to the chairman of British Rail at their meeting yesterday?
    The Prime Minister: It is not customary to publicise any advice which may or may not have been given. May I make it perfectly clear that we stand behind the British Railways Board in its efforts to achieve a modern and efficient railway service.
    Mr. Eggar: With regard to the question that my right hon. Friend has just answered, has she noted that the Leader of the Opposition has yet again put the interests of a small, Luddite union in front of the interests of commuters and the national interest? Is she aware that there is one thing, and one thing only, that commuters in particular will never forgive, and that is a return to peace on the railways without real productivity gains?
    The Prime Minister: Yes. I wholly agree with my hon. Friend. Other industries in this country, including nationalised industries, have made strenuous efforts to increase productivity, even though it has meant a number of redundancies, realising that we must live in this decade if we are to raise sufficient income for all our people. I noted the Leader of the Opposition's support for ASLEF. Indeed, he seems to have become the strikers' friend.
    Mr. Foot: I am a friend of a peaceful settlement in the railway industry, as in others. With regard to the railway strike, which has great dangers for the railway industry and the community at large, will the right hon. Lady or one of her Ministers at last make an effort to try to achieve a settlement? Has she had a chance to compare the proposals that were made by the British Railways Board on 25 June with the proposals that were available and were ready to be accepted by ASLEF on 3 July? Having looked at them, does she not agree that those proposals are very close and that therefore if only the Government would make an effort, a settlement could be reached? When will the Government do their duty in that respect?
    The Prime Minister: No. I do not agree with the right hon. Gentleman. We want a settlement on terms and conditions that will produce a modern, efficient railway. Nothing less will do for Britain, nor for those many commuters and workers who rely on the services that the railway can provide. I disagree with what the right hon. Gentleman said about that offer. It is an offer to call yet another conference. That is not sufficient.
    Mr. Foot: The right hon. Lady has apparently been misinformed on this most important subject. If she is in
    852
    favour of achieving a settlement on reasonable terms, does she not agree that reasonable terms were offered by the British Railways Board on 25 June, that it was a pity they were not accepted then—[HON. MEMBERS: "Ah!"] Yes, a pity that they were not accepted then; but when they were accepted 10 days later, surely the Government and the Railways Board should now be prepared to stand by the offer that they originally made? Surely that is the way to achieve peace. I urge the right hon. Lady once again not merely to stand on what she said but to get one of her Ministers occupied on the business of achieving a genuine settlement of the dispute.
    The Prime Minister: I do want a genuine settlement. I believe that that is what the British Railways Board wants and is going for. I am more in agreement with Mr. Sidney Weighell than with the right hon. Gentleman, when Mr. Weighell said:
    "No amount of smokescreens can hide the fact that the train drivers have refused to accept a decision on flexible rostering, which my union is operating. This is a narrow, stupid, sectional dispute and it is causing untold damage to the railways."
    Mr. Peyton: Does my right hon. Friend agree that it would be interesting to know whether the Leader of the Opposition first consulted Mr. Sidney Weighell before he plumped in support of ASLEF?
    The Prime Minister: I entirely agree with my right hon. Friend. Mr. Sidney Weighell on another occasion, when referring to the leader of the Labour Party, said that what he had been saying was what he expected the leader of the Labour Party to say.
    Mr. Foot: Is the right hon. Lady aware that what I plumped for was the settlement proposed by Mr. Len Murray, which her Government and the British Railways Board are now apparently rejecting? I urge the right hon. Lady once again to examine the proposals for a settlement, which are still available, and which are the basis on which a real solution could be secured?
    The Prime Minister: No, they are not. The right hon. Gentleman has become, and remains, the strikers' friend.
    Dr. Mawhinneyasked the Prime Minister if she will list her official engagements for 13 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Dr. Mawhinney: Has my right hon. Friend seen reports that, because of strike action and picketing by NUPE members at St. Thomas's hospital, six wards, including a children's ward, have had to be closed and the number of operations per day has been reduced from 120 to 30? Does my right hon. Friend really believe the unions claim that their action is not affecting the sick?
    The Prime Minister: I understand that the facts given by my hon. Friend are correct, that about 1,000 operations have been postponed. That means that the unions are damaging patient care.
    Mr. Hoyle: You are!
    The Prime Minister: I do not believe that that is what trade unionism stands for. What has been offered is a final offer. It is the percentage that has been accepted by the Armed Forces, the Civil Service, the doctors and the teachers and should now be accepted by the National Health Service workers.
    Mrs Renée Short: Is the Prime Minister aware that, in my constituency—
    Mr. Skinner: The Prime Minister is the workers' enemy.
    Mrs. Short: I hope that my hon. Friend will let me have a go. Is the Prime Minister aware that the Goodyear tyre plant in my constituency, which is the largest employer, has recently declared further massive redundancies of about 560 workers? Is she further aware that that is in a town where there is 17 per cent. unemployment, and in a country where there are more than 3 million unemployed, a million of whom have been out of work for more than a year? What does the Prime Minister intend to do to restore the prosperity of the West Midlands region, which was one of the most prosperous regions in the country before her Government came to office?
    The Prime Minister: We shall restore the prosperity of the West Midlands and every other region only if our companies and their work forces are competitive in the goods that they produce. There is no other way. Only by that means shall we be able to get a larger share of world trade. The hon. Lady will perhaps have noted that the number of imports, particularly in semi-manufactures, rose last month, which means that we are still not yet competitive and have a long way to go.
    Mr. Douglas Hogg: Does my right hon. Friend agree that the Leader of the Opposition is not merely the strikers' friend, but, in addition, by his support of ASLEF, is putting at risk the jobs of thousands?
    The Prime Minister: Yes. I believe that that is precisely what is happening, particularly in some of the heavy and chemical industries, which rely on the railways for moving their products.
    Mr. Altonasked the Prime Minister if she will list her official engagements for Tuesday 13 July.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Alton: Is the Prime Minister aware that during the last 12 months, 349,000 homes in the United Kingdom were broken into, and that in my area of Liverpool, one home is broken into every 20 minutes? Will the right hon. Lady explain what action she intends to take to increase the paltry sum of £23,000 made available to the national victims' support scheme each year? Will she also agree to provide intruder alarms for all people of pensionable age?
    The Prime Minister: I cannot agree to provide intruder alarms for everyone. As the hon. Gentleman knows, we have done everything possible to bring the police forces up to establishment, to pay them exactly what the Edmund-Davies committee stated and to see that they are properly equipped. We also rely on the standards of ordinary citizens to see that crime is prevented by doing as much as they can to keep the police informed and to help them and support them in their difficult duty.

    BILL PRESENTED
      DISPOSAL OF PUBLIC ASSETS (COMMERCIAL INFORMATION)
      Mr. Lawrence Cunliffe presented a Bill to ensure that before any shares in a publicly owned industry are disposed of the Government shall lay before Parliament all the commercial calculations on which the judgments regarding price, method of disposal and timing of sales are based; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Wednesday 14 July and to be printed. [Bill 164.]

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

Water Rates (Provision of Rebates)
3.31 pm
Mr. Dafydd Wigley: I beg to move,
That leave be given to bring in a Bill to amend the Water Act 1973 to allow water authorities to vary their scale of charges so as to distinguish between water rate imposition on single person households, pensioners and families on low incomes, and other categories of consumers; and for related purposes.
You may be aware, Mr. Speaker, that this is not the first time this year that I have mentioned water charges in the House. They are an issue of great controversy in Wales. However, the Bill that I seek to introduce will be of benefit not only to people in Wales but also to pensioners and others on low incomes everywhere. The Bill relates to the unfairness of the impact of the present system of water rates on those most vulnerable in our community. The burden of water rates has increased enormously on all groups in the population over the last eight years. In Anglesey in my own county of Gwynedd the water rate in 1973–74 was 3·6p in the pound. It is now 28p in the pound, an increase of 800 per cent.
This increase, like all inflation, hits particularly hard those on low incomes, pensions and fixed incomes. The National Old Age Pensioners Association of Wales has written to me stating:
"Our members are adversely affected by the way in which the water rate is based on rateable value. This latest increase will make it a hardship for many to pay, and if you have been thrifty, bought your own house and put by a little money so that you are not a burden to your children, then it is impossible for you to get help to pay the extra."
I have also had an opportunity to study the headquarters files of the citizens advice bureaux on this issue. From all parts of England as well as Wales, dozens of formal representations have been made by their local staff calling for a rate rebate to be available on water rates for those on low incomes or pensions. This is a general and widespread complaint and one which will be known to every hon. Member.
I wish to make it clear that water rates hit not only those who own their own homes but also those who are in rented dwellings, whether council houses or privately rented houses. The increase in water rates hits them just as hard. In those areas where direct billing to council houses has recently been introduced, the impact of this burden is felt particularly acutely. Likewise, many private landlords who formerly used to collect the water rates as part of the rent, now insist that water rates are paid directly to the water authority by the tenant.
The unfairness can be summed up by four cases. Mrs. A, a widow living on a pension in Caernarvon in a one-bedroom rented flat, is having to pay £127 in water rates this year. Mr. and Mrs. B from Clwyd, aged about 80 and living in a small flat, have a bill of over £100. Mrs. C, who wrote to me from Glamorgan and who is another pensioner, had to sell her sewing machine to pay the electricity bill. When the water bill of over £100 came along, she had to consider what other personal possession she would have to sell to pay the bill. Mr. D of Harlech, who has been on invalidity benefit, having had to retire with angina in 1946, lives in a two-bedroomed small bungalow and has a water rate bill of £132.
The nub of the problem is that the water rates payable depend on one thing only—the rateable value of the dwelling. No regard is paid to the amount of water consumed, to the number of persons in the household or
856
to the ability to pay. Unlike domestic rates, for which there is a rebate scheme to alleviate the burden of those on low incomes, there is no such provision for water rates. As a result, a family of half a dozen people with perhaps three of four incomes coming into the household will pay a water rate identical to that of the pensioner next door living alone. Given the relative consumption of these two households, it is likely that the pensioner is paying five or 10 times more for every gallon of water consumed.
No water rebate scheme exists because no such scheme is allowable under present legislation. The chairman of the Welsh water authority recently said that he would welcome greater flexibility to try to overcome this anomaly in the legislative framework within which he has to work. But a change to the Water Act 1973 is needed to accomplish this.
I was told by a Welsh Office Minister some time ago that section 30(5) of the 1973 Act is expressly designed to eliminate preference to any class of persons. It is on the basis of this section that water authorities have been advised that they cannot facilitate any such rebate scheme for pensioners and other persons on low incomes. It is therefore the intention of my Bill to amend section 30 of the Act. Together with consequential provisions, this will enable rebates to be paid to persons on low incomes in order to reduce the unfairness of the present system.
I should like to deal with two excuses sometimes made for not introducing a rebate scheme. First, it is said that there is an option for those living by themselves to have meters installed. This is a costly business and may involve expenditure of £35 or £40. Metered water is not free. The break-even point beyond which meters give a better deal for a couple receiving pension has been assessed as property of a rateable value in excess of £150. Metering is, of course, no solution for families on low incomes. Secondly, it is said that supplementary benefits can help those hard hit by water rates. In some cases, the benefits can help. I would advise anyone with problems with their water rates to ask the local DHSS office for assistance.
There are, however, three problems. First, the benefits are still insufficient to bridge the gap facing people who have been landed with enormous water bills and a weekly payment can also cause cash flow problems. Secondly, many people are caught in the poverty trap and miss supplementary entitlement although they undoubtedly need help with their water bills. Thirdly, there is the take-up of supplementary benefits particularly among elderly pensioners living alone.
I readily acknowledge that this is not the first attempt to introduce a Bill of this nature. A few weeks ago, the House gave a first reading to the Fuel Standing Charges (Exemption for Pensioners) Bill which overlaps part of the area covered by my Bill. The hon. Member for Stockport, North (Mr. Bennett) has introduced several Bills over the past five years to try to get a rebate scheme accepted. I raise the issue again for three reasons. First, there has been an enormous recent increase in water charges in Wales, amounting to 18·7 per cent. this year, a greater increase than the rise in income of most pensioners. Secondly, over the past couple of years, an increase in direct billing has caused much anxiety and distress. Thirdly, the Government are this year reorganising the water industry, and now would be an opportune time for this change also to be undertaken.
I therefore ask the House to give the Bill a First Reading, not because it is likely in itself to make much

857
progress in this Session but to show the Government the feeling within the House that legislation on this matter is required and in the hope that the Government will see fit in the next Session of Parliament to introduce legislation to achieve this aim.
Question put and agreed to.
Bill ordered to be brought in by Mr. Dafydd Wigley, Mr. Andrew F. Bennett, Mr. Lewis Carter-Jones, Mr. Alfred Dubs. Mr. Tom Ellis, Mr. Geraint Howells, Mr. Roy Hughes, Mr. D. E. Thomas and Mr. Gordon Wilson.

Water Rates (Provision of Rebates)
  WATER RATES (PROVISION OF REBATES)
  Mr. Dafydd Wigleyaccordingly presented a Bill to amend the Water Act 1973 to allow water authorities to vary their scale of charges so as to distinguish between water rate imposition on single person households, pensioners and families on low incomes, and other categories of consumers; and for related purposes: and the same was read the First time; and ordered to be read a Second time upon Wednesday, 14 July and to be printed. [Bill 163.]
WAYS AND MEANS

  NATIONAL INSURANCE SURCHARGE (LOCAL AUTHORITIES ETC.)
  Motion made, and Question proposed,
  That, notwithstanding the Resolution of 15th March, provision may be made for a different rate of surcharge under the National Insurance Surcharge Act 1976 in the case of certain contributions which ire required to be paid by—

  (a) bodies which are local authorities of a description specified in that provision;

  (b) the Receiver for the Metropolitan Police District and the police authority fox every police area other than that District;

  (c) the fire authority for every area in Scotland falling within a combined area;

  (d) probation and after-care committees; and

  (e) magistrates courts committees and the committee of magistrates for the inner London area.—[Mr. Giles Shaw.]

  The House divided: Ayes 219, Noes 176.

  Division No. 268]

  [3.40 pm

  AYES

  Adley, Robert

  Farr, John

  Alexander, Richard

  Fell, Sir Anthony

  Amery, Rt Hon Julian

  Fenner, Mrs Peggy

  Ancram, Michael

  Finsberg, Geoffrey

  Aspinwall, Jack

  Fisher, Sir Nigel

  Atkins, Rt Hon H. (S'thorne)

  Fletcher-Cooke, Sir Charles

  Atkins, Robert (Preston N)

  Fookes, Miss Janet

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

  Forman, Nigel

  Baker, Kenneth (St.M'bone)

  Fowler, Rt Hon Norman

  Baker, Nicholas (N Dorset)

  Fox, Marcus

  Banks, Robert

  Fraser, Rt Hon Sir Hugh

  Beaumont-Dark, Anthony

  Fraser, Peter (South Angus)

  Bendall, Vivian

  Garel-Jones, Tristan

  Bennett, Sir Frederic (T'bay)

  Glyn, Dr Alan

  Benyon, Thomas (A'don)

  Goodlad, Alastair

  Bevan, David Gilroy

  Gow, Ian

  Biffen, Rt Hon John

  Greenway, Harry

  Biggs-Davison, Sir John

  Griffiths, E. (B'y St. Edm'ds)

  Blackburn, John

  Griffiths, Peter Portsm'th N)

  Blaker, Peter

  Gummer, John Selwyn

  Boscawen, Hon Robert

  Hamilton, Hon A.

  Bottomley, Peter (W'wich W)

  Hamilton, Michael (Salisbury)

  Bowden, Andrew

  Hampson, Dr Keith

  Boyson, Dr Rhodes

  Hannam, John

  Braine, Sir Bernard

  Haselhurst, Alan

  Brinton, Tim

  Hastings, Stephen

  Brittan, Rt. Hon. Leon

  Hawkins, Sir Paul

  Brooke, Hon Peter

  Hawksley, Warren

  Brotherton, Michael

  Hayhoe, Barney

  Browne, John (Winchester)

  Heath, Rt Hon Edward

  Bruce-Gardyne, John

  Heddle, John

  Budgen, Nick

  Heseltine, Rt Hon Michael

  Burden, Sir Frederick

  Higgins, Rt Hon Terence L.

  Chalker, Mrs. Lynda

  Hogg, Hon Douglas (Gr'th'm)

  Channon, Rt. Hon. Paul

  Holland, Philip (Carlton)

  Chapman, Sydney

  Hunt, David (Wirral)

  Churchill, W. S.

  Hunt, John (Ravensbourne)

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

  Irvine, Bryant Godman

  Clark, Sir W. (Croydon S)

  Irving, Charles (Cheltenham)

  Clarke, Kenneth (Rushcliffe)

  Jenkln, Rt Hon Patrick

  Cockeram, Eric

  Jessel, Toby

  Cope, John

  Johnson Smith, Sir Geoffrey

  Cormack, Patrick

  Jopling, Rt Hon Michael

  Costain, Sir Albert

  Kellett-Bowman, Mrs Elaine

  Cranborne, Viscount

  Kershaw, Sir Anthony

  Douglas-Hamilton, Lord J.

  Kimball, Sir Marcus

  Dover, Denshore

  King, Rt Hon Tom

  Dunn, Robert (Dartford)

  Knox, David

  Durant, Tony

  Lamont, Norman

  Edwards, Rt Hon N. (P'broke)

  Lang, Ian

  Eggar, Tim

  Latham, Michael

  Elliott, Sir William

  Lawrence, Ivan

  Fairgrieve, Sir Russell

  Lee, John

  Faith, Mrs Sheila

  Lester, Jim (Beeston)

  859

  Lewis, Kenneth (Rutland)

  Scott, Nicholas

  Lloyd, Ian (Havant & W'loo)

  Shaw, Giles (Pudsey)

  Luce, Richard

  Shelton, William (Streatham)

  Macfarlane, Neil

  Shepherd, Richard

  MacGregor, John

  Shersby, Michael

  MacKay, John (Argyll)

  Silvester, Fred

  Macmillan, Rt Hon M.

  Sims, Roger

  McNair-Wilson, M. (N'bury)

  Skeet, T. H. H.

  Madel, David

  Smith, Dudley

  Major, John

  Smith, Tim (Beaconsfield)

  Marland, Paul

  Speed, Keith

  Marten, Rt Hon Neil

  Spicer, Jim (West Dorset)

  Mawby, Ray

  Sproat, Iain

  Mawhinney, Dr Brian

  Squire, Robin

  Maxwell-Hyslop, Robin

  Stanbrook, Ivor

  Mayhew, Patrick

  Stanley, John

  Mellor, David

  Stevens, Martin

  Miller, Hal (B'grove)

  Stewart, A. (E Renfrewshire)

  Mills, Sir Peter (West Devon)

  Stewart, Ian (Hitchin)

  Mitchell, David (Basingstoke)

  Stokes, John

  Moate, Roger

  Stradling Thomas, J.

  Montgomery, Fergus

  Tapsell, Peter

  Morris, M. (N'hampton S)

  Taylor, Teddy (S'end E)

  Morrison, Hon C. (Devizes)

  Tebbit, Rt Hon Norman

  Morrison, Hon P. (Chester)

  Temple-Morris, Peter

  Mudd, David

  Thatcher, Rt Hon Mrs M.

  Murphy, Christopher

  Thompson, Donald

  Myles, David

  Thorne, Neil (Ilford South)

  Needham, Richard

  Thornton, Malcolm

  Nelson, Anthony

  Townend, John (Bridlington)

  Neubert, Michael

  Townsend, Cyril D, (B'heath)

  Newton, Tony

  Trippier, David

  Nott, Rt Hon John

  Trotter, Neville

  Onslow, Cranley

  van Straubenzee, Sir W.

  Osborn, John

  Vaughan, Dr Gerard

  Page, John (Harrow, West)

  Viggers, Peter

  Parris, Matthew

  Waddington, David

  Patten, John (Oxford)

  Wakeham, John

  Pattie, Geoffrey

  Waller, Gary

  Pawsey, James

  Walters, Dennis

  Percival, Sir Ian

  Ward, John

  Peyton, Rt Hon John

  Warren, Kenneth

  Pink, R. Bonner

  Watson, John

  Pollock, Alexander

  Wells, Bowen

  Porter, Barry

  Wheeler, John

  Price, Sir David (Eastleigh)

  Whitelaw, Rt Hon William

  Raison, Rt Hon Timothy

  Whitney, Raymond

  Rathbone, Tim

  Wickenden, Keith

  Rees, Peter (Dover and Deal)

  Wiggin, Jerry

  Rees-Davies, W. R.

  Wilkinson, John

  Rhys Williams, Sir Brandon

  Winterton, Nicholas

  Ridley, Hon Nicholas

  Wolfson, Mark

  Ridsdale, Sir Julian

  Young, Sir George (Acton)

  Roberts, M. (Cardiff NW)

  Roberts, Wyn (Conway)

  Tellers for the Ayes:

  Rossi, Hugh

  Mr. Anthony Berry and

  Rost, Peter

  Mr. Carol Mather.

  Rumbold, Mrs A. C. R.

  NOES

  Allaun, Frank

  Campbell-Savours, Dale

  Alton, David

  Canavan, Dennis

  Archer, Rt Hon Peter

  Cant, R. B.

  Atkinson, N.(H'gey,)

  Carmichael, Neil

  Bagier, Gordon A.T.

  Carter-Jones, Lewis

  Barnett, Guy (Greenwich)

  Clark, Dr David (S Shields)

  Barnett, Rt Hon Joel (H'wd)

  Clarke, Thomas C'b'dge, A'rie

  Beith, A. J.

  Cocks, Rt Hon M. (B'stol S)

  Benn, Rt Hon Tony

  Cohen, Stanley

  Bennett, Andrew (St'kp't N)

  Coleman, Donald

  Bidwell, Sydney

  Cook, Robin F.

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

  Cowans, Harry

  Bradley, Tom

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

  Brown, Hugh D. (Provan)

  Crawshaw, Richard

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

  Crowther, Stan

  Buchan, Norman

  Cryer, Bob

  Question accordingly agreed to.

Orders of the Day
  Finance Bill
  As amended (in the Committee and in the Standing Committee), further considered.
  Finance Bill
    Clause 30

      SOCIAL SECURITY BENEFITS
      3.50 pm
      Mr. Jim Lester: I beg to move amendment No. 57, in line 43 at end insert:
      'but this section shall cease to have effect as from 22nd November 1982 unless on or before that date the five per cent. abatement of the adult rates of unemployment benefit, made under section 1 of the Social Security (No. 2) Act 1980, is made good.'.
      I notice that since five of my hon. Friends and I tabled the amendment it has attracted support from other parts of the House. The names of 30 Liberal and Social Democratic Members have been added to it. It must be the first time that the Liberals and the Social Democrats have been in one place at one time on the same issue. They are welcome to join us.
      That this is the third time that the House has debated the issue in one form or another demonstrates the anxiety of hon. Members on both sides of the House about it. It has become a House of Commons rather than a narrow party issue. I am sure that if it were presented on a free vote, it would be carried overwhelmingly. I am sad that the arguments that have so far been advanced by my right hon. and hon. Friends have not convinced the Government of the deep sincerity of some hon. Members on the issue. That is why we have tabled the amendment.
      The issue will not be settled tonight by skilled Whipping, trips to the Lebanon or other means to secure a narrow Government majority. I must point out gently and kindly that the issue will not go away. The longer it is left, the harder it will be to settle. More extraneous issues will be introduced and it will become more difficult for the Government to honour their agreement that the reduction in unemployment benefit is not permanent.
      I shall briefly spell out the difference between those who support the amendment and the Government. I shall try to be scrupulously fair, not give a raft of quotations and distil the central points. I shall first trace the relationship between the 5 per cent. abatement and the Social Security (No. 2) Act. I was a member of the Committee on that legislation.
      The Bill, when introduced, was accepted as a blunt instrument to obtain immediate reductions in the social security budget and a cut in overall public spending. Despite misgivings, many hon. Members accepted a variety of unpalatable measures. There was no question but that the 5 per cent. abatement and the reasoning behind it was linked to advance deduction before proper taxation. It was an administrative argument that taxation of short-term benefits could not be introduced and that therefore the 5 per cent. abatement was in advance of that because the Government needed the money. The benefits may not be taxed before 1982, but it was argued that the national need
      862
      required a payment on account. The debates in Committee demonstrated that it was roughish justice, but we accepted the measure.
      My right hon. Friend now the Secretary of State for Industry, for whom I have the highest regard, did not commit himself to an automatic restitution of the cut when taxation was introduced. He did so for invalidity benefit because, as he pointed out at the time, invalidity benefit is a long-term benefit and unemployment benefit is short-term. He never admitted that it was a deliberate act of policy permanently to reduce the level of unemployment benefit. He used words that are familiar to all hon. Members when faced with pressure to make a pledge two years ahead. He said:
      "I am not in a position to give any comparable undertaking on the other benefits. There the words we have used before apply—that we will look at the position at the time in the light of all the circumstances and determine the appropriate level of gross benefit to apply to those benefits when they become part of taxable income. I cannot go further than that.—[Official Report, Standing Committee B, 30 April 1980; c. 460.]
      Does one require any further commitment? Since then, there have been two debates on the issue. There have been 13 speeches from Conservative Members, all of whom have urged the Government to restore the cut to take account of circumstances at the time. The Government now know that the yield from taxing benefits will be about £650 million. They can see the unexpected and unwelcome increase in the number of unemployed, many of whom remain so for a year before exhausting their benefit. The Government must be aware of the increased numbers of unemployed receiving supplementary benefit, which is the most expensive way of helping the unemployed. They must be aware of the political and moral implications and of the fact that there is no case for not restoring the cut in the year that taxation is introduced. It is beyond belief that the Government should draw the taxation line to catch the unemployed. If the line were moved, the 5 per cent. would be restored, the book could be closed, and we could concentrate on measures to deal with long-term unemployment and reviving the economy. The point at issue is where the line should be drawn. If matters are left as they are, we shall effectively double the amount of tax paid by an extremely vulnerable group. They may claim benefit only if they have a contribution record in work covering the year ahead. Those with savings of more than £2,500 may not claim supplementary benefit. Between 500,000 and 750,000 people are involved.
      I sum up with the words of my hon. Friend the Minister for Social Security who, on 18 March, said:
      "My right hon. Friends on the Front Bench have promised to keep this matter under review. We have said that the abatement will not be a permament reduction. It is equally clear that the abatement cannot be made good now, but it will be made good. My right hon. Friends have the matter under review. At the right time it will be made good.—[Official Report, 18 March 1982; Vol. 20, c. 536.]
      Now is the right time to make it good. There can only be one right time to restore the reduction—the year in which the tax has been introduced.
      There is then the argument that we cannot afford £60 million, despite the tenfold yield that taxation has brought to the Treasury. To a simple man like me, it sounds an enormous sum, but colleagues who have been Treasury Ministers describe it as candle ends. That may be going too far the other way, but it is certainly not an impossible amount for the Chancellor to find. The Government argued that the yield of £525 million originally estimated

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      had been allocated to various other forms of social security benefit, but that cannot apply to the extra £120 million that has been found on the re-estimate.
      4 pm
      I have no doubt that others will make a variety of helpful suggestions about sources of revenue that will not involve extra taxes, increasing the public sector borrowing requirement, higher interest rates or defeating the Government's economic strategy. I offer one.
      When my right hon. and learned Friend the Chancellor introduced his Budget on 9 March, he mentioned the possibility of a community work scheme. He suggested that the Manpower Services Commission and the Department of Employment should work out a scheme based on benefit-plus. I understand that that is now proceeding. He suggested that the Government would reach a decision later this summer. Although he did not spell out the exact sums that he had in mind in advance of seeking advice, he gave illustrative figures suggesting that a net additional expenditure of £150 million would be available. He further stated:
      "We should indeed be ready to back this kind of development on an even larger scale if the demand is there."
      I submit that that scheme is unlikely to make any demands on the Chancellor's Budget in the current year, and that, even if it did, the amount would be nowhere near the £150 million that he was prepared to commit in the first place with the possibility of a further £150 million if the demand was there. Therefore, I cannot believe that it is impossible for my right hon. and learned Friend to find £60 million.
      In opening the section on jobs and pay in his Budget Statement, my right hon. and learned Friend used the following very moving words:
      "To have millions of people at a time without work, many of them for long periods, is a tragic loss to any community. To be unable to find work is an affront to personal self-respect. This waste of human resources is today the misfortune of many societies besides our own. It is naturally a cause of deep concern to every Member of this House."—[Official Report, 9 March 1982; Vol. 19, c. 730–32.]
      I could not have put it better myself. It is of such deep concern to us that we suggest that it should not be impossible for my right hon. and learned Friend to find £60 million.
      There is then the moral and political argument. The Government must be seen to be scrupulously fair in their behaviour towards the unemployed, who could be described as the walking wounded of the economic battles to which all Conservative Members have turned their hands in trying to revive and restore the economy.
      When unemployment is 3 million and rising, it cannot be the fault of those affected. It cannot be the fault of the people who are in overmanned industry or in the wrong part of the country. It is not the fault of the employees if a company is forced to close because of exchange rates or has perished because it cannot meet its overheads due to falling demand.
      No Conservative Member could argue that when we fought the 1979 general election we expected or anticipated the present level of unemployment, either national or locally in our constituencies. This issue is particularly close to me, because when I was a junior Minister at the Department of Employment I visited unemployment benefit offices throughout the length and breadth of the country. I stood behind the counters and saw
      864
      the queues of people snaking through. They were good, decent British citizens waiting to sign on, often in premises that were not equipped to handle the numbers involved. That certain knowledge of my own eyes makes me feel strongly that the Government should take this matter in hand and restore the 5 per cent.
      We must bear in mind that a high proportion of the people now out of work have become unemployed for the first time in their lives after many years of work. For the first time in their lives, they must face the challenge of finding fresh employment, perhaps retraining or moving away from where they live. That is challenge enough. If they are also short of money and have to worry about trying to balance an impossible budget, we are adding too much to their burdens.
      Let us consider the cash amounts. From November, a single person will be able to claim £25 per week unemployment benefit and a married couple £40·45. Anyone who has more than £2,500 in savings cannot claim any addition to that. The restitution that we seek amounts to £1·10 for a single person and £1·75 for a married couple. That is less than the cost of a round of drinks in this place.
      Can we really think only of the gross figures—the 3 million unemployed and the £60 million cost? Should we not consider the individual budgets involved? To be unemployed and looking for work costs money. Constituents have proved to me that they have written 50 or 60 letters in their search for a job. How can they afford the postage charges to send those letters? Telephone calls cost money. Bus fares cost money to go to the jobcentre and to parade around going to the various jobs that they may or may not get.
      One has only to compare those sums with the amounts received by old-age pensioners to realise how minimal that income is. The £25 per week compares with £32·85 for a single pensioner and the £40·45 with £52·55 for married pensioners. Therefore, we are dealing with those at the bottom of the scale. They have no additional claim on supplementary benefit, because my arguments do not apply to such people. If unemployment benefit is raised, their supplemetary benefit falls, so they do not receive any more money. We are talking about the 500,000 or 750,000 unemployed who have no claim on supplementary benefit.
      My final point is political. In voting on this matter today, Conservative Members have their last chance to restore the cut in the year in which the benefit has been taxed, because it came into taxation on 6 July this year. It is not beyond reason to believe that there may be a general election in 1983. We should be a very foolish party and Government if we were not prepared for a general election some time in that year. Whenever it comes, there is no question but that unemployment will be one of the key issues for which we shall have to answer.
      It has been suggested that our action today is a test of our loyalty to the party. I do not believe that is the issue. None of my right hon. and hon. Friends who put their names to the amendment could in any way be regarded as disloyal to the party. Our loyalty is unquestioned, but we cannot have loyalty on command or demand. On such issues a case must be made and one must judge one's loyalty against a wider loyalty to one's constituents and, in this case, to those constituents who are unfortunate enough to be unemployed, because they have no one else to speak for them. We could argue that, although it is important to reduce interest rates, to make industry leaner

      865
      and fitter and to get our economy thriving again, the corollary must be that we are seen to treat our unemployed fairly.
      Should there be an election before this matter is settled, how will each of us stand when we are defending the matter to our constituents? We can explain the reason for the increase in unemployment. It may be difficult, but we can sustain the argument. We can probably explain why the Government have removed earnings-related supplement. It is a long argument and I will not enter into it now, but that removal reduced the standards of many unemployed people by 11 per cent. We can explain why we introduced taxation on short-term benefits. Many hon. Members wished that. It is a major step forward that deals with the "Why work?" syndrome and enables the Chancellor to have an intelligent taxation policy by raising thresholds regardless of the source of income. We can explain all those matters, but it will be difficult.
      What about the 5 per cent.? Can we really say to the electorate "It was not the Government's intention for it to be permanent although it is now in its third year"? Can we say "The Government have it under review and will restore it at the right time" and expect to be believed?
      Mr. Robert Sheldon: The hon. Member for Beeston (Mr. Lester) said in his opening remarks that this is a House of Commons issue. Credit is due to him and to other determined Conservative Members for ensuring that it is a House of Commons issue, and the signatures of Members of all parties, including the Liberal Party and the SDP, have ensured that it will remain so. In the many debates that we have had on the subject, speaker after speaker has been in full agreement, until we have come to the Minister's reply. That happened in the debates on 18 March and on 26 April. Such all-party agreement is not uncommon when an effort is being made to extract money from the Treasury, but unity today is not as simple as that.
      There have been charges of errors by Ministers, of misleading statements and even some accusations of deception. I do not make any such accusation, and I shall confine myself to three quotations. The first is from the Secretary of State for Industry, then the Secretary of State for Health and Social Services, who said on 15 April 1980:
      "There are benefits that ought to be taxed but are not. We propose that pending the introduction of proper taxation it would be right to go for an interim scheme providing for a limited uprating … next November."
      The right hon. Member for Daventry (Mr. Prentice), then the Minister of State, said on the same day:
      "We have a rough and ready substitute to last until 1982, when we hope to bring in proper taxation."—[Official Report,15 April 1980; Vol. 982, c. 1034–1042.]
      My third quotation is again from the present Secretary of State for Industry, who said on 30 April 1980:
      "The hon. Gentleman asked specifically about abated unemployment benefit. That will make no difference because as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends. It is an interim scheme in lieu of taxation. One will give way to the other."—[Official Report, Standing Committee B, 30 April 1980; c. 526.]
      4.15 pm
      With such clear statements it should not be necessary to indulge in the "Kremlinology" to which we have been subjected, such as "examining with care what was really intended", asking at what time of the day the speech was made and the subsequent explanations that were attempted. If we were to take account of such
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      considerations, even if they were true, there would be an end to debate as we know it and an end to the record in Hansard, which states clearly what has been said and which forms the basis of our continuing arguments and discussion. If an hon. Member wishes at any time to refute what appears in Hansard, the method by which that is done is known to all. The House accepts readily a personal statement and forgives readily those who make mistakes. However, that was not done and there should be no tampering with the record.
      The Chancellor of the Exchequer, in an important speech to the Conservative Political Centre summer school at Cambridge on 3 July—he was talking about the future as he saw it—said:
      "I can make clear what I believe should be the heart of our approach. It is to continue in three main directions. First, and no one should doubt our determination in this, it is to tackle the root causes of the scourge of unemployment which weakens our economy and threatens to embitter our national life."
      No one can deny that the House is beginning to realise the significance of such embitterment.
      However, many of the unemployed are already embittered. At the time of the debate on the 5 per cent. abatement on 15 April 1980, there were 1,522,000 unemployed. Today there are 3,070,000 unemployed. What would it cost to relieve that embitterment? It would be £60 million out of the £650 million obtained from the taxation of benefits. If, without being partisan, I contrast that £60 million with the £750 million that is being provided in the Bill to the better off in concessions on capital transfer tax, capital gains tax and the higher levels of income tax, some may compare what we are doing for one section of the population—perhaps for good reasons that I do not wish to examine now—with what is being done for a much more hard-pressed part of the population that we have the honour to represent.
      During the past two years the unemployed have lost the earnings-related supplement and the child addition, but the 5 per cent. abatement reduces the income of everyone who receives unemployment benefit. That is why so many believed that the abatement was harsh. If, as the Secretary of State said, the 5 per cent. was in lieu of taxation, those who did not pay tax had no tax advantage to offset against the loss of benefit. For them it was not rough justice; it was clear injustice.
      Unfortunately, this is not the only indignity suffered by the unemployed. The taxation of the unemployed is harsher and more cruel than that devised by the Government for any other citizens. It still amazes me to read section 28 of the Finance Act 1981, which becomes operative this week. The House of Commons is rightly concerned about—indeed, solicitous of—the rights of the taxpayer, and, when dealing with the taxation of the unemployed, that section makes one almost rub ones eyes.
      We are dealing with the poorest people in our midst. Under the legislation passed last year, the benefit officer notifies the unemployed person of the amount by which he is to be taxed. Section 28(1) states that after receiving notice in writing from the benefit officer the unemployed person,
      "may object to the notification by notice in writing given within sixty days after the date of issue of the notification."
      If he does not object in that time, the section states that the
      "amount shall not be questioned in any appeal against any assessment in respect of income including that amount."

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      That applies to the poorest people in our society. If they do not or cannot obey the bureaucratic injunction to object to an assessment that is provided for them, the amount of tax is certain. It is irrevocable and has the force of law.
      It is no use such a person protesting that an error was made, that he was ill or overwhelmed with difficulties at the time through being unemployed, that he was not experienced at putting pen to paper, that he did not retain all his pay slips, that he did not add them together, that he did not subtract the part of the tax year when he was unemployed, that he did not deduct the personal allowance or the married allowance, that he did not compute the rate of tax on the balance, or that he did not check it with the benefit officer's assessment within the 60 days allowed. If he has not done all those things, it is no use his going to the advice bureau of his Member of Parliament, because he will not be able to do anything to help. The right to appeal has been forgone and there is no chance to raise the matter again. Members of Parliament are powerless to help a constituent in that respect. That legislation was a grievous error, because it removed the rights of our unemployed constituents.
      There will, of course, always be errors. Sir Lawrence Airey, the chairman of the Board of Inland Revenue, stated that 10 per cent. of Inland Revenue codings are wrong. That refers to work that is carried out by tax officials—people who are accustomed to operating in this area. The scheme starts this week, but those operating it do not have wide experience of tax matters. They deal with benefits, and have come fresh to these complicated and rather tiresome calculations.
      About 6 million people a year, or about 120,000 each week, will be liable to tax on their unemployment benefit. If we take Sir Lawrence Airey's estimate of experienced tax officials making errors of 10 per cent., about 12,000 people will be wrongly assessed each week. If those people do not object, they will be compelled to pay, without the right of redress by their Members of Parliament. That is almost certain to be happening now, in the first week of the introduction of the new scheme. This legislation will embitter the nation.
      The Government started their life believing that it was necessary to increase the incentive to work. At that time unemployment was about 1·5 million. It is now more than 3 million. All hon. Members know of constituents who have applied for hundreds of jobs and received only a handful of interviews, with no job at the end. We all know of companies that advertise a vacancy and are so overwhelmed by the response that no normal method of selection is possible. We are proceeding towards the alienation of an important part of the population.
      We know the Government's priority. They have stated it again and again. It is to reduce inflation. Although that might mean increased unemployment, they hope that unemployment will eventually decrease. They believe that unemployment is an unfortunate consequence of their policies. If they believe that, these poor unfortunate constituents who are unemployed, not because of their inadequacies, but because of a wider national goal, should be helped. Through no fault of their own, but in response to a higher necessity, their average wage of £150 will drop to a little over £50. Apart from their wounded pride and the injury to the confidence, these people have
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      commitments to meet, such as mortgage repayments. They will suffer a collapse in their standard of living, which for many will never be restored.
      I know that the Minister will point to some of the administrative problems. It is a favourite device used by all Governments to intimidate their Back Benchers. We have all seen it used. It was used in the context of the petrol duty.
      The great advantage of the House of Commons is that it is sovereign. It is able to correct administrative errors. Hon. Members can do this by going into a Lobby against the wishes of the Government. There were much bigger problems with the petrol duty. How could one reimburse those who had paid tax on petrol? That was a formidable argument, but at the end of the day the House of Commons decided that there were other, more important, matters and a way was found to deal with the problem. Even as the Finance Bill proceedings come to an end, the House, with its sovereignty, can resurrect many of the clauses in a new shape.
      We have the famous Rooker-Wise amendment. That fundamental change was accommodated by the Government of the day. The earnings rule is another example of a change. The hon. Member for Islington, South and Finsbury (Mr. Cunningham) was instrumental in obtaining a change in the earnings rule, again to the consternation of the Government. It is right that now and again the Administration should be given a reminder. As the hon. Member for Beeston said, these are House of Commons matters and the House of Commons should decide on them, even if they are awkward—in fact, particularly if they are awkward. A lesson needs to be learnt by Governments who are insufficiently responsive to attitudes that are not hopelessly expensive and can be accommodated within the broad strategy of the Government.
      This is one of those instances. The hon. Member for Hornsey (Mr. Rossi), the Minister for Social Security, said that the abatement
      "will be made good … At the right time it will be made good."—[Official Report, 18 March 1982; Vol. 20, c. 536.]
      The hon. Member for Beeston said that the issue would not go away, and we must therefore ask: when is the right time? The promise has been made and been reaffirmed in the last few months, so when is the right time? Will it be when the Government can claim a great economic success? Will it be when unemployment declines considerably? I believe that the right time is this week, now that the tax has begun and is impinging upon those whom we represent. The House of Commons should decide accordingly.
      4.30 pm
      Mr. Richard Needham: I am sorry, for three reasons, that we are having to debate social security benefits again this afternoon. The first is that we are doing so without the support of my hon. Friend the Member for Bath (Mr. Patten) and my right hon. Friend the Member for Chesham and Amersham (Sir. I. Gilmour). We have a powerful team but we are without two of our strikers.
      Secondly, I regret even more having to debate the matter in the presence of my hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe), as it falls upon him to give the Government's case. He must feel slightly like Uriah the Hittite:

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      "David wrote a letter to Joab, and sent it by the hand of Uriah. And he wrote in the letter, saying, Set ye Uriah in the forefront of the hottest battle, and retire ye from him, that he may be smitten, and die."
      Thirdly, and most of all, I regret that we have to debate the matter again when I genuinely believe that the Government would accept the case that we have already made.
      I am beginning to doubt the Government's real reasons, and certainly the original case that they put forward. Whatever the Minister concerned—my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) and my hon. Friend the Member for Hornsey (Mr. Rossi)—may or may mot have said, they did not at any time argue about the principle; they argued, as we have all said, about the restoration and the timing of that restoration. It is very important to me that they accepted the case.
      The money comes out of the national insurance fund, which is a hypothecated fund. That means, if it means anything at all—I am beginning to doubt whether it does—that it is a fund separate from the Treasury. The Treasury has been playing along with this belief because it has been reducing the Consolidated Fund supplement. It is clear that people look on the contributions that they pay into the fund as payments that enable them to have a reasonable level of benefit in line with the increased contributions that they have had to make. For many of those people, that benefit is the last fall-back position, as my hon. Friend the Member for Beeston (Mr. Lester) said, between losing one job and finding another. They believe—wrongly, as it appears—that it is not something to be tampered with at the whim of some Treasury mandarin.
      If the Treasury is to argue that the national insurance fund is no different from any part of public sector borrowing and no different from any part of public sector finance, why does it have £4 billion sitting in Treasury stocks in the fund? If it is nothing more or less than an extension of Government spending, why does not the Treasury say so? Then at least people will know.
      If the Government continue to argue that they cannot pay the 5 per cent. out of the NIF, after they have increased the direct revenue into the Treasury by about £650 million, reduced the Consolidated Fund element, and abolished the earnings-related supplement, let us call off the whole charade.
      If the national insurance fund is not an insurance fund of any sort, if payments into it are in no way related to benefit, and if they can be altered at the whim of Treasury Ministers, let us at least be honest with the public and say, "It is a pay-as-you-go scheme, it is just part of the taxation that you and your employers have to pay, and the Government can alter what goes in and out of it as they will". But as long as the Government maintain that it is a national insurance fund, and that contributions to it relate to benefits that come out of it, they must restore the 5 per cent.
      If the Treasury is so worried about public sector borrowing or public spending, perhaps it should try to find ways of getting back some of the £1 billion which, apparently, is still outstanding as a result of the Civil Service dispute.
      I do not, however, believe any longer that the Treasury's argument holds water or that the Treasury has the argument in its heart. I have a nagging suspicion that
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      the real reason for the Government's obduracy in regard to reinstatement of the abatement is that they believe that wage levels in the United Kingdom have to fall if unemployment is not to rise, and that benefit must fall with them. Sir John Hoskyns in The Times and Professor Minford and others have used the elegant phrase "clearing the labour markets". I was never quite sure whether the Chancellor of the Exchequer agreed with that concept.
      Sometimes the Chancellor of the Exchequer—as in the quotation given by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon)—seems to have real concern, compassion and sympathy for the unemployed, but on other occasions his economic views make Bismark look like a wet. If it is the Treasury view that it is necessary to restore competitive labour costs, I suppose it can be argued that the level of benefit should correspondingly decline; at least, increases in benefit should not narrow the gap. In replying to the debate, the Minister may make the point that this year the level of benefits has increased at a higher rate than the level of earnings, but I ask the House to consider what has happened in the past five years and to take a rather longer look at the relationship between benefit and earnings.
      In 1978, unemployment benefit rose by 7·1 per cent. and earnings rose by 13·3 per cent. In 1979, unemployment benefit rose by 17·5 per cent. and earnings rose by 19·1 per cent. In 1980, unemployment benefit rose by 11·6 per cent. and earnings rose by 18·9 per cent. In 1981, benefit rose by 9 per cent. and earnings rose by 11·3 per cent. In 1982, unemployment benefit rose by 11·1 per cent. and earnings rose by 9·5 per cent. So only in regard to the last year can it be argued that benefit has begun to creep back and narrow the gap between benefit and earnings.
      What evidence is there for the argument expressed in the elegant words that labour markets "clear on price'"? Recently, I asked my hon. Friend the Member for Dorking (Mr. Wickenden) whether he would be prepared to move from Felixstowe to Liverpool if dockers in Liverpool were £20 cheaper than clockers in Felixstowe. He said that he did not think that that would be the incentive for which he was looking. I accept that there may be a price at which labour markets clear. Today in The Guardian there is a report that seamen from the "Canberra" are being laid off, to be replaced by Indian seamen from the Asian continent who are to earn £70 a month in comparison with the £120 a week earned by British seamen.
      Are the Government really suggesting that we should try to put people back into work by cutting and continuing to cut the level of wages of those who are currently employed? Should we try to test the theory of the "Why work?" syndrome by reducing benefit? What would be the effect of forcing people at that level to find work? My hon. Friend the Member for Bridlington (Mr. Townend) feels strongly on that issue, but would he, as an employer, take on a married man with three children, at a wage on the margin of the poverty line? Does he believe that that employee will be a hard-working, reasonable and active member of his staff, or will he turn into the most radical militant unionist that he has? I should have thought that to try to reduce unemployment by clearing labour markets is not something that a Conservative Government should consider.
      Furthermore, is it not right that it is usually the lowest paid who are sacked first, because it is they who are the ones who have the least skills and who are therefore very

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      often the least important? If there were this demand for labour at a lower price, surely it would be showing itself up somewhere in the vacancy figures. There is no evidence of that. It is interesting to note that, when Japanese companies invest in the United Kingdom, they always make it their first priority to pay more than other local United Kingdom employers.
      I do not want to see a low-wage economy. I want a high-wage economy. I do not want to see a country employing millions of coolies who cannot find work except at the margins. It is not right, and it is not something that the Government should even think about.
      Once we have disposed of the "Why work?" argument, there is another argument that is put forward, that about people who earn low wages. It is asked whether they will resent having to shell out of their contributions towards unemployment benefit for those who have lost their jobs. My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) made that point. That ignores the fact that people are entitled to unemployment benefit out of contributions that they have paid earlier. Further, as I have pointed out, the facts of the case do not bear that out.
      I do not accept or believe for one moment that the ordinary people of this country who are in work, even in low-paid work, are so mean and small-minded that they are not prepared, even if they had to, to contribute out of their wages something towards those colleagues less fortunate than themselves who find themselves out of jobs.
      I wish to quote from a speech made by the then hon. Member for Stockton-on-Tees—Mr. Harold Macmillan—in 1936, when the argument about contributions was being made in exactly the same sort of debate, with exactly the same arguments on both sides as we have today. He said:
      "Against that there is—and on balance in my mind I come down against the Government—"—
      that has not changed much—
      "the undoubted fact, which was put forward by the right hon. Gentleman who spoke for the Official Opposition, that this contribution has become accepted by the men in employment, and that if you were to take, in any industrial area, a plebiscite of the men in or out of work, you would get a majority of men in work who would be prepared to continue to pay their penny, and to see a shilling, or whatever may be the additional benefit, go to their comrades who are out of work."—[Official Report, 8 April 1936; Vol. 310, c. 2830.]
      I do not believe that there is an argument that, in this year, the first in which benefit has been increased more than wages for the first time, there is a groundswell of bad feeling among those in work against those people out of work. I do not accept the "Why work?" argument, I do not accept the argument about those on low earnings and I do not accept the third argument that is advanced by my right hon. and hon. Friends—that unemployment benefit levels determine basic wage demand. I do not see the connection. If one examines the relationship that I have described between unemployment benefit and increases in wages, one finds that the figures do not bear that theory out.
      4.45 pm
      Therefore, there is no basis to the argument that the money is not there. There is no basis to the argument that the low-paid will be resentful and there is no basis to the argument about wage settlements being dependent on unemployment benefit. The central argument is the
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      Government's supposed belief that, if we reduce the level of benefit, people will find their way back into work. That is a belief that rests on the free market and on the concept of labour markets finding their levels.
      Another quotation from the then hon. Member for Stockton-on-Tees is relevant. In a debate on unemployment in 1932 he said:
      "There is a great deal to be said for the free market policy, but there is a great deal to be said against it. To my mind, the great objection to it is that you cannot attain it. To have a free market policy means a world free market. Who is going to get that? It means the abolition of tariffs and exchange restrictions; it means moreover—and let us face the fact—the abolition of trade union restrictions, of insurance schemes, of social services. It means the right of private enterprise to compete, by reducing all costs—and after all social service costs are just as important as wage costs—down to the basis of the very lowest competitor. That is the true free market policy. Is there any party in the House prepared to go ahead and seek to win support from the electors on that policy?"—[Official Report, 4 November 1932; Vol. 269, c. 2203.]
      It may be unfashionable to be a Tory in the Tory Party at the moment, but the welfare of the unemployed and their families is not something that I and many of my hon. Friends are prepared to see diminished. If my hon. Friends on the Front Bench are not prepared to give in to us today on this issue, we shall return to it and we shall return to it again and again because it is the basis of Tory Party philosophy that we help those who cannot help themselves.
      Mr. J. W. Rooker: It is a privilege to follow the speech of the hon. Member for Chippenham (Mr. Needham). I speak as one of the signatories to the amendment, although because of the quirks of Commons procedure it is only the signatures that are added on the day before the debate that appear on the Order Paper. It is not by accident that the SDP signed this amendment last night. I hope that all its members will vote for the amendment because, of the members of that party who signed this amendment, 18 were missing on 18 March when the Government came close to defeat on this issue. I hope, as all except one member of the SDP has signed the amendment, that they will all be here to vote.
      The hon. Member for Beeston (Mr. Lester) said that this was a House of Commons matter, and he was right to make that point. Many quotes will fly around the House today and among them there will be some from the Tory Party manifesto. I wish to remind the House, because I agree with the hon. Member for Beeston, of what is said on page 21 of the manifesto about the supremacy of Parliament:
      "We will see that Parliament and no other body stands at the centre of the nation's life and decisions, and we will seek to make it effective in its job of controlling the Executive."
      There was never a more opportune moment for Parliament to seek to control the Executive than by a vote in favour of amendment No. 57 tonight. That will put reality on those words, with all of which I and any other parliamentarian would agree. There can be no argument across the Floor of the House on that.
      We had two separate debates on this subject earlier in the year, which were different in some respects. Some hon. Members used statistical arguments to try to convince the Government, but the Government know that they cannot win on that argument. Hon. Members raised the issue of the morality of Government giving promises, in whatever words they are spelt out at whatever time in the morning, that are not kept. That did not have much effect

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      on the Ministers. I do not feel sorry for them. We are pleased to see the Ministers from the Department of Health and Social Security today. That Department was responsible for the original legislation. The Government were forced to promise in 1980, both to Conservative Members and Opposition Members, that the 5 per cent. reduction in unemployment benefit was an interim measure in lieu of proper taxation. No one can argue that we shall not have proper taxation from this month.
      I want to raise three or four salient points that show that the Government are not being as moral as they should be in the way they handle this issue, and to point out how unemployed people have been treated by the Government. That is what this debate is about.
      This is the first of the five benefits that were cut by 5 per cent. that has become taxable. None of the others has been caught by the tax system yet. We shall have to wait for each one to become taxable to see whether the Government keep their promise. All the benefits are included—sickness benefit, injury benefit, maternity allowance and invalidity pension. The last benefit is the most unfair because there is no sign of it being taxed, and it is grossly unfair to people who have lost 5 per cent.
      I want to raise the point about how the Financial Secretary deals with the matter. He is the Minister—although one would not realise it today—who has answered letters to the Treasury on that issue. He is also answering letters that have been sent by hon. Members to the Secretary of State for Social Services. He has a standard letter in which he points out:
      "It has long been accepted by successive Governments that there is a strong case in principle for taxing unemployment and social security benefits of an income nature."
      In the first year of the national insurance scheme in 1948 benefits were taxable. It turned out to be administratively impossible to continue the system and it was dropped. The letter continues:
      "We have received a number of inquiries on this subject"—
      I bet they have—
      "so I have prepared a summary—in question and answer form—of the questions most commonly raised."
      He suggests that the letter he sent to the constituent, as it gives the Government's view. A two-page question and answer form is attached. It asks for example:
      "Why is the Government making benefits paid to the unemployed taxable?"
      The answer mentions the principle but not the fact that benefits were cut by 5 per cent. in lieu of tax.
      I consider that question and answer exercise conducted by the Treasury, which hon. Members who inquire are asked to feed to their constituents for whom they have made representations, as utterly dishonest. There is no mention of the groundwork laid for two years to bring benefit into tax by cutting such benefit in lieu of proper taxation. That is pretty disgraceful conduct. It is as if the Treasury is ashamed of what it is doing, and rightly so in my opinion. The problem with legislation that is rushed through, as was the Social Security (No. 2) Act 1980 by means of a guillotine announced the day after the Budget, is that such matters are not properly debated. The public did not appreciate the content of the Act until they lost earnings-related supplement. Hon. Members still receive letters asking why earnings-related supplement is not paid. We explain that the matter was dealt with in Parliament two years ago.
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      I turn to the Department of Employment and the June edition of Employment News. It contains a centre page spread on the taxation of benefits. The article says:
      "It is only fair, says the Chancellor"
      that we should tax these benefits. There is no mention that the benefits were cut by 5 per cent. The article continues:
      "It is not a new idea. Sir Geoffrey Howe, Chancellor of the Exchequer, reminded the House of Commons in 1980."
      There is then the usual twaddle about successive Governments. I do not deny that successive Governments have wanted to bring all forms of income into the taxable net if it can be done. There is no argument about that. But there is no mention of the 5 per cent. cut in the centre page spread of the DoE Employment News. That article is not fair.
      Today is 13 July, which is the third anniversary of the Inland Revenue's raid on the offices of Rossminster. During that three years, hardly any action has taken place. Hundreds of millions of pounds could be lost to the Revenue. However, during those three years, the Government have managed to find time to cut unemployment and other benefits by 5 per cent. and to legislate to tax unemployment benefit without restoring the 5 per cent. The Government have found time to take some actions but not others as the anniversaries roll by. Those members of the public who note what has been said and done in the House will realise what the Government's priority is in their treatment of unemployed people. As many hon. Members have mentioned, there has been an increase in the number of unemployed people. Those hon. Members who have done the calculations know that during the first three years that the Government have been in office one person has joined the dole queue every minute. That is what we are debating.
      I disagree with the hon. Member for Chippenham, who gave the impression that unemployment benefit was racing ahead of earnings or the rate of inflation. A 5 per cent. cut in unemployment benefit might seem a relatively small amount. Benefits to unemployed people have been cut or abolished. I want to give the House a statistic that reinforces the argument for putting back the 5 per cent. That 5 per cent. is only a small part of the loss that unemployed people have suffered under the Government. There are arguments for putting back the other cuts, but we are not debating them today. A man's average earnings, according to official figures, are £160 a week. My constituents do not believe that figure. Therefore, a man with average earnings, with a wife who is not earning and two children—the average family—becoming unemployed after 22 November this year—the date of the annual increase in social security benefit mentioned in the amendment—will receive £41·05 a week. Flat rate unemployment benefit for the man will be £25 a week, for his wife £15·45 and 60p a week for the children. If none of the changes relating to unemployment benefit—the 5 per cent., the earnings-related supplement, tax refunds and the fiddling of the child dependency—had been made by the Government, the same man earning the same wages would have received £79·50 a week. He would have been paid that the week after he lost his job. He is therefore taking a big drop. His unemployment benefit would have been £26·10—putting back the 5 per cent. for the single person. The wife, instead of receiving £15·45, would receive £16·10.
      The increase to the two children under the national insurance scheme, as it was when the Government took

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      office, would have been £4·60. The formula for dependants has been changed. He would have received £18·60 in earnings-related supplement. That has gone. He would have received a tax refund of £14·10 a week, on the assumption that he would have been unemployed from November until the end of the tax year. The House will not want me to go into detail, but I am prepared to publish any of the assumptions. The Library answered my questions.
      Let us compare the profile of a two-child family whose wage earner became unemployed after 22 November with what it would have been had none of the changes affecting the unemployed taken place, including the 5 per cent. For the man on average earnings the income will drop to £41·05 from £79·50. That is half. We are asking for only a small part of the massive gap to be closed. We are asking for only a few quid out of the £38·45 difference.
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      Supplementary benefits are not included in the figures. If a man has savings or redundancy payments of over £2,500, supplementary benefit does not come into it. Surely we cannot tell a man on £41 a week who does not have that sum to go on supplementary benefit. Do we tell all the unemployed to go straight on to the means test the first day on the dole? That is the consequence of the Government's action.
      We are talking about a person on average earnings, whose family will take a catastrophic drop in income, anyway. They will lose half their income, and all we are asking for is to have the 5 per cent. back. It is £2 or £3 a week. The Government will get 10 times as much tax from taxing the benefit as it would cost to put back that few pounds a week. Why in heaven's name can they not do it?
      Mr. Kenneth Lewis: I have some sympathy with the Minister who is to reply. But there is safety in numbers; various Ministers have previously dealt with various points on this subject. Representing, as he does, the Treasury, he is a mountebank. A few months ago the Treasury found a fortune that it did not know it had—£2 billion. It had made a mistake in the right direction. Consequently, in relation to that we are arguing for petty cash. My hon. Friend the Minister of State is now joined by the Financial Secretary, who I hope will also use his influence. I am sorry that my right hon. and learned Friend the Chancellor of the Exchequer is not here. This is an important debate on a matter that worries the country and the House.
      I shall not give financial statistics. My hon. Friends the Members for Beeston (Mr. Lester) and Chippenham (Mr. Needham) dealt with the details. Indeed, we have had them in every debate, including in Committee, and I have read some of the proceedings. My argument is simple. The Government say that they recognise the case for putting back the 5 per cent. They must therefore have considered the finances. We do not have to convince them about that.
      The Government may say that they did not give a firm promise. An oil magnate once boasted about his position until it was pointed out that sardines were also in oil, but they were not clever because they left the key on the outside of the tin. The Treasury and the DHSS have done the same. They offered the key, and that has led to the debate. They have said that the Government will do something. There are promises and promises. We know
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      that in Parliament when dealing with Ministers of whatever Government. But the Government cannot gainsay the fact that there was, to say the least, definitely a nod and a wink—"Do not worry. It will be all right. We shall get round to it." They may not have given a firm "Yes" or a date, but they said that in due time they would tell us that the 5 per cent. was being put back.
      I shall not vote unless we are given a clear date early next year. Let us have no pussyfooting. We want the change in this tax year. It will not be a full financial year—no more than one quarter—so it will not cost the Government much this year.
      In our debate in March the Minister said that the abatement would not be a permanent reduction; it was related to taxation of benefits. I wanted the previous Conservative Government to tax unemployment benefit. There might have been an argument against cutting fully the wage-related unemployment benefit, but most of us went along with it. When the Government introduced the 5 per cent. cut, had we understood that it was an actual cut and not just to make room for taxing unemployment benefit we would not have accepted it. We believed that it was temporary, because that was what we were told. The Government still say that it is temporary, but what is temporary?
      Unemployment is here to stay. It will not greatly decrease in the next two years. A large section of the population will not easily find jobs. It is argued that unemployment benefit should not be too high compared with the lower rates of wages, but we are not talking about people with large families on higher benefits. Those most affected will be getting about £38 a week. Many will be on this benefit for a long time. Even if they are doing their best and are prepared to travel, they will not find jobs.
      There are extraordinary new definitions about politicians of both parties. For example, there has been an attempt to split the Conservatives into wets and dries. I do not know what those of us in the middle are—perhaps somewhat dripping damp. When the wets speak at a meeting of wets they to try go a little to the right—just to get the balance correct. With the dries, it is the opposite way.
      My right hon. Friend the Secretary of State for Employment spoke recently at a Primrose League meeting. He has a reputation for being somewhat dry. At that meeting, in the presence of my hon. Friend the Member for Halesowen and Stourbridge (Mr. Stokes), who has a reputation for being equally dry, my right hon. Friend made a number of wet remarks. That is a great advance. He is beginning to move from the right into the middle. He said that there was no likelihood of getting unemployment down, particularly among young people, to any great extent before the next general election. So he was not making an electioneering speech. He said that he had hopes, once the general election was over. So have I. He then went on to say:
      "But something has to be done in the meantime to ease the problems of this period of transition."
      One cannot be more moderate than that, and that is exactly where I and many of my right hon. and hon. Friends on the Back Benches stand. We want the Government to recognise that the period of transition should be eased. The Government have already said that they intend to do that. When will that be? If they are not careful, they will find themselves in a difficult position. The general election is approaching. If they deal with the

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      5 per cent. near that time, people will say "They have done it only to buy votes in the general election." We do not want that to happen. We want the Government to deal with the problem because they recognise the need to do so.
      We are told that the Government—we are told this about all Governments—might lose face if they were to concede tonight. We are told that if the Minister announces at the Dispatch Box that he is prepared to grant the concession that I and my hon. Friends would like, the Government will lose credibility. I have been in this House a long time—some might say too long—and I have seen many Governments. I have known occasions—they occur in almost every Parliament—when Governments or Ministers—sometimes even Prime Ministers—have to concede to the will of the House of Commons. That is good for democracy, it is good for them, and, on the occasions when I have seen it happen, it has almost always proved to be right. We should avoid having a dictatorship for the term of a Parliament, with the Whips arranging everything and the Government making no concessions.
      This may be a minor matter, but it is important for the country, and it is particularly important for the low-paid unemployed. Therefore, I ask the Government to accept the will of the House of Commons. It will do the Government a power of good, it will do democracy a power of good, and it will avoid much embarrassment later for the Government.
      5.15 pm
      Mr. John Golding: The hon. Member for Beeston (Mr. Lester) took over my job at the Department of Employment after the election. I thought then, and I still do, that it was a change for the worse. However, every cloud has its silver lining, and the silver lining here was that at least one Conservative Member of Parliament went around the country to see the tragedy of unemployment.
      When I was at the Department of Employment I, too, travelled the country, talking to the unemployed, visiting unemployment benefit offices and looking at the queues. However, the characteristics of the queues were different before May 1979, and the differences are important to this debate.
      First, the people in the queue today have less money in their pockets in redundancy payments from their firms. Before 1979, workers had a great desire to draw redundancy benefits because they thought that it would be easy to get jobs after they had been paid off. Employers were often only too willing to pay substantial sums. Those substantial sums are less today, so the unemployed in the queue have less in their pockets.
      Secondly, those in the queue would, on average, have been there for fewer weeks, months or years than is the case now. As the period of unemployment gets longer, so people's poverty gets deeper. I would not campaign or give up one weekend's fishing to try to get rid of unemployment for, say, two weeks in a year. Short-term unemployment is no great traumatic experience. Long-term unemployment is very different. Part of the trauma of long-term unemployment is the growing burden of poverty that the unemployed have to carry. So the fact that, before 1979, the number of weeks, months or years was that much shorter is important.
      The money in the pockets of the unemployed would have been substantially more, partly because of the presence of wage-related benefits. Those benefits were
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      introduced to make it possible for craftsmen, in particular, to retain their pride and sense of status during periods of unemployment. I well remember the argument at the Labour Party conference over the abandonment of the principle of equality in benefits—a principle to which the Labour Party had been wedded. Wage-related benefits were introduced because it was realised that craftsmen, particularly in the Midlands, wanted a social security scheme which gave them unemployment benefits very much nearer to their incomes than could be provided by a flat-rate benefit. Before 1979 the people on the dole queue had wage-related benefits in their pockets. Today, they do not.
      I could have referred to the fact that before 1979 more would have qualified for supplementary benefit and that benefits were not taxed, but my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) eloquently spelt out the gap between what was paid to the unemployed under a Labour Government and what is being paid today.
      I do not pretend that those in the group to whom the 5 per cent. cut is being applied are the worst hit. The people for whom I feel most sorry are those who have exhausted unemployment benefit. There are over 1 million people who have been unemployed for over a year and who are not entitled to any unemployment benefit. If their wives work, they are not entitled to any benefit at all. They have no income and are dependent upon their wives.
      I turn to those who are drawing benefits—£22·50 now, £25 in November. Another difference between now and 1979 is that in areas like mine working people's savings are falling. Before people become unemployed, their overtime may have been cut. That may not be a bad thing, but what is bad as the probability that they were on prolonged short-time working before they were declared redundant. How do such people finance long-term short-time working from their savings? The average savings of working people are slight. They cannot withstand a year on short-time working.
      I visited a friend in Newcastle-under-Lyme in the middle of a period of his short-time working and looked at his pay slip. He is a skilled engineer, yet he was earning about £40 a week. That is what he was paid for going to work. I found what I knew anyway, which is that the only way that such families can survive is to draw on their savings.
      With the growing incidence of short-time working, that has been the general situation in North Staffordshire since the general election. It was partly cushioned by the part-time working compensation scheme, which the Government have now cut. Earnings have collapsed and savings have diminished. When unemployment comes there are just not sufficient savings to fall back on.
      Hon. Members should put themselves in the position of an unemployed man with a family, whose savings have gone. They will receive £40.45. I do not like being too personal in the House, but I must ask Conservative Members to consider the situation of a man with his savings gone being told, as a result of something for which he is not responsible, that his income will be £40.45—a quarter of the national average earnings.
      That must be an appalling prospect to any Conservative Member and, to be fair, to any Labour Member too. For working people with pride who want to work, have worked and who get their status from work, it is a devastating experience, which we cannot tolerate. It is distressing that people should have to come to my advice bureaux with gas

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      and electricity bills which they cannot pay. They ask how they can afford a suit to go for an interview for a new job. One sits there ashamed of society, because they cannot be given a decent answer.
      It is against that background that we are talking about the Government taking away £1.5 from the single person and £1.70 from a married couple.
      I put in a special plea for the young. I am not talking about the 16 to 17-year-olds for whom the Government are doing their level best in the new training scheme. However, let us consider the youngster who was unemployed when I was in the Department of Employment. Perhaps all that he has had since then is six months on a YOP scheme, which we were proud to introduce and which I shall continue to defend. That youngster now will be 20 or 21 years of age. He will never have earned any money. If he had worked and qualified—which he has not—the most that he would get—which he does not, because he is not entitled to it—is £25 a week unemployment benefit.
      How are such youngsters to have any start in life at all? At least adults often have their own houses and furniture. How will such young people be able to get married? The situation arises of a youngster who has never worked, cannot get work, and who, at the age of 20, having fallen in love with a girl who is earning £30 to £40 a week, is not eligible for any benefit at all. He has nothing whatever with which to marry and contribute to a family. That is disgraceful.
      Sir William Clark: He should not get married.
      Mr. Rooker: The vice chairman of the Tory Party says that such a person should not get married.
      Sir William Clark: The hon. Gentleman should get his facts right. I am not the vice chairman of the Conservative Party.
      Mr. Golding: If the hon. Gentleman did say that such youngsters should not get married, what has happened to Toryism? What has happened to our one nation? Is it to be a condition of getting married that one must have the good fortune to have a wealthy parent and to live in an area where work is available?
      The hon. Member for Beeston can bear me out when I say that there are estates in Liverpool and areas throughout the country where decent youngsters who desperately want work cannot get it because there is no work to do. If the Tories say that in those circumstances our youngsters should not get married, I must say that that is an abhorrent—
      Sir William Clark: I should like to—
      Mr. Jack Straw: Did the hon. Gentleman say that they should not get married?
      5.30 pm
      Sir William Clark: I did not get married until I could afford to do so and it is legitimate for me to say that if a person is taking on the responsibility of marriage he should be able to afford to get married before thinking that the State should enable him to marry.
      Mr. Golding: The burden of my remarks was not that people should get married before they can afford to do so.
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      But rules should not make it impossible for thousands of young people to be able to afford to get married. The least that we must do is to change the rules so that the long-term unemployed are entitled to a benefit as of right.
      Mr. Robert C. Brown: My hon. Friend should not be surprised at anything that the hon. Member for Croydon, South (Sir W. Clark) says, because if the hon. Gentleman had had his way we would not be having the debate. He objected to the selection of the amendment and tried to prevent the debate from taking place.
      Mr. Golding: One of the reasons why I entered politics was that I believed that working people in the 1930s were not given a square deal and were not allowed to maintain their pride or to live in dignity. I have always been conscious of the need to have the highest possible benefits, as of right, for those who, through no fault of their own, have no income.
      The first case that I fought was that of my mother against what is now the Supplementary Benefits Commission. We should not tolerate a society in which people who want to work, but do not have the opportunity to do so, have to go to the SBC or any other commission to ask for handouts. They should receive the benefits for which they have paid.
      Working people have paid for the 5 per cent. and they believe that they are being cheated out of it. If the Government persist in their actions there will be tremendous resentment among those who cannot speak for themselves in the House.
      Mr. Bob Dunn: This has been a debate of great sincerity, with telling speeches having been made by my hon. Friends the Members for Beeston (Mr. Lester), Chippenham (Mr. Needham) and Rutland and Stamford (Mr. Lewis) and by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon).
      I am the rose among the thorns because I shall vote for the Government. The debate has centred on a vexed question and my hon. Friend the Member for Beeston argued with great competence and sincerity that the 5 per cent. abatement should be withdrawn. We have become used in the House to the vision of hon. Members petitioning in their own way for changes to take place or not to take place. On this occasion hon. Members are petitioning for a restoration of what was changed.
      The issue raises more points than it answers in the short term. My hon. Friend the Member for Beeston referred indirectly and briefly to the "Why work?" syndrome and my hon. Friend the Member for Chippenham outlined his views on that problem. The syndrome is a manifestation to which our attention hs been drawn on many occasions by my hon. Friend the Member for Norfolk, North (Mr. Howell) and it needs to be examined.
      It can be argued that the restoration of the 5 per cent. abatement will contribute to reinforcing the problem facing the man who is financially better off by being unemployed. Let me outline the problem facing one of my constituents who works in a London retail shop, receives low pay and faces an annual bill of about £500 for British Rail travel—money which must be found from net income. How can he be expected to behave when faced with the choice of staying at home and being financially better off or working in London and being worse off?

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      We have heard nothing from any hon. Member about how the "Why work?" syndrome and the problems associated with it can be solved. The restoration of the 5 per cent. abatement will indeed close a book, as suggested by my hon. Friend the Member for Beeston, but it will not provide a solution to the problems associated with the "Why work?" syndrome.
      Mr. Straw: Is that it? Is that the defence of the Government?
      Mr. Clement Freud: The debate has been interesting, in that we have had nine speeches from the heart supporting an amendment which it is indefensible to oppose. We have now heard a speech read with a very small amount of verve by the hon. Member for Dartford (Mr. Dunn), and they are the only words that we have heard in support of the Government.
      What the hon. Member for Beeston (Mr. Lester) said was right and what those who support his amendment have said was equally right. One juggles with the advisability of saying it again, saying it more loudly or saying it with a regional accent. The fact is that this is a proper amendment and the House is absolutely right to say that in this instance the Government are wrong and they must listen to the majority.
      Dante, who was before my time, said:
      "The hottest place in Hell is reserved for those who remain silent on a moral issue."
      I put it to Conservative Members that remaining silent on a moral issue does not simply mean abstaining. The place in Hell is also earmarked for those who follow the weasel words of the Whips, shuffling through the Lobby without thinking what they are doing.
      Liberal Members and our colleagues in the SDP support a tax credit scheme and therefore do not object to the principle of bringing benefits into taxation. However, we do object to midnight raids on the poorly stocked benefits larder and the surreptitious clawing back of small amounts, in the hope that no one will notice.
      It is easy for us to oppose, because we are in the business of opposition. It is what the Opposition are here for, just as it was when those sitting on the Conservative Benches were on this side. We are paid to say no to whatever the Government propose.
      I wish to pay tribute from the Opposition Benches to those on the Government side who manifest the courage of their convictions, to those who have the decency to say that the needs of their constitutionts are more important than the political ambitions of those of their colleagues who sit on the Front Bench. We shall watch those who vote for what is a proper amendment and we shall see who abstains. We shall salute all those who do what we would consider to be the honourable thing.
      Mr. Patrick Cormack: When the hon. Member for Birmingham, Perry Barr (Mr. Rooker) was speaking, I could not help but think, "Lawson! thou shouldst be living at this hour." I thought that because the Rooker-Wise amendment, which is so frequently quoted, would never have got on to the statute book had it not been for that happy marriage of sensitivity and expediency. My right hon. Friend the Member for Blaby (Mr. Lawson), the Secretary of State for Energy, was the sensitive one. If only he could be here now I am sure that the amendment would be passed tonight.
      What saddens me is that the debate is being held at all. I congratulate my hon. Friend the Member for Beeston
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      (Mr. Lester) on what I considered to be a cogent and moving speech. I thought that my hon. Friends the Members for Chippenham (Mr. Needham) and for Rutland and Stamford (Mr. Lewis) made admirable contributions. It is distressing that the Government have placed some of their most loyal supporters in the position of having to table the amendment.
      In a debate on 18 March some of us felt obliged to go into the Lobby against our own side. We did not want to do that but we thought it was necessary to demonstrate resolve. We received a reply from my hon. Friend the Minister for Social Security which indicated that, yes, the Government had seen our point and that, yes, the time would come. I fondly expected that the time would come about now.
      When we had that debate in April we were in the middle of a grave crisis and a number of us deliberately and consciously did not vote against the Government because we felt that it was wrong to do so at that time. We also felt that we had better give a few more weeks for the implicit pledge of my hon. Friend the Member for Hornsey (Mr. Rossi) to come to pass. It grieves me enormously that we need to have this debate today, and that my hon. Friend the Member for Chippenham and I and many others have felt obliged to table the amendment.
      We are asking for very little for all too many people. They are the victims of the recession and the casualties of the quest for efficiency. The Government knew, when they pursued certain policies, that there would be casualties. Most of the people who are out of work are out of work through absolutely no fault of their own. There was a time, when I first came to the House 12 years ago, when a Member could say that a significant proportion of the unemployed were unemployed because they wanted to be so. At that time, there was more than a grain of truth in that. There is very little truth in it today.
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      In my constituency in the West Midlands, which has been so devastated and which is the heartland of our industrial greatness and must be the cradle of any resurgence from the recession, thousands upon thousands of good working men and women are without hope and must be given hope. The two categories that particularly distress me are those in their early 50s who feel that they will never find another job, and those young people coming out of school many of whom, if they do not have the opportunity to work within two or three years, will adopt the attitude "Is it worth it? Is there any chance?" Some of them will not want to work. That would be a destructive and cancerous feeling in our society, if it were to develop.
      What help have we given those people, our constituents, who are out of work through no fault of their own? I pay tribute to the new training initiative for the young. I wonder sometimes "Training for what?" We must give a great deal more thought to that, but I pay tribute to what has been done.
      But when we come to the other categories, is the ceiling of £2,500, which was bumped up by £500 in the Budget, really the encouragement that one expects from a party that has always believed in encouraging saving and thrift, virtues of which my right hon. Friend the Prime Minister has so proudly boasted in the past, from which she has

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      benefited and which she sought to inculcate in other people? Is it much help when we say "£2,500 and we cut you off"? What about the abatement?
      When it was said that unemployment benefit would be taxed—I, like my hon. Friend the Member for Rutland and Stamford, agree with the taxing of benefits; I do not believe that it is wrong—there was an implicit undertaking in a number of speeches that we would deal with the 5 per cent. We have a moral commitment to do so. It is tragic that we must plead with the Government to change their mind. As Members of Parliament, we know, perhaps more than any other group, what it is to be insecure in a job. There are Members on the Government Front Bench who had to travel from constituency to constituency seeking to get themselves adopted as candidates, wondering whether they would find jobs. They should have a fellow feeling and sympathy with those in the dole queues. I believe that they have, I trust that they have and I only wish that they would translate that sympathy into action by accepting the amendment.
      To me, the Tory Party means many things but it means at home a real concern for the disadvantaged. It means a real determination to do for others as one would be done by and to ensure that people who through no fault of their own are in real trouble are helped. We are not suggesting that largesse be heaped from the Treasury and that the fires of inflation be stoked. All we suggest in the amendment is that some modest restitution should be made; it is restitution that we are discussing. The hard Gradgrind image is not the image of the Tory Party as I know it and believe in it.
      Mr. Gradgrind talked about facts. The facts that face Britain in 1982 are that 3 million people are unemployed, that 1 million have been unemployed for a year or more and that we in the House of Commons today have the opportunity for a small cost in comparison with the sums that have rightly been spent recently on grave national endeavours to restore what we promised would be restored. I believe that it was a promise, I believe that it was a pledge and I believe that it is a pledge that should be honoured.
      I hope that we will have a sympathetic and sensitive reply from my hon. Friend the Minister of State. It is no criticism of him to say that the Chancellor of the Exchequer should have been here to listen to the arguments and to answer the debate. This is a significant issue. It is the third time that the House of Commons has debated it and the Chancellor should have been here to answer. I regret that he is not. The reason, I hope, is that he has given my hon. Friend a message. I hope the message reads: "We accept the logic of your arguments. We accept the equity of your cause. We shall accept what you say."
      The debate could be shortened if my hon. Friend was now to go to the Dispatch Box and say just that. That is all we want—no more and no less. If we get it, we shall all rejoice and remain totally united. If we do not get it, some of us will be moved, as my hon. Friend the Member for Croydon, South (Sir W. Clark) was moved time after time on the Northern Ireland Bill, to vote against our party.
      I shall take lectures from no one on loyalty. What I am doing tonight is certainly no worse than voting against the guillotine on the Northern Ireland Bill. My right hon. and hon. Friends know in their hearts that, if there was a free
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      vote on this issue, there would be no question of the result. I urge them for once to put this matter first, to say that they will vote for the amendment supported by their hon. Friends, to restore some traditional Toryism to the Conservative Party in the Lobby and to ensure that those who are least able to look after themselves are looked after by us in the House.
      Mr. David Ennals: The hon. Member for Staffordshire, South-West (Mr. Cormack) is my pair. I want to make it clear that we are not paired tonight. It is with some pleasure that I shall accompany the hon. Gentleman through the same Division Lobby. This is probably the most important debate in our discussion of new clauses and amendments to the Finance Bill. I agree profoundly with the hon. Gentleman that the Chancellor of the Exchequer should have been present.
      I intend to concentrate on the narrow issue before the House. There has been only one contribution lasting 1½ minutes, if I do not exaggerate, in support of the Government's position. The hon. Member for Dartford (Mr. Dunn), having delivered that oration, has left the Chamber.
      We are discussing a moral issue and not a party political issue. I hope not to embarrass the hon. Member for Beeston (Mr. Lester) by congratulating him. There are times when it is good for a Government, from whichever party it happens to be formed, to be defeated. I congratulate my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) on the Rooker-Wise amendment. There is no doubt that, although gracefully accepted by the Front Bench, it was a defeat for the Labour Government. That was right. Parliament is at its best when the views and feelings of hon. Members can cross the party boundary and morality can come through.
      At the time when this proposal was introduced in 1980, no one in the House, let alone those involved in the legislation, believed that it was other than a temporary expedient. As explained by the then Secretary of State, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), it was a temporary expedient until taxation could be introduced for what are called short-term benefits. In fact, for many of the unemployed, it is long term and getting longer. Many Conservative Members, I believe, only supported what was then proposed in the confident belief that at some stage, when the Government could introduce a system of taxing short-term benefits, the blunt instrument would be withdrawn. I believe that the Ministers who said this at the time intended that it should happen.
      It is therefore a matter of great dishonour that the Government, having found the means to introduce legislation to tax unemployment benefit, should decide not to remove the abatement. One wonders why they have acted in such a manner. Do they believe, genuinely and honestly, that there are 3 million people who do not want to work? No hon. Member can believe that. The vast majority of unemployed people are unemployed through no fault of their own. It is not their fault that they are unemployed. They want desperately to work. Why in heaven's name should we decide to penalise them?
      I am not arguing against taxation of short-term benefits. I am arguing only that the Government should do the honourable thing and fulfil what Ministers at the time had every intention of doing. They should remove the abatement and restore the 5 per cent. One cannot believe

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      that the Government have set morality totally aside. It has been proved that the living standards of working people are going down. One of the first questions to which the recently arrived Member for Beaconsfield (Mr. Smith) received an answer revealed that between 1979–80 and 1981–82 there was a 6·2 per cent. decline in the real value of net income for those on half average earnings compared with a real increase of 8·1 per cent. during the last three years of the previous Labour Government. It is known that living standards are going down.
      Are the Government arguing that, because the living standards of working people are going down, the living standards of the unemployed must be pushed down still further? I cannot believe that the Government would be so heartless. My hon. Friend the Member for Perry Barr made a brilliant case with the figures that he produced. Ministers are aware of the figures. This information does not come as a spark from Heaven. I cannot understand what argument the Government can sustain unless it is that they simply do not understand the humiliation of being unemployed. On top of that, the unemployed are brought into taxation but still receive a reduced level of benefit. This has resulted in great poverty.
      The arguments of Conservative Back Benchers are much more important to the Government than those made by Opposition Members. The Government would expect these arguments from us, yet they have also been put with great force by all but one of the Conservative Members who have spoken. The moment arrives when one says that morality has to come before party commitment, before Whips and before total loyalty. I believe that loyalty to a moral belief will do great honour and credit to those who express it positively tonight. If the Government are defeated, as the previous Labour Government were defeated from time to time when it was right that that should happen, it will be an achievement for democracy of which all hon. Members can be proud.
      6 pm
      Mr. David. Crouch: I, too, am sorry that the Chancellor of the Exchequer is not here and has not been here at all during this serious debate. It must be said over and over again that we are debating one of the most serious aspects of this long Finance Bill at the end of the Session. For a brief moment the Chief Secretary appeared. We were grateful for that. Of course, we are grateful for the appearance at times of Ministers from the Department of Health and Social Security. I am glad to see my hon. Friend the Minister of State, Treasury on the Front Bench.
      This is a serious occasion when the House of Commons is trying to make a point to the Executive. Hon. Members are trying to make the Executive understand that we are concerned about the state of the people and the state of taxation of the people. When Parliament is concerned about taxation, Parliament is dong its primary job. When Parliament is concerned about disadvantaged people, Parliament is doing the most serious job of all.
      I know that the Chancellor of the Exchequer is a busy man at present. It is possible that he is considering and consulting about an adjustment to the Finance Bill as a result of the serious concern voiced on Government Benches about what is proposed in the Bill. I am sorry that he was not present to hear the serious speeches that have been made on both sides of the House by members of all parties, who expressed, not over-emotionally but seriously, with fact and figure, their argument that at this
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      time there is not just a recession but a serious depression for families, for wives at home whose husbands are unemployed and for children who see that their parents are unemployed and wonder whether they will get a job when they leave school at 16 or over. We live in a grave age.
      Serious speeches have been made this afternoon. Parliament has been at its best—not in Committee, but on the Floor of the House. This is when the great moments occur when Governments are sometimes stopped in their tracks and think again.
      The hon. Member for Birmingham, Perry Barr (Mr. Rooker) has broken through your barrier about names being mentioned, Mr. Speaker, in giving his name and the name of a former hon. Member to the Rooker-Wise amendment, which amended another Finance Bill, to which the right hon. Member for Norwich, North (Mr. Ennals) referred. I still hope that after tonight two other names will break the barrier—those of Lester and Needham—in the Lester-Needham amendment. It is in the name of the people and of the Tory Party that we need to pass the amendment tonight. I am speaking not against the Government but for the heart of the Tory Party.
      Let me remind the House of the Government's approach. Of course they are not unthinking. They are faced with giant problems, as is the House. The Government, faced with those problems, have to make decisions. Perhaps as they face the Finance Bill they face the eternal question of how to make savings, cut expenditure and get rid of some of the anomalies.
      The Government might ask: "Is it not right to reduce unemployment benefit now that the rate of inflation has been reduced so considerably and is still going down? Is it not right to ensure that unemployment benefit does not go up when wage settlements are coming down? Is it not right to do all that we can to ensure that the rate of unemployment benefit is not so high that it is an attraction for people not to work?" The Chancellor of the Exchequer and the Cabinet might ask: "Is it not right for the Government to strive all the time to keep down public expenditure?" There must be a limit to the amount that we as a nation can afford to allocate towards social provision.
      The answer to all those questions should be "Yes, in certain circumstances," from any responsible Government, whether Conservative, Labour or of any colour, because that would be responsible. I said "in certain circumstances". However, the circumstances are not right at the moment. We still have inflation. The rate is coming down, but inflation is still between 9 per cent. and 10 per cent.
      Wage settlements are lower but wages are still going up. It is still better to have a job than not to have one. Some would dispute that. Perhaps we shall hear more about that when we ask the electors what they think in a year or so. We know what one advisory body to the Government said about a wage for work and a wage for being unemployed. The Social Security Advisory Committee has observed that
      "very few people are actually worse off in work than out of work; those who are tend to be in very poorly-paid occupations and have large families."
      That is an anomaly. Those of us who advance the case for generous treatment of the unemployed must accept that. Therefore, some people might find it better to stay out of work. We all acknowledge that.
      Perhaps 3 or 5 per cent. of the unemployed believe that it is better to stay out of work, Will we accept that as the

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      norm, tell that to the electors and ask them to vote for us on it? Will we say in our manifesto that that is the norm? Of course we shall not. No Tory, Labour, Social Democratic or Liberal candidate would say that to the electors. The Chancellor of the Exchequer is not saying that now. He is saying merely that we should move in that direction.
      I say again that the Chancellor of the Exchequer is right to strive continually to cut Government expenditure, remove anomalies and cut out waste. In November 1980 the Government decided, as an interim measure in lieu of taxation, to cut adult unemployment benefit. That was decided not just by the Government. Measures must be blessed and voted on by the House, which was done. Why did we do that? Because it was an interim measure. The House went along with that as an interim measure. There is no gainsaying that that was the meaning of what we understood to be a temporary measure. The whole House agreed that it was just that taxation should apply to those benefits. However, it could not be applied two years ago. Therefore, there was to be a temporary reduction of 5 per cent. in lieu of taxation.
      The ultimate intention was to treat unemployment benefit like wage earnings and to make it subject to tax. The House agreed to that. The Conservative Party agreed with the then Secretary of State for Social Services, my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin). We were guided by his observations and the assurance that
      "as the employment benefit comes into tax so the rationale for the 5 per cent. abatement ends."—[Official Report, Standing Committee B, 30 April 1980; c. 526.]
      We are not foolish in the House. What does that mean? My right hon. Friend is an honourable man. We believed what he said. Fair enough. That was helpful, sensible and responsible. The House of Commons acted in the same conditions of being helpful, sensible and responsible. We were considering an interim measure in lieu of taxation.
      Now there is the proposal to tax unemployment benefit. We are not jibbing at that. We accept it. I accept it. I also accept that it will mean lower benefit to unemployed people, who are trying to keep their finances together, hold their families together, face the world, find a future and find a job. We also know that the decision now will mean that there will be a cut in the benefit unless hon. Members stand up for people irrespective of what party hats they wear. The House of Commons should stand up for people wherever they are—the 3 million disadvantaged people—and say that it does not believe that the Government have got it quite right. Some of us still maintain that, although the Government are not entirely wrong, they are not quite right. We are standing for the people tonight. We must ensure that they are not put at a serious disadvantage.
      We were promised that the 5 per cent. cut was in lieu of taxation and would be reinstated eventually. Indeed, whether it was an understanding in the heart and mind of every Member of Parliament, it was on that understanding that we voted for the 5 per cent. reduction of unemployment benefit.
      It may now be Government policy not to reinstate the 5 per cent. but it is not Tory philosophy. That policy goes against the very heart of Conservative principles. I am not speaking against anything. I speak for the principles of
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      Toryism. Our principles do not allow the disadvantaged to suffer the effects of economic realism and recession. We have always talked of a safety net to protect the disadvantaged from the workings of the economics system.
      I do not know who invented the phrase "safety net". I have used it often when talking to my constituents. Perhaps it was my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph). [HON. MEMBERS: "It was Churchill."] Then it has even greater authority. As a good Tory I do not rely on edicts from the Central Office in Smith Square to tell me what Tory philosophy is or is not. I knew it when I joined the party. I know it whenever I address an audience or when I speak in the House. I know in my heart and mind what Tory philosophy and principles are. I shall not forget them tonight. My right hon. and hon. Friends should not forget them either. We must not forget the safety net.
      I have loyally supported the Government's economic policies for the past three years. I am aware of their advantages. Inflation has been reduced, greater productiv-ity has been encouraged, industry has been streamlined and over-manning has been reduced. We all know what that entails. Some people suffer. Some people are made unemployed, even if only temporarily. We all realise that disadvantages can occur. I believe in economic realism, but the party also stands for compassion. We must remember that tonight. Economic realism is important but compassion is essential.
      I was guided into the Tory Party by Rab Butler, Harold Macmillan and the reading of Disraeli's anxiety about the underprivileged nation in British society. For more than 100 years the party has tried to solve the problem of the two nations. The Conservative Party has a duty to remember its traditions. I shall vote for them tonight. I shall vote not against the Government but for my interpretation of Tory philosophy.
      6.15 pm
      Mr. John Horam: I never thought that I would wholly agree with a speech from a Tory, but the hon. Member for Canterbury (Mr. Crouch) made such a one. I congratulate him on injecting instinctive philosophy into an otherwise rather emotional occasion.
      The debate has been one-sided. I calculate that there have been 2½ hours of speeches in favour of the amendment and a speech of only 1½ minutes, if the right hon. Member for Norwich, North (Mr. Ennals) is right—
      Mr. Ennals: I exaggerated—four minutes.
      Mr. Horam: —in support of the Government's case.
      The hon. Member for Dartford (Mr. Dunn) rested his case solely on the "Why work?" syndrome. It is odd if that argument is being used to muster Conservative support for the Government. Conservative Members who have been here for some time must educate the hon. Member for Dartford on what is at issue. It is not the "Why work?" syndrome. That is a problem, but it is overwhelmed by the present scale of unemployment.
      The real problem that we must face is the gap in the living standards between those who are lucky enough to have work and those who are unlucky enough to be out of work. Moreover, acceptance of the amendment would make no difference to the "Why work?" syndrome. A sum

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      of £1·75 a week for a married couple will not make a profound difference to whether people are prepared to go to work.
      Cutting unemployment benefit is no answer to the "Why work?" syndrome. Indeed, if it were, the logical progression of the Government's course would be an additional cut in unemployment benefit. The Government have never argued in that way, nor have they ever justified the 5 per cent. cut in those terms. They have justified it as an interim measure in lieu of the taxation of benefits. As the hon. Member for Canterbury said, it is a matter of believing or not believing what the Government said to their supporters when they introduced the measure. The hon. Member for Canterbury used one of the sacred texts of the Minister, who said that
      "as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends."—[Official Report, Standing Committee B, 30 April 1980; c. 526.]
      There can be only one interpretation of such a precise statement. It is now a question of honour. Do the Government believe that they can resile from so clearly stated a position when the measure was introduced?
      The Bow Group put the matter even more brutally than the hon. Member for Canterbury. It said that:
      "the Government should restore the 5 per cent. abatement on the grounds that … the Conservative Party should not be seen to cheat."
      Mr. D.N. Campbell-Savours: Will the hon. Gentleman clarify some confusion in many of my hon. Friend's minds? If he and his colleagues in the Social Democratic Party had attended the debate in March, today's debate would not have been necessary, because we would have defeated the Government then. Where were the hon. Gentleman and his right hon. and hon. Friends on that occasion?
      Mr. Horam: The hon. Member for Workington (Mr. Campbell-Savours) should make clear why more Labour Members were not present.
      Mr. Campbell-Savours: We were all here.
      Mr. Horam: It does little good to rake over the past. Will there be sufficient hon. Members present to defeat the Government tonight? That is the more pertinent point.
      First, therefore, is there a question of honour for the Government? Certainly there is a question of good faith. That is one reason why the amendment must be accepted.
      Secondly, the amendment must be passed because the unemployed need the money. That is the most important consideration. The unemployed face the cumulative effect of the withdrawal of £1·10 for a single person and £1·75 for a married couple from the real value of unemployment benefit, the withdrawal of a further £1·90 through the recalculation of the child addition, and the abolition of the earnings-related supplement, which may mean a cut in average weekly pay of no less than £11·20. We are dealing with people who have to survive on about £50 per week—a situation difficult for most Members of Parliament to envisage, as we have rarely had to face it.
      The Government have made the position even worse than they intended. By extending the 5 per cent. cut to all the unemployed, they have affected those whose income was so low that they would not have been taxed. Therefore, it is not just the links with the taxation of benefit. People whose earnings were so low that they would otherwise have escaped tax have also been harmed
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      and have suffered as a result. Moreover, they are not people who are in and out of unemployment perhaps twice in a year. This is the core of the problem. They are the long-term unemployed, so we are dealing with real hardship and real poverty. The amendment would at least be a gesture to people facing that situation.
      Thirdly, the Government can afford the amendment. The facts are perfectly clear and are not disputed by the Treasury. The taxation of benefits would raise approximately £650 million in a full year and the amendment would cost about £60 million in a full year. Moreover, as Tory Back Benchers have made clear, we are not even talking about a full year, because we are already well into the financial year.
      There is no doubt that the moral, social and financial arguments all point in the same direction. I salute the very small band of Tories who, for that reason, have consistently proposed and supported amendments of this kind. No doubt other Conservatice Members are wrestling with their consciences on this issue. I hope that they will give themselves the chance, well away from the Whips, the party machine and the rest, to consider this calmly and with real perspective. If they did that and voted for the amendment, they would not only do something genuinely good and helpful, small though it may be, but they would help in a small way to restore the good name of their party.
      Mr. Charles Morrison: I return the compliment of the hon. Member for Gateshead, West (Mr. Horam). There was little in his speech with which I disagreed. Unemployment is high and likely to become higher in the short term. The situation is extremely serious. In the interests of national cohesion—or, as we would put it, of one nation—it is essential to give the unemployed confidence that the Government and the House at least understand their plight, limited by circumstance though our ability to cope with it may be. I cannot see how a 5 per cent. cut in unemployment benefit can help in that.
      I supported the temporary abatement of unemployment benefit as an interim measure until benefits could be brought into tax. That has now been done, so my support for the abatement is at an end. Until now, the Government's justification was, very reasonably, for a temporary abatement. If the amendment is not accepted, they will have to justify a permanent cut in unemployment benefit. Once the period in which the abatement could be justified as temporary has ended, as it has with the application of tax, in the minds of most people the abatement becomes permanent.
      So far as I can discover, unemployment benefit has been cut on only three previous occasions—in 1921, 19:28 and 1931. It would be a pity if we now added the year 1982, breaking a record of 50 years. Admittedly, we now have indexation, but the situation is entirely different because, despite the improvement, prices are still rising too sharply, whereas in 1931 they were falling.
      My right hon. Friend the former Secretary of State for Social Services gave no absolute commitment to reinstate the abatement. I realise that in taking that view I disagree with some of my hon. Friends. It seemed to me, however, that my right hon. Friend carefully qualified his remarks. Nevertheless, his words were taken by many, if not most, people as an absolute commitment. Had they not been taken in that way, I very much doubt whether the Tory Party would have agreed to the abatement.

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      Most, if not all, Tory Members who support the amendment consider ourselves traditional Tories. As my hon. Friend the Member for Chippenham (Mr. Needham) said, whether we are in or out of fashion is neither here nor there. Some of us, too, have Tory origins and connections which go back a long way—to the time when some of our forebears left a Liberal Party which was pursuing a policy of laissez-faire, or what would now be called a free market policy, to the point of harshness and hardship. Our forebears joined a Tory Party based on a philosophy of compassion and one nation.
      To me, therefore, not least because it is contrary to the traditions of the Tory Party, cuts in unemployment benefit are utterly repugnant. There are, of course, occasions in politics when some overriding need or consideration causes us to act in a way which in any other circumstances would be repugnant, but that need or consideration must be overriding. In the case before us today, I cannot see that it is.
      The Government cannot argue that ending the abatement is too expensive or more expensive than was originally envisaged, given the latest estimates of the taxation yield and the cost of restoring the abatement. Nor can they argue that it would affect the "Why work?" syndrome. Several of my hon. Friends have dealt with that. I add one further point which may sound cynical but which I believe is none the less real. Given the level of unemployment and the fact that there are between 10 and 15 unemployed for every vacancy, even if some people were encouraged to wonder "Why work?" and to decide not to do so the only effect would be to relieve the pressure on those who want to work. In any case, research by the Policy Studies Institute has shown that there is no evidence that benefits reduce the incentive to find work. I believe that that is correct.
      Nor can it be argued that the relationship between unemployment benefit and average earnings has done anything but worsen the position as my hon. Friend the Member for Chippenham said. In the present circumstances of high unemployment and low economic growth, it is a thin argument to pretend that the present unemployment benefit or an increase of it will have any effect on wage demands. Nor can it be claimed, given the quiet but no doubt sensible optimism of recent speeches by my right hon. and learned Friends the Chief Secretary and the Chancellor, that the economy is in such poor shape that it cannot withstand the cost of replacing the abatement. In any case, after overestimating the PSBR by £2 billion last year—even without taking into account the effect of the Civil Service strike—it seems inappropriate to become excited about a mere £60 million to £65 million this year.
      6.30 pm
      Nor should it be forgotten that one consequence of a cut in unemployment benefit, thus leaving many more people on social security benefit, would be to encourage people to run down their savings or capital so as to be able to qualify for social security. Yet the Tory Party is the party of savings and capital.
      For the life of me, I cannot see why any overriding consideration should overcome my repugnance at the thought of cutting unemployment benefit in that way. Nor
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      can I see how at the next election the Tory Party will gain any points from claiming that it cut unemployment benefit by 5 per cent. or even from being accused of so doing.
      Despite my remarks, the Minister of State may say that that abatement remains temporary. Perhaps in one sense it will remain temporary but I remind him that there is a danger, if not a certainty, that after today the reinstatement of unemployment benefit will be seen as an election gimmick. Rightly or wrongly, the electorate is sceptical of politicians' actions. In this instance, it would be better not to give people that opportunity for scepticism, just as it would be better to avoid the Conservative Party being accused of reducing unemployment benefit. I ask my hon. Friend to think again about accepting the amendment.
      Mr. Don Dixon: If the amendment has achieved anything, it has concentrated our minds on those who are unemployed and living on the pittance that the State gives them. Every time that we are given unemployment figures we have a debate on the subject, and as the employment figures increase, so do the crocodile tears, but no hon. Member talks about the unemployed as individuals. They are discussed in terms of percentages. The unemployed are human beings and not part of a percentage. They have the right to work. When the House divides on the amendment, I hope that we shall go some way towards helping them.
      When the hon. Member for Beeston (Mr. Lester) moved the amendment, he spoke with some compassion about the time when he was a Minister and visited an employment office. He saw the long queues of men and women waiting to sign the book and draw unemployment benefit. I know that the hon. Gentleman has compassion. That was probably why he was sacked from the Front Bench. He visited a ship repair yard in my constituency and showed that compassion to those who were unemployed and threatened with the sack.
      I speak not with the knowledge of being on the other side of the counter at the employment exchange watching the queues, but of standing in the queue and waiting to sign the book with 1½ in of pencil tied to 3 ft of string so that it cannot be stolen, and then of going along to the office to pick up my dole money at the end of the week. Society has denied the unemployed the right to fend for their families. We are talking about breadwinners who have families to keep. The hon. Member for Croydon, South (Sir W. Clark) said that people should not get married if they are unemployed and cannot afford it. That is nonsense. Both my parents were unemployed when they were married. I am glad that they got married and that they took no notice of such statements.
      The hon. Member for Gateshead, West (Mr. Horam) mentioned the "Why work?" syndrome. In my constituency the job of a receptionist at a community centre was advertised and attracted 267 applications. I do not know where all the "Why work?" syndrome people live. Millions of our unemployed would take any job tomorrow.
      We have heard many flowery speeches, some concerned speeches, and many words of three of four syllables, and have seen many crocodile tears in the House on unemployment. I have received from a constituent a letter that sums up what it is like to be unemployed:
      "Please help me! Through no fault of my own, I have been out of work for over a year now. I assure you sir I have tried, I have looked for work. Within the last year sir, I have had over 52 formal interviews within South Tyneside and out—including

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      places as far as Dover, Hull and London. Some of these interviews I've even hiked it. Even whilst I write this letter sir, I promise I am seeking fitfull employment. I feel despair, I feel degraded, no longer a member of the human race."
      The Government should show concern for such a person.
      There are more than 6,000 unemployed in my constituency. The last pit in the constituency closed a fortnight ago, and the last ship repair yard more than 12 months ago. For those 6,000 who are denied the right to work, there are 35 vacancies registered at the employment exchange. When Labour Members talk about the unemployed, they do not talk about those who have money. Many people in Britain have never done a useful day's work in their lives, but they have money. We are talking about people who must work to fend for themselves and their families—people who do not have money.
      It is bad enough being unemployed under this Government, but if one is aged over 45 and lives in the North-East it is a tragedy. I do not suggest that unemployment was introduced by the Government. In May 1979 there were 1,250,000 unemployed. Some of my colleagues on the Labour Benches have talked about acceptable levels of unemployment. There is no acceptable level of unemployment. My brother, who died two years ago, was unemployed for three years under the Labour Government. I need no lectures from either Conservative or Labour Members about unemployment. I am talking about people who are denied the right to work and who know that their only means of earning money is to work for it.
      The Government, by not accepting the amendment, are doing a disservice not only to the unemployed who vote Labour but to those who vote Conservative. I hope that Conservative Members will join us in the Lobby tonight and do something for the 3 million unemployed who are struggling on the pittance that they receive.
      Mr. Cyril D. Townsend: Unlike many of my hon. Friends, this is the first time that I have debated this subject. I trust that the words and actions of those who have signed the amendment will make it the last time. As the House knows, the stakes are high. They involve the political integrity of the Government and financial and social justice to those in our constituencies who are at present registered as unemployed.
      We have been told that the abatement was temporary—indeed, an emergency measure. Many of us will have taken the trouble to refer to the various Hansard reports. Those who have approached the subject with a fresh mind will have come to the conclusion that, when economic circumstances permitted, the abatement would be made good.
      I cannot claim to come to this debate with a fresh mind. In 1979 I was Parliamentary Private Secretary to the Minister for Social Security. I have loyally voted with the Government on every occasion that this measure has come before the House. However, on 4 July the rates of unemployment benefit for adults were brought into tax, and the position is thus totally transformed. This must be the moment for action.
      In an admirable, cool and rational leader today, The Times stated:
      "It is unsatisfactory for explicitly temporary arrangements to be continued indefinitely when the occasion for them has passed."
      Surely every right hon. and hon. Member can find truth in those words.
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      What are the arguments that the Government are shortly to deploy? I do not believe that it has been seriously suggested, for once, that the cost of £60 million is the clinching argument. Frankly, that cannot be, when the revenue savings are far outweighed by the official estimates of the revenue that will be derived in a full year from taxing benefit, and I support the taxing of benefit.
      Will the Minister seriously suggest that the PSBR is the crucial point and defend the PSBR like a lioness defends her cubs? I do not believe so, because the PSBR is falling and that is an old, tired argument that we can wisely disregard, as we disregard old carcases.
      A more subtle suggestion—I should respect my hon. Friend if he deployed it—might be that the £60 million could be better used. We all have our pet projects in social welfare, but I should hazard a guess that most of my hon. Friends would agree that the topic tonight rates high in the batting order.
      Is it really the "Why work?" syndrome? Does that keep the Minister awake in the small hours? With 3 million out of work, and the number forecast to rise, I find that argument unconvincing. The case against the "Why work?" syndrome was well argued earlier in the debate.
      Research was carried out by the Policy Studies Institute in 1980, when there was far less unemployment. It concluded:
      "In the vast majority of cases, and for 95 per cent of unemployed men there is a clear economic incentive to find work."
      I trust, therefore, that the Minister will not waste the time of the House talking too much about the "Why work?" syndrome. If the Minister says that that is the main plank of the Treasury's case, the Chancellor is wrong to seek to use a measure introduced with one aim in mind for an entirely different and highly questionable purpose.
      6.45 pm
      A remarkable letter appeared in The Times a few days ago. It was signed by the director of the National Council for Voluntary Organisations., the acting director of the National Association of Citizens' Advice Bureaux, the director of the Low Pay Unit, the director of Age Concern, the assistant director of the National Association for Mental Health, the director of Youth Aid, the director of the Child Poverty Action Group, the director of Disability Alliance, and others. The final paragraph of the letter states:
      "We hope that, if the issue can be raised again at the report stage of the Finance Bill … the Government will finally concede that, as a matter of simple political morality, it must now restore to the unemployed the money which is owed to them."
      We all have some knowledge, from our advice bureaux, of the plight of the unemployed. It would also be wise to take into account the feelings of those who produced that letter, the organisations they represent and, of course, the unemployed.
      I have said previously in the House that Treasury Ministers would be prudent to give greater care and consideration to the unemployed, who are the victims of the drive to achieve greater competitiveness in British industry.
      When, during a world recession, bigger burdens must be borne in the heat of the day, it is surely common ground in this country—and, I hope, in the Chamber—that the weakest members of society should not bear the major part of those burdens. To use a military analogy, one does not give the extra weight of ammunition to those at the back

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      of the march who are already straggling and suffering. If I had to argue my position to my constituents, I would not have much trouble in convincing them. The historic duty of the Conservative Party has been to seek to unite the many and varied groups in this great country and certainly not to exploit divisions.
      Mention has already been made of Sir Winston Churchill. Many years ago, when talking about the social problems of his day, he used the splendid phrase "Bringing the rearguard in". That was his concept of social welfare. It is a concept that since the war has proudly served the Conservative Party and our people.
      My vote for the amendment will be in support of that concept. I suggest, with respect to my right hon. and hon. Friends who will be voting against the amendment, that a vote for the Government will be in favour of letting that rearguard get further behind, increasingly isolated, dangerously dispirited and vulnerable.
      Mr. Robert C. Brown: I add my congratulations to the hon. Member for Beeston (Mr. Lester) on tabling the amendment. I remember the hon. Gentleman, as a Back Bencher, coming to see me when I was a Minister. He had considerable compassion for his constituents who were made unemployed as a result of a decision that I had to implement. I remember his tenacity in fighting the case for his constituents.
      As the hon. Member for Canterbury (Mr. Crouch) rightly said, this type of debate shows the House at its very best. I am only sorry that just before the vote is taken on the amendment the House will not be seen at its very best, because we shall then be listening to a reply from the Minister of State who will no doubt be at his smarmy best in an endeavour to convince Conservative Back Benchers that they should not take the ultimate action of voting against the Government, or even abstaining. I have the greatest sympathy for Conservative Back Benchers. I have been in exactly the same situation.
      I feel great concern for the 23,156 unemployed in the city of Newcastle upon Tyne at the last count in June, and for the 230,000 unemployed people within the Northern region. The national figures show that over 1 million people have been unemployed for longer than a year. On that basis, 8,000 people in the city of Newcastle upon Tyne have been unemployed for longer than a year, and in the Northern region 80,000 people have been unemployed for longer than a year.
      I hope that no one on the Treasury Bench, or anywhere else in the Chamber, will suggest that the 8,000 people in Newcastle who have been unemployed for a year or longer are unemployed of their own free will. I do not believe that any man has been unemployed for that long of his own volition.
      My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) talked about the man on average earnings, with two children and a non-working wife, who would immediately lose about £80 a week on first becoming unemployed. Many of my constituents who are members of my union, the General and Municipal Workers Union, and are among the 23,000 unemployed in the city of Newcastle, were earning very much less than average earnings when they were employed. It might be
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      said that the hardship that they suffer on losing their jobs is therefore not so great, and I accept that their monetary loss is not as great as that of the man on average earnings.
      We should remind ourselves that it was in November 1980 that the Government imposed the cut of 5 per cent. in real terms on the adult rates of several short-term benefits, including unemployment benefit. At that time, something else was happening that has not been mentioned in the debate so far. Those who were already swimming in very rich gravy were almost drowned in November 1980 when the extra gravy swept over them from the tax handouts of the Chancellor of the Exchequer in his earlier Budget. None of us can afford to forget that the top rates of tax were massively cut, and that even the standard rate was cut by about 3 per cent.
      There is no real issue between the House and the Government tonight in relation to the ultimate making good of the so-called abatement. It is a matter not of "if" but of "when". There can be only one time when it should be done, and that is tonight. There should be no more prevarication. The Government should accept the amendment with good grace. Indeed, the debate should not have been allowed to go on for as long as it has. The Chancellor of the Exchequer should have been here at the start of the debate and within a short time he should have been on his feet announcing, without leaving it to the Minister of State, that the Government were prepared to accept the amendment.
      In the course of the debate the hon. Member for Croydon, South (Sir W. Clark) seemed to get very agitated when my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) referred to him as the vice-chairman of the Tory Party. It was not a great error, and it was forgivable, because I understand that the hon. Gentleman is a past vice-president of the Tory Party.
      The amendment seeks to remove unemployment benefit from taxation in November of this year if the Government do not by then restore the abatement. The amendment is not motivated by an outright opposition to the taxation of benefits in principle. I certainly do not oppose in principle the taxation of any income, and I do not think that anyone can do so. The amendment is simply a device to remind the Government publicly of their duty to make good the interim abatement once unemployment becomes taxable. I remind the Minister of State that unemployment benefit became taxable a week ago yesterday. We should put matters right tonight by accepting the amendment.
      Mr. Alan Haselhurst: Tonight I shall be voting against the Government for the third time—each time on the same issue. Without getting involved in needless repetition, I should like to say why I have felt so strongly on this one issue when I have had a reasonable record of loyalty to the Government on almost everything else. To me it is a gut reaction—a political judgment.
      As a Conservative, the one thing for which I am not in politics is to hurt those who are at a disadvantage in the community. It is wrong, at a time when many people have become unemployed, to be seeking to save small amounts of money by paring away at the benefits that should be paid to them. I do not believe that is right, and I do not think that it is sensible for the Government to adopt that stance when in the not too distant future they will have to face the electorate.

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      In my view, the Government gave a commitment on the issue. If they did not give a commitment, they allowed an impression to be created. If they did not allow an impression to be created, they dropped a hint. If they did not drop a hint, there was a nod to the effect that it would be a temporary matter. In whatever way we describe in the records of the House what has taken place, most of us believed that it was a temporary provision that would be put right with all speed. That is all we are seeking to encourage the Government to do on this occasion.
      Why are the Government failing to deliver? Is it the money? It cannot be the money. Is it the "Why work?" syndrome? It cannot be the "Why work?" syndrome. Sufficient examples have been presented by my hon. Friends. Those who have any doubt about the "Why work?" syndrome may wish to give examples put to them by constituents of people who have refused to accept jobs that they have been offered, but against those examples are an equal, if not greater, number of cases from constituents who say "It has broken my heart when, having advertised a job, I have had to turn away the other 59 people." I do not believe that the "Why work?" syndrome is the correct argument for the Government to cite tonight in defence of their stubbornness.
      Is it the wrong time? That is surely the tiredest excuse in politics. The Government are in severe danger of being misunderstood by the electorate if they do not realise that their honour is bound up with making good their pledge in the period in which the taxation has come into effect.
      If the money were to be available, would it be better spent on something else? That is a question that I have heard from the Government side. Whether the Minister will refer to it tonight I do not know, but it is an extraordinary argument. On that basis, one could say that another 5 per cent. could be deducted temporarily from unemployment benefit, and then, when its restoration arose, the Government could say that it would be better to spend it on the death grant, retirement pensions or the handicapped. That is not the way to proceed.
      We are discussing the matter within the terms and confines of unemployment benefit and the needs of the unemployed. The Government are raising a large extra sum—more than they expected to raise—so there is certainly room for £60 million on this occasion.
      Is it the Government's pride that is at stake? Is it because we have become so bound up with the language of concessions and defeats that the Government find it difficult to come to the House and have a genuine change of line? If so, it is a pity. It does not help us if the Government always feel that it is somehow an act of weakness ever to concede to the arguments of right hon. and hon. Members. The Government would not be misunderstood in the country, and the party would not stand divided if they conceded. My impression—I can speak with the greatest confidence for my constituency—is that the party as a whole takes the view that we need to be as sympathetic as possible to the unemployed. It is surprised that the Government feel that this is a great issue of principle.
      7 pm
      This may be only a small point when set against the Government's strategy as a whole, but it is, as my hon. Friend the Member for Rutland and Stamford (Mr. Lewis) said, a major point of honour for most of us. I could not hold up my head when facing the unemployed in my
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      constituency or elsewhere and say that I am concerned about their plight if I do not vote for the amendment tonight. It may be that that is my individual sense of honour, but it should be the collective sense of honour of the Conservative Party.
      Mr. Frank Field: One of the advantages of catching your eye, Mr. Speaker, fairly late in the debate is that most of the arguments have been made and contributions can therefore be short. I have spent a fair amount of time listening to the debate, and the most distinguishing characteristic that has come across has not been the power with which a number of Government supporters have put the case on why they will not support the Government tonight, but that, with all the power at the Government's disposal, they have so far managed to persuade only one Conservative Member to speak in support of them.
      The hon. Member for Dartford (Mr. Dunn) stood up, swallowed hard and spoke for about four minutes. I draw attention to the shortness of his contribution, not only because I hope that all of us will follow that example in the remainder of this debate, but because in other debates the hon. Member and I have conversed across the Chamber, sometimes at great length. Normally, the hon. Member does not have any difficulty in deploying a case at length. Tonight, the only Government supporter from their Benches has managed only four minutes in defence of their case. That is worrying for the Government.
      The hon. Member for Canterbury (Mr. Crouch) was right to say that the feeling knitting the debate together was that of the House of Commons trying to make its will felt against the Government. I hope that as he and his colleagues spoke, many of my colleagues listened carefully and learnt the lesson of how important it is, should we have the opportunity to be in a similar position, to act with similar courage.
      The other theme that has knitted the debate together is that no hon. Member has disagreed with the original reason for the 5 per cent. abatement. We have moved on that issue and are now in favour of bringing all income into tax, and tonight's debate is about bringing benefit into tax. There is no dispute there, although many hon. Members on both sides of the House have reminded the Government that they first introduced the 5 per cent. when there were two problems.
      The first of these was that the abatement was a crude substitute for taxation; many people who would not pay tax would suffer the 5 per cent. deduction. The second was that while nobody had any objection to the taxation of benefits, one should not tax benefits until the tax threshold had been brought above the supplementary benefit poverty line. However, the Government went ahead and are now in difficulties of their own making.
      Many hon. Members have asked what the Government's defence of continuing the 5 per cent. abatement is now that benefits have this month been brought into tax. The hon. Member for Gateshead, West (Mr. Horam) stripped the argument down to one central point, which is that the only argument that the Government can advance is the "Why work?" syndrome. The hon. Gentleman went on to say that no hon. Member could say that people are voluntarily unemployed. No hon. Member who goes about the country, talks to his constituents, and sits in his surgery and sees the private grief of the unemployed could advance that argument.

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      I have a much more important argument against this defence of the Government's position. It is that if the 5 per cent. strategy was working the unemployment figures would show a fall. However, the unemployment figures have risen, so the strategy is not working. The strategists may assume that if one does not succeed the first time one tries and tries again. One would then be on the horrendous course of continually cutting unemployment benefit until the unemployment figures come down. To put it this way is to show that that is not an argument that can be advanced.
      I wish to introduce a different note into the debate. There is a real sense of grievance among many of the low-paid, not at the income that they might get when they are out of work, and how little different that is from their income in work, but at the amount that they pay in taxation. About 25 to 30 per cent. of wages are deducted in tax, and the real charge against the Government is that, while this is an important issue for millions of people, they do almost nothing about it.
      The farce of this debate and the farce of the Finance Bill Committee debates is that there is no mention of, and no debate on, the fact that each year we allow 50 per cent. of personal income to be exempted from tax. And yet we debate the need to bring unemployment benefit into tax when about half of gross personal income does not concern the Chancellor of the Exchequer. If we were courageous enough to start a debate about how to rein back on all those tax benefits that have grown like Topsy, we could be talking about a standard rate of tax of about 12 to 13 per cent. in the pound and could be making a major difference to the tax bill of millions of low-paid workers.
      Mr. Campbell-Savours: Regressive.
      Mr. Field: I am not advocating that we have a single standard rate of tax at 13 per cent. I am using this as an illustration of the scale of changes that one has to make if all personal income is brought into tax. It would make such a difference to the amount of revenue that the Government take that they could not only raise the tax threshold above the poverty line, but could make substantial changes in the marginal rate of tax, and there would be money to make big increases in child benefit. All the issues that we have been talking about tonight could be dealt with and we could begin to build a floor on which people could build by their own efforts rather than having a welfare system which traps them into poverty or, worse than that, into deceit.
      There are four reasons why we should support the hon. Member for Beeston (Mr. Lester) in his amendment. First, it gives a bad name to the slow process that we are starting of bringing all income into tax. There is a nasty flavour left in most people's mouths. It will be difficult enough to get the support of our constituents in the campaign to bring all income into tax without having to defend the Government on this issue.
      Secondly, it is wrong because it undermines the national insurance fund. That has been the Opposition's argument. The argument of Government Back Benchers has been that it is against Tory policy, principles and beliefs. They believe that people should be encouraged to put money away for a rainy day to look after themselves. That is done individually, and it is done collectively through the national insurance fund. We have a Tory
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      Government with a high priestess running them who preaches endlessly about the need to stand on one's own two feet, and yet the Government take measures to clobber people who do precisely that by trying to save through the insurance system. That is the second reason for supporting the amendment.
      The third reason is the sense of grievance felt by millions of low-paid workers at the amount that they lose every week in taxation. We shall remedy that grievance only if we bring most income into tax. The 5 per cent. abatement is a decoy rather than an issue for essential debate.
      There is a fourth reason, and every hon. Member who has spoken, even the hon. Member for Dartford, mentioned it, and that is that the 5 per cent. abatement is an attack on unemployed people. If we believe the Prime Minister when she puts forward the argument that it is necessary to increase the number of unemployed people so that the rest of us can benefit by a fall in the rate of inflation, then tonight we are kicking on the shins—if not higher up their anatomy—those who are bearing our unemployment.
      Mr. Matthew Parris: I apologise to my hon. Friends the Members for Beeston (Mr. Lester) and Chippenham (Mr. Needham) for missing the earlier part of their remarks. I am not on the Left, the Right or the Centre of the Party. I suppose one might say that I was elsewhere.
      I felt anxious about our failure to restore the abatement, because I served on the Social Security (No. 2) Bill Standing Committee. I asked myself which of my hon. Friends might share my anxiety so that I could educate myself a little more on the background to the issue. I thought of my hon. Friend the Member for Bristol, West (Mr. Waldegrave). It then occurred to me that there would not be much point in consulting him. I thought of my hon. Friend the Member for Watford (Mr. Garel-Jones), and a similar reason struck me. I then thought of my hon. Friend the Member for Oxford (Mr. Patten), and I realised that that would not be a sensible avenue to pursue. Something dawned on me that should have dawned on me a great deal earlier.
      I want to confine myself to the rather legalistic point that an explicit undertaking has been broken. I do not want to deal with whether this money—had we made no previous undertakings—should be spent for this purpose at this time. The hon. Member for Gateshead, West (Mr. Horam) said that all the moral, social and financial arguments pointed to the need for the money to be spent in this way. For any of the purposes for which the Government spend money to help people, there are always moral, social and financial reasons for helping them more. A decision has to be taken after the competing claims, which are not properly explored in a debate such as this, have been looked at. I should be ruled out of order if I were to detail those competing claims.
      Perhaps we should spend the money in the way suggested, but, despite what we have heard, that is capable of argument. However, it cannot be argued that an undertaking that is clearly given should be lightly broken.
      I served on the Social Security (No. 2) Bill Committee. The grounds on which my right hon. Friend the Secretary of State for Social Services, who is now the Secretary of State for Industry, was arguing for the abatement to take place were clear to me and, I am sure, to all members of

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      the Committee. It would have been open to him to argue the point upon the grounds advanced by my hon. Friend the Member for Dartford (Mr. Dunn) upon whose head much calumny has been heaped this evening. I do not agree with him, but I believe that they are intellectually respectable grounds. My right hon. Friend could have argued that unemployment benefit was too high, but he most notably did not. He simply suggested that unemployment benefit should be taxed, that it was to be taxed and that in the interim there would be a 5 per cent. abatement. Now that unemployment benefit is to be taxed, it is not honest to refuse to restore that abatement. I do not regard this as a massive betrayal of faith, nor the most shameful thing that this or any Government have done. It is a shabby thing to do. I hope that the Minister will not insist on taking us with him into the Lobby against the amendment.
      7.15 pm
      Mr. David Winnick: I apologise for not having been present earlier, but I was at a Select Committee meeting. In the speeches that we have heard, particularly those of the hon. Member for Bexleyheath (Mr. Townsend) and the hon. Member for Canterbury (Mr. Crouch), we have listened to the Tory conscience. Those Conservative Members who support the amendment have no need to justify their conduct in any way. It is those who follow the Government on this issue who need to find some justification for their vote.
      It is a simple issue of injustice. We all know the background. In November 1980 the increase in unemployment benefit was abated by 5 per cent. in lieu of taxation. Now that taxation is being applied to unemployment benefit, that 5 per cent. is not being restored. It is important to remember that we are dealing with the most vulnerable section of the community, those who are living on the lowest incomes.
      From November, unemployment benefit will be £40·45 for a married person and £25 for a single person. The action taken over the 5 per cent. is only part of the action taken by the Government against unemployed people. The earnings-related supplement was phased out and finally abolished, and that has meant that on average unemployed people have lost £11·20 a week. I find it difficult, as I have said previously, to understand how the abolition of the earnings-related supplement can in any way be justified.
      The change in child dependency has meant the loss of about £1·20 for each child of an unemployed person. Tax rebates cannot now be claimed until the end of the year. Under the new arrangement, someone who becomes unemployed, and who desperately needs all the money that he can possibly get, cannot claim the tax refund to which he is entitled until the end of the financial year.
      Hon. Members on both sides of the House have made the point that those who have saved have been penalised. My constituents, like those of other hon. Members, having become unemployed may have their redundancy money and some savings and so on, but if they have more than £2,000 they cannot claim a penny in supplementary benefit. The £500 increase—a ceiling of £2,500—from November is not sufficient. It is a disincentive to save and causes resentment.
      Constant reference has been made today to the ways in which the unemployed will be liable to taxation, but in reply to a parliamentary question I was informed that about 1¼ million, or 40 per cent., of the unemployed will not be
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      subject to tax. Their income is too low. People whose income is so low that it is not liable to tax will be penalised as well, and those subject to taxation will be doubly taxed. They will pay ordinary tax, and the 5 per cent. has been taken away from them. The system is equally unjust to both. The poorest are being hit both ways.
      That is the result of Government action. In the past two or three years the Government have benefited the richest. But the poorest people may get only £40 a week if they are married and £25 if they are single. No one in the House, including the Chancellor and the Minister of State, would try to live on that money. The people about whom we are talking are the most deprived and vulnerable and are the victims of the Government's economic policy. Even though taxation of benefits is being introduced this month they are still not receiving the 5 per cent. back. But the people with the largest incomes, who least need tax reductions, have done very well. In the past two or three Budgets their taxes have been reduced.
      One cannot help comparing how the Government treat the most prosperous and the poorest. The rich have been well rewarded with money that they do not need, while those who are trying desperately to survive are being penalised and punished. That is why even Conservatives have today spoken against, and I hope will vote against, the Government.
      The most interesting speech, I think, came from my hon. Friend the Member for Jarrow (Mr. Dixon), who understands unemployment. He mentioned his brother. He comes from a background where there are a great number of unemployed and he mixes with his constituents. I wonder whether the House always understands what it means to be unemployed, not only for the young, but for the middle-aged who have had a job and sufficient money to make ends meet for some time. Suddenly, at 45 or 50, they may become unemployed, and in parts of the country, including now the West Midlands, they have the awful prospect of being unemployed for years on end and having to live on the most limited income. They cannot properly care for their families and have to think of every penny that they spend.
      I wonder whether the Prime Minister, the Chancellor and the other members of the Cabinet appreciate the harm that they are doing to the unemployed. The amendment is justified, and I hope that it will be carried.
      Mr. Andrew F. Bennett: This has been a useful debate and many issues have been covered.
      I challenge the Chancellor and the other Treasury Ministers whether unemployment benefit is adequate. That is the central question. I challenge them to restrict their spending to that of an unemployed man for two or three months. They would quickly realise that it was not adequate. Many thousands of people find it virtually impossible to get by on the benefit.
      Last Friday I came across two constituents having a whispered row by the pre-packed meat counter in a supermarket about whether to spend a little more on a joint and enjoy the sort of meal to which they were accustomed when the husband was at work or to skimp and spend the money on something else. Many thousands have to make such choices. If Ministers listened to such conversations they would see that the benefit is not adequate.
      A constituent came to my last advice bureau apologising for being late. He had walked three miles. He wanted advice on housing, but another problem was

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      gnawing at him: how could he give his kids a holiday? He felt it was impossible to save from his unemployment benefit. All he could hope for for them was a day in Blackpool, and that would mean saving each week what he would spend on bus fares to cope with the necessities of life. Can it be said that his unemployment benefit is adequate?
      Another constituent at the same bureau blamed the Chancellor for ruining his sex life. For years he had worked shifts. The only privacy that he and his wife had was in the mornings, first when his children were at school and then when they were at work. Both his teenagers are now out of work and have to stay at home all the time because they cannot afford to go anywhere as it costs money. His children do not have sufficient money to go out and mix with their friends who are in work, thereby giving their parents some peace and quiet.
      Yet another constituent on the same occasion was upset about his debts. The family were borrowing from the rent money to pay the gas bill and from the gas money to pay the electricity bill. Two or three years ago they were a happy family with young children, but there are now continual feuds over why the debts are getting worse. The same problems crop up time and again for people on these incomes. The wife admitted to me that last week she had a row with her husband about their debts and the fact that they could not manage. He stormed out of the house. She assumed that he had gone to the pub, but he had cooled off, bought some flowers, and brought them home. Of course, she made the mistake of grumbling that that made their debts worse. One can see how the feuds are fuelled by poverty and unemployment.
      7.30 pm
      I challenge the Chacellor to say that this unemployment pay is adequate, and to tell us how he would get by on it. What about the 60-year-old in my constituency who has no chance of getting work? He not only sees the lifestyle gone that he enjoyed during the past few years, but he sees all opportunities of saving for his old age gone. He knows that, when he draws his pension at 65, it will be reduced because, for the next five years, he will not be able to contribute to the earnings-related part of it.
      I challenge the Chancellor to talk to some of the shopkeepers in my constituency. Their incomes are going down because an increasing number of their clients are on unemployment benefit and cannot afford to spend money in their shops. A constituent set himself up as a window cleaner a few years ago. He did quite well, but he has now lost almost half his clients, because they are on unemployment benefit and can no longer afford to pay someone to clean their windows. They clean their windows themselves. He sees his little business disappearing before his eyes because of the lack of money in the area to pay for such a service.
      The Chancellor should tell us whether unemployment benefit is adequate. In my opinion, it is not, and I am sure that most of my constituents who have to survive on it do not consider it adequate. They believe that he should put back the 5 per cent. immediately, and that that should be only a first step in raising unemployment benefit to an adequate level and thus avoiding the misery and hardship of the many people who are struggling to get by on inadequate incomes.
      Mr. Allen McKay: I shall not detain the House long. First, I congratulate the hon. Member for Beeston (Mr. Lester) on his amendment. Recently, I had the priviledge of serving on the Mental Health (Amendment) Bill Committee with him. I saw the House at its best in those proceedings. All disciplines were working together to bring out the best that there is in legislation.
      That spirit has continued in this debate. I am sure that the Government realise that, whatever the outcome of the vote tonight, they have lost the argument, both physically and morally. If they have any sense of honour, the Minister will acknowledge, when he comes to the Dispatch Box, that he has lost the argument and concede the amendment, because we are not asking for a lot.
      Taxation is always subject to criticism, because no one likes paying taxes. However, the unemployed are the only people who are taxed twice. Not only are they subject to income tax in the normal way, but, unless the 5 per cent. abatement is returned, they are taxed again. In my opinion, these people should never have been taxed at all. People argue that all incomes should be taxed, if that can be done with equity, but it is difficult to explain that to people who are taxed twice. It is hard to sell that argument to my constituents.
      If the Minister tells us about the workshy syndrome, he should look at what has happened in part of my constituency. In the Thorncliffe Valley, during the short period of two years, two collieries have closed. Green's foundry and Paramour's foundry have closed. Aurora Steel was closed because of the import of special steels. There were redundancies at British Steel. In fact, last week Mr. MacGregor told me that another 10,000 jobs would have to go if the industry was to slim down, and that some of those jobs would be in my constituency. Then there is Ransome and Rapier and Newton Chambers engineering works. They are all world-renowned names. Among the workers at Ransome and Rapier who will have to go are 450 craftsmen engineers and 36 apprentices. The whole training scheme and the apprentice shop will close. Never before has the area heard of 36 engineering apprentices being made redundant. That is the blight of unemployment that has hit the Thorncliffe Valley.
      I am sure that many people saw the return of the "Canberra", and many of us cheered the Army coming back from the Falkland Islands. It is ironic that some of the parents of the people whom we cheered are the people who will be hurt by this legislation.
      I have spoken to shop stewards about the situation, and they say that it is becoming harder and harder to ask people to take redundancy or early retirement. They are now looking at the £2,000 cut-off scheme, which is going up to £2,500, and the superannuation benefits or pension benefits from the trade unions, because the pound for pound that is taken off unemployment pay is also having an effect. It is no longer possible to make way for younger workers.
      The Government did great harm when they took away the earnings-related supplement. When people come to me and complain I say to them "You knew what you were voting for when you voted this Government into power, because it was spelt out—admittedly, not always very clearly." However, they did not vote for unemployment. On that, the Government have really let the people and the country down, because unemployment has risen ever since they came to power. Now the Government are putting the

      905
      boot in. Not only have people been made unemployed and their benefits cut; they are now being taxed twice. That is what the Government are doing.
      I have listened to what Conservative Members have argued today in this debate, and I am sure that they should be with us in the Lobby tonight. I was told many times the saying
      "Our country, right or wrong!",
      until I found out that there was a little bit to add to it. It is:
      "Our country, right or wrong! When right, to be kept right; when wrong, to be put right!"
      Right hon. and hon. Members how have the chance to put the Government right.
      The Minister of State, Treasury (Mr. Barney Hayhoe): I have listened to every speech in this important and serious four-hour debate. One of the themes that has run through all the speeches has been the concern felt on both sides of the House about unemployment generally and, in particular, its effects on individuals and their families. Many hon. Members have said that this is a House of Commons matter. I do not dissent from that. How could it be otherwise? The House will decide this issue by its vote tonight. That is our way, and that is why we are here.
      I congratulate my hon. Friend the Member for Beeston (Mr. Lester) on his presentation of the amendment. His humanity, moderation, commitment and concern showed through, and his speech and the speeches of many of my hon. Friends were in somewhat sharp contrast to the more strident notes of the speeches of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), and the hon. Members for Birmingham, Perry Barr (Mr. Rooker), Walsall, North (Mr. Winnick), and others. To some extent, we have had a rerun of our earlier debates of 18 March and 26 April.
      It has been said that the Government are going back on clear pledges that were given by my right hon. Friend the Secretary of State for Industry, and that there was a clear commitment by the Government to the automatic restoration of the 5 per cent. abatement when unemployment benefit was brought into taxation. In opening the debate, my hon. Friend the Member for Beeston made no such suggestion. However, that suggestion was made by the right hon. Member for Ashton-under-Lyne and several other hon. Members. My hon. Friend the Member for Beeston was right, because no such pledge was given.
      In all fairness, I should put on the record what was said by my right hon. Friend the Secretary of State for Industry, then Secretary of State for Social Services, when he gave the clear assurance that when invalidity benefit was brought into tax the 5 per cent. abatement would be restored. In Standing Committee on 29 April, he said:
      "For the other benefits affected,"—
      that includes unemployment benefit—
      "which are quite different, I cannot at this stage go beyond the more general assurance I have given that we shall consider what should be their gross rates in the light of economic and other circumstances prevailing at the time that each of them comes into tax."—[Official Report, Standing Committee B, 29 April 1980; c. 393.]
      I readily and willingly acknowledge that some of my hon. Friends, as they have said clearly in debate today, genuinely and sincerely believed that when unemployment benefit came into taxation—[Interruption.] I know the quotations as well as the hon. Gentleman. I have read them
      906
      all. I quite properly quoted one which supports the view of the hon. Member who introduced the amendment that there was no clear commitment. I believe that that is so.
      Mr. Robin F. Cook rose—
      Mr. Hayhoe: I shall not give way now.
      My right hon. and learned Friend the Chancellor of the Exchequer made it clear in his 1980 Budget that the 5 per cent. abatement decision was not taken solely as a proxy for taxation but as part of a public expenditure savings package and that it was likely to improve work incentives.
      Mr. Cook rose—
      Mr. Hayhoe: No, I shall not give way now. I have listened to the arguments. It is only fair that I should have an opportunity to reply to them.
      Mr. Cook: I refer the Minister to the most recent statement from his own Front Bench when we debated the matter last March. As has been pointed out, in the course of his speech, the Minister for Social Security said:
      "At the right time it will be made good."—[Official Report, 18 March 1982; Vol. 20, c. 536.]
      If the right time is not the moment at which unemployment benefit enters into tax, when is the right time?
      7.45 pm
      Mr. Hayhoe: I should not have given way. I shall come later to what was said by my hon. Friend the Minister for Social Security.
      I was challenging what was said by Labour Members—that a matter of honour was involved because a clear pledge and commitment had been made by my right hon. Friend. I utterly repudiate that. No such clear pledge and commitment were made.
      Mr. Rooker rose—
      Mr. Hayhoe: I shall not give way now. The yield from taxing unemployment benefit in a full year is £650 million. I confirm that the gross cost of reinstating the 5 per cent. abatement would be £60 million. It has been said that we are talking about reductions in unemployment benefit. My hon. Friend the Member for Canterbury (Mr. Crouch) said "It is not right to reduce unemployment benefit." Both he and my hon. Friend the Member for Devizes (Mr. Morrison) spoke of a cut in unemployment benefit this year. The truth is that unemployment benefit will be increased by 11 per cent. in November 1982. The argument today is whether it should be increased by 16 per cent. or 11 per cent. Those are the figures relating to the increase later this year.
      Much has been said about the 3 million unemployed. Again, as my hon. Friend the Member for Beeston made clear, fewer than one in four of the total number unemployed are directly affected. The hon. Members for Gateshead, West and Newcastle-under-Lyme (Mr. Golding) spoke of the long-term unemployed. However, they should know that those who have been unemployed for more than a year are not affected by the abatement in any way because they are not entitled to unemployment benefit after that time. They are on supplementary benefit
      We must get all these matters into perspective. The full year cost of reinstating the abatement is, as I said, £60 million. My hon. Friend the Minister for Social Security made it clear in an earlier debate that his Department has many claims for additional spending. There are many deserving causes. I have since reaffirmed that at the right

      907
      time this benefit will be made good. The matter is under review, it will be kept under review, and I can only repeat that at the right time it will be made good.
      Mr. Cook: In The Guardian yesterday we read that two Ministers had secretly conveyed a message to the rebels that the Government hoped that they would succeed with their amendment. Having listened to the Minister's brief and tawdy response to a debate involving major issues and in which several Conservative Members went to great length to explain their difficulties in supporting the Government, I am tempted to suspect that the Minister is one of the two who would like to see the amendment carried.
      I hope that the Minister will acquit me of any disrespect. Hitherto, he has been one of the Government Members for whom I have had a warm regard, but it is an offence to the House that on such a major issue, when the debate has continued for four hours and raised major issues of principle and brought into question some of the statements by senior Government Members over the past two or three years, a junior Treasury Minister should respond. The House was entitled to a reply from one of the two Cabinet Ministers.
      Hon. Gentlemen may wonder why I respond at this stage. Let me make it perfectly clear. Some Conservative Members have not been present throughout the debate. They may not be aware that this is the second intervention from the Opposition Front Bench. We take the matter seriously enough to believe that it merits two interventions. The earlier intervention was by the Opposition analogue to the Chief Secretary to the Treasury. Hon. Members who tabled the amendment were entitled to a response from the Chief Secretary or the Chancellor.
      Mr. Geoffrey Dickens: The hon. Gentleman has just claimed that Labour Members take the matter seriously. Where are the Labour Members of whom he speaks?
      Mr. Cook: We welcome the hon. Member for Huddersfield, West (Mr. Dickens) to our debate. The answer to his question will be given at the conclusion of the debate when we see who is in which Lobby. We shall watch with interest to see which Lobby the hon. Gentleman goes into.
      Mr. Dickens: It will not be the hon. Gentleman's.
      Mr. Cook: I must correct the hon. Gentleman. It is not a question of our Lobby; it is a question whether he goes into the Government Lobby or that of his hon. Friends who are seeking to save the Government from their own breach of faith.
      The House owes a debt to the courage and persistence of a number of Conservative Members who have continued to try to expose what they regard as an injustice. Once again we have seen an almost unanimous condemnation of the Government from their own Benches. As on the previous occasion when we debated this matter, only one Conservative Member could be found on the Back Benches to speak in support of the Government. This time it was the hon. Member for Dartford (Mr. Dunn), who spoke, by various estimates, for between two and four minutes and immediately rushed from the Chamber, so overcome was he by embarrassment at what he had done.
      908
      It is always difficult to know what to do in a situation like this. Perhaps the cruellest thing that an Opposition spokesman can do is to praise the Conservative Members who support the amendment. That may merely get them into even greater trouble with their Whips. Perhaps the kindest thing for us to do is to flail them mercilessly for having failed to convince their Government.
      In kindness to those hon. Members, I begin by putting on the record the fact that there is a gulf between them and the Opposition. We are not yet convinced that the Government's scheme to bring unemployment benefit into taxation is fair, practicable or necessary. On the contrary, we see the scheme as yet another demonstration of the way in which the Government are remorselessly and desperately hunting among the lower deciles of national income to find additional tax revenue so that they can give tax handouts to the wealthy.
      The hon. Member for Chippenham (Mr. Needham) asked an interesting parliamentary question last month about what tax payments would be made, as a result of the scheme, by those who are unemployed for part of the year. I point the House in particular to the column in the answer given to the hon. Gentleman that sets out the figures for a married couple on three-quarters of average income—that is an income well below the national average. If the head of the household falls unemployed in the second half of the year after the couple had been employed for the first half of the year, the household will pay £305 more in tax as a result of the scheme that we are debating. It is scandalous that we should be asking those with below average incomes to pay more, when the wealthy are time and again being asked by the Government to pay less tax. That is one division between the Opposition and the Conservative Members who support the amendment.
      However, we are with those hon. Members on the major issue that is at the centre of the debate, which is the proposal to introduce the scheme to bring unemployment benefit into tax without restoring the 5 per cent. that was docked from the benefit two years ago on the pretext—let us be clear about that—that unemployment benefit was not then taxed.
      A number of independent commentators and bodies have argued that unemployment benefit should be brought into tax. We recognise that the idea has a long and respectable pedigree. Professor Atkinson has proposed it, and the Institute of Fiscal Studies has proposed it, but each has argued that the benefit should be taxed and the proceeds from the tax revenue used to increase the benefit. Until the Government obtained success at the last general election, no one had ever seriously contended that we should bring the benefit into tax and simultaneously cut the level of the benefit. There is no excuse for that.
      As a number of hon. Members have said, the scheme will result in a large revenue to the Treasury. Hon. Members have calculated that the revenue will be 10 times the amount required to make good the 5 per cent. abatement. The pertinent figures are even clearer. One of the great unresolved mysteries of the business has been the extent to which the Treasury's estimate of the revenue has varied. Last year we were told that the revenue would be £250 million. This year the Treasury estimates that, for some unexplained reason, it will get £650 million. If the Treasury has such a wide margin of error in its calculation

      909
      of the revenue that it will receive, it obviously has not the faintest idea of how well the scheme will work when it hits the unemployed.
      We can see that the Treasury will get from taxing unemployment benefit £410 million more than it expected last year: it will have a windfall of over £400 million. In all fairness and decency, the first charge on that £400 million must be the restoration of the 5 per cent. abatement, which will cost a mere £60 million.
      The restoration of the abatement must be the first charge for a number of reasons. First, the House was led to believe that that would happen. It is necessary to take up a point made by the Minister in his brief response. He put to the House a quotation to rebut another quotation that he did not read into the record. Hon. Members have spared the Minister that other quotation, because we assumed that it was known. Since he has chosen to challenge it, let us be clear what was said. Let us also be clear that the undertaking that I shall quote was given the day after the quotation that the hon. Gentleman read into the record.
      The then Secretary of State for Social Services, referring to my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), said:
      "The hon. Gentleman asked specifically about abated unemployment benefit. That will make no difference, because as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends. It is an interim scheme in lieu of taxation. One will give way to the other."—[Official Report, Standing Committee B, 30 April 1980; c. 526.]
      It is pointless to argue whether that statement constituted a legally binding contract that would stand up in a court of law, but it is perfectly clear that the Committee was led to believe by the Secretary of State that when taxation of the benefit was brought in the 5 per cent. abatement would be restored. The right hon. Gentleman's comments lent colour to that belief. If we are now told that that is not what was intended by the right hon. Gentleman and that the Committee was wrong to draw that conclusion, we are being invited to say that we should not have taken a Minister's remarks at face value. What the right hon. Gentleman said was perfectly clear.
      The hon. Member for Derbyshire, West (Mr. Parris) suggested that this was not a large but a minor breach of faith. The House cannot tolerate a relative scale in breaches of faith. A breach of faith is a matter of absolute concern. The House, and particularly Conservative Back Benchers, cannot permit the Government to commit a breach of faith. We were led to believe that the 5 per cent. abatement would be restored when taxation was brought in. Taxation was brought in earlier this month and the 5 per cent. must, therefore, be restored.
      Another reason why the 5 per cent. abatement must be restored takes me to the speech of the hon. Member for Dartford, who argued that it was necessary to withhold the abatement because of the "Why work?" syndrome. While we have 3 million unemployed, and an increasing trend of unemployment, it is an insult to the unemployed to suggest that they are out of work because they lack the motivation, the will or the financial incentive to find work.
      I will give the hon. Member for Dartford an example from my area. Last month, Strathclyde regional council advertised 31 apprenticeships. There were 7,000 applications. It is a grotesque offence to the 6,969 children who did not get an apprenticeship to say that they are out of work because of the "Why work?" syndrome. They are out of work because they cannot find work.
      910
      8 pm
      I shall spare the House the argument about whether the Government are to blame for the 3 million unemployed. Some of us have a view on that matter, and doubtless it is not shared by the hon. Member for Beeston (Mr. Lester), who tabled the amendment. All that I would ask the House to agree, and I would ask even the hon. Member for Dartford to agree, is that the 3 million unemployed are not to blame for the fact that there is such a high level of unemployment. Because they are not to blame, it is incumbent upon us not to penalise them for being unemployed. That is the third reason why we should restore the 5 per cent.
      As my hon. Friend the Member for Perry Barr and some of my other hon. Friends have said, the withdrawal of the 5 per cent. is not an isolated act. There has been a series of cuts in the level of benefit enjoyed by the unemployed. There was the withdrawal of earnings-related supplement, the changed basis on which child additions are calculated, and the withdrawal, under this scheme of taxation, of the tax refunds. Those changes have had a major impact on the standard of living of the unemployed. Indeed, we know from the Social Security Advisory Committees latest survey that half of all those families now have an income from benefit that less than half the income that they had in work.
      Plainly, any household faced with a halving of benefit will not be troubled about a financial incentive to remain in work—members of that household will look for work. Given the dramatic reduction in the standard of living of the unemployed over the last three years, in all fairness we should accept the recommendation of the Social Security Advisory Committee and make the first priority of our increased expenditure on the social security budget the restoration of that 5 per cent.
      I shall not suggest that financial hardship is the greatest problem faced by the unemployed. I have met many unemployed in my constituency, as I am sure other hon. Member have done in theirs in the past two years. What distresses me most about them is that they are concerned not simply with financial hardship but with the humiliation of being denied a work place in society. It is through the work place that most citizens make their contribution to society. It is through their jobs that they achieve their identity with the community. It is their job that provides the most fulfilling and creative thing that they are likely to do with their lives. If we deny a man his job, if we deny him that work place, we are denying him an identity with society and robbing him of his dignity and self-respect.
      I do not suggest that if we give 5 per cent. to the unemployed we will give them back that dignity and self-respect, but we will at least go some way to ease the severe financial problems that they face. We will go some way to help them to meet the cost of searching for work—to meet the cost of the postage, the phone calls, the travel and the decent appearance that is necessary if they are to find work. Therefore, we should restore the 5 per cent. to the unemployed.
      We know that that view is shared by at least two DHSS Ministers, because The Guardian tells us so. Yesterday, it said:
      "Some Ministers at the Department of Health and Social Security are secretly hoping that the Government will be defeated tomorrow … two of them have indicated to the Tory rebels that they sympathise with the revolt."

      911
      I am invited by that article to speculate about the two Ministers concerned. Is it the Minister of State, who sat throughout most of our debate and was kept carefully bound, trussed and gagged, two Treasury Ministers away from the Dispatch Box, in case he said to us what he appears to have said to The Guardian? Is it the Undersecretary of State, the hon. Member for Braintree (Mr. Newton)? That would be a pleasing thought, because he was formerly the Finance Bill Whip. It would be pleasing to reflect that someone who spent the first two years of the Government's term of office helping to get Finance Bills enacted has now undergone such a reformation that he is seeking to undo the damage of this Finance Bill. I do not expect that we shall find out who the two Ministers are when the Division Bell rings in two or three minutes. I do not expect that we will find DHSS Ministers in the Lobby with us. I hope, though, that we shall find a large number of the hon. Members who have spoken and their hon. Friends in the Lobby with us.
      When we divided on this matter in April, we were told that that was not the time to divide the House because there were other matters that concerned the nation. This is the last chance for the House to restore the 5 per cent, before taxation takes effect. This is the day and this is the hour for hon. Members to restore that 5 per cent. The Opposition will go into the Lobby to vote enthusiastically to restore the 5 per cent. We will do it because we believe that it is an elementary justice owed to the unemployed who need that 5 per cent, and who are entitled to that 5 per cent., and the House, in all earnest decency, owes them the restoration of that 5 per cent.
      Question put, That the amendment be made:—
      The House divided: Ayes 283, Noes 291.

      Division No. 268]

      [3.40 pm

      AYES

      Adley, Robert

      Farr, John

      Alexander, Richard

      Fell, Sir Anthony

      Amery, Rt Hon Julian

      Fenner, Mrs Peggy

      Ancram, Michael

      Finsberg, Geoffrey

      Aspinwall, Jack

      Fisher, Sir Nigel

      Atkins, Rt Hon H. (S'thorne)

      Fletcher-Cooke, Sir Charles

      Atkins, Robert (Preston N)

      Fookes, Miss Janet

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

      Forman, Nigel

      Baker, Kenneth (St.M'bone)

      Fowler, Rt Hon Norman

      Baker, Nicholas (N Dorset)

      Fox, Marcus

      Banks, Robert

      Fraser, Rt Hon Sir Hugh

      Beaumont-Dark, Anthony

      Fraser, Peter (South Angus)

      Bendall, Vivian

      Garel-Jones, Tristan

      Bennett, Sir Frederic (T'bay)

      Glyn, Dr Alan

      Benyon, Thomas (A'don)

      Goodlad, Alastair

      Bevan, David Gilroy

      Gow, Ian

      Biffen, Rt Hon John

      Greenway, Harry

      Biggs-Davison, Sir John

      Griffiths, E. (B'y St. Edm'ds)

      Blackburn, John

      Griffiths, Peter Portsm'th N)

      Blaker, Peter

      Gummer, John Selwyn

      Boscawen, Hon Robert

      Hamilton, Hon A.

      Bottomley, Peter (W'wich W)

      Hamilton, Michael (Salisbury)

      Bowden, Andrew

      Hampson, Dr Keith

      Boyson, Dr Rhodes

      Hannam, John

      Braine, Sir Bernard

      Haselhurst, Alan

      Brinton, Tim

      Hastings, Stephen

      Brittan, Rt. Hon. Leon

      Hawkins, Sir Paul

      Brooke, Hon Peter

      Hawksley, Warren

      Brotherton, Michael

      Hayhoe, Barney

      Browne, John (Winchester)

      Heath, Rt Hon Edward

      Bruce-Gardyne, John

      Heddle, John

      Budgen, Nick

      Heseltine, Rt Hon Michael

      Burden, Sir Frederick

      Higgins, Rt Hon Terence L.

      Chalker, Mrs. Lynda

      Hogg, Hon Douglas (Gr'th'm)

      Channon, Rt. Hon. Paul

      Holland, Philip (Carlton)

      Chapman, Sydney

      Hunt, David (Wirral)

      Churchill, W. S.

      Hunt, John (Ravensbourne)

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

      Irvine, Bryant Godman

      Clark, Sir W. (Croydon S)

      Irving, Charles (Cheltenham)

      Clarke, Kenneth (Rushcliffe)

      Jenkln, Rt Hon Patrick

      Cockeram, Eric

      Jessel, Toby

      Cope, John

      Johnson Smith, Sir Geoffrey

      Cormack, Patrick

      Jopling, Rt Hon Michael

      Costain, Sir Albert

      Kellett-Bowman, Mrs Elaine

      Cranborne, Viscount

      Kershaw, Sir Anthony

      Douglas-Hamilton, Lord J.

      Kimball, Sir Marcus

      Dover, Denshore

      King, Rt Hon Tom

      Dunn, Robert (Dartford)

      Knox, David

      Durant, Tony

      Lamont, Norman

      Edwards, Rt Hon N. (P'broke)

      Lang, Ian

      Eggar, Tim

      Latham, Michael

      Elliott, Sir William

      Lawrence, Ivan

      Fairgrieve, Sir Russell

      Lee, John

      Faith, Mrs Sheila

      Lester, Jim (Beeston)

      859

      Lewis, Kenneth (Rutland)

      Scott, Nicholas

      Lloyd, Ian (Havant & W'loo)

      Shaw, Giles (Pudsey)

      Luce, Richard

      Shelton, William (Streatham)

      Macfarlane, Neil

      Shepherd, Richard

      MacGregor, John

      Shersby, Michael

      MacKay, John (Argyll)

      Silvester, Fred

      Macmillan, Rt Hon M.

      Sims, Roger

      McNair-Wilson, M. (N'bury)

      Skeet, T. H. H.

      Madel, David

      Smith, Dudley

      Major, John

      Smith, Tim (Beaconsfield)

      Marland, Paul

      Speed, Keith

      Marten, Rt Hon Neil

      Spicer, Jim (West Dorset)

      Mawby, Ray

      Sproat, Iain

      Mawhinney, Dr Brian

      Squire, Robin

      Maxwell-Hyslop, Robin

      Stanbrook, Ivor

      Mayhew, Patrick

      Stanley, John

      Mellor, David

      Stevens, Martin

      Miller, Hal (B'grove)

      Stewart, A. (E Renfrewshire)

      Mills, Sir Peter (West Devon)

      Stewart, Ian (Hitchin)

      Mitchell, David (Basingstoke)

      Stokes, John

      Moate, Roger

      Stradling Thomas, J.

      Montgomery, Fergus

      Tapsell, Peter

      Morris, M. (N'hampton S)

      Taylor, Teddy (S'end E)

      Morrison, Hon C. (Devizes)

      Tebbit, Rt Hon Norman

      Morrison, Hon P. (Chester)

      Temple-Morris, Peter

      Mudd, David

      Thatcher, Rt Hon Mrs M.

      Murphy, Christopher

      Thompson, Donald

      Myles, David

      Thorne, Neil (Ilford South)

      Needham, Richard

      Thornton, Malcolm

      Nelson, Anthony

      Townend, John (Bridlington)

      Neubert, Michael

      Townsend, Cyril D, (B'heath)

      Newton, Tony

      Trippier, David

      Nott, Rt Hon John

      Trotter, Neville

      Onslow, Cranley

      van Straubenzee, Sir W.

      Osborn, John

      Vaughan, Dr Gerard

      Page, John (Harrow, West)

      Viggers, Peter

      Parris, Matthew

      Waddington, David

      Patten, John (Oxford)

      Wakeham, John

      Pattie, Geoffrey

      Waller, Gary

      Pawsey, James

      Walters, Dennis

      Percival, Sir Ian

      Ward, John

      Peyton, Rt Hon John

      Warren, Kenneth

      Pink, R. Bonner

      Watson, John

      Pollock, Alexander

      Wells, Bowen

      Porter, Barry

      Wheeler, John

      Price, Sir David (Eastleigh)

      Whitelaw, Rt Hon William

      Raison, Rt Hon Timothy

      Whitney, Raymond

      Rathbone, Tim

      Wickenden, Keith

      Rees, Peter (Dover and Deal)

      Wiggin, Jerry

      Rees-Davies, W. R.

      Wilkinson, John

      Rhys Williams, Sir Brandon

      Winterton, Nicholas

      Ridley, Hon Nicholas

      Wolfson, Mark

      Ridsdale, Sir Julian

      Young, Sir George (Acton)

      Roberts, M. (Cardiff NW)

      Roberts, Wyn (Conway)

      Tellers for the Ayes:

      Rossi, Hugh

      Mr. Anthony Berry and

      Rost, Peter

      Mr. Carol Mather.

      Rumbold, Mrs A. C. R.

      NOES

      Allaun, Frank

      Campbell-Savours, Dale

      Alton, David

      Canavan, Dennis

      Archer, Rt Hon Peter

      Cant, R. B.

      Atkinson, N.(H'gey,)

      Carmichael, Neil

      Bagier, Gordon A.T.

      Carter-Jones, Lewis

      Barnett, Guy (Greenwich)

      Clark, Dr David (S Shields)

      Barnett, Rt Hon Joel (H'wd)

      Clarke, Thomas C'b'dge, A'rie

      Beith, A. J.

      Cocks, Rt Hon M. (B'stol S)

      Benn, Rt Hon Tony

      Cohen, Stanley

      Bennett, Andrew (St'kp't N)

      Coleman, Donald

      Bidwell, Sydney

      Cook, Robin F.

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

      Cowans, Harry

      Bradley, Tom

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

      Brown, Hugh D. (Provan)

      Crawshaw, Richard

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

      Crowther, Stan

      Buchan, Norman

      Cryer, Bob

      Cunliffe, Lawrence

      Martin, M (G'gow S'burn)

      Cunningham, G. (Islington S)

      Maxton, John

      Dalyell, Tam

      Maynard, Miss Joan

      Davis, Clinton (Hackney C)

      Meacher, Michael

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

      Millan, Rt Hon Bruce

      Deakins, Eric

      Mitchell, Austin (Grimsby)

      Dean, Joseph (Leeds West)

      Morris, Rt Hon A. (W'shawe)

      Dewar, Donald

      Morris, Rt Hon C. (O'shaw)

      Dixon, Donald

      Morton, George

      Dobson, Frank

      Moyle, Rt Hon Roland

      Dormand, Jack

      Newens, Stanley

      Douglas, Dick

      O'Neill, Martin

      Dubs, Alfred

      Orme, Rt Hon Stanley

      Duffy, A. E. P.

      Owen, Rt Hon Dr David

      Dunwoody, Hon Mrs G.

      Palmer, Arthur

      Eadie, Alex

      Park, George

      Eastham, Ken

      Parry, Robert

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

      Pendry, Tom

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

      Penhaligon, David

      Ellis, Tom (Wrexham)

      Price, C. (Lewisham W)

      English, Michael

      Radice, Giles

      Ennals, Rt Hon David

      Rees, Rt Hon M (Leeds S)

      Faulds, Andrew

      Richardson, Jo

      Flannery, Martin

      Roberts, Albert (Normanton)

      Fletcher, Ted (Darlington)

      Roberts, Gwilym (Cannock)

      Ford, Ben

      Robertson, George

      Forrester, John

      Robinson, G. (Coventry NW)

      Foster, Derek

      Rooker, J. W.

      Foulkes, George

      Roper, John

      Freud, Clement

      Ross, Ernest (Dundee West)

      Garrett, John (Norwich S)

      Ross, Stephen (Isle of Wight)

      Garrett, W. E. (Wallsend)

      Sever, John

      Golding, John

      Sheerman, Barry

      Gourlay, Harry

      Sheldon, Rt Hon R.

      Graham, Ted

      Shore, Rt Hon Peter

      Grimond, Rt Hon J.

      Short, Mrs Renée

      Hamilton, James (Bothwell)

      Silkin, Rt Hon J. (Deptford)

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

      Silverman, Julius

      Hardy, Peter

      Skinner, Dennis

      Harrison, Rt Hon Walter

      Smith, Cyril (Rochdale)

      Hattersley, Rt Hon Roy

      Soley, Clive

      Haynes, Frank

      Spriggs, Leslie

      Healey, Rt Hon Denis

      Stallard, A. W.

      Heffer, Eric S.

      Steel, Rt Hon David

      Hogg, N. (E Dunb't'nshire)

      Stewart, Rt Hon D. (W Isles)

      Home Robertson, John

      Stoddart, David

      Hooley, Frank

      Strang, Gavin

      Horam, John

      Straw, Jack

      Hoyle, Douglas

      Summerskill, Hon Dr Shirley

      Huckfield, Les

      Taylor, Mrs Ann (Bolton W)

      Hughes, Mark (Durham)

      Thomas, Dafydd (Merioneth)

      Hughes, Robert (Aberdeen N)

      Thorne, Stan (Preston South)

      Hughes, Roy (Newport)

      Torney, Tom

      Jay, Rt Hon Douglas

      Urwin, Rt Hon Tom

      Jenkins, Rt Hon Roy (Hillh'd)

      Wainwright, E. (Dearne V)

      John, Brynmor

      Wainwright, R. (Colne V)

      Johnson, James (Hull West)

      Wellbeloved, James

      Jones, Rt Hon Alec (Rh'dda)

      Welsh, Michael

      Kaufman, Rt Hon Gerald

      Whitehead, Phillip

      Lamond, James

      Whitlock, William

      Leadbitter, Ted

      Wigley, Dafydd

      Leighton, Ronald

      Willey, Rt Hon Frederick

      Lewis, Ron (Carlisle)

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

      Litherland, Robert

      Wilson, Gordon (Dundee E)

      Lofthouse, Geoffrey

      Winnick, David

      Lyons, Edward (Bradf'd W)

      Woodall, Alec

      Mabon, Rt Hon Dr J. Dickson

      Woolmer, Kenneth

      McCartney, Hugh

      Wrigglesworth, Ian

      McDonald, Dr Oonagh

      Wright, Sheila

      McElhone, Frank

      Young, David (Bolton E)

      MacKenzie, Rt Hon Gregor

      McNally, Thomas

      Tellers for the Noes:

      Marks, Kenneth

      Mr. Allen McKay and

      Marshall, Jim (Leicester S)

      Dr. Edmund Marshall.

      Division No. 269]

      [8.05 pm

      AYES

      Abse, Leo

      Cartwright, John

      Adams, Allen

      Clark, Dr David (S Shields)

      Allaun, Frank

      Clarke, Thomas C'b'dge,A'rie

      Alton, David

      Cocks, Rt Hon M. (B'stol S)

      Anderson, Donald

      Cohen, Stanley

      Archer, Rt Hon Peter

      Coleman, Donald

      Ashley, Rt Hon Jack

      Concannon, Rt Hon J. D.

      Ashton, Joe

      Cook, Robin F.

      Atkinson, N.(H'gey,)

      Cormack, Patrick

      Bagier, Gordon A.T.

      Cowans, Harry

      Barnett, Guy (Greenwich)

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

      Barnett, Rt Hon Joel (H'wd)

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

      Beith, A. J.

      Crawshaw, Richard

      Benn, Rt Hon Tony

      Critchley, Julian

      Bennett, Andrew (St'kp't N)

      Crouch, David

      Benyon, Thomas (A'don)

      Crowther, Stan

      Booth, Rt Hon Albert

      Cryer, Bob

      Boothroyd, Miss Betty

      Cunliffe, Lawrence

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

      Cunningham, G. (Islington S)

      Bradley, Tom

      Cunningham, Dr J. (W'h'n)

      Bray, Dr Jeremy

      Dalyell, Tam

      Brocklebank-Fowler, C.

      Davidson, Arthur

      Brown, Hugh D. (Provan)

      Davies, Rt Hon Denzil (L'lli)

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

      Davis, Clinton (Hackney C)

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

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

      Brown, Ron (E'burgh, Leith)

      Deakins, Eric

      Buchan, Norman

      Dean, Joseph (Leeds West)

      Callaghan, Rt Hon J.

      Dewar, Donald

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

      Dixon, Donald

      Campbell, Ian

      Dobson, Frank

      Campbell-Savours, Dale

      Dormand, Jack

      Canavan, Dennis

      Dorrell, Stephen

      Cant, R. B.

      Douglas, Dick

      Carmichael, Neil

      Dubs, Alfred

      Carter-Jones, Lewis

      Duffy, A. E. P.

      912

      Dunnett, Jack

      Mabon, Rt Hon Dr J. Dickson

      Dunwoody, Hon Mrs G.

      McCartney, Hugh

      Eadie, Alex

      McDonald, Dr Oonagh

      Eastham, Ken

      McElhone, Frank

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

      McGuire, Michael (Ince)

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

      McKelvey, William

      Ellis, Tom (Wrexham)

      MacKenzie, Rt Hon Gregor

      English, Michael

      Maclennan, Robert

      Ennals, Rt Hon David

      McMahon, Andrew

      Evans, loan (Aberdare)

      McNally, Thomas

      Evans, John (Newton)

      McNamara, Kevin

      Ewing, Harry

      McTaggart, Robert

      Faulds, Andrew

      McWilliam, John

      Field, Frank

      Madel, David

      Fitch, Alan

      Magee, Bryan

      Flannery, Martin

      Marks, Kenneth

      Fletcher, Ted (Darlington)

      Marshall, D (G'gow S'ton)

      Foot, Rt Hon Michael

      Marshall, Dr Edmund (Goole)

      Ford, Ben

      Marshall, Jim (Leicester S)

      Forrester, John

      Martin, M (G'gow S'burn)

      Foster, Derek

      Mason, Rt Hon Roy

      Foulkes, George

      Maxton, John

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

      Maynard, Miss Joan

      Freeson, Rt Hon Reginald

      Meacher, Michael

      Freud, Clement

      Mellish, Rt Hon Robert

      Garrett, John (Norwich S)

      Mikardo, Ian

      Garrett, W. E. (Wallsend)

      Millan, Rt Hon Bruce

      Ginsburg, David

      Miller, Dr M. S. (E Kilbride)

      Golding, John

      Mitchell, Austin (Grimsby)

      Gourlay, Harry

      Mitchell, R. C. (Soton Itchen)

      Graham, Ted

      Morris, Rt Hon A. (W'shawe)

      Grant, John (Islington C)

      Morris, Rt Hon C. (O'shaw)

      Grimond, Rt Hon J.

      Morrison, Hon C. (Devizes)

      Hamilton, James (Bothwell)

      Moyle, Rt Hon Roland

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

      Needham, Richard

      Hardy, Peter

      Newens, Stanley

      Harrison, Rt Hon Walter

      Oakes, Rt Hon Gordon

      Hart, Rt Hon Dame Judith

      Ogden, Eric

      Haselhurst, Alan

      O'Halloran, Michael

      Hattersley, Rt Hon Roy

      O'Neill, Martin

      Haynes, Frank

      Orme, Rt Hon Stanley

      Healey, Rt Hon Denis

      Owen, Rt Hon Dr David

      Heffer, Eric S.

      Palmer, Arthur

      Hicks, Robert

      Park, George

      Hogg, N. (E Dunb't'nshire)

      Parker, John

      Holland, S. (L'b'th, Vauxh'll)

      Parry, Robert

      Home Robertson, John

      Pavitt, Laurie

      Homewood, William

      Pendry, Tom

      Hooley, Frank

      Penhaligon, David

      Horam, John

      Pitt, William Henry

      Howell, Rt Hon D.

      Powell, Rt Hon J.E. (S Down)

      Howells, Geraint

      Powell, Raymond (Ogmore)

      Hoyle, Douglas

      Prescott, John

      Huckfield, Les

      Price, C. (Lewisham W)

      Hudson Davies, Gwilym E.

      Race, Reg

      Hughes, Mark (Durham)

      Radice, Giles

      Hughes, Robert (Aberdeen N)

      Rees, Rt Hon M (Leeds S)

      Hughes, Roy (Newport)

      Rhys Williams, Sir Brandon

      Janner, Hon Greville

      Richardson, Jo

      Jay, Rt Hon Douglas

      Roberts, Albert (Normanton)

      Jenkins, Rt Hon Roy (Hillh'd)

      Roberts, Allan (Bootle)

      John, Brynmor

      Roberts, Ernest (Hackney N)

      Johnson, James (Hull West)

      Roberts, Gwilym (Cannock)

      Johnson, Walter (Derby S)

      Robertson, George

      Jones, Rt Hon Alec (Rh'dda)

      Robinson, G. (Coventry NW)

      Jones, Barry (East Flint)

      Rodgers, Rt Hon William

      Kaufman, Rt Hon Gerald

      Rooker, J. W.

      Kilroy-Silk, Robert

      Roper, John

      Kinnock, Neil

      Ross, Ernest (Dundee West)

      Knox, David

      Ross, Stephen (Isle of Wight)

      Lambie, David

      Ross, Wm. (Londonderry)

      Lamond, James

      Rowlands, Ted

      Leadbitter, Ted

      Ryman, John

      Leighton, Ronald

      Sever, John

      Lester, Jim (Beeston)

      Sheerman, Barry

      Lestor, Miss Joan

      Sheldon, Rt Hon R.

      Lewis, Ron (Carlisle)

      Shore, Rt Hon Peter

      Litherland, Robert

      Short, Mrs Renée

      Lofthouse, Geoffrey

      Silkin, Rt Hon J. (Deptford)

      Lyons, Edward (Bradf'd W)

      Silkin, Rt Hon S. C. (Dulwich)

      913

      Silverman, Julius

      Wainwright, E. (Dearne V)

      Skinner, Dennis

      Wainwright, R. (Colne V)

      Smith, Cyril (Rochdale)

      Walker, Rt Hon H. (D'caster)

      Smith, Rt Hon J. (N Lanark)

      Walters, Dennis

      Soley, Clive

      Weetch, Ken

      Spearing, Nigel

      Wellbeloved, James

      Spriggs, Leslie

      Welsh, Michael

      Squire, Robin

      White, Frank R.

      Stallard, A. W.

      White, J. (G'gow Pollok)

      Steel, Rt Hon David

      Whitehead, Phillip

      Stewart, Rt Hon D. (W Isles)

      Whitlock, William

      Stoddart, David

      Wigley, Dafydd

      Stott, Roger

      Willey, Rt Hon Frederick

      Strang, Gavin

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

      Straw, Jack

      Williams, Rt Hon Mrs (Crosby)

      Summerskill, Hon Dr Shirley

      Wilson, Gordon (Dundee E)

      Tapsell, Peter

      Wilson, Rt Hon Sir H. (H'ton)

      Taylor, Mrs Ann (Bolton W)

      Wilson, William (C'try SE)

      Thomas, Dafydd (Merioneth)

      Winnick, David

      Thomas, Jeffrey (Abertillery)

      Woodall, Alec

      Thomas, Dr R. (Carmarthen)

      Woolmer, Kenneth

      Thorne, Stan (Preston South)

      Wrigglesworth, Ian

      Tilley, John

      Wright, Sheila

      Tinn, James

      Young, David (Bolton E)

      Torney, Tom

      Townsend, Cyril D, (B'heath)

      Tellers for the Ayes:

      Urwin, Rt Hon Tom

      Mr. Allen McKay and

      van Straubenzee, Sir W.

      Mr. George Morton.

      Varley, Rt Hon Eric G.

      NOES

      Adley, Robert

      Carlisle, Kenneth (Lincoln)

      Aitken, Jonathan

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

      Alexander, Richard

      Chalker, Mrs. Lynda

      Alison, Rt Hon Michael

      Channon, Rt. Hon. Paul

      Amery, Rt Hon Julian

      Chapman, Sydney

      Ancram, Michael

      Churchill, W. S.

      Arnold, Tom

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

      Aspinwall, Jack

      Clark, Sir W. (Croydon S)

      Atkins, Rt Hon H.(S'thorne)

      Clarke, Kenneth (Rushcliffe)

      Atkins, Robert (Preston N)

      Clegg, Sir Walter

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

      Cockeram, Eric

      Baker, Kenneth(St.M'bone)

      Colvin, Michael

      Baker, Nicholas (N Dorset)

      Cope, John

      Banks, Robert

      Corrie, John

      Beaumont-Dark, Anthony

      Costain, Sir Albert

      Bendall, Vivian

      Cranborne, Viscount

      Bennett, Sir Frederic (T'bay)

      Dickens, Geoffrey

      Benyon, W. (Buckingham)

      Douglas-Hamilton, Lord J.

      Best, Keith

      Dover, Denshore

      Bevan, David Gilroy

      du Cann, Rt Hon Edward

      Biffen, Rt Hon John

      Dunn, Robert (Dartford)

      Biggs-Davison, Sir John

      Durant, Tony

      Blackburn, John

      Eden, Rt Hon Sir John

      Blaker, Peter

      Edwards, Rt Hon N. (P'broke)

      Body, Richard

      Eggar, Tim

      Bonsor, Sir Nicholas

      Elliott, Sir William

      Boscawen, Hon Robert

      Emery, Sir Peter

      Bottomley, Peter (W'wich W)

      Eyre, Reginald

      Bowden, Andrew

      Fairbairn, Nicholas

      Boyson, Dr Rhodes

      Fairgrieve, Sir Russell

      Braine, Sir Bernard

      Faith, Mrs Sheila

      Bright, Graham

      Farr, John

      Brinton, Tim

      Fell, Sir Anthony

      Brittan, Rt. Hon. Leon

      Fenner, Mrs Peggy

      Brooke, Hon Peter

      Finsberg, Geoffrey

      Brotherton, Michael

      Fisher, Sir Nigel

      Brown, Michael (Brigg & Sc'n)

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

      Browne, John (Winchester)

      Fletcher-Cooke, Sir Charles

      Bruce-Gardyne, John

      Fookes, Miss Janet

      Bryan, Sir Paul

      Forman, Nigel

      Buchanan-Smith, Rt. Hon. A.

      Fowler, Rt Hon Norman

      Buck, Antony

      Fox, Marcus

      Budgen, Nick

      Fraser, Rt Hon Sir Hugh

      Bulmer, Esmond

      Fraser, Peter (South Angus)

      Burden, Sir Frederick

      Fry, Peter

      Butcher, John

      Gardiner, George (Reigate)

      Butler, Hon Adam

      Gardner, Edward (S Fylde)

      Cadbury, Jocelyn

      Garel-Jones, Tristan

      Carlisle, John (Luton West)

      Glyn, Dr Alan

      914

      Goodhart, Sir Philip

      Moate, Roger

      Goodhew, Sir Victor

      Monro, Sir Hector

      Goodlad, Alastair

      Montgomery, Fergus

      Gorst, John

      Moore, John

      Gow, Ian

      Morris, M. (N'hampton S)

      Gower, Sir Raymond

      Morrison, Hon P. (Chester)

      Grant, Anthony (Harrow C)

      Mudd, David

      Gray, Hamish

      Murphy, Christopher

      Greenway, Harry

      Myles, David

      Grieve, Percy

      Neale, Gerrard

      Griffiths, E. (B'y St. Edm'ds)

      Nelson, Anthony

      Griffiths, Peter Portsm'th N)

      Neubert, Michael

      Grylls, Michael

      Newton, Tony

      Gummer, John Selwyn

      Normanton, Tom

      Hamilton, Hon A.

      Nott, Rt Hon John

      Hamilton, Michael (Salisbury)

      Onslow, Cranley

      Hampson, Dr Keith

      Oppenheim, Rt Hon Mrs S.

      Hannam,John

      Osborn, John

      Hastings, Stephen

      Page, John (Harrow, West)

      Havers, Rt Hon Sir Michael

      Page, Richard (SW Herts)

      Hawkins, Sir Paul

      Parkinson, Rt Hon Cecil

      Hawksley, Warren

      Parris, Matthew

      Hayhoe, Barney

      Patten, John (Oxford)

      Heath, Rt Hon Edward

      Pattie, Geoffrey

      Heddle, John

      Pawsey, James

      Henderson, Barry

      Percival, Sir Ian

      Heseltine, Rt Hon Michael

      Peyton, Rt Hon John

      Higgins, Rt Hon Terence L.

      Pink, R. Bonner

      Hill, James

      Pollock, Alexander

      Hogg, Hon Douglas (Gr'th'm)

      Porter, Barry

      Holland, Philip (Carlton)

      Prentice, Rt Hon Reg

      Hooson, Tom

      Price, Sir David (Eastleigh)

      Hordern, Peter

      Prior, Rt Hon James

      Howe, Rt Hon Sir Geoffrey

      Proctor, K. Harvey

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

      Pym, Rt Hon Francis

      Howell, Ralph (N Norfolk)

      Raison, Rt Hon Timothy

      Hunt, David (Wirral)

      Rathbone, Tim

      Hurd, Rt Hon Douglas

      Rees, Peter (Dover and Deal)

      Irvine, Bryant Godman

      Rees-Davies, W. R.

      Irving, Charles (Cheltenham)

      Renton, Tim

      Jenkin, Rt Hon Patrick

      Ridley, Hon Nicholas

      Jessel, Toby

      Ridsdale, Sir Julian

      Johnson Smith, Sir Geoffrey

      Rifkind, Malcolm

      Jopling, Rt Hon Michael

      Rippon, Rt Hon Geoffrey

      Joseph, Rt Hon Sir Keith

      Roberts, M. (Cardiff NW)

      Kaberry, Sir Donald

      Roberts, Wyn (Conway)

      Kellett-Bowman, Mrs Elaine

      Rossi, Hugh

      Kershaw, Sir Anthony

      Rost, Peter

      Kimball, Sir Marcus

      Royle, Sir Anthony

      King, Rt Hon Tom

      Rumbold, Mrs A. C. R.

      Knight, Mrs Jill

      Sainsbury, Hon Timothy

      Lamont, Norman

      St. John-Stevas, Rt Hon N.

      Lang, Ian

      Scott, Nicholas

      Latham, Michael

      Shaw, Giles (Pudsey)

      Lawrence, Ivan

      Shelton, William (Streatham)

      Lawson, Rt Hon Nigel

      Shepherd, Colin (Hereford)

      Lee, John

      Shepherd, Richard

      Le Marchant, Spencer

      Shersby, Michael

      Lennox-Boyd, Hon Mark

      Silvester, Fred

      Lloyd, Ian (Havant & W'loo)

      Sims, Roger

      Lloyd, Peter (Fareham)

      Skeet, T. H. H.

      Loveridge, John

      Smith, Dudley

      Luce, Richard

      Smith, Tim (Beaconsfield)

      Lyell, Nicholas

      Speed, Keith

      Macfarlane, Neil

      Speller, Tony

      MacGregor, John

      Spence, John

      MacKay, John (Argyll)

      Spicer, Jim (West Dorset)

      McNair-Wilson, M. (N'bury)

      Spicer, Michael (S Worcs)

      McNair-Wilson, P. (New F'st)

      Sproat, Iain

      Major, John

      Stainton, Keith

      Marland, Paul

      Stanbrook, Ivor

      Marten, Rt Hon Neil

      Stanley, John

      Maude, Rt Hon Sir Angus

      Steen, Anthony

      Mawby, Ray

      Stevens, Martin

      Mawhinney, Dr Brian

      Stewart, A. (E Renfrewshire)

      Mayhew, Patrick

      Stewart, Ian (Hitchin)

      Mellor, David

      Stokes, John

      Mills, Iain (Meriden)

      Stradling Thomas, J.

      Mills, Sir Peter (West Devon)

      Taylor, Teddy (S'end E)

      Mitchell, David (Basingstoke)

      Tebbit, Rt Hon Norman

      915

      Temple-Morris, Peter

      Watson, John

      Thatcher, Rt Hon Mrs M.

      Wells, Bowen

      Thomas, Rt Hon Peter

      Wells, John (Maidstone)

      Thompson, Donald

      Wheeler, John

      Thorne, Neil (Ilford South)

      Whitelaw, Rt Hon William

      Thornton, Malcolm

      Whitney, Raymond

      Townend, John (Bridlington)

      Wickenden, Keith

      Trippier, David

      Wiggin, Jerry

      Trotter, Neville

      Wilkinson, John

      Vaughan, Dr Gerard

      Williams, D.(Montgomery)

      Viggers, Peter

      Winterton, Nicholas

      Waddington, David

      Wolfson, Mark

      Wakeham, John

      Young, Sir George (Acton)

      Waldegrave, Hon William

      Younger, Rt Hon George

      Walker, Rt Hon P.(W'cester)

      Walker, B. (Perth)

      Tellers for the Noes:

      Waller, Gary

      Mr. Anthony Berry and

      Ward, John

      Mr. Carol Mather.

      Warren, Kenneth

      Question accordingly negatived.
      Mr. Peter Shore: We have had a remarkable vote, one of the closest votes certainly in this Parliament, and certainly on this Finance Bill.
      Mr. Straw: The closest vote.
      Mr. Shore: Indeed, the closest vote in the whole of this Parliament. The vote was on a matter on which the House of Commons was ranged against the Executive. I should like to think that the Chancellor of the Exchequer, who again is an absentee from the House and, if not, the Chief Secretary, will consider carefully the meaning of the vote and the fact that 44 members of his own party have voted against the Government. I hope that he will be prepared to come to the House again and tell us when he intends to honour the implicit commitment to make good the 5 per cent.

    Clause 37

      SHARE OPTIONS
      The Financial Secretary to the Treasury (Mr. Nicholas Ridley): I beg to move amendment No. 58, in page 32, line 15, after 'which', insert
      ', subject to subsection (1A) below,'.
      Mr. Speaker: With this we may take Government amendments Nos. 59 to 61.
      Mr. Ridley: It might be for the convenience of the House if we were to discuss also Government amendment No. 62, and amendment No. 63, in page 32, line 31, leave out 'thirty days' and insert 'one year.'.
      Mr. Speaker: If there is no objection to that, so be it.
      Mr. Ridley: The amendments are four minor relieving provisions to the clause, which deals with the option of spreading the tax on the exercise of a share option over a three-year period. I believe that they raise no issues of substance. I hope that the House will accept them.
      Amendment agreed to.
      Amendments made: No. 59, in page 32, line 18, leave out 'obtained' and insert 'granted'.
      No. 60, in page 32, line 18, leave out 'and' and insert 'or, if the right was granted before 6 April 1982, 90 per cent. of that market value; and'.
      No. 61, in page 32, line 29, at end insert—
      '(1A) Shares which are acquired for a consideration less than that required by paragraph (b) of subsection (1) above by reason only of a diminution in the market value of shares of that class
      916
      (determined as aforesaid) which is attributable solely to the share capital of the company issuing the shares being varied after the right to acquire the shares was granted, shall for the purpose of that paragraph be regarded as having been acquired for a consideration not less than that required by that paragraph.'.
      No. 62, in page 32, line 31, leave out 'thirty' and insert sixty'.—[Mr. Ridley.]

    Clause 40

      BENEFITS IN KIND: VOUCHERS
      The Chief Secretary of the Treasury (Mr. Leon Brittan): I beg to move amendment No. 64, in line 18, leave out from 'which' to end of line 20 and insert
      'the voucher is handed over in exchange for money, goods or services (a voucher which is posted being treated as handed over at the time of posting).'
      This is a technical amendment that concerns the date on which an employee who uses a cheque voucher is deemed to secure a benefit. The words deleted tie the benefit to the obtaining of money, goods or services. The amendment ties it to the tendering or the posting of the cheque. There can be only one date on which a cheque is tendered or posted and the amendment is designed to avoid possible doubt or difficulty about the date on which a charged tax arises. I commend the amendment to the House.
      Amendment agreed to.
      Mr. Cook: I beg to move amendment No. 65, in page 35, line 34, after '1982' insert
      'former employees of a passenger transport undertaking under arrangements in operation on 31st December 1969 or'.
      Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will be convenient to take amendment No. 66, in page 35, line 37, at end insert—
      '(aa) his former employer'.
      Mr. Cook: The origins of the amendment go back to last year when the Committee debated the provision in the Finance Bill to bring transport vouchers within tax. As a result of representations from the Opposition, the Chief Secretary gave a commitment on Report to protect employees of British Rail and other transport undertakings from the effect of the change in the law so that the traditional arrangements by which those concessions were not liable to tax were preserved. We are grateful to the Chief Secretary for honouring that commitment in this year's Finance Bill.
      Since the matter was considered in Committee—when we passed the clause that gave effect to last year's undertaking—it has emerged that a small group of people who previously benefited from the traditional tax arrangement will apparently be outwith the scope of the clause as drafted. They are former employees of British Rail who have been transferred to other transport undertakings that have been created by Act of Parliament. The most obvious is the National Freight Corporation. Many former employees of British Rail were transferred to the NFC when it was set up, especially National Carriers. A smaller group of people are employed by other transport undertakings—for example, the docks. All are in the public sector and all were set up by legislation. In every case, the employees were transferred from British Rail to their new employer by an Act of Parliament, not by their own actions. The employees did not choose to change their employers. Although they continued to work

      917
      at the same place and do the same job, by a change in the law, they discovered that their employers had been changed from one public sector undertaking to another.
      Anyone who has been recruited by those companies in the past 13 years is not eligible for any transport concession from British Rail. Only those who were employees of British Rail in the late 1960s, when the new arrangement was created, obtain travel concessions. As part of the transfer arrangements and to ensure that there was no worsening of conditions, those employees continued to enjoy the same transport concessions as employees of British Rail.
      As a result of the drafting of the clause, such employees will now be liable to tax on the travel concession, although their former colleagues in British Rail who have remained in its employ will not be liable to tax on the same transport concession. It is unclear how those who were not liable to tax under the previous arrangement should now, under the clause as drafted, be brought within the scope of tax.
      I hope that the Chief Secretary will say that this anomaly is the result of an oversight—that those people have been forgotten 13 years after being transferred from British Rail to another employer. I hope that, if he cannot accept the amendment, he will accept the principle of our anxiety and ensure that they will be protected from tax on a concession on which other employees of transport undertakings will not be taxed.
      8.30 pm
      Mr. Brittan: I was aware of the concern of the hon. Member for Edinburgh, Central (Mr. Cook) before he tabled the amendment, as representations on these lines had been made. As the hon. Gentleman was good enough to say, we have honoured the undertaking that I gave in Standing Committee on last year's Finance Bill, and naturally I wanted to consider carefully whether the principle embodied in the change enacted pursuant to that undertaking required or necessitated the hon. Gentleman's further amendment.
      I must tell the hon. Gentleman that I do not accept his argument in this instance. Last year's Bill contained a provision to ensure that, when employers bought season tickets for their employees, the cost of those tickets should be assessable as a benefit to the employee. That was generally accepted to be right.
      On Report last year, the hon. Member for Edinburgh, Central himself said:
      "We accept that it is right and proper that if an employer furnishes a transport voucher to his employees to enable them to buy season tickets for use on the railways, it is proper that the employees should be taxed on the benefit in kind that they receive as a result."
      That seems a generally acceptable principle. He went on to explain that the official Opposition had not challenged the clause in Committee because they understood that it did not disturb the basis of assessment laid down in the 1975 (No. 2) Act,
      "that the employee will be taxed by an amount equal to the expense incurred by the person providing the voucher.—[Official Report, 15 July 1981; Vol. 8, c. 1318.]
      The whole argument about transport undertakings was on the basis that it was difficult in cases such as British Rail to establish that any real cost at all was incurred by the employer in providing travel concessions for its own employees. In the course of that debate, I said that the Inland Revenue was examining the argument that British Rail incurred no expense in providing privilege travel
      918
      concessions for its employees. In the event, the Inland Revenue—I wholly concur with its conclusions—was not persuaded that the argument was valid. None the less, to fulfil my promise not to disturb the status quo in relation to British Rail, the relevant provision was introduced in the Bill.
      There was never any question, however, of extending such an exemption to employees of bodies which actually made payments for travel concessions.
      Mr. Cook rose—
      Mr. Brittan: If the hon. Gentleman will contain himself for a moment, I am sure that he will have the opportunity to intervene at the appropriate moment. I have not yet reached the nub of the argument, although the hon. Gentleman, with his customary acuity, has no doubt anticipated it well in advance.
      There was never any question of extending such an exemption to employees of bodies which actually made a payment to a transport undertaking to secure travel concessions and I can see no justification, consonant with the principle on which we have operated, for extending exemption to those whose free or cheaper travel has been paid for. The hon. Gentleman himself accepts the principle that the measure of the benefit should be the amount of expense incurred by the person providing the benefit.
      A limited group of people who have been receiving benefit may now find that they have to pay a tax which they would otherwise not have been obliged to pay, but we cannot really envisage people carrying a tax exemption with them as a portmanteau donation for the rest of their lives, or even for the rest of their working lives. The normal incidence of tax changes which are justifiable on the ordinary principles of tax, and on the principle which the hon. Gentleman has agreed is appropriate, must therefore apply. Whether or not, as a result of any adverse effect on the total financial position of the people affected, there are grounds for any other adjustments of their general emoluments is a matter not for revenue law, nor for the House, nor indeed for the Government on this occasion. Therefore, the principle that we could not accept, but for which I see a case, has been fully honoured by the propositions that we put forward. I cannot go further and accept the hon. Gentleman's amendment.
      Amendment negatived.

    Clause 42

      BENEFITS IN KIND: CARS AND CAR FUEL
      Mr. Robert Sheldon: I beg to move amendment No. 67, in page 39, line 15 leave out subsection (6).
      We are on the old familiar territory of benefits in kind and considering an extension of them to cover access to motor cars. In this case we are dealing with fuel. Under the existing legislation no benefits in kind are held to obtain from the provision by the employer of fuel. That loophole has existed for some time and the Government have now rightly brought forward this legislation, but unfortunately they are proposing a change in the period of introduction from 1983–84 to 1984–85. It is not easy to see why there is a need for such delay in this important matter.
      The problem with which the House is concerned is the entire operation of benefits in kind as they apply to the provision of motor cars. For a long time the scale charges

      919
      have been hopelessly under-estimated compared with other benefits in kind. As the benefits in kind are in essence identical to some of the schedules of charges for the benefits in kind of motor cars, perhaps I can refer to the scale of motor car benefits in kind.
      The Automobile Association produces a technical services leaflet in the spring of each year. The leaflet, dated April 1982, shows a schedule of the estimated standing and running costs of a motor car. The standing charges include licences, insurance and depreciation and the running costs per mile cover petrol, most importantly, but also oil, tyres and servicing.
      If we examine the schedule of engine capacity that ranges from below 1,000 cc to 4,500 cc, the document shows that the cost of running such cars, including standing charges and running costs, ranges from £2,079 a year to £6,048. The scale of charges in the Finance Bill shows that the benefit that is held to arise ranges from £270 to £540. That is £540 against £6,000 and £270 against £2,000. That is an astonishing difference between the benefit in kind as estimated by the Automobile Association and the estimate in our legislation. The Government have examined that legislation in order to assess the benefits in kind of the fuel charge. They have gone straight to schedule 7 of the Finance Act 1976 as it has been updated, taken those figures and said that that should be the benefit in kind for fuel. Schedule 7 contains a range of figures in tables A and B. It is hard to see how that relates to the cost of petrol because we are dealing with 1984–85 and the assessment of benefit will occur two years from now. It will be difficult to say how much benefit will be derived from the provision of petrol by the company. Why has there been such a delay?
      Britain's problem is that it has the largest number of company-owned cars. Other countries do not have the same system of company-owned cars, which are an inducement to recruitment and to retention of staff. When the Government came to office they believed that the perks provided by companies to their employees would decline as taxation declined. They believed that the provision of perks was a direct consequence of high taxation, so they provided benefits that would avoid the high taxation that was then prevalent. However, although the highest rates of taxation have declined, company perks have not so declined. The proportion of company cars is a matter of great concern to those who are not provided with them. They see their neighbours with more modern and better maintained cars, although they may earn the same. That is a cause of great dissatisfaction, and the inability to raise, for taxation purposes, what is held to be an assessable benefit is a matter of some concern.
      We tabled the amendment in order to have some clarification. I hope that the right hon. and learned Gentleman will assure the House about the way in which benefits will be increased. If he will change his mind about the date of introduction, perhaps we can avoid a Division.
      Mr. Brittan: The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) has rehearsed usefully some considerations of the taxation of this benefit in kind. I hope that I can explain some, if not all, of the points that he raised, because I am sure that he does not wish his amendment to have the effect that it would have if passed.
      920
      The postponement was from 1982–83 to 1983–84. The right hon. Gentleman suggested, no doubt inadvertently, that there was a further postponement to 1984–85. Clause 42 shows that section 69(1)(b) is a new provision on car fuel that will not have effect until 1983–84. Accordingly, in subsection (2), 1983–84 should be substituted for 1982–83. I can well understand the right hon. Gentleman being puzzled by the reference in subsection (6) to 1984–85. I hope that I can explain the purpose of that subsection.
      The general scheme envisaged was that in the year of the actual introduction of the scales the scale should be provided for in the Finance Bill itself, but that there should be a provision that in the following year a decision could be made as to what the relevant scale should be, if a change was to be made, by order subject to the negative resolution procedure.
      8.45 pm
      When the matter was originally envisaged to start in 1982–83, the scales were laid down for 1982–83 and resolutions by the negative procedure were the appropriate method to deal with orders which would set out provisions for 1983–84. However, with the change in the year of the actual introduction everything, as it were, slipped forward. The year 1982–83 becomes 1983–84 in clause 42(1)(b) and 1983–84 becomes 1984–85 in clause 42(6). It is simply a procedural matter that ensures that there is proper debate in the first year and for subsequent years it is done by orders.
      The right hon. Gentleman asked why there should be deferment. There was opposition by employers to the scheme as it was first announced on the grounds of complexity and administrative cost. It was, therefore, necessary to postpone it to allow preparatory work to be carried out so that the scheme can be implemented in the way proposed. All that has been before the House and discussed. Similarly, the question what the scales should be and the principles that should be applied have been ventilated in the House and in Committee. I did not expect the right hon. Gentleman to seek to engage in a general debate on that, or I should have been prepared to do so. The amendment related simply to the different procedure for establishing what the scale, in years, should be.
      I readily confess that the scheme is not without complexity, but I hope that I have assisted the right hon. Gentleman and the House in explaining that we are simply shifting everything forward one year and that no principle is involved.
      Mr. Robert Sheldon: I thank the right hon. and learned Gentleman for that explanation. I was anxious about the way in which the period had slipped forward. I note the differences between the new provision for 1983–84, and the provision to vary this by order in 1984–85. I was particularly concerned about what appeared to be a lack of urgency in the introduction of these changes. I look forward to the changes coming from the orders on the scales of benefit. We shall debate these fully in due course. I hope there will be much tighter action by the Government in these matters.
      I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Schedule 8

      SUB-CONTRACTORS IN THE CONSTRUCTION INDUSTRY
      Mr. Cook: I beg to move amendment No. 68, in page 167, line 44, at end insert
      'provided that no certificate issued to an applicant by virtue of this sub-paragraph shall be valid for a longer period than a year.'
      The amendment relates to a matter that was debated in Committee but goes back beyond that to the Chancellor's Budget Statement. He said that he wanted to make it easier for those who have recently left school or college to start a business. As reports of the Budget Statement record, that statement was followed by laughter.
      It has since emerged that, instead of providing that it should be easier for those who have recently left school or college to start a business, what the Chancellor of the Exchequer had in mind when he made the statement to the House was changing the provision so that young people could enter the building industry on the "lump" rather than as employees of a building contractor.
      It is wholly fallacious to pretend that the provision will in any way bring about increased employment among young people—or, for that matter, anybody else—because it will not release one additional penny for added expenditure on construction projects, and will do nothing to remove the sharp reduction in demand in the construction industry that the Government have already engineered. All it will do is to permit young people who have managed to find a toehold in the construction industry to do so from the position of a self-employed small business man operating on the "lump" rather than as the employee of a building contractor.
      Since the matter was debated in Committee, several hon. Members will have received a copy of the letter sent by the general secretary of the Trades Union Congress on 30 June to the Chancellor of the Exchequer, in which Mr. Len Murray makes precisely the same point. It says:
      "The Committee"—
      this was the TUC construction industry committee—
      "believe that the changes in the tax deduction scheme will have little or no impact on the current levels of unemployment in the industry, much of which is directly related to successive cuts in the level of public sector spending on construction work."
      Although the letter came from the TUC, it is worth placing on record that anxiety about the proposal is felt on both sides of industry. The employers and trade unions in the construction industry wrote to every member of the Standing Committee on the Finance Bill to express their concern about the proposal and the extent to which it would undermine the training initiatives and the apprenticeship schemes on which both sides of the construction industry have already agreed.
      The matter should be of particular concern to all hon. Members, because the real argument for training in the construction industry does not rest solely on the obvious and very clear importance of ensuring a proper standard of workmanship and the control of quality, but rests on the urgent necessity—which I hope every hon. Member will recognise—to improve the appalling safety record of an industry in which nearly 200 people are killed every year. That was one of the points that the general secretary of the TUC emphasised in his letter to the Chancellor of the Exchequer.
      In his letter of a fortnight ago, Mr. Len Murray said that the TUC construction industry committee
      "were also particularly concerned at the impact the changes in the scheme could have on the already poor health and safety
      922
      record in the industry. As you may be aware, construction is one of the most dangerous industries to work in, measured by the number of accidents and fatalities, and recent trends indicate little improvement. The proposed changes will encourage young people with little or no site experience to enter the industry without the benefit of supervision and training, and this in turn must pose a serious threat to health and safety standards within the industry. This threat is not just an increase in risk to the young people themselves, but to other workers on site who may be endangered by the Lack of experience."
      We anticipated the letter with the concern that we expressed in the Standing Committee. On that occasion we sought to prevent the Government from inserting the clause as a new clause into their Finance Bill. We were unsuccessful. We failed to sway a sufficient number of the Minister's colleagues to take the view that it was opening the door to workers entering the construction industry without proper training, without proper knowledge of the trade and without proper knowledge of their own safety rules.
      Therefore, we have not attempted on this occasion to strike the clause from the Bill. We have adopted what I hope the Financial Secretary will recognise as a more moderate approach, accepting that he has the votes to insist on the clause remaining in the Bill if he wishes to do so. We do not anticipate that, if we were to attempt to remove it, we would achieve a majority even of the small size achieved in the Division a few minutes ago.
      We have therefore tabled this amendment, which will have the effect of limiting the length of the certificates to one year at a time. This would enable the Inland Revenue to have regard to the conduct of the person holding the certificate in the previous year before deciding whether to make an annual extension certificate. This is a prudent precaution because of the nature of the certificates.
      The 714 certificates are available to those who have worked for three years in the industry. There is therefore an adequate basis in the normal run of cases to assess whether those who apply for the certificates have a good record of tax contributions and an adequate record of activity in the construction industry. Under the clause 714 certificates will become available to people who have no such record of three years work in the construction industry or three years payment of tax to the Inland Revenue.
      It would therefore seem appropriate that in this case, and only in this case, there should be the annual bar of the requirement of the annual extension so that over three years the Inland Revenue can consider whether those who obtain the certificates without a previous record of tax payments have, by their conduct in the preceding year or the year before that, demonstrated that they will maintain tax payments through their work in the construction industry.
      It is worth referring again to the letter of the general secretary of the TUC, who drew the attention of the Chancellor of the Exchequer to the implications of the scheme for the Inland Revenue and receipt of tax by it. Mr. Murray said:
      "The removal of certification requirements for school-leavers undermines the scheme, and may encourage unscrupulous individuals within the industry to try to exploit this loop-hole for their own advantage. This may well mean an increase in tax evasion."
      I hope that the Financial Secretary will be as anxious as the general secretary of the TUC to prevent tax evasion. Therefore, I hope that he will recognise that we have conceded that he has the clause in the Bill and has

      923
      sufficient votes to retain it there. Presumably, the Chancellor has decided not to accede to the request of the TUC to remove the clause. That being the case, the Financial Secretary should, in the spirit of compromise, be willing to accept the amendment which would at least go some way to ensuring that proper control is kept over those who succeed in obtaining a 714 certificate under the provisions of the clause.
      Mr. Ridley: I do not think that the hon. Member for Edinburgh, Central (Mr. Cook) will expect me to take this amendment seriously. The suggestion that the certificates should be renewable every year instead of every three years is a concealed way of returning to this subject. Of that I make no complaint, but the hon. Gentleman cannot believe in the amendment. He must know that it would cause a great deal more administrative work and achieve nothing to protect the Inland Revenue. There are already plenty of checks.
      The hon. Gentleman said that the general secretary of the TUC, whose letter I have not seen, believes that this is a way of exploiting a loophole. However, the weekly limit of £150 which can be paid to holders of the school leaver certificate without deduction of tax is a guard against evasion. The requirement that a certificate holder must provide a voucher before the contractor pays him without deduction helps even more. The hon. Gentleman will also be aware that Revenue officials check that vouchers are being used correctly before new voucher books are issued. That virtually closes any chance of abuse.
      I would prefer these checks not to be necessary, because they circumscribe the opportunities for young men to start up and expand their businesses. These people are not all in their teens. They may be well into their twenties. There is no reason why they should not be allowed to start their own businesses or become self-employed in any industry. It puzzles me that the hon. Member for Edinburgh, Central should seek to prevent them doing so in the construction industry. He put forward the argument about training as if training were a matter for the Inland Revenue. No industry in this country or any country requires that the ability to go into business or training should be determined by tests laid down by the tax authorities.
      9 pm
      The hon. Member for Edinburgh, Central, the TUC and builders are seeking to put these entrants into the profession at a competitive disadvantage by manipulating the fiscal system. The hon. Gentleman should be ashamed of himself. I am not surprised that employers and unions would like to exclude competition from the industry, but for the hon. Gentleman to have the desire to deny all opportunities for enterprise to young people, and to laugh—and laugh he did—at the possibility of even one person coming off the unemployment register to start his own business, shows the utter cynicism of a party that does nothing but talk about unemployment. The moment that there is a chance of taking one person off the register, that is their reaction.
      The true nature of Socialist thinking is "Let us operate a closed shop by any means at our disposal, even by using the tax system as a licence to work." When the Chancellor
      924
      introduced this measure in his Budget speech, there was laughter from the Luddite part of the House of which the hon. Member is a distinguished representative.
      Mr. Cook: The Financial Secretary is either in urgent need of the July recess or has spent too long over dinner this evening. It is one thing to say that one will not take seriously the TUC or the building industry employers, as he plainly does not. It is another matter to say to the House that he, as a Minister, cannot be expected to take seriously an amendment on the Amendment Paper.
      The House has a perfect right to expect every Minister who replies to debates to take seriously any amendment that an hon. Member has troubled to put on the Amendment Paper. It ill becomes the Minister to behave in such a supercilious and arrogant fashion and to pretend that an amendment is beneath his contempt. He draws his salary to take the proceedings of the House seriously. He should not scorn the proceedings of the House.
      The laughter on the occasion of the Chancellor's speech was at the utter cynicism and hollowness of his claim that he would provide employment for young people in the construction industry. The Government have done more to destroy employment in the construction industry than any previous Government or any foreign enemy of the British people. I represent a region in which one in four construction workers are currently unemployed. There are more unemployed construction workers in Scotland than there are men employed in the Scottish mining industry, despite its importance to the British economy.
      That is the level of devastation that the Government have created. To claim that they will provide employment opportunities in the construction industry deserves derisive laughter. This tawdry scheme does no such thing. It provides for people to enter the construction industry on the lump, rather than become employees of a building contractor. The motivation behind the clause is the hon. Gentleman's atavistic dislike of the system introduced by the Labour Government to control the lump.
      The hon. Gentleman knows why the system was introduced. The lump is an abuse of the fiscal system. It is a way to evade tax. His psychological problem is that he cannot get over admiring any group of people who successfully evade the payment of tax. That is his dilemma. However he may try to shrug it off or wish it were otherwise, he now has a responsibility to safeguard the revenue. Instead of doing that, in the clause he is undermining the scheme introduced by the Labour Government because of his spite towards it. [Interruption.] I shall answer the Minister in the way that he answered me. If the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) does not like the answer, he should ensure that he is not represented by Ministers who show the contempt that the Financial Secretary offered us in his answer.
      I moved the amendment seriously and I expected the Minister to take it seriously. Both sides of the construction industry requested us to put down the amendment. [Interruption.] The Minister laughs. The contempt that he feels for the TUC and the construction workers whom he has put out of work is plainly what he feels also for the construction employers. The construction industry also expected the Minister to take the amendment seriously. I regret that we put down the amendment in its present form.

      925
      It would have been far better to have tabled the standard amendment to leave out the clause and to have voted upon it.
      Mr. Ridley: That would have been out of order.
      Mr. Cook: No, it would not. If the hon. Gentleman wishes to claim to answer for the Treasury in the House, he should learn the orders of the House. If he looks at the Amendment Paper he will see that other such amendments have been selected, which I suspect he will find himself answering later. If he has not yet looked at the amendments for which I suspect he will be handling the Treasury brief, it demonstrates beyond doubt the contempt with which he takes the Report stage of a Bill for which he is responsible and to which his name is attached.
      It came as a shock and an outrage to me to learn that a letter that the TUC general secretary had sent a fortnight ago to the Chancellor of the Exchequer about the matter was not included in the Treasury brief for the Minister. Remarks will be made outside the Chamber about the revelation that either the letter has not been passed to the Minister or has been passed to him but has not been read by him, as he plainly has not read his brief on later amendments.
      Had we tabled the amendment to vote against the clause we could have voted against the Minister's vulgar prejudices. But we have this amendment, and after the insult to the House we have no alternative but to vote on it.
      Question put, That the amendment be made:—
      The House divided: Ayes, 210, Noes 322.

      Division No. 270]

      [9.07 pm

      AYES

      Abse, Leo

      Cryer, Bob

      Adams, Allen

      Cunliffe, Lawrence

      Allaun, Frank

      Cunningham, Dr J. (W'h'n)

      Anderson, Donald

      Dalyell, Tam

      Archer, Rt Hon Peter

      Davidson, Arthur

      Ashley, Rt Hon Jack

      Davis, Clinton (Hackney C)

      Ashton, Joe

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

      Atkinson, N. (H'gey,)

      Deakins, Eric

      Bagier, Gordon A.T.

      Dean, Joseph (Leeds West)

      Barnett, Guy (Greenwich)

      Dewar, Donald

      Barnett, Rt Hon Joel (H'wd)

      Dixon, Donald

      Benn, Rt Hon Tony

      Dormand, Jack

      Bennett, Andrew (St'kp't N)

      Douglas, Dick

      Bidwell, Sydney

      Dubs, Alfred

      Booth, Rt Hon Albert

      Duffy, A. E. P.

      Boothroyd, Miss Betty

      Dunnett, Jack

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

      Dunwoody, Hon Mrs G.

      Bray, Dr Jeremy

      Eadie, Alex

      Brown, Hugh D. (Provan)

      Eastham, Ken

      Brown, Ron (E'burgh, Leith)

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

      Buchan, Norman

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

      Callaghan, Rt Hon J.

      English, Michael

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

      Ennals, Rt Hon David

      Campbell, Ian

      Evans, Ioan (Aberdare)

      Campbell-Savours, Dale

      Evans, John (Newton)

      Canavan, Dennis

      Ewing, Harry

      Cant, R. B.

      Field, Frank

      Carmichael, Neil

      Fitch, Alan

      Carter-Jones, Lewis

      Flannery, Martin

      Clark, Dr David (S Shields)

      Fletcher, Ted (Darlington)

      Clarke, Thomas C'b'dge,A'rie

      Foot, Rt Hon Michael

      Cocks, Rt Hon M. (B'stol S)

      Ford, Ben

      Cohen, Stanley

      Forrester, John

      Coleman, Donald

      Foulkes, George

      Concannon, Rt Hon J. D.

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

      Cook, Robin F.

      Garrett, John (Norwich S)

      Cowans, Harry

      Garrett, W. E. (Wallsend)

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

      Golding, John

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

      Gourlay, Harry

      Crowther, Stan

      Graham, Ted

      926

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

      Parry, Robert

      Hardy, Peter

      Pavitt, Laurie

      Harrison, Rt Hon Walter

      Pendry, Tom

      Hart, Rt Hon Dame Judith

      Powell, Raymond (Ogmore)

      Hattersley, Rt Hon Roy

      Prescott, John

      Haynes, Frank

      Price, C. (Lewisham W)

      Heffer, Eric S.

      Race, Reg

      Hogg, N. (E Dunb't'nshire)

      Radice, Giles

      Holland, S. (L'b'th, Vauxh'll)

      Rees, Rt Hon M (Leeds S)

      Home Robertson, John

      Richardson, Jo

      Homewood, William

      Roberts, Albert (Normanton)

      Hooley, Frank

      Roberts, Allan (Bootle)

      Howell, Rt Hon D.

      Roberts, Ernest (Hackney N)

      Hoyle, Douglas

      Roberts, Gwilym (Cannock)

      Huckfield, Les

      Robertson, George

      Hughes, Mark (Durham)

      Robinson, G. (Coventry NW)

      Hughes, Robert (Aberdeen N)

      Rooker, J. W.

      Hughes, Roy (Newport)

      Ross, Ernest (Dundee West)

      Janner, Hon Greville

      Rowlands, Ted

      Jay, Rt Hon Douglas

      Sever, John

      John, Brynmor

      Sheerman, Barry

      Johnson, James (Hull West)

      Sheldon, Rt Hon R.

      Jones, Rt Hon Alec (Rh'dda)

      Shore, Rt Hon Peter

      Jones, Barry (East Flint)

      Short, Mrs Renée

      Kaufman, Rt Hon Gerald

      Silkin, Rt Hon J. (Deptford)

      Kerr, Russell

      Silverman, Julius

      Kilroy-Silk, Robert

      Skinner, Dennis

      Kinnock, Neil

      Smith, Rt Hon J. (N Lanark)

      Lambie, David

      Soley, Clive

      Lamond, James

      Spearing, Nigel

      Leadbitter, Ted

      Spriggs, Leslie

      Lestor, Miss Joan

      Stallard, A. W.

      Lewis, Ron (Carlisle)

      Stoddart, David

      Litherland, Robert

      Stott, Roger

      Lofthouse, Geoffrey

      Strang, Gavin

      McCartney, Hugh

      Straw, Jack

      McDonald, Dr Oonagh

      Summerskill, Hon Dr Shirley

      McElhone, Frank

      Taylor, Mrs Ann (Bolton W)

      McGuire, Michael (Ince)

      Thomas, Dafydd (Merioneth)

      McKay, Allen (Penistone)

      Thomas, Dr R. (Carmarthen)

      McKelvey, William

      Thorne, Stan (Preston South)

      MacKenzie, Rt Hon Gregor

      Tilley, John

      McNamara, Kevin

      Tinn, James

      McTaggart, Robert

      Torney, Tom

      McWilliam, John

      Urwin, Rt Hon Tom

      Marks, Kenneth

      Varley, Rt Hon Eric G.

      Marshall, D(G'gow S'ton)

      Wainwright, E. (Dearne V)

      Marshall, Dr Edmund (Goole)

      Walker, Rt Hon H. (D'caster)

      Marshall, Jim (Leicester S)

      Weetch, Ken

      Martin, M(G'gow S'burn)

      Welsh, Michael

      Mason, Rt Hon Roy

      White, Frank R.

      Maxton, John

      White, J. (G'gow Pollok)

      Maynard, Miss Joan

      Whitehead, Phillip

      Meacher, Michael

      Whitlock, William

      Millan, Rt Hon Bruce

      Wigley, Dafydd

      Miller, Dr M. S. (E Kilbride)

      Willey, Rt Hon Frederick

      Mitchell, Austin (Grimsby)

      Wilson, Rt Hon Sir H.(H'ton)

      Morris, Rt Hon A. (W'shawe)

      Wilson, William (C'try SE)

      Morris, Rt Hon C. (O'shaw)

      Winnick, David

      Morton, George

      Woodall, Alec

      Moyle, Rt Hon Roland

      Woolmer, Kenneth

      Newens, Stanley

      Wright, Sheila

      Oakes, Rt Hon Gordon

      Young, David (Bolton E)

      O'Neill, Martin

      Palmer, Arthur

      Tellers for the Ayes:

      Park, George

      Mr. Derek Foster and

      Parker, John

      Mr. James Hamilton.

      NOES

      Adley, Robert

      Baker, Kenneth('St.M'bone)

      Aitken, Jonathan

      Baker, Nicholas (N Dorset)

      Alexander, Richard

      Banks, Robert

      Alison, Rt Hon Michael

      Beaumont-Dark, Anthony

      Alton, David

      Beith, A. J.

      Ancram, Michael

      Bendall, Vivian

      Arnold, Tom

      Bennett, Sir Frederic (T'bay)

      Aspinwall, Jack

      Benyon, Thomas (A'don)

      Atkins, Rt Hon H.(S'thorne)

      Benyon, W. (Buckingham)

      Atkins, Robert(Preston N)

      Best, Keith

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

      Bevan, David Gilroy

      927

      Biffen, Rt Hon John

      Glyn, Dr Alan

      Biggs-Davison, Sir John

      Goodhart, Sir Philip

      Blackburn, John

      Goodhew, Sir Victor

      Blaker, Peter

      Goodlad, Alastair

      Body, Richard

      Gorst, John

      Bonsor, Sir Nicholas

      Gow, Ian

      Boscawen, Hon Robert

      Gower, Sir Raymond

      Bowden, Andrew

      Grant, Anthony (Harrow C)

      Boyson, Dr Rhodes

      Gray, Hamish

      Braine, Sir Bernard

      Greenway, Harry

      Bright, Graham

      Griffiths, E.(B'y St. Edm'ds)

      Brinton, Tim

      Griffiths, Peter Portsm'th N)

      Brittan, Rt. Hon. Leon

      Grylls, Michael

      Brooke, Hon Peter

      Gummer, John Selwyn

      Brotherton, Michael

      Hamilton, Hon A.

      Brown, Michael(Brigg & Sc'n)

      Hamilton, Michael (Salisbury)

      Browne, John (Winchester)

      Hampson, Dr Keith

      Bruce-Gardyne, John

      Hannam,John

      Bryan, Sir Paul

      Haselhurst, Alan

      Buchanan-Smith, Rt. Hon. A.

      Hastings, Stephen

      Buck, Antony

      Havers, Rt Hon Sir Michael

      Budgen, Nick

      Hawkins, Sir Paul

      Bulmer, Esmond

      Hawksley, Warren

      Burden, Sir Frederick

      Hayhoe, Barney

      Butcher, John

      Heddle, John

      Butler, Hon Adam

      Henderson, Barry

      Cadbury, Jocelyn

      Heseltine, Rt Hon Michael

      Carlisle, John (Luton West)

      Hicks, Robert

      Carlisle, Kenneth (Lincoln)

      Higgins, Rt Hon Terence L.

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

      Hill, James

      Cartwright, John

      Hogg, Hon Douglas (Gr'th'm)

      Chalker, Mrs. Lynda

      Holland, Philip (Carlton)

      Channon, Rt. Hon. Paul

      Hooson, Tom

      Chapman, Sydney

      Horam, John

      Churchill, W. S.

      Hordern, Peter

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

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

      Clark, Sir W. (Croydon S)

      Howell, Ralph (N Norfolk)

      Clarke, Kenneth (Rushcliffe)

      Howells, Geraint

      Clegg, Sir Walter

      Hunt, David (Wirral)

      Cockeram, Eric

      Hunt, John (Ravensbourne)

      Colvin, Michael

      Hurd, Rt Hon Douglas

      Cope, John

      Irvine, Bryant Godman

      Cormack, Patrick

      Irving, Charles (Cheltenham)

      Corrie, John

      Jenkin, Rt Hon Patrick

      Costain, Sir Albert

      Jessel, Toby

      Cranborne, Viscount

      Johnson Smith, Sir Geoffrey

      Critchley, Julian

      Jopling, Rt Hon Michael

      Crouch, David

      Joseph, Rt Hon Sir Keith

      Cunningham, G. (Islington S)

      Kaberry, Sir Donald

      Dickens, Geoffrey

      Kellett-Bowman, Mrs Elaine

      Dorrell, Stephen

      Kershaw, Sir Anthony

      Douglas-Hamilton, Lord J.

      Kimball, Sir Marcus

      Dover, Denshore

      Knight, Mrs Jill

      du Cann, Rt Hon Edward

      Knox, David

      Durant, Tony

      Lamont, Norman

      Eden, Rt Hon Sir John

      Lang, Ian

      Edwards, Rt Hon N. (P'broke)

      Latham, Michael

      Eggar, Tim

      Lawrence, Ivan

      Elliott, Sir William

      Lee, John

      Ellis, Tom (Wrexham)

      Lennox-Boyd, Hon Mark

      Eyre, Reginald

      Lester, Jim (Beeston)

      Fairbairn, Nicholas

      Lewis, Kenneth (Rutland)

      Fairgrieve, Sir Russell

      Lloyd, Ian (Havant & W'loo)

      Faith, Mrs Sheila

      Lloyd, Peter (Fareham)

      Farr, John

      Loveridge, John

      Fell, Sir Anthony

      Luce, Richard

      Fenner, Mrs Peggy

      Lyell, Nicholas

      Finsberg, Geoffrey

      Lyons, Edward (Bradf'd W)

      Fisher, Sir Nigel

      Mabon, Rt Hon Dr J. Dickson

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

      Macfarlane, Neil

      Fletcher-Cooke, Sir Charles

      MacGregor, John

      Fookes, Miss Janet

      MacKay, John (Argyll)

      Forman, Nigel

      Macmillan, Rt Hon M.

      Fowler, Rt Hon Norman

      McNair-Wilson, M. (N'bury)

      Fox, Marcus

      McNair-Wilson, P. (New F'st)

      Fraser, Peter (South Angus)

      McNally, Thomas

      Fry, Peter

      Madel, David

      Gardner, Edward (S Fylde)

      Major, John

      Garel-Jones, Tristan

      Marland, Paul

      Ginsburg, David

      Marten, Rt Hon Neil

      928

      Maude, Rt Hon Sir Angus

      Shaw, Giles (Pudsey)

      Mawby, Ray

      Shelton, William (Streatham)

      Mawhinney, Dr Brian

      Shepherd, Colin (Hereford)

      Maxwell-Hyslop, Robin

      Shepherd, Richard

      Mayhew, Patrick

      Shersby, Michael

      Mellor, David

      Silvester, Fred

      Meyer, Sir Anthony

      Sims, Roger

      Miller, Hal (B'grove)

      Skeet, T. H. H.

      Mills, Iain (Meriden)

      Smith, Cyril (Rochdale)

      Mills, Sir Peter (West Devon)

      Smith, Dudley

      Miscampbell, Norman

      Smith, Tim (Beaconsfield)

      Mitchell, David (Basingstoke)

      Speed, Keith

      Moate, Roger

      Speller, Tony

      Monro, Sir Hector

      Spence, John

      Montgomery, Fergus

      Spicer, Jim (West Dorset)

      Moore, John

      Spicer, Michael (S Worcs)

      Morris, M. (N'hampton S)

      Sproat, Iain

      Morrison, Hon C. (Devizes)

      Squire, Robin

      Morrison, Hon P. (Chester)

      Stainton, Keith

      Mudd, David

      Stanbrook, Ivor

      Murphy, Christopher

      Stanley, John

      Myles, David

      Steel, Rt Hon David

      Neale, Gerrard

      Steen, Anthony

      Needham, Richard

      Stevens, Martin

      Nelson, Anthony

      Stewart, A.(E Renfrewshire)

      Neubert, Michael

      Stewart, Ian (Hitchin)

      Newton, Tony

      Stokes, John

      Normanton, Tom

      Stradling Thomas, J.

      Ogden, Eric

      Tapsell, Peter

      O'Halloran, Michael

      Taylor, Teddy (S'end E)

      Onslow, Cranley

      Tebbit, Rt Hon Norman

      Oppenheim, Rt Hon Mrs S.

      Temple-Morris, Peter

      Osborn, John

      Thomas, Rt Hon Peter

      Page, John (Harrow, West)

      Thompson, Donald

      Page, Richard (SW Herts)

      Thorne, Neil (Ilford South)

      Parkinson, Rt Hon Cecil

      Thornton, Malcolm

      Parris, Matthew

      Townend, John (Bridlington)

      Patten, John (Oxford)

      Townsend, Cyril D, (B'heath)

      Pattie, Geoffrey

      Trippier, David

      Pawsey, James

      Trotter, Neville

      Penhaligon, David

      van Straubenzee, Sir W.

      Percival, Sir Ian

      Vaughan, Dr Gerard

      Pink, R. Bonner

      Viggers, Peter

      Pollock, Alexander

      Waddington, David

      Porter, Barry

      Wainwright, R. (Colne V)

      Prentice, Rt Hon Reg

      Wakeham, John

      Price, Sir David (Eastleigh)

      Waldegrave, Hon William

      Prior, Rt Hon James

      Walker, Rt Hon P. (Wcester)

      Proctor, K. Harvey

      Walker, B. (Perth)

      Raison, Rt Hon Timothy

      Waller, Gary

      Rathbone, Tim

      Walters, Dennis

      Rees, Peter (Dover and Deal)

      Ward, John

      Rees-Davies, W. R.

      Warren, Kenneth

      Renton, Tim

      Watson, John

      Rhodes James, Robert

      Wellbeloved, James

      Rhys Williams, Sir Brandon

      Wells, Bowen

      Ridley, Hon Nicholas

      Wells, John (Maidstone)

      Ridsdale, Sir Julian

      Wheeler, John

      Rifkind, Malcolm

      Whitelaw, Rt Hon William

      Rippon, Rt Hon Geoffrey

      Whitney, Raymond

      Roberts, M. (Cardiff NW)

      Wickenden, Keith

      Roberts, Wyn (Conway)

      Wilkinson, John

      Rodgers, Rt Hon William

      Williams, D. (Montgomery)

      Roper, John

      Williams, Rt Hon Mrs (Crosby)

      Ross, Stephen (Isle of Wight)

      Winterton, Nicholas

      Rossi, Hugh

      Wolfson, Mark

      Rost, Peter

      Young, Sir George (Acton)

      Royle, Sir Anthony

      Younger, Rt Hon George

      Rumbold, Mrs A. C. R.

      Sainsbury, Hon Timothy

      Tellers for the Noes:

      St. John-Stevas, Rt Hon N.

      Mr. Anthony Berry and

      Scott, Nicholas

      Mr. Carol Mather.

      Question accordingly negatived.

    Clause 47

      INVESTMENT IN NEW CORPORATE TRADES
      The Minister of State, Treasury (Mr. John Wakeham): I beg to move amendment No. 69, in page 43, line 19, at end insert—
      '(2A) In subsection (7) of section 55 of the Finance Act 1981 (restrictions as to share capital for qualifying company for purposes of section 52 of that Act) for the words "at any time in the relevant period include" there shall be substituted the words "include at any time in the period of three years beginning with the date of issue of the shares in respect of which relief is claimed".'.
      The amendment relates to the business start-up scheme. The purpose is to change slightly the rules relating to share capital incorporated in the scheme. Certain companies are interested in using the scheme, but their share capital does not comply with the rules. If they are able and willing to adjust their share capital for the future, they will be eligible to take part, notwithstanding the fact that in the past their share capital had made them ineligible.
      Amendment agreed to.

    Clause 48

      PURCHASE OF OWN SHARES BY UNQUOTED TRADING COMPANY
      Mr. Ridley: I beg to move amendment No. 70, in page 44, line 9, after 'payment', insert
      '(apart from any sum applied in paying capital gains tax charged on the redemption, repayment or purchase)'.
      The amendment fulfils an undertaking that I gave in Committee to my hon. Friend the Member for Bath (Mr. Patten), whom we all hope will soon recover and be back with us.
      The new tax treatment available where shares have to be sold back to the company to meet a liability for capital transfer tax on death will be amended to ensure that the benefit will not be lost merely because some of the proceeds are used to pay for any capital gains tax liability charged on the sale of the company. It is a relieving provision and I hope that it will be helpful.
      Mr. Robert Sheldon: I am almost tempted to ask the Financial Secretary a number of questions, because I am not certain that he understands all the amendments that he has to move. We viewed his reply on the previous debate with some concern. As I am satisfied with the amendment before us, I am prepared to let it go, but we will be looking for evidence of good behaviour by the hon. Gentleman.
      Amendment agreed to.

    Schedule 9

      PURCHASE OF OWN SHARES BY UNQUOTED TRADING COMPANY
      Sir William Clark: I beg to move amendment No. 71, in page 168, line 29, leave out paragraph 1.
      This is a simple amendment. The schedule relates to the purchase of shares by unquoted companies. The amendment would remove the requirement that the vendor of shares in the company must be ordinarily resident in the United Kingdom.
      Clause 48 and the schedule contain extensive anti-avoidance provisions and I cannot, therefore, see why the
      930
      sale of shares should be restricted to those who are ordinarily resident in this country. It could be in a company's interests to buy out a non-resident shareholder. For example, he may intend to set up an overseas rival to the organisation in this country.
      I cannot understand why the Treasury should insist that vendors of shares in unquoted companies must be ordinarily resident in the United Kingdom. The tax concessions in this part of the Bill could be an inducement to an overseas shareholder to sell his shares back to the company.
      Mr. Ridley: While I cannot accept my hon. Friend's amendment, the next two amendments are concessions in the area of purchase of own shares. I tried hard to accept his amendment and had long discussions to see if it was possible, culminating in a letter to my hon. Friend in which I explained the two reasons why the Government do not feel able to meet his amendment.
      The first reason is not one that I would stress or dwell on because it is only a partial reason. If an overseas resident sells his shares back to a United Kingdom company he would, according to the clause, escape the tax on a distribution and could claim that it would be a capital gain only if, indeed, there was a capital gain. As he would be an overseas resident he would be exempt from capital gains tax and there would be no tax to pay. That could be wrong as the gain is the result of enterprise and work in a British company. That is not uniform because it will vary according to whether we have a double tax agreement with the country, and the circumstances of the overseas resident.
      The second and real reason why we cannot accept the amendment is that it makes it almost impossible to police the clause because the Revenue is not in a position, and never can or will be, to find out who is the beneficial owner of a share that is sold by an overseas resident. It would be possible for those who wanted to manipulate the new scheme of purchase of own shares to set up overseas nominees or front men who could carry out the transaction and refuse to divulge to the Revenue who was the beneficial owner or what were the circumstances to ensure that the transaction takes place within the rules. We have extended the privileged tax treatment for purchasing own shares both to corporate and to trustee shareholders, and it would be difficult to ensure that it was not being manipulated.
      I looked again for a satisfactory way in which to distinguish genuine sales by non-residents which would not prejudice the two purposes for which we need the rule, but I failed to find it. It is one of those unfortunate examples where the bona fide operator does not realise that certain restrictions are necessary upon him because there are some who are not so bona fide and will take advantage of what is being done. It is difficult to justify to the bona fide operator, but, on the other hand, we would not be able to extend the privilege at all unless we were able to police it.
      Sadly, and after much deep examination, I must tell my hon. Friend that we have not found a way around the difficulties, although we will continue to see whether they can be overcome in the light of experience with the scheme.
      Sir William Clark: We said in Committee on many occasions that the Revenue seem to be paranoid about

      931
      loopholes and about the person who tries to escape taxation. My hon. Friend rightly suggests that a nonresident might try to manipulate the tax system to avoid capital gains tax, but he can do that now if he is so minded. It is illegal, and he takes the chance of being caught. I do not accept my hon. Friend's argument about manipulation, because the anti-avoidance provisions are extremely stringent. However, I do not want to labour the point, because my hon. Friend has said that he will have another look at it and also because the Government have made a number of concessions. One can see from the Government amendments to follow that Ministers have met many of the points raised in Committee. I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      9.30 pm
      Mr. Ridley: I beg to move amendment No. 72, in page 169, line 2, at end insert—
      '(1A) If at any time during that period the shares were transferred to the vendor by a person who was then his spouse living with him then, unless that person is alive at the date of the purchase but is no longer the vendor's spouse living with him, any period during which the shares were owned by that person shall be treated for the purposes of sub-paragraph (1) above as a period of ownership by the vendor.'.
      One of the conditions of clause 48 is that the shares in question must have been owned by the vendor for at least five years. Schedule 9(2) provides for this. The purpose of this small amendment is to allow the ownership by a husband or a wife to count for this purpose as ownership by whichever spouse is selling the shares. I commend the amendment as a slight improvement.
      Amendment agreed to.
      Mr. Ridley: I beg to move amendment No. 73, in page 169, line 4, after 'owner', insert '(a)'.
      Mr. Deputy Speaker (Mr. Paul Dean): With this it will be convenient to take Government amendments Nos. 74, 75 and 76.
      Mr. Ridley: The purpose of the amendment is to reduce from five years to three years the period of ownership required where the sale to the company follows a death. This is a point that several of my hon. Friends have raised with me. It seems reasonable that, where an owner intended to hold shares for five years but unfortunately died, his heirs or widow should not be circumscribed by the five-year rule, particularly as they might need to raise cash for one purpose or another. I hope that the House will feel that this small amendment slightly improves the scheme.
      Amendment agreed to.
      Amendments made:No. 74, in page 169, line 7, at end insert
      'and
      (b) that sub-paragraph shall have effect as if it referred to three years instead of five'.
      No. 75, in page 169, line 9, after 'owner', insert '(a)'.
      No. 76, in page 169, line 11, at end insert
      'and
      (b) that sub-paragraph shall have effect as if it referred to three years instead of five'.
      No. 77, in page 172, line 30, at end insert—
      '(3) This paragraph has effect subject to paragraph 9 below.'.—[Mr. Ridley.]
      Mr. Ridley: I beg to move amendment No. 78, in page 173, line 13, at end insert—
      '(1A) A payment made by a company on the redemption, repayment or purchase of its own shares shall be deemed to be one to which section 48 of this Act does not apply if, before it is made, the Board have on the application of the company notified the company that they are satisfied that the section will not apply.'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 79.
      Mr. Ridley: This is a more substantial amendment. Clause 48 treats the transaction where a company buys back or redeems its shares as one of purchase and sale and not as one involving a distribution of profits. Generally, this will give more favourable tax treatment to all concerned. This is, however, not always the case. It has come to our notice that there could be circumstances in which those concerned may want to be sure that the new tax treatment will not apply because it gives a less favourable tax result for them.
      We have already set out in Committee a clearance procedure in schedule 9(10) under which the company may seek advance confirmation that the Revenue is satisfied that clause 48 will apply. If it notifies the company that it is so satisfied, that clause is statutorily deemed to apply. The amendment now gives the same opportunity to seek certainty about the application of the law, where the desired result is the opposite—that clause 48 should not apply.
      Mr. Robert Sheldon: I am not sure of the circumstances in which it will be favourable to the taxpayer for the new tax treatment not to apply. I understand about purchase and repayment, but if the Minister has an example, I should be grateful to him if he would give it, because I could not think of one.
      Mr. Ridley: It came to our notice after the debates in Committee that the Industrial and Commercial Finance Corporation and possibly other companies are in the business of subscribing to shares, particularly in unquoted companies, and in doing so they negotiate terms that take account of the tax consequences for them. If they agree terms on the basis of a sale to the company invested in, clause 48 will not apply, and if it were subsequently to turn out that it applies, they might be able to get a better price because the redeeming company would be relieved of having to pay advance corporation tax. For some companies, investment in other companies is treated as a trade, so the returns from the sale of shares are treated as franked investment income. Therefore, that is more valuable to those companies than to treat the returns as a capital gain. I hope that that helps the right hon. Gentleman.
      Amendment agreed to.
      Amendment made: No. 79, in page 173, line 29, leave out from 'notification' to 'shall' in line 30 and insert 'by the Board'.—[Mr. Ridley.]
      Mr. Ridley: I beg to move Amendment No. 80, in page 175, line 18, leave out from 'sub-paragraph' to end of line 19 and insert—
      'or of companies in a group to which that company belongs, or their dependants (and are not wholly or mainly for the benefit of directors or their relatives);
      and for the purposes of this sub-paragraph "group" means a company which has one or more 51 per cent. subsidiaries, together with those subsidiaries.'.

      933
      This amendment corrects, in favour of the taxpayer, two defects in the provisions relating to employee trusts. Paragraph 14(9) (b) of schedule 9 excludes certain trusts from the rules that make trustees and beneficiaries associates. As drafted, it does so broadly only where the trust is exclusively for the benefit of employees of the company concerned. The amendment extends the definition in two ways. First, trusts will now also be excluded where they are for the benefit of employees or their dependants. Those last three words are vital. Secondly, they will be excluded where they are set up to benefit employees of part or all of the group of which the company is a member. In other words, there is a loosening of the definition of "associate" in favour of trusts and employees.
      Amendment agreed to.
      Mr. Ridley: I beg to move amendment No. 81, in page 175, line 35, leave out from beginning to end of line 45 and insert—
      '(3) Where a person—

      (a) acquired or became entitled to acquire loan capital of a company in the ordinary course of a business carried on by him, being a business which includes the lending of money, and

      (b) takes no part in the management or conduct of the company,

      his interest in that loan capital shall be disregarded for the purposes of sub-paragraph (2) above.'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 82.
      Mr. Ridley: Clause 48 provides new tax treatment when a company buys back or redeems its share capital and certain conditions are met. One of the conditions is that after the transaction the vendor must not be connected with—that is, must not have a dominant interest in—the company. Schedule 9, paragraph 7, so provides and paragraph 15 spells out the circumstances in which the person is treated as being connected with the company. One of the matters taken into account is possession of or entitlement to loan capital. That is necessary because a person who is a significant loan creditor can in practice exercise a dominant influence over a company.
      It has been suggested to us, however, that that rule could inhibit institutions from providing finance in a mix of shares and loan capital. They sometimes subscribe for preference shares redeemable before the loan is repayable, and the loan which is essential to the financing of the company may constitute more than 30 per cent. of the combined loan and share capital. In these circumstances, as the schedule is at present drafted, clause 48 would not apply when the shares were redeemed because the vendor would continue by virtue of its lending to be connected with the company. I am assured that this combination of circumstances does arise. Therefore, we think that it is right to make an exception to cover those cases. The amendments do just that.
      Amendment agreed to.
      Amendment made: No. 82, in page 176, line 17 at end insert—
      '(5A) References in this paragraph to the loan capital of a company are references to any debt incurred by the company—

      (a) for any money borrowed or capital assets acquired by the company, or

      (b) for any right to receive income created in favour of the company, or

      934

      (c) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon).'.—[Mr. Ridley.]

    Clause 49

      PURCHASE OF COMPANY'S OWN SHARES FROM DEALER
      Mr. Ridley: I beg to move amendment No. 83, in page 45, line 3, leave out from beginning to 'shares' and insert
      'but subject to subsection (4) below.
      (4) Subsection (1) above shall not apply in relation to—

      (a) the redemption of fixed-rate preference shares, or

      (b) the redemption, on terms settled or substantially settled before 6th April 1982, of other preference shares issued before that date,

      if (in either case) the shares were issued to and continuously held by the person from whom they are redeemed.
      (5) In this section—
      "fixed-rate preference shares" means shares which—

      (a) were issued wholly for new consideration, and

      (b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities, and

      (c) do not carry any right to dividends other than dividends which—

      (i) are of a fixed amount or at a fixed rate per cent. of the nominal value of the shares, and

      (ii) together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued;

      "new consideration" has the same meaning as in Part X of the Taxes Act; and'.
      This also is an amendment to the purchase of own shares provisions. When a company buys back or redeems its own shares, the normal position is that any payment over and above the return in the original subscription price is a distribution of profits. Clause 49 ensures that when a shareholder is a dealer in shares he is not to be treated as receiving a distribution. Instead, the transaction is treated in his hands just like any other disposal of shares that he makes—as a sale. The purchase or redemption price is accordngly taken into account in arriving at his dealing profits.
      There is a special case which needs further consideration. It is that of institutions or others who do not buy and sell shares but provide finance by subscribing for shares and are treated as carrying on a trade or providing finance. They also are covered by the clause. The price that they receive on the sale of the shares by them, otherwise than to the company, would be taken into account in computing their profits chargeable to tax under case 1 or case 2 of schedule D. That gives rise to two problems that it is right to resolve.
      First, some institutions have in the past subscribed for preference shares of various types. There is usually little premium due on their redemption and the change of treatment will have little effect. It has been suggested, however, that in some cases the finance package has been negotiated on the basis of a considerable part of the consideration of the shares and was to be paid not in the form of dividends, which were accordingly lower than usual, but in the premium on redemption. When that financing was negotiated, it was expected that the premium would be treated as a distribution which in the hands of a corporate institution is franked investment income and therefore not subject to further tax. The change introduced by clause 49 will increase the tax

      935
      consequence. They could thus obtain a significantly smaller return than expected from the investment. That matter should be put right.
      The provision of finance on that basis should be encouraged to continue. It is advantageous to the company that is raising finance to be relieved of some of the burden of paying for finance in the early years when it needs to retain as much of its profit as possible. It is helpful to be able to issue shares on terms under which the company must pay a lower than usual rate of dividend and makes it up only when the shares are redeemed. Clause 49 will discourage that. Those who provide that type of finance must take more of a return in the form of dividend if they are to continue to be able to offer finance and receive the same tax reward as before doing so.
      In providing for the future, however, we must be careful. Clause 49 is partly an anti-avoidance provision in so far as we make a breach in it for shares that are already issued. There is no scope to take advantage of that breach. That is not so for shares that will be issued in future.
      In future, therefore, I propose to restrict the change in the rules for fixed-rate preference shares as defined in the clause. That is based on an existing tax definition which broadly excludes shares which, though called preference shares, are nearer to ordinary shares. That will go a long way towards meeting the points that have been put to us.
      Mr. Robert Sheldon: I understand the way in which the clause affects the return on investment when one is concerned about the redemption of fixed-rate preference shares, but does the hon. Gentleman believe that that is a problem for the future? I should have thought that there were few, if any, cases when that applied to transactions that have taken place before the conception of the present legislation. Perhaps the hon. Gentleman could enlighten me. I know that he has great hopes for the extension of this form of lending instrument for the future. If that is so, this type of legislation is desirable and necessary. Without his expectation for the future, however, would it have been necessary?
      9.45 pm
      Mr. Ridley: I must agree with the right hon. Gentleman that when the legislation was designed we did not expect there to be any cases of this kind. Only when it was published did the possibility come to light that some loans of this kind existed. It is a reasonable and respectable form of finance. First, therefore, we did not wish to prejudice loans that existed. Secondly, we wanted to facilitate the continuance of this form of financing.
      We are verging on the subject of yesterday's debate on different forms of lending instruments. The vast variety of these and the differing tax treatments mean that one must pick one's way through this field carefully. Our guiding principle has been to give people the maximum freedom to do that which suits them most. The amendments were drafted with that in mind.
      Amendment agreed to.

    Schedule 10

      INCOME TAX: MAINTENANCE FUNDS
      Amendments made: No. 84, in page 178, line 1, leave out from first 'of' to 'no' in line 2 and insert
      'paragraph 3(1) of Schedule (Capital transfer tax: maintenance funds) to the Finance Act 1982 there is (or, but for paragraph 3(4), there would be)'.
      No. 85, in page 178, line 6, leave out 'the Finance Act 1982' and insert 'that Act'.
      No. 86, in page 178, line 22, leave out from first 'of' to 'no' in line 23 and insert
      'paragraph 3(1) of Schedule (Capital transfer tax: maintenance funds) to the Finance Act 1982 there is (or, but for paragraph 3(4), there would be)'.—[Mr. Ridley.]

    Clause 60

      DOUBLE TAXATION RELIEF: INTEREST ON CERTAIN OVERSEAS LOANS
      Mr. Ridley: I beg to move amendment No. 87, in page 51, line 30, leave out from 'exceeds' to end of line 32 and insert
      'the amount of the credit which, by virtue of Chapter II of Part XVIII of the Taxes Act and subsection (5) below, is allowed for that foreign tax against income tax or corporation tax'.
      The amendment relates to the clause dealing with double taxation relief on overseas loans of banks which we discussed in Committee. It affects the double taxation relief available when a United Kingdom bank or a United Kingdom branch of a foreign bank is engaged in overseas lending and foreign tax is withheld from the interest paid by the overseas borrowers. The amendment ensures that in any case in which the whole of the foreign tax does not qualify for credit relief the non-creditable portion can be deducted in computing the bank's profits for United Kingdom tax purposes.
      Amendment agreed to.

    Clause 65

      ALLOWANCES FOR ASSETS LEASED OUTSIDE THE UNITED KINGDOM
      Mr. Ridley: I beg to move amendment No. 167, in page 55, line 45, after 'effect', insert
      'subject to subsection (3A) below'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 168, 169, 170, 171, 93, and 174.
      Mr. Ridley: The purpose of this group of amendments is to prevent certain schemes designed to achieve a tax subsidy from the United Kingdom Exchequer for assets leased overseas. Despite the new reduced rate of 10 per cent. annual writing down allowances for overseas leasing, where a lease falls foul of any of the five new conditions in the amendment no allowances are due and, if already given, are withdrawn.
      I gave notice in Committee that this loophole had become apparent to us even before the ink was dry on the clauses restricting overseas lending. The amendments are designed to put that undertaking into effect. I commend them to the House.
      Mr. Robert Sheldon: From what date would the allowances be withdrawn?
      Mr. Ridley: The provisions apply to expenditure incurred on or after 23 June 1982, which was the date on which I announced in Committee that we intended to legislate in this way.
      Mr. Sheldon: With the leave of the House, may I ask whether the Financial Secretary can give us any idea of the extent of transactions carried out in any of those five categories between the publication of the Bill and 23 June?
      Mr. Ridley: I cannot give a categoric assurance that no such transactions were carried out, but I think that in this case the stable door was bolted before any horses got out. It was partly because we had seen the possibilities and partly because we heard that others had also seen them that we moved as quickly as we did and sought the leave of the House to legislate from the date on which the announcement was made. I suspect, however, that little, if any, business was written before that date.
      Amendment agreed to.
      Amendments made: No. 168, in page 56, line 15, at end insert—
      '(3A) No first year allowances, balancing allowances or writing-down allowances shall be available in respect of expenditure falling within subsection (1) above if the circumstances are as mentioned in subsection (3)(b) above and—

      (a) there is a period of more than one year between the dates on which any two consecutive payments become due under the lease; or

      (b) any payments other than periodical payments are due under the lease or under any agreement which might reasonably be construed as being collateral to the lease; or

      (c) disregarding variations made under the terms of the lease which are attributable to—

      (i) changes in the rate of corporation tax or income tax, or

      (ii) changes in the rate of capital allowances, or

      (iii) changes in any rate of interest where the changes are linked to changes in the rate of interest applicable to inter-bank loans, or

      (iv) changes in the premiums charged for insurance of any description by a person who is not connected with the lessor or the lessee,

      any of the payments due under the lease or under any such agreement as is referred to in sub-paragraph (b) above, expressed as monthly amounts over the period for which that payment is due, is not the same as any other such payment expressed in the same way; or

      (d) either the lease is expressed to be for a period which exceeds thirteen years or there is, in the lease or a separate agreement, provision for extending or renewing the lease or for the grant of a new lease so that, by virtue of that provision, the machinery or plant could be lease for a period which exceeds thirteen years; or

      (e) at any time the lessor or a person connected with him will, or may in certain circumstances, become entitled to receive from the lessee or any other person a payment, other than a payment of insurance moneys, which is of an amount determined before the expiry of the lease and which is referable to a value of the machinery or plant at or after that expiry (whether or not the payment relates to a disposal of the machinery or plant).

      (3B) Where a first year allowance, a balancing allowance or a writing-down allowance has been made in respect of expenditure incurred in providing machinery or plant and, at any time in the requisite period, an event occurs such that, by virtue of subsection (3A) above, there is no right to that allowance, an amount equal to any such allowance which has previously been given (less any excess reliefs previously recovered by the operation of section 66 of the Finance Act 1980) shall, in relation to the person to whom the machinery or plant belongs immediately before the occurrence of that event, be treated as if it were a balancing charge to be made on him for the chargeable period in which, or in the basis period for which, the machinery or plant is used at the time that event occurs.
      938
      (3C) Subsections (3) and (4) of section 66 of the Finance Act 1980 apply in relation to the allowances mentioned in subsection (3B) above as they apply in relation to the allowances mentioned in subsection (2) of that section.'.
      No. 169, in page 56, line 29, leave out 'subsection (1)' and insert 'subsections (1) and (3B)'.
      No. 170, in page 56, line 40, at beginning insert
      'Subject to subsection (7A) below'.—[Mr. Ridley.]
      Mr. Ridley: I beg to move amendment No. 89, in page 57, line 6, leave out '1984' and insert '1985'.
      Mr. Deputy Speaker: With this, it will be convenient to discuss also Government amendments Nos. 90, 91 and 92.
      Mr. Ridley: The amendment is designed to help those who would otherwise have been caught by the overseas leasing arrangements. We allowed those who have contractual obligations—at least with their suppliers if not with their lessors—to have two years' grace before the new rules applied to them, where they were under a contractual obligation. We understand that certain contracts, particularly building and civil engineering contracts overseas, might run for a longer period, so we suggest extending it a further year to make sure that those contracts that were genuinely commitments would not be disadvantaged by the changeover.
      The purpose of the three related amendments, amendments Nos. 90, 91 and 92, is to allow some cross-border leasing transactions, particular sale and leaseback, that were arranged before Budget day and completed before 18 July 1982, to qualify for 25 per cent. writing-down allowances, instead of the new lower rate of 10 per cent. allowances. The difference is between sale and leaseback rather than leaseback transactions and the purpose is to ensure that no one is disadvantaged by the transaction that we introduced in the Budget.
      Mr. Robert Sheldon: What is the cost of amendment No. 89?
      Mr. Ridley: I do not have a figure available but I do know of two contracts—it would not be proper to reveal their nature—that were genuine undertakings and that would have caused a large loss for those who undertook the contracts and would have to renege upon them. The cost difference between the two treatments of leasing would be very small and depends upon whether the lessor, the bank, would have found some other way of sheltering its profits had this amendment not been put down or whether it would have found something else to lease instead. One can safely say that the cost is minimal.
      Amendment agreed to.
      Amendments made: No. 171, in page 57, line 6, at end insert—
      '(7A) In its application to subsections (3A) to (3C) above, subsection (7) above has effect as if for the references to 10th March 1982 there were substituted references to 23rd June 1982.'.
      No. 90, in page 57, line 24, after 'arrangements' insert '(i)'.
      No. 91, in page 57, line 28, after 'supplier' insert
      'or (ii) the lessee purchases the machinery or plant in question and transfers it to the lessor before 8th July 1982'.
      No. 92, in page 57, line 32 at beginning insert 'disregarding any use before 8th July 1982'.
      No. 93, in page 57, line 38 leave out 'paragraph (g) above' and insert 'this section'.

    Schedule 11

      ALLOWANCES FOR ASSETS LEASED OUTSIDE THE UNITED KINGDOM
      No. 174, in page 179, line 22 at end insert—
      '3A.—(1) Subject to sub-paragraph (3) below, the provisions of sub-paragraph (2) below apply where—

      (a) by virtue of subsection (3B) of the principal section any amount falls to be treated as if it were a balancing charge, and

      (b) the person on whom the balancing charge is, by virtue of that subsection, to be made acquired the machinery or plant in question as a result of a transaction which was, or a series of transactions each of which was, between connected persons, and

      (c) a first-year allowance, a balancing allowance, or a writing-down allowance in respect of expenditure on the provision of that machinery or plant has been made to any of those persons.

      (2) Where this sub-paragraph applies—

      (a) subsection (3B) of the principal section shall have effect as if it referred to the allowances specified in sub-paragraph (1)(c) above; and

      (b) for the purposes of that subsection any consideration paid or received on a disposal of the machinery or plant between connected persons shall be disregarded; and

      (c) if a balancing allowance or balancing charge is made in respect of the machinery or plant, there shall be made such adjustments of the relief falling to be taken into account by virtue of paragraph (a) above as are just and reasonable in the circumstances.

      (3) Sub-paragraph (2) above does not apply where section 154(2), section 155(1), or section 225(2) of the Taxes Act or subparagraph (a) or sub-paragraph (b) of paragraph 13 of Schedule 8 to the Finance Act 1971 (succession to trades) applied on the occasion of the transaction or transactions referred to in subparagraph (1)(b).
      (4) Section 533 of the Taxes Act (connected persons) applies for the purposes of this paragraph.'.

    Clause 76

      EXTENSION OF GENERAL RELIEF FOR GIFTS
      Mr. Hayhoe: I beg to move amendment No. 94, in page 66, line 6, leave out 'by an individual'.
      This amendment meets a point that was raised by my hon. Friend the Member for Croydon, South (Sir W. Clark) in Committee that I undertook to examine. It will allow claims for gifts rollover relief to be made by the transferor alone when property is distributed from one settlement to another. As the Bill was previously drafted, the claim had to be by the transferor and the transferee together or by the transferee.
      Amendment agreed to.

    Clause 79

      MAINTENANCE FUNDS FOR HISTORIC BUILDINGS
      Amendments made: No. 96, in page 71, line 8, leave out
      'section 108(1) or (5) or 109(3) of'
      and insert
      'paragraph 1(1) or (5) or 3(1) of Schedule (Capital transfer tax: maintenance funds) to'.
      No. 97, in page 71, line 11, leave out
      'section 108(9) of that Act'
      and insert
      'paragraph 1(2) or (8) or 3(4) of that Schedule'.—[Mr. Ridley.]

    Schedule 12

      THE INDEXATION ALLOWANCE
      Mr. Ridley: I beg to move amendment No. 98, in page 181, line 44, at end insert
      'any of the following enactments applying to the initial disposal, namely'.
      With this it is convenient to take amendment No. 99, which is consequential. The amendments correct an error in the Bill. They remove a small uncertainty in the drafting and put the estimate of a disposal by a personal representative of a legatee on the basis that the Government originally intended.
      Amendment agreed to.
      Amendment made: No. 99, in page 182, line 1, leave out 'or section 49(4)'.—[Mr. Ridley.]
      Mr. Ridley: On a point of order, Mr. Deputy Speaker. It might be more convenient if we take amendment No. 175 with the next group of amendments.
      Mr. Deputy Speaker: If the House agrees, we can take amendment No. 175 with the next group. To avoid any confusion, I shall ask the Financial Secretary to move amendment No. 175.
      Mr. Ridley: I beg to move amendment No. 175, in page 185, line 3, leave out 'paragraph' and insert 'Part of this Schedule'.
      Mr. Deputy Speaker: With this it will be convenient to take the following amendments: No. 163, in page 185, line 5, leave out
      'Subject to paragraphs 9 and 11 below'.
      Government amendment No. 176.
      No. 164, in page 185, line 28, leave out paragraph 9.
      Government amendment No. 177.
      No. 165, in page 186, line 15, leave out paragraph 10.
      Government amendments Nos. 178 and 179.
      Mr. Ridley: I am grateful to you, Mr. Deputy Speaker, for allowing us to discuss the next group together because the amendments all deal with the transitional arrangements for capital gains tax indexation between the 12 months immediately before 5 April this year and the period after that. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) put down some useful suggestions in those amendments. I hope that my hon. Friend will excuse me if I outline the matters. I do not wish to trespass on his amendments and I look forward to hearing what he says.
      The first question is, what should be the treatment of share pools between 9 March 1982 and the end of the financial year, 5 April 1982? The second question is, what should be the treatment of share pools in the 12 months before the beginning of the financial year 1981–82? My hon. Friend and the Government are at one on what should be done about the three weeks between the Budget and the end of the financial year. We both suggest the abolition of special rules. The cost of this abolition is negligible. It is unmeasurable. There was no forestalling, and there were no bed and breakfast transactions designed to take advantage of the situation. I must concede to my hon. Friend that the legislation was not published. Even if it had been published, it would have been so complicated that nobody could have taken advantage of the short period in a way that the rules sought to guard against. We are at one that those rules should be abolished.

      941
      10 pm
      As regards the transitional period, while shares in a pool prior to the Budget are waiting to acquire their 12 months' maturity, so to speak, so that they can become subject to the indexation allowance, my hon. Friend again suggests abolition. I should have liked to go along with him on that. It would have saved a great deal of transitional complication and it would have been easier for the taxpayer and the Revenue. However, there is a snag and it is for that reason only that we have not been able to accommodate him. This concession would cost £7 million in 1983–84 and £40 million in the first full year. In subsequent full years the amount would decline, but the cost might amount to £100 million overall.
      If we were to make that concession for assets bought within less than a year of Budget day, so that they are entitled to the first year's indexation, we would have to extend that concession to non-quoted shares and other assets such as land, buildings and works of art. That would double the cost of the concession. Therefore, after a severe analysis, I must advise the House that to accept the amendment could cost, over a number of years, as much as £200 million.
      Instead, we suggest modified rules under which the cost will be much lower—£5 million or less—in the first full year. These rules are much less complicated and restrictive. Although they are not all that my hon. Friend might wish, they go some way to simplifying the tax as well as making it slightly easier to administer. If my hon. Friend wishes, I can detail the new arrangements, but they are complicated and the House might have already studied them and be aware of what is proposed in the Government amendments.
      My hon. Friend has been a persistent and well-informed critic of the detailed provisions of the capital gains indexation, while at the same time supporting the Goverment's intentions. I have nothing but admiration and gratitude for the way that he has made us look at all these points and seek to simplify and improve the tax. I pay tribute to his understanding, percipience and persistence. His main criticism is that it is not possible to continue with share pooling and that we should move to the share identification rules instead.
      Although I cannot meet that point, the Government recognise that the ending of share pooling may cause problems for institutional investors such as the life offices, particularly in the use of their computers. We have, therefore, asked the Revenue to undertake discussions with the institutions on how the new rules can best be implemented in practice. I hope that those discussions will help them with their technical problems and we shall do our utmost to meet any reasonable requests that result from them.
      Mr. Anthony Beaumont-Dark: It is very difficult, after such a gracious tribute from my hon. Friend the Financial Secretary, to have anything critical to say. For some weeks we have had not a running battle but certainly a running and interesting discussion. Correspondence has taken place between myself and the Minister and between financial institutions and the Minister.
      Particularly after an exchange such as we had in the early hours of this morning, I should not like the Treasury team—under the leadership of the Financial Secretary it has been a team—to think that the investing community,
      942
      of which I am one, as the House well knows, have been ungrateful to the Government for their willingness to concede the point that indexation of capital gains is proper, because to tax capital gains is a right thing but capital confiscation is a bad thing.
      The Government have gone a very long way upon the path towards seeing that justice is done to those who invest their capital and wish to see it grow and not to be taken away from them.
      I recognise—as does anyone who understands the problem—that when we try to draw up legislation to stop people avoiding tax but at the same time to let them take the full benefits of private gain, the complications are tremendous. It is shown by the fact that the very schedule that we are discussing tonight—which should be basically a simple one, because it is dealing only with one-year arrangements and in many ways is dealing only with a matter of months—takes up about eight pages of the Bill, so the complications involved are obviously many.
      I am particularly heartened by the way that the Financial Secretary has been willing to understand that the comments from institutions, and particularly from the life offices and the Stock Exchange, have not been carping comments; the intention has simply been to try to make an excellent idea work better. I am glad to acknowledge that we have, at this late stage in the Bill, arrived at a stage where each side understands the other that much better. I do not altogether accept the Financial Secretary's suggestion that the total cost over some years could be £200 million if adopted my suggestions. Figures prepared for me show that the total cost over a period might be more like £30 million.
      After an interesting and fruitful debate over some weeks and months, we have reached the stage where the Treasury is willing to accept that the investing public are grateful for the intentions and are willing to discuss the matter further so that a good idea can be made to work better. Therefore, it would be churlish of me not to accept the good faith of the Government and of the Financial Secretary, which I have never had any reason to doubt. In those circumstances, I shall not wish to pursue my amendment.
      Amendment agreed to.
      Amendments made: No. 176, in page 185, line 5, leave out 'paragraphs 9 and 11' and insert 'paragraphs 9'.
      No. 177, in page 185, line 41, leave out from 'applies' to end of line 11 on page 186 and insert
      'the identification rules set out in sub-paragraph (4) below shall be assumed to have applied in relation to every acquisition or disposal of securities which occurred after the day referred to in sub-paragraph (1)(b) above and before the operative date and which, apart from this paragraph, would have increased or reduced the size of the holding; and accordingly—

      (a) only such of the securities (if any) which constituted the holding on that day as are not identified, by virtue of those rules, with securities disposed of before the operative dale shall be regarded as constituting the holding on the operative date; and

      (b) all securities acquired after that day and before the operative date, so far as they are not so identified with securities disposed of before the operative date, shall be regarded as separate assets.

      (4) The identification rules referred to in sub-paragraph (3) above are—

      (a) that securities disposed of on an earlier date shall be identified before securities disposed of on a later date, and the identification of the securities first disposed of shall accordingly determine the securities which could be comprised in the later disposal; and

      943

      (b) that securities disposed of shall be identified with securities acquired on a later date rather than with securities acquired on an earlier date; and

      (c) that securities disposed of shall be identified with securities acquired at different times on any one day in as nearly as may be equal proportions;

      and these rules shall have priority according to the order in which they are set out above.
      (4A) In this paragraph and paragraph 10 below—

      (a)"the reduced holding" means the securities referred to in sub-paragraph (3)(a) above; and

      (b) "relevant allowable expenditure" has, in relation to a disposal taking place at any time, the meaning assigned to it by subsection (2)(b) of section 80 of this Act in relation to a disposal to which that section applies.'.

      No. 178, in page 186, line 16, leave out from 'of' to end of line 36 and insert—

      '(a) the reduced holding, or

      (b) any other securities which, by virtue of sub-paragraph (3) (b) of paragraph 9 above, constitute one or more separate assets,

      the 1982 amount, as defined in that paragraph, shall be apportioned between the reduced holding and that asset or those assets in proportion to the number of securities comprised in each of them on the operative date.
      (2) In relation to a disposal on or after the operative date, the amount apportioned to the reduced holding or to any asset by virtue of sub-paragraph (1) above shall be regarded for all purposes of capital gains tax as the relevant allowable expenditure attributable to the securities comprised in the reduced holding or, as the case may be, in the asset in question'.
      No. 179, in page 186, line 42, leave out paragraph 11.—[Mr. Ridley.]

    Clause 81

      CALCULATION OF INDEXATION ALLOWANCE
      Mr. Ridley: I beg to move amendment No. 100, in page 73, line 17, leave out from 'when' to end of line 18 and insert
      'that expenditure became due and payable'.
      Mr. Deputy Speaker: With this we shall take amendment No. 101, in page 73, line 17, leave out from 'was' to the end of line 18 and insert 'due and payable'.
      Mr. Ridley: Government amendment No. 100 meets the points that my hon. Friend the Member for Croydon, South (Sir W. Clark) makes in amendment No. 101.
      I undertook in Committee to table the amendment. It provides that when enhancement is made to an asset the value of that enhancement for the purposes of indexation will have the benefit of indexation relief from the time it became due and payable rather than when it was first reflected in the state or nature of the assets. I hope that it will be a welcome concession.
      Amendment agreed to.

    Clause 87

      MAINTENANCE FUNDS: TREASURY DIRECTIONS
      Amendment made: No. 103, in page 78, line 42, leave out from first 'of' to 'in' in line 44 and insert:
      'paragraph 3(1) of Schedule (Capital transfer tax: maintenance funds) to this Act there was no charge (or, but for paragraph 3(4) of that Schedule, there would have been no charge) to tax' — [Mr. Wakeham.]

    Clause 89

      MAINTENANCE FUNDS: EXEMPT TRANSFERS
      Amendment made: No. 162, in page 81, line 14, leave out 'becomes' and insert:
      'by virtue of the transfer becomes, or immediately after the transfer remains,'.—[Mr. Wakeham.]

    Clause 90

      NON-RESIDENTS' BANK ACCOUNTS
      The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne): I beg to move amendment No. 104, in page 81, line 36, after 'any', insert 'qualifying'.
      Mr. Deputy Speaker: With this we shall take Government amendments Nos. 105 to 108.
      Mr. Bruce-Gardyne: The House will be aware that clause 90 excludes foreign currency accounts held by an individual with no United Kingdom ties from the capital transfer tax charge on death. To qualify for exemption, the clause requires the account to be with a recognised bank within the meaning of the Banking Act 1979. The purpose of the amendments is to extend the range of qualifying accounts to accounts with the Bank of England, the Post Office—in other words the Giro bank—and licensed institutions—licensed deposit takers. I commend the amendments to the House.
      Amendment agreed to.
      Amendments made: No. 105, in page 81, line 36, leave out from 'his' to 'and' in line 37.
      No. 106, in page 81, line 38, after 'any', insert 'qualifying'.
      No. 107, in page 81, line 39, leave out from 'account' to first 'of'.
      No. 108, in page 82, line 18, leave out subsection (5) and insert—
      '(5) In this section "qualifying foreign currency account" means a foreign currency account with the Bank of England, the Post Office, a recognised bank or licensed institution; and for this purpose—

      (a) "foreign currency account" means any account other than one denominated in sterling, and

      (b) "recognised bank" and "licensed institution" have the same meanings as in the Banking Act 1979.'.—[Mr. Wakeham.]

    Clause 96

      RELEVANT PROPERTY
      Amendments made: No. 109, in page 85, leave out line 9.
      No. 110, in page 85, line 10, at end insert—
      '(cc) property to which paragraph 2 of Schedule (Capital transfer tax: maintenance funds) to this Act applies;'.—[Mr. Wakeham.]
      The Solicitor-General (Sir Ian Percival): I beg to move amendment No. 111, in page 85, line 29, at end insert—
      '(2) The reference in subsection (1)(d) above to property which is part of or held for the purposes of a fund or scheme does not include a reference to a benefit which, having become payable under the fund or scheme, becomes comprised in a settlement.'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments No. 125 and No. 155.
      The Solicitor-General: These are consequential amendments designed to ensure that the existing reliefs from capital transfer tax for superannuation schemes will apply unchanged under the new regime for discretionary trusts.
      Amendment agreed to.

    Clause 99

      TEN-YEAR ANNIVERSARY
      The Solicitor-General: I beg to move amendment No. 180, in page 86, line 21, leave out from 'year' to 'except' in line 23 and insert:
      'an event occurs in respect of the settlement which could not have occurred'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 181 to 186.
      The Solicitor-General: The Bill was amended in Committee to enable trustees of settlements set up before the introduction of capital transfer tax to elect for the existing capital transfer tax regime for discretionary trusts to continue to apply to their trusts for a limited period. It in effect postpones the implementation of the new regime that is introduced in the Bill. The seven amendments, which go together, extend the range of circumstances in which the election is available. They also effect the necessary consequential changes in relation to a trust tenure anniversary.
      Mr. Robert Sheldon: Will the Solicitor-General tell us about the extension of the circumstances and what the circumstances apply to?
      10.15 pm
      The Solicitor-General: The provisions of part II of the schedule were introduced by the Government in Committee in fulfilment of an undertaking given at the time when the Bill was published. It has since been represented that the requirement that there must be a payment out of the trust if the period of election is to be extended to 1 April 1984 is far too restrictive. It will not cover the case where, for example, the proceedings before the court result in the creation of an interest in possession or an employee or charitable trust rather than a payment out, since none of those events will involve an actual payment out of the trust, and the original wording was limited to payments out.
      I can enlarge on that if the right hon. Gentleman wishes.
      Amendment agreed to.
      Amendment made: No. 181, in page 86, line 24, at end insert
      'and
      (c) the event is one on which tax is (or, apart from Part H of Schedule 14 to this Act, would be) chargeable under this Chapter.'.—[Mr. Wakeham.]

    Clause 102

      CHARGE AT OTHER TIMES
      The Solicitor-General: I beg to move amendment No. 112, in page 87, line 41, after `benefit)', insert
      'or section 97 of the Finance Act 1981 (grant of tenancies of agricultural property)'.
      Mr. Deputy Speaker: With this we may take Government amendment No. 113.
      The Solicitor-General: The amendments ensure that there will be no proportionate or flat rate charge to tax when trustees of a discretionary trust of a special trust grant a lease of agricultural property, so long as the grant is for full consideration.
      Amendment agreed to.

    Clause 107

      PROPERTY LEAVING TEMPORARY CHARITABLE TRUSTS
      Amendment made: No. 113, in page 93, line 32, after `benefit)' insert
      "or section 97 of the Finance Act 1981 (grant of tenancies of agricultural property)'.—[Mr. Wakeham.]

    Clause 108
      PROPERTY BECOMING COMPRISED IN MAINTENANCE FUNDS
      Amendment made: No. 114, in page 94, line 34, leave out clause 108.—[Mr. Wakeham.]
    Clause 109
      PROPERTY LEAVING MAINTENANCE FUNDS
      Amendment made: No. 115, in page 96, line 11, leave out clause 109.—[Mr. Wakeham.]
    Clause 110

      ACCUMULATION AND MAINTENANCE TRUSTS
      Mr. Straw: I beg to move amendment No. 116, in page 98, line 2, leave out paragraph (a).
      The purpose of the amendment is to make subject to a charge to tax the situation when a beneficiary becomes entitled to property in a trust or to interest in possession within a trust in a settlement where he attains the entitlement before the age of 25.
      Clause 110 is about accumulation and maintenance trusts, which may be better known, at least to my hon. Friends, as discretionary trusts for children. They arise as a legitimate device. Property cannot be passed absolutely to minors, and it becomes desirable to settle it on trusts. The usual procedure is to settle it on trust, by which some income can be used for the education and maintenance of potential beneficiaries, with the rest being accumulated and becoming settled on the beneficiaries, often at the age of 25 or on marriage. Concessions were originally made on the tax treatment of such trusts under the capital transfer tax legislation of 1975. They were tightened, in 1976.
      The result of the labours of Lord Cockfield is that the law relating to the tax treatment of discretionary trusts, described in the Finance Bill as settlements without "interest in possession", has now been recast, in particular so that there is generally no exit charge when property leaves the trust. However, at the same time as this recasting has taken place there has been a substantial reduction in capital transfer tax applicable both to transfers on death and to lifetime transfers.
      Labour Members have become increasingly unhappy about the additional exemptions that are made for accumulation and maintenance trusts, so much so that now no tax is to be charged, if the House approves subsection

      947
      (4)(a) of clause 110, when the property is passed to a beneficiary and he becomes beneficially entitled to that or to an interest in possession in respect of the property.
      We had a brief discussion on the matter in Committee when we debated what at that time was clause 86. As a result of an explanation from the Solicitor-General about a paving clause in the Bill relating to the definition of relevant property, we withdrew the amendment.
      We have given considerable thought to the desirability of allowing this concession to remain in the body of the Bill, but, in view of the substantial recasting of the law relating to discretionary trusts and the overall substantial reduction of capital transfer tax for these trusts and for other transfers, we do not consider that this further exemption is desirable. That is why we have tabled the amendment.
      The solicitor-General: The hon. Member for Blackburn (Mr. Straw) is quite right when he says that the law relating to capital transfer tax on discretionary trusts has been substantially recast. He is also right when he says that there is no longer an exit charge, although it is important to remember that there is a proportionate charge when funds leave the trust. It is not that the exit charge has been done away with and not replaced by anything at all.
      I shall limit my remarks to what the hon. Gentleman said about the accumulation of maintenance trusts. I respectfully suggest to him and to the House that what is being done need not give rise to the concern that he expressed. In fact, it does not change anything.
      There are two exceptions from the charge that arises when property ceases to be held on accumulation of maintenance trusts. These are paragraphs (a) and (b) of the subsection to which the amendment relates, and the amendment relates to the first paragraph only—that is, the exception that applies when a beneficiary of the trust becomes beneficially entitled to the property, or to an interest in possession in it, on or before attaining the age of 25. That is similar to the exemption under the existing legislation, which is paragraph 15(2)(a) of schedule 5 to the Finance Act 1975.
      The special reliefs are designed to ensure that, for capital transfer tax purposes, gifts to infants are treated no more harshly than gifts to adults. I realise that I said that in Committee, but I repeat it because it is the substance of the argument. It is not always possible or wise to make an outright gift to an infant. The gift would normally be deferred until the infant attains a specified age, which is commonly the age of majority, and the property would be technically held in discretionary trust. But for the special reliefs, a gift made to an infant in that way would be subject to a tax charge when the property went into the discretionary trust, and again when it came out of the trust. On the other hand, a gift to an adult would not suffer the second charge.
      The Government, like the Labour Government who introduced this relief, take the view that a gift to an infant that is deferred until he reaches the appropriate age—often 25—should be treated in broadly the same way as a outright gift to an adult. The exemption from the charge when the beneficiary becomes beneficiary in title to the property or to an interest in possession in it on or before attaining the specified age is necessary to achieve that objective. If the beneficiary took the property at the
      948
      specified age, there would be no further tax until he died or gave the property away. The same is true of a direct gift to an adult beneficiary.
      The hon. Gentleman was good enough to refer to some tightening of the other provisions relating to the trusts. The one point that arises on the amendment is that without this relief money settled on an infant would pay tax on the way in and on the way out, whereas a gift to an adult would pay tax once only. It is necessary to balance the two.
      Question put, That the amendment be made:—
      The House divided: Ayes 212, Noes 308.

      Division No. 271]

      [10.26 pm

      AYES

      Abse, Leo

      Evans, Ioan (Aberdare)

      Adams, Allen

      Ewing, Harry

      Allaun, Frank

      Faulds, Andrew

      Anderson, Donald

      Field, Frank

      Archer, Rt Hon Peter

      Flannery, Martin

      Ashley, Rt Hon Jack

      Fletcher, Ted (Darlington)

      Ashton, Joe

      Ford, Ben

      Atkinson, N. (H'gey,)

      Forrester, John

      Bagier, Gordon A.T.

      Foster, Derek

      Barnett, Guy (Greenwich)

      Foulkes, George

      Barnett, Rt Hon Joel (H'wd)

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

      Benn, Rt Hon Tony

      Freeson, Rt Hon Reginald

      Bennett, Andrew (St'kp't N)

      Garrett, John (Norwich S)

      Bidwell, Sydney

      Garrett, W. E. (Wallsend)

      Booth, Rt Hon Albert

      Golding, John

      Boothroyd, Miss Betty

      Gourlay, Harry

      Bray, Dr Jeremy

      Graham, Ted

      Brown, Hugh D. (Provan)

      Hamilton, James (Bothwell)

      Brown, Ron (E'burgh, Leith)

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

      Buchan, Norman

      Hardy, Peter

      Callaghan, Rt Hon J.

      Harrison, Rt Hon Walter

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

      Hart, Rt Hon Dame Judith

      Campbell, Ian

      Hattersley, Rt Hon Roy

      Campbell-Savours, Dale

      Haynes, Frank

      Canavan, Dennis

      Heffer, Eric S.

      Cant, R. B.

      Hogg, N. (E Dunb't'nshire)

      Carmichael, Neil

      Holland, S. (L'b'th, Vauxh'll)

      Carter-Jones, Lewis

      Home Robertson, John

      Clark, Dr David (S Shields)

      Homewood, William

      Clarke, Thomas C'b'dge, A'rie

      Hooley, Frank

      Cocks, Rt Hon M. (B'stol S)

      Howell, Rt Hon D.

      Cohen, Stanley

      Hoyle, Douglas

      Coleman, Donald

      Huckfield, Les

      Concannon, Rt Hon J. D.

      Hughes, Mark (Durham)

      Cook, Robin F.

      Hughes, Robert (Aberdeen N)

      Cowans, Harry

      Hughes, Roy (Newport)

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

      Janner, Hon Greville

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

      Jay, Rt Hon Douglas

      Crowther, Stan

      John, Brynmor

      Cryer, Bob

      Johnson, James (Hull West)

      Cunningham, Dr J. (W'h'n)

      Jones, Rt Hon Alec (Rh'dda)

      Dalyell, Tam

      Jones, Barry (East Flint)

      Davidson, Arthur

      Kaufman, Rt Hon Gerald

      Davies, Rt Hon Denzil (L'lli)

      Kerr, Russell

      Davis, Clinton (Hackney C)

      Kilroy-Silk, Robert

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

      Kinnock, Neil

      Deakins, Eric

      Lambie, David

      Dean, Joseph (Leeds West)

      Lamond, James

      Dewar, Donald

      Leadbitter, Ted

      Dixon, Donald

      Lestor, Miss Joan

      Dobson, Frank

      Lewis, Ron (Carlisle)

      Dormand, Jack

      Litherland, Robert

      Douglas, Dick

      Lofthouse, Geoffrey

      Dubs, Alfred

      McCartney, Hugh

      Duffy, A. E. P.

      McDonald, Dr Oonagh

      Dunlop, John

      McElhone, Frank

      Dunnett, Jack

      McGuire, Michael (Ince)

      Dunwoody, Hon Mrs G.

      McKay, Allen (Penistone)

      Eadie, Alex

      McKelvey, William

      Eastham, Ken

      MacKenzie, Rt Hon Gregor

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

      McNamara, Kevin

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

      McTaggart, Robert

      English, Michael

      McWilliam, John

      Ennals, Rt Hon David

      Marks, Kenneth

      949

      Marshall, Dr Edmund (Goole)

      Shore, Rt Hon Peter

      Marshall, Jim (Leicester S)

      Short, Mrs Renée

      Marshall, Michael (Arundel)

      Silkin, Rt Hon J. (Deptford)

      Martin, M (G'gow S'burn)

      Silverman, Julius

      Mason, Rt Hon Roy

      Skinner, Dennis

      Maxton, John

      Smith, Rt Hon J. (N Lanark)

      Maynard, Miss Joan

      Soley, Clive

      Meacher, Michael

      Spearing, Nigel

      Mikardo, Ian

      Spriggs, Leslie

      Millan, Rt Hon Bruce

      Stallard, A. W.

      Miller, Dr M. S. (E Kilbride)

      Stoddart, David

      Mitchell, Austin (Grimsby)

      Stott, Roger

      Morris, Rt Hon A. (W'shawe)

      Strang, Gavin

      Morris, Rt Hon C. (O'shaw)

      Straw, Jack

      Morton, George

      Summerskill, Hon Dr Shirley

      Moyle, Rt Hon Roland

      Taylor, Mrs Ann (Bolton W)

      Newens, Stanley

      Thomas, Dr R. (Carmarthen)

      Oakes, Rt Hon Gordon

      Thorne, Stan (Preston South)

      O'Neill, Martin

      Tilley, John

      Palmer, Arthur

      Tinn, James

      Park, George

      Torney, Tom

      Parker, John

      Urwin, Rt Hon Tom

      Parry, Robert

      Varley, Rt Hon Eric G.

      Pavitt, Laurie

      Wainwright, E. (Dearne V)

      Pendry, Tom

      Walker, Rt Hon H. (D'caster)

      Powell, Raymond (Ogmore)

      Weetch, Ken

      Prescott, John

      Welsh, Michael

      Price, C. (Lewisham W)

      White, Frank R.

      Race, Reg

      White, J. (G'gow Pollok)

      Radice, Giles

      Whitehead, Phillip

      Rees, Rt Hon M (Leeds S)

      Whitlock, William

      Richardson, Jo

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

      Roberts, Albert (Normanton)

      Wilson, Gordon (Dundee E)

      Roberts, Allan (Bootle)

      Wilson, Rt Hon Sir H. (H'ton)

      Roberts, Ernest (Hackney N)

      Wilson, William (C'try SE)

      Roberts, Gwilym (Cannock)

      Winnick, David

      Robertson, George

      Woodall, Alec

      Robinson, G. (Coventry NW)

      Woolmer, Kenneth

      Rooker, J. W.

      Wright, Sheila

      Ross, Ernest (Dundee West)

      Young, David (Bolton E)

      Rowlands, Ted

      Sever, John

      Tellers for the Ayes:

      Sheerman, Barry

      Mr. Lawrence Cunliffe and

      Sheldon, Rt Hon R.

      Mr. Ron Leighton

      NOES

      Adley, Robert

      Brinton, Tim

      Aitken, Jonathan

      Brittan, Rt. Hon. Leon

      Alexander, Richard

      Brotherton, Michael

      Alison, Rt Hon Michael

      Brown, Michael (Brigg & Sc'n)

      Alton, David

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

      Ancram, Michael

      Browne, John (Winchester)

      Arnold, Tom

      Bruce-Gardyne, John

      Aspinwall, Jack

      Bryan, Sir Paul

      Atkins, Rt Hon H. (S'thorne)

      Buchanan-Smith, Rt. Hon. A.

      Atkins, Robert (Preston N)

      Buck, Antony

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

      Budgen, Nick

      Baker, Nicholas (N Dorset)

      Bulmer, Esmond

      Banks, Robert

      Burden, Sir Frederick

      Beaumont-Dark, Anthony

      Butcher, John

      Beith, A. J.

      Butler, Hon Adam

      Bendall, Vivian

      Cadbury, Jocelyn

      Bennett, Sir Frederic (T'bay)

      Carlisle, John (Luton West)

      Benyon, Thomas (A'don)

      Carlisle, Kenneth (Lincoln)

      Benyon, W. (Buckingham)

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

      Berry, Hon Anthony

      Chalker, Mrs. Lynda

      Best, Keith

      Channon, Rt. Hon. Paul

      Bevan, David Gilroy

      Chapman, Sydney

      Biffen, Rt Hon John

      Churchill, W. S.

      Biggs-Davison, Sir John

      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, Sir Nicholas

      Cockeram, Eric

      Boscawen, Hon Robert

      Colvin, Michael

      Bottomley, Peter (W'wich W)

      Cope, John

      Bowden, Andrew

      Cormack, Patrick

      Boyson, Dr Rhodes

      Corrie, John

      Braine, Sir Bernard

      Costain, Sir Albert

      Bright, Graham

      Cranborne, Viscount

      950

      Crawshaw, Richard

      Knight, Mrs Jill

      Critchley, Julian

      Knox, David

      Crouch, David

      Lamont, Norman

      Dorrell, Stephen

      Lang, Ian

      Douglas-Hamilton, Lord J.

      Latham, Michael

      Dover, Denshore

      Lee, John

      du Cann, Rt Hon Edward

      Lennox-Boyd, Hon Mark

      Dunn, Robert (Dartford)

      Lester, Jim (Beeston)

      Durant, Tony

      Lewis, Kenneth (Rutland)

      Eden, Rt Hon Sir John

      Lloyd, Ian (Havant & W'loo)

      Edwards, Rt Hon N. (P'broke)

      Lloyd, Peter (Fareham)

      Eggar, Tim

      Loveridge, John

      Elliott, Sir William

      Luce, Richard

      Eyre, Reginald

      Lyell, Nicholas

      Fairbairn, Nicholas

      Lyons, Edward (Bradf'd W)

      Fairgrieve, Sir Russell

      Macfarlane, Neil

      Faith, Mrs Sheila

      MacGregor, John

      Farr, John

      MacKay, John (Argyll)

      Fell, Sir Anthony

      Macmillan, Rt Hon M.

      Fenner, Mrs Peggy

      McNair-Wilson, M. (N'bury)

      Finsberg, Geoffrey

      McNair-Wilson, P. (New F'st)

      Fisher, Sir Nigel

      McNally, Thomas

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

      Madel, David

      Fletcher-Cooke, Sir Charles

      Major, John

      Fookes, Miss Janet

      Marland, Paul

      Forman, Nigel

      Marten, Rt Hon Neil

      Fowler, Rt Hon Norman

      Mather, Carol

      Fox, Marcus

      Maude, Rt Hon Sir Angus

      Fraser, Peter (South Angus)

      Mawby, Ray

      Fry, Peter

      Mawhinney, Dr Brian

      Gardner, Edward (S Fylde)

      Maxwell-Hyslop, Robin

      Garel-Jones, Tristan

      Mayhew, Patrick

      Glyn, Dr Alan

      Mellor, David

      Goodhew, Sir Victor

      Meyer, Sir Anthony

      Goodlad, Alastair

      Miller, Hal (B'grove)

      Gorst, John

      Mills, Iain (Meriden)

      Gow, Ian

      Mills, Sir Peter (West Devon)

      Grant, Anthony (Harrow C)

      Miscampbell, Norman

      Gray, Hamish

      Mitchell, David (Basingstoke)

      Greenway, Harry

      Moate, Roger

      Griffiths, E. (B'y St. Edm'ds)

      Monro, Sir Hector

      Griffiths, Peter Portsm'th N)

      Montgomery, Fergus

      Grylls, Michael

      Moore, John

      Gummer, John Selwyn

      Morris, M. (N'hampton S)

      Hamilton, Michael (Salisbury)

      Morrison, Hon C. (Devizes)

      Hampson, Dr Keith

      Morrison, Hon P. (Chester)

      Hannam,John

      Mudd, David

      Haselhurst, Alan

      Murphy, Christopher

      Havers, Rt Hon Sir Michael

      Myles, David

      Hawkins, Sir Paul

      Neale, Gerrard

      Hawksley, Warren

      Needham, Richard

      Hayhoe, Barney

      Nelson, Anthony

      Heddle, John

      Neubert, Michael

      Henderson, Barry

      Newton, Tony

      Heseltine, Rt Hon Michael

      Normanton, Tom

      Hicks, Robert

      Ogden, Eric

      Higgins, Rt Hon Terence L.

      Onslow, Cranley

      Hill, James

      Oppenheim, Rt Hon Mrs S.

      Hogg, Hon Douglas (Gr'th'm)

      Osborn, John

      Holland, Philip (Carlton)

      Page, John (Harrow, West)

      Hooson, Tom

      Page, Richard (SW Herts)

      Horam, John

      Parkinson, Rt Hon Cecil

      Hordern, Peter

      Parris, Matthew

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

      Patten, John (Oxford)

      Howell, Ralph (N Norfolk)

      Pattie, Geoffrey

      Howells, Geraint

      Pawsey, James

      Hunt, David (Wirral)

      Penhaligon, David

      Hunt, John (Ravensbourne)

      Percival, Sir Ian

      Irvine, Bryant Godman

      Peyton, Rt Hon John

      Irving, Charles (Cheltenham)

      Pink, R. Bonner

      Jenkin, Rt Hon Patrick

      Pollock, Alexander

      Jessel, Toby

      Porter, Barry

      Johnson Smith, Sir Geoffrey

      Prentice, Rt Hon Reg

      Jopling, Rt Hon Michael

      Price, Sir David (Eastleigh)

      Joseph, Rt Hon Sir Keith

      Prior, Rt Hon James

      Kaberry, Sir Donald

      Proctor, K. Harvey

      Kellett-Bowman, Mrs Elaine

      Raison, Rt Hon Timothy

      Kershaw, Sir Anthony

      Rees-Davies, W. R.

      Kimball, Sir Marcus

      Renton, Tim

      King, Rt Hon Tom

      Rhodes James, Robert

      951

      Rhys Williams, Sir Brandon

      Skeet, T. H. H.

      Ridley, Hon Nicholas

      Smith, Cyril (Rochdale)

      Rifkind, Malcolm

      Smith, Dudley

      Rippon, Rt Hon Geoffrey

      Smith, Tim (Beaconsfield)

      Roberts, M. (Cardiff NW)

      Speed, Keith

      Roberts, Wyn (Conway)

      Speller, Tony

      Rodgers, Rt Hon William

      Spence, John

      Roper, John

      Spicer, Jim (West Dorset)

      Ross, Stephen (Isle of Wight)

      Spicer, Michael (S Worcs)

      Rossi, Hugh

      Sproat, Iain

      Rost, Peter

      Squire, Robin

      Rumbold, Mrs A. C. R.

      Stainton, Keith

      Sainsbury, Hon Timothy

      Stanley, John

      St. John-Stevas, Rt Hon N.

      Steel, Rt Hon David

      Scott, Nicholas

      Steen, Anthony

      Shaw, Giles (Pudsey)

      Stevens, Martin

      Shelton, William (Streatham)

      Stewart, A. (E Renfrewshire)

      Shepherd, Colin (Hereford)

      Stewart, Ian (Hitchin)

      Shepherd, Richard

      Stokes, John

      Shersby, Michael

      Stradling Thomas, J.

      Silvester, Fred

      Tapsell, Peter

      Sims, Roger

      Taylor, Teddy (S'end E)

      Question accordingly negatived.

    Clause 114

      PROPERTY BECOMING HELD FOR CHARITABLE PURPOSES OR BY EXEMPT BODIES
      Amendments made: No. 117, in page 101, line 25, leave out '109'.
      No. 118, in page 101, line 25 at end add
      'or paragraph 2 of Schedule (Capital transfer tax: maintenance funds) to this Act'.—[Mr. Brooke.]

    Clause 118

      PROPERTY BECOMING SETTLED ON A DEATH
      The Solicitor-General: I beg to move amendment No. 119, in page 104, line 17 leave out from 'settlement' to 'shall' in line 19 and insert
      'in pursuance of a will or intestacy'.
      Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will be convenient to take amendment No. 120.
      The Solicitor-General: These two essentially drafting amendments are designed to ensure that clause 118 produces the effect that was intended—that a settlement that comes into existence on a person's death, typically a settlement set up by will, will have as its commencement date the date of the settler's death.
      Amendment agreed to.
      Amendment made: No. 120 in page 104, line 20, leave out from 'it' to end of line and insert:
      'on the death of the testator or intestate (whether it occurred before or after the passing of this Act)'.—[Mr. Brooke.]

    Schedule 14

      CAPITAL TRANSFER TAX: SETTLEMENTS COMMENCING BEFORE 27TH MARCH 1974
      The Solicitor-General: I beg to move amendment No.121 in page 188, line 41 after 'this', insert 'Part of this'.
      This is a purely drafting amendment designed to achieve greater clarity.
      Amendment agreed to.
      Amendments made: No. 182, in page 191, line 5 leave out from '1984' to 'except' in line 7 and insert:
      'an event occurs in respect of the settlement which could not have occurred'.
      No. 183, in page 191, line 9 leave out 'payment constitutes an event' and insert:
      'event is one'.
      No. 184, in page 191, line 21 leave out from '1984' to 'except' in line 23 and insert:
      'an event occurs in respect of the settlement which could not have occurred'.
      No. 185, in page 191, line 25 leave out 'payment constitutes an event' and insert:
      'event is one'.—[Mr. Brooke.]

    Schedule 15

      CAPITAL TRANSFER TAX SETTLEMENTS WITHOUT INTERESTS IN POSSESSION
      The Solicitor-General: I beg to move amendment No. 122 in page 193, line 9, at end insert—
      '(c) in sub-paragraph (7) after the words "section 78" there shall be inserted the words "or 82(3)".'.
      Mr. Deputy Speaker: With this it is convenient to take amendments Nos. 123, 124 and Nos. 128 to 136.
      The Solicitor-General: These amendments provide the necessary rules relating to liability, accountability, the due date for payment of tax and interest on tax in relation to the special flat rate charge for tax that would apply in certain circumstances to national heritage property that has been acquired by trustees and discretionary trusts.
      Mr. Tim Eggar: Amendment No. 135 is the Government's response to a debate in Committee when I proposed an amendment on behalf of the heritage lobby. The Government have accepted the point that was made, but I wish to raise the question of the magnitude of the charge that should be brought down on the recipient of heritage property distributed under what is known as conditional exemption by trustees if the recipient breaches his undertakings to maintain, repair, preserve and show the property to the public.
      As the Bill is drafted, the full charge is exacted even though the charge conditionally exempted cannot be more than 30 per cent. of the full charge. In most cases, it will be much lower. The Government amendment reduces the charge to 30 per cent., or 60 per cent. of the full charge, or retains it as a full charge. Which of these is chosen depends on complex arrangements that I shall not discuss now. The approach that the Government have put forward is somewhat illogical. Because the charge increases with time, the taking of conditional exemption will be inhibited.
      This is too blunt an instrument. It is a slightly disappointing response by the Government to the point made in Committee. I recognise that this is an extremely complex matter. I have already supplied the Solicitor-General with an amendment. I recognise that there is no chance that it can be introduced this year. I hope, however, that my hon. and learned Friend will consider it and possibly return to the matter next year.
      10.45 pm
      The Solicitor-General: My hon. Friend suggests that the solution adopted in amendment No. 135 is a blunt instrument. He implies that the reductions to 30 per cent. and 60 per cent. of the full senior's rate are not sufficiently precise. I accept that the percentage reductions are deliberately simple. To attempt anything more elaborate runs the risk of considerable complications that would be difficult to justify on a comparatively narrow point. My hon. Friend has kindly given me a copy of suggested alternative provisions. I have had just long enough to look at them and take advice. My reference to possible complications is well illustrated by the alternative provisions. Although they have been prepared, I have no doubt, by knowledgeable experts, they are remarkably complicated and deficient in at least two respects, which I shall be happy to import to my hon. Friend afterwards.
      In response to what my hon. Friend says, I am prepared to agree that the matter should be considered further. My hon. Friend is right that it is too late to do anything about it. I give the undertaking that the matter will be looked at further without any commitment as to the result. I suggest that the obvious course is for representatives of the lobby that put forward those points to enter into discussions immediately with the appropriate officials. Between us all, perhaps we can find the best answer.
      Mr. Eggar: Not only is the instrument somewhat blunt, but the amount of tax is being raised over and above what it was before the amendment was tabled. I am sure that the members of the heritage lobby would also want to discuss that with my hon. and learned Friend.
      Sir Ian Percival: I do not think that my hon. Friend is right in that proposition. However, if he is, of course that will be another matter to be considered. Meanwhile, I commend the amendments to the House.
      Amendment agreed to.
      Amendments made: No. 123, in page 193, line 22 at end insert—
      '9A. In paragraph 12(4) of that Schedule after the words "section 78" there shall be inserted the words "or 82(3).".'.
      No. 124, in page 193, line 38 at end insert—
      '11A. In paragraph 19(1)(c) of that Schedule after the words "section 78" there shall be inserted the words "or 82(3)".'.
      No. 125, in page 194, line 3 at end insert—
      '14A. In paragraph 16(6) of that Schedule, for the words from the beginning to "settlement is" there shall be substituted the words "Where a benefit has become payable under a fund or scheme to which this paragraph applies, and the benefit becomes comprised in a settlement".'.
      No. 126, in page 194, line 30 at end insert—
      '16A. In paragraph 4 of Schedule 10 to that Act, for sub-paragraph (2) there shall be substituted—
      "(2) Sub-paragraph (1) above shall not apply where the chargeable transfer is made under Schedule 5 to this Act or under Chapter II of Part IV of the Finance Act 1982 and the gain accrues to the trustees of the settlement; but if in such a case any capital gains tax chargeable on the gain is borne by a person who becomes absolutely entitled to the settled property concerned, the amount of the tax so borne shall be treated as reducing the value transferred by the chargeable transfer".'.
      No. 127, in page 194, line 31 leave out
      'Schedule 10 to that Act'
      and insert 'that Schedule'.
      No. 128, in page 195, line 6 leave out '(7A)' and insert '(8)'.
      No. 129, in page 195, line 7 at end insert—
      '(9) Subsection (1)(b) above shall have effect subject to section 82A(6) and (7) below.'
      No. 130, in page 195, line 29 leave out from beginning to end of line 32 and insert—
      '(2) References in subsections (3) and (4) below and in sections 82, 82A and 83 below to a conditionally exempt occasion are to—

      (a) a transfer or event which by virtue of subsection (1) above does not constitute an occasion on which tax is chargeable under the Chapter there mentioned;

      (b) a conditionally exempt distribution (within the meaning given by this subsection as it had effect in relation to events before 9th March 1982).'.

      No. 131, in page 196, line 48 at end insert—
      '(3A) Tax shall not be charged under subsection (3) above in respect of property if, after the occasion and before the occurrence there mentioned, there has been a conditionally exempt occasion in respect of the property.'.
      No. 132, in page 197, line 5 after 'quarters', insert
      '(that is, periods of three months)'.
      No. 133, in page 197, line 20 at end insert—
      '(6A) The persons liable for tax in respect of a charge under subsection (3) above are—

      (a) the trustees of the settlement; and

      (b) any person for whose benefit any of the property or income from it is applied at or after the time of the event occasioning the charge.'.

      No. 134, in page 197, line 41 at end insert—
      '(9) In this section "ten-year anniversary" in relation to a settlement has the same meaning as in Chapter II of Part IV of the Finance Act 1982.'
      No. 135, in page 198, line 31 at end insert—
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      '(6) If the last transaction regarding property before a chargeable event was a conditionally exempt occasion, and the relevant person died before 13th March 1975, section 79(1)(b)(ii) above shall (subject to subsection (7) below) be taken to read as follows:—
      "(ii) the rate or rates that would have applied to that amount ('the chargeable amount') under the appropriate Table in that section if the relevant person had died when the chargeable event occurred, the value transferred on his death had been equal to the amount on which estate duty was chargeable when he in fact died, and the chargeable amount had been added to that value and had formed the highest part of it."
      (7) If the last transaction regarding property before a chargeable event was a conditionally exempt occasion, the rate (or each of the rates) mentioned in section 79(1)(b)(i) or (ii) above—

      (a) shall, if the occasion occurred before the first ten-year anniversary to fall after the property became comprised in the settlement concerned, be 30 per cent. of what it would be apart from this subsection; and

      (b) shall, if the occasion occurred after the first and before the second ten-year anniversary to fall after the property became so comprised, be 60 per cent. of what it would be apart from this subsection.

      and in this subsection "ten-year anniversary" in relation to a settlement has the same meaning as in Chapter II of Part IV of the Finance Act 1982.'.
      No. 136, in page 198, line 31, at end insert—
      '22A. In section 83 of that Act, after subsection (3) there shall be inserted—
      "(3A) References in subsection (3) above to a conditionally exempt transfer of property include references to a conditionally exempt occasion in respect of property.".'.
      No. 137, in page 198, line 31, at end insert—
      '22A. For subsection (8) of section 114 of that Act there shall be substituted—
      "(8) This section shall apply to occasions on which tax is charegable under section 102 of the Finance Act 1982 in cases within paragraph 5 of Schedule 14 to that Act in the same way as it applies to transfers of value; and for this purpose references in this section to transfers made by the same person shall be construed as references to occasions relating to, or distribution payments made out of property comprised in, the same settlement.".'.
      No. 138, in page 199, line 15, at end insert—
      '25A. For paragraph 6 of that Schedule there shall be substituted—
      "6. Where tax is chargeable under paragraph 2 of Schedule (Capital transfer tax: maintenance funds) to the Finance Act 1982 on any occasion after a reduction and the rate at which it is charged falls to be determined under paragraph 8 of that Schedule by reference to a death which occurred before that reduction (or before that and one or more previous reductions) that paragraph shall apply as if the Tables in section 37(3) as substituted by that reduction had been in force at the time of the death.".'.—[The Solicitor-General.]

    Clause 126

      MAINTENANCE FUNDS FOR HISTORIC BUILDINGS
      Amendments made: No. 139, in page 107, line 4, leave out
      'section 108(5) or 109(3) of'
      and insert
      'paragraph 1(5) or 3(1) of Schedule (Capital transfer tax: maintenance funds) to'.
      No. 140, in page 107, line 7, leave out
      'section 108(9) of that Act'
      and insert
      `paragraph 1(8) or 3(4) of that Schedule'.—[The Solicitor-General.]

    Clause 129

      ALTERNATIVE VALUATION OF ETHANE USED FOR PETROCHEMICAL PURPOSES
      Mr. Robert Sheldon: I beg to move amendment No. 159, in page 108, line 6, leave out clause 129.
      Mr. Deputy Speaker: With this it will be convenient to take amendment No. 187, in page 199, line 31, leave out schedule 16.
      Mr. Sheldon: Clause 129 covers the alternative valuation of ethane used for petrochemical purposes. We debated that matter late in the Bill. Many changes were made in the clause. The amendments were large and numerous. The clause was taken at the end of the Finance Bill debate, which was an unusual procedure, because of the late consultations that were taking place.
      The reason that we have sought to bring back the matter on Report is the great disquiet that we have seen as a result of Imperial Chemical Industries suing the Government over certain matters concerned with clause 129. We thought it right that those matters, so recently discussed and debated in Committee, ought to be brought forward for further examination in the light of subsequent events.
      When we discussed the matter in Committee, the Minister of State said that he would use the period between the Committee debate and our return to the Floor of the House to consult ICI and the oil industries in an attempt to find a solution that was acceptable to both. There is a great deal of unease that the Government are favouring one company rather than another. The House naturally must be concerned about the demand for equity between the oil companies on the one hand and the chemical industry, in this case ICI, on the other hand. Clause 119, as it then was in Standing Committee, extended oil taxation to mixed gases. As a result of developments in Scotland and elsewhere, Shell, Esso and BP have their own ethane and can transfer it to chemical operations.
      The substantial question that was before the Committee and still remains before the House is: how do we value internal transactions upon which PRT and corporation tax will be raised? Because those taxes are involved, a large sum of money is in question. The normal method of valuation—market price—is denied to us because of the restricted outlet of ethane gas. The valuation as decided by the Treasury and the Inland Revenue was to be based on a formula that was to be revealed in confidence to the Inland Revenue. That is natural enough and we understand the reasons for it. These matters are not generally disclosed. But ICI is at some disadvantage because it does not know the basis of costing and, therefore, the basis of taxation. We understand the problems that are involved.
      Shell is an important part of the groups that are developing the projects. It has its own ethane cracker project which has been developed over several years. Shell and Esso, as developers of the Brent field, had to find a secure outlet for ethane from that field. The feedstock necessary to establish the project was not to be bought from an independent supplier but to be provided by an affiliated company. The attempt to discover a suitable method for obtaining a suitable transfer price is the major cause of the problem as we see it.
      Ethane can be valued as a fuel. That is one of the solutions that ICI advanced. The Government believe that
      958
      that is one of the problems to which they have discovered the solution. I wish that that were so. ICI does not agree that the Government have discovered the solution. The Government have failed to convince ICI that the solution is fair to it and the oil companies.
      ICI was also worried about the lack of certainty about a sufficiently frequent examination of the pricing formula which would decide price in the absence of the market price. Despite what the Minister may say, all parties agree that it will be difficult to estimate a price for ethane. The formula that will be determined in agreement with the Inland Revenue will not be revealed to ICI. It may therefore feel that it may be discriminated against. That may not be so, but ICI can not say with certainty that it is operating competitively in a fair and open market.
      The price of the feedstock that ICI uses is known with certainty. Anyone can establish its commercial price. The price of its competitors' feedstock will not be known quite so clearly. If ICI is beaten on price, it will not know whether that is because the feedstock has been valued at a lower price, whether its competitors' plant is more efficient or whether it is operating at a loss. Those considerations are not normally found in the commercial world. ICI therefore believes that it has a grievance which it has brought to the attention of hon. Members.
      A number of important companies in which the Government have an important interest are in conflict. That is the great problem. The companies are important for the development of the economy of various parts of the country and for the jobs and the progress that they can bring. It is no happy solution to try to find a compromise, as the Minister did, only to have it rejected by a major part of the petrochemcial industry. As a result, an important national company—ICI—is now suing the Government in a situation that is entirely without precedent.
      Mr. Eggar: Is the right hon. Gentleman coming to the view that ICI should have the right to decide whether the Government introduce the clause and thus perhaps to gain a competitive advantage over a rival and possibly to jeopardise jobs at Moss Morran?
      Mr. Sheldon: I am certainly not saying that. The important consideration is that there are two types of development. Our task is to retain both the one that is already in existence and the one that is in development. ICI feels that arrangements may be reached between the Inland Revenue and the companies in secret and unannounced—I do not deny that there are good reasons for that—which might have a serious effect not just on ICI's profits but on its very viability. The Minister must therefore seek to assure both ICI and the oil companies as well as the House on that point.
      The Minister gave an undertaking in Committee that there would be discussions. We hoped to arrive at a solution that would be seen to be fair between the various companies and would be accepted by them. Unfortunately, he has failed to do so. Nevertheless, a solution is clearly needed and we believe that it is possible to find an arrangement of the kind that we discussed in Committee which would be acceptable to the various groups, perhaps on the lines of the Shell suggestion. That might meet the requirements of ICI. Shell suggested that the proposed forward estimate of the value of the ethane being transferred into the petrochemical plant should accord with

      959
      the kind of pricing formula that one would expect between two independent companies. That is similar to the solution suggested by ICI.
      I think that if the Minister pursues that line of thought he may find a solution. I hold the Government responsible in these matters. They had the basis for a compromise and an agreement of enormous concern to two very important parts of the country where jobs and progress are vital. He owes it to the House to try to find a solution in that way. I hope that he will do so. I regret that he has not done so in the time that was available to him.
      Mr. Harry Ewing: I declare an interest at once. The amendment proposed by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) would have serious repercussions for my constituency and certainly for the development of the Shell-Esso plant at Moss Morran.
      If any Member of Parliament thinks for one moment that we can please the chemical companies with some legislative proposal or compromise agreed among ourselves in the House, the experience of each and every one of us should prove the contrary. I hold no brief for any of them. My brief is to protect employment, not just in my constituency, or even just in Scotland and the North-East, but throughout the United Kingdom.
      I do not accept that the proposal that the clause should be withdrawn from the Bill will protect unemployment, and for that reason I am against it. My experience of chemical companies is that, whatever we do for them, we then come up with another excuse for doing something further to assist them with the problems that they present to us from time to time.
      11 pm
      Mr. Dick Douglas: Especially ICI.
      Mr. Ewing: I have also had the experience of BP in my constituency. I hold no brief for any of the companies. The House must decide whether the Government's proposals at this stage in the development of Moss Morran, against the background of British Petroleum's investment decisions announced last week, should be accepted to allow those developments to proceed. If the clause is withdrawn, the investment decisions announced last week will be cancelled and there will be a serious danger—some of my hon. Friends will speak to this—that the development at Moss Morran will also be stopped.
      As to the difference in the feedstocks, British Petroleum has also used naptha at its Baglan Bay cracker, so it has an interest in preserving a viable naptha cracking market in the United Kingdom. BP also has an interest in the Stockton-on-Tees cracker. The problem arises because of the new chemical feedstock that is due to come on stream in 1983—ethane from the North Sea.
      It is all very well for ICI to say, in the document sent to hon. Members, that perhaps the answer is to remove the clause from this year's Finance Bill and to return in 1983 with alternative proposals. Everyone in industry and commerce knows that massive investment decisions are now being taken to meet the date when the ethane will be available from the North Sea. It will be available to BP at Grangemouth in 1983. The Shell-Esso cracker at Moss Morran is not due to come on stream until 1986, but these
      960
      investment decisions are being taken now and the uncertainty created by the removal of the clause would be unacceptable.
      The job consequences for Fife, the Central region of Scotland and for the Grangemouth and Moss Morran travel-to-work areas would be serious. I know that my hon. Friends from the North-East of England have had the same experience of job losses in the petrochemical industry, but in the past eight to 10 years we have lost more than 1,000 jobs in the petrochemical industry at Grangemouth. That is the most industrialised part of Scotland. Even the jobs that will be created as a result of the conversion of the cracker at Grangemouth and the construction of the plant at Moss Morran will not compensate for the job loss that we have suffered during the past eight years. Central Scotland and the surrounding area is not the only area to suffer losses. They are prevalent throughout the United Kingdom.
      However, that is no reason why ICI should deliberately attempt—however unkind it may be to say so—to prevent the development at Moss Morran. The background is interesting. When it was known that substantial quantities of ethane were available in the North Sea, the proposal was to bring the gas, not into Moss Morran, but to Stockton-on-Tees, to reverse the flow in the joint pipeline that runs between Stockton and Grangemouth and pumps it back to Grangemouth. That is what ICI wanted.
      My hon. Friend the Member for Dumfermline (Mr. Douglas) is more of an expert than I am. I am in favour of coming as far south as possible, but I am more strongly in favour of using the chemical feedstuff that has its origin in Scotland being made available to the plants being constructed in Scotland, as well as to the plants in the North-East of England. It ill becomes ICI at this stage in the development of the North Sea gas field to come up with such a rejection of the Government proposals.
      The discussions have been going on for some time. There was a hiccup in the development of the Shell-Esso plant at Moss Morran. Everyone thought that it was to do with industrial rates in the Fife region. It had nothing to do with that. It had nothing to do with derating plant and machinery outside buildings, which in Scotland are subject to rating, but which in England and Wales are derated. That is not the problem. The problem is whether it is possible to strike a proper tax margin for ethane gas. That was discussed in October last year. We now have an objection from ICI.
      I have a double interest, in that both BP and ICI have plants in my constituency. Although the ICI division at Grangemouth is involved in fibre rather than chemicals, it will feel the consequences of the decision by the House tonight. To suggest that we should withdraw the clause and jeopardise any investment decisions in relation to the Scottish economy is an outrage.
      The people of Falkirk, Grangemouth, Stirling, Clackmannan and Fife will be badly affected by the withdrawal of the clause. I hope that my colleagues will not press the issue to a Division, because there is no reason why we should disagree with our colleagues in the North-East of England. I hope that the clause will remain. If we vote, I shall vote in favour of the clause remaining in the Bill, because it is important for the development of the Scottish economy and for the economies of the North-East and other parts of the United Kingdom.
      Mr. James Tinn: We are becoming only too accustomed to the dismal exercise of swapping statistics of hardship and unemployment and accounts of the impact of measures, particularly Government measures, in our respective areas. I do not disagree with my hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing), or with other hon. Members who may follow, as to the seriousness of job losses and unemployment in Scotland, any more than my hon. Friend and others would question the seriousness of our job losses in the North-East. We are not competing with each other on this level. We regard every case of unemployment as an individual tragedy. At the same time, we have the responsibility of representing our own areas to the best of our ability, and when measures are proposed which are likely, in our view, to worsen the impact of unemployment, it is obviously our duty to do what we can to oppose them.
      The impact on my own constituency, where the Wilton plant is situated, can hardly be exaggerated if ICI's fears prove to be justified. The loss of up to 10,000 jobs would be on a scale that we have not seen anywhere in the United Kingdom up to now—not even in my own town of Consett, where 6,000 jobs were lost.
      My hon. Friend rightly spoke about the 1,000 job losses in the chemical industry in his area. In steel alone we have lost 10,000 jobs over recent years on Teesside, and we are now called on to envisage the possibility of another 10,000 if ICI's figures are right. That is the question: is ICI right? The Government insist that ICI is wrong and that there is no need to worry about the consequences of the measure.
      I have rather more confidence in ICI's ability and its knowledge of its own business, and in its ability to forecast the future and the impact of the measure on the future, than I have in Treasury Ministers, certainly of this Government and perhaps even of previous Labour Administrations. I doubt whether the Treasury has shown such skill and exactitude—.especially when we recall its forecasts in the past—as to allow any of us to place undue confidence in its assurances that in the present case ICI is wrong.
      I have read what the Minister of State said in Standing Committee. I understand that the Government are insisting that all they are doing is to correct an existing anomaly in the tax system. I think that the Minister of State said that it makes no difference to the tax revenue. That strikes me as very odd.
      I should have thought that Shell, Esso and BP were under the impression that they were getting something from the clause. I should have thought that they were under the impression that it would put some money into their pockets and that they would benefit from it. It is hard to see how they can benefit if there is no impact on the revenue. Have they been kidded along that the measure will do things for them when that is not the case? Or have the Government made a deal with them? Is it right, as has been suggested, that the development at Moss Morran is to be cancelled? Can the Minister confirm that Grangemouth is to go? I would regret it just as much as my hon. Friend. Or has pressure been put on the Government? I would be the last to complain if this Government, who have done it so rarely, were to intervene to protect jobs. But are they? Is that the reason? If they are intervening to protect jobs, presumably a benefit is accruing, and, rightly or wrongly, it is a concession to those companies.
      962
      11.15 pm
      Is the concession justified? As I understand it. it applies to the ethane transfer from the oil companies through their pipelines—the Flags pipeline—to their subsidiaries. It is argued—no doubt, rightly—that it is not possible to establish a market price. That, I believe, is the heart of the problem that confronts the Government. There are no arm's length sales in the commodity whereby a fair price can be assessed. That has led to the anomaly which the Government seek to rectify.
      Before I come to the Government's method of solving the problem, may I ask: is there no other way? In fact, the ethane has an alternative use. It has a use as fuel oil, as well as a use in the petrochemical industry. ICI's suggestion that the price for tax purposes in this transfer to the subsidiaries should be based on the best price for ethane as a fuel oil would not destroy the advantageous position that the plastic producers—the ethylene producers using ethane as their feedstock—at present enjoy. Incidentally, those of us who support the ICI case—and certainly ICI—recognise that ethane has an inherent cost advantage. No one is trying to destroy that. No one is seeking protection against that natural advantage. It is ironical that, had the Government allowed the gas-gathering pipeline to go ahead, ICI would have had access to a supply. At the time when ICI was negotiating for a price for ethane, the oil companies were asking for a premium on its fuel oil cost. They were asking for the fuel oil cost plus, when ICI had thought of getting it through that pipeline. However, that opportunity has gone.
      What would the damaging impact of this formula be on the ethane-using plastics producers?
      Mr. T. H. H. Skeet: The idea, as I understand it, is that ICI wants to level up the commercial advantage. As there is considerable ethane in the North Sea, it is quite possible for ICI to buy it at some future date. The other installations at Moss Moran are not expected to be in operation between 1982 and 1984. I put it to the hon. Member for Redcar (Mr. Tinn) that ICI has a highly advantageous natural gas contract with the British Gas Corporation, and it is buying its gas very much below 10p per therm. I shall not give the price; I merely say that it is an advantageous price. Fisons, on the other hand, in order to produce ammonia, got rather annoyed about it. There may be fairness or unfairness, but should we take into account the environment and all the circumstances involved?
      Mr. Tinn: Of course we should. I have never been tempted by the scent of a red herring and I do not intend to follow the one that the hon. Gentleman has trailed some length across the Floor of the House.
      I do not wish to detain the House longer than is necessary, but 10,000 jobs on Teesside are worth a few minutes of our time. I was about to make the point that the alternative pricing formula proposed by ICI based on fuel oil would still leave the ethane-using producers with an advantage. The present price of ethane as a fuel oil is 26p per therm. The price of naphtha, which ICI accepts and makes no complaint about, is 33p per therm. We make no complaint about that advantage, but it seems odd that we should be thinking about giving a further tax concession that it is calculated would amount to £50 per tonne out of every £300—about £17 per tonne in addition to the natural advantage enjoyed by the ethane producers.
      Mr. Eggar rose—
      Mr. Tinn: After my last experience, and as I do not wish to detain the House, the hon. Gentleman will forgive me if I do not give way.
      The proposal is not necessary, but since the Government seem determined to press it I must turn to consider how it would work. It seems that the oil companies are to be offered the option of electing to submit a formula to the Inland Revenue Board to fix a price for taxation purposes in the absence of a fairly determined market price.
      The Minister quoted the relevant passage in Committee on 24 June. He said:
      "Then paragraph 2(1) makes it clear that an election will be accepted if
      'under a relevant contract.… for the sale at arm's length of the ethane to which the election applies, the contract prices would not differ materially from the market values determined in the accordance with the price formula specified in the election; and if the Board are not so satisfied they shall reject the election.—[Official Report, Standing Committee A, 24 June 1982; c. 975.]
      If I understand that gobbledegook at all, it imposes on the Board a duty not to accept the formula submitted by the applicants unless it conforms with the Board's estimate of the market price. A moment ago I was expressing my understanding that there is no recognised market price. What will guide the Board in deciding whether the submitted formula is fair and fits in it with the market price when there is no market? I shall be interested to hear the Minister's reply.
      I hope that when the oil companies make elections to the Board, other interested parties, such as ICI, will be able to express their views as well. It may well be that the Government will concede that point. If they do, it would be rather like giving a torch to a blind man if ICI have to make its representations in complete ignorance of the formula submitted by the oil companies. How can it argue reasonably about a proposal about which it knows nothing? Why should it be so damaging to the oil companies for the taxed costs of their raw materials to be disclosed? Why should it be such a problem for ICI to know what the oil companies have to pay in tax on their ethane when everyone knows what ICI pays in tax for its naphtha? I find that difficult to understand.
      I am also concerned about the five-year review and the long-term stability that seems to be given by it. But, even more important, this concession applied to ethane—mistakenly, we believe—is also to apply to other liquefied petroleum gases such as propane and butane where these are mixed together. Both have a clear market value. None of the problems which it is claimed attach to the valuation of ethane attaches to either of these. What is more, 25 per cent. of ICI's feedstock comes from these liquefied petroleum gases from its Ninian field. On these, ICI pays the full commercial price for tax purposes.
      Not only is it proposed that users get what in my view is an unjustified concession on the ethane that they use; they are also to get the concession on the butane and the propane that they use. Twenty-five per cent. of ICI's feedstock intake will be of these gases, and the company will have to pay the full tax on it based on the commercial price.
      I make no apology for detaining the House on this matter. I want finally to stress again the impact on the whole Teesside area if the Government's proposal is accepted. I understand the concern of my hon. Friends from Scotland about the 2,000 construction jobs which
      964
      might not go ahead. They hope for 2,000 jobs over three or four years, with a few hundred jobs remaining afterwards. I share their concern. But I invite the House to measure that concern against the loss of 10,000 jobs on Teesside. In my opinion, the answer is inescapable. It is to support the amendment for the deletion of the clause.
      Dr. Jeremy Bray: The amendment has to be seen as my hon. Friends have seen it—in the light of the industries at stake and not just as an abstract question of fiscal principle. It has been presented as a matter of jobs in Scotland versus jobs on Teesside. Presented like that, there is no way in which my hon. Friends representing constituencies in Fife can abstain in any vote that threatens Moss Morran, and no way in which my hon. Friends representing Teesside constituencies can abstain on any vote that threatens Wilton.
      I am no more disinterested or interested than any other hon. Member, but I have two specific interests or disinterests to declare. First, I represent a Scottish constituency and am anxious to see Scotland gain the greatest possible number of jobs from North Sea oil and gas. Secondly, I worked in ICI at Wilton for six years before I was first elected to Parliament for a Teesside constituency, and I worked not on some remote irrelevant problem, but on the planning and optimisation of production of ethelyne from plants which basically had the same configuration then as they have now. I left the employment of ICI immediately on my first election to the House and have never been employed by the company in any capacity since then.
      To trace the background, and perhaps to see some way forward in the extremely difficult situation that we are facing, it is helpful to go back to 1976, when we first heard talk of Moss Morran and when ethylene demand in the United Kingdom was projected at about 2 million tonnes per annum. It was obvious that new capacity would use ethane, but Moss Morran was no threat to ICI operations on Teesside. However the bottom dropped out of the ethylene market, and of the petrochemical market generally early in 1980, partly as a result of the economic and industrial policies of "You know who".
      11.30 pm
      The demand for ethylene in the United Kingdom is now projected at about 1 million to 1·2 million tonnes per annum, of which Moss Morran will represent 50 per cent. It is 5 per cent. of the European market, but ethylene is a highly inflammable and explosive gas which is expensive to transport. There are pipelines connecting all the major United Kingdom producers and consumers, but there are no connections in Europe and none is envisaged.
      The House may be aware that ICI was negotiating for ethane supplies from the gas-gathering pipeline until the cancellation of the pipeline, when the project was sabotaged by the Government. It was dependent thereafter on its competitors in the chemical industry, on BP, Esso and Shell, as effective sole suppliers of the reduced supply of ethane that is now available as a result of the cancellation of the gas-gathering pipeline. In this changed situation in the supply of ethane and in the changed market for petrochemicals—
      Mr. Eggar: Will the hon. Gentleman confirm that ICI and BP were offered the ethane by Shell and Esso and that it is now being used at Moss Morran?
      Dr. Bray: The hon. Gentleman will be aware also that ICI offered to Esso and Shell the sale of an ethylene plant at Wilton as easily the cheapest way of using the ethane. The issue of the sale of ethane to ICI is no longer an option, as it is not on offer. There is no market for it, because the vendors are unwilling to sell it.
      That method of adapting the No. 5 cracker at Wilton to take ethane rather than naphtha feedstock would have been easily the cheapest way of absorbing the ethane capacity. However, it was not a solution that was acceptable to the oil companies. It is true that the ethane route for the production of ethylene is cheaper, but ICI has a complex which is dependent on products from feedstock which cannot be produced from ethane. It is, therefore, dependent on the continued use of at least some naphtha to provide the products needed for the aromatics, the benzenes and the xylenes for the production of nylon and polyesters as well as the production of the ethylene for the ethylene oxide, ethylene dichloride and vinyl chloride and on into the polyvinyl chloride market.
      The complex cannot be sustained if the ethylene economy is undermined. It is not practicable to continue operating the nylon plants and the polyester plants—the monomers—if there is not an economic market for the ethylene which is necessarily co-produced with the raw material for the nylon and polyester. My hon. Friend the Member for Central Ayrshire (Mr. Lambie) is well aware of the tragedy of Ardeer and the loss of nylon production at that plant.
      Mr. David Lambie: And Monsanto.
      Dr. Bray: And Courtaulds at Aintree.
      All that nylon capacity was vulnerable because it was not knit into the kind of complex that exists at Wilton, with the support not only of other chemical byproduct schemes but also on the energy side. The power station at Wilton produces a great amount of pass-out steam that is used in the nylon and other processes at the same time as it generates electricity. If one took away the demand for steam, the electricity for the electrolysis of chlorine would become uneconomic and the whole house of cards would fall to bits.
      In that situation we are in serious danger of abandoning our position on synthetic fibre monomers and a great deal of petrochemical production generally. It would be for the convenience of ICI if Moss Morran disappeared, but that will not happen. My hon. Friends and myself in Scotland will ensure that it does not. Likewise, however, if Moss Morran is allowed to undermine our ethylene economy, ICI is not kidding when it says that the future of Wilton as a whole is seriously threatened. Once that investment of many billions of pounds is lost there is no chance of the plant being rebuilt in Scotland.
      The dilemma that we are in is due to the random and irresponsible hands-off attitude of the Government and their total lack of an industrial policy. Such matters cannot be left to legalistic judgments by the Inland Revenue of tax laws framed in ignorance of a great many of the costs and other factors involved. These huge capital projects have to be looked at primarily in terms of their own cost structures, and then the tax and grant impact added to the basic economics to find the sensible solution.
      When I was a Teesside Member, I said that it was cheaper to pension off chemical workers on full pay in the
      966
      south of France than to pay development area grants to keep them in jobs in the chemical industry. I received small thanks from my hon. Friends in the North-East for saying so. But it is the utmost folly to base job creation on huge capital-intensive plants which cost about £1 million or more per jpb created. It is an absurdly stupid way to build up employment in the development areas. That does not mean that we do not need the industries, but they are a wildly inefficient way to create jobs. However, where the plants already exist, just because there has been such a huge national investment, it is folly to dismantle and destroy them. That applies just as much to the steel as to the petrochemical industry.
      The sensible course is to look at the operating costs and capacities of existing plants, the cost of different feedstocks, new plant and plant conversion to see what the best solution is without tax. The Treasury, the Inland Revenue and the Department of Industry have made no attempt to put together the information needed to reach a judgment. They believe that the problem can be resolved by gamesmanship and competition in a situation where competition cannot exist. We are talking of only one plant.
      Having made proper examinations of the costs and benefits from the alternative solutions pre-tax, the Government should then add the tax and grant regime in such a way as not to distort the economic decisions, palatable or unpalatable, which then have to be adjusted for the necessary social considerations about which we all feel so strongly, but with full knowledge of the costs.
      That is the basis on which we try to manage the North Sea oil tax regime. We try to create a tax structure that does not distort the basic economics of the situation. Surely it is rational to try to follow the same practice in the petrochemical industry. This miserable clause fails to do that.
      Although ICI has a strong case, which the Government have failed to consider, and there are claims in Scotland that will have to be accommodated, it was wrong for ICI to go to the European Court to seek a resolution of the matter. We can sort out our industrial problems within this country. We have miserably failed to do so on this matter and the problems will not go away. They will still be with us in two years' time when the next general election is due. It is likely that the clause will be passed, Moss Morran will go forward and ICI will face difficulties over the viability of its petrochemical plants on Teesside. The next Government, not this miserable Government, will have to solve the problems.
      Mr. William Rodgers: I agree with the hon. Member for Motherwell and Wishaw (Dr. Bray) that this is a miserable clause. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was reasonable to the point of ambivalence and I understand why that was. Hon. Members on both sides of the House have direct interests in the outcome of the debate. I have no such interest, but I am a Teesside Member and I agree with the hon. Member for Redcar (Mr. Tinn) that the right course is for the Government to withdraw the clause.
      I should prefer the amendment not to be pushed to a Division, but if there is a vote I shall vote for the deletion of the clause. I hope that the Government will listen to the debate, dwell on the point made by the hon. Member for Motherwell and Wishaw at the end of his speech and

      967
      accept that there is still time to find an accommodation that will meet the needs of all parts of Britain and will result in no loss of employment.
      The hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) was as reasonable as ever, while being honestly partisan. He referred to the need to strike a proper bargain. What is at stake is a fair decision which will help both ICI and the oil companies. I do not believe that it is impossible to achieve that, but it will not be possible if the Government do not accept the amendment.
      The Government's position is incomprehensible. The hon. Member for Motherwell and Wishaw was wrong when he said that ICI had taken the matter to the European Court. It has taken the issue to the High Court, which is a most unusual procedure. We have all reflected on whether that was proper, given that the Bill is before the House, but it was clearly the court of last resort for ICI. I hope that the Government will tell us about the discussions that they have had with the company since the Bill was considered in Committee.
      There is no doubt that the clause involves clear and damaging discrimination against one company. If it were a Bill, instead of a clause in the Finance Bill, it would be appropriate to look at it in terms of hybridity. It makes a distinction in terms of rights between one private company and others. If it were a Bill it would not be acceptable to the House or to our Clerks.
      I take the point made by the hon. Member for Stirling, Falkirk and Grangemouth about the need for industry in both the public and private sectors to be able to know what the future holds when making investment decisions, but, given the controversy that has arisen, the clause could be withdrawn for further discussion and reintroduced in next year's Finance Bill or, if necessary, brought back in special circumstances before then.
      We are not committed to an annual cycle to settle these matters. It would be deplorable if we were. Many of us have thought that the idea of an annual Budget and Finance Bill is a mistake. This matter, which is directly related to the future of industry in the whole of the United Kingdom, is surely one at which the Government could have another look and come back to the House.
      If I refer to the clause as corrupt, I do so in the philosophical and not in the moral sense. It does not involve corruption on anyone's part, but it does involve a philosophical distinction of corruption in so far as it differentiates in favour of some private companies owned by their shareholders and against others. That is another reason why the Government should withdraw the clause and examine it again.
      I wish to put forward a series of propositions by which the clause must be examined. If there has been a conscious decision by the Government in favour of selective support, that is intervention by the Government of a remarkable type, but if that decision has been made in favour of selective support for Moss Morran and against Teesside, it is right that it should be said and defended today. But if it is not a decision in favour of selective support and conscious intervention, it is a gross error. The Government must decide which it is.
      968
      11.45 pm
      There is an alternative and, here again, I believe it is for the Government to say. First, and most plausibly, ICI is incompetent as a judge of its best interests. If the Government take that view, they should say that ICI has no case and that if the clause remains in the Bill it will not be damaging to ICI or to employment in the way that the hon. Member for Redcar has suggested. That is another argument that the Government can deploy, but they must choose if they wish to do so. But, if ICI is not incompetent as a judge of its best interests, it is for the Government to say that ICI has been deliberately misleading Members of Parliament and the House in arguing the consequences of the clause as it sees it. Those are the different reasons the Government can give for seeking to maintain the clause in the Bill.
      In view of our debate tonight, the discussions in Committee and the breakdown of negotiations between the Government and this major British company, and in view of the action that ICI has taken in the High Court, the right course is for the clause to be withdrawn.
      May I suggest a procedure? This is not a division between the two sides of the House or between sectional geographical, regional or constituency interests, although those considerations come into the matter. It is a matter of interpreting the clause and deciding where its burden will lie, to whose advantage it is and to whose disadvantage. This is a unique situation. I should like to suggest to the Government that they should withdraw the clause and submit the principle and their own proposition to the Select Committee on Industry and Trade. That is an unusual procedure but a wholly fair one. No one would be prejudiced by the delay and in the end, when a recommendation was made by the Select Committee, the House would be prepared to accept it.
      The right course for the Government is to withdraw the clause. I should be sorry to vote against it but will do so in the absence of an alternative.
      Mr. Douglas: I shall try to be brief in my remarks about the amendment. I am a trifle disappointed with my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). I normally agree with the line that he takes on such issues, because he is competent on Treasury and tax matters. One of the suppositions and fears underlying the proposals to delete the clause is that somehow or other the Inland Revenue will be taken in by the machinations of Shell and Esso and, perhaps, BP. If there is a fear of a tax concession—I deal quite bluntly with my hon. Friend the Member for Redcar (Mr. Tinn) and others who have expressed that fear—and of an advantage in tax terms, that is a matter for the Public Accounts Committee to examine. It is for the Public Accounts Committee to go behind the tax deals to see if there is any loss of revenue. A searching examination would be involved. Unlike the right hon. Member for Stockton (Mr. Rodgers), I do not take the view that this is a tax concession to Shell, Esso and BP. It is to remove, I understand, an anomaly in the Oil Taxation Act 1975. If the companies did not have a long-term view of the pricing arrangements for ethane, it would have been difficult for them to undertake a capital investment of the Moss Morran type.
      It would be delightful to share the happy, academic and statistical view of my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) under which we would start again on the industrial strategy. My hon. Friend

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      knows that Moss Morran and Braefoot Bay are under construction. It is not possible to go to the constituencies of my hon. Friends the Members for Fife, Central (Mr. Hamilton) and for Kirkaldy (Mr. Gourlay) and say "Look boys, we will start again." It cannot be done.
      Dr. Bray: If my hon. Friend had listened more carefully, he would have heard me say that it is necessary to consider the existing stock of plant. That stock determines the present operating costs. No stock of plant will stand still either at Moss Morran or on Teesside. It is necessary to consider the logic of future developments. The position in two year's time will be different to that of today.
      Mr. Douglas: It is necessary to examine existing stock. It is also necessary to take account of the gases coming from the North Sea. Everyone would be happy if Almighty God had provided them in different proportions. When ethane was known to be available, neither ICI nor BP expressed interest. An arm's length deal could have been done. When the gas-gathering system was mooted, ICI thought, perhaps correctly, that it would be able to do a deal with BNOC and British Gas. I do not recall the right hon. Member for Stockton saying at that time "We should have the gas gathering system." I do not recall the hon. Member for Cathness (Mr. Maclennan) arguing that the ethane should be sent to safeguard jobs in central Scotland and to create Moss Morran.
      Mr. Robert Maclennan: The hon. Gentleman must recall vividly that my right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon) spoke in just those terms for the Social Democrats.
      Mr. Douglas: Where is the right hon. Member for Greenock and Port Glasgow (Dr. Mabon), the former Energy Minister, tonight? I am sure that he would accept the argument of Shell and Esso. I know enough about the oil companies to know that one thing one does not do is trust them. [HON. MEMBERS: "Oh".] One does not trust the oil companies because one day they will all fight each other and we shall try to arbitrate between them. The next day the oil companies will come together and fight us. I know sufficient about that.
      Therefore, we must face reality. It is an unfortunate reality from the point of view of my right hon. and hon. Friends from the North-East. If I were in their position, I would do exactly the same as they are doing. They are right to defend their corner. ICI is right to put the pressure on the Government.
      The right hon. Member for Stockton proposes the coitus interruptus view of the Social Democratic Party. We will stop now, and Shell and Esso can have their investment and go on with their project when the review by the Select Committee on Industry and Trade has been carried out. We cannot carry on industrial policy in that way. No one sensible who has anything to do with industry would propose it.
      What do we do with the ethane? Is it proposed that we put it back in the ground? Do we flare it? It is obvious that it will be used for industrial purposes. My major argument against ICI's case is as follows. I play the Scottish card. Is it suggested that as a result of the finds in the North Sea in Scotland we cannot have new petrochemical developments or protection of existing petrochemical
      970
      developments which will assist other petrochemical developments in the south through the ethylene pipeline and other developments? If that is what ICI is saying, Scottish Members will be entitled to rebel against ICI's case.
      I do not accuse ICI of being incompetent. It has a great deal of difficulty in relation to the international petrochemical market. It has much difficulty in matching the opposition. Is it being suggested that the only opposition that it will face is a 500,000-ton cracker at Moss Morran? That is a ridiculous contention. My hon. Friend the Member for Motherwell and Wishaw understands the technical terms better than me.
      If ICI is afraid that there is a concession in taxation remission terms, we should share that fear and go behind it as far as possible. I do not think that the Inland Revenue are fools. No one who has anything to do with them could take that point of view. Perhaps there is some mistake in the administered price. The House should investigate through the Public Accounts Committee.
      I have the background of Scotland, particularly Fife, as do many of my right hon. and hon. Friends. If the amendment is pressed to a division, there is no way I can support the Opposition.
      Mr. Ian Wrigglesworth: I have tried to follow the hon. Gentleman's argument. The jobs of 9,000 people on Teesside are threatened. Is the hon. Gentleman saying to those 9,000 workers that their jobs are not under threat of that, if jobs are under threat, their jobs are less important than those in Scotland?
      Mr. Douglas: As a lifelong member of the AUEW, I am hardly likely to take that view. ICI's case should not be examined merely on the basis of its submission. Perhaps that is a matter for the Select Committee on Industry and Trade which could examine ICI's case. If it is believed that the companies with which it competes are getting an unfair tax advantage, the matter should be examined.
      One must return to the reality of what one does with the ethylene. It cannot be given to ICI. It must be used in petrochemical development. It is perfectly fair that the price structure is made as transparent as possible.
      12 midnight
      Mr. Ted Leadbitter: No one is better able to convince Members of Parliament that they should fight each other on a regional basis than large companies. Whenever I hear threats of lost work or of "If we do not get this" and "If we do not get that", my ears prick up. It is not the House's duty to respond to threats that deviate from the facts of the argument. The House makes a judgment about legislation and whether it will seriously affect employment prospects. It is up to the Government to convince the House of their arguments. They have had several consultations with oil companies and ICI. The House does not yet know all the facts.
      The oil companies rightly want to persuade the Government that tax concessions are important to them because of the £500 million of investment at Moss Morran. Anyone may try to achieve a tax reduction. Because it is not at the North Sea exploration production level, ICI is trying to persuade Members of Parliament that it is disadvantaged. It says that because it must buy naphtha for its production of petrochemicals at 33p per the

      971
      therefore faces a bill of £500 million. It argues that, because of that Bill, it will lose £500 million worth of investment and 9,000 jobs.
      A couple of simple questions must be asked. [Interruption.] The House might be aware that if it does not listen I shall talk for an hour. I have the Floor and I am just the chappie to keep it. The House determines the use of its time. I should enjoy reflecting after my speech on how the time was wasted.
      The outcome of the negotiations appears to have given Esso, Shell and BP what might nicely be called an in-house transfer price advantage in relation to the chemical subsidiaries. In dealing with its naphtha production, ICI must have an arm's-length contractual arrangement which places it at a competitive disadvantage in the same area of production. That seems quite wrong. The Government must assure themselves that they have not made an error in the clause in such a way as to promote a situation that is unacceptable to two or three major private industries.
      It is not often that I agree with the right hon. Member for Stockton (Mr. Rodgers) these days, but on this issue I do, although I do not accept that withdrawal of the clause would solve the problem. I should prefer the Government to convince the House that the dangers that we see in the Bill—not the companies' threats about unemployment—do not exist. I hope that the Government can do that and give some assurance to my part of the country, which is suffering excessive unemployment. In my constituency, 35,000 men are out of work, 2,000 young people have no firm jobs and almost 1,000 young people have not even a first offer of a job. Moreover, unemployment on Teesside is forecast to rise by a further 14,000 in the next two years. We cannot afford a judgment by the House on the legislation before us that will add to the job losses already forecast.
      I appeal to the Government to respond to the request that I and others have made. They know all the facts of the matter and all the arguments that have been deployed and they have been party to a large number of discussions. The matter was debated thoroughly in the Standing Committee and the Opposition at any rate have decided that there is no political gain to be derived from fighting one another on a regional basis. We must bend our minds to the consequences of the legislation itself. If the Government will give an explanation, a Division may be avoided. I am afraid that Scottish Members might be pressed into supporting the Government, but I have no choice. If I am not satisfied with the Government's explanation I shall vote against their proposals.
      Mr. Crouch: I shall detain the House for only a couple of minutes. [Interruption.] I was here until 4.30 this morning and I wish to speak on this issue.
      We are dealing with two major industries—the oil industry and its by products and the chemical industry. In considering the problem of clause 129 we must be concerned with whether we may be damaging one or other of those important industries. Having worked all my life in the chemical industry—at one time I was with ICI, but I no longer have any connection with it—and as chairman of the all-party group on the chemical industry and also the all-party group on chemical studies dealing with the oil industry and others, I am somewhat split in my views on this.
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      I believe that the Government should pause tonight in dealing with clause 129. As they rush into this with typical Treasury logic in the belief that it is right and correct, they may well damage a major industry. The chemical industry could suffer due to the overcapacity and overproduction that could result from what in simple terms is a subsidy to the North Sea oil producing companies producing a product that will then go into the chemical industry at a far cheaper price.
      It is a late hour for us to discuss such complicated matters, but all discussions with Treasury Ministers are complex. With my limited knowledge of the two industries, I plead with the Government to think beyond the range of Treasury and Inland Revenue matters and to consider two of our major industries. Perhaps even at this late hour the Treasury can think again about clause 129, which might cause irreparable harm because of unprofitable over production.
      My right hon. Friend the Secretary of State for Education and Science, formerly the Secretary of State for Industry, often used to ask me "Everything is all right with the chemical industry, is it not?" I used to say "Yes", but I have not said it recently. There are signs on the horizen of great danger for the chemical industry in Britain, Europe and the world. They are signs of overproduction. ICI already overproduces and no longer makes a profit in some of its major divisions. We cannot afford to see our industries get into such a state. Clause 129 could produce overcapacity in our major earning industry and could produce fundamental change and disadvantage for our industrial future if we are not careful.
      I urge Treasury Ministers to think carefully about the clause. Is it not worth postponing it for one year? Such a postponement would give everyone time. The oil industry is involved with the chemical industry, which has not let Britain down. It employs many people, has great productivity, good industrial relations, good research and great investment and export achievements. Let us not do anything that might jeopardise it. We have an opportunity tonight to pause for at least one year before taking a step that might cause irreparable damage.
      The Minister of State, Treasury (Mr. John Wakeham): I am grateful to the Opposition for enabling such an important debate to take place. I understand the anxiety that hon. Members have expressed about their constituents' jobs. The Government share that concern, but they must do the right thing. I doubt whether I shall satisfy everyone tonight, but I shall try my best. I shall also try to avoid the ex-family squabbles that have broken out, but I shall try to go coolly and slowly through the matter to make it as clear as possible.
      Where oil or gas is not sold at arm's length—for example, in transfers between affiliates—it must be valued for tax purposes at the price that it would fetch in a comparable arm's length deal. That is a necessary and internationally recognised rule to prevent oil companies from reducing their tax bills by imposing artificially low prices. The principle is clear, well known and accepted. Without it, integrated companies could unfairly undercut their non-integrated competitors, so the detailed rules must be drawn up carefully so as to favour neither the independent nor the integrated company. Therefore, we must examine the way in which independent companies draw up arm's-length deals.

      973
      12.15 am
      Crude oil and the heavier gases are sold on relatively short-term deals and, where the contracts last for a longer period, there are provisions for the price to be renegotiated at least as frequently as once a quarter. But lighter gases, such as ethane, would be sold at arm's length in long-term deals lasting up to 20 years with a price formula to operate during the life of the contract. I should tell the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) that many examples of long-term contracts for the lighter gases last longer than this contract.
      Such a formula would usually comprise a base price and an escalator which changes the price regularly over the contract period in accordance with a published price indicator. Renegotiation of the formula would be possible, if at all, only years apart or in specially defined circumstances.
      Under the existing tax rules, the valuation rules for ethane, unlike those for crude oil and the heavier gases are anomalous in that they provide for monthy valuations and simply do not reflect what is happening on the open market. They therefore expose inter-affiliate deals to great uncertainty and risk which cannot be justified.
      The essence of the Government's case for the clause is that it does not represent a concession, but removes an anomaly. The hon. Member for Redcar (Mr. Tinn) was the first to make that point. To continue to tax ethane under the existing inter-affiliate system in schedule 3 to the 1975 Act would not be in accordance with what happens in the market place.
      Mr. Tinn: In the absence of a market for ethane, how will the Inland Revenue determine whether the election formula is justified?
      Mr. Wakeham: The matter is complex and I shall deal with it.
      Clause 129 and schedule 16 remove the anomaly by allowing companies involved in non-arm's-length transactions to elect for valuations to be based upon a long-term price formula. The formula cannot be any selected by the oil company. It must be comparable in the base price and the escalator with what arm's-length parties would agree. It provides the certainty that is present in third-party deals.
      It is not right to say that there is no market in ethane. There are certainly a number of long-term contracts in Europe and the Revenue has evidence of what buyers and sellers are prepared to pay. It is certain that there is no short-term market in ethane.
      I was asked about Shell's proposals. I have not had the opportunity to discuss the proposals with Shell, but they seem to be similar to the proposals in the Bill. If ICI believes that further useful discussions could take place between Shell and ICI to see whether there is common ground, the Government would be happy to consider that.
      Representations were made to the effect that confining the scope of the clause to commercially pure streams of ethane was too restrictive. We accepted that there was a good case in principle and in practice for the clause to be extended to mixed streams where, as with ethane, they would also be sold on long-term contracts in arm's-length deals.
      ICI's petrochemical plants use naphtha which ICI has to buy on the open market. It is a feedstock that is more expensive than ethane and is therefore at a natural competitive disadvantage. The purpose of the clause is to give neither an additional advantage nor an additional
      974
      disadvantage to ethane compared with naphtha. There is no dispute between the Government and ICI about the fact that naphtha has a disadvantage; indeed, ICI recognised it during all our discussions. ICI's position is not that the clause will do harm to ICI; its view, as I understand it. is that the clause might do harm to ICI. ICI does not know, nor do I know, what valuation will be agreed between the Inland Revenue and oil companies.
      When we debated the Bill in Committee, I explained that we had tried to reassure ICI that the clause does not involve any element of subsidy to its competitors, but in view of the concern expressed by several hon. Members at the time, I undertook without commitment to hold further discussions with ICI before Report in an endeavour to allay its fears. Since the Committee stage, my right hon. and learned Friend the Chancellor of the Exchequer and I and officials have met ICI repeatedly, and every effort has been made to clarify points of doubt and to give all reasonable assurances on the principle and operation of the clause.
      My view is that ICI appreciates that there is an anomaly in the existing rules but is concerned about the proposed remedy in clause 129 because it fears that it might lead to too low a valuation. But the proposals do no more than model the tax valuation on the price formula which independent parties, dealing at arm's length, would agree. If the proposition is that the Inland Revenue would agree a valuation, it is one that I will not accept. The Inland Revenue has statutory duties imposed upon it pertaining to the care and maintenance of the tax system, and to agree a valuation that did not take into account all the proper factors would be tantamount to a wilful neglect of those responsibilities.
      Mr. Wrigglesworth: Will the Minister accept that the feedstock that ICI would be obtaining would cost about 33p, as against 16p for the other feedstock in Scotland?
      Mr. Wakeham: I certainly do not accept that. I understand that ICI has quoted the figures. Therefore, the figure of its own price that it pays for naphtha is presumably right. The figure for ethane is agreed between the Inland Revenue and the oil companies concerned, and I have no knowledge of it. It would be quite wrong for me to know. I do not know and no Minister knows the price. What we know is the formula. The tax affairs of any taxpayer in Britain are confidential and are not discussed between Treasury Ministers and the Inland Revenue.
      Dr. Bray: Will the Minister agree that there is a considerable possibility that the companies involved in the case would agree to full cost disclosure to enable a sensible solution to be reached?
      Mr. Wakeham: If companies wish to reveal information they may. It is not possible for the Inland Revenue or the Government to breach the long-accepted rules of confidentiality. If companies are prepared to reveal information as a result of the discussions that is up to them. The Government would not require them to give details of confidential information.
      One of ICI's specific fears was that the evaluations under the clause would ignore what ethane would fetch for fuel use. That is another point that the hon. Member for Redcar made. That never was intended, but due to ICI's worries we introduced an amendment in Committee which would put beyond doubt the fact that the valuation would

      975
      reflect the highest price an arm's-length seller would receive for the ethane for fuel or petrochemicals. Unfortunately, ICI felt that that did not go far enough.
      Mr. Tinn: The hon. Gentleman continues to refer to the price that would be paid in arm's-length dealing. The need for the machinery arises because there are no arm's-length deals in this commodity. How will the Inland Revenue determine what is a fair market price when it has nothing to go by?
      Mr. Wakeham: There are some long-term contracts for ethane in Europe. The Inland Revenue has plenty of information about those, and I do not believe that it will be as difficult as the hon. Gentleman thinks to arrive at a fair price.
      ICI argued that ethane should be valued at the equivalent of heavy fuel oil, which the company suggests is about 26p a therm. It wanted that included in the legislation as a floor to the valuation. I am advised that there is no simple market price for ethane that could be properly written into the legislation. The price can vary considerably with the volume of gas, its position, and the specification and timing of any agreement. It is those considerations that the Inland Revenue must bear in mind when it looks at contracts on which it is asked to form an opinion. If the Inland Revenue is not satisfied that such contracts are fair and proper it has a statutory duty to reflect that opinion.
      During the discussions with ICI it was suggested—this was a point made by the right hon. Member for Stockton (Mr. Rodgers)—that the legislation might be deferred until next year because valuations do not have to be made for a few years. Arm's-length purchasers would agree contracts with long-term price formulae for their ethane supplies before committing themselves to the substantial capital expenditure involved. In an attempt to agree in non-arm's-length negotiations what would happen in an arm's-length agreement it would be essential for the oil companies to agree the price and arrangements for their long-term supplies before they could involve themselves in substantial capital expenditure.
      The possible application of the clause to actual valuation of certain mixed streams could arise fairly soon. Deferment would prejudice the companies compared with those involved in third-party negotiations and put important investments at risk. Against that, it has been argued that we are putting investment and many jobs at risk at Wilton. We have investigated the matter thoroughly. Naphtha-based crackers such as those at Wilton face a challenge with ethane becoming available, not just from the North Sea but also the Middle East, when the market is already depressed.
      Ethane cannot take over completely from naphtha. It does not produce a wide range of products. There will still be a future for efficient naphtha crackers. Whether or not that will be so—it would be a rash man who forecast the long-term future of any industrial plant in a rapidly changing world—clause 129 does not put its future at risk. It removes a tax anomaly against inter-affiliate deals. It would be wrong to keep such an anomaly to protect naphtha-based crackers. The end result could be a weaker and not stronger United Kingdom petrochemical industry.
      976
      12.30 am
      ICI is seeking in the courts a declaration that the clause is contrary to article 92 of the Treaty of Rome as constituting a State aid to industry that distorts competition. It is now a matter for the courts to decide and it would be wrong for me to prejudice the outcome of the case. But the Government's advice is that the clause is not a State aid as it does no more than put inter-affiliate deals on all fours with arm's-length deals for tax purposes. In doing so, it follows the internationally accepted principle of arm's-length valuation.
      I am sorry that ICI has felt it necessary to take that step, with its potential repercussions on areas outside the tax treatment of its case. But it should not dissuade hon. Members from agreeing to the clause, which, as I said in Committee, despite the controversy that it has aroused, is no more than a measure to remove a tax anomaly arising under existing legislation that might otherwise inhibit worthwhile investment.
      Failure to pass the clause could put in question the future development of Moss Morran and Grangemouth and the jobs in those places. To discriminate against certain tax-paying companies because of a call by one company that faces a difficult problem would be to act in a way not in accordance with the generally accepted principles of taxation. It would not be right to solve a difficult problem by treating unfairly and unjustifiably another company's tax affairs. The implicit criticism is that the Inland Revenue would not be able to carry out its statutory duties responsibly and efficiently, but I do not believe that.
      The Government understand the problem that ICI faces because of the natural advantages of ethane over naphtha as a feedstock. We are not prepared to wash our hands of the problems on Teesside. We are prepared to continue to talk to ICI to see whether we can find a way in which it is right and proper for the Government to assist in dealing with the difficulties. But it cannot be by unfairly treating a tax-paying company that submits that the present valuations for ethane are inappropriate.
      Mr. Robert Sheldon: The Minister rightly points to the seriousness of ICI's case and the potential repercussions.
      It is wrong that matters have been allowed to come to the pass where important large companies that have enormous consequences for employment, development and other industrial prospects are placed in a difficult position because the Government came late to a discussion and understanding of the important issues.
      The promise to extend the consultations that were to take place between the Committee and Report stages of the Finance Bill has not produced the solution that was hoped for. It may be that there has been insufficient time for the discussions that we expected. It is not the legislation that is important. The legislation will not take effect for a year or two, or even longer. There is no ethane being used under the legislation. The industry rightly wants to be able to plan on the basis of an agreement. It is up to the Minister to obtain such an agreement, so that the assurances can be given.
      The Minister said that he was prepared to enter into discussions on the basis of the Shell memorandum, the purpose of which is to ensure that the forward estimate of the value of the ethane being transferred to the

      977
      petrochemical plant will equate with the pricing formula that one would expect to see between two independent companies.
      That is similar to the arguments being put forward by ICI and should form the basis of a number of useful discussions. I look forward to seeing such discussions continue. We should come to a resolution. The clause should not proceed, so that discussions of the kind that have been mentioned can take place. We shall continue to press for a solution that is satisfactory to such important companies. We shall expect the Minister to come to the House at some stage with such a solution. Meanwhile, we cannot allow the clause to proceed. These matters should be decided in the interests of the companies concerned. Assurances can and should be given on the basis of which companies can develop and advance.
      Question put, That the amendment be made:—
      The House divided: Ayes 174, Noes 299.

      Division No. 271]

      [10.26 pm

      AYES

      Abse, Leo

      Evans, Ioan (Aberdare)

      Adams, Allen

      Ewing, Harry

      Allaun, Frank

      Faulds, Andrew

      Anderson, Donald

      Field, Frank

      Archer, Rt Hon Peter

      Flannery, Martin

      Ashley, Rt Hon Jack

      Fletcher, Ted (Darlington)

      Ashton, Joe

      Ford, Ben

      Atkinson, N. (H'gey,)

      Forrester, John

      Bagier, Gordon A.T.

      Foster, Derek

      Barnett, Guy (Greenwich)

      Foulkes, George

      Barnett, Rt Hon Joel (H'wd)

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

      Benn, Rt Hon Tony

      Freeson, Rt Hon Reginald

      Bennett, Andrew (St'kp't N)

      Garrett, John (Norwich S)

      Bidwell, Sydney

      Garrett, W. E. (Wallsend)

      Booth, Rt Hon Albert

      Golding, John

      Boothroyd, Miss Betty

      Gourlay, Harry

      Bray, Dr Jeremy

      Graham, Ted

      Brown, Hugh D. (Provan)

      Hamilton, James (Bothwell)

      Brown, Ron (E'burgh, Leith)

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

      Buchan, Norman

      Hardy, Peter

      Callaghan, Rt Hon J.

      Harrison, Rt Hon Walter

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

      Hart, Rt Hon Dame Judith

      Campbell, Ian

      Hattersley, Rt Hon Roy

      Campbell-Savours, Dale

      Haynes, Frank

      Canavan, Dennis

      Heffer, Eric S.

      Cant, R. B.

      Hogg, N. (E Dunb't'nshire)

      Carmichael, Neil

      Holland, S. (L'b'th, Vauxh'll)

      Carter-Jones, Lewis

      Home Robertson, John

      Clark, Dr David (S Shields)

      Homewood, William

      Clarke, Thomas C'b'dge, A'rie

      Hooley, Frank

      Cocks, Rt Hon M. (B'stol S)

      Howell, Rt Hon D.

      Cohen, Stanley

      Hoyle, Douglas

      Coleman, Donald

      Huckfield, Les

      Concannon, Rt Hon J. D.

      Hughes, Mark (Durham)

      Cook, Robin F.

      Hughes, Robert (Aberdeen N)

      Cowans, Harry

      Hughes, Roy (Newport)

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

      Janner, Hon Greville

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

      Jay, Rt Hon Douglas

      Crowther, Stan

      John, Brynmor

      Cryer, Bob

      Johnson, James (Hull West)

      Cunningham, Dr J. (W'h'n)

      Jones, Rt Hon Alec (Rh'dda)

      Dalyell, Tam

      Jones, Barry (East Flint)

      Davidson, Arthur

      Kaufman, Rt Hon Gerald

      Davies, Rt Hon Denzil (L'lli)

      Kerr, Russell

      Davis, Clinton (Hackney C)

      Kilroy-Silk, Robert

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

      Kinnock, Neil

      Deakins, Eric

      Lambie, David

      Dean, Joseph (Leeds West)

      Lamond, James

      Dewar, Donald

      Leadbitter, Ted

      Dixon, Donald

      Lestor, Miss Joan

      Dobson, Frank

      Lewis, Ron (Carlisle)

      Dormand, Jack

      Litherland, Robert

      Douglas, Dick

      Lofthouse, Geoffrey

      Dubs, Alfred

      McCartney, Hugh

      Duffy, A. E. P.

      McDonald, Dr Oonagh

      Dunlop, John

      McElhone, Frank

      Dunnett, Jack

      McGuire, Michael (Ince)

      Dunwoody, Hon Mrs G.

      McKay, Allen (Penistone)

      Eadie, Alex

      McKelvey, William

      Eastham, Ken

      MacKenzie, Rt Hon Gregor

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

      McNamara, Kevin

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

      McTaggart, Robert

      English, Michael

      McWilliam, John

      Ennals, Rt Hon David

      Marks, Kenneth

      949

      Marshall, Dr Edmund (Goole)

      Shore, Rt Hon Peter

      Marshall, Jim (Leicester S)

      Short, Mrs Renée

      Marshall, Michael (Arundel)

      Silkin, Rt Hon J. (Deptford)

      Martin, M (G'gow S'burn)

      Silverman, Julius

      Mason, Rt Hon Roy

      Skinner, Dennis

      Maxton, John

      Smith, Rt Hon J. (N Lanark)

      Maynard, Miss Joan

      Soley, Clive

      Meacher, Michael

      Spearing, Nigel

      Mikardo, Ian

      Spriggs, Leslie

      Millan, Rt Hon Bruce

      Stallard, A. W.

      Miller, Dr M. S. (E Kilbride)

      Stoddart, David

      Mitchell, Austin (Grimsby)

      Stott, Roger

      Morris, Rt Hon A. (W'shawe)

      Strang, Gavin

      Morris, Rt Hon C. (O'shaw)

      Straw, Jack

      Morton, George

      Summerskill, Hon Dr Shirley

      Moyle, Rt Hon Roland

      Taylor, Mrs Ann (Bolton W)

      Newens, Stanley

      Thomas, Dr R. (Carmarthen)

      Oakes, Rt Hon Gordon

      Thorne, Stan (Preston South)

      O'Neill, Martin

      Tilley, John

      Palmer, Arthur

      Tinn, James

      Park, George

      Torney, Tom

      Parker, John

      Urwin, Rt Hon Tom

      Parry, Robert

      Varley, Rt Hon Eric G.

      Pavitt, Laurie

      Wainwright, E. (Dearne V)

      Pendry, Tom

      Walker, Rt Hon H. (D'caster)

      Powell, Raymond (Ogmore)

      Weetch, Ken

      Prescott, John

      Welsh, Michael

      Price, C. (Lewisham W)

      White, Frank R.

      Race, Reg

      White, J. (G'gow Pollok)

      Radice, Giles

      Whitehead, Phillip

      Rees, Rt Hon M (Leeds S)

      Whitlock, William

      Richardson, Jo

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

      Roberts, Albert (Normanton)

      Wilson, Gordon (Dundee E)

      Roberts, Allan (Bootle)

      Wilson, Rt Hon Sir H. (H'ton)

      Roberts, Ernest (Hackney N)

      Wilson, William (C'try SE)

      Roberts, Gwilym (Cannock)

      Winnick, David

      Robertson, George

      Woodall, Alec

      Robinson, G. (Coventry NW)

      Woolmer, Kenneth

      Rooker, J. W.

      Wright, Sheila

      Ross, Ernest (Dundee West)

      Young, David (Bolton E)

      Rowlands, Ted

      Sever, John

      Tellers for the Ayes:

      Sheerman, Barry

      Mr. Lawrence Cunliffe and

      Sheldon, Rt Hon R.

      Mr. Ron Leighton

      NOES

      Adley, Robert

      Brinton, Tim

      Aitken, Jonathan

      Brittan, Rt. Hon. Leon

      Alexander, Richard

      Brotherton, Michael

      Alison, Rt Hon Michael

      Brown, Michael (Brigg & Sc'n)

      Alton, David

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

      Ancram, Michael

      Browne, John (Winchester)

      Arnold, Tom

      Bruce-Gardyne, John

      Aspinwall, Jack

      Bryan, Sir Paul

      Atkins, Rt Hon H. (S'thorne)

      Buchanan-Smith, Rt. Hon. A.

      Atkins, Robert (Preston N)

      Buck, Antony

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

      Budgen, Nick

      Baker, Nicholas (N Dorset)

      Bulmer, Esmond

      Banks, Robert

      Burden, Sir Frederick

      Beaumont-Dark, Anthony

      Butcher, John

      Beith, A. J.

      Butler, Hon Adam

      Bendall, Vivian

      Cadbury, Jocelyn

      Bennett, Sir Frederic (T'bay)

      Carlisle, John (Luton West)

      Benyon, Thomas (A'don)

      Carlisle, Kenneth (Lincoln)

      Benyon, W. (Buckingham)

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

      Berry, Hon Anthony

      Chalker, Mrs. Lynda

      Best, Keith

      Channon, Rt. Hon. Paul

      Bevan, David Gilroy

      Chapman, Sydney

      Biffen, Rt Hon John

      Churchill, W. S.

      Biggs-Davison, Sir John

      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, Sir Nicholas

      Cockeram, Eric

      Boscawen, Hon Robert

      Colvin, Michael

      Bottomley, Peter (W'wich W)

      Cope, John

      Bowden, Andrew

      Cormack, Patrick

      Boyson, Dr Rhodes

      Corrie, John

      Braine, Sir Bernard

      Costain, Sir Albert

      Bright, Graham

      Cranborne, Viscount

      950

      Crawshaw, Richard

      Knight, Mrs Jill

      Critchley, Julian

      Knox, David

      Crouch, David

      Lamont, Norman

      Dorrell, Stephen

      Lang, Ian

      Douglas-Hamilton, Lord J.

      Latham, Michael

      Dover, Denshore

      Lee, John

      du Cann, Rt Hon Edward

      Lennox-Boyd, Hon Mark

      Dunn, Robert (Dartford)

      Lester, Jim (Beeston)

      Durant, Tony

      Lewis, Kenneth (Rutland)

      Eden, Rt Hon Sir John

      Lloyd, Ian (Havant & W'loo)

      Edwards, Rt Hon N. (P'broke)

      Lloyd, Peter (Fareham)

      Eggar, Tim

      Loveridge, John

      Elliott, Sir William

      Luce, Richard

      Eyre, Reginald

      Lyell, Nicholas

      Fairbairn, Nicholas

      Lyons, Edward (Bradf'd W)

      Fairgrieve, Sir Russell

      Macfarlane, Neil

      Faith, Mrs Sheila

      MacGregor, John

      Farr, John

      MacKay, John (Argyll)

      Fell, Sir Anthony

      Macmillan, Rt Hon M.

      Fenner, Mrs Peggy

      McNair-Wilson, M. (N'bury)

      Finsberg, Geoffrey

      McNair-Wilson, P. (New F'st)

      Fisher, Sir Nigel

      McNally, Thomas

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

      Madel, David

      Fletcher-Cooke, Sir Charles

      Major, John

      Fookes, Miss Janet

      Marland, Paul

      Forman, Nigel

      Marten, Rt Hon Neil

      Fowler, Rt Hon Norman

      Mather, Carol

      Fox, Marcus

      Maude, Rt Hon Sir Angus

      Fraser, Peter (South Angus)

      Mawby, Ray

      Fry, Peter

      Mawhinney, Dr Brian

      Gardner, Edward (S Fylde)

      Maxwell-Hyslop, Robin

      Garel-Jones, Tristan

      Mayhew, Patrick

      Glyn, Dr Alan

      Mellor, David

      Goodhew, Sir Victor

      Meyer, Sir Anthony

      Goodlad, Alastair

      Miller, Hal (B'grove)

      Gorst, John

      Mills, Iain (Meriden)

      Gow, Ian

      Mills, Sir Peter (West Devon)

      Grant, Anthony (Harrow C)

      Miscampbell, Norman

      Gray, Hamish

      Mitchell, David (Basingstoke)

      Greenway, Harry

      Moate, Roger

      Griffiths, E. (B'y St. Edm'ds)

      Monro, Sir Hector

      Griffiths, Peter Portsm'th N)

      Montgomery, Fergus

      Grylls, Michael

      Moore, John

      Gummer, John Selwyn

      Morris, M. (N'hampton S)

      Hamilton, Michael (Salisbury)

      Morrison, Hon C. (Devizes)

      Hampson, Dr Keith

      Morrison, Hon P. (Chester)

      Hannam,John

      Mudd, David

      Haselhurst, Alan

      Murphy, Christopher

      Havers, Rt Hon Sir Michael

      Myles, David

      Hawkins, Sir Paul

      Neale, Gerrard

      Hawksley, Warren

      Needham, Richard

      Hayhoe, Barney

      Nelson, Anthony

      Heddle, John

      Neubert, Michael

      Henderson, Barry

      Newton, Tony

      Heseltine, Rt Hon Michael

      Normanton, Tom

      Hicks, Robert

      Ogden, Eric

      Higgins, Rt Hon Terence L.

      Onslow, Cranley

      Hill, James

      Oppenheim, Rt Hon Mrs S.

      Hogg, Hon Douglas (Gr'th'm)

      Osborn, John

      Holland, Philip (Carlton)

      Page, John (Harrow, West)

      Hooson, Tom

      Page, Richard (SW Herts)

      Horam, John

      Parkinson, Rt Hon Cecil

      Hordern, Peter

      Parris, Matthew

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

      Patten, John (Oxford)

      Howell, Ralph (N Norfolk)

      Pattie, Geoffrey

      Howells, Geraint

      Pawsey, James

      Hunt, David (Wirral)

      Penhaligon, David

      Hunt, John (Ravensbourne)

      Percival, Sir Ian

      Irvine, Bryant Godman

      Peyton, Rt Hon John

      Irving, Charles (Cheltenham)

      Pink, R. Bonner

      Jenkin, Rt Hon Patrick

      Pollock, Alexander

      Jessel, Toby

      Porter, Barry

      Johnson Smith, Sir Geoffrey

      Prentice, Rt Hon Reg

      Jopling, Rt Hon Michael

      Price, Sir David (Eastleigh)

      Joseph, Rt Hon Sir Keith

      Prior, Rt Hon James

      Kaberry, Sir Donald

      Proctor, K. Harvey

      Kellett-Bowman, Mrs Elaine

      Raison, Rt Hon Timothy

      Kershaw, Sir Anthony

      Rees-Davies, W. R.

      Kimball, Sir Marcus

      Renton, Tim

      King, Rt Hon Tom

      Rhodes James, Robert

      951

      Rhys Williams, Sir Brandon

      Skeet, T. H. H.

      Ridley, Hon Nicholas

      Smith, Cyril (Rochdale)

      Rifkind, Malcolm

      Smith, Dudley

      Rippon, Rt Hon Geoffrey

      Smith, Tim (Beaconsfield)

      Roberts, M. (Cardiff NW)

      Speed, Keith

      Roberts, Wyn (Conway)

      Speller, Tony

      Rodgers, Rt Hon William

      Spence, John

      Roper, John

      Spicer, Jim (West Dorset)

      Ross, Stephen (Isle of Wight)

      Spicer, Michael (S Worcs)

      Rossi, Hugh

      Sproat, Iain

      Rost, Peter

      Squire, Robin

      Rumbold, Mrs A. C. R.

      Stainton, Keith

      Sainsbury, Hon Timothy

      Stanley, John

      St. John-Stevas, Rt Hon N.

      Steel, Rt Hon David

      Scott, Nicholas

      Steen, Anthony

      Shaw, Giles (Pudsey)

      Stevens, Martin

      Shelton, William (Streatham)

      Stewart, A. (E Renfrewshire)

      Shepherd, Colin (Hereford)

      Stewart, Ian (Hitchin)

      Shepherd, Richard

      Stokes, John

      Shersby, Michael

      Stradling Thomas, J.

      Silvester, Fred

      Tapsell, Peter

      Sims, Roger

      Taylor, Teddy (S'end E)

      Tebbit, Rt Hon Norman

      Ward, John

      Temple-Morris, Peter

      Warren, Kenneth

      Thomas, Rt Hon Peter

      Watson, John

      Thompson, Donald

      Wells, Bowen

      Thorne, Neil {Ilford South)

      Wheeler, John

      Thornton, Malcolm

      Whitelaw, Rt Hon William

      Townend, John (Bridlington)

      Whitney, Raymond

      Townsend, Cyril D, (B'heath)

      Wickenden, Keith

      Trippier, David

      Wiggin, Jerry

      Trotter, Neville

      Wilkinson, John

      van Straubenzee, Sir W.

      Williams, D.(Montgomery)

      Vaughan, Dr Gerard

      Williams, Rt Hon Mrs (Crosby)

      Viggers, Peter

      Winterton, Nicholas

      Waddington, David

      Wolfson, Mark

      Wakeham, John

      Young, Sir George (Acton)

      Waldegrave, Hon William

      Younger, Rt Hon George

      Walker, Rt Hon P. (W'cester)

      Walker, B. (Perth)

      Tellers for the Noes:

      Waller, Gary

      Mr. Peter Brooke and

      Walters, Dennis

      Mr. Archie Hamilton.

      Division No. 272]

      [12.37 am

      AYES

      Abse, Leo

      Forrester, John

      Allaun, Frank

      Foster, Derek

      Alton, David

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

      Anderson, Donald

      Freeson, Rt Hon Reginald

      Archer, Rt Hon Peter

      Garrett, John (Norwich S)

      Ashley, Rt Hon Jack

      Garrett, W. E. (Wallsend)

      Ashton, Joe

      Graham, Ted

      Atkinson, N.(H'gey,)

      Hamilton, James (Bothwell)

      Bagier, Gordon A.T.

      Hardy, Peter

      Barnett, Guy (Greenwich)

      Harrison, Rt Hon Walter

      Barnett, Rt Hon Joel (H'wd)

      Hattersley, Rt Hon Roy

      Beith, A. J.

      Haynes, Frank

      Benn, Rt Hon Tony

      Heffer, Eric S.

      Booth, Rt Hon Albert

      Holland, S. (L'b'th, Vauxh'll)

      Boothroyd, Miss Betty

      Homewood, William

      Bray, Dr Jeremy

      Hooley, Frank

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

      Howell, Rt Hon D.

      Callaghan, Rt Hon J.

      Hoyle, Douglas

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

      Huckfield, Les

      Cant, R. B.

      Hughes, Mark (Durham)

      Carter-Jones, Lewis

      Hughes, Robert (Aberdeen N)

      Clark, Dr David (S Shields)

      Hughes, Roy (Newport)

      Cocks, RtHon M. (B'stol S)

      Janner, Hon Greville

      Cohen, Stanley

      Jay, Rt Hon Douglas

      Coleman, Donald

      John, Brynmor

      Concannon, Rt Hon J. D.

      Jones, Rt Hon Alec (Rh'dda)

      Cowans, Harry

      Jones, Barry (East Flint)

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

      Kaufman, Rt Hon Gerald

      Crawshaw, Richard

      Kerr, Russell

      Crowther, Stan

      Kilroy-Silk, Robert

      Cryer, Bob

      Kinnock, Neil

      Cunliffe, Lawrence

      Lamond, James

      Cunningham, Dr J. (W'h'n)

      Leadbitter, Ted

      Davidson, Arthur

      Leighton, Ronald

      Davies, Rt Hon Denzil (L'lli)

      Lewis, Ron (Carlisle)

      Davis, Clinton (Hackney C)

      Litherland, Robert

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

      Lofthouse, Geoffrey

      Deakins, Eric

      Lyons, Edward (Bradf'd W)

      Dean, Joseph (Leeds West)

      McCartney, Hugh

      Dixon, Donald

      McDonald, Dr Oonagh

      Dobson, Frank

      McElhone, Frank

      Dormand, Jack

      McGuire, Michael (Ince)

      Dubs, Alfred

      Maclennan, Robert

      Duffy, A. E. P.

      McNamara, Kevin

      Dunnett, Jack

      McWilliam, John

      Dunwoody, Hon Mrs G.

      Marks, Kenneth

      Eastham, Ken

      Marshall, Dr Edmund (Goole)

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

      Marshall, Jim (Leicester S)

      Ennals, Rt Hon David

      Martin, M(G'gow S'burn)

      Evans, loan (Aberdare)

      Maynard, Miss Joan

      Evans, John (Newton)

      Meacher, Michael

      Faulds, Andrew

      Mitchell, Austin (Grimsby)

      Field, Frank

      Morris, Rt Hon A. (W'shawe)

      Flannery, Martin

      Morris, Rt Hon C. (O'shaw)

      Fletcher, Ted (Darlington)

      Moyle, Rt Hon Roland

      Ford, Ben

      Newens, Stanley

      978

      Oakes, Rt Hon Gordon

      Stallard, A. W.

      Palmer, Arthur

      Steel, Rt Hon David

      Park, George

      Stoddart, David

      Parry, Robert

      Stott, Roger

      Pavitt, Laurie

      Strang, Gavin

      Pendry, Tom

      Straw, Jack

      Powell, Raymond (Ogmore)

      Summerskill, Hon Dr Shirley

      Prescott, John

      Thomas, Dr R.(Carmarthen)

      Race, Reg

      Thorne, Stan (Preston South)

      Radice, Giles

      Tilley, John

      Rees, Rt Hon M (Leeds S)

      Tinn, James

      Richardson, Jo

      Torney, Tom

      Roberts, Allan (Bootle)

      Urwin, Rt Hon Tom

      Roberts, Ernest (Hackney N)

      Varley, Rt Hon Eric G.

      Roberts, Gwilym (Cannock)

      Wainwright, E. (Dearne V)

      Robinson, G. (Coventry NW)

      Walker, Rt Hon H. (D'caster)

      Rodgers, Rt Hon William

      Welsh, Michael

      Rooker, J. W.

      White, Frank R.

      Roper, John

      Whitlock, William

      Ross, Stephen (Isle of Wight)

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

      Rowlands, Ted

      Williams, Rt Hon Mrs (Crosby)

      Sever, John

      Wilson, Rt Hon Sir H. (H'ton)

      Sheldon, Rt Hon R.

      Wilson, William (C'try SE)

      Shore, Rt Hon Peter

      Winnick, David

      Short, Mrs Renée

      Woodall, Alec

      Silkin, Rt Hon J. (Deptford)

      Woolmer, Kenneth

      Silverman, Julius

      Wrigglesworth, Ian

      Skinner, Dennis

      Wright, Sheila

      Smith, Cyril (Rochdale)

      Young, David (Bolton E)

      Smith, Rt Hon J. (N Lanark)

      Soley, Clive

      Tellers for the Ayes:

      Spearing, Nigel

      Mr. George Morton and

      Spriggs, Leslie

      Mr. Allen McKay.

      NOES

      Adams, Allen

      Butcher, John

      Aitken, Jonathan

      Butler, Hon Adam

      Alexander, Richard

      Cadbury, Jocelyn

      Alison, Rt Hon Michael

      Campbell, Ian

      Ancram, Michael

      Canavan, Dennis

      Arnold, Tom

      Carlisle, John (Luton West)

      Aspinwall, Jack

      Carlisle, Kenneth (Lincoln)

      Atkins, Robert (Preston N)

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

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

      Chalker, Mrs. Lynda

      Baker, Nicholas (N Dorset)

      Channon, Rt. Hon. Paul

      Banks, Robert

      Chapman, Sydney

      Beaumont-Dark, Anthony

      Churchill, W. S.

      Bendall, Vivian

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

      Bennett, Sir Frederic (T'bay)

      Clark, Sir W. (Croydon S)

      Benyon, Thomas (A'c'on)

      Clarke, Kenneth (Rushcliffe)

      Benyon, W. (Buckingham)

      Clarke, Thomas C'b'dge, A'rie

      Berry, Hon Anthony

      Colvin, Michael

      Best, Keith

      Cope, John

      Bevan, David Gilroy

      Corrie, John

      Biffen, Rt Hon John

      Costain, Sir Albert

      Biggs-Davison, Sir John

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

      Blackburn, John

      Cranborne, Viscount

      Blaker, Peter

      Critchley, Julian

      Body, Richard

      Crouch, David

      Bonsor, Sir Nicholas

      Dewar, Donald

      Boscawen, Hon Robert

      Dorrell, Stephen

      Bottomley, Peter (W'wich W)

      Douglas, Dick

      Bowden, Andrew

      Douglas-Hamilton, Lord J.

      Boyson, Dr Rhodes

      Dover, Denshore

      Braine, Sir Bernard

      du Cann, Rt Hon Edward

      Bright, Graham

      Dunn, Robert (Dartford)

      Brinton, Tim

      Durant, Tony

      Brittan, Rt. Hon. Leon

      Eadie, Alex

      Brooke, Hon Peter

      Eden, Rt Hon Sir John

      Brotherton, Michael

      Edwards, Rt Hon N. (P'broke)

      Brown, Hugh D. (Provan)

      Eggar, Tim

      Brown, Michael(Brigg & Sc'n)

      Ewing, Harry

      Browne, John (Winchester)

      Eyre, Reginald

      Bruce-Gardyne, John

      Fairbairn, Nicholas

      Bryan, Sir Paul

      Fairgrieve, Sir Russell

      Buchanan-Smith, Rt. Hon. A.

      Faith, Mrs Sheila

      Buck, Antony

      Furr, John

      Budgen, Nick

      Fell, Sir Anthony

      Bulmer, Esmond

      Fenner, Mrs Peggy

      Burden, Sir Frederick

      Finsberg, Geoffrey

      979

      Fisher, Sir Nigel

      Marland, Paul

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

      Marten, Rt Hon Neil

      Fletcher-Cooke, Sir Charles

      Mather, Carol

      Fookes, Miss Janet

      Maude, Rt Hon Sir Angus

      Forman, Nigel

      Mawby, Ray

      Foulkes, George

      Mawhinney, Dr Brian

      Fowler, Rt Hon Norman

      Maxton, John

      Fox, Marcus

      Maxwell-Hyslop, Robin

      Fraser, Peter (South Angus)

      Mayhew, Patrick

      Gardner, Edward (S Fylde)

      Mellor, David

      Garel-Jones, Tristan

      Meyer, Sir Anthony

      Glyn, Dr Alan

      Miller, Hal (B'grove)

      Goodhart, Sir Philip

      Mills, Iain (Meriden)

      Goodhew, Sir Victor

      Mills, Sir Peter (West Devon)

      Goodlad, Alastair

      Miscampbell, Norman

      Gorst, John

      Mitchell, David (Basingstoke)

      Gow, Ian

      Moate, Roger

      Grant, Anthony (Harrow C)

      Monro, Sir Hector

      Gray, Hamish

      Montgomery, Fergus

      Greenway, Harry

      Moore, John

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

      Morris, M. (N'hampton S)

      Griffiths, Peter Portsm'th N)

      Morrison, Hon C. (Devizes)

      Grylls, Michael

      Morrison, Hon P. (Chester)

      Gummer, John Selwyn

      Mudd, David

      Hamilton, Michael (Salisbury)

      Murphy, Christopher

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

      Myles, David

      Hampson, Dr Keith

      Neale, Gerrard

      Hannam, John

      Needham, Richard

      Haselhurst, Alan

      Nelson, Anthony

      Hastings, Stephen

      Neubert, Michael

      Havers, Rt Hon Sir Michael

      Normanton, Tom

      Hawkins, Sir Paul

      O'Neill, Martin

      Hayhoe, Barney

      Onslow, Cranley

      Heddle, John

      Oppenheim, Rt Hon Mrs S.

      Henderson, Barry

      Osborn, John

      Heseltine, Rt Hon Michael

      Page, John (Harrow, West)

      Hicks, Robert

      Page, Richard (SW Herts)

      Higgins, Rt Hon Terence L.

      Parkinson, Rt Hon Cecil

      Hill, James

      Parris, Matthew

      Hogg, Hon Douglas (Gr'th'm)

      Patten, John (Oxford)

      Holland, Philip (Carlton)

      Pattie, Geoffrey

      Hooson, Tom

      Pawsey, James

      Hordern, Peter

      Percival, Sir Ian

      Howe, Rt Hon Sir Geoffrey

      Pink, R. Bonner

      Howell, Ralph (N Norfolk)

      Pollock, Alexander

      Hunt, John (Ravensbourne)

      Porter, Barry

      Irvine, Bryant Godman

      Price, Sir David (Eastleigh)

      Irving, Charles (Cheltenham)

      Prior, Rt Hon James

      Jenkin, Rt Hon Patrick

      Proctor, K. Harvey

      Jessel, Toby

      Raison, Rt Hon Timothy

      Johnson Smith, Sir Geoffrey

      Rathbone, Tim

      Jopling, Rt Hon Michael

      Rees, Peter (Dover and Deal)

      Joseph, Rt Hon Sir Keith

      Rees-Davies, W. R.

      Kellett-Bowman, Mrs Elaine

      Renton, Tim

      Kershaw, Sir Anthony

      Rhodes James, Robert

      Kimball, Sir Marcus

      Rhys Williams, Sir Brandon

      King, Rt Hon Tom

      Ridley, Hon Nicholas

      Knight, Mrs Jill

      Ridsdale, Sir Julian

      Knox, David

      Rifkind, Malcolm

      Lambie, David

      Rippon, Rt Hon Geoffrey

      Lamont, Norman

      Roberts, M. (Cardiff NW)

      Lang, Ian

      Roberts, Wyn (Conway)

      Lawrence, Ivan

      Robertson, George

      Lee, John

      Rossi, Hugh

      Lennox-Boyd, Hon Mark

      Rost, Peter

      Lester, Jim (Beeston)

      Rumbold, Mrs A. C. R.

      Lewis, Kenneth (Rutland)

      Sainsbury, Hon Timothy

      Lloyd, Peter (Fareham)

      St. John-Stevas, Rt Hon N.

      Loveridge, John

      Scott, Nicholas

      Luce, Richard

      Shaw, Giles (Pudsey)

      Lyell, Nicholas

      Shelton, William (Streatham)

      Macfarlane, Neil

      Shepherd, Colin (Hereford)

      MacGregor, John

      Shepherd, Richard

      MacKay, John (Argyll)

      Shersby, Michael

      MacKenzie, Rt Hon Gregor

      Silvester, Fred

      Macmillan, Rt Hon M.

      Sims, Roger

      McNair-Wilson, M. (N'bury)

      Skeet, T. H. H.

      McNair-Wilson, P. (New F'st)

      Smith, Dudley

      Madel, David

      Smith, Tim (Beaconsfield)

      Major, John

      Speed, Keith

      980

      Speller, Tony

      Wakeham, John

      Spicer, Jim (West Dorset)

      Waldegrave, Hon William

      Spicer, Michael (S Worcs)

      Walker, Rt Hon P.(W'cester)

      Sproat, Iain

      Walker, B. (Perth)

      Squire, Robin

      Waller, Gary

      Stanbrook, Ivor

      Walters, Dennis

      Stanley, John

      Ward, John

      Steen, Anthony

      Watson, John

      Stevens, Martin

      Wells, Bowen

      Stewart, A.(E Renfrewshire)

      Wells, John (Maidstone)

      Stewart, Ian (Hitchin)

      Wheeler, John

      Stokes, John

      White, J. (G'gow Pollok)

      Stradling Thomas, J.

      Whitney, Raymond

      Tapsell, Peter

      Wickenden, Keith

      Taylor, Teddy (S'end E)

      Wiggin, Jerry

      Temple-Morris, Peter

      Wilkinson, John

      Thomas, Rt Hon Peter

      Williams, D.(Montgomery)

      Thompson, Donald

      Wilson, Gordon (Dundee E)

      Thorne, Neil (Ilford South)

      Winterton, Nicholas

      Thornton, Malcolm

      Wolfson, Mark

      Townend, John (Bridlington)

      Young, Sir George (Acton)

      Townsend, Cyril D, (B'heath)

      Younger, Rt Hon George

      Trippier, David

      Trotter, Neville

      Tellers for the Noes:

      van Straubenzee, Sir W.

      Mr. David Hunt and

      Viggers, Peter

      Mr. Archie Hamilton.

      Waddington, David

      Question accordingly negatived.

    Schedule 17
      SUPPLEMENTARY PROVISIONS RELATING TO APRT
      Mr. Wakeham: I beg to move amendment No. 141, in page 213, line 35, at end insert—
      SUPPLEMENTARY PROVISIONS RELATING TO APRT

        'Repayment of APRT
        13A.—(1) If a participator in an oil field has an excess of APRT credit for the last of the chargeable periods referred to in section 134(1)(b) of this Act, then, on the making of a claim the amount of that excess shall be repaid to him.
        (2) For the purposes of this paragraph there is an excess of APRT credit for the last of the chargeable periods referred to in subsection (1)(b) of section 134 of this Act if any of that credit would, apart from this paragraph, fall to be carried forward to the next chargeable period in accordance with subsection (4) of that section; and the amount of the excess is the amount of the credit which would fall to be so carried forward.
        (3) A claim under sub-paragraph (1) above shall be made not earlier than two months after the expiry of the last chargeable period referred to in that sub-paragraph.
        (4) In any case where—

        a claim is made under sub-paragraph (1) above before an assessment is made for the chargeable period referred to in that sub-paragraph, and

        (b) the APRT credit for that period exceeds the amount of tax which, in the statement delivered under section 1(1)(a) of the Petroleum Revenue Tax Act 1980, is shown to be payable by the participator concerned in accordance with the Schedule to that Act for that period in respect of the oilfield in question, the amount of the excess shall be repaid to the participator and that repayment shall be regarded as a payment on account of any amount which may fall to be repaid to him by virtue of sub-paragraph (1) above.

        (5) Paragraph 10(4) above shall not apply to any amount of APRT which is repayable only on the making of a claim under sub-paragraph (1) above.
        (6) Amounts repaid to a participator by virtue of this paragraph shall be disregarded in computing his income for the purposes of income tax or corporation tax.'.
        Mr. Deputy Speaker: With this we may take Government amendments Nos. 143 and 144.
        Mr. Wakeham: The amendments complete the package of modifications to the Budget oil taxation

        981
        proposals announced by the Chancellor on 9 June. The other proposals were implemented by amendments in Committee.
        The effect of the amendments is to advance the time at which APRT that cannot be set off against PRT is repaid. Under the Budget proposals that would have been the end of field life; it will now be five years after the first payment. That will help the less profitable fields that pay APRT but little or no PRT.
        At the same five-year point, amendments passed in Committee will cut off all future liability to APRT. That should provide a substantial protection for less profitable fields.
        The amendments are proof of the fact that we take account of representations made by the oil industry. We find it extremely helpful when companies back up their representations with detailed figures about particular projects. I am extremely grateful to companies that have supplied information. We do a great of analytical work in Government on the figures that we have. We look at existing fields and we look at our best ideas of what future developments will be like. We looked very carefully at the field profiles that were prepared by the joint Government—UKOOA review of marginal fields a couple of years ago, but inevitably the details of actual projects under consideration are known to the companies alone.
        I hope that in the forthcoming discussions with UKOOA about the tax regime companies will feel able to support their arguments with chapter and verse about individual projects.
        Mr. Eggar: This is an important point relating to the evidence the will be given. Can my hon. Friend give us assurances that talks will be held not only with the industry body, UKOOA, but with individual companies about individual fields and that the talks will be held at a suitably high level with the Inland Revenue, if necessary with Treasury Ministers being present?
        Mr. Wakeham: I give my hon. Friend that assurance and I add the comment that any information will be treated in the strictest confidence.
        Mr. Peter Hardy: The Minister is on an important point. This is the eighth or ninth set of changes in the fiscal regime. Is he saying that until recent months or weeks the oil companies had failed to give the Treasury information that might have prevented the Government from making some of the incautious changes that were made a year or two ago?
        Mr. Wakeham: I reject the hon. Gentleman's implied criticisms of the regime. There is much change and uncertainty in the oil world, and that is likely to continue for the foreseeable future. We are making sure that we get as close to the oil companies as we can. I do not complain about past co-operation; there has been a great deal, but I shall be writing to UKOOA on the review that my right hon. and learned Friend the Chancellor agreed with the association recently on some of the problems of the marginal fields and I shall urge that the oil companies be as forthcoming as possible, in the interests of getting a sensible tax regime for both the country and the companies.
        Mr. Straw: We discussed the principle behind the amendments at length in Committee, but I have one question for the Minister of State. If he cannot answer it
        982
        now, perhaps he will write to me. How many fields are the changes likely to help, compared with the previous regime?
        Mr. Wakeham: For the sake of accuracy, it would be better if I wrote to the hon. Gentleman.
        Amendment agreed to.
        Amendments made:
        No. 142, in page 213, line 40 at end insert—
        '(1A) For the purpose of determining whether the new participator is liable to pay an amount of APRT, but for no other purpose, subsection (1) of section 134 of this Act shall apply as if any gross profit which at any time before the transfer had accrued to the old participator from the field had accrued at that time to the new participator or, if the transfer is of part of the old participator's interest in the field, as if a corresponding part of that gross profit had at that time accrued to the new participator.'.
        No. 143, in page 215, line 15 at end insert
        'and (c) the date stated in that decision as the date on which the winning of oil from the field ceased is earlier than the expiry of the last of the chargeable periods specified in section 134(1)(b) of this Act.'.
        No. 144 in page 215, line 16 leave out
        'paid any amount of APRT'
        and insert
        'an amount of APRT credit'.—[Mr. Wakeham]

    Clause 138

      REDUCTION OF NATIONAL INSURANCE SURCHARGE
      Mr. Brittan: I beg to move amendment No. 145, in page 120, line 1 at beginning insert—
      'Subject to subsections (2A) and (2B) below'.
      Mr. Deputy Speaker: With this we may take Government amendment No. 146.
      Mr. Brittan: These amendments make local authorities and certain related bodies which are also financed partly through the rate support grant liable to pay the same rate of national insurance surcharge—3½ per cent.—for the whole of 1982–83. From 6 April 1983, local authorities will again become liable to the rate applicable to other employers—2½ per cent.— with the reduced cost being reflected in a lower rate support grant for 1983–84.
      The amendments are designed to give effect in the area of local authorities with a minimum of administrative and distributional difficulties to the Chancellor's proposal in the Budget to take steps to ensure that public sector employers would be left in the same position as they would have been without the reductions in the national insurance surcharge which are due to take effect from 2 August Similar amendments are not required in respect of other public sector employers, for whom offsetting reductions have already been announced in the cash limits of central Government, including the National Health Service, and in the external financing limits of the nationalised industries and corporations. These will take full account in 1982–83 of the reduction in these bodies' national insurance surcharge burden which will occur after 2 August.
      At the time of the Budget it was envisaged that the local authorities should, like other parts of the public sector, pay national insurance surcharge at an effective rate of 2 per cent. from August 1982 to April 1983. The intention was that the whole of their reduction in costs arising from that lower rate of national insurance surcharge would be offset through a reduced rate support grant, but the current amendments meet local authority objections to handling the matter in that way, which rested on the fact that the

      983
      distribution of grant abatement would not, and indeed could not, match the national insurance reduction for each local authority. In some cases, the discrepancies could have been substantial.
      For that reason we have accepted that it would be distributionally fairer for local authorities to pay the higher rate of tax for the remainder of this financial year and for the adjustment to be made in the following year through the rate support grant. It is for those reasons that I commend the amendments to the House.
      Mr. Straw: We have just spent two hours discussing the need for fairness in taxation. That need is recognised on both sides of the House. It is a fundamental principle of taxation that taxes should have an even application and that all in the same circumstances should be liable to the same rate of tax and to pay it on the same conditions.
      Since local authorities and public sector corporations were treated in the same way as other corporations in the private sector when the national insurance surcharge was first introduced—in other words, they became liable to that surcharge, and when it was increased they became liable to the increases—it was expected that when the Government announced the much heralded reduction in the surcharge, local authorities and public sector corporations would be subject to a similar reduction.
      It then emerged that because of the Government's ideological opposition to the public sector, which is plain from the many speeches from the Conservative Benches, they were going to claw back the reduction in the national insurance surcharge, but only from public sector employers. The result was discriminatory and also had the perverse effect of reducing the intended reflationary effect of the reduction in the national insurance surcharge.
      1 am
      As the Chief Secretary has remarked, the proposed method of clawback from local authorities which the Government originally had in mind would have been capricious in its effect. It would not have provided a proper readjustment through the rate support grant and the reduced NIS that local authorities were to pay. The right hon. and learned Gentleman referred to the distributional problems that would have arisen had the original proposal for clawback gone through and there had been a readjustment through the rate support grant. Those problems would have been substantial. Local authorities that did not receive grant would not have been subject to clawback through the mechanism.
      The right hon. and learned Gentleman went on to say that, next year, clawback arrangements would be written into the RSG which did not involve a differential rate of national insurance surcharge. That is what I understood him to say. I see the Minister for Local Government and Environmental Services shaking his head. Are the Government clear that the procedure that they want to adopt for clawing back or offsetting the reduction in NIS through the rate support grant will fairly reflect the amount of employment of the local authorities and the lower amount that they pay as a result of the reduction in NIS?
      As a result of substantial representations by local authorities, the Government have decided to change the clawback arrangements by the simple device of maintaining the old, higher rate of national insurance for local authorities. While the Opposition regard the whole
      984
      scheme of discrimination against the public sector as repugnant, we consider that this proposal for clawback is less undesirable than the original proposal. We shall not divide against it.
      There are two further questions that I wish to put. The first concerns the effect of the change on direct labour organisations. The Government have been concerned to ensure that these organisations do not possess any competitive advantage over private sector builders. The result of the change, if unamended, will be that direct labour organisations, which are expected to have the same financial environment as private sector builders, will pay a higher rate of national insurance surcharge than private sector builders. That will place them at a competitive disadvantage. Will the Government make any adjustments in the rate of return imposed upon direct labour organisations so that they enjoy competitive neutrality with private sector companies?
      The second point relates to the higher rate of national insurance surcharge on public transport authorities and London Transport. My information is that the Government's position is not clear. Is it intended that the higher rate should apply to passenger transport authorities and to London Transport? If so, will the appropriate adjustment be made in the grant?
      Mr. Brittan: Consideration is being given to the means by which passenger transport authorities can be put on a par with other public sector bodies, with regard to the national insurance surcharge reduction. I cannot announce precisely how that will be done, but an announcement will be made in due course.
      With regard to direct labour organisations, the differential impact of my proposal will be taken into account. I assure the hon. Member for Blackburn (Mr. Straw) that the offset in rate support grant for future years will leave local authorities neither better off nor worse off. That leads me to the substantial and central point that the hon. Gentleman made, which should not go uncorrected.
      The hon. Gentleman implied that in some sense it was objectionable or unfair for the benefit of the national insurance surcharge reduction not to apply to public bodies. I remind the House that it applies not only to local authorities but to nationalised industries and central Government Departments.
      The criticism that the hon. Gentleman makes totally ignores the purpose and the motive of the reduction in the national insurance surcharge. The cost of extending the benefit of the national insurance surcharge reduction to public bodies would have been £360 million in 1982–83 and £430 million in a full year. It is plain that within any given total level of relief for industry the effect of applying the national insurance surcharge reduction to the public sector would have meant that the relief to the private sector would have had to be correspondingly less. As the object of the exercise with regard to the national insurance surcharge reduction was to reduce the costs of the productive wealth-creating sections of society and the private sector embodying that, it made sense that the reduction in national insurance surcharge should be confined in that direction.
      It is for those reasons that I commend the principle, as well as its application to local authorities, which is reflected in the amendments.
      Amendment agreed to.
      Amendment made: No. 146, in page 120, line 6 at end add—
      '(2A) The amendments made by subsections (1) and (2) above do not apply to any secondary Class 1 contribution which any of the bodies specified in subsection (2B) below is liable to pay in respect of earnings paid in a tax week beginning before 6th April 1983; and accordingly in the case of any such contribution, the rate of surcharge shall continue to be 3½ per cent.
      (2B) The bodies referred to in subsection (2A) above are—

      (a) in England and Wales, those which, by virtue of section 53(5) of the Local Government, Planning and Land Act 1980, are local authorities for the purposes of Part VI of that Act;

      (b) in Scotland, regional, islands and district councils,

      (c) the Receiver for the Metropolitan Police District and the police authority for every police area other than that District;

      (d) in Scotland, the fire authority for every area falling within a combined area;

      (e) the committees established under paragraph 2 of Schedule 3 to the Powers of Criminal Courts Act 1973 (probation and after-care committees); and

      (f) magistrates' courts committees, within the meaning of section 19 of the Justices of the Peace Act 1979, and the committee of magistrates referred to in section 35(1) of that Act (the committee for the inner London area).'.—[Mr. Brittan]

    Clause 141
    Mr. Ridley: We shall sell the shares when the market is right. That seems thoroughly sensible and to answer both hon. Members.
    Finally, I note that the Opposition have opposed this proposal in the Oil and Gas (Enterprise) Bill Committee
    988
    and on this Bill both in Committee and today. Of course oil is a priceless asset and a source of tax as well as of oil, but the argument cannot be sustained that it can be secured only by the operation of public sector companies. The vast bulk of the oil won from the North Sea was won by private sector companies. Before oil was discovered there, it was won in other territory and brought to Britain by private sector companies, thus assuring tax revenue and security of supply to Britain.
    On the happy note that the assets will pass to the good management of the private sector, the House will wish to resist the penultimate amendment to the Bill. The House will have done a good deed if it commits these clauses to law.
    Question put, That the amendment be made:—
    The House divided: Ayes 181, Noes 275.

    Division No. 273]

    [1.20 pm

    AYES

    Adams, Allen

    Faulds, Andrew

    Allaun, Frank

    Field, Frank

    Anderson, Donald

    Flannery, Martin

    Archer, Rt Hon Peter

    Fletcher, Ted (Darlington)

    Ashley, Rt Hon Jack

    Ford, Ben

    Ashton, Joe

    Forrester, John

    Atkinson, N.(H'gey,)

    Foster, Derek

    Bagier, Gordon A.T.

    Foulkes, George

    Barnett, Guy (Greenwich)

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

    Barnett, Rt Hon Joel (H'wd)

    Freeson, Rt Hon Reginald

    Benn, Rt Hon Tony

    Garrett, John (Norwich S)

    Booth, Rt Hon Albert

    Garrett, W. E. (Wallsend)

    Boothroyd, Miss Betty

    Graham, Ted

    Bray, Dr Jeremy

    Hamilton, James (Bothwell)

    Brown, Hugh D. (Provan)

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

    Brown, Ron (E'burgh, Leith)

    Hardy, Peter

    Buchan, Norman

    Harrison, Rt Hon Walter

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

    Hart, Rt Hon Dame Judith

    Campbell, Ian

    Hattersley, Rt Hon Roy

    Campbell-Savours, Dale

    Haynes, Frank

    Canavan, Dennis

    Hogg, N. (E Dunb't'nshire)

    Cant, R. B.

    Holland, S. (L'b'th, Vauxh'll)

    Carmichael, Neil

    Homewood, William

    Carter-Jones, Lewis

    Hooley, Frank

    Clark, Dr David (S Shields)

    Howell, Rt Hon D.

    Clarke, Thomas C'b'dge,A'rie

    Hoyle, Douglas

    Cocks, Rt Hon M. (B'stol S)

    Huckfield, Les

    Coleman, Donald

    Hughes, Mark (Durham)

    Concannon, Rt Hon J. D.

    Hughes, Robert (Aberdeen N)

    Cook, Robin F.

    Janner, Hon Greville

    Cowans, Harry

    John, Brynmor

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

    Jones, Rt Hon Alec (Rh'dda)

    Cryer, Bob

    Jones, Barry (East Flint)

    Cunliffe, Lawrence

    Kaufman, Rt Hon Gerald

    Cunningham, Dr J. (W'h'n)

    Kerr, Russell

    Davidson, Arthur

    Kilroy-Silk, Robert

    Davies, Rt Hon Denzil (L'lli)

    Lamond, James

    Davis, Clinton (Hackney C)

    Leadbitter, Ted

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

    Leighton, Ronald

    Deakins, Eric

    Lewis, Ron (Carlisle)

    Dean, Joseph (Leeds West)

    Litherland, Robert

    Dewar, Donald

    Lofthouse, Geoffrey

    Dixon, Donald

    McCartney, Hugh

    Dobson, Frank

    McDonald, Dr Oonagh

    Dormand, Jack

    McElhone, Frank

    Douglas, Dick

    McGuire, Michael (Ince)

    Dubs, Alfred

    McKay, Allen (Penistone)

    Duffy, A. E. P.

    McKelvey, William

    Dunnett, Jack

    MacKenzie, Rt Hon Gregor

    Dunwoody, Hon Mrs G.

    McNamara, Kevin

    Eadie, Alex

    McTaggart, Robert

    Eastham, Ken

    McWilliam, John

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

    Marks, Kenneth

    English, Michael

    Marshall, D (G'gow S'ton)

    Ennals, Rt Hon David

    Marshall, Jim (Leicester S)

    Evans, Ioan (Aberdare)

    Martin, M (G'gow S'burn)

    Evans, John (Newton)

    Maxton, John

    Ewing, Harry

    Maynard, Miss Joan

    989

    Meacher, Michael

    Skinner, Dennis

    Millan, Rt Hon Bruce

    Soley, Clive

    Miller, Dr M. S. (E Kilbride)

    Spearing, Nigel

    Morris, Rt Hon A. (W'shawe)

    Spriggs, Leslie

    Morris, Rt Hon C. (O'shaw)

    Stoddart, David

    Morton, George

    Stott, Roger

    Moyle, Rt Hon Roland

    Strang, Gavin

    Newens, Stanley

    Straw, Jack

    O'Neill, Martin

    Summerskill, Hon Dr Shirley

    Palmer, Arthur

    Thorne, Stan (Preston South)

    Park, George

    Tilley, John

    Parry, Robert

    Tinn, James

    Pavitt, Laurie

    Torney, Tom

    Pendry, Tom

    Urwin, Rt Hon Tom

    Powell, Raymond (Ogmore)

    Varley, Rt Hon Eric G.

    Prescott, John

    Wainwright, E. (Dearne V)

    Price, C. (Lewisham W)

    Walker, Rt Hon H. (D'caster)

    Race, Reg

    Welsh, Michael

    Radice, Giles

    White, Frank R.

    Rees, Rt Hon M (Leeds S)

    White, J. (G'gow Pollok)

    Richardson, Jo

    Whitehead, Phillip

    Roberts, Ernest (Hackney N)

    Whitlock, William

    Roberts, Gwilym (Cannock)

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

    Robertson, George

    Wilson, Gordon (Dundee E)

    Robinson, G. (Coventry NW)

    Wilson, William (C'try SE)

    Rooker, J. W.

    Winnick, David

    Ross, Ernest (Dundee West)

    Woodall, Alec

    Rowlands, Ted

    Woolmer, Kenneth

    Sever, John

    Wright, Sheila

    Sheerman, Barry

    Young, David (Bolton E)

    Sheldon, Rt Hon R.

    Shore, Rt Hon Peter

    Tellers for the Ayes:

    Short, Mrs Renée

    Dr. Edmund Marshall and

    Silkin, Rt Hon J. (Deptford)

    Mrs. Austin Mitchell.

    Silverman, Julius

    NOES

    Aitken, Jonathan

    Cadbury, Jocelyn

    Alison, Rt Hon Michael

    Carlisle, John (Luton West)

    Ancram, Michael

    Carlisle, Kenneth (Lincoln)

    Arnold, Tom

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

    Aspinwall, Jack

    Chalker, Mrs. Lynda

    Atkins, Robert (Preston N)

    Channon, Rt. Hon. Paul

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

    Chapman, Sydney

    Baker, Nicholas (N Dorset)

    Churchill, W. S.

    Banks, Robert

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

    Beaumont-Dark, Anthony

    Clark, Sir W. (Croydon S)

    Bendall, Vivian

    Clarke, Kenneth (Rushcliffe)

    Bennett, Sir Frederic (T'bay)

    Colvin, Michael

    Benyon, Thomas (A'don)

    Cope, John

    Benyon, W. (Buckingham)

    Corrie, John

    Berry, Hon Anthony

    Costain, Sir Albert

    Best, Keith

    Cranborne, Viscount

    Bevan, David Gilroy

    Crouch, David

    Biffen, Rt Hon John

    Dorrell, Stephen

    Biggs-Davison, Sir John

    Douglas-Hamilton, Lord J.

    Blackburn, John

    Dover, Denshore

    Blaker, Peter

    du Cann, Rt Hon Edward

    Body, Richard

    Dunn, Robert (Dartford)

    Bonsor, Sir Nicholas

    Durant, Tony

    Boscawen, Hon Robert

    Eden, Rt Hon Sir John

    Bottomley, Peter (W'wich W)

    Eggar, Tim

    Bowden, Andrew

    Elliott, Sir William

    Boyson, Dr Rhodes

    Eyre, Reginald

    Braine, Sir Bernard

    Fairbairn, Nicholas

    Bright, Graham

    Fairgrieve, Sir Russell

    Brinton, Tim

    Faith, Mrs Sheila

    Brittan, Rt. Hon. Leon

    Farr, John

    Brooke, Hon Peter

    Fell, Sir Anthony

    Brotherton, Michael

    Fenner, Mrs Peggy

    Brown, Michael (Brigg & Sc'n)

    Finsberg, Geoffrey

    Browne, John (Winchester)

    Fisher, Sir Nigel

    Bruce-Gardyne, John

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

    Bryan, Sir Paul

    Fletcher-Cooke, Sir Charles

    Buchanan-Smith, Rt. Hon. A.

    Fookes, Miss Janet

    Buck, Antony

    Forman, Nigel

    Budgen, Nick

    Fowler, Rt Hon Norman

    Bulmer, Esmond

    Fox, Marcus

    Burden, Sir Frederick

    Fraser, Peter (South Angus)

    Butcher, John

    Gardner, Edward (S Fylde)

    990

    Glyn, Dr Alan

    Monro, Sir Hector

    Goodhart, Sir Philip

    Montgomery, Fergus

    Goodhew, Sir Victor

    Moore, John

    Goodlad, Alastair

    Morris, M. (N'hampton S)

    Gorst, John

    Morrison, Hon C. (Devizes)

    Gow, Ian

    Morrison, Hon P. (Chester)

    Grant, Anthony (Harrow C)

    Mudd, David

    Gray, Hamish

    Murphy, Christopher

    Greenway, Harry

    Myles, David

    Griffiths, E. (B'y St. Edm'ds)

    Neale, Gerrard

    Griffiths, Peter Portsm'th N)

    Needham, Richard

    Grylls, Michael

    Nelson, Anthony

    Gummer, John Selwyn

    Neubert, Michael

    Hamilton, Hon A.

    Newton, Tony

    Hamilton, Michael (Salisbury)

    Normanton, Tom

    Hampson, Dr Keith

    Onslow, Cranley

    Hannam, John

    Oppenheim, Rt Hon Mrs S.

    Haselhurst, Alan

    Osborn, John

    Hastings, Stephen

    Page, John (Harrow, West)

    Havers, Rt Hon Sir Michael

    Page, Richard (SW Herts)

    Hawkins, Sir Paul

    Parkinson, Rt Hon Cecil

    Hayhoe, Barney

    Parris, Matthew

    Heddle, John

    Patten, John (Oxford)

    Henderson, Barry

    Pattie, Geoffrey

    Heseltine, Rt Hon Michael

    Pawsey, James

    Hicks, Robert

    Percival, Sir Ian

    Higgins, Rt Hon Terence L.

    Pink, R. Bonner

    Hill, James

    Pollock, Alexander

    Hogg, Hon Douglas (Gr'th'm)

    Porter, Barry

    Holland, Philip (Carlton)

    Price, Sir David (Eastleigh)

    Hooson, Tom

    Prior, Rt Hon James

    Hordern, Peter

    Proctor, K. Harvey

    Howe, Rt Hon Sir Geoffrey

    Raison, Rt Hon Timothy

    Howell, Ralph (N Norfolk)

    Rathbone, Tim

    Hunt, John (Ravensbourne)

    Rees, Peter (Dover and Deal)

    Irvine, Bryant Godman

    Rees-Davies, W. R.

    Jessel, Toby

    Renton, Tim

    Johnson Smith, Sir Geoffrey

    Rhodes James, Robert

    Jopling, Rt Hon Michael

    Rhys Williams, Sir Brandon

    Joseph, Rt Hon Sir Keith

    Ridley, Hon Nicholas

    Kellett-Bowman, Mrs Elaine

    Ridsdale, Sir Julian

    Kershaw, Sir Anthony

    Rifkind, Malcolm

    Kimball, Sir Marcus

    Rippon, Rt Hon Geoffrey

    King, Rt Hon Tom

    Roberts, M. (Cardiff NW)

    Knight, Mrs Jill

    Roberts, Wyn (Conway)

    Knox, David

    Rossi, Hugh

    Lang, Ian

    Rost, Peter

    Lawrence, Ivan

    Rumbold, Mrs A. C. R.

    Lee, John

    Sainsbury, Hon Timothy

    Lennox-Boyd, Hon Mark

    St. John-Stevas, Rt Hon N.

    Lester, Jim (Beeston)

    Scott, Nicholas

    Lewis, Kenneth (Rutland)

    Shaw, Giles (Pudsey)

    Lloyd, Peter (Fareham)

    Shelton, William (Streatham)

    Loveridge, John

    Shepherd, Colin (Hereford)

    Luce, Richard

    Shepherd, Richard

    Lyell, Nicholas

    Shersby, Michael

    Macfarlane, Neil

    Silvester, Fred

    MacGregor, John

    Sims, Roger

    MacKay, John (Argyll)

    Skeet, T. H. H.

    Macmillan, Rt Hon M.

    Smith, Dudley

    McNair-Wilson, M. (N'bury)

    Smith, Tim (Beaconsfield)

    McNair-Wilson, P. (New F'st)

    Speed, Keith

    Madel, David

    Speller, Tony

    Major, John

    Spicer, Jim (West Dorset)

    Marland, Paul

    Spicer, Michael (S Worcs)

    Marten, Rt Hon Neil

    Sproat, Iain

    Mather, Carol

    Squire, Robin

    Maude, Rt Hon Sir Angus

    Stainton, Keith

    Mawby, Ray

    Stanbrook, Ivor

    Mawhinney, Dr Brian

    Stanley, John

    Maxwell-Hyslop, Robin

    Steen, Anthony

    Mayhew, Patrick

    Stevens, Martin

    Mellor, David

    Stewart, A. (E Renfrewshire)

    Meyer, Sir Anthony

    Stewart, Ian (Hitchin)

    Miller, Hal (B'grove)

    Stokes, John

    Mills, Iain (Meriden)

    Stradling Thomas, J.

    Mills, Sir Peter (West Devon)

    Tapsell, Peter

    Miscampbell, Norman

    Taylor, Teddy (S'end E)

    Mitchell, David (Basingstoke)

    Temple-Morris, Peter

    Moate, Roger

    Thomas, Rt Hon Peter

    991

    Thompson, Donald

    Wells, Bowen

    Thorne, Neil (Ilford South)

    Wells, John (Maidstone)

    Thornton, Malcolm

    Wheeler, John

    Townend, John (Bridlington)

    Whitney, Raymond

    Townsend, Cyril D, (B'heath)

    Wickenden, Keith

    Trippier, David

    Wiggin, Jerry

    Trotter, Neville

    Wilkinson, John

    van Straubenzee, Sir W.

    Williams, D. (Montgomery)

    Viggers, Peter

    Winterton, Nicholas

    Waddington, David

    Wolfson, Mark

    Wakeham, John

    Young, Sir George (Acton)

    Waldegrave, Hon William

    Younger, Rt Hon George

    Walker, B. (Perth)

    Waller, Gary

    Tellers for the Noes:

    Walters, Dennis

    Mr. David Hunt and

    Ward, John

    Mr. Tristan Garel-Jones.

    Watson, John

    Amendment accordingly negatived.

    Clause 141

      TRANSFER OF ASSETS OF BRITISH NATIONAL OIL CORPORATION
      Mr. Cook: I beg to move amendment No. 147, in page 121, line 31, leave out clause 141.
      Mr. Deputy Speaker: With this it will be convenient to take amendment No. 148, in page 122, line 8, leave out clause 142.
      Mr. Cook: The purpose of these two amendments is to leave out clauses 141 and 142. Those two clauses provide a favourable tax regime for the hiving-off of the assets of BNOC and British Gas. They provide that when any such disposal takes place in future, it will not trigger a charge under capital gains tax or development land tax.
      The House will be aware that the opposition are opposed to any such disposal. We believe that our North Sea oil represents one of the major national strategic assets of Great Britain. It provides us with a secure energy supply, the means of transforming our balance of payments and generous tax revenues. Against that background of the importance of that asset to the British national interest, it is perverse that we should not have a direct public sector share in that asset. Were we to divest ourselves of the public sector share we would be unusual among oil-producing nations in that we would not have our own public sector company capable of protecting the national interest in that asset.
      British Gas is such a successful company that Conservative Members have been using a covert method of taxation through the gas levy. So enterprising is that company that Conservative Members constantly criticise it for its successful contract, by means of which British consumers have been able to enjoy gas at a cheaper price than could have been provided by the free market under any conceivable system of free market competition.
      Therefore, as the object of the clauses is to pave the way for the disposal of the assets of the companies and threaten that successful record, it logically follows that we object to those clauses. In Committee, the Financial Secretary
      986
      said that the clauses were necessary, otherwise potential investors who might buy the public sector companies might be deterred. If that is so, it is an eminently good reason for leaving the clauses out of the Bill and carrying the amendments.
      I invite the Minister to correct what I hope was an error in Committee. In relation to the sale of British Gas, the Financial Secretary said:
      "I confirm that it is our intention to ask the BGC to transfer its assets both in oil fields and gas fields in the sea" — [Official Report, Standing Committee A, 22 June 1982; c. 869.]
      That flatly contradicts what the Under-Secretary of State for Energy said in Committee on the Oil and Gas (Enterprise) Bill. He said:
      "At present there are no plans for BGS's interests in gas fields to be privatised."—[Official Report, Standing Committee E, 2 March 1982; c. 682.]
      He could not have been clearer. The Committee eagerly and willingly accepted that undertaking.
      The Opposition have their reservations about the clauses. We hope to persuade the House to strike them out of the Bill. Whatever may be said for them and the House's scrutiny of them, I hope that we shall get through our debate on them without widening privatisation and increasing the number of assets that are stripped off BGC.
      I hope that we shall be told that the Financial Secretary was in error and that the Government stand by what the Under-Secretary of State for Energy said. I hope that it will be reinforced in the urgings of the Secretary of State for Energy to his colleagues that the Government have no plans to dispose of BGC's gas fields.
      We meet only 14 hours after the OPEC conference broke up is disarray. Yesterday's Financial Times described that event as giving rise to the gravest crisis in the history of OPEC. Spot oil prices have been tumbling, companies' oil shares have been declining for some time and are likely to accelerate in that direction. It is doubtful whether either of those developments will be reversed before the end of next year.
      If Conservative Members wanted an historic moment at which to receive the least return for the sale of oil assets, they could not have done better than hit upon 1982. If any Conservative Member consulted his broker about whether now was a good time to dispose of his oil shares, it is extremely doubtful whether the broker would advise him to do so in the present climate or in any foreseeable one.
      Perhaps the Secretary of State for Energy will answer. He would make a pleasant change from the Treasury Ministers that we have had to put up with for the past six weeks. We are entitled to ask whether, given that any private individual would now receive advice not to dispose of his assets, the Government seriously intend to press ahead with the sale of public interests, even though the price will be depressed—certainly until the next Finance Bill.
      When that matter was raised on the Oil and Gas (Enterprise) Bill, the Minister said:
      "We would not arrange for the sale of shares merely to meet a timetable. I made our objectives clear and said that we were anxious to obtain the best possible price."—[Official Report, 31 March 1982; Vol. 21, c. 350.]
      The best possible price will not be obtained this year.
      As I assume that a Treasury Minister will reply to the debate, although there seems lo be some doubt about that at the moment, I hope that as Treasury Ministers have responsibility for the revenue, expenditure and assets of the nation they will make it clear that whatever rash

      987
      intentions the Secretary of State for Energy may have he will not be permitted to dispose of those assets in the next year at the depressed price that would be obtained for them.
      When we considered the clause relating to the BGC in Committee, the Financial Secretary indicated a certain distaste for its provisions. He said:
      "I do not like having to give tax relief to pampered public sector bodies".—[Official Report, Standing Committee A, 22 June 1982; c. 869.]
      The only way in which one could describe the BGC or BNOC as pampered at the moment is in the sense that lambs are fattened for slaughter. It is an insult to suggest that either company has been pampered. BNOC is an expansionary, dynamic company that has held its own in a very competitive industry. The BGC has provided its product reliably throughout the nation and in the past two decades has changed its infrastructure and achieved productivity gains that shame the private sector.
      The reward for those two companies is that they should have their assets stripped—a decision which has no logic other than the prejudice of Conservative Members that wherever profits occur they should be handed over to the private sector. That prejudice has the happy corollary for them of ensuring that only loss-making enterprises remain in the public sector, thus confirming their other prejudice that companies operating in the public sector must by definition be failures.
      The Opposition do not share that dismal vision of the public sector. We shall therefore vote against these clauses which pave the way for the Conservatives to turn their prejudice into reality.
      Mr. Ridley: I am beginning to be dimly aware that the Opposition do not favour the privatisation of BNOC and parts of the BGC. In this context, I wish to correct two small errors straight away.
      First, I said that without these clauses the uncertainty about capital gains tax liability would not so much deter investors from buying the shares as deter them from paying the most advantageous price that could be obtained for the nation. In the aftermath of Amersham International, I am sure that the Opposition would not wish to do anything that would put at risk the amount of money received from the sale of shares.
      Secondly, I willingly acknowledge that only the oilfields in the sea are included in my right hon. Friend's plans.
      Of course the Government will time the sale of the assets as and when it is believed that the timing is right. If a higher authority than me is required, may I say that my right hon. Friend the Prime Minister, in referring to this at Question Time on 8 July, used the words:
      "… if the market is right".—[Official Report, 8 July 1982; Vol. 27, c. 455.]
      We shall sell the shares when the market is right.
      Mr. Edward Rowlands

    Clause 150

      SHORT TITLE, INTERPRETATION, CONSTRUCTION AND REPEALS
      Mr. Brittan: I beg to move amendment No. 152, in page 125, line 39, at end insert—
      '(7) The provisions of Part XI of Schedule 20 to this Act, except in so far as they relate to the Wellington Museum Act 1947 and the Finance (No. 2) Act 1975, shall have effect in substitution for the provisions of section B of Part VI of Schedule 20 to the Finance Act 1980 and, accordingly, that Section shall be deemed not to have taken effect at the beginning of the year 1982–83.'.
      The purpose of the amendment is to preserve the provisions governing the apportioning of dependent relative allowances when two claimants cannot agree on how they should be split. The provisions were accidentally omitted or repealed as a result of the operation of the Finance Act 1980, and the amendment seeks to correct that error.
      Amendment agreed to.

  New Schedule
    CAPITAL ALLOWANCES FOR DWELLING-HOUSES LET ON ASSURED TENANCIES

      Initial allowances
      1.—(1) Subject to the provisions of this Schedule, where an approved body incurs capital expenditure on the construction of a building which is to be or to include a qualifying dwelling-house, then, for the chargeable period related to the incurring of that expenditure an allowance (in this Schedule referred to as an "initial allowance") shall be made to that body in respect of each qualifying dwelling-house to be comprised in the building.
      (2) An initial allowance in respect of a qualifying dwelling-house shall be of an amount equal to three-quarters of the capital expenditure appropriate to that dwelling-house
      (3) No initial allowance shall be made in respect of any expenditure if, when the dwelling-house to which it relates comes to be used, it is not a qualifying dwelling-house; and where an initial allowance has been granted in respect of any expenditure otherwise than in accordance with the provisions of this paragraph, all such assessments shall be made as are necessary to secure that effect is given to those provisions.
      (4) For the purposes of this Schedule, the capital expenditure appropriate to a dwelling-house shall be determined as follows:—

      (a) if the building concerned consists of a single qualifying dwelling-house, then, subject to the relevant limit, the whole of the capital expenditure referred to in subparagraph (1) above is appropriate to that dwelling-house; and

      992

      (b) in the case of a dwelling-house which forms part of a building, the capital expenditure appropriate to it is, subject to the relevant limit, the aggregate of—

      (i) that proportion of the capital expenditure referred to in sub-paragraph (1) above which is properly attributable to the construction of that dwelling-house; and

      (ii) where there are common parts of the building, such proportion of the capital expenditure on those common parts as it is just and reasonable to attribute to the dwelling-house and as does not exceed one-tenth of that proportion of the capital expenditure referred to in paragraph (i) above;

      and in this Schedule "the relevant limit" means £60,000, if the dwelling-house is in Greater London, and £40,000 if it is elsewhere.
      (5) In sub-paragraph (4) above "common parts", in relation to a building, means common parts of the building which—

      (a) are not intended to be in separate occupation (whether for domestic, commercial or other purposes); and

      (b) are intended to be of benefit, to some or all of the qualifying dwelling-houses included in the building;

      and the capital expenditure on any such parts of the building is so much of the expenditure referred to in sub-paragraph (1) above as it is just and reasonable to attribute to those parts.

      Writing-down allowances
      2.—(1) Subject to the provisions of this Schedule, where—

      (a) an approved body or a body which has been an approved body is, at the end of a chargeable period or its basis period, entitled to an interest in a building, and

      (b) at the end of that chargeable period or its basis period, the building is or includes a qualifying dwelling-house or two or more qualifying dwelling-houses, and

      (c) that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building, an allowance (in this Schedule referred to as "a writing-down allowance") shall be made to that body for that chargeable period in respect of the dwelling-house or, as the case may be, each dwelling-house falling within paragraph (b) above.

      (2) The writing-down allowance in respect of a dwelling-house shall be equal to one twenty-fifth of the capital expenditure which is appropriate to that dwelling-house, except that for a chargeable period of less than a year that fraction shall be proportionately reduced.
      (3) If, in the case of a building which is or includes a qualifying dwelling-house, —

      (a) the interest which is the relevant interest in relation to any expenditure is sold, and

      (b) the sale is an event to which paragraph 4(1) below applies, then (subject to any further adjustment under this sub-paragraph on a later sale) the writing-down allowance in respect of that dwelling-house for any chargeable period, if that chargeable period or its basis period ends after the time of the sale, shall be the residue, as defined in paragraph 7(1) below, of that expenditure immediately after the sale, reduced in the proportion (if it is less than one) which the length of the chargeable period bears to the part unexpired at the date of the sale of the period of 25 years beginning with the time when the building was first used.

      (4) Notwithstanding anything in the preceding provisions of this paragraph, in no case shall the amount of a writing-down allowance made to a body for any chargeable period in respect of any expenditure exceed what, apart from the writing-off falling to be made by reason of the making of that allowance, would be the residue of that expenditure at the end of that chargeable period or its basis period.

      Qualifying dwelling-house
      3.—(1) In this Schedule "qualifying dwelling-house" means, subject to the following provision of this paragraph, a dwelling-house let on a tenancy which is for the time being an assured tenancy, within the meaning of section 56 of the Housing Act 1980.
      (2) Without prejudice to section 57 of the Housing Act 1980 (by virtue of which certain tenancies continue to be treated as assured tenancies notwithstanding that the landlord has ceased to be an approved body by reason of a variation in the description of bodies for the time being approved) a dwelling-house which has been a qualifying dwelling-house by virtue of sub-paragraph (1) above shall be regarded as a qualifying dwelling-house at any time when—

      993

      (a) it is for the time being subject to a regulated tenancy or a housing association tenancy; and

      (b) the landlord under that tenancy either is an approved body or was an approved body but has ceased to be such for any reason.

      (3) Notwithstanding that a dwelling-house is let as mentioned in sub-paragraph (1) or sub-paragraph (2) above, it is not a qualifying dwelling-house for the purposes of this Schedule—

      (a) unless the landlord is for the time being entitled to the relevant interest in the dwelling-house or is the person who incurred the capital expenditure on the construction of the building in which the dwelling-house is comprised; or

      (b) if the landlord is a housing association which is approved for the purposes of section 341 of the Taxes Act (cooperative housing associations) or is a self-build society, within the meaning of Part I of the Housing Act 1974; or

      (c) if the landlord and the tenant are connected persons; or

      (d) if the tenant is a director of a company which is or is connected with the landlord; or

      (e) if the landlord is a close company and the tenant is, for the purposes of Chapter III of Part XI of the Taxes Act, a participator in that company or an associate of such a participator; or

      (f) if the tenancy is entered into as part of an arrangement between the landlords (or owners) of different dwelling-houses under which one landlord takes a person as a tenant in circumstances where, if that person was the tenant of a dwelling-house let by the other landlord, that dwelling-house would not be a qualifying dwelling-house by virtue of any of paragraphs (c) to (e) above;

      and section 533 of the Taxes Act (connected persons) applies for the purposes of this sub-paragraph.
      (4) In this paragraph "regulated tenancy" and "housing association tenancy" have the same meaning as in the Rent Act 1977.

      Balancing allowances and balancing charges
      4.—(1) Where any capital expenditure has been incurred on the construction of such a building as is referred to in paragraph 1(1) above and any of the following events occur while a dwelling-house comprised in that building is a qualifying dwelling-house, that is to say—

      (a) the relevant interest in the dwelling-house is sold, or

      (b) that interest, being a leasehold interest, comes to an end otherwise than on the person entitled to it acquiring the interest which is reversionary on it, or

      (c) the dwelling-house is demolished or destroyed or, without being demolished or destroyed, ceases altogether to be used,

      then, subject to sub-paragraph (2) below, for the chargeable period related to that event an allowance or charge (in this Schedule referred to as a "balancing allowance" or a "balancing charge") shall, in the circumstances mentioned below, be made to or, as the case may be, on the person entitled to the relevant interest immediately before that event occurs.
      (2) No balancing allowance or balancing charge shall be made by reason of any event occurring more than twenty-five years after the dwelling-house was first used.
      (3) Subject to paragraph 5 below, where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made and the amount of it shall be the amount of that residue or, as the case may be, of the excess of that residue over those moneys.
      (4) Subject to paragraph 5 below, if the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the residue is nil, to those moneys.
      (5) The provision of section 78 of and Schedule 7 to the Capital Allowance Act 1968 (special provisions as to certain sales) apply for the purposes of this Schedule as they apply in relation to the sale of an industrial building and as if—

      (a) any reference in these provisions to Part I of that Act to this Schedule; and

      (b) for the words in sub-paragraph (2)(a) of paragraph 4 of that Schedule following "the case of" there were substituted the words "a qualifying dwelling-house, the residue of the expenditure immediately before the sale, computed in accordance with paragraph 7 of Schedule
      994
      (Capital allowances for dwelling-houses let on assured tenancies) to the Finance Act 1982"; and

      (c) for paragraphs (a) and (b) of sub-paragraph (3) of paragraph 4 of that Schedule there were substituted the words "both the seller and the buyer are at the time of the sale approved bodies, as defined in section 56(4) of the Housing Act 1980".

      (6) For the purposes of this Schedule, any transfer of the relevant interest in a dwelling-house, otherwise than by way of sale, shall be treated as a sale of that interest for a price other than that which it would have fetched if sold on the open market; and if Schedule 7 to the Capital Allowances Act 1968 would not, apart from this sub-paragraph have effect in relation to a transfer treated as a sale by virtue of this sub-paragraph, that Schedule shall have effect in relation to it as if it were a sale falling within paragraph 1(1)(a) of that Schedule.
      (7) Notwithstanding anything in the preceding provisons of this paragraph (or in paragraph 5 below), in no case shall the amount on which a balancing charge is made on any person in respect of any expenditure on the construction of a dwelling-house comprised in a building exceed the amount of the initial allowance, if any, made to him in respect of the expenditure appropriate to that dwelling-house together with the amount of any writing-down allowances made to him in respect of that expenditure for chargeable periods which end on or before the date of the event giving rise to the charge or of which the basis period ends on or before that date.
      5.—(1) If, in a case where paragraph 4(1) above applies, a dwelling-house which had been a qualifying dwelling-house was not, for any part of the relevant period, such a dwelling-house, the provisions of this paragraph shall have effect instead of subparagraphs (3) and (4) of paragraph 4 above.
      (2) Subject to sub-paragraph (4) below, where the sale, insurance, salvage or compensation moneys are not less than the capital expenditure appropriate to the dwelling-house, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the allowances given.
      (3) Subject to sub-paragraph (4) below, where there are no sale, insurance, salvage or compensation moneys or where those moneys are less than the capital expenditure appropriate to the dwelling-house, then—

      (a) if the adjusted net cost of the dwelling-house exceeds the allowances given, a balancing allowance shall be made and the amount thereof shall be an amount equal to the excess;

      (b) if the adjusted net cost of the dwelling-house is less than the allowances given, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the shortfall.

      (4) No balancing charge or allowance shall be made under this paragraph on the occasion of a sale if, by virtue of paragraph 4 of Schedule 7 to the Capital Allowances Act 1968, as applied by paragraph 4(5) above, the dwelling-house is treated as having been sold for a sum equal to the residue of the expenditure before the sale.
      (5) In this paragraph—
      "the relevant period" means the period beginning at the time when the dwelling-house was first used for any purpose and ending with the event giving rise to the balancing allowance or balancing charge, except that where there has been a sale of the dwelling-house after that time and before that event the relevant period shall begin on the day following that sale or, if there has been more than one such sale, the last such sale;
      "the capital expenditure" means—

      (a) where paragraph (b) of this definition does not apply, the capital expenditure incurred (or by virtue of paragraph 8 below deemed to have been incurred) on the construction of the dwelling-house;

      (b) where the person to or on whom the balancing allowance or balancing charge falls to be made is not the person who incurred (or is deemed to have incurred) that expenditure the residue of that expenditure at the beginning of the relevant period,

      together (in either case) with any amount to be added to the residue of that expenditure by virtue of paragraph 7(9) below;
      "the allowances given" means the allowance referred to in paragraph 4(7) above;
      "the adjusted net cost" means—

      995

      (a) where there are no sale, insurance, salvage or compensation moneys, the capital expenditure appropriate to the dwelling-house; and

      (b) where those moneys are less than that expenditure, the amount by which they are less, reduced (in either case) in the proportion that the part of the aggregate of the parts, of the relevant period for which the building is a qualifying dwelling-house bears to the whole of that period.

      6.—(1) If a dwelling-house ceases to be a qualifying dwelling-house otherwise than by reason of a sale or transfer of the relevant interest in it, that relevant interest shall be treated for the purposes of this Schedule as having been sold, at the time the dwelling-house ceases to be a qualifying dwelling-house, for the price which it would have fetched if sold in the open market.
      (2) For the purposes of this Schedule, a dwelling-house shall not be regarded as ceasing altogether to be used by reason that it falls temporarily out of use, and where, immediately before any period of temporary disuse, it is a qualifying dwelling-house, it shall be regarded as continuing to be a qualifying dwelling-house during the period of temporary disuse.

      Writing off of expenditure and meaning of "residue of expenditure"
      7.—(1) Any expenditure appropriate to a qualifying dwelling-house shall be treated for the purposes of this Schedule as written off to the extent and as at the times specified below, and references in this Schedule to the residue of any such expenditure shall be construed accordingly.
      (2) Where an initial allowance is made in respect of a qualifying dwelling-house, the amount of that allowance shall be treated as written off as at the time when the qualifying dwelling-house is first used.
      (3) Where, by reason of the whole or part of a building being at any time a qualifying dwelling-house, a writing-down allowance is made for any chargeable period in respect of the expenditure, the amount of that allowance shall, subject to subparagraph (4) below, be treated as written off as at that time.
      (4) Where, at a time which is material for the purposes of sub-paragraph (3) above, an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be treated as written off by that sub-paragraph as at that time shall be taken into account in computing the residue of that expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made.
      (5) If, for any period or periods between the time when the whole or part of a building was first used for any purpose and the time at which the residue of the expenditure falls to be ascertained, the building or part, as the case may be, has not been a qualifying dwelling-house, there shall in ascertaining that residue be treated as having been previously written off in respect of the said period or periods amounts equal to writing-down allowances made for chargeable periods of a total length equal thereto at such rate or rates as would have been appropriate having regard to any sale on which paragraph 2(3) above operated.
      (6) where, on the occasion of a sale, a balancing allowance is made in respect of the expenditure, there shall be treated as written off as at the time of the sale the amount by which the residue of the expenditure before the sale exceeds the net proceeds of the sale.
      (7) Where, on the occasion of a sale, a balancing charge is made in respect of the expenditure, the residue of the expenditure shall be deemed for the purposes of this Schedule to be increased as at the time of the sale by the amount on which the charge is made.
      (8) Where, on the occasion of a sale, a balancing charge is made under paragraph 5(3)(b) above in respect of the expenditure and, apart from this sub-paragraph, the residue of the expenditure immediately after the sale would by virtue of sub-paragraph (7) above be deemed to be greater than the net proceeds of the sale, the residue immediately after the sale shall be deemed for the purposes of this Schedule to be equal to the net proceeds.
      (9) Where a dwelling-house is demolished, and the demolition gives rise, or might give rise, to a balancing allowance or charge under this Schedule to or on the person incurring the cost of demolition, the net cost to him of the demolition (that is to say the excess, if any, of the cost of the
      996
      demolition over any moneys received for the remains of the property) shall be added for the purposes of this Schedule to the residue, immediately before the demolition, of the expenditure appropriate to the dwelling-house; and if this sub-paragraph applies to the net cost to a person of the demolition of any property, the cost or net cost shall not be treated, for the purpose of this Schedule, as expenditure incurred in respect of any other property by which that property is replaced.

      Buildings bought unused
      8.—(1) Subject to sub-paragraph (2) below, where expenditure is incurred on the construction of such a building as is referred to in paragraph 1(1) above and the relevant interest in that building is sold before any of the dwelling-houses comprised in it are used,

      (a) the expenditure actually incurred on the construction of the building shall be left out of account for the purposes of the preceding provisions of this Schedule; but

      (b) the person who buys that interest shall be deemed for those purposes to have incurred on the date when the purchase price becomes payable, expenditure on the construction of the building equal to the expenditure actually incurred or to the net price paid by him for that interest, whichever is the less.

      (2) Where the relevant interest in such a building as is referred to in paragraph 1(1) above is sold more than once before any of the dwelling-houses comprised in it is used, the provisions of sub-paragraph (1)(b) above shall have effect only in relation to the last of those sales.
      (3) Where the expenditure incurred on the construction of such a building as is referred to in paragraph 1(1) above was incurred by a person carrying on a trade which consists, as to the whole or any part thereof, in the construction of buildings with a view to their sale, and, before any of the dwelling-houses comprised in it is used, he sells the relevant interest in the building in the course of that trade, or, as the case may be, of that part of that trade, paragraph (b) of sub-paragraph (1) above shall have effect subject to the following modifications—

      (a) if that sale is the only sale of the relevant interest before any of the dwelling-house comprised in the building is used that paragraph shall have effect as if the words "the expenditure actually incurred or to" and the words "whichever is the less" were omitted, and

      (b) in any other case, that paragraph shall have effect as if the reference to the expenditure actually incurred on the construction of the building were a reference to the price paid on that sale.

      Manner of making allowances and charges
      9.—(1) Any allowance under this Schedule shall be made to a person by way of discharge or repayment of tax and shall be available primarily against the following income, that is to say—

      (a) income taxed under Schedule A in respect of any premises which at any time in the chargeable period consist of a qualifying dwelling-house; or

      (b) income which is the subject of a balancing charge under this Schedule.

      (2) Effect shall be given to a balancing charge to be made on a person—

      (a) if it is a charge to income tax, by making the charge under Case VI of Schedule D,

      (b) if it is a charge to corporation tax, by treating the amount on which the charge is to be made as income of the description in sub-paragraph (1)(a) above.

      Expenditure on repair of buildings
      10. This Schedule shall have effect in relation to capital expenditure incurred by a person on repairs to any part of a building as if it it were capital expenditure incurred by him in the construction for the first time of that part of the building.
      Exclusion of double allowances
      11. No allowance shall be made under this Schedule in respect of any expenditure on a building or in respect of a dwelling-house if for the same or any other chargeable period an allowance is or can be made under any provisions of Chapter V of Part I of the Capital Allowances Act 1968 (agricultural land or buildings) in respect of that expenditure or that dwelling-house.

      Holding over by lessee, etc.
      12.—(1) Where the relevant interest in relation to the capital expenditure incurred on the construction of a building is an

      997
      interest under a lease, this Schedule shall have effect subject to the following provisions of this paragraph, and in those provisions—

      (a) except in sub-paragraph (5), any reference to a lessor or lessee is a reference to the lessor or lessee under that lease and

      (b) in sub-paragraph (5) the reference to the first lease is a reference to that lease.

      (2) Where, with the consent of the lessor, a lessee of any building remains in possession thereof after the termination of the lease without a new lease being granted to him, that lease shall be deemed for the purposes of this Schedule to continue so long as he remains in possession as aforesaid.
      (3) Where, on the termination of a lease, a new lease is granted to the lessee in pursuance of an option available to him under the terms of the first lease, the provisions of this Schedule shall have effect as if the second lease were a continuation of the first lease.
      (4) Where, on the termination of a lease, the lessor pays any sum to the lessee in respect of a building comprised in the lease, the provisions of this Schedule shall have effect as if the lease had come to an end by reason of the surrender thereof in consideration of the payment.
      (5) Where, on the termination of a lease, another lease is granted to a different lessee and, in connection with the transaction, that lessee pays a sum to the person who was the lessee under the first lease, the provisions of this Schedule shall have effect as if both leases were the same lease and there had been an assignment thereof by the lessee under the first lease to the lessee under the second lease in consideration of the payment.

      Meaning of "the relevant interest"
      13.—(1) Subject to the provisions of this paragraph, in this Schedule "the relevant interest" means,—

      (a) in relation to any expenditure incurred on the construction of a building, the interest in that building to which the person who incurred the expenditure was entitled when he incurred it; and

      (b) in relation to a dwelling-house comprised in such a building as is referred to in paragraph 1(1) above, that interest, to the extent that it subsists in the dwelling-house, which is the relevant interest in relation to the capital expenditure incurred on the construction of that building.

      (2) Where, when it incurs expenditure on the construction of a building, a body is entitled to two or more interests in the building and one of those interests is an interest which is reversionary on all the others, that interest shall be the relevant interest for the purposes of this Schedule.
      (3) An interest shall not cease to be the relevant interest for the purposes of this Schedule by reason of the creation of any lease or other interest to which that interest is subject, and where the relevant interest is a leasehold interest and is extinguished by reason of the surrender thereof or on the body entitled thereto acquiring the interest which is reversionary on it, the interest into which that leasehold interest merges shall thereupon become the relevant interest.

      Application of provisions of Capital Allowances Act 1968
      14. The following provisions of the Capital Allowances Act 1968, namely—

      section 71 to 74 (income tax and corporation tax allowances and charges),

      section 76 (companies not resident in the United Kingdom),

      subsections (1) to (3) of section 77 (apportionment of consideration etc.),

      section 81 (procedure on apportionments),

      subsections (1) and (3) of section 82 (interpretation of certain references to expenditure etc.),

      section 84 (subsidies),

      section 86 (meaning of "sale, insurance, salvage or compensation moneys"), and

      subsections (1), (3) and (6) of section 87 (interpretationof Part I),

      shall apply for the purposes of this Schedule as they apply for the purposes of Part I of that Act and, accordingly, any reference in those provisions to part I of that Act shall include a reference to this Schedule.

      Interpretation
      15.—(1) In this Schedule—

      "approved body" has the meaning given by section 56(4) of the Housing Act 1980;

      998

      "building", except where the context otherwise requires, includes part of a building;

      "dwelling-house" except where the context otherwise requires, has the same meaning as in the Rent Act 1977; "expenditure appropriate to a dwelling-house" has the meaning given by paragraph 1(4) above; and

      "qualified dwelling-house" has the meaning given by paragraph 3 above.

      (2) References in this Schedule to expenditure incurred on the construction of a building do not include any expenditure incurred on the acquisition of, or of rights in or over, any land.
      (3) A person who has incurred expenditure on the construction of a building shall be deemed, for the purposes of any provision to this Schedule referring to his interest therein at the time when the expenditure was incurred, to have had the same interest therein as if the construction thereof had been completed at that time.
      (4) Without prejudice to any of the other provisions of this Schedule relating to the apportionment of sale, insurance, salvage or compensation moneys, the sum paid on the sale of the relevant interest in a building or structure, or any other sale, insurance, salvage or compensation moneys payable in respect of any building or structure, shall, for the purposes of this Schedule, be deemed to be reduced by an amount equal to so much thereof, as, on a just apportionment, is attributable to assets representing expenditure other than expenditure in respect of which an allowance can be made under this Schedule.—Mr. Brittan.]
      Brought up, read the First and Second time, and added to the Bill.

  New Schedule
    CAPITAL TRANSFER TAX: MAINTENANCE FUNDS

      Property becoming comprised in maintenance funds
      1.—(1) Subject to sub-paragraphs (2) and (3) below, tax shall not be charged under section 102 of this Act in respect of property which ceases to be relevant property on becoming property in respect of which a direction under section 87 of this Act then has effect.
      (2) If the amount on which tax would be charged apart from sub-paragraph (1) above in respect of any property exceeds the value of the property immediately after it becomes property in respect of which the direction has effect (less the amount of any consideration for its transfer received by the trustees of the settlement in which it was comprised immediately before it ceased to be relevant property), that sub-paragraph shall riot apply but the amount on which tax is charged shall be equal to the excess.
      (3) Sub-paragraph (1) above shall not apply in relation to any property if, at or before the time when it becomes property in respect of which the direction has effect, an interest under the settlement in which it was comprised immediately before it ceased to be relevant property is or has been acquired for a consideration in money or money's worth by the trustees of the settlement in which it becomes comprised on ceasing to he relevant property.
      (4) For the purposes of sub-paragraph (3) above trustees shall be treated as acquiring an interest for a consideration in money or money's worth if they become entitled to the interest as a result of transactions which include a disposition for such consideration (whether to them or to another person) of that interest or of other property.
      (5) Subject to sub-paragraphs (7) and (8) below, tax shall not be charged under section 102 of this Act in respect of property which ceases to be relevant property if within the permitted period an individual makes a transfer of value—

      (a) which is exempt under section 89 of this Act, and

      (b) the value transferred by which is attributable to that property.

      (6) In sub-paragraph (5) above "the permitted period" means the period of thirty days beginning with the day on which the property ceases to be relevant property except in a case where it does so on the death of any person, and in such a case means the period of two years beginning with that day.
      (7) Sub—paragraph (5) above shall not apply if the individual has acquired the property concerned for a consideration in money

      999
      or money's worth; and for the purposes of this sub-paragraph an individual shall be treated as acquiring any property for such consideration if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that or other property.
      (8) If the amount on which tax would be charged apart from sub-paragraph (5) above in respect of any property exceeds the value of the property immediately after the transfer there referred to (less the amount of any consideration for its transfer received by the individual), that sub-paragraph shall not apply but the amount on which tax is charged shall be equal to the excess.
      (9) The references in sub-paragraphs (2) and (8) above to the amount on which tax would be charged are references to the amount on which it would be charged apart from—

      (a) paragraph (b) of section 102(2) of this Act, and

      (b) Schedule 10 to the Finance Act 1976 (business property) and Schedule 14 to the Finance Act 1981 (agricultural property); and the references in those sub-paragraphs to the amount on which tax is charged are references to the amount on which it would be charged apart from that paragraph and those Schedules.

      Property leaving maintenance funds: charge to tax
      2.—(1) This paragraph applies to settled property which is held on trusts which comply with the requirements mentioned in subsection (3) of section 87 of this Act, and in respect of which a direction given under that section has effect.
      (2) Subject to paragraphs 3 and 4 below, there shall be a charge to tax under this paragraph—

      (a) where settled property ceases to be property to which this paragraph applies, otherwise than by virtue of an application mentioned in paragraph (a)(i) or (ii) of subsection (3) of section 87 of this Act or by devolving on any such body or charity as is mentioned in paragraph (a) (ii) of that subsection;

      (b) in a case in which paragraph (a) above does not apply, where the trustees make a disposition (otherwise than by such an application) as a result of which the value of settled property to which this paragraph applies is less than it would be but for the disposition.

      (3) Subsections (4), (5) and (9) of section 107 of this Act shall apply for the purposes of this paragraph as they apply for the purposes of that section (with the substitution of a reference to sub-paragraph (2)(b) above for the reference in section 107(4) to section 107(2)(b)).
      (4) The rate at which tax is charged under this paragraph shall be determined in accordance with paragraphs 5 to 9 below.
      (5) The devolution of property on a body or charity shall not be free from charge by virtue of sub-paragraph (2)a above if, at or before the time of devolution, an interest under the settlement in which the property was comprised immediately before the devolution is or has been acquired for a consideration in money or money's worth by that or another such body or charity; but for the purposes of this sub-paragraph any acquisition from another such body or charity shall be disregarded.
      (6) For the purposes of sub-paragraph (5) above a body or charity shall be treated as acquiring an interest for a consideration in money or money's worth if it becomes entitled to the interest as a result of transactions which include a disposition for such consideration (whether to that body or charity or to another person) of that interest or of other property.

      Property leaving maintenance funds: exceptions from charge
      3.—(1) Subject to sub-paragraphs (3) and (4) below, tax shall not be charged under paragraph 2 above in respect of property which, within the permitted period after the occasion on which tax would be chargeable under that paragraph, becomes comprised in another settlement as a result of a transfer of value which is exempt under section 89 of this Act.
      (2) In sub-paragraph (1) above "the limited period" means the period of thirty days except in a case where the occasion referred to is the death of the settlor, and in such a case means the period of two years.
      (3) Sub-paragraph (1) above shall not apply to any property if the person who makes the transfer of value has acquired it for a consideration in money or money's worth; and for the purposes of this sub-paragraph a person shall be treated as acquiring any property for such consideration if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that or other property.
      (4) If the amount on which tax would be charged apart from sub-paragraph (1) above in respect of any property exceeds the value of the property immediately after it becomes comprised in the other settlement (less the amount of any consideration for its transfer received by the person who makes the transfer of value), that sub-paragraph shall not apply but the amount on which tax is charged shall be equal to the excess.
      (5) The reference in sub-paragraph (4) above to the amount on which tax would be charged is a reference to the amount on which it would be charged apart from—

      (a) section I07(5)(b) of this Act (as applied by paragraph 2(3) above), and

      (b) Schedule 10 to the Finance Act 1976 (business property) and Schedule 14 to the Finance Act 1981 (agricultural property);

      and the reference in that sub-paragraph to the amount on which tax is charged is a reference to the amount on which it would be charged apart from section 107(5)(b) and those Schedules.
      4.—(1) Subject to the following provisions of this paragraph, tax shall not be charged under paragraph 2 above in respect of property which ceases to be property to which that paragraph applies on becoming—

      (a) property to which the settlor or his spouse is beneficially entitled, or

      (b) property to which the settlor's widow or widower is beneficially entitled if the settlor has died in the two years preceding the time when it becomes such property.

      (2) If the amount on which tax would be charged apart from sub-paragraph (1) above in respect of any property exceeds the value of the property, immediately after it becomes property of a description specified in paragraph (a) or (b) of that subparagraph (less the amount of any consideration for its transfer received by the trustees), that sub-paragraph shall not apply but the amount on which tax is charged shall be equal to the excess.
      (3) The reference in sub-paragraph (2) above to the amount on which tax would be charged is a reference to the amount on which it would be charged apart from—

      (a) section 107(5)(b) of this Act (as applied by paragraph 2(3) above), and

      (b) Schedule 10 to the Finance Act 1976 (business property) and Schedule 14 to the Finance Act 1981 (agricultural property);

      and the reference in sub-paragraph (2) above to the amount on which tax is charged is a reference to the amount on which it would be charged apart from section 107(5)(b) and those Schedules.
      (4) Sub-paragraph (1) above shall not apply in relation to any property if, at or before the time when it becomes property of a description specified in paragraph (a) or (b) of that subparagraph, an interest under the settlement in which the property was comprised immediately before it ceased to be property to which paragraph 2 above applies is or has been acquired for a consideration in money or money's worth by the person who becomes beneficially entitled.
      (5) For the purposes of sub-paragraprh (4) above a person shall be treated as acquiring an interest for a consideration in money or money's worth if he becomes entitled to the interest as a result of transactions which include a disposition for such consideration (whether to him or to another person) of that interest or of other property.
      (6) Sub-paragraph (1) above shall not apply in respect of property if it was relevant property before it became (or last became) property to which paragraph 2 above applies and, by virtue of paragraph 1(1) or (5) above, tax was not chargeable (or, but for paragraph 1(2) or (8), would not have been chargeable) under section 102 of this Act in respect of it ceasing to be relevant property before becoming (or last becoming) property to which paragraph 2 above applies.
      (7) Sub-paragraph (1) above shall not apply in respect of property if—

      (a) before it last became property to which paragraph 2 above applies it was comprised in another settlement in which it was property to which that paragraph applies, and

      (b) it ceased to be comprised in the other settlement and last became property to which that paragraph applies in circumstances such that by virtue of paragraph 3(1) above there was no charge (or, but for paragraph 3(4), there would have been no charge) to tax in respect of it.

      (8) Sub-paragraph (1) above shall not apply unless the person who becomes beneficially entitled to the property is domiciled in the United Kingdom at the time when he becomes so entitled.

      Property leaving maintenance funds: rates of charge
      5.—(1) This paragraph applies where tax is chargeable under paragraph 2 above and—

      (a) the property in respect of which the tax is chargeable was relevant property before it became (or last became) property to which that paragraph applies, and

      (b) by virtue of paragraph 1(1) or (5) above tax was not chargeable (or, but for paragraph 1(2) or (8), would not have been chargeable) under section 102 of this Act in respect of it ceasing to be relevant property on or before becoming (or last becoming, property to which paragraph 2 above applies.

      (2) Where this paragraph applies, the rate at which the tax is charged shall be the aggregate of the following percentages—

      (a) 0·25 per cent. for each of the first forty complete successive quarters in the relevant period,

      (b) 0·20 per cent. for each of the next forty,

      (c) 0·15 per cent. for each of the next forty,

      (d) 0·10 per cent. for each of the next forty, and

      (e) 0·05 per cent. for each of the next forty.

      (3) In sub-paragraph (2) above "the relevant period" means the period beginning with the latest of—

      (a) the date of the last ten-year aniversary of the settlement in which the property was comprised before it ceased (or last ceased) to be relevant property,

      (b) the day on which the property became (or last became) relevant property before it ceased (or last ceased) to be such property, and

      (c) 13th March 1975,

      and ending with the day before the event giving rise to the charge.
      (4) Where the property in respect of which the tax is chargeable has at any time ceased to be and again become property to which paragraph 2 above applies in circumstances such that by virtue of paragraph 3(1) above there was no charge to tax in respect of it (or, but for paragraph 3(4) there would have been no charge), it shall for the purposes of this paragraph be treated as having been property to which paragraph 2 above applies throughout the period mentioned in paragraph 3(1).
      6.—(1) This paragraph applies where tax is chargeable under paragraph 2 above and paragraph 5 above does not apply.
      (2) Where this paragraph applies, the rate at which the tax is charged shall be the higher of—

      (a) the first rate (as determined in accordance with paragraph 7 below), and

      (b) the second rate (as determined in accordance with paragraph 8 below).

      7.—(1) The first rate is the aggregate of the following percentages—

      (a) 0·25 per cent. for each of the first forty complete successive quarters in the relevant period,

      (b) 0·20 per cent. for each of the next forty,

      (c) 0·15 per cent. for each of the next forty,

      (d) 0· ·10 per cent. for each of the next forty, and

      (e) 0·05 per cent. for each of the next forty.

      (2) In sub-paragraph (1) above "the relevant period" means the period beginning with the day on which the property in respect of which the tax is chargeable became (or first become) property to which paragraph 2 above applies, and ending with the day before the event giving rise to the charge.
      (3) For the purposes of sub-paragraph (2) above, any occasion on which property became property to which paragraph 2 above applies, and which occurred before an occasion of charge to tax under that paragraph in respect of the property, shall be disregarded.
      (4) The reference in sub-paragraph (3) above to an occasion of charge to tax under paragraph 2 does not include a reference to—

      (a) the occasion by reference to which the rate is being determined in accordance with this Schedule, or

      (b) an occasion which would not be an occasion of charge but for paragraph 3(4) above.

      8.—(1) If the senior is alive, the second rate is the effective rate at which tax would be charged, on the amount on which it is chargeable, under the appropriate Table if the amount were the value transferred by a chargeable transfer made by him on the occasion on which the tax becomes chargeable.
      (2) If the senior is dead, the second rate is (subject to subparagraph (3) below) the effective rate at which tax would have been charged, on the amount on which it is chargeable, under the appropriate Table if the amount had been added to the value transferred on his death and had formed the highest part of it.
      (3) If the settlor died before 13th March 1975, the second rate is the effective rate at which tax would have been charged, on the amount on which it is chargeable ("the chargeable amount"), under the appropriate Table if the settlor had died when the event occasioning the charge under paragraph 2 above occurred, the value transferred on his death had been equal to the amount on which estate duty was chargeable when he in fact died, and the chargeable amount had been, added to that value and had formed the highest part of it.
      (4) Where, in the case of a settlement ("the current settlement"), tax is chargeable under paragraph 2 above in respect of property which—

      (a) was previously comprised in another settlement, and

      (b) ceased to be comprised in that settlement and became comprised in the current settlement in circumstances such that by virtue of paragraph 3(1) above there was no charge (or, but for paragraph 3(4), there would have been no charge) to tax in respect of it,

      then, subject to sub-paragraph (5) below, references in subparagraphs (1) to (3) above to the senior shall be construed as references to the person who was the settlor in relation to the settlement mentioned in paragraph (a) above (or, if the Board so determine, the person who was the settlor in relation to the current settlement).
      (5) Where, in the case of a settlement ("the current settlement"), tax is chargeable under paragraph 2 above in respect of property which—

      (a) was previously comprised at different times in other settlements ("the previous settlements"), and

      (b) ceased to be comprised in each of them, and became comprised in another of them or in the current settlement, in circumstances such that by virtue of paragraph 3(1) above there was no charge (or, but for paragraph 3(4), there would have been no charge) to tax in respect of it,

      references in sub-paragraphs (1) to (3) above to the settlor shall be construed as references to the person who was the senior in relation to the previous settlement in which the property was first comprised (or, if the Board so determine, any person selected by them who was the settlor in relation to any of the other previous settlements or the current settlement).
      (6) Sub-paragraph (7) below shall apply if—

      (a) in the period of ten years preceding a charge under paragraph 2 above (the "current charge"), there has been another charge under that paragraph where tax was charged at the second rate, and

      (b) the person who is the settlor for the purposes of the current charge is the settlor for the purposes of the other charge (whether or not the settlements are the same and, if the settlor is dead, whether or not he has died since the other charge);

      and in sub-paragraph (7) below the other charge is refened to as the "previous charge".
      (7) Where this sub-paragraph applies, the amount on which tax was charged on the previous charge (or, if there have been more than one, the aggregate of the amounts on which tax was charged on each)—

      (a) shall, for the purposes of calculating the rate of the current charge under sub-paragraph (1) above, be taken to be the value transferred by a chargeable transfer made by the settlor immediately before the occasion of the current charge, and

      (b) shall, for the purposes of calculating the rate of the current charge under sub-paragraph (2) or (3) above, be taken to increase the value there mentioned by an amount equal to that amount (or aggregate).

      (8) References in sub-paragraphs (1) to (3) above to the effective rate are to the rate found by expressing the tax chargeable as a percentage of the amount on which it is charged.
      (9) For the purposes of sub-paragraph (1) above the appropriate Table is t he second Table in section 37 of the Finance Act 1975, and for the purposes of sub-paragraphs (2) and (3) above it is (if the settlement was made on death) the first Table in that section and (if not) the second.
      9. Where property is, by virtue of section 88(5) of this Act, treated as property in respect of which a direction has been given under section 87 of this Act, it shall for the purposes of paragraphs 5 to 8 above be treated as having become property to which paragraph 2 above applies when the transfer of value mentioned in section 88(5) was made.—[Mr. Brittan.]
      Brought up, read the First and Second time, and added to the Bill.

  Schedule 20

    REPEALS
    Amendment made: No. 155, in page 222, line 25, column 3, at end insert 'paragraph 16(5);'.—[Mr. Brittan.]
    Mr. Brittan: I beg to move amendment No. 156, in page 223, line 42, leave out 'paragraph 3' and insert 'paragraphs 3 and 4A'.
    Mr. Deputy Speaker: With this we may take Government amendment No. 157.
    Mr. Brittan: These are drafting amendments designed to bring together all the references to the material to be repealed in schedule 15 to the Finance Act 1980.
    Amendment agreed to.
    Amendments made: No. 157, in page 223, leave out line 48.
    No. 186, in page 224, line 11, at end insert—
    '1A. The repeal of paragraph 12(1) and (2) of Schedule 5 to the Finance Act 1975 has effect as from 1st January 1982.'.—[Mr. Brittan.]
    Mr. Brittan: I beg to move, That the Bill be now read the Third time.
    I understand that it would be for the convenience of the House if the right hon. Member for Stepney and Poplar (Mr. Shore) were to say a few words on this matter, and I similarly propose to do no more than that.
    Four months ago my right hon. Friend the Chancellor of the Exchequer presented his fourth Budget. The Bill represents the enactment of that Budget. The principal purpose of that Budget was to provide a financial framework which would enable British industry to recover, on the basis of the reduction in interest rates.
    On Second Reading I mentioned that the banks and building societies had announced their latest reductions in lending rates after the Budget. That was no accident. They wanted to see how the markets would take the Budget, and the markets reacted in the way that we have seen. There have since been further movements in the markets, reflected by a further fall in interest rates. It is by providing a responsible framework that we see reductions in interest rates.
    The Bill provides a package of measures designed to help and encourage both new and existing small businesses. I do not propose to set them out in detail. The measures are not designed to provide a major reflationary package, which would lead to the renewal of inflation. They are individually and collectively designed to assist British industry to recover. It is in that spirit that I commend the Bill to the House.
    1.35 pm
    Mr. Shore: On the occasion, keenly awaited, of the Third Reading of this important Bill,, we have come not to praise the Bill but to bury it. We voted against the
    1004
    Second Reading of what we consider to be an ugly Bill because of the gross inequalities reflected in its pages. Earlier today we drew attention to the appallingly bad treatment of unemployed people and their benefits and the great generosity accorded to those who pay capital gains and capital transfer tax.
    The ugliness of the Bill is reflected in the fact that it is part of an economic strategy to keep 3 million of our fellow citizens unemployed. We are anxious to dispose of the Bill. We tried to improve it in Committee, and I pay tribute to the efforts of my Treasury team and the members of the Committee who assisted. We have reached the Third Reading. The Bill has not been improved. I invite my friends to vote against it.
    Question put, That the Bill be now read the Third time:—
    The House divided: Ayes 274, Noes 183.

    Division No. 274]

    [1.37 am

    AYES

    Aitken, Jonathan

    Crouch, David

    Alison, Rt Hon Michael

    Dorrell, Stephen

    Ancram, Michael

    Douglas-Hamilton, Lord J.

    Arnold, Tom

    Dover, Denshore

    Aspinwall, Jack

    du Cann, Rt Hon Edward

    Atkins, Robert (Preston N)

    Dunn, Robert (Dartford)

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

    Durant, Tony

    Baker, Nicholas (N Dorset)

    Eden, Rt Hon Sir John

    Banks, Robert

    Eggar, Tim

    Beaumont-Dark, Anthony

    Elliott, Sir William

    Bendall, Vivian

    Eyre, Reginald

    Bennett, Sir Frederic (T'bay)

    Fairbairn, Nicholas

    Benyon, Thomas (A'don)

    Fairgrieve, Sir Russell

    Benyon, W. (Buckingham)

    Faith, Mrs Sheila

    Best, Keith

    Farr, John

    Bevan, David Gilroy

    Fell, Sir Anthony

    Biffen, Rt Hon John

    Fenner, Mrs Peggy

    Biggs-Davison, Sir John

    Finsberg, Geoffrey

    Blackburn, John

    Fisher, Sir Nigel

    Blaker, Peter

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

    Body, Richard

    Fletcher-Cooke, Sir Charles

    Bonsor, Sir Nicholas

    Fookes, Miss Janet

    Boscawen, Hon Robert

    Forman, Nigel

    Bottomley, Peter (W'wich W)

    Fowler, Rt Hon Norman

    Bowden, Andrew

    Fox, Marcus

    Boyson, Dr Rhodes

    Fraser, Peter (South Angus)

    Braine, Sir Bernard

    Gardner, Edward (S Fylde)

    Bright, Graham

    Garel-Jones, Tristan

    Brinton, Tim

    Glyn, Dr Alan

    Brittan, Rt. Hon. Leon

    Goodhart, Sir Philip

    Brooke, Hon Peter

    Goodhew, Sir Victor

    Brotherton, Michael

    Goodlad, Alastair

    Brown, Michael(Brigg & Sc'n)

    Gorst, John

    Bruce-Gardyne, John

    Gow, Ian

    Bryan, Sir Paul

    Grant, Anthony (Harrow C)

    Buchanan-Smith, Rt. Hon. A.

    Gray, Hamish

    Buck, Antony

    Greenway, Harry

    Budgen, Nick

    Griffiths, E.(B'y St. Edm'ds)

    Bulmer, Esmond

    Griffiths, Peter Portsm'th N)

    Burden, Sir Frederick

    Grylls, Michael

    Butcher, John

    Gummer, John Selwyn

    Cadbury, Jocelyn

    Hamilton, Hon A.

    Carlisle, John (Luton West)

    Hamilton, Michael (Salisbury)

    Carlisle, Kenneth (Lincoln)

    Hampson, Dr Keith

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

    Hannam, John

    Chalker, Mrs. Lynda

    Haselhurst, Alan

    Channon, Rt. Hon. Paul

    Hastings, Stephen

    Chapman, Sydney

    Havers, Rt Hon Sir Michael

    Churchill, W. S.

    Hawkins, Sir Paul

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

    Hayhoe, Barney

    Clark, Sir W. (Croydon S)

    Heddle, John

    Clarke, Kenneth (Rushcliffe)

    Henderson, Barry

    Colvin, Michael

    Heseltine, Rt Hon Michael

    Cope, John

    Hicks, Robert

    Corrie, John

    Higgins, Rt Hon Terence L.

    Costain, Sir Albert

    Hill, James

    Cranborne, Viscount

    Hogg, Hon Douglas (Gr'th'm)

    1005

    Holland, Philip (Carlton)

    Porter, Barry

    Hooson, Tom

    Price, Sir David (Eastleigh)

    Hordern, Peter

    Prior, Rt Hon James

    Howe, Rt Hon Sir Geoffrey

    Proctor, K. Harvey

    Howell, Ralph (N Norfolk)

    Raison, Rt Hon Timothy

    Hunt, David (Wirral)

    Rathbone, Tim

    Hunt, John (Ravensbourne)

    Rees, Peter (Dover and Deal)

    Irvine, Bryant Godman

    Rees-Davies, W. R.

    Jessel, Toby

    Renton, Tim

    Johnson Smith, Sir Geoffrey

    Rhodes James, Robert

    Jopling, Rt Hon Michael

    Rhys Williams, Sir Brandon

    Joseph, Rt Hon Sir Keith

    Ridley, Hon Nicholas

    Kellett-Bowman, Mrs Elaine

    Ridsdale, Sir Julian

    Kershaw, Sir Anthony

    Rifkind, Malcolm

    Kimball, Sir Marcus

    Rippon, Rt Hon Geoffrey

    King, Rt Hon Tom

    Roberts, M. (Cardiff NW)

    Knight, Mrs Jill

    Roberts, Wyn (Conway)

    Knox, David

    Rossi, Hugh

    Lang, Ian

    Rost, Peter

    Lawrence, Ivan

    Rumbold, Mrs A. C. R.

    Lee, John

    Sainsbury, Hon Timothy

    Lennox-Boyd, Hon Mark

    St. John-Stevas, Rt Hon N.

    Lester, Jim (Beeston)

    Scott, Nicholas

    Lewis, Kenneth (Rutland)

    Shaw, Giles (Pudsey)

    Lloyd, Peter (Fareham)

    Shelton, William (Streatham)

    Loveridge, John

    Shepherd, Colin (Hereford)

    Luce, Richard

    Shepherd, Richard

    Lyell, Nicholas

    Shersby, Michael

    Macfarlane, Neil

    Silvester, Fred

    MacGregor, John

    Sims, Roger

    MacKay, John (Argyll)

    Skeet, T. H. H.

    Macmillan, Rt Hon M.

    Smith, Dudley

    McNair-Wilson, M. (N'bury)

    Smith, Tim (Beaconsfield)

    McNair-Wilson, P. (New F'st)

    Speed, Keith

    Madel, David

    Speller, Tony

    Major, John

    Spicer, Jim (West Dorset)

    Marland, Paul

    Spicer, Michael (S Worcs)

    Marten, Rt Hon Neil

    Sproat, Iain

    Maude, Rt Hon Sir Angus

    Squire, Robin

    Mawby, Ray

    Stainton, Keith

    Mawhinney, Dr Brian

    Stanbrook, Ivor

    Maxwell-Hyslop, Robin

    Stanley, John

    Mayhew, Patrick

    Steen, Anthony

    Mellor, David

    Stevens, Martin

    Meyer, Sir Anthony

    Stewart, A. (E Renfrewshire)

    Miller, Hal (B'grove)

    Stewart, Ian (Hitchin)

    Mills, Iain (Meriden)

    Stokes, John

    Mills, Sir Peter (West Devon)

    Stradling Thomas, J.

    Miscampbell, Norman

    Tapsell, Peter

    Mitchell, David (Basingstoke)

    Taylor, Teddy (S'end E)

    Moate, Roger

    Temple-Morris, Peter

    Monro, Sir Hector

    Thomas, Rt Hon Peter

    Montgomery, Fergus

    Thompson, Donald

    Moore, John

    Thorne, Neil (Ilford South)

    Morris, M. (N'hampton S)

    Thornton, Malcolm

    Morrison, Hon C. (Devizes)

    Townend, John (Bridlington)

    Morrison, Hon P. (Chester)

    Townsend, Cyril D, (B'heath)

    Mudd, David

    Trippier, David

    Murphy, Christopher

    Trotter, Neville

    Myles, David

    van Straubenzee, Sir W.

    Neale, Gerrard

    Viggers, Peter

    Needham, Richard

    Waddington, David

    Nelson, Anthony

    Wakeham, John

    Neubert, Michael

    Waldegrave, Hon William

    Newton, Tony

    Walker, B. (Perth)

    Normanton, Tom

    Waller, Gary

    Onslow, Cranley

    Walters, Dennis

    Oppenheim, Rt Hon Mrs S.

    Ward, John

    Osborn, John

    Watson, John

    Page, John (Harrow, West)

    Wells, Bowen

    Page, Richard (SW Herts)

    Wells, John (Maidstone)

    Parkinson, Rt Hon Cecil

    Wheeler, John

    Parris, Matthew

    Whitney, Raymond

    Patten, John (Oxford)

    Wickenden, Keith

    Pattie, Geoffrey

    Wiggin, Jerry

    Pawsey, James

    Wilkinson, John

    Percival, Sir Ian

    Williams, D.(Montgomery)

    Pink, R. Bonner

    Winterton, Nicholas

    Pollock, Alexander

    Wolfson, Mark

    1006

    Young, Sir George (Acton)

    Tellers for the Ayes:

    Younger, Rt Hon George

    Mr. Anthony Berry and

    Mr. Carol Mather.

    NOES

    Adams, Allen

    Harrison, Rt Hon Walter

    Allaun, Frank

    Hart, Rt Hon Dame Judith

    Anderson, Donald

    Hattersley, Rt Hon Roy

    Archer, Rt Hon Peter

    Haynes, Frank

    Ashley, Rt Hon Jack

    Hogg, N. (E Dunb't'nshire)

    Ashton, Joe

    Holland, S. (L'b'th, Vauxh'll)

    Atkinson, N. (H'gey,)

    Homewood, William

    Bagier, Gordon A. T.

    Hooley, Frank

    Barnett, Guy (Greenwich)

    Howell, Rt Hon D.

    Barnett, Rt Hon Joel (H'wd)

    Hoyle, Douglas

    Benn, Rt Hon Tony

    Huckfield, Les

    Booth, Rt Hon Albert

    Hughes, Mark (Durham)

    Boothroyd, Miss Betty

    Hughes, Robert (Aberdeen N)

    Bray, Dr Jeremy

    Janner, Hon Greville

    Brown, Hugh D. (Provan)

    John, Brynmor

    Brown, Ron (E'burgh, Leith)

    Jones, Rt Hon Alec (Rh'dda)

    Buchan, Norman

    Jones, Barry (East Flint)

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

    Kaufman, Rt Hon Gerald

    Campbell, Ian

    Kerr, Russell

    Campbell-Savours, Dale

    Kilroy-Silk, Robert

    Canavan, Dennis

    Lamond, James

    Cant, R. B.

    Leadbitter, Ted

    Carmichael, Neil

    Leighton, Ronald

    Carter-Jones, Lewis

    Lewis, Ron (Carlisle)

    Clark, Dr David (S Shields)

    Litherland, Robert

    Clarke, Thomas C'b'dge,

    Lofthouse, Geoffrey

    A'drie

    McCartney, Hugh

    Cocks, Rt Hon M. (B'stol S)

    McDonald, Dr Oonagh

    Cohen, Stanley

    McElhone, Frank

    Coleman, Donald

    McGuire, Michael (Ince)

    Concannon, Rt Hon J. D.

    McKay, Allen (Penistone)

    Cook, Robin F.

    McKelvey, William

    Cowans, Harry

    MacKenzie, Rt Hon Gregor

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

    McNamara, Kevin

    Cryer, Bob

    McTaggart, Robert

    Cunliffe, Lawrence

    McWilliam, John

    Cunningham, Dr J. (W'h'n)

    Marks, Kenneth

    Davidson, Arthur

    Marshall, D (G'gow S'ton)

    Davies, Rt Hon Denzil (L'lli)

    Marshall, Dr Edmund (Goole)

    Davis, Clinton (Hackney C)

    Marshall, Jim (Leicester S)

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

    Martin, M (G'gow S'burn)

    Deakins, Eric

    Maxton, John

    Dean, Joseph (Leeds West)

    Maynard, Miss Joan

    Dewar, Donald

    Meacher, Michael

    Dixon, Donald

    Millan, Rt Hon Bruce

    Dobson, Frank

    Miller, Dr M. S. (E Kilbride)

    Dormand, Jack

    Mitchell, Austin (Grimsby)

    Douglas, Dick

    Morris, Rt Hon A. (W'shawe)

    Dubs, Alfred

    Morris, Rt Hon C. (O'shaw)

    Duffy, A. E. P.

    Moyle, Rt Hon Roland

    Dunnett, Jack

    Newens, Stanley

    Dunwoody, Hon Mrs G.

    O'Neill, Martin

    Eadie, Alex

    Palmer, Arthur

    Eastham, Ken

    Park, George

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

    Parry, Robert

    English, Michael

    Pavitt, Laurie

    Ennals, Rt Hon David

    Pendry, Tom

    Evans, Ioan (Aberdare)

    Powell, Raymond (Ogmore)

    Evans, John (Newton)

    Prescott, John

    Ewing, Harry

    Price, C. (Lewisham W)

    Faulds, Andrew

    Race, Reg

    Field, Frank

    Radice, Giles

    Flannery, Martin

    Rees, Rt Hon M (Leeds S)

    Fletcher, Ted (Darlington)

    Richardson, Jo

    Ford, Ben

    Roberts, Ernest (Hackney N)

    Forrester, John

    Roberts, Gwilym (Cannock)

    Foulkes, George

    Robertson, George

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

    Robinson, G. (Coventry NW)

    Freeson, Rt Hon Reginald

    Rooker, J. W.

    Garrett, John (Norwich S)

    Ross, Ernest (Dundee West)

    Garrett, W. E. (Wallsend)

    Rowlands, Ted

    Graham, Ted

    Sever, John

    Hamilton, James (Bothwell)

    Sheerman, Barry

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

    Sheldon, Rt Hon R.

    Hardy, Peter

    Shore, Rt Hon Peter

    1007

    Short, Mrs Renée

    Walker, Rt Hon H. (D'caster)

    Silkin, Rt Hon J. (Deptford)

    Welsh, Michael

    Silverman, Julius

    White, Frank R.

    Skinner, Dennis

    White, J. (G'gow Pollok)

    Soley, Clive

    Whitehead, Phillip

    Spearing, Nigel

    Whitlock, William

    Spriggs, Leslie

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

    Stoddart, David

    Wilson, Gordon (Dundee E)

    Stott, Roger

    Wilson, William (C'try SE)

    Strang, Gavin

    Winnick, David

    Straw, Jack

    Woodall, Alec

    Summerskill, Hon Dr Shirley

    Woolmer, Kenneth

    Thorne, Stan (Preston South)

    Wrigglesworth, Ian

    Tilley, John

    Wright, Sheila

    Tinn, James

    Young, David (Bolton E)

    Torney, Tom

    Urwin, Rt Hon Tom

    Tellers for the Noes:

    Varley, Rt Hon Eric G.

    Mr. Derek Foster and

    Wainwright, E. (Dearne V)

    Mr. George Morton

    Question accordingly agreed to.
    Bill read the Third time, and passed.

  FOREIGN AFFAIRS
  Ordered,
  That Mr. Bowen Wells be discharged from the Foreign Affairs Committee and Mr. Jim Lester be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

  SOCIAL SERVICES
  Ordered,
  That Sir Brandon Rhys Williams be discharged from the Social Services Committee and Mrs. Angela Rumbold be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

  TREASURY AND CIVIL SERVICE
  Ordered,
  That Mr. Tim Eggar be discharged from the Treasury and Civil Service Committee and Mr. John Browne be added to the Committee.—[Mr. Philip Holland, on behalf of the Committee of Selection.]

  Growth Area (Mid-Sussex)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. David Hunt.]
  1.48 am
  Mr. Tim Renton: I wish to call the attention of the House to the urgent need to remove the growth area label from Mid-Sussex. That label stems from the strategic plan for the South-East that was approved by the Government in 1971.
  When I became the parliamentary candidate for Mid-Sussex in 1972, one of my first interests stemmed from the certainty that the growth area label was a mistake. In the light of all the development that has taken place in the past decade, I am even more convinced than I was 10 years ago that it is a mistake.
  I apologise for bringing this urgent matter to the attention of my hon. Friend the Under-Secretary of State for the Environment at this late hour. However, I am delighted to see two neighbourly colleagues in their places, my hon. Friends the Members for East Grinstead (Sir G. Johnson Smith) and for Horsham and Crawley (Mr. Hordern). Also in his place is my hon. Friend the Member of Eastbourne (Mr. Gow). Their presence emphasises the fact that we in Sussex feel about this issue.
  I appreciate that it is thoroughly unusual to ask for a growth area label to be removed from a part of the country. We in Sussex have, like others, suffered from increasing unemployment, but in West Sussex the unemployment figures are only about 7 per cent. That is much lower than the figure in other areas. We have had so much house-building in the past 20 years that we now need a breathing space in which we can as a community absorb the changes and provide the necessary facilities for the many families and firms that are already in our part of the country. We must look to local firms to absorb school leavers and the unemployed with their natural growth rather than have the Government encourage other major firms to come into the area from elsewhere in Britain.
  If you were fortunate enough, Mr. Deputy Speaker, to drive down the M23 on your way to Brighton, you would, when the M23 ceases, drive along the A23 for nearly 20 miles through my constituency. You would go first through the beautiful country of the High Weald, which is now an area of outstanding natural beauty. On your left would be the garden of Nymans, a National Trust property. You would then pass the Ardingly reservoir. On your left would be Balcombe viaduct. After Haywards Heath you would see the South Downs. In that lovely countryside you might wonder where all the growth is to be found about which I am speaking.
  The drive down the A23 through beautiful countryside would conceal the incredible rate of growth that we have had in Mid-Sussex in recent years. Between 1971 and 1981 the population of the United Kingdom increased by 0·5 per cent. The population of Mid-Sussex increases by 18·5 per cent. Burgess Hill has been the fastest growing town in West Sussex, growing from 7,000 people in 1951 to about 22,000 souls, and still rising in 1982.
  In many ways the growth is not surprising. To the north of us we have Crawley, a new town, to which many of my constituents travel for their daily work. Others go south to Brighton. Again, to the north there is Gatwick airport, which is growing rapidly. There is the possibility of a second terminus there, about which many of us have

  1009
  serious worries and reservations. To the south there are the Channel ports, including Newhaven. When trains run, which is not happening at present, we have a very good train network to London which is used by many commuters.
  It is not surprising that with all these natural facilities we should have had a substantial rate of growth. However, what concerns my constituents, myself and the Mid-Sussex district council, which thoroughly supports the need to remove the growth area label, is not merely the innate growth of populations and firms that are already in the South-East but the growth that has come to us from outside—the new firms, with the attendant families, which have moved into our area.
  In Mid-Sussex, we already see a great shortage of land for industrial development. It was announced by the council last weekend that it would release some 10 acres for new industrial development in Burgess Hill, and the view was that it would be snapped up straight away. In Mid-Sussex, we do not see anything like the number of workshops and the factory space for small companies which are starting that we should like to see.
  The West Sussex structure plan has favoured continued new building in Mid-Sussex. The Mid-Sussex district council would much prefer stretching the present land allocation for house building from 1991–1996. But the county council suggests that another 9,000 dwellings should be built between 1991 and 1996 in Central Sussex, of which at least 5,000 would be in Mid-Sussex.
  A recent survey showed that only 28 per cent. of new houses in Mid-Sussex were being bought by local residents. All the others were going to newcomers to the area. This stresses the point that so much of the building and development that has gone on is not for firms and families already with us but for others attracted into the area.
  It is on that basis that I ask for the growth area label to be removed. It is obvious that this tremendous pace of house building has not been matched by an equivalent development of social and community facilities. We have not had the right amount of development in terms of schools, health care, recreation or open space. In that context, I quote from a recent report that was attached to the Burgess Hill local plan. It was prepared by the area office of the West Sussex county council social services department. It says that two new estates,
  "Laylands Park and Folders Lane (Burgess Hill) totally lack facilities and minor research done with developers in response to community generated needs highlighted that there are no community resources planned. The requests from this area were for facilities to develop a Mother and Young Group, a pre-School playgroup, Brownies, Guides, Scouts and Cub Scouts. These needs are directly related to the needs of the range of families moving into the area. During discussions we became aware of the tremendous isolation and loneliness that many of the young mothers were experiencing … Feedback from social workers at the Child Guidance Clinic, Cuckfield Hospital and area office showed that this problem was increasing on the new estates".
  Recently, the West Sussex county council decided to sell three acres of open space at Marie Place in Burgess Hill. The idea was that the land would be sold and used for house building. That decision caused an outburst of local fury. Those three acres are not very well located in the town, but they are some of the small amount of recreational space available in the centre of the town. The news that the land was to be sold for house building provoked an indignant reaction from my constituents.
  1010
  It has a very bad effect on a community when families move in and spend a great deal of money on their new houses, having taken on mortgages which are often too large for their budgets, only to find that there is no village atmosphere, no village hall and no community building. It is from circumstances of that kind that the family problems that I have descried arise.
  In Mid-Sussex, we have had a continuing fight on our hands to keep the precious green gaps which separate villages and tow as—which separate Balcombe from Haywards Heath, Haywards Heath from Hurstpierpoint, and Hurstpierpoint from Keymer and Hassocks. If growth continued over the next decade at the pace at which it has proceeded in the past decade, all those green gaps would disappear, one by one.
  It is easy for the Department of the Environment to say that with the development of housing we should be spending more on community facilities, new playing fields and so on, but my Conservative-controlled district council has always levied rates prudently. It currently levies a rate of only 14·3p and all that goes on the basic services, such as refuse collection, which automatically expand as houses are built and new families move in. There are no great sums available for capital projects, particularly as the council has tried to hold down rates in cash terms.
  The Department cannot have its financial caution cake, which I respect, and eat that cake by telling a prudent council that it should spend more on recreational and leisure facilities.
  I must ask my hon. Friend the Under-Secretary of State for the Environment immediately to review the regional strategy for our area. Such a review is overdue and essential and it is also clear that West Sussex county council should be asked to be much more flexible over the county structure plan, so that not all the development that takes place in West Sussex is dumped in our part of the county.
  Surrey must take its share of development and, as Gatwick airport is developed, the green belt in Surrey should not be sacrosanct.
  Unless we have a review of the regional strategy and the growth area label is removed, we shall see within a generation urban sprawl all the way from Crawley to Brighton. The mavellous countryside that I mentioned earlier will be lost. We need a breathing space to accommodate what is already there.
  I often think of my part of Sussex as potentially the Silicon Valley of Western Europe. The many high technology companies there are expanding and exporting well to Western Europe. But we cannot have chips—even silicon chips—with everything, and unless we have severe restraint now, the famous Sussex by the sea will become Sussex under the sea—submerged by people, concrete, airports and factories. I do not believe that that is what the people in Sussex want.
  2.3 am
  Sir Geoffrey Johnson Smith: I congratulate my hon. Friend the Member for Mid-Sussex (Mr. Renton) on raising this important matter and I am grateful to him for allowing me to take part in the debate.
  My constituency in East Sussex adjoins that of my hon. Friend, and his comments about Mid-Sussex apply with equal force to some parts of East Sussex. For example, one of my towns also rose in great wrath when it was suggested that it could accommodate many thousand more homes

  1011
  without the proper schools and with no hope of the proper social infrastructure being allowed. There are also totally inadequate road and public transport systems.
  All in all, it is ludicrous to think that the area should be despoiled. We have a natural growth which will make it increasingly difficult for us to house our own people, but I should like to look at the issue from the view point of land use and farmers.
  Hundreds of thousands of acres of virgin farm land are developed for industry and housing, while hundreds of thousands of acres of land in our big cities is not properly used. Much of it is derelict and it is ripe for such development. I do not want to talk about green belts being despoiled but I journey through south London and I see the land there which is not being properly used. If we want to provide jobs for the people of inner and outer London, who really need the jobs, that is where much of the development should take place rather then turning some of the beautiful countryside which is used for valuable farming purposes into a new industrial slum stretching from London to the south coast. We should not have our countryside murdered. That is why I support my hon. Friend.
  2.5 am
  Mr. Peter Hordern: I am grateful to my hon. Friend the Member for Mid-Sussex (Mr. Renton) for raising this important matter. The Cuckfield and Crawley area has been designated a growth area for some years in the original regional structure plan. Should not the whole concept of the growth area now be reviewed? Not only was it started many years ago but circumstances have changed enormously since then, in the sense that the population of London is fast dwindling and the growth in our area should no longer be appropriate when one thinks that the Docklands board and other development area authorities are trying to attract people back to London. The whole concept of the growth area should be reviewed. I fully support what my hon. Friend has said about that.
  I echo what my hon. Friend has said about the importance of preserving the character of our countryside, in his area and in mine. He talked about the gaps between the towns and villages and how necessary it is to preserve them. Perhaps the most important is that narrow gap that separates Crawley new town and Horsham, which must be preserved at all costs.
  I have only one slight difference with my hon. Friend. If the county council is to review its structure plan in relation to the growth plan, that has implications for Horsham council and other councils throughout West Sussex. The Cuckfield and Crawley area having been designated a growth area—Crawley is part of my constituency—I do not believe that growth should be foisted on to other equally desirable parts of West Sussex. But much the most important part of our care, with which my hon. Friends the Members for Mid-Sussex and East Grinstead (Sir G. Johnson Smith) agree, is that the regional structure plan should be reviewed once more.
  2.7 am
  Mr. Ian Gow: There can rarely have been an Adjournment debate in which a trio of such distinguished Sussex Members have participated.
  Mr. Hordern: A quartet.
  Mr. Gow: No. My hon. Friend should not place me in the category of distinguished Members from Sussex. I support most strongly the speech of my hon. Friend the Member for Mid-Sussex (Mr. Renton). It is rather bizarre that my hon. Friend the Under-Secretary of State for the Environment should represent a Yorkshire constituency, but I am sure that my three hon. Friends will join me in inviting him to visit us in Sussex.
  Mr. Hordern: Soon.
  Mr. Gow: My hon. Friend the Member for Horsham and Crawley is right when he says that it should be soon, by which he means before the end of this month.
  We should like the Under-Secretary to visit our constituencies, when he would be able to see for himself the truth of what my hon. Friend the Member for Mid-Sussex (Mr. Renton) described. All over our county we see that from which we have suffered for so long. We see those involved in central Government seeking to impose their presumed superior wisdom over those who live, move and have their being in the constituencies. I am sure that when the Under-Secretary of State replies he will acknowledge the truth, that the man in Whitehall does not always know best.
  2.9 am
  The Under-Secretary of State for the Environment (Mr. Giles Shaw): I rise fearful of the fact that behind me there are four Horsemen fearing the Apocalypse of uncontrolled growth in the great and good county of Sussex. I hope, however, that what I have to say will give some comfort to my hon. Friends in the line of reasoning that they have so eloquently and jointly presented. In the relatively short time available, I should like to deal with the issues raised by my hon. Friend the Member for Mid-Sussex (Mr. Renton).
  My hon. Friend will no doubt remember that the Government's views on the regional strategies were set out in a letter from my right hon. Friend the Secretary of State to Lord Nugent in August 1980. That letter set out strategic guidance. The letter is substantially an update of the original regional strategy, to which my hon. Friend referred, laid by a previous Administration some years ago. It is important for my hon. Friends to understand that the regional strategy set some years ago is not of itself the route by which all future planning should flow.
  My hon. Friend the Member for Shipley (Mr. Fox), when he was Under-Secretary of State, answered a question from my hon. Friend the Member for Melton (Mr. Latham) saying:
  "We are not bound by the regional strategies of previous Governments but we shall take note of them before approving structure plans and we shall in due course arrange for the provision of whatever new or amended regional guidance may be needed as a framework for structure planning."—[Official Report, 11 July 1979; Vol. 970, c. 230.]
  That view still holds. The position of Sussex has been largely determined by the strategic regional planning of a previous Administration. My right hon. Friend's letter of 7 August 1980 made it clear that he supported the principle of making provision in structure plans for concentrating substantial new developments in identified locations. This principle has been carried through in the approval of some growth areas in the existing structure plans. I take up the point made forcibly by my hon. Friend the Member for

  1013
  Horsham and Crawley (Mr. Hordern) and also by my hon. Friend the Member for East Grinstead (Sir. G. Johnson Smith) about the role of London being so crucial in the development pressures in counties such as Sussex.
  In the same letter my right hon. Friend said:
  "New and expanding town schemes have been scaled down or brought to an end. More specifically, London is no longer regarded as a source of population and jobs for other areas. Favourable conditions must be created in London so that private individuals and firms will once more choose to live and invest there."
  That has been followed by the creation of the Docklands urban development corporation in London, the enterprise zone, the Land Register and all the other measures. We are determined to recycle urban land and to end the automatic assumption that green field site development is the only way to cater for growth.
  In the letter of August 1980, my right hon. Friend stated:
  "This Government firmly supports rural conservation, although the degree of restraint must depend on local circumstances. There should continue to be the strongest restraint on development in the Metropolitan Green Belt … Structure plans also set out other approved policies to protect and enhance the region's countryside."
  The Government share the commitments that my hon. Friends the Members for Mid-Sussex, for East Grinstead, for Horsham and Crawley and for Eastbourne (Mr. Gow) have so eloquently expressed.
  I should like to deal with three aspects raised by my hon. Friend the Member for Mid-Sussex which were also contained in the document he supplied to my Department from the Mid-Sussex district council. I take up the point that the regional strategy is out of date and needs reviewing as a matter of urgency. The Government are not bound by the regional strategies of their predecessors. Nor do we believe regional strategies to be an essential part of the planning framework though, from time to time, in some regions, strategic guidance may be called for. The status of the regional strategy is now that of useful historic source material which, as time goes by, will become increasingly out of date at the local level.
  The Government's current regional strategic guidance is contained in my right hon. Friend's letter to Lord Nugent. It endorses the concept of growth areas but it does not presuppose the designation of any particular area as a growth area. The need to withdraw Burgess Hill's status as a growth area in the strategy does not, therefore, arise.
  My right hon. Friend the Secretary of State's consideration so far of the appropriate level of growth in the Crawley-Burgess Hill area was reflected in his approval of the West Sussex and Surrey structure plans. Further growth may need to be catered for to continue to meet local needs, including the possible consequences of a second terminal at Gatwick, if it is permitted. Whether Crawley or Burgess Hill should remain a growth area in the structure plan—and at what level—is therefore a matter for debate and discussion in the processes leading to the approval of any future alterations to the West Sussex structure plan.
  My hon. Friend referred to the possibility of the Surrey towns, particularly Horley, taking their full share of growth. The Surrey structure plan, approved in April 1980, extended the metropolitan green belt over most of Surrey and, though allowing for growth in the towns within the green belt to meet local needs, applied a general policy of restraint. We attach, of course, great importance to the continued protection of the green belt around
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  London. I am sure that all my hon. Friends will endorse that. The green belt did not include Horley and my right hon. Friend, when approving the structure plan, indicated that there was some scope for growth around Horley, and that part of Surrey within the Crawley-Burgess Hill area, but it should be limited and should be on a scale appropriate to satisfy locally generated demand.
  Clearly this area will have to make a contribution to meeting future housing demand arising from Crawley-Gatwick, to which it is so closely associated. When West Sussex county council reviews its structure plan on a matter such as this it will necessarily consult its neighbouring planning authorities, including Surrey county council, and this will be the appropriate forum for it to discuss the point that my hon. Friends have made about the relationship between Sussex growth and Surrey taking its share.
  My hon. Friend the Member for Mid-Sussex also referred to the sense of injustice that his constituents feel arising from the fact that a disproportionate amount of growth should be directed towards Mid-Sussex and that this will cause damage to the lovely towns of that area and its beautiful countryside. I well understand those anxieties.
  Any proposals to change the policies on the scale and location of development included in the West Sussex structure plan will, of course, need to be approved by my right hon. Friend before they become part of the statutory development plan. My hon. Friend will appreciate that my right hon. Friend the Secretary of State is obviously not bound in any way by the discussion document that I understand has been prepared by the West Sussex county council.
  Before any such proposals are approved they will need to go through the statutory procedures, including public consultation. That process ensures that all views, such as those expressed tonight, will be taken into account. I emphasise that it will be open to the Mid-Sussex district council to bring forward any evidence it wishes at the regional, sub-regional or local level at the examination in public, as will be the case for the county council.
  In answer to the points made by my hon. Friend, the Government are of course concerned that adequate supplies of housing land are made available in suitable locations. It will no doubt be necessary for further provision to be made in West Sussex. But I should like to reassure my hon. Friend that we have no preconceived ideas about the scale of this or its location. We are conscious of, and indeed appreciate, the effort that has been made by Mid-Sussex district council and the important contribution that it has made, not only to meeting the needs of its own area but to meeting the needs of other parts of the county and indeed the region.
  I hope that I have been able to reassure my hon. Friends tonight that when my right hon. Friend comes to consider any proposals put to him by West Sussex county council he will listen very carefully to all the arguments with an open mind.
  I also reassure my hon. Friend that the regional strategy was never more than an advisory, and was not a mandatory, document. At the outset its advice should have been heeded, but its influence has diminished over time. As a consequence, following my right hon. Friend's letter, it is not necessary for it to be reviewed as has been suggested. As I said earlier, the letter endorses the concept of growth areas, but it does not presuppose the designation of such areas. It seems to me that a review of the structure

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  plan for West Sussex, and possibly Surrey, might be the better route by which to resolve the local objections that my hon. Friends have raised and to reduce the local
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  anxieties that my hon. Friends the Members for Mid-Sussex, Horsham and Crawley, East Grinstead and, above all, Eastbourne have skilfully drawn to the attention of the House.
  Question put and agreed to.
  Adjourned accordingly at eighteen minutes past Two o' clock.

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

Royal Assent
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Iron and Steel Act,

Food and Drugs (Amendment) Act,

Civil Jurisdiction and Judgments Act,

Taking of Hostages Act,

Supply of Goods and Services Act,

Local Government (Miscellaneous Provisions) Act,

Firearms Act,

Local Government Finance Act,

Cinematograph (Amendment) Act,

Forfeiture Act,

Copyright Act 1956 (Amendment) Act,

Feltham Station Area Redevelopment (Longford River) Act.

UN World Food Council: Mexico Conference
Lord Brockway: 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 conclusions were reached at the conference of the United Nations World Food Council in Mexico, and what contribution the United Kingdom representative made to the proposals.
Lord Skelmersdale: My Lords, as the conclusions are rather long, I have placed a copy in the Library of your Lordships' House. The council examined in turn the pursuit of national food policies and strategies in developing countries, direct national and international measures to help eradicate hunger, the African food problem and the role of international agencies, and issues of world food security and trade. Britain is not this year a member of the council, but our representative was present as an observer and took part in formulating the common Community position, both for general debate and for the preparation of the conclusions.
Lord Brockway: My Lords, I thank the Minister for that very full reply, and I assure him that I shall read with great interest the Statement in the Library. May I ask him whether, in view of the need, he thinks that the conclusions are adequate? Did he note the statement of the Secretary-General of the United
126
Nations at the council meeting, that shortage of food is now more critical than it has been since 1970, and that in Africa the average person today eats 15 per cent. less than he did a decade ago? Will the noble Lord agree that there are two main problems? One is the maldistribution of food, as illustrated by the fact that America is reducing production because the poorer people cannot buy. The second problem concerns the absence of agricultural development in the rural countries, as illustrated by the fact that only nine of the 61 countries which signed the FAO Rome Agreement some years ago have increased production?
Lord Skelmersdale: My Lords, I am satisfied with the conclusions of the conference mentioned in the noble Lord's Question. However, I would point out that the object of the conference, which was set up in 1974, following the World Food Conference, was to provide a political forum where agriculture Ministers could, and should, meet annually to review the world food situation. Both of the points to which the noble Lord has drawn attention find expression in the communiqué concerning the conclusions and recommendations to which the Question refers. I most certainly agree with the noble Lord that these are the two most serious problems facing the world today.
The Earl of Lauderdale: My Lords, will not my noble friend agree that the rise of world hunger has followed startlingly the withdrawal of colonial power from a great part of the globe?
Lord Skelmersdale: My Lords, that may be a fact, but I do not think it is the reason here.
Lord Taylor of Gryfe: My Lords, will the noble Lord agree that the shortage referred to is a shortage not of food, but of credit, and that to make some impact in reducing interest rates might make it possible for the purchasing countries to buy food and to feed their people?
Lord Skelmersdale: Yes, of course, my Lords; I accept that there is currently a snarl-up in world interest rates, but I think that the most important thing is to give sufficient aid and instruction to enable the countries to grow their own food. This is probably the key to the whole problem.
The Earl of Lauderdale: My Lords, will not my noble friend agree that the aid should include encouragement to white colonials to remain and to help the oncoming countries?
Lord Skelmersdale: My Lords, that is a matter for the Governments and countries concerned.
Lord Oram: My Lords, is not the proposal on grain reserves one of the most important results of the conference, and will Her Majesty's Government seek to take an initiative in this matter? For instance, I gather from the noble Lord's original Answer that at the conference our delegate played a part within the Community's delegation. Will the Government continue to do that, since is it not the case that in terms of grain production the European Community

127
is much better placed to take an initiative in the matter of grain reserves than we would be, as a single country, and as a considerable importer of food?
Lord Skelmersdale: Yes, my Lords; certainly the Government attach great importance to our multilateral forms of aid, whether they be of grain or anything else, through our membership of the Economic Community. Regarding the special grain reserves to which the noble Lord referred in the first part of his supplementary question, I would say that this idea was noted with appreciation, but many questions were then raised, and have since been raised, about its economic and technical feasibility. The conclusions of the conference asked the director to do more work on it with other agencies concerned, and to bear in mind the related questions involved. In fact, it was agreed that there was a case for building up grain reserves in developing countries as part of their own stocks and production policies, as well as for protection against market fluctuations. The United Kingdom Government's view is that another thing which should go hand in hand with this is the solving of transport difficulties, which tend to preclude regional stores.
Lord Brockway: My Lords, may I ask a rather different question, of which I gave belated notice? May I ask the noble Lord this question: Arising from the meeting of the World Food Council, is it not desirable that there should be some simplification and co-ordination of the United Nations bodies on this subject? At present there are five different bodies, often rivals. Would it not be a good idea if the economic department of the United Nations sought to find some co-ordination of their activities and the ending of the bureaucracy which is present in many of them?
Lord Skelmersdale: My Lords, I must note with some measure of approval what the noble Lord, Lord Brockway, has said, and point out that the World Food Council was set up to serve as a co-ordinating mechanism to provide overall, integrated and continuing attention for the successful co-ordination and follow-up of policies concerning food production, et cetera. Certainly one of the things with which it could well concern itself is the rationalisation of the bodies to which the noble Lord refers.
Lord Seebohm: My Lords, would the noble Lord agree that the developing countries constitute the world's greatest reservoir of food production, that each country therefore has an obligation to pursue a food strategy which has a realistic chance of meeting basic internal needs, and that international aid should be conditional upon its being used primarily for this purpose?
Lord Skelmersdale: My Lords, many of these countries about which we are talking this afternoon have enormous potential, but without help they are unable to realise this potential. That, I think, probably answers the noble Lord's question.

Government Forms
2.45 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 the number of Government forms which businesses are required to fill in has decreased since publication of the White Paper Administrative Forms in Government published on 17th February 1982 (Cmnd. 8504).
The Lord Privy Seal (Baroness Young): My Lords, in the White Paper the Government announced changes based on looking at 93 types of forms which mean 5 million fewer forms and leaflets for the public and businesses each year. Departments are now working on arrangements for improving the control and design of all forms. I expect that we shall be able to drop some, and we intend to make those which cannot be dropped easier and quicker to complete. That will save business time.
Baroness Sharples: My Lords, I thank my noble friend for that encouraging reply, but I understand that there are 2,000 million forms in existence, and if we do them at the rate of 5 million a year I think it will take 100 years. Would my noble friend please assure me that the forms which are sent out are somewhat simpler than in the past, and easier to understand, and also that there is room on which to write the answers?
Baroness Young: My Lords, my noble friend has clearly read the White Paper well; it has indeed been identified that there are something like 2,000 million forms. This includes not only forms sent out to be filled in for particular information but, of course, follow-up letters as well. It is an enormous task, and departments are now making arrangements to review all their forms to see which ones can be dropped and to give priority to those forms which have the widest distribution and are the most important.
Lord Leatherland: My Lords, would the noble Baroness agree that the return for income tax purposes which many citizens have to make is one which might very well be dropped?
Baroness Young: My Lords, I fear it might be replaced by another, even if it was a simpler one.
Lord Bruce of Donington: My Lords, is the noble Baroness aware that part of the complication that arises on the drafting of certain of the forms comes from the complexity of the innumerable regulations that are issued by Government departments; and will she pay attention, please, to the necessity for simplifying a good number of the regulations with which the country is inflicted at the present time?
Baroness Young: My Lords, I would agree with the noble Lord, Lord Bruce, that it is the complexity of some legislation which makes the design of forms most difficult; but the House may like to know that the

129
leaflet entitled Filling in your VAT Returns in fact won a Plain English award last December from the National Consumer Council and the Plain English Campaign. So it is possible.
Lord Elwyn-Jones: My Lords, would the noble Baroness the Minister say what the plain English was?
Baroness Young: My Lords, I should be happy to send the noble and learned Lord one of the forms.
Viscount St. Davids: My Lords, will the noble Baroness ensure that her most praiseworthy efforts do not result in a long and complicated form sent out to all firms asking them which forms they want abolished or altered?
Baroness Young: My Lords, in fact we are consulting businesses on the type of form; and, depending on the particular business and the particular form, we would of course consult appropriate representatives of that business in order to obtain their advice on the form in regard to both its intelligibility and its ease of completion.

British Rail and Productivity
2.49 p.m.
Lord Orr-Ewing: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what progress has been made in implementing the six productivity items agreed between the rail unions and the British Rail Board a year ago.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, on the six productivity measures agreed last year between the railway unions and the British Railways Board, little substantive progress has been made, even though the board paid for these in advance. The unions have accepted the concept of open stations, and some pilot schemes are now in operation. The National Union of Railwaymen and the Transport Salaried Staff Association have accepted and are working flexible rosters, and are thereby enjoying the financial and social benefits which they bring. The remaining measures have not been implemented. In particular, the ASLEF Executive remain stubbornly opposed to flexible rostering for train drivers, against the obvious best interests of their membership.
Lord Orr-Ewing: My Lords, while thanking my noble friend for that rather disappointing reply, may I ask whether he is aware that Mr. Buckton, on behalf of ASLEF, frequently asks that more investments should be made in the railways? There is no one in Parliament who does not wish to see an efficient railway system. Can my noble friend say how much money has been invested in British Rail since the May 1979 election? Is not it rather unfortunate that with the electrification of the line from Bedford to St. Pancras,
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all the new rolling stock which has been supplied, costing £150 million, cannot be used because ASLEF have refused to operate these modern methods?
Lord Bellwin: My Lords, of course on the latter point it is disappointing; and some might say it is more than disappointing. It has all sorts of implications. So far as the statistics are concerned, £1,500 million have been invested since 1979. Since 1976, that figure is £3 billion.
Lord Underhill: My Lords, would not the Minister agree that this type of Question, in the middle of what could be a disastrous industrial dispute, is hardly helpful to achieving settlement? Can the Minister not agree that over the last 10 years the trade unions in the railway industry have a great record of improved productivity? Can the Minister indicate how much has already been saved by the productivity measures, how much will be saved by flexible rostering on the locomotives only and how much has already been lost by this disastrous strike? Would it not be better if the Minister—not this Minister, but the Secretary of State—instead of making threatening speeches did something about trying to settle the strike which could have been done on an agreement which was reached on experimentation with alternative flexible rostering?
Lord Bellwin: My Lords, I think the noble Lord has put to me about ten supplementary questions in one. I am at pains always in answering Questions to be as factual as I can and not to exacerbate situations which are very sensitive. Nevertheless, I think that in the interest of giving a few facts to answer the points that the noble Lord raises, I should say that the board's figures show that productivity between 1974 and 1979 rose by 5 per cent. and between 1979 and 1981 fell by I per cent. The noble Lord asked whether the Secretary of State should not (if you like) step in. I think the answer to that must be that the Government have no intention of intervening in what is a matter for the Railways Board to settle with its workforce. I think the noble Lord was less than his usual evenhanded self when he suggested that it is in any way the responsibility of British Rail for not being willing to talk about this matter when, having made their offer to do precisely that, it was ASLEF who called a strike. In those circumstances, there can be no meaningful discussions and negotiations; so that it is not too helpful.
Lord Boyd-Carpenter: My Lords, whether my noble friend's reply be helpful or not, is it not at any rate more helpful than the recent intervention by the Leader of Her Majesty's Government's Opposition?
Lord Bellwin: My Lords, that certainly has not been helpful at all; I agree with my noble friend on that. It is not surprising that the leader of the National Union of Railwaymen has expressed his own dismay at that intervention.
Lord Avebury: My Lords, bearing in mind what was said about sensitivity in this issue, may I ask whether there is not some misunderstanding about what hours actually would be worked under the flexible

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rostering proposed by the Railways Board; and is there not some residual fear among many railwaymen that they will be asked to vary their starting and finishing time by such wide margins that it will destroy their social life? If this is incorrect, could not some statement of the British Railways Board be published to show what the effect will be on the average railwayman?
Lord Bellwin: My Lords, perhaps it would be helpful to say that the ASLEF membership feared the very point that the noble Lord makes; but I would have to go on to say that the report of the Railway Staff National Tribunal proposed a series of safeguards to protect the interests of the drivers and to allay their fears; and that the board accepted these safeguards in full. It is worth pointing out that over 80 per cent. of British Rail guards are now working flexible rostering and that with only one exception all other European railways are successfully and fully operating flexible rostering.
Lord Underhill: My Lords, I asked the noble Lord whether he could indicate how much would be saved per year by adopting flexible rostering for the locomotive men. If the Minister does not have the answer, perhaps he could write to me, because ASLEF have claimed that the saving would be only £2 million a year.
Lord Bellwin: My Lords, I am able to give an indication of that. It is that the benefits which would flow from the introduction of flexible rostering and associated items total over £35 million.
Baroness Burton of Coventry: My Lords, may I ask the Minister—although I think he has already answered it in commenting on the supplementary question put by the noble Lord, Lord Underhill—whether, on the question of alternative flexible rostering, I am not right in remembering that this proposal was put forward by British Rail, that it was totally ignored by ASLEF for a period of, I believe, six days and ASLEF then replied with a national strike? We are now told by Mr. Ray Buckton on television that ASLEF wished to undertake flexible rostering and that it is the Railways Board who are being obdurate. Would the Minister agree that if that is correct, we might have it underlined and got over to the general public?
Lord Bellwin: My Lords, so far as I am aware, what the noble Baroness has said is correct. I think the public are not being starved of comment and information about what is happening. I am sure they will come to their own conclusions, and they would probably be the ones the noble Baroness mentioned.
Lord Tanlaw: My Lords, could the noble Lord give an undertaking that once this dispute has been settled there will be no further delay in the investment programme of railway system modernisation in this country?
Lord Bellwin: My Lords, the noble Lord will know that I can make no such comment on that.
Lord Orr-Ewing: My Lords, is my noble friend aware that some of the information given us will be of interest to the electorate as a whole that many millions of people and businesses, too, are suffering grievous inconvenience as a result of what many people believe is an unnecessary strike, and that anything we can do to make the facts known to Parliament and the electorate must be helpful?
Lord Bellwin: My Lords, I accept what my noble friend has said as to that.
Lord Beswick: My Lords, will the noble Lord confirm one figure from the reply he made to my noble friend Lord Underhill? He said that £34 million would be saved if the flexible rostering scheme had been accepted. Does that apply to flexible rostering for locomotive men, which was the subject of the supplementary question?
Lord Bellwin: My Lords, the figure I gave is over £35 million. The figure I have is £35.4 million. As to what it refers, yes, it is to cover flexible rostering and associated items. If the noble Lord would like a breakdown, I will send it to him.

Civil Service Efficiency
2.59 p.m.
Lord Gridley: 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 has been taken to improve the efficiency of the Civil Service.
Baroness Young: A very great deal, my Lords. From 1979 to 1981 there have been 108 departmental scrutinies and three large service-wide reviews. Last year we published a White Paper, Efficiency in the Civil Service, in which we set out our policies for improving management and efficiency. We have since pressed ahead with new and substantial work, including our programmes of lasting reforms, of action to improve financial management, and of scrutinies and other reviews.
I am arranging, with the leave of the House, for a list of the scrutinies and service-wide reviews being conducted in departments as part of our central efficiency strategy for 1982 to be published in the Official Report.
Following is the list referred to:

1982 SCRUTINY PROGRAMME AND SERVICE WIDE REVIEWS

Department

Scrutiny

Review

Home Office

Administration of the Criminal Injuries Compensation Scheme*

Resource control review of the prison service* Review of personnel work *

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Department

Scrutiny

Review

Lord Chancellor's Department

Administrative procedures for means assessment of those applying for civil legal aid (jointly with the Department of Health and Social Security)

Review of personnel work*

Foreign and Commonwealth Office (including Overseas Development Administration)

Use made of Diplomatic Service personnel overseas (postponed from 1981)* Review of the Passport Office*

Running Costs Review*

The work of the ODA's professional advisers (other than economists)*

HM Treasury

Civil Service Catering Organisation*

Resource Control review of Royal Mint*

Inland Revenue

PAYE End of Year Procedures* Visits made to the public by Inland Revenue staff District Memoranda and Instructions to tax and collection offices

Review of personnel work*

Customs and Excise

Processing of Customs Import Entries

Review of personnel work*

Department for National Savings

Improving the quality of the Post Office service paid for by the Department*

Department of Industry

Methods used to assess the cost-effectiveness of Selective Financial Assistance

Department of the Environment

The Cartographic service

Property Services Agency

Resource Control review of District Works Offices* Review of personnel work

Department of Education and Science

Running Costs Review*

Department of Health and Social Security

Payments of social security benefits to people in hospital

Review of personnel work*

Management and Personnel Office

Running Costs Review—Departmental review and central team* Resource control review—Central team* Review of personnel work—Central team*

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Department

Scrutiny

Review

Government Actuary's Department

Actuarial services needed by Ministers*

Paymaster General's Office

Declarations of Entitlement for public sector pensions (postponed from 1981)*

Department of Energy

Energy conservation effort*

Running Costs Review*

Department of Employment

Running Costs Review* Review of personnel work

Northern Ireland Departments

Acquisition, management and disposal of land by the NI Departments

MAFF

Generation and use of written documents*

Review of personnel work*

Ministry of Defence

Service and civilian pension administration* Service pay and records

Resource control reviews of:(1) RAF Support* (2) Meteorological Office*

Scottish Office

Resource control review of Prisons* Review of personnel work

Welsh Office

Administrative and grant procedures under the Land Drainage Act 1976*

Department of Trade

Practice relating to the supervision of insurance companies

Resource control review of Coastguard Service* Running Costs Review*

Department of Transport

Administration and enforcement of the Goods Vehicle Licensing System

Manpower Services Commission

Review of personnel work

Health and Safety Executive

Arrangements for the supply and use of information on industrial accidents and diseases*

Review of personnel work

*Already under way.

Lord Gridley: My Lords, I am most grateful to my noble friend the Lord Privy Seal and Leader of the House for that interesting and informative Answer. May I ask my noble friend whether she will be prepared to give further information to your Lordships on the benefits which it is hoped will accrue from this efficiency operation?
Baroness Young: My Lords, potential savings of around £300 million a year and £37 million once-and-

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for-all savings have been identified. Savings from decisions taken so far are around £150 million a year, and as much again is still for decisions. We believe that the scrutinies and reviews have resulted in greater value for money, more streamlining, better management and, above all, a better service to the public. I should like to place on record that all this work has been done by civil servants themselves.
Lord Derwent: My Lords, is my noble leader satisfied that all those who examine and select candidates, particularly for the senior grades of the Civil Service, are sufficiently qualified and lacking in prejudice to select the best candidates? If she is so satisfied, is she aware that my information is quite to the contrary?
Baroness Young: My Lords, if my noble friend in his question is referring to what we are doing on succession planning, I should like to say that the new arrangements that have been made should ensure that those who are going to the top of the Civil Service get experience of managing both people and money, and I believe that within the Civil Service we are fortunate in having very many very able people indeed.
Lord Derwent: My Lords, I am very sorry that my noble leader has misunderstood me; it is entirely my fault. I was referring to those candidates who are not yet in the Civil Service.
Baroness Young: My Lords, if my noble friend is referring to applicants for administrative trainees, this year, I think I am right in saying, we are taking in about 45 administrative trainees and indeed we may not be able to fill all the posts.
Lord Elwyn-Jones: My Lords, is the Lord Privy Seal able to give any indication at this point of time when the Government's response to the Megaw Report on the Civil Service is going to be discussed or the Government's reactions to it are going to be indicated?
Baroness Young: My Lords, as the noble and learned Lord will appreciate, the Government are still considering their response to this important report. It is another question, but I hope that at an appropriate moment the noble and learned Lord will put down a Question on that subject.
Lord Bruce of Donington: My Lords, is the noble Baroness aware that the recruitment of accountants into the Civil Service is proceeding far more slowly than the Government themselves envisage? Will she assure herself that there is no undue resistance on behalf of some of the administrative grades to the introduction of rather more accountants into the Civil Service, which process at the moment, as the noble Baroness is aware, is being conducted by Mr. Kenneth Sharp?
Baroness Young: My Lords, I should like to assure the noble Lord that it is the intention of the Government that the number of accountants in the Civil Service will be doubled over the next 10 years. We are
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introducing new training facilities to give much greater training in financial management to all those seeking top posts in the Civil Service. These are important matters which will underpin our drive for greater financial efficiency throughout the Civil Service.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that dinner will be available this evening at the usual time. The Committee stage of the Employment Bill will be adjourned at approximately 7 o'clock for approximately one hour and, during this adjournment, the two Town and Country Planning (Minerals) Regulations and the Agriculture Act 1970 Amendment Regulations will be taken.
It may also be for the convenience of your Lordships to know that the Grill Room will be open from this evening for the dispensing of refreshments, including breakfast, for so long as the House sits.

Falkland Islands (British Citizenship) (No. 2) Bill [H.L.]
Lord Bruce of Donington: My Lords, I beg to introduce a Bill to enable citizens of the Falkland Islands to acquire British citizenship. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.— (Lord Bruce of Donington.)
On Question, Bill read a first time, and to be printed.

Employment Bill
3.5 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): 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.—(Earl Ferrers.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
The Lord Advocate (Lord Mackay of Clashfern)The Lord Advocate (Lord Mackay of Clashfern) moved Amendment No. 99A:
After Clause 11, insert the following new clause:
("Prohibition on union recognition requirements.
.—(1) Any term or condition of a contract for the supply of goods or services is void in so far as it purports to require any party to the contract—

(a) to recognise one or more trade unions (whether or not named in the contract) for the purpose of negotiating on behalf of workers, or any class of worker, employed by him;

(b) to negotiate or consult with, or with any official of, one or more trade unions (whether or not so named).

(2) A person contravenes this subsection if, on the ground of union exclusion, he acts in a manner falling within paragraph (a), (b) or (c) of section 11(2) of this Act.
(3) For the purposes of subsection (2) above, a person acts on the ground of union exclusion if the ground or one of the grounds for his action is that the person against whom it is taken does not, or is not likely to, recognise, negotiate or consult as mentioned in subsection (1) above.
(4) Subsection (2) above does not create an offence but the obligation to comply with it is a duty owed to each of the following—

(a) the person against whom the action is taken; and

(b) any other person who may be adversely affected by the contravention,

and any breach of that duty shall be actionable accordingly (subject to the defences and other incidents applying to actions for breach of statutory duty).").
The noble and learned Lord said: I should like to take Amendment No. 99A in explanation with Amendments Nos. 99B, 99C, 103A, 103B, 104A, 104B, 104C and 151A. Before I move those amendments to Clause 12 I would point out that there are two very minor mistakes in them as they appear on the Marshalled List that I need to correct before moving the amendments in the corrected form. First, in Amendment No. 99B the phrase to be inserted should begin with the word "Section" so that the insertion reads:
"Section 11(1) or".
Secondly, in Amendment No. 104B, originally numbered as Amendment No. 104A, the phrase to be inserted should end with the figure (1) so that it closes with the phrase,
"as mentioned in Section (Prohibition on union recognition requirements) (1)".
Amendment No. 99A, which is the first one to which I shall speak and which I move now, is a Government new clause. The other amendments that I mentioned are so closely linked with the new clause that it seems sensible to speak about them together. The new clause and the amendments have all been tabled to deal with a specific problem which has recently come to our notice and which we believe is not at present covered by Clauses 11 and 12 as drafted. The problem is this: a number of local authorities have been insisting that contractors must recognise and negotiate with trade unions or have agreements with trade unions about procedures if they are to gain contracts. We know of at least one council which is insisting that even before they can be on the list of contractors from whom tenders are invited, contractors should undertake to recognise the appropriate trade union.
These requirements have caused great and understandable concern among non-union contractors. They are not covered by Clause 11, because they do not say that all the contractor's employees must be union members. But in many respects their effiect is the same: first, because they force trade unions and trade union recognition on to companies and employees who do not want it; and, secondly, because they exclude non-union firms from tender lists and contracts in the same way as union labour-only requirements. Let me emphasise that we are not against employees recognising trade unions for negotiation and collective bargaining purposes. All we are saying is that this should be an internal matter for an employer and his employees to decide—free from external pressure from another employer or a trade union. We do not understand what business it is of the local authority how the contractor chooses to conduct his relations with his employees. Why,
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my Lords, should a local authority refuse to do business with a company which does not negotiate with trade unions?
The purpose of the new clause and the amendments is therefore to make requirements about recognition and negotiation unlawful and to provide redress for those who suffer from them. The new Clause 99A is a mirror image of Clause 11. It provides, first, that any requirements about recognition and negotiation which appear in a contract will be void and unenforceable. Secondly, it makes it unlawful to exclude someone from a tender list or fail to award him a contract or to terminate a contract with him on the ground that he does not recognise, negotiate or consult with a trade union or a trade union official.
Amendments Nos. 99B and C, 103A and B and 104A to 104C referring to Clause 12 deal with the same problem from the trade union point of view. As I said earlier, in the Government's view it is unacceptable that a company should be forced to accept recognition of a trade union owing to pressure from outside, and that is so whether the pressure comes from a company or from a trade union. The effect of Amendments Nos. 99B and 99C is therefore to remove immunity from trade unions who take or threaten industrial action to put pressure on an employer to act in a way which is unlawful under the new clause.
The other amendments seek to remove immunity from industrial action to interfere with the supply of goods and services, taken on the ground that a supplier does not recognise, negotiate or consult with trade unions. We believe that the new clause and the amendments constitute an important addition to the present Bill. They will help to stop practices which most people would consider unacceptable and they will be widely welcomed by contractors in particular. For all these reasons, I commend them to your Lordships and beg to move Amendment No. 99A.
Lord McCarthy: When the noble Lord, Lord Mackay, said that there were certain mistakes in the amendment, I thought for one wondrous moment that the Government might have relented. I did not believe this amendment when I saw it and I hoped maybe they had thought better of it; and of course one should think better of it. But it was not the case. I do not say that this is the most important new clause; I do not say it is the most important clause. I say it is the most objectionable; I say it is the most immoral; I say it is the most unjustified. I say it represents a further incursion into trade unionism and the ordinary day-to-day practices and beliefs of those who believe in trade unions.
Those members of the Committee who were awake when we stopped yesterday may remember that it was necessary to withdraw the amendments which my noble friends and I had put down, dealing with the previous clause. That was a pity but it was necessary, and it was justified on our side because of the very much more objectionable nature of this clause—which is not to say that we found the previous clause in any way acceptable, but at least it could be said about the previous clause that it was to do with the closed shop.
It is perfectly true that it simply meant that no rank-and-file trade unionists, whether they were in a position of authority in local authorities, or the chairmen

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of Labour clubs, or branch secretaries in trade unions or whatever they might be, or whether they were rank-and-file journalists working with various types of casual journalists, were entitled to insist on the so-called "fair lists", because fair lists in one way or another include firms or are made up of firms who recognise trade unions and who in many cases operate a closed shop.
But this clause goes much further. It has similar widespread coverage to the previous clause—that is to say, it does not deal just with contracts but with all forms of commercial activity, such as tendering, cancelling, failing to enter into tender. All kinds of commercial activities are covered in the way that Clause 11 covers them, but this clause has nothing to do with the closed shop. No longer are we being told, "You must not make these requirements in cases of a closed shop", but, "you must not make these requirements if the only thing you are asking for is that people should recognise trade unions and carry out trade union rates".
I wonder what noble Lords opposite really believe to be the motivation of people who try to secure that contracts, undertakings and work go to firms who recognise trade unionism. As little while ago as the 1971 Industrial Relations Act, a previous Conservative Government—though it is embarrassing to the present Government to refer to it—understood this; and indeed, the 1971 Industrial Relations Act, for all its faults, contained a number of provisions to encourage the spread of collective bargaining. Even in 1971, men of good will on both sides of the Chamber believed in the encouragement and spread of collective bargaining. Noble Lords opposite have changed their minds. They want to discourage the spread of collective bargaining. They believe that anybody who seeks to use his position, and even his own money and his own work, to encourage the spread of collective bargaining is some kind of moral pariah who should be in some way penalised.
It is perfectly true that the noble and learned Lord told us that this Government is not against recognition and that they do not intend at this moment (although of course we must be careful, because we have not finished the passage of the Bill yet and we might get another clause on Report) but at this moment the Government are not against recognition—not yet—in the sense that they are not yet introducing a clause which actually makes the recognition of trade unions unlawful. But give them time. Step by step the seven league boots are still in place and we are promised another Bill and another Bill and another Bill. They may get round to it; and if they got up today and told me that they did not intend to get round to it, it would not mean much to me.
So we have to look at this clause. This clause is saying that people should not use their positions of authority to seek to encourage trade unionism—not the closed shop, not coercion, but trade unionism. So we have to tell noble Lords, since they have clearly forgotten, though they knew about it in 1971, why it is that people should want to do that. It is because they are old-fashioned enough to believe that recognising trade unions, negotiating with trade unions and paying trade union rates is a kind of shorthand for
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non-exploitation; because they believe that if you insist on this simple provision the chances are that the people whose business you put in their way will not be exploiting their workers, will not be paying "scab" rates, will be giving decent conditions and therefore you will not be negotiating practices which you consider to be unjustifiable. That is their belief, and that is the belief which this Government are now going to make an actionable belief.
I sought to argue late last night that one of the great weaknesses, one of the great emotional, cultural and moral weaknesses, of the party opposite is that they have forgotten—one wonders how far they ever knew it—the possibility that trade unionists can have morals, beliefs, convictions and conscientious objections to encouraging "scab" labour and low levels of pay and conditions of work which they consider to be a disgrace. And because they consider them to be a disgrace, they insist, whenever they can, on putting work in the way of trade union firms. This is a simple, ethical principle. We think this is an ethical clause, and we will certainly divide the Committee.
Lord Campbell of Alloway: I do not understand how the noble Lord, Lord McCarthy, can stigmatise this amendment as objectionable, immoral and unjust. We are not against recognition, but we are against abuse and we are against pressure to force recognition. Why are we against that? It is because we are committed to the concept of freedom of association and all that that entails, which is envisaged in this Bill. Indeed, the activities that gave rise to this amendment only highlight the problem that there is now, as I stated before, no recognition machinery to obviate poaching, or to deal with inter-union disputes, which adversely affect those with no interest in the dispute. By and large, the Bill does not purport to deal with the internal affairs of trades unions, and how it can be stated that this amendment is immoral and objectionable, when all that it seeks to do is to obviate abuse, wholly defeats me.
Lord Underhill: In supporting the objection to this new clause, I should also like to take into consideration some of the points which might have been made last night on Clause 11 stand part, if there had been time, because they are somewhat inter-related. I could hardly believe my ears when the reasons for this new clause were given by the noble and learned Lord the Lord Advocate. It may be that some of us are wrong, but it hits at the very principles and beliefs for which some of us have strived for over half a century, and have tried to do it with a sense of moderation, believing that our way was the right way to achieve them.
I asked yesterday what noble Lords on the Government side were doing to show their belief in trade unionism—not dealing with abuses—and nothing that has been said in favour of this clause can possibly be said to be in support of a belief in trade unionsim. I hope that all sides of the Committee will question this, because of where it will lead in future industrial relations. It was asked: what right have people to interfere?—I was going to say as a member of the working class, but that may be an out-of-date expression to use. But as somebody who believes in the advancement of the people of this country, as someone

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who believes that the trade union organisation is a step towards that, I have a right to interfere in order to see that other people get decent conditions of work, and that is why we are opposed to this clause. It is said that it is to protect contractors, particularly small firms. Has anything been said about the protection of workers who find that they are in competition with another contractor or sub-contractor who has no trade union agreement, does not observe trade union conditions of work and who undercuts?
The Minister referred to freedom of choice. What about my freedom of choice as a consumer? I do my very best to buy essential things that are British made. I also want to do my very best to ensure that the things I buy are produced by people whose firms give them decent wages and conditions. Clause 11 may prevent me from doing that. For years and years, the organisation with which I was associated would not give a piece of printing to firms that did not observe a fair list, not because we were saying that they had to be trade union members, but in order to ensure that the conditions of work were fair and that we were not having competition from jumped-up outfits which did not observe proper print conditions.
Under Clause 11, I cannot in future get a fair list. Will a firm still be able to put,
"Printed by Blank Blank Brothers (TU)".
to show that I am dealing with a decent firm and not one that is undercutting rates? I am concerned with trade union conditions of work, as well as with trade union membership, and why should I, as a ratepayer, not insist that my local authority does not give work out to firms that undercut union conditions?
I ask your Lordships to put trade union membership on one side for a moment. Let us talk about decent conditions of work. If I can avoid it, my local authority will not give any work out to a firm which undercuts, which does not have a trade union agreement and which will not observe trade union conditions of work. I believe that the whole attitude—not just the wording—shows that words which say, "We are not opposed to trade unionism" need to be reconsidered. We are talking about the right of people to ensure that other people have decent conditions of work.
I should like to take one final example—and I ask your Lordships to remember that we are not just talking about local authorities. There may be a firm or an authority with construction work. It has good agreements with its own workers, trade union agreements, and it observes all national conditions of wages and other matters. A contractor comes on the job and he has no trade union agreement and is undercutting conditions. What do you expect the workers in the first outfit to do? They will down tools immediately and say, "We are not going to put up with this." It is an obvious thing to do for people who want to preserve not only their own conditions, but the conditions of other people.
The noble and learned Lord the Lord Advocate referred to the right of interference with materials. I am a moderate person, but if I knew that a firm which undercut trade union conditions, which did not observe trade union membership and did not even recognise a trade union was bringing in equipment and materials, I would stop it from being used in my firm. That is the spirit which still exists in the trade
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union movement, and this new clause, and Clause 11, are leading the way to further industrial action. I ask the Government to reconsider, and I also ask noble Lords on all sides to refuse to let this amendment go through, because it will be fatal for future industrial relations.
3.27 p.m.
Lord Boyd-Carpenter: This debate, so far, has been immensely revealing in that it has shown that the normally moderate Lord Underhill and the normally immoderate Lord McCarthy are lined up together in quite vehement opposition to a proposal which appeals to most of us on this side as fair and reasonable. This indicates, regrettably, a very real gap in the thinking of noble Lords on the other side from that of noble Lords on this side.
The noble Lord, Lord McCarthy, was extraordinarily emotional and used highly emotional terms, such as "scab rates" and "scab labour". What do those expressions really mean? They mean labour paid at rates lower than those negotiated by trade unions. But it does not follow from that, particularly in the present economic situation of the country, that those rates are either unreasonable in payment to the people concerned, or contrary to the national interest. Indeed, those rates may well mean that people are employed who otherwise would not be employed at all, because it is, if you like, a platitude of economic discussion that the higher you force up wage rates, the higher you force up the level of unemployment and vice versa. Therefore, to try to obscure a calm consideration of this matter by use of distinctly old-fashioned expressions of this kind—I think that the expression "scab" goes back to Victorian times—high in emotional, but low in intellectual, content does not help.
If I understand it aright, what my noble and learned friend's amendment means is that those who put out business should remain neutral as between those firms that recognise, accept and negotiate with trade unions and those who do not. If trade unionism does all the good which noble Lords opposite sometimes suggest—and I believe that it does quite a lot of it, though perhaps not all—that should be a sufficient advantage to the firms which recognise unions in terms of good industrial relations, co-operation, working together, of which we hear a great deal, and a great deal of it is very good sense, and should reward them sufficiently. But why should the purchasing power of particular purchasers—we are concerned here with local authorities and other politically motivated bodies—be used to discriminate between those who as a matter of good sense and good policy recognise trade unions and those who, as a matter of their own judgment of what is good sense, do not? Why should they be able to use their political power to discriminate in this way?
Baroness Gaitskell: Why not?
Lord Boyd-Carpenter: The noble Baroness asks, why not? I am delighted that she asked that question. Let me take the case of a local authority. A local authority represents ratepayers of all political views, some of them no doubt loyal and determined trade unionists. Others have perhaps suffered from trade

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union action. Other people see—as many of us do—the harm which the excessive power of trade unions has done to the British economy in recent years. The ratepayers consist of people of all those different views. Why should a majority, perhaps a temporary majority, in political control of a local authority use that political power to discriminate in favour of trade unions and against those companies which do not recognise them? That seems to me to be a most dangerous thing to do.
If the noble Baroness will permit me, I shall follow this a little further. It is well known that the Labour Party owes most of its financial support and a great deal of its electoral support to the unions. There is to some of us something a little repulsive in a political majority, owing so much to the support of the unions, using its political power in the direct financial interests of its supporters. If this were done the other way round and one had a Conservative-controlled authority openly acting in the interests of employers, noble Lords opposite would be raising Cain and would be perfectly entitled and right to do so. But they must appreciate that what is sauce for the capitalist goose is sauce for the even larger and rather redder Labour gander. I think therefore that they must appreciate that there are a great many people in this country who, like myself, believe strongly in a fair and effective trade union movement but who very much dislike exercises of political power of this kind which are designed to benefit the supporters of the political majority concerned at the expense, maybe, of the ratepayers.
It does not seem to me that there is anything unreasonable in saying that those who place contracts of this kind should do so on the normal basis upon which a businessman places contracts: on the basis that the supplier is likely to supply the right sort of goods or services at a competitive price. Why they should get worked up and involve themselves in questions about alleged scab rates is quite a different matter. In the present situation in this country, it is a little unrealistic—as I say, it goes back to Victorian times—to talk about scab rates. In Victorian times there was such a thing and the union movement was a very strong and a very natural and proper reaction against them, but to go on talking about scab rates in the situation of 1982 is to suggest that one is not in the real or the contemporary world. There are rates below trade union rates. They may be perfectly good rates; and they are rates which people are prepared to work for. There is no divine dispensation about trade union rates which makes it, in the words of the noble Lord, Lord McCarthy, immoral to pay less. It may well be—it is, in fact, the case—that some rates negotiated by some trade unions in recent years have been excessive and contrary both to the competitive power of the industries in which the people concerned work and therefore to the employment prospects of their own members. This is undoubtedly the case. Therefore, to say that as a matter of morality, again to quote the noble Lord, Lord McCarthy, any firm which pays less than that is doing something immoral is not only, to most people's minds, an exaggeration but a blinding revelation of the mentality of some noble Lords opposite.
Baroness Gaitskell: The noble Lord has mentioned me, so may I just comment? I have heard him make
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very many reactionary speeches, but the one which he has just made is one of the most reactionary.
Lord Boyd-Carpenter: Will the noble Baroness allow me? Her intervention is based on a misunderstanding. I did not mention her.
Lord Rochester: At the beginning of this discussion I think I can say that I had a completely open mind on this point. Until now we have been discussing union membership agreements. This clause has to do with union recognition requirements. I must confess that I was a little concerned as to the reason why this new clause was being suggested. I felt that it might indicate some feeling on the Government's part that union membership should in some way be discouraged. However, as I understand it, an abuse has been uncovered in which certain local authorities, or a certain local authority, is seeking to exclude from lists of tenderers firms which do not recognise trade unions.
I believe in trade unions. I have said before in this House that if there were not trade unions somebody would have had to invent them in order to protect working people. I would go further and say that I believe in the positive encouragement of people to belong to trade unions. But I do not think that that belief in trade unions should extend to a position where certain firms which are not unionised are excluded from work, all the more when such firms may employ very few people. Having therefore listened to the arguments on both sides, it seems to me that the Government case has been made out. I shall therefore recommend to my noble friends that we should support the insertion of this clause.
Baroness Wootton of Abinger: The noble Lord, Lord Boyd-Carpenter, concluded his speech by choosing a particular example. There is no reference in the amendment to local authorities. Local authorities do employ persons and they have to pay certain rates of wages, but this is an amendment which refers to employers, and the typical employer is a business person. It is intended, and I think rightly intended, that business people, whether or not they be local authorities, should pay the wages which have been negotiated by trade unions for the particular occupations of those whom they employ. It is not a device by which local authorities can somehow betray ratepayers by giving preference to people who are members of the Labour Party, as the noble Lord, Lord Boyd-Carpenter, apparently implied.
Baroness Burton of Coventry: I never know how wise it is to appear to be ignorant, but I am completely ignorant on this matter. However, it may be that when I sit down, having exhibited my ignorance, I shall get an answer. In listening to—I was going to say to my noble friend Lord Underhill, whom I have always regarded as a moderate, I came to the conclusion that we were obviously not looking at the same amendment. I should be very grateful if somebody could explain it to me afterwards.
I should like to ask the noble Lord, Lord Underhill, whether what he was saying means that, when firms tender for a job, if, for example, one firm has better conditions, offers better pay and produces a good

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tender but does not recognise trade unionism among its member, then the job concerned will go to the firm which has none of those advantages but which does recognise trade unions? That seems to be the argument put forward, and I believe the noble Lord, Lord Underhill, is indicating that that is the case. Obviously my ignorance has been enlightened, and I totally disagree.
Perhaps I may move on from there. It seems to me most unfortunate that these days, when the trade unions have done so much and when there is considerable criticism about the wrong use of some of their powers, their friends should think they are in need of any recognition such as this. I would not have thought that any trade union of real standing—as most of them are—would feel that it needed to have written into the law that jobs were only to go to firms or to organisations which have a trade union membership. I believe that is completely wrong. The more I have listened to the vehemence on this side of the Committee, the more it seems to me that there is nothing unfair in suggesting that, while conditions should not be applied to the giving of contracts, we hope that they will go to the firm or tenderer offering the best tender and the best conditions for its workers.
Lord Jenkins of Putney: I wish that I had been able to get in before the noble Lord, Lord Rochester, and the noble Baroness, Lady Burton of Coventry, because I might conceivably have been able to explain one or two points in the clause which might have brought them to a rather different conclusion from that to which they have committed themselves. The reason why I would endeavour to do so—successfully or otherwise—is this. The new clause is titled Prohibition on union membership requirements. This clause and the previous clause, Clause 11, which has the title Prohibition on union membership requirements, and also the next clause, which is also the subject of amendments we are now discussing, entitled Pressure to impose union membership requirements, are all prohibitive.
It is within my knowledge that the British Actors Equity Association believing that these clauses—although not this new one—might inhibit the operation of their arrangements with theatrical employers, had a discussion with Mr. Tebbit and he gave them an assurance that it was not the intention of the Bill to intervene in any way in arrangements between employer and employee, and that the object of this series of clauses was to lay down conditions which would affect a contract of service in the sense which has been illustrated in a somewhat exaggerated form by the noble Lord, Lord Boyd-Carpenter, as being something which a Labour-controlled council might carry out in relation to contracts which it would engage.
How much reliance one puts on an undertaking given by Mr. Tebbit is a matter of opinion.
Earl Ferrers: No.
Lord Jenkins of Putney: It appears to have satisfied Equity. However, I believe that if Equity had seen the new clause which has been moved this afternoon,
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they might have had second thoughts. What the clause says is:
" (1) Any term or condition of a contract for the supply of goods or services is void in so far as it purports to require any party to the contract"—
and so on. The point might be made that a contract of employment between an employer and employee is a contract of service and is not a contract for the provision of services. This is generally true but it is not true so far as theatrical employment is concerned. An actor is not on a contract of service but is on a contract for the provision of services. He provides his services on income tax Schedule D in the same way as any small businessman might. Therefore, it is my belief that he is caught by this clause.
The West End contract I have here is the one on which every actor in the West End is employed, and it contains within it a clause stating:
"The Society agrees"—
that is, the Society of West End Theatre Managers—
"that its members in the normal course of events shall not offer engagements for any of the said productions to artistes who are not full members of Equity or"—
et cetera. It is my belief that the proposed new clause after Clause 11 prohibits that condition in the society's agreement. We believe that the new clause put forward this afternoon combined with the other clauses which have been put in effectively scuppers the London Theatre Council. In fact, I believe that every contract existing in the West End will, after these clauses have been brought into effect, be null and void.
If the noble and learned Lord who has moved Clause 11 can give us an absolutely firm assurance that this is not the case, then it may be that we shall be able to tell Equity that the assurance they received from Mr. Tebbit has been carried out publicly and has been carried out here. But if the noble and learned Lord is not able to give such an assurance—and, whatever he says, I myself doubt whether the wording will support him—then what he ought to do, if Mr. Tebbit meant what he said, is to agree to the insertion of a manuscript clause at Report stage which would make it quite clear that, when the relationship between the parties is that of employer and employee, irrespective of the fact that it may be a contract for services and thus caught by this clause, it will under these circumstances be inapplicable. Without that manuscript amendment in the Bill, or in the Act as it will become, the consequence will be completely to destroy the entire theatrical employment set-up and it would be entirely contrary to the assurances which I understand Mr. Tebbit gave to Equity.
3.47 p.m.
Earl De La Warr: I am rather surprised that up to now no noble Lord has mentioned the local authority called East Kilbride. I had a copy of that letter many weeks ago. I know that the noble Lord, Lord McCarthy, is very cross about this amendment, but I too was extremely indignant when I read the letter that went out to all local authorities on the East Kilbride list. It was clear to me—and although this is not evidence, it was clear to the Financial Times—that what East Kilbride were doing was deliberately trying, in advance of the passing of this Act, to get round its intentions. Noble Lords can have whatever

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views they like about the intentions behind Clause 11, but it seems to be monstrous when a local authority in advance of the passing of a Bill which will surely go through, makes provisions such as these which deliberately flout the law which is to come.
I am not going to say that this is what the Government had in mind, but I am sure that it was not very far from their minds. Perhaps the noble Lord, Lord McCarthy, would help us by giving us an assurance, if he can, that in his opinion it was not the intention of East Kilbride to get round the provisions of this Bill. If he really believes that, then we shall be a little bit wiser about why he is so upset.
Lord Wedderburn of Charlton: Will the noble Earl tell your Lordships whether he objects to the army of draftsmen who arrange the avoidance, quite lawfully, of Finance Bills and tax reviews which come before both Houses of Parliament? Is that to be stopped?
Earl De La Warr: I really do not feel disposed to widen the debate that far.
Lord Oram: My noble friend Lord McCarthy reminded us that we are under some threat that this Employment Bill will not be the last and that there are other measures contemplated by the Government in relation to trade unions. Reading this proposed new clause, I wonder whether one of those new steps will be a change of the House of Commons resolution concerning fair wages in Government contracts. In reading that and reading this new clause, I believe we are on the brink of passing a clause which runs contrary to that resolution of the House of Commons. I do not say it does; I do say it is a matter that we ought seriously to consider.
For that purpose I will read just two of the clauses in the House of Commons' Motion which concerns fair wages clauses in Government contracts. The House of Commons is of the opinion that such contracts should provide as follows:
The contractor shall pay rates of wages and observe hours and conditions of labour not less favourable than those established for the trade or industry in the district where the work is carried out by machinery of negotiation or arbitration to which the parties are organisations of employers and trade unions representative respectively of substantial proportions of the employers and workers engaged in the trade or industry in the district".
Further:
"The contractor shall recognise the freedom of his work-people to be members of trade unions".
I recognise that that is not directly contrary to this clause, but suggest that we are getting dangerously near to the point where, if the Government pursue the path they seem bent on pursuing, they will have to ask the House of Commons to change its own resolution, and if they do that I believe there will be trouble in store.
Lord McCarthy: I do not want to intervene twice in this debate, but I have been asked a number of specific questions and I would like to reply to those briefly. The noble Lord, Lord Boyd-Carpenter, was surprised at the degree of unanimity between myself and the noble Lord, Lord Underhill. So far as I can remember, we have never disagreed yet, so perhaps it
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is just the language we use. The noble Lord, Lord Boyd-Carpenter, also asked me why I used phrases like "scab rates". I use the phrase "scab rates" because those are the phrases which are still used by people who are seeking to defend trade union rates and trade union principles.
Of course, if the world were full of nothing but trade union rates and nothing but employers who observe trade union principles such words would be old-fashioned and out of use, but while there still are "scab rates", which are rates below trade union minimum rates which are paid in order to under-cut trade union minimum rates, then we have to have a word for them, and the word in conventional normal usage is "scab rates".
He also asks me why I think, why anybody would think, that local authorities have a right to insist that they do not employ contractors who pay scab rates. The answer is because they believe in trade unions and they believe in trade union standards. The only thing which can be asked of them—and if this is what he said I would accept it entirely, and I do not know the answer on this one in East Kilbride—is that they should make no secret about that. This may not be the kind of thing that you put in election addresses, but I do not see why not. I do not see why a party with a majority should not say in an election, "We do not propose to employ contractors who do not observe trade union rates". If the electorate do not want to elect them on that basis that is a matter for the electorate, but if the electorate do elect them then they are perfectly entitled to do so.
This brings me to a question raised in particular by the noble Lord, Lord Oram. I should have said this, and it is my answer to the question posed by the noble Lord, Lord Rochester. It is quite true that there is an almost exact parallel with the fair wages resolutions, the fair wages resolutions of the Commons, which go back a very long time. Whether they are exactly the same, the noble Lord, Lord Oram asks; I do not know whether what we are doing is formally in breach of them. But their objectives are exactly the same as the objectives of the East Kilbride Council. Parliament in its wisdom at that time wanted to prevent giving public money to support "scab rates". That is what the fair wages resolution is all about. We understand that the present Secretary of State, so he has told us, intends to introduce legislation which will repeal the fair wages clauses whether or not that puts us in breach of various ILO conventions. So that is the answer to the noble Lord, Lord Rochester. The abuse, which he says has to be corrected, is the abuse of seeking to do in local authorities and private authorities and, so far as one's own money is concerned, what Parliament has done at this moment in time on the fair wages clauses. That is what is involved with this Bill.
Finally, the noble Baroness, Lady Burton, says that she does not like it because we are asking for something to be written into law, that people shall recognise trade unions. We are not saying that. In the first place, it is a Government clause; it is not an amendment of ours. In the second place, we have not an amendment asking for it to be written into law that people must recognise trade unions. We are asking for it not be actionable at large if individuals or organisations want to support trade union standards in the way that Parliament at this

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moment of time, though God knows for how long, does through fair wages resolutions.
Baroness Burton of Coventry: The noble Lord, Lord McCarthy, has not translated my very simple question in the very simple terms in which I asked it. I said nothing about the public recognising trade unions. I did ask whether I had understood from what the noble Lord, Lord Underhill, had said—and he confirmed it—that what was suggested from the Opposition side of the Committee was that contracts should not be given to firms, whatever standards they offered, if they did not recognise trade unions in their establishment. That is quite different. Would the noble Lord care to correct that?
Lord McCarthy: I would only say let us see what Hansard says tomorrow. I think I have got what the noble Baroness said right.
Lord Underhill: May I say that what the noble Baroness has just said is what I want, because I do believe that public contracts should not go to firms which do not observe trade union conditions and which oppose trade union agreements. I am certain that the Social Democratic Party will find itself in very great trouble if that proves not to be the policy of the Social Democratic Party.
Baroness Burton of Coventry: I am sorry to be persistent and be a nuisance, but I am going to have this right because one gets tied with it for ever if one does not put it right. I did not say about recognising trade union practices; I said something quite different. I asked the noble Lord whether he would take it that firms which might offer better wages and better conditions than trade unions should not have a contract, and he agreed with me.
Lord Wilson of Langside: I wonder whether I could ask the noble and learned Lord a very simple short question, the answer to which I thought I knew when this debate started, but having listened to the debate I find myself in some doubt. The question is simply this: Is there anything in this amendment which would prevent an individual or a company, who wished to employ a contractor who observed certain conditions for his workpeople with regard to membership of trade unions, from doing so.
As I understand it, the amendment says that any condition to that effect shall be void. But does the clause go further than that? Is there any sanction to prevent an individual doing that? For example, if the TUC want to let out a printing contract, why should they not make it a condition of that contract that certain conditions shall be observed by the printer? Is there anything in the amendment which prevents that happening? I can understand the anxieties about the local authority abusing political power. I can understand the anxieties expressed by the noble Lord, Lord Boyd-Carpenter. I can understand Lord Boyd-Carpenter's scorn at the use of emotive expressions by those concerned with trade union liberties. But is there anything in the amendment which would seriously interfere with the right of people who quite
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legitimately want to ensure that any work done for them shall be done under certain conditions?
Lord Mackay of Clashfern: I venture to think that the noble Baroness, Lady Burton of Coventry, has underlined, as so often she does, if I may say so with respect, the confusion which has existed in a good deal of what has been said about this clause. The clause deals with provisions requiring a proposed party to a contract to recognise a union or to recognise its negotiating procedures. It does not deal with rates of pay, and as I understand the position the fair wages resolution of the House of Commons is not in breach of this clause—indeed, I think that the noble Lord, Lord Oram, who raised that matter accepted that to be so. He said that they were coming close, but this certainly is not in conflict with that resolution because of the distinction between conditions of work and recognition of a union.
It would be perfectly possible to have a situation at present in which a district council took the view that it should apply a clause such as this, requiring recognition of a union, to strike out from their list of contractors a contractor whose rates of pay were double those that the union required, but did not himself have union recognition in his business and where his employees were perfectly satisfied with that situation. Why should a person who has managed to arrange his affairs in such a way as not to require the intervention of a union between himself and his employees in a way with which the employees are perfectly satisfied, be prevented by conditions of this type from getting work from other employers?
The situation with which this clause is dealing is a situation in which there is a requirement about union recognition or union procedures in the contract and it outlaws such a requirement as part of the contract. It does not, of course, prevent a contracting party himself from employing union labour if he wishes to do so. The freedom of persons to join a union and, indeed, the protection of persons engaged in union activity, is not managed by this Bill at all. Indeed, the compensation provisions for people who are dismissed for trade union membership and activity are improved by the Bill. Accordingly, what the Bill does not affect is the right of an employer and employee to make arrangements between them about the union matters in that firm. What it does strike at is pressure from outside on these matters. In our view, it is that pressure which requires to be made unlawful and that is the purpose for which this clause is introduced.
Lord Wedderburn of Charlton: Before the noble and learned Lord sits down, may I ask one question which is very germane to this part of your Lordships' discussion? It is not about pay: it is about the lives and the security of people at work. Looking at the new clause—Amendment No. 99A—I should like to ask the noble and learned Lord how wide is the forbidden consultation in respect of which the four subsections extend? Would a requirement of one contracting party upon another, that the other party observe the requirements of Section 2 of the Health and Safety at Work Act 1974, and that that other party consult with safety representatives and with

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safety committees which have been established in the last few years and which have saved a large number of lives and maimings in industry, also be forbidden within this new and extraordinary clause?
Lord Mackay of Clashfern: Before I answer that question completely, I would need to look at the detailed provision that the noble Lord has in mind. On a proper reading of the clause, I certainly would not regard this clause as striking at the consultation provisions of the Health and Safety at Work Act.
Lord Beswick: I should like to ask the noble and learned Lord the Lord Advocate whether he would be good enough to answer the question put to him by the noble Lord, Lord Wilson of Langside. Would this amendment preclude or not preclude the Trade Union Congress from awarding a contract to a printer on the basis that that printer was a trade union house?
Lord Wilson of Langside: Before the noble and learned Lord answers that matter further—indeed, I thought that he did say something about it—I should like to focus his attention in particular on the provisions of subsection (4) of the amendment, which trouble me a little. I have not had much time to think about it, but it states:
"Subsection (2) … does not create an offence"—
so it is not a criminal offence—
"but the obligation to comply with it is a duty owed to each of the following".
and there then follows (a) and (b). It then goes on to say:
"and any breach of that duty shall be actionable accordingly (subject to the defences and other incidents applying to actions for breach of statutory duty)."
It was the implications of that which troubled me a little.
Lord Jenkins of Putney: Before the noble and learned Lord replies to that point, would he agree that a court would interpret this provision of services which is made void if it requires recognition of a trade union, to apply to the employer/employee relationship which exists between Equity and the West End theatre managers? In those circumstances, would he accept a manuscript amendment to make it clear that that kind of relationship is not caught by the clause?
Baroness Seear: I should like to raise another matter which is germane to the other questions which have been raised. Would I be right in thinking that, if the clause goes through, it would still be open to any local authority, for example, to use the fair wage regulation which does not require union membership but which requires conditions no less good than union membership, and that in that case—to use a rather extreme example—they would then be in the clear? They could then employ IBM because it certainly has no less good conditions whereas if there is a ban on contracts where there is not union membership, they would not be able to employ IBM. Am I right?
Lord Mackay of Clashfern: Yes, as I understand the position, the noble Baroness, Lady Seear, is perfectly right. Indeed, that is what I was trying to say,
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although not so plainly, when I took up the point that the noble Baroness, Lady Burton of Coventry, made earlier. This clause strikes at matters related to union recognition and union procedures. It does not deal with rates of pay and conditions. I gave the illustration of a company that perhaps paid double the amount but did not recognise a union being excluded by the clause. So far as the noble Lord, Lord Jenkins of Putney, is concerned, I shall not expressly deal with the point that he raised because I think it would be unwise for me to try to deal with it and to give a view on it without the full text of the document from which he was reading. But I shall be very happy to have from him the use of a copy and to consider it later on. However, as I say, I think that it would be unwise to venture a view at the moment.
I endeavoured to deal with the question asked by the noble and learned Lord, Lord Wilson of Langside, and I said that this clause would strike at a condition of that sort as part of the contract. It would not, of course, strike at the relationship between the employer and the employee if the employer decided that he wished the work to be done for him by members of a trade union.
4.11 p.m.
On Question, Whether the said amendment (No. 99A) shall be agreed to?
Their Lordships divided: Contents, 144; Not-Contents, 48.

DIVISION NO. 1

CONTENTS

Abercorn, D.

Ebbisham, L.

Adeane, L.

Eccles, V.

Airedale, L.

Ellenborough, L.

Alexander of Tunis, E.

Elliot of Harwood, B.

Allerton, L.

Elton, L.

Amherst, E.

Energlyn, L.

Ampthill, L.

Evans of Claughton, L.

Auckland, L.

Faithfull, B.

Avon, E.

Ferrers, E.

Aylestone, L.

Fortescue, E.

Baker, L.

Fraser of Kilmorack, L.

Beaumont of Whitley, L.

Gardner of Parkes, B.

Belhaven and Stenton, L.

Gladwyn, L.

Bellwin, L.

Glanusk, L.

Beloff, L.

Glenarthur, L.

Berkeley, B.

Glenkinglas, L.

Bessborough, E.

Gowrie, E.

Blake, L.

Granville of Eye, L.

Boyd-Carpenter, L.

Grey, E.

Burton of Coventry, B.

Gridley, L.

Byers, L.

Hailsham of Saint Marylebone, L.

Campbell of Alloway, L.

Campbell of Croy, L.

Halsbury, E.

Cathcart, E.

Hampton, L.

Chitnis, L.

Hankey, L.

Clifford of Chudleigh, L.

Harris of Greenwich, L.

Clitheroe, L.

Harris of High Cross, L.

Cromartie, E.

Henley, L.

Daventry, V.

Home of the Hirsel, L.

Davidson, V.

Hylton-Foster, B.

De Freyne, L.

Ilchester, E.

De La Warr, E.

Kennet, L.

Denham, L.—[Teller.]

Killearn, L.

Diamond, L.

Kilmany, L.

Dilhorne, V.

Kilmarnock, L.

Donaldson of Kingsbridge, L.

Kimberley, E.

Kinloss, Ly.

Drumalbyn, L.

Lane-Fox, B.

Duncan-Sandys, L.

Lauderdale, E.

153

Listowel, E.

Sainsbury, L.

Long, V.

St. Aldwyn, E.

Lucas of Chilworth, L.

St. Davids, V.

Lyell, L.

St. John of Bletso, L.

McAlpine of Moffat, L.

Salisbury, M.

McFadzean, L.

Saltoun, Ly.

Mackay of Clashfern, L.

Sandys, L.—[Teller.]

Mackie of Benshie, L.

Seear, B.

Macleod of Borve, B.

Sharples, B.

Mancroft, L.

Skelmersdale, L.

Mansfield, E.

Soames, L.

Margadale, L.

Spens, L.

Marley, L.

Stradbroke, E.

Marsh, L.

Strathcarron, L.

Merrivale, L.

Strathcona and Mount Royal, L.

Monk Bretton, L.

Montgomery of Alamein, V.

Swinfen, L.

Tanlaw, L.

Mottistone, L.

Taylor of Gryfe, L.

Mowbray and Stourton, L.

Terrington, L.

Murton of Lindisfarne, L.

Trenchard, V.

Norfolk, D.

Trumpington, B.

Northchurch, B.

Vaux of Harrowden, L.

Nugent of Guildford, L.

Vernon, L.

Onslow, E.

Vivian, L.

Orkney, E.

Wakefield of Kendal, L.

Orr-Ewing, L.

Ward of Witley, V.

Penrhyn, L.

Weidenfeld, L.

Perth, E.

Westbury, L.

Plummer of St. Marylebone, L.

Whaddon, L.

Wigoder, L.

Porritt, L.

Wilson of Langside, L.

Portland, D.

Windlesham, L.

Rochdale, V.

Winstanley, L.

Rochester, L.

Young, B.

Romney, E.

NOT-CONTENTS

Ardwick, L.

John-Mackie, L.

Balogh, L.

Leatherland, L.

Beswick, L.

Llewelyn-Davies of Hastoe, B.

Birk, B.

Bishopston, L.—[Teller.]

Longford, E.

Blease, L.

Lovell-Davis, L.

Blyton, L.

McCarthy, L.

Boston of Faversham, L.

Milford, L.

Brockway, L.

Oram, L.

Bruce of Donington, L.

Paget of Northampton, L.

Caradon, L.

Peart, L.

Collison, L.

Ponsonby of Shulbrede, L.—[Teller.]

David, B.

Davies of Leek, L.

Ross of Marnock, L.

Davies of Penrhys, L.

Stewart of Alvechurch, B.

Donnet of Balgay, L.

Stewart of Fulham, L.

Elwyn-Jones, L.

Stone, L.

Ewart-Biggs, B.

Strabolgi, L.

Fisher of Rednal, B.

Strauss, L.

Gaitskell, B.

Taylor of Mansfield, L.

Glenamara, L.

Underhill, L.

Hatch of Lusby, L.

Wedderburn of Charlton, L.

Houghton of Sowerby, L.

Wells-Pestell, L.

Jeger, B.

White, B.

Jenkins of Putney, L.

Wootton of Abinger, B.

Resolved in the affirmative, and amendment agreed to accordingly.
Clause 12 [Pressure to impose union membership requirements]:
4.19 p.m.
The Minister of State, Northern Ireland Office (The Earl of Gowrie)The Minister of State, Northern Ireland Office (The Earl of Gowrie) moved Amendment No. 99B:
Page 14, line 14, leave out ("subsection (1) of section 11") and insert ("section 11(1) or (Prohibition on union recognition requirements) (1)").
The noble Earl said: This amendment was spoken to earlier. I beg to move.
On Question, amendment agreed to.
The Earl of Gowrie The Earl of Gowrie moved Amendment No. 99C:
Page 14, line 16, leave out ("subsection (2) of section 11") and insert ("section 11(2) or (Prohibition on union recognition requirements)(2)").
On Question, amendment agreed to.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 100:
Page 14, line 18, at end insert ("and one of the facts relied upon for the purpose of establishing liability would satisfy subsection (2)(a) or (b) below").
The noble Lord said: This is the first of our amendments on Clause 12. As some of my noble friends have pointed out, Clause 12 now becomes even more important than it was before this new clause was introduced to your Lordships' Committee, over six months after the Bill was brought into the light of day, to remedy what it appears from previous speeches has been a long, well-known abuse. I noted that noble Lords speaking to the clause referred only to local authorities as the offenders. It puzzled me why it was not limited to them if they were right. But it is not; it includes all employers.
Clause 11, new Clause 99A, and Clause 12 now make up a trio that will cover a wide area of British commercial and industrial life. I stress commercial because Clause 11 and the new clause are about commercial practices, and Clause 11 underpins them by trying to prevent the activities of those who by industrial action or the like would try to cause a contravention either of Clause 11 or of the new clause in a variety of ways.
However, it is about far more than pressure in regard to work that is to be done. Clause 12(1) sets up to remove a defence from that which is being done. Clause 12 may be put into two parts: 12(1) appears to want to stop the inducements which it describes which lead to a contravention of Clause 11, or now the new clause. Clause 12 subsections (2) to (7) are the second half, to which we come later. When Parliament appears at least to be enacting a new liability, given the way some of your Lordships think this House should function, no doubt noble Lords opposite will think that this House is somewhere where attention should be paid to this matter, because if the clause does not clearly set out the liability, then in view of the serious nature of the problem as described by noble Lords opposite that is a grave matter for a revising Chamber, albeit that it has first go at the new clause. In Clause 12 doubly so because it is indeed a revising question.
Having set up the forbidden commercial practices which must not be done on the ground that the other employer is to insist on union membership, or the other employer is to be forced, or compelled, or persuaded to recognise, consult, or negotiate with trade unions, we now find in Clause 12(1) that nothing in the 1974 Act, in Section 13, is to prevent an act from being wrongful or actionable in tort where the person who does it induces the other person to do one of two things, and the act which is done incorporates, or constitutes, the inducement. The two things

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which are described as being induced are, first, to incorporate in a contract any of the terms previously described as being void. That is to say, the terms in Section 11(1) or subsection (1) of the new clause whereby the contractor is required to have union employees, or to recognise a trade union or even consult with it.
I hope that the noble and learned Lord the Lord Advocate will tell us what the position is on safety, because it is a most serious situation that the Government can introduce liabilities of this kind without even a flicker of interest in the statute of 1974 in respect of safety representatives and safety committees, to which people's lives and safety have been more closely related since that year.
First, then, we have an inducement to incorporate a void term in a contract. Nothing in Section 13 of the 1974 Act is to protect it. But Section 13 of the 1974 Act does not say anything about incorporating void terms in a contract. Section 13 of the 1974 Act is about interferences with a contract by a third party. If I had a contract with the noble Earl, Lord De La Warr, who I see looking with amusement at this point, and if someone else interrupted it then they would be liable for the tort of inducing a breach of contract. But if that were done in furtherence of a trade dispute subject to the Government's Act of 1980, which of course has more or less destroyed it, they would have had a defence under Section 13 of the 1974 Act in a trade dispute.
But that is not this. This is inducing someone to put a term into the contract which then the Government say is void. So that the defence is taken away against a liability which is irrelevant to the defence. Then one says, where is the liability? And you cannot find it. It is not set out in terms that an act which induces the incorporation of a void term in a contract is a tort. You will not find that anywhere in the clause. The same is true of the second except that it is rather more complex. I say to the noble Lord, Lord Boyd-Carpenter, that if he wants more intellectual content and less emotion then perhaps we can move carefully together across the face of the clause. He will not mind if it becomes complicated, because the matter is complicated and ought to be looked at. It is said by Clause 12(1) that the protection of Section 13 of the 1974 Act shall be taken away when anyone induces another person to contravene Section 11(2). Although we did not debate it yesterday, that is a vast range of commercial practices pressuring the contractor to enter into union labour only requirements.
But again Section 13 of the 1974 Act is not about inducing people to enter contracts based on union labour only requirements. I accept there could be a case where some interference with another contract was constituted by that same Act, but not by reference to the definition of Section 11(2). Once again the Bill will have the appearance, if enacted in this form, that 12(1) will take away a defence from a cause of action which is not clearly there, on the basis of which I suppose the courts will say, "Well, what shall we do?"
I am sorry that the noble and learned Lord the Lord Advocate has left us. I appreciate there are good
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reasons for this. I make no complaint. I think I heard him accurately when he said that what the Government were out to do was to ban pressure either by a union or by a company. Presumably then that would include any sort of pressure by means that were lawful or unlawful whereby the object is the unlawful purpose under paragraph (a) or paragraph (b). I hope that the noble Earl will not tell us that it is necessarily an unlawful and tortious act to do something inducing the breach of a paragraph in a section if all that the section sets out is that the contract shall be void—which is taking paragraph (a)—because of course that is not true.
If a statute says that a contract is void, or a term in a contract is void, as here, and I induce you to enter into such a contract, no liability in tort arises under the ordinary principles of English law. We shall come back to recognition in another context, because throughout Section 12 of the Act comes the influence of the new clause.
Under the influence of the new clause, Clause 12, which was a bit odd and should be looked at again, now becomes horrendous, because the courts might say—I think it unlikely, but who knows?—that as the provision is drafted the legislature must have meant all these things to be tort or civil wrongs.
If that happens, how will businessmen conduct their affairs? I am not talking only of trade unions. Indeed, I note that our amendments in this series, in a curious way, might be unfair to trade unions as against companies. Amendment No. 100 would, in effect, limit the liability which could arise under Clause 12(1) to the same area as subsection (2) and the provisions following it, which in layman's terms I can call "industrial action"; that is, inducing breaches of contracts of employment or interfering with them or threatening to do so. Therefore, by Amendment No. 100 we would create a liability usually for trade unionists as against the company so that our object when I tabled it would not be fulfilled. As against that, there is a later amendment, which I mention in passing but will deal with in detail later, No. 106, which deals with the second half of Clause 12. Again, that is an attempt to limit the area of liability.
With the permission of the Committee I will now speak to Amendment No. 102, which is another attempt to say to the Government, "Please spell out the area of tort liability", because No. 102 says that nothing in the subsection we have been discussing shall be a tortious liability, or actionable in tort, on any ground except one which would be protected by Section 13 of the 1974 Act. I am anxious to make that point strongly in closing my remarks on the clause, before coming to the social meaning of these—I am sure the noble Lord, Lord Boyd-Carpenter, agrees—complicated legal points. Amendment No. 102 would say, "Since you are protecting a liability in Clause 12(1) with Section 13, presumably you must be talking only of the torts in respect of which Section 13 applies, for you mention no other". There is no other area of independent liability in Clause 12(1) for inducement. As I say, it is not automatically an inducement to induce terms in a contract, nor indeed to induce statutory torts, although it may be said that the parties would be joint tortfeasors. If that is what the Government mean, they should spell it out. When Section 13

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is not to be a defence, it would seem sensible to spell out the liability.
There is one golden principle with which I suggest the Committee approach this and the other matters which the Government—the Government, not we—have introduced into the Bill. It is that every time one sees a protection from the immunities (usually in the 1974 Act as amended in 1976) the golden principle is: if an immunity is removed, a liability springs up. Most of the way through the Bill later we shall see that where immunities are removed, liabilities spring up for trade unions in respect usually of the common law. That is a good way through the verbiage of the clause. But it does not work here because, remove the protection and in Clause 12(1)(a) you do not have a liability, and in paragraph (b) if you have one it is very obscure; it is difficult to know exactly what it is or how wide it is.
As the Government put such enormous store on this basic freedom they are enacting, one would have thought that they would have got rather more clarity into the clause that begins to underpin the whole apparatus. I trust that the noble Earl will be able to tell us clearly and precisely—albeit with a complex structure, because it is a complex matter—what the liability is that the citizens of this country are supposed to be put under by subsection (1). I say, on the analysis that I make, that at the moment the first part of it is absurd and the second part is highly obscure. We await with interest to hear what the Minister has to tell us about the matter. I beg to move.
4.35 p.m.
The Earl of Gowrie: The noble Lord, Lord Wedderburn, was kind enough to remind the Committee that my noble and learned friend the Lord Advocate has had to be away, with good reason. I am here to take his place on this amendment. I must say that I am not fully happy at this substitution at this stage, but I will do my best. This is the first amendment to Clause 12 and therefore it may be helpful briefly to remind the Committee what the clause is about.
Clause 12 is really a mirror image of Clause 11. Whereas Clause 11 is mainly about employers who impose union labour only requirements on non-union firms, Clause 12 is about trade unions and trade union officials who seek to impose such requirements or to have them imposed. The clause operates by removing the immunity provided by Section 13 of the 1974 Act from those who threaten or organise industrial action to prevent work being done by non-union firms. Therefore, it is most important for the Committee to realise that all this clause does is to remove immunity from action to put pressure on an employer to discriminate against non-union firms. Removing immunity means that if a person, in putting pressure on an employer, induces a breach of contract, then he is liable; it is the interference with the contract which is actionable.
Subsection (1) removes immunity from those who threaten or call industrial action against an employer to pressurise him to put a void term in a contract or otherwise to contravene Clause 11. Subsections (2) to (4) are mainly concerned with industrial action taken or threatened after the contract has been awarded, to prevent a non-union firm from fulfilling the contract or to prevent goods provided under the contract from
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being delivered or used. This amendment focuses on subsection (1). That is the subsection which removes immunity from those who threaten or call industrial action against an employer to pressurise him to put a void term in a contract or otherwise to contravene Clause 11. The amendment seeks to limit the circumstances in which that immunity is removed by subsection (1) to cases where there has been interference or threatened interference with contracts of employment. In other words, to bring an action under subsection (1) it would be necessary to show that the trade union pressure on an employer to impose union labour only requirements had involved threatened or actual industrial action which had interfered with or threatened to interfere with contracts of employment.
I have to say that the Government do not believe that this would have much effect on the coverage or impact of subsection (1). In practice, the sort of pressure which is envisaged in the subsection is pressure which is exercised through threats of, or actual, industrial action. So in 99 per cent. of the cases which are liable to arise under subsection (1), there will have been the kind of interference with contracts of employment which are set out in subsection (2)(a) or (b).
There may, however, be the odd case where there is no clear interference with contracts of employment, but there is nevertheless clear pressure on employers to break commercial contracts. That will not arise very often in cases arising under subsection (1), but it might do so, particularly in cases involving pressure to terminate a contract with a non-union firm. It seems to us right that if such direct interference with contracts occurs, it should lose its immunity under this subsection. If the amendment were accepted, it would not do so. I emphasise again that there is not very much between the Government and the proposers of the amendment. All we are doing in subsection (1) is to remove the Section 13 immunity in certain circumstances from interference with contracts. The normal cases which arise under Clause 12(1) will be cases where there has been threatened or actual interference with contracts of employment.
The noble Lord asked me about a number of specific points. He asked me about the Health and Safety at Work Act 1974. That Act imposes duties on employers to consult safety representatives who are union nominated. The duties apply to employers in any case, and there is no need whatsoever for them to be imposed through commercial contracts by other employers. The noble Lord raised the question of liability for inducing a breach of statutory duty. As I said, the principal effect of Clause 12(1) is to disapply the Section 13 immunity, where there is trade union pressure to put union labour-only clauses in contracts, or otherwise to prevent non-union firms obtaining contracts or getting on to tender lists. That means that the principal cause of action will be for the well-known and well-established torts of inducing breach of, or otherwise interfering with, contract or threatening such, which is set out in Section 13 of the 1974 Act.
Therefore, despite there not being a very great deal between the noble Lord and myself on subsection (1), he will see that Clause 12 is critical to Clause 11, which we have just passed, and is the mirror image of it.

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Therefore I hope that he will not see fit to press the amendment.
Lord Wedderburn of Charlton: I found the noble Earl's reply at one and the same time disappointing and revealing. Since I think that we shall have this thread during the debate, I would say that safety is a very important matter. I do not wholly accept the noble Earl's reply, though I am grateful for it. He suggested that because there is a statutory duty on an employer under the 1974 Act to take steps to allow safety representatives to operate and to consult safety committees where requested—which is a separate step under the Act—no pressure of contractual form would be needed to cause the obligations to be observed. Of course we all know that in matters concerning equal pay, safety, and so on the better employers—I do not now speak of trade unions—veryfrequently put pressure, sometimes commercial pressure, upon other employers to observe standards of this kind; and it is the erosion of such standards which is objectionable. But the question of safety does not rest there. I hope that there will be further intervention on safety when the noble and learned Lord perhaps deals with it on the debate on clause stand part. I pose the question now so that it can be thought about.
Under Section 2 of the Health and Safety at Work Act 1974 there are various obligations; they are not all the same. There are regulations which enshrine some further provisions. There is then a code of conduct, which is not law, but guidance, and then there is a code of guidance, which is in fact further guidance, but is below the code. How far can either a union or another employer go in pressurising a "cowboy" employer to observe decent standards of safety for his workers in terms of consulting trade union safety representatives? Can he do only what the Act obliges the other man to do? Can he verge off into the regulations? Is he allowed to get into the code or the notes on guidance and the like? Without a specific provision in the schedule of the Bill this matter will be what I think would be called a "dog's breakfast".
As I said, the noble Earl's reply was revealing, and I should like to put the matter very quickly in the following way. He has confirmed that Clause 12(1) is really about industrial action. It is about threatened or actual industrial action. He has said that the practice of pressurising in the way that he has described would in 99 per cent. of cases involve threats of industrial action which would amount to inducing breach of employment contracts or the other tortious acts which are similarly described—by way of interference with contracts of employment. The noble Earl said that there might be 1 per cent. who break commercial contracts. Well, I do not agree with his batting averages, but that does not matter. That is the ground that he covers—interference with contract.
But where in subsection (1) is the provision that liability is restricted to that area? It would be quite improper of me in reply—and I am sure that the noble Earl would not so wish me—to try to go through the case law on breach of statutory duty in respect of civil liability. But there is much difficult case law in a certain chapter of a certain book to which I could
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refer the noble Earl, about the difficulty of knowing when the courts will construe a statute to impose a civil liability perhaps rather wider than Parliament had foreseen. That is why it is so important to get this matter right. I remember many occasions when in regard to other legislation the party opposite said, "Go and get it right". I do not believe that the noble Earl considers that on any ground subsection (1) is thoroughly satisfactory, but in view of the position that he has taken, we shall expect the Government to look at it again, and perhaps to debate it once more in a rather different way on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4.46 p.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 101:
Page 14, line 18, at end insert ("and is, or (as the case may be) are, directed against the person by whom the action is brought").
The noble Lord said: This is perhaps a rather easier matter for me to understand. The basis of liability is always to be measured in part by the question, Who can sue? Who can bring an action? Indeed, the first thing that the lawyer asks, if he is told that there is a likely plaintiff, is, "Has he got a cause of action?" The point of the amendment is to question the extraordinary width of persons who might sue, if Clauses 11, the new clause contained in Amendment No. 99A, and Clause 12 are added together. I shall not try to do that by reference to the Bill. In speaking to Amendment No. 101 I should also like, if I may, to speak to Amendment No. 106, which parallels the amendment that I am now moving, in limiting Clause 11(7)—and I shall come to that in the right place.
If in looking at the Bill one asks the question, who can sue? the most important provision to which to refer is Clause 11(7). In doing that, one should bear in mind that it is all about people who can complain of others who have carried out the commercial practices that the Government find so terrible, including requiring consultation with trade unions. The situation is rather extraordinary. One would not have believed that your Lordships could possibly be considering a Bill that provided that one could not refuse to contract with someone on the grounds that he did not recognise or consult a union. But that is what it comes to. One's right to contract with whom one pleases is taken away. Under Clause 11 a remedy can be obtained against one if one refuses to contract with a person because he does not consult safety representatives—unless the statute gets one out of it, and one is lucky with the 1974 Act. We have been told that one can then sue the person who has done the inducing by means of industrial pressure, and indeed I accept that Clause 12(2) and what follows is about industrial pressure.
Who are the people with whom we are concerned? Subsection (7) on page 13 of the Bill states, first, that the person is the supplier who is being kept off the tenders list, and the like. Well, given the philosophy of the clause, which I deplore and abominate, I understand that that is logical. Paragraph (b) of the subsection states that the person is the other party to

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a contract which has been torn up, albeit lawfully on other grounds. One can lawfully terminate the contract in every other respect, but one can then be sued by the person concerned if one did it because one wanted him to consult the trade unions. So notice is given, and all the rest of it, but that is not good enough. Well, at least I understand that on the basis of the words used.
Thirdly, in paragraph (c) on page 14 there is a slightly wider area, which one can only describe as relating to other people, who have been referred to earlier as being involved, largely in subsection (3), in the commercial practices which are being struck at. I understand that a rather more general reference has to be made. But those people are fairly clearly identifiable. If it had stopped there, at least the employer, who has done this terrible thing of pursuing the policy of the fair wages resolution by parallel means, or the union, which has done this terrible thing of demanding that decent standards be maintained of rates and conditions at work, would know who they had to fear. But, no, there is an extra group—paragraph (d). I quote:
"in any case, any other person who may be adversely affected by its contravention"—
that is, the contravention of this section. Of course, it is such a group which, logically and understandably, would be the plaintiffs against the union for inducing the wrong.
I repeat: any other person adversely affected by the contravention of the section? I do not understand it. I hope the Government will not say that I ought to understand it because (as they said in another place) the same phrase is used in the Resale Prices Act 1976, Section 25(3) of which also talks about enforcement by, "any other person who may be adversely affected", because so far as I know, people who have looked at that Act are still trying to find out what it means there, so if they have taken a precedent from that they are not doing very well.
It is necessary now to depart from the law and to think about real life. If I may say so, although the first debate today was extraordinarily useful in setting the broad lines of where we are, we have had precious little detail of what this clause really could do—indeed, what these three clauses really can do. May I take an example? Let us take a supplier of goods. I have it in mind to take fish; I do not know why, but I suppose it is because he sends his fish by lorry to the docks, where they are taken across the estuary to the wholesaler across the way, who distributes to the retailers who, in turn, sell to the fish and chip shops who sell to the public.
Let us suppose this all goes wrong. Why does it go wrong? His normal lorry has broken down, and he has on offer three people who have lorries. One of them, Lorries Limited, employs only T and G members; or, if you like, Lorries Limited recognise the Transport and General Workers' Union and consult them. So he takes Lorries Limited because he thinks it is not a bad firm; and, as a matter of fact he rather likes to have a firm which negotiates and consults with the union because the dockers are in the union, too, and it is a fact of life, whether it is good or bad, that the drivers in the Transport and General Workers' Union get on rather better with the dockers. Noble Lords
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opposite will not like that, but it happens; and why should the employer not be free to consider such a matter in a competitive society?
So he deliberately rejects Carriages Limited, which has submitted a parallel tender, and one of his grounds—we will come to that in moment; it need only be one, but we will take it as the one for the moment—is that Carriages is a non-union firm. They may pay good rates, they may drive good fish in their lorries, but they do not seem to get the same co-operation with everybody else.
Then, Lorries Limited having been taken on, the unfortunate thing happens (that is, fortunate only to the lawyers) and that is that Lorries Limited's lorry breaks down—it has not got enough cash, perhaps, to service its vehicles—and the fish does not get through, or at least gets through very late. It gets to the wholesaler, who says he cannot distribute it, it is late at night; the retailers have not got any fish; there are fish and chip shops which have not got any fish and chips; and Bill the consumer is so enraged that he tells his wife some very nasty things when she tells him she cannot get any fish and chips for supper. This is a very serious question. The noble Earl looks amazed.
The Earl of Gowrie: Not amazed.
Lord Wedderburn of Charlton: Not amazed; dumbfounded, perhaps. Who are the people "adversely affected "by reason—indeed, not "by reason", because the Bill does not say "by reason", but "adversely affected by its contravention"? That is even looser than "by reason". It must be that Carriages Limited has an action, and from debates in another place that is what the Government were thinking about, although actually I think they would come under another head, given my example. The wholesaler? It is difficult to say that he should not have an action if he has lost his profit on the deal. The retailers? Did they not depend on this practice not being engaged in? What other reason is there for them having suffered loss or being affected adversely but that this man chose the union firm instead of the non-union firm? And what about Bill, the consumer? Why should he be excluded—the little man? And what about the lady consumer? Where does she come in if she has suffered either physical or mental torture from this unhappy event?
Of course, I put the point in a somewhat jocular tone to the noble Earl, but I say that it covers a most serious problem. Under normal principles of law there is no universal duty of care to all the citizens of the United Kingdom to avoid a breach of each and every statute that might affect them adversely beyond all contemplation of the person who contravenes it, or, indeed, in many cases, even within the contemplation of the person who fails to observe the statutory duties. It is not a question of contemplation; it is a question of what the legislation says, and this legislation says that anyone can sue who may be—not who is likely to be, not who can reasonably be foreseen to be, but who may be—adversely affected by its contravention.
Amendments to Clause 11 could, as it were, have taken this point then, but as my noble friend Lord McCarthy said, we (I think quite properly) decided to debate these three clauses together in substance on the new clause and Clause 12. But I say to the Govern-

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ment that two things arise out of that analysis and that illustration. Firstly, is it not the case that the words "may be adversely affected" cover an enormous range and should perhaps be rather limited in the two ways that my noble friends' two amendments suggest? The first way, in Amendment No. 101, is that the contravention must be directed against the plaintiff who says he was adversely affected. This is an ordinary principle of law. If we are talking about the tortious liability of unlawful interference with trade, it is clearly established in the case that the plaintiff, in order to sue, must show that he was deliberately and directly aimed at by the defendant. That is quite different from this. This is a vague liability and covers a wide range. I say, first, that it should be limited to the intentional or deliberate act aimed in the clear direction of the defendant.
Secondly—and this would be Amendment No. 106 —if the Government cannot go that far, then at any rate (and this is a subsidiary point; in order not to go further, I make this, as it were, a totally separate second heading to the noble Earl) Clause 12 does not even tell you that the people who can sue the union are limited to the people who can sue the employer. What Amendment No. 106 does is to say that, whatever range of plaintiffs can sue the men in the commercial deal which you dislike so much in order to have consultation with unions prohibited and done down by commercial dealing, which must not be allowed, if you insist on saying that anyone who may be adversely affected can sue if he suffers loss—I see that the noble and learned Lord is with us, and he may not have heard the beginning of my speech. Of course, I accept that there must be causation; clearly causation of the loss must be proved, and so on; but given that, it is the range of plaintiffs and who may be adversely affected which I have illustrated.
If the Government insist on keeping that, then I say that it will be noted by the courts that it is not repeated in Clause 12, on which I think the courts will place considerable significance. Because the courts believe—the courts have to believe, because there is no other way of administering the law and justice—that there is such a thing as the intention of Parliament. We in this Chamber tonight may think of it only as some abstract thing high up in the ceiling that will go forth without us noticing it when we send this Bill away. But there is such a thing as an intention of Parliament, expressed not in the ceiling but in the Bill. If the Bill is left in this form, a court will be bound to say: "What a funny thing that they put subsection 7(d) at the end of Clause 11 and nothing parallel in Clause 12 and, therefore, as a second string, Amendment No. 106 (to which I speak as well) would say that only those who could sue under Clause 11 could sue the union under Clause 12. I beg to move.
The Earl of Gowrie: The only thing which rather amazed me about most of the speech of the noble Lord, Lord Wedderburn, is that it seemed to be about Clause 11 and who can sue under Clause 11. Under Clause 11, a person can sue if he is adversely affected by the unlawful practices set out there, but under Clause 12, which we are supposed presently to be debating, a person can sue in tort if he is a party to a
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contract which is broken or threatened by industrial action against a non-union firm. It was that which caused my expression of puzzlement when this sad story of the failed fish was enunciated from the Benches opposite—and not through any culinary inexpertise, as I am the cook in my household.
Lord Wedderburn of Charlton: I am grateful to the noble Earl. Of course, I should have said the sentence expressly: if you accept this amendment, you will have to amend Clause 11. We did not have a debate on that. It was agreed that we should debate all the clauses together. I accept we will come to it on Report.
The Earl of Gowrie: I am glad that the noble Lord and I are on side about that. If I could deal with the point he made—I accept wholly that it is a serious point—in his interesting story about the fish and chips, there may be those who can show that they have been adversely affected by practices outlawed by Clause 11, and, if so, they, too, may have a course of action under subsection 7(d) of Clause 11. But this does not over-ride the normal principles of law. Anyone bringing an action will have to show that he has sufficient locus standi to bring a case; in other words, that he has suffered loss as a result of the imposition of union membership requirements. It will sometimes be difficult enough for a contractor himself to prove that he suffered because of those practices. The more remote a person is from the union membership requirement, the more difficult it will be for the person to bring a case. It would be a mistake, therefore, to think that subsection 7(d) of Clause 11 will cause widespread legal actions. But we believe that anyone who can show a sufficient cause of action should be able to bring legal proceedings; and subsection 7(d) will enable them to do so.
Returning to Amendment No. 101 and to Clause 12, this amendment would restrict the right to take legal proceedings in tort by virtue of Clause 12(1) to a person against whom the trade union pressure to impose the union labour-only requirement was directed. This presumably means that in most cases only the employer whose employees were taking, or threatening to take, industrial action to persuade him to discriminate against non-union firms, will have a right to sue in tort, The non-union firms themselves and anyone else whose contract was interfered with by unlawful action could be prevented from taking legal proceedings. We do not accept the limitations which that amendment imposes on the rights of plaintiffs to take legal action against those acting unlawfully and, for that reason, I would ask the Committee to reject the amendment.
Before I sit down, if I understood the noble Lord aright, the noble Lord also gave me notice that he was speaking to Amendment No. 106. As I have said in response to the previous amendment, Amendment No. 101, we do not see justification for restricting those who may be able to take legal action under Clause 12. The effect of Clause 12 is to remove in certain circumstances the immunity from actions in tort provided by Section 13 of the 1974 Act. This means that anyone who is damaged will be able to bring legal proceedings, if he can show under the normal rules of the law on the relevant tort, that he has sufficient cause for action. This may be the employer of the employees who are taking the industrial

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action or the customer or supplier of such an employer if they are damaged directly as a result of unlawful action. There, in a slightly different context, the noble Lord's story of the fish may be relevant; or the non-union firm which has been prevented from fulfilling a contract. In practice, it is unlikely to include anyone more remote from the action than that.
I cannot leave this debate without returning to a point which has been made. There is one simple way to avoid being liable under Clause 12 and that is simply to remain within the law. If trade unions and trade union officials abide by the provisions of Clause 12 then it will not matter who can sue because no unlawful act will have been committed and no damage caused.
Lord Wedderburn of Charlton: I must express disappointment that no other Members of your Lordships' Committee with legal knowledge is taking part in this debate, because the noble Earl has taken us into water which is very deep. I have brought forward some points which perhaps would have been made later but which now must be made here because they are germane to what he said. They fall under three headings. The first relates to his last remarks. I put it this way. It will not do for the Government to tell us when the Bill is obscure that the easy way to avoid problems is to stay within the law. That is a self-contradiction. What we are saying is that the law is not clear. "Tell us what the law is", we say, "and we will try to keep within it". But I do not know what it is, and the noble Earl has not told me; so that it is no good his getting up and saying that there is nothing wrong with the Bill, keep within the law and do not break it so as to effect a contravention. What I am saying is that the Bill is obscure.
May I take the two points that he put to me? I understand them. They engage with my argument but they do not answer it. The first was that the normal principles of law would apply and the ordinary law of the land—I have noted it—would be applicable. Of course, that is true. But the ordinary law of the land on this matter has become extremely complex. There was, for example, in 1981 an action taken to the Judicial Committee of your Lordships' House between Lonrho Corporation and Shell Petroleum based upon the issue of whether Lonrho could sue Shell because Shell, breaking the sanctions regulations, had put petrol and oil into Rhodesia for many years. Lonrho said: "Because you broke that criminal obligation in that case"— but that is not the only point of the judgment—" and the statute and regulations, we want damages because we suffered loss". As a matter of fact, they might well have been people who were adversely affected. They certainly were; and Shell could even foresee it, as was accepted.
The argument was whether or not the statute on its construction allowed for this plaintiff to sue in respect of that kind of loss. So the problem in the Lonrho case, albeit not parallel in every respect, is, nevertheless, precisely germane to the noble Earl's correct reminder that the normal principles of law apply. There, the Law Lords have recently clarified this area of the law. The noble and learned Lord, Lord Diplock, in a unanimous opinion put it forward in two propositions—and I will read only thoseparts which make it absolutely
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clear—in page 461 of 1981 2 All England Reports. He says:
"First, there is liability where on a true construction of the Act it is apparent that the obligational prohibition was imposed for the benefit or protection of a particular class of individuals".
—such as in the Factory Acts. I am saying that this Act does not make it clear where the class of individuals is to be delimited. And it could do better. On Lord Diplock's principle, there, how do you get much help on the basis of anyone who may be adversely affected, except to say that it is very wide indeed? It is certainly wider than the Factories Act.
Then there is a second principle that where a statute creates a public right then a particular citizen who suffers can sue if he suffers particular, direct and substantial private damage. I apprehend that no one would suggest that the second principle applied. So we are left with the first principle, the ordinary law of the land. I say that it leaves the matter obscure.
I say with no hesitation that the law officers of the Government should pay attention and say to the Cabinet that this is a very serious matter. It has been to the courts and the appellate courts many times, and only in the last few weeks have there been cases on other statutes—it happens to be statutes that people want to use to control those who pirate and bootleg video tapes and so on, a constant source of litigation—but it raises the same point because the Acts are obscure as to who can sue for what. There is no reason why there should be very much obscurity about that. Any decent plaintiff can always raise a bit of dust; but there is no reason to leave it as obscure as the Bill does.
The noble Earl's second point was this. He said if you limited it to a liability for acts done which are directed at a person, then only the other party to a contract or in a similar relationship would be able to sue, and third persons, the non-union firms—which were really the losers down the line—would not be able to sue. With great respect, that is a simple confusion.
You can of course limit the range of plaintiffs to the other parties to a relationship. That is what paragraphs (a), (b) and (c) of Clause 11(7) do and by reference presumably thereby to Clause 12, although we have not had much response to the idea that perhaps the unions could be put in the same position as the employers by taking Clause 11(7) into Clause 12 as well. I hope that the Government are thinking about that. But it does not follow from the fact that you have limited the liability to acts which are done when they are directed against another person that that only reaches the other party to the transaction. That reaches a much wider area.
All the cases on unlawful interference and unlawful damage in trade and business show clearly that the plaintiff need not be a party to a contract. He need not be a party to a relationship. He must be someone in respect of whom the deliberate act of the defendant in breaking a statute which caused the duty to be owed to him caused damage of the type envisaged by the statute and caused proximate loss within the normal principles of causation. I take the noble and learned Lord, Lord Diplock, to be saying that in slightly different words in the first principle in the Lonrho case.

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If the noble Earl does not like "directed", he can find something else; anyone who is deliberately done damage by the breach. I am not asking the noble Earl to take these words. I am saying—he said nothing about it at all—that Clause 11(7) is not in Clause 12, which means that the unions have no guidance at all. In so far as they would have guidance if it were put there, it would be poor guidance because his answer did nothing to clarify the meaning of "adversely affected". I cannot understand why the Government six months after they have put a Bill forward have the new clause which is what makes this such a big matter and imposes these areas of liability with hundreds of plaintiffs who may have to litigate and perhaps waste their money to see whether there is locus standi or not, and expect a revising Chamber to put it through. I expect that the Committee will put it through. With the greatest respect to the Committee, it shows the limitations of the House of Lords as a revising Chamber.
Lord Molloy: I should like to emphasise one point which occured to me when the noble Earl was speaking. One tried to follow the arguments as closely as possible. The point that I am trying to make is that the noble Earl referred to the fact that no one need worry if they keep within the law. Does he mean the law that might come if this Bill becomes an Act or the law at the moment extant?
It seems to my simple mind that if he means the existing law, there is no need for the Bill. If he means when the Bill becomes law then I am faced with the quandary that my very experienced noble friend Lord Wedderburn is in. This is not a political matter; no politics are involved in this. If it is a question of the law which ought to be reasonably easy for ordinary lay people to understand, I simply say that I found difficulty in following both the noble Earl's arguments and my noble friend's arguments. We shall not solve anything by having Divisions or political arguments—there are no politics involved in this is it therefore unreasonable, as my noble friend Lord Wedderburn has requested of the noble Earl, to ask that this particular aspect be taken back and that a fresh look be taken at it in the light of what my noble friend has said as an expert, and in the light of what I have said as an ordinary person who does not understand too much of the details of law?
5.16 p.m.
The Earl of Gowrie: I am extremely grateful for the intervention of the noble Lord, Lord Molloy, because he has brought us back to earth. The fact of the matter is that I meant that there would not be difficulties—or I would have thought few difficulties—for people once this Bill became an Act to decide on their liability or on whether or not they could sue. The territory we are in in the arena of Clause 11 and Clause 12 of the Bill is pretty simple. It does not involve a great deal of learned expertise or difficulty. Clause 11 is designed to deal with what are generally known as union labour only requirements. We have debated the reasons why the Government find this long standing practice in some industries distasteful, particularly in view of the increasing use by public authorities. We can argue the merits or demerits in political
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terms. Here I respectfully disagree with the noble Lord, Lord Molloy; there is a political argument here about these practices.
If we pass Clause 11—as so far, for the sake of argument, we have—Clause 12 is only a logical extension of it in that Clause 12 goes on to make it unlawful for employees and unions to put pressure on employers to violate the laws that we have, so to speak, just passed under Clause 11. To even an unlearned figure like myself this does not seem to be a very difficult point to grasp. The noble Lord, Lord Wedderburn—with I acknowledge a great deal of flair and all the expertise of one who spent a lifetime in the distinguished practice of labour legislation—has both widened and narrowed the debate. He has taken our eye a little off the ball as to what these clauses are designed to do. As he is a skilful professional person, I may be forgiven a little if I suspect him of going into these regions in order to take the mind of the Committee off the rather simple provisions which exist in these clauses.
Lord Wedderburn of Charlton: I know that the noble Earl will not think I am in any way being other than courteous and respectful. I want to remind the Government of an occasion—I have to admit that I do not remember which Bill it was, but I remember reading the Hansard account in 1974, 1975 or 1976—where the provisions of one of the trade union labour relations Acts or employment protection Acts caused the then Opposition to demand that the noble and learned Lord the Lord Chancellor come to the Chamber to explain them. I have made no such demand tonight, but we should all look at that occasion in Hansard. I suspect that provision was certainly not as obscure and strange as this one. Our eye was not off the ball. The noble Earl's eye was well on the ball when he diverted us to the simple point at the end. We shall not withdraw these amendments. Let them remain on the record.
On Question, amendment negatived.
[Amendment No. 102 not moved.]
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 103:
Page 14, line 35, leave out ("reason, or one of the reasons,") and insert ("principal reason").
The noble Lord said: If I may, I will move Amendment No. 103, speak to Amendment No. 104 and mention Amendment No. 105. Unless the noble Lord the Minister says something very extraordinary compared with what has been said throughout these three-and-a-half days of debate, my noble friends and I will ask leave to withdraw the amendments. The reason for moving them is so that they can be put on the record, and if I am brief I hope it will not be thought that the amendments are considered by us to have anything other than 100 per cent. convincing merits.
The point made by Amendments Nos. 103 and 104 is that this very wide new liability is based upon someone acting for a reason or "on a ground", as it is in Clause 11. Of course the things aimed at, as the noble Earl has made clear, are union labour requirements and now banning consultation with trade unions or anything to do with trade unions, as far as one can see, in

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terms of consultation and commercial practice. When one puts these clauses together, one can see that they cover a very wide area.
At the centre of the liability is the reason or the ground upon which somebody does an act. Normally, in a statute, if you think something is obnoxious you say, "You must not do it for that reason", and then somebody will say to you, "But most people in life are more complicated than that". It may be that noble Ministers act for only one reason, but most of us are rather more complex and it is normally enacted, in the format in which earlier, indeed, clauses in this Bill are enacted, that the particular provision applies when someone acts for a reason, or, where there is more than one reason, a principal reason, and then it is set out. On page 2 of the Bill in Clause 2 you will find—
"the reason (or, if more than one, the principal reason)"—
and then follows the rest of the clause. But that is not so here.
All the way through Clause 11, the new clause, and Clause 12 imposing commercial and industrial liabilities, constricting the freedom of people to contact and constricting the freedom of workers to take ordinary industrial action or indeed, as we have seen, possibly not industrial action, inducing breach of any contract, there at the centre is the one ground which, if it appears, vitiates the entire cobweb of transactions. So there might be a hundred reasons. According to this Bill, you can have a million reasons, and so long as one of them is what the Government do not like then the Bill automatically comes down with its civil liability for damages, the extent of which you cannot be sure of because you do not know.
In regard to injunctions, if we had had some debates on this in which the Government were prepared to consider the difficulties, perhaps we might have discussed the remedies of injunction, because the Government plainly mean to have injunctions available for plaintiffs here. I should like the noble and learned Lord to tell us what forms of injunction he thinks are likely to be awarded and what are not, and whether or not they would reach to the edge of a court, telling a defendant that he must enter into a contract or telling a union that it must help him to enter into a contract, or what form the injunctions would take under the new Clauses 11 and 12. The noble and learned Lord may say that they will take the ordinary form, but that will not do because this is not an ordinary trio of clauses. They raise entirely new problems and they do so because the liability tests where someone acts with a variety of reasons; but you have only to have one reason—to push someone, to force someone or to edge someone towards consultation with a union—and all your other reasons are out of the window.
I say that is totally unreasonable and I appeal to noble Lords—the Government cannot be serious in saying that only one reason, when there are dozens of others, is a liability every time. It is not sensible—I use a neutral word: it is silly. The public will think we are silly if we pass an Act which says that if you have a million reasons and one of them falls within the Bill you will be liable for the loss, sued by someone who is adversely affected. Surely the Government will look at this again; but I suspect they will not. And presumably they will not look at the kind of liability
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which might be reconstructed around the notion that an employer should be put with his associated employee, which we put forward in Amendment No. 105. I have some hope left that the noble and learned Lord will tell us something to the advantage of the Bill, apart from anything else; and so in that sense I move Amendment No. 103.
Lord Mackay of Clashfern: The purpose of subsections (2) and (3) of Clause 12 is to remove immunity from industrial action to interfere with the supply of goods or services from another employer on the grounds that the work in connection with these goods or services is to be or has been done by non-union or union employees. As with the imposition of union membership requirements by employers, it does not make much sense to consider in these cases, as these amendments would have us do, whether union membership was a major or a minor factor. If it was a factor at all in the union's action, then, in our view, it is right that the immunity should be removed. If the action is taken for other reasons altogether then the immunity is retained. That seems to us to be a reasonable criterion and to justify your Lordships in not accepting this amendment.
On Question, amendment negatived.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 103A:
Page 14, line 38, leave out from ("persons") to ("who") in line 39 and insert ("(other than persons employed by the relevant employer)").
The noble and learned Lord said: I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 103B:
Page 14, line 40, leave out ("or").
The noble and learned Lord said: I have spoken to this amendment already, and I beg to move.
On Question, amendment agreed to.
Amendment No. 104 not moved.]
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 104B:
Page 14, line 44, at end insert ("or
(c) the supplier of the goods or services in question is not the relevant employer and the reason, or one of the reasons, for doing the act is that the supplier does not, or is not likely to, recognise, negotiate or consult as mentioned in section (Prohibition on union recognition requirements)(1)").
The noble and learned Lord said: I have already spoken to this amendment, and I beg to move.
On Question, amendment agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 104A:
Page 14, line 43, leave out (" (employed by another") and insert ("(other than persons employed by the relevant").
The noble and learned Lord said: I have already spoken to this amendment, and I beg to move.
On Question, amendment agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 104C:
Page 15, line 1, leave out from ("above") to first ("the") in line 2 and insert ("the "relevant employer" means").
The noble and learned Lord said: I have already spoken to this amendment, and I beg to move.
On Question, amendment agreed to.
[Amendments Nos. 105 and 106 not moved.]
On Question, Whether Clause 12, as amended, shall stand part of the Bill?
5.29 p.m.
Lord Wedderburn of Charlton: It is, in the view of my noble friends and me, very important now to look at the clause as a whole and indeed, as I have said in regard to previous amendments, to look at Clause 12 as the final chance of the Committee to pass a judgment upon the trio of clauses. As I shall suggest later, they enact anti-union measures and indeed measures aimed at businessmen, who are happy with their relationships with their unions and merely want to see common standards and fair wages resolution standards applied in a decent way throughout a trade. It is not just unions who have things to fear from these clauses, and the message should go out to businessmen. As we have just seen over the last amendment, the Government do not care whether a businessman has 300 charitable reasons, 5,000 decent reasons and 600 justifiable reasons: so long as he has one reason that he wants someone else to recognise or consult with a union; that is enough for the Government. Then he is for the high jump and the whip or the hoop can be thrown by anyone who may be adversely affected.
There is a little recent history to this—the encouragement of employer—undercutting of basic rates; the problem of the—to use the Words of Alan Flanders—employer and union engaging in the joint regulation of the enterprise and, perhaps, of the trade, district or whatever is the relevant sphere; the whole concept of the extension of standards and decency in trades which many British employers are right to uphold. Many British employers do not like the cowboy outfits which do not observe safety regulations and which have standards that do not depend upon statute. Many British employers do not like people who cut rates, when they know that, somewhere in the background, there is not a payment of social security subscriptions or various other practices, to which I shall come later, in regard to self-employment.
This matter was discussed in 1980, and subjects of this kind were put to the then Secretary of State in regard to Section 18 of the Employment Act 1980. That was triggered by the report of Mr. Leggatt on SLADE, and its activities as a union to compel people into membership over a very wide area of activity. The Government then devised a clause which they said would stop the activities of SLADE and would not go very much further, because it was put to them "Wouldn't it be a very bad thing if, in this legislation, you stopped what in some industries are called fair lists?"
On 28th July, 1980, the then Secretary of State, Mr. Prior, said in Committee in another place:
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"I do not particularly care for the fair list system operated by TASS, but I accept that it is an industrial practice and one with which I am not seeking to deal in this clause or in any other clause of the Bill".
He went on later:
"We are not seeking to abolish fair lists. The way fair lists are entered into as a result of an agreement, as is the case with the TASS agreement with the employers here, is something with which we all ought to be able to live in good industrial relations". —[Official Report.]
My noble friends and I were critical of Section 18, but it did not seem to us that the Secretary of State at that time was anything other than sensible about fair lists and similar arrangements.
It may be that there is a line to be drawn, but why ban them all, when in some industries they are the only reason why those employers who would be the black sheep employ their workers on contracts of employment, instead of on self-employment or lump labour, and when they are much more effective in upholding jointly regulated standards—I stress jointly regulated—than legislation? They are employer-union arrangements which are not harmful to competition and they are not harmful to costs, because, in the long run, they give the employer an opportunity of working with his work force, of participating with them and of gaining productivity and efficiency through consensus, rather than conflict.
They are part of arrangements between some of the best unions and employers in the country. But they will be more than at risk, and 90 per cent. of them will very likely fall foul of this Bill. There must be many in Birmingham, Leeds, Glasgow, Manchester and Cardiff who, when they read the report of this debate, will wonder what on earth was going on in London when these provisions were passed.
My second point is about the extraordinary way in which these three very wide liabilities in the clauses, and these three very wide areas of possible plaintiffs, have been justified in effect, by one area alone—local authorities. I said yesterday that gradually coming out of the Bill was the attack upon what the noble Earl, Lord Gowrie, referred to as the politically motivated act by certain councils. I referred to the fact that the district auditor will be used in order to charge labour councillors for political convictions which the Government do not like, but on which they may well have been elected.
But this time the Government are not going to leave it to the courts, in case it goes wrong. They are going to say, "We do not care what your election programme was. You are not allowed by us, no matter what your local voters say, to make contracts on the basis of consultation with trade unions by the other contracting party". What a preposterous, outrageous proposition to put before the country! Indeed, was it ever put before the country? What was the consultation on this? Perhaps the Minister will tell us when he replies. What document was sent and to which union and to which employer? What are the views of the CBI? Does the EF agree, because they did not agree with many areas in the Bill? Can we know and, if we cannot, when will we be told?
The noble Lord, Lord Boyd-Carpenter, said earlier that these clauses are fair and reasonable and he could not understand why anyone should oppose them. The words that he used were almost exactly those

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used in a certain leader in The Times, which said that unhappy though it was to see this happening "we must preserve the rules of fair fighting". That was in 1872, when the gas strikers were convicted for the strike in the West End of London that was called a criminal conspiracy by Mr. Justice Brett. The terms of the speech of the noble Lord, Lord Boyd-Carpenter, were very similar to The Times on that occasion which I do not have with me, but which I have well in mind in speaking of it.
This whole debate has shown again that the Government have forgotten some of the wisdom of those from whom they would claim descent, because when, in 1909, the wages councils or the trade boards, as they were called, were being set up, the President of the Board of Trade said on 28th April, at col. 388 of Hansard:
"It is a serious national evil, that any class of His Majesty's subjects should receive less than a living wage in return for the utmost exertions. It was formerly supposed that the workings of the laws of supply and demand would naturally regulate or eliminate that evil. The first broad division we make on that question is between healthy and unhealthy conditions of bargaining".
That was the basis of the Trade Boards Act and the wages councils which, if they have their head, I have no doubt the Government will get rid of, in view of the response of the noble Earl, Lord Ferrers, in the debate initiated by the noble Lord, Lord Spens.
The President of the Board of Trade went on:
"Where in the great staple trades of the country you have powerful organisation on both sides, there you have a healthy bargaining which increases competitiveness in industry".
Later he said:
"But where you have what we call sweated trades you have no organisation, no parity of bargaining, the good employer is undercut by the bad and the bad employer is undercut by the worst".
The Government have forgotten all that. The Government are now going to legislate against the kind of organisation that prevents that. The speaker on that occasion was far more wise those many years ago. It was the President of the Board of Trade, Winston Churchill. This Committee should not accept Clause 12, nor, indeed, should it have accepted the previous two clauses.
Lord Mackay of Clashfern: A good deal of the latter part of the noble Lord's speech in relation to Clause 12 suffers. I suggest, from the same sort of confusion as was pointed out by the noble Baroness, Lady Burton, in connection with an earlier debate. The fact that these clauses seek to preserve for employers and employees the right to manage their own affairs without outside interference, is in no way to promote cowboy outfits in relation to safety or to promote sweated labour or anything of that sort. The conditions in which trade unions are able to invite people to join today are surely very different from those which prevailed in the history to which the noble Lord has been kind enough to treat us this afternoon.
So far as the Government are concerned, Clause 12, like Clause 11 and the new clause, is concerned with the imposition of union labour only and other requirements on contractors, but whereas Clause 11 and the new clause deal with the imposition of such requirements by employers, Clause 12 is aimed at trade union
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pressure to impose and enforce such requirements. The Government take the view that pressure of this kind, which is dealt with by this clause, is not appropriate and ought no longer to be lawful.
The clause is in two distinct parts, as your Lordships have seen, which it is convenient to consider separately. Subsection (1) is a direct consequence of the two previous clauses. It removes immunity from a union or other person who organises or threatens industrial action in order to put pressure on an employer to do something which Clause 11 and the new clause declare to be unlawful. In other words, if trade union representatives in a company threaten to call out the employees in that company unless that employer sub-contracts only to a sub-contractor with a closed shop or recognition agreement, they or their trade unions may be liable to be sued for an injunction or damages.
I hope no one is in any doubt why we are taking such a step. The Government are opposed to requirements about union membership and recognition, whether they are enforced by employers or trade unions. It would be absurd to make it unlawful for an employer to impose such requirements while leaving trade union action to persuade the employer to impose such requirements completely untouched. It would put employers in an impossible position, caught between the provisions of the law on the one hand and pressure from their trade unions on the other.
Subsections (2) to (4) of Clause 12 deal with the related but wider question of industrial action which interferes with the supply of goods or services from non-union companies. Two typical examples of such action which may be affected by these subsections are, first, the refusal of employees to work with or allow on to a site an employee of another company who cannot produce the requisite union card and, secondly, the refusal of workers in a company to handle goods or materials because they have come from a non-union source. It does not at all follow that because they are coming from a company which is a non-union source, the terms upon which the workers work are any less favourable than those which would obtain in a union situation.
Lord Wedderburn of Charlton: They may be.
Lord Mackay of Clashfern: The noble Lord says they may be, but that shows that the mere fact of this sort of provision being put in has very little to do with conditions. It is a very different situation that the union wishes to achieve by pressure of this kind. It is to have the union recognised rather than specially to promote any particular conditions of employment. These practices are common in some industries, particularly where there is a long tradition of union membership or a high level of sub-contracting.
The noble Lord asked me about consultation and spoke of the practical difficulties of implementing these proposals which, in our view, are very justified in principle because of the practices which they are to outlaw. The possible consequences were considered. The Government consulted on these matters and set out the issues very plainly in the Green Paper on trade union immunities, and in a consultative paper on the Government's proposals we specifically sought further advice on this question before we made up our mind about the contents of the Bill.

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The response to both the Green Paper and the consultative paper left us in no doubt about the strong views of employers and employers' organisations that these practices should be dealt with in the Bill, first because they are objectionable in principle and if we miss this opportunity to put up barriers to them they may take an even firmer hold; and, secondly, because without subsections (2) to (4) it was widely felt that the Bill's measures to make unlawful union labour only requirements would be incomplete—and dramatically incomplete.
We were impressed by these arguments and by the strength with which they were expressed. In the light of these explanations, I hope your Lordships will agree that this clause should stand part of the Bill.
Lord McCarthy: Before the noble and learned Lord sits down, I think he referred to the trade union immunities Green Paper. May I ask the noble and learned Lord where in the trade union immunities Green Paper, to which I am sure he referred, there is anything at all on prohibition of union recognition requirements. I do not think it can be found anywhere. Indeed, I cannot find a direct reference in it to any of the previous clauses on union requirements. But specifically I think the noble and learned Lord will find that there is nothing at all on the prohibition of union recognition requirements. It is something which the Government have invented in this Committee at the last moment.
Lord Mackay of Clashfern: As the noble Lord will remember when I introduced the amendment with the new clause about union recognition, I explained that the matter concerning this particular aspect had been drawn to our attention since the Bill was published. But the principle upon which it rests is exactly the same and the reason that it is obnoxious is exactly the same as the reason in principle upon which Clause 11 itself rests.
Lord Wedderburn of Charlton: Before the noble and learned Lord finally resumes his seat, there is nothing in the document about that. May I ask him a second question? I asked, I think specifically, about fair lists. The Government specifically took a stand in 1980 and gave the reasons for their position on Section 18 of the 1980 Act. That position has now been overturned and these clauses do what the Government said they would not do in 1980. What specific points about fair lists have the Government taken into consultation and which parties on fair lists have they consulted?
Lord Mackay of Clashfern: If I correctly took the quotation which the noble Lord gave from my right honourable friend who was then the Secretary of State for Employment, he was making it clear that it was not the intention of the Government to deal with that particular matter in the 1980 Bill. The quotation does not suggest that it would not be appropriate to deal with it on a future occasion, once these matters had been consulted upon.
5.47 p.m.
On Question, Whether Clause 12, as amended, shall stand part of the Bill?
Their Lordships divided: Contents, 139; Not-Contents, 52.

DIVISION NO. 2

CONTENTS

Aberdeen and Temair, M.

Lane-Fox, B.

Airedale, L.

Lauderdale, E.

Airey of Abingdon, B.

Lloyd of Kilgerran, L.

Alexander of Tunis, E.

Long, V.

Allerton, L.

Lucas of Chilworth, L.

Auckland, L.

Lyell, L.

Avon, E.

McFadzean, L.

Aylestone, L.

Mackay of Clashfern, L.

Baker, L.

Mackie of Benshie, L.

Bellwin, L.

Macleod of Borve, L.

Beloff, L.

Margadale, L.

Bessborough, E.

Marley, L.

Blake, L.

Marsh, L.

Boardman, L.

Massereene and Ferrard, V.

Boyd-Carpenter, L.

Merrivale, L.

Brougham and Vaux, L.

Mills, V.

Burton of Coventry, B.

Montgomery of Alamein, V.

Campbell of Alloway, L.

Mottistone, L.

Campbell of Croy, L.

Mowbray and Stourton, L.

Cathcart, E.

Murton of Lindisfarne, L.

Chitnis, L.

Norfolk, D.

Clifford of Chudleigh, L.

Northchurch, B.

Cockfield, L.

Nugent of Guildford, L.

Craigavon, V.

O'Hagan, L.

Cromartie, E.

O'Neill of the Maine, L.

Daventry, V.

Onslow, E.

Davidson, V.

Orkney, E.

De Freyne, L.

Orr-Ewing, L.

De La Warr, E.

Pender, L.

Denham, L. [Teller.]

Penryhn, L.

Diamond, L.

Plummer of St. Marylebone, L.

Dilhorne, V.

Donaldson of Kingsbridge, L.

Portland, D.

Drumalbyn, L.

Rochdale, V.

Ebbisham, L.

Rochester, L.

Eccles, V.

Romney, E.

Ellenborough, L.

Sainsbury, L.

Elles, B.

St. Davids, V.

Elliot of Harwood, B.

St. John of Bletso, L.

Energlyn, L.

Salisbury, M.

Erroll, E.

Saltoun, Ly.

Faithfull, B.

Sandford, L.

Ferrers, E.

Sandys, L. [Teller]

Fortescue, E.

Seear, B.

Fraser of Kilmorack, L.

Sempill, Ly.

Gardner of Parkes, B.

Sharples, B.

Gladwyn, L.

Skelmersdale, L.

Glanusk, L.

Spens, L.

Glenarthur, L.

Stamp, L.

Glenkinglas, L.

Stodart of Leaston, L.

Gowrie, E.

Stradbroke, E.

Gridley, L.

Swinfen, L.

Hailsham of Saint Marylebone, L.

Tanlaw, L.

Terrington, L.

Halsbury, E.

Thomas of Swynnerton, L.

Hampton, L.

Trefgarne, L.

Hankey, L.

Trenchard, V.

Harris of Greenwich, L.

Trumpington, B.

Harris of High Cross, L.

Vaux of Harrowden, L.

Harvington, L.

Vernon, L.

Henley, L.

Vivian, L.

Home of the Hirsel, L.

Wakefield of Kendal, L.

Ilchester, E.

Walston, L.

Ironside, L.

Ward of Witley, V.

Kennet, L.

Westbury, L.

Killearn, L.

Whaddon, L.

Kilmany, L.

Wigoder, L.

Kilmarnock, L.

Wilson of Langside, L.

Kimberley, E.

Windlesham, L.

Kinloss, Ly.

Young, B.

Kinnaird, L.

NOT-CONTENTS

Ardwick, L.

Bernstein, L.

Balogh, L.

Beswick, L.

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Bishopston, L.

Llewelyn-Davies of Hastoe, B.

Blease, L.

Lovell-Davis, L.

Blyton, L.

McCarthy, L.

Boston of Faversham, L.

Milford, L.

Briginshaw, L.

Molloy, L.

Brockway, L.

Oram, L.

Brooks of Tremorfa, L.

Peart, L.

Bruce of Donington, L.

Phillips, B.

Collison, L.

Pitt of Hampstead, L.

David, B. [Teller.]

Ponsonby of Shulbrede, L. [Teller.]

Davies of Leek, L.

Davies of Penrhys, L.

Ross of Marnock, L.

Elwyn-Jones, L.

Sefton of Garston, L.

Ewart-Biggs, B.

Segal, L.

Fisher of Rednal, B.

Stewart of Alvechurch, B.

Gaitskell, B.

Stewart of Fulham, L.

Gregson, L.

Strabolgi, L.

Hatch of Lusby, L.

Taylor of Mansfield, L.

Houghton of Sowerby, L.

Underhill, L.

Jeger, B.

Wedderburn of Charlton, L.

Jenkins of Putney, L.

Wells-Pestell, L.

John-Mackie, L.

White, B.

Kirkhill, L.

Wootton of Abinger, B.

Lee of Newton, L.

Wynne-Jones, L.

Listowel, E.

Resolved in the affirmative, and Clause 12, as amended, agreed to.
5.56 p.m.
The Earl of Gowrie: I think that the noble Lord, Lord Marsh, and the noble Lord, Lord Harris of High Cross—who appear not to be present—would wish to move their amendments, although quite what to do about it I do not know. But now I see the noble Lord, Lord Harris of High Cross, approaching.
Lord Harris of High Cross Lord Harris of High Cross moved Amendment No. 107:
Before Clause 13, insert the following new clause:
("Lay off and industrial action by employees of the employer
.—(1) An employer whose customary course of business is disrupted by industrial action by his employees shall, subject to compliance with the requirements of subsection (2) and the provisions of subsection (3), be entitled to suspend without pay—

(a) employees participating in industrial action or financing or directly interested in the dispute which caused the industrial action;

(b) any other employees of the employer for so long as the dispute continues.

(2) The requirements of this subsection in respect of subsection (1)(b) are satisfied if the employer—

(a) causes to be displayed at the place of work of all employees intended to be suspended a written notice ("the warning notice") identifying such employees and stating the reason for such intended suspension;

(b) takes such steps as are reasonably practicable to ensure that the attention of all employees intended to be suspended is drawn to the warning notice on the day on which it is first displayed ("the date of notification"); and

(c) exercises the right to suspend not sooner than 48 hours after the date of notification as shall have been specified in the warning notice.

(3) A complaint may be presented to an Industrial Tribunal by any person whose pay has been suspended by the employer by virtue of the provisions of subsections (1) and (2) of this section on the grounds that such provisions were inapplicable; and unless the employer satisfies the Industrial Tribunal that in all the circumstances of the case the suspension and the period of suspension were justified having regard to the provisions of subsections (1) and (2) of this section, the Tribunal may declare the suspension to have been unfair and award compensation in accordance with the principles set out in
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section 74 of the Employment Protection (Consolidation) Act 1978.").
The noble Lord said: The full merits of Amendments Nos. 107 and 108 will be revealed to the Committee shortly by my noble friend Lord Marsh who has been working intensively for some days on the full legal complexities of the matter. I want to put a simpler argument before your Lordships. The Committee has listened patiently for some days to many amendments which have been advocated on a whole range of different grounds. Some have been posed on legal or constitutional grounds and others have been based on political, historical, social or even—when the noble Lord, Lord Molloy, was in full spate—on high emotional grounds. We have heard about individual or collective rights. We have heard about public opinion. We have heard about restoring the balance between the two sides. I want to put before the Committee the economic merits of this amendment.
Whatever the rights or wrongs of a strike, one of its primary aims and one of its invariable consequences is to impose a cost on the company through the interruption of production. In olden days, if the workforce went on strike, the company suffered some loss through the interruption of its business and through having to bear unavoidable overheads which persisted throughout the strike. But then at least the cost of maintaining the strikers and their families is shifted to the trades unions, if they offer strike pay, or to the workers themselves—or to the taxpayers, through supplementary benefits and related support.
However defective the economic understanding of some trades union leaders may be, they have recently increasingly "tumbled" to a way of inflicting a larger cost on employers at small expense to themselves. Thus, a selective strike by key workers is a far more onerous penalty to impose upon the employer with whom they are in conflict. They can immobilise production—sometimes completely—but leave the company with a contractual obligation to pay wages to the non-striking majority for whom there may be no work at all. In this way, a small minority of workers, at minimum sacrifice, may impose a maximum loss upon the company. This wholly disproportionate pressure may lead to an immediate "shot-gun settlement" on the strikers' terms, or it may lead to a protracted dispute, as we saw in the Civil Service dispute last year, or as we are seeing in the present National Health Service strike. Either way the company may suffer losses which impair its competitive position or its ability to raise or service new capital for investment. But when you come to a number of industries that have a very high proportion of their costs represented by labour costs, like the railways, or coal, or newspapers, the cost of continuing a selective strike by key workers is particularly severe and it must at some stage bring the company towards insolvency or indeed into bankruptcy.
I believe the Government may be inclined to offer some token resistance to this amendment as licensing a breach of contract. But if that is so, we have to ask who is responsible for the breach: is it the employer, who is running out of cash, or is it the union for bringing the company's survival into jeopardy? And if the company is finally bankrupted, what then? Not only will contracts be broken willy-nilly but

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future employment prospects may be destroyed. This is by no means an arcane economic speculation, if we remember how the print unions have helped over the years to destroy newspapers, going back to almost forgotten names like the News Chronicle, the Daily Herald, and more recently two of the three London evening newspapers with which most of us were brought up.
I want to put to the Committee very strongly that lay-off provisions of the kind incorporated in these two amendments, Nos. 107 and 108, are perfectly familiar in leading European countries. I cannot claim to have had time to conduct a possibly exhaustive survey, but in Germany, in France, in Denmark, in Belgium employees can be laid off if strikes in essential public services cause disruption or suspension of a company's production. This is regarded as force majeure, as arising from the interruption of supplies from outside of the company, for which the employer can have no possible responsibility. This is covered by our new clause in Amendment No. 108, the second of the two clauses. In most of these cases, even in Sweden, there is also provision for lay-off where a selective strike is by the company's own workers which causes the disruption of production, as incorporated in our Amendment No. 107 as we will discover from my noble friend Lord Marsh. Both these clauses provide the customary safeguards. They provide for an announcement of the intention to activate the suspension, they provide for a period of notice, and they provide for the right to appeal to an industrial tribunal.
We may hear that not all employees are agreed about the need for these clauses. Well, that is fine, they do not have to use them: there is no compulsion; there is no requirement. I can conceive of employers who would judge that to mobilise these powers might on balance be disadvantageous to the company. That is for their judgment. But in some circumstances they might find it a valuable way of preserving the solvency of their company as a future employing unit.
The Engineering Employer's Federation have strongly urged the merits of this amendment, as discouraging irresponsible militancy and diminishing the possibility of jobs being destroyed by selective strikes. Similar clauses to those before the Committee were tabled in the other place but were not discussed owing to the operation of the guillotine. It is my submission that, by incorporating these clauses in the Bill tonight, we shall be performing our constitutional duty in providing an opportunity for the elected House to consider, for the first time, these amendments, which have so much industrial and economic logic to commend them. I beg to move.
Lord Campbell of Alloway: I would urge upon your Lordships not to accept this amendment. Your Lordships have heard the economic case advanced, but will it work in practice, and ought we to license breaches of contracts of employment? We have heard about other countries. They are Napoleonic Code countries with a wholly different régime, where the lay-off clause in different ways is treated as a force majeure clause. Comparison with those countries, because the régime is so different, affords little assistance.
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But to take a common law country, consider Australia. There is at the moment a Bill before the Australian Parliament to amend their principal Act of 1904, and Clause 6 of that Bill contains a lay-off clause which bears a striking similarity to the form of the subject matter of this amendment. It may interest your Lordships to know that this Bill at the moment has been referred to the Select Committee of the Senate to consider inter alia—and here I quote, with your Lordships' leave:
"whether this right of lay-off without reference to the Conciliation and Arbitration Commission is consistent with modern industrial practice and will contribute to industrial peace".
I would oppose this clause as drafted mainly for the reason that it seeks to impose lay-off without the pre-requisite of conciliation. If there were some sort of mandatory conciliation, such perhaps as is envisaged by Amendment No. 143, that might—I underline "might"—be different. But there is not.
I am tired of hearing from noble Lords opposite that I am anti-union, hostile to unions, do not understand anything about it, and so on. I may not understand much about it, but I am not hostile to anyone, I regard this lay-off clause in its present form as unwise, unfair to trade unions, far too draconian and only for use in a form of national emergency, and this is not a Bill, fortunately, which envisages any such situation. I invite your Lordships for those reasons, if they commend themselves to your Lordships, to reject this proposed amendment.
Lord Marsh: I must apologise to the Committee for having been somewhat late on this occasion. I think it is a combination of my past with British Rail and experience of another place where things move at a more leisurely pace. I listened to the noble Lord, Lord Campbell, obviously with very great interest and consideration for the views which he puts forward. But, with the greatest respect, I suggest that he misses the entire point of the new clauses. This is not a question of a legal argument, it is a question of practicality. These two amendments are designed to assist an employer whose business is disrupted, either (in the case of Amendment No. 107) by some of his own employees or (in the case of Amendment No. 108) by employees of some other business on which he is dependent. This is intended to provide him with a third course of action. As things stand in the present situation, he has only two options open to him. In such a situation he can meet the claim, whatever its justification and however fair or unreasonable, or he can continue to pay the full costs of the labour until such time as he goes insolvent.
To the best of my knowledge, there is no other alternative open to him. That is a situation which is a practical problem. In these days, recession and cash flow problems can result, and do sometimes result, in the collapse of a company and the permanent loss of the employment opportunities for the workforce themselves. In fact, the clauses are designed not to attack trade unionists and their employment, but as the only practical proposition which I personally can see at the present of preserving their future job opportunities in those circumstances.
In the bad old days employers were able—and frequently did—dismiss their workers without notice,

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without compensation and frequently for no good reason. It still happens no doubt sometimes but it is not without notice and not without compensation but it is sometimes done without good reason. I suspect that there is nobody in this Committee who would wish to see those days return or would have any time for that sort of behaviour. That situation was indefensible and it has changed very much indeed, and quite properly so.
Anyone who is involved in day-to-day business will know that the dismissal of an employee today is frequently very difficult and it is almost always very expensive. It is not something which employers do lightly. Indeed, the situation has changed so much that voluntary redundancy is an extremely attractive proposition to many employees, particularly older staff with long service, and it is a traditional well known way in which to reduce labour forces. In periods when Governments of both parties decide to freeze salaries or to control them within certain norms, frequently the best way of helping a good executive is to fire him and let him get his tax-free redundancy payments.
Therefore, the situation has changed very much. Today the required notice for the dismissal of an employee varies, but in most cases it is quite substantial. Perhaps I may speak about one industry, the newspaper industry, in which I obviously declare a direct financial interest. The average period of notice there is 12 weeks. I would ask your Lordships to bear that in mind—12 weeks notice. Of course, despite the pockets of low paid wages in some industries, in others wages today are not at subsistence level. In national newspapers, for example, the average earnings of a semi-skilled worker today is £206.85 per week—£10,765 per year. That is the wage for the semiskilled and obviously one would not expect him to get as much as the skilled worker whose average earnings today are £341.25 per week—£18,000 per year. So we are talking about a commitment in the case of a stoppage for which the employer has no direct responsibility and, indeed, if it is caused by extraneous action in some other company, no control. There is nothing that he can do. The option he has is to pay out for a period of 13 weeks, wages at those levels. It is not a legal question; it is an economic impossibility in many companies.
Let us take, for example, an average national newspaper company. A stoppage will cost something around £4 million a week; something in excess of £½ million a day. It may well be that the contract reached says that the employer has to go on paying £½ million a day for 13 weeks. But I would submit to your Lordships that it is no great secret that there are many newpsapers in Fleet Street who could not go on doing that for a month or a fortnight—they are already in a loss-making situation. The danger is that it is possible for people to have in mind the long disputes that can be borne in the public sector. However, they cannot be borne in the private sector on this scale for long.
So what are the options? One option is that they can give 13 weeks notice to their employees, but of course they will be insolvent long before that time and the jobs will be gone for good. The second option is that they can pay up regardless of the merits of the claim. All Ministers—and many Members of this House have been Minister and have shared this view,
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including myself—have a touching and totally unjustified faith in the power of exhortation. I have heard industrialists—I have taken part in it myself—over and over again entreated to stand firm in the national interest. I have heard Prime Ministers of both parties and several Governments make the most scathing attacks—and frequently the irritation of Conservative Prime Ministers with industrialists is only matched by the irritation of Labour Prime Ministers with trade unionists—on the weakness of employers for not assisting them. The position is that very few companies in the private sector can afford not to accede to any union claim if it is pursued with skill and with determination.
These clauses are quite well known in British industry. I am sure that the noble Lord, Lord Wedderburn, would agree that they exist in a number of industries and have done for many years. I accept that they exist on a voluntary basis, but they are well known and the value of them has been known in the past. It could be said that to introduce them would involve a breach of faith with employees by their employers. I dispute that. As my noble friend Lord Harris has said, in these cases the employer is frequently not in dispute with his employees, particularly if it is extraneous action.
I keep coming back to the point, at the risk of being tedious, that the company has no alternative if it is to survive. Frequently, the temporary suspension of the guaranteed week is the only way in which to preserve the longer-term job opportunities of the employees within the company where the company is faced with a financial obligation which it simply cannot meet. We have talked a great deal about the rights of trade unions and the power which they have quite legitimately obtained over many years. If they have that power, then to suggest that they have an obligation to take into account the effect of the exercise of that power upon other workers is not unreasonable. That is something about which they can be asked.
The two clauses have differences. The first of course deals with the right to suspend after 48 hours. It concerns the case where there is a domestic dispute and where it is easy for the workers affected to consult with the management and, equally, to consult with each other. I suspect that in very few cases would the powers be used as early as that. But I come back to the point where one can give examples of industries where 48 hours may not sound very long, but it is £1 million in hard cash and there really is not a long time to philosophise about it.
The second involves a company suffering the effects of extraneous industrial action. Here the provisions of the clause become effective after five working days because the affected company, as in the case of the rail strike, will have some flexibility at least for a limited period. The rail disputes and mining disputes are good examples. As my noble friend has said, subsection (3) of both clauses provides a way whereby any employee who feels aggrieved can take his case to an industrial tribunal and the industrial tribunal can find against the employer if the industrial tribunal believes that it has been unfairly applied.
I understand the view of those who think that the clauses perhaps go too far; that, as the noble Lord said, they are draconian. But I believe it is a fact

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that must be faced, and the Government delude themselves if they believe that industrialists have any chance of standing firm when the scales are so unbalanced that the actions of, say, 5 per cent. or 10 per cent. of a labour force, or a labour force totally outside the company, can completely cut off the income to the company and leave it with an obligation to pay the whole of the wage bill.
Lord Boardman: The noble Lords, Lord Harris and Lord Marsh, have spoken of the problems of particular industries, and the noble Lord, Lord Marsh, referred specifically to the difficulties in the printing industry, which is an example of the problem which his clause seeks to remove. All of us who are involved in industry must know of countless similar cases where one or two people can stop a whole business and operation with thousands of other employees. The penalty that is imposed upon the employer and the pressure that it puts upon the employer, as the noble Lord, Lord Marsh, has said, is a menace.
There is the further point, that if a clause on the lines of that now proposed should become law, there would be increasing pressure upon the other employees to bring sense to bear on those who are out on strike. One would have the pressure of those who have been laid off because of the strikers, which I believe would be helpful in reaching a sensible solution. As the noble Lord, Lord Campbell said, there may be defects in the clause or other procedures which should be adopted, but I hope that, when the Government reply to this amendment they will indicate their acknowledgment and understanding of the problems around us, and perhaps make some proposals as to how this can he dealt with in order to relieve industry from the very heavy penalty that it suffers at the moment.
Lord Spens: I want to intervene for a very short moment because the noble Lord, Lord Campbell of Alloway, suggested that my amendment, No. 143, would be better than this one. I do not agree with that at all. I think that this Amendment, No. 107, and the next one, No. 108, will fit in extraordinarily well with my Amendment, No. 143, and I hope that the Government will accept all three of them.
6.32 p.m.
Lord Wedderburn of Charlton: We on these Benches have listened with great interest to the debate. We have been a little disappointed. The noble Lord, Lord Harris, said that his noble friend Lord Marsh would explain the full legal complexities to us. I do not think that he did that. I contest the law in Denmark, France and Germany as stated by the noble Lord, Lord Harris, with which no doubt he and I can join at another time. There are legal questions and, indeed, industrial and moral questions in these amendments. There is a sense in which the noble Lords, Lord Marsh and Lord Harris, solve the problem of lay off by the ultimate solution of putting the employer completely in the saddle, and indeed equating lay off to dismissal—at any rate, as near dismissal as any employee would like to get. The clauses, as the noble Lord, Lord Marsh, has taken your Lordships through them—give the employer as much power as it would be
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possible to imagine without using the word "dismissal".
Perhaps I may deal with the legal points which the noble Lord, Lord Marsh, mentioned. He said that dismissal was always expensive, to which one might respond that it is not more expensive than that which you have contracted to pay if you do it with notice, and fairly. It is, of course, true that by statute workers have a basic floor of notice rights in their contracts of employment, as their service goes up over the years. But I was not very sure whether the noble Lord, Lord Marsh, wanted to get rid of that, and whether that was his main statutory object and target, becaues if it was, it would be very easy simply to repeal those clauses and have done with it.
If notice depends—as he seemed to suggest—upon contract, and the reality in industrial life upon industrial relations conducted so far, at least, despite what so far has gone in this Bill, by collective bargaining, then, of course, it is a matter beyond that floor of negotiation. It may be that there are situations where the noble Lord, Lord Marsh, and I, would find ourselves in disagreement and others where we would find ourselves possibly in agreement as to the power, and desirable power, of the parties to the bargaining. But I suggest that the only thing the noble Lord, Lord Marsh, can do in that situation, if he thinks the union is too powerful, is to go away and keep away from the arrows and shots of the law. If the union is powerful enough to impose on the employers more notice than they would care to have given above the statutory floor, I do not know what he thinks the union's response to these clauses would be likely to be.
I do not claim expertise in having surveyed clauses of this sort in the way in which some of my noble friends, have, but I came across some in the Law Reports, because they have come to court, especially in Scotland—and I am sure that the noble and learned Lord, the Lord Advocate, would agree—where cases have been dealt with rather favourably to the employers in their interpretation of the standard guaranteed week and the suspension clauses in them. On this I should like to say a few words, because so far it seems to me that their position has been left rather obscure.
The one I came across in 1977 Reports said:
"All hourly-rated manual workers continuously employed for not less than four weeks will be guaranteed employment for five days in each normal pay week".
But it went on:
"In the event of dislocation of production in a federated establishment as a result of an industrial dispute, in that or any other federated establishment, the operation of the period of guarantee is automatically suspended."
That is a lay-off clause by way of a suspension. It sometimes begins for workers who are under discipline, but normally arises in these collective agreements where the disruption is due to a trade dispute. Sometimes it covers disputes within the federation or within associated employers, and, as the noble Lord, Lord Marsh, knows, sometimes it deals more widely. This is a matter for negotiation.
These clauses are saying that those who support them wish, by law, to impose the unilateral right of the employer, no matter what collective agreement he has negotiated, to tear it up and lay off the workforce

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without pay. What would the party opposite say if a Labour Government asked for a similar right on the other side of the coin to be negotiated or legislated: that unions could seek peace-obligations clauses, but if they found them inconvenient, contrary to custom and practice or harmful to the workers in some economic way they could, in giving suitable notice, say "We shall now tear up the agreement"? What would happen would be what will happen if clauses of this kind are enacted in Bills of this sort.
I say, "Bills of this sort", because I think it behoves my noble friends and myself to say this to the Government. We apprehend that the Government are likely to oppose this amendment—we may be wrong, but that is what we guess—just as we thought that the Government would oppose certain amendments in the Bill in 1980 that went through then. If we had said in 1980 that the 1980 Bill would incorporate in two years' time the sort of things before your Lordships' House in this Committee, most people would have laughed. They would not have believed us. Indeed, I suggested some of the things myself. In fact, I was quite wrong; I was too moderate. I had no idea that they would go as far as they have gone today.
Let us look at what the Government are now doing: getting ready to tear up the fair wage legislation—not in this Bill; getting ready to pounce on the Wages Councils—not in this Bill; dealing with supplementary benefit for those who will not have training places (in one way or another it is a tight-rope which way it will go)—and not in this Bill. A clause of this sort?— no not in this Bill. But what about the next one? The answer from the Government tonight will be looked at very carefully, not only by those who know what is going on in your Lordships' Committee, but by trade unions.
To return to the industrial reality, what happened the last time something of this sort was tried? The parallel is the attempt in 1971 to make collective agreements into contracts by law or, in effect, with very little way out. But a way out was left: presumed to be contracts unless they stated that they were not. What happened?—all the collective agreements had within them the TINALEA clause—this is not a legally enforceable agreement. Indeed, shop stewards—and I am told in one case a manager—had rubber stamps with the TINALEA formula ready to put on the end of the document, because what mattered was the agreement, not whether it was legally binding. They wanted to get away from the presumption which the Act created.
If these clauses were enacted now and came into effect in 1983, by 1984 we should have a rash of Son of TINALEA or IPNUMALL—I promise not to use the Marsh lay-off law. That would be the rubber stamp this time. The noble Lord, Lord Marsh, must know that that would happen unless—unless what? That would happen unless workers were driven further into the ground, rather than in the way they are being treated now, and if the policies being pursued in this Bill are any indication that is how they will be treated in future.
For the noble Lord, Lord Marsh, to come to your Lordships' Committee and complain about the fact that one-third of 35,000 applicants to industrial tribunals last year received compensation for being
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unfairly dismissed, when there are three million people without work, verges upon the irresponsible. Of course, most noble Lords know that is true, and also most noble Lords know that it is not the way to handle the problem. Most of your Lordships know what the Financial Times said (and since the noble Lord, Lord Marsh, is associated with the newspaper industry I know he will have read it and taken it in in the way that I did; I keep it close to me at all times) on 10th November last—and this was a leader and is relevant to this debate:
"Managements should not believe, however, that employees' more docile attitudes which have been bred mainly by fear of unemployment, automatically indicate a permanent acceptance of economic realities or a permanent willingness to co-operate with management decisions".
I quote this not because I agree with all the phraseology but because of the argument. It goes on:
"One is not arguing here for soft management, nor for creation of endless committees which can slow down decision making … The tide that swept the Bullock proposals on industrial democracy into a major issue has not receded forever".
I agree a bit more now. Then,
"Employees, whether they are shop-floor workers, or highly paid professional staff, are slowly demanding a greater say in the, affairs of their companies. Most of them do not want to usurp their managers' authority; but they do want their views to be heard and taken into account, sometimes by the boards of holding companies as well as by their nearest line managers. The challenge now is for companies to find ways of basing their newfound managerial authority on the involvement and support of their employees".
Although my programme would no doubt be different, my sentiment is very much the same. It is a sentiment which cannot be accepted by those who promote the policies of this clause and the economic policies that go with them, quite honestly because they believe that the way to deal with economic problems is to price workers in and out of work with as little collective organisation as possible. They believe that is the way—the Hayek, the market, way. The question for the Government now with this Bill, because it is a decisive Bill, is whether they are going to allow their industrial relations policy, albeit that they refuse this amendment, to go down that path, and leave behind the sensible sentiments and the ability and desire of consensus and collective industrial relations, which up to this time has been a beneficial feature for all of our citizens and our industries.
6.34 p.m.
The Earl of Gowrie: I, for one, am glad that the noble Lord, Lord Marsh, got to the church on time because the Government have considerable sympathy with the plight of employers whose business is disrupted by industrial action. It therefore must follow that the Government are sympathetic to these amendments which are concerned with the situation where an employer cannot provide work for his employees as a result of industrial action. Amendment No. 107, for instance, deals with the situation of selective industrial action in the employer's own organisation; Amendment No. 108 is concerned with extraneous industrial action which disrupts the supply or delivery of goods or services, and that can of course be as damaging to a business as the industrial action in the employer's own organisation. Both amendments therefore seek to give employers a statutory right to

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lay off without pay employees who have been rendered idle in these circumstances.
The Government therefore appreciate that selective industrial action can be disproportionately expensive for an employer, and we heard the noble Lord, Lord Harris of High Cross, talk about the infliction of huge costs to employers at small costs to unions. I think that was a point very well found. In these situations a few key workers can be called out on strike, and unless there is a voluntary lay-off agreement in force the employer must continue to foot the wage bill for the remainder of his workforce even though they cannot be provided with productive work.
Extraneous industrial action can be equally devastating, particularly if it occurs in a major service industry. How many employers are facing severe hardship at this moment, or even, as the noble Lord, Lord Marsh, sought to remind us, facing actual insolvency at this very moment, because of a national rail strike for which, of course, they are in no way to blame? How many employees are liable to lose their jobs as a result of this dispute, or of comparable disputes, in which they are in no way involved? It really depressed me that nothing in the words that the noble Lord, Lord Wedderburn, used a few moments ago paid even lip-service to the difficulties faced by industry of the kind outlined by my noble friend Lord Boardman.
I can assure the Committee that the Government have given careful consideration to these amendments. We do, however, have some difficulties in accepting them. To confer on employers the right to lay off without pay employees who may not be connected with the industrial action poses profound and difficult problems, both practical and legal, and some of these have been intimated by my noble friend Lord Campbell of Alloway. Given the state of trades unionism as we find it in Great Britain, it is difficult to make easy comparisons with other countries. In Denmark, Norway, and Sweden employers may lay off without pay employees who cannot be employed in the normal manner because of industrial action taken by others. In Norway and Sweden this right is embodied in law, and in Denmark it is a traditional feature of industrial relations, and all three Scandinavian countries seem to be very sensible in this regard.
However, the right to lay off in Scandinavia is very much part of the wider collective bargaining context. Collective agreements are legally binding, and strikes are unlawful during their period of validity. Then again collective bargaining units are very large and negotiations are highly centralised. They are conducted as it were, by the equivalent of the TUC and the CBI. Therefore, employees laid off normally belong to the same bargaining group as the strikers and have an interest in the outcome of the dispute. Consequently, the power to lay off can be regarded as a spur to strong internal trade union discipline. I cite those instances to show how a principle with which I personally am in broad agreement may need a somewhat different industrial relations context to be easily operable in practical and legal terms.
Some practical difficulties were recognised by a number of those who responded to the Green Paper on trade union immunities last year as well as those who responded to the Government's more recent
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consultative document; and had a considerable debate on the subject. It was pointed out that giving employers wide powers to override their employees' individual contracts of employment could have a damaging effect on their industrial relations. I can say in this context to the noble Lord, Lord Marsh, that employers do, of course, have a third option to the two he mentioned. They can negotiate, perhaps in return for improved terms of service, a right to lay off in the circumstances envisaged by the amendment, and many employers have already done so, but I accept of course that this option is not always available or possible for employers. The Government have therefore concluded that given the other major changes in industrial relations legislation which are being made in the Bill, we need to go into these legal and practical difficulties rather more deeply before embarking on any additional measures at this stage concerning lay-off.
It is also the case that the two amendments being discussed contain a number of technical deficiencies, though I hasten to say that this is not an insuperable objection. Nevertheless, these technical difficulties illustrate the difficulties of legislating in this area. There are problems of interpretation in the drafting of amendments. For instance, industrial tribunals would have considerable difficulty in deciding in any particular case whether the customary course of business had been disrupted or whether useful or valuable work could have been found for the employees laid off.
To what extent, for instance, would an employer be expected to apply measures of self-help? These uncertainties could leave art employer, exercising the right of lay-off, exposed to numerous challenges by the employees who were laid off by him and the employees could present complaints to industrial tribunals alone the lines that one or more of the requirements had not been satisfied by their employer. My noble friend Lord Campbell of Alloway, with his great experience, indicated some of the difficulties there. Furthermore, I find that the two amendments appear to give the employer no protection against statutory claims which employees might bring for unfair dismissal and redundancy pay. The words "be entitled to suspend without pay" also may not protect the employer from all common law rights such as the right to claim wrongful dismissal.
In sum, the Government have said that they will not hesitate to introduce further measures in the employment field as and when these are shown to be necessary and desirable. I want to make it clear that we have much sympathy with the thinking behind this series of amendments, but we do not believe that the time is yet right to introduce a far-reaching measure of the kind proposed, if only because of other shortcomings or deficiencies in industrial relations law and practice. We are, as your Lordships know, committed to the step-by-step approach. I have also tried to draw the Committee's attention to certain deficiencies in the drafting of the amendments. For those reasons, and because I have tried to indicate the Government's sympathy to the problem and our determination to wrestle with attempts to find a solution to it, I hope that at this stage noble Lords will not seek to press the amendment.
Lord Marsh: I thank the Minister for making those remarks and the context in which he made them. In the light of them and the assurance that he has given, it would be totally unreasonable, even unforgivable, to take any steps which would force him and the noble Lord, Lord Wedderburn, into the same Lobby.
The Deputy Chairman of Committees (Baroness Wootton of Abinger): Amendment No. 107 was moved by the noble Lord, Lord Harris.
Lord Harris of High Cross: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 108 not moved.]
Clause 13 [Actions in tort against trade unions and employers' associations]:
6.45 p.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendments No. 109 and 110:
Page 15, line 5, at beginning insert ("Subject to subsection (1A) below,").
Page 15, line 7, at end insert—
("(1A) Subsection (1) above shall not apply to proceedings arising from an application for an interlocutory injunction (or in Scotland interim interdict) made to a court pending the trial of an action.").
The noble Lord said: As the discussion on the Bill goes on, in the view of my noble friends and myself it becomes more and more serious and one would like to think that it would receive increasing attention. Clause 13, is of course, the provision which will reintroduce the Taff Vale principle which, as I said in debating an earlier amendment, is the principle that a trade union should be liable in tort as established in the Taff Vale judgment of 1901 by the Law Lords.
It is worth recalling, as we look at the clause and the amendments tabled to it, the context in which we debated the matter. In 1901 the decision of the House of Lords Judicial Committee, in the words of Citrate on Trade Union Law,
"reversed the unanimous decision of the Court of Appeal, who pointed out with unassailable logic that the provisions of the 1871 Act were inconsistent with an intention to incorporate registered unions or render their funds generally liable in the law of tort".
Lord Asquith in 1927, in a book he produced when he was still at the Bar, surveyed the law and concluded that it was,
"not surprising that public opinion was unprepared for any such decision".
The shock of the Taff Vale decision is still relevant today for a number of reasons. I preface them by saying that of course my noble friends and I understand what the Government have said and will say: that to re-enact the principle of Taff Vale is not necessarily to re-enact the liability of Taff Vale because the trade dispute defences, or such of those defences as are left after the ravages of the 1980 Act and of this Bill—which is a matter we will come to later—apply.
Nevertheless, it is worth recalling that, in the long and protracted debates that took place in another place, in your Lordships' House, in the Royal Commission and in many other places in the era of 1901 to 1906 and
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after, the debate really centred around two things. One was the juridical character of a trade union, on which various people held various views both in analysis and in policy, and I would share the view of anyone who said that that problem, from a lawyers' point of view at any rate, was never properly cleared up; indeed, it has caused much unnecessary litigation in the civil area other than the one we are discussing.
The second problem, however, is rather more germane to the Bill, although it is notable that this measure does not try to do what the Industrial Relations Act 1971 tried to do; namely, to settle that problem once and for all by having a registered set of trade unions which were incorporated. On the whole, trade unions do not respond kindly to that, either here or in other jurisdictions, especially in the Commonwealth, because they feel like corporate bodies; they are not what I called, in debating a previous amendment, command organisations in that they do not rest on a chain of command.
What was central also to the Taff Vale problem was the special difficulty in the English jurisdiction—I think the Scottish, too—more than perhaps some other similar countries, but not wholly dissimilar, that if you apply the old law of the common law to trade unions, you tended, because of the nature of the illegalities of industrial action, rapidly do to away with their funds, and when we come later to the substantive issues in the clause, my noble friends and I will wish to look further at that and to ask the extent to which the Government have understood that problem.
Perhaps I could put it in a phrase as a preliminary to our discussions on the clause. The problem which underlines the difficulty—and in respect of which the amendment, to which I now come, is moved maybe summarised by saying that since the 1850s, there have been at least six major new dimensions to the law of tort and tortious liability. If one rested merely as one was told to do at times, on a defence in trade disputes for certain headings of liability, one constantly found that the common law—the genius of which is to develop; the common law does develop, and therefore if you are dealing with a statutory defence, which is necessary static, or at least lagging behind, one finds that the common law has a genius to develop—always finds some new course of action in the end.
Lord Campbell of Alloway: I am terribly sorry, but I have become lost, even though I have been trying to follow the noble Lord. Are we on Amendments Nos. 109 and 110, relating to injunctions, or are we moving beyond the injunctive relief? I shall be most grateful to know the situation, since I am trying to follow, but I have become lost.
Lord Wedderburn of Charlton: I am grateful to the noble Lord for his efforts, and I shall make a bigger effort. I have said that the remarks that I am now making will save time in the end, because they are a necessary preface to the amendments that we are moving, and to which I am about to come. One is dealing with damages because the first amendment is about injunctions, not damages, and that is why I am explaining the basis of the damages difficulty. The basis of that difficulty is that with the six or seven major new developments in the law of tort in the last

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century, statutory protection, if it is based onnominated tort liability, is always out-of-date. There are other problems, too. But we shall leave the matter there for the moment, and return to it later.
The noble Lord, Lord Campbell of Alloway, has asked, what has the matter to which I am now referring to do with Amendment No. 109?—and at the same time I should like to speak also to Amendment No. 110. Well, it is everything to do with the amendment, which is a very modest one. The Government are about to revive liability in tort for trade unions, with all the dangers that that has, in the final orders upon a final trial. Let us take the two customary orders: the order for compensation by way of damages, and perhaps the order for a final injunction. We need do no more than take those two orders. The amendment is not about the final trial. That is why I have prefaced the amendment in the way that I have done, so that we can see it in its context. That does not mean that my noble friends and I are happy about the final trials position under Clause 13. We are certainly not, and we shall vote against the clause. But the labour injunctions, or the interlocutory injunctions—I think that at home the noble and learned Lord the Lord Advocate would call them interim interdicts—are in a category different from that of the final trial remedies.
We seem to be indulging in a little comparative law this evening, and so it is not uninteresting to mention that other comparable countries have got rid of, or have tried to get rid of, the labour interlocutory injunction. For example, in 1932 in federal labour law the United States tried to get rid of it. So what is so special about it? In the common law jurisdictions the interlocutory labour injunction exists so that one can go to a Chancery judge as quickly as possible and stop the noble and learned Lord the Lord Advocate from knocking down one's house—not of course that he would ever do so. But it is a very sensible remedy to have. It is peculiarly sensible procedure. One gets to the judge immediately, and says, "Don't knock the house down until we see that there is a right to knock it down".
That is the image which the lawyer carries over into labour relations and labour law. When it comes to an interlocutory injunction application the plaintiff has had some time to prepare his case, and then, on one day's or two days' notice, he takes the defendant to court. The case might, or might not, last a while, but all the evidence is on affidavit—and that is very important. If your Lordships' rights have to be decided, and the evidence is all on affidavit, and the witnesses cannot be cross-examined—or at least normally are not cross-examined—then the situation is very different. Your Lordships would not like your final rights to be decided on that basis.
After the rather speedy procedure that I have described the remedy is either denied or given; and of course for many years it was regularly given. The trade union had very little way of opposing even ex parte interlocutory injunctions; that is to say, interlocutory injunctions where the plaintiff came along and there was not time to get the defendant to court. In 1974 we tried to put a stop to that in trade dispute cases, under Section 17 of the Trade Union and Labour Relations Act. In 1975, in our administration, we
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added a section which also stated in effect that the courts should take special care in seeing whether at the interim stage, as it is supposed to be, the defendant trade unionists had in fact a likely defence. That was because the wording of the interlocutory proceedings is always concerned with likelihood.
But of course the reality of the matter—and this is why the amendment is so important—is that to a great extent the employer wants the interlocutory injunction as his final remedy, subject to going against the union for damages at a much later stage. He wants the interlocutory injunction quickly; and it does two things. If he gets the injunction, and it is obeyed, as it normally is, he stops the industrial action, and he also holds above the head of the union at any rate an interim verdict that the union is in the wrong. Cases go on for years. A leading case was decided in 1965 in your Lordships' Judicial Committee, where the injunction was granted. In 1969 (four years later) it went back to the Court of Appeal in a dispute about damages; and I am aware that the noble Lord, Lord Campbell, knows the case well. There are very serious matters for the trade union, because the procedure is unsatisfactory. The way that it is carried out, with much more notice for the plaintiff than for the defendant, is quite unjust. The examination of affidavit evidence is never satisfactory, in particular for the defendant, because he never has time to get his affidavit evidence into shape. There might be an adjournment, but sometimes the court is slow to grant one, because it has the image of the house being knocked down, which until very recently has been built into the common lawyer's mind.
I say "until recently" because of what the noble and learned Lord, Lord Diplock, said in 1979 in the case of NWL Ltd. v. Woods, which I think we shall be looking at later in the Bill, since I fear that it is necessary to look at some of the law that we are amending in order to understand what we are doing. In giving his judgment in the case, at page 1305 of the Weekly Law Reports, the noble and learned Lord, Lord Diplock, stated, in effect, that the interlocutory labour injunction is a special and indeed unique kind of procedure. At page 1308 he stated that the interlocutory injunctions are "unique". He prefaced that by explaining what he meant. There are some two or three pages of his judgment, but I shall read to the Committee only a few lines. He stated:
"… on the face of the proceedings in an action of this kind the balance of convenience as to the grant of an interlocutory injunction would appear to be heavily weighted in favour of the employer"—
This is Lord Diplock speaking, not me; and I draw attention to the phrase,
"heavily weighted in favour of the employer".
The noble and learned Lord went on to state:
"To take this view, however, would be to blind oneself to the practical realities"—
He then set out the four considerations that he thought go back upon the proposition, but if one takes them, one can see at least the realities. They are as follows:
"(1) that the real dispute is not between the employer and the nominal defendant but between the employer and the trade union that is threatening industrial action; (2) that the threat of blacking or other industrial action is being used as a bargaining counter in

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negotiations either existing or anticipated to obtain agreement by the employer to do whatever it is the union requires of him; (3) that it is the nature of industrial action that it can be promoted effectively only so long as it is possible to strike while the iron is still hot; once postponed it is unlikely that it can be revived; (4) that, in consequence of these three characteristics, the grant or refusal of an interlocutory injunction generally disposes finally of the action; in practice actions of this type seldom if ever come to actual trial".
Your Lordships will see that in the judgment there are some phrases with which, naturally, I disagree. But as a general analysis that is now accepted as being right—that the interlocutory injunction is unique and special; that there are certain features of it at least which lean against the defendant; and that most employers stop at that point once they have got the injunction. Perhaps I may add to the analysis of the noble and learned Lord, Lord Diplock, by saying it is true that employers regard it as the final remedy, at any rate for the time. They very frequently leave the interlocutory order on the file.
So what does the amendment state? It relates to when an employer goes in for the kind of procedure I have described; and my noble friends and I shall later be moving a new clause asking the Government yet again to modify this very unfair procedure for trade unions in interlocutory cases. I shall make a fuller case on that point when we come to it. However, having that in mind as the context in which we move the amendment, the effect of it would be as follow—and it seems to me perfectly reasonable that the Government should accept this. If this were the only amendment moved, the Government would have their way on two things. They would have their way that trade unions were liable in damages, and they would have their way that trade unions were liable to injunctions and orders on the final trial, where the evidence has been properly heard, cross-examined to and the rest, and no doubt appealed.
But in interlocutory proceedings, if they stay as they are, the employer will not be able to go against the union, though he can go against the officials. There is nothing in Amendment No. 110 (which goes, of course, with No. 109) which says that interlocutory proceedings cannot be pursued against officials and members of the union. The law would stay as it is now, subject to the dreadful alterations made in this Bill, but the individuals could be ordered by the court not to do whatever it was the court thought was contrary to their duties in the law of tort and the rest.
The one change which would be made would be that the issue of union liability would not be fought out on interlocutory proceedings; and that is why Acts like the Norris-La Guardia Act in 1932 in the federal jurisdiction of the United States got rid of the interlocutory injunction. That had a slightly different history, but it was a very parallel point in the United States; and in other jurisdictions, too, the problem has arisen. The problem is particularly acute. This amendment is (if you like) not dealing with the whole ill-patch of the Bill across Clause 13; it is taking out the worst spot of it.
This is the place where it will be most effective from the point of view of some who sponsor it, and most resented, because the interlocutory proceeding is resented, certainly in my experience, by every trade union official who has been part of it. As one said
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to me once, "If I am going to be done, I want to be done with a full trial and with him up there for a day or two in his red robes". I think most British trade unionists have great respect for the High Court, despite all the criticisms that sometimes flow to and fro in that connection. But they have little respect for the interlocutory proceeding, and although that would still go against the officials, though they would lose that as well, nevertheless if you make that interlocutory proceeding go against the union and fight out the issue of vicarious liability and statutory agency, as we have seen in previous debates, on an interlocutory basis, with affidavits, the resentment when it is understood what is happening will be very great indeed.
So Amendments Nos. 109 and 110 are together, in fact, I hope the noble Lord, Lord Campbell, will accept, a rather carefully thought-out small amendment to the clause which says that there is a special area, it is specially had and it will be made specially worse in the interlocutory proceeding by your Bill, so could we not take that out? Because at least that will do something to make the thing less harmful to trade unionists—and I make no bones about that. That is absolutely true. But let us at least give the trade union the right to have its action determined upon a full trial instead of the threat of a quick action for damages on the basis of interlocutory proceedings which must, while the order stays on the file, prejudice the position as the evidence gets stale. I beg to move Amendment No. 109, speaking also to No. 110.
The Deputy Chairman of Committees: Does the noble Lord wish to move Nos. 109 and 110 en bloc? They are very closely linked.
Lord Wedderburn of Charlton: Yes.
The Deputy of Chairman Committees: The Question is that Amendments Nos. 109 and 110 be agreed to?
Lord Campbell of Alloway: Could I, very briefly, in view of the hour and in view of my involvement in this—indeed, there have on occasions in the past been cases where the noble Lord, Lord Wedderburn, and I have been on opposite sides—say that I agree that he has drafted this provision, Amendment No. 110, with very great care. I also agree that the interlocutory injunction in a trade union case is within a special category. But where I do not agree—and this is where the rub lies—is that the main purpose of Clause 13 of the Bill is to be able to give the court jurisdiction to do this very thing rather than to award damages; in other words, to be able to move in quickly and regulate a problem, a trouble, as it does in other spheres, before the whole thing gets out of hand and vast damage is caused.
The concept is not to be legalistic, not to put legal shackles around trade unions, but merely to state what I am sure practically all your Lordships would agree: that the unions must be subject to the rule of law. If they are subject to the rule of law, and if they act outside the law, then the courts can move in (and why not here as in other cases?) to grant the interlocutory injunction if, in the discretion of the judge—subject, of course, to the Court of Appeal—it is considered appropriate to do so. So while I give the

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noble Lord, Lord Wedderburn, the first two points he has made, it is on the third point that we are in disagreement.
Lord Mackay of Clashfern: At first sight this might look a rather technical amendment, but as the noble Lord, Lord Wedderburn, has explained it (and I think that if one had thought about it even without the benefit of his help it would have appeared so) it goes to the very heart of Clause 13 in practical application. In a case where a trade union was responsible for unlawful industrial action it would prevent an employer seeking an immediate interlocutory injunction against that trade union, ordering it to call the action off. If he wanted to proceed against the trade union itself he would have to wait for a full hearing of the case—possibly weeks or months later.
In our view this is unacceptable. Experience has shown, as the noble Lord has said—indeed, it is part of his argument—that many cases on industrial action do not proceed beyond the interlocutory stage. Where an employer is suffering serious loss as a result of unlawful action, his main concern is to get that action stopped as quickly as possible. He cannot wait until the matter can he brought to a full hearing—often months later—before a decision is made. By then it may be too late. His business may be damaged beyond redemption, and along with it the jobs of his workers. That is an aspect of this matter which we ought not to leave out of account. It is sometimes very easy to forget the community of interest, at least the community of long-term interest, between an employer and his employees.
The noble Lord, Lord Wedderburn, has pointed out very fairly to us—indeed, he reminded me of it just this moment—that this amendment will not prevent an employer proceeding against a senior official of the union like the general secretary. That is certainly true. It is fair to say that in some cases it will not make much difference whether an interlocutory injunction or interdict is granted against the general secretary or the union itself. But in some cases it will make a difference. In some cases it will be an advantage that it is the trade union as an organisation which is held liable for an unlawful action and which has the responsibility for making sure that the injunction or interdict, the order of the court, is obeyed.
The noble Lord has also argued that the odds will be stacked against trade unions in interlocutory proceedings; that there will not be time for a court to establish at the interlocutory hearing whether or not the union is liable, and that, therefore, the courts will tend to award injunctions against them. I do not think I can accept that. The noble Lord has referred to Lord Diplock's speech in the NWL case. In the passage which the noble Lord has very fairly quoted—he did not stop off at the first sentence; he never does, as he points out: sometimes there might be an advantage from some points of view if he did, but not on this occasion—Lord Diplock very severely qualifies what he said first, and no doubt any judge dealing with this matter since the NWL case will give very careful attention to these factors in the other direction to which the noble and learned Lord, Lord Diplock, drew attention. In our view, Clause 13 sets out
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perfectly clear rules on when a union has to be held liable for the unlawful acts of its officials and members and in most cases it should be a relatively simple matter to decide whether the union is liable. The fact that the matter has to be decided in the context of an interlocutory proceeding fairly quickly, with limitations on the time that can be spent on it and so on, are factors which the court will have in mind in these matters; but, it certainly seems to us, as my noble friend Lord Campbell of Alloway has just remarked, that it would be extraordinary to allow this amendment to pass. It will be, in effect, to say that at the interlocutory stage the unions, for no particular reason, were to be above the law. I hope that your Lordships will not accede to this amendment and that the noble Lord may feel able to withdraw it.
Lord Wedderburn of Charlton: I shall ask leave to withdraw these two amendments, although on the basis of some puzzlement. The noble and learned Lord the Lord Advocate would well get his remedy if he went against all the officials. The only point against going against the union is to tie it up or half tie up to get halfway towards damages and by an unsatisfactory procedure; but to that we shall return on a subsequent amendment. I beg leave to withdraw the amendments.
Amendments, by leave, withdrawn.
Lord Sandys: I think it may be the wish of the Committee to take the dinner break at this point. During the dinner adjournment we will take other business and will return to consider the Committee stage at 8 o'clock. Meanwhile, I beg to move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Town and Country Planning (Minerals) Regulations 1982
7.12 p.m.
The Earl of Avon: My Lords, I beg to move that the Town and Country Planning (Minerals) Regulations 1982 be approved. At the same time I would speak to the Town and Country Planning (Minerals) (Scotland) Regulations 1982. Copies of both these regulations were laid before the House on 15th and 16th June respectively. The House may recall spending some time last year considering what was then the Town and Country Planning (Minerals) Bill. This was designed to encourage higher environmental standards at active and disused mineral working sites. That Bill formed the first part of the Government's implementation of the recommendations of the Report of the Stevens Committee on the Control of Mineral Working. The committee had been appointed in 1972 to study problems faced by the minerals industry and by the planning authorities in trying to work within a planning system which had been designed mainly to control urban development.

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The committee published its report in 1976 and made a large number of important recommendations intended to benefit both the industry and local planning authorities. The previous Government welcomed the report and issued circulars in 1978 setting out their reactions to the recommendations and, in particular, which of these it was intended to implement. This Government have pressed ahead with implementation. Now that those measures requiring primary legislation have been enacted, we are turning our attention to some of the other Stevens Committee recommendations which our predecessors accepted and the regulations which are before the House today represent the beginning of the next stage in our implementation of the Stevens package.
Turning now to the regulations themselves, noble Lords will see that they are designed to revoke Regulation 10 of the 1954 Town and Country Planning (Minerals) Regulations, together with related enactments and the parallel Scottish provisions. Regulation 10 is the direct successor to regulations made in 1948. It is mainly a legacy from wartime contingencies but partly a transitional arrangement following the introduction of the new controls enshrined in the Town and Country Planning Act 1947. A developer who was caught in the middle of a development by the combined effects of the war and the substantial controls introduced by the 1947 Act was recognised to have a right either to complete the development or, if he was refused planning permission, to be compensated for the abortive expenditure he had already incurred.
The only logical end to a minerals development might be said to be the exhaustion of the mineral deposit which is being worked. Any extension to a pre-1947-Act working can be seen as an attempt to complete that development—and therefore as something to which the operator had a right before the passing of the 1947 Act. This is the view which Regulation 10 takes.
In detail, what the regulation provides is that if an operator applies for planning permission to extend a pre-1947-Act working into adjacent land, and if permission is refused or granted subject to conditions, the operator is entitled to claim compensation for three different things. First, he may claim for expenditure incurred on work which is rendered abortive either by the refusal or by the conditions imposed as the case may be (including loss by way of depreciation of value in respect of building, plant or machinery). Secondly, he may claim in respect of any contract for work which has to be abandoned. And, finally, if either of the above claims is successful, he may claim for any other loss or damage directly attributable to the refusal or conditions, excluding depreciation in the value of the land.
The Stevens Committee argued convincingly that the need for Regulation 10 was now past and recommended that it should be revoked. The 1978 Circular announced the intention to pursue this. The reasons are simple. It is perfectly proper to recognise that a new piece of legislation may adversely and inequitably affect the rights of some people and to provide a means of compensating them for their loss. It is quite unjustifiable to suggest that the availability of compensation should continue indefinitely. There certainly exist other potential cases in which the refusal
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of an application for permission to extend a pre-1947-Act working could lead to claims for compensation under this regulation. But, as Stevens pointed out, there has been ample time over the last 30 years for anyone affected in this way to apply for planning permission to resume or extend their operations and to claim compensation if they were refused. A number of claims have been made, but, in relation to England, the Government know of no claims lodged during the last six years and of no more than 22 claims received during the period 1954 to 1976. Of those 22 claims, 16 were made between 1957 and 1971 but they have not been pursued over the last 10 years or so. Similarly, there are no claims outstanding in Scotland, so far as we are aware. I can assure the House that any existing claims which may have been made but not yet settled will be unaffected by the revocation of Regulation 10.
In short, the Government's view is that the justification for this regulation has diminished over the last 30 years and that it is now time for its revocation. The Stevens recommendation to that effect was accepted by both the industry and by the local authorities who, as planning authorities, are of course responsible for paying any claims for compensation.
I should like to emphasis that the revocation of Regulation 10 will not affect the compensation of the 1981 Minerals Act. These two separate pieces of legislation deal with compensation for completely different things. Regulation 10 deals with compensation for refusal to grant a new planning permission for an extension of mineral working in certain limited circumstances. The provisions of the 1981 Act concern modifications and orders relating to existing workings and permissions.
Finally, it might be helpful if I say a very brief word about the form of the two sets of regulations which are now before the House. Dealing first with those applicable to England and Wales, Regulation I provides merely that they shall be called the Town and Country Planning (Minerals) Regulations 1982 and shall come into effect the day after their approval by Parliament. Regulation 2, together with the schedule, provides for the revocation of Regulation 10 of the 1954 Regulations and for the revocation of two other regulations made in 1957 and 1971.
The Scottish Regulations have exactly the same effect as those applying to England and Wales. However, because of consolidation which took place in Scotland, the regulations which these new regulations revoke are both contained within the same statutory instrument. I beg to move.
Moved, That the regulations laid before the House on 15th June be approved.—(The Earl of Avon.)
Lord Ponsonby of Shulbrede: My Lords, may I thank the noble Earl for explaining the regulations. We do not oppose or wish to delay the implementation of these regulations. Indeed, I should state that it is the earnest desire of the three local authority associations that these regulations come into force as soon as possible, and the order states that they shall come into force on the day after they have been approved by both Houses of Parliament.
Since the publication of the Stevens Report in 1976 and the then Labour Government's acceptance of the recommendations in that report in 1978, the intention

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of Government has been clear, and in effect operators have had a sufficient warning period to make any appeal for compensation before these new regulations come into effect. The circular issued by the Department of the Environment in 1978 stated:
"We accept this recommendation. It has been suggested to us that we should allow a period for operators to apply for extensions to those workings covered by regulation 10. We consider that the time which has elapsed from the time of the publication of the committee's report has provided a sufficient warning period."
That was issued by the department some five years ago. The noble Earl has assured your Lordships that there are no outstanding applications, and one assumes therefore that there is no more compensation payable under these particular regulations. We support the orders.
On Question, Motion agreed to.

Town and Country Planning (Minerals) (Scotland) Regulations 1982
The Earl of Avon: My Lords, I have already spoken to this order. I beg to move that the Town and Country Planning (Minerals) (Scotland) Regulations 1982 laid before the House on 16th June be approved.
Moved, That the regulations laid before the House on 16th June be approved.—(The Earl of Avon.)
On Question, Motion agreed to.

Agriculture Act 1970 Amendment Regulations 1982
7.22 p.m.
Lord Sandys Lord Sandys rose to move, That the draft regulations laid before the House on 21st May be approved.
The noble Lord said: My Lords, these regulations constitute a necessary step in the process of giving effect to certain EC directives on the marketing of animal feeding stuffs. They will apply throughout the United Kingdom. They will be followed by detailed regulations made under Part IV of the Agriculture Act 1970 as amended by these regulations. These later regulations will be known as the Feeding Stuffs Regulations 1982.
The aim of these two sets of regulations will be to implement the requirements of two harmonisation directives concerned with the marketing of straight and compound feeding stuffs—Directives 77/101/EEC and 79/373/EEC respectively; and to help to complete the implementation of Directive 74/163—controlling undesirable substances in animal feeding stuffs which are not covered by regulations made under the Medicines Act 1968. Taken together with some amendments subsequently agreed to these directives, the regulations will be a consolidated implementation of our obligations under the Treaty of Rome in this sector.
Together with the Feeding Stuffs Regulations 1982, another set of regulations will have to be laid and come into operation at the same time, prescribing the agreed methods of sampling and analysis necessary for the proper enforcement of the feeding stuff regime. These will be known as the Feeding Stuffs (Sampling and Analysis) Regulations 1982.
To a large extent these regulations and the subsequent ones mirror existing United Kingdom legislation already on the statute book. Indeed, we in this country have been concerned to control the trade in animal feeding stuffs since the Fertiliser and Feeding Stuffs Act 1893. The basic principles of our legislation have been to ensure that the buyer is properly informed about his purchase and the philosophy of the European directives is not far removed from outs in that, to accord with Article 3 of the Compounds Directive (79/373/EEC) and with Article 3 of the Straights Directive (77/101/EEC):
"…feeding stuffs may be marketed only if they are wholesome, unadulterated and of merchantable quality … feeding stuffs may not represent a danger to animal or human health and may not be presented or marketed in a manner likely to mislead".
The instrument now before the House seeks to make minor adjustments to the philosophy contained in the Agriculture Act 1970 as are necessary to align it with that agreed within the Community. It will extend the regulation-making powers so that detailed provisions may be lawfully made in regulations to correspond with the detailed provisions of the directives. The instrument also extends the scope of the Act to embrace feeding stuffs intended for pet animals and to comply with EC requirements. I beg to move.
Moved, That the draft regulations laid before the House on 21st May be approved.—(Lord Sandys.)
Lord Bishopston: My Lords, I am sure that the House is grateful to the noble Lord for describing the regulations which I welcome and which have already had detailed scrutiny in another place. As the Minister said, the aim of these regulations is to implement the requirements of two harmonisation directives dealing with feeding stuffs. They also regulate and control substances and additives in certain feeding stuffs and details of sampling and the analysis for enforcement. This is very desirable.
I accept that these regulations harmonise the EEC with some of the current legislation and practices of the United Kingdom and are aimed at ensuring that the buyer is properly informed about his purchase and also assured about the quality. I note the statutory instrument also includes pet animal feeding stuffs required under Part IV of the 1970 Agriculture Act. I have one or two questions for the noble Lord if he would be prepared to answer them. I understand that the amending regulation to which he referred in respect of the feeding stuffs regulations needs to be laid before Parliament soon. Can we be told how soon this will be and whether this will be before the Summer Recess?
Certain particulars will be requited to be detailed about the make-up of feeding stuffs when marketed and while these added safeguards about the quality and contents of feeding stuffs are welcome—and I believe the trade has also welcomed them—will the Minister estimate the extra cost to the compounding industry and consequently of course to livestock producers of the carrying out of the regulations and allowing for the invariable changes which can be made in the individual composition of feeding stuffs. Can he say what consulations he has had on these changes and with what result about the cost, so far as those aspects are concerned?

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I understand, finally, that Article 3, to which the noble Lord referred of the Compounds Directive and the Straights Directive requires:
"…feeding stuffs may be marketed only if they are wholesome, unadulterated and of merchantable quality … feeding stuffs may not represent a danger to animal or human health and may not be presented or marketed in a manner likely to mislead."
That of course is good. For clarification, may I ask whether this means that humans can eat pet food and that tins can specify the contents as fit for animal or human consumption? I ask this particular question because the Explanatory Note, which of course is not part of the regulations, stipulates in paragraph 5:
"Regulation 6 extends Section 73(1) (which prohibits the sale, or possession for sale, of feeding stuffs deleterious to prescribed animals) so as to apply to ingredients deleterious to pet animals or human beings."
The next paragraph refers to Regulation 7 which adds a new Section 73A. I quote:
"This makes it an offence to sell or possess for sale a feeding stuff which is unwholesome for, or a danger to, prescribed animals or pet animals or a danger to human beings."
I think this could be misleading and it is of course important that those concerned in the trade and among the consuming public are not misled as to what is and what is not edible for human consumption. I feel that it would be too bad if human beings, wrongly eating pet food, went around making animal noises. It may even attract a few catcalls. Seriously, I welcome the measure and I hope that the Minister can clarify the several points I have raised.
Lord Mottistone: My Lords, I hope that the noble Lord, Lord Bishopston, did not think that my laugh was a catcall. I am advised in what I have to say by the United Kingdom Agricultural Supply Trade Association. I am going to talk only about Regulation 5 which, as my noble friend told us, will lead to further regulations. We are concerned that the further regulations should not demand any more of the compounders than at the moment they provide, and happily provide, by way of information to their customers. We are particularly concerned that the optional factor in the directive with regard to the declaration of ingredients should remain optional and that there should be no threat in these further regulations of any compulsion with regard to declaration of ingredients or indeed of compulsion with regard to how the ingredients might be presented on any labelling. The point about this, very briefly, is that too tight a control, which is not now required, can lead only to lack of flexibility which in turn can lead only to increased costs—and increased costs will be to the detriment of the livestock farmers, whom I understand are very satisfied with the present arrangements. We are not talking about petfoods and the regulations in relation to those; we are talking only about the supply of feeding stuffs to farmers, who are perfectly capable of making their own arrangements to see that they get the sort of feed which they want and for which the current practices are satisfactory.
There is another factor; that is, that if too much ingredient-marking is required, the value of the research and development on which the compounders spend large sums of money will be eroded and we might get a situation in which further recession development was
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not continuing or indeed that companies could not withstand pressures from their competitors. All in all, I would hope that any regulation that is yet to be put before your Lordships should have full consultation given to it, and I hope that my noble friend can reassure me on this. I also hope that the points I have made—and, I believe, were made in a similar manner in another place—will be given proper regard in any regulations that may come forward. I trust that my noble friend will be able to give me that reassurance.
Lord John-Mackie: My Lords, I must apologise for not being present at the beginning of this short debate. Does it take three pages of the most dreadful officialese that I have read to say that pet foods come under the Feeding Stuffs Act? The noble Lord, Lord Bishopston, quoted some of it, but when you read at the bottom of page 1:
"'pet animal' means any animal belonging to a species normally kept and nourished but not consumed by man,"—
am I right in thinking that a judge kept a tame pig in his chambers not so long ago? What are we to make of him?
"—not being an animal which has been or may be prescribed for the purpose of the definition of 'feeding stuff'."
I would quote one sentence from (2)(a) on page 3:
"In the case of proceedings for an offence of selling, or having for sale, material which is unwholesome for, or dangerous to, animals he shall not be convicted by reason of the fact that the material is found, or the sampled portion of it is shown, to be unwholesome only for or, as the case may be, dangerous only to animals of a kind different from that specified."
I ask your Lordships! If any layman, wanting to do something about selling pet foods is given this order, I should think he would be utterly confounded by reading any or all of it. I would suggest that something should be done to write things so that ordinary people can understand what on earth they are all about.
7.36 p.m.
Lord Sandys: My Lords, I am very much obliged to the noble Lord, Lord Bishopston, for giving me advance notice of a number of questions he wished to ask about this instrument. His first question concerned when the detailed regulations would be made. I can say that they will be made during August and the main provisions will come into force six months later, but not so far as the pet food labelling is concerned. That will operate some eight months later: that is, during July 1984. The regulations will be by Negative Resolution. Although laid during the recess, 40 sitting days are allowed for purposes against the regulation.
The noble Lord asked, as his second point, whether Ministers would estimate the cost of these regulations to the compounding interests and to the livestock producers. The compounders already provide a good deal of information to their customers. Some changes follow from the change in the law, but that is unlikely to give rise to significant cost increases. For the reasons given above, this is unlikely to suffer significant price increases. However, if mandatory ingredient-listing were to be required—and at this stage that is not yet certain—I am bound to say this would be more expensive both to the compounder and to the farmer. I am very glad that my noble friend Lord Mottistone

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referred to this. My honourable friend the Parliamentary Secretary, Mrs. Fenner, is examining this question and will be meeting representatives of the National Farmers' Union and compounders representatives later this month. I can assure noble Lords that this matter is under consideration at present.
The noble Lord asked what consultations with interested parties have taken place on changes in the law and what reaction there might be on the cost aspects. Section 84 of the Agriculture Act 1970 requires Ministers to consult with all interested parties before making any regulations. There have been expensive consultations. No particular reference has been made to costs, although the Government appreciate that any improvement in consumer information must involve some additional cost, however slight. The noble Lord particularly referred to ingredient-listing cost. My honourable friend is considering whether mandatory listing should be included in the detailed regulations, but no decision has yet been taken on this important matter.
The fourth point mentioned by the noble Lord referred to Article 3: did it mean that humans could eat pet food, and should it be marked as suitable for human consumption? The short answer is, no. The law is concerned that there should be no deleterious carry-over from animal food to the human food chain. Although many pet food manufacturers in this country will say that their product is safe for humans to eat, they do not recommend it. It is not practicable for the law to seek to control use in the home: otherwise rape seed manufacturers would need to put a health warning on all their products.
I should like to refer, once again, to the important matters raised by my noble friend Lord Mottistone. I am afraid that I cannot give him any definitive answer and assurance in the terms which he would hope to receive tonight, because, as I have already said, my honourable friend is discussing this matter at the present moment with the interested parties. I think it would prejudice negotiations if I gave an answer which might be read into the argument in one way or another.
I listened with interest to the words of the noble Lord, Lord John-Mackie, on the definitions of the terms in the order. As ever, as he rightly pointed out, that excellent book by Sir Ernest Gowers called Plain Wordy should constantly be beside us in our discussions, and also beside those who draft the regulations. In a sense, we are subject to so many decisions which have been taken in the drafting of previous regulations. While they are not always in the most elegant forms, we believe that they are as serviceable as they may be. We take the point that the noble Lord made and enjoyed his humorous reference to the judge in chambers. I hope that I have answered the questions put by noble Lords.
Lord Mottistone: My Lords, before my noble friend sits down, could he reassure me on two points? Can he reassure me that, when his honourable friend Mrs. Fenner has her meeting with the NFU, the NFU delegation will include representatives of livestock farmers? Secondly, can he reassure me that, at the same time, she will be meeting representatives of compounders?
Lord Sandys: My Lords, so far as representatives of the compounding industries are concerned, I can give that assurance. As to whether National Farmers' Union representatives will include livestock breeders, I think the answer is less certain, except in so far as the National Farmers' Union automatically represent those interests as part of their corporate body.
Lord Mottistone: My Lords, would it be possible for my noble friend to suggest to the NFU that in this case it is very important that the livestock farmers should be represented?
Lord Sandys: My Lords, I am quite certain that the NFU will take much interest in what my noble friend has said. But far be it for me, or indeed members of the Government, to suggest to the NFU how their delegation should be composed. However, I think that this matter will certainly receive their attention automatically.
On Question, Motion agreed to.
Lord Sandys: My Lords, I beg to move that the House do now adjourn during pleasure until 8 o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The sitting was suspended from 7.43 until 8 p.m.]

Employment Bill
House again in Committee on Clause 13.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 111:
Page 15, leave out lines 10 to 16.
The noble Lord said: We are now on the clause which re-creates the liability in the law of tort for trade unions and which therefore faces the problem which your Lordships' Committee faced in another dimension in a previous sitting of the Committee; namely, the question of vicarious liability: for whom is a union to be liable in tort? The clause deals with this problem in a particular manner. The amendment would change that formulation in a very significant way. Clause 13(2) creates in effect for trade unions two codes of agency for vicarious liability in the law of tort. The union will be made liable, as we have seen, because of the refusal of our previous amendment, not only at final trial for damages and final injunctions but also at interlocutory injunctions in the rapid procedure of the interim proceedings which may lie on the record for many years as an interim judgment of the industrial as well as the legal case.
My noble friends and I asked ourselves why it was necessary for the Government to create two codes of agency. I would remind your Lordships of the manner of that creation. In regard to tort liability generally, the Bill would leave the question of vicarious liability to be judged by the principles of the common law. In each case the question would have to be asked whether the shop stewards or full-time officials—possibly, sometimes, even members and other officers of the union—were acting within their authority on behalf

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of the union. As I have said on a previous amendment, this problem and this concept is particularly difficult to apply to trade unions because the authority of trade union officers is not analogous to that of agents and servants of employers from which the legal principles sprang.
That can be well assessed by looking at the case law on the subject under the Industrial Relations Act, especially in the Heaton Transport v. Transport and General Workers' Union litigation, reported in 1973 Appeal cases, 15, as well as in a case which went the other way on very similar facts—General Aviation Services v. Transport and General Workers' Union, reported in the Industrial Relations Law Reports, 1976. That is one code of agency which applies generally in the law of tort, except where the second applies. The second applies to what one might call, in layman's language, the economic torts or the industrial torts and to what is, in lawyers' language—and therefore is in the Bill—specified as the area of liability which is covered by Section 13(1) of the 1974 Act, which we could conveniently call the interference with contract area of liability. To that is added the conspiracy liability for combining to effect such an interference.
When one looks at the features of the special code of agency which will apply in the industrial tort area one sees that it has three features. First, the Bill provides that those who have authority or who are empowered by the rules to authorise the acts in question hind the union. Subject to the definition of the rules, which we shall come to later, where the Government have introduced a most extraordinary requirement that the court should read the word "rules" as including not only the rule book but some other curious ill-defined area of documents which is dealt with in a subsequent amendment, this may be said to be the same, for all intents and purposes, as the common law principle. Most people read it as applying primarily to shop stewards. Either they have authority under the rules or they do not. The second group is at the other extreme of the spectrum. They comprise the general secretary, the president and the national executive committee. These people bind the union, whatever they do, so far as the law of tort is concerned—however extravagant and no matter what the rules say.
One wonders as a lawyer whether or not there would be some limitation upon some act done by them when they were not in command of their faculties perhaps not binding the union or not being the act of the union—which is here the more exact manner of stating the case, in my view. Other than that, they bind the union, whatever they do. In the phrase of the old case law of the 1830s, they bind a union where the servant goes on a frolic of his own. Why a president and a general secretary should always bind the union by authorising acts when they are on a frolic of their own is difficult to understand until one looks at the rest of the Bill.
The third category are the people left out. They are the other officials from national to local level—mainly the full-time officials, although not necessarily, and other committees, whether it be national, sectional, trade, regional, district or divisional. These groups bind the union by authorising acts, provided that the rules do not prevent them from having authority,
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which is a different formulation from the first group, and subject to the doctrine of repudiation.
We shall be coming to amendments on the doctrine of repudiation later, but it is necessary to set it out because it is, I submit, at the heart of the apparatus. The doctrine of repudiation has been invented by the Government, We are now a million miles away from any normal common law rules of agency, in view of the status of the president and general secretary in particular. The doctrine of repudiation says that whenever this third category of people authorise acts they can be repudiated, within certain conditions, as to time and manner by the executive committee, or the president. or the general secretary, subject to the extraordinary provision, which we shall come to in another amendment, or doctrine which one might call repudiation of repudiation. That is to say, as the Bill stands now, a repudiation is not effective not only if it is not in good time, and not in writing, and all the rest, but also if one of the people who can act as an alter ego of the trade union takes steps but behaves in a manner which is inconsistent with the purported repudiation.
These questions are the ones to which this amendment is directed. The amendment would cut out the statutory code of agency and leave it to the common law which, for all its defects, would fit the purpose. We say that there are defects and problems in the statutory code of agency which apply to the industrial torts and that if we have to choose between the two it would be better to leave it to the common law principles, for legal and industrial reasons. The legal reasons will come out in subsequent amendments relating to the absurd doctrine of repudiation, the manner in which it has to be done and the legal advice which would have to be obtained.
The industrial reason is this. It is quite clear that the structure which has been set up combines principles of vicarious liability with those of a different area of the law in which organisations may be liable for contempt of court, which was also involved in the Heaton case, if the top officials or the top group of directors in the case of a company do not renounce those transactions when they are meant to do so. The Government have muddled up principles of common law vicarious liability with penal doctrines of repudiation under contempt of court, which assumes that the union is liable already, in order to produce this repudiation doctrine. It would mean that the union was cut up into slices; the members wondering what on earth was going on while the stewards asked if they had authority, and the local, district and even national officials tried to act although they knew they could be repudiated—while above the whole thing, there are these three curious characters, who could apparently repudiate one another, would all act by committing the union to anything that they did.
The element which is important here is that the top group become the police force of the union. The doctrine of repudiation inevitably leads to what the Donovan Report and indeed Lord Devlin once said one could not ask unions to do—namely, be the policemen of industrial affairs. This doctrine is suited to that kind of approach and has the defects mentioned in the Donovan Report.
There is a final point, which is a legal point. There is an absurdity about this section. Take a case of

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picketing which manages to go off the rather badly-built rails of the 1980 Act; it is not difficult to do. You get to the wrong place and you are liable—but what are you liable for? There are two torts which come to the mind of the lawyer any minute. The first is interfering with contracts, because the 1980 Act says one has no protection against the tort of interference with contracts. So there, the statutory code of agency would apply. That would be something to which Section 13 of the 1974 Act would have been a defence, but it is not now.
However, as was confirmed in the recent case of Mersey Docks v. Verrinder in the High Court this year, it was confirmed that common law normally sees a picket as a nuisance; I do not mean that in the layman's sense but in the legal sense of committing the tort of nuisance by using the highway for a purpose other than of walking to and fro. In the same proceedings, damages are claimed and an injunction is claimed for inducing breach of contract and for nuisance, but it is claimed primarily against the union.
We see how this clause, as it goes on, means that plaintiffs want to get their remedies against the union. No matter what the arguments are that they can have the equivalent against the officials; no, as the noble and learned Lord, the Lord Advocate, made clear, they want the order against the union even if it does not add anything at all to getting it against the officials. So the court looks at it and says, "Well now, interfering with contract—that is the statutory code". It looks and sees that the president was on the picket line and that leads the court to its answer. On the other hand, with the law of nuisance it is left with common law, and it would have a fine old time deciding whether or not a particular group of pickets was a nuisance—although, as I have suggested, liability there is much stricter than most peple realise and was reaffirmed in the Verrinder case this year.
How can it possibly be right in an industrial relations situation—and I have taken only a simple example to abbreviate my argument. I hope that the noble and learned Lord will not suggest that this is an isolated example. If he does, I shall have to repeat the other examples, which are more complex. I know that he will not. My simple little example illustrates only the kernel of a principle question; namely, that time and time again different kinds of tort liability will be involved in a case. Is it right, and if so on what principle is it right—other than that of policing—to put a union into the position of having to make its lawyers argue two cases instead of one? I beg to move.
8.14 p.m.
Lord Mackay of Clashfern: I may have misheard the noble Lord, Lord Wedderburn of Charlton, but thought he said that the effect of his amendment would be to make the common law rules about agency apply to all torts, including interference with the contract type of case. If I did hear him correctly, then I believe that is not so. His amendment would have the effect of applying the new rules to all torts.
Lord Wedderburn of Charlton: The noble and learned Lord is absolutely right. I should have said that we would prefer the common law but that the Government
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seem to want the statutory code. Whichever way we put it, the Government are to explain their position.
Lord Mackay of Clashfern: Before I try to deal with the main matter, may I say that, in relation to the last point made by the noble Lord, the advice we have—and I must say, without being impertinent, that I agree with it—is that where (a) or (b) are involved in proceedings, then subsection (2) gives the rule for those proceedings, so that one does not have the kind of particular difficulty to which the noble Lord referred at the very end of his speech. It talks about proceedings and so long as material of the type of (a) or (b) is in those proceedings, that will be the rule.
This amendment brings us to the question of the guidance which Clause 13 provides when a trade union is to be held liable for the unlawful acts of its officials. That guidance is contained in subsection (3) and there will be an opportunity to discuss it in more detail on later amendments. But it may be helpful at this stage just to remind noble Lords why it is there at all. Clause 13 has the effect of making trade unions liable to be sued in their own name when they organise unlawful industrial action. This is the interference with contract area, including conspiracy, to which the noble Lord, Lord Wedderburn of Charlton, referred. The only other period since 1906 when trade unions have been liable in this way was between 1972 and 1974 when the Industrial Relations Act 1971 was in force. Under that Act the courts had considerable difficulty deciding when and whether a trade union could be held responsible for the unlawful acts of its officials and members. In order to reduce the chances of the same difficulties arising under this Bill, the Government believe it is essential to provide more detailed guidance about trade union liability than was provided in the 1971 Act.
Under subsection (2) of Clause 13 these rules on liability apply only to what are known as the "industrial torts"—that is to say, to the torts concerning interference with contract which are contained in Section 13 of the Trade Union and Labour Relations Act 1974. The amendment under discussion would remove subsection (2) altogether, so that the guidance on liability applies not just to the "industrial torts" but to all torts committed by or on behalf of trade unions. So, in short, the proposers of this amendment are saying: if it is necessary to have guidance on trade union liability, why should that guidance apply only to one set of torts and not to them all?
The basic reason for singling out the industrial torts for special treatment in Clause 13 is that they are the torts associated with the calling of industrial action; and it is in relation to the calling of industrial action that the main problems of union liability are likely to arise. This is because union rules are all too often unclear on who has authority to call industrial action, and because the union machinery for making such decisions (both formal and informal) is often complex with unclear lines of authority. In other areas there are unlikely to be special problems which warrant the use of special rules either because unions very rarely commit other torts, or, if they do, because there is usually no difficulty in deciding whether the union is liable. The torts not covered by subsection (2) fall into four broad categories. First, there are the torts specified in Section 14(2) of the 1974 Act, for which

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unions are already liable if committed outside a trade dispute. These are basically negligence, nuisance or breach of duty resulting in personal injury, and any breach of duty connected with the use or ownership of property. These cases are rare, but the unions have been liable for them for over 70 years and it would seem odd to start applying special rules of liability to them now. Certainly there has been no suggestion that one has seen of there being any particular difficulty in dealing with cases in that area where unions are concerned.
Secondly, there are other torts which are of a nature which make it very difficult to imagine how a union could be considered liable in the type of cases in which they could arise, such as battery or assault. Thirdly, there is a further group of torts which could be "committed" by a trade union, but where there seems no justification for treating trade unions differently from corporate bodies such as companies, charities or clubs. There seems, for example, no necessity to treat libel cases over an article in a union journal differently from similar caries arising from a newspaper article.
Finally, there are some torts other than those specified in subsection (2) which it is just possible could arise as a result of industrial action authorised by the union. The most obvious are nuisance and trespass, although false imprisonment is another, albeit remote, possibility. However, if these were committed during industrial action they would almost certainly arise in cases which also involve the "industrial torts", so that the "mixed proceedings" rule to which I have referred would apply.
To sum up, the courts will be required to apply the normal rules of vicarious liability in any cases of the sort I have just described. In general, this means that the law will hold the union liable for torts committed by persons acting on its behalf. Where the relationship of master and servant exists the master is liable if, but only if, the unlawful acts are committed in the course of the servant's employment. In the cases of industrial action the problem under the 1971 Act was in determining whether officials as servants of the union were authorised to call industrial action in the course of their employment. That is why it has been necessary, in our view, to devise in this clause special rules to cover this particular case. I hope in the light of that explanation the noble Lord will feel able to withdraw this particular amendment.
Lord Lloyd of Kilgerran: It is with some hesitation that I presume to enter into this argument. I have always been fascinated by the depth of knowledge of the noble Lord, Lord Wedderburn, in these matters. I hope it is not impertinent of me to say so. I was trying to follow his argument. It ranged from the more modern general aviation cases to the 1830s; we heard about the doctrine of repudiation and the doctrine of repudiation of repudiation. I do not wish to be impertinent, but I thought his speech was something of the order of a speech which would be more suitable for the Question that Clause 13 stand part rather than in relation to this particular amendment. I find it very difficult indeed to understand the basic reasons for his having put forward this amendment. It is entirely my fault, but I do not understand in any way how this deletion of lines 10 to 16 on page 15 assists
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his case in relation to the position of the trade unions at the present time.
Lord Wedderburn of Charlton: In view of what the noble Lord, Lord Lloyd, has just said, I must obviously try harder. But I will not start again. I will finish by saying this. The noble and learned Lord says that he does not follow the problem. The problem is this: that there are two different sets of principles in the Bill that govern the liability of trade unions for the acts of their agents or the like. We ask the Government by this amendment, why should there be two? We do it in the time honoured way of knocking out one and leaving the other one, and putting the Government to its proof. It is true—the noble and learned Lord was quite right—I got my argument the wrong way round; it would not have mattered which we chose to push out. The Government could then explain why there should be two. That is the essence of the matter.
The noble and learned Lord made a most important point, that where the statutory code applies because an industrial tort is in the proceedings, or to be more accurate is one of the grounds upon which the proceedings are brought, then it would, as it were, swamp the common law, and that would apply throughout the proceedings. So we get the situation where if you issued a writ with an industrial tort in it, no matter what other claims you had—false imprisonment, nuisance, Rylands and Fletcher liability, or whatever—they would all be governed by the statutory code because you have one ground of an industrial tort. On the other hand, if the defence knocked that out as disclosing no cause of action, suddenly halfway through the action the principles governing the liability of the union would change and you would go back to the common law, because you would not have an industrial tort.
I take the noble and learned Lord's point. I had not read the Bill in that form, because I took it that where it said,
"Where proceedings in tort are brought against a trade union on a ground specified in the 1974 Act, Section 13(1)"
it meant what it said. I suggest the Government take it away and look at it again, if this is really what they want to do. Having given that example, I rather doubt it; but if they really want to do that, then they should say, "Where proceedings in tort brought against a trade union include a ground", because then it would be clear that the inclusion of the ground was, as it were, enough to knock out the rest. I see the noble and learned Lord moves his head in an unfortunate direction, and so I must go on.
The clinching point is further down in the clause. It says,
"Where proceedings in tort are brought against a trade union on a ground specified in Section 13(1) … then for the purpose of determining in those proceedings whether the union is liable in respect of the act in question that act shall be taken to have been done by the union if but only if it was authorised or endorsed by a responsible person".
Acts may overlap; one set of proceedings will involve many acts. Are we to sort out in mixed proceedings the area where the industrial code applies, where the mixed proceedings rule applies and therefore the industrial code applies, and other acts which are left to the common law? The only people to make a

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profit out of this are the lawyers. I am sure the noble Lord on the Liberal Benches would agree with that. But then we are all three lawyers, and that does not do the case any good.
The only other point I would wish to make is that I genuinely believe the Government should look at this point again, because again it is creating litigation when it could make it so clear, whatever it wants to do. With respect to the noble Lord, Lord Lloyd, I do not think it is a clause-stand-part point; it is building to a clause-stand-part point, but then amendments do that to highlight the features. The feature which is highlighted here is in the very words of the noble Lord the Lord Advocate. He said that the basic reason for having this statutory code is to deal with the torts associated with the calling of industrial action; that is what the Bill is about. It is to isolate industrial action; not the other affairs of the trade union, not its internal affairs or its contractual arrangements. That is why the other torts are left out, although he is not very sure of it, because of course trespass may be involved in sit-ins, and up in Scotland they have had some trouble with that lately. They might consider whether they have got it right, even from their own point of view.
I hope the noble Lords on the Liberal Benches will look at this matter because, if I may say so, this is not a clause-stand-part-point; it is a Bill-not-stand-part point. In 1906 their party gave us the framework of our industrial relations law which is now being destroyed, and they should look at this very carefully in the light of the history and tradition of their party. This puts trade unions in a position of great complexity and doubt and uncertainty; they will not know what principles govern what. Secondly, in so far as the industrial code applies it applies to industrial action, and it singles out industrial action. This is another example of a Government that says it is being evenhanded—singling out industrial action for a special statutory code of responsibility. It is quite clear the unions will know what to do.
On Question, amendment negatived.
8.28 p.m.
Lord McCarthy Lord McCarthy moved Amendment No. 112:
Page 15, line 25, at end insert ("acting within its authority under the rules").
The noble Lord said: I should like to take this amendment with four others which run in sequence, Nos. 113, 114, 115 and 116, because they all have the same objective in view. My noble friend has just been arguing that we believe it would be easier if trade unions had one set of liabilities based on one set of grounds. We were saying in a sense that it does not really matter—although we prefer one ground rather than the other—whether it should be the common law ground or the formula in the Bill. The Government have said, no, they want two different sets of formula, one for industrial torts and the other for other forms of tortious liability. We say O.K., that is what you want; then let us look in more detail at the actual formula you propose should apply for liability in respect of the area of liability which you specify in the Bill; that is to say, liability in the areas of industrial torts.
We are saying that it is a very strange set of arrangements which you are seeking to introduce into the operation of trade union rule books, and we are saying that if you look at actual trade union rule books, at least the trade union rule books that are known to us, there is a very wide difference between the way that authority is actually distributed in trade unions—the people who actually take decisions in trade unions and who are in fact responsible persons and principal executive committees, presidents, general secretaries and employed officials and so on—all phrases used in the Bill. We are saying that there is a very different set of actual relationships—power and authority relationships which exist in actual trade unions—from the ones the Government appear to be assuming they would like to see exist inside trade unions for the purpose of deciding what responsibility is to lie on trade unions under the Bill.
We are saying that that will lead to very considerable problems and those problems will add to the problems, which my noble friend has laid before your Lordships, which will arise for trade unions because they do not know, or it will be difficult for them exactly to tell, whether they have one set of responsibilities laid down in the Bill as a result of industrial torts or another set of responsibilities which arise in other forms of tortious liability. In addition, when they come to the area of industrial torts they will find a whole set of imaginary relationships embodied in the Bill which sit very ill with the actual authority in the rule book.
Therefore, the purpose of the amendment is quite simple. Indeed, the purpose of all the amendments is quite simple. What we are trying to do—and if we have not done it perfectly I am sure that the noble and learned Lord could do it much better, if he would only take the point—is to say that on each occasion these responsible persons and principal executive committees, presidents, general secretaries and so on, should all act within the autonomy that they have under the rule book. That is centrally the aim of all these amendments. If our amendment were carried those people, those characters that have been conjured up, whatever you may think they ought to do, will all be operating under the authority of the rule book.
There are many reasons why that should be so. One of the reasons is that trade unions respect rule books. The rule book is for the trade union, the constitution. It is all that there is. I do not suggest that trade unions always observe their rule books; they do not always know what they say. But when there is a challenge as to whether A, B or C has any right to do what he has done, then at least the active trade unionist knows that he has to find something in the rule book somewhere to justify what has occurred. The rule book is the constitution. The rule book has the same role in the union as a written constitution has in the state. It is all there really is which governs the power relationships.
Of course, as political scientists will tell us, because the rules are what they are, the power relationships are what they are—the power relationships go back to the authority in the rule book In some unions the responsible person—the principle executive committee—has a great deal of power. The principal executive committee is a very important group of people because that is what the rule book says. In other unions, the

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principal executive committee is a relatively unimportant institution because there are other bodies such as the final appeal court or the annual conference which is not mentioned here. It might be some other body in the rule book which has the authority and the power, and it might even be the sovereign decision-making body. It is the same in states; it is the same in countries; it is the same in trade unions. You cannot come along and impose upon an organisation a set of your own norms, your own concepts and your own authority structures, and seek to create a whole set of responsible people and tell them that they have power, and that unless they exercise that power then you will hold their organisation liable. We are saying that whatever you want to do, make it act within the autonomy under the rules. That is our general point.
Nevertheless, one must say that when one comes to look at the way in which the Government at this point in the Bill actually set out the relationships between different bodies in the union, it is—and I choose my words with moderation—somewhat bizarre. We begin with a responsible person; the concept of the responsible person, not, of course, a concept known to trade unionists. So we have the concept of the responsible person and he turns out to be a number of things. He can be, according to Clause 13(3)(a), a principal executive committee; according to Clause 13(3)(c) he can be a president or a general secretary and, of course, the Bill assumes that all general secretaries are as powerful as all presidents. The Bill does not go into such fine points. Alternatively, the responsible person can be any employed official or any committee to whom such an official reports. So far these creations have nothing to do with the rules of the union.
We are not told so far, as regards these aspects of the Bill, that anybody has any authority deriving from the rule book. We could have presidents, general secretaries, or employed officials who in the rule book have no power at all. Indeed, I intend to go on to indicate that many employed officials have no power whatever for the kind of things which the Government assume they should have certain powers. But then all of a sudden we see that there is some reference to the rules of the union. We are told at Clause 13(3)(b) that in addition to these heretofore named responsible persons we shall have:
"any other person who is empowered by the rules to authorise … acts of the kind in question".
So the rules get a little look in at that stage.
But that is not the end of the bizarre approach. We are also told at Clause 13(4)(b) that officials cannot endorse if the rules tell them that they cannot do so, and that their acts can be repudiated—not repudiated by reference to the rules, as my noble friend said, but repudiated by reference to this special, special category of responsible person: the president or the general secretary. They have a kind of special, special position. The principal executive committee, the president and the general secretary have a special, special kind of role in respect of the doctrine of repudiation. Again, as I say, this has nothing to do with what the rules say.
We are suggesting that if you want to fasten upon trade unions this bizarre set of relationships with all the legal consequences, you might have the decency to follow their own rules. You might have the decency
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to say that presidents will be responsible, or general secretaries will be responsible in so far as they are responsible under the rules. For example, in the area of strike action, it might be the case that, under the rules, none of the individuals or groups actually has any responsibility for strike action at all. You might be inventive enough or perhaps even commonsensical enough to say: "Let that authority be responsible under the rules". For example, in some cases the annual conferences have the power to authorise industrial action.
Sometimes—I do not want to encourage noble Lords opposite or they will get very uptight about it—you actually have ballots. Some unions have ballots to see who is responsible. They say that the whole of the district has to ballot if the vote involves the whole of the district, and the national executive has no power over that at all. So we are saying: "Do not create all these totally ignorant constructs; try to fit your responsibilities within what actually happens". To do that—it is not complicated; it is extremely simple—you just have to accept this amendment. I beg to move.
Lord Rochester: I am just a little troubled about this matter, as I endeavoured to indicate in our Second Reading debate. I do not quarrel at all with what the Government, as I understand it, have in mind in seeking to alter the law in relation to trade disputes in principle. But I am a little concerned as to how far their proposals may work in practice. To that extent, therefore, I have, if not sympathy with what the noble Lord, Lord McCarthy, has just said, some understanding of the noble Lord's position. I wonder in particular, as he does, whether the proposed legislation takes sufficient account of trade union structure as it actually exists, and whether it takes sufficient account of how far union officials possess in reality, and are actually capable of using, the powers that they are assumed in this Bill to have. I wanted to say that at some point and it may be that this is the most appropriate point at which to say it.
I realise that the response from the noble and learned Lord the Lord Advocate may be that all that unions have to do in this connection is to stay within the law. But I hope that he may have a little more to say than that about these practical difficulties because, as I say, in principle I am inclined to support the Government, but I am looking for a little more reassurance than I have so far had any indication of as regards the practicality in terms of the point raised by the noble Lord, Lord McCarthy, as to where power actually resides. I am looking for a little more reassurance, if he can give it to me, on that issue.
Lord Mackay of Clashfern: As the noble Lord, Lord McCarthy, has explained, these amendments bring us to the provisions which set out when a union should be held liable for unlawful acts committed by its officials and members in the course of industrial action. Those provisions are set out in subsections (3) to (7) of the clause. I should like to address myself immediately to the point that the noble Lord, Lord Rochester, has raised. The purpose of these provisions is to try to make these ideas in relation to union liability fit in with practical reality. As I said earlier,

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we recognise the difficulties that the courts found in the 1971–1974 era in dealing with this matter against the background of the ordinary law when it came to a question of a union calling industrial action. It is in an attempt to deal with that in a practical way that these particular proposals have been made.
Perhaps it would be helpful, therefore, if I briefly explained the provisions as I understand them in relation to this amendment. Subsection (3) contains the basic rules on union liability on which the subsequent subsections depend. It says in effect that a trade union shall only be held liable for unlawful action if that action has been authorised by a "responsible person". It then goes on in paragraphs (a) to (e) to define who is a "responsible person" for the purposes of this clause. Therefore the use of the phrase "responsible person" is—as I think the noble Lord, Lord McCarthy, recognised—an apt phrase to use in the context as a drafting device to list the people who might be responsible.
Before I come to the detail of that, it is important to bear in mind the practical situation with which we are dealing. We are dealing with a situation in which industrial action has been called by someone, and the question is: is that industrial action for which the union can be held responsible? What the clause says is that the union will he held responsible only if the industrial action is called by a person who falls into this particular classification, subject, of course, to the later provisions.
In paragraphs (a) to (e) there are basically two types of "responsible person" who make the union liable. First, in paragraphs (a) to (c) there are those whose actions automatically and irrevocably commit the union: the principal executive committee; any person or committee empowered to call industrial action by the rules of the union; and the president or general secretary. The second group, in paragraphs (d) and (e), are those people and committees who make the union liable unless under subsection (4) they are prevented by the union's rules from authorising or endorsing industrial action or their action has been repudiated by the principal executive committee or the president or general secretary. These are, in paragraph (d), the middle-ranking and junior employed officials like the regional secretary or the district organiser; and, in paragraph (e), the committees to which such officials regularly report, such as the regional or district committees.
Against that background, perhaps I may turn to these amendments. These amendments seek to impose an overriding condition that none of the "responsible persons" listed in subsection (3) will make the union liable unless the union's own rules give them authority to call industrial action. This is unacceptable for two reasons. First, the Government believe that any authorisation by the union's executive committee, general secretary or president should automatically commit the union, regardless of what the union's own rules say. Such a policy may be unacceptable to the noble Lords opposite with their strong belief in the primacy of union rules, but to do otherwise would seem most odd to the vast majority of the general public, and indeed to most ordinary union members. The executive committee and the very top officials are regarded by most people as the "voice of the union",
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and we believe the whole clause would be brought into disrepute if, to take an all too current example, ASLEF was not to be held liable for any unlawful action authorised by the general secretary.
Secondly, these amendments are unacceptable because they reintroduce the element of uncertainty about the authority conferred by union rules which the clause is designed at least in part to overcome. If it were possible to look at trade union rules and see immediately who has and who has not authority to call industrial action, then we might be able to accept these amendments—indeed, we might be able to dispense with the guidance on liability altogether. However, the reality is—and I am sure that there are noble Lords here who know this better than I do—that the majority of union rule books are silent or unclear on who may and who may not authorise industrial action. That is what caused the courts problems with the 1971 Act, and it is why it is necessary to make special provisions on liability in this Bill.
Let us suppose that these amendments were accepted and that industrial action was called by a union and the union rules are unclear; that anyone has authority on behalf of the union to call industrial action. Who will be liable? It has also been argued that these provisions cut across union rules and interfere with their internal affairs. But this argument misunderstands the purpose of the clause. Our aim is simply to set out when someone damaged by unlawful action should be able to claim redress from the union concerned. It does not prevent unions from having their own different and separate rules about authority to call industrial action. Nor does it stop a union enforcing those rules against its members or officials who break them, or indeed a member or official enforcing the rules against the union in the High Court.
It is also important to emphasise that paragraph (a) of subsection (4) does go a long way to achieving the purpose for which these amendments are designed. Under paragraph (a) it will be possible for a union to avoid liability for the acts of its middle-ranking and junior officials and their committees if they act outside the union rules—as long as those rules are clear and they do not have the authority to call industrial action. In other words, if a junior official calls industrial action and it is clear from the union rules that he has no authority to do so, he will be responsible, but the union will not be liable. He will not be a "responsible person" in terms of the full provisions of the clause. The premium is on clarity. The clause allows the union rules to be paramount in deciding questions of liability if those rules are clear. The only exception to this, as I have explained, is in relation to the national executive of the union and its president or general secretary, who we believe should be regarded as automatically committing the union.
To sum up, in our view these provisions set out clear rules on when a union is to be held liable for the unlawful acts of its officials. They are firmly grounded in industrial reality, and are based as far as is practical on what the union's own rules say. But we cannot, as these amendments suggest, accept that the whole question of liability should be based on union rules. That was the essential difficulty faced between 1971 and 1974. The fact is that union rules do not always represent the reality of authority within the union.

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Nor are they always clear on the authority to call industrial action. For these reasons, I must invite your Lordships not to agree with these amendments.
Lord McCarthy: What the noble and learned Lord says does not come as a surprise, but as a disappointment. He used such phrases as, "fitting in with practical reality", but the practical reality is not the practical reality of union government; it is the practical reality that the Government are determined to get the unions one way or another. Even if they have to make up an imaginary system which has nothing to do with actual power relationships in the union, they are going to get someone because he says an action is called by someone and therefore of course someone has to be "got" for that action.
Of course, the logic of that position would not allow any sense of repudiation at all. But the Government are not prepared to be quite as silly as that, so they invent a whole new set of constructs which are going to be made responsible whether they like it or not, and they cannot get out of it whether they like it or not. The facts of industrial life are that in most circumstances for most major industrial disputes it is clear, at least it is clear enough, who is responsible in a union and who has authorised the action. But there are bound to be areas of inconclusiveness such as those which came out in the Heaton case and in the General Aviation Services case where, I am bound to say, the common law in those circumstances sensibly sought to interpret the power relationships and the authority structure by reference to the only reality there is, and that reality is the union rule book.
For many other reasons, quite apart from the decision that the Government have tried to impose liability wherever they can, even if responsibility is not really there, I would caution the Government seriously against trying to create within unions forces, reference points, and authority structures which have nothing to do with the rule book. That way you simply create uncertainty and insecurity. But then of course that may be exactly what the Government want to do, and that may be why they refuse to accept our amendment.
On Question, amendment negatived.
[Amendments Nos. 113 to 116 not moved.]
8.53 p.m.
Lord McCarthy Lord McCarthy moved Amendment No. 117:
Page 15, line 36, leave out ("prevented") and insert ("not empowered").
The noble Lord said: This is a small but significant amendment which deals with subsection (4), where the Bill spells out what happens in a situation where any other official or committee to whom an officer regularly reports authorises an act that he is not entitled to authorise under the rules. As the Bill now stands subsection (4)(a) says that such a person or committee shall not be taken to have authorised that act if the rule prevents them from doing so.
We think that that is a strange kind of phrase to use. Indeed, in the context of union rule books, we would argue that it is an odd bit of ignorance, because it would be our submission that unions do not prevent what otherwise members have a right to do, especially in the case of strikes. In the common law situation,
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a rule book is a contract between the members, and in practice it is the constitution of the union setting out the authority structure of the union.
On both grounds of the legal position of the rule book, and in practice in terms of what the rule book means to the members, we are suggesting in this amendment that better than "prevented" would be "not empowered". We suggest that that is really what the Government mean; that the rule book does not empower people to do these things. This suggests no residual residue of rights that need to be wiped out by the rules because that is not the situation. People have what rights and what authority they have under the rules, and if the rules do not empower them to do these things then they are not authorised to do these things, and therefore this tiny amendment "not empowered" is a better form of words than the word "prevented". I beg to move.
Lord Mackay of Clashfern: This amendment seeks to alter paragraph (a) of subsection (4). The purpose of this paragraph is to take account of union rules when determining liability. It specifies that the union may not be held liable for industrial action authorised by employed officials or their committees if the union rules prevent them from calling industrial action.
This amendment seeks to turn this concept on its head. It amends paragraph (a) of subsection (4) so that the union is liable only if the union rules give these officials and committees positive powers to authorise industrial action. If the rules are silent or unclear about whether they have authority, then presumably the union is not to be held liable if this amendment were to be inserted. In other words, the amendment removes the incentive which paragraph (a) provides to a union to make its rules absolutely clear on who has, and who has not, authority to call industrial action.
Once again this amendment belongs to the theoretical world where union rules on industrial action are perfectly clear. If this was also the reality there would, in fact, be no practical difference between the formula now in the clause and that proposed by the noble Lord, Lord McCarthy. But, as I have already said, the reality is far from the theory. The majority of union rules are unclear or silent on v. ho may, and may not, authorise industrial action. That was part of the problem the courts had in deciding when a trade union was liable under the 1971 Act. At present, the clause says to unions, "If you want to avoid liability, then make your rules clear not only about who has the authority to call industrial action but Also about who has not". What the amendment says is "if you want to avoid liability, keep quiet about authority or make your rules unclear". For these reasons we prefer the clause as it is, and I would invite your Lordships not to accept this amendment.
On Question, amendment negatived.
8.57 p.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 118:
Page 16, line 1, after ("has") insert ("by notification in writing from a person affected by the act").
The noble Lord said: This amendment covers a small but important point. Under the structure which

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is now being elaborately woven within and around the union by law, the acts of some of the responsible persons, most of the officials and most of the committees, but not those who are empowered under the rules in 13(3)(b), can be repudiated. The conditions of repudiation are set out and the formula is in subsection (5), where it is said:
"…an act shall not be treated as repudiated unless—
(a) it is repudiated as soon as is reasonably practicable after the purported authorisation or endorsement of the act has come to the knowledge of the principal executive committee or, as the case may be, the president or general secretary;".
These three top people, as I shall call them. I must say to the noble and learned Lord that it was difficult to know where to stop with amendments to this structure, so rickety is it.
We have not an amendment and it will not come on clause stand part, but perhaps someone should mention in a footnote that nowhere anywhere in the Bill does it say when the principal executive committee ceases to act on behalf of the union. It is defined in one of those definitions which do not mean much but which help the court a little, but nobody says what sort of quorum it has to have. You cannot go to the rules because it is not bound by the rules. You must not go there. Or should you go there? If you go there to look at the quorum, how do you go there and not look at its powers? These matters will be mixed up. We have not got an amendment on that, but I give the Government notice that they might like to think about that for Report.
This is a much more limited point. It becomes very important, if you are general secretary, to repudiate. The noble and learned Lord should put himself in the position of a general secretary. I appreciate my noble friend's point on the president, but most unions will be able to find, or the plaintiff will be able to find, who is the general secretary of most of them.
There he is in London; he has been out for the evening having settled things. He returns to find the television reporters on the doorstep—that, after all, is the way of life these days—and they say, "What are you going to do about this South Wales strike?" But he does not know about it because it has happened quickly; it is a small group. They have got going and all sorts of local officials are involved. The various stories are put to him and he is told, "You must repudiate this", and of course the unwise general secretary will phone this lawyers, who will ask, "How much is at stake"? and he may reply, "I hear it is several thousands of pounds", to which they will reply, "You had better repudiate it because we do not want any of that".
Of course, if he does that, he is highly likely to be a bad general secretary for the union. What he will say, and what the amendment says, is, "Give me time to know", whereas all the Bill says is that he must repudiate as soon as "reasonably practicable"—not simply "reasonable" but "reasonably practicable", a much more limited phrase—after the act has come to his knowledge. That is a very tight formula and if we are looking at industrial realities—and I am here dealing with one that I think does not involve any legal point as such—this is an amendment which says to the Government, even at this residual level, "Surely
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you will change your formula so as to take account not just of the need of the general secretary but the desirability of doing this with regard to the community as a whole", otherwise, if the procedure of repudiation is triggered into action too quickly, we shall have the president repudiating the general secretary, as he can do under the following subsection, and the whole thing will disintegrate into confusion We have a suspicion that it may do that, anyway.
It is not right and fair that the general secretary should be made to respond to anything other than what is in our amendment. We say that he should respond with reasonable despatch, after he has been notified in writing from a person affected by the act in question; that is, the industrial action. It must be in writing so that he can see what is said. It need not be by a member; it could be by the employer, even by way of a telegram. But let him have some documents to which he must respond. That seems to us common justice, whereas the clause as drafted is not. I beg to move.
Lord Mackay of Clashfern: As I understood the purpose of the amendment as explained by the noble Lord, Lord Wedderburn, it would have the effect of preventing a union from being held liable for unlawful acts authorised by employed officials and the committees to which they report until the union receives a written complaint from someone affected. Such a principle is unacceptable to the Government because it gives unions further special privileges in law, which runs counter to the basic aim of bringing their position into line with that of their officials and members. It may in practice often be wise for an employer to write to the union to put it on warning that unlawful industrial action is taking place in order to give it an opportunity to try to get the action stopped. But we do not agree that an employer should be under an obligation to inform the union in this way.
The crucial question is: did the union know of the unlawful action? If it did, then it should have taken every possible step to get it stopped. If it did not, then it will not be held liable if, when it does learn of the action, it takes steps to repudiate it. In our view, the question should be: did the union know? and not: has somebody written to tell it? I must add that the more we have thought about the amendment as proposed, the more it has seemed to us to have quite the opposite effect to that which I have described as the intended effect. Under subsection (3), paragraphs (d) and (e), the union is liable for any unlawful action authorised by its employed officials or the committees to which they report, unless and until the union repudiates the action. This repudiation must meet the requirements set out in subsection (5) if the union is to avoid liability.
If the amendment were accepted, there would be no way of meeting the amended requirements for repudiation unless a written complaint had been received from someone affected by the action. Then the unions could not escape liability unless a written complaint is made. There would be nothing preventing them from becoming liable before a written complaint was made. The amendment does not, it seems to me, meet the point which the noble Lord explained as its aim, but perhaps that is a matter more for him than for me. I could not advise the Committee to accept the amendment.
Lord Underhill: I hesitate to intervene on a matter in which the legal luminaries are involved, but I think it necessary for a plain person to look at the matter. I said to some of my colleagues that, although we would be up all night, we would be wasting our time because it seemed the Government were determined not to agree to change even a comma in the Bill. On this series of amendments, although my noble friends are strongly opposed to the whole clause, we are trying to make it sensible in relation to union rule books. Some of the points made by my noble friend Lord Wedderburn show conclusively that the Government are not helping to make matters clear in that context. Take the very point we are discussing. As an ordinary individual, "has come to the knowledge" does not seem, even to me, to be a well-defined phrase. The provision says:
"has come to the knowledge of the principal executive committee or, as the case may be, of the president or general secretary".
There are times when the president and general secretary are both abroad. In that event, of whom must it come to the knowledge?
Lord George-Brown: Their deputy.
Lord Underhill: The Bill does not refer to a deputy. I should have thought it would be sensible for the noble and learned Lord to say that at least a few of the points which we have made are worthy of consideration and that, while he may not accept them now, he will study them. It seems that the Government have dug their heels in and, no matter what may be said, not a dot or comma will be changed. We are not debating an enormous issue, but it is one the Government should re-examine to avoid possible legal cases becoming protracted in the courts simply because the matter is not clear in the Bill. Whatever else noble Lords opposite may think of my noble friends Lord McCarthy and Lord Wedderburn, I think it will be agreed that they know more about union rule books and have seen more of them for different unions than anybody in this Committee.
Lord George-Brown: I hope noble Lords will forgive me—I have not been in my place for the whole debate—but I too speak as a normal, ordinary person. However, unlike any others who have spoken, I spent a very long time as a trade union official, full-time for a long time and part-time for an even longer time than that. I might possibly be the only noble Lord carrying in my pocket a fully paid-up 50-year-old trade union card. Fully paid up means paid personally to the branch—
Lord Underhill: There are others.
Lord George-Brown: Now then, let us examine the matter; and if I may say so to my fellow "ordinary" person, he has not gone into it in depth. I can excuse the noble and learned Lord, Lord Mackay of Clashfern; there is no reason why he should do other than read out his brief. The noble Lord, Lord Wedderburn of Charlton—OK; he, too, learnt it from books. Shall we just look at what we are talking about? If, as the other "normal" person said, our purpose is to let the
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Bill pass, but with such amendments as we may make, let us look at what it states:
"For the purposes of subsection (4)(b) above, an act shall not be treated as repudiated unless—
…it is repudiated as soon as is reasonably practicable"—
which leaves a hell of a lot open—
"after the purported authorisation or endorsement of the act has come to the knowledge of the principal executive committee".
The other "normal" person who spoke to your Lordships' Committee addressed himself to the rest of the subsection as though the part which I have just read out did not exist.
If the president and the general secretary of the union are both abroad at the same moment, not only do they have deputies who are entrusted with their authority, but the principal executive committee is also there. I speak as a member of the Transport and General Workers' Union. Whether Mr. Mostyn Evans will be thrilled to hear that is another question. But I do so speak, and there is no way in which the president of the T and GWU and/or his general secretary go abroad without leaving executive authority behind them. Now I believe that on that basis the case of the other "normal" Member of your Lordships' Committee falls, because there would be somebody holding executive authority.
What are we asked to insert? The proposed words are:
"by notification in writing from a person affected by the act".
Let us be honest and clear with one another. The noble Lord, Lord Wedderburn, knows what we are about; the noble Lord, Lord McCarthy, knows what we are about. We are trying to make it as difficult as we can for the individual member of a union to be able to withdraw. This is another version of "contracting" meaning having to contract out. Trying to insert the amendment means that the individual ASLEF driver, the individual T and GWU member, are being asked subject to all the pressures that can be brought upon them, to take on the whole might of a trade unionism which, let us remember, has gone mad since the days when we were brought up in it. It is no longer democratic. It no longer allows people to explain their views.
I should like to say to my other "normal" friend in your Lordships' Committee that he knows exactly what will happen if we insert the amendment. Some-body will have to write a letter and so come under all the pressures, which can be very great, very offensive, very physical. If we push in the amendment, someone has to go through all of that in order to establish the position.
I do not like the Bill, because I think that it is much too weak. I would have had it much tougher than it is. But I would leave it as it is, with the responsible executive authority or the responsible executive officers—and there will always be such. I tell my other "normal" friend that there is no moment when a union does not have responsible authoritative executive officers. We are saying, if we adopt the Bill, that if they do not act within a "reasonably practicable" period after it comes to their knowledge—and, Heaven knows!, that cannot be wider—it becomes operative to write in. I assure your Lordships that Brother Jones in Swindon has actually got to write a letter.

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My trade union colleagues here know only too well that is not on. The noble Lord, the other "normal fellow", drew up a report on how the Trotskyists got power in the Labour Party, and was squashed for his pains. I am a trade unionist; I am not a Labour Party authority. I know how they get power in the trade unions: it is because they simply make it impossible for an individual, unless he is, like me, a natural rebel, even to run a train. The fellows who were willing to break a week ago are less willing to break now because of the pressures on them, and yet you ask them to put their name to a letter? You are asking the impossible. Some chaps will do it, but they will be very brave, foolhardy fellows.
The two college lecturers who are conducting the debate for the Labour Party have never had to face this situation. I have, as a lay official of the union, as a full-time official of the union and as an opponent, sometimes supporter, of every leader of my union from Bevin—well, let me go back, from Tillett to Moss Evans. Given this closed shop situation, given the situation where you can rob people of their jobs, if you ask them to write a letter and sign their name in order to get even this limited protection you are ensuring that only the bravest of the brave, the stupidest of the stupid, will do it.
My noble friend, the other "normal" person in this Committee, knows as well as I know that that is why the Trotskyists got control of the party. That is why individuals in the party did not object. That is why they got control of the unions. If you write this in, the Bill becomes a dead letter. I do not think it is a very powerful Bill as it is, but do not weaken it any further. Unlike my other "normal" friend, I hope the Committee will certainly reject this amendment. To the two college lecturers here I would say, if I may, that I was teaching at the same polytechnic before either of them was known, so I am also a Woolwich Polytechnic lecturer and I have as much a right to be called "from Charlton" as either of them. I was teaching industrial relations before they were, but I was also practising it. I knew it, and I know it now. I ask the Committee, please, not to adopt this amendment.
9.19 p.m.
Lord Campbell of Alloway: May I very briefly return to the serious matter of this amendment, and try to meet it with reason rather than polemics? In particular, may I try to meet the point raised by the noble Lord, Lord Underhill, in deference to the great regard that I hold for him? With respect, I think the problem is really this. I know it is not intended to, but this amendment will in fact only add confusion; because if Brother Jones from Swindon writes a letter to the executive committee, how does he prove that the executive committee have ever received it by way of notification?—and you are back where you started from. It does not really help—and I think that that is the problem. I know it was not intended as an obstructive amendment but, on an objective analysis, I hope that the Committee will agree it does not really matter.
Lord Mackay of Clashfern: I wanted to say, in answer to the noble Lord, Lord Underhill, that, on behalf of the Government I have endeavoured to understand the amendments proposed from his side of the Committee and I have endeavoured to set out as fully as I could, consistent with my responsibility to make progress, a reasonable answer to them. There is no question of riding roughshod over the amendments as if they had not been put down at all.
Lord Wedderburn of Charlton: The noble and learned Lord never does that. I will try to be brief and restrained, and claim the title to speak in your Lordships' House like everybody else, as a human being—and no more. This amendment has nothing to do with the members at Swindon as against the union, and, in a sense, that mistake is plain if one reads the amendment in the context of Clause 13, which is about liability in tort. I agree. I think that the noble Lord, Lord Campbell of Alloway, suggested that the amendment might be the plaintiff. That is possible, of course, but it has nothing to do with the internal relationships between unions and members and Trotskyists and all that sort of thing. It is, of course, about the issue, which could be very important for union liability in the union funds, as to the validity of a repudiation. As the Bill stands, it refers to the top people, the general secretary, the president and the executive—although one fancies that the executive would not act until it had been convened; therefore the problem is not quite so acute. But the problem is acute for the president and the general secretary, for the reasons adverted to in the last set of amendments by my noble friend. Therefore the issue does arise: upon what basis of evidence is the general secretary and president—although I say that it will be the general secretary in most unions—to act?
The Bill leaves it at large except that it has to be done very quickly and without delay (that is in the subsequent paragraph (b); and I understand that we do not always have to read out all the words, for your Lordships will have read the Bill) and, in paragraph (a) as soon as is reasonbly practicable after having reliable evidence of what is going on. So far, I believe that I take the noble and learned Lord with me. If there was not reliable evidence then it would be arguable that he should not be put to his option. All that this amendment does is to say that someone affected by the Act should present something in the nature of a written description of the Act on which the general secretary can rely. The noble Lord, Lord Campbell of Alloway, says that that it might be a forgery or it might not be reliable. That is true of all evidence. The noble Lord has destroyed more evidence as unreliable than I have eaten hot dinners. Of course, whatever we put in the Bill, that would be possible; but it does not alter the formula that one tries to invent.
The amendment does not fall under the particular lash of the noble and learned Lord the Lord Advocate when he says that only a document from a complainant, or by way of complaint, would fall within the amendment. That, surely, is not a reasonable view of the amendment. Many people may be affected by the Act. The first person I thought of was the official who is to be repudiated or not repudiated, or some other official within the union. That is the first person

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who may be affected by the Act if the union is to be liable to damages. My noble friend and I did not put in notification in writing from an official, for we thought we would then come under criticism and it would be said, "You are keeping it within the union". So we said, "All right; anybody affected by the Act on the basis of a document which no doubt the court would say looked all right at the time and he ought to take his bid and make a choice on such evidence as he can get after that, within a reasonable time."
It seems to us a perfectly reasonable amendment. If this is a revising Chamber of the Legislature it is quite extraordinary how a debate like this will read in Hansard. There will be many people who will read this debate with interest and those who have enjoyed it may not enjoy the reading of it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.25 p.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 119:
Page 16, line 10, leave out ("behaved in a manner") and insert ("taken a step on behalf of the union").
The noble Lord said: There are two points in this amendment which deals with the situation where repudiation has already been effected, but where under subsection (6) on page 16 an attempt is made to withdraw the amendment. I meant to say "withdraw the repudiation". I am so used to withdrawing amendments that it slipped in not by way of Freudian but by way of procedural lapse.
The question is: how is a repudiation to be overtaken or repudiated? How are we to repudiate the repudiation? When the Bill began life, it said half of what our amendment says; that is to say, only by way of amendment of the Government's extraordinary scheme. The subsection says:
"The principal executive committee or president or general secretary must take a step which is inconsistent with the purported repudiation".
That is how the last two lines of subsection (6) used to read.
In Committee in another place, the Government changed the wording of the subsection on grounds which the noble Earl who is to reply will describe better than I can. It struck me that the reason was that it would be too easy to repudiate a repudiation if it suited the union, while on the other hand it was too difficult to show whether or not it had happened; that is to say, "taken a step" as a phrase was too difficult a burden to put upon the plaintiff if he wanted to show that a repudiation had been repudiated, and therefore liability sprang up again.
So they changed the formula, saiyng that repudiation of repudiation occurred if the committee, president or general secretary has behaved in a manner which is inconsistent with the purported repudiation. This is quite a serious matter, as indeed was the last amendment. The phrase, "taken a step" is more concrete. You know where you are; you look for a step; you have to prove the step. "Behaved in a manner" is vague, and if it is not different, why did they change it? It is clear that they changed it, because it covered a broader area. It is another change to broaden the
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area of union liability. There is some behaviour which is very hard to designate and very difficult to describe.
It may be that it takes a long time in court, with different recollections, to describe the behaviour of the president. Let us take the case where my noble friend is right. He says that in many unions you may not have both these officers. At any rate, if you have a general secretary, the president, under the rules, may be a figurehead position. Indeed some people who come from the United States make the mistake in company law and believe that the chairman of a company here is like the president of a corporation in the United States. It is the type of mistake that the Government are making in their unitary view of trade union rules instead of understanding how much they differ. If the president is a figurehead and perhaps the oldest member of a union, then short of his behaviour going beyond the bounds of control and auto-control, everything he does is to be looked at in this context to see whether he has repudiated the general secretary.
The general secretary may well be someone who has considerable rules under the rule book, and not just a rule book but under the custom and practice of the union. The living union may indeed trust the general secretary to do many things. It happens in many unions. It happens in most organisations, be it the managing director or the go-getting head, whatever he is called, of the outfit. In that respect, organisations have common features.
However, the general secretary may have to tell the executive committee: "For goodness' sake, lock up the president and get him out of the chamber, because he may behave in a way that would be thought to be inconsistent with my repudiation", whatever that means. The noble Earl looks puzzled, so I shall give him an example. The general secretary gets knowledge of industrial action, apparently with the approval of certain officials, but he is not sure. He asks whether he repudiates it. He investigates it, and let us assume he does that. The president, however, has a different view from the general secretary, not one shared by many members of the union but perhaps some down where the industrial action occurred. He rolls across in an evening stroll, in and out of the head office, to some newspaper reporters. He says, "It is all nonsense, my union is not repudiating the strikers down in South Wales; I am with them."
I ask the noble Earl: what is the legal situation? It is very difficult. I ask to be treated as a human being. That is all: it is not a legal question in the sense of an examination question: it is an honest human situation in which a general secretary finds himself and, instead of repudiating the liability, he suddenly finds that the president has caused the union to be liable through his not watching out for him. That cannot be right, and that is why we put in the second half of our formula. I now understand that that is what the Government are objecting to. We say that repudiation of repudiation in this extraordinary scheme, if it is to exist at all, must consist of taking a clear step, which can be proved in evidence, and it must be a step on behalf of the union. Of course, that gives away the difference between the Government and ourselves on this.
I understand now much better than I did previously to what extraordinary lengths the Government are prepared to go so as not to have the life of the union governed by the rules construed in its custom and practices and of course the phrase "on behalf of the union" will not be accepted by the Government. Perhaps they would reiterate that that is so—in terms of repudiation of repudiation it has a special importance here. The union authority is to be for nought for these top officials and, "taking a step" instead of "behaving" which one would think they would want to have third thoughts on, having got it wrong the first time round. I beg to move.
The Earl of Gowrie: The noble Lord's amendment seeks to change paragraph (b) in subsection (4), and the purpose of the subsection is to ensure that a union can escape liability for unlawful action by repudiating the authorisations of junior employed officials and their committees, but only if their repudiation is genuine. Under paragraph (a) repudiation will not stand if it is merely a formal act designed to avoid liability while the union's national executive, president or general secretary, continue to support the unlawful action.
When the Bill was originally published, this paragraph provided that a repudiation would not stand if the executive or top officials had subsequently taken a step which was inconsistent with it. However, concern was expressed by the CBI and others that this wording was too restrictive. The Government accordingly accepted an amendment which replaced the words "taken a step" with the present words "behaved in a manner". Part of this amendment therefore seeks to reverse that decision. The Government accepted the amendment in another place because they accepted that "behaved in a manner" is a wider formulation than "taken a step". It clearly covers informal support by "nod and wink" techniques as well as positive acts like authorising strike pay. We accepted that amendment because we are keen to draw this provision as widely as possible. That is why we cannot accept the amendment which seeks to reverse the decision. In the example which the noble Lord, Lord Wedderburn, in his guise as an ordinary human being, put to me, if the president is just a figurehead, then surely he will not be involved in the authorisation or the endorsement or the repudiation of the unlawful action; and so the noble Lord's example falls down. I hope the amendment will as well.
Lord Howie of Troon: I am drawn really to the support of my noble friend Lord Wedderburn in this case because I happen to be just such a figurehead. I am the president of a small but relatively unimportant union—unimportant to the world as a whole, but of great importance to its members, who are professional engineers, mainly in the electrical business. I am their titular president and my duties are totally honorary. I appear to grace the occasion and add dignity to a number of functions, which I do to the best of my ability. I also give them lectures from time to time, when I give them what I consider to be wisdom, and they are kind enough to listen to me politely even to the end; but I am not in any way engaged in their deliberations.
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The general secretary and the executive committee run the union and they call upon me when they feel it necessary, expedient or even decent so to do. But what I wonder about is this. Let us suppose that, in the course of a dispute, my union, which is a very well behaved one, and my general secretary and executive repudiate some action. Meanwhile, I am, in all innocence in my honourary capacity, saying things—quite without desire to wound or confuse—which are inconsistent with that repudiation. Does that mean that the lack of repudiation on the part of the honorary president will be held in some way against the repudiation on the part of the active figures?
It is fairly clear from the comments of the noble Earl, Lord Gowrie, that it would not be, in his opinion; but his opinion, although it is interesting and almost always right and conclusive within these four walls, does not carry the same weight outside these walls as it does inside. That is possibly because people outside do not know him as well as we do. When he says that the figurehead would be regarded as nothing more than a sort of figment of the imagination, and that nobody would pay the slightest heed to him, that might be good sense, but it might not be how the lawyers would carry on outside this House.
I should like him to make sure that his law is watertight and really carries the weight that he means it to carry. But at the moment, so far as this debate has gone, I am fairly sure that the amendment proposed by my noble friend Lord Wedderburn puts the law of the noble Earl the Minister into a much better and sounder case.
The Earl of Gowrie: I do not think that the world outside, as well as inside this Chamber—and I am grateful to the noble Lord, Lord Howie, for his kind remarks—is indifferent to common sense or common interpretation. I believe that "behaved in a manner" is a wide-ish formulation which would cover most situations, and I do not think the noble Lord need have any fears that he would be implicated in a piece of behaviour which was quite clearly, and evidently, designed to take steps which he was not authorising. I think that he has nothing whatsoever to fear.
Lord Howie of Troon: It seems to be more a case of the union having something to fear, due to my ineptitude.
Lord Wedderburn of Charlton: Coming to the end of the string of amendments, we begin to see through each crack how rotten is the core of the timbers of the clause and on Clause Stand Part I think that it will be taken apart. There are two small points which the noble Earl raised. He said that this change is to deal with the nod and a wink problem. There is always a nod and a wink problem, whatever formula you have. If you say "take a step" or "behave in a manner" or "do an act", in order to give authority or to take away authority, there is always a problem that the other side will say "You seemed to do it. You overtly appeared to do it. But in some way you cancelled what you did". There is almost no formula, except a very long and legalistic one, that would avoid that, even in part.

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The noble Earl said that to take a step in order to repudiate repudiation is too restrictive. That is what we have been saying all evening. Every time they are faced with a choice, the Government say "That is too restrictive". Of what is it too restrictive? It is too restrictive of union liability, and the change is always made outwards in order to make liability wider. My noble friend Lord Howie has lived the kind of example that I tried to give to the noble Earl. The general secretary repudiates. The president, who is honorary, is giving a lecture. He hears about it and, no doubt from the depths of his soul, having spent his whole life in the union and being the oldest member, with a card more than 50 years old, feels very deeply on this matter and says, "I think that the general secretary is wrong. It is nonsense". My noble friend would do that, because that is what he is like. According to the Bill, the union would then be liable again. So in the course of an evening the general secretary would have repudiated the liability and, if I may read the Bill, the president would have behaved in a manner which was inconsistent with the purported repudiation. The purported repudiation is now the important second half of our amendment.
The noble Earl says we do not need to have that on behalf of the union; that it would not fit the bill. Because of the way the Government have treated all the previous amendments—it is necessary for noble Lords to relate this point to all previous amendments, especially those moved by my noble friend—we cannot rely in this area, other than under subsection (3)(b) and, for the purposes of preventing authority, under (d) and (e), upon the rules. Steps taken on behalf of a union relate primarily to the rules. So the Government cannot use that argument. Therefore they are in the difficulty that, having created these creatures of their own imagination who walk about as the union, they now find that there are two, if not three of them, if the executive is in session, and that they might act one contrary to the other. The Government do not like that and they have tried to find a way out of the clause. The way out is to accept our amendment, but that is not very convenient for the Government because it is not wholly consistent with what they want the rest of it to mean.
What this debate has done, especially on this amendment and my noble friend's amendment on the rules, is to bring out a small but important point. Various statements were made when the Government first produced the documents which preceded the Bill: that a union would be liable under the ordinary common law principles of vicarious liability. I merely register the fact that we have travelled a very long way since then and that the statutory code of agency is a long way from the principle of Joel v. Morrison, which I can now at last accurately identify in my notes as 1834, where it was said that if a servant were going on a frolic of his own without being on his master's business, the master would not be liable. That is as true today of the common law in an updated fashion as it was in 1834. But that would not be true of the noble Lord, Lord Howie of Troon. He can go on what frolics he likes and he will bind the union if he acts as its president. I take his point that he will not bind the union if he acts in any capacity other than president;
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but if he acts in his capacity as president, the Bill, especially in Clause 13(5) and (6), is clear.
The Earl of Gowrie: Is it not the case that if the noble Lord, Lord Howie of Troon, were too frolicsome or irresponsible, the union would be able to remove him?
Lord Wedderburn of Charlton: I quite understand that. The noble Earl and I are very rarely in disagreement. We both agree that it would be better if the problem did not arise. If the president were removed there would not be a problem. One would be left only with the acts which he had already committed. The noble Earl might like to ponder this. We are on to a much more important point than I had realised and I am very grateful to him. If he says that the way out for the union is to repudiate the president and to dismiss him—under the rules, I presume—they get rid of him. But the president has acted in his capacity as president, so the clause applies. Where in the clause does it say that if you kick the president out by proper, lawful means under the rules, the acts which he committed to repudiate the repudiation of the general secretary do not stand? What would you say if you were in court and you were asked where it is said that what he did was in his capacity as president? There may be a conflict of evidence as to whether he acted in a private capacity. The noble Lord, Lord Howie of Troon, would not do that. He would give his lecture as president on union policy to members to convince them about what to do. He would say that they should support South Wales but that the general secretary does not.
We have concentrated on this one example. I ask noble Ministers to bear this far with us: that it may be possible to say that a particular example is special in a variety of ways. But it does not take a great deal of imagination, when one is presented with two people and one body, each with independent commissions to rove about as a union, whatever the rules say, to think of many situations where difficulty will arise. We are saying and my noble friend is saying that this sort of amendment will in fact create less litigation than will the Government's Bill. So, at the lowest level, I ask the Government whether they will consider the point and come back and say something on this matter, at least at Report stage.
9.45 p.m.
Lord George-Brown: I find this explanation from the Front Bench of the party to which I have belonged for so long incredible. We are not talking about what a president may do and what a general secretary may disagree with. It is rather like talking as though Sir John Boyd was the general secretary of the AEU and the noble Lord, Lord Scanlon—I wish he were here—was the president of the AEU. What the noble Lord the polytechnic lecturer is presenting is a situation in which the noble Lord, Lord Scanlon, would be opposed by Sir John Boyd. As the Bill stands it says that the principal executive committee or the president—that is to say, Lord Scanlon or Sir John Boyd—must have behaved "in a manner which is inconsistent".
The noble Lord the polytechnic lecturer knows as well as I do that union rules vary and in only a very

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few cases does the president have executive authority—I would rather like to engage the attention of the noble Lord, Lord Wedderburn of Charlton, I gave him all mine. Only in a very few unions does the president have that authority. In only another few cases does the general secretary have that authority. In most unions, and certainly in the craft unions, the principal executive committee has that authority. We are dealing with different unions created at different times, but for the most part they have a principal executive committee. The noble Lord, who does not wish to listen to me, no doubt with deliberate intent, clearly does not understand this. For the most part, but not for the whole part, there is a principal executive committee which is always to be held responsible, even if Lord Scanlon and Sir John Boyd happen to disagree.
Now to the actual terms of the amendment to which the noble Lord, Lord Wedderburn of Charlton, did not address himself. The Bill as it stands refers to whoever holds the authority, be it the principal executive committee, the president or the general secretary. I repeat that there are very few cases where it would be the president and only a certain number of cases where it would be the general secretary. In most cases it would be the principal executive committee. Indeed, I think I would go a wee bit further, because it is difficult to think of any case where the president or the general secretary actually purports to use that authority except in the name of the principal executive committee. What are we asked to do? The Bill mentions repudiation if the principal executive committee, the general secretary or the president
"has behaved in a manner which is inconsistent with the purported repudiation."
to which the noble Lord wishes to insert "taking a step on behalf of the union". With very great respect, without either of us trying to be very erudite—and I am quite willing to pit my erudition in this against his—it must be as plain to him as it is to me that he is again trying to insinuate something quite different; he is trying to protect somebody in authority in the union who takes a step on behalf of the union, even though that step may be inconsistent with the law. Forget all the kerfuffle about who is taking it, the president or the general secretary or the executive committee, and I will meet him on that argument any day he likes in any way he wishes to choose; the real issue here is, if I as a general secretary or a president or, as I was for a long long time, the effective officer of the union, can claim, were this amendment to be moved, that I was taking a step which seemed to me to be on behalf of the union, I take myself out of this Act and I take my union out of this Act. That is the issue. The noble Lord knows it as well as I do. I hope other noble Lords understand it.
We are still arguing the same thing we were arguing on the last amendment. We are trying to take the unions—not the members of the unions, may I respectfully point out; not the membership of unions, not the fellows who pay the dues—we are trying to take out the officials, who in my day had to be representative, nowdays do not; nowadays we know only too well that they can be the creatures of cliques; we are trying to take them out of an Act of Parliament by just artfully inserting a few words which simply say "taking a
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step on behalf of the union". If you have got that right, you can drive a coach and four horses through the Act of Parliament.
As a trade unionist, trade union official, with a card as long as anybody in this House, I never claimed that right, nor did Mr. Bevin, nor did Mr. Dukes, nor did any of the great men who led our union movement forward. This is a protection for any Trotskyist group, any militant group that happens to get control of any union, and the Lord Howie of Troon knows as well as I do the Civil Service unions in which this has happened, and the opponents of Kate Losinska could claim protection under this. I would not give it house room. I am astonished that the noble Lords on the Front Bench can pretend to; and I simply say to the Committee, please do not. Each union has its own rules, its own authority. What we must not give to that authority is the right to say: "Because we declare that we were taking a step on behalf of our union, that entitles us to contract out of the law". I hope that the Committee will understand the real issue which is at stake here.
9.55 p.m.
Lord Molloy: I should like to make a comment which I think is rather vital and important. I am not prepared to comment on what the noble Lord, Lord George-Brown, has just said because I do not think it is worth it. I do not believe, for example, that British trade unionists today are ruled by a bunch of cliques. They still have the same sense of honour and dignity as they had in the noble Lord's day and my day, when we were both members of the same union, although I am bound to say that I think that there is much more democracy in that union now than when the noble Lord, Lord George-Brown, and I were members of it many years ago. I shall also not be tempted to comment on what I thought was the unnecessarily offensive way in which the noble Lord referred to my noble friend Lord Wedderburn on the Front Bench. I think that his comments were quite uncalled for and highly offensive. The noble Lord was taking advantage, and we all know what we call people who take advantage of other people who cannot immediately reply.
I want to put the following point to the noble Earl, Lord Gowrie. There is another situation and it might concern the Civil Service unions more than anyone else and some of the National Health Service unions, who very often have to work together in combinations of what is known as "the staff side". Let us take, for example, the national staff side of all Great Britain's civil servants. I find it highly offensive for the noble Lord, Lord George-Brown, to say that the leaders elected by Great Britain's civil servants, from ambassadors right down to the ladies who clean this Chamber, would allow themselves to be governed and ordered about by a couple of cliques. I am bound to say that that particular part of Lord George-Brown's speech indicated to me that he is rushing headlong for the 19th century.
However, the point I want to make is that sometimes a number of general secretaries under the Whitley system have to make decisions which later have to be confirmed by their unions, and sometimes they are confirmed. Where they are not confirmed, they have

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to oppose what is decided, and sometimes even before the national staff side meets to meet the official side. When they are meeting the official side the chair is usually taken by one of Her Majesty's Ministers. So the point that I am raising is extraordinarily important. Let us suppose that in some instance the president of a union or the general secretary of a union is a member of the staff side with three or four other general secretaries and maybe a president or two, according to the rules of the particular union. Would we not be in some difficulty if this particular clause is not amended as indicated by my noble friend Lord Wedderburn? I am not entirely satisfied with his amendment, but I seriously ask the noble Earl, Lord Gowrie, whether he would consider this particular point. It would be offensive of me to expect him to give an answer tonight. However, I think that I have raised a point that is worthy of any responsible Chamber's examination.
The Earl of Gowrie: I am grateful to the noble Lord for his request and I welcome the tone in which he made it. Again, I do not think that it is at all offensive of him in any way whatever to ask for a reply tonight and I will try to give it. The plain reality of the matter is—and again I try to refer the
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Committee back to the sort of common-sense intentions behind this provision—that when industrial action is going on, the executive will usually have taken a view about whether the union supports it or not. The president and general secretary will usually act in accordance with that decision. If either of them does not, if the general secretary goes on supporting and encouraging the action despite the executive, then of course the union would be liable.
In the instance that the noble Lord cited, if there are eight unions on the staff side and all eight general secretaries have authorised the unlawful industrial action, then of course all eight unions are liable. But we must remember that it has to be unlawful action.
To revert to Lord Molloy's noble friend Lord Howie of Troon, he, of course, would only be acting inconsistently if, with his executive's repudiation, he continued to go on encouraging the unlawful action after the general secretary or executive had repudiated it. Again, the common-sense interpretation of the provision is really the one to stick to. I am a little confused as to why we are making such heavy weather of this particular provision.
On Question, amendment negatived.
10 p.m.
Lord Spens Lord Spens moved Amendment No. 119A:
Page 16, line 11, at end insert—
("(6A) When, in the opinion of the Secretary of State, any action taken in a trade dispute is likely to cause widespread economic or personal damage or distress to persons not involved in the dispute, he may order the union or unions involved to hold a ballot of their members before any such action is taken.
(6B) Section 13 of the 1974 Act shall not apply to any action taken in the dispute after an order has been made under subsection (6A) above unless and until a majority of those entitled to vote have voted in favour of such action being taken.
(6C) A ballot under this section shall be conducted in accordance with the provisions of section 58A of the 1978 Act.").
The noble Lord said: This amendment is rather different from the bunch that the Committee have been discussing for the last two hours or more. It has nothing to do with presidents or general secretaries, or even principal executive committees of unions. It will give the Secretary of State the discretionary power to order a union or unions, which is or are about to engage in a trade dispute, which the Secretary of State considers is likely:
"to cause widespread economic or personal damage or distress to persons not involved in the dispute",
to hold a ballot before it goes or they go any further.
We have been regaled for some time with a very large number of quotations from noble Lords on the Opposition Front Bench, most of them legal ones. So I shall add my own quotation to theirs, although it is not a legal one—it is a political one. It starts like this:
"It is a matter for concern that at present it is possible for a major official strike to be called when the support of those involved may be in doubt. A number of unions already have provisions in their rules making a ballot of their members obligatory before a strike. In other cases the holding of a ballot is discretionary. In others there are no provisions about ballots in the rules.
"The Industrial Relations Bill will give the Secretary of State discretionary power to require the union or unions involved to hold a ballot on the question of strike action. The power will be used where the Secretary of State believes that the proposed strike would involve a serious threat to the economy or public interest and there is doubt whether it commands the support of those concerned".
I expect your Lordships all know where that comes from. It comes from a White Paper called In Place of Strife: A Policy for Industrial Relations, which was presented to Parliament by the First Secretary of State and the Secretary of State for Employment and Productivity in January 1969. I have an idea that we have that First Secretary of State sitting as my colleague on the Cross-Benches. I am not sure and I may be wrong.
Lord George-Brown: No; it was Lady Castle.
Lord Spens: I thought that Barbara Castle was the Secretary of State for Employment, not the First Secretary of State. Anyway, that is the quotation. It was a White Paper produced by the then Labour Government. Therefore, it was their policy until their paymasters, the unions, told them to drop it, and it has not been picked up since.
We have heard a lot about the 12 million members of trade unions but, so far as I know, no one has mentioned the 34 million other people in the United
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Kingdom who are over 14 years of age and who suffer from these serious strikes—such as the one we have at the moment—who have no possibility of doing anything about it and who have to accept even the ruin of their businesses because a handful of union leaders decide to call a serious strike. The time has come when power should be given to the Government in the form of the Secretary of State for him to call a compulsory ballot before any such action is entered into.
I drafted this amendment about a fortnight ago. It was just after the NUR strike but before the ASLEF strike had started. I offered it around to two or three people to get advice as to whether to table it or not and I got rather contrary advice. I was advised by one person that this was not the Bill to put it in, but that I ought to wait for the next Employment Bill. On the other hand, someone else said, "Go ahead and table it and let us hear what the Government have to say about it." Since then, not last weekend but the weekend before, most of the press were saying that it was not likely that the Government would be able to table another Employment Bill in this next Session and therefore we would have to wait for the last Session of this Parliament, if Parliament is going to run its full course, before we get the next Employment Bill. That would mean two possible further winters of discontent before someone is able to stop these drastic strikes from taking place. I came to the conclusion that I would table an amendment to see what views the Government have on it. I beg to move.
Lord Boardman: The noble Lord, Lord Spens, has clearly explained the amendment and I shall not detain your Lordships for many moments in supporting what he has said. The issue is simple. It has been widely debated outside this House and Parliament, but unfortunately it was not debated in another place in the passage of this Bill there, for reasons known to your Lordships. On an issue which attracts so much public attention we should know how the Government view this important point.
The public are intensely offended at the way in which they are held to blackmail by a comparatively few people in essential services. They, and I certainly, would wish to see measures introduced which prohibited strikes in essential services. I recognise that that is outside the ambit of this Bill and I recognise the problems involved, but they feel that Government have a responsibility for the freedom, liberty and convenience of the general public to introduce some measures to curtail the type of thing that is happening at the moment.
This proposal would go some way at any rate to removing the offence of a strike of the nature to which he referred being held when it is genuinely believed that it is not supported by a majority of those taking part in the strike. It would not weaken the trade union movement. It would strengthen the trade union movement in enabling those in the trade union movement who disagree with the action taken by the small militant minority, but who are powerless themselves to demand or call a strike, to have the opportunity of voting in such a ballot if the Secretary of State so proposed and so moved. For that reason I support the amendment

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and hope that the Government will be able to make some encouraging response to it.
Lady Saltoun: I am not a university lecturer. I am not a paid-up member even for one year of a trade union. I am just an ordinary woman, and as such I go about and talk to other ordinary people and listen to what they have to tell me. I entirely agree with the noble Lords, Lords Spens and Lord Boardman, that the public of this country are thoroughly fed up with endless strikes, many of which are not wanted even by the majority of union members who dare not say so openly for fear of intimidation. I therefore support the amendment, which seeks merely to curb the power of undemocratically elected tyrants, and not to be nasty to the poor dear trade unions, and I hope the Committee will support it.
Viscount Massereene and Ferrard: I wish briefly to add my support to the amendment. I have been campaigning for a step like this for a number of years—for ballots before major strikes—and many trade unions now have provision in their rules for ballots. The Government will probably say the amendment is not correctly drafted or is suggested for the wrong Bill; but, be that as it may, it would do the trade union movement a great deal of good if such an amendment were made law because, as everybody knows, the majority of trade union members are not militant. If there is no ballot—I am not sure whether, under the amendment, it is meant to be a secret ballot, which is not the law at present—but just a show of hands, then as we know, there is the question of intimidation, and while many union members may not approve of a strike, they are frightened not to put up their hands to vote for strike action. That is well known. I will not go on longer, because we want if possible to get home before breakfast time. I warmly support the amendment.
Lord Rochester: I wish to—
Lord Jenkins of Putney: I think—
Lord Sandys: I think the noble Lord, Lord Rochester rose first.
Lord Jenkins of Putney: I think it is about time somebody against the amendment spoke. So far, only those in favour have spoken.
Lord Rochester: If the noble Lord, Lord Jenkins, will be patient he may hear one now. I have a great deal of sympathy with the general expressions of view there have so far been, but I have some reservations, on grounds not of principle but of practicality, about the making of secret ballots, before major industrial action, mandatory, at least at this stage in our development.
The Donovan Commission rejected the idea—I appreciate that was a long time ago—that an affirmative secret ballot should be held if the organisers of industrial action were to have immunity. Ex-
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perience in North America seems to be that more often than not ballots of this kind favour strike action rather than the reverse. The only instance in this country of which I know, the vote on the 1972 British Rail pay offer, is not an exactly encouraging precedent or a good advertisement for the idea.
There are other difficulties, as last year's Green Paper on trade union immunities showed. Once a strike has been endorsed by a ballot, settlement might be delayed by restricting the freedom of action of union leaders. There is the problem of how the question on which the vote is to be held is to be framed. For example, if the vote is on whether the employer's latest pay offer should be accepted, what happens if he then makes an improved offer? There are all those points and my fear, putting it as simply and briefly as I can, is that any attempt to force ballots of this kind on unwilling unions might prove counter-productive and encourage even more unofficial action than there is at present, and goodness knows! there is enough of that now.
For all those reasons, though my heart is very much with what the noble Lords, Lord Spens, Lord Boardman, and others have said—and perhaps one day we shall get there—I fear that my head tells me that at this stage it would be unwise to adopt the amendment.
10.15 p.m.
Lord Jenkins of Putney: I am glad that Lord Rochester's head is in the right place, even if his heart is not. In my own case my heart goes with my head. I regard the amendment as wholly undesirable. The whole of the Bill seeks to move in a direction which to me is the opposite of freedom. After all, what is the difference between a free man and a slave? It is that the free man is free to withdraw his labour. The whole of the Bill seeks to put curbs around him, to make it more difficult for him to withdraw his labour; to make it more difficult for workers collectively to do that. The purpose is to move more in the direction of the slave state and away from the free state. Oh yes, that is the whole of the exercise—
Lord Harris of Greenwich: May I—
Lord Jenkins of Putney: No, I shall give way in a moment. The whole object of the exercise is to curb the freedom of the trade unionist to excerise his right and his power to withdraw his labour. That is what it is. It is an anti-freedom Bill—
Several noble Lords: Oh, oh!
Lord Jenkins of Putney: I know that noble Lords opposite regard themselves as apostles of freedom, but they are not. They are apostles of the unbridled licence of the capitalist to exploit the worker; that is what they are about. Anybody—
Lord Campbell of Alloway: Will the noble Lord give way?
Lord Jenkins of Putney: No, not at present. I shall give way in a moment, but not just yet. I want to finish mentioning the point that noble Lords dislike,

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before I get on to the points that they will like. The point that they do not like concerns what I regard as the whole emphasis of the Bill, and the amendment seeks to drive the Bill to its logical conclusion. This is where I feel that the noble Lord goes wrong. He is exposing what noble Lords opposite are up to. Now, he must not do that. Until this moment noble Lords opposite have been able to present a civilised face, and to say, "We want to protect the public at large who have been exploited".
Well, of course, if the worker withdraws his labour, it inconveniences somebody, and the factor that determines whether his labour is important is the number of people whom he inconveniences. So, the Bill seeks to give the Secretary of State the right to determine, "Your labour is important, and therefore you shall not exercise the freedom which other people, whose labour is unimportant, shall exercise". If all of us here went on strike, nobody would care a damn; nobody would be inconvenienced whatsoever. In fact, society would probably benefit. If we all packed up and did not return for a week, it would not inconvenience anybody at all. But when the public are upset and inconvenienced because certain people withdraw their labour, that is the mark of the fact that those workers are really beneficial to society. They are the people who really matter, who really count, who actually do the work, and not merely talk about it, as we do. They are the people who run our society. They are the people who really matter.
The amendment proposes that it must be decided whether the strike is important, and, if it is, the Secretary of State may say, "You must have a ballot". But here I would point out to the noble Lord, Lord Rochester, that in quite a number of cases a ballot produces a pair of handcuffs, from which the executive committee cannot escape. That has happened in the present case that we are worrying about. The ASLEF committee is in difficulty at the moment because it cannot escape the consequences of its own actions. Therefore, it is not the case, as the noble Lord, Lord Spens, seemed to imagine, that the consequences of a ballot would be to restrain a Left-Wing executive committee. The consequences of a ballot might be to place the executive committee in a position in which it cannot negotiate a peaceful retreat.
If any noble Lord now wants to intervene, by all means let him do so; I am about to sit down. If the noble Earl, Lord Gowrie, reacts as I think he will, he will say that what is proposed in the amendment is going altogether too far. It is something that the Government do not want. I sit down confidently expecting to hear him agree with me—possibly not with the way in which I have expressed the argument, but with my conculsion.
Lord Aylestone: The noble Lord, Lord Jenkins, will pardon me if I do not follow him. In fact, my colleagues on this Bench are here because he is on those Benches. We have looked very carefully at the amendment in the name of the noble Lord, Lord Spens, and my old political opponent, the noble Lord, Lord Boardman. May I say first that we are not in any way opposed to pre-strike ballots? In fact, we favour them. But we are not really happy with the way they
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are proposed to be dealt with under this amendment, and for this reason: we cannot accept that it is the duty of a Minister of the Crown, the Secretary of State, to decide whether, in his opinion,
"action taken in a trade dispute is likely to cause widespread economic or personal damage".
It is not his duty. It may be somebody's duty. It may be that of the chairman of a company; it may even be that of a trade union official; but it is not the duty of a Minister of the Crown.
In fact, if he were to call such a strike ballot before a potential industrial strike and the ballot went against him and the strike took place, what a position the Secretary of State would be in! What would then be the action that the Secretary of State would necessarily have to take to call the ballot off? No; we would favour, even perhaps at a later stage, a different sort of amendment which would give us pre-strike ballots, but we would hope that it would not involve a Minister of the Crown.
The Duke of Portland: I am at a loss to understand how any of your Lordships who desires to see truth prevail can oppose this amendment. If a ballot is taken before industrial action, the union leaders will then know for sure that they have the full and genuine support of their members, and will not run the risk of having to call the strike off through lack of support. Moreover, they will be in a position to show the management beyond a shadow of doubt that the industrial action is not merely being fermented by loudmouthed militants but is based on a deep feeling of grievance.
I would suggest that the question on the ballot paper should be as simple as possible: for instance, "Do you or do you not accept the employer's offer?" Thus the employer will know that he has to make the best offer he can afford, and the employee will know that he has got as much as he can hope for. There will then be no further bargaining, but, hopefully, back to work and higher productivity.
Lord Campbell of Alloway: I support the views taken by the noble Lord, Lord Rochester. I, too, would urge your Lordships not to support this amendment, really for these three reasons. The first is the one put forward by the noble Lord, Lord Aylestone; that is, that it sets up the Secretary of State as an arbiter as to whether or not a ballot should be held—a decision which is not subject to any control, any judicial review, and which, frankly, brings the Government into direct conflict with the trade union movement and, in my submission, is wholly inappropriate.
The second reason is that it is too wide, too drastic and too interventionist, and is for those reasons a dangerous innovation, especially if, as many of us do, we wish to encourage a strong and responsible trade union movement. But the third reason is perhaps the most important, your Lordships may think, and that is because the amendment is wholly unworkable. If you look at the drafting of this clause, your Lordships will see that the opinion of the Secretary of State is in relation to the future effect of action already taken, not the threat of future action. If such be the case, how can he order a ballot before such action is taken? The noble drafting, with the greatest respect, is a nonsense.
True, the Secretary of State could order a ballot

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before such action is continued, but if the majority vote is in favour of the continuance, then how is such industrial action to end? Does the Secretary of State carry on ordering ballots every week, every month, to see whether it is to be continued? No, this question wants far greater thought. I also have considerable sympathy for the sincerity of those who feel that something ought to be done; but that feeling that something ought to be done is perhaps the most dangerous feeling of all in the sphere of industrial relations. What is done must be right.
10.25 p.m.
Lord Molloy: Following what has just been said, I am bound to say that in my judgment it is probably the most sober contribution on this amendment that we have heard. I feel that the referendum was born out of an emotional spasm because of the present railway strike. What I should like to be clearly understood is that every noble Lord and noble Baroness should know in their minds precisely, under existing legislation—legislation which is congruous (and has to be so) to the trade union rule books—the manner in which ballots are held. Then, there are the responses in different parts of the country. I am quite sure that what the noble Baroness said, talking as an ordinary woman to ordinary people, probably in the southern part of our country—
Several noble Lords: No.
Lord Molloy: Then in the wealthier parts of our country. It was said that there is a great animosity to the strike which is going on at the moment. But when one looks at the great industrial areas—and I have some experience of this—and at the results of ballots (and this is what I hope your Lordships will understand) one sees that sometimes, according to some trade union rules, ballots have to be taken region by region. Therefore, you can get an "Aye" vote in Wales and Scotland and a "No" vote in, say, the Midlands and in the South of England. Then the numbers have to be collated together and the decision is made. There is also the awkward part (which I think was adumbrated by the noble Lord who has just sat down) of how you get them back—which really means that unless all our objectives have been achieved they will stay on strike. That cannot be; so there must be another ballot.
Then there is also the very difficult situation that, in so far as the amendment refers, I believe, to the possibility of a trade dispute likely to cause widespread economic and personal damage and distress to persons not involved in the dispute and so on and so forth, it could conceivably be argued that some other issues equally cause this sort of damage to our nation. For example, I should have thought no one would disagree that when anyone innocently, mischievously, by accident or through stupid economic policies, has created 3 million unemployed in this country, we ought to have a ballot immediately. We call that ballot a general election. That seems to me to be a very fair thing to have to do. I do not know whether the Government would agree with that; if so we could all go home and prepare for the next election. But if they are going to argue that they support this amendment and those who submitted it, the logic is pure.
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The other thing that I think is very important to understand is the structure of some of our large trade unions on a regional basis. They are scrupulous in the manner in which their ballots are held. For example, the National Union of Mineworkers, as I am sure most noble Lords know, employ a highly reputable City firm to organise a ballot, to check it, to check every vote, which is scrupulously examined so that its authenticity is checked and the numbers are checked. It has nothing to do with the union. That is done under the rules of the union. Whenever a ballot is taken nobody within the union has anything more to do with it until the announcement is made.
What we have to be careful about is that when sometimes a ballot is taken and the majority is narrow, it can cause disruption within the union. If this was to cause some disruption among barristers, lawyers or Members of this House or other professional people, the damage is likely to be negligible. But where it can cause a serious dispute within a great trade union, and they were fighting—if I may use the term—among themselves for the honour of what they call democracy, which we all laud and praise in this House, then that too could cause irreparable damage.
My final point is this: I beg Ministers opposite and indeed every Member of your Lordships' House, let us not be too hasty and too savage in what we might like to do as individuals at a moment of anger and annoyance. What I am frightened of is this: the accusation of this House, the other place and of the British Parliament that when Polish trade unions declare their massive solidarity we laud and praise them, and when British trade unions want to do the same we call them disrespectful, disruptive and abusive. Such terms are heaped on their heads because they too have the guts and the courage when they think they are right—and they are not always right in their thinking.
I beg the Committee, as I think the noble Lord, Lord Spens has, not to disregard the 20 millions or 30 millions who are not trade unionists; but equally do not disregard the 12 million who are, and who are just as fervent in their support for, and total opposition to what is happening to, their fellow trade unionists in Poland. I beg this Committee not to allow a situation to arise where we and Members of another place will be equated to the vile behaviour of those who rule Poland, and what they have done to the Polish trade union movement, Solidarity. I hope that anything we might do will not sow that type of seed in the minds of the ordinary decent British trade unionist.
10.32 p.m.
Lord Beloff: I think that it would be appropriate, since both the noble Lords, Lord Molloy and Lord Jenkins, have from the opposition Benches opposed these proposals, to say something about their arguments. It seems to me to fit very closely the arguments which on other amendments, and other clauses, have been advanced from the Front Bench.
I think the argument just put by the noble Lord, Lord Molloy, could be turned upside down. It is, after all, a fact that in 1983 or 1984 the electors of this country, through secret ballot, will be able to say whether or not they wish the present Administration to be kept in office. Suppose I were to advance a Bill

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in this House and say that we should go back; that we should abandon the idea of secret ballots for our legislature; that we should have them done openly in public meetings where people could observe for whom others voted. I would be regarded as even more reactionary than the present Government. Yet on matters which affect the ordinary person a great deal more than who sits for Loamshire, this is thought to be a proposition which should not be advanced.
The point made by the noble Lord, Lord Jenkins of Putney, is an upside down point again because what is suggested is the precise opposite of what he said. He said that this was a way of denying workers the enormously important right to say whether or not they wished to work on the terms that some employer is offering them. But if they have the right to say this through a ballot then this particular freedom is best sustained. It is not identical with saying that some group or some leader may decide for them whether they should have this, any more than we would accept this in our political life.
It seems to me that this comes very close to the points which have consistently been made by the noble Lords, Lord McCarthy and Lord Wedderburn of Charlton, which has been throughout this debate not to pay a great deal of attention to the effect of this Bill on the fortunes either of our economy or on those who work in it. No reply was made to the noble Lord, Lord Marsh, when he indicated the number of jobs that had been lost in the newspaper industry through strike action, and not only in this country. But their interest has been the preservation of the prerogatives and rights of the constituted authorities named by the rule books of the unions.
It takes me back a long way, and perhaps noble Lords will pardon me—the noble Lord, Lord Wedderburn, has investigated history over the last 150 years at some length. I should like to go back a little further, to a very important Act of Parliament passed in 1468 and known as the Act on Livery and Maintenance. Some people think it is the beginning of our rule of law.
What were livery and maintenance? At a time when barons—perhaps the ancestors of some noble Lords present—ruled the country in what was known as bastard feudalism, they exercised their influence in two ways. They employed individuals and made a mark of their employment by giving them their livery or badge, and insinuated them into positions of power and influence. They adopted the legal cases of individuals, from whom they hoped in turn to get support, by intimidating courts and juries and officers of the law. And that was known as maintenance.
It seems to me that when, over and over again, the noble Lord, Lord Wedderburn, has said, "I know the Government are not going to accept this: just you wait and you will see what will happen"—that is, that some other form of action will be taken to prevent the operation of this Act—then I say in all sincerity that I do not regard it as in any sense humorous that the noble Lords, Lord McCarthy and Lord Wedderburn, Lord Molloy and Lord Jenkins of Putney, are the livery and maintenance men of the modern industrial barons of the trade union movement.
If they are prepared to say that that is what they want
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—they want to preserve untouched the present structure: they do not want ballots or intervention, or the possibility of intervention by the ordinary union member—let them get up and say so. But even if they do not, it seems to me that by now, after listening to them for nigh on four days, we at least know where they stand.
Several noble Lords: Hear, hear!
Lord George-Brown: May I perhaps intervene again, because I think, if I may say so, that the noble Lord, Lord Beloff, has put his finger on the issue. I listened to the noble Lord, Lord Jenkins of Putney, making a speech which was not in favour of free men: it was in favour of the appointed, maybe self-appointed, maybe the oligarchically-appointed general secretary of Equity; it was exactly the speech that General Jaruzelski made against Solidarity. It was exactly the basis upon which Lech Walesa was taken out of circulation Lech Walesa and Solidarity were, rightly or wrongly, badly or well run, trying to establish the right of ordinary shipyard workers in Gdansk, ordinary colliers in Katowice, to take a different view from the Hugh Jenkins's of this world, from the Moss Evans's of this world, from the Scargills of this world. What General Jaruzelski said is, "You shall have a trade union movement of which I approve and you will obey the orders of those who lead it", and, with the greatest respect, that is exactly what Lord Jenkins of Putney put forward tonight.
If I may say so to my noble friend across the way, any barrack room lawyer can nit-pick the words. May I say to the noble Lord, Lord Rochester, that it is open to any Liberal to argue, but today is not the right time. Lloyd-George knew differently from that. We can revise the wording. I do not like the word "order". You do not order trade unions; you request or require. We can argue the terms of the amendment.
Let us discuss what we are trying to do. We are trying to establish that the ordinary fellow or lady who makes up a union shall, at the end of the day, determine its policy; shall determine what effect they impose upon themselves and upon their fellow men and women. They shall decide it, not the man or woman who, because of a clique organisation within an organisation, get themselves into power and order the rest, on pain of dismissal, on pain of all kinds of things, to follow them.
I was rather shocked at the speech of my noble friend—I should call him my noble leader, I suppose—Lord Aylestone. That we in the SDP should not be willing to stand up for this principle seems to be absolutely shocking. We are for the nation, and the nation is not just even the workers. It most certainly is not just those who run the trade unions, however they have got there; and it most certainly—if I may say so to the noble Lord, Lord Rochester, and my noble friend over here—is not a cosy arrangement between those who run the unions and those who run industrial enterprises, such as the CBI. At the end of the day, this has to be the right of individuals.
If I may now address myself again to the Labour Front Bench, although I doubt whether they will listen to me, when I was a full-time trade union official I had to carry my members with me. In those days I did

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not need secret ballots, but equally, neither did I ever have a mass meeting on a rubbish tip outside a large factory where you could not tell who was holding up two hands and who was holding up one. I had my meetings either in the canteen, if the employer was sufficiently wise in those days to let me, or I had them in the local hall, which I hired for the purpose.
Those were the days when fellows lived fairly near to their place of work. One could always consult one's people and be supported by them. The situation today, my noble friends, is quite different. People live a hell of a long way away from where they work. The buses are queueing up to take them off the moment they are finished. There is no way in which you can get them to the kind of trade union meeting we used to know, so, out of a labour force of 20,000, you get 100 or 1,500 on a rubbish tip at lunchtime. You have got yourself a result.
Alternatively, you have a craft union like ASLEF whose officials are fighting more for their economic life than they are fighting for the lives of their members. They have lost so many members already that when they lose another 3,000 or 4,000 they cease to be a viable union. The most terrifying thing for Arkwright House will be when they have to amalgamate with the NUR because there is nothing else they can do. That is what this row is about more than anything else. If you consult their members, their members are not concerned.
The whole situation of British trade unionism is different from what it was. Leaders now lead by their authority, their authority being backed by the closed shop and by employers who do not want cosy relationship disturbed. Men and women are ordered about. Tea ladies, for God's sake, the tea ladies on 30 hours a week are sacked because they do not accord with the views of the leaders of USDAW. It is a different world, and in a different world one must provide different remedies.
When I was an official, the idea of having a secret strike ballot never occurred. For 15 years I organised 26,000 people in most areas of this country. I had no more than one strike in the whole time. I had no need to have recourse to a secret ballot. All mine were open but were at places where all the people were there. We are not living in that world now. I urge the merits of the intention of the resolution, but, like Lord Spens, I shall not hang myself on the actual words. The spirit can be accepted and we can talk about the exact wording.
I am now what I used not to be, absolutely persuaded that if ordinary railwaymen, ordinary workers who pay their union dues—and to the noble Lord, Lord Rochester, I say, let us remember that even that has changed and few union members pay their dues—get a pay cheque at the end of the day, their union dues matter no more than their PAYE or their national insurance. They are just deducted. They no longer go to branch meetings. They are no longer contacted by branch secretaries. They are no longer contacted by branch collectors. It is all taken off the pay cheque. It has become such an ordinary thing.
What those of us who support this amendment and others like it are trying to do is to bring back some democracy, some membership responsibility. I know
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that clever men can laugh at me about this, but there is only one form of democracy. There is only one form of responsibility: where the individual has the power to exercise it in a situation in which he cannot be victimised for doing it. It is for this reason that I have come round to the view that for electing senior officials of a union, for having membership agreements—as we call them, oddly enough, in this Bill under 58A which we have already passed—for deciding to inflict economic and social consequences upon the nation and upon ourselves, we, the union members, should be allowed to say that that is what we want.
"Now then", says Lord Rochester, "Now then", says Lord Molloy," if you ask them whether they want to do it, what do you do if you want to ask them whether they want to end it? "I suppose the answer is, "You do the same". But in fact they will not do that. Lord Rochester quoted something that happened in 1972. Has he forgotten what happened in the Transport and General Workers' Union much later than 1972 when the leaders of the Transport and General Workers' Union, Mr. Moss Evans and the rest, were thrown right overboard? Has he forgotten what happened in the AEU with "Red Robbo"? He was thrown right overboard. Has he forgotten what happened in the Yorkshire coalfield when Mr. Scargill was thrown right overboard? Has he forgotten what happened in the NUM when Joe Gormley stood up and said, "I don't seek to tell you how to vote, but think twice". There are many examples.
I presume that at the end of the day my noble friend will withdraw the amendment for further consideration. Let us consider how we can better draft an amendment to achieve this purpose. But I say to my ex-Labour Party colleagues and I say to Lord Aylestone: do not let us kid ourselves. We have a union movement, the leadership of which has for the most part never been so unrepresentative as it is now. We are not dealing with a situation which he and I knew. We are dealing with a situation in which cliques get power by exercising the means to get power and then order their people into place.
Against that situation we need some protection, and the only protection that I can see is that in certain cases, for certain purposes, it is necessary to require of a trade union that it takes a secret ballot of its members. I hope that the Government will offer such a reply tonight, after we have heard the expertise of the Front Bench. I hope that the Government will offer such an answer as will enable the noble Lord, Lord Spens, to say that he accepts that this is not the right wording and that he may discuss between now and Report stage what is the right wording.
But we need some such thing in the unions as they are now organised if we are not to totally destroy, as we are now doing, the social fabric of this country. Who could believe that the First Division association of civil servants, the Secret Communications Branch, could be ordered about like this without anybody actually asking them. Is that what you want to do? Because the nature of the trade union movement has changed, we have to do something like this. The Tolpuddle Martyrs were martyred by the landlords; the trade union leadership is martyring the trade unionists today.
10.56 p.m.
Lord McCarthy: I want to say only a few words because the case from our side of the Committee has been put very well by my noble friends behind me. I merely want to say that we agree with what they have said and we agree with what the noble Lord, Lord Rochester, has said. We believe that this is something which has actually been tried. It has been tried, as he said, with the 1971 compulsory ballot and it failed. It has been tried in the United States. It has been tried in Canada. It has been tried in British Columbia. It has the effects that he said it has; the experience is that strike ballots are overwhelmingly likely to go in favour of strike action and that, as a result, they restrict the freedom of officials to settle. I am quite certain that whatever reasons the Front Bench give, they will give different reasons; but they will come to the same conclusion—that for those reasons or other reasons, the Government will decide, at this stage at least, not to support this amendment.
I am sorry to see that the noble Lord, Lord Beloff, has left the Chamber because I wanted to thank him. He gave me a clear idea (I said the other day I did not know what it was, but I know now) of what a Second Reading speech is on Committee; that is what he has given us. If he wants to read my works, such as they are, he will find that they are full of criticisms of the trades union movement. For example, he will find in The Closed Shop in Britain, which many Members of this House have quoted, that I was suggesting in 1964 that something should be done about existing employees when the present Government and subsequent Governments thought that it was perfectly all right to exclude them from closed shops and give them no compensation at all. Nevertheless, my noble friend Lord Wedderburn of Charlton and I, although we often criticise trades unions, do not criticise trades unions in the way which noble Lords opposite do; and in particular, we do not take our criticism to the point where we support this Bill. That is the difference between us. We believe that this Bill is a bad Bill and we seek to improve it by amendments.
I now come to this amendment in particular, and I want to ask just one question of the noble Lord, Lord Spens, because in this very long and interesting debate it is a question that has not been asked. I want to ask the noble Lord what he means in his Amendment No. 119A when he says,
"(6C) A ballot under this section shall be conducted in accordance with the provisions of Section 58A of the 1978 Act."
That puzzles me—in the first place, because that part of the 1978 Act deals with unfair dismissals and, of course, it deals with union membership agreements. Therefore it deals with whether or not dismissal is on grounds of trades union membership. I am not quite clear why that is there. I wonder whether what the noble Lord means by it—in which case he would be going far beyond anything which the previous Government would have done in 1971 and anything which I know anyone to have done who has introduced compulsory ballots—is that he would be insisting upon an affirmative vote of 80 per cent. of those entitled to vote or 85 per cent. of those voting. If that is what he means by the reference to Section 58A of the 1978 Act, that is an extra reason why we should vote against his amendment.
11 p.m.
The Earl of Gowrie: I think this has been almost an hour's debate and perhaps it might be for the convenience of the Committee if I now very rapidly gave the Government's view. I think this is what could be called a "Yes, but" amendment. I wholly agree with the noble Lady, Lady Saltoun, that if you asked 100 ordinary sensible people whether there should be ballots held in secret about the holding of major strikes, the overwhelming majority, perhaps over 90 per cent., would say yes. It is a certain and true instinct of people that this kind of opinion should be taken and should be taken away from harassment and in secret. The "buts" are when you try to start to work it on the ground, and they are rather more than a question of the wording of the amendment. A substantial "but", a substantial objection, in the particular amendment, rather than in the general sentiment which I am trying to express, is that the Secretary of State, the Government, here would be asked to intervene in a major dispute.
We have some experience of trying to deal with the issues surrounding mandatory strike ballots. The issues were rehearsed fairly and squarely in the Green Paper, Trade Union Immunities, and we sought views on measures of an emergency nature such as that proposed in this amendment, as well as on whether unions should be required to hold secret ballots of their members before any strike at all. We sought views from those on the ground, and many of those who replied to us were, of course, employers.
Numerous employers—indeed, the majority of employers—came out against legislation in this area. I stress the word "legislation", because I am not saying that employers were opposed to ballots or opposed to secrecy. A reason they frequently advanced was that they wanted to retain the initiative to ballot their employees themselves, where they thought it would be conducive to resolving a dispute. That seems to us to be a compelling argument. The present amendment—not because of any drafting or technical deficiences—takes no account of an employer's wishes. A ballot, it seems to me, is rather like the ultimate ballot—that is, it is rather like a general election. Once you get into a general election, it is hard to get out of one until the issue is resolved, even in the interests—which of course does not apply during a general election—of achieving a particular settlement of a particular dispute.
The other thing is that the amendment is geared to the big strike, the major strike which affects public attitudes and perhaps public services. Major strikes of this kind inevitably occur in highly emotive situations. I must say I do question whether Government intervention would have the effect of settling a dispute, whether it might not have the effect of hardening attitudes and prolonging the dispute, perhaps even into a comment before a general election on the Government concerned. I would also say that this particular Government have, in my view, been rather successful in keeping out of industrial disputes, in trying to restore the authority of managers to manage, and of unions to negotiate with their employers free from Government intervention. We are sometimes criticised and teased for this. It is said that there are not enough beer and sandwiches at No. 10 Downing Street. I am far from

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persuaded that beer and sandwiches at No. 10 Downing Street are the best way of settling disputes.
I must say also that I agreed with the noble Lord, Lord Rochester, when he reminded us that in British industrial relations the worst trouble tends to happen in unofficial disputes rather than official disputes. Again, this kind of amendment would make a little dent on unofficial action. The Government, however, are very sympathetic to those who wish to strengthen the democratic rights of trade union members as individuals, and much of what the noble Lord, Lord George-Brown, said was not only experienced, but very powerful in this respect.
I would remind the Committee that we have introduced a scheme whereby unions may apply for reimbursement of the costs incurred in holding secret postal ballots on certain issues, including the calling and ending of strike action. I must say that we are not convinced at this time that any further legislation on strike ballots would be, to use the word of my noble friend Lord Campbell of Alloway, "workable". I therefore hope that the noble Lords will not press the amendment, secure, however, in our conviction that we must look at this issue continually to see if there is some way in which we can resolve it.
Lord Hankey: I hope that, without unduly lengthening this debate, I may be allowed to say a few words. I do not share the view of the noble Earl about the action which the Government have taken, having been so successful in the industrial relations field. I must honestly say that I think that the Government were elected in order to protect the public interest from unreasonable action by sectional parts of our community. I really do think that the great majority of our people would go along with my view that the Government have not really taken the action that was expected of them.
I personally consider that this is a particularly well drafted amendment. The noble Lord, Lord Aylestone, and the noble Lord, Lord Campbell of Alloway, said, for instance, that they did not like the idea of the Secretary of State being involved. I ask the Government: who is going to protect the public interest if the Government do not stand up for it? The public interest is going by default and this country is still going downhill on that account. Honestly, somebody has to take this question under his arm and make the thing get going. I do not know who is to do it unless it is the Secretary of State.
I think that the Secretary of State is just the man who should do it. He is politically elected, democratically elected. He is in charge of an enormous Ministry—full of "wet" people, I am afraid—but I think that he is the right person to take the action. Who else will protect the public interest? At present we have no trains and members of the health service are deciding what supplies go into hospitals. The place is in chaos. It is the Government's business to see that this sort of thing does not disable our community in essential parts of the economy. I thought that my noble friend the Duke of Portland made an excellent speech on this subject.
I hope very much that the Government will consider this again. I can see that they are going to ask for assistance from their supporters, and that the Labour
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Party is going to ask its supporters to vote against it. I would like to ask them to consider this issue very seriously. It is not enough to look at it, as my noble friend Lord Gowrie has said: they really have to get on with it. I urge this on the Government. I think that the Secretary of State is the right person to do it. If a union decides for a strike in the ballot which he orders, I do not think that the Secretary of State loses a lot of face: it just proves that the situation which my noble friend Lord George-Brown mentioned has not occurred—and the great mass of the union support it. That is all right. We must have strikes if they are democratically supported in that way. In my opinion, the Secretary of State does not go down; he goes up because he has tried to protect the public interest.
Finally, subsection (6C) says that we do it in accordance with the new text of Section 58A, which we have recently approved, which provides for secret ballots. I think that it makes sense. Therefore, I ask the Government to do more than think again; let them act.
Lord Spens: We have had a very interesting debate. It has gone on for very nearly 70 minutes. I want to thank everyone who has taken part, whether or not they have been supporting my amendment, because it will be extremely useful to read everyone's views. I have no doubt that we shall come forward again with something else. I am disappointed in the Government's attitude because they seem to want to stay aside from these major situations where it is not just a question of employer versus employee; it is a question of the other three-quarters of the nation who have nothing to do with the industrial trouble and who are being affected.
We have heard a great deal from the noble Lord, Lord Molloy, about his 12 million trade unionists. His arithmetic was not very good. There are altogether 44 million people over the age of 14 in the United Kingdom, and if you take 12 million away from that number you are left with 32 million who are not, and that is very nearly three-quarters of the whole. So that his 12 million, even if they were all of one accord—and I am quite certain that they are not—would, between them, provide only one-quarter of our total adult population. It is what happens to the other three-quarters that worries me.
Lord Molloy: Where does the noble Lord get the impression that all British trade unionists are single and do not have wives, children, aunts, uncles, and so on? Would he explain to the Committee why he believes that?
Lord Spens: They may have wives and children, but it is not necessary in these enlightened days that those wives and children support them. In fact, I think in many cases they do not support them. In fact, it is very often the wives who bring their erring husbands back to reality by telling them to stop striking. That is by the way.
I support very much the words of my noble friend Lord Hankey. It is the problem of the public and the public interest which must be looked at now, and it is only the Government who can do it. You cannot stand back and let this chaos continue and simply say that we must not get ourselves involved

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in an industrial dispute. It is getting to the stage where the country is becoming bankrupt because of the difficulties and the impossibility of ordinary men and women carrying on with their jobs. I shall certainly ask leave to withdraw the amendment, but I reserve my right to bring it back in some other form on Report.
Amendment, by leave, withdrawn.
[Amendment No. 120 not moved.]
[Amendment No. 120 A had been withdrawn from the Marshalled List.]
On Question, Whether Clause 13 shall stand part of the Bill?
11.14 p.m.
Lord McCarthy: We do not wish to hold up the Committee at this time of night, but we feel at this stage that we must say why we believe that this clause is a bad clause and is opposed. Essentially, the clause is simple. It aims to repeal Section 14 of the 1974 Act and, therefore, it aims to open trade unions to tortious liability in the area of an industrial dispute. It is as well to ask—because until we got to clause stand part it was not logical to ask—why that is necessary today.
I think the answer, first, is that history has shown it to be necessary and that the contemporary situation reveals it to be more necessary than ever. The history of trade union law has been a history of false dawns, and at this time of night I do not intend to go through one false dawn from the time of R v. Bunn in 1872, right down to Rookes v. Barnard and beyond.
It has been a series of false dawns; of occasions when the trade union movement were led to believe that they had legislation enacted which gave them protection for their normal occasions and businesses within the context of a trade dispute. Then in the language that my noble friend Lord Wedderburn of Charlton used earlier today, because of what he called the genius of the creativity of the common law, judges found, invented, created or discovered ways in which things were otherwise. Unions found over and over again that areas of immunity which they thought were theirs were not theirs any more.
Therefore, they enacted, or their friends enacted for them, in 1906 and again in 1974 and 1976 what you might call the belt and braces clause—a clause which says in broad terms that there is a limit to liability, and that liability shall lie against individuals but it shall not lie against trade unions per se. That is the historical reason. When one looks at great historical figures in the past who have been mentioned in debates in another place—for example, Sidney Webb and the Donovan Commission—who did not think so, it was because they were optimistic. Sidney Webb thought in 1902 that he had a definition of what we would now call a trade dispute which would be perfect, which would be safe, and watertight. He thought he had such a first-class belt that he did not need any braces. But it turned out not to be so.
Similarly the Donovan Commission thought, for example, that if they could extend immunity in the context of a trade dispute to commercial contracts, which they thought at the time was the main area in which the creativity, or whatever you like to call
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it, of the common law had set aside the assumed effects of the 1906 Act, then trade unions would be all right. But it did not turn out to be like that. A series of cases was developed on a whole series of grounds which I do not want to go into tonight, which led us to a situation in which once again we felt in 1974 and 1976 that we needed this belt and braces clause. That is the historical reason.
The contemporary reason is the new liabilities under this Bill. These are the liabilities under the 1980 Act and the further liabilities under this Bill, which we shall be discussing when we discuss further clauses in this Bill. When you put alongside the historical conditions and the history and the extremely unsatisfactory nature of the immunities position of the trade unions arising out of the 1980 Act, the further liabilities on union membership agreements and liability for union labour only contracts, and the crucial redefinition of a trade dispute which we are going to hear about later, this represents a general area of liability which is serious enough for individuals but is potentially catastrophic for trade unions themselves.
We have tried to put forward a whole series of amendments to reduce the scope of this clause. We have met with no success whatever, and we are not all that surprised. Therefore, the Government have to rest their case either on their belief that they want to put unions in this position, or in a belief in one side, the weaker side, of the arguments put forward in their Green Paper. Never was there a section of the Green Paper in which the argument was so weak on one side and so strong on the other, though God knows they tried their best! They trotted out all the old argument that tortious liability would exert greater discipline over strikers; prevent strikers striking; help to avoid martyrs; enable employers to get total redress. Alongside them they set the much more persuasive arguments—they were even rather longer—about the nature of the power relationship inside trade unions, about the impossibility of expecting trade unions to act as policemen, about the encouragement of unofficial action which would follow from this policy and the fact that employers wanted stable relations rather than revenge. In the end—not in the Green Paper; that was almost over-fair—we have a Government who have introduced this clause in this Bill, and we oppose it tonight.
On Question, Whether Clause 13 shall stand part of the Bill?
11.22 p.m.
Their Lordships divided: Contents, 84; Not-Contents, 27.

DIVISION NO. 3

CONTENTS

Ampthill, L.

Craigavon, V.

Avon, E.

Craigmyle, L.

Aylestone, L.

Crathorne, L.

Bellwin, L.

Davidson, V.

Bessborough, E.

De Freyne, L.

Blake, L.

De La Warr, E.

Boardman, L.

Denham, L.—[Teller.]

Caldecote, V.

Drumalbyn, L.

Campbell of Alloway, L.

Eccles, V.

Cathcart, E.

Elliot of Harwood, B.

Coleraine, L.

Elton, L.

Colville of Culross, V.

Energlyn, L.

Cork and Orrery, E.

Faithfull, B.

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Ferrers, E.

Mowbray and Stourton, L.

Forester, L.

Murton of Lindisfarne, L.

Fortescue, E.

Onslow, E.

Gainford, L.

Platt of Writtle, B.

George-Brown, L.

Redesdale, L.

Glenarthur, L.

Rochester, L.

Gowrie, E.

Romney, E.

Gridley, L.

Saltoun, Ly.

Hankey, L.

Sandford, L.

Harris of Greenwich, L.

Sandys, L.—[Teller.]

Harvington, L.

Seear, B.

Henley, L.

Sempill, Ly.

Home of the Hirsel, L.

Simon, V.

Kennet, L.

Skelmersdale, L.

Kilmarnock, L.

Spens, L.

Kinnaird, L.

Stodart of Leaston, L.

Long, V.

Tanlaw, L.

Lyell, L.

Taylor of Gryfe, L.

Mackay of Clashfern, L.

Teviot, L.

Mackie of Benshie, L.

Thomas of Swynnerton, L.

Macleod of Borve, B.

Tordoff, L.

Mansfield, L.

Trefgarne, L.

Margadale, L.

Trenchard, V.

Marsh, L.

Trumpington, B.

Massereene and Ferrard, V.

Vaux of Harrowden, L.

Whaddon, L.

Monk Bretton, L.

Wilson of Langside, L.

Montgomery of Alamein, V.

Winstanley, L.

Yarborough, E.

Mottistone, L.

Young, B.

NOT-CONTENTS

Ardwick, L.

Kirkhill, L.

Birk, B.

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

Bishopston, L.

Blease, L.

McCarthy, L.

Brooks of Tremorfa, L.

Molloy, L.

Collison, L.

Oram, L.

David, B.

Peart, L.

Davies of Leek, L.

Pitt of Hampstead, L.

Elwyn-Jones, L.

Ponsonby of Shulbrede, L.—[Teller.]

Ewart-Biggs, B.

Gosford, E.

Stone, L.

Hatch of Lusby, L.

Underhill, L.

Jeger, B.

Wedderburn of Charlton, L.

Jenkins of Putney, L.

Wynne-Jones, L.

John-Mackie, L.

Resolved in the affirmative, and Clause 13 agreed to accordingly.
Clause 14 [Limit on damage awarded against trade unions in actions in tort]:
11.29 p.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 121:
Page 16, line 42, leave out subsection (2).
The noble Lord said: We now come to a situation in which your Lordships' Committee has voted for the revival of the Taff Vale principle elaborated by my noble friend. Therefore it becomes important to trade unions—by which I mean especially to trade unions, in the sense that they are an aggregation of human beings, who are the membership, and who are the union—to know what provision the Government are prepared to make in respect of the funds of the union, having regard to actions for damages, which were touched upon in earlier amendments, the debates on which some noble Lords might have heard.
Of course one could do nothing at all. If one really believes that in the High Court the doctrines of the law of tort should be applied to the union in the
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same way as to any other organisation—putting aside for the moment the question of its status as an unincorporated body, and the difficulties of procedure; ignoring all difficulties of that kind—one might say, well, it is a body which has trustees and funds, and with suitable procedures we shall make it answerable; and that is that. The interesting thing is that the Government do not say that.
Clause 14 is a clause which indicates that the Government see that there is a problem. It is a problem which arose some 20 or 30 amendments ago—a little more than that in minutes; I am amazed at the way in which this Committee has dealt with some of the amendments tonight, but it has been interesting to watch. The limitation which Clause 14 puts down upon the ability of the plaintiffs to be awarded damages against a union is a very special privilege, I suppose. Some noble Lords who spoke in the previous long debate about the ballots that they wanted held, and who are no longer with us, would say, I apprehend, that perhaps it is quite improper that this special privilege should be placed upon the damages that may be awarded to a plaintiff against a trade union. Subsection (3), which provides a limit of £10,000 for the smaller union ranging upwards to a quarter of a million pounds in one set of proceedings for a union above 100,000 members, is obviously a very special provision. That is the context of the amendments which are now coming before your Lordships, and also the clause itself.
This amendment goes to a particular point in that regard. The limits go together with a system of protection in Clause 15, but there are exceptions. In Clause 14(2) the limitation of amount does not apply to the designated causes of action in paragraphs (a) and (b). They are, in paragraph (a), personal injury arising from,
"negligence, nuisance or breach of duty";
and in paragraph (b):
"without prejudice to paragraph (a) … for breach of duty in connection with the ownership, occupation, possession, control or use of property (whether real or personal or, in Scotland, heritable or moveable)".
That means all property.
If we take those two paragraphs and examine them with this in mind, we have, I think, a case for saying that the subsection as it stands should be removed from the Bill. I am not going to indulge in the fashion, which has rather invaded your Lordships' Committee in the last few hours, of suggesting that when people say one thing they mean another; I take it that the Government mean what they say in Clause 14 generally, and that they wish to limit the damages that may be awarded against a trade union. Exactly why they want to do that they will say, I hope, on the Question, Whether the clause shall stand part of the Bill?
But, then, to that they make an exception and say, "No, here the union must pay in full". So the logic of such a structure should be that these are rather special cases, or that they can be justified by some special considerations. These are torts, perhaps, which are not the industrial torts. The logic—to us the illogic, but the explanation—of the previous division between the statutory code of agency and the common law code of agency which will apply to different types of tort in actions from the date of the coming into effect of

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this Bill would then be matched by two different areas of tort liability, where the limit did apply and where it did not apply, hopefully in the Government's view reflecting the industrial and the non-industrial situation.
That is the logic of subsection (2) as I read it, and as I read it in the context of such debate as took place in another place. Because, of course, in another place, after Clause 4, the guillotine fell—and perhaps that is a factor which should have been considered during the course of the Bill through your Lordships' Committee rather more than it has been. If one looks at subsection (2) one should find narrow areas or easily definable areas of tort liability which are not industrial. At first glance it looks easy to do so. The first seems to relate to personal industries—and no one would suggest at first glance that that is a normal cause of action in an industrial or an economic tort case—and the second seems to relate to ownership or use of property. When we examine them a little more, we find that that is not the meaning of the clause.
I take with subsection (2) subsection (6) which defines "duty" to mean a duty imposed by any rule of law or any enactment; and "personal injury", which includes disease or any impairment of a person's physical or mental condition. If I may take physical injury first, that is any personal injury which includes any disease and any impairment to the person's physical or mental condition arising from any breach of duty—because the "breach of duty" as defined in subsection (6) applies to all rules of law, common law and enactments.
It is not very difficult to imagine a case where some impairment of a physical or mental kind, be it a breakdown or anything else, arises in an industrial case. So there is one area where the exception is not completely congruent with the industrial tort/non-industrial tort division. But much more important is when we come to paragraph (b), because there we have a phrase which has been taken, as I shall suggest in a moment, from another part of the statute for a different purpose and which has been put here and has a much wider effect than appears at first sight.
What does it mean to say that you will be liable for breaches of duty in connection with the use of property, including personal property as against real property—which to those of your Lordships who are not lawyers in real and ordinary language means land and all other types of property whatever, including rights in contract? You may take the use of property rights ignoring land, the use of a car during the course of flying picketing, the use of a printing press on which there is some judicial dicta; but the noble and learned Lord the Lord Advocate need not worry, I am not going to cite them, partly because the best ones are Irish and it would delay the Committee. But he would agree, I am sure, that the place from which these words came has been judicially discussed and not made very clear; and it is possible to give it a very wide meaning; the use of property, the use of the printing press, the use of union notepaper. Indeed, that was adverted to in the Heaton case in the course of discussion of implied authority of the unions to shop stewards when they were allowed to use the premises and allowed to use the notepaper.
So we find that, if during the course of an industrial
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action, there is tort liability around, it may well be that the cause of action is based upon interference with contract, but it may also involve—and I only take the words of the statute because those are all we have—"a breach of duty in connection with the use of union property". Indeed, it may not be union property in terms of ownership. It may be only in union control.
The examples that one could give are plainly legion and the exact place where courts would draw the line is uncertain; but there are situations where, even in paragraph (a) and, certainly, in paragraph (b) (and there are many situations in paragraph (b)) the limit disappears because you are within what is said to be the exception. The importance of that to the union and to its members is that liability in damages is then unlimited.
I repeat that I am not saying to the Government: "We do not think you mean what you say." I am saying to the Government: "We think you have made a mistake and we think you know why you have done it"—because what the Government have done; and the noble and learned Lord adverted to this in an earlier debate; and I did not stop then because it is appropriate now; the place where the Government found these words was, of course, in Section 14(2), by a curious chance of history the same number and Section (14(2)) of the Trade Unions and Labour Relations Act 1974 which was enacted as a modernised version of the second part of Section 4 of the 1906 Act.
What that said was that there should be an exception to the trade union immunity in tort; but it did not enact exactly what Clause 14(2) here says in that respect. What that said was, having established the trade union immunity against the Taff Vale principle, it should be restored as it has existed from 1906 to 1971. The 1974 Act then said that there will be an exception to the principle of trade union tort immunity where liability is not arising from an act done in contemplation or furtherance of a trade dispute—that is to say, any negligence, nuisance, breach of duty, and so on and, without prejudice, other breach of duties in connection with ownership and use of property. That is precisely the same formula which I have not read in full. What the Government have done is to take an exception to the immunity which related to acts done not in furtherance of a trade dispute, take the formula out when they were looking around for some way of finding a formula that seemed to suit them as an exception to the limitation on damages, knock out the point about trade dispute and say. "Let us put that in".
The effect of doing that, using old words for a new purpose, which is going to appear again and again in the Bill, is to create a very unsatisfactory situation because, now that noble Lords have expressed their wish to retain Clause 13, it will be very important indeed in particular cases to know whether the limit applies or not. It is a had enough limit if it applies in any set of proceedings, and one wonders whether £250,000 could not be claimed by two different writs which dealt with two related incidents; and if, in addition to that, the ambit of subsection (2) is uncertain and may be extraordinarily wide in relation to paragraph (b), then those to whom the limitation of liability in damages is presented will see it as some

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kind of false prospectus. It may be that cases show that it is not worth very much. I say, if the Government do not mean to give that impression, will they reconsider the very wide terms in subsection (2)? I beg to move.
Lord Mackay of Clashfern: This amendment seeks to delete subsection (2) of Clause 14, which sets out a number of circumstances in which the limits on damages shall not apply. These are, broadly, proceedings for negligence, nuisance or breach of duty which results in personal injury; or for breach of duty in connection with the ownership or use of property. The effect of this amendment would be to apply the limits to cases of this type.
The Bill does not apply the limits to cases involving these torts because trade unions are already liable for damages without any statutory limit in such cases if they are committed other than in contemplation or furtherance of a trade dispute. So the Government's thinking is that, where the liability is presently ousted by means of the immunity, where the immunity is withdrawn, the limit should be put in its place. But the situation would be rather difficult if arbitrary distinctions were made purely on the grounds of the trade disputes. The unions presently have this liability by virtue of Section 14(2) of the 1974 Act, which makes cases of this sort the only exception from the present almost "blanket" immunities given to trade unions. The unions have had this liability since 1906. It has caused no problems in the past and so it would be a retrograde step to impose a limit where none exists now. This is particularly so since these cases include personal injury resulting from, for example, union negligence, such as a person run down by a badly maintained union van. In the case of loss of life or serious injury, it really would be hard to justify limiting a claim for damages to, in the case of a small union, £10,000. Of course, it is perfectly possible that the claims in this area would be covered by insurance.
However, subsection (2) will also mean that no limits will apply if these torts are committed in contemplation or furtherance of a trade dispute, for which at present trade unions do have immunity under Section 14 of the 1974 Act. This has been because it is difficult to justify treating cases involving, for example, personal injury differently simply on the grounds that they do or do not occur in contemplation or furtherance of a trade dispute. In our view, it is right that, just as now there are no limits on the damages which can be awarded in these cases if they arise outside a trade dispute, there can be no justification for applying limits to the same cases if they occur inside a trade dispute in matters of this particular type. By treating these torts in the same way inside and outside the context of a trade dispute the Bill is correcting an anomaly in the present law, and using it as the basis for the definition, as the noble Lord, Lord Wedderburn, has explained: this is something which has been in the law for some considerable time. I hope, in the light of that explanation, that the noble Lord will feel able to withdraw his amendment.
11.46 p.m.
Lord Davies of Leek: May I ask the noble and learned Lord a question seriously? Under Section 14(2) of the
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1974 Act, as the Minister has already said, trade unions are already liable for such torts outside a trade dispute. I want to know here, having been interested in statutory instruments for many years, about all these amounts of £125,000, £250,000, large sums of money, that could be paid out under subsection (3). Under subsection (4) the Secretary of State is enabled to vary these limits by order. That kind of order, again, is in the negative form, is it not? Can the noble and learned Lord explain what exactly that means?
Lord Mackay of Clashfern: We will come to that particular matter in a moment. The point I have to explain is based on what the noble Lord, Lord Davies of Leek, said first. The justification for Section 14(2) is the present position, as he has correctly explained. So far as the power to amend by the Secretary of State is concerned, that is obviously to take account of possible changes in the value of money, and it would be normal for the Secretary of State to have power to vary such figures. It would also be normal for that to be subject to negative resolution. That is the way it is in this Bill.
Lord Davies of Leek: I am grateful. I have it now: it is a movable feast. These compensations or prices will move with the value of money, or with inflation. If they can be increased upwards, can they be increased or decreased downwards if we go into deflation?
Lord Mackay of Clashfern: There would be some difficulty in increasing downwards, but certainly it might be possible. The noble Lord envisages the possibility that if this Government continue it might be possible to envisage a situation where it would be appropriate to vary them downwards. But the idea is to provide flexibility in the numbers provided on limits of damages.
Baroness Seear: Does the noble and learned Lord see any distinction between the offences referred to under subsections (a) and (b)? One can see that,
"for any of the following resulting in personal injury to any person, that is to say negligence, nuisance, or breach of duty",
there is a case for saying that the sky is the limit for damages. But is there not a point of considerable substance when it refers to the ownership of property, the control or use of property and so on, where it is in furtherance of a trade dispute? As the noble Lord, Lord Wedderburn, has said, one can envisage a lot of actions in connection with a trade dispute in which it could be made out that questions affecting property have arisen. Is it really right that there should be no limit for damages in that case? Is that not more closely related to the following provisions concerning personal injury?
Lord Mackay of Clashfern: The basic position is that both paragraphs (a) and (b) are presently liabilities without limit and without immunity, so long as they are outside a trade dispute. But when they come inside the trade dispute, the view we have taken is that the nature of the torts in paragraphs (a) and (b) is such that it ought not to matter whether or not they are in pursuance of a trade dispute. I think it likely that the legislative history of this provision would be

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relevant in its construction. Therefore, it is of some importance that we use the same phraseology as was used in the previous Section 14(2). I acknowledge that the argument is more narrow within the trade dispute area, but it seems to us to be a reasonable argument, even in that area, to provide no limit where the tort is the same tort, by definition, as the one which presently is not subject to a limit outside a trade dispute.
Lord Wedderburn of Charlton: The noble and learned Lord causes me anxiety. I was going to press him, as the noble Baroness did, about his answer upon the use of property paragraph. I was also going to say to him that I knew that he understood very well that trade unions had never, to my knowledge, had any complaint made against them for not paying compensation for personal injury, in spite of the technical legal position. I see the case for saying that, if they are liable in tort, then, in personal injury cases, defined in a slightly better way than this, broadly speaking, yes. I quite see that and, in a sense, I half conceded that in opening. But it is the contrast between paragraphs (a) and (b) which struck me when you use the formula this way round.
The noble and learned Lord says that the courts will look at the legislative history. I have two points upon that, but I shall not read them. I assert that in the few discussions of what is the slightly different formula of subsection (2) of Section 4 of the 1906 Act—there are two Trish cases which may be of no great persuasive authority, but they are interesting—there are different views among various judges, who did not have to decide it, about the width of the phrase" use of property I agree with the noble Baroness that it is the use of any sort of property. A pen may be of no importance, but I am talking about any sort of substantial property which is used, where you can say that the breach of duty was in connection with its use.
That is open to argument, but it is much wider than the noble and learned Lord will allow, and an appeal to the legislative history would be an appeal to divided views among the judiciary, where some interpret it very widely in a context where the formula was being used for something else. It was being used to remove immunity from acts that were not in trade disputes in the law of tort. So, naturally, the legislative history will be extremely skewed from the point of view of the legislative purpose of this clause, which is different, is to limit damages and does not relate at all to the trade dispute point. So there is a serious matter here. There are those who say that trade union funds must be liable in tort, but that liability must be limited. If they are saying that it must be limited because of industrial relations factors, which I take to be the view of the majority in this Chamber, then they must tell the trade union movement when its funds are protected and when they are not.
Paragraph (b) may look as though it is a false prospectus, and when it is adjudicated upon in the courts it will not be the fault of the judges if this loose and wholly inappropriate terminology is left to the guidance of the courts because the limitation on trade union liability, even to £250,000, has been blown sky-
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high out of the water by some judgment which, for those who know the history of the matter, may not be a surprise. But it will burst upon the unions and employers as a great bubble of interest and extraordinary amazement, when the limit is shown to disappear every time there is the use of property connected with a breach of duty.
I shall withdraw this amendment. It was moved to get the Government to think again. I shall be very surprised if, in view of this debate, the noble and learned Lord does not give some intimation that the Government will at least consider the words in paragraph (b). I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
11.55 p.m.
Lord Kilmarnock Lord Kilmarnock moved Amendment No. 122:
Page 17, leave out lines 6 to 11 and insert—

(" (a) £5,000, if the union has less than 5,000 members;

(b) £25,000, if it has 5,000 or more members but less than 25,000 members;

(c) £75,000, if it has 25,000 or more members but less than 100,000 members;

(d) £150,000, if it has 100,000 or more members but less than 300,000 members; and

(e) £250,000, if it has 300,000 or more members.").

The noble Lord said: We seem to have come down from the heady peaks of an hour or so ago, when we were contemplating the new slave state, to the practicalities of this Bill. We on this Bench have accepted as reasonable, and have supported, the Government proposal to bring the legal immunities of trade unions into line with those of other organisations and individuals. We are a party of union reform, as will be clear from our Green Paper on the subject when it is published shortly, but we are not anti-union. It is no part of our policy to drive unions to the wall, nor to interfere with the right to strike. We accept the principle that trade union funds should be liable in cases where trade unions break the law, but the way the Bill is framed opens unions to massive claims for damages, and that is not acceptable to us.
While the Bill puts a limit of £250,000 on awards for a single action, it places no limit on liability where several cases can arise from a single dispute. Multiple prosecutions arising from one dispute could theoretically face unions with millions of pounds in damages. It would also be possible for unions to incur these liabilities by accident, and in another place we put down an amendment stipulating the injunction procedure. We also believe that not only are the limits of damages far too high, but the structure of damages should be made fairer for the medium and smaller unions. At present, Apex, with 130,000 members, would be potentially liable for the same amount of damages as the Transport and General Workers' Union with 1·9 million members.
This amendment addresses the levels of penalties to the size of unions to which they apply. We think it proper, as stated in the amendment, for a union with a membership of up to 5,000 members to have a limit of £5,000, half what is in the Bill; for unions with between 5,000 and 25,000 members to have a limit of £25,000, not £50,000 as it is in the Bill. Here we introduce a new category, an intermediary scale of 25,000 to 100,000 members with a top limit of £75,000. We

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have reduced to £150,000 from £250,000 the limit proposed for unions with a membership between 100,000 and 300,000 and above £300,000 we have left it untouched at £250,000.
I should like particularly to interest the noble Earl, if he is to reply, in the new category we have introduced, which spaces the rungs of the ladder much more evenly and, in our submission, much more fairly. If our figures prove not exactly right,—it is always hard to get it completely right—and if they prove too low or too high, the Secretary of State has the power under the Bill, as has already been pointed out in this debate, to alter them by negative order. That would have to be prayed against, and he does not need the approval of both Houses. My suggestion is: Why not start with the figures we propose. We regard them as just and fair. I beg to move.
Lord McCarthy: The noble Lord, Lord Kilmarnock, will know that I always try to agree with him, however difficult that may be; but it is not all that difficult this time, because although the figures in the amendment have been plucked out of the air they are slightly more acceptable and welcome than the Government figures, which are equally clutched out of the air. To adapt, once again, the noble Baroness, Lady Seear's principle, it is a small baby but we should not smother it. It is a good deed which shines like a candle in a naughty world. Although it is a very small candle and a very small good deed, and although it leaves most of the problems intact, we should like the Government to accept the amendment. But we know that they will not.
Baroness Seear: I should like to support the amendment. We want trade unions to be responsible, but it is no part of our policy to cripple them or to take away the reality of the right to strike. The level of damages here means that for a great many unions strike action will be so financially perilous that they will be prevented from taking it.
Earl Ferrers: It was interesting to see the noble Lord, Lord McCarthy, clutch what cherries he could see coming from his noble friend behind him. There is not a great deal of difference between the motives of the movers of the amendment and the Government. We both agree that there should be limits on the damages which can be awarded against trade unions. We both agree that these limits should be related to the numbers of members in trade unions. The only difference is that the movers of the amendment would like to divide the top category of unions with over 100,000 members into two categories and apply rather lower limits than those contained in the Bill to all but the very largest of unions.
The noble Baroness, Lady Seear, said that she did not want to see the unions crippled. Nor, I can assure her, do we. The question of where the limits on damages should be set is a matter of judgment. There is a need to set them at a level which is high enough to act as a deterrent against unlawful action, and to allow those who suffer loss as a result of unlawful industrial action to gain reasonable compensation. At the same time there is a conflicting need to avoid setting them at so high a level as to put unions at
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the risk of serious financial damage as a result of a small number of cases.
There is no obvious or right answer on this question. The noble Lord, Lord McCarthy, says that the figures of the noble Lord, Lord Kilmarnock, were plucked out of the air, and then said that ours were plucked out of the air, too. But that is not so. The figures contained in the Bill are the product of a careful analysis of past experience and the present level of trade union funds, and the four categories of unions which are contained in the clause are the same as those which were contained in the 1971 Act. So far as we know, during the operation of that Act they caused no particular difficulty.
The approach which we originally adopted in our proposals for legislation, which were published in November of last year, was to update the amounts used in the 1971 Act by increasing them in line with the growth in union funds. This produced limits which were significantly lower than would have been achieved by increasing the 1971 figures in line with inflation. During consultations on the proposal, the Conservative trade unionists and others expressed the view that the limits which were proposed for the smaller unions were too high. In response to those representations the limit on damages which may be awarded against unions with fewer than 5,000 members was reduced from £12,500 to £10,000, and that applying to unions with more than 5,000 but fewer than 25,000 members was reduced from £62,000 to £50,000.
The Government would prefer to stick with the proposals for setting limits on damages which are contained in the Bill. As the noble Lord, Lord Kilmarnock, realises, Clause 14 also contains a power for the Secretary of State to vary the the limits by order. If it should prove that our judgment is wrong and that the limits are not set at the right level, there will be scope for them to be adjusted as appropriate: increased upwards or, as the noble Lord, Lord Davies of Leek, would say, increased downwards as well.
Lord McCarthy: Before the noble Earl sits down, would it not be true to say that it is not quite true to say, as he said, that these figures caused no trouble in 1971? They applied to registered unions and there were no registered unions. But the other unions had unlimited damages and that caused a great deal of trouble.
Earl Ferrers: If the unions had registered, it would not have caused any trouble.
Lord McCarthy: But nobody did, so we do not know.
Earl Ferrers: That was their fault.
Lord Harris of Greenwich: I hope that the noble Earl will take the matter slightly more seriously. He made a point of substance when he said that in this connection there had in the past been no problems. The noble Lord, Lord McCarthy, made a perfectly valid point in answer, but the noble Earl regards a joke as being an appropriate way of dealing with the issue. He and I, and others, have spent an agreeable period this evening in the same Lobby on a number of issues in this Bill, and my noble friends and I do not

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disagree with the general thrust of the Bill, as we have made absolutely clear. Quite bluntly, however, sometimes it is reasonable for a Government to make some concession to the Committee.
On a matter of this kind, it does seem quite extraordinary that the noble Earl is giving no indication of movement of any kind; the Government know best. With great respect to the noble Earl, I do not believe that any Government necessarily know best. Sometimes it is possibly a good idea to listen to what is said in Committee and to make some concession of this kind. With great respect to the noble Earl, he has made a most unpersuasive defence. It does seem to me that, on a matter of this kind, where there is no great gulf of principle, it is reasonable to make some concession. May I suggest to him that it is also a way of making rather more speedy progress than might otherwise be the position?
Earl Ferrers: After that considerable riposte from the noble Lord, Lord Harris of Greenwich, may I say that I did not regard this in a frivolous way, and nor did I intend to regard this amendment as a joke. I did explain to the noble Lord, Lord Kilmarnock—and I said this perfectly clearly—that it was a matter of judgment. I merely gave the reasons why we thought that the figures we have in the Bill are reasonable. With the greatest respect to the noble Lord, Lord Harris of Greenwich, I do not see that that is a reason for jumping on me and assuming that I regarded this in a flippant way; I do not do so in the slightest way.
May I just say again to the noble Lord, Lord Harris of Greenwich, that this is a matter of judgment. I accept that some noble Lords may think that the figures are too high. I merely gave the reasons why we have set the figures at this height. If we take the 1971 figures as a basis, those unions which had less than 5,000 members would have had a limit of £5,000 in 1971; if that figure had increased according to inflation, it would now be £19,000, and the limit in this clause is £10,000. Those unions with over 100,000 members had a limit of £100,000 in 1971; according to inflation that figure would now be £381,000, and we have put the figure at £250,000. That is the basis on which we propose these figures. If the noble Lord takes a different view, I absolutely accept it. I merely say what I said earlier, that we hope the Committee will see that these figures are reasonable.
Lord Kilmarnock: Before I decide what to do, may I press the noble Earl on one point I made to him? Would he undertake to consider before Report stage looking at the question of the rungs on the ladder. There are only four rungs in the noble Earl's ladder and there are five rungs in our ladder, which we consider to be a little more flexible, and more sensitive to the varying types of unions and varying types of membership. Can the noble Earl give us a little encouragement on that?
Earl Ferrers: Of course I will be entirely happy to consider what the noble Lord, Lord Kilmarnock, has said. I will certainly look at it.
Lord Kilmarnock: I am grateful to the noble Earl for
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that. I must confess that I am rather disappointed with the rest of his response, but I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
12.9 a.m.
Lord McCarthy Lord McCarthy moved Amendment No. 123:
Page 17, line 27, leave out from ("the") to end of line 29 and insert ("trade union shall be treated as having in membership only those persons whose acts its own officials are empowered to authorise or endorse under its rules.").
The noble Lord said: We regard this as a very important amendment. We are trying to clarify the position under the Bill, and in particular the position in relation to the Trades Union Congress. The way that we read the Bill at this point, the TUC could be—for the purposes of this Bill—regarded as a trade union, and therefore the purpose of the amendment is to make it clear that the TUC should not be regarded as a trade union because, as the amendment suggests, a trade union,
"shall be treated as having in membership only those persons whose acts its own officials are empowered to authorise or endorse under its rules."
That, if you like, would make the TUC a union, but a union consisting of the members of the Congress House staff, which would not be a problem because they would not carry the higher levels of liability.
On the other hand, of course, if the TUC were a union in the full sense of the liabilities then it would carry the very highest level of liability. I say the TUC, because it is the most obvious example, but there are others. There is the Confederation of Shipbuilding and Engineering Unions, which in some ways might be said to be even more of a union if it gets within the terms of this part of the Act, because the Confederation of Shipbuilding and Engineering Unions does become involved in the kind of objectives and aims which under the terms of the legislation constitute it a union.
Indeed, not only does the TUC do that, or could be said to do that—it would be for the courts to decide—but most people would say that it was a good thing that that was so. For example, one of the most hopeful developments in the trade union movement in the past 10 years or so has been the development of industrial committees by the TUC. They have brought together affiliated unions and sought, through its industrial committees, to get round some of the very serious industrial relations problems we have in this country which derive from our chaotic trade union structure.
Since it has turned out to be extraordinarily difficult to introduce any rational trade union structure, the industrial committees of the TUC are the best substitute for a rational trade union structure. In a number of ways, they have become involved in negotiation—in the iron and steel industry, for example; in the health services at the moment. If people want to negotiate with a group of unions in a particular industry, they tend increasingly to negotiate with the members of the industrial committees of the TUC. I regard that as a forward looking and progressive step that we should all wish to encourage.
Then, of course, there are the activities of the TUC which arise out of Rule 12 of the TUC, which deals with problems in relation to member unions, inter-union disputes and the possible discipline of unions in inter-union disputes, and their role in settling disputes

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—the kind of work which the TUC did, for example, in the Isle of Grain. Once again, I would say that these activities of Congress House are some of the more useful, progressive, helpful activities conducted by the TUC, the trade union centre in this country, at this time. But they certainly take the TUC into industrial relations.
There are all the conciliation and mediation activities which the general secretary is constantly engaged in, as at this moment. All these things could take the TUC into the field where someone could say that the purposes, aims, objectives and activities of this organisation constitute it a union, and if it is a union, and if its membership is calculated in the terms of this clause, the TUC, for the most part in its conciliation and mediation activities, would be liable to all these penalties.
Of course, if you want to punish trade unions and penalise trade unions, the bigger you can get them, and the larger the damages, the better. But the effect of that would be that the TUC would be forced in the end to wind up the activities of the industrial committees, to move out of the area of inter-union problems, and leave the unions to their own devices, in order to protect TUC funds. I cannot believe that even this Government want that, and therefore they should accept this amendment. I beg to move.
Lord Mackay of Clashfern: This amendment seeks to alter subsection (7), which sets out how to calculate the membership of federations of trade unions for the purposes of accessing limits on damages. Without this subsection the figure taken to determine the appropriate limit on damages in the case of federations would depend on how the federation itself defined its membership in its rules. Some federations, such as the National Union of Mineworkers, which is actually a federation of regional unions, make it clear that their members are the individual workers who belong to each of the federated trade unions. In such cases there would be no problems.
However, other federations (including the TUC and the International Transport Workers Federation) have a corporate membership made up of the affiliated unions. Thus, the Transport and General Workers Union and the 2 million workers it represents count as one 'member' of the International Transport Workers Federation. In practice, awards of damages against such federations would therefore always be subject to the lowest of the limits on damages. Any federations which have a mixed individual and corporate membership would present problems of interpretation without this subsection. Subsection (7) overcomes these problems by saying that the membership of a federation should be taken to be the sum of the memberships of the individual federated unions which are based in Britain. It seems to be a fairly simple and direct method of calculation.
The amendment seeks to replace this very simple approach with the more complicated one of counting up those persons whose acts the federation's officials are empowered to authorise or endorse under the federation's rules, which is not, I suggest, a particularly simple concept. But the approach is unacceptable for two reasons. First, it is too complex, and would pose very considerable practical problems for
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the courts. Secondly, the approach is once again based on the theory that union rules are clear on the authority of its officials. But as we have said before, the theory does not always fit the practice. Many union rules are either unclear or silent on the authority of their officials, and such cases would pose serious problems for the courts when determining the appropriate limit on damages. Indeed, it would appear that this amendment proposes that if a federation's rules do not give officials specific authority to authorise or endorse the acts of any of its members, then, so far as this clause and the limits on damages are concerned, the federation will be treated as if it had no members at all.
Finally, the situation to which this particular amendment would lead would, I suggest, be simply to add complexity to the Bill. The noble Lord, Lord McCarthy, in moving his amendment has particularly related it to the situation of the TUC. But there is nothing in the Bill that would prevent the TUC from getting involved in disputes to mediate or conciliate. It is only if they authorised unlawful industrial action that they would be liable. I do not myself see, from what the noble Lord has said, that the particular activities of the TUC, to which he has made reference and to which he has attached importance and to which I also would attach importance, are in any way damaged by the rejection of this amendment. I hope that the noble Lord on reconsideration will see his way to withdrawing this particular amendment.
Lord McCarthy: Let me try again. First, the noble and learned Lord says—at least I understand him to say—that the TUC is covered, and I am glad that we know that he says that it is covered. What we are saying is that it should not be covered. I want to know whether the Government think that it should be covered. Presumably they do. Therefore, we have to work out the consequences of that.
Let us not get into the question of the details of the words in our amendment. Maybe our amendment is the wrong way in which to do it. Maybe the words that we have used are ambiguous, complicated and difficult and give rise to all kinds of legal thickets, difficulties and ambiguities. Farewell to the words: let us have some other words. Let the Government go away and say that they like the principle, but they do not like the words. We do not stand upon our words. But, if it be the case, as it seems to be, that the Government accept that the words that are in the Bill cover the TUC, then I say that it is a very serious matter to face. It is not enough to say that, if the Congress gets involved in some of the activities that I have mentioned—the ones maybe that the Government like, such as when Mr. Murray intervenes and settles a strike—that is all right, because it must not get involved in any way in order to authorise a strike because that is not the way in which industrial relations work. If the TUC is to become involved and to take over disputes and to take over problems for unions, sometimes it must authorise things; sometimes it must take decisions on behalf of unions or unions must give it authority to take decisions. Our position all night has been that such is the nature of this Bill that it is not true and fair to say, "You must be lawful, you must stop within the confines of the law", because the

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law is uncertain. The law is uncertain on the extent of tortious liability; the law is uncertain as to how far you avoid that liability; in any case, as we shall go on to argue, the limits of a trade dispute are extremely doubtful now, and it is absolutely impossible for any lawyer to take the TUC's money and tell it, at this moment in time or when this Bill is passed, what it has to do to stay within the law.
Take, for example, a case which noble Lords may think is a little controversial, but let us take it at this time of night; take the TUC's involvement through the Health Committee of the TUC in the National Health Service dispute, where the leader of the trade union side, Mr. Albert Spanswick of COHSE, is, in fact, the leader of the trade union side because he is the chairman of the TUC's Health Committee. Sooner or later, there will be a negotiation and there will be a settlement. That settlement will be focused and processed through the TUC's Industrial Committee.
I am not suggesting at this moment in time that anything unlawful is being done in the health service strike, but it might be after this Bill and, if it were, after this Bill, Congress would have to be told by its lawyers that it must not get involved in things like that, that it must leave the unions to their own devices. Is that what this Government want?
Lord Mackay of Clashfern: I do not think that I need to add to what I have already said. The situation is that it would be only if the TUC were to become involved in calling unlawful industrial action that this matter would arise. I must say, I do not see it as at all likely that that would happen.
Lord Wedderburn of Charlton: Before the noble and learned Lord sits down, in order to make progress, on his answers depend the question whether or not we move the next amendment. We had hoped not to move it. I should like to get this clear not merely for the purpose of vicarious liability for unlawful acts but in terms of legal analysis. I heard, I thought, the noble and learned Lord say to your Lordships, as the Government's considered view, that the Trades Union Congress is now a trade union within the meaning of Section 28 of the Trade Union and Labour Relations Act 1974. I should just like to check that I understood that correctly.
Lord Mackay of Clashfern: I think that the technical position is that I assumed for the purposes of this argument that the TUC would be covered. I must say, I think it will be covered by this particular provision, but, for the purposes of the argument, I assumed that it was in order to deal with the matter which the noble Lord, Lord McCarthy, raised.
Lord McCarthy: In those circumstances, we shall not press this amendment to a Division, but we shall not withdraw it and we shall raise the issues which the noble and learned Lord raised in the course of our next amendment.
On Question, amendment negatived.
12.24 a.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 124:
Page 17, line 29, at end insert (" but no such trade union shall be liable for acts done, authorised or endorsed by members or
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officials of those organisations save to the extent to which its rules empower such persons to act on its behalf.").
The noble Lord said: The noble and learned Lord will understand why I was exercised about his response to the last amendment. If the Government had said that these clauses apply to trade unions, which are, of course, federations of trade unions, as it is sometimes put, within Section 28(2) of the 1974 Act, I would then not have moved this amendment. I move it partly to put it on the record and for this reason: the noble and learned Lord has said partly that he assumed that the Trades Union Congress was a trade union, but then he said that he thought it was right. So twice I heard him say, as his view, that the Trades Union Congress is a trade union.
I would say to the noble Lords who are not familiar with this statute and may think that we are having some kind of theological debate, that, indeed, we are not. There is nothing about angels on the tops of pins here. A trade union within the section is required to be two things: Either an organisation of workers—I will cite the statute if any noble Lord wishes, but I am trying to make progress and fairly compress it—or an organisation of affiliated organisations which are organisations of workers—that is, federations, the obvious example—and in each case where the principal purpose includes the regulation of relations between workers and employers or employers' associations.
It has always been said in the past, and said for decades after 1868 when it was formed, that the Trades Union Congress was not a trade union, not because it did not consist of organisations affiliated to it that were trade unions, because it did, but because it did not carry out the functions of relations between workers and employers as one of its principal purposes. It is that that has come under reconsideration—there is more than one view on the matter; that is why I am so interested in the Government's view—because of the factors my noble friend made clear; things like the industry committees, and so on.
If it is the view that the Trades Union Congress is even probably, or likely, to be a trade union within this legislation, then it is unjust legislation. If you go back to Clause 13, the general secretary makes the Trades Union Congress liable in respect of things which he has endorsed without reference to the rules. I am not going to repeat the debates on Clause 13 but I pray them in aid for all the problems that will arise. It will be absurd to ask the general secretary of the Trades Union Congress, who is now one of the major engines for conciliation and sense in industrial relations matters, to continue in his work when a Government of the day irresponsibly place on the statute book a subsection (7) which would mean that he could cause the Trades Union Congress to be made liable, on the basis that it is an organisation with organisations having a main or head office in Britain having 12 million members in membership, and that it should count as a trade union in that category. Who knows where the Secretary of State will put the upper limit before a few years are out?
I am not prepared to rest on some assurance that it will all be all right if nobody does any wrong, and the Secretary of State will not put the figures up too much. The second is unreliable and the first is fanciful. If

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every time we passed a statute we said that all you had to bother about was not to do anything unlawful, then we simply put down the basic rule of what you must not do and leave all the other problems out, because no one will ever transgress it. The problem about Clauses 13, 14 and 15 is that we are dealing with problems which are consequential, for the most part, upon the establishment of liability in a human being. Somewhere an official, or another person, has authorised something to be done which is a tort. Clause 13 says that the union responsible for him shall be responsible in tort. Taff Vale lives again. Clauses 14 and 15 place limits on that liability in terms first of the damages.
What the structure amounts to in subsection (7) in regard to federations, and now, it appears, the TUC, is that they are to be adjudged on the current level of damages that can be awarded according to the numbers of the organisations affiliated to them. It is absurd. If the Government are not prepared to reconsider that, then I must press upon them the spirit of Amendment No. 124, and I shall explain why I move it. I take this as the Government's view, or interim view, and I do not put it forward as my view. It may well be the case that some litigious person fights this hard as an interpretation. It is in dispute. But for the moment we must assume it.
So, says the amendment, no such trade union, federation or TUC, shall be liable for acts authorised by any members or officials, except to the extent to which its rules—the federation's or TUC's rules—empower that person to act on its behalf. Surely that is reasonable in the case of the TUC at least. The TUC at Congress House tries to help in the trade union movement of this country and to lead it, and to provide leadership in industrial relations generally.
It is surely not unreasonable to say that the officials and officers of the TUC, in the work they now do, shall be liable only in respect of those who have done acts in the constituent organisations which the TUC could have given them authority to do. Why should the TUC be responsible for the act of someone whom the Government assume will be acting irresponsibly, and then tortiously, in an industrial dispute? It may well happen, but why should the TUC be responsible for that, beyond its rules and the affiliated organisations' agreements to the extent of the TUC's very existence, which are in the rules of the TUC? Why should it be liable, on the basis that it is a trade union federation, for someone in an affiliated organisation, outside its own rules?
This is a most serious matter. I had not appreciated it when we wondered whether to table these amendments. Then it became clear to us that we must ask where they would apply. If the Minister had merely said federations, we could have understood that—although we would not have liked it—as being part of the Bill. Now that it has turned into a debate about the legal status of the TUC, the matter is more serious than perhaps the Government themselves realised. I ask the noble and learned Lord, in regard to Amendment No. 124, to say that at least he will return on Report with a further considered view as to the nature of the position of the TUC under the Bill. If he is prepared to do that, we would happily withdraw
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the amendment. If not, it is a matter of the utmost and profound importance that must be investigated at some length on Report.
Lord Teviot: The argument in relation to this and the previous amendment has involved the two Front Benches bouncing backwards and forwards, so to speak. I think my noble and learned friend the Lord Advocate said the TUC probably would be covered, though it has been difficult for one to grasp all the arguments because the debate has gone rather beyond the language of the layman. The noble Lord, Lord Wedderburn, is extremely clear in general, and I thought my noble and learned friend gave a clear-cut answer. If so, perhaps we might move to the next business quite quickly.
Lord Mackay of Clashfern: I am certainly anxious to move to the next business as quickly as I can. The situation so far as the TUC is concerned must depend on Section 28 of the 1974 Act, and of course if somebody wants to litigate about that, that is up to them. For the purposes of dealing with the amendment, I assumed that, and I must say there is a good deal to be said for it. If the TUC is not a trade union, I am not sure it would have any immunity anyway, so the problem would not arise. As for giving the noble Lord an assurance that I shall consider what he said, I hope it goes without saying that I will always consider what he says, and if that helps to speed matters forward, I shall be very glad.
On Question, amendment negatived.
Clause 14 agreed to.
Clause 15 [Recovery of sums awarded in proceedings involving trade unions and employers' associations]:
[Amendment No. 125 not moved.]
12.34 a.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 126:
Page 18, line 22, after ("work") insert ("or unemployed for any reason").
The noble Lord said: This relates to a specific point which is central to the clause, and it is sensible for the Committee to consider that point on this amendment, bearing in mind the structure of the clause and the effect of the amendment.
In speaking to Amendment No. 126, with the leave of the Committee, I should like to speak also to Amendments Nos. 127, 128, 129 and 129A. All the amendments relate to the basic definition, which is of importance to the clause. This is the clause which does not set a financial limit, but takes the other tack, as it were, and offers some protection to the trade union in court in an action in tort.
In passing, I say that neither on Second Reading, nor in Committee, nor at any other time have I heard from the Government any kind of explanation of why they have inserted the particular limitations. However, one must not be uncharitable in the face of offers of this kind, and one looks down the list to see what is protected. Apart from various rather technical problems that relate to the wording concerning

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trustees holding property, the most important areas are twofold. In subsection (2) on page 18, we find that the political fund of the union is protected from the enforcement of damages or costs, and, in paragraph (e) of the subsection, the provident benefits fund of the union is protected.
The provident benefits fund is a most important area of trade union property, which for many years has been protected in respect of the taxation provisions of the taxation statutes. The details of the taxation advantages may perhaps be left aside at this stage, in order to make progress. But, since 1893, provident benefits, as defined in the Bill, have been accorded considerable taxation advantages. It is quite clear that the provision relating to the meaning of provident benefits—which I must read, in order quickly to make sense of the argument—has been taken from taxation statutes. It is precisely the same as in the relevant tax statutes and reads:
"'provident benefits' includes any payment, expressly authorised by the rules of the union, which is made to a member during sickness or incapacity from personal injury or while out of work, or to an aged member by way of superannuation, or to a member who has met with an accident or has lost his tools by fire or theft, and includes a payment in discharge or aid of funeral expenses on the death of a member or the wife of a member, or as provision for the children of a deceased member".
That is the precise wording of the tax statutes.
Is it very satisfactory for the Government simply to adopt words which are contained in another statute for another purpose which is not necessarily related to this purpose? In their argument, the taxation advantages do not necessarily correlate with the argument for protection as contained in the Bill. Furthermore, the formula is a very old one; it is from the 1893 statute.
I do not quite understand why the worker who loses his tools by fire or theft can claim from a fund which is protected from liability in tort, whereas the member who loses his tools by way of earthquake or other natural hazard appears to fall outside it. Of course one could mock the definition, if that it be, because it is a very old one. There are various forms of impoverishment which Amendment No. 127 suggests should be imported into the definition, and Amendment No. 129A suggests that legal expenses in connection with accidents—in particular accidents at work, of course—ought to be included, for the very good reason that that aspect is especially related to the taxation concession of 1978, whereby it has been conceded by the Revenue that benefit funds of that kind are to be admitted to the taxation privilege.
Moreover, it is not a definition in the tax statute. It used to be a definition, because the 1893 Act stated that provident benefits "meant a number of things which followed—and then there was the same list. However, for many years the tax statutes have stated simply that provident benefits include a number of things which are listed.
In putting down a few suggestions as to payments that might well be incorporated, the Government have taken the easy course. They have taken a formula from another statute that is not necessarily relevant for this purpose. What they should have done was to draft a modern and relevant definition of provident benefits. I beg to move.
Earl Ferrers: The paragraphs on political funds and on provident benefits funds—and these are the paragraphs in subsection (3)—both state quite clearly that the term means something specific, and they are therefore definitions of the terms concerned. The paragraph on provident benefits in fact begins with the words" 'provident benefits' includes", and the list that follows is a list of examples of provident benefits. I understand the concern of the noble Lord, Lord Wedderburn, but, of course, it is clearly not an exhaustive list, nor is it an exclusive list. It is simply guidance to the courts as to the sorts of things which might constitute provident benefits.
As the noble Lord, Lord Wedderburn, said, there is a perfectly good reason why this has been included. It is, of course, taken straight from Section 338 of the Income and Corporation Taxes Act 1970, as amended by the Finance Act 1974, and that is the latest version of a tried and tested description of provident benefits which has been used for tax purposes, as the noble Lord said, since around the turn of the century. I do not believe it has given rise to any problems in those 80 or so years, and the Inland Revenue does not apply the passage as if it was an exhaustive list. I would have thought that the courts will adopt the same approach in any cases which may arise out of this legislation. That is the reason why the words are used as they are, and I would have thought that, being not exclusive or exhaustive, the words used are reasonable.
Lord Davies of Leek: May I ask one question? The words used are,
"lost his tools by fire or theft".
The loss of tools by the movement of earth or subsidence in the mining industry is of particular importance to that special group, and I should have thought that when this clause was drafted the mining industry would have been in mind. There is no need to develop the point any more at this hour, but if the Minister would be kind enough to comment on my little statement, I should be obliged.
Earl Ferrers: I think there is absolutely no reason why that should not be included. I would only draw the attention of the noble Lord, Lord Davies of Leek, to the fact that it says,
"'provident benefits' includes any payment",
and so on. It does not say that such payments as the noble Lord has in mind are excluded simply because they are not written in the Bill.
Lord Wedderburn of Charlton: Before the noble Earl sits down, may I say, with leave, that there is a total difference between having a general description which is not exclusive for the purposes of the tax law, where the Revenue has a discretion, and presenting the court with a description which is not exclusive of the provident benefit fund having defined the political fund above by saying what it means. Here, the Government are dealing with what is and what is not, not liable to taxation with a discretion but liable to be attacked by a plaintiff who has the right in the court to enforce against the fund except for that which is protected. That is why it is a slovenly piece of work.

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It is not only a slovenly piece of work; it is unfair to put it to the trade unions, because they sometimes do not know which of their funds will be protected and which will not. They do not know whether the Court of Appeal will exercise its discretion in the same way as the Inland Revenue, and they cannot be expected to know. The noble Earl says that it has never caused trouble, but, even in the case of the Revenue it has caused trouble. In the case of the National Union of Railwaymen in 1966, reported in Volume 43 of the Tax Cases, he will find a very complicated case even on the Revenue side, and what could happen on the other side of civil liability is much greater.
I beg leave to withdraw the amendment, but I hope the Government will consider very seriously whether they do not have an obligation to make matters of this sort clear in their legislation instead of, again, just leaving it to the discretion of the courts.
Amendment, by leave, withdrawn.
[Amendments Nos. 127, 128, 129 and 129A not moved.]
Clause 15 agreed to.
12.45 a.m.
Lord Spens Lord Spens moved Amendment No. 129B:
After Clause 15, insert the following new clause:
(" Increase of fines.
.The limits on fines which may be awarded for offences under section 12 of the 1974 Act shall be increased as follows—

(a) the limit under section 12(5)(a) shall be increased to £10,000;

(b) the limit under section 12(5)(b) shall be increased to £40,000.").

The noble Lord said: I shall not detain your Lordships very long over this amendment. It arises as a result of an oral Question which was asked by my noble friend Lord Orr-Ewing on 5th July last, when he asked Her Majesty's Government:
"how many of the 12 largest trades unions have now tiled their accounts for 1981; how many are in arrears; and which ones".
He was told that, of the 12, five had filed their accounts, one was waiting for one section to file and six had not filed their accounts by that date. Under the Employment Act 1974, annual accounts have to be filed by 1st June in each year; so that on 5th July these six trade unions had been more than a month late in filing their annual returns. The Question went on to elucidate the maximum fine that could be imposed by the certification officer for anyone who failed to carry out his obligations. The noble Earl the Minister replied that the maximum fine was £100.
When it was suggested to the noble Earl that a maximum fine of £100 at a time when union income is more than £270 millions a year and that 12 million trade unionists are affected was a bit of a nonsense, the noble Earl said:
"My Lords, there are in this life all sorts of things which are extraordinary. Perhaps this is one of them."
So my noble friend Lord Orr-Ewing and I decided to assist the noble Earl and we have put down this amendment which increases the maximum fines from £100 to £10,000 and, in more serious cases, from £400 to £40,000. We have multiplied everything by 1,000. I should like to suggest to the noble Earl that this
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gives him his opportunity of removing the extraordinary nature of the situation and putting it more into perspective. I beg to move.
Earl Ferrers: I am most grateful to the noble Lord, Lord Spens, for his help in saying that he wished to assist me to overcome the problem. I am bound to say that it is a curious form of assistance where he multiplies the fine 100-fold from £100 to £10,000. My noble friend Lord Orr-Ewing asked this Question the other day and he was concerned that trade unions had not presented their accounts at the appropriate time. But there is no evidence of serious non-compliance with the legislative requirements for trade unions, and since the certification officer was appointed in 1976 there have been no prosecutions under Section 12; and it is perfectly true in fact that both trade unions and employers' associations have encountered certain difficulties in complying with the statutory requirements.
I will give one example. It is where a trade union has a number of different branches and it is very difficult to get the accounts of all those sectors of such a union in a form such as can be presented to the auditors in an appropriate fashion for auditing within the correct time. The certification office has, in general, secured the co-operation of the organisations and of their auditors, so that compliance has been achieved; and the Government's view is that the existing provisions are working reasonably well. For those reasons, we would see no justification for raising the maximum fines one hundredfold when already there have been no prosecutions. The amounts of fines will in any case be increased by the Criminal Justice Bill which is at present in front of the House, to £200 and £1,000. It will thereafter be subject to further increase by an order of the Home Secretary.
The maximum penalties provided for under Section 12 of the 1974 Act are generally pretty well in line with those of similar offences in the Friendly Societies Act 1974 and in the Companies Act 1980. The Friendly Societies Act at present provides that a maximum fine of £50 can be incurred for a failure to submit returns, and a maximum fine of £400 for falsification of balance sheets. Under the Companies Act 1980, £200 is the common maximum for failure to submit accounts, returns and so forth, and offences for fraudulent behaviour are generally triable either summarily or on indictment with a statutory maximum of £1,000 available on summary conviction and an unlimited fine on conviction on indictment.
The regulatory offences covered by Section 12 of the Trade Union and Labour Relations Act 1974 are designed simply, like many other measures throughout Acts of Parliament, to ensure that records are properly kept and the information they contain is available to those concerned. Such offences are generally triable only in magistrates' courts, where the maximum fine available for any offence is of course normally only £1,000, which again will be subject to increase by order. To provide therefore as the noble Lord, Lord Spens, would have in his amendment, a maximum of £10,000 and £40,000 for the offences in question, would be quite out of line with the structure of fines for summary offences and give them undue prominence in comparison with many other offences of a similar nature through-

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out our legislation. I hope therefore that, in the light of these observations, the noble Lord, Lord Spens, will consider it appropriate to leave the fines as they are at the moment.
Lord Spens: I understand that the noble Earl wants to continue to keep these things extraordinary. He says that there have been no prosecutions, but why on earth should a certification officer want to prosecute when the maximum fine on a union is only £100? If it was much more, then there might be a case for him to prosecute. However, as the noble Lord, Lord Orr-Ewing, is not present, and as this was really his amendment, I beg leave to withdraw it at this time.
Amendment, by leave, withdrawn.
Clause 16 [Meaning of "trade dispute"]:
[Amendment No. 130 not moved.]
12.54 a.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 131:
Page 18, line 38, at end insert ("or between employees and employers who are parties to a trade dispute by virtue of section 19(1) of the Social Security Act 1975.").
The noble Lord said: May I speak also to Amendment No. 132 in moving Amendment No. 131? As we move into the early morning, we come to the other clause which is central to the structure of the Bill. Having revived Taff Vale, having told the trade union movement, "Yes, you are liable in tort and you have little protection of your funds, but of course you have the trade dispute defences", now we set about the process of dismantling the trade dispute defences. Clause 16 changes the definition of a trade dispute, the fundamental bedrock upon which protections in trade disputes exist, and therefore the fundamental law on which the right of workers to withdraw their labour is based in this country.
This amendment goes to the nature of the parties which are required to be parties to a dispute to qualify it as a trade dispute. Other amendments concern—if I may use the nearly neutral term—the content of the dispute. It may be important to noble Lords to observe the distinction between the problem of the parties to a dispute which have to qualify as a trade dispute, and the content which the dispute is about or makes reference to.
The present definition allows for the trade dispute to include disputes between employers and workers and workers and workers, That definition of the parties has been more or less the same since 1906, though the period of 1971 to 1974 is a very special one in all respects and excluded from that statement. There grew up very early on—1911, I think, is the right date to place upon the origin—a congruity between the law of trade disputes, the law of the right to withdraw labour and the law of social security. One finds it matched on the early statutes, on the second one, although it becomes clearer in the later ones in the 1920s.
If I read the definition of trade disputes, your Lordships may recognise it, but I pause for a moment to make clear the importance of the trade disputes aspects of social security law. It has long been the case that
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in a trade dispute the employee loses his employment benefit. It is also the case during the course of a trade dispute, that while the stoppage continues, to be accurate, he loses his supplementary benefit. Your Lordships have debated social security law on other occasions, and I pause merely to observe, as my noble friend did on an earlier amendment, that this Government have done nothing to improve the employee's position in that respect. Indeed, his social security position is very much worse, and though your Lordships do not sometimes like the result of surveys, except that on occasions they mention them as having surveyed the damages awarded, as in respect of a recent amendment, nevertheless it is quite clear from the work of the last decade that most people who stop work for any period live largely on credit and savings, and the Government have cut back in a most Scrooge-like manner on a supplement they managed to obtain from income tax rebates and the like.
But that congruity in the law still exists: that is to say, the area in which you have the right to stop work. In the last few hours I have been amazed at the way noble Lords have treated the right of a man to stop work, as though it were some kind of privilege which they had the right to mould and re-assess other than as a legislature, and in judging the legislation they had the right to say: "You should not go on strike; you should not stop work" People can withdraw their labour within the law and if, when they withdraw their labour, it is lawful, it has sometimes been asserted that it is logical to say," Then they must not get unemployment benefit."
There is a big debate among commentators on the issue of state neutrality, on which one side says it is logical to remove unemployment benefit in a trade dispute because that is state neutrality. The others dispute that proposition. The first, orthodox, proposition I will take as being one that the Government might well adopt, but it works only if the area of the trade dispute is roughly the same for the purposes of both areas of the law, because if you are a worker and wish to see a lawful area of the right to strike or to stop work, then you want a wide definition of "trade dispute" If you are a worker and you are on strike and want to get your unemployment benefit and not have it disqualified under the statutes of social security, then of course you want a narrow definition. The two, therefore, must be the same if the famous attitude of even-handedness is to be maintained by the Government; but this Bill breaks the link between the two.
Under the trade disputes statutes, the Social Security Act 1975, Section 19(2) defines "trade dispute" as,
"any dispute between employers and employees, or between employees and employees, which is connected with the employment or non-employment or the terms of employment or the conditions of employment of any persons, whether employees in the employment of the employer with whom the dispute arises, or not."
That is the definition, more or less, of the 1906 Trade Disputes Act, as I am sure the noble and learned Lord accepts. It was roughly parallel, although not exactly the same, in the 1974 Trade Union and Labour Relations Act, Section 29.
But now the trade dispute definition is to be retained in its 1906 form, in order to exclude the right to unemployment benefit and supplementary benefit. But the trade dispute formula for the purposes of the right

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to withdraw labour, and now the right of the trade union to defend itself in a court in respect of the liabilities in tort that fall upon it, is to be compressed in the way that the Bill suggests; that is, to get rid of the dispute between workers and workers, or, in the social security statute, employees and employees, which the Government accepted was more or less done already by Section 17 of their 1980 Employment Act; and, secondly, and much more important, to take out the general phrase "disputes between employers and workers" and to restrict the trade dispute as a dispute between workers and their employer.
On Clause 8, I suggested that, in relation to unfair dismissal, what the Government were doing was to put a limitation on the right to strike by allowing for lawful dismissals of the employees in small packages, in one establishment and another, to pick and to choose, and they are matching that here by saying: "You can only have a trade dispute in your own place of work with your own employer." That gives an enormous advantage to the employer. It is the employer who decides for the average man by whom he is employed, because the ordinary employer is not a man but a company, and the company will form a subsidiary. If it wants to organise its business in a conglomerate group it will do so, and each group of employees will be employed by a different company, which is a different employer. In consequence of that, it will be more and more difficult to assert a trade dispute.
What these two amendments are saying is that it is unjust to break the link of congruity between social security law and labour law. It is wholly immoral to say to workers: "The area in which you will lose your unemployment benefit and supplementary benefit, and now be subject to other disadvantages, is much wider than the area in which you can remove your labour and lawfully withdraw, partially or wholly, from work." That is a totally improper proposition in respect of morality, but is another aspect of the way in which this Government, in a cavalier manner and without even mentioning it, have thrown aside their obligations under Article 6 of the European Social Charter.
It will not surprise the Government that in seminars it is a matter of international interest, in an abstract way, that they have gone this far in the face of the European Social Charter, without, so far as I know, having addressed a word to the point. Perhaps this will be their opportunity. This breakage of the link, which has been there for a century, between the rights and the disadvantages of workers in both social security and labour legislation, is a break which is fundamental, and is fundamental to this clause, which is why we press the Government on these amendments. I beg to move.
The Earl of Gowrie: I think that we should re-address our minds to Clause 16 and not to the European Social Charter. The clause makes four main changes to the definition of what constitutes a lawful trade dispute. The first is the most important, and I shall concentrate on it. It is to restrict lawful trade disputes to disputes between workers and their own employer. The obvious and main purpose of this is to protect employers and employees from pressure from trade
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unions and workers outside the company to force them to do something which they do not want to do.
At present the definition is so wide that a trade union can be in dispute with an employer even though it represents none of that employer's workers; but we believe this to be absurd and unacceptable, and therefore we are establishing the principle in this Bill that in order for there to be a lawful dispute there must first be workers in dispute with their own employers. Of course, once that is established, a trade union will still be free to organise industrial action by its workers in furtherance of that dispute.
The noble Lord, Lord Wedderburn, referred to two amendments. I assume that he was referring to Amendment No. 130, which he did not move, or is he just referring to Amendment No. 131?
Lord Wedderburn of Charlton: Amendment No. 130 was not moved. I am moving Amendment No. 131 and speaking to Amendment No. 132, because obviously workers and workers should stay in the labour legislation as in the social security legislation. I said that I was speaking to No. 132, I think.
The Earl of Gowrie: I am grateful for the correction. The first thing I have to say about this amendment is that it would, by a circuitous route, completely nullify the effects of restricting trade disputes to disputes between workers and their own employer. As such it comes in a "nice try" category. It would do that by attaching to the definition of a trade dispute in Section 29 of the 1974 Act the much wider definition of a trade dispute which occurs in Section 19 of the Social Security Act, and that, of course, is unacceptable to us. For that reason alone, I would hope that the amendment would be rejected were it pressed to a Division.
The noble Lord, Lord Wedderburn, has also made great play of the fact that in future there will be two different definitions in legislation of a trade dispute. I have to say that I cannot quite understand what all the fuss is about. We are using different definitions of trade dispute because they are needed for quite different purposes. In the Social Security Act, the definition determines when a worker is entitled to receive state benefits when there is industrial action at his place of work. The definition in the Trade Union and Labour Relations Act, 1974, as amended by this Bill, defines the circumstances in which trade unions or their officials can lawfully organise industrial action.
There seems to me to be no reason why the same definition should be used. As I am sure the noble Lord has worked out, if the new definition of trade dispute were to be incorporated in the social security legislation, workers would be entitled to receive benefit if they were participating in a dispute which Parliament had declared unlawful because it was not a trade dispute as defined in the Act. That is to say, it would not be with an employer, but would be a political dispute or some such dispute.
From the noble Lord's remarks, the Committee might be forgiven for falling into the error of thinking that the use of two different definitions of trade dispute was new. The previous Government themselves defined trade dispute in the Social Security Act 1975 differently

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from the way they defined trade dispute in the Trade Union and Labour Relations Act 1974.
There is no reference in the 1975 Act to disputes over facilities for trade union officials or machinery for negotiation or consultation, both of which are included in the 1974 Act, which the Government are retaining. I am hopeful that that should convince the noble Lord that we are not doing anything out of the ordinary, and perhaps he will be pleased, therefore, to withdraw his amendment.
Lord Wedderburn of Charlton: My Lords, I am disappointed at the reply by the noble Earl, but not surprised. I cannot accept one of the points that he makes, both legal and other, although there is one at the end where we are at one, but for different reasons.
First of all he says, let us not look at the European Social Charter. The United Kingdom has acceded to the charter and unless, in some fit of distraction, the Government have today got rid of it, I wonder why the noble Earl says we should not look at the European Social Charter? It is relevant. It says that those states which accede to it accept that there should be the right to strike. I have quoted it before and answered the noble Lord, Lord Marsh, about it. I cannot quote it at the moment because I do not have it here, but I say that it says there must be a right to strike, subject to limitations placed, by way of peace obligations, in collective agreements which are adapted to local law. That seems to me to go out of the window, and it has not been denied.
Secondly, the noble Earl is right in saying that this amendment would require some amendment and adjustment in the social security legislation. I say to him that the reason I did not put down an amendment in that sense was because we understood that it would not be within the Long Title of the Bill and that it would have been improper to try to put it into the Marshalled List.
Thirdly, the noble Earl says that the 1974 Act was in different words from the Social Security Act 1975. No doubt he would include the Supplementary Benefit Act 1976. He is right. The words in the Social Security Act maintained more or less the equivalent of those in Section 5 of the Trades Disputes Act 1906. The 1974 Act spelled it all out at much greater length—perhaps too long. If the noble Earl looks at the case law on the 1906 Act, I would challenge him to find very much in the 1974 definition which did not fall clearly within the 1906 definition which is maintained in the social security statutes. I accept that one of those is facilities for trade union officials. That was always a debated point. It had not been litigated. I always held the view that it would have been included within the 1906 formula. Apart from that and two or three small matters, the vast majority are the same.
Now we come to the point where we are perhaps agreed. The noble Earl said that of course there must be two different definitions of trades disputes because they are wanted for two different purposes. To that, say two things. It is the same man on strike. It is the same man with a family who is not getting unemployment benefit, but who is now, illogically, being made into a law breaker. Of course there are different purposes for this Government. The purpose in one case—the
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trade dispute—is to make the strike unlawful. The purpose in the social security legislation is to stop him getting his social security benefit. This Government have double standards. If you have a definition in favour of the striker you must squeeze it until the pips squeak. You get your boots on and trample on it. When it comes to the other side, where he might get a benefit and the strike might be lawful, you must do the opposite and not allow him to have his social security benefit. We do not think this is a satisfactory approach to the problem, to put it at its lowest. We shall not withdraw the amendments. We shall simply see what happens to them as the Committee progresses.
On Question, amendment negatived.
[Amendment No. 133 not moved.]
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 133:
Page 18, line 41, leave out ("relates wholly or mainly to") and insert ("has a substantial connection with").
The noble Lord said: This is the central core of the clause, and I shall refer it to in clause stand part. I want to put to the noble Earl one major point. The content of the 1906 and the 1974 definition, which we may call loosely for the moment employment and industrial matters, had to be connected with the dispute or, as the statute had it, the dispute had to have a connection with the list of employment and industrial matters set out. The phrase "connected with" over the years went through a number of changing interpretations.
It is true that from 1909 the case law was such, especially after the case of Conway v. Wade in your Lordships' Judicial Committee, that it was thought that where the objects of industrial action were mixed, the courts should look for the predominant object. It was not very clear, but that is what most people thought the House of Lords probably said. Others said, No: "connected with" means "connected with" In 1974 that is what the Judicial Committee of the House of Lords decided it meant—in NWL v. Woods, a case to which I have already referred (and so has my noble friend) in your Lordships' Committee.
In that case, the noble and learned Lord, Lord Diplock, said in the course of his judgment—holding, as their Lordships did, that any dispute connected with employment terms, whatever the other objects of the dispute, must fall into this point of the category at least of trade dispute—as he said in a later case, perhaps somewhat unwisely,
"Even if the predominant object were to bring down the fabric of the present economic system by raising wages to unrealistic levels or to drive Asian seamen from the seas except where they serve in ships beneficially owned by nationals of their own countries, this would not … make it any less a dispute connected with terms and conditions of employment and thus a trade dispute, if the actual demand that is resisted by the employer is as to the terms … of employment [of] his workers".
That is on pages 1304 to 1305 of Volume I of the Weekly Law Reports for 1974.
The Government have seized upon this case and have said, "We must change this wide link in the definition of trade dispute, because it can be connected with employment matters and industrial matters and you might have millions of other objectives. It is very dangerous, because we want to stop political strikes."

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They know, and we know, that political strikes in the ordinary man's vocabulary have never been lawful within the trade dispute formula. They are not lawful now and they will not be when the Bill is enacted. The Government are seizing upon the occasion of that judgment—and in particular on that passage and associated passages in the judgment of the noble and learned Lord, Lord Diplock—to change the very basis of the trade dispute formula.
Instead of the requirement that the dispute be "connected with" employment matters, now the Bill requires that they should relate wholly or mainly to the matters set out in the definition clause of the 1974 Act on employment and industrial affairs. The change is very great. A dispute may be connected in a quite substantial way, but it may not relate wholly or mainly to it. Everybody knows that what is happening is that in the course of their drive towards privatisation, while on one flank they use labour law to get the district auditor to clout the Labour councillors who have been elected on a programme, for trying to put it into effect, on the other side the Government have opened up another attack on trade union rights by saying, "If you oppose our privatisation, you are not wholly or mainly opposing redundancies; you are mainly opposing the political programme of the elected Government of the day."
It is quite clear that what the Government are doing here, in the rhetoric which is used about this particular point, is to extend the meaning of political strikes as they would have it in the legal vocabulary of this country. They have done so on the basis of a judgment which, fortuitously and strangely, has now been shown to be a very special case and one where the language was not, perhaps, wholly correct.
In the recent case of Universe Tankships v. International Transport Workers' Federation, where the ITWF was sued by a flag of convenience company for money which the company had paid into the seafarers' welfare fund, the noble and learned Law Lords were divided three to two on an issue which came before them during the course of the case, as to whether there was a trade dispute. The difference between them centred on this very point. So the latest authority, on the basis of the opinions of the three Law Lords who said it was not a trade dispute, should have been looked at and considered as the Bill moved through. The Government have moved plenty of other things in and out of the Bill and should have looked at this since they rely on NWL so much, as they do.
Of the majority the noble and learned Lord, Lord Diplock, told his learned brethren that the phrase "connected with" was a wide expression. I must quote just a few of his words in view of the importance of the matter. But he said:
"In my view, it is not enough in order to create the necessary connection between a dispute relating to terms and conditions of employment of employees of a particular employer, and a demand made upon that employer by a trade union acting on its own behalf and not on behalf of the employees working for the employer, that the demand should be made at a time when the trade union is negotiating a collective agreement relating to terms and conditions of employment of those employees".
He is distinguishing between a trade union negotiating and demanding for the employees, and making other demands on the side. And the debate on that point
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involved a reconsideration of the phrase "connected with". Lord Diplock approved of Mr. Justice Parker's way of putting it, and said:
"The Court of Appeal would have taken the same view and upheld the judgment of Parker J on the duress point had they not felt that they were prevented from doing so by certain observations in the judgment of Lord Justice Roskill as he then was, in BBC v. Hearn, and of my own in my speech in NWL v. Woods".
He then says a word about Lord Justice Roskill, and I will go to the main point. He says that there is nothing in that case—and I take the quotation—
"or the reference to those judgments in Hadmor Productions v. Hamilton, that throws any doubt upon the correctness of the law of the passage I have quoted from the judgment of Parker J. I must, however, take the blame for expressing myself in NWL v. Woods in terms that could be understood as being inconsistent with that passage in Parker J's judgment in the instant case."
He then goes on to re-explain the NWL case in a long passage which no doubt your Lordships would wish me to read if you dispute it. The noble Earl does not dispute it, but he has not heard my assertion yet. I assert that it redefines "connected with" in a most fundamental way, because you have to look again at the NWL case, and it is no good relying on that for this amendment. What I am saying is that when we look at the development of the law, which has always been slightly unclear as to the precise meaning of "connected with", nevertheless, we have known roughly where the boundaries are and the NWL case did not change them. We now see that there was no major change in the NWL case in the light of Hadmor Productions, which I have not cited, but which the noble Earl will know about reaching the Judicial Committee, and especially the Universe Tankship case which I was quoting from the 1982 Industrial Relations Law Reports at page 206.
What I say is that, in that state of affairs, it is not right for the Government to redefine the fundamental phrase in the statute on this matter, and that what they are doing is putting into trade disputes a formula which will serve their other purposes, including of restricting ordinary strikes between an employer and his own workers. That is unjustifiable enough, and I do notice how, when the question of workers outside the particular company comes in, the noble Earl and his colleagues on the Front Bench have, more than once, assumed that the workers outside the company are coming in to pressurise the workers in the particular company involved. Noble Lords on this side of the Committee would, perhaps, suggest that workers outside a company are more likely to be coming in to give support.
The idea of worker solidarity is a real one. It is one which is laughed at in some quarters, although not throughout the world, and it is real in Britain. Workers across the limits fixed sometimes want to support one another. Similarly here, a matter may well be connected with a large number of matters and a large number of workers, and the phrase that we suggest as an amendment would wholly meet the Government's point, because, if they have any residual worries about the NWL case, we suggest that they put in a modification of the old formula, making it a dispute which has "a substantial connection". We cannot see why it is necessary to go beyond "a substantial connection" with the traditional matters of a trade dispute. I beg to move.
The Earl of Gowrie: The purpose of subsection (2)(a) of this clause—and that is the subsection that the amendment seeks to change—is to make unlawful disputes which have only a slight connection with the subjects of a trade dispute listed in Section 29(1) of the Trade Union and Labour Relations Act. We are, as the noble Lord, Lord Wedderburn, reminded us, on board what the shorthand of the industrial relations trade refers to as "the good ship 'Nawala' and related vessels". It is important to establish at the outset that the change to the "wholly or mainly" phrase in connection with a trade dispute will not affect the vast majority of normal industrial action which is taken by employees against their employer, whether that is in the public or private sector. What this subsection is seeking to do is to ensure that disputes become lawful trade disputes only where they are genuinely and primarily concerned with what most people would regard as the normal subjects of trade disputes between employers and workers.
The noble Lord, Lord Wedderburn, cited the Nawala case and NWL v. Nelson and Woods in 1979. He cited the judgment of Lord Scarman and he cited the judgment of Lord Diplock. Since he quoted the noble and learned Lord, Lord Diplock, I shall not need to weary the Committee by repeating the quotation. But the Government's view is that the effect of this judgment has been to extend the definition of a trade dispute so that trade union officials have virtually complete freedom to pursue disputes of a purely personal and political kind, and to call strikes which have only the slighest connection with the subject of a trade dispute. It is unlikely that this would frequently occur, but, if it does occur, it is, in our view, unacceptable, and the change to "wholly or mainly" is intended to correct the position.
Now the noble Lord opposite is suggesting that in place of "wholly or mainly", we require a dispute to have a substantial connection with the matters listed. That is at least an advance on the present position—I acknowledge that—but what sort of an advance?
Trade union leaders have complained that "wholly or mainly" is too vague. But surely greater uncertainty and vagueness would ensue if we were to accept the wording proposed by the noble Lord, Lord Wedderburn. It is not clear to me what the courts would consider to be substantial—almost half, more than half or 90 per cent. But I would suspect that it might be intended to be a less stringent requirement than "wholly or mainly". It is intended to give trade unions greater freedom to organise industrial action than is proposed by the Government's present clause and for that reason alone we would wish to resist the amendment.
On Question, amendment negatived.
1.27 a.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 134:
Page 19, line 4, after ("as") insert ("(a)").
The noble Lord said: I beg to move amendment No. 134 and I should like to speak at the same time to Amendment No. 135, because Amendment No. 135 is the substantive amendment. In 1974, it was thought a
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good idea to spell out the fact that a trade dispute could be connected with—or now I suppose I have to say "related to"—matters that were abroad. There has always been a dispute between the parties which has always seemed to me perhaps slightly unnecessary, but it reflects the same approach; namely, broadening or narrowing the scope of "trade dispute".
The dispute between the Government and these Benches has been the following. We have always said that multinational enterprise and transnational enterprise are so important today that one must treat the connection with matters abroad in the same way as trade disputes here. The Conservative Party has always said, "No, you must treat the matter as allowable within trade dispute only if it affects British workers".
I want to make it clear that the amendment is not an effort to resolve that dispute in our favour, but is an effort to make sense of the Bill, because the Bill at the moment just does not make any sense. The Bill at the moment says, as the previous amendment of the Opposition—as they then were in 1974—said, that the trade dispute can relate to matters occurring outside Great Britain:
"so long as the person or persons whose actions in Great Britain are said to be in contemplation or furtherance of a trade dispute relating to matters occurring outside the United Kingdom are likely to be affected in respect of one or more of the matters specified …"
The people who are acting in contemplation or furtherance of the trade dispute, on the assumption that there is a strike or industrial action, are the organisers; they are the defendants who are being sued as having acted and organised industrial action in contemplation or furtherance of a trade dispute. But the Bill says—as did the previous clause that the Opposition put in, that we removed—that it is their interests that have to be shown to be affected in respect of one or more of the matters specified.
Trade union officials may not be able to show that their interests are affected, and I do not believe that that is what the Government mean. I do not believe it is what the Conservative Party meant in 1974; I believe that they meant—and they would be very silly if they did not mean—to say what Amendment No. 135 says; namely, that the interests, either of the union officials who organise the action—if you want that in, although it is rather odd—or secondly, the interests of the workers who are induced to take the action, but who are not the people acting in contemplation or furtherance of the trade dispute within the meaning of this Bill and the 1974 legislation, which it amends, are likely to be affected, which the court must look at under the Government's intention.
This is not in any way a wrecking attempt; it is an attempt to make sense of the clause. At the moment—and I press the point—the clause requires that the interests of the organisers of the strike must be affected by the dispute and not the workers. Surely the Government should accept that the trade dispute which they are narrowing so much should at least make sense in respect of overseas disputes, which are indeed becoming rather more important. I beg to move.
Lord Campbell of Alloway: Is not the problem in practice the sympathetic strike with the seamen who strike in this country within the jurisdiction by

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way of sympathetic action with, for example, the longshoremen in the United States of America? Is it not right that it is considered that it does not make sense to extend the area of disruption in industrial relations in that sort of way, because it is contrary to the economic interests of this country and that, therefore, this Bill, as it stands, far from not making sense—if the premise that I am putting forward is right—makes total sense? It depends on which way you look at it. I quite understand that the noble Lord, Lord Wedderburn, looks at it from a different point of view, but from the point of view from which we look at it, it makes total sense. I would therefore suggest that the amendment is not well founded unless one wishes to extend the area of trade dispute, which is the one thing which this Government are committed to narrow.
Lord Mackay of Clashfern: I am obliged to my noble friend. I think the point of view from which you start to look at this clause is important. Perhaps just before plunging into the detail, I could say a few words about our general attitude to disputes which relate to matters occurring overseas. We are not seeking to outlaw such disputes altogether, but we do not think that it is satisfactory that, under the present definition of a trade dispute, workers in this country can undertake damaging industrial action in the United Kingdom in support of a dispute overseas when they have no involvement in the dispute and are not affected by its outcome.
So what we are doing in subsection (4) of this clause is to say that disputes about matters overseas are not lawful trade disputes unless the persons taking action in the United Kingdom are likely to be affected by the outcome of the dispute. This seems to us to be a fair and balanced approach to the problem.
Turning to the amendments, the noble Lord, Lord Wedderburn, has questioned what we mean by the use of the words "person or persons" in subsection (4)—does it mean the workers who are taking the supportive action or the union or individuals who are organising it?
The answer is that it is intended to include the workers who are taking the action, and we find it difficult to believe that it will be interpreted in any other way. This is because when the Bill is enacted Section 29(3) will refer to persons who are likely to be affected by the outcome of the dispute in relation to one or more of the matters listed in subsection (1). That reference back to the list in subsection (1) does, in our view, make it clear to the courts that the persons covered in subsection (3) are intended to encompass workers.
On a straight reading of subsection (4) which the noble Lord read to us, that would be my impression also. I hope that in the light of that the noble Lord will see fit not to press this amendment. I appreciate the sense in which he has moved it, that it is not a wrecking amendment but one seeking clarification, but we believe that the person or persons whose actions in the United Kingdom are said to be in contemplation or furtherance or a trade dispute must
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include the people actually engaging in the industrial action.
On Question, amendment negatived.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 135:
Page 19, line 7, after ("Kingdom") insert—
("; or
(b) any person or persons whose acts in the United Kingdom are induced, counselled or otherwise caused by such actions,").
The noble Lord said: I apprehend that it would be a correct reading of the sense of your Lordships' Committee if I were to say that Amendments 135A, 136 and 137, which are concerned with the important question of the International Transport Workers' Federation, would be a matter which I would wish to speak to in the course of my speech on clause stand part, and indeed that the other amendments, if my noble friend agrees with the suggestion, could be dealt with in clause stand part by way of, if your Lordships would agree, moving them formally so that they appear on the record and discussing the ship amendments in clause stand part. That is a suggestion which I may not have made in the correct manner or order, but no doubt the Government Bench will put me right if it is wrong. I beg to move.
On Question, amendment negatived.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendments Nos. 135A, 136, 137 and 138:
Page 19, line 9, at end insert ("or so long as one or more of those matters relates to persons employed within the United Kingdom or on a ship situated within the United Kingdom").
line 10, at beginning insert ("In").
line 13, leave out ("shall be omitted") and insert ("for the words" to which workers or as the case may be, employers are parties "there shall be substituted the words between workers and their employer where that dispute relates to persons employed on a ship situated within the United Kingdom"").
line 16, leave out ("in relation to a dispute with an employer") and insert ("for the purposes of determining whether a dispute is a dispute between workers and their employer within the opening words of subsection (1) above").
On Question, amendments negatived.
[Amendments Nos. 139 to 141 not moved.]
On Question, Whether Clause 16 shall stand part of the Bill?
1.38 a.m.
Lord Wedderburn of Charlton: I wish to assert strongly that a number of the matters we have not discussed in detail are nevertheless of great importance. What could be of greater importance than the definition of "trade dispute"? The Government's own Green Paper of 1981 accepted at paragraph 384:
"The immunities are not simply legal privileges which could be abolished outright. Without some legal protection, however circumscribed, it would be impossible for trade unions or individuals to organise industrial action without risk of civil proceedings, and the ultimate safeguard of collective withdrawal of labour would be effectively nullified."
Although that is a modest statement, nevertheless it puts the issue of the clause correctly; namely, that if you reduce the immunities sufficiently, and the best way to do it is to reduce the basic formula of that which

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defines a trade dispute, then you effectively nullify, to use the words of the Green Paper, the basic right of withdrawal of labour. It may be that some of your Lordships think we are taking a small step, but this Committee tonight is crossing two Rubicons at once.
First, the Taff Vale principle has been revived. Secondly, if the Committee passes the clause, it will reduce the concept of trade dispute to a point where the right to strike will be of a much narrower proportion than it was in our previous law and as it exists in other systems of law of comparable countries, and this country will begin to look like the pariah of the employment and trade union law system of Western Europe. It is not that there is any lack of difficulties in the definition of "trade dispute". Indeed, Professor Kahn Freund, who later, for 20 or 30 years, was the leading expert in the international world of democratic countries in labour law matters, said when he wrote his first major work in 1954 that the definition of trade dispute in the 1906 Act rested perhaps on a theory of society and politics which, even in 1906, was open to grave doubt, and which today is plainly untenable because, as he went on to suggest, it rested on a concept of a division between state and society which no longer fits the 20th century, if it fitted the 19th. That was his view. I discussed it with him, as many of us did, and it was an interesting proposition.
But at the end of the day, as a practical matter, he agreed, as we all did, that modern industrial legal systems must find a distinction because, as one noble Lord from the Liberal Benches said when debating an earlier amendment, if it did not exist, it would have to be invented. The division between trade dispute and beyond—political and other disputes—has to be found in a society, and, where it is found, should reflect a point on consensus, because if that is lacking, then the division will not be accepted. And since it is a manufactured thing and is not inherent in society by the law of nature, it is something for which those who make policy are responsible. It is not given to them; they manufacture it. But if they manufacture it in such a way as to make cramped the consensus they found when they came into office, their responsibility may be profound.
Thus, the enlargement of political disputes, as we have seen in this clause, is the first step the Government take, and therefore fewer strikes will be lawful, with the narrowing of the area of the parties to the dispute; only the employees of that employer, with the employer able to decide where the employment unit is to be found. I noticed that the noble Earl and the noble and learned Lord did not rely very strongly on the subsection; I think it was mentioned in one speech, but not very clearly. I refer of course to the subsection which says that this provision does not affect the question whether a party is acting in contemplation or furtherance of a dispute, whether or not he is a party to it. They know as well as I do that that is the last refuge in court, and it is very difficult to show that, as is shown by many cases from the 1960s onwards.
The parties are important and the connection is important, and one other matter is important, and that is the definition in subsection (6), which redefines "worker", not only in relation to the parties but also in relation to the content, so the dispute between the
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workers and their employer can now only be about their own employment positions. An amendment was moved in another place and the Government changed the formula to make quite sure that that was so. So they have narrowed the area to little pockets of workers. There are many illustrations of the way in which this is unreasonable, but I will give merely two to conclude our opposition to the clause.
The first is that there are groups of workers who are in need of support and to whom British workers have for many years, in an honourable tradition, given, without profit to themselves, industrial support which is matched only in some of the more advanced labour movements of Western Europe. The best example is the flag of convenience. I have in my hand a copy, of which I have seen many, of a letter written by a seaman from an East Asian country. The name and address must be whitened out because, if it should be found, he would be sent home and, what is more, none of the wages having been paid for three months, that would be deducted and he would not be paid anything at all. One member of crew whom I heard about in a case was flown to New York, where he was persuaded to take back what he had said to the International Transport Federation officer, who had managed to find him in port, in the few minutes that he was allowed to talk to him.
Flag of convenience ships are death traps, cause pollution, and in every way form an unsatisfactory world system of shipping. They are in fact a threat to British shipping. British seamen do not support flag of convenience vessels. British seamen who went to the Falklands do not support the idea that we must let off the flag of convenience shipowners, so that competition can improve our chances in international trade.
The flag of convenience ship has traditionally been permitted by the Government of this country to be aided by the trade union movement, and it has always done so by way of secondary action, because the crew is locked up in the ship and not allowed ashore, and the only way in which the International Transport Federation can be assisted in getting to the owners and negotiating for the crew is if the ship does not leave port. In the 1980 Act the Government have made that unlawful. The recent case in the Court of Appeal of Marina Shipping v. Lawton has shown that blacking of that kind is unlawful under the 1980 Act, with almost no gateway through which to slip to legality. Now under the Bill the restriction of trade dispute will be another nail in the coffin—and perhaps literally in the case of the people who, unhappily, are aboard the ship. How the Government at all positively justify the failure to include within the Bill an exception at least in respect of support for the crews of flag of convenience vessels I really fail to understand. The whole thrust of the Bill, and in particular the present clause—and this is the nub of our reason for opposing it—is that they do not permit groups of workers to support one another; the strong to aid the weak. That view is very different from one that was given in 1958.
In conclusion, I should like to read to the Committee a different view that was taken in 1958. It suggested that it was sometimes legitimate and sometimes

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illegitimate to allow for sympathetic action, as it was then called; we had not then heard of secondary action. It was stated:
"Further, the old conception of a separate industry, and certainly of one industry isolated from the rest of the economy, is outmoded. In truth, this, like the prior question of the justifiability of the strike generally, is one of expediency. The power to strike sympathetically is politically, socially and economically justified if without it employees will have insufficient bargaining power; but not otherwise. On this test, in conditions of full employment and a delicately balanced economy where the threat of the strike is a powerful and menacing one, it is almost certainly unnecessary".
That was stated in 1958 by the Conservative and Unionist Inns of Court Society, on page 26 of a document entitled, A Giant's Strength.
Of course on that premise the society concluded that with full employment sympathetic action was, in its eyes, not needed. Today, with three million unemployed, where are the same gentlemen, saying, "Let the workers support one another"? They are certainly not in this Chamber. I suspect that some of them are elsewhere in the building. But the same line is not propounded by Conservative lawyers today, because the line that is propounded is always the one that restricts the rights of workers, as it has been since 1927; indeed even since 1901. Only Disraeli gave the Conservative Party any kind of pedigree on the right to strike, and it lost it at the turn of the century. It will not recover it with the present Bill. If the Conservative Party passes the Bill in its present form, it will encounter very solid opposition to the ideas that are there put forward, as well as a firm proposal to repeal this monstrous clause, if it is ever enacted.
Lord Underhill: I rise to say just a few words in order to indicate quite clearly that everything my noble friend has said is, I think I can say, fully supported by all the Members on these Benches. Members opposite smile, but we are really serious on this issue. I should like the Minister who is to reply to justify why in this clause the Government are taking steps to remove the possibility of international solidarity. I should have thought that this was one thing upon which the whole Committee would be united, whether it be to avoid cheap labour, whether it be to avoid action possibly being taken on the blacking of supplies to dictator countries like El Salvador, where supplies may be used against progressive forces, or whether it be in order to prevent non-union activities in certain countries. It seems to me that this is international solidarity, where one ought to give support.
I should like to ask a question. We have (I presume it is a true report) a disgraceful report in today's press of the dismissal of certain men on the "Canberra" and their replacement by Indian seamen earning a quarter of the salary of the dismissed United Kingdom sailors. What would be the position if the rest of the ships in the P & O Line said, "We will strike in sympathy? I would have thought that this was a genuine dispute. I hope I am wrong, but presumably this would be outlawed by this clause. I think my noble friend has made quite a strong case about the position which is now obtaining whereby one can have a firm taking action against one section and whereby the rest of the workers in that concern say, "If this is not resisted then it will spread to us", so they feel that the only thing they can do
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is to strike, even though they are not directly involved at that stage.
As I have said previously, I want to see the number of disputes reduced to a minimum, even eradicated, by proper industrial relations, industrial democracy; but that does not mean that we have to give up the right that workers have to defend other workers who need assistance and to take action when they fear it may spread to themselves.
In an earlier debate I put one or two other points. Let me take a construction site, because this happens so often there. If workers take strong resentment because a contractor or a subcontractor is coming in who is anti-union, who everybody knows is anti-union and who has conditions of work which are well below the recognised standards, then these workers, who have a good agreement with their own employers, may say, "We will not have these people on the site". I would have thought that that was a legitimate stand to take. I believe it would be outlawed by this clause. Surely that is something we ought to resist.
The other case I mentioned is if one has very good relationships with one's own firm but one knows that supplies are coming in from, again, a firm which is completely anti-union, which will not recognise a union and which will not have agreements with a union, and which is undercutting recognised rates. The workers in the firm, which has very good relationships with its own employees, say, "We will not have those supplies; we will black them". That will be outlawed by this clause. I hope the Minister can say that I am wrong and that these cases that I have mentioned will not be outlawed, but if all these three cases are outlawed by this clause then it is one which ought to be resisted because it is taking away the normal rights of workers, not only to protect their possible interests later on but also to declare solidarity with fellow workers.
Lord Campbell of Alloway: May I assure noble Lords on the Benches opposite that I take the threats of opposition to this Bill and as to the repeal of this Bill quite seriously. So, indeed, no doubt, will the rank and file trade union membership, and so, indeed, no doubt, will the electorate when it comes to the next general election. But to deal with the point that is made about "trade dispute" and the narrowing of "trade dispute", it is right that noble Lords on the Benches opposite should accept that ever since the decision in Torquay v. Cousins, which was in 1969 and in which the noble Lord, Lord Wedderburn, appeared as junior counsel, the Labour Party has consistently sought to widen the definition of "trade dispute as a matter of policy. I do not criticise them for their policy. I just happen to think that their policy is misconceived and wrong. But this is what it is all about. Their policy has been consistently to widen it; we are now bringing it back to a more balanced state.
Finally, I should like to say a word about the ITWF which appears to give rise to some emotive considerations, if I detect these aright, as regards the noble Lord, Lord Wedderburn. There are two sides to this ITWF problem. I know that from the three cases that I have had in my own professional experience at the Bar, all of which are reported and all of which will be well known to the noble Lord, Lord Wedderburn. On the one side, as he speaks in his emotive way, there

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are these hulks and, on the other side, there is extortion by the trade unions, there are threats by the trade unions there is improper pressure to drive funds out of ship owners as fines in order to release the ship. There are two sides to most problems and there are assuredly two sides to that problem.
1.56 a.m.
Lord Hatch of Lusby: I have sat through most of the Committee stage of this Bill and have deliberately refrained from taking part in the detailed debate since Clause 1, the reason being that Clause 1 was important in the first half of the Bill, the part in which trade unionists were tempted by the offer of large sums of money to leave their unions. But this clause is the fourth clause of the real heart of the Bill, the Bill which is intended to open up trade union funds to confiscation. I think it would be right before we divide—and I hope that we shall divide on this—to put the Bill itself in its political context for one or two moments.
This Government's policies, as they themselves must agree, have been responsible for soaring unemployment, for falling living standards, for reduced social services and social security benefits, for a rundown in the public infrastructure and for handing back public industries to private ownership. The attack on the trade union movement that is contained in this Bill is an integral part of this policy. It is part of the strategy of the Government, and I think that everything that has been said in this Committee, as in the Second Reading debate, shows that this is a consistent strategy on the part of the present Conservative Government.
But do we really believe that, towards the end of the 20th century, the workers of this country are going to take this kind of policy without some form of revolt, without some form of opposition to what they find is being done to themselves and to their families? It is the only weapon that the working people of this country have: to withdraw their labour when the situation becomes intolerable, and this is a principle which has been increasingly recognised all over the world over the past 150 years. It is the only possession they have which they can put to any use against this kind of strategy. But as individuals they are virtually helpless, and that is the reason and that has been the reason throughout the 20th century at least since 1906—and I would remind Members of the Liberal Party that it was their Government that recognised this in 1906—why the protection of the law is needed so that the individuals can work together, can combine together, to overcome their weakness by collective action.
This Bill attacks that protection. It attacks it in a number of ways, and I am going to refer only to those that are dealt with in Clause 16. First, in 1980 there was the restriction of picketing and on secondary action. This Bill adds to that, as has been so lucidly pointed out by my noble friend Lord Wedderburn, the extension of the conception of the political strike and the restriction of the definition of industrial action.
I would point out that when Members of this House are talking about a strike being a political strike, they may well refer to the Green Paper that was quoted by my noble friend Lord Wedderburn, who referred to
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another section from that Green Paper, paragraph 192, quoting Lord Justice Roskill. I will only take one sentence from the quotation, because it is the relevant one:
"It is all too easy for someone to talk of a strike as being a political strike when what that person really means is that the object of the strike is something of which he as an individual subjectively disapproves".
The phrase in this clause of the Bill "wholly or mainly" is clearly designed to extend to the concept of industrial action as political action when that action is disliked by the Government. Secondly, this clause can only do untold damage to industrial relations in this country.
I mentioned the question of industrial relations when I spoke on Clause 1. This clause goes much further and has a much worse effect. It creates new flashpoints in industrial relations. It attacks the internal cohesion of the trade unions, and we saw an example of this when the noble Lord said, "You can always dismiss the honorary president of the union". It is that kind of internal wrangling, quarrelling and dispute within the unions which can sadly and dangerously damage the industrial relations of this country.
As I say, I hope we are going to divide on this, because I believe that it is expected of us by those who have built up the trade union movement in this country and also by those who have built up the trade union movement in the world. I well remember the international action that was organised by the International Miners' Federation when the new mining unions in Africa were under attack by colonial governments and were assisted by the trade union movement of this and other European countries as a matter of international solidarity. But, if we do divide, I should like to address one short word to the famous Alliance here, because, as on Clause 1, I am still very confused. In another place in a similar situation on Clause 16 of this Bill, the Liberal Party voted with the Government and the Social Democratic Party voted with the Opposition. I hope they have had time to get together tonight and discover that the instincts of the Social Democratic Party on this occasion are more in tune with the national and international interests than those of the Liberal Party. I also hope that the members of the Social Democratic Party have examined their own record in the Division Lobbies of 1980 before they decide which way they are going to vote on this point.
Lord Kilmarnock: Will the noble Lord give way? Before he presumes to lecture the Alliance, he may like to accept, as I think he will have to, that certainly in the perception of the general public in this country, the divisions currently existing inside the Labour Party are far and away of a larger order of magnitude than any minor cracks there may appear to be in the Alliance.
Lord Hatch of Lusby: I would not dream of trying to lecture the Social Democratic Party or indeed any member of it. What I would suggest, though, is that when you look at the Division lists you will not find the divisions within the Labour Party that have become quite apparent between the two sections of the Alliance during the passage of this Bill through both Houses of Parliament, and I was just hoping that this time they

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would get together and see sense and see, also, the important morality which some of them were very vociferous in expounding only two years ago. I hope that we shall divide and get the support of the Liberal Party with, at least, their recollection of 1906, and that the Social Democratic Party will join them.
2.10 a.m.
The Earl of Gowrie: We have had a good run on this clause and, in answering just one or two points, I shall be very brief. I should like to thank the noble Lord, Lord Wedderburn, for moving the previous amendments en bloc and saving us a bit of time, and, also, as we pass the two o'clock mark, to congratulate the noble Lord, Lord Wedderburn, on his stamina. He has taken the biggest burden of this debate and seems to be in fine fettle, fine voice and fine mind. I should like to commiserate with him on the habit of some of the Cross-Benchers of referring to him as a polytechnic lecturer, which is not how I would describe the London School of Economics, fine though most of our polytechnics are—
Lord Wedderburn of Charlton: If the noble Lord will allow me to say so, I am sure that the universities and the polytechnics stand in solidarity together.
The Earl of Gowrie: I am sure that the noble Lord will pass that on to the noble Lord, Lord George-Brown. The thing that really puzzles me, though, after 33 minutes of debate, is the way in which members of the Committee, such as the noble Lord, Lord Underhill, and the noble Lord, Lord Hatch, persist in treating workers or members of trade unions as if they were bears of very little brain. It is astonishing to find such patronising attitudes coming from the Labour Party towards what are, supposedly, their traditional supporters. The idea that there are no methods of showing international solidarity, or registering disapproval of actions by overseas employers or Governments, other than taking action winch affects jobs and prosperity here at home, seems to me to be quite extraordinary.
In this clause, we are simply seeking to restrict industrial action about matters which are external to a company, and which do not directly concern the employer or his own employees. It would seem to us that, to the vast majority of members of trade unions and to employers, industrial relations and industrial action are fundamentally about what goes on at the work place. There must be other methods of registering political assent or dissent, or political approval or disapproval. The fact, also, is that purely political strikes, as the noble Lord, Lord Wedderburn, will well know, have never had immunity. They are not connected with the normal subjects of a trade dispute listed in Section 29. So the accusation that the Government are, in some way, outlawing political strikes for the first time in this Bill is utter nonsense. All we are saying in the Bill is that, where a strike is mainly for a political motive and has only a slight connection with the subjects of a trade dispute, it will fall outside the definition in future.
The noble Lord, Lord Wedderburn, has sought to justify special treatment for the International Transport Workers' Federations, because of the special vulnerability of seamen on ships which sail under flags of convenience. This is not, perhaps, the place and is
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certainly not the hour to get into an argument on the relative merits of flags of convenience ships, but it is important to understand what the ITWF and those who support them are asking for when they seek exemption from this Bill. Not only do they want to be allowed to continue practices which, in a domestic context, most people regard as unacceptable, but also they are seeking to be allowed to use British ports to further an international campaign.
With respect to them, the problem is that Britain is one of the few places in the world where the campaign can still be conducted lawfully, but we are a trading nation and much of the wealth of our nation and the livelihood of so many of our people depends on the free flow of goods through our ports. If Britain is virtually the only place in the world where this kind of campaign can be conducted, trade and jobs depending on it will be put at risk because only high cost shipping will be prepared to come into British ports. The economic justification therefore for our changes in the Bill in this respect seems to me to be very great indeed.
On the issue of the "Canberra", there is nothing in the clause to stop workers in a dispute with P & O being laid off, nor is there anything to stop other P & O workers taking action to support such workers. All that is primary action unaffected by the Bill. The Bill takes measures against secondary action.
I refute altogether the charges that the changes we have made are anti-trade union. Trade union activity, to most people, means protection of the terms and conditions of employment. You have to have employment for its terms and conditions to be protected and so many of the suggestions made by noble Lords opposite would add to our already unacceptable levels of unemployment.
Baroness Seear: Before the noble Earl sits down, may I ask him to clear up one point? It may have been dealt with already and, because of the lateness, or should I say earliness of the hour, depending on one's point of view, I may have failed to appreciate it. If there is a dispute in one country, can the employees of that company in another country strike in support of the initial dispute in the foreign country? They have a common employer, but the dispute is outside the United Kingdom.
The Earl of Gowrie: I should have to take advice on that, but, as I understand it, they would not be covered by the immunity so long as they are unaffected by the outcome of the dispute.
2.18 a.m.
On Question, Whether Clause 16 shall stand part of the Bill?
Their Lordships divided: Contents, 53; Not-Contents, 20.

DIVISION NO. 4

CONTENTS

Airey of Abingdon, B.

Campbell of Alloway, L.

Avon, E.

Cathcart, E.

Aylestone, L.

Coleraine, L.

Blake, L.

Cork and Orrery, E.

Boardman, L.

Craigmyle, L.

Caldecote, V.

Davidson, V.

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De La Warr, E.

Montgomery of Alamein, V.

Denham, L. [Teller]

Mottistone, L.

Elton, L.

Murton of Lindisfarne, L.

Ferrers, E.

Pender, L.

Gainford, L.

Redesdale, L.

Glenarthur, L.

Rochester, L.

Gowrie, E.

Romney, E.

Gridley, L.

Saltoun Ly.

Harris of Greenwich, L.

Sandford, L.

Harvington, L.

Sandys, L. [Teller.]

Henley, L.

Seear, B.

Kennet, L.

Sempill, Ly.

Kilmarnock, L.

Skelmersdale, L.

Lindsey and Abingdon, E.

Spens, L.

Long, V.

Teviot, L.

Lyell, L.

Thomas of Swynnerton, I.

Mackay of Clashfern, L.

Trenchard, V.

Mansfield, E.

Vaux of Harrowden, L.

Margadale, L.

Yarborough, E.

Massereene and Ferrard, V.

Young, B.

Monk Bretton, L.

NOT-CONTENTS

Birk, B.

Kirkhill, L.

Bishopston, L.

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

Blease, L.

Boston of Faversham, L.

McCarthy, L.

Brooks of Tremorfa, L.

Oram, L.

Collison, L.

Pitt of Hampstead, L.

David, B. [Teller.]

Ponsonby of Shulbrede L.

Davies of Leek, L.

Underhill, L.

Ewart-Biggs, B.

Wedderburn of Charlton, L.

Hatch of Lusby, L.

White, B.

John-Mackie, L.

Resolved in the affirmative, and Clause 16 agreed to accordingly.
2.25 a.m.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 141A:
After Clause 16, insert the following new Clause:
("Amendment of sections 13 and 30 of 1974 Act.
.—(1) In section 13 of the 1974 Act (acts in contemplation or furtherance of trade disputes) subsection (2) shall cease to have effect.
(2) In section 30 of the 1974 Act (interpretation), in the translation of "tort" as respects Scotland, for the words from "any to "reparation" there shall be substituted the word "delict".")
The noble and learned Lord said: The first part of the new clause which constitutes this amendment seeks to repeal a provision which first appeared in trade disputes legislation as long ago as 1906. There had been a decision in a case called Allen v. Flood in 1898 that mere interference with business—that is, interference with business without use of other unlawful means—was not actionable as a tort in its own right. The Royal Commission recommended that this decision on mere interference with business should be given legislative effect to guard against any reversal of the Allen v. Flood judgment. This was considered necessary because the law in this area appeared to be unsettled at the turn of the century and there were some dicta which cast doubt on the Allen v. Flood judgment.
The predecessor of Section 13(2) was simply intended to guard against a reversal of the Allen v. Flood judgment, and the record of debates on the 1906 Act makes this perfectly clear. In between 1906 and the 1960s it became even clearer that the tort of mere interference did not exist—not least in the case of Rookes v. Barnard.
When the Donovan Commission's report in 1968 considered whether the immunity in Section 3 was still needed, it accepted that,
"strictly speaking … there would seem to be no need today for the second limb in Section 3",
of the 1906 Act. However it also pointed out that the provision did no harm, because,
"if illegal means are used to bring about the interference [with business] then the section gives no protection, and never has."
Donovan therefore concluded that there was no reason why the provision should not remain on the statute book. When the Labour Government re-enacted the 1906 immunities in Section 13 of the 1974 Act, they incorporated this provision as subsection (2). It was clear that this subsection was no more than a declaratory provision and did not give a substantive immunity, because it was prefaced with the words "for the avoidance of doubt".
Now, however, there are indications that the continued presence of subsection (2) on the statute book is actually creating doubt rather than avoiding it. In two recent cases—the case of Hadmor Productions v. Hamilton in this House and the case of Plessey Company PLC v. Wilson and Others in the Court of Session, it has been suggested that Section 13(2) might be providing an immunity against interference with business by unlawful means. That is a development which was not in the minds of those who first enacted this provision, nor was it in the minds of those who have re-enacted it over the years. It has been suggested that the judgment in the Plessey case might in every case protect workers who occupy a factory to protest about its closure As one can imagine, this has caused considerable concern in Scottish industry. Some people have suggested that it might provide an encouragement to workers to occupy factories in Scotland without fear of the legal consequences of doing so. It was greeted by the Scottish TUC as a "charter for sit-ins", I understand.
Until this decision, it had not been thought that factory occupations were protected by the immunities in the Trade Union and Labour Relations Act 1974. This is clearly shown by the fact that, after the passage of the Act, the TUC continued to press the Labour Government to make sit-ins lawful. At the TUC's 1975 conference, for example, it passed a motion calling for changes in the law which would enable such occupations to be treated as accepted forms of industrial action with immunity from legal proceedings. I do not know what became of that motion, but I do know that the Labour Government of the day did not change the law, and I can only conclude that they also saw dangers in legalising such occupations.
We are also taking the opportunity, in subsection (2) of this new clause, to amend the definition of "tort" as respects Scotland in Section 30 of the 1974 Act. The English word "tort" has always had to be translated for the benefit of Scottish practitioners, and the present translation says that tort means,
"any wrongful or negligent act giving rise to liability in reparation".
The phrase is somewhat cumbersome and does not fit well into many of the provisions of the 1974 Act. That was apparent in the Plessey case in the Court of Session. Further, there may be wrongful acts which

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in England would be torts but which in Scotland, depending on the circumstances, would not found an action of reparation. Since the intention is that a wrongful act should be treated in the same way on both sides of the border in this particular context, it is proposed to alter the translation so as to substitute the single word "delict" for the awkward phrase which I have quoted. The clause then is intended to produce a result which was widely believed to be the result before the judgments in the Hadmor and Plessey cases. I beg to move.
Lord Campbell of Alloway: I raised this matter at Second Reading. It is a technical matter. The object of this amendment is to ensure that the ambit of statutory immunity afforded by Section 13(1) of the Act of 1974 should not be extended by Section 13(2) in accordance with the interpretation of your Lordships' Appellate Committee in Stratford v. Lindley, and the Court of Appeal in Torquay v. Cousins, those being both more recent decisions. These decisions were on the Act of 1906, and the sister provisions of the Act of 1906 are reflected in Section 13 of the Act of 1974. These decisions held that the equivalent of Section 13(2) was declaratory only, and the object of this amendment is to give effect to that judicial interpretation.
The problem has arisen recently because of the case mentioned by my noble friend Lord Mackay of Clashfern, the Hadmor decision, Lord Diplock, and Mr. Justice Templeman (as he then was) in the case of the tanker "Camilla M". This has been exacerbated by the decision of the Inner House of the Court of Session in the Plessey sit-in case. This is a serious problem in practice, having cleared away the technicalities, because a sit-in involves the extraneous tort of nuisance or of trespass, and it was held that the sit-in was lawful, notwithstanding these extraneous torts. It is clearly, in submission, unacceptable that Section 13(2) should be construed as a licence to commit such extraneous torts. If it is declaratory, it is a useless appendix which has led to judicial confusion and should be removed.
Lord Wedderburn of Charlton: Both the noble Lord, Lord Campbell, and the noble Lord the Minister have addressed this repeal of a section which has been in our trade dispute law for many years, as the noble and learned Lord said, since 1906, in two ways: first, that the subsection does not matter and can therefore be removed; and, secondly, that it does matter and therefore it had better be removed. It is an interesting way that the Government have of approaching our trade union rights and trade dispute matters. Although broadly I accept the historical account that the noble and learned Lord provided, admirably condensed—what a tortuous route it really was—nevertheless, I must add a word because there is a question mark against it.
It is perfectly true that, when it was enacted in 1906, in the second half of Section 3 of the 1906 Act, that a mere interference with trade done in contemplation or furtherance of a trade dispute should not be actionable, it was widely thought by some lawyers that there was such a cause of action in tort by what was then
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usually called malicious interference with trade per se, a wrong which was thought to date from Sir William Earl and his memorandum of 1869. It is true that the majority view was that that cause of action with the genius of the common law for change died away. So when one came to Rookes v. Barnard in your Lordships' Judicial Committee in 1964 Appeal Cases, it is found that Lord Reid was saying the section was unnecessary, Lord Evershed, after a struggle trying to interpret it, said it was nugatory, and the noble and learned Lord, Lord Pearce, said with a little puzzlement that it appeared to be pointless. However, Lord Devlin did not express that view. If the noble and learned Lord would look at page 1215 of the report, he will see that Lord Devlin said:
"I do not think that it is necessary for the House to decide whether or not malicious interference by a single person with trade, business or employment, is or is not a tort known to the law: but I must at least say what I mean by such a tort—I mean, putting it shortly, Quinn v Leatham without the conspiracy".
That, of course has been its name in the trade ever since.
It is not finally decided whether there is a wrong of some kind which is Quinn v. Leatham without the conspiracy; it has never finally been decided that that is so. Although it is true that most people think that there is not, the Government choose a very odd moment when the matter is still in some doubt to take away yet another immunity. They got rid of Section 13(3) in 1980; they are getting rid of Section 13(2) now; they emasculated Section 13(1) in the Bills of 1980 and 1982; and they told the trade unions, "Do not worry about liability in tort; it is true you have it imposed on the Taff Vale principle, but it will be all right because you have trade dispute defences."
Then we come to Scotland. I noted that the noble and learned Lord was slightly more reticent perhaps about the Scottish position, but I plainly cannot challenge him on it, coming from south of the Border. Fortunately, there arrived only yesterday a note on the Plessey decisions, by which I mean the first decision and the second of the inner and outer house, I believe, of the Court of Session. The judges appeared to be saying, as the noble and learned Lord said, that a sit-in just by itself might be an interference with trade and, therefore, defensible under this section. Of course, if that were so, it would be important at any rate as far as these proceedings go. But it is very tentative. The noble and learned Lord may have read the judgment; I certainly have. It would not take long to read it out, but I shall not do so; it is of only one column. They are only saying that this may be the position, "we shall see".
In the 1982 June number of the Industrial Law Journal Mr. Miller of the University of Strathclyde has written a note on the case and the judgments at page 117 which, if I may, I shall summarise for your Lordships. First, he says that the "relevance and force of the judgments"—that is his phrase—are diminished by the nature of the interlocutory or interim proceedings, as he rightly calls them. Secondly, he stresses that the judges were at pains to point out:
"that if the case ever went to full trial on the merits Plessey might be able to lead evidence that would show conclusively that a sit-in is more than just an interference with a trade or business".

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Thirdly, he adverts to the point which I believe to be the case:
"that this has particular significance for England because of the differences in trespass laws between the two countries. In Scotland trespass is merely part of the general law of reparation and land ownership. A trespass per se gives no right to a proprietor to sue for damages".
I only have Mr. Miller's word for that, but if that is really Scottish law, then of course it is very different from English law.
So in the Plessey case—which has finally concluded the Government to get rid of this section which has been there for so many years—they first of all decided, contrary to the full evidence, that it was clearly unnecessary; that secondly, there was a whiff of possible life in the old section from Scotland where the judges tentatively in interim decisions decided that they might conceivably have a defence in an area where trespass is actionable without proof of damage. Then the Government come along at the Committee stage of this Bill in your Lordships' House and take away yet another of the basic immunities if there is a liability here to be defended.
I find this most extraordinary, and in the history books on the subject it will not look a very pretty picture if they manage to kill off Section 13(2) now, and it is found, and it may well be—and we come to this in a later new clause—that the courts find new areas of civil liability. If the noble and learned Lord could give me a guarantee that I now know or at least can find out—because I am sure that I do not know them—and if the noble Lord, Lord Campbell, can show me and we can go to the Library and say, "That is the law of tort; now you have a defence for this piece and this piece"—if you can assure me that there will be no more liabilities based on interference with trade, then at least I would feel a little happier. But I suggest that it would be a rash noble and learned Lord Advocate, possibly even a rash noble and learned Lord Chancellor, or a rash benchful of judges who could ever give that kind of guarantee with the legal system that we have. It is in that way that it is sad and really indefensible on the case that has been made to repeal Section 9.
Lord Mackay of Clashfern: Perhaps all I need say is that I have no intention of being rash.
On Question, amendment agreed to.
2.40 a.m.
Earl De La Warr Earl De La Warr moved Amendment No. 142:
After Clause 16, insert the following new clause:
("Election of President, General Secretary and principal executive committee of trade union.
.—(1) The rules of a trade union shall, subject to subsection (2) below, provide by 1st January 1985 that the President and the General Secretary, or the holders of equivalent offices, and the members of the principal executive committee of that trade union shall be elected not less often than every five years by a secret ballot of members of the trade union, which shall be conducted so as to secure that, as far as reasonably practicable, all those entitled to vote have an opportunity to do so.
(2) If, after 1st January 1985, the rules of any trade union do not provide for elections as set out in subsection (1) above, not less than one thousand members of that trade union or five per cent. of the membership of the trade union (whichever is the less) may require the Secretary of State to amend, in accordance
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with subsections (3) and (4) below, the rules of the trade union to give effect to subsection (1) above.
(3) The Secretary of State, having received a requisition in accordance with subsection (2) above and having consulted with officials of the trade union, shall prepare and lay before each House of Parliament the draft of an Order giving effect in the rules of the trade union to subsection (1) above.
(4) Where a draft order under this section is approved by resolution of each House of Parliament, the Secretary of State shall make an order in the form of the draft.")
The noble Earl said: Before I start to speak on this new clause, I think I should say that I understand that the noble Lord, Lord Aylestone, will also speak to his clause at the same time, and I very much welcome this because they both deal with the same thing. Your Lordships will know that this is a new clause which is the same as the one that was to have been moved in another place on Report by my honourable friend Mr. Renton. It was never moved, as the Report stage ran out of time, and so no indication was given of the Government's attitude. Briefly, this clause is designed to achieve that, by 1st January 1985—that is, two and a half years' time—each union's rule book shall provide that at least every five years the president and general secretary and the members of the principal executive shall be elected by the secret ballot of the members.
If, after the two and a half years are up, these changes have not taken place, then, at the petition of a relatively small percentage of the members, the Secretary of State must lay an order before Parliament requiring those changes to be made. We are now discussing the second lot of employment legislation in the lifetime of this Parliament. This second lot, if I may say so, is very much the 1980 Act Mark 2. It toughens up many aspects of the 1980 Act, particularly with regard to closed shops and related matters and, of course, it grasps the nettle of the liability of the unions themselves to legal action. But both Bills concentrate on who may take whom to the courts to right specific wrongs.
This new clause moves into a further, and I should say quite a different, aspect of industrial affairs. I want to suggest that your Lordships accept three propositions: first, that the danger of the unions getting into the hands of militants is greater now than it ever was before and that this is a terrifying prospect for our country; secondly, that the vast majority of trade unionists take this view themselves and would welcome the chance to gain more control over the affairs of their union; and, thirdly, that nothing could change the attitude of unions to their employers more than if their officials had to stand regularly for election in a normal democratic way.
I believe—and I believe strongly—that the Government have been very unwise in failing to deal with this aspect of the trade union movement in this Bill. Your Lordships will remember that Sections 1 and 2 of the 1980 Act made specific provisions for various aspects of balloting, including this one. But there is no follow-up to these provisions in the current Bill.
Something over a year ago, in April 1981, we debated the Green Paper, Trade Union Immunities. I had it in mind to read a section of the speech I made then, but I shall spare your Lordships on account of the time, and confine myself to saying that I begged the Government

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then to get on with dealing with the question of balloting for union officials, and I said that I thought that that was far more important than balloting over strikes, which is a quite separate matter. I begged them then and I beg them again this morning.
I well understand that outside interference with rule books is highly contentious, though I doubt whether it is any more contentious than the repeal of Section 14 of the Trade Union and Labour Relations Act 1974, much as I welcome that. But let us agree that it is a sensitive matter because it seeks to deal with the internal affairs of the union. But to try to achieve something as important as this without doing it through the medium of the rule book is impossible, and were we to do so we would quite rightly be accused of attempting to subvert the way that unions order their affairs.
Rule books are tremendously powerful. The noble Viscount, Lord Trenchard, gave us one good example from a rule book:
"The National Executive Committee shall have power to fine, and/or suspend all benefits, and/or exclude from office in the Association, and/or exclude from the Association any member who, in the opinion of the National Executive Committee, by his conduct acts against the interests of his Association."
I would only interpose that I have never heard anything like that since way back in 1939 when I first heard of Section 40 of the Army Act.
It will take many years before this sort of measure can have any chance of producing the change in attitudes for which we are all looking. This clause deliberately allows for a long time to elapse before the Secretary of State's back-up powers come into effect, for no union can be asked to make a major change in its constitition overnight. Perhaps more important, no union can be expected quickly to set up a central register of its members, which is surely the sine qua non of an effective voting system in any organisation.
This is one of the reasons why we are asking for legislative action now and not next year; not sometime, but now. It is most important that Parliament should for the first time during the passage of this Bill have the benefit of a full statement of the Government's views on the question of regular balloting for national officers. I hope that they will accept the essence of this proposed new clause, will tell the Committee that they intend to wait no longer and that they will be inserting their own clause at Report stage. I beg to move.
Lord Aylestone: I am grateful to the noble Earl for mentioning the new clause which stands in my name and that of my noble friends, which in principle is exactly the same as his amendment. I assure the Committee that, having made a brief comment on his amendment, it will be my intention to withdraw our Amendment No. 148 when, in an hour or so, we reach it. As I say, the principle of the two amendments is the same; we are of the opinion that trade unions should elect their chief officers, executive officers, executive committees and anyone of that rank who has the right to vote by secret ballot. In saying that, we accept at once that there are many unions to whom this already applies, in particular the National Union of Mineworkers, which has already been mentioned, who not only have a ballot but use a private company to see that the operation is correctly
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carried out. We should like to see all unions do the same. On the contrary, however; not only do many unions not engage in secret ballots, but some of them—we are clear about this from evidence that has been collected over the years—are somewhat suspect.
The difference between the noble Earl's proposal and ours is in the way in which we approach the problem. He uses the Secretary of State, whereas, as I said when debating a previous amendment, we feel that the Secretary of State should not be quite so involved. Accordingly, in our proposal we bring in the certification officer, who is appointed by the Secretary of State. The certification officer's main job is within the rule books of the trade union movement; he does not have to approve the rule books, but he does vet them. He also, for example, decides what is or what is not an independent trade union. Therefore, we feel he is the right individual to undertake the work of ensuring that the objective of the noble Earl's amendment and ours is correctly carried out. I hope we shall be able to reach some sort of agreement between us whereby on Report we have tabled a proposal that is to the heart's delight of both of us.
Lord Massereene and Ferrard: I intervene briefly because for several years I have been proposing in your Lordships' House exactly what is proposed in my noble friend's amendment. As many noble Lords will be aware, often for union annual general meetings they choose an extremely unsocial hour and some dark and dingy hall in an out of the way place, to make sure that very few members turn up, and the principal officers and executive are often elected by a handful of people. I do not want to mention names particularly, but I believe that when the noble Lord, Lord Scanlon, was head of his union he was elected by 7 or 8 per cent. of the members. That is really most undemocratic and, as I have often said, it is time the unions became more democratic. I agree that some unions have moved in this direction, but I should like to see the whole trade union movement electing their principal officers by secret ballot in a democratic way.
Lady Saltoun: I too support the amendment. It is long overdue and we need it now, not next Session or the one after in yet another Employment Bill. This Government have, by their courage over other matters, won greater support in the country than any other Government since 1945. Courage is a most attractive virtue, and if they now have the courage to do what most people in the country want, they will earn everyone's admiration. We have been at this cherry twice. Let us stop nibbling at it like mice, and finish it off like men.
2.55 a.m.
Viscount Caldecote: I should like to say a few words in support of my noble friend Lord De La Warr, who has moved the amendment. The issue here is very different from that of having ballots on strike action, and there is every reason to bring the practices of all trade unions up to the high standards of those that already adopt the practice of electing their officers. There is no doubt that noble Lords opposite will say

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that this is a disgraceful proposal because it interferes with the internal affairs of trade unions. But if trade unions wish to be regarded as responsible bodies, representing large numbers of people, handling big sums of money, and with special privileges granted by law, there is no reason for them to resent a reasonable measure of regulation of this kind, just as other public bodies—companies, professional institutions, and the like—have accepted.
An important point is that if such an arrangement exists, or is adopted, then ballots on other important issues in industrial disputes—strikes, and the like—become much less significant because the officers and the executive committee of the union are much more likely to represent the views of the membership. For those reasons, I strongly support the amendment, and I hope that, if the Government cannot accept it tonight, they will at least move a similar amendment at the Report stage.
Lord McCarthy: I think that the noble Earl, Lord De La Warr, would accept me if not as a friend, then as a well-wisher. I am not sure that it does him much good if I say that I have always found him by far the wettest Conservative in your Lordships' House. I think that he is so wet that he cannot even be wrung out, but I think that from me he will take that as a compliment.
I know that he wants to do well with the amendment. So I begin by asking for information. I want to know what the amendment means. Earlier in the Chamber tonight we had very long speeches from noble Lords who had read bits of amendments. I suspected that some noble Lords read bits of amendments when they got into the Chamber; in fact they read them first to us.
I am concerned with a bit of the amendment that I have read previously, but I am still not quite sure what it means. So, to begin with, I have to read it and ask the noble Earl to help me. This is the crux of his amendment:
"The rules of a trade union shall, subject to subsection (2) below"—
That does not concern us at the moment, because it has to do with when things go wrong—
"provide by 1st January 1985 that the President and the General Secretary, or the holders of equivalent offices, and the members of the principal executive committee"—
To my noble friends that will be the national executive committee—
"of that trade union"—
and here is the bit with which I am concerned—
"shall be elected not less often than every five years by a secret ballot of members"—
of members—
"of the trade union, which shall be conducted so as to secure that, as far as reasonably practicable, all those entitled to vote have an opportunity to do so".
Now, my problem concerns the phrase "members of the trade union". Does it mean all members, or some members, or those members specified under the rule book? Then there is the phrase, "entitled to vote". Who would be entitled to vote? Would it be all the members, or some members, or those members entitled under the rule book, or who? This
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is not a distinction that I make to be awkward. I make it because it goes to the heart of any attempt to regulate trade union election procedure. It goes back to a point which I fear I made somewhat earlier tonight, regarding the primacy of the union rule book, because, if the noble Earl says to me, "Of course, yes, what I mean is all those entitled to vote under the rules", then I say to him, with respect, that the trade union movement, for good or ill, could face subsection (1) of this clause by making virtually no changes at all in its existing methods of election.
The fact is, of course, that virtually all general secretaries and presidents, and virtually all national executives, are elected by someone. Sometimes, they are elected by all the members. No, let me stop. No national executive is ever elected by all the members, for the simple reason that national executives have constituencies. You might expect the House of Commons to be elected by the entire nation. They are in constituencies. But virtually all presidents and general secretaries are elected by someone, and very often they are elected by all the members, though not all that often every five years or less.
But, on the whole, national executives are elected in constituencies, so, if the noble Earl says to me that he does not mean all those entitled to vote under the rule (which, as I say, I think would be compatible with virtually all union rule books; even if people are elected by annual conference, it is some members) but means all members, and if he tells me that he wants to apply it not to general secretaries and to presidents but also to the principal executive committee—and I do not see how I can take it either one way or the other, for there are only two ways of taking this—then he really is revolutionising trade union elections because he is saying that all presidents, all general secretaries and all national executives will be elected by one great big constituency: they cannot have constituencies, they will all be elected by, as it were, one big constituency. For example, the executive council of the AEU would not have anybody representing Scotland, or anybody representing the Midlands; they would be elected by the million members of the AEU. The fact is, of course, that executives are sometimes elected on a trade or occupation basis; sometimes they are elected geographically; and sometimes they are elected by a mixture of the two—but not by all the members; by the members under the rule. So my first and major question to the noble Earl really is: what does he mean by the first part of his clause? The same problems, I may say, arise in the case of the clause which the noble Earl has taken away. He also does not say whether it is to be all the members under the rules or whether we are going back to the kind of approach which this Government had earlier tonight, when they were trying to imagine some set of principles which they would then read into the rule books.
The only other point I would make about this strange proposal is: why every five years? If we are talking about national executives, the fact is that most national executives are elected less than every five years. In the case of quite a large number of national executives, at least a proportion of the national executive comes out every year. So why is the noble

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Earl saying it should be every five years? If he is applying it, as of course he is, to general secretaries and presidents, then I have to say to him that there is a very good reason why general secretaries and presidents should not be elected every five years. It is because general secretaries and presidents in some unions are in fact officers of the organisation. They do not have the kind of authority that they have in other unions, when they are sometimes lay officials. They are officers of the organisation. They are in the same relationship to the membership as other officers—district officers, regional officers, officers in trade groups, for example.
If the noble Earl is saying, "All right, then; we will elect the lot; we will elect the officers" (I take it he will not elect all the officers in one great constituency) then I say to him that he is doing something very controversial indeed. One of the most complicated issues of trade union government is the case for and against the election of union officers. I am not talking about executives, I am not talking about lay officials; I am talking about union officers. Such is the myopia of British trade unionism, which is just as bad and just as prevalent as the myopia of British management, the myopia of the Civil Service, of the services and of every other aspect of British life, that each trade unionist believes that the way in which he appoints, elects or gets his officials is the only possible way of doing it. In fact, most of them do not know how the others do it. They think that their particular way of doing it is the only way.
But, in fact, it is a very complicated question. On the one hand, if you elect officers you do not have the division of functions between professional and lay members and you do not have officers who are, as it were, functionaries of a lay executive. On the other, hand, if you do, the chances are that you may get people who are in some way able to give more of a lead in certain circumstances. Furthermore, some people will say, "Of course, if you have appointed officials, you can promote good men. You can get a good district official and a good general secretary and take him up through the union hierarchy". It is a complicated business. I myself do not know the answer. Why anybody would wish to come along and seek at this time to fasten on to trade unions a single way, let alone in a single constituency, I fail to see.
Several noble Lords: May I—
Lord Mottistone: My name is on this amendment. Perhaps I might have a turn to speak. Perhaps, also, on behalf of my noble friend, I may say something by way of riposte (if that is the word) to the noble Lord, Lord McCarthy. I am surprised at Lord McCarthy's approach to this problem. Of course, it meant that he could make a much longer speech, and I could not understand that, either. But I am surprised that he professed not to understand at the beginning; whereas the basic principle of what it is all about is very clear indeed, In saying that he could not understand, he then gave us some very good hints as to how this amendment might be tidied up, to be rather better in practical terms, and I am grateful to him for that. As for saying that he did not understand subsection (1), well, this must be the clearest part of the whole thing. The whole thing, to my mind, is very clearly written.
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The most important supporting points about it were said just now by my noble friend Lord Caldecote, and I do not need to repeat them.
To come back to the noble Lord, Lord McCarthy, certainly I accept that any amendment of this sort cannot be expected to be perfect and we would look perhaps to the Government to express sympathy with the concept and perhaps, taking advantage of what the noble Lord, Lord McCarthy, has said, to come forward at a later stage with an amendment of their own which embodied it.
As to the question of the difficulties of dealing with the different unions and the different visions that they have of their presidents and general secretaries and so on, I think we have got to get to the first principles here. What we are saying is that the effective people in the unions, like the effective people in the companies, are, in this respect, similar in that they are in charge of large organisations which can have great effect on the country. In fact, the unions in a way can have an even greater effect than have large companies or the medium-sized companies.
Company directors are appointed in accordance with the Companies Acts and there is provision for them to be re-elected every so often. This is the point. The root of this is that the principal officials of these organisations that can have an effect on the country should be re-elected from time to time if the members can be encouraged to see the advantage of that. And there is within this amendment provision for the members to start the ball rolling themselves, so that the Secretary of State is not involved ab initio. This, I think, is one of the better points of the amendment as it stands. So I feel that what we must have is something on these lines and, as for the detail, f would hope that the Government would help us with it.
3.10 a.m.
Lord Kilmarnock: One of the great advantages that have emerged from the Committee stage is the noble Lord, Lord McCarthy, recommended his book, The Closed Shop, I think on the first day, and I took him up and read it. He was asking me to point to him a passage in it this morning which he could not find. Joking apart, in that distinguished work, the noble Lord on page 262 made some specific proposals for reform, and these extend to the rule book. He said, on page 267:
"The reformer of union rule books may be concerned with four types of union rule: procedural, substantive, admissive and electoral".
Electoral reform is the one that we are talking about this morning. I have to be fair to him: it is the one he attaches the least importance to, but he did not at that time want to leave things as they were.
On page 273, he said:
"It is not enough to review the procedural, substantive and admissive rules to protect the individual worker from the arbitrary and unnecessary use of closed shop sanctions. One should also try to ensure that the leaders who have to administer these rules emerge, at least in the most important instances, as a result of an elective process which is fair and not open to obvious abuse".
He goes on to say:
"It would probably be admitted that it is advisable for the

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more important national posts to be subject to election, and probably the supreme policy-making body of the union should be an elected one".
Having conceded that, he asks:
"why not leave such a task to the unions themselves? Why not propose that the TUC should draw up a model rule book on the lines outlined above?"
He then goes on to admit that:
"the chance of the TUC being able to push through such a comprehensive change in union rules is extremely slim".
And a little lower down, he tells us:
"I do not believe that the sort of uniformity and standardisation presupposed in the section above is obtainable without some kind of external sanction".
Finally, on almost the last page of the book—and I must say I enjoyed the book very much indeed; it is a good read and I recommend it—he says:
"To operate these reforms it might be advisable to create a public authority which could, if necessary, take over the existing functions of the Registrar of Friendly Societies in regard to trade unions. The authority would have the duty of administering what, in effect, would be another trade union Act. This would involve interpreting and applying the rule book standards".
I do not want to be unfair to the noble Lord—I also like to call him my friend because we sat together on a committee—I hope productively—for two and a half years. I do not want to do him an injustice, and I do know he is mainly talking about exclusion. The point I want to make is, he is not discounting or throwing out the possibility of some greater type of public intervention in the rule book. This is really the point that I want to make. He says it is very difficult to bring it about without some kind of external sanction.
He proposed the registrar of friendly societies. Of course, the registrar of friendly societies was succeeded by the certification officer, who appears in an amendment to which my noble friend Lord Aylestone referred. We have this difference at the moment with the noble Earl, Lord De La Warr, that we feel the certification officer is the right person to administer a balloting procedure of this sort. That is something positive that we can sort out between us. The point I want to make is that the noble Lord, Lord McCarthy, suggested the registrar of friendly societies, and we are suggesting his successor, who is the certification officer, who is already concerned in a very intimate way, a custodial way, with the union rule book.
The 1980 Act has been mentioned. It is true that a permissive ballot procedure was provided for in Section 1 I took the trouble to find out what has happened since that Act came into operation. Although a number of small unions have applied for funds and have been granted funds for the conduct of a number of ballots on internal union affairs, no single union affiliated to the TUC has so applied. So Section 1 has, to all intents and purposes, proved a dead letter on a voluntary basis and therefore it sems to me that in some clause—possibly somewhere between the Lord De La Warr's amendment and Lord Aylestone's amendment—we ought to come to some position in which this ballot procedure is made obligatory.
Lord Campbell of Alloway: May I make one very brief point. I have every sympathy with the spirit behind this amendment, whether it be one for two or one for eight, but the problems of the rule book to
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which the noble Lord, Lord McCarthy, has referred are real and not imaginary. Let no one pretend to the contrary. With respect, I would urge the Government not to rush into this without careful consideration.
Lord Oram: I rise merely to make the point that noble Lords who have spoken in favour of this amendment seem to be advocating the system of the National Union of Mineworkers, which has led to the overwhelming election of Mr. Arthur Scargill. I therefore suspect we are witnessing a Left-Wing infiltration into the Conservative and Social Democratic Parties.
Lord McCarthy: I did not intend to intervene again but the noble Lord kindly quoted me at great length and helped to prove the converse of what was asserted earlier tonight—namely, that I never criticise the trade unions. But would he not agree that I also say at 274:
"All that the body set up to authorise union rules should ensure would be that the electoral and appointment provisions contained in any rule book had no obviously unfair rules or provisions which would lay them open to abuse",
and that the reason for that is the very complexity of trade union rule books which I have put forward tonight?
3.17 a.m.
Earl Ferrers: The noble Lord, Lord McCarthy, must have been grateful to the noble Lord, Lord Kilmarnock, for quoting his book so generously. Indeed, so copious were his quotations that I thought there was no part of the book he had not quoted. I have a certain sympathy with the noble Lord, Lord McCarthy, in saying that when he read my noble friend's amendment he did not understand it and wanted to ask some questions. I know the feeling. When I read some of the amendments put down by the noble Lord, Lord McCarthy, I did not understand them and had to ask sonic questions—not, of course, of the noble Lord, but of some kind gentleman w ho illuminated me as to exactly what they meant. I found that I did not agree with them; so at least in that the noble Lord and I have a common conclusion.
I am glad we are taking these two amendments together. I have very considerable sympathy with the principles which underline them. My noble friend Lord De La Warr said he hoped for a very full statement of the Government's views over secret balloting. I thought that was rather a daunting prospect for the Committee at this hour of night, but I shall do my best not to disappoint my noble friend. There is certainly general agreement that trade unions ought to be more democratic, and that they have failed to adapt their institutions and practices to the economic and social pressures for change.
The two amendments before us, moved as they have been by noble Lords on both sides of the Committee, underline this widespread concern. It is still far too rare for unions to consult their members directly through the ballot box on major decisions which affect their members deeply, such as calling for strike action and the election and re-election of their leaders. But the Government have always taken the view that it is much better for unions to reform themselves voluntarily.

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In the Employment Act 1980 we removed the only credible argument against the more widespread use of secret ballots by enabling unions to apply for reimbursement of the costs which were incurred in the holding of secret ballots for a number of purposes, including union elections and decisions on industrial action. The high cost of postal ballots is therefore no longer a reason open to the unions for failing to undertake the necessary reforms. As we promised in our recent consultative document, we have brought before Parliament subordinate legislation, which your Lordships passed last week, to extend the present arrangements to cover ballots on wage offers. I am hound to say that it is regrettable—and, indeed, remarkable—that the TUC has chosen to boycott the scheme, particularly since they have not been inhibited in requesting, and, indeed, in taking, a grant directly from this Government towards the cost of shop stewards' training.
The question which we now have to ask ourselves, therefore, is: will the unions ever reform themselves of their own accord, or will they do so only under the pressure of legislation? It is now clear that many trade unions have not shown the will to take the necessary action themselves, and that the Government should look more seriously at what options are open to them, including legislation, to achieve what must be the common goal of making unions more representative and more democratic.
The Government therefore intend to conduct consultations, which will be both early and wide, on such questions as whether there should now be legislation to require unions to use secret ballots in their elections and, if so, as to the form that such legislation should take. The initiation of this consultation will not be unduly delayed and a document will be published as soon as possible. But it is important that we should consider very carefully exactly what matters it should cover, and that we should not hastily incorporate into legislation what may prove to be ineffective measures.
The amendments before us contain a number of technical defects which illustrate the difficulty of framing workable provisions. I highlight this not just to be pernickety, but to explain some of the difficulties which legislation in this area creates. For example, in Amendment No. 142, subsection (1), we find the phrase:
"… by a secret ballot of members of the trade union".
But this clause does not provide that all members must be entitled to vote. It may well be possible to meet the provisions of the clause by conducting a ballot in which only a few selected individuals were entitled to vote. This could, of course, be remedied by providing that all members must be entitled to vote, but even that is not as simple as it sounds.
Unions may have good reasons for excluding certain members; for example, those in arrears or those who have retired. They may have, or may wish to have, a voting system under which the individual members elect regional or trade group representatives and they, in turn, elect the executive committee. I am not sure that we would want to prevent unions from using such a system. This sort of problem illustrates the difficulty of legislating in this area.
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The difficulties are more than simply drafting. It is no simple task to say exactly what the clause might sensibly provide. That is not to say that it could not be done, or that it should not be done. But it means that time and careful consideration of the effect on existing arrangements will be required. I agree with my noble friend Lord Campbell of Alloway, who said that we have to move slowly and carefully in this area.
Perhaps I may give an example from Amendment No. 148 of the noble Lord, Lord Aylestone. Subsection (2) provides for rules for the conduct of the ballots to be approved by the certification officer, and for him to hear complaints about breaches of rules. However, it does not say what is to happen if a union ignores the subsection and does not adopt the necessary rules. The only remedy in such a case would be by way of a High Court action. A member might be able to obtain an injunction preventing his union from electing or appointing its executive under its old unapproved rules, or, perhaps, a mandatory injunction to compel the union to have rules approved and to hold a ballot as required. But the clause does not provide a time by which rules must be approved, or by which ballots must be held, and it is, therefore, difficult to know when these rights might arise, because the unions could always say that they were just about to comply with the requirements.
It is vital and important that we should follow the normal procedure of allowing discussion after the publication of a consultation document: first, out of fairness to the many interests which would, quite rightly, want to make known their views; and, secondly, because it is likely that legislation on these matters which is designed after consultation is likely to be better received, better implemented and, therefore, more effective than legislation which is designed without consultation.
The essence of the whole Bill, apart from Clause 1, which is special, is that virtually all the matters to which the Bill refers have been the result of discussion. It would run counter to the ethos of the Bill to incorporate matters even of such importance as these, without them first having been discussed with those most likely to be affected by them. It was a matter of regret to my right honourable friend the Secretary of State, that the matters which we have been able to discuss here were blocked from discussion in another place. The exchange of views in this debate has been most helpful, and what has been said will be taken very carefully into account. Indeed, I can tell your Lordships that the issues which have been raised will not be allowed to drop, and that it is the intention of the Government to start consultations as soon as possible.
There has been, as a result of recent events and the views of your Lordships and others, a significant change, not in Government thinking, which was outlined by my right honourable friend the Secretary of State in Blackpool last October, but in the pace at which that thinking will be translated into action. I hope that, in view of this explanation of the Government position, my noble friend and the noble Lord, Lord Aylestone, will see fit not to press their amendments to a Division.
Lord McCarthy: The noble Earl has made an amazing announcement at this time of night. Will he answer one

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question, or perhaps two? What is to be the scope and timing of this consultative document? Is it to include elections and strike ballots, and is it to be produced in the next month or sixth months, or what?
Earl Ferrers: If the noble Lord would, with his customary patience, be a little patient, he will see that a document will be issued depicting exactly what will be discussed.
Several noble Lords: When?
Earl Ferrers: Soon.
Lord Harris of Greenwich: Let me asure the noble Earl, Lord Ferrers, at once that I am delighted to hear what he said about this consultative document. I do not find it amazing. I find it a very understandable acceptance on the Government's part that there is overwhelming support for this view, both by the general public—of that there can be no serious doubt whatever—and, as all public opinion polls demonstrate, from individual trade union members. Why should that be so? It is so because, for a substantial period of time, there have been growing doubts, justified by evidence we have all read, of abuses of a very disturbing character in terms of trade union elections.
I remember many years ago sitting in the High Court and listening to a story of widespread corruption in the Electrical Trades Union, when Lord Gardiner was appearing on behalf of Mr. Frank Chapple and others in that case. That was undoubtedly one of the worst cases of union corruption we have seen in this country for many years, but there have been many other episodes which have raised serious doubts about the propriety of elections in the trade union movement.
I would accept, of course, what the noble Lords, Lord Campbell of Alloway and Lord McCarthy, said. There are real difficulties about trade union rule books, and I do not think those of us who strongly favour a move help our case by minimising the real difficulties which exist. Although I do not find anything amazing in what the noble Earl, Lord Ferrers, said this morning, I hope that he will be as helpful to us as possible on the matter on which he was pressed by Lord McCarthy. It has, after all, been a matter of public debate for a considerable period of time and must have been considered by the Government when formulating the present legislation. They then decided not to proceed with it. They have changed their minds, and that is wholly admirable, but it would be helpful were we to be given some indication of the time-scale which is involved.
As the noble Earl has indicated, the Government share the view that this is a serious matter. What is the time-scale that we are talking about? Will there be a fairly early publication of a consultative document? What we are most interested to discover—I know the noble Earl cannot meet me on this point, even if he is anxious to do so—is whether we are likely to get, first, consultation as early as possible and, secondly, some prospect of legislation in the present Parliament. The matters raised in these two amendments are serious questions which, I repeat, trouble public opinion over
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a very wide area and, again, individual trade unionists whose rights have been so seriously abused as a result of the misuse of power in a number of trade unions in this country.
Earl Ferrers: I shall do my best to help the noble Lord, Lord Harris of Greenwich. I am so glad that on this occasion he did not think I was joking. I should like to correct him on one point; namely, that the Government have changed their mind. The Government have not changed their mind. As I explained before, it is not a change in the Government's thinking but the pace at which that thinking will be translated into action which has been expedited. I cannot tell the noble Lord exactly when this consultation will start. I have already said that the Government intend to start consultations as soon as possible. The scope and the timing have not yet been decided, but union elections will be covered.
Earl De La Warr: I am most grateful to my noble friend Lord Ferrers for the excellent way in which he sought to comply with my inquiry, which he said was a bit tough—and rightly tough—at this time of the morning. He gave us a full explanation of how the Government are feeling. While I regret that they did not start this process earlier, I welcome very much what my noble friend said about the Government's intention to produce a consultative document. This is an enormous advance. I shall think very carefully about what has been said by all noble Lords, in particular by my noble friend, and take these matters away and consider them very carefully. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.33 a.m.
Lord Spens Lord Spens moved Amendment No. 143:
After Clause 16, insert the following new clause:
("Resolution procedure to be followed before dispute treated as trade dispute.
. After section 29 of the 1974 Act there shall be inserted—
"29A.—(1) Subject to subsections (2) and (3) below, a dispute shall not be treated as a trade dispute for the purposes of this Act unless—

(a) a procedure for resolution of disputes agreed between workers and their employer, and described in a document or documents the wording of which has been agreed between workers and their employer, has been undertaken and completed; or

(b) where a procedure as defined in subsection (1)(a) does not exist, the issues involved have been referred to the Advisory, Conciliation and Arbitration Service for conciliation to be undertaken and there has been a failure to agree.

(2) Any disagreement as to whether a procedure as defined in subsection (1)(a)—

(a) exists or does not exist, or

(b) applies or does not apply, or

(c) has or has not been undertaken or completed, shall be referred to the Central Arbitration Committee for resolution by declaration.

(3) Where in any case to which subsection (1)(a) refers the workers to whom the agreement applies claim that the employer has unreasonably dela ed or obstructed the procedure from being undertaken or completed, that claim shall he referred to the Central Arbitration Committee for decision.
(4) If, in a referral of a claim under subsection (3), the Central Arbitration Committee decides that the claim is well founded this section shall cease to have effect.
(5) This section shall not be taken into account in determining any question arising from an action of the kind referred to in section 17(2) of the 1980 Act.
(6) Notwithstanding section 29(1)(g) of this Act if a disagreement of the kind referred to in subsection (2) is one of the circumstances giving rise to the dispute, that dispute shall not be treated as a trade dispute.".").
The noble Lord said: This is another amendment which was tabled in another place but which was not called, so there has been no discussion upon it. It looks a bit complicated but I hope to be able to show your Lordships that it is not so complicated as it looks. What it means is that no dispute between employees and employers will be given the title of a trade dispute until either an agreed procedure for resolution of the dispute has been carried out between the employees and the employers or, if no such agreed procedure exists, that dispute has been put to ACAS. It is only after that that the immunities given to a trade dispute will come into effect.
There are various exceptions which I do not propose to go into. Subsection (5) makes it clear that this clause would not cover any secondary action taken which would be affected by Section 17 of the 1980 Act. Apart from that, I do not think that there are any other points I need to make at this stage. I beg to move.
Lord Rochester: I am sorry to say that, although I have a great deal of sympathy with the objective of this amendment, I have very little sympathy with the immediate mandatory means by which it is sought to achieve that objective. As the consultative document on trade union immunities, published last year, pointed out, the whole question of the removal of immunity from industrial action taken in breach of collective agreements is inextricably bound up with the further problem of whether it is feasible to make agreements legally enforceable contracts. For the reasons given in the Green Paper, I fear that there is a great deal of education needed before negotiators are sufficiently convinced of the desirability of such arrangements for them to become workable in this country.
Indeed, it was for that reason that in our debate in April last year I asked the noble Earl, Lord Gowrie, whether as a first step the Government would consider the possibility of introducing a further code of practice to deal with negotiating procedures. The suggestion was that consultations might be held with a view to drawing up a code of practice aimed at ensuring the establishment throughout British industry of negotiating procedures under which disputes concerning agreements already entered into, but not other disputes, should be settled by arbitration instead of industrial action. In that way I thought that we might gradually and with a sufficient degree of consent reach a position where organisers of industrial action taken in breach of collective agreements would no longer have legal immunity and could be sued for damages.
In replying to that debate, the noble Earl, Lord Gowrie, said that serious consideration would be given to the proposal. I have heard nothing since and I should be grateful for any information which the noble Earl, Lord Ferrers, may be able to give me as to what the Government think of that suggestion. I should apologise to the noble Earl, in that I have not given
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him notice that I was going to raise this point again. Nevertheless, I should be grateful for any information which may be forthcoming.
For the rest, I fear that any attempt to impose the enforceability of collective agreements by law will, as the Donovan Commission concluded, fail until such time as changes in our dual system of formal and informal bargaining have been effected and the incidence of unofficial industrial action has thus been greatly reduced.
Lord Campbell of Alloway: I wholly support the noble Lord, Lord Rochester, in this particular regard. It is a matter of very great importance in respect of predictability in industrial relations, economic recovery and the rest of it. There is a gap in the legislation and I was hoping that perhaps my noble friend the Minister might consider including this matter on his agenda for consultation. The approach in the drafting of this clause is not to be recommended, as, again, it is almost too draconian. But the approach advocated by the noble Lord, Lord Rochester, is a wholly constructive and useful approach and one that should be considered with care.
Lord McCarthy: I have an even shorter question to ask of the noble Lord, Lord Spens, and it relates to one word in subsection (1)(a) of his amendment, where it says that there shall be,
"a procedure for the resolution of disputes".
The whole thing is based upon the fact that there should be a procedure for the resolution of disputes, and, unless there is an agreed procedure for resolution of disputes, you lose your trade union immunities, and the thing goes to the Central Arbitration Committee and ACAS, who then attempt to provide you with a procedure for resolution of disputes.
Of course, over the greater part of British industry, at least where there are organised trade unions and they are recognised, there is a procedure for the resolution of disputes. There is the disputes procedure; everybody has a disputes procedure. The trouble is that when you get to the end of that procedure you get a failure to agree, or in the unique phraseology of the railway industry, you get a declinature. The trouble comes when you get a failure to agree: what does the noble Lord, Lord Spens, propose should happen next? If you only lost your immunities because you did not have a procedure, which ended up with a failure to agree, then we should not have any problem; this amendment would not make any change to anyone and it would not do any good and it would not do any harm, but I do not think that that is what he means.
So we must assume that it means something more than just a procedure for the resolution of disputes, that it means that something happens when you get a failure to agree. Is he suggesting, for example, that you lose your trade dispute defences if you do not have some form of compulsory conciliation? In 29A(1)(b), he starts to talk about the Advisory Conciliation and Arbitration Service. But suppose you bring in ACAS and ACAS gets a failure to agree, what happens then? Do we go to arbitration?
At this point, I have to declare an interest. A system of industrial relations where you had to go to

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arbitration or you would lose your trade dispute immunities would mean full employment for us all. But I am not sure whether that is what he is suggesting. What would happen if you did not accept the arbitration award?—something which is not unknown in the business. Would it mean that you lost your trade disputes defence? In other words, what does he mean by "a procedure for resolution of disputes"?
Lord Mackay of Clashfern: The Government have great sympathy with the aims of this amendment. There is no doubt that British industry has suffered over the years from too great a willingness on the part of workers and trade unions to go on strike or to take other industrial action before the agreed procedures for resolving disputes have been exhausted. The result has sometimes been needless and damaging disruption of production which might have been avoided if the agreed procedures had been followed. Achieving a greater observance of procedure agreements could bring a greater stability and predictability into industrial relations, which in the long run could only be of benefit to employers and employees alike.
There are, however, difficulties. May I just summarise these very briefly? First of all, most procedure agreements are unsuitable for legal incorporation and interpretation. They are of a sufficiently vague kind to make it very difficult effectively to incorporate them in a legal arrangement of the sort proposed in the amendment. Secondly, the effect of removing immunity from breach of procedure agreements might well be to make trade unions simply withdraw from existing procedure agreements. Thirdly, there is no agreement among employers at the present time about the desirability of such a proposal. Consultation on the matter has indicated a good deal of difference of opinion. The CBI, the EEF and the British Institute of Management in particular are opposed to the inclusion of this measure in the present Bill, on the basis that a good deal of further work has to be done.
So far as the Government are concerned, if I may answer the question asked by Lord Rochester, there is no plan at present to advance that particular matter further. The Government would, of course, welcome guidance provided by the CBI, ACAS and others. I hope that, in the light of that explanation, the noble Lord, Lord Spens, will feel able to withdraw this amendment.
Lord Spens: I do not think that I really have to interpret to the noble Lord, Lord McCarthy, what this amendment means. It seems to me to be very clearly written in English. If there is a procedure for resolution of disputes, it has got to be carried out before any immunity is given to the perpetrators of that dispute. If it does not exist, then they have to go to ACAS. If they fail to agree there, then at that stage the immunity comes into effect. It is quite clear.
I must say that this amendment has been put forward by the Institute of Directors and they are very keen about it. They may not be in the CBI, but they do cover a large number of people in responsible positions. I think that they will be very disappointed to hear that the Government do not intend to give this further consideration at the moment. I hope that we shall be
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able to persuade the Government to include it in their new consultation document. With that hope in mind, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.46 a.m.
Lord Rochester Lord Rochester moved Amendment No. 144:
After Clause 16, insert the following new clause:
("Employee participation.
.—(1) In this section—
references to "the Act" of any particular year to the Companies Act of that year;

"directors' report" means a report by the directors of a company which by section 157(1) of the Act of 1948 is required to be attached to a balance sheet of the company prepared under section 1 of the Act of 1976 (or under that section taken with section 150 of the Act of 1948); and

"employment" means employment other than employment to work wholly or mainly outside the United Kingdom; and "employed" and "employee" shall be construed accordingly.

(2) This section applies to every directors' report of a company which relates to a financial year beginning on or after 1st September 1982 where the average number of persons employed by the company in each week during the financial year exceeded 100; and for the purposes of this subsection that number shall be the quotient derived by dividing by the number of weeks in the financial year the number derived by ascertaining, in relation to each of those weeks, the number of persons who, under contracts of service, were employed in the week (whether throughout it or not) by the company and adding up the numbers ascertained.
(3) In every directors' report of a company there shall be contained a statement describing the action that the company has taken during the financial year—

(a) to provide employees systematically through their managers or supervisors with relevant information about the establishments at which they are employed and to answer questions on all matters reasonably concerning them as employees;

(b) to consult employees and/or their representatives on a regular basis so that the views of employees can be taken into account before decisions are made which are likely to have a substantial effect on their interests;

(c) to encourage the involvement of employees in the company's performance through means such as employees' share schemes;

(d) to promote within the company a joint understanding by managers and employees of the relationship between pay, productivity, investment, prices and employment.").

The noble Lord said: I beg to move Amendment No. 144. At Second Reading I said that what most concerns the Liberal Party about the Bill is that it will do nothing positively—and I stress that word—to improve industrial relations. This amendment aims to go some way towards remedying that omission in the crucial field of employee participation. It stems in part from amendments which I sought unsuccessfully to make to the 1980 Industry Bill, aimed broadly to oblige the National Enterprise Board in undertakings for which it was responsible, first, to increase the involvement of employees before decisions affecting them were taken; and secondly, to promote the disclosure by management to employee representatives of information aimed at achieving a shared understanding of economic realities.
In resisting those amendments, the noble Viscount, Lord Trenchard—whom I am glad to see is still at his post—understandably said, among other things, that it did not make sense to include such statements in a statute without incorporating any specific powers to

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make them effective. In this amendment we have sought to remedy that defect by making it a statutory requirement that in every director's report of a UnitedKingdom company which relates to a financial year beginning on or after 1st September next, and where the number of people employed exceeds 100, a statement should be included describing the action that has been taken during the year to develop employee participation in the ways set out in subsections (3) (a) to (d), which I hope will speak for themselves.
The legislative background, by reference to which the Secretary of State would be given the power to deal with this matter by statutory instrument, is to be found in the Companies Act 1948. The wording used in the introductory paragraphs of this amendment is taken largely from a statutory instrument which in 1980 imposed an obligation on companies to include in their reports a statement about the employment of disabled people. So there is a precedent for the legislative procedure here proposed about which I feel sure the noble Lord who is to reply has been well briefed.
There are one or two possible criticisms of our amendment which might be made and which I would therefore like to anticipate. It can fairly be claimed that the medium and large-sized companies, to which the proposed new clause would apply, are mainly in the private sector of industry. Some of the more progressive of them already do voluntarily what would here be required of them all. Yet the need for more employee participation is less in the private sector than in the public sector. That I would concede.
However, it is difficult to see how all the various elements which make up the public sector could readily be brought within a single clause such as this. We should, therefore, start where we can. We should go with the grain—as the noble Earl, Lord Gowrie, would put it—in the companies which have the potential to create the bulk of the additional wealth on which our future competitiveness ultimately depends.
Next, it may be claimed that a clause of the kind that we are proposing should not form part of this particular Bill. Here I should tell the Committee that on 7th April last leave was given to a number of Conservative Members of another place to bring in a Bill of a somewhat similar kind. This has since been printed, but unfortunately I understand that it now has no chance of making progress in this Session of Parliament.
From this it should not be thought that I have stolen the clothes of the author of the Private Member's Bill; nor that he has taken mine. Rather, we have reached comparable conclusions at much the same time, thanks I believe partly to a common awareness that the Industrial Society, whose work in the field of employee involvement I am always glad to acknowledge, has for some time been aiming in the same general direction. I have dwelt on this point so as to be as open as possible with the Committee, but also as an indication that I do not care through what agency legislation on these lines finds its way on to the statute book as long as it gets there quickly. Indeed, I shall gladly withdraw this amendment if the Government are prepared to give a firm undertaking that as soon as possible in the next Session of Parliament they will introduce a Bill of the same kind.
Those noble Lords who, like me, took part in the
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discussions in Sub-Committee "C" of the European Communities Committee on the draft directive of the European Commission on Employee Consultation—and I see, in the person of the noble Lord, Lord Mottistone, one of them—will know very well of the mounting pressure there is upon the United Kingdom to do more in this field. The Liberal Party has for the last 50 years wished to go much further in the direction in which this amendment points, but in the present instance we are only asking for this very limited legislative action in place of the largely fruitless exhortation which is all there has been since the Bullock Report was published more than five years ago.
In conclusion, I would say that the most compelling reason for taking speedy action is surely that it is only by means such as that advocated in this amendment—and especially in its last sentence:
"to promote within the company a joint understanding by managers and employees of the relationship between pay, productivity, investment, prices and employment"—
that our basic economic and industrial problems will be solved. I beg to move.
Lord Aylestone: One of the reasons, if not the main reason, for industrial troubles these days is the complete lack of communication between the shop floor and the board, between the workers and the employers. This is not entirely met by earlier ideas, such as profit-sharing, which nevertheless helps. Nor is it met by the old idea of the statutory worker on the board. The statutory worker on the board, where it has been tried—and in not many cases has it been tried—has not really worked at all. I think in the terms of the amendment now before us we have the possibility of improving communications between the workers and the Board, in giving the workers as much information as possible about what is the board's policy. I do not mean that the board of directors should discuss the intimate details of the financial problems and loans and so on, but their main policy and the ends which they are pursuing could easily be communicated to the workers on the floor.
They could also consult with the workers about new decisions, probably new plants, and the directions in which they hope to expand their business, and take the workers completely into their confidence in this direction, with of course full details of their trading objectives. If this were done on some basis whereby the workers feel that they are part of the company and the whole machinery and not just someone who collects wages on a Friday or at the weekend, I am sure that many of the problems we get these days in the workshops could be met.
3.56 a.m.
Lord Mottistone: I sympathise with this, as the noble Lord, Lord Rochester, indicated, in that I sat with Sub-Committee C when they were tackling this sort of problem. It is a most ingenious way of injecting this thought into the minds of people by using the company report as one way of doing it. I am not sure on the other hand—and I do not want to disappoint the noble Lord, Lord Rochester—that we are quite ready for this. It is important that it should be in people's minds that we should work in this way, but we are in an area of attitude changing, where, if you put

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this into legislation in the form in which it is and then it has to be dealt with in every company, I have a feeling that the result in the reports will be sort of cosmetic and will not necessarily be real. What we want it to be is real.
The question is how to get this through to the companies that are backward in realising that their profitability can be improved by following the sorts of practices written into this. I have misgivings about whether this is the right time to put it into major legislation. That is my only thought, but I like the idea and I hope we shall keep on arguing it in this House, and I hope we shall one day put it into some suitable piece of legislation. By that time perhaps everybody will be doing it anyhow.
Lord Oram: I am mildly but not enthusiastically in favour of this amendment. During the course of discussion on several of the amendments that we have been dealing with, there has been a great deal of demand for more democracy on the labour side of industry, but I suspect that, if we were able to put it to the test, those who have been strongest in advocating more effective democracy among trade unions would not be in favour of more democracy on the capital side of industry. At least this amendment takes us some way towards an achievement of better democracy on the capital side of industry.
I would wish that it went a good deal further in this respect. The Bill in general seeks to deprive trade unions of much of their power. I believe that trade unions should be given more power in society; more participation in the factories and in their employment; more ability to be able to control the working practices and the outcome of the enterprise in which they work. That means—and this is where the amendment does not go far enough—that they should be involved much more in ownership. I recognise that there is a reference to share schemes, but it should go considerably further than that in providing ownership for the workers in industry, and particularly the principle of one man, one vote, in the control of economic enterprises should be incorporated. Therefore I am mildly in favour of the amendment, but I wish it were stronger.
Lord Campbell of Alloway: I share the enthusiasm of the noble Lord, Lord Rochester, and the misgivings of my noble friend Lord Mottistone. Voluntary worker participation must be the order of the day, but what positive initiative can the Government produce? I should be most interested to hear anything in that respect.
Lord Kilmarnock: As my name appears above the amendment, I wish to give it my warm support. Our party will produce a strong programme for industrial democracy, and may even set up an industrial democracy agency with statutory powers; but that is in the future, a gleam in our eye. In the meantime, as the noble Lord, Lord Mottistone, said, the amendment is an ingenious way of introducing a small but positive step forward in the practice of industrial democracy in companies. I support it because, while Lord Mottistone thought we might not be ready and it was perhaps
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cosmetic, one of its great advantages is that it would give us a great deal of information. If directors' reports across the board are coming in, with a large number of companies reporting, a most important element in industrial democracy will be the variety, and it is vital that there should be as much freedom as possible for workers and employers to devise the form of participation that suits them best. One of the great advantages of this suggestion is that as these reports come in over one or two years, we shall be able to see what people are doing, what is successful, what is less successful, and that will give us a much better idea of how we should go forward, possibly in a statutory form.
Lord Massereene and Ferrard: I have great sympathy for the amendment and I have tried what is proposed. I had a small works and I put one of the most popular men on the shop floor on the board and made him a director. Unfortunately, the moment he was on the board his workmates on the shop floor would have nothing to do with him. It is a nice idea, but we must be practical. I know of several works which issue a paper trying to explain to the employees how the factory is getting on and what is happening. Obviously, you cannot tell the employees everything; if you have a secret process and you tell 200 or 300 people exactly what it is, it will be secret no longer, and the works would probably close down. As I say, you have to be practical about these matters.
As for share schemes, they have been in operation for a long time. The trouble is that if you give shares to the employees, a great many of them, especially in public companies, sell them immediately. They cannot do that in a private company, and so such a scheme is then a little more successful. If shares are given to employees in a public company, they must be shares which they cannot instantly sell on the Stock Exchange.
However, this is quite a difficult matter. The more information that one's workpeople can have, the more one can take them into one's confidence. This is far easier in a private company. One knows most of the workers by name, and one probably knows their families. But it is a much different matter in a public company. I have great sympathy with the idea of the amendment, but I rather doubt whether it is suitable to include in the Bill.
Lord McCarthy: To adopt the language of the noble Lord, Lord Campbell of Alloway, I would say that I share the enthusiasm of the noble Lord, Lord Oram. I am mildly in favour of the amendment. It surely can do no harm to have in a directors' report a statement describing what the company did to inform, consult and involve the employees. What is really interesting is to find out what excuse the Government are to give for not accepting a single amendment to the Bill.
4.6 a.m.
Earl Ferrers: That is quite an interesting proposition, but of course it has nothing to do with this particular amendment. My noble friend Lord Mottistone said that he had misgivings about the amendment, but he liked the idea. Every noble Lord who has spoken on the amendment seems to have been mildly in favour

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of it. Even the noble Lord, Lord McCarthy, was mildly in favour. I am not quite certain whether that was to the amendment's credit, or whether it was a drawback.
I think we are all agreed that for the benefit of the economy there should be greater advances in British industry on the employee involvement front. There are those who maintain that the only way to make progress in this direction is through legislation. This Government are firmly committed to the principle of managements informing and consulting their employees about matters which affect them, but we are doubtful about the idea of imposing a rigid legal system on all employers, irrespective of their particular needs and circumstances. We believe that such legislation could disrupt established arrangements and could harm, rather than improve, industrial relations.
The amendment represents a "half-way house" between the statutory and voluntary approaches. It seeks to stimulate the growth of employee involvement by ensuring that it receives top-level attention in companies, and from that point of view it has its attractions. It would require directors of companies which are over a certain size to include in the annual report that is required of them under companies legislation, a statement of the action that has been taken by the company during the financial year to promote employee involvement and economic understanding.
The noble Lord, Lord Rochester, referred to the proposal which was introduced last April in another place in a Private Member's Bill. The Government were impressed with that idea, but we feel that it would be unwise to rush into legislation of this kind. It could be argued that the burdens that it would impose on companies would outweigh the benefits that it brought. Directors' reports are costly to produce, and clearly the longer the report, the more expense is incurred. Paradoxically, the amendment would impose the greatest burden on those employers who already have well-developed employee involvement policies.
The proposal might be acceptable if the legislation also stimulated progress where it was most needed, but we cannot be sure that it would. I should mention that a comparable requirement was introduced in the Companies (Directors' Report) (Employment of Disabled Persons) Regulations 1980, which require directors to include in their report a statement describing the company's policy towards the employment of disabled persons. There has not yet been time to assess the impact of the regulations, and until we have established that they are working well, it would be unwise to introduce another, similar measure. We must also remember that the directors' report under the Companies Acts is designed to give shareholders information to supplement the financial details that are provided in the annual accounts. It must be doubtful whether this is the most appropriate vehicle for promoting industrial relations reform.
I think I could sum up the position of the Government by saying that we like the idea but we have misgivings about it. We are sympathetic to the amendment, and we have not ruled out a legislative step of this kind in the future, if industry makes insufficient progress on a voluntary basis. But I think
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it would be risky to take this step without further and careful consideration. I therefore hope that the Committee would not see fit to press the amendment.
Lord McCarthy: Before the noble Earl sits down, I am trying to follow him, and perhaps he can help me. How does he reconcile his desire not to rush into a mild, inoffensive statement about a directors' report, waiting to see whether the voluntary system works well and so on, with his desire to rush pell-mell into ballots and further legislation against the rights of union members?
Earl Ferrers: I was taking the advice of my noble friend Lord Campbell of Alloway on the earlier amendment, when he said—and I think the noble Lord, Lord McCarthy, would agree with him—that it would be unwise to rush into legislation of a certain nature without first making quite certain that what we do is going to be an improvement. We have no intention of rushing pell-mell into anything, and I do not think this Bill makes the Government be seen to be rushing pell-mell into union affairs at all. It is just a gentle, modest progress.
Lord Rochester: I am very grateful to all the noble Lords who have contributed to this interesting and, I think, useful discussion, and for the general, if somewhat limited, welcome it has received. I do not really think there is very much danger of rushing into legislation. As I sought to say, it is now more than five years since the Bullock Report on this subject was published, and there is pressure from Europe upon us to do something. At Second Reading I said that really I was not fussy about the wording of this, and we could perhaps work it out together. For example, there is nothing sacrosanct about the date of 1st September 1982, to which I referred. I had hoped that it would be seen that there was nothing rigid in this system, but rather that one of its aims was to be as flexible as possible while requiring some progress to be made. The intention is certainly to build on the best practice that there is in this field.
Perhaps I may clear up just one or two factual points as quickly as lean, and address myself particularly to the noble Lord, Lord Oram. I am very grateful for what he had to say, and I should like to consider with my noble friends and allies, if I may, the additional emphasis which he gave to the concept of ownership and that of one man one vote. It is just the sort of thing that we should be likely to take into account, I think, in looking at this amendment again.
To the noble Viscount, Lord Massereene and Ferrard, I might perhaps be allowed to say that there is no question here of workers being placed on boards. As a matter of fact, I am not a believer in workers being placed on boards, certainly not at this stage. To my way of thinking, this whole concept of employee participation should be a matter of organic growth which starts at the bottom and works upwards. So let me relieve him of any fears on that score.
For the rest, at this time of night or early morning I think it would be quite inappropriate for me to say more than that I should certainly wish, as I say, to

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think more and consult more about this, but I shall also certainly wish to return to the subject at Report stage.
Amendment, by leave, withdrawn.
[Amendment No. 145 had been withdrawn from the Marshalled List.]
4.15 a.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 145A:
After Clause 16, insert the following new clause:
("Information for collective bargaining.
. In section 17(2) of the Employment Protection Act 1975 the words "about matters, and" shall be deleted.").
The noble Lord said: I will speak briefly, if I may, in moving this amendment. Here is a little amendment that the Government could consider. We are coming near the end of our deliberations and they might like this one because this is an amendment which amends the legislation of the Labour Government which preceded them in office; and, in offering an amendment which amends the Employment Protection Act 1975, we finally demonstrate towards the end of your Lordships' Committee that it is not the Government Benches but these Benches which are even-handed in these matters. We are prepared to amend any Act if we think it needs amending.
To take out three little words from the Employment Protection Act, in my submission, would have—and I do not put it too high—as great an impact, perhaps, on the communication of information as that aspect of industrial democracy of which noble Lords on the Liberal and other Benches were speaking when dealing with the last amendment. After all, it does no more, as was said in the discussion, than demand that in the directors' report there be a report describing what has been done. Presumably, if nothing has been done, nothing appears. This amendment relates to Section 17 of the 1975 Act, which, if I may summarise it, I hope not unfairly, demands that the employer must disclose information for the purpose of collective bargaining to trade union representatives of recognised unions which would to a material extent impede the carrying on of collective bargaining if it were not disclosed and the disclosure of which would be in accordance with good industrial relations practice.
Section 17 was undoubtedly meant to be a serious contribution to industrial democracy and it is only a curious quirk of interpretation—and, perhaps, miswording, as this amendment suggests—which has caused it to "black" a particular power. I have always believed that this is the level at which legislation can help in promoting the extension of disclosure of information, and thereby collective bargaining from the shop floor upwards.
I held that view as a member of the Bullock Committee. It has always puzzled me that people who know that think that those of us who favoured the majority report of the Bullock Committee did not think about collective bargaining. We could, indeed, have produced a bigger report one year later than the year-long Bullock Report—Son of Bullock—which would have been almost entirely about collective bargaining.
This amendment shows the way in which legislation must be so carefully phrased. I know what my noble friend Lord McCarthy pointed out: that the Government, in being careful on this matter, will no doubt be as careful on some others, which they have not been on this Bill in regard to the introduction of new clauses. The problem arises from the fact that the section demanded that the information which it was claimed should be disclosed should relate to the matters and to the description of workers in respect of which the trade union is recognised by the employer. That was a mistake of a major kind because it has allowed the clause to say, as they have now said clearly, that disclosure can only be demanded in respect of matters which already fall within the area of collective bargaining between employer and trade union.
The Government, having repealed the legal obligation to recognise in the 1980 Act, therefore leave the employer totally in control of the area over which obligatory disclosure is demanded. That this was not the intention of the statute, and certainly not the intention of ACAS, can be seen very well if one looks at the code of practice for the disclosure of information to trade unions for collective bargaining purposes from ACAS which was produced shortly after the 1975 Act.
If one looks at paragraph 11 of that code, one finds that the examples of information relating to compulsory collective bargaining disclosure in some situations which are not specified, which are obviously meant to be descriptive of the kind of thing that would happen under the section, include not merely all the issues of pay, benefits, conditions of service, manpower, labour turnover, investment plans, productivity, efficiency data, return on capital invested, state of the order book, cost structures, gross and net profits, allocation of profits, loans to parent or subsidiary companies, but also a large number of other items as well.
There can be very few unions which bargain today over all those areas that the ACAS code sets out. It is quite clear that ACAS is directing itself in the code to a different situation from the one that we now see the statute creating. With the wisdom of the courts applied to it, we see that these three little words which are mentioned in the amendment, the words "about matters, and", are the obstacle to compulsory disclosure of information being used to promote the purposes about which the noble Lord, Lord Rochester, and the noble Lords who associated themselves with the previous amendment, spoke.
This small amendment would not be in any way revolutionary because the employer today faces no legal sanction if he does not recognise it; nevertheless, he would be forced where he is in a state of collective bargaining with trade unions, as most good employers are, to disclose information under the same conditions with one amendment; and it would need to be information in accordance with good industrial practice which would impede collective bargaining if it were not disclosed and which was about the workers in respect of whom collective bargaining was taking place. Those seem to me to be three perfectly reasonable conditions and I have some apprehension that the Government might at this very late hour possibly consider accepting this minor improvement.
Lord Genarthur: The noble Lord has described the effect of the amendment, which is to extend trade unions' statutory rights to information. I do not think I need to go into any more detail on the description; but the amendment has clearly been moved with the aim of extending a union's information rights to subjects beyond those in respect of which it is recognised by the employer for collective bargaining purposes.
Although the noble Lord did not mention it, I think that to some extent his amendment has been promoted by a recent High Court ruling which quashed the Central Arbitration Committee's decision in the case of ASTMS and BTP Tioxide Limited. The CAC had decided that the union was entitled to information on matters in respect of which it had representational rights as well as on matters in respect of which it was recognised for collective bargaining purposes. The High Court held that the CAC had misdirected itself in law.
This amendment therefore appears to be designed to overcome the High Court ruling in this case. But the Government believe the court interpreted the Employment Protection Act in the way it was intended to be read. I should add that we are not averse to employees being given more information about their jobs and the organisation they work for. On the contrary, the Government have consistently encouraged employers to adopt an open management style and inform employees about matters which affect them. But they believe that progress is best made on a voluntary basis, and that further statutory information rights of this kind would not improve industrial relations. I therefore ask the Committee to reject the amendment.
Lord Wedderburn of Charlton: Of course, I was aware of the Tioxide case; I referred to a recent judicial decision. I accept what the noble Lord has said. The court was constrained because of the presence of these three little words to adopt a quite dotty approach to the industrial situation. They had to distinguish between negotiations which were collective bargaining within the definition in the Acts, making representations of one kind, making representations of another kind, and to apply all that to negotiations about a job evaluation scheme. Of course, I make no criticism whatever of the judgment of Mr. Justice Forbes because I can see that, being led into the matter through the section as it is, he came to that conclusion quite understandably. Remove the three little words and you remove part of the Tioxide case—not all of it, but I will not go into that—and you make a modest contribution to industrial democracy.
On Question, amendment negatived.
4.30 a.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton had given notice of his intention to move Amendment No. 146:
After Clause 16, insert the following new clause:
("Restriction on interlocutory injunctions in trade disputes.
.For subsections (2) and (3) of section 17 of the 1974 Act there shall be substituted—
"(2) Where an application is made to a court, pending trial of an action, for an interlocutory injunction (or in Scotland interim interdict) and the party against whom the injunction (or interdict) is sought claims that he acted in contemplation or furtherance of a trade dispute, the court
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shall not grant the injunction (or interdict) unless it is proved that that party is not likely to establish the matter or matters which would under sections 13 or 15 above afford at the trial a defence to the action.".").
The noble Lord said: My noble friends and I would ask your Lordships' leave to say one thing before we ask leave to withdraw this amendment. It is a serious matter because we feel very strongly, as the Government Benches know very well from debates in 1980 and from our debates on this Bill tonight, about the matter of interim interlocutary injunctions. We also feel that the issue of the emergence of new causes of actions in industrial relations law and trade disputes is so well exemplified by the recent emergence of the doctrine of economic duress, which is so exotic as to be not even a tort, into the labour relations field that it must be taken account of in this part of the Bill.
However, the Government have introduced first the new clause between Clause 11 and Clause 12 on which we had some debate and which is an area of liability contiguous to this because it is an area of statutory tortious liability. Secondly, they have now at a very late stage of the amendments seen fit to repeal Section 13 (2) of the Trade Union and Labour Relations Act 1974. We therefore think it would be proper to ask your Lordships' leave to withdraw these amendments on the basis that we want to look at the rather changed Bill we are now considering, with a view to considering the relationship of these matters to the new Bill on Report.
[Amendment No. 146 not moved.]
[Amendments Nos. 147 and 148 not moved.]
Clause 17 agreed to.
Schedule 2 [Change of basis of computation of period of continuous employment.]
Earl Ferrers Earl Ferrers moved Amendment No. 148A:
Page 30, line 21, leave out (""three months"") and insert (""thirteen weeks"").
The noble Earl said: This particular amendment is virtually drafting. I beg to move.
On Question, Amendment agreed to.
Schedule 2 as amended agreed to.
[Amendments Nos. 149 and 150 not moved.]
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 151:
Before Clause 18, insert the following new clause:
(" Employee's rights on insolvency of employer.
.In subsection (2) of section 122 of the 1978 Act, the words "whichever is the later" shall cease to have effect, and there shall be substituted the words "or, in a case where the debt is one referred to in section 121(2) or section 122(3)(d), the date on which the award of the industrial tribunal which gives rise to the debt is notified to the parties, whichever is the latest".").
The noble Lord said: I beg to move this amendment because it seems that in these debates, surely, one day there will be a Last Trumpet sounded; a line will be drawn and those who did not stand up for individuals will be on one side of it, and the rest of your Lordships will be on the other—I am going to be on this side of the line, which is the right side, because this involves individuals—not a lot—who are getting a raw deal. I am advised on this matter,

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by those who have far more knowledge of it than I have, that Section 122 of the 1978 Act was enacted to protect employees in the event of their employer's insolvency. They are unable to be paid the whole or part of a debt to which the section applies and to claim the amount owing upon their employer's insolvency from the Secretary of State. The Secretary of State takes over the rights and remedies of the employees. The debts to which the section applies are in Section 122(3) and include certain awards made by industrial tribunals. It is in relation to these debts arising by virtue of industrial tribunal awards that the difficulties have come about. The problem is, partly, the definition of the "relevant date" of the debt in Section 122(2). To qualify for payment from the Secretary of State, the employee must have been—and this is the main point—entitled to be paid the debt on the relevant date. The relevant date is defined as the date on which the employer became insolvent, or the date of termination of the employee's employment, whichever is the later. In practice, what has arisen is that in a number of cases the sequence of events has been: first, dismissal; secondly, insolvency and, thirdly, the industrial tribunal award and, as I understand it, that gives rise to a situation where the employee loses his rights. There are other technical difficulties in Section 122 and the relationship of the problem of the ceiling of eight weeks' pay in relation to Section 121. Those two are touched upon, as the noble and learned Lord will recognise, in the amendment. But it is the main problem of the loss of the right in insolvency which this amendment seeks to cure. I beg to move.
Lord Mackay of Clashfern: The present wording of the 1978 Act, literally interpreted, leaves some room for doubt as to whether claims for tribunal awards of this kind, made after the event, so to speak, should be met from the Redundancy Fund. As far as the Department of Employment who manage the fund were concerned, however, these doubts were resolved in employees' favour by the unreported industrial tribunal decision of Scott v. Secretary of State for Employment in 1977. The then President of the Industrial Tribunals noted that, in the case of protective awards in particular, it was common for tribunal decisions to be made some time after the employee's dismissal or the employer's insolvency. He concluded that the legislation's purpose would be defeated if the debt the employer owed as a result of such awards could not be related back to the date of the events which gave rise to the application to the tribunal, which would have been on or before the relevant date. Ever since, the Department of Employment has taken that tribunal decision as a precedent. To the Government's knowledge, no employee has lost his claim for payment from the Redundancy Fund of money which a tribunal awarded him under Sections 121(2) or 122(3)(d) of the 1978 Act.
In other words, in practice, the proposed amendment is followed, but it would obviously be an improvement to clarify the law in this area. Perhaps the noble Lord has waited a little time for an amendment to be accepted, and this is the occasion. So it gives me very great pleasure, indeed, to accept this amendment.
On Question, amendment agreed to.
Clause 18 [Interpretation, minor and consequential amendments and repeals]:
Lord Glenarthur Lord Glenarthur moved Amendment No. 151A:
Page 20, line 38, leave out ("and "trade union"") and insert (""trade union" and "worker"").
The noble Lord said: This amendment to Clause 18 is consequential on the clause to define "worker" as meaning the same as in Section 30 of the 1974 Act. I beg to move.
On Question, amendment agreed to.
Clause 18, as amended, agreed to.
Schedule 3 [Minor and consequential amendments]:
Lord Glenarthur Lord Glenarthur moved Amendment No. 151B:
Page 31, line 6, leave out paragraph 1 and insert—
("1. In section 55 of the 1978 Act (meaning of "dismissal") for subsection (5) there shall be substituted the following—
"(5) Where the contract of employment is terminated by the employer and the notice required by section 49 to be given by an employer would, if duly given on the material date, expire on a date later than the effective date of termination (as defined by subsection (4)) then, for the purposes of sections 53(2), 64(1)(a), 64A and 73(3) and paragraph 8(3) of Schedule 14, the later date shall he treated as the effective date of termination in relation to the dismissal.
(6) Where the contract of employment is terminated by the employee and—

(a) the material date does not fall during a period of notice given by the employer to terminate that contract;

(b) had the contract been terminated not by the employee but by notice given on the material date by the employer, that notice would have been required by section 49 to expire on a date later than the effective date of termination (as defined by subsection (4)),

then, for the purposes of sections 64(1)(a), 64A and 73(3) and paragraph 8(3) of Schedule 14, the later date shall be treated as the effective date of termination in relation to the dismissal.
(7) "Material date" means—

(a)on subsection (5), the date when notice of termination was given by the employer or (where no notice was given) the date when the contract of employment was terminated by the employer; and

(b) in subsection (6), the date when notice of termination was given by the employee or (where no notice was given) the date when the contract of employment was terminated by the employee".").

The noble Lord said: It might be convenient for the Committee if I were to speak also to Amendments 152A and 152B. The purpose of this amendment is to clarify the drafting of this provision and of the section in the 1978 Act to which it relates. The provision is concerned with cases of constructive dismissal; that is where an employee has resigned because his employer has broken, or shown his intention to break, a fundamental term of the employment contract.
It provides in these circumstances for the extension of the employee's period of service by a period equal to his minimum notice entitlement under the 1978 Act, in the same way as if the employer had terminated the contract but had failed to give the due statutory notice. Its primary purpose is to benefit the constructively dismissed employee, who would have had sufficient service to make an unfair dismissal complaint had his contract been terminated by his employer, but who currently does not because the provision for extension of service by the statutory notice entitlement does not apply.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 152:
Page 34, line 45, at end insert—
("14A. In section 23 of the 1978 Act (action short of dismissal taken against employee in respect of trade union membership or activities), in subsection (2A)(b), after the words "subsection (1)(c)" there shall be inserted the words "or (1A),".").
The noble Lord said: This amendment is purely consequential on the earlier amendment, Amendment No. 80, to Clause 9, which we have already debated. The Committee may remember that, provided that where, under Clause 2, an employee cannot be fairly dismissed for failing to make a payment in lieu of union membership, he also has the right, under Clause 9, not to have action short of dismissal taken to force him to make such a payment. This amendment merely provides that this right does not apply if, under Clause 2, the employee could be fairly dismissed for failing to make payment in lieu of union membership.
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 152A:
Page 35, line 38, at end insert—
("23A. In section 153(1) of the 1978 Act (interpretation) in the definition of "effective date of termination" for the words "and (5)" there shall be substituted the words "to (6)".").
On Question, amendment agreed to.
Lord Glenarthur Lord Glenarthur moved Amendment No. 152B:
Page 35, line 50, at end insert—
(" 24A. In Schedule 12 to the 1978 Act (death of employee or employer) for paragraph 9 there shall be substituted—
"9. Where—

(a) the employee's contract of employment has been terminated; and

(b) by virtue of subsection (5) or (6) of section 55 a date later than the effective date of termination as defined in subsection (4) of that section is to be treated as the effective date of termination for the purposes of certain of the unfair dismissal provisions; and

(c) before that later date the employer or the employee dies;

subsection (5) or, as the case may be, (6) shall have effect as if the notice referred to in that section as required by section 49 would have expired on the date of the death.
24B. In paragraph 11(1) of Schedule 13 to the 1978 Act (deemed continuity of employment where a later date is treated as the effective date of termination) after the words "55(5)" there shall be inserted the words "or, as the case may be, (6)".
24C.—(1) Schedule 14 to the 1978 Act (calculation of normal working hours and a week's pay) shall be amended as follows.
(2) In paragraph 7(1) (the calculation date)—

(a) in paragraph (h), after the words "55(5)" there shall be inserted the words "or, as the case may be, (6)"; and

(b) in paragraph (i), for the words "section 55(5) does not apply" there shall be substituted the words "neither subsection (5) nor subsection (6) of section 55 applies".

(3) In paragraph 8(3) (maximum amount of week's pay for certain purposes) after the words "55(5)" there shall be inserted the words "or, as the case may be, (6)".").
On Question, amendment agreed to.
Schedule 3, as amended, agreed to.
Schedule 4 [Repeals.]
Lord Glenarthur Lord Glenarthur moved Amendment No. 152C:
Page 37, line 7, column 3, at end insert—
("Section 13(2).").
The noble Lord said: This is purely a technical amendment. I beg to move.
On Question, amendment agreed to.
[Amendment No. 153 not moved.]
Schedule 4, as amended, agreed to.
Clause 19 [Short title, commencement and extent]:
4.39 a.m.
Lord Mottistone Lord Mottistone moved Amendment No. 154:
Page 21, line 16, leave out ("and").
The noble Lord said: With permission, I will speak also to Amendment No. 155. I am advised on these amendments by the General Council of British Shipping and, in that connection, it gives me great pleasure to address your Lordships at the beginning of the morning watch, just as dawn is coming through.
When speaking on Amendment No. 17 my noble friend Lord Trenchard said that the Government was still considering whether the transitional period before application of the ballot should be one year or two years. He went on to refer to a later amendment which was later passed, which gave authority for holding ballots on more than one day. He hoped, at that time, that the concern being caused to the General Council of British Shipping might, to a certain extent, be satisfied by these offers. I am afraid that they are not. I hope to be fairly speedy in explaining to your Lordships in general, and to the Government in particular, why they are not, in the hope that they may listen more carefully to what the general council are trying to say to them.
Because of very serious practical problems in the shipping industry of meeting the levels of support proposed in the Bill for a ballot on a closed shop agreement, linked with the high level of compensation obtainable for unfair dismissal on the grounds of union membership—those were points to which an earlier amendment of mine referred—the General Council of British Shipping has asked the Secretary of State to delay the implementation of Clause 2 of the Bill for the shipping industry for a period of five years, in the event that the Government cannot agree to separate arrangements for the industry. The purpose of these amendments is to give to the Government powers to agree to separate arrangements for the industry.
The reason why the general council is looking to five years rather than one or, more hopefully, two is that the shipping industry's union membership agreements are at present industry-wide agreements which form part of the large number of industry-wide agreements on pay and conditions and form an integral part of the central system of supply of ratings jointly controlled by the General Council of British Shipping and the National Union of Seamen for employment by individual shipping companies.
At present, 60 per cent. of ratings are employed by shipping companies on a voyage-by-voyage basis and frequently transfer from company to company. The industry has decided that there would be advantage in moving away from the central supply system and institutions to permanent company employment and company negotiations on employment conditions. However, only a small minority of companies employ-

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ing about 20 per cent. of seafarers consider that they are in a position to move to full company employment and company bargaining in the immediate future against the background of the current international slump in world shipping, and a sharply reduced United Kingdom flag fleet. Consequently, a move to company bargaining will take a number of years to achieve. It certainly will not be achieved within the next two years and would be severely jeopardised if attempts were made to rush it.
The General Council of British Shipping believes that, while there will continue to be considerable practical problems for shipping companies even when the move to permanent company employment has been reached, because of the difficulty for even an individual shipping company to carry out a ballot on the lines proposed in the Bill, these will be less severe than under the present centralised system; but they are likely to require five years to reach this situation.
Turning now to the ballot over an extended period, the shipping industry's problems are not solved by allowing a ballot to be held over an extended period. While it would obviously be impossible for most shipping companies to hold a secret ballot of all their employees other than over an extended period, this could be said to provide a complication to their difficulties because of the great mobility of the rating workforce. Even in companies which maintain a largely permanent workforce, an average of over 10 per cent. of the workforce will move from ship to shore, from shore to ship and from ship to ship each week. However, for most companies the great majority of ratings are employed for the duration of the voyage only. Consequently, over any extended period there will be a considerable flow of employees into and out of a company.
Apart from the difficulty of monitoring the ballot in such circumstances, the interchange of personnel between companies is at present such that a significant number of those who are employed by one company when a ballot is held are likely to be employed by other companies within a matter of months, and perhaps before the result of the ballot is announced. Voters in a company ballot may therefore not be bound by its result and may be determining the status of those subsequently employed who did not participate in the ballot. It is complicated.
The solution could rest in the Government giving shipping time—the five years they have asked for—to make a really major change in their whole system of engaging about 60 per cent. of their ratings. I hope that the Government might be able to give a fair wind to my amendment. If not, I hope they will appreciate that the problems are probably greater than has hitherto been thought by my noble friend's department, and that further discussion will go on in order to satisfy this very real and practical problem, so that the shipping industry will not be hampered by the Bill before us when it comes into force. I beg to move.
Lord McCarthy: We would urge once again that the Government look favourably upon this amendment. In fact, inspired by the success of my noble friend Lord Wedderburn of Charlton in gaining an amendment, I believe that this must be the only amendment
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which the Government have accepted from this side of the Committee, both in this Bill and in the previous Bill. There you are. We hope that the Government will consider favourably the amendment of the noble Lord, Lord Mottistone. It is perfectly true, as the noble Earl, Lord Gowrie, said, when we last debated this issue and persuaded the noble Lord, Lord Mottistone, to remit his previous amendment, that there was going to be another amendment about extending the date of the ballot.
As the noble Lord says, when one considers what has been proposed, it does not actually assist the shipbuilding industry at all and, indeed, having looked closely at that amendment, I do think that it was necessary. I do not believe there is anything in this Bill which would have prevented employers from having a ballot over more than a day, and so the Government have made no real move so far towards the noble Lord's position. Now is the time to do it.
Lord Rochester: I, too, would like to encourage the Government to respond as positively as possible to the amendment put forward by the noble Lord, Lord Mottistone.
Earl Ferrers: I always like to respond as positively as I can. I am grateful to my noble friend Lord Mottistone for explaining the difficulties which the shipping industry envisage they would have on balloting. We must remember that all employers with closed shops will have at least one year, and possibly two years, after the Bill is enacted to organise their ballots. They have already had more than six months while the Bill has been going through Parliament in which to consider any problems that may arise. I would think that this is an entirely adequate and indeed fairly generous period of time in which employers could prepare themselves for ballots. I find it remarkable that the shipping industry requires five years.
It is only the shipping and the entertainment industries which have made representations to us on this point. I would not have thought their position was such as to justify special treatment. But I am very grateful to my noble friend for explaining what is, as he rightly said, a complicated amendment. I hope that he will not press this—in fact, I am quite certain that he will not do so tonight. On the face of it, I cannot see that it is justifiable to extend this for five years and so remove the basic question of principle—the right of employers to have their say—from the shipping industry for that length of time. However, I will certainly look at the point my noble friend has raised and, if I may, I will get in touch with him again between this and the next stage of development.
Lord Mottistone: I am most grateful to my noble friend Lord Ferrers for that small crumb of hope. I shall look forward to hearing from him. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendment No. 155 not moved.]
Clause 19 agreed too.
House resumed: Bill reported with amendments.
Lord Denham: My Lords, I think at this comparatively early hour it would not come amiss for me

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to thank the House for the despatch with which they have considered this Bill, and I think, on behalf of the whole House, we would like to thank all those members of the staff who have backed us up so marvellously during this period.
I beg to move than the House do now adjourn.
Moved accordingly, and, on Question, Motion agreed to.

SOUTHERN WATER AUTHORITY BILL
Reported from the Select Committee with amendments and recommitted to an Unopposed Bill Committee.
  PRISONERS: CENSORSHIP OF LETTERS
  PRISONERS: CENSORSHIP OF LETTERS
  FALKLAND ISLANDS: MINEFIELDS
  FALKLAND ISLANDS: MINEFIELDS
  SCIO HOUSE, PUTNEY
  SCIO HOUSE, PUTNEY
  GREY SEAL PUPS IN ORKNEYS AND WESTERN ISLES
  GREY SEAL PUPS IN ORKNEYS AND WESTERN ISLES
  THE UNITED NATIONS AND MILITARY BUDGETS
  THE UNITED NATIONS AND MILITARY BUDGETS