Sitting of 3 May 1984

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

    BRITISH RAILWAYS BILL
    Lords amendments agreed to.
    CORNWALL COUNTY COUNCIL BILL [Lords] (By Order)
    Order for consideration, as amended, read.
    To be considered upon Thursday 10 May.
    NOTTINGHAMSHIRE COUNTY COUNCIL BILL [Lords] (By
    Order)
    Order for further consideration, as amended, read.
    To be further considered upon Thursday 10 May.
    LONDON DOCKLANDS RAILWAY (No. 2) BILL (By
    Order)
    Bill read a Second time and committed.
    TEES AND HARTLEPOOL PORT AUTHORITY BILL (By
    Order)
    DARTMOOR COMMONS BILL (By Order)
    orders for Second Reading read.
    To be read a Second time upon Thursday 10 May.

  Oral Answers to Questions
    AGRICULTURE, FISHERIES AND FOOD

      Fishing Licences
      1. Mr. Nichollsasked the Minister of Agriculture, Fisheries and Food whether he will make a statement on the problems involved in issuing fishing licences to the United Kingdom fishing industry.
      The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John MacGregor): Following the announcement of new pressure stock licensing arrangements on 3 February, representations were received on individual cases of eligibility for licences and on the principles of the system. After careful consideration we have modified some of the rules, in particular to allow licences for vessels acquired by fishermen who were temporarily without a vessel on 3 February but could demonstrate a recent history of pressure stock fishing. But the basic purpose of the schemes, namely the containment of the number of vessels able to fish for pressure stock, stands and has the broad backing of the fishing industry.
      Mr. Nicholls: Bearing in mind the problem that United Kingdom fishermen in general could have faced with
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      regard to pressure licensing, is my hon. Friend satisfied that the measures that he has announced will have the widespread support of the industry?
      Mr. MacGregor: Yes, I think that there is widespread recognition among fishermen of the need for some measure of restrictive licensing, although, of course, we shall wish to continue to monitor the new arrangements. However, I believe that the amended measures, which are designed both to protect the benefits of the decommissionning scheme and to tie in with the arrangements needed for quota management for conservation purposes, provide a fair and flexible basis.
      Mr. Wallace: Does the Minister recognise that one of the long-term fears of the fishing industry in certain communities is that, on transfer of boats, licences may be lost from some communities which are heavily dependent upon fishing and become concentrated in a few hands? What steps does he propose to take to avert any such danger?
      Mr. MacGregor: That would happen only if those who had the boats in the first place decided to get rid of them. One of the safeguards therefore lies in the hands of the fishermen themselves. However, the system is new and we shall continue to monitor it.
      Mr. Austin Mitchell: For Grimsby, the main problem connected with licences is that people who may want to come into the industry in future should be able to do so and to concentrate at a port such as Grimsby.
      The immediate problem for those with licences is the cod quota. Forty-five tonnes of cod per month is an inadequate catch for the cat class vessels and the pair trawlers. Will the Minister consider allowing the quota to be caught in three-monthly sectors so that vessels can catch up and lay up?
      Mr. MacGregor: I have endeavoured to make the licensing system as flexible as possible, because I do not want to restrict the fishing industry too much. There must be restrictions in the case of pressure stocks, but I have attempted to give flexibility to enable fishermen to cope with such problems.
      There is a later question on the Order Paper about quota management. The move to monthly quotas will undoubtedly help, and we are considering the possibility of sectoral quotas for recognised groups of vessels, which might also help ports such as Grimsby.
      Mr. Kennedy: Will the Minister take careful account of the representations that he has received from the Scottish Fishermen's Federation and the Highlands and Islands Fishermen's Association about a deferment of the minimum landing size for lobsters?
      Mr. MacGregor: That is a completely different question, but I can tell the hon. Gentleman that we have recently been in touch with various organisations about that matter.
      Mr. Donald Stewart: As the Minister is so concerned about licensing, why does he turn his face so strongly against licensing lobster fishing boats?
      Mr. MacGregor: One of the important points in that regard is that we have a minimum limit of 10 metres below which there is no licensing in the licensing system for pressure stocks. In the vast majority of cases the lobster fishing industry was looking for licensing below 10

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      metres. It is not clear whether we need that for conservation resons, and there are enormous administrative and other difficulties associated with operating it on that basis.

      Milk Quotas
      Mr. Penhaligonasked the Minister of Agriculture, Fisheries and Food if he will allocate milk production quotas to the advantage of the small producer and milk producing areas.
      The Minister of Agriculture, Fisheries and Food (Mr. Michael Jopling): I refer the hon. Gentleman to the reply that I gave to my hon. Friend the Member for Meriden (Mr. Mills) on 26 April. Initial provisional quotas have been allocated to producers related to their deliveries during the reference period, but a reserve amounting to about 2·5 per cent. of the quota has been set aside to deal with special cases, which will be carefully considered.
      Mr. Penhaligon: On the whole, I interpret that answer as being no. Will the Minister partially mitigate the phenomenal social damage created by what he has so far done by quickly setting up the appeals procedure and announcing today that some financial compensation will be available to those who are most harshly affected, some of whom are in danger of going bankrupt?
      Mr. Jopling: The detailed rules were finally debated in Brussels only yesterday and therefore we shall consider the details carefully. I assure the hon. Gentleman, however, that we shall move ahead with the special cases as fast as we can.
      Mr. Maclean: Will my right hon. Friend take into account the special problems of small dairy producers who farm extremely wet land, such as is found in many parts of Cumbria, and therefore cannot switch into any other form of farming activity such as sheep or cereals?
      Mr. Jopling: We shall examine all hard cases. I hope that we shall be able to consider the cases that my hon. Friend mentioned—he knows that I am well aware of them.
      Mr. Torney: Is the Minister aware that, in addition to the hardship that will be suffered by all dairy farmers, considerable hardship will be experienced by the processing and distribution side of the milk industry? We already know that some creameries are likely to close and therefore considerable unemployment will be caused in that industry. Will the Minister assist in any way to alleviate that suffering?
      Mr. Jopling: We are well aware of the problems that the imposition of the superlevy will cause in all sections of the dairy industry. I do not doubt that it will also cause problems in some processing plants, but that is an inevitable consequence of cutting production as we have. I remind the hon. Gentleman that, quite recently, the United Kingdom had about 140 tonnes of butter a day going into intervention.
      Mr. Jim Spicer: I know that my right hon. Friend fully understands that the small dairy producer who has maintained his herd numbers at a constant level has not contributed to the expansion of milk production and is probably the hardest hit as a result of the base year. Will he assure us that when the appeals procedure comes into
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      existence it will deal with those small producers first because, at the moment, many of their provisional figures are a cut not of 9 or 15 per cent., but of 20 per cent. and more?
      Mr. Jopling: I assure my hon. Friend that I shall consider the possibility of helping the small producer. That is allowed for under the rules that the Commission has examined. I hate to argue in this way, but it is not strictly true that no small producers have expanded recently. On reflection, my hon. Friend will agree that some of them have.
      Mr. Nicholson: Is the Minister aware that it is clear that there will be a much greater problem of hardship cases under the EEC milk quota arrangements in Northern Ireland? I fully support the view of the Ulster Farmers Union that it is essential that the Minister introduces measures to reduce the level of hardship for Northern Ireland dairy farmers, considering that we did not get the 65,000 tonnes which the Minister was supposed to negotiate for us in the EEC. Will the Government—
      Mr. Speaker: Briefly.
      Mr. Nicholson: —give an undertaking that measures will be introduced to relieve the special problems of Northern Ireland dairy producers?
      Mr. Jopling: In allocating United Kingdom quotas between the regions account was taken of the trends of deliveries between 1981 and 1983. Northern Ireland was given the full benefit of the 63·1 million litres from the Community's reserves. In addition, a further allocation was made to Northern Ireland so that the reduction on 1983 deliveries would be no more than in other regions of the United Kingdom.
      Rev. Ian Paisley: May I remind the right hon. Gentleman that when he finished his negotiation he went public on the fact that Northern Ireland dairy interests would have a good deal and that they would be advantaged by some 63 million litres? Why is the dairy industry in Northern Ireland not advantaged at the same level as that in the rest of the United Kingdom, but is getting less for its finished quantity?
      Mr. Jopling: I can only repeat the answer that I gave to the hon. Member for Newry and Armagh (Mr. Nicholson), that Northern Ireland has been given the full benefit of the 63·1 million litres which I announced in terms of 65,000 tonnes, and that in addition it has had a further allocation so that the reduction on 1983 deliveries in Northern Ireland will be no more than in other regions of the United Kingdom.
      Mr. Wigley: Has the Minister seen reports today of a dairy farmer with some 60 acres who increased his production from about 8,000 litres in April 1982 to 27,000 litres last month on the advice of the Ministry, and is now facing bankruptcy? Will the Minister assure us that people in this position will get an advantage under the 2·5 per cent. to which he referred earlier?
      Mr. Jopling: The hon. Member will recall that the quotas are based on 1983 deliveries, which was the most up-to-date pattern of production. I should have thought that that arrangement would particularly help the farmers whom he has in mind. As to the Government's advice, the level of production is only one factor in determining profitability and the Government have consistently

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      encouraged increased efficiency and better marketing. That can lead to increased profits even, in some cases, at reduced levels of production.
      Mr. Colin Shepherd: Will my right hon. Friend confirm that in drawing up the present rules, arrangements, levels of quotas and so on, the Milk Marketing Board was closely consulted and involved and was highly regarded during the course of the discussions?
      Mr. Jopling: The Milk Marketing Board was consulted all through this matter, right back to the point when the Commission first produced its proposals for a super-levy last July. A document which I believe the Milk Marketing Board has circulated to hon. Members says:
      "The milk board will be responsible for paying the levy on any milk producer in excess of quota and then recovering the relevant part of the levy from those producers who had sold to the board milk in excess of their individual farm quota."
      Mr. Robert Hughes: Is not the truth of the matter that the Minister, having failed in Brussels, has now bungled the applications, to the detriment of the small producers? Given that one third of the herds are of 60 cows or fewer, would it not have been better to exempt, and will the Minister not now consider doing so, small herds from the levy and having a progressive scheme for the bigger herds so that the levy is recovered from those best able to face the difficulty? What response does the Minister have to the Milk Marketing Board's reference to the £200 million made available in Germany and the 3 billion francs made available in France for compensation? What will he do about that?
      Mr. Skinner: Come on. The right hon. Gentleman has a worse record than Bobby Robson.
      Mr. Jopling: The hon. Gentleman made that carefully rehearsed joke a few moments ago. I am sorry that nobody heard it the first time.
      The figures given by the hon. Member for Aberdeen, North (Mr. Hughes) are not entirely accurate. As I remember, 37 per cent. of herds have fewer than 40 cows.
      One must bear in mind that in France and in Germany, where a £200 million scheme has been announced to create a reserve of quota for reallocation—I believe that it is hoping that it will be 4 per cent.—the structure of dairy farming is much inferior to ours. Britain has many more viable dairy farms than France or Germany.

      Tree Planting
      Mr. Chapmanasked the Minister of Agriculture, Fisheries and Food what initiatives his Department is taking to encourage farmers to plant trees.
      Mr. MacGregor: The development of farm woodlands is promoted by the Agricultural Develoment Advisory Service, which has recently issued a display for use at shows and other countryside functions. Grants are made available for planting trees for landscaping associated with eligible farm buildings and in less-favoured areas for shelter belts. However, the main sources of grant-aid for tree planting on farms are the Forestry Commission and, for smaller areas of amenity planting, the Countryside Commission.
      Mr. Chapman: I am grateful to my hon. Friend for that reply. As many of our rural landscapes have been dramatically changed for the worse in recent years, not only through tree diseases and drought, but through far too
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      much uprooting of our hedgerows—the rural seedbed of much of our tree stock—is not the time appropriate to follow up the successful "Plant a Tree in '73" campaign with a voluntary campaign directed particularly at farmers to encourage them to plant many more in the autumn of '84?
      Mr. MacGregor: I shall certainly give some thought to that suggestion. Many farmers voluntarily engage in big tree planting operations on their own account. My hon. Friend will know that we took steps last year to end all grants for the uprooting of hedges and that they are now no longer available. The Ministry, under the farm capital grants scheme, offers grants of 60 per cent. in less-favoured areas for the planting of trees as shelter belts and in all other areas for the planting of trees as a landscape feature associated with farm buildings. Therefore, we give positive encouragement.
      Mr. Bermingham: What incentive does the tenant farmer have to plant trees, bearing in mind that the protection of succession that he had under the 1976 legislation is shortly to be removed?
      Mr. MacGregor: The hon. Gentleman knows, because he has been very much involved in our discussions on the Agricultural Holdings Bill, that that is intended to stop the decline in tenanted farms and to start to get new tenancies on to the market. Most of those tenant farmers will have a long period during which many of them will take advantage of the incentives to plant trees.
      Mr. Crouch: Is my hon. Friend aware that I wrote to my right hon. Friend the Minister of Agriculture, Fisheries and Food last autumn pointing out that many farmers were burning down hedgerows and trees in the process of straw and stubble burning? Will he remind them not to do that again and to replace those trees that have been burnt down?
      Mr. MacGregor: I am conscious of that problem. My hon. Friend will know that much tougher model bylaws for local authorities on the burning of straw and stubble have been agreed, which I hope will go a long way towards dealing with the problem of the destruction that is sometimes caused.

      Beef Cows
      Mr. Farrasked the Minister of Agriculture, Fisheries and Food what will be the effect on beef cow numbers of recent decisions by the European Economic Community Council of Ministers of Agriculture.
      Mr. MacGregor: It is too early to forecast the precise effect of the recent CAP price settlement on beef cow numbers, but specialist beef producers will benefit significantly from the Government's recent decision to double the rate of suckler cow subsidy payable in Great Britain to the maximum amount permitted under Community rules. Those in marginal areas will also benefit from the introduction next year of hill livestock compensatory allowances as a result of the recent extension of the less-favoured areas.
      Mr. Farr: Notwithstanding those two useful points, is it not a fact that the recent decision on milk has been a major blow to what one would call the balance of agriculture? Must it not now be the chief concern of my hon. Friend the Minister of State and my right hon. Friend

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      the Minister to seek to restore that balance to try to give some encouragement to those engaged in livestock production in Britain?
      Mr. MacGregor: If my hon. Friend is referring to the milk arrangements, I must tell him that much will depend on the reactions of individual producers. I think that they will vary widely. The amount of meat available on the market could have the short-term effect of depressing prices. However, the more stable and better balanced conditions for milk over the period ahead will help to balance the market in the medium to long term. We have taken a number of steps, some of which I have referred to. The retention of the beef variable premium scheme, which is still at a better level than in 1982, the new carcase classification grid and achieving a better balance between cereal and livestock prices will all help.
      Mr. Key: Will my hon. Friend also undertake to consider the position of farmers who are excluded from taking advantage of the changes in the arrangements? I refer to the small dairy farmers who, because of their farm agreements, are specifically forbidden to undertake anything but dairy farming and who now have nowhere to go.
      Mr. MacGregor: My hon. Friend refers to the impact on the conditions of the development plans. We are examining that matter closely.

      Newcastle Disease
      Mr. Colin Shepherdasked the Minister of Agriculture, Fisheries and Food how many cases of outbreaks of Newcastle disease have been reported to him; and if he will make a statement.
      Mr. Jopling: Seventeen outbreaks of Newcastle disease have been confirmed to date. In all but one outbreak on which investigations have been completed a link has been established with raw material for feedingstuffs contaminated by diseased feral pigeons. Measures have been taken to ensure that the possible risk to poultry from such raw materials is minimised.
      Mr. Shepherd: Is my right hon. Friend aware of the marked lack of confidence and concern in the poultry sector at the long-term nature of the infected feral pigeon problem? Will my right hon. Friend be more specific and outline the arrangements for preventing the further infection of silos? What investigations are being made on the various options open to the Ministry for minimising the risk for the future?
      Mr. Skinner: It is the hon. Gentleman's fault. Blame the pigeons.
      Mr. Speaker: Order.
      Mr. Jopling: My hon. Friend will recall that we took legislative measures which quickly strengthened our powers to act so that contaminated material leaves stores only under strict Ministry control. Diseased pigeons associated with stores have been detected only in the Liverpool and Birkenhead area. The degree of risk depends upon the extent to which contamination has occurred in a particular store.
      Mr. Maginnis: Will the right hon. Gentleman acknowledge that the high standard of poultry husbandry in Northern Ireland means that no cases of Newcastle
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      disease have occurred there for many years? Will he encourage the poultry industry in Northern Ireland by ensuring that we receive an allocation of intervention grain again this year?
      Mr. Jopling: I am grateful to the hon. Gentleman for that intervention. Any action that he can take to stop pigeons from Liverpool and Birkenhead going to Northern Ireland would be welcome.
      Mr. Mark Hughes: Will the Minister assure the House that no gap remains in legislative control which will allow potentially contaminated foodstuffs to be supplied to poultry producers? There is still a fear that that can happen. What control is there over infected feral pigeons?
      Mr. Jopling: The legislative steps that I announced to the House some weeks ago to deal with these matters have been widely welcomed. Contaminated material from stores in areas where diseased pigeons have been discovered can leave those stores only under strict Ministry control.

      Dairy Farmers (Assistance)
      Mr. Stephen Rossasked the Minister of Agriculture, Fisheries and Food what financial assistance he is prepared to make available to smaller dairy farmers, whose income has been substantially reduced following the recent price review.
      Mr. Jopling: As part of the agreement to introduce the supplementary levy scheme for milk, agreement was reached to extend the Community scheme to aid the incomes of small-scale milk producers for a further two years. There are also provisions; which may benefit smaller producers, in the Community regulations on the supplementary levy scheme for special allocations of milk quota to a producer who is implementing, or has recently implemented, a milk production development plan under either an FHDS or AHDS scheme.
      Mr. Ross: Has the Minister seen the press release, which I believe has been sent to most hon. Members, by the Milk Marketing Board which makes very dismal reading? Will the collection of the levy be delayed for some time? Will the right hon. Gentleman introduce a scheme similar to that introduced by the Germans and French—his answer to an earlier question on that was disappointing — under which about 200 million deutschmarks will be given by the Germans and umpteen million francs by the French to help producers who want to leave the dairy industry? Further, will he do something for the producer-retailers to help sort out the mess in which they find themselves? Will he do something to put a bottom into the cow beef market, which would seem a sensible step to take?
      Mr. Jopling: I am pleased to report to the House that the Commission has agreed to lump the first two payments of levy together. As a result, the first levy payments do not have to be collected until 45 days after the end of September—that is, by mid-November at the latest—and the hon. Gentleman will agree that that is a good move forward, which will help many milk producers.
      As for the outgoers' scheme, which has been announced by Germany and to which the hon. Member for Aberdeen, North (Mr. Hughes) referred earlier, I understand that, for instance, the Netherlands and

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      Denmark have not announced schemes. The fine print and details of the regulations were discussed in Brussels only yesterday, and we shall be considering that provision carefully.
      Sir Peter Mills: While congratulating my right hon. Friend on that announcement, may I ask him to consider seriously a national scheme to allow, on a voluntary basis, dairy farmers to get out, as other countries are introducing such schemes? The milk quota could then be reallocated. Is he aware that it would be a serious blow to British dairy farmers if other Community countries made such arrangements and we did not?
      Mr. Jopling: My hon. Friend will realise that the regulations came to fruition very recently indeed. Although a number of states, including ourselves, voted against them in Brussels yesterday, because certain details of them remain unsatisfactory, I hope that we can get them right. I hear what my hon. Friend says about the outgoers' scheme and the fact that it seems to have been taken up by some states and not by others.
      Mr. Molyneaux: As the discussions and consultations with the Milk Marketing Board in Northern Ireland have been minimal, and regardless of what the right hon. Gentleman said in answer to an earlier question, may I ask him to publish a White Paper setting out all the facts and figures governing the allocation and arrangements for the milk quota scheme in Northern Ireland?
      Mr. Jopling: I do not think that it is necessary to produce a White Paper on this matter. I am grateful to the right hon. Gentleman for not making the accusation that was made earlier, that Northern Ireland had been deprived of the 65,000 tonnes allocated to it. I am glad that he did not repeat that statement, which was wrong.
      Mr. Hunter: In the light of the concern that is being expressed in some quarters about the volume of dairy products that we are importing from New Zealand, may I ask my right hon. Friend to comment on the possibility or otherwise of that being reviewed?
      Mr. Jopling: The Council of Agriculture Ministers will be meeting on Monday and Tuesday of next week, when the import arrangements for New Zealand will be an important matter for discussion. As my hon. Friend probably knows, the Commission's proposal is that this year 83,000 tonnes of butter should be imported from New Zealand, falling over each of the next five years by 2,000 tonnes, to 75,000 tonnes. The Government believe strongly that we should give that market to New Zealand, as it is essential to it, and we shall be pressing the Council next week to adopt that proposal of the Commission.
      Mr. Robert Hughes: Notwithstanding the slight difference over figures that arose between us during an earlier question, will the Minister accept that by far the best way of providing assistance to smaller producers is to exempt them from the levy and to have a sliding scale upwards above a certain figure for larger producers? Now that the date of the collection of the levy has been postponed, will the right hon. Gentleman take this opportunity to rediscuss the matter with those involved in the industry to ascertain whether such a scheme can be formulated? That would do far more to help than dealing with the 2·5 per cent. reserve to which he referred earlier.
      Mr. Jopling: I am surprised that the hon. Gentleman is saying that small farmers should be exempted from the
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      levy. He will recall that we have been insistent, throughout the negotiations that have taken place over the past eight or nine months on the super levy, that small farmers throughout the Community should not be exempted from the levy. Such an exemption would discriminate very much against the British dairy industry and I am most disappointed to hear that the Opposition are taking that approach.
      Mr. Hughes: That is a distortion of my supplementary question.

      Common Agricultural Policy
      Mr. Baldryasked the Minister of Agriculture, Fisheries and Food what has been the overall effect of the common agricultural policy on British farming and on the consumer since the United Kingdom joined the European Economic Community.
      Mr. Jopling: It is, of course, a matter a conjecture what other policies might have been pursued had we not joined the European Community, and any measurements of the kind envisaged would equally be quite conjectural.
      I would point out, however, that since 1972 our agriculture industry has succeeded in raising the volume of its gross output by 14 per cent. and in raising the nation's self-sufficiency for temperate-type food from 63 per cent. to 76 per cent. At the same time, retail food prices have not increased faster than prices in general.
      Mr. Baldry: Will my right hon. Friend confirm that since we joined the Community net exports of British food have increased by about 77 per cent.? Indeed, France and the Netherlands are now net importers of butter from the United Kingdom. Will he confirm also that we are now self-sufficient in beef and for the first time are net exporters of cereals? As my right hon. Friend confirmed, food prices have declined relative to other prices. Does he accept that our membership of the Community has been of considerable benefit to the British farmer and British consumer?
      Mr. Jopling: I am happy to confirm what my hon. Friend has said. Our participation in the common agricultural policy has been good for consumers, for agriculture and for the nation generally.
      Mr. Deakins: Does the Minister recall that when we entered the Common Market in 1972–73 one of the major arguments was that the CAP would be bad for Britain and that we would gain compensating economic advantages from access to an industrial free trade market? Surely the CAP has been a disaster for the British economy, as was forecast at the time. The Minister should recognise that and turn to his right hon. Friend the Secretary of State for Trade and Industry for confirmation of such beneficial effects, if any, that have come to Britain from our membership of the Community.
      Mr. Jopling: The hon. Gentleman is wrong. He will recall that the Conservative party was elected to Government in 1970 on the policy of shifting from the old system of deficiency payments and guaranteed prices to a system of support based on import levies, which is virtually the same as the CAP system. We were elected on that policy, irrespective of whether we joined the Common Market, and we believe that it is the best policy for Britain.
      Mr. Jackson: Does my right hon. Friend agree that the period of expansion for British agriculture since 1973 has

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      produced an expansion of farm borrowings? Will he take the opportunity to urge bank managers to take a cool, calm and collected view of farmers' borrowings until the uncertainties about quotas are finally resolved?
      Mr. Jopling: I have noted what my hon. Friend has said. Borrowings by British agriculture have increased, but I believe that it is generally agreed that they are at a prudent level. I hope that in this period of difficulty, especially in the dairy sector, the banks will be as tolerant and helpful to their dairy farmer customers as possible.
      Mr. Mark Hughes: Will the Minister reconsider his reply to my hon. Friend the Member for Aberdeen, North (Mr. Hughes)? Although a European-wide operation to remove small farmers from the dairy levy is unacceptable, it is entirely within the power of the right hon. Gentleman and the Government to arrange our domestic affairs so that the small farmers have less of a burden to pay and a greater burden is placed on the larger farmers.
      Mr. Jopling: I hope that the hon. Gentleman and the hon. Member for Aberdeen, North (Mr. Hughes) will forgive me if I have not answered that question. I thought that it was right to put our general principles on the line. I am glad that there is now sweetness and light between our two parties over this basic part of the Government's policy. The rules of the Community, when considering reallocations of quotas that become unused, provide for a move in favour of the small farmer. We shall be considering that point carefully.

      Milk Quotas
      Mr. Colvinasked the Minister of Agriculture, Fisheries and Food if he will consider making special provision to help those dairy farmers forced out of milk by the quota scheme but still committed to the farm and horticulture development scheme.
      Mr. Jopling: A reserve quota of about 2·5 per cent. of the total England and Wales Milk Marketing Board quota has been set aside to assist producers who have been severely affected by special circumstances or who have development plans. I hope this reserve will help those who are in the process of expanding to remain in milk production if they wish to do so. Any producer with a development plan who wishes to go out of milk production will have his request considered on its merits.
      Mr. Colvin: I thank my right hon. Friend for that reply, which shows that he appreciates that it will be extremely difficult for dairy farmers to fine tune production. A dairy cow is not something one can turn on and off like a tap. Will my right hon. Friend go further and suggest to the Milk Marketing Board that it considers a scheme to set aside part of the Co-responsibility fund—money which is paid by dairy farmers—to provide, say, a 1 per cent. buffer above and below the quota figure, a measure which would reduce the risk of penalty to dairy producers?
      Mr. Jopling: I do not believe that it would be within the rules for the Government or the Milk Marketing Board to keep aside some of the money paid into the Co-responsibility fund. We have always been prepared to be sympathetic if farmers get into difficulty. In certain cases we have been able to agree to withdrawals from those plans without penalty.
      Mr. Geraint Howells: If a new entrant buys a non-dairy farm, will he be allowed to change the policy on that farm to make it a dairy farm?
      Mr. Jopling: That is one of the matters we must consider in detail now that we are at last reaching a point when we know what the detailed rules of the super levy arrangements will be. The hon. Gentleman's question is one that we shall be considering carefully and urgently.
      Mr. Maxwell-Hyslop: Will my right hon. Friend invite his colleagues to bear constantly in mind the position of a tenant farmer producing milk who has not expanded his output since 1981 and is giving up 2·5 per cent. of his quota as well as a general 6·5 per cent. of the quota? If he is forced out of milk production and his tenancy, because the land cannot be used for any other form of farming, he loses not only his job but his home. His position differs from that of people in other industries, for example, steel—which are subjected to EEC quotas — and to whom compensation is paid. A person displaced from such industries does not lose the roof over his head.
      Mr. Jopling: In deciding which year to make the base year for quotas, one chose 1983 for the most up-to-date patterns of production. One faces an inherent difficulty when considering people, such as those to whom my hon. Friend referred, who have not expanded since 1981. I agree that this is a difficult matter, and I hope that we can look at the specific problems. I hope that the housing problem to which my hon. Friend referred will not occur on a large scale. If they do, naturally I hope that we can give a little thought to them in talks.
      Mr. Mark Hughes: After three attempts, I am glad that we have persuaded the Minister to confirm that he has room for considerable manoeuvre under the rules on the application of quotas and that he will consider the scheme that we have suggested to him.
      Mr. Jopling: I am glad to repeat what I said earlier. We shall look at the possibilities during the next few weeks.

    PRIME MINISTER

      Engagements
      Mr. Simon Hughesasked the Prime Minister if she will list her official engagements for Thursday 3 May.
      The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today.
      Mr. Hughes: Will the Prime Minister reflect on the fact that since she moved into her two new houses five years ago the number of homeless people in Britain has increased from 57,000 to 80,000? Will she further reflect that since she took on her new job five years ago the number of jobless has increased from 1·25 million to 3 million? If she fulfils her determined plan to be in office for another five years, are we to expect more than 100,000 homeless and more than 5 million unemployed?
      The Prime Minister: Since one moved in some five years ago, 1·4 million more people own their own homes,

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      the dwelling stock has risen by 700,000 and the spending on home improvement has multiplied eight times. With regard to those people unfortunately without a job, I remind the hon. Gentleman that the proportion of the population in work in Britain is better than in most other European countries in the Community—and certainly higher than in France.
      Mr. Kilfedder: In view of the allegation made by some nationalist politicians, who produced the Dublin forum report yesterday, that the Government are responsible for a political vacuum in Northern Ireland, will the Prime Minister point out—at least to those who are genuinely concerned about that part of the United Kingdom—that the Northern Ireland Assembly still exists despite attempts to destroy it before it has had a reasonable trial? Will she further point out that the Assembly is working energetically within its limitations to deal with the realities of the present position in the Province and is attempting to help Protestants and Roman Catholics alike?
      Will the right hon. Lady urge those constitutional politicians boycotting the Assembly to take their places and participate in the dialogue with the elected representatives of different political and religious groups?
      The Prime Minister: I agree with the hon. Gentleman that those elected to the Northern Ireland Assembly—with which he has a distinguished connection—can freely express their views there, as they were elected to do.
      Mr. Kinnock: On this election day, will the Prime Minister tell us whether she is glad or sorry that she, who was going to roll back the state, has actually brought a greater concentration of power to the central state than. ever before in British peace-time history?
      The Prime Minister: That just is not true. We have abolished controls on prices, incomes, industrial development certificates, office development certificates, and also abolished many other controls, including exchange control. We have reduced the number of civil servants by the greatest number since the war.
      Mr. Kinnock: The Prime Minister either does not know what she is doing or she has a very selective view of the past five years. Does she not recall that she has deprived 13 million people of their votes in the Greater London and metropolitan areas? Does she not understand the effect of imposing penalties and rate-capping on local services that are a matter of life and death for many people? Does she not understand the effect of making £8·8 billion worth of cuts in rate support grant on people whose rates have shot up because of that action? Does she not recall that is she who has made political obedience a condition of appointment to senior positions in the Civil Service, nationalised industry boards, wages councils and many other bodies, such as the area health authorities? If the right hon. Lady does not think that that is a process of centralisation and the assertion of central state control, she does not understand the word democracy.
      The Prime Minister: With regard to what the right hon. Gentleman says about rates—I understand that he did not quarrel with any of my previous replies because they were all deadly accurate—in the four years from 1979 to 1983, prices rose by 55 per cent. and earnings by 65 per cent., but domestic rates went up by an average of 91 per cent. In 10 local authorities, mainly Labour-controlled, rates increased by 145 per cent. If people
      536
      cannot look to the Government to protect them, to whom can they look, especially when one of the functions of Parliament, although the right hon. Gentleman does not recognise it, is to check tax, including rates, and not to increase it as he would like to do?
      Mr. Kinnock: The Prime Minister is the highest-taxing Prime Minister in the history of the British economy. Does she not realise that the effect of her policies has been to increase the rate burden on households from an average of £2·46 in 1979 to ·6 in 1984? If the right hon. Lady is so keen on cutting taxes, why does she not start now for the poorest in our society, instead of making them pay for the ridiculous ambitions of her policy of starving this country into solvency?
      The Prime Minister: The right hon. Gentleman is complaining about the height of rates, so he must be for rate-capping.
      Mr. Warren: Will my right hon. Friend, in her gallant and worthy attempts to roll back the state's industrial frontiers, accept the fact that the appalling argument between the steel men and the miners' leaders is one where the suicidal stupidity of the miners' leaders is hallmarked by Mick McGahey's remarks yesterday, when he said that by closing down industry he would not lose jobs? Is not the conflict one between the steel men, who know that only customers make jobs, and the miners' leaders, who do not know how to keep jobs?
      The Prime Minister: I agree very much with my hon. Friend. The steel industry is a very good customer to coal and one would think that an industry wanting a good future would be careful to keep its customers.
      Mr. Hickmet: Does my right hon. Friend agree that it is time for ISTC, NUR, ASLEF and other unions to abandon their support for the strike among some miners, especially when one bears in mind its disastrous effect on job prospects at Ravenscraig and Scunthorpe? Do not the actions of some miners' leaders demonstrate the ruthless political means they are prepared to use to achieve their objectives? Will my right horn. Friend find time today to inform the Leader of the Opposition that Conservatives, who represent the workers of this country, do not expect steel workers to pay 50p a week to striking miners?
      The Prime Minister: I thank my hon. Friend. The fact is that strikes lose jobs, sometimes in the industry in which the strike occurs and sometimes in other industries as well. The right hon. Gentleman the Leader of the Opposition is the strikers' friend.
      Mr. Steel: Will the Prime Minister reassure the House that, contrary to newspaper speculation, she will honour her commitments to the nursing profession and implement the recommendations of the nurses' pay review body?
      The Prime Minister: The review body report on nurses' pay has reached the Government, as have the reports of other review bodies. We shall be considering them together and hope to be in a position to make a statement after the Whitsun recess.
      Mr. John Townendasked the Prime Minister if she will list her official engagements for 3 May.
      The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
      Mr. Townend: Will my right hon. Friend take time today to reconsider the barristers' monopoly of right of

      537
      audience in the higher courts in the light of her remarks in January that the Government wanted to be seen to be tackling all monopolies, including those in the professions?
      The Prime Minister: As my hon. Friend will know, that question was considered by the Royal Commission on legal services under Lord Benson, which reported that it would be against the interests of the client to extend the solicitors' right of audience from the lower to the higher courts. The Government accepted that advice in 1983, and it is too early to reconsider it.
      Mr. Dormand: In response to Opposition Members' questions about the mining dispute and investment in the coal industry, the Prime Minister has several times said that the NCB should be allowed to get on with its job without Government interference. If that is the Government's policy and philosophy towards the nationalised industries, why, last year, did they force both the gas and electricity boards to put up their prices substantially, against their commercial judgment and in the face of their publicly stated objections?
      The Prime Minister: The Government set objectives, including financial objectives, which are supposed to give a good return on taxpayers' money and which sometimes result in subsidies to the nationalised industries. The Government also set the external financing limits and then, broadly speaking, they leave management to get on with the job. That is what they are doing in the coal industry.
      Mr. Penhaligonasked the Prime Minister if she will list her official engagements for Thursday 3 May.
      The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
      Mr. Penhaligon: On the fifth anniversary of the date on which the Prime Minister succeeded to office, would she care to reveal to the House what she believes to have been her biggest mistake so far?
      The Prime Minister: Not enough to reveal.
      Mr. Gould: What happened to the £457 million refund from the EEC which the Prime Minister told us she had negotiated? What happened to the 31 March deadline, the date by which, she told us, payment would be made, and what happened to the tough action which she said would be taken if payment were not made by the due date?
      The Prime Minister: The 850 million ecu refund that has been negotiated for 1983 should, by virtue of the Stuttgart communiqué, have been repaid by 31 March this year. But the agreement is not legally binding. It was an agreement between Heads of Government, which I am the first to say—and which I do say to other Heads of
      538
      Government—they have gone back on. They will not all accept that, because they say that they did not agree to the communiqué. It was an agreement by word among Heads of Government in the communiqué. It is not a legally binding agreement, and so technically the Community is not in default. If we were to withhold at present it would be contrary to international law.
      Mr. Baldry: Has my right hon. Friend had a chance to study yesterday's CBI survey, which shows that orders and optimism in industry are now greater than they have been for many a year, with healthier order books, higher output and high hopes for the coming year? Does not that survey show that Conservative economic policies are continuing to lead Britain back to economic prosperity?
      The Prime Minister: Yes, Sir. The CBI survey was very good and optimistic this month. Industry now has a chance, because this Government have cut inflation to its lowest level for 15 years, manufacturing productivity has increased by 14 per cent., interest rates are 3 per cent. lower, and Government borrowing has fallen from 5·5 per cent. of gross domestic product to 3·25 per cent. Once again growth is increasing and is greater than in any other country in the Community.
      Mr. Stephen Rossasked the Prime Minister if she will list her official engagements for Thursday 3 May.
      The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
      Mr. Ross: As the Prime Minister is determined to abolish the metropolitan counties and return those areas to single-tier authorities, will she consider providing my constituency of the Isle of Wight, which is the most over-governed constituency in the country, with one all-purpose authority, for which we would give three hearty cheers?
      The Prime Minister: I am delighted to know that the hon. Gentleman is a great supporter of the Government's decision to abolish the GLC and metropolitan county councils. I thank him for his support and I shall ask my right hon. Friend the Secretary of State for the Environment to consider his request.
      Mr. Gregory: Will my right hon. Friend impress upon the Government of Zimbabwe the importance of Bishop Able Muzorewa, who has been held for a considerable time, being brought to trial as soon as possible?
      The Prime Minister: I am aware of that, but it is a matter for the Government of Zimbabwe and it is a matter in which we must not interfere. The bishop is not a British citizen, unlike other citizens on whose behalf we have made representations.

    Business of the House
    3.30 pm
    Mr. Neil Kinnock: Will the Leader of the House state the business of the House for next week?
    The Lord Privy Seal and Leader of the House of Commons (Mr. Biffen): Yes, Sir. The business for next week will be as follows:
    TUESDAY 8 May—Second Reading of The Cable and Broadcasting Bill (Lords).
    Motion on European Community documents on the European regional development fund. The relevant numbers will appear in the Official Report.
    WEDNESDAY 9 MAY—Progress in Committee on the Local Government (Interim Provisions) Bill.
    Motions on the Agriculture (Miscellaneous Provisions) (Northern Ireland) Order and on the Fines and Penalties (Northern Ireland) Order.
    THURSDAY Io MAY—Further progress in Committee on the Local Government (Interim Provisions) Bill.
    Motions relating to the Supplementary Benefit (Conditions of Entitlement) Regulations and the Supplementary Benefit (Single Payments) Regulations.
    FRIDAY 11 MAY—There will be a debate on policing in the Metropolis, on a motion for the Adjournment of the House.
    MONDAY 14 MAY—Progress on remaining stages of the Police and Criminal Evidence Bill.
    [European Community Documents and relevant Reports of European Legislation Committee, debate on Tuesday 8 May.
    European Regional Development Fund
    The following documents are relevant:
    a. 8833/81 New regional policy guidelines
    b. 12104/82 Special report of the Court of Auditors on job-creation in the granting of aid to regional investments
    c. 11232/82 Second series of specific Community regional development measures
    d. 9449/83 Aid from the ERDF for infrastructure projects
    e. 9361/83 Eighth Report on the activity of the ERDF in 1982
    f. 9938/83 Amendments to draft Regulations concerning measures under Article 13 of the ERDF Regulation
    g. 10705/83 Amendment to Regulation establishing ERDF
    Relevant Reports of the European Legislation Committee
    a. HC 32-xxxiv (1980–81) para. 2
    b. HC 34-xii (1982–83) para. 1
    *c. HC 34-viii (1982–83) para. 1
    d. HC 78-iv (1983–84) para. 2
    e. HC 78-v (1983–84) para. 7
    *f. HC 78-viii (1983–84) para. 7
    g. HC 78-xi (1983–84) para. 5.]
    Mr. Kinnock: Can I notify the right hon. Gentleman that on Tuesday we shall want a three-hour debate on the European regional development fund? I hope that he can allow time for that business. Does he agree that it is ironic that on the day when millions of people will vote in local elections, he announces that next Wednesday and Thursday the House will debate a paving Bill, which will result in the removal of voting rights from 30 million people in the GLC area and metropolitan counties? I and
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    many other hon. Members, including Conservative Members, should like the Government to remove the business. If the right hon. Gentleman cannot do that, can he arrange to split the business so that we debate the issue on two separate days, with an intervening period, not only for purposes of rest and recuperation, but also reflection on the business undertaken on the first day?
    In the light of the publication of the new Ireland forum report, we should like a full day's debate in Government time as soon as possible. The report represents a unique initiative in recent Irish history and deserves the thorough attention of the House, as the right hon. Gentleman will agree.
    In view of the fact that British Airways announced a post-tax profit of £181 million, will the right hon. Gentleman arrange a debate in Government time about the future of British Airways so that before the Government take the irrevocable step of privatising British Airways, we have time to pause and reconsider the acceptability of the denationalisation of this major asset of British taxpayers?
    Mr. Biffen: Perhaps I could reply to the right hon. Gentleman's points in the order in which they were presented. First, I am happy to confirm that on Tuesday provision has been made for a three-hour debate on the motion of the European regional development fund.
    I have also noted the right hon. Gentleman's wish that the Local Government (Interim Provisions) Bill should be so structured as to provide orderly and expeditious progress. If that can be secured through the usual channels, I would join him in a sense of relief and satisfaction.
    The right hon. Gentleman said that he wishes to have a debate in Government time on the measured and significant report of the new Ireland forum, which I am sure will be of great interest to the House. He also wished to have a debate on the remarkable success story of British Airways, as revealed by its latest accounts. I cannot guarantee that Government time will be available in the near future for such debates, but we can consider the matter through the usual channels.
    Mr. John Stokes: My right hon. Friend will remember that I wrote to him some time ago informing him that I had asked the Secretary of State for Defence to make arrangements for colleagues to attend the D-day ceremonies in Normandy next month. I confidently expect a favourable reply from the Ministry, but I should be most glad to have my right hon. Friend's support so that we know the arrangements in good time.
    Mr. Biffen: I thank my hon. Friend for raising that point, and I shall do all I can to facilitate an answer.
    Dr. David Owen: Given the widespread sentiment in the House that there should be an independent inquiry into the circumstances associated with the killing — [Interruption.] Given the widespread sentiment associated with the killing of WPC Fletcher, and given the impossibility of anyone putting down a motion for a vote in the House other than the Government or the Leader of the Opposition, will the Leader of the House, in acknowledgement of his responsibility to all hon. Members allow a motion for the establishment of a small all-party committee of Privy Councillors to consider this matter?
    Mr. Biffen: No, I cannot helpfully add to the contents of the letter which my right hon. Friend the Prime Minister wrote to the right hon. Gentleman.
    Dr. Owen: But the right hon. Gentleman is the Leader of the House.
    Mr. Jonathan Aitken: Further to the Leader of the Opposition's request for a debate on the future of British Airways, would my right hon. Friend welcome that and could we debate it in the exact terms of the right hon. Gentleman's request, which were that the House would welcome—although he did not say that—the irrevocable decision to privatise British Airways?
    Mr. Biffen: If the Leader of the Opposition so happily phrased his words that they have that compulsive attraction to my hon. Friend, that must make this matter an obvious subject for an Opposition Day debate.
    Mr. Harry Cohen: Is the Leader of the House aware that this morning the police arrested and detained Afia Begum and her daughter Asma, whose case I raised in the House on 7 March? In view of that, will he bring before the House without delay my Entry Clearance (Change of Circumstances) Bill, which relates to this case? Will he also make representations to the Home Secretary not to deport Afia and Asma until the House has considered the Bill and the European Court of Human Rights has heard this case? In the interim, will he make representations for Afia and Asma to be released immediately?
    Mr. Dennis Skinner: Give them the Zola Budd treatment.
    Mr. Biffen: I cannot offer the facilities for the hon. Gentleman's private legislation, but I shall of course draw the points that he has made to the attention of my right hon. and learned Friend the Home Secretary.
    Mr. Nicholas Soames: Now that my right hon. and learned Friend the Foreign Secretary has returned from his visit to Hong Kong, could time be found to debate the future of Hong Kong?
    Mr. Biffen: I very much hope that there will be a debate in the week beginning 14 May.
    Mr. Stuart Bell: In the light of that answer about a debate on Hong Kong, can the Leader of the House recommend that the same conditions of independence for Hong Kong will be accorded to the Falkland Islands?
    Mr. Biffen: That relates to the content of the debate. I am mainly concerned with its timing.
    Sir Frederic Bennett: In view of the appallingly worsening position in Afghanistan, which not only has the largest refugee problem in the world but where more Afghans have been killed than the number of British casualties in the second world war, and since it is clear that the well-meant attempts of the Secretary-General of the United Nations to bring about a settlement have, unfortunately, failed completely, if we cannot have a debate on what is easily the biggest tragedy in the world at present, could we have a statement soon from my right hon. and learned Friend the Foreign Secretary about the policies that he will advocate in view of the failure of the United Nations to resolve this matter?
    Mr. Biffen: I accept at once the importance of the topic raised by my hon. Friend and I shall certainly ensure that my right hon. and learned Friend the Foreign Secretary is made aware of his anxiety that a statement should be made.
    Mr. Skinner: Does the Leader of the House not think that it is high time we had a debate on the mining industry in view of the fact that since the dispute began there has been only one debate—under Standing Order No. 10? Does he not think that we should have a full-scale debate so that we can draw attention to the fact that in the think tank report it is disclosed that £1·3 billion is being disposed of by the Department of Trade and Industry, and that every farmer receives £20,000 out of the CAP and £7,000 subsidy per employee? If miners got the same treatment, there would not be a single uneconomic pit in Britain.
    Mr. Biffen: I shall resist the temptation to try to answer the content of the question. In regard to timing, I cannot offer the prospect of a debate on the mining industry next week, but this matter will be kept under constant review.
    Mr. Ivor Stanbrook: If my right hon. Friend is disposed to give the House an opportunity to discuss the report of the new Ireland forum, will he ensure that the debate covers the more valuable reports on constitutional reform in Northern Ireland issued by the Unionist parties of Northern Ireland—who are, after all, British citizens?
    Mr. Biffen: I am very happy to join my hon. Friend in paying tribute to those reports. We are some way away from any debate and as we approach that point no doubt we can think more productively about the terms of the debate.
    Mr. Stephen Ross: Although we support the request for a debate on the report of the new Ireland forum, and also the recent proposals of the Unionists for devolution in Northern Ireland and the EC report, which is a very good one, it would be a good idea if these matters were debated in the House in the not-too-distant future.
    Mr. Biffen: I take note of what the hon. Gentleman has said. In particular, I note that he places the Unionist party report alongside that of the new Ireland forum.
    Mr. Nicholas Baker: Does my right hon. Friend share my concern at the regrettable action being taken by teachers? In the event of the examinations faced by many pupils being disrupted, will my right hon. Friend consider giving parliamentary time for a discussion of this serious and grave action?
    Mr. Biffen: I take note of what my hon. Friend says. As he will realise, we are moving into a rather congested period of the year for parliamentary business, but I shall certainly draw his remarks to the attention of my right hon. Friend the Secretary of State for Education and Science so that he may take account of them and keep the house informed as he thinks appropriate.
    Mr. D. N. Campbell-Savours: Is the Leader of the House aware that Labour's attempt last night to amend the Finance (No. 2) Bill to increase the rate of supplementary benefit paid to the long-term unemployed was defeated heartlessly by the Government? In so far as it is clear that the Government do not understand what poverty and need are about, can we have a debate in Government time on the single and important subject of poverty?
    Mr. Biffen: We had a debate last night and clearly there were not enough Members—
    Mr. Skinner: My hon. Friend was there.
    Mr. Biffen: What about the missing millions? This subject will doubtless be a continuing part of the economic debate which divides the House and on which so far the hon. Gentleman has been unable to convince the nation.
    Sir Geoffrey Finsberg: In connection with the paving legislation, the Local Government (Interim Provisions) Bill, to be debated next week, will my right hon. Friend accept that those of us on these Benches who endorse the legislation and who have not been taken in by Socialist propaganda on the subject feel that it is time my right hon. Friend introduced legislation to prevent authorities from wasting ratepayers' money on political purposes?
    Mr. Biffen: I note what my hon. Friend says and I will ensure that his views are conveyed to my right hon. Friend the Secretary of State for the Environment.
    Mr. Geraint Howells: Is the right hon. Gentleman aware that confidence in the dairy industry is at a very low ebb? In view of the present proposals and the anxiety felt within the industry, is the right hon. Gentleman willing to let us have a debate on the Floor of the House so that the dairy producers can know exactly where they go from here?
    Mr. Biffen: No provision has been made in the business that I have announced, but I will draw the attention of my right hon. Friend the Minister of Agriculture to the points raised by the hon. Member.
    Mr. David Harris: May I reinforce the plea of the hon. Member for Ceredigion and Pembroke, North (Mr. Howells)? My right hon. Friend was present for recent exchanges and heard the concern expressed by hon. Members on both sides of the House about the impact on small farmers. May we please have a debate so that we can consider measures to soften that impact?
    Mr. Biffen: Again, I note what my hon. Friend says, and I ask him to accept the broad answer that I gave to the hon. Member for Ceredigion and Pembroke, North (Mr. Howells).
    Mr. Jeremy Corbyn: Will the Leader of the House find time next week for a debate on the performance of the Home Office in dealing with immigration and nationality matters and applications for British nationality? It seems that there is a discrepancy between granting Zola Budd's application in next to no time and deporting Afia Begum for no reason other than the fact that her husband tragically died in a fire. Will the right hon. Gentleman make representations to the Home Secretary to ensure that Afia Begum and her daughter are immediately released from Harmondsworth detention centre, are given the same treatment as Zola Budd and are allowed to remain here permanently?
    Mr. Biffen: The case of Afia Begum was raised with me by the hon. Member for Leyton (Mr. Cohen). My answer to the hon. Member for Islington, North (Mr Corbyn) is in the same terms as my answer to the hon. Member for Leyton.
    Mr. Teddy Taylor: As the exports of highly subsidised food and wine to the Soviet Union have further increased to the staggering level of over 100,000 tonnes a week and are clearly providing a major boost to the Soviet economy, does not my right hon. Friend believe
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    that we should discuss that enormous expenditure instead of talking about some of the rather nebulous EEC issues that we have to consider late at night?
    Mr. Biffen: Yes. I do not want to guide any discussion on the European regional development fund, but it seems to me that the parts of the Community that are covered by that fund involve a great deal of agricultural output.
    Mr. Archy Kirkwood: If there is a continuing threat to coal supplies for the steel mill at Ravenscraig and the Leader of the House cannot find time for a debate next week, will he at least give us an assurance that a Minister will come to the Dispatch Box and explain the situation, so that we may have a chance to comment on the dire circumstances that are arising at Ravenscraig?
    Mr. Biffen: The hon. Gentleman raises a serious point. All comments should be measured to produce a reasonable outcome to the dispute rather than to exacerbate it, but I will refer his anxieties to my right hon. Friend the Secretary of State for Trade and Industry. Doubtless he will take the hon. Gentleman's comments into account.
    Mr. Richard Tracey: Has my right hon. Friend noted the growing number of hon. Members who have signed the early-day motion on tendering by local government? Will he give the House the opportunity of an early debate on that important subject?
    Mr. Biffen: I am sure that the number of signatures demonstrates both the importance of the topic and the strong sense of commitment to it on the Conservative Benches. I do not think that I can go further than that today.
    Mr. Harry Greenway: Bearing in mind the Government's welcome announcement today of measures to combat glue sniffing and to prosecute those who push glue to would-be sniffers, and following my Bill on this important matter, will my right hon. Friend assure us that the legislation will be introduced at an early date, because there is an epidemic of glue sniffing in this country?
    Mr. Biffen: I understand my hon. Friend's anxiety and the importance of the topic. I am not sure that I can be forthcoming about the speed with which the legislation will be brought forward, but I will look at the matter.
    Mr. Jerry Hayes: Will my right hon. Friend give the House an early opportunity of discussing the recent Select Committee report on children in care? Many hon. Members in all parts of the House have signed an early-day motion, making it clear that they feel that our child care law is close to a national disgrace.
    Mr. Biffen: I shall consider that point and get in touch with my hon. Friend.

    BALLOT FOR NOTICES OF MOTION FOR MONDAY 21 MAY
    Members successful in the Ballot were:
    Mr. Jim Spicer
    Mr. Heathcoat-Amory
    Mr. Peter Lloyd

    Orders of the Day

      Finance (No. 2) Bill
      (Clauses 10, 17, 18, 20, 21, 27, 57, 98, 105, 113, and Schedules 6 to 8 and 12)
      Considered in Committee [Progress 1 May]
      [MR. HAROLD WALKER in the Chair.]

      Finance (No. 2) Bill
        Clause 113

          ABOLITION OF NATIONAL INSURANCE SURCHARGE
          3.52 pm
          Mr. Terry Davis: I beg to move amendment No. 64, in page 99, leave out lines 16 to 21 and add
          'with respect to earnings paid on or after 1st October 1984.'.
          The amendment would omit five lines from clause 113, and its purpose is to put local authorities and some other bodies on the same basis as privately owned industry. The national insurance surcharge is to be abolished from 1 October 1984 for privately owned industry, but it will not be abolished until 6 April 1985 for local authorities and some other bodies specified in the Finance Act 1982. The House may consider that the most important of those other bodies are the police authorities.
          I do not understand why the Government insist that local authorities and the police authorities should not benefit sooner from this measure, which is widely welcomed on both sides of the House. I look forward to the Minister's explanation.
          The Chief Secretary to the Treasury (Mr. Peter Rees): I shall be delighted to reply on the amendment moved with such attractive brevity — by the hon. Member for Birmingham, Hodge Hill (Mr. Davis).
          The reason for the Government's opposition is simple. The local authorities have presumably made their plans on the basis of the existence of national insurance surcharge. It would be wrong to give them an unexpected bonus at this stage of the year. Although one is always delighted to do what one can to help, there is no need to ease the authorities' public expenditure plans in such a way. The abolition of NIS is intended primarily to relieve pressure on the private sector, reduce its costs and make it more competitive, particularly with regard to exports. It is with that end in view that we have finally managed to abolish NIS.
          I was delighted that the hon. Member for Hodge Hill welcomes the principle underlying the clause. I am sure that, on reflection, he will accept that NIS was a singularly ill-conceived tax which has, in particular imposed a burden upon the private sector that I doubt that it deserved. One might have expected the Labour party to have learnt from the error of the selective employment tax, which was imposed earlier and has been abolished, that such impositions are not the right way to raise revenue. The tax was introduced in singularly inauspicious circumstances.
          Mr. Terry Davis: On a point of order, Mr. Walker. The Chief Secretary to the Treasury seems to be engaging in remarks which are more appropriate to a clause stand part debate. I preserved my more general comments for
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          that debate. I am anxious to know why the right hon. and learned Gentleman is penalising local authorities. If my speech was brief his is invisible.
          The Chairman: The hon. Gentleman is on to a fair point.
          Mr. Rees: If the Chair is delicately saying that it will allow a clause stand part debate, I shall reserve my general comments for it. I was not aware that the hon. Member for Hodge Hill was sitting in the Chair—perhaps that is one of his ambitions. However, I take your point, Mr. Walker.
          This is not merely a case of penalising local authorities. The hon. Gentleman will recognise that they are in slightly different circumstances from the rest of the public sector because the notice issued at the time of the Budget said that there will be an adjustment for cash limits. We felt it right that local authorities should not enjoy the benefit of a relief that they could not possibly have taken into account when settling their public expenditure plans. There is no desire to discriminate against local authorities. There is no case for giving them this unexpected bonus, so we have excluded them.
          Mr. Terry Davis: I am disappointed with the Chief Secretary's response. I shall leave aside his personal remarks and my more general comments, which I shall make later if I catch your eye, Mr. Walker.
          The point of the amendment is to ask why local authorities and police authorities should be penalised in this way. The Chief Secretary said that they are not being penalised and that he does not understand why they should derive what he described as an unexpected bonus because they prepared their expenditure plans for the current year on the assumption that NIS would apply. The same arguments, could be applied to privately and publicly owned industry. I shall comment on publicly owned industry later. It must be within the knowledge of Treasury Ministers that privately owned industry prepares plans, and budgets for the current year. Such industry is being given what the Chief Secretary described as an unexpected bonus. I shall try to show that it cannot have been that unexpected. Why must local authorities not be given that unexpected bonus? why are they unable to share the benefits that are to be derived only by privately owned industry?
          Some local authorities engage in some forms of trading and there are direct labour organisations. Why should they not benefit from the abolition of NIS? Why should the ratepayers not benefit? We sometimes forget the effect of NIS on ratepayers. I am surprised that Treasury Ministers should forget today, of all days, which is polling day in local elections, that ratepayers stand behind local authorities. Why should not they and council tenants benefit from the abolition of NIS?
          The Chief Secretary has given us absolutely no reason for rejecting the amendment. Unless he gives us a more convincing argument I shall be forced to the conclusion that this is simply one aspect of the Conservative Government's bias against local democracy and local authorities. In the press recently there has been much comment by spokesmen of local authorities and police authorities about the burden being put on ratepayers as a result of the industrial dispute in the mining industry, because of the use of police in that dispute. Why should not the ratepayers receive this small benefit to meet the cost of policing that dispute? The Chief Secretary has

          547
          given us no justification whatever. I remember his words on the subject—they were few. He asked why the Government should ease the public expenditure plans of local authorities. There we have the nub of the Government's prejudice and bias. That is why the Opposition will vote for the amendment.
          I was not in the House when the national insurance surcharge was introduced but I took the trouble to read the comments of Conservative Members who were then in Opposition. One Conservative Member, who is now a Minister, comes from the county of Norfolk. He referred to the wicked imposition of the national insurance surcharge being borne by the ratepayers of Norfolk, not once, not twice but on every possible occasion. Why should not the ratepayers of Norfolk now have the benefit of its removal? This amendment will be known as the Norfolk amendment.
          4 pm
          Mr. D. N. Campbell-Savours: The Minister was given adequate opportunity to reply to my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis), so why did he not tell the House what the cost of our amendment would be? Had he done so, local authorities and the ratepayers would have been able to identify clearly how much the Government have effectively whipped from the coffers of local councils. I ask the Minister to tell us now, because that money rightfully belongs to the ratepayers.
          Mr. Peter Rees: I am delighted to tell the hon. Gentleman, in response to his challenge, that the cost would be £85 million. That sum would have to come from the pockets of taxpayers.
          Mr. Campbell-Savours: The right hon. and learned Gentleman's reply is interesting. We all know where that £85 million could have gone in local authority budgets. It could have been spent on servicing those in need in the communities, on social services, on helping people whose houses need repairs and on helping every part of local government provision where authorities feel that they have a responsibility to look after those in need.
          However, we know that that money is being spent elsewhere. The public should know that later on in today's proceedings we shall be dealing with other amendments that relate to capital transfer tax and the extortionate amount of money that is being allocated, in the form of tax concessions, to the better off, many of whom own more than £100,000 in capital assets. Once again, we are seeing a disgraceful representation of Government financial policy.
          Question put, That the amendment be made:—
          The Committee divided: Ayes 36, Noes 151.

          Division No. 277]

          [4.02 pm

          AYES

          Bell, Stuart

          Foster, Derek

          Bermingham,Gerald

          Gould, Bryan

          Blair, Anthony

          Hamilton, W. W. (Central Fife)

          Campbell-Savours, Dale

          Healey, Rt Hon Denis

          Cartwright, John

          Holland, Stuart (Vauxhall)

          Cocks, Rt Hon M. (Bristol S.)

          Hollwells, Geraint

          Corbyn, Jeremy

          Hughes, Dr. Mark (Durham)

          Cox, Thomas (Tooting)

          Kennedy, Charles

          Davies, Rt Hon Denzil (L'lli)

          Kirkwood, Archibald

          Davis, Terry (B'ham, H'ge H'l)

          McDonald, Dr Oonagh

          Dobson, Frank

          Marek, Dr John

          Dormand, Jack

          Mikardo, Ian

          Fisher, Mark

          Mitchell, Austin (G't Grimsby)

          548

          Owen, Rt Hon Dr David

          Stewart, Rt Hon D. (W Isles)

          Penhaligon, David

          Wallace, James

          Roberts, Ernest (Hackney N)

          Wigley, Dafydd

          Ross, Stephen (Isle of Wight)

          Shore, Rt Hon Peter

          Tellers for the Ayes:

          Skinner, Dennis

          Mr. Frank Hayes and

          Steel, Rt Hon David

          Mr. Harry Cowans.

          NOES

          Adley, Robert

          Jessel, Toby

          Ashby, David

          Jones, Gwilym (Cardiff N)

          Aspinwall, Jack

          Jones, Robert (W Herts)

          Baker, Nicholas (N Dorset)

          Kershaw, Sir Anthony

          Baldry, Anthony

          Key, Robert

          Bellingham, Henry

          Kilfedder, James A.

          Bennett, Sir Frederic (T'bay)

          Lang, Ian

          Berry, Sir Anthony

          Latham, Michael

          Biggs-Davison, Sir John

          Lawler, Geoffrey

          Boscawen, Hon Robert

          Lawrence, Ivan

          Bowden, Gerald (Dulwich)

          Lennox-Boyd, Hon Mark

          Braine, Sir Bernard

          Lester, Jim

          Bright, Graham

          Lewis, Sir Kenneth (Stamf'd)

          Brinton, Tim

          Lloyd, Peter, (Fareham)

          Brown, M. (Brigg & Cl'thpes)

          Lord, Michael

          Buck, Sir Antony

          Macfarlane, Neil

          Butterfill, John

          MacKay, Andrew (Berkshire)

          Carlisle, Kenneth (Lincoln)

          Maclean, David John

          Chapman, Sydney

          Maples, John

          Chope, Christopher

          Mates, Michael

          Clark, Sir W. (Croydon S)

          Mather, Carol

          Clarke, Rt Hon K. (Rushcliffe)

          Maxwell-Hyslop, Robin

          Clegg, Sir Walter

          Mills, Sir Peter (West Devon)

          Cockeram, Eric

          Moore, John

          Coombs, Simon

          Murphy, Christopher

          Cope, John

          Neubert, Michael

          Couchman, James

          Nicholls, Patrick

          Crouch, David

          Onslow, Cranley

          Currie, Mrs Edwina

          osborn, sir john

          Dorrell, Stephen

          Ottaway, Richard

          Durant, Tony

          Page, John (Harrow W)

          Eggar, Tim

          page, Richard (Herts SW)

          Dorrell, Stephen

          Ottaway, Richard

          Durant, Tony

          Page, John Harrow W)

          Eggar, Tim

          Page, Richard Herts SW

          Evennett, David

          Peacock, Mrs Elizabeth

          Farr, John

          Powell, William (Corby)

          Finsberg, Sir Geoffrey

          Powley, John

          Forman, Nigel

          Prior, Rt Hon James

          Forth, Eric

          Pym, Rt Hon Francis

          Fox, Marcus

          Raffan, Keith

          Freeman, Roger

          Rathbone, Tim

          Galley, Roy

          Rees, Rt Hon Peter (Dover)

          Garel-Jones, Tristan

          Renton, Tim

          Goodlad, Alastair

          Rhodes James, Robert

          Gorst, John

          Ridsdale, Sir Julian

          Gower, Sir Raymond

          Roe, Mrs Marion

          Greenway, Harry

          Rossi, Sir Hugh

          Gregory, Conal

          Ryder, Richard

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

          Sackville, Hon Thomas

          Griffiths, Peter (Portsm'th N)

          Sainsbury, Hon Timothy

          Grist, Ian

          Shelton, William (Streatham)

          Ground, Patrick

          Shepherd, Colin (Hereford)

          Gummer, John Selwyn

          Sims, Roger

          Hamilton, Hon A. (Epsom)

          Smith, Tim (Beaconsfield)

          Hamilton, Neil Tatton

          Soames, Hon Nicholas

          Hanley, Jeremy

          Spencer, Derek

          Hannam, John

          Spicer, Jim (W Dorset)

          Harris, David

          Squire, Robin

          Hawkins, Sir Paul (SW N'folk)

          Stanbrook, Ivor

          Hayes, J.

          Stewart, Andrew (Sherwood)

          Hayhoe, Barney

          Stewart, Ian (N Hertf'dshire)

          Hayward, Robert

          Stradling Thomas, J.

          Heathcoat-Amory, David

          Sumberg, David

          Hickmet, Richard

          Taylor, Teddy (S'end E)

          Holt, Richard

          Thompson, Donald (Calder V)

          Hooson, Tom

          Thorne, Neil (llford S)

          Howard, Michael

          Townsend, Cyril D. (B'heath)

          Howarth, Alan (Stratf'd-on-A)

          Tracey, Richard

          Howell, Rt Hon D. (G'ldford)

          Twinn, Dr Ian

          Howell, Ralph (N Norfolk)

          van Straubenzee, Sir W.

          Hubbard-Miles, Peter

          Viggers, Peter

          Hunt, David (Wirral)

          Waddington, David

          Hunter, Andrew

          Wakeham, Rt Hon John

          549

          Walden, George

          Wolfson, Mark

          Wardle, C. (Bexhill)

          Young, Sir George (Acton)

          Warren, Kenneth

          Wheeler, John

          Tellers for the Noes:

          Whitfield, John

          Mr. Douglas Hogg and

          Whitney, Raymond

          Mr. John Major.

          Wilkinson, John

          Question accordingly negatived.
          Question proposed, That the clause stand part of the Bill.
          Mr. Terry Davis: I am not sure whether the Minister appreciated the brevity of my remarks on the previous amendment but I shall seek to take a little longer in the stand part debate.
          As the Minister said, I gave a welcome to the clause. I have some reservation about its underlying principle in view of his antipathy to local authorities in the previous debate. I am not sure whether we can agree on the underlying principle, but the Labour party, and I believe all sides of the House, welcome the abolition of the NIS.
          There are several reasons for that welcome. First, the House will be spared the annual ritual of the Opposition urging the reduction or abolition of the NIS and the Government resorting to the typical yah-boo tactics of pointing out that it is a tax that was introduced by a Labour Government, with Labour spokesmen then arguing that there were different economic circumstances at the time of its introduction and the Government spokesmen simply repeating that the tax was introduced by a Labour Government.
          The House will also be spared the spectacle of the Opposition putting forward an amendment to reduce, or more recently to abolish, the NIS and the Government replying that that is impossible, only to be followed a year later by the Government doing exactly what the Opposition had urged.
          This year is the final stage in that procedure. The Labour party welcomes the benefit that is being given to privately owned industry. The NIS has been rightly described as a tax on exports which does not apply to imports. It has been described as a tax on employment and jobs at a time when unemployment is at almost unprecedented levels. It has been described as a tax on competitiveness which makes it more difficult for industry at home and abroad. For all those reasons we welcome the final step in the saga—the abolition of the NIS.
          However, the only beneficiaries from the abolition of the NIS will be privately owned industry. I am not seeking to re-open the short debate on the amendment, but there is another group of people who pay the NIS who will not benefit from its abolition because, as I understand the Government's intention, they will not give the same benefit to publicly owned industry. I hope that when the Minister comes to reply he will explain why the Government are refusing publicly owned industry the same benefit as privately owned industry. After all, on its introduction the NIS affected privately owned and publicly owned industry alike. I should have thought that the Government would see the justice and equity of removing it and giving the benefit of that removal to both industries.
          It is nonsense that an industry that has already been privatised by the Government will receive the benefit of the abolition of the NIS whereas if an industry continues to be publicly owned it will not, bearing in mind that the consumers of publicly owned industries would be the
          550
          eventual beneficiaries because it would not be necessary for those industries to increase their prices. But the Government have deliberately increased the prices of publicly owned industries, and I suspect that that is behind their restriction of the benefit of the abolition of the NIS to privately owned industry.
          4.15 pm
          If an industry which was publicly owned has now been privatised, the shareholders, consumers or employees—one of those three—will benefit from the removal of the surcharge. It is a double nonsense that if an industry is to be privatised it will not see the benefit of the abolition of the NIS simply because of timing. I suspect that this is another example of the Minister's prejudices, but I await his reply with interest.
          Mr. Campbell-Savours: The debate gives us a little wider latitude to debate broader economic issues in so far as the NIS is a surcharge which certainly had some effect on the cash flow position of companies, and much of our discussion during the Budget debate has been on company funding.
          There has been one notable comment during this year's debate. Before I mention that, let me quote from the debate two years ago when the then Chief Secretary to the Treasury announced to the House that he needed the money. Throughout subsequent proceedings in Committee there was repeated reference in our more humorous moments—there were such moments—to that statement. During our debates on the Finance Bill this year the most notable exclamation came from the Financial Secretary to the Treasury the other day when he referred to VAT on fish and chips as being good for the cash flow of industry. He was trying on that occasion—this is a debate about cash flow—to convince the House that chippies up and down the land should welcome the introduction of VAT because it would help them inasmuch as they would be in receipt of what I understand to be a three months' free loan pending the payment of VAT to the Exchequer. Of course, that did not happen.
          We must not be churlish. Industry will welcome the abolition of the national insurance surcharge. But let us not forget that for three years the Labour party has repeatedly demanded the withdrawal of the surcharge. Our position is not inconsistent, although a Labour Government introduced the surcharge in 1977. We introduced the surcharge when fewer than 1 million people were unemployed. Different economic conditions then applied. Today real unemployment stands at over 4 million. When we moved our first amendments two years ago unemployment stood at 3 million.
          I hope that the Minister will not repeat the misleading statement that he always makes to the House, that, since Labour introduced the surcharge, we are responsible. We introduced it in different economic conditions.
          Mr. John Maples: It is interesting to hear the hon. Gentleman's effort to square the circle. He supported the surcharge when it was introduced and now says that that is consistent with supporting its abolition. If the national insurance surcharge is bad when unemployment stands at 3 million why was it good for employment when unemployment stood at only 600,000?
          Mr. Campbell-Savours: Then there was more latitude in the economy and the fiscal regime throughout the

          551
          United Kingdom was far less disciplined than it is today. There was a substantially higher level of reflation in the economy. We introduced the surcharge as part of our reflationary strategy.
          The world and the United Kingdom stand in the middle of a recession. Last year many pundits outside the House and hon. Members from all sides hoped that the Williamsburg summit would to some extent deal with the problem in the western world. Following the summit The Sunday Times said that it demonstrated "collective complacency" in the knowledge that everyone was aware and concerned about the deficit in the United States of America.
          I should like to discuss the link between company cash flow and the international recession. I am not one of those hon. Members who believe that pressure should be exerted on the United States to reduce its budget deficit. I believe that that would be highly dangerous. We have heard repeated statements from the Dispatch Box during economic debates and questions to the Chancellor of the Exchequer which show that the Government wish to exert that pressure.
          Reducing the American budget deficit would have a devastating effect on the social complexion of the United States. It would create social chaos there. If western Europe wishes to create social chaos here it should demand the closure of that deficit in the United States. We have come to terms with the fact that we have to live with high interest rates in America. Europe must now accord its economic system with what is going on in America.
          Mr. Austin Mitchell: Does my hon. Friend agree that the United States has prospered in that it has created 4 million jobs in just over a year by doing exactly the opposite of what the British Government preach? The Americans are ignoring the money supply by running a deficit in good old Keynesian fashion. If the British Government succeed in persuading the American Government to adopt the same narrow, piggy-banking orthodoxy that is used here the same fate that has overtaken us will await the Americans.
          Mr. Campbell-Savours: My hon. Friend is correct. The Americans have created jobs in areas which this Government say they treat as priorities—in service trades and industry. An excellent article appeared in The Guardian two or three weeks ago drawing attention to the new job profile in the United States which arises from a willingness to sustain and maintain a high deficit level.
          I appeal to the Chancellor not to go overboard in his demands and to accept that by pressing America in that way he will invite social difficulties, not only for the United States, but for parts of western Europe, and even the United Kingdom.
          The Association of British Chambers of Commerce say:
          "The United States' high interest rates are choking the mechanism of recovery throughout the western world."
          Is the association aware of the implications of pursuing the strategy that they wish to be pursued?
          The Budget judgments of various organisations outside the House are crucial to this debate. My hon. Friends will wish to draw attention to many of the judgments and perhaps quote from them. One particular organisation historically has given support and commitment to the British Conservative party and, certainly, to the Government. I refer to the Institute of Directors. It carried
          552
          out a business opinion survey after this year's Budget. It concluded from the findings that the Budget made little difference to the overall position of companies.
          After all the expressions of complacency and self-satisfaction by the Government over the last few weeks, a key organisation tells the Government that almost half of its membership believe that they will not benefit from anything that the Government have done in the Budget.
          No better example of a sectoral response can be found than that by the paper and board industry. In one of the regular newsletters that it sends to hon. Members the industry says:
          "The paper and board industry stands to gain £million from this particular area of the budget"—
          that is, the abolition of the national insurance surcharge. It counters that £3 million with the high additional cost of rates for industrialists. Rates have been forced up directly as a result of the withdrawal of rate support grant to local authorities. The industry counters that £3 million with the additional costs of energy that it has to pay as a result of Government energy policies in the last three or four years. It also counters the £3 million with the changes in corporation tax which cannot be separated from the capital allowance changes in the Budget because they interact. The net effect of that interaction is that in the coming year more money will be paid in corporation tax by companies. By 1986 the industry maintains that it will be paying almost £1·5 billion more per annum than it pays today. Such organisations know what is happening. The Government have refused to take their voice into account in the formulation of their Budget strategy.
          In its recommendations the Association of British Chambers of Commerce says that it wants
          "a generally more expansionary international economic policy."
          It knows, as do industrialists in my constituency, that despite all the Government's palliative measures and the considerable aid given to small businesses in the last four years in 90 or more measures that a reflationary policy is needed to provided jobs and boost demand in the United Kingdom. That is the answer. That is the case that Labour put to the people at the last general election. Because we were sidetracked on peripheral issues which had nothing to do with the central issues in British politics, we did not get the point over. The Bill contains the petty prejudices of the Conservatives towards local government and the public sector of industry. We shall oppose such measures resolutely in the Lobby. At the same time, we welcome the broad thrust of the reduction in national insurance surcharge.
          4.30 pm
          Mr. Archy Kirkwood: I join hon. Members in welcoming the clause. The joy and euphoria which we witnessed on the Tory Benches when the Chancellor annouced the abolition of the national insurance surcharge left me bemused. The tax should have been abolished many years ago.
          The Conservatives are celebrating their fifth birthday in office. Throughout those years we have seen record levels of unemployment, high interest rates in the early part of their administration and high levels of exchange rates. The experience of businesses, big and small, during those years has been horrific, exacerbated by this wholly bad tax which the Conservatives have taken five years to get rid of.
          Mr. Eric Cockeram: Does the hon. Gentleman recall that, during the Lib-Lab pact, his party supported the then Labour Government in the continuation of this taxation, despite the fact that unemployment was rising? Why did his party support it when it was part of the Lib-Lab pact but has had a conversion since the pact collapsed?
          Mr. Kirkwood: The short answer is that I was not here at the time. The hon. Member for Workington (Mr. Campbell-Savours) explained how the circumstances of the time were different; there were only 1 million unemployed and the whole economic background was different. Despite that, I accept the hon. Gentleman's point; we spend too much time in these debates blaming one another for historical excesses.
          I do not say that when the Prime Minsiter first went through the door of 10 Downing street in 1979 she should have abolished the national insurance surcharge at a stroke, but it would have given industry and commerce a significant fillip had it been done a couple of years ago. In recent years, industry has been extremely hard-pressed. The CBI, TUC and every other pressure group have been arguing for this change for much longer than a year or two.
          I hope that the experience which we have had with the national insurance surcharge will dissuade future Administrations of whatever political complexion from adopting similar measures. There are other, better ways of raising money. Governments must raise revenue, and while payroll taxes are simple to administer, the experience that we have had with this duty should teach us not to repeat it.
          Mr. Maples: Will the hon. Gentleman agree that, had the national insurance surcharge been abolished four or five years ago, the benefit would almost certainly have gone in increased wages, whereas, now that the climate is different, it will probably operate on industrial costs, which is what we want to see?
          Mr. Kirkwood: Its abolition years ago would have stimulated the economy, increased demand and reduced unemployment. However, that is water under the bridge, and the hon. Gentleman asks a hypothetical question.
          I welcome the Government's decision in this matter, even if it has been a long time coming. I hope that the experience that we have had with this form of tax will dissuade future Governments from repeating the exercise and that the short period during which we have suffered the national insurance surcharge will prove a dose of political aversion therapy for future Administrations.
          Mr. Austin Mitchell: Why so late? That is the central question that we are all asking about the abolition of the national insurance surcharge. I suppose that the Government are entitled to congratulate themselves over this; they do not have much else about which to congratulate themselves. Congratulations are not really in order, however, because this step should have been taken years ago. This is a totally unjustifiable tax on jobs in a period of rising unemployment, and there has been a rapid rise in the numbers unemployed since the Conservatives came to office.
          The Conservatives came to power with promises about regenerating the British economy and rebuilding British industry. We recall the "Labour isn't working" posters and the rest, yet as soon as they took office there began a rapid
          554
          rise in unemployment. That rise clearly took the Conservatives by surprise as things got out of control. Sam Brittan forgave them, for they knew not what they did. They did it nevertheless, and we must hold them responsible.
          As that rise in unemployment continued, the national insurance surcharge did not just remain the anomaly which it always had been, a tax on jobs, but a grievous anomaly, and it was the economics of bedlam to continue that tax on jobs for so long.
          Mr. Gerald Bermingham: Does my hon. Friend agree that in the last three years, when there has been a shift from the industrial to the service sector, the existence of this tax has been a disincentive to the service sector to expand so as to offer employment to young people?
          Mr. Mitchell: My hon. Friend is right, and it has been an even bigger disincentive to the manufacturing sector, which has been the most hard hit by various Government measures. Indeed, in considering the loss of 2·5 million jobs in the last four years, one realises that 1·5 million of those have been in manufacturing industry. The much-vaunted service sector, which the Government say will be the answer to our problems, has also lost jobs, partly because of this tax on jobs which the Government are now removing.
          There is no point in the Government making the perennial cry that we find in handouts from Central Office; the cry that the Conservatives have been making since 1979, "You put it on, yah-boo," as if that were a justification for having retained the national insurance surcharge for all this time. It was put on in 1976 largely as a result of the situation that existed when the IMF came in. [Interruption.] We were in particular difficulties at that time. Given the mess that the Conservatives have made with the benefit of North sea oil revenues, which should have transformed the whole of the industrial situation, what we did is understandable. The incoming Labour Government had to face the horrendous crisis that was left by the Heath Government. They were faced with the worst economic crisis that Britain had experienced since the war. They did not have the benefit of North sea oil, which the present Government have thrown away.
          Sir William Clark: Does the hon. Gentleman agree that the day before yesterday the Government paid back £477 million of overseas borrowings that were made by the Labour Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey)?
          Mr. Mitchell: Oil wealth is running out of the Government's ears. Their only achievement is to pump oil out of the North sea at a more rapid rate than anything apart from their own insolvency would justify. To congratulate themselves on paying back borrowings is to raise only a very small cheer. If that is the only cheer that the hon. Gentleman has to raise, he will have to raise it more loudly and on many more occasions.
          Sir Geoffrey Finsberg: The hon. Gentleman said that the national insurance surcharge was introduced by the Labour Government and that the IMF borrowings were arranged because of the mess that was left by the outgoing Tory Government. Will he reconcile that argument with the statement of the

          555
          Labour Chancellor of the Exchequer during the second general election of 1974 that everything was fine and that inflation was declining?
          Mr. Mitchell: The outgoing Conservative Government left inflationary pressures in the pipeline. Those pressures and the oil price increase left the incoming Labour Government in 1974 with a horrendous crisis. If the Conservatives' only justification for the mess that has ensued is the Labour Chancellor's statement in August 1974 that inflation was declining, that is a rather pathetic justification for the disaster which the incoming Labour Government were left to tackle. In coping with the crisis the Labour Government of 1976 had two choices. Faced with pressure from the IMF, they could have cut public spending. The alternative was increased taxation. They chose to impose the national insurance surcharge instead of introducing more cuts in public spending, which would have had a depressing effect on the economy.
          Mr. Stuart Bell: Does my hon. Friend agree that the Chancellor of the Exchequer of 1974 did not say that inflation was declining? In fact, he said that inflation would be 8·4 per cent. Secondly, the Labour Government of 1974, like other Governments throughout the Western world, and certainly in common with the Governments of Third world countries, borrowed to keep the economy in balance following the fourfold rise in oil prices in 1973. Is it not a fact that the Government are benefiting from the policies into which the 1974 Labour Government entered? They are now able to use North sea oil revenues to pay back the moneys that were borrowed. Surely that is a vindication of the policies of the Labour Government from 1974 to 1976.
          The Second Deputy Chairman of Ways and Means (Mr. Paul Dean): Order. I realise that the hon. Member for Great Grimsby (Mr. Mitchell) has been tempted by recent interventions. I remind the Committee that it is supposed to be debating what should happen to the national insurance surcharge, not recent history.
          4.45 pm
          Mr. Mitchell: The debate is somewhat sterile, Mr. Dean. It is a fact that this Government inherited a benefit which no previous British Government had had. North sea oil revenues presented them with the opportunity to invest in British industry and to rebuild an economy that had been in comparative decline for decades. That benefit should have been the solution to our problems, but it has been frittered away to pay for manufactured imports that have destroyed jobs in Britain. Tax revenues have been used internally to finance the unemployment which the balance of payments effect has created.
          The national insurance surcharge has been a tax on jobs, and I ask the Committee to recognise that circumstances alter cases. Unemployment rocketed under the Government's policies, and from 1979 there was no justification for retaining the surcharge. I accept that unemployment has been an accidental by-product of the Government's policies, in the sense that they did not expect it. They thought that inflation would be reduced painlessly merely by controlling the money supply. They did not understand — this is a reflection of their economic ignorance—that monetarist economic policies could work in bringing down inflation only by producing a depression of the sort that ensued. Unemployment was
          556
          the inevitable connection between control of the money supply and inflation. However, monetarist policies have been pursued and the result has been under-used resources and economic decline since 1979.
          Unemployment has continued to rise, but the Government have argued that the abolition of the NIS would lead to greater borrowing. They should have borrowed far more to stimulate the economy, and the need to do so was recognised by President Reagan, that belated convert to Keynes. Indeed, Reagan is almost a posthumous convert. The newly-elected Reagan Administration was dedicated to Thatcherite policies, to monetarist economics. It quickly discovered — the United States has an open and democratic system—that the howls of pain from industry and the unions were such that a different approach had to be found. The United States political system is sensitive and the Reagan Administration realised that it was necessary to expand the economy by deficit financing. The British Government should have taken the same course. If the Government were not prepared to do that, they should certainly have abolished the national insurance surcharge. Its abolition has been urged constantly by the Labour Opposition.
          Dr. John Marek: My hon. Friend said earlier that he thought that the rapid increase in unemployment of three or four years ago was a surprise to the Government. I am inclined not to take such a charitable view. I think that they increased unemployment deliberately. It must have occurred to the Government that the early abolition of the surcharge would have a beneficial effect on unemployment. The fact that they have only recently decided to abolish it is a sign that the Government's policy was deliberately to keep unemployment at a high level.
          Mr. Mitchell: There are two explanations, and both are discreditable to the Government. The Prime Minister pleads innocence at the accusation that her Government have increased unemployment. She gets out the glycerine and puts it in her eyes. She says that unemployment is a world phenomenon and is something over which she has no control. The Government's defence is shifting now and they are saying that unemployment is unavoidable during the transition to the new microchip economy.
          There are only two explanations for the huge surge in unemployment. One explanation is that it was deliberate. As my hon. Friend for Livingston (Mr. Cook) has said so graphically, unemployment for the Government was the answer and not the problem. Perhaps they considered it to be a means of disciplining the unions and making working people so scared about losing their jobs that they would not ask for wage increases. Alternatively, the Government did not realise that the inevitable consequence of their policies was unemployment. We can accept the Machiavellian explanation, or the naive explanation, but neither leaves the Government with much credit. Being a charitable person, I blame the Government for naivety, stupidity and incompetence. My hon. Friend the Member for Wrexham (Dr. Marek) is welcome to place a more sinister interpretation on the facts that are before us.
          The fact remains that unemployment was out of control and was still rising. However, the Government chose to retain the national insurance surcharge, notwithstanding the constant pleading of the Labour Opposition to abolish it. That pleading was echoed by the CBI on the rare

          557
          occasions when it managed to get up off its knees. The sore-kneed CBI was bold enough to ask, first, for a reduction, and then for the abolition of the surcharge. We are now discussing its proposed abolition; we are here to bury it, not to praise it. It is important to emphasise the consequences that its retention has had. It has been a direct burden on the costs of manufacturing industry, which is crucial to jobs and Britain's survival in a competitive world market.
          The Government say that the key to survival is to bring down our costs, and they are undoubtedly correct in that analysis. Their mistake is to offer us techniques that will not bring down costs, but will increase them. The Government offer the techniques of monetarism, deflation, call it what one will. Those techniques aim to reduce costs by using the pressure of unemployment and high interest rates. I do not know how high interest rates can reduce costs. Interest rates are at historically high levels. Given the low rate of inflation, it is criminal that the Government have not reduced them.
          One would have thought that the central part of policy of any Government sensitive to the desire for home ownership, and a desire to stimulate the economy and produce investment, would be to bring down high interest rates, but they have not done so. Why have the Government not reduced interest rates ? They have not done so because they regard them as a discipline and a pressure on costs.
          The only way to reduce costs—the Government have avoided this measure and regard it as economically reprehensible—is to expand. There is no better way of bringing down unit costs than by increasing 'production; nor is there a better way of improving productivity. That is a simple correlation. The OECD's main economic indicators show that in the past year our unit costs have risen, despite the self-congratulation of the Government on bringing inflation down from the heights to which they increased it. Our unit costs are still increasing, while in the past year unit costs in America, Germany and Japan have come down substantially because they increased output more. The national insurance surcharge has imposed an extra burden on costs which should have been removed years ago from our competitive economy.
          This measure has been left too late and has been undertaken too slowly. The Government must go further, because they have left this measure too late. It is not sufficient to give compensation and provide the boost needed by manufacturing industry. We are in the position of the man in the old Yorkshire joke. His friend comes round asking for Tom. His wife comes to the door in tears and says, "I'm sorry to have to tell thee, but Tom is deed. Come in and look at him." They go upstairs to see Tom lying in bed. His friend says, "Well, he looks well, dun't ee". His wife says, "So he should, we've just come back from Bridlington." The Government say to British industry as it expires, "You are looking good. We have just taken off the national insurance surcharge."
          Mr. Bell: I am always delighted to follow my hon. Friend the Member for Great Grimsby (Mr. Mitchell) in his analysis of the economic position in relation to the abolition of the national insurance surcharge. I am sure that the Committee enjoys not only the way he makes his speeches but the humour with which he laces them.
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          We are discussing a matter on which, I believe, the House is unanimous. All hon. Members welcome the abolition of the national insurance surcharge. The surcharge payable under the National Insurance Surcharge Act 1976 is now being abolished. We have heard a great deal on the matter since the surcharge was imposed as part of a £2,000 million package, designed to raise revenue for the Exchequer. It was a tax that was going not into the national insurance part of the Budget but into the Treasury side of finance. The insurance surcharge was a new tax. The existing 1 per cent. surcharge is to be abolished from 1 October 1984, except in the case of local authorities, police authorities, the Scottish fire authorities, magistrates courts committees and probation and after-care committees, for which the effective date of abolition of the tax is 6 April 1985.
          None of that news is welcome to the people of Teesside, whom I represent. The local authority discussed the matter. The budget of the police authorities in Cleveland for the present year has been reduced by £1 million. They would have benefited if the national insurance surcharge had been removed now, but they must wait until 6 April 1985. The port of Cleveland includes a great complex of industrial chemical materials. ICI and Monsanto Chemicals are sited in Cleveland, and chemicals are shipped up and down river. Cleveland needs a high budget for its fire authority. That authority would have benefited had the national insurance surcharge been abolished at the same time as it was abolished for the private sector. Cleveland's social services, magistrates courts, probation and after-care committees would have benefited also from the abolition of the surcharge now. This is a matter of priorities. The Government do not have the same priority for social service, fire and police authorities as they have for the private sector.
          I should like to lay one matter to rest once and for all, because this is probably the last time we shall be discussing the national insurance surcharge. When the legislation was placed on the statute book, the tax was designed to raise money. The entire thrust of the Budget is in the interests of the City of London. It is difficult to accept the criticism of Conservative Members about a tax on jobs and a money-raising exercise when the aim of the Budget is to release money into the City of London to improve its competitiveness. The Budget is not in the interests of job creation, as we understand that term.
          The expected yield of the national insurance surcharge was £910 million in 1977–78 and about £1,000 million in a full year. From the time the tax was imposed, a great fuss was made about it by the Conservative party, which sought to wring as much political capital from the tax as it could. Conservative Members are still seeking to wring all the political capital that can be extracted from the surcharge, even in its death throes and when it is about to be abolished. When the scheme was introduced, Conservative Members called it the job destruction scheme. They did not consider the £500 million we were spending on job creation schemes at the same time. None of the forecasts which have been resurrected by the Conservatives ever came to pass.
          Conservative Members were worried that employers would react in a variety of ways. The criticism was that employers would raise prices to make good the addition to their costs, absorb the additional costs, at the expense of profits, and reduce the size of their labour force. The fact is that, in 1979, when Labour left office, inflation was

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          down to 8 per cent. and more people were in work than ever before. I shall make an aside that might not appeal to Conservative Members—more trade unionists were in work in 1979 than at present. Fewer companies were going broke than now.
          Since the Budget statement, the Opposition have consistently referred to the fact that last year more bankruptcies occurred among small firms than ever before. Companies in 1979 achieved higher profits than they do at present under the Conservatives. Since 1979, there has been uncertainty and insecurity. Many businesses have had to consider whether they can remain viable. The criticisms made by the Conservatives in 1979, which have continued to this day, have never been justified. I say that on a factual basis.
          Mr. Bermingham: I have listened carefully to my hon. Friend. Does he agree that it is ironic that it takes between six and 12 months to remove a tax, which everyone says it is desirable to abolish and two or three months to impose a tax on, for example, building alterations, which everyone says is counter-productive?
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          Mr. Bell: I am grateful to my hon. Friend for drawing attention to yet another of the anomalies in the Budget. The great euphoria with which Government Back Benchers welcomed the Budget has already been punctured in a number of ways. My hon. Friend and I will continue to expose its weaknesses.
          The abolition of the national insurance surcharge is confined to the private sector. Yet again, the Government are subtly discriminating against the public sector. Does not the Chief Secretary realise that the steel and coal industries, which suffer heavily from interest charges on money that they have borrowed, need some assistance? Both industries are attempting to be competitive, and both should be helped. The entire thrust of the Government's argument is in favour of competitiveness and exports. The steel and coal industries both export goods, yet they are to be penalised because the Government will not extend to them the abolition of the national insurance surcharge.
          We have heard yet again today, and will no doubt hear again in future, about the Government's concept of rolling back the frontiers of the state. Those frontiers might be rolled back for private firms, but they are certainly not being rolled back for public firms. About 7,500 able-bodied men on Teesside work in the steel industry. They have fought hard to make it competitive, while seeing their labour force reduced from 25,000 under the Conservative Government. They want to compete with European countries, Japan and South Korea—yet they will not benefit now from the abolition of the surcharge. Therefore, it is right to draw the attention of the wider public to the facts.
          We had hoped that the great battle about the nationalisation of the steel and coal industries had long since been buried. But those battles are not over and we now know that the industries will continue to be penalised. Nothing will be done to ease their burdens—they will not even have the benefit of the abolition of the surcharge.
          In the Chief Secretary's speech during the Budget debate, he said:
          "I now come to the broad sweep of the Budget. It has two themes. It re-emphasises our determination to continue the fight
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          against inflation through sound financial policies, and it introduces a radical programme of tax reforms."— [Official Report, 14 March 1984; Vol. 56, c. 420.]
          The fact that the abolition of the surcharge will not benefit local authorities, police authorities, Scottish fire authorities, nationalised industries, magistrates courts and probation and after-care committees belies his statement.
          In response to my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) earlier today, the Chief Secretary said that he hoped one consequence of the abolition of the surcharge would be a greater volume of exports. It is rather like the feeding of the 5,000—there are so many different mouths to feed that no one knows which will be fed.
          Teesside has a large number of small businesses, and would welcome the abolition of the surcharge, provided that the £350 million that is to be given back to private industry in 1984–85 and the £850 million that will be given back in a full year is used for job creation. Our fear is that the money will go into profits, dividends and portfolio investment abroad—not into job creation. The coming year will be a great test of the Government's theory that there will be an upsurge in jobs throughout the country.
          The Government constantly urge competitiveness. In a recent speech the Chancellor said:
          "Inflation destroyed our competitiveness, our profits, our investment, and undermined incentives and industrial relations. The reduction of inflation to its present low levels and its further reduction, are the preconditions for creating new jobs."
          As we know, the contrary is true. The reduction of inflation to 4 per cent. or 5 per cent. has been at the cost of jobs. We as a nation and the Conservative Government have been prepared to put 2 million additional souls on the dole. No other country in the western industrialised world has sought to balance the rate of inflation with unemployment. This is the only Government that have destroyed employment prospects to bring down inflation.
          We hope that the abolition of the surcharge will lead to the creation of more jobs. We hope that it will bring more employment to Cleveland, where 18 per cent. of the male work force is unemployed. We hope that it will help firms such as Davy Modules in my constituency, which has set up a new plant. We hope that there will be better prospects than those held out by the CBI yesterday in its report about business reaction to the Budget and our future prospects. We are about to expand from a narrow base and the prospects for business reflected by the CBI extend for no more than six months.
          The abolition of the surcharge—which we welcome —is part and parcel of the shifting of our economy from the so-called manufacturing sector to the service sector. While we accept that, we do not believe that it will have the consequences that the Government have suggested.
          Mr. John Farr: To hear the miserable succession of Opposition speakers, one would not have thought that the Government were making a substantial change in direct taxation by removing the national insurance surcharge. Opposition Members have said that they welcome the abolition of the surcharge, but that it is long overdue, that, anyhow, it is unnecessary in their constituencies, and that, in any event, it was not the fault of the Labour Government that it was first imposed.
          My constituents view the abolition of the surcharge as a great opportunity and a milestone. Employers and employees alike believe that there are great opportunities for those engaged in business enterprise and small

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          companies. The surcharge is far more than a tax on jobs — it is a tax on incentives and on exports. The surcharge is one reason why our export performance has been so dismal, why our industrial capacity has been declining and why our industrial performance was so poor until 1979–80. The Government are now abolishing that surcharge.
          The Budget is excellent, and it contains a large number of good points. One could debate for many hours which is the more significant improvement in the economy that has been introduced by my right hon. Friend the Chancellor. I believe that, over the next few years, the abolition of the surcharge will prove to be one of the most significant improvements ever to take place in our economic management.
          What appals me from what I have heard so far in the Opposition speeches is that a Socialist Government imposed the surcharge, and that Labour Members will vote against its abolition. I understand that the Opposition will vote against the Finance Bill throughout the day. I should say if I were not such an experienced politician that what revolts me about politics is how insincere people can be in criticising the Government, who in this case are sweeping away the surcharge originally imposed by a Socialist Government. How can the Opposition be so double-faced as to complain that the Government are not doing enough—
          Mr. Bermingham: Will the hon. Gentleman give way?
          Mr. Farr: No.
          In the words of an Opposition Member, the surcharge should be abolished also in relation to the nationalised industries, the Government should make more such changes, and their response is insignificant. Another Opposition Member even had the arrogance to say that the abolition should have taken place years ago. But the Socialists took no steps before 1979 to reduce or limit the impact of NIS upon jobs, enterprise and exports.
          It is interesting to consider, had my right hon. Friend not introduced clause 113 and relieved the great load on the backs of so many working people, what alternatives he could have introduced in the Budget costing roughly the same to the Exchequer as the abolition of NIS.
          Mr. Bermingham: With great respect to the hon. Gentleman, he has missed the point. Everybody welcomes the abolition of NIS. The question that I must ask the hon. Gentleman is: if its removal is beneficial should it not have been removed forthwith in 1979?
          Mr. Farr: That could not have been done. When the Conservatives returned to office in 1979 there were many major financial problems of pressing importance to be solved after years of Socialist Government. Clearly, a sense of priority was necessary. I believe that the priorities have been achieved in the right way.
          Sir Raymond Gower: Are not the Opposition very attached to penal taxes that are damaging to industry? My hon. Friend will recall that the Labour Government introduced the selective employment tax that was so injurious.
          Mr. Farr: I thank my hon. Friend. He has an excellent and long memory. He knows as well as I do that a
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          Socialist, whether in or out of government, is never happier than when he or she is thinking up a new tax and imposing it upon the wretched taxpayer.
          In relation to national insurance surcharge, my right hon. Friend must have turned the matter over carefully in his mind. I know that its abolition has been at the top of the Government's list since 1979, but there must be a sense of priorities in these matters. Let us suppose that clause 113 had not been introduced, and that the surcharge had remained in existence for another year. What alternative improvements could my right hon. Friend have made? He has greatly increased personal allowances over the whole range, well above the rise in prices and the cost of living. I do not believe that Opposition Members, who are arguing so strenuously against clause 113, would have said that personal allowances should have been increased more than they were.
          Mr. Bell: We are not arguing against clause 113.
          5.15 pm
          Mr. Farr: What other methods of fund raising has the Chancellor under examination? If he had left intact the national insurance surcharge, could he have done something about, say, the massive increase in the cost of road fund licences, perhaps by reducing the imbalance of payments and expenditure? Again, I have no doubt that the Chancellor has considered that approach, as representations have been made to him by motoring organisations and local authorities.
          Perhaps my right hon. Friend could have changed his policy in relation to Customs and Excise duty and not increased duty on beer and tobacco, or even decreased it, but retained NIS. I have no doubt that the Chancellor considered such alternatives and many others. His decision to abolish NIS at long last, and to do away with what I call a stain on the enterprise and initiative of British workpeople, which was imposed by the Labour Government some years ago, is not a day overdue. If the Socialists are determined to vote against clause 113, I shall certainly support my hon. Friend in the Lobby tonight.
          Mr. Mark Fisher: I am sure that the House has enjoyed the contribution of the hon. Member for Harborough (Mr. Farr). Indeed, Opposition Members were enrapt over his reasons and attempted explanation of the fact that this all-action, dynamic Conservative Government have taken five Budgets to do what the hon. Gentleman so studiously and earnestly recommends. His contribution to the debate was most interesting.
          I should make clear the point that seems to have escaped the hon. Member for Harborough. Opposition Members welcome the abolition of the NIS. If I say that slowly enough, perhaps the hon. Gentleman will understand and recognise the Opposition's view. Indeed, we shall support the clause.
          Dr. Marek: I notice the hon. Member for Harborough (Mr. Farr) shaking his head. It would be better if my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) said two or three times, to get the message across, that we all welcome the abolition of NIS. Has that message got across to the hon. Gentleman?
          Mr. Fisher: I am grateful for my hon. Friend's assistance. I see now that the hon. Gentleman has got the gist of our argument. The point has been made.

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          All would have been well in the debate if the Government, through the Chief Secretary or the Chancellor, had modestly brought the change to the House, saying, "Here is a change that we recommend." The Government know very well that the Opposition support the measure. If they had done that we should have been able to proceed with the Bill more quickly. Unfortunately, although the Chief Secretary is a modest fellow and would have left the matter to the House—the Opposition would have supported him—the Chancellor is not so modest. He is a more ebullient and complacent character. He made grandiose claims for this tax change, and it is those claims that we dispute.
          The Chancellor of the Exchequer had the cheek to claim that the abolition of the national insurance surcharge would help to provide employment. In his Budget statement he went to great lengths to make that point. That really is a cheek from a member of a Government under whom unemployment has risen from less than 1 million to more than 3 million. Every constituency bears the scars of the steps that the Government have taken to increase unemployment. In the past few years, summer school leavers in my constituency and in those of most hon. Members have had little chance of finding jobs.
          It is impertinent of the Government to say now that they are doing something to help employment. It is rather like Sweeney Todd surveying the blood and the wounds of lost job opportunities and saying that he is going into the Elastoplast or Band-Aid business. That is the scale of it, and it is an impertinence.
          Mr. Maples: While we are on the implied subject of hypocrisy, does the hon. Gentleman agree that under the previous Labour Government unemployment doubled, and that it increased under every Labour Government?
          Mr. Fisher: Every hon. Member and every member of the public would love to return to the levels of unemployment under the previous Labour Government. If this Government could reduce unemployment to below 1 million again, I am sure that even Labour Members would congratulate them.
          Mr. Bell: For the record, is not it true that between 1945 and 1951 unemployment fell under a Labour Government?
          Mr. Fisher: I think that we are talking about history when we should, perhaps, be discussing the Finance (No. 2) Bill 1984. The Chancellor of the Exchequer claims that abolition will help employment, but how many jobs will it create, and when will they be created? To find out the Government's view, we should look at the "Financial Statement and Budget Report", but, strangely, there is no forecast there of a decline in unemployment. Perhaps, then, we should turn to the public expenditure White Paper, but this year the White Paper says that in 1984 there will be no fall in the unemployment rate. As we know, in the first few months of this year the underlying trend of unemployment has regrettably been inexorably upwards.
          Will the Chief Secretary make good that omission from the Budget statement and tell the Committee when the benefits of removing the national insurance surcharge will be reflected in a reduction in the number of unemployed? I refer him to the evidence which the Treasury and Civil Service Committee heard from Lionel Murray, the general secretary of the TUC. Very pertinently, in evidence to the Select Committee, he said:
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          "The fact is that previous reductions in the national insurance surcharge have not increased employment and indeed I see that the chairman of GKN, for example, said this very clearly in his statement last week."
          So, unless the Chief Secretary has something to tell us, there is no evidence that this measure will have much effect on employment or unemployment. In a full year it will release £865 million, but it is difficult to see how that money will affect employment.
          Sir Raymond Gower: If the hon. Gentleman is so convinced that abolition will not confer any benefits and will not reduce unemployment, why are he and his colleagues so insistent that they support it? If it is not to confer any benefits, why do they intend to support something that will cost a good deal? According to the hon. Gentleman, abolition will be quite ineffective.
          Mr. Fisher: I am grateful to the hon. Gentleman for bringing me to my next point. Abolition will undoubtedly be effective, and in the private sector it should lead to higher profits. I should put it on record that Opposition Members are definitely in favour of higher profits, despite what Conservative Members so often say. We certainly support higher profits in industry, and abolition of the national insurance surcharge will lead to that.
          However, what will happen to those profits? If, as I suspect, private industry becomes marginally more profitable as a result of abolition, will that be reflected in lower prices? I should be interested to hear the Chief Secretary's opinion. Can he name an industry or company which he believes will lower its prices as a result? I shall leave that question with him.
          Will higher profits be reflected in higher wages? That is quite possible and would be greatly welcomed in many instances. Will higher profits be reflected in more investment? If so, we would 'welcome that. However, we are constantly told by the Chief Secretary that we should take the Budget as a whole, and it is interesting to note that many other measures, such as the withdrawal of first-year capital allowances, penalise capital investment in industry. So it is a strange double-take by the Government.
          I very much fear that for a great many companies those higher profits will not be reflected in prices, wages, investment, design or research and development, and that much of that £865 million will go on higher dividends. Those dividends will certainly benefit one or two people involved in those private companies, but an increase in the dividend take will not address the problem of creating employment, contrary to the Chancellor's grandiose claims.
          Sir William Clark: I am sure that the hon. Gentleman will be fair. As he knows, much of the return on capital is dividends out of retained profits. The rate of return on investment in equities—which includes manufacturing industry, and industry generally — is extremely low. Therefore, does the hon. Gentleman not agree that it is no good calling for more investment unless a better return is given on those investments? In the past, under successive Governments, the rate of return on gilt-edged shares has been much higher than on equities. That is the imbalance that must be changed.
          Mr. Fisher: If only Conservative Members were as well-intentioned, good-hearted and innocent about the world as the hon. Gentleman. Sadly, people do not respond to profits like that. If the hon. Gentleman's thesis

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          is correct, there should suddenly be an enormous increase in capital investment in Britain, particularly in manufacturing industry, when dividends are high. However, when dividends were high in the early 1970s that money went abroad and into property. Property values rocketed when dividends were extremely high in 1971, 1972 and 1973. Such is the cynicism of private equity holders in this country that there is no sign that when dividends are high they rush to pump that money into manufacturing industry. That is why our manufacturing industry is so under-capitalised. That money has gone abroad and into speculative ventures, such as property, and not into the industrial infrastructure, despite the desperate need.
          I wish that private investors were as well-intentioned and good-hearted as the hon. Gentleman, and I mean that sincerely. However, the facts are against him. When dividends are high, they are not translated into investment in manufacturing industry. The truth is that, other than verbally, the Government do not care about employment. Ministers make protestations on television, but their actions are antagonistic to employment and amount virtually to an attack on it.
          The Prime Minister makes a great point of telling us that we must get our competitiveness and productivity right. Productivity and competitiveness have improved on paper, but many people suspect that one reason why unit costs have come down and competitiveness has improved is that many companies have gone bankrupt. If the number of batsmen is reduced at the beginning of the cricketing season, the average increases because the number of runs scored is divided between fewer batsmen. Similarly, by reducing the work force, productivity appears to increase. However, real productivity and competitiveness have not changed much.
          5.30 pm
          During the past four years the Government have made a concerted attack in the name of productivity and competitiveness on labour-intensive industries. With the withdrawal of capital allowances the Government are now attacking capital-intensive industries and showing themselves to be inconsistent, dangerous and daft. The Government should care about employment and jobs, for the important social reason that government is about people, and one of the most dignified things for a human being is the right to earn a living, support a family and contribute to the well-being of society. That is a simple, basic human aspiration, and it will be true for as long as we have the puritan work ethic. The Government must recognise that. That is the important social reason for employment. The economic reason for employment is that it increases the tax revenue and its base, and increases consumer demand.
          Both points seem to have escaped the Government's previous two Chancellors, and they appear to be in danger of escaping the present Chancellor. Even he would agree with the rough equation that the level of employment depends on the output demanded and on the mix of capital and labour that is necessary to produce that output and satisfy the demand. Even Conservative Members will agree that that is a basic truism.
          One way to bring that about is to boost demand—to reflate demand in the economy, as so eloquently outlined
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          by my hon. Friend the Member for Great Grimsby (Mr. Mitchell). The Government, however, have depressed demand. They should boost output, but they have depressed it.
          Despite the abolition of the national insurance surcharge, which comes too late, like the cavalry coming over the hill when the battle is over, the Government have concentrated almost exclusively on the capital and labour mix, and got it wrong. Now they have even changed their mind about that. During the first four years the Government's medium-term financial strategy was to control inflation and reduce interest rates, to create the climate for investment. In this year's Budget the Chancellor decided that there was too much investment and that we needed to concentrate on labour. This year's tax measures relate to labour. The Chancellor presented the abolition of the national insurance surcharge as a way of tackling labour costs rather than capital costs. Although the medium-term financial strategy is nominally intact, we see a complete volte face. I should be grateful for the Chief Secretary's views about that, because the Government appear to have changed tack.
          Despite the measure the Government are attacking labour, and with the measure they are attacking capital. With that change of emphasis, the Government have hoisted a flag to show that they are lost. Unfortunately, when they are lost, the economy and the country are likely to be becalmed and in a fog of misapprehension and misunderstanding. Despite the measure, which we welcome, the Government will damage the economy, the people, and the country.
          Sir Raymond Gower: I start by emphasising that the hon. Member for Stoke-on-Trent, Central (Mr. Fisher), supported by his hon. Friend the Member for Wrexham (Dr. Marek), said that the Labour party was in favour of the measure. However, he expressed great doubts about it because the Government—especially the Chancellor—cannot prescribe with certainty — [Interruption.] A combination of many factors has caused difficulties for many of our industries. In my experience, large industrialists and those who must supervise the difficult problems of running small firms, are of the opinion that this is a severe handicap to industrialists and all those who seek to provide employment.
          The hon. Member for Stoke-on-Trent, Central ranged widely over the financial spectrum. I agree with my hon. Friend the Member for Harborough (Mr. Farr) that this relatively narrow matter is a cumulative achievement. It is part of the process commenced by my right hon. and learned Friend the previous Chancellor and has been carried on while there have not been available great sums of money for easy disbursement. Times have been difficult. The hon. Gentleman gave the impression that we have no desire to reduce unemployment. That is a statement often made by Opposition Members. I am anxious, as are all my right hon. and hon. Friends, to reduce unemployment substantially as soon as possible. I hope that the hon. Gentleman accepts that.
          Mr. Fisher: I accept the hon. Gentleman's sincerity. I wish that he would put greater pressure on his Government to implement policies that would do that. The sincerity of Tory Back-Bench Members is not in doubt, but the actions of the Government are not conducive to reducing unemployment. They show categorically that the

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          Government have deliberately followed policies, the necessary price for which — so they believe — is a reduction in employment. We believe that they are wrong.
          Sir Raymond Gower: I wish it were even half as easy as the hon. Gentleman implies. If it were, France, under its Socialist Government, would not be facing problems such as having to shed 20,000 jobs in the steel industry alone. Throughout the world Governments of different political outlooks are facing great difficulties. Those who manage our industries now have been facing different circumstances from those in the early 1970s.
          Mr. Bermingham: Does the hon. Gentleman agree that the American economy, which has taken the opposite policy to ours, has an expanding steel industry and is taking on more employees?
          Sir Raymond Gower: We cannot possibly compare the American economy with ours. America can subsist without exporting. It could be completely independent. It is a continent, and has all the necessary raw materials. We cannot compare it with a small island which must export two thirds of its output to exist. To do so is a perversion of my argument.
          All countries that are comparable with Britain face great problems, and we must consider this valuable change in that context. I do not suggest that the change will make our job easy, but had the surcharge not been first reduced and then abolished, how many more jobs might have been lost? Labour Members have welcomed the change with many reservations, but I welcome it because I believe that the surcharge was a severe handicap to industry. It is significant that a Labour Government imposed this obnoxious tax, and proposed previously another obnoxious tax — the selective employment tax. They contributed to unemployment and left a nasty heritage for the Governments who followed them. In 1970 the Conservative Government had to get rid of the selective employment tax, and now we have had to get rid of the national insurance surcharge, with great difficulty.
          Mr. Fisher: I do not wish to divert the Committee too much, but I should point out that when those two taxes were introduced, economic circumstances were different, with high profits in companies and great difficulty in tackling tax lawyers, who advised companies so skilfully that the reveue from corporation tax was always low. Many companies contributed to our tax revenue only through selective employment tax and national insurance surcharge. Had the tax lawyers — there are several eminent tax lawyers in the Government ranks—not been so successful in advising companies, selective employment tax and national insurance surcharge would probably not have been necessary.
          Sir Raymond Gower: The hon. Gentleman said that it was strange that the Government now appeared to be dealing with the needs of employment whereas previously we were more concerned about capital investment. However, it was our experience that in some cases the former allowances meant vast payments that produced few jobs. The hon. Gentleman should be pleased that the emphasis is now on labour, not on capital. However, again he welcomed it, with many reservations.
          We still face formidable problems, for which we cannot seek easy solutions. Our difficulties are equalled and
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          sometimes surpassed in other countries. This is just one useful step that could lead to an improvement in the employing capacity of industry, which we all desire.
          Mr. Bell: I am most grateful for the opportunity to address the Committee again, because I wish to reply to some of the points made by the hon. Member for Vale of Glamorgan (Sir R. Gower), who has enlivened our proceedings. My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) did not doubt the sincerity of the hon. Gentleman or of other Conservative Members in wishing to reduce unemployment. No one would doubt the sincerity of Marshall Haig and Marshall Joffre in the first world war, who sent millions of men to their deaths because they believed that that was the way to win the war. No one doubts that the belief of Conservative Members, which has run like a thread throughout Conservative policy since the early 1900s, is to create reservoirs of unemployment so as to create the right economic conditions for capital.
          5.45 pm
          However, Conservative Members seem to wish to forget the increase in unemployment since 1979 and the fact that the Chancellor has built into the economic equation 3·1 million people officially unemployed. They do not draw attention to that fact in every speech made from the Dispatch Box or elsewhere. There is a great wringing of hands about unemployment, but I repeat that the abolition of the national insurance surcharge is not necessarily aimed at the creation of jobs. It may be aimed at adding to the profits of companies. The Chancellor said that it is aimed at the creation of jobs, and the Chief Secretary said that it is aimed at exports, but the fact is that the abolition of the tax is akin to feeding the 5,000— [interrution.] If the Hon. Member for Croydon, South (Sir W. Clark) wishes me to speak for the next three hours, I should be happy to do so and I hope that he will sit there and listen to me. I have tried to put my arguments in a friendly fashion, accepting the sincerity of Conservative Members. If they wish me to adopt a different tone, we shall go through all the points that we can and continue the debate for many hours.
          The abolition of the national insurance surcharge, which the Opposition welcome, might increase investment overseas or increase profits, but it will not create employment. I said earlier that on Teesside we expect some job creation in the area
          One reason why I intervened a second time was because of the remarks of the hon. Member for Harborough (Mr. Farr). It is a pity that the hon. Gentleman will not be a member of the Standing Committee on the Bill, because we should have welcomed a continuation of the remarks that he made today. He began by saying that he had heard a series of miserable speakers. I hope that he meant a series of what he might describe as miserable speeches, and that he was not suggesting that Opposition Members are miserable people.
          The hon. Gentleman tried to advance the myth, which the Conservative party has supported since national insurance surcharge was introduced in July 1976, that it creates unemployment. However, in 1976, Select Committees of the House estimated that only 10,000 jobs would be lost as a result of the surcharge. The tax was so successful that in 1978 it was increased by my right hon. Friend the Member for Leeds, East (Mr. Healey) to 3·5 per cent., and its cash yield was £1,030 million.

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          The hon. Member for Vale of Glamorgan asked why the Labour Government had introduced selective employment tax. The emphasis of the Labour Government was on manufacturing production, goods for export and wealth creation through manufacturing. We tried to move people away from the service industries into manufacturing. That was the basis of selective employment tax but, as my hon. Friend the Member for Stoke-on-Trent, Central said, we were somewhat defeated in our purpose by skilful tax accountants, who reduced the revenue from the tax and encouraged investment in the service sector as opposed to the manufacturing sector.
          We welcome the abolition of the surcharge, but we regret that it has not gone wide enough. I hope that the Chief Secretary will tell us why local authorities, police authorities, Scottish fire authorities, magistrates courts, probation and after-care committees, and the public sector have been excluded. Why does the private sector need such a boost, when nationalised industries such as coal and steel, which sell products abroad in a highly competitive market, do not?
          We hope that the Chief Secretary will give us the answers to the questions that we have put and that we continue to put. We welcomed the reduction by 1 per cent. of the national insurance charge by the Foreign Secretary when he was Chancellor of the Exchequer. We regretted then that he did not have the courage of the present Chancellor to abolish it altogether. In a difficult economic climate, he might have helped more people to stay in work when the dole queues were lengthening and he might have helped to sustain more businesses that were going bankrupt.
          We welcome the abolition of the national insurance surcharge also because that was one of the manifesto commitments of the Labour party. We welcome at every opportunity the Conservative party carrying our Labour party manifesto commitments. We urge the Conservative Government to do this time after time in the months and years ahead.
          Mr. Peter Rees: I suppose it is worth reflecting occasionally on how our debates strike the unprejudiced observer outside the House, whether he is listening to the radio or reading Hansard. I dare assert that this debate must strike unprejudiced observers as having drifted at times far from reality. I hope hon. Members will allow me to remind them that we are debating the question that clause 113 should stand part of the Bill.
          Mr. Austin Mitchell: That is an attack on the Chair.
          Mr. Rees: The Chair is well able to look after itself without the intervention of the hon. Member for Great Grimsby (Mr. Mitchell) from a sedentary position; his command of the rules of relevance and order struck me as being tenuous in the extreme.
          Every hon. Member who has spoken from the Opposition Benches has prefaced his remarks by welcoming the abolition of the national insurance surcharge. Then with a sigh of relief they have changed gear and have gone on to qualify their welcome with a mass of irrelevancy and inaccuracy. Perhaps the best service that I can do the Committee is to set out as briefly and succinctly as I can some of the basic facts. It is worth reminding the Committee, as some of my hon. Friends
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          have done, particularly my hon. Friend the Member for Vale of Glamorgan (Sir R. Gower) and my hon. Friend the Member for Harborough (Mr. Farr) that this tax was introduced by a Labour Government who appeared to have learnt nothing from the inadequacies of selective employment tax. When they introduced the national insurance surcharge, unemployment stood at over 1 million. I know the hon. Member for Workington (Mr. Campbell-Savours) will allow me to correct his inaccuracy; he said unemployment was below 1 million, but it was not. The figure was 1,313,000. The surcharge was introduced at 2 per cent. Two years later in 1978—and I give them this—unemployment had dropped by 14,000.
          Mr. Campbell-Savours: If the right hon. and learned Gentleman refers to the Official Report tomorrow he will see that I did not make any reference to election year but to 1977. I think he will find that I am right.
          Mr. Rees: I never referred to election year. I referred to the year it was introduced. The figures for 1977 are the figures that I have just given to the House. Perhaps the hon. Gentleman will do me the courtesy of reading my speech and comparing it with his. If he finds that he was in error I have no doubt that, with his habitual courtesy and regard for the truth, he will make an ample and honourable apology to me on a suitable occasion, perhaps upstairs in Committee Room 10.
          In 1978—and I give this to Opposition Members—unemployment had fallen by 14,000, so it was still 1,299,000. Encouraged by that, and no doubt encouraged by their new-found sympathy with the Liberal party, because those were the heady days of the alliance that kept that Administration in power for another two years—
          Mr. Kirkwood: I was not a Member of the House at that time.
          Mr. Rees: I know that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) was not in the House then, but if he cares to distance himself from the policies that were advocated by the hon. Gentleman who then represented two thirds of his constituency and whose campaign I understand he masterminded with such assiduity and skill, I shall willingly give way. Is he prepared to say publicly that he would now prefer to distance himself from the activities of the Liberal party in alliance with the Labour party under that Administration?
          Mr. Kirkwood: The Chief Secretary must be joking. The period of the Lib-Lab pact was one of the most successful periods of Government that the country has seen since the war in terms of the reduction in inflation and a series of other economic factors with which I shall not detain the Committee. The right hon. and learned Gentleman should not look to me. It is right that I was not a Member of Parliament then, but I in no way repudiate that period. The history books will show that that was one of the most successful periods of Government.
          Mr. Rees: There will be other occasions to explore that bold assertion. I think that historians may reach a different conclusion.
          Let me remind the Committee that, having introduced this ill-judged tax at 2 per cent., a couple of years later the Labour Government raised it to 3·5 per cent. There was very little attempt to justify the tax in terms of what it would do for investment or jobs. It was just a crude

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          response to a crisis that had been created by the profligacy of that Government. Opposition Members who doubt that would do well to reflect on the debates. They will see that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) picked up a point as a result of which the right hon. Member for Leeds, East (Mr. Healey) admitted that the introduction of the tax would almost immediately result in a loss of 10,000 jobs.
          The hon. Member for Stoke-on-Trent, Central (Mr. Fisher) put to me a series of questions; he asked whether I could say over what length of time there would be an increase in jobs. Of course I cannot. The economy is not such a precise machine as those who adhere perhaps to Marxist philosophy would believe—and I do not know the philosophical or economic stance of the hon. Gentleman. There is an area of imprecision. There is a range of factors that even Ministers, with all the resources of the Treasury at their command, should be unwilling to forecast, and I will not satisfy the hon. Gentleman's curiosity.
          Mr. Fisher: Of course I can see the complexity of the issue. Will the right hon. and learned Gentleman then agree that if it is impossible to forecast accurately and responsibly the Chancellor should not have been so bold as to make rhetorical claims for a reduction in unemployment?
          Mr. Rees: I shall associate with my right hon. Friend's rhetoric in the best sense, because I believe that it is founded on good sense and on the likely outturn of events.
          Various points were made by Opposition Members in an endeavour to distance themselves from the simple proposition that commands support from both sides of the House that this is a worthwhile provision because national insurance surcharge is a bad tax. It takes a Conservative Administration to deal with it. It is not often that I carry the whole Committee with me. Therefore I suppose I must savour this moment of exquisite pleasure.
          Mr. Bermingham: Will the Chief Secretary please explain to the Committee why, if it is such a bad tax, it is proposed to continue imposing it on the public sector parts of the economy?
          Mr. Rees: The problem with the hon. Gentleman is that he so often comes in two thirds of the way through a series of debates. Clearly he was not here for the debate on the amendment that was moved earlier by the Opposition. [Interruption.] Perhaps the hon. Gentleman will contain himself now, and on another occasion he might care to listen to the debate.
          I know that he is an agile debater. We know of his exploits in the police courts and we know that he is a man of a silver, agile tongue whose charms are widely appreciated inside and outside the House. All I can say is that perhaps it would advance debate if he were to listen to all the speeches.
          If I may return to the subject which should be engaging our attention—
          Mr. Terry Davis: Yes, please.
          Mr. Rees: The hon. Member for Birmingham, Hodge Hill (Mr. Davis) will recognise that I have been sticking to the clause that we are supposedly debating and that I have generously given way so far to any hon. Gentleman who has sought to intervene if he has had a point that bears on the debate.
          Mr. Terry Davis: The Chief Secretary has made some personal comments about my hon. Friend the Member for St. Helens, South (Mr. Bermingham). I shall speak later in the debate.
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          Mr. Rees: My comments were limited to the intervention of the hon. Member for St. Helens, South (Mr. Bermingham) and I suspect that he is well able to look after himself. I cannot understand how the hon. Member for Hodge Hill can misconstrue my remarks. Perhaps he will explain later. I prefer to revert to clause 113.
          The clause is designed to abolish a tax that is universally acknowledged to be a bad tax and is long overdue for abolition. Labour Members have been taking us to task and claiming that there have been no moves on this front since 1979. They seem to be oblivious of the fact that the tax has been steadily reduced.
          Dr. Oonagh McDonald: The Chief Secretary continually claims that the reduction in the surcharge and its proposed abolition will lead to an increase in the number of jobs. Where are the jobs?
          Mr. Rees: I have so far been dealing with the background of the tax. I do not recall whether the hon. Lady supported its introduction. If she had been listening to my exchanges with the hon. Member for Stoke-on-Trent, Central (Mr. Fisher), she would have heard the answer to her question.
          The tax has been steadily reduced since the Conservative Government came to power in 1979. Finally, it comes to be abolished. I do not believe that the pleasure of the House at our proposal need be qualified. It is a good proposal which deserves universal support.
          Over the past five years., we have been engaged in a process, which will be completed by the Bill, of restoring £3 billion to employers. That money will be available for investment and I was delighted to hear the hon. Member for Stoke-on-Trent, Central say that it may increase profits. If employers are so minded, the money could enlarge their scope for taking on more employees. More important, it will lower unit costs, increase our industry's cost competitiveness, provide a fillip for exports and leave companies with greater resources for investment and, ultimately, sustained improvement and sustained jobs. Surely those are worthwhile objectives. I believe that they should commend themselves to both sides of the Committee.
          In opposition, the Labour party is full of frothy rhetoric about industry and employment. It takes a Conservative Government to do something about those matters. On that basis, I commend the clause to the Committee.
          Mr. Bermingham: I listened carefully to the Chief Secretary's comments about me. It has always seemed to me utterly counter-productive to go down the road of personal exchanges, because one does not make good debating points that way.
          I concede that I missed the previous debate. I was talking to some Iranian students about their claims that Iranians had been beaten up in their embassy; I do not intend to go down that road either.
          I took the trouble to ask the Opposition Front Bench spokesmen whether an explanation had been given of the salient fact that the surcharge was to be removed from the

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          private sector but not from the public sector. I thoroughly agree that the removal of the surcharge from the private sector is a good thing. I used to be an employer in the service sector and I know that the surcharge created problems and was a disincentive to take on staff.
          I sometimes make interventions to save making speeches, because I find that a much more economical way to proceed, and I asked earlier why it was necessary to wait until October to remove the surcharge. I pointed out that in June VAT will be imposed on the glass industry, which is close to my heart as it is centred in my constituency. Why cannot the surcharge be removed in June, as a quid pro quo which might help industries in my constituency?
          I checked whether anyone had explained why the public sector is still to suffer the burden of what everybody agrees is a rotten tax. The Chief Secretary was right to say that the removal of the surcharge will lower unit costs. The removal of the surcharge in the manufacturing public sector—the steel industry, for example—would also lower unit costs and help that industry to be competitive.
          The removal of the surcharge from the rest of the public sector might contribute towards a reduction in the rates burden on industry, which would reduce the unit costs of manufactured goods and make them more competitive.
          I cannot understand why the tax is still to be imposed on the public sector. Is there some blind prejudice which benefits the private sector at the expense of the public sector? I hope not, because if we are to have government based on prejudice, we shall not have a good Government —not that I think that we have a good Government; we have a pretty awful Government, as I have said ever since I was elected to the House.
          Let us at least be told the logic and the reasoning behind the decision to provide a benefit for the private sector—I welcome the effects that it will have on investment—but to deny that benefit to the public sector. It is not too much that an ordinary Back Bencher should ask such a simple, fundamental question. I sought to do it by way of an intervention and I got no answer, but merely comments on my debating technique. So be it. I now ask the question on my feet.
          I believe that open government is valuable government. It means replying to important questions. My question is simple. Why should a tax that is of no use to anyone and is a disincentive and increases unit costs be removed from the private sector, but not from the public sector?
          Mr. Terry Davis: I shall not comment on the personal remarks of the Chief Secretary. It is possible that he did not realise what he said, but I suggest that if he reads Hansard he will agree that his choice of language was infelicitous. I know that the right hon. and learned Gentleman is a sensitive man and I think that, on reflection, he will agree that his remarks were unfortunate. If he has any doubts about that, I suggest that he talks to some of his colleagues on the Government Front Bench. The Chief Secretary criticised my hon. Friend the Member for St. Helens, South (Mr. Bermingham) for having missed our earlier debate. I can tell my hon. Friend that he did not miss much in the reply of the Chief Secretary.
          The Chief Secretary teased the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) by asking him whether he wished to distance himself from the leader of the Liberal party. The hon. Gentleman asked the Chief
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          Secretary whether he ws joking. The Chief Secretary was not joking. He was quoting selectively from history. A good defence can be made for the Liberal party's attitude to the introduction of the tax, but it is for the hon. Gentleman to make it.
          The hon. Member for Harborough (Mr. Farr) seemed to have misunderstood the import of speeches made by Opposition Members. He said that we had claimed that there was nothing much to welcome in clause 113 and that my hon. Friends had said that the clause was not necessary in their constituencies. It cannot be emphasised too strongly that that claim is simply not true. As my hon. Friends the Members for St. Helens, South, for Middlesbrough (Mr. Bell), for Wrexham (Dr. Marek) and for Stoke-on-Trent, Central (Mr. Fisher) made clear beyond doubt, the Opposition welcome the clause.
          The hon. Member for Vale of Glamorgan (Sir R. Gower) recognised that we welcome the abolition of NIS but said that we had some strange addenda. That is not so. Our reservations about what is happening concern the refusal of the Government to extend the benefit of abolition to local authorities and nationalised industries. We understand the reason for that prejudice on the part of the Government, but we do not agree with it.
          My hon. Friend the Member for Middlesbrough referred to exports by the steel and coal industries. He is quite right. If the abolition of the NIS is supposed to encourage exports, that encouragement should be given to the nationalised industries as well as to the privately owned industries.
          The gas and electricity industries must continue to pay the surcharge. The price of gas and electricity adds to the costs of exporting industries, and it would certainly help those industries if gas and electricity could benefit from the abolition of the surcharge. I do not exaggerate that claim. The gas and electricity industries are not labour-intensive and the benefit would therefore be small. Nevertheless, it would be helpful.
          Mr. Peter Rees: The hon. Gentleman seems to be suffering from a misconception. Does he not appreciate that the surcharge will be abolished even for nationalised industries, and that the external financing limits for this year have been set on the basis that the NIS will be charged? That is the very simple reason for the difference. Had I not assumed that the hon. Gentleman had understood it, I should have explained it at greater length.
          Mr. Davis: I understand the position. I appreciate that the EFLs are based on the assumption that the surcharge will remain. I understand from a press release issued at the time of the Budget that EFLs will take account of the abolition of the surcharge from next year and that therefore there will be no benefit from the abolition for the industries concerned.
          If the Chief Secretary can tell me that those industries will benefit from reduced labour costs as a result of the abolition I shall happily give way to him, but my understanding is that the Government are to ensure that no benefit accrues to the nationalised industries. They will do that by adjusting the EFLs during the next financial year. The Chief Secretary is nodding in agreement. The Government are taking steps to ensure that publicly owned industries will derive no benefit whatever from the abolition of the surcharge.
          6.15 pm
          Mr. Fisher: What the Chief Secretary has said is correct about nationalised industries with a positive EFL, but some industries have a negative EFL, and that factor has not been taken into account. Those industries are not beneficiaries of the Government's policies. They are paying tax to the Government.
          Mr. Davis: I am not sure whether I agree with my hon. Friend on that point. I believe that the EFLs of all nationalised industries—whether negative or positive—have taken account of the effect of the surcharge. None of those industries, whatever the EFL, will ever derive any benefit from the abolition of the surcharge. We believe that that is wrong. We do not begrudge the benefit to private industry. If we had done so we should not have moved our new clause on the subject last year. We want publicly owned industries to benefit, too.
          Several Conservative Members, including the hon. Member for Harborough, reminded us that the surcharge was introduced by a Socialist Government. The hon. Member for Vale of Glamorgan added selective employment tax to the list of charges, and the Chief Secretary repeated it. I shall make the Government an offer. If they will stop referring to the NIS and the SET as Socialist taxes, I promise never to refer to other taxes as Tory taxes. Value added tax was introduced, and nearly doubled, by Conservative Governments, but I have never called it a Tory tax. It was introduced by a Conservative Government and reduced—though not abolished—by a Labour Government.
          Mr. Cockeram: VAT was introduced as a replacement for purchase tax, which was abolished at the same time, whereas the SET and the NIS were additional taxes imposed on the employment of labour. They were not substitutes for any other tax.
          Mr. Davis: The hon. Gentleman's point is entirely accurate, unlike some of his earlier remarks. On the other hand, if we look back to a period long before the hon. Gentleman or I came to the House, we shall find another example of a Tory tax.
          Mr. Farr: Window tax.
          Mr. Davis: We need not go back that far. I was thinking of income tax, which was introduced by a Conservative. It was introduced by Pitt to pay for a war. The war was over long ago, but we still have the tax. It was temporarily abolished, but reintroduced. Income tax could be described as a Tory tax, but it would be rather hard to do so today, bearing in mind the number of Labour Governments who have not abolished it. If Government Members will stop referring to taxes introduced by Socialist Governments as Socialist taxes I shall not describe other taxes as Tory taxes.
          The hon. Member for Harborough made another mistake. He seemed to think that the Opposition intended to vote against the abolition of the surcharge. He is totally mistaken on that score.
          The hon. Gentleman also said that the surcharge had been responsible for the decline in exports. The hon. Gentleman exaggerates. I agree that it has had an effect on our exports and on the competitiveness of privately owned industry, but to say that it has been responsible for the decline in manufacturing exports is to exaggerate.
          Mr. Farr: I was merely repeating what had been said to me by the leaders of various industries in the city of Leicester. They have found the tax a great burden which has blunted the edge of their competitiveness when they have had to submit critical quotations for contracts overseas.
          Mr. Davis: I accept the hon. Gentleman's explanation, but if those business men said that that NIS was responsible for the decline in British exports in recent years they were exaggerating. If that was so, why have the Government waited so long to abolish the surcharge? The hon. Member for Harborough did not vote for its abolition when he had an opportunity to do so a year ago. If the NIS is indeed responsible for taking the edge off the competitiveness of British exports, I am surprised that the hon. Gentleman did not extend his criticism to the national insurance contribution, because the same argument logically applies to it. I do not believe that he would want to go so far.
          The hon. Member for Croydon, South (Sir W. Clark) argued that the money that had hitherto been paid by way of the NIS would now increase profits, and therefore the rate of return on investment. He said that the rate of return on investment was important in increasing the amount of investment. We all agree that the rate of return on investment is important, but he exaggerated the point. A much more important factor in the level of profits and return on investment must be the amount of demand in the economy. Several of my hon. Friends have made the valuable point that the size of the market is much more important than the NIS—smaller markets mean lower investment. As my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) observed, the Government have pursued policies of deflation that have reduced the size of the market and demand and have therefore reduced profits and the return on investment.
          The hon. Member for Lewisham, West (Mr. Maples) justifiably asked whether the NIS had ever been good for employment. By implication, he is correct, as it was never good for employment. The Chief Secretary reminded us that my right hon. Friends gave the relevant figures when it was introduced. They agreed that the tax would cost 10,000 jobs, but they also pointed out that it was a matter of choice. In the package of measures which they imposed in July 1976 they had to choose between a national insurance surcharge or an increase in VAT. They calculated that the necessary increase in VAT would have been 3·5 per cent., which would have cost 50,000 jobs—five times as many as the NIS. They could have reduced public expenditure, but if they reduced it by an additional £1 billion—they intended to reduce it by that amount anyway—the total reduction of £2 billion would have led to cuts in public services which they were not prepared to countenance and cost even more jobs.
          As the Chief Secretary reminded us, the evidence was given to the Select Committee. I suggest that the hon. Member for Lewisham, West should read that evidence. The total package was estimated to cost between 150,000 and 160,000 jobs. If the introduction of the NIS was responsible for the loss of 10,000 jobs, the cost of cuts in public expenditure would have been between 140,000 and 150,000 jobs. It also follows that if the Labour Government had chosen to cut public expenditure, as advocated by the Conservative Opposition, there would have been an even greater reduction in jobs—about

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          300,000. I do not believe that the hon. Member for Lewisham, West would have supported that, at least in his more reflective moments. However, Conservative Members of the day advocated cuts on that scale.
          The hon. Member for Lewisham, West also pointed out that unemployment doubled under the previous Labour Government. We can all quote statistics, but I simply remind him that unemployment has trebled under the Conservatives. Indeed, in absolute terms, it has quadrupled.
          We all agree that the tax reduces employment and competitiveness. The hon. Member for Lewisham, West incorrectly suggested that the Labour party advocated its abolition four or five years ago. That also is an exaggeration. The hon. Gentleman also argued that if the tax had been abolished four or five years ago the extra money would have gone in increased wages, whereas now that will not happen. Three years ago the Labour party urged that the NIS should be reduced, and last year urged that it should be abolished. If abolition increases some wages, that should be welcomed. Many people receive low wages and if abolition of the NIS raises the wages of the low paid, that is more desirable than an increase in profits.
          The Opposition welcome clause 113. It is better late than never. The Chief Secretary claimed to have carried the Committee with him. That was another of his pardonable exaggerations. The truth is that it is the Opposition who have carried the Committee. We have not persuaded the Government to do everything—we have not persuaded them to extend the benefit to local authorities or nationalised industries—but that was to be expected. At least and at last we have persuaded the Government to give this small help to manufacturing industry, and we shall certainly vote for clause 113.
          Question put and agreed to.
          Clause 113 ordered to stand part of the Bill.

        Clause 27

          INTEREST PAID ON DEPOSITS WITH BANKS ETC.
          Mr. Cockeram: I beg to move amendment No. 60, in page 16, line 31, at end inser—
          '(2) In calculating the tax payable in accordance with subsection (1) the first £70 in any special account, or the first £140 in any joint special account, shall be excluded, and no assessment of income tax shall be made on the person receiving payment of such interest, provided that the account is approved by the Inland Revenue and that the person entitled to any interest holds only one such special account.'.
          The Temporary Chairman (Sir Michael Shaw): With this it will be convenient to discuss also the following:
          Amendment (a) to the proposed amendment, leave out `£70' and insert '£80'.
          Amendment (b) to the proposed amendment, leave out `£140' and insert `£160'.
          Amendment No. 47, in schedule 8, page 136, line 43, at end insert—
          '(h) it is a gross interest account, namely a savings account approved by Inland Revenue having a maximum balance of £1,500 for a single account or £3,000 for a joint account and being the sole account held by the person to whom interest is payable.'.
          Amendment proposed to amendment No. 47, leave out `£1,500' and insert `£3,000'.
          Mr. Cockeram: We all know the phrase, "The unacceptable face of capitalism" and I believe that clause 27 will come to be known as the unacceptable face of Treasuryism. If it is implemented, the composite rate of income tax, which at present applies to building societies alone, will apply to all interest paid on personal deposit accounts at banks.
          The composite rate of tax is to be 25 per cent. rather than the normal 30 per cent. It is worth examining why the rate is to be reduced to 25 per cent. It is an average rate of net tax paid by a spectrum of the population. It takes into account the fact that there are many non-taxpayers because they receive low incomes, are children or are old-age pensioners. It is incongruous for the Government to raise personal allowances as they have done in the Bill by 12 per cent. and to claim that by so doing they are taking 850,000 people out of income tax if, at the same time, they impose this composite rate of income tax on all bank interest which will bring into tax people who formerly have not paid tax for the reasons that I have outlined.
          Mr. Bermingham: I agree with every word that the hon. Gentleman has said so far, but does he accept that the British Bankers Association, in a briefing document sent to many hon. Members, has estimated that approximately 3 million non-taxpayers have deposits or savings accounts?
          Mr. Cockeram: I acknowledge the expertise of the source of that information, and if that is the association's estimate, I am interested to know it.
          6.30 pm
          It was a declared and avowed policy of the Government at the general election, fought only 12 months ago, to reduce the burden of taxation, but this proposal goes contrary to the principle on which we fought the election. One may ask therefore why the Treasury has come forward with this proposal. It has declared that it has done so to conform with another aim that was part of the manifesto, that to reduce the number of civil servants. I freely accept that the proposals to deduct from bank interest at source the composite rate of income tax will involve many fewer civil servants than when, as now, interest is paid gross and the tax is collected in arrears from those who are subject to tax, but the effect runs contrary to the declared policy of the Tory party.
          Sir Raymond Gower: While my hon. Friend is making these valid points, perhaps he will explain how the Treasury's proposal squares with the third objective of our policy, which is to simplify the tax structure.
          Mr. Cockeram: One can have two views on that. It can be claimed that the tax structure is being simplified, but it is not part of our policy to create anomalies and injustices in the process of implementing that proposal.
          The amendment proposes that bank interest shall in future be treated in the same way as bank interest in an ordinary account in the National Savings bank, whereby the first £70 of interest on a personal account and £140 on a joint account are exempt from taxation. It seems that the Government's proposal differentiates between private sector banks and building societies and the public sector in the shape of the National Savings bank by imposing a tax on the former and exempting the latter. That is not what the Conservative party sought to espouse at the last general election.

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          The proposed amendment will have the effect of enabling banks in the private sector to treat those on low incomes with an account at the bank in the same way as they are treated in the public sector. The banks in question will be called upon to declare to the Inland Revenue the names and amounts of interest that is paid.
          I suspect that when my hon. Friend replies, he will refer to the possibility of evasion if the amendment were to be carried, but I point out that the possibility of evasion exists at the moment with the National Savings bank. There is nothing to stop a person opening an account in one part of the country and claiming the £70 of interest free, going to another part of the country and opening another account, then sitting back and waiting to see whether the Treasury, via the Inland Revenue, catches up. That is possible at the moment, but the Treasury is clearly satisfied that it is not happening on a material scale or it would not continue the concession.
          It is the policy of this Government to exempt from income tax as many as possible of those on a low income, because we are indulging in a rather generous policy in paying out as much as the country can afford on social security and other benefits to such people. It is incongruous to suggest, therefore, that those people should, at the same time, be taxed, as they will be if the clause is carried. We declare that it is our policy, as it is, to encourage thrift across the full spectrum of population, including those on low income, but this clause will go against that policy.
          The clause will particularly hit the Trustee Savings bank which has a high proportion—almost 100 per cent.—of its deposit accounts from the private sector, as distinct from the clearing banks which have a large proportion of their accounts with companies and the corporate sector. Some 20 per cent. of Trustee Savings bank accounts from the private sector belong to those on low incomes—children, pensioners and others. It is that 20 per cent. that will in future be subject to taxation if the clause is carried. That is not part of what we fought an election on 12 months ago.
          The proposal is that the accounts so specifically designated in the four banks will be treated in the same way as are similar accounts with the National Savings bank. Interest will be paid gross and the account will be clearly designated as such. For those who say that we are seeking fiscal neutrality that treats everyone alike, I shall add two comments. First, this amendment also referred to building societies when I first tabled it, enabling them to offer similar accounts. For technical reasons, I was advised that references to building societies had to be removed from the amendment, and so they were. I hope that when my hon. Friend replies he will note my comment and perhaps refer to building societies as well.
          My second point about fiscal neutrality is that I hope that my hon. Friend will not use that argument to justify clause 27, because if he does, I shall intervene to ask him why, if he believes in fiscal neutrality, he has not ensured that the National Savings bank similarly should charge the composite rate for its interest, which at the moment is paid gross. If we believe in the theory of fiscal neutrality, we believe in it not merely for the private sector but for the public sector.
          Linked with amendment No. 60 is amendment No. 47 to schedule 8, which is an alternative way to achieve similar objectives. The amendment would allow the creation of gross income accounts with a capital sum of
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          £1,500 maximum in the name of any one individual or £3,000 for a joint account, the interest on which would again be paid gross to achieve some of the objectives of the earlier amendments. Each individual, or in the case of the joint account, each pair of individuals, would be allowed only one such account as they are at the National Savings bank. Again, interest would be declared to the Inland Revenue by the banks.
          Lest anyone were to say that this would create an anomaly or a difficulty, I point out that schedule 8 already lists seven exemptions. My proposal would add an eighth. Under schedule 8, banks are instructed to pay interest gross on timed deposit, on debentures, on deposits taken in the ordinary course of business activities, and on debts on a security on sums deposited by someone outside the United Kingdom. Foreign banks are covered as they will not be required to pay interest net. I do not think that the House will find anything unacceptable in my eighth addition to the list of exemptions in view of the anomalies that will be created if the measure proceeds.
          It is interesting that the Wilson committee in 1980 advocated fiscal neutrality, as did the National Consumer Council's report on banking last year. Both those reports accepted the principle. The purpose of these amendments is to establish fiscal neutrality and to enable the private sector to compete with the public sector on equal terms. They propose that thrift should be encouraged in all income groups and that conforms with Conservative policy, whereas the Bill offends Conservative policy. Accordingly, I seek the support of my hon. Friends.
          Mr. Terry Davis: It might be helpful if I explain my amendments to the amendments tabled by the hon. Member for Ludlow (Mr. Cockeram). The hon. Gentleman referred to the general arguments for clause 27 and schedule 8. I shall not follow him in those arguments, although I agree with almost everything that he said. I hope that we shall be able to consider those arguments in the stand part debate if the amendments are not accepted. In the interests of brevity I must also say that I agree with everything that the hon. Gentleman said about the merits of his amendments. I seek only to persuade him to change the figures.
          Amendment No. 60 follows a suggestion by the British Bankers Association, which sought to put all savings on the same basis as that for the Trustee Savings bank. The figure of £70 comes from the present practice regarding interest and tax paid on accounts in the Trustee Savings bank.
          Sir Geoffrey Finsberg: The hon. Gentleman means the National Savings bank, not the Trustee Savings bank.
          Mr. Davis: I am grateful to the hon. Gentleman. I meant to say the National Savings bank. The Trustee Savings bank is one of those affected by the Government's proposals.
          The hon. Member for Ludlow follows the lead of the British Bankers Association in seeking to put all accounts on the same basis as those in the NSB. I am asking him to increase the amount from £70 to £80, because in the Budget the Government have increased personal allowances by 12 per cent. It is therefore reasonable that we should also increase the amount of interest that is tax free. If the hon. Gentleman accepts my amendment, and if his amendment is accepted by the Government, I hope that the Government will extend it to the NSB. I am asking

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          for £80 instead of £70, on the narrow points of the Government's other measures which increase the amount of personal allowances. It is proportionate.
          I have also tabled a amendment to amendment No. 47. I am seeking to provide for people to hold £3,000 in an account instead of £1,500. Having listened to the hon. Gentleman's arguments, I now understand how he arrives at the figure of £1,500. It is connected with the figure of £70. He is seeking to make the same provision with amendment No. 47, but in a different way, as he is seeking to make with amendment No. 60. My argument for inserting the figure of £3,000 instead of £1,500 arises as a result of the provisions for social security and supplementary benefit.
          Sir Raymond Gower: Does the hon. Gentleman propose to confine his change from £1,500 to £3,000 and to leave the £3,000 for a joint account as it is?
          6.45 pm
          Mr. Davis: Yes. Hon. Members will know from their constituency work that if someone has £3,000 in a savings or other account it is disregarded for the purposes of calculating supplementary benefit. The interest on those savings is also disregarded in that calculation. If we adopt the amendment tabled by the hon. Member for Ludlow we shall provide for people to be excused tax on interest on an account with £1,500. They will then be taxed on the interest paid on a sum between £1,500 and £3,000 if they have those additional savings in another account. I am anxious to achieve consistency, and it would be sensible for the Government to disregard the interest on savings of £3,000 for the purpose of income tax, in the same way as they disregard that interest for the purpose of calculating supplementary benefit. It makes no difference whether the account is a single or a joint one.
          At present, a single householder on a long-term rate receives £34·10 per week in supplementary benefit and a single householder on an ordinary scale rate receives £26·80 per week. If that person has £2,000 in a trustee savings bank, he will be taxed on the interest which amounts to £80 a year. That is not right. It is in everyone's interest that people living in such straitened circumstances should be excused tax on their interest. The Government have accepted that those amounts are so small that they should be disregarded in the calculation of supplementary benefit.
          I shall not make the point at length, because it is obvious. I hope that I shall be able to persuade Conservative Members to support my amendments to the amendments tabled by the hon. Member for Ludlow.
          Sir William Clark: It is my pleasure to follow the hon. Member for Birmingham, Hodge Hill (Mr. Davis). It is always a delight to learn that Labour Members are now coming round to the view that interest and dividends are an essential part of the economy and should be encouraged rather than taxed out of existence. I welcome that change in attitude on the part of some Labour Members.
          I hope that when my hon. Friend the Minister replies he will not have on the top of his brief an instruction from the Treasury to resist the amendments. Apart from having a bank account, I have no vested interest in banks. I accept that a composite rate is probably, on balance, from an
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          administrative point of view, extremely welcome, but we sometimes twist the economy for adminstrative purposes and anomalies creep in.
          I am speaking with all the sincerity and force that I can when I say that it is time that we told the Inland Revenue that it is becoming paranoiac about loopholes in our tax system. One has only to look at the Bill. When it deals with the control of foreign companies, there is a labyrinth of restrictions on this, that and the other. Under the guidance of the Revenue the Treasury penalises the private sector to catch one person who is avoiding or evading tax. The Treasury penalises 999 taxpayers to catch just one.
          The Minister may argue that there are too many loopholes. That will not wash this time because, as my hon. Friend the Member for Ludlow (Mr. Cockeram) said, the National Savings bank has enjoyed a tax exemption for some years. The Minister may argue that the exemption was given to the National Savings bank—which used to be the Post Office Savings bank — because of the Treasury premise that the interest paid was low. It used to be only 2·5 per cent. The evidence from the clearing banks is that many of their 3 million deposit accounts are held by people who are not in the tax bracket. To exempt accounts with a low interest rate from tax is small comfort to those who do not pay tax anyway.
          I understand that the composite rate is to be 25 per cent., although it is not yet settled. That will hit many small depositors. People in the income tax bracket usually pay tax at the 30 per cent. rate. The argument is that, instead of paying 30p in the pound, savers with a deposit account will pay only 25p. That is fine for the taxpayer, but it is small comfort to the person who does not pay tax.
          My hon. Friend the Member for Ludlow has explained why the composite rate is 25p rather than the standard rate. It is simply because so many people affected do not pay income tax. That is the only reason. In my experience, the Inland Revenue is never over-generous to the taxpayer. The lower rate is given not out of generosity, but out of a sense of rough justice because many of the people concerned do not pay tax.
          Many people with deposit accounts at banks will hear that they are to be taxed and move their accounts from the banks. The clearing banks fear that there could be a massive withdrawal of funds. Has the Treasury worked out the liquidity ratio of banks if there were a sudden diminution in deposit holdings? I hope that the Government have considered that.
          I agree with my hon. Friend the Member for Ludlow that the private sector should be encouraged. The Government have introduced economic packages for the private sector such as the business expansion scheme, the start-up scheme and the loan guarantee scheme. They are geared to help the private sector to increase its activity and the creation of wealth, yet the Government are introducing an inhibiting factor for the private sector.
          I cannot understand the philosophy of the clause. Why penalise the private sector? What is so different about the National Savings bank? Why should the National Savings bank be exempt? Another advantage is being given to the public sector. Everyone knows that money in the National Savings bank is used by the Government to help with their borrowing requirement. There are many fiscal advantages in investing in Government stock, including exemptions from capital gains tax on the gilt market. The Government

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          are creating another advantage. People who invest their money in a bank deposit account will have to pay 25 per cent. tax without exemption.
          I do not argue about whether the figure should be £70 or £80; the principle must be settled. The Government proposal is inequitable. I do not want to take away the £70 limit from the National Savings bank, but, in all fairness, people should enjoy the same exception whether they invest in the National Savings bank or any other bank. What is the difference? There is no difference, except that the Government cannot get their hands on deposits in other banks.
          I hope that the Minister will accept the amendment. I urge him strongly to consider it. We have a year before the provision comes into effect. If during that year an announcement is not made about the £70 exemption, people will withdraw their funds from banks. That would be a retrograde step. I urge my hon. Friend, even if the drafting is defective, to do something about this matter on Report. I have never heard a Government say that a Back-Bench amendment is perfect. They often ask for it to be withdrawn because the wording is wrong. We do not mind that. We shall withdraw the amendment if the draftsmen can devise an amendment which agrees with the spirit of our proposition.
          Mr. Fisher: It is a pleasure to follow the hon. Member for Croydon, South (Sir W. Clark) and the hon. Member for Ludlow (Mr. Cockeram). I certainly support the spirit of the amendment, although I prefer the amendments tabled by my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) because they are marginally more generous in the exclusion. I urge Government Members to support my hon. Friend's amendments. If my hon. Friend's amendments fall we shall support amendment No. 47. The spirit of all the amendments on this matter is the same. The all-party agreement is welcome and interesting. I hope that it is infectious and that the Minister catches the spirit and accepts the amendment.
          The principle behind the amendment is crucial. It seeks to protect the small saver—the non-taxpaying investor. Does the Minister agree that the small, non-taxpaying saver should be protected? Is that person who is so insignificant to Governments worthy of being protected?
          If the Economic Secretary accepts the amendment, let him say so now and we can move on to the next amendment. If not, will he explain why the Government have no interest in protecting the small saver and small non-taxpaying investor?
          The people about Whom we are speaking include children and pensioners, and I declare my interest in the subject in that I have four children all of whom have savings accounts. Hon. Members with children, I am sure, recognise that we should encourage our children to be thrifty—to save their money and later to become good consumers—and spend their money wisely.
          7 pm
          Mr. Tim Eggar: I am delighted to hear a good Socialist arguing in favour of thrift among children. I hope that his children's money is not invested either in a bank account or building society account. If it is, he is doing them a disservice. If he wants to maximise the amount of interest they receive, helping them to become real rentiers, he should persuade them in the present circumstances to invest in the National Savings bank.
          Mr. Fisher: The hon. Gentleman is wrong when he says that they should take that course in the present circumstances. At present, as in the past, it is perfectly acceptable for them to have their money in a bank. He is referring to what the situation will be if the amendment is not accepted.
          Mr. Eggar: Perhaps the hon. Gentleman will telephone his local bank to ask what rate of interest is currently being paid on his children's accounts. He should then contact the NSB and inquire what interest they will get there. I suggest that he will then advise his children to shift their accounts to the NSB.
          Mr. Fisher: We on these Benches are grateful for such advice. We should have to pay heavily for investment advice outside the House.
          Mr. Terry Davis: My hon. Friend will appreciate that one always obtains good advice from Conservative members on where to place investment. I took the trouble before the debate to check the interest rates. The hon. Member for Enfield, North (Mr. Eggar) did not make it clear that he was talking about one type of NSB account. The ordinary account does not carry such a high rate of interest.
          Mr. Eggar: Perhaps it can be described as suitable for children.
          Mr. Terry Davis: I am prepared to accept—
          The Temporary Chairman: Order. The advice bureau has gone far enough. Let us now return to the subject of the amendment.
          Mr. Fisher: If the hon. Member for Enfield, North (Mr. Eggar) catches my eye during the Division, perhaps he will give me some more free advice on behalf of my children, who I am sure will benefit enormously from it.
          The banks and financial institutions recognise how important it is that people are taught young the idea of saving and becoming responsible members of society. Naturally, the banks are not entirely disinterested in having them become savers. They do their job effectively and I accept that they are performing an important function.
          I do not want to go too far into the realms of Dickensian sentimentality, but in addition to children who save, we must consider little old ladies and pensioners, who are often small investors in banks. For it is important that they should be protected in the way proposed by the amendment.
          I hope that the Minister will give figures of the typical amounts of interest received on the deposits which will come into the maw of the Treasury. Such figures would establish beyond doubt the sort of level at which we should be aiming. My hon. Friend the Member for Hodge Hill is suggesting a level different from that suggested by the hon. Member for Ludlow. We could arrive at a definitive sum if we knew that average figure.
          Of the 3 million non-taxpaying investors of whom the British Bankers' Association speaks in its brief, may I ask the Financial Secretary to say how many are pensioners and how many are children in the non-taxpaying bracket? Without those details it must be difficult for him to calculate the cost of the amendment, which—as it has been on the Notice Paper for several days—the Treasury should have costed out.

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          I presume that the hon. Member for Croydon, South is right to say that the Economic Secretary's brief is marked "Resist". If so, a costing must have been done, in which case the hon. Gentleman must have arrived at the number of pensioners and children who will be affected. Without that empirical evidence, his brief is worthless. If he does not have those statistics, I trust that he will obtain them during the remainder of the debate.
          We accept that the Economic Secretary is an honourable man. But if he resists the amendment, there will be nothing to protect the people about whom we are speaking. Surely, he does not want to put young children and pensioners who are not taxpayers at a disadvantage. "As easy as taking candy from a baby" is a well-known expression. If the amendment is not accepted, it will be changed to, "As easy as taking tax from a baby". The Prime Minister's reputation of being a milk snatcher will, if the amendment is not accepted, be changed to describe her as a tax snatcher. She will become "Thatcher the children's tax snatcher", and I suspect that she does not wish to have that round her neck.
          If the Minister has a heart behind his Treasury facade, let him throw off the shackles of his brief and accept the amendment, preferably with the Opposition amendments to it. His hon. Friends will come into the Lobby but will not know for what they are voting. If he throws away his brief and does the decent thing for young children and non-taxpaying pensioners, nobody will be any the wiser because his hon. Friends will vote the way they are told. I urge the hon. Gentleman to do the decent thing, to throw away his "Resist" brief and to improve the quality of life for those concerned.
          Sir Geoffrey Finsberg: This is an interesting debate. I was somewhat worried by the warmth and—I hope that I shall not be accused of making personal remarks—weighty support of the hon. Member for Birmingham, Hodge Hill (Mr. Davis) for the amendment. He and I have had some duels in the past, and, for the benefit of the Economic Secretary, I shall refer to them later.
          The Opposition amendments to the amendment are somewhat naive. They would go against one of the major points put forward by my hon. Friend the Member for Ludlow (Mr. Cockeram), that of fiscal neutrality, because the national savings figure would have to be increased, and that would give the perfect excuse to the Minister to reject the amendment because he could say that even more money would be involved. For that reason, Opposition Members cannot expect much support for their proposals in this matter.
          The hon. Member for Stoke-on-Trent, Central (Mr. Fisher) does not need advice from my hon. Friends. Our very good friend, the grandfather of his children, Sir Nigel Fisher, could give him all the free and expert advice he needs, without incurring the wrath of the Chair, which I shall do if I go further into that matter.
          If the hon. Gentleman is looking for the support of Conservative Members, he did not play his cards properly when he talked about my right hon. Friend the Prime Minister in terms of her being a child tax snatcher. That comment may persuade some of my right hon. and hon. Friends that we should not find ourselves in the same
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          Lobby, if there is a Division, as the hon. Gentleman. I caution him by saying that a good speech was spoilt by a throw-away line, which I do not think helped his case.
          Mr. Fisher: I hope that the hon. Gentleman will temper his understandable loyalty to the Prime Minister by an examination of the facts behind the amendment. If he wishes to do the decent thing by non-taxpaying pensioners and young children, he must support the amendment, despite his loyalty to the Prime Minister.
          Sir Geoffrey Finsberg: My loyalty to the Prime Minister stems from the fact that I believe that she is entirely right in thinking that the economy must be put right. However, I do not think that the Treasury is right in pursuing a policy which was never intended to have the effect which is now apparent.
          My hon. Friend the Member for Croydon, South (Sir W. Clark) said that the Minister's brief would be marked "Resist". I am certain that that is so. Having had four years of briefs, I can confirm that it will be so marked. However, when I was responsible for taking the Dentists' Bill, as it then was, through Committee, with the hon. Member for Hodge Hill leading for the Opposition, I crossed out "Resist" on many occasions and said that I would accept an amendment because the arguments had convinced me that it would be right to do so. Alternatively, I said that I would consider an amendment. That did not endear me to some of my civil servants, but I felt that that was the right course.
          I do not expect my hon. Friend the Economic Secretary to the Treasury to accept the amendment, but I do not expect him to say that he rejects it and will not consider the matter again. Many of his colleagues share his policies, including some who are as senior and distinguished as my hon. Friend the Member for Croydon, South. Against that background, he should say that he is prepared to consider the issue again. Of course, I expect him to say that he will do so without commitment. If he is prepared to take a chance by saying that he will accept the amendment, I shall not argue with him; I would not seek to persuade him not to take that course. I merely say that he owes it to his colleagues to say that he is prepared to consider the matter again.
          I should declare my interest as a regional board member of the Trustee Savings bank.
          Mr. Cockeram: My hon. Friend has reminded me of an omission from my speech. I should likewise declare a similar interest. I hope that the House will excuse me for my oversight, for which I apologise. I thank my hon. Friend for allowing me to intervene to make this correction.
          Sir Geoffrey Finsberg: I have not enjoyed the benefit of any briefing from the British Bankers Association, which seems to be more at home with Labour Members. I am glad that that is so. I am delighted to learn of the late conversion of Labour Members. I listened with fascination to the information that was given to us by certain Labour Members.
          With one exception, to which I referred in the VAT debate, my right hon. Friend the Chancellor of the Exchequer introduced a superb Budget. That being so, why do the Government have to muck it by penalising the private sector and favouring the public sector? However my hon. Friend the Economic Secretary may try to answer

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          me, that is the fact. If the clause is not amended, only National Savings bank depositors will be beneficiaries. There will then be direct encouragement for savers to transfer their savings up to about £1,200 a year, into the National Savings bank.
          I did not believe that that was the Government's economic policy. That was certainly not the policy on which Conservative candidates contested the previous two elections. As my hon. Friend the Member for Croydon, South said, we have before us a Revenue idea. Revenue officials slip these provisions into complicated Budgets and Ministers find that they are stuck with them. That is not the way in which we should proceed. After all, Ministers and the House generally decide taxation policy. The responsibility for those decisions does not rest with civil servants of the Inland Revenue.
          7.15 pm
          There has been a growing feeling for too long—I accept that it may be wrong but my hon. Friend the Economic Secretary cannot say that it does not exist—among the British public that Revenue officials are becoming more and more domineering at the expense of the ordinary citizen. The preference that is to be given to the National Savings bank is not in accordance with the philosophy for which I have fought for nearly 40 years within the Conservative party.
          As the hon. Member for Stoke-on-Trent, Central said, many little old ladies and little old gentlemen put their money into building societies on the advice of the same bank managers who no doubt told them to put their money into Rolls-Royce or the Mersey Docks and Harbour Board. Bank managers are great experts on investment! They put their money into building societies and they do not pay tax, but no one tells them that even in building societies they are paying the composite rate and are therefore on the losing side. This happens to many small investors—many of them are little old ladies and gentlemen—who have limited amounts on deposit in the joint stock banks and the Trustee Savings bank. As my hon. Friend the Member for Croydon, South has said, they are paying tax quite unnecessarily. There may have to be a campaign to persuade them to take their money out of these investments and to put it into the National Savings bank.
          But why should we do that? My hon. Friend the Economic Secretary may recall that it was not so long ago when there was a substantial volume of opinion in the Conservative party that the National Savings bank and Giro should be taken out of the public sector and placed in the private sector. Instead, we are going very much in the opposite direction.
          Mr. Bermingham: As the hon. Gentleman suggests, there would have to be an advertising campaign to persuade the non-taxpaying small depositor to place his savings in the National Savings bank. If that were to happen, the amount of money available to the joint stock banks, which are the basic funding source for much of industrial investment, would perforce decrease.
          Sir Geoffrey Finsberg: That very point was made while the hon. Gentleman was absent from the Chamber, whether he was seeing Iranian students or not. The argument was well advanced previously. I make that point in a way which I hope the hon. Gentleman will not find offensive. If he reads the report of our debate in Hansard tomorrow, he will find that I am right.
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          My hon. Friend the Economic Secretary may talk about evasion. The proposals of my hon. Friend the Member for Ludlow appear to be sufficiently watertight to preclude evasion, coming as they do from a Bank Bencher. I accept that parliamentary draftsmen will be able to make them more watertight. If there is a will, the Treasury can will the means to meet the ends that my hon. Friends and I would like.
          My hon. Friend the Economic Secretary is a courteous and receptive Minister and I am sure that he has grasped the direction of my argument. I do not ask him to say that he accepts the amendment—this may make some of my hon. Friends unhappy—but I ask him to say that if the amendment is withdrawn he will, without commitment, think about it again. That will give him a chance to tell us at a later stage where we are going from here.
          Mr. Austin Mitchell: The hon. Member for Hampstead and Highgate (Sir G. Finsberg) put the case for the amendment with great effectiveness. It is a pity that he prepared a trap-door from which to escape the onus of voting for the amendment. It appeared that he was going to wound, yet was afraid to strike. He should strike, because his statements rang true and should be followed up.
          I welcome amendment No. 60 and the improvements in amendments (a) and (b). The measures right a wrong that needs righting. There is no need for the composite rate. The system is being introduced to allow the Government to achieve their objective of cutting by about 1,000 the number of civil servants—an ambition which the Government pursue with no eye to the realities—in the Inland Revenue. The work will be shifted to the banks, which will charge account holders and spread the burden of charges down, as they usually do. The marble halls are good at putting the burden of changes and administration on the smaller customers, especially those who have overdrafts, as I do.
          Amendment No. 60 rights an injustice for about 3 million people who receive interest but pay no income tax and who should not pay this form of taxation on their accounts. The composite rate measure breaches the basic principle of the taxation system that the income to he taxed should be aggregated so that those whose total income is below a taxable level do not pay tax. I am sure that if the people taxed in this way were part of a more powerful vested interest and richer section of society Conservative Members would make a greater outcry and the Government would display greater sensitivity.
          The only fair way to get around the problem is to allow those who should not pay the tax to reclaim the tax taken by the composite rate. I assume that this system operates in other countries. Do other countries make provision to rebate the tax to those who should not be paying it because their income is too small?
          It might be possible to give a certificate to certain account holders stating they are not eligible for taxation. That has effectively been done for account holders living overseas, and that scheme is being maintained in the legislation for another two years. Why cannot the accounts of smaller account holders who do not pay tax be certificated in the same way? These are principles of elementary justice. The reason given for not taking those measures is that it would be administratively inconvenient

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          and too expensive. The principle of reform in shifting work from the Civil Service to the banks would be undercut.
          "And wretches hang, that jurymen may dine."
          Small account holders will be taxed because it is administratively inconvenient to do anything else.
          Essentially, the Government are stealing money from account holders, when the Government are not entitled to that money. They are taxing people who should not be paying tax. That is theft, filching and tea-leafing. It is fiscal mugging. Taxing people who should not be paying tax is stealing—it is as simple as that. There is no reason to mince our words about this matter. The mites of the widows and orphans are being stolen. Money will be taken from those groups which the Government usually put in the front line in their defence of capitalism. There is usually an outcry from Conservative Members that taxation proposals will take the mite from the widows and orphans, but the Government are now doing the same thing in the name of administrative convenience.
          The 3 million people affected must include many old-age pensioners. I hope that the Economic Secretary will cite the number of account holders who are old-age pensioners. The Government, when abolishing the investment income surcharge, said, "We are doing this because it will help many old-age pensioners." The Government prided themselves on removing that surcharge, which affects only those with savings of £70,000 or more. They said that their measure would help those on low incomes.
          If that principle is all right when abolishing taxation, it should be maintained when introducing taxation. It is not right to abolish the investment income surcharge, justifying that action as helping old-age pensioners, yet to take money away from those same people on the ground of administrative convenience. All hon. Members will see in their surgeries people with bank account statements and books who will ask, "Why is this money being taken away?" We shall have to explain why that is happening, unless the amendment is accepted and the Government make some concession.
          If this measure were being undertaken by a Labour Government—it would not, of course—the public relations agency employed by the Conservative party would attack us as piggy-bank raiders, mite milkers, penny-pinchers and all the adjectival diarrhoea that always pours out from the central Government agencies. The Government pride themselves on this measure.
          Sir Geoffrey Finsberg: I hope that during this sudden outburst the hon. Gentleman will tell us why it was right in the years of Labour Governments for money to be filched from the elderly who had accounts in building societies. Why did the hon. Gentleman do nothing about that?
          Mr. Mitchell: As I understand it—I hope that the Economic Secretary will correct me if I am wrong—most people saving with building societies have to pay tax. That is why many people go to building societies with their savings. They would have to pay tax on the interest from a bank deposit. We are now talking about non-taxpayers. The principle is iniquitous for people with accounts who are not taxpayers. Are the Government so desperate for money to keep the confidence trick of economic recovery
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          going that they must take the mites from the widows and orphans and pinch pennies from piggy banks in this fashion?
          Mr. Eggar: As well as being an unpaid adviser to hon. Members' children, I am a consultant to a bank, although one that does not take retail deposits. It is well known to the House that people have worried about the differing treatment given to building societies and banks for a considerable time. Building societies and banks have had arguments about whom the different treatment benefits.
          7.30 pm
          During the debates on the Finance Bill 1982 I supported the idea that the Government are now introducing, which is that, if we cannot abandon the composite rate—there are good administrative reasons for not doing so—we must introduce the composite rate for the banks as well as the building societies.
          I was slightly amused by the brief sent to me and other hon. Members by the banks. I am sorry that my hon. Friend the Member for Hampstead and Highgate (Sir G. Finsberg) was not included in the banks' largesse. They argued fiercely on behalf of the children, the small depositors and the non-taxpayers, yet they did not do that when the composite rate applied to the building societies. In fact, had they done so, they would have benefited because small depositors and non-taxpayers misguidedly invested in building societies, which allowed the building societies to offer a lower composite rate that was attractive to standard and higher rate taxpayers.
          One of the most curious things about the battle between the building societies and the banks for retail deposits has been that the banks, rather than using their ability to pay gross and realise the marketing advantage in the amount of interest they could pay over the building societies, consciously preferred to pay a lower rate of interest and so reduce their funding costs.
          Mr. Cockeram: My hon. Friend has referred to what he likes to call the battle between the banks and the building societies. There is no such battle. He has charged the banks with being inconsistent because they are now expressing an interest in the deposits of the small saver, widows and children. He overlooks the fact that the banks have always paid gross interest on such deposits and, therefore, they have not had cause to speak up on behalf of those investors who previously have not been penalised by paying tax. It is only now that such a proposal has been put forward that they need to point out the consequences of it. I hope that we will not become involved in what my hon. Friend chooses to call a battle between one financial sector and another. It has not been referred to by other speakers.
          Mr. Eggar: I am sure that my hon. Friend will allow me to develop my argument in my own way. The banks complained about the so-called composite rate advantage for the building societies. It was an advantage because a number of small investors, who would have been best advised to invest in gross interest paying accounts, chose to invest in the building societies, thus reducing the effective tax paid by standard rate taxpayers.
          The banks consistently failed to pass on gross interest payments to their depositors. They preferred to take the slight marketing advantage that they held—the difference between the net and the gross interest payments—and use it to reduce their funding costs.

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          The main argument against the Government's proposal is that it exempts National Savings accounts. We must examine whether that is a serious exemption. It gives the non-taxpaying investor an option—he does not have to choose a net paying account, he can choose a National Savings account where he will be paid gross. Will the Government use that tax advantage for themselves, or will it be passed on to the investor? I hope that my hon. Friend the Minister will answer that question.
          The Temporary Chairman: Order. The hon. Gentleman is straying into a clause stand part debate. He must stick to the amendment.
          Mr. Eggar: Although I take your point, Sir Michael, the amendment seeks to put bank and building society accounts on the same basis as National Savings accounts. I shall observe your ruling, Sir Michael, but would argue that the Government's policy on National Savings accounts is a crucial part of the issue. If the Government behave reasonably and pass on the advantage of the gross payment to the investor rather than keep part of it for themselves, my criticism would not apply.
          There are three main reasons why I believe that the Government will be forced to pay a proper rate of interest on a gross basis. First, they will still have to compete with building societies and banks for deposits and will have to take account of the interest paid by them. Secondly, my right hon. Friend the Chancellor made a clear policy announcement in the Budget that interest rates on National Savings accounts would be kept competitive. That implies that they must be competitive with both market rates of interest and the different tax treatment of accounts.
          Thirdly, there are sound monetary control reasons why it is in the Government's interest to benefit to the maximum from National Savings deposits rather than going to the gilts markets. However, I recognise that that argument might stretch the amendment a little too far.
          I believe that what the Government are doing is fair and right. It puts banks and building societies on an equal competitive footing. My only slight reservation concerns the way that they intend to fix interest rates on National Savings accounts. I hope that my hon. Friend the Minister will reassure me on that point.
          Mr. Bermingham: I apologise to the hon. Member for Hampstead and Highgate (Sir G. Finsberg) for missing the point that he made in an earlier speech. I am grateful to him for explaining it to me.
          I agree with the fiscal arguments advanced by the hon. Member for Enfield, North (Mr. Eggar) on purely monetary matters. However, the House should address itself to more philosophical questions, such as that posed not only today but in previous sittings of the Committee when the Financial Secretary said that we must look at the Budget in the whole and at what is given and what is taken.
          I have looked extremely carefully at the Budget and I have seen the various gifts—for example, the abolition of the national insurance surcharge, which we discussed earlier. I also see what has been taken. We have been given an undertaking that the abatement of the long-term hardship payment of 5 per cent. will be reconsidered. That means nothing, because the long-term chronically sick are suffering. Many of them are non-taxpayers, yet they suffer a £3 a week deduction.
          Let us consider what the Treasury has done about the composite interest rate. I do not want to repeat the
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          arguments of many hon. Members, including Conservative Members, with whom I agree. I add my support to amendment No. 60. They are saying that it is not philosophically correct to tax the untaxed—that is, those who should not be subject to taxation. I believe that that is a fundamental principle of taxation, and that is why I urge amendment (a) to amendment No. 47 upon Conservative Members and the point that it makes about social security benefits. The amendment would make the minimum balance £3,000, whether for a single person or a married couple. It is only right that someone who receives social security should not suffer taxation on the interest that may be earned on a small saving, which is often such a person's sole capital asset. Often it represents the cost of his funeral.
          The philosophical point is whether it is right to tax those who should not be subject to tax. I hope that that consideration is at the heart of this worthy amendment, which I support. I openly acknowledge the point made earlier about building societies. I am prepared to go on record as saying that I do not believe that the composite rate for building society investments—it is 25 per cent., when taxation is taken into account — is morally justified. I said that within my party before I came to House, and I shall continue to say it, because I cannot see how it is morally or philosophically correct to penalise someone with a few paltry pounds of savings. If he is not currently in a position to pay tax, he should not have to pay it now. I support the amendments, because they pass taxation along the line.
          At the end of the day the Government must justify themselves on moral grounds and on whether a measure is fair, and not consider it simply in terms of votes in the House. The justification of fairness cannot often be provided, although the result will be delivered because of the Government's voting strength.
          I should like the Minister to explain how it is that if I have, say, £50,000 in cash and put that into a bank on deposit for 28 days I can get a certificate and do not have to pay any tax. I leave the Treasury Ministers to work out the interest at 10 per cent. over 28 days, but I believe that it is just under £1,000. If I were to spend that £50,000 on a house, so that I have no more unearned income and only a small pension from my income in any year, I should not pay tax on the interest earned in that 28 days.
          I have another question for the Treasury Ministers. if I had a very high unearned income, it would be in my interest to stick some money in a building society, if the measure were passed, as there would be a composite overall lower rate of tax to pay on it, because I would pay tax at the new rate. If I am wrong in that, no doubt the Economic Secretary or the Minister will correct me. There are ways in which I can manage my affairs so as to minimise my tax liabilities. It seems, once again, that if one is at the top end of the scale one is doing all right, but that if one is at the bottom and is not meant to pay tax, one is not doing so well in terms of the Budget.
          7.45 pm
          I keep returning to what the Economic Secretary said in answer to a remark made earlier in Committee. I continue to look quite happily for an answer to the question whether those at the bottom of the scale will get anything out of the Budget.
          I find what is proposed quite remarkable The Committee of London Clearing Bankers described the

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          composite rate as "unjust" and as "Robin Hood in reverse" and said that the measure would force the 3 million bank customers who pay no tax into the tax net; worse, that it would subsidise the better off. It cannot usually be said that the committee of London Clearing Bankers is a great supporter of the Labour party, but if it says that the proposal is not very fair, I tend to listen, because it may be right. Perhaps it is just like the glib undertaking given the other night about abatement.
          I shall try not to use emotive phrases when I talk about children's piggy banks. I do not need to do that, as the story speaks for itself. When I was at school a long time ago, we had a penny savings club. We brought in our pennies and piled them up. Now we say to our children or grandchildren, "When you take your pennies into Lloyds or Barclays or Natwest, do not worry. You will be learning two lessons, because the Government have said so. Lesson one is how to save, and lesson two is how to pay income tax." Income tax payments will start in the classroom, with kiddies' savings, if the measure is passed unamended.
          I say with due respect to the hon. Member for Hampstead and Highgate that, although I have been in the House for only nine months, I have learnt that it is dangerous to say that we may be given an undertaking by the Government if the Minister considers the matter. That never happens.
          Sir Geoffrey Finsberg: Rubbish.
          Mr. Bermingham: It is not rubbish. It does not happen unless the Government give a firm undertaking that x or y will be done. If the Minister stands at the Dispatch Box tonight and undertakes to bring forward a clause to enact the spirit of the amendments that have been introduced by hon. Members, we shall all go home happy at a day's work well done. On the other hand, if the Minister merely says that he will think about the matter, my natural north country suspicions will be aroused. I shall say to myself when the Minister returns, "Not much change"—to use a good Lancastrian and Yorkshire expression. That means that the piggy banks of England will be—
          Mr. Kirkwood: What about the piggy banks of Scotland?
          Mr. Bermingham: I apologise to the hon. Gentleman for omitting Scotland and Wales. Those piggy banks will become, so to speak, the first steps in a child's taxpaying life. That is not very nice to think about.
          Mr. James Kilfedder: There are piggy banks in Northern Ireland, too, and I accept the apology of the hon. Member for St. Helens, South (Mr. Bermingham).
          I support my hon. Friend the Member for Ludlow (Mr. Cockeram). I note that the Minister has not shown much sign of responding to the speeches made in Committee. This short debate has been marked by much good humour and I hope that the Minister will not make a bland speech or a speech merely saying that he will consider the points raised by hon. Members. I intend to support the amendment, if need be in the Lobby. An important principle is involved. It is not just a question of 3 million depositors. The Government should ensure that someone who does not pay tax is not forced to do so as a result of the Bill.
          I declare an interest as a member of the Trustee Savings
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          bank parliamentary committee. I am anxious to ensure that the Government adopt the amendments, particularly as many people, both young and old, save with the Trustee Savings bank. I urge the Government to accept the
          Mr. Farr: I support my hon. Friends the Members for Ludlow (Mr. Cockeram) and for Croydon, South (Sir W. Clark), and the two amendments. I understand that they have the full support of hon. Members on both sides of the House and that there is, unusually for the House, unanimity on this subject. I hope that my hon. Friend the Minister is listening to me, and that he will consider what my hon. Friend the Member for Croydon, South has said. If the brief of my hon. Friend the Minister says that he should resist the amendment, I hope that he will bear in mind that the amendments have been tabled in a most friendly way and that we do not expect a categorical refusal. If, for good reasons, he cannot give us as full or as hopeful an answer as we might have wished, we nevertheless hope that he will be reasonably helpful about the future conduct of affairs.
          I was particularly impressed by what my hon. Friend the Member for Hampstead and Highgate (Mr. Finsberg) said about those who will be caught inadvertently by the Bill. In a telling speech, my hon. Friend said that the same old ladies and gentlemen who had been caught before would be caught again, perhaps because they had followed, through lack of experience, advice that was not as good as it should have been. I agreed with what he said about the old ladies who had been advised, and who had paid the price for not receiving very good advice in the past. They are typical of the vulnerable elderly, not only in Hampstead and Highgate but in Harborough and the rest of the country. They are patriots— the sort of people who would invest in war loan. They probably took the bank manager's or Government's advice many years ago. They always seem to lose out, so the Government have a duty and responsibility to put the matter right.
          I have no interest to declare other than the fact that the Leicester building society and the Market Harborough trustee savings bank are in my constituency. They are very distressed about the situation. I fully support my hon. Friend the Member for Ludlow about the changes that should be made to put the National Savings bank on an equally fair and competitive footing as the Trustee Savings bank and the building societies. If the same exemption as now applies to the National Savings bank applied to building societies and the Trustees Savings bank there might be a saving in administrative costs for the Inland Revenue.
          I have followed the debate quite closely and I cannot believe that the Government intended this situation. If my hon. Friend the Minister is in any doubt about what hon. Members have said today, I will arrange a meeting for him in my constituency with the chairman of the Leicester building society and the chairman of the Market Harborough trustee savings bank. He will then hear from the horse's mouth of their apprehension about the severe effects that the Bill will have on their economies unless some change is made.
          The Temporary Chairman: Before calling the Minister to speak, perhaps I should say that I am grateful to hon. Members for the way in which they have stuck, in general, to the terms of the amendment. Inevitably, the debate has moved to the fringe of what I felt was possible,

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          and I suspect that the Minister may well feel that he will have to move towards a general clause stand part type debate. If that is so, I trust that any widening of the debate will be kept to a minimum and that any points made in his concluding speech will not be repeated during the clause stand part debate. I thought that that guidance might be helpful.
          The Economic Secretary to the Treasury (Mr. Ian Stewart): I shall endeavour to follow your guidance, Sir Michael, which has been most helpful to us.
          The debate has ranged widely over the principle of the composite rate, and it is not really possible for me to reply properly without mentioning that, as well as the technical points raised by the amendments. My hon. Friend the Member for Ludlow (Mr. Cockeram) pointed out that the amendment had, for technical reasons, been tabled only in relation to bank deposits. He asked me to bear in mind that it was not his intention that the suggestion of the amendment should be that banks ought to be treated differently from building societies. Accordingly, I shall address my remarks to the spirit of the amendment and not just to the technicalities, as that would limit me to the proposal for banks alone.
          It would, of course, be absolutely outrageous to propose that there should be an unfair advantage to the banks through having such tax-exempt arrangements if a composite rate is applied to them, if building societies, which have had a composite rate for a long time, are not treated similarly. Amendment No. 60 seeks to exclude the first £70 of interest from the composite rate for the taxpayer. Amendment No. 47 provides that banks should be allowed to hold gross interest accounts for the purpose of paying the gross interest, which would then be exempt in the hands of the taxpayer. So the two go very much together.
          If the proposals were applied both to the banks and the building societies, they would cost £300 million to £350 million a year. Amendment (a), tabled by the Opposition, would mean a figure of about £400 million, because they ask for higher figures on the gross interest accounts and higher figures for exemption from the composite rate to the depositor. The provisions for special accounts contemplated by these amendments would complicate the whole system of the composite rate in a way in which it would not be easy, or feasible, to manage. The amendments would cut across the concept of the composite rate, which is designed to introduce greater simplicity and parity of treatment for depositors. They cannot be accepted on those grounds, and the ground of cost.
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          Sir William Clark: The formidable cost of £350 million presupposes that present deposit accounts will remain where they are. If, as many hon. Members believe, most deposit accounts are switched from the clearing banks to the National Savings bank, the loss will be equal because the £70 exemption will also be switched. Is the £350 million cost, which is a frightening figure, the net cost after the Treasury's estimate for the switching of funds? If all present small deposit accounts were switched to National Savings banks, it would still cost the Revenue £350 million. Therefore, the effect of the amendments would be nil
          Mr. Stewart: I appreciate my hon. Friend's point. That is why I can only give an approximate figure of the
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          potential cost and cannot be specific. The impact will depend on the way in which funds are moved between homes. I shall come later to the question of movement.
          Mr. Cockeram: If the opposition of my hon. Friend the Member for Croydon, South (Sir W. Clark) were followed through, and all those people who are not liable for income tax were to switch their accounts to the National Savings bank, what would the consequences be for the composite rate? In those circumstances, with the tax-free element removed, the composite rate would be the same as the standard rate of 30 per cent., and the knockon effect on savings in building societies would be considerable.
          Mr. Stewart: The point raised by my hon. Friend wall arise on clause 26 when we shall consider how the composite rate is established.
          If there were no non-taxpayers with bank or building society accounts and the composite rate applied, the composite rate would move rapidly to 30 per cent. That did not happen with building societies, and it is unlikely to happen with banks when the composite rate is applied to them.
          Sir Geoffrey Finsberg: The Minister cannot expect the Committee to accept his figure of £350 million without answering the question of my hon. Friend the Member for Croydon, South (Sir W. Clark). The Minister must have calculated how much money would be affected the other way. The Committee is entitled to ask him for at least a rough figure.
          Mr. Stewart: I am not entirely sure what figure my hon. Friend seeks, but if he tables a question I shall give him precise information.
          The figures take into account the likelihood of movement of non-taxpayers' accounts from banks when the composite rate is applied to them. However, they do not assume that all non-taxpayers will move their accounts from banks. There are many uncertainties — for example, the attitude of the banks to the level of interest rates which they set when the composite rate applies. We took those factors into account and our best estimate has been between £300 million and £350 million. Some bank customers may move to building societies and yet remain within the composite rate. It is almost impossible to predict exactly how these dispositions will take place. I shall return to the question of the movement of funds between the two bodies.
          The hon. Member for Birmingham, Hodge Hill (Mr. Davis) spoke to the amendment which substitutes £80 for £70. He suggested that on the basis of indexation or uprating of personal allowances the £70 figure should be set at £80. That figure is not appropriate for indexation in that way or in relation to personal allowances. The amount of interest received varies as much by changes in interest rates as by the amount in the deposit. We should not bring the figure of £70 into the indexation provisions.
          The hon. Member for Stoke-on-Trent, Central (Mr. Fisher) asked how many non-taxpayers would be affected, and how to cost the implications of the amendments. Their cost arises, not from the lack of imposition of tax on non-taxpayers, but from the exemption of tax from taxpayers. The figures are based on the assumption that most depositors with banks and building societies are taxpayers and would be relieved by a provision for a £70 or £80 exemption.

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          The amendments would introduce a hybrid arrangement into the composite rate system in the building societies and banks, which would make the arrangements exceedingly complicated. One of the main purposes of the composite rate system is to bring about greater simplicity. It was suggested that the arrangements were designed by Revenue officials whose attitude was not always helpful. May I say in their defence that I am sure that the Revenue officials who implemented the existing arrangements with building societies, will behave scrupulously when the new arrangements are introduced.
          The position on the payment of composite rate tax was that there was a major distortion between the building societies and the banks. My hon. Friend the Member for Croydon, South and others asked the Government to reconsider our decision. We gave careful thought to our proposals before the Budget. All the points raised tonight were considered then. In view of the reaction to the proposals since the Budget, I have examined the provisions carefully in the light of what was suggested, but still believe that we should introduce the composite rate proposals as stated in the Budget. It would be dishonest and misleading of me to say that I shall reconsider the proposals with a view to changing them.
          It is better to be straightforward and clear about that rather than to say something which might lead my hon. Friends or anyone else wrongly to believe that we would consider changing the proposals in the way that they have asked.
          We cannot leave the discrimination between building societies and banks under the composite rate system as it is now. It is a major distortion. The Wilson committee said that the two should be put on a common basis. The National Consumer Council described the composite rate system applied to building societies as a major competitive imbalance. Indeed, the Wilson committee said that the building societies had an unfair advantage over other savings institutions, and the banks have objected. There are three possible ways of dealing with that distortion. One is to achieve absolute fiscal neutrality, as my hon. Friend the Member for Ludlow said, either by abolishing the composite rate or by extending it to all bodies that pay interest on accounts, including the National Savings ordinary account.
          I shall deal with each point briefly in turn, because the decision to resist these amendments depends on an overall view of the balance of advantage and disadvantage in the composite rate scheme. At the time of the Budget my right hon. Friend the Chancellor said that the composite rate for building societies had worked well for the past 90 years, but that it had advantages and disadvantages. He made no secret of that. The disadvantage was that a minority of depositors who are below the income tax thresholds still pay tax at the composite rate. However, that has not stopped many of them using building societies because of the competitive rates offered. The advantage of the scheme is its extreme simplicity, especially for the taxpayer. Most taxpayers are spared the bother of paying tax on interest through PAYE or individual assessment. I must tell the hon. Member for St. Helens, South (Mr. Bermingham) that that is the case only for standard rate taxpayers. There is a separate assessment for those who pay higher rates.
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          Equally, the Revenue is spared the need to recruit many extra staff to collect the tax due on interest paid without deduction.
          If one took one of the routes to absolute fiscal neutrality, the proposal to abolish the composite rate would not just involve recruiting 1,000 extra staff for the Inland Revenue to cover the banks. The Revenue would need about 2,000 extra people to deal with tax on building society accounts and, bearing in mind the fact that interest-bearing current accounts are spreading rapidly in the banking system, it is likely that up to another 3,000 staff would be required as that process continued. We are talking about 6,000 or more extra Inland Revenue staff, which would mean tens of millions of pounds more in direct staff wages and overheads. That solution is absolutely out of the question on grounds of public manpower and administrative costs.
          That route would also make life much more complicated for many taxpayers. The National Consumer Council said that the composite rate was attractive to many consumers because they had no subsequent dealings with the tax authorities. The scheme has been convenient in practice. I do not pose this argument, as some hon. Members have suggested, on the ground of dealing with the problem of evasion. That would be a marginal consequence of introducing the composite rate across the board.
          If we deduct tax at source, we ensure that the full amount of tax is collected, and we shall probably include some tax which, for one reason or another, may not be collected now. However, that is not the main objective of the scheme; it is simply a useful consequence in terms of compliance with the tax.
          8.15 pm
          Another route to achieving absolute fiscal neutrality would be to take the composite rate across the board, but that would leave no avenue for non-taxpayers to obtain gross interest. My hon. Friend the Member for Enfield, North (Mr. Eggar) suggested that that would not be attractive to the Committee, and I agree with him entirely. I am sure that the Committee would not want non-taxpayers to be deprived of all possible means of obtaining gross interest.
          Mr. Cockeram: Is the Minister seriously propounding the philosophy that the Conservative Government will drive the small saver from the private sector into the public sector?
          Mr. Stewart: I am not developing a philosophy. I am merely saying what, in practical terms, I believe the Government should provide and what the great majority of hon. Members would support: that we should not follow a course which denied to non-taxpayers the opportunity of obtaining gross interest.
          Sir William Clark: We are not concerned with the philosophy. The effect of this clause will be to force the small, non-taxpaying saver into the public sector—the National Savings bank. It will become the only instrument whereby a small saver can obtain tax-free interest. My hon. Friend the Member for Ludlow (Mr. Cockeram) is asking whether, since this is the effect of the clause, we are changing Conservative philosophy.
          Mr. Stewart: I can only repeat that I was not basing this argument on philosophy. I was explaining to the Committee why the Government came to the conclusion that they did in the Budget.
          Sir Geoffrey Finsberg: Will my hon. Friend give way?
          Mr. Stewart: If I am not allowed to deploy my arguments, my speech will take a very long time.
          Sir Geoffrey Finsberg: We cannot leave the matter there, even if my hon. Friend wishes to deploy his arguments, because he has failed to answer two specific questions put to him by four Conservative Members. Does he accept that the consequence of the proposal will be to benefit only the state sector? If the philosophy of the Government is to encourage the private sector, how can he equate that with the clause? I apologise to him if he was about to answer those questions. If he was not, I shall have to speak again and try to force him to answer those simple questions.
          Mr. Stewart: My hon. Friend was kind enough to say earlier that he believed that I would deal with the debate courteously, and I shall do my best. However, it is difficult to deal with these points if I can get out only one sentence at a time. I would now like to discuss whether National Savings accounts should be exempted from these arrangements, because I know that the matter has greatly worried several of my hon. Friends.
          Mr. Campbell-Savours: To save time, will the Economic Secretary simply answer yes to his hon. Friends?
          Mr. Stewart: Many points have been put to me from different angles, and it is only fair, after such an important debate, that I should try to respond to them all.
          It has been suggested that the proposal to exempt National Savings accounts gives them an unfair advantage. I must point out first that they are not competing in the same way with other deposit takers on business on both sides of the balance sheet. They are competing for deposits but they are not competing for lending. There is a difference between the separation that exists under the present system between banks and building societies and the difference between banks and building societies on the one hand and National Savings on the other.
          Mr. Bermingham: Perhaps the Minister will answer the question, as he has already been asked to do by my hon. Friend the Member for Workington (Mr. Campbell-Savours) and then explain how the non-taxpayer who seeks to deposit £100 or £200 cannot be said to have an attraction towards the state sector because no tax will be deducted and he will get the interest gross. What did the Minister mean when he said that there are other features in regard to lenders? Is he suggesting that the non-taxpayer will be attracted back to the bank because he wants a loan?
          Mr. Stewart: I shall try to be as courteous to Opposition Members as I am to my hon. Friends. It is difficult. I am endeavouring to explain why the Government have put forward these proposals, and the Committee is not showing much enthusiasm to hear the case that I am trying to put. It would be helpful if I were to be allowed to complete my case. When I have explained the arguments that should be deployed I shall give way again.
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          Dealing still with National Savings, the point has been raised by several hon. Members that the Government would be able to compete unfairly against institutions in the private sector. My hon. Friend the Member for Croydon, South (Sir W. Clark) and others spoke of whether this would have an effect on the liquidity of banks because it would draw deposits away from them. My answer is that the National Savings target for the next year will be the same as the target for the last two years, that is, £3,000 million.
          We have also made a change in regard to the accounts of INVAC and the income bonds of National Savings to reduce the ceiling from £200,000 to £50,000 so that above that level they do not compete with deposits in banks. National Savings will not be attempting to raise extra money from depositors as a result of the introduction of the composite rate. There may be a change in the disposition of the bodies with whom individual depositors place their funds, but it is not a part of our purpose to use this exemption for National Savings to take money away from banks and building societies. Indeed, by holding the target at £3,000 million, which is the same as in the past, we are not even taking into account the increase that would be available because of inflation and expansion of the economy. Therefore, there will be an extra amount of deposits available to building societies and banks if that target is held steady.
          Sir William Clark: I was not arguing about the target of the National Savings movement. What I was arguing was that if banks are lending money to industry and their deposits decrease, they will still have to maintain their liquidity ratio, and this has nothing to do with the target. Has the Treasury taken this into account? That is all I ask.
          Mr. Stewart: With respect to my hon. Friend, that is the point that I was answering. If the flow of money into National Savings is maintained at the same level, then, by definition, the banks and building societies are not being deprived of deposits. So the availability of deposits for building societies and banks will increase, while the target for National Savings is not being increased.
          The Department of National Savings has for some time had a tax-free interest band, which is now £70 on the ordinary account. That has generally been welcomed in the House and in previous Finance Bill Committees, but it does not extend to the private sector. Therefore, there is already discrimination in National Savings which the House has found it right to accept in the past. I believe that hon. Members would be right to accept similar arrangements in future, but I do not think that we should widen arrangements of that kind. They would be much more difficult to control and would call into question the merits of having such exemptions.
          In regard to the payment of interest gross as opposed to the tax-free band, in existing circumstances there is a distinction because stocks bought through the National Savings register pay interest gross whereas interest on debentures, company securities and so on is paid after deduction of tax. There are elements of discrimination in the National Savings mechanism already and it is appropriate that we should not deprive non-taxpayers of the means of obtaining a source of gross interest.
          We have therefore felt it right to deal with the composite rate problem by extending the composite rate to banks but not to National Savings facilities. This will

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          even out competition between banks and building societies. There is already a rapid increase in interest-bearing accounts in banks. This may well accelerate that increase. Of course, there will be some inconvenience and cost to the banks in introducing this arrangement but I should like to point out something announced at the time of the Budget but perhaps not fully appreciated: arrangements under schedule 20 to the Finance Act 1972, which governs the offset of interest paid under deduction of tax against interest received under deduction of tax from banks and other institutions, will apply to composite rate tax. This will accelerate the advantage to the banking sector by an amount which it is hard to estimate precisely without knowing the details of their business, but which could be of the order of £70 million which will be useful in dealing with the costs of establishing composite rates.
          The question is not a matter of philosophy, as my hon. Friends have suggested. One could argue anything on the basis of philosophy and on the basis of what is practically sensible under the circumstances. I put forward an argument which I think is practically sensible under the circumstances for extending the composite rate to the banks, but not to National Savings. Whether or not the composite rate is deducted is not the deciding factor in where depositors place their money.
          In regard to recent levels of interest rates the banks have been quoting 5·25 per cent. on deposit, which is a gross rate without deduction of tax, and building societies have been quoting 6·25 per cent. which is a net rate after deduction of composite rate tax. The National Savings ordinary account pays 6 per cent. and INVAC 9·25 per cent. Therefore, it is not surprising that some money has moved between banks and National Savings or between building societies and banks on other grounds. Many depositors put their money with banks because of the other facilities that they can obtain by holding deposits in the banks rather than in other institutions.
          The rate of interest that is received by the depositor can hardly be the only or, indeed, the major determining factor in where funds are placed. To that extent much of the comment during the debate has suggested that the impact of the introduction of the composite rate will be much more severe and damaging than I believe it is likely to be.
          The banks will want to compete in this market and will do so either by the services that they provide or by the rates of interest that they pay, which may not be the same after the introduction of the composite rate. I must resist the temptation to join the advice bureaux of hon. Members who were suggesting where depositors should place their money. Factors other than the composite rate will enter depositors' considerations.
          I sympathise with the points raised by those who have taken part in the debate, but I cannot accept that their arguments outweigh the undoubted advantages of the composite rate system.
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          Sir William Clark: Hon. Members on both sides of the House are always worried about how much concessions sought in amendments will cost the Exchequer. My hon. Friend has said that the Treasury's best estimate of the cost of the amendment is £350 million.
          Let us go through the calculation slowly. There are 3 million deposit accounts. The amendment of my hon.
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          Friend the Member for Ludlow (Mr. Cockeram) would allow exemption for the first £70 of interest on each of those 3 million accounts. I make that £210 million. If we do not take off the composite rate, it will cost the Exchequer 25 per cent. of £210 million, which is £52 million. At the standard rate, it will cost the Exchequer £70 million.
          We should be given the correct figures. The estimate of £350 million seems to have been plucked out of the air. I cannot see how that would be the cost to the Exchequer when the total interest relieved if each account has a £70 exemption—and some do not—would be only £210 million a year, subject to tax of £52 million. That is very different from £350 million.
          I do not think that many of my hon. Friends can understand why there is a difference between the National Savings bank and other banks. The Economic Secretary said that the ordinary banks are different because they lend money to people to buy machinery and so on and that the National Savings bank does not lend. But that is not true; the National Savings bank lends to the Government. There is no difference between the institutions that we are talking about.
          I hope that my hon. Friend will at least clear up the difference between my calculation of the interest at £52 million and the Treasury's estimate of £350 million.
          Mr. Stewart: I explained that quite a while ago in response to an intervention by the hon. Member for Stoke-on-Trent, Central (Mr. Fisher), who made a similar point. The cost of the amendment is substantially the cost of relieving from tax the taxpaying depositors and not the depositors who pay no tax.
          Mr. Terry Davis: It seems that some Conservative Members do not follow the Economic Secretary's calculation. The hon. Member for Croydon, South (Sir W. Clark) referred to 3 million deposit accounts as if that was the total number of accounts, and he did his calculations on that basis. However, there are 3 million non-taxpayers, but many more deposit accounts, all of which would benefit from the £70 exemption.
          Mr. Stewart: If the hon. Gentleman has put that more clearly than I did earlier, I am grateful to him. That is, indeed, the reason. We are talking about taxpaying depositors with the banks and the building societies and the figures that I gave apply both to building societies and to banks.
          I do not want to develop what I said earlier about competition with National Savings, but we are trying to reduce discrimination and distortion in competition, and in the case of National Savings, competition is only on the deposit-taking side and not on the commercial lending side.
          Mr. Bermingham: Will the Economic Secretary make it absolutely clear that he is saying that the effect of the composite rate will be to cause a number of non-taxpayers to switch their accounts to the National Savings Bank, which has only one borrower—the Government? The bank has a target of £3 billion to raise this year and if people switch their accounts the Government will presumably not be making so many calls. Is that what the hon. Gentleman is saying?
          Mr. Stewart: I am not sure that I follow the hon. Gentleman's argument. The National Savings target will

          603
          remain the same and, therefore, the Government will not be seeking to raise more money. If money comes to National Savings accounts because of the introduction of the composite rate—as, no doubt, some will, though it is difficult to quantify it—that will reduce the extent to which National Savings will seek to raise money from other sources. I mentioned the reduction in the limits on other accounts, which will serve partly to offset that.
          I have covered most of the points raised in the debate and I ask the Committee to reject the amendments.
          Mr. Cockeram: I find the Economic Secretary's reply unsatisfactory politically. I do not believe that he has produced any arguments in favour of special treatment for the public sector and the taxing of the private sector and he has not produced adequate arguments to support the taxation of people who would not otherwise be taxed. That is contrary to all the other themes of the Budget, including the raising of personal allowances.
          I also feel that my hon. Friend has not produced satisfactory technical answers to justify the basis of the Government's proposal. I shall continue to make representations to him and my right hon. Friend the Chancellor of the Exchequer, and I reserve the right to raise the matter again on Report. I am sorry that I cannot support my hon. Friend.
          Sir Geoffrey Finsberg: I hope that my hon. Friend the Economic Secretary will accept that he has not answered two questions. I desperately wish to help him to help us, but he does not seem willing to do so. He said that he cannot be wholly accurate, which I accept, and he quoted a figure of £300 million to £350 million, but he did not answer the point by my hon. Friend the Member for Croydon, South (Sir W. Clark) who asked by how much that £300 million or £350 million would be reduced by people switching from the joint stock banks or the building societies to the National Savings bank. If the Economic Secretary has been over the matter with his usual care, the Treasury must have had figures to put before Ministers.
          The second question that my hon. Friend has not answered requires only a simple yes or no reply. Does he accept that the result of what he intends will be to encourage the state sector against the private sector? The question is as simple as that.
          Mr. Terry Davis: The Economic Secretary made a brave and honest speech, but I am sorry that he called in aid of his arguments the report of the Wilson committee and the views of the National Consumer Council. I regret his references to the views of those bodies, because he turned them round and implied that they had advocated what the Government are doing. That is not correct.
          The hon. Gentleman said that those bodies had criticised the distinction between the banks and the building societies and he used them to support his case. That was unfair because although it is true that those bodies condemned the distinction between banks and building societies, they urged that the composite rate on building societies should be scrapped—the opposite of what the Government are doing. They wanted equality, but equality of a different sort. They did not want to put the composite rate of tax on bank accounts; they wanted to abolish it for building societies. It is a question of levelling up or levelling down.
          The Economic Secretary made a brave and honest speech, but his approach was rigid and inflexible. He
          604
          would not accept my amendment to amendment No. 60, but I was not convinced by his arguments. He said that the exemption of £70 was not suitable for indexation, but he gave no reason for that view. I shall not press him on that point now. I shall wait to read in Hansard what he said.
          I was very disappointed when the Economic Secretary refused to accept, or even to consider, amendment No. 60. He said that the cost of the amendment would be £300 million to £350 million a year. However, he was unable to answer question put to him by his hon. Friends, especially the hon. Member for Hampstead and Highgate (Sir G. Finsberg), the hon. Member for Croydon, South (Sir W. Clark) and the hon. Member for Ludlow (Mr. Cockeram) about how many people will switch to National Savings bank accounts as a result of the Government's provisions. I came to the conclusion that the Minister did not know the answer. I am sorry that he was not able to give us clear information. Apart from cost, his only other argument was that the amendment would complicate the administration of the composite rate. That argument, too, was not convincing.
          The question of cost has impressed some hon. Members. The Economic Secretary said that the cost of accepting amendment No. 60 would be between £300 million and £350 million a year. The Government, in this Bill, propose to abolish the investment income surcharge. That tax was paid only by those who receive more than £7,000 in interest from their investments. That tax raised £360 million for the Revenue in a full year.
          We can see what the priorities of the Government are. They have abolished the investment income surcharge and given £360 million to people who have very high investment incomes, but they are imposing a composite rate of tax on those whose incomes are so low that they will pay no income tax. The Government apparently cannot afford amendment No. 60. They can afford to give £360 million to those who get £7,000 in interest on their investment, but those who pay no income tax are to be brought into the tax net.
          Sir William Clark: The Government's figure of £350 million is based on 3 million accounts. There are 5 million deposit accounts and, taking the first £70, we are talking about interest of £350 million. However, only 25 per cent. of that £350 million is a cost to the Exchequer, and the building societies, which are not included in the amendment, are not affected.
          Mr. Davis: I accept the latter point, although I accept the Minister's logic when he said he would have to extend it to both institutions. He assumed that he would have to tidy up the legislation to provide for the building societies. The hon. Member for Croydon, South (Sir W. Clark) may not agree with the Minister, but I do.
          The hon. Member for Croydon, South is mistaken in saying that the Economic Secretary would say that the total interest would be £350 million. The Minister said that the cost of the amendment would be £350 million. I see the Minister nodding his head in agreement.
          The Government say that they cannot afford to lose £350 million in revenue through accepting amendment No. 60, which would provide for at least £70 to be tax-free for small savers as well as big savers. Three million people who do not pay tax would benefit from the amendment. However, the Government can afford to abolish the investment income surcharge at a cost of £360 million.

          605
          I would prefer the adoption of amendment No. 47, together with my amendment (a), but amendment No. 60 has been called first and we shall support it.
          Mr. Campbell-Savours: Wholly inaccurate figures are being bandied about the Chamber. Can my hon. Friend extract the correct figure from the Minister? We believe that figure is less than £100 million. The Minister says that it is more than £300 million. The House should be told tonight what the true figure is.
          Mr. Davis: I am sorry to disappoint my hon. Friend, but if Conservative Members cannot extract better figures from the Minister I doubt whether I shall be able to do so.
          Mr. Campbell-Savours: This is a matter of importance. If the Minister is unable to give us an accurate figure, the House should adjourn pending the presentation of accurate information. It is irresponsible for a Minister to use figures during a debate while knowing that he is deliberately misleading the House.
          Mr. Davis: I should prefer to finish our consideration of the clause rather than to adjourn. We shall hope to explore the major point on clause stand part.
          I object to clause 27 even if it is amended, but if amendment No. 60 was made it would be a better clause. Many hon. Gentlemen are concerned about the effects on competition between the different institutions, and especially the effect on the banks. The Opposition are concerned about the effects on small savers, particularly those who do not have to pay income tax at present. Nevertheless, we shall make common cause with Conservative Members and do our best to impose amendment No. 60 on the Government.
          Mr. Cockeram: In view of the unsatisfactory nature of the Minister's reply I intend to pursue the matter further with my right hon. Friend the Chancellor of the Exchequer and with my colleagues. I shall consider putting down further amendments or new clauses on Report. I beg to ask leave to withdraw the amendment.
          Hon. Members: No.
          The Chairman: Does the hon. Member for Birmingham, Hodge Hill (Mr. Davis) wish formally to move amendment (a)?
          Mr. Davis: In the interest of unity and harmony with Government Members, I do not propose to move it.
          Question put, That the amendment be made:—
          The Committee divided: Ayes 22, Noes 122.

          Division No. 278]

          [8.48 pm

          AYES

          Banks, Tony (Newham NW)

          Howells, Geraint

          Barron, Kevin

          Hughes, Simon (Southwark)

          Bell, Stuart

          Kennedy, Charles

          Bermingham, Gerald

          Kilfedder, James A.

          Campbell-Savours, Dale

          Kirkwood, Archibald

          Cocks, Rt Hon M. (Bristol S.)

          McDonald, Dr Oonagh

          Cohen, Harry

          McWilliam, John

          Cook, Frank (Stockton North)

          Skinner, Dennis

          Davis, Terry (B'ham, H'ge H'l)

          Smith, C.(isl'ton S & F'bury)

          Dobson, Frank

          Fisher, Mark

          Tellers for the Ayes:

          Gould, Bryan

          Mr. Frank Haynes and

          Hamilton, W. W. (Central Fife)

          Mr. Austin Mitchell.

          606

          NOES

          Alison, Rt Hon Michael

          Hunter, Andrew

          Amess, David

          Jackson, Robert

          Ashby, David

          Jessel, Toby

          Baker, Nicholas (N Dorset)

          Jones, Gwilym (Cardiff N)

          Baldry, Anthony

          Jones, Robert (W Herts)

          Bellingham, Henry

          Kershaw, Sir Anthony

          Benyon, William

          Key, Robert

          Biggs-Davison, Sir John

          Knight, Gregory (Derby N)

          Boscawen, Hon Robert

          Lang, Ian

          Bowden, Gerald (Dulwich)

          Latham, Michael

          Bright, Graham

          Lawler, Geoffrey

          Brinton, Tim

          Lennox-Boyd, Hon Mark

          Brown, M. (Brigg & Cl'thpes)

          Lester, Jim

          Buck, Sir Antony

          Lyell, Nicholas

          Butterfill, John

          Macfarlane, Neil

          Carlisle, Kenneth (Lincoln)

          MacKay, Andrew (Berkshire)

          Chapman, Sydney

          Mather, Carol

          Chope, Christopher

          Miller, Hal (B'grove)

          Clarke, Rt Hon K. (Rushcliffe)

          Mills, Sir Peter (West Devon)

          Clegg, Sir Walter

          Moore, John

          Conway, Derek

          Murphy, Christopher

          Coombs, Simon

          Neubert, Michael

          Cope, John

          Powell, William (Corby)

          Couchman, James

          Rathbone, Tim

          Cranborne, Viscount

          Rees, Rt Hon Peter (Dover)

          Currie, Mrs Edwina

          Renton, Tim

          Dunn, Robert

          Rhodes James, Robert

          Durant, Tony

          Roe, Mrs Marion

          Eggar, Tim

          Rossi, Sir Hugh

          Evennett, David

          Ryder, Richard

          Fallon, Michael

          Sackville, Hon Thomas

          Forman, Nigel

          Sainsbury, Hon Timothy

          Forth, Eric

          Shelton, William (Streatham)

          Fraser, Peter (Angus East)

          Sims, Roger

          Freeman, Roger

          Smith, Tim (Beaconsfield)

          Galley, Roy

          Spencer, Derek

          Goodhart, Sir Philip

          Spicer, Jim (W Dorset)

          Goodlad, Alastair

          Squire, Robin

          Gow, Ian

          Stanbrook, Ivor

          Gower, Sir Raymond

          Stevens, Martin (Fulham)

          Gregory, Conal

          Stewart, Ian (N Hertf'dshire)

          Griffiths, E. (By St Edm'ds)

          Stradling Thomas, J.

          Griffiths, Peter (Portsm'th N)

          Sumberg, David

          Grist, Ian

          Thatcher, Rt Hon Mrs M.

          Ground, Patrick

          Thomas, Rt Hon Peter

          Gummer, John Selwyn

          Thompson, Donald (Calder V)

          Hamilton, Neil (Tatton)

          Thompson, Patrick (N'ich N)

          Harris, David

          Tracey, Richard

          Hawkins, Sir Paul (SW N'folk)

          Twinn, Dr Ian

          Hayes, J.

          van Straubenzee, Sir W.

          Hayward, Robert

          Viggers, Peter

          Heathcoat-Amory, David

          Waddington, David

          Heddle, John

          Wakeham, Rt Hon John

          Hickmet, Richard

          Walden, George

          Hogg, Hon Douglas (Gr'th'm)

          Wardle, C. (Bexhill)

          Holt, Richard

          Whitfield, John

          Hooson, Tom

          Whitney, Raymond

          Howard, Michael

          Wiggin, Jerry

          Howarth, Alan (Stratf'd-on-A)

          Wolfson, Mark

          Howell, Rt Hon D. (G'ldford)

          Howell, Ralph (N Norfolk)

          Tellers for the Noes:

          Hubbard-Miles, Peter

          Mr. John Major and

          Hunt, David (Wirral)

          Mr. Archie Hamilton.

          Question accordingly negatived.
          Question proposed, That the clause stand part of the Bill.
          Mr. Terry Davis: I thought that some other amendments had been selected for debate on clause 27.
          The Chairman: No.
          Mr. Davis: The list of amendments that I obtained in the Lobby, Mr. Walker, shows that you selected amendments Nos. 61, 62 and 63 to be debated together—
          The Chairman: Order. Those are to schedule 8, not to clause 27.
          9 pm
          Mr. Davis: I beg your pardon, Mr. Walker.
          The Government have said that their aim with the clause and the schedule is to pursue fiscal neutrality. One way to achieve that would be to abolish the composite rate on building society accounts, as has been urged by the banks, the Wilson committee and the National Consumer Council. That proposal has been rejected by the Economic Secretary because, he says, it will involve more civil servants, and he has suggested that instead we should introduce a new system of a composite rate of tax on interest on a whole range of accounts, which we shall discuss in our debate on the schedule.
          The Government say that their proposal is neutral, but by neutral they mean that there is no effect on revenue. The clause is not neutral in its effect on people. It will redistribute the tax burden from taxpayers to non-taxpayers. That means that someone with a low income on which he is not liable for tax will become liable for tax on the interest that he receives on some of his savings—it depends on the form of savings. Someone whose income is as low as £30 a week could become liable for tax on the interest that he receives from savings, whereas a taxpayer on £300 a week will see his tax burden reduced. That is the Government's idea of neutrality.
          The Trustee Savings bank has calculated that 20 per cent. of its customers are non-taxpayers, in that they do not pay income tax. Those people will now become liable for tax on the interest that they receive on their accounts in the Trustee Savings bank. The banks have calculated that 3 million people will now become liable for tax on interest, when they have not been liable for tax before.
          I can give some examples of what this will mean. Let us consider the case of a retired man in his sixties who was self-employed and has sold a small business and invested the money, or someone who has been made redundant and has invested his redundancy payment, in one of these accounts. I have a letter from one such person. He explains that he is 55 years old and has been unemployed for two years. His total savings, accrued during 31 years of employment, amount to £20,000 and he has increased them with his redundancy payment. He receives no benefits from the social security system and has no earnings, because he is redundant. His sole source of income is the interest of £2,000, before tax, on his savings. As he says in his letter,
          "I exist (rather than live) on my interest topped up with steadily declining capital."
          That man would not have been liable to income tax, because he is married, but he will now pay tax on the interest that he receives.
          There are many people in that situation, many of them in their 60s, who are waiting until they become entitled to their retirement pension, and they rely on the married man's tax allowance of £3,155 to avoid liability for any income tax.
          The Government say that national savings are an alternative, but there is an important difference. National savings accounts do not provide a monthly income. They provide interest, which is paid on a six-monthly or annual basis. It is not possible for someone who has invested his redundancy payment or savings to obtain a regular monthly income from that form of investment. Therefore,
          608
          people have to put their savings into other forms of investment, such as the Trustees Savings bank and other savings institutions where they can get the interest more frequently. One gentleman to whom I have spoken arranged for the bank to pay him the interest monthly so that he could have a monthly income. That is an important distinction between savings institutions and National Savings accounts.
          Under the Government's proposals, 3 million non-taxpayers will be charged tax. They include not only the kind of people whom I have described, who have suffered from the effects of Government policies which have led to an increase in unemployment. They include those who have previously not been liable for tax on their small savings. They include people on supplementary benefit, pensioners and married couples whose income is less than £60 a week. The changes will benefit a similar couple on £350 a week, because they will be paying a lower rate of tax as a result of the composite calculation. I have already drawn attention to the contrast between the Government's policy on that and their policy on the investment income surcharge. That change benefits people whose income is £700 a week, and costs £360 million.
          The Government are attacking small savers, particularly children, and we shall deal with this aspect in an amendment to the schedule. Not only children will be affected; so will their grandparents. That is the effect of the composite rate of tax. The Government have described the Budget as a savers' Budget. It is not. It may be an investors' Budget, but it certainly is not a savers' Budget. The Government have also described it as an incentive Budget. Where is the incentive to children to learn the habit of thrift, and where is the incentive for pensioners who have made sacrifices to save? We all know pensioners who have small amounts of money invested in various savings accounts which is intended for their burial. It is accrued and jealously guarded for that purpose. It is extremely important to those elderly people to have that money available, especially with the present death grant. For the first time the Government will be taxing the interest that these people receive on their small savings. Other old-age pensioners who save weekly or monthly to pay electricity, gas and rates bills and who receive small amounts of interest will now be taxed.
          The Government are reducing the taxes paid by people who have capital of more than £70,000 and are introducing a tax for people who have saved a few hundred pounds who have not previously been liable to pay any tax at all on their income. We object to the clause in its entirety. In his reply to a previous amendment the Economic Secretary could only defend the Government's measures as being simple for taxpayers. It may be simplicity that he is aiming for, but the clause is expensive for non-taxpayers. It is being introduced at the expense of people who are not liable for income tax, and the Opposition oppose it.
          Mr. Kirkwood: I feel obliged to make a short contribution to the debate. I came to the debate with a fairly open mind, and I have listened carefully to the arguments, but the Treasury Bench has come off worse by a long chalk in the argument.
          I am not well up in the economic theory of the balance of advantage as between building societies, banks and the rest. It may be that at another time and in another place the Economic Secretary will be able to persuade me of the merits of the theology of that argument. It may be that the

          609
          banks and building societies are not on a par under the present arrangements. From what I have heard tonight, one way to redress the balance would be to go in exactly the opposite direction from the way that has been chosen. The Economic Secretary has not chosen to do so and so we are faced with the position where the small depositors, who are the main depositors in banks such as the Trustee Savings bank in constituencies such as my own—the elderly and the young—will be clobbered by the way that they are treated for tax purposes. I am disappointed that the Minister did not even say that he would consider exemptions for institutions such as the Trustee Savings bank, the joint stock banks or banks north of the border. If he had done that, I should have listened with more sympathy to his arguments.
          If the Government do not intend to countenance the suggestions that I have mentioned, they are guilty of pushing depositors towards investing in the National Savings bank. That is astonishing for a Conservative Administration. It is unexpected. I should never have believed that I would hear a Treasury Minister advocate such action.
          I shall study what the Minister said about the amendments. I did not understand half of what he said. That may be due to my ignorance, but it may be because of the confusion which crept into the discussion on the amendments. I shall read Hansard carefully and return to some of the arguments on Report.
          I have listened to the debate for a number of hours and I cannot ask my hon. Friends to support the Government if a Division is called. I shall advise my hon. Friends to vote against the clause because of the way in which the Government are treating small depositors and the effect that the proposal will have on the Trustee Savings bank. We heard a quote from a letter—
          The Chairman: Order. I am reluctant to interrupt the hon. Gentleman, but we seem to be trespassing on amendments Nos. 61, 62 and 63 which refer to specific deposit takers. I hope that we will not trespass too far on amendments which lie ahead.
          Mr. Kirkwood: I am grateful for that advice, Mr. Walker. I was saying that the Government have not convinced me that the arrangements will give the necessary protection to small depositors. For that reason, the Government cannot expect support from these Benches. I hope that they will come back on Report with some remedies.
          Mr. Ian Stewart: I dealt with the arguments thoroughly when replying to the amendments to the clause, so I do not think that I need respond to the hon. Member for Hodge Hill (Mr. Davis). The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) did not contribute to the earlier debate. I am sorry that I did not persuade him and others of the merits of the case.
          I have always said that there are advantages and disadvantages in the composite rate scheme. The disadvantage is that non-taxpayers who deposit their money in the big banks and building societies will be subject to the composite rate. They do not have to do that. Therefore, it is not right to say that they are being clobbered. They have the opportunity to use the National Savings bank. It is right to keep that avenue open for them.
          Mr. Campbell-Savours: Such people may have that opportunity, but under that scheme they can withdraw money only every six months. How can the Minister expect people who want a monthly income to invest in that way?
          9.15 pm
          Mr. Stewart: Arrangements for National Savings vary greatly between the different instruments and accounts. The hon. Gentleman raises an interesting point, which we shall consider. We are always anxious that National Savings should meet the needs of those who put their savings into them.
          On the general point, I repeat to the hon. Members for Roxburgh and Berwickshire and for Hodge Hill that there are many factors besides the composite rate which determine where depositors place their money, and I believe that in the proposals as they stand the advantages greatly outweigh the disadvantages.
          Mr. Terry Davis: Is the hon. Gentleman giving an assurance that he will consider the possibility of interest being credited to National Savings accounts on a monthly basis? I should be grateful for that assurance.
          Mr. Stewart: That is not a matter for the Finance Bill. As I said—and this embraces the point that the hon. Gentleman made—we are always open to suggestions, and I heard what he said.
          Question put, That the clause stand part of the Bill:—
          The Committee divided: Ayes 123, Noes 18.

          Division No. 279]

          [9.15 pm

          AYES

          Alison, Rt Hon Michael

          Gow, Ian

          Amess, David

          Gower, Sir Raymond

          Ashby, David

          Gregory, Conal

          Baker, Nicholas (N Dorset)

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

          Baldry, Anthony

          Griffiths, Peter (Portsm'th N)

          Bellingham, Henry

          Grist, Ian

          Benyon, William

          Ground, Patrick

          Biggs-Davison, Sir John

          Gummer, John Selwyn

          Boscawen, Hon Robert

          Hamilton, Neil (Tatton)

          Bowden, Gerald (Dulwich)

          Harris, David

          Bright, Graham

          Hawkins, Sir Paul (SW N'folk)

          Brinton, Tim

          Hayes, J.

          Brown, M. (Brigg & Cl'thpes)

          Hayward, Robert

          Buck, Sir Antony

          Heathcoat-Amory, David

          Butterfill, John

          Heddle, John

          Carlisle, Kenneth (Lincoln)

          Hickmet, Richard

          Chapman, Sydney

          Hogg, Hon Douglas (Gr'th'm)

          Chope, Christopher

          Holt, Richard

          Clarke, Rt Hon K. (Rushcliffe)

          Hooson, Tom

          Clegg, Sir Walter

          Howard, Michael

          Conway, Derek

          Howarth, Alan (Stratf'd-on-A)

          Coombs, Simon

          Howell, Rt Hon D. (G'ldford)

          Cope, John

          Howell, Ralph (N Norfolk)

          Couchman, James

          Hunt, David (Wirral)

          Cranborne, Viscount

          Hunter, Andrew

          Currie, Mrs Edwina

          Jackson, Robert

          Dunn, Robert

          Jessel, Toby

          Durant, Tony

          Jones, Gwilym (Cardiff N)

          Eggar, Tim

          Jones. Robert (W Herts)

          Evennett, David

          Key, Robert

          Fallon, Michael

          Knight, Gregory (Derby N)

          Farr, John

          Lang, Ian

          Finsberg, Sir Geoffrey

          Latham, Michael

          Forman, Nigel

          Lawler, Geoffrey

          Forth, Eric

          Lennox-Boyd, Hon Mark

          Fraser, Peter (Angus East)

          Lester, Jim

          Freeman, Roger

          Lyell, Nicholas

          Galley, Roy

          Macfarlane, Neil

          Goodhart, Sir Philip

          MacKay, Andrew (Berkshire)

          Goodlad, Alastair

          Major, John

          611

          Mather, Carol

          Stanbrook, Ivor

          Miller, Hal (B'grove)

          Stevens, Martin (Fulham)

          Mills, Sir Peter (West Devon)

          Stewart, Ian (N Hertf'dshire)

          Molyneaux, Rt Hon James

          Stradling Thomas, J.

          Moore, John

          Sumberg, David

          Murphy, Christopher

          Thatcher, Rt Hon Mrs M.

          Neubert, Michael

          Thomas, Rt Hon Peter

          Newton, Tony

          Thompson, Patrick (N'ich N)

          Powell, William (Corby)

          Tracey, Richard

          Rathbone, Tim

          Twinn, Dr Ian

          Rees, Rt Hon Peter (Dover)

          van Straubenzee, Sir W.

          Renton, Tim

          Viggers, Peter

          Rhodes James, Robert

          Waddington, David

          Roe, Mrs Marion

          Walden, George

          Ryder, Richard

          Wardle, C. (Bexhill)

          Sackville, Hon Thomas

          Whitfield, John

          Sainsbury, Hon Timothy

          Whitney, Raymond

          Shelton, William (Streatham)

          Wiggin, Jerry

          Sims, Roger

          Wolfson, Mark

          Smith, Tim (Beaconsfield)

          Soames, Hon Nicholas

          Tellers for the Ayes:

          Spencer, Derek

          Mr. Donald Thompson and

          Spicer, Jim (W Dorset)

          Mr. Archie Hamilton.

          Squire, Robin

          NOES

          Banks, Tony (Newham NW)

          Howells, Geraint

          Bell, Stuart

          Hughes, Simon (Southwark)

          Bermingham, Gerald

          Kennedy, Charles

          Campbell-Savours, Dale

          Kilfedder, James A.

          Cocks, Rt Hon M. (Bristol S.)

          Kirkwood, Archibald

          Cohen, Harry

          McDonald, Dr Oonagh

          Cook, Frank (Stockton North)

          McWilliam, John

          Davis, Terry (B'ham, H'ge H'l)

          Skinner, Dennis

          Dobson, Frank

          Fisher, Mark

          Tellers for the Noes:

          Gould, Bryan

          Mr. Austin Mitchell and

          Hamilton, W. W. (Central Fife)

          Mr. Frank Haynes.

          Question accordingly agreed to.
          Clause 27 ordered to stand part of the Bill.

      Schedule 8

        INTEREST PAID ON DEPOSITS WITH BANKS ETC.
        Mr. Terry Davis: I beg to move amendment No. 61, in page 135, leave out line 24.
        The Chairman: With this, it will be convenient to consider the following amendments: No. 62, in page 135, leave out lines 25 and 26.
        No. 63, in page 135, leave out lines 27 and 28.
        Mr. Davis: The purpose of these probing amendments is to discover why the Government selected certain savings institutions. Amendment No. 61 proposes to remove from the schedule the reference to the Post Office. I understand that the only Post Office savings medium covered by the schedule is the Girobank. How did the Government decide to include the Girobank in their list of savings institutions on which the composite rate of tax on interest would be levied? They have decided to levy that rate on accounts with the Girobank but not those with the National Savings bank. What is the reason for that?
        This matter was raised by some Conservative Members in a previous debate. A philosophical argument seemed to rage on the Conservative Benches about the encouragement given by the Bill to the publicly owned National Savings bank. Conservative Members argued that this was discrimination in favour of publicly owned savings institutions and against privately owned savings institutions. The Girobank is publicly owned also and is included in the list of savings institutions.
        612
        The Economic Secretary said that the National Savings bank differed from the other institutions because it did not lend as well as take deposits. I may be mistaken—if I am wrong, I am sure that the Economic Secretary will tell me in his reply—but I do not believe that the Girobank lends to people. It was pointed out that the National Savings bank is in the business of lending to the Government. The amendment refers specifically to the Girobank. We should like to know the basis of the Government's choice of institutions.
        Amendment No. 62 involves the Trustee Savings bank. We should like the Government to justify the inclusion of that bank in the list. The Trustee Savings bank is important because many people graduate from using National Savings bank current or ordinary accounts to Trustee Savings bank accounts. Many children progress in that way as they grow up, eventually opening current accounts with the clearing banks. The Trustee Savings bank plays an important role in the economic life of the country and the education of our children.
        Amendment No. 63 deals with banks under the Savings Bank (Scotland) Act 1819. As I understand it, those banks are regarded as trustee savings banks in Scotland. It is instructive to look at the long title of that Act. Its words shed light on the Government's intentions in putting a tax on the interest paid on the small accounts in the trustee savings banks and Scottish banks. The Act explains that it was introduced
        "for the safe custody and increase of small savings, belonging to the industrious classes of His Majesty's subjects."
        That may be old-fashioned language, but we all understand the intent.
        9.30 pm
        We are discussing accounts that comprise the small savings of those who do not have a great deal of money. They are not investors; they are savers—people who have put a little by each week from their wages. People have been doing that for almost 200 years. For the first time the Government will tax the small amount of interest paid on their savings. The Government must justify the inclusion of the Scottish equivalent of the trustee savings banks.
        It is not clear from paragraph 2(1)(F)) whether retail co-operative societies are included in the category of licensed deposit takers or whether their share capital constitutes relevant deposits. I should be grateful if the Economic Secretary would clarify that point. I hope that he will assure us that Co-operative Society share capital will not be affected by the schedule.
        I declare an interest as a member of the Co-operative Society. That is not exceptional as it has 9 million members throughout the country. On the latest available statistics, its members contributed about £180 million to the shares of their societies, an average of £20 per member. While societies draw their membership from the whole of the community, most of it is of a working-class character, often housewives of families on low incomes, skilled or unskilled manual workers and senior citizens. Many of its members are unemployed and pay little or no tax. Many of them are in the evening of their lives and the small amounts of savings in their local societies have been built up laboriously over a lifetime and used either to supplement their living standards or to provide a reserve against the cost of their funerals.
        It would be intolerable if a proposal that is of doubtful wisdom in the broadest sense were to be applied against

        613
        the interests of those on low incomes with a negligible tax liability. I trust that the Economic Secretary will make a clear and specific statement that co-operative society capital will not be affected by the proposed composite arrangements.
        Mr. Ian Stewart: The co-operatives would not be deposit takers and, therefore, would not be covered by the proposals.
        The hon. Gentleman asked me to explain the basis for including the bodies mentioned in the amendments within the proposed arrangements. The 1819 Act savings banks are treated as savings banks for many purposes and are being included generally within the concept of savings banks. The proposals are not directed specifically at them. If those banks were set up for the industrious, and the industrious are those who work hard, presumably the banks would include many taxpayers among their savers.
        The hon. Gentleman was right to say that the Post Office is included because of the Girobank. That bank does make commercial loans and it is included for that reason. National Savings banks are deposit takers, but do not compete in the lending markets with banks and building societies. The Girobank competes in only a limited way at present, but that practice is steadily increasing. Both the Girobank and the Trustee Savings banks are developing their commercial business and seeking in many ways — and it is a welcome development—to become more like other banks and licensed deposit takers in their lending activities. Therefore, it is right that they should all be treated in the same way.
        Mr. Terry Davis: I beg to ask leave to withdraw the amendment.
        Amendment, by leave, withdrawn.
        Question proposed, That the schedule be the eighth schedule to the Bill.
        Mr. Terry Davis: I am disappointed that the hon. Member for Croydon, South (Sir. W. Clark) has not moved amendment No. 48, which would have provided some relief for children. As I understand the amendment, it would have allowed children to open small savings accounts not liable to income tax. I should not want to associate myself with any loopholes that would enable the children of wealthy families to avoid paying tax on their savings and investments. The amendment would have meant that such children paid income tax in the same way as they do now, because they would be liable to higher rates, and even to the standard rate of income tax. Unfortunately, however, we cannot debate that as the hon. Gentleman has not moved his amendment.
        The Opposition object to the new tax that will be levied on the interest received by small savers, many of whom are not at present liable to pay tax. We are told that the banks have calculated that 3 million people who do not pay income tax at present will become liable to pay it because of the Government's measure.
        Throughout this evening's debate it has been clear that the Government are anxious to put banks, Trustee Savings banks and the Girobank on the same basis as building societies. Leaving aside the point that they could have done it in a different way, by scrapping the composite rate of tax on building societies—I accept that that rate of
        614
        tax has existed for many years under Labour and Conservative Governments—I emphasise that if the Government's aim is fiscal neutrality and to put building societies and other institutions on the same basis, they could have done so by scrapping the composite rate of tax. In that way, those who are not liable to income tax would have been able to invest in building societies without their money being taxed willy-nilly by the Chancellor.
        The Government, however, have turned their face against that option and have introduced clause 27 and schedule 8 to put their fiscal policy into effect. The schedule lists many savings institutions in which people have placed small savings without having them raided by the Chancellor. The policy of taxing the small amount of interest received by those who are so poor that they are not liable to income tax is totally abhorrent to the Opposition. We shall, therefore, vote against the schedule, as we voted against the clause.
        Question put, That this schedule be the eighth schedule to the Bill:—
        The Committee divided: Ayes 121, Noes 17.

        Division No. 280]

        [9.38 pm

        AYES

        Alison, Rt Hon Michael

        Hayes, J.

        Amess, David

        Hayward, Robert

        Ashby, David

        Heathcoat-Amory, David

        Baker, Nicholas (N Dorset)

        Heddle, John

        Baldry, Anthony

        Hickmet, Richard

        Bellingham, Henry

        Holt, Richard

        Biggs-Davison, Sir John

        Hooson, Tom

        Boscawen, Hon Robert

        Howard, Michael

        Bowden, Gerald (Dulwich)

        Howarth, Alan (Stratf'd-on-A)

        Bright, Graham

        Howell, Ralph (N Norfolk)

        Brinton, Tim

        Hunt, David (Wirral)

        Brown, M. (Brigg & Cl'thpes)

        Hunter, Andrew

        Buck, Sir Antony

        Jackson, Robert

        Butterfill, John

        Jessel, Toby

        Carlisle, Kenneth (Lincoln)

        Jones, Gwilym (Cardiff N)

        Chapman, Sydney

        Jones, Robert (W Herts)

        Chope, Christopher

        Key, Robert

        Clarke, Rt Hon K. (Rushcliffe)

        Kilfedder, James A.

        Clegg, Sir Walter

        Knight, Gregory (Derby N)

        Conway, Derek

        Latham, Michael

        Coombs, Simon

        Lawler, Geoffrey

        Cope, John

        Lennox-Boyd, Hon Mark

        Couchman, James

        Lester, Jim

        Cranborne, Viscount

        Lyell, Nicholas

        Currie, Mrs Edwina

        Macfarlane, Neil

        Dunn, Robert

        MacKay, Andrew (Berkshire)

        Durant, Tony

        Major, John

        Eggar, Tim

        Mather, Carol

        Evennett, David

        Miller, Hal (B'grove)

        Fallon, Michael

        Mills, Sir Peter (West Devon)

        Farr, John

        Molyneaux, Rt Hon James

        Finsberg, Sir Geoffrey

        Moore, John

        Forman, Nigel

        Murphy, Christopher

        Forth, Eric

        Neubert, Michael

        Fraser, Peter (Angus East)

        Newton, Tony

        Freeman, Roger

        Powell, William (Corby)

        Galley, Roy

        Rathbone, Tim

        Goodhart, Sir Philip

        Rees, Rt Hon Peter (Dover)

        Goodlad, Alastair

        Renton, Tim

        Gow, Ian

        Rhodes James, Robert

        Gower, Sir Raymond

        Roe, Mrs Marion

        Greenway, Harry

        Ryder, Richard

        Gregory, Conal

        Sackville, Hon Thomas

        Griffiths, Peter (Portsm'th N)

        Sainsbury, Hon Timothy

        Grist, Ian

        Shelton, William (Streatham)

        Ground, Patrick

        Sims, Roger

        Gummer, John Selwyn

        Smith, Tim (Beaconsfield)

        Hamilton, Hon A. (Epsom)

        Soames, Hon Nicholas

        Hamilton, Neil (Tatton)

        Spencer, Derek

        Harris, David

        Spicer, Jim (W Dorset)

        Hawkins, Sir Paul (SW N'folk)

        Squire, Robin

        615

        Stanbrook, Ivor

        Viggers, Peter

        Stevens, Martin (Fulham)

        Waddington, David

        Stewart, Ian (N Hertf'dshire)

        Walden, George

        Stradling Thomas, J.

        Wardle, C. (Bexhill)

        Sumberg, David

        Whitfield, John

        Thatcher, Rt Hon Mrs M.

        Whitney, Raymond

        Thomas, Rt Hon Peter

        Wiggin, Jerry

        Thompson, Donald (Calder V)

        Wolfson, Mark

        Thompson, Patrick (N'ich N)

        Tracey, Richard

        Tellers for the Ayes:

        Twinn, Dr Ian

        Mr. Douglas Hogg and

        van Straubenzee, Sir W.

        Mr. Ian Lang.

        NOES

        Banks, Tony (Newham NW)

        Haynes, Frank

        Bell, Stuart

        Howells, Geraint

        Bermingham, Gerald

        Hughes, Simon (Southwark)

        Campbell-Savours, Dale

        Kirkwood, Archibald

        Cocks, Rt Hon M. (Bristol S.)

        McDonald, Dr Oonagh

        Cohen, Harry

        Skinner, Dennis

        Cook, Frank (Stockton North)

        Davis, Terry (B'ham, H'ge H'l)

        Tellers for the Noes:

        Fisher, Mark

        Mr. Austin Mitchell and

        Gould, Bryan

        Mr. John McWilliam.

        Hamilton, W. W. (Central Fife)

        Question accordingly agreed to.
        Schedule 8 agreed to.

      Clause 98

        REDUCTION OF TAX
        Mr. William Powell: I beg to move amendment No. 55, in page 87, leave out lines 3 to 26 and insert—

        FIRST TABLE

        Portion of Value

        Rate of Tax

        Lower limit

        Upper limit

        Per cent.

        £

        £

        0

        64,000

        Nil

        64,000

        30

        SECOND TABLE

        Portion of Value

        Rate of Tax

        Lower limit

        Upper limit

        Per cent.

        £

        £

        0

        64,000

        Nil

        64,000

        15.'.

        I begin by declaring an interest, in that I act as adviser to the Unquoted Companies Group.
        In his Budget speech on 13 March my right hon. Friend the Chancellor said:
        "Unnecessarily high rates of tax discourage enterprise and risk taking. This is true of the capital taxes, just as it is of the corporation and income taxes. It is a matter of particular concern to those involved in running unquoted family businesses. The highest rates of capital transfer tax are far too high and badly out of line with comparable rates abroad. I propose therefore, in addition to statutory indexation, to reduce the highest rate of capital transfer tax from 75 per cent. to 60 per cent. —
        [Official Report, 13 March 1984; Vol. 56, c. 299.]
        I welcome the reduction which my right hon. Friend announced in his Budget speech. The effect of the amendment is further to reduce capital transfer tax from 60 to 30 per cent. The amendment aims to tackle two problems in one. First, the indexation of capital transfer tax rates under the Finance (No. 2) Act 1983 has ignored the substantial increases caused by inflation between 1974 and 1982—
        Mr. Campbell-Savours: Will the hon. Gentleman give way?
        Mr. Powell—in the value of assets subject to tax.
        Mr. Campbell-Savours: Will the hon. Gentleman give way?
        Mr. Powell: The retail price index has increased by a factor more than 300 per cent. since 1974—
        Mr. Campbell-Savours: On a point of order, Mr. Armstrong. Is it in order for the hon. Member for Corby (Mr. Powell) to come to this Chamber and read his speech, especially since it is such an appalling one?
        The First Deputy Chairman of Ways and Means (Mr. Ernest Armstrong): It is quite in order for hon. Members to refer to notes.
        Mr. Campbell-Savours: But he is reading his speech, Mr. Armstrong.
        The Chairman: Order. The hon. Gentleman has just started his speech, and some hon. Members make more references to notes than do others.
        Mr. Powell: The retail price index has increased by a factor of more than 300 per cent. since 1974, so in real terms the tax on death is heavier over the range of £75,000 to £2·42 million than it was in 1974.
        However, there is no logical reason for levying a tax on death at graduated rates. The suggested new tables in my amendment would exempt completely smaller estates up to the present ceiling proposed by the Government, and would introduce one rate of tax on all estates—30 per cent. on death and 50 per cent. on lifetime gifts. That is not as satisfactory as it would be were the tax on lifetime gifts abolished, which I hope my right hon. Friends will do in due course, but which I do not urge upon them tonight.
        The yield from capital transfer tax on lifetime transfers, including the tax on discretionary trusts, was £30 million in 1981–82, which is the latest year for which figures are available. That figure compares with a peak of £32·8 million in 1978–79. Since capital transfer tax is collected in arrears, the figure for 1981–82 will have been little affected by the reduction in the rate of tax on lifetime transfers from 75 to 50 per cent., which was announced in 1981. In 1984 the top rate was further reduced to 30 per cent.
        There are no published figures to enable an up-to-date estimate to be made of the yield of capital transfer tax on lifetime transfers. However, the current figure should be substantially less than £38 million; let us say £25 million. The amendment would reduce the yield of capital transfer tax on lifetime transfers by nil at the bottom of the scale and by half at the top. Let us call it an average of 25 per cent. A quarter of £25 million gives a full-year cost of some £6 million. That is about £2 million in the first year.
        The total yield of capital transfer tax is forecast for 1984–85 to be £680 million. After the deduction of the £25 million which I have just analysed on lifetime transfers, the yield on death is some £655 million. Therefore, the cost of my amendment on the same basis as for lifetime gifts is a quarter of £655 million—that is, £164 million in a full year and £66 million in 1984–85. The total cost on death and lifetime transfers is therefore £170 million in a full year and £68 million in the first year.
        As the Chancellor said in his Budget statement, the highest rates of capital transfer tax are far too high and are

        617
        badly out of line with comparable rates abroad. Of course, the provisions of the Finance Bill will reduce the maximum rate from 75 to 60 per cent., but this contrasts with a maximum rate in Scandinavia for tax on transfers to lineal descendants of 39 per cent., in the rest of the European Community minus ourselves of 27·22 per cent., and in other western European non-EC countries of 20·2 per cent. This contrasts with a rate of 20 per cent. in France and 35 per cent. in Germany.
        Mr. Fisher: Is the hon. Gentleman aware of the proportion of total taxes, including social security contributions, that is paid as taxes on capital in this country? If he is, he will be aware that only Ireland, Luxembourg and Germany pay a lower proportion of tax than people in this country and that everybody else in the Common Market pays a great deal more.
        Mr. Powell: The hon. Gentleman is entitled to his opinion. I simply dispute his facts.
        Mr. Bell rose—
        Mr. Powell: No; I have just given way and I want to develop my argument on why it is necessary that there should be the change that I propose.
        Experience shows that capital transfer tax is often a major and insurmountable barrier to the expansion of unquoted companies. The reason for this is simple. Capital transfer tax is a graduated tax and the cost of funding it from personal resources rises rapidly to prohibitive levels as the business grows. If the principal motivation is to keep the firm as a family company, capital transfer tax can be an absolute barrier to expansion that would otherwise be desirable commercially. Family firms desire to maintain control and to pass a secure and sound business to the next generation. Capital transfer tax therefore acts as a business disincentive tax. It acts as a direct disincentive to growth, in that beyond a certain size further expansion implies eventually a larger capital tax liability than can be met other than by selling the company and terminating its existence as an independent organisation.
        The fiscal destruction of larger unquoted companies is doubly undesirable. First, by virtually every relevant criterion of efficiency, unquoted companies out-perform quoted companies. This applies to profit ratios, to the growth of net assets and to other profit and growth rates, all of which shows that unquoted companies are at a decided advantage over quoted companies. Yet the fiscal bias against unquoted companies relative to quoted companies, as characterised in the present structure of capital transfer tax, tends to lower the general efficiency of British industry.
        Unquoted companies are relatively efficient because they are compelled to be so by their more limited financial base. They have to bear their own losses and they cannot afford cross-subsidisation or empire building. That characteristic also assists growth, since unquoted companies, in contrast to quoted companies, are not bound by market forces to distribute dividends and they therefore plough back a greater part of their revenue into investment, which tends to increase their capital transfer tax burden. That is absurd.
        10 pm
        The damage done by capital transfer tax on unquoted companies is social as well as economic.Unquoted
        618
        companies represent independent centres of economic power and, except to the extent that they are inhibited by capital transfer tax, they take a long view of the future, often extending over several generations.
        By contrast, quoted companies are inevitably more influenced by short-term considerations, particularly the profit figures of last year and next year. Moreover, their decision-takers, because they are disposing of other people's money and not their own, are often more averse to risk than are decision-takers in unquoted companies. The safest course for salaried decision-takers is generally to keep in step with their counterparts in other companies.
        The course that is often more profitable in the long term is to go against that trend and, therefore, although the principle of safety in numbers operating in the quoted sector tends to exaggerate cyclical variations between boom and slump, the devolution of decision-taking to locally based owner-managers, with a long-term view, has the opposite effect.
        Many unquoted companies follow a policy of no redundancies, which can be justifiable commercially for an owner-managed company with a long time scale, even when it is not right for a quoted company subject to shorter-term pressures.
        The depth and duration of the present recession has been increased by the dismantling of so many well-established unquoted family companies in recent decades because of the threat of estate duty and capital transfer tax. The economic recovery would be more rapid and enduring if the abolition of capital transfer tax enabled established and successful unquoted companies to make their full contribution once again.
        Similarly, unquoted companies are dispersed all over the country and, unlike the head offices of quoted companies, are not concentrated in a small number of large cities. The existence of numerous independent centres—
        Mr. Campbell-Savours: Will the hon. Gentleman give way?
        Mr. Powell: Yes, at the end of the sentence. The existence of numerous independent centres of economic power and decision-taking helps to maintain activity away from the major centres of industrial production and the more prosperous areas of the country.
        Mr. Campbell-Savours: Instead of saying that he would give way at the end of the sentence, the hon. Gentleman should have said that he would give way at the end of the page. Did he consult his constituents in Corby about his contribution to the debate? How many of his constituents will gain from the reduction of the CTT liability of those who have more than £80,000? Did the hon. Genleman ask his 55,000 constituents? If so, how many will benefit from his proposal—10 or 20?
        Mr. Powell: We would not expect the hon. Gentleman to pursue a sensible argument. My constituents and the hon. Gentleman's constituents will benefit from all steps taken to strengthen new companies that are growing. Companies are growing in my constituency particularly rapidly and my amendment will assist that process. I shall show how that relates to a number of initiatives taken by the Government in the past three or four years. However, CTT and estate duty have prevented unquoted companies from making their maximum contribution to keeping up

        619
        the level of activity in the peripheral regions, including the constituency of the hon. Member for Workington (Mr. Campbell-Savours). Once an independent company is sold or taken over, it becomes merely the branch or subsidiary of a large concern. Instead of being relatively immune to eonomic storms by reason of the long-term horizon of its owner-managers, it becomes exceptionally vulnerable because the new owner will treat it as a prime candidate for retrenchment if business turns down.
        Capital transfer tax on unquoted companies has made a significant contribution to the problems of the disparity between the peripheral areas and the centre. Although my arguments are focused on unquoted companies, they go wider. Other assets as well as unquoted company shares are better held personally than by institutions. For example, it is also desirable for directors and managers of quoted companies to have substantial holdings of their companies' shares. This amendment will at last reduce the rate schedule of CTT, which has never been indexed for the more-than-threefold increase in prices between 1974 and 1982 and which rises to two and a half times the average top rate in the rest of Europe on transfers to beneficiaries in the direct line.
        The amendment will still leave our own rate higher than those that exist in the rest of the European Community, but it will be a major benefit to a vital sector of our economy and will assist in the process that we have begun of regenerating British industry. In the past three or four years there have been the business start-up scheme, the loan guarantee scheme and the business expansion scheme, which have enabled a large number of new companies to he formed. This reform in CTT will enable these new companies to grow and prosper down the generations, and it will be a major step to ensuring that they are able to take their place alongside existing well-established companies. I commend the amendment to the Committee..
        Mr. Peter Rees: The Committee will agree that my hon. Friend the Member for Corby (Mr. Powell) moved his amendment with great lucidity and that it raises a point of considerable importance.
        620
        On the more technical aspects, I must tell the Committee that the amendment would not fundamentally simplify the tax, because it would still be necessary to calculate the complex reliefs. A compelling argument, to my mind, is that the cost would be considerable. The Chancellor and I have to bear that in mind. For 1984–85 the cost would be £55 million, and in a full year it would be £175 million. There are slight discrepancies between my figures and those of my hon. Friend, but we can iron them out later if necessary. The figures are broadly similar.
        My right hon. Friend the Chancellor of the Exchequer made it clear that the Budget has to be neutral. A cost of this nature could not be absorbed. However, I welcome my hon. Friend's commendation of the relief that we have introduced in clause 98. We may debate the scope of the clause on clause stand part.
        My hon. Friend developed an attractive argument about the unquoted company and I should be the first to recognise the contribution that such companies make to the economy.
        My hon. Friend was pressed by the hon. Member for Workington (Mr. Campbell-Savours). The hon. Gentleman must recognise that, in Corby and elsewhere, unquoted companies are making their contribution to the provision of jobs. Notwithstanding their rather odd contribution to job creation in the form of the national income surcharge, I know that the Opposition are preoccupied—as we are—with the need to provide jobs.
        I hope that my hon. Friend will feel that justice has been done to his powerful case. In view of the considerable cost of his amendment in tax terms, I hope that he will not feel disposed to press it to a Division.
        Mr. William Powell: In view of the considerable step that my right hon. Friend the Chancellor has been able to take in the Budget to reduce the maximum rate from 75 to 60 per cent., I do not think that it would be right to press the amendment, and I therefore beg to ask leave to withdraw it.
        Amendment, by leave, withdrawn.

    Finance (No. 2) Bill
    Question proposed, That the clause stand part of the Bill.
    Dr. McDonald: We listened with amusement to the hon. Member for Corby (Mr. Powell), who, having got nothing from the Chief Secretary except a few kind words, immediately abandoned the companies about which he grieved so much, leaving them to suffer the burden of taxation which, in his view, will wipe them out, thus adding to the never-ending number of companies that have gone into liquidation under the present Government.
    Clause 98 proposes yet more reductions in the rate of capital transfer tax and the indexation of the thresholds at which the tax is payable. It will abolish the three highest rates of capital transfer tax applying to transfers of assets after death, abolish the three highest rates of capital transfer tax applying to lifetime transfers, and reduce tax on other lifetime transfers of assets from 35 per cent. to 30 per cent. and from 30 per cent. to 27 per cent. at what appears to be a modest cost of £49 million. I shall return to that apparent modesty as this is simply yet another reduction in the tax.
    The Chancellor has talked of the unnecessarily high rates of tax that discourage enterprise and risk taking. The Government have provided no empirical evidence for that. There is no evidence to suggest that the tax has prevented the formation of companies or the continuation of successful ones. It is the Government's conduct of economic policy, the pursuit of high interest rates in the initial part of their first term of office and the lack of demand that have destroyed the companies that have floundered. Those are the factors that have led to the highest rate of company liquidation that we have experienced for many years. If the Government were really worried about the health of companies, they would be changing their economic policies rather than fiddling around with tax changes to give even more benefits to the better-off.
    Even the present rates of capital transfer tax allow large amounts of capital to be transferred. The £60,000 that can now be transferred without being liable to tax is to be increased to £64,000. Because the exemption is renewed every 10 years, a married couple can arrange for as much as £384,000 to be transferred in a 30-year period without being liable to tax. It is an ineffective tax which was regarded as so much so a couple of years ago that an article entitled "Capital Transfer Tax: An Obituary" appeared in Fiscal Studies. The article was premature, as it followed the 1981 Budget. The patient is dying, but dying very slowly. It was not quite dead then, but it was pretty ineffective.
    10.15 pm
    The article then gave an example. The Chancellor's reduction in capital transfer tax in the 1981 Budget meant that almost all personally owned businesses had low tax rates. Even on assets worth as much as £4 million, the effective tax rate was less than 12 per cent. once in a generation or about 0·4 per cent. in a year. Those were the estimates in the article. I see that the hon. Member for Corby has left his place, no doubt to sympathise with all the suffering companies that he has so abruptly deserted. He could hardly claim that an effective tax rate at that level was any great suffering to companies.
    622
    More recently, the Treasury and Civil Service Sub-Committee, in a report called "The Structure of Personal Income Taxation and Income Support" which had all-party support, had this to say about capital transfer tax:
    "Capital transfer tax contained general exemptions, including the ability to transfer wealth freely between spouses and a reduction in liability on private business on agricultural land. As the Financial Times noted following the March 1982 Budget, all of these concessions plus the raising of the threshold has meant that CTT has declined as a proportion of GNP and that all but the very wealthiest can almost escape tax entirely. For even 1982–83, the absolute amount of tax is expected to fall. CTT raises little more revenue, even in cash terms, than the estate duties which it replaced. It represented only 1·2 per cent. of all Inland Revenue receipts, little more than an eighth as much as that raised before the last war. Proposals in the March 1982 Budget to index the tax for inflation will result in a further decline in future revenue from that tax."
    The Select Committee examined a wide range of evidence, and the report showed clearly that little of the tax was collected.
    After all, the tax is easily avoided—this was one of the glaring omissions from the speech of the hon. Member for Corby. This is shown by the endless financial advice given in the financial sections of newspapers and in Accountancy Age. I have a couple of articles from that paper that will serve as an illustration. One of them suggests that one should take the avoidance so seriously that one plans from the cradle to the grave. To make that clear, it has a series of photographs, ending with a picture of a graveyard, when presumably one will have lost interest in capital transfer tax.
    In considering gifts to children or the younger generation, the article said:
    "where possible gifts should be made of assets likely to appreciate in value. Woodlands, for example, offer a significant planning tool."
    The article then goes on to mention one or two other examples, as though there are many people who can seriously give some woodland to their children as a way to avoid capital transfer tax and as though that is a serious part of life for the majority of people. Avoiding this tax is an indulgence for the wealthy and the ways to avoid it are simple.
    The advice is summed up at the beginning of the article where it says:
    "Your estate will be healthy if you keep making the gifts."
    Another major article refers to how to inherit the earth the efficient way. There is plenty of advice and there are tax avoidance schemes of all sorts, which have proliferated under this Government. There are ways to make sure that whatever rates are proposed in the Finance Bill can be avoided. The reductions that the Chief Secretary and the Government have so kindly given to their friends are meaningless for many of the people who, on paper, look as though they should be paying capital transfer tax but who in fact pay very little.
    Mr. Tim Smith: It really will not do for the hon. Lady to say that tax avoidance schemes have proliferated under this Government when she knows, first, that the higher the rates of tax the more people endeavour to avoid paying it—it is inevitable, it is human nature—and, secondly, because of the recent decision of the House of Lords in the case of Furniss v. Dawson which outlawed a wide range of tax avoidance schemes.
    Dr. McDonald: The hon. Gentleman's place is in offering yet more advice. As he and Treasury Ministers know well, as soon as one tax avoidance scheme is

    623
    stamped on it is replaced by another. If one is serious about collecting such a tax, one is constantly trying to close one loophole after another.
    The hon. Gentleman shrugs the matter off by saying that it is just human nature that people should try to avoid paying higher rates of tax. I should love to hear what he has to say about alleged cases of social security fraud. Does he just shrug his shoulders then or does he endorse everything that the Government have done to increase the number of inspectors who chase after social security fraud but not those who chase after income tax fraud?
    Mr. Smith: Does not the hon. Lady understand the distinction between tax evasion and tax avoidance? Social security fraud is akin to tax evasion, not tax avoidance. I was not talking about fraud, nor was she earlier.
    Dr. McDonald: I certainly was talking about tax avoidance. The hon. Gentleman finds it difficult to understand the simple point that I was making. He shrugs his shoulders and says that it is just human nature for people to try to avoid paying tax. He certainly would not shrug his shoulders if it were a social security matter. If he did, I should like to see it happening. I know that it would be a rare occurrence among Conservative Members. I do not mean to imply that Labour Members condone social security fraud any more than we would condone tax fraud. Our attitude to both is the same. I wish that Conservative Members were as energetic in chasing tax fraud and in closing tax avoidance loopholes. The hon. Gentleman need not wriggle in his seat. I carefully made the distinction between the two.
    The total revenue from capital transfer tax in 1981 was £479 million. In subsequent years the figure ranges from £500 million in 1982 to an estimated £680 million in 1984. Of course, in terms of the total tax take from income tax, VAT, and so on, that is a tiny proportion. The Government are bent on reducing both the amount and the proportion. Since they first started changing the rates and thresholds for capital transfer tax in 1980—not in 1979—including this year's proposal, the Government have spent £350 million in four years to reduce what is a light tax indeed and a small proportion of total revenue. When that is set against demands for money in other directions, whether for schools, hospitals, the reversal of the housing benefit rules, an increase in the age allowance and so on—admittedly I have taken the figure over a four-year period—nevertheless £350 million is exactly the amount of money that the Government constantly declare that they cannot find to fund projects, allowances or benefits which would help the majority of people in Britain and not a tiny minority who are already pretty well off. It is no wonder that capital taxes contribute only 1·3p in the pound—the figure for 1984–85—compared with 3·9p in the pound in 1973–74. We are talking about a tiny amount.
    Mr. Nicholas Lyell (Mid-Bedfordshire): Will the hon. Lady take the opportunity to clarify Labour's position? Would she greatly increase the tax or abolish it? Would she introduce a wealth tax and nationalise land?
    Dr. McDonald: It is amazing that Government Back-Bench Members are even better at dreaming up manifestos for us than Ministers. We are not committed to nationalising land.
    Mr. Bell: A figleaf—but there is not much to cover.
    Dr. McDonald: My hon. Friend the Member for Middlesbrough (Mr. Bell) tempts me to say that it is a figleaf which is larger than required. Perhaps I should not be tempted.
    I have answered the first part of the question posed by the hon. and learned Member for Mid-Bedfordshire (Mr. Lyell). My answer to the second part is that we are in the process of reviewing the tax structure. With what is left of the capital transfer tax by the time that we take office—I hope in October 1987—it will not be worth raising the rates or adjusting the thresholds. Capital taxation must be rethought in a more effective way. That is an answer to the hon. Gentleman. More will be forthcoming in the years to come. The hon. Gentleman must try to make what use he can of that.
    The Government's claim is that the highest rates are badly out of line with comparable rates abroad. The hon. Member for Corby, who is still out of the Chamber, made plenty of that—[HON. MEMBERS: "Where is he—reading his speech?"] I should think that the hon. Member is trying to understand his speech. What confuses the hon. Member and many other Government Members is that they tend to think of the rates rather than the corrected amounts and therefore regard them as a proportion of taxes including social security.
    The taxes on capital in Belgium, France, the Netherlands, Denmark and Greece are higher in proportion to total taxes than in the United Kingdom. Neither the. Chancellor's nor the hon. Member for Corby's claims were correct. Their assessment of international comparisons is about as reliable as the comparisons with EEC figures that were discussed earlier this week.
    A long time ago, in 1975, the Prime Minister, then an Opposition spokesman, gave a commitment on capital transfer tax. Complaining about the then Chancellor, she said that he had brought in a capital transfer tax which, unless it was repealed in time, would cripple business and farms. It did neither. It was left to the Conservatives to cripple business and, as a result of agreements with the EEC, to cripple some farms. This Government have destroyed more companies than ever the Labour Government did, whatever Conservatives now say about the kind of taxation that we then introduced.
    10.30 pm
    The Conservatives have decided to tackle capital transfer tax in a different way. At first I thought, having looked back at what the present Prime Minister said in 1975, that this was another example of a Tory broken promise. But it is nothing of the sort. Instead, they have gone in for killing off CTT slowly; it is, for this tax, death by a thousand cuts, and the Government have altered the rates and turned a blind eye to tax avoidance schemes. It was said in a recent Financial Times article:
    "The last three years, however, have seen the emergence of off-the-peg CTT avoidance schemes which have been mass-marketed, mainly by life assurance companies, and have so far attracted an estimated £1·5 billion. As for the Conservative Government, not only has it expanded the reliefs from CTT; it has also turned a blind eye to many loopholes. In some cases, it appears deliberately to have created loopholes — for example, by repealing rather than beefing up the clause which deemed interest-free loans to be a partial gift. According to barrister Robert Venables, a tax specialist, the Government have been very clever. Their original plan to repeal the tax would have looked too much like favouring rich. Instead, they have allowed most of their supporters to avoid its harmful effects by careful planning."

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    That sums up precisely what the Government have done with capital transfer tax. They have made up for the loss of revenue by vastly increasing the tax burden on wage earners, and particularly low wage earners, many of whom now bear the brunt of the £17 billion increase in taxation which the Conservatives have imposed since 1979.
    There is no way out for most wage earners. They pay their tax through the PAYE system. They cannot indulge in tax avoidance schemes or hire accountants to find a way out of paying their tax. That is the prerogative open to many who are better off, and the Government have indulged this kind of tax avoidance, thus enabling the wealthy to reduce their tax burden, and in some cases to pay hardly any tax at all. No wonder such people are laughing all the way to the bank, for life is good for them under the Conservatives.
    Tax inspectors have been reduced in number and it is more difficult for them to carry out their work of checking the accounts of companies and individuals. Meanwhile, the Government have stepped up their attack on social security fraud. They are determined to harass working-class people, impose burdens of taxation on them, deny them benefits through legislation and ensure that not one of them escapes. If they were equally concerned to close the loopholes in capital transfer tax, they would have our support for the provisions that they wish to include in the Bill. If that were their concern, the unity to which hon. Members have referred this evening could be restored.
    However, the clause will favour once again the wealthy in our society. It will reduce the tax burden for them and we cannot give our support to such a measure. We are here to protect the interests of the low paid. We are here to protect the interests of the average wage earner. We are not here to protect the interests of the wealthy and to enable them to avoid tax. It is not our purpose to continue to reduce the burden of taxation on them at the expense of the low and average wage earner.
    Mr. Bell: I appreciated and enjoyed the speech of my hon. Friend the Member for Thurrock (Dr. McDonald), notwithstanding the fact that it was laced with certain interventions of levity from Conservative Members. We would expect them to introduce levity during a debate on the proposed reduction of capital transfer tax rates. I think that my hon. Friend did justice to our cause and we are grateful to her for stating it so clearly.
    My hon. Friend the Member for Workington (Mr. Campbell-Savours) has mentioned the hon. Member for Corby (Mr. Powell). I wished to be charitable at this time of night and it was my intention not to mention the hon. Gentleman, but having used notes copiously and having declared an interest, he thought that it was fitting for him to withdraw his amendment after a few words from the Chief Secretary to the Treasury. He reminded me of a worthy Member of this place, Aneurin Bevan, a great socialist, who once said, "He who fights and runs away lives to run another day." The hon. Member for Corby will do exactly that for he left the Chamber when we began to debate whether the clause should remain part of the Bill. One consolation for my hon. Friends is that the hon. Gentleman will be a member of the Standing Committee which will consider the Bill. We look forward to many lengthy sessions running until two o'clock or three o'clock
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    in the morning on the complex issues raised by the Bill. We look forward also to the hon. Gentleman's interventions.
    My hon. Friend the Member for Thurrock referred to a statement that was made by a former spokesman of the Conservative party who is now the Prime Minister. The right hon. Lady criticised CTT in 1975 and said that a future Conservative Government would abolish it. That cry was heard throughout the life of the previous Labour Government. It was heard from the inception of the tax. The Foreign Secretary, who became the Chancellor of the Exchequer in 1979, claimed on 27 October 1976 that the mix of capital taxes discouraged the creation of individual and national wealth. The right hon. and learned Gentleman was Chancellor for four years, but he did not rid the tax system of CTT. He had as little courage in that respect as Chancellor as that which he has shown in other areas.
    I wish to make no criticism of the Foreign Secretary, but CTT was criticised by Conservative Members, yet when they formed a Government in 1979—they have now been in office for five years, a fact of which we have been reminded forcefully today—they did not abolish it. It remains on the statute book after five years of Conservative Government.
    We should be grateful to my hon. Friend the Member for Thurrock for stating so clearly, concisely and forcefully at the end of her remarks the beliefs and tenets of the Labour party. It is proud to believe in a fundamental and irreversible shift in the balance of wealth and power in favour of workers and their families. It has been suggested by Conservative Members that we would substitute tax on capital by the nationalisation of land—move from the sublime to the ridiculous and back again—but it is a fact that we favour labour as opposed to capital. We have never made any bones about that.
    When in office, we introduced a capital gains tax, capital transfer tax, development gains tax, stamp duty and an investment income surcharge. We are not ashamed of our record in government. We do not seek to wriggle away from it. The Chief Secretary might wish to blame us for our record and to suggest that we were misguided. He should not feel that we regret that we imposed the taxes on capital and sought to advance the cause and interests of labour. When we are returned to office, as I believe we shall be, we will again shift the emphasis away from capital in favour of labour. We make no bones about that aim.
    I sought to intervene when the hon. Member for Corby made a statement in response to an intervention of my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher). My hon. Friend referred to the levels of taxes, including social security contributions, in other European countries. The hon. Member for Corby said that that was a matter of opinion. I wished to intervene to say that it was a matter not of opinion but of facts. Those facts are published by Her Majesty's Stationery Office in "Economic Trends" for December 1983, which clearly shows in table 4 that the proportion of total tax, including social contributions paid from taxes on capital in 1981, were as follows: Greece, 1·4 per cent., Belgium, 0·9 per cent., France, 0·8 per cent., the Netherlands, 0·5 per cent., and Denmark, 0·4 per cent. That is not anecdotal evidence or opinion, but facts. My hon. Friend the Member for Stoke-on-Trent, Central sought to draw those facts to the attention of the Committee.

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    one of the major justifications the committee has heard for the reduction in the capital transfer tax and the review of the transfer was that unnecessarily high rates of tax discourage enterprise and risk taking. That claim, like many of the Chancellor's claims, is not supported by any evidence, including empirical evidence. The capital transfer tax operates only against very high levels of transfers. Transfers of capital of less than £60,000 attract no liability. Because the exemption is renewable every 10 years, a married couple could arrange for as much as £384,000 to be transferred during a 30-year period without incurring any capital transfer tax liability. These cuts in capital transfer tax will continue the overall decline in capital taxes, which will contribute only 1·3p in the pound collected by Inland Revenue in 1984–85, compared with 3–9p in the pound in 1973–74. Those facts are from the "Financial Statement and Budget Report" for 1984–1985 and "Financial Statistics" for June 1983.
    Part of the Government's justification for the cuts in capital transfer tax is that high interest rates are badly out of line with comparable rates abroad. We have clearly shown tonight that that is not the case.
    Labour Members are proud to assert again our defence of labour against the interests of capital. I support fully the statements of my hon. Friend the Member for Thurrock. We will always be opposed to any measures to alleviate the tax on capital. As my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) said on 14 March 1984 during the Budget resolution and economic debate:
    "If there is money to reduce the rate of capital transfer tax from 75 to 60 per cent., how can the chancellor justify a cut of £185 million in housing benefit?"—[Official Report, 14 March 1984; Vol. 56, c. 415.]
    We are no more likely to get the answer to that question tonight than my right hon. Friend was on that occasion.
    10.45 pm
    Mr. Campbell-savours: I shall speak only briefly, as I hope to speak on Report. I wish to comment on the speech of the hon. Member for Corby (Mr. Powell), who read his brief with care. I must tell him that there are many hon. Members who, over the years, have repeatedly risen in the annual ritual of debates. We have witnessed the festering, sordid underbelly of British Conservatism in action, demanding further reductions in capital transfer tax to feed their festering greed—which everyone knows is wrong when, every year, the amount of money made available by the state to those in need is cut. We are tired, sick and fed-up of the process. It is an embarrassment to the House of Commons and it should be an ambarrassment to the Government. It puts a shame on every hon. Member who supports this nonsense—this sordid, disgraceful annual exercise.
    The Minister may shake his head, but he knows that if the House was televised—and I have always voted against that, despite the strong pressure from my hon. Friend the Member for Great Grimsby (Mr. Mitchell)—the Minister would not dare to stand at the Dispatch Box and make the statement that he is about to make. He knows that the British people—and I would like his attention—would take exception to the way that the Government annually hand out this sordid money to their even more sordid friends.
    Mr. Austin Mitchell: I shall be brief. I wish to add to the chorus of protest from the Opposition. We will vote
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    against the motion that the clause stand part of the Bill because it is a further stage in the long process of whittling away the capital taxation that is an essential part of any reasonable, fair tax system. The Government are taking the teeth out of capital transfer tax.
    It is a basic principle not only of a Socialist society but of any fair tax system that there should be substantial taxation of capital. Capital is well able to bear its share of the common weal. A few welts on capital in the common weal is no more than social justice. Wealth is powerful enough to bear its share.
    The process of taxing capital leads to an essential part of a dynamic, healthy and vigorously competitive society—the shake-up of capital. Much of the sluggishness of British capital has been caused by firms descending from father to idiot sons without innovation or new ideas, and gradually wasting away as families withdraw from management, live on capital and run down their businesses. That has especially happened in the wool business of the West Riding, where I was brought up. The Opposition want to avoid that sluggish society. We want a competitive society in that there should be a turnaround, a shake-up and new blood.
    The chorus of protest that developed in the late 1970s about the burden of income tax was due to the inadequate share borne by capital. We have been good at taxing income—perhaps too good—but very bad at taxing that section of wealth that is well able to carry its share burden.
    The capital transfer tax has been a sad experience for the Opposition. It has been a hate symbol for Conservative Members. When it was introduced 10 years ago, I and a large section of the Labour party had high hopes for it. My right hon. Friend the Member for Leeds, East (Mr. Healey) said that it would produce howls of anguish from the rich, yet we have been disappointed because capital has borne a diminishing share of taxation. In 1968–69, estate duties amounted to 7 per cent. of the Government's total income from tax. In 1982–83, with capital transfer tax, the income amounted to 1·1 per cent. Thus, there has been a substantial reduction in the tax share carried by capital.
    That decline in the capital share of the tax burden puts Britain, as has been pointed out, at the bottom end of the table for capital contributing to taxation. A far lower proportion of capital contributes to taxation in Britain than is the case in Belgium, France and most other Common Market countries, with the exception of Ireland.
    Mr. Fisher: What about Greece?
    Mr. Mitchell: The capital tax share in Britain is certainly substantially lower than that in Greece.
    There are numerous reasons for the failure of capital transfer tax. In a sense, the tax was introduced a little too speedily. In an article in the Financial Times of 24 March 1984, Lord Barnett admitted that the speed with which it had been introduced had made it more complicated and less effective than it might have been. We had to face a continuous barrage from the tax fiddlers' party, which is ably represented tonight, and from people who have dedicated their lives to doing well for capital and to providing loopholes and all the little fiddles through which capital creeps out. They are skilled at that sort of thing.
    I must admit that the Labour party does not have the expertise in tax matters that we need. Conservative

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    Members should not worry, though, because we shall develop it. When capital transfer tax was introduced, immediate concessions were made. There were mistakes such as a reduced rate on lifetime transfers and an unlimited exemption for gifts between spouses. Given the need to shake up capital and to provide more dynamic in society, the major reductions in the taxable value of farms and small businesses were also a mistake.
    In 1976–77, I was involved for the first time in a Finance Bill, having been persuaded by the Labour party Whip that it was an honour to take part in it. That was two weeks after I had been elected to Parliament. I must say, I learnt very rapidly. I watched that process of exemption for land and small businesses. It defeated what I saw as one of CTT's main objectives, which was to shake up capital and to get it to change hands. I wanted to give it more vigour, and to put it into new hands, so getting the dead wood out. But that objective was not helped by the exemptions.
    Since 1979, the Conservative party has been in office, and we have had the sordid sad spectacle of it taking the teeth and guts out of CTT. [Interruption.] This is not a requiem to CTT, as it still has life. However, Labour Members should look at the whole structure of capital taxation. That will almost certainly mean a wealth tax. I do not know whether that means a revived and strengthened CTT or a return to death duties, coupled with a simpler gift tax. However, the taxation of capital and wealth must be one of our priorities when we form the Government after the next election. By taking the teeth out of CTT and allowing capital to escape so easily, by putting the burden increasingly on the poor and removing it from the shoulders of the wealthy, Conservative Members will have brought such changes on themselves.
    Mr. Bell: On a point of order, Mr. Armstrong. I am a new Member of the House, and perhaps you could give me some guidance. I was under the impression that one was not allowed to speak from the Cross-Bench seats as they are not part of the House of Commons.
    The First Deputy Chairman: No one has spoken to the House from those seats.
    Mr. Peter Rees: Labour Members have tried to flog a bit of life into what was otherwise a rather dispiriting exercise from the Opposition side. I suppose that, adopting the purple prose of the hon. Member for Workington (Mr. Campbell-Savours), I must regard myself as part of the festering, sordid under-belly of the Conservative party. I bear that with as much equanimity as I can, and I look forward to some equally highly charged prose in our encounters in Committee Room 10. It might add a little life to our proceedings.
    What saddens me is that Opposition Members are right to say that this has become an annual ritual. The phrases and sentiments from the Opposition never vary. It is a pity that we cannot have a rational debate about the balance of taxation between capital and income, and the consequences of any course of action. Instead we have highly charged speeches which I do not believe Opposition Members take seriously.
    Dr. McDonald: Yes, we do.
    Mr. Rees: The hon. Lady says that she takes them seriously. The kindest thing that I could say about her
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    speech was that it seemed to be a series of newspaper articles cobbled together. She can prove me wrong in Committee with her formidable command of the details of fiscal legislation, but I doubt whether the inwardness of her speech made a great impact on her.
    The principal theme of the hon. Lady's speech was that capital transfer tax is now completely ineffective. I look back with some nostalgia to 1974 and 1975, when I and some of my hon. Friends obviously spent far too much time discussing this tax. I was interested to read, as no doubt was the Committee, the candid and charming admissions of Lord Barnett that the tax was not well thought out, not well put together, and not well defended on that occasion. It was a commentary on that Administration and their endeavours in this area.
    I remind the Committee that the majority of the reliefs to which the hon. Lady and her hon. Friends have taken exception were introduced into the tax during those debates. I was especially interested in the statement of the hon. Member for Great Grimsby (Mr. Mitchell), speaking with all the authority of an Opposition Whip and presumably, therefore, enunciating Labour party policy, that a future Labour Government would have nothing to do with gifts between spouses. The sentiments which I respected and which led the right hon. Member for Leeds, East (Mr. Healey) to introduce the tax are evidently no longer current in the rather harsher climate prevailing in the Labour party.
    Mr. Campbell-Savours: That is not what he said.
    Mr. Rees: That is what can reasonably be inferred from what the hon. Gentleman said. I should prefer to debate this matter with the hon. Member for Workington when he is standing, not sitting down.
    Mr. Campbell-Savours: That is not Labour party policy.
    Mr. Rees: Then I am reassured. If it is not Labour party policy, I do not know what the hon. Member for Great Grimsby was complaining about. Perhaps I am attaching too much significance to his words. Perhaps he thought that he would help the debate along and that, to make an amusing exchange, he would cast off a few frivolous ideas. He made great play of dynamism, and I take his point. How far should a fiscal system be designed to encourage a dynamic society and economy?
    That would be an interesting subject for a debate, and it was precisely that sort of consideration, as I recall from our debates on the introduction of capital transfer tax, which led the right hon. Member for Ashton-under-Lyne (Mr. Sheldon)—or it might have been Lord Barnett, as he now is—to introduce an amendment at a late stage reducing the rate of tax on lifetime gifts to encourage people to pass on their capital so as to make a more dynamic economy, and so that capital would not be retained by older members of society. I do not know whether the hon. Gentleman still approves of that relief. He told us that the Labour party's policy does not embrace the abolition of relief on lifetime gifts. Apparently he personally is moving away from the idea of a reduced rate on lifetime gifts. There is a serious theme underlying this which was picked up by his right hon. Friends when we debated these matters between 1974 and 1975.
    11 pm
    Coming back to the hon. Lady's main theme, which is that capital transfer tax is now a totally ineffective tax ripe

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    for the final chop, some of my hon. Friends might wish that that were so, but I should like to give the yield figures. The highest yield under the Labour Administration was in 1977–78, when the figure was £398 million. Adjusted to 1984–85 figures that would be £758 million. The yield on capital transfer tax in 1983–84 was £610 million. In 1984–85, assuming that the amendments we propose commend themselves to the Committee, the yield will be £680 million. That is less than £758 million, but not by a great deal. For the hon. Lady to suggest that the tax has been robbed of all effect does not seem right.
    Dr. McDonald: The Chief Secretary knows full well that he is making a spurious point and that the figures relating to the amount of revenue collected from capital transfer tax during the term of the Labour Government were for a transitional period. As the Inland Revenue has itself stated, this was a transitional period when estate duty was being phased out and capital transfer tax was in the process of replacing it. The point is not the amount, be it £500 million or over £600 million as is expected this year, but the proportion of total revenue which capital transfer tax constitutes. If the Chief Secretary takes that figure for comparison he will find that it is much lower under this Government.
    Mr. Rees: I am sorry, but the hon. Lady does not support the point that she is endeavouring to make. The simple test of whether a tax is more or less effective than when it was introduced is the yield. I have given the yield figures. If the hon. Lady wishes to put down a question to me to amplify the point I shall endeavour to answer it. She has now shifted her ground very adroitly, as one expects of such a charming hon. Lady, to a different point. I have to give the figures as I know them.
    Dr. McDonald: I gave those figures.
    Mr. Rees: I am deeply apologetic to hon. Members if I bore them by giving the figures twice over. They do not support the conclusion that the hon. Lady is endeavouring to draw. The right hon. Member for Llanelli (Mr. Davies) knows a little about this tax, because he and I sparred for many long hours during the winter of 1974–75. He will recall the difficulties and imperfections of the tax and the very eloquent way in which he and his right hon. Friend introduced the reliefs of which the hon. Member for Great Grimsby now complains. I know that the Labour party is shifting its complexion and its ideas. There will be a rather cold frisson in the country when we hear from the hon. Member for Thurrock (Dr. McDonald) that the whole capital taxation system will be reviewed. We shall probe in these annual exchanges just how far the thinking of the Labour party has progressed, if it has. I suggest that it has probably regressed. I suspect that the Labour party has learnt nothing from its experience in power and from its fiscal mistakes.
    Mr. Kirkwood: While we are thinking about potential reviews, may I insinuate the thought into the heads of those on the Treasury Bench that we on these Benches — [HON. MEMBERS: "We? Who are 'We'?"]. I have been sitting here since 4 pm. I have been here minute by minute through the Committee stage. It ill behoves Conservative Members to come in now and criticise me—
    Mr. David Harris: On a point of order, Mr. Armstrong. Is it in order for the hon. Gentleman to use the royal "we", when he is alone on the Liberal Benches?
    The First Deputy Chairman: Order. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is completely in order.
    Mr. Kirkwood: May I insinuate the thought into the Treasury Bench's head that a far better way of redistributing wealth, in terms of the sorts of taxes that we are talking about, would be to move towards an accessions tax, which would put the burden on beneficiaries?
    Mr. Rees: I am tempted to respond to the hon. Gentleman, because that is a serious matter which we have debated in the Conservative party and in the House of Commons, but I suspect that I would be out of order if I succumbed to that temptation. Many continental countries have a form of accessions tax and consanguinity reliefs which are much more generous than anything on offer here. I say that in the knowledge that some of my hon. Friends may think that we have not gone far enough in the Bill.
    Let me put our proposals in perspective. We have heard many highly charged statements from the Opposition, but the cost of our proposals—over the indexation of the various bands—
    Mr. Campbell-Savours: Give us the cash figures.
    Mr. Rees: If the hon. Member for Workington wants inflation to complete the work that his right hon. Friend the Member for Leeds, East failed to do, he will get no support from the Government and he should not get support from his hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) who, with Mrs. Audrey Wise, of late lamented memory, and my right hon. Friend the Chancellor of the Exchequer thought it right to index The income tax thresholds. If that 'was right for income tax, it must, in equity and fairness, be right for capital taxes. Over and above the indexation of the various bands, the cost for 1984–85 will be £3 million. For a full year, it will be £9 million.
    Mr. Campbell-Savours: Will the Chief Secretary give way?
    Mr. Rees: No. I know that the hon. Gentleman gets a little over-excited in these debates. [HON. MEMBERS: "Oh."] When the hon. Gentleman describes me as the festering, sordid under-belly of the Conservative party, I am entitled to say that he gets a little over-excited.
    The hon. Member for Thurrock said that if we had only devoted those sums to the lower paid we could have achieved a social and economic revolution. If hon. Members will recall that we have devoted slightly less than £2 billion to raising the threshold of income tax, taking 850,000 people out of tax next year, that will show the spurious nature of the points made by the Opposition.
    Mr. Fisher: Will the Chief Secretary give way?
    Mr. Rees: Well, I respect the hon. Gentleman and his father. We have had many interesting debates.
    Mr. Fisher: Although the Chief Secretary has failed to give my hon. Friend the Member for Workington (Mr. Campbell-Savours) the cash figure for which he has asked, he has been well briefed, and we are grateful for that. However, it does him no credit to drag out the tawdry and

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    ill-considered figure of 850,000. As the right hon. and learned Gentleman knows, the vast majority of those people fell into tax only last year. It is not a real figure at all. The right hon. and learned Gentleman should come clean about it.
    Mr. Rees: The figure will be very real to those who are taken out of charge to tax. Nothing that the hon. Gentleman says will persuade me to the contrary.
    My point is that if the Committee compares the resources which the Government are devoting to raising the thresholds for income tax with what we are devoting to ameliorating the burden of capital taxation, it will be realised that we have been more than even-handed in our fiscal approach. All the bogus and highly charged points made by Opposition Members are just part of an annual ritual exchange. I ask the Committee, the House and the country to consider the facts and to support us wholeheartedly in our endeavours to make a little more sense of a rather ill-conceived tax.
    Dr. McDonald: We have listened again to the endless outpourings of the Chief Secretary, which have not answered any of the points that we have made. He says that 850,000 will be brought out of taxation by the Government's measures this year, but 550,000 of them would have been taken out of taxation by indexing in any case. He says that a married couple will gain about £2 per week. Much of that money will be taken back by increases in VAT on take-away food and other tax increases. The Chief Secretary, and other Conservative Members, would do well to consider the tax burden on families of VAT, income tax and customs and excise duties. The Chief Secretary should study the figures, and see what those increases in indirect taxation, including VAT will mean to many families.
    The Chief Secretary talks about the annual debate on reducing the rates of capital transfer tax and raising the thresholds. There would not need to be an annual debate, if the Government had the courage to carry out the commitment that the Prime Minister gave in opposition and repealed CTT altogether. The Government do not have the nerve to do that, because they know how much opposition there would be throughout the country. They prefer to hold an annual debate at a late hour and to hope that the public will not notice—[Interruption.] It is the Government who select the clauses and the days. Hon. Gentlemen should find out something about the procedure. We should have preferred the debate to take place earlier in the day, or indeed on another day, as it could have done if the Government had provided more days for the Committee stage on the floor of the House. Right hon. and hon. Gentlemen would rather hold the debate at a late hour. They hope that the public will not notice that taxes on capital are being decreased, while the burden on wage-earners has increased steadily since 1979, and the Government are still holding to the same practices and policies. That is why we oppose clause 98.
    Question put, That the clause stand part of the Bill:—
    The Committee divided: Ayes 108, Noes 13.

    Division No. 281]

    [11.14 pm

    align="center">AYES

    Amess, David

    Howell, Ralph (N Norfolk)

    Ashby, David

    Hunter, Andrew

    Baker, Nicholas (N Dorset)

    Jackson, Robert

    Baldry, Anthony

    Jessel, Toby

    Bellingham, Henry

    Jones, Gwilym (Cardiff N)

    Benyon, William

    Jones, Robert (W Herts)

    Biggs-Davison, Sir John

    Kershaw, Sir Anthony

    Boscawen, Hon Robert

    Key, Robert

    Bowden, Gerald (Dulwich)

    Knight, Gregory (Derby N)

    Bright, Graham

    Lawler, Geoffrey

    Brinton, Tim

    Lennox-Boyd, Hon Mark

    Brooke, Hon Peter

    Lester, Jim

    Brown, M. (Brigg & Cl'thpes)

    Lyell, Nicholas

    Buck, Sir Antony

    Major, John

    Butterfill, John

    Mather, Carol

    Carlisle, Kenneth (Lincoln)

    Miller, Hal (B'grove)

    Chapman, Sydney

    Moore, John

    Chope, Christopher

    Moynihan, Hon C.

    Clegg, Sir Walter

    Murphy, Christopher

    Conway, Derek

    Neubert, Michael

    Coombs, Simon

    Rathbone, Tim

    Cope, John

    Rees, Rt Hon Peter (Dover)

    Couchman, James

    Renton, Tim

    Cranborne, Viscount

    Rhodes James, Robert

    Currie, Mrs Edwina

    Roe, Mrs Marion

    Dunn, Robert

    Ryder, Richard

    Eggar, Tim

    Sackville, Hon Thomas

    Evennett, David

    Sainsbury, Hon Timothy

    Fallon, Michael

    Shelton, William (Streatham)

    Farr, John

    Sims, Roger

    Finsberg, Sir Geoffrey

    Smith, Tim (Beaconsfield)

    Forman, Nigel

    Soames, Hon Nicholas

    Forth, Eric

    Spencer, Derek

    Fraser, Peter (Angus East)

    Spicer, Jim (W Dorset)

    Freeman, Roger

    Squire, Robin

    Galley, Roy

    Stanbrook, Ivor

    Goodlad, Alastair

    Stevens, Martin (Fulham)

    Gow, Ian

    Stewart, Ian (N Hertf'dshire)

    Gregory, Conal

    Sumberg, David

    Griffiths, Peter (Portsm'th N)

    Thomas, Rt Hon Peter

    Grist, Ian

    Thompson, Donald (Calder V)

    Ground, Patrick

    Thompson, Patrick (N'ich N)

    Hamilton, Neil (Tatton)

    Tracey, Richard

    Harris, David

    Twinn, Dr Ian

    Hawkins, Sir Paul (SW N'folk)

    Viggers, Peter

    Hayes, J.

    Waddington, David

    Hayward, Robert

    Wakeham, Rt Hon John

    Heathcoat-Amory, David

    Walden, George

    Heddle, John

    Wardle, C. (Bexhill)

    Hickmet, Richard

    Whitfield, John

    Hogg, Hon Douglas (Gr'th'm)

    Whitney, Raymond

    Holt, Richard

    Wolfson, Mark

    Hooson, Tom

    Howard, Michael

    Tellers for the Ayes:

    Howarth, Alan (Stratf'd-on-A)

    Mr. Archie Hamilton and

    Howell, Rt Hon D. (G'Idford)

    Mr. David Hunt.

    NOES

    Bell, Stuart

    Kirkwood, Archibald

    Bermingham, Gerald

    McDonald, Dr Oonagh

    Campbell-Savours, Dale

    McWilliam, John

    Cocks, Rt Hon M. (Bristol S.)

    Skinner, Dennis

    Cohen, Harry

    Cook, Frank (Stockton North)

    Tellers for the Noes:

    Davies, Rt Hon Denzil (L'lli)

    Mr. Austin Mitchell and

    Davis, Terry (B'ham, H'ge H'l)

    Mr. Frank Haynes.

    Fisher, Mark

    Question accordingly agreed to.
    Clause 98 ordered to stand part of the Bill.
    Clause 105 ordered to stand part of the Bill.
    Bill (Clauses 10, 17, 18, 20, 21, 27, 57, 98, 105, 113; and Schedules 6 to 8 and 12), reported, with amendments; to lie upon the Table.

    Radioactive Waste (Disposal)
    Motion made, and Question proposed, That this House do now adjourn.—/Mr. Sainsbury.]
    11.27 pm
    Mr. Frank Cook: I am most grateful for the opportunity to raise with the House the subject of radioactive waste and its disposal. In doing so, I seek not only to discuss the issues of its proposed deposition in the disused anhydrite mine at Billingham but also to examine some of the broader aspects that have a direct bearing on the subject. Because of the constraints on time I must assume that the House has knowledge of the different types of radiation, their varying characteristics, their penetrating power and their potential toxicity.
    Radiation can be borne by wind, water, land, food, clothing and vehicle. Radiation can cross a vacuum. Radiation poses not only a threat to those generations living today but an increasing threat to those generations yet unborn. Sister Doctor Rosalie Bertell, the eminent American commentator on radiation and human health, in describing the effect of radiation penetration on the DNA in the cells of reproductive organs of people of suitable age, refers to the continuing and growing effect in following generations. She has classified that as a form of insidious species death. Furthermore, the Minister may be interested to learn of investigations that she is conducting into a theory developed by an eminent German scientist at Karlsruhe who has postulated that gaseous beta emissions from nuclear installations can be the possible cause of acid rain and its predominance in the past 30 years. However, we must await the results of her experimentation before we can examine that more closely.
    It would seem sensible, then, that, as we already have radwaste from a whole range of sources, we do not scatter it around the countryside but store it as far away from people as possible and monitor it carefully so that we can retrieve it and repackage it should it become unsafe due to the deterioration of its containment.
    Such sense, however, has no appeal for NIREX. That is the agency given responsibility for examining the issue. It is the agency established by the "In-Club" of the Industry. It is the industry responsible for radwaste production permitting proposals that are frankly irresponsible.
    NIREX plans to place the high level intermediate level waste immediately below a community of 35,000 people in a surrounding population approaching 750,000.
    To counter opposition to this preposterous proposition, NIREX constantly changes its tune and switches its approach. It is consistent only in its inconsistency.
    Because of the time I shall give but two instances. NIREX originally said — this was confirmed by the Secretary of State in this very Chamber — that two planning applications would be necessary. One would be to determine the mine's suitability and the second to consider deposition specifically. In fact, the Minister stated that both applications would be "called in". Since the ICI statement of opposition NIREX has told me that it may well be able to assess the mine's suitability on the basis of published data, so that the first planning application could be rendered unnecessary. It is saying that 12-year old information can be used to avoid a public inquiry. I understand that on this morning's radio
    636
    programme, "Rollercoaster" Mr. Giddes stated categorically that one planning application is needed. I seek from the Minister an unequivocal assurance that this will not happen.
    NIREX was originally required to examine a range of possible sites and publish a shortlist of its preferences. It appears that underground disposal was presumed the best from the outset. Its only shortlist has been a "short list one" — one for high level intermediate waste at Billingham and one for low level intermediate waste at Elstow in Bedfordshire. NIREX has resolutely refused to fulfil its remit and publish other preferred locations as required.
    I must remind the Minister, respectfully, that on the occasion of our last private interview on this subject on Monday 2 April his Permanent Secretary offered the commitment, and repeated it when pressed, that NIREX would be compelled within a matter of weeks to make public the balance of its preferences.
    I ask respectfully that the Minister kindly expedites such publication so that other communities and, indeed, other Members of this House, representing constituencies under a threat presently hidden, may enjoin with us in pressing for the closer examination of methods other than underground dumping. There are alternatives and they must be considered carefully.
    Indeed, it was reassuring to read in last Monday's copy of The Guardian reports that Dr. C. P. Haigh, a senior scientist with CEGB, has issued a memorandum advocating treatment similar to that which I have been urging for more than a year. Such proposals have already been discarded by NIREX after somewhat scant examination.
    Pressure for examination of alternatives and opposition to the NIREX plan is considerable and growing constantly as more information is disclosed.
    Tomorrow morning I shall be formally presenting to this House a petition from my parish. Tomorrow afternoon, some of my constituents and fellow Members from both sides of this Chamber, will present a petition signed by about 85,000 Clevelanders to the Prime Minister's Office in No. 10 Downing street. As we sit here early day motion 514, expressing opposition, bears 126 signatures and that total climbs steadily.
    Yet this opposition, popular though it is, has to fund its campaign from the private pocket of public subscription. While BAND—Billingham Against Nuclear Dumping—runs coffee mornings, cabarets and collections to raise cash, NIREX simply engages the services of a city firm of public relations consultants on an annual budget of £240,000 to persuade the people of Billingham that they have got it wrong and that NIREX has got it right.
    If these proposals go to public inquiry, NIREX will have almost unlimited resource coming indirectly from public funds via the CEGB. Will the Minister consider seriously the provision of funding for local councils and environmentalist groups to ensure that any inquiry is genuinely balanced?
    I am told that the strength of opposition displayed by the Cleveland community has caused surprise in some quarters. If that is true, it can only be because it was thought that Stocktonians could be contained in ignorance indefinitely. Thankfully, that is not so.
    We have learned that, according to the Radioactive Substances Act 1960, the average effective dose equivalent from all sources, excluding natural background

    637
    radiation and medical procedures, to representative members of a critical group of general public shall not exceed 5 mSv, or 0·5 rem, in any one year.
    To the uninitiated, that is the equivalent in terms of a bone marrow dose, of 100 chest x-rays per year, two per week. By comparison with the maximum dose to a member of the public of 5 mSv, the maximum dose to a radiation worker is 50 mSv. That is the equivalent, in terms of a bone marrow dose, of 1,000 chest x-rays per year or three per day.
    Is this in accord with that Act's requirement that radiation exposure of individuals, and the collective dose to the population arising from radioactive waste, shall be reduced to levels which are as low "as reasonably achievable?" Can we be saying seriously that three chest x-rays per day is ALARA? Are we mad?
    Clevelanders have also learned that these principles are accepted by the United Kingdom on the recommendation of the International Commission on Radiological Protection, frequently called ICRP. But they learn, too, the nature of ICRP: that it claims origins dated 1928, when in fact it was founded in 1952; that members can only become members only by invitation; that it will allow membership only from vested interests; and that as an organisation it is quite unscientific in that it not only fails to encourage comment from other disciplines but positively disallows it. So we have a somewhat pathetic tapestry of practitioners of this industry dreaming up a standard, toddling off to ICRP to peddle it, and returning in triumph to proclaim its international acceptability. That is not good enough.
    The ICRP is self-justifying, self-generating and incestuous, as, indeed, are both NIREX and the NRPB, but not to the same extent. I urge the Minister to press most strenuously for the inclusion on all such bodies of suitably qualified commentators representing interests not vested in the industry. Until we achieve that, the whole game is nothing more than a sham.
    Clevelanders have further learned that the prospect of the implementation of NIREX's proposals could have greviously adverse effects on the regional economy. We have evidence of the serious effect on land values, house purchase, industrial development and job provision, all directly attributable to this nonsensical idea. Some developers have denied a link between the circumstances, but when examined closely such denials do not withstand scrutiny. Sadly, time does not allow me to outline that as fully as I would have liked.
    Finally, I shall deal with the political aspects of the proposals. Clevelanders do not need the proposed site. They do not want it, and furthermore they will not have it. They already tolerate more than 14-5 per cent. of the nation's registrable hazardous locations, one in seven of Britain's gigantic dangerous dustbins. They do not like that, but they tolerate it. They do so because the hazardous chemicals and the like were produced in the area. Their production provided employment and a degree of prosperity, however limited, for the whole community. This radwaste is unwanted and it is quite alien. The proposals are so wrong that they verge on the unbelievable apart from their being unacceptable. They are wrong technically, environmentally, economically, socially, legally and politically. The councils say so, the churches say so, IC says so and industry generally says so. The
    638
    people say so. The Government may choose to disagree, but they must listen. In the name of all that is good in creation, they must listen. The wishes of the Clevelanders must be paramount.
    11.41 pm
    Mr. Nicholas Lyell (Mid-Bedfordshire): I am extremely grateful to the hon. Member for Stockton, North (Mr. Cook) for providing me with the opportunity to join him to make briefly three important points on behalf of Elstow in my constituency, which has had the misfortune to be chosen—it seems almost by means of a pin—by NIREX as the site of a nuclear dump for low and short-life and intermediate level nuclear waste.
    I ask the Department of the Environment, which is represented this evening by my hon. Friend the Parliamentary Under-Secretary of State for the Environment, to give careful consideration to three matters before it encourages NIREX to proceed further down the road that it has chosen. First, would not NIREX be better advised to make a comparative study of the suitability of a number of sites instead of plucking a single site from the air, as it were? Secondly, whatever the views of the experts may turn out to be in future, it must be borne in mind that we are dealing with a problem where our knowledge is only at an early stage of development. Would not NIREX be much wiser carefully to evaluate sites and to choose a site which is remote from any centre of population, rather than a site such as Elstow which is so close to substantial centres of population? As in Billingham, there is overwhelming opposition from the local people of the Elstow area and the likelihood of great anxiety whatever the experts may tell us.
    Thirdly, does my hon. Friend agree that it is wrong to confine the choice of site to sites such as Elstow, which happen to be in the ownership of one of the sponsor bodies for NIREX? Surely it would be right to undertake a careful survey to find the best site nationally, even if it requied compulsory purchase.
    I repeat that I am most grateful to the hon. Member for Stockton, North for giving me the opportunity to intervene briefly in his Adjournment debate. My constituents and I will be most grateful if in his reply my hon. Friend the Minister can respond to the three matters that I have raised.
    11.43 pm
    The Parliamentary Under-Secretary of State for the Environment (Mr. William Waldegrave): I have to respond to the many issues raised by the hon. Member for Stockton, North (Mr. Cook) and my hon. and learned Friend the Member for Mid-Bedfordshire (Mr. Lyell), and I hope that they will accept my assurance that if I omit to deal with any of them in this response I shall take care to scan Hansard and respond by letter.
    I congratulate the hon. Member for Stockton, North on securing this debate. His passion in putting forward the argument which he believes is respected by the House and his personal courtesy to those with whom he deals never deserts him, though the heat of his argument is always powerful. He is right to say that the issue that he has raised is a matter of widespread concern in the area which he represents. That is reflected by the presence of my hon. Friend the Member for Langbaurgh (Mr. Holt), who has also made representations. I hope that the hon. Gentleman, my hon. and learned Friend and my hon. Friend will

    639
    acknowledge and accept that Ministers of both Labour and Conservative Governments have tried to grapple with the difficult problems that are involved and have done so with equal care.
    I hope that the hon. Member for Stockton, North will not spoil a powerful case which he must wish to put forward with every form of the considerable eloquence at his disposal, by attacking—I am sure that he does not mean to do so—the motives of the many thousands of men and women who work in the civil nuclear industry and who are doing what they regard as their best to produce balanced and careful judgments.
    Successive Governments have recognised that, as nuclear power is here to stay in the foreseeable future, whatever the decisions made now, we must take sensible action on wastes. The Royal Commission on Environmental Pollution in its recently published tenth report acknowledged that it would be wrong to discard the experience and expertise gained from several decades of nuclear power development. The Royal Commission proceeded to show its strong support for a modest increase in nuclear power capacity. The Royal Commission, however, recognised and expressed respect for the worry that many people voice about aspects of the nuclear power programme. How to deal safely with radioactive waste is perhaps its principal concern. My ministerial colleagues and I have great respect for those worries.
    Eight years ago, the sixth report of the Royal Commission started us on the process we now face. The Royal Commission effectively criticised all of us for not at that time having paid sufficient attention to the problems of waste, and it made a number of recommendations. Positive steps were taken by the Labour Government of the day in response to those recommendations. It is fair to say that there has been considerable continuity in the approach of successive Governments of both persuasions to radioactive waste management. NIREX was set up. The Radioactive Waste Management Advisory Committee was established. The responsibilities of the Secretary of State for the Environment to deal with waste management policy were separated from those of the Secretary of State for Energy. I believe that those decisions were accepted by the House.
    The 1982 White Paper published decisions on the storage of high level waste which had until then been stored in stainless steel tanks for 25 years. The White Paper stated also that steps should be put in train to deal with intermediate waste, and I believe that that aim was acceptable to the House. The right hon. Member for Birmingham, Small Heath (Mr. Howell) welcomed the White Paper generally. That is not to say that individual decisions about sites and the ways we set about finding them and letting people make representations about them must not be taken with the greatest care.
    The hon. Member for Stockton, North referred to The Guardian article, which the Government have studied. That article was specifically about the possibility of sealing redundant nuclear power stations. I believe that the hon. Gentleman will accept that, although that plan would deal with a great number of the intermediate wastes, we would still need to deal with others.
    NIREX so far, as the hon. Gentleman well knows—no one knows better about its activities — has spent about a year on desk studies. NIREX said that it identified
    640
    two sites that looked promising. Hon. Members from constituencies that include those sites have spoken in the debate tonight. Elstow in Bedfordshire is one, and the former ICI anhydrite mine at Billingham is the other.
    I make it clear that NIREX has not put forward any firm or formal proposals for either the Billingham site or the clay beds at Elstow. They are possibilities which, because of their geology NIREX is considering. NIREX will continue to evaluate possible disposal sites in addition to those two sites. Any further sites that NIREX identifies as potentially suitable will be announced as well. I regret that I cannot yet give the hon. Member for Stockton, North a date for that announcement. I hope that when we spoke about the matter I made it clear to the hon. Gentleman that if a planning application is made under the procedures that we envisage alternative sites would have to be named.
    I hope that I can set the hon. Gentleman's mind at rest on another point. He expressed the fear that NIREX might rely on geological data already available, and proceed to specific proposals without undertaking geological investigations and, therefore, without any need to apply for planning permission. I can assure him that, while such existing data might be adequate in theory for the assessment of what I believe is known in technical terminology as the near field, they would not provide information about what is known as the far field—the area around the mine itself. Therefore, a certain amount of geological investigation would be necessary to confirm the characteristics of the far field. Such investigations would be subject to planning procedures. I hope that that puts the hon. Gentleman's mind at rest.
    We shall assess specific proposals from NIREX very carefully indeed. To that end we have recently concluded a public consultation exercise on the draft principles that authorising Departments would apply to proposals from the Executive. My Department is now considering the comments received. The draft assessment principles will be revised in the light of those comments and the advice of the radioactive waste management advisory committee. The final version will be available later this year.
    My hon. and learned Friend the Member for Mid-Bedfordshire referred to one point that has been raised in a number of submissions, which is the size of population in the area of the disposal facility. That point will be considered in our review of the principles.
    We would all like to have longer to debate these matters. I shall pass over the comments I would have liked to have made about the International Commission on Radiological Protection, although I would want to defend that organisation from some of the attacks on it by the hon. Member for Stockton, North. The most important point is that we are reaching the view that we should not take the ICRP limit as the be all and end all. We try to work to about one tenth of the ICRP limit if possible. Hon. Members will know that we have been involved in such matters at Sellafield.
    I assure hon. Members with an interest in the matter that both in delegations to us and in the debate tonight their voices are closely listened to by Ministers. I think that that was the principal message that the hon. Member for Stockton, North gave us. We respect that message.
    Question put and agreed to.
    Adjourned accordingly at eight minutes to Twelve o' clock.

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Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Gloucester.

GLC Employees' Pensions
Baroness Wootton of Abinger: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what arrangements are being made to continue payment of the pensions now currently paid to retired employees of the Greater London Council, in the event of the Bill for the abolition of the council becoming law.
Lord Skelmersdale: My Lords, in the White Paper, (Cmnd. 9063) of 1983, the Government proposed that a small statutory body should be established to deal with certain residual responsibilities of the Greater London Council, including the handling of residual superannuation matters. The comments which have been made on that proposal are being considered. I can assure the noble Baroness that the rights of existing pensioners will be fully safeguarded.
Baroness Wootton of Abinger: My Lords, I am very grateful to the noble Lord for the news that this matter is under early consideration, along with so many other complex issues arising from the impending death of these various councils. Is it proposed to make a general arrangement which will be common to all the councils which are about to disappear, so far as the pensioners are concerned? Secondly, is it proposed to take into account the position of persons who may still be in employment with the council at the time it is abolished and who already may have accumulated rights to considerable superannuation when they retire?
Lord Skelmersdale: My Lords, I find myself in some difficulty over the first supplementary question of the noble Baroness because the Question on the Order Paper refers to the GLC, whereas I understand that in her supplementary she is referring also to the metropolitan counties, for which, as the House will know, the Government also have proposals. I shall, therefore, answer her second supplementary question. Existing employees transferred to successor bodies, whether or not they are borough councils, will take their pension rights with them. However, existing pensioners and those not re-employed in local government service will stay in a unified fund.
Baroness Jeger: My Lords, can the noble Lord the Minister say what this unified fund will be? Is it the intention of Her Majesty's Government to break up the existing GLC superannuation fund? Surely that would not be financially satisfactory. Further, is it the intention of the Government to abolish the GLC

626
Retirement Association, which has 30,000 members who depend very much upon that association for help and practical advice? What is to happen to these ex-GLC employees in the situation which the Government are precipitating?
Lord Skelmersdale: My Lords, there is no intention to break up the existing fund. It will be transferred lock, stock and barrel to the residual body to which I referred in my original Answer. With regard to the second supplementary question of the noble Baroness, the details are still to be announced, but I shall make sure that the point raised by the noble Baroness is taken fully into account.
Baroness Wootton of Abinger: My Lords, I apologise for extending, if by implication, the scope of my Question. It was obvious to me that as soon as we started on one council it would become a common matter which would necessarily be dealt with in relation to all the councils which would come under a central scheme. I hope that that extension will be taken into account.
Lord Skelmersdale: Yes, my Lords, most certainly it will.

Africa: Drought Aid
3.10 p.m.
Lord Hatch of Lusby: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what assistance they are giving to the people dying from the effects of drought in eastern and southern Africa.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, last financial year, 1983–84, we offered 11,500 tonnes of cereals to Mozambique, and 5,000 tonnes to the World Food Programme's reserve for international emergencies, most of which went to Zambia. The European Community is providing about 200,000 tonnes to 10 drought-stricken countries in these areas and we pay about a fifth of this cost. Further allocations will be decided soon. For this year we have already agreed to give Zimbabwe 10,000 tonnes and to repeat our emergency contribution to the World Food Programme. My right honourable friend the Minister for Overseas Development expects to make further allocations before long.
During 1983–84 we provided disaster relief costing £1.7 million to fight drought in Botswana, Ethiopia, Mozambique and Zimbabwe. We have contributed £1 million to a special appeal by the League of the Red Cross Societies for drought-stricken Africa, including six eastern and southern countries. Finally the European Community has just agreed an emergency allocation to 13 countries, of which our share will be about £2 million. The 13 will include Zambia, Zimbabwe and Ethiopia.
Lord Hatch of Lusby: My Lords, I thank the noble Baroness the Minister for that reply and welcome the

627
figures she has given, although I think we would all wish that they were higher. Is the noble Baroness aware that, at the time the Question was tabled, according to the Food and Agriculture Organisation there were 20 million in Africa facing starvation but that since the Question was tabled, as shown by the Oxfam report yesterday, that number has been greatly extended, particularly to the Sahel? Can the noble Baroness inform the House whether Her Majesty's Government are taking any particular notice of the drought which now appears to be approaching the disastrous proportions of a few years ago in the Sahel as well as East and Central Africa?
Baroness Young: My Lords, as far as the first part of the noble Lord's supplementary question is concerned, I have of course seen the estimates made by the FAO, but the fact is that it is never easy to quantify situations of this kind. As I understand it, the effects of the drought are patchy. Some areas have escaped lightly but overall the problem is certainly very serious and has been prolonged.
On the second part of the noble Lord's question, I have seen the newspaper reports to which he has referred. He will have noticed that in fact they refer to our contribution to IDA. As he I think will know, Britain has an outstanding record in regard to IDA. In our view the United States 9 billion dollar IDA now under consideration is inadequate to meet the needs of the world's developing countries, but we hope that it will be agreed in time to become effective in July.
Lord Avebury: My Lords, can the Minister remind the House whether aid is being provided either directly or through the EEC to the drought stricken areas of Eritrea which are occcupied by the Eritrean People's Liberation Front; and whether consideration will now be given to enlarging the amount of any such aid in the light of the recent defeats of the Ethiopian armed forces by the EPLF and its consequent assumption of responsibility for a larger area which is stricken by drought?
Baroness Young: My Lords, the noble Lord's question refers to something which is in fact not a part of the Question on the Order Paper. If he would care to put down a Question on that subject I should of course be happy to answer it.
Lord Oram: My Lords, while we can greatly appreciate the work that is being done in this matter by the Overseas Development Administration and indeed by the voluntary agencies in the matter of relieving disasters, is not the problem of the encroaching desert one that ought to be tackled on a long-term basis? For example, has not our own British experience with the Gezira scheme some years ago and Israel's success in her agriculture proved that, given the resources and the will, man can conquer the desert? Is the Minister satisfied that within our aid programme sufficient weight is given to the long-term consideration of this problem?
Baroness Young: My Lords, I agree with the noble Lord that drought is only one of the causes of the

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present tragedies in Africa. What has become quite clear is that there are frequently policy and institutional weaknesses in many of the African countries which they are now trying to counter, particularly with IMF and IBRD help. The noble Lord also asked whether we were giving aid to help countries grow more food. We have of course done some of this under disaster relief and also some of it through our regular development aid, where one of the objectives is to develop greater self-sufficiency in food production.
Lord Mackie of Benshie: My Lords, may I ask the noble Baroness a question which relates to the Question on the Order Paper? Does the assistance include the all-important question of seed corn in drought areas? The important thing appears to be to keep agriculture going in difficult circumstances. Even if you are giving food to relieve famine, you still need to keep agriculture going.
Baroness Young: Yes, my Lords. I am happy to confirm to the noble Lord that such things as a better supply of seeds and water hole boring and other such equipment, which will all be part of the encouragement of greater self-sufficiency, will be a central objective of European Community aid under the next ACP/EC conventions.
Lord Molloy: My Lords, is the noble Baroness aware that, the figures she gave in answer to the Question of my noble friend Lord Hatch will be very welcome by the people of this country who have been horrified by some of the things they have seen on TV, and that the attitude of compassion and understanding shown by our Government should be an example to many other Governments who should also contribute? In response to the point about prevention being better than cure, is she prepared to state her understanding that consultations should take place with many of Britain's voluntary overseas services which have been involved in and understand the problem—for example, with members of the British Red Cross, which has already made recommendations on the basis that prevention is better than cure?
Lord Denham: Speech!
Lord Molloy: Should not their understanding and experience be added to the generosity and understanding shown by the Government?
Baroness Young: My Lords, of course if there are particular voluntary organisations which the noble Lord has in mind, perhaps he would let me know and we could consider them. As it is, we are giving £10 million, which was announced in March, which includes £1 million for the League of Red Cross Societies and £½ million for various voluntary agency projects to fight drought. I might add that we have also contributed £200,000 to Christian Aid for use by the Sudan Council of Churches for victims of the drought in Northern Ethiopia, which I hope may go some way to answer the question asked by the noble Lord, Lord Avebury.
Lord Hatch of Lusby: My Lords, I congratulate the noble Baroness on her comments concerning the

629
International Development Association fund and the cuts by the United States, but will she go a little bit further and say what Her Majesty's Government are doing to restore the funds of this most important organisation which quite clearly can give a great deal of aid to the drought-stricken areas? Secondly, to take up her point concerning the fact that drought is only one issue in the lack of food and starvation, does she agree that the aid cuts, mainly by the United States but also by Her Majesty's Government, have contributed to that situation, as has the necessity for concentrating on cash crops in order to pay the very large interest rates on the debts incurred by those countries?
Baroness Young: My Lords, on IDA, as a Government we have come out publicly in favour of the United States 12 billion dollars replenishment and have urged it on other donors. When the 9 billion US dollars replenishment was agreed, but not signed, earlier on this year, we rallied support for a supplementary fund of 3 billion US dollars. When the United States Government decided not to pay its share of IDA replenishment, we waived our rights to a pro rata cut in our own contribution, and a vast majority of other donors followed us. So I think our record on IDA is a good one. Of course, on the question about aid generally, I think the figures that I have given this afternoon indicate that the sums that we are giving are very considerable indeed.
Baroness Ewart-Biggs: My Lords, is the noble Baroness aware—perhaps she is not—that I am president of the British branch of an NGO called SOS Sahel, which works against drought in the Sahel regions? Would she not agree that if perhaps I told her about this organisation, she would find it worthy of Government support?
Baroness Young: My Lords, I was not aware of the information that the noble Baroness has given me, though I am very pleased to hear it. I have noted what she has said, but I think she would agree with me that it is rather wide of the Question.

Bedford College Buildings: Sale Proceeds
3.21 p.m.
Baroness Jeger: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government to what purpose the funds resulting from the proposed sale of Bedford College buildings in Regents Park will be devoted, and how this sale will benefit the University of London.
The Earl of Swinton: My Lords, Her Majesty's Government intend in principle that the proceeds of sale of the leases of the Bedford College buildings will be devoted to the costs of the transfer of the college to Egham. The whole of the proceeds will therefore be used for the benefit of the college, which is part of the University of London. Final agreement to this arrangement is subject to the demonstration of the cost effectiveness of the proposal.
Baroness Jeger: My Lords, I thank the noble Earl the Minister for that encouraging Answer. Can he say whether the Government will try to suggest to the Crown Commissioners, who I understand own this uniquely beautiful site, that whoever takes possession of it, some consideration will be given as to the public good and that this lovely site will not be used for speculative and profiteering purposes?
The Earl of Swinton: My Lords, I cannot give any details of the negotiations taking place, but I can say that I understand the negotiations taking place are satisfactory in regard to the kind of point about which the noble Baroness asks.
Baroness Wootton of Abinger: My Lords, it seems rather surprising that the proceeds from this extremely valuable site—I do not know how much money it has fetched, but it must be a great deal—should apparently all be spent on what is virtually a removal job.
The Earl of Swinton: My Lords, I cannot give the noble Baroness, Lady Wootton, any details of what the site is going to fetch, but I can say the proposal was based on the need to rationalise the accommodation of the two colleges in such a way that they could keep within their advised lower level of funding, without damaging their academic strength. The proposals will have been subject to a full investment appraisal by the university. So far as this lovely site is concerned, I think it is important to remember that only a 26-year lease remains on the buildings in Regents Park.
Baroness Lockwood: If there is a surplus on the transfer, would the Minister consider using some of the money for the purpose of special educational needs of women, such as conversion courses to science and technology subjects?
The Earl of Swinton: My Lords, as I understand it, I think it is unlikely there will be much of a surplus. How the money will be spent, and whether it may all be spent, is of course a subject for negotiation with the university authorities.
Lord Allen of Abbeydale: My Lords, as a member of the Bedford and Holloway councils, thanks to the noble Lord the Lord President, may I ask the Minister whether he agrees that it is not just simply a removal job, but that it involves a great deal of new construction at Egham to accommodate the needs of the combined college?
The Earl of Swinton: My Lords, I am most grateful to the noble Lord for drawing the House's attention to that point. I should have explained that when I answered an earlier question.

Royal National Orthopaedic Hospital: Future
3.25 p.m.
Lord Diamond: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

631
The Question was as follows:
To ask Her Majesty's Government what plans they have in mind in order to maintain the Royal National Orthopaedic Hospital in its present state as an international centre for the management of orthopaedic problems.
Baroness Trumpington: My Lords, the Royal National Orthopaedic Hospital is managed by the Bloomsbury Health Authority, which plans to relocate those important services which are affected by the termination of a lease. These plans do not jeopardise the RNOH's position as a centre of excellence in the field of orthopaedics.
Lord Diamond: My Lords, in view of the anxiety which I know is being felt, as both a Member of your Lordships' House and an ever grateful National Health Service patient at this hospital, may I say how much I am grateful to the noble Baroness for that Answer? I presume that the Answer which the noble Baroness has given refers to the Great Portland Street centre. Therefore I do not think that it would be too strong a request to seek her categorical assurance that the future of the Stanmore branch is equally secured.
Baroness Trumpington: My Lords, Bloomsbury Health Authority's latest consultation document Towards a Strategy makes it quite clear that the authority has not come to any conclusion about the future plans for the Stanmore branch. If and when such plans are made, they will be the subject of full consultation in the usual way. If the community health councils concerned were to object, final decisions would be made by Ministers.
Lord Kilmarnock: My Lords, would the noble Baroness tell the House whether the chairman of the regional health authority concerned has made any representation to the Secretary of State on this matter and, if so, what was the Secretary of State's reply?
Baroness Trumpington: No, my Lords, I cannot tell the noble Lord.
Lord Kilmarnock: My Lords, can the noble Baroness discover the position?
Baroness Trumpington: My Lords, I shall see that a letter is written to the noble Lord.
Baroness Macleod of Borve: My Lords, may I ask my noble friend the Minister whether it is envisaged that the centre of excellence in Great Portland Street should be concentrated, as seems reasonable, at Stanmore, and that all the surgeons who are now performing wonderful operations should be transferred to Stanmore en bloc?
Baroness Trumpington: My Lords, in answer to my noble friend, I would point out that the move is actually split. Consultations have been held on the move to the Middlesex buildings and it has been agreed. In the longer term the RNOH will occupy its own discrete unit of 50 beds and two operating

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theatres in the Middlesex buildings. However, the final accommodation will be available only in 1987. Meanwhile, the Great Portland Street lease expires at the end of June this year. Noble Lords might be interested to know that the rental per annum until the end of the lease is at the moment £191. If there was a renewal of the lease, the cost would be £350,000 per annum.
Lord Ennals: My Lords, while I would not for a moment suggest to the noble Baroness that there should be that kind of sum paid to retain the Royal National Orthopaedic Hospital in London, is she not aware that there is a great deal of concern about the situation in Stanmore itself? This is partly because of the very run down condition of the buildings, most of which were built on a temporary basis, and also because of the acute shortage of nursing staff at Stanmore. In view of the excellence which this hospital has shown over very many years on a national basis—not just a regional basis and a Bloomsbury basis—is it not essential that from Bloomsbury, or regionally, or nationally there should be an infusion of funds in order that the Stanmore scheme, wherein will lie the future of the Hospital, is properly implemented, in order that it can provide the service which has been previously provided?
Baroness Trumpington: My Lords, I am aware of the faintly unsatisfactory state of the Stanmore premises. However, the noble Lord is no doubt himself aware that a new theatre will be built at Stanmore particularly for the purpose and that the accommodation will naturally be of the highest order in order to fulfil the needs of the patients who will be admitted.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Rating and Valuation (Amendment) (Scotland) Bill will be adjourned for dinner at approximately 7 p.m. for a short period.
Dentists Bill [H.L.]
Report received.
Registered Homes Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Anatomy Bill
Read a third time, and passed.
Law Reform (Husband and Wife) (Scotland) Bill
Read a third time, and passed.

Tenants' Rights, Etc. (Scotland) Amendment Bill
3.32 p.m.
Read a third time.
Clause 4 [Secretary of State's power to authorise refusal to sell certain dewlling-houses required for educational purposes]:
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 1:
Page 3, line 23, leave out from ("later") to ("serve") in line 25.
The noble Lord said: My Lords, with this amendment, I should like to speak also to the remaining amendments which deal with the same matter and are consequential.
Amendment No. 2: Page 3, line 27, leave out line 27 and insert ("A refusal by the landlord under").
Amendment No. 3: Page 3, line 29, leave out from first ("to") to ("the") and insert ("demonstrate that").
Amendment No. 4: Page 3, line 32, leave out from beginning to end of line 10 on page 4.
The amendment deals with a particular problem that arises in the islands of Scotland which are all-purpose authorities. I refer to the Western Isles, Orkney and Shetland. Under the Tenants' Rights, Etc. (Scotland) Act, teachers' houses on the mainland of Scotland are normally owned by the regional councils and not by the district councils which are the housing authority. The result is that there is no question of the teachers being allowed to purchase the houses. The reasons are fairly obvious. The houses are needed for the school to which they are attached. When it comes to the islands, however, one discovers that as all-purpose authorities they are also the housing authority. As a result, these teachers, unless the original Act had been amended, would have the right to purchase houses. In the remote parts of the mainland and in the islands, it is not possible to get a teacher unless there is a house available.
This is generally recognised. The Government recognised it and therefore amended Clause 4 and gave the right to the local authority, the islands authority, to refuse the purchase of a house provided that they obtained the agreement of the Secretary of State for Scotland. That does not apply to the law in respect of teachers' houses on the mainland. One can imagine how the local authorities feel about not being allowed to judge this matter on their own. They know the situation. They know when a house is needed, and they do not press the matter. There is very little difficulty about it. There are only perhaps one or two towns within the area of the authority, and the matter is settled quite easily. However, to give the right in this way and then to say that the Secretary of State must have the deciding voice is the sticking point.
At one stage I suggested it should not be the Secretary of State but the Lands Tribunal. That did not suit the Government. I then asked what was wrong in allowing the sheriff to decide. He is much more local. He is there and knows the situation. The Government said, "Oh no, we cannot have that". They argued that it would mean another tier. I do not know how the Government regard the Secretary of State; whether or not he is another tier. He seems to be

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above all things. This time therefore I have proposed that the matter should be left entirely to the islands authority. I have support for that in respect of the law relating to houses of a similar kind on the mainland. The Government carried out an inquiry into the islands authorities. It was conducted by a well known Scot, Sir David Montgomery, who addressed himself to this point. It is interesting to see what he said. I shall not give a long quotation but the Montgomery report states on page 77:
"It is our view that the cuncils should not be subject to such a control."
That is the Secretary of State.
"They should instead be allowed to designate certain houses as essential for maintaining education in remote areas. In this way, it would be clearly understood by all concerned that these houses are not available for sale. Other education authorities are not obliged to sell houses in similar circumstances, and our solution would put the islands councils in the same position.… we recommend that the legislation should be further amended to put the islands councils in the same position as other education authorities in Scotland".
That is the purpose of the amendment. I beg to move.
The Minister of State, Scottish Office (Lord Gray of Contin): My Lords, I think that we might be forgiven if we felt that we had been here before. This is the third occasion during our deliberations when noble Lords opposite have tabled an amendment similar to this. Clause 4 contains the requirement that an islands council must obtain the approval of my right honourable friend the Secretary of State before it can issue a notice of refusal to a tenant who wishes to purchase a house which the council needs to retain for educational purposes. Perhaps noble Lords are hoping that on this occasion it may be third time lucky. If that is their hope, I am extremely sorry to have to tell the noble Lord, Lord Ross of Marnock, that he is going to be disappointed.
As I explained during our earlier debates in Committee and on Report, the Government accept that the islands councils should not be required to sell houses in remote areas which they require to retain for educational purposes in order to attract another teacher to that area. The difficulty arises, however, over how best to achieve this since the islands authorities are both education and housing authorities. Their tenants are therefore secure tenants and the houses in question do not have any easily distinguishable characteristics which mark them out from the general housing stock.
To leave the islands councils sole judge in their own case would have no precedent in the 1980 tenants rights' legislation, and the Government do not believe that it would be fair to the tenants. While we accept that the islands councils would act responsibly, a discretion to allow a council to refuse the sale of a house which it believed that it might require for housing a teacher at some time in the future is a wide one. It is without precedent in the tenants' rights legislation and it is potentially open to abuse. The noble Lord argued that only the islands councils have the local knowledge to decide whether or not they intend to retain a house. We might as well say that local authorities generally should be given a discretion to sell or refuse to sell any house and that the decision should always be taken locally. I am sure the noble Lord would agree with that.

635
That was the situation which existed before we introduced the right to buy. The result was that very few houses were sold. At previous stages of the Bill the noble Lord said to me that his party were never at any time against the principle of tenants being able to buy their houses. I reminded him—I think justifiably—that he and his party had paid lip service to the principle of selling council houses while at the same time doing everything in their power to try to make sure that it never actually took place. His attitude and that of his noble friends has not changed as far as that is concerned.
Quite fairly, the noble Lord mentioned the recommendations of the Montgomery Committee. He has drawn attention to the fact that, when it looked into the functions and powers of the islands councils, it suggested that in this matter they should be put into exactly the same position as other education authorities. I have noted the committee's recommendation but I have to say that I do not think it is a practical proposition. The fact is that the other education authorities are regional councils, and regional councils do not have any houses to which the right to buy applies.
The islands councils combine both education and housing authority functions. But because there is no way to distinguish those houses which the islands councils require to retain for educational purposes from other houses in the stock, the only way to put the islands councils on the same footing as other education authorities, as the Montgomery Committee recommends, would be by taking the whole of the islands councils' stock outside the right to buy and removing security of tenure from all of their tenants. This is a proposition which I would find it very difficult to accept.
I must ask noble Lords to accept that we have considered this matter very carefully. We and the islands councils are agreed in our objective; it is that the islands councils should not be required to sell teachers' houses in remote areas. Our only difference is how this can best be achieved, given the multi-purpose functions of the islands councils, without impairing the rights of a substantial group of tenants and without creating major anomalies in the tenants' rights legislation.
I believe that we have gone a very substantial way to meet the islands councils' concerns, as they themselves well know. The present solution is a compromise, but it is workable and it has proved successful in relation to other groups of houses. I have explained why the Government do not feel it would be acceptable to leave the islands councils complete discretion in this matter.
In correspondence and negotiation with the islands councils we have gone almost all the way that they asked us to go in order to meet what they wanted to achieve in this legislation, with the exception of this one point. We have not taken lightly the suggestions which have been put forward by the noble Lord, Lord Ross, and others. We have considered them very carefully indeed, but regrettably we cannot find a practical way of achieving what they seek to do. We do not accept what the noble Lord has suggested and I

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regret very much that I am not able to accept these amendments.
Lord Grimond: My Lords, I do not want to delay these proceedings too much. We have argued a great deal about this matter but I am bound to say that I regard the Minister's arguments as bureaucracy of the worst order. The whole difficulty arises not from any reality but from the technical point that islands councils are both housing authorities and education authorities. It has nothing to do with the realities of the world. It has to do with what goes on in the Scottish Office. The argument over these houses is that many of them are on separate islands. It is not a question of remote areas; they are divided by the sea, and the Scottish Office cannot ignore the sea. It cannot pretend that separate islands are exactly the same as Edinburgh or Glasgow, because they are not. God made them differently and not even the noble Lord can put that right.
The Government have gone a long way to meet the point, and we are grateful to them, but it is ludicrous to say that the compromise must be that the Secretary of State will decide. On what evidence is he going to decide which is not put forward by the islands councils? The islands councils know far more at first hand about the matter than the Scottish Office is likely to do. The idea that they will refuse to sell houses which they do not want for education, apparently with the object of. keeping them empty because they cannot put anyone else into them, is absurd and treats the islands councils as totally irresponsible bodies.
It is very strange that a Government who in theory wish to reduce bureaucracy and bring decisions more to the local level should strain at this gnat. Having agreed the principle that there is a difference between these houses and that the difficulty is a technical difficulty about the status of the authorities, they should go the whole hog and say, "We will leave it to the authorities who, after all, are sensible people, to decide when a house is needed for a teacher and when it is not".
Lord Ross of Marnock: My Lords, it is very disappointing that we should get the kind of answer we have had from the Minister of State. I should like to tell him that this is not a political matter. We are not dealing with the principle of whether or not the houses should be sold; we are accepting that. All that is beside the point. As the noble Lord, Lord Grimond, said, the Government themselves seized on the lightness of the claim that was being made by the islands councils. That is why the clause was put in the Bill. Our complaint is about how they are doing it. It is rather silly to use this factor that because they are all-purpose authorities they would not deal fairly with the matter. Up to now, that has not been the case.
We are not dealing with a great many houses, although the Minister referred to a great many houses. I do not think anyone knows better than the noble Lord, Lord Grimond, the nature of the problem in small islands off the west coast of Scotland or parts of Shetland or Orkney, where probably there are only two or three families and only one teacher. If that teacher occupies and insists on occupying that school, one will not get another teacher there.

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With all due respect, I was Secretary of State for quite a long time, probably too long. But I did get to know the islands. I would not have presumed to say that the Secretatry of State is the person who should make a decision of this kind. I am disappointed in the noble Lord, Lord Gray. I thought he would bring some fresh Highland air into the Scottish Office, but not so. The "Boy George" reigns supreme. I do not think we should carry on this argument; we should settle it with a Division.
I raised the matter again because of the Montgomery Report, which was received only last week by the Scottish Office. I mentioned this at the last stage of the Bill but I got no answer about it. The report is there and I have quoted what they said. Sir David Montgomery is a pretty well-known Scotsman. I think most of your Lordships on the other side of the Committee know him very well and trust his judgement. That is what he said—leave it to the good sense of the islands councils. I think we shall need to move to a Division.
3.49 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 95; Not-Contents, 84.

DIVISION NO. 1

CONTENTS

Airedale, L.

Hylton-Foster, B.

Amherst, E.

Ilchester, E.

Ardwick, L.

Jacques, L.

Aylestone, L.

Jeger, B.

Banks, L.

Jenkins of Putney, L.

Beaumont of Whitley, L.

Kennet, L.

Beswick, L.

Kilmarnock, L.

Birk, B.

Kirkhill, L.

Boston of Faversham, L.

Leatherland, L.

Brooks of Tremorfa, L.

Listowel, E.

Bruce of Donington, L.

Lloyd of Hampstead, L.

Buckmaster, V.

Lloyd of Kilgerran, L.

Caradon, L.

Lockwood, B.

Carmichael of Kelvingrove, L.

Longford, E.

Cledwyn of Penrhos, L.

Mackie of Benshie, L.

Cooper of Stockton Heath, L.

McNair, L.

Cromartie, E.

Mais, L.

Crook, L.

Mar, C.

Darling of Hillsborough, L.

Milverton, L.

David, B.

Minto, E.

Diamond, L.

Mishcon, L.

Donaldson of Kingsbridge, L.

Molloy, L.

Donnet of Balgay, L.

Mulley, L.

Elwyn-Jones, L.

Munster, E.

Ennals, L.

Nicol, B.

Ewart-Biggs, B.

Oram, L.

Gaitskell, B.

Parry, L.

Gallacher, L.

Perth, E.

Glenkinglas, L.

Phillips, B.

Graham of Edmonton, L.

Ponsonby of Shulbrede, L.

[Teller.]

[Teller.]

Grey, E.

Rathcreedan, L.

Grimond, L.

Rea, L.

Hale, L.

Roberthall, L.

Halsbury, E,

Ross of Marnock, L.

Hampton, L.

Sainsbury, L.

Hanworth, V.

Saltoun, Ly.

Harris of Greeenwich, L.

Seear, B.

Hatch of Lusby, L.

Shaughnessy, L.

Hayter, L.

Somers, L.

Hooson, L.

Stallard, L.

Houghton of Sowerby, L.

Stamp, L.

Hughes, L.

Stodart of Leaston, L.

638

Stoddart of Swindon, L.

Whaddon, L.

Stone, L.

White, B.

Strabolgi, L.

Wilson of Langside, L.

Taylor of Blackburn, L.

Winstanley, L.

Wallace of Coslany, L.

Winterbottom, L.

Wells-Pestell, L.

NOT-CONTENTS

Alexander of Tunis, E.

Lane-Fox, B.

Ampthill, L.

Lauderdale, E.

Auckland, L.

Long, V.

Avon, E.

Lothian, M.

Belhaven and Stenton, L.

Lovat, L.

Belstead, L.

Lucas of Chilworth, L.

Bessborough, E.

Lyell, L.

Blanch, L.

Macleod of Borve, B.

Brookes, L.

Margadale, L.

Broxbourne, L.

Marley, L.

Caccia, L.

Maude of Stratford-upon-

Carnegy of Lour, B.

Avon, L.

Chelmer, L.

Merrivale, L.

Clancarty, E.

Mersey, V.

Cockfield, L.

Molson, L.

Coleraine, L.

Mottistone, L.

Cottesloe, L.

Murton of Lindisfarne, L.

Cullen of Ashbourne, L.

Northchurch, B.

Daventry, V.

Nugent of Guildford, L.

Davidson, V.

Onslow, E.

De Freyne, L.

Orr-Ewing, L.

Denham, L. [Teller.]

Pender, L.

Drumalbyn, L.

Porritt, L.

Dundee, E.

Rankeillour, L.

Ebbisham, L.

Renton, L.

Eccles, V.

Renwick, L.

Effingham, E.

Saint Oswald, L.

Ellenborough, L.

Sandford, L.

Elton, L.

Sandys, L.

Faithfull, B.

Selkirk, E.

Ferrier, L.

Sempill, Ly.

Fraser of Kilmorack, L.

Skelmersdale, L.

Gainford, L.

Spens, L.

Gardner of Parkes, B.

Strathspey, L.

Gormanston, V.

Suffield, L.

Gray of Contin, L.

Swinton, E. [Teller.]

Gridley, L.

Terrington, L.

Hailsham of Saint

Thorneycroft, L.

Marylebone, L.

Trenchard, V.

Harvey of Prestbury, L.

Vaizey, L.

Henley, L.

Vaux of Harrowden, L.

Kintore, E.

Vickers, B.

Kitchener, E.

Whitelaw, V.

Resolved in the affirmative, and amendment agreed to accordingly.
3.57 p.m.
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 2:
[Printed earlier: col. 633.]
On Question, amendment agreed to.
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 3:
[Printed earlier: col. 633.]
On Question, amendment agreed to.
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 4:
[Printed earlier: col. 633.]
On Question, amendment agreed to.
Lord Gray of Contin: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Gray of Contin.)
On Question, Bill passed, and returned to the Commons with amendments.

Rating and Valuation (Amendment) (Scotland) Bill
3.59 p.m.
Lord Gray of Contin: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Gray of Contin.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
The Chairman of Committees (Lord Aberdare): Before I call Amendment No. 1, I have to explain that this amendment should have been printed as two amendments: the first amendment, that headed "Part 1A"; and the second amendment that headed "Part 1B". I therefore first call the amendment to insert the new clause headed "Part 1A".
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 1 A:
Before Clause 1: Page 1, line 4, at end insert—
("PART 1A REFORM OF SCOTTISH RATING SYSTEM
The Secretary of State shall establish within six months of the passing of this Act a Committee to enquire urgently into the Scottish rating system and its need for reform and to make recommendations to that end.").
The noble Lord said: First, I should like to express a word of gratitude and thanks to the Public Bill Office for their patience, efficiency and the way in which they have helped—certainly the Opposition—in respect of not just these amendments but others. I know that they are hard pressed with legislation and I am unfailing in my admiration for their unflagging patience with people like myself.
This amendment is a fairly simple one. I hope that it will commend itself to your Lordships. It is headed "Reform of Scottish Rating System". It reads:
"The Secretary of State shall establish within six months of the passing of this Act a Committee to enquire urgently into the Scottish rating system and its need for reform and to make recommendations to that end.".
It ties the Government only to setting up the committee. Thereafter it is for those people in Scotland who for a long time have been expressing their concern about the unfairness of the whole rating system to make their voices heard. Opposition to or disaffection with the present rating system is widespread. At one time I thought that it was shared by the Government. Indeed, it is not so long since the Government themselves said that within the lifetime of a Parliament they would get rid of domestic rating. Your Lordships will remember that during the last Parliament a Bill came before us to enable the

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Government to postpone revaluation in Scotland. That is the first time that that has happened in Scotland. I know that there have been constant postponements of revaluations in England and Wales, to the extent that revaluations are completely out of date. I believe that the last revaluation in England and Wales was in 1973. The last one in Scotland was in 1978, and then we had the first postponement. The Government gave the impression then that there would be only partial revaluation. Then they changed their mind and scrapped all idea of revaluation.
We were given an indication that they would make sweeping changes in the rating system and in valuation. Therefore, we were disappointed when we received a very patched-up White Paper, which I doubt mentioned the word "Scotland" at all, and which said that the Government had changed their mind and thought that:
"The rating system is basically sound".
The one thing that the rating system is not in Scotland is basically sound. We work on the basis of a rating system in respect of which, if there is not an existing rent, there is a notional rent fixed by the assessors, who eventually decide the annual rateable value upon which people then pay rates. The expenditure of Scottish local authorities is over £2,000 million per year. Last year the local authorities' percentage of that was roughly £1,400 million. To fix the raising of the local authority's percentage on the narrow basis of the occupier being assessed upon the rent of his property means that the system becomes more and more unwieldy and more and more anomalies arise, and anomalies have been countless.
Sometimes there have been amendments. One of the first large amendments arose about 50 years ago, which is within my lifetime. In Parliament there have been very considerable changes. The rating system used to be divided between owners and occupiers. Then the owners were wiped out and the whole burden was placed on the occupiers. At that time there was a notional reduction of rent, so the whole burden is upon the occupier.
Then there is the case of agricultural land. That used to be rated. I believe that farmers paid one-eighth rates. That was taken away; no rates are paid on agricultural land in Scotland now, but there is full rating on dwelling-houses. Even last year changes were made in respect of outdoor machinery. Every time such a change is made, we narrow the base of those who bear the burden of rates but we make no change in the actual burden itself. With every Act that passes through this House we place further burdens on the local authorities, and the result is that the whole thing becomes unwieldy and more and more complaints are received from people about the unfairness of the rating system.
There is another aspect which is unfair, which is the unfairness of the Scottish rating system as compared with the English rating system. To a certain extent we have only ourselves to blame. When we passed the Valuation and Rating (Scotland) Act 1956, we decided that we should keep our present system under which we employed our own assessors, who were elected to their posts by the then county councils and large boroughs and who are now elected by the region

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authorities, and we paid for them ourselves. In England, this is done by the Inland Revenue. Of course, different sets of assessors give rise to different interpretations even of the same law. We discovered that in an amendment which is being made to this Bill in respect of caravans, but it does not apply only in that respect.
I do not know how many noble Lords know Glasgow. I do not know whether they know Parkhead, which the locals call Paradise and where a football team called Celtic plays. Another very well known team called Rangers plays at Ibrox. But noble Lords would be surprised if I told them that the rates paid by Celtic are double those paid by Manchester United. The assessments and the rate poundage are such that there is this inequality between England and Scotland. Partick-Thistle used to be a very prominent team in Scotland, and it is based in Glasgow. The stadiums in which these teams play are rated very high, and had to be remodelled because the Government said so. This was done under legislation dealing with the safety of sports grounds. So millions of pounds had to be spent—and I mean millions; I believe that Celtic had to spend £ 1¾ million on their ground; Rangers spent far more on theirs and have a very up-to-date stadium, as does Aberdeen. But, by virtue of the fact that they improved and reduced the capacity of their grounds, they had to pay even more rates. It is not fair. Why should Rangers have to pay more than Arsenal? It is a big enough ground as far as gates are concerned.
The matter is simple. The assessors could not work on the basis of a rent formula in respect of stadiums in Scotland; the assessors work on the basis of a contractors' formula and the cost of construction. It depends when a stadium is constructed. If it is constructed this year, the rate assessment will increase tremendously. On the other hand, in England it is worked on a revenue basis. Therefore, you get a very different answer, which virtually means that in Scotland the assessments are three times as much as they are in England and Wales. Of course, this is unfair. The assessors themselves are probably the first to admit it, but they are working upon Scottish law and Scottish legislation and practice.
It is time we had a reconsideration of how we levy our rates in Scotland. We are now being manipulated in Scotland into being the most highly-rated part of this country. Rates are to meet the expenditure of the local authorities. That expenditure is for all the various duties placed upon them by the Government, and then apart from that there is another account which is the housing account. It is separate from the reckonable expenditure which was met in part by the Government through rate support grant.
When I was Secretary of State the Government met over 70 per cent.—this is the average in Scotland—of local authorities' reckonable expenditure. That is apart from their charges, their income from various sources. That has been reduced now. This year it is being reduced by a further 1.2 per cent. It is now just over 60 per cent. If we take the accumulated withdrawal of that support from Scottish local authorities, in the last five years it must come to over £1,000 million. Because the expenditure has not been reduced by that amount, how are the local authorities going to meet it? They can only put up their rates.
Now the Government are telling them, "We are going to fix the rates for you". We have a ludicrous situation. So far as housing is concerned, the position is exactly the same again. I see Members of this House who were in another place for as long as I was, and who saw Housing Bill after Housing Bill in which the Government were urging local authorities to build houses, and gave them subsidies to do it. But in giving Government subsidies to do it, they insisted that the local authority take from its general rates usually about a third of what they were applying per house.
That third is still being paid, and probably more, because suddenly the Government departed from their bargains and created something called housing support grant. When this Government took office £214 million was paid in Scotland in that regard. Last year it was £52 million. How have the local authorities to make up the difference? Out of their rates. If they do that, up go the rates.
In Scotland we have a big public sector housing because of the whole history of Scotland, the bad housing, the poor conditions in respect of employment, and the rest of it. In some areas 50 per cent. of the people live in local authority housing. There has always been a cry from the Government that there is not enough owner occupation in Scotland, people owning their own houses. If there are more people in England owning their own houses, then the cost to the Government in mortgage relief must be much higher in England than in Scotland. Therefore, there is a greater sense of fairness. If we are asking for less in mortgage relief, we should have housing support grant at a far greater rate than we are getting; but we are not getting it. So by reducing the rate support grant, by reducing the housing support grant, automatically up go the rates in Scotland, and it is not the fault of the council but the fault of the Government's policies and the effect of the rating system.
The extent to which Scotland is being manipulated into high rates, which affects business, is now a scandal. It affects industry, too, although in Scotland industry seems to get round the anomalies of the nonsense of our rating system. Industry in Scotland is derated by 50 per cent. Who pays for that? The other ratepayers, of course. There is every case for a committee to inquire into the Scottish system and to make recommendations. That is the sole purpose of this amendment. I beg to move.
4.15 p.m.
Lord Mackie of Benshie: I rise to support this amendment strongly. The Government are introducing this rather ludicrous Bill; a patching up of a bad system. It is a system they condemned in their manifesto and which they intended to put right. Instead of that they have abandoned the search for alternatives. They are patching up a system that they themselves think is totally unsatisfactory, and in so doing they are introducing curbs on local government, and direction of local government, which make a nonsense of the whole question of putting responsibility nearer to the people.
It is the Government's fault. Therefore, they really must accept that this proposal is a sensible thing; and I am assuming that a reform of the Scottish rating

643
system will include a look at the alternatives available, on which the Government do not seem to be able to make up their minds at present. The way that local government has developed has been scandalous. I do not think that the Labour Party in Scotland are totally without blame for the high rates. However, the fact is—and the Government knew it very well before the election—that the people who pay the rates in many cases are not the people who are obtaining the benefit, or who are electing the local councils.
What we must do is bring back responsibility to the local councils, and bring back the ability of the people who pay to shift the local councils if they do not like them. That would do away with the need for this extraordinary legislation which takes responsibility completely away from the same local councils. Therefore, I cannot believe that the Minister can resist this amendment. It is part of Conservative policy.
The Government have run away from taking a decision on rates. Therefore, the least that they can do is to agree to set up a committee to inquire into what is, by their own admission, an urgent need. I hope that the Minister will tell us that he can accept this amendment and set up a strong committee.
Goodness knows, there is enough evidence from all over the world. There are old Liberal policies on site value rating about which I have no doubt many Members opposite would be able to inform the Minister. There is evidence from all over the world of different systems which have been tried, some of them very successfully. I am sure that the noble Lord will accept this amendment and try to shed some light on a fairly murky subject.
Lord Grimond: If no one else is going to address the Committee on this important matter I shall take it upon myself to say a few words, largely adopting those that have already been said. I do not think that the noble Lord the Minister will be able to deny that Scottish rating is now on a very narrow base indeed, and getting narrower. Nor can he deny that over the last two or three years the Government have put more and more responsibilities on local authorities. We have had at least two long Local Government (Scotland) Bills, mostly on unimportant matters, evading the main troubles of local government but nevertheless putting new duties on local authorities. Meanwhile, the base upon which they raise their finance is being steadily narrowed. It is long past the time when we need a new system of raising local government finance.
We now have the position that industry is 50 per cent. derated, agriculture is derated, crofting is derated, many people get assistance over the rates, and there is no relationship between the power to elect the local council and the payment of rates. The argument by industry that it is not represented locally is a false argument, because it is not represented nationally either. If we are to be told that the oil industry, for instance, should not pay rates because it has no representation on local councils, then perhaps it should not pay taxes either because so far as I know it does not directly elect people to Parliament; and we should soon find that our taxation system as a whole

644
was in some difficulty. But industry is perfectly entitled, I think, to say that the rating system in Scotland is now highly deleterious to an expansion of its operations in Scotland. Therefore, the first point is the narrow base.
The next point is that there is no relationship between the use which people make of local services and the amount they pay. The third point I have touched upon is that if you think that taxation and representation should be connected, I would point out that they are now severely disconnected in Scotland.
There is then the question of the unfairness, which has also been mentioned. We have had trouble over the last year at race courses and on football grounds, but we have had more serious troubles. Still, a very large proportion of the rates of Shetland, for instance, and those of certain other local authorities arises from oil installations. Suddenly there was an alteration in the rating of outdoor installations, and the Shetlands local council found that its rateable base had been slashed by about half.
Now what happens? I believe—and I have no doubt that the Government will confirm this—that the oil companies set off their rates against tax. So this is really a transfer to the people of Shetland of the obligations previously borne by the Exchequer. That cannot be right; nor can it have been intended. Furthermore, when the rateable base is slashed what happens is that the rates on ordinary people—householders and so forth—continue. This is one matter which certainly needs examination by a committee.
In addition, I should very much like to know what is the effect of the rates in big cities. When I go through Glasgow I find enormous alterations involving, I think, additions to office accommodation. Branch offices of insurance companies and so on are going up in Glasgow while shops are going out of business, and so is industry. Has this anything to do with the rating system? If so, why, and what is happening about it? To my mind there is scope here for another examination. I am sorry that we must have it, since we have had a great many. But as the Government cannot make up their minds and have gone back on all their pledges to reform the system, all we can hope is that another body might persuade them to do something about the system in general, abolish the rating system, and have a local income tax or other form of local taxation which would be far more sensible and far fairer.
At the same time, such a body would be useful for examining the numerous anomalies which now exist in the rating system and the very unfair way in which it falls on certain people and types of business, as well as the way in which others have been exempted from rates, largely for historical reasons. I speak in the presence of my noble friend Lord Mackie who. of course, is a small farmer in his own right, but of course I would not dream of putting any rates on his property. Nevertheless, there are in Scotland some quite large farmers who are doing quite well and I wonder whether they might not make a contribution to the rates. I say that with all due deference to many of my friends and supporters. However, I only illustrate the anomalies of the system and the peculiar situation which has arisen in which, for purely historical reasons, the rating system has become grossly unfair.

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So I hope the Government will look with some favour upon this very sensible amendment.
Lord Drumalbyn: Perhaps I may make one observation on this matter. I am less qualified than many people here to make it, but I am sure most of us would agree that in fact it was the intention to review the rating system. As I understand it, the only reason for not doing so now is that there are more important things to do than to change the rating system. I simply want to ask my noble friend whether, even though there is no immediate prospect of changing the rating system, it would not be a good thing to look at it.
As I understand it, that is what the amendment is proposing. Surely we should be able to look at it and take plenty of time to do so now, because it is quite conceivable that if we go on as we are at present, there may be a breakdown in the system. Then we should have to look at it quickly. Surely it is better to give it full consideration now. I commend this to my noble friend and I hope we shall not divide on the amendment today because we are not at the moment a very representative body of Scotland in the Chamber. So I think it would be a good thing if the noble Lord, Lord Ross, would withdraw his amendment today. However, I hope that the greatest possible pressure will be brought to bear to have this matter looked at very fully, starting from now.
Lord Stodart of Leaston: My noble friend Lord Drumalbyn, who has just spoken, has said much of what I wanted to point out and I shall not be repetitive. However, it is a fact that during the last five years two committees have been set up to look into certain aspects of local government. Modesty naturally prevents me from referring to one of them, particularly as the noble Lord, Lord Grimond, slightly deflated me by saying that neither of them had examined anything of any importance at all. I hope I am not misquoting him, but that was the impression I got—
Lord Grimond: If the noble Lord will permit me to interrupt, perhaps I may say that I would hate him to go away with that impression; I hope I said no such thing. What I said was that the Government had introduced two Bills, much of which I thought was unnecessary, but of course the noble Lord's committee had made a very great contribution of thought. I am very glad of this opportunity to put that on record.
Lord Stodart of Leaston: I am much obliged to the noble Lord. I should certainly say that though I think both those committees made useful suggestions—and indeed your Lordships' House took it upon itself to support one of them not very long ago—I would fully subscribe to the view that neither of the subjects inquired into, be it the functions of local government in Scotland or the particular problems of the islands, is basically as important as looking into the rating system itself. I am particularly moved to say that in view of what I think everybody knows—which has been referred to today—regarding the unfairness of the system asit applies in many cases in Scotland. That may be because—undoubtedly it is because—the law of Scotland in many matters to do with land and inheritance is different from, and in many cases better

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than, the law of England. These are matters which I believe should be inquired into.
However, where I would agree with the noble Lord, Lord Drumalbyn, is that I do not think that such a committee need necessarily be set up next week. What I should like my noble friend to do is to give some kind of undertaking to us that the Government will take note of this matter, regard it as being of importance, and take steps, basically because of what I regard as the unfairness of the system as it at present exists.
The Earl of Perth: I have been listening to the noble Lords who have spoken in support of this amendment and I must say that in my experience too one finds gross anomalies overburdening certain sections and giving relief to others, which is not very fair. Like the noble Lord, Lord Drumalbyn, I think we ought to ask that in the rather near future this question is all looked into. I recognise that the amendment says "within six months", and then "urgently". I know that even with those words in the practice with these committee reports means that it will probably be a year or so before there is any outcome. That takes us to 1986. Then the Government will think about it for a year or two, and so it will probably be 1988 before we reach any outcome. Because the last revision was in 1978, for 10 years we shall have been labouring under what many of us feel is an unfair system. I hope that the noble Lord, Lord Gray of Contin, will consider accepting this amendment in principle, if not in its entirety.
4.30 p.m.
Lord Gray of Contin: We have had a very interesting, if short, debate on this amendment. It would be quite wrong of me not to consider very carefully the contributions which have been made. In doing so I should be absolutely frank with the House. It would be wrong to suggest—nobody has directly suggested this, although it has been implied in certain ways—that the Government have not really considered this matter all that carefully. Let me remind the Committee of what has happened. The aim of this amendment is to set up a committee of inquiry into the Scottish rating system. After all the consideration that has been given to rates over recent years, I believe that what is really needed and what is taking place in the Bill, is action. It may not necessarily be action which commends itself to all parts of this Committee, but the Government are trying to do something about the rating system.
Let me first go back a little way. In 1976 we had the report of the committee of inquiry into local government finance chaired by Sir Frank Layfield; an extensive examination of the whole isssue. We drew on this in drafting alternatives to domestic rates which we published in December 1981. We consulted widely on this but, as we reported in Valuation and Rating in Scotland: Proposals for Reform, published in August 1983, the results of the consultation were not conclusive for radical change. Having considered them all very carefully indeed, we decided to make reform to the rating system, which is basically sound but needs improvement.
From what I have said I think I have made it abundantly clear that the Government have certainly

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not been sitting back and not paying any attention to the problems. We have considered various proposals very carefully indeed, but the difficulty has been that we did not think it an advantage to replace an existing system with something which would not prove very much more acceptable and satisfactory all round. Therefore we decided—and my noble friend Lord Perth made a good point—that speed is important in these matters. If at this stage we were to follow the suggestions contained in the amendment, of necessity a considerable period of time would elapse before we should be in a position to legislate upon it.
I take the point made by my noble friend Lord Stodart of Leaston, and also by my noble friend Lord Drumalbyn, that this is something which the Government should not put aside but should look at for the future. I am not in a position to tell the House today that we shall take any new initiative in this matter, but the deliberations which take place in your Lordships' House are always carefully read and carefully considered. I have no doubt that what has been said in the course of this Committee stage will be read and studied.
The results of our decisions on reform are contained in this Bill. At this stage and after all the consideration we have given to the rating system, I can see no point in agreeing at this time that we should set up a committee of inquiry such as this amendment proposes.
It was interesting that those who moved the amendment, the noble Lord, Lord Ross of Marnock, supported from the Liberal Bench by the noble Lords, Lord Mackie of Benshie and Lord Grimond, made criticisms of the rating system. That is perfectly justified, but they put forward no suggestions, or even the hint of suggestions, about how this might be put right. The setting up of an inquiry is something which could look into the whole matter and perhaps might come up with some proposals. But in the meantime the rating system would continue in its present form. But for the Bill and but for the excellent proposals which the Government are putting forward in the Bill, the position would not be improved at all. I give way to the noble Lord.
Lord Mackie of Benshie: I rise to say to the noble Lord the Minister that the hint was given by my noble friend Lord Grimond, who said that a local income tax could be investigated. This was a hint. It really is not good enough for Ministers to say to the House, "We have considered everything enormously carefully and anything the Government have considered is bound to be right". That is not debate. He should really give the arguments.
I should like him now to explain why local income tax has been turned down as wholly impracticable; not that he has carefully considered it and turned it down but, rather, giving us perhaps one reason why the Government have turned it down.
Lord Gray of Contin: I do not accept what the noble Lord has said. The amendment we are debating calls for a committee of inquiry into the Scottish rating system. It does not specifically deal with the question of local income tax. It might be significant if I turned

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the argument the other way to the noble Lord—that nobody who spoke in favour of the amendment mentioned specifically the virtues of a local income tax or developed it in any way.
Lord Grimond: I am most grateful to the noble Lord. I do not wish to delay matters. I did mention it. To have gone into it in detail at this time in this debate might have irritated the Committee and indeed possibly, if there is such a possibility, have been out of order.
Lord Gray of Contin: I shall not rule on the relative merit of what might be in order or out of order in your Lordships' Committee. That would be out of my province as well.
I do not believe that it would be in the best interests of the Committee to accept an amendment calling for a committee of inquiry into the Scottish rating system at this time in connection with this Bill, but I take the point made by several of your Lordships that you would like to see the Government consider this for the future. I shall make the views of the Committee known, but more than that at this stage I cannot say. What I can say is that I am not prepared to accept the amendment at this time in relation to this Bill.
Lord Wilson of Langside: Before the Minister replies to the mover and the supporters of this amendment I should like to say that I resisted the temptation to express the strong support which I feel for the amendment for a number of reasons. In particular, I resisted the temptation because—and I must say this—I think that a very formidable case was made out in the three speeches from this side of the Committee by Lord Ross of Marnock, Lord Mackie of Benshie and Lord Grimond: it was so formidable that I should have thought it was unanswerable. I thought it unlikely that the Government would resist it. I should have known better, because they resisted the last amendment on the last Bill before your Lordships' House but with a happy outcome, showing the great common sense of your Lordships' House.
Quite apart from the formidable arguments which were presented in the three speeches from this side of the Committee, there was no suggestion from the Government side of hostility to the amendment. The noble Lord, Lord Drumalbyn, shared the kind of feelings which I have and which the noble Lord, Lord Stodart of Leaston, and the noble Earl, Lord Perth, from the Cross-Benches also share. In these circumstances—I have great affection and respect for the Minister—I should have thought that before your Lordships rejected this amendment we should have a more impressive answer to it from the Government.
Lord Dean of Beswick: May I briefly say that the noble Lord the Minister in his reply in effect has said: "Trust the Government; they will look after the situation!" Although I know that the present amendment and the Government proposals refer to Scotland, they embrace a far wider field than that. We have had similar arguments concerning proposals originating in England. The Minister is saying: "We will look at the situation and we will decide. We think that we can come to a more equitable

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situation"—when, in fact, the obverse clearly is the case. I hope that noble Lords will support the amendment and base their support on the fact that although the Government are asking noble Lords to trust them to come up with an alternative, they are producing no such alternative.
I think that the amendment calls for an inquiry into the whole situation on the basis of providing a more equitable financial situation in local government. The Government are extremely fortunate in the role that they have adopted, bearing in mind that some of the original manifesto promises on which they were elected were based on the fact that they would destroy or re-jig the rating system. But the Government have run away in cowardice from that promise, for they have done no such thing. They are not prepared to alter anything at all.
I think that it is incumbent upon noble Lords here to say that they are not prepared to say that the Government should have a blank cheque to deal with the situation as they see it. I think that the amendment is worthy of support and I commend it to the Committee.
Lord Hughes: I should like to intervene briefly to make three points. The first relates particularly to what the Minister of State has said. He referred to the various inquiries which have taken place. Probably the most important of these was the Layfield Committee of inquiry. That committee reported on its proceedings before the Government gave their undertaking at the 1979 election that it would be part of their programme to abolish domestic rates. One of two things obviously emerges from what he has said. Either the Government made that undertaking purely for electoral purposes without having gone into the matter at all or, if they went into the matter fully, we should like to know the reasons which have emerged since to make them state that they were wrong in 1979.
My second point relates to the amendment which is before us. The Minister was listing those things which the Government have done to improve the rating system in its effects but without altering the system. He did not seem to realise that, even if the Bill as it stands was absolutely unchanged, it would still be relevant to have this amendment at the beginning. In fact, if the Bill is unchanged, it will be even more necessary to have this amendment carried so that there is a firm commitment to investigate the system.
My third point, he will be glad to hear, has nothing to do with the Minister. It relates to the remarks which were made by the noble Lord, Lord Drumalbyn, in suggesting that this was perhaps not the best time to decide this matter as this was not a very representative Scottish attendance. I have been looking at the Members present in Committee and I am quite certain that if this Bill were being discussed at any other day there would be no more Scots on either side of the Committee than there are at present. If the noble Lord, Lord Drumalbyn, will look behind him he will see that Scotland is as well represented by his colleagues as ever it is on that side of the Committee. So far as this side is concerned, there are very few of us present in any event. But to the best of my knowledge there is only one noble Lord who might have been here but who is

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not here today. I suggest to the noble Lord, Lord Drumalbyn, that this is possibly the best time to consider this, particularly in view of the fact that he supports the amendment in principle and that, if we go on the experience of the last Division, there is a fair chance that it will be carried.
Lord Carmichael of Kelvingrove: I am sure that we are all rather disappointed at the answer of the Minister. I think he should realise that, within the amendment, there is no demand for immediate action. There is just a feeling that the present rating system—and we have heard this from all sides of the Committee—is very, very perplexing to a great number of people in Scotland, including we, ourselves, who are supposed to be the ones who should understand it. We find great difficulty in understanding it. Many examples have been given of the difficulties. Something is happening when—whether it is because of the fact that the rates are based on the rental system or not—we are finding, as the noble Lord, Lord Grimond, has said, cities like Glasgow becoming mainly insurance branch offices, when very good shopping streets are disappearing and are becoming either building societies or banks or television showrooms and when all the little shops are disappearing. We do not know what the answer is; and I am sure that the noble Lord the Minister also is not aware of the answer. Certainly the Committee is not aware of what should happen.
It may very well be that following a committee examination it will be decided that there is no alternative to the present rating system. The Minister has spoken of the studies that the Government have made and of what they have discovered. But they have not told the rest of the population about it; far less this Committee. Therefore we feel that this is an amendment which is well worth pressing merely to impress upon the Government the fact that it is not a party matter. The decision on how rates will ultimately be allocated is a matter for politics; but the basis of the rating system is something which the whole Committee and the whole country and, in particular, Scotland would like to know about. At present, it seems merely to have gradually grown up over the years. There are so many anomalies existing now, anomalies that have been pointed out in all parts of the Committee. An investigation such as this, a committee to inquire urgently into the Scottish rating system, is something that I think the Committee should press for. I urge all my colleagues and all noble Lords in all parts of the Committee to support the amendment.
Lord Gray of Contin: By leave of the Committee may I briefly say a few words? It would be quite wrong of me to be so insensitive as not to appreciate the views which have been expressed in all parts of the Committee regarding this amendment. I am sure that the noble Lord, Lord Ross of Marnock, would be equally reasonable in appreciating that I simply could not accept an amendment of this kind which binds the Government to setting up any inquiry of this sort within six months. I suggest to the noble Lord, Lord Ross, and to other noble Lords who have participated in the debate, that, if he were prepared to withdraw his amendment, I would take it back and discuss it with

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colleagues, making them aware of the views of the Committee. Perhaps then we can consider the matter at a later stage when I might be able to have some alternative proposal to put to noble Lords.
Lord Ross of Marnock: I am very grateful for the way in which the Minister belatedly has sensed the feeling of the Committee in relation to this. We have not put the proposal forward in any sort of party spirit at all. In Scotland the whole thing is creaking: it just cries out for it. And when the noble Lord says, "This is what we are doing in this Bill", does he not realise that if the Bill takes rush beds out of rating and reduces rates on caravan parks it just means that the burden, on a narrow base, is greater for the others? It is this we are complaining about, and there must be some other way.
The Minister says he is prepared to take it back. What surprises me is that the Government have not looked at this before. Admittedly, by the very nature of things, since Second Reading there has been only a matter of a week or so and I think I put my amendment down the day before yesterday. But the Government are supposed to consider amendments as soon as they go on to the Marshalled List. I have a feeling that the speech the Minister delivered—and full marks to him for it—was not the speech that was written for him, because after he heard the feeling of the Committee he decided he had better alter his tune.
I am the most reasonable man in the world—I must be, to be here on a Thursday, although I have given an ultimatum that at half-past ten I walk out for the night train—but we are to take the next session of this next Thursday when I suppose we shall deal with valuation. That means it will be the following week, at least, before we get to the next stage of the Bill. If I can have a pledge from the Minister of State that he will inform your Lordships of the results of his reconsideration, then I will gladly withdraw the amendment; but I must warn him that we shall have to cover ourselves by putting it down at the next stage in case the Government were to decide that they have gathered enough force to be sure of defeating us on the next occasion.
I have been too long in politics, and so have other noble Lords on the opposite side. I can see all the moves that are likely to happen; but, as I say, I am a reasonable man and always have been. Why should my reason desert me at this stage? In view of that, and of the promise that has been made, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 1B:
Page 1, line 4, at end insert—
PART 1B SCOTTISH RATING ADVISORY COUNCIL

.—(1) The Secretary of State shall establish within three months of the passing of this Act a Scottish Rating Advisory Council consisting of 16 members of whom ten shall be appointed from a panel of persons nominated by the Convention of Scottish Local Authorities and the remainder shall include persons experienced in the law and local government finance.

(2) The Secretary of State shall appoint a Chairman and a deputy Chairman from among the members of the Advisory Council.

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(3) The functions of the Advisory Council shall include—

(a) advising the Secretary of State on any matter relating to rating which he may refer to them; and

(b) making representations and recommendations to the Secretary of State on any matter relating to rating.

(4) Without prejudice to subsection (3) above the Advisory Council shall comment and advise the Secretary of State on any guidance which he proposes to issue to local authorities as to what their expenditure ought to be.").

The noble Lord said: We now come to the Scottish Rating Advisory Council, and I have suggested that we should ask the Secretary of State to set up within three months of the passing of the Act a Scottish Rating Advisory Council. I suggest that it should have 16 members and I have suggested the kind of persons it should have—
"… of whom ten shall be appointed from a panel of persons nominated by the Convention of Scottish Local Authorities and the remainder shall include persons experienced in the law and local government finance. …
(3) The functions of the Advisory Council shall include—

(a) advising the Secretary of State on any matter relating to rating which he may refer to them; and

(b) making representations and recommendations to the Secretary of State on any matter relating to rating.".

So there is a two-way traffic. Even more important is a matter not unconcerned with this Bill, and it is this:
"(4) Without prejudice to subsection (3) above the Advisory Council shall comment and advise the Secretary of State on any guidance which he proposes to issue to local authorities as to what their expenditure ought to be.".
That is a reference to the following clause of the Bill. I think this is important from the point of view that the Secretary of State is more and more taking upon himself an executive power in respect of the rating system, the actual rates. He is giving guidance to local authorities as to what they should spend. He is now going to prescribe in the first clause something in relation to the needs portion of the actual apportionment of grants for rating purposes. More and more he is taking powers, and as we go further through the Bill we shall see where he is going to give orders, and all the rest of it. This means that civil servants are replacing the local authorities, and if they are not going to give the powers back to the local authorities I think there should be a watchdog committee for the public to advise the Secretary of State and to whom the Secretary of State must go for advice in respect of orders and the issuing of guidance.
There is a perfectly reasonable precedent for all this. In respect of valuation, there is the Scottish Valuation Advisory Committee, which has been helpful to the Secretary of State when there have been problems in relation to valuation. There used to be an excellent committee, which I think existed for 40 or 50 years and which published splendid reports on Scottish housing. That was the Scottish Housing Advisory Committee, and some of their reports were classics. I do not know whether the noble Baroness, Lady Carnegy, remembers that particular committee.
I think nothing would be lost and everything would be gained by the Secretary of State if he had such a committee at his hand, and it would be much more reassuring to the public and to local authorities, who would not be represented but who could nominate members for the committee, that there should be a committee of this kind to give advice and to make recommendations to the Secretary of State. I beg to move.
Lord Gray of Contin: I do not think I am going to be able to be as sympathetic to what the noble Lord seeks to do in this amendment as I was in relation to the last one.—
Lord Ross of Marnock: I am sorry to interrupt the Minister so early, but when he started speaking on the last one he was not sympathetic at all.
Lord Gray of Contin: I shall be surprised—shall I put it that way?—if the Committee feels about this amendment as it felt about the last amendment; but whether or not that is so I am always reasonable and perfectly prepared to listen to what others have to say. But at this stage I shall need a lot of convincing so far as this amendment is concerned.
As the noble Lord, Lord Ross of Marnock, will know well—because, so far as I know, he found them perfectly adequate—there are already satisfactory arrangements for discussing local government financial matters with the Convention of Scottish Local Authorities. My right honourable friend the Secretary of State has quarterly meetings with the convention on such matters. The convention are free to raise any matters; and any matters affecting rating, as a matter of course, would be discussed at these meetings or at one of the official committees supporting them. In particular, current expenditure guidelines are discussed fully and I cannot really see what would be gained from setting up a further committee which would have the majority of its members drawn from the convention, which already has adequate arrangements to make representations on any matters relating to rating and to comment on current expenditure guidelines.
For these reasons I do not feel that it would be in any way beneficial to what we are all seeking to achieve in this legislation, or indeed in any legislation relating to rates, to create yet another committee, when we already have facilities which are perfectly adequate to enable local government to make its views known adequately to the Secretary of State.
The noble Lord, I have no doubt, in his time as Secretary of State, had little difficulty in having his meetings with various local authority bodies. Even at that time—those were earlier days—there were adequate facilities. If I felt that the noble Lord was proposing something which would make a genuine contribution over and above what is already available, then I should certainly be prepared to consider it. But I really feel that in this case what he is suggesting is just a duplication of what already exists and what is already working satisfactorily. For that reason, I would ask the noble Lord to consider withdrawing this second amendment.
Lord Wilson of Langside: Again, I find the Minister's answer somewhat disappointing. Are we not in a new and special situation, so far as the relations of local and central government are concerned? I know that historically there have always been tensions; I am not so naive as to be unaware of that. But when there is a climate which is very akin to a cold war between local and national government, would not a body of this kind have a very useful function to perform, which the Committee should consider very carefully before rejecting?
Lord Ross of Marnock: The Minister of State suggests that this would serve no useful purpose and would lead only to duplication. I do not know whether he has recently been in touch with members of local authorities. I can well remember meeting them and the one big meeting used to be the rate support grant meeting, when we had a great round table and everyone said his piece. I have never had any difficulty at all with local authorities. The fact of the matter now is that it is not so much a meeting as a monologue. The Government tell the local authorities; they no longer discuss with the local authorities. This is absolutely clear from the nature of this kind of legislation.
We have to get away from that kind of confrontation. The Minister need not deny that there is confrontation and he need not say that it is working well. It is not necessarily working well. Furthermore, I want more of a searchlight of public opinion on what is happening, so that the public can be aware of the points of view, of the justifications and of the support that there is within what would not necessarily be a particularly independent committee, but a knowledge-able committee of this kind, as regards what the Government are doing.
There can be no denying that the extent of the participation of the Scottish Office in local government affairs is greater now than it has ever been. It is not good enough just to have meetings of civil servants and councillors, or indeed meetings between civil servants and municipal servants as very often happens. We want overall a Scottish body which is advising on these rating aspects. I consider it very important indeed. I do not consider that it would duplicate. It would be very annoying for the Secretary of State, but most of these things are not even coming to your Lordships' House.
There is new power being taken in respect of guidelines and we shall come to that later. It is not good enough for this just to be decided by a few little committees or sub-committees of COSLA and the Scottish Office with, finally, a large meeting being told what is the answer. I want to know what advice the Government are getting. Are they getting the right kind of advice? Even Secretaries of State need advice!
The same arguments could have been used about the Scottish Valuation Advisory Committee, because the assessors in Scotland have a group which could equally meet with those concerned about valuation matters in the Scottish Office. But, no, we set up—I think in 1956—the Scottish Valuation Advisory Committee, and the Government have found it invaluable in supporting what they propose to do. Some of the things which the noble Lord, Lord Grimond, mentioned in respect of changes in valuation that have been made within the present rules had the support of the Scottish Valuation Advisory Committee. The same is true in respect of rating.
More and more, in every branch of rating, the Government are coming in, and I want a kind of in-between body which will give advice and to which the Government can go for advice. I am quite convinced that, if they had gone for some advice in respect of this Bill, they would not have in it the kind of things they have. So I am disappointed with what the Minister said, and I think that this is an amendment on which we should test the feelings of the Committee.
5.5 p.m.
On Question, Whether the said amendment (No. 1B) shall be agreed to?
Their Lordships divided: Contents, 75; Not-Contents, 95.

DIVISION NO. 2

CONTENTS

Airedale, L.

Irving of Dartford, L.

Ardwick, L.

Jacques, L.

Aylestone, L.

Jeger, B.

Banks, L.

John-Mackie, L.

Beaumont of Whitley, L.

Kearton, L.

Bernstein, L.

Kilmarnock, L.

Beswick, L.

Kirkhill, L.

Birk, B.

Leatherland, L.

Boston of Faversham, L.

Listowel, E.

Bottomley, L.

Lloyd of Kilgerran, L.

Briginshaw, L.

Longford, E.

Brooks of Tremorfa, L.

Lovell-Davis, L.

Bruce of Donington, L.

Mackie of Benshie, L.

Carmichael of Kelvingrove, L.

Milverton, L.

Cledwyn of Penrhos, L.

Mishcon, L.

Collison, L.

Molloy, L.

Crowther-Hunt, L.

Mulley, L.

Darling of Hillsborough, L.

Nicol, B.

David, B. [Teller.]

Ogmore, L.

Dean of Beswick, L.

Oram, L.

Diamond, L.

Parry, L.

Donaldson of Kingsbridge, L.

Phillips, B.

Donnet of Balgay, L.

Pitt of Hampstead, L.

Elwyn-Jones, L.

Ponsonby of Shulbrede, L.

Ewart-Biggs, B.

[Teller.]

Gaitskell, B.

Ross of Marnock, L.

Gallacher, L.

Seear, B.

Gladwyn, L.

Stallard, L.

Graham of Edmonton, L.

Stoddart of Swindon, L.

Grimond, L.

Stone, L.

Hale, L.

Strabolgi, L.

Hampton, L.

Taylor, L.

Hanworth, V.

Taylor of Blackburn, L.

Harris of Greenwich, L.

Wallace of Coslany, L.

Hatch of Lusby, L.

Wells-Pestell, L.

Hooson, L.

White, B.

Houghton of Sowerby, L.

Wilson of Langside, L.

Hughes, L.

Winstanley, L.

NOT-CONTENTS

Airey of Abingdon, B.

Erroll of Hale, L.

Alexander of Tunis, E.

Fanshawe of Richmond, L.

Ampthill, L.

Ferrier, L.

Auckland, L.

Gainford, L.

Avon, E.

Glenkinglas, L.

Belhaven and Stenton, L.

Gray of Contin, L.

Belstead, L.

Gridley, L.

Brookes, L.

Hailsham of Saint

Bruce-Gardyne, L.

Marylebone, L.

Carnegy of Lour, B.

Hanson, L.

Cathcart, E.

Henley, L.

Chelmer, L.

Hertford, M.

Cockfield, L.

Holderness, L.

Coleraine, L.

Hornsby-Smith, B.

Cottesloe, L.

Hylton-Foster, B.

Cromartie, E.

Ilchester, E.

Cullen of Ashbourne, L.

Inchcape, E.

Daventry, V.

Killearn, L.

Davidson, V.

Kintore, E.

De Freyne, L.

Lane-Fox, B.

Denham, L. [Teller.]

Lawrence, L.

Donegall, M.

Long, V.

Drumalbyn, L.

Lucas of Chilworth, L.

Dundee, E.

Luke, L.

Ebbisham, L.

Lyell, L.

Eccles, V.

Macloed of Borve, B.

Elton, L.

Margadale, L.

Marley, L.

St. Aldwyn, E.

Marshall of Leeds, L.

Saltoun, Ly.

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Maude of Stratford-upon-

Sandys, L.

Avon, L.

Selkirk, E.

Merrivale, L.

Sempill, Ly.

Mersey, V.

Skelmersdale, L.

Morris, L.

Somers, L.

Mottistone, L.

Spens, L.

Murton of Lindisfarne, L.

Stamp, L.

Newall, L.

Stodart of Leaston, L.

Northchurch, B.

Strathspey, L.

Nugent of Guildford, L.

Suffield, L.

Onslow, E.

Swansea, L.

Orkney, E.

Swinton, E. [Teller.]

Orr-Ewing, L.

Terrington, L.

Pender, L.

Teynham, L.

Penrhyn, L.

Trenchard, V.

Plummer of St. Marylebone,

Trumpington, B.

L.

Vaux of Harrowden, L.

Porritt, L.

Vickers, B.

Rankeillour, L.

Whitelaw, V.

Renton, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
Clause 1 [Basis of apportionment of needs element of rate support grants]:
5.15 p.m.
The Deputy Chairman of Committees (Lord Hayter): I have to point out that if Amendments Nos. 2 to 6 are not agreed to, I cannot call Amendments Nos. 13A to 13E.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 2:
Page 1, line 16, leave out (", in his opinion.").
The noble Lord said: Amendment No. 2 is a small but important amendment. Already local authorities are losing a great deal of their status because of the powers taken under various Acts during the last few years. This amendment omits the opinion of the Secretary of State. The Bill specifies that only expenditure allowable in the opinion of the Secretary of State will be proper. We believe that not just the Secretary of State but other people should be involved in making the decision as to whether or not expenditure is proper, by means of the normal way of arriving at these decisions. In an effort, therefore, to remove the authoritarian nature of the clause, the omission of the words "in his opinion" would give more authority and power to the local authorities concerned which have to bear the responsibility for the operations in their areas. I beg to move.
Lord Grimond: On the face of it, this seems to be a reasonable amendment. I shall be interested to hear the views of the Government upon it. Perhaps they will be able to explain what the clause means. After the words
"have regard to the extent to which, in his opinion",
there follow two matters: the actual expenditure of an individual authority and the estimated expenditure. These are facts about which one cannot have an opinion. The expenditure would be known. The estimated expenditure would also be known. Do the Government infer that they will dispute the estimates with the authority? Or in what way do they expect that the opinion of the Secretary of State will differ from the facts set out by the local authority? I should be grateful if this point could be clarified.
Lord Gray of Contin: I shall try to deal with this point as quickly as I can, because I do not believe that there is as much in this amendment as the noble Lord, Lord Carmichael of Kelvingrove, has suggested.
The amendment would delete from the clause the words "in his opinion", thus removing a well-nigh essential flexibility from the operation of what is generally agreed to be a worthwhile change in the arrangements for grant penalties. If these words were removed, the relationship of expenditure to guidelines and subsequently to the share of any general abatement would turn into a matter of application of mathematical formulae, and there would be no room to take into account special circumstances affecting expenditure. For instance, the Secretary of State might well decide that extra expenditure to cope with some quite exceptional and unforeseeable natural disaster, for example, should not be taken into account for grant loss purposes. If it had kept prudently within guidelines, and then, as could happen, a local authority was faced with such an event, causing its outturn to go above the guidelines, it would lose grant in the same way as an authority which had budgeted above the guidelines and persisted in this overspending. Therefore we feel that the benefit of this is that it gives flexibility. This amendment, quite unintentionally, would remove that flexibility. For that reason, I must ask the noble Lord, Lord Carmichael of Kelvingrove, to consider withdrawing it.
Lord Ross of Marnock: I have listened to the noble Lord, but I do not know whether he has read his own clause. To suggest that the dropping of these words will deprive the Secretary of State of flexibility is absolute nonsense. In any case, if the noble Lord refers to the Acts of Parliament setting this up—I think in 1966 but I do not want to go too much into this—he will find that in respect of these grants, and so on, the Government have the power to make additional grants available where there are extraordinary emergencies. All that is already covered by legislation. The Bill states that the Secretary of State shall,
"have regard to the extent to which, in his opinion".
What we are dropping is "in his opinion". The facts are there. If there is to be any doubt let us go to law. The opinion of the Secretary of State and the opinion of the local authority may well be different.
This is one of the favourite ways of a Secretary of State getting his own way; just by putting in the few words "in his opinion". He merely says that something is his opinion, whether or not that opinion is justified by the facts. There is no judge in Scotland who can argue with that. That is why the words are there. They are not to give him this flexibility to be generous. It is not the intention of this clause to be generous. This clause deals with one element of rate support grant. Rate support grant is divided into three elements: a needs element; a resources element; and a domestic element. The Secretary of State is now taking powers—this is what I said should go to a rating committee but we voted on that and, for your sins, your Lordships turned it down—to determine how, not the whole grant but this needs element will be apportioned. If anyone opposes his opinion that the actual expenditure or the proposed expenditure differs

658
from, or does not conform to, his guidelines, then he will take certain powers. Of course, that will be to claw back from a local authority which offends.
This is where the Government get into a bit of a mess. They take the power of clawback, then discover that in clawing back generally they may well be penalising a local authority that "in his opinion" has been behaving itself. Authorities do not all bear the burden according to the orginal apportionment of these elements of the rate support grant. I want to take away some of the autocratic powers and leave some room for argument—that is the flexibility I want—where the local authorities have been, in their opinion, conforming as far as possible with the guidelines.
There is another point, and I am perfectly sure I am right in this. We use in this clause—and it is vital for this "opinion"—the guidelines issued—not prescribed, but issued—by the Secretary of State. Is there anywhere in legislation, Scottish or English, where the word "guidelines" is defined or where the power in respect of guidelines has statutory authority? I do not think there is. I probably should not have told the Minister that because he will no doubt hurry away and try to include it in this Bill. To my mind, "guidelines" has no statutory authority. Now we are trying to give such authority and weave it into the powers of the Secretary of State so that his opinion and his guidelines will have statutory authority.
It is not the flexibility that the Minister suggests is being denied to him, it is the assurance that he can do nothing wrong in respect of what happens in the guidelines. It is that that I am taking away and leaving a certain flexibility between the local authorities and the Secretary of State.
Lord Gray of Contin: By leave of the Committee, I shall try to anwer the last point made by the noble Lord, Lord Ross of Marnock. Whether he intends to or not, he is removing a flexibility with his amendment. Indeed, the amendment might, in fact, make this useful reform on occasion unfair. I urge the noble Lord to consider that. I am asking him to withdraw the amendment not because I have any vigorous objection to it but because I genuinely believe that if he removes these words there will be occasions where the provision could have an unfair effect. I assume that his amendment is, in any event, a probing amendment. I understood it to be so from the way he described it. He would do more damage than good if he insisted on pursuing the amendment.
Lord Hughes: I cannot possibly agree with the Minister that if this amendment is carried the Secretary of State will lose flexibility. In reading the wording of the Bill the Minister will see that flexibility does stay. The Bill would read:
"The Secretary of State may, in prescribing a basis for apportionment under either of those paragraphs or in providing for apportionment under paragraph 3 above, have regard to the extent to which either or both".
The very fact that the Bill states that the Secretary of State "may" take this into account gives him all the flexibility that he needs.
My noble friend Lord Ross of Marnock has put his finger on the objectionable part of these words. It is not

659
that "in his opinion" gives him flexibility. I submit that the Bill does that anyway. The words mean that he is unchallengeable in the courts because, as my noble friend Lord Ross said, no judge in Scotland can challenge the Secretary of State's opinion. If the Secretary of State says "I am acting on my opinion", that is conclusive. Sometimes, to put it on no worse a basis, the Secretary of State may be wrongly advised in arriving at his opinion. But, having done so, the harm is done.
I suggest that the amendment is reasonable from the point of view of the Secretary of State always having to look at the possibility, "Am I making a decision which, if challenged in the courts, is likely to be upheld?" At the same time it gives him discretion to do the sort of thing which he feels may be desirable at some time, and to ignore strict adherence to the guidelines because of unforeseen circumstances which have arisen. I do not know the extent to which it may arise in Scotland, but we have seen unforeseen circumstances occurring daily south of the Border, where local police authorities are incurring the most extraordinary expenditure which obviously would never have been taken into account in any guidelines. If this were an English Bill and applying to the present English circumstances, the absence of the words "in his opinion" would not deprive the appropriate English Minister from taking into account such exceptional expenditure.
Lord Gray of Contin: The amendment would remove the discretion of the Secretary of State in relating apportionment of the needs element of rate support grant to the actual and estimated expenditure of the local authority. The point that I am trying to emphasise is that it would mean that the grant reduction would proceed automatically regardless of any special circumstances that there might be in the case of an individual authority. That was why, in an earlier intervention, I said to the noble Lord, Lord Ross of Marnock, that there could be occasions where there would be unfairness if these words are removed.
I suggest to noble Lords opposite that it would be unfortunate if we were to take a step which would have quite the opposite effect to that which we all seek in passing legislation in this House. We do not want to create a situation which, by the interpretation of the Act, as it would ultimately be, might result in unfairness; whereas, if we leave it as it is at the moment, that discretion and flexibility remain. In my view that is an advantage. I think that the amendment would take away that advantage.
5.30 p.m.
Lord Hughes: If the Minister is right in his contention, how does he interpret the words, "may … have regard to"? How can that phrase be interpreted as being obligatory on the Secretary of State? We have had many arguments in Parliament about "may" or "shall". "May" quite obviously does not always mean "shall" or "must". I submit that, "may … have regard to", gives the Secretary of State all the discretion that he requires. It has been sufficient in many Acts of Parliament in the past without including the words, "in his opinion".
Lord Gray of Contin: I do not think that I shall be able to convince the noble Lord. I will not be drawn on an argument about "may" or "shall" at this stage. We are discussing the words "in his opinion". I believe that by removing those words we should be removing a flexibility, and that could have unfortunate effects on the way that the Act was interpreted in the future. It is for that reason that I disagree.
Lord Ross of Marnock: No.
Lord Gray of Contin: I know that the noble Lord does not agree with me, but I have my opinion and he has his. I am sorry about that!
Lord Ross of Marnock: That is the very thing: "in his opinion". The Minister thinks that his opinion is final.
Lord Gray of Contin: No. By no means.
Lord Ross of Marnock: Oh, yes. As far as he is concerned it is final. The Minister is turning down the amendment. That is the thing I am guarding against in respect of the power of the Secretary of State. The noble Lord is saying, "You can have your opinion but it is my opinion that counts". The Secretary of State will be able to rule out the local authority's attitudes, arguments and everything else. The inflexibility is there with the words. The inflexibility will be removed if we take the words out.
Lord Stodart of Leaston: Will the noble Lord, Lord Ross of Marnock, go to the stake and contradict me if I say that my recollection is that in the Scottish Standing Committee on several occasions either he or one of his Ministers defended the words, "in the Secretary of State's opinion", and insisted on them being left in legislation?
Lord Ross of Marnock: If the noble Lord can produce these things, I will gladly justify my words on a particular occasion. But it is a purely hypothetical point that he raises. The words may well have been there and the noble Lord just did not realise what he was doing when he agreed to them, and he may now have learnt what he should have done on that occasion. But I do not know of any particular occasion when this matter was raised with me. I am raising it now. The actual attitude and words of the Minister of State prove how right I am to do that.
The flexibility is there, as my noble friend Lord Hughes said, with the word "may". If the Secretary of State may do a thing, he also may not do it. That is the flexibility. He, "may … have regard"—that is fairly flexible—or he may not have regard. Why do we need the words "in his opinion"? The real reason is that the Secretary of State would be unchallengeable at law if there was an argument between him and the local authority.
Let us remember that this is to take away money from local authorities in a particular way. That is its purpose. I think that the whole principle of clawback is wrong, but to do it in this particular way so that the Secretary of State is unchallengeable is utterly wrong. The arguments used about emergencies and the rest of

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it are far from the truth. I am sure that the noble Lord, Lord Grimond, will remember many pleas to the Scottish Office in respect of special events in the Shetlands. We did not require to look at the needs apportionment in respect of them. We were able to do it.
I do not know whether the Minister has been misled by his civil servants. He had better go back to them. This is only the first Committee day in respect of this. I can assure him that I will have every piece of housing legislation that has been passed since 1924 down in my room and will bring it up to prove to him just how wrong he is in pleading this argument that it would be harmful to certain local authorities. I know that it will be harmful to certain local authorities in apportionment if the apportionment is done in a different way from the way that the Secretary of State does it. If you are apportioning among 53 local authorities, obviously some will get more and others less. The real purpose of the clause is to try to get a better system of apportionment so that you will inflict the heaviest punishment on those who in the opinion of the Secretary of State have sinned in respect of expenditure. That is the real argument about the clause. The phrase, "in his opinion", is purely to cover the Secretary of State at law.
Lord Hughes: May I put a question to the Minister? Does he agree with what my noble friend has said and which I backed up, that these words make the Secretary of State's decision unchallengeable in the courts?
Lord Gray of Contin: It is not on those grounds that I have been arguing against this amendment. I have clearly stated my case as to why I do not feel able to accept the amendment. The reason is quite simple. It is because it removes a flexibility from the Secretary of State. If we were to accept this amendment, it is conceivable that the interpretation of this Bill could have unfair and unintended results. I do not think that it is the intention of noble Lords on that side of the Committee any more than it is the intention of noble Lords on this side that that should be the case. I do not believe the amendment improves the Bill at all, and for that reason I am not prepared to accept it.
Lord Hughes: That is very interesting, but I repeat my question. Does the Minister agree that the inclusion of the words, "in his opinion", makes the Secretary of State's decision unchallengeable in the courts?
Lord Gray of Contin: I am not the Lord Advocate and nor am I the Solicitor-General. I am not competent to comment on what the result might be in a court of law.
Lord Hughes: I think the answer has just come along.
Lord Ross of Marnock: Could we ask for the presence of Lord Lyell? I am sure that he might be able to help. We miss the Fifth Cavalry.
Lord Carmichael of Kelvingrove: The Minister must appreciate that the points put by several noble Lords from this side of the Committee have not been fully answered. I accept that he is not a lawyer, but I am sure that he has sufficient understanding to realise that, "in his opinion", quite distinctly would appear to take the matter out of the hands of the courts. I am not inclined to ask for a Division on this amendment, but I do not think it would be right to let the matter pass without at least asking the Minister to take the amendment away and consider whether the phrase will put the Secretary of State above the courts by giving him this incredible power. There are other words which would give him flexibility, such as the old legal stalwart "reasonable"—"reasonable authority" or "reasonable powers"—instead of merely "in his opinion". Local authorities which represent large numbers of people might feel badly done by, but because of those words they would have no way to challenge the Secretary of State's decision once it had been made.
I would hope that the Minister would at least be willing to look and see if there is a way to retain the flexibility he spoke about, which he doubts, although other noble Lords do not doubt, is always available to the Secretary of State. If he would take the matter away and look at it in that respect, without any promises—merely look at the question of giving flexibility while still leaving, if necessary, a very serious matter challengeable in the courts—I would certainly be willing at this point to withdraw the amendment.
Lord Gray of Contin: I am always willing to be reasonable, and in golfing terms the noble Lord is using up his bisques rather quickly. But let me say this to him. Yes, of course I will take it back. I will look at this again, without any commitment whatever, because I am practically sure that the conclusion to which I will come will be the same as that which I have expressed today. I shall certainly take it back and have a look at it. If I find that my arguments are not as convincing as I believe them to be, then we shall look at it again and see what we can do.
Amendment, by leave, withdrawn.
5.40 p.m.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 3:
Page 1, line 18, leave out ("has conformed").
The noble Lord said: It would be for the convenience of the Committee, as the grouping suggests, that we take Amendments Nos. 4 and 5 with this amendment.
Page 2, line 3, leave out from ("authority") to first ("to") in line 6 and insert—
("is reasonable and consistent, in respect of the statutory duties").
Page 2, line 6, leave out from ("relates") to end of line 7.
The purpose of this amendment, or this set of amendments, is to make it clear that local authorities have certain statutory responsibilities that are continually being laid upon them by this House. Therefore, Amendment No. 5 suggests that the expenditure and the estimated expenditure of local authorities shall be reasonable and consistent in respect of the statutory duties which they are forced or which they are bound to accept.
The reason that there must be this flexibility, which is a word that was used frequently by the Minister on the last occasion, is that local authorities have statutory duties—or statutory duties that they believe they have and which Parliament have put on them—which might be misinterpreted by the Secretary of State. He may feel that the duties that they are performing are outwith the statute law that they believe they must adhere to.
One example of this, of course, is the Bill we were discussing earlier today; that is, the Tenants' Rights Bill. A great responsibility could be put on certain local authorities by this Bill, and it would depend on the response of the public and the local authority householders as to exactly how much statutory expenditure a local authority would be involved in because of the demands of tenants. So it is suggested that this Bill be changed merely to the extent that it is not the view of the Secretary of State only but also the statutory duties as seen by the local authorities that must be conformed to. The local authorities have these statutory duties and it is up to them. Or in many cases, particularly after the passing of the last Bill, the Tenants' Rights Bill, it is really the responsibility of the tenants, who can put very, very high demands on the local authorities to which they will be obliged to conform.
I hope the Minister will realise that the words we propose to insert or to omit make it more likely that local authorities will be able to carry out their statutory duties with a flexibility and an understanding of their own electorate and also for the laws that have already been passed by this House. I beg to move.
Lord Gray of Contin: Before I answer the noble Lord, perhaps for the convenience of my noble friend Lord Drumalbyn I would read out what Amendments Nos. 4 and 5 seek to do. Amendment No. 4 states:
"Page 2, line 3, leave out from ('authority') to first ('to') in line 6 and insert—
('is reasonable and consistent, in respect of the statutory duties')".
Amendment No. 5 reads:
"Page 2, line 6, leave out from ('relates') to end of line 7".
I was a little surprised that attempts were to be made to amend this clause at all. In another place it received very full consideration. Perhaps it might be rather an exaggeration to use the word "welcome" given to it by members of the Opposition, but I think it was generally agreed on all sides that it was a real improvement on the current position. We are clear that this clause removes an unfairness from the present way in which grant penalties are allocated among authorities.
The clause as it stands is designed to allow my right honourable friend the Secretary of State the power to distribute any general abatement of rate support grant having regard to the extent to which actual and estimated expenditure conforms with the guidelines he had issued before the financial year in question started. The noble Lord now proposes to amend this clause in a way which will make this impossible, replacing what is generally regarded as fair with the vague formulation based on a concept of expenditure, reasonsable and consistent, in respect of the statutory duties to which the expenditure relates.

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It is a little difficult to see how this will work. It will certainly make impossible what is generally accepted as an improvement in the grant penalty arrangements. If the aim is to ensure that the Secretary of State takes into account the responsibilities of authorities in distributing grant, he already does this. The Secretary of State indeed is required by statute so to do. He is required to take into account the expenses incurred by local authorities in carrying out their statutory duties. The guidelines and the rate support grant settlement are all calculated with this in mind, especially since the introduction of the client group approach which allows this to be done much more systematically. Really, I find it difficult to see any merit in the amendments which the noble Lords put forward. In view of this, I ask them if they would consider withdrawing them.
Lord Ross of Marnock: I am prepared to consider anything at all, provided I am persuaded. The noble Lord says that the Bill provides a fairer way of doing things. It is only fair if the guidelines are fair, if the guidelines in respect of each authority are fair. But the guidelines, as I understand it—and the noble Lord might have taken the opportunity of negativing my opinion about this—have no statutory authority at all. When they were first mentioned in Parliament it was said, "Oh, there is nothing rigid about this; this is just a guideline". But the guidelines have now become something more important on which one can apportion penalties. That is what we are talking about: apportioning the amount of money that can be taken back from each authority according to the heinousness of their crime, in the opinion of the Secretary of State.
The provision is fair only if the guidelines are fair, and it is only fair if the Secretary of State's opinion is justified. But no one is going to be able to argue with the Secretary of State's opinion, so the Secretary of State has it all his own way. I think it is far, far better to judge the extent of the "criminality" of a local authority according to whether they have carried out their statutory duties—spent the money, in other words—reasonably and the expenditure is consistent with their duties. I am substituting that for guidelines. I do not care what the other House did or what it thought. I am telling you what I think about guidelines.
The year before last, 53 of the Scottish local authorities planned to spend more than the guidelines. Even this year, the number of local authorities planning to spend above the guidelines is about 36, based on their estimates of what is needed. It has to be remembered that the Government in respect of these guidelines are giving 1.5 per cent. more to the local authorities in their budget compared with last year, when they know that the rate of inflation is about 4.7 per cent. He is deliberately cutting down.
There has been a reapportionment in respect of what has been given. The guidelines of the district authorities are, I think, up on average by about 9 per cent. and the regional authorities by a lot less. The guideline for Strathclyde, which has possibly the greatest problems, is up by just over 1 per cent. This is how the Secretary of State can manipulate the manner in which grants are paid and the extent of clawback by which he can bring back more from particular

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authorities. I can remember Conservative authorities and Conservative MPs being very worried in 1974 because they felt that the Labour Government, in the apportionment of grants, had manipulated the formula and had taken away what rural areas were entitled to receive and given it to the borough and metropolitan areas.
This is the kind of freedom being given to the Secretary of State to manipulate the formula. Guidelines which have hitherto had no statutory authority are now being given statutory authority. In the same way that he can decide whether local authorities are guilty, in his opinion, of offending him, it has to be remembered that the guidelines are also "in his opinion". I should like to know—I have not received the answer yet from the Minister of State—what statutory authority these guidelines possess. There is a later amendment dealing with this, so I hope that he will look it up and get the information on what Parliament has to do and say about this.
I still believe, irrespective of what anyone says, that what the Government are putting into the hands of the Secretary of State is a dangerous power. At the moment, he has to apportion according to the original apportionment. Now he is acting in relation to his opinion of the extent to which they have departed from, or not conformed with, his guidelines. I am not satisfied with the Minister's answer.
Lord Gray of Contin: I shall try again. I doubt that I shall be able to satisfy the noble Lord, but let me try to deal with one or two of the points he has raised. The amendments that he has tabled remove the clear comparison between expenditure and guidelines and replace it with a rather vague relationship based on what his amendment describes as reasonable and consistent expenditure. Again the term "reasonable and consistent" is arguable. We were arguing a little earlier about the Secretary of State "in his opinion". I suggest to the noble Lord that "reasonable and consistent" gives just as much cause for argument and speculation as "in his opinion" would do. The noble Lord is not substituting anything more positive or easier to define for what is already in the Bill. The necessary expenditure of authorities in carrying out statutory duties is already provided for in legislation. In arriving at the rate support grant settlement each year and particularly the level of relevant expenditure and grant, the Secretary of State is bound under Section 2 of the Local Government (Scotland) Act 1966 to take into consideration,
"the latest information available to him as to the rate of reckonable expenditure"
and
"any probable fluctuation in the demand for reckonable expenditure so far as the fluctuation is attributable to circumstances prevailing in Scotland as a whole which are not under the control of local authorities."
The noble Lord has been most concerned about the question of guidelines. He suggested that guidelines are unfair and have no statutory authority. Guidelines do not need to be statutory to be fair. Guidelines are the subject of careful consideration designed to ensure that they are fair. That is really the starting point of the argument. For the noble Lord to question whether or not guidelines are statutory is really beside the point.

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So long as the guidelines are fair, that is what we all seek to achieve. I do not really consider that the noble Lord's amendments would do anything to ensure that a greater degree of fairness was achieved at the end of the day over and above what we are seeking by the measures we are adopting. I do not think that there is very much more I can say to the noble Lord other than to suggest that his proposed amendments would not be an improvement in this instance. I hope therefore that he may be prepared to withdraw them.
Lord Carmichael of Kelvingrove: The noble Lord suggested that by putting in "reasonable and consistent" we had in some ways made things more rigid. In fact, when I was speaking earlier about the Secretary of State "in his opinion", I suggested that words like "reasonable" were the old lawyer's way of giving flexibility. But the words "in his opinion" take away flexibility completely. I am surprised that, in so quick a juxtaposition, the noble Lord should use the very words that I used. He seemed to have the impression that the words "in the opinion" of the Secretary of State gave more flexibility. We have been saying for some time that this was not the case.
Guidelines can be fair but they can also be unfair. My noble friend was merely asking what was the statutory basis of guidelines. I do not feel that the Minister has fully answered the case, at least not to my satisfaction. I do not know, however, whether this is a matter that we would necessarily press to a vote.
Lord Ross of Marnock: I do not know whether the Minister of State realises how all this is done. There are three elements in respect of rate support grant. The Government do not do anything except say what proportion they will meet. It has been reduced from 70 per cent. to just over 60 per cent. in the last five years. Then the committees get together with the Government to work out what will be the apportionment in respect of needs, resources and the domestic element. Now we see that the Government have introduced a new element called guidelines. This year, a change in the distribution formula saw the district councils have their total guidelines upped by 9·5 per cent., the islands by 14·1 per cent. and the regions by only 1·8 per cent.
In the distribution within the regions, Strathclyde's share has dropped, and it gets only 1·5 per cent. This means that our overall share under the guidelines dropped by about £17 million. That is the practicality of the working of the guidelines. It may well be the case, having been given an artifically low and unfair guideline, that, should Glasgow exceed the guideline, it will be still further penalised by a clawback in the apportionment of the penalty. It does not necessarily mean that it is fair. It may well be that this clause is not unfair; probably it is the whole principle of clawback. That being so, I am not prepared to withdraw this amendment at the moment; I will allow it to be negatived and then we shall get on to probably some of the more important parts of this Bill where the unfair way the local authorities are being dealt with by the Government is much more clear cut.
On Question, amendment negatived.
[Amendments Nos. 3, 4 and 5 not moved.]
6.1 p.m.
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 6:
Page 2, line 7, at end insert—
("( ) No guidance shall be issued to Scottish local authorities until it has been approved by resolution of the Commons House of Parliament..')
The noble Lord said: This amendment says that,
"No guidance shall be issued to Scottish local authorities until it has been approved by resolution of the Commons House of Parliament."
Why not? I beg to move.
Lord Gray of Contin: This amendment seeks to require the Secretary of State to submit the guidance he issues to local authorities on expenditure to the approval of the other place. In practice, the only guidance he issues are the current expenditure guidelines which are issued in the late autumn each year and indicate what level of expenditure for each authority is considered appropriate by the Government. These guidelines were first issued in 1976–77 when the party of which the noble Lord was a member was in power. I doubt whether there was any question of their being submitted to Parliament for approval, but if I am not correct I am sure the noble Lord will very soon correct me.
At the time of year when guidelines are issued, authorities are keen to know how they stand for the coming year and what their expenditure should be. They would not welcome the delay and uncertainty occasioned by the need proposed here to seek parliamentary approval. It is difficult to see what would be gained by such a procedure, especially as the guidelines are already the subject of discussion with the Convention of Scottish Local Authorities. With that explanation I trust that the noble Lord will withdraw his amendment.
Lord Ross of Marnock: If the noble Lord knew very much about it, he would know that I resigned from that Government in April 1976. He would also appreciate that guidelines carried no mandatory authority. They were not followed up by things such as clawback and penalising of local authorities for not paying enough attention, strict attention, to conforming—that is the word in the Bill—to guidelines. The whole thing has changed, and it is because it has changed, and because apportionment of penalty now relates to guidelines, that Parliament should know a little more about the guidelines.
I am perfectly sure that there is not a noble Lord on the other side of the Committtee who knows exactly what guidelines have been laid down for his district authority or his regional authority and how they compare with last year. If noble Lord opposite want to correct me, I shall sit down gladly and they can tell me. I presume they have all voted in today's election, yet they do not realise the extent to which the Government have been putting down for local authorities' expenditure for next year guidelines which do not meet the known facts of inflation. This is the ironic bit about it, in view of the quotation from the 1966 Act that we had from the Minister of State.
Teachers in Scotland accepted a rise of 4.5 per cent. But what increase for inflation is there in the guidelines? Can the Minister tell us? He should be able

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to do so, since he thinks guidelines are so wonderful. Will I have to tell him? They do not meet it by half. This is how local authorities cut their expenditure. If they do not, and if they put up their rates, then the Government are going to deal with them again in the same way.
I am sorry to say it, but I do not think the Minister understands local government expenditure at all. He does not understand what development there has been in respect of guidelines and the new importance they now have as the result of this Bill. For the first time guidelines have come into legislation, but they are not defined, even in the interpretation clause. I hope someone in the Scottish Office will have a look at that. I am not going to divide the Committee on this amendment; we must just have it negatived.
Lord Grimond: Before we pass from this point, if the Minister intends to reply to the noble Lord, Lord Ross, could he also reply to the question I am going to ask? The noble Lord has an important point when he says that matters have changed since he was Secretary of State for Scotland. I am not convinced that everything he did as Secretary of State was itself ideal, but certainly things have changed.
Can the Minister tell us whether there will be any opportunity in the Commons to discuss these guidelines, which have become very much more important? If this amendment is negatived—I see the argument that it would delay the matter a great deal and might be inconvenient to local authorities—will there be an opportunity at all for discussion of these guidelines? I do not think it is enough to say they will be discussed with the Convention of Scottish Local Authorities. This is now a matter which can carry heavy penalties and there should at least be an opportunity to ventilate it in the other House of Parliament.
Lord Gray of Contin: I believe that I can answer the noble Lord. There will not be an opportunity for the House to discuss the individual guidelines because the guidelines are discussed with each local authority and the forum for discussion of the whole concept of guidelines is COSLA. It is not intended that Parliament should discuss those guidelines individually, for the reason I explained. The time factor is such that local government would be very upset if they thought there was to be a delay in order to allow Parliament to discuss these matters at the very time when they want to get on with them. It would be wrong for me to suggest to the noble Lord that it is intended that the other place should discuss the guidelines.
Lord Ross of Marnock: The guidelines are discussed, but who makes the decision? It is the Government who hand it down to the local authorities. The local authorities have no argument; they just have to accept them. If the guidelines came before Parliament, the Government would have to justify them publicly in the House of Commons, which I think is right. Not only that; the individual Members from outside who have got to cope with the problems of cuts in expenditure and the effect they have upon their constituents would be able to get up and argue the case in respect of their particular local authorities.

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It is this attitude of the Scottish Office today that appalls me. Their attitude is, "Whatever we say is right. We summon these people; we tell them what the guidelines are; that is discussion". That is what it is coming to. I do not know how many of these meetings the Minister of State has attended. Can he tell me, or may I venture a guess that he has not attended any? That is what happens today. The local authorities are told what are the guidelines; there is not a suggestion of discussion. It is in circumstances such as this that there is a complete erosion of democracy in Scotland, in particular in local government. That is one of the reasons why if that is happening there we should strengthen the ties and the interests of Parliament with the Scottish Office and particularly watch out for what they are doing. I am not going to withdraw this amendment; I think we should press it.
On Question, amendment negatived.
Clause 1 agreed to.
Clause 2 [Procedure under section 5 of the Local Government (Scotland) Act 1966]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 7:
Page 2, line 13, leave out ("subsection") and insert ("subsections")
The noble Lord said: It will be convenient to take Amendments Nos 7, 8, 9 and 10 together.
Page 2, line 15, leave out ("more than one") and insert ("two")
Page 2, line 15, leave out ("authority") and insert ("authorities")
Page 2, line 18, at end insert—("(5B) A report thus relating to more than one local authority shall be presented to Parliament in such a way as to allow the House of Commons if it so wishes to vote separately on the proposals affecting each local authority." ")
This is one of the very important and highly contentious parts of this Bill. It has been very thoroughly discussed but it will be discussed a great deal further as long as the Government still cling to the view that these very important matters of penalising local authorities can all be discussed—no matter how many local authorities are involved—under the one order in the House of Commons.
Amendment No. 8 suggests leaving out "more than one" and inserting "two". In certain circumstances that would be a fall-back position. At least one would only be discussing two local authorities which had overstepped what, in the opinion of the Secretary of State, were reasonable rating levels; even that, as I say, would be a fall-back position. It would be less satisfactory and less fair than taking each local authority separately. Obviously there could be difficulties on the question of time in doing it individually, but the matter is so important to local authorities that the idea that local authorities such as Glasgow, Edinburgh or Falkirk could all be taken in one-and-half hours on one night is really quite preposterous. We are therefore suggesting that the very most which can be done is to make it two local authorities—repugnant as the principle is.
There was a great deal of discussion in another place, so may I ask the Minister whether there is such a thing as a list of local authorities who are already over the guidelines or who are likely to be over the guidelines? One of the lists I have is a most varied one. It starts with Edinburgh; it has Glasgow in it; it has

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Strathkelvin; it has Eastwood, Bearsden and Milngavie, Cumnock and Edinburgh. I do not think any such list actually exists, but merely looking at the "possibles" which have been suggested in another place makes the idea of discussing the problems of Edinburgh, Cumnock, Glasgow, Eastwood, Bearsden and Milngavie in an hour-and-a-half in another place, probably very late at night, seem at the very least a negation of any sort of democracy.
This is one of the most fundamental parts of the Bill. Not only is the Bill itself considered by local authorities and many people in both Houses to be draconian, but there is not going to be a proper opportunity even for discussing the effect of the Bill or the actions of the Government upon local authorities; the opportunity will be quite inadequate for the Members. After all, in Strathclyde there are something like 40-odd Members of Parliament, many of whom would want to speak on this matter. Glasgow itself has 11 Members of Parliament, and if Glasgow was involved all of them would certainly want to speak. Every other city and town in Scotland, many of which are represented by more than one Member of Parliament, would certainly want to air the views of their constituents. It is a quite ridiculous procedure.
I am sure the noble Lord the Minister is, in his own way, silently and quietly ashamed of this, and I only hope he will give us some indication in his reply that the Government are seriously considering that they have made a very bad mistake. If it is not something which people in Scotland are speaking about just now—other than those who are involved in politics in a local or national way—but the minute the Government are seen to be taking half a dozen or more orders in the one evening, or an order covering half a dozen local authorities in an hour and a half, with very serious consequences for the ratepayers, I think the people of Scotland will realise what an appalling mishmash has been made of this procedure. I hope the noble Lord the Minister will have the foresight to see this, will give us a response and will perhaps reconsider this matter despite what has happened in another place. I hope he will realise that this is too serious to be put off very easily or for much longer. I beg to move.
Lord Mackie of Benshie: I must say that this is an extremely sensible amendment. I cannot see how the other place can judge a whole batch of authorities which misbehave without being able to judge whether one has misbehaved more than another or deserves the penalties more than another. It is rather like the Chinese general who was converted to Christianity and had his troops baptised with a hose—it is not really a very effective or fair way to proceed.
It must be that in this case the Secretary of State is asking the House to accept that his opinion is valid over a whole range in spite of the individual cases. If Parliament cannot vote on individual cases, it appears to me entirely illogical to ask for its approval: because no two authorities are the same. The noble Lord, Lord Carmichael of Kelvingrove, cited the differences in Glasgow, but Scotland contains authorities far removed from Glasgow—for example, in the islands—and the problems which exist in the East of Scotland are different from those of the West. The opinion of the Secretary of State has to cover a very

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wide field and it must be logical that each case—if another place is to consider them—must be considered on its own merits. It appears to me that this is a sensible and fair amendment.
Lord Gray of Contin: Perhaps I may at the very outset reassure the noble Lord, Lord Carmichael, that there are available budget guideline comparisons for 1984–85; I have a list of them here. These have been available for some time and I can easiy ensure that the noble Lord is given a copy of them. There is no difficulty about that at all, and I shall be very happy to let him have them in due course.
The amendments would severely restrict the operation of the clause by allowing reports proposing rate or grant reduction to be combined for only two authorities. The third amendment in the group then attempts to fetter the standing order of the other place by making specific provision on how it should conduct its business. The sole purpose of this clause is to streamline the procedures, and my right honourable friend the Secretary of State has made it clear that this power will not be used to combine reports of individual authorities regardless; it will only be used when it seems reasonable to do so. On this basis, I cannot see any advantage in confining the extent of the combining of authorities in one report to two authorities.
The other place, not unnaturally, is very jealous of its standing orders and its own right to change them if necessary. They would regard it as improper to have an Act specify how they should conduct their business. For that reason I feel that I cannot accept these amendments and I invite the noble Lord to withdraw them.
6.20 p.m.
Lord Ross of Marnock: As I understand it, if we pass an amendment here it goes to another place. Therefore, we will not be offending the other place; the other place will have an opportunity to say what it thinks about our amendment, and if we have offended them then they can either turn the amendment down or they can amend the amendment. That is possible in respect of amendments. So do not come crying to us about offending another place. We remember a lot of the history of the relations between the one House and the other.
Lord Drumalbyn: I wonder whether the noble Lord will allow me to intervene. Is he quite certain about that? From my experience of looking at the amendments that come up from another place, it seems to me that in some cases they disagree without assigning any reason—the reason generally being that they have decided to ignore our amendment because it is not a matter upon which they think that we are entitled to comment.
Lord Ross of Manock: I do not know whether the noble Lord, when he was in another place, was ever privileged to participate in the following practice. Every time the House of Commons disagrees with the House of Lords, before they send the amendments back they have a committee meeting and certain
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Members attend and assess what report they will make and why they disagree. In case the noble Lord does not know, all that is done in a little room behind the Speaker's House. I attended on several occasions and on one occasion I was even appointed the chairman of the committee.
A very delicate dance goes on between the two Houses in respect of disagreements that take place. One of the most famous disagreements concerned local government reform or reorganisation when this House turned down the proposal to create Strathclyde. The Government did not accept that proposal. In case we tend to forget it, it was a Tory Government which reorganised Scotland and which created Strathclyde which contains half the population of Scotland. They proceeded to disagree with the amendment and to add, as amendments to that proposal, matters which made changes in respect of the Glasgow district as well, which the House of Commons had never discussed. Therefore, so far as offending the other place is concerned, the noble Lord can take it from me that I would be much more cautious in respect of them than, historically, his own party have been.
Is it right to give power to the Government to take more than one authority at a time and to put those authorities into one report and to have that report discussed in perhaps an hour and a half? I do not know whether the noble Lord the Minister was present in the last Session of Parliament—I think that perhaps he was present—when the Government had five separate orders in respect of offending local authorities. Out of the goodness of their heart, the Opposition agreed to take them all together, one after the other, and they were then entitled to vote at the end, if they wanted to do so, on each of the authorities. What happened was that inevitably time was spent in such a way that there was one particular authority which was highly offended because there was not time to discuss it properly or to vote on it.
If we are to deal with this matter properly—and that is what the Government intend—then it can only be done if we limit the number within any one order. In my view two is enough, and then we have to make arrangements to enable them to vote on each of them. I remember the time when we reorganised constituencies. It was done in one order but we talked about them one after the other, and if we so wished, we voted in respect of them. I am sure that the noble Lord, Lord Drumalbyn, will remember that occasion which took place in about 1950. That was how it was done then. Not all of them may be highly offensive and people may not be determined to vote on all of them, but the opportunity should be given so that proper discussion can take place on each and they should not be all lumped together. There is no limit to it. There could be six, seven or eight, but in England and Wales there are likely to be very many more than that.
The noble Lord has said that he was streamlining the procedure—steamrollering it is far more like it. It suits the Government because they can get through it more quickly; but it does not suit me. Any fair-minded person would not accept it. We want matters to be fairly discussed and this is the only way in which we can achieve that. I am being fairly generous because at present the Government have to put each offending authority into one report and one order. Now we are

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allowing them two. I think that we should be given a vote of thanks rather than be treated in the way in which the Minister of State has treated us in this regard. They are going too far by just saying "more than one". I suggest that there should be no more than two, and I think that we should make our views known about this in the Lobby.
Lord Drumalbyn: Surely my recollection is correct. I hope that the noble Lord's recollection conforms with mine. One way of dealing with an order with which you disagree—at least on one respect—is to get the Government to withdraw it, and then reintroduce it. Surely that is possible, and that is perfectly democratic.
Lord Ross of Marnock: But surely it is far, far better to vote on each individual one rather than the whole lot together. A government which has the kind of majority that this present Government have in another place, find it very easy to deal with one order and to get it out of the way rather than, as the noble Lord suggests, to withdraw the order. I can remember that being done on only about four or five occasions.
Lord Stodart of Leaston: I should like my noble friend to reassure me on one point. My recollection of the other place is that a resolution of the kind referred to here is either negative or affirmative. Am I right in thinking that the discussion is limited to an hour and a half, or can there be unlimited time? If by any chance there were to be a discussion on six or seven different authorities, I find it difficult to see how justice could be done to them in the course of 90 minutes.
Lord Ross of Marnock: If the noble Lord looks at the report for last year, he will discover that reports were issued in respect of Glasgow, Stirling, Lothian and, I think, Central. There were four or five individual orders. The decision of Parliament was to take them all together. They sought to divide up the time, but it did not work out that way because there was not enough time for the proper discussion of them all or for the proper voting on them all, and the question of voting was quite easy on that occasion because they were separate orders. That practice is followed often and it can work.
Lord Stodart of Leaston: I am not being in the least bit discourteous, but I was addressing my question to my noble friend and I still would like him to tell me about the 90 minutes.
Lord Gray of Contin: I am most grateful to the noble Lord, Lord Ross of Marnock, for answering my noble friend on that point. The noble Lord of course did not make it absolutely clear—and his recollection of the other place is the same as mine—that the times are agreed between the usual channels. It is perfectly correct that an order can be discussed for an hour and a half, but it does not mean that if there are a number of orders relating to similar subjects they cannot be taken together. But if they are taken together, they are taken together only after agreement has been reached through" the usual channels. Therefore, if the House decides that it shall not debate them altogether, an hour and a half is allocated for each one. It is purely for
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the parties in the House to make that decison. So there is no question of it automatically being only an hour and a half for all the orders; they can all be taken separately, if that is the wish of the House.
Lord Carmichael of Kelvingrove: I was intrigued when the Minister suggested that all the orders could be taken separately. I thought that the whole purpose of the clause in the Bill was (as he said) to streamline the procedure. There was no suggestion that Parliament would have an opportunity to deal with them separately.
As I remember the procedure in the other place, an order is made, and the order must either be passed or not passed. On one very disastrous occasion I was involved when the whole of an order had to be taken away; it was a long time before it came back, because no amendment was possible—it just had to go through as it was. That is my recollection.
I was also intrigued when the Minister suggested that, in putting forward orders, the Government would combine offending authorities "realistically and sensibly" I took a note of the actual words. The noble Lord, Lord Mackie, raised the point of a highlands local authority, a lowland local authority and a major city local authority. How would the Minister propose to combine them, or can he give an assurance that only Highlands authorities would be taken together? Each Highlands authority may be guilty of different offences; in fact, their offences (if that is the right word) may perhaps be closer to those of one of the major cities. I was rather intrigued when he suggested that the Government would realistically and sensibly combine orders. He suggested that perhaps on some occasions there would be more than one order. But the Bill does not say that. It suggests that the Government can name as many authorities as they wish in the one order. Therefore, it is quite impossible to accept this proposal without putting it to the vote. I beg to move.
6.32 p.m.
On Question, Whether the said amendment (No. 7) shall be agreed to?
Their Lordships divided; Contents, 56; Not-Contents, 86.

DIVISION NO. 3

CONTENTS

Airedale, L.

Graham of Edmonton, L.

Aylestone, L.

[Teller.]

Beaumont of Whitley, L.

Grimond, L.

Beswick, L.

Hampton, L.

Boston of Faversham, L.

Houghton of Sowerby, L.

Bottomley, L.

Howie of Troon, L.

Broadbridge, L.

Hughes, L.

Brooks of Tremorfa, L.

Irving of Dartford, L.

Carmichael of Kelvingrove, L

Jacques, L.

Cledwyn of Penrhos, L.

Jeger, B.

Collison, L.

John-Mackie, L.

David, B.

Kennet, L.

Dean of Beswick, L.

Kirkhill, L.

Diamond, L.

Longford, E.

Elwyn- Jones, L.

Lovell-Davis, L.

Ennals, L.

Mackie of Benshie, L.

Erroll, E.

Mishcon, L.

Ewart-Biggs, B.

Molloy, L.

Gallacher, L.

Mulley, L.

Gladwyn, L.

Nicol, B.

675

Ogmore, L.

Stoddart of Swindon, L.

Oram, L.

Stone, L.

Parry, L.

Taylor of Blackburn, L.

Pitt of Hampsted, L.

Tordoff, L.

Ponsonby of Shulbrede, L.

Wells-Pestell, L.

[Teller.]

White, B.

Ross of Marnock, L.

Wilson of Langside, L.

Segal, L.

Wilson of Rievaulx, L.

Stallard, L.

Winstanley, L.

NOT-CONTENTS

Airey of Abingdon, B.

Lothian, M.

Auckland, L.

Lucas of Chilworth, L.

Avon, E.

Lyell, L.

Belhaven and Stenton, L.

Macleod of Borve, B.

Belstead, L.

Margadale, L.

Boothby, L.

Marley, L.

Brookes, L.

Marshall of Leeds, L.

Bruce-Gardyne, L.

Maude of Stratford-upon-

Caccia, L.

Avon, L.

Campbell of Alloway, L.

Mersey, V.

Carnegy of Lour, B.

Milverton, L.

Cathcart, E.

Morris, L.

Cockfield, L.

Murton of Lindisfarne, L.

Colville of Culross, V.

Nugent of Guildford, L.

Colwyn, L.

Onslow, E.

Daventry, V.

Orkney, E.

Davidson, V.

Orr-Ewing, L.

De Freyne, L.

Pender, L.

Denham, L. [Teller.]

Penrhyn, L.

Donegall, M.

Plummer of St. Marylebone,

Drumalbyn, L.

L.

Dundee, E.

Rankeillour, L.

Elton, L.

Redesdale, L.

Ferrier, L.

Renton, L.

Fraser of Kilmorack, L.

St. Aldwyn, E.

Gainford, L.

St. Davids, V.

Gardner of Parkes, B.

Saltoun, Ly.

Gray of Contin, L.

Selkirk, E.

Greenway, L.

Sempill, Ly.

Gridley, L.

Skelmersdale, L.

Hailsham of Saint

Somers, L.

Marylebone, L.

Spens, L.

Halsbury, E.

Stamp, L.

Hanson, L.

Stanley of Alderley, L.

Henley, L.

Suffield, L.

Holderness, L.

Swansea, L.

Hornsby-Smith, B.

Swinfen, L.

Hylton-Foster, B.

Swinton, E. [Teller.]

Killearn, L.

Teviot, L.

Kinnoull, E.

Teynham, L.

Kintore, E.

Trumpington, B.

Lane-Fox, B.

Vaux of Harrowden, L.

Lauderdale, E.

Whitelaw, V.

Lawrence, L.

Wise, L.

Lindsey and Abingdon, E.

Young, B.

Long, V.

Resolved in the negative, and amendment disagreed to accordingly.

The Deputy Chairman of Committees (Baroness Wootton of Abinger): Before calling Amendment No. 8 I must point out that if Amendments Nos. 8, 9 and 10 are not agreed to, it will not be possible for me to call Amendments Nos. 11,12 and 13. Amendment No. 8.
[Amendments Nos. 8 to 10 not moved.]
6.40 p.m.
On Question, Whether Clause 2 shall stand part of the Bill?
Their Lordships divided: Contents, 78; Not-Contents, 58.

DIVISION NO. 4

CONTENTS

Airey of Abingdon, B.

Lauderdale, E.

Auckland, L.

Lindsey and Abingdon, E.

Avon, E.

Long, V.

Belhaven and Stenton, L.

Lucas of Chilworth, L.

Belstead, L.

Lyell, L.

Boothby, L.

Macleod of Borve, B.

Broadbridge, L.

Margadale, L.

Brookes, L.

Marley, L.

Bruce-Gardyne, L.

Marshall of Leeds, L.

Caccia, L.

Maude of Stratford-upon-

Campbell of Alloway, L.

Avon, L.

Carnegy of Lour, B.

Mersey, V.

Cathcart, E.

Morris, L.

Cockfield, L.

Murton of Lindisfame, L.

Colville of Culross, V.

Nugent of Guildford, L.

Colwyn, L.

Onslow, E.

Davidson, V.

Orkney, E.

De Freyne, L.

Pender, L.

Denham, L. [Teller.]

Penrhyn, L.

Donegall, M.

Rankeillour, L.

Drumalbyn, L.

Renton, L.

Elton, L.

St. Aldwyn, E.

Ferrier, L.

St. Davids, V.

Fraser of Kilmorack, L.

Saltoun, Ly.

Gardner of Parkes, B.

Selkirk, E.

Gray of Contin, L.

Skelmersdale, L.

Greenway, L.

Spens, L.

Gridley, L.

Stamp, L.

Hailsham of Saint

Stanley of Alderley, L.

Marylebone, L.

Stodart of Leaston, L.

Halsbury, E.

Suffield, L.

Hanson, L.

Swansea, L.

Henley, L.

Swinfen, L.

Holderness, L.

Swinton, E. [Teller.]

Homsby-Smith, B.

Teviot, L.

Hylton-Foster, B.

Trumpington, B.

Killearn, L.

Vaux of Harrowden, L.

Kinnoull, E.

Whitelaw, V.

Kintore, E.

Wise, L.

Lane-Fox, B.

Young, B.

NOT-CONTENTS

Airedale, L.

Kennet, L.

Aylestone, L.

Kilmamock, L.

Beaumont of Whitley, L.

Kirkhill, L.

Beswick, L.

Longford, E.

Boston of Faversham, L.

Lovell-Davis, L.

Bottomley, L.

Mackie of Benshie, L.

Brooks of Tremorfa, L.

Mishcon, L.

Carmichael of Kelvingrove, L.

Molloy, L.

Cledwyn of Penrhos, L.

Mulley, L.

Collison, L.

Nicol, B.

David, B.

Ogmore, L.

Dean of Beswick, L.

Oram, L.

Diamond, L.

Parry, L.

Elwyn-Jones, L.

Pitt of Hampstead, L.

Ennals L

Ponsonby of Shulbrede, L.

Erroll,E.

[Teller.]

Ewart-Biggs, B.

Ross of Marnock, L.

Gallacher, L.

Segal, L.

Gladwyn, L.

Stallard, L.

Graham of Edmonton, L.

Stoddart of Swindon, L.

Grimond, L.

[Teller.]

Hampton, L.

Stone, L.

Hatch of Lusby, L.

Taylor of Blackburn, L.

Houghton of Sowerby, L.

Tordoff, L.

Howie of Troon, L.

Wallace of Coslany, L.

Hughes, L.

Wells-Pestell, L.

Irving of Dartford, L.

White, B.

Jacques, L.

Wilson of Langside, L.

Jeger, B.

Wilson of Reivaulx, L.

John-Mackie, L.

Wootton of Abinger, B.

Resolved in the affirmative, and clause agreed to accordingly.
6.49 p.m.
Schedule 1 [Sections 2 to 7 of and Schedule 1 to the Local Government (Scotland) Act 1966 set out as amended]:
The Deputy Chairman of Committees: Schedule 1. Owing to the fact that Amendments Nos. 8, 9 and 10 were not agreed to, I cannot call Amendments Nos. 11, 12 and 13 to Schedule 1. We must therefore proceed to the Question that Schedule 1 shall stand part of the Bill?
Schedule 1 agreed to.
Clause 3 [Power of Secretary of State to control rates]:
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 14:
Page 2, line 23, at beginning insert ("In any financial year in which the average of the proposed rates in Scotland shows an increase of more than ten per cent, above that of the preceding financial year")
The noble Lord said: I think it would be convenient if we took Amendments Nos. 14, 15, 16 and 17 together.
Amendment No. 15: Page 2, line 23, after ("may") insert ("after full discussion with and the approval of the Convention of Scottish Local Authorities")
Amendment No. 16: Page 2, line 25, leave out ("any") and insert ("the")
Amendment No. 17: Page 2, line 26, after ("year") insert ("following revaluation")
This will take us some time because we now reach a very important clause indeed. Clause 3 deals with the power of the Secretary of State to control rents. The rent of every single local authority in Scotland can be determined by the Secretary of State; I wonder why he is not one of the candidates today in Scotland. But in all the local authorities and district authorities in Scotland today candidates think they are going to go in and control, among other things, the expenditure and the rates for the ratepayers.
I do not know whether they know about this power taken by the Secretary of State who is a member of a party which used to proclaim freedom. The man in Whitehall does not know best; it is the local man who knows best. Here is that very man taking power to determine what will be the rate of every single authority in Scotland. It really is appalling—the extent to which local democracy is being eroded by a party that claims to be the party of freedom.
I remember when we set up the Wheatley Commission to reconstruct or reorganise local authorities one of the things we were concerned about was the lack of interest in local government; the interest was in the quality of candidates that there would be. The word will get round that the candidates who people are electing will not have the power, or will already have had the power taken away from them by the Secretary of State. He will determine the standard of services. He will determine what will be the rents of the houses. He will determine whether or not the councils will sell the houses—and here the Government take the power to fix the rent of every single house. What real power is then left to the local authorities? They are becoming puppets.
It is no use the Government coming along and saying, "We are only taking this power, we shall never
678
use it". They think they have an armoury of power which is sufficient and certainly sufficiently oppressive. But still they take this power. They know exactly what is the attitude to their guidelines at the moment. The majority of Scottish local authorities, with the best will in the world, cannot keep to their guidelines, and if they do, they will try further to cut the services.
I remember in the Second Reading debate telling your Lordships of the cuts that would have to be made in Glasgow, whose increase in expenditure over the last year is remarkably little, but they are £50 million above the guidelines. This means cuts all round. But here are the Government taking the power to circumvent even potential increases in our services by saying what the actual rate poundages will be.
For a Government who have not made up their minds yet as to whether or not they should have a committee to look into the need to reform the rating system in Scotland, I think that is appalling. The fact that they themselves have to resort to this power shows that the rating system, the whole local government system in Scotland, needs drastic reoganisation; or if it does not, then it is the Government who need drastic reorganisation.
There is more and more power going to the centre, with less and less power locally. That will apply to Dumfries, Galloway, the Western Isles, Orkney, Shetland—the whole lot. I do not know whether people realise exactly the kind of Government we have and the extent to which they are prepared to deny democracy. There was a time when local authorities in Scotland vied with one another in respect of the kind of service they provided. I remember Glasgow used to pride themselves that they had the best teachers from the training colleges. They paid them an extra £50 a year and they used to come down as soon as the training college year was over and pick out the teachers they wanted. Of course, all that is streamlined now; they all pay the same salaries under the scales.
But there is still considerable power. I remember that Kilmarnock, my own constituency, which I represented for a long time—and was honoured to do so—pioneered services for the old poeple, with old people's homes. While the neighbouring town of Ayr, which was reckoned to be much more wealthy, did little or nothing about it, Kilmarnock had four old people's homes of a character or calibre that people could be proud of.
They did the same thing with sheltered housing and the best of each local authority became the envy of the others, and so the standards rose. There was a certain measure of competition, there was a variety in expenditure and rates; but what people were concerned about was whether they got value for their rates. Very often it was well worth while.
But here sitting in St. Andrew's House is a man who will determine the rate poundage, with the help of half a dozen civil servants. Do not tell me anything about civil servants. They are pretty good as civil servants, but as far as being adminstrators of local government is concerned, they just do not begin to appreciate what should be done. They are going to determine what will be the rate poundage for every single authority. That is the power we are seeking to give to the local authorities.
I say that we must limit this in some way. My first amendments, to this extent, are to say that in any financial year in which the average of the proposed rates in Scotland shows an increase of more than 10 per cent. above that of the preceding year, local authorities should be free to act.
The people who discipline local authorities are those people who are doing so today in Scotland at local elections—not a government who have not got a mandate to do anything at all in Scotland. May I remind the Government that so far as Scotland is concerned, with its 72 Members of Parliament, there are only 22 Tories and there are 42 Labour Members. That may be why the Government are doing this; it is purely political dogma.
I have already today demonstrated—I think effectively—that the people who determine whether or not there shall be increases in rates in Scotland are the Government. They determine what will be the reckonable expenditure and they pitch it low—lower than is realistic. Then they determine what share of that they will pay. When I was Secretary of State it was over 70 per cent.; today it is 60·2 per cent.
Then, if you are going to meet your expenditures, how do you do it? You put the rates up; that is one side of it. The people who have created the rates scandals and the rates crises in Scotland are the Government themselves.
That is only one aspect of expenditure in Scotland—that which is supported from the rates support grant. The other part is that for supporting housing. As for the district councils in Scotland, just about under one-third of their expenditure is spent on housing. That is about the only service they have left under the functions of reorganisation. Why have they spent as much on housing?—because the Government have consistently refused to meet their historic commitments in respect of housing.
I have here the 1935 Act—a Tory Government Act dealing with slum clearance. The Government paid a generous subsidy to each local authority in respect of each house, but the condition was that nearly half of the amount that the Government paid was also paid out of the rates. Now they are denying power to pay out of the rates any more than the Secretary of State decides. The Government's contribution in many local authorities is nil. Under a Labour Government it was £214 million a year and under the Tories this year it is £52 million. How can the local authorities carry out their statutory obligations without increasing the rates, because of what the Government have decided? The real crisis of rates in Scotland is the Tory Government.
To take this further power to deal with the situation that they have created, which means they fix the rates, which means the money is no longer available to the local authorities, means automatic cuts in services. There are many people who think the services have already been badly cut. Our standards in education, our standards in local health and our standards in local services are no longer things to be proud of. Last year the Government were proclaiming and Scotland was proclaiming the fact that we had opened a great new exhibition in Glasgow, the Burrell Collection, thanks

680
to the Glasgow authority. They would not even give them credit for the additional £1 million that it will take to keep that place open. This is the crisis of rates. It is the crisis of the Tories.
What I seek to do here is to put a restricting hand on the Government. They can only interfere with the rates if there has been a departure from the preceding expenditure of more than 10 per cent. I think that is fair. I think it is right. I beg to move.
Lord Grimond: It seems to me that the two basic objections to the Government's attitude towards rates are these: first, that instead of laying down more precisely what local authorities have power to do and relieving them of many duties, they have left it very largely open-ended in some directions about what they can do and they have laid new duties upon them. It is absurd to proceed by allowing the local authorities to take on commitments of all sorts, indeed encourage them to do so, then say that they are spending too much and that they must be cut.
In my part of the world there is large duplication; for instance, in agriculture the local authorities have agricultural advisers and officers, so does the North of Scotland College and the Crofters' Commission, and altogether there are no fewer than five authorities dealing with agriculture. There has been no attempt by the Government to clear up the basic responsibilities of local authorities and no one can undertake good management until that is done.
The second point, to revert to what was discussed earlier today, is the position over the rates. Of course, it is true that the right sanction against over-spending local authorities should be the electorate; and at the local elections those authorities which have been grossly extravagant should be turned out. But the ratepayers are now a minority. Many people are relieved of rates by one method or another and other people work in occupations which are derated. Therefore there is not, as I said earlier today, that connection between taxation and representation which is supposed to be the foundation of democracy, national or local. Until the Government have reformed the method of financing local authorities, until they have set in order the powers of local authorities, they will, in my view, make the position of local authorities impossible and they will make the muddle of local government worse still.
There are many other points to be made but these are the basic troubles. There is no proper definition of the responsibilities of local authorities. There is no attempt to prevent gross overlapping in Scotland between the various authorities, and there is no logical or efficient method of raising local authority finance which will be related to the voting at local government elections.
Lord Howie of Troon: My noble friend Lord Ross of Marnock in his interesting opening remarks at the beginning of this debate said that this was a highly political Bill. Coming from such an authority on political matters as he, this is something which we have to listen to very carefully. My noble friend's experience of politics and politicians goes back in my recollection for at least 40 years, and probably long before that, so when he says a Bill is political in its

681
intent, as apart from merely being an adjustment of legislation that is something to which we must pay great care and great attention.
While I was ruminating over these comments of my noble friend I took the opportunity to discuss briefly and quickly certain aspects of this clause with my noble friend Lord Pitt of Hampstead, who unfortunately is not a Scot but is experienced in English matters. My noble friend Lord Pitt drew to my attention something which had escaped me. I sincerely hope the Minister will be able to enlighten me and to assure me that my noble friend Lord Pitt is correct.
This is the political point which my noble friend Lord Pitt drew to my attention. He claimed that this Bill, the Scottish Bill, is rather more draconian than its English equivalent. That seems an odd thing to be doing because my noble friend Lord Ross of Marnock has drawn attention to how shallow the Government's writ runs in Scotland in terms of the electoral strength of the respective parties in that part of our common country. Why should the Scots be treated more harshly than the English? If I am right, the Minister will tell me.
Under the Bill the Government are taking power to fix not only the maximum amount by which rates should be greater, but also the minimum amount. As I understand it, under the English Bill the Government are taking powers to fix only the maximum. For the moment they are not taking powers, as I understand it, to deal with the minimum. If it is appropriate to deal only with the maximum in England and to deal with the minimum at some other time in the future, surely it is sensible to apply exactly the same criteria to Scotland. If the maximum is enough for the English to bear it must be enough for the Scots to bear as well. If powers are not to be taken to fix the minimum in England is there any reason why they should be taken to fix the minimum in Scotland? Is it merely that the Government are looking on Scotland as some kind of test bed in which to try out their powers to fix both maxima and minima? On the strength of what happens in Scotland will they decide what to do at some later date in England?
As noble Lords will realise, I am not one who thinks that everything should be the same in Scotland and England and even in Wales—I see one of my noble friends from that Principality looking at me. I do not think that things should be equal, but when there are differences in legislation of this nature between the various parts of the United Kingdom the reasons for these differences and the justification for them should be made plain and we should be convinced that there is reason for them. I am perfectly sure that the noble Lord the Minister of State, whom we have referred to often in this Chamber as a reasonable man, will have some reasonable explanation for this farrago of nonsense. I wait with interest to hear it.
7.10 p.m.
Lord Wilson of Langside: I, too, shall await with interest. I support these amendments because the clause, unamended, (which is the basis of the Bill) focuses on bringing into perspective how utterly misdirected is the Government's policy in this field. A vast amount has been said on the subject in relation to the English Bill, a Bill which produced something of a

682
revolt in the Conservative party. There has been no similar revolt (which, I must say, I find disappointing) in relation to this Bill. But so much has been said that I content myself with adding only this. The clause shows the basic misdirectedness of the Government policy in this sphere because, on the one hand, they say in their White Paper that the Scottish rating system is basically sound; and then, on the other hand, they put before Parliament, before your Lordships' House, a Bill which effectively takes away from local government their rights in relation to the rating system.
Lord Gray of Contin: I think that I should start replying to this debate by putting right two of the claims made by the noble Lord, Lord Ross of Marnock, when he made his opening speech. The noble Lord is extremely articulate and he is extremely impressive when he is on his feet; but he is not always totally impartial. Therefore, I think it only right that I should highlight on occasion some of the suggestions which he makes which might be acceptable by his standards and his beliefs but to which I would take exception.
The noble Lord, first of all, suggested that rate limitation will stop any local discretion. This is not the case. If rate limitation has to be used as a last resort, local authorities will continue to be able, within that limit, to make their own decisions on service priorities in exactly the same way as they do at present. The noble Lord also suggested that services have been cut under this Government. If that is the case, why is it that local authorities are planning to spend more this year than they did in 1978–79—the last year in which the party opposite were in power—with inflation having been taken into account in that figure? I think that we have to bear in mind that when the noble Lord, Lord Ross of Marnock, is talking to us—and I nearly said "lecturing" us; because while he does not lecture the opposite side, he certainly lectures this side from time to time—we have to temper his comments with his passionate beliefs which we respect but with which we do not agree.
Amendment No. 14 which is the first of the group we are discussing, would restrict the circumstances in which there was the power to put a general limit on rates to occasions when the proposed average rate was 10 per cent. above that of the previous financial year. This would be unworkable. It might help if I outlined at this stage the procedure envisaged for general rate limitation. In late February or early March, authorities strike their rate and notify the Secretary of State of their rate and planned expenditure for the following year. If rates and expenditure were unacceptably high, the Secretary of State, about this time, would notify authorities of his intention to place a general limit on rates in the following financial year.
The necessary order under Clause 3 of this Bill would be laid in the autumn and applications for derogations dealt with in time for authorities to set rates in accordance with the general rate limit, or any individual exemption from it, by 5th March, the date by which rates must be fixed. However, this amendment, if accepted, would mean that the possibility of general rate limitation for a given financial year could only be considered once the rate

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for that year had been struck and it was clear that they were on average 10 per cent. above the preceding year. Thus it would be possible to consider taking action only after 5th March; that is, three weeks before the financial year to which the rates applied actually started. It would be impossible to complete the procedures for a rate-limitation order until well into the financial year and the result would be chaos and very unwelcome to the local authority. I hope that the noble Lord, if he reflects on the practicalities of his proposals, would accept that it is completely unworkable. It may be that the noble Lord has this in mind; but I suggest to him that that would, in effect, be what it would lead to.
Amendment No. 15 would remove the requirement to consult the Convention of Scottish Local Authorities and, instead, give them a veto over any limitation proposals. Local authority expenditure accounts for one-quarter of public expenditure. No Government could accept that local government itself should be given a veto over whether or not measures designed to control that expenditure could be used. The final two amendments, Amendments Nos. 16 and 17, would restict rate limitations to the year following revaluation. It is difficult to see the logic of this. Revaluations take place every five or seven years. There is no reason why local authority rates and expenditure may only need to be controlled by the last-resort power in a year following revaluation. Rate poundages can certainly change substantially following revaluation; but it is the rate Bill which concerns the ratepayer and that could give rise to concern whether or not there was a revaluation.
The noble Lord, Lord Howie of Troon, suggested that the Scottish Bill is harsher than the English, especially since the English Bill fixes only maximum rate increases. So far as the general rate limitation is concerned, both Bills have the same objective—to give a last-resort power to set a limit on the rates of all authorities. However, the method chosen is different. The English Bill will enable individual maximum rate poundages for each authority. These would be reductions to be set for each authority. A maximum is only necessary in such a situation. However, the Scottish approach is different. It sets a general limit for changes in rates, and since these could be either up or down both maxima and minima are included.
The two Bills are aiming to achieve the same objective but the routes are slightly different. I sense that there is an air of hunger in the Committee and I suspect that it would not be welcome if I were to extend this debate for too long. Therefore, I would say to the noble Lords, Lord Ross and Lord Carmichael, that I am not able to accept their amendments and I hope that they will consider withdrawing them.
Lord Howie of Troon: Would the noble Lord the Minister reflect for a moment on the intervention that I made earlier, which was intended to seek enlightenment more than anything else? What he has done in response to my question is what he very often does in response to a question from this side of the Chamber and especially from up here—that is, he has said quite distinctly and quite firmly what the situation actually is. But my question went a little further than merely
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asking to be told what the situation was because, following my discussions with my noble friend Lord Pitt of Hampstead, I had a fair idea before I spoke of what the position was. The question I asked the noble Lord really was: why was it different? I know that "how?" or "in what way?" is usually an easy question to answer and he is usually very adroit and adept at doing so; but "why?" is a question of a different dimension. I really wonder why the Scottish Bill should differ from the English one.
I am sure the noble Lord would agree with me—indeed the noble Lord, Lord Ross of Marnock, has said this in this Chamber and in another place on many occasions—that it simply is not good enough that Scottish legislation should necessarily be modelled entirely on English legislation, and that just as Scotland is a totally different place and as Scots are totally different people, then it is quite natural that from time to time there can be differences in legislation. There are many Bills which have gone through this Chamber and another place which do precisely what this one does: that is, achieve the same objective but take a different route.
Lord Ross of Marnock: This is a completely new power that the Government are taking. I am still waiting for the justification of that. It may be that we shall get it on clause stand part; but the noble Lord has not told us just why they need it. When he tells me that the effect of my amendment would be to make it difficult and, he suggested, even unworkable, I am not exactly weeping tears over that because I do not want the clause at all.
The other point he made was: why did I suggest that it might be in the year of revaluation? I do not know whether or not he has a long memory, but in the last year of revaluation we saw a very considerable jump on rate poundages because of the tendency there is sometimes with local authorities, because revaluations go up and automatically rate poundages should go down, to keep them higher than they should. There are more likely to be difficulties on that point in a year of revaluation than at any other time, and that was the reason for that. Experience has shown us that if it is going to be used at all, it might be used then. But because it is such a power that no Government ever dreamt of taking I sought in some way or other to restrict the effect of it. If that is the best the Minister of State can do, then the sooner we vote on this amendment the better.
7.23 p.m.
On Question, Whether the said amendment (No. 14) shall be agreed to?
Their Lordships divided: Contents, 42; Not-Contents, 71.

DIVISION NO. 5

CONTENTS

Aylestone, L.

Collison, L.

Beaumont of Whitley, L.

David, B. [Teller.]

Beswick, L.

Dean of Beswick, L.

Birk, B.

Diamond, L.

Brooks of Tremorfa, L.

Elwyn-Jones, L.

Carmichael of Kelvingrove, L.

Gallacher, L.

Cledwyn of Penrhos, L.

Grimond, L.

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Hampton, L.

Nicol, B.

Hatch of Lusby, L.

Parry, L.

Houghton of Sowerby, L.

Pitt of Hampstead, L.

Howie of Troon, L.

Ponsonby of Shulbrede, L.

Hughes, L.

Ross of Marnock, L.

Irving of Dartford, L.

Stallard, L.

Jeger, B.

Stoddart of Swindon, L.

Kilmarnock, L.

[Teller.]

Kintore, E.

Stone, L.

Kirkhill, L.

Strabolgi, L.

McGregor of Durris, L.

Taylor of Blackburn, L.

Mackie of Benshie, L.

Tordoff, I.

Mishcon, L.

White, B.

Molloy, L.

Wilson of Langside, L.

Mulley, L.

NOT-CONTENTS

Alexander of Tunis, E.

Lawrence, L.

Auckland, L.

Lindsey and Abingdon, E.

Avon, E.

Long, V.

Belhaven and Stenton, L.

Lucas of Chilworth, L.

Belstead, L.

Lyell, L.

Boothby, L.

Macleod of Borve, B.

Brookes, L.

Margadale, L.

Bruce-Gardyne, L.

Marley, L.

Caithness, E.

Marshall of Leeds, L.

Campbell of Alloway, L.

Maude of Stratford-upon-

Carnegy of Lour, B.

Avon, L.

Cathcart, E.

Merrivale, L.

Colville of Culross, V.

Mersey, V.

Cornwallis, L.

Montagu of Beaulieu, L.

Craigavon, V.

Morris, L.

Davidson, V.

Mountevans, L.

Denham, L. [Teller.]

Murton of Lindisfarne, L.

Donegall, M.

Orkney, E.

Drumalbyn, L.

Pender, L.

Dundee, E.

Rankeillour, L.

Elton, L.

Redesdale, L.

Ferrier, L.

Renton, L.

Gardner of Parkes, B.

St. Aldwyn, E.

Glenarthur, L.

St. Davids, V.

Gray of Contin, L.

Saltoun, Ly.

Greenway, L.

Selkirk, E.

Gridley, L.

Skelmersdale, L.

Hailsham of Saint

Stodart of Leaston, L.

Marylebone, L.

Suffield, L.

Halsbury, E.

Swinton, E. [Teller.]

Henley, L.

Trenchard, V.

Holderness, L.

Trumpington, B.

Hornsby-Smith, B.

Vaux of Harrowden, L.

Hylton-Foster, B.

Vickers, B.

Kinnoull, E.

Whitelaw, V.

Lane-Fox, B.

Wise, L.

Lauderdale, E.

Resolved in the negative, and amendment disagreed to accordingly.
7.32 p.m.
Lord Lucas of Chilworth: This might be a convenient moment to adjourn for dinner. I beg to move that the Committee stage be adjourned during pleasure until 8.15 p.m.
[The sitting was suspended from 7.32 until 8.15 p.m.]
[Amendments Nos. 15 to 17 not moved.]
Lord Mackie of Benshie Lord Mackie of Benshie moved Amendment No. 18:
Page 2, leave out lines 27 to 32 and insert ("an abatement of the first £500 Of rateable value of commercial properties.").
The noble Lord said: I rise to move this amendment, which is extremely important and towards which I am
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sure the noble Lord the Minister will be very sympathetic. By this amendment, I should like to probe the Government's intentions with regard to the encouragement of small business, which is extremely important—and perhaps more so in Scotland than elsewhere—because I do not see how we are to get energy and enterprise into the economy unless it comes from small business. Our unemployment problem in Scotland is much worse than it is in some areas of Britain, and small business can play a tremendous part in increasing employment; indeed, it is the natural source of the sort of growth that we require in this country.
The rates burden is a very heavy one on a lot of people who are starting up. The intention behind this amendment was quite sympathetically treated in the other place, but the amendment there would have applied to a whole lot of big business as well as small business. So we have put down this amendment simply to abate the first £500 of rateable value, which would be a very substantial contribution to a whole lot of people who are starting up, but it would not be a sort of present to a big prosperous business.
Particularly in the retail area, we hear a great deal of nonsense talked about the number of jobs created when a supermarket or a large hypermarket opens up. It is reported that there will be 200 or 400 new jobs, but the fact is that such places destroy far more in the way of employment and enterprise around them than they create, because small firms go out of business when a supermarket opens up, taking an enormous slice of trade—admittedly, in a very efficient manner.
There is a great deal more that could be done for small business, although that is not what we are discussing tonight, but this would be a very significant factor. Some incredible figures were recently produced, applying particularly to the United States of America and Japan, where they have been creating new jobs at some 10 times the rate of new job creation in Britain, and at a much greater rate than our more successful co-partners in the European Community. Much of the improvement is concerned with the encouragement of people starting up in business. I admit that this has got to come off somebody else. If one abates £500 of rateable value, somebody else has got to pay it. However, the reward to the community would be substantial if we encouraged the growth of new businesses, whether retail, or manufacturing, or some other form of service, because that is where enterprise begins.
Some of the Government's legislation has been very favourable for small businesses. A number of bodies have been set up to encourage small businesses. If the Government were to follow this up by treating the amendment sympathetically and by assisting us to find a slightly more workable place for it than we have at the moment, it would be a step forward towards the fulfilment of their promise and of their desire to see small businesses grow and enterprise flourish. I beg to move.
8.22 p.m.
Lord Gray of Contin: I have sympathy for what the noble Lord, Lord Mackie of Benshie, seeks to do. There are difficulties, which he has recognised. I am grateful to him for moving his amendment as a

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probing amendment. I know that it would not be his intention to wreck Clause 3, but there is a danger that this would happen if this amendment were passed. The noble Lord's purpose is to aid the commercial ratepayer. However, he will recognise that the amendment renders Clause 3 incapable of its original purpose of providing general control of rate increases. In wrecking the clause we should remove a power which is designed to help all ratepayers. In doing so, we should harm the very people the noble Lord seeks to help.
The clause as it stands provides an important reserve power for the Secretary of State. We envisage that it will be used only as a measure of last resort if local authorities fail to bring their rates and expenditure into line with the Government's plans. It will enable the Secretary of State to prescribe the maximum rate increases which an authority may impose or, if necessary, to require minimum rate reductions. We hope and, indeed, expect that as authorities see the benefits of bringing their expenditure to a level which the country can afford this power will not be needed.
The Government are very conscious of the problem which rates can cause for businesses, especially for small businesses which this amendment is particularly designed to help. It is for this reason that since they came to office the Government have pursued a policy of reducing local authority expenditure in order to reduce the burdens on taxpayers. The selective action powers have successfully brought down the rates and expenditure of a number of authorities. The improved method of distributing general abatements for grant, contained in Clause 1 of the Bill, will put further pressure on high spending authorities. Under Clause 4, commercial ratepayers, along with other non-domestic ratepayers, will be consulted each year before any local authority can fix its rates. From all this, commercial ratepayers will benefit, along with ratepayers generally.
While the amendment would help small businesses, the rate rebate proposed, as the noble Lord rightly pointed out, would have to be paid for by somebody—householders, perhaps, and industry. If one gives rate rebates of this kind and somebody has to pay for them, one should try to decide where that money is to come from. It is difficult to calculate what the loss of rate income would be if this amendment were made. However, it would be substantial and local authorities would have to make it up by increasing everybody else's rates. Thus, for instance, a small industrial firm would face increased rates in order to provide reduced or even complete exemption from rates for small commercial firms.
To take some examples, a small knitting firm, a small steel fabrication firm, a small type-setting firm, since they are classified as industrial, would not benefit and would have to pay increased rates, although they are small businesses. All other ratepayers would also have to continue to pay rates. Therefore, the problem is one of trying to find a way to achieve what the noble Lord seeks to do, quite reasonably, to help small businesses. However, the irony of the situation is that one could have a small business association in a
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particular part of the country in which some members of that association would be suffering as a result of the benefits given to others. So it is a quite difficult problem and I am glad that the noble Lord recognises that it is a problem.
I have no doubt that between now and another stage of the Bill the noble Lord will try to devise a method to overcome this problem, and the Government would be happy to find a means of overcoming it. However, we have been unable to devise a method. Nevertheless, I am grateful to the noble Lord for giving us the opportunity to discuss this very interesting point, to which we may return on a future occasion. In the meantime, perhaps the noble Lord would be prepared to withdraw his amendment.
Lord Ross of Marnock: When I first read the amendment I wondered what it meant. I had the feeling, which has not left me, that it was misplaced and that it would be better placed in Part II of the Bill. The Government spokesman said something which would have been ruled out of order in another place. He told us about his sympathy for commercial businesses. I do not have the same amount of sympathy for commercial businesses. The Government should know, if nobody else knows, that the basis of commercial business valuation is rental. The noble Lord, Lord Mackie of Benshie, spoke about his lack of sympathy for big department stores and objected to people claiming that big department stores create many more new jobs. He quite rightly said that big department stores mean the departure of small businesses and small shops.
I do not know whether it is still the practice of many of these big department stores, but I remember that Mr. Hugh Fraser, later Sir Hugh Fraser and then Lord Fraser of Allander, bought up a business and, as soon as he had bought it up, sold it, usually to an insurance company. He then rented it back at what anybody else would have thought was an inflated rent. But the fact that he was prepared to pay that inflated rent meant that his valuation was determined by that high rent. But it did not stop there. The assessor was bound to know that the premises next door were under-rated. Therefore, many small businesses in the centre of our towns were driven out by an action which suited a very large businessman who came in to work this financial wangle, whereby a business was bought and sold and then rented, and all that he owned were the goods in the store. That is one of the weaknesses of the Scottish rental system.
The Government say, "Of course, we would like to help", but remember, the amendment would reduce the first £500 for large and small. That is one of the biggest weaknesses. It is the same problem that the Treasury are up against in relation to raising a threshold. It gives a benefit to everyone whether they need it or not. The Minister is right in saying that it did not reduce expenditure and that it just meant a further concentration on a narrow base for those who have to pay for that expenditure through rates. He said that it was, of course, inevitable. With respect, it is not inevitable because we have rate abatements in Scotland. Industry is abated to the tune of 50 per cent. It used to be 75 per cent. Remember, there is a gap at the moment between the amount that the

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Government grant to England and Wales compared with the Government grant to Scotland. We receive a higher proportion of grant and there are very good reasons for it.
One of them—and this is one of the arguments—is that it was to make up for the abatement that was given to industry; so the Government, to meet the cost of this to local authorities, could have increased their share of the expenditure if they are so anxious to help industry. I know that because at one time the abatement to industry in Scotland was 75 per cent. and then it was changed to 50 per cent. That was a very considerable gain in rateable value and in rates to the local authority. But in stepped the Treasury and said, "Ah, we must take a share of that because we have been paying a considerable part of it". Therefore, when the Minister is thinking up his arguments in respect of the next amendments I hope he will remind his right honourable friend that the Government can do something to help in shouldering this burden and not leave it to the local authorities. He is right in that he appreciates the weaknesses. It has been an interesting debate.
Lord Gray of Contin: I cannot let the noble Lord, Lord Ross, get away with that last remark. The abatement of rates for industrial companies is certainly helpful, but our concern is for ratepayers as a whole. Tackling the problem of high rates at source, high expenditure, reduction of corporation tax, removal of the National Insurance surcharge, increases in the tax threshold on investment income, the VAT threshold—all these are major matters which are helpful toall businesses.
The only objection I have to the noble Lord's amendment is that it removes a power which is available as a last resort to help all ratepayers, including the small businesses which most concern the noble Lord. As I said earlier, we have to try to find some means of overcoming the problems which I have mentioned and which have been mentioned by the noble Lord, Lord Ross of Marnock, in order to create assistance for these small businesses. Everyone is concerned about the small businesses and if there is a way of helping, then I am sure we would be interested. Whether a way will be found in Part II of the Bill, as suggested by the noble Lord, I do not know. I do know that the amendment in its present form would not suffice. Perhaps between now and the next stage of the Bill we can turn our minds to it.
Lord Ross of Marnock: I hesitate to speak again because it means that the Minister will have time to read over his brief again and find another bit that he missed and plague us with.it. May I add to his long catalogue of how the Government are aiding business? It may be of interest to the noble Lord, Lord Mackie, on a future amendment. There is something called an enterprise zone; there is postponement; there is a 100 per cent. rebate for a period on rates in an enterprise zone. So there are plenty of precedents for doing something for small businesses, either along the way mentioned by the noble Lord, Lord Mackie, or in some other way which is more specifically related to the actual size of the business.
However, let us not get led away on this. It depends whether the Government are prepared to support it.

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The Minister talks to me about high rates but the fact is that there is the rates portion which is paid by the ratepayers, and there is the portion that is paid by the Government through rate support grant or specific grants—although there are fewer and fewer specific grants as they are all wrapped up into a block rate support grant. If the Government reduce their share of that then automatically, unless one cuts the services, the rates go up. What the Government are now talking about is the rates going up; or the fixing of a lower rate and a compulsory cut in services. That is far away from the £500, but it does mean that, unless the Government give support, whatever the Minister is going to say, the rates will increase further for the others.
Lord Mackie of Benshie: I am much encouraged by the response and the help that has come from the noble Lord, Lord Ross of Marnock, and from the Minister. In Scotland we have a very energetic and busy Small Business Federation with whom I have been in touch, and that will be much encouraged, too, by the Minister's sympathetic attitude. I am perfectly certain that we can find a method which will not lay too much of a burden on other people.
It is worth doing. The noble Lord, Lord Ross of Marnock, is right. The Government might well consider making a contribution to an abatement because there is nothing more important, and more important to the other ratepayers, than the encouragement of fresh enterprise in Scotland. Only out of that can we get the sort of growth that we need; can we attain the Government's objectives of expanding our industrial base and get ourselves once more into the black as regards exports. It all has to come from the people and it cannot all come from large business and large investment.
I am, therefore, much encouraged by the Minister's reply. I will certainly be working on it and hope to produce at the next stage some form of amendment which will enable the Government to help small business to expand in all these fields without its costing too much; because, whatever it costs, it will eventually be useful for the community. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 19:
Page 2, line 32, at end insert—
(" ( ) In any financial year in which the power in subsection (1) above is exercised the percentage of reckonable expenditure met by the Secretary of State shall be not less than that of the preceding financial year.").
The noble Lord said: The purpose of this amendment is to try to persuade the Government to incorporate in the Bill provision for the fact that there is inflation. Local authorities have the same burdens arising from inflation as do everyone else. In fact, as my noble friend Lord Ross said earlier, Scottish teachers have just been given a 4.5 per cent. salary increase which, according to Government figures, is at or above the level of inflation. Therefore, local authorities' expenditure, if they are to keep anything like the same services going, would need in real terms to be the same as in the preceding financial year. If not,

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it is axiomatic that there will be a decrease in services to the ratepayers.
The whole purpose of the amendment is to ask the Minister to accept the fact that local authorities suffer in the same way as the Government. We wish to insert at the end of line 32:
"In any financial year in which the power in subsection (1) above is exercised the percentage of reckonable expenditure met by the Secretary of State shall be not less than that of the preceding financial year",
in order to ensure that the people voting in Scotland today do not suffer poorer services than they would do if the amendment were not made. I beg to move.
Lord Gray of Contin: This amendment would restrict rate limitation to years in which the percentage of rate support grant had been reduced. Reductions in grant percentage have been used by all Governments to put pressure on local authorities to reduce expenditure. It is in these situations, when expenditure is high, that general limitation might well have to be used. What I said when we were discussing Amendments Nos. 14, 16 and 17 applies equally to Amendment No. 19. Therefore I am very sorry that I cannot accept the amendment. I must ask the noble Lord whether he will consider withdrawing it.
Lord Ross of Marnock: I heard most of what the noble Lord said. So far as I can gather, he does not like the amendment. It would give a certain measure of justification to the Government for doing this if in that year they decided that by way of rate support grant they would meet the same percentage as they had the previous year. There would require to have been some serious runaway or proposed runaway of expenditure in respect of the rates to justify the kind of increases that would mean Government intervention. There might then be some justification for it. But the Government themselves may make the position of local authorities intolerable by reducing their share of the reckonable expenditure. That is only the part of the expenditure not met outside of housing and beyond that met by specific grants, which is covered by the block grant, and after deduction of income, be it from charges, property, or that kind of thing. That is then the aggregate of reckonable expenditure. At the moment in Scotland the Government meet 60.2 per cent. It is under that for England.
The Government just make the decisions. If there is no reduction in expenditure—and expenditure has been cut and cut—and the Government further reduce their share, the only alternative, if the local authority wishes, and decides, to maintain its services, is to increase the rates. The Government can manipulate a local authority into a position which the Government say is one of excessive expenditure. Where the Government construe that there has been excessive expenditure all over Scotland, so that they need to exercise this power, they should be able to say, "At least we are not to blame because we have not cut our share of rate support grant".
It is asking an awful lot of the Government. Year after year during the past five years, they have cut about nine points. It is not really 9 per cent. Nine parts of 70 is a lot more than 9 per cent. This year the cut

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is 1.6 per cent. That would justify them doing it. That is why I put this amendment down. It is an important provision. I think it is realistic. If the Government are not sure of this and turn it down, it will mean that in the following year they will again cut their percentage. I fear this is what will happen. The Government are opting out of meeting their financial commitments in respect of all kinds of expenditure, and this is leading to the cutting out of services which this House and the other House have said are necessary.
Not all that long ago we had a Bill on mental health. Eventually this Government accepted the will of the House that in Scotland there should be an after-care service for people who leave mental hospitals. Who was to provide it? It was the local authorities, and that meant more money. If the Government will the service, they should be prepared to meet their share of the cost. That is not happening. Many of the services are not being cut; they are just not being introduced, and that is a cut in the standards laid down by the House.
That is the purpose of the amendment. I do not think it has been dealt with by the Minister, but at this moment I shall not press it. Perhaps like the noble Lord, Lord Mackie of Benshie, I shall rephrase the amendment and put it back in the same place. I still hope to convince the noble Lord; after all, he is quite a reasonable person. If he gets the Highland air about him, and once he receives the plaudits of the islands authorities for what he wanted to do and what the House forced him to do today, he may well seek a little more popularity in that area by accepting a few more of our amendments. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
8.47 p.m.
Lord Ross of Marnock Lord Ross of Marnock had given notice of his intention to move Amendment No. 20:
Page 2, line 35, at end insert ("and that percentage shall not exceed five per cent.").
The noble Lord said: I shall not pursue this amendment at this hour of the night and with so much work to do, though it is one that I would ask the Government to have a look at, because they will see it again. But it is not moved.
[Amendment No. 20 not moved.]
The Deputy Chairman of Committees (Lord Renton): If Amendment No. 21 is agreed to, I cannot call Amendment No. 22.
[Amendment No. 21 not moved.]
Lord Mackie of Benshie Lord Mackie of Benshie moved Amendment No. 22:
Page 3, line 8, after ("consult") insert ("individually each authority affected by the order and also").
The noble Lord said: I put down this amendment because at the moment the clause reads a little unreasonably. It states:
"The Secretary of State shall, before making an order under this section, consult such associations of local authorities as appear to him to be concerned".
That rather reads as though he will not give the authorities concerned the time nor the opportunity to

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make a case. I cannot believe that that is so. There may well be special circumstances, and he would surely consult them in order that they can explain why they are displeasing him by putting the rate at a certain level. Certainly he should also consult the local authority associations. As it is, the clause reads as though the offending authorities are not to be allowed to make their case to the Secretary of State. I beg to move.
Lord Gray of Contin: As the noble Lord has pointed out, this amendment proposes that before making a rate limitation order, the Secretary of State shall consult each authority affected by it. The Bill provides that an order may cover one or all three classes of local authorities: regions, districts, and islands. All authorities in the class or classes will be affected by the order, whether they fix a rate in accord with the order or seek a derogation.
Consequently, the amendment, if carried, would require the Secretary of State to consult each and every authority before making the order. This is clearly impracticable and completely at variance with the procedure accepted over many years—a procedure for consultation on the rate support grant order—which also affects every authority. This is a well-established principle of collective consultation with the convention on matters that affect all authorities, and provision is made in subsection (5) of this clause for this form of consultation on any rate limitation order.
If the noble Lord is concerned about the exceptional case, I would point out that this is fully provided for under the derogation procedure, where exceptional, individual circumstances can be taken into account. There would therefore be no justification for discussing the general limits with each authority individually. In the light of what I have explained about the effect of this amendment, I would invite the noble Lord to withdraw it.
Lord Mackie of Benshie: I thank the Minister for the reply and I shall study what he has said to see whether the derogation procedure covers the situation; I hope it does. In the meantime I shall withdraw the amendment and have a look at what the Minister has said and the effects thereof. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 23:
Page 3, line 15, leave out subsection (7).
The noble Lord said: There is a very simple reason why this amendment has been put down. I could not make head nor tail of the subsection, but I knew we would get a very long and lucid explanation from the Minister of State. I beg to move.
Lord Gray of Contin: I shall endeavour to give a lucid, if not too long, explanation, which I hope may satisfy the noble Lord. The amendment would remove the provision under which an authority which failed to determine a rate in accordance with the rate limitation order would be deemed to have determined its rate in accordance with the maximum increase or minimum increase in the order, whichever was appropriate. This is intended to deal with the authority which decided to

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challenge the Government at the expense of its ratepayers, either by failing to set a rate in accord with the general limitation order and leaving it with inadequate income to provide essential services, or by actually setting a rate involving an increase above the limit. That would obviously be unacceptable and subsection (7) will ensure that an authority has income to provide adequate services.
I am sure that the noble Lord will see that the provision he seeks to remove is useful and sensible. He may therefore wish to withdraw his amendment.
Lord Ross of Marnock: No; I just still do not understand it. You see, you get a maximum or a minimum. There is certain latitude each way. But if an authority does not fix its rates—and, remember, a rate is a fixed rate; it is not within a range—it
"shall be deemed to have … determined the rate at which the maximum or, as the case may be, the minimum amount referred to in the order is exactly complied with".
I just do not understand how you can deem what is a fixed rate to be either a maximum or a minimum.
Lord Gray of Contin: The purpose and effect of the amendment which the noble Lord seeks to move would be to remove the provision under which an authority which had failed to determine a rate in accordance with a general rate limitation order would be deemed to have determined a rate in accordance with the rate limit. I am sure the noble Lord can follow that. I do not think I can make it any clearer, but I shall try again. It would remove the provision under which an authority which had failed to determine a rate in accordance with a general rate limitation order would be deemed to have determined a rate in accordance with the rate limit.
Lord Ross of Marnock: Yes, but they have not. The point is that the power that the Secretary of State takes is to determine a maximum or a minimum. Then it is up to the local authority to comply by fixing a rate which is within the maximum or, as the case may be, the minimum. However, when they have not done anything but it is deemed that they have, and it is said that the matter must be ended in relation to the original order, nobody has fixed anything. Nobody has fixed anything within the maximum or within the minimum. So how can you possibly deem it as having been done? If the Government had said, "This is a figure" and they refused to fix that as the figure, then you can deem that figure which has been laid down by the Secretary of State as the figure. But it is not a figure; it is a maximum or a minimum.
Lord Gray of Contin: I do not think we are in disagreement as to whether it is a maximum increase or a minimum decrease in the order, whichever is appropriate. This provision is to deal with the authority which decided to challenge the Government at the expense of its ratepayers, either by failing to set a rate in accord with the general limitation order and leaving it with inadequate income to provide essential services, or by actually setting a rate involving an increase above the limit. Deeming a rate is designed to deal with authorities which do not comply. Therefore the only way that they can have a rate at all is for one to be deemed at the appropriate maximum or minimum.
Lord Ross of Marnock: It does not say that.
Lord Gray of Contin: I am trying to explain to the noble Lord what "deeming a rate" means. If the authority does not fix a rate then the only way that a rate can be deemed is for one to be deemed at the appropriate maximum or minimum.
Lord Mackie of Benshie: I wonder whether I may come into this private argument. When the Government have made an order, which, as it says in paragraph (a) of the subsection,
"has effect in relation to a local authority"
do they actually specify the rate maximum or minimum which may be charged? If that is the case, I understand it, but they would have to specify which one applied.
Lord Gray of Contin: That, with respect to the noble Lord, is not actually the point. The point is that deeming a rate is intended to deal with authorities which do not comply. Therefore the only way they can have a rate at all is for one to be deemed at the appropriate maximum or minimum rate. If they comply, they then make their own rate. If they do not comply, then one has to be deemed for them.
Lord Mackie of Benshie: I understand that. But if an authority is to charge a rate of £5 in the pound, then I would presume that the Government, when they made the order—if an order under this clause has effect in relation to a local authority—would say, "You cannot charge £5 for a pound's rateable value; the maximum you can charge is £1·50". If that is what is provided for, then I can understand the rest of it. If not, then I cannot understand it.
Lord Gray of Contin: Perhaps I may explain to the noble Lord. When a rate limit is set, it is set either as a maximum increase or a minimum decrease. It cannot be both. It is set as one or the other.
Lord Ross of Marnock: I gather that the intention is that if a local authority does not comply, then automatically it is deemed that the increase is the maximum laid down or the minimum laid down. I hope that there is only one of them laid down, not both. There must only be one of them laid down. If that is the case, I would ask the draftsman to have another look at this and see that it is much more clear. The only latitude a local authority has is to be within the maximum or within the minimum. If they do not determine the rate, they have no option. It will be either the maximum or the minimum. I presume that that is the case, but it is not clearly stated.
I think that I know what was intended but I received little or no help from the explanation of the Minister. That means that there is something wrong with the drafting. If a brief cannot be drafted properly, it is a pretty poor look-out for the actual drafting of the Bill. Perhaps the Minister can promise that the draftsman will have another look at this point to make more explicit what will happen to a local authority that decides not to determine a rate in accordance with the Government's wishes. We are told that this will never be introduced, anyway. But we had better get it right at the start. That being so, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 3 shall stand part of the Bill?
Lord Ross of Marnock: This is the important clause. It is the clause that deals with rate capping. I could not possibly allow this clause to stand part of the Bill without saying a word or two. We have come to a pretty sorry pass when we have so to interfere with local democracy as to deny the right of local authorities even as a last resort to fix their own rates. The Government keep coming to this business of last resort. If the powers are there in a Bill the Secretary of State will use them. It was the powers in the 1966 Act that started us all on this. They stemmed, I think, from an Act of 1949, carried through in consolidation and the rest of it. Eventually they were used—and used by the present Government.
Year after year—I think that this is the third Bill—one power led to another power and led to the power that we are now discussing. No doubt in the next Bill we shall get another. Really, this has gone far enough. I do not care how few people are here today. I am determined that we must oppose this clause standing part of the Bill.
9.3 p.m.
On Question, Whether Clause 3 shall stand part of the Bill?
Their Lordships divided: Contents, 48; Not-Contents, 14.

DIVISIION NO. 6

CONTENTS

Avon, E.

Hornsby-Smith, B.

Belhaven and Stenton, L.

Long, V.

Belstead, L.

Lothian, M.

Boothby, L.

Lucas of Chilworth, L.

Brookes, L.

Lyell, L.

Bruce-Gardyne, L.

Macleod of Borve, B.

Campbell of Alloway, L.

Margadale, L.

Carnegy of Lour, B.

Marshall of Leeds, L.

Cockfield, L.

Morris, L.

Coleraine, L.

Murton of Lindisfarne, L.

Craigavon, V.

Napier and Ettrick, L.

Davidson, V.

Rankeillour, L.

Denham, L. [Teller.]

Renton, L.

Donegall, M.

Saltoun, Ly.

Elton, L.

Skelmersdale, L.

Ferrier, L.

Soames, L.

Gardner of Parkes, B.

Stodart of Leaston, L.

Glenarthur, L.

Swinton, E. [Teller.]

Gray of Contin, L.

Trumpington, B.

Greenway, L.

Vaux of Harrowden, L.

Hailsham of Saint

Vickers, B.

Marylebone, L.

Whitelaw, V.

Halsbury, E.

Wise, L.

Henley, L.

Young, B.

Holderness, L.

NOT-CONTENTS

Airedale, L.

Pitt of Hampstead, L.

Carmichael of Kelvingrove, L.

Ross of Marnock, L.

Collison, L.

Stoddart of Swindon, L.

David, B. [Teller.]

[Teller.]

Dean of Beswick, L.

White, B.

John-Mackie, L.

Wilson of Langside, L.

Lockwood, B.

Winstanley, L.

Mackie of Benshie, L.

Resolved in the affirmative, and clause agreed to accordingly.
9.11 p.m.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 24:
After Clause 3, insert the following new clause:
("Restriction of Secretary of State's power to control rales.
. After section 108C of the Local Government (Scotland) Act 1973 there shall be inserted the following section—
Restriction of Secretary of State's power to control rates.
"108D. No order under section 108B of this Act may be made in respect of any local authority whose expenditure has not risen in real terms in the immediately preceding financial year." ")
The noble Lord said: The proposed new clause, 108D, is an amendment to the Local Government (Scotland) Act 1973. Amendments similar to this one were moved in another place in an effort to modify the very severe effects of this Bill, particularly Clause 3, if it is enacted by this House and the other place. Under Clause 3 the Secretary of State has power to reduce in any year the rate poundage as against that levied in the previous year. We have already discussed the ability of the Secretary of State to group offending local authorities in any one order, although I understand there will be powers for some local authorities individually to appeal to the Secretary of State for special dispensation. Nevertheless, the Bill is fairly draconian from that point of view.
This amendment suggests that an order under Clause 3 should be laid only if the rise over the previous year in that local authority's expenditure is greater than any rise due to inflation. This is close to the earlier amendment that I tried to get the Minister to accept. In real terms it is saying that as long as the local authority has not spent more it should not be possible to use this power.
With hard pressed local authorities—and local authorities in Scotland are extremely hard pressed just now—merely to stand still will be quite a feat because all the time restrictions in Government expenditure are in vogue. It is not just a question of inflation; deprivation in many of our areas is increasing. The age profile is increasing quite noticeably, throwing additional expenditure and additional work and responsibility on to local authorities and social services.
We are finding more problems, as the noble Lord the Minister knows very well, with the young unemployed. It is a hopeless situation to have left school hoping to work and finding there is nothing for you. It is the old story: you leave your house in the morning not knowing whether to go left, right or back indoors because nobody cares. From that emerges a great deal of anger, frustration and depression. It hits young people, and it is amazing that a great many more are not affected in this way. There are strains on those who find unusual and sometimes illegal ways to break their boredom, and therefore great strains are put on the social services because of the existing policies of the Government. The local authorities would like to spend more to try to relieve these tensions but they find it impossible, and they will find it even more difficult if we cannot get the Government to accept this new clause or something very close to it.
The dilapidation in local authority housing and buildings is very noticeable despite the money they have been spending and the very great efforts they have
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been making. Cities like Glasgow, Dundee and Edinburgh, partly because of the problems of the type of building that was encouraged by various Governments immediately after the war (the systems building, the hurried building, the inadequate supervision because of the rate at which we were trying to build at one time with the new methods involved) we now find are paying off to the detriment of the tenants. This is because faults which were not apparent on the drawing board or in the test lab are beginning to come out in the Scottish weather. Local authorities are running hard, and as every year goes by a higher percentage of houses built immediately after the war is beginning to reach the point where the houses need fairly serious reconditioning. The findings of the housing stock has to be kept in a decent condition.
In the present depressed state of Britain the only people who can pick up the tab for a great deal of the open and hidden costs of deprivation are national or local government. The very thought that a local authority will be penalised for spending just the same as it had in real terms last year, and would perhaps have even this limited amount reduced, would cause even greater despair. Many responsible people who entered local government in an attempt to try to ameliorate the conditions of people and to give some sort of service, find it is impossible to give that service because of the way the Government is depriving them of money. They themselves get tired of trying to stem the waters and we shall lose some of the best people we have in local government.
It is, however, interesting when the Government talk about the profligacy of local government to look at the Government's own record in terms of expenditure. The findings of the famous report of the Treasury and Civil Service Select Committee of 1983–84 (chaired, as the noble Lord the Minister knows, by a very distinguished senior Conservative Back-Bencher) have been quoted since the election and are most interesting when contrasted with the way that the Government criticise local authorities. The Government want local authorities to reduce their expenditure although, with all their powers, they have not been able even to hold their own expenditure steady.
In Table 1 of the report to which I referred, it appears that, since 1979 when the present Government first came to power, local government expenditure has increased by 6·9 per cent. in real terms. But central Government expenditure in the same period, according to the report, has increased by 11·2 per cent. My noble friend Lord Ross of Marnock has already given the figures for housing alone in Scotland. The housing support grant in 1979–80 was £213 million. In 1983–84 it was down to £72 million and this coming year it will be down to just over £50 million.
Glasgow, for example, was originally asked in 1980 to increase its rents by 70 per cent. It was severely castigated by the Government because it increased its rents by only 31 per cent. The story about Glasgow's rents being ridiculously low is very much out of date. Considering conditions in Glasgow, Glasgow rents are about the average for most of the country. However, the penalty that was imposed on the City of Glasgow for not increasing its rents by 70 per cent. was £11 million. In 1982–83 the Government demanded that

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Glasgow increase its rents by 32 per cent. Because it was not able to comply completely with that request in view of the concern felt for the tenants, Glasgow lost £17 million from its housing capital allocation.
Notwithstanding all this saving from local authorities which are hard pressed (as they always are) by the Government and by Government policies, the Government still outspend the very people who run local authorities and at whom this Bill and many other pieces of legislation are aimed in order to try to control them. The Government certainly have not been able to keep their house in order although they expect others to do so with fewer powers ultimately and a great deal of responsibility literally on their own doorsteps. When those people leave their town halls and city chambers in Glasgow and Edinburgh to go home, they see deprivation and they feel that they have responsibilities which they are covering inadequately because they do not have sufficient income.
Therefore, when we ask in Amendment No. 24 that no local authority shall be reprimanded or penalised if their:
"expenditure has not risen in real terms in the immediately preceding financial year"
we do not think that we are asking too much. When one considers that the Government have been in power since 1979, it would be almost insulting if the Minister suggested that this provision had to be introduced because there may have been a very high expenditure year. For the last three or four years local authorities in Scotland have not been allowed by this Government to have a high expenditure year. Therefore, any increase in line with inflation and merely allowing the local authorities to keep pace with what they were doing in the previous year, is the least that the Government can do if they are going to continue with their quite irresponsible general economic policy. I beg to move.
Lord Stodart of Leaston: I should like to raise one point for clarification, and I hope that the noble Lord will forgive me if by any chance my thoughts were wandering when he moved this amendment. There is reference to the Local Government (Scotland) Act 1973 and references are also made to Section 108C, 108B and 108D. I have the Local Government (Scotland) Act 1973 in my hands and I find that Section 108 bears no reference whatever to the subject under discussion. The rubric to Section 108 is:
"Determination and levy of regional, district and general rates",
and it has nothing to do with the restriction of the Secretary of State's power to control rates.
Lord Carmichael of Kelvingrove: According to my Bill, Section 108 of the Act, and Section 108B are concerned with the power of the Secretary of State to control rates. Perhaps the Minister, who has the power behind his elbow—
Lord Ross of Marnock: If my noble friend will allow me, if the noble Lord looks at the Bill which we are seeking to amend, in Clause 3 on page 2 he will see the reference to Section 108B, which is an insertion into Section 108A of the Local Government (Scotland)
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Act, 1973. If he looks further down the page he will see that his own Government have put in the actual rubric of the clause:
"Power of Secretary of state to control rates".
May I remind him that this is the third go that we have had at changing these local government Acts, and it may be that the answer to the noble Lord's problem is that the Act of 1973 has been changed more than once. I believe that it was changed in 1981 and again in 1982.
Lord Gray of Contin: The amendment would prevent an authority being affected by a rate limitation order if its expenditure in the year to which the order applied was no more in real terms than it was the previous year. Leaving aside the question of definition of real terms, on which the amendment is imprecise, the Government clearly cannot accept this limitation on the general rate control power, and I should like to make one or two points about it.
First, this amendment assumes that it is possible for a general rate limitation order not to apply to individual authorities. This is not possible. A general rate limitation order is what its name suggests, and if it applies to all authorities in the class or classes to which the order relates, all authorities covered by an order have to set their rates in accordance with it. If there are any exceptional circumstances affecting individual authorities, this can be dealt with by means of the derogation procedure in Section 108C of this clause.
Secondly, the Government could not accept an amendment which made it impossible to apply this power if it meant a reduction of a local authority's expenditure in real terms. The expenditure of Scottish local authorities, despite the Government's exhortations, is still above the level that the Government consider acceptable, and they are looking for reductions in real terms in the interest of both the national economy and of the ratepayer. In this situation it would clearly be unacceptable to exclude an authority from general rate limitation simply because it would mean a reduction in that authority's expenditure in real terms.
Local authority current expenditure has for many years exceeded the provision made for it by the Government. It has been growing at a faster rate than central government current expenditure. In 1983–84 authorities planned to spend about 96 per cent. more in cash than they did in 1978–79, whereas the comparable figure for central government is 79 per cent. The claim that central government spending is growing faster than that of local authorities is based on total provision, including capital expenditure, to which different considerations apply. Current expenditure is what we have to bring under control if rates are to be controlled.
In view of what I have said, the noble Lord will not be surprised that I cannot accept his new clause, and I ask him to consider withdrawing his amendment.
9.30 p.m.
Lord Ross of Marnock: I hope that my noble friend will not consider withdrawing the amendment in view of the figures that have been produced by the noble Lord. I can quote figures as well. I can give him a figure

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of the increase in central government spending in Scotland—and remember we are talking about Scotland and not talking generally. Between 1978–79 and 1983–84 central government spending showed an increase of 102·8 per cent. Even if you deduct from that the increase in social security spending it would be somewhere about 89 per cent. The expenditure rise of local authorities is very much lower than that.
When the noble Lord says, "We cannot do that because this is a general application", the fact is that the Government can do anything they like. That is what they are going to do anyway. If Parliament said that you will leave out of that general rate fixing the question of this authority and that authority which have kept their expenses down, I do not think that anyone would complain. In fact, judging by what the Government said they were doing in the Clause 2 apportionment in respect of the needs section of rate support grant, and ensuring that those who were the sinners in respect of excessive spending should be penalised rather than the others on the new apportionment basis, then the noble Lord should welcome this particular clause.
I do not think that the noble Lord, Lord Stodart of Leaston, was here when we started this in the House of Lords. Those were his fallow years when he was involved with inquiries for the Government, and so on. Little did he think then that he would come back to help the Government or have to sit and suffer the kind of explanations that we have had about why they would not do this or that in respect of local government now.
But we had first the 1966 Act, which itself had been amended by the 1973 Act. We had a complete distortion of the power that was there in respect of the standards of service and the expenditures of local authorities. There was a double-edged power at that time; first, to penalise local authorities that were not reaching the proper standard of service, and then there was another power which related to excessive and unreasonable expenditures. The noble Lord will find that the 1966 Act is now so bad that it has to be reprinted in the Schedule here in order to be understood. If the 1966 Act had been brought into the House, you would not have understood a word of what we have been talking about trying to relate it to that Act. I think that is what has happened with the 1973 Act.
The whole thing was based upon excessive and unreasonable expenditure. If a local authority in real terms holds its expenditure this year to what it was last year, that local authority is doing pretty well. That itself should be a criterion. as to whether or not it should be penalised in respect of the Government interfering with its power to fix its rates. It has shown itself as responsible.
The fact is that this year the Government are giving an actual increase of 2·7 per cent. to the local authorities. But that is not an increase in real terms, when the same Government are telling us that the inflation rate will be just over 5 per cent. We already know that the teachers have settled for 4·5 per cent. That is above the increase that has already been allowed by the Government. Now what are the local authorities to do? The Government should do it.
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Instead of fixing the rate, they are the people who should sack the teachers. They are the people who should cut the services. But no, they say, "We do not interfere. We will let the local authority apply their priorities and make their own cuts".
They put it a little more politely, they say they can determine the priorities on which they will spend what little money we leave them. That is what they really mean. We would draw attention to the fact that there are local authorities who are not spending more in real terms, but they are being penalised and we are trying with this particular new clause to prevent them from being further penalised.
If the Government want to do what Parliament tells them has to be done, then it will be done. The last thing any Minister should do is to come along and say: "We can't do it". We can do anything if we put our minds to it: if it means changing it from a general control to a less general control in respect of this type of authority, then they should do it. I think that my noble friend was quite right in his speech.
On Question, amendment negatived.
Clause 4 [Consultation with non-domestic ratepayers]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 25:
Page 4, line 7, after ("procedure") insert ("and in accordance with such a timetable").
The noble Lord said: This is really an amendment which the Minister may very well say is purely technical, and it could be, unless he can assure the House that a timetable is included in the procedure. Otherwise I can see very easily that if the local authority had to consult with non-domestic ratepayers, there could be a great deal of time involved and a great deal of additional pressure. In most terms this would mean additional expenditure laid on local authorities before they were able to decide or to publish or to make other arrangements for the other expenses and the other sources of income. They might have to wait too long because of delay not caused by them but by non-domestic ratepayers.
It is a fairly simple amendment which I am sure the Minister will be able either to accept or explain clearly. The purpose and thrust of the amendment is contained or will be contained in the procedure which the Secretary of State may direct the local authorities to apply when they are approaching the non-domestic ratepayer. I beg to move.
Lord Gray of Contin: This amendment is intended to ensure that the consultation exercise with non-domestic ratepayers should proceed along a prescribed timetable, as well as under a prescribed procedure. The answer to this is simple: procedure includes timetable. We have already had discussions with the Convention of Scottish Local Authorities and the Scottish Business Rates Committee on the basis of a draft of a code of practice. This draft code has a section headed "Procedure" which includes the time-table.
In brief, the timetable envisaged is that the first set of prescribed information would be made available by October, followed by meetings with bodies representa-

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tive of non-domestic ratepayers. The second set of information would be made available by the end of January for a further meeting with bodies representative of non-domestic ratepayers. Individual non-domestic ratepayers could make written representations at both stages. In the light of these consultations, local authorities would fix their rates, fully aware of the views of the non-domestic ratepayers in their area.
I hope that that explanation satisfies the noble Lord, and I think that the point which he was making is already well taken. I am sure that he would wish to withdraw his amendment in view of that explanation.
Lord Carmichael of Kelvingrove: Yes, I can accept that fully and agree with the Minister, but he mentioned a code of practice. It would be for the interest of the Committee if before the Bill ultimately left the House we could have some view of the code of
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practice. I know there is a feeling among some local authority people that there could be unnecessary delay. That is not a frivolous thing. I have known local treasurers who have had their holidays disturbed during the period of budget making and it has been a most difficult job for them. Therefore, they and we must be assured that these people, who are giving so much of their time, are given every facility by the procedure to be able to budget their time as well as the money with which they are entrusted. I shall be happy to withdraw on the assurance that the Minister will give us some idea of the code of practice he intends to use or to issue to local authorities.
Lord Gray of Contin: I can respond to the noble Lord in that I mentioned that at the moment it is a draft code of practice. It will not be finalised until the local authorities concerned have been fully consulted.
Amendment, by leave, withdrawn.
9.42 p.m.
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 26:
Page 4, line 19, leave out ("and") and insert ("or").
The noble Lord said: This is a simple amendment. Subsection (4) says:
"The persons referred to"—
that is those who receive this information, should be—
"those liable to pay rates in respect of lands and heritages other than dwelling-houses"—
that is the non-domestic ratepayers—
"and bodies appearing to the local authority to be representative of persons"—
who are non-domestic ratepayers. I wondered whether it was desirable to have both of these. The individual ratepayers—a wonderful collection of them, and there is no doubt that it could become quite a thing—would disrupt much of what happened. Or it could be limited, and here I suggest "or" to be added rather than "and": or
"bodies appearing to the local authority to be representative of persons so liable".
This will most likely be done on the basis of representatives of bodies. It may be of individual ratepayers, non-domestic ratepayers either industrially or commercially based. That I can understand. Many local authorities in Scotland tend to try to bring them in and give them much information about what the situation is in respect of the rates and expenditure. There is a lot more understanding of this than people would imagine. There has been much over-playing of the cost of rates to particular people and the rates burden compared with the burdens of other things placed upon them by Governments.
I am not too happy about the extent of this. It would be far better to have one or the other rather than paragraphs "(a)" and "(b)" because it could be troublesome at a time when local authorities are trying to strike rates, give information to the Government, and get information back from the Government about what they think the situation should be in relation to the guidelines. It will be a complex business. While one is giving rights which may be desirable to particular people the work of the local authorities still has to go on efficiently.
The Minister of State in reply to some of my amendments referred to the possibility of the practical difficulties of meeting deadlines and what other people have to do. I hope he has this in mind too. The Secretary of State has to determine the procedure. I had hoped that by this time in the Bill we would have had a sight of what the Government or the Secretary of State have in mind. I am with my noble friend when he suggests that we should see this before the next stage of the Bill. I suppose it is only a draft of what the Secretary of State has in mind, but we should have a chance to see it, to see whether it is sensible and wise, as well as the representatives of the local authorities. That is the purpose of this amendment: to leave out "and", which is additive, and to put in "or", which gives the alternative.
Lord Gray of Contin: Clause 4 introduces an important new right for non-domestic ratepayers, who do not have a vote but pay more than 60 per cent. of the rates. It will require them to be consulted before a
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local authority fixes its rate. This amendment would restrict that right, in that it would enable a local authority to decide to consult, for example, only representative bodies of non-domestic ratepayers or only individual non-domestic ratepayers. It is possible to conceive of cases where only comparatively few of the non-domestic ratepayers were represented by a body and it would very much weaken the clause if in those cases the local authority could in effect ignore and not consult the individual non-domestic ratepayer.
The procedure we envisage for this and on which we are carrying out consultations is as follows. Local authorities would have to provide certain prescribed information as the basis for consultation. They would have to hold meetings to discuss this information with such bodies as appeared to them to be representative of the non-domestic ratepayers in their area. The authorities would also have to make this information available for inspection by individual non-domestic ratepayers and to enable them to make written representations. We believe that both bodies representative of non-domestic ratepayers and individual non-domestic ratepayers (especially in sparsely-populated areas where there may not be representative bodies) have a part to play in this process.
I know that the noble Lord would not seriously wish to exclude any grouping which might be affected, particularly in sparsely-populated areas. It is important that we keep both groups involved. I am sure that the noble Lord would accept our reasons for wishing to maintain what we have spelled out in the Bill as far as this is concerned. With that in mind, I hope that he may be prepared to withdraw his amendment.
Lord Ross of Marnock: I still think that it could be unduly troublesome. It may well not be so; but if I were one of the ratepayers, or if there were a group with myself, we could cause endless trouble to those setting the rates—not that I should ever dream of doing it. But there are troublesome people in Scotland, quite apart from Ross, who are interested in the details of politics. I see the noble Lord, Lord Stodart, with a revived interest in these things. I am sure that he will make life difficult for local authorities who presume to do things and deny him the right to go out at a time inconvenient to them but convenient to him.
Did the Minister say what opportunity there would be for us to see the code of practice? I do not think that he mentioned that point. It is an important one. It might blow away all the fears that I have about people being a bit of a trial and about being troublesome to local authorities. Does the noble Lord want to answer that point? If he wants me to put the amendment down again at another stage in order that he can answer it—in different words, words more directly related to codes of practice—then I shall certainly do so. We are going to have plenty of time. But since there is no response from the Minister, I shall withdraw the amendment and think about it again.
Amendment, by leave, withdrawn.
Lord Ross of Marnock Lord Ross of Marnock moved amendment No. 27:
Page 4, line 24 leave out subsection (6).
The noble Lord said: This is an important amendment. I am sure that it has caused considerable vexation to a lot of people to have to track down Sections 108A, 108B, 108C, the 1966 Act, as amended, of course, and the 1973 Act, as amended. But this duty, this new right of ratepayers, which is so important, shall "not apply". As soon as I see these words, "not apply", I see that you give a right and then you take it away.
How do we take it away in relation to the determination of rate under Section 108A of this Act—and remember that we are talking about the 1973 Act, as amended by paragraphs (a), (b), (c) and so on? I hope that the Minister of State will tell us what is stated in Section 108 A or Section 5(4)(b) of the 1966 Act. I hope he will tell us what is the position in relation to,
"a deemed determination of a rate under the Proviso to the said section 5(4)(b) or under section 108B of this Act."
We know about "section 108B of this Act"; we can look at it.
They are not going to get the right when the Secretary of State fixes the rate. Is that fair? Really, why should the Secretary of State be so protected? Why should the very civil servants who advise the Secretary of State about this Bill be so protected? Why should the ratepayers be denied the right to go and see them? It is all right for them to go and see the local council, but when the Secretary of State fixes the rate, no, they must not go and bother him. They do not need to bother him—but they might want to. Why should they not be given the same right when the Secretary of State fixes the rate? That is the simple question I am asking.
I could make a guess that Section 108A and those other provisions are all of the same kind when it comes to the Secretary of State intervening to fix a rate. But is not the fixing of the rate by the Secretary of State important for the non-domestic ratepayers and for those people who live in the rural areas, about whom the Minister of State is so concerned, to ensure that they all get the right to go and harry, or go and help, the local council to fix the rate? When it is the Secretary of State who fixes it, it is a case of, "Don't come near us: we are far too busy. We are preparing another Bill to hammer the local authorities." The civil servants are not concerned about this; they are far too busy; they must not be troubled. The same right should be given to the local authority when the rate is being fixed by the Secretary of State. It is simple justice. I beg to move.
Lord Gray of Contin: Before dealing with this point, perhaps I may put the noble Lord, Lord Ross of Marnock, at ease regarding the question of the code of practice, which he raised with me. I can confirm to him that there will be absolutely no problem about sending a draft of the code of practice to the noble Lord.
With regard to this amendment, subsection (6) disapplies the duty laid on local authorities in terms of the new subsection (3) in relation to rates determined under Section 108A of the 1973 Act or Section 5(4)(b)
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of the Local Government (Scotland) Act 1966, or in relation to a deemed determination of a rate under the proviso to the said Section 5(4)(b) or under Section 108B of the 1973 Act. That is where an authority voluntarily reduces a rate already fixed as a result of the initiation of selective action, or where an authority is forced to reduce its rate as a result of selective action.
This provision does not, however, absolve a local authority from the duties imposed on it under sub-section (3) of making available to non-domestic ratepayers the information as directed and consulting on that information and the rate it proposes to determine. All it does is to make clear that where a rate is determined or deemed to be determined in accordance with the provisions set out in sub-section (6), there is no requirement on a local authority to carry out a subsequent round of consultation on that rate. I know that the noble Lord is using this as a probing amendment and I hope that I have been able to answer his query.
Lord Ross of Marnock: It is more than probing. I have been asking for justice.
Lord Gray of Contin: I have given it.
Lord Ross of Marnock: No. The noble Lord read his brief very nicely. It was not like the minister about whose sermons complaints were made among the congregation. It was said about a sermon, first, that it was read; secondly, that it was not very well read; and, thirdly, that it was not worth reading. That has applied to one or two of the briefs which the noble Lord has been inflicting on us. I wish that the civil servants would remember that we have to listen to what is said. But I was doing more than probing; I was seeking justice. When the Secretary of State actually fixes the rates and is making these determinations, as he does under some of these other sections, other people are entitled to be satisfied that they have all the information and have something to do with it. They want to know that they are part and parcel of this business of consultation in respect of rates. But I shall not inflict this very much longer on the noble Lord. The hour approaches and we had better make a little more progress. But, meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clause 5 [Premises qualifying for rates relief for institutions for the disabled]:
9.57 p.m.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 28:
Page 4, line 40, at end insert—
("( ) after subsection (1) there shall be inserted the following subsection—
"(1A) The cost of any rate relief granted under this Act shall be met in full by grant from the Secretary of State." ")
The noble Lord said: I shall try to be brief on this amendment. This refers to the Rating (Disabled Persons) Act 1978. At this point, I look nervously at the noble Lord, Lord Stodart. He really should not do things like that when someone is moving an

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amendment. I remember that one of the first jobs I had was in the building industry, and the first lesson I was taught was that before you start building anything make sure that you are in the right field. I suddenly began to wonder whether I had forgotten that when the noble Lord, Lord Stodart, suggested earlier that I was speaking about the wrong Act.
This is evidence of the fact that the noble Earl, Lord Selkirk, was quite right in saying that there have been calls for some sort of consolidation in the rating and valuation laws, as well as in many other matters. However, while the giving of rate relief to a disabled person is a laudable one and one with which no one would disagree, there may be groups other than the disabled, whom we can perhaps discuss when we come to the later clauses on valuation. But we certainly think it very reasonable that there should be rate relief for disabled people, although we could argue about the floor area and the details.
But the important point about this amendment is that this relief should be nationally accepted. A local authority may have a higher percentage of people who, quite correctly, get rate relief because of disablement, and may have additional expenditure compared with another authority which has lower expenditure of this kind. I do not think that the sum would be very great, but the principle behind this amendment is one that will be very much appreciated as being fair, decent and honest.
Therefore, if rating relief is admissible on the basis of criteria laid down in the Bill and adjudicated upon and measured by professional assessors, I hope that the Minister will accept that, in order that there shall be balance throughout Scotland, the cost of this additional relief should be borne by central government, not by the local authorities upon which, just because of a borderline drawn on a map, the cost happens to fall. In that spirit, I hope that the Minister will give the matter serious consideration. I beg to move.
Lord Mackie of Benshie: I regard this as a splendid amendment which could be used for other purposes for which the Minister has sympathy. I hope that he will accept the principle embodied therein.
Lord Gray of Contin: I am grateful to the noble Lord for moving this amendment and for the opportunity it gives me to draw to the attention of your Lordships' Committee the very generous contribution which the Government currently make towards the rate rebates given by rating authorities under the Rating (Disabled Persons) Act 1978. Under Section 69 of the Local Government, Planning and Land Act 1980, the Secretary of State pays a grant to rating authorities equal to 90 per cent. of the aggregate amount of the rebates they are required to give under the 1978 Act. The balance of 10 per cent. of aggregate rebates, which shows as a loss of local rating resources, is taken into account in determining total rate support grant and in the distribution of resources element. In the Government's view, there should be some direct financial interest by local authorities in the granting of
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this rebate, as there is under the general scheme for rate rebates within housing benefit, where the direct grant is also 90 per cent.
A residual burden of 10 per cent. of rebates, which is taken into account in determining general support through rate support grant, is not an onerous burden on rating authorities. For the information of your Lordships, the current amount of rebates under the 1978 Act is estimated at about £7.5 million. Inquiries have been made of local authorities to attempt to assess the cost of the provisions in Clause 5, but such an estimate could only have been made by local authorities undertaking a detailed survey at disproportionate cost. The financial effect of the Clause 5 provision will, in common with other local authority financial matters, be kept under review by the Secretary of State.
I hope that the noble Lord will accept the explanation which I have given and that he may be prepared to withdraw his amendment.
Lord Carmichael of Kelvingrove: I am grateful to the Minister for his reply. I understood him to say that it leaves the authority which has a higher percentage than a neighbouring authority with 10 per cent. to be met because of its circumstances. I firmly believe that this should be a national rather than a local responsibility. However, it is a point to which we could return later. As the noble Lord, Lord Mackie of Benshie, suggested, there are one or two other areas which we may be encouraging the Minister to look at, as well as this matter which comes under the Rating (Disabled Persons) Act 1978. I shall not press the amendment on this occasion but will take the opportunity to say that at a later stage we shall want more information from the Minister.
Amendment, by leave, withdrawn.
10.5 p.m.
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 29:
Page 5, leave out lines 18 and 19.
The noble Lord said: It is nice to be able to approach this Table to move an amendment that one knows, in the presence of the noble Viscount, is going to be accepted. It is to him that I now speak. We are concerned here with a benefit which is being given to the disabled in respect of rates, but it is left to the assessor to determine the extent of the provision that is to be made. Having said all this on what the assessor has to do, a certificate has to be obtained. Then in lines 18 and 19 on page 5 come the important words that I want deleted. They are:
"and, subject to subsection (7) below, the assessor's certificate shall be conclusive "
In other words, in subsection (7) we find that the assessor's certificate is not conclusive because there is an appeal to the valuation appeal committee, or to the lands valuation appeal court, and so on.
If the certificate is not conclusive why on earth do we say that it is conclusive? There is no reason why we should say that it is conclusive when there is a right of

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appeal. Therefore, those two lines are just a red herring. Flags are waving that the certificate is conclusive. However, it is not; it is subject to subsection (7). It states:
"An appeal shall lie in respect of a certificate under subsection (5A) above".
The words should not be there. They add nothing. As a matter of fact, they might mislead someone who reads quickly—someone who is as blind as myself, anyway—when they see that the certificate shall be conclusive. It is not conclusive because there is a right of appeal, so we should get rid of those words. I beg to move.
Lord Gray of Contin: I am grateful to the noble Lord for raising this point. Perhaps I should emphasise that the responsibility for determining entitlement to rebate and the amount of rebate rests with the rating authority. The assessor's function is to assist the rating authority by providing a certificate of the rateable value attributable to the parts of the lands and heritages qualifying for rebate. Almost certainly, the rateable value attributed by the assessor to the qualifying parts will have been arrived at, at least in part, by a process of estimation. But the basis of any estimates will not change in the same way that estimates of expenditure made before the beginning of a financial year change as the financial year progresses. One attribution of rateable value and one related certificate should be sufficient in each case. To avoid administrative difficulties it is important that it should be clear that these should be conclusive.
Of course, if an attribution of rateable value is considered to be wrong by the ratepayer concerned it is open to him to pursue the matter through the normal valuation appeal procedures. For those reasons I have to ask the noble Lord, Lord Ross of Marnock, to consider withdrawing his amendment.
Lord Ross of Marnock: No, I shall not, because the subsection does not make sense. The certificate is not conclusive if it can be appealed against, and that is what the next words say.
"An appeal shall lie in respect of a certificate under subsection (5A) above."
People want to know their rights. There is no justification for the two lines I wish to delete. I hope that the noble Viscount is paying attention to this kind of thing. This is what we have to contend with. This is why things take longer and my temper gets shorter. They add nothing at all.
Lord Gray of Contin: I always find it difficult to convince the noble Lord, but probably I am not alone among Ministers in that. Let me say this to him. I tried to explain that the basis of any estimates will not change in the same way as estimates of expenditure made before the beginning of a financial year change as the financial year progresses. One attribution of rateable value and one related certificate should be sufficient in each case. To avoid administrative difficulties it is important that it should be clear that these should be conclusive, but the fact that these are conclusive should not necessarily mean that they should not be appealed against. It is conclusive
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with the one exception, and the one exception is subsection (7).
Lord Ross of Marnock: Yes, that is right; which means that they are not conclusive. It is as simple as that. They are not conclusive.
Lord Gray of Contin: With respect to the noble Lord, anything is conclusive until such time as an appeal is launched against it. If there is no appeal against it, it is conclusive. If the ratepayer concerned considers that he is not being treated fairly he has the democratic right of appeal. I really do not understand what objection the noble Lord has to that. That seems perfectly fair and democratic.
Lord Ross of Marnock: I know it is fair and democratic but we are not talking about that. We are talking about the words in the legislation, and these two lines are unnecessary.
The Deputy Chairman of Committees (Lord Murton of Lindisfarne): Amendment No. 29; the Question is that this amendment be agreed to?
Lord Ross of Marnock: I think that I shall withdraw this amendment. The whole Scottish Office, and I hope the Secretary of State, the Lord Advocate, and the Solicitor-General will all be brought in to discuss this point, as it is so terribly important. It is so terribly important that it amazes me that a Minister of State does not have the guts to get up and say, "Of course you are right", and withdraw the objection. But I shall not let this amendment go to the determination of the Committee. I shall withdraw it to give the Government time to have another look at it.
Amendment, by leave, withdrawn.
On Question, Whether Clause 5 shall stand part of the Bill?
Lord Stodart of Leaston: May I make one very small point and ask my noble friend for clarification. This clause amends Section 5 of the 1978 Act, as has been mentioned, which to my mind was a very clearly written section, whereas the present one strikes me as being very much more complex. Perhaps I may briefly paraphrase the 1978 section. It says that rating rebates will be granted to certain premises which fulfil certain purposes. It defines the purposes—whether the premises form residential accommodation, people are being re-trained and welfare services are involved. It says that the rebate will be given provided that the premises are used wholly for one of the purposes in the list, or partly for one of the purposes in the list.
What puzzles me—and I am sure that my noble friend has the answer—is that both he and the Minister in another place said that the 1978 provision was a question of all or nothing. I find it very hard to understand why it was all or nothing when in fact it was wholly or partly. I cannot really see at first sight in what way there is any improvement to this. It is a much more complicated provision than it was formerly.
Lord Gray of Contin: My noble friend is correct. This matter is very complicated and if he is agreeable, I shall write to him in due course about it.
Clause 5 agreed to.
Clause 6 [Power of Secretary of State to limit estimated rate fund contributions to housing revenue account]:
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 30:
Page 6, line 4, after ("State") insert ("after holding a public inquiry into the housing and other relevant circumstances in the area").
The noble Lord said: With Amendment No. 30 we come to an important clause whereby the Secretary of State takes power to limit the estimated rate fund contribution to the housing revenue account. From the point of view of district authorities, housing is the one important function that they have. Indeed, a considerable proportion of the rates that they raise is related to the maintenance of their housing stock. That is that part of the housing revenue account that is not met (a) by Government grants, (what used to be considered housing subsidies), and (b) the actual rents. That has to be made up from a rate contribution.
A rate contribution has always been part of the whole area of housing finance in Scotland, right from the very beginning of the Addison acts, right through to the Wheatley acts. Then there was the 1935 Act of the Conservative Government; I have that here as a matter of a fact; it just happens to be by my hand today. When we were seeking in 1935 to get rid of the slums and start on slum clearance, the Government made a contribution which was to be a sum payable annually for a period of 40 years. This was in 1935. Of course, this was used by local authorities up until about 1940–46 and beyond.
The Act stated that a local authority to whom the department had undertaken to make a contribution in respect of any house should make a contribution out of the appropriate rate in accordance with the provision of the Act. The local authority had to make a rate contribution. It was half of the conditions of receiving a subsidy from the Government. It is interesting that the Act goes on to say that a contribution shall be provided by equal annual instalments during a period of 60 years. This started in 1935, so the obligation was to last for at least 60 years from the completion of any of the houses built under that Act. Even my simple arithmetic takes me to 1995.
What I am trying to bring out is that it was part of the whole policy of building houses by local authorities that the Government made a contribution, and the local authority also had to make a contribution out of the rates—a rate contribution. If we take this particular Act, the contribution out of the rates was to be about one half of what the Government paid. Now it has suddenly become a matter of concern over the years that monies were taken out of the rates. They had to be taken out of the rates in order to get the support of the Government in the first instance. We now have the position where the obligation that was given in Acts of Parliament, right up to the early 1960s, where subsidies were paid over a period, was wiped out later on and the housing support grant was introduced.
When the Labour Government left office in 1979 the amount of the housing support grant payment in Scotland was £214 million. The Government had been forcing, forcing and forcing local authorities, by the particular formulas of payment of this grant, into the position of raising the rents and thereby putting themselves out—despite all the pledges of 60 years' support and the rest of it—of the position of receiving any housing support grants.
Last year, the amount paid in housing support grant had dropped in five years from £214 million to about £52 million. It is dropping further this year. if the Government are withdrawing their support, it means that the rate support has to grow unless you are to get into the position of making rents unreasonable. My noble friend Lord Carmichael quoted earlier what Glasgow was supposed to do in one year: increase rents by 70 per cent. What this Bill already does in taking powers from the local authority to fix its rates and enabling the Government to fix the rates is bad enough. Now, the Government are virtually fixing the rents.
This means that a limit will be placed on the rate contribution that has always been respectably present as a condition of building houses at all. If the Government are going to limit the rate contribution and put it fairly low, two things will happen. There will have to be a tremendous increase in rent or there is going to be a reduction in the maintenance standards of houses—this at a time when we have just passed a tenants' rights Bill that tries to ensure that houses will be properly and adequately repaired.
That was the basis of the new right given to the tenants. It presupposed further expenditure by local authorities in maintaining and repairing houses. Here we have the Government limiting what can be taken from the rates in order to perform that function. All that can be done in that case, if you are to survive, is to have rents go up. This, again, is encroaching upon the democratic rights of local authorities—something that has been accepted certainly in Scotland if not in England and elsewhere.
If the argument is that ratepayers are paving too much in rent, may I remind members of the party opposite that only £52 million was paid in respect of all the houses—about a million in Scotland. I should like to know what was paid by the Treasury last year in England in mortgage relief to owner occupiers. The pendulum has swung far too far the other way Rents in Scotland are no longer low. They are now reasonable. But the Government are bent on further increasing them to get themselves out of a dilemma. Their manipulations have led to considerable increases in rates.
It is the Government's withdrawal of support from the housing revenue account that has led to the position of increases in rents and rates Now they are going to try to keep the rate business lower by limiting the rate contribution to housing. The only possible answer is that rents will go up. The Government create a dilemma and cause difficulties for everyone else. We are getting to a point where I shall require to leave you. In the meantime, I have pleasure in moving the amendment.
10.24 p.m.
Lord Gray of Contin: I know that I speak for the whole of your Lordships' Committee when I say how sorry we are that the noble Lord, Lord Ross of Marnock, will have to leave us soon. I shall try to answer one or two of the points that he raised before he departs. He made the point about rate contribution and suggested that this has always been part of housing finance. The rate contribution meets the balance between expenditure and income but there is no right to make a rate contribution where authorities can reasonably be expected to balance their books without it. In too many cases nowadays authorities are making contributions beyond what is justified by need. I do not accept the noble Lord's suggestion that reductions in rate support grant are a relevant factor. Housing support grant is intended to meet the difference between what the authorities can reasonably expect to receive by way of income and what they might realistically be required to spend on their housing account. Where an authority can balance its books without Exchequer subsidy—that is, without housing support grant—I do not see why the ratepayer should be expected to step into the breach. Nor do I accept that it is unreasonable to expect some increase in rents. Average weekly rents in Scotland are running at only about two-thirds of the level of average rents in England. But the average wages of a Scottish manual worker are now slightly ahead of those of his English counterpart. I do not think this differential can be justified.
I accept that we shall need to look carefully at the circumstances of individual authorities. Much of the relevant material is already gathered by my department as part of the annual housing expenditure limits and housing support grant exercises and there are regular discussions with the local authorities on these matters. I do not believe, therefore, that this will lead to any significant addition to the workload of my department or of the local authorities. I make no bones of the fact that we want to see a reduction in aggregate rate contributions. The subsidy from the ratepayers towards rents is already higher than can be justified by need and is pre-empting resources which will be better spent on the modernisation and improvement of stock.
I am afraid that I cannot accept the noble Lord's amendment. To accept it would cause very serious problems for the implementation of Clause 6, and I hope that before he leaves us he will consider withdrawing the amendment.
On Question, amendment negatived.
Lord Ross of Marnock Lord Ross of Marnock moved Amendment No. 31:
Page 6, leave out lines 14 to 16 and insert—
("(2) The limit referred to in subsection (1) shall not be such as to require any local authority to reduce the proportion of expenditure on their housing revenue account met by a contribution out of their general fund below 20 per cent.").
The noble Lord said: I still have a few minutes; I am leaving at half past ten. I have already complained about the treatment of Scottish Members and Scottish business, and I hope that the Leader of the House will take due note.
I quoted the Act of 1935 where the proportion in relation to what the Government were giving was
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50 per cent. I think this percentage is fair and reasonable in this respect. This amendment was prompted by discussions and correspondence we had with Shelter, who are concerned that the reduction of the rate contribution that may well be forced upon local authorities by the Government will lead to lower standards of maintenance and repair—measures that the Government are pressing on local authorities in another Bill which we dealt with today and on which the Government had the rather unfortunate experience of being defeated on a particular clause.
What the Minister of State said is not good enough. I have been in this housing field all my days, long before I came into this Committee. It was always the case that the Government gave a subsidy on the understanding and on the condition that the local authority paid a rate contribution. The facts in Scotland were that poverty was such that even with that rate contribution the rents were too high and a further rate subsidy had to be made. Those were the facts, and it is no great glory to this Government that they have reduced and reduced the support that was long promised to Scottish housing and in respect of which local authorities in Scotland borrowed money over 60 years. The money has still to be paid back at a time when support has been withdrawn from the Government. To say that all this is for the good of this, that and the other person, is not good enough.
I want the Scottish householders to be treated as fairly and as generously as the English householders. There has been no reduction in mortgage relief to owner-occupiers in England. The complaint has always been that there are not sufficient owner-occupiers in Scotland. One of the reasons why we have not got them is that we cannot afford them, and we had to build houses to provide people with anything at all. This withdrawal has just meant a continual pushing up of rents.
I know that the Government will probably get no joy today from the results of the municipal elections in Scotland any more than they did from the general election in Scotland. Quite apart from their failure to get support, they should appreciate that there is a sense of justice. It is little wonder that the people of Scotland really want to have this kind of discussion that we have here. I have been counting the number of people on the other side of the Committee who are interested in Scottish business—I am talking about the House of Lords. You see, I do not approve of the place. The kind of thing which has happened today and is happening now justifies my plea in respect of Scotland —that this kind of thing should be done in Scotland. I am in favour of devolution; the Government are opposed to devolution. That indicates that they should be interested in Scottish business. Look at them—a "crowded" Committee again at half-past ten!
I am not satisfied with what we have from the Government, and I sincerely hope that they will think about this in a much more constructive way than they are thinking at the present time. They certainly have no sense of knowledge of the history of local authority building in Scotland, all that went before it and all that was promised in respect of it.
Lord Gray of Contin: The noble Lord, Lord Ross, has explained the purpose of this amendment, and we

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are grateful to him for doing so. Once again, I am afraid I cannot accept the amendment and I cannot agree with what he has said. I have explained already that Clause 6 will enable my right honourable friend the Secretary' of State to limit by order the contributions local authorities budget to make from their rates towards current expenditure and their housing account.
We have been prompted to take this power because we are concerned that local authorities continue to budget for rate contributions in excess of the levels which we believe are reasonable and necessary. In the current year, for example, local authorities have budgeted for rate contributions some £22 million in excess of the levels which we consider to be reasonable, and fully £5·5 million of that figure is accounted for by Glasgow alone. This is unfair to the ratepayers and tenants, because authorities by their decisions pre-empt for a general subsidy on rents resources which would be otherwise available and would be better spent on the modernisation and improvement of housing stock.
Of course, in setting limits by order under Clause 6 and in determining what rate contributions local authorities might reasonably need to make in order to balance their books, we shall need to look carefully at the circumstances of individual authorities. The present amendment, however, suggests that there is a minimum proportion of the housing budget which local authorities should have a right to meet from the rates without reference to any other considerations. Whether that proportion is set at 10, 20 or 30 per cent., this is not an argument which the Government could accept. Our concern is that the rate contributions to housing are in general too high.
A number of authorities are already able to balance their housing revenue account without any contribution from the rate fund, and without needing to charge excessive rents. I am not saying that it should be possible for every authority, or even a majority of authorities, to reach this position; we shall need to look very carefully at individual circumstances. But I am saying that in general the level of rate contributions is at present too high and this is giving rise to misdirection of resources. I regret that I cannot agree with the comments of the noble Lord; nor can I accept his amendment.
Lord Ross of Marnock: In view of that unsatisfactory answer, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 32 not moved.]
Clause 6 agreed to.
Lord Denham: I think that this is probably the time of day when it would be most satisfactory to move on. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Health and Social Security Bill
Brought from the Commons; read a first time, and to be printed.

British Railways Bill
Returned from the Commons with the amendments agreed to.
House adjourned at twenty-three minutes before eleven o'clock.

  PUBLICATION OF STOLEN MATERIAL
  PUBLICATION OF STOLEN MATERIAL
  LOCAL AUTHORITY GRANT-RELATED EXPENDITURE
  LOCAL AUTHORITY GRANT-RELATED EXPENDITURE