Sitting of 10 July 1985

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  EAST LOTHIAN DISTRICT COUNCIL (MUSSELBURGH LINKS, ETC.) ORDER CONFIRMATION
  Mr. Secretary Younger presented a Bill to confirm a Provisional Order under section 7 of the Private Legislation Prodecure (Scotland) Act 1936, relating to East Lothian District Council (Musselburgh Links, etc.): And the same was read the First time; and ordered to be considered upon Tuesday 16 July and to be printed. [Bill 187.]
  SHETLAND ISLANDS COUNCIL ORDER CONFIRMATION
  Mr. Secretary Younger presented a Bill to confirm a Provisional Order under section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to Shetland Islands Council: And the same was read the First time; and ordered to be considered upon Tuesday 16 July and to be printed. [Bill 188.]
  PETERHEAD HARBOURS (SOUTH BAY DEVELOPMENT) ORDER CONFIRMATION
  Mr. Secretary Younger presented a Bill to confirm a Provisional Order under section 8 of the Private Legislation Procedure (Scotland) Act 1936, relating to Peterhead Harbours (South Bay Development): And the same was read the First time; and ordered to be read a Second time upon Thursday 18 July and to be printed. [Bill 189.]
Oral Answers to Questions
  ENVIRONMENT

    Regional Water Authorities
    Mr. Hoyleasked the Secretary of State for the Environment how many representations he has received regarding the proposed privatisation of the regional water authorities.
    The Minister for Housing and Construction (Mr. Ian Gow): Twenty-nine, Sir.
    Mr. Hoyle: Why does the Minister persist in putting the public's health at risk by water privatisation? Does he not realise that water is an essential commodity which cannot be substituted? What will happen to investment in the water authorities, especially with respect to replacing sewerage and recreation centres? Does this mean that the
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    water supply will be in the hands of the City of London and foreign investment? Why does the hon. Gentleman persist in this folly, especially as the public are outraged by this privatistion?
    Does the hon. Gentleman not realise that if he continues with this programme the public will rise up and give him a black eye? That is no trivial matter.
    Mr. Gow: I am aware that water is essential to human life. The House would do well to remember that 25 per cent. of the British people are already provided with fresh water by the private water companies. Hon. Members should understand that many great benefits will accrue to the water industry and, above all, to customers if we can bring a measure of privatisation to the water industry. The Government intend persevering in their examination to ascertain whether they can bring some free enterprise to the industry.
    Several Hon. Members rose—
    Mr. Speaker: Order. Long supplementary questions lead to long ministerial replies, which cannot help Question Time.
    Sir John Page: Is my hon. Friend aware that private water companies are celebrating this year their 100th anniversary of supplying wholesome water to the people? Will my hon. Friend consider, during discussions on privatisation, the possibility of using the legislation covering the water companies as a model for the privatisation of the authorities?
    Mr. Gow: There could be no better example of the success of the private water companies than the successful private water company of which my hon. Friend is a director. During our examination of privatisation we shall certainly consider the lessons that we can learn from the successful private companies.
    Mr. Kilroy-Silk: How many water authorities have been exempted from the EEC requirement which came into effect this month on the amount of nitrates allowable in drinking water?
    Mr. Gow: Although that matter does not arise directly from this question, I can point out that I had a meeting yesterday with the Government's Chief Medical Adviser on the subject. I shall be announcing the decision on derogations shortly.
    Mr. Stanbrook: If a decision is taken on that matter, will my hon. Friend bear in mind that it is desirable not only that costs should be kept as low as possible but that there should be no great variation of water prices throughout Britain? That would be most undesirable as regards past investment in the industry and what is available now. Such a variation might widen the gap between those areas that are fortunate in fostering investment and those that are not.
    Mr. Gow: I shall certainly consider my hon. Friend's advice. I remind the House that among the advantages of privatisation will be the possibility that those who at present work for water authorities and, not least, those who are customers of the water authorities will become shareholders.
    Mr. Cowans: Will the Minister reflect on the fact that water is far too important a commodity, to use his own words, to leave to the "whims" of the free market? If he

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    will not reflect on that, I am bound to say that the Labour party in power will return it to public control. If the private sector is so good, will the Minister kindly explain why the private firm that supplies Eastbourne charges more than the public sector?
    Mr. Gow: It used to be believed, even by some of my right hon. and hon. Friends, that the ratchet-effect of Socialism was such that any threat to renationalise that which we denationalised should be taken seriously. I say to the House and to the engaging Labour party spokesman on water that a threat to renationalise that which we may denationalise is no threat.
    Mr. Cowans: Eastbourne.
    Mr. Speaker: Order.
    Mr. Meadowcroft: Is not the present position unsatisfactory, in that those who supply water are not properly accountable as virtually all water authorities, with some notable exceptions, meet in private? Why would a privatised system be more accountable than the present system, which is hardly accountable to consumers? What protection will there be to ensure a pure water supply?
    Mr. Gow: It is because the present organisation of the water industry, though greatly improved since 1979, is not yet perfect that we are examining the possibility of a measure of privatisation. I should have thought that the Liberal party, which claims to be the party of participation, would have welcomed the opportunity for more and more customers and more and more employees to become owners of the business. It is characteristic of the Liberal party — that band of visionary missionaries with neither vision nor mission — that it should make a wet observation of that kind.

    Derelict Dormant Land
    Mr. Steenasked the Secretary of State for the Environment how many acres of publicly owned derelict dormant land now appear on the register of vacant land; and how that compares with the figures for each of the last three years.
    The Minister for Local Government (Mr. Kenneth Baker): At the end of June 1985 the land registers showed 113,000 acres of unused or underused land owned by local authorities and other public bodies in England. Figures for the last three years are:

    1982 95,000 acres

    1983 109,000 acres

    1984 114,000 acres

    Those figures conceal the fact that over 21,000 acres have been removed since the registers started because the land has been sold or brought back into use.
    Mr. Steen: In view of the immense amount of land stuck on the registers, which I believe is only the tip of the iceberg, will my right hon. Friend consider privatising public land, raising the necessary finance through the issue of industrial revenue bonds, and amending planning laws so that a national, wasting asset may be put to excellent use?
    Mr. Baker: My hon. Friend's proposals are interesting. We wish to persuade local authorities to use the land, because the public hoarding of land when nothing
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    is planned for it and nothing is happening to it is unacceptable. I shall certainly consider my hon. Friend's proposals.
    Mr. Allan Roberts: Is the Minister aware that a great deal of public and private land from which the negative value has been removed by public money from the Merseyside development corporation is still standing idle because private developers will not go on it?
    Mr. Baker: Merseyside development corporation is undertaking some of the best developments on Merseyside, as I think the hon. Gentleman will recognise. Members on both sides of the House will agree that it is a disgrace when public authorities—local authorities or nationalised industries—own land and are doing nothing with it, and that that land should be sold and developed.
    Mr. Ward: My right hon. Friend will be aware of the pressure on housing land in the south. Is it not a scandal that those authorities are still holding on to land which in many cases is derelict? Has the time not come to give up persuasion and to set a time limit on how long those authorities may hang on to what is a valuable and, as my hon. Friend the Member for South Hams (Mr. Steen) said, wasting asset?
    Mr. Baker: A third of the land is in the inner cities, and the Government are not sitting idly by. We have already issued four directions, and in June my right hon. Friend the Secretary of State said that he was thinking of giving warnings that he would issue instructions on a further 50 sites covering some 388 acres. We are moving energetically.
    Mr. Freeson: Is not one of the biggest single obstacles to bringing derelict land back into use, particularly in inner cities, the Government's failure to remove the restrictions on the expenditure of derelict land grant? Have not hundreds of projects submitted by local authorities been held up by the Government's restrictions? Could such schemes not bring commerce, industry and housing, and private investment to match public expenditure, if only the Government would increase the permitted expenditure?
    Mr. Baker: We have substantially increased expenditure on derelict land grants since we came into office. It has increased again this year to about £75 million a year. I agree with everything that the right hon. Gentleman said, and I hope that there will be an increase next year.

    Office Development
    Mr. Boyesasked the Secretary of State for the Environment if he will make a statement on his policy towards the control of office development in the light of the report on office rents and rates 1973 to 1985, published in May by Debenham, Tewson and Chinnocks, a copy of which has been sent to him.
    The Parliamentary under-Secretary of State for the Environment (Mr. William Waldegrave): I have read the report with interest.
    Mr. Boyes: That was a pathetic answer. Does not an hon. Member who has tabled a question deserve an answer from a Minister? Should the Minister not have taken into consideration the comments by Mr. Peter Evans, the head of research at Debenham, Tewson and Chinnocks, who

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    said that office accommodation is cheaper now than for a long time, and that one cannot claim that the rates burden is causing rent rises because the relationship between the two is not proved, rents not having risen in real terms over the past few years? How does the Minister justify that statement?
    Mr. Waldegrave: I read the report with interest, because it says:
    "As found in both the association's report and our survey, commercial rates in the inner London boroughs have risen by one of the lowest margins in the last 10 years and this can be attributed directly to the Government's rate capping controls."
    For that and other reasons, I read the report carefully.
    Mr. Dickens: Does my hon. Friend agree that the Debenham, Tewson and Chinnocks annual report is crammed with statistics and does not make good bedtime reading? Only one sentence in it could affect and influence the hon. Member for Houghton and Washington (Mr. Boyes)—that which said that many office accommodation owners are moving out of the London area, and perhaps into the hon. Gentleman's constituency. Will not economic measures influence such moves, with offices then going to the provinces?
    Mr. Waldegrave: The move to constituencies such as that of the hon. Member for Houghton and Washington (Mr. Boyes) might be the kind of phenomenon that the report shows, because it shows that because of the rates office accommodation has been tending to move out of areas such as Lambeth and Southwark.

    South-East (Housing Demand)
    Mr. Proctorasked the Secretary of State for the Environment what assessment he has made concerning the supply and demand for houses in the south-east of England.
    The Secretary of State for the Environment (Mr. Patrick Jenkin): While my Department does not attempt to forecast housing supply and demand, it publishes much information on recent trends. The London and south-east regional planning conference—SERPLAN—is preparing an assessment of future housing requirements in the region.
    Mr. Proctor: Is my right hon. Friend aware that one of the proposals to meet the alleged shortfall is that proposed by Consortiums Developments Ltd. to build a new town of 5,000 houses in my constituency between West Horndon and Bulphan? Is my right hon. Friend further aware that that proposal has led to universal and substantial all-party opposition from the Essex county council, from the London borough of Thurrock and from the villages of Bulphan and West Horndon and the local Members of Parliament? Will he take that into account when he makes his decision?
    Mr. Jenkin: I am aware of the proposal to which my hon. Friend draws attention. The matter will be dealt with in accordance with normal planning procedures. There is a planning application before the Thurrock borough council, and it will be for it to take a view in the first instance.
    Mr. Dubs: Does the right hon. Gentleman agree that in inner London there are many badly housed or homeless people who are too poor to compete effectively in the
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    private housing market and that his policies of cutting back on the public sector are denying many of them the chance of decent homes in their lifetimes?
    Mr. Jenkin: The hon. Gentleman will recognise that it has been Government policy that the demand for new homes should primarily be met by the private sector and that the number of houses built by the private sector has increased substantially. The Government recognise that there will always be a proportion of the population unable to afford the full cost of private sector housing. For them, the housing associations and local authorities will provide a way to be housed. But it is up to the local authorities to make the best use of their resources and not, for instance, have up to 25,000 houses and flats empty for more than a year. If they can deal with that, they may be able to help some of the homeless.
    Mr. Andrew MacKay: Is my right hon. Friend aware that there is no proof of the size of demand for new houses in central Berkshire to justify the foisting of an excessive number of houses on to the area completely against the wishes of the people, the local planning authority and local business?
    Mr. Jenkin: I am aware of my hon. Friend's forcefully expressed views on this, which I know are reflected in those of a great many of those whom he represents. The Government will be making their view public on this shortly.
    Dr. Macdonald: Is the right hon. Gentleman aware that, according to his Department's figures, there is enough land available with planning permission to continue building houses at the present rate in Essex until 1990? Is he aware, further, that the proposals by Consortium Developments to use green belt land is opposed by the leading Labour group on Thurrock borough council and that, furthermore, Thurrock borough council is considering plans to use derelict land which is available in Thurrock and can build a further 5,000 to 6,000 houses on it and that therefore Consortium Developments' planning application to misuse green belt land should be firmly rejected by his Department?
    Mr. Jenkin: I am sure the hon. Lady recognises that if Consortium Developments appealed against a refusal of permission or a failure to give permission within the specified time, that appeal would have to come to my Department and that it would be wrong for me to express any view on the merits of the proposal to which she referred.
    Mr. Soames: Is my right hon. Friend aware that in the south-east many people are extremely alarmed about the pressure on land for house building? That being so, will he assure the House that he will respect the integrity of the county plans, which are an important protection for my constituents?
    Mr. Jenkin: Yes, indeed. The county structure plans are one of the mechanisms whereby it is possible to regulate the development of housing in areas which are already under pressure. My hon. Friend will know that the Government have made it abundantly clear again and again that they do not wish to see development on the green belt, where the protection should be permanent, and that they do not want to see good agricultural land taken. At the same time, it has to be said that there is a demand for housing in the south-east, as there is in other parts of

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    the country. It is our policy to make sure that sufficient suitable land comes forward for that purpose to meet the demand.
    Mr. Simon Hughes: Given that incomes in my constituency average about £5,000 and that the average price in the private sector is £39,000 for a flat and £48,000 for a terraced house, will the right hon. Gentleman give some thought — given that he accepts the demand for low-cost homes for sale in docklands, especially from young married couples — to introducing new schemes and methods of finance so that people can live where they work and come from and not be forced to move from the area when the demand is there, the land is there and the supply could be there as well?
    Mr. Jenkin: I understand the hon. Gentleman's point, and he knows of the various low-cost home ownership schemes promoted by the Government. He also knows that in his constituency the London Docklands development corporation has been among the foremost in making use of those schemes so that his constituents can occupy homes close to where they have always lived on land which for many years has lain derelict. I hope that the hon. Gentleman approves of that.
    Mr. Squire: Despite comments from some of my hon. Friends, does my right hon. Friend accept that in parts of east London and south-west Essex there is considerable unmet demand for houses to buy? That must be taken into account when he considers these policies, because many young people are being driven from where they wish to live.
    Mr. Jenkin: I certainly take most careful note of what my hon. Friend said. It reflects my impression, as I also have a constituency in that area.
    Mr. John Fraser: Is the Secretary of State aware that in Greater London the average price of a pre-1919 terraced house is now almost £50,000, which is twice the national average and well beyond the means of many needy first-time buyers? Is he further aware that that extremely high price is a reflection of the 1,000 per cent. increase in the south-east in land prices since the Government took office? Does he agree that we have, not a housing policy, but a speculators' bonanza? Will he now engage in an exercise of positive planning to identify private land, along the lines suggested by my hon. Friend the Member for Thurrock (Dr. McDonald), which can be used for private housing, without raping the green belt for private profit?
    Mr. Jenkin: The Government certainly want to see the maximum possible use of inner city land that is available for housing for that purpose. However, one of the best ways in which inner city authorities, particularly those in London, can meet the needs of the families to whom the hon. Gentleman referred is to bring into use by homesteading or other ways the many thousands of empty houses and flats that they have on their books. It is a scandal that so many should be allowed to remain empty for so long, and that homeless families must then be put into bed-and-breakfast accommodation.
    Mr. Speaker: Order. I again appeal for brief questions.

    Liverpool (Rates)
    Mr. Parryasked the Secretary of State for the Environment if he has any plans to meet Liverpool city council leaders to discuss the council's recent decision about rates.
    Mr. Patrick Jenkin: No, Sir.
    Mr. Parry: Will the Secretary of State at least meet elected Members of Parliament to discuss this critical position and consider meeting council leaders? Meantime, will he ask the district auditor to withdraw the letter that has been sent to councillors who are defending jobs, services and rates in Liverpool? The right hon. Gentleman knows that the previous Tory-Liberal coalition left Liverpool city council in a mess, because he saw that for himself. Is it not a disgrace that councillors could be banned from office or gaoled for carrying out their pledges to their citizens?
    Mr. Jenkin: The district auditor is completely independent of central Government, which has been the case since the office was first established 150 years ago. I therefore have no power to control him in the performance of his duties. However, it is a complete fallacy to imagine that the problems which now beset Liverpool city council are all the making of its predecessors. The present councillors were given time last year to put their house in order, but they failed utterly to do anything about it. On the hon. Gentleman's first point, I shall be ready to meet Members of Parliament from Liverpool who would like to discuss the matter.
    Mr. Favell: Will my hon. Friend take this opportunity to remind the people of Liverpool that they are heavily dependent on the charity of taxpayers in other areas, and that many of those hard-working people resent their money being poured down the bottomless hole which the leaders of Liverpool city council seem determined to create?
    Mr. Jenkin: The Government certainly think it right to give substantial help to Merseyside in general and Liverpool in particular. We look to Liverpool city council to do more to help itself. Why does collecting the refuse in Liverpool cost the council double the number of rounds as, and 25 per cent. more staff than, in Birmingham, which is twice the size of Liverpool? That is an example of the woeful inefficiency of Liverpool city council.
    Mr. Heffer: Will the Secretary of State repudiate what his hon. Friend the Member for Stockport (Mr. Favell) said? The people of Liverpool or elsewhere do not receive charity from anyone. [Interruption.] Although many of the problems were caused by the previous administration in Liverpool, the basic problem is that the rate support grant was cut drastically by the Government over several years, and this year the housing investment programme for Liverpool was cut. On that basis, is it not clear that a reversal of policy is needed? As the Government are already intending to go in that direction, why not start now?
    Mr. Jenkin: If the Liverpool city council was prepared to tailor its budget so that it could live within its target, it could have rate support grant this year of £118 million. If it succeeded in living within its target, it could manage its services with a very modest rate rise.
    Mrs. Currie: Does my right hon. Friend agree that the disastrous policies of the current Liverpool city council

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    serve only to make things worse in that sad city by deterring any potential employer from moving there? Will he say why people in south Derbyshire should have to fork out a ton of money to keep that council afloat on the Mersey when the money could be far better spent on our own ratepayers and taxpayers?
    Mr. Jenkin: I entirely agree with my hon. Friend. I hope that members of the Liverpool city council will recognise, from what has been said from the Conservative Benches, that Parliament's patience is running very short. It is high time that they set about putting their house in order instead of continually standing with their hands outstretched, asking for more money.
    Mr. Alton: Is it not the case that, by budgeting for £100 million above the income that the council will receive this year, the trouble has been brought on the heads of the councillors because they have practised policies of self-immolation? Will the Secretary of State give the House an assurance the he will not send a commissioner to Liverpool—he would be seen as the Prime Minister's henchman — but will instead allow the law to run its natural course? Will he also give assurances to council employees, who are worried about what will happen to them when the money runs out?
    Mr. Jenkin: The employees of the council, including the members of NALGO and of the teachers' unions, have already made their anxieties extremely plain to the ruling majority on the Liverpool city council. The law will take its course as the district auditors' proceedings go through the normal process. I have no power whatever to send in commissioners. I hope that the Liverpool city council will take the steps that still remain within its powers to set its affairs in order.
    Mr. Wareing: Does the right hon. Gentleman agree that the people of Mossley Hill do not need a Tory Member of Parliament when they have the hon. Member for Liverpool, Mossley Hill (Mr. Alton)?
    Does the right hon. Gentleman agree that the people of Liverpool are trying to put their affairs in order? They have 17 priority housing areas. He has seen the housing problems on Merseyside, and will see them again during his visit next Friday. He refuses to acknowledge the real needs of the people of Merseyside and prefers instead to dissipate taxpayers' money on international garden festivals and Tate galleries for the north, which, while desirable, are not first priorities for the people of Liverpool.
    Mr. Jenkin: The hon. Gentleman has been less than fair to those who successfully carried through Britain's first international garden festival. Nothing did more to lift the spirits of the people of Liverpool than that festival last year. They demanded that it should be opened again this year, and it has been. That in no way excuses the failure of the Liverpool city council to use the time that it was given last year to put its house in order, to seek to get more efficient services and better value for money, and so live within its income. It is because the council has failed to do that that it is now facing very serious problems.
    Mr. Allan Roberts: Will the Minister accept some responsibility, as the Minister responsible for Merseyside—as was his predecessor — for the fact that hard drug-taking among young people has increased fourfold, while at the same time Government policies have created a
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    situation in which the leader of Liverpool city council, a JP and retired schoolmaster who has never broken the law in his life, is being turned into a law-breaker by the Government because he wants to defend services for the elderly, the disabled and the children in Liverpool?
    Mr. Jenkin: The hon. Gentleman is seriously misrepresenting the situation. If Councillor Hamilton or any other councillor of Liverpool city council chooses to go outside the law and vote for a budget or rate which may or may not be illegal, that is a matter for the courts. That is their decision. It is in no sense a decision of the Government, and I repudiate wholly what he has said.

    Council Housing Stock
    Mr. Flanneryasked the Secretary of State for the Environment if he will institute a survey in all major cities of council housing stock to discover how much money necessary repairs will cost.
    The Parliamentary Under-Secretary of State for the Environment (Sir George Young): My Department has already launched such an inquiry. On 11 April of this year my Department wrote to all local housing authorities in England asking them for information on the condition of their housing stock, and the expenditure they estimate is needed to put it in good condition. Local authorities' returns are now being processed and I hope initial results will be available by the end of this month.
    Mr. Flannery: Is it not a fact that Sheffield launched such a survey, the results of which show that hundreds of millions of pounds are needed at a time when the trail of destruction of cuts by the Government is not only allowing the infrastructure to degenerate on a grand scale but is causing the superstructure to degenerate? When will the hon. Gentleman realise that, as a result of those cuts and the ensuing rate capping, it is impossible to provide services for people in the way that councils have been doing for years because the Government are cutting out the money that is needed to repair council houses, for which the waiting lists grow longer every week?
    Sir George Young: On the first point, my Department is indeed analysing the results of the survey that Sheffield council has done. As I said, we hope that the results will be available by the end of the month. With regard to reductions in public expenditure investment in housing, as I am sure the hon. Gentleman knows, between 1974 and 1979 public sector investment in housing fell by 45 per cent., after allowing for inflation, and since we came to power it has fallen by 26 per cent. on the same basis, so I reject his criticism.
    Mr. Galley: Has my hon. Friend had any discussions with the Halifax building society about the approval of repair schemes for pre-cast reinforced concrete houses in major cities or elsewhere? If so, can he tell the House what types of houses and what methods of repair may now be eligible for mortgages from the Halifax as a result of what seems to be an excellent initiative by the society?
    Sir George Young: I was delighted to learn that the Halifax building society has agreed that PRC houses repaired under the NHBC schemes will automaticaly be accepted by the society for a mortgage. It has done this in advance of formal approval by the NHBC. I very much

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    welcome that initiative, which I think will be greatly welcomed by many owners. I hope that it will not be too long before other building societies follow in its wake.
    Mr. Cartwright: Does the Minister recognise that the massive problems of dampness and condensation, which affect so many flats in constituencies like mine, result directly from the fact that many tenants simply cannot afford adequate heating in their own homes, particularly when they have to contend with wickedly expensive and inefficient heating systems put in during the 1960s? What steps are the Government planning to help local authorities to tackle those problems?
    Sir George Young: As the hon. Gentleman knows, I visited his constituency and met a number of the tenants in some of the more difficult estates in Greenwich. If Greenwich borough council wishes to spend part of its HIP on improving the heating systems in local authority stock, the Government would not question its priority. We shall be discussing at a later stage with Greenwich and other local authorities which have difficulty what can be done through the newly established unit on urban housing renewal, which my Department launched a few weeks ago.
    Mr. Frank Cook: *Having carried out this survey, will my hon. Friend also take the opportunity to examine the length of time for which council houses remain void in the Middlesbrough area in particular, and the outstanding rents that are owed in that area? If the two things were brought together, after 50 years of almost continuous rule by the Labour authority in Middlesbrough, the situation would improve for council house and other tenants in that region.
    Sir George Young: I agree with my hon. Friend that if houses are left unlet there is a loss of income. Likewise, if rents are not collected, the local authority is also out of pocket. This may inhibit the level of service that it can provide to tenants and ratepayers. I hope that Middlesbrough will respond to the prodding of my hon. Friend and reduce the number of vacant properties and outstanding debts.
    Mr. Campbell-Savours: Has the Minister seen the Royal Institute of British Architects' survey on local authority housing entitled "Decaying Britain", which shows that £10,000 million is needed to deal with the backlog of repairs and maintenance? Is the Minister aware that selling council houses will not raise that amount of money? Where will it come from? Will the Government cough up? Can the people who live in that housing be assured that these problems will be resolved?
    Sir George Young: As of a few days ago, I understood that the policy, supported by a number of the hon. Friends of the hon. Gentleman, was to sell council houses. I am surprised to learn that this policy does not have the support of the hon. Gentleman. On the figure of £10 billion that he mentioned, I have seen a range of figures, from £10 billion up to £20 billion, from the Association of Metropolitan Authorities. When we have the results of the survey to which I referred we shall have a much clearer picture of how much money is needed to catch up with the backlog of repairs to local authority stock.
    *The question was in fact asked by Mr. Holt. see Official Report, 11 July 1985, c. 1291.
    Mr. Hill: My hon. Friend realises that repairs and maintenance are a serious matter for any city. The citizens who occupy council tenancies in Southampton are very angry with the Labour-controlled council because its repairs fund is underspent by £600,000, due mainly to a series of mistakes and omissions. Whatever may be the council's excuse, this is deplorable when one realises how much of the housing stock of some cities is in need of repair.
    Sir George Young: I hope that the electors of Southampton will wreak their vengeance on a local authority which has failed to spend the resources that have been made available to it. It is worth reminding the House that expenditure this year on renovating public sector housing stock is running at over £1 billion. That is an increase on the 1979 figure.
    Mr. Merlyn Rees: Does the Under-Secretary of State really need an inquiry to point out to him that the major social problem in many of our inner cities is the repair of houses, when people are constantly complaining about the condition of their houses? When the report is published there will be only one recommendation: that local authorities need money to help them to repair their housing stock.
    Sir George Young: I referred not to an inquiry but, to a survey. We require up-to-date, accurate information about what is needed to put local authority housing stock into a better condition. My Department has asked for this information to be made available in time for the public expenditure round. When we have the information we shall be better placed to make decisions and solve the problems to which the right hon. Gentleman has referred.
    Dr. Cunningham: Is the Secretary of State confessing to the House and to the millions of people who live in substandard and inadequate accommodation that the Government do not understand the problems and do not have the information? If, when the survey is completed, the overwhelmimg evidence that is already available from the Association of Metropolitan Authorities, the Royal Institute of British Architects and others is confirmed, will the Government provide the extra resources that are needed to help the millions of families who are living in squalor, dampness and freezing conditions?
    Sir George Young: The problems to which the hon. Gentleman has just referred have not arisen only during the last four or five years. They are due to years of neglect and bad management of local authority stock. The Government are trying to obtain an up-to-date and accurate assessment of the resources that are needed. When we have that information we shall be better placed to negotiate the resources that are needed.

    Halvergate Marshes
    Mr. Lordasked the Secretary of State for the Environment what progress has been made by the Government to save the Halvergate marshes.
    Mr. Waldegrave: One hundred and eighteen applications have been received under the Broads experimental scheme, covering nearly 95 per cent. of the estimated total eligible grazing marshes. The scheme will run for three years and all the applicants have agreed not to plough or destroy their marshland and to manage it in

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    sympathy with conservation objectives. In return, they will receive an annual payment of £50 per acre. This take-up is very encouraging and should do much to ensure that this landscape is preserved.
    Mr. Lord: I thank my hon. Friend for his answer. I am very pleased that the Halvergate scheme is proceeding so well. At the same time, I urge him to continue to seek a balance between agriculture and conservation, particularly in environmentally sensitive areas such as the Halvergate marshes.
    Mr. Waldegrave: This experimental scheme is an outstanding example of co-operation between the Ministry of Agriculture, Fisheries and Food and the Countryside Commission. It may provide useful lessons for the development by my right hon. Friend the Minister of Agriculture, of his environmentally sensitive areas scheme.
    Mr. Dalyell: Is not £50 an acre quite a lot of money to pay people for not doing what they ought not to have done anyway? Is this not an argument for the listing of sites of special scientific interest, just as buildings are listed?
    Mr. Waldegrave: The problem in the Halvergate area is that there are very few SSSIs. We are involved there with general landscape matters. The interesting point is that the £50 per acre scheme is cheaper than the management agreements for which payments were being made, so it can be argued that the scheme is good value for money.
    Mr. Budgen: Has my hon. Friend calculated by how much it would be necessary to reduce cereal prices to remove the financial inducement to plough areas such as the marshes?
    Mr. Waldegrave: That would be a difficult calculation to make. The cereal problem is not the only factor. Pressure from the dairy industry meant that there were fewer dairy followers to go to grazing in the Broads, which meant that there was a further incentive to plough. It is a little more complicated than my hon. Friend believes.
    Dr. David Clark: Will the Minister pursue the request of his hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), because the figures would be interesting? Further to the Minister's reply to the hon. Member for Suffolk, Central (Mr. Lord), who is PPS to the Minister of State, Ministry of Agriculture, Fisheries and Food, will he give the House a categorical assurance that no farmers in Halvergate are applying for grants to drain parts of that wetland?
    Mr. Waldegrave: On the fundamental point, there is no disagreement between us. The Government have been among the leaders of those seeking more realistic cereal prices in the European Community. It would be rash of me to assure the hon. Gentleman — as I once assured the hon. Member for Linlithgow (Mr. Dalyell) — that no field in this area will ever be ploughed. However, we hope that the great majority of the area is now safe.

    Capital Spending
    Mr. Hunterasked the Secretary of State for the Environment what representations he has received since 19 June from the Association of County Councils on capital spending.
    Mr. Patrick Jenkin: None, Sir. But I met all the associations on 20 May to discuss the review of the capital control system and the chairman of the ACC wrote to me after that meeting.
    Mr. Hunter: Bearing in mind the association's concern about the capital control system and the Audit Commission's condemnation of it, will my right hon. Friend comment on the strength of that feeling and assure us that he will give careful consideration to a recommendation that he either has received or is about to receive from the joint working party of the Department of the Environment and ACC officials?
    Mr. Jenkin: The report that Ministers have received certainly confirms the need for a change in the system. It also identifies a number of options, which we have been discussing with the local authority associations. We seek two objectives. The first is to get better control of the totals of capital spending by local authorities, and the second, which is no less important, is to give local authorities greater certainty so that they can plan their expenditure more efficiently.
    Mr. Jack Thompson: Is the Secretary of State aware that the present system of capital spending controls is causing absolute chaos for local authorities at all levels, because they do not have the opportunity to plan ahead? Is he aware that capital spending must be planned on as long a term as possible, yet some authorities are working on plans covering less than six months? Does the right hon. Gentleman agree that he should consider introducing a proper system of capital spending controls? One cannot criticise controls of some sort, but they must be on a longer-term basis.
    Mr. Jenkin: I do not agree with what the hon. Gentleman has said, but I hope that he took some comfort from my answer to my hon. Friend the Member for Skipton and Ripon (Mr. Watson) on 26 June, when I said that we did not propose to take any action at present where we noticed that there was the prospect of an overspend on local authority capital spending this year. I know that the statement was widely welcomed by local authorities.

    Housing (Elderly Persons)
    Mr. Haynesasked the Secretary of State for the Environment how many housing units built for the elderly were completed by local housing authorities in the years 1980, 1981, 1982, 1983 and 1984.
    Sir George Young: The latest figures of completions of local authority dwellings for the elderly are 10,300, 7,600, 7,600 and 8,500 in 1981 to 1984, respectively. Complete figures are not available for 1980.
    Mr. Haynes: Is the hon. Gentleman aware that that is a terrible record and that the Government and particularly the Secretary of State ought to be ashamed of themselves? The Government regularly trip out the claim that they look after the elderly, yet in my constituency and, no doubt, throughout the country, elderly people are living in two-bedroomed houses or three-bedroomed houses which could be allocated to young married couples. Because the Government have cut back on finance, properties for the elderly are not being built. What does the Minister intend to do about that?
    Sir George Young: I hope that the hon. Gentleman will recognise that local authority renovations in 1984

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    added 5,200 to the figures which I have just given and that the number of housing association schemes has risen from 1,800 to 2,500. The figures indicate a rising trend, which I hope he welcomes.
    Mr. Dickens: Do not the figures announced by the Minister this afternoon represent a good record for pensioners? Do not the figures illustrate vividly that pensioners, in terms of pensions and living accommodation, are far better off under the Conservatives?
    Sir George Young: I am grateful to my hon. Friend for his robust defence of Government policy. It is worth remembering that a growing number of pensioners are owner-occupiers and have a substantial equity in their own homes. They do not look to the local authority for accommodation in their retirement, but are happy to buy leaseholds on suitable accommodation provided by the private sector — a fact overlooked by the hon. Member for Ashfield (Mr. Haynes).

    Housing Investment
    Mr. Hardyasked the Secretary of State for the Environment if he will list those local housing authorities which have expressed approval of current Government policy in respect of housing investment.
    Mr. Gow: No such list is maintained.
    Mr. Hardy: Does the Minister accept that if there were a list it would be incredibly short? Is he aware that the majority of housing authorities which have to face staff decay and the reality of need, even if Conservative, would be exceedingly critical of present policy? Has the Minister seen the pertinent comments by the retiring ombudsman about improvements, or does he think that everyone other than Ministers is out of step?
    Mr. Gow: The common experience of mankind is that all those who receive allocations would like more. The House should understand that.
    Mr. Marlow: Given the appalling record of mismanagement by many Labour-controlled local authorities, instead of listening to their whingeing about not having the funds and not being able to cope, why does my hon. Friend not require them to hand over much of their housing to skilfully managed private sector companies, which would have three advantages: first, they would not be politically motivated, secondly, they would be using private not public funds, and, thirdly they might actually know what they were doing?
    Mr. Gow: My hon. Friend rightly draws attention to the importance of improving the management of our public sector housing stock. My hon. Friend the Under-Secretary of State last month launched the urban housing renewal unit, which is devoted to a much closer partnership between the public and private sectors in trying to find solutions to our housing problems.
    Mr. Chris Smith: Since 100,000 homeless families report to local authorities every year, since millions of families are badly housed and in need of council accommodation and since 400,000 construction workers are on the dole, costing the British Exchequer £2,400 million a year, would it not make social, compassionate and economic sense to put those people to work building more houses?
    Mr. Gow: The whole House is concerned about the problem of homelessness.
    Mr. Dobson: Humbug.
    Mr. Gow: It is unworthy of Opposition Members to claim a monopoly of compassion. I am looking forward to visiting the Brent, East and Brent, South constituencies on Monday week, when, in the company of the right hon. and hon. Members who represent those constituencies, I shall examine the severe problems of homelessness in that area. A real contribution to solving the problem of homelessness could be made if some of the 25,300 local authority-owned dwellings which have been empty for more than a year were brought back into use.
    Mr. Fairbairn: If my hon. Friend wants a cheap way of improving housing imvestment, will he immediately sell off the historic buildings in which his Department keeps sculptures, which are surrounded by neat little lawns with expensive little notices telling us that we are not allowed to walk on them, so that the buildings can be restored as homes for people by people who care about old buildings?
    Mr. Gow: I am not sure that I entirely understand my hon. and learned Friend's suggestion but as it comes from him I shall examine it most carefully.
    Mr. Rooker: If the Minister and, indeed, the Secretary of State are so concerned about the homeless, why is the Department refusing to have a British element in the 1987 International Year for the Homeless? Secondly, does the hon. Gentleman agree that an element of Government policy should be investment in housing, including repairs, new build and renewal, at a rate that is at least equal to that of deterioration?
    Mr. Gow: I shall discuss with my right hon. Friend the Minister for Overseas Development, who represents the sponsoring Department, the first issue raised in the hon. Gentleman's supplementary question. Secondly, my hon. Friend the Under-Secretary of State told the House earlier this afternoon that £1 billion a year from housing investment programme allocations is being spent on the repair of our local authority housing stock. In addition, another £1 billion a year is being spent from the housing revenue account.

    Southwark Borough Council
    Mr. Gerald Bowdenasked the Secretary of State for the Environment how many meetings there have been between officials of his Department and senior officers of Southwark borough council since the beginning of 1985; and what were the reasons for such meetings.
    Sir George Young: There have been two such meetings this year: a discussion about the redevelopment of the Bonamy estate and one about the disposal of land on the borough's land register. However, my hon. Friend the Minister for Housing and Construction is arranging to meet the elected representatives of Southwark, together with their officials, in the near future to discuss the unwarranted delays being experienced by tenants seeking to exercise their right to buy from the council.
    Mr. Bowden: I thank my hon. Friend for his answer. I hope that when the meeting takes place my hon. Friend the Minister for Housing and Construction will tell the

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    officials of Southwark borough council of the frustration, anger and disappointment that so many of my constituents feel because of the lack of progress with their right-to-buy applications? Will he say what he intends to do about the incompetence and intransigence of Southwark borough council in dealing with the applications?
    Sir George Young: I understand my hon. Friend's indignation. He has been in regular contact with my Department about the frustrations of the tenants in his constituency. My Department has formally warned the council under section 23 of the Housing Act 1980 that we are contemplating intervention. Before we take that step we wish to discuss the issue with councillors and officials in the near future. Southwark borough council indulges in meaningless procedural requirements, which delays the opportunity for tenants to buy their homes.
    Mr. Simon Hughes: Will the Minister think again about the powers of the ombudsman? It appears that Southwark and many other authorities are guilty regularly of what is found to be maladministration. There will be no effective remedy until the ombudsman is given power to impose a solution when a local authority is not going about its affairs properly.
    Sir George Young: I have noted what the hon. Gentleman has said. I have no doubt that the Government Departments that are responsible for these matters will take account of what he has said and consider whether there is any remedy for the injustice that he has described.

    Business Rates
    Mr. O'Brienasked the Secretary of State for the Environment what responses he has received to his letter of 8 March asking for details of the effects of business rates on the location of employment.
    Mr. Kenneth Baker: I have received six replies from organisations I consulted. A number of other bodies have also volunteered their interest.
    Mr. O'Brien: Will the Minister accept the conclusions of the Cambridge report entitled "The Effects of Rates on the Location of Employment"? The report was commissioned by the Government at a cost of £50,000. It concludes that there is no evidence that rates or rate increases have an effect on employment. It states also that
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    rating does not have an effect on the location of employment in local authority areas. Will the Minister accept the report in full?
    Mr. Baker: The dossier which the CBI sent to me does not support what the hon. Gentleman says. If he believes what he says, let him make a speech in Birmingham, where the rates have gone up by 42p this year, or in Newcastle, where they have gone up by 54p. Let him try to persuade the business men in those two great industrial cities that rates are not important.
    Mr. Fallon: Is my right hon. Friend aware that a department store in Darlington has a rates bill this year of over £250,000, that many smaller businesses have to pay rates of over £100 a week and that high rates in the north are not only driving businesses away from the region but are dissuading them from coming to the north?
    Mr. Baker: My hon. Friend is right — and hon. Members on both sides of the House know from experience that he is right—in saying that high rates by high-spending authorities affect areas adversely. That is true both in jobs and in the domestic area.
    Mr. Straw: Why is the Minister refusing to accept the conclusions of the independent study which his Department established? Does he appreciate, since he referred to Birmingham, that that city had the fastest rate of job loss when the Conservatives were in control there and that the rates fell? Is he aware that the report not only said that there was no relationship between rates and unemployment but that it went on to say that higher levels of spending in Labour areas led to higher levels of employment? As there is now clear evidence that Labour policies by Labour-controlled authorities are working to bring down unemployment, when will the Minister change his policies, which have led to massive cuts in services and jobs and have in no way helped the businesses which he claims to represent?
    Mr. Baker: The hon. Gentleman lives in an unreal world. After the big increase in Birmingham, Ericsons told the leader of Birmingham city council:
    "Your decision to increase your prices, the rates, by 43 per cent. has, at a stroke, reversed our attitude towards our planned further expansion in Birmingham."
    That is the real world. High rates affect business decisions and employment.

Written Questions
3.32 pm
Mr. Gerald Kaufman: On a point of order, Mr. Speaker. I wish to draw your attention to, and ask your advice about, written question No. 104, which stands in the name of the hon. Member for Westminster, North (Mr. Wheeler), which appears at page 4454 of the Order Paper and which, according to the note on the Order Paper, was tabled only yesterday, but nevertheless will be answered immediately today. That question, clearly put down at the instance of the Home Secretary, asks
"the Secretary of State for the Home Department, whether he has decided on changes to the immigration rules to comply with the recent judgment of the European Court of Human Rights."
It is clear that the Home Secretary is using this planted question as the occasion to make an announcement about his decision on the matter.
On 3 June I moved a Standing Order No. 10 motion that we should debate this subject, but you, within your discretion, decided that that was not the occasion for such a debate. A month later, the Home Secretary, speaking about the matter, said:
"I made it clear at the time of the decision that we would take whatever steps were necessary to ensure that we were complying with the convention as interpreted by the Court. I hope to announce our plans for doing so shortly."—[Official Report, 4 July 1985; Vol. 82, c. 508.]
The implication to a large number of people of a statement such as that by the Home Secretary must have been that he would make an announcement to the House about the Government's decision on a matter of enormous constitutional and human importance to many thousands of women in Britain.
What will now happen is that a written answer will be made available to the hon. Member for Westminster, North and to the press. It will be available to the news media for the rest of the day and be subject to the news management of the Home Office during that period. However, the House will not have an opportunity to question the Home Secretary about his decision.
I am therefore asking you, Mr. Speaker, in your role as guardian of the rights of hon. Members to explain how we can secure a statement to the House by the Home Secretary in oral form so that we may question him on a decision of very great importance indeed.
Mr. Speaker: The right hon. Gentleman well knows that it is not for me to summon Ministers to make statements. I have no authority over that. It is some three or four years since I heard the phrase "planted question", so I do not know what the right hon. Gentleman means by that, either. Copies of written answers are always available in the Library, so the right hon. Gentleman and other hon. Members who are interested in the subject—I know that many are — will have an opportunity of seeing the answer to this question.
Mr. Andrew Faulds: Further to that point of order, Mr. Speaker. Planted questions answered by putting the replies in the Library does not give Members of the House of Commons an opportunity to pursue this highly important—
Mr. Speaker: Order.
Mr. Faulds: It is totally unacceptable.
Mr. Speaker: Order. I said that I had no knowledge of this planted question theory.
Mr. Jeremy Corbyn: Further to that point of order, Mr. Speaker. As the answer that the Minister will give is a matter of law and might require a change in the immigration rules, would it be in order for him to make a statement, as he must before such changes can be put into operation, so that he can be questioned and these matters can be debated on the Floor of the House?
Mr. Geoffrey Dickens: Further to that point of order, Mr. Speaker. The shadow Home Secretary raised a point of order, but are we not just being presumptuous, because many times when we table questions we get a holding answer saying that the Minister will make a statement shortly? How on earth can we now discuss what might be in an answer when we have not yet seen it?
Mr. Laurie Pavitt: Further to that point of order, Mr. Speaker. This procedure is within the rules of the House, but Ministers are aware of special interest. I received letters this morning from two Mr. Patels, which are fairly typical of my mail. They have fiancée problems. The Home Secretary is aware that certain areas and certain hon. Members have a specific interest. Is it not your experience, Mr. Speaker, that when this kind of thing has occurred the Minister concerned has informed individual Members and given them the opportunity of contacting the Minister's private office on the matter?
Mr. Merlyn Rees: Further to that point of order, Mr. Speaker. I acccept what you said, that this is not a point of order, but may we have your advice on the matter? Giving a written answer to a question, whether planted or not, is giving information to Parliament, and is within the rules. However, this is a most important matter, and for the Government to proceed in this way is wrong. We need to discuss it.
Several hon. Members rose—
Mr. Speaker: Order. None of this is a matter for me. I also am a constituency Member of Parliament, and I have an interest in the matter, too. I have not seen the answer to the question. I shall be sending to the Library also. It is not a point of order for me.
Mr. David Winnick: Further to that point of order, Mr. Speaker. You have stated that it is not a matter for you, and we understand that. No doubt Ministers will argue that the procedure is in order. However, would I not be right in saying that when a matter is controversial, hon. Members should be able to question Ministers? Does not the procedure that has been adopted illustrate the contempt that Ministers have for the House of Commons?
Mr. Speaker: Order. We do not know whether the matter is controversial. I have not seen the answer.
Mr. Peter Pike: Further to that point of order, Mr. Speaker. You will appreciate that I have asked several questions on the issue recently. I was contacted by the press this morning and virtually told the answer. Many newspapers are running this as an important issue in their evening editions. I recognise that a planted question is not an issue for you, Mr. Speaker, but if the answer is known, and has been given to the press, is that not a matter for you?
Mr. Speaker: The House well knows my oft-repeated comments on this matter. If the press has information that is embargoed, it should never make use of it before hon. Members have had an opportunity to see the answer.
Several hon. Members rose—
Mr. Speaker: Order. I cannot take any further points of order on this matter. The House well knows that it is not a matter for me. It will have to be pursued in other ways.
Mr. Kaufman rose—
Mr. Speaker: I shall hear the right hon. Member.
Mr. Kaufman: Thank you, Sir. May I put this to you, in the presence of the Government Chief Whip? Since I raised my point of order, evidence of concern in the House has manifested itself—[HON. MEMBERS: "No."]—and it is clear that if you had not decided to curtail any further points of order it would have manifested itself further. That being so, may I say, in the presence of the Government Chief Whip, that I hope that the Government will take account of what has been said this afternoon, that they will consider the comments carefully and that they will come back to the House with a response.
Mr. Dennis Skinner: Further to the point of order, Mr. Speaker.
Mr. Speaker: Is this a different point of order?
Mr. Skinner: It is adjacent to the matter that is being discussed.
On Monday there was a fairly considerable change in the Government's policy — for which they are, of course, not responsible. The Government decided to relax trade with Argentina. The information came in the form of a written question and answer. Some would say that it was a planted question and a planted answer. However, we are not into that, because we have heard enough about it.
I should have thought, Mr. Speaker, that you, as the custodian of our affairs, would want the House of Commons, at all times when this is possible, to be able to debate the issues of the day. On Monday, I and others said, "Is it not a scandal that we have a written question and answer on trade with Argentina being relaxed?" At one time, that was a big affair. Today, my right hon. Friend
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the Member for Manchester, Gorton (Mr. Kaufman) has raised another issue. I took only a passing interest in chat matter. The Home Secretary made a promise to the House—not just to my right hon. Friend, but to Mr. Speaker—that this matter would be dealt with in the House. He was saying that you, Mr. Speaker, would be in charge of the proceedings when the matter was raised.
The last thing that we want is for the Front Bench continually to be heaping insults upon the Chair. I make a suggestion along the lines of your statement last week, after you were faced with a problem. You gave an off-the-cuff response, but came back a few days later—I do not want to have to repeat this story, because it is difficult to remember and difficult to digest—and said, "In future, I shall look at matters in a more studied fashion."
You have heard the complaints about the Government's growing practice of abusing the form of written questions and answers. I suggest that you examine this matter and return with a statement on a future occasion.
Several Hon. Members rose—
Mr. Speaker: Order. It is plainly not a question on which I can make a statement. It is nothing at all to do with me. The House well knows that this is a matter for the Government. Whether statements are made, whether answers are given and whether written or oral questions are asked has nothing to do with me.
Mr. Michael Meadowcroft: On a separate point on the same issue, Mr. Speaker. May I put it to you that you are the guardian of Back Benchers' rights in the Chamber? We respect your task. Some of us have many cases relating to the particular problem of the immigration of fiancées. The problem is that, once the issue is raised in the press as a result of a reply to a written question, a number of our constituents will come to us with different parts of the reply. If we have no opportunity in the Chamber to ask the Minister questions on the different aspects, we have no way of answering our constituents' questions. Is it not part of your duties, Mr. Speaker, in protecting the rights of individual Members who are faced with these problems, to ensure that the information comes to the House in the proper way?
Mr. Speaker: Order. The House has never given the Chair that responsibility. It is not a matter for me.

South Africa (Sanctions)
3.44 pm
Mr. Richard Caborn: I beg to move,
That leave be given to bring in a Bill to establish machinery to impose economic sanctions on trade with South Africa subject to conditions relating to the system of apartheid operated in South Africa.
It is extremely unfortunate that the subject of sanctions against South Africa has to come before the House of Commons in the form of a ten-minute Bill. The people of this country would have expected the Government to have given time for a full debate on what is an extremely important issue.
The Bill has five main elements. The first is to give the Secretary of State, by order, the power to control the import and export of goods to and from South Africa. That is a general provision. Secondly, there is a power to stop the import or export to or from South Africa of oil or products derived from it, coal or products derived from it, uranium and all militarily strategic goods of a description included in groups 1 –4 of part II of schedule 1 to the Export of Goods (Control) Order 1985. Thirdly, there is the element that gives the Chancellor of the Exchequer power to prohibit and regulate transactions between the United Kingdom and South Africa relating to individual residents in or bodies corporate registered in South Africa, directly or indirectly, of gold, currency payments, securities, debts and the import-export transfer and settlement of property. Fourthly, the Chancellor of the Exchequer shall prohibit the import of Krugerrands, dealing in gold and currency, the payment of any capital moneys, directly or indirectly, to any person resident in South Africa or body corporate in South Africa. Fifthly, there is the power to request Her Majesty, by Order in Council, to effect the United Nations Council on Namibia decree No. 1.
The position in South Africa is deteriorating daily. I have heard and seen that on the radio and television today. Over the past nine months there have been over 500 deaths in that country, the vast majority of which have been at the hands of the security forces or the police.
In the past week the South African Government's think-tank report proclaimed that apartheid has failed to solve South Africa's racial problems, and warned that attempts to enforce it would only exacerbate racial tension. That long-awaited report from the Government-funded Human Science Research Council recommended talks with the leaders of all races and the establishment of a democratic system open to all South Africans. The report also noted that nearly 66 per cent. of the black population favoured the use of violence to bring about change. I and many people believe that that shows that the level of repression in South Africa is such that the majority of blacks are prepared to resort to violence to secure basic freedoms.
One of the report's most striking points is the acknowledgement that the security legislation, whilst theoretically designed to ensure the security of the state, has, in practice:
"been largely employed to deal with persons and organisations engaged in extra-Parliamentary opposition to Government racial policies."
The report concludes that the security legislation is
"a threat to the security of the state … the mistrust of a legal system is one of the strongest incentives for revolution."
That comment is made in a report on the internal problems of the country funded by the South African
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Government. The South African authorities clearly break and disregard international law with their illegal occupation of Namibia and by acts of international terrorism — we have heard some prominent people talking about international terrorism — such as their bloody incursions last month into Botswana, when a number of innocent men, women and children were killed, and the attempted sabotage of an American oil installation in Angola.
When South African subjects carry out illegal acts in the United Kingdom—as the Coventry four trials have shown; the results are in this morning's newspapers — the South African Government openly defy the British Government's request for the return of South Africans who were involved in that illegal act, although the bail conditions were underwritten by the South African embassy in London. The bail amounted to some £400,000. The decision not to return those people to stand trial in the United Kingdom was a political decision by the South African Government.
The British Government's response to acts of international terrorism, which resulted in bloody slaughter within a Commonwealth country, is to call in the South African ambassador and to slap his wrists. I asked a question about the number of visits the South African ambassador has had to the Foreign Office and the reply states that there have been seven since August 1984. There is a path between Trafalgar Square and the Foreign Office where from time to time one might bump into the ambassador for South Africa. The Government did not even recall their ambassador from South Africa for consultation, which would at least have shown some visible signs of disapproval. Even the Americans recalled their ambassador. Against this background of growing tension and conflict the international community are taking steps in one form or another to bring pressure to bear on the South African authorities to introduce fundamental reforms to give the majority of people in South Africa their basic democratic rights and freedom.
In the United States over 20 Bills have been submitted through Congress with Republican and Democratic support and in the next few weeks the President of the United States of America will have to make a decision either to continue with his policy of constructive engagement or to support the majority decisions of the Congress. In Canada, only this past weekend, a package of economic sanctions against South Africa has been announced as part of the international action aimed at getting Pretoria to abandon apartheid.
The Nordic states have acted jointly to halt flights to South Africa. The Swedish Government, in June, recommended severely curtailing contacts with South Africa. A seven-page Foreign Ministry report urged that cultural, scientific and sports contact with Pretoria be avoided so as to express Sweden's disapproval of apartheid. France has announced measures against South Africa. The European Parliament in April, agreed a resoulution which outlined actions that should be taken against South Africa and called on the Council of Ministers to act forthwith.
Only yesterday in London the Commonwealth Committee on South Africa fully supported the Security Council resolution No. 566. These are only an illustration of what is happening on the international front. All these countries and organisations are rejecting the theory of constructive engagement. The only country that is openly

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advocating the status quo is our own, leaving us in total isolation and apart from the rest of the international community, which can be clearly seen as siding with the apartheid regime. The United Kingdom has a very important role to play in bringing about change in South Africa. Since 1979, when the Labour Government left office, we have invested something over £300 million each year. That is an increase since 1979 of 600 per cent.
On the question of trade, the Government have openly encouraged trade with South Africa, spending over £600,000 of taxpayers' money in promoting 85 trade missions since 1979. We are the biggest international prop to the system of apartheid. The arguments we have heard from the Foreign Office against the limited boycott of South Africa are twofold. First, it is said the blacks in South Africa are divided about sanctions. It is a bit difficult to take a Mori or NOP poll in South Africa on this question, particularly when the answers one may give could land one in jail and up until recently carried a minimum sentence of five years' imprisonment. The South African Council of Churches stated in a six-point recommendation that disinvestment was, and I quote
"one of the few remaining methods to achieve justice without violence".
The second argument put forward by the Government is that sanctions do not work, but when pressed to apply limited sanctions, such as no new investment, they argue, because one has conceded the principle of sanctions, further actions and measures would be required if the limited sanctions do not work.
We have the sports boycott through the Gleneagles agreement. We have the arms embargo through the United Nations. I challenge the Government, in the face of mounting international pressure to say that this will not work. I repeat the words of Bishop Tutu when he appealed to the people of the United Kingdom at St. Pauls' last November to
"ensure that your country exerts political, diplomatic, but above all economic pressure on the South African Government to persuade it to go to the Conference Table of a National Convention with the authentic leaders of all sections of our community, and for us blacks it would mean our real leaders, now in jail or in exile."
I ask the House to reject the argument from the hard line Members on the Conservative Benches. We want to rid South Africa of 20th century slavery, which is what segregation and apartheid means, and to stop the United Kingdom from becoming isolated in the international community. I ask the leave of the House to bring in this Bill.
3.54 pm
Mr. John Carlisle: Mr. Speaker—
Hon. Members: Shame.
Mr. Speaker: Order. The hon. Gentleman has a right to be heard.
Mr. Carlisle: My right hon. and hon. Friends and I sat and listened to the epistle read out by the hon. Member for Sheffield, Central (Mr. Caborn) with a certain amount of interest, but a certain amount of sadness.
Mr. Roland Boyes: On a point of order, Mr. Speaker.
Mr. Speaker: Does it relate to this matter?
Mr. Boyes: Yes it does. Will the hon. Member for Luton, North (Mr. Carlisle) tell the House whether he has any interest in South Africa?
Mr. Speaker: Order. If the hon. Gentleman has a financial interest, no doubt it will be in the Register of Member's Interests. [Interruption.] Order. The hon. Gentleman has hardly begun.
Mr. Carlisle: The predictability of the Opposition in their usual question to me is answered in the Register of Members' Interests, as you say, Mr. Speaker. I have nothing further to add. I was tempted to ignore the squalid introduction given to the Bill by the hon. Member for Sheffield, Central. Perhaps if it had not been for his emotive language, the ignorance that he displayed and—
Mr. David Winnick: On a point of order, Mr. Speaker. You said that no doubt the hon. Member would declare his financial interest. The hon. Gentleman has referred to the Register of Members' Interests, but how can we know what is in that register at this stage, and how can the public know? As I understand it, the hon. Gentleman has conceded the fact that he has had a number of free trips to South Africa. He has a duty and an obligation to make it clear that he has been to South Africa at the expense of the South African authorities.
Mr. Speaker: Order. It is a matter of honour for hon. Members to declare any interest in the Register of Members' Interests. If the hon. Member for Luton, North (Mr. Carlisle) has any other interests, I am sure that he will declare them.
Mr. Carlisle: The hon. Member for Walsall. North (Mr. Winnick) has put that point many times and obviously does not remember much of what he says in the House, which is of benefit to us. He should know, as I have declared to the House, that I have no financial interest in South Africa.
The House has been asked to hear the usual parade of conscience by a member of the anti-apartheid movement, supported by Labour Members. It is a conscience that they see fit not to parade when they talk about human rights in other countries.
Mr. Andrew Faulds: That is not true.
Mr. Carlisle: I will concede, as I have always done, that I find apartheid a violation of human rights, and I abhor the system. I have always said so publicly and I repeat that assertion today. However, the House has to ask itself whether the introduction of the Bill will be of any benefit to those whom it is intended to benefit—that is, blacks in South Africa—and what effect those sanctions would have upon the blacks in South Africa and the many other people in South Africa who should also be remembered.
What the Opposition and those who advocate sanctions do not understand is that they will create an enormous loss of jobs in South Africa. A 20 per cent. disinvestment by the west would see a loss of 90,000 jobs for the whites within the South African economy and the loss of 350,000 jobs for the blacks. I should not wish to advocate that for a policy.
The second effect of sanctions on South Africa is the fact that many foreign workers, of whom there are about 1 million in South Africa, would have to leave the country and that is understandable, given the unemployment

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position. The third effect is perhaps one of the most telling and sad facts about this Bill. It would halt those reforms that have recently taken place in South Africa.
As usual, Labour Members have jeered ironically, and I would admit that those reforms are inadequate in terms of western ideals. We must recognise that reform there has been, and the advancement of the black in South Africa has been considerable in South African terms over the past five to 10 years. This measure would halt those reforms in their tracks, and I remind hon. Members that the changes that took place in the United States and advanced the blacks in America occurred in conditions of economic prosperity and not in the conditions that Labour Members want to see, of economic depression.
The last effect that this Bill and disinvestment would have upon South Africa is that they would undoubtedly increase violence in that society. I suspect, and I say no more, that there are many Opposition Members who would wish to see that violence increase against the elected South African Government, whether that Government be elected by the whites alone or by the whites, and the coloured and Indian populations. The case is severely undermined by the violence in that country perpetrated by the ANC and others who would, of course, welcome disinvestment.
If we are to have some sort of influence—and here I have a genuine sympathy and understanding with the Opposition — upon the South African Government, surely we would be better able to exercise it on the basis of some form of involvement with British companies investing in that country, rather than trying to disinvest and cutting ourselves off from them. The record of British companies in South Africa is extremely good and the wages of 98 per cent. of the black workers is above the
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EEC code laid down in Europe. We must ask ourselves whether this measure and the measures proposed by the United States Congress will benefit the blacks. I suggest they will have the opposite effect.
Evidence put forward by various commentators against disinvestment is very considerable. The opinions of the hon. Member and his hon. Friends are in a minority, certainly in South Africa as well as in the rest of the world. Prominent people like Alan Paton, who is no supporter of the South African Government, has said there should never be disinvestment. Even Bishop Tutu, who was mentioned by the hon. Member, caused some consternation when he questioned whether disinvestment would have any effect. I leave the house with the words of Chief Buthelezi who leads some one million blacks of the Inkatha tribe in South Africa, whose word I would trust rather more than the ignorant words of the hon. Member for Sheffield, Central. Chief Buthelezi says:
"If the West wants to increase black bargaining power it must double up on its investments, not disinvest."
For that reason and certainly for the good of the black people in South Africa, I ask the House to reject the Bill.
Question put and agreed to.
Bill ordered to be brought in by Mr. Richard Caborn, Mrs. Ann Clwyd, Mr. Derek Fatchett, Mr. Andrew Faulds, Mr. Robert Hughes, Mr. Peter Pike, Mr. Allan Rogers, Mr. Ernie Ross, and Mr. David Winnick.

South Africa (Sanctions)
  SOUTH AFRICA (SANCTIONS)
  Mr. Richard Caborn accordingly presented a Bill to establish machinery to improve economic sanctions on trade with South Africa subject to conditions relating to the system of apartheid operated in South Africa: And the same was read the First time: and ordered to be read a Second time upon Friday 25 October 1985 and to be printed. [Bill 190.]
Orders of the Day
  Finance Bill
  Not amended (in the Committee) and as amended (in the Standing Committee), considered.
  Finance Bill
    New clause 9

      MITIGATION OF CORPORATION TAX LIABILITY OF INDUSTRIAL AND PROVIDENT SOCIETIES AND HOUSING ASSOCIATIONS
      '(1) Where in any accounting period of a body to which this section applies the rate of corporation tax exceeds such special rate as Parliament may fix for the purposes of this section the body may claim that the corporation tax charged on the income of that body for that period shall be calculated as if the rate of corporation tax were equal to that special rate.
      (2) The bodies to which this section applies are:

      (a) any registered industrial and provident society as defined in section 340 of the Taxes Act and any such co-operative association as is mentioned in subsection(8) of that section;

      (b) any housing association for the time being approved for the purposes of section 341 of that Act;

      not being a society, association or company under the control (within the meaning of section 302 of that Act) of one or more companies which are not themselves bodies to which this section applies.
      (3) For the purposes of this section the income of a company for an accounting period is its income charged to corporation tax for that period as defined in section 85(6) of the Finance Act 1972.
      (4) The special rate for the purposes of this section shall have effect for the financial year 1985 and subsequent years and be 30 per cent.'.—[Mr. Hattersley.]
      Brought up, and read the First time.
      4.7 pm
      Mr. Roy Hattersley: I beg to move, That the clause be read a Second time.
      The purpose of the new clause is to provide what is wrongly, though properly, called a special rate of corporation tax, a rate of 30 per cent. which this new clause would apply to registered industrial and provident societies and to housing associations. The incidence of this tax would be importantly felt and is desperately needed by housing associations and co-operative societies.
      I said that I regarded the term "special rate" as something of a misnomer, because the idea of a special rate implies, and certainly in uninformed circles is taken to mean, that something to the advantage of the group in question is being proposed. This clause deals with the rate of corporation tax paid by industrial and provident societies and housing associations. It is not demanding, and I am not asking for them to be specially advantaged. I am asking that that group of institutions should be removed from their present situation, in which they are disadvantaged compared with their commercial competitors.
      Some of my hon. and right hon. Friends may argue — I would argue on another occasion — that the advantages of these non-profit making institutions are such that they should be given a positive advantage from corporation tax. But that is not what we are arguing for today. We are asking for their treatment to be comparable with and no worse than that which is given to commercial companies. The new clause merely seeks to relieve the
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      societies and the associations of the discriminatory tax penalties which they presently suffer as a result of last year's Finance Bill.
      When we sought to amend last year's Finance Bill to avoid these unfair penalties, I assumed that the Government in reforming corporation tax — as they chose to describe their proposals—had simply forgotten the effect which their proposals would have on friendly societies, provident and industrial societies, co-operatives and housing associations. I assumed that they had not realised the necessity of making special arrangements for these institutions to ensure that they would not be disadvantaged. It is impossible for me to be so charitable this year. The Government must know of the damage that their tax policy is now doing to these institutions, yet they have chosen to do nothing to rectify the injustice of last year's Bill.
      Last year, when I moved the amendment which would have avoided the injustice coming about, the Financial Secretary sought to rebut the Opposition's arguments simply by saying that all tax innovations ought to be welcomed and that only fiscal conservatives would oppose a change of this kind. I understand why anyone who is responsible in any degree for Government economic policy welcomes changes of any description, but I cannot support a change—I did not support it, and I now want to remedy that change — that puts an important section of the economy at a disadvantage.
      Now that Treasury Ministers have had a year to ponder the injustice, I look forward to hearing whether it will be argued that no such injustice exists or whether it will be said that the injustice exists but that it is just the bad luck of the institutions involved. My suspicion is that the failure to remove it is at least in part the result of the Government's prejudice against some of these institutions, co-operative societies especially.
      The problem faced by the co-operative societies is easy to describe. When, in 1965, corporation tax was introduced, the rate of 40 per cent. was applicable to all companies — large and small companies and industrial and provident societies. In the early 1970s, the assessment of corporation tax was changed to what is called the imputation system. That system gave relief to businesses in respect of advance corporation tax on distributions. But since industrial and provident societies by their nature could not make such distributions, they were not originally required to pay the tax at the full rate. So when the imputation system was first introduced there were two special categories of enterprises which faced special problems for which the Government made special and necessary allowances. They were co-operatives and the like and companies or institutions which could not, sometimes by rule and often by practice, make the normal level of dividend distribution. Special arrangements were also made for small concerns which distributed a smaller proportion of their profits than the new rate of corporation tax hypothesised — 52 per cent. based on average distribution, which was anticipated to give a 40 per cent. yield.
      At that time, the Government accepted that in smaller firms and institutions where the proportion of profit distributed was smaller than in normal commercial undertakings, a special accommodation had to be made. To accommodate the small companies, the small company

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      rate was introduced. Initially, it was 42 per cent. Then it was 40 per cent. Then it was 30 per cent. That was designed as a special encouragement to small firms.
      The Government of the day acknowledged that a parallel position existed in and for the institutions listed in the new clause. They acknowledged that co-operative societies by their nature distributed a smaller and a fixed percentage of their profits. Therefore, a special rate was fixed for them.
      The differential between normal commercial companies and friendly, industrial, provident and co-operative societies was not meant to favour the latter group. It was not meant to ensure that those institutions paid less than others in tax. It was meant to give them equality of treatment.
      The point was described exactly by the hon. Member for Croydon, South (Sir W. Clark) in Committee on last year's Finance Bill. I did not warn the hon. Gentleman of my intention to quote his words because I felt certain that he would be here to take part in the debate. I am gratified to see that my judgment on that issue about him is correct, and I repeat that I cannot imagine a better way of describing the position than that which he used a year ago. He said:
      "if one accepts the principle of the differential between imputation where one can and cannot distribute, there should be a lower rate for building societies, and presumably co-operative societies, so that we still maintain the justice effected in 1972."—[Official Report, 1 May 1984; Vol. 59, c. 286.]
      4.15 pm
      The new clause seeks to restore the justice that the Government in 1972 believed to be proper. Yet last year the justice effected in 1972, in the hon. Gentleman's terms, was removed. Co-operatives are now taxed at full corporation rate, whilst private and commerical companies are allowed to deduct their shareholders' liabilities on the distributions which are made.
      When the special rate for co-operatives was withdrawn last year, I am told that the Co-operative Union, speaking on behalf of co-operative societies in general, met the Inland Revenue. The Co-operative Union assures me that the Revenue itself, acting as the Revenue always does in a role almost independent of that of the Treasury and its Ministers, agreed that to introduce the scheme proposed in last year's Finance Bill and to abandon the special rate for co-operatives would be to militate against the interests of co-operatives in a way which placed them at a severe fiscal disadvantage to their commercial competitors.
      The talk about fiscal neutrality does not appear to apply to co-operative societies, to industrial and provident societies, to friendly societies and to housing associations.
      Mr. Alfred Morris: My right hon. Friend is on to a very important point in arguing for, in effect, simple equity. He is making a compelling case, and I welcome that as chairman of the Co-operative parliamentary group in the House. Will he emphasise that a fundamental difference is that a co-operative shareholding is quite distinct from that in a company and that co-operative members do not benefit from rights issues? Again I am extremely grateful to my right hon. Friend for the very strong and unanswerable case that he is advancing.
      Mr. Hattersley: I am grateful to my right hon. Friend as well, because he is right when he says that, by their
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      constitutions, co-operative societies have members — in some cases they are nominally described as shareholders — who do not enjoy the normal privileges and advantages of shareholders. There are no rights issues and no scrip issues, and the proportions of the profits that they receive are always limited by convention, often limited by rule and sometimes limited by law. It is because of the limitation on distribution that, were there not to be a special rate for co-operatives, the co-operatives would be enormously disadvantaged.
      By their nature, co-operative societies minimise profits to their shareholders because they exist to maximise benefits to the consumers. Very much the same rule applies with the co-operative wholesale societies in England and Scotland which, although having a new and different constitutional form, nevertheless do not distribute profits in the way which is common in commercial undertakings, and they could not be allowed to do so. It is for the reasons that my right hon. Friend explained that, were they to be treated as if they were normal commercial companies operating under normal commercial rules, they would continue to be disadvantaged in the way that I have described.
      When the Financial Secretary wound up last year's debate, he made two points in rebuttal, having criticised the Opposition for not accepting any change, no matter how unjust. First, he said that the problem that we described did not arise, and he added that in any case it arose only in a very few cases. He said that fewer than 30 industrial and provident societies and what he described as rather more than 50 building societies would be adversely affected.
      At the end of the debate, I was glad that the hon. Gentleman at least conceded that some of these societies, worthy in themselves and an important part of the economy — the co-operative movement represents 6 per cent. of the total retail trade — were adversely affected by the new rule. But I made it clear on behalf of the Opposition that we regarded this as a gross injustice which ought to be removed if only one society was affected.
      However, more and more co-operative societies seem certain to be affected because of the reorganisation now going on within the co-operative societies. They are amalgamating. They are becoming larger. As they become larger, they become more profitable. As they have become simultaneously larger and more profitable, an increasing number are being required to pay a rate of tax which is unjust compared with that of commercial competitors.
      I shall conclude—no doubt the Chief Secretary will soon conclude the speech that he will give rather than the one that he is preparing — with three examples of the new iniquitous system, which the Finance Act 1984 brought about. They relate to successful co-operative societies.
      The Sheffield society, which was called the Brightside and Carbrook when I was a subscriber, would have paid £510,000 under the scheme that existed before the Finance Act 1984. Under the new scheme it pays £675,000 on exactly the same turnover, and if the new clause is accepted, the tax liability at 30 per cent. will produce a yield to the Treasury of £306,000, which will more or less return it to its position before the discriminatory clause was introduced.
      Under the old scheme the Plymouth co-operative society would have paid £20,000. Under the new scheme it pays £708,000, and if my 30 per cent. proposal is

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      accepted the society will be required to pay £531,000, which is little more than was levied from it under the old scheme, but much more in line with what was regarded as just before the Finance Act 1984.
      Under the old scheme the Peterborough society would have paid £705,000, under the new scheme it pays £800,000, and under my scheme it would receive a benefit which would return it more or less to its position before the Finance Act 1984.
      We are asking for a return to the position that existed before the Finance Act 1984, which acknowledged that because of the co-operative societies' patterns of profit and dividend distribution, to levy corporation tax on them in the same way as on commercial undertakings would put them at a fiscal disadvantage. Surely that is wrong. I hope that the Financial Secretary will agree to change it.
      Mr. Ian Wrigglesworth: I support the new clause because I welcome the opportunity to support mutual organisations. Yesterday we discussed an amendment which sought to help friendly societies. We all know, especially those of us who come from and represent northern constituencies, of the important social and economic role that mutual organisations, such as friendly societies and co-operative ownership enterprises, have played in the north and, indeed, throughout the country. We should support those organisations because their owners and participants, whether consumers or producers, workers or customers, are motivated by a prime interest in the organisation. They participate in and organise the societies not for private gain, but for the benefit of the co-operative and the community that it serves.
      The new clause would help co-operative societies, especially co-operative ownership in housing, which is a relatively recent development. It has become a significant part of the housing sector—some would say not nearly as significant as it should be—only during the past two decades as a result of the pioneering work of a small group of enthusiastic supporters including Mr. Harold Campbell, who played a major role both through the Co-operative Housing Agency and by promoting the idea of co-operative housing in Government circles and throughout the country.
      As the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said, the new clause seeks to extend the lower rate of corporation tax to a variety of institutions defined in the Taxes Act. As I understand it, that includes credit unions, industrial co-operatives, housing associations and self-build societies. In my constituency, self-build societies, co-operative housing bodies and housing associations are making a most worthwhile contribution to the community's housing needs, especially in the south Middlesbrough area.
      One of the best features of that development, which my colleagues and I should like to see extended to other areas, is the mixture and proximity of different types of housing ownership. Rented accommodation, self-build accommodation, part-rent and part-owned accommodation, co-operative owned accommodation and privately owned accommodation are together in the same development. That provides both a good social mix and, more importantly, a chance for consumers to have a wide range of opportunities to buy or rent houses, and to participate in housing schemes, as their inclination and pockets will allow. That sort of development, which the new clause would encourage, should be supported by the House.
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      The trouble is that, even if the Government accept the new clause, it will do little to reverse the dreadful decline in support for this type of housing venture and institution that has occurred since they carne to office. There has been a 21 per cent. real fall in gross loans and grants to housing associations since 1982–83. That means that in the north-east the Housing Corporation cannot meet the bill for more than £4 million worth of major repairs to housing association properties, of which some £2·27 million relates to properties for which local authorities are prepared to provide funds, but to which the corporation cannot respond. For a Government who say that home ownership is one of their most important aims in housing policy—they said that in the housing expenditure White Paper—they have been especially tardy in helping the low-cost home ownership programmes, which have become a growing proportion of housing association activity.
      4.30 pm
      We all know from our experience in our constituency surgeries, possibly from our own personal experience, and from those with whom we have contact, that low-cost home ownership and the role that the housing associations can play in it is vital.
      In the north-east, the housing associations were allocated only £16 million, compared to bids of up to £45 million. Therefore, there is a substantial gap between what the associations could do to help the housing needs of the north-east, where the gap is considerable, and what they are enabled to do. We have rehearsed, during general economic debates in this House, the arguments for investment of that sort. It is just the type of investment on which the Government should be embarking at present. There is a real need, in areas such as the north-east, for this type of housing accommodation. There is also a real need for the spin-off in jobs and growth which would arise if the Government were to respond to the bids of £45 million made in the north-east by the housing associations.
      In view of the Labour party's new enthusiasm for home ownership, it is interesting to note that in the 1985–86 programme there are only 300 houses under this heading for the whole of Cleveland county, where the smallest number of bids in the north-east region were made. Those are in Middlesbrough, which I have already mentioned. Perhaps some of the local authorities and their representatives on the boards of housing associations should investigate that apparent lack of interest, because many of us believe that the developments in co-operative housing and housing associations in the past 20 to 30 years have led to a third force in housing that is of enormous benefit to the community.
      We hear a great deal from the Conservative Benches about the shortage of rented accommodation, but the references are usually to private rented accommodation. In recent times, to the benefit of many communities, there has been an enormous growth in the number of rented units of accommodation available through housing associations as an alternative to council housing. That is a very desirable development. I hope that the Government will support it.
      The Conservative Government's limitations on capital finance have already held back the development of housing co-operatives. While the right hon. Member for Sparkbrook and some of his hon. Friends may be enthusiastic about the development of housing co-operatives, which were supported in the past by the late

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      Tony Crosland and others who established the Co-operative Housing Agency, only 8,000 units of housing have been provided since the Government started to take action in that area many years ago. Those 8,000 units have been provided by about 200 registered co-operatives. One of the reasons for the small number of units is that Labour councils throughout the country have been adamantly opposed to the development of housing co-operatives and housing associations because of the blind ideological commitment of those Labour councils to council housing as the answer — and the only answer — to the housing problems in their areas.
      There is no better example than Liverpool. Under the Liberal council, 2,000 homes were provided in over 30 registered co-operatives—a high proportion of the total in the country as a whole. Therefore, it is not surprising that the registered co-operatives in Liverpool have been given a tribute—
      Mr. Speaker: Order. The hon. Gentleman is straying rather wide of the new clause.
      Mr. Wrigglesworth: I am marshalling the case in support of the new clause, which seeks to aid mutual bodies, such as the housing co-operatives to which I am addressing my remarks. In demonstrating why the new clause should be supported, I think it is appropriate that I should point out the developments that have taken place in housing co-operatives in past years. I have also tried to show why such developments have not taken place more rapidly than some of us would have liked to see.
      I was pointing out that one of the reasons for the slow rate of development is the antagonism towards those mutual bodies, which provide housing and other forms of enterprise, by councils such as Liverpool, because of their commitment only to local authority housing. It seems to me that that is a perfectly valid point to make, because the new clause is concerned with encouraging the development of mutual housing associations and mutual bodies which can provide facilities of that sort.
      I hope that the House will support the new clause, because the distinctive type of housing that is involved could make a major contribution to the country's housing and social needs. One of the best ways to encourage that sort of development is through the taxation system, and it is wrong that the mutual bodies should not be on all fours with companies in that respect. They should be given the fairly modest encouragement that the new clause envisages. As I said earlier, the new clause would do very little to make up for the deficiences in respect of which the Government have been guilty since they came to office.
      I am very pleased that the Government, after some dithering on coming to office, kept the Co-operative Development Agency in existence. The agency is doing a first-rate job but it could be doing a much bigger and better job if more resources were made available to it. In the 1960s and early 1970s, I was, together with other colleagues, responsible for putting together the proposals that led to the establishment of the agency. We also saw it not only as a promotional body but as a body that would provide substantial funding for co-operatives of all sorts. I appeal to the Minister, in considering the new clause, to have regard to the good work of the Co-operative Development Agency and to the extra work that it could do if given more resources.
      1102
      The case made by the right hon. Member for Sparkbrook in favour of helping mutual bodies also applies to resources for the Co-operative Development Agency. That body, which at national level can do a certain amount, could do a great deal more if it had the co-operation, support and resources of the local co-operative development agencies that local authorities have established in some areas to promote mutual bodies and co-operatives of one sort and another. We want to see the co-operative sector and the mutually owned sector develop as a significant force in the British economy. We want to see bodies with a diverse ownership. That is why in consideration of the Bill last night we proposed amendments to seek to make share ownership in institutions established under the Companies Act much broader, to try to introduce incentives to spread ownership.
      We should like to see the co-operative sector as a dynamic and much more substantial third sector of co-operative employee-owned enterprises than is currently the case. We believe that this requires a new framework, including the development of strong co-operative support organisations along the lines of the Spanish Laboral Popular, which has helped to foster the Mondragon group of co-operatives, with which I know many hon. Members on both sides of the House are familiar. That has been an enormous success. There are other reasons, in addition to the support which is being given by that body. The provision of up to 75 per cent. of the finance for new co-operatives is an enormous help to the establishment of such mutual organisations, and we have nothing comparable in this country.
      In addition to the modest incentives provided in the new clause, we also want to see a new form of incorporation.
      Mr. Hattersley: I would not interrupt the hon. Gentleman's exposition on co-operatives in general and on Social Democratic party policy in particular were he not doing damage to the case which some of us want to make. What we are arguing for in the new clause is not a special incentive. The strength of the case which I have tried to make out, and the strength of the case which the hon. Member for Croydon, South (Sir W. Clark) made a year ago, is not that this proposal provides anyone with some special incentive that gives an advantage, but that, unless the new clause is accepted, people will suffer from a disadvantage. If the hon. Gentleman insists on talking as if he wants to give people some special advantage, he totally undermines the case which he is making for the co-operative movement.
      Mr. Wrigglesworth: I do not accept that. I take the right hon. Gentleman's point that it is a powerful argument, when a Conservative Government are in office, to suggest that mutually owned organisations should be on all fours with institutions registered under the Companies Acts, but I should like to think that he and his right hon. and hon. Friends will also accept from me and my right hon. and hon. Friends that the concept of mutual ownership and co-operative ownership is so desirable that it should be encouraged by other incentives, in addition to the modest incentive of putting it on all fours with company-registered institutions, as the new clause proposes.
      I was seeking simply to demonstrate our commitment to the co-operative sector. As you will know, Mr. Deputy

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      Speaker, for many years many of us have had, and continue to have, long associations with that movement, and we believe that a great deal more should be done beyond putting these institutions on all fours, as the right hon. Member for Sparkbrook is proposing.
      I will not go into the details of the proposal which we have made for encouraging the co-operative sector. That will no doubt be appropriate on another occasion. New clause 9 is a limited but helpful step in the direction of giving co-operatives and other voluntary developments support on equal terms with conventionally owned companies. I hope that the Government will respond to the pressure that has come from various parts of the co-operative movement, and that they will seek to make up for some of the damage that their other policies have done by accepting what is, after all, a modest and fair proposal.
      4.45 pm
      Mr. Roger Freeman: I wish to associate myself with the remarks of the hon. Member for Stockton, South (Mr. Wrigglesworth) and of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) regarding not only co-operatives but housing associations. I think that the comments were well taken.
      The right hon. Member for Sparkbrook may not be aware that my constituency was and, indeed, still is the home of many well-known co-operative associations, particularly in the footwear industry. At the end of the 19th century, far-sighted employers set up many institutions as workers co-operatives or entities in which the principle of sharing the profits and involving the work force in the management of a company was enshrined. I think that the right hon. Member for Sparkbrook was quite correct. He may be interested to know that my council — which, incidentally, has a Conservative majority — has recently decided to provide finance for our local co-operative development association. One of the best managed co-operatives in my constituency is in Brixworth, which I have visited and which I intend to visit again soon.
      Housing associations are very important to my part of the world with its high proportion of elderly citizens who depend a great deal upon the work of institutions such as the Abbeyfield, which in turn depend upon local housing associations for support. Therefore, I agree with the sentiments.
      However, I have experienced great difficulty in accepting some of the arguments put forward in the debate. I should like to address some of the arguments, in particular those advanced by the right hon. Member for Sparkbrook. The essence of his argument is that the imputation system, the rate of advance corporation tax, which has been in operation for a decade now, in a sense benefited companies which had a distribution policy and were able to distribute some of their profits by convention or practice. For those entities which by convention or in terms of their own internal statutes or requirements did not distribute profits, his argument was that if one took the old corporation tax rate of 52 per cent., one had to deduct the standard rate of tax, the advance corporation tax, which the company was deducting from the dividend flow and paying to the Inland Revenue, with the shareholder receiving only the net payment and, therefore, 52 per cent., where, in a simplistic world, all the profits were paid out. I make that assumption to simplify the argument, although we know that it is not the case.
      1104
      At one extreme, if a company paid out all its profits, with a 30 per cent. standard rate of tax and the old 52 per cent. corporaton tax rate, that would bring down the figure to a 22 per cent. rate of tax — mainstream corporation tax, as it is called — which would compare very unfavourably with a lower company rate and, indeed, with the rate at which larger companies would be paying corporation tax. I think that that was the argument that the right hon. Member was advancing.
      I have problems with that argument, and I should like to advance three in particular. I will not pursue the obvious argument that companies do not distribute all their profits, but in the argument one would have to make some assumptions about the average rate of dividend distribution in the economy before one could compare those companies which distributed profits with those which did not. I did not pick up the exact calculation which the hon. Gentleman was making on that point, but I know that he shared the point with me.
      My three points are as follows. First, it depends on which industry and company one picks before a generalisation can be made about dividend rates. There is no way in which one can make a general argument, as the right hon. Gentleman tried to do, about companies in relation to dividend rates. They vary from industry to industry, from type of company to type of company and from year to year, whether we are in recession or in boom. It may be legitimate to use that argument in a debate, but if the right hon. Gentleman tried to reduce the argument to an amendment or to a new clause to be included in the Finance Bill I think that he would be in serious difficulties because one cannot generalise about the dividend rate. It is a fair debating point, but, in practice and reality, one which cannot be sustained in considering legislation.
      I suspect that the right hon. Member for Sparkbrook understands that point. He advanced the argument that a company is interested only in the net cost of its dividends. It assumes that the advance corporation tax that it deducts from dividends and pays to the Inland Revenue is a payment on behalf of shareholders as part of their total tax liability. That is the nature of our tax legislation and I cannot quarrel with it, but the reality is that companies look at their total corporation tax rate, not just at their mainstream rate. That is the rate which is shown in their accounts and which is used by financial analysts and the stock market when it compares the performance of different companies. Companies therefore look at their total corporation tax rate. When the right hon. Gentleman says that he is comparing the 30 per cent. rate for workers' co-operatives, housing associations and friendly societies with a higher rate nominally, but with a lower rate in reality, because of the payment in advance on account of shareholders' liability to tax, that, in the real world, is not the way in which companies look at it. They look at their total corporation tax liability.
      Another argument relating to the main philosophical thrust of the right hon. Gentleman's case is that dividends are assessable at the higher rates of tax, not just at the standard rate. He knows that the advance corporation tax that is paid by companies on dividends paid out is added back. The net dividend is grossed up at the standard rate of 30 per cent., the advance corporation tax rate, but the shareholder is liable to higher rates of tax. It is not true to say in a simplistic way that the imputation system to which he referred earlier is simply about the standard rate of tax.

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      It is not. It is about the part deduction by a company of a shareholder's ultimate liability to tax, but one has to look at the total liability of the shareholder.
      The right hon. Member for Manchester, Wythenshawe (Mr. Morris) made an interesting point about rights issues but it seemed to me to be a bogus point. He appeared to argue that the entities that the right hon. Gentleman's new clause encompasses—housing associations, workers' co-operatives and friendly societies — do not have rights issues, whereas companies have rights issues, and that there is injustice, in the sense that corporate shareholders benefit from rights issues whereas this benefit is not available to the owners of the entities that are referred to in the right hon. Member for Sparkbrook's new clause.
      Many hon. Members will be aware that if one takes up one's rights in a rights issue all that happens is that the total equity of the company may have grown by the subscription of new cash to the company but that there is no change in the financial status of the individual shareholder who takes up his rights. Therefore, I cannot follow the argument of the right hon. Member for Wythenshawe. If a shareholder does not take up his rights but sells them, he is subject to tax, but he gives up part of his equity ownership in the company. He gains cash through the sale of his rights but he forgoes an equal amount in terms of the value of his remaining ownership in the company, assuming that he remains a shareholder. I do not therefore follow the right hon. Gentleman's argument. The fiscal relevance of rights issues is not relevant to the new clause or to the argument upon it.
      As for the main part of the right hon. Member for Sparkbrook's argument, he acknowledged that the small company rate of tax is 30 per cent. That rate is referred to in new clause 9. I imagine that the right hon. Gentleman chose that rate not only because it is the income tax rate but because it is relevant to the rate that is paid by small companies. However, the right hon. Gentleman correctly pointed out that he is addressing his argument not to the smaller entities that would pay 30 per cent. but to the larger entities where the rate of corporation tax will be 35 per cent. in the fiscal year 1986. He argued that for the larger entities paying 35 per cent. one must deduct a proportion of the advance corporation tax on dividends paid out to shareholders. That brings the effective rate which should be borne by the company below 30 per cent.
      I do not accept that argument. One should stick to the 35 per cent. rate of corporation tax for the larger entities caught by that rate for two reasons. The first is fiscal simplicity. Many farmers in my constituency choose to be taxed at income tax rates rather than at corporation tax rates. They do not incorporate themselves. That may or may not be wise. I submit that it is for the convenience of the business world that there is a 35 per cent. standard rate of corporation tax that will apply from fiscal year 1986 and a lower rate of 30 per cent. That is widely understood, so I am not in favour, unless there are compelling arguments, of variations.
      The second and more important point relates to a matter to which the right hon. Gentleman did not refer, namely, the major capital allowance changes that were announced in the 1984 Budget and incorporated in the Finance Act 1984. He knows that many large companies, although on a nominal rate of 52 per cent., were paying actual rates of corporation tax that were considerably less than that. As
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      a general rule of thumb in the banking world one assumed, in the analysis of an industry, that the actual rate of corporation tax was between 25 per cent. and 30 per cent. for industry as a whole. What has happened as a result of the Chancellor of the Exchequer's 1984 Budget and the Finance Act 1984 is the reverse of the right hon. Gentleman's argument. The rates of corporation tax for companies have risen in many instances because capital allowances have been withdrawn. The position of entities like co-operatives and housing associations which did not have the benefit of capital allowances has remained unaltered. The effective rates of corporation tax for service companies have fallen, but for manufacturing industries and for some exploration companies they have risen. The actual rate is very close to the nominal rate. From fiscal year 1986 onwards it will be 35 per cent. Therefore, the injustice to which the right hon. Gentleman referred does not exist.
      Mr. Wrigglesworth: Is that not an argument for not abolishing capital allowances? Is that not the core of the argument to which the hon. Gentleman should address himself?
      Mr. Freeman: As the hon. Gentleman knows, that is an entirely separate issue which has been debated on its merits: whether there should be specific fiscal incentives for capital investment. I am very much in favour of encouraging correct capital investment, but it must be capital investment in either the public or the private sector that will make an adequate return on outlay. The right way to do that is not by the continuation of our very generous capital allowance system but by proper management systems for the review of capital investment projects and other projects to which I have referred in previous debates on the Budget and the Finance Bill and to which I intend to return later.
      5 pm
      The right hon. Member for Sparkbrook made a speech at the meeting of the Crosland Society at Trinity college on 7 June 1985. I draw the House's attention to the speech because it explains what sort of entities would benefit from the new clause, and what the right hon. Gentleman has in mind as examples of co-operatives. Towards the end of the speech, the right hon. Gentleman said:
      "We have to realise that if we are committed to a more equal distribution of power as well as of wealth, the old Morrisonian model of centrally controlled public utility does not meet our needs."
      The right hon. Gentleman made it clear that old-style nationalisation is no longer relevant to the future of the Labour party or our economy. Some enlightenment from the right hon. Gentleman would be helpful because it is confusing that later in the same speech he spoke about institutions that have been privatised by the Government. The right hon. Gentleman referred to the time
      "when a privatised utility is returned to public ownership"
      and spelt out the type of control there would be if Labour renationalises British Telecom, British Aerospace — although that is not a public utility — and British Gas which Conservative Members hope that the Government will succeed in privatisating next Session. What does the right hon. Gentleman mean when he refers to the renationalisation of utilities such as British Telecom and British Gas? What type of control will there be? Will they be genuine workers' co-operatives? The right hon. Gentleman ruled out the Morrisonian nationalized

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      industries. Does the right hon. Gentleman imagine that if British Telecom is returned to public ownership it will be a gigantic workers' co-operative? That is the only conclusion one can draw from his speech.
      I can understand the thinking behind the new clause, if the right hon. Gentleman is serious about his intention regarding the 30 per cent. rate of corporation tax for those entities. Perhaps the real reason is to benefit the utilities that the Labour party would renationalise as workers' co-operatives if, heaven forbid, it is returned to power, because they would be subject to this rate of corporation tax. I hope that the right hon. Gentleman will enlighten the House.
      Mr. Stuart Randall: I wish only to add a few words of support for the new clause which aims to overcome the tax penalties that emanated from the Finance Bill last year. All sorts of organisations are affected, including industrial societies and other mutual organisations such as the friendly societies and the various types of co-operatives. We have heard from both sides of the House examples of the effect of the removal of the differential rate of corporation tax on those organisations.
      We had a long debate on friendly societies yesterday. Already, we have seen that the Government's action is crushing these organisations. My hon. Friend the Member for Workington (Mr. Campbell-Savours) quoted Mr. Madders, the chairman of the friendly societies liaison committee, who said that the Government's action could result in friendly societies becoming extinct. That would be sad because the societies have a long-established tradition and have been in existence for about 100 years. They have served the people of Britain, especially those on lower incomes and in rural areas. The new clause would help the mutual organisations to come to grips with the severe competition with which they must contend.
      The Government's line on friendly societies is that if they want to remain alive they must compete in broader areas of business where they would encounter more forms of taxation. They would have to employ staff to overcome the intricacies of tax problems. They do not have the necessary expertise or manpower. They rely on the voluntary help of people who do not have the skill or the time to deal with the complicated taxation matters which the organisations inevitably must deal with if they are to survive in the competitive areas into which Ministers suggest that they should move.
      The Government's removal of the differential rate of corporation tax is an additional crushing action on the friendly societies. We argue our case not only from the economic point of view, but from the social aspect. That aspect is most prominent in my mind when considering the corporation tax treatment of friendly societies.
      The local postman often plays the role of the deposit collector in rural areas, especially in the north of England. The postman does his rounds and collects deposits. He makes sure that Mrs. Smith is alive and well by checking the milk bottles on her doorstep. We must consider the friendly societies in that context. Social services have been cut; that is a broader issue and I do not wish to go wide of the point, but the social angle must be taken into account when considering the effect of last year's Finance Bill on mutual organisations.
      Some hon. Members have mentioned the effect of the changes on co-operatives and much mention has been
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      made of housing associations. I regard my constituency as a deprived area in housing terms and hon. Members who represent deprived parts of the country welcome all initiatives to help overcome the housing crisis which has resulted from the Government's crazy economic policy. It is distressing for the co-operatives to be crushed at a time of housing crisis. In my constituency there are 2,640 families in houses unfit for human habitation, houses with black fungus crawling up the wall and so on.
      Mr. Tim Eggar: I understand the argument, but so that we may be better informed may we have an estimate of how many more properties would become available if the hon. Gentleman had his way and there was a reduction in corporation tax for housing associations?
      Mr. Randall: We are not talking about a swamping action but about a fairly small reduction. The effect will not be massive and the new clause will not change the world, but small improvements can contribute to creating a better society. I do not think that the hon. Member for Enfield, North (Mr. Eggar) would like small co-operatives or housing associations to disappear because they help, in their small way. I see that the hon. Gentleman agrees with me.
      Sir Peter Hordern: The hon. Gentleman refers to small co-operatives and friendly societies. What rate of corporation tax do they pay now? Surely they benefit from the differential rate for small companies. Is the hon. Gentleman thinking of the larger co-operatives?
      Mr. Randall: My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) made an interesting and useful point about the larger co-operatives when he said that because of competition co-operatives were having to get together and that we were experiencing a "fewer and larger" syndrome. That means that the tax paid by the larger co-operatives makes them uncompetitive compared with their commercial counterparts.
      Mr. Eggar: Is the hon. Gentleman saying that, for instance, most of the members of the Co-operative Wholesale Society will benefit because they are covered by section 340 of the Taxes Act? I do not have a copy of that Act but is the hon. Gentleman suggesting ways of helping the Co-op to beat Sainsburys and Tescos? Is that what he is really after?
      Mr. Randall: The hon. Gentleman should go to the Library and check whether he is really talking about section 340 of that Act. I have been asked an ill-prepared question and I do not want to waste my time on it. I want to talk about the future of co-operatives.
      A specific example of the importance of co-operatives is in high technology. The Labour party is now strongly associated with high technology. I regard the Labour party as the party of the future and of high technology. There is no question about that.
      Many small companies involved in high technology are co-operatives. Such businesses, by their nature, are high risk. There is a serious downturn in the electronics industry and this is causing liquidations. The uncertain future and the changes in technology mean that a company might soon be producing obsolete products which it cannot sell and so it will become unprofitable.
      One advantage of co-operatives is that the equity can be shared among a number of owners. Many instances of

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      that have occurred in Scotland. I think of the closure of the British Steel plants. Many organisations have branched out. Joint ownership is laudable and should be encouraged. The removal of the benefits which existed until March last year has had serious effects.
      We are talking about helping high technology not in a massive way, but in a small but significant way. My right hon. Friend the Member for Sparkbrook will recall visiting the Earls Court exhibition and speaking to three people who owned a small company. They explained how difficult it was to raise the capital to float the company. They did not intend to expand the business because they could not afford to go through yet another nine months of raising money.
      5.15 pm
      Such organisations should not be discouraged by an oppressive tax regime. Diverse ownership is the principle behind co-operatives and should be encouraged. It gives employees the opportunity to take part in the management and running of a business.
      The new clause is worth supporting. It will ensure that mutual organisations such as co-operatives and friendly societies can go from strength to strength rather than being destroyed.
      Sir Peter Hordern: When I first saw the new clause I confess that I was attracted by the notion that co-operatives, friendly societies and housing associations should be relatively well treated compared with other companies. After all, co-operatives and friendly societies have had a long and honourable history. Long before the welfare state the majority of people in Britain were covered by friendly societies.
      There is more to the clause than meets the eye. I understand that friendly societies and co-operatives were favourably treated in terms of corporation tax before the changes made last year. The Opposition are suggesting that they should be yet more favourably treated.
      I agree about the need to encourage small companies. The hon. Member for Kingston upon Hull, West (Mr. Randall) referred in particular to high technology companies. In passing, the hon. Gentleman said that the Labour party was the party of high technology. When I first came to the House similar claims were made. The Labour party described the trend as the "searing white heat of technology." Shortly after the Labour party came to power, it put its plans in hand in the shape of the national plan. It needed evidence that there was a real interest in technology, and created the Department of Technology. More importantly, it put Mr. Frank Cousins in charge. The reason for placing Mr. Frank Cousins in charge was not—as it might seem to the general public and as we were led by Lord Wilson of Rievaulx to believe — to encourage technology but to find Frank Cousins a job. That job-finding practice has been done before and will no doubt be done again.
      I was interested in the remarks made by the hon. Member for Kingston upon Hull, West about encouraging small companies and technology. He was right to say that these companies suffer from an acute shortage of capital because they do not have much of a track record to impress bankers. The fault that the hon. Member for Kingston upon Hull, West ascribes to the present system does not apply to small companies because small companies have
      1110
      the benefit of the small companies corporation tax rate. I hope that the Minister will tell us how small companies, whether they are co-operatives or industrial provident societies, will be affected by the proposal.
      Small companies do not suffer in the way that the new clause tabled by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) suggests. When the Minister replies, I hope that he will say how many co-operatives pay the full rate of corporation tax. My guess is that not many pay the full rate. Most are small, individual, friendly and provident societies that we all want to see thrive. They are doing well under the present corporation tax rate.
      The Chancellor's measures taken in last year's Finance Act were intended to avoid distortion in the operation of corporation tax. My hon. Friend the Member for Kettering (Mr. Freeman) made that point in his excellent speech when he said that there had been too much of a buzz and distortion about investment. Companies should concentrate on making profits, and any distortion of the corporation tax in favour of a specific form of money-making activity — for instance, co-operatives and friendly or industrial societies — departs from the principle set out in the Chancellor's measures.
      Some distortions do exist in corporation tax. As I see the right hon. Member for South Down (Mr. Powell) present I shall mention one area where distortion arises, and that is in Northern Ireland. I am in favour of a distinctive form of corporation tax for different parts of the country. The system of regional aid and grants has been extremely wasteful and we should reduce the cost of work either by reducing national insurance contributions or corporation tax in the regions most affected by the tax—
      Mr. Deputy Speaker (Mr. Harold Walker): Order. We have strayed from the new clause. I hope that we may return to the mitigation of corporation tax liabilities.
      Sir Peter Hordern: I apologise, Mr. Deputy Speaker. The new clause invites us to make distortions in corporation tax, and I know that I cannot ask your opinion on that. If distortions must exist they should not be in the techniques of corporation tax or its operation but in its coverage. It is an established practice for grants to be given to firms in Northern Ireland to recover corporation tax.
      The substance of the new clause remains to be proved. I understand why the Opposition want to make a case for the co-ops and that some Opposition Members may be sponsored by the Co-operative Wholesale Society. I hope that the Minister will tell us whether the Co-operative Wholesale Society as a trading unit suffers in terms of taxation when compared with such trading units as Sainsburys or the other big multiple organisations. The new clause does not make the case and I believe that the fewer distortions in corporation tax, the better.
      Mr. Austin Mitchell: I declare an interest as a member of several co-operative societies, many of which have gone bankrupt. I was a member of the Sowerby Bridge co-operative society and I am a member of the Oxford co-operative society.
      The Opposition have a simple motive in tabling the new clause. We want to encourage the co-operative principle and to encourage the co-op which has fallen on hard and tough times. The co-op is not organised on the same basis as the giant organisations and cannot fight Sainsburys, Tesco and Asda. The Government want to put the co-op

      1111
      on the same competitive footing as the giants in terms of taxation. The co-op is not organised for that form of competition.
      The Opposition want to encourage the principle of co-operation and the co-ops. The tax concessions to co-operatives in the rate of corporation tax has been accepted by Labour and Conservative Governments. It originated in the Heath Government, and there is no reason why what the Heath Government giveth the Thatcher Government should take away. The only reason can be that the Thatcher Government have a distaste for the principle of co-operation and for any principle decreed or decided by the Heath Government. That is another manifestation of the difference between the Heath Government, which wisely agreed a distinct rate of corporation tax for co-operatives, and the Thatcher Government, with their extremist composition.
      The Opposition seek to repair the damage caused by the Finance Act 1984 by restoring the special tax concession for co-operatives which all previous Governments have accepted.
      Sir Peter Hordern rose—
      Mr. Mitchell: I shall not give way.
      The Government are clear in their commitment to remove that privilege and to put co-operative societies on the same tax footing as private firms. I know that the Economic Secretary to the Treasury will say that co-operative societies should be treated the same in tax terms, but I say that co-operatives should have special treatment. They are a special form of organisation which deserves a special concession which all Governments have conceded in the past. That is an advantage — not a major advantage—that the co-operatives need because of their peculiar form of organisation and the specific competitive difficulties they face. Their interests are different from crudely and directly motivated, profit-oriented firms. The co-operatives' role is much wider and they have a commitment to serve their members and to advance certain principles in society. Co-operation is only one of those principles. Such aims and objectives merit and justify special treatment.
      The Government will doubtless claim the principle of equality. They do not like co-operation, and do not know what co-operation and working together means. They will proclaim the virtue of one system of reduced corporation tax for all. The Opposition say that that is not right or reasonable. The co-operatives deserve a special advantage that they once had and that we are seeking to restore. The advantage springs from the co-operative principle which is not to maximise profits for their shareholders but to further the cause of their members and to maximise the benefits for their consumers by returning any profit or surplus in the system to those members at intervals in the form of the dividend in proportion to their purchases.
      The central principle of co-operative societies is a commitment of service to, and a desire to advance and improve the position of, their members. Generally speaking, the members of co-operative societies are not the wealthy in society. Indeed, in most cases they are not even the middle class, because the co-operative principle has always been strongly rooted in working-class areas. Their aim is to improve the position of the less well-off, and that is another argument for the special tax concession that they had and that we are seeking to restore by the new clause.
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      5.30 pm
      Although there have been accusations of giantism against the co-operative wholesale societies, the impact of competition from undoubted giants such as Sainsbury has forced the co-ops to come together to achieve the benefits of strength and size to enable them to face competition. It is unfair, therefore, to tax them with this form of liability when it has been forced on them by the nature of the giants with which they are competing. Nevertheless, the giants among the co-operatives are organised on exactly the same co-operative principle. Although they may be concerned with production, they are organised in the interests of the consumers, their members, rather than in the interests of the profit of their shareholders.
      With more than 12 million members in about 500 separate societies, it is clear that the co-operative societies have a role which is worth encouraging. They appeal to millions of people who do not have large spending power. These are people to whom the pence really count and for whom the principle of co-operation—the return of the "divi"—is important.
      My hon. Friends and I hold strongly to the view that it is fair to give organisations which perform that important social purpose the advantage which was accepted by all Governments up to the time of the passing of the Finance Act 1984. We want to return the position to the status quo ante Lawson. That position, which we say the societies should have, arises from the nature and organisation of co-operatives. When, in the early 1970s, there was a change in the basis of corporation tax, a Select Committee examined the possibility of changing from the classical system to the imputation system. That Committee received representations from, among others, all interested bodies, including the Co-operative Union and the various co-operative societies. It agreed that the change would be unfair to the co-operatives and that there should be a special rate to recognise their unique role.
      When, therefore, the new chit system was brought in, there was a special rate; without that rate, there would have been a massive increase in taxation for co-operative societies. The reason for the distinction was simple. Co-operatives do not make distributions, as companies do, and, as the imputation system gives relief to a business in respect of the advance corporation tax on distributions, the co-operatives would have been paying tax on the full rate of mainstream tax. They were therefore given a special rate in recognition of their special role.
      The Government argue that, because they are bringing down the rate of corporation tax, the co-operatives should be on the same basis as other private firms, so that they will all pay the same rate. However, the reasons for the special concession remain. If there was justification for the concession, it remains valid whether at the higher or lower rate.
      When the Chanceller introduced his 1984 Budget, the co-operative societies protested against the abolition of their special rate, not because that rate had given them an advantage but because, if there was no special rate, the co-operatives would be liable to corporation tax at the full rate, whatever the full rate was, whereas companies could deduct the tax liability of the shareholder on the distribution.
      After that proposal was made, a meeting took place between officials of the Inland Revenue and a deputation from the Co-operative Union. That took place in September of last year, when spokesmen for the Inland

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      Revenue agreed with the co-operatives that the withdrawal of the special rate would disadvantage the co-ops compared with companies, and they agreed to advise the Financial Secretary accordingly.
      The Inland Revenue officials also confirmed at that meeting what had been said by their predecessors in 1971 to the then Select Committee which recommended the special rate in the first place — that there had been no change in the circumstances to alter the co-operatives' position.
      That was the situation at that meeting in Somerset house in September of last year. Subsequently, the co-ops received the news that there would be no amendment of the 1984 legislation and that the special rate would be abolished. That seemed to be a negation of the agreement — or at any rate the feeling — of that September 1984 meeting. It seemed an unreasonable decision which bore no relation to the position that the Inland Revenue officials had taken at the meeting. If the grounds were as the officials had then suggested, there should have been a change. That change has not been made, and that is why we are proposing in the new clause that it be made.
      Why are the Government, in their zeal to remove anomalies and have a more uniform and simple tax system, so preoccupied with removing only those anomalies which help the mass of the people, particularly the less well-off, rather than the tax perks and advantages of those whom the Conservatives, by and large, represent?
      The Government demonstrate that zeal — as the Minister will no doubt do when he replies — single-mindedly against one section of society — those whom my hon. Friends and I represent — whereas when it comes to any similar zeal for uniformity, efficiency and simplicity in the system which might harm the supporters of the Conservative party, it suddenly dries up. The cold glint behind the steel-rimmed glasses turns warm and affectionate, and changes proposed in that direction are suddenly withdrawn.
      Let us consider some of the privileges and anomalies that are being attacked, amid howls of protest only from Opposition Members. When it comes to tax concessions which might benefit workplace nurseries or tax changes which might benefit friendly societies and working-class organisations such as the Buffaloes, or to considering postmen's Christmas boxes, the Government are full of zeal for tax reform and efficiency. When we speak of a special concession for the co-operatives, which benefit working-class people and help the humblest in society to improve their lot, giving them more power as consumers, the Government are full of energy and efficiency, bustling with zeal to clean up anomalies. But as soon as we consider anything which harms concessions to the Conservatives in society, it becomes political and cannot be done.
      The Government stopped short of the sort of changes, for example, that the Secretary of State for Education and Science wanted to make in the grant system, because that would have harmed their section of society.
      Mr. Deputy Speaker: Order. The hon. member must restrict his remarks to the question of the mitigation of corporation tax liability.
      Mr. Mitchell: My zeal for the new clause has overcome my normal caution and desire to stay within the rules of order.
      There is a case for a special rate for co-operatives to demonstrate the Government's attachment to furthering the cause of co-operation and to demonstrate that we regard co-operatives as something of a higher order and a better form of industrial and economic organisation than the simple profit-oriented greed of the company that has only shareholders. By the new clause, we are therefore giving the comparatively small advantage to the co-operatives that they have always had.
      There are various arguments for doing that. The former economics editor of The Times, Mr. Peter Jay, was writing in the mid-1970s about the theme, which has now been taken up in America, of furthering co-operatives as a means of breaking the deadlock in society between capital and labour and ending the constant wages inflation that seemed to be the dominant theme of the economics of the 1970s. There are economic, social and political reasons for recognising co-operatives as a higher form of economic and industrial organisation that should be encouraged.
      We have to recognise that at the moment the co-op is not as healthy or as powerful as it was, and it is certainly not the intimidating organisation that Conservative Members have been trying to paint it as. It is having a difficult time in competition with Sainsbury, Asda and Tesco. One reason is that it is a democratic organisation that serves its members and puts their interest higher than sheer greed for profit.
      A second reason is that the co-op has social commitments and responsibilities that spring from being a co-operative organisation. All those factors have to be recognised in the way the co-op is run, and if they are recognised, the co-op is put at a competitive disadvantage. We could argue that the clause is not only recognising a higher organisation, but repairing a weakness under which the co-op now labours. It is totally single-minded fallacious pursuit of the principle of tax equality for the Government to kick the co-op when it is in that state, as they did in the Finance Bill last year.
      By the new clause we should recognise the unique role and special importance of the co-operatives, and express our desire to encourage that vital social principle.
      Sir William Clark: The House started off listening with interest to the hon. Member for Great Grimsby (Mr. Mitchell), but during his speech our interest waned. His special pleading on behalf of the co-operative movement killed his case. If I had anything to do with the co-operative movement, I should not ask him to advocate my case.
      The hon. Gentleman talked about the profit motive of companies such as Sainsbury and Tesco and compared that with the co-operative movement. What is wrong with the management of the co-operative movement? Why is it not making profits? Why do people who used to go to the co-operatives now go to Tesco and Sainsbury? The simple reason is that they are cheaper, so that is where the British working man and woman are now buying their goods. Let me make it clear that I have no vested interest in Sainsbury, Tesco, Fine Fare or any other supermarket.
      Mr. Eggar: Does my hon. Friend agree that the speech of the hon. Member for Great Grimsby (Mr. Mitchell)

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      called on people to shop at Tesco or Sainsbury because they are more efficient than the Co-operative Wholesale Society?
      5.45 pm
      Sir William Clark: I am sure that my hon. Friend is right. The special pleading became a little sickening, because in my view the co-operative movement has gone down because it cannot face the competition. When the hon. Gentleman began his speech he spoke about two co-operatives that had gone bankrupt. It is small wonder that they go bankrupt if they cannot face the competitiveness of Tesco, Sainsbury and so on. The co-operatives are owned by their members, and the hon. Gentleman maintains that the mass of poor people go there. If that is so, why are the co-operatives not more successful? The Opposition are always saying that everyone is poor. If everyone is worse off, surely people should be flocking to the co-operatives, which should be thriving, but the reverse is the case, and people are shopping at Tesco, Sainsbury and so on.
      One of the best co-operative movements that we have seen in the past few years is the co-operative that has been formed by the National Freight Company. That co-operative works, but before the employee buy-out it was a loss-making organisation. It is now highly profitable. Is it not possible for the co-operative movement to do that? I do not know whether the hon. Member for Great Grimsby has anything to do with the co-operative movement, but if he has I suggest that he either pays a little more attention to why the co-operative movement has gone downhill or resigns from the movement.
      I come next to housing associations. The hon. Member for Kingston upon Hull, West (Mr. Randall) did not know what section 340 of the Taxes Act covered. It covers the mutual societies and the rest, which do a good job. Housing associations do a first-class job.
      Housing associations have done good work in the sale of the houses and flats they have owned. That is a good thing, but we have to do more. We should not single out any section, because the sale of houses and accommodation of housing associations is an incentive to buy for people who belong to the associations.
      I shall trace the history of corporation tax so that we may discuss the subject with more clarity than is evident in the clause tabled by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). If the right hon. Gentleman looks at corporation tax, he will see that it was introduced at a rate of 40 per cent. It was then increased to 45 per cent. and when the Conservative Government took office it came down to 40 per cent. In 1973, as the right hon. Gentleman will recollect, the imputation system was introduced, whereby advance corporation tax became an advantage to distribution—a 30 per cent. advantage.
      In an articulate speech of great clarity, my hon. Friend the Member for Kettering (Mr. Freeman) dealt with the matter. If a company distributed the whole of its profits, and if the profits were 100 units, and there was a 52 per cent. rate of corporation tax, that left a possible dividend of 48 units. If the 48 units were grossed up, it would be 70 units. With 30 per cent. ACT off, that brought one down to 48 units. In my reckoning, that meant that the effective cost of corporation tax on a distribution was just over 31 or 32 per cent. That was an advantage to companies that could distribute profits.
      1116
      Mutual societies, co-ops, and housing associations do not distribute profits in that sense. That was the origin of the special rate for the mutual societies and so on. That special rate was 40 per cent. But then, as has been mentioned, in 1984 my right hon. Friend the Chancellor stopped stock relief and cut down capital allowances. He made the reason perfectly clear last year. He did it so that overall he could cut the burden of corporation tax. It was at 52 per cent., then it was at 50 per cent., 45 per cent. and 40 per cent., and it is coming down to 35 per cent. in 1986, which is one year hence. That reduction in corporation tax is an incentive for our whole economy. I am sure that the right hon. Member for Sparkbrook, who has special responsibility for matters affecting our economic future, will agree. Corporation tax reductions must generate economic activity. That is the idea behind them.
      The special rate was and is set at 40 per cent. The Opposition want it to be reduced to 30 per cent. A rate of 35 per cent. should be the lowest level for every mutual society. What happens if the co-operatives and the housing associations do not make huge profits? They are not in business to make huge profits. As the hon. Member for Great Grimsby said, their profits are small. In the past, the co-operatives have enjoyed the advantage of paying dividends fully tax free, which are chargeable against their gross profits. Now they give a discount with their stamps, which are fully allowed for tax purposes.
      I congratulate my right hon. Friend the Chancellor on achieving a maximum 35 per cent. rate of corporation tax for next year. The corporation tax level for any business earning £100,000 profit is 30 per cent. The new clause is slightly redundant because most of the mutual societies — the co-operatives and housing associations — make profits below £100,000 and would suffer only 30 per cent corporation tax. This new clause would impose another anomaly on our tax system. If we say that all organisations should pay corporation tax at 35 per cent., let us stop special pleading. Small businesses, small mutual societies, co-operatives and housing associations would be on all fours if this measure were accepted. I trust that my hon. Friend will resist the new clause.
      The Economic Secretary to the Treasury (Mr. Ian Stewart): The right hon. Member for Sparkbrook (Mr. Hattersley) explained that the measure followed from a similiar amendment that he moved to last year's Finance Bill. The new clause has enabled us to have an interesting and, in some ways, rather general debate on the societies — the provident societies, co-operatives, housing associations and building societies—that are affected by the new clause.
      We have had a wide-ranging debate and it is not easy for me to pick up all the threads. The hon. Member for Stockton, South (Mr. Wrigglesworth) referred to the taxation of housing associations. Under section 341 of the Taxes Act, which applies to approved housing associations, rents received by associations are not liable to tax. Interest paid by associations qualifies for tax relief for their members and the profits on house sales are exempt from capital gains tax. Housing associations are liable to the full rate of tax only if the profits exceed £100,000, when they move beyond the small companies rate. Although most hon. Members would agree that housing associations need encouragement, I believe that the regime under which they operate is favourable.

      1117
      A number of hon. Members referred to the nature and virtues of co-operatives. The right hon. Member for Sparkbrook suggested that the Government had a prejudice against co-operatives. That is not the case. The hon. Member for Stockton, South spoke of the Co-operative Development Agency's work. My hon. Friend the Member for Kettering (Mr. Freeman) referred to the work of the co-operative development association in his area. The hon. Member for Kingston upon Hull, West (Mr. Randall) referred to the possibility of co-operatives becoming more involved with the high technology sector. Hon. Members generally have recognised the valuable role that co-operatives can play.
      The hon. Member for Great Grimsby (Mr. Mitchell) said that he thought that the co-operatives should be especially advantaged and should have special treatment because they particularly look after the interests of consumers whereas companies with shareholders do not. He said that they were suffering from competition from these companies with shareholders and that this was not necessarily fair. They therefore needed special treatment. There is a certain inconsistency in that line of argument. Any company, whether an incorporated or a co-operative body, that looks after the interests of consumers and customers is likely to flourish and any body that neglects them is likely not to do so well. My hon. Friend the Member for Croydon, South (Sir W. Clark) referred to the reasons for the decline in the co-operative movement. I do not think that any of us disagrees with the fact that the cooperative societies — the industrial and provident societies, housing associations and building societies—that are covered by the suggested provisions of the new clause play an important and sometimes central role in various activities in the community. We want them to prosper and develop.
      The right hon. Member for Sparkbrook said that he was asking not for special advantages for the co-operatives and the other societies but for comparable treatment with commercial companies. He said that it would be wrong to call the proposed 30 per cent. tax a special rate and that he wanted to ensure that those societies were not disadvantaged. He referred to the "discriminatory pressures" of the 1984 changes in the corporation tax regime for capital and other allowances. He referred to the "injustice" of last year's legislation.
      Even if the comments of the right hon. Member for Sparkbrook were justified — I shall endeavour to show that they were not — they conflict with what his colleague the hon. Member for Great Grimsby said. The hon. Gentleman felt that the co-operatives should receive special treatment because they were a higher form of organisation. I do not want to dwell on this difference between Labour hon. and right hon. Members, but it is important in understanding the new clause to be clear about what they said. The right hon. Member for Sparkbrook said that he was not asking for special advantages; he was merely suggesting that last year's changes brought about particular disadvantages for the co-operative societies. He looked back to the introduction of corporation tax in 1965 and then to the significant change made in 1972, from the "classical" system to the "imputation" system. He said that special arrangements were introduced at that time for small companies—the small companies rate—and for the societies because of
      1118
      their acknowledged special circumstances. That is the point on which we differ, because his argument is that the maximum rate of 40 per cent. which applied to those societies from that date recognised that the industrial and provident societies were in some way disadvantaged by the imputation system and, therefore, that a special rate should be retained to shield industrial and provident societies from the impact of the 1984 corporation tax reforms. I hope that that is not an unfair representation of the right hon. Gentleman's argument.
      6 pm
      I should like to take the right hon. Gentleman through the arguments, which will show that that is an incorrect interpretation of what happened. It was not the imputation system which damaged the societies from 1972 onwards. The rate of corporation tax which was, at that time, raised from 40 per cent. to 52 per cent. caused the problem. Before the imputation system was introduced, all companies paid the 40 per cent. corporation tax rate. With the introduction of the imputation system and the application of advance corporation tax payments for incorporated companies being offset by a higher rate of corporation tax, which rose to 52 per cent., the societies were damaged, but they were damaged by the rate change and not by the imputation system. It was, therefore, fair that there should be a special rate for industrial and provident societies, not because of the structural change but because it would have been wrong to make them pay the 52 per cent. which was the rate chosen to offset changes effected by advance corporation tax.
      When the rate returns to 40 per cent., as now, and goes to 35 per cent. as it will next year, there is no longer a case for retaining a special rate because the industrial and provident societies are not disadvantaged by having to pay a rate above that which operated under the old system. The 40 per cent. rate was introduced, not to advantage them but to stop the 52 per cent. rate disadvantaging them.
      The right hon. Gentleman argued that a special rate should be retained to shield societies from the consequences of last year's tax reforms. More than 99 per cent. of the industrial and provident societies pay the small companies rate, which we reduced last year from 38 per cent. to 30 per cent. Like small incorporated companies, if their profits are below £100,000 they are already enjoying a lower rate of corporation tax. Larger societies would pay the normal corporation tax rate. Most building societies pay the small companies rate, and the great majority of co-operative retail societies will be paying the small companies rate.
      Mr. Wrigglesworth: May I confirm that the Minister is not misleading the House when he gives such volume figures? How much business do the societies which pay at the higher rate conduct? Many of the societies to which he referred may be substantial but they may conduct little business.
      Mr. Stewart: That is a fair point. I was coming to it immediately. I do not intend to mislead the House. The hon. Member for Kingston upon Hull, West mentioned some of the smaller societies. About 20 of the 200 retail societies conduct about 75 per cent. of the turnover. The top 10 per cent. therefore conduct three quarters of the business. The smaller societies mostly benefit from the small companies rate.
      The larger co-operatives, housing associations and building societies pay at the full corporation tax rate.

      1119
      During the 10 or 12 years before last year such societies enjoyed a highly privileged regime. When the imputation system was introduced, the offset for companies between advance corporation tax and the 52 per cent. rate was set to produce a broadly neutral revenue outturn for the incorporated sector. At that stage it did not and could not take account of the influence on rates of tax paid caused by 100 per cent. first-year capital allowances and by stock relief because they had not been introduced. The 100 per cent. capital allowances were introduced after the imputation system and stock relief was introduced in 1974. Those allowances were designed to ameliorate the 52 per cent. basic rate of corporation tax.
      If we take into account what happened in the 10 or 12 years that followed, first, inflation turned out to be higher than had been anticipated and, therefore, stock relief came to play a much larger part in the tax affairs of distribution companies. Secondly, there was a period of heavy investment and many companies and societies took the opportunity to shelter their profits from corporation tax through capital allowances. They, therefore, enjoyed a relative advantage through an unintentional combination of circumstances during that time.
      All that is happening as a result of the 1984 changes is that the societies are being brought back to a more normal and ordinary basis of tax charge. They will still be better off than under the classical system. They will still be better off than companies because their dividends to members are allowed in full against their taxable profits whereas company dividends suffer a 30 per cent. deduction which is allowable as an offset against advance corporation tax although it does not fully cover the corporaion tax charge. In that respect, societies, co-operatives and so on are at an advantage compared with the incorporated company sector. Although such societies and co-operatives in recent years have taken great advantage—as it was reasonable for them to do — of an extraordinary combination of high capital allowances, high stock relief and a lower ceiling to the corporation tax rate, that is not a regime which we choose to perpetuate. It was a set of circumstances which did well for the societies and I do not begrudge them that. It enabled them to accumulate reserves in a satisfactory way and I hope that they will be useful to the societies. There is no argument for introducing a different system of corporation tax or a lower rate for those societies merely because they were able to take unusual advantage of a set of circumstances in recent years. I therefore ask the House to reject the new clause.
      Mr. Hattersley: May I first clear up the distinction—there is not a shadow of difference—that the Minister of State seemed to see between my speech and that of my hon. Friend the Member for Great Grimsby (Mr. Mitchell)? Much to my regret I missed my hon. Friend's speech, but as I understand it he was arguing for the principle of assistance because co-operatives are, in the Minister's words, a "higher form of organisation" which should be given special benefit. I share that judgment. I believe that the co-operative organisation is a superior form of organisation. I should like and hope one day to be able to give them special assistance. My hon. Friend and I are in agreement on that point.
      That is a subject, as I know my hon. Friend will agree, for another new clause or for an amendment, not the one that we are debating today. My hon. Friend and I equally agree that the new clause is only a step towards the
      1120
      superior treatment that we should like to see given to restore the previous position that co-operatives had in the fiscal lexicon.
      The most surprising speech of the day was that made by the hon. Member for Croydon, South (Sir W. Clark). As I understand it, he was opposed to the new clause and to the reorganisation of tax liability that I suggested for co-operative societies in particular. This is surprising, because last year when we debated the subject he was the most passionate advocate of the position which the new clause advocates. The hon. Member shakes his head. I have already had the good fortune to quote one paragraph from his speech. Let me quote his peroration in full:
      "In 1972, the Finance Bill was introduced by a Conservative Chancellor and it was seen that equity should be carried through. I hope that my hon. Friend will either now — if he can say it now all well and good—or between now and Report say that when corporation tax comes down from 50 per cent. to 40 per cent. the differential, whether it is 31 per cent. or something else—I shall not argue the percentage — will be between the top rate of corporation tax and the rate that building societies pay. If it is not, there will be an injustice because building societies and co-operative societies do not have the right to distribute their profits."—[Official Report, 1 May 1984; Vol, 59, c. 286.]
      If the hon. Gentleman will forgive me for saying so, he could not have put it more clearly a year ago, yet this afternoon he argued quite the opposite. I do not know why that should be, but the case he made a year ago is much stronger than that which he has made today and was not in any way undermined by the speech of the Minister of State. As I understand the last passages of the speech of the Minister of State, the Government case now is that co-operative societies, housing associations and the rest were unfairly advantaged in 1972. If he is not saying that, I do not understand how he can possibly advance his case.
      With corporation tax at 52 to 55 per cent. it was necessary to have a 40 per cent. special rate to meet the needs of co-operative societies because of their special conditions in that they distributed only a small percentage of their profit. If it was necessary when the normal rate was 52 per cent. to have a co-operative rate that met their needs of something like 80 per cent. of the usual figure, why is it not necessary to have 80 per cent. of the usual figure to meet the special conditions of co-operative societies?
      It is no good the Minister of State saying or implying that the change in the top rate of corporation tax has absolved the co-operative societies from the need to pay at a rate which penalises them. I gave him three examples — Sheffield, Peterborough and Ipswich. Each of those societies demonstrates that under the new arrangement, which is trumpeted about the country as a reduction in corporation tax, they are now paying more because the new method of calculation excludes them from the special rate. If they were not specially benefited 30 years ago and they are paying more now in comparison with what they might have been allowed to pay had the old arrangements been allowed to continue, the only possible conclusion anyone is able to draw in logic is that there is unfair discrimination against the societies and it operates—I do not know whether by intention or by mistake—because they distribute a very small proportion of their profits.
      The Minister if State's answer was wholly unconvincing but not surprising. The speech of the hon. Member for Croydon, South was equally unconvincing but astonishing. In the light of what the Minister of State says we shall divide the House or we shall continue to argue the case of equity for co-operative societies and the proper incentives that they need to multiply and to profit.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 197, Noes 267.

      Division No. 268]

      [6.13 pm

      AYES

      Alton, David

      Freud, Clement

      Archer, Rt Hon Peter

      Garrett, W. E.

      Ashdown, Paddy

      George, Bruce

      Ashton, Joe

      Gilbert, Rt Hon Dr John

      Atkinson, N. (Tottenham)

      Godman, Dr Norman

      Bagier, Gordon A. T.

      Golding, John

      Barnett, Guy

      Gourlay, Harry

      Barron, Kevin

      Hamilton, James (M'well N)

      Beckett, Mrs Margaret

      Hamilton, W. W. (Central Fife)

      Beith, A. J.

      Hardy, Peter

      Bell, Stuart

      Harman, Ms Harriet

      Bennett, A. (Dent'n & Red'sh)

      Harrison, Rt Hon Walter

      Bermingham, Gerald

      Hattersley, Rt Hon Roy

      Bidwell, Sydney

      Healey, Rt Hon Denis

      Blair, Anthony

      Heffer, Eric S.

      Boothroyd, Miss Betty

      Hogg, N. (C'nauld & Kilsyth)

      Boyes, Roland

      Holland, Stuart (Vauxhall)

      Bray. Dr Jeremy

      Home Robertson, John

      Brown, Gordon (D'f'mline E)

      Howells, Geraint

      Brown, Hugh D. (Provan)

      Hoyle, Douglas

      Brown, N. (N'c'tle-u-Tyne E)

      Hughes, Dr. Mark (Durham)

      Brown, Ron (E'burgh, Leith)

      Hughes, Robert (Aberdeen N)

      Bruce, Malcolm

      Hughes, Simon (Southwark)

      Buchan, Norman

      Janner, Hon Greville

      Caborn, Richard

      Jenkins, Rt Hon Roy (Hillh'd)

      Campbell-Savours, Dale

      John, Brynmor

      Carter-Jones, Lewis

      Johnston, Sir Russell

      Cartwright, John

      Jones, Barry (Alyn & Deeside)

      Clark, Dr David (S Shields)

      Kaufman, Rt Hon Gerald

      Clarke, Thomas

      Kennedy, Charles

      Clay, Robert

      Kilroy-Silk, Robert

      Clwyd, Mrs Ann

      Kinnock, Rt Hon Neil

      Cocks, Rt Hon M. (Bristol S.)

      Kirkwood, Archy

      Cohen, Harry

      Lambie, David

      Coleman, Donald

      Leighton, Ronald

      Concannon, Rt Hon J. D.

      Lewis, Ron (Carlisle)

      Cook, Frank (Stockton North)

      Lewis, Terence (Worsley)

      Cook, Robin F. (Livingston)

      Litherland, Robert

      Corbett, Robin

      Lloyd, Tony (Stretford)

      Corbyn, Jeremy

      Lofthouse, Geoffrey

      Cowans, Harry

      Livsey, Richard

      Cox, Thomas (Tooting)

      McCartney, Hugh

      Craigen, J. M.

      McCusker, Harold

      Crowther, Stan

      McDonald, Dr Oonagh

      Cunliffe, Lawrence

      McKay, Allen (Penistone)

      Cunningham, Dr John

      McKelvey, William

      Dalyell, Tam

      MacKenzie, Rt Hon Gregor

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

      Maclennan, Robert

      Deakins. Eric

      McNamara, Kevin

      Dewar. Donald

      McTaggart, Robert

      Dixon, Donald

      McWilliam, John

      Dobson, Frank

      Madden, Max

      Dormand, Jack

      Marek, Dr John

      Douglas, Dick

      Marshall, David (Shettleston)

      Dubs, Alfred

      Mason, Rt Hon Roy

      Duffy, A. E. P.

      Maxton, John

      Dunwoody, Hon Mrs G.

      Meacher, Michael

      Eastham, Ken

      Meadowcroft, Michael

      Edwards, Bob (W'h'mpt'n SE)

      Michie, William

      Ellis, Raymond

      Millan, Rt Hon Bruce

      Evans, John (St. Helens N)

      Miller, Dr M. S. (E Kilbride)

      Ewing, Harry

      Mitchell, Austin (G't Grimsby)

      Fatchett, Derek

      Molyneaux, Rt Hon James

      Faulds, Andrew

      Morris, Rt Hon A. (W'shawe)

      Field, Frank (Birkenhead)

      Morris, Rt Hon J. (Aberavon)

      Fisher, Mark

      Nellist, David

      Flannery, Martin

      Nicholson, J.

      Foot, Rt Hon Michael

      Oakes, Rt Hon Gordon

      Forrester, John

      O'Brien, William

      Foster, Derek

      O'Neill, Martin

      Fraser, J. (Norwood)

      Orme, Rt Hon Stanley

      Freeson, Rt Hon Reginald

      Owen, Rt Hon Dr David

      1122

      Park, George

      Smith, Rt Hon J. (M'kl'ds E)

      Parry, Robert

      Smyth, Rev W. M. (Belfast S)

      Patchett, Terry

      Snape, Peter

      Pavitt, Laurie

      Soley, Clive

      Pendry, Tom

      Steel, Rt Hon David

      Penhaligon, David

      Stewart, Rt Hon D. (W Isles)

      Pike, Peter

      Stott, Roger

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

      Strang, Gavin

      Powell, Raymond (Ogmore)

      Thomas, Dafydd (Merioneth)

      Prescott, John

      Thompson, J. (Wansbeck)

      Radice, Giles

      Thorne, Stan (Preston)

      Randall, Stuart

      Tinn, James

      Redmond, M.

      Torney, Tom

      Richardson, Ms Jo

      Wainwright, R.

      Roberts, Ernest (Hackney N)

      Walker, Cecil (Belfast N)

      Robertson, George

      Wareing, Robert

      Rogers, Allan

      Weetch, Ken

      Rooker, J. W.

      White, James

      Ross, Wm. (Londonderry)

      Williams, Rt Hon A.

      Rowlands, Ted

      Wilson, Gordon

      Ryman, John

      Winnick, David

      Sedgemore, Brian

      Woodall, Alec

      Sheldon, Rt Hon R.

      Wrigglesworth, Ian

      Shore, Rt Hon Peter

      Young, David (Bolton SE)

      Short, Ms Clare (Ladywood)

      Short, Mrs R. (W'hampt'n NE)

      Tellers for the Ayes:

      Silkin, Rt Hon J.

      Mr. Frank Haynes and

      Skinner, Dennis

      Mr. Sean Hughes.

      NOES

      Adley, Robert

      Chope, Christopher

      Aitken, Jonathan

      Churchill, W. S.

      Amery, Rt Hon Julian

      Clark, Dr Michael (Rochford)

      Amess, David

      Clark, Sir W. (Croydon S)

      Ancram, Michael

      Clarke, Rt Hon K. (Rushcliffe)

      Ashby, David

      Clegg, Sir Walter

      Atkins, Rt Hon Sir H.

      Cockeram, Eric

      Atkins, Robert (South Ribble)

      Colvin, Michael

      Atkinson, David (B'm'th E)

      Coombs, Simon

      Baker, Nicholas (N Dorset)

      Cope, John

      Baldry, Tony

      Corrie, John

      Banks, Robert (Harrogate)

      Couchman, James

      Batiste, Spencer

      Cranborne, Viscount

      Beaumont-Dark, Anthony

      Currie, Mrs Edwina

      Bellingham, Henry

      Dickens, Geoffrey

      Bendall, Vivian

      Dicks, Terry

      Benyon, William

      Dorrell, Stephen

      Bevan, David Gilroy

      Douglas-Hamilton, Lord J.

      Biffen, Rt Hon John

      Dover, Den

      Body, Richard

      du Cann, Rt Hon Sir Edward

      Bonsor, Sir Nicholas

      Durant, Tony

      Boscawen, Hon Robert

      Dykes, Hugh

      Bottomley, Peter

      Eggar, Tim

      Bottomley, Mrs Virginia

      Emery, Sir Peter

      Bowden, A. (Brighton K'to'n)

      Evennett, David

      Bowden, Gerald (Dulwich)

      Eyre, Sir Reginald

      Boyson, Dr Rhodes

      Fairbairn, Nicholas

      Braine, Rt Hon Sir Bernard

      Fallon, Michael

      Brandon-Bravo, Martin

      Favell, Anthony

      Bright, Graham

      Fenner, Mrs Peggy

      Brinton, Tim

      Fletcher, Alexander

      Brittan, Rt Hon Leon

      Forman, Nigel

      Brown, M. (Brigg & Cl'thpes)

      Forsyth, Michael (Stirling)

      Browne, John

      Forth, Eric

      Bruinvels, Peter

      Fowler, Rt Hon Norman

      Bryan, Sir Paul

      Franks, Cecil

      Buchanan-Smith, Rt Hon A.

      Fraser, Peter (Angus East)

      Buck, Sir Antony

      Freeman, Roger

      Budgen, Nick

      Gale, Roger

      Burt, Alistair

      Galley, Roy

      Butcher, John

      Gardiner, George (Reigate)

      Butler, Hon Adam

      Gardner, Sir Edward (Fylde)

      Butterfill, John

      Gilmour, Rt Hon Sir Ian

      Carlisle, John (N Luton)

      Glyn, Dr Alan

      Carlisle, Kenneth (Lincoln)

      Goodlad, Alastair

      Carlisle, Rt Hon M. (W'ton S)

      Gorst, John

      Carttiss, Michael

      Gow, Ian

      Cash, William

      Gower, Sir Raymond

      Chalker, Mrs Lynda

      Grant, Sir Anthony

      Chapman, Sydney

      Gregory, Conal

      1123

      Griffiths, Sir Eldon

      Neubert, Michael

      Griffiths, Peter (Portsm'th N)

      Norris, Steven

      Grist, Ian

      Osborn, Sir John

      Ground, Patrick

      Page, Richard (Herts SW)

      Grylls, Michael

      Parris, Matthew

      Gummer, John Selwyn

      Pattie, Geoffrey

      Hamilton, Hon A. (Epsom)

      Peacock, Mrs Elizabeth

      Hamilton, Neil (Tatton)

      Porter, Barry

      Hampson, Dr Keith

      Powley, John

      Hanley, Jeremy

      Proctor, K. Harvey

      Hannam, John

      Pym, Rt Hon Francis

      Haselhurst, Alan

      Raison, Rt Hon Timothy

      Havers, Rt Hon Sir Michael

      Rees, Rt Hon Peter (Dover)

      Hawksley, Warren

      Renton, Tim

      Hayes, J.

      Rhodes James, Robert

      Hayhoe, Rt Hon Barney

      Robinson, Mark (N'port W)

      Heathcoat-Amory, David

      Rossi, Sir Hugh

      Heddle, John

      Rost, Peter

      Henderson, Barry

      Rowe, Andrew

      Heseltine, Rt Hon Michael

      Rumbold, Mrs Angela

      Hickmet, Richard

      Ryder, Richard

      Higgins, Rt Hon Terence L.

      Sackville, Hon Thomas

      Hill, James

      Sainsbury, Hon Timothy

      Hind, Kenneth

      Sayeed, Jonathan

      Hirst, Michael

      Shaw, Giles (Pudsey)

      Hogg, Hon Douglas (Gr'th'm)

      Shaw, Sir Michael (Scarb')

      Holt, Richard

      Shepherd, Colin (Hereford)

      Hordern, Sir Peter

      Shepherd, Richard (Aldridge)

      Howard, Michael

      Shersby, Michael

      Howarth, Gerald (Cannock)

      Silvester, Fred

      Howell, Rt Hon D. (G'ldford)

      Sims, Roger

      Hunt, David (Wirral)

      Skeet, T. H. H.

      Hunt, John (Ravensbourne)

      Smith, Sir Dudley (Warwick)

      Hunter, Andrew

      Smith, Tim (Beaconsfield)

      Irving, Charles

      Soames, Hon Nicholas

      Jenkin, Rt Hon Patrick

      Speed, Keith

      Jessel, Toby

      Speller, Tony

      Johnson Smith, Sir Geoffrey

      Spencer, Derek

      Jones, Robert (W Herts)

      Spicer, Jim (W Dorset)

      Jopling, Rt Hon Michael

      Spicer, Michael (S Worcs)

      Joseph, Rt Hon Sir Keith

      Squire, Robin

      Kellett-Bowman, Mrs Elaine

      Steen, Anthony

      Key, Robert

      Stern, Michael

      King, Roger (B'ham N'field)

      Stevens, Lewis (Nuneaton)

      King, Rt Hon Tom

      Stevens, Martin (Fulham)

      Knight, Greg (Derby N)

      Stewart, Allan (Eastwood)

      Knight, Dame Jill (Edgbaston)

      Stewart, Andrew (Sherwood)

      Knox, David

      Stewart, Ian (N Hertf'dshire)

      Lang, Ian

      Stokes, John

      Latham, Michael

      Stradling Thomas, J.

      Lawler, Geoffrey

      Sumberg, David

      Lawson, Rt Hon Nigel

      Tapsell, Sir Peter

      Lee, John (Pendle)

      Taylor, John (Solihull)

      Leigh, Edward (Gainsbor'gh)

      Taylor, Teddy (S'end E)

      Lewis, Sir Kenneth (Stamf'd)

      Temple-Morris, Peter

      Lightbown, David

      Thompson, Donald (Calder V)

      Lilley, Peter

      Thompson, Patrick (N'ich N)

      Lloyd, Peter, (Fareham)

      Thorne, Neil (Ilford S)

      Lord, Michael

      Thornton, Malcolm

      Lyell, Nicholas

      Thurnham, Peter

      McCurley, Mrs Anna

      Townend, John (Bridlington)

      MacGregor, John

      Townsend, Cyril D. (B'heath)

      MacKay, Andrew (Berkshire)

      Trippier, David

      MacKay, John (Argyll & Bute)

      Trotter, Neville

      Maclean, David John

      Twinn, Dr Ian

      McQuarrie, Albert

      Vaughan, Sir Gerard

      Major, John

      Viggers, Peter

      Malone, Gerald

      Wakeham, Rt Hon John

      Mather, Carol

      Waldegrave, Hon William

      Maude, Hon Francis

      Walden, George

      Mawhinney, Dr Brian

      Walker, Bill (T'side N)

      Maxwell-Hyslop, Robin

      Wall, Sir Patrick

      Merchant, Piers

      Waller, Gary

      Miller, Hal (B'grove)

      Ward, John

      Mills, Iain (Meriden)

      Wardle, C. (Bexhill)

      Miscampbell, Norman

      Warren, Kenneth

      Moore, John

      Wells, Sir John (Maidstone)

      Morrison, Hon C. (Devizes)

      Wheeler, John

      Murphy, Christopher

      Whitfield, John

      Neale, Gerrard

      Whitney, Raymond

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      Wiggin, Jerry

      Younger, Rt Hon George

      Wilkinson, John

      Wolfson, Mark

      Tellers for the Noes:

      Woodcock, Michael

      Mr. Tristan Garel-Jones and

      Yeo, Tim

      Mr. Mark Lennox-Boyd.

      Young, Sir George (Acton)

      Question accordingly negatived.

    Clause 1

      SPIRITS, BEER, WINE, MADE-WINE AND CIDER
      The Minister of State, Treasury (Mr. Barney Hayhoe): I beg to move amendment No. 129, in page 2, line 6, at end insert—
      '(3A) With respect to wine or made-wine imported into or produced in the United Kingdom on or after 29th July 1985, Schedule 1 to this Act shall have effect with the substitution—

      (a) for the words "of less than 15", in each place where they occur, of the words "not exceeding 15"; and

      (b) for the words "or not less than 15" of the words "exceeding 15".'.

      Mr. Speaker: I have reconsidered my grouping with this amendment, and now propose to take Government amendment No. 129 on its own, and to take, separately, amendment No. 2, after amendment No. 1.
      Mr. Hayhoe: In the Committee debate on clause 5, strong representations were made about the adverse effect of the clause on the import of Cyprus sherry, and the hon. Member for Birmingham, Hodge Hill (Mr. Davis) persuasively and eloquently argued the case for a change. Subsequently, I met the Cypriot Minister of Commerce and Industry and members of the Cyprus wine trade. That meeting was followed by talks with the Customs and Excise, the Ministry of Agriculture, Fisheries and Food, the Cyprus high commission, representatives of the United Kingdom importers and a small deputation led by the hon. Member for Hodge Hill.
      It became clear, as a result of all these discussions, that the difficulties did not centre on clause 5 but stemmed from a combination of European Community regulations, which were applied within the United Kingdom from January of last year and which contained an anomaly affecting medium and dry style Cyprus sherries, and the provisions of the 1984 Budget. The full impact on Cyprus sherry of this combination did not come to light last year because it was masked by the importers taking advantage of the loophole on blending that clause 5 is closing. It was not until that loophole was blocked that the serious nature of the Cyprus problem became apparent.
      As I said in Committee and subsequently, there was no intention of causing a severe disadvantage to the Cyprus sherry interests when action was taken in 1984. I have sought to establish what is necessary to restore the pre-1984 position for Cyprus sherry. Part of that is the amendment that I now commend to the House.
      Mr. D. N. Campbell-Savours: Before the Minister sits down—
      Mr. Speaker: Order. The hon. Gentleman has sat down.
      6.30 pm
      Mr. Terry Davis: I should like to thank the Minister of State for his kind words about my persuasion and eloquence in Standing Committee. I raised this issue on behalf of the Labour party and I was

      1125
      supported in Committee by my hon. Friends the Members for Wrexham (Dr. Marek) and for Kingston upon Hull, West (Mr. Randall). We were acting at the direct request of the Co-operative Wholesale Society, which is one of our biggest importers of Cyprus sherry.
      I am assured that the society and the other members of the Wine and Spirit Association regard the Government's amendment as a most satisfactory solution to the problem which we drew to the Minister's attention in Committee. Not only will it avoid the impact of clause 5 of the Bill; it will also restore Cyprus sherry to the tariff classification which it enjoyed two years ago. As a result, the consumer will pay 50p less for a bottle of Cyprus sherry. Cyprus sherry will be cheaper now than it was as a result of the blunder made 12 months ago.
      I am not blaming the Minister of State for what happened. It was obvious from our discussions in Committee and our private discussions afterwards that the Minister had not been told about this problem. I should like to pay tribute to his readiness to find a solution which will benefit not only the trade and the consumer, but also the economy of Cyprus. To be blunt, I believe the problem was known to the Government, to the Ministry of Agriculture, to the Foreign Office and to the Customs and Excise. Unfortunately, no one told the appropriate Treasury Ministers. I thank the Minister of State for acting so promptly and for responding so helpfully to our representations.
      Dr. John Marek: This amendment is the result of co-operation between the Opposition and the Government. Very often the Opposition plead for something and the Government willy-nilly resist it. I hope the Minister will not take this unkindly, but I believe the situation about Cyprus sherry was not known to him precisely, at least in Committee. It was clear to both sides on the Committee that something was going wrong and that if something was not done quickly a long-established industry would fade away along with all the other long-established industries that have faded away during the course of this Conservative Administration.
      I am pleased that the Minister and my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) got together and got to the bottom of the problem. I am pleased that the Minister has said the amendment will put the matter right. The problem in Cyprus may be a small one in relation to industry in this country, but it would have had very serious ramifications for the economy of Cyprus. I am glad that the Minister has solved the problem, that the economy of Cyprus will not be damaged, and that the economy of this country, certainly in the Manchester area and in Birmingham, will not be damaged either.
      My hon. Friend the Member for Workington (Mr. Campbell-Savours) wants to intervene when the Minister comes in, if he does. I hope that, in a spirit of co-operation, the Minister will give way so that we can put this matter right and for once have unanimity in the House.
      Mr. Randall: My contribution to this debate will be brief because we had a considerable debate in Committee.
      I believe that the Government were not aware of the anomaly caused by the change which took place in the 1984 Budget, and the way in which the importers were mixing their various grades of sherry overseas. That affected the imports. That anomaly was having a
      1126
      detrimental effect not just on the economy of Cyprus and the standard of living of its people, but also upon the retail and distributive outlets in this country.
      As my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) pointed out, the Co-operative Wholesale Society is our largest importer of Cyprus sherry. I know that the society was deeply concerned about the effect of this anomaly. I agree with my hon. Friend the Member for Wrexham (Dr. Marek): I am delighted the Minister has had consultations, and from what he said they seem to have been very thorough. If the amendment is accepted, an anomaly will have been overcome, and that will be to the benefit of everybody.
      Amendment agreed to.
      Mr. Campbell-Savours: On a point of order, Mr. Speaker. The amendment was moved by the Minister. Why did he not seek to reply to the debate?
      Mr. Speaker: That is not a matter for me; it is a matter for the Minister.

    Clause 3

      HYDROCARBON OIL
      Mr. K. Harvey Proctor: I beg to move amendment No. 1, in page 2, line 26, leave out subsection (2) and add—
      '(2) In section 9(2) of the Hydrocarbon Oil Duties Act 1979 (oil delivered for home use for certain industrial purposes) the words "but do not include the use of oil as fuel or, except as provided by subsection (3) below as a lubricant' shall be deleted and there shall be inserted in its place the following:—
      "(c) use in the bench-testing of an internal combustion piston engine by a motor vehicle manufacturer or motor vehicle engine manufacturer during the research development manufacture or preparation of such engine or any part thereof
      but do not include except as provided in subsection 2(c) above the use of oil as fuel or, except as provided by subsection (3) below as a lubricant".
      (3) Subsection (1) above shall be deemed to come into force at six o'clock in the evening of 19th March 1985 and subsection (2) shall be deemed to come into force on the passing of this Act.'.
      The purpose of the amendment is to allow fuels used in research and development of automotive engines to be exempt from duty under the Hydrocarbon Oil Duties Act 1979. This is not a new idea or a new amendment. The amendment covers only the bench testing of engines for research and development in the motor industry. The cost to the Exchequer would be around £3 million a year for the industry as a whole. Ford carries out this type of work in my constituency of Billericay and would save about £500,000 a year.
      My hon. Friend the Under-Secretary of State for the Environment has been closely involved in EEC moves to reduce pollution levels of vehicle exhaust gases. Like me, he believes that British development in lean-burn technology — that is, altering the ratio of the fuel to air mixture in the engine — is the key to more acceptable emission technology throughout Europe. The motor industry is spending millions of pounds to achieve these improvements, and much of the work is carried out by Ford at Dunton in my constituency, where the company employs 3,316 people. It is the largest employer of labour in my constituency.
      This is a tax on innovation and is not levied in some of our overseas competitive markets, such as Germany,

      1127
      which puts the United Kingdom industry at a serious disadvantage when competing for research work of this nature. Engine research and production is vital for Britain if we are to maintain a high technology base, and is vital for our overseas trade. Ford produced over 780,000 engines last year in the United Kingdom and 46 per cent. of those engines were exported, earning for Britain £250 million.
      The research being carried out into new generations of engines will have a continuing benefit for the United Kingdom balance of trade. Ford recently announced a £157 million investment in new engine development at Dagenham in order to produce about 200,000 engines a year, the majority of which will be for export. The developments are the result of long and expensive research activity in my constituency and bring to a total of £370 million Ford's engine investment in the United Kingdom in the last two years.
      Lean burn still has enormous development potential; that is why we should be anxious to ensure that the United Kingdom motor industry does not suffer development costs that are not experienced by some of our competitors abroad. There is a case for arguing that all aspects of automotive engine research, which include engine testing both in vehicles and on test rigs, should be excluded, but the difficulty in controlling such exemptions is recognised, and this modest amendment applies only to rig testing where separate fuel storage facilities and records can be easily verified.
      I hope that my right hon. Friend will look carefully at the points made in the amendment and be able to regard them with some favour.
      Mr. T. H. H. Skeet: I congratulate my hon. Friend the Member for Billericay (Mr. Proctor) on moving the amendment, and I shall be extremely disappointed if the Minister of State does not accept it.
      The need for the amendment arises out of section 9 of the Hydrocarbon Oil Duties Act 1979 in which considerable concessions were made. The provision covers the exemption of petroleum products used in the manufacture of an article, for cleaning plant and for certain lubricating purposes. I should not have thought it unreasonable to extend it still further.
      My hon. Friend was right to say that any tax on what we call research and development is a tax on innovation, enterprise and the way that the country is likely to go. I should have thought that the amendment was the right course to follow.
      It might be helpful to read a short paragraph in a letter that I have received from Ford:
      "the engines we produce at Dagenham and Bridgend have substantially increased our exports from the UK and offer the prospect of reduced emission levels and improved fuel economy."
      The Minister of State should take account of this observation:
      "But the payment of excise duty is imposing a substantial cost on our research and development programme in the UK. The petrochemical industry is not charged duty on fuel used in this way and certainly we are at a disadvantage compared with companies in Germany where there is a tax rebate on such uses of fuel."
      Everyone knows that the motor car industry in the United Kingdom is struggling. We also know that our leading competitors are France, West Germany and elsewhere and that we must be on level terms with them.
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      We are concerned not only with the lean-burn engine but with the use of ceramics for cylinder blocks. All these have to be experimented with, and many petroleum products have to be utilised to find whether they are suitable for the market. I should have thought that what leads to a better and more efficient engine and a more adaptable way of producing cars was what the Treasury in all its wisdom should encourage.
      If my right hon. Friend fears that the fuel might be used for vehicle use on the open road, it could be dyed just as diesel is dyed, and some tracer compounds could be included in it. There are very few sites in which it would have to be organised in the United Kingdom, because it would involve only the main motor companies. Storage facilities could be agreed, and there could be a pipe feed between the storage facilities dedicated for the purpose and the few sites in question.
      As my hon. Friend said, we are talking about static engine testing. It is for the motor industry, which is very competitive. Unless R and D work is done, the industry could be going into extremely heavy weather. Therefore, I support my hon. Friend's suggestion. I know that the Minister of State does not want to make many concessions on this occasion, but when the takes account of the importance of research and development to British industry, especially the motor industry, which is under considerable strain, bearing in mind that the amendment will deprive the Treasury of only £3 million a year, I hope that he will regard this as an area in which he should make a concession.
      6.45 pm
      Mr. Terry Davis: I am not unsympathetic to the amendment, even if it comes from what I regard as a surprising source. Nevertheless, I should like to know a little more about the cost involved, and I await the Minister's response before advising my hon. Friends how to vote.
      Dr. Marek: I am also not unsympathetic to the amendment, but I wonder whether it is the right way to proceed. I am worried whether there would be sufficient control, and I am not assured that it would add anything significant to research and development. I am all for increasing the sums that companies spend on R and D, but I should have thought that the best way to do that was to provide fiscal incentives generally rather than to go for it piecemeal, as this proposal seems to do.
      Mr. Hayhoe: As my hon. Friend the Member for Billericay (Mr. Proctor) said, the purpose of the amendment is to relieve from excise duty hydrocarbon oil—mainly it would be petrol—used in the bench testing by manufacturers of motor vehicle engines. As my hon. Friend said, this is not a new proposal. I understand that this relief or something similar to it has been sought for at least 20 years and that successive Governments have taken the view that it is inappropriate to grant it.
      I was glad to note my hon. Friend's comments about the Ford motor company's research and engineering centre in his constituency. I am sure that we all welcome what is being done there to develop a lean-burn engine. Looked at in isolation, the case for giving duty relief on oil used as fuel in research and development of lean-burn motor engines especially is at first sight reasonable. The amount of revenue forgone in this very restricted area would be

      1129
      small as a proportion of the total yield. But if the relief was so drawn, only a few major motor manufacturers would be involved and the administrative effort would not be great.
      Those are the simple arguments in favour of the relief sought by my hon. Friend. However, his amendment is drawn more widely, and there would be a strong probability of further repercussions. The amendment goes further than relief for research and development and seeks relief also for fuel used in bench testing during the manufacture or preparation of engines. It also covers the manufacture or preparation of parts.
      The hon. Member for Birmingham, Hodge Hill (Mr. Davis) asked about the cost. From what I have said he will appreciate that it is very difficult to give an accurate estimate.
      Mr. Campbell-Savours: Why?
      Mr. Hayhoe: I have just explained why. It is very difficult to judge how far the amendment would go in covering the work being done by manufacturers. At the moment the best estimate that I can give is that it would be several million pounds. The best estimate that the Customs can produce of the non-road use of petrol is in the order of £50 million to £100 million, and it could be argued that a very substantial part of that, if not covered directly by the amendment, would be somewhat on all fours with the amendment, and I am sure that the case for equity would be argued by others saying that they should also benefit from it.
      There are knock-on effects and, as my hon. Friend said, there are control difficulties, though he thought that they could be overcome. I am not sure whether the control arrangements that apply to diesel oil which is used for particular sections of industry, which are relieved, will be as effective as the hon. Gentleman thinks in dealing with the wider questions of control that would arise, if the amendment were accepted.
      Mr. Mark Fisher: Will the Minister give us slightly more information about his estimate of the cost? He seems extremely vague on that subject. What estimates has he received, what consultations did he have, and what representations did he receive that lead him to believe that the cost would be several million pounds?
      Mr. Hayhoe: I received that advice from my advisers, who studied the terms of the amendment, which do not necessarily provide what the hon. Members who tabled the amendment wish to suggest. It is important on Report to deal with the words before us. The approach in Committee is different because we can deal more generally with the ideas behind the matter, and if the words are defective we can correct them later. My advice is that several million pounds are involved.
      Mr. Skeet: My hon. Friend is not unsympathetic towards the amendment. Will he undertake to consider the matter seriously and to see whether, within his terms, he can assist us? Will he bear in mind that such assistance is provided in Germany and other Continental countries, and that something should be done to help the British motor industry?
      Mr. Hayhoe: I am glad to undertake to have further consultations, and a better estimate of the cost involved, especially with a closer definition of the proposed changes, may be made.
      The duty on petrol has generally been regarded by successive Administrations—I emphasise that this is not a new matter which has arisen in recent months—as one on the product itself, wherever it is used. Exceptions are made for refineries, fishing boats, and for petrol and oil when it is used as a manufacturing material and furnace fuel. The House will be aware of the reduced rates that apply for aviation gas. The exceptions are few, and successive Governments have maintained that line.
      Apart from the control difficulties, which arise from possible abuse, revenue would undoubtedly be lost. I accept that my estimates are not as accurate as those which I normally give.
      Mr. Campbell-Savours: The Minister did not take the amendment seriously.
      Mr. Hayhoe: I shall continue to ignore the hon. Gentleman's series of interventions from a sedentary position.
      The relief proposed in the amendment is not as clearly defined as one would wish. In those circumstances, and following the precedent of many of my predecessors who have replied to similar debates or dealt with similar representations from the industrial interests involved, I cannot commend the change to the House. If the amendment is not withdrawn, I hope that the House will reject it.
      Mr. Proctor: I thank my hon. Friend the Minister for replying to the points raised by my hon. Friend the Member for Bedfordshire, North (Mr. Skeet) and me. I was surprised that the hon. Member for Birmingham, Hodge Hill (Mr. Davis) was surprised that I moved the amendment. During the last Parliament, I represented more Ford employees than any other hon. Member, and in this Parliament I represent many Ford workers, some of whom work at the Ford research and development establishment in my constitency, some work in my former constituency of Basildon, and some may work at Dagenham, but live in Billericay, Wickford or other parts of my constituency.
      Mr. Terry Davis: I have respected the hon. Gentleman for his consistency in opposing subsidies, and this appears to be a subsidy to research and development.
      Mr. Proctor: I am certainly opposed to subsidies in principle. As the hon. Gentleman knows, one represents one's constituents to the best of one's ability, and there is no inconsistency in that.
      Mr. Campbell-Savours rose—
      Mr. Proctor: I shall not give way to the hon. Gentleman, who seems to interrupt everyone from a sedentary position, but is not prepared to make a speech. He makes only stupid interventions.
      I thank my hon. Friend the Minister for his remarks in replying to the debate. I am grateful for his undertaking to reconsider the point to see whether a more tightly defined amendment can be tabled in future. On that basis, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Mr. Speaker: Order. Before I call the next amendment, it may be appropriate to announce that I have

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      reconsidered my provisional selection of amendments, and propose to select amendment No. 45 in the name of the right hon. Member for Taunton (Sir E. du Cann).

    Clause 5

      BLENDING OF CERTAIN WINES TO CONSTITUTE PRODUCTION OF WINE
      Mr. Warren Hawksley: I beg to move amendment No. 2, in page 3, line 17, leave out clause 5.
      The amendment would remove clause 5 from the Bill. I do not wish to detain the House long, because the matter was debated at length in Committee. Although I was not a member of the Committee, I read its reports, and hoped that there would be a Government amendment to deal with the problem raised by Opposition spokesmen on behalf of my constituents and Cinzano.
      Amendment No. 129 dealt with the Cypriot problems, but did not cover the problem of blending for Cinzano. Cinzano resides in my constituency, and for many years has bottled all its vermouth in Telford. The company came in 1977 when the area suffered, as it still does, from high unemployment. Since then, sales of vermouth have fallen by about 20 per cent. in the United Kingdom, and this has obviously created problems for the company. With great relief, last year to save money it was able to start blending the different strengths and so maintain its bottling production in Telford. Clause 5 puts directly at risk about 50 jobs in my constituency and hundreds of jobs throughout the country. I appreciate that that may not be many, but it is important and should be considered.
      Before the Budget, my noble Friend Lord Thorneycroft and I put our arguments on behalf of Cinzano to the Minister of State, who listened carefully. Clause 5 arises from a court case which was taken last year by Customs and Excise against Cinzano and which Customs and Excise lost. The question was whether blending was legal or whether it should be liable to double taxation. The House of Lords eventually ruled in favour of my constituents. It is regrettable that the Finance Bill is being used to change that decision, which has been in force for some time. In the past others engaged in blending when it was to their advantage.
      In proposing the amendment, I do not blindly argue that the House should accept it to save jobs. Although that is important, sometimes there are more important matters. There are two strong arguments behind Cinzano's case. First, it is desirable to encourage bottling in the United Kingdom. It is better to use British people to bottle imports, and thus create jobs and add value to the raw product, than to import a finished product.
      7 pm
      Secondly, I am greatly worried about the danger that the proposal will lead to retaliation in other countries. I have in mind particularly the problems in the past in Italy where the sale of Scotch whisky has met with resistance, and has had to be dealt with at the highest level. Italy has acted honourably and has agreed to the sale of whisky in Italy without difficulty. If we introduce a piece of legislation that appears to be aimed at an Italian company, or at vermouth producers generally, Italy may try to retaliate. If that were to happen, it would be to the disadvantage of Britain.
      Mr. Campbell Savours: The hon. Member is making a substantial case. He will know that many hon. Members feel strongly on the matter. Some of us intend to press the matter to a Division. Will he vote with us against the Government?
      Mr. Hawksley: It would not be the first time that I voted against my own party. I certainly have no fears of voting for what I believe in. If there is a Division, the hon. Gentleman will see how I vote. It is important that the matter should be aired. If hon. Members feel that it is necessary to force it to a Division, that is up to them. It is interesting that in Committee the Opposition did not bother to push the matter to a Division.
      Retaliation from foreign countries is a risk that must be considered. Cyprus, South Africa and Australia may be satisfied that, following a previous amendment, problems affecting them will not arise, but the risk that I have mentioned should be borne in mind.
      I wish to save jobs in my constituency and I make no secret of it. The arguments in favour of encouraging bottling in Britain, and making sure that we do not put our exports at risk, justify the tabling of the amendment. I hope that I have persuaded the Minister that the arguments are just and that he will accept my amendment.
      Mr. Fisher: I am delighted to support the amendment tabled by the hon. Member for The Wrekin (Mr. Hawksley). The burden of his argument — although he was too polite to say it—is that the clause as drafted is nonsense and is simply a response to the situation in which the Government have put themselves. As the hon. Gentleman says, as a result of the clause, 50 jobs could be lost in his constituency. As he is an hon. Gentleman and has spoken eloquently on the subject, I am sure that he will back up what he said and join us in the Division Lobby in voting for the amendment. We shall welcome him on that occasion.
      The hon. Gentleman related the background to the clause to the judgment in another place in February this year but, as I am sure he is only too well aware, the clause in this year's Finance Bill arose through a piece of faulty drafting of a measure in last year's Finance Bill when the Government were trying to comply with a judgment of the European Court.
      The 1984 Finance Bill widened the differential between light and higher strength wines. Cinzano and other companies which are smaller and less well known saw that that gave them an opportunity to blend higher strength wines, with between 15 and 22 per cent. alcohol, with lower strength wines with less than 15 per cent. alcohol, and thus to pay duty on the proportional strength. As I understand the position, it meant a differential for them of 20p less duty per bottle. It arose from a mistake by the Treasury in its drafting last year, but now the Government are saying that what Cinzano is doing constitutes production.
      Will the Minister in his reply say whether he agrees with me that production is already defined in the Alcoholic Liquor Duties Act 1979? I hope that the Minister will confirm my reading of that Act, in which it says that production means a material change in the product through a fermentation of grapes. According to that definition, we are concerned here not with production but with something called blending. It is an old practice, well known in Britain. That is how many fortified wines are made. The

      1133
      House of Lords was unanimous in ruling in February that blending was legal. Is the Minister now saying that the House of Lords was wrong in defining blending as legal, and that it was wrong in confirming the definition of production contained in the 1979 Act?
      The truth is that the 1984 Finance Bill got things wrong and created a situation of which Cinzano has taken advantage. The Government are supposed to be in favour of business initiative but, when they see a company seizing an area of the market in which it can make money and provide jobs and opportunities and income in Britain, they immediately try to close what they consider to be a loophole.
      I ask the Government to reconsider their view. They made a mistake last year and they are trying to cover it up this year, but the measure, as it stands, will lead to double taxation. As the hon. Member for The Wrekin has said, it will lead to job losses. It will also be a false economy, because the Treasury is likely to be the loser.
      Mr. Freeman: Will the hon. Gentleman explain to the House in a little more detail how double taxation will apply if the company does not blend the product in future?
      Mr. Fisher: I understand that the company wants to blend the product and, if it does so, it will suffer double taxation on the importation of the wine and on the blended product that it produces. That is manifestly unfair, and I do not think that even the Government can have intended that result. The hon. Member for Kettering (Mr. Freeman) shakes his head, but I understand that to be the position. The hon. Gentleman, who was a member of the Standing Committee, will recall that the Minister appeared to give some rather cautious and circuitous reassurances about setting up bonding arrangements, but it is my understanding that the Customs and Excise would not allow small companies to have those bonding arrangements, which are seen as a way round double taxation.
      I believe that the Government made fools of themselves in their drafting of the Finance Bill last year. They will not concede that they made a mistake, and in addition they are challenging the ruling in the other place. On both counts we shall oppose them, and I hope that the hon. Member for The Wrekin will join us in the Division Lobby.
      Mr. Freeman: I was not intending to speak in the debate, but I should like to declare an interest as a director of Martini and Rossi Ltd., which has two-thirds of the vermouth market in branded products in the United Kingdom. Therefore, I am familiar with the problem which has been brought to the attention of the House.
      It might be of assistance to the House to know how the industry has reacted to the problems that my hon. Friend the Member for The Wrekin (Mr. Hawksley) has so clearly portrayed. It is important to appreciate that the ending of blending has merely put the industry back to the position in which it was before initiatives were taken by my own company — and certainly Cinzano and other companies—to blend for the purpose of mitigating the effects of the comparatively higher rates of excise duty that were introduced — with the consequential VAT rates — in the Budget last year. As a result of this year's Budget, all that happened is that we in the industry have gone back to the burden of excise and VAT duties which applied before blending.
      Mr. Fisher: I would be grateful if the hon. Gentleman, with his expert knowledge of the industry, could clarify one matter. Is it not the case that the duty arrangements have now been altered? They were altered by the 1984 legislation under which duty on a blended wine was payable at the higher rate rather than at the average and mixed rate. That loophole has created these circumstances, and if the so-called loophole is closed there will be job losses. It is that point which has opened up the whole area of change.
      Mr. Freeman: All that has happened is that we have gone back to the situation which existed before, whereby the duty was charged on the blended product as opposed to the constituent parts of the product which was blended. If the duty was charged on the constituent parts, the duty was lower than that charged on the blended product. The hon. Gentleman is absolutely right.
      My point is a simple one. The hon. Gentleman talks about employment prospects in the industry. That is a perfectly fair point to make, but it is nothing to do with blending. The problems of the industry, to the extent that there are problems, existed before blending because blending has taken place, as the hon. Gentleman knows, for the last nine months only. Therefore, to connect the argument of job losses with blending and with the ending of blending is a little misleading. If there are problems in the industry because of changing tastes, competitive pressures and comparatively high rates of duty in comparison with the duty on still wine — and, as my hon. Friend the Minister of State knows, all those points have been represented to him in the past, and doubtless will continue to be represented to him—I do not think that there is any validity in the argument which relates the employment problems and prospects of the industry specifically to the episode of blending. It is more relevant to connect the problem of employment prospects and the prosperity of the industry to the situation that prevailed hitherto.
      Mr. Austin Mitchell: I still do not follow the point that the hon. Member for Kettering (Mr. Freeman) makes. On the amendment — let us not call it a wrecking amendment, but a Wrekin amendment — the hon. Member for The Wrekin (Mr. Hawksley) said quite clearly that a lower duty was payable on the component parts of the blended product than that payable on the blended product. This gave an incentive to blend it in this country, and thus created jobs. The argument is that 50 jobs have been created in The Wrekin which the Government now seek to wreck. In the case of Martini, a larger number of jobs—possibly 200, but I am not sure, because Martini has a bigger share of the market — have also been created by Martini in the process of blending.
      Mr. Freeman: I think that it would be fair to say that no new jobs have been created as a result of blending, and in my company no jobs will be lost by the ending of blending. The episode has had a totally neutral effect on employment prospects and employment in my company.
      7.15 pm
      Mr. Mitchell: In that case, is Martini blending abroad? The explicit evidence of Cinzano is that it is blending in this country and that, unless the amendment is carried, 50 jobs will be lost. We have assumed that Martini is behaving with similarly patriotic motives, with the desire

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      to encourage jobs in the country, and that it, too, will lose jobs unless the amendment is carried. If that assumption is wrong, the argument concentrates on Cinzano, which, of the two companies, is perhaps behaving more honourably.
      I hope that the hon. Member for The Wrekin will push the amendment to a Division because it is an important issue. It is well worth taking a stand against the Government. I was hoping that the Minister of State would give us the "Mr. Nice Guy" routine, of which he is the representative in the Treasury, and accept the amendment, realising that the Government have erred. The Government have erred because they are behaving with clear and simple vindictiveness. Indeed, I speak in the debate to criticise the way in which the Government are acting.
      The Government have been defeated. They lost in the House of Lords where their arguments were not acceptable. Having lost at the game, they are now changing the rules of the game to get more money out of firms. In so doing, they are destroying jobs — Cinzano jobs, if not Martini jobs. On the evidence that Cinzano has provided, the Government are certainly destroying jobs. While the Government, albeit accidentally, have created 50 jobs in Cinzano as a result of blending, out of vindictiveness, to get their own back for having been defeated in the House of Lords, they are destroying those jobs, so it is worth making a stand on the issue.
      The Government argue that the blending was simply a tax loophole because it was cheaper to pay duties separately on low and high strength wines which were then blended rather than to pay duty on an already blended, imported vermouth. In fact, blending has been practised regularly over the years. It is a traditional process. The great gain of the decision was that the blending was being done in this country.
      The House of Lords in its unanimous ruling in February this year found that blending is legal, does not constitute production and, therefore, should not be double taxed. It is that decision that the Government are trying to reverse. The Government claim that, because of the practice of blending, they have lost £3 million from Cinzano and £10 million all told. However, in attempting to recoup the money they have lost, the Government are penalising themselves. The loss of jobs implied in the loss of blending in the country will lead to people becoming unemployed and to a loss in PAYE and national insurance contributions. This almost certainly will knock off something like £1·4 million in costs from the £3 million that the Government will gain in taxation. The Government are cutting off their own nose to spite their face in a fit of petty vindictiveness because they were defeated in the House of Lords. It is as simple as that.
      Dr. Marek: It is amazing that in the debates on the Finance Bill one Conservative Member after another is pleading for more money to be given by the Treasury in the form of a tax cut or as extra expenditure for some constituency enterprise. In the past hour, we have heard the hon. Member for Billericay (Mr. Proctor) making a case for extra money to be provided for research and development in engines in his constituency, and the hon. Member for The Wrekin (Mr. Hawksley) stating that a special situation exists in his constituency for which extra money should be provided by way of a tax concession to preserve jobs in the constituency.
      Mr. Hawksley: Will the hon. Gentleman accept that I am not asking for extra money, only that last year's status quo should continue?
      Dr. Marek: There was a status quo situation last year but not the year before. Conservative Members are very good at looking after their constituency interests. Nevertheless, during the past two years they have voted with the right hon. Lady the Prime Minister against all sorts of public expenditure. No matter what kind of public expenditure it was, it was bad, until last week when the Chancellor suddenly said that perhaps public expenditure was good and that it should be increased.
      Mr. John Golding: As the hon. Member for The Wrekin (Mr. Hawksley) will vote with us against the Government, is this not the wrong time to chastise him?
      Dr. Marek: I am suitably admonished and will not pursue that line of argument. Last year Cinzano took advantage of the loophole. If there is a tax loophole it should be closed, but this one is slightly different. My hon. Friend the Member for Great Grimsby (Mr. Mitchell) said that earlier this year the House of Lords unanimously concluded that blending was not production and that it would be more acceptable if duty was levied on wine at the port of entry; there would be fiscal neutrality. After wine had been imported and duty paid it could be mixed or diluted without the need for further checks by Customs and Excise.
      I understand the Government's point of view. They feel that they have been "done" and that legislation has exposed this loophole, as a result of which they have lost revenue. They want to get it back, but I ask the Minister of State, Treasury to think carefully about the matter. If a substantal amount of revenue has been lost something must be done, but if we return to the 1983 position 50 jobs will be lost in Telford. Could not the Government have discussions with Cinzano and find out how small a concession needs to be made for Cinzano profitably to keep open its blending plant in Telford?
      Ever since we joined the European Community we have heard about jobs being exported to France, Italy and other countries. For once the position has been reversed. Jobs have come, albeit in an unusual way, to this country and we should do everything that we can to try to keep them here. I hope that the Minister has had discussions with Cinzano. I am sure that the company would not say that the plant will be closed unless the 1984 position is retained; it would be exceedingly silly of Cinzano to adopt that attitude. The concession could be tightened up. Most of the revenue would then be recouped, but a sufficiently significant concession could be made to enable Cinzano to keep open its blending plant in this country. With 4 million people unemployed we must change direction. Manufacturing has not recovered; it is still below the level at which it stood in 1979. The Opposition believe it is most important that these jobs should be retained, and it would not cost very much to keep them here. If the Minister of State has the will, I am sure that he will find the way.
      Mr. Campbell-Savours: First, may I refer to what was said by Conservative Members about my sedentary interventions. For some inexplicable reason the Minister of State suddenly took his seat when, it appeared to me., he saw that hon. Members wished to intervene during his speech. Only the Minister knows why he did that.

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      Since we are debating a subject that is connected with sherry, perhaps I may put to him a question that I had intended to ask during his speech. During his discussions with representatives of the Cyprus Government, were employment questions raised by them? I am informed that they were. Was his judgment on that matter influenced by the possible loss of jobs in Cyprus, in the event of the Government failing to make the necessary changes?
      Could it be that the 150 jobs that are at risk at the CWS blending plant at Irlam near Manchester and the thousands of jobs that will be lost in Cyprus affected the Minister's decision? If so, it means that employment implications are on the agenda. If they are on the agenda, the letter that was written by Cinzano to me and to other hon. Members is relevant to our debate. Mr. Farrar, as the managing director of Cinzano, must know his business. I am sure he objects to Government Ministers telling him his business, as may have happened this evening. He said:
      "As you know, we are extremely concerned about this clause which has made it uneconomic for us to continue blending vermouth in the UK. As a consequence our Telford blending plant is likely to close with the loss of 50 permanent jobs and others in ancillary industries."
      Mr. Hayhoe indicated dissent.
      Mr. Campbell-Savours: From a sedentary position, the Minister is shaking his head. He complained about my interventions from a sedentary position, but mine were oral. Perhaps the Minister is concentrating on another issue. If so, he should address himself to this issue. Mr. Farrar says that 50 jobs are likely to be lost. That should be a crucial consideration, particularly if it influences the Minister's judgment about Cyprus sherry. Mr. Farrar continued:
      "You will not be alone on this issue. We have had support from all sides of the House and there was a fairly lengthy debate on the subject during the Committee stage when I am afraid the Minister stonewalled."
      Of the 640 or so hon. Members of this House, only one Conservative Member has said that he supports the Opposition, yet he has been unwilling to give an undertaking that he will vote with us tonight. Where are the hon. Members who support the Opposition? Have they been silenced by the Whips? Have the Whips issued an instruction to Conservative Back Benchers not to speak on this issue and embarrass the Government because of the job implications?
      Mr. Fisher: My hon. Friend will remember that in Committee we debated this clause for more than an hour and a quarter. During that time not a single Conservative member of the Committee sought to catch the Chairman's eye and speak. I do not know, therefore, why my hon. Friend is so surprised that Government Back Benchers are reluctant to speak tonight. We welcome the support of the hon. Member for The Wrekin (Mr. Hawksley) and are delighted that he will be voting with us on behalf of his constituents. I do not know where Mr. Farrar got the idea that he has support from the Tory Back Benches, because it was certainly not apparent in Committee.
      7.30 pm
      Mr. Campbell-Savours: Mr. Farrar met Conservative Members. He asked for their support and they undertook that they would give it. In the light of that, Mr. Farrar wrote to me and some of my hon. Friends. I wish to know
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      why those Conservative Members have been prevented from expressing their support in the Chamber. In reference to the effect of the clause on 50 jobs, Mr. Farrar said:
      "it affects real people, real jobs"—
      Mr. John Major (A Lords Commissioner to the Treasury): Try to keep a straight face.
      Mr. Campbell-Savours: The assistant Patronage Secretary suggests that I smiled. He knows the truth about why those Conservative Members have failed—
      Mr. Austin Mitchell: Has it occurred to my hon. Friend the Member for Workington (Mr. Campbell-Savours) that the assistant Patronage Secretary might be a consumer of these drinks?
      Mr. Campbell-Savours: Perhaps that accounts for the smile of the hon. Member for Huntingdon (Mr. Major). Mr. Farrar said:
      "it affects real people, real jobs and the interests of industry as well as the consumer. We have fought long and hard — and successfully — through the Courts for the right to continue blending without being subject to punitive taxation. Now the Government wants to overrule the decision of the Courts. Please help us to dissuade them from this action."
      We are trying our hardest to persuade the Government against the course that they currently seem bent upon. We seek the support of Conservative Members.
      From a constitutional point of view, there is another matter of interest to the House. I am sure that it will appeal to the right hon. Member for South Down (Mr. Powell), because he specialises in European matters. It has been suggested that the Government exercise positive discrimination against European products. As Britain is a member of the European Community, there is much concern about the matter. Some Members of the European Parliament have tabled questions about it. It is hard to understand why the Minister is unwilling to cede the point while those questions remain unanswered. If it could be proved that there were some form of positive discrimination against European products, the Government might wish to reconsider the matter. Even at this late stage, I ask them to take that into account.
      According to Mr. Roth's "Parliamentary Profiles" the hon. Member for The Wrekin (Mr. Hawksley) is sensitive to constituency issues. On one occasion, he was so sensitive that he warned the Patronage Secretary and his assistants that his seat would be at risk if he backed entry for Asian fiances. For many hon. Members, that may be an obscure issue.
      Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. The hon. Gentleman must not stray too far from the amendment.
      Mr. Campbell-Savours: I am coming straight back into order, Mr. Deputy Speaker. The hon. Member for The Wrekin expressed his view on that occasion and this is a far more sensitive issue for the people of his constituency. The Labour party in The Wrekin is expressing considerable anxiety about the matter and it hopes that the hon. Member will feel strongly enough to vote against the Government.
      Mr. John Golding: Unusually, I do not wish to go all round The Wrekin. However, I congratulate the hon. Member for The Wrekin (Mr. Hawksley) on his courageous stand.
      Mr. Campbell-Savours: What courageous stand?
      Mr. Golding: I assume that the vote will follow the voice. I know that when the hon. Member for The Wrekin votes, he will be putting his career at stake and his chances of promotion at risk.
      Dr. Marek: Non-existent chances.
      Mr. Golding: No. My hon. Friends are unusually uncharitable today. The hon. Member for The Wrekin is taking a correct and courageous stand against the Government and he may suffer in consequence. I have already seen sinister individuals trying to talk him out of pressing his amendment. The hon. Gentleman will not be alone in the Division Lobby. He should stick to his amendment. We shall vote with him and give him and his constituents the support that they deserve. We could feel malicious towards the hon. Gentleman because he defeated a first-class Labour candidate at the general election. But we are forgiving and we will stand with the people of The Wrekin in support of their hon. Member who has moved the amendment in their interests.
      Some of my hon. Friends are slightly cynical about the intentions of the hon. Member for The Wrekin. I do not share that cynicism. I expect the hon. Gentleman to vote on the amendment, because the issue is so serious to his constituents. The Wrekin has one of the highest unemployment rates in the west midlands.
      Mr. Campbell-Savours: It is 21·7 per cent. — 13,000 people.
      7.45 pm
      Mr. Golding: No doubt my hon. Friend will tell me any minute now how many of those people are male, how many are female and how many are young. I know that the youth employment rate in The Wrekin is one of the highest in the country. That is why the hon. Member for The Wrekin has been driven to put his future and his promotion prospects at risk. He is challenging not only the Minister of State, Treasury, but the assistant Patronage Secretary.
      Why have the Government brought in the assistant Patronage Secretary? He is a reminder of what might happen to the hon. Member for The Wrekin if he votes in the interests of his constituents against the Government's dirty deed. I am shocked that the Government have not brought in the Patronage Secretary himself. His absence is almost a slight on the hon. Member for The Wrekin. The hon. Member for The Wrekin must go into the Division Lobby. Indeed, he must lead the way into the Lobby.
      Mr. Deputy Speaker: Order. I hope that the hon. Gentleman will relate his remarks to the amendment.
      Mr. Golding: I am saying that I think that the amendment is of first-class importance and—
      Mr. Deputy Speaker: Order. I am talking about the terms of the amendment.
      Mr. Golding: The terms are at the heart of the matter for the constituents of The Wrekin.
      Mr. Campbell-Savours: Fifty jobs.
      Mr. Golding: As my hon. Friend says, we are talking about 50 jobs. It is a matter of good faith. The Government are trying, through legislation, to put jobs at risk. That is the issue tonight.
      The House of Lords clearly said "Keep the jobs." What a situation. The House of Lords say that we should not have penal legislation to cripple production. The Law
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      Lords say "Keep the jobs" but Ministers in the Commons say, "Keep the revenue and do not bother about the jobs." That is nonsense.
      Has the Treasury calculated how much revenue it will collect. [HON. MEMBERS: "Come on."] Some hon. Members are taking your role, Mr. Deputy Speaker. What calculations have been made about the cost of the loss of the jobs compared with the additional revenue?
      Mr. Campbell-Savours: The cost is £1·4 million.
      Mr. Golding: I should prefer the Minister to tell me the cost. What is the cost of the jobs? We are talking not about hypothetical jobs but real jobs. Cinzano has said real people and real jobs are involved. It should be possible for the Treasury to make calculations about the cost to the state of the 50 lost jobs. People who are unemployed are a cost on the state.
      We want to know the real cost to the state of the unemployment that will be caused compared with the receipts. After that calculation has been made we shall still want to know the cost to the individual of unemployment. What will the social cost be?
      The other day I gave a lad from The Wrekin a lift in my car. He had become a market trader in north Wales. He could not get work in Telford because there is no possibility of work there, so he became an itinerant. He described what was happening. It is tragic. There is no work for young people.
      Dr. Marek: The Telford area has been given some status in that it has been given some regional development aid recently. That means that the Government recognise the unemployment difficulties in that area. We are talking not only about 50 jobs but about other jobs in ancillary industries. The loss of 50 jobs might not sound very important but it is not insignificant to the 50 who lose their jobs. The loss of those jobs will have knock-on effects, so the problem is more serious than the Government would have us believe.
      Mr. Golding: I think that the Government gave assistance to The Wrekin just to spite us in north Staffordshire. The Government might have taken into consideration the marginality of The Wrekin constituency but not the unemployment level there. Granting assisted area status has nothing to do with the Government's sensitivity to unemployment but more to do with their sensitivity to the constituency's marginal status in election terms and the certainty that the hon. Member for The Wrekin will lose his seat at the next election.
      It is disturbing that the Government are prepared to go to the length of overturning a House of Lords decision. That is almost incredible. The House of Lords took a decision but the Government, in their determination to make matters worse in the west midlands, have decided to hit Telford even harder. That is intolerable.
      My hon. Friends have concentrated on one aspect—unemployment. That is the most important aspect but they have not addressed themselves to the discrimination against those who drink blended vermouth. I wonder why the Government have chosen to impose a further tax on that alcohol. Blended vermouth is a relatively mild drink, which is less intoxicating than many others. Why has the Treasury chosen to discriminate against people who drink blended vermouth? What is the justification for overturning the decision by the House of Lords?

      1141
      [Interruption.] It seems that the Whips now want to prolong the debate. The Whips and the Whips' dummies are trying to intervene and I find it difficult to reply to monosyllabic Members on the Front Bench. If they want to ask a question, let them do so.
      Treasury Ministers should not sit on their Benches like dummies in Burton's shop window only opening their mouths to utter a single, useless word. The Government must give way to the enormous pressure coming from their own Back Benches. When Cinzano wrote to my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher), it told him that it expected enormous pressure to come from the Conservative Back Benches. That pressure has not manifested itself in speeches, but I assume that those Conservative Members who promised the company that they would speak on its behalf—
      Mr. Fisher: They had free meals.
      Mr. Golding: My hon. Friend the Member for Stoke-on-Trent, Central forgets himself.
      I assume that those Conservative Members who promised to support Cinzano have written to the Minister protesting about the decision. Will the Minister tell us how many Conservative Members, after being wined and dined by Cinzano, have written to him to protest about this tax and in support of the amendment? What undertaking has the Minister given to those Conservative Members?
      My hon. Friends are cynical because they assume that those Conservative Back Benchers have not spoken in support of Cinzano because they were not sincere when they gave their undertaking. Of course that may not be so. Those Conservative Members may have discussed the amendment with the Minister and told him that they support it. The Minister may have given them some secret undertaking, which has led them to be absent tonight, thinking it unnecessary to give visible and vocal support in the Chamber. The Minister may have told them that he would do what the company wants. Will the Minister tell us what representations he has received and what replies he has given? If he remains seated, some of us will believe that the company was wrong when it said that there would be Conservative support for my hon. Friend the Member for Stoke-on-Trent, Central on this issue.
      Unless the Minister can assure us that these missing Conservative Members have spoken or written to him and discussed this matter with him, we will think that, with the honourable exception of the hon. Member for The Wrekin, who will lead us into the Division Lobby tonight, we shall be alone. There will be only one Tory Member in the Division Lobby surrounded by the supporters of Cinzano, who are the Labour Members present. I am waiting to hear what the Minister will say.
      I have just received a note telling me that I am requested to shine my pants. I do not know whether that is a parliamentary note, but I am grateful to my hon. Friend the Member for Great Grimsby (Mr. Mitchell) for his advice. I shall conclude and shine my pants by saying that the Opposition are waiting for the leadership of the hon. Member for The Wrekin and we hope that he will not fail us or his constituents tonight.
      Mr. Terry Davis: As the hon. Member for The Wrekin (Mr. Hawksley) said at the outset of his speech, I have taken a particular interest in this issue for several reasons.
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      In moving the amendment, the hon. Gentleman was rather kind to the Government in his summary of the reasons for the problem. He fairly said that the problem began with a decline in sales, but I do not believe that that decline — for which he gave no reason — can be attributed entirely to a change in taste, as was suggested by the hon. Member for Kettering (Mr. Freeman).
      There are several reasons. The decline in sales of vermouth began in 1980 with a significant increase in the duty on vermouth. In that year the increase was 30 per cent., and at that point the fall in sales began. That is not surprising. In the past five years total sales of vermouth have declined by 20 per cent. Last year there was a very steep increase in the tax on vermouth. It was a small amount in absolute terms, because it was only 8 per cent., but it was a big increase in relative terms because the duty on wine was reduced by 20 per cent. at the same time. Therefore, the relative duties on vermouth and wine were substantially changed to the disadvantage of vermouth.
      In the last five years, the duty on vermouth has risen by 80 per cent. whereas the duty on wine has risen by only 20 per cent. It is therefore not surprising that during those five years there has been such a substantial fall in the sale of vermouth, and that decline in the total market has caused the problem for Cinzano.
      The hon. Member for The Wrekin said that it was a relief for Cinzano to start blending last year, but I should remind him that the return to blending was occasioned by the big relative increase in the duty on vermouth. That was not designed to save sales; it was a step to reduce the duty and to improve sales by affecting the retail price of vermouth. Although the duty has risen significantly in the last five years, the retail price of vermouth has risen by much less. Consequently, the increase in duty has tended to be absorbed by Cinzano.
      My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher) said that the Government made a fool of themselves last year. He is absolutely right, because at the same time as there was a big increase in the duty on vermouth there were changes in the categories of wine and fortified wine. The Government made particular fools of themselves in that context because they created a loophole which the makers of Cinzano were right to use to their advantage in order to alleviate the problem caused by the increase in duty.
      The Government then tried to cover up their mistake by going to court. In fact, they took the case all the way to the House of Lords on the argument that if blending took place in this country it was a type of production and, therefore, a tax should be paid on top of the tax that was paid on imported wines. In other words, there would be double taxation. That is what the Government tried to achieve by legal proceedings.
      I disagree with my hon. Friends in their analysis because I believe that the hon. Member for Kettering is right to suggest that bonding is the answer to the problem of double taxation. The Minister made the point in Committee — I have examined it carefully, and I think that he is correct — that bonding is the answer for Cinzano. There is a level at which an importer must import wine in order to be given the opportunity to import into bond and to pay tax as the wine leaves bond. I entirely accept that Cinzano is above that level and, therefore, that bonding could be described as an answer.
      It is not simply a problem of double taxation. Even if Cinzano uses bonding and blends in bond—so that the

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      company pays the tax only once, as the wine leaves the bond—it still faces the overall increase in duty of nearly 8 per cent. in five years, and a decline in sales. That increase in duty applies if the wine has been blended in bond. The bonding arrangement simply puts Cinzano back to where it was a year ago, when it began to take advantage of the loophole.
      8 pm
      I have described it as a loophole, but let me make it clear that I am not criticising the management of Cinzano. On the contrary, it deserves praise for showing flair in spotting an opportunity to alleviate difficulties created for the company by the Government's increase in the total duty on vermouth. Clearly, sharper people work for Cinzano than work for the Customs and Excise. Indeed, a learned judge said that the Government needed not a lawyer but an arithmetician.
      There are some people with extremely sharp pencils working for Cinzano, and it is to the credit of the company that it took the opportunity to save jobs at Telford. It is not true to say that blending created those jobs at Telford. There was already a bottling plant there. Those jobs were jeopardised by the decline in sales, a decline that was the result of the Government's increase in the duty on vermouth. The management of Cinzano saw an opportunity to use blending to save jobs, and I gather that there are 50 full-time jobs at the Telford plant.
      What are the Government willing to do about those jobs at Telford, if they intend to insist on clause 5? I appreciate the Government's argument on the issue and I have some sympathy with it. However, that does not get them off the hook from the point of view of those jobs at Telford.
      Yesterday we were told by the hon. Member for Beaconsfield (Mr. Smith) to devote more time in our debates to the problems of unemployment. That is precisely what we are doing tonight, although that hon. Gentleman is not in his place. The Government have a responsibility to explain what steps they will take to save those jobs at Telford if they insist on blocking the so-called loophole that has been used by Cinzano in the last 12 months.
      We can look a stage further and ask what the Government propose to do to create more jobs in blending. My hon. Friend the Member for Wrexham (Dr. Marek) referred to the number of jobs that have been exported from Britain. As a result of the introduction of blending, jobs have been imported into Britain. To the extent that vermouth is sold in this country, it will be blended either in Italy or here. In the last 12 months, some jobs have been saved in Britain by Cinzano. That has represented, in effect, the importation of jobs. That raises interesting opportunities. What other new jobs can be provided in the blending of other drinks by other companies? I do not know whether Martini blends vermouth. Either way, what can be done to encourage that and other companies to create such jobs here?
      I was impressed by the arguments adduced by the Minister of State in Committee about the cost of opposing clause 5. He said that if we did not approve the provision, the Revenue stood to lose £10 million. About £3 million of that would be derived by Cinzano. I accept that it is an expensive way of saving jobs to spend £60,000 per job. Indeed, using the £10 million, it would work out at £200,000 per job. I appreciate, therefore, why the Minister regards that as an expensive procedure.
      1144
      It was not clear from what the Minister said in Committee whether he was talking about the effect of the current blending operations in this country or was referring to potential blending operations. Is that £10 million the amount that has been lost in the last year, and will be lost to the Revenue in the coming year if we do not approve the clause, as a result of blending operations already located in Britain? Or is it the Government's estimate of the money that would be lost to the Revenue if there was an increase in the amount of blending done here and, therefore, an increase in the number of blending jobs that would thereby be created?
      We should know the figures because if we are being told of possible lost revenue in respect of only 50 jobs, we need to know whether the Government are adding to the cost money that would create jobs elsewhere in the United Kingdom. We are satisfied, whatever the figures, that 50 jobs are at risk in Telford new town. We must be told what the Government propose to do to save those jobs if clause 5 is approved.
      The Government may be wondering whether my hon. Friends and I intend to vote against clause 5. The hon. Member for The Wrekin lost my sympathy when he said that the Opposition did not vote against it in Committee. He will see at column 103 of the Committee proceedings that the Minister assured us that he would examine the points that we had made, with particular reference to Cyprus sherry.
      I am not suggesting that the Minister has not fulfilled every assurance that he gave in Committee. It would have been wrong for the Opposition to have voted against clause 5 at that stage when the Minister had given fulsome and ready assurances not only to consider the points that we had made but to meet a deputation led by Opposition Members. That is why we did not press the point to a vote in Committee.
      Not having been a member of the Committee, the hon. Member for The Wrekin may not have been aware of everything that was said at that stage, and he could not have been aware of the flavour of what was said. It would have been discourteous and ungenerous of us to have voted against the Government on this issue then, particularly as we now see that the Minister of State's assurances have been fully fulfilled, for example, in relation to the previous amendment dealing with Cyprus sherry.
      We are now concentrating on the issue of vermouth, the jobs at risk at Cinzano and jobs which may be at risk in other companies. We are also concerned with jobs that could be created if only we imported blending jobs into Britain, instead of leaving them in other countries in the Common Market. I await the Minister's explanation before advising my hon. Friends on how to vote on the amendment.
      Mr. Hayhoe: This has been a curious debate, since it has taken place by courtesy of my hon. Friend the Member for The Wrekin (Mr. Hawksley). Those outside the House who are not familiar with our procedures may have thought that Opposition Members, who have largely spoken in the debate, were so concerned over the matter that they were determined to have the debate on the motion that clause 5 stand part of the Bill.
      That is not the case because the debate is being held wholly by courtesy of my hon. Friend the Member for The Wrekin. If he had withdrawn his amendment last night, there would have been no possibility of Opposition

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      Members having this debate. Normally in these circumstances, if hon. Members are determined to make their point of view heard, they sign amendments so that they cannot be withdrawn. Either Opposition Members were not sufficiently wise to follow the normal parliamentary practice and sign my hon. Friend's amendment, or they were prepared to leave the decision on whether there should be a debate, first to Mr. Speaker, to see whether he would select the amendment, and then to my hon. Friend—
      Mr. Campbell-Savours rose—
      Mr. Hayhoe: I appreciate the hon. Gentleman's emotion at having been caught out on the procedural inadequacies of his and his hon. Friend's actions.
      Mr. Campbell-Savours: Is the Minister not aware that he casts a slur on his hon. Friend the Member for The Wrekin (Mr. Hawksley)? His hon. Friend, as an honourable Gentleman, would never have withdrawn from the Notice Paper an amendment that was crucial to his constituents. We placed our faith, and were right to do so, in his hon. Friend. We are supposed to be honourable Gentlemen. The Minister should apologise to his hon. Friend.
      Mr. Hayhoe: I think that my hon. Friend will be able to use what has just been said in campaigning in his constituency. I do not think that I have heard such an open-ended compliment or endorsement of a Member of Parliament by Opposition Members for a long time. Although I know that my hon. Friend will have no difficulty in defeating any candidate who may be put up by the Labour party, that full and forthright endorsement of his position will be noted by him, and he will take advantage of it.
      I reiterate the point that the debate and all the speeches that we have heard from Labour Members are wholly by courtesy of my hon. Friend the Member for The Wrekin. I hope that those who study debates in the House and are concerned with the way in which we deal with the important matter of excise duty will read with care all that has been said on this occasion. That will be to their advantage, and I hope that they will draw interesting conclusions from what has been said.
      Most of the comments that have been made have concentrated on the issue of jobs, particularly the 50 jobs at the bottling plant in Telford. Some hon. Members who participated in the debate do not appreciate that, before the Budget changes of 1984, Cinzano was imported in bulk and bottled in this country. The blending was the bonus that flowed from the changes made in 1984. Those changes allowed producers of blended products, if those products were blended from two different levels of alcohol in the liquor, to pay less duty than would be paid in respect of the final product if it had been imported or manufactured in accordance with the law as it then stood. As has been said, that matter was taken to the courts, and the House of Lords, in its judicial capacity, ruled that the Customs and Excise view was incorrect and, as a result, the blending taking place was perfectly legal and proper.
      Mr. Fisher rose—
      Mr. Hayhoe: Let me deal with points that the hon. Gentleman made in his speech. I noted with interest the
      1146
      deference that he paid to the House of Lords and the great unwillingness of Opposition Members even to contemplate overturning a judicial decision by the House of Lords. I am a more robust democrat and a more robust believer in the House of Commons. I believe that in the House of Commons we are perfectly justified in looking at the state of the law that has been determined by the House of Lords—no higher body could so determine it—and deciding that, if we do not like that provision of the law, we can bring to Parliament proposals for change. That is the democratic method, and it is what we are doing in clause 5.
      I am astonished that Opposition Members should seek to elevate the decisions of the House of Lords into a constitutional doctrine and that their respect and support for the House of Lords are so intense that the hon. Member for Stoke-on-Trent, Central (Mr. Fisher) should criticise me and other members of the Government for coming forward—
      Mr. Fisher: Will the right hon. Gentleman give way?
      Mr. Hayhoe: I have listened to a long debate from Opposition Members, and I am wholly entitled to reply to the points that were made.
      The 50 jobs at Telford were crucial to the issue. During the debate in Committee the hon. Member for Birmingham, Hodge Hill (Mr. Davis) properly referred not only to those 50 jobs at Telford but to the 150 jobs at Irlam involved in bottling and blending Cyprus sherry. It was the hon. Member for Hodge Hill who reasonably and courteously congratulated me only a short time ago on having brought forward amendments that make the blending of Cyprus sherry unnecessary. Therefore, if the 150 jobs at Irlam are involved purely in blending, they may well be at risk.
      Mr. Terry Davis: There may be some misunderstanding between us. I have checked this point. There would not be any loss of jobs at Irlam as a result of amendment No. 129.
      8.15 pm
      Mr. Hayhoe: In other words, the removal of the need to blend at Irlam is not the determinant; and it would not be with regard to Cinzano, either. I had discussions with representatives of Cinzano, who came to see me before the Budget. I asked the specific question: could the jobs be guaranteed at Telford if the House of Lords judgment—the discussion took place even before we knew that judgment—went against the company and in favour of Customs and Excise? Alternatively, I asked, what would happen if we changed the law? I was not given a categorical assurance about that.
      Mr. Davis: The Minister of State will accept my assurance that I checked with both companies and, just as I have been assured that the 150 jobs are not in jeopardy at Irlam as a result of amendment No. 129, I have also been assured that the 50 jobs at Telford are very much in jeopardy as a result of clause 5. I do not make the point in any partisan sense. I believe that those are the facts.
      Mr. Hayhoe: Those are representations that have been made to the hon. Gentleman. I note what he said.
      It is absurd to say that we should maintain a loophole in the excise duty provisions to allow that blending to take place, as that would create an unfairness, since the blended product would have a lower rate of duty than exactly the

      1147
      same product that had been blended outside the country or manufactured at the same level of alcohol outside the country. I do not believe that that method of job creation or protection would stand up to intensive survey. As has been admitted, the actual cost of those jobs would be considerable.
      There could also be the adverse knock-on effects on others involved in the drinks business, who would be hurt by the unfairness and inequity of letting that "loophole" continue—I use the word that was used by Opposition Members. All that I have heard in the debate convinces me of the wisdom of the Government's proposal to maintain clause 5 in the Bill. I hope that the House will so maintain it.
      Mr. Hawksley: I thank the Minister of State for his reply to the debate. We have had a good debate, which has been lively and longer than many of us had thought.
      Fifty jobs in my constituency are important. I am glad that we have had an opportunity to discuss them. The hon. Member for Newcastle-under-Lyme (Mr. Golding) talked about the assisted area status aid that had come to Telford, which might help us to create more jobs there. He could have mentioned many other things that the Government have done to help Telford. We have had the new hospital and motorway, the enterprise zone and urban aid grants, which should create thousands of jobs. However, I still believe that, in spite of the thousands of jobs that the Government are creating there, those 50 jobs are very important. I do not ask—not that the Opposition would agree anyway—for leave to withdraw the amendment. I leave it to the House to decide how to deal with it. If hon. Members wish to support it, they know what to do.
      Question put, That the amendment be made:—
      The House divided: Ayes 65, Noes 188.

      Division No. 269]

      [8.19 pm

      AYES

      Abse, Leo

      Hawksley, Warren

      Alton, David

      Haynes, Frank

      Anderson, Donald

      Hogg, N. (C'nauld & Kilsyth)

      Archer, Rt Hon Peter

      Home Robertson, John

      Ashdown, Paddy

      Howells, Geraint

      Barron, Kevin

      Johnston, Sir Russell

      Beith, A. J.

      Kennedy, Charles

      Bennett, A. (Dent'n & Red'sh)

      Kirkwood, Archy

      Bidwell, Sydney

      Leighton, Ronald

      Blair, Anthony

      Livsey, Richard

      Boyes, Roland

      McDonald, Dr Oonagh

      Brown, R. (N'c'tle-u-Tyne N)

      Marshall, David (Shettleston)

      Bruce, Malcolm

      Maxton, John

      Buchan, Norman

      Meadowcroft, Michael

      Callaghan, Rt Hon J.

      Owen, Rt Hon Dr David

      Callaghan, Jim (Heyw'd & M)

      Parry, Robert

      Campbell-Savours, Dale

      Pavitt, Laurie

      Clwyd, Mrs Ann

      Pendry, Tom

      Cocks, Rt Hon M. (Bristol S.)

      Penhaligon, David

      Cohen, Harry

      Randall, Stuart

      Cowans, Harry

      Rees, Rt Hon M. (Leeds S)

      Craigen, J. M.

      Ross, Stephen (Isle of Wight)

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

      Sheerman, Barry

      Dewar, Donald

      Skinner, Dennis

      Dixon, Donald

      Steel, Rt Hon David

      Dormand, Jack

      Strang, Gavin

      Duffy, A. E. P.

      Thompson, J. (Wansbeck)

      Dunwoody, Hon Mrs G.

      Wainwright, R.

      Eastham, Ken

      Wilson, Gordon

      Fatchett, Derek

      Wrigglesworth, Ian

      Fisher, Mark

      Forrester, John

      Tellers for the Ayes

      Golding, John

      Dr. John Marek and

      Gould, Bryan

      Mr. Austin Mitchell.

      Hamilton, James (M'well N)

      1148

      NOES

      Adley, Robert

      Heathcoat-Amory, David

      Alexander, Richard

      Heseltine, Rt Hon Michael

      Amess, David

      Hind, Kenneth

      Ancram, Michael

      Hirst, Michael

      Aspinwall, Jack

      Hogg, Hon Douglas (Gr'th'm)

      Atkins, Robert (South Ribble)

      Holt, Richard

      Atkinson, David (B'm'th E)

      Howard, Michael

      Baker, Nicholas (N Dorset)

      Howarth, Gerald (Cannock)

      Baldry, Tony

      Howell, Rt Hon D. (G'ldford)

      Batiste, Spencer

      Hunt, David (Wirral)

      Beaumont-Dark, Anthony

      Hunt, John (Ravensbourne)

      Bellingham, Henry

      Hunter, Andrew

      Benyon, William

      Jessel, Toby

      Bevan, David Gilroy

      Jones, Robert (W Herts)

      Body, Richard

      Joseph, Rt Hon Sir Keith

      Boscawen, Hon Robert

      King, Roger (B'ham N'field)

      Bowden, Gerald (Dulwich)

      Knight, Greg (Derby N)

      Braine, Rt Hon Sir Bernard

      Knight, Dame Jill (Edgbaston)

      Brandon-Bravo, Martin

      Knox, David

      Bright, Graham

      Lang, Ian

      Brinton, Tim

      Lawler, Geoffrey

      Brittan, Rt Hon Leon

      Lawson, Rt Hon Nigel

      Brooke, Hon Peter

      Lee, John (Pendle)

      Brown, M. (Brigg & Cl'thpes)

      Leigh, Edward (Gainsbor'gh)

      Browne, John

      Lewis, Sir Kenneth (Stamf'd)

      Bruinvels, Peter

      Lilley, Peter

      Burt, Alistair

      Lloyd, Ian (Havant)

      Butcher, John

      Lord, Michael

      Butler, Hon Adam

      McCurley, Mrs Anna

      Butterfill, John

      MacGregor, John

      Carlisle, John (N Luton)

      MacKay, Andrew (Berkshire)

      Carlisle, Kenneth (Lincoln)

      MacKay, John (Argyll & Bute)

      Carlisle, Rt Hon M. (W'ton S)

      Maclean, David John

      Carttiss, Michael

      Major, John

      Chalker, Mrs Lynda

      Mates, Michael

      Chapman, Sydney

      Mather, Carol

      Chope, Christopher

      Maude, Hon Francis

      Clark, Sir W. (Croydon S)

      Mawhinney, Dr Brian

      Clegg, Sir Walter

      Maxwell-Hyslop, Robin

      Coombs, Simon

      Merchant, Piers

      Cope, John

      Miller, Hal (B'grove)

      Corrie, John

      Mills, Iain (Meriden)

      Cranborne, Viscount

      Moore, John

      Currie, Mrs Edwina

      Murphy, Christopher

      Dover, Den

      Neale, Gerrard

      du Cann, Rt Hon Sir Edward

      Norris, Steven

      Durant, Tony

      Osborn, Sir John

      Edwards, Rt Hon N. (P'broke)

      Page, Richard (Herts SW)

      Evennett, David

      Parris, Matthew

      Fairbairn, Nicholas

      Pattie, Geoffrey

      Fallon, Michael

      Peacock, Mrs Elizabeth

      Fenner, Mrs Peggy

      Percival, Rt Hon Sir Ian

      Fletcher, Alexander

      Porter, Barry

      Forman, Nigel

      Powley, John

      Forsyth, Michael (Stirling)

      Proctor, K. Harvey

      Forth, Eric

      Rees, Rt Hon Peter (Dover)

      Fowler, Rt Hon Norman

      Roberts, Wyn (Conwy)

      Fox, Marcus

      Robinson, Mark (N'port W)

      Fraser, Peter (Angus East)

      Roe, Mrs Marion

      Freeman, Roger

      Rowe, Andrew

      Gale, Roger

      Sackville, Hon Thomas

      Gardiner, George (Reigate)

      Sainsbury, Hon Timothy

      Gardner, Sir Edward (Fylde)

      Sayeed, Jonathan

      Garel-Jones, Tristan

      Shaw, Giles (Pudsey)

      Glyn, Dr Alan

      Shaw, Sir Michael (Scarb')

      Good lad, Alastair

      Shelton, William (Streatham)

      Gower, Sir Raymond

      Shepherd, Colin (Hereford)

      Grant, Sir Anthony

      Silvester, Fred

      Gregory, Conal

      Sims, Roger

      Griffiths, Sir Eldon

      Skeet, T. H. H.

      Griffiths, Peter (Portsm'th N)

      Smith, Sir Dudley (Warwick)

      Grist, Ian

      Smith, Tim (Beaconsfield)

      Ground, Patrick

      Soames, Hon Nicholas

      Gummer, John Selwyn

      Speed, Keith

      Hamilton, Neil (Tatton)

      Speller, Tony

      Hanley, Jeremy

      Spencer, Derek

      Havers, Rt Hon Sir Michael

      Spicer, Jim (W Dorset)

      Hayes, J.

      Spicer, Michael (S Worcs)

      Hayhoe, Rt Hon Barney

      Stern, Michael

      1149

      Stevens, Lewis (Nuneaton)

      Vaughan, Sir Gerard

      Stevens, Martin (Fulham)

      Viggers, Peter

      Stewart, Allan (Eastwood)

      Waldegrave, Hon William

      Stewart, Andrew (Sherwood)

      Walden, George

      Stewart, Ian (N Hertf'dshire)

      Waller, Gary

      Stradling Thomas, J.

      Ward, John

      Sumberg, David

      Wardle, C. (Bexhill)

      Taylor, John (Solihull)

      Watson, John

      Taylor, Teddy (S'end E)

      Wells, Sir John (Maidstone)

      Temple-Morris, Peter

      Whitney, Raymond

      Thompson, Donald (Calder V)

      Wilkinson, John

      Thompson, Patrick (N'ich N)

      Yeo, Tim

      Thorne, Neil (Ilford S)

      Young, Sir George (Acton)

      Tracey, Richard

      Trippier, David

      Tellers for the Noes:

      Trotter, Neville

      Mr. Archie Hamilton and

      Twinn, Dr Ian

      Mr. Michael Neubert.

      Question accordingly negatived.

    Schedule 3

      AMENDMENTS OF ALCOHOLIC LIQUOR DUTIES ACT 1979
      Amendment made: No. 58, in page 106, line 21, leave out 'be omitted' and insert
      'cease to have effect on the coming into operation of regulations under section 71A of the Alcoholic Liquor Duties Act 1979.'.—[Mr. Hayhoe.]

    Clause 13

      TAX EVASION: CONDUCT INVOLVING DISHONESTY
      8.30 pm
      Mr. Archy Kirkwood: I beg to move amendment No. 141, in page 9, line 33, leave out from 'conduct' to end of line 34 and insert 'is dishonest'.
      Mr. Deputy Speaker (Mr. Harold Walker): It will be convenient also to take Government amendment No. 3.
      Mr. Kirkwood: The amendment would result in clause 13 reading:
      "(1) In any case where,—

      (a) for the purpose of evading tax, a person does any act or omits to take any action, and

      (b) his conduct is dishonest

      he shall be liable, subject to subsections (4) and (5) below, to a penalty equal to the amount of tax evaded or, as the case may be, sought to be evaded, by his conduct."
      As will be clear to those hon. Members who served on the Committee, clause 13 introduces a general anti-dishonesty offence which is punishable by a civil penalty equal to the tax evaded, although that can be reduced by half at the discretion of the Customs and Excise if the taxpayer cooperates. To commit the new civil offence of tax evasion, the taxpayer's conduct must be shown to involve an element of dishonesty as clause 13(1)(b) stands. In Committee it was recognised that the phrase "element of dishonesty" could be interpreted differently and that that could give rise to uncertainty.
      The phrase "element of dishonesty" taken with the words
      "(whether or not it is such as to give rise to criminal liability)"
      seems designed to produce an offence which is wider in scope than the existing criminal offence under section 38 of the Value Added Tax Act 1983 and wider than the offence recommended by the Keith committee which envisaged that the new offence of civil fraud which is created in the Finance Bill would be defined as
      "an act or omission with dishonest intent"
      1150
      and that the decriminalising of the offence of fraud should mark a difference in investigatory techniques rather than a difference in the essential nature of the conduct. That provoked the Law Society, amongst others, to say:
      "We recommend that, in view of the importance and objectives of this new civil offence, uncertainty over the scope of it should be removed by deleting the present wording of subclause (1)(b) and replacing it by: 'his conduct is dishonest'."
      We fully recognise the need to expedite timeous VAT payments. We also recognise that the Government have made the improvements that were carefully worked out by the Keith committee. Those improvements which make a distinction between civil and criminal penalties are largely welcome.
      The hon. Member for Beaconsfield (Mr. Smith) tabled a similar amendment in Committee which was not selected for debate. The Government seek to amend the clause in response to the discussions that took place in Committee, but I feel that amendment No. 141 is to be preferred because it is clearer and avoids any element of doubt. Amendment No. 141 which seeks to add the words "is dishonest" is different from the Government's proposal which suggests inserting the words "involves dishonesty". That may seem a small distinction, although amendment No. 141 seeks in addition to remove the words in the brackets, but I hope to be able to explain that there is a considerable difference.
      The criminal test is whether the act, or omission, was done with the intention of evading tax. To a simple Scots criminal lawyer like myself, the test is an easy one. In Scots law terminology it involves an element of mens rea. If there is a wilful intention to avoid tax, there is a criminal offence. Using the Scots criminal law test, the act or omission is either dishonest or it is not. Before the Committee stage I could not for the life of me understand what an "element of dishonesty" could be. The Minister was asked by the hon. Member for Stretford (Mr. Lloyd) whether he would expand on that. I agree that some of these matters are complicated but on 16 May the Minister gave the definition as:
      "a dishonest act involving a £1,000 evasion might be part of a £5,000 fraud for which the whole fraud of £5,000 was supported by documentary evidence or a general admission. In those circumstances, it would be reasonable on the civil standard"—
      the new standard that has been adopted by the Government—
      "of probability to accept that the offence was the evasion of £5,000, even though the precise evidence attached the dishonesty only to one part of that amount. Those involved might have left the country, and it might be impossible to gain the evidence from elsewhere."—[Official Report, Standing Committee B, 16 May 1985; c. 130.]
      I have given that matter a great deal of thought, and I do not think that the Government's amendment is good enough. An element of doubt remains if the Bill talks about "involving dishonesty". That is ambiguous. If the Minister's explanation is right and in future the Customs and Excise will be able to catch much larger sums of money, although it can prove only a small part of the amount, and impose a civil penalty on the global amount, however big, that gives an unacceptable power to the commissioners.
      That would create a bad precedent. We must bear in mind that we are not dealing with the criminal courts. We are dealing with an administrative branch of the law. The Government already have the additional benefit of the civil test of the burden of proof — on a balance of probabilities—as opposed to the criminal test—beyond

      1151
      reasonable doubt. That should be more than enough to enable the Government to catch those people guilty of this new civil offence.
      The changes are too draconian. They give far too much power to the commissioners. The clause will cause a great deal of uncertainty. There will be misinterpretation and problems will be caused.
      I support the view taken by the Law Society and many other people in Committee and outside the House that the Government's amendment does not go far enough. I hope that the Minister will consider, even at this late stage, adopting the amendment in my name rather than the one he is proposing to move later on.
      Sir William Clark: Mr. Deputy Speaker, may I speak to the following two amendments which you have been kind enough to say may be discussed with this one?
      Mr. Deputy Speaker: I remind the hon. Gentleman that with amendment No. 141 we are discussing only Government amendment No. 3.
      Mr. Tim Smith: We had a long debate on this matter in Committee. The words found to be objectionable were "an element of". The Government are proposing to remove those words and I therefore welcome the Government amendment.
      Mr. Tony Blair: It is difficult to see how far this debate is a semantic one and how far it is a real one and I appreciate the Government's difficulties. It is fair to say that most of the debate in the Standing Committee was about the words "an element of dishonesty". It was felt that the words "an element" brought a degree of confusion into the proceedings which was regrettable. The Minister said that he would look at it and he has done so and deleted those words. The difficulty, on reflection, and reading what he said in Standing Committee, is that there is some confusion in the mind of the Government as to exactly what they want the nature of this new civil fraud to be. The difficulty arises not just from the words "an element" but from the use of the word "involves".
      The question is, does the conduct have to be dishonest or is it necessary only for a part of the conduct to be dishonest, even if the rest of the conduct in the particular circumstances of an offence is all right? That is a distinction which is almost impossible to draw. Further ambiguity is engendered by a misuse of the distinction between the test in criminal and civil law for the burden of proof. In criminal law, in order to prove a particular offence, it has to be shown beyond a reasonable doubt that someone acted with a dishonest intent. In civil law it is merely that on the balance of probabilities fraud or dishonesty is established. If that burden of proof is the problem and if the Government wish to say that the civil test applies and not the criminal test, which seems to follow from the nature of the offence that is being legislated, and they are attempting to distinguish between gradations of dishonesty within this clause, it confuses more than it elucidates.
      The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) asked whether the Government were saying that an evasion of VAT, say, of £5,000 should be caught in its entirety by clause 13, even though there was only dishonest conduct in relation to a fraction of that amount. That would be highly unsatisfactory, because either
      1152
      someone has behaved dishonestly in respect of an evasion of VAT or he has not. If there is any sum of money for which they are liable but they have not behaved dishonestly in relation to it, they should not be caught by clause 13. That is an unjustifiable distinction.
      The Minister has very fairly thought about it and it would be wrong, given that we concentrated so much attention on the words "an element of dishonesty", to criticise him. If he wants to make it clear that a lesser burden of proof is being applied, then it could be done in a much less ambiguous way. The danger of leaving in the word "involves" is that it has the same connotation as an "element" because it may involve a certain amount of dishonesty, but one is not sure whether the entirety of the conduct needs to be dishonest. So the amendment does not really deal with the essential point made in Standing Committee. When introducing a new offence, it is right that people should know exactly where they stand. I ask the Minister to think again because there is a general view among lawyers, certainly outside the House, that there is a lack of clarity in clause 13 that could pose problems. It is much better that we deal with them as legislators rather than leave them to be dealt with by the courts.
      8.45 pm
      Mr. Hayhoe: I am grateful for the manner in which the amendment has been moved and the way in which the hon. Member for Sedgefield (Mr. Blair), speaking for the Opposition, has responded to it. There are real difficulties here because, as I understand it, not being a lawyer, we are moving into somewhat new ground on which there is much precedent in legislation. We are decriminalising a large number of offences concerning VAT and the whole House has welcomed that. We are replacing those criminal offences by a civil offence and the arguments and problems of changing from the burden of proof—which, as I understand it, for a criminal offence is that it is beyond reasonable doubt — towards that for a civil offence, which is the balance of probabilities, has caused problems for the draftsman and certainly also caused problems for those of us who are looking at this more as laymen.
      I responded to points made in Committee about an element of dishonesty, saying that could imply that there was a very considerable amount of conduct in which there was just a tiny element of dishonesty and it would be unfair to roll up the whole thing together. I believe that the words "involves dishonesty" imply that it is running through the whole of these transactions and that the level of proof would be the balance of probability level rather than the beyond a reasonable doubt level. One of the reasons why this formulation of words appealed to me was that it was recommended by the VAT practitioners group. I do not wholly accept the arguments that it was putting forward but it, too, was attempting to find a formulation of words which would reflect what was in Keith's mind. Alas, he did not give us the benefit of a formulation of words to give legislative effect to what he was recommending.
      Mr. Blair: This is a problem between a layman's way of looking at things and a lawyer's way of looking at them. The notion of civil fraud is a common law offence and the burden of proof will necessarily apply when it is deemed as a civil offence and not a criminal offence. Can I suggest that if the word "involves" is present simply to make it clear that there is a civil burden of proof that is what is needed? It probably is not needed but, if the Minister

      1153
      wants to make it clear beyond any doubt, it is best to state it expressly rather than leave it as it is at present. This might go not to the burden of proof but to the actual quality of dishonesty, in other words, not proving the dishonesty but the actual quality of the dishonest act. That distinction is probably the correct one to make.
      Mr. Hayhoe: I am in the position in which people sometimes find themselves when they take legal advice and where that advice is not wholly unanimous and there are differences of graduation. I suspect that what is happening to me tonight is that I am receiving from distinguished Opposition lawyers advice which is not entirely in accord with that which I have taken. I can assure the House that, having given the undertaking in Committee, I have tried to discharge it to the best of my ability.
      The change proposed in amendment No. 3 will reflect the Government's intention that there should be a demonstration of sufficient dishonesty to satisfy a tribunal on the balance of probabilities that the whole conduct merited a civil penalty and that the Customs and Excise should apply that standard. I hope that the courts will not find any ambiguity in the approach that I am commending to the House. It would be necessary to have another look at this legislation if the results worked out that way in practice, and it is only right that one should do so.
      I advise the House not to adopt the form of words proposed by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) in his amendment No. 141. I hope that the House will agree to the change, which I suspect will be welcome even if it does not go as far as some would wish, set out in amendment No. 3.
      Mr. J. Enoch Powell: It is obvious that the Minister will look again at this wording, but I hope that he will not wait until there is a case that obliges him or his successor to do so. I put a purely linguistic and not a legal point to him in that context. I suggest that the word "involves" was chosen in the original drafting because it fits with the words "an element". "Involves an element of was a whole phrase and, by removing the words "an element of in discharge of his undertaking to the Committee the Minister has not removed the essential difficulty to which all the argument was directed. I hope that he will take that into account when he looks at this.
      Mr. Kirkwood: I accept what the Minister says. We are on difficult ground, and I hope that the hon. Gentleman can assure me that he will keep a careful and close watch and, if the courts get into a fankle about this, he will take quick and urgent action to remedy the distress that it will cause. I fear that there is a real prospect that there will be difficulties. However, if the Minister can give me that assurance, I shall be happy to withdraw my amendment.
      Mr. Hayhoe: I am glad to give that assurance. This is difficult ground, and I am grateful to the right hon. Member for South Down (Mr. Powell) for his comments. I should like to consider with my advisers what has been said. I somehow suspect that this is not entirely the end of the matter, but I hope that at least the House will think that I have sought to be helpful and to move in the direction that the Committee wished.
      Mr. Kirkwood: I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Amendments made, No. 3, in page 9, line 33, leave out 'an element of.'
      No. 4, in page 9, line 35, leave out '(5)' and insert '(7)'.—[Mr. Hayhoe.]
      Mr. Kirkwood: I beg to move amendment No. 142, in page 10, line 20, leave out from 'amount' to 'and' in line 21 and insert 'as appears appropriate'.
      Mr. Deputy Speaker: With this it will be convenient to consider amendment No. 143, in page 10, line 20, leave out 'not less than half' and insert 'less than'.
      Amendment No. 144, in clause 14, page 12, line 28, leave out 'if' and insert
      'in the circumstances outlined in (a) and (b) of this subsection but shall in other circumstances give rise to liability to such a penalty not exceeding the penalty under subsection (1) above as the Commissioners or on appeal by the person concerned a value-added tax tribunal having regard to all the circumstances of the case think fit'.
      Amendment No. 145, in clause 15, page 14, line 11, at end insert
      'but shall if he does not so satisfy either of them give rise to such penalty not exceeding the amount of the penalty specified in subsection (1) above as the Commissioners or on appeal by the person concerned a value-added tax tribunal having regard to all the circumstances of the case think fit'.
      Amendment No. 146, in clause 16, page 15, line 19, at end insert
      'but shall if he does not so satisfy either of them be liable to such penalty not exceeding the amount of the penalty specified under subsection (3) above as the Commissioners or on appeal by the person concerned a value-added tax tribunal having regard to all the circumstances of the case think fit'.
      Amendment No. 147, in clause 17, page 17, line 27, at end insert
      'but shall if he does not so satisfy either of them give rise to such penalty not exceeding the amount of the penalty specified under subsection (1) or (2) above as the Commissioners or on appeal by the person concerned a value-added tax tribunal having regard to all the circumstances of the case think fit'.
      Mr. Kirkwood: Clause 15, which deals with VAT criminal penalties, was rehearsed at some length in Committee. The burden of the representations that we received both before the Committee stage and since convinced me, as it did the Association of Certified Accountants, the Law Society, the Institute of Directors and many others, that it was a mistake to take away the power of mitigation that the Bill proposes.
      Clause 13 reduces, although it does not take away, the discretion to mitigate the penalty. Therefore, we should have more confidence in the tribunals. I should be happy to leave them to make judgments about individual cases in a better way than we can, as legislators, dealing with a matter in principle. On that basis, the words "as appear appropriate" would allow for much more flexibility. I would be happier if we adopted that approach rather than the approach of the Bill as it stands.
      Sir William Clark: Mr. Speaker has selected amendments Nos. 143 to 147 in this group. They are similar to the amendment tabled by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). The one fear outside the House is that it looked as if the VAT tribunal powers would be treated differently from those of the special and general commissioners of the Inland Revenue. I know that the Government have gone some way to mitigating the penalties that at one time were fixed. However, I should have thought that there is a case for

      1155
      saying that, now that there is the right of appeal to a tribunal, a tribunal could, in its wisdom and judgment, have the power to mitigate the penalty from zero to the maximum. This is what my hon. Friend the Member for Tatton (Mr. Hamilton) and I are trying to deal with in the amendments.
      I hope that my hon. Friend the Minister will look at this. If he is not prepared to accept any of the amendments in this group, will he give an undertaking that he will look at the matter by the next Budget, with the experience that we have had from now until then? If it is found that mitigation from zero to maximum should be allowed and that there should be some change in the appeal procedure, I trust that he will make these changes.
      Mr. Neil Hamilton: When we debated these matters in Committee I made it clear that I thought that the Government were mistaken in withdrawing clause 23, which gave the power to the commissioners to mitigate penalties and interest. I thought that the Government took the wrong line. Rather than taking away the right to mitigate altogether, they should have accepted Conservative amendments to extend that power to the tribunals.
      At the moment, we have an all-or-nothing solution. One is either subject to no penalty or the maximum penalties. This has never been the case for income tax and many people are clearly worried, as my hon. Friend the Member for Croydon, South (Sir W. Clark) has said, that next year, when the Keith committee's proposals on the enforcement powers of the Inland Revenue are put into legislative form, the power of mitigation will be taken away from it as well. That would be wholly unacceptable and would meet with the united opposition of all the business representative organisations. It would be unacceptable to the taxpayer as well, whether an individual or in the corporate or business sector.
      I warn my right hon. and hon. Friends in the Treasury that if the Government are thinking of extending this line of thinking into the Inland Revenue sector they will be in for a great deal of opposition. Many people will feel a great sense of injustice that they will not be able to place themselves in between the two extremes of no penalty or maximum penalty as a result of the Bill. VAT is not a popular tax, particularly with small trades, because it imposes an enormous administrative burden. Whether justified or not, there is a widespread feeling that the Customs and Excise, because of its long history of involvement in smuggling and offences of that kind, has far too heavy a hand in dealing with those who have to administer the tax. Here is another imposition on them.
      I regret that the Government have not seen fit to take the middle way of giving power to the commissioners and the tribunal to mitigate penalties. This will make the tax much more unpopular and the Government will forfeit a great deal of good will that needs to be fostered. I hope my right hon. Friend will heed the words that have been spoken not only by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) but by many Conservative Members both upstairs in Committee and on the Floor of the House. I hope the Government will think again about this matter.
      9 pm
      Mr. Blair: In the Standing Committee, the Opposition tabled a new clause specifically giving such a power of
      1156
      mitigation. It was a pity, when Conservative Members feel so strongly about it now, that they did not support us. That clause introduced a specific power of mitigation and would have tidied up the detritus of clause 23.
      Mr. Neil Hamilton: Rubbish.
      Mr. Blair: The hon. Gentleman says rubbish, but a specific clause was introduced providing a power of partial mitigation and he did not support it.
      The amendment by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) deals specifically with clause 13(4). Subsection (4) is not, strictly speaking, a mitigation clause. It allows the commissioners or, on appeal, a VAT tribunal, to reduce the penalty by up to 50 per cent. as a reward for co-operation. It applies only in circumstances of co-operation and is a direct incentive to people to co-operate. The arguments that apply in relation to that special incentive do not necessarily apply to the general case for mitigation. I have read the proceedings of the Standing Committee because I was not present for that part of the discussion. The penalty should not be reduced to nothing in circumstances where someone has merely co-operated with the commissioners. If what was being given was a real power of mitigation under which any circumstance could be taken into account, there would be more reason for allowing that general power.
      Amendments were moved in the names of the hon. Member for Croydon, South (Sir W. Clark) and the hon. Member for Tatton (Mr. Hamilton). We had a very full debate upstairs in Committee as to whether or not there should be a power of mitigation. I made clear at that time that there should be a power of mitigation because there are graduations of offences. When legislation of a fairly tough nature is being introduced, it is wrong for no leeway to mitigate to be given to the commissioners or the VAT tribunal, not just when someone is co-operating, but in cases of great hardship. Without repeating them fully, I reiterate the arguments made In the Committee. I hope the Minister will look at the matter after some months of experience of these provisions so that we can see whether or not the injustice some of us fear has come about.
      Mr. Hayhoe: The matters being debated in this series of amendments were given a good airing in our proceedings upstairs in Committee. As has just been said, we have had a re-run of the arguments during the short debate on new clause 32. I could re-state the arguments I then deployed, but that would not be helpful. I suspect that most hon. Members in the Chamber heard me say them in the first instance and might not be pleased if I were to repeat them at length.
      To make the changes proposed would strike at the heart of the Keith philosophy. My hon. Friend the Member for Tatton (Mr. Hamilton) was less than fair in his comments, though I accept that, right from the start on one of his earliest interventions in the Committee, he was arguing in favour of a power to lie both with the commissioners and the VAT tribunal to vary the amounts of penalties imposed. The philosophy of Keith was the certainty of fixed penalties. The Government have introduced—and this was not recommended by Keith—the whole concept of a reasonable excuse. I note the comment made in Committee, that to say the taxpayer had to exercise due diligence and have a reasonable excuse might be too stringent a test. Therefore, I propose that "due diligence" should be dropped.

      1157
      Having a resonable excuse is a very marked change in favour of the taxpayer compared with the Keith recommendations on which, as the House knows, there were wide consultations in the many months following publication of his report. Equally, there is a reserve power, which I have explained, still resting with the commissioners to exercise if there are grounds of compassion or something similar that would not be covered by "reasonable excuse". The commissioners will have that power to remit on an intermittent basis penalties that might be imposed.
      The change that has been made of introducing the reasonable excuse defence to be argued both to the commissioners—who I hope in the main will deal with the matter so that it does not need to go any further—and if necessary to the tribunal, the raising of the trigger points quite significantly compared with those recommended by Keith, the residual mitigation powers which Customs and Excise has and which have been endorsed by the Public Accounts Committee quite recently, and the way in which they are exercised, all add up to a significant change in favour of the rights of the taxpayer and safeguard him against the original proposals made by Keith. In those circumstances, I commend the provisions to the House, and I hope that the House will not seek to introduce the amendment.
      I was asked to keep the matter under review. Of course, we shall do so. However, the next Budget is too soon for us to have had much experience. The default surcharge in clause 19 does not come into effect until October 1986. The serious misdeclaration provision in clause 14 does not come into effect until 1988. We shall need a little longer to get some feel and experience of this change, but I gladly undertake that matters will be kept under review. It is important to remember that, even if a Minister did not give such an undertaking, individual Members of the House would keep the matter under review and find ways of raising it if they saw elements of injustice occurring.
      I hope that the amendment will not be pressed to a Division. Let us see how we get on with the new regime being introduced in these clauses.
      Mr. Kirkwood: I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Clause 14

      SERIOUS MISDECLARATION OR NEGLECT RESULTING IN UNDERSTATEMENTS OR OVERCLAIMS
      Mr. Freeman: I beg to move amendment No. 161, in page 11, line 36, leave out
      '£3,000 and 1½ per cent.'
      and insert
      '£10,000 and 5 per cent.'.
      I sense that there is broad support on both sides of the House for the amendment, and I am grateful to the Minister for the courteous and encouraging way in which he has considered our discussions about its terms. The purpose of the amendment is to raise the minimum error threshold before the penalties of clause 14 apply.
      1158
      It may help the House if I explain briefly what the clause provides at present and what the amendment would substitute for it, because the language in subsection (2)(a)(i) and (ii) is difficult to follow.
      As the Bill stands, if the true amount of tax due in a quarter is between nil and £10,000, the error threshold is 30 per cent., that is from nil to £3,000. If the error is greater than that, the automatic penalties provided in clause 14 will come into play, that is the 30 per cent. penalty and the recovery of the tax. If the true amount of tax due is between £10,000 and £200,000, the error threshold is £3,000, and if it is above £200,000 the 1·5 per cent. provision comes into play. Therefore, the error threshold starts at £3,000 and rises to 1·5 per cent. of the true amount of tax due.
      Under the amendment, if the true amount of tax due is between nil and £33,333, the error threshold is 30 per cent. of the true amount of tax due. If the tax due is between £33,333 and £200,000, the error threshold is at £10,000, and if the tax due is above £200,000 the 5 per cent. provision comes into effect.
      The practical effects of that are that the error thresholds are increased for all companies where the true amount of tax due in any quarter is greater than £10,000. That is equivalent to £40,000 per annum. The amendment would benefit companies where the true amount of tax due is greater than that. The benefit is not confined purely to medium-sized and large companies, but to what many involved in business and industry would regard as small companies. The Confederation of British Industry, the Institute of Taxation and many companies throughout the country will welcome the amendment, and I commend it to the House.
      Mr. Hayhoe: I am happy to say that the Government accept the amendment, and I join my hon. Friend the Member for Kettering (Mr. Freeman) in commending it to the House.
      Amendment agreed to.
      Mr. Hayhoe: I beg to move amendment No. 5, in page 11, line 42, after 'periods', insert
      "beginning after the day appointed under subsection (8) below'.
      The purpose of the amendment is to safeguard taxpayers by ensuring that there can be no possibility of retrospection, either directly or through the operation of the totting up test in respect of the civil penalties and serious misdeclaration under clause 14, breaches of regulatory provisions under clause 17, and of interest on tax under clause 18. The amendment implements assurances which I gave to the Committee, and I commend it to the House.
      Mr. Blair: As I understand it, the amendment will prevent retrospective totting up, and that is its sole effect.
      Mr. Hayhoe: That is my understanding. The amendment is in pursuance of my undertaking to the Committee when my hon. Friend the Member for Tatton (Mr. Hamilton) raised some points.
      Amendment agreed to.
      Mr. Hayhoe: I beg to move amendment No. 137, in page 12, line 20, at end insert
      'but if for any period there is an understatement of credit for input tax or an overstatement of output tax, allowance shall be made for that error in determining the tax for that period which would have been so lost.'.

      1159
      My hon. Friend the Member for Bristol, North-West (Mr. Stern) is unable to he present this evening. As I was going to accept the amendment, I gladly move it and accept it in the same breath.
      Mr. Blair: I wish to ensure that I understand the effect of the amendment. Will the Minister confirm that if a trader has understated both the input and output tax—in other words, he is understating the volume of the business — and if he is brought up for one understatement, he will be given credit for the other?
      9.15 pm
      Mr. Hayhoe: It is the net position that will be dealt with. It seemed reasonable and fair.
      Amendment agreed to.
      Amendments made: No. 6, in page 12, line 28, after 'section', insert
      'nor be taken into account under subsection (2)(b) above'.
      No. 7, in page 12, line 29, leave out from 'person' to end of line and insert `concerned'.—[Mr. Hayhoe.]
      Mr. Hayhoe: I beg to move amendment No. 8, in page 12, line 31, leave out
      'that he exercised all due diligence and'.
      Mr. Speaker: With this it will be convenient to take the following amendments:
      Government amendments Nos. 10, 11, 14, 17 and 27.
      Amendment No. 175, in clause 33, page 34, line 45 at end insert
      'save where the insufficiency of funds arises directly from the fact that the person has not received the payment from his customer in respect of which value-added tax is due and has not been paid.'
      and Government amendment No. 28.
      Mr. Hayhoe: The amendments give effect to the undertakings that I gave in Committee to reflect upon the need for the provision concerning "all due diligence". Upon reflection, and taking account of the arguments put from both sides of the Committee, I am now bringing forward these amendments, which I hope will be welcomed and supported by the whole House.
      Mr. Blair: I have no difficulty with the Government amendments, but amendment No. 175 takes us in a slightly different but important direction.
      At present, under clause 33, if a trader attempted to provide a reasonable excuse for any conduct that was unlawful under the VAT provisions, the effect of subsection (2) of that clause would be to prevent an insufficiency of funds to pay any tax due being deemed by the commissioners or the VAT tribunal to be a reasonable excuse; in other words, the definition of "reasonable excuse" is drawn in such a way as to exclude the situation in which someone cannot pay because of an insufficiency of funds.
      Amendment No. 175 would add, at the end of subsection (2), the words
      "save where the insufficiency of funds arises directly from the fact that the person has not received the payment from his customer in respect of which value-added tax is due and has not been paid".
      It is important to note that the amendment does not relieve the trader or person concerned of the obligation to pay the VAT. Yesterday, on one of the new clauses, the discussion related to whether, in circumstances where a customer had not paid the VAT to the trader or taxpayer, the taxpayer could then count that as a bad debt. The
      1160
      Government resisted that amendment. I could see why they did so, because it would have relieved the trader altogether of the obligation to pay.
      Our amendment does not relieve the person concerned of the obligation to pay; it simply relieves that person, if the commissioners or the VAT tribunal so desire, of the harsh system of automatic penalties and the different rates of interest in circumstances where that non-payment of VAT has genuinely been caused through no fault of the trader. In other words, it gives a power to the Customs and Excise or the VAT tribunal to take into account insufficiency of funds in carefully prescribed circumstances when deciding whether there is a reasonable excuse for non-compliance.
      That does not mean that the commissioners or the VAT tribunal would have to take into account insufficiency of funds arising in those circumstances — they would not have to describe that as a reasonable excuse — but it does not exclude from the definition of reasonable excuse the circumstances in which an inability to pay arises directly from the customer not paying the trader and the trader having sought from him VAT in respect of that invoice.
      The prescribed circumstances are very tight. The insufficiency of funds must arise directly from nonpayment by the customer. We are therefore discussing a fairly limited range of situations and a case in which a trader may issue an invoice for a large amount. By so doing, he is liable for VAT upon it. If the customer refuses or fails to pay, the VAT trader may be in difficulties in meeting the VAT liability because the customer has not honoured the invoice. The insufficiency of funds arises directly from the conjunction of an invoice being issued, a liability to pay, and the customer not meeting that liability.
      With great respect, I suggest that such a narrowly drawn discretion as contained in the amendment is in the interests of equity. We know that there are small businesses which can have major cash flow problems as a result of VAT liabilities. We know that, particularly in certain trades, it can be difficult to secure payment of invoices from customers. It seems unfair that those cash problems can result in the serious VAT penalties under these clauses in circumstances in which, through no fault of the trader, the customer refuses to pay the trader.
      I repeat that this does not relieve a trader of the obligation to pay VAT; it simply relieves, or gives the commissioners of the VAT tribunal discretion to relieve, the harsh penalties prescribed by these provisions of the Bill in circumstances where the problems arise directly from the failure of a customer to pay.
      The Government boast of their record on small businesses. Of all the VAT subjects which we will discuss tonight, I think that none is closer to the heart of small businesses than the difficulties which can arise in the circumstances I have described.
      I ask the Minister to consider carefully whether he can accept the amendment. It would allow for fairness in the treatment of businesses and traders, but it would not relieve people of the basic obligation to pay. It is a way of easing the burden of these penalties in circumstances in which, through no fault of the trader, a great financial difficulty can occur.

      1161
      I appeal to the Minister, in terms of a fairly tightly drawn clause, to consider whether he can allow the amendment, which I believe would greatly increase the justice of these provisions.
      Mr. Tim Smith: This group of Government amendments will be widely welcomed, I think, because the Bill as drafted would have required the taxpayer to meet a double test to establish a defence: first, a reasonable excuse and, secondly, due diligence. I think that that would have caused confusion. Therefore, I am grateful to my right hon. Friend the Minister for having introduced what I think will be a valuable simplification.
      My hon. Friend may recall that I sent him a redraft of some of these clauses prepared by Mr. St. John Price, a VAT practitioner. Mr. St. John Price felt, as I think many people do, that some provisions of the Bill are still extremely complicated and difficult to follow. Can my hon. Friend tell me what has happened to those proposals?
      Mr. Hayhoe: To reply first to my hon. Friend, I have a letter in draft in response to my hon. Friend. Perhaps I should not seek to do more than give him a soupcon of an hors d'oeuvre by saying that it is not as simple as his constituent has led him to believe or, indeed, as I said in Committee, as simple as I dearly wish it could have been. I will be writing to him. With his permission, if other hon. Members wish to have copies of that correspondence, I would be happy to co-operate. I am delighted that the Government amendments removing the due diligence provision have been generally welcomed.
      The hon. Member for Sedgefield (Mr. Blair) made various points about amendment No. 175. Clause 33(2) provides that
      "an insufficiency of funds to pay any tax due is not a reasonable excuse."
      It limits the circumstances in which the benefit of this defence may be claimed. The purpose of the amendment is to remove this limitation where the taxpayer can show that an insufficiency of funds results directly from nonpayment by his customer and thus to permit more taxpayers to avoid the penalties, in particular the default surcharge.
      The hon. Gentleman made out a persuasive case on the basis of the hard cases that he used as a foundation, of which all right hon. and hon. Members are aware, because of our contact with constituents. However, like the hoped-for simplicity of the drafting of these clauses, it is not quite so easy. The Opposition amendment would begin to undermine the basic concept of VAT: that tax becomes due at the time of supply or in the issue of the tax invoice, subject to its being issued reasonably promptly. These matters were referred to yesterday in our debate on new clause 11.
      The amendment effectively changes the tax point to the date of payment for the supply, since it would allow nonpayment by customers to be the basis of a perpetual claim to the reasonable excuse defence against all sanctions for non-payment of the VAT in question. Under the guise of helping the hard cases, for which there is great sympathy, it could drive a coach and horses through the surcharge arrangements and would open the floodgates to representations about and appeals against surcharge of varying degrees of sincerity. To expect Customs and Excise or, on appeal, the VAT tribunal to distinguish the
      1162
      small minority of cases of genuine difficulty without letting in larger numbers of less deserving cases, thus eroding the revenue benefits of the surcharge, would be almost impossible.
      We have already established the unfairness to the complying trader of allowing the non-complying trader effectively to have an interest-free loan from the taxpayer by withholding and hanging on to the tax. It is not just the revenue which would be at a disadvantage. His local and honest neighbour who is trading properly and paying his taxes would be equally at a disadvantage.
      Although I accept the honourable intentions behind the amendment, it would be a move towards providing a total VAT bad debt relief by the back door. These matters were considered in the Committee debate to which my right hon. and learned Friend the Chief Secretary to the Treasury replied. We have made a significant move on bad debt relief by linking it to the provisions of the Insolvency Bill, but we have not gone as far as many hon. Members wish in providing the complete VAT bad debt relief that this amendment would provide.
      Furthermore, it would be a vehicle for abuse. It would make it possible for one taxpayer to supply an associate, perhaps even companies in common ownership, who does not pay for the supplies but claims the input tax. The input tax can be reclaimed on the basis of the invoice by companies who do not need to have made the payment. That is the other side of the coin to which I referred in our debates on clause 11 yesterday. The possibility of fraud and abuse would be opened up if it were possible for the input tax to be claimed back. Inter-associate debts could be run up with impunity, no output VAT would be accounted for under the Opposition's dispensation, but the input tax would be paid by the Customs and Excise, to the detriment of the Revenue.
      I accept that the intention of the hon. Member for Sedgefield is to meet the hard cases that we all know about, but I hope that I have persuaded him that his amendment would go a long way beyond that. We may return to the general matters at a later date but not, I suspect, tonight.
      9.30 pm
      Mr. Blair: By leave of the House, I express my gratitude to the Minister of State, who made a good and persuasive case, though I wonder whether the results of our amendment would be as bad as he makes out.
      The debate has shown the need for flexibility in the system. That need runs through the mitigation arguments and this debate.
      Amendment agreed to.
      Amendment made: No. 9, in page 12, line 35, leave out from 'person' to 'furnished' in line 36 and insert `concerned'.—[Mr. Hayhoe.]

    Clause 15

      FAILURES TO NOTIFY AND UNAUTHORISED ISSUE OF INVOICES
      Amendment made: No. 10, in page 14, line 10, leave out
      'that he exercised all due diligence and'.—[Mr. Hayhoe.]

    Clause 16

      BREACHES OF WALKING POSSESSION AGREEMENTS
      Amendment made: No. 11, in page 15, line 18, leave out
      'that he exercised due diligence and'.—[Mr. Hayhoe.]

    Clause 17

      BREACHES OF REGULATORY PROVISIONS
      Amendments made: No. 12, in page 15, line 30, after '(10)', insert `and section 21(6)'.
      No. 13, in page 16, line 12, at end insert—
      (aa) a previous failure to comply with any such requirement shall be disregarded if it occurred before the passing of this Act.'.
      No. 14, in page 17, line 23, leave out
      'that he exercised all due diligence and'.—[Mr. Hayhoe.]

    Clause 18

      INTEREST ON TAX ETC. RECOVERED OR RECOVERABLE BY ASSESSMENT
      Amendment made: No. 15, in page 20, line 11, at end add
      'and any reference in this section to a prescribed accounting period is a reference to a period which begins on or after the day so appointed'.—[Mr. Hayhoe.]

    Clause 19

      THE DEFAULT SURCHARGE
      Amendments made: No. 16, in page 20, line 37, leave out from 'If' to 'an' in line 39 and insert
      'a surcharge liability notice is served by reason of default in respect of two prescribed accounting periods and the second of those periods ends at or before the expiry of'.
      No. 17, in page 21, line 34, leave out from beginning to end of line 41 and insert—

      '(a) the return or, as the case may be, the tax shown on the return was despatched at such a time and in such a manner that it was reasonable to expect that it would be received by the Commissioners within the appropriate time limits, or

      (b) there is a reasonable excuse for the return or tax not having been so despatched'.

      No. 18. in page 21, line 42, leave out from 'and' to end of line 43 and insert
      'for the purposes of the preceding provisions of this section he shall be treated as not having been in default in respect of the prescribed accounting period in question (and, accordingly, any surcharge liability notice the service of which depended upon that default shall be deemed not to have been served)'.— [Mr. Hayhoe.]

    Clause 20

      REPAYMENT SUPPLEMENT IN RESPECT OF CERTAIN DELAYED PAYMENTS
      Mr. Neil Hamilton: I beg to move amendment No. 150, in page 22 leave out lines 35 and 36 and insert—
      '(c) repayment is not made.'.
      Clause 20 provides that where a delay is involved in the repayment of VAT to a registered trader, a repayment supplement shall be paid in addition to the sum owed. There is a de minimis provision to cut out entitlement to the supplement where there is only a short delay. The
      1164
      period chosen is 30 days. When the 30-day period has elapsed, the registered trader becomes entitled to his supplement.
      There is a deficiency in the clause that would be remedied by my amendment. The clause provides that the commissioners should not repay VAT and pay the supplement, but should merely issue a written instruction for the repayment. That will normally be sufficient, but there have been strikes involving Customs and Excise employees and if they are repeated in future an order for repayment may be made, but no cheque might he issued to the taxpayer.
      If that happened, the taxpayer would suffer the loss of the interest that he would otherwise have been able to gain on the money repaid to him. It would be unfair if that extra cost were imposed on taxpayers and I hope that my right hon. and learned Friend the Chief Secretary will accept the amendment or at least think about the matter and return to it next year.
      The Chief Secretary to the Treasury (Mr. Peter Rees): My hon. Friend the Member for Tatton (Mr. Hamilton) moved his amendment with characteristic lucidity and brevity. He discussed the matter in Committee so I am aware of and understand his concern. We have thought long and hard about his arguments in Committee, but on reflection we are still not able to meet the point for practical reasons.
      The Customs and Excise deal with about 50,000 claims a week, most of which are dealt with within seven days. My hon. Friend will be among the first to admit that the system works smoothly and that delays do not usually occur. My hon. Friend mentioned postal strikes and the computer strike six years ago.
      The system is clear cut. The Customs and Excise is able to say with precision when the period has expired because that is when the instruction is given. My hon. Friend will appreciate that sometimes it will not be able to check. During a postal delay it will have to depend upon the records of the recipient or the registered trader. It will be in his hands.
      My hon. Friend might argue that if there is inconvenience it should be borne by the Administration rather than by the taxpayer. However, I hope that he and the House will bear in mind that the repayment supplement is generous. We are talking about a 5 per cent. supplement. It is not even calculated on a per annum basis. It is difficult to estimate the cost of my hon. Friend's amendment, but it might cost as much as £1 million a year.
      I recognise my hon. Friend's anxiety, but I hope that he and the House will be impressed by the practical limitations.
      We are moving into new territory. The Keith committee did not recommend an amendment such as that proposed by my hon. Friend, but we shall keep the matter under review. If hardship is caused, we shall examine the matter again.
      My hon. Friend has done the House a service by underlining the problem. I hope that he will feel that justice has been done and will leave the matter where it is.
      Mr. Neil Hamilton: I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Amendment made: No. 19, in page 22, line 44, leave out `£10' and insert `£100'.—[Mr. Peter Rees.]

    Clause 21

      ASSESSMENT OF AMOUNTS DUE BY WAY OF PENALTY, INTEREST OR SURCHARGE
      Amendment made: No. 20, in page 24, line 18, leave out from 'be' to end of line 19 and insert
      `for which entitlement to a payment under section 14(5) of the principal Act was overstated'.—[Mr. Hayhoe.]

    Clause 22

      ASSESSMENTS: TIME LIMITS AND SUPPLEMENTARY ASSESSMENTS
      Mr. Hayhoe: I beg to move amendment No. 21, in page 26, line 9, leave out from `if' to end of line 10 and insert 'tax has'.
      Mr. Speaker: With this we may discuss Government amendment No. 22.
      Mr. Hayhoe: The amendment honours assurances that I gave in Committee during discussions on amendment No. 118 to my hon. Friend the Member for Tatton (Mr. Hamilton).
      Amendment agreed to.
      Amendment made: No. 22, in page 26, line 24, leave out paragraph (b) and insert—
      '(b) if the circumstances are as set out in subsection (4) above, the modification of subsection (1) above contained in that subsection shall not apply but any assessment which (from the point of view of time limits) could have been made immediately after the death may be made at any time within three years after it.'.—[Mr. Hayhoe.]

    Clause 24

      AMENDMENTS OF SECTION 40 OF THE PRINCIPAL ACT
      Amendment made: No. 23, in page 27, line 22, leave out
      '(disregarding any mitigation by the Commissioners)'.—[Mr. Hayhoe.]

    Clause 29

      ENFORCEMENT OF CERTAIN DECISIONS OF TRIBUNAL
      Mr. Hayhoe: I beg to move amendment No. 153, in page 31, line 29, at end insert
      `(5) Any reference in this section to a decision of a value added tax tribunal includes a reference to an order (however described) made by a tribunal for giving effect to a decision.'.
      This is a technical amendment concerning the administration of the VAT tribunals and the way in which they promulgate brief orders of their decisions which I understand will be to the benefit of all concerned. I hope that the House will support it.
      Amendment agreed to.

    Clause 31
      INSOLVENCY
      Amendment made: No. 24, in page 32,line 8, leave out made' and insert 'in force.'—[Mr. Hayhoe.]
    Clause 32

      REFUND OF TAX IN CASES OF BAD DEBTS
      Mr. J. Enoch Powell: I beg to move amendment No. 25, in page 33, line 17, leave out 'in Great Britain'.
      Clause 32 deals with relief for VAT in case of bad debts, and subsection (3) defines insolvency for the purposes of that VAT relief. There are two alternative headings of the definition in paragraphs (a) and (b). An attentive reader — or, in the case of Northern Ireland, even an unattentive reader—would notice that, whereas definition (a) of liquidation relates to the United Kingdom and the Isle of Man, definition (b) relates only to Great Britain. That throws up the question whether the relief from VAT in case of a bad debt that is provided by subsection (3)(b) is not to be available in the case of a company in Northern Ireland and a claim for the repayment of VAT arising out of transactions with that company.
      My hon. Friends and I would have been doing less than our duty had we not drawn attention to an apparent inequity. Indeed, a number of constituents have written to us expressing their anxiety that this relief is apparently to be denied in the Province.
      Seeing it to be so blatant, however, and following the general proposition that there is usually some explanation for everything, I communicated with the Financial Secretary to the Treasury and relied upon the rules of the ex-FST club, only to receive, to my delight, a lengthy and helpful reply from the Minister of State. If I understand it correctly, the position roughly is that the circumstances defined in paragraph (b) — which is confined to Great Britain — arise under the provisions of the Insolvency Bill, which has not yet received Royal Assent. Well and good so far! However, the relevant provisions of the Insolvency Bill do not apply to Northern Ireland. Consequently, until an Order in Council is made which applies those provisions to Northern Ireland, there is nothing upon which the relief provided by this paragraph can bite for a company in Northern Ireland.
      However, I am not entirely content to leave it with the right hon. Gentleman's concluding assurance:
      "In the meanwhile … VAT bad debt relief is still available in Northern Ireland where a company enters into a compulsory or creditors' voluntary liquidation."
      It is quite clear that there are circumstances in which relief will be provided in other parts of the United Kingdom which will not be available in Northern Ireland until the corresponding Northern Ireland legislation is made.
      I have two complaints on that score. The first is one with which the House in its midnight hours has become very familiar — the complaint of my hon. Friends and myself that for no sufficient reason the law is made in the Province not by Act of Parliament but by Order in Council. That is a delightful example of the difficulties and injustices that we get into when we legislate by different methods for different parts of the United Kingdom.
      Those difficulties and injustices would not be so great if the different methods of legislation were simultaneously applied in both parts of the kingdom. But in this case it is quite clear that there is to be a time lapse before the legislation comes into effect. I understand that it will come into effect in Great Britain early next year, but we do not yet have a date on which the legislation, for which proposals for a draft Order in Council have not yet been

      1167
      made, will come into effect in Northern Ireland. There is, therefore, a gap of injustice between those concerned in Northern Ireland and those relieved in the rest of the United Kingdom.
      9.45 pm
      The Treasury is the last Department of State that I would hold guilty of the current absurdity of legislation in Northern Ireland by Order in Council. To find the culprits in that respect, one must look to other Departments of State. But I have a friendly and helpful hint to offer to the Treasury. It is that, in its endless pursuit of savings of public expenditure, it would find a rich field if it proceeded to eliminate the duplication of effort, staff and work — not only in this House but elsewhere in the public service—caused by the two concurrent forms of legislation for Great Britain and Northern Ireland.
      That is a good tip for the Minister of State, for which I hope he and his Department will be duly grateful — although, when I offered it to an earlier Minister at the Treasury, at a less advanced stage of political affairs in Northern Ireland, though gratefully received, it was by no means acted upon.
      There is something, however, that the Minister of State could do which would be of practical help in existing circumstances, and I am sorry that the proposition I have to make is not one that I had time to put him in advance of the debate. I shall therefore understand if he responds to my suggestion simply by undertaking to examine it. That is the most in the circumstances that I could expect.
      It is admitted that there will be a gap of time between the availability of this relief in Northern Ireland and its availability in the rest of the United Kingdom. My suggestion is that the Government could undertake that, by concession, the same relief will be afforded in Northern Ireland during that interval as will be available in Great Britain and will, in due course, be available statutorily in Northern Ireland.
      I hope that I am not asking something which is too libidinous from the Customs and Excise by suggesting that there should be an extra-statutory concession in this respect. After all, we have the Government's assurance that legislation in these precise terms is intended. It seems only reasonable, that being so and there being an inequitable gap between the application in two parts of the kingdom, that the inequity should be removed by extra-statutory action. I hope that the Minister will undertake to consider benevolently the suggestion that I have made.
      Mr. James Molyneaux: As my right hon. Friend the Member for South Down (Mr. Powell) rightly said, this is a clear and even dramatic example of the disadvantage suffered by Northern Ireland under the system which is more accurately called colonial rule than direct rule.
      I shall give an example because it is important that the Treasury should understand the whole iniquity of that which we suffer. That is the example of the measure that was processed through the House to remedy the defects in Orlit houses. On the day it was announced, I sought an assurance from the Minister for Housing and Construction that Northern Ireland would receive the benefits simultaneously with the rest of the United Kingdom. The Minister expressed the hope that there would be — he was in favour of—simultaneous application, but, lo and behold, when the rats got at it, we were told that that was not possible and that we should need lengthy discussions
      1168
      on the same topic dealing with the same problem. It was nearly two years before the Order in Council dealing with the same problem came before the House.
      Only last week Her Majesty's Government and Her Majesty's Opposition showed clearly that they were at least willing to consider the possibility of radical change to that unacceptable system. My right hon. Friend the Member for South Down has properly shown that, when the Insolvency Bill receives Royal Assent, Northern Ireland will not automatically benefit. We shall have the same charade once again. We shall be told that the sacred Stormont statute book must be thumbed over until the powers that be satisfy themselves that no dot or comma has been accidentally omitted. After a period of nonsensical consultations—they are nonsensical, considering that all citizens of the United Kingdom have an opportunity to comment on legislation before the House—and possibly 18 months to two years after the Insolvency Bill receives Royal Assent, we shall be privileged to debate in the middle of the night a parallel, ditto measure in the form of a Northern Ireland Order in Council to deal with the same problem.
      Therefore, I reinforce the plea made by my right hon. Friend that Treasury Ministers give thought to providing some flexibility and relief in what will be a temporary period of 18 months to two years. People in Northern Ireland will find it difficult to understand why the law will not confer benefits upon them and why the Finance Bill will be applied in a different form in two separate parts of the same United Kingdom.
      Mr. Hayhoe: The right hon. Members for South Down (Mr. Powell) and for Lagan Valley (Mr. Molyneaux) have correctly identified the problem as the provisions of the Insolvency Bill rather than those of the Finance Bill. I can only confirm that that is so and that the reason for the Finance Bill being drafted as it is is the present provisions of the Insolvency Bill, which is going through the House.
      I reinforce what I said in the letter to the right hon. Member for South Down. As soon as legislation is brought in to extend the Insolvency Bill's provisions to Northern Ireland, the Government will extend those bad debt relief provisions concurrently. The Insolvency Bill provisions will be extended to Northern Ireland by statutory instrument. I note what has been said about the criticisms of those procedures. I can give the undertaking that, once that extension is made and once the Insolvency Bill point has been dealt with, Customs and Excise will extend the relief by concession until an amendment can be made in the next Finance Bill. There is no administrative problem in giving VAT relief to creditors in Northern Ireland as soon as practicable.
      Mr. J. Enoch Powell: Perhaps the right hon. Gentleman has not fully appreciated the nature of the concession for which I was asking. I appreciate that before the Finance Bill is amended the relief will be granted as soon as the Northern Ireland law is brought into congruence with the Insolvency Bill, as it still is. What I was asking for was something more—that, in the period between the coming into force of this legislation and the coming into force of the Northern Ireland Order in Council, there should be an extra-statutory concession to fill that gap.
      Mr. Hayhoe: If the right hon. Gentleman had contained himself for a moment, he would have found that

      1169
      I was just about to address myself to the very courteous request that he put to me. I was going to preface my comments by saying that the information available to me is that only 12 receiverships occurred in the Province of Northern Ireland during 1984, out of 1,600 in the whole of the United Kingdom. The number of receiverships is therefore small. Four of the 12 went into liquidation. Because of this, there was an almost immediate entitlement to relief. The area in which the temporary concession is being requested is very small.
      I gather that there is some problem with the issue of certificates. This means that I must take up the suggestion of the right hon. Member for South Down that I should undertake to examine his request sympathetically. I gladly undertake to do that.
      Mr. J. Enoch Powell: I am grateful to the hon. Gentleman for his response. I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Amendment made: No. 26, in page 33, line 31, at end insert
      'or to a person deriving title from, through or under that person'.—[Mr. Hayhoe.]

    Clause 33

      INTERPRETATION AND CONSTRUCTION OF CHAPTER II
      Amendments made: No. 27, in page 34, line 44, after 'conduct', insert '(a)'.
      No. 28, in page 34, line 45, at end insert
      'and
      (b) where reliance is placed on any other person to perform any task, neither the fact of that reliance nor any dilatoriness or inaccuracy on the part of the person relied upon is a reasonable excuse.'
      No. 29, in page 35, line 4, at end insert—
      '(3A) In any case where—

      (a) an amount is due from the Commissioners to any person under section 14(5) of the principal Act, and

      (b) that person is liable to pay a sum assessed by way of penalty, interest or surcharge,

      the amount referred to in paragraph (a) above shall be set against the sum referred to in paragraph (b) above and, accordingly, to the extent of the set-off, the obligations of the Commissioners and the person concerned shall be discharged.'.—[Mr. Hayhoe.]

    Clause 39

      BUILDING SOCIETIES
      Amendment made: No. 30, in page 39, line 2, leave out
      'relating to interest paid or credited'.—[Mr. Ian Stewart.]

    Schedule 10

      DEEP DISCOUNT SECURITIES
      10 pm
      Mr. Ian Stewart: I beg to move amendment No. 59, in page 124, line 38, leave out subparagraph (3).
      Mr. Speaker: With this it will be convenient to take Government amendments Nos. 60 to 66.
      Mr. Stewart: This measure fills a gap in the schedule which could have allowed the aim of the coupon-stripping legislation to be subverted by the conversion of securities issued as part of a coupon-stripping operation.
      1170
      When we discussed the schedule in Standing Committee I assured the hon. Member for Thurrock (Dr. McDonald) that we would consider possible ways around the legislation. We have concluded that the existing provisions on conversion of securities are not entirely satisfactory. This group of amendments is designed to close a potential loophole.
      Dr. Oonagh McDonald: I am glad that, because of our questioning in Committee, the Government have identified a complicated manoeuvre which could have led to tax avoidance. As usual, the Opposition are glad when such possible abuses are prevented by Government legislation.
      Does the Economic Secretary have any idea how much revenue would have been lost had tax planners been able to indulge in such manoeuvres and avoid the tax that should have been paid? I am grateful to the hon. Gentleman for explaining the possible abuses that could have arisen and the ways in which they have been prevented by the amendments.
      Mr. Ian Stewart: It is not possible to quantify the amount of potential revenue involved, as no activities of this type have taken place. The calculations would be complicated, so it is difficult to assess the extent to which the procedures have been used.
      I shall briefly explain how the system would work. To exploit the defects in the Bill as drafted, a promoter of a coupon-stripping scheme would engage in something like the following sequence of operations. First, he would issue deep discount securities for cash. Then, at a later date, the cash would be invested in securities where the coupons were to be stripped. Later, but before the end of the first income period of the deep discount securities, some of the securities in which the coupon-stripping company had invested would be sold, so as to take the percentage of relevant securities that it owned below the 75 per cent. limit. The coupon-stripping company would then convert its deep discount securities into new securities and shortly after would re-acquire the relevant securities that it had previously sold. The process would be repeated.
      This type of arrangement could enable the provisions of the Bill as drafted to be avoided, because paragraph !(3) at present applies only to the tests that operate on the position of the coupon-stripping company at the time when it issues the deep discount securities.
      The purpose of the amendment is to stop this type of device by ensuring that the first test of a coupon-stripping operation in paragraph 1(4), which looks at what happens over the first income period, is applied in a modified way when securities are converted during their first income period.
      Amendment agreed to.
      Amendments made: No. 60, in page 125, line 9, leave out
      'sub-paragraph (1), (2) or (3) above does not apply'
      and insert
      'neither of the preceding sub-paragraphs applies'.
      No. 61, in page 125, line 13, at end insert—
      '(4A) This sub-paragraph applies to deep discount securities issued by a company where either—

      (a) they are issued on a conversion to which section 82 of the Capital Gains Tax Act 1979 applies of old securities, or

      (b) they are issued by a company in exchange for old ecurities in circumstances in which section 85(3) of that Act applies or are treated as so issued by virtue of

      1171
      section 86(1) of that Act,

      and in this sub-paragraph "old securities" means deep discount securities to which sub-paragraph (1), (2) or (4) above or this sub-paragraph applies, except that securities to which sub-paragraph (4) above applies are not old securities unless sub-paragraph (4) (b) has been fulfilled in their case by the time the conversion or exchange concerned takes place.'
      No. 62, in page 125, line 15, leave out 'one' and insert 'any'.
      No. 63, in page 125, line 19, at end insert "income period" has the meaning given by paragraph 1(7) of Schedule 9 to that Act.'.
      No. 64, in page 125, line 20, leave out
      'subsection (4) of that section'
      and insert
      'section 36(4) of that Act'.
      No. 65, in page 126, line 32, at end insert—
      `(4A) Paragraph 8(3) of that Schedule shall not apply in the case of a chargeable security which is converted or exchanged.'.
      No. 66, in page 127, line 6, leave out '(3)' and insert '(4A)'.—[Mr. Ian Stewart.]

    Clause 47

      LIMITED PARTNERS: RESTRICTION OF RELIEFS
      Mr. Peter Rees: I beg to move amendment No. 31, in page 47, line 22, leave out from `restriction' to end of line 37 and insert
      'in case of limited partners and others of reliefs in respect of losses, interest and charges and of allowances for expenditure) shall have effect where the chargeable period—

      (a) in which the loss in question is sustained or incurred, or the interest or charges in question paid, or

      (b) for which the allowance in question falls to be made, begins after 19th March 1985.

      (2) That Schedule shall also have effect where that period begins on or before that date and ends after it if the person sustaining or incurring the loss or paying the interest or charges, or to whom the allowance falls to be made, begins after that date to carry on as a limited partner the trade—

      (a) in which, or in connection with which, the loss is sustained or incurred or the interest or charges paid, or

      (b) in taxing which, or by reason of participation in which, the allowance falls to be made,

      and it is immaterial whether or not he was carrying on the trade otherwise than as a limited partner on or before that date.'.
      Mr. Deputy Speaker (Mr. Ernest Armstrong): It will be convenient also to take Government amendments Nos. 67 to 73.
      Mr. Rees: The purpose of the amendment is to allow the taxpayer to elect for the indexation of allowances to be based on the value of an asset at 31 March 1982 where the taxpayer making the disposal did not hold the asset at that time and each disposal of the asset since that time has been subject to a particular provision specifying that neither a gain nor a loss should arise. I am sure that the good sense of that will commend itself to the House and I hope that on that basis the House will accept the amendment.
      Mr. Blair: I should like the Chief Secretary's assurance that we have understood the effect of the interlocking amendments. As I understand it, they tighten the anti-avoidance provisions in relation to limited partnerships by ensuring that they cover losses created by capital allowances as well as losses created by income. On that basis, the Opposition are happy to support the amendments. I wanted to ensure that we had understood the amendments correctly.
      Mr. Peter Rees: I am happy to give the hon. Gentleman that assurance. The provision is designed to include capital allowances as well as charges on income and losses.
      Amendment agreed to.

    Schedule 11

      LIMITED PARTNERS: RESTRICTION OF RELIEFS
      Amendments made: No. 67, in page 127, line 35, leave out from '(3)' to end of line 38 and insert:
      below—

      (a) in respect of a loss sustained by him in a trade, or of interest paid by him in connection with the carrying on of a trade, in a relevant year of assessment, or

      (b) as an allowance falling to be made to him for a relevant year of assessment either in taxing a trade or by way of discharge or repayment of tax to which he is entitled by reason of his participation in a trade.'

      No. 68, in page 128, line 16, leave out from '(3)' to end of line 19 and insert
      'above—

      (a) in respect of a loss sustained by him in the trade, or of interest paid by him in connection with carrying it on, in any relevant year of assessment, or

      (b) as an allowance falling to be made to him for any relevant year of assessment either in taxing the trade or by way of discharge or repayment of tax to which he is entitled by reason of his participation in the trade;'.

      No. 69, in page 128, line 23, leave out
      ', the expenditure incurred or the interest paid' and insert 'or the interest paid, or for which the allowance falls to be made'.
      No. 70, in page 128, line 26, at end insert—
      '(5) To the extent that an allowance is taken into account in computing profits or gains or losses in the year of loss by virtue of section 169(1) of the Taxes Act it shall, for the purposes of section 47 of this Act and this paragraph, be treated as falling to be made in the year of loss (and not the year of assessment for which the year of loss is the basis year).'
      No. 71, in page 128, line 30, leave out from '(3)' to second 'in' in line 32 and insert
      'below—

      (a) in respect of a loss incurred by a company in a trade, or of charges paid by a company in connection with the carrying on of a trade, in a relevant accounting period, or

      (b) as an allowance falling to be made to a company for a relevant accounting period either in taxing a trade or by way of discharge or repayment of tax to which it is entitled by reason of its participation in a trade;

      and'.
      No. 72, in page 129, line 4, leave out from `(3)' to end of line 7 and insert
      'above—

      (a) in respect of a loss incurred by the partner company in the trade, or of charges paid by it in connection with carrying it on, in any relevant accounting period, or

      (b) as an allowance falling to be made to the partner company for any relevant accounting period either in taxing the trade or by way of discharge or repayment of tax to which it is entitled by reason of its participation in the trade;'.

      No. 73, in page 129, line 12, leave out
      'or expenditure is incurred or the charges paid' and insert 'is incurred or the charges paid, or for which the allowance falls to be made'.—[Mr. Moore.]

    Clause 54

      TIME WHEN CAPITAL EXPENDITURE IS INCURRED
      Mr. Moore: I beg to move amendment No. 32, in page 51, line 38, leave out `(3) and' and insert `(2A) to'.
      Mr. Deputy Speaker: It will be convenient also to take Government amendments Nos. 33 and 34.
      Mr. Moore: During our deliberations in Committee we had a full and useful debate about the clause. There was agreement that it dealt satisfactorily with the majority of capital expenditure contracts even if the agreement did not extend to the exact size of the majority. I undertook further to consider points that worried hon. Members and interested parties outside the House. My hon. Friend the Member for Kettering (Mr. Freeman) also mentioned the point. The amendments represent refinements of the basic rules in the clause and are the result of that further deliberation. Amendments No. 32 and 33 are directed at a kind of construction contract which provides for payment to be made throughout the contract as predetermined stages or milestones are reached. Often, payment for a stage becomes due when an engineer or architect has certified that the work has been completed satisfactorily. Another common feature of that type of work is that the asset becomes the property of the taxpayer as it is built and before any certificate is completed — before an unconditional obligation to pay for that part of the work arises.
      In those circumstances, when the event which brings about that unconditional obligation to pay comes about early in the new year—we have specified one month—it seems to us entirely reasonable to ensure that the capital allowances treatment conforms with the balance sheet treatment and that is what amendments Nos. 32 and 33 seek to do.
      On amendment No. 34, we said in Committee that if we had evidence that the present period of three months allowed in clause 54(3) was not right, we should consider the matter again and return to it on Report.
      Since then, we have discussed the matter with the Institute of Taxation and the CBI, and several reasons have been put to us as to why we should support the case that some extension is warranted.
      The point has been made that credit periods are often expressed in days rather than months, and in periods of up to 100 days. A 100-day credit period would fall outside the present three calendar month period. It is not unknown for a credit period to begin to run from the end of the month in which the invoice is delivered. Where a three-month credit is measured in this way it, too, would be outside clause 54 as it stands. While acknowledging that the three-month period in clause 54 should deal with the vast majority of cases, several bodies have said that four months would clear the bulk of the residue so that any additional compliance costs as a result of this part of the clause should become truly insignificant. We think that there is a case for a small extension of the credit period and we are proposing an extension of one month. This is the basis of this series of interlocking amendments.
      Mr. Blair: Amendments Nos. 32 and 33 deal with a different situation from amendment No. 34. As I understand it, they deal with the situation where plant, machinery or buildings are being made for the taxpayer and payments are made in stages. The amendment deals with a situation where the work might be completed in one accounting year but the liability to pay crystallises within the first month of the next year. That is particularly so in circumstances where an architect's or engineer's certificate is issued and that is the crystallising event. It
      1174
      often happens in commercial contracts, particularly building contracts. If the certificate is signed in the first month of the new accounting year, that enables the taxpayer to claim relief in the old year. In other words, it is a framework for the time when expenditure is incurred.
      The other Government amendment is No. 34.
      Mr. Randall: I should like to ask my hon. Friend the Member for Sedgefield (Mr. Blair) whether the Minister's explanation was adequate. I listened carefully to the Minister, and although he described the problem very thoroughly, he did not say how the amendment overcame the problems involving certificates of completion. Will my hon. Friend be asking the Minister to explain how these amendments do the job because we had a detailed discussion on this in Committee?
      Mr. Blair: I am delighted to give way to the Financial Secretary if he wishes to give an explanation.
      Mr. Moore: The amendment seeks only to give a modicum of flexibility at a key point where we have the particular problem of the unconditionality relationship. It gives a modicum of flexibility which might be quite important at the year end. That is the essence of what it does.
      Mr. Blair: To try to flesh out what the Financial Secretary has said for the benefit of my hon. Friend the Member for Kingston upon Hull, West (Mr. Randall), the time when capital expenditure is incurred is essential in deciding when a claim for capital allowances can arise. The question is, at what point is that capital expenditure incurred? There can be situations where it is easy to say that the capital expenditure is incurred because the obligation to pay has become unconditional, but there may be circumstances in which it is more difficult to say that the obligation to pay has become unconditional, for example, where there is a series of stage payments and a certificate is required to be issued by an architect or engineer saying that the work is up to a particular standard. This amendment gives a little bit of leeway. It is difficult to pluck a figure out of the air, but the amendment has taken a one-month date and is saying that in the circumstances, where the certificate is issued within one month of the new accounting period, a taxpayer can still make the claim in respect of the old accounting period. That flexibility has been introduced.
      We debated amendment No. 34 at some length in Committee from two different angles — first, the circumstances where the credit period allowed by the Government, which was a three-month period, may be unnaturally short and, secondly, the circumstances where the normal payment time might be less than three months and there could be some prospect of avoidance there. The Under-Secretary has extended the period so that we are dealing now with a period of four months rather than the original period of three months. That means that when credit is given up to a four-month period it is still, when the obligation to pay becomes unconditional, crucial to determine when the capital allowance can be claimed.
      The difficulties that I raised in relation to this in Committee still remain. We are assuming that the credit period may be unnaturally extended, say beyond the four-month period, to allow avoidance. There may be circumstances where the normal credit period might be less than four months and, by allowing a four-month period, there would be avoidance.

      1175
      I appreciate that the Financial Secretary has decided, on consideration, that such avoidance is a small possibility, but I should be grateful if he would respond to this point. I repeat what I said in Committee. We are trying to ensure that the credit period given is in accordance with normal commercial usage. Those words are used in a different part of the clause and I am still not entirely convinced that they could not have done this in a better way. I appreciate that these are difficult matters to judge.
      The Minister has obviously taken account of the representations that have been made to give some sort of leeway in introducing the amendments. I hope that it will not be thought churlish if I contrast the ease with which perfectly sensible amendments may be introduced and representations from several parts of industry can be listened to when we are discussing such things as capital allowance with the less than listening Government who dealt with some of the matters about which we were talking yesterday. I am thinking in particular of what my hon. Friend for Birmingham, Hodge Hill (Mr. Davis) said about work-place nurseries.
      I appreciate that the Government have to pay attention to the representations that have been made, but one sometimes wonders whether the Government do not pay more attention to representations from certain quarters than they do to representations from other quarters. If the alacrity with which the difficulties relating to capital allowances for companies have been dealt with was transferred across the broad spectrum of taxation problems, we might have a much more efficient and equitable taxation system.
      Mr. Randall: I am still not happy with the answer that the Financial Secretary gave. I am sure that he has attempted to do this in the best possible way. The answer to the tripartite discussion that we had is that the Government have introduced a modicum of flexibility. We are talking about completion dates for construction contracts, payments and so on. However, we should rise above that to see what this clause means in quantitive terms, for example, to the construction industry in terms of capital allowances.
      What consultations has the Minister had with the industry, and what has it said about the modicum of flexibility? I have not looked up the word modicum in the dictionary, but it does not convey the idea of a huge change in capital allowances for the construction industry. I see it as a rather small change. Perhaps the Minister could give us some feel for the order of magnitude of the relief given to the construction industry through the capital allowances.
      Mr. Moore: I was using "modicum" as the description of one month in relation to a year. I apologise if the word lacked a certain precision. The extent to which this is a complex sector was discussed in Committee, as the hon. Member for Sedgefield (Mr. Blair) said. We were trying to put into statutory form a complex new attempt to interpret a set of commitments to pay by purchasers at a point at which they became absolutely unconditional obligations. That was an entirely new concept and the basic purpose was to try to put on the statute book normal accountancy practice. As the hon. Member will remember from our debates upstairs, normal accountancy practice was a rather difficult thing to pursue, locate and establish.
      1176
      There seemed to be many different principles and it was an attempt to fit correctly into the pattern and practice of the majority of British industry.
      10.15 pm
      In Committee one of my hon. Friends and one of the hon. Gentleman's hon. Friends raised the matter of milestone contracts and the problems of the construction industry. To that extent, my officials continued, as I said they would, the whole process of attempting to make sure that our legislation got the issue right. Because of the nature of accountancy practice in putting these obligations unconditionally on to the accounting books of companies, my officials found that they differed somewhat from our attempt to get the unconditional obligation to pay. In an important part of British industry, we tried to find a modicum in terms of a month to allow flexibility. I cannot pretend that the industry is totally satisfied with that.
      In the judgment of the Inland Revenue and the Government, that brings to bear a fair balance of judgment, and, as the hon. Member for Sedgefield said, it gives protection to the Revenue as well as helping the accounting systems of our major construction companies.
      I would not suggest that the hon. Member for Sedgefield was being churlish, because he would find great difficulty in ever being churlish. In the debates in Standing Committee, we were trying to put into statutory form for the first time the normal accountancy practices, and it did not seem unwise to take account of the advice of industry about that. As he said, there was a dispute — both sides were displayed in Committee — about whether it was to be three or four months.
      In Standing Committee, the hon. Gentleman rightly identified one of the problems of the Government. which was to try to ensure that one could find a solution — I accept his argument that it is a matter of judgment—that does not create a possibility or encourage the problems of avoidance. I understand the points he is making and I think there are two reasons why any worries are likely to be misplaced. Perhaps we did not elaborate sufficiently in Committee. Most buyers and sellers operate at arm's length, with one wanting to pay the lowest price possible — a long credit period would be likely to affect the price — and the other party to the transaction trying to obtain his money as soon as possible. We think it improbable that present practices in the market place would be much affected or would change because of clause 54, as amended.
      I went on to describe upstairs the workings of the anti-avoidance feature. I listened very carefully to what the hon. Gentleman said. Obviously, we have come to a judgment on the three points I made earlier after further discussion with people outside. If, having established this, we judge that the clause is in any way being abused, we will come in very quickly to seek to tidy it up. We are trying to judge the right length of time. I will be happy to come back and inform the hon. Member if we think it merits further scrutiny.
      Amendment agreed to.
      Amendments made:
      No. 33, in page 51, line 42, at end insert—
      '(2A) If, under or by virtue of any agreement,—

      (a) as a result of the issue of a certificate or some other event, an obligation to pay an amount of capital expenditure on the provision of an asset becomes unconditional, and

      1177

      (b) at a time before that obligation becomes unconditional, the asset becomes the property of or is otherwise under the contract attributed to the person having that obligation,

      then, in a case where the obligation referred to in paragraph (a) above becomes unconditional within the period of one month beginning at the end of a chargeable period or its basis period but the time referred to in paragraph (b) above falls at or before the end of that chargeable period or its basis period, subsection (2) above shall apply as if the obligation became unconditional immediately before the expiry of that period.'.
      No. 34, in page 52, line 4, leave out 'three' and insert 'four'. —[Mr. Moore.]

    Clause 55

      ELECTION FOR CERTAIN MACHINERY OR PLANT TO BE TREATED AS SHORT-LIFE ASSETS
      Mr. Neil Hamilton: I beg to move amendment No. 155, in page 53, line 4, leave out '1986' and insert '1984'.
      This amendment is designed to bring forward the date on which the new capital allowance treatment for short-life assets comes into force from 1 April 1986. The Government have accepted that short-life assets require a special regime, and I applaud the measure they have brought forward. It will allow the taxpayer to elect within two years of the purchase of the asset for the asset to be treated as short life and he would therefore be entitled to receive a balance allowance or suffer a balancing charge if he disposed of his acquisition.
      The amendment would apply this treatment to all assets from the time that the 100 per cent. first-year allowances for machinery and plant were withdrawn rather than waiting until only the 25 per cent. reducing balance annual allowances were available. It has to be remembered that depreciation starts when the asset is purchased.
      The second effect of the amendment is that it would help ease the dip in capital allowances during the transitional period from the old 100 per cent. first-year allowance system. The bottom of the dip is in 1986–87. If the commencement of the short-life treatment is brought forward from 1 April 1986 to 1 April 1984, some balancing allowances will occur in 1986–87 and reduce the dip, making it less deep. Even if the balancing allowance occurs before 1986–87, it will improve the company's cash flow and help it cope with the dip that much better.
      The amendment is an ameliorative measure and I hope that it will appeal to my hon. Friend.
      Mr. Blair: The amendment makes me suspicious, but I am not entirely sure why. I want to make sure that I have understood exactly what is being proposed.
      Clause 55 gives a certain exceptional treatment to short-life assets and in many ways the amendment results from what happened last year and the problems arising from the 1984 Budget taking away capital allowances.
      The improvement in capital allowances for short-life assets applies at present to expenditure incurred after 1 April 1986, and that is when first-year allowances will be phased out. The amendment would bring forward the date to April 1984, and that would be the start of the phasing-out period and not its conclusion.
      In a perfect world it would mean that the exemption of short-life assets from the provisions of last year's Budget would be given from the moment the first-year allowances
      1178
      started to be phased out rather than there being somewhat of a hiatus between April 1984 and April 1986. If the election for certain machinery to be treated as short-life assets and the preferential treatment given to them can only be given after 1 April 1986, there is the period between April 1984 and April 1986 when the first-year allowances are being phased out and the treatment of short-life assets will not be as good as it will after 1 April 1986.
      I always approach amendments tabled by the hon. Member for Tatton (Mr. Hamilton) with an extremely open mind. I always assume that they will fairly distribute the burden between the taxpayer and the Revenue. But my hon. Friends behind me who have greater experience than I in these matters tell me to be more cautious. I should like to ask the Financial Secretary — it may be that the hon. Member for Tatton will deal with it when he comes to press or to withdraw his amendent — whether the difficulties of administration with this type of amendment would not be considerable. There would be every opportunity going back to 1 April 1984 for elections to be made in circumstances where perhaps there was a very much greater burden on the Revenue than might otherwise have been thought.
      Mr. Tim Smith: I cannot see that the amendment will be of much value. In the period from 1 April 1984 to 31 March 1985 a taxpayer could get an allowance of 75 per cent. on the asset which he acquired. Therefore, of what value will the amendment be?
      Mr. Blair: Between now and 1986 the amount that could be claimed will not be 75 per cent. but less than that — 50 per cent. this year. If the date were put back to April 1984, a taxpayer could take full advantage of the relief under clause 55 back to April 1984. Therefore, the amendment would bring taxpayers an advantage.
      The difficulty with the amendment is that it appears to be open to potential abuse, but the Financial Secretary will no doubt give us the answer to these conundrums.
      Mr. Randall: I am a little suspicious, because we have already had a similar amendment from the hon. Member for Tatton (Mr. Hamilton). He is a charming man, but I am suspicious of him on financial matters. I do not trust him — I mean that in the kindest sense. I am not suggesting that he is dishonest, but I do not understand his motives.
      Dr. Marek: It is precisely because we understand the hon. Gentleman's motives that we are suspicious. Conservative Members represent the rich and the idle rich. We know whom they represent and what their motives are.
      Mr. Randall: I am a gentle person, and I am not prepared to go as far as my hon. Friend the Member for Wrexham (Dr. Marek).
      We are discussing bringing forward the date when short-life assets can be paid. The hon. Member for Tatton suggested that that would apply to all assets where the 100 per cent. capital allowances have been withdrawn. He talked about the improvement in companies' cash flows, and clearly the amendment would achieve that. One can see why companies would like to claim their allowances earlier because of the obvious consequences in that respect.
      I feel that there is something behind the amendment which the hon. Gentleman did not fully describe. Will the

      1179
      Minister explain fully the consequences of the amendment to business in terms of money from the Exchequer? Would the amendment be particularly beneficial? Finally, what scope exists for abuse?
      Mr. Moore: I shall respond quickly to the question of cost. It is always the Treasury's unfortunate task to put cost on to the record. The cost would not begin until 1987–88, when it would be £10 million. In 1988–89 it would be £50 million, in 1989–90 £70 million, and thereafter there would be a saving on present costings.
      Although I shall not go into the underlying strategy of the capital allowance changes — we may have an opportunity for that later — it may be useful to remind the House that from April 1986 the capital allowance system for machinery and plant will be based on a pool of expenditure, attracting an annual allowance of 25 per cent. on a reducing balance basis. That will enable most business equipment to be written off over a period, but on average it will more than fairly reflect its useful life. We recognise that, for those assets which depreciate much more quickly than the average, something more is needed, and the Chancellor of the Exchequer announced the new de-pooling arrangements which we now know as clause 55. According to advice from my Revenue officials, we do not see much problem in terms of additional administration. Despite the suspicions of Opposition Members, we do not see the problems of potential for abuse — as opposed to the cost, which is quite a different question — or excessive administrative difficulties.
      Mr. Blair: Where does the cost come from?
      10.30 pm
      Mr. Moore: I think the hon. Gentleman will appreciate the point when I go through the arithmetic. It is clear that there is a modest advantage entailed.
      My hon. Friend the Member for Tatton (Mr. Hamilton) talked about the dip — the point raised by the CBI. I refer to it in the context of the CBI's reference, as opposed to endorsing the concept of a dip. As my hon. Friend will know, there will always be difficulty in any period of transition where major change is enacted. The Government were very conscious of that in 1984, when framing the capital allowance proposals to give assistance specifically during that transitional period. Therefore, the Government advanced, first by one year, the pattern of reduction in corporation tax rate. Clearly, the reduction in rate will benefit the company sector. Those are factors which have to be taken to the other side of the ledger. Equally, we are making those changes at a time of greatly improving corporate profitability and liquidity, which is an important factor in relation to the proposal.
      The option to de-pool assets is to be an integral part—this is the point that the hon. Member for Sedgefield (Mr. Blair) was making—of the new capital allowance system and not part of the old one, which does not come to its end until 31 March 1986. In the period from March 1984 to 1985, expenditure on business machinery and plant attracted a first-year allowance of 75 per cent., and in the period April 1985 to March 1986 it attracts a first-year allowance of 50 per cent. It is only from April next year that, for businesses generally, first-year allowances disappear altogether, and the new system, including the
      1180
      refinement for short-lived assets, is fully in place. As opposed to what my hon. Friend the Member for Beaconsfield (Mr. Smith) said, I know that my hon. Friend the Member for Tatton will appreciate the details of the impact on company investment during the transitional period.
      In 1984–85, with a 75 per cent. first-year allowance, the company's investment is written down by 82 per cent. in just two years, almost to residual value. In 1985–86, the second transitional year, with a 50 per cent. first-year allowance, within three years nearly three-quarters of the initial cost will have been written off for tax. Against that background I do not see any case for bringing forward the starting date for just one element in the new system. The new system is an integral system. I hope that my hon. Friend the Member for Tatton, having probed the matter, will not press his amendment.
      Sir William Clark: If there is any suspicion relating to my hon. Friend the Member for Tatton (Mr. Hamilton), that suspicion relates also to me, as I signed the amendment.
      The Minister referred to the cost to the Exchequer. Will he agree that it is only a cash flow loss and nothing whatever to do with loss of revenue, and that my hon. Friend is only trying to give a cash flow advantage?
      Mr. Moore: My hon. Friend is right. That was the whole nature of the debate, in which so many of us have been involved, on capital allowances. It is a debate relating to cash flow. The amendment, in the names of my hon. Friends the Members for Tatton and Croydon, South (Sir W. Clark) seeks to assist what they see as the particular problem of British industry. In the Government's judgment, we have covered the problems in the transitional arrangements.
      Mr. Neil Hamilton: As my hon. Friend has vindicated my character and allayed the suspicions of Opposition Members, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Amendments made:
      No. 35, in page 54, line 23, at end insert—
      '(5A) If, at a time before the notional trade would otherwise be permanently discontinued for the purposes of section 44, the short-life asset begins to be used otherwise than for a qualifying purpose, within the meaning of section 64 of the Finance Act 1980 (leased assets used for certain purposes) and the occasion of its beginning to be so used falls within the requisite period, within the meaning of that section, then at that time—

      (a) the notional trade shall be treated as permanently discontinued but no balancing allowance or charge shall be made to or on the trader by reason thereof, and

      (b) the amount which, apart from this subsection, would be the trader's qualifying expenditure for the chargeable period in which, or in the basis period for which, the asset began to be so used shall for the purposes of section 44 (as it has effect in accordance with section 65 of the Finance Act 1980) be added to the trader's qualifying expenditure for that chargeable period in respect of the separate trade referred to in subsection (2) of the said section 65.'.

      No. 36, in page 54, line 24, leave out from 'if' to 'the' in line 25 and insert
      'at a time before the notional trade is permenantly discontinued for the purposes of section 44.'.
      No. 37, in page 54, line 43, leave out 'and this subsection'.—[Mr. John Moore.]

    Clause 57

      ENTITLEMENT TO ALLOWANCES FOR MACHINERY AND PLANT WHICH ARE FIXTURES
      Mr. Moore: I beg to move amendment No. 38, in page 56, line 42, at end insert—
      '(8) Nothing in subsection (1) above affects the entitlement of any person to an allowance by virtue of section 85 of the Capital Allowances Act 1968 (allowances in respect of contributions of a capital nature) and, accordingly, in paragraph 15(6) of Schedule 8 to the Finance Act 1971 (modification of the operation of section 85 in relation to allowances for machinery and plant) after the words "the said Chapter I", where they last occur, there shall be inserted "or Schedule 15 to the Finance Act 1985".'.
      This deals with a matter discussed in Committee in consideration of amendments tabled by the hon. Member for Sedgefield (Mr. Blair) and my hon. Friend the Member for Tatton (Mr. Hamilton). We have looked closely at the problem identified by that discussion, and the amendment is the result.
      As it stands, clause 57 allows only the person to whom fixtures are treated by schedule 15 as belonging to receive capital allowances on those fixtures. However, it has been put to us that this could upset long-established methods of commercial funding where, for example, one company contributes to the capital expenditure incurred by another on machinery or plant which is a fixture, and in which both have a commercial interest. The amendment will allow these arrangements to continue to be made unaffected by the clause and its schedules.
      While commending it to the House, I commend my hon. Friend the Member for Tatton and the hon. Member for Sedgefield for their diligence in ensuring that we had the benefit of their advice.
      Mr. Blair: I am grateful to the Financial Secretary for having taken account of our representations. I believe that this deals with the problems of contributor companies.
      Amendment agreed to.

    Schedule 15

      CAPITAL ALLOWANCES FOR FIXTURES
      Amendment made:
      No. 74, in page 141, line 30, leave out 'debtor' and insert 'person having that right'—[Mr. Moore.]
      Mr. Moore: I beg to move amendment No. 75, in page 147, line 46, at end insert
      'and
      (c) the occasion of the fixture ceasing to belong to the former owner is not its permanent severance from the relevant land (whether on disposal, demolition, destruction or otherwise)'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 76 to 78.
      Mr. Moore: These four amendments substantially alter the rules which require disposal value to be brought into account when a fixture is treated as no longer belonging to someone for capital allowance purposes.
      The difficulties at which the amendments are aimed arise because the value of fixtures turns very much on the value of land to which they are attached. At the extreme, the fixtures in a building may be very valuable, but they are not worth much to someone whose lease has only one
      1182
      day to run. The rules which we had originally intended are contained in paragraph 9 of schedule 15. Paragraph 9 provides a general set of rules which require the adoption of a notional sale price based on an apportionment of some arbitrary assumptions about the open market value of the interest in the land to which the fixtures are attached.
      Originally, this approach was regarded as necessary so that on the basis of that open market valuation at least some capital allowances could be recovered from the old owner and the fixtures at the same time as the new owner began to receive allowances.
      It has been widely suggested by the British Property Federation, the CBI, all the accountancy bodies and the Institute of Taxation that the rules should give greater recognition to the actual consideration — the hon. Member for Sedgefield referred to this — if any, of the fixtures which passes between the parties concerned, assuming that they are acting on an arm's length basis. It is that which the amendments do.
      The amendments in practice will considerably reduce the extent to which open market value calculations have to be made and correspondingly will increase the extent to which the actual sale proceeds which pass between the old and new owners of a fixture can be brought into the old owner's capital allowances computation.
      We believe that, even though it is longer than the present set of rules, this alternative approach to dispose of value can be widely welcomed by those concerned with this difficult subject, whether directly or as professional advisers, since a great deal of work on valuations and apportionments will be avoided altogether.
      Mr. Randall: I have a brief question. I was interested to hear the Minister's explanation in which he suggests that we de-couple certain fixtures from assets like land and other assets which should not be taken into account in deciding values when computing the capital allowances. I am wondering whether, in carrying out the computations, this de-coupling exercise might be susceptible to abuse. Land is a fairly cut and dried issue, but there must be other examples where it would be necessary for the Inland Revenue to de-couple the assets in such a way that the boundary becomes blurred and a judgment therefore more difficult to make. Can the Financial Secretary say whether he thinks that in some of the other examples where this exercise will need to take place there might be the opportunity for abuse?
      Mr. Moore: I shall examine very carefully the hon. Gentleman's point. We are very conscious of the problem of avoidance. The hon. Member for Workington (Mr. Campbell-Savours) raised in Committee a similar point and we gave assurances upon it. I am happy to give assurances on this point. However, I shall look at the matter again and will write to the hon. Gentleman if I find that there is any need to consider the matter further.
      Amendment agreed to.
      Amendments made: No. 76, in page 148, line 3, leave out 'this paragraph' and insert 'sub-paragraphs (1A) to (3A) below'.
      No. 77, in page 148, line 4, leave out from beginning to 'the' and insert—
      '(1A) Subject to sub-paragraph (3A) below, if the occasion of the fixture ceasing to belong to the former owner is the sale of the qualifying interest, the price referred to in sub-paragraph (1) above is that portion of the sale price of the qualifying interest

      1183
      which falls (or, if the purchaser were entitled to an allowance, would fall) to be treated for material purposes as expenditure incurred by the purchaser on the provision of the fixture.
      (1B) If the fixture ceases to belong to the former owner by virtue of sub-paragraph (5) of paragraph 7 above, the price referred to in sub-paragraph (1) above is so much of the capital sum referred to in sub-paragraph (1)(c) of paragraph 5 above as falls to be treated for material purposes as expenditure by the lessee on the provision of fixture.
      (2) If neither sub-paragraph (1A) nor sub-paragraph (1B) above applies.'.
      No. 78, in page 148, leave out lines 14 to 22 and insert—
      '(3A) If the sale referred to in sub-paragraph (1A) above is at a price lower than that which the qualifying interest would have fetched if sold in the open market, that sub-paragraph shall not apply unless the purchaser's expenditure on the acquisition of the fixture can be taken into account as mentioned in section 44(6)(b)(i) of the Finance Act 1971.
      (3B) If the occasion of the fixture ceasing to belong to the former owner is the expiry of the qualifying interest, then, except in so far as the former owner receives any capital sum, by way of compensation or otherwise, by reference to the fixture, the disposal value of the fixture which falls to be brought into account under section 44 of the Finance Act 1971 shall be nil.
      (3C) In any case where—

      (a) the disposal value of a fixture falls to be brought into account in accordance with section 44 of the Finance Act 1971 on the permanent discontinuance of the trade in circumstances where that value falls to be determined under paragraph (e) of subsection (6) of that section; and

      (b) before the occurrence of the later event referred to in that paragraph, the fixture is not permanently severed from the relevant land,

      that paragraph shall apply as if the reference therein to paragraph (a) and paragraph (b) of that subsection were omitted; but if the event which follows the discontinuance of the trade is the sale of the qualifying interest, the disposal value of the fixture to be brought into account under that section shall be that portion of the sale price referred to in sub-paragraph (1A) above.
      (3D) If the disposal value of the fixture falls to be brought into account in accordance with section 44 of the Finance Act 1971 on its beginning to be used wholly or partly for purposes which are other than those of the trade, paragraph (f) of subsection (6) of that section shall apply as if the reference to the price which the machinery or plant would have fetched if sold on the open market were a reference to that portion of the price referred to in sub-paragraph (2) above.
      (3E) If, on the occasion of the fixture being treated, by virtue of paragraph 7 above, as ceasing to belong to the former owner, another person incurs expenditure on the provision of the fixture, there shall be disregarded for material purposes so much (if any) of that expenditure as exceeds the disposal value which the former owner is required to bring into account in accordance with section 44 of the Finance Act 1971.'.—[Mr. Moore.]

    Clause 60

      AGRICULTURAL LAND AND BUILDINGS
      Mr. J. Enoch Powell: I beg to move amendment No. 39, in page 57, line 23, leave out '1986' and insert '1989'.
      Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 40, in page 57, line 27, leave out '1987' and insert '1990'.
      No. 41, in page 57, line 42, at end add
      '(5) For the purposes of this section as it applies for income tax purposes the date "6th April 1989" shall be substituted for the date "1st April 1986" in subsection (1) hereof and the date "6th April 1990" shall be substituted for the date "1st April 1987" in subsection (1)(b) hereof.'.
      Mr. Powell: This amendment, together with amendments Nos. 40 and 41, has the effect of modifying by deferring the severe impact upon the agricultural industry
      1184
      of the elimination of the initial allowance and the reduction of the annual write-off from 10 to 4 per cent. per annum. The amendments relate to the Bill as a United Kingdom Bill. Most of the right hon. and hon. Members who have put their names to these amendments represent Northern Ireland constituencies. That is not surprising, since the impact and the arguments in relation to the change are probably the most severe in relation to the general run of the farming industry in Northern Ireland. Nevertheless, we are happy that the broad acres of Cheshire have been associated by the hon. Member for Tatton (Mr. Hamilton) with the drumlins and mountains of Ulster.
      Mr. Campbell-Savours: And bogs.
      Mr. Powell: Bogs could well, as the hon. Member for Workington (Mr. Campbell-Savours) suggests, be added to the landscape for the sake of completeness.
      The reduction of these allowances was made in a specific context. It was made in connection with corporation tax relief. Consequently, for most farm businesses that are not liable to corporation tax there have been the disadvantages, unaccompanied by the counter-balancing advantages. In the case of the writing down figure in particular, the reduction from 10 to 4 per cent. per annum is severe in its impact upon most forms of agricultural capital. There are certain forms of agricultural capital where a 25-year period of write-off might be reasonable, but for most agricultural buildings a period much shorter than 25 years before they are required to be renewed and replaced is now reasonable. Buildings that are associated with use for animals or buildings where the processes of corrosion, as in the handling of slurry, are relevant are particularly short in life. Consequently the write-off over 25 years instead of 10 years is serious in its impact.
      I know that it can be argued that there is always at the end of the life of an asset a balancing allowance which can be made if the value has been unexhausted by the annual write-off. However, that does not affect the financial position of the farm or undertaking during the life of the asset. It remains a disadvantage that an asset that is replaced after 10 years has been depreciated over 25 years.
      The supporters of the amendments appreciate that the new system of initial and write-off allowances hangs together. Therefore, we ask only for a deferment of the impact so that those who will be severely affected will have the opportunity to rearrange the finances of their businesses to meet the new conditions under which they will have to operate.
      The problem comes home particularly to the small farmer who will be affected by the income tax rather than the corporation tax aspects of the new provisions. I hope that my right hon. and hon. Friends will further illustrate to the Government why a deferment of the impact for three years, as proposed by the amendments, would be just and welcome.
      10.45 pm
      Mr. Neil Hamilton: I endorse the closing comments of the right hon. Member for South Down (Mr. Powell). The amendments are designed to ameliorate the position of the small farmer and the family farmer who is not incorporated.
      When we discussed in Committee a number of other amendments affecting agriculture, I was the butt of some

      1185
      ridicule and ribaldry from Labour Members for defending an interest that was already heavily subsidised by the taxpayer. As the House knows, I hold no brief for the common agricultural policy and all the anomalies and absurdities that characterise it.
      The income of a small farmer is relatively low, although he has a large capital asset, the value of which has been built up largely because of the CAP. The amendments seek to ameliorate the position of farmers who survive on low incomes, who will be greatly affected by the speed at which we move from the old system of allowances to the new one.
      Most farmers in my constituency are dairy farmers and they have been adversely affected by changes in the CAP. Their incomes have been depressed and their businesses weakened. I am no friend of the surpluses inherent in the CAP and I want us to move to a more rational system, but the transitional period must be a reasonable one. The amendments seek to help the small family farmer for a transitional period.
      The amendments would also give an impetus to conservation of the countryside. When farmers' incomes are reduced, they are less likely to spend money on farm buildings and other visible assets. As a result, the countryside may be adversely affected. Several farmers in my constituency have spent money on buildings so that they merge attractively into the countryside. All hon. Members would applaud that aim. It is a question of improving cash flow so that such schemes can be continued.
      The 4 per cent. writing down allowance does not represent a realistic rate of depreciation for many modern farmers. That is unfortunate. It is extraordinary that, under the new system, the balance of tax relief is moved in favour of investment in machinery and against buildings, the construction of which creates more employment. The machinery write-off in the first year will be 25 per cent. instead of 100 per cent., but for farm buildings the write-off in the first year will be 4 per cent. instead of 30 per cent. Machinery allowances are reduced by a factor of four, but for buildings the factor is over seven.
      I agree with what has been said about the unincorporated business. There is a counter-balancing advantage for incorporated businesses in the reduction in corporation tax. I applaud the Government's strategy, but I hope that we can do something for the income tax payer rather than the corporation tax payer. The amendments suggest changes to help farmers.
      Mr. William Ross: The hon. Member for Tatton (Mr. Hamilton) referred to small farmers. Very few large farmers exist in Northern Ireland. By reducing allowances, the Government are simply trying to return to the position which prevailed before the high inflation rate under which we have suffered in the last 10 to 15 years.
      It is laudable for any Government to take such steps. However, the Government are treating all farm and industrial buildings as if they were the same. I declare an interest since I own a small farm. I have a farming background and I know how to dig a drain. That is how I earned my living for 15 years.
      The Government are treating buildings which are different as if they were the same. They do not seem to
      1186
      recognise that farm buildings are different from industrial buildings in many respects. Industrial buildings have a long life; even if they cannot be used for their original purpose they are so adaptable that they can be used for many other purposes. Most farm buildings have a relatively low output and many are used for only part of the year. Cattlehouses, for instance, are used only in the winter months. During those months the metal work deteriorates more quickly than it does in other buildings. That is a fact of life. If barley is dried in a building it will deteriorate even more quickly.
      The life span of farm buildings varies according to the use to which they are put. For instance, a store is a simple and cheap building which will usually last a long time, but a silage pit is a building which has to be roofed over in the wetter parts of the United Kingdom and it is costly although it is used for only a short time each year. Pig and poultry buildings are intensively used. We must give closer consideration to the matter.
      Many farm buildings, especially those erected for pigs and poultry, are highly specialised and cannot be used for any other purpose. Big changes have taken place in farming in the last 10 to 15 years — so much so that once profitable enterprises have vanished from the scene, especially in Ulster. It is not apparent to those who are not farmers that severe working conditions apply on farms during the winter months. That is why buildings are vital, for the comfort not only of farm animals but of those who look after them.
      A highly specialised work force has grown up in erecting farm buildings, with many people employed permanently on that work. In recent years, however, farming has suffered a number of blows which have reduced the amount of money available for the erection of farm buildings. The industry has lost the initial allowance, the writing down allowances are being reduced and there are lower farm grants. It is clear from what was said in the House on Monday that those grants will be greatly reduced in the future. The cash flow problems of farmers will increase considerably in the near future, and I regret that the Government seem to be adding daily to their problems.
      In Northern Ireland — I cannot speak for the rest of the United Kingdom—most industry receives industrial development grants for machinery. Farming does not. Farm buildings have always had a short writing down period. Conditions have not changed so much in recent years as to enable the Government to depart from the long-established practice in that respect. I hope that the Government will look again at this issue, will take on board the representations that are being made tonight and will act to relieve farmers of the burdens that are currently being heaped upon them.
      Mr. James Nicholson: I support what hon. Members have said on this subject. Like my hon. Friend the Member for Londonderry, East (Mr. Ross), I have an argicultural interest and am well aware of the problems that are being caused to the industry in Northern Ireland.
      The proposed changes will greatly add to the difficulties of those engaged in agriculture. The proposal to extend the 10-year write-off period to 25 years will mean many agricultural buildings becoming obsolete and having to be replaced by more modern ones even before the old ones have been written off. My right hon. Friend the Member for South Down (Mr. Powell) outlined the

      1187
      position correctly when he referred to the various types of agricultural building, and I will not go over the ground that he covered.
      The present system has been in operation for over 40 years and has proved adequate. We are asking for farmers to be given a reasonable period in which to adjust to the changes. Cash flow is vital to any business, including farming. In the long term and the short term, cash flow plays an important part, and I urge the Minister to consider the types of people who will be most affected by the changes.
      In Northern Ireland, the small family farmer will be the hardest hit. The young farmer trying to get started at the bottom of the ladder will be hard hit as well. The proposals will be most damaging to those people. They will not be able to claim relief through the reductions in corporation tax. Few, if any, small farmers will be able to alleviate their problems if there is no offsetting.
      11 pm
      How many farmers are incorporated? Such farmers are few and far between in Northern Ireland. Farm businesses have already suffered from the changes in plant and machinery allowances which were introduced last year. I am informed — I may be corrected on this — that the changes will cost agriculture more than £400 million in the five-year transitional period. We must consider also what will happen in the transitional period for building allowances. Judging by present ceilings, the change could cost agriculture another £400 million.
      Unfortunately, the changes can lead only to a severe decrease in investment in agriculture. Because the small farm system in Northern Ireland means that it is necessary to apply a more intensive system of agriculture than in other parts of the United Kingdom, this policy will be to our detriment. We live in a time when technology can transform any sector. This feature is most pronounced in the intensive sector of horticulture. Existing buildings can become obsolete and outdated within a short period. Will the Government award any recognition to this point, as it will concern us in the future?
      Agriculture is facing a difficult time and it is unwise to add an extra burden. I ask the Financial Secretary to reflect on the changes last November in the farm capital scheme when the amount available was reduced by £40 million. My hon. Friend the Member for Londonderry, East referred to this week's announcement on the scheme. We can expect another large slice to be taken from the farm capital scheme. That is another reason why the Financial Secretary should afford the amendment consideration and support. Such a proposal, if passed, would have far-reaching consequences for United Kingdom agriculture, and more particularly for Northern Ireland.
      Mr. Randall: I have great reservations about the amendment. The right hon. Member for South Down (Mr. Powell) is essentially asking for special arrangements to be made for agriculture because of the reduction in allowances associated with the corporation tax changes. I do not regard tin sheds, slurry sheds, barns, and so on as short-life assets. I cannot understand why it is necessary to give agriculture yet another boost in this way while other industries are deprived.
      I should like the high tech industries to be given even more help. I know that the Government are making special arrangements to assist those industries. This is as a result of the 1984 changes arising from the Chancellor's
      1188
      statement on these matters. The deferment to which the right hon. Member for South Down referred is bound to mean that less money will be available for other industries. It would be of interest if the Minister can tell the House how much that will cost.
      We are aware that all businesses—farming, industry and financial institutions — want to improve their cash flow, but the amendment amounts to giving agriculture special assistance. The hon. Member for Tatton (Mr. Hamilton), who supported the amendment, is asking for yet another subsidy. It is not a lump sum handout or anything like that; it is a revenue subsidy. I understand the thrust of the argument, but I cannot support the amendment.
      Dr. Marek: I am not sure that I go along completely with my hon. Friend the Member for Kingston upon Hull, West (Mr. Randall). I hope that the right hon. Member for South Down (Mr. Powell) might elucidate a little. My experience is that small farmers in many areas need help. They do not all conform to the image commonly held of the farmer in East Anglia growing a great deal of cereals, driving a Jaguar and having two or three Range Rovers in a shed.
      I have been to Northern Ireland. It is similar to Wales. I do not know what the pattern of farming in Ulster is or what the acreage is. I imagine that it is not large and that many farmers farm small acreages and just manage to make a living. I also believe that the land is not especially good. If I am wrong no doubt hon. Members will tell me. That is true of many parts of Wales.
      Small farmers need help. If the amendment seeks to help them I support it. There is, however, a caveat. I do not know whether the amendment will also help the large unincorporated farmer. If it does, the amendment is not tuned finely enough. That is the problem. I do not know what effect the amendment will have. No doubt the Minister will enlighten us about that.
      My sympathies are with the small farmer. More needs to be done for him, but I am not sure that the amendment is the right way to go about it.
      Mr. Blair: Like all my hon. Friends, I am sympathetic to small farmers. The Labour party will long be remembered for the position that it took on the dairy quotas that the Government introduced which seriously hit many small farmers.
      This amendment and the clause apply to farmers in general. It does not distinguish between large and small farmers. We must decide whether we should single out agriculture for yet another subsidy, because whether or not one calls it a subsidy that is what the provision amounts to. Those who vote for the amendment will have decided to give agriculture special treatment. There is no way of getting out of that.
      One of the features of our debate this evening has been the degree to which certain hon. Members opposite have been totally against subsidies in general but wholly in favour of subsidies in particular. The hon. Member for The Wrekin (Mr. Hawksley) spoke about business within his constituency and the hon. Member for Tatton (Mr. Hamilton) talked about particular interests. They appear to adopt a view of the economy which is wholly inconsistent with the view that they adopt as monetarists in other areas. If only the same concern was shown for building up our industry, in particular our manufacturing

      1189
      industry, that is shown towards the special interests which they represent we would all be much better off. The truth of the matter is that when allowances were done away with last year there was a substantial withdrawal of the incentive to invest in industry. We are still dealing with those problems this year.
      Opposition Members are unable to support these amendments, although we are not unsympathetic to the problems raised by hon. Members. Capital allowances should be looked at as they relate to industry in its entirety and not to individual sectors which may have the particular sympathy of Conservative Members.
      Mr. Moore: I shall turn my attention to the specific amendments of the right hon. Member for South Down (Mr. Powell). The principal purpose of his amendments is to defer by three years the proposed reduction in the rate of agricultural building allowance. I am very conscious of the contributions which he and his hon. Friends have made about particular problems in the agricultural industry in the areas they represent. Having said that, it is essential that I put that request for a deferral into the context of the overall background of the Government's proposals last year. I should mention as an aside that the detailed proposals were announced in March 1984 and do not go into effect until April 1986.
      As the House will know, the Government last year embarked on a major reform of business taxation. Our aim is to move to a system which is much more neutral as between different types of investment so that the pre-tax return on capital investment rather than the post-tax return becomes the basis of commercial decision making. Coupled with this is a determination to achieve lower tax rates on business profits since high rates are themselves a disincentive to investment and therefore to worthwhile economic progress.
      We reduce the small companies rate of corporation tax to 30 per cent. with immediate effect. In addition, the main rate of corporation tax is being reduced by one-third over the period from 1984 to 1986. And for income tax, which is of principal concern to the unincorporated sector, there are a number of significant benefits flowing from both last year's Finance Bill and this year's.
      These include real increases in income tax thresholds which continue the progress made in reducing levels of personal tax since this Government took office in 1979; the abolition of both the investment income surcharge and the national insurance surcharge; the capital taxation changes; the proposed reform of the capital gains tax retirement relief; and the national insurance contribution changes such as the reduction in class 2 contributions and the giving of relief on one-half of the class 4 contributions. Those have to be put in context because those last two changes in class 2 and class 4 are worth £155 million to the unincorporated sector in a full year.
      The changes to the main allowances for machinery and plant and for industrial buildings were made last year. At the same time, we announced our intention to make changes this year to other allowances, including the agricultural buildings allowance. When all these changes are in place, the capital allowance system will generally be much more streamlined than before 1984; most assets qualifying for relief will attract allowances either at 25 per
      1190
      cent. on a reducing balance basis if they are machinery or plant, or at 4 per cent. on a straight line basis if they are buildings.
      The proposed changes to the agricultural buildings allowance in this year's Finance Bill have to be seen therefore as a part of this pattern of reform. The rate of allowance for expenditure which qualifies for relief will become 4 per cent. straight line so that agricultural buildings will be treated in the same way as industrial buildings from 1 April next year, thus bringing to an end the present distortion between them in the tax system. I stress the word distortion because, before this change, industrial buildings were on a slightly better system than agricultural buildings. Both will now be on a 25 year or a 4 per cent. straight line. Industrial buildings move from six years to 25 and agricultural buildings from approximately eight years to 25.
      Many buildings qualifying for the agricultural buildings allowance have long life spans so that for them relief for construction costs over a 25-year period—which is what an annual allowance of 4 per cent. straight line means — will represent a reasonable rate of relief for tax. However, I recognise, as right hon. and hon. Members have said, that this is not the whole story.
      11.15 pm
      Some specialist agricultural buildings, such as some kinds of farrowing houses used in pig breeding, are regarded in entirety as machinery or plant rather than "buildings" so that the entire cost qualifies at machinery and plant rates of allowance — 25 per cent. on a reducing balance basis. This writes off their cost for tax to a residual 10 per cent. over eight years. In other buildings, such as milking parlours and glasshouses, a significant part of the cost of the building may be attributed to fixtures which are also treated as machinery or plant. In either case, the building or part of it could also benefit from the new rules for short-life assets which are being introduced by clause 55, as the right hon. Member for South Down appreciates.
      It has been put to us that some modern purpose-built agricultural buildings do not qualify as machinery or plant and have working lives that are very much shorter than the average. For these buildings, it is said, an annual allowance of 4 per cent. on a straight line basis is unfair; and the unfairness — this is an important point — is compounded by the absence of rules which would at least permit balancing allowances to be made when the building is sold or scrapped.
      We recognise the strength of this argument. It is indeed an unusual feature of the agricultural buildings allowance that as the rules now stand, and unlike the industrial buildings allowance, balancing adjustments on the sale or destruction of an agricultural building are not possible. This has always been the case but the matter naturally assumes greater importance against the background of a longer writing-off period for tax.
      Accordingly we have already set in hand a detailed review of the present agricultural buildings allowance rules so that we can consider the most appropriate ways in which the code might be restructured. How to introduce a system of balancing adjustments will be central to that review.
      I know that the right hon. Member for South Down, his colleagues and my hon. Friend the Member for Tatton (Mr. Hamilton) will be pleased when I say that it is our

      1191
      intention to include proposals for restructuring the allowance, to include balancing adjustments in next year's Finance Bill, with a starting date of 1 April 1986 to coincide with the date on which the annual allowance becomes 4 per cent. I shall consider carefully the particular points that have been made in the debate.
      The effect of these three amendments would be to put back the starting date for the new rate of allowance by three years either for all taxpayers — incorporated and unincorporated alike — or, alternatively, possibly only for the unincorporated. It is not absolutely clear from the way in which the amendments are drafted whether they are intended to stand as a whole or whether they are alternatives.
      A deferral of the new rates of agricultural buildings allowance for all taxpayers, that is companies, partnerships and individuals alike, would clearly be welcomed by those likely to benefit. However, such a deferral would be difficult both to explain and to justify to taxpayers whose capital investment is in other types of buildings such as industrial structures and hotels, for which initial allowances will have been phased out by 1 April 1986 and which will thereafter attract only the same annual allowance — 4 per cent. — as is proposed for agricultural buildings. Equally the changes to the allowances for plant and machinery, which we are making over a three-year period, will be completed next April.
      Mr. Teddy Taylor: As my hon. Friend has made a significant concession for next year for shorter life agricultural buildings, does he plan any comparable concession for short-life buildings in any other industries, particularly bearing in mind that agricultural buildings are the only ones that do not bear any rate liability?
      Mr. Moore: My hon. Friend misunderstood. I was drawing attention to the absence under the present agricultural buildings allowance system of a set of balancing charges, in contradistinction to the existing balancing charges on industrial buildings.
      What I was saying was that the agricultural building allowances being put on all fours merited clear consideration in advance of the review, and it seemed to me to be right that that be included in the changes taking place next year. They will not be treated advantageously in relation to industrial buildings. It would give them the same opportunity, because obviously the relevance of the change from eight to 25 years is significant in the need for such buildings to have such balancing charges.
      If, on the other hand, what is intended in the alternative is a deferral for income taxpayers only — and this was raised by my hon. Friend the Member for Tatton—it is difficult to see how the exclusion of company taxpayers from such a deferral can be justified. The case for a general reform of the capital allowances which we explained in detail to the House last year — in essence making the commercial assessment of business investment more important than the tax assessment — is as valid for the unincorporated sector as it is for the incorporated. While it is true that rates of income tax are not being reduced in the same way as rates of corporation tax, we have taken a significant number of important steps to help the self-employed, some of which I have already mentioned.
      Farmers carrying on their businesses as individuals or in partnership would benefit, as would the private
      1192
      landowner who invests capital in buildings on agricultural or forestry land. But companies carry on similar activities and also claim the agricultural buildings allowance and would have every right to feel unfairly treated.
      We have looked at the matter most carefully in the light of the comments and other representations which we have received since our intentions were announced last year. We think it right, however, to proceed as planned and, in this year's Finance Bill, bring the rate of this allowance into line with the other buildings allowance with effect from 1 April next year. At the same time, we also think it right to proceed with a thorough examination of the structure of the agricultural buildings allowance so that changes which bring the rules of the present allowance also more into line with the other buildings allowances and, in particular, provide for balancing adjustments, may be introduced in next year's Bill. On that basis I urge the right hon. Gentleman to withdraw his amendment. I hope he understands the points I have made.
      Mr. J. Enoch Powell: It was certainly necessary that the impact of these changes upon the agricultural industry, and particularly upon some parts of it, should hake been openly debated during the debate on this Finance Bill, especially as that did not happen at the Committee stage. I recognise that the form of the amendments, framed to raise the whole question, was not in itself wholly satisfactory, partly because it went for a deferment rather than for any other remedy, and also because it was unable to distinguish between one section of the industry and another. For instance, it does not distinguish between the incorporated and the non-company sector of the industry.
      The result has been that it has drawn from the Government not only a recognition of the problems which the industry undergoes in making the transition from one approach to another, to capital allowances and capital taxation, but also the important statement that the Minister has made about the review of balancing charges in the context of agricultural buildings. That has been more than sufficient to justify the debate. On that basis, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Clause 61
      ALLOWANCES FOR CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH
      Amendment made: No. 42, in page 58, line 8, leave out `a building' and insert 'or of machinery or plant which forms part of a building or other structure'.—[Mr. Ian Stewart.]
    Clause 65

      MODIFICATION OF INDEXATION ALLOWANCE
      Amendment made: No. 43, in page 62, line 10, leave out from 'Act' to 'on' and insert—

      (a) shall not have effect with respect to disposals of gilt-edged securities as defined in Schedule 2 to the Capital Gains Tax Act 1979 or qualifying corporate bonds as defined in section 64 of the Finance Act 1984; and

      (b) shall have effect with respect to disposals of other securities.'.—[Mr. Ian Stewart.]

      Mr. Ian Stewart: I beg to move amendment No. 131, in page 62, line 19, leave out 'and'.
      Mr. Deputy Speaker: With this it will be convenient also to take Government amendments Nos. 132 and 133.
      Dr. McDonald: I intend to speak mainly to the amendments which have been grouped with amendment No. 131. The amendments were tabled on 4 July—only last Thursday — and that in itself is extremely interesting.
      Dr. Marek: The Minister has chosen a rather sly way of getting out of defending his amendments. Amendment No. 131 is rather trivial, but No. 133 is a substantive amendment. I had expected the hon. Gentleman to tell us about its effect before we discussed it.
      Dr. McDonald: I am grateful to my hon. Friend. That is why I wanted to make it clear that I intended to discuss the whole of the Chairman's selection. The amendments were tabled quite recently, and that is interesting, because they make significant changes in the capital gains tax regime.
      Companies were able to pool their shares — indeed, they still are — and under the pooling arrangements all purchases of shares in other companies were pooled to produce an average acquisition cost. If, for example, we talk about Fred Bloggs Investments Ltd. and assume that 1,000 ICI shares were bought at £1 each in 1967 and another 1,000 at £10 each in 1984, the acquisition cost under the pooling arrangements could be averaged out at £5·50.
      This group of amendments allows companies to have a choice. Companies will be able to revoke the pooling election — formerly, companies preferred that, even though it might have meant that they paid more tax, because it simplified book keeping arrangements. The reason why they might want to revoke the pooling election, despite the administrative convenience and so on, is that they can go for a last in, first out arrangement under later amendments, in which case they will be able to sell off the most expensive shares first.
      This group of amendments seems enormously to advantage companies in terms of capital gains tax, and they have been tabled rather late in the day. We know from the Red Book that the Government expected to get £720 million from capital gains tax this year. If these changes are advantageous to companies in the way in which I have described, that amount could well be reduced, and we want to know how much these changes will cost and why the Government have introduced them at this late stage.
      I repeat that the amendments were tabled on 4 July. Why were we not given an opportunity to discuss them in Committee, when we would have had tine to consider them in great detail, instead of having to discuss what seem to be quite significant changes at half-past 11 at night?
      It will be interesting to hear the Minister's answers to all these questions.
      Mr. Ian Stewart: I am happy to respond to the hon. Lady. The only reason why I did not deal with the amendments at greater length was that she had told me beforehand that she wanted to raise a number of questions and it seemed more sensible to explain the amendments in more detail after she had spoken.
      The substance of the changes recently announced come in a later group of amendments, Government amendments
      1194
      165 to 168, which I am not dealing with now but which my right hon. and learned Friend the Chief Secretary will deal with in a moment.
      Government amendments Nos. 131 to 135 deal with the technical side of the implementation. They involve additional parts of the schedule, which deal with two aspects of the reforms, and they were not included in the Bill so that discussions could take place with the representative bodies of those concerned. The first part of the two provisions relates to the rule for parallel pooling, which was introduced for companies in 1983 to facilitate the application of computer programmes to large portfolios. The way in which the companies now hold their portfolios under those arrangements are not in a form to which the new arrangements could be applied.
      11.30 pm
      As the hon. Lady knows, the system of parallel pooling involves two pools — one with the actual cost, and the other with the index cost. The comparison between the two will enable the indexed gain to be calculated. The new system, which could be called consecutive pooling, will have a pool of pre-1982 holdings and one of post-1982 holdings. They will be updated for each transaction. Two provisions are being introduced to meet that.
      The first provision will allow those who have elected for parallel pooling to revoke that election, and we understand that most companies would wish to do that. For those who do not, a statutory instrument will be issued detailing how the parallel pools can be converted into the correct form. We shall have further discussions of the details with those concerned.
      The second provision relates to the application of the new indexation provisions to underwriters' premiums trust funds. Hitherto, because indexation has not applied to the first 12 months of any asset holding, indexation relief has not been due on the premiums trust fund. Under the special statutory provisions the securities in those trust funds are treated as disposed of and reacquired at the end of each calendar year accounting period. Now that the indexation provisions apply to the first year of ownership, the amendment secures that with the necessary modifications, indexation relief could be given in calculating the gains arising on the assets in those trust funds.
      The provisions are purely technical, and I commend them to the House.
      Dr. McDonald: The Economic Secretary referred to discussions with the representative bodies of those concerned. He should tell the House exactly who he means by that. I notice that he has still not answered the question about costs.
      Mr. Stewart: There is no cost involved in the implementation of the arrangements. Those concerned are mostly insurance companies and large companies which hold pools of investment shares. Further discussion is needed because the arrangements for the new consecutive pooling involve changes in computer arrangements. As soon as that has been sorted out with the companies, the provisions can be published in a statutory instrument.
      Dr. McDonald: The Economic Secretary has still not named the bodies with whom discussions took place, and we want those names. Secondly, is he saying that the changes have no revenue impact? I remind the House that the amendments must ultimately be linked with

      1195
      amendments Nos. 165 to 168. Therefore, what is the revenue impact of the changes together with the later amendments?
      Mr. Stewart: I have already explained that discussions took place with insurance companies and most of the life offices associations. The cost of the changes does not arise on these technical arrangements. My right hon. and learned Friend the Chief Secretary, who will deal with Government amendments Nos. 165 to 168, which are the substantive ones, will answer questions about the substantive changes. These are technical, not substantive provisions.
      Amendment agreed to.
      Amendment made: No. 132, in page 62, line 22, at end insert—

      `(d) Part V has effect with respect to securities in respect of which elections have been or could be made under Schedule 6 to the Finance Act 1983; and

      (e) Part VI contains consequential provisions relating to assets forming part of a premiums trust fund'.— [Mr. Ian Stewart.]

      Sir William Clark: I beg to move amendment No. 156, in page 62, line 31, at end insert—
      '(4A) In applying subsection (4) above if the asset is disposed of by a company B to whom it was transferred directly or indirectly by another company A, within section 273 Taxes Act 1970, then if A held the asset at 31st March 1982 B shall be entitled to be treated as if it B had held the asset at 31st March 1982.'.
      Mr. Deputy Speaker: With this it well be convenient to discuss Government amendment No. 130.
      Sir William Clark: The House will recollect that where a person disposes of shares after April 1985, indexation will start from April 1982 under the new indexation rules. The amendment relates to indexation only and has nothing to do with the eventual capital gain on the share or asset.
      Sometimes assets are transferred within a group of companies and the purpose of the amendment is to allow the asset, wherever it is in the group, to enjoy indexation. The amendment is simpler than Government amendment No. 130 and it is unusual for a Back Bench Member to move an amendment and to have the Government tagging on behind. However, I am grateful to my right hon. and learned Friend the Chief Secretary to the Treasury for taking the point. The Government's amendment is more complicated but it deals with the problem more comprehensively, which I welcome.
      Mr. Peter Rees: My hon. Friend the Member for Croydon, South (Sir W. Clark) has identified a problem and he and my hon. Friend the Member for Tatton (Mr. Hamilton) have sought to meet it by means of the amendment. Government amendment No. 130 identifies the problem and goes slightly wider in tackling it.
      My hon. Friend the Member for Croydon, South has referred to transfers within a group of companies, but there are other no-gain, no-loss transfers where the same problems arise. These include company reconstructions or amalgamations and transfers between husband and wife. There are such arcane matters as transfers by the marketing board that deals with hops. The House will be moved when it hears that the problem can arise for a local constituency association after a redrawing of boundaries.
      I pay tribute to my hon Friends the Members for Croydon, South and for Tatton for having identified the problem in their amendment but I hope that they and the
      1196
      House will feel, on reflection, that it is better that it should be dealt with comprehensively, which is the purpose and intention of the Government amendment.
      Dr. McDonald: The Chief Secretary has rightly said that Government amendment No. 130 goes wider than amendment No. 156. The hon. Member for Croydon, South (Sir W. Clark) has suggested that the amendment has nothing to do with indexation but I shall describe the effect of the amendment as I understand it. If a group of companies can switch assets around within the group it will not pay capital gains lax. However, when the last company in the group sells the asset outside the group, the acquisition cost will be the cost to the first company in the group. If the amendment were accepted, the last company in the group would be able to claim the indexation allowance against the cost to the first company which bought the shares or asset. We see no reason for agreeing to such an amendment.
      The Chief Secretary will remember that when we discussed the abolition of stamp duty on voluntary dispositions in Committee we emphasised how the Government have been busily dismantling capital transfer tax. Indeed, that had been done to such an extent that the Institute of Fiscal Studies — which, as hon. Members know, is an independent research group — produced an article in August last year entitled "CTT Adieu", and that would be even more true of this year's Finance Bill. When we were discussing that, my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) pointed out that one way of avoiding what remains of the CTT charge is to make lifetime gifts, and that the Government have made this easier by the introduction of the CGT holdover relief.
      If a rich man gives some shares to his son in 1985, the object being to reduce his eventual CTT liability, and they make a CGT holdover election, no charge to CGT will arise, but the son will be deemed to have acquired the shares at the price originally paid by the father. The effect of amendment No. 130, in terms of that example, is to allow the son, when he sells the shares, to claim indexation allowances calculated from the time when the father paid the shares, or from 1982, if that was later.
      Given that example, which seems to follow from the Government tabling amendment No. 130, how much will it cost and how many people will benefit from that kind of change? We have figures of the number of capital gains tax payers with whom the Inland Revenue deals. I am here referring to individuals and not, of course, to companies. How many rich individuals are likely to benefit from that kind of change, and how much will it cost? What possible justification have the Government for introducing such an amendment? Why is it that at this stage in the Finance Bill the Government appear to be introducing a series of amendments to capital gains tax which, if taken together—we cannot, of course, discus them in total—seem to lighten the burden of capital gains tax still further?
      Sir William Clark: The Chief Secretary is right in saying that the Government's amendment is far wider and far more equitable than the one tabled by my hon. Friend the Member for Tatton (Mr. Hamilton) and myself. In view of that, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Amendments made: No. 130, in page 63, line 4, at end insert—

      1197
      `(6A) Subsection (6B) below applies to a disposal of an asset which is not a no gain/no loss disposal, if—

      (a) the person making the disposal acquired the asset after 31st March 1982; and

      (b) the disposal by which he acquired the asset and any previous disposal of the asset after 31st March 1982 was a no gain/no loss disposal;

      and for the purposes of this subsection a no gain/no loss disposal is one on which, by virtue of section 267 or section 273 of the Taxes Act, section 44 of the Capital Gains Tax Act 1979, section 148 of the Finance Act 1982 or section 7(4) of the Finance (No. 2) Act 1983, neither a gain nor a loss accrues to the person making the disposal.
      (6B) Where this subsection applies to a disposal—

      (a) the person making the disposal shall be treated for the purpose referred to in subsection (4) above as having held the asset on 31st March 1982; and

      (b) for the purpose of determining any gain or loss on the disposal, the consideration which, apart from this subsection, that person would be treated as having given for the asset shall be taken to be reduced by deducting therefrom any indexation allowance brought into account by virtue of Part I of Schedule 13 to the Finance Act 1982 on any disposal falling within subsection (6A)(b) above.'.

      No. 44, in page 63, line 7, leave out from 'include' to 'relevant' in line 8.—Mr. Peter Rees.]

    Schedule 17

      INDEXATION
      Amendment proposed: No. 164, in page 152, line 11, leave out 'following that'.—[Mr. Peter Rees.]
      Mr. Deputy Speaker: With this it will be convenient to take the following amendments:
      Government amendments Nos. 165 to 167.
      No. 169, in page 159, line 11, leave out from 'a' to 'of' in line 13 and insert
      'new holding, within the meaning of Part III of this Schedule rather than with securities forming part of a 1982 holding, within the meaning of Part II'.
      and Government Amendment No. 168.
      Dr. McDonald: I am glad to have the opportunity to speak to amendment No. 164. I noticed that the Chief Secretary carefully avoided answering any of the questions which were raised on the last group of amendments, so some of the same questions have to be pressed on this group of amendments. This group—I refer particularly to Government amendments Nos. 164 to 168 — were tabled even later than the ones that we have already debated. They were tabled on Monday, 8 July — very late indeed—and they constitute a change in the Finance Bill as originally published. The amendments alter the arrangements that were made for the basis of indexation of capital gains tax. It shows that the Government changed their minds at a very late stage between publication of the original Bill and these amendments. Instead of basing the indexation of a group of shares or assets on the principle of first in, first out, the Government have substituted the principle of last in, first out, thus reducing the liability to capital gains tax.
      11.45 pm
      For example, under the original Finance Bill, shares were to be identified on a first in, first out, basis. The amendments change the rules to a last in, first out basis. Almost always this will benefit the taxpayer. If, to use again the example of Mr. Jones, he bought 1,000 ICI
      1198
      shares in 1975 at £5 each— £5,000 — and 1.000 ICI shares in 1983 at £10 each — £10,000 — and if he sold 1,000 ICI shares in 1985 at £12 each he gained £12,000. On the first in, first out basis he gains £12,000 less £5,000. The basis for tax liability is £7,000. On the last in, first out basis he gains £12,000, less £10,000. The basis for tax liability is therefore £2,000.
      We want to know why the Government changed their mind. At the last moment did they decide to cave in to their City friends and change the basis? How much will this cost? How can the Government justify such a cost when they were unable last night to find the quite small amount of money that would be necessary to alter the tax regime that they now wish to impose upon the workplace nurseries?
      The Chief Secretary to the Treasury is on record as saying that he is opposed to capital taxation. He has been unable to abolish it. Instead, the process of reducing it goes on year after year. This is another example, which was introduced at a very late stage. Both he and his right hon. Friends chip away at capital taxation until it is hardly worth collecting. Instead of death for capital taxation by a thousand cuts it is death by a thousand reliefs. I am sure that the Chief Secretary is pleased about that. The Opposition are not at all pleased about it.
      We do not think that there should be this imbalance, which we have commented upon time and time again, between the burden of taxation on capital and the burden of taxation on taxpayers, especially those whose incomes are particularly low. The burden of taxation on those with below average incomes has increased during the last six years, while the burden of capital taxation has decreased. Capital gains tax has dropped to less than 1 per cent. of total revenue. One concession after another has been made. This set of concessions has been made at an extremely late stage. The result will be that only the rich will benefit. We want the Chief Secretary to tell us how many people are involved, how much it will cost and what justification can possibly be produced for caving in to the City.
      Mr. Anthony Beaumont-Dark: The hon. Member for Thurrock (Dr. McDonald) accuses the Government of having caved in to their rich friends. I tabled an amendment on this matter and the hon. Lady may be right to say that the Government amendments, which I regard as being as satisfactory as mine, were tabled late in the day. The difficulty is that capital gains tax is so complicated that it takes time to work out the problems involved.
      We are seeking to help not a few rich individuals, but the insurance companies, life offices, investment trusts and trade union pension funds in the City that all have large core holdings. If we had left the situation as it was, there would have been an aggregation of costs and profits and, under the FIFO method, £200,000 of capital gains tax could be paid when no overall capital gain had been made. Therefore, the funds of pension funds would have been diminished.
      In addition, once an investment company had bought a holding it would never wish to deal in the share, because there would be a financial distortion. Surely it is good for the country that the change has been made. Eating up in tax the benefits going to trade union pension funds and others would have been a great folly. The country is not the net loser. The losers would have been the beneficiaries

      1199
      of funds; they are not a few rich individuals, but hundreds of thousands of people who get the benefit of expert advice.
      The Government should be congratulated on seeing the wisdom of the argument, not criticised for changing what would have been a damaging provision.
      Mr. Peter Rees: We have been congratulated by one side of the House and condemned by the other. It would be wearisome if I deployed at length the Government's views on capital taxation, but the hollowness of the case of the hon. Member for Thurrock (Dr. McDonald) was demonstrated when she talked of death by a thousand reliefs; I have never heard of anyone dying from an excess of reliefs.
      We are people of warm hearts who are endeavouring to do justice in a complex matter. The hon. Member for Thurrock does not recognise that, with the impact of inflation over the years, capital gains tax has become, to a considerable extent, a capital levy. It has not been creaming off real profits. All too often, it has been cutting into the core holdings of institutions.
      I emphasise that the change does not benefit what the hon. Member for Thurrock chooses to call the rich friends of the Tory party. It covers the institutions, through which many of our fellow countrymen who could never be described as rich save for themselves, their families and their old age.
      The change was pressed on us between the Committee and Report stages. I do not apologise for the fact that we had to table the amendments rather late. They include complex provisions and it was necessary to work out the details and get them right. The justification for our proposals was clearly deployed by my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark).
      The Bill originally included the first in, first out rule, which was the general identification rule from 1965 to 1982. We thought that as people were familiar with the admittedly slightly complex rule, it was worth perpetuating it in the new situation created by the indexation provisions in the Bill. However, it was represented very strongly to us at the end of the Committee debate that this would create a distortion in the operations not just of private individuals but of institutions. It would provide, so to speak, a clog on the market. People would be disinclined to have their stocks and shares turned over in the way that market circumstances would normally have dictated. We thought it right, therefore, to eliminate that distortion by introducing the last in, first out rule.
      The hon. Member for Thurrock asked me perfectly properly how many people will be affected. I cannot tell her. [Interruption.] We all know the bonhomie of the hon. Member for Workington (Mr. Campbell-Savours). The hon. Gentleman might reflect on the utter impossibility of knowing the composition of the portfolios of the institutions of the country, let alone of individuals. If he and the hon. Member for Thurrock reflected for a moment, they would recognise the utter impossibility of my giving the numbers likely to be affected.
      Mr. Campbell-Savours: What about last year's bond washing.
      Mr. Peter Rees: I think that I would be out of order if I were to debate bond washing. The hon. Gentleman, who intervenes regularly from a sedentary position, might
      1200
      recognise that this year the Government have devoted considerable legislative time — with, I had hoped, the approval of the Opposition — to bringing bond washing with the charge to tax. I should have thought that the hon. Gentleman might recongise that fact, but maybe he has his own motives for contributing in his own particular way.
      The hon. Member for Thurrock, again properly, asked me what the cost would be. Once more, it is impossible for me to say, but it is likely to be negligible. It is likely that there will be more disposals although, because of the indexation provisions and the application of the last in, first out rule, the charge on each disposal is likely to be less. However, as there will probably be a larger number of transactions, the ultimate overall quantum of capital gains tax should be about the same. I have to admit quite candidly that that it is absolute assumption. It is, I hope, an informed guess.
      I apologise for not having dealt with that point in the last case. Again, it would have been impossible for me to put forward a figure because the basic data are not available — that is, the number of transactions which have been on the no gain, no loss basis which would have preceded the ultimate transaction, subject to capital gains tax. Much as I would have liked to give the figure, it would not have been realistic for me to do so.
      In this case, as I said — and I am sure that the hon. Lady will understand how I have approached the problem — there is likely to be a greater turnover of the securities, but, admittedly, at a lesser charge to capital gains tax, to corporation tax or chargeable gains. None the less, I hope that the actual amount of revenue collected by Government would not be seriously affected. I therefore hope that the House will feel able to accept the amendments.
      If I may deal briefly with amendment 164, which is of a slightly different quality, this is a technical amendment to bring the treatment of shares and other securities into line for the purposes of applying the 10-day rule. Due to slight drafting defects, some were on an 11-day basis and some on a 10-day basis, and the amendment is to harmonise them on a 10-day basis.
      I hope that all the amendments will, therefore, find favour with the House.
      Dr. McDonald: I should like to explain why the Opposition wish to call a vote on this amendment. The Chief Secretary says that these general identification rules have not been changed since 1965, yet inexplicably changes in the identification rules were introduced after the Bill was published on 8 July. The Chief Secretary has not told the House why that was done at such a late stage, from whom the representations came or how many individuals will be affected by the changes. The Inland Revenue, of course, knows how many individuals it deals with who have directly to pay capital gains tax. I take the Chief Secretary's point about the number of individuals who might indirectly be affected by the proposals.
      Somewhat misleadingly, the Minister talked about institutions, but pension funds should be exempted. He said that the costs were negligible, but he does not know the cost of the changes.
      The Government expect to gain £720 million from capital gains tax this year. The Opposition will watch closely to see how much the Government gain. Because of the lack of answers, the lateness of the changes and our

      1201
      belief that rich people are likely to benefit more than the many whom we represent, we intend to vote against the amendment.
      12 midnight
      Mr. Tim Smith: I was surprised that the Government should introduce the amendment at such a late stage, but it is important to get the new arrangements for capital gains tax on to a sensible footing. The amendments fall into the same category as one which we discussed yesterday. Although a relief is being introduced, the revenue consequences might be neutral or even beneficial.
      It has become clear that the market might become clogged up. Capital gains tax is only payable when an individual makes a disposal. On the basis of last in, first out, rather than first in, first out, there will be no inhibition, so the revenue effects will not be as dramatic as the hon. Member for Thurrock (Dr. McDonald) suggests.
      The hon. Lady said that pension funds were exempt from capital gains tax. That is true, but the insurance companies were, understandably, particularly worried.
      The revenue from the bond washing provisions is to be £300 million in a full year and insurance will have to stump up a large proportion of that.
      The hon. Lady will know that the insurance companies will lose as a result of the change which the House approved yesterday — the abolition of the short-term capital gains tax on gilts — because they will no longer be able to set off their losses against their equity gains. It is right that the Government should examine, even at this late stage, the strong representations by insurance companies. I do not think that the effect will be as damaging as the hon. Lady suggests, so I support the changes.
      Dr. Marek: We should vote against the amendment, because we have not had time to study the proposals. The insurance companies should have made their representations earlier so that the proposals could be discussed properly in Committee. It is important to vote on the issue.
      Question put, That the amendment be made:—
      The House divided: Ayes 114, Noes 23.

      Division No. 270]

      [12.02 am

      AYES

      Alexander, Richard

      Clark, Sir W. (Croydon S)

      Amess, David

      Clegg, Sir Walter

      Ancram, Michael

      Cope, John

      Ashby, David

      Corrie, John

      Aspinwall, Jack

      Currie, Mrs Edwina

      Atkins, Robert (South Ribble)

      Dorrell, Stephen

      Atkinson, David (B'm'th E)

      Dover, Den

      Baker, Nicholas (N Dorset)

      du Cann, Rt Hon Sir Edward

      Baldry, Tony

      Durant, Tony

      Batiste, Spencer

      Edwards, Rt Hon N. (P'broke)

      Beaumont-Dark, Anthony

      Fenner, Mrs Peggy

      Bellingham, Henry

      Forman, Nigel

      Boscawen, Hon Robert

      Forth, Eric

      Bottomley, Peter

      Fraser, Peter (Angus East)

      Bottomley, Mrs Virginia

      Freeman, Roger

      Bright, Graham

      Gale, Roger

      Brittan, Rt Hon Leon

      Galley, Roy

      Brooke, Hon Peter

      Gardiner, George (Reigate)

      Browne, John

      Garel-Jones, Tristan

      Butcher, John

      Goodlad, Alastair

      Butler, Hon Adam

      Gow, Ian

      Butterfill, John

      Gregory, Conal

      Carlisle, John (N Luton)

      Griffiths, Peter (Portsm'th N)

      Chalker, Mrs Lynda

      Grist, Ian

      1202

      Hamilton, Neil (Tatton)

      Robinson, Mark (N port W)

      Havers, Rt Hon Sir Michael

      Roe, Mrs Marion

      Hawksley, Warren

      Shaw, Sir Michael (Scarb')

      Hayhoe, Rt Hon Barney

      Shepherd, Colin (Hereford)

      Henderson, Barry

      Smith, Tim (Beaconsfield)

      Hirst, Michael

      Soames, Hon Nicholas

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

      Speller, Tony

      Howarth, Gerald (Cannock)

      Spencer, Derek

      Howell, Rt Hon D. (G'ldford)

      Stern, Michael

      Hunt, David (Wirral)

      Stevens, Lewis (Nuneaton)

      Jopling, Rt Hon Michael

      Stevens, Martin (Fulham)

      Lang, Ian

      Stewart, Allan (Eastwood)

      Lawson, Rt Hon Nigel

      Stewart, Andrew (Sherwood)

      Lilley, Peter

      Stewart, Ian (N Hertf'dshire)

      Lloyd, Ian (Havant)

      Thompson, Donald (Calder V)

      Lord, Michael

      Thompson, Patrick (N'ich N)

      McCurley, Mrs Anna

      Thorne, Neil (Ilford S)

      MacKay, John (Argyll & Bute)

      Tracey, Richard

      Maclean, David John

      Viggers, Peter

      Major, John

      Wakeham, Rt Hon John

      Mather, Carol

      Waldegrave, Hon William

      Maude, Hon Francis

      Walden, George

      Maxwell-Hyslop, Robin

      Walker, Cecil (Belfast N)

      Merchant, Piers

      Ward, John

      Miller, Hal (B'grove)

      Wardle, C. (Bexhill)

      Moore, John

      Warren, Kenneth

      Murphy, Christopher

      Wheeler, John

      Nicholson, J.

      Whitney, Raymond

      Osborn, Sir John

      Wilkinson, John

      Pattie, Geoffrey

      Wood, Timothy

      Percival, Rt Hon Sir Ian

      Young, Sir George (Acton)

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

      Proctor, K. Harvey

      Tellers for the Ayes:

      Rees, Rt Hon Peter (Dover)

      Mr. Tim Sainsbury and

      Roberts, Wyn (Conwy)

      Mr. Michael Neubert.

      NOES

      Barron, Kevin

      McDonald, Dr Oonagh

      Beith, A. J.

      McKay, Allen (Penistone)

      Bermingham, Gerald

      McWilliam, John

      Blair, Anthony

      Maxton, John

      Bruce, Malcolm

      Parry, Robert

      Cocks, Rt Hon M. (Bristol S.)

      Penhaligon, David

      Cook, Frank (Stockton North)

      Prescott, John

      Cowans, Harry

      Randall, Stuart

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

      Ross, Stephen (Isle of Wight)

      Dixon, Donald

      Evans, John (St. Helens N)

      Tellers for the Noes:

      Hogg, N. (C'nauld & Kilsyth)

      Mr. D. N. Campbell-Savours

      Kirkwood, Archy

      and Dr. John Marek.

      Litherland, Robert

      Question accordingly agreed to.
      Amendments made: No. 79, in page 152, leave out line 17 and insert—
      '(2) The following provisions of that section shall be omitted—

      (a) in subsection (1), the words "and section 89 below" and "section 89 below"; and

      (b) subsection (5A).'.

      No. 80, in page 152, line 25, leave out from beginning to 'and' in line 26.
      No. 81, in page 152, line 30, leave out 'In'.
      No. 82, in page 152, line 31, leave out from beginning to end of line 4 on page 153 and insert `shall be omitted'.—[Mr. Peter Rees.]
      12.15 am
      Mr. Peter Rees: I beg to move amendment No. 134, in page 153, line 29, leave out `sub-paragraph (2)' and insert `sub-paragraphs (2) and (3)'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 135 and 136.
      Mr. Rees: The purpose of the amendments is to allow taxpayers a fresh opportunity to elect to pool quoted

      1203
      securities acquired before 6 April 1965 where they have not already done so. This should simplify the capital gains tax still further. I know that the hon. Member for Thurrock (Dr. McDonald) is interested in the questions of cost. The measure is unlikely to have any significance on tax liability. In most cases, the effect will be to spread the gains from pre-1965 securities over a greater number of disposals.
      Amendment agreed to.
      Amendments made: No. 135, in page 153, line 43, at end insert—
      '(3) If a person so elects, quoted securities, as defined in paragraph 8 of Schedule 5 to the Capital Gains Tax Act 1979 (assets held on 6th April 1965) which are covered by the election—

      (a) shall be treated as an accretion to an existing 1982 holding or, as the case may be, as constituting a new 1982 holding; and

      (b) shall be excluded from paragraph 2 of that Schedule (restriction of gain or loss by reference to actual cost);

      and the relevant allowable expenditure (as defined in relation to a disposal to which section 86 of the Finance Act 1982 applies) which is attributable to that 1982 holding shall be adjusted or determined accordingly.
      (4) Paragraphs 4 to 8 of the said Schedule 5 (except paragraph 4(1) shall apply in relation to an election under sub-paragraph (3) above as they apply in relation to an election under paragraph 4 of that Schedule, but with the substitution for any reference to 19th March 1968 of a reference to 31st March 1985 in the case of holdings or disposals by companies and 5th April 1985 in any other case.'.
      No. 136, in page 154, line 3, leave out 'where paragraph 6(2) above applies' and insert
      'if it comes into being by virtue of paragraph 6 above'.—[Mr. Peter Rees.]
      Mr. Peter Rees: I beg to move amendment No. 83, in page 155, line 3, leave out '6th April 1985' and insert 'the 1985 date'.
      Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 84 to 89.
      Mr. Rees: These amendments make a number of technical drafting changes to the Bill. There is no change of substance.
      Dr. McDonald: These amendments are rather more than technical changes. As we are aware, someone can buy a share option — the right to buy shares at a fixed price at some time in the future. The amendments provide an indexation allowance in addition. That will, of course, benefit financial dealers or rich individual investors. It benefits those who can adopt a highly speculative approach to buying shares. The Chief Secretary said that the cost is negligible. We are not convinced of that. He might like to reconsider that point and tell us what the cost will be and confirm that the provision will benefit the few people whom I have described.
      Mr. Peter Rees: I cannot speculate about the wealth of the taxpayer whom the amendments might benefit. The hon. Member for Thurrock (Dr. McDonald) is correct when she says that they will enable expenditure upon acquiring a share to be indexed from the date upon which it is incurred, but that is the tenor of the provisions. I am afraid that that is as far as I can take the matter. I cannot calculate how much is involved because one has to make too many assumptions. The best evidence that I have is that it will be negligible.
      Amendment agreed to.
      Amendments made: No. 84, in page 155, line 12, leave out `6th April 1985' and insert 'the 1985 date'.
      1204
      No. 85, in page 156, line 20, leave out 'and shall at that time' and insert
      'or, if it is earlier, when any of the qualifying expenditure is incurred and shall at the time it comes into being'.
      No. 86, in page 158, line 8, at end insert—
      '(3) Notwithstanding anything in sub-paragraphs (1) and (2) above, the provisions of this Part of this Schedule do not apply to shares in respect of which relief under Part I of Schedule 5 to the Finance Act 1983 (relief for investment in corporate trades) has been given and not withdrawn.'.
      No. 165, in page 158, line 17, leave out 'securities acquired' and insert
      `disposals of securities on or'.
      No. 166, in page 158, line 21, leave out '19(2)' and insert `19(3)'.
      No. 87, in page 158, brie 26, after first 'and' insert `subsequently'.
      No. 88, in page 158, line 32, leave out from 'then' to second 'the' in line 33 and insert
      'subject to sub-paragraphs (1A) and (1B) below'.
      No. 89, in page 158, line 36, at end insert—
      `(1A) If, in a case falling within sub-paragraph (1) above, the number of securities acquired exceeds the number disposed of.—

      (a) the excess shall be regarded as forming part of an existing new holding or, as the case may be, as constituting a new holding; and

      (b) if the securities acquired were acquired at different times (within the ten days referred to in sub-paragraph (1) above) the securities disposed of shall be identified with securities acquired at an earlier time rather than with securities acquired at a later time.

      (1B) If, in a case falling within sub-paragraph (1) above, the number of securities disposed of exceeds the number acquired, the excess shall be not identified in accordance with that sub-paragraph.'.
      No. 167, in page 159, leave out lines 2 to 9 and insert
      'forming part of a new holding, within the meaning of Part III of this Schedule, rather than with other securities'.
      No. 168, in page 159, line 12, leave out from 'with' to end of line 13 and insert
      'other securities and, subject to that, shall he identified with securities acquired at a later time rather than with securities acquired at an earlier time'.
      No. 133, in page 159, line 13 at end insert—

      'PART V

        PARALLEL POOLING
        20.—(1) Where an election has been made under Schedule 6 to the Finance Act 1983 (parallel pooling) that election may be revoked, by notice in writing to the inspector not later than 31st March 1987 or within such further time as the Board may allow.
        (2) At the end of paragraph 2(2)(b) of the said Schedule 6 (elections to be irrevocable) there shall be added the words "except in accordance with Part V of Schedule 17 to the Finance Act 1985".
        (3) All such adjustments shall be made, whether by way of discharge or repayment of tax, or the making of assessments or otherwise, as are required in consequence of a revocation under sub-paragraph (1) above.
        21.—(1) An election under Schedule 6 of the Finance Act 1983 shall not have effect with respect to any disposal on or after 1st April 1985.
        (2) The Treasury may by regulations make such provisions as are referred to in sub-paragraph (3) below in relation to qualifying securities, within the meaning of the said Schedule 6,—

        (a) in respect of which an election under that Schedule has been made and not revoked under paragraph 20 above; and

        (b) which, immediately before 1st April 1985, were regarded as indistinguishable parts of a single asset by virtue of paragraph 3 of chat Schedule.

        (3) The provisions referred to in sub-paragraph (2) above are such as appear to the Treasury to be appropriate to enable section 65 of this Act and the preceding provisions of this Schedule to take full effect in relation to the securities concerned.
        (4) Regulations under this paragraph shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

      PART VI

        UNDERWRITERS' PREMIUMS TRUST FUNDS
        22. This Part of this Schedule has effect with respect to premiums trust funds, within the meaning of Schedule 16 to the Finance Act 1973 (underwriters), and any reference in paragraph 23 below to a fund is a reference to such a premiums trust fund.
        23. — (1) Subject to the following provisions of this paragraph, the enactments relating to indexation shall apply with any necessary modifications in relation to assets forming part of a fund as they apply in relation to other assets.
        (2) In this paragraph "the enactments relating to indexation" means—

        (a) sections 86 to 88 of and Schedule 13 to the Finance Act 1982; and

        (b) section 65 of this Act and Parts Ito III of this Schedule.

        (3) For the purposes of the application of the enactments relating to indexation in accordance with sub-paragraph (1) above, it shall be assumed—

        (a) that assets forming part of a fund are disposed of and immediately reacquired on the last day of each accounting period; and

        (b) that the indexation allowance computed for that accounting period is allocated to the corresponding underwriting year in the same proportion as the gains or losses referred to in paragraph 6(2) of the said Schedule 16'.—[Mr. Peter Rees.]

    Clause 66

      RELIEF FOR DISPOSALS BY INDIVIDUALS ON RETIREMENT FROM FAMILY BUSINESS
      Sir Edward du Cann: I beg to move amendment No. 45, in page 63, line 31, at end insert—
      "(2) Where an individual who is a partner with his spouse in a business has retired on ill health grounds below the age of 60, and his spouse is thereby compelled to withdraw from the business, such part of the spouse's gains on the withdrawal shall qualify for relief as appears to the Board to be just and reasonable.".
      I express my gratitude to Mr. Speaker for selecting the amendment. He has a great and deserved reputation for solicitude for the position of Back Benchers and in selecting this amendment he has demonstrated that qualify yet again.
      Any examination of Mr. Speaker's provisional selection of amendments indicates that a total of 120 amendments is to be discussed tonight. No fewer than 100 are Government amendments. Taking into account the amendments proposed by the official Opposition, that indicates very clearly that the result of our present arrangements for dealing with the Finance Bill each year inevitably tends to mean that the point of view of the Back Bencher is being increasingly crowded out. Remembering the undertakings given and the suggestions made in 1967, when our arrangements were changed and Standing Order No. 42 was altered, in particular the suggestion that a more careful examination of the Finance Bill would be possible, it has to be admitted that, in practice, the result has been thoroughly disappointing.
      1206
      In recent years there has been a tendency to allow the general membership of the House of Commons, if anything, a lesser opportunity to discuss the Finance Bill in detail. It is nearly half past midnight and this is no time to examine statistics in any detail. Taking the first 10 years after the arrangements were changed and examining the number of days available for Report, there were in fact 11 Finance Bills. On six occasions three days were allowed, on two occasions four days, on another occasion two days and on two occasions only one day. The average number of days allowed was three. Since then the average has dropped dramatically to between one and two days.
      I repeat that the net result is that the private Member is becoming increasing disfranchised when it comes to an opportunity to test an idea, to propose an amendment or a change, unless it attracts very widespread support. Remembering how unsatisfactory is the general shape of our Committee stage—because opinion is becoming, in my view, absurdly polarised between the parties—
      Mr. Deputy Speaker: Order, I hope that the right hon. Gentleman will come to the amendment.
      Sir Edward du Cann: I shall come to the amendment immediately, Mr. Deputy Speaker. I am merely saying that it is time that our arrangements for the examination of the Finance Bill were looked into.
      There is a new principle in the Bill, in clause 66, which is very much to be welcomed. This allows retirement relief from capital gains tax to be claimed when an individual has to give up his business on grounds of ill health. That is a great step forward, but the arrangements as presently proposed involve a problem, which relates to a problem common in small businesses such as a farm or a shop where a husband and wife jointly own a property and run the business in partnership. If the business has to be sold owing to the ill health of the husband, his part of the gains would qualify for retirement relief, but there would be no relief for the wife's share.
      I am advised by the National Farmers Union that it has already seen three cases of husband and wife partnerships, which are common in farming, where one spouse is having to give up on ill health grounds, and it is not practicable to continue the business as before. The matter came to my particular attention because I had a constituency case in a farm just outside Taunton, where a constituent found himself in real difficulties. His wife had had a severe stroke, and the medical report is that she will be unable to take any part in the business in future.
      The amendment suggests a discretion to the Inland Revenue in such circumstances to allow reasonable relief to the other spouse. I cannot say whether the form of the amendment will be acceptable to my right hon. and learned Friend the Chief Secretary. To return to my first point, it is a pity that one has not had the chance in Committee to test that, so that there would be an opportunity, if the wording of the amendment is not suitable, to promote something better on Report. I hope that my right hon. and learned Friend will be able to say what his feeling is about the real problem that I have described. If he is unable to accept my wording, I hope that he will be able to suggest that next year my right hon. Friend the Chancellor will be able to introduce such an improvement to clause 66 that will help what is a real difficulty for a number of individuals.
      Dr. McDonald: The Opposition are not unsympathetic to the purpose of the amendment. However, if the right hon. Member for Taunton (Sir E. du Cann) is willing to give the Inland Revenue such discretion, and if the Government are willing to accept it in the case of illness that the right hon. Gentleman so well described, could not the Inland Revenue be given the same kind of discretion to give tax relief on work-place nurseries for lone parents or low-paid workers?
      Mr. Peter Rees: My right hon. Friend the Member for Taunton (Sir E. du Cann) has clearly identified a problem that I am sure commands sympathy from both sides of the House. It will reassure right hon. and hon. Gentlemen who spoke earlier and said that that was the only time that the particular problems of agriculture had become the subject of debate either in Committee or on Report. Here is a second occasion, although my right hon. Friend would say that the amendment is not confined to agriculture.
      We view the problem with sympathy, but the amendment is not satisfactory. The unsatisfactory nature of it could not have been demonstrated more clearly than it was by the speech of the hon. Member for Thurrock (Dr. McDonald). I do not know whether that was her intention, but she demonstrated the inadvisability of giving the Inland Revenue a discretion which, to be fair to it, it would not want to exercise.
      I hope that my right hon. Friend will accept what I have to say in the spirit in which it is offered. We should like to keep this problem under review.
      I am sure that my right hon. Friend will accept that the precise form of his amendment would not meet the full circumstances of the case. He has, however, identified a problem which we should like to keep under review and I hope that we may come back to it, if not next year at least on some later occasion when we have better evidence about the scope of the problem and how best it should be tackled. I hope he feels that justice has been done to the case which he so ably advaced and he will not feel obliged to press his amendment to a Division.
      Sir Edward du Cann: In the light of that very clear undertaking from my right hon. and learned Friend that he will be good enough to keep the matter under review, and that a remedy will be sought and introduced, I am happy to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Schedule 18

      RETIREMENT RELIEF ETC.
      12.30 am
      Mr. Peter Rees: I beg to move amendment No. 91, in page 160, line 46, leave out 'date of the disposal' and insert
      'end of the year of assessment in which the disposal occurred'.
      Mr. Deputy Speaker (Mr. Harold Walker): With this we may discuss Government amendments Nos. 92, 93 and 95.
      Mr. Rees: These amendments are designed to standardise the time limits for the making of claims to reliefs under schedule 18. Various other elections are provided for under that schedule. Both the claim and the elections will now require to be made within two years of the end of the year of assessment in which the event to
      1208
      which the claim or election relates took place. This will simplify administration and I hope it will be welcomed in all parts of the House.
      Amendment agreed to.
      Amendments made: No. 92, in page 162, line 36, leave out 'disposal concerned' and insert
      `end of the year of assessment in which the disposal occurred'.
      No. 93, in page 166, line 38, leave out from 'than' to third 'the' in line 39 and insert
      'two years after the end of the year of assessment in which the individual or the trustees received the capital distribution'.—[Mr. Peter Rees.]
      Mr. Peter Rees: I beg to move amendment No. 94, in page 169, line 16, at end insert—
      '(4) References in this paragraph to relief given under this Schedule include references to relief given under section 34 of the Finance Act 1965 or section 124 of the Capital Gains Tax Act 1979; and—

      (a) in relation to relief given under either of those sections paragraph (b) of sub-paragraph (1) above shall have effect as if, for the words from "which was" onwards, there were substituted "made by the individual"; and

      (b) in the application of sub-paragraph (3) above where the earlier disposal was a disposal in respect of which relief was given under either of those sections, the reference in paragraph (a) to the qualifying period appropriate to the disposal is a reference,—

      (i) if the disposal took place on or before 11th April 1978, to the period of ten years ending with the disposal; and

      (ii) in any other case, to the qualifying period within the meaning of the section in question.'

      Mr. Deputy Speaker: We shall take with this Government amendment No. 96.
      Mr. Peter Rees: This amendment takes care of a transitional point which I say candidly we did not have time to prepare and put in for debate in Committee. Schedule 17 contains special rules for applying a ceiling to the amount of retirement relief available on a later disposal when some relief has already been given on an earlier one. The broad intention is to ensure that no individual can get more than die maximum relief, which is up to £100,000 throughout his life.
      Amendment 96 is to ensure that a husband or wife who has been working in partnership or in a company and has received shares by way of gift or by inheritance, will get the full relief to which the donor spouse would have been entitled. That relief will be limited to £100,000. I hope that these two amendments will commend themselves to the House.
      Amendment agreed to.
      Amendments made: No. 95, in page 169, line 34, leave out from `(e)' to 'the' in line 35 and insert
      `not later than two years after the end of the year of assessment in which the material disposal occurred'.
      No. 96, in page 170, line 15, at end insert—
      '(5) In sub-paragraph (4)(a) above, the reference to relief given under this Schedule includes a reference to relief given under section 34 of the Finance Act 1965 or section 124 of the Capital Gains Tax Act 1979'.—[Mr. Peter Rees.]

    Clause 68

      ASSETS DISPOSED OF IN A SERIES OF TRANSACTIONS
      Mr. Michael Stern: I beg to move amendment No. 46, in page 71, line 35, leave out from 'them' to end of line 36.

      1209
      The purpose of this amendment is to remove from the draft legislation words which are at best unnecessary and at worst confusing. The substance of the amendment was discussed in Committee and I commend it to the House.
      Mr. Peter Rees: I fully agree with my hon. Friend. The amendment was ventilated in Committee and I agree with his analysis. The words are unnecessary and could lead to uncertainty. I am happy to recommend to the House that the amendment should be accepted.
      Amendment agreed to.

    Clause 71
      TREATMENT OF DEEMED SUMS AND RELIEFS
      Amendment made: No. 47, in page 75, line 8, leave out second 'as'.—[Mr. Peter Rees.]
    Clause 72

      EXCEPTIONS FROM PROCEDING PROVISIONS
      Amendments made: No. 48, in page 76, line 26, after `period,' insert—

      `(ee)the transferor is not ordinarily resident in the United Kingdom during the chargeable period in which the transfer occurs and, if he became entitled in the period to any interest on the securities transferred, it would not be liable to income tax by virtue of section 99 of the Taxes Act (securities free of income tax for residents abroad),

      (eee) the securities transferred are FOTRA securities, the transferor is not domiciled in the United Kingdom at any time in the chargeable period in which the transfer occurs, and he is either not ordinarily resident in the United Kingdom during that period or a non-resident United Kingdom trader in that period,'.

      No. 49, in page 76, line 40, after `(e)' insert', (ee), (eee)'.—[Mr. Peter Rees.]
      No. 50, in page 77, line 22, at end insert—
      '(6) For the purposes of this section "FOTRA securities" means securities issued with the condition mentioned in section 22(1) of the Finance (No. 2) Act 1931 (securities free of tax for residents abroad) as modified by virtue of section 60(1) of the Finance Act 1940.'.—[Mr. Peter Rees.]

    Clause 73

      DEEMED INTEREST
      Amendment made: No. 126, in page 77, line 25, leave out
      '28th February 1985 and 27th February 1986'
      and insert 'certain dates'. —[Mr. Peter Rees.]

    Schedule 20

      DEEMED INTEREST ON CERTAIN SECURITIES
      Amendments made: No. 97, in page 175, line 3, at end insert—
      '(2A) For the purposes of this Schedule a person is to be treated as not entitled to securities if he is not ordinarily resident in the United Kingdom during the year and, if he became entitled in the year to any interest on the securities, it would not be liable to income tax by virtue of section 99 of the Taxes Act (securities free of income tax for residents abroad).
      (2B) For the purposes of this Schedule a person who is not domiciled in the United Kingdom at any time in the year, and is either not ordinarily resident in the United Kingdom during the
      1210
      year or a non-resident United Kingdom trader in the year, is to be treated as not entitled to securities which are FOTRA securities.'
      No. 98, in page 175, line 36, at end insert—
      '(10) For the purposes of this paragraph "FOTRA securities" mean securities issued with the condition mentioned in section 22(1) of the Finance (No. 2) Act 1931 (securities free of tax for residents abroad) as modified by virtue of section 60(1) of the Finance Act 1940.'.
      No. 127, in page 175, line 40, leave out 'him' and insert 'the person'.—[Mr. Peter Rees.]

    Schedule 21

      SECURITIES: FURTHER PROVISIONS
      Amendments made: No. 99, in page 178, line 5, at end insert—
      '(10) Where, in Scotland, two or more persons carry on a trade or business in partnership, any partnership dealings shall be treated as dealings by the partners and not by the firm as such and the partners as being entitled to securities held by the firm.'.
      No. 124, in page 178, line 21, after 'months', insert '(a long period)'.
      No. 21, in page 178, line 39, leave out sub-paragraph (7) and (8) and insert—
      '(7) In the case of a period which is an interest period by virtue only of sub-paragraph (4) above or paragraph 18F(3) below—

      (a) the interest applicable to securities for the period is the interest payable on them on the interest payment day with which the long or straddling period concerned ends, and

      (b) section 70(8) of this Act shall have effect as if the references to the period were to the long or straddling period concerned.'

      No. 100, in page 179, line 27, after '12', insert 12A'.
      No. 101, in page 181, line 4, at end insert—
      '8A. —(1) Sub-paragraph (2) below applies where—

      (a) a trustee of a settlementis treated as receiving annual profits or gains under section 71(2) of this Act, or

      (b) a trustee of a settlement who is resident or domiciled outside the United Kingdom throughout any chargeable period in which an interest period (or part of it) falls would, at the end of the interest period, have been treated under section 71(2) of this Act as receiving annual profits or gains or annual profits or gains of a greater amount if he had been resident or domiciled in the United Kingdom during a part of each such chargeable period.

      (2) Chapters II to IV of Part XVI of the Taxes Act (settlements) shall have effect as if the amount which the trustee is or would be treated as receiving were income (withing Chapter II) or income arising under the settlement (within Chapter III or IV).
      (3) Sub-paragraph (4) below applies where income of a trustee of a settlement who is resident or domiciled outside the United Kingdom throughout any chargeable period in which an interest period (or part of it) falls consists of interest which falls due at the end of the interest period and which would have been treated under section 71(5) of this Act as reduced by an allowance or an allowance of a greater amount if he had been resident or domiciled in the United Kingdom during a part of each such chargeable period.
      (4) For the purposes of Chapters II of Part XVI of the Taxes Act, the interest shall be treated as being reduced by the amount of the allowance or by the additional amount (as the case may be).
      (5) In this paragraph—

      (a) "settlement" means settlement within the meaning of Chapter II, III or IV of Part XVI of the Taxes Act (as the case may be), and

      (b) references to a trustee of a settlement are, where there is no trustee of the settlement, to any person entitled to securities comprised in the settlement.'

      No. 102, in page 183, line 45, at end insert—

      SECURITIES: FURTHER PROVISIONS

        'Conversions
        12A. — (1) Where there is a conversion of securities the person who was entitled to them immediately before the

        1211
        conversion shall be treated for the purposes of this Chapter as transferring them on the day of the conversion (if there is no actual transfer).
        (2) The transfer shall be treated as made with accrued interest if the person was entitled to receive in respect of the securities interest payable on—

        (a) the day of the conversion, if that is an interest payment day, or

        (b) the next (or first) interest payment day to fall after the day of the conversion, in any other case,

        and they shall be treated as transferred without accrued interest if he was not so entitled.
        (3) For the purposes of this Chapter the interest period in which the conversion is made shall be treated as ending on the day on which it would have ended had the conversion not been made.
        (4) In this paragraph "conversion" means conversion within the meaning of section 82 of the Capital Gains Tax Act 1979.'.
        No. 128, in page 186, line 33, at end insert—

        'Underwriters
        18A. In paragraphs 18B to 18H below "approved association of underwriters", "business" and "premiums trust fund" have the meanings given by paragraph 16(1) of Schedule 10 to the Taxes Act.
        18B. An underwriting member of Lloyd's or of an approved association of underwriters shall be treated for the purposes of this Chapter as absolutely entitled as against the trustees to the securities forming part of his premiums trust fund, his special reserve fund (if any) and any other trust fund required or authorised by the rules of Lloyd's or the association in question, or required by the underwriting agent through whom his business or any part of it is carried on, to he kept in connection with the business.
        18C. — (1) In relation to securities forming part of a premiums trust fund, any reference in Schedule 20 to this Act to a date in the first column in sub-paragraph (3) below shall be read as a reference to that opposite it in the second.
        (2) Where securities are transferred by or to the trustees of a premiums trust fund, this Chapter (other than Schedule 20) shall be read in relation to the trustees as if any reference to a date in the first column in sub-paragraph (3) below were a reference to that opposite it in the second, but without being so read in relation to the transferee or transferor (unless in turn constituting trustees of such a fund).
        (3) The dates are—

        28th February 1982

        1st January 1982

        27th February 1985

        31st December 1984

        28th February 1985

        1st January 1985

        27th February 1986

        31st December 1985

        28th February 1986

        1st January 1986.

        18D.—(1) The securities forming part of a premiums trust fund at the beginning of 1st January 1986 or 1st January of any subsequent year shall be treated for the purposes of this Chapter as transferred on 1st January concerned to the trustees of the fund.
        (2) In relation to such a transfer, the settlement day is the day preceding that of the transfer (notwithstanding paragraph 4 above).
        (3) The securities shall be treated as transferred with accrued interest if the trustees are entitled to receive in respect of them interest payable on—

        (a) the day of the transfer, if that is an interest payment day, or

        (b) the next (or first) interest payment day to fall after that day, in any other case,

        and they shall be treated as transferred without accrued interest if they are not so entitled.
        (4) This paragraph does not apply as regards securities if the day preceding 1st January concerned is an interest payment day in relation to them.
        18E.—(1) The securities forming part of a premiums trust fund at the end of 31st December 1986 or 31st December of any subsequent year shall be treated for the purposes of this Chapter as transferred on 31st December concerned by the trustees of the fund.
        (2) In relation to such a transfer, the settlement day is the day of the transfer (notwithstanding paragraph 4 above).
        (3) The securities shall be treated as transferred with accrued interest if the trustees were entitled to receive in respect of them
        1212
        interest payable on the next (or first) interest payment day to fall after the day of the transfer, and they shall be treated as transferred without accrued interest if they were not so entitled.
        (4) This paragraph does not apply as regards securities if 31st December concerned is an interest payment day in relation to them.
        18F. — (1) Where securities are transferred by or to the trustees of a premium trust fund, this paragraph shall have effect in relation to the trustees, though not in relation to the transferee or transferor (unless in turn constituting trustees of such a fund).
        (2) In this paragraph "straddling period" means a period which would (by virtue of paragraph 3(3) and (4) above and apart from this paragraph) be in relation to the securities an interest period beginning on or before and ending after 31st December 1986 or 31st December of any subsequent year.
        (3) For the purposes of this Chapter a straddling period is not an interest period, but the following shall apply to it—

        (a) the period beginning with the day on which the straddling period begins and ending with 31.st December concerned is an interest period, and

        (b) the period beginning with the day following 31st December concerned and ending with the day with which the straddling period ends is an interest period.

        18G. — (1) Paragraph 11 above does not apply where the individual concerned is an underwriting member of Lloyd's or of an approved association of underwriters and the securities concerned form part of a premiums trust fund, a special reserve fund or any other trust fund required or authorised by the rules of Lloyd's or the association in question, or required by the underwriting agent through whom the individual's business or any part of it is carried on, to be kept in connection with the business.
        (2) In such a case the deceased's personal representatives shall be treated for the purposes of this Chapter as the transferor or transferee in relation to transfers of securities as to which the deceased was the transferor or transferee (as the case may be) in the interest period in which he died.
        18H. — (1) This paragraph applies where an underwriting member of Lloyd's or of an approved association of underwriters is entitled to securities forming part of a premiums trust fund or to different securities forming part of different premiums trust funds.
        (2) Where there is one such fund, he shall be treated for the purposes of Schedule 20 to this Act as holding the securities forming part of it as one person and as holding as another person any other securities to which he is entitled.
        (3) Where there is more than one such fund, he shall be treated for those purposes as holding the securities forming part of different funds as different persons and as holding as yet another person any other securities (not forming part of such a fund) to which he is entitled.
        (4) In relation to the securities forming part of such a fund, four of the references in Schedule 20 to this Act to a person (where they would otherwise be to the member) shall be read as references to the underwriting agent through whom the business to which the fund relates is carried on; and the four references are the reference in paragraph 2(1), the first two in paragraph 6(1) and the first in paragraph 6(2).
        (5) Where an underwriting member of Lloyd's or of an approved association of underwriters is entitled to securities forming part of a premiums trust fund, and different securities are attributable to his participation in different syndicates, the securities attributable to different syndicates shall be treated for the purposes of this paragraph as forming part of different premiums trust funds.
        18I. In paragraph 7(3)(a) of Schedule 10 to the Taxes Act (special reserve funds) "income" includes annual profits or gains chargeable to tax by virtue of section 71(2) of this Act or paragraph 2(4) of Schedule 20 to this Act or paragraph 13(3) above.'.
        No. 103, in page 189, line 38, at end insert—
        '23A. — (1) In this paragraph "conversion" means conversion within the meaning of section 82 of the Capital Gains Tax Act 1979, and "exchange" means an exchange which by virtue of Chapter II of Part IV of that Act (reorganisation etc.) does not involve a disposal.
        (2) Where on a conversion or exchange of securities a person is treated as entitled to a sum under section 70(2)(a) of this Act,

        1213
        an amount equal to the accrued amount (determined under that section) shall, for capital gains tax purposes, be treated as follows—

        (a) to the extent that it does not exceed the amount of any consideration which the person receives (or is deemed to receive) or becomes entitled to receive on the conversion or exchange (other than his new holding), it shall be treated as reducing that consideration, and

        (b) to the extent that it does exceed that amount, it shall be treated as consideration which the person gives on the conversion or exchange.

        (3) Where on a conversion or exchange of securities a person is treated as entitled to relief under section 70(3)(a) of this Act, an amount equal to the rebate amount (determined under that section) shall, for capital gains tax purposes, be treated as consideration which the person receives on the conversion or exchange.'.— [Mr. Peter Rees.]

    Clause 78

      GIFTS INTER VIVOS
      Amendment made: No. 51, in page 83, line 8, leave out
      'below to contain a certificate'
      and insert
      'or (2) below to be certified'.—[Mr. Ian Stewart.]

    Clause 80

      DEATH: VARYING DISPOSITIONS, AND APPROPRIATIONS
      Amendments made: No. 52, in page 84, line 10, at end insert—

      '(4A) Where on an intestacy property is appropriated by a personal representative in or towards satisfaction of any interest of a surviving husband or wife in the intestate's estate, stamp duty under the heading mentioned in subsection (1) above shall not be chargeable on an instrument giving effect to the appropriation.

      (4B) The reference in subsection (4A) above to an interest in the intestate's estate—

      (a) includes a reference to the capital value of a life interest which the surviving husband or wife has under the Intestates' Estates Act 1952 elected to have redeemed, and

      (b) in Scotland, includes a reference to prior rights (within the meaning of the Succession (Scotland) Act 1964) but, without prejudice to subsection (4C) below, not to such rights as are mentioned in that subsection.

      (4C) Where in Scotland, on an intestacy or otherwise, property is appropriated by a personal representative in or towards satisfaction of the right of a husband to jus relicti, of a wife to jus relictae or of issue to legitim, stamp duty under the heading mentioned in subsection (1) above shall not be chargeable on an instrument giving effect to the appropriation.'.

      No. 53, in page 84, line 13, leave out 'or (4)' and insert
      ', (4), (4A) or (4C)'.
      No. 54, in page 84, line 19, leave out 'This' and insert
      'Subject to subsection (8) below, this'.
      No. 55, in page 84, line 21, at end insert—
      '(8) Subsections (4A) to (4C) above and, so far as it relates to subsection (4A) or (4C), subsection (5) above apply to instruments executed on or after 1st August 1985.'.—[Mr. Ian Stewart.]

    Clause 89

      ABOLITION OF DEVELOPMENT LAND TAX AND TAX ON DEVELOPMENT GAINS
      Mr. Terry Davis: I beg to move amendment No. 157, in page 90, line 1, leave out clause 89.
      1214
      This is the clause which abolishes development land tax, and we discussed it in some detail in Committee of the whole House.
      The Chancellor of the Exchequer (Mr. Nigel Lawson): Absolutely.
      Mr. Davis: The right hon. Gentleman says, "Absolutely". Since he has been watching the proceedings with interest and no doubt has been considering events outside the House, he will know that the purpose of the clause has been widened as a result of the ingenious schemes pursued by tax lawyers since our debate in Committee of the whole House. I am glad that the right hon. Gentleman sees the clause as so important that he has decided to attend the debate.
      The clause abolishes development land tax, at a cost of £50 million — [HON. MEMBERS: "Hear, hear."] I recognise that that is popular among Government supporters, but the Opposition take a different view. The purpose of the amendment is to debate loopholes which have emerged as a result of the sloppy drafting of the Bill since our debate in Committee of the whole House.
      The Government's intention, as announced in the Budget by the Chancellor of the Exchequer and repeated in our debate in Committee of the whole House, is to abolish development land tax with effect from the date of the Budget announcement. Subsequently, it has become clear that it is possible that development land tax has been abolished with effect before the date of the Budget, and it has happened in two ways.
      It has become clear that it is possible for developers to use an existing deemed disposal in such a way that they can change the basis of the development land tax charge and avoid the charge which they would otherwise have incurred.
      I give an example, which I take from an interesting article in The Law Society's Gazette of 8 May. The author points out that a developer who had planning permission to build 100 houses and whose development was due to last four years could have become liable to development land tax at the beginning of, say, March as a result of giving notice of the beginning of his project. If, after the Budget statement, he changed his mind and decided to build a smaller number of houses — say, 10 instead of 100 houses — to leave the other 90 houses until a later date and therefore to a later decision, and served a notice of variation of the project so that he was only taxed on a project for 10 houses, in the future he could change his mind again and decide to build more houses—90, 89 or 91 — and this decision and the development of the land would not be taxed.
      There is the possibility of applying the decision in the case of Furniss v. Dawson about a pre-ordained series of transactions being taken as a single composite transaction where steps had been inserted which had no commercial purpose other than that of avoiding tax. However, it is clear that when this project began it was not pre-ordained that the other steps would follow, and it could be held that the variation of the project and the subsequent project could not be treated as a series of transactions or that that series of transactions could be ignored by the Revenue. It would be possible for a developer to avoid tax, especially if he could argue that there was some other commercial purpose for the variation and for the new project. As the author of the article pointed out, there could well be no

      1215
      problem in finding such reasons. The changes would mean that developers would not be liable for development land tax, which the Government intend them to pay.
      I am aware that other clauses seek to prevent tax avoidance, but as the author of the article points out, in practice the clauses are not operated. That is one way in which a developer could avoid the stated intention of the Chancellor of the Exchequer on development land tax, which was that if a developer had already incurred liability on the date of the Budget statement, the tax would be payable.
      A second way for a developer to avoid his tax liability would be to rescind a contract for the sale for development. With a contract which disposes of land the developer becomes liable for tax, but that liability can be extinguished by rescinding the contract before completion, and therefore vitiating the pre-19 March disposal. Again, the Opposition believe that people whom the Chancellor intends should pay tax, could avoid it.
      We are drawing those two loopholes to the attention of the Economic Secretary. I am glad that he will reply to the debate because, in a previous debate on Report, I drew his attention to a loophole which the Government were blocking, but only after waiting 11 months. I also drew his attention to a second loophole involving the same tax, and asked him whether the Government intended to block it before they lost money, but he could not answer that question.
      This time I hope that the hon. Gentleman will answer because next year the Treasury will not be able to block these loopholes. The developers will have got away with it, and the law will have applied as it is now. If, as the article suggests, those loopholes exist, the Treasury Ministers and the Chancellor of the Exchequer are obliged to ensure that the Budget statement of 19 March is put into effect by blocking these loopholes tonight.
      Mr. Ian Stewart: The hon. Member for Birmingham, Hodge Hill (Mr. Davis) raises a question which derives from an article in The Law Society's Gazette of 8 May, in which Mr. Clifford Joseph, a barrister, suggested that development land tax on existing disposals or projects could be mitigated through arrangements involving rescission of existing contracts or variation of projects. However, he then said that purely contrived schemes could be challenged by the Inland Revenue on the strength of the House of Lords decision in the Furniss v. Dawson case.
      I have asked the Inland Revenue to study the implications, but I understand that no cases have come to its attention, in which post-Budget rescissions have been made of pre-Budget contracts. I note the hon. Gentleman's comments, and shall certainly ensure that his points are followed up.
      Mr. Davis: What will happen if the hon. Gentleman finds such a case? Why not block the loophole before the Bill is enacted? How will the Inland Revenue know whether the contracts have been rescinded or varied? Perhaps it is given notice. The developers who intend to use the loophole may well be waiting until the Bill is enacted, or at least has completed its Report and Third Reading. By then it will be too late for the Government to block the loopholes. Why have they not taken action? They have had two months since The Law Society's Gazette drew it to everybody's attention. What are they waiting for? On Monday they managed to table
      1216
      amendments to change the basis of capital gains tax. Why are they not prepared to stop developers avoiding development land tax? They have had two months, not two days.
      12.45 am
      Mr. Ian Stewart: The hon. Gentleman is correct to say that the matter was drawn to public attention some time ago. Had there been evidence of a serious risk of circumvention of the proposals, it would have been possible to frame means of dealing with that in the Bill. The matter has been drawn to the attention of the Revenue and I have asked that it should respond. It has advised me that no such cases of rescission have come to its notice. That is as far as I can reassure the hon. Gentleman.
      Mr. Davis: How significant is that explanation? Does the Minister expect any examples of rescission — all examples of rescission and all rescissions and variations — to come to the notice of the Revenue? Is he saying that, if there are rescissions or variations the Inland Revenue is informed, or do we rely on pot luck?
      Mr. Stewart: Notice is not automatic, but the Revenue keeps in touch with these matters. Of course, there cannot be rescission unless there is existence in the first place.
      Mr. Davis: I am not satisfied with that explanation. The Treasury has had long enough to look into these matters. I do not intend to delay the proceedings this evening by calling a Division, but I put it on record that the Government are happy to wait until a loophole has been exploited before they say or do anything about it, if they do. I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Schedule 24

      CAPITAL TRANSFER TAX: CONDITIONAL EXEMPTION
      Amendments made: No. 104, in page 196, line 29, leave out 'beneficially entitled' and insert
      'entitled (either beneficially or otherwise)'.
      No. 105, in page 197, leave out lines 26 to 30 and insert—
      '(2) Where there has been a conditionally exempt transfer of any property (or part), tax shall be charged under this section in respect of that property (or part) on the first occurrence after the transfer of an event which under this section is a chargeable event with respect to that property (or part).'
      No. 106, in page 198, line 37, after 'event', insert
      'with respect to the property (or part) concerned'.
      No. 107, in page 199, line 20, leave out
      'part only of one of the associated properties'
      and insert
      'one of the associated properties or part of it'.
      No. 108, in line 24, leave out
      'part only of one of the associated properties'
      and insert
      'one of the associated properties or part of it'.
      No. 109, in line 29, after 'the', insert 'property or'.
      No. 110, in line 31, after 'that', insert 'property or'.
      No. 111, in line 37, leave out from 'Act,' to end of line 38 and insert
      'at the end there shall be added "or, where the property has been disposed of as mentioned in section 32A(5) above, before any event which apart from section 32A(5) would have been such a chargeable event."'.—[Mr. Peter Rees.]

    New Schedule
      'GROUP RELIEF
        PART I
          GENERAL MODIFICATIONS

            Interpretation
            1. In this Part of this Schedule—

            (a) a "company owned by a consortium" means either such a trading company as is referred to in paragraph (a) or paragraph (b) of subsection (2) of section 258 of the Taxes Act or such a holding company as is referred to in paragraph (c) of that subsection (companies owned directly or indirectly by consortia);

            (b) a "consortium claim" means a claim for group relief made by virtue of subsection (2) of section 258 of the Taxes Act;

            (c) a "group claim" means a claim for group relief made by virtue of subsection (1) of that section;

            (d) a "group/consortium company" means a company which is both a member of a group of companies and a company owned by a consortium;

            (e) "relevant accounting period" means an accounting period beginning on or after 1st August 1985; and

            (f) other expressions have the same meaning as in section 258 and the following sections of Chapter I of Part XI of the Taxes Act.

            Claims for losses etc. of a group/consortium company
            2.—(1) For the purpose of a consortium claim in respect of the loss or other amount of any relevant accounting period of a group/consortium company, that loss or other amount shall be treated as reduced (or, as the case may be, extinguished) by first deducing therefrom the potential relief attributable to group claims.
            (2) Subject to sub-paragraph (3) below, in relation to the loss or other amount of a relevant accounting period of a group/consortium company, the potential relief attributable to group claims is the aggregate amount of group relief that would be claimed if every company which, as a member of the same group of companies as the group/consortium company, could make a group claim in respect of that loss or other amount made such a claim for an amount which, when set against the claimant company's total profits for its corresponding accounting period, would equal those profits.
            (3) Where for any accounting period another member of the group of companies of which the group/consortium company is a member has a loss or other amount available for relief and one or more group claims is or are in fact made in respect of that loss or other amount, account shall be taken of the relief so claimed before determining (in relation to the loss or other amount of the group/consortium company) the potential relief attributable to group claims under sub-paragraph (2) above.

            Claims for relief by a group/consortium company
            3.—(1) In any case where—

            (a)a consortium claim is made by a group/consortium company in respect of a loss or other amount of an accounting period of a member of the consortium, and

            (b) the corresponding accounting period of the group/consortium company is a relevant accounting period.

            the total profits of that accounting period of the group/consortium company, against a fraction of which that loss or other amount may be set off (in accordance with section 259(8)(b) of the Taxes Act), shall be treated as reduced (or, as the case may be, extinguished) by deducting therefrom the potential relief available to the group/consortium company by way of group claims.
            (2) Subject to sub-paragraph (3) below, in relation to a relevant accounting period of a group/consortium company, the potential relief available to the company by way of group claims is the maximum amount of group relief that could be claimed by the company for that accounting period on group claims relating to the losses or other amounts available for relief of other members of the group of companies of which the group/consortium company is a member.
            (3) Where another member of the group of companies of which the group/consortium company is a member in fact makes
            1218
            one or more group claims in respect of losses or other amounts of other members of the group, account shall be taken of the relief already claimed by that company in determining the potential relief available to the group/consortium company by way of group claims under sub-paragraph (2) above.

            Trading losses to be set against profits before group relief
            4.—(1) Where a company owned by a consortium—

            (a) has in any relevant accounting period incurred such a loss as is referred to in section 259(1) of the Taxes Act, and

            (b) has profits (of whatever description) of that accounting period against which that loss could be set off under subsection (2) of section 177 of that Act,

            the amount of that loss which is available to any member of the consortium on a consortium claim shall be determined on the assumption that the company owned by the consortium has made a claim under that subsection requiring the loss to be so set off.
            (2) Where the company referred to in sub-paragraph (1) above is a group/consortium company, the amount of the loss shall be determined under that sub-paragraph before any reduction is made under paragraph 2 above.

            Extension of scope of consortium relief
            5.—(1) This paragraph applies where—

            (a) a company (in this paragraph referred to as "the link company") which is a member of a consortium is also a member of a group of companies; and

            (b) the link company could (disregarding any deficiency of profits) make a consortium claim in respect of the loss or other amount eligible for relief of a relevant accounting period of a company owned by the consortium.

            (2) Subject to sub-paragraph (3) and (4) below, a company (in this paragraph referred to as a "group member") which is a member of the group referred to in sub-paragraph (1)(a) above but is not itself a member of the consortium may make any consortium claim which could be made by the link company; and the fraction which is appropriate under section 259(8) of the Taxes Act where a group member is the claimant company shall be the same as that which would be appropriate if the link company were the claimant company.
            (3) A group member may not, by virtue of sub-paragraph (2) above, make a consortium claim in respect of the loss or other amount of any relevant accounting period of a company owned by the consortium unless the claimant company was a member of the group concerned throughout the whole of the accounting period or, as the case may be, each accounting period of the link company which, if that company were making the claim, would be a corresponding accounting period in relation to the relevant accounting period concerned.
            (4) The maximum amount of relief which, in the aggregate, may be claimed by group members and the link company by consortium claims relating to the loss or other amount of any relevant accounting period of a company owned by the consortium shall not exceed the relief which could have been claimed by the link company (disregarding any deficiency of profits) if this paragraph had not been enacted.
            6.—(1) This paragraph applies where—

            (a) a company (in this paragraph referred to as "the link company") which is a member of a consortium is also a member of a group of companies; and

            (b) a company which is a member of that group of companies but is not itself a member of the consortium has for any relevant accounting period a loss or other amount available for relief;

            and, in relation to the link company, any reference in this paragraph to a group member is a reference to a company falling within paragraph (b) above.
            (2) Subject to the following provisions of this paragraph, a company owned by the consortium may make any consortium claim in respect of the loss or other amount referred to in subparagraph (1)(b) above which it could make if the group member were a member of the consortium at all times when the link company was such a member, but not at any other time.
            (3) The fraction which is appropriate under section 259(8) of the Taxes Act in relation to a consortium claim made by virtue of sub-paragraph (2) above shall be the same as that which would be appropriate if the link company were the surrendering company, except that the accounting period in respect of which

            1219
            the Member's share in the consortium is to be ascertained shall be that of the group member which is in fact the surrendering company.
            (4) A company owned by the consortium may not, by virtue of sub-paragraph (2) above, make a consortium claim in respect of the loss or other amount of any relevant accounting period of a group member unless, throughout the whole of that accounting period, the group member was a member of the group of companies referred to in sub-paragraph (1) above.
            (5) for any accounting period of a company owned by the consortium (in this sub-paragraph referred to as "the claimant company's accounting period"), the maximum amount of relief which, in the aggregate, may be claimed by that company by consortium claims relating to the losses or other amounts of accounting periods of the link company and group members shall not exceed that fraction of the total profits of the claimant company's accounting period which would be brought into account under section 259(8)(b) of the Taxes Act on a consortium claim in respect of which—

            (a) the link company was the surrendering company; and

            (b) the link company's accounting period was the same as the claimant company's accounting period.

            Restriction on consortium claims where companies join or leave consortium
            7.—(1) In any case where—

            (a) a consortium claim is made in respect of the loss or other amount of a relevant accounting period of a company owned by a consortium (in this paragraph that claim is referred to as "the primary claim", that company is referred to as "the principal surrendering company" and that accounting period is referred to as "the principal accounting period"), and

            (b) the company making the primary claim or, if that claim is made by virtue of paragraph 5 above, the company which is the link company for the purposes of that paragraph was not a member of the consortium throughout the whole of the principal accounting period, and

            (c) on or after the date on which the primary claim is made, a consortium claim is made which falls within sub-paragraph (2) below,

            no relief shall be allowed on the primary claim, or, as the case may be, any relief which was so allowed shall be withdrawn.
            (2) A consortium claim is to be taken into account under subparagraph (1)(c) above if—

            (a) it is in respect of the loss or other amount of an accounting period of a surrendering company (being a company owned by the consortium referred to in subparagraph (1) above); and

            (b) it is made by the company making the primary claim or, if that claim or the claim mentioned in this subparagraph is made by virtue of paragraph 5 above, by any other member of the group referred to in subparagraph (1) (a) of that paragraph; and

            (c) at any time during the principal accounting period the surrendering company is a member of the same group of companies as the principal surrendering company; and

            (d) the accounting period to which the claim relates falls, in whole or in part, within the principal accounting period.

            (3) Where any relief which has been allowed is withdrawn by virtue of sub-paragraph (1) above, all such adjustments shall be made, whether by way of assessment or otherwise, as may he necessary in consequence of that withdrawal.
            8.—(1) In any cases where—

            (a) a company owned by a consortium makes a consortium claim (in this paragraph referred to as "the primary claim") in respect of the loss or other amount of a relevant accounting period of a member of the consortium or, if the primary claim is made by virtue of paragraph 6 above, of a company which, in relation to that member of the consortium, is a group member, within the meaning of that paragraph, and

            (b) the member of the consortium concerned (whether as the surrendering company or the link company, within the meaning of paragraph 6 above) was not a member
            1220
            of the consortium throughout the whole of the relevant accounting period referred to in paragraph (a) above, and

            (c) on or after the date on which the primary claim is made, a consortium claim is made which falls within sub-paragraph (2) below,

            no relief shall be allowed on the primary claim or, as the case may be, any relief which was so allowed shall be withdrawn.
            (2) A consortium claim is to be taken into account under subparagraph (1) (c) above if—

            (a) it is made by a company owned by the consortium referred to in sub-paragraph (1) above; and

            (b) the company making the claim is a member of the same group of companies as the company making the primary claim; and

            (c) the claim relates to the loss or other amount of an accounting period of the consortium member referred to in sub-paragraph (1) above or of a company which, in relation to that consortium member, is a group member, within the meaning of paragraph 6 above; and

            (d) the accounting period referred to in paragraph (b) above falls, in whole or in whole or in part, in the relevant accounting period referred to in sub-paragraph (1)(a) above.

            (3) Where any relief which has been allowed is withdrawn by virtue of sub-paragraph (1) above, all such adjustments shall be made, whether by way of assessment or otherwise, as may be necessary in consequence of that withdrawal.

        PART II

          AMENDMENTS OF SECTION 263 OF TAXES ACT
          9.— (1) At the beginning of subsection (3) there shall be inserted the words "Subject to subsections (3A) and (3B) below".
          (2) In that subsection for the words from "are made" to "relate to" there shall be substituted the words "relating to".
          (3) In that subsection after the words "surrender company", in the first place where they occur, there shall be inserted "arc made by two or more claimant companies which themselves are members of a group of companies".
          10. After subsection 83) there shall be inserted the following subsections:—
          "(3A) If companies which are members of different groups make claims falling within subsection (3) above, that subsection shall apply separately in relation to the companies in each group.
          (3B) For the purposes of subsection (3) above, there shall be left out of account a claim made by a company if—

          (a) the claimant company joins or leaves a group of companies at the same time as the surrendering company; and

          (b) both before and after that time either the claimant company is a 75 per cent. subsidiary of the surrendering company or the surrendering company is a 75 per cent. subsidiary of the claimant company or both companies are 75 per cent. subsidiaries of another company."

          11. — (1) In subsection (4) for the words "If claims for group relief" there shall be substitued "Subject to subsection (4A) below, if claims as respects two or more surrendering companies which themselves are members of a group of companies".
          (2) In that subsection the words "as respects more than one surrendering company" shall be omitted.
          12. After subsection (4) there shall be inserted the following subsections:—

          "(4A) If claims falling within subsection (4) above are made as respects surrendering companies which are members of different groups, that subsection shall apply separately in relation to claims as respects the surrendering companies in each group.

          (4B) For the purposes of subsection (4) above, there shall be left out of account a claim made as respects a surrendering company if—

          (a) the surrendering company joins or leaves the group of companies concerned at the same time as the claimant company; and

          (b) both before and after that time either the surrendering company is a 75 per cent. subsidiary of the claimant company or the claimant company

          1221
          is a 75 per cent. subsidiary of the surrendering company or both companies are 75 per cent. subsidiaries of another company."

          13. For subsection (5) there shall be substituted the following subsection:—
          "(5) References in subsection (3) to (4A) above to claims for group relief do not include references to consortium claims, that is to say, claims made by virtue of section 258(2) above.".'.—[Mr. Peter Rees.]
          Brought up, read the First and Second time, and added to the Bill.

    New Schedule
      SUPPLEMENTARY PROVISIONS AS TO WITHDRAWAL OF TAX CREDITS

        Recovery of tax credits incorrectly paid
        1. — (1) Where the provisions of section [Withdrawal of right of certain non-resident companies to payment of tax credits] of this Act apply so as to withdraw the entitlement of a company to claim to have a tax credit in respect of a qualifying distribution set against the income tax chargeable on its income and to have the excess of the credit over that income tax paid to it and the company (in this paragraph referred to as "the recipient company") has either had that excess paid to it, or has received an additional amount in accordance with arrangements made under Regulation 2(1) of the Double Taxation Relief (Taxes on Income) (General) (Dividend) Regulations 1973, it shall be liable to a fine for the violation of the provisions of section [Withdrawal of right of certain non-resident companies to payment of tax credits] of this Act equal to twice the amount of the excess or additional amount as the case may be and such fine (in this section referred to as "the recoverable amount") shall be payable to the Board and be treated as having become payable at the date when the excess or additional amount was paid to the recipient company and may be recovered in accordance with subparagraphs (2) to (5) below.
        (2) The recoverable amount may be assessed and recovered as if it were unpaid tax and section 30 of the Taxes Management Act 1970 (recovery of overpayment of tax, etc) shall apply accordingly.
        (3) Any amount which may be assessed and recovered as if it were unpaid tax by virtue of this paragraph shall carry interest at the rate of 9 per cent. per annum from the date when it was payable in accordance with this paragraph until the date it is paid and it is hereby declared that this paragraph applies to a recoverable amount which is paid without the making of an assessment (but is paid after it is due) and that, where the recoverable amount is charged by any assessment (whether or not any part of it has been paid when the assessment is made), this paragraph applies in relation to interest running before, as well as after, the making of the assessment.
        (4) Where the recoverable amount is not paid by the recipient company within six months from the date on which it became payable—

        (a) the recoverable amount may at any time within six years from the date on which it became payable be assessed and recovered as if it were unpaid tax due from any person who is or was at any time prior to the expiration of the said six year period connected with the recipient company, or would have been connected on the assumption that all the facts and circumstances relating to the recipient company at the time the excess or additional amount as the case may be was paid continued to apply for six years thereafter, and section 30 of the Taxes Management Act 1970 shall apply accordingly, and

        (b) as respects its accounting periods beginning with that in which the excess or additional amount referred to in sub-paragraph (1) above was paid and ending with that following that in which the recoverable amount is paid in accordance with the provisions of this paragraph, the company which made the qualifying distribution in respect of which the recipient company received the excess or additional amount shall not be entitled to set any advance corporation tax paid by it against its
        1222
        liability to corporation tax for such periods in accordance with section 85 of the Finance Act 1972 (payments of advance corporation tax to be set against company's liability to corporation tax on its income) nor to surrender the benefit of the whole or any part of any amount of advance corporation tax to a subsidiary in accordance with section 92 of that Act (setting of company's surplus advance corporation tax against subsidiary's liability) in such periods.

        (5) Where a recoverable amount is assessed and recovered from a person connected with the recipient company in accordance with sub-paragraph (4)(a) above, that person shall be liable for the interest payable in accordance with sub-paragraph (3) above and, until the interest is so paid, sub-paragraph (4)(b) above shall apply as if the words "the interest due in accordance wih subparagraph (3) above is paid" were substituted for the words "the recoverable amount is paid in accordance with the provisions of this paragraph".
        (6) Interest payable under this paragraph shall be paid without any deduction of income tax and shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes.
        (7) Where under the law in force in a territory outside the United Kingdom interest is payable subject to a deduction in respect of taxation and such deduction applies to an amount of interest paid in accordance with sub-paragraph (3) above, the reference to the rate of 9 per cent. per annum in that sub-paragraph shall be deemed to be a reference to such rate of interest as after such deduction shall be equal to the rate of 9 per cent, per annum.

        Claims to payment of tax credits following remedial legislation in unitary states
        2. — (1) This paragraph has effect where a company to which section [Withdrawal of right of certain non-resident companies to payment of tax credits] applies has a qualifying presence in a province, state or other part of a territory outside the United Kingdom which has been prescribed as a unitary state for the purposes of that section and, at the time when a qualifying distribution is made to that company by a company which is resident in the United Kingdom, that state has enacted legislation the effect of which is that, as from a future date which shall not be later than 31st December 1986, it will cease to be a unitary state within the meaning of the definition in paragraph 5(1) below, notwithstanding that it remains prescribed as such for the purposes of that section.
        (2) In the circumstances described in sub-paragraph (1) above the company in receipt of the qualifying distribution shall be entitled on or after the effective date to claim to have the tax credit to which it is entitled in respect of the distribution set against its liability to income tax and to have the excess (if any) of the credit over that liability paid to it; but, if payment of the excess or of the additional amount referred to in Regulation 2(1) of the Double Taxation Relief (Taxes on Income) (General) (Dividend) Regulations 1973 is made before the effective date, the provisions of paragraph 1 above shall apply in relation to that payment regardless of the enactment of the legislation referred to in sub-paragraph (1) above.
        (3) For the purposes of this paragraph the efective date shall be deemed to be the date (Not to be later than 31st December 1986) on which the legislation referred to in sub-paragraph (1) above actually becomes effective in the province, state or other part of the territory outside the United Kingdom which has been prescribeed as a unitary state for the purposes of section [Withdrawal of right of certain non-resident companies to payment of tax credits], irrespective of the date, if any, specified in that legislation.

        Avoidance of provision withdrawing tax credits
        3.—(1) in any case where arrangements are made, whether before or after section [Withdrawl of right of certain non-resident companies to payment of tax credits] comes into force, as a result of which interest is paid or a discount is allowed by or through a person who is resident in the United Kingdom, or carries on business in the United Kingdom through a branch or agency, and it is reasonable to suppose that, if such payment or allowance had not been made, a qualifying distribution would have been made by the person by or through whom the payment or allowance is made, or by another company resident in the United Kingdom,

        1223
        to a company which has, or is an associated company of a company which has, a qualifying presence in a unitary state at the time when the payment or allowance is made, then—

        (a) no person who receives that payment or allowance shall be entitled to relief from income tax or corporation tax thereon by virtue of arrangements having effect under section 497(1) of the Taxes Act, and

        (b) the payment or allowance shall not be allowed as a deduction in computing any income profits or losses for any tax purposes.

        (2) Without prejudice to the generality of sub-paragraph (1) above, where a payment or allowance is not of itself a payment or allowance to which sub-paragraph (1) above applies, but is made in conjunction with other payments of whatever nature and taken together with those payments has substantially similar effect to a distribution, then, for the purposes of sub-paragraph (1) above, it shall be treated as a payment or allowance within that sub-paragraph.
        (3) Any company which has received such a payment of interest as is referred to in sub-paragraph (1) above, from which income tax has not been deducted by the person making the payment, and has a qualifying presence in a unitary state at the time of the payment, shall be treated for the purposes of paragraph 1 above as a company from which the entitlement to claim payment of the excess of a tax credit over the income tax chargeable on its income has been withdrawn by section [Withdrawal of right of certain non-resident companies to payment of tax credits] (1) and which has had paid to it such an excess in an amount equal to the income tax which should have been deducted from the payment of interest.

        Power to inspect documents of non-resident companies
        4.—(1) Where it appears to the Board that the provisions of section [Withdrawal of right of certain non-resident companies to payment of tax credits] and this Schedule may apply to a company resident outside the United Kingdom (in this paragraph referred to as a "foreign parent"), the Board may, by notice in writing given to the foreign parent or any associated company of that foreign parent, require that company within such time (not being less than thirty days) as may be specified in the notice to make available for inspection any books, accounts, or other documents or records whatsoever of that company where in the opinion of the Board it is proper that they should inspect such documents for the purposes of ascertaining whether the said provisions apply to the foreign parent or such associated company notwithstanding that in the opinion of the person to whom the notice is given those provisions do not apply to that company or any associated company of that company.
        (2) In the Table to section 98 of the Taxes Management Act 1970 (penalties) at the end of the first column there shall be added—
        "Paragraph 4 of Schedule [Supplementary provisions as to withdrawal of tax credits] to the Finance Act 1985".

        Meaning of "unitary state", etc
        5.—(1) In this Schedule and section [Withdrawal of right of certain non-resident companies to payment of tax credits] of this Act—
        "group" and "member of a group" shall be construed in accordance with section 272(1) of the Taxes Act (definition of groups of companies) with the omission of the restriction in paragraph (a) of that subsection and the substitution of the words "51 per cent." for the words "75 per cent." wherever they occur,
        "qualifying distribution" has the same meaning as in Part V of the Finance Act 1972 (taxation of companies and company distributions),
        "unitary state" means a province, state or other part of a territory outside the United Kingdom with the government of which the arrangements referred to in subsection (1) of section [Withdrawal of right of certain non-resident companies to payment of tax credits] have been made which, in taxing the income or profits of companies from sources within that province, state or other part, takes into account, or is entitled to take into account, income, receipts, deductions, outgoings or assets of such companies, or of associated companies of such companies,
        1224
        arising, expended or situated as the case may be outside that territory and which has been prescribed under subsection (7) of that section as a unitary state for the purposes of that section; but no such province, state or other part shall be so prescribed which only takes into account such income, receipts, deductions, outgoings or assets—

        (a) if the associated company was incorporated under the law of the territory, or

        (b) for the purpose of granting relief in taxing dividends received by companies.

        (2) For the purposes of this Schedule and section [Withdrawal of right of certain non-resident companies to payment of tax credits] of this Act—

        (a) section 533 of the Taxes Act (connected persons) applies; and

        (b) section 302 of the Taxes Act (meaning of "associated company" and "control") applies with the substitution of the words "six years" for "one year" in subsection (1) of that section.'.—[Mr. Peter Rees.]

        Brought up, read the First and Second time, and added to the Bill.

    Schedule 25

      REPEALS
      Amendments made: No. 159, in page 203, line 32, column 3, at beginning insert

      'In section 263(4), the words "as respects more than one surrendering company".'.

      No. 160, in page 204, line 25, at beginning insert—
      'The repeal in section 263 of the Income and Corporation Taxes Act 1970 has effect in accordance with section [Group relief: modifications] (2)(b) of this Act.'.
      No. 112, in page 207, line 4, at beginning insert—

      '1970 c. 10.

      The Income and Corporation Taxes Act 1970.

      Section 270(3).

      1975 c. 45.

      The Finance (No. 2) Act 1975

      In section 58(12), the words from "(other' to "that Act)".'.

      No. 113, in line 4, column 3, at beginning insert—

      'In section 65, in subsection (1)(b), the words from "and this" to the end and in subsection (7)(b), the words from "subject" to "above".

      In section 66, in subsection (4), the words from "and in" to the end.

      Section 67(2) and (3).

      Sections 68 to 70.

      In section 84, in subsection (3)(b)(ii), the words "if the disposal is within" and "that section".

      No. 114, in line 5, at end insert—

      '1981 c. 35.

      The Finance Act 1981.

      In section 41, in subsection (1) the words "or gains or losses" and in subsections (2) and (3) the words "gains or losses".'.

      No. 115, in line 5, column 3, at end insert—

      'In Schedule 7, paragraph 2(2) and in the Table in paragraph 9, the second entry relating to section 58(12) of the Finance (No. 2) Act 1975.'.

      No. 116, in line 6, column 3, at beginning insert—

      1225

      'In section 58, in subsection (5) the words from "including" to "gains" and subsection (6)'.

      No. 117, in column 3, leave out lines 14 and 15 and insert—

      'In section 88, in subsection (1) the words "and section 89 below" and "section 89 below", paragraph (b) and the word "and" immediately preceding it; and subsection (5A).

      Section 89.'.

      No. 118, in line 32, at end insert—

      '1984 c. 43.

      The Finance Act 1984.

      In Schedule 9, in paragraph 11 (1) the words "and 89".

      In Schedule 13, paragraph 4 and paragraph 9(b) and the word "and" immediately preceding it.'.

      No. 119, in line 34, at beginning insert—
      `The repeals in section 270 of the Income and Corporation Taxes Act 1970, section 58 of the Finance (No. 2) Act 1975, sections 65 to 70 and 84 of and Schedule 7 to the Capital Gains Tax Act 1979, section 41 of the Finance Act 1981, section 58 of the Finance Act 1982 and Schedule 13 to the Finance Act 1984 have effect with respect to disposals on or after 2nd July 1986.'.
      No. 120, in line 39, leave out from '1983' to 'have' in line 40 and insert
      'the Finance (No. 2) Act 1983 and Schedule 9 to the Finance Act 1984.'.
      No. 121, in line 42, after 'Act' insert
      '(other than those mentioned in paragraph (bb) below)'.
      No. 122, in line 43, at end insert—
      '(bb) in the case of gilt-edged securities as defined in Schedule 2 to the Capital Gains Tax Act 1979 and qualifying corporate bonds as defined in section 64 of the Finance Act 1984, with respect to disposals on or after 2nd July 1986, and'. — [Mr. Peter Rees.]
      12.46 am
      Mr. Peter Rees: I beg to move, That the Bill be now read the Third time.
      This is the final stage of a long and intricate legislative process. I ventured to say at the beginning of the debate on Second Reading that it was a good Bill, but I am ready to admit that it has been improved in Committee and on Report. There have been valuable contributions from Government and Opposition Members in Committee and on the Floor of the House.
      The Bill may not have quite the same dramatic impact as last year "s Finance Bill and it has not had the same dramatic passage through the House. However, the Bill has been considered in Committee rather better than last year's Finance Bill. It has one inestimable quality, which I am sure will command the approbation of the entire House. Although it amounts to 98 clauses and 27 schedules, the repeals in schedule 25 remove many measures from the statute book and we are not making a net addition to the statute book.
      More significantly, the Bill sustains the momentum of fiscal reform. The abolition of development land tax did not entirely command the approbation of the hon. Member for Birmingham, Hodge Hill (Mr. Davis), but it is one of the features of the Bill. Other features are the indexation
      1226
      provisions for capital gains tax, the exclusion of gilts and certain corporate bonds from capital gains tax, which goes far to simplify an unduly complex tax, the simplification and modernisation of many of the stamp duty provisions and the unitary tax measures, which were debated in the early hours of yesterday morning and for which we are indebted to my hon. Friend the Member for Surrey, North-West (Mr. Grylls) and other of my right hon. and hon. Friends. I am sure that that measure will make a valuation contribution to the development of thought on both sides of the Atlantic on that complex issue.
      Finally, I turn to the recommendation of the Keith committee on the administration of indirect taxes. I paid a tribute, which I shall not repeat, on Second Reading to the labours of that committee. It has produced a thoroughly painstaking and admirable piece of work. The fact that we have adopted more or less most of the recommendations in legislative form is eloquent testimony of our regard for the committee's work. I am sure that it will improve the administration of the taxes for which Customs and Excise is responsible while maintaining a fair balance between the interests of the administration and those of the taxpayer.
      The provisions were inevitably long and complex and they have been properly subjected to close scrutiny in Standing Committee and on Report. It can be claimed that it was quite a feat that the recommendations of the Keith committee should have been implemented in legislative form within two and a half years of the first report, especially when it is borne in mind that there have been extensive consultations and the publication of draft clauses. That is indeed the way that this Administration likes to proceed in complex legislative fields. I also remind the House that it should be the prelude to further provisions next year in regard to direct taxation.
      I assure the House and the country that the Government have not lost their appetite for tax reform. As further evidence of that, we shall be publishing in due course a Green Paper on personal allowances and other related subjects.
      It was, I believe, a well-conceived, well-constructed, well-criticised and well-considered Bill. It has been improved by our various debates. On that basis, I have no hesitation in commending it to the whole House.
      12.50 am
      Mr. Terry Davis: The Chief Secretary will not be surprised to learn that we take a different view of the Bill. I think that his reference to the Bill as having been well criticised was intended as some sort of compliment. I see that he is nodding, so I take it as such. We are critical of the Bill in its overall strategy and also in its detailed provisions.
      Whereas the Chief Secretary, understandably, regards the abolition of development land tax, at a cost of £50 million to the Exchequer, as a good thing, we regard it as something to be criticised. Similarly, we were and still are critical of the changes in capital gains tax, and of a measure tht I think the Chief Secretary overlooked in his contribution a few moments ago. He did not refer to the extension of VAT to newspaper advertisements — I am sure that it was an oversight — even though it was debated at length in the House. We regard that as one of the serious extensions of the taxation system and we seriously object to it.

      1227
      There were other features of the debates which are worth putting on record. In Committee, we discussed the increases in the excise duties on spirits, beer, wine, made wine and cider, and it became clear that there was no logic in the Government's approach to those duties. There were different increases in the duties on different drinks and there was no logical explanation for them; at least, there was no logical explanation given to the Committee.
      Similarly, we had the benefit of a Minister from the Department of Transport during our consideration of vehicle excise duty. It was the unanimous conclusion of Opposition Members—and, I suspect, the conclusion of some Conservative Members — that there was no logic behind the Government's approach to vehicle excise duty. Again, there were different increases in the rates of vehicle excise duty for different vehicles. It was kindness that led us to terminate that debate, because we were getting no satisfaction whatever from the Minister who had been brought to the Committee to explain what was supposed to be the Government's thinking.
      The Opposition regard the Bill as being particularly badly drafted. The Chief Secretary referred to the fact that the Bill consists of 98 clauses, yet during the past two days we have had to deal with 106 Government amendments at this late stage in our proceedings. We dealt with a considerable number of Government amendments in Committee, and since then there have been 106 amendments and new clauses tabled by the Government. I do not object to all of them; indeed, we welcome some of them, and are grateful for amendment No. 129, dealing with the problem of Cyprus sherry. In our earlier exchanges, I paid tribute to the Minister of State, Treasury, for the way in which he approached the problem. That expression of gratitude was sincerely meant.
      Nevertheless, putting those very few concessions on one side, the large number of amendments to a Bill with only 98 clauses is significant. Indeed, it compares with only a slightly larger number of amendments that were tabled last year to a much longer Bill. It suggests to us that the draftsmanship on this occasion has been below the standard that we expect from the Treasury and from the Chief Secretary.
      A large number of the amendments were moved formally by the Government tonight, showing that they were regarded by the Government as technical amendments. At the same time, we also object to the very short notice that has been given of some amendments tabled for consideration on Report. A few minutes ago my hon. Friend the Member for Thurrock (Dr. McDonald) protested about four amendments that were tabled on Monday. Four more amendments were tabled less than a week ago. Those amendments are significant and change the basis for calculating the value of a disposal for capital gains tax purposes. We regret the Government's treatment of the House in that way.
      However, it would be unfair of me not to say that the Chief Secretary to the Treasury in particular has made a great effort to be flexible and co-operative and to consult the Opposition. The Chief Secretary responded to my request in Committee that the Treasury should consult the Opposition in more detail about proposed amendments that affect taxes on the heritage. The Chief Secretary responded to other points that were put to him in Committee. On this occasion, we were provided with a
      1228
      much more detailed explanation of amendments that were made on the nod on Report. I hope that this precedent will be followed next year.
      In putting forward their amendments on Report, some at very short notice, the Government have ignored two or three obvious loopholes, among them the abolition of development land tax. It is unfortunate that the Government have not seen fit to seek our assistance and consult us about the way in which those loopholes could be closed.
      Last year, my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) pointed out that the price of the Finance Bill 1984 was £9·75. This year's Finance Bill, which is much shorter, costs £10·20. The increase cannot be justified.
      12.57 am
      Dr. Marek: The Bill can be criticised for not including what it ought to include, a point which I cannot develop on Third Reading. I can only refer to what it contains. This year's Finance Bill is much less damaging to the country than last year's. I support what was said by my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) about vehicle excise duty, which varies according to the number of axles on a lorry. The Treasury has not consulted the Department of Transport because there is no set of principles whereby lorries with different axles are taxed.
      Mr. Campbell-Savours: Has my hon. Friend received the correspondence that I have received from hauliers about these new rates of tax? The Government are a net beneficiary, after expenditure on roads, from the tax on heavy goods vehicles. The road haulage industry is most aggrieved. In Committee we dealt in detail with the regional implications of the Government's taxation policy for heavy goods vehicles. If my hon. Friend has received any such correspondence, will he draw it to the attention of the House, in particular the comments of hauliers in North Wales who are most aggrieved by this year's Budget.
      Dr. Marek: I should like to oblige my hon. Friend, but unfortunately I have received no correspondence from hauliers in north Wales, or anywhere else, for that matter. However, I have received serious complaints from the county surveyor of Clwyd county council. Heavy lorries are damaging the surface of Clwyd roads particularly the bridges. Local authorities are in difficulty over strengthening these bridges, with very serious consequences. Their difficulties should be reflected in the Finance Bill. Thirty-two tonne vehicles with four axles damage the roads very much more than vehicles with five axles, or light vehicles.
      My impression in Committee was that the Government did not know what guidelines they should adopt to ensure that vehicles covered their track costs. It was not clear how the Government defined track costs and I believe that a Minister said at one point, "It is a bit of a mess and we are just starting to put it right."
      I hope that the Treasury will insist that the Department of Transport should examine the issue over the coming year and provide details on how the vehicle excise duty tables can be put in order so that there is some fairness in the system and so that lorries cover road costs and the cost of ancillary services such as bridges and street lighting. The costs of accidents and environmental damage should also be included.

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      I agree with my hon. Friend the Member for Hodge Hill that we were disappointed that there was not a brisk response from the Treasury. Ministers should at least have given the impression that they knew where they were going. We might have argued about that, but we never found out where they were going. I hope that a different attitude will be displayed next year.
      Mr. Campbell-Savours: I do not know whether my hon. Friend grasped the point that I made in my previous intervention. I am sure that he wishes to do so, because he comes from an outer region.
      The cost of heavy goods vehicle licences bears unnecessarily heavily on hauliers outside the major conurbations. Whenever a manufacturer in my hon. Friend's constituency wishes to supply goods to a major conurbation, he has to pay for haulage and those costs depend greatly on the cost of diesel and the price of a licence.
      Mr. Deputy Speaker: Order. Interventions should be brief.
      Mr. Campbell-Savours: I hope that my intervention can be kept as brief as possible.
      Mr. Deputy Speaker: Order. It has not been very brief so far.
      Mr. Campbell-Savours: Transport costs must have implications for regional policy. Wales is as much a region as is Scotland, the south-west or Manchester. These matters should be taken into account by the Government when they set taxes for what are, in effect, infrastructure services in our areas.
      Dr. Marek: I do not want to talk about matters that should have been in the Bill, but I assume that the Treasury is taking account of the point made by my hon. Friend. We all have our views about whether diesel should be cheaper and excise duty abolished, with the extra cost being put on petrol.
      The Bill includes a comprehensive set of tables. If one compares the rates in the Bill with those in previous Finance Bills it seems that much that was raised was ad hoc. Some things might have been raised in one year and others in another year. The top of a column might have been raised by £25 for the first five entries and by £45 for the next five entries. With reference to page 99, Table C(1) the bottom five entries might have been raised by £60 or £70 but no coherent strategy is evident as to what the Treasury was trying to get at.
      The Bill is before us, and there is nothing that we can do about it now. I am not happy about it because I do not understand the system. I hope that the Treasury will be able to liaise with the Department of Transport to produce a set of principles by which we can be guided.
      Mr. Campbell-Savours: Is my hon. Friend aware of the special procedure with regard to the introduction of some Bills whereby evidence can be taken prior to a Bill being considered in Committee? Would that not have been a good area in which to proceed on that basis?
      Mr. Deputy Speaker: Order. I hope that the hon. Gentleman will not pursue that matter on Third Reading. He knows that the House is required to consider what is in the Bill, not the procedures that led to it.
      Mr. Campbell-Savours: If I may complete my intervention—
      Mr. Deputy Speaker: I thought that I had indicated to the hon. Gentleman that he was out of order.
      Dr. Marek: If my hon. Friend wishes to be in order, I will of course give way in due course.
      I deal next with VAT on newspapers, which I regret. This is not the type of thing that Labour would have done if they had been in Government. The newspaper industry was very worried about the provision. It forced it into two sections, the national press on one side and the local press on the other. The local press is not particularly healthy. It survives, and we have a very good local press, but it lives on shoestrings and cannot afford a large increase in cover price. Before the Finance Bill was published, it was feared that VAT might be put on the cover price of newspapers. It was not, for which I am thankful. However, VAT has been put on advertisements.
      I cannot object very strongly to the imposition of VAT on advertisements, but I do object to the imposition of VAT on classified advertisements, by which people announce the birth of a son or daughter or a death, or an article for sale. The article offered for sale often is worth only £2 or £3, and the advertising cost must be about 80p which, with VAT 92p. If to that amount has to be added another 15 or 17p for the cost of a stamp, the exercise is made that much less economic. I am somewhat mollified by the fact that the Government, having put VAT on classified advertisements, are not receiving letters from newspapers, including local newspapers, to the effect that they will close down because they are experiencing serious problems. However, newspaper people are unhappy about what is happening.
      Mr. Campbell-Savours: My hon. Friend might want to extend the argument because he will recognise the major switch from direct to indirect taxation in the last five years. In 1979 the Conservatives went into a general election—
      Mr. Deputy Speaker: Order. We are discussing the Third Reading of the Finance Bill, not its historical background.
      Dr. Marek rose—
      Mr. Campbell-Savours: My hon. Friend made a statement and I was referring to the historical background because it was in order for me to suggest that there is a link between the Government's decision to raise indirect taxation and to reduce direct taxation, which is what they have been doing, although both types of taxation have increased. Will my hon. Friend comment on the fact that little things like VAT on fish and chips introduced in the last Budget, which was referred to—
      Mr. Deputy Speaker: Order. The hon. Gentleman must not comment upon last year's Budget. We are discussing this year's Finance Bill and we must stick to that.
      Mr. Campbell-Savours: On a point of order, Mr. Deputy Speaker. During discussions on this matter repeated references have been made to Government decisions on VAT, and in particular to the imposition of VAT on fish and chips. Reference was made to that because damage was inflicted on a particular sector. The argument about—
      Mr. Deputy Speaker: Order. On Third Reading debate is restricted to what is in the Bill. Discussions at previous stages are not relevant. The discussions to which the hon. Gentleman refers are not relevant. Debate must be about the content of the Bill.
      Dr. Marek: The Bill has been discussed at length so I do not want to detain the House much longer, but I want to make one or two further points as briefly as possible.
      There has been a shift to indirect taxation away from direct taxation. The income tax bands and personal allowances have been raised over the inflation rate so that those people who are at work benefit — over 4 million are not at work and cannot do so. However, the benefits are taken away because of the absurdly high interest rates caused by the Government's idiotic monetarist policies. The advantages for people with mortgages are nullified by the Government's economic policies.
      Despite the shift from direct to indirect taxation, overall taxation has gone up under this Administration.
      The capital gains tax changes were made by the Government late in the day. The provisions making those changes were tabled so late that I saw them for the first time only yesterday. I did not understand them when I read them then, and I do not fully understand them now. Time did not permit hon. Members to examine those provisions carefully or to take professional advice. Thus, we do not know if they are defective or if we could have improved them. It would have been better for the Government to have left such a change until, say, next year. Alternatively, they should have thought the matter through earlier, and tabled the necessary provisions in good time.
      Mr. Campbell-Savours: My hon. Friend may recall that in recent years there have been repeated capital gains tax reductions. In each case we have pressed Ministers to say how many people would be affected by, and the value of, the reductions. On each occasion when figures have been given, the Government have underestimated the revenue loss. When moving their amendments today, the Government refused to say how many people or how much revenue would be involved. They only said that the effect on the revenue would be negligible. Does my hon. Friend agree that next year we should table questions before the Finance Bill—
      Mr. Deputy Speaker: Order. One Finance Bill at a time, please. We are dealing with this year's, not next year's, Finance Bill.
      Dr. Marek: My hon. Friend has, in part, made my speech for me. I shall not comment further on what he said or I would be out of order. The Chief Secretary said, I am sure sincerely, that he was unable to give an estimate of how much additional money would stay outside the Treasury's net as a result of the capital gains tax changes. Because the amendments to make those changes were tabled so late, we have had no real chance to form an opinion, and that is a major reason why the Opposition voted against them.
      We have had this year a Budget for the rich. It is not designed to benefit the unemployed, single-parent families, pensioners or the disabled. Much of the Finance Bill is concerned with tax reliefs and incentives for a small minority of people. However, it does not do as much damage in that it does not go as far down that road as last year's Budget. Nevertheless, it takes a similar line and,
      1232
      because of that, I should like to vote against the Bill. But the hour is late and chances are that many hon. Members have gone away to sleep.
      Opposition Members do not like the Budget and we would not have introduced such measures had we been in office. I am sure that within two years there will be a radical change in Budgets. Members of the present Administration will be sitting on the Opposition Benches and the Labour party will be producing its first Budget. I am confident that that will happen. Britain has almost been ruined under this Government. The Labour party will save it within two years.
      1.20 am
      Mr. Campbell-Savours: It seems that the House is most eager to hear what I have to say! Therefore, I shall speak briefly, although bluntly and to the point. The measure of the Budget is the assessment of it in my constituency by industrialists, trade unionists and the general public. Over the past five years, industrialists in the northern region, especially in the Workington constituency, have had what can only be described as a hell of a time. Throughout my constituency, factories have been emptied; whole industrial estates have been laid bare; new plants, opened under Labour in the 1960s, have been shut; and the 3,000 jobs created under Labour Administrations in the 1970s have been wiped out in net terms.
      Dr. Marek: I apologise to my hon. Friend for interrupting him when he is referring to a serious set of statistics. I hope that he will not forget the extra 50 or so redundancies at Cinzano that the Government have declared tonight.
      Mr. Campbell-Savours: I am glad that my hon. Friend said that the Government had "declared" those redundancies, because that reflects precisely my constituents' feelings about the loss of large manufacturing units in west Cumbria. They blame the Government.
      The people, many of whom voted Conservative in 1979 and 1983 increasingly recognise that the Budget has failed to meet their expectations of what would come about with the election of a Conservative Government. In Brecon and Radnor a couple of weeks ago, I found that wherever I knocked on the doors, the people were talking about the uncaring nature of Government policy. I was stunned by their knowledge of the contents of the Finance Bill. They identified the Budget's deficiencies. They saw it not as a Budget for jobs, as the Government had presented it, but as a Budget for unemployment, and they were right. Every one who watches the Friday morning BBC programme and examines the net—
      Dr. Marek: It is not only a Budget for unemployment. The national insurance changes mean that it is a Budget for low wages for those in employment. It is a doubly damaging Budget.
      Mr. Campbell-Savours: My hon. Friend is absolutely right. We all know that the Government intend to farce wages down in many sectors of the economy. The argument about market forces placing pressure on wages is deployed only to reduce the wages in the regions, especially in areas such as mine in west Cumbria. We reject that approach. People in the north of England who have always voted Conservative also reject it, because

      1233
      they believe that it is unfair. They do not believe that people's lives should be played with as this Government have done in successive Finance Bills.
      My constituents wanted a Budget that would open new factories, increase demand, stem the flow of imports, create new jobs, increase wages, raise living standards and fund additional social services and public provision generally. They have seen the reverse. Those things will not happen this year, and, if what the Chancellor said last Sunday is to be taken at face value, not even the Brecon and Radnor by-election result will change the course that the Government have set for themselves. The Opposition can only appeal for a re-examination of what is happening and a re-examination of the Government's future policy. Unless the Government move on that important front, all we can see is more and more misery in our constituencies.
      Dr. Marek: This will be my last intervention, but my hon. Friend has made an important point.
      Mr. Deputy Speaker: Order. I should be grateful if the hon. Member would address the Chair rather than present his back to me.
      Dr. Marek: I apologise, Mr. Deputy Speaker. My hon. Friend made an important point because this Administration have been in office and presented Budgets for six years. This Finance Bill contains nothing new. The Government are caught up in their policy of trying to bring down inflation, which they see as their first priority, maintaining high interest rates and cutting public expenditure. They are caught within their economic dogma. Their Budgets cannot therefore be any different. On reflection, it is what many of us expected. Will my hon. Friend argue for them to break out of their straitjacket, admit that their policies are failing and have new economic policies and a new Finance Bill?
      Mr. Deputy Speaker: Order. I hope that hon. Members will not start talking about a new Finance Bill. One Finance Bill at a time is sufficient. Let us discuss the one that is before the House.
      Mr. Campbell-Savours: We are discussing a Finance Bill that was rejected by a number of Conservative Members. They said that the Bill was inadequate and asked for reflation. That is my case.
      Question put and agreed to.
      Bill accordingly read the Third time, and passed.

  Unemployment (Isle of Wight)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Neubert.]
  1.27 am
  Mr. Stephen Ross: I feel that in some ways I could have continued the Third Reading of the Finance Bill, because, although I have crossed swords with the hon. Member for Workington (Mr. Campbell-Savours) on many occasions, I agreed entirely with the remarks that he made. I intend to make somewhat similar remarks.
  I want to talk about the problems of the continuing rise in unemployment on the Isle of Wight. I welcome the fact that the Under-Secretary of State for Employment, the hon. Member for Eltham (Mr. Bottomley), who has suffered as I have until this late hour, is here to reply because, as is well known, he and his wife, the hon. Member for Surrey, South-West (Mrs. Bottomley), know my constituency and its problems well.
  As the Minister will be aware, the Isle of Wight has consistently sought assisted area status. The local authorities helped by local businesses, made what they thought was an especially strong case only last autumn.
  As predicted then, unemployment has continued to rise and it reached a peak of 17·3 per cent. in February this year. Since 1980, over 3,000 jobs have been lost in manufacturing in my constituency, and at the same time the tourist trade upon which we rely has fallen by about 25 per cent.
  On the industrial front, the long-term trends have shown a continuing decline. More men and women were out of work in June this year than in 1984. That is when we are approaching the height of the season, when the rate decreases for about three months. It is currently — I know that this will be pushed back at me — running at 12·1 per cent. which is below the national average but still much higher than the average for the south-east as a whole. We have the highest unemployment in the south of England.
  Last winter, male unemployment in Ryde reached 26·7 per cent. and in Shanklin it was no less than 32·4 per cent. Those figures are reminiscent of Northern Ireland and no one should be complacent about them. Worse is about to descend upon us, because on or about 16 August 160 more jobs will go at Fibre Resin Developments in East Cowes when the firm closes its doors, despite a full order book, mostly from television manufacturers and the motor industry. I quote from the Portsmouth Evening News of 3 July last:
  "160 lose jobs as buy-out collapses
  Hopes of a jobs lifeline for a doomed Isle of Wight factory have been dashed.
  The management of Fibre Resin Developments, of East Cowes, has confirmed that hopes of buying-out the plant have vanished and it will close next month with the loss of 160 jobs.
  While Fibre Resin had a healthy order book its parent company, the Unitech Group of Reading, claimed fierce competition ruled out profit in the production of moulded components, particularly for televisions."
  I understand there is only one other manufacturer of these products in the United Kingdom. The article goes on:
  "Fibre Resin Managing Director, Mr. John Hand, and colleagues originally hoped they could find a way of turning the work into profits but now say there is only the possibility of a venture that would provide work for 'a few' employees.

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  They ruled out the possibility of a management takeover for the same reasons that the parent company decided to pull out of the Island — high transport costs and less demand for some of the company's TV products."
  A company which is not Isle of Wight-based but which is a subsidiary of a larger company, either American or United Kingdom, and which operates on an offshore island, when it retracts, looks to see what plant it has in diverse areas of the country, particularly an offshore island, and we always suffer. To bring component parts or basic materials to the island and take them back again to the mainland costs a great deal of money. It costs something like £100 for each vehicle that comes across from the mainland.
  To add insult to injury, the Desmond Norman aeroplane company is moving its base from Sandown airport to Cardiff with the aid of loans totalling £2·3 million, including £500,000, subscribed in ordinary preference shares, from the Welsh Development Agency. I note from last Friday's Financial Times that the agency is claiming that it has built a portfolio of around £27 million and by the end of this year it expects this will have risen to between £37 million and £40 million, invested in industrial concerns of one sort or another. Desmond Norman will, in the process, increase his current work force to about 134.
  I am sure the Minister must agree with me when I say that we could have done with such a boost. We cannot offer the Desmond Norman's of this world attractive terms of that dimension. We wish him well. We are sorry to lose him, but we feel bitter about his departure, particularly as the skills are undoubtedly available to him on the Isle of Wight. The Firecracker, which we all know was one of the competitors for the replacement of the jet Provost, was designed and built on the Isle of Wight. Desmond Norman is well known as the designer, with John Britten, of the original Islander aircraft, the first 240 of which were built mostly by the British Hovercraft Corporation, but built on the island. On that self-same airfield, Mr. Richard Noble, the holder of the world land speed record, is also constructing a small plane and the county council, along with the Development Commission, have given him financial backing. But will it be enough? The aid that we have been able to provide pales into insignificance compared with the Welsh package for Desmond Norman. One can anticipate what Mr. Noble must be thinking as he sees his competitor on the other side of the airfield picking up such a large sum. It makes nonsense of the current assisted area designation.
  As a member of the Select Committee on Transport, I know that marine pilotage is also under review. Some 28 of such pilots live on the islands, and some of their jobs could be in jeopardy. I could go on. The future, despite our efforts, which I believe to be praiseworthy — the Minister may confirm that, and his colleague, the Minister for Information Technology, who was on the island only last Monday thought so — is not bright. We have tried our best through both local government and local businesses to improve the position, but nevertheless, we seem to be losing.
  I have only to finish by mentioning Westland, and its subsidiary, the British Hovercraft Corporation, to give an illustration of another firm that is causing us some concern. That company is our biggest industrial employer, and, as we know, is going through a difficult patch. I shall
  1236
  not say more, because the subject was duly aired only last Monday, but the importance of BHC to the economy of the Isle of Wight cannot be over-emphasised.
  We long ago came to the conclusion that tourism and leisure are our natural growth areas, but to make this a reality, we desperately need a carrot to offer the specialist investors. Small grants from the English Tourist Board to hoteliers and others are greatly to be welcomed, but the seaside resorts of Ventnor, Shanklin, Sandown, Ryde and the sailing centre of Cowes need much more than that.
  I have to return to the Principality, because when we look at what is given to places such as Rhyl and Cardiff through the EEC, we are made envious. No completely new hotel has been built in my constituency since the war. While we now have some excellent leisure centres, one or more must become of national importance if our summer season is to be substantially extended.
  Cowes was again this year the home of the prestigious Admirals cup racing, but it particularly needs to upgrade its shore facilities. Representations on this subject have been made to me by senior officials in yachting, and I know that it is true. We must try to get developers with experience in leisure to take an interest in the island and invest there, but to do so we have to be able to offer them some encouragement. They will not come unless there is a carrot. Last year, our rate support grant settlement was the worst of any in the country, so local Government has even less room for manoeuvre than before.
  Some will say that I have said all this before and made little progress, so why do I go on about it? The answer is, "What else can I do?" Politics is the art of the possible, and it is perhaps true that if one says the same thing often enough and long enough—I have learnt that in politics one has to go on saying the same thing over and again, however boring it may be—it will eventually attract the attention of somebody who matters. I am putting down another marker on behalf of my constituents. I hope that the Under-Secretary will do all that he can to persuade his colleague of the urgency of cur case, and the need for a more sympathetic approach to our economic well-being.
  1.38 am
  The Under-Secretary of State for Employment (Mr. Peter Bottomley): I welcome the opportunity to listen to the hon. Member for Isle of Wight (Mr. Ross). I take seriously his final remarks about the need for persistence, and about politics as a process. If any Minister responded to the case that he outlined with a pat answer, that would do politics a disservice. I am talking not about party politics, but about the natural process of politics, which is that matters are raised in the House, through deputations and to Ministers when they visit constituencies such as the Isle of Wight. It helps to develop Government policy and approach, not only to legislation, but to other things that the Government can do, such as transferring money from one set of pockets to another. The hon. Gentleman referred to some of the incentives in Wales. Like the hon. Member, I would have liked this debate to take place earlier in the evening. I do not agree with him that the remarks of the hon. Member for Workington (Mr. Campbell-Savours) were that germane to the previous debate or to this one.
  The hon. Gentleman mentioned the Admirals Cup. Perhaps it is a good omen for Britain and the Isle of Wight that one of the competing yachts was called Rubber Duck and has been re-named Phoenix. The House will recognise the efforts the hon. Gentleman has put into his

  1237
  constituency. Perhaps what is needed for the Isle of Wight is a resurgence of what was achieved in the early 1970s in a slightly different economic climate, when the manufacturing base expanded. It expanded because small and medium-sized firms came to the Isle of Wight. They came there for the sort of reasons outlined in the county council's case, which it put forward last year for assisted area status. It talked about the kind of people on the Isle of Wight and the kinds of skills they have. I should like to refer the House to the biography of Uffa Fox. During his early life he changed from one job to another, and that shows the sort of adaptability that is characteristic of the Isle of Wight.
  In these summer months of July and August, it is important not only to talk about the unemployment in the area, but to talk about the good sides of the island. The hon. Gentleman courteously referred to the links that my hon. Friend the Member for Surrey, South-West (Mrs. Bottomley) and I have with his constituency. The numbers of people who read the County Press and the other newspaper in the Isle of Wight grow enormously during July and August. I hope that the headlines following this debate and other headlines which will appear in the island's newspapers during the weeks when Cowes is full of people who may be able to bring in investment into the island, will be about the adaptability of the work force in the Isle of Wight, about the successes of the Isle of Wight's schools and the kind of environment that makes people very keen to live there if they could find jobs. I hope they do not just talk about the difficulties of transportation and use the word peripherality, which is somewhat new to me. Perhaps we could look at the Isle of Wight as the place it could become, the Silicon Island of Britain. People talk about Silicon Glen and about the high-tech corridors down the M4. There are many products connected with new technology where transport costs become less significant, and where the attractions of a place like the Isle of Wight can get people not only to build their own firms there, but to put into the island some of the manufacturing and development and design processes that are so important to the modern industry of the future.
  Employment in the island rests on what used to be called the three legs, but I suppose that there are actually five. The traditional ones are tourism, light industry and agriculture and fishing. To those I would add the two greatest areas of employment, which are public administration and retail distribution. It is worth noting that many of the developments in the area have made it possible for more people to do their shopping on the island. They do not have to go to Portsmouth or Southampton for that purpose. I will not answer the hon. Gentleman in detail on the pattern of unemployment during the year, because it is obvious to anyone who knows the island that it suffers severe unemployment during the winter months, and the reduction to below the national average during the summer is a seasonal trend.
  I will pass on to my right hon. Friends in Government some of the points which are more properly directed to them. As one example of politics being not only the art of the possible but the art of making possible what is right, may I say how much I welcomed the response from the Isle of Wight county council to the Government's White Paper last year on changes in regional aid and assistance, gearing much more to job creation, extending aid to include parts
  1238
  of the service sector as well as manufacturing, trying to go for increased selectivity and a review of the assisted area maps. As the hon. Gentleman pointed out, the Isle of Wight has not been successful in getting its application approved in this process. As he and I know, politics is a moving business, and the representations made by the county council are important. Having had the chance of looking at the video film that was shown to my hon. Friend the Minister for Information Technology, I know that the Isle of Wight does manage to demonstrate many of the things that make it attractive not only in a physical sense but in a manufacturing sense. It is for that reason that the island boasts, even with the intended move of the manufacturing of NDN planes to Wales, more aircraft manufacturing businesses than almost the whole of the rest of the country put together. That shows that there are people on the island, most of them who have been there for a long time but some who have come in, who believe that it is a place where they can get their acts together and start developing their own businesses.
  I add my weight, for what it is worth, to the efforts of the Isle of Wight tourist board which manages—much of the money being raised on the island — to have a budget larger than the Southern tourist board which covers a far wider area. I know from personal experience how much many of the people involved in the hotel, catering and tourist industry put in to promoting the Isle of Wight. There is much more that they can do, and my right hon. Friend the Minister without Portfolio, whose portfolio, if it does not sound too paradoxical, includes looking at tourism, will be coming forward with plans and proposals and he has been providing a focus for Government efforts, because the development of this side of the service sector is extremely important to the Isle of Wight.
  As for the Development Commission, the hon. Gentleman said characteristically that rural development area status for the Isle of Wight had been important. It is also worth recognising that the island can go further. Without straying into the areas of responsibility of the local authorities on the island, I may say that it is worth people thinking whether they are always gearing their decisions towards the promotion of employment and tourism as much as they might. I am not an expert, but I recall an example two years ago of a proposed hotel development in Cowes which, it was said in public though there may have been other reasons, could not go ahead because inadequate car parking spaces had been provided. If much of the hotel accommodation needed in Cowes is tied to yachting, many people may be arriving by boat and wanting to sleep on land, and they will not bring their cars stuck on the fronts of their Admirals Cup yachts.
  Mr. Stephen Ross: There were other reasons why that proposal did not meet with everyone's approval.
  Mr. Bottomley: I am sure that is right. I used that as an example of how people not only can ask the Government to reconsider how they can help but can continue themselves to look for an environment for the promotion of tourism and industry.
  I quote from the Isle of Wight's case for assisted area status. It says on page 14:
  "Within the broader national policies for encouraging industrial development there is scope at the local level to further these aims. The Isle of Wight County Structure Plan, as approved by the Secretary of State in March 1979, laid particular emphasis on the need to increase employment opportunities. The County Council, in conjunction with the Borough Councils, the

  1239
  Development Commission and CoSIRA, have been vigorously implementing the strategic employment policies through land-use planning, the active promotion and encouragement of industry and the provision of sites and buildings and also by establishing a single centre for advisory services to small firms."
  I do not think that anyone would claim that people on the Isle of Wight are not doing the best they can, and I know from my own experience that both in the voluntary sector and at the local authority level people do their best to work together and, while having occasional differences of politics, dedicate themselves to the wellbeing of the Isle of Wight. It is one of the advantages of being a self-contained unit that people actually live and work in the same place rather than the difficulties faced in so many other constituencies where some of those involved live some way away from where they work.
  The Development Commission has helped by funding a number of projects on the island, including an imaginative project to bring Souter's boatyard at Cowes back into productive use with a potential to accommodate more than 400 jobs. The commission, with the local authority, is also preparing a rural development programme for the Isle of Wight, which will offer a way to co-ordinate local and Government assistance to the island during the next 10 years. The hon. Gentleman referred to rate support grant. One of the areas in which the Isle of Wight has done better than other areas, has been transport grants. The island has had some of its special needs recognised, which I hope is welcomed there.
  I pay tribute to the work done by CoSIRA, which works closely with the island's enterprise agency. During the past 12 months it has helped 21 firms to obtain more than £1 million in loans, and has done much to support community development. On the wider scale of the European social fund, a welcome recent development is granting the island priority status for support for training and employment schemes from 1 January 1986. Now many more types of scheme can receive funding than previously. The Department of Employment has already made contact with the Isle of Wight County Council about that. I hope that the Council and other organisations can make applications to, and benefit from that fund.
  I am not saying that sufficient has been achieved, but many of the developments that the Government have been promoting are of assistance in the Isle of Wight and throughout the country. The enterprise allowance scheme helps people who have been on benefit for some time to set up in business. It is a powerful stimulant to the creation of new small businesses, and I recommend anyone who has been on benefit or under notice of redundancy for some time—if a person has been on benefit for 13 weeks, he or she will qualify if he or she can show £1,000 of his or her own, or access to that sum — to apply for that scheme, under which he or she can receive an allowance of £40 a week for a year. Our experience shows that 75 per cent. of businesses set up under the scheme still exist 15 months after they started — that is, after the allowance has run out—and that more than half of them have created jobs, not all full-time jobs, for others. Sixty jobs for every 100 businesses operating after 15 months shows that a great well of enterprise is waiting to be tapped. The enterprise allowance scheme is one way of doing that.
  The scheme has been expanded by a further 25 per cent., and the Isle of Wight will share in the extra places being made available. Examples of the scheme from the
  1240
  island include hand-made pottery, windsurfing promotion, the sale of second-hand classical records, a magician, a successful tea room and a hairdresser. I am not suggesting that everyone should compete in those fields, but that shows the range and breadth of ideas being brought forward.
  The hon. Gentleman does not need me to talk about the youth training scheme. It is vital that young people, who are important to the Isle of Wight, are not forced to emigrate, but can build up their skills and work experience on the island, and be available to take jobs that become available. YTS provides a rung on the employment ladder. The developing quality training will help them, as will the move towards a two-year YTS. It is pleasing that last year 70 per cent. of those leaving YTS on the island went into jobs. Our experience throughout the country shows that it is a valuable way for people to build up their experience and ability to be employed. The same sort of story cart be told about adult training.
  The community programme provides special help to the long-term unemployed. When the House goes into summer recess I shall visit the Isle of Wight to follow up some of the hon. Gentleman's remarks and for my own pleasure and education. I shall do my best to promote some of the ideas to which I have referred when meeting people on the island. I shall do what I can to encourage the advertising of the island, especially during the peak summer months. It seems ridiculous that so many people, when they have the chance, go shooting off abroad for their holidays when the range of pursuits for families on the Isle of Wight is so great and the attractions so well known. There is net immigration to the island of those aged 50 years and over, and if the island is attractive to members of that age group, many of whom are returning to the island after a working life away, it should be attractive to those who have the opportunity of taking a business to it or developing a business while there.
  None of this is to deny the possibility that some of the aid that the Government provide to other areas is harming the Isle of Wight. Much of the diversion of public revenues to special assistance in certain areas costs jobs because of the nature of taxation and tends to divert jobs. The hon. Member has rightly drawn attention to an example that may be of benefit to Wales, but may be of harm to the Isle of Wight.
  I recognise the points that he made briefly tonight but at greater length two nights ago about the possible impact on the island of developments at Westland. I pay tribute to the staff of BHC for the way in which it has helped to diversify the work that it has managed to achieve and its order book. I hope that the company will prosper and that its example will help others to do the same.
  I recognise the importance of what the hon. Gentleman said at the beginning of his speech. I attach importance also to my initial comments. The hon. Gentleman has asked that his arguments be considered properly and I shall do that within Government. I hope that it will be possible in a year's time to have a similar debate so that we can discuss some of the successes as well as some of the problems that remain to be tackled successfully. The Government will do the best that they can on the Isle of Wight and throughout the

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  country to raise the levels of employment and economic activity and to ensure that we represent the people whom we are here to serve in the best way possible.
  Question put and agreed to.
  Adjourned accordingly at three minutes to Two o' clock.

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Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Leicester.
The Earl of Ypres—Took the Oath.
Lord Beaverbrook—Sat first in Parliament after the death of his father (who disclaimed the Barony of Beaverbrook on 11th June 1964).

Chile: Arms Sales Policy
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 their attitude is to a reimposition of an arms embargo on Chile.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, we believe that a total embargo would be ineffective, but we take great care to ensure that British firms do not sell items which, in our judgment, are likely to be used for internal repression.
Lord Hatch of Lusby: My Lords, I should like to ask the noble Lord whether or not it is the case that a demonstration model of the gun-carrying half-track vehicle, the Centaur, has been sent to Chile with a view to further sales.
Lord Trefgarne: My Lords, yes. As the noble Lord says, an export licence was granted for the demonstration model. We have not received any application for a full export licence for Centaur vehicles to Chile. Any such application would be considered carefully, taking into account all the prevailing circumstances.
Lord Avebury: My Lords, are not the Government making an arbitrary distinction between arms which can be used for internal repression and those which can be used for defence against an external threat? Would not the noble Lord agree that many weapons fall into both categories? I am thinking, for example, of jet aircraft manufactured by British Aerospace, which can be used for the purpose of training pilots but which can also, by a very simple modification in the field, be changed to have a ground attack role which might be used against civilian populations. Therefore, would not the Government consider that, in line with their policy of supporting the special rapporteur on Chile, they should reimpose the arms embargo to demonstrate their displeasure at the current state of human rights in that country?
Lord Trefgarne: My Lords, I am not sure that the type of embargo which the noble Lord has in mind would actually achieve the end that he seeks. We repeatedly and continuously make clear our views on
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abuses of human rights wherever they may occur, including in Chile. However, if we were to proceed along the route which the noble Lord suggests, I do not think that we should carry the same force.
Lord Boyd-Carpenter: My Lords, would not the type of ban which the noble Lord opposite has suggested simply have the usual effect of these bans—in other words, we should lose the market and Chile would get the same arms from our competitors?
Lord Trefgarne: My Lords, history would suggest that my noble friend is quite right.
Lord Oram: My Lords, is not the Chilean Government's record on human rights—which was already deplorable before the declaration of the state of siege last November—becoming very much worse, including murders by death squads? Therefore, is it not quite wrong for us to supply arms of any kind to such a regime? How is it possible to differentiate those arms which are ostensibly supplied for external defence, but which in fact are used for internal repression?
Lord Trefgarne: My Lords, I offered no defence for the abuses of human rights which occur in Chile, or indeed elsewhere. We make our views known to the Chilean Government on appropriate occasions. On the question of the state of seige to which the noble Lord referred, I understand that the state of seige was lifted recently by the Chilean Government and we shall be watching to see how matters develop following that. However, on the wider question on how one differentiates between arms destined for one purpose or another, I point out that one needs to recall that the UN Charter, no less—I think that it is Article 52—confers the right of self-defence upon all the signatories to that Charter. That is a right which we ourselves enjoy and one which we would not wish to disturb in others.
Lord Hatch of Lusby: My Lords, will the noble Lord take the opportunity of dissociating himself from the view of his noble friend who spoke earlier, that if a repressive regime is to receive the weapons to exercise that repression, it does not matter whether we supply them—provided we get the market—or whether somebody else supplies them, and that we are guiltless because if we do not supply them then somebody else will do so? Will the noble Lord also say whether or not there is any point in sending the demonstration model which I mentioned in my first supplementary question unless that demonstration model is to be taken up and supplied? Do the Government contemplate giving a licence for the supply of the Centaur? If so, do they not agree that that is assisting the repression of human rights which the noble Lord has said in so many words the Government deplore?
Lord Trefgarne: My Lords, we have not yet taken a decision on whether the Centaur vehicles, to which the noble Lord refers, should be exported to Chile. Indeed, we have not yet received an application; nor, so far as I know, have the suppliers received an order for the vehicles. We shall want to take our decision in the light of all the factors relevant when, and if, those events occur.

Allotment Gardens: Thorpe Report
2.43 p.m.
Lord Wallace of Coslany: 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 whether they intend to introduce legislation to implement the Thorpe Report on allotment gardens during the present Parliament.
Lord Skelmersdale: No, my Lords.
Lord Wallace of Coslany: My Lords, is the noble Lord aware that that is a very poor Answer for the £100 which I understand it costs for a Question? I nearly asked for my money back. Is the noble Lord aware that that Answer is not good enough? Several successive Governments have promised to bring in comprehensive legislation based on the Thorpe Report. Is he further aware that I have in my possession a letter dated April 1980 in which the Department of the Environment said that, following the Minister's statement in Committee, it was considering introducing,
"in the future, a comprehensive Bill on recreational gardening"?
Is the noble Lord further aware that, apart from whatever he may have in mind over the Thorpe Report, it is necessary at the present time to introduce some consolidation of the present allotments law, which at the moment is antediluvian in character and needs to be brought up to date?
Lord Skelmersdale: My Lords, I answered the Question on the Order Paper. In regard to the Department of the Environment's letter to which the noble Lord referred, I should point out that my right honourable friend the then Minister of State at the Department of the Environment said on 12th February 1980:
"This reforming, radical Government is looking at it"—
meaning legislation on the Thorpe Report—
"but I cannot give any commitment upon it."
We have looked at it and we have decided that it is not appropriate for modern times.
Lord Graham of Edmonton: My Lords, can the Minister be a litttle more positive than that? Does the Minister not recall that when the Bill of my noble friend Lord Wallace of Coslany left this place it was blocked in the other place by the Government's spokesman doing what he was entitled to do—that is, object to the Bill being read a second time? Will the Minister reflect on the value to millions of people who will be able to take part in, and extend their ability to enjoy, their recreation if some progress is made and some legislation brought forward? There is a great need for more food to be grown in this country, as well as for enhancing the opportunities for ordinary people—who may well be confined to high-rise developments—to enjoy a little recreation on their own allotment.
Lord Skelmersdale: Yes, my Lords. I agree with the background to the supplementary question provided by the noble Lord, Lord Graham, but I always made it clear on behalf of the Government that recreational gardening is a matter for education and not for legislation.
Lord Wallace of Coslany: My Lords, further to the noble Lord's reply to me when he quoted from the Minister, can he assure me that the Government have not given up any idea of being radical and reforming, or have they just packed it in?
Lord Skelmersdale: My Lords, since we have just been through in this House a local government measure taking up several weeks of your Lordships' time, I would regard that as both radical and reforming.
Lord Leatherland: My Lords, may I ask the Minister whether he recalls referring to a reforming, radical Government? May I further ask him what right he has to speak on behalf of a previous Labour Government?
Lord Skelmersdale: My Lords, I was not aware that on 12th February 1980 the Government of this country were a Labour Government. It was that Government to whom I was referring.

The Electricity Supply Industry
2.48 p.m.
Lord Stoddart of Swindon: 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 discussions they have had with the chairman of the Central Electricity Generating Board concerning the privatisation of the electricity supply industry.
The Minister of State, Scottish Office (Lord Gray of Contin): My Lords, the Government have not discussed the privatisation of the electricity supply industry with the chairman of the Central Electricity Generating Board since they have no present plans to privatise the industry.
Lord Stoddart of Swindon: My Lords, I am grateful for that reply. Obviously the noble Lord has seen the remarks of Sir Walter Marshall, to whom we shall give a warm welcome to this House on 30th July. Does the Minister not think it rather unwise, if the Government have had no discussions with the chairman of the industry, for that chairman to advocate the privatisation of the electricity supply industry, bearing in mind that this is a highly contentious political issue? Perhaps he would like to take the chairman gently by the arm and advise him of that fact. May I ask the noble Lord to state once again categorically that there will be no legislation during the present Parliament to privatise the whole of the electricity supply industry, or any part of it?
Lord Gray of Contin: My Lords, I certainly would not give the noble Lord the assurance that he seeks. He will see that my Answer to his original Question, when he studies it in Hansard, was extremely forthcoming and factual. So far as the remarks made by Sir Walter Marshall are concerned, Sir Walter Marshall is well able to defend his own remarks. I have no doubt that your Lordships will be entertained to many instructive and interesting speeches from him when he joins us shortly. I would not dream of taking him to task on this.
I do not think that the noble Lord was quite correct in saying that he had advocated privatisation. He made reference to privatisation in answer to one of the questions put to him, and he is of course perfectly entitled to air his views in the way in which he did.
Lord Hatch of Lusby: My Lords, in view of the fact that the Chancellor of the Exchequer has given a pledge that income tax will be reduced during the life of this Parliament, and as the Government have found it impossible to collect sufficient money from North Sea oil and the sale of national assets so far, is it not the case that the word "present", which the Minister used in his answer to my noble friend Lord Stoddart of Swindon, has a somewhat sinister implication? Is it not likely that—
Noble Lords: Speech!
Lord Hatch of Lusby: Is it not likely that, along with the sale of gas, the Government will need to sell electricity also as a public asset to secure the revenue to pay out the tax bonuses which the Chancellor has promised before the next election?
Lord Gray of Contin: My Lords, even in my most generous frame of mind it would be difficult for me to answer briefly that conglomeration of questions. Indeed, they are far removed from the original Question.
Lord Grimond: My Lords, at any rate will the Minister confirm that income tax will be reduced during the present Parliament?
Lord Ezra: My Lords, can the noble Lord indicate to us whether, if and when the Government decide to privatise the electricity industry, they will do it en bloc, as they are doing in the case of gas and as they have done in the case of Telecom, or whether it will be in some other form?
Lord Gray of Contin: My Lords, I am afraid the noble Lord has asked me a hypothetical question. All I can say is that if and when such a thought were to enter the mind of the Government then the noble Lord and those noble Lords who are interested will be given ample warning.

Nuclear Weapons: Accident Plans
2.53 p.m.
Lord Molloy: 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 whether they have made any provision, for instance through Civil Defence and related services, to deal with the situation in which a nuclear weapon is set off in the United Kingdom by accident or mistake.
Lord Trefgarne: My Lords, I can assure the noble Lord that there is no prospect of an atomic bomb-type explosion occurring by accident or mistake. Even the possibility of the release of the radioactive component of a nuclear weapon in such circumstances is extremely remote. Nevertheless, it is clearly prudent that there should be contingency plans for dealing with any such accident, however unlikely, and detailed arrangements exist for this purpose.
Lord Molloy: My Lords, I am grateful for the latter part of the noble Lord's Answer: that such plans exist. Can he tell the House whether the top levels of all our medical services and our scientific services have been involved in the awful peradventure of an accident? He assured the House that no such thing can happen; but would he care to consider that statement? If that is really so, there is no need for any action to be taken in the peradventure that an accident might take place.
Lord Trefgarne: My Lords, I do not think that I can go further than the main Answer I gave in answer to the second part of the noble Lord's supplementary question. However, in answer to the first part of his question, I can assure him that we engage the very best expertise available in these matters and that is why I can give him the reassuring answer that I do.
Lord Graham of Edmonton: My Lords, I wonder whether the Minister can be reminded of the organisation that I have already suggested should receive his support. I refer to the initiative shown by the National Council for Civil Defence. The president is the noble Lord, Lord Renton, who is at present in his place. That organisation is strongly advocating the depoliticising of Civil Defence. Is the Minister interested in building bridges among those authorities and councils who hitherto have spurned the efforts of the Government on what I would call the traditional Civil Defence line to take account of the kind of accident or hazard that can occur? If the Minister is anxious to make friends, I believe that this speech is a very good one.
Lord Trefgarne: My Lords, with repect to the noble Lord, our Civil Defence arrangements do not arise directly from this Question, which specifically relates to the movement of nuclear weapons. I do not think I can go further than the Answer that I gave to the noble Lord, Lord Molloy, but I agree with the noble Lord, Lord Graham, about the general desirability of Civil Defence.
Lord Renton: My Lords, does not my noble friend realise that the Question of the noble Lord, Lord Molloy, also could cover the possibility of terrorists setting off a nuclear weapon, albeit of a smaller kind? If that happened, would it not be the responsibility of the Government and local authorities, within the ambit of the all-hazards approach to dealing with emergencies in peace and war, to be prepared to handle such a situation?
Lord Trefgarne: My Lords, there are important security considerations which have to be taken into account in preparing our plans for the circumstance to which my noble friend refers. I can assure him that we have all those considerations in mind.
Lord Mayhew: My Lords, would the noble Lord not agree that in the event of a single, perhaps accidental, explosion a well-organised Civil Defence could do a great deal to limit death and injury on the fringes of the explosion? Would he not agree that councillors and peace campaigners who obstruct the development of Civil Defence would carry a heavy responsibility for avoidable suffering?
Lord Trefgarne: My Lords, I agree with the noble Lord that those in some local governments who oppose our arrangements in this area might have a heavy burden to bear if the worst were to happen. I can do no more than repeat what I said earlier to the noble Lord, Lord Molloy, that the prospect of an accidental discharge of a nuclear weapon is very remote indeed.
Lord Molloy: My Lords, is the Minister not aware that in addition to the point made by the noble Lord, Lord Renton, when we asked for assurances some 20 years ago—I beg the House to listen to this—in connection with the then remote possibility of the production of nuclear power we were informed that this was an impossibility? We know that those top scientists were devastatingly wrong. Will the Minister also acknowledge that the deliberate setting off and the testing of missiles has resulted in serious damage to human beings? Will he be prepared to accept that, despite the remote possibility of such a thing happening, nevertheless our country ought to be fully prepared for the terrible peradventure becoming a reality?
Lord Trefgarne: My Lords, I think that I can almost agree with the noble Lord. I have said that the prospects of an accidental discharge are so remote as to be almost capable of being ignored, but we do not ignore them. We make detailed arrangements to ensure that it does not happen and I can do no more than underline the Answer that I originally gave to the noble Lord.

Business
2.58 p.m.
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Transport Bill will be adjourned at approximately 7 p.m. for a short period and that during this adjournment the Deer (Firearms etc.) (Scotland) Order 1985 will be taken.

Plymouth Marine Events Base Bill
Read a third time, and passed, and returned to the Commons with amendments.
Shetland Islands Council (Omnibus Services) Order Confirmation Bill
Considered on Report.

Transport Bill
3 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Belstead.)
Lord Shepherd: My Lords, before the Question is finally put, perhaps I may say that the noble Lord, Lord Belstead, like all his colleagues, true to the traditions of the Front Bench, always seeks to be of help to your Lordships' House in considering legislation before it. The noble Lord was very helpful on Monday in giving an explanation as to what changes the Government had in mind in regard to Schedule 5. We fully understand the noble Lord's difficulties in having those amendments on the Marshalled List today.
However, later on Monday night, as the noble Lord himself is fully aware, certain information was given to me from as good a source as any as to possible changes that the Government had in mind in regard to the date of deregulation. The date of deregulation is a very crucial factor in our consideration of the Bill and particularly of Clause 6, which we shall be considering immediately after the Question is put. I was given full discretion to consult with my colleagues on this matter, and I have so done; but I hope that the noble Lord will feel that this information ought to be available to the Committee of the House. I wonder whether the noble Lord would care to make a statement.
Lord Belstead: My Lords, although we are not yet at Schedule 5—would that we were!—I quite understand why the noble Lord wants to hear just a word from me about the transitional arrangements, because it is they that all the operators and local authorities are concentrating upon for putting this Bill into effect. I hope that this is an indication that the noble Lord is looking forward to the day when the Bill comes into effect.
My answer to the noble Lord is that it is indeed the case that when the Bill left another place, although no undertaking of any kind had been given by my right honourable friend in another place that there would be any rethinking on the transitional arrangements, comments were made by experts in the field and we therefore thought that there should be some consultation; and that has been going on. The basis of that consultation has been as to whether the transitional period should be brought forward a little from 1st October in order to come into effect before the start of the school term.
But one is in a difficulty here because the start of the school term is not the same in England as in Scotland and there are problems so far as that is concerned. I

193
think that all I ought to add is that I believe we have been acting properly in consulting about the transitional period so that the Government can bring forward amendments to Schedule 5 for your Lordships' House, which after all is a revising Chamber. In order to do that we have been consulting; and it is very much to my regret that we have not yet been able to put the amendments on the Marshalled List. But I give an undertaking to the noble Lord, Lord Shepherd, that they will be on the Marshalled List next week.
Perhaps I ought to say to the noble Lord that I know that our thinking at the moment is that we would almost certainly be putting it to your Lordships that the date of deregulation ought to remain as it is at the moment in Schedule 5; but I think that we must see about that finally when we come to lay those amendments.
Lord Shepherd: My Lords, I am grateful to the noble Lord for the statement and particularly for the latter point which he made, which is certainly different from the one which I understood was made to me on Monday night.
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 6 [Registration of local services]:
[Amendment No. 39 not moved.]
Lord Teviot Lord Teviot moved Amendment No. 40:
Page 5, line 25, leave out ("in which there is a stopping place for the service").
The noble Lord said: I beg to move Amendment No. 40. I should like to speak also to Amendments Nos. 42 and 43.
Amendment No. 42: Page 5, line 29, at end insert:
("( ) the traffic commissioner has consulted every local authority in whose area the service is proposed and every chief officer of police in whose area the service is proposed and is satisfied after consideration of the relevant aspects of the service that the proposed service will not give rise to dangerous traffic conditions or severe traffic congestion;").
Amendment No. 43: Page 5, line 33, at end insert—
("( ) In subsection (2) above the reference to relevant aspects of the service is a reference to the route of the service, a terminal point, a point at which a passenger may or may not be taken up or set down, or a place at which, or street by the use of which, vehicles used for the service may turn at a terminal point.").
The whole purpose of these amendments is to strengthen the operation of Clause 6 of this Bill. The main purpose of the legislation, as we know, is to relax licensing arrangements for public service vehicles in order to encourage greater competition between operators in the provision of bus services. Sitting on this side, I applaud competition, and I think that the Committee applauds competition, especially when it is innovative and interesting. My amendments are entirely consistent with that view.
Amendment No. 40 is concerned with the way in which a traffic commissioner would deal with service registrations and is to ensure that all services passing through any traffic area, whether stopping or not, would be considered. As the Bill stands at the
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moment, registration is automatic. Only after registration and after having received the relevant information are the police responsible for highway matters, including road safety and traffic control, or the traffic authorities able to make representations. Only then is a traffic commissioner able to receive and consider representations from the police and traffic authorities.
The next two amendments I have lifted entirely, on information the Government gave me, from the London Regional Transport Bill last year. Amendment No. 42 would ensure that every local authority and every chief of police affected are consulted and their views considered before registration takes place. In making provision for a traffic commissioner to receive representations, the imposition of any traffic regulation conditions would be limited to matters of road safety or public convenience and may only be received from the authorities named in the amendment. It may be felt by some that a traffic commissioner should have wider powers, but I have deliberately resisted this. In my view that would tend to stifle competition, which I appreciate is contrary to the policy of the present Bill. My amendment seeks to improve the conditions in which competition could take place.
Amendment No. 43 requires reference to be made to terminals and stopping places where passengers may be picked up or set down. Such features are an integral part of any route or bus service and thus should be included in registration details.
Without these amendments a traffic commissioner can do absolutely nothing to stop the congestion and hazardous conditions which I can foresee, not only because of the private car but, very much more importantly, because the local bus services could be severely hampered. Therefore I hope that my noble friend will give his kind consideration to these three amendments. I commend them to your Lordships. I beg to move.
Lord Belstead: On my noble friend's first amendment, Amendment No. 40, looking at the wording I doubt whether a service is provided in any real sense of that word in an area in which the bus does not stop. I wonder whether my noble friend really thinks that a bus is providing a service to a place if it does not actually stop there to put down or to take up people. The provision in this clause, as my noble friend said, follows one in the previous Act under which licences are not required from traffic commissioners in whose areas passengers will neither be taken up nor set down.
I am bound to say that it has caused no difficulty there, and if my noble friend will forgive my saying so I do not think that it is going to cause any difficulty here. Once again, if there is no stopping place for a bus service in a traffic area or in a county, I do not think that the commissioner for that area or the county council should be particularly concerned about it; although perhaps I may say, as I think your Lordships will have noticed from the Notes on Clauses which are available, that when registration takes place we would envisage, subject to the wishes of Parliament, that the regulations will be prescribing for registration the route of a service, the stopping place of a service, the

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timings of a service and perhaps even some details of vehicle type. People will know a good deal from the registration particulars if we are able to go down that road.
I turn to my noble friend's second pair of amendments. Here, I quite understand the concern of my noble friend to prevent the operation of local bus services which endanger road safety or the reasonably safe flow of traffic. There is absolutely nothing between my noble friend and the Government in that objective. The only difference is that we are endeavouring to do it in Clause 7 of the Bill and my noble friend has focused on a slightly earlier part of the Bill. As to the amendment itself, I genuinely think that it has some fundamental difficulties. First, it bites only on initial registrations, but my noble friend would be the first to say to me that it is difficult to conceive that a variation to a quite innocuous service can turn that service into one which might cause danger or congestion. Secondly, Amendments Nos. 42 and 43 do not give any rights to the operator, and I am rather surprised that my noble friend Lord Teviot, of all your Lordships, should be moving an amendment which does not give any rights to the operator. Under the amendment the traffic commissioner has to consult the local authorities and the police, but there is absolutely nothing about allowing the operator to have his say. The person who wants to run the service surely ought to be given the opportunity to convince the traffic commissioner that the county council or the police are being too apprehensive, or even, in some cases, perhaps, prejudiced. Thirdly, the amendment makes no provision for any appeal; and, fourthly, it seems to be an all-or-nothing provision, but in practice, a service may easily be variable to avoid causing danger or congestion.
If I may come back to the area of agreement, I readily accept that the amendment before us could be changed so as to meet those objections. It would become much more complex, but it would be workable. However, I think that Clause 7 is really the place to do that, because if we do it here we are going to erect a hurdle over which all applications for registration will have to jump—even, for instance, for once-weekly market services in rural areas—while Clause 7 is designed to give protection against dangerous traffic conditions only where there is or is demonstrably likely to be danger or severe congestion.
My noble friend has much more experience of this than I have, but surely there is every reason to hope that voluntary negotiation will take place, or ought to be allowed to take place, just as it does now, between the operator, the traffic authority and the police on routes, on bus stops and, indeed, on termini. I should like to give an assurance that the literature we shall be putting out when this Bill goes on to the statute book will encourage voluntary negotiation. There will always be the potential of traffic regulation conditions in the background, and that will be the incentive to operators to co-operate. Our intention is that we should allow for voluntary negotiation and, with great respect to my noble friend, I really do not think there is much opportunity for that under the second pair of amendments to which my noble friend has referred.
Lord Teviot: I am grateful to my noble friend for what he has said, even though I do not agree with every word of it. I shall of course beg leave to withdraw my amendment, but I made my noble friend aware earlier that I had found a pair of amendments which dealt with just that situation in the case of the London Regional Transport Bill. There was something similar in the Greater London Council powers dealing with a specific London question, and it was the Government which finally came up at Third Reading with that pair of amendments. It is very interesting to hear my noble friend's comments, and I shall read carefully what he has said and then make an assessment. I am grateful to him for those parts that he has agreed with, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.15 p.m.
Lord Monk Bretton Lord Monk Bretton moved Amendment No. 41:
Page 5, line 28, after ("area") insert ("and delivered to every county, regional and islands council within whose area there is a stopping place for this service").
The noble Lord said: I think this is really a fairly simple administrative matter: at least, I hope so. The effect of the amendment is that it obliges a bus operator, when registering a new service, a variation or a cancellation of a service with the traffic commissioner, to lodge the details with the county council at the same time. The argument for this really is that it is vital for the county councils to have information quickly in order that they should be able to perform their duties to the public in providing bus services.
I think that perhaps the best example to quote would be where a commercial service is cancelled and the county council has to decide, first, whether to provide a subsidised service instead; and then it has to prepare tender documents. After that it has to invite and receive tenders, and one knows that that is a fairly lengthy proceeding. They have in fact 42 days in which to do that, so there is very great anxiety on the part of county councils that absolutely no time should be lost. I think that other avenues and methods of trying to get this information from the traffic commissioners to the county councils have been considered, but they have not found favour. The county councils had really wanted to be the registration authorities, and they felt that it would in future be a pretty passive and non-controversial role. I think they were quite affronted when it was decided that that was not to be the case any more. That issue was raised in another place, and of course there were objections from other quarters to it.
I shall not proceed with that argument: but I am merely concentrating on the administrative difficulty involved. The amendment is simply an attempt to give county councils the information they need as quickly as possible. I beg to move.
Lord Carmichael of Kelvingrove: This is, as the noble Lord, Lord Monk Bretton, has said, a fairly simple administrative amendment. During the Committee stage in another place the Parliamentary Under-Secretary said that he was prepared to give clear instructions to the traffic commissioners that they must notify districts and counties affected by

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registration or deregistration. While we accept the word of the Minister in the other place, there is a difficulty in that this kind of detail will in fact be enshrined in regulations, if the Minister's words are to be taken literally. While he can give an assurance that adequate information will be provided, the definition of "adequate", of course, can vary very widely.
It seems to me that the county councils are going to need the full details on registration for three purposes. The first is to know precisely where the gaps are that might be covered by subsidised services and for which tenders must be formulated and put out. The second is to be able to deal with any matters to do with traffic regulation conditions, such as bus stops, turning circles, suitability of roads, terminal places and so on. The third purpose is very important from the public's point of view; that is, to be able to compile and publish timetables so that the public will have some sort of collective timetable instead of having timetables from all the different organisations and trying to fit them together. It seems to me to be a fairly simple requirement to ask the operator to send copies of his registration with these details to the councils and the counties. This is a fairly simple technical amendment which I hope the Minister will be able to accept in principle, at least.
Baroness Carnegy of Lour: I was at a meeting with the Convention of Scottish Local Authorities, and they made a number of points about the Bill. They were very strong on this point. They pointed out that so far as they are concerned the administrative arrangements are dependent on speed and on achieving as good an understanding as they can get as quickly as possible. For a number of reasons, all of which I think the noble Lord opposite has just enunciated, it seems to me there is a strong point here, and if the Government could look at this again it would be extremely helpful to local authorities. Those authorities are anxious about playing their full part in the implementation of the Bill.
Lord Belstead: I have a lot of sympathy with what my noble friend has said in moving this amendment. I agree it is important that county councils should have very early warning of an operator's intentions to start, vary or discontinue services. County councils, and regional and island councils in Scotland, have very important functions under the Bill for the subsidising of non-commercial services, for seeking traffic regulation conditions where necessary and for promoting the availability of bus services other than subsidised services, and the convenience of the public in using them.
I think it was helpful to the case for the amendment that the noble Lord, Lord Carmichael, weighed in and made the three major points—as he saw them—for the amendment. Hitherto, the Government's proposal on this matter has been that registration should go to the traffic commissioner and that the traffic area office should send the information on very quickly to the county councils. I admit that, however efficient traffic area offices are, there will be some slight delay in this progress. My noble friend Lord Monk Bretton is of course putting forward another proposal which would avoid that delay but which would have some
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disadvantages. The solution proposed by my noble friend is that the operator registering, varying, or cancelling a service must send a copy to the county council at the same time; otherwise registration will not take place.
The difficulty with that proposal is that if a registration is not to be valid unless the necessary notifications have been made, there will have to be further contact between the traffic area office and the county council making an operator send copies of documents to at least two, and perhaps even several, bodies instead of just one, which will also add to the burdens of the operator and could lead to possible confusion and delay. I wonder, for instance, what would happen if an operator whose service is mainly in one county but who has one stopping place in another inadvertently failed to notify the other county council.
Nonetheless, although there are those disadvantages, I have listened carefully. It is interesting that this particular point—although it has been put forward in a very modest way by my noble friend—was the subject of enormously long debate in another place which lasted, if I remember rightly, for several pages of the report of the Standing Committee. Nonetheless, my noble friend Long Monk Bretton has cut through the subject in a very clear and brief speech. The noble Lord, Lord Carmichael, has supported him with the three major points which he has put forward; and my noble friend Lady Carnegy has told me that in Scotland they feel the same about this. Therefore, I should like to give an undertaking to my noble friend Lord Monk Bretton in response to this amendment. We shall require operators to copy registrations to the county council—which is what my noble friend is asking for—at the same time as they send them to the traffic commissioner during the transitional period. If this arrangement proves to have the advantages that my noble friend is claiming, then we would be able to continue this process by regulations under paragraph (k) of subsection (8) of this clause.
I realise that the undertaking I am giving to my noble friend does not quite go so far as accepting his amendment; but, without invalidating registration, if an operator does not comply, the solution I am offering will enable us to see whether the idea of my noble friend has the desired effect of keeping county councils informed immediately of registrations. I hope that that assurance will commend itself to my noble friend and that if it does he will consider withdrawing the amendment.
Lord Tordoff: I think that people on all sides of the Chamber will be reassured by that offer from the Minister. At the end of the day I wonder who will decide whether it has been successful or not. Is it going to be the traffic commissioner; or the county council?
Lord Belstead: I think that will be a matter for consultation. I would not be at all surprised if some of your Lordships will be asking in the normal way in your Lordships' House as to what the Government think at the same time.
Baroness Fisher of Rednal: Can the noble Lord tell us how that would operate in the PTE areas where they are going from one district council to another. If they

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have co-ordination of traffic, would they be informing each district council in the same way as they would be informing the county council?
Lord Belstead: There will be notification to the district councils. Indeed, we shall be touching on this in a subsequent amendment of my noble friend Lady Vickers. But the thrust of the amendment of my noble friend Lord Monk Bretton is that the county councils, and the islands and regional councils in Scotland, should have simultaneous notification by having copies sent to them at the same time as they are sent by the operator to the traffic commissioner, because it is those councils which are the highway authorities. It is on that point that I am replying on this amendment.
Lord Monk Bretton: I am most grateful that my noble friend the Minister has recognised the very real dangers of the suspension of bus services as a result of lack of time and the trouble that that could cause. I certainly welcome his assurances that at least this may be tried out for a trial period. I think we must all consider that and the results thereof. I should also like very much to thank the Members of the Committee who have supported me over this amendment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 42 not moved.]
Lord Ennals Lord Ennals moved Amendment No. 42A:
Page 5, line 29, at end insert—
("( ) the registered particulars of the service include a description of any facilities, special or otherwise, that will make the service convenient for the use of disabled or elderly passengers;")
The noble Lord said: It is my pleasure to move Amendment No. 42A, and to speak to Amendment No. 42B, which for the convenience of the Committee are being taken together and are clearly linked.
Amendment No. 42B: Page 5 line 33, at end insert—
("and
( ) the services make appropriate provision for the needs of passengers who are elderly or disabled.")
I had originally hoped that the noble Baroness, Lady Darcy (de Knayth), would have moved this but it is her birthday today and she has a child-like excitement that is lovely to see. Therefore, she asked me if I would do so instead and it is with great pleasure that I do so.
Before going into the detail of what I believe are two very important and linked amendments, I hope that the Committee will permit me to refer to a very happy event and also a sad one. The happy event occurred yesterday at the Festival Hall when Dial-a-Ride—which we debated extensively during the passage of the London Regional Transport Bill—celebrated the fact that it now covers the whole of the Greater London area. It was a source of great celebration for disabled people and a very large number of them were there to celebrate. I was honoured to be one of the group doing so.
This is a great service that is 95 per cent. financed by the GLC. There is a working party which is looking at how the task can be effectively financed when the funds run out after the GLC goes out of existence. There is a working party which includes the Department of the Environment, the London
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boroughs, Dial-a-Ride itself and the London Regional Transport Authority. I mention this because had we not waged a great and, I believe a very significant battle in this House, to ensure that the London Regional Transport Authority had a statutory obligation to be concerned with, and have regard to, the needs of disabled people, there is no reason to believe that they would have been part of this essential working party. That is the link with the purpose of the amendment.
I have to say that it was also a sad occasion because it was the day following the midnight decision of another place that the GLC and the metropolitan authorities should go. I found it very sad, bearing in mind the many weeks of your Lordships' time that were taken, the fact that the debate started with the guillotine, and that to a large extent the very careful considerations that had been given in your Lordships' House were brushed aside with, I thought, some disdain. I hope that we shall never again see another place treating with such disrespect the consequences of debates that have taken place in this Chamber.
3.30 p.m.
Let me come to the two amendments. These are the first of a number of amendments which have been tabled and which are designed to meet the real transport needs of the elderly and the disabled. We know, particularly in the case of the disabled, that the proportion of elderly people in our society is steadily growing, and in each piece of legislation that we pass we make provision for services for what will be an increasing proportion of our population.
The amendments follow discussions with the Joint Committee on Mobility for the Disabled, which represents practically every organisation concerned with almost every type of physical disablement—over 30 of them in all, including such major organisations as the British Legion, RADAR, the Royal National Institute for the Blind, the British Association of Occupational Therapists and the British Limbless Ex-Servicemen's Association. Many of your Lordships will have had, as I have had, a mass of letters of representation to ensure that we succeed in something like the amendments that I am proposing today on behalf of so many other noble Lords across parties.
Clause 6(2) describes certain conditions under which a service must operate. The first amendment, No. 42A, would ensure that the registered particulars of the service include a description of facilities being provided for disabled people, so that those who have the responsibility of licensing would know what was on offer and so that there was not just a bunch of old second-hand buses that would not be able to meet the needs of elderly and disabled people. The second amendment would ensure that a service was not provided unless it could make appropriate provision for elderly or disabled people.
If accepted, these amendments would ensure that operators took account of the needs of the elderly and disabled at a very early stage in the provision of transport services. Thus the first amendment calls for information on the provision that a service makes for people who are elderly and disabled. We who move this amendment believe that councils and passenger transport authorities need to have this information in order that they may effectively plan transport in their

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areas and in order to decide, fairly and properly, what additional services may be required. So we argue that this is essential information.
The second amendment calls for
"appropriate provision for the needs of passengers who are elderly or disabled",
to be made on all services in an area and not merely on services which would not otherwise be available. This is a matter to which we shall come on Clauses 57 and 61. We believe that this amendment is crucial to ensure that people who are elderly or disabled are brought into the mainstream of public transport whenever and wherever possible, and your Lordships have the opportunity of doing that in this Bill.
Perhaps I may quote a sentence from the Royal National Institute for the Blind. Writing to me on 1st July, they said:
"We believe that the Government's aim could be best met by a duty on operators to provide for the needs of disabled and elderly people. We will also welcome clarification of the extent to which public authorities will be required to make proper provision for such needs."
One has had many letters in this vein.
It may be argued that operators will not know how to make provision for elderly and disabled passengers, nor whom to approach to find out. This is not a problem. There is an enormous amount of information which has been collected together, and I have before me an excellent article headed, "Public Transport for Disabled People: the Role of the British Department of Transport", which shows in detail just how adjustments can be made. Also, a great deal of work is being done at the Transport and Road Research Laboratory in Crowthorne.
The aim must be to increase the accessibility and convenience of all ordinary buses—and I am not talking about specialised vehicles for the moment—so that in future the ordinary bus services will cater for the majority of would-be travellers. This is especially important for the elderly in our population. At present ordinary buses cater for, at most, 74 per cent. of would-be travellers. Buses such as we are proposing—for example, the Ogle bus with its very sophisticated design—will make ordinary buses suitable for 95 per cent. of would-be travellers.
I want to make it perfectly clear that in this and later amendments we are not suggesting that all buses must immediately be transferred, in order that they can cater for all the elderly and disabled, with forklifts and all the rest. We want to lay a plan for the future which will be an improvement of service rather than what could well be a deterioration of service. Making ordinary buses cater for 95 per cent. of travellers or more will ensure that the services are as profitable as possible. This is a very important factor. One has to realise that roughly 25 per cent. of the population cannot use our buses at present. This is denying to transport companies which will be affected by this Bill the resources available, quite apart from denying the opportunities to disabled people.
It may conceivably be argued by the Minister that the Government's promise to amend the construction and use regulations to include features that would make all buses more suitable for a larger proportion of would-be travellers is all that is required. I want to say that those who move these amendments do not agree.
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In the long term, the amendment of the construction and use regulations will indeed help to make all buses more suitable for people who are elderly or disabled. But as the sole means of securing future improvements the construction and use regulations are not satisfactory, and for the purposes of the Transport Bill the regulations can only cover buses in general.
Without a general requirement, such as that provided in the second amendment, the regulations cannot secure the provision of any special vehicle that in future may be thought appropriate for meeting the needs of disabled or elderly people. For example, the regulations could not provide for wheelchair accessible buses for a route such as Manchester Airport to Manchester Central Station, nor could they provide for wheelchair accessible buses such as those being tried out in London on ordinary routes, unless there was a statutory requirement to use these special vehicles. So we are trying to set the pattern for the future and at the same time to avoid what some of us fear is a kind of cowboy approach of turning up with a service which does not meet the needs of our population.
The regulations will probably not cover a variety of features that would help to make buses better for disabled or elderly people: for example, the colour of handrails and the size, positioning and layout of signs and other details such as that. Furthermore, the regulations are unlikely to be changed very frequently. Without other provisions in the Bill, there would therefore be a considerable delay in securing any improvements in bus services following advances in bus design. At present we do not know—but we hope that the Minister will tell us—how the Government intend to amend the construction and use regulations, nor have we any means of ensuring that future Governments will carry on where this Government leave off in relation to the regulations.
I want to emphasise that bus operators must be reminded they should have an obligation—that is the purpose of the amendment—to think about and make provision for would-be travellers who are elderly or disabled. This reminder should be in the Bill, as I have reminded the Committee is the case with London Regional Transport. I hope that the lessons we learned in that debate, which I believe were an absolute breakthrough of tremendous significance achieved in your Lordships' House—they did not come from another place; they were decisions taken here—will mean that we do not have to have as much pressure on the Government to do what is right in this Bill relating to buses as we did in relation to London Regional Transport.
I sincerely hope that the Minister will feel that the case is overwhelmingly proven. Our own—I was going to say "wheelchair brigade", but we are very privileged to have in our Chamber, as they do not have in another place, people who actually know the problems. So many of your Lordships know what are the problems of public transport unless some provision is made. It is from your Lordships' House that the public will expect planning for the future. It is in that mood of planning for the future, for a society which will include an increasing proportion of elderly people—I hope not of disabled people, but certainly of elderly people—that we should write into the Bill at

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this stage the provisions that are set out in the two amendments which it is my privilege to move.
Baroness Phillips: Before any further debate takes place I should like to ask my noble friend whether he will define "elderly". I have raised this point before, and I shall continue to raise it. By Act of Parliament it is defined as those over 80. When I was in Government I had the privilege of introducing an Act covering the pensions of elderly persons. I would remind your Lordships that if you are over 80 you get 25 pence a week extra on your pension, so it is worth hanging on for if you think about it. But it does not mean that a cheap bus pass, or in some cases, of course, a completely free bus pass, is given only to those who are over 80. It is given to women at 60 and to men at 65.
When we are framing Acts of Parliament we have to be a little more specific. What are we talking about? Are we talking about the very old, or are we talking about the people who may have retired but are certainly not in need of some of the aids which my noble friend has just mentioned? I think it is important to have this very much more clearly defined. We can all recognise the disabled, and we know and understand the problems. I am very much in favour of the amendment, but I think it is a pity that my noble friend is not a little more definite in what he wants.
Lord Ennals: I am assuming that the intervention of the noble Baroness was "before the noble Lord sits down". Perhaps I may therefore reply to the point before I sit down. The question of who is aged is not dependent upon the age but is dependent upon the need. The majority of your Lordships are not aged. You may receive a pension (it may even include the extra 25 pence a week, god bless you, which will make a whole difference to your lifestyle!) but it is need with which we are concerned. At a later stage we shall be concerned with concessions in terms of fares, but we are concerned here with the needs of people who are elderly. There are certain Members of your Lordships' Committee who may have reached the statutory retirement age and who are as fit as a fiddle. They may be 80, they may be 85, they may be 100. Whatever their age, the question is: do we make provision for those whose advancing years have lessened their ability to climb on to a bus without difficulty? With respect to the noble Baroness, who I always respect and whose wisdom is known to the Committee, if we had sought to include a provision which defined who was "elderly" that would have been the best way of dividing this Committee, because one is as old as one feels. The noble Lord, Lord Shinwell, is the best example of being as old as one feels. That applies to all of us.
We are concerned with the quality of provision and the needs of people regardless of what is their actual age. The noble Baroness says that you can see someone is disabled: but you cannot always, of course. Some of us are disabled and it is not always apparent physically. With regard to the elderly, this amendment is concerned with people whose very age makes it more difficult for them to travel and more necessary for their needs to be considered both by those companies which wish to be licensed and by the
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licensing authorities. I hope that I have answered the noble Baroness.
3.45 p.m.
Lord Brougham and Vaux: I shall not say "before the noble Lord sits down" because we are at Committee stage and I believe that the noble Lord can get up more than once if he wants to. I have a lot of sympathy with this amendment. I agree with the noble Lord that we are very fortunate in having a number of very distinguished people in wheelchairs who, as I am sure all noble Lords will agree, are friends of ours on whichever side of the Committee we are sitting. My problem with this amendment—perhaps someone can explain it to me as we go along—is the phrase, "a description of any facilities". Which facilities? I am not disabled, and so I am not too sure; but it does not seem to be clear what is being asked. Perhaps someone can enlighten me as we go along in the debate.
Lord Somers: I should like to support this amendment, but before I go any further I should like to join in congratulating the noble Baroness, Lady Darcy (de Knayth), on a very happy occasion—and may there be many more!
Noble Lords: Hear, hear!
Lord Somers: I think I can safely cast myself in the first category of elderly people. I remember not too long ago trying to get on to a bus in London. The conductor kindly stretched out his hand and said, "Come on, grandpa". I think I am really in that category. Very little need be done in some cases. I am not in the least denying that constructional improvements to buses, and so on, are very necessary: but I have often felt that, when one is waiting for either a bus or a taxi, then somewhere to sit, be it just an ordinary bench, would be an absolute godsend to those who really do find standing for a long time very tiring. A great deal might be done in that way. I entirely agree that improvements to buses for those who find even greater difficulty are absolutely essential.
Lord Beloff: I do not think that any of us would wish to deny the importance of making provision for the elderly and the disabled, but there must be a question as to whether this is the appropriate point in a Bill of this kind at which to introduce these provisions. I say that because we are dealing now with the registration of services, and we are endeavouring to meet this problem by making it, as it were, a condition for the approval of a service by the traffic commissioners.
The difficulty there seems to be that we are not starting from scratch. Let us consider who is going to apply for the right to run services. According to the Bill, there will be the various portions of the National Bus Company, which will have been divided up; there will be the present municipal buses under new companies; but basically—very largely, at any rate—they will be exactly the same vehicles as at present go along the bus routes. All of us know—I am not talking about London—that few of them have extensive provision for the disabled, let alone the elderly. The bus route which I normally take passes a major hospital of the St. Dunstan's organisation. But

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I would not recommend any blind person who lives there to try to cross the road and get on to a bus of this kind unless he has a fairly stout and fully-sighted companion with him.
Those provisions are not at present made. It is desirable that they should be and it is certainly a point which, as the noble Lord, Lord Ennals, said, will no doubt be dealt with when we come to the provisions made for the future construction of vehicles. With our present knowledge of what can be done to make vehicles more accessible for the elderly and disabled, new vehicles can obviously be made part of the law and part of the regulations made under the law.
The other point to which the speech of the noble Lord, Lord Somers, drew attention, is that in some cases the important factor is not the way in which the bus is constructed but the way in which drivers or conductors—if there are conductors—behave towards passengers of the kind in question. As someone who is on the verge of being elderly, according to the noble Baroness, Lady Phillips, I find that in competing with a horde of French schoolchildren who get on my bus, my age is a little bit of a handicap. I can see the difficulty for people who have reached the really elderly stage, unless it is regarded by the bus driver or the bus conductor as a part of his duty to see to it that persons who are handicapped have access to the vehicle. They may see to it, for example, that the vehicle does not start with a jolt until disabled passengers have found a seat, and so on.
This, again, is desirable but it does not seem to me that it affects the point of registration of services which for the most part, and for some time to come, must be services which use the present vehicles and the present staff. However, looking to the future, it will no doubt be possible in the licensing of drivers and so on to try to introduce if not regulations then at least a suggestion that the training of crew should include the ability to recognise the needs of the disabled.
Although I hope that the Minister will show himself very favourably disposed towards the cause which has been put forward by the noble Lord, Lord Ennals, I should myself be surprised if my noble friend found that this was the point in the Bill at which he wished to insert an amendment of the kind now proposed.
Baroness Darcy (de Knayth): I should like, despite my increased age, to say a few words in support of this amendment. I must first thank the noble Lord, Lord Somers, for his good wishes.
The amendments have been ably moved by the noble
Lord, Lord Ennals, who has covered a very great deal of the ground. I shall try not to repeat his arguments. As the noble Lord, Lord Ennals, said, there is a very strong feeling that there is a need to write into the Bill a clear duty on operators of mainstream public bus services to make provision for elderly and disabled people. Possibly the noble Lord, Lord Beloff, has a point, and this is not the right place to insert such an amendment. Perhaps we can find a better place, and maybe the noble Lord the Minister can even assist us to find it. The point is that such a provision must relate to mainstream ordinary transport services and not to the subsidised services.
I should like to say to the noble Lord, Lord Beloff, that we are not in the main talking about expensive
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provisions. We are talking mainly about such features as colour contrasts, brightly-painted handrails or thicker handrails, tactile symbols for the blind, and other improvements of that kind. When it comes to building new buses, even more can be done. In fact, I believe that the Government are proposing to amend Clauses 57 and 61 to ensure that the needs of the elderly and disabled are mentioned there. While this is very welcome, it applies only to services which would not otherwise be available and not to the ordinary transport services.
This amendment is essential, at whatever point we insert it into the Bill, to ensure that the elderly and the disabled are catered for by ordinary buses and are not made dependent upon special and subsidised services or do not become the responsibility of social service departments. We have discussed this issue many times lately, mainly in relation to Dial-a-Ride.
I agree that there will always be a need for some special transport because even a totally accessible public transport service could never hope to provide the door-to-door service which some people will need because they cannot walk or wheel from their home to the bus. However, this should not remove the obligation to provide wherever possible public transport which will, over the years, become increasingly accessible to elderly and disabled people.
As the noble Lord, Lord Ennals, said, such provision makes economic sense. If operators provide only for the fittest members of the community, the cost of the subsidised services will be increased unnecessarily. As he said also, we are talking about quite a large number of people. At present, only 74 per cent. of would-be bus travellers can use public buses. The noble Lord, Lord Ennals, also mentioned the wealth of information that is available about what provisions exist. When the Secretary of State, Mr. Nicholas Ridley, was kind enough to meet us a week or two ago, he talked about issuing a code of practice. A code of practice could be very helpful and I wonder whether the Minister can say anything about that aspect later.
It is very important not to draw lines and not to set limits; not to say which categories of people we can cater for and which we cannot. I therefore approve very much of the word "appropriate" in the amendment because it ensures flexibility. It is not asking for anything more than is reasonable and practicable at a particular moment. Financial climates change, attitudes and expectations change, and technology changes. A combination of those and other factors determines what is appropriate. I rather think that this amendment does not indicate who would judge what was appropriate. It may be that we would need to specify who it is, but I am sure that that point can be tidied up. I may be wrong. I hope that the Minister will look kindly upon this amendment. Perhaps he can tell the Committee where it should be inserted, if he feels that its proposed place of insertion is not right. I certainly hope very much that he will agree with the basic philosophy behind this amendment.
Bus transport is not good for elderly and disabled people at present and we have here a great opportunity to improve it and to ensure that such people are catered for in the mainstream transport system and

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not hived off onto the special and subsidised services. The elderly and the disabled are part of the public and yet it appears that more than 25 per cent. of the potential bus-going public cannot use the transport provided. I believe we shall make a bad mistake if we fail to remedy that situation by not writing into the Bill a duty to make appropriate provisions for such people.
Let us remember that easier access also benefits the very young, the pregnant, people with young children and pushchairs, and those carrying parcels and heavy shopping. Let us remember also that the more people who can be catered for on the open market, the less needs to be spent on subsidised services. I hope very much that your Lordships will support this amendment.
Lord Shepherd: I personally welcome this amendment, although like the noble Lord, Lord Beloff, I can see some difficulty in the Government's accepting it. There is a great deal that could be done for the disabled without a great deal of money having to be spent by the company. I appointed Mrs. Claudia Flanders, who had unique experience in the whole field of the disabled. The disabled are not only those who, like our noble friends, have to sit in a wheelchair. The disabled are also the blind and the deaf.
A great deal can be done for such people. Some of it may be done at considerable expense. In one experiment in the south-west, we introduced a talking bus stop. It allowed a person who was blind to plug in and hear what was the next vehicle due, where it was going, and what was its schedule. Of course that is an expensive facility but it is something which, in a good society, we should seek to achieve. Later I shall be talking about cross-subsidy. In a sense all this can only be achieved by a degree of cross-subsidy within an operator's performance.
Things are moving and I believe there is a great deal of understanding among bus drivers and inspectors as to the needs of the disabled. A bus driver is of course in some difficulty if he is running a one-man operation. He cannot then get out from behind his steering wheel, and leave his money unguarded, while he assists a disabled person. There are all these various difficulties but my experience of drivers, particularly in the country, is that there is a great community feeling and great respect for those who are in need, whatever the causes may be.
4 p.m.
The noble Lord, Lord Beloff, spoke about the design of vehicles and the regulations concerning them. Of course, the modern fleet—the Leyland National and the Leyland Olympian—all have wide entrances. That is an essential factor for the disabled. They also have low steps, or as low as can be achieved. In fact, at one stage there was a "kneeling" Leyland National; in other words, the bottom step of the Leyland National could be dropped in order that the first step from the pavement into the vehicle was much lower than normal. Of course, that is an extra expense.
Where the traditional bus companies will have these vehicles, if we take the Hereford situation merely as a lesson I suspect that the newcomers into the competitive scene will, by the very force of
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circumstances, be buying coaches. The ordinary style coach is a very different animal from a stage carriage bus designed for a specific purpose. Therefore, I believe that if there is a legislative duty placed upon a bus operator for the provision of the disabled, this will create major difficulties for a newcomer into the bus scene; unless he is willing to provide or Parliament insists that he should provide, that type of vehicle. Generally the coach vehicle, which is often used in the less well paying areas of the country, is a vehicle which is unlikely ever to be suitable for the persons we are considering in this amendment. I welcome the thought that is behind it. It has my complete support. Certainly it will take time to bring about, but it is helpful to have such a measure in legislation, though with the recognition that it cannot be implemented immediately; although it can be accomplished with good will and understanding by operators over a period of time.
Lord Belstead: It might help if I said a few words on the amendment at this stage. I thank the noble Lord, Lord Ennals, for moving it. It is an important amendment. I am glad that it coincides with the birthday of the noble Baroness; Lady Darcy (de Knayth), and I hope that both the noble Baroness and I, and others in your Lordships' Committee, will be able to celebrate at the end of it.
As this is the first occasion on which this subject is being debated in this Committee stage, I should like to say a few words on behalf of the Government and remind your Lordships that in Committee in another place my right honourable friend made it clear that he intended to take three specific initiatives in this area; and they have been mentioned. The first is that he will consult on using the results of research already produced in his department, and by others, about the kind of adaptations and improvements to bus design that can make travel easier for elderly and disabled people as a basis for deciding about specific amendments to be made to the construction and use regulations. These would apply to new vehicles, I know, but, nonetheless, that is the first point.
The second initiative is that in view of the need to encourage operators to make similar adjustments and adaptations to vehicles already in service, my right honourable friend intends to draw up a code of practice which will provide guidance for operators on the kind of action they can also take in this way, whether or not they have a new bus. The noble Baroness, Lady Darcy (de Knayth), asked me to say something about that but, if the noble Baroness will forgive me, the code of practice will need to be drafted when it becomes clear what the changes in the construction and use regulations will be.
The third initiative that my right honourable friend is determined to take, in consultation, is to bring forward changes in the regulations on the conduct of drivers to achieve the sort of improvements on which my noble friend Lord Beloff put his finger when he said how important this is for people who are uncertain—often in a crowd and with a bus starting to move—about travelling on public transport at all. They would gain additional confidence from knowing that the drivers' regulations lay down stricter rules on how the elderly and disabled are to be treated.

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In another place the Government also agreed that it would be appropriate to consult on amendments designed to ensure that proper consideration is given to the needs of elderly and disabled passengers. A consultation letter was sent out and the proposal we put forward is that there should be amendments to Clauses 57 and 61, dealing with the powers and duties of non-metropolitan county and district councils in England and Wales and regional and island councils in Scotland, and also the powers of the PTAs and PTEs. Our intention is to include the requirements of disabled people among the requirements which authorities have a duty to meet under the provisions for securing subsidised services designed to meet the transport needs of their areas.
If we go ahead along that route—and it is a route which has already been criticised in the exchanges—authorities would be under a clear obligation to consider what steps they can take to provide additional assistance and support for disabled people when drawing up their policies for the support of public transport services. For example, local authorities will, under amendments of this kind, be able to stipulate what vehicles are used on subsidised services and how they should be adapted, if necessary, in order to make boarding or seating arrangements more convenient. Authorities may also wish to require more comprehensive adaptations in the case of some particular services; for example, on a route serving a hospital or an old people's home.
It is also our intention to include specific reference to the needs of disabled people in the powers which authorities will have under these clauses to promote the availability of all services—commercial as well as subsidized—and the convenience of the public in using them. Such powers would, for example, make it possible for authorities to encourage the operators of all kinds of services to make the kind of changes and modifications—often small changes, which the noble Baroness spoke about—in vehicles and working practices which can make travel so much easier not only for the disabled but generally for elderly and less mobile people. The changes might involve modifications in matters such as handrails or the use of tactile symbols. The noble Baroness has rightly drawn attention to these matters.
The noble Lord, Lord Ennals, spoke of the duty which is placed on London Regional Transport in the London Regional Transport Act. I suggest to your Lordships that the duties for authorities and PTAs which I have
just attempted to sketch out would correspond to the duties of London Regional Transport under its own Act. That Act requires LRT to have due regard to the transport needs of Greater London and makes clear that this includes the needs of disabled people. Of course, LRT, unlike the authorities covered by Clauses 57 and 61, is itself an operator of bus services and, therefore, provides a precedent for placing duties directly on operators themselves rather than on the local authorities, which is what these amendments would do.
However, I put it to your Lordships that LRT is in a very different position from other bus operators. Under the London Regional Transport Act LRT has overall responsibility for transport in London, which makes it in many respects more closely analogous to a
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PTE than to an individual operator of services. It is in that role that the Government believe that the precedent of LRT should be interpreted. We believe, therefore, that it is right and necessary for these duties and responsibilities to be placed on the local authorities and the PTEs rather than the individual operator.
There is another reason for being worried about placing the responsibility absolutely directly on the shoulders of the individual operator, and that is that there are no criteria laid down in these two amendments; there is no standard set for the sort of details the operator will be required to provide. It is not clear from these amendments where one draws the line between features of particular relevance to the elderly and the disabled and those which naturally promote the convenience of all passengers. No doubt the larger operators will have no difficulty in producing comprehensive and detailed statements, but the smaller operator, who is often working in close contact with his public and providing equal or even better support for the less robust passengers, may find it much more difficult to complete such a return. Certainly he will if there are no criteria to guide him about what he has in fact to produce.
I was interested to hear that the noble Lord, Lord Shepherd, under whose chairmanship the NBC has done so much thinking about this particular problem, and who gave us the benefit of his views on the subject, nonetheless delivered a few words of warning about some of the dangers here. I will simply say on behalf of the Government that I think that, if these particular amendments were to go through, potential operators could be intimidated by a requirement along these lines, because these amendments are linked to a statement that one would not be allowed to run a bus service unless one had provided facilities which are unspecified. The result would be a loss of operators who had a real and worthwhile contribution to make to the expansion of public transport, which, after all, is the objective of us all. On this point may I just say that it is not clear, not only what has to be judged but who will make the judgment.
I was interested in the exchange between the noble Lord, Lord Ennals, and the noble Baroness, Lady Phillips, about who exactly are the elderly—not the noble Baroness, I am certain, from all that I know of her—and the noble Lord, Lord Ennals, was quite right: it is a question of need. But if you are moving an amendment to prevent a bus service from operating at all until it provides for people's needs, then I think that the Committee can reasonably expect that some criteria and some standards should be set out in the amendment which is demanding that.
Having said that, we are dealing with an enormously important point, of course, and one about which many of your Lordships are speaking not only with first-hand experience but with great experience. I shall therefore add only one word more. In his speech the noble Lord, Lord Ennals, suggested that I might rise and say that changing the construction and use regulations would be all that was required. I hope the Committee will take the view that I have gone a great deal further than that. I have said that we are going to consult. In other words, I have repeated my right

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honourable friend's undertaking on the construction and use regulations.
I have made it absolutely clear that we realise it is only for new buses, and that one has to do something about the whole broad spread of the bus services, so a code of practice will be necessary. I have reminded your Lordships that we have also given an undertaking about consulting on improvements to the drivers' regulations. In addition to that, I have gone into some detail about our proposal for promoting the convenience of the public and the availability of public transport by laying a responsibility on county councils and PTEs to have proper regard to the needs of elderly or disabled people, and I have tried to explain what I think we can achieve through that proposal.
Having said that, I know I shall be told that there is a difference of view on this question, and perhaps I may just add this last word. We really are as open-minded as we can be about this important subject. About a fortnight ago we had a meeting to which my right honourable friend came with representatives of the disabled, with the noble Viscount, Lord Ingleby, in the chair, and we listened very carefully. I have looked at the Marshalled List and I see that there are some interesting amendments to come, not the least one on a statutory advisory committee for travel for the disabled and the elderly, in the names of my noble friend Lady Lane-Fox, the noble Lord, Lord Zouche, and my noble friend Lord Renton, on which I think we shall probably have an interesting and, I hope, fruitful debate.
But in the light of what we are genuinely trying to do, and considering the difficulties that there are in reaching judgments on these particular amendments, I ask those who have their names down to them not to press them today. I cannot promise that, at the very end of the day, when this Bill finally becomes law, we shall have a complete meeting of minds, but I do promise that as the Bill goes through we shall try to do our best.
4.15 p.m.
Lord Shepherd: I should like to put this question to the noble Lord. There is a very considerable difference between the capital costs of the types of vehicle that we are talking about; namely, vehicles suitable for dealing with the disabled. If my memory is right they cost in the region of some £35,000 to £40,000 apiece. There may be an operator who is providing those services and doing his best with a vehicle that is suitable to a certain degree for those who are handicapped, and then a new competitor comes along—as he will be able to under this Bill—with some coaches which he may have bought for £1,000 each. That is about the price of those vehicles.
The Minister is quite right if what is in these amendments would mean that the new operator would probably not be able to get on the road; but in fair competition, when an operator is using vehicles which cost £35,000 to £40,000 each against an operator whose capital cost is only £1,000 for each vehicle, is there not a risk that, because of the capital cost, the operator who has the suitable vehicle may have no other choice but to withdraw that type of vehicle and to seek to use a vehicle which is similar in
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order to be able to compete. I put this point to the noble Lord not in order to make his problem any greater but because, in relation to what is being asked for in this amendment, it does not strike at the philosophy behind the Bill but it has to be recognised that what we should like to see come from this Bill may not be able to be provided, and where it is now provided it may well be lost.
Lord Belstead: I wonder whether I may answer that, because it is a very shrewd point, such as I would expect from the noble Lord. I think there are three things which I should say. One, which I think is of importance, is that we have said that there will be a code of practice. Very well: we shall have to see what effect the code of practice will have. In some cases codes can have effect so far as courts of law are concerned. We have not got as far as that yet, but I think that is one leg of the three-legged answer I shall give to the noble Lord.
The second leg is this. Do not let us forget that under the proposals that I am putting forward in answer to the amendment it would be quite clear that the operator who has a vehicle which has not in any way been made suitable for elderly or disabled people would almost certainly find that he would be unable to tender for subsidised services—almost certainly. Thirdly, if it is the case, as I accept that it is, that some 25 per cent. of the travelling public are either elderly or disabled people—
Lord Shepherd: More than that!
Lord Belstead: More than that, yes—then it is really almost inconceivable that an operator who has any ambition to serve the public, and indeed his own interests as well, will not be led along to improving his fleet of vehicles whenever he can.
Lord Shepherd: I hope so!
Lord Zouche of Haryngworth: I support my noble friend the Minister. He assured the Committee that he will impose a requirement on local authorities. Although I do not believe that that is exactly what has been asked for, it will go a long way down the road to achieve the end desired. As I outlined in my maiden speech, I feel very strongly indeed about the disabled, but I want to support the Minister in this because I think that at the end of the day the disabled will get a good deal after his assurances. I believe what he said has put us a lot further down the road.
Lord Henderson of Brompton: I should like to thank the Minister for what he said. I think that he was right to speak when he did. He shortened the debate as he answered a number of questions which had been posed and some which had not. I think that we are greatly in his debt. As far as I understand it, he is agreeing to general duties being imposed roughly in the terms of Amendment No. 42B, but on the authorities and not on the operators.
Lord Belstead: Yes.
Lord Henderson of Brompton: Very much the same general duties were imposed on London Regional

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Transport in, I think, the Bill of last Session. We all attached the highest importance to the amendment to that Bill, and the amendments are very much the same. If we can have an assurance that an equivalent amendment will go into this Bill but that the duty will be placed on the authorities and not the operators, I think that that would go a long way to satisfy a number of us.
The Minister promised amendments to Clauses 57 and 61. When are we likely to receive those? It would have been of great assistance to the Committee had we had them early in the Committee stage. If that is not possible, shall we have them by the time Clauses 57 and 61 are reached at this stage or shall we have to wait until Report? I think that that is a fair question.
The Minister was helpful about what he proposed to put in that area of the Bill. It seems to me that as drafted those clauses do not cover all services within an area; they cover only services which would not otherwise be available. Somewhere in his speech I think that he said that the amendments which he was proposing would cover all services. I should very much like an assurance that that will be so. Again I think that would meet the general wishes of those who are concerned about the disabled.
The question of drafting was raised not least by the noble Baroness, Lady Phillips. She said that it was impossible to define "the elderly". I agree, but I would say that it is also impossible to define "the disabled". There are so many invisible disabilities. There are a number of the disabled who are not elderly and a number of the elderly who are not disabled. I think that it is perfectly possible to use those expressions in a statute without definition. I take the point that the noble Lord the Minister made, however. There are other expressions in these two amendments which are perhaps too vague to go into a statute.
On a very minor point, one wants to clear up the question of the description of the disabled and the elderly—which comes first? In Amendment No. 42A the disabled come first and in Amendment No. 42B the elderly come first. That is only a minor point, and I think in the other amendments on the subject there are slightly different expressions. I think that perhaps the time has come for the draftsman's attention to be drawn to that. I hope that we shall be able to get it right now and for the future.
Those are the only points that I should like to bring to the Minister's attention at this stage. I thank him once again for the comprehensive and sympathetic statement that he made.
Baroness Faithfull: I shall make one brief comment. We have talked about the disabled. May I make a plea for the staff of the buses—the conductors and drivers? When there are adequate facilities for the disabled and the elderly their task is made much easier. For instance, if there is a long strip so that people may touch it for the bus to stop, that saves trouble for the drivers and conductors. While we are talking about the disabled, let us think also about the ease of running the buses and giving the best service possible; and those facilities will help the staff of the buses.
Lord Shinwell: In the debate various terms have been used. I have been trying to follow their meaning.
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What is required before we come to any decision at all is a definition of the terms that are in use in our discussions. For example, what is meant by
"disabled"? I ask the question not because I seek to advise; I seek information. Quite frankly, there are periods when I find myself completely disabled. For example, I go to bed at night; most people do. The purpose is to engage in sleep. I wish that that could be achieved on every occasion. Sometimes it is a complete failure, and so I indulge in reading. I occupy much of my time with literature which members of your Lordships' Committee would wonder about—copies of Hansard and not Private Eye, Time and Tide or other periodicals of that character! I gather a great deal of information from reading Written Questions and following what happens in the other place as well as in your Lordships' House.
There are occasions during the night when I fail to sleep and when I suffer severe pain—pains which are excruciating and for which I obtain remedies from my medical adviser or advisers. One goes from one to another and one is supposed to do this or asked to do that. I obtain what are called painkillers. The pain continues and becomes even more intense. I live by myself in my humble flat with very little help. I do not want to go into that matter at all. It is personal. In the course of the night if I fail to sleep and am tired of reading, I get up and dance about. I shake my limbs and indulge in what is called exercise. If the cameras were working and I gave an example now it would be one of the best shows people ever saw, but it would not be to my credit or even in the long run to my advantage.
If this sort of thing happens to me—and I have a fairly strong and tough constitution—heaven knows what happens to people who are in an inferior state of mind or physical condition. I am sorry for them. Indeed, many times I have had to force myself to come to your Lordships' House. I have to get transport as I can never use public transport I should be unable to use some of these vehicles that my noble friend Lord Shepherd talked about. They do not cost a lot of money. They are vehicles which would be provided, but for whom? They are for disabled people. Does that mean partially disabled, or may be disabled? It means disabled in what? It may be failure of eyesight, failure of hearing—that kind of disability.
Let me put the matter in a blunt, simple fashion. I know more about every item in the British medical pharmacopoeia than any Member of your Lordships' Committee. I read every item that I can get hold of in the hope that I shall gain some relief. I suffer in that way. I am not exaggerating—far from it. In fact, it is the first time that I have talked about it in a personal way because I do not like to complain. I would explain, but I do not like complaining. Anyway, nobody listens to one when one complains. It is like a couple of old ladies discussing their operations: it is a form of conversation, it is a kind of hobby. I do not want to follow that line of country at all.
4.30 p.m.
When one is discussing this, consider what one is talking about. What does "disabled" mean? Disabled in what respect? Is it hearing, is it mental, is it physical, is it partially physical and partially mental? I shall not

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use the term "intellectual" because that would be out of the question entirely. Let us deal with the matter as it should be dealt with. I have not the least doubt that Members of the Government who are taking part in this debate are as anxious as anybody else to provide every possible means of relief for those who are suffering from one form of disablement or another. Of course they are. I shall give them every credit for that. That would be a characteristic of every Member of your Lordships' Committee. What is left to us is a measure of compassion. What else have we to boast about, anyhow?
As we go down the scale, year after year, from one century and possibly to another, or part of a century, then we become very troubled, worried about what is going to happen. One must not be too frightened about it. I myself am not frightened. I only wonder what your Lordships are going to do when I am not here. These contributions that one wants to make will no longer be available. I shall not be able to get on the telephone. Nobody will be able to telephone me, and I shall not be able to hear them, anyhow.
When one talks about disablement one has to consider every aspect of it. Thus, if I may say so in this debate, I would suggest that the Minister should consider what has been said this afternoon and find some means of dealing with the subject of disablement in general and, at the same time, in its various aspects. Perhaps he can see whether it is possible to do so, either by an adequate pension, which the country can afford, or by the provision of adequate transport and a means of moving from one place to another—of communication, not mental but physical. Physical communications are of the utmost importance.
I suggest that the Government give these matters consideration. Perhaps before Christmas or before we go into recess, or not long after it, the Minister will come forward on behalf of the Government, a compassionate and understanding Government, leaving politics aside—politics do not matter when it comes to civilised behaviour—and provide something which I believe every Member of your Lordships' Committee desires and is very anxious to achieve. Without that, I am afraid that much of this discussion will be of little value.
Lord Monk Bretton: We in East Sussex are not quite as senior as the noble Lord who has just spoken, but our average age is frighteningly high. The number of people over 65 is, I believe, the highest percentage of any county. It is because of this that we have specialist vehicles, dual purpose vehicles, which can take the infirm. They have a lift at the back especially to do that. They are owned by the county council, or at least I think the county council leases them from the manufacturers and then leases them on. It does that really so that it has control of the vehicles and they are not actually in the hands of the operators.
I think that under the Bill it cannot go on owning these vehicles because it is a little too near to running a service. I am not quite sure what will happen. It will have to make some other arrangement for this. I hope my noble friend the Minister will keep his eye on what happens to those vehicles, and maybe what provision
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there will be for such vehicles in other places in the future.
The Earl of Perth: I have listened to much of this debate. In particular, I listened to the noble Lord when he spoke and gave us a good deal of encouragement. As far as I can make out, nowhere in this Bill at the present time do the words "elderly" or "disabled" appear.
I gathered that the noble Lord felt that it might well be appropriate to put something in Clause 61 about the need for the councils to secure the public transport requirements. Perhaps it could include, in addition, something about those who are elderly or disabled. I recognise the difficulty of definition, as the noble Lord, Lord Shinwell, has pointed out.
I, for one, would be very much happier if, in some way or another, the particular needs of the elderly and disabled were in fact mentioned in the Bill and not merely in a code of practice, or something like that. As to what is the right place in the Bill for it, I am not quite clear. I should have thought that it could well be done in Clause 61. I think that, anyhow, somewhere should be found for those words.
Lord Belstead: Before the noble Viscount, Lord Ingleby, speaks to this amendment finally, I think I owe the noble Lord, Lord Henderson, a reply to what he said. I must apologise that the amendments which I said that the Government were proposing to bring forward are not yet down on the Marshalled List. Of course, we shall be having an eye on this particular debate as well, but, nonetheless, the amendments we are proposing to bring forward are not yet down on the Marshalled List. If it is possible to bring them forward during this Committee stage and not for Report, I certainly shall do my very best to do that. If we have to wait until Report stage, I today give an undertaking to do my best to keep Members of the Committee who are taking part in this debate fully informed as to what are the Government's intentions.
The other thing I should say is this. I hope the noble Lord, Lord Shinwell, will not think that I am in any way by-passing what he said, but I should just like to say something in answer to the noble Earl, Lord Perth. When the noble Earl says that it is his desire to see the words "elderly" and "disabled" upon the face of the Bill, of course this would be the effect of putting down amendments to Clauses 57 and 61. I simply confirm to the noble Lord, Lord Henderson, that his understanding of what I said about our intentions for those amendments is absolutely correct.
Viscount Ingleby: I should merely like to say that I welcome what the Minister has said. I would point out that the amendment of the construction and use regulations will be a long-term process. Not only will it obviously take some time to work out the proper wording, but then there will also be a delay while the bus manufacturing companies are given sufficient time to adapt their models.
The noble Lord made some helpful suggestions about amending Clauses 57 and 61. However, I believe these would apply only to subsidised services. We are anxious that anyone providing a public bus service should be under a duty to consider what is

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appropriate for disabled and elderly people. We are not telling them what they must do at all. What the other amendment says is, "We would like you to tell us what you are prepared to do to make travelling easier for elderly and disabled people".
Baroness Darcy (de Knayth): Perhaps I, too, may ask the Minister something. First, I hope that he did not think I was criticising the plans to amend Clauses 57 and 61. I think I said that they were very welcome. However, as my noble friend has just said, I think we need to have amendments directly to encourage mainstream operators as well. Not being as quick as my noble friend Lord Henderson of Brompton to grasp what is on offer, which is very difficult to know without seeing amendments to Clauses 57 and 61, may I ask the Minister whether he is saying that the Government amendments will give direct and firm encouragement to mainstream public transport operators to provide appropriate provision as well? Is he saying that?
Lord Belstead: I am glad of the opportunity to clarify the point. When I said to the noble, Lord Henderson, that he was correct, I should have added a little extra information and I can now do so. I am making two points on behalf of the Government to the noble Baroness and to the Committee. It is our intention—and our difficulty has been that we have been consulting—to include the requirements of disabled people and the elderly among the requirements which authorities have a duty to meet under the provisions for securing subsidised services designed to meet the transport needs of their areas. Therefore, authorities would be under a clear obligation to consider what steps they could take to provide additional assistance and support for disabled people when drawing up their policies for support for public transport services. It means, in effect, that an authority under this limb would be able to say to those who are tendering for its subsidised services, "We are going to stipulate certain things for those particular services". Therefore the noble Viscount, Lord Ingleby, is absolutely justified in saying that that only applies to subsidised services.
However, the second limb of what I was seeking to say on behalf of the Government is that it is also our intention to include specific reference to the needs of disabled people and the elderly in the powers which authorities will have under these clauses to promote the availability of all services—commercial as well as subsidised—and the convenience of the public in using them. That is precisely the answer which I give to the noble Baroness. Such powers would, for example, make it possible for authorities to encourage operators of all kinds of services to make the type of changes and modifications which my noble friend Lady Faithfull sketched out in her brief intervention in this particular debate.
Lord Ennals: I am most grateful to all those who have taken part in what has been a most useful debate. I remember that the noble Lord, Lord Zouche, made his maiden speech on the question of disability and I am certain that we all echo his wish that by the end of the day a good deal will have been achieved for the elderly and the disabled. One of the good points is that
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the end of the day has not yet come, because we have this stage, the Report stage and we also have t bird Reading.
I should also like to welcome very much the support of the noble Lords, Lord Shepherd and Lord Somers, and the very wise contribution from my noble friend Lord Shinwell. Whether we shall be able to provide bus services which will suit my noble friend's needs is perhaps doubtful, but we have a great reflection on how he spends his nights, and I have often wondered!
I come back to the point which was made by the noble Earl, Lord Perth—namely, that within the Bill there should be clearly written the responsibilities both of the operators and of the licensing authorities to have due regard—to use the words of the London Regional Transport Act—"for disabled people".
I greatly welcome the mood of the Minister's approach. He referred to the three initiatives which had been mentioned by his noble friend. One of those initiatives was to consult about research into adaptations, which in my view is extremely important. We know of many—and there has been some reference to this by the noble Baroness, Lady Darcy (de Knayth)—excellent initiatives which have been taken. We know of some of the fine steps which have been taken by local authorities themselves in a very imaginative way. Many of us conceive that, while we shall not get every bus converted so that—to use any easy term—a forklift is available for wheelchairs, we should like to see many bus services in future providing, perhaps at specified times of the day, a service which it is known can be used by those who are disabled. I am not suggesting that every bus be adapted in that manner. It may concern only one bus in eight or whatever may be the arrangement. The important point is that it is known to be available. However, that will take some time. I think that the noble Lord the Minister will accept that we welcome the promise of consultation, but we do not know what will be its outcome.
4.45 p.m.
The second point concerns the code of practice, which is also important. A number of points about definition—such as the matter put to me by my noble friend Lady Phillips—will probably be dealt with within the code of practice. However, we have not seen the code of practice either, and I do not suppose that we shall see it or be consulted about it until the Bill has departed from your Lordships' House. If I am wrong, then of course the Minister will intervene. However, I assume that we shall not have a chance of seeing it before the Bill is passed.
Thirdly, amendments have been promised to Clauses 57 and 61, and those in themselves are very welcome. However, the Minister very clearly indicated in his last intervention that they would only deal with subsidised services and that they would not deal with mainstream services. It is most important that they should deal with mainstream bus services as well.
Therefore, although I warmly welcome the mood of the Minister's response and the promises which he gave to us, which I totally accept, I do not think that any of them provide reasons why these two amendments should not at this stage be put into the Bill. The noble Lord, Lord Beloff, quite rightly said

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that maybe this is not the best place to insert amendments in the Bill. One of the great advantages of your Lordships' procedures is that if we discover that we have put amendments into the Bill in the wrong place or that the words are wrong, then at the Report stage the noble Minister, bearing in mind the commitments which he made, can come forward with amendments in the right place and in what he considers to be the right form of words.
However, at this stage, no damage would be done if we registered here and now in the Bill that there should be a responsibility on both operators and licensing authorities for caring for the elderly and the disabled. I am certain that all of those who have put their names to, and have spoken in favour of, these amendments will be only too willing at the next stage to see the Government come forward with amendments which would, if they were satisfactory, replace the amendments which we are now proposing to insert at this stage. Therefore, I feel it right that we should take action now. We can always put the situation right if we have got it wrong. Indeed, if we have got it wrong, then all of us would want to put it right. My anxiety is, and I have always felt—
Lord Mottistone: May I interrupt the noble Lord?
Lord Ennals: Perhaps I may just finish my sentence and then I shall give way. I have always felt that you should get what you want when you can, and if what you have is not exactly right, then you should take the opportunity to get it right. If you have put it in the wrong place, then you can take a later opportunity to put it in the right place. If the wording is not the best, then you can take the advice of those who are wiser and those who have been advised on the ministerial Front Bench, and get the wording right.
Lord Mottistone: Bearing in mind what my noble friend the Minister has said and also the gist—if I have understood it correctly—of the contribution of the noble Lord, Lord Ennals, I question whether the noble Lord is being entirely wise in being about to suggest to the Committee that we should insert the amendments in the Bill now? In view of what my noble friend has said, a great many of us thought that he had gone quite as far as could be expected at this stage. Therefore, it is highly likely that these amendments will be defeated and that surely would not be in the best interests of the elderly and the disabled. It would create the impression that what my noble friend is saying as regards the amendments which he will bring forward later and which will reflect the view of the House is somehow denigrated in advance by the defeat of these amendments. I should have thought that it would be most unwise to put these amendments to the Committee at this stage.
Lord Nugent of Guildford: This is a very important point. I felt that the noble Lord, Lord Belstead, gave a satisfactory answer and commitment—certainly one which has my sympathies. I shall be unhappy if the noble Lord, Lord Ennals, takes this to a Division and puts many of us in the position of voting against something which in principle we want to see conceded. I most sincerely hope that he will not feel that it is necessary to do that.
Baroness Carnegy of Lour: I have not spoken in this debate because I thought it was going in the way that it should go. It would be to be seen to be voting for something which would say that there would be no bus in remote areas in Scotland because the bus operator was not able to say that he was going to do these things and to provide them, which would be something which very few disabled people would want.
A great deal that has been said has been going in the way that disabled people want in my experience. My heart sank when I heard the noble Lord suggesting that he was going to ask us to vote at this stage on this matter, because, although it might work in the cities, in the remoter areas it is the wrong approach, and I think that disabled people would be worried by it.
Lord Shepherd: On a point of order, I think that my noble friend gave way to the noble Lord, Lord Mottistone, when he intervened in the course of my noble friend's speech. If we are going to have a series of interjections from other Members in the course of my noble friend's speech we shall get ourselves into grave difficulties. Pleas have been made to my noble friend. I hope he will set the minds of noble Lords at rest.
Lord Ennals: I am grateful to my noble friend. If the noble Lord wishes, I shall of course give way. Well, let me say that I do not intend to divide the Committee. One of the great advantages of having the privilege of winding up is that one can count on so much wisdom from those who support the cause here. If the Minister has to argue the case with his right honourable friend the strength of the case is immensely increased by the fact that we have decided not to put this to the vote. The interventions of the noble Baroness and the noble Lord, Lord Mottistone, and others who have said, "Do not put it to a Division", add to the strength of the case.
We have recorded our strong feelings. The Minister has replied in a warm and receptive way. At the next stage of this Bill, or at a later clause of the Bill when he puts down his amendments to Clauses 57 and 61, we shall look carefully at what he says. I personally shall not be satisfied, and I do not think that my noble friends who have tabled these amendments will be satisfied, with amendments to Clauses 57 and 61 which do not deal with mainstream services.
In a sense, this is putting the noble Lord on notice. I feel that it is the wish and the mood of the Committee that this is not the time to divide. I think it is the wish and the mood of the Committee that the noble Lord shall come forward at the appropriate stage with some clear amendments which we shall then have the privilege, if we feel we need to, of seeking to amend. Having said that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 42B not moved.]
[Amendments Nos. 43 and 44 not moved.]
Lord Shepherd Lord Shepherd moved Amendment No. 45:
Page 6, line 1, after ("accepted") insert ("(a)").
The noble Lord said: I beg to move Amendment No. 45 and speak to Amendments Nos. 46 and 47, all

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three being paving amendments to the substantive Amendment No. 61.
Amendment No. 46: Page 6, line 5, at end insert—
("; and
(b) subject to the provisions of section (acceptance of applications under section 6).").
Amendment No. 47: Page 6, line 9, at beginning insert ("Subject to the provisions of section (Acceptance of applications under section 6)").
Amendment No. 61: After Clause 6, insert the following new clause:
("Acceptance of applications under section 6.
.—(1) Where an application is made to register a service or to vary a registration of a service under section 6 of this Act that application shall only be accepted if and to the extent that the traffic commissioner is satisfied that its acceptance would not be against the public interest.
(2) In considering whether an application would be against the public interest under subsection (1) above the traffic commissioner shall have regard to:

(a) the interests of those who are or are likely to be users of the service;

(b) the interests of the users of other local services in the area;

(c) the desirability of encouraging innovation;

(d) the implications of the acceptance for operators of other local services in the area; and

(e) any representations made to him in the prescribed manner which he considers relevant.

(3) In considering whether an application would be against the public interest the traffic commissioner may hold a public sitting and shall do so if he has received (within the prescribed period) a request for such a sitting from:

(a) any local authority in whose area the service to which the application relates is or is to be operated; or

(b) any operator of a local service in the area.

(4) This section shall have effect from the ending of the initial period, provided that after not less than two years from that date the Secretary of State shall review the working of the section and may, if he thinks fit, make an order repealing it.
(5) In this section—
"local authority" means any county council or district council in England or Wales or any regional or islands council in Scotland;
"initial period" has the meaning given by paragraph 6 of Schedule 5 of this Act; and
"local service" means a service registered under section 6 of this Act.").
I had this amendment drafted to seek to achieve an orderly transitional period between the passing of the Bill and deregulation. In the light of what the noble Lord said at the beginning when he moved that the House should go into Committee, I do not think I need to say anything further about the various difficulties that the various authorities will have in dealing with the requirements in the Bill. Therefore, I shall just concentrate on the reasons why I had the amendment drafted in this way.
I should like to say a few words in regard to cross-subsidy. There is nothing evil about it. It means that from where you have lucrative and profitable routes or services you give support to other services which may be socially desirable but uneconomic. Certainly so far as the National Bus Company was concerned you had a statutory duty to consult, and to co-operate with, the shire counties. Therefore cross-subsidy was an important factor.
Cross-subsidy means also the funding of early morning services and late night services, and certainly the funding of Sunday services in many parts of the country. There is nothing in itself evil in cross-subsidy at all, but we must recognise that some are paying more for their service in order that there shall be cross-subsidy.
The noble Baroness, Lady Carnegy—who unfortunately is not in her seat—drew the Committee's attention to some words that I used in a chairman's statement, I think in 1983, when I expressed a considerable concern at the size of the cross-subsidy bill. Cross-subsidy has gone up just as have all other subsidies within the last some 10 years, for basically the same reason.
If the noble Baroness had gone on she would then have told your Lordships that, while I was expressing concern about the size, I was advocating change, but a pragmatic approach to it; a move to the reduction of cross-subsidy because of its effect upon the services and the ridership of even the very good routes. I have advocated change, but I expressed great caution that one should proceed pragmatically and cautiously because of the sheer size of what is involved.
Solely within the National Bus Company—and it is, I think, in the main the shire areas where the hulk of the cross-subsidy that we have in mind is to be found—we have done various exercises. At Second Reading I gave a rather conservative figure of some £30 million, being the order of cross-subsidy. It could be more. Certain studies might lead one to believe that it could be more, but I took a conservative approach.
On deregulation what will happen is that competition will come upon those very services which in fact make cross-subsidy possible. An operator who is already there will have no option therefore but to reduce the fares immediately and also make curtailments in service, or maybe even an increase in services in order to deal with competition. But the element of cross-subsidy will broadly disappear on deregulation, and even if competition did not arise there are what are known as contestable markets. That is the view that markets, routes or services are open to competition and therefore one withdraws one's fares and makes the necessary adjustments to meet competition, were it to arise.
5 p.m.
I do not think the Government would disagree that there will be a considerable difference in the amount of cross-subsidy that will be available in the shire county areas. The Minister has said that this can be made up by savings and increased efficiency. He has quoted certain figures for Norfolk which, as I suggested on Monday, are open to considerable question as to whether one is comparing like with like.
In Hereford the improvement of productivity is even more questionable from the Government's point of view because the Midland Red company unfortunately because of the shortage of labour in the 1950s and 1960s, was forced to pay drivers, conductors and the whole workforce what was the going market rate in the Midlands. There is no doubt at all that the wages and terms and conditions in Midland Red companies were well beyond the similar terms of the other companies within the National Bus group. The change made had nothing to do with the trial area, because the problems that confronted the Midland Red company in the trial area were also being found outside the trial area in places such as Worcester and other parts of the territory.
The point I am trying to make is that while there was a dramatic improvement in productivity in Midland

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Red (West), it would be wrong to believe that productivity improvements could be achieved in other parts of the country unless the Government have in mind a complete debasement of the pay rates of the drivers and engineers in the bus industry. I am quite sure that that is not in their minds. But without it the sort of figures which the noble Lord is relying upon to meet the cross-subsidy factor will not be there. There will be improvements, but the shortfall, which I give on conservative estimates, between the subsidy that is now available under Section 1 grants (which is £65 million plus the £20 million which the Government have given for four years to see this transitional period through) will be of the order of £110 million. That shortfall of £110 million will be siphoned out of the system in comparison with the Section 1 grants of £65 million which the counties provide for today's services.
Your Lordships can see the enormity of the problem, but when one considers that this will not be taken out gradually over a period of adjustment—it can happen more or less over-night on the day deregulation comes into being—one asks: how will the authorities be able to adjust even if they have the resources available?
I can understand the Government's anxiety that they would like to move ahead as fast as possible towards deregulation, but if one takes into account the enormity of the funds to be found within the industry for socially desirable services which are in themselves uneconomic and which the counties are today unable to support, one sees that there is a serious position. I have to say firmly that I do not think the effect will be quite as harsh and severe in the urban towns or the great metropolitan cities. Their problems will be of a different nature. What I have been talking about will have a direct effect on the shire areas which are sparsely populated but which also have persons who have a greater need for public transport than perhaps those in other parts of our country.
I do not put this amendment forward in any way as a wrecking amendment, but as a means by which the Government could achieve their end over a longer period. It would avoid all the worst of the dangers and hardships that I believe would be created if we proceeded on the timescale and in the manner laid down in the Bill. I beg to move.
Lord Teviot: I fully support this important amendment, which is one of the most important amendments we have. It was interestingly and fairly introduced by the noble Lord, Lord Shepherd. However, it is rather a pity that the attendance in the Committee is rather thin at the moment. This is a worthwhile compromise which will smooth the transition to deregulation. It does not make the mistake of looking at tendered services in isolation, which would be quite easy to do. It also does not wreck the Bill by stopping deregulation; rather it forms a bridge between the final phase of deregulation and the final adjustment to a free market. My right honourable friend the Secretary of State has agreed that when there is so much uncharted territory ahead it is prudent to make the first reconnaissance and then to allow a
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period for assessment and replanning before making the final drive into the unknown.
It is to be expected that bus operators and potential operators will be planning their strategies before the introduction of notification, registration and tendering, so that by the start of the transitional period there will already be a considerable upheaval in the pattern of bus services in this country. Clearly there will be a continuing need for adjustment of the market and this should rather be a time for tuning the new arrangements the better to meet public need. Unless there is stability at this time, chaos could result.
These amendments allow for such tuning; they allow a period of two years for stabilising the market in the new competitive environment and therefore they positively promote the objectives of this Bill in securing the smoothest possible transition to final deregulation.
The noble Lord, Lord Shepherd, has already explained the way in which traffic commissioners will serve the public interest during this two-year period and I can only endorse the good sense of the procedures as he has advocated them. I believe that this is a significant and valuable improvement to the Bill and I strongly urge your Lordships to accept it in the interests of the people whom we in Parliament represent.
Lord Nugent of Guildford: I have listened with great attention to the noble Lord, Lord Shepherd, and recognise his authority in the matter. He has the advantage of speaking with a large measure of experience, and that carries great weight. His first figure of what is the existing cross-subsidy in the NBC is obviously correct, and it is a formidable figure. I should like to say this about the whole principle of cross-subsidisation. Like the noble Lord, I have seen it working for many years, and, as I said on Second Reading, I think that it worked fairly well in the past, in the days when bus operations on the whole were profitable and solvent. However, I believe that, come the day when they became unprofitable and they depended upon public subsidy in order to survive, and with a gradually increasing public subsidy, the psychology of the cross-subsidy changed, inevitably. In the days when the bus operators knew that where they had cross-subsidies they still had to make ends meet, they had the proper incentives of commerce to ensure that the business was just as efficient as could be.
This is the whole basis on which commerce and industry work in this country and in most countries in the world. I believe that it is an absolutely vital element. That has gone; every year the element of subsidy has become bigger and, inevitably, even with a well-managed business like the National Bus Company, the incentive to efficiency and innovation is bound to shrink when there is the cushion of public funds coming in to cover the deficit. This is deficit financing.
We have seen it again and again. It is always, at the end of the day, the high road to inefficiency and unproductivity. Therefore, I believe that the noble Lord, Lord Shepherd, despite the great cogency of his speech, is not making sufficient allowance for this factor. The Government believe firmly that if the

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whole scene of bus transport is open to free competition with the subsidy available to cover mainly the essential rural services, which will not be profitable to the private operator to promote, there will be the advantage of complete competition. This, we believe, will give the bus traveller the advantage of services which it is generally agreed are going to have cheaper fares in the urban areas, and where there are going to be, we think, competitive fares in the rural areas.
Throughout the whole scene, we shall get an element of efficiency, of enterprise, of operators (many of them small ones in rural areas particularly) who will use their ingenuity and their enterprise to lay on services in their localities, in their villages, which will suit the local people, will be flexible enough for the operator to get a partial living out of it perhaps by combining with it some other activity. This scene overall, by introducing the major factor of full competition, will bring benefits to the bus traveller.
The noble Lord's element carves out a very large part from that. There is no question about it. It really would take away from the Government's intention a very large element of the major factor which we think the bus-travelling public ought to have. Therefore, I say to the noble Lord and to the Committee that I believe that this experiment should go ahead—the experiment, yes; this major change—because we see a scene with these very large elements of public subsidy working on this cross-subsidy situation even in the urban areas, with fares going up excessively and much faster than inflation. Even in the urban areas which are bearing the burden of cross-subsidy, they are subsidising the rural areas at the expense of the urban services so that the urban bus traveller is being deterred from using the bus service as much as he might if it was fully competitive and charging a fully competitive commercial rate; so we are getting a double disadvantage here.
I recognise the major element of uncertainty here and these are big sums; but I believe that the Government have made out their case that this will confer overall major benefits. Although I know that the noble Lord has not moved this amendment in any sense as a wrecking amendment, it really would knock the bottom out of this Bill. I hope that the Committee will not accept it.
5.15 p.m.
Lord Belstead: I take an amendment of this kind, moved by the noble Lord with all his experience, very seriously indeed. But I also take very seriously the intervention from my noble friend Lord Nugent of Guildford who has occupied a very distinguished place in Goverment so far as transport is concerned and who (if I may put not too fine a point on it) knows what he is talking about. The noble Lords are not agreeing on this. One has to see where the truth lies. Perhaps the more modest and prudent thing for me to say is that almost certainly these things are a matter of judgment and that quite likely the truth is going to lie somewhere in between.
But I gently say to the noble Lord, Lord Shepherd, that I am surprised that the noble Lord was as trenchant as he was in pointing to what he believed would be very substantial losses, particularly in rural
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areas, so far as the removal of cross-subsidy is concerned when this Bill comes into effect. I have asked about this of course in the Department of Transport, and those who have talked to me have always prudently said that these things must be a matter of judgment. However, it has been pointed out to me again and again that where there is a situation—as sadly there is these days, as all my noble friends know so well—where in rural areas very often none of the routes is a money spinner, cross-subsidy has become far less significant of late.
The noble Lord, Lord Shepherd, more than anybody else will remember the evidence of Mr. Meredith, an NBC manager, to the Committee on Welsh Affairs which was given on 14th November last year, about the support which was given to Crosville for its Welsh operations. I understand that the figures were that in 1983 Crosville received a total of very nearly £3 million support for services in four Welsh counties while the cross-subsidy amounted to only half a million pounds. The noble Lord says to the Committee that that is all very well but nonetheless the loss of cross-subsidy is simply not going to be made up by what the Government keep on saying is going to be the other side of the coin—namely, reductions in cost.
The noble Lord is habitually fair, and we are benefiting very much in this Committee stage from the advice that he is giving even though it does not always make life easy for me. I am sure that the noble Lord would concede that one really has to take into account that first of all not all cross-subsidy is going to disappear. A good deal will continue for commercial reasons—and there is absolutely no question about that—and there is nothing to stop that in the Bill. There is no question about it, there will be substantial cost savings. We believe that the evidence suggests that there is scope for improvements by up to about 30 per cent. although I realise that this is open to debate. Further, the increase in patronage which undoubtedly is going to come from lower fares and better services will mean an increase in the revenue which operators receive through the fare box making them less dependent on revenue support.
In case some of my noble friends may feel that I am just simply saying these things because they are on a piece of paper in front of me, there is hard evidence which has come in from various areas. I understand that the Department of Transport assessed from the transport plans of Nottinghamshire and Derbyshire that the costs in those two counties of local independent operators in receipt of revenue support appear to be 30 per cent. less than those of public sector operators. This of course is self-evident from the Bill which is going to give opportunity to the independent operator for the first time not to have to fight his way through all the labyrinthine and enormously expensive processes of the traffic commissioners' hearing.
There was—and it came very near to my noble friend Lord Nugent—the study conducted by Surrey County Council into services in the Guildford Cranleigh area which again showed that the average difference in unit costs between the independent operators and the NBC companies was of the order of 20 per cent. That has nothing to do with earnings but it is because of the major underlying factor of the numbers of staff needed per vehicle, comparing

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independent operators with other operators. Then of course there was the evidence of Midland Red (West), but I will not add to what the noble Lord, Lord Shepherd, has himself said on that particular matter.
I realise that we can go on arguing this backwards and forwards across the Chamber, and perhaps the most constructive suggestion I can make in finishing my response is that we should look at the actual effect of the amendment. Perhaps it is a very nice amendment and one which, despite the arguments which I am not accepting, we ought to grab with both hands. But, my goodness, I would ask your Lordships to take a look at the amendment and see what actually it is asking us to do. Apparently the noble Lord would allow unfettered registration during the transitional period—that is, next year up to 1st October when deregulation would start, because I cannot see any parallel amendment to Schedule 5. Then there would be a period of restriction, during which registrations could be objected to by this paraphernalia of appearing before traffic commissioners, which is set out in Amendment No. 61, followed after two years by derestriction again if the Secretary of State were to make the necessary order.
That oscillation seems to me to be designed to cause the maximum uncertainty to the bus industry, to its passengers and to local authorities. I suppose it might benefit some larger operators who could adjust their services during the transitional period without let or hindrance, and then be given at least partial protection from competition. But, with respect to the noble Lord, I really do not think it could benefit anyone else. So, again with respect to the noble Lord—and I mean that genuinely—I must say that I do not much like the look of this amendment.
In addition to that, it does something which I absolutely dig in against, completely and utterly: it asks the Committee to reverse the agreement we have already reached in respect of Clause 1. In considering Clause 1 on Monday we agreed that we would not have any more a system of regulation, including the labyrinth of inquiries, evidence and presumably legal representation, and all the other difficulties involved for the small operator. The noble Lord, Lord Shepherd, is in fact now saying, "Be blowed to that; we will bring regulation back by a side wind" The Government are not going to have that.
Earl De La Warr: I have listened very carefully to what the noble Lord, Lord Shepherd, has said, and to what has been said by my noble friend the Minister and also by my noble friend Lord Nugent. My noble colleague Lord Shepherd, so far as I could tell, was pointing out to us more than anything else the dangers of the gaps that would emerge immediately because of the withdrawal of cross-subsidy, and possibly because of other reasons, when the networks that his bus companies have operated were forced to cut down their mileage by up to 30 per cent. My noble friend Lord Nugent has countered that and said, "There is no danger, because I believe"—and I daresay it is almost a mystic belief—"that this void will be filled by the operation of this noble word 'competition' ".
He and the Minister between them have talked about the importance of the increased productivity
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which will come. I daresay it will come, and in some cases perhaps it will be 20 per cent. But can your Lordships actually relate that increase in productivity to the risk that the noble Lord, Lord Shepherd, pointed out, of certain major gaps not being filled. These are quite separate things. There may well be increased productivity on the main routes that are facing competition but are still in the network. That has nothing to do with how to fill the gaps that are created by the Government's change of subsidy policy.
This brings me back to what I said on Second Reading and again yesterday: we do not know how big the gap is going to be and we do not know how much money is going to be available to subsidise these abandoned services, so that the bus at least will still be there. I would again refer your Lordships to something which I mentioned on Second Reading—that is, the last two lines of the conclusion in the White Paper, where we were told there would be better services for less expenditure by the taxpayer and the ratepayer. Now we are really down to cases. We have agreed, I think, that there will be gaps created; but still we have no knowledge of how they are going to be filled or whether they are going to be filled.
It can easily be that county councils taken together, with the best will in the world, will come to the conclusion that with the limited sum of money they have available to them (and it will now be all in a block grant and not in a transport support grant) they will have to pay more attention to keeping concessionary fares going and to maintaining the highways. We do not know, and neither do they—and it is worrying them like anything—how much money they are going to have available to fill these gaps to which, among other things, the noble Lord, Lord Shepherd, referred.
If the money is not there the gaps simply will not be filled, and in my humble submission the statement made by the Government in the conclusion to the White Paper that there will be better services for less money is, by definition, popycock. Of course there is a chance that these services which disappear overnight will be filled overnight, because new entrants will suddenly find that the services they really want to run are those services which have just been abandoned by the networks. They may; but if I were an entrepeneur coming in I do not think I would be competing for things which were not good enough for the companies in the National Bus Company. I think I would go somewhere else.
So let us be quite clear that one of the things that arises out of what the noble Lord, Lord Shepherd, has drawn attention to, so rightly, is the enormous uncertainty that comes with the sudden appearance of great gaping gaps in the network of services. I simply cannot accept that my noble friend Lord Nugent is anywhere but in cloud-cuckoo-land in thinking that by some mysterious means the new devices which are offered to the Government, important as they may be in the long run, are going to give everybody the bus that was there the day before.
We cannot be certain. The noble Lord, Lord Shepherd, has said: let us have a period when we move into the totality and then we shall find these things out and nobody will suffer. That surely must be sensible. I am not asking the Government to accept the wording

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of this amendment. I am asking them to accept the force of the arguments that have been put. I have put only one part of the argument; and I have no doubt that other noble Lords will wish to add to this, but it is an immensely important subject which the noble Lord, Lord Shepherd, has raised, during the course of his admirable speech on his amendment.
5.30 p.m.
Lord Tordoff: I should like to endorse what the noble Earl, Lord De La Warr, has just said, that there are genuine worries that the Government saying, "Come in, the water is lovely", is not sufficient to give confidence to either consumers or operators. There seems to be an act of faith needed in accepting the Government's point of view.
In relation to what the noble Lord, the Minister, said in his winding-up remarks, may I say to the Government that it is not good enough when we get to Committee stage of Bills—whether it be this or the previous one—to try to burn off amendments by saying, "Well, it was really all decided at Clause I". If that were the case then we should all go home and start the Recess rather earlier than we shall; and I am sure that we should all enjoy that more than sitting around here for several more weeks.
The danger is not that it cannot be put right in the end. It almost certainly can. But by that time, if we have made mistakes—and I say "we" collectively—there would be no possibility of running bus services in those areas from which they have disappeared. Once the market has gone, and once people have made other arrangements, then the chances of having an orderly network of bus services in some of these places will have gone forever. I am sure that is not something that anybody on any side of this Chamber wishes; or at least I hope not. I hope that the object of this whole exercise is not to get rid of bus services.
Let us come back to the question of cross-subsidy. It seems to me that that is all part of this problem. The noble Lord, Lord Shepherd, has dealt with that in much greater detail and from much greater knowledge than I can. It seems to me that the problem of cross-subsidy at the moment is that it is opaque. We need to get to a situation where if cross-subsidies need to exist—and they may need to exist—they should be transparent. If we can achieve that, we can start making decisions about which cross-subsidies should be returned and which should not.
The argument that cross-subsidies somehow hit the poor, which has been suggested by the Government on a number of occasions, does not seem necessarily to be true. Those who have read the publication from the Institute of Transport Studies of the University of Leeds will understand that the whole business of cross-subsidy is not as simple as perhaps people from the Government side have tried to make out. There is certainly a worry that some of the savings which are being talked about by the Government will be on the basis of wage cuts in what is already a fairly low-paid industry. I think that we need considerably more time and investigation before we can be anything like sure that the kind of savings which the Government are predicting are achievable.
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I come back to what the noble Earl, Lord De La Warr, said in his speech, that this is being put forward as an act of faith. Of course people on the Government side may have that faith. But I suspect that a number of them, as we go further on in this Bill, will have their faith somewhat undermined when they get into the detail of what is a complex industry. I do not believe that we can jump off the river bank into the river on the basis, as I said before, that the Government say, "Come in, the water is lovely". The Government are, after all, still standing on the bank.
I hope that this amendment which gives a degree of flexibility to the introduction of the Government scheme will be seriously considered on all sides and not merely rejected on a purely dogmatic basis. I support this amendment.
Lord Mottistone: The noble Lord, Lord Tordoff, as I said earlier—I think it was at Second Reading—surprises me by his rigid adherence to the importance of regulation, and control, and making sure that everybody is told what to do and prevented from getting on to new things. That is so strange, speaking from the Bench that he does. I think that the rather vaguely "damning with faint praise" approach is irrelevant to this particular Bill.
I shall not say much because my noble friend Lord Nugent of Guildford said all that was important, as did my noble friend the Minister. But there are two points which stick out for me. One is the point made by my noble friend the Minister. The noble Lord. Lord Shepherd, and my noble friends Lord Teviot and Lord De La Warr, and the noble Lord, Lord Tordoff—all of whom are a team together—do not seem to have taken into account Schedule 5 because a lot of their talk was about gaps. If one does not know anything about it one has not read the Notes on Clauses which are available to us all; and they are very clear on the subject. There is no doubt that this great worry about gaps will not itself be the sort of problem that noble Lords have indicated because we have a transitional phase which is taken care of in the Bill. That is the first point.
The second point is that saying that this is not a wrecking amendment—that is, an amendment which is preserving means by which the old order can be carried on—is absolute nonsense. When one looks at subsection (2) of the new clause in Amendment No. 61 one sees that all the people who want to keep the old order going will be able to put in their pennyworth to stop new registration taking place. It seems to me that to pretend that that will not give every opportunity to people who do not want the new experiment—if we call it an experiment; I would call it the new way of life—is trying to press the facts of the case too much in the wrong direction.
Finally, why is it necessary to have this new way of doing this? I think that it was the noble Lord. Lord Tordoff, who said that none of us wanted to have the bus services swept away for ever because people during this period (because he did not remember about Schedule 5) would find other means of transport. People have found other means of transport. That is why the number of bus services and the people using them has gone down to only 8 per cent. of all passengers. What we are trying to do is to arrest and to reverse that. We have lost the services and we want

231
them back. We want them back for the private operators who will be hampered in achieving that position if this amendment is passed. I trust very much that if, unwisely, this amendment is taken to a Division, the Committee will vote strongly against it.
Lord Marsh: I shall speak very briefly, because I wish to make only three specific points. When the noble Lord, Lord Shepherd, opened his remarks, he said that there was nothing particularly evil about cross-subsidisation in this area. He then went on, as I think he was bound to do, with his experience, constantly to refer back to many of the real dangers of cross-subsidisation, about which, in his own view, he has always been very clear.
I have three objections to this amendment. The first is that one can of course make the point too heavily that it concerns the poor subsidising the rich, because it involves people in heavily used areas, which is what makes their services profitable, subsidising people in lightly used areas. That might lead one to suppose that, by definition, the people in the lightly used areas had more access in general to alternative forms of transport than those people in the heavily used areas. But you cannot go on from that and say that it means that all the subsidies are a tax on the poor to assist the wealthy. That would be an absurdity.
However, the position is worse than that, because there is no rationale at all about it. Nobody knows how many rich people there are travelling on buses, probably with their subsidised bus passes, in the leafy glades of West Sussex and East Sussex, the Cotswolds or Oxfordshire, where, without doubt, there is a high proportion of uneconomic services. Therefore it is said that all the others who are lucky enough to live in the leafy glades of Brixton, Southall and the other areas where the buses are used to the full, should subsidise those other routes. There is no social logic at all in that.
My second objection is that the amendment, again by definition, damages the potentially profitable services. If you have a service which you can milk—and I am grateful to the noble Lord, Lord Shepherd, for agreeing with me, because in fairness it is a point that he himself has made—in order to cross-subsidise other services, because of the sheer level of usage made of it, there comes a time when you have to start pushing up the fares. So one of the services which was heavily used in a key part of the transport infrastructure in a particular area becomes less and less attractive and less and less viable. That cannot make transport planning sense.
The third and final point to which I take exception is a much more general one, and it is something about which many of us have become concerned over the years with publicly owned activities. I think that the management of public sector companies are frequently very unfairly maligned, because often the bad results of some of their operations are not their fault. The reason is the restrictions which are placed upon them and, above all, the extent to which public sector operations are used for social purposes. It is not the job of executives in companies, be they public or private, to take unto themselves the responsibility of allocating funds for undefined social purposes.
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Of course there are areas of transport in general, as there are in every other field, which have a social element in them and which require subsidy and support. But those areas should be defined, the criteria should be defined and the decision should be made by elected bodies, whether it be Parliament or the local authorities. It is not for executives of the National Bus Company to make subjective judgments about social needs and the extent to which money should be transferred for the satisfaction of those needs.
If you seek to make them do that, you place a major millstone around the necks of those charged with the responsibility of running those great industries, because you cannot confuse the two objectives of the financial control of their industries—and the noble Lord, Lord Shepherd, like a number of us, has suffered from this in the public sector chairmen's club (retired)—and holding them responsible for the efficient management of their industries, and at the same time place around their necks responsibility for subjective judgments on social needs.
I hesitate to take up your Lordships' time, but for those reasons I would personally vote against this proposition because I believe on the evidence that the logic of what the noble Lord, Lord Shepherd, has said over the years about the dangers of cross-subsidisation is far more convincing than the views which he applied to the amendment he moved.
5.45 p.m.
Lord Carmichael of Kelvingrove: It is a great pleasure, in many ways, for me to follow the noble Lord, Lord Marsh, who was my chief for a period in the Ministry of Transport. I am sorry that he seems to have used the opportunity to discuss what I know is a very real problem that he and my noble friend Lord Shepherd had in their terms as chairmen of nationalised industries. I suggest to him with very great respect, because I have a lot of respect for his ability, that he was using this clause quite wrongly to voice his views on cross-subsidisation.
There is no question in this amendment of continuing cross-subsidisation. The whole tenor of what has been said by those who support this amendment is that cross-subsidisation has been with us for 50 years and is inbred in the industry. While I agree with the noble Lords, Lord Tordoff and Lord Marsh, that the cross-subsidy should be transparent so that we know what it is, the fact is that we have this situation now and the main purpose of this amendment is to see that the transition from the present system to the new system proposed by the Government is smooth and will not greatly inconvenience the public.
I agree with the noble Lord, Lord Mottistone, that Schedule 5 is very important, but we do not know a great deal about what will be contained in it because there are so many allowances for regulations to be made. I read it with great interest and the words that continually appear are, "Regulations will be made" and, "Regulations will be brought forward"; but we do not know the substance of those regulations. When the noble Lord spoke about the new clause which is down in my noble friend's name, he referred to subsection (2) and mentioned paragraphs (a), (b), (c), (d) and (e). He did not mention the fact that these are to do with

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the protection of the consumer, except perhaps paragraph (d)—
Lord Mottistone: Paragraphs (a) and (b) refer to the interests of those who are users. My interpretation of phrases like that is that it is not the consumer who is being looked after, but somebody who will get up and say that he speaks for the consumer.
Lord Carmichael of Kelvingrove: That is an interpretation which I and many noble Lords would find difficulty in agreeing with. The noble Earl, Lord De La Warr, has great experience in this industry and speaks with a great deal of concern and worry because, like all of us, he wants the industry to survive and grow. He spoke most tellingly about the real purpose of these amendments, which is to fill the very major gaps that we are afraid may appear.
The noble Lord, Lord Nugent, who, again, has great experience and speaks with great authority and importance in this House, spoke about the cross-subsidy. The noble Earl, Lord De La Warr, made the point that the noble Lord is worried about the enormity of the subsidy that is being given. He believes that this leap can be made suddenly from the position that we are now in to a position of almost pure competition, without the necessity of having any gaps. It will be done smoothly and there will be very few problems.
This is where the noble Earl, Lord De La Warr, suggested to the noble Lord that he was relying on faith. For the sake of the people who have made representations to me and to most noble Lords in the Committee, I personally want a little more than faith. They want the bus in the morning at the right time to take them to places of work, to schools and all the rest of it. It is the sudden changeover that gives rise to the concern in the shire counties. The present system has evolved over 50 years. It cannot suddenly be broken without the expectation that there will be dislocation in the lives of many people.
Many of us are worried about the Bill but we accept the fact that the Government are going to get the Bill and that the Bill will go through. But, for the sake of the people who use the service, we feel that we have a duty to make the changeover as smooth as possible. We believe that the amendments, and particularly the new clause, will give the opportunity for a consideration of the changeover period to make it run smoothly so that there will be no sudden dislocation. I hope that the Committee will support the amendment.
Lord Belstead: Before the noble Lord, Lord Shepherd, ends the debate on this amendment, perhaps I may say this. Many noble Lords have talked about the basis of this amendment being the danger of having a sudden changeover. I am sure your Lordships will not mind if I remind the Committee that no noble Lord has mentioned the fact that the Government are making available £50 million in additional revenue grant through the fuel duty rebate to bus undertakings over the next four years. That is additional to what is already being made available by the local authorities. In addition to that we are making £1 million available to the Development Commission in order to start
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experiments into new kinds of bus services. Therefore, if the noble Lord, Lord Carmichael, who is habitually fair, will forgive me for saying so, when he says there is a sudden changeover, I say to him that we have a four-year period in which a massive amount of additional money is being injected into the bus industry to help passengers.
This leads me to say, secondly, that that does not bring me to the kind of conclusions that the noble Lord, Lord Tordoff, sought to draw. The noble Lord talked of wage cuts in the industry; he said "We are not wanting to do away with buses, are we?", indicating to your Lordships that the Bill would presumably be doing away with buses. He then ended in triumph by saying that it was very like jumping into the river from the river bank. If the noble Lord had had the grace just to recognise that the Government are making available this very large sum of money, and had he even begun to address himself to the difficult arguments as to whether or not that will compensate for the loss of hidden cross-subsidy, it would have taken us some way further forward. I was particularly glad that the noble Lord, Lord Marsh, made his first interjection into the debate by pointing out the very real drawbacks at the present time of hidden cross-subsidy, which has undoubtedly contributed to the absolutely drastic cut over recent years in passenger-carrying by bus services in this country.
All those points lead me to the conclusion that the one thing we cannot do is simply to say we will go on with strict regulation. I am sorry—that is what the amendment does. It is for that reason that it is not acceptable to the Government.
Lord Teviot: Before my noble friend sits down, can he please tell me about the figure of £50 million? In the White Paper the figure of £20 million is given. Is this something fairly new?
Lord Belstead: I do not think I have anything to add to my noble friend—it is over a period of four years.
Lord McIntosh of Haringey: If this had been a Government amendment, the Government spokesman would have been briefed to explain, subsection by subsection, the new clause which has been put forward. I think perhaps there has been some loss of clarity in this debate, if I may put it that way, because nobody has actually done that. I wonder whether it is not necessary at this stage—perhaps it should have been done earlier—to say what the amendment actually means.
We are talking to Amendment No. 61, because Amendment No. 45 is a paving amendment, and subsequent amendments are paving amendments, to the new clause, Amendment No. 61, which is on page 5 of the Marshalled List. Amendment No. 61 is not about the transitional period at all. Subsection (4) of the amendment says:
"This section shall have effect from the ending of the initial period".
The initial period is the period after the initial registration in the early part of next year, after the tendering period which takes place in the middle of next year, and after the period of calm, as the noble Lord. Lord Belstead, put it, which takes place in the

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autumn of next year. In other words, it is probably from 1st December 1986. There is no question whatsoever of any interference in the transition from the existing system to the new system. What is looked for in this amendment is a subsequent safeguard to make sure that the initial bids, the initial services which are proposed, do not decay and disappear as they appear to have done—I do not wish to go back into the debate about trial periods—with some other experiments.
The second thing to be said about the amendment is that it is not regulation. There is no question of regulation in this amendment. It says that applications for registration after the initial period—after December 1986—shall be considered by the traffic commissioner in the light of:
"the interests of those who are or are likely to be users of the service"—
that is, the passengers—
"the interests of the users of other local services in the area"—
because passengers use a network of services, not normally a single service—
"the desirability of encouraging innovation"—
I do not believe that the Government are likely to disagree with that objective—
"the implications of the acceptance for operators of other local services in the area"—
that is another element of stability which I should have thought the Government would wish to see as a result of the period which takes place in 1986; and—
"any representations made to him in the prescribed manner which he considers relevant".
The only element in this amendment which might be thought to involve compulsion is that, if representations are made by a local authority or an operator of a local service in the area, the traffic commissioner shall hold a public sitting and consider those representations. In other cases, if anybody else makes representations he may hold a public sitting for that purpose. That is the minimum amount of regulation that one could possibly imagine for a service which is designed to produce a network of differing services, flexible services, for the travelling public after the period of transition.
On Monday I moved an amendment which would have delayed the implementation of the Bill for a period of 12 months for the purpose of greater trials. That amendment was rejected by your Lordships' Committee and in supporting this amendment I have no intention whatsoever of saying that we are trying now to delay the implemention of the Bill. The transitional period will be covered by Schedule 5. We do not know what Schedule 5 yet says, because the Government have not been able to introduce the amendments which they have undertaken to introduce to Schedule 5, but from the remarks of the noble Lord on Monday we have some idea of what it will be. We have the idea that there will be a rather rapid registration period. We all can suspect that the actual registration period will be five minutes before midnight on the last day. We have a period of possibly six months for the authorities to consider the services registered and to consider what it is therefore necessary to put out to tender. We then have a period of calm and collectedness and then we have implementation.
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6 p.m.
There is no attack on any element of Schedule 5 in this amendment. This amendment implies that we have the utmost confidence in the good faith of the Government to do what they claim they will do in Schedule 5. This amendment has nothing to do with Schedule 5; it is after the initial period. However, we are saying that if we are to have an effective service after the initial period then there must be some protection for the travelling public and for other operators who have gone through the whole of this period in 1986.
Let us consider a couple of examples: first, an operator who puts forward under the tendering procedure a village service which is to be provided, perhaps once a day, throughout the week, to link a village with a market town. If there is no amendment of this kind, it will be perfectly possible after that procedure has taken place, after the tender has been accepted and after the subsidy has been agreed, for somebody else to come along and say, "Friday is market day. I am going to run a service on Fridays. I am going to take away the whole economic viability of the scheme that has been carefully considered by the authorities, and tendered for". It would make a nonsense of the tendering procedure if one allowed people to come in afterwards and mess up everything that had been carefully thought out, without any restrictions whatsoever.
Take a second example, this time concerning innovation. A few weeks ago, in Weston-super-Mare, an operator there, with the support of Avon County Council, changed over to a mini-bus system. The mini-bus system involves smaller vehicles and a much more frequent service. It has the effect of increasing ridership. That innovation has taken place without the provisions of this Bill. It has taken place under the existing system, which many noble Lords have thought to be so restrictive, so regulatory and so damaging to the interests of passengers and the public.
This amendment is in no sense a wrecking amendment. It is an amendment to make sure that the intentions of the Government throughout the transition period are maintained after the transition period and that the interests of passengers have some continuity of protection. I cannot see how some of the speeches against this amendment can have been made in a full understanding of the implications of what is said in Amendment No. 61.
Lord Shepherd: I suspect that your Lordships wish to come to a decision. I will say just a few words. I was delighted to hear my noble friend (if I may still so call him) Lord Marsh using certain words in the same kind of tone as that which I had been using because of my experience, like himself, as chairman of a public company. I believe my noble friend will agree—I think he said so—that the problem of cross-subsidy was of minor importance, certainly in his time as Minister of Transport. The problem has developed in recent years, and cross-subsidy is really not to the advantage of the operators. The element of cross-subsidy that we have today is the consequence of a conspiracy of successive central Governments and successive local authorities using the traffic commissioners to bring it about. When one pleads for continuation for a period of time,

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it is not for the good or for the purposes and the coffers of the bus operators.
My anxiety when I put this amendment down, as I said in a statement when I was chairman, was that we needed to deal with this enormous problem pragmatically and over a period. I said it then and I still believe it. I have no confidence, I am sorry to say, in the propositions which the Government have put forward. Certainly there will be changes. Certainly the area of subsidy may be reduced; but that will be done in time. I am concerned not so much with the long-distance future as about the transition from regulations which we have had since the early 1930s to a situation unlike that obtaining in any other country in Western Europe. When this Bill goes through, the closest similarity will be Chile.
My anxiety is still the same, and that anxiety is I know shared by pretty well every shire county in this country, be it Conservative, Labour or Social Democrat. I have never known such a unanimous view being taken among the counties as their concern about what will happen in the very short term. In all honesty, I feel that I cannot withdraw this amendment.
6.6 p.m.
On Question, Whether the said amendment (No. 45) shall be agreed to?
Their Lordships divided: Contents, 106; Not-Contents, 123.

DIVISION NO. 1

CONTENTS

Airedale, L.

Granville of Eye, L.

Amherst, E.

Gregson, L.

Ardwick, L.

Grey, E.

Aylestone, L.

Haig, E.

Banks, L.

Hampton, L.

Barnett, L.

Hanworth, V.

Bernstein, L.

Harris of Greenwich, L.

Beswick, L.

Hatch of Lusby, L.

Birk, B.

Heycock, L.

Blyton, L.

Houghton of Sowerby, L.

Boston of Faversham, L.

Hughes, L.

Bottomley, L.

Hutchinson of Lullington, L.

Brockway, L.

Irving of Dartford, L.

Bruce of Donington, L.

Jacobson, L.

Carmichael of Kelvingrove, L.

Jacques, L.

Chitnis, L.

Jenkins of Putney, L.

Collison, L.

John-Mackie, L.

Crawshaw of Aintree, L.

Kagan, L.

Darling of Hillsborough, L.

Kaldor, L.

David, B.

Kennet, L.

Davies of Leek, L.

Kirkhill, L.

Davies of Penrhys, L.

Listowel, E.

De La Warr, E.

Llewelyn-Davies of Hastoe, B

Dean of Beswick, L.

Lockwood, B.

Diamond, L.

Lovell-Davis, L.

Donoughue, L.

McIntosh of Haringey, L.

Elwyn-Jones, L.

McNair, L.

Elystan-Morgan, L.

Mayhew, L.

Ennals, L.

Mishcon, L.

Ewart-Biggs, B.

Monkswell, L.

Falkender, B.

Morton of Shuna, L.

Falkland, V.

Mulley, L.

Fisher of Rednal, B.

Nicol, B.

Fitt, L.

Northfield, L.

Foot, L.

Oram, L.

Gaitskell, B.

Perry of Walton, L.

Gallacher, L.

Pitt of Hampstead, L.

Galpern, L.

Plant, L.

Gladwyn, L.

Ponsonby of Shulbrede, L.[Teller.]

Graham of Edmonton, L.

238

Rea, L.

Taylor of Gryfe, L.

Ritchie of Dundee, L.

Taylor of Mansfield, L.

Roberthall, L.

Teviot, L.

Robson of Kiddington, B.

Tordoff, L. [Teller.]

Rochester, L.

Turner of Camden, B.

Ross of Marnock, L.

Underhill, L.

Seear, B.

Wallace of Coslany, I.

Shepherd, L.

Walston, L.

Silkin of Dulwich, L.

White, B.

Stedman, B.

Williams of Elvel, L.

Stewart of Fulham, L.

Wilson of Rievaulx, I

Stoddart of Swindon, L.

Winchilsea and Nottingham, E.

Stone, L.

Strabolgi, L.

Winstanley, L.

NOT-CONTENTS

Airey of Abingdon, B.

McFadzean, L.

Alexander of Tunis, E.

Macleod of Borve, B.

Ampthill, L.

Malmesbury, E.

Arran, E.

Mancroft, L.

Baker, L.

Margadale, L.

Barber, L.

Marley, L.

Bauer, L.

Marsh, L.

Belhaven and Stenton, L.

Massereene and Ferrard, V.

Beloff, L.

Maude of Stratford-upon- Avon, L.

Belstead, L.

Birdwood, L.

Merrivale, L.

Brabazon of Tara, L.

Monson, L.

Bridgeman, V.

Montgomery of Alamein, V.

Brougham and Vaux, L.

Morris, L.

Broxbourne, L.

Mottistone, L.

Cairns, E.

Mowbray and Stourton, L.

Caithness, E.

Munster, E.

Cameron of Lochbroom, L.

Murton of Lindisfarne. L.

Campbell of Alloway, L.

Newall, L.

Carnegy of Lour, B.

Nugent of Guildford, L.

Cathcart, E.

O'Brien of Lothbury, L.

Chelmer, L.

Orr-Ewing, L.

Chelwood, L.

Peyton of Yeovil, L.

Coleraine, L.

Portland, D.

Cork and Orrery, E.

Rankeillour, L.

Cowley, E.

Reay, L.

Cox, B.

Reigate, L.

Craigmyle, L.

Renton, L.

Crathorne, L.

Renwick, L.

Denham, L. [Teller.]

Rochdale, V.

Denman, L.

Rodney, L.

Drumalbyn, L.

Russell of Liverpool, L.

Eden of Winton, L.

St. Aldwyn, E.

Elliot of Harwood, B.

Saint Brides, L.

Elliott of Morpeth, L.

St. Davids, V.

Elton, L.

Sanderson of Bowden, L.

Erroll of Hale, L.

Sempill, Ly.

Fanshawe of Richmond, L.

Shannon, E.

Ferrier, L.

Skelmersdale, L.

Gainford, L.

Somers, L.

Gisborough, L.

Stamp, L.

Glenarthur, L.

Stanley of Alderley, L.

Gridley, L.

Stodart of Leaston, L.

Harmar-Nicholls, L.

Strathcona and Mount Royal, L.

Henley, L.

Hives, L.

Swansea, L.

Holderness, L.

Swinton, E. [Teller.]

Hood, V.

Tranmire, L.

Hooper, B.

Trefgarne, L.

Hylton-Foster, B.

Trumpington, B.

Inglewood, L.

Tryon, L.

Kilmany, L.

Vaux of Harrowden, L.

Kimball, L.

Vickers, B.

Kinloss, Ly.

Vinson, L.

Kinnoull, E.

Vivian, L.

Lane-Fox, B.

Whitelaw, V.

Lauderdale, E.

Wise, L.

Lindsey and Abingdon, E.

Wolfson, L.

Liverpool, E.

Wynford, L.

Long, V.

Young, B.

Lothian, M.

Young of Graffham, L.

Lucas of Chilworth, L.

Zouche of Haryngworth, L.

Lyell, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.14 p.m.
[Amendments Nos. 46 and 47 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 48:
Page 6, line 9. leave out ("at the instance or) and insert ("on an application made by").
The noble Lord said: With the leave of the Committee, I should like to speak also to Amendments Nos. 49 and 55.
Amendment No. 49: Page 6, line 14, leave out from ("commissioner") to ("and"), in line 15, and insert ("accepts the application").
Amendment No. 55: Page 6, line 43, leave out paragraph (e) and insert—
("(e) for an application for registration or for the variation or cancellation of a registration not to be accepted by the traffic commissioner to whom it is made unless the applicant gives to the commissioner such information as he may reasonably require in connection with the application.").
These are minor tidying-up amendments. They clarify the intention that the point at which a service is registered, varied or cancelled is when the traffic commissioner has accepted an application and the prescribed period of notice begins at that point. They will allow the traffic commissioners to obtain more information from operators if their application is inadequate and to do so without eroding the period of notice. They are sensible, administrative provisions to ensure that the system works smoothly. I beg to move.
On Question, amendment agreed to
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 49:
[Printed above.]
On Question, amendment agreed to.
Baroness Vickers Baroness Vickers moved Amendment No. 50:
Page 6, line 20, at end insert —
("(7A) The operator or prospective operative of a registered service shall give, at the time of his application for the registration, a copy of his application and any particulars submitted pursuant to subsection (2) above to every district council in whose area the service or proposed service is operated or will be operated.
(7B) Registration under this section shall not be effective until the end of a period of not less than twenty-eight days from the date of the application for such registration.
(7C) The traffic commissioner to whom an application for registration has been made shall not register any service which appears to him after consideration of any representations made by a district council to whom particulars were given under subsection (7A) above to be likely to have a harmful effect upon any existing registered service which is being provided by an operator under the terms of an agreement providing for service subsidies within the meaning of Part V of this Act.
(7D) The traffic commissioner shall not register any application if the district council represent to him that the application is made in contravention of a prohibition or condition made or imposed under section 83 of this Act".).
The noble Baroness said: In urban areas considerable lengths of main and feeder roads have to be used for different parts of estates and areas. Subsidised services will be tendered and accepted for unserved areas based on revenue assumptions about the section of the route using the main and feeder roads. If another operator subsequently introduces and increases a service over the common section the operator and the council, or.both, (depending on the type of contract) will find the fares revenue reduced and the subsidy inadequate. This could be chaotic, with a continuous need to re-tender. It is very much in
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the ratepayers' interest to utilise the revenue from the common section to keep the rates down.
Many noble Lords will join the Government in their wish to bring deregulation and competition into the bus market, especially as it is tempered with acceptance that local authorities will have to subsidise socially necessary services. However, this interface between a commercial network and a subsidised network will present problems. If we are to improve the Bill our role is very much to try to foresee the problems that will arise. Currently we have cross-subsidised networks, with local authorities performing a co-ordinating function to feed in rate subsidy without causing friction between commercial and subsidised services. The Bill as it now stands does nothing to lubricate the friction that will occur between commercial and subsidised networks.
A local authority could find two areas unserved on Sundays and put out two tenders to provide the service. The first half of the route may be nearly profitable but to serve the further end of each route means incurring a loss, and it thus needs subsidising. After these contracts are in place another operator could create a circular route that covers the more lucrative halves and make a small profit. The loss and, therefore, subsidy on the two original routes would escalate because they still have to incur the cost of travelling over the roads now served commercially. The local authority may have to abandon them because of lack of cash or at the very least need to go through the tendering process all over again, incurring extra cost and perhaps seeing a hiatus in the service.
My amendment seeks to avoid that problem. Noble Lords will realise that it does not give automatic refusal of registration over subsidised routes, and the matter is referred to an independent traffic commissioner to judge whether the registration would be harmful. I beg to move.
Lord Belstead: Two important issues are raised by the amendment tabled by my noble friend Lady Vickers. It raises two further issues which are rather more technical. I shall first say a few brief words about the two technical matters.
The amendment seeks to require that the period of notice before a registration becomes effective is at least 28 days. We debated this in detail on Amendment No. 44 and, as my noble friend Lord Brabazon said on that amendment, while the Department of Transport has not yet reached a firm decision on the length of notice a period of 42 days has been suggested as a result of consultation. I hope that the noble Baroness may be reassured that there is more of a consensus of opinion on that period of time.
Secondly, I very much agree with my noble friend that, if an operator is prohibited by a condition under Clause 25—I think it is Clause 25 rather than the Clause 83 that is mentioned in the amendment which is the relevant one—from running a local service, he should not be allowed to register one. I think that is something which goes without saying. I promise my noble friend that I shall look again at this point. If on further consideration the Bill seems to need tightening up, I assure the noble Baroness that we shall certainly do that. I thank my noble friend for raising the point.

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Perhaps I may say a brief word about the real meat of this amendment, which is the role of district councils and the position of subsidised services. I know that many district councils play an absolutely vital role in transport matters, and it is acknowledged in this Bill. Many district councils have agency agreements for road traffic regulation; nearly 50 have their own bus undertakings either as sole or joint owners. Under this Bill shire district councils in England and Wales are responsible for taxi-sharing schemes; they retain powers for concessionary fare schemes, and in most areas they are the tier of local government which has taken the responsibility for concessionary fares. Under this Bill they will be able to own bus-operating companies and will be able to subsidise bus services after going out to tender, and for that reason they will receive notification from the traffic commissioner of registrations, variations and withdrawals under subsection (9) of this clause.
But what my noble friend is seeking to do in new subsection (7C) is to say that if there is a harmful effect upon subsidised services in a district council area from the running of another commercial service, then it will be possible to protect the subsidised service. If my noble friend will forgive me for saying so, this presents a problem because there is no criterion at all in the amendment for what "a harmful effect" is to be. I am not quibbling when I say that. Later on this evening we shall come to Amendment No. 107, where the amendment of my noble friend Lord Monk Bretton covers about two pages of the Marshalled List in setting out with very great care how he believes it is possible to identify when harm might be caused and when not.
I hope that my noble friend Lady Vickers will not think that I am being slipshod when I say that it is difficult to mount a detailed argument on this part of the amendment—though as I have shown, there are other parts of the amendment with which I very much agree—when we have simply a statement that where there is a harmful effect to a subsidised service another service shall not run. We know what harm has occurred over the years from the effect of hidden cross-subsidy. This has been the subject of the amendment on which we have just divided, and on which the Committee has given its decision.
So, if my noble friend will forgive me, on this particular aspect of the amendment I shall simply say that if we start down the road of outlawing some commercial operations in order to protect a subsidised service on a blanket "harmful effect" basis, I think that it will be a very short road back to the system of licensing which the Government believe has damaged the health of the industry as a whole. As I have said, there is one particular aspect of the amendment which I should very much like to follow up, and I hope that the noble Baroness will not press this particular amendment.
Lord Monk Bretton: I should like to say just a word to the effect that I sympathise with the principles which brought my noble friend Lady Vickers to put down and move this amendment. I hope that my noble friend the Minister will keep a very close eye on what I call the problems of the interface—namely, the interface between two systems: the competitive sector
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and the subsidised sector—which I think are something we still have to try to deal with.
I believe that there are dangers of an increase in subsidy cost for which we have to watch out very carefully. At this stage I do not wish to introduce or debate Amendment No. 107, but I should like to say to my noble friend Lady Vickers that, while I am primarily concerned with shire counties and problems in rural areas, if she looks at subsection (2)(a) of the amendment that I shall be moving, she will find that it could include a district council. Amendment No. 107 here refers to subsection (6) of Clause 61 of the Bill, and it is this subsection that brings in the district councils—subject to regulations made by my noble friend the Minister under the new clause and subject to the pretty stringent tests that the new clause lays down with regard to any protection of subsidised services.
Baroness Vickers: I should like to thank my noble friend for his courteous reply to my amendment. I am very glad to hear that he will look into a very important part of it. In view of that, I shall be pleased to withdraw my amendment and hope to support Amendment No. 107 in time.
Amendment, by leave, withdrawn.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 51:
Page 6, line 20, at end insert—
("( ) If any part of the route proposed to be registered or varied coincides with any part of the route of a service provided under subsidy arrangements in accordance with sections 82 to 86 of this Act, the registration or variation shall only be effective if—

(a) the local authority or Passenger Transport Executive providing the subsidy has no objection to the proposed service or variation; or

(b) where the local authority or Passenger Transport Executive objects to registration the Traffic Commissioner has held an inquiry and determined that the objection cannot be sustained.").

The noble Lord said: This is an amendment dealing with what the noble Lord, Lord Monk Bretton, described as the interface, which is a very difficult part to deal with. It is even difficult to describe in words, though we all know exactly what it is. Clearly, the degree of subsidy which any operator will require if he is to run a route into rural areas will depend on the degree of profit that he can expect on the profitable part of the route, and this in turn will depend on the extent and nature of the competition he can expect there. In other words, instead of talking about transparent subsidies, we are talking about transparent competition, so that any operator who is making a tender has to see what sort of competition he is likely to meet. Amendment No. 107 of the noble Lord. Lord Monk Bretton, perhaps covers this question more adquately than this particular amendment of mine, and therefore I have no desire to labour it. I should just like to give the Minister notice of the kind of arguments to which we should expect to have answers.
The problem is that unless a check of some sort is built into the legislation along the lines proposed in this amendment, or perhaps in Amendment No. 107, there will be no way for an operator, who has bid for a rural service, a social service or an unprofitable service, to foresee what his profit or his future is likely to be. The arrival of a competitor on some part of the route after acceptance of a tender could result in the

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agreed tender becoming quite unrealistic. I am sure the Minister has looked at this very carefully. Representations were made to him and to the department by many people and particularly by the shire counties who have considerable worries about this point. It applies to every service that is to be put out for tender. I should like to hear the Minister's interim reply, but the rural point will be brought out more completely perhaps in more full replies of the Minister, if he has time in his answers between now and the debate on Amendment No. 107. I beg to move.
6.30 p.m.
Lord Belstead: If I may respond to the noble Lord, he puts his finger upon the difficulty, and I acknowledge that it has been put to me in private meetings and discussions off the Floor of the Committee that there is a problem so far as the Bill is concerned with the concept of creaming-off a particular part of a route. I shall reply briefly now, if the noble Lord will allow me, with the answers which I wish to deploy later this evening.
I do not think that operators will put in bids with their eyes closed. They will very much have their eyes open. An operator in a particular locality will already know of the chances of competition, and the possibility of somebody coming in and creaming-off a part of a route is unlikely. The noble Lord may ask whether that is a tenable argument. I think that it is. The holder of the subsidy, by the very fact that he has a subsidy, will be at an enormous advantage over any other competitor.
I shall content myself at this stage with making those two brief points, and add just one more. The noble Lord must address himself to this difficulty, if I may say so: how does one give protection, bearing in mind that often different services use the same routes? He has completely bypassed the difficulty in the amendment by simply putting in a blanket provision that if there is competition between a subsidised and a commercial service, on an objection to the traffic commissioner the subsidised service would be able to win the day. That is perhaps the most difficult point to which I think we will come on Amendment No. 107. But the Achilles' heel of Amendment No. 51 is that it does not address itself to that point.
Lord Carmichael of Kelvingrove: I thank the Minister for that reply. As he said, later this evening we hope to be dealing with Amendment No. 107 and we shall go into the whole question again. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 52:
Page 6, line 25, leave out from beginning to ("without") and insert ("unforeseen circumstances").
The noble Lord said: With this amendment I think it will be convenient to take Amendments Nos. 53 and 54.
Amendment No. 53: Page 6, line 26, at end insert ("where this is essential to safeguard passengers from hardship or severe inconvenience").
Amendment No. 54: Page 6, line 27, leave out paragraph (b).
There should be no relaxation in the requirements for operators of whatever type or size to comply with registration procedures except in unforeseen circumstances where strict compliance would, because of the delays involved, give rise to hardship or serious inconvenience for passengers. New competitive operations by other operators should certainly not be permitted to affect the registration requirements. Short notice decisions by operators or by tendering authorities might, however, be a justification for some reduction in the registration notice periods, but only such as are necessary in each case to safeguard the passengers from hardship or severe inconvenience.
A possible safeguard for unusual cases such as an operator's bankruptcy would appear to exist under the provisions in the Bill by virtue of the intended regulations in respect of Clause 6(8)(c), which might authorise the traffic commissioner to exercise some discretion. I wonder whether the Minister will accept that some discretion is required and that some allowance is needed for relaxation if a particularly serious happening occurred. I beg to move.
Lord Belstead: I am a little surprised at this amendment. There is in the Bill a broad power to make exceptions and, as I understand it, the intention in the amendment is to replace it with a narrow one. I think that that would create difficulties for operators and for the travelling public.
We take the point that there is a need for an exemption—and it would be prescribed under Clause 6(8)(a) as it stands—for unforeseen circumstances requiring a variation in registration. But there are unforeseen circumstances for legislators as well. With experience we may find that the periods prescribed for general purposes are quite unreasonable in certain classes of case. We may also find that trivial variations are not worth the trouble of registering. The noble Lord may have had time to glance at the Notes on Clauses for Clause 6, which give examples of where it would be desirable to allow the variation of a registered service without having to vary the registration. For instance, the closure of a road may necessitate variations of a route and minor changes in timetable, routes or stopping places.
I assure noble Lords opposite that the aim in drafting these regulations will be to maintain the principle of registration which is essential for information and for surveillance, while allowing a sensible measure of flexibility. I should also like to give an assurance that we shall consult before making regulations. Indeed, there is a statutory requirement under the 1981 Act to do so. Under those circumstances, I hope that the noble Lord will feel that we should not perhaps become too rigid in the exemption-making power under this clause. I feel that the amendment would move in that direction.
Lord Carmichael of Kelvingrove: I agree with the Minister and welcome his assurances, but I hope the Government are not proposing different treatment for different classes of operator. Any change necessary should be applicable to whichever operator requires it, and it should not be done on the basis of the type of operator.
Lord Belstead: I can give the noble Lord that assurance.
Lord Carmichael of Kelvingrove: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 53 and 54 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 55:
[Printed earlier.]
The noble Lord said: I spoke to this amendment with Amendment No. 48. I beg to move.
On Question, amendment agreed to.
Following is the text of the amendment (No. 55):
Page 6, line 43. leave out paragraph (e) and insert—
("(e) for an application for registration or for the variation or cancellation of a registration not to be accepted by the traffic commissioner to whom it is made unless the applicant gives to the commissioner such information as he may reasonably require in connection with the application.").
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 56:
Page 7, leave out lines 29 and 30 and insert ("authority within whose area lies any part of the route of the service.").
The noble Lord said: With the leave of the Committee, I should like to speak also to Amendments Nos. 57, 58 and 59.
Amendment No. 57: Page 7, line 31, leave out ("local").
Amendment No. 58: Page 7, line 36, leave out ("and").
Amendment No. 59: Page 7, line 37, at end insert—
("(d) any Passenger Transport Executive; and
(e) any chief officer of police.").
These amendments repair an omission and will add passenger transport executives to the authorities which must be notified of registrations, variations and cancellations, and they improve the drafting. In view of the functions given to PTEs by the Bill, we recognise that they should be entitled to the same notification as local authorities and the police. As I say, the other changes merely improve the drafting. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 57 to 59 en bloc.
[Printed Above.]
On Question, amendments agreed to.
Baroness Vickers Baroness Vickers moved Amendment No. 60:
Page 7, line 37, at end insert—
("( ) The traffic commissioner shall not register a service unless:—

(a) he is satisfied that the applicant is of proper financial standing to operate such a service, and

(b) the applicant enters into a bond with a bondsman determined by the traffic commissioner so as to secure the continuing provision of the service to be registered during the period of notice required to cease the service.").

The noble Baroness said: All of us will welcome the new entrants that the Bill will bring into the market. Many of them will already be experienced and will help to improve public transport. However, there will be less experienced new entrants. Their tenders for subsidised services may appear very optimistic to local authorities. Local authorities may wish to take advantage of their low tenders but may fear that the
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new entrants may not be able to sustain the service at the subsidy level requested.
If a "cost" form of contract is used, the tenderer will only have to estimate his costs and therefore his tender should be reliable. However, many local authorities will not be able to take the revenue risk implied in a "cost" contract and will have to turn to the "deficit" form of contract. This requires the operator to also estimate the fare revenue on the service and subtract that from his costs to calculate the deficit.
Estimation of this fare revenue is far harder, and new entrants could easily estimate incorrectly. A relatively small error in the fare revenue estimate could lead to a large error in the deficit estimate.
If an operator has to withdraw from a contract, or even go bankrupt, the local authority has rapidly to arrange a new operator, probably at a higher cost, or, if funds are exhausted, stop the service. Worse still, the public may suffer interruption to their services.
My amendment not only seeks to avoid these problems for local authorities and the public but should allow local authorities to take the risk of using a new entrant to the market who offers a low price tender. This is therefore a genuine improvement to the Bill, in that it helps achieve its aims whilst protecting the public and local authorities.
The amendment requires the successful tenderer to have a bond that would pay the local authority the cost of continuing the service if his service fails. The amount of the bond would not be a great burden on the operator as it only has to cover the cost of replacing the service during the notice period, which I believe is 56 days, and of course it will apply to all operators. I beg to move.
Lord Belstead; I am grateful to my noble friend Lady Vickers for moving this amendment, because she is in more detail going into a point which captured the attention of Members earlier on—namely, in what were Amendments Nos. 38 and 38A in the names of my noble friends Lord Peyton and Lord De La Wan. On that occasion, I gave an assurance to the Committee that the vigilance of the commissioners will be maintained and stepped up. To require a financial examination before anyone can start a new service would be a massive discouragement to innovation and competition, and so would be detrimental to the bus passenger. We went over that ground fairly throughly.
My noble friend raises a very interesting and important point when she brings into her amendment the question of a bond being held by a bondsman. My noble friend, in essence, is asking: what happens if a major operator collapses, leaving a whole area without services more or less overnight? Many Members of the Committee would be the first to caution me that the area of bankruptcy and insolvency is a complex one, and I am sure that I should not try to stray unduly into detail in it. However, it is fair to say that a completely unforeseen collapse of a company of any significant size in this field is nowadays unusual. I do not say that it could never happen, but the presence of modern management information systems and the audit requirements of the Companies Act normally provide good warning of possible insolvency, and operators would have time to seek to trim their business in an

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orderly fashion. Should matters come to the point where a receiver is appointed, he will be doing all he can to preserve a viable business for sale and keep in operation whatever parts of the business can make a contribution to that future business. One could expect that much of a bus operation could be continued in this way. Generally, a receiver can be appointed and make decisions very quickly. Any disruption to services in these circumstances should be minimal. I think that is all I can say on that matter. Before I sit down, perhaps I may go back to the first principle, which is that I have earlier on, on Monday, given an assurance that we are at one with noble Lords in believing that suitable financial standing must be put under the microscope in this Bill. I gave an undertaking on Monday that we would look at those amendments, Amendments Nos. 38 and 38A, to see whether anything further needed to be done. I should like to say that in the light of what my noble friend has said on her amendment today, we shall include what she has said in our deliberations on this area of the Bill.
Lord Carmichael of Kelvingrove: The assurances were helpful. It is extremely important that continuity is guaranteed and that there is not a sudden withdrawal of an operator at a most inopportune time. While I can see the difficulty in the method of a bond suggested by the noble Baroness, Lady Vickers, I hope that the Government will give very serious consideration to the whole question of the reliability of services and, as I think will be raised in some later amendments, the question of making sure that the financial capability of any prospective operator is such that they will not suddenly fold up. While, as I say, the bond is perhaps not the best way to do it, I hope the Government are aware that it is a very important measure that the noble Baroness is suggesting for the protection of the public.
Baroness Vickers: I thank the noble Minister for his reply. I shall look forward to seeing the amendment which he is possibly going to put down in the near future, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6, as amended, agreed to.
[Amendment No. 61 not moved.]
The Deputy Chairman of Committees (Lord Ampthill): Amendment No. 62, Lord McIntosh.
Lord Denham: Of course I am in the hands of the Committee on this. I understand that this is the first of a number of amendments that are to be taken together. I am just wondering whether, in view of the timing, it would be wise to embark on this now. I know it is a little earlier than we normally adjourn, but if we can agree not to come back to this Bill before, let us say, 10 minutes to eight, then I shall move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Deer (Firearms etc.) (Scotland) Order 1985
6.48 p.m.
The Earl of Caithness: My Lords, I beg to move that the draft order laid before the House on 3rd June be approved. This order is brought forward under Section 23A of The Deer (Scotland) Act 1959, which gives the Secretary of State power to regulate the classes of firearms, ammunition and other equipment which may be used in Scotland for killing deer.
I should like first to say a word about consultation. The Act requires that consultation with interested bodies must take place before any order is made. This requirement has been fulfilled and our proposals have been subjected to the most extensive consultations; three full rounds were undertaken and, following the withdrawal from Parliament of a previous draft, further comprehensive discussions have been held. The subject is complex and the many different views received were all strongly and sincerely held. Naturally, we were not able to accept all the points made. However, substantial and significant changes were made to the original draft and I should like to take this opportunity of thanking all those who took the time and trouble to respond. We are grateful to the Red Deer Commission, on whose advice we relied most strongly, and I am bound also to mention the noble Lord, Lord Northfield. Your Lordship's House is noted for its erudition in unlikely subjects and, so far as the subject of firearms for use against deer is concerned, I can confirm that the noble Lord, Lord Northfield, has indeed upheld this reputation. We were particularly grateful to receive his views on necessary controls for shotguns. Long consultations are not always a good thing, but I believe a shorter timescale in this instance would have resulted in a less satisfactory compromise between the various interests and, consequently, a poorer order.
With your Lordship's permission, I shall go on to say a word about the order and the changes it introduces. The only lawful way to kill deer in Scotland (except to prevent suffering) is by shooting, but aside from the general restrictions of the Firearms Act of 1968, no control over weapons or ammunition used extists. This deficiency was recognised in 1982 when an order-making power was inserted into the 1959 Act. The purpose of the order now before your Lordships is to ensure that in future only guns capable of making a humane kill in a wide range of conditions may be used, and, also, to help combat poaching.
The main provisions of the order concern rifles and shotguns. With regard to rifles, the order allows the use of a rifle which is capable of firing ammunition of a given specification. Defining standards for ammunition rather than simply specifying rifle calibre is, of course, a most convenient and technically satisfactory means of setting out which guns should properly be used. Without compromising our overriding objective of achieving humane killing, we have sought in every case to set standards for ammunition which will allow suitable weapons currently in greatest use to continue to be so used, and to avoid, as far as possible, shooters having to change a basically satisfactory weapon or load because it falls marginally short of the new regulations.

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It has been possible to allow lower minimum specifications for roe deer than for other deer. This reflects the lower bodyweight of this smaller species. In practice, this means the 222/50 grain centre fire bullet will continue in use. This is important because rifles firing this bullet are now widely used in forest control, where roe has become a serious pest. For other types of deer, the formula allows bullets of .243 calibre or greater.
I should perhaps say a little more about the "tripartite" formula set out in Article 3 of the order. The formula sets minimum values for bullet weight, muzzle velocity and muzzle energy, all of which must be satisfied before ammunition qualifies as lawful. The Red Deer Commission first suggested this useful and original approach, and the formula has been widely welcomed. Furthermore, we have been assured from many quarters that it is unlikely to give rise to difficulty or confusion. All the criteria are easily available in the manufacturer's literature and are frequently specified on boxes in which ammunition is purchased, and in cases of difficulty I have no doubt whatsoever that firearms dealers will be only too happy to assist. However, these will not be the only sources of assistance. The Red Deer Commission is shortly to issue a code of practice on firearms which will explain these matters simply and clearly.
As I have said, the provisions about rifles have been widely welcomed. The provisions concerning shotguns and ammunition, though more straightforward, are, nevertheless, also more controversial. I am, of course, aware of strongly-held views that the shotgun should be banned altogether; that it is not an appropriate weapon for use against deer; and that an absolute ban would not only reduce cruelty but help prevent poaching. These are strong arguments and deserve consideration. But there is another point of view. The shotgun is a weapon traditionally used for crop protection by farmers and crofters for whom it is often the only weapon available to protect crops. There are other circusmtances where the shotgun may be needed; perhaps crops needing protection are close to habitation, where a high velocity rifle could not be used safely.
Complete reconciliation of these issues cannot be achieved, but we have attempted in the order to include a realistic compromise. The shotgun is retained, but its use is limited, first, as to circumstances, and, secondly, as to ammunition, and it is confined to specified persons. A shotgun may be used only where an occupier has good grounds for believing that serious damage will be caused to crops on agricultural land or in enclosed woodland. We have now harmonised the crop protection provisions in Scottish deer legislation.
For the avoidance of doubt, I confirm that the use of the slaughtering instrument using ammunition intended for it will continue. Also, your Lordships will have noticed ordinary sights, including normal telescopic sights, are authorised under Article 5(b), but special sighting devices for night shooting are not.
Finally, I should like to mention the position of semi-automatic weapons. These are, of course, permitted at the present time but are not, I understand, widely used. Nevertheless, these weapons have shown some promise as efficient and effective
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instruments to control deer in woodland situations. I can assure the House, however, that we intend carefully to monitor the use of the weapon, and if evidence of abuse or unnecessary suffering comes to light we shall not hesitate to consider how the statutory provision might be changed.
The commencement date of the order is to be 21st October 1985. This marks the beginning of the open season for female deer of all species and the start of the close season for roebucks and stags of red and sika deer and their hybrids. It is thus a sensible and convenient date. The Government's intentions have been known for well over a year, and I believe the shooting fraternity will be well able to comply with the new provisions.
I have given a specific assurance about the monitoring of semi-automatic weapons but I am aware that there may be other parts of the order which we shall need to watch closely. This is the first Scottish deer legislation regulating firearms. The Red Deer Commission has kindly agreed to advise the Secretary of State on its effectiveness in the coming years and to tell him whether and when a review might be necessary. I am confident that the order achieves a balance between interests, and is reasonable and fair. It has been widely welcomed as a significant advance in Scottish deer legislation, and I commend it to the House. I beg to move.
Moved, That the draft order laid before the House on 3rd June be approved. [24th Report from the Joint Committee.]—(The Earl of Caithness.)
Lord Northfield: My Lords, I am very grateful indeed for the kind remarks of the noble Earl about my own contribution to this issue, and I shall say a little more about that in a moment. In the meantime, I express my very warm thanks for his kindness.
It is little to our credit as an animal-loving country that until this order comes into operation later this year deer in Scotland may be shot—or more likely shot at—with any type of firearm: rim-fire .22s, and even air rifles. That is a monstrous situation. It is a black mark on our national reputation. However, thankfully, with this order that will become past history. We now have the order, and it is to be welcomed unreservedly. The provisions dealing with rifles cut new ground, and, if I may say so, they do so most competently. Those who have devised the terms are very much to be congratulated. The ballistic requirements should now exclude unsuitable rounds and thus unsuitable weapons, and ensure, as far as we can, effective, clean and humane killing. That, surely, should be our primary aim.
However, main attention is focused on the issue of shotguns. It hardly needs to be repeated in your Lordships' House that a large body of informed opinion—people who know about deer and who know a great deal about the control of deer and the culling of deer—is unswervingly opposed to shotguns. It is widely hoped that the day is not too distant now when the shotgun will be prohibited as a deer weapon throughout the whole of the United Kingdom. I hope that we are steadily on the way to that situation by means of the first step taken in this order. In Europe our rating in this matter is not high. We are almost the only country which still allows the use of the shotgun against an animal of this size.

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In the meantime, as I have said, as a first step the use of the shotgun must be subject to stringent conditions. The noble Earl mentioned a previous draft of this order about which I should like to say a few words. The draft which appeared before the House some eight months ago contradicted, if not the stated wishes certainly the understanding of Parliament, and also of the overwhelming mass of those who were consulted. Mildly but firmly I must protest at the lengths to which I had to go in order to get the previous defective draft order withdrawn in late 1984. I gave notice that I would be fairly tough about this matter as long ago as 21st June 1982, when I said that an order would be coming and that we would all have to be quite deliberate in opposing it if it were defective.
With the invaluable advice of my adviser Mr. John Hodgkiss, an eminent member of the British Deer Society, who is known to many members of your Lordships' House and who has been of invaluable assistance to this House in redrafting deer legislation in recent years, I pointed out the defects of that first draft order to the Scottish Office. In the end I had no alternative but to put on the Order Paper a Motion for rejection of that draft, and I had to seek the help of authoritative officers of the House in pointing out how defective it was. It used words and phrases which were not in the parent Act, making open-ended the circumstances in which a shotgun could be used against marauding deer. It gave an absurdly wide definition, not found anywhere in the Act, of persons authorised to take and kill with shotguns.
The wording in the parent Act had been hammered out over a long period and in great detail, and it should not have been departed from in this way. That is water under the bridge but I want to put it on the record so that on future orders greater care will be taken over this kind of drafting. It would have saved a lot of us a lot of time if that greater care had been taken with the first draft.
7 p.m.
In parentheses, perhaps I may say how unsatisfactory it is that over recent decades our examination of subordinate legislation in general has become so relatively perfunctory in both Chambers compared with 30 years ago. I was then a Member of the other Chamber and we used to debate it on the Floor of the House. Now in the other place it goes to a committee where the examination is quite perfunctory. It may be that some day this Chamber ought to take up this issue and see whether we cannot do better work on subordinate legislation. That is a wider issue. I mention it only in parentheses, and I leave it.
To return to that first draft which was before the House some months ago, I said that the conditions in it regulating the use of shotguns were unacceptably permissive. They were virtually unenforceable, too. They would have provided—and I hope that the department will take note of this—ready-made loopholes for deer poachers. On all counts that was a slightly unsatisfactory chapter in this matter. But we can rejoice that we have the new draft order before your Lordships this evening, and it fully takes care of these objections.
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The noble Earl mentioned self-loading weapons. I probably would part company with him on this. At least I would raise the question: are they really acceptable? Do we really want stalkers going out on the hill armed with what one might call semiautomatics? There are noble Lords in this Chamber with more experience than I have on that matter, and I shall be interested to hear their views. In the meantime, I merely put a big question mark over the issue.
The order is clear now about the shotgun and the circumstances. As a previous critic of the old draft, I want finally to say how fully I support the amended proposals, and indeed the whole of the order now before us. I add a postscript. An order of this kind is only as good as its enforcement. I have had cause in recent weeks to write to the Scottish Office about the way the courts in Scotland are handling poaching cases and are not dealing with them seriously enough to deter.
Similarly on this matter, if the police and the courts do not enforce this order our deliberations this evening will have been no more than a paper exercise. I suggest therefore that it would be appropriate if we sent out a message from your Lordships' House to those who look after these matters in Scotland, asking them to please see that this order at least is fully enforced. A great deal of cruelty could be cured by this order if that enforcement is deliberate, and if we take great care to see that everybody knows its provisions. I repeat my thanks to the noble Earl for his kind remarks and wish this order godspeed and great effectiveness in the coming years.
Viscount Massereene and Ferrard: My Lords, I should like to say a few words about this order since I introduced the original Act in this House regarding the close season for deer in England and Wales, and I have always taken part in deer legislation regarding Scotland. I agree with the noble Lord opposite that the shotgun ought to have been phased out a long time ago. It has only been kept there owing to pressure from the farmers' unions—the NFU, and the Scottish NFU. It is a disgrace. It is difficult to kill a deer with a shotgun. You nearly always wound it or blind it. The other thing with which I cannot agree in this order is that self-loading rifles are allowed; that should never be so.
Regarding poaching, perhaps I may say that the allowing of self-loading weapons and shotguns is of assistance to poachers. The poaching is still deplorable, especially in the western Highlands. Not so long ago there were in my area four young men I know very well. They are always being had up for poaching. They usually only get a fine, but of course the social security pays their fine.
The other day four of them went out on the hill. I say, "the other day"; that would be in January. They shot four young stags, and they were caught. They had not got firearms certificates for their rifles. They had no insurance on their van. I am not sure about the tax. I am glad to say that they got four months. They had been in jail once or twice before, but nothing seems to deter them because they are usually fined. They come out of court and cock a snook at the police and just laugh, and of course the welfare state pays their fines.

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A month or two ago we had a welfare officer come to the area, and the welfare officer told the police not to harass these young, underprivileged, poor people. These underprivileged people have nice council houses, nice cars, and they have a nice motor-boat. What annoyed me further was that they stole the propeller off my motor-boat and they have it on theirs. But there you are; it is difficult to prove.
I think I have spoken enough. I welcome this order. It is a step in the right direction, but we must do away with the shotgun for deer. It is quite unknown on the Continent. I also deplore the inclusion of automatic weapons, self-loading weapons, in this order.
Lord Stanley of Alderley: My Lords, I hesitate to intervene in Scottish legislation, but often what happens up there comes to us, and vice versa, as I think the noble Lord will remember. I understand the feelings of the noble Lord, Lord Northfield—or at least I should do, as I have heard enough of them—and indeed of my noble friend Lord Massereene, but deer are pests. They are very serious pests. My noble friend Lord Massereene shakes his head. Come and see them with me down in the south of England. They are grossly overstocked, and they are increasing at a vast rate. I know that I am talking about the south, but these regulations will come there in the end. They are there at the moment. At times deer need severe culling. The culling in my district is something like 100 per cent. below what would be satisfactory. That is not my figure; it is that of the Forestry Commission and indeed all the other organisations round me.
I therefore welcome my noble friend Lord Caithness's remarks about the need for the shotgun in order for farmers to cull deer. It is the only weapon that we can reasonably use in these circumstances. It is no good the noble Lord, Lord Northfield, shaking his head. He knows it as well as I do. He does not want me going around with a rifle.
Here I come to another point made by the noble Lord, Lord Northfield, and my noble friend Lord Massereene. The noble Lord quotes Europe against us. Thank God we are not Europe; we are Britain. One of the things we have in this country is rights of way, and people walking across those rights of way. If my noble friend and the noble Lord, Lord Northfield, like shooting up and killing courting couples, that is up to them. I frankly have a certain doubt about doing it, and that is one of the reasons the shotgun, certainly in England, is a much safer weapon. I hope that this will remain so.
There was one point that my noble friend Lord Caithness did not mention so far as the use of the shotgun is concerned. I have personally found it a remarkably good threat to use against organisations such as the Deer Society who will not cull to the extent that they should. It is a perfectly legitimate country fashion to threaten people if you cannot get them to do it. You say, "If you are not going to shoot these deer correctly, as we do in my area, with your rifle, then we shall use the shotgun." It is a remarkably effective threat and the result is that they are shot with a rifle and, thank God, I have never had to shoot one with a shotgun.
Lord Northfield: My Lords, will the noble Lord tell us whether he has made an attempt to ask the Deer Society to do the culling for him because I should be surprised if they had not taken up his request?
Lord Stanley of Alderley: My Lords, I said before that we have people on our farms (and we combine with a whole series round us, including the Forestry Commission) who are authorised to shoot with rifles. They are members of the Deer Society. I regret to say that the cull is something like 100 per cent. wrong.
Viscount Massereene and Ferrard: My Lords, with leave of the House, the noble Lord is speaking of roe deer; I was more interested in red deer. When he says that they are pests, roe deer on one's arable land can be pests if the land is not fenced properly. But I have a place down here and I have fallow deer; I have no trouble from them. The red deer in the Highlands is a tremendous earner of foreign currency from stalking tenants. The export of venison to Germany alone is worth £2 million. When my noble friend speaks of deer being a pest, with due respect I could say a lot of things but I will not. I do not agree with him.
Lord John-Mackie: My Lords, I am not sure whether it is in order for one to make two speeches, but we are in a good mood and have plenty of time for the noble Lord to have two bites at the cherry.
The noble Lord, Lord Stanley, said that deer were a pest and there was a lot of head-shaking by the noble Viscount, Lord Massereene, and by my noble friend behind me. I know this is Scottish legislation, but the same situation occurs in this part of the world. I farm between Epping Forest and here and I have seen as many as 18 fallow deer in a field of wheat. They can be pests with a vengeance: there is not much doubt about that. I farm near the hills in East Scotland and have seen huge herds. When I say "huge" I mean literally hundreds in bad weather coming down and clearing up a field of turnips overnight. So to suggest that they cannot be pests is ludicrous.
The main purpose of this order is to prevent cruelty. There is an amazing amount of cruelty in the wrong use of shotguns, and using the wrong ammunition in a rifle does not stop the animals with the first shot. I should like to say something about the banning of the shot-gun. As the noble Earl, Lord Caithness, said, generally speaking the only weapon most farmers have is a shot-gun. The noble Lord, Lord Stanley, mentioned that. The trouble is that such a variety of ammunition can be used in a shot-gun Generally speaking, the ammunition that is mentioned in the order is not available. The NFU probably would wish to satisfy everybody and would publish in some sort of communication to farmers these provisions about the use of shot-guns and the size of ammunition available so that farmers do not break the law. If I had seen 18 deer and the only shot I had was No. 6 I should have been tempted to use it. As it happens, my foreman is a very good shot. We bought him a rifle and we use a rifle to dispose of any deer that are harming crops. But it is an expensive business to buy a rifle and not everybody can use it properly. I have seen some very accurate shooting in my Home Guard days with shots of up to 100 yards and even more. It is not good for the gun, nevertheless it can be done and it would he a pity

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if it were banned altogether. Like my noble friend, Lord Northfield, I think that the enforcement and the monitoring of this is one way to ensure that there is no misuse of a shot-gun. As the noble Earl, Lord Caithness, said, he thought that a compromise had been brought into this order and I agree with him.
7.15 p.m.
On self-loading weapons, when I was in the Forestry Commission many of our rangers told me that a self-loading or semi-self-loading weapon was of tremendous help in stalking deer. I am no roe deer stalker myself although I have stalked once or twice; I only needed one shot I should like to say so I did not need a self-loading rifle; but the rangers impressed on me that it was of great help in stalking deer to have a self-loading rifle. I have seen an article written on the arguments for it and I should perhaps mention that.
This order will do a great deal to satisfy people who were worried about the wrong use of shot-guns, as my noble friend Lord Northfield said, and the monitoring and enforcement is essential. We give the order our blessing.
Lord Swansea: My Lords, like other noble Lords, I welcome this order because it is a great step forward for Scotland. I have no connection with Scotland myself because I come from another part of the Celtic fringe. Nevertheless, this order is to be welcomed. I welcome it with certain minor reservations. An order, as we know, cannot be amended and our convention is that we do not reject one, either. The order lays down certain minimum requirements in the weight of the bullet, the muzzle velocity and the muzzle energy. I gather that these were worked out on the basis of advice given by the Red Deer Commission. It is desirable that the order should specify certain minimum standards, allowing a wide range of weapons covering all calibres in common use. But there are certain calibres still widely used, although they are of some age now. They might be regarded by some people as almost obsolete or old-fashioned, but they are still widely used, popular, effective and are capable of killing a deer humanely, although they might fall marginally short of one or other of the requirements laid down in this order. I hope that it is not the Government's intention to outlaw these weapons, which, although elderly, are still widely used and still effective.
A problem that I see is that of verification, of checking on the muzzle velocity and muzzle energy of a cartridge. Commercially manufactured ammunition has its weight printed on the package so it is there for all to see. But it does not give the muzzle velocity because that is subject to certain variables. It can vary from one rifle to another according to the conditions under which it is fired. One can only say with regard to a given cartridge that its muzzle velocity would probably fall within certain brackets. One cannot say what it is exactly without firing the weapon and measuring the velocity with a chronograph.
Apart from commercial ammunition, some shooters for economic reasons choose to hand-load their ammunition. There one can only verify the ballistics of that by firing it and measuring the velocity. It is not an easy process, and one cannot expect the
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average policeman, if he comes across someone carrying a rifle and ammunition, to say, "Show me the ammunition you are using!"—and then to be able to tell instantly whether or not that ammunition will fall within the requirements laid down in this order. It is necessary to take a sample of the ammunition, to break it down by pulling the bullet and weighing the bullet and then firing the rest of the sample over a chronograph; and the facilities for that are not in every village police station. I rather wonder where and in how many places are there facilities available for carrying out tests of this sort.
We have also talked quite a lot about shotguns. I do not like the use of a shotgun on deer because, for it to be effective, you have to strike a balance between the striking energy of the pellets, which of course varies with their size, and the density of the pattern, which also varies with the size of the pellets. If you use larger pellets which will strike a harder blow, then you get a much thinner pattern and you might not hit a vital part of the animal. Shotguns also have a very limited range and it is a great temptation to shoot at something too far away, especially with a shotgun. We very often hear of cases of wounded animals dying what is sometimes a lingering death.
The rifle is still the most effective weapon. With regard to the safety of a rifle, if I were shooting on land which was crossed by a public footpath I should know better than to shoot in the direction of the public footpath. If a person is responsible enough to be granted a firearms certificate to enable him to use a rifle, he should be reckoned to be responsible enough to use that rifle safely.
The present legislation on rifled weapons is a hindrance to their possession for lawful purposes and it is really the only justification for continuing to permit the use of shotguns. If legislation was less restrictive so as to make it easier for responsible persons to own rifles for deer control, then perhaps one could say goodbye to the shotgun for that purpose. With those comments, I wish this order a fair wind.
Lord Tryon: My Lords, I shall be very brief as I see people looking around and looking forward to other business. I do not hesitate to intervene in a Scottish matter, particularly being a veteran of a number of Lord Northfield's debates on deer in the past, when the noble Viscount, Lord Thurso, in particular, had no hesitation in coming down here and telling us how to run deer matters in England. I should like to support everything that the noble Lord, Lord Northfield, has said other than that I have no experience of his defective draft that made him cross.
Despite the reservations of my noble kinsman Lord Swansea and declaring some interest as a director of a gun-making company, I welcome the, I thought, very sensible formula for deciding the size of rifle bullet that can be used. I think that it is an advance on merely putting in the calibre, which was the method that we used in the past. I shall be interested to hear the Minister's answer to my noble kinsman's technical questions on some of the more obscure calibres.
On shotguns, I, too, look forward to the day when only rifles are allowed. I accept that we are not going to get it today or anything like it, but some of us will go on hoping and pressing for it in due course. I believe

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that rifles can be safely used by sensible people and, by definition, those with firearms certificates should be sensible people. I have one suggestion for the Minister on the subject of shotgun cartridges. We heard a very good suggestion from the noble Lord, Lord John-Mackie, that the NFU, or whoever, should give publicity to these shot sizes which are not that easy to guess. They are not sold in great numbers but they are fairly readily available at gunmakers.
I have a suggestion that some thought ought to be given to putting some kind of health warning on those two particular sizes of shot which are liable to be used almost exclusively for deer, although AA may be used on geese. The health warning should say something of the range at which they are effective against deer, because, as we have heard from other noble Lords, the question of range is of critical importance with a shotgun. Anything over 25 yards or 30 yards is too far even with the very big pellets. With a rifle, the range is relatively immaterial. If you can see a deer the bullet is likely to be going fast enough to kill it. Even if you cannot hit it at very long ranges, the bullet is still going fast enough to kill it. That is not so with shotguns. That is the main objection to them. In the wrong hands they will be used at wrong ranges. It is only at very short ranges that they are effective.
The noble Lord, Lord John-Mackie, asked about self-loading rifles. I have a little experience of them and I would say to him that, in my opinion, they are more humane than single-shot or bolt-action rifles in that in the event of the first shot not being fully effective it is very easy to fire the second shot very quickly and finish the job humanely.
The Earl of Caithness: My Lords, we have had a full and interesting debate this evening and I am very grateful to all noble Lords who have taken part for the general welcome that they have given this order. I turn first to answering some of the points this evening and if I miss any I shall write to the noble Lord concerned. I turn first to the noble Lord, Lord Northfield, who, as he forewarned me, gave criticism to our first order. I should not like the House to think that the first order was out of order. In fact, it was a perfectly legitimate order and it was open to the department to make an order in the form of the draft. He might have disagreed with it but it was certainly not ultra vires.
I turn next to shotguns mentioned by other noble Lords. If I can just sum up the Government's thoughts on this and those on the Red Deer Commission who advised us, we considered all the arguments that recommended the retention of the shotgun for crop protection only and advised that the right to use the weapon should be restricted to the occupier or his authorised employees and residents on the land. We believe that this strikes the right balance. It restricts the use of the shotgun to circumstances where it is strictly necessary and avoids abuse arising from its widespread and indiscriminate use.
In an effort to ensure humane and clean dispatch of animals, the order lays down minimum standards of ammunition so that the weapons will have enough reserve power to kill animals cleanly or, at least, incapacitate them long enough for a further killing shot to be administered.
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The effectiveness of the weapon is much dependent on its distance from target when fired. We do not consider that maximum legal distances laid down by order would be enforceable; but the Red Deer Commission are to issue a code of practice which will clearly set out recommended distances according to species of deer and ammunition used. I hope that that answers the point of the noble Lord, Lord Tryon.
While on ammunition for shotguns, I would say that the gun itself must be 12-bore or more and loaded with the specified ammunition; that is to say, a rifle slug or SSG or greater for all species or, for roe deer, AAA or larger. With regard to the shotgun, I think that my noble friend Lord Stanley has a point. The shotgun itself can be a deterrent. I know that it is slightly prejudicing the old home county, but I would invite the noble Lord, Lord Northfield, up to Caithness to have a look at some of the crofting communities, where a rifle simply would not be an appropriate weapon to use.
7.30 p.m.
The noble Lord, Lord John-Mackie, and the noble Lord, Lord Tryon (who, incidentally, said that he was not Scottish, although I remember not so very long ago spending many happy hours on the hill with him), mentioned that shotgun ammunition was not readily available. The Red Deer Commission will shortly issue a code of practice which will tell farmers what shotgun ammunition is allowed. I have just mentioned that under the order. Also, the order has been, and will be, given adequate publicity. It is not accepted, I do not think—this is from my own experience, too—that the specified ammunition is not readily available in all gun shops.
My noble friend Lord Swansea mentioned the problems that could arise over the use of hand-loaded ammunition. It will be the responsibility of the person loading his own bullets to reach the necessary specification. Of course I admit that enforcement will be more difficult in those circumstances, but anybody who loads his own ammunition will, we hope, be responsible and sensible enough to keep it up to the right specification; and, of course, we do have a strict method of enforcement.
I believe that all speakers mentioned self-loading weapons. As the noble Lord, Lord John-Mackie, with his vast experience of the Forestry Commission, said, they are particularly keen on this, and we did receive extremely strong representations for the retention of those rifles from all sectors of the forestry industry, because they are useful tools in combating increasing deer damage which is being done in the Scottish forests. Perhaps if we got rid of the Scottish forests we could get rid of self-loading rifles; but that is another debate altogether, and I do not want to go down that path tonight.
The Government would be as concerned as anybody if needless cruelty resulted from the use of these weapons, which I emphasise can be used quite legally at the present time. I hope that the Red Deer Commission will be able to advise the Secretary of State on these matters in due course. I have clearly stated that if it is found they are being abused or used recklessly, the Government are prepared to reconsider

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their status. The noble Lord, Lord Tryon, said we should have a health warning for shotgun ammunition—I suppose rather like that on cigarette packets—and that the Red Deer Commission's code of practice will be specific on the recommended range for specified loads.
Lastly, I turn to enforcement, which was raised by many noble Lords, and particularly by the noble Lords, Lord Northfield and Lord John-Mackie, and by my noble friend Lord Massereene and Ferrard. The Red Deer Commission has recently written to all court authorities emphasising the need to punish poachers effectively. It is hoped that due regard will be paid to this. Prosecution, of course, is a matter for the Procurator Fiscal and I hope that noble Lords have taken on board the fact that the Lord Advocate has sat with us throughout our discussion tonight.
I hope that I have now dealt with the principal questions that arose in the debate. The interests involved in deer are many and are often in conflict. The conflict seems to be at its sharpest when it comes to the question of firearms and ammunition, but nevertheless I think there are large areas of common ground. We are generally agreed that some control is overdue; that the shotgun should be restricted but is still a useful weapon; that each species of deer should be shot only with weapons amply capable of delivering a fatal blow, but that in all cases only the expanding bullet should be used; and that the time is not yet ripe to allow the use of the highly-specialised type of sight developed originally for military use. The order provides for all these things, and that is a solid advance. Whatever our views on other aspects of the order we should not lose sight of that, and I hope that your Lordships will give the order a warm welcome now.
On Question, Motion agreed to.
The Earl of Caithness: My Lords, I beg to move that the House do now adjourn during pleasure until ten minutes to eight, which I believe is the agreed time.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.35 until 7.50 p.m.]

Transport Bill
House again in Committee.
Clause 7 [Application of traffic regulation conditions to local services subject to registration under section 6]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 62:
Page 7, line 38, leave out ("If").
The noble Lord said: With Amendment No. 62, it may be for the convenience of the Committee if I speak to Amendments Nos. 63 to 65, 68, 76 to 80, 82 to 83, 86, 88, and 92 to 100.
Amendment No. 63: Page 7, line 38, leave out ("asks him to exercise his powers under this section").
Amendment No. 64: Page 7, line 39, leave out ("the traffic commissioner for any traffic area").
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Amendment No. 65: Page 8, line 4, leave out ("commissioner") and insert (authority").
Amendment No. 68: Page 8, line 11, leave out ("commissioner") and insert ("authority").
Amendment No. 76: Page 8, line 32, leave out ("the traffic commissioner for any traffic area") and insert ("any traffic authority").
Amendment No. 77: Page 8, line 34, leave out ("his") and insert ("its").
Amendment No. 78: Page 8, line 35, leave out ("he") and insert ("it").
Amendment No. 79: Page 8, line 36, leave out ("he") and insert ("it").
Amendment No. 80: Page 8, line 40, leave out ("commissioner") and insert ("authority").
Amendment No. 82: Page 8, line 42, leave out ("commissioner") and insert ("authority").
Amendment No. 83: Page 9, leave out lines 1 and 2.
Amendment No. 86: Page 9, line 12, leave out ("commissioner") and insert ("authority").
Amendment No. 88: Page 9, line 13, leave out ("he") and insert ("it").
Amendment No. 92: Page 9, line 17, leave out ("him") and insert ("it").
Amendment No. 93: Page 9, line 18, leave out ("asking").
Amendment No. 94: Page 9, line 18, leave out ("commissioner to exercise his") and insert ("authority exercises its").
Amendment No. 95: Page 9, line 19, leave out ("a traffic authority") and insert ("it").
Amendment No. 96: Page 9, line 23, leave out ("commissioner in response to the request") and insert ("authority").
Amendment No. 97: Page 9, line 28, leave out ("commissioner") and insert ("authority").
Amendment No. 98: Page 9, line 29, leave out ("him") and insert ("them at their own instance or").
Amendment No. 99: Page 9, line 31, after ("any") insert ("other").
Amendment No. 100: Page 9, line 36, at end insert—
("( ) A traffic authority shall inform the traffic commissioner of all traffic regulation conditions it has determined in relation to its area and each traffic authority shall maintain a record of all traffic regulation conditions in force in its area and shall allow such records to be inspected at its offices by members of the public.").
The impulse behind this complicated series of amendments is one which I am sure will be attractive to the Government. It is an impulse to reduce bureaucracy, to reduce the complicated chain of responsibility and command which is implicit in the present provisions of the Bill as it stands; and to restore to democratically-elected local authorities the responsibilities that they have had in the past and ought to have in the future under the new status of the bus industry as it is proposed in the Bill. I hasten to say that this wish is in no way inimical to the intentions of the Bill. It is simply a matter of how the intentions of the Bill shall best be achieved.
Behind the series of amendments lies what I would not call a theory, but experience in practice, of the relationships between bus operation and the whole range of problems of transportation of which I have experience, particularly in urban areas, in which they mainly apply, but may well also apply in rural areas. I had the fortune or misfortune, for a number of years to be chairman of three of the four area boards of the Greater London Council responsible for transport and planning. A considerable part of the time of the Greater London Council in those areas was concerned with how best to provide mobility for the people of London, including both those who have cars and use

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cars in London, and those who do not have cars and are therefore reliant on their feet or on London Transport services.
The complexities of the inter-relationships between bus operation and traffic management in its wider sense are difficult to conceive unless one has actually been involved in it. Let me give an example of Romford town centre. I appreciate that the Bill does not cover London, but I can only talk from my own experience and I know that this experience is matched in our major cities. In order to have an effective, commercially viable town centre to many of the cities of this country, it is necessary to provide adequate movement for pedestrians. It is necessary to provide adequate car parking accommodation for those who wish or need to use their cars for shopping or for journeys to work. It is also necessary to provide adequate access by public transport, whether it be by bus or by Underground services.
This inevitably means that there will be conflicts in town centres for space. It inevitably means that when, for example, one wishes to pedestrianise a town centre one has to consider whether the pedestrianisation will apply purely to commercial vehicles and private cars, at what hours of the day it will apply, and whether it will apply to buses as well. One of the most successful examples of pedestrianisation, I suppose, is in Oxford. For many years now buses have been allowed to use areas of the town centre of Oxford which are not accessible to private cars during certain hours of the day. The responsibility for these complicated, difficult decisions, which encompass the provision of stopping places, encompass the waiting and parking restrictions, the provision of bus bays—or, as one of my former colleagues on the GLC who has also worked for London Transport used to call them, bus traps—is of great interest and importance to the people living in the area, both the passengers and the voters. It is impossible to separate one from the other. It is impossible to think about the operation of buses in a city centre without thinking about the interests of pedestrians and of car users and of commerce and industry using those town centres.
We do not have adequate experience from the trials that have taken place so far. I do not wish to go over past debates, but it is a matter of fact that in Hereford—which is the largest experiment of its kind—we are talking about a few dozen bus movements per day in the peak hours, whereas in a city like Leeds there are at least 500 bus movements in the course of a day. The effect on traffic congestion on the sensible use of limited road space of that large amount of bus operation is bound to be considerable. The hidden costs—in other words, the costs not taken into account in the sums, such as they are, which have been done in justification of this Bill—could be very considerable and could very well outweigh any benefits in saving in bus operation which the Government imagine will come from the Bill. Again, I shall not repeat the arguments about the amount of saving. Let us accept that there will be some. But let us also consider what other costs there may be because these costs could run into millions of pounds if changes in the efficient management of traffic in our cities involve us in millions of pounds of capital
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expenditure in order to cope with a less manageable, less well thought-out, use of limited road space.
The purpose of these amendments is to ensure that it is the democratically-elected traffic authorities in our cities which have the responsibility for traffic regulation conditions and ensure that those traffic regulation conditions apply to buses just as much as they apply to all other kinds of traffic. There is nothing revolutionary in this. Section 122 of the Road Traffic Regulation Act places a statutory duty on the highway and traffic authority to secure the expeditious and safe movement of traffic generally and also specifically identifies the importance of facilitating the passage of public service vehicles and the safety and convenience of persons using, or desiring to use, such vehicles.
In other words, the spirit behind this amendment is one which the Government have, within the last 12 or 18 months, already found to be acceptable and appropriate for city government in our cities throughout the land. There is nothing inimical again to Government policy in this attempt. What we are doing in these amendments is seeking to cut out the middle man, seeking to cut out the quite unnecessary consultation between traffic commissioners and traffic authorities; and to say that there should be direct contact between the democratically-elected traffic authorities and the bus operators who will work on the roads.
Bus operation is not separate—it can never be separate—from the economic or social life of our cities. It would be a fantasy to think that it could be run as if it were a manufacturing industry which does not have social obligations. The Government do not think so. There are many occasions in this Bill where the Government recognise the social responsibilities of bus operators. Surely it is the simplest, the most straight forward and the most logical thing to do. to see to it that democratically elected authorities should be those negotiating directly with the operators in order to secure the greatest good for the greatest number in our cities. I beg to move.
8 p.m.
Lord Brabazon of Tara: Clause 7 was designed carefully to give the initiation of traffic regulation conditions to the county councils and their Scottish equivalents, with their great expertise and wide traffic management responsibilities, but to give the impartial traffic commissioners the responsibility for deciding whether they should be imposed and in what form. I think that this is the right balance. The noble Lord's amendment would destroy that balance. This is certainly not acceptable so far as trunk roads are concerned, which, as00000000000 the noble Lord will be aware, are the responsibility of my right honourable friend who is responsible for road traffic regulations. Nor do I think that it would be right elsewhere.
The spirit of the Bill is that any properly licensed bus operator should be able to provide services where he judges the market wants them. Traffic regulation conditions are an interference with this and are to be imposed only where the case for them is overriding to prevent danger to road users or unacceptable congestion. Traffic regulation conditions moreover, may, if necessary, discriminate between operators and may be used to allocate the use of bus stops in, say,

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very congested town centres. It is absolutely essential—and this is a very important point—that this allocation is done quite objectively and that operators have confidence in it. For that to be the case, I am sure that the allocation will have to be the responsibility of the traffic commissioner.
I am in no way denigrating county councils here. The fact is that they have many very important policy responsibilities other than traffic regulations. They will be subsidising non-commercial services through the tendering process and will be promoting public passenger transport more widely. Inevitably, therefore they may on occasion have a preference for one operator over another, so the unsubsidised operator might fear from the beginning of the process that it was biased against him. I do not think that that could be right; better to put the responsibility with the traffic commissioner, whose impartiality is accepted on all sides.
It is also worth remembering that these conditions are being made an integral part of the PSV operators' licensing system and will be imposed by the traffic commissioners on 0-licences. As such, it is right that their determination should also be for the commissioners. A partition of responsibility would lead to confusion. I should emphasise to the noble Lord that we are not interfering in any way with the powers that counties have had under the Road Traffic Regulation Act. Their powers will indeed have priority over traffic regulation conditions in the case of any conflict. I hope that with that reassurance the noble Lord may wish to withdraw the amendment.
Lord McIntosh of Haringey: I do not think I have ever heard a more revealing turn of phrase than that which the noble Lord has used in the context of the relationship between central and local government. He described the traffic commissioners as being impartial. The traffic commissioners are, of course, appointed by Whitehall, whereas the highway authorities are democratically elected by the people of our towns and cities. If to be central is to be impartial and to be democratically elected is to be partial, then the noble Lord and I are living in a different country. I cannot believe that the Government can be so openly centralist as to say that a traffic commissioner, because of his appointment by central government, is somehow more impartial than a democratically elected city or town council. The concept is totally foreign to everything that I have been brought up to understand about the nature of the relationship between central and local government in this country.
This amendment does not seek to make major changes in that constitutional relationship between central and local government. It seeks to simplify. It seeks to say that the traffic authorities which have, as the noble Lord said, overriding responsibilities which will remain shall deal directly with those who have responsibility for providing bus services on the streets which they share with commercial and private vehicles. There could not be a more gross example of the Government's misundertanding of the nature of our objection to this Bill than the speech which the noble Lord has made in reply to my amendment.
Lord Mottistone: Before my noble friend Lord Brabazon replies, one point that my noble friend made, which I think contradicts the theme of what the noble Lord, Lord McIntosh, said, of which I saw the force, is that subsection (1) states, "If a traffic authority asks him". So the initiation comes from the democratically elected body and then the traffic commissioner acts as an impartial authority for putting it into effect. I should have thought that that was the right balance and a much better balance than sweeping away the intervention, because it is not quite like that. It is not a middle-man situation. So I really think that the noble Lord might like to think about that.
Lord McIntosh of Haringey: It may be convenient if I reply to the noble Lord, Lord Mottistone, before giving way to the Minister. Of course, our amendments are designed to secure that Clause 7(1) should say—and I read it having excised those words which we seek to excise—
"A traffic authority in relation to a particular traffic problem may determine conditions (`traffic regulation conditions') which must be met in the provision of services in the area to which the conditions are expressed to apply."
The noble Lord is quite right that there is still the possibility of a traffic authority expressing an opinion and taking part in the decision process about traffic regulation conditions. On that, I entirely agree with him. What I am asking is: Why should there be a middle-man? Why should there be a centrally appointed official who comes between the people and their buses?
Lord Mottistone: It is not a possibility. It is a requirement that the traffic authority, as the Bill is written, initiates this action.
Lord McIntosh of Haringey: It is indeed a requirement that this should take place, but that does not answer my question. I still ask why a centrally appointed official should come between the people who have the possibility of that requirement and the bus operators who serve their area. That is the question to which the Government must reply.
Lord Brabazon of Tara: With great respect, I think that, to use an unparliamentary term, the noble Lord is getting slightly hot under the collar. As I said, the local authorities still have the powers under the Road Traffic Regulation Act to control access by buses, lorries and so on to certain parts of their town or city if they so wish. All I am saying is that under the traffic regulation conditions imposed by the traffic commissioner, as we propose, he is able to discriminate between one operator and another. That is why I say that he is impartial, in that he can say to one operator that he must use a bus stop at one end of the street and to another operator that he must use the bus stop at the other end of the street.
I believe he is more impartial, in that he can look at the matter perfectly objectively, whereas, as I pointed out, the county council could—I am sure that they would not—attempt to favour one operator over another. There is that danger. From the operator's point of view, I think he would definitely rather have the traffic commissioner taking those decisions, whereas the local authority under the Road Traffic

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Regulation Act has the powers in general terms to ban buses, allow buses or make pedestrian precincts etc.
Baroness Carnegy of Lour: Perhaps the noble Lord, Lord McIntosh, will allow me also to intervene. It seems to me quite wrong to say that the local authority is just as detached as a traffic commissioner and that the contrast is between somebody appointed by local government and somebody appointed by central Government. Anyone who has been in local government knows, for example, that where the bus stops, where the crowd is and where the crush of traffic is—there are problems sometimes as to who is an operator and who is allowed to do it—are all matters of very great interest to local electors. If local government has this responsibility and is reflecting the will of the electors, it is inevitably involved in local politics, whereas the traffic commissioners, and traffic commissioners hitherto, have been able to stand back from that. I think that that is probably what my noble friend on the Front Bench was saying. That is how I understood him. I know that many local authorities are very sorry not to carry out what I think is a purely mechanical process as outlined in the Bill. If it is to be a mechanical process, it might be very much better done by the traffic commissioner. I know there is an argument, but I am inclined to come down on the side of the Bill in this respect.
Lord McIntosh of Haringey: The noble Baroness, Lady Carnegy, makes two extremely interesting points which deserve reply. The first is about the possibility of partiality on the part of the local authority. I perfectly accept that where there are municipal bus services in the classical sense it would be possible for a local authority, which has financial responsibility for those municipal bus services, to give preferential treatment to those bus services in comparison with private operators. But the whole intention of the Bill is that municipal bus services shall be at arm's length from the local authority, and therefore that presumption of partiality no longer applies.
The second interesting point which the noble Baroness makes is about the reference to the responsibility to electors, whose views will be expressed in the ballot box. That is exactly what I am talking about. That is exactly why I am saying that it is the democratically elected authority which will have the responsibility of standing up at election time and saying why they have authorised or permitted an arrangement of bus stops, an arrangement of access for buses to city centres, or whatever the issue may be, which is at variance with the wishes of the electors, who are also the bus passengers and the road users. That is the responsibility which democratically elected councils have at intervals; that is not any responsibility which traffic commissioners have, at intervals or at any time. That is the reason why it is important to have the democratic control of these matters in the hands of those who are responsible.
I should like to make an additional point. They are responsible not only for the regulation of bus services—that is one of the responsibilities of highway authorities—but also for the probably much more expensive, but equally important, other issues of transportation in our cities—the question of the size of
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road provision, the question of priorities in the use of our roads in the form of bus lanes, and so on. All of these matters, as the noble Baroness, Lady Carnegy, says, are matters of great local interest and importance. Can it be right that they should be the responsibility of unelected, centrally appointed traffic commissioners? I cannot believe that the Committee would wish that to be the case.
I think that the response of the Government has been totally inadequate on this matter. It may be that there are other ways in which we can express more effectively to a larger Committee our outrage at what is being proposed. On that basis only, and not on the basis of any concession or understanding from the Government of the issues involved, I beg leave to withdraw the amendment.
The Deputy Chairman of Committees (Lord Aylestone): Is it your Lordships' pleasure that the amendment be withdrawn?
Lord Belstead: Not-Content!
The Deputy Chairman of Committees: Is it your Lordships' pleasure that the amendment be withdrawn?
Noble Lords: Not-Content!
On Question, amendment negatived.
[Amendments Nos. 63 to 65 not moved.]
8.15 p.m.
Lord Ezra Lord Ezra moved Amendment No. 66:
Page 8, line 8, leave out ("or")
The noble Lord said: I should like to propose that with Amendment No. 66 we take Amendment Nos. 67 and 69 to 75.
Amendment No. 67: Page 8, line 9, at end insert—
("( ) prevent excessive environmental disturbance; or
( ) secure the appropriate use of bus stopping places.").
Amendment No. 69: Page 8, line 16, leave out ("and").
Amendment No. 70: Page 8, line 17, at end insert—
("( ) pedestrians and person residing on or adjacent to the route of such services; and
( ) the efficient provision of public passenger transport services to meet requirements in the area.").
Amendment No. 71: Page 8, line 18, leave out ("may") and insert ("shall").
Amendment No. 72: Page 8, line 20, at end insert (", taking into account the types of vehicle to be used and their suitability for the highways proposed.").
Amendment No. 73: Page 8, line 21, after ("places") insert ("and termini").
Amendment No. 74: Page 8, line 23, after ("places") insert ("and termini").
Amendment No. 75: Page 8, line 24, after ("so") insert—
("( ) the availability of information on fares and timetables both on and off the vehicle;").
These amendments deal with the position of the wider public. The public were referred to earlier on in our debate on this Bill and defined as "the coach-travelling public". However, the public have other capacities as well. There are pedestrians and there are people who live in their homes. The purpose of these amendments is to ensure that when the traffic commissioners address themselves to this question they take into account the environmental problems

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and they take into account the interests of pedestrians and persons residing on or adjacent to the route of the services on which they are expressing their opinions.
While we must all be in support of the provision of transport which will be economic, affordable and in the interests of the public, we must also consider the impact of the arrangements proposed in this Bill. Where there are environmental difficulties arising, where there are residents in the areas where these arrangements will create disturbances, it seems to us to be very clear that the traffic commissioners should be asked to take those into account. When we come to the second part of the Bill, which deals more specifically with London, we shall be raising this point more strongly, but we feel that it is desirable that at this stage we should suggest to the Government that they take into account the interests of the public in their other capacities—that is, other than simply the bus-travelling public—as pedestrians and as residents. We therefore suggest that it would make this Bill a much more effective piece of legislation if it were shown that all these other interests were taken into account. I beg to move.
Lord Belstead: I have listened to the noble Lord with interest, and I recognise the strong feelings which the noble Lord has expressed: that the overall impact of bus operations on the environment of an area is something that the traffic commissioners ought to be able to address if the county councils apply to them to determine traffic regulation conditions on such a ground. If I may say so, I think that the words which the noble Lord and the noble Lord, Lord Strabolgi, have chosen to use in Amendments Nos. 66 and 67 are helpful here. I should like to give an undertaking to the noble Lord, Lord Ezra, to consider this amendment further and, if the noble Lord will agree, to come back after consultation with the noble Lord and the noble Lord, Lord Strabolgi, with an appropriate amendment on that aspect of this set of amendments for the Report stage. The Government feel that the noble Lord is on to an important point.
Are we taking Amendments Nos. 69 to 75?
Lord Ezra: Yes.
Lord Belstead: So far as the other points are concerned, to determine conditions on all of these matters would begin to take us into the danger of getting back to route licensing. Even under road service licensing, minor problems on bus stops and choice of routes are sorted out by negotiations and agreement between the operator, the local authorities and the police. I am sure that common sense will prevail in the future.
However, I take the point about the possibility of determining traffic conditions for termini and turning points where these are on a road. We have this in mind for the regulations under subsection (6)(d), and there will of course be full consultation on those regulations. As regards the fares and timetable information on the vehicle, we again propose to deal with this matter under the regulations. However, I must admit to the noble Lord that we do not have any plans to direct how operators ought to display those details off the vehicle.
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Nonetheless, I cannot believe that such details are to remain secret for very long. Operators will of course wish to publish their timetables as widely as possible in order to attract custom.
I hope that I have said enough to indicate to the noble Lord that we shall do our best to try to meet some of the points for regulations. I have given an undertaking to the noble Lord that we will try on the face of the Bill to meet the point made in Amendments Nos. 66 and 67. I hope the noble Lord will feel that my reply is of some help.
Lord Ezra: I should certainly like to thank the noble Lord the Minister for his very positive response and for the fact that the Government, in formulating this Bill, are prepared to take into account the interests of the public in all their capacities. I am sure that in showing details of fares and routes, a suitable solution will be found. On that basis I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 67 not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 68:
[Printed earlier: col. 260.]
The noble Lord said: I have been considering coolly and with some distaste the tactics of the Government on Amendments Nos. 62 to 65. When I sought the leave of the Committee to withdraw my amendment, that request was negatived from the Government Front Bench.
We have had this tactic before. We had it on the Local Government Bill. I understand the feeling that was behind it on the Local Government Bill, because then it was the feeling of noble Lords opposite that liberties were being taken with the timetable—to be candid about it, that amendments were being withdrawn in order to maximise the possibility of a vote at a particular time. Such a move is not foreign to either side of the Chamber. It is no secret that those of us who feel strongly about the issues we are debating seek to secure the maximum possible vote at the best possible time.
That cannot be the case in this instance. We had returned from an adjournment to debate a matter of some significance. I hope that I am not the only person to think that it is a matter of some significance. I am referring to the relationship between central and local government and the relationship between traffic authorities and traffic commissioners.
When I sought to withdraw the amendment without accepting the Government's arguments (and that is my privilege) my Motion was negatived. Such tactics have been the subject of representations from the Opposition to the Leader of the House on the Local Government Bill. It is my understanding that the Leader of the House indicated that such tactics should be used only in the most extreme cases, where there was the risk of an abuse of the procedures of the House. Under the circumstances, the attempt to prevent my noble friends and I from bringing forward such an amendment at Report stage is a misuse of the procedures of the House. I believe that we are not

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being well served by the tactic of negativing a Motion to withdraw an amendment. I beg leave to move Amendment No. 68 standing in my name.
8.25 p.m.
On Question, Whether the said amendment (No. 68) shall be agreed to?
Their Lordships divided: Contents, 35; Not-Contents, 65.

DIVISION NO. 2

CONTENTS

Airedale, L.

Molloy, L.

Aylestone, L.

Monkswell, L.

Beaumont of Whitley, L.

Mountevans, L.

Bottomley, L.

Nicol, B. [Teller.]

Carmichael of Kelvingrove, L.

Perry of Walton, L.

Dean of Beswick, L.

Pitt of Hampstead, L.

Ezra, L.

Raglan, L.

Grey, E.

Roberthall, L.

Hall, V.

Rochester, L.

Houghton of Sowerby, L.

Seear, B.

Jeger, B.

Shepherd, L.

John-Mackie, L.

Simon, V.

Kilbracken, L.

Stoddart of Swindon, L. [Teller.]

Kilmarnock, L.

Kirkhill, L.

White, B.

Kissin, L.

Wigoder, L.

McIntosh of Haringey, L.

Wilson of Rievaulx, L.

McNair, L.

Winchilsea and Nottingham, E.

NOT-CONTENTS

Airey of Abingdon, B.

Hives, L.

Arran, E.

Hood, V.

Bauer, L.

Hooper, B.

Belhaven and Stenton, L.

Lane-Fox, B.

Belstead, L.

Lucas of Chilworth, L.

Brabazon of Tara, L.

Lyell, L.

Bridgeman, V.

McFadzean, L.

Brougham and Vaux, L.

Macleod of Borve, B.

Caithness, E.

Massereene and Ferrard, V.

Cameron of Lochbroom, L.

Monk Bretton, L.

Carnegy of Lour, B.

Morris, L.

Cathcart, E.

Mottistone, L.

Chelmer, L.

Murton of Lindisfarne, L.

Cowley, E.

Napier and Ettrick, L.

Crathorne, L.

Newall, L.

Denham, L. [Teller.]

Norfolk, D.

Elliot of Harwood, B.

Rankeillour, L.

Elliott of Morpeth, L.

Renton, L.

Faithfull, B.

Renwick, L.

Ferrier, L.

Rochdale, V.

Gisborough, L.

Saltoun of Abernethy, Ly.

Glenarthur, L.

Sanderson of Bowden, L.

Gowrie, E.

Shannon, E.

Gridley, L.

Skelmersdale, L.

Haig, E.

Stanley of Alderley, L.

Halsbury, E.

Stodart of Leaston, L.

Henley, L.

Swinfen, L.

270

Swinton, E. [Teller.]

Whitelaw, V.

Trefgarne, L.

Wise, L.

Trumpington, B.

Wynford, L.

Vaux of Harrowden, L.

Young of Graffham, L.

Vickers, B.

Zouche of Haryngworth, L.

Vinson, L.

Resolved in the negative, and amendment disagreed to accordingly.
8.33 p.m.
[Amendments Nos. 69 to 80 not moved.]
The Deputy Chairman of Committees: We now come to Amendment No. 81. If this amendment is carried, I cannot call Amendment No. 82.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 81:
Page 8, line 41, leave out from beginning to ("received"), in line 43, and insert ("if he has").
The noble Lord said: With the leave of the Committee I shall speak also to Amendment No. 84.
Amendment No. 84: Page 9, line 8, leave out ("or (b)") and insert ("and the request has not been withdrawn.
(10) Subsection (9) above shall not apply where the traffic commissioner").
The present drafting of Clause 7(9) and (10) was adversely commented upon by traffic commissioners because it seemed to leave them with no discretion over the holding of inquiries. The presumption is heavily in favour of inquiries although in many cases, as experience with road service licensing suggests, it might be perfectly feasible for the traffic commissioner to determine generally acceptable traffic regulation conditions without an inquiry. Inquiries can be expensive and time-consuming, and a spate of them could cause a backlog of undecided cases.
The amendments are little more than drafting amendments, but shift the onus on the traffic authorities or operators affected to request an inquiry and allow the traffic commissioners not to hold an inquiry if the request is withdrawn—which may not infrequently happen. The rights of affected parties to insist on an inquiry remain intact. I beg to move.
On Question, amendment agreed to.
[Amendment Nos. 82 and 83 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 84:
[Printed above.]
On Question, amendment agreed to.
Lord Monk Bretton Lord Monk Bretton moved Amendment No. 85:
Page 9, line 10, at end insert ("; or
(c) has been required by the traffic authority to determine the conditions under subsection (10A) below.
(10A) If a traffic authority is satisfied that a particular traffic problem is or is about to become so severe, and involves or will involve such danger to road users or such severe traffic congestion that traffic regulation conditions should be determined with immediate effect, the authority may deliver to the traffic commissioner for the area a notice requiring him to determine such appropriate traffic regulation conditions as the authority may specify in the notice; and subject to subsection (10B) below the conditions so specified shall be deemed to be determined by the traffic commissioner with immediate effect from the time of delivery to him.
(10B) A traffic authority delivering a notice under subsection (10A) of this section shall take such steps as are reasonably practicable and appropriate to bring the conditions specified in the notice to the attention of every operator of a local service affected by the conditions; and in any proceedings under the 1981 Act in respect of an alleged contravention of such conditions it shall be a defence to prove that the defendant was not aware of those conditions.").
The noble Lord said: The purpose of this amendment is to enable county councils, in really urgent cases, to serve a notice on the traffic commissioner specifying traffic regulations and conditions; which regulations and conditions should take effect immediately without having to await the traffic commissioner's decision.
The history of this is as follows. It is well known that many older town centres are not terribly well designed for our modern traffic. Trial experience—particularly the Hereford experiment—demonstrated the need to deal with problems arising from deregulated bus services. The county councils' existing traffic regulation powers were found to be too blunt an instrument for the task as they only enable whole categories of vehicles to be banned from using certain streets at particular times. Hence Clause 7 was introduced into the Bill to deal with that problem.
Clause 7 is broadly welcomed by highway authorities. The traffic commissioner is given power to regulate bus routes, stopping places, and so on. That is subject to inquiry. Subsection (10) gives the traffic commissioner power to act without inquiry where he is satisfied that conditions should be determined without delay.
It is here that the highway authorities have some anxieties. They foresee difficult situations arising, perhaps outside a major traffic attraction such as Marks and Spencer in the high street. They see these difficulties arising very rapidly. They feel that they are on the spot and will immediately be aware of the situation and that the traffic commissioner will not be on the spot. I believe that it has often been bandied around in discussions that the traffic commissioner for Oxford happens to reside by the seaside, in Eastbourne. Therefore delays are foreseen while the traffic commissioner decides, first, whether or not to hold an inquiry, and, secondly, then what to do. It is a very long way for the traffic commissioner to go to see for himself.
I understand the susceptibilities of operators who do not want traffic regulation in the hands of the county councils, but the amendment provides for subsequent inquiry before the traffic commissioner if the county council has abused its position. I should have thought
272
that this would satisfy commercial interests fairly well and that there is a great deal to be said for it from the point of view of administrative commonsense. I have a list of 15 non-metropolitan counties who have given this matter deep thought and reported their problems to the Association of County Councils, so I trust that my noble friend the Minister will look at this matter.
There is something that I have to add. What is not known about the registration procedure is the closeness with which the detail will be defined, by which I mean the detail on stopping places, frequency of stopping, etc. If these details are sufficiently closely defined, maybe the Bill will work as it is; but if the intention is to leave these details pretty flexible, I think the amendment begins to have considerably more merit. If these details are closely defined, it may not be necessary. Therefore I think this is a probing amendment and I shall await with interest what my noble friend the Minister may have to say about this problem. I beg to move.
Lord McIntosh of Haringey: Before the Minister receives the probe—or whatever it is that happens with a probe—perhaps I may add my support to the amendment of the noble Lord, Lord Monk Bretton. It is not as far-reaching as I should have wished on the amendments that I previously moved, but it tackles some of the problems which I confidently, fearfully if you like, foresee will arise in many of our town and city centres. May I draw particular attention to the following words in the amendment:
"That a particular traffic problem is or is about to become so severe, and involves or will involve such danger to road users or such severe traffic congestion that traffic regulation conditions should be determined".
That I think is the important point; it introduces the possibility that traffic authorities, the democratically elected authorities—I shall not go back over that argument again—from their long experience and their wide-ranging responsibilities, have the ability to anticipate problems which perhaps the traffic commissioner, with his more limited range of experience and responsibility—and certainly more limited democratic responsibilities—cannot anticipate.
The advantage of the amendment that is now being moved is that the traffic authorities can anticipate the necessity for a traffic regulation condition and can issue a notice requiring a traffic commissioner to determine such appropriate traffic regulation conditions. This matter is an ongoing problem. It concerns central government and local government and has done for many years, since motor vehicles caused traffic problems in our town and city centres—and I do not doubt that it happened in the days of horse-drawn carriages as well. But it is important that we should have this power of immediacy. It is important that we should have the power to anticipate problems and not have them arise and then go through a complicated bureaucratic procedure in order to overcome them afterwards. Anybody who has travelled around central London, as I have—because I come from my place of work to the House every day by bus—can see the difficulties which are caused by the enormous explosion in the numbers of buses—sight-seeing buses which are three-quarters

273
or nine-tenths empty, buses parked in front of our major architectural monuments, sightseeing coaches and foreign coaches parked at our bus stops. I ask Members of the Committee to look at the bottom of Whitehall at any time of the day, if you need to be convinced of that.
8.45 p.m.
In any competitive environment of the kind that the Government are envisaging, operators will be tempted to cut costs to the bone. A prospective operator has been overheard by a county council official to say: "Of course, as soon as we get deregulation, what we shall do is have our stopping places outside Marks and Spencer"—and who will stop them? Who will anticipate the problem which will inevitably arise? The high volume store or stop of course will be an attraction to an operator; but it may not be the best place for a bus to stop in traffic terms nor in bus operation terms. Who will stop the bus operator who wants to get back to his garage—a garage which may be a deserted field, as we know from the experience in Hereford? Who will stop him taking a short cut when he has only one or two paying customers left?
It is not a good enough argument to say that the Road Traffic Regulation Act 1984, Section 14, to which I referred, covers that point. I have no doubt that that will be the Government's argument, but Section 14 only covers the possibility of likely danger to the public or likely danger to the highway. The problems which the noble Lord, Lord Monk Bretton, is anticipating and seeking to prevent are much more widespread than that. They are essential to the effective and economic running of our cities, and I hope that the Government will make sufficient concessions to him on this amendment to satisfy him or, if they do not, that he will pursue the matter.
Lord Belstead: I understand the concern that has prompted the amendment of my noble friend Lord Monk Bretton. My noble friend accepts reluctantly that the responsibility for traffic regulation conditions has to be with the traffic commissioner and that the commissioner should have discretion; but my noble friend, and indeed the noble Lord, Lord McIntosh, wants county councils to be able to get conditions imposed immediately when they are convinced that they are necessary, and for the commissioner's discretion to confirm, vary or revoke them afterwards.
I was able to move towards my noble friend's point of view on an earlier amendment today when we were talking about registration regarding making sure that the county councils are notified during the transitional period, as an experiment first of all, concurrently with the notification to the traffic commissioner.
However, I regret that I do not think that I can move towards my noble friend's point of view on this amendment because I honestly think that the proposal is unnecessary and that it is undesirable. I think the proposal is unnecessary because the commissioner does have the power to determine conditions immediately—that is in subsection 10(b) of Clause 7—and in a situation like that which my noble friend has described, I have no doubt that the commissioner
274
will do so. I think it is undesirable because it would simply make the traffic commissioner into a rubber stamp. I assure noble Lords that the clause as it is drafted really is adequate. Traffic commissioners are reasonable and judicious people; and, incidentally, wherever they may live—I say this to my noble friend—they do have staff as well as manning the office. The clause means exactly what it says: that traffic commissioners may determine conditions without delay if satisfied that they ought to do so.
May I repeat the point which was made very well earlier on by my noble friend Lord Mottistone that it is the local authority, it is the county council, who must press the button to say that they want traffic regulation conditions to be imposed. It is the authority that really is in the driving seat so far as initiating action is concerned. But in the final analysis—and this can be done very quickly indeed under the urgency procedure of Clause 7(10)(b)—it is the traffic commissioner in his independent, semi-judicial position who takes the decision. I am sorry that I am being unhelpful on this, but I do not think that this is an amendment that the Government can support.
Lord McIntosh of Haringey: I do not want to detain the Committee, but before the noble Lord replies I should like to say a word or two more about local authority procedures and the way in which they work. If it is the responsibility of a local authority and it appears that something has to be done urgently, there are procedures within local authorities (county councils and so on) for taking chairman's action and doing something immediately. If it is a matter of going through a middle man—of making representations to a traffic commissioner—the Government must recognise that local authorities are heavily constrained legally to go through proper committee and council procedures. Even apart from the summer recess, a period of six or eight weeks may pass between the urgency of a problem being recognised and the possibility of a local authority formally making representations—pushing the button, as the noble Lord, Lord Belstead, said—and something being done. That is why I moved the earlier amendments and sought to cut out the middle man. I do not seriously think that the Government have fully recognised the nature of local authority procedures, the possibilities of delay and the dangers of the procedures proposed in the Bill.
Lord Monk Bretton: I think that county councils could better anticipate their problems if the registration details are sufficiently close to the ground. I do not know whether my noble friend can do a bit more to indicate how detailed the registrations will be on stops, timings and so forth. That is what will determine the ease with which highway authorities can deal with the matter. Before we get on too far with the Bill more may be known about that. If so, so much the better.
Lord Belstead: I referred earlier today to the fact that we have said openly in the Notes on Clauses which noble Lords have that we envisage that the regulations for registration will provide that

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registration particulars should include information needed on stops, routes and timetables, to give three examples. I cannot help my noble friend very much further than that answer. The regulations will be the subject of consultation.
Lord Monk Bretton: Nevertheless, I thank my noble friend very much. That gives us all considerable food for thought meanwhile. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 86, 87 and 88 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 89:
Page 9, line 14, after ("(a)") insert ("(i) or (iii)")
The noble Lord said: With the leave of the Committee, I should like also to speak to Amendments Nos. 90, 91, 102, 103, 105 and 106.
Amendment No. 90: Page 9, line 15, after ("above") insert ("or any other traffic authority affected by the conditions").
Amendment No. 91: Page 9, line 15, leave out from second ("the") to ("asked") in line 16 and insert ("prescribed period").
Amendment No. 102: Page 9, line 38, leave out ("any traffic area in").
Amendment No. 103: Page 9, line 39, leave out from ("county") to ("and"), in line 40.
Amendment No. 105: Page 9, line 41, leave out ("any traffic area in").
Amendment No. 106: Page 9, line 42, leave out from ("area") to end of line 43.
These are essentially technical amendments. Where an inquiry is held under Clause 7(11) a traffic regulation condition will already be in force and the words, "likely to be affected", as in subsection (10), are inappropriate; "affected" is better. Since we are giving neighbouring traffic authorities the right to request an inquiry we must logically do so even if they are in a different traffic area. The amendments to subsection (16) achieve that aim. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 90:
[Printed above.]
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 91:
[Printed above.]
On Question, amendment agreed to.
[Amendments Nos. 92 to 100 not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 101:
Page 9, line 36, at end insert—
("( ) A traffic commissioner shall inform the traffic authority of all traffic regulation conditions he has determined in relation to the area of that authority, and each traffic authority shall maintain a record of all traffic regulation conditions in force in its area and shall allow such records to be inspected at its offices by members of the public.").
The noble Lord said: This, again, is a compromise—moderate and reasonable. It is not the
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ideal amendment that I, personally, would wish to move—I do not know what the noble Earl thinks—but I still think that it is worthy of discussion and of the Government's consideration. In Clause 7 as it now stands a traffic commissioner has to maintain a record of all the traffic regulation conditions in force in his area, but he does not have to inform the appropriate local authority. As I have said ad nauseam in the past hour or so, a local authority has very much wider responsibilities to the people living in its area, as well as to the bus passengers, than a traffic commissioner can have. If a local authority is to carry out those duties and its statutory duties with regard to the highway system effectively, it is necessary for that information to be relayed to the local authority.
Clause 6(9) requires that information on services shall be relayed to the local authority. Surely, therefore, it is consistent that information on the conditions determined should also be sent to the local authority—and I do not think that it is enough to say that it should be sent to the local authority. Whether it is on the face of the Bill or not, I believe that the local authority has concomitant obligations to convey the information which it would receive under the amendment to the public, to other operators and to everybody else who may be concerned. In the spirit of the Local Government (Access to Information) Act, recently passed, I think it is proper that there should be obligations on the local authorities as well.
At the Committee stage in another place the Parliamentary Under-Secretary, on behalf of the Government, offered to consider an amendment which:
"would require the traffic commissioner to notify traffic authorities of the conditions he determined".
He undertook to come back to another place at Report stage. He did not do so; and the Government did not place such an amendment at Report stage. This amendment is an invitation to them to repair that omission and to make what seems to me to be a perfectly reasonable extension of obligations already recognised in other parts of the Bill. I beg to move.
Earl De La Warr: I support the amendment. It is about the least that one can do, and it is essential that this should be done. We have to devise methods of making absolutely sure that the public have ready access to these traffic regulations as and when they come out. For the traffic authority to send those to the local authority and for it to have to make them available to the public is the least that could happen for the sake of the travelling public.
I am not quite sure whether it follows that the information could be made available at district level. I do not think that it does, and therefore I am raising a slightly different point, but if the Committee does not mind I should like to raise it. The place where people go is the local town hall. That is normally a district. I throw that in when I say that this is the very least that should be done on behalf of operators and, more particularly, the travelling public.
9 p.m.
Lord Belstead: I have great pleasure in saying that I have been persuaded by the speech of the noble Lord, Lord McIntosh, in moving this amendment, and the

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support of my noble friend Lord De La Warr in accepting the first half of the amendment. So far as doing something on the face of the Bill is concerned, it will not have escaped the Committee's notice that we are still under quite a lot of pressure on drafting. I really have not had the opportunity to discuss this with the parliamentary draftsmen. If the noble Lord, Lord McIntosh, and my noble friend are prepared to withdraw the amendment, I think it will be for the convenience of your Lordships if I consult before Report stage and we bring forward an amendment which is agreed among us.
In addition to that, there is a further point—that is, that although the second half of the amendment may be very desirable I am not entirely sure that it is something that ought to be written on the face of the Bill. That is something I should like to think about a little more and I should like also to consult both noble Lords about it. However, I have great pleasure in accepting in principle the main thrust of this amendment.
Baroness Macleod of Borve: Before my noble friend sits down, I wonder whether, for the sake of the people in the country, not only in England and Wales but also in Scotland, he will agree that all this information, which is so vital to the people in the country, miles away from everywhere and certainly a long way from town halls, should be put into the local post office. In Scotland that is very often the local grocer's shop too. It must be at the very basic level.
Lord Belstead: I shall look at that point. Of course we are talking about traffic regulation conditions which the operators need to take on board because it is they who will have to make sure that they do not contravene the traffic regulation conditions. I shall look into the point which my noble friend Lady Macleod has made.
Lord McIntosh of Haringey: That is the most gracious and least qualified response to an amendment that I have had in the course of this Bill. I certainly shall not kick it back in the face of the Government. I express my gratitude to the noble Lord, Lord Belstead, for his acceptance of the principle behind the first half, by which I take it he means the first two-and-a-half lines, of the amendment. Perhaps I may add my urging to that of the noble Baroness, Lady Macleod, that there should be more wide publication of perhaps the relevant parts of the traffic regulation conditions so that people can actually get to see them. Indeed, that is what I was intending to say when I talked about the concomitant responsibilities of the local authorities themselves.
With those words, and with renewed gratitude to the noble Lord, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Belstead Lord Belstead moved Amendment No. 102:
[Printed earlier; col. 275]
On Question, amendment agreed to.
Following is the text of the amendment (No. 102):
Page 9, line 38, leave out ("any traffic area in").
Lord Belstead Lord Belstead moved Amendment No. 103:
[Printed earlier; col. 275]
On Question, amendment agreed to.
Following is the text of the amendment (No. 103):
Page 9, line 39, leave out from ("county") to ("and"), in line 40.
Baroness Vickers Baroness Vickers moved Amendment No 104:
Page 9, line 39, after ("county") insert ("or district").
The noble Baroness said: I beg to move Amendment No. 104. This Bill gives a number of powers to county councils, presumably because they are seen as subsidising authorities and the powers are complementary, especially in Clause 61, to the subsidising process. However, district councils may also subsidise, and in Devon the county council has a positive policy of no subsidy in urban areas. Hence the powers need to be concurrent to ensure their even application across the country.
Clause 7 quite properly allows county councils to ask traffic commissioners to apply conditions as to the stopping places of buses and to how long and when they may stop. Without this, we would see traffic chaos. An example of the problem can be found by considering the possible consequences of the Bill. For instance, if one takes the main cities, such as Plymouth, with the Royal Parade, and Bristol, with its shopping centre, these are all very popular places for the termination of buses. They can currently handle a large volume of bus movements.
The bus movements and operations must be done by local people. The bus operators have set up an integrated timetable and allocated routes and stops to take account of actual departure times. This balance can be easily lost if new operators are to independently use stops at the same time as other existing or competing bus operators. The effect on traffic flow of several buses coming to a halt in different places at different times, which bear no relationship to each other, would mean that many city centres and main thoroughfares would quickly become blocked.
I am sure we all therefore welcome the restrictions which the clause would permit. However, it is suggested that only county councils should be able to ask the traffic commissioner to exercise his powers to apply these conditions. With regard to Devon, the county council officers are 45 miles away from Plymouth. I think most noble Lords will agree that there is a need to move quickly when congestion occurs. The city council on the spot therefore can readily see the problem.
The amendment would only provide that district councils as well as counties should have the power to ask the traffic commissioner—that is what I want to emphasise: to ask the traffic commissioner—to apply conditions to stopping places. It will not lead to any more restrictions on the bus market as the traffic commissioner will still have to decide, regardless of who asks. We are only asking that the district councils shall be allowed to ask. The traffic commissioner can see whether this is a reasonable question and whether it has been asked by the local people.
Since the traffic commissioner is to decide conditions, he would have regard to the fact that the county councils and the highway authorities are not

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themselves significant in the context of making this request to him. I think it is a practical suggestion, because traffic piles up very quickly in seaside towns which have a great many tourists in the summer, and in other towns. One wants to clear it quickly. If my noble friend can say that the district councils can apply to the traffic commissioner, that would be a great help to all concerned. I beg to move.
Lord Belstead: My noble friend Lady Vickers is very appealing and I know that she has a very close connection with a great district council and city in the West Country. I shall reveal to my noble friend that we have indeed considered carefully whether the districts should be the relevant traffic authority in this clause and should have the right to seek traffic regulation conditions. So far as the Government are concerned, we decided against doing so when drafting the Bill not because of the county councils paying subsidies—indeed, district councils can pay subsidies—but because the Road Traffic Regulations Act functions remain the responsibility of the county council and not the district council. Even when those functions are exercised through the districts, it is the county council which is the Road Traffic Act authority.
While it is absolutely understandable—and my noble friend said this in moving the amendment—that district councils when they have agency agreements may consider that they have a reasonable case for being the traffic authority under this clause, I have to remind my noble friend that those arrangements can be ended, new ones can be created and that really it would be very difficult to have two traffic authorities in respect of the same area. I ask my noble friend to consider what would happen if the county council decided that it wanted to apply for traffic regulation conditions because it considered that there was a serious congestion problem, and the district council decided that there was not a serious congestion problem and that it did not want any such application to be made. I think that it would put the traffic commissioner into a very difficult position.
In my view, a single channel for requests to the commissioner is essential for the efficient dispatch of business. Indeed, as that is the case which has been put to me again and again over the last half an hour or so, I should not want to jeopardise any opportunities for dispatching the business of either imposing or not imposing traffic regulation conditions. Therefore, I am saying to my noble friend that I really think that there is genuine difficulty in saying that you can have twin sources of decision as to whether or not an application should be made for traffic regulation conditions. If those twin sources decided to disagree, it would be a recipe for very great confusion, and we certainly do not want that.
Lord McIntosh of Haringey: Before the noble Baroness replies, may I make another perhaps sour or cynical remark about local government? It is well known that counties of one political persuasion are not particularly attracted to the propositions of district councils within their area which are of another political persuasion. I am not making a point about one party or another. Those of us who have served in local government know that that is the case. I am not
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convinced by the noble Lord's reply. I am not convinced that there would not be a protection in the amendment moved by the noble Baroness, Lady Vickers, for those who found themselves in districts which were at political odds with the county council.
Baroness Vickers: I am very disappointed at my noble friend's reply. It is very difficult with a distance of 45 miles to get a quick answer. Anyway, the district council is on the spot and can see the congestion from the civic centre windows. Surely there is no reason why it should not apply and try to get the matter settled as quickly as possible? I am sorry to have to say that I shall try to bring forward something more amenable to my noble friend in the future. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 105:
[Printed earlier; col. 275]
The noble Lord said: I spoke to this amendment and Amendment No. 106, with Amendment No. 89. I beg to move.
On Question, amendment agreed to.
Following is the text of the amendment (No. 105):
Page 9, line 41, leave out ("traffic area in").
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 106:
[Printed earlier; col. 275]
On Question, amendment agreed to.
Following is the text of the amendment (No. 106):
Page 9, line 42, leave out from ("area") to end of line 43.
Clause 7, as amended, agreed to.
Lord Monk Bretton Lord Monk Bretton moved Amendment No. 107:
After Clause 7, insert the following new clause:
(" Restriction conditions.
.—(1) At the request of any local authority, the traffic commissioner for any traffic area may determine conditions ("restriction conditions") which must be met in the provision, in the area to which the conditions are expressed to apply, of local services which are subject to registration under section 6 of this Act.
(2) The area to which restriction conditions may be expressed to apply is—

(a) the route, or any part of the route, of any social bus service of which the local authority making the request secures the provision pursuant to subsections (5) or (6) of section 61 of this Act, and

(b) such adjacent roads, if any, as the commissioner at the request of the authority may determine,

in so far as they fall within the traffic area of the traffic commissioner determining them.
(3) Restriction conditions shall have the effect of prohibiting any operator, other than an operator who has entered into an agreement under section 61 of this Act in respect of the area to which they apply, from operating a local service with a stopping place in that area at such times as may be specified in the conditions.
(4) No traffic commissioner shall determine restriction conditions unless he is satisfied, after considering—

(a) the interests of the operators of local services operated in that area and of prospective operators of such services;

(b) the interests of those who are, or are likely to be, users of such services; and

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(c) the costs likely to be incurred by the local authority making the request, any other local authority and any body providing transport by means of money provided by Parliament,

that the conditions which he proposes to determine are required in order to prevent the use of public money in a way which does not secure effective value.
(5) Before determining any restriction conditions, a traffic commissioner, if so requested (within the prescribed period) by any of the persons mentioned in paragraphs (a) and (b) of subsection (4) above, shall hold an inquiry.
(6) Restriction conditions may make different provision with respect to the operation of any service to which they apply during different periods of the year, on different days of the week, or at different times during any period of 24 hours.
(7) A traffic commissioner may vary or revoke any restriction conditions determined by him on being requested to do so by—

(a) any local authority; or

(b) the operator of any local service affected by the conditions.

(8) A traffic commissioner shall maintain a record of all restriction conditions in force in his area and shall allow the record to be inspected at all reasonable times by members of the public, on payment of the prescribed fee.
(9) Regulations under this section may make provision for limiting the aggregate area in respect of which a local authority may make requests under subsection (1) of this section, and may make different provision for different classes of local authority.
(10) In this section—
"local authority" means—

(a) In relation to any traffic area in England and Wales, the council of any county or non-metropolitan district which lies wholly or in part within that area;

(b) in relation to any traffic area in Scotland, the regional or island council;

"social bus service" means—

(a) a local service having a stopping place in a rural area as defined by regulations made under this section; or

(b) such other classes of service as may be prescribed by regulations made under this section.")

The noble Lord said: In moving Amendment No. 107, I should like to speak also to Amendments Nos. 108, 109, 111, 112, 113, 114 and 115.
Amendment No. 108: Clause 8, page 10, line 1, leave out ("traffic regulation")
Amendment No. 109: page 10, line 2, leave out ("section 7") and insert ("sections 7 or (Restriction conditions)")
Amendment No. 111: page 10, line 12, leave out ("traffic regulation")
Amendment No. 112: page 10, line 20, leave out ("traffic regulation")
Amendment No. 113: page 10, line 34, leave out ("traffic regulation")
Amendment No. 114: Clause 9, page 10, line 45, leave out ("traffic regulation")
Amendment No. 115: page 10, line 46, leave out ("section 7") and insert ("sections 7 or (Restriction conditions)")
The purpose of this new clause after Clause 7 is to provide selective protection for subsidised services against competition on the roads; in other words, a reserve power to meet situations where it is found that the shoe pinches, which I envisage will be primarily in rural areas and semi-rural areas.
I understand that this amendment is supported by all members of the Association of County Councils, including those who support the general principle of deregulation: in other words, the Government's friends among shire county councillors; those people who are anxious to support this Bill and who wish to see it work, and work well. The amendment therefore is in no way intended as an attack on the central thrust
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of the Bill. Its proponents prefer to see it as a matter of administrative prudence that such reserve powers as are proposed in the amendment should exist.
9.15 p.m.
I want to say a word or two about the need for the amendment. There is evidence from shire counties that operating savings under the Bill in rural services may well, in a number of cases, be considerably less than Government estimates. The Association of County Councils has plenty of examples of individual difficulties of which I hope my noble friend the Minister is aware. I am sure that he is aware of some of them. I shall not go into that now but there is information that could be supplied.
There is a knowledge that existing cross-subsidy in shire counties is generally greater because the shire counties have been more successful in holding subsidy expenditure in check. I have in mind to mention one statistic here. I understand that 20 per cent. of all the subsidy handed out to buses is handed out by the county councils and that it goes to 60 per cent. of the population. Therefore, one must bear in mind the amount of subsidy which goes to the other 40 per cent. of the population.
There is a knowledge that the degree of cross-subsidy varies substantially from area to area, and that this means that there are likely to be some notable variations in the effect of the Bill from one rural area to another when cross-subsidy goes. Of course cross-subsidy is extremely difficult to estimate, and the answer really is that nobody knows with any great precision, as again they do not know with any great precision from area to area what economies are going to be possible.
However, enough appears to be known to indicate the need to proceed with caution. My noble friend Lord Nugent of Guildford, when he spoke at Second Reading on 11th June, put his finger on the right spot when he said that he thought the troubles were going to be primarily in the rural and semi-rural areas. I would say that the theory that cost savings would cancel out loss of cross-subsidy is too much of a generalisation, and I prefer not to rely on this being so in all areas.
It appears that it is in these rural areas, or more particularly in the semi-rural ones, where the difficulties could most likely begin, and the form of this will be increases in cost of subsidy due to competition on parts of routes or at certain times of day. To those who say in that case that you must be subsidising a route unnecessarily, I must point to the need for the subsidised route to provide a reasonable destination, otherwise it is only too likely to be badly patronised.
Therefore, there is a choice of evils here for county councils. It is as follows: to go on to the preferred destination with the risk that they get, in the vernacular, creamed off, or to stop before the destination and find that their service loses goodwill and passengers through delay, inconvenience, and unpopularity. Either choice is likely to lead to the same problem of increased subsidy anywhere. That increase in subsidy is certainly of no benefit to the ratepayer and it does not appear to be of any benefit to

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the passenger. It is for that reason that it is not unreasonable to endeavour to put some limit upon it.
There will be increased costs to the local authority not merely in subsidising the bus services, but other costs could also be affected: the cost of the education service transport, cost to the Department of Health, and so on. The amendment admittedly keeps some degree of on route cross-subsidy which is criticised by some of the purists. But is this an unreasonable thing to do? We shall keep a degree of commercial cross-subsidy in any case. I feel that it is a sensible commercial decision made on behalf of the public in general by local authorities if a certain degree of on route subsidy is retained; but it it a pretty small degree, too.
This amendment or something on these lines was moved in another place. It was less tightly drawn than this, but even so I am not sure that it received quite the degree of justice and consideration that it should have received. What happened was that there was a Conservative who spied a Trojan bus, the PTEs did not relish the thought of Trojan buses that much either, and the amendment was lost somewhere between that Scylla and Charybdis. I think it deserves another look. I take the remark of the Minister's right honourable friend in another place that it is undesirable to protect routes which may prove not to need protection. I agree, but I believe the amendment as drafted should avoid that problem.
As a result of this new clause as now written I think we can be sure that no Trojan busmen can charge around unfettered in large conurbations because they can only operate in such areas as defined by the Secretary of State in regulations under subsection (9) of the new clause. These regulations could follow the Secretary of State's definition of rural areas or—and possibly more flexibly—towns of such size as he considered appropriate. These buses would even then have no privileges unless they satisfied the stringent conditions—I trust they are stringent enough and if they are not they should so be made—of subsection (4) of the new clause. The kind of privilege that I envisage such a service might be awarded under the new clause might, for example, be this: the traffic commissioner might say that there should be restriction of competition on part of the route, say within half an hour either side of the time the scheduled service operates. That is the kind of degree of effect I should expect the amendment to have.
I should like to add a few further comments about the intended working of the amendment. It should give power to the Secretary of State to prevent a county council seeking protection of its whole network or of anything except specific subsidised routes or smaller networks. In my view, the restrictive conditions should not be used unnecessarily. Under subsection (4) another operator could say that he could provide the service more cheaply. If so, the traffic commissioner would not make an order for a restrictive condition. This would let in the other operator. I think that the amendment will safely avoid the traffic commissioner receiving an inundation of requests, which I am sure is important; and I think and trust also that the new clause indicates with adequate clarity the basis upon which requests for protection would be determined.
Finally, in order to avoid the expense and difficulty of quasi-judicial procedure, we have tried to make
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arrangements for a simple and cheap decision to be reached by an independent party; namely, the traffic commissioner. Then, hopefully, judicial proceedings would be avoided unless anyone wished to appeal to the traffic tribunal. I think the amendment is an earnest attempt to lay at rest the interface difficulties between the competitive and the subsidised systems. As the Committee knows, this interface is difficult to determine. It is mobile, it is mobile at different times of the day, week and year, and commercial pressures will move it about, too. I hope that my noble friend will give this amendment most careful consideration. I hope very much that he will take it away and consider it, at least. I beg to move.
Lord Carmichael of Kelvingrove: I hope that the last words of the noble Lord, Lord Monk Bretton, were listened to by the Minister: that he would take it away and look at it and not make a hasty decision tonight; because I think this is a subject that is going to come up again and again. It came up earlier today, when we were discussing Amendment No. 51; it was raised in the Commons Committee, and I do not think that it is something that is going to be easily pushed off.
I recognise what the Minister said earlier—that there are great boundary problems of definition—and I do not think that anyone would doubt that. When it was discussed in the Commons, the Secretary of State argued that any restriction would introduce an element of protection and thereby deny the whole concept of competition. He said that passengers would have a better service because more buses will pass by. This is an interesting reflection on one of the key features of the Hereford trial area—and not in this Bill—which was that some protection for subsidised services was given. In that trial area it was achieved by contractually prohibiting the operator of a subsidised service from then competing on another subsidised service. So an operator, presumably, could not pick up even a school contract and the use that as a basis for competition which would simply increase the burden of the county council elsewhere. If he did this he would lose his contract.
There have been a number of other examples of this, of attempted protection, because of the situation. The temptation to try to pick up other contracts was so evident that efforts were made in the trial area to ensure that this would not happen. I think that the idea of creaming off is likely to be greatest at peak times, or immediately before and after, or on a seasonal service. This is particularly likely when the service may be run from premises in conjunction with a school contract.
I thought it was a rather interesting point made by the noble Lord, Lord Monk Bretton, when he used a possible defence and a possible way of controlling competition in this particular area not in geographical terms but in time terms. He suggested that if there was a delay—a period of, say, half an hour before and after a subsidised service—no other service could use that period. I do not say it is necessarily the right way, but I would suggest that it is a little more positive than the answer we got from the Minister when he was dealing with Amendment No. 51. There was a certain amount of novelty in it which makes it worth looking at.

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9.30 p.m.
In Norfolk last year there were certain exchanges in looking at some of these services. The independents took on 26 routes because the county council gave financial guarantees: that is, the county council took the risk of any failures as regards the service. That is what will happen in tendering. Therefore we need to ensure that the county council or the local authority who are willing to subsidise the services are given some kind of safeguards. If they are not, the county council will be unwilling to take on any subsidised service, and really in a period of rate grant penalties that reluctance will be even greater.
At a conference in Nottingham last year the counties of Hereford and Worcester were represented. We have heard a lot of them in the past few weeks, and one of their representatives said:
"It has been widely advocated that there should be safeguards against the possible 'creaming off' of traffic from subsidised services under contract. Safeguards are a more reasonable approach than the termination of contract in such circumstances, but that is not inconsistent with the concept of deregulation, since all operators would have had an opportunity to compete for the contract and an operator so minded could have offered to perform the service without subsidy in the first instance."
That would be if the operator felt there was some way of providing a service without requiring a subsidy because he saw other ways of expanding his service perhaps by taking school contracts or something of that kind and he would have been able to do it. This new clause is restricted to rural services and I think it meets the point that the county surveyor, who was responsible for the Hereford trial, made in the quotation that I have just given.
This is something which will scare off many operators from going for non-commercial services. I do not have the same confidence that the Minister seems to have that there would be an easy way round this. He believes that there are difficulties in him drawing the lines in order to satisfy the conditions of the earlier amendment and of this amendment. I think there are great difficulties if he does not find a way, by some means or other, to help the local authority and the operator who is willing to take a contract of a non-commercial service.
I do hope he will take this matter back with him. I know it has been raised several times and probably the department have been looking at it very carefully. However in today's debate it has been raised even more sharply, especially by the noble Lord, Lord Monk Bretton. I hope the Minister will realise that many of us think this is one of the crunch questions in the whole of this Bill: trying to provide services in areas where there is not sufficient population to support a commercial service.
Earl De La Warr: I have consistently during this Bill laboured the point that one of the great dangers is that there would not be enough money available either to the shire counties or to the authorities in the conurbations to subsidise services on the scale which might be needed. But at the same time—and this may surprise my noble friend—I have not been convinced that commercial competition on would-be tendered routes is anything like the danger that people have suggested.
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I think that the dangers come from all sorts of other things, such as the counties having other priorities and the Government wishing to cut down Government subsidies in the metropolitan counties and rate-capping them traffic-wise at the same time. This tends to be a bit of an excuse. I do not find any real danger as regards the amount of money that might be required by counties on account of the fact that would-be tenderers would "jack-up the ante" because they were frightened that they might get subsequent competition.
I do not think that what I have said—even though, as I say, it may surprise my noble friend—need be thought to be running counter to my much more general argument. As for this amendment, it has been said more than once that a camel is a horse designed by a committee. To me, this amendment bears all the marks of being the result of a tug-of-war between various interests, particularly on the Association of County Councils, who could not make up their minds what they wanted. I do not think much of it; and I certainly could not support it.
Baroness Carnegy of Lour: I do not know whether I agree that the amendment of my noble friend looks like a camel designed by a tug-of-war: but I think it does not sit very well within the whole notion of the Bill. I do not say that on grounds of theory at all, but on totally pragmatic grounds. I can understand why the county councils have suggested this. They are genuinely worried that their ratepayers' money will get into trouble in the new system. They want quite genuinely to protect their ratepayers' money. But I go along with my noble friend Lord de la Warr, and I do not think, in practice, that this will be the problem which they fear.
I should also suggest to noble Lords that it is not fair on anybody involved to suggest that subsidised routes should have some protection in this way. One would, in fact, be protecting one contractor who is subsidised against another who is not, looking at the whole of the concept. In fact, a subsidised contractor taken on to do this will look at the route that he is taking on, will appreciate that there could be a threat here and there of somebody coming in to take on the more profitable part of the operation, will think what he would do in that case, and will allow for it. Local authorities are very much at the mercy, in rural areas, of one, two or three contractors. Very often there is only one who is prepared to do it. But they will in fact "up" their price, "up" the subsidy they ask for, in order to allow for this if it happens.
I do not believe that the contractors will in fact be so daft as local authorities are afraid they will be. There is also the question of all the other parts of the routes. This route about which we are thinking is probably not isolated. It will not be just one route where, in the middle, somebody might come along and, as we say, cream off some of the route. There will be other routes coming in at a tangent. There will be other possibilities for routes. If the taxi part of the Bill goes through there may be taxis operating bus routes. There will be all sorts of things happening which are quite new.
There will also be a possibility—and already this is very often exercised—of break clauses so that

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contractors can get out of their contract during the course of it, if problems like this arise. There will probably also be a need to renegotiate the school bus side of it into the changed circumstance. So we are envisaging something which is quite new to local authorities—a completely different role for them, a completely different system serving the public.
Picturing the area that I know, I think that the problems which arise will, in the end, cost a local authority a lot less than protecting a fairly high subsidy which it would have to give in order to cover all the possibilities for all subsidised routes that are required. I believe that at the end of the day not an enormous amount of ratepayers' money will go wrong because of this possibility, and that a great deal will go right. It is in a sense a guess, but I think that it is a guess which is good enough to rely on in the Bill.
Lord Belstead: As my noble friend Lord Monk Bretton said in moving this amendment, he has made an earnest attempt in bringing forward this amendment to give protection to subsidised services in rural areas. I agree with my noble friend that we must have workable arrangements in the future to secure those services, because in too many parts of the country we have seen our rural buses disappearing. I believe that the Bill gives hope for reversing that trend.
By comparison, I really do not think that this amendment has struck the right answer, for the way in which it would give protection is to say that if a subsidised rural service is running, its route or indeed its adjacent routes can be declared in effect off-limits for any other buses. However, the routes of bus services are rarely entirely separate one from another. They are bound to converge, for instance, on the run into towns or even on the routes outside town centres; and protecting a subsidised route which travels from village to village may be possible only at the expense of a more direct inter-town service. It is exactly that kind of protection which has been turning passengers away from using local buses over the years.
In distinction to that, it has been the freeing of longer distance coach travel which has brought passengers back into that particular form of transportation. The problem which I have just tried to outline, about the fact that once you start to try to protect bus services of any kind you find that you are affecting other bus services in a detrimental way, is inherent in this whole area. Competing services are absolutely bound to use either the same routes or parts of the same routes.
If I may now talk in rather more practical terms, it would be unthinkable to ban buses from being allowed to stop in a street just because a subsidised service happened to be using that route. So we have a paradox here and this is why we have a difficulty. Protection can only really work without damaging effect to the customers where competition is least likely to occur. Let us remember all the time that we are not talking in the context of local bus services which are stuffed full of passengers. We are talking in the context of a local bus system in this country which, despite devoted staff and careful management, has been losing passengers in enormous numbers over the years.
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9.45 p.m.
In this amendment my noble friend has attempted to set out some stringent conditions for protection, and he has very carefully tried, I admit, to limit the extent to which an authority could use these powers. I understand the concern of county councils; it is quite genuine. I was interested that, despite the fact that my noble friend Lord De La Warr has been not uncritical of the Bill and also has great experience of public transport and considerable sympathy for the position of rural bus services, he said that he felt that this amendment really would not do.
By way of illustration, let us just imagine for a moment that we are all in the place of the traffic commissioner who is suddenly faced with the demand from a local authority under this amendment to impose restriction conditions in a real situation. Indeed, I am choosing a situation which my noble friend Lord Monk Bretton actually described to me at a meeting which he and I had only about two weeks ago. Suppose there is a bus service subsidised by my noble friend's county council running from the Sussex village of Ringmer to Brighton and passing through the market town of Lewes on the way. Suppose, following deregulation, an operator wished to start a commercial service to run from the outskirts of Brighton back into the town but using the end of the same route of that Ringmer-Brighton subsidised service. Suppose another operator also wished to start another commercial service from a housing estate just outside Lewes into the town, also using a bit of the same route of that Ringmer-Brighton subsidised service. Imagine our role as traffic commissioners in deciding whether or not to impose restriction conditions on those two commercial services.
We would have to weigh up exactly the same arguments as the traffic commissioner has to weigh up now when he is considering a road service licence. The determining factor would finally be not the best value for passengers but the best value for those services supported from the public purse. The end of the story would be, as it so often is now, that the commercial services would be told to disappear. Indeed, without meaning to do so, this new clause is very much more damaging than road service licensing. After all, under a road service licence it is difficult for an operator to get started, but once he has a licence he can look forward to running his buses more or less as a right. But under my noble friend's new clause an operator could find that he is suddenly stopped from running a lucrative part of his route simply because the local authority subsequently starts a subsidised service on, or indeed even near, the same route. Imagine how the passengers would feel when the bus that they had been used to catching passes them by because the local authority has said that it was forbidden to stop along that route any more.
I really do not think that there is the difficulty that my noble friend is forecasting in this whole area. I was most interested that, with my noble friend's knowledge of local authority work north of the Border, the noble Baroness, Lady Carnegy, pointed out that when an operator bids for a subsidy he will have assessed the revenue that he can expect to earn with an eye as to where the competition is already running or from where it may suddenly appear. Anyway, anyone

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who gets a subsidy is going to have an absolute headstart over anyone else. It is true that unexpected competition could appear if the county council has misjudged the market and is in fact seeking to subsidise a service which can be run commercially anyway. Such cases are bound to occur, and prudent local authorities and prudent operators will see to it that they have suitable break clauses in their contracts.
Finally, I must reject the argument that a deregulated system will be more expensive for local authorities. This matter is one we debated at considerable length earlier this afternoon in connection with Amendments Nos. 45 and 61 of the noble Lord, Lord Shepherd. On this particular point, I would only say to my noble friend that there is compelling evidence that reductions in costs in a deregulated system will balance out removal of hidden cross-subsidy and give a much better service to passengers into the bargain.
I shall say also that if any noble Lord thinks that hidden cross-subsidy is some splendid panacea which we will lose, and that that will be a tragedy, then he ought to have heard the speech of the noble Lord, Lord Marsh, a former Minister of Transport, who exposed hidden cross-subsidy for what it is—something which we would do well to get rid of if we can possibly do so.
I realise that we can argue about this point until we are blue in the face. I would only add that the available evidence from the trial areas has proved one thing—that is, that county councils can get their services for less of ratepayers' money, or indeed get more services for the same expense if that is what they wish.
I am grateful to my noble friend Lady Carnegy of Lour for pointing out the dangers of this amendment, and for the very fair way in which my noble friend Lord De La Warr also drew attention to its dangers. However, I am sorry—and I mean this quite genuinely—not to be able to accept the argument of my noble friend Lord Monk Bretton. Although he has indeed produced a very closely thought out amendment—indeed, an amendment of almost Byzantine complexity—it really will not do. I ask my noble friend to think carefully about the arguments which I have sought to put forward in reply, and I would ask him also not to press his amendment.
Lord Monkswell: Before the noble Lord sits down, perhaps he will clarify one point for me. He mentioned hidden cross-subsidy as though it were some monstrous evil. That may be so, but can he explain to the Committee whether it is the fact that it is hidden which is monstrous, or that it exists at all?
Lord Belstead: I do not think that I used the word "monstrous" or "evil", but I did indeed use the word "hidden". I used the word "hidden" because, as I said earlier, a former very distinguished Minister of Transport, the noble Lord, Lord Marsh, who was in his place earlier, exposed in a few sentences the difficulties of hidden cross-subsidy.
In essence, the noble Lord said in his speech earlier this afternoon that the difficulty was that nobody has the slightest idea of where the cross-subsidy is going; and that even if one could find out where it is going, it
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is not going on socially desirable objectives. It is something that simply goes on services according to how the operator thinks the cross-subsidy should work. It was on those grounds that the noble Lord, Lord Marsh, attacked it. It is in the noble Lord's absence, I must make it clear, that I attack it on those grounds too.
Lord Shepherd: The noble Lord cannot get away with that, even if we can forgive him at this fairly late hour. What was said by the noble Lord, Lord Marsh, was not as just stated by the noble Lord. Lord Belstead.
The truth of the matter is—and the noble Lord, Lord Marsh. would agree with me, as would any other former Ministers of Transport who may be present—that cross-subsidy has become institutionalised. It has been a conspiracy of central Government and local government, using the traffic commissioners and using the device of cross-subsidy with the operator, to provide socially desirable, uneconomic services on as wide a spread as possible within the locality.
The truth is that if the operator can get the money for the benefit of cross-subsidy—and it is for the operator to decide how he intends to use it—he could distribute it as profits. But there are statutory duties imposed upon all operators, certainly public operators, to consult and co-operate. As I said, there has been a conspiracy over many years and cross-subsidy has emerged.
I agree entirely with what was said by the noble Lord, Lord Marsh, that while cross-subsidy may not be evil it has, over the years, grown too big. Cross-subsidy has grown too big alongside ordinary central Government Section 1 grants, but it has grown in a way that the noble Lord, Lord Monk Bretton, is concerned about. The sole purpose of tabling Amendent No. 61 was to give time to remove the enormity of cross-subsidy out of the system by a pragmatic approach.
I have spoken longer than I intended but I could not let the noble Lord get away with pleading the case of the noble Lord, Lord Marsh, because it is not true.
Lord Belstead: The one point on which I was perhaps right is that we can argue cross-subsidy until we are blue in the face. However, I must say to both noble Lords opposite, and to the noble Lord, Lord Shepherd, in particular, that if the argument now on this amendment is that we need the amendment in order to preserve cross-subsidy, that is an argument which strikes at the very principles of the Bill. My understanding of my noble friend's amendment, which I still find unacceptable, is that it is an amendment which is needed to prevent a certain element of creaming-off. I do not accept that argument, but that was my understanding of the effect of the amendment.
If it is understood by noble Lords on the Opposition Benches that this is an amendment which is needed to preserve cross-subsidy then I must say absolutely clearly that the effect of the amendment will be to damage the best services, to drive passengers away from using buses and to deny the industry the

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opportunity of escaping from the cycle of decline from which we are seeking to rescue it.
Lord Monkswell: The noble Lord, Lord Belstead, has not answered my question and I think it would be useful for the Committee to know—
Lord Mottistone: Perhaps I may intervene to suggest to the noble Lord that to swan into the end of a debate, pick up a single phrase and start teasing it just to pursue his little argument, when we have been here concentrating on this amendment for 44 minutes, is outside the keepings of how the Committee behaves, according to my understanding. Perhaps the noble Lord will allow us to get on with the amendment.
Lord Monkswell: I take note of the noble Lord's comment.
Lord Mottistone: Thank goodness for that.
Lord Monkswell: I think that the Government's position is still unclear as to whether they are against hidden cross-subsidy or against cross-subsidy per se.
Lord Tordoff: I wish to reinforce what the noble Lord, Lord Mottistone, said. If the noble Lord had come in for the full Committee stage of the Bill he would perhaps understand what is going on. Since he has not been here I believe that he should listen and reserve his judgment for a later stage of the Bill.
Lord Monk Bretton: On Monday evening I was a little heartened by what my noble friend the Minister said in reply to my noble friend Lady Vickers on her Amendment No. 2. He said that,
"it is right that we should be concerned with what the future will be for low spending authorities in a deregulated system".—[Official Report, 8/7/85; col. 27.]
I am afraid his reply this evening to this amendment has not lived up to that faint ray of hope.
10 p.m.
I felt that this amendment of mine would help to eke out the £50 million bastion, mostly over four years, that is being provided to deal with the problems that are likely to arise. I think that one of the reasons for a difference of opinion about the cost savings that are possible is really that a good many county councils have already made part of the Hereford-type economies, even under present legislation. At any rate I think it is a very difficult and complex question to argue about very much further.
I shall just mention that I had thought that under the amendment a commercial service could challenge the need for or the level of a local subsidy, but I am sure it would be best to study what my noble friend the Minister has said, and what other noble Lords have contributed to the debate on this amendment, for which I thank them. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 [Enforcement of traffic regulation conditions, etc.]
[Amendments Nos. 108 and 109 not moved.]
The Deputy Chairman of Committees (Earl Cathcart): In calling Amendment No. 110, I should inform the Committee that, if it is agreed, I cannot call Amendment No. 111.
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 110:
Page 10, line 12, leave out from ("who") to first ("to") in line 15 and insert ("is aware of traffic regulation conditions which apply to licences or permits granted by another commissioner it shall be his duty")
The noble Lord said: This is a very simple amendment after the last rather exhausting one. It is merely to confirm that, as it is at present in the Bill, it is the duty of the traffic commissioner in determining traffic regulation conditions to inform the traffic commissioner who granted the operator's licence if he is in a different area. It is merely to allow the traffic commissioner to tell other traffic commissioners in adjoining areas that an operator's licence has been granted. Such a situation cannot arise very frequently, as there are only nine districts in the whole of the country. While there are obviously cross-boundaries, they will not occur very frequently. I hope that this will be a helpful amendment and that the Government will accept it. I beg to move.
Lord Brabazon of Tara: I am grateful to the noble Lord, Lord Carmichael, for explaining the amendment, because I must admit that I was not quite sure what he was actually getting at in moving it. Perhaps I may explain that an operator's licence issued by any traffic commissioner is valid throughout Great Britain. An operator needs a licence from each commissioner in whose area he has an operating centre, but he can run services in an area in which he does not have an operating centre. It is easy to see that where somone has his base close to the boundary between two traffic areas he can be running services in the area in which he does not have a base and hence his operator's licence.
It is essential that traffic regulation conditions should be imposed on the operator's licences of all operators running services affected by the condition. The Bill therefore provides that where the commissioner who determined the condition and the commissioner who granted the relevant licence are different, the former commissioner shall send the necessary details to the latter commissioner for imposition on the relevant licence. The proposed amendment seems aimed to shift the duty from the commissioner who made the determination to the commissioner who granted the licence. I see no need for the Bill to impose any duty on a commissioner to do that which he obviously must do as a matter of practice. I hope that the noble Lord will be satisfied with that explanation.
Lord Carmichael of Kelvingrove: I think there is a complication here. The Minister seems to have been satisfied, but the point raised, whether it is the first or the second traffic commissioner who should transmit the information, is something I shall take away and look at. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 111 to 113 not moved.]
Clause 8 agreed to.
Clause 9 [Appeals against traffic regulation condition]:
[Amendments Nos. 114 and 115 not moved.]
Lord Shepherdhad given notice of his intention to move Amendment No. 116:
Page 10, line 46, leave out ("or")
The noble Lord said: Amendments Nos. 116 to 121 would have been consequential on Amendment No. 61 had it been agreed to. Since it was not, I do not intend to move those amendments.
[Amendments Nos. 116 to 121 not moved.]
Clause 9 agreed to.
Lord Teviot Lord Teviot moved Amendment No. 122:
After Clause 9 insert the following new clause:
("Publication of information.
.—(1) Each traffic commissioner shall cause to be issued not less frequently than weekly during the transitional period and fornightly thereafter a statement to be known as "Notices and Proceedings" which shall include (unless previously notified therein) details of—

(a) the registration by him of any service in accordance with section 6 of this Act or any variation or cancellation of any such registration;

(b) any traffic regulation conditions determined by him under section 7 of this Act;

(c) any application to him for the grant of a permit under section 20 or section 21 of this Act or the grant variation or revocation by him of any such permit;

(d) any application made to him under the 1981 Act for the grant of a PSV operator's licence or the grant, revocation, suspension, curtailment or variation by him of any such licence;

(e) any conditions attached by him on the grant of a PSV operator's licence under the Act of 1981; and such other information as may be prescribed.

(2) Copies of Notices and Proceedings shall be published to such people as may be prescribed and made available by the traffic commissioner by whom they are issued for inspection at the offices of that commissioner free of charge and the said commissioner shall supply copies thereof to any persons requiring such copies on payment of such fee as may be prescribed.
(3) In this section the expression "the transitional period" has the meaning given by paragraph 1(1) of Schedule 5 to this Act.")
The noble Lord said: In moving this useful amendment I know that I have in principle the support of Her Majesty's Government. It is their declared intention to publish information regarding the introduction and variation of services, so that those who have a need for that information are able to come to respond to it and, after considering it, to take that action which is appropriate to themselves as local authorities or operators.
Unfortunately, although the intention is clear we have no provision in this Bill to ensure that intentions are turned into actions. Therefore, one feels that it is necessary to bring forward this amendment giving a clear requirement and indicating those matters which are to be published in the document long known as Notices and Proceedings, or colloquially as N & Ps, which is published fortnightly. I do not want to confuse scholars with N & Qs, which are quite different.
As your Lordships are aware, I have spent much time since last autumn in discussing the substance of
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this Bill with operators in the industry, with local authorities and with users. It is as a result of those consultations that I have presumed to set out in my amendment those matters which require to be published in Notices and Proceedings. I emphasise that it is the people who will rely upon this document (a document which the Government intend to be published) who have told me what it must contain if it is to be of any practical value to them. I cannot think that there will be a better source for recognising those needs, and, if this is the information needed, it must be given.
Furthermore, I should be grateful to my noble friend if he could give some indication of the amount of detail that could be set out in N & Ps regarding registration of services. In that respect the amendment speaks for itself. It seeks publication of essential details of registrations, variations or cancellations; of traffic regulation conditions determined by traffic commissioners; relevant information in respect of minibus permits; and details regarding PSV operators' licences—which will become of greater importance following the abolition of road service licensing.
This is an exercise which will pay for itself because most operators, local authorities and others purchase at a commercial price the issues of N & Ps which are appropriate to their needs. In short, this is a necessary provision of information if this Bill, when enacted, is to work in practice. It embodies a principle supported by the Government and covers those matters which are vital to the users of this publication. I beg to move.
Lord Belstead: I agree with almost all that my noble friend has said. Notices and Proceedings belongs essentially to road service licensing, but it is our intention to continue such a publication after deregulation. There will be statutory requirements for the notification of registrations, and a publication of that kind will enable the commissioners to discharge those requirements sufficiently. However, my noble friend asked what detail of registrations will be published. I do not think that I can add to what I said earlier this evening about the detail of the registrations at the present time. We shall obviously have to consult further. It is also our intention that information about traffic regulation conditions and applications for public service vehicle operators' licences should be published in this format.
There is one paragraph in my noble friend's new clause that I feel I must resist. I do not think we ought to require the commissioners to publish the mini-bus permits they issue when so many mini-bus permits are not issued by them at all. The mini-bus permit, which we shall no doubt be debating later on, is not some kind of a second-class licence: it is an exemption, and is in a quite different category.
I am interested in my noble friend's idea of weekly publication during the transition. There will certainly need to be some special arrangements to deal with the quite exceptional prospect of having to register every local service in a matter of months. However, I think it may be preferable to authorise one or two special editions which may well enjoy wider than usual circulation. Perhaps this is a point to which we can return when we turn to Schedule 5.

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Therefore, at the end of this part of the Bill it gives me pleasure to say that with the exception of paragraph (c) I feel that in this new clause my noble friend and the noble Lord, Lord Tordoff, are making out a good case. I should like to accept the principle of the amendment, except for paragraph (c). I hope that on that undertaking both noble Lords will agree to withdraw the amendment so that we can consult on bringing forward a suitable amendment at Report stage.
Lord Tordoff: In response to that, all I can say is that silence is clearly golden.
Lord Teviot: I shall also follow that. I am grateful to my noble friend. I shall look into paragraph (c) of the amendment. Perhaps there will be a change after we discuss the amendments next Tuesday, or whenever. I am very grateful to my noble friend. I agree with him that before we move on to the subject of taxis it is pleasant that this part of the Bill should end on such a happy note. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 [Immediate hiring of taxis at separate fares]:
Lord Shepherd Lord Shepherd moved Amendment No. 123:
Page 12, line 14, after ("without") insert (", subject to subsection (1A),".)
The noble Lord said: I beg to move Amendment No. 123 and to speak to Amendment No. 124.
Amendment No. 124: Page 12, line 19, at end insert—
("(1A) Notwithstanding subsection (1)(a) a licensed taxi permitted to carry passengers for hire or reward at separate fares under subsection (1) shall be regarded as a public service vehicle for the purposes of Part VI of the Transport Act 1968 and related legislation.")
I can be brief. I think it will be agreed that all drivers of vehicles used for the conveyance of passengers for either hire or reward should, in the interests of road safety, be subject to the provisions of Part 6 of the 1968 Act, which deals with the control of drivers' hours.
While this view applies to taxi operations in general, the current amendment relates merely to the proposed new ability of taxis to carry passengers at separate fares, under clause 10, and seeks to bring the use of vehicles under this clause within the scope of the drivers' hours provisions of the 1968 Act. A similar amendment is proposed in respect of Clause 11. I beg to move.
Lord Trefgarne: In moving this amendment, the noble Lord said that he was speaking also to Amendment No. 124. However, I believe the noble Lord will agree that very similar arguments apply to Amendment Nos. 132 and 133. If the noble Lord agrees, I should like to reply to all four amendments.
Amendment No. 132: Clause 11, page 13, line 39, after ("without") insert (", subject to subsection (2A).")
Amendment No. 133: page 14, line 11, at end insert—
(" (2A) Notwithstanding subsection (1)(a) a licensed taxi or licensed hire car permitted to carry passengers for hire or reward at separate fares under subsection (1) shall be regarded as a public service vehicle for the purposes of Part VI of the Transport Act 1968 and related legislation".)
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Amendments Nos. 123 and 124 would have the effect of making taxis shared under the provisions of this clause subject to the domestic drivers' hours rules. Amendments Nos. 132 and 133 would have the same effect for taxis and hire cars shared under the provisions of Clause 11; that is to say, the pre-booked sharing arrangements.
Since my remarks apply equally to both clauses, I shall as I said earlier, discuss them together. Such rules apply to bus driving in order to protect the safety of passengers. Some of your Lordships, in tabling these amendments, may have thought that this would be necessary for these new kinds of service. We are of course concerned to ensure the safety of passengers on all forms of passenger transport. However, there is no evidence of problems which would indicate a need for drivers' hours controls on taxi operation. Although many taxi drivers work quite long hours, their working day, unlike that of a bus driver, is generally interspersed with periods of rest.
The provision of shared services under Clauses 10 and 11 requires a form of operation which is little different from that of exclusive taxi and hire-car services. When operating a regular registered service under the provisions of Clause 12, these vehicles will, like buses, be subject to the drivers' hours rules. However, for the types of service which we are currently considering, such control is not, we believe, necessary.
If noble Lords can produce any convincing evidence to show that drivers' hours controls are necessary for taxi drivers, we shall certainly consider it in the full review that we shall be undertaking of taxi and hire-car legislation. However, I believe that it would be illogical that taxis and hire cars should be controlled in this way only when they are being shared. I hope that the noble Lord will accept that explanation and will not press his amendment.
10.15 p.m.
Lord Shepherd: The noble Lord has undertaken to examine the matter further and so shall I. My understanding is that some of the taxis are subject to drivers' hours rules. The purpose of the amendment was to bring in line the new extension in the Bill. I shall check my information if the noble Lord will take note of what I have said and see whether I am right or wrong. I hope that the Minister will agree that the new change—I shall not say an unwelcome change—in the Bill gives flexibility for the people living in the country. On the other hand, we do not want to put passengers at risk in regard to safety with drivers working unacceptable hours. If the noble Lord will do what I shall do and check his source of information, we could perhaps have further words later—not necessarily in your Lordships' House but elsewhere—to see whether there is agreement between us. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 124 not moved.]
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 125:
Page 12, line 34, at end insert ("with the agreement of the county council whose area includes the area of the licensing authority")
The noble Lord said: I move this amendment in order to get some guidance from the Minister. I am concerned about the difficulty into which an openly subsidised service may be placed if, for instance, a local authority decided that a particular village had to have a service provided, but it was loss-making. Let us suppose that they were willing to pay a certain amount for the service and that someone tendered for the service relying on the fact that it had, perhaps, two fairly good evenings per week which were compensation. Let us suppose that he tendered on the basis that he would have a half-full bus twice a week, and that then somebody came in with a taxi. I do not know how you would get over that situation.
When I look at the amendment I can see the great pitfalls for someone tendering in a situation where people are allowed to share taxi fares. Perhaps the Minister would give me the views of his department. Having read the amendment carefully, I cannot really see a way around the situation. I move the amendment only in the hope that the Minister will be able to give me some information. I beg to move.
The Earl of Caithness: I am grateful for what the noble Lord, Lord Carmichael, has said because he has elucidated the situation for me. When the noble Lord moved the amendment, he introduced many points which I had not realised were intended to be covered. The amendment is tabled in the name of fair competition and the maintenance of quality and safety standards. In our view, it is both unnecessary and misconceived for two reasons: first, that taxis are subject to lower standards of quality control than are buses; and, secondly, that making the sharing of taxis subject to the agreement of the county council would in some way improve the situation.
Taxis are licensed by district councils who have adequate powers to ensure that they are operated safely, and that is why we have restricted the provision of this type of service to licensed vehicles. Furthermore, when providing a shared service, taxis will be subject to additional regulation as provided for in subsection (6) of this clause and to overriding regulations made by the Secretary of State under subsection (5). There are certainly sufficient powers to ensure the safe operation of these services.
To make that operation conditional on the agreement of county councils could in no way improve safety standards. It is the traffic commissioner, not the county council, who is responsible for ensuring the quality and safety of bus operations. The county councils license neither buses nor taxis, have no powers to carry out checks on these vehicles, and would be in no position to assess their safety. This amendment achieves one thing. It would achieve a conflict of responsibility between the two tiers of local government, and I am sure that that is not what the noble Lord wanted.
Lord Tordoff: That is a fair response to the amendment as it stands, but I am not sure that it deals with the problem underlying this question. There is a problem of subsidised services being undermined by shared taxi services, and particularly in rural areas. Would the Minister care to think about it again and
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perhaps at a later stage come back and give us some further information on that problem? I do not think that the noble Lord, Lord Carmichael, wishes to press this amendment to any sort of decision tonight, but there are worries in this area that all of us feel.
The Earl of Caithness: I think there was a misconception that it was on safety arising from the way the amendment was worded, whereas the noble Lord, Lord Carmichael, was on a subsidy point. County councils are given no powers in the Bill to veto bus services. The concept of such veto is contrary to the fair competition spirit of this Bill, but notwithstanding what I have said I shall look at the points that the noble Lord raised when he moved the amendment. In the meantime, I hope he will withdraw it.
Lord Carmichael of Kelvingrove: The point of the lower standard is, as the noble Lord, Lord Tordoff, said, that taking a cheaper vehicle, or a vehicle that is cheaper to run, could exploit in rural areas any good traffic which would be much more expensive for the local authorities since they would be subsidising much heavier and much more expensive vehicles. There is a point there. Although the amendment talks about safety standards, they are obviously reflected in costs. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Tordoff Lord Tordoff moved Amendment No. 125A:
Page 12, line 36, leave out ("at least ten per cent. of the taxi licences issued") and insert ("a simple majority of the licences issued to drivers and proprietors.")
The noble Lord said: This is really a probing amendment. It touches on the trigger mechanism for the introduction of the cab-sharing scheme, which noble Lords who have read the Bill will realise can be triggered at a request of a mere 10 per cent. of the licence holders. We all know that the Secretary of State is going to trigger this scheme anyway, but we just wonder why 10 per cent. is the figure put in.
If we are talking about getting the genuine feeling of the taxi people, then presumably it would make sense to have a majority of those people triggering this scheme. It is a probing amendment, but it would be interesting to know why the Bill says 10 per cent. and not 50 per cent. plus. I beg to move.
Lord Trefgarne: I think there may be a misunderstanding about the way that Clause l0(4) will operate. Your Lordships may therefore find it helpful if before addressing this amendment I outline how this provision will work.
Subsection (4) was introduced by amendment in another place with the aim of preventing a taxi licensing authority from blocking the wishes of its local taxi trade by refusing to set up a taxi sharing scheme. I think that your Lordships will agree that that would be undesirable and that the provision serves a useful purpose. It achieves that purpose by requiring a district council to set up a scheme if requested to do so by the holders of at least 10 per cent. of all taxi vehicle licences. The threshold of 10 per cent. was chosen to prevent a handful of taxi operators from requiring the licensing authority to go to the lengths of setting up a scheme when there were an insufficient number of

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proprietors willing to participate to provide a proper service.
Let me say what that means. First, it is not a consultation requirement. Arrangements for consultation will be laid down by the Secretary of State in regulations made under subsection (8). It does not restrict the right of a licensing authority to act to set up a scheme. It limits their right to refuse to act. Secondly, it confers no power on the taxi trade to determine the nature of the taxi sharing scheme. They may require only that some such scheme be made. It will be for the licensing authority to determine the details (subject of course to the test of reasonableness) and following consultation.
Finally, in each area there will be only one scheme. It may include several different services but technically these will all form part of the same scheme. Thus, once a scheme is in place subsection (4) will become redundant; its purpose will have been achieved. Consequently in London, which I believe may be the noble Lord's main concern, this subsection is most unlikely ever to be called upon. The Secretary of State would not have gone to the lengths of including Clause 10 in the Bill only to decline to make a scheme for London, where he is the authority.
This explanation may be sufficient to allay the noble Lord's concerns and I hope that, in the light of what I have said, he may consider withdrawing his amendment.
Lord Tordoff: I am grateful to the noble Lord. That helps to elucidate the situation. I still am not sure that 10 per cent. is necessarily the right figure, but who knows? I should certainly like to read what the Minister said, and in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Caithness The Earl of Caithness moved Amendment No. 126:
Page 12, line 36, after second ("the") insert ("current").
The noble Earl said: This amendment and Amendments Nos. 127, 128, 129, 130 and 131 are minor and technical, and therefore it may be for the Committee's convenience if I deal with them together.
Amendment No. 127: Page 13, line 8, before ("Any") insert ("Subject to subsection (5) above,").
Amendment No. 128: Page 13, line 12, leave out ("licensed").
Amendment No. 129: Page 13, line 18, leave out ("licensed").
Amendment No. 130: Page 13, line 22, leave out from beginning to ("and") in line 23 and insert ("Except in the case of a scheme made by the Secretary of State, any scheme under this section").
Amendment No. 131: Page 13, line 31, leave out ("licensed").
The first amendment, No. 126, ensures that only current licences are taken into account in arriving at the figure of 10 per cent. Clearly lapsed licences should not influence whether or not a taxi-sharing scheme should be set up. The second amendment, No. 127, makes clear that the provisions of any scheme made under this clause will be subject to the regulations made by the Secretary of State in accordance with the provisions of subsection (5)(c).
The third set of amendments, Nos. 128, 129 and 131, eliminates from the various places in the clause the unnecessary qualification of "taxi" as "licensed taxi". Subsections (1) and (2)(b) make clear that this clause applies only to licensed taxis.
Finally, Amendment No. 130 brings the variation of a scheme by the Secretary of State into line with the making of such a scheme—neither being subject to the prescribed procedures. A scheme made by the Secretary of State would be made by order and would therefore be subject to different procedures than apply to one made by resolution by a district council. I beg to move.
On Question, amendment agreed to.
Lord Tordoff Lord Tordoff moved Amendment No. 126A:
Page 132, line 37, at end insert—
("(4A) In relation to the London taxi area, the licensing authority shall consult with the recognised body for the London Taxi Trade.").
The noble Lord said: It may be for the convenience of the Committee if we deal also with Amendment No. 129A, which is consequential upon this amendment.
Amendment No. 129A: Page 13, line 21, at end insert ("subject to the same tests of consultation as stated in subsections (4) and (4A) above.")
The noble Earl may have answered this question in saying that Clause 4 does not constitute a consultative scheme, but I wonder whether it might not be possible to have a consultative process within this scheme, in which case the recognised bodies of the London taxi trade would be the obvious people to consult on this matter. The noble Earl may have partially dealt with this in reply to my questions on the earlier amendment. I beg to move.
The Earl of Caithness: I have covered some of this ground, and I can assure the noble Lord that such consultations as he requires have already taken place between officials at the Department of Transport and the London trade (that is, the London taxicab trade) on this particular matter. Indeed, the London trade have always been consulted about matters affecting taxi operations in London, and I see no reason why this situation should change. Given that, I believe that the noble Lord's amendment is unnecessary. Consultation is existing and will continue.
Lord Tordoff: I am sure that the people involved will be grateful for that assurance, and on that basis I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
10.30 p.m.
Lord Tordoff Lord Tordoff moved Amendment No. 126B:
Page 12, line 40, at end insert ("and such places designated for the immediate hire of taxis at separate fares shall be physically separate from places for hiring at single fares.")
The noble Lord said: This touches a rather different matter. There are going to be differences between cabs for individual hire and cabs for shared hire. I think there are going to be green lights on the latter. But I ask your Lordships to consider the situation at some of our great railway terminals, where some cabs are for shared hire and some for individual hire. One sees the situation of the Japanese tourist coming here and not quite knowing which cab is which, and the sight of cabbies toting up and down the ranks to fill their cabs to go from Victoria to Euston or from Waterloo to Heathrow, or whatever. It seems to me that unless there is some separation between the two sorts of cabs

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on a purely physical basis, chaos is going to ensue, particularly at our major terminals. I wonder whether the noble Earl would care to comment on that situation, and how they propose to resolve it. This, again, is a probing amendment. I beg to move.
Lord Mottistone: The amendment seems a very sensible one to me.
The Earl of Caithness: This amendment to Clause 10 would force any taxi-licensing authority making a scheme for shared taxi services to designate separate ranks for shared and exclusive taxi services. I can fully understand the concern that has led to this amendment being tabled by the noble Lord, Lord Tordoff, and so ably supported by my noble friend Lord Mottistone. The taxi trade, especially in London, can envisage problems occurring at what are now very busy and congested taxi ranks if shared services were also permitted to operate from them. A shared taxi waiting for second or subsequent fares might block such a rank. However, I am sure that noble Lords can think of a great many taxi ranks where no such problems would occur. Moreover, there may be places where there is simply insufficient road space to allow the designation of two ranks. It may be sensible in some cases to designate separate ranks, and the clause as it stands does not prevent this. I am sure we can rely on the licensing authorities, in consultation with their local taxi trade, to locate and designate such ranks as are necessary without this extra restraint. The powers are already there for them to do so, and we are sure that they will. I am grateful to the noble Lord for raising this. I think the matter is taken care of in the Bill.
Lord Tordoff: I wish I could believe that it was taken care of in the Bill, because there are stations in London where it is quite easy to segregate these things. Waterloo is a case in point. It is much more difficult at Victoria; and at Euston, where there are barriers, it is almost impossible. Clearly, I am not going to press this tonight, but I would ask the noble Earl to go back to his ministerial friends and say that there is a practical problem here which I do not think they have solved. I am overwhelmed by the support of the noble Lord, Lord Mottistone. It is late at night, and I am grateful for it. Nevertheless, on the understanding that the noble Earl will look at this problem again in purely practical terms, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn
Lord Belstead Lord Belstead moved Amendments Nos. 127, 128 and 129:
[Printed earlier.]
On Question, amendments agreed to.
Following is the text of the amendments (Nos. 127 to 129):
Page 13, line 8, before ("Any") insert ("Subject to subsection (5) above,")
Page 13, line 12, leave out ("licensed").
Page 13, line 18, leave out ("licensed").
[Amendment No. 129A not moved.]
Lord Belstead Lord Belstead moved Amendments Nos. 130 and 131:
[Printed earlier.]
On Question, amendments agreed to.
Following is the text of the amendments (Nos. 130 and 131):
Page 13, line 22, leave out from beginning to ("and") in line 23 and insert (" Except in the case of a scheme made by the Secretary of State, any scheme under this section")
Page 13, line 31, leave out ("licensed").
Clause 10, as amended, agreed to.
Clause 11 [Advance booking of taxis and hire cares at separate fares]:
[Amendment No. 132 not moved.]
Lord Tordoff Lord Tordoff moved Amendment No. 132A:
Page 14, line 7, leave out subsection (2)(b).
The noble Lord said: Again, this is a probing amendment but I believe it raises an important problem, a human problem. The clause is concerned with the consent given by a hirer, and I should say that this amendment should read: "leave out subsection 2(b)" and not the whole of subsection (2) of Clause 11.
This clause is concerned with consent given by a hirer when booking to share a ride. A number of us are concerned about the contractual position of the hirer. I would ask your Lordships to consider the situation when somebody rings up to hire a taxi or hire car on a shared basis. The vehicle arrives at the door and the hirer—who may be a young girl, an old lady or whoever—gets to the cab and finds inside the cab already, sharing their cab, someone to whom they take an instant dislike. It may perhaps be someone who is slightly inebriated or someone they do not like the look of and do not wish to travel with. So they refuse to get into the cab.
What I am asking is: what is their contractual position if they refuse to get into the cab? Have they a contract with the cab hire firm that they have to fulfil? Are they likely to be subject to penalties if they do not get into that cab? Those are the questions that lie behind this amendment. I beg to move.
The Earl of Caithness: I am grateful to the noble Lord, Lord Tordoff, for explaining the thought behind the amendment. As he points out, the amendment as it stands does not cover the point that he was raising. I would say to him that I should like to consider with my noble friends and the department the exact point that he has raised, and perhaps I can write to him and we can discuss this at a later stage. I assure him that I shall look at it again.
Lord Tordoff: I am most grateful to the noble Earl. As I say, it was a device to ask an important question on a human basis. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 133 not moved.]
Clause 11 agreed to.
Clause 12 [Use of taxis in providing local service]:
Lord Shepherd Lord Shepherd moved Amendment No. 134:
Page 14, line 12, leave out subsection (1) and insert—
(" (1) Where the holder of a taxi licence wishes to use one or more licensed taxis to provide a local service he may apply to the appropriate traffic commissioner for a PSV operator's licence to be issued to him for this purpose only under Part 11 of the 1981 Act".)
The noble Lord said: I beg to move Amendment No. 134 and to speak to Nos. 135, 136 and 138.
Amendment No. 135: Page 14, line 21, leave out ("restricted")
Amendment No. 136: Page 15, line 1, after ("licences") insert ("or such lower number as the traffic commissioner may determine")
Amendment No. 138: Page 15, leave out lines 17 and 18.
In the Bill as at present drafted, there is no requirement that any person wishing to run licensed taxis on registered local bus services has to satisfy the commissioner to hold or retain a public service vehicle operator's licence, in accordance with Section 14 of the 1981 Act. Therefore he will not be required to satisfy the commissioner of any of the following: first, his good repute; secondly, his appropriate financial standing; thirdly, his professional competence; fourthly, that he has adequate facilities or arrangements for vehicle maintenance; and, lastly, that he has adequate arrangements for securing compliance with the law relating to the driving and operation of vehicles used under the licence.
I suggest that it is imperative that all operators of registered local bus services should be required to meet adequate quality and safety standards. It is therefore to be regretted that taxi operators who wish to operate registered services have been omitted from the provisions of the Bill. The number of vehicles permitted should, in my view, be the number for which the operator holds taxi licences, or those which he is deemed by the commissioner to be capable of operating satisfactorily, whichever is the lower, and in line with Clause 24(1) there should be a maximum of only two vehicles authorised should the requested licence be a restricted one not requiring the taxi operator to satisfy the commissioner as to his professional competence.
The second half of this amendment is aimed by the deletion of subsection (10)(a) at bringing the obligation to the operator of taxis on registered local bus services into line with the holders of PSV operators' licences generally, including the requirement that the drivers of vehicles should hold PSV drivers' licences.
Quite apart from the safety and quality considerations it should not be overlooked that the less demanding standards that would have to be met by taxi operators who intend to run local bus services under the provisions within the Bill as they stand could, and certainly would, represent unfair competition to other public service vehicle operators who are obliged to meet very stringent standards to the full. I beg to move.
Lord Trefgarne: This clause makes provision for the proprietor of a licensed taxi to hold a special public service vehicle operator's licence the grant of which takes account of the fact that he has already satisfied a licensing authority of his suitability to operate the vehicle in question as a taxi and the restricted use to
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which the licence will be put. When operating such a service the fitness of the driver and the quality of the vehicle will be regulated by the taxi licensing authority while the provision of the service will be regulated by the traffic commissioner under the registration requirements of this part of the Bill.
These amendments may have been tabled under the misconception that taxis are subject to lower safety and quality standards than are buses, thus resulting in unfair competition and even putting the public at risk. This is not the case. And, indeed, these are exactly the concerns which led us to restrict this type of operation to licensed taxis. To put your Lordships' minds at rest on this issue, perhaps I may outline briefly the quality controls to which taxis are subject.
Responsibility for licensing in London is delegated by the Secretary of State to the Assistant Commissioner of the Metropolitan Police and is carried out on his behalf by the Public Carriage Office. A taxi vehicle licence may only be granted to a vehicle which meets the metropolitan conditions of fitness. These run to some 40 detailed conditions which can only be met by a purpose-built vehicle. Furthermore, the vehicle must be fit for public use and properly insured. The PCO inspect licensed taxis annually (when their licences are renewed) and at random at other times during the year and following any repair of accident damage to a vehicle. Stop notices are issued to prevent the use of any taxi that does not meet these exacting standards. In 1984, 3,251 such notices were issued. A taxi vehicle licence can only be issued to an applicant who is over 21 and who is a fit and proper person—that is, of good character, of good business repute and financially sound. There are provisions for the withdrawal of a taxi licence if the proprietor breaches the required standards.
Turning now to taxi drivers, such a licence may be issued only to a person over 21 years of age who is again of good character and fit to act as a taxi driver. London taxi drivers have to pass a special driving test and "the knowledge" which is a detailed knowledge of the streets of London, taking over a year to acquire—something no PSV driver ever has to do. There are extensive provisions for the suspension or revocation of the licence of a driver who misbehaves.
Similarly in Scotland the Civic Government (Scotland) Act 1982 contains very clear and strict conditions governing the quality and safety of taxis. Conditions are laid down as to the suitability of the vehicle and its fitness, and the repute and fitness of the proprietor and the driver.
10.45 p.m.
In England (outside London) and in Wales, taxis are licensed by District Councils under the Town Police Clauses Act 1847 or that Act as amended by the Local Government (Miscellaneous Provisions) Act 1976, or under local powers. Section 4 of the 1976 Act enables a district council to attach to a taxi licence such conditions as it considers reasonably necessary—a very sweeping power. The 1976 Act also contains specific powers in Sections 50 and 60 for the inspection of taxis and, if necessary, the suspension, revocation or refusal of a licence. Section 57 enables a district council to require such information from applicants for licences as they consider reasonably

305
necessary to enable them to determine whether the licence should he granted or any conditions should be attached to it. The Town Police Clauses Act 1847, enables a district council to make by-laws regulating the conduct of proprietors and drivers, the manner in which taxis are to be provided and equipped, and their inspection for safety maintenance.
Finally, all licensed taxis must pass the department's annual test of roadworthiness or an equivalent examination every year, regardless of the age of the vehicle, and under the provisions to which I have already referred a taxi licensing authority can suspend or revoke the licence of any taxi which is found to be unfit for use.
I hope, therefore, that the noble Lord will agree that there is really no need to require what is already a highly controlled industry additionally to comply with a very similar set of controls in order to operate local services. In the light of those considerations I invite the noble Lord to withdraw his amendment.
Lord Shepherd: I listened with great care to the noble Lord, Lord Trefgarne, and— I have to be frank and open—I think I am satisfied. I shall take just one precaution. I shall read with great care the report of what he has said. There seemed to be just a slight difference between the very strong standards in London, which we all know about, and Scotland, and those in the rest of England and Wales. But I think I got enough of the drift of what the noble Lord said to leave me satisfied with his response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 135 and 136 not moved.]
The Earl of Caithness The Earl of Caithness moved Amendment No. 137:
Page 15, line 14, at end insert—
("(9A) For the purposes of section 12(3) of the 1981 Act (which provides that where two or more PSV operator's licences are held they must be granted by traffic commissioners for different traffic areas), special licences shall be disregarded.
(9B) A person may hold more than one special licence but shall not at the same time hold more than one such licence granted by the traffic commissioner for a particular traffic area.")
The noble Earl said: This is a technical amendment. Without it, a person who operates with a public service vehicle opeator's licence and who also runs taxis would not be able to hold a special PSV operator's licence under Clause 12 in respect of taxis in order to use them to operate a registered local service. I beg to move.
On Question, amendment agreed to.
[Amendment No. 138 not moved.]
Clause 12, as amended, agreed to.
Clause 13 [Provisions supplementary to sections 10 to 12]:
Lord Mottistone Lord Mottistone moved Amendment No. 139:
Page 15, line 25, at end insert ("; and such an order may include regulations with regard to maintenance and drivers' hours.")
The noble Lord said: This is a probing amendment and it is on very much the same lines as No. 134,
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which was moved by the noble Lord, Lord Shepherd. Indeed, the answer to Amendment No. 134 provides the answer to most of this amendment. The reason for it is partly the safety of the passengers and partly the question of competition with the buses. But the one point which my noble friend the Minister did not make, because the amendment did not require it, was the question of drivers' hours. It strikes me that under the new arrangements taxi drivers, with their greater freedom, particularly where they are running on what is the equivalent of bus routes, may not be subject to the same limitations on drivers' hours as are the heavier vehicles, and it might be a good thing if they were.
My amendment puts the responsibility for including these in regulations on the Secretary of State so as to cover the whole country. We know about London, because we travel about in taxis, and we have heard that Scotland is much the same. But the answer given to the noble Lord, Lord Shepherd, was not authentic enough with regard to the other local authorities. There might be room within the regulation to which Clause 13 refers to have something rather more stringent with regard to these particular points. I should be grateful if my noble friend can clarify this. I beg to move.
Lord Trefgarne: As regards drivers' hours for taxi drivers, there is already a provision contained in the Town Police Clauses Act 1847 for a district council to make by-laws controlling the hours during which a taxi driver may exercise his calling. Very few, however, have found a need or chosen to do so. This view is supported by available accident statistics which do not indicate that there is a need to apply drivers' hours rules to taxi services.
As I explained when we were debating some earlier amendments, although many taxi drivers work long hours their working day is interspersed with long periods of rest. The operation of shared services under Clauses 10 and 11 would be little different from the operation of exclusive taxi and hire car services. Drivers' hours controls for this type of service would therefore be unnecessary. With this reassurance I hope that my noble friend will be able to withdraw his amendment.
Lord Mottistone: Yes. I am 90 per cent. pleased, but I have exactly the same reservations as the noble Lord, Lord Shepherd. I shall read what my noble friend has said to both me and the noble Lord, Lord Shepherd, and reserve the right to come back on Report if I am not happy. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 13 shall stand part of the Bill?
Lord Tordoff: I have given an indication that I wish to oppose the Question that the clause stand part. Again, this is very much of a probe, particularly relating to subsections (2)(b) and (c) of Clause 13, which appear to allow the Secretary of State to amend licence conditions, particularly for drivers in London—it is drivers in London who are worried about this—who at present have the right to refuse a fare over six miles. It seems to them that under this

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clause the Secretary of State would have the right to require a driver to accept any hiring. That would be a very significant change in their normal mode of operation.
It also seems that under the clause there could be an arbitrary interference with fares. There is no consultation built into this clause, and consultation with the trade ought to be envisaged. Nor is there any room for parliamentary debate on this clause. It seems to be a slightly draconian measure. Although at the end of the day I shall not press the clause out of existence, even if I could, I should be grateful if the noble Lord could answer those very genuine worries of people in the taxi trade in the London area.
Lord Trefgarne: Perhaps I may help the noble Lord very swiftly. The noble Lord may not have at his fingertips the provision of the London Cab Act 1968 which I believe provides a power for both the functions to which the noble Lord has referred.
Clause 13 agreed to.
Clauses 14 and 15 agreed to.
Lord Denham: I think it is generally agreed that this is as far as we can usefully go tonight. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Greater London Council (Money) Bill
Reported from the Unopposed Bill Committee without amendment.

Weights and Measures Bill [H.L.]
Reported from the Joint Committee with amendments, and recommitted to a Committee of the Whole House; Bill ordered to be printed as amended.
House adjourned at six minutes before eleven o'clock.

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