Sitting of 8 July 1986

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

  PLYMOUTH CITY COUNCIL BILL [Lords] (By Order)
  Order for Second Reading read.
  To be read a Second time upon Thursday 10 July.

  BLYTH HARBOUR BILL [Lords] (By Order)
  Read a Second time, and committed.

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

1. Road Traffic Regulation (Parking) Act 1986.

2. Children and Young Persons (Amendment) Act 1986.

3. Consumer Safety (Amendment) Act 1986.

4. Forestry Act 1986.

5. Airports Act 1986.

6. Drug Trafficking Offences Act 1986.

7. Disabled Persons (Services, Consultation and Representation) Act 1986.

8. Protection of Children (Tobacco) Act 1986.

9. Protection of Military Remains Act 1986.

10. Harrogate Borough Council Act 1986.

11. South Yorkshire Passenger Transport Act 1986.

12. Clifton Suspension Bridge Act 1986.

Oral Answers to Questions
  EDUCATION AND SCIENCE

    School Books
    Mr. Hardyasked the Secretary of State for Education and Science what is his estimate of the amount which will be spent in the current financial year upon books in schools; how much this represents per pupil; and if he will take action to assist local authorities to increase this provision.
    The Minister of State, Department of Education and Science (Mr. Chris Patten): Local education authorities and schools decide how much is spent on books. The plans which we published in January were consistent with an expenditure on books of £70 million or £10 per pupil. On 10 June my right hon. Friend the Secretary of State announced a further £20 million for books and equipment for GCSE courses.
    Mr. Hardy: Is the Minister aware that the total shortfall now amounts to more than £5 million a year, that most schools lack sufficient hooks and that books in use are often out of date? Is he further aware that the older geography books show nothing of the industrial transformation and devastation that has completely altered many local economies, and that pupils are not only hurt by the Government's lack of vision and provision but are demonstrably ill-informed?
    Mr. Patten: I do not accept what the hon. Gentleman has said. [HON. MEMBERS: "HMI report".] As Opposition Members are shouting about the HMI report, I should remind them that it noted that the inadequate identification by teachers of pupils' educational needs and poor management of resources were more telling factors than the level of capitation.
    Mr. Dorrell: Does my hon. Friend agree that recent developments in school management in Cambridgeshire, which offer greater discretion to school heads and governors in the use of resources, represent an interesting way forward? Could not other local education authorities usefully allow their schools more discretion and give heads more ability to decide the priorities that should be attached to the provision of textbooks and other school resources?
    Mr. Patten: I entirely agree with my hon. Friend. I am only sorry that he is not serving on the Education Bill Committee. But, as has been said, it is never too late. If he was serving on it, he would know that clause 25 helps to promote those very activities.
    Mr. Freud: Is the Minister aware that yesterday the Minister for the Arts gave a commitment that the library service would remain free? Does the hon. Gentleman accept that it would be very damaging to the public service and to education if parents had to make an input into the provision of books? Will he give an undertaking that that will not occur and that books for education will remain his Department's responsibility?
    Mr. Patten: There is no such obligation on parents. I think that there is a question on the library service later on the Order Paper.
    Mr. Adley: Does the Department have any policy of ensuring, as far as possible, that school books are published by British publishers? Will my hon. Friend do what he can to ensure that pirated editions of British publishers' books are not allowed into our schools?
    Mr. Patten: I will certainly look into what my hon. Friend has said.
    Mr. Radice: Does the Minister accept that the relevant facts are that there has been a reduction in book spending per pupil in primary and secondary schools in each of the past three years? That information was provided by the Parliamentary Under-Secretary of State to my hon. Friend the Member for Denton and Reddish (Mr. Bennett). In May HMI warned the Secretary of State about the inadequacy of books provision. In case the Minister has forgotten, that appeared in paragraph 12 of the report. Why does he not simply tell the House this afternoon that the Government will provide extra resources for books in 1987–88?
    Mr. Patten: As the hon. Gentleman will know, most schools are given a capitation allowance which covers books and equipment, and they make the choice between spending on books and equipment. The spending per pupil on books and equipment fell by 6 per cent. in primary schools and by 8 per cent. in secondary schools in real terms between 1975 and 1979. Under this Government, spending on books and equipment has increased by 8 per cent. for primary schools and by 5 per cent. for secondary schools. No decision has been taken on local authority spending for 1987–88, but I am sure that the report by HMI will be taken into account.

    Polytechnic Courses
    Mr. Wattsasked the Secretary of State for Education and Science what is the number of students currently attending polytechnic courses; and how this compares with 1979.
    The Secretary of State for Education and Science (Mr. Kenneth Baker): In 1979 there were 131,000 full-time equivalent students at polytechnics. This had risen by 1984 to just under 171,000: an increase of just over 30 per cent.
    Mr. Watts: I thank my right hon. Friend for that most encouraging reply. Does he expect the growth in numbers of technically and technologically skilled students and graduates from polytechnics to continue? Will he take the opportunity to refute the wild allegations that a massive cut in pupil numbers is in prospect?
    Mr. Baker: On my hon. Friend's latter point, the Government do not want to see any overall reduction in intakes to polytechnics.
    On the question of technology students, I pay tribute to the excellent work of polytechnics in training for professions and careers in technology. For example, at Coventry polytechnic, only one student out of 29 who graduated from the industrial design degree course last summer was still looking for a job in December, while all those who graduated from the combined engineering and languages course obtained jobs.
    Mr. Flannery: Is it not a fact that the draconian cuts in universities have meant that many highly qualified young people who would otherwise have attended university have had to seek entrance to polytechnics?
    Mr. Baker: Not for the first time, the hon. Gentleman has got it wrong. Under this Government there has been an unprecedented increase in the number of full-time students entering univerisities and polytechnics. As I said in the House about a fortnight ago, the total increase is 80,000 full-time students, and nearly 140,000 if one includes part-time students. That is a record of which we can be proud when it is compared with the reduction in the number of students during the period of the Labour Government.
    Mr. Michael Morris: If my right hon. Friend wishes to increase the numbers still further, will he examine closely the submission to his Department of an application for polytechnic status by Nene college in Northampton, which, by any yardstick, has achieved the academic requirements for polytechnic status?
    Mr. Baker: I shall consider my hon. Friend's request. I hope to visit Northampton and Northamptonshire in the not-too-distant future.
    Mr. Fatchett: If the Secretary of State wanted to give a complete picture of what has happened in polytechnics during the past seven years, would he not draw the attention of the House to the fact that the amount of money spent per student has decreased by 25 per cent.? Is that not the real figure that shows the Government's record on polytechnics?
    Mr. Baker: The hon. Gentleman makes the mistake of thinking that it requires only money to buy good education. The polytechnics have demonstrated that there is considerable scope for greater efficiency, not least by filling previously empty places. Nevertheless. I applaud their success in increasing the student-staff ratio from 8·4:1 in 1979 to 11·5:1 in 1984.
    Mr. Douglas Hogg: Is my right hon. Friend aware that there is considerable concern about the funding of polytechnic evening-only degree and postgraduate courses? Will he give personal and careful consideration to the representations that have been made by Professor Burlin, which are set out in a letter dated 3 June 1986, addressed to my hon. Friend the Under-Secretary of State for Education and Science, who has responsibility for higher education?
    Mr. Baker: Yes, I shall do that. I pay tribute to the family interest of my hon. Friend, whose great, great grandfather started one of the greatest polytechnics in Britain.
    Mr. Andrew F. Bennett: Before the Secretary of State becomes too smug and rewrites history, does he recall that it was the Conservative Government who tried to cut the number of students in universities? It was fortunate that local authority control of polytechnics took up the cut in student numbers. Can he tell us what will happen for the following academic year? Will he allow the polytechnics sufficient resources so that they do not have to cut places, or will he insist that there will be a cut of 9,000 places in 1987–88?
    Mr. Baker: I am not trying to rewrite history. My hon. Friend's great, great grandfather founded one of our first polytechnics. The talk of 10,000 places being cut that is being bandied around is conjecture based upon hypothesis inflamed by exaggerated anxiety. I cannot announce an

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    expenditure figure until local authority current expenditure is agreed. I hope to be able to give a figure to the National Advisory Board by the end of August. I assure the House that the Government do not want to see an overall reduction in the intake of polytechnics.

    Holidays (School Premises)
    Mr. David Atkinsonasked the Secretary of State for Education and Science if he will make a statement about his policy on the use of educational establishments during school holidays.
    The Parliamentary Under-Secretary of State for Education and Science (Mr. Bob Dunn): The use of school premises out of hours is a matter for local decision by authorities and governors. The Government encourage their fuller use by the community where this is practicable and justified.
    Mr. Atkinson: Is my hon. Friend satisfied that the commercial potential of school premises and grounds, when they are not being used by pupils, is being exploited fully by education authorities to increase their revenue? Is he aware of the growing number of sports and activity holidays and of the thriving English language school industry, which often need venues of this kind?
    Mr. Dunn: Local authorities are empowered to make an economic charge for the services that are provided. The evidence available to me of sports-centred holidays and school facilities is that they are developments that are worth watching. I shall continue to watch how this trend develops and how it can best be promoted.
    Mr. Carter-Jones: Does the Minister not yet realise that the concepts enunciated in the village colleges in Cambridge well before the second world war are worthy of consideration now? Does he not recognise their importance to the community, and will he encourage them?
    Mr. Dunn: I am not entirely aware of the pre-war development to which the hon. Gentleman refers. The concept of the use by the community of facilities as currently practised in Cambridgeshire — I visited Cambridgeshire a short while ago to see at first hand what it was doing — is to be encouraged and should be undertaken by other local authorities. I trust that in time the Cambridgeshire example will be followed.
    Mr. Pawsey: I thank my hon. Friend for his generally helpful reply. Bearing in mind the importance of dual use to many of our communities, will he consider issuing a circular to local authorities so that this activity might be promoted?
    Mr Dunn: The promotion of this activity is of great interest to the Government. A circular is one of a number of vehicles available to us. I shall bear my hon. Friend's comments in mind.
    Mr. Sheerman: Will the Minister use this occasion to denounce the scheme, published in The Guardian this morning and emanating from the Department of the Environment, that local education authorities will be forced to let out schools to the highest bidder in the holidays, at weekends and in the evenings, and that parents of schoolchildren will be charged at the market rate for extra curricular activity, such as music lessons? Will he denounce this plan immediately?
    Mr. Dunn: Before commenting, I should like to see the article to which the hon. Gentleman referred. I am grateful to the hon. Gentleman for handing me a copy. I shall read it in the course of the next few questions.
    The purpose of this question is to establish the Government's attitude towards the use of school facilities in the holidays and at other times. I have already said that we welcome the maximisation of the use of facilities at all times by local authorities.

    Mathematics and Science
    Mr. Alan Howarthasked the Secretary of State for Education and Science what measures he intends to take to improve recruitment of teachers of mathematics and science.
    Mr. Kenneth Baker: I am working on a range of measures with the education service and with industry. I will publish a consultation document tomorrow.
    Mr. Howarth: Does my right hon. Friend agree that the most important single cause of our present shortage of mathematics and science teachers lies in the negative attitude to salary differentiation on the part of teachers' union representatives on the Burnham committee over many years? That is the principal reason why our school leaders are now, on average, two years behind their German and Japanese counterparts in mathematical attainment, with all the handicaps that that means for them personally and for our economy. Is my right hon. Friend aware that his determination to grasp the problem and build on the initiatives taken by his predecessor will be greatly welcomed?
    Mr. Baker: I shall certainly be building on the initiatives taken by my predecessor. The shortage of mathematics, physics and technology teachers is a grave crisis for our country. It has been arising for a long time. The consultation document that I shall be publishing tomorrow puts forward eight different proposals. I hope that when it has been considered by the education world and by industry there will be even more proposals. One of them is the point that my hon. Friend has addressed, the question of differentials, and whether, as there is a shortage, that should be recognised in the pay. This matter must be addressed by ACAS. I take note of the point made by my hon. Friend in recognising that some differential should be paid to encourage more people to teach in these subjects.
    Mr. Dalyell: Is Sir John Mason of the Royal Society right in saying that only 40 or 50 teachers of physics will go into teaching next year? Have the Government, in their preparation of the paper, clone any projections for 1992, when a lump of physics and mathematics teachers are due to retire and the number of schools requiring mathematics and physics teachers will begin to increase rather dramatically?
    Mr. Baker: The hon. Gentleman will see that in the consultation document we set out the number of applications by graduates who want to take courses in teaching physics and maths. I agree that we must find ways of attracting more people into teaching physics and maths. Various ideas have been put forward to involve industry and to try to encourage people who have a mathemathical and tehnological background who want to retire early to come back and possibly teach in our schools. Surrey

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    county council has approached the chambers of commerce and the rotary clubs to see whether they can help in that regard. I also want to involve people who retire from the services early who now have a strong technological background. I have met former officers and noncommissioned officers who are teachers in computer studies. We must explore all methods to attract more people to that area. We must also persuade children, even at the primary school level, to take an interest in these subjects so that there is a steady flow through the educational stream.
    Mr. Gerald Bowden: Has my right hon. Friend heard of the scheme known as SMILE — the secondary mathematics individual learning scheme that is used in inner London schools? Has he seen a recent report in the Daily Telegraph that children taking the CSE examination were asked to estimate the cost of providing food, housing and welfare for the world and to compare that with NATO and Warsaw pact military expenditure? Is that the sort of question that should be asked of children? Is it any surprise that mathematics is at such an appallingly low standard in inner London schools? Is it any surprise that no teacher of calibre can be recruited to those schools?
    Mr. Baker: I have seen the examination paper in question, and I deplore the fact that an examination paper appeared in that form. —[HON. MEMBERS: "Why?"] Because it has nothing to do with mathematics; it is all to do with politics. I deplore the fact that politics has been dragged in in that way. I have written to the chairman of the examinations board asking him to look into the matter.
    Mr. Freud: We are pleased to hear that the Secretary of State acknowledges that the reasons for the shortage of science-skilled teachers can be found long before the teacher training college stage. Does the right hon. Gentleman accept that paying one set of teachers more than another will create divisions in the teacher force? Will he bear in mind the failure of the £1,000 bounty for teachers who were to go into mathematics and science?
    Mr. Baker: The hon. Gentleman was a little quick in calling it a failure. It is not £1,000, but £1,200, so he is only 20 per cent. out. The bursary to students entering postgraduate teacher training courses from this September is £1,200. I hope that more students will be persuaded to take it up. Pay differentials do operate, recognising merit, quality and responsibility. That may well be a way forward towards recognising the shortages that exist.
    Mr. Radice: It is common ground that there is a major crisis of teacher supply in mathematics, physics and technology. I welcome the consultative document which the Secretary of State is to publish tomorrow. In view of the crisis and the need to act swiftly—which I think the right hon. Gentleman acknowledges — should he not now call on industry, which is always rightly asking our schools to raise their standards, to organise an immediate programme of secondment of qualified people to our schools?
    Mr. Baker: The hon. Gentleman will find that there are various proposals in the consultative document which deeply involve industry. For example, GEC will find work for teachers in its factories for four or five weeks in the
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    year. That is a step forward. The hon. Gentleman speaks of a crisis, but I hope he will recognise that it is not a crisis of the Government's making.
    Mr. Sheerman: It is always someone else's fault.
    Mr. Baker: In 1977 the Labour Government started a series of incentives, some of which have not worked. Over the past 30 years previous Governments have tried to solve the problem. For example, in the late 1940s some people were let off national service if they decided to teach mathematics and physics. This long-term problem requires urgent action. The document contains many proposals, and I hope that the country will consider them seriously.

    Crime Prevention
    Mr. Brandon-Bravoasked the Secretary of State for Education and Science to what extent the Education (Grants and Awards) Acts have been used to assist in specific programmes to help education for crime prevention.
    Mr. Chris Patten: In the current year education support grants are supporting expenditure by local education authorities of up to £2 million on preventing the misuse of drugs. In 1987–88 they will, in addition, be supporting expenditure of up to £1 million on schemes to promote social responsibility among young people with a view to reducing juvenile crime.
    Mr. Brandon-Bravo: I welcome expenditure in this area of education. Are any of these grants used to discourage vandalism? Are grants available to encourage parental responsibility in respect of this activity? My hon. Friend may be aware—if not, I will send him the details—of a great tragedy in my consitituency where young persons are causing great distress and damage. I believe that education has a role to play in improving the position.
    Mr. Patten: I assure my hon. Friend that what we have in mind will include schemes designed to reduce vandalism as well as projects to involve parents. I draw my hon. Friend's attention to the guide on best practice in securing education buildings against vandalism, which we have already published, and a study of the subject, which we initiated. We hope that the Education Bill, which strengthens the links between parents and schools, will help in that regard as well.
    Mr. Greenway: Will my hon. Friend consider using the Education (Grants and Awards) Acts to stimulate team games coaching and teaching in all schools? That will give our children a chance to learn cricket, rugger, soccer and other team games which are currently denied them by many Labour authorities. Does my hon. Friend realise that Michael Gatting, who is captaining England at cricket with such distinction, was a product of a London school, and that we shall never see the like of him again if the Labour-controlled London authorities are allowed to continue as they are?
    Mr. Patten: Like my hon. Friend, I deplore some of the attitudes of Labour-controlled local education authorities on team games. Like my hon. Friend, I think that there is a strong case for encouraging more coaching of cricket, especially in view of events elsewhere today.

    Population Growth Areas
    Mr. Adleyasked the Secretary of State for Education and Science what steps he is taking to ensure that adequate education facilities are available in areas of population growth; and if he will make a statement.
    Mr. Dunn: It is for the local education authority to ensure that the schools available in its area are sufficient in number, character and equipment.
    Mr. Adley: I thank my hon. Friend for that reply. Is he aware that there is a warm welcome in my constituency for his recent decision on the voluntary aided school in Verwood? I am doing nothing less than my duty in thanking him and my right hon. Friend the Secretary of State for the speed with which they acted. However, is he aware that in east Dorset, an area of major population growth, there remain many problems about bussing and so on, which cause distress to many parents? Could he have a word with the Department of the Environment to try to ensure that, when major housing schemes are proposed, for example, under structure plan amendments, there is some input from his Department to see that schools are provided before the huge housing developments take place?
    Mr. Dunn: I am grateful to my hon. Friend for his kind words about the recent decision, published on 10 June, to establish a new voluntary aided middle school in Verwood. With regard to my hon. Friend's question about transport, I shall ensure that the comments he has made are drawn to the attention of the appropriate Department.
    Mr. Campbell-Savours: To what extent is the Department of Education and Science being consulted by the Department of Employment over the review of skill-centres that is currently going on, which arises in part from changes in population? In the event that the Government were to proceed with the stupid decision, or were to proceed down the route of taking a stupid decision to close the Maryport skillcentre in my constituency, may I have an assurance that the Department of Education and Science will object most vigorously, because it will affect education and training provision in west Cumbria?
    Mr. Dunn: This question is about adequate education facilities in the context of school places. However, I shall undertake to ensure that the comments the hon. Gentleman has just made are drawn to the attention of the Paymaster General.
    Mr. Conway: My hon. Friend's reply to my hon. Friend the Member for Christchurch (Mr. Adley) was no doubt right, in that it is the responsibility of local education authorities to establish provision, but does my hon. Friend accept that where Governments accelerate population growth, such as in the county of Shropshire, with the establishment and growth of a new town, it is incumbent upon them to ensure that sufficient resources go along with that nationally inspired growth to cope with educational demand?
    Mr. Dunn: In deciding upon the distribution of financial resources available to us, we shall continue to give priority to work necessary to meet increased pupil numbers in areas of population growth. That is a guarantee that I can give to my hon. Friend.
    Mr. Meadowcroft: Is the Minister aware that in parts of a large city such as Leeds there is population growth but
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    the overall trend is of falling rolls? Will the Minister say whether he favours a single solution for such cities, which in the case of Leeds would involve the reorganisation of all the schools, including one single tertiary college, which has been proposed by the local education authority?
    Mr. Dunn: The hon. Gentleman is very seductive in trying to make me pass comment on proposals which have not yet come to the Department for deliberation and adjudication. I can assure him that any comments that he or any other Member from the city of Leeds cares to make about any proposals which may come my way will be borne in mind.
    Mr. Nicholas Winterton: A number of hon. Members are concerned about the amount of sports field provision within education and are deeply anxious that many sports fields are being sold off. Bearing in mind the shortage of sports field facilities in many parts of the country, does my hon. Friend not feel that it would he sensible to look at this seriously so that, before land currently used to provide sporting facilities is sold off for other purposes, the overall physical recreation requirements of all areas are properly investigated?
    Mr. Dunn: School playing fields are protected by the appropriate regulations, have just written to my hon. Friend on that very subject.

    Royal Greenwich Observatory
    Mr. Tony Lloydasked the Secretary of State for Education and Science what recent representations he has received about the Science and Engineering Research Council decision to transfer the Royal Greenwich Observatory to Cambridge.
    The Parliamentary Under-Secretary of State for Education and Science (Mr. George Walden): Since the council meeting on 18 June my right hon. Friend the Secretary of State and I have received 22 letters commenting on the decision to transfer the RGO to Cambridge.
    Mr. Lloyd: Has the Minister seen the editorial in the latest edition of Nature, which surmises that the decision to refuse to transfer the Royal Greenwich Observatory to Manchester seemed to be justified by a desire to please the staff at the RGO, who felt that living north of the River Trent would be uncomfortable and a little bit like living in a foreign country? Does the Minister accept that nobody — not only those in the north of England -believes that the decision was made on technical grounds, but was simply to please the Oxbridge mafiosi? Will the hon. Gentleman now agree to publish the reports leading up to the decision so that at least he can absolve himself of the charge that he is pandering to that mafiosi?
    Mr. Walden: Such decisions on scientific grounds are taken by the research councils that are appointed by my right hon. Friend the Secretary of State to make precisely that sort of decision.
    Mr. Charles Wardle: Is my hon. Friend aware that both the Royal Society and the Royal Astronomical Society have advised the SERC to leave the Royal Greenwich Observatory at Herstmonceux? Is he further aware that the chairman of the SERC said in March that the cost of the move would be £3·5 million, and now he is saying that

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    it will cost £6 million? Will my hon. Friend examine the proposal carefully and critically, and particularly the financial reasoning that underlies it?
    Mr. Walden: I can only repeat to my hon. Friend what I have just said in reply, to the first question. Those decisions are taken on scientific grounds, by people who are appointed by my right hon. Friend the Secretary of State to take them. However, I should like to add that I am well aware of the uncertainty and, perhaps, the disruption that will be caused to the lives of some of my hon. Friend's constituents. As he knows, the SERC is anxious to do whatever it can to help in that regard.
    Mr. Faulds: Is the hon. Gentleman not aware that there is widespread and near total opposition—[Interruption.] I will get on when people shut up and let people be heard—
    Mr. Speaker: Order. I can hear the hon. Gentleman.
    Mr. Faulds: For the benefit of these loons, I will repeat the question. Is the hon. Gentleman unaware that there is widespread and near total opposition to the move from Herstmonceux by those in the astronomical world who actually know something about this problem, unlike the majority of the members of the SERC? Will the hon. Gentleman get his right hon. Friend the Secretary of State to review this decision before the damaging implications become too obvious?
    Mr. Walden: I am not aware of near total opposition to the decision. What I am aware of, as in any such decision, is very healthy and natural public discussion and public dissent.
    Mr. Silvester: Will my hon. Friend make it clear, because it is not altogether clear from his answers, whether he is simply taking the decision of the SERC at face value, or reviewing it? If he is reviewing it, will he make sure that before the review he publishes the facts on which the council's decision and statement are based, particularly in respect of the Herschel development?
    Mr. Walden: The position is as follows. The council is required to seek my right hon. Friend's approval to the capital expenditure at Cambridge, and through him, the Treasury, for the retention of the receipts from the sale of the Herstmonceux estate. Apart from those financial approvals, there is a long-standing practice over many years, observed by Governments of both complexions, not to overturn a decision by a research council made on scientific grounds.
    Dr. Bray: Is the Minister aware that the SERC in fact said that Manchester as well as Cambridge
    "would be very satisfactory from scientific, technological and administrative viewpoints"?
    Is he further aware that the decision to send the observatory to Cambridge greatly increases the claims that Manchester will have for the next research institute, which will perhaps create more employment in Greater Manchester than in La Palma or Hawaii?
    Mr. Walden: I note the hon. Gentleman's advance lobbying.
    Mr. Gow: Is my hon. Friend aware that among the 22 letters which he has received about the recommendations of the research council there is a particularly powerful one from the hon. Member for Eastbourne? Following the
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    answer that he has just given to my hon. Friend the Member for Manchester, Withington (Mr. Silvester) will my hon. Friend make it clear that the Secretary of State does not have in mind even the possibility that the Government will reject the recommendations of the research council?
    Mr. Walden: Among the other letters, I am aware, of course, of the powerful points that have been put by my hon. Friend. I can only repeat that there is a long-standing practice, observed by all Governments, not to question decisions by research councils which are taken on scientific grounds.

    Polytechnics
    Mr. Brownasked the Secretary of State for Education and Science what representations he has received in the past month from directors of polytechnics about the National Advisory Body's planning exercise for 1987–88.
    Mr. Kilroy-Silkasked the Secretary of State for Education and Science what representations he has received in the past month from directors of polytechnics about the National Advisory Body's planning exercise for 1987–88.
    I have received one letter. During the past month I have also visited five polytechnics and my right hon. Friend has also visited one. The National Advisory Body's planning exercise was among the subjects discussed on each occasion.
    Mr. Brown: When the hon. Gentleman responds to the representations made to him by the directors of the polytechnics in the northern region — Teesside, Middlesbrough, and Newcastle—will he give due weight to the representations that have been made by major private sector employers in the northern region, including Alcan and Swan Hunters, which have protested most vigorously to the cuts that he proposes?
    Mr. Walden: The hon. Gentleman's question is based on a total misconception. I propose no cuts and the Government propose no cuts. As it happens, I have visited the polytechnics to which the hon. Gentleman refers and I have therefore had a recent opportunity to leave people on the spot in no doubt about the inaccurate and misleading information which has been put about and which has been encouraged by the hon. Gentleman.
    Mrs. Currie: I congratulate my hon. Friend on the excellent results which were announced earlier this afternoon of the increase under the Government in the numbers of polytechnic students. Does that not show the Conservative Government's considerable support and commitment to the growth of this particular sector of higher education, which now rivals the universities in the quality of the work that it does?
    Mr. Walden: I am glad that my hon. Friend made that intervention, because it will help to counter some of the nonsense that is put about by the Opposition. I am never surprised when the Opposition flog a dead horse, but "Poly Cuts" expired before it even got to the starting line.

    School Reorganisation Plans
    Mr. Sternasked the Secretary of State for Education and Science if he has any plans to speed up the work of his Department in considering school reorganisation plans submitted to him.
    Mr. Baker: I have appointed Mr. J. A. M. Mitchell to undertake a scrutiny of the Department's procedures on school closures, with the purpose of speeding those procedures up.
    Mr. Stern: May I assure my right hon. Friend that that is a most welcome answer especially in a politically volatile area such as the county of Avon, where the disadvantage of delays in the programme of school reorganisation means that the beneficiary is often the successor administration?
    Mr. Baker: I agree with my hon. Friend. There have been quite unacceptable delays in coming to decisions. There is a proposal before me from the Avon local education authority, and I shall try to deal with it as expeditiously as I can.

    University of Edinburgh
    Mr. Dalyellasked the Secretary of State for Education and Science what representations he has had from the vice-chancellor and principal of the University of Edinburgh on the issue of research funds.
    Mr. Walden: My right hon. Friend has received a letter from Dr. Burnett describing some of the implications for Edinburgh university of the University Grants Committee's grant allocations for 1986–87 and expressing concern about future funding prospects.
    Mr. Dalyell: May I ask two questions, of which I have given the Minister's office notice? On what proportion of the total grant did the UGC exercise research selectivity? Was it 15 per cent., 30 per cent. or 100 per cent.? On what proportion of the total grant was the new common funding base applied?
    Mr. Walden: The proportions of the resources allocated notionally for teaching and research purposes were determined by the UGC sub-committees and varied between subjects. I understand that, overall, about two thirds of the resources were allocated on a common basis to teaching purposes and that one third was allocated to research purposes. Obviously the effects in each university will be different according to the different mix of subjects.

    School Reorganisation Plans
    Mr. Teddy Taylorasked the Secretary of State for Education and Science how many proposals for major reorganisation of secondary education he has received from local authorities since 1979; and how many he has approved.
    Mr. Dunn: Detailed records of proposals for major reorganisation of secondary education are available only in respect of those published since August 1980, when sections 12 to 15 of the Education Act 1980 came into force. Of the 73 such proposals received since that date, 45 have been approved, nine are undecided, and 19 were rejected.
    Mr. Taylor: Is my hon. Friend aware from his highly successful visit to Southend last week of the damaging
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    educational uncertainty created by county councils which put forward major reorganisation plans, in this case twice within a period of three years, to take away the sixth forms from comprehensives and to abolish two excellent grammar schools? Will he urge local councils not to produce a large number of secondary school reorganisations within a short time, thereby creating massive uncertainty for teachers, parents and pupils?
    Mr. Dunn: We are fully aware of the reputation at present enjoyed by Southend's grammar schools and the other schools which my hon. Friend mentioned. His comments will be fully taken into account if and when proposals come before us.

  PRIME MINISTER

    Engagements
    Mr. Evennettasked the Prime Minister if she will list her official engagements for Tuesday 8 July.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in this House I shall have further meetings later today. This evening I hope to have an audience of Her Majesty The Queen.
    Mr. Evennett: Will my right hon. Friend reassure the House and the nation that the wild allegations circulating about the supposed state of health of the British people are wholly false, and that the incidence of major and killer diseases, such as cancer and heart disease, is no higher in this country than in other Western industrial nations?
    The Prime Minister: I am happy to say that this country has an excellent Health Service, which serves its people well. There may be many causes of heart disease, but the number of heart bypass operations has trebled since 1979.
    Mr. Kinnock: When P. W Botha cannot find time to see the Foreign Secretary this week, when black leaders in South Africa will not see him, and when the attitude of both the African National Congress and the leaders of the front-line states could not be more plain or more opposed to the Prime Minister's attitude to sanctions, what exactly is the purpose of sending the Foreign Secretary to southern Africa this week?
    The Prime Minister: President Botha will see my right hon. and learned Friend the Foreign Secretary on a date which has now been arranged in July, convenient to both of them. My right hon. and learned Friend will visit the front-line states before then and will hope to see some Heads of Government or Heads of State. I rather thought that the right hon. Gentleman was supporting my right hon. and learned Friend in his mission. Last week the right hon. Gentleman said that he wished my right hon. and learned Friend well, but at present the right hon Gentleman is doing everything that he can to undermine him.
    Mr. Kinnock: That is impossible when the Prime Minister has done such an effective job on scuppering her right hon. and learned Friend. In any case, it is not my enthusiasm that is required, but the response of P. W. Botha. Why is it that the Prime Minister wants to wait upon the convenience of P. W. Botha? Does she not realise

    163
    that people of all parties in this country take it ill that our Foreign Secretary should be regarded with such contempt by a bunch of racist gangsters in South Africa?
    The Prime Minister: The right hon. Gentleman must be hard up for a question if he asks such bunkum.
    Mr. Kinnock: May I then ask the Prime Minister what, precisely, is the purpose of the Foreign Secretary going to southern Africa this week? Is he not filling in time on a fool's errand?
    The Prime Minister: My right hon. and learned Friend goes to South Africa representing the 12 Governments of Europe. He is representing not only this country, but the 12 Governments of Europe, which have said:
    "The European Council decided to ask the future UK Presidency Foreign Minister to visit southern Africa, in a further effort to establish conditions in which the necessary dialogue can commence."
    Twelve Governments, 12 Heads of Government, 12 Foreign Secretaries have great faith in my right hon. and learned Friend the Foreign Secretary.
    Mr. Haywardasked the Prime Minister if she will list her official engagements for Tuesday 8 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Hayward: Will my right hon. Friend, during her busy day, consider, in her role as Head of the Civil Service, the recent election as general secretary of the Civil and Public Services Association of a gentleman who does not support the constitution or the monarchy and opposes the independence of the Civil Service? Is it not astonishing that such a man should—according to The Guardian—be a lifelong member of the Labour party? Is it not members such as him who cause the Labour party to lose by-elections in such places as Filton in Bristol North-West, because while they belong to the party, people do not believe that it has rid itself of the Militants?
    The Prime Minister: My hon. Friend makes his own point very effectively. The election within the CPSA is a matter for that union. If there were any allegations of irregularity, that would be a matter for the courts.
    Mr. Heffer: If the Foreign Secretary is not successful in the mission on which the right hon. Lady and the other Governments have sent him, if Nelson Mandela is not released from prison and there is no end to apartheid, will the right hon. Lady assure us that there will then be economic sanctions against South Africa?
    The Prime Minister: The position is set out in the communiqué issued by the 12 Governments, which states:
    "In the meantime in the next three months the Community will enter into consultations with the other industrialised countries on further measures which might be needed covering in particular a ban on new investments, the import of coal, iron, steel and gold coins from South Africa."
    There is nothing automatic about that, but contingency plans are being made and other countries are being consulted. I remind the hon. Gentleman that my right hon. and learned Friend is going as the representative of all the nations of the European Community, which have great confidence in my right hon. and learned Friend.
    Mr. Wrigglesworth: Will the Prime Minister consider today the continued deterioration in the competitiveness of British industry as measured by unit labour costs? Does she not agree that the deterioration is in large part due to
    164
    increases in pay led by the private sector and that it will inevitably lead to further job losses? Will she tell the House what, apart from uttering exhortations, the Government intend to do to prevent this?
    The Prime Minister: As the hon. Gentleman is aware, the crucial figure is the unit labour cost. If unit labour costs rise faster here than in other countries, I agree that we are in danger of losing trade, and if we lose trade because we are not competitive, we lose jobs. It is, therefore, vital that wage negotiations should be conducted in such a way as to produce the result that our unit labour costs stay down.
    Mr. Temple-Morrisasked the Prime Minister if she will list her official engagements for Tuesday 8 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Temple-Morris: Has my right hon. Friend had time today to see reports of a quite outrageous, vicious and brutal attack upon a News International distribution depot in Eastleigh, Hampshire? Has she also seen police reports that members of SOGAT '82 were involved? Will my right hon. Friend, before the House, condemn that action as the outrage that it is?
    The Prime Minister: I believe that criminal behaviour of that sort will be condemned by decent people everywhere. I understand that the raid on Sunday was the tenth made so far on TNT premises around the country since the printing dispute between News International and the print unions began in January this year. It is part of an attack made by some people. The Hampshire police are conducting an urgent investigation so that those responsible can be brought before the courts. This is no way in which to conduct an industrial dispute.
    Mr. Nicholas Brown: On 24 April the Prime Minister gave an assurance that Harland and Wolff's bid for AOR I had been comprehensively costed. Why are the designs for that ship still being reviewed at the Ministry of Defence?
    The Prime Minister: As the hon. Gentleman is aware, we have done everything to facilitate the transfer of designs and we shall continue to do so. He also knows that we have done a great deal to enable Swan Hunter to obtain orders and to bring them forward so that it could do so.
    Sir John Biggs-Davisonasked the Prime Minister if she will list her official engagements for Tuesday 8 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Sir John Biggs-Davison: Even if some Boers have been boorish, will Her Majesty's Government not be deterred from playing a helpful role in South Africa? Will my right hon. and learned Friend the Foreign Secretary consider suggesting to Bishop Tutu that it would be helpful if he would denounce the politics of the necklace? Will he also suggest to the ANC that it would be helpful if it were to suspend its death threats against two other bishops who, with millions of black Africans not of the ANC, stand for non-violence and dialogue with the state President?
    The Prime Minister: Again I believe that most decent people everywhere totally and utterly condemn the necklace and the use to which it has been put in South Africa. It was for that and other reasons that the

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    Commonwealth conference called upon both sides for the suspension of violence—the precise thing for which my hon. Friend is calling—to bring about the conditions under which a dialogue can take place between the Government of South Africa and proper and full representatives of black South Africans. That is the way in the end that the problem will be solved, and in none other.
    Mr. Pike: When the Prime Minister said last week that it was for the South African people to determine what type of Government they wanted in South Africa and that that Government had to be acceptable to all people of whatever background, did she mean that she was prepared to support black majority rule? Will she spell that out clearly and support the line taken by the Church of England Synod yesterday in calling for sanctions?
    The Prime Minister: The Commonwealth conference and the communiqué have taken a similar view. Our role is to try to bring about the necessary negotiations and dialogue between the Government and the black South African people, and, indeed, all people in South Africa. If there were to be a constitutional convention, it would be for them to decide what kind of constitution would emerge and not for us to predetermine it for them.
    The hon. Gentleman asked me about economic sanctions. No. I will not support full economic sanctions. I know of very few people who do, except those on the Labour Benches. I find it ironic that on the one hand people, including the Church, are calling for all help to end starvation, famine and poverty in South Africa, and on the other hand are calling for the very economic sanctions that would increase that.
    Mr. Michael Colvinasked the Prime Minister if she will list her official engagements for Tuesday 8 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Colvin: Has my right hon. Friend noted that BBC television has at last presented the other side of the South African sanctions equation by reporting last night that some 450,000 young blacks in the Homelands may well die of starvation if the faltering economy of South Africa does not soon recover? Does she agree that positive measures to aid all South Africans would do much more to assist that country to a true democracy than would wielding a big stick? Does she also agree that it is high time that leaders on all sides in South Africa learnt who their real friends were and stopped indulging in their favourite pastime of shooting themselves in the foot?
    The Prime Minister: I heard of the broadcast to which I think my hon. Friend is referring. It was a BBC report on Operation Hunger in South Africa and a Mrs. Pearlman who runs it was broadcasting and pointed out the difficulties already in South Africa where some people, with the uncertainty of the present economic circumstances, are returning to the Homelands and are not able to support their families as they have done. She went on to say:
    "Sanctions would probably immediately double our normal death rate of 50,000 children under the age of 5 per year, and they could he placing at least another 400,000 children under 15 at risk."
    We do not wish to go that way.
    Mr. Ewing: Is the Prime Minister aware that tomorrow her predecessor as leader of the Tory party the right hon. Member for Old Bexley and Sidcup (Mr. Heath) will celebrate his 70th birthday? Will the Prime Minister convey our good wishes that the right hon. Gentleman will long continue to represent with strength and vigour the human face of the Conservative party, which is more important now than ever in view of her inhuman approach to almost every subject?
    The Prime Minister: I gladly wish my right hon. Friend well, and a very happy birthday. He is as much against economic sanctions as I am.

European Community (Agricultural Spending)
3.31 pm
Mr. Teddy Taylor: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the decision of the Council of Finance Ministers yesterday to approve substantial additional agricultural spending in breach of the budgetary limits agreed by the European Council on 4 December 1984."
While EEC spending is a continuing issue, yesterday's decision is in a different category and strikes at the heart of this House's control of spending. The House agreed in 1985 to increase the VAT contribution to the EEC by 40 per cent. in real terms following a specific agreement concluded by the Prime Minister which provided, first, that the additional resources would last for several years, secondly, that strict budgetary controls would be applied, and, thirdly, that the rate of increase in farm spending would be limited to the natural increase in own resources. But the Commission has since advised in document 7113 that the 40 per cent. increase will be exhausted this year, and yesterday's unanimous decision of the Council of Finance Ministers proves that strict budgetary limits are dead and that farm spending arrears are out of control in relation to the agreement which was solemnly concluded.
If there is no debate today or tomorrow, our Chancellor and other Finance Ministers will conclude by Wednesday an agreement that ignores the December 1984 agreement which this House was advised was binding on the Council of Finance Ministers. If no debate is held, Parliament will
168
have surrendered a huge area of control over spending. I therefore conclude that this is an important, urgent and serious matter that should have the immediate attention of the House.
Mr. Speaker: The hon. Member for Southend, East (Mr. Taylor) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the decision of the Council of Finance Ministers yesterday to approve substantial additional agricultural spending in breach of the budgetary limits agreed by the European Council on 4 December 1984."
I have listened with great care to what the hon. Gentleman has said. As he knows, my duty in considering an application under Standing Order No. 10 is to decide whether it should be given priority over the business already set down for today or tomorrow. I regret that I cannot find that the matter that he has raised meets all the criteria laid down in the Standing Order, and I cannot therefore submit his application to the House.
Nevertheless, I say to the hon. Gentleman that I hope that even this week he will find other opportunities of raising this matter in the House.

STATUTORY INSTRUMENTS, &c.
Mr. Speaker: By leave of the House, I will put together the Questions on the two motions relating to statutory instruments.
Ordered,
That the draft Job Release Act 1977 (Continuation) Order 1986 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Air Navigation (Noise Certification) Order 1986 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Peter Lloyd]

Scottish Bank Notes
3.45 pm
Mr. Dennis Canavan: I beg to move,
That leave he given to bring in a Bill to make Scottish pound notes and other Scottish bank notes legal tender throughout the United Kingdom and to facilitate the issue and distribution of Scottish pound notes and other Scottish bank notes throughout the United Kingdom; and for related purposes.
At present, three Scottish clearing banks—the Bank of Scotland, the Royal Bank of Scotland and the Clydesdale Bank — are allowed to issue their own bank notes in Scotland, but strictly speaking they are not classified as legal tender, even within Scotland. The only exception to this was during the two world wars earlier this century when, as an emergency measure, Scottish bank notes were classified as legal tender.
I still receive complaints from some Scottish visitors to England about the difficulty or embarrassment that they experience when they tender Scottish bank notes in a shop or a pub, or to a taxi driver, or elsewhere. At present, because of the law, there is no obligation to accept Scottish bank notes. My Bill would make them legal tender, not just in Scotland but throughout the United Kingdom. It would also enable the three Scottish banks to issue their pound notes and other bank notes throughout the United Kingdom. At present, for example, the Royal Bank of Scotland operates on both sides of the border, with branches down here, even in London. It has its own bank notes. The bank is allowed to issue them north of the border, but it is not allowed to issue them through its branches down here. My Bill would enable it to do so.
A few years ago my Bill would not have been all that popular, perhaps, down here. It might have added a little confusion. because at one time a larger number of Scottish hank notes was issued than is issued at present by those three banks. Also the Bank of England pound note was competing. However, since the Bank of England made what, to my mind, was the daft mistake of withdrawing its pound note completely in favour of the pound coin, my feeling is that many people down here are envious of what we in Scotland have—a choice between the pound coin and the pound note.
In Scotland, the pound note is far more popular than the pound coin. I submit that the reasons for this are obvious. If somebody changes a fiver or a tenner down here, he invariably receives a fistful of change. Sometimes it is very heavy change. Heavy, unwieldy coinage tends to make holes in men's pockets. Because the pound note is more popular than the pound coin north of the border, it is much easier for men to slip notes into their wallets or and for women to slip them into their handbags, or whatever.
Mr. James Lamond: Or sporran.
Mr. Canavan: My hon. Friend is quite right.
The pound coin is particularly confusing for some old people because the pound coin does not even look like a pound. It looks like one of the old threepenny bits, without the sawn-off edges. Old people were confused enough about decimalisation. Now that there are no pound notes at all the pound coin adds to the confusion.
If Scottish pound notes and other Scottish bank notes could be issued here they would soon catch on and would
170
be as popular as they are north of the border. That was borne out by an experimental walkabout that I had through the streets of London this morning. I asked various people and traders what they thought about Scottish bank notes. I told them who I was and said that I was introducing this Bill, and virtually everybody that I spoke to supported my Bill. Even people who expressed a preference for the pound coin—and they were in the minority—agreed that there should be a choice between the coin and the note. I sensed that overseas visitors were completely confused and outraged by the lack of opportunity to have pound notes in England. I told them that they could come to Scotland and that there they would get as many pound notes as they wanted, provided they paid for them.
I know of no other currency in the world where the lowest denomination note is valued at £5. I am glad to see that the Economic Secretary to the Treasury is in the House to hear what I have to say, because the Treasury and the Bank of England made a gross mistake in abolishing the pound note. However, it is not too late to correct it. The Economic Secretary is of Scottish ancestry; I think he was born in Scotland. I hope that he will hear in mind the points tnat I am making and will try to facilitate the distribution and exchange of Scottish pound notes and other bank notes in England. I hope that he will also facilitate the passage of the Bill.
The universal popularity of my Bill is reflected in the breadth of the sponsorship. Sometimes when I wish to introduce a Bill I am almost on my knees looking for 12 sponsors. This time I have been so inundated with requests that I have even had to turn down my hon. Friend the Member for Bolsover (Mr. Skinner), who normally sponsors all my Bills. This time all the places were filled before he got in. When I read out the names, my hon. Friend will probably be grateful that he did not add his name to the list, because I have hon. Members from all parts of the House, from one extreme to the other, including a few moderates like myself.
The list contains hon. Members from Scotland, Wales and England and includes my hon. Friend the Member for Jarrow (Mr. Dixon), who is well known and well admired as a great supporter of all things Scottish. He tells me that when he used to return from his frequent forays across Hadrian's wall he had his pockets full of Scottish bank notes. To his dismay, he found that some of the Geordie money traders would offer him only 19s 6d for a Scottish pound. My Bill would help to eradicate that kind of unfair exchange and injustice, and would help people north and south of the border.
The Bill is not a retrograde nationalist measure; rather it is an attempt to give a degree of international recognition to something that is part of the Scottish heritage. It would be of considerable benefit to many of Scotland's friends in other parts of the United Kingdom. I ask the House to support it.
Question put and agreed to.
Bill ordered to be brought in by Mr. Dennis Canavan, Mr. William McKelvey, Mr. Gerald Bermingham, Mr. Tom Clarke, Mr. Nicholas Winterton, Mr. Allen Adams, Mr. Ted Garrett, Mr. Ron Davies, Mr. Bill Walker, Mr. David Lambie, Mr. Ron Brown and Mr. Don Dixon.

Scottish Bank Notes
  SCOTTISH BANK NOTES
  Mr. Dennis Canavan accordingly presented a Bill to make Scottish pound notes and other Scottish bank notes legal tender throughout the United Kingdom and to facilitate the issue and distribution of Scottish pound notes and other Scottish bank notes throughout the United Kingdom; and for related purposes: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 201].
WAYS AND MEANS

  BROADCASTING: ADDITIONAL PAYMENTS BY PROGRAMME CONTRACTORS.
  Resolved,
  That provision be made (with retrospective effect) with respect to additional payments payable under section 32 of the Broadcasting Act 1981.

  BUILDING SOCIETIES: REGULATIONS
  Resolved,
  That provision may be made amending section 343 of the Income and Corporation Taxes Act 1970.

  OCCUPATIONAL PENSION SCHEMES
  Resolved,
  That provision may be made restricting the operation of—

  (a) section 26(1)(a) of the Finance Act 1973;

  (b) paragraph 32 of Schedule 23 to the Finance Act 1985.—[Mr. Ian Stewart.]

Orders of the Day

  Finance Bill
  Not amended (in the Committee) and as amended (in the Standing Committee), considered.
  Ordered,
  That the Finance Bill, as amended, be considered in the following order, namely, Amendments relating to Clause No. 39 and Schedule No. 8; new Clauses Nos. 2 to 17; new Clauses Nos. 19 to 25; new Clause No. 18; Amendment No. 29; new Clauses Nos. 26 to 30 and new Clause 31; and Amendments relating to Clauses Nos. 64 to 94, Clauses Nos. 1 to 3, Schedules Nos. 1 and 2, Clauses Nos. 4 and 5, Schedule No. 3, Clause No. 6, Schedule No. 4, Clauses Nos. 7 and 8, Schedule No. 5, Clause No. 9, Schedule No. 6, Clauses Nos. 10 to 31, Schedule No. 7, Clauses Nos. 32 to 38, Clause No. 40, Schedule No. 9, Clauses Nos. 41 and 42, Schedule No. 10, Clauses Nos. 43 and 44, Schedule No. 11, Clauses Nos. 45 and 46, Schedule No. 12, Clauses Nos. 47 to 55, Schedules Nos. 13 and 14, Clause No. 56, Schedule No. 15, Clause No. 57, Schedule No. 16, Clauses Nos. 58 to 62, Schedule No. 17, Clause No. 63, Schedule No. 18, Clauses Nos. 95 and 96, Schedule No. 19, Clause No. 97, Schedule No. 20, Clauses Nos. 98 to 104, Schedule No. 21, Clauses Nos. 105 to 108 and Schedule No. 22.—[Mr. Peter Lloyd.]

  Finance Bill
    Schedule 8

      PERSONAL EQUITY PLANS
      3.46 pm
      The Financial Secretary to the Treasury (Mr. Norman Lamont): I beg to move amendment No. 37, in page 119, line 4, leave out
      'in shares under a plan (a personal equity plan)'
      and insert 'under a plan'.
      Mr. Speaker: With this it will be convenient to discuss Government amendments Nos. 38 to 47.
      Mr. Lamont: The amendments refer to the personal equity plan. Under our original proposals, investment in unit and investment trusts was excluded from the personal equity plan scheme. That was because, as my right hon. Friend the Chancellor of the Exchequer made clear, the scheme was primarily designed to encourage direct investment in equities. However, it was put to us that many people, particularly small investors, might not be able to spread their risks as widely as they might wish, at least in the early years of the scheme. The Government accepted that there was some substance in that point, and that the needs of such investors should be catered for.
      The purpose of the amendments is to enable a modest proportion of investment in unit and investment trusts to be allowed under personal equity plans. That was made clear in the consultative document that we published, but the Bill, as originally drafted, contained references only to "shares" rather than "investments". In Committee, it was said that schedule 8 would be amended if necessary. As originally drafted, the schedule referred to "shares", which does not cover investment in unit trusts.
      I hope that the change will be seen as fairly non-controversial and that the reasons for it are clear.
      Mr. Terry Davis: As the Financial Secretary has said, the amendment is noncontroversial, as it has been moved in response to pressure

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      and representations from several parties on this side of the House. We welcome the amendment and certainly do not seek to divide the House against it.
      Mr. Douglas Hogg: I, too, welcome the amendment, as I regard it as rather important. The previous restrictions confining the scheme to shares were undesirable, because they would have limited the range and type of investor. As one of the Government's aims is to encourage wider ownership in investments generally, this move is both dramatic and welcome, and I hope that it will receive wide publicity.
      Amendment agreed to.
      Amendments made: No. 38, in page 119, line 6, leave out 'shares' and insert 'investments'.
      No. 39, in page 119, line 12, leave out `shares in which they may invest'
      and insert 'investments they may make'.
      No. 40, in page 119, line 14, leave out 'shares' and insert 'investments'.
      No. 41, in page 119, line 15, leave out 'shares' and insert 'investments'.
      No. 42, in page 119, line 25, leave out 'in shares'.
      No. 43, in page 119, line 27, leave out 'them' and insert 'the investments'.
      No. 44, in page 119, line 32, leave out 'in shares'.
      No. 45, in page 119, line 41, leave out 'shares' and insert 'investments'.
      No. 46, in page 120, line 8, leave out 'shares' and insert 'investments'.
      No. 47, in page 120, line 12, leave out 'shares' and insert 'investments'.—[Mr. Norman Lamont.]
      Mr. Terry Davis: I beg to move amendment No. 49, in page 120, line 13, at end insert—
      '(4A) The regulations shall provide that an investor shall not be entitled to relief from tax in respect of shares in a company the whole or part of whose income derives

      (a) from a trade or business carried out in whole or part in the Republic of South Africa; or

      (b) from investment in a company or companies the whole or part of whose income is derived from a trade or business carried out in whole or part in the Republic of South Africa; or

      (c) from transactions undertaken with or in connection with a company or companies the whole or part of whose income is derived from a trade or business carried out in whole or part in the Republic of South Africa; or

      (d) from transactions with the Government of the Republic of South Africa.

      (4B) The regulations shall provide that an investor shall not be entitled to relief from tax in respect of shares in a company which controls either directly or indirectly another company the whole or part of whose income is derived in the manner set out in subparagraphs (a), (b), (c) or (d) of paragraph (4A).'.
      I begin by putting the amendment in context. I must emphasise that the Labour party objects most strongly to the inclusion of clause 39 and schedule 8 in the Bill, because it completely opposes the idea of the personal equity plan on grounds of principle and priority.
      When the scheme was announced by the Chancellor of the Exchequer in the Budget on 18 March, he claimed that the scheme would help to make
      "The British people a nation of share owners."
      He went art to claim that it was,
      "Specially designed to encourage smaller savers." [Official Report, 18 March 1986; Vol. 94, c. 177–78.]
      As we established in Committee, the scheme is worth very little to the smaller investor, but it is worth a lot to the big
      174
      investor, especially the investor who has capital gains of more than £6,300 a year. The personal equity plan has little or nothing to offer to the genuine small investor. Frankly, we regard it as bogus.
      We also oppose the scheme on the ground of priority. If the Chancellor can afford to give away £25 million a year, we could all think of many more deserving groups of people than those who can afford to invest in shares.
      This afternoon, we are concerned about a different point. In the prospectus for potential plan managers issued by the Board of Inland Revenue, there is only one restriction on the shares which will qualify for tax relief. The investment must be confined to ordinary shares in United Kingdom incorporated companies quoted on the stock exchange. My amendment seeks to introduce another restriction—to ensure that the shares are not in a company whose income derives from conducting business in South Africa, or a company with investments in South Africa, or a company which conducts business with the South African Government.
      The position in South Africa is well known to the Government and to all hon. Members; it does not need a detailed exposition from me. I simply remind the House that in South Africa only 15 per cent. of the population—the white people—are treated as full citizens and 85 per cent.—the black, Asian and coloured people—are treated as second-class citizens or worse. The system of apartheid is abhorred by the overwhelming majority of people in Britain. Hardly anyone on the House will stoop to defend it. But it is not enough o condemn apartheid The question is what should be done about it and what the British Government should do.
      There is a clear difference between the Conservative Government and the Conservative party—or the Prime Minister and her friends—on the one hand, and the Labour party, all other political parties, even some Conservative Members and most of the people outside the House, on the other. Only the Prime Minister arid her more extreme supporters are resisting the call for international economic sanctions to be applied against South Africa, and the Prime Minister and those who think like her are rapidly becoming as isolated at home as they have become isolated abroad.
      The amendment is concerned with a slightly different, although related, point. As matters stand, the Government are planning to encourage investment in South Africa by giving tax relief on the income derived from shares in companies investing in South Africa doing business in South Africa or doing business with the South African Government. Surely we can all agree that this policy is morally wrong and politically mistaken.
      Surely even this Government would accept that the introduction of new tax incentives for investing in companies which are in turn investing in South Africa must constitute the wrong message to send to the South African Government now. Surely we must agree that, whatever our differences about the concept of the personal equity plan, we should exclude investors in companies conducting business in South Africa. I hope very much that the Government will accept the amendment.
      Mr. Douglas Hogg: I hope that the Government will not accept the amendment. It is, as the hon. Member for Birmingham, Hodge Hill (Mr. Davis) has been frank enough to admit, an attempt to introduce sanctions by the back door.

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      The Labour party has no monopoly of concern about the policies of the South African Government. I am deeply opposed to the policies of the South African Government and I suspect that that is the position of almost the entirety of the members of my party. I support the mission of my right hon. and learned Friend the Foreign Secretary, and I agree entirely with those who say that we should introduce additional measures if it does not bring about any substantial concession.
      The Government have already introduced measures against the South African Government and I feel certain that additional measures will be forthcoming if they are necessary. That, however, does not mean that the approach that is set out in the amendment is right. Indeed, it is wrong on at least two grounds. First, it is wrong to adopt a piecemeal policy. If Governments are to introduce measures against the South African Government, they must be part of a concerted approach and a general policy. I think that that is best done in concert with other EEC and western countries. Secondly, a policy of the sort that is set out in the amendment is curiously inflexible. A sanction that is incorporated in statute law is difficult to change. Therefore, it is not an especially effective method of inducing concessions. It is not something that can be used flexibly.
      If the South African Government seek to make concessions, they will still be affected by the amendment if it is incorporated in legislation. On the grounds that we should not approach the problem of South Africa in a piecemeal fashion or adopt an inflexible method of the sort that is advocated by the hon. Member for Hodge Hill, I hope that the Government will not support the amendment.
      Mr. Robert Sheldon: No one can doubt that it would be far better to have a list of sanctions separate from the Bill. That is the obvious approach. No one would be happier than myself if the Prime Minister or the Chancellor of the Exchequer were to say that the amendment is not a suitable way of introducing sanctions, that there are many other and better ways and that the Government intend to implement them. Unfortunately, we do not have that option before us. However, we have the amendment.
      We can express through the amendment our need to consider whatever sanctions it might be possible to introduce to bring pressure to bear upon the South African Government. There will be many flaws in any amendment of the sort that is before us—for example, it is hard to determine the limits of involvement of South African companies — but the view that is expressed in the amendment is important.
      The clause represents the great hope of the Chancellor of the Exchequer to bring about a body of knowledgeable shareholders throughout the country that will bring pressure to bear upon certain companies and improve their performance by causing them to respond to it. I do not believe that it will have anything like that effect. The British people are not the same as the people of the United States. There are many in the United States who spend a great deal of their time investing and switching their investments from one company to another. They are extremely knowledgeable about their investments. I do not think that most of the British work force would take that
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      approach. We are likely always to find that those who invest in shares in Britain will be a rather more knowledgeable part of the population than the majority and rather wealthier than the average person. The clause will not have anything like its intended effect.
      The hon. Member for Grantham (Mr. Hogg) speaks with great concern, interest and understanding on these matters. He said that the amendment is an attempt to introduce sanctions by the back door. I do not agree. It is unfortunate that we do not have a front door. If we had a front door, I would be delighted to discuss much more effective methods of introducing sanctions. The amendment can be said to constitute a piecemeal approach, but if it were passed we could express in the Bill the fact that we shall use whatever means is available to us to show our detestation of the South African regime.
      Mr. Douglas Hogg: I understand the right hon. Gentleman's position. I am not trying to denigrate the position he has adopted. Will he tell the House what would happen if the amendment were passed and it was incorporated into statute law and the South African Government made major concessions in their policy? Would we have to introduce primary legislation to delete the amendment?
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      Mr. Sheldon: That would be a most happy occasion. There are not many opportunities for a Finance (No. 2) Bill. If we were to see in South Africa a position of one man, one vote, I should be pleased to be one of the signatories to such a Bill. Let us be realistic: that All not happen.
      Mr. Hogg: The right hon. Gentleman is quite right. We shall not see a one man, one vote position in South Africa in the foreseeable future. However, we might see substantial concessions — for example, the freeing of Mandela and negotiations with the ANC. There comes a point when some concessions are so significant as to require this House and the Government to make changes in the statute law, which the right hon. Gentleman advocates.
      Mr. Sheldon: I should be happy to negotiate with the hon. Gentleman if such an eventuality came about. I should be pleased to consider where, how and in what circumstances we might repeal the legislation.
      Mr. David Winnick: Would the simple guide he that, when the representative organisations of the African majority and their white and coloured allies in South Africa say that no economic measures should be taken, it would be right for us to respond in the manner outlined by my right hon. Friend?
      Mr. Sheldon: My hon. Friend has a most practical approach to such matters. At such a time when good fortune were to attend our labours, I do not think that there would be any problem about the repeal of a limited piece of legislation which the amendment proposes. We are concerned to express a clear view to put to disadvantage those companies that trade with and get a great deal of their profits from South Africa, and meet the conditions of the amendment. It is a muted clarion call, but at least it shows the views of my hon. Friends. It is a way in which we can bring to bear in some small way the

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      revulsion that we feel about the events taking place in South Africa. This is a limited but useful amendment, and I hope that it will be supported.
      Mr. Michael Hirst: The amendment is undoubtedly a foolish piece of ideology. It is objectionable that Labour Members should try to pretend that they have a monopoly of concern to see the end of apartheid. When one looks back at speeches made by Labour right hon. and hon. Gentlemen, one may ask what they did in government to bring about the ending of apartheid.
      I find it curious that the amendment is tabled in the name of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), because when the Prime Minister challenged him on economic sanctions at Question Time a few weeks ago, he wriggled out of giving any commitment to imposing economic sanctions and said that he w old prefer to think about other measures—measures short of economic sanctions. Yet he is the lead signatory on an amendment which, in its most naked form, intends to introduce such sanctions.
      The wording of the amendment is ludicrous. Any company, any quoted security that invests, trades or invests in another group of companies that trades with South Africa would be excluded from PEP. There is hardly a leading British company quoted on the stock exchange in London—the sorts of investment that people would put by in their PEP—that does not have some form of investment in or trade with South Africa or with a third party that in turn trades with South Africa. I commend the hon. Member for Birmingham, Hodge Hill (Mr. Davis) for having the honesty to admit that the effect of such an amendment would be to emasculate PEP. I believe that I speak for my colleagues who welcome PEP. We certainly do not want to see the introduction of any wrecking amendments.
      I had the opportunity to visit South Africa. Before I went, I condemned apartheid. I went there with an open mind, which is more than the hon. Member for Walsall, North (Mr. Winnick) has done. I am tired of people with open mouths and closed minds who will not see things for themselves. In the course of that visit, I looked at one of the investments of a British leading company—BP. BP has a substantial interest in coal mining. That interest produces a substantial number of jobs and a great deal of wealth for the people who work in those mines.
      Moreover, the conditions in such mines are superior to anything that I have seen in mines in this country or those which I have visited in Europe. I was proud of the fact that a British company had set the highest standard of living and working conditions of its black African employees and that it was giving a standard to which other South African companies could aspire. I have no doubt that, if economic sanctions were introduced against South Africa, the jobs of a successful work force in that mine would come to an end overnight.
      I do not believe that the amendment is likely to deter any company from trading with or investing in South Africa. It is likely to prevent people from taking advantage of what was intended in the Budget proposal for a personal equity plan. As such, I find it objectionable. I hope that my right hon. Friend the Financial Secretary to the Treasury will call upon his colleagues in the Government to oppose the amendment, should the Opposition choose to press it to a vote.
      Mr. Ian Wrigglesworth: I share the anxiety that has been expressed on the Opposition Benches about putting economic pressure on the South African regime to change their policies. The amendment is drawn so widely that I think that there is virtually no organisation in the land that carries out business that would not be covered by it. I must say to the Labour Front Bench that that probably includes the Co-operative bank, Unity Trust and the other organisations to which they may he close. If transactions as well as investments arc included, any organisation or company— not to mention Mr. Maxwell and Pergamon printers, and so on—that is trading in almost any market, but especially internationally, if not directly, will be caught by the amendment. If the amendment had been better targeted and more tightly drawn, it would have been more effective and would have gathered wider support.
      As I said in the Standing Committee, the PEP scheme is a poor scheme. In our view, it will not extend share ownership in this country in the way that the Chancellor trumpeted forth in his speech. It is a mouse of a scheme. I regret that the Government were not prepared to accept amendments that I and others tabled to make it a more effective and catch-all scheme that people could take up as small investors in the way that the Chancellor said he hoped would happen.
      In my view, the amendment would not only undermine the scheme completely, because I can think of virtually no business organisation that would not be hit by it, but it would not achieve the purpose that the Opposition intend. I think that there are much more direct economic actions that can be taken and should be taken by the Government to persuade the South African Government to change their policies.
      Mr. Winnick: My hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) has explained the criticisms that we have of the scheme. He went into considerable detail when the Bill was in Committee. Despite all the ministerial optimism about helping the small investor and what is described as "people's capitalism" and other propaganda, the plain truth is that the scheme will help those with substantial incomes. The Government are perfectly aware of that. The Chief Secretary admitted as much when he replied at the Committee stage.
      Far too many people in our community have been penalised as a result of Government action in the past few years. In more recent times, owner occupiers who become unemployed will face difficulties because the assistance that they receive towards mortgage interest will be reduced. That was the subject of a debate initiated by the Labour party.
      Of course, no one is surprised when a Tory Administration substantially assist the most prosperous in the community. The Government have tried to cover it up, giving the impression that they wanted to help the ordinary person but, as with the tax concessions, those who have benefited in some cases in terms of thousands of pounds a week have been the most prosperous. That is the function and role of the Tory Government and only the most naive person would expect them to act otherwise.
      It is even more unacceptable that such tax relief is given for any form of investment in respect of shares in a company with South African involvement. The hon. Member for Stockton, South (Mr. Wrigglesworth) echoed

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      the comments of Tory Members. Of course, the hon. Member for Grantham (Mr. Hogg) said that he was against apartheid. I had not heard a single Conservative Member—even the hon. Member for Luton, North (Mr. Carlisle)—argue otherwise. I shall pay the hon. Member for Grantham the compliment of not putting him in the same category as the hon. Member for Luton, North and one or two other Conservative Members who might be associated with the South African lobby on the Tory Benches. I must say, with respect, that it is not sufficient to say that one is against the system in South Africa. The obvious question, which the Church of England debated yesterday with great seriousness, as one would expect, is: what does one intend to do about the events in South Africa? It is not sufficient to say, in effect, that one is opposed to the system and to leave it at that.
      Mr. Douglas Hogg: I do not want the hon. Gentleman to misrepresent my position. I have made it clear, especially in this debate, that, if the concessions are not forthcoming as a result of the visit by my right hon. and learned Friend the Foreign Secretary, I hope that additional sanctions or measures will be imposed.
      Mr. Winnick: That is a step forward, and it is about time, after all the years of tyranny. It is fortunate that, at long last, there are Conservative Members who take that line. I should be out of order if I were to discuss the Foreign Secretary's proposed trip.
      Mr. Jeremy Hanley: Does the hon. Gentleman know the policy of the Church Commissioners on their investments in South Africa?
      Mr. Winnick: I am sure the hon. Gentleman will be pleased to take up that matter as soon as he can with the Church of England authorities. It would be inappropriate for me to act as a spokesman on behalf of the Church Commissioners. After all, a Conservative Member answers in the House for the Church Commissioners. I see no reason why the hon. Member for Richmond and Barnes (Mr. Hanley) should not table a written question for priority answer on Thursday or Friday, and he would then be satisfied.
      The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) has said that we have closed minds. Presumably, anyone who is against apartheid, including the hon. Gentleman, has a closed mind. It would he odd if we had an open mind in view of the type of racial tyranny and oppression that exists in South Africa.
      It is unfortunate that so many leading British companies have substantial holdings in South Africa. I have a list of category A companies, which are British companies holding 50 per cent. or more of the equity of a South African company. That is a fairly large equity. Those companies are household names—Barclays bank, BAT Industries, the Beecham group, Blue Circle, the BOC group, Boots, Brooke Bond, Cadbury Schweppes, Dunlop Holdings, GEC, Great Universal Stores, Rio Tinto-Zinc, Rank Xerox, Plessey, Rowntree Mackintosh, Tate and Lyle, Vickers, Wilkinson Sword and Wimpey. They are all leading British companies.
      Mr. Douglas Hogg: On a point of order, Mr. Deputy Speaker. If the hon. Member for Walsall, North (Mr. Winnick) is correct in saying that Barclays bank holds a
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      substantial interest in South African companies, I fancy that the representative of the Social Democratic party—the hon. Member for Stockton, South (Mr. Wrigglesworth)—should have declared an interest. As I understand it, he is a paid representative of Barclays bank.
      Mr. Deputy Speaker (Sir Paul Dean): It is a point of debate rather than a point of order. The House knows that, if an hon. Member has an interest to declare, he should declare it.
      Mr. Wrigglesworth: Further to the point of order, Mr. Deputy Speaker. I am not a paid representative of Barclays bank, as I think the hon. Member for Grantham (Mr. Hogg) knows. I am an adviser to Barclays bank. That is well known in the House. I have, of course, no hesitation in declaring that position.
      4.15 pm
      Mr. Winnick: Not only am I not the representative of the Church Commissioners but I am not, in any circumstances, a representative of or spokesman for that wretched group, the SDP. I leave it to the hon. Member for Stockton, South to square his conscience. No doubt he will do so in a way that is appropriate to him.
      It is unfortunate that so many leading British companies have such a huge stake in the South African economy. Although Conservative Members—no doubt including the Financial Secretary to the Treasury—will tell us that this is all to the good for South Africa, I, like my right hon. and hon. Friends, have a different attitude. I believe that such involvement by leading British companies can do nothing but strengthen the South African economy and help the South African authorities to remain in power. The fact that some of those companies pursue a fairer employment policy than native companies in South Africa is beside the point. They play a leading role in the apartheid system, no matter how they argue otherwise. It is understandable that the South African authorities are so anxious that these British companies retain their stake in South Africa. We shall be taken seriously in our arguments against apartheid only when economic measures and sanctions are imposed, as inevitably they will be, and when British companies are clearly told by the Government of the day that their involvement in South Africa must end or be substantially reduced as I believe it should be.
      The Labour party knows that the amendment will be voted down. The SDP and, no doubt, the Liberals will vote with the Tories. We are under no illusions. Anyone who believes that this is just a propaganda ploy and that, if the Labour party were in office, we would act differently does not understand. The other day, the Prime Minister baited my right hon. Friend the Member for Leeds, East (Mr. Healey) about what he did or did not do in Cabinet in 1967 in respect of selling arms to South Africa, but 140 Labour Members of Parliament made it clear then that in no circumstances would they allow their Government to change their policy. That policy was retained as a result either of the view of the 140 Labour Members of Parliament or of the way in which our views were made clear to the Whips. I was a Member at that time. We made it clear that we were not willing to support any Government, including our own, who pursued a policy of selling arms to South Africa. It is understandable that in 1967 the Labour Cabinet decided to continue their policy.

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      During the emergency debate on 19 December 1967, under Standing Order No. 9, Conservative Members were highly critical of the Labour Government for pursuing a policy of not selling arms to South Africa.
      Mr. Deputy Speaker: Order. The hon. Member is straying from the subject. He must relate his comments to personal equity plans.
      Mr. Winnick: I appreciate your guidance, Mr. Deputy Speaker.
      We demonstrated in 1967 that we were not playing with words. We do not have to wait many years to understand the tyranny in South Africa. Although the amendment will he voted down, we shall have established an important principle. Other sections of the community here are making it clear that economic measures and sanctions should be imposed on South Africa. We say, as Labour Members of Parliament in a Tory-dominated House of Commons, that that should be done. That is the way in which we can associate ourselves with those in South Africa fighting tyranny who want us to take those economic measures. I am sure that people will understand what we are trying to do. In effect, we are saying to the country, "We totally oppose the Tory Government's collaboration policy. We are for sanctions and effective measures against South Africa." This is one way in which we are illustrating that measures could be taken, but will not be taken because of the Government's action.
      Mr. Norman Lamont: I am sorry that the personal equity plan has received such a sour response from Opposition Members. The purpose of the personal equity plan is to increase share ownership and make it available to people of modest means. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) seemed to pooh-pooh the whole idea. He said that he did not think that the United Kingdom could acquire the same interest in investment as the United States. It may be difficult to get that sort of popular interest, but I think that most of my hon. Friends would agree that it would be excellent if we could imitate that part of American culture and that our economic success would be more likely to be assured if people took a close interest in the fortunes of individual companies.
      The hon. Member for Birmingham, Hodge Hill (Mr. Davis) almost openly admitted that his amendment would have a severe effect on the personal equity plan. The hon. Member for Stockton, South (Mr. Wrigglesworth) agreed with the hon. Member for Hodge Hill that he did not think it was a satisfactory scheme because it did not go far enough. However, at least he had the grace not to want to wreck the scheme. He at least wanted to preserve it and enable it to get off the ground. It may be a modest start, but it could be the modest start of something very significant and far-reaching.
      The hon. Member for Hodge Hill said that the scheme would benefit the wealthier investor. That was echoed by the hon. Member for Walsall, North (Mr. Winnick). At times there seemed to be a conflict between Opposition Members. Some were saying that it was a mouse of a scheme and did not amount to anything and others were saying that it gave too much benefit to the rich. We believe that it can benefit the small investor. I imagine that Opposition Members think that it may not because they believe that it is unlikely that a capital gain will arise which is anywhere near the indexed rate of £6,300 a year.
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      However, that does not take account of two factors. The first is the relief that is avail able on dividends that are reinvested and the second is the gearing effect that will have over time as the portfolio and the value of the portfolio build up. I believe — I am sure that I carry my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) with me—that it could be significant for the smaller investor.
      Mr. Terry Davis: I believe that the Financial Secretary missed the discussion on this schedule in Committee. At that time he had not been appointed as Financial Secretary. May I assume that he has taken the trouble to read our proceedings in Committee? Will he answer the point that I made in Committee about the comparison between the tax benefit and the cost of paying the manager of the PEP to run the plan? As the Financial Secretary will remember, in Committee I showed that the charge to be expected for the management of a PEP would exceed the income tax refund.
      Mr. Lamont: Not having been in the Standing Committee, I do not know what the hon. Gentleman said about that.
      Mr. Davis: Has the Financial Secretary not taken the trouble to read our debates? Perhaps that is why he has been put up to reply to this debate.
      Mr. Lamont: I may have read innumerable copies of Standing Committee proceedings on the Finance Bill before I appeared on that Committee myself. If the hon. Gentleman will excuse me, I certainly do not carry in my head every argument that he puts when I am not present. I know that he expects me to follow his speeches very closely, and indeed I do. I understand the point that the hon. Gentleman has made because he has put it to me. However, the effect of the rolled-up relief available to dividends and the effect of the cumulative investment over the period of a plan could be significant to the small investor. That is the only point that I make, and I think it is important because an attempt has been made to suggest that the scheme is not important for the small investor. We intend it to be designed for the small investor and we intend to do what we can to encourage wider share ownership.
      Most of the debate has been about South Africa. The purpose of the amendment is to take measures which, it has been argued, might have some effect on the problems in South Africa. I would like to explain to the House why the amendment would be quite unworkable. Apart from any other objection I might have to it—the amendment may give Opposition Members some moral satisfaction; it may be a moral free lunch—it is unworkable.
      As my hon. Friend the Member for Strathkelvin and Bearsden pointed out, the amendment would exclude from the personal equity plan proposal not merely any company or its subsidiary which traded or invested in South Africa, but any company which had any transactions with such a company. That would be a far-reaching and wholly unenforceable provision. Who would enforce it? Would plan managers have to seek an assurance from companies that they would not trade with or invest in South Africa? Would United Kingdom companies have to check, before conducting any transaction with any other company in the world, that neither it nor any of its subsidiaries derived any

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      income from South Africa? How, in the real world, would failures to comply with this restriction be discovered, either by plan managers or the Inland Revenue?
      Secondly, is it fair that a personal equity plan holder should be denied his or her tax relief—however much Opposition Members may not sympathise with the concept — because, without his or her or the plan manager's knowledge, the company in which the money was invested turned out to have South African connections? What possible explanation would the hon. Member for Hodge Hill give to a widow who suddenly found herself subjected to unforeseen capital gains tax? How would the hon. Gentleman justify to any investor with a modest income that he would be presented with an unforeseen capital gains tax liability for which there were no funds?
      As my hon. Friend the Member for Grantham (Mr. Hogg) said, it is the introduction of sanctions by the back door. It is penalising the wrong people because it is putting the penalty on the investor and the plan manager for investing in companies which would be doing something of which they had no knowledge and no way of finding out and something which was not illegal. If that is not sanctions by the back door, I do not know what is. My hon. Friend the Member for Grantham was right to describe it in that way.
      Even if we accepted the principle of this amendment, which we certainly do not, we could not advise the House to enact legislation which is impracticable and cannot be enforced. The hon. Member for Walsall, North said that this concerns a matter of principle. The amendment is not about a matter of principle; it is about a gesture that the hon. Member for Hodge Hill is anxious to make. For that reason, I advise my right hon. and hon. Friends to reject the amendment.
      Mr. Terry Davis: Once again, we have found that the Financial Secretary has been careless in his homework. I did not expect him to read all the reports of our proceedings before he joined the Committee after his appointment as Financial Secretary in succession to the right hon. Member for Croydon, Central (Mr. Moore), but he could have taken the trouble to read our discussion about PEP before he responded to the debate today. It is clear from what he has said that he has not taken the trouble to read the reports of the proceedings when we debated the schedule in Committee. If he had, he would not have dared to describe the investors who will benefit from the personal equity plan as "small investors of modest means".
      The right hon. Gentleman would have known that we showed to the satisfaction, not only of my hon. Friends but of many people sitting in the Public Gallery listening to the debate, that the people who will benefit will he those whose income exceeds £25,000 a year. I am prepared to admit that the Financial Secretary may regard that as modest means, but I do not think that any Opposition Member would regard an income of £25,000 a year as modest. He talks about the classic Conservative widow and cries at the Dispatch Box about the widow of modest means who suddenly discovers that she has become liable for capital gains tax because she has invested in a company trading with South Africa. Elsewhere, in other investment, she will already have had to make a capital gain of £6,300
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      in that year alone, but that widow of modest means was not sharp enough to know that she was investing in South African companies. We recognise that the Financial Secretary, unfortunately, has maintained his usual standard in replying to the debate.
      4.30 pm
      The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) fell below his usual standard in his contribution to the debate. Clearly he has not listened to what I said in moving the amendment. He said that he regarded it as objectionable that Opposition Members should claim a monopoly of concern over what is happening in South Africa. I specifically said, and took care to say, that I recognised that some Conservative Members were concerned about South Africa. The hon. Gentleman did not listen. I accepted that some Conservative Members, such as the hon. Member for Grantham (Mr. Hogg), who may be a Johnny-come-lately, said today for the first time that he shared the concern of my hon. Friend the Member for Walsall, North (Mr. Winnick) about what is happening in South Africa.
      I was careful not to claim a monopoly of concern. The hon. Member for Strathkelvin and Bearsden is prepared to complain about what is happening in South Africa, like the hon. Member for Stockton, South (Mr. Wrigglesworth). In fact, I am not sure about the hon. Member for Strathkelvin and Bearsden. His hon. Friend the Member for Grantham was prepared to condemn what was happening, but he said that he took pride in some of the things that were happening. I see very little in which to take pride in South Africa.
      Mr. Hirst: The hon. Gentleman, in turn, is falling short of his usual standard. I made it absolutely plain that I admired the positive and progressive way in which British investments in South Africa had advanced the economic and, in turn, political rights and conditions of people who work in South Africa. I fear that the hon. Gentleman has misconstrued my words. I should be interested to hear him say whether he accepts my proposition that his amendment will wreck the prospect of personal equity plans being successful in this country.
      Mr. Davis: If I misconstrued what the hon. Gentleman said, I apologise unreservedly, because that is not my wont. Nevertheless, he objected to the alleged claim of a monopoly of concern by the Opposition. That has not occurred during debate. I hope that the hon. Gentleman will find an opportunity to apologise for that.
      The hon. Gentleman made an important and interesting point about the effect on the British economy, which I shall deal with later. However, first, I should like to deal with the hon. Member for Grantham, who told us that he is deeply opposed to the policies of the South African Government and that he could conceive that additional measures—I think that he meant sanctions—may be necessary if his right hon. and learned Friend the Foreign Secretary returns empty-handed from South Africa, and there are not improvements in the situation there.
      The hon. Member for Grantham said that the amendment represented sanctions by the back door. Like my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), I would much prefer sanctions by the front door. Unfortunately, we are not getting sanctions by the front door. We must look for other ways in which to

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      express our concern and dissociate ourselves from economic policies that are bolstering and supporting the South African Government.
      The hon. Member for Grantham also said that it was wrong to approach the matter in a piecemeal way. Again, as my right hon. Friend the Member for Ashton-under-Lyne said. I would prefer it if we could approach the matter in a comprehensive way and had a list of sanctions to be imposed upon the South African Government. Unfortunately, that matter is not before us. We have to deal with matters as they come before us and in the form in which they come before us. Today we are dealing with the Finance Bill and a schedule in it.
      This Bill extends economic involvement in South Africa, and we say that it is wrong to increase the involvement of British investors in South Africa at present. If my amendment were accepted, it would still remain legal for people to invest in South Africa, but they would not get tax incentives to do so. Surely it is wrong for the British Government to give tax relief to people, to encourage them to invest, when that investment may go into companies that are taking part in economic suppression in South Africa.
      Mr. Douglas Hogg: The hon. Gentleman's argument is most eloquent. He will recognise that his amendment would penalise companies that are trading with other companies that have an interest in South Africa. Was that a drafting mistake on his part, or was it intended?
      Mr. Davis: It was my intention to avoid any loopholes. If the hon. Gentleman co-operated with us, in his new enthusiasm for measures to cope with the situation in South Africa, in drafting amendments that will not penalise companies that inadvertently do small business with other companies that are active in South Africa, we would welcome his assistance. That assumes that we share the ultimate objective. I do not think that we do. Unfortunately, that is the problem. Therefore, we must rely on my poor efforts of draftsmanship, which will encompass companies that do business with other companies that are active in South Africa.
      The hon. Member for Grantham also said that it was wrong to approach the matter by way of statute law because statute is inflexible. I have a great deal of sympathy with that point. However, the answer lies in the hands of the Government. They have put a restriction on personal equity plans, but they have not put it in the Bill —it is not in the schedule. They have put it in a green document called "Prospectus for Potential Plan Managers". The Government have included in that prospectus, published by the Board of Inland Revenue, a restriction that requires that the shares must be in a company which is a United Kingdom incorporated company quoted on the stock exchange. If it would be inflexible to put the measure into statute law, as the hon. Member for Grantham said, let us have something in the prospectus instead. We should tell the potential plan managers that the measure will be included in regulations, which will be published, so that they can be amended when, on the happy day that cannot come too quickly for my hon. Friends and myself, the South African Government change. I fear that it will have to be the South African Government who change. The present one will not change their policies. On that day we can drop this little sanction. If the Government said that, I would withdraw
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      my amendment. I appreciate the point that was made by the hon. Member for Grantham, but that is not what the Government said. The Financial Secretary did not give us that olive branch. He did not say, "We did not want to be so inflexible by writing the measure into the statute book." He has left us with no alternative. The Government will not do anything. They will not introduce any such restriction.
      If the Government had said, "We shall let the measure go into statute law," of course, the situation might change and the hon. Member for Grantham would say to the House of Commons, "We must remove that restriction." Then it would be open for the Government to bring in one of their famous retrospective Bills. We are now used to dealing with their retrospective Bills. We have the restrospective Rate Support Grants Bill, which makes legal something which was illegal. It was admitted to be illegal by the Secretary of State for the Environment in a court of law. Yet, retrospectively, the Government will make it legal.
      Similarly, the Government could introduce a Bill that retrospectively gave tax relief on investments in South Africa for the period between the change in the South African Government or in their policies and when the Government were able to get the Bill through Parliament. In the meantime, the Government could give us one of their extra-statutory concessions that we heard about in Committee. We can have an extra-statutory concession to exempt American service men from paying road tax while the Finance Bill goes through the House of Commons. I would not oppose a similar extra-statutory concession in these circumstances. Therefore, we shall not take too seriously that objection from the hon. Member for Grantham. This is not a case of imposing sanctions on people who are already doing business in South Africa.
      Mr. Hirst: How does the hon. Gentleman propose to enforce the amendment? Upon whom will the obligation fall to determine whether a group has or has not traded with South Africa, or has or has not invested in South Africa and, more particularly, has or has not traded with a connected party that may or may not have traded with South Africa?
      Mr. Davis: That is a fair point. I would envisage the measure working in this way. The plan manager, who has responsibility for the administration of the personal equity plan, would be responsible for ensuring that investments took place only in the shares of companies that were not disqualified, in the same way in which he must take care that investment takes place only in shares in United Kingdom incorporated companies quoted on the stock exchange. Of course, he would depend on the information provided by the companies. That is what I would expect. If companies in this country are as anxious as they should be to ensure changes in South Africa, to honour the law and to honour the wishes of Parliament, I would expect them to be able to provide that information which, in my experience, is not difficult to provide. The amendment would ensure that tax incentives should not be given to people to encourage them to invest in South Africa.
      Mr. Hirst rose—
      Mr. Davis: I have given way to the hon. Gentleman several times.
      Mr. Hirst: I am grateful to the hon. Gentleman for trying to ' tell the House how he would enforce the

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      amendment. I ask him to address himself to one further point: how would he deal with a situation in which a fund manager, in good faith, invests in a company which has no such dealings in South Africa, but which, in the same tax year as the tax allowance is given, suddenly discovers that the company has subsequently some transaction in South Africa? What is the position of the personal equity plan holder in those circumstances?
      Mr. Davis: I would he prepared to accept a plea of good faith as a defence in any sort of proceedings.
      The hon. Members for Stockton, South and for Strathkelvin and Bearsden gave the game away because it was they who said it was difficult to find any leading company which was not involved in South Africa. The hon. Member for Stockton, South went further because he told the House that he regarded the personal equity plan as a poor scheme — a mouse of a scheme. When the Financial Secretary used those words in his speech, he was quoting from the hon. Gentleman. I must tell the Financial Secretary that I do not attach too much importance to those criticisms. The Minister should not take such criticism seriously because, if he took the trouble to read reports of our previous proceedings, he would know that, at one time, the hon. Member welcomed the personal equity plan. 1 do not mean that another spokesman for the alliance welcomed the plan—I will come to that later—but the hon. Member for Stockton, South told the House that he was
      "pleased … to welcome the Government's announced intention to examine the possibility of giving tax relief on profit-sharing".
      I think he was referring to this personal equity plan because he went on to say:
      "Similarly, we support in principle the Government's proposals for tax relief and other benefits for people buying shares for the personal equity plan." — [Official Report, 20 March 1986; Vol. 94, c. 456.]
      What was pleasure has now become a criticism of this mouse of a scheme. But even pleasure was something of a change because the hon. Member for Colne Valley (Mr. Wainwright) had previously said that he gave the personal equity plan an unqualified welcome.
      Mr. Wrigglesworth: Will the hon. Gentleman at least have the good grace to read the whole of the speech? Perhaps he will read the remarks which I made in the Budget debate wherein, as the Minister rightly said, I welcomed the principle—I still do—of the plan. But it is being introduced in such an ineffective way that it can rightly be described as a mouse of a scheme. That does not mean that the principle is wrong and that is why, as the hon. Gentleman is aware, I sought to move amendments in Committee.
      Mr. Davis: I believe we are getting closer to the heart of alliance policy, which is that it wishes to give more tax relief.
      Mr. Wrigglesworth: Yes.
      Mr. Davis: The hon. Gentleman says yes, but his party opposed taking a penny off income tax. It objected to taking a penny off the income tax of those on low earnings, yet it wishes to give more money to people who earn £25,000 a year and invest in shares on the stock exchange. That is its priority.
      Mr. Deputy Speaker: Order. This is beginning to sound very much like a regurgitation of a Committee stage debate. I hope that the hon. Gentleman will return to the amendment.
      Mr. Davis: Indeed, Mr. Deputy Speaker.
      Mr. Wrigglesworth: As I am sure the hon. Gentleman has studied the Order Paper closely, and as he participated in last year's debate, he will be aware that our proposals are contained clearly in an amendment to the Finance Bill. It outlines the scheme that we would introduce.
      Mr. Davis: I thank the hon. Member for that trailer. Now we all know where the hon. Member for Stockton, South stands.
      I wish to deal with the more serious remarks of the hon. Member for Strathkelvin and Bearsden. He told us that there was hardly a leading company which did not trade with South Africa and he argued that the House should oppose the amendment because it would emasculate the personal equity plan. I did not make that claim; I am not going to describe the amendment as a mouse, but I did not claim that it would emasculate the personal equity plan. However, having listened to the hon. Gentleman and my hon. Friend the Member for Walsall, North (Mr. Winnick), I realise that it is clear that British business is so deeply enmeshed in the South African economy that it would be difficult for savers—these people of modest means, £25,000 a year — to invest in the shares of companies which are not undertaking business in South Africa, trading with companies undertaking business in South Africa or doing business with the South African Government.
      4.45 pm
      My hon. Friend the Member for Walsall, North came to the heart of the matter when he said that it is not enough to say that one is opposed to the system in South Africa; the question is, what are we to do about it? This is one small measure, but at least it sends a message to the South African Government. We are not prepared to allow the British Government to give tax relief to people who invest in the economy of that most evil regime. Therefore, I ask my hon. Friends to support me in the Division Lobby.
      Question put, That the amendment be made:—
      The House divided: Ayes 134, Noes 232.

      Divison No. 246]

      [4.45 pm

      AYES

      Archer, Rt Hon Peter

      Cocks, Rt Hon M. (Bristol S)

      Ashton, Joe

      Cohen, Harry

      Atkinson, N. (Tottenham)

      Coleman, Donald

      Banks, Tony (Newham NW)

      Cook, Frank (Stockton North)

      Barnett, Guy

      Cook, Robin F. (Livingston)

      Beckett, Mrs Margaret

      Corbett, Robin

      Bell, Stuart

      Craigen, J. M.

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

      Cunningham, Dr John

      Bidwell, Sydney

      Dalyell, Tarn

      Blair, Anthony

      Davies, Ronald (Caerphilly)

      Bray, Dr Jeremy

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

      Brown, Hugh D. (Provan)

      Deakins, Eric

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

      Dewar, Donald

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

      Dixon, Donald

      Buchan, Norman

      Douglas, Dick

      Callaghan, Jim (Heyw'd & M)

      Duffy, A. E. P.

      Campbell-Savours, Dale

      Dunwoody, Hon Mrs G.

      Canavan, Dennis

      Eastham, Ken

      Carter-Jones, Lewis

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

      Clarke, Thomas

      Evans, John (St. Helens N)

      Clay, Robert

      Ewing, Harry

      Clelland, David Gordon

      Fatchett, Derek

      Clwyd, Mrs Ann

      Faulds, Andrew

      189

      Field, Frank (Birkenhead)

      Morris, Rt Hon A. (W shawe)

      Fields, T. (L'pool Broad Gn)

      Nellist, David

      Fisher, Mark

      O'Neill, Martin

      Flannery, Martin

      Orme, Rt Hon Stanley

      Foot, Rt Hon Michael

      Park, George

      Forrester, John

      Pavitt, Laurie

      Foster, Derek

      Pendry, Tom

      Foulkes, George

      Pike, Peter

      Fraser, J. (Norwood)

      Powell, Raymond (Ogmore)

      Garrett, W. E.

      Radice, Giles

      George, Bruce

      Randall, Stuart

      Gilbert, Rt Hon Dr John

      Redmond, Martin

      Gourlay, Harry

      Rees, Rt Hon M. (Leeds S)

      Hamilton. W. W. (Fife Central)

      Richardson, Ms Jo

      Hardy, Peter

      Roberts, Ernest (Hackney N)

      Harrison, Rt Hon Walter

      Robertson, George

      Haynes, Frank

      Robinson, G. (Coventry NW)

      Heffer, Eric S.

      Rogers, Allan

      Hogg, N. (C'nauld & Kilsyth)

      Rooker, J. W.

      Home Robertson, John

      Ross, Ernest (Dundee W)

      Hoyle, Douglas

      Rowlands, Ted

      Hughes, Roy (Newport East)

      Sheerman, Barry

      Hughes, Sean (Knowsley S)

      Sheldon, Rt Hon R.

      Janner, Hon Greville

      Shore, Rt Hon Peter

      John, Brynmor

      Short, Ms Clare (Ladywood)

      Jones, Barry (Alyn & amp;Deeside)

      Silkin, Rt Hon J.

      Kaufman, Rt Hon Gerald

      Skinner, Dennis

      Lambie, David

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

      Leighton, Ronald

      Snape, Peter

      Lewis, Ron (Carlisle)

      Spearing, Nigel

      Lewis, Terence (Worsley)

      Straw, Jack

      Lloyd, Tony (Stretford)

      Thomas, Dafydd (Merioneth)

      McCartney. Hugh

      Thomas, Dr R. (Carmarthen)

      McDonald, Dr Oonagh

      Tinn, James

      McKay, Allen (Penistone)

      Torney, Tom

      McKelvey, William

      Warden, Gareth (Gower)

      MacKenzie, Rt Hon Gregor

      Wareing, Robert

      McTaggart, Robert

      Wigley, Dafydd

      McWilliam, John

      Williams, Rt Hon A.

      Madden, Max

      Wilson, Gordon

      Marek, Dr John

      Winnick, David

      Maxton, John

      Michie, William

      Tellers for the Ayes:

      Millan, Rt Hon Bruce

      Mr. James Hamilton and

      Miller, Dr M. S. (E Kilbride)

      Mr. Allen Adams.

      Mitchell, Austin (G't Grimsby)

      NOES

      Adley, Robert

      Clegg, Sir Walter

      Aitken, Jonathan

      Cockeram, Eric

      Amess, David

      Colvin, Michael

      Ancram, Michael

      Conway, Derek

      Atkins, Rt Hon Sir H.

      Coombs, Simon

      Atkinson, David (B'm'th E)

      Cope, John

      Banks, Robert (Harrogate)

      Corrie, John

      Batiste, Spencer

      Couchman, James

      Beaumont-Dark, Anthony

      Critchley, Julian

      Bennett, Rt Hon Sir Frederic

      Currie, Mrs Edwina

      Best, Keith

      Dickens, Geoffrey

      Biggs-Davison, Sir John

      Dunn, Robert

      Blackburn, John

      Durant, Tony

      Boscawen, Hon Robert

      Fallon, Michael

      Bottomley, Mrs Virginia

      Farr, Sir John

      Bowden, Gerald (Dulwich)

      Favell, Anthony

      Brandon-Bravo, Martin

      Fenner, Mrs Peggy

      Bright, Graham

      Finsberg, Sir Geoffrey

      Brown, M. (Brigg & Cl'thpes)

      Fletcher, Alexander

      Bruinvels, Peter

      Fookes, Miss Janet

      Bryan, Sir Paul

      Forsyth, Michael (Stirling)

      Buchanan-Smith, Rt Hon A.

      Forth, Eric

      Budgen, Nick

      Fowler, Rt Hon Norman

      Burt, Alistair

      Fox, Sir Marcus

      Butterfill, John

      Fraser, Peter (Angus East)

      Carlisle, Kenneth (Lincoln)

      Freeman, Roger

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

      Galley, Roy

      Carttiss, Michael

      Gardiner, George (Reigate)

      Cash, William

      Gardner, Sir Edward (Fylde)

      Chope, Christopher

      Garel-Jones, Tristan

      Clark, Dr Michael (Rochford)

      Gilmour, Rt Hon Sir Ian

      Clark, Sir W. (Croydon S)

      Glyn, Dr Alan

      190

      Gow, Ian

      Murphy, Christopher

      Gower, Sir Raymond

      Neubert, Michael

      Greenway, Harry

      Nicholls, Patrick

      Gregory, Conal

      Norris, Steven

      Griffiths, Sir Eldon

      Onslow, Cranley

      Griffiths, Peter (Portsm'th N)

      Osborn, Sir John

      Hampson, Dr Keith

      Ottaway, Richard

      Hanley, Jeremy

      Page, Sir John (Harrow W)

      Hannam,John

      Page, Richard (Herts SW)

      Hargreaves, Kenneth

      Patten, Christopher (Bath)

      Harris, David

      Pawsey, James

      Harvey, Robert

      Percival, Rt Hon Sir Ian

      Hawkins, C. (High Peak)

      Pollock, Alexander

      Hawkins, Sir Paul (N'folk SW)

      Powley, John

      Hawksley, Warren

      Prentice, Rt Hon Reg

      Hayes, J.

      Proctor, K. Harvey

      Hayhoe, Rt Hon Barney

      Pym, Rt Hon Francis

      Hayward, Robert

      Raffan, Keith

      Heathcoat-Amory, David

      Renton, Tim

      Heddle, John

      Rhodes James, Robert

      Henderson, Barry

      Rhys Williams, Sir Brandon

      Hickmet, Richard

      Ridley, Rt Hon Nicholas

      Hicks, Robert

      Ridsdale, Sir Julian

      Higgins, Rt Hon Terence L.

      Robinson, P. (Belfast E)

      Hind, Kenneth

      Roe, Mrs Marion

      Hirst, Michael

      Rowe, Andrew

      Holland, Sir Philip (Gedling)

      Ryder, Richard

      Hordern, Sir Peter

      Sackville, Hon Thomas

      Howard, Michael

      Sainsbury, Hon Timothy

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

      St. John-Stevas, Rt Hon N.

      Howarth, Gerald (Cannock)

      Sayeed, Jonathan

      Howell, Ralph (Norfolk, N)

      Shaw, Giles (Pudsey)

      Hunt, David (Wirral W)

      Shaw, Sir Michael (Scarb')

      Irving, Charles

      Shepherd, Colin (Hereford)

      Jackson, Robert

      Silvester, Fred

      Jessel, Toby

      Sims, Roger

      Johnson Smith, Sir Geoffrey

      Skeet, Sir Trevor

      Jones, Gwilym (Cardiff N)

      Smith, Tim (Beaconsfield)

      Jones, Robert (Herts W)

      Soames, Hon Nicholas

      Kellett-Bowman, Mrs Elaine:

      Speed, Keith

      Kershaw, Sir Anthony

      Spencer, Derek

      Key, Robert

      Spicer, Jim (Dorset W)

      Knight, Greg (Derby N)

      Spicer, Michael (S Worcs)

      Knight, Dame Jill (Edgbaston)

      Stanbrook, Ivor

      Knowles, Michael

      Stanley, Rt Hon John

      Lamont, Rt Hon Norman

      Stern, Michael

      Latham, Michael

      Stevens, Lewis (Nuneaton)

      Lawler, Geoffrey

      Stewart, Allan (Eastwood)

      Lawrence, Ivan

      Stewart, Andrew (Sherwood)

      Lawson, Rt Hon Nigel

      Stewart, Ian (Hertf'dshire N)

      Leigh, Edward (Gainsbor'gh)

      Sumberg, David

      Lennox-Boyd, Hon Mark

      Tapsell, Sir Peter

      Lester, Jim

      Taylor, Teddy (S'end E)

      Lewis, Sir Kenneth (Stamf'd)

      Tebbit, Rt Hon Norman

      Lilley, Peter

      Temple-Morris, Peter

      Lloyd, Peter (Fareham)

      Terlezki, Stefan

      Lord, Michael

      Thomas, Rt Hon Peter

      Lyell, Nicholas

      Thompson, Donald (Calder V)

      MacGregor, Rt Hon John

      Thompson, Patrick (N'ich N)

      MacKay, Andrew (Berkshire)

      Thorne, Neil (Ilord S)

      McLoughlin, Patrick

      Thornton, Malcolm

      McNair-Wilson, M. (N'bury)

      Thurnham, Peter

      Madel, David

      Townend, John (Bridlington)

      Major, John

      Townsend, Cyril D. (B'heath)

      Malins, Humfrey

      Twinn, Dr Ian

      Marland, Paul

      Vaughan, Sir Gerard

      Marlow, Antony

      Viggers, Peter

      Marshall, Michael (Arundel)

      Waddington, David

      Mather, Carol

      Wakeham, Rt Hon John

      Maude, Hon Francis

      Wall, Sir Patrick

      Mayhew, Sir Patrick

      Waller, Gary

      Mellor, David

      Ward, John

      Merchant, Piers

      Wardle, C. (Bexhill)

      Meyer, Sir Anthony

      Watts, John

      Mills, Iain (Meriden)

      Wells, Bowen (Hertford)

      Mills, Sir Peter (West Devon)

      Wells, Sir John (Maidstone)

      Morris, M. (N'hampton S)

      Wheeler, John

      Morrison, Hon C. (Devizes)

      Whitfield, John

      Morrison, Hon P. (Chester)

      Whitney, Raymond

      Moynihan, Hon C.

      Wiggin, Jerry

      191

      Wilkinson, John

      Young, Sir George (Acton)

      Winterton, Mrs Ann

      Younger, Rt Hon George

      Winterton, Nicholas

      Wolfson, Mark

      Tellers for the Noes:

      Wood, Timothy

      Mr. Archie Hamilton and

      Yeo, Tim

      Mr. Gerald Malone.

      Question accordingly negatived.
      Mr. Norman Lamont: I beg to move amendment No. 49A, in page 120, line 16, after 'income tax', insert `, corporation tax'.
      This is a technical amendment which is necessary if the Government should decide to allow dividends from personal equity plan shares to be paid gross. This point has arisen from the proposal that such dividends can be rolled up tax free in the plan. The original intention was that dividends should be subject to the normal advance corporation tax rules, and that plan managers would reclaim the tax credits from the Revenue in the normal way.
      Some potential plan managers have argued that this could increase the costs of administration and, therefore, the cost of personal equity plans to investors. It has been claimed that that problem could be solved by allowing companies to pay dividends gross in those circumstances. At present we are considering that in consultation with the various interested parties which would be affected by the procedure, but we are not yet able to make an announcement.
      Therefore, we are moving this amendment in case we decide in due course that allowing payment of dividends gross would be the right course. The amendment enables the regulations to include provision for the purpose of the administration of corporation tax because we would be changing a detailed aspect of the ACT rules. If the Government decide against gross payments, the amendment would not be needed. Schedule 8 enables the Treasury to make regulations setting out the detailed rules of the scheme. The amendment enables the regulations to cover the ACT provisions for dividends and the gross or net point.
      I stress to the House that, although we are taking this power, no decision has been made. We felt it right to make the amendment at this stage because we want the scheme to be launched on 1 January. We are considering this and consulting on it.
      Mr. Terry Davis: Before the Minister sits down, can he give us an assurance that whichever course the Government follow it will not make any difference to the cost to the Revenue, and that it is simply a matter of administration?
      Mr. Lamont: That is right. Amendment agreed to.

    New Clause 2

      VALUE-ADDED TAX—PENALTIES
      'In section 15 of the Finance Act 1985 (value-added tax: failure to notify liability for registration) after subsection (4) here shall be added the following subsection:
      "(4A) Any penalty imposed by this section may be reduced to such lesser amount as appears to the Commissioners or, on appeal, to a value-added tax tribunal to be just and reasonable in all the circumstances of the case.'.—[Mr. Blair.]
      Brought up, and read the First time.
      Mr. Tony Blair: I beg to move, That the clause be read a Second time.
      New clause 2 is of major importance to small traders. It is widely supported by groups representing the self-employed and small business men and it will be a crucial test of whether the Government's proclamations about the worth of small businesses are rooted in propaganda or practice.
      The Keith committee, which reported in 1983, effectively recommended that value added tax offences should be decriminalised but that a system of automatic penalties should he brought into being. The sanction of the criminal law was to be taken away, but there were to be automatic penalties, in order to speed up the process of bringing to justice those in default of VAT.
      5 pm
      It was pointed out in volume 2, chapter 20 of the report that the Inland Revenue had the power of mitigation in respect of income tax offences and that that power was useful as a bargaining counter and in order to avoid hardship. In chapter 18, the Keith committee recommended extending that power of mitigation to VAT offences and penalties. The Keith committee—the body that gave rise to the provisions in last year's Finance Act in relation to VAT — recommended that there be a power of mitigation for all VAT penalties, including the new offence of civil fraud, in which case the committee recommended the power to mitigate down to 50 per cent. of the penalty.
      The Government rejected the view of the Keith committee and rejected a new clause tabled by Labour last year. At present, therefore, there is no mitigation in the case of VAT offences and someone who is in breach of the VAT regulations can escape penalty only if he can show a defence of reasonable excuse. Only in those circumstances can he escape the full rigour of the law. The effect is, for example, that someone who deliberately fails to register for VAT is treated in exactly the same way as someone who innocently fails to register.
      The new clause is a very modest proposal. It would allow the power of mitigation, but only on late registrations for VAT, where someone's turnover exceeds the requisite level for VAT but he fails to register in time. That power of mitigation would be given both to the commissioners for Customs and Excise and to the VAT tribunal.
      The need for action is both urgent and easily demonstrable.
      Mr. Douglas Hogg: Am I right in thinking that the penalty imposed for a default is a fixed penalty, fixed either by statute or by statutory instrument, and the commissioners or the tribunal have no power to impose a different penalty?
      Mr. Blair: There is a fixed penalty referable to 30 per cent. of the amount of VAT in, say, the quarter in which the person should have registered. The penalty is fixed in that sense by reference to a percentage of the amount of tax due. At present there is no power to abate that in circumstances in which the commissioners or the tribunal might think it reasonable to do so. In a number of cases that have appeared before it, the VAT tribunal has drawn attention to the substantial injustice to small traders that arises from an absence of a power of mitigation.
      The Rhodes case came before the VAT tribunal on 31 March 1986. In that case Lord Grantchester, the president

      193
      of the tribunal, said in express terms that he regretted the absence of any power of mitigation. That case precisely illustrates the problems faced by small traders because of the absence of the power of mitigation. A small trader started a debt collection agency. In the year to 31 March 1985 the amount of turnover was well below the registration limit for VAT. In the following quarter the turnover exceeded £6,500, the level above which one should register for VAT. The trader did not know that she had to register her agency when that limit was exceeded. She found out only during a conversation with her accountant, a quarter later. As soon as she told the accountant what the turnover was, he told her to apply for registration. She did so immediately, received a form from Customs and Excise and replied by return. She then issued back invoices to all the customers with reference to the quarter during which she should have registered for VAT, so ensuring that no tax was lost to Customs and Excise.
      The VAT tribunal accepted that she had behaved entirely innocently. There had been no loss to Customs and Excise and, indeed, the trader herself had volunteered the information to Customs and Excise that enabled the penalty to be levied. In his judgment, Lord Grantchester said that he had to dismiss the appeal because the trader's innocence did not amount to a reasonable excuse in law and so she had no defence for her failure to register in time. However, he continued:
      "I dismiss this appeal. I do so with regret. Had there been criminal proceedings requiring the imposition of a fine, I would have taken full account of the mitigating circumstances. Little or no tax has been lost and all books and documents have been adjusted retrospectively so that for practical purposes, they now record what they would have recorded if the Appellant had duly complied with the relevant requirements. But neither the Commissioners nor this Tribunal has been entrusted with such a power to mitigate a fixed penalty."
      In successive cases, other chairmen of VAT tribunals have made the same point. No fewer than three VAT tribunal chairmen, other than the president of the VAT tribunal, have drawn attention to the injustice that has occurred.
      These traders are all people who run very small businesses. They are usually self-employed. A French polisher may be involved, or a small furniture business. In the last couple of weeks, the case of Mr. Pearson has been decided. Mr. Pearson is a decorator who failed to register for VAT in time. The chairman of the VAT tribunal, having said that again he could not say that there was a defence, because ignorance of the law is no defence, then said:
      "Since I have no power to mitigate the penalty, I did not explore matters which went solely to mitigation. It was apparent that there were many such matters, in particular the transparent honesty of the Appellant, his (and his accountant's) prompt and full disclosure of the facts to the Commissioners and, subject to clearance of the Appellant's cheque, the fact that no tax has been lost to the Commissioners."
      I understand that many more cases are pending before the VAT tribunal. It is clear that the absence of any power of mitigation is causing substantial injustice. All the cases before the VAT tribunal have features in common. First, it is accepted that all the people acted in good faith and honesty. Secondly, their only fault was ignorance of the law. Thirdly, there has been no loss to Customs and Excise, and fourthly, and perhaps most importantly, the people involved are all small traders in a very small way of business.
      194
      It is generally accepted in the House that there is, and will continue to be, a growth in the number of small businesses and self-employed people. In my own constituency, many people have used redundancy money from their factories to start up their own businesses. Such people are often not aware of all the intricacies of form-filling, VAT and so on and they can get into difficulties. The absence of any power for the VAT commissioners or the tribunal to mitigate penalties is a substantial block on the establishment of new businesses.
      The Government have put forward only two arguments why such a power of mitigation should not be accepted. First, the Government say that there has been a considerable increase in the speed of registration since the system of automatic penalties was introduced. In other words, there has been a diminution in the amount of late registrations.
      I accept that that is the case and I welcome it. But, with great respect, there has been a speeding up of registrations for VAT because of the introduction of automatic penalties. It has nothing to do with the absence of the power of mitigation. I can see no logical or practical reason why the absence of a power of mitigation should speed up VAT registrations. Indeed, many of the cases before the VAT tribunal involve people who have been ignorant of the fact that they have to register for VAT. So automatic penalties were not a factor governing whether they registered.
      The second and perhaps more surprising argument that was put forward in Committee in answer to the clause moved by the hon. Member for Slough (Mr. Watts) was that a power of mitigation would increase the number of civil servants that were needed to deal with mitigation. That is a classic example of how, as so often, the Government misunderstand the nature of the problems of bureaucracy. It is not civil servants who cause problems of bureaucracy but unnecessary rules of civil servants doing work with no useful purpose. Civil servants properly used, for example, assisting small businesses in setting up and overcoming their problems, are a positive bonus to small businesses and should not be regarded as some obstruction.
      The Financial Secretary should consider the new clause, from the point of view of cutting not the costs of the Civil Service, but the burdens on small businesses. I use the words "cutting the burdens" because we have heard a lot from the Government about how they want to lift the burdens on small businesses. They have published two White Papers in the past two years, one called "Lifting the Burdens" and one called "Building Businesses — Not Barriers".
      The Government introduced legislation on small businesses because a Department of Trade and Industry survey said that red tape was a problem, and the single most important item of red tape to which small businesses referred was value added tax. There was huge concern among small traders about the injustice of automatic penalties with no power of mitigation.
      I have been through the White Paper "Building Businesses—Not Barriers" and as a piece of second-rate propaganda it takes some beating. When one looks at the Government's proposals on value added tax, most are elementary, such as allowing traders to make monthly rather than three-monthly accounts. I do not know how that is of great assistance to the small trader, but it is put forward as a great proposal by the Government.

      195
      Hon Members will find it amusing that the Government also include as one of the great steps that they have taken for small businesses the fact that they have revised guidance on the treatment of motoring costs after full consultation with business. A naive person reading those lines would think that the Government have helped to simplify the problems of VAT on fuel for motorists, but, as we learnt in Committee, what has actually happened is that the Government have introduced a system of standard computations of VAT on fuel which has saved the Government about £50 million. The notion that sucking £50 million out of the ordinary trader and motorist is some great bonus to small businesses is laughable. The truth is that when the Government are presented with a small but practical instance of how they can help small traders such as is suggested in new clause 2, they do not seem to be interested.
      New clause 2 is a test for the Government. It has widespread support and it is difficult to see what coherent arguments there are against it. It is supported by those who specialise in value added tax work. It has been tacitly recommended by the tribunal chairmen who have to administer the system and it is widely supported by small businesses and the self-employed.
      The test for the Government is whether they are more interested in headlines for themselves than in help for the small businesses, in publishing White Papers that are long on promises and short on practice, or in doing something that is really worthwhile for Britain's self-employed and small businesses. New clause 2 is such a clause and I recommend it to the House.
      Mr. Douglas Hogg: I shall not speak for long because I am looking forward to hearing my right hon. Friend the Financial Secretary's reasons for not accepting the new clause. Looking at it in general terms, I think that the new clause is good and that it requires support.
      As a general principle I have always been against fixed penalties. I have also been against minimum penalties. Indeed, that is the view that the Government have adopted in the criminal law ever since I have been in the House. On various occasions some of my hon. Friends have called for minimum penalties for this or that offence under the criminal law and the Government have always resisted, in my view rightly. The same general principle applies to fixed penalties.
      5.15 pm
      All penalties — whether minimum penalties, fixed penalties or penalties of any kind — must have some regard to the degree of culpability involved. Failure of registration in VAT cases may be a deliberate act of fraud. That is an extreme degree of culpability. On the other hand, failure to register might come about from a much smaller degree of culpability— for example, illness, the destruction of documents or ignorance. That is another and quite different degree of culpability.
      It is wrong in principle that a penalty should be imposed that does not reflect the degree of culpability involved on the part of the person who has offended. Therefore, as a matter of general principle, I am highly sympathetic to new clause 2.
      I am aware that the Government say that fixed penalties have necessarily resulted in an increase in the number of registrations. I have two comments to make on
      196
      that. First, I suspect that the hon. Member for Sedgefield (Mr. Blair) is right in his explanation for the increase in the number of registrations, but there is another point, too. There is always a natural tension between the desire on the part of the Executive to do those things that are convenient to it, on the one hand, and the desire of the legislature to ensure natural justice, on the other. If I hear that argument advanced by my right hon. Friend the Financial Secretary today — I fancy that I shall, although he will cloak it in his usual eloquent and charming manner—I must tell him that I am in favour of natural justice, not the Executive.
      Having made those few remarks, I look forward to hearing my right hon. Friend tell us why we should not support new clause 2.
      Mr. David Penhaligon: I echo what the hon. Member for Grantham (Mr. Hogg) has said. There is no logic in having a mitigation procedure for income tax but not for value added tax. One is aware of income tax procedures from one's constituency work. I have occasionally helped a constituent and been surprised at the outcome. At the end of the day a constituent often seems to have been rather well treated. In such circumstances one tends to claim some credit for such things.
      A system of mitigation does exist and is operated in such circumstances. Therefore, I do not see why the powers of discretion and intelligent analysis of the background cannot be given to somebody within the area dealt with by the new clause. It is a power that cannot be unduly abused. If the Minister believes that it can be used as an excuse for putting off the payment of the tax even further, no doubt his Department, with its ingenuity, will find some way to deal with that.
      The law, as it currently stands, says that there is never a harsh word within the worlds of justice, right and reason. The Government should give serious consideration to the new clause or, if an opportunity exists, at least to introduce something that approximates closely to it.
      Sir Kenneth Lewis: When I first came to the House, I was told—I suppose correctly — by the Conservative Whips that it was always dangerous to listen to arguments in debate. One was supposed just to vote. To my great surprise, I discovered myself listening to the debate and, therefore, listening to the arguments of the hon. Member for Sedgefield (Mr. Blair) and of my hon. Friend the Member for Grantham (Mr. Hogg). I have been convinced by the arguments that the Government must be wrong if they do not accept new clause 2.
      For some years, we have been saying, first, that there will be a big expansion of new businesses, which will be the Government's salvation and will do us much good at the geneal election because it will provide jobs; secondly, that we should do everything we can to support new businesses in every way. We have produced various documents, as my hon. Friend the Member for Grantham and the hon. Member for Sedgefield have mentioned. We wanted to get off the backs of small businesses. We know that our constituents have problems with VAT from time to time. VAT must be collected and no one wants to make it easy for people to get out of paying it. I am not on the side of those who want to try to get round paying the tax.
      We have a tribunal procedure. Presumably the merit of the tribunal is that it is flexible. If it is to make decisions

      197
      on the basis of hard lines—where it does not get the chance to mitigate —it will not have the opportunity to deal with cases that may be different. If it must simply take a hard line, because that is what the Act says—the idea of the tribunal is to help businesses and to help the Government to get their proper tax income—it will be put into a difficult position and will not be able to do its job properly.
      My right hon. Friend the Financial Secretary to the Treasury should consider that and concede the new clause, or at least propose one in its place, for two reasons. First, it will help the tribunal to provide justice. Secondly, it will help small businesses, which may have made errors and which may have sought to put those errors right, when they come to the tribunal. The tribunal will be able to recognise that fact and deal with those businesses and business men differently from those who have skived and got round the VAT regulations.
      If we wish to help small businesses, we must be seen to help them. The Treasury has an opportunity to do that today. I hope that it will take that opportunity, because it is within the guidelines of the Government's policy. If it does not take that opportunity, it will lead people to say, "What is all this talk about? When a Minister gets the chance to turn talk into action, he does not do it."
      Mr. Harry Cohen: I do not wish to repeat the excellent points that have already been made. On the point of small businesses being affected and the Government's claims, I would point out that there have been record bankruptcies of small businesses under this Government. The imposition and high increase of VAT has been a factor in that.
      A letter from the Minister of State, Treasury went out to hon. Members only this week. In effect, it said "You will have complaints about VAT. Here is the answer.- It is a complicated letter which deals with many complicated issues. Yet here we are penalising people because they honestly fall foul of the law. It might often be a matter of ignorance. Tribunal officials acknowledge that the mistakes are often innocent mistakes, yet people are penalised for them. The letter from the Minister of State is a case for the clause being accepted. As has been stated, there should be the opportunity for mitigating circumstances to be taken into account by the tribunal or the commissioners where the circumstances are just and reasonable. That is what is contained in the amendment.
      The tribunal must also take into account the hardship that small businesses face. I began by mentioning the record number of bankruptcies. Some small businesses are close to bankruptcy, and the penalties might tilt them over the edge, as several hundreds of pounds can be involved in each case.
      I endorse and repeat the comments made by my hon. Friend the Member for Sedgefield and by Conservative Members. In the interests of natural justice, the Government should accept the new clause.
      Mr. Norman Lamont: This subject was debated several times in Standing Committee and at the Report stage of the Finance Bill 1985, and again in Committee this year. The hon. Member for Sedgefield (Mr. Blair) reminded the House that the Keith committee on the enforcement powers of the Revenue Departments, which was set up by my right hon. and learned Friend, the Secretary of State for Foreign and Commonwealth Affairs when he was
      198
      Chancellor, reported on VAT in early 1983. The present position is based on the recommendations of the Keith committee, and its conclusions, which were generally in favour, after examining the subject, of fixing penalties for specific defaults. That is the position now and that is how we arrived at the decision to decriminalise offences.
      As the hon. Member for Sedgefield recalled, the Government held a consultation exercise on the Keith committee's recommendations. In November 1984, we issued a consultation document which explained our intention to legislate in 1985. We put forward detailed clauses for comment.
      The Keith committee wanted to balance the proposed strengthening of some of the powers of the Customs and Excise with the decriminalisation of most VAT offences and other forms of increased protection for the taxpayer. In preparing the 1984 consultation document, and between the consultation exercise and the publication of the 1985 Finance Bill, we made some important changes to the Keith proposals in favour of the taxpayer, including perhaps the most important change, the introduction of the statutory defence of reasonable excuse, which had not been generally recommended by Keith. The Finance Act 1985 was, therefore, a carefully balanced package which was introduced after full consultation with taxpayers and their representatives.
      In its balanced approach, the Keith committee recognised that two particular problems concerning VAT for the Government were late payment and inaccurate accounting for the tax. The two best-known examples of these are that the average amount of VAT outstanding at any one time is about £1,200 million and the net underdeclarations of VAT found by Customs and Excise officials on control visits to business premises amounted to almost £500 million in 1985–86. Customs and Excise needed to have effective powers to encourage more timely and accurate compliance on these and other important aspects of the tax. The Keith committee therefore proposed a regime of surcharge, interest and civil penalties specifically for that purpose. Today we are discussing the civil penalties charged under section 15 of the Finance Act 1985 and especially the penalty on belated notification of liability to register for VAT.
      Consistently with the Keith committee's other compliance proposals, the belated registration penalty is dependent, not on subjective factors, but on an objective test as to whether the registration is late. There is a right to appeal to the VAT tribunals on grounds of reasonable excuse or against the liability to register, or if Customs and Excise appears to have made an error in its calculation of the penalty assessment. Beyond that the penalty is fixed at the rate of 30 per cent. of the tax liability for the period by which the registration is late. There is no provision for mitigation.
      5.30 pm
      The hon. Member for Sedgefield referred to Keith's views on mitigation. It is true that Keith recommended that Customs and Excise should have the general power to mitigate penalties, but he also said that the use of that power should be restricted to exceptional cases. Keith had proposed that mitigation should be limited to exceptional cases of financial hardship, injustice or difficult points of tax liability. The last item on that list is fully covered by "reasonable excuse". For the other two, as my right hon.

      199
      Friend explained last year, Customs and Excise already have the power, subject to the supervision of the Public Accounts Committee and the Comptroller and Auditor General, to remit tax extra-statutorily in wholly exceptional cases on grounds of equity or compassion. It is the Government's view that those powers should be adequate similarly to cover penalties, interest and surcharge in such exceptional circumstances.
      The hon. Member for Sedgefield has argued that there should be a power to reduce the penalty in particular circumstances to recognise the different weights of offence, including the question of the taxpayers' co-operation with the Customs and Excise investigation. I can assure him that any liability to late registration penalty — and, indeed, most of the other civil penalties—will be decided by simple objective tests concerned with the lateness of the registration. It follows that the quicker the taxpayer cooperates with Customs and Excise and discloses his late registration, the less will be the turnover that he will have accumulated while unregistered. The hon. Member for Sedgefield may not have said this today, but he will forgive me if I have been reading in Hansard some of the speeches that he made on other occasions. I observe that the hon. Gentleman nods. I am sure that he thinks that it is not a very good argument—indeed, I agree with him in that—but he will forgive me for having knocked down the argument that he put forward.
      Mr. Douglas Hogg: In almost every penalty that I can think of within the criminal or civil law, the authority that has the power to impose the penalty has the power to vary a penalty in accordance with the degree of culpability involved. For the life of me, I cannot see why that general principle should not apply to late registration.
      Mr. Lamont: My hon. Friend has made his position very clear on this. That is the view that he has taken, and he says that there should be no exception to that principle. This departure from that principle was fully debated and paraded with the Keith recommendations. Although my hon. Friend does not like the situation, it should not be a novelty to him. It has been in position since the recommendations of Keith, and it was because of the need to achieve greater compliance that the regime was adopted.
      As my hon. Friend may know, I pick up this point simply because the hon. Member for Truro (Mr. Penhaligon) referred to the difference between the treatment of VAT and the treatment of income tax. Keith is being implemented in stages. There are other parts of Keith that the Government are still considering and that will be implemented this year. The question of the Keith recommendations on income tax is being examined by the Government. The implementation of Keith is happening by stages.
      Sir Kenneth Lewis: Time has moved on since then. We do not stick to a line if a position is reached where we think that modification might be an advantage. It is some time now since Keith. We have decided as a Government that we are going to be as helpful as we can to small businesses. Surely the Government can decide that, although they took a line at the time which they say was effective, they do not now need to stick to that line because time has moved on, and they can give the tribunal the flexibility that it says it would like.
      Mr. Lamont: I note what my hon. Friend says, but not very much time has moved on. I shall be coming to the question of a review of these procedures later in my remarks, if my hon. Friend will bear with me.
      I certainly agree that the effects would be limited if the power of mitigation was limited to section 15 penalties alone, as proposed in the new clause. I am not sure whether the hon. Member for Sedgefield would go further and would want to see mitigation much more widely. I ask the House to remember that there are two sides to the question of non-compliance with VAT-registration requirements. We have heard about certain cases in which penalties for late registration have been imposed. The hon. Gentleman may care to reflect that, while these businesses remained unregistered, many of their commercial competitors were already registered and having to account for VAT. We receive many complaints, particularly from the building and catering industries, about the problems that VAT-registered traders can face in competing for business with unregistered competitors. There is a great deal of pressure from the business community for compliance and fair competition. Non-compliance is not fair competition. That has to be borne in mind.
      Mr. Blair: Nobody is suggesting that there should not be compliance with VAT regulations— of course there should be. The situations with which we are dealing are those in which there has been an innocent non-compliance. It should always be borne in mind that the power of mitigation depends precisely on the VAT tribunal commissioners thinking it right to exercise it.
      Mr. Lamont: I agree with what the hon. Gentleman was saying, and I was not in any way suggesting that he felt otherwise. The question is whether effective compliance can be achieved if we abandon the method that Keith concluded was necessary. Keith recommended mitigation in a very prescribed circumstance. The Government came to the conclusion that was not necessary after giving effect to the other alteration involving "reasonable excuse" that the Minister of State announced in Committee last year.
      We have had now almost a full year's experience in the operation of belated registration penalties. In the period from Royal Assent last year to 30 June this year there were about 172,000 new registrations for VAT. Belated registration penalties under section 15 have been imposed in about 3,700 cases, a rate of just over 2 per cent. of all new registrations in the period. Customs and Excise has accepted pleas of reasonable excuse for late registration in a further 187 cases.
      That brings me to the purpose of the new system, which sometimes seems to be overlooked. The purpose is not, of course, to see how many penalties can be imposed but to improve compliance with the law. Although my hon. Friend the Member for Grantham (Mr. Hogg) was sceptical about it, Customs and Excise says that it has detected a marked improvement in compliance during the last year. There is no doubt that many potential taxpayers and, perhaps more importantly, their professional advisers are increasingly realising that timely compliance with the registration requirements is important. It is by the yardstick of improvement in compliance that the penalty system must be ultimately judged.
      My hon. Friends the Members for Grantham and for Stamford and Spalding (Sir K. Lewis) said that sufficient time had elapsed and that the time had come for

      201
      modification. When my right hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe) was Minister of State last year he gave an undertaking that the new penalty system would be carefully monitored. That reassurance was reiterated in the White Paper. Indeed, in paragraph 6.5 there is a specific commitment that
      "the system as a whole, including the operation of penalties and of reasonable excuse, will be reviewed by Ministers, before the 1988 budget, after a full year's practical experience."
      I repeat that the review will be after a full year's practical experience, because we wish also to examine the effects of the surcharge that is to be applied in the case of persistent underpayment as from 1 October 1986. A single review covering both phases is justifiable, since a commitment has been given that both of these matters, taken together, will he reviewed.
      Mr. Douglas Hogg: Will my right hon. Friend confirm that the review will extend not only to the mechanics but to the justice of what is being done?
      Mr. Lamont: I am sure that that will be very carefully considered. We shall pay careful attention to all the representations.
      We stand by that commitment, which offers safeguards for the long-term interests of the taxpayer. In the meantime, the taxpayer is benefiting substantially from the reasonable excuse provisions that were introduced, even though they had not been generally recommended by Keith.
      Sir Kenneth Lewis: I believe that 136 out of 3,000 appeals were allowed under the reasonable excuse provisions. That is not a very high figure. Will my right hon. Friend try to persuade the commissioners to be more realistic in placing reasonable excuse at the forefront of their considerations?
      Mr. Lamont: About 5 per cent. of potential cases were allowed, but what has been said in this debate will certainly be noted.
      The pursuit of the alternative of mitigation is not right. Mitigation would serve only to erode the valuable tax compliance benefits of the package and would open the gates to appeals. We should then lose many of the benefits that we arc now beginning to gain.
      I understand the unease and the points that have been made on both sides of the House. I assure my hon. Friends the Members for Grantham and for Stamford and Spalding that the commitment to a review before the 1988 Budget stands. Therefore, I cannot advise my hon. Friends to accept the Opposition's new clause.
      Mr. Blair: The Financial Secretary to the Treasury says that there has been much greater compliance with VAT registration since the introduction of the Keith committee's recommendations. With respect, I do not understand how the absence of the power of mitigation can be said to have affected compliance under the VAT regulations. The point made by the hon. Member for Grantham (Mr. Hogg) is fundamental, but I hope he will forgive me if I do not pursue it.
      I realise that the existence of automatic penalties means that there has been an increase in compliance, but the new clause does not touch the automatic penalties system. That remains in being. Therefore, the Keith committee's fundamental proposal will be untouched by the new clause. It is ludicrous to suggest that the existence of a
      202
      power of mitigation will encourage people not to comply with the original law, yet that is the effect of what the Financial Secretary has said.
      It is not the case that we have no experience upon which to form a judgment. During the last few months there have been cases before the value added tax tribunal in which not just the president but the president and three different chairmen have specifically pointed to the injustice of the absence of a power to mitigate.
      As the hon. Member for Stamford and Spalding (Sir. K. Lewis) said, we have the benefit of experience. We know that there is an injustice here. That injustice is recognised not merely by traders but by those who practise in the value added tax area. It is not good enough to ask us to await the outcome of a review that is to take place in a few months' time which will cover a whole range of different matters. An injustice exists now and we have been provided with an opportunity to remedy it.
      If we really care about small businesses and if what we are saying is not mere rhetoric but has a touch of reality about it, those who go through the Lobby and vote for the new clause will be pinning their colours to the mast of small businesses, while those who do not will forfeit their right to be called the friends of small businesses.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 166, Noes 225.

      Division No. 247]

      [5.45 pm

      AYES

      Adams, Allen (Paisley N)

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

      Alton, David

      Deakins, Eric

      Archer, Rt Hon Peter

      Dewar, Donald

      Ashdown, Paddy

      Dixon, Donald

      Ashley, Rt Hon Jack

      Douglas, Dick

      Ashton, Joe

      Duffy, A. E. P.

      Atkinson, N. (Tottenham)

      Dunwoody, Hon Mrs G.

      Banks, Tony (Newham NW)

      Eadie, Alex

      Barnett, Guy

      Eastham, Ken

      Beckett, Mrs Margaret

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

      Beith, A. J.

      Evans, John (St. Helens N)

      Bell, Stuart

      Ewing, Harry

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

      Fatchett, Derek

      Bidwell, Sydney

      Faulds, Andrew

      Blair, Anthony

      Field, Frank (Birkenhead)

      Bray, Dr Jeremy

      Fields, T. (L'pool Broad Gn)

      Brown, Gordon (D'f'mline E)

      Fisher, Mark

      Brown, Hugh D. (Provan)

      Flannery, Martin

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

      Foot. Rt Hon Michael

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

      Forrester, John

      Bruce, Malcolm

      Foster, Derek

      Buchan, Norman

      Foulkes, George

      Callaghan, Jim (Heyw'd & M)

      Fraser, J. (Norwood)

      Campbell-Savours, Dale

      Freud, Clement

      Canavan, Dennis

      George, Bruce

      Carlile, Alexander (Montg'y)

      Gilbert, Rt Hon Dr John

      Carter-Jones, Lewis

      Gould, Bryan

      Cartwright, John

      Gourlay, Harry

      Clark, Dr David (S Shields)

      Hamilton, W. W. (Fife Central)

      Clarke, Thomas

      Hancock, Michael

      Clay, Robert

      Hardy, Peter

      Clelland, David Gordon

      Harrison, Rt Hon Walter

      Clwyd, Mrs Ann

      Haynes, Frank

      Cocks, Rt Hon M. (Bristol S)

      Heffer, Eric S.

      Cohen, Harry

      Hogg, Hon Douglas (Gr'th'm)

      Coleman, Donald

      Hogg, N, (C'nauld & Kilsyth)

      Cook, Frank (Stockton North)

      Home Robertson, John

      Cook, Robin F. (Livingston)

      Hoyle, Douglas

      Corbett, Robin

      Hughes, Dr Mark (Durham)

      Corbyn, Jeremy

      Hughes, Roy (Newport East)

      Craigen, J. M.

      Hughes, Sean (Knowsley S)

      Cunningham, Dr John

      Janner, Hon Greville

      Dalyell, Tam

      John, Brynmor

      Davies, Ronald (Caerphilly)

      Johnston, Sir Russell

      203

      Jones, Barry (Alyn & Deeside)

      Richardson, Ms Jo

      Kaufman, Rt Hon Gerald

      Roberts, Ernest (Hackney N)

      Kennedy, Charles

      Robertson, George

      Kilroy-Silk, Robert

      Robinson, G. (Coventry NW)

      Kirkwood, Archy

      Rogers, Allan

      Lambie, David

      Rooker, J. W.

      Leighton, Ronald

      Ross, Ernest (Dundee W)

      Lewis, Sir Kenneth (Stamf'd)

      Rowlands, Ted

      Lewis, Ron (Carlisle)

      Ryman, John

      Lewis, Terence (Worsley)

      Sheerman, Barry

      Livsey, Richard

      Sheldon, Rt Hon R.

      Lloyd, Tony (Stretford)

      Shore, Rt Hon Peter

      McCartney, Hugh

      Short, Ms Clare (Ladywood)

      McDonald, Dr Oonagh

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

      McGuire, Michael

      Silkin, Rt Hon J.

      McKay, Allen (Penistone)

      Skinner, Dennis

      McKelvey, William

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

      MacKenzie, Rt Hon Gregor

      Spearing, Nigel

      McTaggart, Robert

      Steel, Rt Hon David

      McWilliam, John

      Stewart, Rt Hon D. (W Isles)

      Madden, Max

      Strang, Gavin

      Marek, Dr John

      Straw, Jack

      Maxton, John

      Thomas, Dafydd (Merioneth)

      Meadowcroft, Michael

      Thomas, Dr R. (Carmarthen)

      Michie, William

      Thompson, J. (Wansbeck)

      Millan, Rt Hon Bruce

      Tinn, James

      Miller, Dr M. S. (E Kilbride)

      Torney, Tom

      Mitchell, Austin (G't Grimsby)

      Wainwright, R.

      Morris, Rt Hon A. (W'shawe)

      Wardell, Gareth (Gower)

      O'Neill, Martin

      Wareing, Robert

      Orme, Rt Hon Stanley

      Welsh, Michael

      Park, George

      Wigley, Dafydd

      Parry, Robert

      Williams, Rt Hon A.

      Pavitt, Laurie

      Wilson, Gordon

      Pendry, Tom

      Winnick, David

      Penhaligon, David

      Woodall, Alec

      Pike, Peter

      Wrigglesworth, Ian

      Powell, Raymond (Ogmore)

      Radice, Giles

      Tellers for the Ayes

      Randall, Stuart

      Mr. James Hamilton and

      Rees, Rt Hon M. (Leeds S)

      Mr. Lawrence Cunliffe.

      NOES

      Adley, Robert

      Dunn, Robert

      Atkins, Rt Hon Sir H.

      Durant, Tony

      Banks, Robert (Harrogate)

      Dykes, Hugh

      Batiste, Spencer

      Emery, Sir Peter

      Beaumont-Dark, Anthony

      Farr, Sir John

      Bennett, Rt Hon Sir Frederic

      Favell, Anthony

      Best, Keith

      Fenner, Mrs Peggy

      Biggs-Davison, Sir John

      Finsberg, Sir Geoffrey

      Blackburn, John

      Fookes, Miss Janet

      Boscawen, Hon Robert

      Forsyth, Michael (Stirling)

      Bottomley, Mrs Virginia

      Forth, Eric

      Bowden, Gerald (Dulwich)

      Fowler, Rt Hon Norman

      Brandon-Bravo, Martin

      Fox, Sir Marcus

      Brown, M. (Brigg & Cl'thpes)

      Fraser, Peter (Angus East)

      Bruinvels, Peter

      Freeman, Roger

      Bryan, Sir Paul

      Galley, Roy

      Buchanan-Smith, Rt Hon A.

      Gardiner, George (Reigate)

      Budgen, Nick

      Gardner, Sir Edward (Fylde)

      Burt, Alistair

      Garel-Jones, Tristan

      Butterfill, John

      Gilmour, Rt Hon Sir Ian

      Carlisle, John (Luton N)

      Glyn, Dr Alan

      Carlisle, Kenneth (Lincoln)

      Gow, Ian

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

      Gower, Sir Raymond

      Carttiss, Michael

      Greenway, Harry

      Chope, Christopher

      Gregory, Conal

      Churchill, W. S.

      Griffiths, Sir Eldon

      Clark, Dr Michael (Rochford)

      Griffiths, Peter (Portsm'th N)

      Clegg, Sir Walter

      Grylls, Michael

      Cockeram, Eric

      Hamilton, Hon A. (Epsom)

      Colvin, Michael

      Hampson, Dr Keith

      Conway, Derek

      Hanley, Jeremy

      Coombs, Simon

      Hannam, John

      Cope, John

      Hargreaves, Kenneth

      Corrie, John

      Harris, David

      Critchley, Julian

      Harvey, Robert

      Currie, Mrs Edwina

      Hawkins, C. (High Peak)

      Douglas-Hamilton, Lord J.

      Hawkins, Sir Paul (N'folk SW)

      204

      Hawksley, Warren

      Pollock, Alexander

      Hayes, J.

      Portillo, Michael

      Hayhoe, Rt Hon Barney

      Powley, John

      Hayward, Robert

      Prentice, Rt Hon Reg

      Heathcoat-Amory, David

      Proctor, K. Harvey

      Heddle, John

      Raffan, Keith

      Henderson, Barry

      Renton, Tim

      Hickmet, Richard

      Rhodes James, Robert

      Hicks, Robert

      Rhys Williams, Sir Brandon

      Higgins, Rt Hon Terence L.

      Ridsdale, Sir Julian

      Hind, Kenneth

      Robinson, Mark (N'port W)

      Hirst, Michael

      Roe, Mrs Marion

      Holland, Sir Philip (Gedling)

      Rowe, Andrew

      Hordern, Sir Peter

      Ryder, Richard

      Howard, Michael

      Sackville, Hon Thomas

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

      Sainsbury, Hon Timothy

      Howarth, Gerald (Cannock)

      Sayeed, Jonathan

      Howell, Ralph (Norfolk, N)

      Shaw, Giles (Pudsey)

      Hunt, David (Wirral W)

      Shaw, Sir Michael (Scarb')

      Hunter, Andrew

      Shepherd, Colin (Hereford)

      Irving, Charles

      Silvester, Fred

      Jackson, Robert

      Sims, Roger

      Jessel, Toby

      Skeet, Sir Trevor

      Johnson Smith, Sir Geoffrey

      Smith, Tim (Beaconsfield)

      Jones, Gwilym (Cardiff N)

      Soames, Hon Nicholas

      Jones, Robert (Herts W)

      Speed, Keith

      Kellett-Bowman, Mrs Elaine

      Spencer, Derek

      Kershaw, Sir Anthony

      Spicer, Jim (Dorset W)

      Key, Robert

      Spicer, Michael (S Worcs)

      Knight, Greg (Derby N)

      Stanbrook, Ivor

      Knight, Dame Jill (Edgbaston)

      Stanley, Rt Hon John

      Knowles, Michael

      Steen, Anthony

      Lamont, Rt Hon Norman

      Stern, Michael

      Latham, Michael

      Stevens, Lewis (Nuneaton)

      Lawler, Geoffrey

      Stewart, Allan (Eastwood)

      Lawrence, Ivan

      Stewart, Andrew (Sherwood)

      Leigh, Edward (Gainsbor'gh)

      Sumberg, David

      Lennox-Boyd, Hon Mark

      Tapsell, Sir Peter

      Lester, Jim

      Tebbit, Rt Hon Norman

      Lilley, Peter

      Temple-Morris, Peter

      Lloyd, Peter (Fareham)

      Terlezki, Stefan

      Lord, Michael

      Thomas, Rt Hon Peter

      MacGregor, Rt Hon John

      Thompson, Donald (Calder V)

      MacKay, Andrew (Berkshire)

      Thompson, Patrick (N'ich N)

      McLoughlin, Patrick

      Thorne, Neil (Ilford S)

      McNair-Wilson, M. (N'bury)

      Thornton, Malcolm

      Madel, David

      Thurnham, Peter

      Major, John

      Townend, John (Bridlington)

      Malins, Humfrey

      Townsend, Cyril D. (B'heath)

      Marland, Paul

      Twinn, Dr Ian

      Marlow, Antony

      Vaughan, Sir Gerard

      Marshall, Michael (Arundel)

      Viggers, Peter

      Mather, Carol

      Wakeham, Rt Hon John

      Mayhew, Sir Patrick

      Walker, Bill (T'side N)

      Merchant, Piers

      Wall, Sir Patrick

      Meyer, Sir Anthony

      Waller, Gary

      Mills, Iain (Meriden)

      Ward, John

      Mills, Sir Peter (West Devon)

      Wardle, C. (Bexhill)

      Moate, Roger

      Watson, John

      Morris, M. (N'hampton S)

      Watts, John

      Morrison, Hon C. (Devizes)

      Wells, Bowen (Hertford)

      Moynihan, Hon C.

      Wells, Sir John (Maidstone)

      Murphy, Christopher

      Wheeler, John

      Neale, Gerrard

      Whitfield, John

      Nelson, Anthony

      Whitney, Raymond

      Neubert, Michael

      Wilkinson, John

      Newton, Tony

      Winterton, Mrs Ann

      Nicholls, Patrick

      Winterton, Nicholas

      Norris, Steven

      Wolfson, Mark

      Onslow, Cranley

      Wood, Timothy

      Osborn, Sir John

      Yeo, Tim

      Ottaway, Richard

      Young, Sir George (Acton)

      Page, Sir John (Harrow W)

      Younger, Rt Hon George

      Page, Richard (Herts SW)

      Patten, Christopher (Bath)

      Tellers for the Noes:

      Pattie, Geoffrey

      Mr. Francis Maude and

      Pawsey, James

      Mr. Gerald Malone.

      Percival, Rt Hon Sir Ian

      Question accordingly negatived.

    New Clause 4

      CAPITAL ALLOWANCES—RELIEF FOR EXPENDITURE TO PROVIDE ACCESS FOR DISABLED WORKERS
      `(1) If a person carrying on a trade or profession has on or after 1st August 1986 incurred expenditure on building works or equipment designed to facilitate access to his premises by disabled workers and an allowance or deduction in respect of the expenditure could not, apart from this section, be made in taxing the trade or profession or computing the profits or gains arising from it, Chapter I of Part III of the Finance Act 1971 shall apply as if the expenditure were capital expenditure incurred on the provision of plant or machinery for the purposes of the trade or profession, and as if the machinery or plant had, in consequence of his incurring the expenditure, belonged to him; and as if the disposal value of the plant or machinery were nil.
      (2) This section shall be construed as if contained in Chapter I of Part Ill of the Finance Act 1971.
      (3) In this section "disabled workers" means persons, being registered disabled under the Disabled Persons (Employment) Act 1944, who are engaged or employed to work on the premises in question, or who could he engaged or employed to work on the premises in question but for being disabled, and whose mobility is restricted by physical injury or infirmity.'.— [Mr. Blair.]
      Brought up, and read the First time.
      Mr. Blair: I beg to move, That the clause be read a Second time.
      The clause will enable an employer to claim capital allowances for alterations to his premises or for the construction of premises designed to assist access to the workplace for disabled workers. The capital allowance given under the new clause would be 25 per cent. on a reducing balance basis. This clause is limited in scope, but it is extremely important for the rights of disabled people. It covers only access, but access is an important element in disabled people being able to obtain and retain employment. For example, it would cover the installation of wheel ramps, specially widened doors, grab rails and braille signs.
      At present, capital allowance relief is given to an employer for plant and machinery. That covers everything. It could, for example, cover the installation of a lift for the use of disabled people. That is merely coincidental, because the relief is given for plant and machinery generally. Alternatively, an employer could claim an industrial buildings allowance, and that would give him some form of tax relief for the construction of a building. That simply coincides with general relief, but it may contain some element of help for disabled people. However, it does not cover, for example, shop or office units and it does not apply if an industrial building is already in use. The new clause would allow the employer to claim capital allowance relief if he was altering or constructing premises so that disabled people could gain access to them. We believe that it would be of significant benefit to disabled people.
      6 pm
      It is worth pointing to the items upon which employers already claim capital allowance relief. The chairman's company car is treated as an item of plant and machinery for which capital allowances are available. The chairman's cocktail cabinet, and the Wedgwood or Royal Doulton
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      teacups in his room can be treated as items for which capital allowances are available. Apparently, even the potted plants can be designated as plant and machinery and are thus eligible for capital allowance relief. If capital allowance relief can be claimed on all those things, why should specially constructed access for the disabled fall outside the scope of that tax relief? Grants of up to £6,000 are already available to provide access for the disabled, and grants can be claimed through the disablement advisory service. Thus, some help is already given to disabled people when it comes to obtaining access to their places of employment.
      Perhaps I could point to the limitations on the grant system operated through the Manpower Services Commission. First, those grants are available only if access is being specially constructed in order to retain or recruit a specific person. In other words, a grant towards constructing access to the workplace can be obtained only if a specific person is targeted, either because the employer wants to employ him or because he wants to retain him. Thus, the employer has to have a person in mind before he can apply for the grant. If the grant is obtained, the works must be carried out before the person can gain access to the workplace.
      Secondly, I should be grateful if the Financial Secretary could confirm that those disablement grants can be sanctioned up to a limit of only £500 at local level. I understand that for sums above that level there must be referral to headquarters, which requires at least three estimates of the work proposed before allowing the employer to carry it out.
      There is a general feeling among disabled groups that there are significant bureaucratic obstructions to access to the workplace being provided. I understand from the figures that I have obtained from the MSC that, in the last year for which figures are available, only 165 such applications were granted. We therefore believe that a more general approach is necessary.
      There is a twofold advantage to using capital allowances. First, an employer can change the work premises or construct access for the disabled without having to target a particular person. In other words, he could alter his premises, and the disabled person would then compete for a job within an environment of equality of opportunity. That is an important reason for seeing the capital allowance system as a useful complement to the grants that are already available through the MSC.
      The second advantage may seem somewhat esoteric to my hon. Friends, but it is important. At present, the grant system operated through the MSC is advertised in a series of booklets put out by the MSC or by the Department of Employment. But there might be more of an incentive if accountants knew that capital allowance relief was available to employers if they wanted to take advantage of it. If an employer was thinking of altering his premises, the accountant might suggest that special access for the disabled could he included as plant and machinery. That employer would then create the premises that would enable a disabled person to compete for a job on equal terms with a person who does not suffer from any disability. There would also be an advantage in the byproduct for the customer.
      It is worth noting the number of people who suffer from some disability. The 1983 household survey showed that about 19 per cent. of working people reckoned that they were limited in some way through disability. I understand

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      that the number of those registered disabled under the 1944 Act is well in excess of 400,000. That puts into perspective the 165 applications for special grants made through the MSC.
      Some of my hon. Friends may raise the question of quotas, so I shall say only that it is extraordinary that there have been 10 prosecutions since 1944 for breaching statutory obligations in relation to the quota system. Since March 1979 there has not been a single prosecution for breach of the quota regulations. Therefore, one is entitled to say that we must not be complacent about the incentives given to disabled people.
      Thanks in great measure to the activities of my hon. Friends, the profile of the disabled and public awareness of the problems that they face have been heightened. I make no apology for saying that this is the right time for this new clause. Today, Royal Assent has been given to the Disabled Persons (Services, Consultation and Representation) Bill, which was introduced by my hon. Friend the Member for Monklands, West (Mr. Clarke). There is no more fitting time to move this new clause. It is an earnest of our good intentions towards the disabled, and I have pleasure in commending it to the House.
      Mr. Dafydd Wigley: I am pleased to support the new clause. If I had seen it early enough, I would have added my name to it. It represents a step in the right direction, although its scope within this Bill must of necessity be limited.
      The question of developing policies to help to integrate disabled people into the workplace has been underlined over the years. It was highlighted in section 8(2)(a) of the Chronically Sick and Disabled Persons Act 1970, which the right hon. Member for Manchester, Wythenshawe (Mr. Morris) did so much work to promote. It was also highlighted in the Snowdon report on integrating the disabled. It is worth quoting the recommendations of the Snowdon working party. No. 20 says:
      "The premise on which our Sub-Committee's philosophy is based is that employment itself is crucial to the integration of disabled persons of employable age within the life of the community, and that such employment should, so far as is practicable, be as similar as possible to that of able-bodied people in respect of conditions of work, status and pay."
      Recommendation No. 37 stated:
      "There is need to improve the access of places to work for disabled people. In some instances the provision of hostel accommodation is advocated—in others financial assistance to make it easier for the disabled people to move nearer to their place of work."
      Obviously, the ability of disabled people to get to their places of work and to be taken on was a major factor in the working party's thinking. The report was published in 1976, yet we have made relatively little progress.
      There have been changes in building regulations, and so on, but there is a general feeling that the time may be right to look to the carrot as well as to the whip of regulations and restrictive legislation. Whether the carrot consists of grants or tax incentives, it must be considered. The legislation that has been put on the statute book in recent years has largely dealt with existing factories, offices or shops, and has sought to ensure that new buildings provide access for disabled people.
      However, we have not been able to attack in as meaningful a way as we should have the problem of existing buildings. As they represent 95 per cent. of all
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      construction, we must consider ways of improving access to them for disabled people. That may be one important way to help, although it is not the only way. If the allowances which the hon. Member for Sedgefield (Mr. Blair) referred to when moving the new clause arc available for the range of expenditures that he highlighted, both sides of the House would feel that the grants should be available to improve facilities for disabled people.
      The point made by the hon. Member for Sedgefield about the need to get this right before individuals' specific problems are highlighted is most important. It is wrong that disabled people should be helped only when the problem arises. By definition, that makes disabled people abnormal. We should have met their needs before a question of non-discrimination or discrimination arose.
      I have drawn the attention of the House previously to the slogan used in Sweden and I make no apologies for referring to it again. In Sweden they say that handicap is a relationship between a disabled person and his or her environment, be that the physical environment, social environment or the psychological environment. We may not be able to do much about a disability, but by tackling the physical environment in the context of the new clause we can do something to prevent that disability from becoming a handicap. We have an opportunity in the Bill to do something about this problem. There is a need for an attack on the problem in existing buildings, and I commend the new clause to the House.
      Mr. Lewis Carter-Jones: I hope that the Financial Secretary to the Treasury will not be misled by his officials in this matter. Some of us have lived with this problem for 22 years. We are surprised when these matters are brought before us and the interpretation of these problems by officers and officials differs from our own. That is why it is important that we should accept the new clause. The Minister of State, Treasury, who handles VAT problems in the Treasury, can relate alarming cases where VAT has applied to appliances and building regulations in relation to disability. I pay tribute to the Financial Secretary's colleague for his efforts to undo the evil that has been done by officials misinterpreting the regulations in that respect. That is why the problem must be countered by a copper-bottomed new clause as part of the Bill.
      I hope that the Financial Secretary will not turn down this new clause on the ground that it is unnecessary. That was the excuse used when we tried to get on to company records the provision that a statement by the directors must be contained in the annual report as to what they are doing on behalf of disabled people. The Financial Secretary is a kindly man and will think that my remarks are unnecessary. I can assure him on behalf of my hon. Friends and on behalf of his Conservative colleagues that the interpretation happens far too often to the disadvantage of the disabled.
      I should like to define the nature of the problem for the benefit of the Financial Secretary. Unemployment among young people with handicap is twice that of their non-handicapped peers. The national child development study found that over a two-year period 10 times as many young handicapped people had been out of work for six months or more than had their non-handicapped fellows.
      I am wearing the Rehab International tie. The symbol on the tie has become the symbol of disability in Britain. In truth, when Rehab International developed this symbol it was meant to be a symbol of access. Access is the most

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      important factor involved in obtaining a job. There is the main problem of access to premises and the problem of access to toilets. There is also a problem about providing training areas and training equipment.
      The Financial Secretary to the Treasury may do his right hon. and learned Friend the Paymaster General a favour if he allows the new clause to be passed because it may relieve the pressure on the quota system for the employment of disabled people. That might indirectly help the Paymaster General to sustain the quota and so avoid attacks from both sides of the House because the 3 per cent. rule is not being implemented.
      My hon. Friend the Member for Monklands, West (Mr Clarke) has asked me to apologise to the House for his absence. He had a great success today as the Royal Assent was given to his Bill. I gather that he has been asked to account for that in another place. I hope that the House will accept his profuse apologies. I would like to deal briefly with the problem of access for mentally handicapped people.
      MENCAP has a scheme called the Pathway employment services. That accounts for a substantial number of new jobs for mentally and physically handicapped people. MENCAP argues that the new clause is absolutely essential for that purpose. Let me quote what Mary Holland of MENCAP said in a letter to me:
      "Physical barriers to employment for people with handicap can be overturned: social barriers created by ignorance and myth will take longer. The first step must be to ensure that people with disabilities are encouraged positively to take their place in the work force. Financial incentives will help employers to provide suitable working environments which will in turn ensure that we practise rather than preach the reality of finding work for disabled people."
      6.15 pm
      The new clause encapsulates the feelings of many of us about the opportunities of work for disabled people. The Government have contributed to that and the Council of Europe has produced a coherent policy for the rehabilitation of disabled people. Experts from this country and Northern Ireland have played a part in this.
      MIND states that if we are to encourage employers and workers to help disabled people to enter employment and rehabilitation, we have
      "to encourage employers generally to facilitate the rehabilitation of disabled workers by making suitable work available to them, if necessary after making adaptations to machinery or equipment and by giving them the opportunity to return to suitable types of employment as soon as they are medically fit for work, although not necessarily fit enough to resume their former occupation."
      I do not know what messages the Financial Secretary to the Treasury is receiving from elsewhere in the House. However, I hope that those messages do not encourage him to turn down the new clause. Many of us, as you are aware. Mr. Speaker, must try, with heavy hearts, to influence Ministers who mean well but who are told by their advisers that they cannot do something because it is not in the Act. The new clause offers the Financial Secretary the chance to get this provision in the Act.
      Mr. Robert N. Wareing: I am sure that the new clause will be commended by all the organisations representing disabled people as a much needed clause to enable the 3 per cent. quota under the Disabled Persons (Employment) Act 1944 to be more readily achieved. At present, more than 65 per cent. of
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      firms in this country are outside of the law. They are not taking the 3 per cent. quota. Indeed, not one Government Department abides by the quota set in the 1944 Act.
      One of the arguments often put forward by the Government when disabled people are discussed and efforts are being made to help them is that the term "disabled workers" needs to be defined. It is defined on this occasion. My hon. Friend the Member for Sedgefield (Mr. Blair) has said that there are 430,000 registered disabled, but there are more than 5·5 million who are either physically or mentally handicapped. At present, there is no incentive to register. Nothing is gained by registering. If the new clause were accepted and implemented, it would provide encouragement to register if nothing else.
      There is a wide variety of housing grants available to the disabled but there is no comprehensive scheme available to the employers of the disabled, and that is what the new clause will provide. Capital grants of up to £6,000 are available for adaptions and special equipment. Unfortunately, the take-up has been abysmal. In answer to my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) on 9 February 1983, at column 392, it was revealed that there was no year between 1971–78 arid 1981–82 when the estimate of the capital grant that should be made available was equalled by the level of take-up. For example, £500,000 was allocated in the Estimates of 1977–78 and the take-up was only £11,040. Only 21 firms were involved. In 1981–82, there was a much reduced estimate by the Government of £150,000. However, only £71,469 was taken up by 93 firms. There are more than 93 firms within a mile of this building.
      The sum that is allocated each year is underspent and the reasons are simple. There is a lack of knowledge, just as in our previous debate it was said that many of those who are taking redundancy pay and setting up their own small businesses are not au fait with the problems or difficulties that will confront them and with what will be available to them.
      A company which wants to take on a worker will want to employ him or her as soon as possible, and it will need to ascertain what will be available to it if it decides to take on a disabled worker. If the firm is asked to make an application, it will have to supply estimates of the cost of any construction work or equipment that will be required if the disabled worker is to be taken on before it is informed of the size of the grant that will be made available. This process involves an inordinate amount of delay, and fairly often the job will be taken by someone else who is not disabled—that is discrimination against the disabled—or the firm will go out of business by the time that the grant is awarded.
      The quota scheme can be made more effective without even changing the law. If the House were to accept the new clause and it were incorporated in the Bill, the law would be changed only slightly.
      In 1976, the Snowdon working party on the integration of the disabled recommended the levying of a disablement employment tax, the revenue from which would go into a disablement employment fund. It was proposed that the fund should be used to compensate employers for the expenditure entailed in assisting disabled workers. It was a form of capital tax relief. The new clause is in the spirit of that recommendation of the Snowdon working party. It would provide real encouragement to employers not to discriminate against the disabled. Instead, it would

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      encourage employers to take them on. The clause would not incur any additional expenditure. If the Minister reads the answer that was given to my right hon. Friend the Member for Stoke-on-Trent, South, which appeared in Hansard some years ago, he will find that the grants are not taken up. There is plenty of leeway to enable the Government to provide the wherewithal to counteract any possible loss in tax as a result of the implementation of the new clause.
      The new clause would encourage the disabled to register and would provide much needed statistics. We would know the number of handicapped people within the community. That statistic is needed for many vital purposes. For most firms the clause would involve only a once-and-for-all expenditure. That is because the capital tax relief would not accrue every year. The Government are always prating that we should widen and extend choice, and here is an opportunity for them to widen the choice of employment that is available to the disabled. The new clause would give employers the chance to show their good will towards the disabled community, which constitutes a sizable constituency. The Government are being given the opportunity to demonstrate their good will be accepting this proposal.
      Mr. Cohen: This a sensible new clause and will facilitate access to employment for the disabled. The clause is well drafted. I understand that its wording follows quite closely the provisions on fire precaution expenditure in section 17 of the Finance Act 1974. It has sound antecedents, which should encourage the Government to adopt it.
      The tax laws that relate to the disabled are a mess. If a lift is installed, the expenditure will probably qualify for a grant or allowance, but the provision of ramps and widened doors to permit wheelchair access will not. The cost of constructing a new factory that has design features to permit access to the disabled will qualify for grant, but alterations to an existing building will not.
      It has already been said that perks often have little connection with the real interests and activities of a business. Two examples are the chairman's new Rolls-Royce and the managing director's cocktail cabinet. Such perks qualify for an allowance from the Revenue but the provision of access for disabled workers will not. That is a gross contradiction. Why should the chairman of a company enjoy tax relief on the purchase of a Rolls-Royce to facilitate his mobility when disabled workers do not get any relief of that sort? The managing director receives a cocktail cabinet, but many disabled workers will not be able to enter the place of work, let alone reach the room where the cocktail cabinet is sited.
      The new clause is a sensible provision to counter the discrimination against disabled workers that stems from access problems. The recent survey of the National Child Development Council reveals that young people who are handicapped are 10 times more likely to be unemployed for six months or more than their counterparts who are handicapped. That is shocking. The Government should be doing much more directly to counter discrimination in employment against the disabled. At least the new clause would provide a small encouragement to employers and I hope that it will be accepted by the Government.
      Mr. Norman Lamont: We have had an informed debate, not least because several of those who have spoken,
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      especially the hon. Members for Eccles (Mr. Carter-Jones), Caernarfon (Mr. Wigley) and Liverpool, West Derby (Mr. Wareing), take an extremely long-term and consistent interest in the subject. Their remarks today were interesting and informing. I appreciated the spirit in which the hon. Member for Sedgefield (Mr. Blair) moved his new clause. I certainly appreciate his motives for doing so, because obviously the question of access is of great importance to disabled people.
      6.30 pm
      The purpose of the new clause, as the hon. Member for Sedgefield outlined, is to give tax relief through the capital allowance system to employers who would not otherwise get relief for expenditure incurred on or after 1 August 1986 on building works or equipment designed to facilitate access to their premises by disabled employees.
      The underlying question raised by the clause is, what is the best way to help and encourage provision and access for the disabled? Is it by grants, tax relief, or a combination of the two, bearing in mind the statutory obligation imposed on people in the construction of new buildings to which the hon. Member for Caernarfon referred? The Government believe that we should do so by both methods, but that the first line of assistance should be by grants and, after they have been taken into account, the normal tax rules should apply—that is to say, the rules for machinery and plant, industrial buildings, hotels, buildings in enterprise zones, and so on. Those allowances can help in certain ways.
      I shall deal with the question of grants, to which the hon. Member for Sedgefield referred. The Manpower Services Commission can pay grants of up to a maximum of £6,000 to eligible employers, who are the great majority, who make essential adaptations to their premises or equipment to enable them to engage and retain specific disabled employees.
      The hon. Gentleman referred to restrictions on the grants. As I understand it, those restrictions are there because until the nature of the specific disability is known it cannot be known what precise alterations are needed. As I understand it, that is the nature of the restrictions to which the hon. Gentleman referred.
      I think that the hon. Gentleman referred to the bureaucracy in the MSC procedures. I do not mean to misrepresent the hon. Gentleman, but I thought I heard him refer to that. I shall draw the attention of Ministers at the DHSS to what the hon. Gentleman has said. I have not been advised of such complaints, but perhaps the hon. Gentleman will enlighten me.
      Mr. Alfred Morris: The Minister will be aware that I was involved in legislating for the grants to which he referred. Can he tell me how much has been spent in the past few years on publicising those grants to improve the take-up?
      Mr. Lamont: I do not know the answer to that question. I intended to refer to what the right hon. Gentleman's hon. Friend the Member for West Derby said. He said that the grants have been undersubscribed, even by the amounts that the Government have put by. That is an important point. I shall draw the attention of my hon. Friend the Minister for Social Security to what 1 think has been the feeling in the debate that if we are to rest the argument of grants, the grants should be publicised. There has been a poor uptake of the grants in the past few years.

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      Perhaps it is worth mentioning, in passing, the job introduction scheme which is run by the MSC, under which grants of £45 a week can be paid to employers to take on a disabled person for a trial period giving him a chance to prove that he can do the job. Under that scheme, nearly 8,500 disabled people have been helped over the past five years by way of grants totalling about £2·7 million. There are other schemes of assistance for the disabled.
      The normal tax reliefs apply on top of the grants to the net amount—the cost, less any grant, of the employer's expenditure; that is, the normal rules for machinery and plant and the fabric of qualifying buildings apply to the expenditure which the employer incurs. If, for the purposes of his business, an employer spends money on equipment for the benefit of his disabled employees which consists of machinery or plant, the equipment will qualify for an annual allowance of 25 per cent. on the reducing balance basis. The hon. Member for Lcyton (Mr. Cohen) spoke on that point. The capital allowance system already provides relief at the rate proposed by new clause 4 for an employer's expenditure on, for example, lifts, other types of mechanical hoist and special toilet facilities. The relief extends to the cost of any alterations to an existing building which are incidental to the installation of such equipment. So, for equipment, it is unlikely that new clause 4 would represent a new relief.
      Mr. Carter-Jones: Very often, an employer buys standard equipment and the opportunity comes along to employ a disabled person. Is the Financial Secretary spelling out to the House that whatever modifications are made to such equipment which allows a disabled person to operate it they will count under the category?
      Mr. Lamont: I was saying that if an employer buys a piece of captial equipment, it will qualify for the 25 per cent. allowance. The cost of any alterations to the building that are incidental to the installation of that equipment that qualifies for the 25 per cent. would qualify for the 25 per cent. I am not saying that alterations to buildings for the purpose of access qualify for 25 per cent. That was the point on which I wished to develop my remarks.
      Mr. Carter-Jones: The Financial Secretary has now come into the cloudy area which I and my right hon. and hon. Friends and his right hon. and hon. Friends have come across from time to time. Will the Financial Secretary clear the cloudy area, which seems to give officials the right to make interpretations which he never intended?
      Mr. Lamont: I shall see whether any further clarification can be given. I shall look at the point that the hon. Gentleman has made to me. I wanted to be careful not to use other than the precise words which 1 know represent the position legally. I follow the point that the hon. Gentleman has made. I shall look at it further. I can see that it can give rise to a grey area and that it may be difficult to draw the line as to where the end of the 25 per cent. allowance comes. If I can give any further clarification, I shall write to the hon. Gentleman. Indeed, I shall write to him anyway.
      We have said that the grant is the first line of assistance. However, if the premises to be adapted are industrial or agricultural buildings, capital expenditure on altering them will qualify for an annual allowance of 4 per cent.
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      The same will apply in the case of certain hotels. If the premises are used for the purposes of scientific research or are in an enterprise zone and qualify for the special allowances there, capital allowances of 100 per cent. will be available.
      I recognise what hon. Gentlemen wish to do. I am afraid that I cannot go as far as they would like, but I hope that they recognise that the existing arrangements, which are primarily outside the tax system although some are within it, provide a degree of assistance and encouragement to employers to take on disabled people.
      Mr. Wigley: Do I understand the right hon. Gentleman correctly? Is he saying that adaptations to buildings to 'meet the needs of disabled people—for example, ramps —would qualify for a 4 per cent. rate but could not qualify for 25 per cent.? Are the Government against changing that 4 per cent. to 25 per cent. as a matter of policy, not because there is a technical reason why it should not be changed?
      Mr. Lamont: The position is as I have said with regard to industrial and agricultural buildings, hotels, premises used for scientific research or buildings in an enterprise zone. There have not been capital allowances for commercial buildings, as I am sure the hon. Member for Caernarfon appreciates, for obvious reasons. Capital allowances have, in general, been provided on assets that depreciate rather than on those that appreciate. That is the distinction which has been drawn between commercial buildings and other buildings.
      I should like to draw attention to one point concerning the new clause, although I make no complaint about it. As drafted, the new clause would give employers capital allowances at the 25 per cent. rate in respect of qualifying expenditure on adapting commercial buildings, because capital expenditure on such buildings outside enterprise zones does not attract tax relief. On the other hand, similar expenditure on industrial and agricultural buildings and hotels would not qualify for allowances at this rate under the new clause, because it is likely that the expenditure already qualifies for allowance, but at 4 per cent. There is a difference of treatment in the present system. The new clause is a move towards greater differences in tax allowances on buildings. I drew that point to the attention of the hon. Member for Sedgefield because I was not sure that that was his deliberate intention.
      Although there are points which I shall pursue and points to which I will return— in the case of the hon. Member for Eccles—and others to which I shall draw the attention of my hon. Friend the Minister for Social Security, especially those concerning publicity for the grants system, we think that we should look largely to the grants in respect of conversion of buildings. We think that the existing arrangements both outside and inside the tax system provide a degree of assistance.
      Mr. Blair: This point should be clarified because some Opposition Members may have misunderstood it. As I understand it, there are no allowances for alterations to industrial buildings for disabled people.
      Mr. Lamont: If industrial buildings are adapted, capital expenditure on altering them qualifies for an annual allowance of 4 per cent., as I said to the hon. Gentleman.
      Mr. Alfred Morris: This is an important debate for people with disabilities. The starting point, for both sides

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      of the House, should be the undoubted entitlement of disabled people to count as a part of and not apart from society, which is impossible if buildings in which they could work are inaccessible to them. They want, wherever possible, to enjoy the dignity of being taxpayers, not the dependence of supplementary benefit. That means allowing them access to far more places of work than are accessible to them now. Not to do everything within our power to improve access is to pile handicap on handicap for disabled people.
      The Financial Secretary to the Treasury cited some statistics on the employment of disabled people. In most parts of Britain, unemployment among disabled people who are looking for work is twice as high as it is among people generally. As my hon. Friend the Member for Eccles (Mr. Carter-Jones) said, the same is grievously true of disabled school leavers who, in so many cases, now go straight from school to scrap heap. Unemployment is bad enough among the able-bodied, but among disabled people it is a scandal which should be of surpassing concern to the House.
      Not long ago, I saw a deputation from the organisations of disabled people in Scotland, Wales and Northern Ireland. They told me that, in many parts of all three, unemployment among disabled people who are registered for work is now more than 80 per cent. That is the sombre backcloth to the debate and the justification for the new clause. How can the Government possibly justify resistance to a measure that can help to change for the better that shocking statistic from Scotland, Wales and Northern Ireland? For a disabled person, unemployment is a double handicap which can lead to double despair, and reducing it should be one of our highest priorities.
      6.45 pm
      The Treasury is keen enough to cost any and every claim for a new benefit. I know that as a former Minister for the Disabled. What costing has the Treasury done in relation to the new clause? What does it estimate the net cost would be? The aim of the new clause is to take people off social security by making them taxpayers. The net cost could well be negligible, while the good it can achieve will be crucially important to people with disabilities. Rejection of the measure would be seen not only as self-defeating but as hurtful to some of the most needful people in Britain today.
      In granting capital allowances for expenditure on building works to provide access for disabled workers, the new clause could well have been more than self-financing. How can the Financial Secretary possibly reject the proposition which we are making in the new clause when there are tax allowances for the managing director's cocktail cabinet and, as my hon. Friend the Member for Sedgefield (Mr. Blair) said, for the Royal Doulton in the directors' dining room?
      The justification for the new clause is self-evident and its drafting closely follows that of other legislation. The Financial Secretary questioned the drafting of the new clause. If there are defects, I am sure that the combined ingenuity of both sides of the House will overcome any problem that may stand in the way of carrying through this important reform for disabled people.
      The new clause is about improving access not only for physically disabled people, but for the sensorily disabled,
      216
      especially the deaf and the blind. They, too, have daunting, not to say intimidating, problems of access to many public and social buildings.
      The Government never tire of expressing their concern about the totally unacceptable level of unemployment among disabled people, but what is needed is practical concern and meaningful help, not the customary mixture of sympathy and sloganising. My hon. Friend the Member for Sedgefield made a compelling case for a measure that is of the first importance if we are further to improve the well-being and status of people with disabilities. The new clause is not about compassion; it is about equal rights. I am delighted to support it. If, as the Financial Secretary said, this is but a modest improvement, why on earth can he not accept the new clause?
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 166, Noes 215.

      Division No. 248]

      [6.47 pm

      AYES

      Adams, Allen (Paisley N)

      Ewing, Harry

      Alton, David

      Fatchett, Derek

      Archer, Rt Hon Peter

      Faulds, Andrew

      Ashdown, Paddy

      Field, Frank (Birkenhead)

      Ashley, Rt Hon Jack

      Fields, T. (L'pool Broad Gn)

      Ashton, Joe

      Fisher, Mark

      Atkinson, N. (Tottenham)

      Flannery, Martin

      Banks, Tony (Newham NW)

      Foot, Rt Hon Michael

      Barnett, Guy

      Forrester, John

      Barron, Kevin

      Foster, Derek

      Beckett, Mrs Margaret

      Foulkes, George

      Beith, A. J.

      Fraser, J. (Norwood)

      Bell, Stuart

      Freud, Clement

      Bidwell, Sydney

      Garrett, W. E.

      Blair, Anthony

      George, Bruce

      Bray, Dr Jeremy

      Gilbert, Rt Hon Dr John

      Brown, Gordon (D'f'mline E)

      Gould, Bryan

      Brown, Hugh D. (Provan)

      Gourlay, Harry

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

      Hamilton, James (M'well N)

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

      Hamilton, W. W. (Fife Central)

      Bruce, Malcolm

      Hancock, Michael

      Buchan, Norman

      Hardy, Peter

      Callaghan, Jim (Heyw'd & M)

      Harman, Ms Harriet

      Campbell-Savours, Dale

      Harrison, Rt Hon Walter

      Canavan, Dennis

      Heffer, Eric S.

      Carlile, Alexander (Montg'y)

      Hogg, N. (C'nauld & Kilsyth)

      Carter-Jones, Lewis

      Home Robertson, John

      Cartwright, John

      Howells, Geraint

      Clark, Dr David (S Shields)

      Hoyle, Douglas

      Clarke, Thomas

      Hughes, Dr Mark (Durham)

      Clay, Robert

      Hughes, Roy (Newport East)

      Clelland, David Gordon

      Hughes, Sean (Knowsley S)

      Clwyd, Mrs Ann

      Hughes, Simon (Southwark)

      Cocks, Rt Hon M. (Bristol S)

      Janner, Hon Greville

      Cohen, Harry

      John, Brynmor

      Coleman, Donald

      Johnston, Sir Russell

      Cook, Frank (Stockton North)

      Jones, Barry (Alyn & Deeside)

      Cook, Robin F. (Livingston)

      Kaufman, Rt Hon Gerald

      Corbett, Robin

      Kennedy, Charles

      Corbyn, Jeremy

      Kirkwood, Archy

      Craigen, J. M.

      Lambie, David

      Cunliffe, Lawrence

      Leighton, Ronald

      Cunningham, Dr John

      Lewis, Ron (Carlisle)

      Dalyell, Tam

      Lewis, Terence (Worsley)

      Davies, Ronald (Caerphilly)

      Livsey, Richard

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

      Lloyd, Tony (Stretford)

      Deakins, Eric

      McCartney, Hugh

      Dewar, Donald

      McDonald, Dr Oonagh

      Dixon, Donald

      McGuire, Michael

      Douglas, Dick

      McKay, Allen (Penistone)

      Duffy, A. E. P.

      McKelvey, William

      Dunwoody, Hon Mrs G.

      MacKenzie, Rt Hon Gregor

      Eadie, Alex

      McWilliam, John

      Eastham, Ken

      Madden, Max

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

      Marek, Dr John

      Evans, John (St. Helens N)

      Mason, Rt Hon Roy

      217

      Maxton, John

      Shore, Rt Hon Peter

      Meadowcroft, Michael

      Short, Ms Clare (Ladywood)

      Michie, William

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

      Millan, Rt Hon Bruce

      Silkin, Rt Hon J.

      Miller, Dr M. S. (E Kilbride)

      Skinner, Dennis

      Mitchell, Austin (G't Grimsby)

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

      Morris, Rt Hon A. (W'shawe)

      Spearing, Nigel

      Morris, Rt Hon J. (Aberavon)

      Steel, Rt Hon David

      O'Neill, Martin

      Stewart, Rt Hon D. (W Isles)

      Orme, Rt Hon Stanley

      Straw, Jack

      Park, George

      Thomas, Dafydd (Merioneth)

      Parry, Robert

      Thomas, Dr R. (Carmarthen)

      Pavitt, Laurie

      Thompson, J. (Wansbeck)

      Pendry, Tom

      Tinn, James

      Penhaligon, David

      Torney, Tom

      Pike, Peter

      Wainwright, R.

      Radice, Giles

      Wardell, Gareth (Gower)

      Randall, Stuart

      Wareing, Robert

      Redmond, Martin

      Welsh, Michael

      Rees, Rt Hon M. (Leeds S)

      Wigley, Dafydd

      Richardson, Ms Jo

      Williams, Rt Hon A.

      Roberts, Ernest (Hackney N)

      Wilson, Gordon

      Robertson. George

      Winnick, David

      Robinson, G. (Coventry NW)

      Woodall, Alec

      Rogers, Allan

      Wrigglesworth, Ian

      Rooker, J. W.

      Ross, Ernest (Dundee W)

      Tellers for the Ayes:

      Rowlands, Ted

      Mr. Frank Haynes and

      Sheldon, Rt Hon R.

      Mr. Ray Powell.

      NOES

      Adley, Robert

      Galley, Roy

      Aitken, Jonathan

      Gardiner, George (Reigate)

      Atkins, Rt Hon Sir H.

      Gardner, Sir Edward (Fylde)

      Atkins, Robert (South Ribble)

      Garel-Jones, Tristan

      Atkinson, David (B'm'th E)

      Gilmour, Rt Hon Sir Ian

      Batiste. Spencer

      Glyn, Dr Alan

      Beaumont-Dark, Anthony

      Goodhart, Sir Philip

      Bennett, Rt Hon Sir Frederic

      Gow, Ian

      Best, Keith

      Gower, Sir Raymond

      Biggs-Davison, Sir John

      Greenway, Harry

      Blackburn, John

      Gregory, Conal

      Boscawen. Hon Robert

      Griffiths, Sir Eldon

      Brandon-Bravo, Martin

      Griffiths, Peter (Portsm'th N)

      Brown, M. (Brigg & Cl'thpes)

      Grylls, Michael

      Bruinvels, Peter

      Hamilton, Hon A. (Epsom)

      Buchanan-Smith, Rt Hon A.

      Hampson, Dr Keith

      Burt, Alistair

      Hanley, Jeremy

      Butterfill, John

      Hargreaves, Kenneth

      Carlisle, Kenneth (Lincoln)

      Harris, David

      Carttiss, Michael

      Harvey, Robert

      Chope, Christopher

      Hawkins, C. (High Peak)

      Churchill, W. S.

      Hawkins, Sir Paul (N'folk SW)

      Clark, Dr Michael (Rochford)

      Hawksley, Warren

      Clark, Sir W. (Croydon S)

      Hayes, J.

      Clarke, Rt Hon K. (Rushcliffe)

      Hayhoe, Rt Hon Barney

      Clegg, Sir Walter

      Heathcoat-Amory, David

      Cockeram, Eric

      Heddle, John

      Colvin, Michael

      Henderson, Barry

      Conway, Derek

      Heseltine, Rt Hon Michael

      Coombs, Simon

      Hickmet, Richard

      Cope, John

      Hicks, Robert

      Corrie, John

      Higgins, Rt Hon Terence L.

      Critchley, Julian

      Hind, Kenneth

      Douglas-Hamilton, Lord J.

      Hirst, Michael

      Dunn, Robert

      Holland, Sir Philip (Gedling)

      Dykes, Hugh

      Hordern, Sir Peter

      Emery, Sir Peter

      Howard, Michael

      Farr, Sir John

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

      Favell, Anthony

      Hunt, David (Wirral W)

      Fenner, Mrs Peggy

      Hunter, Andrew

      Finsberg, Sir Geoffrey

      Irving, Charles

      Fookes, Miss Janet

      Jessel, Toby

      Forsyth, Michael (Stirling)

      Johnson Smith, Sir Geoffrey

      Forth, Eric

      Jones, Gwilym (Cardiff N)

      Fowler. Rt Hon Norman

      Jones, Robert (Herts W)

      Fox, Sir Marcus

      Kershaw, Sir Anthony

      Fraser, Peter (Angus East)

      Key, Robert

      Freeman, Roger

      Knight, Greg (Derby N)

      Gale, Roger

      Knight, Dame Jill (Edgbaston)

      218

      Knowles, Michael

      Ryder, Richard

      Lamont, Rt Hon Norman

      Sackville, Hon Thomas

      Latham, Michael

      Sainsbury, Hon Timothy

      Lawler, Geoffrey

      Sayeed, Jonathan

      Lawrence, Ivan

      Shaw, Giles (Pudsey)

      Lawson, Rt Hon Nigel

      Shaw, Sir Michael (Scarb')

      Leigh, Edward (Gainsbor'gh)

      Shelton, William (Streatham)

      Lennox-Boyd, Hon Mark

      Shepherd, Colin (Hereford)

      Lester, Jim

      Shersby, Michael

      Lewis, Sir Kenneth (Stamf'd)

      Sims, Roger

      Lilley, Peter

      Smith, Tim (Beaconsfield)

      Lloyd, Peter (Fareham)

      Speed, Keith

      Lord, Michael

      Spencer, Derek

      MacGregor, Rt Hon John

      Spicer, Jim (Dorset W)

      MacKay, Andrew (Berkshire)

      Spicer, Michael (S Worcs)

      McLoughlin, Patrick

      Stanbrook, Ivor

      McNair-Wilson, M. (N'bury)

      Stanley, Rt Hon John

      Major, John

      Steen, Anthony

      Malins, Humfrey

      Stevens, Lewis (Nuneaton)

      Marland, Paul

      Stewart, Allan (Eastwood)

      Marlow, Antony

      Stewart, Andrew (Sherwood)

      Marshall, Michael (Arundel)

      Sumberg, David

      Mather, Carol

      Tapsell, Sir Peter

      Maude, Hon Francis

      Tebbit, Rt Hon Norman

      Mellor, David

      Temple-Morris, Peter

      Merchant, Piers

      Terlezki, Stefan

      Meyer, Sir Anthony

      Thomas, Rt Hon Peter

      Mills, Iain (Meriden)

      Thompson, Donald (Calder V)

      Mills, Sir Peter (West Devon)

      Thompson, Patrick (N'ich N)

      Moate, Roger

      Thorne, Neil (Ilford S)

      Morris, M. (N'hampton S)

      Thornton, Malcolm

      Morrison, Hon C. (Devizes)

      Thurnham, Peter

      Moynihan, Hon C.

      Townend, John (Bridlington)

      Murphy, Christopher

      Twinn, Dr Ian

      Neale, Gerrard

      Vaughan, Sir Gerard

      Nelson, Anthony

      Viggers, Peter

      Neubert, Michael

      Waddington, David

      Newton, Tony

      Wakeham, Rt Hon John

      Nicholls, Patrick

      Wall, Sir Patrick

      Norris, Steven

      Waller, Gary

      Onslow, Cranley

      Ward, John

      Osborn, Sir John

      Wardle, C. (Bexhill)

      Page, Sir John (Harrow W)

      Watts, John

      Patten, Christopher (Bath)

      Wells, Bowen (Hertford)

      Pawsey, James

      Wells, Sir John (Maidstone)

      Peacock, Mrs Elizabeth

      Wheeler, John

      Percival, Rt Hon Sir Ian

      Whitfield, John

      Pollock, Alexander

      Whitney, Raymond

      Portillo, Michael

      Wiggin, Jerry

      Powley, John

      Wilkinson, John

      Prentice, Rt Hon Reg

      Winterton, Mrs Ann

      Proctor, K. Harvey

      Winterton, Nicholas

      Raffan, Keith

      Wolfson, Mark

      Renton, Tim

      Wood, Timothy

      Rhodes James, Robert

      Yeo, Tim

      Ridsdale, Sir Julian

      Young, Sir George (Acton)

      Rifkind, Rt Hon Malcolm

      Robinson, Mark (N'port W)

      Tellers for the Noes:

      Roe, Mrs Marion

      Mr. Tony Durant and

      Rowe, Andrew

      Mr. Gerald Malone.

      Rumbold, Mrs Angela

      Question accordingly negatived.

    New Clause 11

      SELF EMPLOYMENT
      `(1) No person shall be subjected to tax under Schedule E of the Income and Corporation Taxes Act 1970, where that person is employed otherwise than under a contract of employment and notice to that effect has been submitted to Her Majesty's Inspector of Taxes.
      (2) In any determination of employment or self-employment status hereunder submission of such notice shall be conclusive evidence of self-employed status save where General Commissioners or Special Commissioners, on application by Her Majesty's Inspector of Taxes, shall determine that the taxpayer is an employee.

      219
      (3) No such determination by General Commissioners or Special Commissioners shall be made unless:

      (a) the taxpayer gains earnings from one single employer under one contract of employment only; and

      (b) such a contract of employment is evidenced in writing; and

      (c) the taxpayer has the right under his contract of employment to be reimbursed with authorised out of pocket expenses.'—[Mr. Watts.]

      Brought up, and read the First time.
      7 pm
      Mr. John Watts: I beg to move, That the clause be read a Second time.
      You will recognise the pedigree of the new clause, Mr. Speaker, because of its marked similarity to the Right to be Self-Employed Bill introduced by my hon. Friend the Member for Stirling (Mr. Forsyth) under the ten minutes rule on 4 February this year. Your will recall that the Bill received its First Reading by a majority of 174 to 125, which shows the widespread concern in the House about the need to clarify the status of the self-employed and, indeed, the need to encourage the further growth of self-employment.
      There has been a welcome development in that area. Since 1970 the numbers of self-employed have increased by 700,000 to a new total in excess of 2·5 million, or one in 10 of the employed population—the highest level for 60 years. That growth has been encouraged by various measures promoted by the Government, notably the enterprise allowance. It has also been helped by the reduction in national insurance contributions for the self-
      I believe that the growth of self-employment also reflects a substantial change in attitude and a far greater willingness to create a job for oneself. Earlier, the hon. Member for Sedgefield (Mr. Blair) referred to many of his constituents using redundancy money to set up their own businesses. Those people are the new self-employed —those who go out and make jobs for themselves if nobody else will make a job for them.
      Further growth of self-employment is obstructed unnecessarily by the arcane way in which income tax operates, and, in particular, by the difficulty that the self-employed can face in establishing their self-employed status. The new clause seeks to provide a simple mechanism whereby self-employed status can be established. Subsection (1) states that schedule E would not apply to anyone
      "where that person is employed otherwise than under a contract of employment and notice to that effect has been submitted to Her Majesty's Inspector of Taxes."
      The procedure for the self-employed person is simple. He has merely to notify Her Majesty's inspector of taxes that he is self-employed. If we were to leave it at that, I acknowledge that the procedure could be open to abuse. People who were not self-employed might claim that status in the belief that it would confer on them certain advantages. Therefore, subsection (2) makes the notice given to Her Majesty's inspector of taxes conclusive evidence of self-employed status, unless the inspector makes an application to the general commissioners or special commissioners, and, on the inspector's application, they determine that the taxpayer is not self-employed, but an employee. We have the balance there.
      The self-employed person can make a claim to be self-employed and notify the Inland Revenue that that is so, but the Inland Revenue has the opportunity to challenge
      220
      that if it does not believe the assertion to be in accordance with the facts. The matter is determined conclusively by the commissioners. It is right that there should be that independent adjudication where there is a dispute between the Inland Revenue and the taxpayer.
      Subsection (3) seeks to define an employee as a taxpayer who
      "gains earnings from one single employer under one contract of employment only".
      That contract must be evidenced in writing, and the taxpayer must be entitled
      "under his contract of employment to be reimbursed … out of pocket expenses."
      It is just possible that the definition of "employee" embodied in the new clause is not perfect and that further refinements would be needed before the scheme that I have outlined could operate without giving rise to a serious risk of abuse. I am sure that if there is any imperfection in the definition in the new clause, when my right hon. Friend the Financial Secretary replies to the debate, he will be quick to draw it to my attention and to suggest a constructive way in which that problem can be overcome.
      I hope that there will be general recognition of the need for a method, such as I have proposed, whereby a taxpayer can establish his status as a self-employed person. At present there is no clearance procedure. There have been cases in my constituency — no doubt other hon. Members can cite similar instances in their constituencies —where taxpayers have carried out work as subcontractors for local businesses in the belief, common to the taxpayer and the company, that they were entitled to be treated as self-employed. Then, some time after the event —perhaps when those arrangements have subsisted for a year, 18 months or two years—along comes the Inland Revenue, saying, "No, you are not self-employed. You are an employee, and we will treat you as an employee from the time when you first started to treat yourself as self-employed."
      It is not satisfactory that matters should reach that stage. Such problems would be resolved if the new clause, or something similar to it which was based on its underlying principles, were embodied in our tax law. Thus, taxpayers could establish their right to be treated as self-employed by a simple means of notification. The onus would be upon the Inland Revenue to challenge that claim if it seemed unjustified. Ultimately the status would be determined by the independent commissioners. That seems to me to be a good scheme.
      Even if the precise form of the new clause does not commend itself to my right hon. Friend, I am sure that, as a staunch supporter of the enterprise culture, the principle will appeal to him.
      Mr. Patrick Thompson: I am grateful for the chance to speak in support of new clause 11.
      As a Member of Parliament in Norwich, I am continually called upon to help or advise small business men or people who aspire to run a business of one sort or another. In every case, the person is confused by our system of income tax legislation and value added tax legislation. Indeed, in our local newspaper during the past 24 hours an Inland Revenue official was quoted as saying, "You cannot expect the system to be fair," or words to that effect. I hope that that is not a correct report, but that is what was said in the paper.
      I know of cases of people being forced to operate PAYE in unsuitable circumstances. That is the very point that is

      221
      addressed by new clause 11. I can best illustrate it by quoting from two letters that concern a constituency case. The first is a letter from Her Majesty's inspector of taxes in Norwich, dated 7 March. He says:
      "Dear Sir
      I refer to our previous correspondence concerning the agency operated by yourself. It is my opinion"— note the word "opinion"— "that this agency is caught"— note the use of the word "caught" "under Finance (No. 2) Act 1975 Section 38 and as such all the earnings of the relief workers provided by the agency are chargeable under Schedule E."
      In that case, I had already been in correspondence with my constituent. Not surprisingly, he was distressed by the outcome. He wrote me a letter from which I shall quote briefly because it illustrates perfectly the need for new clause 11. He starts by saying:
      "If you remember my problem concerning my HGV relief driving service with the DHSS and now the Inland Revenue, I have now been given a date to start a PAYE system which I cannot do, as I have no regular work from the companies I deal with. This means that myself and about eight self employed men will now be unemployed."
      He went on to say:
      I feel very sad to think that I built this business up from nothing to finding work for 9 men and be closed down with the people who should be helping me find work."
      He went on to make complimentary remarks regarding the Prime Minister's belief that people should be able to build up their own businesses and thrive in this way. In conclusion, he states:
      "One of these DHSS inspectors told me they would rather see men unemployed than working through my Agency. The reason being that they are losing revenue for these men and there are too many self-employed men having a go on their own."
      That case illustrates perfectly the need for new clause 11 and the reason why I supported the ten-minute Bill introduced by my hon. Friend the Member for Stirling (Mr. Forsyth).
      I should like to quote from a letter from my right hon. Friend the Secretary of State for Transport when he was the Financial Secretary to the Treasury:
      "For example, I am advised that it is at least arguable that the definition in your Bill"— that is the ten-minute Bill— "would treat as 'self-employed' the 100,000 or so school teachers marking examination papers."
      I can comment on this because I was a school teacher and was marking examination papers during the time that the change was made from self-employed status or schedule D to schedule E status. It seemed at that time to be a move in the wrong direction. Nothing that has occurred since has made me change my opinion. It is just another example of our extolling the virtues of people doing their own thing while the Inland Revenue, under its masters at the Treasury, do exactly the opposite.
      It is time that the Government took on board the fact that what is happening on the ground does not always follow the rhetoric that we put forward, and it is time that we did something about that. There is too much bureaucracy and the system must be simplified for the benefit and expansion of small business, and the employment of people—which is what we all want—as well as bringing about a general decrease in irritation among the business community, especially those running small businesses.
      222
      There seems to be an order of batting in these matters. At the top of the tree and most favoured are the well-established business men, advised by accountants who make the maximum, obviously legal, use of the available allowances. Second, and quite a long way behind, come those who are on PAYE and who feel burdened by the fact that there is no way in which they can claim for allowable expenses. Teachers are right when they say it is almost impossible for them to claim any type of sensible allowable expense. They have a just grievance. Finally, right at the bottom of the tree—this is the point of new clause 11— are those who are trying to start up on their own, such as the man from whose letter I have quoted. He was trying to establish himself and take on casual work in the hope that it would lead to something better, like the building worker who operates on the 715, if he is lucky enough to get one and is able to overcome all the difficulties.
      For the people in the third of my classifications the situation is almost intolerable. The Government should seriously consider the new clause and the Bill which preceded and inspired it. It is no good saying that this is a problem that we can address at some other time. It is at the root of what the Government are proposing, and we must do something about it as soon as possible.
      With our present system of tax and social security, we are strangling the goose that will lay the golden egg. Priority should be given to this clause. It is even more urgent than tax cuts. Something must be done to remove the stranglehold of the complexity of the regulations as well as to cut taxation. I support new clause 11 with examples taken from my constituency, and I hope that it will find favour with my right hon. Friend the Financial Secretary to the Treasury.
      7.15 pm
      Mr. Michael Forsyth: I thank my hon. Friend the Member for Slough (Mr. Watts) for tabling the new clause. It is of fundamental importance and I believe that there is support from both sides of the House for the spirit behind it. Indeed, the ten-minute Bill received support from all parties.
      Although the Government have had remarkable success in creating conditions for the growth of selfemployement, we must recognise that they started from a low base. There is considerably more scope for its development. Although my right hon. Friend the Financial Secretary to the Treasury may argue that at the moment every worker has the right to be self-employed, in practice, it is a heavily qualified right. There is considerable uncertainty about where the courts will draw the line between employment and self-employment. The uncertainty is compounded by what is clearly a direct interest on the part of the Inland Revenue to minimise the numbers of self-employed taxpayers. The considerable resources which are available to the Revenue to act on the conduct of appeals adds to the risks for self-employment both for the worker and for the client.
      My right hon. Friend will no doubt be concerned about the costs of implementing the new clause. If there were a substantial expansion in the numbers of self-employed, which all of us on this side of the House would welcome, no doubt he would have to consider the financial implications. Certainly there would be a reduction in the national insurance revenue. That reduction would almost be matched by a reduction in liabilities on the fund. An increase in the numbers of self-employed would mean that

      223
      there were fewer people claiming benefits. On the supply side, more efficient work patterns would undoubtedly increase economic performance and general tax revenue.
      Many of the additional expenses which would be allowed under schedule D, such as advertising, secretarial assistance and professional fees, would represent additional taxable income in other taxpayers' hands. My hon. Friend may feel that this new clause is not as well drafted as it might be, but I hope that he can say that he will try to meet its spirit by establishing a clear definition of self-employment for all tax, national insurance and employment law purposes. That would go a long way to dispelling any remaining suspicions there might be — they come from unexpected quarters, the National Federation of Self-Employed and Small Businesses, the Institute of Directors and the Confederation of British Industry—that the Government are not as committed to encouraging self-employment as they profess to be.
      I believe that the new clause would do an immense amount to reduce the burdens on business both for the self-employed and, depending on one's perspective, the employer's clients. Much uncertainty has resulted in people being reclassified from the status of self-employed to employed. It has also resulted in employers finding themselves liable for national insurance contributions and tax which they had no reason to suspect they would have to meet. In one case that resulted in substantial financial difficulties and premises had to be sold to meet financial obligations. The new clause will enable the tax position to be determined simply and immediately at the time of contract. It would reduce the risk to businesses of incurring costs in arguing their position with the commissioners.
      My hon. Friend the Member for Norwich, North (Mr. Thompson) mentioned examination markers. I have also been in correspondence with my hon. Friend the Minister and his predecessor. It emerged that the 100,000 examiners who were reclassified from schedule D to schedule E could not be regarded as small business men in business on their own account, so the Revenue was justified in singling out that group. Had those examination markers bothered to read the leaflet "Employed or Self Employed" produced by the Department, and had they answered the questions which help one to decide whether one is employed or self-employed, they would have found that they fitted the criteria for the self-employed more closely than those for the employed. Of the seven questions to which an employee would tend to answer yes, examination markers would definitely answer no to five of them and might answer no to the questions about the right to substitute, depending on the contract, and about working wholly or mainly for one employer, depending on the number of boards worked for and the relative duration and size of contracts.
      I also understand that, in determining whether those examiners were to be reclassified, the Inland Revenue had to consider the contractual arrangement case by case, and that in some cases the matter could be resolved only by reference to the wording of university statutes under which the particular examining board was established. The tax status of the examiners was far from clear, and their case highlights the limitations of leaflet IR56 which the Department produced to make the position clear.
      224
      I suspect that the background to this has nothing to do with employment status and everything to do with ensuring that earnings are declared and taxed. I am sure that my hon. Friend the Minister would not argue that examination markers may not have declared their earnings which is why it is necessary to relassify them, because that has nothing to do with the appropriate tax status for their earnings.
      There is a clear need to change the burden of proof. At present tax inspectors can make arbitrary decisions about whether one is self-employed, and the literature from the Department leaves room for doubt. If we could change the burden of proof so that the onus was on the inspector to argue that the individual was not entitled to self-employed status, it would be a major step forward.
      If we could make it easier for people to be self-employed, we would at a stroke achieve much of what the Government say they want to achieve in unburdening businesses. When employers take on people to carry out functions as self-employed people under contract, they do not add to their turnover, which means that they may not be required to register for VAT, and that the number of their employees who must be covered by health and safety at work regulations, employment protection and all the other burdens which add to employers costs will not increase. It would enable employers to provide employment at a lower price without depressing wage levels.
      In short, as my hon. Friend the Member for Norwich, North pointed out, it enables us to put into practice and to establish the conditions to create the enterprise culture, the standing on one's own two feet and the entrepreneurial zeal which is so much a part of the—I hesitate to use the word "rhetoric" — philosophy and objectives of the Government. Although my hon. Friend the Minister may not be able to accept the new clause tonight, I hope that he will assure us that he will do everything possible and that he recognises the genuine problem which requires his attention.
      Mr. Hanley: I wish briefly to support the amendment in the light of the cases of some of my constituents. A large number of people in my constituency are employed in the film, television and radio industries. During the past four years many have come to me, not only because I am a Member of Parliament, but because I am a chartered accountant and may understand their tax affairs on a free basis—many of them could not afford professional help — when they have found themselves arbitrarily reclassified as being in schedule E. That has often caused great hardship to them and their families. Moreover, in many cases reclassification has been so arbitrary as to be almost illogical.
      On 4 February my hon. Friend the Member for Stirling (Mr. Forsyth) mentioned that more than 7,000 self-employed taxpayers engaged in those industries between 1979 and 1983 were reclassified as schedule E, and that a further 100,000 people engaged in part-time or occasional employment were also reclassified by the Inland Revenue during that period. No one would defend those who abuse the schedule D system by trying to pretend that they are self-employed when they are employed. However, artists and technicians based at an umbrella studio used by different production companies—perhaps even one after the other—often work for separate companies and there is no guarantee of continued employment from one company to another. They are hired by film companies

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      although they happen to work within one building. Those people have been shabbily treated. It is greatly desirable that the Inland Revenue should use a little more discretion in reclassifying individuals as schedule E, particularly because of its sudden financial effect on family life.
      The Inland Revenue is tightening up on certain individuals who have paid tax under schedule D to such an extent that it is being increasingly grossly unfair. It is claiming that expenses cannot be proven for past years and, clearly, they often cannot be proven when the expenses were estimates. It is imposing back taxes and heavy penalties, and some of my constituents have suffered the loss of large sums as a result. Therefore, I ask my hon. Friend the Minister to consider whether he is being fair to self-employed people.
      Mr. Norman Lamont: I was extremely interested to hear the speeches of my hon. Friends the Members for Slough (Mr. Watts) and for Stirling (Mr. Forsyth) because one of my first tasks as Financial Secretary to the Treasury was to read the file of letters which my hon. Friend the Member for Stirling had written on this subject. My hon. Friends have fought a doughty campaign with the Right to be Self Employed Bill and the Finance Bill. I certainly recognise, particularly from the speech of my hon. Friend the Member for Norwich, North (Mr. Thompson), that there are some genuine anxieties about the classification of the self-employed. I hope that I shall not shock my hon. Friends by declaring immediately that, although I was extremely intrigued by their correspondence, I remained unconvinced by it, which is why I was looking forward greatly to the debate. I wondered whether I would be persuaded by them, but I am not.
      My hon. Friend the Member for Norwich, North made some powerful points and I do not doubt that he represented a genuine sense of grievance. In view of what he and my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) said, I undertake to look at certain matters. I shall certainly wish to consider the implications of the cases that have been mentioned, as well as the general principles outlined by my hon. Friends.
      7.30 pm
      Under the new clause, the individual could, by simple notification, elect to be self-employed. That of itself would be sufficient to establish self-employed status unless the commissioners determined that the individual was an employee. As drafted, the clause would determine status only for tax purposes, although I understand that the intention is that, once self-employed status had been elected, other matters, such as national insurance contributions, would be affected. Similarly, as a self-employed person, the individual would give up entitlement to unemployment benefit and the earnings-related additions to other benefits, and of course he would no longer he covered by legislation on employment protection or health and safety at work.
      In principle, it is right that people should be able to choose to be self-employed. I do not take issue with that principle. The clause is not, however, about choosing self-employment; it is about choosing self-employed status for tax and other purposes, even though in reality the engagement in question may have all the attributes of employment.
      I am sympathetic to what my hon. Friends have said, but I am puzzled as to why they should wish to go so far and to give a choice almost regardless of any objective test.
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      I am certainly prepared to look at the working of the system and at individual cases, but I am surprised that my hon. Friends should wish there to be a choice regardless of any test of objective considerations. I would not say that the test is wonderful or that it has been perfectly administered, but I am surprised at the lengths to which my hon. Friends take their argument.
      It is already open to both parties to any engagement to arrange the terms so as to make the engagement one of self-employment rather than employment. Whether self-employment is achieved in a particular case will then depend upon the specific terms of the working relationship of that engagement. When in doubt, the Inland Revenue on the tax side and DHSS on the national insurance contributions side look to established case law for guidance. The courts have laid down a number of criteria, and the Revenue—as my hon. Friend the Member for Stirling acknowledged—has produced a leaflet, intended only as general guidance. However, the key question that it poses is whether the individual is in business on his own account.
      The Government are committed to the growth of self-employment, and we have done much to encourage people in that direction. My hon. Friend the Member for Slough pointed out that since we took office in 1979 the number of self-employed people has risen by well over a third from 1·9 million to 2·6 million. We are extremely pleased to see that growth continuing. We welcome measures that will increase genuine self-employment. However, I do not believe that the present proposal is precisely targeted on that. I think that the main effect of the new clause would be to enable a large number of ordinary employees simply to change their status for tax and other purposes without necessarily changing their present work pattern in any way, or taking risks. Moreover, if enough people elected to change their status, there could be a heavy cost in reduced tax and national insurance contributions. My hon. Friend the Member for Stirling considers that the reduced liabilities in terms of reduced entitlements to benefit would offset that effect. I do not believe that would be so. Many people, even if they did not qualify for national insurance benefit, would still be entitled to supplementary benefit.
      Not everyone who was able, under the clause, to elect for self-employed status would necessarily do so. As I have just mentioned, there would be some disadvantages to consider. However, the cost in reduced national insurance contributions could be very substantial.
      Would the benefits arising from the proposal justify the cost? I do not believe so. The clause would allow virtually anyone—for example, a civil servant—to achieve self-employed status. I do not believe that much would be achieved by that in terms of increasing employment, strengthening the enterprise culture or encouraging risk taking.
      Mr. Watts: I am willing to concede that the new clause may be widely drafted and would allow too easy access to self-employed status, but I cannot see how a civil servant could take such status under the new clause. When he applied to the commissioners, they would surely find that he was a taxpayer who
      "gains earnings from one single employer under one contract of employment only; and
      (b) such a contract of employment is evidenced in writing; and

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      (c) the taxpayer has the right under his contract of employment to be reimbursed with authorised out of pocket expenses."
      If the commissioners so found, the civil servant could not claim to be self-employed.
      Mr. Lamont: I hope that I am not caricaturing my hon. Friend's argument. It is certainly not my intention to do so. However, I was advised that such is the effect of the new clause.
      Mr. Patrick Thompson indicated dissent.
      Mr. Lamont: My hon. Friend the Member for Norwich, North shakes his head. I can only say that having read the letters written by my hon. Friend the Member for Stirling, I did not think that that view was a caricature.
      I emphasise that I wish to meet some of the genuine problems and anxieties that have been identified. However, I could not accept the new clause as drafted. I believe that, as drafted, it will have the effect that I have described.
      Mr. Michael Forsyth: My right hon. Friend is caricaturing the new clause to some extent. We are trying to establish the principle that one can elect to be self-employed and that it is for the tax inspector to show why one should not be. At present, the individual has to go capin-hand to the tax inspector, who makes an arbitrary decision. My hon. Friend says that the criteria are clear and that there is plenty of case law. For the average small business man— let alone the average tax inspector —the situation is by no means clear. Some extraordinarily diverse decisions have been made. We are asking for clearly defined criteria. At present we have none. Recourse to case law is the basis of the present uncertainty.
      Mr. Lamont: I certainly do not wish to caricature the new clause, but I firmly believe that it would go rather further than I now understand my hon. Friends would intend. I do not say that there are no other matters that we could consider. I do not say that the application of the present law causes no grievances to which we should address our minds. However, the new clause goes too far. It would make possible a cosmetic adjustment to self-employment rather than promote the real growth in self-employment that we all want. We want a framework that will easily and properly allow a genuine growth in self-employment. What we do not want — and this is the effect of the amendment — is a system which would merely allow people to be reclassified when, on objective standards, they were not self-employed. That is the effect of the new clause.
      I stress that I have heard what my hon. Friends have said about how the present system operates. I am new to considering the issues raised here, but I undertake to look seriously at them. However, new as I am, I could not accept the new clause as drafted. I hope that, on the basis of what I have said, my hon. Friends will withdraw the motion. My hon. Friends the Members for Stirling and for Slough are great campaigners. I have no doubt that the campaign will go on, and who knows who might be converted.
      Mr. Watts: I do not wish to push to a vote a new clause which might open the floodgates. It is not our intention to do that. I take some comfort from what my right hon. Friend has said, particularly about looking at some of the
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      problems that have been highlighted. Perhaps when we come to the Finance Bill next year we shall have a go with something rather more tightly drafted. We might even see the skill of the Treasury draftsmen with the Government coming forward with amendments to the law to meet some of the objectives that we have described.
      I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 14

      EMPLOYMENT BONDS
      '1. Income from employment bonds shall he exempt from income tax and gains realised on a disposal of employment bonds shall not be chargeable gains.
      2. Employment bonds are securities issued by a body corporate resident and carrying on a qualifying trade in the United Kingdom the issue of which has been approved by the Board.
      3. The Board shall not approve an issue of securities for the purposes of this section unless satisfied that

      (a) the proceeds of the issue will be used for the purposes of a qualifying trade carried on in the United Kingdom;

      (b) the making of the issue can reasonably be expected to result in additional full time employment in the United Kingdom for a period of not less than three years being offered to and accepted by not less than one individual for every £50,000 raised by the issue before expenses;

      (c) the securities will be issued to and held by a recognised institution in accordance with the regulations for the time being prescribed under subsection (5); and

      (d) the amount raised by the issue will constitute a normal commercial loan within the meaning of paragraph (5) of Schedule 12 to the Finance Act 1973.

      4. A trade is a qualifying trade if it complies with the requirements of paragraph 6 of Schedule 5 to the Finance Act 1983.
      5. The Treasury shall by order made by statutory instruments prescribed regulations for giving effect to this section, for imposing conditions relating to the giving and withdrawal of approval under subsection (3) and containing such incidental or consequential provisions as may appear to the Treasury to be appropriate, and may from time to time in like manner vary the regulations so prescribed.
      6. Any statutory instrument made in exercise of the power conferred by subsection (5) shall take effect subject to an affirmative resolution of the Commons House of Parliament.
      7. This section shall have effect with respect to securities issued on or after 6th April 1986:.—[Sir William Clark.]
      Brought up, and read the First time.
      Sir William Clark: I beg to move, That the clause be read a Second time.
      New clause 14 stems from an idea by a Mr. Gareth Jones and a Mr. David Soskin who wrote an excellent paper on employment bonds. The new clause seeks to help unemployment in Britain.
      7.45 pm
      Having said that, what the Government have done for unemployment is not widely publicised. The percentage of the population of working age in work in the United Kingdom compares favourably internationally. We have just over 65 per cent. of the working population in work whereas West Germany has 59 per cent., France 60 per cent. and Italy 54 per cent. Therefore, we have a better percentage of people in work than do our three main partners in the EEC. The average in the OECD countries

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      is 58 per cent. compared with ours of over 65 per cent. We are beaten by the United States which has 68 per cent. and Japan which has 71 per cent.
      Mr. Michael Meadowcroft: Is not the particular difference that the proportion of long-term unemployed is far higher in Britain than in any of the countries that the hon. Gentleman has mentioned? Is not that the particular problem to which we must address ourselves?
      Mr. Deputy Speaker (Mr. Harold Walker): Order. The new clause relates to employment bonds. I hope that the debate will not extend to one about unemployment.
      Sir William Clark: I am grateful to you for your protection, Mr. Deputy Speaker.
      The employment bonds are to help unemployment. The Government have taken measures to help the long-term unemployed, to whom the hon. Gentleman has referred, such as the restart scheme, the community programme, the new worker schemes, the two-year youth training scheme, the job release schemes, the adult training schemes and the enterprise allowance. One would think, to hear Opposition Members, that the Government were doing nothing about unemployment. I remind the House that the Government are spending over £3,000 million of taxpayers' money to help unemployment. The business expansion scheme has also created many new jobs throughout the economy since March 1983. It is worth putting on record that nearly 1 million new jobs have been created by the various Government measures.
      However, having said all that, there is still more to be done. One of the snags in our economy today is the high cost of borrowing. If one compares the cost of borrowing in Britain with that of our competitors, one sees that Germany has a well-developed debt market whereby long-term loans of 10 years and more are available to industry at low rates of interest. The clearing banks in Germany take equity positions in various industrial companies and that must he of assistance to German firms because there is no interest element within that. The United States of America has for many years had something called industrial development bonds, which are similar to the employment bonds that I am about to advocate. Japan, another of our competitors, has long-term low-cost finance. I do not have to remind the House that the economies of those countries is buoyant. France, one of our partners in the EEC, has direct interest subsidies.
      When we look around at our international competitors we can see that we lose out on the cost of financing a development. Moreover, the cost of borrowing in the initial stages of a business is vital. Once a business is established it can afford a higher rate of interest because profits are being generated. But in the initial years it is vital for the cost of money to be as low as possible.
      I hope that my hon. Friend the Economic Secretary will not bother to criticise the wording of the new clause because all that I am asking him and the Government to do is to accept the spirit behind it.
      The idea of the employment bond is to channel investment into genuine job-creation projects. Each bond will be issued by one of the clearing banks. It is suggested that for any one project there should be a maximum bond of, say, £10 million, although 1 am not arguing for that figure. The hank would create the bond and then sell it to investors. If it were sold to 100 people, they could take
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      £100,000 each, or whatever it may be. Consequently, the money lent to the business would be covered by the employment bond.
      There is one stipulation, and that is that the money lent from the bond would go to a project whereby genuine jobs would be guaranteed for three years and no job should cost more than £50,000 of that investment. That would mean that if there were a maximum of £ 10 million for one project, 200 jobs would be created. It is true that £50,000 per job is extremely high. The American experience is that in practice the figure works out very much lower. But, if one takes the worst, it would create 200 new jobs.
      In order to make the bonds attractive the Government must give the interest on the bonds tax-free. If it were given tax-free any investor, particularly those at the higher rates of tax, would be attracted to them. Remember, the bonds must be directed to a genuine project which will create long-term jobs.
      If one takes the example of, say, 100 units going into a bond, a taxpayer at the maximum rate of 60 per cent. will, if he gets a 10 per cent. return on his 100 units, receive 10 units of interest. But the Exchequer will take six of those units and he will be left with four. The net interest that he receives will be 4 per cent. Consequently, that investor cart not only afford but it would be an incentive for him to lend his money at 6 or 7 per cent. tax-free.
      We must remember that the individual employment bond scheme would be run by the banks. The banks would guarantee repayment to the investor. There could be a secondary market — like the Euro dollar market — in which an investor could buy and sell his bonds as and when he wished. I am sure that that would be an advantage. The Chancellor of the Exchequer and the Government should experiment with that. I suggest that the experiment should be £1 billion worth of employment bonds. I remind my hon. Friend the Minister that £1 billion worth of employment bonds would be about one eighth of the total manufacturing investment in the economy.
      Before the Inland Revenue approved a scheme, it would have to be satisfied that it was a genuine project, that it created new jobs and, of course, that it was underwritten by the banks. If one considers a £10 million project, and assumes that the interest rate on it is 10 per cent., any individual or group of people investing that sum would collect £1 million a year in interest. If those people pay tax at the maximum rate, the Chancellor of the Exchequer would take 60 per cent. in tax. The loss to the revenue if the interest was tax-free would be £600,000 on £10 million invested. If one multiplied that to £1 billion—the sum involved in the experiment—the loss to the Exchequer would be £60 million. But we must remember that that loss of £60 million would create 20,000 new jobs. If one considers some of the job-creation schemes with which successive Governments have dabbled, that figure is small.
      How successful will the scheme be? I can only remind my hon. Friend of the experience in the United States of America. An important report published recently by leading economists in the United States maintained that the success of the industrial development bond in the United States— no one can say that its economy is not buoyant—was shown by an increase of 4·75 per cent. in its gross national product. That 4·75 per cent. increase occurred between 1980 and 1985. If one could extrapolate that to the position in Britain, it could mean 1 million extra jobs in five years.

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      Employment bonds would be especially attractive to companies that cannot get off the ground, especially in low-return industries such as textiles, light engineering, food manufacturing and office equipment. In those industries there is a low rate of return on the capital employed. Consequently, with the base rate at 10 per cent., although one cannot borrow money at 10 per cent. anywhere and one is bound to pay two or three points above the base rate—if it is a new business, the chances are that it will pay 13 per cent.—interest charges are an enormous drain on a low-return industry, even if it is expanding.
      One can compare the purchase of capital equipment in America, where, with an industrial development bond, one could borrow £1 million, £2 million or £10 million—whatever the cost of the plant and machinery was—and repay it over 10 or 15 years, with the position in Britain, where no financial institution would give those terms. The best one could get would be a leasing arrangement perhaps over five years. If an American competitor borrows £10 million, and he must pay it back in 10 years, he must find £1 million plus interest each year out of the new venture. In Britain, a £10 million loan for a similar plant to be repaid over five years means that a business man has the millstone round his neck of a £2 million repayment each year plus a much higher rate of interest than is payable abroad.
      The scheme is a much better incentive for the Government to create employment at a much lower cost. No extra bureaucracy is involved except for the Inland Revenue's approval. The Inland Revenue must consider three things. Is it a genuine project? Will it create jobs? Is it underwritten? Those are three simple points. The scheme involves no bureaucracy because private enterprise will take the responsibility for its administration and the risk.
      The scheme has worked well in the United States, and with unemployment at its present level it is another idea to help to solve the problem. The Government have done much to contain unemployment, despite the fact that we have been suffering, as everyone in the House knows, from many more people of school-leaving age entering the labour market and fewer people retiring.
      I urge my hon. Friend not just to dismiss the scheme.
      I am sure that he will not criticise the wording of the clause. The spirit behind the clause is to attract investment into genuine businesses which will create genuine jobs.
      Dr. Oonagh McDonald: Labour Members share the anxiety of the hon. Member for Croydon, South (Sir W. Clark) about unemployment in Britain. However, he should note that in Britain the underlying trend of unemployment is still moving upwards and that there are I million fewer people in work now than there were in 1979 when Labour left office. Since 1979, Britain has lost more jobs more quickly than the other EEC countries put together. Since 1979, jobs have been destroyed at an alarming rate. The hon. Gentleman is right to recognise that it is a serious problem and to attempt to provide a solution. Part of the analysis that the hon. Gentleman proposed is accepted by the Labour party, but not by the Government. We agree with the hon. Gentleman's statement that high interest rates are a strong disincentive
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      for investment and especially for investment in job creation.
      There is an urgent necessity for investment in job-creating projects. The hon. Gentleman is right to urge the Government to make such investment. We would propose different measures for job creation from the ones that he has proposed in the new clause.
      I have two more points to make about the new clause. The hon. Gentleman compared it with the business expansion scheme. I do not suggest that it would operate in exactly the same way, because, of course, it would not. That was not the best comparison for the hon. Gentleman to choose. The Peat Marwick report on the operation of the business expansion scheme shows clearly that, at best, that scheme has maintained some jobs rather than created new jobs. If the hon. Gentleman examines the figures, he will discover that that is the case.
      Another problem with the business expansion scheme is that it benefits higher rate taxpayers. Since its inception, the Government have had to introduce one tax avoidance measure after another to prevent the use of the business expansion scheme, not for the purpose for which the Government intended — job creation — but as a tax avoidance measure by higher rate taxpayers. I can see that the same difficulty may arise for his scheme which, as he suggested, would encourage higher rate taxpayers to invest in employment bonds.
      8 pm
      Sir William Clark: It is surely illogical to assume that. If we are endeavouring to channel investments into employment, creating jobs, all the Government can do is to give fiscal incentives to a potential investor. Those who are paying a higher rate of tax are obviously the potential investors.
      Dr. McDonald: It is not at all illogical to make the point. Fiscal incentives cost the Government money. If fiscal incentives are designed for job creation, the Government need to see to it that job creation results or there is no point in giving fiscal incentives because the Government will be giving yet another tax handout.
      The hon. Gentleman himself drew a comparison between the business expansion scheme and his proposal. The business expansion scheme has often been misused, as the Minister knows. It has been used for tax avoidance purposes rather than for new investment that will lead to job creation. One has only to look at agricultural property investment and the investment in fine wines that took place under the business expansion scheme. It is difficult to ensure that fiscal incentives like this go towards job creation.
      I share the hon. Gentleman's concern that job creation should be the result. The method that he has chosen in proposing this kind of tax incentive for investment in employment bonds is a dubious one. He suggested that it would not cost a great deal of money. However, I shall be interested to hear the Minister's figures based on the suggested amount of £1 billion in bonds of this kind. Even if the cost is only £60 million, that money must be used for job creation. That is why, although naturally sharing the hon. Gentleman's objectives, the Opposition are dubious about the method that he has proposed.
      The Economic Secretary to the Treasury (Mr. Ian Stewart): First, I compliment my hon. Friend the Member

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      for Croydon, South (Sir W. Clark) for giving us an opportunity to debate the interesting idea embodied in the new clause. He drew attention to the number of jobs generated in the economy in the last few years, but rightly said that we are all anxious to ensure that there should be as many ways as possible of encouraging the creation of new jobs. That sentiment, I think, is shared by hon. Members on both sides of the House.
      My hon. Friend said that the high cost of borrowing in the initial stages was one of the greatest deterrents to projects that are likely to give rise to new job-creating businesses. There is certainly truth in that. It is very encouraging that longer term interest rates have for the first time in many years come down into single figures. Although there is a margin to pay on top of the strict money market costs, it has not been possible for companies to work on the basis of gilt-edged stock yielding less than 10 per cent. for many years now. If that has not created a climate in which it is easier for all businesses that want to expand to raise longer term finance, it has certainly been a substantial step in the right direction, and it is one of the important achievements of our financial policies in the last few years.
      My hon. Friend may have guessed that I would not feel able to recommend to the House that the new clause be accepted. I do not want to attribute to him any great powers of clairvoyance, but there is a certain similarity between this debate and one that took place a year ago at a similar stage of the Finance Bill. I recall that the hon. Member for Thurrock (Dr. McDonald) was involved and, although I was not called upon to respond, my right hon. Friend the former Financial Secretary did. The debate was opened by my hon. Friend the Member for Kettering (Mr. Freeman), and he made a number of these points. As that debate is on the record, I looked to see whether any of the arguments had changed. Following that, I had the opportunity of a meeting with my hon. Friend the Member for Lewisham, East (Mr. Moynihan) and the two gentlemen, Mr. Jones and Mr. Soskin, to whom my hon. Friend referred. I had an interesting discussion with them.
      I shall certainly follow my hon. Friend's request that I should not dwell too much on the wording of the new clause, but deal rather with the spirit of it. Indeed, I go even further and promise not to read the Treasury brief that has been put in front of me for this occasion. I do not know that it would necessarily be conducive to the conduct of the debate at five minutes past eight this evening. I do not wish to cast any aspersions on the Treasury briefs, because they are marvellous documents. All those of us who have the opportunity to rely on Treasury briefs will bear witness to that. The points that my hon. Friend makes are really general, not detailed, about the wording of the clause, and I shall therefore try to deal with them.
      The first and most important point is whether relief of this kind would be an economic use of tax revenues forgone. Would it be sufficiently targeted on the type of companies that my hon. Friend has in mind? Having thought about this, when I met my hon. Friend the Member for Lewisham, East and again when my hon. Friend the Member for Croydon, South tabled the new clause, I could not convince myself that the degree of targeting of a proposal of this kind would come anywhere near a sufficiently satisfactory level to justify the introduction of such a wide-ranging relief. My hon. Friend said that these should be specific projects of a kind that would lead to the generation of new employment, in
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      practice, but I think that it would be a great deal more difficult to achieve that with any degree of confidence and certainty in order to justify such a relief.
      My second anxiety is that a great deal of investment that was going to take place anyway could be organised in such a fashion that it would qualify for relief under these arrangements. This is a factor that has always to be taken into account. Not only is there potential advantage to new activity—what is known in the jargon as additionality— but there is also the possibility that, unless such reliefs are very carefully defined, there is a great risk that, within the law, a great deal of activity that would otherwise have taken place but would not have come within the ambit of relief of this kind could be organised in such a way that it did come within its scope. That would mean an Exchequer cost that would not be related directly to the purpose that my hon. Friend has so rightly said deserves our attention.
      My hon. Friend went on to say that the idea of these bonds has been inspired to some extent by experience in the United States and other countries. He made a general point about other countries, but one has to look at the financial conditions in each country and at existing markets. It is not easy to extrapolate from one country to another, regardless of the surrounding circumstances and taxation systems for companies, and say that they would operate just as efficaciously in another country.
      My hon. Friend concentrated on the United States. Therefore, I ought to do so, too. Tax relief in the United States operates in a way that is bound to be popular with some of those who are involved. It is popular with the recipients because this money is a subsidy. Tax relief makes it possible to quote a lower rate of interest. Therefore, it is popular with those who are able to invest and gain a gross interest on bonds that are not liable to tax. It is also popular with those states in the United States that operate this system. They are able to offer tax subsidies to enterprises in individual states, but the cost falls on the federal Government. Ultimately, therefore, the federal Government have to bear the loss of revenue and to weigh up whether they believe they are getting a reasonable deal. The latest United States Treasury view is that
      "inefficient, economically distortive, and ill-targeted tax expenditures of this type should be eliminated."
      Preliminary steps towards that end have been taken in the United States.
      One of the reasons why the United States came to that conclusion was that a significant proportion of the tax relief was being given as a subsidy to financial intermediaries or to higher rate taxpayers. I am sure that that would happen in this country, because our rates of personal tax are higher than those in the United States. If approximately one third of the cost in the United States was used not for the creation of new jobs but as a subsidy for those other parties, I do not think we could expect that the percentage that leaked out in that way would be any lower. Indeed, it could conceivably be higher.
      The United States authorities concluded that for every $2 of interest costs that are saved by the borrower, the federal Government forgo more than $3 of revenue. That is not a formula upon which we could base a similar provision. That leaves aside any possibility of exploitation or lack of targeting to which the hon. Member for Thurrock alluded. A loan guarantee scheme or a business expansion scheme needs to be as closely targeted as

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      possible. It is inherent in any such scheme that one has to look at the limits of the target and to maintain vigilance, because the temptation for it to be used for purposes other than those that we have in mind are bound to be great.
      If an experiment costing £1 billion were carried out—with an interest rate of 10 per cent. and with only top rate taxpayers at 60 per cent. involved—we should be talking of £60 million. However, it is almost impossible to quantify the cost because we do not know what rates of interest relating to the credit worthiness of the borrowers would be charged on particular bonds, and we should not know what were the individual tax rates of those who put
      Finally, my hon. Friend said that the experience of this scheme in the United States was that the gross national product increased within a few years by about 4·75 per cent. That is a huge figure if it can be attributed to a single measure of this kind. The paper that includes these figures refers to a sum that is quoted in dollars rather than to a percentage of GNP. The GNP percentage is nearer 0·1 per cent.
      On the evidence of the figures and the American experience, I do not feel that a case has yet been made for a provision of this kind. We are always anxious to find ways in which to encourage businesses to create more job opportunities. Along the lines of employment bonds there may be a formula that would work and be economical for the general body of taxpayers, but I regret that the formula that is contained in this new clause has not found it.
      8.15 pm
      Sir William Clark: That was a very disappointing reply, particularly as my hon. Friend prefaced his remarks by saying that he would not read the Treasury brief, and then proceeded to quote from the Inland Revenue brief.
      My hon. Friend took me to task at the beginning of his reply on bank interest. I know that interest rates have been reduced and I congratulate the Government on that reduction. However, the idea behind employment bonds, as I tried to point out, is to obtain a lower rate for genuine projects. I do not accept my hon. Friend's assessment. If there are loopholes, it is up to the Inland Revenue to close them, as it did with the business expansion scheme. Of course, these ideas will be exploited, but it is up to the Inland Revenue to close the loopholes.
      I said that the Inland Revenue would closely monitor employment bonds. The fact is that £60 million would create 20,000 jobs. The figure may be less or it may be more, but I believe that my hon. Friend agrees that a £1 billion issue of investment bonds would cost £60 million, and the risk would be taken by the banks.
      In view of what my hon. Friend has said, it is obvious that this year we shall be unable to push the matter further. However, I assure him that the matter will not be forgotten and that it will be raised again. I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 19

      BINGO DUTY (No. 2)
      `(1) Schedule 3 to the Betting and Gaming Duties Act 1981 (exemptions from bingo duty) shall have effect subject to the following provision:—
      (2) In subsection 2(1) (inserted by Finance Act 1982) there shall be inserted the following paragraph—
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      "(aa) the said bingo is played as an activity of a non-profit making members' club or society"; or'. — [Mr. Greg Knight.]
      Brought up, and read the First time.
      Mr. Greg Knight: I beg to move, That the clause be read a Second time.
      I am sure that it has not escaped your attention, Mr. Deputy Speaker, that this clause has all-party support. Appended to the clause are the names of more hon. Members than are appended to any other new clause. The clause would remove all non-profit-making clubs from the scope of bingo duty in respect of bingo being played as an activity of the club. If the new clause were agreed to, it would cost the Treasury £2·7 million. For that reason, the House will want to know why I urge that the new clause should be approved.
      Since 27 September 1982, non-profit-making clubs have been obliged to pay bingo duty in respect of bingo that exceeds certain thresholds. The decision to make clubs liable to duty is not, I understand, a cornerstone of the Government's economic strategy and it does not relate to any central Treasury principle. It was introduced, firstly, as a result of pressure from profit-making organisations that felt that they were facing unfair competition. I do not accept that point.
      Secondly, I understand that at that time the then Chancellor of the Exchequer was experiencing some difficulty with Conservative Members who did not accept the Government's proposal to increase the duty on derv. Other ways had to be examined of raising finance. Because of the circumstances in which non-profit-making clubs were brought within the scope of the tax, I hope that my hon. Friend will accept that there was less consultation on this issue than I am sure he would have wished. If the new clause is accepted, non-profit-making clubs will be exempted from bingo duty.
      The distinction between profit-making organisations and non-profit-making organisations is that the profit from bingo played in clubs such as Royal British Legion clubs, Conservative clubs and Labour clubs is usually used to finance other activities and does not go into the pockets of owners and shareholders.
      In the Financial Times on 17 June there was an article headed:
      "Ladbroke sells Rank its bingo clubs in £67m deal."
      The article reads:
      "Rank Organisation yesterday become the largest licensed bingo hall operator in the UK with the agreed acquisition of Ladbroke Group's 36 bingo clubs and 42 high street amusement centres in a deal worth L67·5m."
      Quite rightly, these clubs have to pay tax, and I do not seek in any way to alter their tax liability, but non-profit-making clubs should be exempt. Mr. Deputy Speaker, you represent an area of Doncaster and you know that nonprofit-making clubs in Great Britain provide leisure activities for approximately 10 million people. In addition to providing entertainment, the clubs often sponsor and provide sporting activities.
      In my part of Britain, the east midlands, many professional musicians got their first start in the clubs. If a youngster who is learning to play an instrument wants to go on stage and perform before an audience, often the only outlets—the only places which can give him an opportunity to do so — are the working men's clubs, Royal British Legion clubs or Conservative clubs.

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      Boxers like Tony Sibson often receive their first encouragement by way of the help given by non-profit-making clubs. Those clubs sponsor and assist young people and it is the modest bingo profit that is invariably used to help to pay for that sort of activity, rather than lining the pockets of proprietors.
      In many areas the facilities in non-profit-making clubs are of social benefit to the communities that they serve. In such places bingo is primarily a fun game, a sort of low-powered gaming. Some people might even say it is a form of no-power gaming. Members do not gamble for high stakes of the sort that we see in the clubs operated for profit, many of which have taken over disused cinemas and other high street premises.
      Many hon. Members may ask why this new clause is necessary. They may say that, after all, the present law provides for exemptions where the ticket sales from bingo fall below a certain level. I shall explain to the House why the present exemptions from bingo duty are inadequate and unfair.
      At present, non-profit-making members' clubs are required to register with the Customs and Excise when prize money or money collected for the purchase of bingo tickets, whichever is the greater, exceeds £400 in a day or £1,000 in a week. When a club exceeds either of these thresholds it must within the following five days register for bingo duty with the local Customs and Excise office. Duty is then payable at the rate of 10 per cent. of the prize money or ticket money, whichever is the greater, in that week and in the following 12 weeks. Payment of the duty continues until 12 consecutive weeks occur in which the thresholds are not exceeded. At that time the club has a right to be deregistered.
      In a normal week the majority of unlicensed clubs—that is, working men's clubs — do not reach the thresholds. Usually it is only in weeks during which a bank holiday occurs and in which, understandably, the number of club functions is greater that the threshold is reached and the club needs to register. The clubs find that, because bank holidays occur in virtually each quarter, many of them reaching the thresholds on perhaps only five, six or seven weeks of the year require to be registered for the whole of the year.
      I have a letter dated 10 April from Her Majesty's Customs and Excise. It is addressed to the secretary of the Manningham ward Labour club, Whetley lane, Bradford, west Yorkshire. The letter could equally have been written to a Royal British Legion club, a Conservative club or a Liberal club. In the letter, the senior officer says:
      "Dear Sirs … I am writing in connection with our recent visits and discussions regarding the bingo played in the Club and the liability to Bingo Duty when the small-scale bingo exemption limits are exceeded.
      Examination of your Bingo Duty Finance Record Book has shown that the small-scale bingo exemption limits were exceeded during weeks ending 30 December 1984, 6 January 1985, 29 December 1985 and 5 January 1986 thus rendering all the bingo played in the Club during those particular weeks, and in each of the twelve succeeding weeks, liable to Bingo Duty."
      The senior officer goes on to tell the club that it is liable for the sum of £2,183·77.
      I draw this matter to the attention of the House to show that the mechanism not only causes problems in terms of record keeping, but is inequitable because in many cases clubs breach the threshold in one week, a week in which there is a bank holiday, and are then obliged to pay bingo duty for the following 12 weeks. If the trigger mechanism
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      operates on every bank holiday, the club may find that it has to be registered all year and has to pay bingo duty during that time when for most of the year the income from bingo falls well below the thresholds.
      The other difficulty experienced by non-profit-making clubs is that, unlike the organisations that are making money for shareholders, the non-profit-making clubs are managed by unpaid volunteers and quite often the extra paper work is unduly onerous. Many clubs are finding it difficult to get officers to serve on the committee; that is because of the onerous duties placed upon them by the provisions.
      I hope that the House will accept the new clause and will exclude all non-profit-making organisations from the ambit of bingo duty. If my right hon. Friend the Minister feels that he cannot accept the new clause as drafted, I ask him to consider another point. Before 27 September 1982 non-profit-making clubs were exempt from the bingo duty provisions. They were brought within the provisions on that date, as I have said, following pressure from the commercial bingo clubs.
      I have looked into the matter and have found that no non-profit-making club was consulted before such clubs were brought within the ambit of bingo duty. I do not entirely blame the Government for that, because at that time the non-profit-making clubs did not have an umbrella organisation by which they could be represented nationally and through which they could let their views be known. That is no longer the case, because in the last couple of years the Committee of Registered Clubs Association was formed specifically to look after the interests of the non-profit-making clubs and especially to make representations about legislation that affects the club movement.
      If my right hon. Friend the Chief Secretary cannot accept the new clause today, I hope that he will give an assurance that during the next 12 months, and before next year's Finance Bill, he will meet members of the association, or at least listen to their views. If he gives that assurance, I may consider not pressing the new clause to a Division. But given the difficulties that I have outlined to the House, I hope that my right hon. Friend will at least be prepared to enter into a dialogue with the Committee
      8.30 pm
      Mr. Meadowcroft: I rise to underline the point made by the hon. Member for Derby, North (Mr. Knight). This is, indeed, an all-party matter. Sometimes, particularly when we discuss Treasury matters, hon. Members find that they have a collective opponent in the form of Treasury Ministers. We have to gather our strength and concentrate on the arguments that the Treasury may throw up. In this instance, we must point out that the income involved is crucial to the survival of those clubs.
      The new clause may seem to involve a small issue, but I am glad that it was selected. It has enabled hon. Members to point out just how crucial non-profit-making members' clubs are to their communities. In many areas, they are vital to the fabric of society. They are one of the few institutions to be run by ordinary working people, for their benefit. It is important to stress that we are not dealing with clubs where people legitimately and deliberately wish to make a profit or with the sort of clubs that the police are often worried about, which just try to get round the licensing laws.

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      We are dealing with clubs that are run by members for the benefit of themselves and that of their local community. It is thus important to discover how best they can be assisted. During a recession, they are particularly important to the fabric of society. However, I doubt whether many clubs are now highly profitable. Of the 25 or so in my constituency, I imagine that very few of them are financially viable. If we could lift even a small burden from them, it might help them and their community to survive.
      If the law on charities was not so restrictive, many of those clubs—if not all of them—would probably qualify to be regarded as charitable. Much of the work that they do is akin to being charitable. Only today a letter from the secretary of a club in my constituency raised the problem of one of his members in relation to the DHSS. That is typical of the sort of work carried out by clubs on behalf of their members.
      I am not a great bingo lover, but as a politician I have learned over the years that it is fatal to stop bingo going on in a local club. In this instance, I doubt whether the loss of income to the Treasury will break the Government, but that income makes a difference between survival and closure to some of those clubs. Therefore, I hope that the Chief Secretary understands the problems faced by many of our clubs, and that he will respond sympathetically to the new clause.
      Mr. Terry Davis: Hon. Members on both sides of the House—or perhaps I should describe them as all-party Members — have supported this new clause, and I listened to the speeches made with great care and interest. In fact, I have a particular interest to declare in that, no doubt like the Chief Secretary, I am a member of several clubs in my constituency. I certainly endorse the remarks made by the hon. Members for Derby, North (Mr. Knight) and for Leeds, West (Mr. Meadowcroft) about the good work done by non-profit-making clubs.
      I have some sympathy with non-profit-making members' clubs and with the problems that they encounter in the present economic climate. However, I am not sure that I can support the abolition of the duty on bingo in clubs. I was impressed by the arguments of the hon. Member for Derby, North, who said that the measure would cost only £2·7 million. I can see that that is a small amount of revenue for the Treasury to lose. But I am concerned about the precedents that the new clause would create. Consequently, I await with interest the Chief Secretary's reply.
      I accept what the hon. Member for Derby, North said about the problems of registration. It seems grossly unfair that clubs should be required to register for 12 weeks after every bank holiday and so are always subject to that tax. But perhaps we should be pressing the Treasury to do something about the problem of registration rather than pressing for the abolition of bingo duty in respect of nonprofit-making members' clubs. However, that is a matter for the consideration of those hon. Members who are most concerned about this issue on behalf of the all-party group.
      On behalf of the Opposition, I express some sympathy with the pleas that have been made, but I am not prepared to recommend that my right hon. and hon. Friends go into the Lobby if the new clause is pressed to a Division—at least not until I have heard the Chief Secretary's views.
      The Chief Secretary to the Treasury (Mr. John MacGregor): I know of the considerable interest that has been shown in this subject by my hon. Friend the Member for Derby, North (Mr. Knight). He has demonstrated it not only by pressing Treasury Ministers in correspondence on the matter, but by raising the issue in the House tonight. I entirely support him in his commendations of the worthy work done, and social contribution made, by the non-profit-making clubs. I also fully understand the point made by the hon. Member for Leeds, West (Mr. Meadowcroft) about those clubs being crucial to the fabric of society in some parts of the country. Indeed, the hon. Member for Birmingham, Hodge Hill (Mr. Davis) made the same point. Thus, there is all-party agreement on that.
      The hon. Member for Hodge Hill said that he would wait until he had heard what I had to say before deciding what action to take. That is the first time that he has invited me to make up his mind for him, and I hope that he will do so again. As my hon. Friend the Member for Derby, North rightly said, before September 1982 any club promoting bingo in accordance with sections 40 or 41 of the Gaming Act 1968 was automatically exempt from bingo duty. Following complaints from commercial clubs that they were facing unfair competition from exempt social clubs, the whole basis of exemption was changed in the Finance Act 1982, and then modified in the Finance Acts 1983 and 1984 so that there is now exemption for clubs where there is a £400 daily limit and a £1,000 weekly limit for stakes as well as prize values.
      My hon. Friend the Member for Derby, North advocates removing all non-profit-making clubs from the ambit of bingo duty. If exemption was given to all members' clubs or societies of this sort, the commercial promoters of bingo would again face serious competition from the clubs. The number of commercial clubs has declined year after year, and if members' clubs did not have to pay duty on similar turnovers—I shall come to that point in a moment — that decline would be accelerated.
      It is also possible that members' clubs, which may have restricted their playing of bingo in order to avoid breaking the exemption limits, would increase the amount of bingo played. Some hon. Members might argue that that would be a very good thing for the clubs. I can see that argument, but it would also increase the competition with commercial clubs.
      Some hon. Members may know that in its pre-Budget representations the Bingo Association of Great Britain suggested that the exemption for members' clubs should be further restricted, as it still regards those clubs as representing competing interests. The Government have recently acknowledged the industry's difficulties by facilitating the introduction of a national bingo game. The problem is that the existing exemption limits are reasonably generous. In bringing non-profit-making members' clubs within the scope of the duty, we are talking about regular, high turnover bingo at what is really a commercial rate. I understand that the stake figures for quite a number of working men's clubs go up to £1,700 or £1,800 a week. I think that the accurate, up-to-date figure is 363 for the number of non-exempt, non-profit-making clubs. That is a very small proportion of all the clubs and societies, but in comparison with the commercial operators it is quite large. There are 513 commercial operators at present, involving some 900 outlets altogether. On the assumption that the clubs and societies

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      have one outlet each, they represent nearly one third of the total number of commercial outlets, and so there is a point to be made about commercial competition.
      Commercial outlets have been under heavy pressure. Nearly 300 outlets have disappeared in the past four years. There is a question of balance. I would like to give the last figure so that all the figures have been given to the House. The cost of revenue lost would be some £3 million. That is a similar figure to that mentioned by my hon. Friend the Member for Derby, North.
      A balance must be achieved. The changes made in 1982 and 1983 were intended to ensure fair competition between the members' clubs with a comparatively high turnover relative to the bingo promoters and the commercial bingo promoters. I am not sure that the case has been made to go back on the decisions that were taken then. There would be strong representations from those who make a profit out of bingo and who also provide a leisure facility in the community.
      I would like to consider the specific points raised by my hon. Friend the Member for Derby, North. I have stated the reasons why we should not accept his new clause, which would sweep away all the requirements for bingo duty from clubs and societies. My hon. Friend made two specific points. First, he said that it is the mechanism which causes the problem. The hon. Member for Hodge Hill followed that point. My hon. Friend said that the mechanism caused problems in connection with record-keeping. I understand the problem of keeping paperwork for volunteers. However, any well-ordered club will have to carry out a considerable amount of record-keeping because the Customs and Excise, legitimately, in fulfilling Parliament's obligations, will go to clubs and societies from time to time and check whether they are above the exemption limits. A certain amount of paper-work would therefore have to be carried out.
      My hon. Friend the Member for Derby, North made a second point concerning the difficulty about the way in which the exemption limit is established. He stated that there are specific parts of the year — for example, holiday periods — when some clubs suddenly find themselves above the limit and having an exceptional turnover for limited periods in the year. Under the present system, the clubs will have to register and pay duty for three months thereafter.
      That provision was introduced because it would not have been practicable to treat each day or week separately. The new provisions were aimed at giving clubs the choice. It was reasonable to assume that most clubs would make the choice either to have bingo on a sufficiently substantial scale to be above the exemption limits for most parts of the year and accept that they would have to pay bingo duty, or they would wish to remain exempt throughout the year. In the latter case, when clubs ran into the specific problem—and there is evidence that many clubs do this—of the kind identified by my hon. Friend the Member for Derby, North of a high turnover in Christmas week or whenever, they could deal with that by reducing stakes in the Christmas period to keep below exemption limits. I am told that the number of clubs that are non-exempt has remained fairly static. That suggests that many clubs have been doing that.
      Nevertheless, I accept that that does not meet the point. I stress that because it might be useful for some clubs to know that that is one way out of the difficulty. However, I can make no commitment to my hon. Friend the Member
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      for Derby, North beyond saying that I would consider his point and see whether there is a way of dealing with it to meet the problem of the very high turnover in specific parts of the year. I do not make a commitment to bring some measure on that point back to the House next year. I would like to consider it and I am grateful to my hon. Friend for raising the matter in the House.
      8.45 pm
      My hon. Friend's other main point related to the umbrella organisation — the Committee of Registered Clubs Association. I would obviously be willing to receive representations about that. Whether we need to have a meeting is a matter I must leave open. These days I lead a hectic life and if necessary one of my hon. Friends may have to deal with that. I cannot make a commitment to regular meetings but I would be willing to receive representations. If we considered that a meeting would be sensible, we would have one.
      I especially welcome the idea of an umbrella organisation. I would be happy for my Department and for the Inland Revenue to engage in discussions with such an organisation. In the past there have been difficulties in explaining to many smaller clubs the position on bingo duty and difficulty in publicising that position. There have been difficulties in dealing with arrears of duty when a club has strayed over the limits.
      There is merit in having a body which represents, if not all clubs—as that would be difficult to achieve—many more than previously. I welcome my hon. Friend's point about the umbrella organisation and I would certainly welcome the opportunity to receive representations arid consider certain points. I hope that I have explained why the new clause goes further than I would be prepared to recommend to the House that we should go tonight.
      Mr. Terry Davis: I must thank the Chief Secretary for his comments as he has helped to make up my mind. He has been very forthcoming to his hon. Friend the Member for Derby, North (Mr. Knight) in agreeing to receive representations and to meet representatives of clubs. The main point appears to be the requirement for registration based on a limited experience of high turnover. There are several ways in which that could be tackled. Instead of being required to register if turnover exceeds a limit in one week, the limit should have to be exceeded for three consecutive weeks or perhaps for a certain number of weeks in a year, which would take care of the peaks. There are ways around that problem. I am grateful to the Chief Secretary for agreeing to receive representations and perhaps we can return to this point next year. In the meantime, I can assure the hon. Member for Derby, North that if the Chief Secretary does not have time to meet representations from clubs the Labour party Front Bench would be delighted to do so.
      Mr. MacGregor: Long may the Labour party Front Bench have plenty of time on their hands to do that.
      The hon. Member for Birmingham, Hodge Hill (Mr. Davis) has made a reasonable point. We ought to see whether the mechanism is causing unnecessary problems and if there is a way around that. On that basis, I hope that my hon. Friend the hon. Member for Derby, North (Mr. Knight) will understand why I cannot accept the new clause and I hope that he will be prepared to withdraw it.
      Mr. Knight: I am grateful for the wide measure of support that I have received on this issue from both sides

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      of the House. Unfortunately, many of the hon. Members who supported the clause were unable to be present this evening. I do not know whether they are out playing bingo somewhere, but I have received their apologies for absence.
      I am also grateful for the comments of the hon. Member for Birmingham, Hodge Hill (Mr. Davis). He is correct to say that it is primarily the mechanism which is causing many of the clubs difficulty. I was sorry to hear that the hon. Member for Leeds, West (Mr. Meadowcroft) does not like bingo. However, as the House will know, the hon. Member for Leeds, West is a musician. He must therefore appreciate that bingo in clubs has given employment to many musicians because without bingo in many cases there would be no way of funding entertainment in clubs.
      I am extremely grateful to my right hon. Friend the Chief Secretary to the Treasury. I do not necessarily agree with his comments on why he cannot accept the clause. I still believe that there is some merit in the clause. In view of my right hon. Friend's generous comments, however, and the welcome sign that he would be prepared to receive representations and, if necessary, to attend a meeting, I am sure that all concerned with the clubs movement will warmly welcome his comments. In the spirit of my right hon. Friend's gesture, I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 21

      LUNCHEON VOUCHERS
      `In subsection 4 of section 36 of the Finance (No. 2) Act 1975, in the definition of "voucher", after the words "this Act", there shall be inserted the words "or a voucher exchangeable and only exchangeable for food to be consumed on the premises in which the voucher is exchanged or freshly prepared for immediate consumption, except to the extent (if any) by which the value of the voucher or vouchers given to the employee exceeds £1 for each working day."'.— [Mr. Michael Cocks.]
      Brought up, and read the First time.
      Mr. Michael Cocks: I am much encouraged by the response of the Chief Secretary to the last clause. I therefore beg to move, That the clause be read a Second time.
      Out of consideration for the House, I did not take part in the previous debate, although I was sorely tempted to do so as I am chairman of the Bristol, South Labour club and felt a great affinity with much that was said. It may not surprise the House to learn that relations between the Bristol, South Labour club and the Bristol, South constituency party are rather strained. In spite of this unfortunate lack of identity of views, I am glad to say that, unlike some of the clubs that have been described tonight, the Bristol, South Labour club is thriving and prosperous and is prepared on occasion to donate money to causes which we consider to be worthy.
      I am pleased to introduce the new clause because by doing so I am giving the House an opportunity to consider and possibly to rectify an anomaly which discriminates especially against small firms, young people and lower paid workers. These are three groups which the
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      Government, and particularly the Chancellor of the Exchequer, are always telling us that they are most anxious to assist.
      The present position is probably known to right hon. and hon. Members. Everyone who is given a luncheon voucher by his employer has to pay tax on every penny that he receives above 15p a day. That tax has to be paid by the employee; it cannot be paid for him by the employer. This is in strong contrast to the treatment of those employees who eat in company canteens, which are frequently heavily subsidised. They do not have to pay any tax on the benefit that they receive. Whether it is a factory canteen or a directors' dining room, they are not liable to 1p extra on their tax. The anomaly is manifestly unfair and it is becoming increasingly unfair as the years pass as a result of inflation. The inequity puts at a disadvantage firms which are not large enough to maintain a staff canteen and which cannot afford all of the overheads that go with it when it comes to recruiting staff.
      Luncheon vouchers were introduced after the war when 15p, or three shillings—or three bob, as I prefer to call it — was sufficient to buy a three-course meal. I can remember after the war having a number of substantial blowouts in the then British Restaurants, and the total bill for a good feed was no more than three shillings. At that time the value of a luncheon voucher equated roughly with the price that was being paid in factory canteens. Today, 15p will scarcely buy a cup of coffee. The value of a luncheon voucher is in no respect equal to the amount of subsidy which goes into maintaining staff canteens.
      By any standards, the tax-free element of luncheon vouchers is absurd. It has been absurd for a long time and the anomaly has been recognised for a long time. In 1975, an attempt was made to make the luncheon voucher system more realistic. A number of enlightened Members tried to rectify the anomaly by supporting an amendment that was moved in Committee during the consideration of what was then the Finance (No. 2) Bill. An amendment was moved to increase the tax-free element from 15p to 50p, and the Member who moved it used words which are difficult to improve upon. He said:
      "We seek the change simply on the ground of equity between the employees who have to have luncheon vouchers because their employers are either too small or do not have the premises to provide canteen facilities and those who have canteen facilities, for whom the fringe benefit has been able to keep pace with the cost of food. We seek to make the tax-free benefit more realistic in terms of current costs.
      The Financial Secretary will be aware that 15p now goes not very far at all in many parts of the country, particularly in London, in assisting an employee to have a decent lunch. We seek to bring the amount into line with reality." — [Official Report, Standing Committee H, 1 July 1975; c. 649.]
      Those were wise words then and they are wise words now. They were the words used by the right hon. Member for Norfolk, South (Mr. MacGregor), who is now the Chief Secretary to the Treasury. I commend them to the House today. The right hon. Gentleman has a chance that is not presented to many who stay in this place for any time. He can demonstrate that he does not say one thing when he is out of office and another when in power. Two faces are not for him. He has a chance to strike a blow for consistency, honesty and sincerity.
      When the issue was drawn to my attention I was tempted initially to table an amendment in the precise terms used by the Minister, as he now is, in 1975. However, I resisted what might be described as a tease. I thought that it would be better to table a new clause in words which

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      overcame some of the objections which were raised in 1975. I succumbed to the tease in Committee, but some of my colleagues argued that I had not brought the value of luncheon vouchers in line with current practices, so I have added the words
      "or freshly prepared for immediate consumption".
      This relates to food which can be purchased by luncheon vouchers. I have taken into account the many snack and sandwich bars, for example, which have come into existance since 1975, when the Minister tabled his amendment, and instant food and food which is taken off the premises.
      Luncheon vouchers are provided by many small employers and they are given mainly to young and lower paid workers. The tax-free element governs to a large extent the value of vouchers issued, or which in many instances can be issued. An employer who issues vouchers worth more than 15p a day has to set up machinery to deduct tax at source from each of his employees who receives more than 15p daily. This is expensive and troublesome and consequently in most instances the amount given is limited to the tax-free limit of 15p a day. I am sure that an increase in the tax-free level would result in an increase in the value of the voucher issued for the majority of recipients. Many young and low-paid workers would receive an increase and small firms would be in a better position to compete with firms large enough to run staff canteens.
      About 14,000 British companies provide luncheon vouchers for about 500,000 employees. An increase in the value of vouchers would provide more employment in the catering industry, especially for small and family businesses. About 30,000 caterers are involved already. The new clause would cost money and in Committee I expressed my sympathy with the Chief Secretary for the demands which were made on him for resources from various Departments. If the new clause were to be approved, however, a good deal of benefit would be returned to the Treasury in a reduction in unemployment and extra tax revenue. Fewer low-paid people would be in the poverty trap, where it is sometimes more beneficial to be unemployed than to take a job.
      t is possible also that the new clause would help to turn people away from having junk food for lunch. If they were encouraged to have something more substantial, that would be of benefit to their working ability and to their general health. Other countries have recognised the benefit of the concession. I do not normally take examples from the continent, but in France the benefit is equivalent to £1·40, and in Portugal, £1·50.
      As the Chief Secretary said some time ago, the benefit increase is long overdue. I hope that the right hon. Gentleman likes the change that I have made to the clause since it appeared in Committee. I think that between us we have come up with a pretty good formula to increase the safeguards over any abuse which may be made, or thought to be made, by those who use vouchers for other purposes. I do not think that the receipt of luncheon vouchers is what is sometimes described vulgarly as a perk. It is a genuine and desirable benefit. I certainly would not support it if I thought that it was just another perk.
      If we brought the value of the tax-free element to the present equivalent, having regard to inflation, the original 15p would have to go up to about £3. I do not ask for that. I think that an increase to £1 would go some way to demonstrating that the Government have the interests of
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      small employers and young workers at heart. At a comparatively small cost to the Treasury, the Government can assist 500,000 workers. There can be few cheaper ways of showing that they mean what they say about the problems.
      9 pm
      Since I tabled the clause, I have had a number of representations. I think that a number of hon. and right hon. Gentlemen have also had them. The interest shown by various organisations and individuals has reinforced my view that reform is long overdue. I do not want to embarrass the Chief Secretary by congratulating him too heartily on his prescience in pointing the way. He was a sort of parliamentary pathfinder in 1975, blazing the way for the reform that he now has a chance to pick up.
      It is most unusual to find oneself in the position of being able to do what one was thinking about 10 or 11 years ago. If the Government accept my new clause, I should be the first to congratulate them. I would not make any cheap party points about saying one thing in opposition and doing another in government. If any of my colleagues felt inclined to go along that path, I should do my best to damp it down. It would be a most praiseworthy event if the Chief Secretary were able to cough up on this occasion.
      If the Government oppose the reform, despite my best blandishments, some of my colleagues might be so churlish as to point out that one thing was said in opposition and another in government. However, the Chief Secretary can rely on me to put the best possible gloss on the outcome of the debate. He is a decent chap; I am sure that he will do his best. I am giving him an opportunity to cast an eye over a simple and inexpensive reform that would help a number of people who are probably most deserving of assistance. The measure would help entrepreneurs who are setting up small businesses and younger people going to work, possibly for the first time.
      Mr. Penhaligon: Can the right hon. Gentleman say which is the most expensive proposal in real terms—the proposal argued in 1974, or the proposal put so wonderfully to the House by the right hon. Gentleman? Perhaps the answer is that his proposal is the cheapest.
      Mr. Cocks: I am obliged to the hon. Gentleman. I was thrown a little at first because he used the superlative when he should have used the comparative. I know that he did that only to test my knowledge of English grammar. I agree entirely with the point that he made. I hope that that will be a further reinforcement to the Chief Secretary to cast a favourable eye over the new clause. However sympathetic he may be, he may feel that further consultations are required and that perhaps the net should be spread more widely. I should not be aggressive if he made such a point. I look forward with great interest to the response from the Treasury Bench.
      Mr. MacGregor: As the right hon. Member for Bristol, South (Mr. Cocks) has made clear, the matter is a regular runner in Finance Bill debates. As the right hon. Gentleman pointed out, it has been run in Committee, without success, by some young Back-Benchers who have just become Members. Following representations made to them, Back-Benchers may subsequently have been converted to a different view. I shall say something about that later. As the right hon. Gentleman knows, the matter has not been run only once; it has been run many times.

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      I am aware that the right hon. Gentleman has been prevented from making contributions to our debates for some years. He has certainly made some charming, witty and well-researched contributions to our debate this year. I can see that he has spent many years storing up his contribution. He will know, from his research, that the matter has come up regularly. Therefore, he will not be surprised at some of the points that I shall make to him in return.
      As has frequently been pointed out, tax relief on luncheon vouchers was introduced in 1948. Subsequently, it was developed in a different form by way of extra-statutory concessions. It was introduced in the immediate post-war period when conditions and requirements were quite different from those which exist today. The problems were quite different. For example, the income position of employees has changed substantially since then.
      The right hon. Gentleman said that one of the reasons for the introduction of tax relief on luncheon vouchers was that people who had subsidised meals in work canteens were advantaged compared with those who did not have subsidised meals at their place of work. The luncheon voucher system was intended to deal with that. Today the great majority of employees have neither luncheon vouchers nor an employer-subsidised canteen and therefore must meet the full costs of their meals from their pay net of tax. The current daily luncheon voucher with the 15p tax concession is equivalent to a tax-free payment of £40 a year. Increasing the concession on the scale suggested by the right hon. Member for Bristol, South would certainly discriminate substantially further against the vast majority of employees who have the benefit of neither provision.
      I, too, have been doing research. I think that the right hon. Member for Bristol, South will remember the response to a parliamentary question in February 1979, under the previous Labour Government, when the then Financial Secretary to the Treasury — the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) —responded with these words:
      "I do not think that such an increase would be justified. To increase the value of the concession would be unfair to the millions of workers who have the benefit neither of luncheon vouchers nor of subsidised canteens." — [Official Report, 12 February 1979; Vol 962, c. 423.]
      That is the point I am making now and about which I am convinced. I shall be interested to know whether the hon. Member for Birmingham, Hodge Hill (Mr. Davis) holds the view that was held by the then Government or whether he has changed his mind.
      During the period of the last Labour Government, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), the present Financial Secretary to the Treasury, put the point correctly when he said:
      "I accept the case that benefits in kind should be taxable. I think that it would be far better to have lower tax rates, higher pay, and a totally sensible tax regime. But that is not the world in which we live."—[Official Report. 17 May 1976; Vol. 911, c. 1070.]
      That was an accurate comment on the position under the last Labour Government. I am sure, although I cannot quite recall, that that must have been one of the reasons why I was advocating some relief for as many people as possible from the very high tax regime, the levels of which had been increased in 1975.
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      There are other reasons why the new clause would introduce even greater unfair discrimination against all those who do not have the benefit of these provisions. I shall refer first to perhaps the least important. The right hon. Member for Bristol, South said that, if we accepted his recommendation, it was likely that fewer people would eat junk foods in the middle of the day. There is evidence — I recall what happened when I had the benefit of luncheon vouchers and saw what happened with many people—that often luncheon vouchers are not used for the purpose intended. They are often used to purchase goods and not simply to purchase lunch-time meals. It is a problem. It is difficult to prevent that. Obviously, increasing the limit would increase the scope for misuse. However, that point is secondary to the issue of unfair discrimination.
      The concession would be very costly. That is an important point. The current claim, on figures which we have been able to establish—I think they come mainly from the company that produces the luncheon vouchers — is that about 400,000 employees currently receive luncheon vouchers. If that is accepted as the normal figure and if one uses the normal calculation of the number of days in the year on which luncheon vouchers are available, the annual cost of the present 15p exemption is about £4 million. Increasing the exemption to £1 a day, as suggested by the right hon. Member for Bristol, South, would increase the cost to at least £30 million, but it could well be beyond that.
      If the tax exemption were increased to £1, there would obviously be a greater incentive for more employees to request luncheon vouchers and for more employers to grant it. There could easily be a substantial increase in the number of luncheon vouchers and the cost would rise accordingly. In talking about that scale of tax relief and the costs, it becomes important to consider whether this is the right priority at this time. I do not believe that it is.
      What we are endeavouring to do with the tax regime and the point made back in 1976 by my right hon. Friend the Financial Secretary are relevant to my next point. We believe that priority must be given to reducing the burden of taxation to the benefit of all taxpayers, rather than to extending special relief to particular groups such as those who have luncheon vouchers. Given that approach and determination, I must challenge whether it should be a priority, or an objective at all, to encourage the spread of perks and benefits in kind. Remuneration in cash rather than kind gives employees greater freedom to decide for themselves how to spend their income. There is also the point that, at the end of the day, benefits in kind are just another form of remuneration.
      I do not think that the right hon. Member for Ashton-under-Lyne was in the Chamber when I referred to his response on this subject. I would be interested to know whether he agrees with himself.
      Mr. Robert Sheldon: I only came into the Chamber to hear whether the arguments have altered. I regret that the right hon. Gentleman has not discovered anything new. I was able to discover one or two new aspects. I am afraid that the right hon. Gentleman has let me down.
      Mr. MacGregor: What has altered is that the cost is rising in terms of priorities. Many of the arguments have not changed. In fact, I accept the arguments. What is different is our determination to reduce the burden of

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      taxation on employees generally. Therefore, that is why there is a point of principle here. When one accepts that benefits in kind are a form of remuneration and, in principle, should be taxed accordingly, especially in fairness to all taxpayers not in receipt of them—I know that we are not in a perfect world in that respect—I do not believe that it is right substantially to extend the benefit in kind and the tax treatment of it, as the right hon. Member for Bristol, South suggested. It would not be available to all taxpayers and, in any case, I do not believe that it is the right approach at present.
      It is for that reason that I have to say to the right hon. Member for Bristol, South that 1 am sorry to disappoint him but we are in a different tax regime and my point of view makes sense.
      Mr. Terry Davis: I should like to congratulate my right hon. Friend the Member for Bristol, South (Mr. Cocks) on tabling this new clause and drawing attention to what I would describe as an obvious injustice in that the value of luncheon vouchers has not increased for many years. There was an increase at one time. It used to be 12½p, half a crown, and was then increased to 15p. That was a long time ago and there has not been an increase since. Clearly, the amount has not kept pace with inflation since luncheon vouchers were originally introduced in the 1940s.
      Obviously the amount should have been increased and equally obviously the Government should accept my right hon. Friend's new clause in view of what was said by the Chief Secretary to the Treasury in 1975 when he not only debated this proposal but actually moved a new clause to this effect in Committee. He tells us that he has subsequently seen the force of the arguments adduced by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) on that occasion. I understand that my right hon. Friend pointed out that he was not relying on the Treasury brief because he was teased by Conservative Members on the Committee that he was relying on the brief they had used during the previous Conservative Administration. Those arguments, which were so hackneyed and had such little force for the Chief Secretary in 1975, have prevailed in his mind since he came to office a few months ago.
      The right hon. Gentleman described this issue as a regular runner. To my knowledge, it has not been discussed for four or five years, certainly not in this Parliament. I am not going to tease the Chief Secretary any more, but he should have been consistent and at least have expressed more sympathy with the arguments of my right hon. Friend the Member for Bristol, South, even if he was not allowed to accept the new clause.
      The Chief Secretary put some new arguments. He said that the world, or at least the tax regime in this country, has changed since 1975. He said that, because this country does not have what he described as a high tax regime in 1986, the force of the argument for an increase in luncheon vouchers had declined. In the days when I used to receive luncheon vouchers, they were issued to more junior people in the company. They were not given to the directors, who had rather better eating arrangements. I did not resent that. The fact is that luncheon vouchers brought particular benefit to the more junior and lower-paid people in the office.
      Mr. Hanley: The Conservative principle is that those people should be taken out of tax altogether.
      9.15 pm
      Mr. Davis: I am delighted to hear that, but that has not happened under the present Government. The people who have had their taxes reduced are precisely those on the highest rate of tax, not those on the basic rate of tax. The fact is that the marginal rate of tax for the low-paid has increased under this Government. When one takes into account the impact of indirect taxes, they are even worse off. The hon. Member for Richmond and Barnes (M r. Hanley) shakes his head. He must have missed our debate in Committee on clause 15.
      Mr. Hanley: I am sure that the hon. Gentleman will remember that I was present during that debate. The tax-free benefit that has been proposed by the right hon. Member for Bristol, South (Mr. Cocks) amounts to about £66 a year for a person paying 29 per cent. tax. The Government have reduced taxation upon exactly the sort of people that the hon. Gentleman has been talking about by more than £66 a year.
      Mr. Davis: That is not true. I am sure that the hon. Gentleman believes it, but it is a fairy story. I gave the figures in our earlier debate. If the hon. Gentleman was present, obviously he did not take them in. I should be happy to discuss the matter with him privately afterwards, and to show him the tables that have been produced by the most respectable outside organisations, showing that the marginal rate of tax paid by people in that income bracket has increased under this Conservative Government. The people who have really benefited from the reduction in taxation and who are no longer living in a high tax regime are people like the hon. Gentleman, whose income is much higher than that of people who benefit from luncheon vouchers.
      The second reason that was given for the Chief Secretary's change of mind was that there is some abuse of luncheon vouchers. It existed in 1975 as much as it does now in 1986. I see that the Chief Secretary is nodding. So that is a bogus reason.
      I had some sympathy with the Chief Secretary when he then said that the provision would cost £30 million, so the Government cannot afford it. The Government have a philosophical approach towards benefits in kind, and I think that the Chief Secretary was alluding to the Government's philosophy during the latter part of his remarks. It has been made clear on Report in Finance Bills in the past two years that the Government have a philosophical objection to benefits in kind, including not only luncheon vouchers but factory and office canteens. I do not think that I am quoting unfairly the previous Financial Secretary, the right hon. Member for Croydon, Central (Mr. Moore). In our debates on workplace nurseries, I am sure that I remember him saying that if the Government had the option today, in the 1980s, they would not exempt the benefit of eating in a factory or office canteen from liability to tax. The fact is that the arrangements for canteens and luncheon vouchers have existed since the 1940s, and the Government are not prepared to experience, particularly in the run-up to the general election, the outcry that would ensue if they put their philosophy into practice. That is their position. If they had their way, they would not be giving those exemptions now.
      The Chief Secretary asked me directly what I would do it I were in his shoes. I am tempted to say, "Wait and see,"

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      although that would not be a satisfactory answer. The Labour Governments of the past have not increased the tax-free value of luncheon vouchers—I am sure that my right hon. Friend the Member for Bristol, South (Mr. Cocks) played some part in ensuring that that did not happen in his previous role as Chief Whip in the Labour Government—and I would not hold out any hope that the next Labour Government would increase the tax-free value of luncheon vouchers, precisely because of priorities. The Chief Secretary estimated that the provision would cost £30 million, which is a substantial sum. The sums of at least £25 million for the personal equity plan and £30 million for luncheon vouchers add up to significant amounts. The next Labour Government would want to use such substantial sums to put our priorities into effect, which, in any case, are different from those of the Conservative Government.
      Therefore, although I have a great deal of sympathy for my right hon. Friend the Member for Bristol, South, and would not wish to oppose his arguments as a friend because I recognise the force and justice of his case, I cannot tell him that I would support him if he pressed the new clause to a Division because I do not want to put a future Labour Chief Secretary in the position in which he has put the present Chief Secretary, the right hon. Member for Norfolk, South (Mr. MacGregor).
      Mr. Cocks: I am grateful to the Chief Secretary for his contribution. I agree that in 1948 the position was different.
      Then a dynamic Government got 6 million people out of the forces and back into civilian life without any massive unemployment. They put our war industries onto a peacetime footing and on a smooth and equitable basis. They took into public ownership the clapped-out public utilities which had been run on a care and maintenance basis throughout the war. At the same time, the Government repaired and restored over 2 million homes which had been destroyed or severely damaged due to the German blitz. All this occurred when our overseas assets had been flogged to buy essential war equipment, food and raw materials and the bulk of our merchant shipping fleet had been sunk. I agree that the situation in 1948 was entirely different but I will not go on to draw a parallel with how the Government are tackling the problems facing the country today.
      I thought there was a certain inconsistency in the Chief Secretary's argument that people should be given their money to spend as they liked but then said that one of the reasons why he was not in favour of luncheon vouchers was that they might be abused by a small number of people who might use them for other purposes. I thought that was a weakness in his argument.
      I understand the right hon. Gentleman's argument about the possibility of a large uptake if this scheme was introduced. Such an uptake could not be predicted. Given the difficulties under which Treasury Ministers labour in attempting to keep within limits and always having to look for economies, an open-ended commitment of this nature is difficult to undertake. I understand that.
      I was encouraged when the Chief Secretary said that this was not the right priority. I hope that this opens the door to show that the Treasury mind is not entirely closed on the matter. It may well be that last Thursday night we
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      had a curtain-raiser to the possible date of the next general election. The Secretary of State for the Environment came to the House and announced that water privatisation was off the menu for this Parliament.
      I worked in the usual channels for many years and I know that, unfortunately, with the best will in the world one often imputes base motives to people in circumstances where others may have given them the benefit of the doubt. I thought that the announcement was a ploy for possibly having a nice fat carrot next year at a general election. Perhaps the Government will offer to increase mortgage relief from £30,000 to £35,000 or £40,000. I declare an interest because I am at present in the process of upgrading my mortgage commitment to £40,000. I trust that the House, and even the Chancellor, who is present, will take that into account.
      I thought last Thursday's announcement was a sprat to catch a mackerel. In scavenging about, the government may think that luncheon vouchers are an attractive thing to put in the shop window. However, I do not think that that will be sufficient to return them at the next general election.
      Because of the comparatively forthcoming statement by the Chief Secretary and his mention of priorities, and understanding his difficulties about taking on a commitment—the full extent of the expenditure was not foreseen—it would be in the best interests of the House if I were to beg leave to withdraw the clause. At least we have had a debate about it and the points can be considered. No doubt one party or the other will return to the matter at some future date.
      Motion and clause, by leave, withdrawn.

    New Clause 22

      BOARD AND LODGING ALLOWANCES
      `In section 189, subsection (1), Taxes Act 1970, after "defrayed", the following words shall be inserted—
      "Any employee may make a claim for board and lodging in respect of expenditure incurred while away from his normal place of work, providing he is maintaining, or contributing to the maintenance of, a residence in the vicinity of his normal place of work.".'. — [Mr. Wrigglesworth.]
      Brought up, and read the First time.
      Mr. Wrigglesworth: I beg to move, That the clause be read a Second time.
      This clause arises from a case which I have taken up on behalf of a constituent. I have pursued it over a period of years to try to get for him what I believe is proper justice in the legitimate claims that he makes for expenses and which he is taxed upon. My constituent is involved in a long-running dispute with the Inland Revenue. I raise this matter this evening because it has wider implications and interests than merely those of my constituent.
      My constituent is a single man and is sent to different parts of the country to work for one or two weeks at a time. His employers have apparently agreed with the Inland Revenue that, where an employee is married, hotel costs can be reimbursed free of tax, but that in the case of a single employee tax and national insurance contributions must be deducted from his expenses, and it also costs the company additional employer's national insurance contributions.
      I should have thought that the employee concerned could make a section 189 claim, but the basis of the

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      Revenue agreement is that a single person does not have to maintain a fixed abode, and so is taxable on living expenses which are reimbursed, whereas a married person does and so is not taxable. The concept that a married man must keep an abode and that a single man must not is nonsense. It underlines Ministers' judgments in my correspondence with them.
      The present Revenue treatment of this company's case produces farcical results when a married person and a single person are away together on business on an out-of-town job. They both claim expenses but those expenses are taxed differently. Surely the Revenue is wrong not to admit a section 189 claim.
      My new clause seeks to make the treatment of single and married people the same in those circumstances. At present people such as my constituent are losing considerable sums from having to pay tax on necessary expenses incurred when they have an abode at home. I see no reason why such people should be treated differently from their married colleagues when they have exactly the same responsibilities of maintaining a home.
      I hope that the Minister will be prepared this evening to give some assurance to me, my constituent and many others in the same position that he will reconsider the provisions of the law and, perhaps, accept this new clause so that there may be equality of treatment between married and single men claiming expenses in this way.
      Mr. Norman Lamont: The hon. Member for Stockton, South (Mr. Wrigglesworth), through the case of his constituent, has certainly uncovered a complicated matter and I for one am grateful to him for raising it. I do not think that his new clause is the right way to tackle the problem for reasons which I shall explain, but I shall say how I think I could approach it constructively, even if I cannot guarantee to solve it.
      Under the general rules of schedule E, an employee is chargeable to income tax on all of the remuneration from his employment, including any allowances or reimbursed expenses, except to the extent that he is entitled to an offsetting deduction for expenses incurred.
      Obviously the schedule E expenses rule must be strict. An employee may have a deduction only for expenses he "necessarily" incurs in travelling in the performance of his duties, or which he otherwise incurs "wholly, exclusively and necessarily" in the performance of those duties. That means that if an employee necessarily incurs additional expenses of travel or accommodation as a result of travelling in the performance of his duties, or of his being required temporarily to perform those duties at some location away from that where he usually works, such expenses will normally already be deductible under the existing statutory rules. Where, as will usually happen, the employee receives an allowance from his employer to cover those expenses, that allowance will not in such circumstances be taxed on the ground that the employee would be due an equal and offsetting expenses deduction.
      9.30 pm
      For this reason, the new clause would be superfluous. Indeed, though no doubt the hon. Gentleman did not intend this, it could actually leave some employees worse off. For example, as drafted, the new clause would allow relief for board and lodging expenses only if the employee was maintaining or contributing to the maintenance of a
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      residence in the vicinity of his normal place of work. The hon. Gentleman will see that that could operate to some people's disadvantage.
      The schedule E expenses rule is nevertheless a strict one and has been strictly interpreted by the courts. It is well established that relief is not admissible for the expenses that an employee incurs in travelling between his home and the place where he normally works, or for the expense of maintaining a home at or near his normal place of work. The reasoning here — the hon. Gentleman will be familiar with it—is that such expenses are not incurred in the performance of the duties of the employment. Rather they are expenses of a personal nature which simply put the employee in a position to carry out those
      Though strict, it is obviously right and sensible that the line should be drawn in that way. Virtually all employees will to a greater or lesser extent incur such personal expenditure in travelling between their home and their place of work, and of course we all incur living expenses wherever we work. In short, the law already makes suitable provision for the deductibility of expenses, including board and lodging.
      I gather from the constituency case that he has raised that the hon. Gentleman is especially concerned about the tax treatment of allowances for single employees under a working rule agreement, which are taxed, whereas those paid to married employees are not.
      Working rule agreements are drawn up between representatives of employers and trade unions to govern rates of pay and conditions of work in the construction and various allied industries. The Inland Revenue is not a party to the agreements itself, but in view of the high degree of mobility of employees in the industries concerned the Revenue has for many years agreed that payments of certain of the allowances under the agreements—including those for board and lodging—should not be taxed, on the basis that in the generality of cases the employee would be entitled to an offsetting expenses deduction for some or all of the expenses in question. In short, this arrangement has no statutory effect but is simply one of administrative convenience for the benefit of employers, employees and the Revenue alike. It is welcomed by employers and is designed to obviate the need for the many individual expenses claims that would otherwise arise.
      One of the allowances is for board and lodging, where the employee is working at a site which necessitates his living away from home. Under the Revenue's practice in respect of such agreements, such lodging allowances paid to a single employee who does not maintain dependants at his permanent home are taxed, whereas those paid to a married employee or to a single person with dependants are not.
      The reason for this difference in treatment is that it is clear in the case of a married man or a single man with dependants that, in addition to the cost of his lodgings while away from home, he will continue to incur the expense of maintaining a permanent home for his dependants. The case of a single man without dependants is less clear cut and may be distinguished because he may or may not have continuing responsibilities.
      This is an extra-statutory concession, but I quite see that the distinction is somewhat arbitrary. However, if it is to work, the Revenue and employers alike need clear-cut

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      rules and definitions which can be operated in practice and which we do not have to police with too many local inquiries. That is why the line has been drawn in this way.
      This is a complicated matter and I have tried to explain the difference between the statutory position and the extra-statutory position and how it is operating. Nothing, as it operates, is denying any taxpayer of any of his statutory rights. In so far as there is a concession, it is obviously a concession which benefits the married person with dependants or the single person with dependants. They are getting a concession. No one is denied any statutory right as a result of the way in which this operates.
      When I looked into the matter, I felt uneasy about the point which the hon. Gentleman has raised. I cannot give a clear assurance that there is an easy answer to it, but we shall look carefully at it to see whether there is a practicable way in which this particular feature in the arrangements operated by the Revenue might be relaxed so as to take account of the single employee who does not have dependants living with him but who is, nevertheless, maintaining a permanent home, which, I think, is the precise point at which the hon. Gentleman is getting.
      Mr. Wrigglesworth: I am grateful to the Minister for rehearsing the background to this matter. I have been through it in correspondence with his predecessor and know it well. I have summed up the basic grievance in my speech which the Minister has come to at the end of his remarks.
      The working rule agreement is the basis of the anomaly, but it is intolerable that, as is so clearly demonstrated, when a married man and a single man, both with homes in the same town, go to work in another town together, the single man should be taxed on the hotel accommodation that he must have in order to carry out this duties, while his married colleague is not taxed. He is worse off although he is carrying out his duties at work. That is an intolerable situation which does not apply only to my constituent. It has wider implications for others, which is why I have raised it this evening.
      I am grateful to the Minister for saying that he will look at it. It is an arbitrary distinction and I hope that he will find some way of overcoming it, not just in the case of my constituent, under his particular working rule agreement, but in all working rule agreements that apply to other employees in other parts of the country.
      I can understand, and I think my constituent understands, that it is to the benefit of the Revenue, firms and employees that arrangements of this sort should operate. It is clearly to everybody's benefit that they should, but not if they give rise to anomalies of this sort.
      I have fought to try to have this put right for some years and I plead with the Minister to take action on this quickly so that the anomaly is not continued. I know that he cannot find and announce the solution now, but I hope that he will be able to come to the House soon, having expressed his understanding of the predicament in which my constituent finds himself, and announce that a solution to it has been found.
      The Minister having given those assurances, I am pleased to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 24

      EXTENSION OF SECTION 5A OIL TAXATION ACT 1975 (ALLOWANCE OF EXPLORATION AND APPRAISAL EXPENDITURE) TO EXPENDITURE INCURRED IN DEVELOPING AN OILFIELD
      '(1) With respect to expenditure incurred on or after 1st July 1986, section 5A of the Oil Taxation Act 1975 (allowance of exploration and appraisal expenditure) shall be amended in accordance with subsections (2) and (3) below.
      (2) For subsection (1)(b) of section 5A of the Oil Taxation Act 1975, there shall be substituted—

      "(b) is so incurred either wholly and exclusively for one or more of the purposes specified in subsection (2) below or, being expenditure which would be allowable under section 3 of this Act in relation to a field, is incurred before the first day of the critical half year as defined in section 1(4) of this Act for that field."

      (3) At the end of subsection (1)(c) of section 5A of the Oil Taxation Act 1975, there shall be added—
      "or, if it does so relate, was incurred on or after 1st July 1986.".'.— [Mr. Kennedy.]
      Brought up, and read the First time.
      Mr. Charles Kennedy: I beg to move, That the clause be read a Second time.
      I am grateful that the new clause, which I have tabled along with my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan), has been selected and that we have the opportunity for a short debate on this important matter. I hope that the House will understand if I put the matter in context by painting the importance of the issue to my constituency, to my part of the country and to the economy as a whole.
      The House will be well aware of the growing concern in the oil and oil-related industries as the result of the developments that have taken place as a result of the dramatic and remarkable fall in price on the international market. That fall in price has beneficial consequences for many aspects of the economy. Indeed, no secret has been made of that fact by Ministers, who have welcomed it. However, it has carried with it a downside, as most things do, in respect to the pace and momentum of North sea oil
      My concern arises because in the Ross, Cromarty and Skye constituency there are two major fabrication yards, Howard Doris on the Kishorn site, Wester Ross, and Highlands Fabricators, which, I am glad to say, recently won the substantial Eider platform contract, leading to an audible sigh of relief throughout the economically depressed Easter Ross area. In addition, there is McDermotts, Ardersier, in the constituency of my hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston), which was unlucky in regard to the Eider award. There are many examples of the oil-related industries creating employment generally on the supply and servicing side. Therefore, the downturn in prices that has given rise to a downturn in development activity is bad news for areas dependent on the large construction contracts and servicing and supply contracts that come from the momentum of North sea development as a whole.
      With OPEC in some disarray, we can hardly look to the Treasury to solve such a complicated and volatile international problem. I do not ask the Minister to try to perform miracles in promising or guaranteeing specific levels of oil price in the future and stability in the market; coming even from these Benches, I think that that would be fairly unreasonable, given the geopolitics and

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      economics of oil at present. However, the Government should give us the opportunity to hear from the Dispatch Box at this stage their views on steps with regard to the tax regime and certain aspects of it as they affect development work in the North sea.
      I have had a fair amount of correspondence of late with Ministers on the matter. It is worth bearing in mind that the rewards for Britain's current attractiveness as a location for petroleum investment are high. I refer to an industry study of two years ago on the geological potential of the United Kingdom. It is estimated that beween then and the end of the century about 80 new fields could be developed, 100 production platforms built, 1,400 appraisal and development wells drilled and over 2,700 miles of offshore pipeline installed. That would be expected to call for an expenditure of up to £60 billion at 1984 prices, three quarters of which could reasonably be anticipated to be awarded directly via contracts by British companies. That is a considerable long-term potential. I think that we all agree that we want to see as much of that potential realised as possible.
      The argument that is beginning to build up in oil circles and elsewhere is that the time has come to look at the existing tax structure for North sea work and see whether there is anything that the Government can do at this stage, because of the depressing effect of reduced oil prices, to encourage development work.
      9.45 pm
      A few weeks ago I made proposals both to the Department of Energy and to the Chief Secretary to the Treasury. The Minister with responsibility for industry at the Scottish Office commented on some of the points that I made. He endorsed the view of both the Treasury and the Department of Energy and said that there was little evidence that the tax regime was making economic projects uneconomic. That is not a clear-cut issue. Even this new clause is not the panacea to all ills, but the distinction that is being made by Ministers is missing the point to a certain extent.
      It is valid to argue that a project that is economic before tax considerations are taken into account remains economic, even under the present fiscal regime. It is not the tax regime that has led to the problem. The fall in the price of oil has led to the problem. Constraints surround what the Government could do, although one could argue that they could do more. However, that is not the point that I want to make this evening. The Government could encourage the oil companies to continue development work by altering the tax regime. This was acknowledged by the Chancellor of the Exchequer in his Budget speech on 18 March. He said:
      "Otherwise, I propose only minor technical changes to the taxation of North sea oil; but I am continuing to keep the economics of incremental investment under review, and shall not hesitate to introduce at the earliest opportunity any changes which may prove necessary to ensure that worthwhile projects are not frustrated by the fiscal regime."—[Official Report, 18 March 1986; Vol. 94, c. 174.]
      The industry welcomed that statement. Under the strict criteria of the Chancellor's argument a cogent case can be made for saying that as yet there is little evidence of worthwhile projects being frustrated purely by the fiscal regime. However, given the fall in the price of oil, the fiscal regime is one means by which some stimulus could be provided to create the momentum that is now lacking.
      I acknowledge that there are difficulties. Different types of fiscal alterations could be introduced, but I do not
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      intend to rehearse them tonight; some of them are outwith the bounds of the new clause. I am more interested in the principle that is at stake, which is what action could he taken by the Government. One of the difficulties was best summed up in a recent article by Dominic Lawson, who wrote an article in the Lombard column under the appropriate title
      "Taxing times in the North Sea."
      He referred to the general argument surrounding the petroleum revenue tax regime and made the very important point that if the Government introduced certain concessions the oil majors would perhaps not channel the money right back into the North sea. They are baulking at North sea developments because they are not sure that the project will give a satisfactory return irrespective of the tax regime.
      Money given back by the Government is more likely to fuel the acquisition of one company's reserves by another. That outcome would not be attractive to the Government and I would share their view about that. Mr. Lawson goes on to detail some of the other difficulties that would arise if the type of concession given was the one that we now read so much about in the financial press. It is a concession promoted by the major companies and it would benefit them.
      I appreciate that there is a genuine problem and I do not pretend that this new clause would in itself be able to overcome it. The Scottish Grand Committee recently debated the oil industry and in the Committee the Minister of State, Department of Energy developed the argument about which I have spoken. He said:
      "Several companies and associations in the oil industry have put forward suggestions for change. I suggest to the Committee, however, that the tests that we apply to those suggestions have to be, first and foremost, not merely what effect a tax change has on the cash flow of a company. A company will naturally argue for changes in tax that will help cash flow".—[Official Report, Scottish Grand Committee, 24 June 1986; c. 9.]
      The central point is surely the purpose for which the increased cash flow is used. It should be used in a way that will not simply generate more profits for the company with no guarantee of subsequent reinvestment in the areas in which we seek investment.
      One of the ideas being canvassed goes slightly beyond the scope of the new clause, but is relevant to the issue that the new clause seeks to address. It is the abolition of inter-field ring fences on development costs. The ability of the oil companies to set development costs and new projects against PRT on existing fields could reduce the net capital investment on new field development and shorten the payback period. That abolition would arise from the concession which allows exploration costs to be set against PRT.
      If that kind of change is considered, I strongly urge that the principle of ring fencing should be retained for the whole of the North sea. I say that for the reasons that. I have outlined: that any returns accruing to the oil companies as a result of such a concession would have to be reinvested directly in the continuing development of the North sea as opposed to being directed to other activities. It is that type of approach to which I hope the Government will give further consideration, and it is with that type of approach and in that spirit that the new clause is moved.

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      The clause is not perfect, and since I tabled it I have been advised that if I want to make its provisions more comprehensive about the development work that could be encouraged I should add at the point which reads
      "under section 3 of this Act"
      the words "and section 3 of the Oil Taxation Act 1983". Therefore, I am the first to concede that the clause is not as good as it could be, and on that ground alone I suspect that the Minister will probably reject it.
      The clause is put forward to voice the view that we must be getting near the stage where some kind of Government action is required to forward development work. In putting forward that case, it must be remembered that we are not talking just about profits, jobs, industries and communities such as mine. Those things are important, but we are also talking about the beginning of the disbandment, especially by many of the major companies, of the development teams, the people who are concentrated in Aderdeen and elsewhere. Those people have the ability to work as a team and to carry forward development plans and projects from concept to reality.
      With the industry in some disarray and with there perhaps being some over-reaction to the present difficulties, we shall lose some valuable people as they are dispersed. A signal from the Government might do something to retain those important people, so that if the price picks up again development work can be carried out and seemingly non-viable fields can once again become viable. Such a measure might favourably affect the viability of certain projects.
      The aim of the new clause is to permit expenditure on developing a field to be offset against PRT payable on another field owned by the same licensee. The clause works by expanding the relief currently available for exploration and appraisal expenditure on searching for oil and so on, as contained in section 5A of the Oil Taxation Act 1975. The relief is limited to expenditure incurred before "the critical half-year". That means that relief is limited to the period before the six months in which production from the field exceeds 1,000 metric tonnes.
      Thus, the aim would be to limit the qualifying expenditure to that incurred in developing the field, as opposed to operating it. Rather as I said about the use of any extra returns that may accrue to companies, my anxiety is about development work and about maintaining its momentum.
      Relief would be available only for expenditure incurred from 1 July 1986. Thus, if a field commenced production after that date, but expenditure had been incurred in the period bridging 1 July, only the expenditure from 1 July would qualify. Having admitted the difficulties, complexities and political constraints that would face any Government, especially following the difficulties in which OPEC finds itself, I hope that the Minister will be able to accept the spirit in which the new clause has been moved. I hope that he will also accept the genuine local concern about present developments in the oil industry and the effect that is already being experienced on the Scottish economy. I fear that things will get considerably worse if the current slow-down in development persists.
      It is also worrying that when the Chancellor referred to this difficulty, he also told us that his Budget strategy was based on the price of oil probably levelling out this year at about $15. That figure is beginning to look rather
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      optimistic. In recent days, the price has fallen still further. But even in the unlikely event that the price returns to an average of $15 a barrel, it must be recalled that the Scottish Development Agency recently did a computer projection which showed that if that oil price was projected over a 10-year period it would lead to a cut of no less than 40 per cent. in spending by the companies. That means big trouble for some of the firms and major industries that have contributed so much in terms of advanced international technology. Moreover, the oil industry contributes to 25 per cent. of what is left of our manufacturing capacity.
      Those are the reasons for this admittedly imperfect new clause. I hope that the Minister will give us the benefit of the Treasury's thoughts at this stage. I also hope that, when the Treasury continually says that it is keeping the matter under review, it is not just wringing its hands while the oil industry collapses round our ears, rather like the price of oil has done, but that it is ready to step in and to take preventive action. I hope that the Treasury is convinced that such action will be of assistance. Indeed, hon. Members on both sides of the House are becoming increasingly sure that it will be.
      It being Ten o'clock, further consideration of the Bill stood adjourned.

  BUSINESS OF TH1E HOUSE
  Ordered,
  That, at this day's sitting, the Patents, Designs and Marks Bill [Lords] may be proceeded with, though opposed, until any hour.— [Mr. Peter Lloyd.]

  Finance Bill
  Not amended (in the Committee and as amended in the Standing Committee), again considered.
  Question again proposed, That the clause be read a Second time.
  Mr. Norman Lamont: The hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) has a strong constituency interest in the oil industry and in the offshore supply industry. I appreciate what has prompted him to move the amendment and I am grateful for the restraint with which he did so. I noted the hon. Gentleman's comments about Mr. Dominic Lawson. I am not sure how seriously those comments were meant, but I assure the hon. Gentleman that all Treasury Ministers read Mr. Dominic Lawson very seriously.
  The new clause seeks to widen the definition of expenditure qualifying for immediate PRT relief to include any development expenditure other than long-term assets incurred before total production from the field reaches 1,000 tonnes. Its intention, I assume, is to include all development expenditure although as drafted, capital expenditure qualifying for relief under section 3 of the Oil Taxation Act 1983 is not covered. In other words, the aim is considerably to extend the scope for companies to offset North sea costs against the PRT payable in respect of other fields. In that case, it is a new development because it breaches the present field-by-field basis of the charge.
  The new clause represents a significant relaxation of the present North sea fiscal regime. The hon. Member argued that some relaxation is required to cushion the impact of the fall in oil prices. It would be wrong simply to focus on the rate of tax. Admittedly, that looks high, but it is only part of the story. Account must also be taken of the

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  especially generous reliefs built into the system. The net result is a regime that is well-tuned to adapt automatically to oil price movements.
  On the Government's calculations, tax take on an accruals basis as a proportion of pre-tax North sea revenues remains almost unchanged in 1986 from the 1985 figure. If we compare tax with the pre-tax trading surplus —that is, sales revenue minus operating costs—we see that the proportion has fallen quite significantly. The North sea continues to provide substantial profits for the oil industry while the tax regime ensures that the Government bear their share of the consequences of the price fall. It should be remembered that these conclusions exclude the industry's downstream operations and these are generally more profitable than has been the case for some time.
  The Government have long made it clear that one of the overall objectives of the North sea tax regime is to leave companies with adequate incentives for future exploration and development. It was with this objective in mind that we introduced in the 1983 Budget a package of generous reliefs aimed at exploration and new fields. In our view, there is no evidence that the tax system as thus reformed, is causing problems. Virtually all developments which are economic in pre-tax terms remain economic after tax. The hon. Member admitted that in his remarks and said that as yet there are no signs that developments were being held up. I am sure that the hon. Gentleman will not argue that something which was uneconomic before tax should be made economic after tax.
  I assure the hon. Member that the Government are in no way complacent about the problems which could be created by the fall in oil prices. It is our practice to keep the overall impact of the regime under review and in recent months we have kept a particularly close watch on the position. We believe that it is especially important to maintain contact with the industry. In addition to our regular contacts, we have specifically invited the industry to submit evidence about the operation of the present regime in the new situation.
  Some evidence has already come in and this is being analysed. In addition, we have made our own analysis, which suggests that where lower prices seem to be causing delays, tax cannot be blamed. Projects that are uneconomic after tax are almost always uneconomic before tax. In any event, as a result of the changes that we made in 1983, many of the next generation of projects are paying virtually no PRT and no royalties. They will be subject to the same regime as companies in the rest of the United Kingdom's industry and will pay only corporation tax.
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  Even if it appeared that some relaxation of the present regime were needed, it is not clear that the measures set out in the new clause would provide the answer. By providing an incentive to projects which would otherwise be uneconomic, distortions would inevitably be introduced into the system. Investment priorities would be determined in part by fiscal considerations. In general, there is no guarantee that the tax thus saved by the companies would be channelled into increased activity on the United Kingdom's continental shelf. Such activity might be channelled outside the United Kingdom altogether.
  For these reasons, we do not believe that the cost of the proposed change could be justified. I have explained to the hon. Gentleman the extent to which we watch developments. For the reasons that I have given, some of which he has heard before, I cannot accept the new clause.
  Mr. Kennedy: I shall not say that I am grateful, but I thank the Minister for his reply. I accept that it cannot be argued that it is tax, in splendid isolation, which is causing all the problems in the North sea. It is OPEC and not tax which is doing that. However, the one lever which is at the Government's disposal and which can influence development activity is the fiscal regime. I enter the plea that the Government keep that under close review. I was glad to hear what the Minister said about that in his reply. The right hon. Gentleman has told us that a close review is taking place with a view to the making of any changes which may become worth while, and which may yet persuade Ministers of the need for action. As the Chancellor of the Exchequer said in March, Ministers will not hesitate to make changes.
  We do not want to see any accruals which would come to oil companies being directed elsewhere. I hope that other changes that the Treasury may consider in due course can be geared in a way that ensures that any returns coming to the companies can be reinvested directly in development work, which will lead in turn to contracts for companies which employ many people—sadly, some do not—in the north of Scotland, of which they can take advantage. I thank the Minister for his indication of Treasury thinking at this stage from the Lawson in the Financial Times and the Lawson at No. 11. I beg to ask leave to withdraw the motion.
  Motion and clause, by leave, withdrawn.
  Further consideration adjourned. — [Mr. Peter Lloyd.]
  Bill (not amended in the Committee, and as amended in the Standing Committee), to be further considered this day.

Patents, Designs and Marks Bill [Lords]
As amended (in the Standing Committee), considered.
10.10 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher): I beg to move, That the Bill be now read the Third time.
The Bill is a non-controversial amending measure. It is of restricted scope and is directed to two particular purposes. Since this is the first time that the Bill has come before the House, let me briefly state what these purposes are.
Clause 1 and schedule I amend the Trade Marks Act 1938, the Registered Designs Act 1949 and the Patents Act 1977 so that the Patent Office will no longer be obliged to keep its statutory registers in documentary form. The Patent Office will therefore be able to computerise such parts of the registers as it finds expedient as soon as this becomes possible. The public will be able to inspect the material on the computerised registers—for example, on VDUs at the Patent Office—and to obtain hard copies.
The other main subject of the Bill is service marks. Provision is made for the registration of service marks by the Trade Marks (Amendment) Act 1984, which was originally introduced by my hon. Friend the Member for Loughborough (Mr. Dorrell). That Act is not yet in force, but the Government intend to implement it from 1 October this year. Before that can be done, however, a number of consequential amendments need to be made to existing legislation, and that is the purpose of clause 2 and schedule 2.
Several amendments to the Bill were effected in Committee, but they were all technical. Some were consequential on amendments already effected in another place, and others were directed to correcting an omission in the 1984 Act. They were all, as I have said, technical amendments and the Bill before the House today is, in all major respects, no different from the Bill as brought from another place.
10.11 pm
Mr. Bryan Gould: This small but useful measure is brought forward at a time when the whole world of intellectual property is in a state of rapid transformation. First, there was the White Paper "Intellectual Property and Innovation" published in April this year, which I assume presages a major piece of legislation to be introduced in the new Session. Then there is the change in the status of the Patent Office, a change which I should make clear that Labour Members regard with some scepticism, and which has aroused the anxieties of the work force at the Patent Office. That is one aspect of the new legislation that we shall consider with considerable care and critical judgment.
Less controversially, there is the impending decision to be taken as to the siting of the European Community's trade marks office. I make clear the support of Labour Members for the campaign waged by the Government in support of siting the office in Britain. We support that campaign, both on its merits and because we believe that it is high time that we had placed with us in this country the headquarters of a major European Community institution. It is a sort of quid for a substantial quo.
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In case you are on the point of saying, Mr. Deputy Speaker, that none of those matters is strictly relevant to the Bill, I concede immediately that the Bill, as the Minister has said, concerns itself with two small but, in their own way, important points. The first enables the Patent Office to bring itself into the computer age. I think that the Bill removes obstacles rather than commands the Patent Office to do that. The Patent Office is well advanced in its plans for the computerisation of its records. Secondly, the Bill, in a sense, makes consequential amendments which will pave the way for the introduction of service marks in October this year.
We support both those worthwhile measures. Accordingly, during the brief earlier stages of the Bill, we have contended ourselves with asking the odd probing question and watching the progress of the Bill with a benevolent eye. Now that it has reached its final stage, we are happy to give it a Third Reading.
10.14 pm
Mr. Archy Kirkwood: I am grateful to the Under-Secretary of State for allowing this brief debate to take place. I am sure that he agrees that, because the Bill originated in the other place and was considered in Standing Committee, it is appropriate for us to spend some time rehearsing it on the Floor of the House.
I congratulate the Under-Secretary of State on the smooth passage of the Bill which he has piloted through the House. Obviously, there were more complex debates in the other place. The alliance is grateful that the Government listened carefully to the contribution of my noble Friend Lord Lloyd of Kilgerran, some of whose amendments were considered in depth and some of which were accepted. His knowledge is recognised by both sides of the House.
The Bill's objectives, restricted though they are, are to be applauded. Some work remains to be done if the legislation is to meet the needs of modern business. I single out the inclusion of service marks as an especially welcome provision. We do, however, have some doubts about the costs of acquiring these new service marks. If small business men use professional advisers, it can cost as much as £1,500 to £2,000 to obtain a United Kingdom patent. If that is extended to a worldwide patent, it could cost as much as £50,000. The Government would do well to bear in mind those costs and to ascertain whether they can be reduced.
Lord Lloyd of Kilgerran described this aspect of the law as being full of "fulginous obscurity" — a well-known Welsh expression. We believe that small inventors should be able to register service marks more cheaply than at present.
As Lord Lucas and the hon. Member for Dagenham (Mr. Gould) said, we now have the White Paper on intellectual property. I think I would be ruled out of order if I followed its arguments, but I should like some of its ideas to be included in the legislation. I accept that, if that had been done, the measure might have been made controversial and its progress might have been stymied.
We are still slightly surprised that the Government did not respond more positively to the proposal to extend privilege to patent agents who do trade mark work. Those agents do work which, in other cases, would be done by solicitors or even counsel. They play an important role in the creation of wealth and work extremely closely with

265
industry. It is slightly perverse to continue this lack of privilege, to which reference was made in the other place. Recently, in "Reports of Patent Cases 1983", Mr. Justice Nurse is reported as having said:
"It seems odd and perverse that, if a trade mark agent was entitled to advise a client in relation to legal matters and to conduct certain legal proceedings on his behalf, the same privilege should not apply as would certainly apply in a case where the advice was being given and the proceedings were being conducted by a solicitor."
We should have been happier if such a provision were included in the Bill. We hope that there will be opportunities to include such a measure in the not-too-distant future.
I return to where I began, by congratulating the Under-Secretary of State on piloting the Bill so smoothly towards the statute book.
10.18 pm
Sir John Page: I commend these new measures, which will modernise the registers of trade marks and bring Britain into line with the most modern practices in the rest of the world. In this new modernized
266
system there is a perfect opportunity for the European trade mark office to be brought to England, to Greater London. It would be a great advantage for the country to have the European trade mark office here and it would be right and proper that it should be so. I must say, in an entirely objective manner, that the place for it to be is Harrow. We have an old intellectual background, with a modern dynamic community. Nowhere in Europe could fulfil all the criteria for the office more successfully than Harrow with its nearness to London airport and London, magnificent communications and magnificent schools.
I am grateful to have this opportunity, on behalf of myself and my hon. Friend the Member for Harrow, East (Mr. Dykes), who is in his place and who, with his European knowledge, blazed the trail for the Government to follow to Harrow. We hope that soon the whole weight of the Government's prestige will be behind having the European trade mark office in England and I think that it should be in Harrow.
Question put and agreed to.
Bill accordingly read the Third time, and passed, with amendments.

European Community (Agricultural Reforms)
10.21 pm
The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner): I beg to move,
That this House takes note of European Community Documents Nos. 6466/86, draft Regulation amending Regulations 797/85, 270/79, 1360/78 and 355/77 on agricultural structures in order to adjust agriculture to the new market situation and maintain rural areas and draft Decision amending Decision 83/641 on joint research programmes and programmes for co-ordinating agricultural research, and 7126/86, draft Regulation amending Regulations 797/85, 355/77 and 1360/78 on agricultural structures to take account of the accession of Spain; and supports the Government's view that these measures should have as a primary aim the closer alignment of agricultural production to the requirements of the market and that the measures must be both cost-effective and containable within existing expenditure ceilings.
With the leave of the House, we shall tonight consider principally the package of socio-structural measures contained in European Community document 6466/86, but it will be convenient to take with it European Community document 7126/86, which extends to Spain the provisions of Council regulation 797/85.
The proposals in document 6466/86 are designed to complement the agricultural price measures agreed by the Council of Ministers at the end of April. They seek to assist farmers to adjust to price restraint but they also seek to achieve a measure of progress towards diverting agricultural land to alternative uses.
We welcome the attempt by the Commission to complement price measures with structural measures to achieve a better orientation of agricultural production within the Community in order to reduce surpluses. As the House is well aware, we have fought long and hard to try to get agricultural production in the Community into a better balance and reduce the burden of supporting surplus production.
Against that background we shall be examining very closely the consequences of the proposals for the Community budget. The Commission had estimated that the package would cost about 900 million ecu over the period to 1991. The expenditure up to 1989 would fall within the current five-year financial framework for the European agricultural guidance and guarantee fund guidance section as a whole. The Commission has stated that the present five-year framework figure would be sufficient to accommodate this expenditure.
We also welcome the Commission's recognition that environmental concerns must be given due priority in any consideration of the future direction of the common agricultural policy. That is reflected in certain of the measures proposed in the socio-structures package, notably the proposals relating to environmentally sensitive areas.
I would like now to deal in a little more detail with the substance of the package. First, under the pre-pension scheme, farmers aged 55 or over who took their holdings out of production or handed them over to young relatives would be eligible for an annual payment attracting an EAGGF contribution of 25 per cent., 50 per cent. in
268
certain less favoured areas, to a maximum of 4,000 ecu for married farmers and 2,500 ecu for single farmers. The precise level of pre-pension payable, for a minimum of five years and a maximum of 10 years, would be left to member states to determine in the context of their own socioeconomic conditions. Where land was fallowed or put to non-agricultural use such as forestry, the pre-pension would be supplemented by an annual hectarage payment, payable, in the case of forestry, over the period of establishment. There would also be provision for agricultural workers aged 55 or over, displaced as a result of the scheme, to receive a pre-pension.
The likely effectiveness of a general age-related outgoers scheme, such as the proposed pre-pension arrangements, in reducing surplus production will need to be carefully considered, but we are worried that its effectiveness in that respect will be limited not least because it provides for succession by a younger relative. So we shall be looking for further justification for adopting the approach that the Commission has suggested.
Beneficiaries of the pre-pension scheme would also be eligible for capital grants towards the cost of adapting their holdings to non-farming functions, providing they were environmentally acceptable.
We have some reservations about that radical step. The proposal could cover such things as racecourses, golf courses and so on. There is no requirement that the owner demonstrate that the investment is sound or what benefits will accrue. That provision, therefore, needs much more examination.
As regards pensions for farm workers, we already have a well-established social security system in the United Kingdom, which includes provisions for redundancy payments and for unemployment benefit. I do not believe that an additional measure such as this is required or that it would be helpful.
It is proposed that member states may pay an annual premium to young farmers who reduce production either by farming their holding more extensively or by producing for quality rather than quantity. We shall clearly want to consider the proposal in much more detail than it has been possible to do so far. But we doubt that the proposed arrangements would provide sufficient inducement to restrain production and whether they would therefore be cost-effective. Their administration would also be extremely complex and at first sight there would appear to be major problems of enforcement.
I now refer to the proposals on environmentally sensitive areas. When regulation 797/85 was agreed in March of last year, we successfully negotiated provision for designation of environmentally sensitive areas. Then the Commission also committed itself to making further proposals to provide for EC funding of the measures, and it has now done that. However, to safeguard EC funding, more specific conditions are proposed, including a maximum payment against which reimbursement would be paid, and a requirement that payments be made annually on a hectarage basis and that each ESA agreement must run for at least five years. I can appreciate the Commission's concerns, but the proposals are disappointing. They introduce an unnecessary degree of inflexibility, which we shall seek to have removed, although obviously at this stage I cannot predict our chances of success.

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The package contains a number of proposals relating to the payment of compensatory allowances in the less favoured areas. They include amendments to the framework under which hill livestock compensatory allowances are payable.
First, it is proposed to vary the present range within which HLCAs have to be paid—that is, from 20·3 to 101 ecu per livestock unit, up to a maximum of 101 ecu, or around £64, per hectare. The Commission proposed a minimum allowance of 30 ecu per livestock unit and a new maximum of 120 ecu per hectare of livestock unit in areas where the severity of the permanent natural handicap justified it. Secondly, it is proposed to increase HLCA allowances by 50 per cent. where producers undertake to improve quality or to change production to meet market needs, or significantly reduce the intensity of production for five years. Thirdly, it is proposed that the maximum allowance attracting EAGGF contributions should be set at 3,000 ecu, or around £1,900, per labour unit.
Fourthly, it is proposed that, where land goes out of agriculture under the pre-pension arrangements, HLCAs would continue to be paid for the duration of those arrangements. Fifthly, it is proposed to amend the provision relating to the afforestation of HLCA land by extending the period during which producers who afforest all or part of their HLCA land may have such land taken into account in their HLCA calculations from 15 years to 20 years.
If adopted, these proposals could have a significant effect on the existing arrangements for paying HLCAs in this country; and, in general, we can give them a cautious welcome. However, there are aspects that are not entirely clear, and in negotiations in Brussels we shall seek to secure improvements. But the proposals are framed so that member states will have a good deal of discretion on the actual implementation. Decisions on the precise nature of any changes in the HLCA arrangements as a result of the new EC proposals would be taken in the context of the review of economic conditions in the hills and uplands which we conduct each autumn. I am not, therefore, in a position at the moment to spell out the full opportunities that might be available to less favoured area producers — or to give a realistic indication of the cost implications.
It is also proposed to extend the system of compensatory allowances to other farmers in the less favoured areas, though a range of commodities would be specifically excluded from coverage. The objective of this proposal is not entirely clear. It seems to us unlikely to control surpluses and is therefore unattractive, even as an optional measure. Moreover, given that compensatory allowances are restricted to the less favoured areas, it is questionable how much scope there is for encouraging non-livestock production here in the United Kingdom.
I now turn to the measures proposed on forestry and farm woodlands. These are of course areas which will need particularly careful attention as we consider ideas for alternative uses for land now producing agricultural surpluses. The Commission has proposed certain changes to the existing provisions on farm forestry in regulation 797/85, which we have not so far implemented in the United Kingdom because we have considered our national grant schemes to be more favourable. It has also included in the pre-pension proposals provisions which could lead to the afforestation of land taken out of agriculture by those qualifying for the pre-pension. Both these sets of
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proposals will need careful examination. They will also require to be considered against the background of the proposals which will flow from the EC Commissions consultations on forestry, which we expect to see later this year.
The proposals on training would specifically include three areas of training within those which are eligible for EAGGF reimbursement — training in production of quality lines, in the application of production methods compatible with environmental protection and in forestry skills for farmers. The proposals are a small though welcome addition to a wider regulation covering vocational training. They would be expected only to have a minor effect in the United Kingdom if the regulation on training is implemented.
The Commission has also proposed two measures in the marketing area. They modify regulation 1360/78 on launching aid to producer groups and regulation 355/77 on grant to projects involving investment in marketing and processing. The first proposal, the extension of the life of regulation 1360/76, would apply only to Belgium and the Mediterranean regions. It therefore brings no benefit to the United Kingdom, where we have our own system of formation grants for co-operatives under the agricultural and horticultural co-operation scheme. The Government will therefore be particularly concerned about the financial implication of the proposal. There is little doubt that agricultural structures in the Mediterranean member states need improving but we would need to be satisfied about how useful the proposal is likely to be given that there has been no expenditure under it in recent years.
The second proposal on marketing would amend regulation 355/77 to enable encouragement to be given to investment in the marketing and processing of "alternative crops". The Commission has organically grown products particularly in mind. The maximum grant would be increased by five percentage points. Individual projects riot falling within an investment programme could also be aided at the basic rate. We accept that the possibility that individual projects may be aided may be useful, but may be unnecessary where member states already have investment programmes for the sectors concerned. We will be investigating the proposed higher rates of grant because there are restricted funds available for this regulation. We will need to be satisfied that they are really necessary, even though the Commission expects to contain expenditure within the existing provision.
Provisions for modifying the Community's agricultural research and development programme are included in the package. These are intended to redirect the programme to take account of recent developments affecting agriculture.
Our objectives will be to ensure that the changes proposed to the programme are justified in their own right and do not overlap with other Community initiatives in this area. We will also seek to ensure that such work is most appropriately dealt with on a Community rather than a national basis and represents value for money. We will also bear in mind that concerted action between scientists in the Community, in the form of seminars and information exchanges, can be a quicker and cheaper way of advancing scientific thinking than shared cost research. In a process of adjustment we clearly need to ensure that we have wide and rapid access to results which will be of assistance to agriculture.
In conclusion, our overall attitude towards the sociostructures package is to welcome it as an expression of the

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Commission's intention to assist the reorientation of agricultural production within the Community in the face of price restraint. But we are not yet convinced that it is the right way to proceed. There are elements contained in it which we support, but as I have mentioned, there are also elements which will require a great deal of further consideration. We shall also be paying particular attention to the financial implications of the package in terms of cost effectiveness. I shall listen with great attention to the view of hon. Members on the package as a whole and on its constituent parts. I can assure the House that these will be fully taken into account during the course of the discussions on the package within the Community.
Document 7126/86 amends regulation 797/85 on agricultural structures to take account of Spain's accession to the Community. It was discussed by the Council of Agriculture Ministers at the end of May and was agreed in principle, subject to the approval of the European Parliament.
The proposal stems from a statement issued by the Community on 18 April 1985 during the Spanish accession negotiations. The statement acknowledged the structural shortcomings in certain areas of Spain, and confirmed the Community's readiness to make provision for certain favourable conditions under the existing structures legislation. Although the proposal goes further than the statement, all the proposed measures are well precedented elsewhere. The measures provide for some easing of the eligibility conditions for compensatory allowances and capital grants. They also provide for a temporary increase in the maximum rate of capital grant which may be paid and for an increase in EAGGF reimbursement for aids to investments on holdings, compensatory allowances and for aids to joint investment schemes in the least favoured of the less favoured areas.
The Commission has also proposed changes to regulations 355/77 and 1360/78 to take account of Spanish accession. Under regulation 355/77, investment projects in the more disadvantaged regions of the Community receive 50 per cent. or 35 per cent. FEOGA grant rather than the usual 25 per cent. The proposal is to include Spain in the countries eligible for the higher rates of grant and to define the regions to which the rates apply. As regards regulation 1360/78, the proposal is merely to include Spain in the list of member states to which it applies. The Commission has said that the expenditure will be met from within existing financial provisions. The proposals were both agreed by the Council of Agriculture Ministers in May.
10.45 pm
Mr. John Home Robertson: I was about to thank the Parliamentary Secretary for her lucid explanation of the documents, but I am not sure whether such thanks would be very convincing. I wish that the hon. Lady could have seen the expression on the faces of her officials in the Box when she undertook to give detailed consideration to all the points raised in the debate.
The term "socio-structural policy" could only have come from Brussels. However, it appears to be a first timid step in the direction of a comprehensive policy for the benefit of rural areas. The Labour party has been calling for such an approach for some time, and welcomes the fact that it may be on the agenda at last.
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I must express a fundamental doubt whether the basic objectives of a rural policy can possibly be dealt with within any comprehensive European framework. The patterns of rural communities, farms and the natural environment of the countryside are subject to so many essentially local variations that it seems to us that it would be more sensible to deal with such local affairs at a national level. My hon. Friend the Member for Pontypridd (Mr. John) has repeatedly called for the repatriation of national aspects of the common agricultural policy, and any proposals for structural reform seem to be obvious candidates for national decisions and initiatives within a framework of European priorities.
What the CAP lacks in logic it makes up for in momentum. We have known for years that the system of unrestricted market support through intervention was distorting agriculture, penalising the consumer and fleecing the taxpayer, but the juggernaut is still rolling on, and this year will probably bring even more intervention stores for junk cereal surpluses that no one would want even if they could afford to buy them. The system should go bust, but it will probably not be allowed to. What we need now are policies to restrict output, encourage better types of farming and protect rural communities. My party has made a range of suggestions including disincentives for the production of surplus commodities and incentives for the production of things that we need more of, especially timber.
Such a major shift of direction will require carrot as well as stick. We have had some stick in the form of milk quotas, the co-responsibility levy and higher intervention standards. I take it that the documents before us are supposed to offer a somewhat diminutive carrot to encourage farmers to produce less of the surplus commodities and to do so in a more sensitive manner.
One cannot turn a barley baron into a fully-fledged Friend of the Earth overnight, and the Minister knows that many people in the industry are facing a culture shock. I speak not just for myself but for a number of farmers in my constituency. However, in the past, agriculture has responded spectacularly to incentives and guidance from Governments and from the Community. Just as the industry has responded to production incentives, I have no doubt that it can work within a different set of priorities in future.
The trouble is that the industry has been adrift in a sea of indecision for a number of years. The word "Jopling" has passed into the farming vocabulary as a term for prevarication, confusion and muddle. The prospect of the Minister taking over the Presidency of the Council of Agriculture Ministers at this critical stage is causing some alarm and despondency. But never mind, we have here some new ideas so it is fair enough that we should have a look at them.
The first heading that we are discussing is this so-called pre-pension scheme, which seems to be another way of saying early retirement. I welcome any initiative which could start to establish a career structure in agriculture. It would let older farmers retire and young entrants into the industry. But I question whether a pension of £2,547 a year, less than £50 a week, would be enough of an incentive to persuade many 55-year-old British farmers to retire. Indeed, it is not entirely clear to me why we should want 55-year-old farmers to retire anyway.
Mr. Andy Stewart: Is not the £2,500 that is being offered as a pension about the net farm income that most farmers of 55 are receiving at the moment anyway?
Mr. Home Robertson: I rather doubt that. The average British farmer could expect a considerably higher return than that, although there have obviously been particular problems in particular sectors, of which the hon. Gentleman is as well aware as I am.
The other question which should be raised is why a beneficiary will be allowed to relinquish his farm only to a close relative. Is there not a strong case for encouraging farmers to relinquish land to some appropriate local agency, such as a county council smallholding scheme, which could let the land to a suitably qualified young person who wants to start a career in farming? We have proposed a land bank for that sort of purpose which would fit well with such a publicly funded early retirement scheme.
The other alternative in the pre-pension proposal seems downright bizarre to many of us. Article 1(c) provides for the abandonment of farms which includes
"simple abandonment of the land without allocation for any other utilization",
although the farmer might be required to "maintain" the land, for which he would be paid £95 per hectare per year.
I would reject that idea out of hand. I doubt whether it would work. For a start, £95 per hectare would not cover the basic cost of maintaining a farm and its steading. Obviously jobs would be destroyed and the resulting rural dereliction would be fully as ugly as urban dereliction can be.
I can easily anticipate the sort of complaints about weed seeds blowing around from officially abandoned farms, and that would be the least of the problems. If the Minister will not take that from me, perhaps I may refer her to the speech made by the Minister of State, Department of the Environment, to the Oxford farming conference in January this year, if that would not be too painful. We for our part do not want to see any such abandonment of farms.
I want to raise one or two detailed points about the pre-pension proposal. The principal one is whether a landlord's consent will be required for a tenant to enter the scheme. That point should be cleared up. While I am on the general subject, may I ask how the great set-aside debate is progressing in her Department? This sounds like some kind of variation on the theme of quotas, but if it could encourage farmers to bring fallowing back into their cropping system, it could be useful from all points of view. There is a world of difference between "abandonment", as referred to in the documents, and incentives for managed fallowing, which is good husbandry and good for the environment, quite apart from its effect of reducing production.
The second point covered in the documents is the question of helping young farmers to adopt less intensive husbandry techniques. The specific question that I want to ask is why is it necessary to encourage only young farmers to adopt such methods? Surely if that is a worthwhile objective it is a worthwhile objective right across the board.
The next question that must be put is: how can it work? All of us are now supposed to be in favour of the idea of less intensive farming—it is rather like being against sin
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—but how precisely can the Minister define "less intensive practices" for the purposes of operating a package of incentives? I warn her that there is an underworld of agricultural consultants out there waiting to take advantage of any loopholes in any grant scheme.
The third section relates to the less-favoured areas. I am intrigued by the possibility of compensatory allowances being paid for crops and produce other than cattle and sheep. I doubt whether there is is scope for such diversification in the British upland areas, but I should be interested to know whether and how the Government propose to implement the suggestion in Britain, or whether it is entirely for the benefit of Herr Kiechle in Gennany. The Royal Society for the Protection of Birds has raised the question of the damaging effect of overstocking, which is positively encouraged by HLCAs at present. It is a fair point. Might it be better to operate the scheme on the basis of area rather than headage? The Minister said that that was possible. Will she consider the point further? I stress that the Opposition strongly support the principle of more effective assistance in less-favoured areas.
The fourth point relates to environmental grants. The Opposition welcome the principle of incentives for farming practices which enhance or protect the rural environment. The Minister acknowledged that the Government have already made a token gesture in that direction with the six environmentally sensitive areas, which are yet to be selected. Indeed, we are still waiting for the legislation to return from the House of Lords. We welcomed the initiative, but it must be greatly expanded if it is to have a significant effect. The Government have earmarked £6 million for the pilot scheme of six sites, and the proposals that we are debating tonight could provide a further 25 per cent., or £1·5 million, from European funds. Will the Minister treat that extra money as extra cash for this purpose, and take advantage of it by designating another two environmentally sensitive areas, or will the money simply follow so much European money into the maw of the Treasury? I hope that we can have a specific answer from the Minister this evening.
The Minister also mentioned afforestation. The incentives that are suggested appear to be consistent with the proposals made by my hon. Friend the Member for Pontypridd a year ago, so we support them. But I must press the Government on this issue, because we are still waiting for them to implement article 20 of the previous structures directive, which would have provided much more generous and appropriate incentives for small-scale tree-planting on farms than is available through the Forestry Commission's planting grant scheme. How long must we wait before that is implemented, let alone any fresh proposals under this directive?
The documents also deal with research and training. The draft Council regulation states:
"Existing agricultural training schemes should be stepped up so that farmers can receive the services they require if they are to reorient their production, apply production methods compatible with protection of the countryside and afforest agricultural areas."
Amen to that.
Since the Minister of Agriculture, Fisheries and Food will be the President of the Council that considers that draft, he will have some explaining to do to his colleagues about what he has done to our agricultural advisory, research and development services in recent years and months. Only last week, the Ministry announced that it

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would slash another £4·1 million off the Agriculture and Food Research Council's research and development budget, and a further £2·8 million off the Agricultural Development and Advisory Service's research and development budget. We oppose that attack on ADAS, the AFRC and the Scottish agricultural colleges. We recognise the vital role of research, advice and training in such difficult times for farming, so on this occasion we must support the Commission, not the British Minister.
May I conclude on the vexed question of funding. It was originally intended that the guidance section of the common agricultral policy, which deals with structures, would account for 25 per cent. of European agricultural spending. It still accounts for less than 4 per cent. If we want the radical restructuring which the industry requires, and if we want to protect rural communities from the worst effects of that restructuring, we shall need realistic funding from the European Community and from the national Governments. Anyone who reads the publication Agra Europe will have been disturbed to see in the April edition this year the following statement:
"Although there was broad agreement on the content of the proposals in the Commission, discussion centred on the difficulties of financing the measure. It seems unlikely that they will be implemented this year in view of the Community's budgetary difficulties, and there is even doubt as to whether there will be enough cash available to introduce them in 1987."
All this talk about a socio-structural package—I would prefer to call it a rural policy—will be so much hot air if it is not backed up by the resources that are required to make it work.
What are the prospects of getting the national back-up funding that will be necessary to make it possible to implement these proposals in Britain? Since the British Minister of Agriculture, Fisheries and Food is now going to be the President of the Council of Agricultural Ministers, will he have either the clout or the ability to persuade his colleagues to begin to shift resources away from the bottomless pit of intervention buying, and to divert appropriate funding into a more constructive, comprehensive rural policy? That is the question that has to be answered.
10.55 pm
Mr. David Harris: Despite the valiant attempts of my hon. Friend the Minister to make some sense of this rather woolly document, I could not help wondering in the course of her speech what an upland farmer, say, from Bodmin moor would have thought about the start of the debate if by chance he had strayed into the Strangers' Gallery. These matters are complicated and woolly, and we all wrestle with them and wonder what they really mean.
I echo the question posed to my hon. Friend by the hon. Member for East Lothian (Mr. Home Robertson). What, for example, are the prospects of bringing in the pre-pension scheme? There is a great deal of interest among farmers on this matter. What is the attitude of Her Majesty's Government to the scheme? Are they really enthusiastic about it? Will they push it in the term of the United Kingdom presidency?
I want to concentrate on one aspect of the documents, the section dealing with compensatory allowances for less favoured areas. My hon. Friend was rather baffled when
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she touched on this part of the documents about the scope for extending the allowances to other types of production. So indeed was the hon. Member for East Lothian. I wonder, therefore, whether I could direct my hon. Friend's attention to a unique less favoured area in the country, the Isles of Scilly, which form the only less favoured area that is not a hill area. She will be aware that the designation of the Isles of Scilly came about some four years ago, and, as the then Member of the European Parliament for Cornwall and Plymouth, I had a small hand in winning that designation. It has meant very little to the farmers and, particularly, the growers on the Isles of Scilly simply because the animal population of the Isles of Scilly is very low. There are no upland farms. Our whole approach in this country to the less favoured areas is based on compensatory allowances for hill farmers.
My hon. Friend will know that the Isles of Scilly National Farmers Union has been pressing strongly in the intervening years to persuade the Government to institute a scheme in which designation of the islands as a less favoured area really means something to horticulture, in particular, on the islands. So far, I am afraid, the union and I have failed in our objective to persuade the Government to come forward with some such scheme. We have received a lot of sympathy from the Ministry. Indeed, the Minister's noble Friend Lord Belstead met me last year on this question. The upshot of our talks was that the Government were sympathetic, but unfortunately a suitable vehicle has not yet arrived by which the change could be made. I am wondering whether the suitable vehicle has arrived tonight in this House.
May I ask my hon. Friend the Parliamentary Secretary to examine, in particular, paragraph 2 of the document, on page 15, which refers to the possibility of an extension, and consider whether that would be a suitable vehicle for the extension of compensatory allowances to other forms of production, particularly horticulture, on the Isles of Scilly. If my hon. Friend were to do that, she would not be opening the door to a great increase in public expenditure. I have already said that the Isles of Scilly are unique. It is the only non-hill area to be designated as a less favoured area.
By happy chance, my attention was drawn to this matter today by the secretary of the Isles of Scilly branch of the National Farmers Union, Mrs. Penny Rogers, who has written to me about it. I shall be writing to my right hon. Friend the Minister of State. In the meantime, however, I should be most grateful if she would ensure that her officials looked into the matter. I shall be pressing them upon it.
11 pm
Mr. Robert Maclennan: The draft regulations are in principle exceedingly important. During the price-fixing debate that was held earlier this year some hon. Members took the view that the deal that the Government had brought home from Brussels was so bad for British farmers that only the structures package, which was considered to be complementary to the prices package, might help to retrieve the situation. Alas, the Minister has said nothing tonight to comfort those farmers whose incomes were shattered last year, partly by the appalling harvesting conditions and partly by the systematic and deliberate downward pressure that has been exerted on farmers by this Administration.

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The Minister's speech will probably read better than it sounded in the House. She took the trouble to explain the provisions of the draft regulations and in some cases gave the Government's view on the principles, but her speech will convey almost nothing to the farming community about what the Government intend British farmers to derive from the package. She said nothing about money, although that is what we wished to hear about. I hope that the Minister will say more about it.
If adequately financed, this series of proposals could achieve some of the objectives that the Commission, the Government and other parties in the House support. They would redirect agricultural production to commodities that are not in surplus, encourage the diversification of land use and help to ease out of agriculture those who wish to leave the industry. These are meritorious objectives. However, when they are set against the Commission's budgetary proposals it appears that very little is likely to be achieved.
The Commission has costed this package at 896 million ecu over a period of five years. To illustrate how little this is, I reckon that there are 45 million hectares of less favoured area land in the Community. All these funds will not be directed towards the less favoured areas, but if, for the sake of argument, that sum of money were to be concentrated on the less favoured areas alone, it would work out at about £13 per hectare over the five-year period. The farmers will not hang out their flags in jubilation if the Community's proposals are implemented. They will be even less enthusiastic about the proposals because there is no price tag from the Government.
The Commission's document that the Government have put before us shows that the package is almost valueless and contains no major commitment by Governments. What the Commission says bears repeating. It says:
"it will only be possible to put the measures into practice from 1987 at the earliest,… the new measures will be put into effect only gradually as and when administrative and budgetary measures are taken at national level."
We have heard almost nothing from the Government about what they intend to do in that respect. We cannot regard this as the end of the matter and we shall have to question the Government about the progress of their thinking.
Mr. Ivan Lawrence: We will.
Mr. Maclennan: I am glad that the hon. and learned Member for Burton (Mr. Lawrence) shares my views on these matters. We have a long history of agreeing about many things. I should like to raise a couple of important issues of principle with the Government. Do they intend to offer any new research or advisory back-up money to assist and facilitate some of the transformations that are taking place? Will they look again at the proposals to reduce ADAS funding and to cut experimental husbandry farm schemes and expenditure on the Scottish colleges of agriculture?
It is nonsense on the one hand to produce a package for far-reaching structural change and on the other to cut the advice about how to make it work effectively. The hon. Member for East Lothian (Mr. Home Robertson) spoke about the most recent announcements of Government cuts in this field, but it is never too late to ask the Government to think again. If they are serious in wanting the kind of adaptations that the Minister spoke about, they ought to reconsider.
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I notice that the proposals about hill livestock compensatory allowances call for more flexible headage payments. There is some merit in that proposal and it is one that the alliance put forward at an earlier stage. The Minister did not make it clear how the Government see these variations being made. There is a great deal to be said for local and regional determination of these varying rates, and we would like to see some movement in that direction. Regrettably, such movement is not apparent.
The weakness of the proposals is that there is no direct recognition of the potential importance of these schemes concerning the need to reduce surplus production. The proposals smack too much of tokenism. They are all worthy objectives, but the pre-pension scheme is probably set too low to offer any real inducement. As the Minister said, it is likely that, because the farm can be taken up by a close relative, people will not be taken out of agricultural production. In itself, it is a meritorious scheme and will help to provide a sensible career structure for farmers, but it does not have much to do with the central core of thinking about the agricultural problems of the Community.
Above all, this package does not recognise that the problem of massive overproduction, especially of cereals, will not be solved by taking a few marginal farmers out of cereal growing. The major problems are created by the extremely efficient, large farms whose owners have been encouraged over the years by an absurd open-ended system of price support hugely to intensify their production. None of the measures will touch these people. They will affect—or or might beneficially affect—those at the margin who are under enormous pressure because of the policy being pursued on price support. It is not a sensible way to contribute to the reduction of production on a large scale.
The Minister looked to the House for suggestions as to what might be done and I have mentioned a few points in that respect. However, a Minister in opening a debate of this kind has a duty to tell the House and the industry what the Government have in mind and not simply to come along with an open mind and describe the regulations in a generalised way, and say nothing about the money that the Government propose to put into the proposals to make them work.
I believe that the regulations represent a token of good intentions put forward by the Commission under considerable financial pressure because the budget on the Community's agricultural fund is so heavily canted towards the price regime and therefore inadequately directed towards the structural side. Although this is a step forward in that context, no one in the farming industry will believe that it will mark the difference between bankruptcy and profitability within the foreseeable future.
The impact of the proposals on farmers in this country as opposed to their impact on farmers in other countries, appears to raise the possibility that there might be discrimination here arising from the proposal to place ceilings on the payments per farm in the less-favoured areas. I hope that the Minister and those who negotiate in Brussels will pay close attention to that possibility.
In conclusion, I must state that I do not agree with the hon. Member for Pontypridd (Mr. John), who said that the structural measures of the European Community should be repatriated. We pay a lot into the Community budget in support of farming and we ought to get a lot out of it. We do not get as much out of it as we might and that

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is largely due to the misdirection into open-ended price support. If we tried to match consumer needs to output and supported that amount of commodities which the Community needed, there would be a substantial amount of Community money available for suitable structural schemes. However, it would never be right that the full burden of that should be borne by Brussels. The proposed proportions in the package are probably about right. However, they are far too low and we look to the Government to say at least something tonight about the order of magnitude of the amount of money that they propose to make available under these schemes over the proposed five-year period.
11.15 pm
Mrs. Fenner: Many matters have been raised and I hope that I shall be able to cover them all. The hon. Member for East Lothian (Mr. Home Robertson) raised a number of general points and I take issue with him over his remarks about penalising the consumer. We are doing all that we can—this we have done over many years— to curb surpluses in the CAP. I do not take kindly from the hon. Gentleman his comments about the consumer being penalised when I recall that food prices rose by 25·6 per cent. a year when the previous Labour Government were in power. The House will know that food prices have risen by 3·1 per cent. this year. This Government know a good deal about protecting the consumer.
The hon. Member asked about young farmers and wanted to know how the Government defined "less intensive production". As I explained in my earlier remarks, we see difficulties in administering and enforcing the proposed measures. We shall be probing the proposals in our discussions in Brussels on the package. The hon. Gentleman talked about the damaging effects of overstocking, about which the Royal Society for the Protection of Birds is concerned. We are aware of concerns about overstocking, but it is not a general problem in the United Kingdom. There are isolated examples, but United Kingdom rules provide safeguards against overstocking. We are always willing to consider new ideas on improving the rules. We shall consider extremely carefully the scope offered by the new package.
The hon. Member suggested that we should pay by area rather than by headage rates. EC rules do not allow for hectarage payments on livestock and the package does not amend that. The hon. Gentleman commented on our set-aside scheme. We are considering ideas for a voluntary set-aside scheme for cereals, which could apply Communitywide. The scheme concentrates on cereals because that is where the greatest problem lies. The Commission estimates that by 1991 grain stocks in the Community could reach 80 million tonnes if nothing is done. They now stand at 15 million tonnes.
The hon. Member asked specifically about the pre-pension scheme and landlord's consent. There is no specific requirement for a tenant to obtain his landlord's consent. The pre-pension scheme is voluntary, and if a tenant chooses to take advantage of it he must comply with the terms of his tenancy agreement. Normally that contains provisions on good husbandry, which could well preclude the abandonment of agriculture without the landlord's consent. We are well aware of the implications
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of the pre-pension scheme for relations between landlords and tenants. We shall want to ensure that the Commission's proposals are fair to both parties.
The hon. Member commented on the non-implementation of article 20 of the existing structures regulation on forestry. As I said earlier, the article was not implemented because our forestry grant and broadleaf woodland grant schemes are more attractive. The implementation of the article in the United Kingdom can be reconsidered in the light of the proposed amendments that are contained in the package, which are designed to make the article more attractive. That is something that can be reconsidered.
My hon. Friend the Member for St. Ives (Mr. Harris) asked, among other things, about the pre-pension scheme. We have already expressed our reservations about the pre-pension scheme proposals as we are not convinced that they will be cost-effective in reducing the surplus production. The hon. Member for Caithness and Sutherland (Mr. Maclennan) said a number of times that the Government should say exactly what we shall do, but this is an opportunity for the House to debate the issues. When we go to Brussels we shall be able to discuss the scheme and draw attention to the matters about which individual Members are concerned. As I have said, there are matters about which we, the Government, are concerned. In some instances we feel that the proposals are ambiguous or are not likely to work and will not, therefore, be cost-effective.
The hon. Member for Caithness and Sutherland said that the package will be ineffective in reducing surplus production. We tend to agree with him. That is why we are considering ideas for cereal set-aside, which we believe are designed to tackle the roots of the over-production problem.
The hon. Member for East Lothian mentioned environmentally sensitive areas. We are not very satisfied with the proposals that have been put forward, as they lack the flexibility that we would wish. For instance, they have specific conditions attached to them which we would not have found helpful in the work that we have done in connection with the Norfolk Broads. We want to see a slightly more flexible arrangement for ESAs.
Mr. Home Robertson: We are not terribly satisfied with the level of funding or the scope of the environmentally sensitive areas scheme. I should be grateful to the Minister if she would say whether the additional £1·5 million that will become available for ESAs in Britain as a result of the additional grant will be treated as extra money which could extend the scope of the scheme in the first year, or whether the money will simply be swallowed up.
Mrs. Fenner: The present schemes that are already listed for this year and which form part of the proposals in the Agriculture Bill will continue. The others will be additional. The ESAs that are being introduced are funded nationally under an article already provided.
Mr. Home Robertson: Is the amount of £ 1·5 million that is to be provided in the first year additional to the £6 million that is already budgeted?
Mrs. Fenner: Until the EC legislation is amended, the existing text of the article permitting ESAs is the law. It is under that article that the present ESAs are conducted.
This is a complicated package. We have deep reservations about many parts of it. There are many parts

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to which we give a cautious welcome. I hope that hon. Members will feel that they have had an opportunity tonight to discuss the matter before it is settled in Brussels.
Mr. Harris: Can my hon. Friend say that the points I raised about the isles of Scilly will be considered by her Department?
Mrs. Fenner: Yes, indeed. The point that farmers other than livestock farmers could be in receipt of hill livestock compensatory allowance is raised by the new proposals. It is a matter that we shall consider.
Question put and agreed to.
Resolved,
That this House takes note of European Community Documents Nos. 6466/86, draft Regulation amending Regulations 797/85, 270/79, 1360/78 and 355/77 on agricultural structures in order to adjust agriculture to the new market situation and maintain rural areas and draft Decision amending Decision 83/641 on joint research programmes and programmes for co-ordinating agricultural research, and 7126/86, draft Regulation amending Regulations 797/85, 355/77 and 1360/78 on agricultural structures to take account of the accession of Spain; and supports the Government's view that these measures should have as a primary aim the closer alignment of agricultural production to the requirements of the market and that the measures must be both cost-effective and containable within existing expenditure ceilings.

Immigration Appeals
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Maude.]
11.22 pm
Mr. David Clelland: Tonight I raise a matter that concerns justice, fairness and equality of treatment under the law. The subject affects an often already disadvantaged minority — those who have applied to come to our country to live and who want to be a part of our community. At a time when the world is concerned about the inhumanity and injustice of apartheid in South Africa, and when our Prime Minister has appealed for a measure of equality in that troubled country—even though she refuses to back up her words with deeds—I draw attention to a glaring anomaly in our own system. It is an anomaly that the Government have the power to correct. I hope that the Minister of State, Home Office—the hon. and learned Member for Ribble Valley (Mr. Waddington)— will tell us that he will give sympathetic consideration to it.
To illustrate the nature of the problem, I shall tell the House a story about a little boy — a nine-year-old youngster alone in Bangladesh. It is also a story about injustice and the increasing inaccessibility of a fair hearing to an ever-growing number of ordinary men and women. If my experience is any indication of the problem, there can be very few hon. Members who have not had, at some point, a request from a constituent for help in an immigration case. I have already dealt with quite a number of cases in what is a relatively short time representing the people of Tyne Bridge.
The small boy in this case, Bablus Muskad, is the son of Abdul Muskad, a British resident since 1957, and Mala Bibi Muskad, Abdul's first wife. Bablus, like Abdul's other children, was born in Bangladesh, where his father went for long periods, whilst retaining his British citizenship. Mr. Muskad applied in 1979 for his second wife, Gulnahar Bibi Muskad, and her two children, to join him in England. Bablus was not included in that application, because his mother was still alive. Sadly, by the time the application came through, Mala Bibi had died. Naturally, Gulnahar looked after little Bablus who was only three and a half at the time, with her other children after Mala Bibi's death.
The family arrived in England in 1983 and immediately applied for Bablus to join them. His first interview with the authorities was, of course, in Bangladesh. He was asked many questions about his relationship with Gulnahar and her two sons, Bablus's stepbrothers. The eight-year-old, like eight-year-olds the world over, was confused and imprecise about these relationships. He called Gulnahar his mother and said that his stepbrother was his brother. They were understandable mistakes, given that Gulnahar had looked after Bablus since he could speak.
Many people might find it incredible that those mistakes by an eight-year-old were enough to make the interviewing authorities reject his application to join his father and the stepmother who had cared for him for so long. Bablus was left with a loose network of aunts and uncles, some of whom he did not know, to look after him.
Of course, Mr. Muskad lost no time in appealing against the decision. He was lucky enough to be advised by the family services unit in Newcastle, but it soon found that to take the appeal to tribunal meant that he, together

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with any other members of his family who were going to give evidence, would have have to travel to Leeds, where the newly centralised immigration appeals office for the whole of the north of England is based.
The catch about this system of appeal is that each appellant has to pay his own costs. There is no provision in this tribunal, as there is in industrial tribunals and employment tribunals, for appellants to reclaim travel costs or other expenses. In this case, Mr. Muskad first had to go down to Leeds, with one of his sons to act as interpreter, to see the United Kingdom immigration advisory service. He had to go back a second time with Gulnahar and another son for a further visit. Then, since of course the onus is on the appellant to produce as much corroborative evidence as possible, all four members of the family went to Leeds to give evidence to the tribunal.
This particular story has a happy ending—for those hon. Members whose hearts have not been hardened by over exposure to Thatcherism. The Muskad family won their case and Bablus has now been united with his father and stepmother. But that decision took nine return journeys to Leeds at considerable cost to the family and, of course, there are other costs to take into account, such as the travel cost of the family services worker, who helped and advised the Muskad family through the maze of legality.
Even so, Mr. Muskad got off lightly. The adjudicator could have decided, as often happens, that further inquiries should be made in Bangladesh. The hearing would then have been adjourned until a future date when the family would have had to go down to Leeds yet again. If the appeal had been unsuccessful, Mr. Muskad would probably have had to go down to London, again with his family—for the burden of proof rests squarely upon the appellant—but at an even greater cost.
Bablus Muskad's case highlights a glaring failure in the legal appeal system to meet the needs of those men and women who rely on it.
The legal system has recognised that there is a need for appellants to be able to claim some expenses. In social security appeal tribunals, medical appeal tribunals and industrial tribunals the appellant can not only claim travel expenses but loss of earnings—for himself and for the witnesses he calls to support him. Legal aid has recently been extended to include patients appearing before mental health review tribunals. Ironically, had Mr. Muskad been a convicted criminal, appearing before a prison board, he would probably have been able to claim legal aid.
In most other tribunals there is provision for the legitimate expenses of claimants and witnesses whose evidence is material to the case to be met from public funds, although not those of their legal representatives. But there is no provision for this in these immigration appeal cases. It goes without saying that the attendance of witnesses in most immigration appeals is crucial, given that the onus of proof is always on the appellant and that the appellant's case will be that much stronger if corroborated by the evidence of other witnesses.
It is easy to see how the expenses involved in travelling, subsistence and loss of earnings can run into hundreds of pounds. What sort of legal system is it that first weaves a web of complexity around itself and then adds an extra layer of financial cost? A Newcastle solicitor recently wrote to me saying:
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"there is no doubt that extreme hardship is caused to many claimants, and it is not unfair to conclude that there are certainly a number of cases in our experience where, because of the distance involved in getting to Leeds and the time that that involves — and the expense that our costs and the travel costs involve — some people decide that it is not worth going through with the system. If that is the case, then of course it is a strong indictment of the system, because there is no point at all in having a system of judicial review of cases of this nature which is not effectively and realistically accessible to the parties who are expected to use it."
By definition, these are not simple, straightforward cases. They are highly complex and are of the utmost importance to the individuals concerned, as they deal with their liberty to remain here or ability to bring their families to this country.
There is a strong argument in favour of extending legal aid to this increasingly complex area. The absence of aid has far-reaching consequences, for instance for the appellants' representatives who must also travel to Leeds or London with a properly prepared brief.
In April of this year I had some correspondence with the Lord Chancellor about the current study and review of the legal aid scheme. The noble and learned Lord stressed the Government's commitment to an effective legal aid scheme. That being so, it is time they drew immigration appeals into the network of assistance.
The transfer of the immigration appeals office to central offices in Leeds was, I gather, one of the earliest steps towards the centralisation of Government Departments to cut costs. As is often the case, any saving for the Government purse has resulted in ordinary people having to dig deeper into their pockets. While the Home Office is not famed for handing out money, there is a real need for appellants before immigration appeal tribunals to have at least some access to public funds for the repayment of travel expenses.
In April last I asked the Home Secretary
"if he will make funds available for the purpose of providing travel expenses for persons involved in immigrant appeal hearings."
The Minister of State, not a man to mince words or to use two words where one will do, replied:
"No". — [Official Report, 17 April 1986; Vol. 95, c. 466–7.]
Though that may have been a factual answer, I had hoped for a more considered and comprehensive one. Hence tonight's debate, which gives the hon. and learned Gentleman the opportunity to give a considered and comprehensive answer.
In the light of what I have said and in the interests of fairness and natural justice, I hope that the Minister's answer tonight will be to the effect that the Government intend to extend the payment of expenses to immigration appeal tribunals.
11.33 pm
The Minister of State, Home Office (Mr. David Waddington): The hon. Member for Tyne Bridge (Mr. Clelland) has raised an important point, though he rather spoilt his argument by raising some blatantly party political issues, including at one point making a sneering reference to what he called Thatcherism.
The system to which he is drawing attention has been in existence since the immigration appeals system was created, and therefore any criticisms he has of it would have been just as appropriate in the days of the last Labour Government. So it is nonsensical and rather childish of

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him to try to turn this into a party political issue. It is, nevertheless, an important issue, and he questions whether legal aid should be available in immigration appeals.
I remind the hon. Gentleman that the Wilson committee, which recommended the setting up of an appeals system, was of the opinion that if the legal aid scheme was extended to tribunals in general, immigration appeals could no doubt be brought within the scope of that extension, but there were no good grounds for giving priority in respect of immigration appeals. I am bound to say that we see no reason to dissent from that view. I shall explain why.
There is no provision in the Immigration Act 1971 for the payment of expenses to people attending hearings before the appellate authorities, but section 23 of the Act provides for a grant to be made to a voluntary organisation that provides advice or assistance to persons having a right of appeal under the Act. Such a grant is made to the United Kingdom immigrants advisory service, which provides a free service advising appellants about their appeals and representing them at appeal hearings. The grant this year is £870,000. We are grateful to UKIAS for undertaking that work.
Most appeals are heard initially before independent adjudicators. Adjudicators sit not only in London but in Manchester, Birmingham and Leeds, to make it easier for appellants and sponsors who live in the north and the midlands to attend hearings. They also sit in Edinburgh, Glasgow, Belfast, Bristol, Cardiff and Southampton. It should therefore be possible for people to attend a hearing centre within reasonable distance of their home. Furthermore, the procedural rules allow for an appeal to be transferred from one adjudicator to another, and that provision can be and has been used to make it easier for an appellant or a witness to attend an appeal hearing. The Immigration Appeal Tribunal, which in the main hears appeals from an adjudicator's decision sits only in London, but the tribunal normally relies on documentary evidence and oral submissions from the appellant's and respondent's representatives, so it is not usually necessary for an appellant or his sponsor to attend the hearing in person.
Rule 27 of the procedure rules provides for the appellate authorities to issue a witness summons, but subject to the caveat that no person shall be required to travel —that is, made to travel against his will—more than 10 miles from his place of residence unless the
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necessary expenses of his attendance are paid. If the decision to summons a witness is solely that of the appellate authority because, for instance, it is felt that a particular person's evidence is essential to fair determination of the appeal, the expenses are paid by the appellate authority. If the summons is issued at the request of either party to the appeal, responsibility for payment then falls on that party. If either party feels it necessary to support its case by calling witnesses but without the formality of seeking a witness summons, the payment of expenses is a matter between the party and the witness.
If an appellant or a witness were to suffer considerable financial loss because of a serious mistake by the home Office or the appellate authority in connection with the appeal proceedings, consideration would be given to the provision of an ex gratia payment. But the mistake would have to be a serious one, that is, more than just an inadvertent error. Loss caused by the adjournment of a hearing would not qualify unless the adjournment itself was caused by serious error. That is in line with the practice of the courts where costs of adjournments are included in the overall costs of the parties to the action. Within the immigration appeals system, each party bears its own costs but, as I said at the beginning, a free advisory service and free representation is provided to minimise the costs faced by a person appearing before the appellate authorities. That was not thought unfair by the previous Administration. We do not think it unfair now.
The hon. Gentleman mentioned a particular case. I cannot comment on it because I did not have notice of the fact that he would mention it and I have no notes about the case before me, but it was an illustration of the fact that there is an appellate authority which can review the decisions of entry clearance officers. In that case, an adjudicator reviewed the decision of an entry clearance officer and allowed entry to the person concerned. Therefore, that was an illustration of the system working, not an illustration of it not working. I do not think that I can comment further on the case.
Once again, I am greatful to the hon. Gentleman for allowing me at least to make clear how the system works and how it has worked, under the previous Labour Government and this Government since it was devised.
Question put and agreed to.
Adjourned accordingly at twenty minutes to Twelve 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 Manchester.
Lord Hawke—Sat first in Parliament after the death of his brother.
The Earl of Lindsay—Sat first in Parliament after the death of his father.

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

Road Traffic Regulation (Parking) Act,

Children and Young Persons (Amendment) Act,

Consumer Safety (Amendment) Act,

Forestry Act,

Airports Act,

Drug Trafficking Offences Act,

Disabled Persons (Services, Consultation and Representation) Act,

Protection of Children (Tobacco) Act,

Protection of Military Remains Act,

Harrogate Borough Council Act,

South Yorkshire Passenger Transport Act,

Clifton Suspension Bridge Act.

Short-term Prisoners: Parole Scheme
2.37 p.m.
Lord Boyd-Carpenter: 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 now considered the views of the judges of the Crown Court on the extension of the grant of parole to prisoners sentenced to short terms of imprisonment; and what action they propose to take.
The Parliamentary Under-Secretary of State, Home Office (Lord Glenarthur): My Lords, we are aware of the concerns that have been expressed by the judiciary about the operation of the parole scheme in respect of prisoners serving short sentences. Against that background, we are looking for ways in which that aspect of the scheme can be improved.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that encouraging reply. However, is he aware that there is concern that, where someone has
160
been sentenced for a short term, he appears to be automatically released after six months, irrespective of the term that the judge who saw him and heard the evidence saw fit to impose?
Lord Glenarthur: My Lords, I am aware that there is that concern. I hope that the improvements that we are considering may help to alleviate it. We are looking, for example, to see whether local review committees can be provided with better information on which to base their consideration of individual cases. Already the police have agreed to make available in all cases a report on the circumstances of the offence, which until recently has been available only in cases involving sentences of over 18 months.
Lord Denning: My Lords, is the Minister aware that the extension of parole means that in many cases the sentences imposed by judges are rendered quite illusory? A man, for good conduct, may get a remission of one-third of his sentence, and now in most cases he will get an additional one-third on parole. The result is that in practical terms there is no difference between a sentence of nine months' and 18 months' imprisonment. Ought not that to be carefully considered? In most cases there is an automatic parole extension of an additional one-third to the original one-third remission. Should not that be carefully looked at at once?
Lord Glenarthur: My Lords, the six-month minimum qualifying period has a flattening effect on the time served in custody over a certain sentence range, but that applied to a different sentence range when the minimum qualifying period was 12 months also. The sentence given by the court is still reflected in the length of the parole licence and hence in the parolee's liability to recall in due course.
Lord Elwyn-Jones: My Lords, does not the Parole Board exercise its responsibilities most carefully? Is it not important to bear in mind the appalling problem of gross overcrowding in prisons and the necessity therefore, consistent with the administration of proper justice, to relieve that pressure so far as is in the public interest possible?
Lord Glenarthur: My Lords, the noble and learned Lord is right. The Parole Board gives great care to its consideration of all cases, as does my right honourable friend if cases come to him. The noble and learned Lord is right also that overcrowding in prisons must be tackled, and that is one way to do that.
Lord Harris of Greenwich: My Lords, will the noble Lord say whether the judiciary was consulted before the change was made in the law? Given that there are expressions of disquiet, as I understand it, by members of the judiciary, was the judiciary consulted? Secondly, the noble Lord talks about possible changes so far as local review committees are concerned and adding to their responsibility. Can he say whether additional resources will be made available for them if they are to be asked to do more work? Lastly, taking up the point made by the noble and learned Lord, Lord Elwyn-Jones, does the noble Lord agree that if we did not continue to apply the parole system as it now exists,

161
overcrowding in prisons would immediately become intolerable?
Lord Glenarthur: My Lords, with regard to the last of the noble Lord's three supplementary questions, yes, 1 think that it would produce serious difficulty. On his point about consulting before change, I understand that when the change came forward in the 1982 Act it was generally welcomed by all sides. I cannot say whether the judiciary was consulted; I shall find out and let the noble Lord know. On the question of funds for the local review committees to which I referred, I am sure that that will be a matter for consideration as it is taken forward.
Lord Hunt: My Lords, does the Minister agree that in the matter of parole the performance and progress of offenders serving shorter terms of imprisonment is often not a significant factor? Does he agree that it would be helpful if, when pronouncing sentence, the courts were to express an opinion on the advisability, value or otherwise of a short period of that sentence being served on parole licence? The local review committees and the Home Office in turn could take that into account when deciding whether on balance parole should be granted. Would that not go a long way towards overcoming the objections of the courts?
Lord Glenarthur: My Lords, that is an interesting suggestion: I shall look into it.
Lord Boyd-Carpenter: My Lords, when weighing the important points made by the noble and learned Lord, Lord Elwyn-Jones, will my noble friend also have very much in mind the danger, in the face of the present crime wave, of undermining the deterrent effect of sentences imposed by the courts?
Lord Glenarthur: Yes, of course, my Lords; that is borne in mind. There is a balance to be struck; but it is important to be aware that those recalled for committing further offences while on licence in 1985 totalled 335 parolees. That is about 2 per cent. of the total recommended for parole.
Lord Hutchinson of Lullington: My Lords, has the Minister told the Crown Court judges that they have brought this reform upon themselves because they sentence more defendants to imprisonment than any other nation in the Western hemisphere except Turkey, and because those sentences are longer than sentences in any other country in the Western hemisphere except Turkey? Have the Crown Court judges expressed any concern about the overcrowding in the prisons to which they send prisoners?
Lord Glenarthur: My Lords, concern about overcrowding in prisons is regularly expressed. The question on sentencing goes rather wider than the Question on the Order Paper.
Lord Donaldson of Kingsbridge: My Lords, does the noble Lord agree with the noble Lord, Lord Boyd-Carpenter, who implied that there is a detectable difference in deterrence between a six- and a 12-months sentence?
Lord Glenarthur: My Lords, there is of course a difference between the two sentences. Parole is looked into for a number of different reasons, most of which have been adduced by the noble and learned Lord, Lord Elwyn-Jones.

Bottle Banks
`2.46 p.m.
Lord Rodney: 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 are favourably disposed toward the bottle bank scheme and whether they have any plans to encourage the spread of these schemes, particularly in urban areas.
Lord Skelmersdale: My Lords, the Government welcome and fully support the bottle bank scheme operated by the glass industry in conjunction with local authorities. A conference was held on Wednesday last to discuss the scope for further expansion of the scheme. It brought together representatives from industry, retailers, local authorities and other interested bodies, under the chairmanship of my honourable friend John Butcher, to see what steps could be taken.
Lord Rodney: My Lords. I thank my noble friend for that encouraging reply. Will he give some indication of the energy-saving potential of the reprocessing of bottles?
Lord Skelmersdale: My Lords, I am afraid I cannot provide my noble friend with details of the actual savings. I shall investigate the matter and write to him and place a copy of my letter in the Library for your Lordships' gaze. It is obvious that melting cullet, as it is called—recycled glass—uses less energy than does making glass from scratch.
Lord Parry: My Lords, is the noble Lord aware that Britain's newest bottle bank is to be opened next Monday in the beautiful seaside resort of Tenby? Does he accept that it is only the natural modesty of the Welsh that prevents me from naming the noble Lord who is to open it? Will he take up the important supplementary question asked by the noble Lord, Lord Rodney, and note that the proximity of the bottle banks to the processing plant is the key to whether we can make the bottle banks effective in terms of national policy? Does he accept that if it is necessary for the bottles to be transported in lorries for considerable distances, that defeats the whole policy and therefore gives point to his Answer to the noble Lord, Lord Rodney?
Lord Skelmersdale: My Lords, I am grateful to the noble Lord, Lord Parry. I am delighted to hear about the proposed opening of the bottle bank site in Tenby. According to my figures, it will be the 2,471st site. I should point out that in 1977 there were only 17 sites, so we have done extremely well. On the question of transport, I understand that the Glass Manufacturers'

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Federation recognises that as cullet is so valuable the economics of transport do not play a great part; and therefore there is no reason from a transport point of view why bottle sites should be near to the various plants.
Lord Constantine of Stanmore: My Lords, I agree entirely with the request to improve the provision of bottle banks. Will the Minister see that consideration is given to the question of noise when the bottles banks are being sited? They create a great deal of noise at night when people want to sleep peacefully, and that should be considered.
Lord Skelmersdale: My Lords, my noble friend raises a valid point. The sites are always provided by the local authorities. Should residents and people nearby have cause to complain about noise pollution, they should refer their queries to the local authority in question.
Lord Strabolgi: My Lords, following the question of the noble Lord on the other side, may I ask whether the noble Lord is aware that the most recent forms of bottle bank—here I must declare an interest—have a pneumatic base and are therefore not nearly so noisy in use? Is he also aware that at the conference to which he alluded, chaired by his honourable friend Mr. John Butcher, there was a commitment to double the number of bottle banks within five years? Is this a fact?
Lord Skelmersdale: My Lords, as regards the first part of the noble Lord's question, no, I was not aware of pneumatic bases. Off the top of my head I would say that the level of noise depends upon how full a particular bank is. Certainly there was a commitment to double the number of sites within five years, which was recognised as a feasible and realisable objective.
Viscount Hanworth: My Lords, would the noble Lord not agree that an alternative to bottle banks is to have a deposit on the bottle? This means that the bottles can go back in the empty lorry after it delivers the new ones. Does he agree that, although this is probably unpopular, it should nevertheless be considered as an alternative where the distances are great?
Lord Skelmersdale: My Lords, even when I was very small most bottles were still returnable and had a deposit on them. But over the years that practice was found to be uneconomic. That is why these days only very few drinks—usually fizzy, alcoholic drinks—are supplied in returnable bottles. This is all because of modern economics, I regret to say.
Lord Morris: My Lords, can my noble friend say what arrangements are made for the disposal of the occasional bottle that is known to leave the Palace of Westminster?
Lord Skelmersdale: My Lords, there is no bottle bank as such, but there are bottle skips.
Lord Bruce of Donington: My Lords, can the noble Lord give a little further information following upon
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the Question put by the noble Lord, Lord Rodney, as to what plans the Government have to encourage the spread of the schemes? Can the noble Lord give some indication of the direction in which the mind of Her Majesty's Government is moving in the matter and what plans have eventuated from those thoughts?
Lord Skelmersdale: My Lords, my honourable friend the Under-Secretary of State at the Department of Trade and Industry has set up a co-ordinating government policy committee on all sorts of recycling. It has established a recycling advisory unit at Warren Spring Laboratory. It is engaged in the production of a video, encouraging recycling, for dissemination to industry, local authorities and other interested parties. It is planning a series of commitment conferences, one of which I referred to in an earlier supplementary, as well as laymen's guides to energy from waste schemes in the United Kingdom and existing Government support for recycling projects.
Lord Mowbray and Stourton: My Lords, can my noble friend tell me why, when I go north of the Border to my home there, I get 10p on non-alcoholic soda water and fizzy lemonade bottles, but south of the Border, here in London, I get nothing back on my bottles?
Lord Skelmersdale: My Lords, the right answer is, I believe, to refer my noble friend's question to the supplier of the bottle in question.

Unemployment: Restart Programme
2.54 p.m.
Lord Hatch of Lusby: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they are taking to provide employment for those who have been unemployed for over a year.
The Secretary of State for Employment (Lord Young of Graffham): My Lords, last week we extended the restart programme nationally. Now everyone who has been unemployed for a year or more will be approached, invited to the jobcentre and offered one or more of eight positive opportunities designed to help them back into employment.
Lord Hatch of Lusby: My Lords, can the noble Lord tell us whether the Government have reconsidered their opposition to the recommendations of the Select Committee on Employment of another place, which reiterated its proposals that the Government should guarantee a job to everyone who has been unemployed for over three years and that there should be pilot schemes for the provision of employment to those who have been unemployed for more than one year?
Lord Young of Graffham: My Lords, since the Select Committee of another place made its report, to which we responded, two things have happened. First, there has been a scrutiny of the community programme which shows the dangers of expanding that

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programme too far and shows, indeed, that there are still difficulties in expanding the programme to anything as large as 255,000 places which it will have by November. Secondly, since then the Government have embarked on the most ambitious scheme of any country in the nationalised—I mean the industrialised—world—
Lord Stoddart of Swindon: My Lords, the denationalised world.
Lord Young of Graffham:—the denationalized world, as the noble Lord says. That scheme will go out to each and every person among the long-term unemployed. That is, I believe, a more effective response.
The Lord Bishop of Manchester: My Lords, can the noble Lord say to what extent the Government are taking account of widespread disparities in the effect of long-term unemployment in different parts of the country and how far the scheme that he has outlined relates, to that situation?
Lord Young of Graffham: Yes, my Lords. We are giving assets to the scheme in proportion to the long-term unemployed who live in a particular area. We have therefore given adequate resources in that regard. I should, however, point out that until recently there were twice as many long-term unemployed people living in London and the South-East as in the whole of the North-East.
Lord McCarthy: My Lords, in relation to the reply given by the noble Lord to my noble friend Lord Hatch, is it not the case that the Government criticised the Select Committee of another place, saying that it had exaggerated the extent to which there would be job creation as a result of its policies and that, in fact, there would only be 20 per cent. net job creation? Does that not apply to the Government's own policies? Does it not apply to the job start scheme? Does it not apply to the new worker scheme? Does it not mean no more than 8,000 jobs in positive net job creation in respect of the jobstart scheme because there is not enough money to do more? Would not the same apply to the new worker scheme? Is it not the case that the same criticism that the Government levelled at the Select Committee in another place can be levelled at their own policies?
Lord Young of Graffham: No, my Lords, I do not think that it can at all. The Select Committee has recognised that its original report was far too ambitious and has since scaled down that report. It is looking for something far less ambitious which I still believe even now would be impossible to put into effect. What the jobstart allowance does and what the new worker scheme allowance does is to target those allowances on two specific groups. I refer to long-term unemployed people looking for a job at a wage of under £80 a week. There are 400,000 such jobs each year in the economy. I refer also, in the main, to young people, in particular those coming off two-year YTS and those who have missed YTS, and their entry into the labour market.
Lord Molloy: My Lords, may I ask the Minister an additional point to that submitted by the right reverend Prelate? Does he accept that in some areas of the country there are families where more than one member of the family have been unemployed for over a year? It is a sad and serious situation. Is it possible for the Minister to take that factor into account and to give as much help as possible to those areas w here that statistic applies?
Lord Young of Graffham: Yes, my Lords. I should, however, point out that, so far as unemployment is concerned, I do not believe that we have a North-South divide. What we have is an inner urban, rural and suburban divide. There are many pockets of very high unemployment in London and the South-East and there are many places of low unemployment up in the North.
Lord Ross of Marnock: My Lords, we have heard a lot about schemes from the Government. Can the noble Lord answer a simple question? Is the number of long-term unemployed rising or falling?
Lord Young of Graffham: My Lords, the number of long-term unemployed at the moment is stable. I have ventured to forecast that when the figures come out for Christmas we shall find that, thanks to the concentration of government effort on that category, which I believe most worthy of all of help, it has started to do down.
Baroness Turner of Camden: My Lords, how many of the new jobs anticipated would be part-time, and how many would be full-time? My impression is that much new employment is part-time and in unskilled areas.
Lord Young of Graffham: My Lords, I do not think that impression is fair. In talking about the number of net increases in jobs—in considering the million increase—noble Lords opposite have drawn attention to the fact that many are part-time. Of course they are because in this country we manage to find jobs for over 65 per cent. of all people of employable age. But if one looks at France or Germany, one sees that it is 59 per cent. or 60 per cent. In Italy it is 54 per cent. The reason is that we have many more women in employment. Many of the women who are going into work are looking for part-time work.
Lord Hatch of Lusby: My Lords, is this not the answer to my noble friend Lord Ross of Marnock? Over the last three years the long-term unemployed have increased by a quarter of a million. Can the noble Lord tell the House whether he is aware that the Select Committee to which I have previously referred rejected the criticisms of the Government—a Select Committee with a majority of Conservative members—and reiterated its demand that those who have been unemployed for more than three years have a right from the Government to be offered a job?
Lord Young of Graffham: My Lords, I should like to confirm that long-term unemployment has been rising each quarter this decade, as it has been rising all over Europe. It is no good the noble Lord refusing to look

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at the rest of Europe. Although we are an island, we are part of Europe; we are part of the same industrialised society. We can learn from our partners in Europe, and I hope that they can learn from us. A Select Committee did disagree with the Government—I suspect not for the first or last time. I often think that that is the principal function in life of Select Committees.

Pay Increases and Inflation
3.2 p.m.
Lord Rochester: 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 action they propose to take to reduce the extent to which increases in pay are currently far outstripping the rate of inflation.
Lord Young of Graffham: My Lords, Her Majesty's Government do not intervene in pay negotiations to which they are not a party. However, we are very concerned that pay rises are increasing unit costs and damaging employment prospects.
Lord Rochester: My Lords, may I take it from that reply that the Secretary of State accepts that there is an urgent need to obtain a more general awareness of the relationship between pay rises, and investment and of the beneficial effects which an improvement in productivity and reduction in unit costs could have on job creation? If he does, will he and his right honourable friend the Chancellor of the Exchequer make use of the National Economic Development Council, whose meetings are attended by representa-tives of Government, employers and trade unions, as a forum in which that educative process can be developed so that as far as possible the deliberations of the council are made known to the public at large?
Lord Young of Graffham: My Lords, I have been privileged to be a Member of the National Economic Development Council in a previous incarnation as well as in this one for the last four years. During that time the relationship between pay, pay rises and employment has been frequently on the agenda. It is not custmary to disclose the future agendas of the council, but I have little doubt that that will be on the agenda again. It is a matter which we consider to be of the utmost seriousness. There is a correlation between the two factors. Our unit costs are rising; those of our competitors are not. That is not good news for employment.
Lord Barnett: My Lords, does the answer of the noble Lord the Minister mean that he would prefer those in work not to have it so good?
Lord Young of Graffham: My Lords, I am very grateful to the noble Lord, Lord Barnett, for pointing out that when I was discussing those in work who have "never had it so good" I was drawing attention—as he has drawn attention in this House—to the fact that
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last year those in manufacturing industries had pay rises of about 7.5 per cent. when they needed only rises of 1.2 per cent. in order to maintain their living standard In the longer run this will mean fewer jobs, including jobs in industry. The answer to the noble Lord is therefore, yes.
Lord Bruce-Gardyne: My Lords, in view of our past calamitous experience with incomes policies, is not my noble friend and the Government entirely right to insist that the proper means of controlling future inflation is by observing an effective control and discipline over monetary policy?
Lord Young of Graffham: My Lords, we never cease to draw attention to the benefits of this Government's economic and monetary policies which have reduced inflation to 2.8 per cent. and which I hope will see low inflation in the future.
The Lord Bishop of Manchester: My Lords, will the noble Lord the Minister indicate whether there is also concern in Government circles—apart from linking pay and productivity—over the fact that very large sums of money are paid out regularly to certain individuals in this country, sometimes running to more than £200,000 a year, with large percentage increases? Will he agree that this has a very considerable psychological effect in the popular mind and that it makes it difficult to encourage pay restraint among those who are comparatively low paid?
Lord Young of Graffham: My Lords, what is of the utmost importance is that we have a productive industry and a commercial base where wealth creation is rewarded to the common good. What we have seen elsewhere in the world is that any society which endeavours to impose a limit does not grow in wealth. We must become as productive as our competitors We must become as well off as our neighbours in Europe We must look after the less fortunate in our society That is the policy of this Government.
Baroness Seear: My Lords, before he again gives us that answer as to the reason inflation has fallen, will the Secretary of State do a calculation as to how much the fall in inflation is due to the fall in oil and commodity prices, and how much it is due to monetary policies?
Lord Young of Graffham: My Lords, I would remind the noble Baroness that inflation had fallen and was kept down before the oil prices fell in the way they did in the last few months Of course we have had a boost from oil prices falling But there are those who wanted to follow an alternative economic policy and had that been done we may well have found that the reduction in inflation would not have occurred.
Baroness Macleod of Borve: My Lords, I wonder whether in future my noble friend the Minister will, for the benefit of all of us throughout the country issue the unemployment figures and the employment figures at the same time side by side?
Lord Young of Graffham: My Lords, I am very grateful to my noble friend, but I have to point out that

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I have been doing that all the months of this year. It just so happens that those in the media point out only the bad news and rarely point out anything that is of great interest. The fact that unemployment remains the same, goes up, or whatever, is always reported. The fact that employment is growing, and growing steadily, does not seem to attract quite the same attention.
Lord Beswick: My Lords, does not the noble Lord the Minister think that he should give a little more attention to what was said by the right reverend Prelate? Has the noble Lord the Minister seen in The Times this morning that £ 16,000 a year is offered to someone just leaving university going into the money market? When one has bright young things in their early thirties earning £50,000 to £60,000 a year just for wheeling and dealing in money and mergers, is there not something innately wrong in our social economy?
Lord Young of Graffham: My Lords, I must confess that I think there is something innately wrong in a view which looks to those who create the wealth of this country and says that they should not be rewarded.
Viscount St. Davids: My Lords, have we not yet learned the lesson of the Gadarene swine that if we are so bedevilled and insane as to try to keep level with each other, we shall all end up by running over the cliff?
Lord Molloy: My Lords, will the noble Lord agree that the last absurd proposal does not apply to the majority of people in British industry or in our services? What is required was mentioned in the point made by the right reverend Prelate. In addition to having a top salaries review board, can we have a very low wages review board so as to strike a balance between those who are drastically underpaid—such as nurses, who are slowly catching up—and those who have had excessive pay increases which amounted to more than a state registered nurse's year's salary?
Lord Young of Graffham: My Lords, I should point out that year after year wage increases—for the last four years or so—have on average gone up considerably above the rate of inflation in every single year. There have been real pay increases, which are to be welcomed; there have been considerable adjustments in the pay of the nurses. However, if we were to look only at those who lead our industries and only at those who lead our commerce, and if we were to make it so unattractive for them to do their jobs, we would find that unemployment and wealth creation would suffer. Nothing which the noble Lords opposite can say will alter that basic fact of human nature.
Lord McCarthy: My Lords, will the Minister please believe the horror that is felt on this side of the House whenever he tells us that the poor cannot create wealth, that only the rich create wealth; that we need them to create wealth so much that they can receive pay rises which are two, three or four times the rate of increase in the cost of living, but the poor must receive rises of only half the increase in the cost of living because the noble Lord believes that the poor cannot
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create wealth and only the rich can? The point is that the poor can create wealth, but they cannot keep it.
Lord Young of Graffham: My Lords, that is nothing to the horror I feel when I hear the noble Lord, Lord McCarthy put in my mouth words about the poor which I have never said. I am endeavouring to bring home the basic facts of human nature—that if you ensure that those with enterprise do not lead our great industries, we shall not have great industries. The noble Lord should look back on the 1950s, the 1960s and the 1970s for proof positive of that premise, and look forward to the growth of our industries today and realise that if we reward the few for their great endeavour and work, we shall benefit the many. There is no getting away from that principle.
Lord Hatch of Lusby: My Lords, is the Minister aware that whenever he speaks of unit costs he seems to imply that unit costs are composed entirely of wages? Is he not aware that management and investment are at least of equal importance in unit costs? Is the noble Lord further aware that over the past six months, while the unit costs in this country have been rising, in comparable terms those in West Germany have been falling, although the wage levels in Germany are much higher than they are in this country?
Lord Young of Graffham: My Lords, I have always referred to unit labour costs being concerned only with the labour content of the cost of goods. I have at all times pointed out that our unit labour costs must be competitive with those of our neighbours, and that our unit costs themselves must be competitive with those of our neighbours, and they have not been recently.

Business of the House
3.12 p.m.
The Lord President of the Council (Viscount Whitelaw): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That Standing Order No. 38 (Arrangement of the Order Paper) be suspended until the Summer Recess so far as is necessary to give Her Majesty's Government power to arrange the order of business; and that Standing Order No. 44 (No two stages of a Bill to be taken on one day) be suspended for the same period.—(Viscount Whitelaw.)
Lord Cledwyn of Penrhos: My Lords, I believe that it would be in the interests of the House if the noble Viscount can tell us when we are likely to rise for the Summer Recess, and when we are likely to return in order to deal with the remaining Government business. It has been reported that we might return at the start of the Labour Party Conference and sit throughout the Conservative Party Conference. This would obviously create problems for some noble Lords, and we should like to know whether there is any truth in that report.
Noble Lords in all parts of the House will agree that we are experiencing a very heavy Session—one of the heaviest on record. In our view, this is due primarily to the Government's failure to calculate the

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consequences of overloading the Government's legislative programme.
Noble Lords: Hear, Hear!
Lord Cledwyn of Penrhos: My Lords, let me give some examples. First, our sitting time in this House has increased substantially. We thought that the last Session, 1984–85, was a very taxing one; and the House may recall that exactly 12 months ago I spoke pointing this out and asking the noble Viscount whether he would bear this in mind for the next Session. The noble Viscount then said that he sympathised with my argument—and I know that he did—and that he would do his best, although he could not guarantee anything. However, in fact this Session has proved much worse.
Let me quote figures to support that contention. Up to the week ending 6th July 1985, this House had sat for 830 hours 35 minutes, with 43 sittings after 10 p.m. This year, up to 5th July—that is to say last Friday—with the same number of sitting days (123) this House has sat 904 hours 21 minutes, and there have been 72 sittings after 10 p.m. That is a considerable increase on last year. Bearing in mind that this is a voluntary Chamber of unpaid Members of a relatively high average age, we must recognise that this places a considerable strain both on noble Lords and on the staff of the House.
In passing, I should like to pay the warmest possible tribute to the staff of this House for their dedication and courtesy under the stress of long hours. The noble Viscount and the House will agree that it is our duty as a revising Chamber—and above all else that is what we are—to ensure that Bills coming to us are properly scrutinised and improved. If they are also contentious, it must be expected that attempts will be made to amend them.
Furthermore, in this Session we have had the experience of "legislation as you go", with huge batches of Government amendments being tabled at very short notice. For example again, in the Education Bill, there were 77 government amendments; in the Airports Bill, there were 107 government amendments; during the Committee stage of the Building Societies Bill there are 191 government amendments, or 72 per cent. of the total; in the Social Security Bill, in Committee, there were 114 government amendments, or 46 per cent. of the total, and I understand that there are also difficulties with the Wages Bill.
That shows that Government Bills have not been properly thought out, and it places a great burden on this House and specifically on noble Lords who are dealing with the legislation both on the Front and on the Back Benches.
There is also the question of the Bills themselves, and I have further statistics, although I do not propose to go into this in any great detail. However, the number of public Bills which had three or more days in a Committee of the Whole House has doubled in the past 12 months. There were four, or 14 per cent., in 1985; and there have been eight, or 24 per cent., so far this year. As a consequence of what I have said, this
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House will therefore sit later than the other place and return far earlier than the other place.
I believe that this House does its work well, and that noble Lords render a vital public service. Nor do noble Lords in any part of this House readily complain about the way in which they are treated. However, I feel that I have a duty to lodge a serious protest and to ask the noble Viscount the Leader of the House to convey to his colleagues the need to consider this problem very carefully, and specifically to consider deferring at least one Bill until the next Session. This is the least that the Government can do in these circumstances.
Noble Lords: Hear, hear!
Lord Harris of Greenwich: My Lords—
Viscount Whitelaw: My Lords, I shall of course, defer to the noble Lord but I think I would have been in order to reply first. However, I defer to the noble Lord.
Lord Harris of Greenwich: My Lords, I would be very glad to give way if the noble Viscount would like to speak. As I understand it, we are discussing a Motion, and the normal procedure is that the noble Viscount, having moved the Motion, will presumably respond to it at the end of the debate. On behalf of my noble friends, I should like to say that we wish to associate ourselves with the remarks made by the noble Lord, Lord Cledwyn.
Before I come to the substance of the matters raised by the noble Lord, Lord Cledwyn, perhaps I may start by asking the noble Viscount a question. In the Motion before us, there is a reference to Standing Order No. 44, which provides that no two stages of a Bill are to be taken on one day. This is the normal Motion at this time of the Session and we make no complaint about that. However, specifically, will all parties in the House be consulted before this Standing Order is waived?
There is a particular reason why I raise this question—and I wish now to return to the events of last Friday afternoon. There was then a short Statement made in the House following pressure from a number of noble Lords opposite, which I can wholly understand and with which I sympathise. The point made to the Government on that occasion—and of course the noble Viscount was in the House at the time—was that many Members were worried that if further time was not made available very quickly for the Building Societies Bill, there would be a danger that it would not receive the Royal Assent before we rose for the Summer Recess.
As a result of that pressure, a last minute change was made in this week's business. The timetable of the Public Order Bill—which is a matter touching the civil liberties of many hundreds of thousands of British citizens—was at the last minute changed. It was taken out of Thursday's business and put into next week's. There was no consultation with my noble friends Lord Tordoff and Lord Kilmarnock. I do not believe that that is in accord with the normal courtesies of the House, and I hope that on matters of this sort there will in fact be the proper processes of consultation.

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Having said that, I should like to come to the important points raised by the noble Lord, Lord Cledwyn. We are now well into the month of July and yet several important Government Bills have not even had a Second Reading in this House. There is the National Health Service (Amendment) Bill, which raises a number of important issues, as we all know. There is the Financial Services Bill, on which this House is almost uniquely qualified to express opinions.
There is the European Communities (Amendment) Bill, which has not even arrived in this House from the House of Commons, and yet it has in fact had a guillotine applied to it there. I can say, as a member of a party which is in favour of the Bill and which will be voting in favour of it, that we nevertheless believe that it should be properly debated in this House with an adequate allocation of time. What some of us find difficult to understand is how Ministers ever believed that the parliamentary timetable on which they embarked at the beginning of this Session of Parliament had the remotest chance of being success-fully applied.
As the noble Lord, Lord Cledwyn, said, we have heard that this House will be sitting well after the House of Commons has risen, and will be returning well before the House of Commons returns. I see from the morning newspapers a calculation, which I suspect is true, that this House is now sitting longer than any other democratic legislature in the Western world.
Every year since I have been a Member there have been complaints raised by Members in all parts of the House about the weight of government business. I acknowledge at the outset that there is nothing unique about complaints of this sort, save that on this occasion 1 think that the amount of parliamentary business that has been pushed through this House has been an intolerable burden for what is a House of part-time Members.
Many Members of the House will recall previous occasions when there have been complaints made from this side of the House. I well remember the noble Lord, Lord Carrington, when Leader of the Opposition, complaining bitterly in the month of July about the way in which the House of Lords was being treated. And yet at that time the amount of parliamentary business was infinitely smaller than the amount of parliamentary business which has confronted us this year. Some of the statistics read to us a few moments ago demonstrated that clearly. The number of days on which this House has been sitting has been growing year after year.
On that occasion the noble Lord, Lord Carrington, asked the Government to give some form of undertaking that in the following Session they would reduce the amount of government business which was initiated in both Houses of Parliament. With great respect to the noble Viscount, I hope he is going to be able to give some sort of undertaking as to what he is prepared to do next Session. First, there is too much legislation; secondly, too little of it is initiated in the House of Lords. That is why every July we have this problem.
The noble Viscount knows perfectly well why that is so. It is so because a substantial number of Ministers
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in charge of departments sit in the House of Commons and wish to make the major Second Reading speeches themselves, and that is why every year the House of Lords finds itself in this situation. I hope that as a result of what has been said today the noble Viscount will be able to give us some sort of undertaking about how he intends to proceed with next year's business. I hope he will also give some indication of what he is going to do about this year's business as well. I very much hope, therefore, that he will be able to answer these specific questions.
If the noble Viscount relies upon a certain lack of progress so far as the Gas Bill is concerned—and I suspect that that may just conceivably form part of his speech—may I say to him that on one occasion (namely, last night) the House was counted out because there were not enough government supporters in the House prepared to vote in the Lobbies. The same thing almost occurred on a previous occasion. Then members of the three opposition parties voted and prevented the House being counted out. Therefore, I hope that the noble Viscount will not rely on the Gas Bill as an explanation of why the Government find themselves in this position.
May I say lastly to the noble Viscount that I hope he will once again examine the proposal made by my noble friend Lord Diamond that we should look into the possibility of having Standing Committees of this House to look at some government Bills? I do not say all Bills, but at least let us try it with some. It is at least an avenue which would provide some hope that we are not going to get the same situation arising year after year, whatever the political complexion of the Government may be.
Viscount Whitelaw: My Lords, I shall seek to reply to the important remarks made by the noble Lord, Lord Cledwyn, and indeed by the noble Lord, Lord Harris of Greenwich. Before I start perhaps I should immediately apologise to the noble Lord, Lord Harris of Greenwich. As is the case so often in my life. I was wrong and he was right. If it gives him pleasure, I never mind. I have always been perfectly happy to admit when I am wrong. Had I not been, I would not have lived nearly so long as I have, because I have been so wrong so often. On that basis I apologise to the noble Lord. I was wrong. I should have waited to reply to the debate.
With regard to the points raised by the noble Lord, Lord Cledwyn, I should like to start by apologising to the House. I realise very well that the House has been overworked. This is particularly unfortunate for our staff, on whom we have placed a great strain. I should like to join the noble Lord, Lord Cledwyn, in saying at once that we are extremely grateful to them and that we realise that we have put a considerable strain on them, and I fully understand that.
I have to turn to what are the prospects. I cannot give an exact date at the moment, because inevitably much will depend on events here, and, while I may have control over some parts of the situation, there are other parts over which I do not have much control. For example, it very much depends on the results of Divisions on various amendments that may be brought forward. I may like to think that I have

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control, but sometimes it seems that that control is rather lacking.
When the Government suffer defeats of various sorts that may change the timing of the programme. Therefore, I cannot give any detailed position. I very much hope that the defeats will not come, but noble Lords like the noble Lord, Lord Cledwyn, very much hope that they will.
On the other hand, I shall give the best indication that I can. I very much hope that the House will not have to sit into the first week of August. Secondly, yes, the House will certainly sit during the period of the Conservative Party conference. Whether it will sit during part of the Labour Party conference I cannot yet say, but as to the Conservative Party conference, it will have to sit during that period. Perhaps that puts as much inconvenience on me as on anybody else, but if I am the architect of the trouble, I have to bear it, and that is what will probably happen. That is the best indication that I can give.
Now, my Lords, why has this situation arisen? Yes, I think that there is too much legislation. I think the difficulty that has arisen in Parliament with governments of all parties in recent years is that a programme is always added to, usually by unforeseen Bills and unforeseen circumstances that come up during the year and that no one foresaw at the start. It may be argued that they should have foreseen them at the start, but frequently, with all governments of all parties—I have a very long memory because, after all, I was Chief Whip in another place in 1964—I remember well all those things happening in exactly the same way. It is one of the problems that upset the whole parliamentary business.
But that is not the whole story. I accept at once that this House is doing its job as a revising Chamber. Moving right away from my party position and my position as Leader of your Lordships' House, which I greatly value, I realise that that is something which this House should do and does do; and it is extremely important in the interest of the nation that it does so. It is true that when Bills are guillotined in another place they come here frequently not fully discussed. That means that there has to be further discussion in this House. That, again, puts a further strain on this House which has to be accepted. I can remonstrate as much as I like with my colleagues in another place on this matter, but that is a fact of life which has to be faced.
We then turn to the question of the very large number of government amendments which the noble Lord has mentioned. In some cases I should be the first to agree with him. In the case of the Building Societies Bill, a great many of the amendments were put down, I understand, as a result of agreement between both parties in another place and indeed between both parties and the Building Societies Association itself. A great many amendments were put down and I believe they have made the Bill something that most people concerned, especially the building societies themselves, are anxious to get through in its present state. That accounts for a great many of those amendments.
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In some other cases, I have to accept what the noble Lord says. I also have to say that there is no doubt that your Lordships take longer to discuss many of the Bills. I am in a position to appreciate that. I shall explain to the noble Lord, Lord Harris of Greenwich, in a moment why I do not have the slightest intention of arguing about what happened with the Gas Bill last night, for the very best of all possible reasons: that I thought somebody might provoke me to do so and I was not going to. Secondly, it so happened that I was representing the Government in the Isle of Man at the Tynwald ceremony. I am sure the House will be very pleased to know that I stayed up very late and got up very early indeed in the morning to fly away from there; so I was up very nearly as long as everyone else in the House.
However, as I was not here I think it would be quite wrong for me to refer to that. On some occasions when I may be seen sitting here quietly, as I am not going to speak I have the opportunity to observe how long it sometimes takes to get through some of the amendments. I have noticed in my time in your Lordships' House that it has begun to take longer and longer and longer.
Noble Lords: Hear, hear!
Viscount Whitelaw: My Lords, there may be very good reasons why it has to take longer and longer. Sometimes I think they are good. Sometimes—just sometimes—I am quite clear that some of the arguments have been pursued for rather longer than perhaps was required on the occasion. I hope I shall not be thought to be unreasonably critical, but I think there are occasions when we are taking longer. That is in our own hands because we have to discipline ourselves. If we do take longer, we take longer, and if it is necessary, very well; but I hope all of us will examine whether always it is necessary. The same goes for the Government as goes for those people moving the amendments. Both have tended to get longer and I think we have to look at both.
The noble Lord, Lord Harris of Greenwich, raised the question of the many important Bills that have not yet come here. I agree entirely with what he says about the European Communities Bill, which is an important Bill. It is not one which is likely to occupy—perhaps this is an unwise prediction—your Lordships as much as some others. Nevertheless, it is arriving late. The Financial Services Bill is very important to us; I entirely accept that. I hope very much that we can proceed as reasonably quickly as possible with the Bills that we have.
I have given the arguments about the timing that we have to face. As to the question of agreement on business, I understand from my noble friend the Chief Whip that discussions were had through the usual channels about the Building Societies Bill. It was agreed with the Official Opposition, and the other Opposition Whips, as is the practice, were informed. I believe that is so. If anything went wrong, I shall make sure that it does not happen in the future. That is what I understand is the position and what I believe is normal, as I understand it—that these matters are discussed.

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I understood that it was greatly in the interests of the House that this change should be made, as there are many people in the building society movement outside this House who want the Bill before the Summer Recess. It was to meet that very widespread view that the Government made that decision.
We shall do our best to make sure that the future Session does not run into the same problems. Indeed, I have to make the fairly obvious comment that it may have been noticed that a Bill which might have occupied a very large amount of your Lordships' time in the next Session of Parliament (had it ever come into the next Session of Parliament) is now not coming into the next Session of Parliament. It may not be a complete coincidence that that has happened because, after all, there are those who look at these matters.
I was surprised that everybody got so excited, because I was brought up on the principle that the Queen's Speech announced the debates for the next Session of Parliament, and therefore until we have heard the Queen's Speech nobody is in a position to state categorically whether or not a Bill will be in it. However, it seems to me that quite a lot of fuss was made, because this Bill will now not be in the Queen's Speech for next year. However, there it is; so perhaps one is seen responding to what is, I believe, a very real point that has been made by the noble Lord. I hope I have sought to answer what was said. I hope that we can stick to the dates, and I would say that I do not think it is unreasonable that some part of the time we take is in our own hands and sometimes we could be a little more careful of it than we are.
Lord Campbell of Croy: My Lords, a very brief word—
Lord Broxbourne: My Lords, before my noble friend sits down—
Noble Lords: Order!
Lord Campbell of Croy: My Lords, may I give my noble friend a very brief reminder and to the noble Lord, Lord Cledwyn—
Lord Broxbourne: May I, my Lords—
Noble Lords: Order—Lord Campbell!
Lord Campbell of Croy: My Lords, I hope my noble friend will allow me to refer helpfully to what the noble Lord, Lord Cledwyn, said from the point of view of having myself been on the Opposition Front Bench in the mid-1970s.
I should like to suggest, I hope helpfully, that another course could also be borne in mind; a variation concerning recesses, which was adopted by the Labour Government in agreement with others at that time. I did not know this subject was coming up so I do not have the exact dates, but in the mid-1970s the same problems arose and this House had to meet for several weeks after the Recess before the other place. A variation was adopted more than once if I remember it whereby this House returned after the Recess in September for about three weeks. That was done in order to avoid clashing with the main party
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conferences. Whether that alternative is more acceptable, I do not know, but I should like to point out that it was adopted in similar situations then.
In relation to government amendments, again I do not have the figures because I was not prepared for the comments of the noble Lord, Lord Cledwyn, but I remember in those days that we had huge quantities of government amendments. To give examples we had amendments on the industry Bill, the energy Bill, the petroleum Bill and the devolution Bill. We were glad to see those amendments because they met many of the points which we the Opposition, in another place, had been making.
Lord Parry: My Lords, before the noble Viscount the Leader of the House sits down, may I raise the matter of Standing Order No. 44, (which is that no two stages of a Bill be taken on one day) and point put the dangers of what recently happened when the Protection of Military Remains Bill was taken through both stages in another place on one Friday afternoon and then through this House entirely during supper breaks?
Lord Broxbourne: My Lords, if my noble friend will allow me to intervene for a very brief moment, can he address himself to the last very important point made in the interesting submissions of the noble Lord, Lord Harris of Greenwich, in regard to the possible use of Standing Committees? I make this point with considerable diffidence as a relative newcomer to this House, but I sat for 11 Parliaments in another place and Standing Committee procedure was of course an integral part of our procedure and it would not have occurred to any Member of that House to do without it. Indeed, if I may be allowed to say so, looking back to my own ministerial experience, two statutes come back to my mind—the Mental Health Act and the Copyright Act—the latter of which my noble friend may conceivably remember because he was with us in the Board of Trade in those days before he went to the lusher pastures of the Whips' Office.
Neither of those statutes which have stood the test of time would, I think, have got on to the statute book had they not been able to have Standing Committee procedure. Can this matter therefore be looked at in the relative calm of the Summer Recess to see whether that might not bring some help to the progress of legislation and some respite and relief to your harassed Lordships?
Earl Ferrers: My Lords, I wonder whether I may be permitted one thought. I think that everyone has a great deal of sympathy with the noble Lord, Lord Harris of Greenwich, and the noble Lord the Leader of the Opposition so far as the congestion of the timetable is concerned. But as the noble Lord, Lord Harris, has said, there is nothing new in that; it has happened constantly year after year whichever party happened to be in power. However, there is one significant difference, and that is that in the past 10 years the number of people who are Members of your Lordships' House has increased very considerably; and with that increase goes seemingly an obligation to participate, which is wholly right.
But I think that it rests with all of us to restrict our observations as much as possible, and not only that

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but to ensure that the rules of procedure are more appropriately kept and that the same or similar items are not discussed at Committee stage and Report stage and Third Reading. That really prolongs matters enormously. I think that if noble Lords were to consider keeping contributions as short as possible and adhering more closely to standing orders, we would at least make some progress in that direction.
The Earl of Halsbury: My Lords, I hope that the noble Viscount will bear in mind that, in any question of Standing Committees, a very great and intrinsic problem arises in your Lordhips' House which is not present in the House of Commons; namely, the substantial body of independents, colloquially known as Cross-Benchers, who are not a political party and cannot therefore be represented collectively on a Standing Committee.
Lord Kilmarnock: My Lords, on the question of last-minute changes of business, I wonder whether perhaps we could reach an understanding that all the Opposition parties are consulted before last-minute changes of business, because they of course can be equally inconvenienced with the Official Opposition.
Lord Hatch of Lusby: My Lords, if the noble Viscount is going to reply to this debate, may I ask him to elucidate one issue which he raised in his reply to my noble friend Lord Cledwyn? When he says that the use of the guillotine in another place requires this House to spend much more time on a Bill, he is quite right. But is it not an anomaly that the other place is going into recess at least a week before this House and that this House is coming back from recess at least two weeks before the other place?
Will he take back to his colleagues in the Cabinet the suggestion that they should not be so cavalier in the future with the use of the guillotine in curtailing debate in the other place?
Viscount Whitelaw: My Lords, by leave of the House, I understand that perhaps I may seek to reply to some of the further points raised by noble Lords. My noble friend Lord Campbell of Croy has made some perfectly correct points about the problems in previous years, and I am grateful to him for that. I must seek to shelter under those points to learn from the past; because simply to go on repeating the mistakes of the past and in fact in some cases reinforcing them, is not a good policy. I accept that. He is perfectly right in what he says.
My noble friend Lord Broxbourne raised the question of Standing Committees. He was replied to by the noble Earl, Lord Halsbury, with one of the powerful reasons why I understand this House has always objected to the idea of Standing Committees in the past. I understand that there is another reason; that is, that there are some noble Lords who for one reason or another cannot give enough time to sit on a Standing Committee who nevertheless have very considerable expertise on a particular Bill which may be coming up at any time. Those noble Lords would be lost to the discussions on that Bill, particularly in Committee. Of course, they could come in on Report
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but they would be lost in Committee and would not be able to give their expertise to the Committee at that point. No doubt these are very important points which many Members of your Lordships' House are far more qualified than I am to answer.
But of course they can be looked at. They would have to be looked at by the Procedure Committee, and I suspect that the Procedure Committee would be more likely to look at them in any month, if I may say so to my noble friend Lord Broxbourne, other than August. Nevertheless, they certainly can be looked at, but those are some of the reasons why it is difficult.
My noble friend Lord Ferrers raised the point that there were more Peers and that they thought that they had a contribution to make; and that no doubt is correct and that is perhaps why we sometimes take longer. I had realised this fact about more Peers but I thought that it would be rather unwise for me, of all people, to raise that because I am one of them. It seemed to me unwise actually to chastise oneself if one could avoid it. But it is true and it is a point that is very real.
The noble Lord, Lord Kilmarnock, raised the point about consultation on change of business. I understand that that is done whenever possible. If there has been a mistake, that is something which I know my noble friend the Chief Whip will want to look into. The way in which the usual channels work is for him and not for me, but he has heard what was said.
The noble Lord, Lord Hatch of Lusby, I think in the end seeks to suggest to me that I should start telling my colleagues how they should run their affairs in another place. I spent a great deal of my life trying to run affairs in the other place. Since they, or others, decided that it was time that I ceased to have any part in that, I have been scrupulously careful to confine my attentions to those matters over which I have some control and not to try to tell other people what they ought to do. I have learnt the hard way in life that it is very unwise to tell other people how to manage their affairs. First, try to get on to manage those under your own control.
I hope that I have been sufficiently chastised this afternoon to realise that that is my task for your Lordships and that that is the task to which I shall address myself. I hope that your Lordships will pass this Motion.
On Question, Motion agreed to.

Wages Bill
3.48 p.m.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, I beg to move that this Bill be now considered on Report. In rising to move that this Report be now received, may I draw your Lordships' attention to the fact that unfortunately the Marshalled List refers to the amendments to be moved in Committee and we are of course at Report stage. I beg to move.
On Question, Motion agreed to: Report received.
Clause 1 [General restrictions on deductions made, or payments received, by employers]:
Lord Rochester Lord Rochester moved Amendment No. 1:
Page 2, line 3, at end insert—
("(2A) The Secretary of State shall, after consultation with the Advisory, Conciliation and Arbitration Service, and prior to the date on which this section comes into force, issue a code of practice containing such guidance as he thinks fit, with the aim of ensuring that any deductions from wages are fair and reasonable and that contractual terms concerning deductions accord with good practice").
The noble Lord said: My Lords, after the discussion which has just taken place I shall endeavour to be as brief as possible in introducing this amendment and in speaking to Amendments Nos. 42 and 43, which are consequential upon it. I should first briefly remind the House of the background to these amendments. In Committee, the noble Lord, Lord Wedderburn of Charlton, moved an amendment which was aimed to ensure that deductions from wages were reasonable in amount. At the same time, I spoke to an amendment which set about the task in a rather different way. My amendment stipulated that deductions should accord with a code of practice issued by the Secretary of State after consultation with ACAS and having as its objective that deductions from wages should be fair and reasonable. In the light of the general discussion which then took place the noble Lord, Lord Wedderburn, was kind enough to withdraw his amendment in favour of my own. In response to my amendment the noble Lord, Lord Trefgarne, said that the Secretary of State had considered whether it would be appropriate for him to issue guidance on good practice in drawing up contractual terms concerning deductions, and on balance he though it would not be. What I hope to do this afternoon is to persuade your Lordships that that balance should be shifted.
The Minister assured the Committee that the Department of Employment would issue guidance on the law before Part I of the Bill came into operation. He further said that it was possible that independent organisations such as ACAS and the Institute of Personnel Management might wish to produce such guidance and that ACAS were aware of the point, but that ACAS was an independent body which was not the instrument of the Department of Employment; it was therefore not appropriate for Ministers to seek to direct ACAS in the matter. However, the noble Lord added that he would be happy to look again at the possibility that the Secretary of State might prepare a code of practice of his own.
I did not think that that went far enough in responding to the views which were expressed at Committee stage and in relation to the principle which was involved. I felt that it should be a requirement that deductions from wages be fair and reasonable, and I felt that should be written into the Bill itself. I therefore pressed my amendment to a Division and the amendment was defeated. I regret that the Committee took that decision but I must of course accept it.
The amendment now before your Lordships is accordingly much more modest. It seeks to provide that the Secretary of State, after consultation with ACAS and prior to the date when the first section of the Bill comes into force, will issue a code of practice containing guidance aimed at ensuring that deductions
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from wages are fair and reasonable and that contractual terms concerning deductions accord with good practice. It therefore gives the Minister the opportunity to tell us what has emerged from his re-examination of this suggestion that the Secretary of State should himself publish a code of practice on this matter.
I hope and believe that my amendment speaks largely for itself and all I therefore need do is to endeavour to anticipate any possible criticism of it. It may be claimed that a code of practice would be superfluous because it could not override the contract of employment and it would have no legal effect. However, as I said on 15th January in the debate which was initiated by the noble Lord, Lord Campbell of Alloway, in my view two great merits of seeking to extend the use of codes of practice in the industrial relations field are these.
First, before they are introduced there must, of necessity, be consultation with interested parties and a recognition of the need to obtain the widest possible measure of agreement concerning the terms of the particular code that is contemplated. In this matter of deductions from wages, a welcome measure of consensus could be achieved in this way in what would otherwise remain a contentious area. Secondly, our codes of practice in the industrial relations field could operate over a period which affords time for their provisions to be tested in such a way as to establish whether in practice they are sufficiently acceptable to employers on the one hand and to the general body of employees on the other to warrant their eventual translation into legislation.
A further possible criticism of this amendment is that since the Government have already said that the Department of Employment will be issuing guidance before Part I of the Bill comes into force, and that at least two independent bodies might wish to prepare a code of practice to facilitate the implementation of this section of the Bill, there is no need for a code to be introduced by the Secretary of State. I disagree. In my view it is up to the Government, after due consultation, to give the lead by themselves taking responsibility for affirming in this first clause of the Bill that they will issue a code of practice aimed at ensuring that arrangements for deductions from wages are fair and reasonable and that contractual terms accord with good practice. For those reasons I very much hope that the noble Lord the Minister will feel able to accept this amendment on behalf of the Government. I beg to move.
Lord Denning: My Lords, I should like to support this amendment. On Second Reading and at Committee stage I supported the general principle that the Truck Acts were out of date and needed reform. In this particular respect the new section does not go far enough. In the Truck Act of 1896 there was a provision that an employer could make deductions from wages so long as there was public notice of those deductions (in effect, a contract with an employee) and also that they were fair and reasonable in all the circumstances of the case. This Act omits the require-ment that deductions should be fair and reasonable in all the circumstances of the case.

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As I read the first section, an employer can produce a printed form of his terms of contract, and he need say nothing about whether they are fair and reasonable. The employer sets out his own terms, drafted by his own lawyers or such people, and the employee has to agree to them. Time after time, in the course of my career as a judge, I have objected to these printed forms of contract which are placed before an employee to sign, or simply to read through, and to be bound by. The employee does not necessarily read them, he does not necessarily understand them, and he may sign them or not; but in the old law they were held to be binding on him. Certainly in the 19th Century they were binding on him, although he acquiesced no real consent and did not understand the terms. It was the employer who stated the terms; they were drafted by him and the employee had no option but to agree or to forgo his employment. That is why, throughout my career, I have sought to impress, both upon the courts and upon this House, that the terms of a contract should be fair and reasonable. So what are we to do? What is suggested in this amendment is about the most modest proposal you can think of; not to insert the words "fair and reasonable", as in the Truck Acts, but to say, "Please, let the Secretary of State, having taken due advice from ACAS, issue a code giving a draft contract or draft terms so as to help employers on the one hand and men on the other to see what are fair and reasonable terms."
It can be said that all that will have no legal effect; nor will it. These codes do not have legal effect, but on the other hand they will have a great persuasive effect on employers and men. I have often known cases where in decisions of the Privy Council we have said, "That is of persuasive effect; it is not binding." This code will be only of persuasive effect, but how valuable it will be to employers and men, unions and so on, because they will have something to go by and something to show as to how to draw up a contract to deal with all sorts of different cases. You can have all sorts of specimens, and this really will give persuasive guidance. It may have no effect in law, but it could have great effect when a man takes his case before the tribunal. If it turns out to be an unfair and unreason-able contract, the chairman will say, "I have got no option; I must enforce it, but this contract is most unfair and unreasonable." If the tribunal says that, it will certainly have an impact on the employer; whereas if this code comes into effect, the chairman can say, "There it is; I have adopted the code and the Secretary of State has approved it after consultation with ACAS." No one can then criticise him for saying it is not fair and reasonable. No chairman of a tribunal can say that. Not only is it of persuasive effect; it is also of guiding effect. It does no harm at all to anyone; it does not oppress the employer or the man in any way. It has a persuasive, guiding effect at the instance of the Secretary of State himself. On that simple ground I would invite your Lordships to accept this amendment.
4 p.m.
Lord Wedderburn of Charlton: My Lords, we support this amendment as a final attempt to get the agreement of the Government to recognise that
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something should be said about arbitrary deductions from wages, especially for those workers who are ill-organised in trade unions or isolated and vulnerable at their places of work.
There are three short points which have been clearly established during your Lordships' debates on this matter so far. First, there is a very widespread problem, even outside retail trades, in regard to arbitrary deductions from wages. The noble Lord, Lord Coleraine, said during the Committee stage on 24th June 1986, at col. 171 of the Official Report, that,
"the problem of deductions, although it may have a different shape now, is just as much with us as it was at the turn of the century".
I am happy to adopt that summary of the real position, which I believe the Government have begun to acknowledge as our debates have gone on. During that period there was the protection of the rule of reasonableness in the Truck Acts of 1896, and so however badly it operated at least the law was there.
Secondly, I believe it to be established that the element of reasonableness has not in this area of the law, as applied, brought great uncertainty. Curiously, there have been few cases in the courts concerning that matter, as was correctly predicted in the debates of 1895 and 1896. Those cases that there are illustrate the appalling character of the practices which go on. I refer again—and no doubt we shall come back to this later—to the position disclosed in the case of Barratt v. Sealand Petroleum this year in the law reports. Your Lordships will recall that this case concerned an 18-year old on a forecourt. He was taken on after one afternoon's training, and found that sums were deducted quite arbitrarily from his wages, as the court found, in a very one-sided manner and in ways he could not check. In some weeks it amounted to his whole wage of some £55.
The third point which is established is, it seems to me, on the balance of the arguments so far that something should be done. We on these Benches acknowledge that we have not persuaded your Lordships or the Government that there should continue to be a rule in the law of reasonableness. Very well; but should there not be at least an expression of public policy in a code, giving guidance on the ways in which deductions under contractual clauses should or might not be applied?
It seems to me quite apparent that it must be accepted that contract is no defence for most of the workers of whom we are speaking. I quote the words of a citizen's advice bureau in a submission to the Government on this issue of whether the contract is enough for these individual workers:
"From our bureau's experience, individuals desperate for employment are only too eager to sign the contract of employment and only later when the deductions affect their living standards do they fully realise the consequences".
Contract is no defence. It is what the Government pin their colours to. But the Government have pinned their colours in the White Paper on building Businesses, not Barriers, in paragraph 7.2:
"To the extent that legislation gives statutory support to the current practice of good employers it will command a broad degree of assent".
That was their principle for when they would and would not support employment protection legislation. This is a weak form, but at least it is a form, of trying

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to extend the good current practice of good employers. It may not deter all bad employers merely to have a code of practice. That would be our self-criticism of the amendment. But it cannot be denied that where an employer is in doubt and says, "How shall I manage this?"—and that will happen in a far greater percentage of cases than the bad employers per se—to have a document referring to good current practice must surely be of benefit to both sides in that employment relationship.
I cannot believe that the noble Lord, Lord Trefgarne, is going to tell us that this code of practice will deter the recruitment of new employees. No doubt we shall be dealing with that point later this afternoon, but surely we shall not hear that argument used on this amendment. Surely it cannot be central to the Government's strategy that at 18 years of age Anthony Barratt should have his whole wage of £55 arbitrarily deducted in one week and another. That does not seem to be any reason why the Government should not support the current practice of good employers, as they say in their own White Paper they will do. They may say, "Yes, we have taken away the rule of reasonableness because we think it is too rigid to have in the law". There it is. We would have it; they will not.
But can they not go on to say, "When you are considering deductions from wages, upon which a household (usually a low-paid household) depends, at least take account of these matters on how you do it. And, in regard to the final pay packet, where we have given you the right to take the lot, if you put in a suitable standard clause, for goodness sake have a think about just when you take the whole wage that is for that family"? I am sure the Government, in their hearts, would want to say that, and I cannot believe that there is any doctrinal reason which would prevent them accepting this very modest amendment.
Lord Sainsbury: My Lords, I shall be very brief. I strongly support this amendment. We all accept that deductions from wages must be fair and reasonable. To help achieve this aim, a code of practice will, in my opinion, be most useful and valuable as a guide to employers, and particularly to the small employer for whom the Government express such concern; to trade unions acting on behalf of the employee; and to the individual worker, who has started, and who should be able to obtain a copy from his employer or from ACAS. I attach great importance to the fact that this amendment has the blessing of the noble and learned Lord, Lord Denning, with his vast experience of the law and of its interpretation. I also believe that this amendment should promote good industrial practices. So I hope that your Lordships in all parts of the House will support it in the Division Lobby.
Lord Campbell of Alloway: My Lords, would your Lordships allow a word or two in opposition to this amendment which is open to objection on three main grounds, all distinct and all of which go to the substance? First, the code would traduce the accepted role of a code of practice by having a persuasive effect contrary to the provisions of the statute which introduces it. Secondly, it is not within the province of the Secretary of State to issue such a code. Thirdly,
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with respect to the noble and learned Lord, Lord Denning, so far as this is motivated by a desire to correct a bargaining disadvantage—the man with no option, as it is put graphically—that is a matter for general legislation wholly beyond the scope of Part I of this Bill, which is concerned only with deductions. Apart from these objections, the substance of this amendment as spoken to today has already been dealt with, if any of your Lordships care to look back at Hansard, on a Division, and this is a second bite at a rather over-ripe cherry.
There are two limbs in this amendment which could either merge or remain distinct on the facts of any given case as regards deductions. The first is: what is fair and reasonable in all the circumstances?—the old Truck Act concept. The second is: what is good practice in drawing up contractual terms in the future, or perhaps in revising existing terms of contract?
The first limb—fair and reasonable—has the persuasive effect of tending to conflict with Clause 1, while the second limb can only but operate to assist in its implementation. Even if it were possible to perform the task of drawing up a code of practice to produce a fair and reasonable deduction in any particular case, which is much to be doubted, this could well resurrect the conflict with Clause 1 which was discussed at some length at Committee stage.
Apart from the fact that the noble Lord, Lord Rochester, sought to introduce this concept at Committee stage on a different type of code of practice, and now returns to the last with another code of practice in the form of this amendment, the issue involved was put to the vote and lost. One of the reasons why it was lost was that the introduction of a code of practice would have this persuasive effect to infect Clause 1 of the Bill with incertitude—this with retrogressive effect—to qualify not only statutory provisions generally, but the employment contract in particular, and even under paragraph (b) to nullify the worker's written consent.
The noble and learned Lord, Lord Denning, takes the view—which I most respectfully question, if I may—that the code would be admissible before a tribunal as in all other cases and codes. Where it is to be admissible, it is so said and written into the clause which introduces the code. But deferring to the noble and learned Lord's view on this matter, if he is right my case is stronger than I thought it was.
It is wholly unacceptable that any code, whether legally enforceable or not—and this code fights shy of saying in terms that it is not legally enforceable, but the noble Lord, Lord Rochester, has confirmed that it has no legal effect—should invite any form of conflict with the provisions of the statute which introduces it. On any analysis, a fair distinction has to be drawn between an explanatory code on law which is issued by the department; a code of good practice for the further assistance of those concerned with operating these provisions, such as could be drawn up by ACAS or by some other body or person; and a code to ensure that any deduction is fair and reasonable as proposed by this amendment. The quality of the three situations is totally different.
Apart from the question of conflict, to which reference has been made, there is no justification for

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imposing this administrative burden upon the Secretary of State and it is not within his province. It is within the province of consultation between employers and employees on matters of contract, as to what is fair and reasonable in the circumstances of any particular case.
In conclusion, on the question which has been raised about the exploitation of workers at a bargaining disadvantage at times of serious unemployment—the man with no option, who signs on the dotted line—is a very serious matter of great significance which we at the Bar all know has always attracted the attention of the noble and learned Lord, Lord Denning, who, on this subject—and one is indeed grateful—has at least delivered more than one dissenting judgment. It is a serious matter which warrants due investigation. But the noble and learned Lord, Lord Denning, would no doubt concede that the question of deductions is but one aspect of a much wider and more general problem—a problem which, if it deserves attention, merits in all probability primary legislation, or perhaps secondary legislation covering all aspects of the employment contract, and not mere guidance on deductions having no legal effect as proposed by this amendment. If in due course such legislation on investigation is required, so be it; but for those reasons the hope is that my noble friend the Minister will not accept this amendment.
Lord Trefgarne: My Lords, legislation or no, I hope not next Session. But as your Lordships know, we had a very full and interesting debate in Committee on the principle of whether there would be merit in the Secretary of State issuing a code of practice on what might be "reasonable" deductions from wages. Forceful arguments were put on both sides. At the conclusion of the debate we voted on the matter and by a clear majority—I think it was 24—we voted against the view that there was merit in the idea of a code. Normally, one would expect that that would be the end of the matter. I think there is room for more than one view as to whether your Lordships should be asked to consider the matter again.
The noble Lord, Lord Rochester, also referred to the undertaking that I gave that the matter would be looked at again. But of course that was in the context of the noble Lord withdrawing his amendment, which he did not do. I stand relieved from that undertaking the moment the noble Lord seeks to divide the House. I do not think the noble Lord disagrees with that. I recognise that noble Lords are striving to find some compromise that would be an improvement on the proposal that was defeated. One should approach compromises with caution. A "half-way house" may have little merit from either point of view, being neither fish nor fowl. In my opinion, that is the position here. The amendment achieves nothing in legal terms and most certainly does not meet the wishes of those who wish to see a legally enforceable "fair and reasonable" test in the Bill.
Let me develop that argument. What is meant by a code of practice? The proposal your Lordships rejected would have involved the production of a code that would have had legal status in that it could be taken into account in determining certain types of
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complaints concerning deductions from wages. But the so-called "code" proposed in this amendment is quite different. It would have no legal status at all. A worker who referred to the code in proceedings before tribunals or complained that a contractual term breached the code would be told that the code was of no relevance to tribunal proceedings. Surely it is quite misleading to call this document a code of practice. It is no more than informal guidance.
So the question is: is there any merit in the Secretary of State producing such guidance? My noble friend the Secretary of State has already said that he will ensure that his department publishes guidance on the law, if needs be in the languages of ethnic minority groups as well as English. This is the proper role of the Secretary of State. If your Lordships were to pass this amendment, the Secretary of State would be required, in the space of a few months, to produce some informal guidance on good practice in an area where there are considerable differences of view and differences of practice between industries and between individual employers. He would have to choose between, on the one hand, producing a vague and nebulous document to achieve broad acceptance, or, on the other, a more substantial one. In either case they would merely be an expression of his opinion with which people would be entitled to disagree. I think statements by the Secretary of State should be authoritative.
As I said in Committee, in the Government's view, independent bodies such as ACAS or the Institute of Personnel Management would be in a better position to produce this type of document. Let us leave the field free for them. But let us not saddle the Secretary of State with the requirement in the amendment to produce a document that would be of little more value than a scrap of paper.
The noble and learned Lord, Lord Denning, with respect to him, referred to the question of the effect of the code upon, for example, a tribunal. There is no evidence that codes which have no statutory effect have any great persuasive effect in an area such as this where there are wide differences of view and of practice. It is bringing the status of codes with no statutory force into disrepute to produce them in a way that the amendment proposes.
What the amendment proposes is not a code of practice; it is informal guidance. I believe that the amendment is therefore naive and misconceived, and I invite your Lordships to reject it.
Lord McCarthy: My Lords, the noble Lord says that there is no precedent for what we are suggesting. I take it that that is the thrust of what he is saying. Will he not accept it from us that the best precedent—I do not suggest there is an exact precedent—is the notes for guidance on health and safety which, it is true, are issued by the Health and Safety Executive? But they are issued by the Health and Safety Executive on the authority of the Act of Parliament. If the noble Lord says to us that he would like ACAS to issue such a code as this by authority of Act of Parliament, that would just be yet another amendment which perhaps we should bring back at Third Reading.
We have tried every possible combination and this is the most modest combination of which we can

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think. What the noble Lord seems to be saying is that there is no precedent for it. There is a precedent and in respect of that precedent it cannot be said, as the noble Lord recently said, that it influences nobody. It influences a very large number of people. Most people would say that the notes for guidance issued as a result of the Health and Safety at Work etc. Act are invaluable. But of course they are not legally enforce-able. Of course they are not taken into account at industrial tribunals. They are a very close analogy. If the noble Lord thinks about that perhaps he could take a different view of this amendment.
Lord Rochester: My Lords, I am grateful to all the noble Lords who have taken part in this short debate, and for the powerful support given, in particular, by the noble and learned Lord, Lord Denning.
I feel that I must make some response to the criticisms made by the noble Lord, Lord Campbell of Alloway, who said a number of things. He did not seem to feel that there was much value in persuasion. He felt that it was not within the province, as he put it, of the Secretary of State to issue guidance. I hope I have already made it plain that I dissent from both those views, feeling that it is up to the Secretary of State to give a lead by taking responsibility in these matters, and that it would be quite wrong for nothing to appear in this Bill which had to do with the need for deductions from wages being fair and reasonable.
It was claimed both by the noble Lord, Lord Campbell, as I recollect, and also by the Minister that this amendment was so similar to the one moved in Committee that in principle it perhaps should never have been moved, but certainly should not be accepted. I reject that point totally. The amendment moved in Committee would have made it a legal requirement that deductions from wages should be fair and reasonable. There is no such requirement in this amendment and it is therefore quite distinct in kind from another one.
The Minister seemed to make great play with the point that this was not really a code of practice but a code of guidance. Quite frankly, I do not much care whether it is called a code of practice or a code of guidance so long as it exercises influence upon the situation.
The noble Lord claimed also that there would be difficulty within the space of a few months, in the Secretary of State finding it possible to draw up such a code. I do not credit that. It seems to me that ACAS in particular, in whom I have great faith, would find it perfectly possible to draw up such a code within such a time limit. There would be every chance that it could be done in a way that introduced an element of consensus into the situation, having the respect both of employers and of representatives of employees.
Your Lordships will see, therefore, that I am quite unconvinced by the arguments of the noble Lord the Minister. As the noble Lord, Lord Wedderburn said, this is an exceedingly modest provision. If, as clearly seems to be the case, the Government are themselves unwilling, to my disappointment, voluntarily to accept the amendment, then I must ask the House to do its best to persuade the Government to the contrary by voting for the amendment in the Division that I now feel obliged to call.
4.31p.m.
On Question, Whether the said amendment (No 1) shall be agreed to?
Their Lordships divided Contents, 119, Not-Contents, 132.

DIVISION NO. 1

CONTENTS

Addington L.

Leatherland, L.

Airedale, L.

Llewelyn Davies of Hastoe, B.

Alport, L.

Lloyd of Kilgerran, L.

Amherst, E.

Lockwood, B.

Annan, L.

Longford, E.

Ardwick, L.

Lovell-Davis, L.

Attlee, E.

McCarthy, L.

Barnett, L.

McIntosh of Haringey, L.

Birk, B.

Mackie of Benshie, L.

Blease, L.

Mais, L.

Blyth, L.

Manchester,Bp.

Blyton, L.

Milford, L.

Boston of Faversham, L.

Milverton, L.

Bottomley, L.

Mishcon, L.

Briginshaw, L.

Molloy, L.

Brockway, L.

Monkswell, L.

Brooks of Tremorfa, L.

Monson, L.

Bruce of Donington, L.

Morton of Shuna, L.

Buckmaster, V.

Mulley, L.

Caradon, L.

Nicol, B.

Carmichael of Kelvingrove, L.

Northfield, L.

Chandos, V.

Oram, L.

Chitnis, L.

Parry, L.

Cledwyn of Penrhos, L.

Phillips, B.

Crawshaw of Aintree, L.

Pitt of Hampstead, L.

Crowther-Hunt, L.

Ponsonby of Shulbrede, L.

David, B.

[Teller.]

Davies of Penrhys, L.

Prys-Davies, L.

Dean of Beswick, L.

Rathcreedan, L.

Denning, L.

Rhodes, L.

Elwyn-Jones, L.

Ritchie of Dundee, L.

Ennals, L.

Robson of Kiddington, B.

Ewart-Biggs, B.

Rochester, L. [Teller.]

Ezra, L.

Ross of Marnock, L.

Falkender, B.

Sainsbury, L.

Fisher of Rednal, B.

Seear, B.

Foot, L.

Seebohm, L.

Gallacher, L.

Sefton of Garston, L.

Gladwyn, L.

Serota, B.

Glenamara, L.

Shepherd, L.

Graham of Edmonton, L.

Silkin of Dulwich, L.

Grey, E.

Stallard, L.

Grimond, L.

Stewart of Fulham, L.

Hampton, L.

Stoddart of Swindon, L.

Harris of Greenwich, L.

Strabolgi, L.

Hatch of Lusby, L.

Strauss, L.

Hayter, L.

Taylor of Gryfe, L.

Henderson of Brompton, L.

Taylor of Mansfield, L.

Heycock, L.

Tordoff, L.

Hirshfield, L.

Turner of Camden, B.

Houghton of Sowerby, L.

Underhill, L.

Jacques, L.

Wallace of Coslany, L.

Jeger, B.

Wedderburn of Charlton, L.

Jenkins of Putney, L.

Wells-Pestell, L.

John-Mackie, L.

Whaddon, L.

Kagan, L.

White, B.

Kilbracken, L.

Wigoder, L.

Kilmarnock, L.

Williams of Elvel, L.

Kinloss, Ly.

Wilson of Langside, L.

Kirkhill, L.

Wilson of Rievaulx, L.

NOT-CONTENTS

Alexander of Tunis, E.

Beloff, L.

Allerton, L.

Belstead, L.

Ampthill, L.

Bessborough, E.

Auckland, L.

Boyd-Carpenter, L.

Bauer, L.

Brabazon of Tara, L.

Beaverbrook, L.

Brougham and Vaux, L.

Belhaven and Stenton, L.

Broxbourne, L.

191

Butterworth, L.

Mancroft, L.

Caccia, L.

Margadale, L.

Caithness, E.

Marsh, L.

Cameron of Lochbroom, L.

Massereene and Ferrard, V.

Campbell of Alloway, L.

Maude of Stratford-upon-

Campbell of Croy, L.

Avon, L.

Carnegy of Lour, B.

Melville, V.

Carnock, L.

Mersey, V.

Cathcart, E.

Middleton, L.

Colville of Culross, V.

Monckton of Brenchley, V.

Constantine of Stanmore, L.

Montgomery of Alamein, V.

Craigavon, V.

Morris, L.

Cullen of Ashbourne, L.

Mottistone, L.

Davidson, V.

Mowbray and Stourton, L.

De Freyne, L.

Moyne, L.

Denham, L. [Teller.]

Munster, E.

Dilhorne, V.

Murton of Lindisfarne, L.

Donegall, M.

Newall, L.

Drumalbyn, L.

Norrie, L.

Ellenborough, L.

Nugent of Guildford, L.

Elliot of Harwood, B.

O'Brien of Lothbury, L.

Elliott of Morpeth, L.

Perth, E.

Elton, L.

Peyton of Yeovil, L.

Enniskillen, E.

Porritt, L.

Erroll of Hale, L.

Portland, D.

Faithfull, B.

Rankeillour, L.

Fanshawe of Richmond, L.

Reay, L.

Ferrers, E.

Reigate, L.

Fortescue, E.

Rochdale, V.

Fraser of Kilmorack, L.

Rodney, L.

Gibson-Watt, L.

St. Aldwyn, E.

Glanusk, L.

St. Davids, V.

Glenarthur, L.

Sanderson of Bowden, L.

Gray of Contin, L.

Sandford, L.

Gridley, L.

Selkirk, E.

Hailsham of Saint

Shannon, E.

Marylebone, L.

Shaughnessy, L.

Halsbury, E.

Skelmersdale, L.

Harmar-Nicholls, L.

Slim, V.

Harvington, L.

Somers, L.

Henley, L.

Stamp, L.

Hives, L.

Stodart of Leaston, L.

Home of the Hirsel, L.

Strathspey, L.

Hood, V.

Sudeley, L.

Hooper, B.

Suffield, L.

Hunter of Newington, L.

Swinton, E. [Teller.]

Hylton-Foster, B.

Teviot, L.

Ingrow, L.

Thomas of Swynnerton, L.

Jessel, L.

Thorneycroft, L.

Kemsley, V.

Thurlow, L.

Lane-Fox, B.

Torrington, V.

Layton, L.

Trefgarne, L.

Lindsay, E.

Trenchard, V.

Lindsey and Abingdon, E.

Trumpington, B.

Long, V.

Vaux of Harrowden, L.

Lucas of Chilworth, L.

Vivian, L.

McAlpine of Moffat, L.

Whitelaw, V.

McFadzean, L.

Young, B.

Macleod of Borve, B.

Young of Graffham, L.

Malmesbury, E.

Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.
4.40 p.m.
Lord Trefgarne Lord Trefgarne moved Amendment No. 2.
Page 2, line 33, after first ("of") insert-("(i)")
The noble Lord said: My Lords, Clause l(5)(a) of the Bill contains a provision which excludes deductions made by employers to recover earlier overpayments of wages from the requirements of Part I. It is common practice in many organisations to make small overpayments of wages or expenses, for administrative convenience, which are then recovered from a later payment of wages. An example would be where final figures on bonus due to expenses claims are not available in the pay office when the computer is
192
run, so a standard sum is paid and the balance paid or recovered later.
In the Government's view deductions for such reasons should not be caught by the Bill; otherwise, provision to make such deductions would have to be made explicitly in the contract of employment, with the result that vast numbers of contracts would have to be rewritten. An employer would also have to ensure that all workers liable to suffer such deductions had been given, at some point in advance of the first such deduction being made, a copy or explanation of the term of the contract providing for the deduction. In short, if such deductions were covered it would lead to the need for substantial changes in administrative and personnel practices in many companies.
The amendments are intended to close a gap in Clause l(5)(a). In some circumstances employers will seek to recover an overpayment of expenses which has been made to a worker in the course of his employment. Because expenses are not included in the definition of wages for the purposes of the Bill, they are not caught by the existing wording of Clause l(5)(a).
Let me emphasise, however, that these amendments will not affect the common law rights of workers where an employer recovers sums from wages on the grounds that he had made an earlier overpayment of expenses and the worker thinks the recovery involves a breach of contract. The Bill will not prevent workers continuing to take employers to the ordinary courts about alleged breaches of contract arising from the non-payment of expenses. Furthermore, there is no possibility that this amendment could give rise to injustice. If the worker believes the employer is deducting more than what was overpaid, he can complain to a tribunal which will determine the matter. If what is being deducted is no more than the earlier overpayment, the worker has not lost anything.
We believe that expenses should be treated in the same way as wages concerning deductions to recover earlier overpayments and I therefore commend these amendments to your Lordships. Incidentally, I hope your Lordships will agree that this explanation covers Amendments Nos. 2 and 3. I beg to move Amendment No. 2.
On Question, amendment agreed to.
Lord Trefgarne Lord Trefgarne moved Amendment No. 3: Page 2, line 33, after ("wages") insert (", or
(ii) any overpayment in respect of expenses incurred by the worker in carrying out his employment,")
On Question, amendment agreed to.
Clause 2 [Deductions from wages of workers in retail employment on account of cash shortages etc.]:
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 4:
Page 4, line 2, leave out ("arising") and insert ("proved to have arisen by reasonably accurate measurement")
The noble Lord said: My Lords, this amendment refers to the clause which limits the amount that can be deducted from wages of a worker in retail employment to 10 per cent., except of course on his final payment for the final wage period. It accepts the debates so far by acknowledging that there can now be

193
no further control by any test of reasonableness. However, it asks a question to which I suspect your Lordships' attention has not been drawn before: what is meant by the "cash shortage" or "stock deficiency" in respect of which the Bill sets out its limits for pay periods other than the last?
In considering the definition of "cash shortage" and "stock deficiency" one finds a definition that tells you very little because "stock deficiency" means:
"a stock deficiency arising in the course of retail transactions".
The view on these Benches is that this leaves the whole concept rather more arbitrary than we suspect even the Government might wish. It is not a matter which has been approached from this direction hitherto. Where the contract permits deductions, with the Bill in its present state the deduction may be made merely upon the say-so of the employer as to the existence of a stock deficiency; and what I say of stock deficiency is normally applicable to cash shortage. This was the case this year, for example, in Barratt v. Sealand Petroleum where two judges criticised so forcefully the contract that was made. One reason they did so was because it allowed the employer simply to assert that a cash shortage existed where the till was checked in ways that the employee could not himself possible see, let alone check.
There is of course the question of the burden of proof in such cases. Is it right that the law should simply allow the employer to assert that there is a cash shortage or stock deficiency without doing anything at all to prove it if the contract goes that far? Should it not be that the reality of these matters is looked at a little more? In Committee reference was made to the way in which stock control, for example, is a very difficult matter in some retail shops. Goods go through many hands. There are part-time employees who are there one day and not the next. The manager cannot always supervise the flow of stock. Where there is a high turnover and low profit margin company systems notoriously cannot always cope with the flow of goods.
There is the whole question on which the Union of Shop, Distributive and Allied Workers has put forward material which I am confident the Minister has seen. If he has not, I am sure the Secretary of State has; and we are very glad to welcome him back to the proceedings on this Bill. I look forward with enthusi-asm to his contribution on this particular matter. I am sure the Secretary of State knows about notional stock losses because, with his experience, he must know that notional stock losses appear where goods are damaged, discounted or returned. It is only later, because of the late entry of the items into the computerised system that what appears to be a stock loss of one sort proves to be either no loss at all or a loss of a different character.
There are of course practices by employers which one should have thought were agreed by all to be undesirable. I am sure the Government would not support the practice of some garage chains of establishing a priori a ratio between oil sales and petrol sales and then checking only the petrol sales, deducting from the wage of the employee if the oil sale does not come to that ratio. Heron garages are well known in this respect, and there are others, I understand, which adopt practices that are not entirely dissimilar. Surely,
194
it should be for the employer to say. "Look here the contract says I can deduct where there is a stock deficiency, and I have this piece of proof and I shall show you how that is done." There should be something more than the say-so of an employer about some notional stock loss one week or the undesirable ratio practices of some of the garages. These amendments do no more than suggest that, in referring to stock deficiency and cash shortage, there should be an objective basis and a reasonable measurement from which one can believe the shortage or deficiency exists.
It has been said of these amendments—and it may well be so—that they are not of our best because in their present form, if passed, the employer could have an increased power to deduct where a stock deficiency is not accurately proved. But that would be contrary to the spirit of the Bill and I would not expect the Government to take points of that kind which could easily be cured on Third Reading.
We are asking for the Government's response to a point not hitherto raised. Can we pass a Bill which allows in the final pay period the whole of a family's wage to be taken away and up to that point one-tenth (which is no small sum for low-wage earners, or perhaps even for higher wage earners, but I would not know about that), on the basis that that may occur not merely whenever the contract says so but whenever the employer under the contract says that a stock deficiency exists, no matter whether there is any basis in reality, experience and evidence for that statement?
Short of material misrepresentation which induced action on the part of the employee, are the Government confident that their Bill does not allow the employer falsely to assert a stock deficiency if that is what the contract clause is adequately drafted to permit? If it does not, is that so very different from the Heron Garage chain practice of an a priori ratio? I am not speaking of misrepresentation which would make the employer liable for deceit or fraud. A statement that there is a stock deficiency or cash shortage, with absolutely no evidence adduced for its existence, is hardly the basis for honourable legislation in connection with workers who will suffer thereby. I very much hope that the Government will at any rate look at the spirit of the amendment and consider whether something can be done about it either now or on Third Reading. I beg to move.
Lord Sainsbury: My Lords, we on these Benches support the amendment because we consider that it is much fairer than the provision in the Bill.
Lord Trefgarne: My Lords, as your Lordships know, Clause 2 of the Bill limits employers to making deductions of no more than 10 per cent. of gross wages where deductions are made on account of cash shortages or stock deficiencies. There is a similar control on payments made by workers to employers on account of such shortages. In the Government's view this strikes the right balance between the rights of employers to recover sums contractually due to them and the need to ensure that workers do not lose large parts of any one pay packet to meet shortages.
I have assumed that these amendments are designed to make deductions on account of cash shortages or stock deficiencies entirely unlawful if there is no

195
"reasonably accurate measurement" of the shortage. But, as the noble Lord rightly anticipated, their actual effect is to remove deductions on account of shortages where there is no "reasonably accurate measurement" of the shortage entirely from the limitations imposed by Clause 2 (and similarly remove payments where there is no "reasonably accurate measurement" from the limitations of Clause 3). The perverse effect is that it would be in the interests of the employer not to measure the shortage accurately, as then he would not be subject to the 10 per cent. limit when deducting on account of the shortage. The amendments are therefore technically deficient.
However, let me turn to what I am sure is the intended effect of making such deductions entirely unlawful if there is no "reasonably accurate measurement". The amendment would produce the result that the tribunal would have to examine in every case involving Clauses 2 and 3 whether there had been a "reasonably accurate measurement" of stock or cash in relation to which the shortage or deficiency had arisen. What is reasonable in this context is very much a matter of opinion and the amendment would therefore create great uncertainty about what deductions were lawful. Such uncertainty would not be in the interests of either employers or workers and would be likely to encourage the bringing of unnecessary tribunal cases.
If the worker's contract says that deductions of up to 10 per cent. of wages can be made equal to shortages and the worker believes that more than the shortage has been deducted because of inaccurate measurements, he can complain to a tribunal, which will then determine the matter. I hope that I have explained the difficulties that I see in the amendments proposed by the noble Lord and that he will not therefore press them.
Lord Graham of Edmonton: My Lords, the Minister seeks to persuade the House that the Government resist the changes in the best interests of the employer and the employee. I do not speak for employers, although as director of a large retail organisation from time to time I sit in the boardroom of the Enfield and St. Alban's Co-operative Society. But the Minister can take it from me, speaking from the point of view of the employee, that USDAW and many other organisations with workers in the retail trade will deeply resent the Government's not accepting the sense of the amendment. Unfortunately, some employers, whatever the size of the organisation, will take advantage of weak systems. It is perfectly proper for an employer, as far as possible, to make sure that his business is run so efficiently that he reduces to a minimum what we call leakage.
At an earlier stage I sought to persuade the Minister and the Committee that we wanted to exclude from the provisions of this clause employees who were honest, diligent and not in default. We wanted to say that any cash shortage or stock deficiency provision should not apply where it could be proved that the employee had genuinely tried to carry out his responsibilities; he had been honest, diligent and not at fault. The Minister did not accept that.
196
When the retail trade operated mainly on a five-and-a-half-day week a shop would open for 44 hours a week, by and large, from 8.30 a.m. to 5.30 p.m., and there would be a statutory half-day on a Wednesday or a Saturday. The manager would be responsible for the shop whenever it was open. But now if a retail organisation opens at 8.30, it may stay open until 6.30 p.m. It is legally permitted to stay open until much later. And it is open not for five but six days. In a typical shop the doors will be open and the tills will be in operation for not less than 60 and perhaps for 65 hours a week. The manager will not work there 65 hours a week, and nor will other employees. According to their various agreements they may work 39 or 40 hours a week. The responsibility has to be shared, and so why lay upon the employee as part of his contract, at whatever level he works, that he must be responsible for stock deficiencies?
Cash deficiencies can be measured. For instance, perhaps there should be £1,000 in the till, and at the end of the day when the money is cashed up there may be only £958. The shortage can be seen immediately. But the till may be used by a number of people. The primary operator may not be there all the time.
There is the other situation, that of stock deficiencies. If the Minister was not as fully acquainted with the background to this matter as some noble Lords may be, he will have done his homework. He will realise that penalties are built into the operations of any decent, well-run company. For instance, in my boardroom, we regularly receive accounts of how the branch or department is doing. The leakage, the stock shortage or deficiency is revealed. I can assure the noble Lord that we do not need to take 10 per cent. from wages. The man responsible is looked upon as a poor manager. He will be moved or demoted. The censure of his ability does not need to be measured by how much money he loses. It can often lead to dismissal.
What kind of people is the Minister talking about? I say that they are hapless individuals who are not shown fairly to be wholly responsible. Many of them receive £80 or £90 a week in wages. The Minister says, "Too bad, hard luck. We cannot prove that you are primarily responsible." That is what we are asking: show us the colour of your money. The employees say, "Give us the evidence. Tell us precisely how you can say that we are responsible for the stock deficiency". The Minister says that an employer may not be able to do that. The employer must obtain payment from someone. The man or woman employed by the company unfortunately is the one who will be dunned for it.
The Minister knows that in 1986 the name of the game is high turnover and low profit margins. In such circumstances, matters move fast. The company must depend upon up-to-date systems. Although I hold no brief from any employer or trade union on this matter, the commercial judgment of and risk taken by the employer often causes the deficiencies or shortages because he is not managing the business properly.
I hope that even at this late stage the Minister will say that he is prepared to reflect upon his unwillingness to write into the Bill a provision which any fair-

197
minded person would see as reasonable. When we debated Amendment No. 1 the Minister was somewhat surprised that, having disposed of an argument at one stage it kept coming back. I have news for the noble Lord. We are talking about people's livelihoods and lives. It is not a question of the Minister or myself shrugging off the loss of £10 or £20 a week. We are talking about a man or a woman going home and saying to the husband or wife, "A terrible thing has happened. I have done my best. I have been honest and diligent, but without producing any evidence, and through no fault of mine, the boss has said that he is taking £7, £8 or £9 from my wages". That is a scandal. It is unjust and unfair. It should not be tolerated. I hope that he Minister will say something which will give some hope to people that when the Bill goes through it will be a little more fair than it is at present.
Lord Wedderburn of Charlton: My Lords, I am grateful to my noble friend Lord Graham for filling out the case with such justice that it is difficult to understand, except for one reason, why the Government will not move a little on this matter. I am also grateful to the noble Lord, Lord Sainsbury. I understand the reason. It is due to the technical deficiency of the amendments. The Minister has persuaded me that they are technically deficient, and that has so obscured your Lordships' discussion of the merits of the case that it is obviously a matter to which we must return on Third Reading, with better-devised amendments which will not obscure the points at issue as these amendments unhappily have done.
The issue has been made clear. It will be seen in your Lordships' Hansard. I must mention to the Minister two places where I think we broke through to the real points at issue. The Minister would object to an amendment such as this because it mentions the word "reasonable". It appears to have made the Secretary of State leave us again because he is not now at our discussion. The word "reasonable" is a fearsome one for the Government. They appear not to know that the law of England and indeed of Scotland is littered with the words "reasonable care" and "that which is reasonably practical". We somehow manage to live from day to day under that rule of law.
There is a more serious matter and I hope that the Minister will not mind my mentioning it. It is that he has not read the cases on the case list with regard to the matter under discussion. Had he looked at Anthony Barratt's case he would have seen an example of where an employee could not normally go to the tribunal. The Minister says that if the employee has a deduction made of an amount which is equal to the shortage, he can complain to the tribunal that there is no such thing. He may be able to do that if the contract said, or meant on its proper construction, that there had to be a shortage before the deduction could be made. That is not what any good draftsman will give to an employee in the average case.
In the Sealand Petroleum Company case the contract, if I may quote merely three lines of it, spoke of the company sustaining loss of cash, stock, tools, equipment and so on. It said:
"The company (A) will hold you responsible for that loss and (B) reserves the right to deduct up to the amount of the loss from your
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pay … The company will determine the amount to be recovered under (B) by reference to all the facts of a particular case, including the amount of cash deficiency, replacement value of missing stock, tools and equipment".
Once he is there, under this Bill, the employee does not have a hope. His contract says that the company will determine the amount. Under the law that we had for 90 years, he had a hope. Someone could say that it was unreasonable under the Truck Acts, but of course the Government do not like the word "unreasonable".
We shall try to devise an amendment which puts the point without using the word "unreasonable" to see whether we get any further with the Government. I understand that in the light of the discussions that we have had the proper course for me is to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 5 not moved.]
Lord Trefgarne Lord Trefgarne moved Amendment No. 6:
Page 4, line 34, after ("is") insert ("or may be").
The noble Lord said: my Lords, this is a technical amendment which has no policy effect and is introduced in the interests of clarity. Without it, it is possible that certain instances, where a bonus is reduced due to a shortage under an agreement involving discretionary payment of bonus—in the light of various factors including shortage—may escape the 10 per cent. limit. I am sure that your Lordships would not like that, and I beg to move.
On Question, amendment agreed to.
Clause 4 [Provisions supplementary to ss. 2 and 3]:
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 7:
Page 6, line 33, after ("termination") insert ("by the worker or its lawful termination by the employer").
The noble Lord said: My Lords, whereas the last amendment would have been of overwhelming force had it been technically correctly drafted, this amendment is of such force because I believe it to be technically correct. That is partly because it has taken note of the Government's point in the face of a similar amendment moved in Committee. That amendment was not the same by any means, but in Committee the matter was rather left over.
The amendment relates to the final payment of wages and the power which the Bill gives to the employer to take the lot. As my noble friend Lord Graham has already said today, it cannot be too frequently repeated that that means taking the whole amount of a low wage for a family. This is a serious matter. Clause 4 permits that to be done where the period of pay is the last of the periods for which the worker is employed under his contract prior to its termination. Those are the words to which we address the amendment.
There are many different types of termination of a contract of employment. There may be notice from the employer or from the employee; there may be summary dismissal; there may be summary resigna-tion; or there may be a constructive dismissal where the worker treats a substantial breach of contract by the employer as a dismissal and is subsequently found

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justifiably to have done so. But we believe that the power to deduct the whole wage on the final payment should arise only where there is a lawful termination.
The Government pointed out in our previous discussion that we could not put that limit on the worker's side, because that would give him an advantage. They are against such advantages whether fair or unfair. But we could see, too, with them, that this would give the worker an unfair advantage. So, in this amendment, we say that the final deduction provisions and the loss of the protection of one-tenth, which is perhaps a better way to put it, should arise where the worker terminates the contract in any way, and where the employer terminates the contract lawfully—whether lawfully by way of summary dismissal or lawfully by way of notice.
There are many reasons for advancing this proposition. One happens to have been put wery well in the correspondence columns of The Times today by the director of the National Association of Citizens Advice Bureaux. Elizabeth Filkin writes:
"It is our experience in Citizens Advice Bureaux that there is a significant minority of unscrupulous employers who evade the protection Parliament has already given to employees against unfair deductions; indeed such deductions sometimes amount to the whole of the wage packet. We fear that unless the 10 per cent. limit also applies to the final wage packet it will be these employers who will make frequent dismissals so that they can make regular large deductions for unproven losses".
That is from the Citizens Advice Bureaux who, nationally, have extensive experience of the matter. Looking back on our discussions, some noble Lords will, I think, agree that the Government would do better to look at these matters rather more than they have. The letter asks for a different solution to the one proposed in the amendment; namely, the extension of the one-tenth limit to the final pay packet. At this stage of the Bill we have not felt able to argue that proposi-tion. We argue the smaller proposition that the employer should surely not be allowed to give himself the power to deduct all beyond the one-tenth by his own unlawful act, which is now the case under the Bill, I am persuaded. The shop assistant earning £50 or £60 per week and knowing that he has a contract that makes for deductions and knowing that these can reach £5 or £6, representing one-tenth, one week after another, suddenly has the whole pay packet taken on an unlawful dismissal, whether unlawful by reason of inadequate notice when there is entitlement to notice but the shop assistant is not given any or enough, or by reason of being unfair because a new owner has perhaps taken over the business and suddenly decides to take on part-time employees. The shop assistant, suddenly and unfairly dismissed, finds that he cannot get within the Transfer of Undertakings (Protection of Employment) Regulations, which is difficult enough as one knows.
Why, in those circumstances, should the employee be deprived, by the law as it will be under this Bill, of more than one-tenth that is otherwise there for the employer to take? It may be that the Government will say that in some of these cases the employee could go to the county court and sue for damages for loss of the notice that should have been given or that he can go to a tribunal to sue for unfair dismissal. But it is no justification to say, "Let him go to the county court or
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a tribunal on some other issue". It is legislation worthy of a Cabinet conducted by Marie Antoinette. It does not follow, even from the notion that he should have all the wages deducted lawfully under the Bill, that the worker can wait to get to a county court when the family has been deprived of the whole of the wages for a week.
There is a final point. It is a legal point, but also a moral point. The Government must, I feel, take it on board. The Government have repeated many a time and oft that they wish the matters within Part I of the Bill to be conducted in accordance with the law of contract. I do not know whether the Secretary of State is nodding assent or dissent. At any rate, he is with us again. The contract between the parties is what the Government wish to have as the basis of the relationship. Very well! The Bill is not in accordance with the principles of the law of contract on this point; on most of the rest it certainly is, but not on this point.
There is a principle that applies in a particular way in the law of contract that no man shall be allowed to take advantage of his own wrong. The noble and learned Lord, Lord Denning, tried to expand that in a case in 1983. He will not mind my mentioning Cheall v. APEX, the trade union case. It does not relate to this matter. But the House of Lords would not expand it. In saying "No", however, the House of Lords was in favour of a narrower proposition that the noble and learned Lord, I am sure, would also support, as he wished to expand it. Lord Diplock, speaking of the principle that no man shall be entitled to take advantage of his own wrong, put it this way:
"To attract the principle, whether it be one of construction or one of law, that a party to a contract is not permitted to take advantage of his own breach of duty the duty must be one that is owed to the other party under that contract".
That statement of principle applies four-square in this case. The employer and the worker owe to each other duties to terminate the contract lawfully. If they terminate the contract unlawfully, certainly where the employer terminates without notice, or terminates summarily and wrongfully, the principles of the law of contract say that he should not have the advantage of his illegal act.
I had not realised quite how serious a problem this was until being written to on the matter by those who know of these occurrences. Then, today, quite by chance, the director of the National Association of Citizens Advice Bureaux writes in respect of a different solution but nevertheless highlights the problem of some unscrupluous employers who will make frequent dismissals so that they can make regular, large deductions for unproven losses. The director would want to combat that by far more than this amendment. But the amendment at least says that, in the face of the problem, the Bill should surely apply the principles of the law of contract and say, "Yes. All right. The Government wish it. The employer can have the whole pay packet for the last period if the contract says so prior to a termination, but not where he caused the termination illegally". Where he causes the termination illegally there must, surely, be a stop. At any rate, no more than the one-tenth should apply. I put it as a matter of law, but I would have thought that the morality was even more strong. I beg to move.
Lord Rochester: My Lords, I should like to support the amendment. I may do so also, I believe, on behalf of my noble friends. It arises, as the noble Lord, Lord Wedderburn of Charlton, says, from a somewhat similar amendment that he moved in Committee and that suffered from the defect that it did not cater for the situation where it was the employee rather than the employer who gave notice of termination of the employment contract. That is remedied in this amendment which is limited to providing that recovery by the employer of the entire wage on the last pay day is inadmissible if the employment is terminated by the employer in an unlawful way. Surely that must be right in principle. As a layman, unpractised in the law, I am impressed by the argument the noble Lord has adduced that in this respect the Bill is not in accordance with a fundamental principle of the law of contract. With all this in mind, I trust that the Minister will accept the amendment.
Lord Trefgarne: My Lords, the aim of the provisions in this clause is to ensure that an employer is able, on the termination of a worker's employment, to recover outstanding amounts owed to him by that worker on account of cash shortages or stock deficiencies. This is achieved by removing the 10 per cent. limit on deductions from the final instalment of wages to the worker. This is fair to the employer as well as the worker. After all, the effect of the 10 per cent. limit is to delay the time at which the employer would otherwise be entitled to make deductions.
An earlier amendment on the same lines, but with crucial differences, was debated at Committee stage, when it was argued by the noble Lord, Lord Wedderburn, that the 10 per cent. limit on deductions for cash shortages or stock deficiencies should be disapplied from the final payment of wages of a worker only if the worker had been given lawful notice of termination. However, I pointed out then that an effect of the amendment was that a worker who hands in his notice and who owes a debt to his employer for cash shortages or stock deficiencies would have the 10 per cent. limit applied to the final payment of wages. In such a case the employer would be unable to recover any outstanding debt beyond 10 per cent. of gross wages from the final payment of wages as he would be bound by the 10 per cent. limit. This new amendment before us today deals with that latter situation and refers to lawful termination rather than termination on lawful notice but I am afraid it is still unacceptable.
If any worker feels that he has been dismissed unlawfully then he has the right to complain to the county court and may have grounds for making a complaint of unfair dismissal to an industrial tribunal. These are adequate remedies, and however reasonable the amendment may appear it is the Government's view that it is not appropriate to place a penalty on employers for terminating a contract unlawfully in this part of this Bill, when it is not concerned in any way with the consequences of unlawful termination. It was never intended to produce the result that if the contract ended before the full amount had been recovered the employer would have to take legal action in the ordinary courts to recover an amount to
202
which he was contractually entitled. That is the effect of this amendment in the circumstances to which it is applied, and that is the idea that we resist.
We have studied this amendment very carefully but, for the reasons I have given, we do not feel able to accept it.
Lord Wedderburn of Charlton: My Lords, I thank the noble Lord, Lord Rochester, for his support It is a little difficult to know what to say. One has here a case where the Government are giving an employer by law clear new powers to deprive a family of its sustenance. On their own logic they have a choice The noble Lord the Minister has just said so; I presume that the Secretary of State also agrees. They can allow the employer to go to the county court for his debt We know the nature of this debt: the debt is what the company says it is under Anthony Barratt's contract. That would be one way round, without stopping the wages. That might be a very good idea. That may be a consequence of our amendment.
Alternatively, one can have the employer stopping all the wages and letting the worker go to the county court for his unlawful dismissal. What do the Government choose? They choose to deprive the underpaid worker's family that week of its money in toto and say, "Let them go to the county court". It is totally astonishing and disreputable for a government to put that forward. I beg to move this amendment.
5.24 p.m.
On Question, Whether the said amendment (No. 7) shall be agreed to?
Their Lordships divided: Contents, 96; Not-Contents, 131.

DIVISION NO. 2

CONTENTS

Addington, L.

Glenamara, L.

Alport, L.

Graham of Edmonton, L.

Ardwick, L.

Grey, E.

Attlee, E.

Grimond, L.

Barnett, L.

Hampton, L.

Birk, B.

Hams of Greenwich, L.

Blease, L.

Hatch of Lusby, L.

Blyton, L.

Hayter, L.

Boston of Faversham, L.

Heycock, L.

Bottomley, L.

Houghton of Sowerby, L.

Briginshaw, L.

Howie of Troon, L.

Brockway, L.

Hunt, L.

Brooks of Tremorfa, L.

Jacques, L.

Bruce of Donington, L.

Jeger, B.

Caradon, L.

Jenkins of Putney, L.

Carmichael of Kelvingrove, L.

John-Mackie, L.

Chitnis, L.

Kilbracken, L.

Cledwyn of Penrhos, L.

Kilmarnock, L.

Crawshaw of Aintree, L.

Kirkhill, L.

David, B.

Llewelyn-Davies of Hastoe, B.

Davies of Penrhys, L.

Lloyd of Kilgerran, L.

Dean of Beswick, L.

Longford, E.

Elwyn-Jones, L.

Lovell-Davis, L.

Ennals, L.

McCarthy, L.

Ewart-Biggs, B.

McIntosh of Haringey, L.

Ezra, L.

Mackie of Benshie, L.

Falkender, B.

McNair, L.

Fisher of Rednal, B. [Teller.]

Mais, L.

Foot, L.

Manchester, Bp.

Gallacher, L.

Milford, L.

Gifford, L.

Mishcon, L.

Gladwyn, L.

Molloy, L.

203

Monkswell, L.

Stewart of Fulham, L.

Morton of Shuna, L.

Stoddart of Swindon, L.

Nicol, B.

[Teller.]

Oram, L.

Taylor of Gryfe, L.

Parry, L.

Taylor of Mansfield, L.

Phillips, B.

Tordoff, L.

Pitt of Hampstead, L.

Turner of Camden, B.

Prys-Davies, L.

Underhill, L.

Rhodes, L.

Wallace of Coslany, L.

Rochester, L.

Wedderburn of Charlton, L.

Ross of Marnock, L.

Wells-Pestell, L.

Sainsbury, L.

Whaddon, L.

Seear, B.

Wigoder, L.

Sefton of Garston, L.

Williams of Elvel, L.

Serota, B.

Wilson of Langside, L.

Shepherd, L.

Wilson of Rievaulx, L.

Stallard, L.

Winterbottom, L.

NOT-CONTENTS

Abercorn, D.

Hylton-Foster, B.

Ailesbury, M.

Ingrow, L.

Airey of Abingdon, B.

Kimball, L.

Allerton, L.

Kinnoull, E.

Ampthill, L.

Lane-Fox, B.

Atholl, D.

Layton, L.

Auckland, L.

Lindsay, E.

Bauer, L.

Lindsey and Abingdon, E.

Belhaven and Stenton, L.

Long, V.

Beloff, L.

Lucas of Chilworth, L.

Belstead, L.

McAlpine of Moffat, L.

Bessborough, E.

McFadzean, L.

Boyd-Carpenter, L.

MacLehose of Beoch, L.

Brabazon of Tara, L.

Macleod of Borve, B.

Brougham and Vaux, L.

Malmesbury, E.

Broxbourne, L.

Mancroft, L.

Butterworth, L.

Margadale, L.

Buxton of Alsa, L.

Massereene and Ferrard, V.

Caithness, E.

Maude of Stratford-upon-

Cameron of Lochbroom, L.

Avon, L.

Campbell of Alloway, L.

Melville, V.

Campbell of Cray, L.

Mersey, V.

Carnegy of Lour, B.

Middleton, L.

Carnock, L.

Milverton, L.

Cathcart, E.

Monckton of Brenchley, V.

Colwyn, L.

Monson, L.

Constantine of Stanmore, L.

Montgomery of Alamein, V.

Craigavon, V.

Morris, L.

Craigmyle, L.

Mottistone, L.

Cullen of Ashbourne, L.

Moyne, L.

Davidson, V.

Murton of Lindisfarne, L.

De Freyne, L.

Nathan, L.

Denning, L.

Newall, L.

Dilhorne, V.

Nugent of Guildford, L.

Donegall, M.

Pender, L.

Drumalbyn, L.

Peyton of Yeovil, L.

Dundee, E.

Plummer of St Marylebone,

Ellenborough, L.

L.

Elliot of Harwood, B.

Rankeillour, L.

Elliott of Morpeth, L.

Reay, L.

Elton, L.

Reigate, L.

Enniskillen, E.

Renton, L.

Faithfull, B.

Rochdale, V.

Fanshawe of Richmond, L.

Rodney, L.

Ferrers, E.

St. Aldwyn, E.

Fortescue, E.

St. Davids, V.

Fraser of Kilmorack, L.

Sanderson of Bowden, L.

Gibson-Watt, L.

Sandford, L.

Glanusk, L.

Seebohm, L.

Glenarthur, L.

Sharples, B.

Gray of Contin, L.

Skelmersdale, L. [Teller.]

Greenway, L.

Slim, V.

Gridley, L.

Somers, L.

Hailsham of Saint

Stamp, L.

Marylebone, L.

Stodart of Leaston, L.

Halsbury, E.

Strathspey, L.

Harmar-Nicholls, L.

Sudeley, L.

Harvington, L.

Suffield, L.

Henley, L.

Swinton, E.[Teller.]

Hives, L.

Teviot, L.

Home of the Hirsel, L.

Thomas of Swynnerton, L.

Hooper, B.

Thurlow, L.

204

Trefgarne, L.

Vivian, L.

Trenchard, V.

Whitelaw, V.

Trumpington, B.

Young, B.

Tryon, L.

Young of Graffham, L.

Vaux of Harrowden, L.

Zouche of Haryngworth, L.

Lord Trefgarne moved Amendment No. 14:
Page 10, line 29, leave out ("that") and insert ("the 1978").
On Question, amendment agreed to.

5.34 p.m.
Lord Trefgarne Lord Trefgarne moved Amendment No. 8:
Page 7, line 16, leave out ("receive any amount from the worker on account") and insert ("recover an amount from the worker in respect")
The noble Lord said: My Lords, Amendments Nos. 8 and 9 are technical amendments. Their effect is to make clear that in proceedings by employers to recover amounts from workers a court is required to limit the rate at which it orders the worker to make payments, so that the 10 per cent. limit is not broken if the amount which the employer is entitled to recover is in respect of a cash shortage or stock deficiency with its wider meaning—that is, embracing deductions and payments on account of conduct leading to a shortage or deficiency. I beg to move.
Lord Trefgarne Lord Trefgarne moved Amendment No. 9:
Page 7, line 38, at end insert ("; and references in this Part to the recovery from a worker of an amount in respect of a cash shortage or stock deficiency accordingly include references to the recovery from him of an amount in respect of any such conduct or event as is mentioned in paragraph (a) or (b).")
The noble Lord said: My Lords, Amendment No. 9 is consequential upon Amendment No. 8. I beg to move.
Clause 6 [Supplementary provisions relating to complaints]:
Lord Trefgarne Lord Trefgarne moved Amendment No. 10:
Page 10, line 7, after ("of) insert ("any provision of this Part")
The noble Lord said: My Lords, this amendment will have the effect of ensuring that any provision in an agreement which purports to exclude or limit the operation of any provision of Part I will be void. This extends the existing provision in Clause 6 which makes void any provision in an agreement which purports to exclude or limit the operation of or preclude any person from presenting a complaint under Clause 5. I beg to move.
Lord Wedderburn of Charlton: My Lords, we wish to welcome this addition to the Bill, which we pressed upon the Government in Committee. Indeed, the Government have done even better than the amendment which we then moved. When the Government are in the wrong they have no stronger critics than those from these Benches. When the Government see the light and repent, however limited the repentance, they have no warmer friends—at least for that moment.
Lord Trefgarne: My Lords, before I am tempted to withdraw the amendment, perhaps I may remind your Lordships that this was one of the lollipops which we offered at an earlier stage.
Lord McCarthy Lord McCarthy moved Amendment No. 11:
After Clause 6, insert the following new clause:
("Unfair dismissal.

.—(1) The dismissal of an employee shall be regarded as unfair for the purposes of Part V of the 1978 Act if the reason (or if more than one. the principal reason) for it is that the employee has brought, or proposes to bring, a complaint under this Part of this Act.

(2) An employee shall have the right not to have action (short of dismissal) taken against him as an individual by his employer for the purpose of preventing or deterring him from making, or proposing to make, a complaint under this Part of the Act.

(3) Sections 24 to 26 of the 1978 Act shall apply to action which contravenes subsection (4) above as they apply to section 23 of that Act.").

The noble Lord said: My Lords, we can only hope that the sweet bag is now open for the evening and perhaps something more may be coming along. I think that the noble Lord the Secretary of State will remember this amendment because it was at this moment that he entered the Chamber on the first day of the Committee stage, although he took no part in the debate. We hope that he will take part this evening. I wish that we had pressed that debate to a Division because then the noble Lord would have had an opportunity to vote for his own Bill. However, the noble Lord has done that today.
On that occasion I argued that, if a worker was dismissed for trying to stop an unlawful deduction by going to a tribunal, there should be a right of protection against unfair dismissal or action short of dismissal. At that time I was told by the noble Lord, Lord Trefgarne, not that an employer should be free to dismiss in such circumstances, not that the Government thought that unfair dismissal was not a concept to be introduced at this stage, but that we should be rejected because in our amendment we had demanded that there should be no qualifying period, as in the case of dismissal on grounds of trade unionism or non-unionism, race, sex and so on, and because we had asked in the case of dismissal on grounds of trade unionism that there should be a special compensation award.
However, at col. 260 of the official record for 24th June the Minister certainly seemed to us to be saying that, in effect, he would not be against the principle of a right of protection for unfair dismissal in the circumstances covered by the amendment, because he said:
"The effect of this new clause would be that workers, irrespective of age, length of service or hours of work, would have new rights to complain to an industrial tribunal either on the grounds that they had been dismissed or that action short of dismissal had been taken against them".
We accept that.
The Minister then said:
"This new clause would apply some of the special compensation provisions which apply to dismissal, and action short of dismissal related to trade union membership, to dismissal for making a complaint under Part I of the Bill".
The Minister then went on to say:
"However, the provision of the Wages Bill do not concern fundamental rights such as those I have just mentioned or the right not to be discriminated against on the grounds of race or sex".
The noble Lord then said:
"We do not believe that there is any justification for special provisions of the sort advocated by the noble Lord. I hope, therefore, that he will not press the amendment".
At col. 261 I replied:
"But suppose we were to come back and say that we will take out the special compensation and take out the two-year rule from the amendment, what would his attitude be to that? I ask that because I thought that the third point he made was that he was in favour of special provision and that he did not want to leave this to chance. That is the real cutting edge of what we are saying—that he did not wish to leave it to the chance that industrial tribunals might or might not get it in under, for example, some other substantial reason",
or for some other reason that they might find. Unfortunately, the noble Lord then replied:
"I replied to the amendment which appears on the Marshalled List If the noble Lord, having heard the shortcomings of that amendment, wishes to table another one at a latter stage shall consider that too "
To that remark I replied:
"In those circumstances and in the hope of a better tomorrow, I shall withdraw the amendment"
and come back. That is what we are doing—wo are coming back.
The argument then is simple, and in general terms we thought that the Government had accepted it. If someone is dismissed for the quite legitimate purpose of trying to go to a tribunal in order to bring a complaint under this part of the Bill, is that a fair or an unfair dismissal? Surely the Government would say that it would be an unfair dismissal. If a man was not promoted, or was moved off bonus work, or was constructively dismissed after taking a case to a tribunal whether he won or not, surely the Government would say that that would be an unfair dismissal. We cannot leave it to chance. We cannot leave it to some other substantial reason, or to the vagaries of the conduct test. Surely we should put this much into the Bill. I beg to move.
Lord Rochester: My Lords, as the noble Lord. Lord McCarthy, has said, this again is an amendment modified to take account of the response made by the Minister to a rather wider amendment moved by the noble Lord, Lord McCarthy, in Committee, dealing with the same principle. We support this amendment. Many of the people we are here considering, as we have said throughout this Bill on a number of issues, are unorganised, they are without protection from trade unions, and they work in occupations where labour turnover is high.
If they have the courage, in these times of high unemployment, to take a complaint relating to deductions from wages, or for that matter anything else affected by this Bill, to an industrial tribunal there is at present nothing to stop an unscrupulous employer from sacking them, and they will have no protection against unfair dismissal. In my view and that of my noble friends, they should have, and I hope that the Minister will agree.
Lord Somers: My Lords, I should be the last one to support any unfair dismissal of any employee, but I have sometimes felt that the employer should be given a little more power to control employees who perhaps are giving bad work either through laziness or possibly through just sheer inefficiency. I am not saying that such examples are frequent, but it is not unknown, particularly in these days, for a man to accept a job purely because of the money he is going to get from it without any willingness to fulfil the job that he has been given.

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In such cases the employer ought to be given a little more power in order to keep the efficiency of his own business up to standard. I cannot make out from the wording of this amendment whether that is implied or not, but I hope that the Government will look at that.
Lord Trefgarne: My Lords, let me start by saying, if I may, that the remarks I made at Committee stage did not remotely imply any support for the concept that dismissal for complaint under the Bill's provisions should be automatically unfair. I merely declined to deal with an amendment that was not before the Committee during that stage in our considerations.
The effect of this new clause would be that workers would be accorded new rights to complain to an industrial tribunal either on the grounds that they had been dismissed, or that action short of dismissal had been taken against them, for bringing complaints under the provisions of Part I of the Bill. An additional and possibly unintended effect would be that there would be no qualifying period in the case of action short of dismissal, while the qualifying period would remain in the case of dismissal itself. This would create an anomalous situation which I am sure none of your Lordships would wish to see.
Turning to the main thrust of the amendment, I assure your Lordships that we have looked hard at this issue since we debated the similar, though more far-reaching amendment tabled in Committee. However, I am afraid that I shall again have to disappoint noble Lords opposite—no lollipops just now. Part I is intended to give workers a more straightforward and cheaper avenue of complaint against unlawful deductions from their wages. This new right of complaint to a tribunal is comparable to existing rights of complaint in the employment field, such as rights of complaint against non-receipt of an itemised pay statement or a written statement of main terms and conditions of employment. None of those rights of complaint to industrial tribunals attracts the kind of protection sought by the amendment when an employer dismisses an employee for exercising that right.
Those rights of complaint to industrial tribunals are very important—I think we would all agree about that—but they cannot be classed among the fundamental human rights, such as the right not to be discriminated against on grounds of race or sex, or the right to belong or not to belong to a trade union. It is only in those cases that individuals have a remedy before an industrial tribunal without a qualifying period, and only in the case of dismissal for a trade union membership reason that dismissal is automatically unfair.
We do not believe that exercising the right to make a complaint to an industrial tribunal should attract any of those special protections. It may, however, be helpful if I say that if the reason for a dismissal was that a worker had complained to a tribunal under Part I, or indeed that he had complained to a tribunal on any of the other grounds open to him, it is hardly conceivable that a tribunal would find dismissal on that ground to be fair. In the light of those difficulties, I hope that the noble Lord will not wish to press his amendment.
5.45 p.m.
Lord McCarthy: My Lords, I see that the sweet bag has been put away. May I first deal with the point made by the noble Lord, Lord Somers. We are not trying to say in this amendment that any of the criteria which exist in the present unfair dismissal legislation under which the tribunals can decide whether someone is fairly or unfairly dismissed shall be changed. Therefore, the kinds of situations the noble Lord was talking about could easily be found, before a tribunal, to be a fair dismissal.
The kind of thing that the noble Lord was talking about was either a question of misconduct on the part of the man or the woman concerned, or a question of capacity. They had not got the capacity to do the job. If it was not conduct or capacity, it may have been some other substantial reason which, given the circumstances of the case, the tribunal might have said was a perfectly fair dismissal.
Therefore, the circumstances in which it is decided in the law of this country whether or not there should be a fair, or an unfair, dismissal in general terms is not changed by this amendment. What we are trying to do is to make specific—not special—the situation in which someone goes to an industrial tribunal to bring a complaint under this part of the Bill, and a complaint that this Bill creates. This Bill creates the right to complain over a deduction under this part of the Bill—a wrongful or unlawful deduction. One can go to a tribunal.
What we say is that if a man or a woman goes to a tribunal to complain of an unlawful deduction—a right that this Bill has put into the hands of working men and women—and if as a result he or she is dismissed simply for taking advantage of his or her legal rights, and dismissed whether the person wins or loses before the tribunal, in those circumstances that should be an unfair dismissal.
It is difficult to say what tribunals would say. If the noble Lord had come along and said to me, as he often does, "This amendment is not necessary because the tribunals would never do a thing of this kind", that is an argument. I would then say, "Why not make sure, as some tribunals do different things?" But if I may turn to what the noble Lord said, he does not seem to be saying that either. He seems to be saying a whole series of different things.
First, the noble Lord is quite wrong to say that this new clause would resurrect the kind of things that we undoubtedly put in our version of this amendment at the Committee stage. At the Committee stage we carefully said that the two-year rule should be set aside. We do not say that this time. At the Committee stage we very carefully said that the special compensation levels, the special award and so on which apply to unfair dismissal on grounds of trade union membership should apply. We do not say this now.
Therefore in our submission all we are doing is creating an additional specified form of dismissal, but not a form of dismissal which has the kind of non-exceptions that dismissal on grounds of sex, race or trade union membership undoubtedly now has. If the noble Lord had come to me and said, "Yes, I accept this, but I am afraid that I think the way you've written

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it the two-year rule might get back in again or the non-two-year rule might get back in again", we would have accepted that and said, "Very well, we'll take it away and we will come back or you can come back with an amendment on Third Reading which specifically says that those special provisions do not apply". In fact they do not apply on the face of the clause.
Finally the Minister says to me that there is some kind of analogy with the position whereby people can go to industrial tribunals to complain about itemised pay statements. He says that there is no amendment from this side of the House and no provision in the Bill to make that unfair dismissal. He does not seriously want us to believe that the Government cannot see the difference. No employer will dismiss a man because he wants itemised pay statements. In fact if a man wants itemised pay statements, he probably will get itemised pay statements, but if someone goes to an industrial tribunal and gets the employer for making unlawful deductions, we are suggesting that it is much more likely not so much that the man or woman will be dismissed, but that a form of constructive dismissal will take place. It is to protect the worker above all against constructive dismissal in such circumstances, which is quite different from itemised pay statements, that we have moved this amendment. I see that we shall not move the Government. We do not intend to divide the House and therefore I withdraw the amendment.
Baroness Seear: My Lords, may I put to the noble Lord the Minister a more general point? The Minister is an honourable man. Does he not accept that if an individual has a legal right to protect himself in a particular way, as is laid down in this clause, he cannot be penalised for doing what the law of the land specifically has allowed him to do? It is a more general point than just whether the individual can go to a tribunal. It is said on the one hand that there is a legal right and on the other that he will not be protected at all if he makes use of that right. What does the Minister say?
Amendment, by leave, withdrawn.
Clause 7 [Meaning of "wages"]:
Lord Trefgarne Lord Trefgarne moved Amendment No. 12:
Page 10, line 25, leave out ("section 121(2)") and insert ("paragraphs (a) to (d) of section 122(4)").
The noble Lord said: My Lords, with your Lordships' permission I should like to speak to this amendment and at the same time to Amendments Nos. 13 and 14. These amendments update certain references in the Bill that have been changed by other legislation. There is no policy implication in any of them. I beg to move.
Lord Wedderburn of Charlton: My Lords, the noble Lord the Minister has moved this as a technical matter, but in our submission the Government's amendment raises a question of some importance. It was our fault perhaps that we did not appreciate the importance of the old Section 121(2) of the 1978 Act having become Section 122(4) through the amendments to the Insolvency Act 1985. In not so appreciating we perhaps failed at Committee stage to
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do what the Government's own amendments now do to bring out the important point revealed. Here the Government's Bill defines the wages in respect of which deductions are to be made and defines that range of payments described in Clause 7 as,
"guarantee payments and other statutory payments in lieu of wages".
There are five such payments and the Minister's amendment brings out the fifth. As I understand it, the five types of payments are guarantee payments, payments in respect of medical suspensions, payments for time off for trade union activities, pay due under a protective award, and statutory sick pay. It is the fifth in that list that is brought out in Amendment No. 13—part of this bundle of amendments which we agree go together. That list is drawn up in respect of matters which an employee may proceed for in the case of an employer's insolvency. As such they make good sense. When the employer goes insolvent the procedures of the 1978 Act allow him to recover in respect of wages and these other payments which are in the same area of his employment—guarantee payments, payments due for time off, and statutory sick pay.
But when the list is used as the definition of that from which deductions may be made in accordance with the conditions of the Bill, the new perspective may give pause for thought. We ask the Government whether they should not really reconsider the fifth item; that is, statutory sick pay. Is statutory sick pay, as this Bill would have it and as this amendment would now make even clearer, a payment in lieu of wages or of that character as such that deductions by the employer should be allowed? We submit that that is not so.
It may be that the employee will be allowed to proceed with it in an insolvency; that is another matter. But it is not a payment in respect of which the employer should be allowed to make deductions. Indeed, we suspect that but for the provisions—is the noble Lord the Minister suggesting that I am on the wrong point? If he is not suggesting that, we are at one. He is receiving help from the Secretary of State, I understand. We are glad to have the Secretary of State with us again.
The nature of statutory sick pay in our submission, if it is suitable for the insolvency provision, is not suitable for the deduction provision. We say that because were it not for this Bill, we do not think that there would be power to deduct from statutory sick pay. I add, to make myself quite clear on this point, that I am speaking of statutory sick pay, not of contractual sick pay, although the two overlap in the new dispensation of sick pay arrangements now that sickness benefit has been overtaken by statutory sick pay. It is well recognised in the law that statutory sick payments are not of that character.
I shall quote merely one statement from the courts, concerning the case of Palfrey v. Greater London Council in 1985, Industrial Cases Reports at 443. I must quote this because it is rather critical to the case. The learned judge said:
"I do not think that any valid distinction can be drawn between unemployment benefit, supplementary benefit, sickness benefit, industrial injury benefit and so on".

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He continued:
"[Counsel] submits … that statutory sick pay is in a different category because it is paid by the employer who is then reimbursed in full by the state and so … the employer gains. It seems to me that the procedure of the employer making a payment and then reclaiming it is simply a convenient way of paying the benefit. In principle there seems to be no difference between this method and the payment of the benefit through a Department of Health and Social Security office or through the Post Office".
Later the judge said:
"It is pointed out to me that the employer may well have, as indeed this employer had, a contractual sick pay scheme. Under the … Acts, even though he is contractually obliged to pay a certain amount to his employee he can recover that amount back, up to the limits of statutory sick pay, and … that really is a windfall for him. That is true".
The categorisation of statutory sick pay in that passage is clearly that of a social benefit administered through the employer. It is not in the category of a payment within the range of wages of the kind that guarantee payments, payments for time off and protective awards can arguably be for this purpose; for insolvency, yes, but for this purpose, no. I ask this question. Is it not the case that this Bill as drafted would actually help to give the permission to deduct from statutory sick pay which otherwise would not be allowed? It is a very different matter from some of the other payments; so that in fact this Bill is facilitating, if it stays in this form, a deduction from a social security benefit merely because, as the judge said, it is administered through the employer.
It cannot be right to have statutory sick pay in this category for this purpose. If there be an obscurity as to whether deductions are possible under statutory sick pay if they are not wages, then that must be a matter to which the Government turn their mind; but now that we have this chance to revise and reconsider the legislation calmly it surely cannot be right to make deductions from a social security benefit, statutory sick pay, under the guise that it is a deduction from something like wages. It is something like wages for the purposes of insolvency and for some other purposes; and so are a lot of other things. But it is not like wages in respect of deductions from wages and in respect of a Bill of this kind.
I earnestly ask the Minister whether he will have another look at this matter and, indeed, if he does not feel fit to look at this matter, whether he will set out in full, either in reply to my criticisms or in the Library, the precise manner in which statutory sick pay is to be lawfully deducted under the provisions of this Bill and other arrangements so that we can see just how far, under cover of this Bill, deductions are being permitted from social security benefit.
It is a very serious and straightforward point. It is not in any way meant to attack the Government in one sense, because it is my honest belief that this matter has not really been fully appreciated in the transfer of the list from the old Sections 121 and 122 into this Bill. I hope that I am right in that. I believe that I am. I think that perhaps there has been one of those transfers of payments like wages which one so often makes in legislation by reference and that one extra, statutory sick pay, has got transferred. Somebody has noticed it and has said, "We'd better state that separately". I am grateful that they did so because it
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brought it to the light of day and has given rise to my question to the Minister, which I think is on a serious matter.
Lord Rochester: My Lords, in the light of what the noble Lord, Lord Wedderburn, has said, I hope that the Minister will agree to look at this again.
6 p.m.
Lord Trefgarne: My Lords, may I say at the outset that the purpose of this provision is to help the worker and not to hinder. That is what I believe to be the effect of the amendments that I have proposed. However, if the noble Lord, Lord Wedderburn, thinks otherwise that is something that I should very much like to consider because he and I are clearly at one in that point of view. If your Lordships will therefore be good enough to agree these amendments, I shall certainly undertake to respond to Lord Wedderburn's request to reply to him in detail on the way that we see these provisions working. Having done that, I shall he happy to copy my letter to other noble Lords—and in particular the noble Lord, Lord Rochester—who have taken an interest.
Clause 8 [General interpretation of Part I]:
Lord Wedderburn Lord Wedderburn of Charlton moved Amendment No. 15:
Page 12, line 28, at end insert—
("( ) Nothing in this Part shall affect the operation of the Unfair Contract Terms Act 1977 ")
The noble Lord said: My Lords, I apprehend some confidence in believing that the Government could easily accept this amendment for a very simple reason. The issue of the relationship of this Bill with the Unfair Contract Terms Act has been around for some time. We even had an amendment down in Committee that referred to it but, because it was technically not perfect, we did not move it. So the Government have their own notice, and they have been put on notice by us, that there is a relationship.
The reason I believe the Government may find it not difficult to accept the amendment is that I think the Government do not wish the Bill they are moving to affect the Unfair Contract Terms Act. Otherwise the Government would have said so. So, if they have not said the opposite, then they must intend that it shall not affect the operation of the Unfair Contract Terms Act. That seems very reasonable and it would be better said. All that this amendment says is that it would be better said. And it would be better said because there are some areas in which the Unfair Contract Terms Act might make a difference.
The Unfair Contract Terms Act has some complex-ities but, like most complex statutes when attacked vigorously, it can be made very simple. At the risk of some inaccuracy, I may put it to your Lordships in this way. There are two parts of the Unfair Contract Terms Act 1977 which can affect the employment area that is relevant to this Bill. The 1977 Act introduced a most important area of novelty to the law of contract over many areas: that is, to give the courts a wider power to control the terms of the contract by reference to what is reasonable. I say that only sotto voce because I know how little the Government think of that kind of test.
But there are two areas where we are dealing with a contract where one person is dealing with another as a consumer or on the other's standard terms and where the other relies upon an exemption clause to exclude his liability totally to perform or to perform below that which would be reasonably expected of him. That is in Section 3. In Section 4, he relies upon an indemnity clause in respect of negligence and breach of contract.
I think that there will be a lot of cases where employment contracts will be touched by the Act, although opinions differ; but there certainly could be some. Where, for example, the employer is obliged to pay a wage and is relying upon a clause allowing him not to perform in full, it could be that Section 3 would apply; or where the employer deducts the final wage in full under a document which represents written consent of the worker but which is not in the contract.
Those who have followed the Bill carefully will know that that is a Clause 1(1)(b) and not a Clause l(1)(a) situation. In a Clause 1(1)(6) situation, it is quite easy to imagine that the employee may be able to challenge a deduction or a series of deductions or a final deduction under the Unfair Contract Terms Act. I take it that the Government wish to allow that possibility to continue. There are some who say that the employee is not someone who deals as a consumer. There is a definition in Section 12 of the Act. I shall not read that out but I shall read the effect of it in Chitty on Contracts, vol. II, page 669, at Note 54, where the learned authors state:
"It would seem clear from the definition of that concept in s. 12 of the Act that an employee 'deals as consumer' with his employer in relation to his contract of employment".
That quotation can be matched a dozen times from other authorities.
So it seems that the employee will often be dealing as a consumer and therefore within the Act, and Section 3 might apply to a number of situations. Indeed, the county court decisions that there have been have accepted that the 1977 Act can apply to some situations. By "apply" I mean that thereby the court has within its grasp the ability to control to some extent (only to a limited extent) the reasonableness of the total non-performance. I suspect that it may be within the area of final payment non-performance, where perhaps the employer has not been advised by lawyers good enough to draft the contract well enough; because the matter still has to be tested against its terms. Nevertheless, there will be some cases where one can foresee that it might apply.
Since that is so, and since it is normal practice where there is doubt in respect of overlapping statutory enactments to state the position and not to have any
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doubt about it, I hope that the Government, since they have not dealt with the matter at all and have not wished to amend the Unfair Contract Terms Act which must be their policy, will see fit to accept the amendment. I beg to move.
Lord Trefgarne: My Lords, I must begin by saying that the Unfair Contract Terms Act 1977 is an enactment dealing almost exclusively with rights under consumer contracts and that in the Government's view it was never intended that it should influence employment law. There is one minor exception to that in paragraph 4 of Schedule 1 to the 1977 Act which makes it clear that parts of Section 2, which prevent the exclusion of liability for negligence, apply to contracts of employment to the extent that they favour the employee. The Act contains a similar exception in its application to Scotland, though it is achieved in a rather different way. This Bill in no way affects those minor exceptions.
I am aware that some commentators hold the view that Section 3 of the 1977 Act applies to contracts of employment. I am not sure whether the noble Lord, Lord Wedderburn, regards himself as a commentator, but that view has certainly been expressed. However, I have to say that the Government do not share that view; nor are the Government aware of any cases in which that section has been held to apply to such contracts. If the noble Lord has any information to the contrary, I should of course be glad to know of it. I am not certain whether, in the course of his remarks, he indicated some view to the contrary. If he did, I shall certainly study them; but in the absence of such information the Government's views are that the amendment would imply that the Bill would or at least could affect the operation of the 1977 Act. Since the Government do not believe that the Bill affects the operation of the 1977 Act in any way, I believe that the amendment is both unnecessary and confusing. I therefore ask the noble Lord not to press it. Having said that, when I am able to do so, I shall carefully study in Hansard the words that he used this afternoon.
Lord Wedderburn of Charlton: My Lords, I am encouraged to ask leave to withdraw this amendment, because I have a nasty feeling that when the Government realise the position they may want to add something to the Bill. I merely say to the Minister that my information is, from secondary sources, that there are various county court decisions, including one in the Brentford County Court in December of 1983, which confirm a view which is held, not simply by some commentators, but rather, I believe, by any writer who has ever written upon this Act. If I may quote from Professor W. Rogers' commentary of the original Act, he states that a contract of employment is one where the employee "deals as a consumer".
The reasons he deals as a consumer is the definition in Section 12 which I was going to read but which I will send to the Minister if he cannot obtain it otherwise. That contains a wide definition of the words, "deals as a consumer", and it covers an employee, where the employer is dealing in the course of his business. Perhaps it was not intended but such appears to be the law. Of course, I was not referring to Section 2, which

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is dealt with by the Schedule that the Minister quoted. This has nothing to do with Section 2 but rather with Section 3.I suggest that it applies especially in Section 3, and I suspect that the answer, which is quite astonishing to me, is that the Government think this 1977 Act will have no effect on the position at all. Since it might work to the advantage of a few poor workers in county courts in the future, I certainly beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.15 p.m.
Clause 12 [Continued existence of wages councils after repeal of Wages Councils Act 1979]:
Lord Dean of Beswick Lord Dean of Beswick moved Amendment No. 16:
Page 14, line 5, after ("effect") insert ("other than in relation to the clothing industry").
The noble Lord said: My Lords, I did, as some noble Lords will recall, speak to this amendment during the previous stages. I said then that I would study Hansard to see what the Minister had actually said. I am not by any means convinced, having read what he did say, that he answered the points as I put them.
Because of the pressure on time for this Bill, I do not intend to speak for very long. However, the Minister, in his reply, said:
"They showed that the majority of employers and employers' organisations favoured retention and reform of the system. I acknowledge that most employers in the clothing industry favoured retention with minimal change."—[Official Report, 26/6/86; col. 425.]
The minimal change which they wanted and sought in response to the Government's consultative paper of the major clothing employers' body, the British Clothing Industry Association, was not any reduction in the powers of wages councils but an institutional change of the removal of the independent members to create a statutory joint industrial council. The Wages Bill makes the creation of a statutory joint industrial council impossible. The Federation of Merchant Tailors wanted no change at all. It therefore seems that this is being forced not only on the employees but on the employers as well.
I drew attention, as the noble Lords present at the time will remember and as is recorded in Hansard, to the fact that the removal of these wages councils could have a serious effect on people, some of whom are very poorly paid and working in very poor conditions. I am glad to see that the Secretary of State is here because I have a copy of a speech that he made to the London Business School, I believe on 28th April. In that speech the Secretary of State referred to his first ventures into the industry which was in those days known as the rag trade. That was, as he says, with a subsidiary of the Great Universal Stores. Although the clothing industry has never been noted for its high pay, I have no doubt that would have been in a factory where the employer recognised the dignity of the workers and gave them perhaps the best possible conditions.
My point in wanting to take the clothing industry out of this Bill, as I said in my previous address, is that I am convinced it will place in jeopardy and have
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adverse effects upon people in the smaller and not so desirable rag trade factories. Although the wages councils are not responsible for such things as fire precautions and regulations, this industry does have a sad history of fatalities, in some cases because of bad working conditions. In 1983, four women died in a fire in a rag trade factory in London. Some years ago, when I still lived in Manchester, in 1976 or 1977, I recall walking past a factory just outside Piccadilly Station. In that building, seven floors up, seven women died, most of them young mothers trying to earn money to give their families a better life. Those 11 deaths were among people who were working for employers who took very little care of their employees and did not by any means fulfil their obligations to employ them in safe and hygenic conditions. That type of factory is unfortunately still in existence, whether we like it or not.
As I have said, one cannot blame the wages councils for things like fire precautions which are not observed, but I think that the fact that such tragedies have taken place clearly indicates that there are still many employers who have no regard for the minimal decencies of employment and who will exploit their employees. This particular trade has a history of this sort of thing. Over the last few years advances have been made and conditions and rates of pay are better than they were and there are an overwhelming number of what I call good employers within that particular industry. That is true because those shops are, in the main, unionised, but there are still in existence literally hundreds of factories, certainly in the centres of the big cities and particularly in the centre of London, where people are being exploited.
I would hope that the noble Lord will listen sympathetically to what I have said. I do not think I am in any way exaggerating the case or making it sound any more adverse than it is. I know that in a lot of these factories are immigrant people who in some cases do not fully understand the language of this country: some are not very well Anglicised. I can only say that there are hundreds of such individuals and they are the type of person whom these small rag trade factories attract. Having said that, I can only see the removal of the wages council having an adverse effect on some of the lowest paid people in any industry in this country. I beg to move.
The Lord Bishop of Manchester: My Lords, I should like to support the noble Lord, Lord Dean of Beswick, in this amendment. I appreciate that we are at the Report stage and that long speeches are not welcome or necessary at this stage. However, there are a number of things in the Bill as a whole about which I am unhappy. In regard to the clothing industry and textile workers, I am remided of a recent visit to India and of going round a textile factory there. Many Indian workers exist in appalling conditions in these small factories. Speaking to the employer at the end, I asked him about the sitution as regards unions so far as his workers were concerned. He lifted his eyes to heaven and said, "Thank God we have no unions in this factory". It seemed to me then that one could see in the textile factories of India very much what things must have been like in Manchester, Salford and other cities where much of Britain's wealth was created in this industry back in the 19th century.

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What alarms many of us, I think, is any tendency to step back in that direction, because low-paid workers in those sorts of industries need not less protection, but more. I appreciate that what is proposed affects workers under 21; but if you look at the textile industry a great deal of what I have read about it indicates that about a quarter of its workers are young workers and many need the kind of protection which the wages councils give.
It might be relevant to remember that when the Social and Industrial Affairs Committee of the Church of England made comments on this Bill last year, one of the things it said was this:
"A job-at-any-price policy might well produce a situation in which the alternative to poverty caused by joblessness became poverty through low wages".
It may be asked: why should workers in the textile industry be excepted when there are others in the hotel and catering industries who are also low paid and need this kind of protection? I think the textile industry has a strong claim to being a special case. Looking, for instance, at Greater Manchester, I see that very large numbers of workers come from ethnic minorities. There are many girls employed there, and I believe they need the kind of protection which wages councils can give. So I would support the amendment of the noble Lord, Lord Dean of Beswick.
Lord Teviot: My Lords, I also have a lot of sympathy with this amendment. The noble Lord, Lord Dean, has naturally concentrated on the Clothing Manufacturing Wages Council, which covers nearly 200,000 workers. The other three wages councils which are included in the clothing industry each cover only a few thousand workers. I intend to concentrate on perhaps the largest of these, the Retail Bespoke Tailoring Wages Council, as I have received represent-ations from both the Federation of Merchant Tailors and the National Union of Tailors and Garment Workers. I may say that both their briefs have been most caring, sincere and moderate. Retail bespoke tailoring is a craft industry where the tailor makes the garment individually to fit each customer. The garment is generally sewn by hand, rather than by machine. Those of your Lordships who may be fortunate enough to be wearing suits bought in Savile Row or similar streets will almost certainly have been customers of members of the Federation of Merchant Tailors and will be enjoying the benefits of the craftsmanship of members of the National Union of Tailors and Garment Workers.
The Federation of Merchant Tailors is an organisation of small employers. As such, their views ought to have been taken seriously by the Government. Unfortunately, it appears that the Government, as the noble Lord, Lord Dean, has pointed out, have ignored their wishes so far. I hope that my noble friend the Minister will be able to give us some joy on this. In putting forward the opinions of the Federation of Merchant Tailors, I cannot do better than quote from a letter I have received from the honorary secretary of the federation, Mr. Robert Bright. He writes:
tail Bespoke Tailoring Wages Council has served both the industry and the workers of our industry very well indeed. We have spent two years simplifying the wages council order and would have
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simplified it still further but for the impositions of the Department of Employment lawyers. "
I may add that, if the Department of Employment lawyers, who are responsible for the new Clauses 17 and 18 (which the Government introduced in Committee at a very late stage), are also drafting the provisions of wages council orders, it is not surprising if the federation has not been able to simplify the wages council order as much as it would like.
Mr. Bright continues:
"The Retail Bespoke Tailoring Wages Council deals with a highly-skilled industry and sets rates for different skills It also sets rates for trainees This is particularly important as the industry is contributing more and more money towards the trainee and has in fact linked trainees' rates to particular modules of learning as specified by the Clothing and Allied Products Industry Training Board".
Mr. Bright goes on to point out that the Retail Bespoke Tailoring Wages Council fixes rates not according to age but on the basis of skill and experience, and that it takes all of five years for a worker to qualify as a craft worker.
Although retail bespoke tailoring is a craft industry, it is an industry where exploitation can occur. Work can be contracted out, though that there is contracting out does not necessarily mean that there is exploitation There is a tradition of craft workers in the West End of London setting themselves up in their own premises as self-employed craftsmen. Many of these outworkers are members of the National Union of Tailors and Garment Workers and, as well as being covered by the wages council, their terms of employment are regulated by collective bargaining between the union and the federation. Elsewhere where workers are not union members, exploitation can occur. This is a matter of great concern to the Federation of Merchant Tailors, which wishes to maintain the industry's image as a good employer and also does not wish to face unfair competition Indeed, the federation is already concerned that the wages council order is not being adequately enforced. Mr. Bright again writes:
"We are already seeing the re-emergence of sweat shop labour, something which the original Wages Council Act sought to defeat and remove".
He goes on to complain about the lack of wages inspectors and the inadequacy of the wages inspectors' lists of establishments.
As I indicated in the Second Reading debate, I am not opposed to the Bill as a whole, but I think it can be improved to take account of the different circumstances of the clothing industry and the different views of employers in the industry.
Lord Harmar-Nicholls: My Lords, I hope the Minister will resist this amendment. If there is any merit in the wages councils as they have operated, then they ought to have been able to deal with all the industries. I think they have interfered with full employment and I believe their interference in carrying out their job has, in many instances done a great deal of harm. I am not saying that on specific occasions they cannot perhaps right a grievous wrong in an individual case, but the overall interference we have had is, I think, on the debit side rather than on the credit side as regards wanting to help the revival of our industrial strength.

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And where do you stop? If one accepts the arguments we have heard from the noble Lord who moved the amendment, from the Bishops' Benches and from my noble friend, they are very meagre arguments. If they are acceptable in order to remove the clothing industry from the effects of this, then you are opening the door and you would have to be prepared to accept arguments, if you are prepared to accept those frail ones, in an extended area.
I was rather disturbed by the comments from the Bishops' Bench, which were a good example of what I have in mind. When the right reverend Prelate was talking about the clothing industry, he said that in that industry, as well as in the hotel and restaurant industry, people are poorly paid and implied that they were covered by the arguments. I know something about that industry. For the whole of my life I have been connected with it and I do not think it justifies the sort of implication there was in the speech of the right reverend Prelate. If that sort of frail argument is accepted in the case of clothing, it will be extended to other industries.
I believe that the Bill is on the right road. I think that the Minister's arguments have been well based in playing a small part in reviving the sort of virility that we want in our industries, if we are to get back to anything like our previous level, and that is the only way in which we can deal with the ogre of unemployment.
6.30 p.m.
Lord Young of Graffham: My Lords, may I say at the outset that I have been touched by the interest and evident concern expressed about my whereabouts by the noble Lord, Lord McCarthy, and the noble Lord, Lord Wedderburn of Charlton. They said, "The noble Lord the Secretary of State enters the Chamber". When I leave they will say, "The noble Lord the Secretary of State leaves the Chamber". I wish to assure them that I am here now and I intend to remain here. That will, no doubt, put their minds at rest.
Our proposals for reform of the wages council system are based on the responses received to the consultative exercise we conducted last year. These showed that most employers and unions in the industries concerned wanted the system to be retained in some form. The majority of employers favoured the reforms put forward in the consultative paper. We accept that the major employer body in the clothing industry favoured retention with minimal change, but it remains the case, however, that employers overall wanted reform and this is what we have provided.
I am grateful to the right reverend Prelate the Bishop of Manchester for his comments, but I have no doubt that the clothing industry in India is a very different industry indeed. But the conditions of work which the noble Lord, Lord Dean of Beswick, raised are matters which should be settled by those concerned with conditions of work—the Health and Safety Executive and those involved with fire. Those matters are of great concern to my department and we must ensure that people work in conditions of safety and comfort. That is something we must seek. Should the noble Lord have any instances at all of where requirements on
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proper conditions are not being complied with, I should be more than happy to take them up on his behalf. But that is an entirely different matter from pay.
It would clearly be administratively burdensome to maintain two different sets of statutory wage-fixing machinery—one for clothing manufacture and one for the other wages council industries—quite apart from the separate machinery for statutory wage fixing in agriculture, of which mention has been made by noble Lords opposite in Committee. Nevertheless, we have considered very carefully the argument that the clothing industry should be treated differently from other wages council industries. We are not convinced, however, that a case for exceptional treatment has been made out. I therefore ask noble Lords to resist the amendment.
Lord Dean of Beswick: My Lords, I can only express my absolute disappointment at the emptiness of the reply. I think that the noble Lord who spoke from the Government Back-Benches made a miniature Second Reading speech, rather than a speech in reply to what I said on moving the amendment. I made the point—and I think I made it quite clearly—that we are dealing with people at the very lowest end of the wage scale, working in some of the poorest conditions. I am convinced that to remove the wages councils and the protection that they give will only exacerbate that situation. When I was talking about the 11 people who had died, I said I was aware that it was not a wages council responsibility, and I was using that as an example to indicate the type of conditions for some of those people in their so-called workshops.
However, time is pressing and I realise that there is very little prospect of carrying the amendment. All I can say is that I think the Secretary of State will carry a very heavy responsibility, when some of the bad employers at the bottom end of the scale start to victimise still further their employees, which is what I think will be the end result of this legislation which is now going through. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2 [Constitution etc. of wages councils]:
Lord McCarthy Lord McCarthy moved Amendment No. 17:
Page 36, line 26, leave out ("5") and insert ("3").
The noble Lord said: My Lords, I am very pleased to see that the Secretary of State is not only here but is taking part in the debate, because this is an amendment which particularly concerns him. I am moving Amendment No. 17 and I shall speak also to Amendment No. 18. We return here to the situation that we were in at the Committee stage, when at the very last moment—and not before—we found in the Marshalled List that the Government were proposing to change the composition of the independent element on the wages councils and to increase it from three members to five.
As I said then, no consultation has taken place on doing this. The CBI was not told, the TUC was not told, it was not in the consultative document, it was not mentioned in the other place, it was not mentioned

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on Second Reading, and it was not mentioned on the first day of Committee. But we suddenly found on the second day of Committee that there was down an amendment in the Government's name, changing the number from three to five. The object of our amendment is to go back to three, and in addition to that to provide, at page 37, line 27, a reserve power for the Secretary of State to dismiss any one of the three. If anyone fails to attend for more than two successive meetings, we say that the Secretary of State may cancel the appointment and appoint a replacement.
We put the amendment in that form because of the debate in Committee, and because of the statements made by the noble Lord, Lord Trefgarne (who has now been relieved) who denied that it was anything to do with all the rather unfortunate suggestions and implications that we were making. For example, we suggested that this change was rooted in debates in another place in Standing Committee K, where the Government Back-Benchers moved to restrict the composition of the new wages councils and to get rid of those old pluralists on the wages councils, such as Sir John Wood and others. The Minister said that that was not the reason.
He said that he was not doing it in order to put in small businessmen, dwarf businessmen or businessmen who knew something about small businessmen, which was suggested in Committee in another place. He said that he had no desire to get rid of the present amalgam of lawyers, academics and the odd surviving trade unionist. He said that it was not at variance with the remarks which Mr. Trippier made on 15th April, at col. 604 of the Official Report, in turning down all those amendments:
"We have difficulty in finding people who are prepared to devote time to the wages councils … It is not easy to get such people whatever the fees may be".
I can tell him that the fees are £64 a day.
Above all, the Government stressed in Committee that they were not trying to pack the wages councils. They were not trying to create jobs for Sir Alfred Sharman, Professor Patrick Minford or, before he produced his report, Professor Peacock. They were not trying to put in people who agreed with them. They wanted to see the wages councils retain their indepen-dence. That is what they said. Despite the few letters and the few complaints which were mentioned at the Committee stage, the noble Lord, Lord Trefgarne, said that the reason was that with three independent members on the present wages councils, there are at present some who have occasionally had difficulty in attending all the meetings of the council and the Government wish to ensure that they are not put to undue inconvenience. Noble Lords can see, I hope, why we have moved the second amendment in my name on the Marshalled List.
Subsequently the Minister asserted that the change from three to five arose from the joint approach of both sides of the Retail Wages Council and that it was sponsored by the employers and supported by the Union of Shop, Distributive and Allied Workers; or, at least, he said, by the trade union in the Retail Wages Council. Naturally enough, I have looked into that and I am authorised to say that that is not the view taken by USDAW. It says that it did see the Minister; it says that it did say that it would accept a move to five
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(or, rather, that it would go along with the move to five which was desired by the employers) but that i t would do so only if the extra two could be appointed in some balanced way, and that it did not approve of the unrestricted and straightforward amendment as it stands.
But, more importantly, because of the passage of time, I have been able to look further into this last-minute change. It is curiouser and curiouser. What I was not aware of at the time was that at the Committee stage in another place a change was made in the composition of the independents on the wages councils so far as their period of office is concerned. At the Committee stage in the other place the Labour Members supported a Conservative initiative to change the period of office from five years to three years. That was because it was said that there was a problem of availability, although, of course, as it had been done in that way it meant that the Secretary of State in the future would have had to create rather more members of wages councils.
The average number of appointments to wages councils which the Secretary of State has to make if it is a five-year period of office is some 15·6 a year. But despite the fact that he finds it difficult to find them, as a result of the amendments that had been passed in the other place he will now have to find 26 new members of wages councils next year. As a result of the amendment which the Government put down he will have to find another 52 members. In other words there will be 68 appointments next year, compared with an average of 16 appointments allowed under the 1979 Act. That is despite the fact that they are hard t0 find and despite the fact that Mr. Trippier said:
"We have diffculty in finding people who are prepared to devote time to the wages councils. It is not easy to get people whatever the fees may be".
Despite that, the Government have proposed and passed an amendment which will multiply by a factor of four the number of people the Secretary of State has to find to run wages councils.
So we must return, I am afraid, to the questions that we asked in Committee. Can we have assurances that these people will not be used to change the composition of the wages councils? Can we be assured that, for example, the Secretary of State will not be terminating the appointment, as I suppose he might have to, of those who have served for four years on wages councils and who will now find that they are one year, as it were, out of time? That would increase the number even more.
Why cannot the Secretary of State accept our amendment? Our amendment says that you can go back to having three members rather than five. You reduce the period in which they are going to operate but if you find that an individual member of a wages council is not turning up and is not doing the job, if the evidence shows that he fails to attend for more than two successive meetings, it will be easy enough for the Secretary of State to cancel his appointment. Of course, if he has a good excuse, you do not have to cancel his appointment. That is a residual power left in the hands of the Secretary of State. But surely, rather than multiply by four the number of appointments of people who are very difficult to find, the Secretary of State should accept our amendment. I beg to move
6.45 p.m.
Lord Rochester: My Lords, in Committee my noble friend Lord Sainsbury and I opposed the government amendment that the number of independent people on wages councils should be increased from a maximum of three to no more than five. We did so largely because the amendment had been made available to us, as the noble Lord, Lord McCarthy, has just said, only a few hours before we were required to take a decision on it and also because what the noble Lord, Lord Trefgarne, said in its support in Committee appeared, at first sight at least, to be somewhat at variance with what the Under-Secretary of State had said in Standing Committee in another place.
There it was stated that in the consultation process the Department of Employment had received few letters about the composition of wages councils, that there did not seem to be dissatisfaction with their composition and that that in itself was compelling. Having since then had time to consider the question further, I must say for my part that I now have rather a more open mind about the Government's proposal. But we—I think I can speak for my noble friends as well—certainly need more information from the Secretary of State before we can reach a conclusion.
Practically all that the noble Lord, Lord Trefgarne, told us in Committee was that the independent members should be increased from three to five because some of the three there are at present have occasionally had difficulty in attending every council meeting: There are a number of possible ways of resolving that problem. One is the course adopted by the Government. Another is that just proposed by the noble Lord, Lord McCarthy. I was once chairman of a district manpower committee, which, like a wages council, was composed of representatives of employers and employees. It also had some independent members. Under its constitution there was a rule that, if a member failed to attend more than a certain number of meetings over a specified period, his or her membership could be terminated. That principle could also be applied in this case.
A further possibility, a further way of resolving this problem, would be some modification by having alternate independent members so that out of a total of five people any three who were available could attend a meeting. At present, there is an unknown factor in the equation—the number of people the Secretary of State will appoint (for it is in his power to appoint them) to represent employers and workers respectively on a wages council. I am sorry to have to say this, but unfortunately the Government seemed to us to act in this matter at an earlier stage in such a way as to raise doubts as to their motives. I am deliberately couching my remarks in moderate words. It might help to allay suspicions if the Secretary of State could now give us some indication, at any rate, as to how many people are likely to be appointed as representatives respectively of employers and employees. We would then have a better idea of the numerical relationship between the five independent people and the others who comprise a wages council.
Finally, and here I may have to part company with the noble Lord, Lord McCarthy, I hope that the
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Secretary of State when he replies will be able to say that if two more independent people are in the event to be appointed, then at least one of them will have practical experience of industry and that due regard will be paid to the fact that in the industries that are covered by wages councils there will be a rather higher proportion of small businesses than there is in industry generally.
In summary, the Government need to tell the House a good deal more about what it is that they have in mind than they have done so far, and that may help to make up the minds of my noble friends and myself.
Lord Young of Graffham: My Lords, an amendment to increase the maximum number of independent members from three to five was adopted by your Lordships in Committee, and the noble Lords and the noble Baroness are now seeking to reinstate the position that obtains in current legislation. I may stress that the amendment adopted in Committee carries no implication of criticism of the independent members of a wages council. It is inevitable that there will be difficulties in finding a date and time convenient for the very large number of people involved in the operation of a major wages council.
To reply to the noble Lord, Lord Rochester, it is technically possible for there to be up to 30 people on each side of a wages council, not including the independent members. On occasions, there would also be last-minute absences through sicknesses or other circumstances beyond the control of the individuals concerned. Increasing the number of independent members that can be drawn upon will make it easier to achieve a fuller presence at meetings which have to decide questions that may be vital to the industry concerned.
I assure noble Lords that there is no intention on the part of the Government to pack the ranks of indepen-dent members with their supporters. Our aim is to avoid criticisms made in the past, particularly by the retail industry, that important questions are left to be decided with the assistance of only one or, at best, two independent members. My noble friend Lord Trefgarne disabused the noble Lord of that idea when it was raised in Committee, and I am surprised to hear the noble Lord repeat it.
The discussions in Standing Committee K centred on the need for independent members to have relevant business experience, the period of their appointment, and on how many councils they should sit. The number of independent members was not, as I understand it, brought into question.
Amendment No. 18 is simply unnecessary. Paragraph 8(1) of Schedule 2 to the 1979 Act provides:
"A member of a wages council… shall hold and vacate office in accordance with the terms of his appointment".
Paragraph 8(1) of Schedule 2 to the Bill repeats that wording. The current instrument of appointment of independent members states:
"If a member appointed by the Secretary of State fails to attend one-half of the total meetings of a wages council in any period of 12 months, or, should only one meeting to be held in any 12 months, two consecutive meetings, the Secretary of State may, after giving the member an opportunity to be heard, determine his appointment".

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Certainly in recent years neither I nor my predecessor has had occasion to terminate the appointment of a member on those grounds.
Lord McCarthy: My Lords, I am sorry that the Secretary of State should take that line. I am glad that he said that there is no implication of criticism even of those members who do not turn up. I am glad that he says also that he does not want to change the composition, although he did not actually say that he would not put small businessmen on the councils. That point was put very strongly in another place at the Committee stage. The point that surprises me is that the Secretary of State now says that there is no real problem, because it would be perfectly possible by the existing rules to put on the councils people who would come.
We thought that because those were the existing rules, perhaps there were two tests: that one had to fail to attend half the meetings and, in addition, to fail to attend two successive meetings; and that it might be better to drop the rule about failing to attend for half the meetings and say that if a member did not attend two successive meetings that would give the Secretary of State the additional power. However, the noble Lord said that he has another power, but that he has never dismissed anybody for bad attendance and has no wish to do so. I fail to see therefore why the noble Lord needs his amendment. It all looks very suspicious. However, we shall not divide the House, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 18 not moved.]
Clause 14 [Wages orders]:
Lord McCarthy Lord McCarthy moved Amendment No. 19:
Page 16, line 10, at end insert—
("( ) fixing appropriate premia payments other than overtime rates in respect of time worked in excess of basic hours where there is evidence that the abolition of orders fixing such payments has been followed by their general disappearance among the workers to whom they applied.").
The noble Lord said: My Lords, in this amendment we are trying to persuade the Government to return to the issue of fixing appropriate premia payments. The House will remember that at Committee stage we went through a whole series of amendments in which we sought to persuade the Government to put back into the Bill various elements that they had taken out of the 1977 wages council legislation.
As a result of the present Bill, the only matter that the wages councils will be able to fix is a single rate and a single overtime rate. We particularly sought to reinstate various kinds of premia payments: occupational rates, Sunday overtime rates, piecework guaranteed earnings rates, annual holidays, and so on. They were all rejected by the noble Lord, Lord Trefgarne, in a variety of ways.
He rejected them for example at col. 457 of the Official Report for 26th June, because of the length and complexity of existing wages councils' orders; or, at the same place, because of the unnecessary burden that the kind of provision we were suggesting would impose, giving businessmen less time to run their businesses; or, at col. 460, because of frequent
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complaints of the minima set for Sunday work in the retail trade. Finally, the Minister rejected our proposals at col. 469 because of the need to sweep away the inordinate detail made possible by the 1979 Act.
Nevertheless, after that debate, in retrospect and in contemplation, and after reading Hansard, we noticed that the Minister had not argued that premia rates were in themselves bad and that individual workers should not be paid overtime rate on Sunday, or that they were not entitled to shift allowances, to holiday premia, to extra pay for unsocial hours, to dirt money, or to extra payment for working at night. His argument was rather that such matters were the subject of collective bargaining or for individual contract negotiations.
He told the Committee not to be faint-hearted; that such excellent provisions would survive. In particular, at col. 457, when speaking about occupational differentials, he said:
"The Bill does not remove workers' rights to differential pay rates. The majority of workers are likely to continue to be entitled to their current rates under the terms of their contract of employment.".
In other words, if the Minister was speaking for the Government—and I take it that he was—he was telling us at that point that the Government do not envisage (and I take it would not want to see) the majority of workers working without overtime premium, shift allowances, holidays, and so on. The Government are confident that despite the fact that there is no legal regulation, matters would continue much the same; the rate of increase in wages may decline but the premium payments, which have nothing to do with the rate of increase in wages, which are merely proportionate to what that rate of increase is, will remain.
That brings us to the amendment. It only comes into operation if it turns out that in their wisdom the Government are wrong. The amendment states that:
"the abolition of orders fixing such payments"—
that is to say, premia payments other than overtime—
"has been followed by their general disappearance among the workers to whom they applied".
So the amendment only comes into operation if it is clear within a wages council that, as we fear—and we are no more certain than the Government can be—the removal of statutory regulations of premia payments may lead to the erosion certainly, for example, of double time for Sunday. That is the one we are most bothered about, or the removal of premia payments for public holidays—that kind of premium. The regulations imposed by the amendment, if passed, would operate only if we were right and the Government were wrong. In that respect I see no reason why the Government cannot accept the amendment.
7 p.m.
Lord Young of Graffham: My Lords, this amendment is designed to enable wages councils to fix premium rates notwithstanding the fact that they may already have fixed an overtime rate if there is evidence that, in general, the demise of the present wages orders has resulted in employers no longer continuing to pay those premium rates.

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Not only would this result in giving wages councils additional powers—something which this Govern-ment have made clear they simply cannot contemplate —but it would lead to more bureaucracy because no council could exercise its power to set premium rates unless there was evidence that the rates contained in the current wages orders were no longer being paid. We should need to make yet more inquiries of employers as to their practices and they would have to provide information on their pay structures. The Government are determined to reduce the burden on employers, not to increase it.
The clear message from the consultative exercise was that the wages council system was in urgent need of fundamental overhaul, and if this could not be achieved then the system should be abolished. Perhaps the noble Lords opposite would do well to listen to what businesses are saying about unnecessary red tape instead of seeking to tie businesses hand and foot so that every conceivable term and condition is the subject of detailed statutory prescription. Employers must be allowed the freedom, within the constraints imposed by Part II of this Bill, to run their businesses free from constricting bureaucracy. The Bill achieves that objective but still maintains a basic wage floor. Premium rates of the kind which the noble Lord opposite seeks are for agreement between parties and not for wages councils to fix. The amendment would run counter to the Government's objectives and I must therefore ask your Lordships to reject it.
Lord McCarthy: My Lords, I am not surprised at what the Minister said. Obviously we have nothing left in the sweetie bag tonight. However, I have to comment on some of what he said.
The noble Lord says that this amendment could not possibly be accepted because it would give extra powers to the wages councils. That is like saying, "I have cut off your legs, I have cut off your arms and now you want your left foot back." Of course, if you take away virtually all the powers and someone then asks for a tiny residual addition to the powers that are left, you can always say that that means extra powers. It only means a slight addition—extra powers from the point to which the wages councils have been reduced. So we do not think much of that reply.
The Secretary of State says the amendment could not possibly be accepted because there would have to be evidence. I know that the Government—and my noble friend Lord Wedderburn has accepted it—do not like reason. We are not supposed to talk about reason and now we are not supposed to talk about evidence or anything which requires evidence and reason. Unreason and prejudice is fine, but anything which requires you to go out and look at the evidence to see whether, in fact, the poor devils are getting any payments of premia is bureaucracy. We know the answer. The Government say, "We do not need evidence. We hate evidence because, on the whole, it is against us". I shall endeavour to show this in the next amendment.
Thirdly, the noble Lord says that we must listen to business. Here there is a little evidence. It is appalling, of course, and appallingly conducted. It is a small
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sample which would be a disgrace to any social scientist. Nevertheless, the Government did a tiny survey with their paper, Burdens on Business. In general terms it showed that wages councils did not bother businessmen. Very few of them mentioned the councils. They were much more concerned about VAT, and so on, than about wages councils. That is not what the CBI and many other businessmen were saying to the Government, but we are being told to listen to the businessmen.
The Government have never actually published the results of the consultative document. They make general statements about how everyone wanted most of the system taken away. They have never published the document and I challenge the Government, even now, to publish what businessmen said. We know what trade unionists said. The trade union evidence has been published. The TUC published what it said. The TUC is against any change in the present system, but the Government say we must not listen to the trade unionists, that we must not have the evidence but should listen to the Government telling us what businessmen say to the Government.
We see no reason why we should accept any of this but we do not propose to divide the House and therefore I ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McCarthy Lord McCarthy moved Amendment No. 20:
Page 16, line 10, at end insert—
("( ) fixing a minimum period of annual holidays.")
The noble Lord said: My Lords, we once again return to an earlier debate, and I must admit that I am in a slight difficulty. I fully accept what the Secretary of State was suggesting or implying. We have been complaining or, rather, drawing attention to the fact that the noble Lord, Lord Trefgarne, was conducting this debate for the Government and now that the Secretary of State is conducting the debate for the Government I find, unfortunately, that all my quotations come from speeches made by the noble Lord, Lord Trefgarne. Therefore, it is possible for the Secretary of State to say that he is not quite certain whether he would have said all that. Nevertheless, we must do our best.
This amendment arises from the Labour opposition, with the assistance of the noble Lord, Lord Rochester, and the noble Baroness, Lady Seear, pressing the Minister in regard to Amendment No. 87, which we tabled in Committee to give back to wages councils the power to decide, first, minimum annual holiday rates and, secondly, minimum annual holidays. In his opposition to our amendment the noble Lord, Lord Trefgarne, focused almost exclusively on the second half of our amendment. I regret that he is not here now because I have to quote what he said. On 26th June, reported in col. 467 of Hansard, he said:
"If this amendment were accepted it would enable wages councils to continue setting the complex rules about holidays and payment for holidays which bedevil the present wages orders.
"We strongly believe that this is a matter which should be left for agreement between employers and workers, and that it is indefensible for such matters to continue to be the subject of detailed statutory prescription."

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Again, we have these general assertions with no evidence. The Government do not like evidence. The noble Lord continued:
"There was almost universal support among employers"—
no percentages—
"for the view that the wages council system must be drastically reformed if it is to remain. Many of the underpayments which occur are attributable to misunderstanding, and miscalulation and payment for holidays figure prominently among these underpayments."
The noble Lord subsequently amplified this in col. 469. He said:
"The detail has been such that even large firms have had difficulties sometimes"—
no names—
"in understanding the orders and a number of errors have inadvertently occurred. It is this inordinate detail"—
whether it is time-and-a-fifth or time-and-a-half, even Sainsbury's cannot do it, we are told—
"that we do not think should stand between an employer and employee and that we seek to sweep away by this measure. This amendment would prevent us doing so. I invite the Committee to reject it."
It seemed to us, and to the Alliance, that this is all very well for premium payments. We accepted that in principle they could be complicated. But surely nothing was complicated, nothing was subject to miscalculation, nothing needed inordinate detail, and nothing led to inadvertent error about awarding people four week's holiday. Therefore, at col. 468, I said:
"Almost everything that the Minister said dealt with the second half of the amendment. The noble Lord dealt with the complexity of remuneration. He spoke about the poor, small employer"
and so on. I continued:
"Let us suppose that the amendment was to stop at fixing a minimum period of annual holidays. Would the Government object to that? … We would be willing to remove the amendment and to come back on Report with another that dealt with fixing a minimum period of annual holidays—full stop, end of message. If we did that, can the Minister say whether the Government would oppose it?".
Unfortunately, the Government could not say.
If we read Hansard carefully we find in the noble Lord's speech a single reference which I take to be relevant to the second half of the amendment. At col. 467 of Hansard the noble Lord said:
"We really cannot continue to put businesses in a straitjacket in which they are breaking the law if, for instance, they pay a higher rate than that fixed by a wages order in exchange for fewer holidays than the order requires".
I suggest to the Secretary of State at ten past seven at night that that is not a serious objection.
The Government cannot wish to facilitate a situation in which workers exchange statutory protection for money; in which employers are free to say that they can have time and a half if they ignore safety standards and they can have double time if they ignore the Factory Acts. If employers can suggest such things, there should be laws to stop them doing it. If pay is raised above the wages council rate and protection against unfair dismissal and sex or race discrimination is ignored, something is essentially wrong and the Government must admit that it is essentially wrong. The same principle applies.
If there is no question of complexity, interpretation or taking time—if the tiniest, most incompetent
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employer who can hardly read can understand that the worker is entitled to four weeks' pay—surely the Government can let that provision stand in the Bill. None of the substantial arguments that they have used can possibly be prayed against the amendment. I beg to move.
Lord Rochester: My Lords, I support the amendment; indeed, I am a signatory to it. In Committee the government case against permitting a wages council to fix a minimum period for annual holidays and minimum pay for such holidays was that that would enable wages councils to continue to make complex orders, which is a point already referred to by the noble Lord, Lord McCarthy, more particularly in relation to remuneration. There is certainly nothing complex about this amendment which would enable wages councils to fix only a minimum period of annual holiday.
The argument adduced by the Minister in Committee that it would be indefensible for such matters to continue to be subject to detailed statutory prescription falls to the ground. So does the argument that the amendment would place an intolerable burden on business. Like the noble Lord. Lord McCarthy, I found it particularly galling in Committee to be told that the matter should be left for agreement between employers and workers. As we constantly say, many of those working in industries covered by wages councils have no protection against unscrupulous employers other than that provided by council orders. The United Kingdom is almost alone among European countries in not providing an overall, statutory holiday entitlement.
As I said in Committee, far from creating new jobs, which is what in the Government's view this part of the Bill is about, the abolition of the holiday provision may even produce a net job loss in industries covered by wages councils by encouraging employers to make do with fewer people on their payroll. Again the noble Lord, Lord McCarthy, referred to that.
In resisting the amendment that was moved in Committee the Minister said that there was almost universal support among employers for the view that the wages council system should be drastically reformed. In degree I have some sympathy for that view, I suppose coloured by my own experience. I have first-hand knowledge of the frustration caused by the unnecessary detail and duplication and the differences between one set of wages orders and another.
But this is the key point. I do not for a moment believe that it follows that employers generally would wish to deny people working in industries covered by wages councils the right to a minimum period of annual holiday. If the Government do not accept the amendment, the House should see to it that that right is upheld.
7.15 p.m.
Lord Young of Graffham: My Lords, the noble Lord, Lord McCarthy, is always dissatisfied. When he has my noble friend Lord Trefgarne he wants me; when he has me, he wants my noble friend back again. I fear that his dissatisfaction will continue on this amendment. He seeks to persuade the House that there can be no case at all for failing to empower wages

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councils to require employers to provide holidays if those employers are not to be required also to provide holiday pay.
I ask your Lordships not to be beguiled by such a proposal and not to lose sight of the essential purpose of this Bill. As we have said before on many occasions, the measure we have put before the House is part of our drive to deregulate the labour market wherever possible in order to free employers to concentrate on the task of running a successful business. The briefest of all wages orders, the sack and bag, contains 11 pages. Of those 11 pages no fewer than six are concerned with the regulation of holidays. We shall never succeed in our efforts if at every turn we are pursuaded to backtrack, make concessions and re-impose complexities.
I have to say yet again that the clear wish of those employers who have to battle with the wages councils system was that it should be reduced, if it was to survive, to a basic role of providing a wage floor for the industry. We have acknowledged the case for a minimum overtime rate and we have recognised the special circumstances of workers in the catering trade, for whom the provision of accommodation is an integral part of the job. We do not intend to go further and to re-impose holiday requirements. There is no compelling reason why all businesses within a wages council trade need to be tied to giving their workers the same amount of holidays without regard to the widely different circumstances of those businesses. I ask the House to reject the amendment.
Lord McCarthy: My Lords, it is not true to say I am always dissatisfied. I am well satisfied if anybody gives me a concession. The trouble is that nobody does. The Minister is right. It does not matter which noble Lord replies. They are equally difficult, intransigent, obstinate and bigoted. Neither gives an inch. The sack and bag wages council order does not have six pages that deal with holidays. Most of the complexities concern premium payments and rates of those payments. Four weeks' holiday is not a complicated provision. It is simple. It is a provision that is universally operated in a wages council industry. I do not believe that the great majority of employers in those industries at the moment are not observing minimum holiday periods. Everybody knows what the minimum period is. The evasions of wages council provisions with which the inspectorate is now much too small to deal for the most part relate to pay. They arise partly because, I admit, premia can sometimes be complicated and because many employers do not want to pay the minimum rate. Most of the people, most of the time, will observe what the holidays are. It is generally known in the particular wages council industry what the holidays are. There is no complex-ity.
No one is saying that the holiday has to be the same. The final argument that the Secretary of State used against us was that we were trying to insist that everybody gave the same amount of holidays. The wages council system is a minimum system. In principle it is possible to give more than four weeks. It is possible to give five or six weeks. I have no doubt that people give six weeks' holiday to their executives;
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nevertheless there should be a minimum amount of time laid down as regards ordinary people. That is really all that we are saying—that a minimum period should be laid down for ordinary people.
I do not suppose that we shall convince the Government. I do not suppose that we shall win. We have won a few votes on sex discrimination. That was partly because the Labour Peers had a party at the time. I understand that the Conservative Peers had a party at the time; but they are well represented in the House. Nevertheless, we intend to divide on this amendment.
7.21 p.m.
On Question, Whether the said amendment (No. 20) shall be agreed to?
Their Lordships divided: Contents, 72; Not-Contents, 113.

DIVISION NO. 3

CONTENTS

Airedale, L.

Mackie of Benshie, L.

Ardwick, L.

McNair, L.

Barnett, L.

Manchester, Bp.

Birk, B.

Mishcon, L.

Blease, L.

Molloy, L.

Boston of Faversham, L.

Monkswell, L.

Carmichael of Kelvingrove, L.

Morton of Shuna, L.

Chitnis, L.

Mountevans, L.

Cledwyn of Penrhos, L.

Nicol, B.

David, B.

Parry, B.

Dean of Beswick, L.

Phillips, B.

Elwyn-Jones, L.

Pitt of Hampstead, L.

Ennals, L.

Ponsonby of Shulbrede, L.

Ewart-Biggs, B.

[Teller.]

Ezra, L.

Prys-Davies, L.

Falkender, B.

Rea, L.

Gallacher, L.

Rhodes, L.

Glenamara, L.

Ritchie of Dundee, L.

Graham of Edmonton, L.

Rochester, L. [Teller.]

Grey, E.

Ross of Marnock, L.

Hampton, L.

Sainsbury, L.

Hanworth, V.

Seear, B.

Hatch of Lusby, L.

Serota, B.

Hayter, L.

Shackleton, L.

Heycock, L.

Stewart of Fulham, L.

Houghton of Sowerby, L.

Stoddart of Swindon, L.

Howie of Troon, L.

Taylor of Gryfe, L.

Irving of Dartford, L.

Taylor of Mansfield, L.

Jeger, B.

Tordoff, L.

John-Mackie, L.

Turner of Camden, B.

Kagan, L.

Underhill, L.

Kilmarnock, L.

Walston, L.

Kirkhill, L.

Wedderburn of Charlton, L.

Llewelyn-Davies of Hastoe, B.

White, B.

Lockwood, B.

Wigoder, L.

Longford, E.

Wilson of Rievaulx, L.

McCarthy, L.

NOT-CONTENTS

Ampthill, L.

Buckinghamshire, E.

Auckland, L.

Butterworth, L.

Bathurst, E.

Caithness, E.

Bauer, L.

Cameron of Lochbroom, L.

Beaverbrook, L.

Campbell of Alloway, L.

Belhaven and Stenton, L.

Campbell of Croy, L.

Beloff, L.

Carnegy of Lour, B.

Belstead, L.

Cathcart, E.

Bessborough, E.

Coleraine, L.

Boardman, L.

Colville of Culross, V.

Boyd-Carpenter, L.

Constantine of Stanmore, L.

Brabazon of Tara, L.

Craigavon, V.

Brougham and Vaux, L.

Craigmyle, L.

Broxbourne, L.

Cullen of Ashbourne, L.

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Davidson, V.

Maude of Stratford-upon- Avon, L.

De Freyne, L.

Denham, L. [Teller.]

Mersey, V.

Dilhorne, V.

Milverton, L.

Donegall, M.

Morris, L.

Drumalbyn, L.

Mottistone, L.

Dundee, E.

Moyne, L.

Elliot of Harwood, B.

Munster, E.

Elton. L.

Murton of Lindisfarne, L.

Enniskillen, E.

Napier and Ettrick, L.

Faithfull, B.

Nelson of Stafford, L.

Fortescue, E.

Newall, L.

Gainford, L.

Pender, L.

Gardner of Parkes, B.

Peyton of Yeovil, L.

Gibson-Watt, L.

Platt of Writtle, B.

Glenarthur, L.

Plummer of St. Marylebone,

Gray of Contin, L.

L.

Greenway, L.

Rankeillour, L.

Gridley, L.

Reay, L.

Grimston of Westbury, L.

Reigate, L.

Hailsham of Saint

Renton, L.

Marylebone, L.

Rochdale, V.

Harmar-Nicholls, L.

Rodney, L.

Harvington, L.

Sanderson of Bowden, L.

Henley, L.

Sandford, L.

Hives, L.

Selkirk, E.

Home of the Hirsel, L.

Sharpies, B.

Hooper, B.

Skelmersdale, L.

Howe, E.

Stodart of Leaston, L.

Ingrow, L.

Swinton, E.

Kimball, L.

Teviot, L.

King of Wartnaby, L.

Thomas of Swynnerton, L.

Kinloss, Ly.

Thorneycroft, L.

Kinnaird, L.

Tranmire, L.

Lane-Fox, B.

Trefgarne, L.

Lauderdale, E.

Trumpington, B.

Layton, L.

Vaux of Harrowden, L.

Lindsay, E.

Vickers, B.

Lindsey and Abingdon, E.

Vinson, L.

Long, V.[Teller.]

Whitelaw, V.

McFadzean, L.

Wise, L.

Macleod of Borve, B.

Young, B.

Margadale, L.

Young of Graffham, L.

Massereene and Ferrard, V.

Ypres, E.

Resolved in the negative, and amendment disagreed to accordingly.
Lord Skelmersdale: My Lords, I beg to move that the House do now adjourn during pleasure until 8.30 p.m.
Moved accordingly, and on Question, Motion agreed to.
[The Sitting was suspended from 7.30 until 8.30 p.m.]
The Deputy Speaker (Lord Hayter): My Lords, I have to tell the House that if Amendment No. 21 is agreed to, I cannot call Amendment No. 22.
Lord McCarthy Lord McCarthy moved Amendment No. 21:
Page 17, line 9, leave out from beginning to ("and") in line 13 and insert—
("(a) any evidence which suggests that a given variation in an existing rate is likely to result in a variation in unit labour costs sufficient to induce a significant variation in the level of employment among the workers to whom it will apply").
The noble Lord said: My Lords, in moving this amendment I wish to speak also to Amendment No. 23. The aim of both amendments is to replace the criteria in Clause 14(6) with a more balanced criteria. The Bill says that wages councils should, in the future, have regard to the effect of any increase awarded on employment levels. That is what one might call the first limb of subsection (6). But the Bill then goes on
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to say that this should particularly be the case where existing wages are below the national level for such workers. That is what might be termed the second limb of subsection (6).
We argued in Committee that the second limb of the subsection was contradictory and that if it was not contradictory and if it was reinforcing the first limb, it was objectionable because it assumed that only the low paid could price themselves out of jobs and that the higher paid had to be bribed into work. We thought that we had got an understanding from the Government spokesman at the time that the two limbs of subsection (6) are reinforcing rather than contradictory. If that is the case, we shall argue it out again on the next amendment to be moved by my noble friend Lady Turner. Nevertheless, we felt that these two criteria together are too vague, too general and too contradictory, and that there is a need for rather more balanced criteria. The amendment that I am moving, in association with Amendment No. 23, is an attempt to replace the present criteria with more balanced criteria.
The two amendments together vary from the present subsection (6) in two ways. First, we focus in our amendment on evidence. There should be evidence, we say, that a given variation in the existing rate is likely to result in a variation in unit labour costs. There has to be evidence, and the evidence is directed to a change in unit labour costs. If there is evidence of a variation in unit labour costs, and this is sufficient to induce a significant variation in the level of employment, the wages councils should take it into account.
But, just as important, we want the wages councils to look beyond merely the effect on employment. If there are to be specific criteria set out for wages councils, the criteria should be balanced. This is where Amendment No. 23 comes in. In that amendment we are saying that they should not just take into account the employment effect. They should also take into account such things as the effect on the quality and supply of labour, and this should be given equal weight in the minds of wages councils and not left to the general clause as it is on the present face of the Bill.
That is the substance of the amendment. I would put three arguments to the House in favour of the amendment. First, the criteria of our amendment approximates to the dictates of what the noble Lord, Lord Trefgarne, called at Committee stage common sense. It is a commonsensical way of looking at the problem. Secondly, the criteria approximates to the results of research. We feel that the Government should have some regard to the results of research if only because most of the relevant research was commissioned by the Government. Thirdly, we say that all independent and balanced observers who have studied the research do not as a whole support what the Government are seeking to do. They could not be said to support the face of the Bill as it stands.
As to the sensible criteria of our amendment, if one wants to discuss sensibly the impact of wages, and increases or reductions in wages, on the level of employment, one has to begin by asking what needs to happen if wages are to be positively related to employment. First, as wage costs fall, there has to be a shift to more labour-intensive methods of

235
production; or, as wage costs rise, there has to be a shift away from labour-intensive methods of production. The assumption is that in that way more people are employed. That is the first way in which there might be a positive employment effect.
Secondly, as wage costs fall, prices might fall. And if prices fall enough, demand will rise and more people will be employed; or, again, if wage costs rise, demand may fall, and fewer people will be employed. These are the two ways in which, on common sense grounds, one might expect there to be a positive employment effect. It is clear that the Government, in subsection (6), take this to be self-evident. Indeed, it has been said. It was said on 6th June at col. 1241 by the noble Lord, Lord Trefgarne. When challenged by my noble friend Lord Graham to say what evidence there was for what the Government wanted to do, the noble Lord said:
"My Lords, the doctrine that I ask your Lordships to accept is the doctrine of common sense, which is that if employers are obliged to pay young people wages that are higher than necessary then they will employ fewer of them. I should have thought that stood to reason".
Again, at col. 433, on 26th June, the noble Lord said:
"If research did not exist, common sense would surely tell us the same thing".
I shall come in a moment to what research says. The point now is that common sense, of course, says nothing of the sort. Common sense suggests that there is a multiplicity of factors which, in the real world, can erode, offset and positively reverse this positive wage employment effect. I do not want to delay the House for too long, so I shall give five to be going on with. There could be no shift away from capital intensive methods to labour intensive methods. New products and technology could require accelerated rates of capital substitution whatever happens to wages. A reduction in labour costs could be used to maintain profits or raise dividends, and there would be no employment effect. There could be no reduction in prices because the employer believes—and he could be right—that the market for the product is inelastic. The employer could assume that the market is inelastic, could reduce prices and could be wrong, and there would be no increase in sales. Or—and this is very apparent in the evidence—the employer could have made a prior decision, because of the unsettled state of the market, not to expand to a point where it is necessary to increase labour supply until there is strong evidence of a sustained and independent rise in a product demand that has nothing to do with the relative factor prices.
On all these common sense grounds the common sense doctrine that a fall in wages means an increase in demand and, therefore, an increase in employment might fall down, and, in the real world, does. The evidence can be found in most of the studies. Most of the studies in most countries suggest that if there is a positive wage employment effect, it is a weak one. It requires a disproportionate reduction in wages to produce a minute increase in employment.
Large number of workers already in employment have to accept severe reductions in their standard of living in order to generate small amounts of employment outside, unless they are part of the
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general expansion of the economy where other factors can come in. The evidence also suggests that the purchase of this tiny element can be at much too high a price, not in social terms—I am not talking about social terms today—but in terms of a fall in labour efficiency, in terms of a decline in morale and productivity, in terms of high rates of turnover, and so on
Noble Lords may say that that is what the noble Lord said and the the noble Lord would say that. We therefore turn to the result of research. Let me ask first: what are the Government's claims for research? The Government are systematically delphic in what they claim about research. The noble Lord, Lord, Trefgarne, said in Committee on 26th June, at col. 433 of Hansard:
"I have been asked about the number of jobs that would be created by these arrangements. The Committee will understand that there can be no certain answer to such questions. Pay is not the only matter which determines the level of employment, and we have never maintained or supposed that it was. I can only repeat to the Committee that research has shown that pay is a significant factor although estimates of its effect vary widely."
Again, at col. 1240, at Second Reading, he said:
"All the studies which have been undertaken on the possible effects of abolishing the system point firmly to job gains and clearly the Government's reforms must go some way down the road".
Finally, at col. 433 on 26th June, he said:
"Evidence can be found in all the studies"—
I repeat—
"in all the studies on the effects of wages councils that they have inhibited employment prospects. We believe in wages council industries employment of young people has been inhibited by rates set far too high".
I would submit to the House that if research generally showed that pay was a significant factor, if all the studies pointed to job gains, if there was evidence that the wages councils inhibited employment in all the cases, there would be no case for our amendment. But what is the position? Because of the lateness of the hour I give merely eight outstanding examples of contrary evidence, and I summarise them.
First, there is the series of studies in 1979 done by Craig and Wilkinson of Cambridge Department of Economic Affairs for the Department of Employment. These are studies which are particularly interesting because they looked at the abolition of wages councils in paper, jute, cutlery, and so on. They found that declining wages were met by declining employment and no reversal of the trend and no positive employment effect.
Secondly, there is Makeham's 1980 Study for the DoE—Youth Differentials and Employment—which said:
"I could not detect any significant effect of relative youth pay upon unemployment".
There is Craig's 1982 general study, also for the Department of Employment: The Relationship of Low Pay, Regulation and Industrial Organisation. That had the same conclusions. So positive was it that it ended up by saying:
"Unregulated low-wage competition destabilises product markets, increases uncertainty and risk, slows down the rate of scrapping of outdated equipment, and consequently reduces the level of new investment in the high wage firms".

237
In 1983, a similar study by Wells produced conflicting results for boys and girls, and concluded:
"Undoubtedly the biggest factor is the general level of employment".
In May 1986, most embarrassing of all—the Department of Employment's own goal—there was Craig and Wilkinson's delayed research paper 51 on wages councils and employment in four retail trades. That says that there is,
"no strong presumption that the retail wages councils have had an important and independent employment effect".
They interviewed 81 per cent. independent businessmen and 90 per cent. of the multiples that they interviewed said they had no intention of taking on any more labour until there was a general revival of the product market.
Of course, these own goals were paid for by the Department of Employment. We have to add the Ministry of Agriculture study on minimum wage regulation for farm workers. The Secretary of State said earlier that he could not possibly countenance the situation in which we had two systems of statutory wage regulation. But the Government have introduced two systems of statutory wage regulation because they are going to leave the agricultural wages board alone. The Ministry of Agriculture upheld the agricultural wages board and it will continue.
There is the ACAS study of hairdressing wages councils and the investigation of the Auld Committee, neither of which proposed the abolition of wages councils to promote employment but both of which feared that in this country at this time the abolition of wages councils, or the cutting back of wages councils, would lead to declining wages without increasing employment.
To be fair, it is true that there are very few studies which are not so sceptical as are the majority of these studies. But without exception they all have serious methodological drawbacks. The latest with the finest set of methodological drawbacks was the internally based EMRU DoE study by Morgan on the clothing wages councils which was published at the same time as the retail wages council study in an effort to show that the retail wages study was not the only one. It was an internally based study which stopped short at 1981 and left out of account the effect of the collapse of exports, ignored the position in relation to women who constitute 75 per cent. of the wages force (because the model did not fit) and who above all, and most importantly, did not do field studies comparable to the studies done in the retail study. After all this it could only manage to bring out a perhaps small but nevertheless clear (if not to the naked eye) negative influence on employment.
There is of course our old friend the Chancellor's methodological disgrace on the relationship between employment and wages. I would make only two points about that study because it is the study that the Government in the end have to rely on. It asserted a positive employment effect of between 5 per cent. and 1 per cent. In other words, in each 1 per cent. change in real wages—said this study—we get 175,000 new jobs. The first point to make is that this was denounced in New Society on 28th February by the two economists on which that prognosis was
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based—Messrs. Metcalf and Nickell. In any case, if one recalculates those figures for this Bill one produces a result of about 3,500 jobs. There is therefore no set of figures, no set of studies which the Government can find which supports what they are saying.
It is not only me who is saying this. If one turns to the views of the independent observers who are faced with all this evidence, who have read all this evidence and used their own common sense, they come to much the same conclusions. That is why the CBI—which did its own study—came to much more sceptical conclusions than the Government. That is why the IPM—which asked its members—came to much more sceptical conclusions. That is why the NEDO working party group said this:
"The idea that the present wage rates are substantially reducing unemployment of the young is largely an unproven assertion".
Above all, and most remarkable of all, that is why the Conservative-controlled Employment Committee in another place looked at all this evidence, read all these research papers—most of which were produced by the Government—and said:
"The highest estimate we could advance for total abolition would be 25,000 jobs".
Once again, for this Bill that would mean 3,500 young workers. For all this the Government will depress living standards of all the young workers. For just this the Government will instruct the wages councils, on the face of the Bill, to focus centrally on the employment effect irrespective of size, evidence. and the other factors that they should take into account, which we ask them to take into account as a result of our amendment. We say that on evidence like this which is now available to the Government no doctor would operate, no businessman would invest, no jury would convict, and no housewife would purchase a bar of soap. We beg them even now to accept the more reasonable and balanced criteria contained in our amendment. I beg to move
Lord Young of Graffham: My Lords, I am grateful to the noble Lord, Lord McCarthy, for what I can only describe as his annual Dimbleby Lecture on all the research and wages councils. However, I should like to turn to Amendments Nos. 21 and 23 which at least concern the subject which we are discussing. It seems to me that we are getting into the field of unintended and quite unnecessary complications. Let me stress that we are not in the business of giving the wages councils complicated and detailed instructions on how they are to do their job.
The reason for this subsection of the Bill is quite simple and I ask your Lordships to look at it in a simple light. The facts are, first, that it has been represented to us on many occasions in the past few years that wages councils see their role as setting "going" rather than "minimum" rates, and secondly that the size of their awards has on some past occasions raised doubts in our minds as to whether the councils have given any thought to the possible effects of those awards on employment. I can speak only from my own experience during my time at the Manpower Services Commission when minimum rates in the distributive trade were set above, for example, the young workers scheme which made the employment of young people at the age of 17 much less likely.

239
The drafting of Clause 14(6) simply reflects our desire to ensure that wages councils take account of the possible employment consequences of their actions, and that they understand that their function is to provide a floor to pay in their industries. We have in no way suggested that they should not take other factors into account—indeed Clause 14(6)(b) invites them to consider whatever other matters they think appropriate.
If a wages council is to set a wages floor for the trade in question, it must, I submit, bear in mind pay variations between one part of the country and another. It must also take note of the fact that the effect of that floor may differ in one part of the country and another. To take an obvious example, living and working costs in a large urban area like London may mean that employers there have to pitch their wage rates at a higher level. If a wages council were to gear its thinking to pay levels obtaining in London, it might, by inadvertance, establish a minimum which would not be appropriate—and indeed might have disemployment effects—in a remote rural area.
Clearly, where we have a situation in which councils are to set only a single minimum, it is important that they understand that the function of that minimum is to provide a floor that is appropriate nationally in terms of the impact on jobs, not one which is geared only to an area like London. There really is nothing more to the subsection than that, and attempts to pick out and emphasise particular concepts such as unit labour costs—important though they are—are merely likely to confuse and complicate the issue.
Concerning Amendment No. 23,I submit that it is the business of employers to decide the level of pay which will recruit and retain the right kind of worker. A statutory minimum rate is a minimum rate. There is nothing to prevent an employer negotiating a higher rate if he considers that it is to the advantage of his business to do so. I ask your Lordships to resist these amendments.
Lord McCarthy: My Lords, the Minister made three or four remarks, none of which was to the point. He says that our argument is complicated and muddled; but he does not say the precise way in which it is complicated and muddled. I say that his Bill is partisan and bigoted, and I have spent a long time saying why. The noble Lord says that I have given a Dimbleby Lecture, but he does not contradict any of the figures. That is the trouble with this lot—they never contradict the figures; they ignore the figures, but they told us earlier that they do not like evidence.
The noble Lord says that he wants the wages councils to take into account what they think is appropriate, and I accept that that is on the face of the Bill. The point we are making is that it is residual; it is something that is included in the Bill after the Government have, first, charged them to take into account the employment effect and, secondly, charged them to do something in particular about the employment effect where wages are unduly low, and then the Government throw them the bone of taking into account whatever they think is appropriate. If the Government want to say what those other matters are,
240
if they want to give those other matters anything like the weight that they give to the matters which they specify in the Bill, then they would be coming forward with some such amendment as this.
The noble Lord then said that the second limb was something to do with regional differentials. I do not think we are suggesting anything to do with regional differentials. I am afraid that that is just a total misunderstanding of the substance of the amendment. There is no help in them; there is no improvement for them. We withdraw this amendment.
Amendment, by leave, withdrawn.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 22:
Page 17, line 10, leave out from ("and") to end of line 13.
The noble Baroness said: My Lords, I rise to move Amendment No. 22 in the names of my noble friends. During the course of the debate in Committee we put down an amendment to delete the words, "national average remuneration" and to insert "general level". The reason for that was that "national average" did not convey a very precise meaning in this context, whereas "general level" did. After all, it was the term used in Schedule 11, which is now repealed, of the Employment Protection Act, and the Central Arbitration Committee, of which I am a member, adjudicated on issues which at that time were referred to it and had no difficulty at all in dealing with that as a concept and producing findings which were usually acceptable to both sides.
However, when we put down this amendment in Committee, the Government rejected our argument at that time, and we are now concerned with the Bill as it stands, because we believe that the clause now before your Lordships is certainly very obscure and not the kind of clause which will enable wages councils to have any real guidance at all. Does it mean that wages which are already low can be further depressed? Is it intended, when looking at the rates in a particular area, to take note of those which are already in the lowest categories? The national average for such workers could not presumably be below the rate set by the wages councils, and if it was, would it not be illegal? In fact the whole of paragraph (a), and particu-larly in view of the response of the Minister to the previous amendment, seems to us to be designed to drive low wages still lower. From these Benches we are saying—and we have been saying it throughout this debate—that further to depress low pay is not the key to the unemployment problem. It is not right or proper that the wages councils that remain after this Bill reaches the statute book should have the impression that their main objective is to drive low pay lower.
As we have often said, poor people with few marketable skills will work for very little. They are vulnerable to exploitation and that is why they need the protection of Parliament. It seems to us that in this Bill the Government are driving down the level of wages of the poorest paid who are of course—and we have repeatedly said this—not in a position to negotiate their own terms and conditions to the advantage of anyone but the employer because the Government believe that in this way they will be priced into employment. That is why the Government

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have denounced the ILO minimum wages convention—and we are the only industrialised country to do so—at a time when Japan, whose economy is so often quoted as a model, has recently decided to adopt it.
We should not burden the wages councils with a formula that is virtually meaningless and which could well compel them to act as an agent for pricing people into low paid jobs. When our previous amendment was before your Lordships in Committee we tried to argue this point and I believe that at that time the Minister felt that we had some arguments on our side, but we did not press the matter. However, we are putting this before the House this evening because we want to improve the Bill. We do not want to burden the wages councils that remain with criteria that will be very difficult for them to operate, and in particular we do not want wages councils left with the function and the feeling that it is their job to drive down wages and further to depress the wages of very low-paid people. On those bases I move the amendment before your Lordships.
9 p.m.
Lord Young of Graffham: My Lords, as I have said in speaking to the previous amendments, councils have been the subject of much criticism for setting minimum rates which reflect what is often called the "going rate" instead of providing a safety-net or "floor" below which no worker's basic pay should fall. The introduction of a specific obligation on councils to consider the link between the rate they fix and the level of employment in their trade in all areas is designed to meet these criticisms.
It is simply there to serve as a reminder to councils that their function is to set only a basic minimum and that, in setting this minimum, they should not focus upon areas of the country like London and the South-East—where earnings costs are higher and employers have to pay higher rates—but direct their attention to the effect the rate they fix would have on lower-paying areas where employers could not afford to pay such a high rate.
In short, the Government's object is not to reduce the rates for the lowest paid, as the noble Baroness has argued, but merely to prevent the minimum rate which employers must pay being increased to the extent that many workers will be likely to lose their jobs. Surely the best protection we can give to any worker is a job itself. I therefore ask noble Lords to resist this amendment.
Lord Graham of Edmonton: My Lords, I wonder how the Minister can justify, at a time when the average industrial wage is in excess of £150 a week, the suggestion that shop workers are apparently in danger of pricing themselves out of a job when the rate under the wages council is less than £80 a week? Where is the logic? If there were a surfeit of workers queueing up to take work at less than £80 a week, that would be a different matter.
The Minister spoke in terms of a floor and a safety net. The Minister is unable to produce any evidence for this whatsoever. He constantly says, "We have been advised", or "We have been told". There is not
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an authoritative body of opinion in industry which is prepared to say that the negotiated rates under the wages councils are not looked upon as the going rate. And quite frankly the going rate is very modest indeed. We are talking in terms of 16 and 17 year-olds with a wage of less than £50. We are talking in terms of employers who, given the opportunity, will pay as modest a rate as possible.
The Minister, with his experience, ought to be ashamed of himself coming to the House and speaking in terms of employers who not only are not prepared to pay the going rate but will seek to keep it modest. The Minister must know that a vast number of workers are part of collective agreements. I can speak of the retail trade, where there are provincial A, provincial B, and metropolitan bands. There already exists, for the vast majority of workers, a means whereby they are able to have built into their minimum rate some reflection of the kind of rates which have to be paid in those areas.
The Minister is in grave danger of allowing this Bill to go on to the statute book with very few friends in the trade union movement, and not only those who enjoy the protection of trade unionism but the millions of people who are unorganised. It is to the credit of the trade union movement that they are concerned not only about the lot of their members but also about the millions of people—particularly women, and particularly part-time workers—for whom a wages council rate is their lifeline. The Government and the Minister should be thoroughly ashamed of themselves.
Lord McCarthy: My Lords, may I ask the Minister to explore what he said? I want to understand it. I apologise if I misrepresented him earlier this afternoon in saying that he did not believe that the poor could produce wealth. However, he seems to be saving something rather strange today, and we ought to try to understand it.
He does not say that they cannot produce wealth, but that the problem is that they are in danger of getting more than their fair share; whereas the danger with the rich, he seems to say, is the reverse. They must get more or they might, in effect, withdraw their labour, or withdraw what Mr. Winston Churchill called their "utmost endeavours". Therefore, the poor can be priced into work, but the rich must be bribed into work.
It seems to me that in effect—and I do not want to misrepresent him—he said that again when he replied to the noble Baroness. I think I have it right that he said that the object of the second limb of subsection (6) is to take into account the fact that, within a given industry, there are some areas where wages are lower than they are generally, and it is in those areas of an industry where wages are lower than they are generally that there is most danger of people being priced out of work, and that is what the wages councils must take into account.
They must not be affected by the fact that there are, let us say, parts of the country where the hairdressers' wages council could afford an increase as high as the cost of living, because it might be that on the north-east coast, if you gave a 5 per cent. increase, hairdressers would be priced out of work. Therefore,

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they must give 3 per cent., so that on the north-east coast they remain in work, and that is unfortunate but at least we maintain employment.
This is the most bizarre economic doctrine. It does not follow that because people are at the lower end of a distribution scale that they are about to be priced out of work. It is just as likely that people at the top end are near the margin of tolerance, and that if they get another 5 per cent. they will be priced out of work. It is just as likely that the higher paid are in much greater danger from reductions in the level of employment than the lower paid.
This is one of our central arguments, but the Secretary of State continues to argue that the rich must get richer unless we are to have them not working as hard as they do. They must be motivated. They must have incentive schemes. There is no risk at all that they will be priced out of work; only the poor can be priced out of work. It is a strange and bizarre economic theory. Adam Smith would have none of it.
Baroness Turner of Camden: My Lords, I take it that the Minister does not feel disposed to accept our amendment. I regret to hear what he said. It has largely been replied to by my noble friend Lord McCarthy. I remind the House, as has been mentioned by my noble friends, that we are considering rates of pay that are already extremely low. The rates for wages councils range between £50 and £78 a week. There are certain industries where for young people in particular the rates are extraordinarily low. This is especially true for part-time employees, large numbers of whom are women. For these reasons it seems to me that it is essential that we have criteria that do not give wages councils the impression that it is their job to drive low wages lower still and to price people into employment in the way that has already been described by my noble friend.
I regret that the Government seem to be set on this course which can only demonstrate to the world at large that we are set upon creating a low-wage economy in this country—something which we have opposed on these Benches and which we shall continue to oppose for as long as we possibly can. We think it is an outrageous concept for a highly industrialised country. While I very much regret what the Minister had to say, in view of the lateness of the hour I shall not press the amendment. But, frankly, I think the reaction of the Government to these very reasonable amendments is in all the circumstances quite deplorable.
On Question, amendment negatived.
[Amendment No. 23 not moved.]
Clause 17 [Computation of remuneration]:
Lord Young of Graffham Lord Young of Graffham moved Amendment Nos. 24 to 29:
Page 20, line 24, after ("expenditure") insert ("consists of payments to persons other than the employer,")
Page 20, line 33, at end insert—
("( ) any deduction in respect of the worker's necessary expenditure in connection with his employment to the extent that the deduction is attributable to the week in question;")
Page 21, line 4, at end insert—
("( ) any payment in respect of the worker's necessary expenditure in connection with this employment to the extent that the payment is attributable to the week in question;")
Page 21, line 5, leave out ("made by the worker to the employer") and insert ("due from the worker in that week")
Page 21, line 10, leave out ("made by the worker to the employer") and insert ("due from the worker in that week")
Page 21, leave out lines 16 and 17.
The noble Lord said: My Lords, with the leave of the House I should like to take Amendment Nos. 24 to 29 together. This is a group of Government amendments to Clause 17 which deals with the method of calculating the remuneration paid to a worker for the purpose of comparison with the statutory minimum due under the wages order. The clause is lengthy and somewhat complex because it has to ensure that the calculation is properly made in all circumstances. The amendments improve the drafting and make the Government's intentions clearer.
Amendments Nos. 24 to 26 do not change the substance of the clause, but they state more logically how a worker's necessary expenditure in connection with his employment is to be taken into account, distinguishing between payments made by a worker to a person other than the employer, deductions made by the employers and payments made by the worker to the employer.
Amendments Nos. 27 to 29 are consequential on Amendments Nos. 24 to 26. The first two replace the line omitted by the third. The combined effect is to ensure that the amounts to which subsection (3) refers are to be taken into account in the week the payment is due from the worker, once they have been received by the employer as in subsection (l)(ii). I beg to move.
Lord McCarthy: My Lords, this is the first chance we have had to debate Clause 17 with full notice because the House will know that it was presented in Committee at a very late stage. This is the very first chance we have had to consider it with the benefit of the Notes on Clauses which the noble Lord, Lord Trefgarne, promised to send us at the Committee stage. I should like to thank him for doing so. Bearing in mind the new amendments that the Government have introduced and looking at the clause again we feel that it is still a most dreadfully written and complicated clause. It still shows no sign of having been written by Sir Humphrey, but it is better than it was and two of the three points that we want to make about it will be made at another time.
We want to make a point that we make in one of our amendments, Amendment No. 30, taking it with Amendment No. 31, which will be spoken to by my noble friend Lord Wedderburn later. It is not for me to mention it now. We shall have something to say later about Amendment No. 32 which the noble Lord is not taking in this group. I do not wish to say anything about that at the moment. On Amendments Nos. 24 to 29, we wish to thank the Government for meeting the substance of the point that we sought to make in our Amendment No. 99B in Committee, and finally eliminating, as I am sure they always intended to do, all elements of truck.
On Question, amendments agreed to.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 30:
Page 21, line 21, leave out ("event") insert ("default")
The noble Lord said: My Lords, this amendment relates to the same clause to which my noble friend spoke. It is a difficult clause but made slightly easier by the explanatory notes sent by the noble Lord, Lord Trefgarne, for which I should like to join my noble friend in thanking him. These amendments really represent a question to the Government. In computing the remuneration, one takes under this clause the money payments with the advantage of certain-deductions in the worker's favour. But in subsection (4) one comes to matters where the worker is deprived of advantage. It is therefore clear that in the light of what is coming in Amendment No. 32, one must look—and clearly the Government have looked—with very great care at this amendment to see that it is not unfair and that it does what it sets out to do.
Amendment No. 30, which I am moving and with which I associated Amendment No. 31, asks the question of whether paragraph (a) really achieves what it sets out to do. That is to say, as I understand it, it means to deprive the worker of advantage in respect of deductions for conduct or events in respect of which he has contractual liability.
Most of those, I suppose, would be covered by Part I of this Bill, but that might not be so. The point which is raised by the two amendments together is simply this. It is plainly the Government's objective that a deduction to avoid paying the minimum rate must not be included because obviously that would defeat the whole object of the Bill. I take that to be common ground.
The Government, as I understand it, believe that they have achieved that objective by the words,
"any conduct of the worker or of any other event in respect of which he … has contractual liability".
It seems to us that that might not be so in the sense that a contract which stated that an agreed deduction of a particular amount say, up to 10 per cent. in retail employment, could be made in the event of certain stock deficiencies or in the event that the wage to be paid exceeded a certain amount, might well be construed by the courts, since both would be "events", to fall within a different compass from that which I believe is the common objective in this clause. It therefore raises the issue of whether the Government would look again at the word "event". In the first line of paragraph (a) and, in connection with that, the second half of our question, perhaps it could be made clear that, if "event" were to be retained, that did not include the event of a wage which exceeded a particular amount giving rise to a liability for deduction or repayment. I beg to move.
9.15 p.m.
Lord Young of Graffham: My Lords, Amendment No. 30 seeks to narrow the application of subsection
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(4)(a), and in doing so is likely to raise difficulties about the meaning of the word "default" in this context. The purpose of subsection (4)(a) is to ensure that amounts relating to the worker's conduct or events in respect of which he has contractual liability do not affect the calculation of remuneration paid when comparing this with the statutory minimum due. The use of the word "event" facilitates interpretation. It simply means that if no event occurs in respect of which the worker has a contractual liability, any deduction under this part of subsection 4(a) would not be allowable. As Part I of the Bill demonstrates, it is the Government's view that there is no reason why employers and workers should not be left to decide the circumstances in which deductions may be made without statutory interference.
The effect of this amendment is contrary to that policy because it has the result that in wages councils' industries a deduction for an event where there was no default on the part of the worker, but for which he had accepted contractual responsibility, would have to be set against the remuneration taken into account in deciding whether the statutory minimum had been paid. This could negative the effects of making the deduction in the first place. The Government believe that these matters should be left for the parties to resolve according to the contractual terms they have agreed to be bound by. For that reason the Government do not find this amendment acceptable.
Lord Wedderburn of Charlton: My Lords, I feel that I must add a word or two. The last sentence of the Secretary of State's reply I feel that he will want to reconsider because this is not an area where we leave matters to the parties to resolve. We are setting down a rule about what would be an allowable deduction and what would not. When the noble Lord says that as the clause stands—I think I have him right; and he will correct me if not—if no event occurs in respect of which the worker has contractual liability then, of course, there will be no deduction to his disadvantage. That is self-evidently true. The whole point of our amendment is to ask whether a liability under a contract cunningly devised which arose in respect of an amount that would be paid as the wage meant in effect that if the wage on all the other computations comes to £60, the worker has a contractual liability in that event to repay £5 or have a deduction of X number of pounds. That seems to us a possible interpretation and if the noble Lord is confident that the High Court could not put that interpretation on his Bill then he will keep his words. For once we are trying to be helpful because for once the interests of the noble Lord the Secretary of State coincide with the interests of the workers. On those occasions of course we are always willing to be helpful. I beg leave to withdraw this amendment, but I very much hope that over a strong black coffee further thought will be given to the words.
Amendment, by leave, withdrawn.
[Amendment No. 31 not moved.]
Lord Young of Graffham Lord Young of Graffham moved Amendment No. 32:
Page 21, line 26, leave out from ("employer") to the second (", or") in line 27 and insert ("with the worker's prior agreement or consent")
The noble Lord said: My Lords, Amendment No. 32 makes it clear that deductions or payments made for the supply of goods and services by the employer are not allowable unless the worker has given prior agreement or consent. It reflects the concern expressed at the Committee stage that the present wording of subsection (4)(c) did not make this sufficiently clear. I beg to move.
Lord McCarthy: My Lords, I was going to say there was once again need here for strong black coffee; but I am not sure that is right. When one reads the face of the Bill in the light of what the noble Lord, the Secretary of State, has said, he is quite right in saying that this does seem to give us the substance of what we want. I suppose that if we had written this amendment ourselves it would have read "written consent" or "contractual consent" and it would then have been perfect, but this is a very long way forward and we thank the noble Lord for it.
On Question, amendment agreed to.
Clause 19 [Obligation to keep records etc.]
Lord Young of Graffham Lord Young of Graffham moved Amendment No. 33:
Page 24, line 6, at end insert—
("(2A) Where any such workers are homeworkers, the employer shall notify them in the prescribed manner of the matters mentioned in subsection (2).")
The noble Lord said: My Lords—
Lord McCarthy: My Lords, I gave notice that we wanted to say something about Clause 18.
The Deputy Speaker (Baroness White): My Lords, we are at Report stage, so the clause is not put to stand part at this stage.
Lord McCarthy: My Lords, it was said at Committee stage that this was the first opportunity we had to discuss Clause 18 and it was admitted at that stage that in fact, since we could not discuss Clause 18, an opportunity would be given to us to do it at Report stage. However, if I am told it cannot be done, it cannot be done.
The Deputy Speaker: My Lords, I have no amendments before the House on Clause 18. I think we must continue with Clause 19, Amendment No. 33.
Lord Young of Graffham: My Lords, during discussion in Committee on Amendment No. 101 my noble friend Lord Trefgarne expressed the Government's sympathy with the amendment standing in the name of the noble Lords, Lord McCarthy, Lord Wedderburn and Lord Stoddart. He asked that no vote be taken on the amendment but gave the noble Baroness, Lady Turner, who moved the
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amendment, an undertaking that he would bring forward for your Lordships' consideration at Report stage a suitable amendment designed to achieve the object of the original amendment. I am happy to have been able to fulfil that commitment. By this amendment employers who make use of the services of homeworkers will be required, once the legislation takes effect, to notify those homeworkers in the prescribed manner of the contents of wages councils' notices of proposals and orders which affect them and of any other matters which may be prescribed.
The exact means by which employers are to meet this obligation—that is, in the words of the amendment, "in the prescribed manner"—is something which is more appropriately dealt with in subordinate legislation and not on the face of the Bill. I hope your Lordships will accept my assurance that the regulations which require Parliament's approval will be specific on this matter. I commend the amendment to your Lordships.
Baroness Turner of Camden: My Lords, I rise on behalf of these Benches to thank the noble Minister for the concession which we were promised in Committee and which we are now glad to see placed before your Lordships in the shape of Amendment No. 33. We are very glad indeed that the arguments we were about to put to the House have been accepted by the Government. Homeworkers are a particularly vulnerable set of people. We are very glad that the Government have acknowledged that and intend to write this into legislation. We are very grateful.
On Question, amendment agreed to.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 34:
Page 24, line 12, leave out ("may appoint") and insert— ("shall appoint an adequate number of")
The noble Baroness said: My Lords, I rise on behalf of these Benches to move Amendment No. 34. It is clear from the arguments advanced from our side during the passage of this Bill in Committee that we are not at all happy with it. We regard it as a lowering of standards for the least fortunate, the most vulnerable, the least organised and often the least skilled members in society.
The mark of a civilised society is that it seeks to protect such people. The arguments advanced indicate that there will be inadequate protection if the Bill passes unamended. We ought to be able to ensure that no one is forced to work for a wage that is below decent minimum standards. A basic framework of legal protection is an essential aspect of this. Nevertheless, as a result of this Bill, we now have a framework of sorts. It is not good enough, but even that needs to be enforced. We have often heard during the debates on this Bill about the burdens upon industry and the burdens upon the small businessman. But what about the burdens on the employee who has to take whatever job he—or more often she—can get and is not in a position to bargain about a decent salary and decent conditions? Indeed, so far as burdens on business are concerned, it has been frequently stated from our side that burdens on business are not so much wages

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council requirements but rather VAT and, I would add, the high cost of borrowing money to enable businesses to continue.
Some of the people who are subject at the moment to wages council orders are, as people have already said, among the poorest and most vulnerable in our society. The Low Pay Unit has done a great deal of research in this area and, if I may, I should like to quote from one individual. She says this:
"Being home in time for the children and flexibility of hours are often the most important factors to a woman looking for a job. I get very angry when I think of how I am being exploited."
This is from a woman who knows she is being illegally underpaid under the present system. She goes on:
"But I need the job and there is not a lot I can do about it. Jobs in this area are very hard to find for a woman, so anything is better than nothing."
The object of the amendment is to ensure that there are enough inspectors to prevent such illegalities from occurring. This is not an argument for lifting the burdens on business: it is an argument for making sure that the law—even the inadequate law we think this is—is properly enforced. Already the resources available to the Wages Inspectorate have been cut. Since 1979 the number of posts in the inspectorate has been reduced to 120; a cut of nearly one-third. As a consequence, there are now fewer inspections directly made by the inspectorate. There were 26,545 in 1984, as against 34,807 in 1979: a drop of almost one-quarter. There has been a corresponding increase from 6,970 to 9,599 in the number of complaints made by individual workers.
Many more employers are now flouting their legal obligations—35·6 percent. in 1984 as against 31·5 per cent. in 1979. It has been estimated by the Trades Union Congress that if the proportion of underpaying establishments—that is the 35·6 per cent. to which I have already referred—was applied to the total number of establishments on the wages council register, which I gather is 376,301, then it is likely that some 134,000 employers are illegally underpaying their employees at the present time. While this may be an over-simplification, it serves to illustrate the magnitude of the proportion of illegal underpayment. That is why we need increased resources and staffing for this inspectorate and a vigorous policy of enforce-ment. If we really want to ensure that poor and vulnerable people are protected, we have to ensure that there is an enforcement arm, and that enforce-ment arm is the inspectorate.
For those reasons I commend the amendment to your Lordships. We have already referred in discussion to the fact that the Government have denounced the ILO convention. We on these Benches think it is a great pity and a great shame that that has been done. But if we are to have any kind of legislation at all in the wages area, even the emasculated legislation that we now have, we must have an adequate system of enforcement. That is what this amendment seeks to do and I commend it to your Lordships. I beg to move.
9.30 p.m.
Lord Sainsbury: My Lords, we on these Benches strongly support this amendment. We were told in
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your Lordships' House only last week, in answer to a question, that 6 per cent. of the people covered by wages councils were being paid under wages council rates, largely because the number of the Wages Inspectorate was inadequate and, in fact, had been reduced recently.
Lord Young of Graffham: My Lords, if I may put that in another way, about 94 per cent. of the workers whose pay is checked by inspectors are being paid at least the legal minimum fixed by wages councils, and the changes which this Bill seeks to introduce will undoubtedly result in a higher general level of compliance. The exclusion of under 21s will reduce the number of workers covered by about half a million. Employers and workers will find it much easier to understand wages orders which will set only a single basic hourly rate and a single overtime rate. There will be none of the present complexities which have been such a common cause of underpayment. The simplicity of wages orders will also enable increased use to be made of postal questionnaires for initial inquiries.
Those who consider that some of the present wages council orders are complex—and perhaps the noble Lord will do me the courtesy of listening—should appreciate that the Unlicensed Places of Refreshment Wages Council wages order alone is 34 pages long and sets no fewer than 144 different rates of pay. That is surely not something which is easy to police. Other methods of checking which do not require visits by inspectors will continue to be used and developed. The policy of the inspectorate will be to reduce the number of visits made to firms which are unlikely to be underpaying. Many of these visits are unnecessary and place an additional burden on the employers concerned.
As fewer inspection visits will be carried out and as checking will be easier and quicker, there can be no justification for maintaining the present number of inspectors. Having carefully assessed what our future requirements will be, it was decided that the number of inspectors should be reduced from 120 to 71 and the number of indoor support staff from 104 to 68.
I should like to make it quite clear that the reduction is the result of an assessment of the future operational requirements of the Wages Inspectorate and is not in any way an indication of any lack of will on the part of Government to ensure compliance by employers. For the reasons I have mentioned I confidently expect compliance under the simplified provisions in the Bill to be higher than the present relatively high level of 94 per cent. and I believe that the number of inspectors we propose to appoint for enforcement will prove adequate for the task.
Amendment No. 34 seeks to make two changes to Clause 20(1). First, the substitution of the words "shall appoint" for "may appoint" would require the Government to appoint officers whatever the circumstances; and, secondly, the insertion of the words "an adequate number of before "officers" would result in endless debate about what constituted "adequate". "Adequate" is not a word appropriate for use in primary legislation in this context. Indeed, its inclusion would replace Ministers' views of what is adequate with that of the courts. This would be

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inappropriate in what is essentially an administrative decision. The phrase "may appoint officers" which the clause at present uses has been in all wages councils legislation since 1909 and I can see no justification for changing it at this time. I therefore ask your Lordships to resist the amendment.
Lord McCarthy: My Lords, what the Secretary of State says is quite amazing. I ask the House to give the noble Lord leave subsequently to tell us what he means when he says that some of the visits are unnecessary. Unnecessary, in God's name, from whose point of view? Is it unnecessary if the wages inspector goes there and finds that the man is actually paying the wage? I do not call that unnecessary. That is necessary to ensure a reasonably high level of compliance. I hope that the Secretary of State will tell us what he means by "unnecessary".
Many of the facts have been placed before the House by my noble friend Lady Turner, but there are others. The attitude of the Secretary of State forces me to mention some of those other facts. There are now going to be 71 out-of-door inspectors. We now have only 120 out-of-door inspectors. I do not make that a reduction of 40 per cent. Those 120 out-of-door inspectors have to police 500,000 firms—in other words, one inspector to about 4,000 firms. We are now going to have one inspector to 12,000 firms. We are told that they can visit only 7 per cent. of registered firms at the moment. Of course we do not know how many unregistered firms there are. We are told that the firms they visit—the 7 per cent.—they can now visit only once in every 14 years. If the Secretary of State is to cut the number from 120 to 71, presumably they will visit firms once every 28 years. But it must not be unnecessary, must it?
The Secretary of State knows that already one-third of the visits are by telephone or by postal question-naire. Is it the case that all the visits in future will be by telephone or by postal questionnaire? Unless we are to have one to 12,000 and visits every 28 years, a very substantial number must be by telephone and by postal questionnaire. Are they less necessary if they are done by telephone and postal questionnaire? Is this the form which the Secretary of State implied in his speech is going to be better and is going to be more effective—never actually knocking on the door; always to do it by telephone; always to do it by postal questionnaire? Will that reverse the trend? I doubt it.
What about the contrasts with other inspectorates? The factory inspectorate has had similar cuts; the railway inspectorate has had similar cuts; the tax inspectorate has had similar cuts; but not the social services fraud squad. The social services fraud squad has recently been increased by 20 per cent. It has six times as many chasers per potential defaulter and nine times as many people to do it. So enforcement must become worse, must it not?
The noble Lord, Lord Sainsbury, says that on the last test 6 per cent. were underpaid. That, we are told, is the result of 34·6 per cent. of firms visited underpaying. How does it come about that there is 6 per cent. underpayment in 34·6 per cent. of firms? It is because it is the small firms that underpay; it is the
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small businessman who underpays. That is why we have underpayment. I cannot accept the argument that because we are going down to single rates we are necessarily going to save all these people. They have still to deal with the complaints. They have still to find whether people are covered. They have now to discover how old they are. They have still to deal with all the problems of evasion, whether it is a single rate or whether it is six rates, because until you go to the firm, telephone the firm, or send a prima facie form to the firm, you have no way of telling whether it is underpaying or paying whatever the rate may be.
I cannot see any reason why there should be substantial changes in the demands made on the factory inspectors—and we are now told there are going to be 71 of them. It is an absolute disgrace.
Lord Young of Graffham: My Lords, with the leave of the House, I think that I ought to put at least some part of the record straight. The noble Lord, Lord McCarthy, runs riot with figures, and, although I have restrained myself with commendable fortitude this evening, I must come back on some of his points.
The aim of our wages council legislation has been to check 10 per cent. of establishments covered by wages councils each year. That is the checking that ran for many years, up until 1978. The Opposition increased it at that time for a year or two, but since then it has been running at 10 per cent. At that level of 10 per cent., approximately 40,000 establishments are checked each year, and during the past four years wages inspectors have checked the pay of nearly half of the 2\ million workers covered by the legislation.
That is an immense simplification of the checking that has to be done. Lest the noble Lord opposite feels that the whole situation is deteriorating, I should tell him that in 1982, 10,000 complaints were received, but last year the figure was 8,000 and it is going down. As regards those employers who we found to be underpaying, there has year by year been a reduction in their number. That shows that we are concerned not about unnecessary bureaucracy but about ensuring that we have adequate and proper policing of the wages councils, which I suspect and suggest we do, at a level that has been complied with for many years. The new level of postings will ensure that that will continue to be true.
Baroness Turner of Camden: My Lords, I take it from the Minister's reply that he does not feel disposed to accept our amendment. I am rather surprised because it is such an innocuous amendment. It simply requires that the Secretary of State,
"shall appoint an adequate number "
of inspectors. I would have expected from a Government who are concerned with law enforcement, as are the present Government, that they would have wanted an adequate number of inspectors to enforce the law.
I am appalled to learn that the number of inspectors is cut from 120 to 71.I do not see how that number of inspectors can possible perform the functions that they will be expected to perform under this Bill if minimum standards are to be enforced. I still do not understand,

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either, from the Minister's reply why some of the people who are performing that function are regarded as having an unnecessary function. It is a very necessary function, because if one has a law then one wants to see it enforced. For that reason, I intend to divide the House. Enforcement is an important matter and I wish to test the feelings of the House on the amendment.
9.43 p.m.
On Question, Whether the said amendment (No. 34) shall be agreed to?
Their Lordships divided: Contents, 29; Not-Contents, 53.

DIVISION NO.4

CONTENTS

Airedale, L.

Phillips, B.

Ardwick, L.

Ritchie of Dundee, L.

Blease, L.

Rochester, L.

David, B. [Teller.]

Sainsbury, L.

Dean of Beswick, L.

Seear, B.

Elwyn-Jones, L.

Stoddart of Swindon, L.

Ezra, L.

Taylor of Gryfe, L.

Falkender, B.

Tordoff, L. [Teller.]

Gallacher, L.

Turner of Camden, B.

Hacking, L.

Underhill, L.

Hanworth, V.

Wedderburn of Charlton, L.

Kagan, L.

White, B.

McCarthy, L.

Wigoder, L.

McNair, L.

Wilson of Rievaulx, L.

Molloy, L.

NOT-CONTENTS

Ailesbury, M.

Hooper, B.

Ampthill, L.

Ingrow, L.

Beloff, L.

Kimball, L.

Belstead, L.

Layton, L.

Brabazon of Tara, L.

Lindsey and Abingdon, E.

Brougham and Vaux, L.

Long, V.

Buckinghamshire, E.

Lucas of Chilworth, L.

Butterworth, L.

Margadale, L.

Caithness, E.

Massereene and Ferrard, V.

Cameron of Lochbroom, L.

Mottistone, L.

Carnegy of Lour, B.

Moyne, L.

Cullen of Ashbourne, L.

Murton of Lindisfarne, L.

Davidson, V.

Orkney, E.

Denham, L. [Teller.]

Rankeillour, L.

Donegall, M.

Rochdale, V.

Elliot of Harwood, B.

Sanderson of Bowden, L.

Elliott of Morpeth, L.

Sandford, L.

Enniskillen, E.

Skelmersdale, L. [Teller.]

Gainford, L.

Strathclyde, L.

Gibson-Watt, L.

Teviot, L.

Greenway, L.

Trumpington, B.

Gridley, L.

Vaux of Harrowden, L.

Grimston of Westbury, L.

Whitelaw, V.

Harvington, L.

Wise, L.

Henley, L.

Young, B.

Hives, L.

Young of Graffham, L.

Home of the Hirsel, L.

Resolved in the negative, and amendment disagreed to accordingly.
9.50 p.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 35:
After Clause 21, insert the following new clause:
(" Unfair dismissal after complaints.

.—(1) The dismissal of an employee to whose remuneration a wages council order relates shall be regarded as unfair for the purposes of Part V of the 1978 Act if the reason for it (or if more than one, the principal reason) is that the employee has made, or proposes to make, a complaint or other communication to an officer appointed under section 20 of this Act.

(2) Section 64( 1 )(a) (qualifying period) of the 197 8 Act shall not apply to a dismissal to which subsection (1) above applies.

(3) An employee shall have the right not to have action (short of dismissal) taken against him as an individual by his employer if the reason (or if more than one, the principal reason) falls within subsection (1) above.

(4) Sections 24 to 26 of the 1978 Act shall apply to action which contravenes subsection (3) above as they apply to section 23 of that act.")

The noble Lord said: My Lords, the amendment proposes that where a worker is dismissed because he or she has made a complaint or communication 10 the inspectorate in a wages council industry, that dismissal should be regarded as unfair, and disciplinary action short of dismissal should be in parallel manner unlawful in regard to the provisions of the Employment Protection (Consolidation) Act 1978.
I do not believe that it would be difficult to obtain broad agreement that it is wrong for an employer to victimise an employee in wages council employment in that manner. Nor is it difficult to find parallels in other legislation for such unfair dismissal provisions. To go to other statutes, the Sex Discrimination Act and the Race Relations Act provide for similar remedies in cases of victimisation of a worker who dares to complain within the province of the statute. Nor would it be true to say that, without a provision of the kind that the amendment offers, a worker so dismissed could in any way go to a tribunal. A tribunal might regard such a dismissal as unfair, but the qualification which the Government have enlarged to all employment beginning after 1985 of two years' employment might disbar an approach to the tribunal for many of the workers of whom we are speaking, and in particular a large number of part-time workers and therefore a large number of women workers, quite apart form the £25 charge that the Government are about to propose as a fee for going to a tribunal.
There is a much more fundamental point in relation to the amendment. It can best be made by summoning to its aid the arguments of the noble Lord. Lord Trefgarne, earlier this afternoon in opposition to the amendment moved by my noble friend Lord McCarthy, which attempted to give unfair dismissal rights in other respects under Part I of the Bill
The noble Lord argued that that amendment did not enter the area of basic human rights which necessarily demands a right to complain to an industrial tribunal. I take my stand within the compass of his argument. He said that in matters of discrimination on grounds of sex, race or trade union membership, the right to go to a tribunal must be allowed in terms of human rights. The case raised by Amendment No. 35 comes within that province, and that is why we feel that it is so strong. That is why we say that the qualifying period is not and should not be required, just as it is not required in those other areas of human rights—sex and race discrimination and dismissal on trade union grounds.
The Government must know why they kept wages councils rather than abolish them. I sometimes feel that the Secretary of State has been provided with arguments which are more appropriate to the abolition of wages councils than to their emasculation. The Government kept wages councils after considerable thought. In doing so, they necesssarily accepted the reason for their existence. They kept them because workers within those industries do not have the great measure of protection that trade unionism normally provides through collective bargaining. One of the ancient, honourable and essential actions of a wages council is that it should wind itself up when collective bargaining can get in. If there is a criticism of some wages councils, it is that both sides of the table have not taken steps in that direction.
Workers within wages councils industries have the protection of the wages councils to a great measure in substitution for that which trade unionism and collective bargaining would normally provide. Each worker within those wages council industries, be they clothing, retail, or whatever, is entitled to his or her human rights. The Government should remind themselves that however small the employer and however small the employer's resources, the worker is smaller and in need of protection. That is why the Government kept the wages councils.
There is an analogy with dismissal for discrimi-nation, particularly on union grounds, which the noble Lord, Lord Trefgarne, rightly described as a central human right. In Committee the Government seemed to object to the proposals for enhanced compensation which would logically follow the pattern of the legislation. As we are always moderate in these matters and take account of what the Government say, we have not included enhanced compensation in the amendment because it might be argued that there are special considerations relating to special awards. We do not much like the special awards and we do not want to get into that argument.
We insist that the worker in the wages council industry who is dismissed for attempting to enforce his or her rights is entitled to an action for unfair dismissal whether or not they have satisfied the qualifying period. That is fundamental. To insist on the qualifying period would be a charade. In order to enforce their rights under the amendment the workers will communicate with or complain to an inspector. I suppose we must add, "When they can find one, in the next few years." There will be 71 inspectors next year. How many will there be a few years later? It all reads like a brief for abolition rather than emasculation.
While the councils exist the dismissal or penalising of the worker who begins to attempt to enforce his or her right to what is left of the wages council order-the statutory minimum rate-should surely be visited with the right of an appeal to an industrial tribunal. It is not a right which gains a high percentage of success under any of the jurisdictions. We all know that actions for unfair dismissal do not lead to many successes in the tribunals. If we look at the evidence, we all also know that that does not bother employers very much. It does not deter recruitment. I hope that the noble Lord the Secretary of State will not suggest
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that this right, put forward for the protection of the rights of the individual worker in wages council industries, will be a major barrier to the recruitment of labour. None of those arguments are valid with regard to the argument about the rights of workers in unfair dismissal cases.
If it is said that the amendment is a bit late and that it might have been more logical to include rights for wages council workers in the legislation in the 1970s, I would say yes to that. I would have no hesitation in saying that workers in wages council industries have the right to resist discrimination of this kind, in terms that the noble Lord, Lord Trefgarne, used of other forms of discrimination-that it should have been in the legislation earlier-and that it would be logical and not difficult for the Government to accept the amendment. 1 beg to move.
10 p.m.
Lord Rochester: My Lords, after what the noble Lord, Lord Wedderburn of Charlton, has said, I do not believe that there is much of substance that I have to add. What there is I said largely in offering support to the noble Lord, Lord McCarthy, when he moved a somewhat similar amendment, Amendment No. 11, relating to Part I of the Bill. I should not, however, like this moment to pass without indicating to the House that the amendment enjoys the support of those on these Benches.
Baroness Seear: My Lords, I should like to ask the Secretary of State to comment on the point that I made to the noble Lord, Lord Trefgarne, but made, I agree, somewhat out of order, because the Motion had been withdrawn. It seems to me that it raises a much more general point. The noble Lord will surely agree that if an individual has a legal right to do something and that is embodied in the law of the land-never mind, for the moment, the extent to which it refers to this Bill-it is not proper that he should be penalised by any other person for using that legal right which the law has given him.
It is for that reason that I ask the noble Lord the Secretary of State to look at what he is doing in denying the right to use powers that the law has given. It is a strange way of interpreting the law of the land if you pass a law and then say that when someone takes advantage of it, he can be seriously penalised for doing so. I would ask the noble Lord to consider what would be the effect if granting of this kind of right was extended to other areas of the life of this country.
Lord Young of Graffham: My Lords, as the noble Lord, Lord Wedderburn, has correctly stated, my noble friend Lord Trefgarne expressed some sympathy with the amendment when it was moved in Committee. I well understand the reasons why he did so. However, as he has since indicated to the noble Lord, Lord McCarthy, in the event we do not find ourselves able to make any concession in this area. Lest this be thought simple bloodymindedness on the part of the Government, I should like to explain why we are maintaining our stance of opposition to the amendment. I should also like to explain the position to the noble Baroness, Lady Seear.

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I realise that there is no right to complain of unfair dismissal if the qualifying period is not satisfied, but the fact is that the only case in which dismissal is automatically unfair and there is no qualifying period is where dismissal is for membership or non-membership of a trade union. Dismissal on the grounds of sex or race is another special case because it is contrary to the Sex Discrimination and Race Relations Acts which have no qualifying period.
It is worth noting that dismissals relating to trade union membership have been treated in this special way ever since 1971 when the remedy of unfair dismissal was first introduced in the Industrial Relations Act. Equally, there has never been any qualifying period for bringing complaints of sex or race discrimination. It is clear therefore that there has been a substantial measure of agreement between governments of different persuasions that dismissals for these reasons deserve special treatment.
Why should this be? I believe it is because the rights not to be forced to join or not join a trade union and not to be discriminated against because of one's sex or race are fundamental and therefore different in kind from all other rights. The Government do not believe that dismissal for complaining to a wages inspector is that kind of fundamental right. The extension of similar special treatment to dismissal for making such a complaint therefore raises the question: if the protection applies to this right, why not to all other statutory employment rights-for example, the rights to an itemised pay statement, and the rights to time off for public duties.
It may be that the Opposition's policy is indeed to extend this special treatment to all statutory employment rights but whatever their position may be it cannot be denied that such a change raises major questions of policy and would be a departure from past practice. What is clear is that such special treatment cannot sensibly be applied only to the rights contained in this Bill.
The Government's view is therefore that this Bill is not the vehicle in which to make this departure in principle from past practice. To apply the special treatment asked for in the amendment simply to dismissals for complaining to a wages inspector or for using the rights in Part I would produce an anomalous and logically indefensible result.
I ask your Lordships to bear in mind that in the case of this particular amendment we are dealing with a situation in which workers have the benefit of an inspectorate to assist them. I note that questions were raised in Committee about workers' knowledge of the existence of the wages inspectorate. I can assure the House that the Bill enables us to require employers to display notices of minimum rates as does present legislation, and we shall also see to it, as at present, that these notices carry information about the availability of the inspectorate to investigate workers' complaints, in confidence if requested. The Government consider that these facilities offer sufficient protection. I ask the House to reject this amendment.
Baroness Seear: My Lords, I cannot accept that the noble Lord has answered my point. He quoted the fact that people have a right to ask for time off. Certain
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activities which are laid down in the Act give people a right to time off. That is not in this Act but in the Employment Protection Act. I think the noble Lord implied that if they asked for that right, and then were sacked because they had done so, that was a perfectly proper way to behave. My point is the general one that if an individual is protected by the law of the land, and is allowed by the law of the land to take certain action, it is not proper that he should be penalised because he took advantage of what the law allows him to do. I do not see that the Secretary of State has answered my point.
Lord Young of Graffham: My Lords, with the leave of the House, I much regret that the noble Baroness believes that. I think that I have answered the point, and I do not think that I can move from that.
Lord Wedderburn of Charlton: My Lords, I am very disappointed in the Secretary of State. I shall explain why in a moment. This is a very serious matter.
I accept what the noble Baroness, Lady Seear, says, and indeed would like to press that point on another occasion. But I think that that general argument cuts across the character of this amendment. It is the kind of argument which my noble friend Lord McCarthy was putting in his earlier amendment on unfair dismissal. I agree with the sentiment of the noble Baroness, but I would not wish that matter to allow the Government to escape this point that we are pressing with this amendment.
The Secretary of State rightly says-indeed, we have both said it-that there is a right to complain of unfair dismissal before the tribunal, without the qualification of continuous employment, in cases of sex discrimi-nation, race discrimination and (he says) discrimi-nation on grounds of trade union membership-the right to join or not to join-and that there is no parallel here. I could contend against that proposition, but I shall not do so, because the Minister's argument left out a very important part of the law which he was describing. There is also the right not to be discrimi-nated against-which the noble Lord, Lord Trefgarne, described, as I remember, as a central human right, on grounds of trade union membership or trade union activities. It is not just a question of joining or not joining.
Every civilised country, certainly every country in western Europe-for longer than we have-has had a corpus of law which tries to protect workers in respect of dismissal, and penalties short of dismissal in most cases, with regard to trade union membership and trade union activities. They are couched in different forms but the nub of the matter is the same. This was wholly omitted from the Secretary of State's descrip-tion. Once you include it, the analogy is made for you, because complaint to an inspector is indeed a central form of trade union activity, or the analogous form of activity, in a wages council industry. That is what it is all about. No wonder the Secretary of State omitted it, because that is where the analogy lies.
Therefore, when the noble Lord says that the Government's objection is not based on simple bloody-mindedness, I fully accept that; it is based on complex bloody-mindedness, leaving out half the formula with which we are making our analogy.

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When the noble Lord says that the logic of our argument presses us to say that everyone must have a right to go to the tribunal to complain about each and every statutory right, I say to that what I said in respect of the argument of the noble Baroness, Lady Seear— there is indeed a case for that, but I am not arguing it at the moment. If the noble Lord wants to know why itemised pay statements are different from the right to join and to take part in the activities of a trade union, he should ask his noble friend Lord Trefgarne, because the noble Lord, Lord Trefgarne, described it earlier this afternoon. The noble Lord said that matters like itemised pay statements are on one side but matters like racial discrimination, sex discrimination and discrimination on grounds of union membership and activity are central human rights. That is what it is all about.
Then the Minister says that this is not the Bill in which to do this. However, this is the Bill about wages councils, and they still exist—they have not yet gone. The Minister still has them and therefore he has the logic of them, and the logic of them is that the workers who are protected through their machinery have central human rights to use that machinery. "Ah", says the Minister, "dismissal simply because a worker complains to an inspector should not give a special right to go to the tribunal". Dismissal simply because of that is still dismissal for the worker—the job has gone.
I say that dismissal simply for that reason is self-evidently a central cause why someone should be given the right to go to the tribunal. I appreciate that there will be notices telling workers how to get in touch with inspectors, such as they are. However, if they cannot get to the inspector without threat of dismissal, what use is that to them? The boss can say or intimate, or perhaps more likely the foreman on the floor in a hot situation can say (because that is often what it is) "You do that, and you'll see what happens". Most workers are very realistic; they know how much the right is worth to go to a tribunal; they know that the compensation is low and that the chance of success is low, but still it is there. As a trade union leader once said to me when students were criticising him for supporting unfair dismissal legislation which got in the way of trade union activity, "If that legislation gives £100 to one of my members next week who would not have had it on his dismissal, then I shall support it". Workers are very realistic about this. They know that the chances are low.
However, for the Government not to allow a worker who is dismissed simply because he complains to an inspector, or threatens to do so, to go to a tribunal really surpasses the imagination of this complex type of objection which the Government have made to this amendment. It is a pity that the amendment cannot be put to a proper vote. I beg the noble Lord the Secretary of State to read the argument which his noble friend Lord Trefgarne put forward earlier this afternoon; indeed, I think that the noble Lord was present when the noble Lord, Lord Trefgarne, made it. If we look at that together after this debate, I suspect that the Minister will find that the objections he has made now have been torpedoed, not by me but by his noble friend. With that, I have no alternative at this stage but to beg leave to withdraw the amendment.
Lord Young of Graffham: My Lords, with the leave of the House, perhaps I might just correct one point made by the noble Lord. I think that he misheard me. I did not say that we should compare the right to itemised pay statements or time off for public duties with the same right to join a trade union. The argument I was developing is that there comes a point at which, if we say that this right should have that, then what other one should not? I believe there will come a time when all employment protection law will be covered at this point, and that is why the Government decided that we must stop here.
Lord Wedderburn of Charlton: My Lords, with leave, may I say that I wish to withdraw any wrong description of the noble Lord's argument. That is a case which no doubt we can debate on some other occasion. There still remains the central thrust of our arguments which I am sure the noble Lord will look at.
Amendment, by leave, withdrawn.
10.15 p.m.
Clause 26 [Interpretation of Part II]:
Lord Young of Graffham Lord Young of Graffham moved Amendments Nos. 36 to 38:
Page 29, line 4, leave out ("under his contract").
Page 29, line 9, at end insert ("and "employed", in relation to a worker, accordingly means employed under his contract;").
Page 30, line 23, leave out subsections (3) and (4) and insert—
(" () Notwithstanding section 14(3)—

(a) where a worker is employed partly for the purposes of his employer's business and partly not, nothing in any order under section 14 shall apply to the worker in his employment otherwise than for the purposes of that business, and

(b) where a worker is employed for the purposes of his employer's business both in an employment to which an order under section 14 applies and in one to which that order does not apply, nothing in that order shall apply to the worker in the second of those employments.").

The noble Lord said: My Lords, with the leave of the House I should like to take Amendments Nos. 36, 37 and 38 together. These amendments are designed to bring the definitions of "employer" and "employment" in Parts I and II of the Bill into line with one another. I hope your Lordships will accept my assurance that no change of substance is involved which could affect anything in Part II of the Bill.
The purpose of Amendment No. 38 is to take account of the inclusion of Clause 18, which deals with the method of apportioning the remuneration paid in cases where a worker is employed on work only part of which is covered by a wages order. As presently drafted, subsections (3) and (4) include the phrase "nothing in this Part shall be construed as applying". The amendent replaces this with "nothing in any order under section 14 shall apply". These changes will enable Clauses 17 and 18 to be applied in cases where apportionment is appropriate.
The amendment also qualifies Clause 14(3), which would otherwise have the effect of making wages orders applicable to workers whether they were employed either fully or partly on work to which the order applied, or, to put it another way, the wages order would apply to work done which is outside its scope. That, of course, would be quite contrary to the Government's intentions. The opportunity has been

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taken to merge subsections (3) and (4) into one subsection and to simplify the working generally. I commend the amendments to your Lordships. I beg to move.
Lord McCarthy: My Lords, the only part of the trilogy of amendments that the noble Lord has moved on which I want to comment is Amendment No. 38. Amendment No. 38 embodies, for the purposes of that part of the Bill, the principle introduced into Clause 18. That was the clause on which we could not speak because we had neglected to put down an amendment. The new Clause 18 simply re-enacted in a somewhat harsher form the principles laid down in the old Section 18 of the 1979 Act. The principle is the principle of apportionment according to the time spent on the work that is covered by a wages council. This was made clear by the Notes on Clauses which the noble Lord, Lord Trefgarne, gave to us on Clause 18, which were also intended to cover Amendment No. 38.
We think that it is time that this principle of apportionment according to the time spent on work of each type was changed. It means, as the example set out in the Notes on Clauses made clear, that if part-time cleaners are working in a shop which is covered by a wages council, they may be earning as much as £2 an hour while working in the shop but if they go upstairs to work in the owner's flat, because that part of the job is not covered by a wages council, they may be earning £1.50 or so an hour.
All they would be entitled to for the purposes of the calculation of their minimum entitlement under the wages council order is the minimum hourly rate for the time spent within the wages council area. We believe that that is anomalous. We believe it is arbitrary. We believe it means that the minimum amount is dependent upon the accident of whether a wages council applies to that particular part of an individual employer's trade which happens to be covered by wages councils.
One of the central defects of the wages council system—and I would agree with the noble Lord, Lord Wedderburn, if we want to confess past sins, that one of the sins of my own party when in office is that we never dealt with this—is that they apply in a most arbitrary way. Groups of workers covered by wages councils work alongside groups of workers doing similar, analogous or, in some cases, identical work, and are not covered by wages councils at all. We have a retail wages council that does not cover butchers' shops, florists' shops, chemists' shops or record shops. Therefore any group of workers who might work for an employer, and there are many, whose interests in the retail trade cover some of these occupations will find that for part- of the week they receive the wage council rate and for part of the week they get less than the wage council rate. The principle of apportionment governs the proportion of their rate which qualifies for minimum wage regulation.
It is just the same in the hotel trade. We have a wages council for the hotel trade that does not cover commercial hotels or boarding-houses. We consider that the anomalies which have existed in the wages councils for a long time could be met in a number of
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ways. If we had had time and if we had thought about it we could have put down various ways in which it might be done. I suppose I am asking the Secretary of State whether he will think about how the Government might react to various ways in which the apportionment principle might be modified.
It could be modified by saying in the simplest way that any worker who works for the majority of time under a wages council should be paid for the whole of his time by the rate of the wages council under which he worked for the majority of the time. It could be done by payment by function—a rather more complicated principle—where part time under a wages council would qualify someone for a full-time rate if he were doing similar work for the same employer outside the wages council area. There are many ways that we could move, without any great cost, away from the anomalous and unjust principle of apportionment. It is that aspect of Amendment No. 38 that I object to tonight.
On Question, amendments agreed to.
Clause 27 [Restriction of redundancy rebates to employers with less than ten employees]:
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 39:
Page 31, line 33, leave out from ("at") to end of line 36 and insert—
("the appropriate date the employer is party to an employment and training scheme approved by, or is pursuing policies approved as equivalent thereto by, the Secretary of State

(1A) The Secretary of State may, in consultation with the Manpower Services Commission, at any time, whether before or after an application for a redundancy rebate, approve either a scheme submitted by an employer as an employment and training scheme, or policies submitted by an employer as equivalent thereto, within subsection (1) above, having regard to the effect of that scheme or those policies upon—

(a) the employment or re-employment of any persons by any employer;

(b) the training or retraining of any person by the employer making the payment or by any associated employer of his; and

(c) the consultation or negotiation conducted by that employer with any trade union recognised by him concerning the redundancy giving rise to the payment.

(1B) The Secretary of State shall, in consultation with the Manpower Services Commission, publish a Code of Guidance setting out the considerations which he will take into account in granting approval under subsection (1A) above and may make regulations by statutory instrument establishing the criteria for the approval of schemes or policies within that subsection." ").

The noble Lord said: My Lords, I do not know whether this amendment will leave the Secretary of State speechless, as my noble friend seemed to do, but it is an adventurous amendment and I have to put it in this way.
We now approach Part III of the Bill, on which remarkably little has been said, as I read, either in another place or here. It is the part of the Bill that brings to an end the insurance arrangement, as the noble Lord, Lord Trefgarne, described it, as I would describe it and as the noble Baroness, Lady Seear, described it in our previous debates in Committee, whereby employers and employees contribute to the redundancy fund and the employee dismissed by reason of redundancy receives the statutory payment and employers have, over the years, received a rebate which has fluctuated in its percentage amount.
The Bill does not kill off the insurance or the fund entirely within that context. Some money will still be used for these insurance purposes for the benefit of certain employers. The noble Lord, Lord Trefgarne, set out the arguments for the Government's Bill, which may be loosely described as retaining redundancy rebates for those employers who employ nine employees or fewer.
He said (at col. 522 on 26th June) that an exception was to be made,
"because we recognise that the cost of redundancy payments can bear relatively heavily on employers running very small businesses".
He also said that any change—a change upwards, at any rate—in the number of the cut-off point would have the consequence of,
"a considerable increase in public expenditure. This increased cost would need to be found from within current allocations and could only be found by making savings elsewhere".
There is a point which emerges from that debate, as so often these points emerge later on; but that does mean that the Government have a notion of the amount of expenditure which is to be afforded. Indeed, the noble Lord, Lord Trefgarne, said in the same column that:
"the threshold that we have chosen concentrates the relief we are able to afford on the employers who most need help from the fund".
I do not think that the Government have ever given a clear indication of what that amount is or how much they expect the expenditure to be in very broad terms. It would be useful, I think, for many purposes if some indication could be given either this evening or at Third Reading.
Whatever it is, the principle of insurance has been jettisoned. Most employers are not to get the rebate. The question arises, accepting all those premises of the Government, of what way the amount which the Government say they can afford—whatever that is—should be distributed. On what principles should it be distributed?
And, of course, in a sense, we fell into the same trap that we now think that perhaps the Government have fallen into in looking for a cut-off figure of employees. I say in parenthesis that it will be an odd situation for employers who employ 10 or 11 employees not merely because of the abitrary nature of the line—any line is to some extent arbitrary, although it is difficult to feel that this is not, if anything can be, very arbitrary—but also because if the employer makes the 10 employees, or a number of them, redundant, he gets no rebate, but if he goes bankrupt, the redundancy fund will pay the redundancy payments. That is how, as I understand it, it will work, and it will be a rather bizarre situation.
If I may return to the Government's principles of what I might call distributive justice, firms with nine workers get the money and firms with 10 do not. I understand another remark of the noble Lord, Lord Trefgarne, in Committee when he said what I think any Government are likely to say when faced with this kind of Bill:
"Whatever threshold or cut-off we had chosen, someone would have been calling for a higher figure".
I understand how, to any Minister, Opposition cries for higher figures must seem like a crowd of Oliver Twists, whatever number the Government put in the Bill.
But what this amendment is saying is this. Is that the sensible way to approach the problem? Do we need to fix some arbitrary line of employees? Is it self-evidently true that the employer with eight employees necessarily has the burden of redundancy payments bear more heavily upon him—whatever that means, unless it be a straight financial calculation? Is it obvious that he suffers more heavily than the middle-sized or even the larger company or company group? In what way are we assessing that, and how does it relate to the number of nine?
I think that we have been led (and the Government have been led) to look for an easy way. I quite see the Government's problem. They want a small amount of money distributed as rebates, without too much trouble, and, as the noble Lord the Secretary of State would assure us, without complexity. They have found something which is not complex, but surely it cannot be right. There is surely a better direction in which to look.
I make only a modest claim for this amendment, but it tries to look in a different direction. It tries to look at tests which are not quantitative but which require some qualitative assessment. What if only some of those employers who have contributed to the insurance fund are to be paid a rebate? The noble Baroness, Lady Seear, raised in Committee the issue of the morality of doing it in quite this way; I leave that to the Minister to answer as he wishes. But if that is to be done, why not distribute it to those employers who are making contributions in respect of training or job creation or the like in the job market?
Without applying this to any particular side of the House, I believe that it is because we are peculiarly insular that we are not able to appreciate the slightly bizarre choice of distribution according to numbers. If we look at France or Italy, we find institutions (which are by no means perfect) such as solidarity contracts. There are many different forms of solidarity contract, but they are essentially arrangements between employers, trade unions and the Government in order to achieve efficient re-organisation of work and working time with adjustments of pay, in many types of solidarity contracts, in order to achieve the greatest maintenance of jobs, whether it be by reduction of hours, early retirement, taking on workers in new ways, or association between full time and part time workers. The objectives are there and the public expenditure is determined accordingly. The noble Lord the Secretary of State will no doubt say that the Government spend a lot of money, which is just as good, although they do not happen to be solidarity contracts, but concerning this, why are we not spending it in the same way?
The criteria in this amendment deliberately give the Secretary of State very wide discretion. The primary criteria in deciding upon payment of a redundancy rebate would relate to the contribution of any employer to the creation of new jobs, to the contribution of an employer concerned in the redundancy and his group of companies to the training and retraining of workers, and to consultation with the appropriate trade unions and the involvement of workers generally. Within that broad area, the Secretary of State would have power to establish guidelines and procedures. There have been and are

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occasions when employing companies cannot avoid dismissals for redundancy, but whatever the responsibility of the Government for these situations, surely the Government have a responsibility to distribute such percentage of the rebates as they say they can afford to those employers who are doing what they can to promote job creation or training, or, if they wish, giving it to those who are promoting training and retraining.
The Secretary of State, the noble Lord, Lord Trefgarne and Government spokesmen in another place have said that this is a Bill to promote employment. We have disagreed with them on Parts I and II. However, if they believe that, why not put the same principle to work on Part III? Rebates distributed on an arbitrary test of 9 or 10 or any other figure cannot really do a great deal to achieve that aim. If our amendment is defective in that respect, we shall be happy to see it replaced by a better one, but rebates which are linked to that aim and which assert the principle that rebates on redundancy will be paid to those doing their best to do the work the Government say has to be done surely make a great deal of sense.
The Government are not going to jettison the redundancy rebate principle altogether and we move in this amendment that they think again about the figures and take on the responsibility of saying to employers that rebates (very modest sums indeed) will be paid to those who meet the following criteria, in the broad terms, under the guidance which is issued in accordance with these proposals. I beg to move.
Lord Rochester: My Lords, I sympathise with the principle underlying this amendment. In Committee I opposed Part III of the Bill on the grounds that people continue to be made redundant in large numbers and that the effect of this part of the Bill must be either to make overall redundancy payments smaller or add to costs.
My noble friend Lady Seear asked the noble Lord, Lord Trefgarne, in Committee what justification there could be for denying an employer who had paid contributions to the redundancy fund the right to draw from it when he was faced with the very circumstances for which the fund had been created. In response, the noble Lord, Lord Trefgarne, said he was not sure what the position was regarding past contributions but that he would look into the matter. I therefore hope that the Secretary of State, in his reply shortly to this amendment, will give the House the answer to my noble friend's question. Those are general points concerning Part III of the Bill, which are not directly related to this amendment.
As to the amendment itself, it seems to me to be imaginative in proposing that if redundancy rebates are in future to be withheld from all but the smallest employers, at least let exceptions be made (if I have got it right) in the case of firms carrying out policies which are designed by means of such matters as redeployment, retraining and prior consultation for negotiation to minimise the impact on their employees of redundancies.
One may question the drafting at certain points of this amendment. For example, in paragraph (c) there
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should surely be reference to consultation with employee representatives generally, at any rate as we on these Benches would see it, rather than exclusively with trade unions. But at least the amendment introduces into a clause which as it stands at present is wholly negative, a positive element which is aimed at improving the general employment position. If only for that reason it deserves some encouragement, and I hope that is what it will get rather than the rebuff which on past form amendments put forward from this side of the House have received from the Government.
Baroness Seear: My Lords, I too would like to ask the Secretary of State to look at this amendment and to look again at his present suggestion that payment should go to firms where there are nine or fewer (or is it 10?) employees. What is the logic of limiting it in this way? We know the Secretary of State is deeply fascina-ted by smallness, but surely it does not logically follow that the undertakings which employ a very small number of people are necessarily in the worst position financially. If you have a capital-intensive small business, in which labour costs are a very small proportion of your total costs, you are a great deal better off than if you are in a labour-intensive business in which labour costs are a high percentage of your total costs and you are employing perhaps 50 or 60 people. I totally fail to see that capacity to pay is automatically linked to the number of employees.
Lord Young of Graffham: My Lords, I understand perfectly well the purpose of this rather complicated amendment, and I congratulate noble Lords opposite on their ingenuity and the intention they are displaying to use a continuation of the redundancy rebate as a subsidy for employers who follow approved policies on employment, training and industrial relations.
However, I must oppose the amendment for a number of reasons. In opposing it, perhaps I may say that at times it is interesting to look back and see why redundancy rebates were created in the first place. It was at a time of shortage of people, and it was done in an endeavour to persuade employers to shed labour, so that those who would therefore lose their job would quickly be employed by other employers. It seemed to me for a long time to be one of the most inconsistent parts of our society that, at a time of high unemployment, we should go around actively persuading employers, making it easy for employers, to shed labour and to give up people's jobs.
The proposal here is for something different. It is for a new regime in which the Secretary of State and the Manpower Services Commission give a seal of approval to the employment, training and industrial relations policies of individual employers, based on regulations to be made in statutory instruments. 1 have to say—and it will come as no great surprise—that we are not in the business of inventing fresh regulations for employers to struggle with; we are about deregulation, safety, lifting the burden from employers, and ensuring that people have liberty, but not of course a licence to abuse their fellow man.
It has been argued that the amendment is about turning what has been a subsidy for putting people out of work into a subsidy for positive policies. We have

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already redirected the public expenditure involved here into employment generation and training programmes; but I think rather more effective and creative ones than the regulatory approach suggested in this amendment. Restricting redundancy rebates to very small firms will save over £200 million a year and we have taken up that saving in helping to finance additional community programme places, an extended enterprise allowance scheme, the restart programme which has just gone national and all the other measures that we announced last November and in the Budget.
It seems to me appropriate that we focus this expenditure on those people who need it most, those who have been out of work for over a year, and to a smaller degree those who were previously unemployed but who wish to work for themselves. I do not believe that the noble Lord opposite, or anyone in your Lordships' House, would wish us to go back on all that.
Indeed, if I may supply some information for which I was asked, the saving of £200 million a year would be increased by a further £10 million a year if we abolish it entirely; in other words, the cost of under 10 employees is about £10 million a year. But I do not believe anyone here would wish us to go back on our policies to help the long-term unemployed, and if the noble Lord does not wish us to do that, then to go down the path suggested in this amendment would require another very large allocation of public expenditure. But we would have to consider whether that would be a sensible way to spend that money, against all the competing other claims.
In the Committee stage debate, the noble Lord, Lord Wedderburn, pressed for a further explanation of the "fewer than 10 employees" qualification, and it may be that this amendment is simply intended to press us again to justify nine. The noble Baroness, Lady Seear, said, quite rightly, that I am obsessed by small firms. Of course I am. All the surveys show that employment starts with small firms. What we must do is to create more small firms. Small firms grow into medium-sized firms and encourage the growth of employment, and the growth of employment must be the first priority in all that we attempt in this field in government.
We chose nine because we wanted to include the very smallest employers who were likely to have to make statutory redundancy payments. It is perfectly possible that you could find a very cash-rich employer employing fewer than nine people; and you could find a very poor employer, in that sense, employing many more. But, as a general rule, I have little doubt that those who employ fewer than 10 people are more likely to be in need of the rebate, in terms of the proportion of assets to their size, than the larger ones.
A survey in 1981 by the Institute of Manpower Studies showed that around 5 per cent. of the rebate claims sent to the department were from employers with fewer than nine employees. The noble Lord asked in the Committee stage how many workers were involved and reported academic estimates that around 1·5 million people are in firms of this size. The labour force survey shows that in 1981 about 1·8 million people, or about 8½ per cent. of employees in employment, were involved in establishments of this
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size. Allowing for multiple retail shops this more or less agrees with the noble Lord's figure, although there may well have been changes during the intervening period, and the past four, five or six years has seen a considerable growth in smaller firms. However, the number of employees eligible for statutory redundancy payments is lower because of the two year service qualification which is less often met in very small firms. The fact is that whatever figure we had chosen for small firms in this context, whether nine, 19 or indeed 199 as the noble Lord's earlier amendment would have had it, one could still argue that the cut-off point was arbitrary and should be much higher.
Perhaps I can take this opportunity to reply to a question raised by the noble Baroness, Lady Seear, in that same debate. She asked what was,
"the legal justification for denying employers the right to draw out of the fund into which they have paid, when they are faced with the circumstances for which the fund was created".
The legal position is that, notwithstanding an employer's previous contributions, Parliament is entitled to abolish his prospective right to receive a redundancy rebate in events which have not happened. (Rights which have already accrued are preserved by the transitional provisions—so there is no question of any retrospection).
In other words, if the redundancy has already occurred, that payment will be due. This is for future redundancies. A redundancy rebate is a payment governed by statute made by Parliament. It is not a matter of contract like a normal insurance policy. In those circumstances, I ask noble Lords to resist the amendment.
Lord Wedderburn of Charlton: My Lords, I welcome the Secretary of State's lengthy statement which included the first figures we have ever had on this matter. I thank the noble Lord very much for that, even at this late stage of the Bill, Would that he had given this information to us earlier. There is a considerable number of figures there at which my noble friends and I will wish to look very carefully. Of course one knows when one is congratulated, at least when one is in England, on putting forward a complicated amendment full of ingenuity that it is going to be resisted because it is clever. In Scotland and Wales, one gets points for being clever, but in England it is a very dangerous quality indeed.
With great respect, we do not think that the Secretary of State's defence is all that clever. All the other schemes of community enterprise are put forward, which we understand, and to which some of the money that is not going on rebates will be put. That seemed an irrelevant point because the money not going on rebates no doubt will be put to good use. But it is the money that is going on rebates that we want to be put to better use.
It seemed to us that the noble Lord totally failed to answer the point that was put with great precision by the noble Baroness, Lady Seear, when she said, "How can you possibly say that the small firm is necessarily one where you have the highest and heaviest burden financially of redundancy?" The small computer software enterprise, which no doubt is dear to the noble Lord's heart, may be in every way less deserving than the middle size enterprise. Unless the noble Lord

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wants to see firms above 10 employees disappear from the economy, one would have thought that it is just in regard to those firms, where his market principles, taking him on his own premises of small firms creating employment, do not appear to work, that the prod might produce some result and one could assist the natural development with some artificial stimulus.
To sum up, while we are very grateful to the noble Lord for his information, what we take to be his reply is that he will not put his signature where his mouth is. He will not sign the guidance to those who ought to get the rebate because they are doing the right thing. We feel very strongly on this matter and we aim to press this amendment.
10.49 p.m.
On Question, Whether the said amendment (No. 39) shall be agreed to?
Their Lordships divided: Contents, 17; Not-Contents, 31.

DIVISION NO. 5

CONTENTS

Boston of Faversham, L.

Ponsonby of Shulbrede, L

David, B.

[Teller.]

Dean of Beswick, L.

Rochester, L.

Hacking, L.

Seear, B.

Harris of Greenwich, L.

Tordoff, L. [Teller.]

Kagan, L.

Turner of Camden, B.

McCarthy, L.

Wedderburn of Charlton, L.

McNair, L.

White, B.

Molloy, L.

Wilson of Rievaulx, L.

NOT-CONTENTS

Ailesbury, M.

Ingrow, L.

Belstead, L.

Kimball, L.

Brabazon of Tara, L.

Layton, L.

Butterworth. L.

Lindsey and Abingdon, E.

Caithness, E.

Long, V. [Teller]

Cameron of Lochbroom, L.

Lucas of Chilworth, L.

Carnegy of Lour, B.

Margadale, L.

Crathorne, L.

Mottistone, L.

Davidson, V.

Renton, L.

Denham, L. [Teller.]

Skelmersdale, L.

Donegall, M.

Strathclyde, L.

Elliot of Harwood, B.

Trumpington, B.

Geddes, L.

Vaux of Harrowden, L.

Gibson-Watt, L.

Whitelaw, V.

Hives, L.

Young of Graffham, L.

Hooper, B.

Resolved in the negative, and amendment disagreed to accordingly.
10.57 p.m.
Schedule 5 [Repeals]:
Lord Young of Graffham Lord Young of Graffham moved Amendment No. 40:
Page 42, line 34, at end insert—
("1982 c. 24. Social Security and Housing Section 23A(2).") Benefits Act 1982.
The noble Lord said: My Lords, this is a straight-forward amendment, which I believe should cause no difficulties. Section 23A(2) of the Social Security and Housing Benefits Act 1982, inserted by paragraph 8 of Schedule 7 to the Health and Social Security Act 1984, applies the Truck Act 1896 to agreements to make deductions from statutory sick pay. As statutory sick pay is within the definition of wages in Clause 7 of
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the Bill, the provisions on deductions in Part I of the Bill would apply to it; and as the Bill repeals the Truck Act 1896 the Truck Acts will no longer apply to agreements to make deductions from statutory sick pay. Section 23A(2) is therefore redundant and can be repealed, and that is achieved by the amendment.
I am aware that in an earlier debate today the noble Lord, Lord Wedderburn, raised some questions about deductions from statutory sick pay, and my noble friend Lord Trefgarne agreed to consider those. I repeat that commitment. If your Lordships agree to this amendment we shall look closely at the points raised by the noble Lord. I beg to move.
On Question, amendment agreed to.
Lord Young of Graffham Lord Young of Graffham moved Amendment No. 41:
Page 42, leave out lines 35 and 36.
The noble Lord said: My Lords, this amendment, which removes paragraph 1 of Schedule 14 to the Building Societies Bill from the list of provisions to be repealed by the Wages Bill is necessary because it now appears likely that the Wages Bill will receive the Royal Assent before the Building Societies Bill. It is therefore proposed that the Building Societies Bill itself will provide for an amendment that makes the Payment of Wages Act 1960 cease to have effect when Part I of the Wages Bill comes into force. There is therefore no need to refer to the Building Societies Bill in this Bill. In the light of that explanation, I ask your Lordships to accept this amendment.
On Question, amendment agreed to.
Clause 33 [Short title, commencement and extent]:
[Amendments Nos. 42 and 43 not moved.]

Education (No. 2) Bill
Brought from the Commons; endorsed with the Certificate from the Speaker that the Bill is a Money Bill; read a first time, and to be printed.
House adjourned at one minute past eleven o'clock.

  FALMOUTH CONTAINER TERMINAL: FISHERIES AND MARINE RESERVE PROTECTION
  FALMOUTH CONTAINER TERMINAL: FISHERIES AND MARINE RESERVE PROTECTION
  DIVORCE PETITIONS AND RELATED APPLICATIONS: STATISTICS
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  LIVERPOOL AIRPORT: FINANCING
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  COT DEATHS: STATISTICS
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