I beg to move Amendment No. 1, in page 2. line 6, leave out £1,200' and insert ' £1,000 '.

With it we shall also consider Amendment No. 2, page 2, line 21, leave out subsection (3).

Lord Avon, when he was Sir Anthony Eden, once said that everyone is always in favour of general economy and particular expenditure. It is one of the objectives of our amendment to attempt to achieve the former and eventually to provide scope for the latter. In moving the amendment, however, I make it quite clear from the outset that in proposing to reduce the level of expenditure on food subsidies we in no way underestimate the effect of accelerating inflation on those who are most vulnerable in the community or the degree of anxiety and often hardship that this causes.

However, there are a number of other ways in which such people could have been helped more directly, more effectively and less expensively. They are already helped in many ways by the indexation of benefits and pensions. We do not under-rate the extent of public alarm about the present disastrous rates of inflation, but for most people incomes have remained well ahead of prices. I entirely recognise that for those who are responsible for doing the family shopping this may be very difficult to accept, particularly if they have not had the whole of their share of wage increases passed on to them. Even if they have had it passed on they may entertain very justifiable fears about what is likely to happen if inflation continues at the present rate.

Nevertheless, the gap between the increase in average earnings and the increase in the cost of living should be enough to provide now and for the period we shall be discussing sufficient scope to offset the effect of our amendment. Unfortunately there is a group of people in the middle income group who have already suffered a significant erosion in their standard of living and they would be the first to bear the full brunt of our amendment. But these are not the people at whom subsidies were aimed in the first place, and they will not suffer hardship as a result. I would have thought that by cutting back expenditure in general, eventually these will be the first people we shall be able to help by means of a decrease in taxation and in contributions.

I hope that the House will accept that we have carefully considered both the social and the economic implications of our amendments, in which we propose to peg spending on food subsidies at £1,000 million. If spending were to continued over the time scale proposed in the Government's public expenditure survey, food subsidies would cost no less than £3,000 million by 1980 after allowing for a comparatively moderate rate of inflation.

That is a high price to pay for a policy that the Government intended to discard. That is a high price to pay for a policy that many people look upon as nothing more than the political raison d'être for the creation of the Department of Prices and Consumer Protection and as one of the conditions of the social contract. It is a very different sum from the £500 million and the £700 million that were first put to us when the Prices Act was first embarked upon. On that occasion we pressed and pressed to be told how much the subsidies would cost in the end. Apparently the right hon. Lady did not believe that it was relevant to point out that long after the last vestige of any of the relevance that the subsidies may have had in the first place had vanished the country and the people would be paying a very high price for them.

It is fair to say that the right hon. Lady has always made it clear that food subsidies were not to be a permanent feature of the economy. Indeed, the Government, and particularly the right hon. Lady, have announced their intention of phasing them out and replacing them with alternative appropriate social security benefits. We cannot help but muse as to why, if there are alternative appropriate social security benefits, they were not introduced in place of subsidies in the first place.

The reason for all Governments having eventually to phase out food subsidies is that the cost gets out of control. The Government have accepted that in the case of nationalised industry subsidies. It is just as true in the case of food subsidies.

What lies between the Government and us is no longer the principle but the timetable. I cannot think that even those Labour hon. Members with whom we have often discussed these matters can now believe that the subsidies were a sensible, effective and expedient way of bringing direct help to those hardest hit at a time of severe inflation. I cannot think why the Secretary of State finds it necessary to defend them so passionately and so often when she herself has announced her intention to get rid of them. In many ways the subsidies have been little more than a cruel delusion. They have heightened unreality, disguised inflation and left us late in the day to face disastrous rates of inflation together with a public expenditure crisis. As we read in the Economist this week, public expenditure levels as a percentage of the gross national product are now nearing wartime levels. That must constitute something of a public expenditure crisis.

I do not intend to go into all the arguments that my hon. Friends and I have put to the House so often about the marginal effects of the subsidies. I hope that the House will not think it immodest if I say that the reason why I do not intend to rehearse them is that we have proved indisputably over and over again that the subsidies have been neither economically wise nor socially compassionate. Moreover, we maintain that at such a time as this superficial policies which may have immediate political appeal but over-simplify the questions and distort the answers are positively dangerous. Even in the context of a near-normal economic situation it cannot be claimed that this was ever anything but a wasteful and indiscriminate policy. We have always argued that avail- able resources could have been concentrated much more effectively on those in need. However, at a time of economic crisis, when the Chancellor of the Exchequer—

As someone who served on the Committee, I have heard the hon. Lady advance her argument before. She says that her party had alternative means, but as far as I know she never described them to the Committee. Further, she has not described them today. What alternatives can the hon. Lady put forward to my right hon. Friend's proposals?

I am sorry that the hon. Gentleman, through no fault of his own, was something of a fleeting visitor in Committee. Probably he did not hear all the arguments that were put forward on a number of occasions and through all the stages of the subsidy legislation. I shall return to that point a little later. I am grateful to the hon. Gentleman for raising it.

At a time of economic crisis even the Chancellor of the Exchequer, whose autumnal euphoria was shattered by the bleak realities of winter, found when the carefully contrived autumnal mists had rolled away that the rate of inflation was not 8·4 per cent. as he claimed, and was not 10 per cent. as he had forecast, but was 26 per cent. He now claims that there is the possibility of national bankruptcy. It is against the background of that statement alone that we believe that the sums proposed in this legislation would be the height of folly in the context of the Government's public expenditure survey. That is particularly so as at least part of the money for the subsidies, as was acknowledged in Committee, must be found from the Budget borrowing requirement.

That means one of two things. First, we can increase our debt and attendant liabilities. Secondly, we can print money. That in itself would be inflationary and would negativate the effects of the food subsidies. In the context of a Budget borrowing requirement of nearly £8,000 million we no longer have the scope for this kind of spending without courting disaster and harming the very people whom we all want to help.

It is tragic that at a time when inflation is declining in most of the major industrial countries in the world Britain has a rate of inflation which is advancing at a catastrophic rate, so that our capacity to provide help even to those in most need, and even by more sensible means than subsidies, must be limited. Our opportunities for doing so have been preempted by an overriding need for economic stringency as well as by the already crippling state of taxation. That is the price that we are paying for 12 months of Labour Government without any coherent counter-inflation policy ; for 12 months of Labour Government in which public expenditure has been increased in a profligate manner ; for 12 months of Labour Government to use the right hon. Lady's own words— in which they have gambled on the social contract. It is partly because it will be wage costs rather than raw material costs—

I think the hon. Lady has made a misquotation of what I said. I said that the social contract was a gamble on democracy. I went on to say that it was our recognition that people were mature enough to accept voluntary restraint. I should like to straighten out what she quoted.

I am grateful for the right hon. Lady's clarification. It seems that she used the word "gamble "—

Not on the social contract.

There are many people who by now must look upon the Government's action as just such a thing. As I was saying, inflation for the coming year is likely to be triggered more by wage costs than by commodity prices. In fact, commodity prices are likely to decline. They have been declining in the past few months. Food subsidies were a condition of the social contract. They were introduced at least in part to buy off inflationary pay settlements. That is an attempt that has failed.

I regret to tell the House that in Committee we received no undertakings from the Government that they would not use the subsidy money to subsidise excessive pay settlements—

Would the hon. Lady not agree, as her colleagues agreed in Committee, that the threshold agreements that we inherited from the previous Conservative administration, when wage rates were related to the retail price index, had a bearing on inflation? Does she agree that the Labour Government's intervention by way of food subsidies kept down the level of the price index and had an effect in keeping down wages?

To the limited extent that subsidies kept down the RPI during the period when thresholds were operational, that is true. We often hear the argument from the hon. Gentleman's hon. Friends that present wage rates are the result of thresholds and special cases. That might have been true in the early part of the year, but it was not true in the latter part of the year, when wage rates accelerated a good deal faster.

At what speed?

The Council has authorised me to tell the House that the speed would be over a period of three years. As the hon. Gentleman and the right hon. Lady know, the paper submitted to them by the Federation of Bakers entitled "The State of the Baking Industry "states:

" The industry is now convinced that the subsidy scheme and the price policy underlying it is working in a manner inconsistent with the long-term functioning of the baking industry."

However, we have tried to give the Government maximum flexibility in our amendment, because we entirely recognise that the phasing out of subsidies is a delicate operation. The Bill provides for £1,700 million to be spent, of which approximately £515 million has already been spent and of which the final £500 million cannot be spent before 1st February 1976. We seek to reduce that amount to £1,000 million, which will leave the Government to spend approximately £485 million over whatever period they wish and on whatever they wish. That is approximately £423 million less in constant 1974 money terms than the amount expressed in 1974 money terms in the Government's public expenditure survey over the next two years. However, it represents a saving of £2,000 million in money terms by the end of 1980.

I hope that the House will accept that in producing these figures we are in considerable difficulty. First, we do not have the resources of the Civil Service available to us, and, secondly, we are in the difficulty of translating the sums in the public expenditure survey into money terms, involving as it does the projection of inflation. We have tried to err on the moderate side. We realise that the figures cannot be correct to the last million pounds, but we believe that they are broadly sufficiently correct to reinforce our arguments.

The House will be aware that proposals to curtail food subsidies of this order and in these circumstances are by no means unprecedented. In his 1952 Budget Statement, with what was remark- able prescience in the context of this amendment, Lord Butler said:

" the very intensity of our economic situation makes it essential to lighten the burden on the economy to bring back…reality."—[Official Report,11th March 1952 ; Vol. 497, c. 1296.]

Lord Butler was proposing to phase out food subsidies in that financial year by what would be at 1975 levels of value £450 million in one year followed by £200 million at 1975 levels in the second year, altogether £650 million— a much sharper curtailment than we propose.

There is one startling coincidence between subsidies at that time and subsidies today, which is that they were worth approximately is 6d per person per week, which, translated into 1975 levels, is 22½ per person per week, identical to the value of present-day food subsidies per person per week.

During the two years in which Lord Butler was phasing out subsidies by this substantial amount, the retail price index fell from a level of increase of 9 per cent. in the previous year to 3·1 per cent. in the first year of the phasing out and 1·9 per cent. in the second year. That is over a 12-month period. The effect was hardly traumatic. It is true that there was a drop in commodity prices during that period, but it was not a dramatic drop. The difference was that the Government were in a position to harness the benefit of the drop in commodity prices because they were moderating public expenditure, they were moderating taxation and there was moderation in wage levels.

Lord Butler went on in his Budget Statement to say— quite correctly as events have proved :

" high Government expenditure accompanied by high taxation themselves have an inflationary effect."— [Official Report, 11th March 1952 ; Vol. 497, c. 1288.]

Lord Butler was not the only one to embark on such a policy. Another Chancellor of the Exchequer formally in his Budget Statement in referring to expenditure on food subsidies said :

" that just cannot go on. We must call a halt…prices have got out of all relationship with realities ".

I am glad to see the hon. Member for Aberdare (Mr. Evans) in his seat. He will recall the number of occasions in Committee on which he quoted his hero, none other than the late Sir Stafford Cripps. That quotation came from Sir Stafford Cripps's annual Budget Statement in which he was proposing to reduce food subsidies by a substantial amount, which he did. He, like Lord Butler, and as we shall be doing today, spoke of the need to face the realities of the situation.

Would it be true to say that there was a movement away from the food subsidies which were introduced during the war years, maintained by the Coalition Government and continued when Sir Stafford Cripps became Chancellor because of the Agriculture Act 1947? By giving subsidies to the farmers, by deficiency payments and guaranteed prices, the Labour Government ensured that the people had cheap food. That Act produced a prosperous agricultural industry and cheap food for the people. I cannot recall the Budget to which the hon. Lady referred, but I think it was at about that time.

Sir Stafford Cripps said that in his Budget Statement in 1949. He said:

" Prices have got out of all relationship with realities."— [Official Report, 6th April 1949 ; Vol. 463 ; c. 2085.]

The hon. Lady confirms what I thought. At about that time the 1947 Act came into effect. Subsidies were being removed because the Labour Government had kept down essential food prices by the Agriculture Act 1947, which the Conservatives have since repealed.

I do not think 1 should pursue that point, Mr. Deputy Speaker, because you might not think it was in order. The fact remains that Sir Stafford Cripps referred to the relationship between reality and prices, which is precisely the point I am making.

The value of the present subsidy is about 85p per average family per week. The effect of the amendment— again we can make only a rough forward projection — is that if subsidies were phased out over a three-year-period there would be a cost of about 7p per person per week, which is a trifling sum compared with the thousands of millions of pounds we would save. The effect on the retail price index would be approximately half of 1 per cent. per year over three years. It would be for the Government to decide their priorities and on what they should spend money. They may wish to spend the whole of the money on milk subsidies. That might be a sensible suggestion, but again it would be for them to decide.

Having said that 7p was a trifling sum, I wish to make it clear that to many people 7p is not a trifling sum. To a pensioner it can mean an extra pint of milk or cream on Sunday. However, pensions are already indexed, and if the Government had followed our example and introduced a six- monthly review of pensions that would have helped considerably. Rather we proposed to introduce it.

The Conservatives propose a lot of things.

I might add that we continue to propose them in Opposition. If the sum of 7p were aggregated to a poor family, it would mean the difference between their buying occasionally what most people take for granted and buy all the time. We do not underrate the effects, but we have said that there are a number of ways in which a family could be recompensed and it would be for the Government to decide.

In reply to a Written Question tabled by my hon. Friend the Member for Altrincham and Sale (Mr. Montgomery) on 6th March, in column 505, we were told that the cost of providing a family allowance of 30p for the first child would be £60 million a year, allowing for tax clawback. The cost up to 1980 would be £300 million against a figure of £3,000 million for subsidy. If compounded over a period of three years, the cost would be about £360 million. Again, it would be entirely for the Government to decide in what way they wished to allocate resources or wanted to obey their own priorities.

I cannot understand the hon. Lady's argument. Is she suggesting that more national resources are available now than were available between 1970 and 1974? She spoke about allowances for the first child and implied that the Government could use this money for that purpose. Was not that money also available to the Conservative Government and could not they have offered allowances for the first child? Why was such action not taken earlier?

I would remind the hon. Gentleman that he is comparing a period when the rate of inflation was 13 per cent. against a figure at present of 26 per cent.

What difference does that make?

It makes a great deal of difference. I am not suggesting that the Government should make this expenditure. I am suggesting that it is one means of compensation which would be available. I am comparing costs. If our amendment were accepted, by 1980 we would save £·2,000 million. That would have an effect in helping to restrain inflation. When suitable economic circumstances arise and money is available for expenditure, it will give the opportunity to embark on a number of priorities.

Hon. Members and Ministers have their pet projects and most of them are worthy ones. Some projects which come to mind are implementation of the Finer Committee's recommendations, assisting the removal of the tax on widows' pensions, help for disabled housewives and many others. They are matters on which all of us would like to spend money. If the money were available, one could spend the next hour conjecturing the sort of project on which one could spend it. But what is certain is that in the present situation that money is not there and we cannot continue expenditure at the levels proposed by the Government in their Bill. If by saving this money we were to succeed in helping to restrain inflation, that would be the finest social service possible.

This, in effect, is the moment of truth for the Government. They now have to balance economic realities against political expediency. They must now accept the former and reject the latter. We believe that our amendment provides an opportunity for them to do so. We regard it as a sensible and practical provision. It will allow them to change direction and show their resolve to overcome our economic difficulties, which are very great. We believe that it is crucial to the interests of the country and, indeed, to ail those who otherwise will inevitably suffer directly the trauma of widespread unemployment and possibly also of economic ruin. We believe that neither the Government nor the country can afford to neglect this opportunity.

I hope the House will reject the amendment. In Committee a similar amendment was tabled seeking to leave out the figure of £1,200 and insert £900. At least it can be said that the Opposition are making some progress.

I believe that the use of food subsidies has been fully justified. The action taken by the Labour Government in the last year can be fully justified by events, and I believe that the subsidies should be continued. I am not saying that they should continue ad infinitum. I believe that the subsidies should be reviewed in meeting the needs of the people. They have played a part in supporting the social contract for which the Government have been seeking wider support from the general public.

The Conservative Government operated a statutory incomes policy. That was coming to an end and needed to be replaced by something else. The hon. Member for Pudsey (Mr. Shaw) raises his eyebrows. I do not know whether he would suggest that they would continue a statutory incomes policy. If that is the case I give way to the hon. Gentleman.

The hon. Member for Aberdare (Mr. Evans) appreciates that the statutory incomes policy was being phased— phase 1, phase 2 and phase 3. I thought that the Government at that time came to an end before the incomes policy reached an end.

We now have a voluntary incomes policy and there are many parts to the social contract. One part involves the implementation of the food subsidies policy. This has been part of the social wage. When we look at the figures elsewhere, we can see the success of that policy.

I shall not become involved in arguments about the Common Market because I know that I shall be ruled out of order, but it is relevant to quote some figures from a recent document issued by Reuters and the Press Association based on retail food prices comparing London, Paris and Bonn. We find that the price of butter in London under a Labour Government was 26p, in Paris 63p, and in Bonn 63p. The price of cheese per pound in London was 40p, in Paris 81p and in Bonn 139p. The price of bread in London was 8p a pound, in Paris 24p and in Bonn 21p. The price of milk per pint was 5p in London, 7·2p in Paris and 10p in Bonn. Therefore, we in this country are in a far better position than are the people in those other European capitals.

I believe that food subsidies have played a part in keeping down prices in this country. Although the Opposition accept subsidies, they do not now say that we should end them tomorrow because they realise that there would be difficulties. Time and again in Committee and in the House they have denigrated the purposes of the food subsidies. They have argued whether food subsidies should come via direct or indirect taxation. Personally, I am a direct taxation man rather than an indirect taxation man. I prefer to see those with the broadest shoulders paying through income tax for what we in Parliament decide should be the social benefits.

Even if the Opposition say that this money is coming not just from what my right hon. Friend the Chancellor of the Exchequer raises in direct taxation but from indirect taxation as well, there are good social arguments for doing that. There are good social arguments for putting a tax on smoking, on alcoholic drinks and on gambling, and for saying that we should subsidise essential commodities to ensure that the lower income groups have their breakfast foods on their tables and that little children going to school get their school milk and school meals. The Conservative Party, of course, may be following its new Leader, who does not believe in free school milk—

The hon. Gentleman's Government have not brought it back.

I hope that the hon. Lady's intervention will be noted by my right hon. and hon. Friends and that in our next manifesto, or before, we shall think of doing that.

While my hon. Friend is dealing with what the Conservatives did when they were in Government, I hope he will not forget that the right hon. Member for Finchley (Mrs. Thatcher) took school milk from our children.

That is the point I was making. I am glad to have my hon. Friend's agreement.

Then again, we hear arguments that food subsidies provide serious distortions. In the earlier Committee last year, we were warned that there would be massive shortages before last Christmas. Hon. Member after hon. Member said that if the Government pursued their policy of food subsidies we might well have difficulty before Christmas in getting milk, that there would be a shortage of butter and that there would be difficulty in getting cheese. I will not taunt the hon. Member for Gloucester (Mrs. Oppenheim) by asking her whether she has yet managed to obtain some Cheddar cheese. In the last few weeks she has said in Committee that she could not buy Cheddar cheese.

I said at Christmas.

I did not think that the hon. Lady had difficulty at Christmas.

In any event, what has happened? Despite all the warnings from the Opposition of the terrible shortages which would emerge as a result of food subsidies, we find that there have not been shortages of those essential food items.

Whenever a Labour Government try to do something which is socially useful, it is always argued that it is bureaucratic. It was argued that food subsidies would mean the creation of a huge bureaucracy to administer the scheme. However, we read in the explanatory memorandum that only 160 staff will be needed to administer this vast public expenditure amounting to more than £750 million.

When we talk of creating bureaucracies, we should not forget that the Conservative Government had various token schemes. They were very expensive to administer. The administration was done in a very bureaucratic way and it was far more costly than this simpler method.

The hon. Member for Gloucester then referred to inflation. Of course we are passing through a phase where there is world inflation. There is an economic crisis in the Western world. There are more than 7 million unemployed in the United States. There is worse unemployment in many parts of Europe. We are passing through a period of serious economic difficulty.

I intervened in the hon. Lady's speech to say that when the Labour Government came into power we inherited a very serious economic situation and were in the middle of a three-day working week. All the signs were that we were going into a disaster situation. I am convinced that that is why we had a General Election last February. But, in addition to the very serious economic situation, we inherited the previous Government's statutory incomes policy, including these threshold agreements which said that as the retail price index went up so wages would go up accordingly. If ever there was a design by a Government to assist inflation, that was it.

The policy which we have pursued of having food subsidies, of keeping down food prices and of keeping the retail price index down has had an effect on the wage inflation which would have occurred if it had not been done.

Earlier the hon. Gentleman spoke of world inflation. However, in most of the major industrial countries inflation has declined and continues to decline rapidly. Where there is higher unemployment than would be acceptable in such countries, those countries have the opportunity to reflate and to overcome their unemployment. In this country we shall have high inflation and high unemployment together, which means that our scope to reflate is very limited.

If the hon. Lady is saying that after four years of Tory Government we were in a worse position last year to face these problems than many other countries, I agree with her absolutely. That was the situation. But those other countries which seem to be far more prosperous flan we are have higher unemployment figures than our own. When we look at the economic situation, we cannot be satisfied when we see the inflation still taking place here, but when we look at our unemployment figures, we see that we are far better off than many of those other countries.

As for subsidies, I remind right hon. and hon. Members that we subsidise other things. We subsidise the National Health Service, education and our social security system. We do it because we find those services socially useful. We also subsidise the arts. What is wrong with the nation being taxed to provide those things which are socially useful? I am sure that the Conservative Party has not yet reached the point where it wishes to abandon the Welfare State.

The hon. Member for Gloucester has referred to the differences in the Labour Party. Comments of that kind come ill from the Opposition, who have just ousted their Leader, who now have a new Leader, and when we can see all the changes taking place as a consequence. We see the right hon. Member for Leeds, North-East (Sir K. Joseph) coming in to formulate the new monetarist policies—

On a point of order, Mr. Deputy Speaker. We did not oust our Leader under Clause 1 of this Bill. May we have your guidance on whether the debate is straying outside the confines of normal order?

I am grateful to the hon. Member for Oswestry (Mr. Biffen). I am afraid that I found the remarks of the hon. Member for Aberdare (Mr. Evans) so interesting that I allowed something to pass which I should not have. This war between Wales and Gloucester might come back to the motion now.

Perhaps I should not get involved. We know the difficulties, and we should leave them where they are. We have differences in both parties. I leave the matter there, possibly to return to it at a more appropriate time.

When the new Leader of the Opposition was elected, she emerged from one meeting and her comments were reported in the evening papers. However, they were very little reported in the morning papers, which is very strange because if there is one thing about Tory Leaders it is that generally speaking they are well reported in the Press. The right hon. Lady said :

"The Tory philosophy is that you can't have what you can't afford."

That is Tory philosophy. I believe that what we cannot afford is a situation where, at a time of very serious economic difficulty, people with very low incomes find it difficult to provide themselves with essential foodstuffs. That is why many of us look forward to the day when we have a Socialist society, when we need not have Governments intervening in this way, when there will be greater equality, and when there will not be the tremendous disparities of wealth that we have at present. When that time comes, we may not need to think in terms of what the Government are doing now. But at present, when we have these difficulties, it is essential to have action of this kind.

I am trying to follow the hon. Gentleman's argument. Perhaps he will explain one or two matters to me. He spoke about the lower paid. Surely there is no argument about the fact that there should be some sort of food subsidy for the lower paid. The argument is that there should not be food subsidies right across the board for rich and poor alike. There is a great need at the moment— I speak as chairman of a social services committee— for more money to be made available for social services to help the sick and the frail and to provide for the mentally and physically handicapped.

Order. Is the hon. Gentleman intervening or making a contribution?

It was slightly longer than an intervention, and I apologise. Perhaps it is because I am such a new Member. I wanted to get home to the lion. Member for Aberdare (Mr. Evans) that there was no quarrel about helping the poor. The quarrel is about spending money on subsidising the well off.

I am glad to have had the hon. Gentleman's long intervention because it expresses the view of the Conservative Party. Hon. Members get food subsidies, but I hope that they fill in their tax returns properly and pay tax. Millionaires get food subsidies, but they pay tax. The method of giving food subsidies in this way is simple. Everyone gets the benefit of food subsidies. The people with very small incomes do not pay tax. Therefore, they get them for nothing. People in the middle income groups pay for what they get, so they are not getting anything at all. But the very rich, the wealthy, are paying the subsidies not only for themselves but for the less well off. I hope that we shall not have any cant from the Opposition about that matter.

We should realise what we are doing. No one should suggest that if we cannot evolve a scheme so that only certain people derive the benefit we should, therefore, stop everybody getting it. Indeed, it might be said that we can spend more on the social services. This Government have a better record than the previous Government in that respect, despite our present difficulties.

Reference has been made to Sir Stafford Cripps. At the end of the last war Churchill said that this country was bankrupt. However, that did not prevent us providing the Welfare State. We are now building on that Welfare State. But at the same time it is important to keep down the prices of essential foods for everyone, particularly for those with small incomes. We shall not argue with the Opposition if they want to spend more on the social services. When it comes to cuts in defence expenditure, the Opposition are silent because they want to spend more. But when it comes to food subsidies, they do not like that kind of Government spending. They have got their priorities wrong. This Government have got them right. I hope that the amendment will be rejected.

It is always difficult to follow the hon. Member for Aberdare (Mr. Evans) because of his fluency, but I am not entirely happy with some of the content of his speech. However, I will leave it to my hon. Friend who will be summing up for the Opposition to make a few apposite remarks.

Our argument in principle concerns what the Bill seeks to do. It seeks to reduce the amount which in time is to be sent on food subsidies. In Committee we reached broad agreement that we would like to see this objective accelerated. Hence, ply hon. Friend the Member for Gloucester (Mrs. Oppenheim) moved the amendment which indicates that we should he accelerating the process of withdrawal.

Despite discussions in Committee, one question which I did not think was adequately answered was whether people in receipt of food subsidies would prefer to maintain the existing system or to have the money given to them as cash in hand. The Secretary of State for Prices and Consumer Protection indicated that the possible replacement of food subsidies by social benefits of one kind or another was her long-term intent. Those presently in receipt of food subsidies have probably not been asked whether they would rather have the 22p per person or the 85p per family. Does the Under-Secretary have a point that he wishes to make?

I was speculating whether the hon. Gentleman was suggesting that we might have a referendum on the subject.

That possibly would not be necessary. I am sure that the hon. Gentleman can find other and simpler means of a constitutional kind whereby these consultations might take place.

There is an argument, which we accept, that in many cases indiscriminate social benefits are the only way to ensure that large amounts of social benefit reach those in greatest need. The right hon. Lady has made this point several times.

I would argue that that is the standard background to all the provisions of social benefit. It is nothing peculiar. There is always a problem of ensuring that these benefits are understood and properly claimed. I cannot believe that there is no way, provided that there is a will and the resources, of getting benefits to those in real need in the correct amounts. After all, the right hon. Lady is proposing to set up a network of national consumer council offices or advice bureaux to which those who are fortunate enough to afford expensive articles like washing machines or electric kettles with which they find fault can make complaint and seek advice for redress, which is a legitimate cause. Therefore, I suggest that one-tenth of the amount currently being spent on food subsidies could be spent on trying to find a method by which real social benefits get to those in real need. It is a matter of resources and of priority.

There is another reason why I firmly support my hon. Friend's proposal. We are concerned about the distortion effect of subsidies. We have expressed this view in several ways, and there are two specific ways to which I should like to draw attention.

First, it is clear that in certain markets food subsidies are having a major distorting effect. The most obvious is that of butter and margarine. Butter, which enjoys a subsidy of about 12p a pound, is now, within a year, substantially cheaper than margarine. Despite the suggestion by the hon. Member for Aberdare that there was no shortage, I think that he will have to agree that the amount of liquid milk available for butter manufacture in this country has been seriously reduced and that the amount of imported butter substantially increased to 400,000 tons in 1974. That brought about an additional distortion, because ;it came at significantly greater cost than would be involved in the importation of raw materials suitable for manufacture into margarine. Therefore, there have been distortions in the way that that subsidy has affected the market.

I could make a similar point on the price of bakery articles— morning goods, rolls, and so on, and the price of bread. Such distortions damage not only the industries in which they occur but the confidence of those industries to continue. The confidence of the baking industry is at an extremely low level at this time.

Another distortion as a result of food subsidies, which I consider more important, concerns the price of manufactured foods. I declare an interest in a food manufacturing company. I regret that it does not produce subsidised foods. It is well known that those who have to compete in the manufacturing and selling of foods, who are not affected by having subsidies applied to their goods or services in the general market, face severe problems. They are still tightly controlled by Section 2 of the Prices Act 1974, to which this modest Bill is but an inadequate amendment. In my view, the Government have shown themselves not sensitive enough— I recognise the many discussions that the right hon. Lady has had with the industry— to the problems of manufacturing industry in general and of food manufacturing in particular. There is increasing evidence that there is a grave loss of funds to maintain employment and supply in many sectors of the food manufacturing industry.

I have referred to the plight of the bakers, which is well known. In the past year there have been more bankruptcies and closures of small independent bakers, and the large bakers showed a substantial loss on their manufactures during 1974. I understand that the forecasts for the industry for 1975 do not show adequate profits either.

The general position of the food manufacturing industry is dire. A recent survey conducted among 26 major food manufacturing companies, accounting for about 45 per cent. of the food trade, discussed the following main points: first, the progressive erosion of margins in the period 1971–74 ; secondly, that food companies' reference levels have fallen to 40 per cent., compared with the average for all companies, excluding oil, of 60 per cent. ; thirdly, that the return on capital has also fallen. That situation is standard throughout industry.

Above all, there was a serious cash outflow over the period 1972–74, due to falling profits and the inflation of stock values. This must ultimately lead to a reduction of capital authorisations and of employment, to the closure of businesses, and possibly to lack of variety and problems over maintenance of supply. I referred to such problems when we debated the Price Code earlier in the year. The Government wish to continue with the food subsidy programme at one end of the scale, with a combination of food subsidies and severe restraint on profitability through the Price Code system at the other end of the scale. There is increasing evidence that the food manufacturing industry is in a severe nutcracker.

The Bill makes two simple amendments, one on subsidy and one on price orders. It fails to make the most important amendment that we should see made now, which is to offer increasing flexibility within the Price Code and possibly even to abolish the code.

Order. I have been even more generous to the hon. Gentleman than I was to hon. Members who spoke earlier. The amendment deals with the size of the subsidy.

I am happy to accept your correction, Mr. Deputy Speaker. I was trying to relate the price of food that was subsidised to the price of that which was not, and to point out the problem of maintaining supply.

With the subsidy system in operation, the problems of the non-subsidised section of the food industry deserve equal attention. Although the Bill does not offer an additional amendment, I urge the Secretary of State and the Government to continue their discussions with a view to reviewing the application of the Price Code.

I shall not take up the point made by the hon. Member for Pudsey (Mr. Shaw)—

My hon. Friend would be out of order if he did.

Apart from the difficulties which my hon. Friend points out, I do not have the hon. Gentleman's expertise to enable me to discuss the implications for the industry of the operation of the Price Code. But it seems to me that as subsidies must marginally reduce the price of certain commodities, they tend to stimulate sales. I cannot see how that can have an adverse effect on the food industry. Perhaps the hon. Gentleman was suggesting what I often advocate, that the whole area covered by food subsidies should be enlarged.

The point that is so often ignored is that sales are one thing but profitable sales are another.

I believe that subsidies are irrelevant to the argument, because their only effect must be to increase total sales, by reducing price, which must increase total profit.

The hon. Member for Cannock (Mr. Roberts), for all his eloquence, gets no joy at all from his own Government Front Bench when he asks for higher spending on food subsidies. He must know in his heart that the trend of the Government is all the other way.

It may be that the full-dress national memorial service for the unlamented food subsidies is to be deferred for perhaps a couple of years— I hope not for three years at the request of some self-appointed body of manufacturers. But, however long that memorial service may be deferred, today is essentially a graveside occasion. The mourners are few. The deceased is of extremely dubious reputation, although possessed of an enormously bureaucratic corpus, and it is being slowly lowered into the soggy ground. It is no occasion, least of all for me, to try to pronounce any elaborate funeral oration. But one or two things must be said.

Ever since the right hon. Lady the Secretary of State appeared in the House in the role of Queen Canute, determined to prevail on the waves of inflation to go back— and I must say that if she could not succeed no one else could— from the Liberal Benches there has been manifest and consistent opposition, which has been shown throughout, in the Lobby and not simply in equivocal speeches.

One of the reasons for our opposition has been that we have seen from the beginning that, once embarked on this enormously expensive and bureaucratic exercise, it would become extremely difficult to withdraw from it. That is the plight in which the House is placed today, as the hon. Member for Gloucester (Mrs. Oppenheim) so clearly revealed in her lucid speech. In great haste, and because of an imminent election, the Government embarked upon this vast expenditure and upon creating an enormous bureaucracy, not only in Government but throughout the food trade, for administering food subsidies. This was done quickly. It had to be before the votes were cast. But the withdrawal will inevitably be a very long and expensive process.

In considering this withdrawal, which we must do if we are to consider the amendment adequately, two consequences of the food subsidies ought to be considered separately. There is what I may call, for shorthand purposes, the feathered pillow effect of subsidies, which makes life artificially easier in general terms for the ordinary shopper. The classic example of the feathered pillow is the tea subsidy, which just happens to create a little extra illusion as to the real price of drinking the products of the Far East.

However, much more serious is what I might call the loaded shopping consequence of some of the food subsidies. In this day and age, of all times, when so many hundreds of millions of people in the world are hungry for lack of protein, we have actually committed the blasphemy of making butter cheaper than margarine. At the very time when it is ludicrous and very offensive to be using protein to feed our cows in their lush meadows, we are turning our backs on what is basically a much cheaper source of fats which would be acceptable to vast numbers of the British people— namely, margarine— by subsidising butter to an ever-increasing extent and not subsidising margarine by even ½p a pound.

The feathered pillow can, by skilled hands, be withdrawn gently but firmly and with reasonable speed. However, it will be very difficult to reverse the new shopping habits of housewives, especially young housewives who have started housekeeping in the age of subsidies, and the false idea of values which has naturally come to them. Therefore, time is required for the process to be gradually reversed.

I say this because I hope that the Government, now that they have embarked upon their deliberate policy of phasing out food subsidies, will pay special attention to restoring as soon as possible, in fairness to the housewife, the proper differential between margarine and butter.

The same is true to a considerable extent of cheese, which has been made artificially cheaper, even in some of its more fantastic and imported forms— fantastically cheaper than it ought to be, and cheaper than other spreads and high tea treats.

Second, as we on the Opposition side of the House are unfortunately obliged to assume the role of spectators in this matter we watch the fascinating procedure of the withdrawal of food subsidies, and we shall have a very interesting experiment in political honesty. We shall see whether, as the expenditure on food subsidies is reduced, as is suggested in the amendment and as the Government will do in any case, we have a pro tanto reduction in the direct taxation which hon. Members on the Government side have always said was the fount and supply of the cost of food subsidies. This was their view. We disputed it. We never admitted for a moment that any taxes are allocated to providing a particular benefit.

I said that I would prefer the money for food subsidies to come from direct taxation. If the hon. Gentleman is able to read Hansard tomorrow he will find that I also said that there are good social arguments for taking it from indirect taxation. I went on to say that a good case can be made out for taxing gambling, tobacco and drinking— pursuits which are socially less useful— to ensure that the less well-off get these essential foodstuffs.

I follow the hon. Gentleman's point. When he extends his argument to include gambling, tobacco, drinking and other forms of vice he is still adhering to the idea that certain forms of tax can be allocated to certain benefits. Perhaps for the last time I must try to repudiate that view. The Secretary of State has herself been guilty of the suggestion that it really all comes from income tax. We shall see when the Chancellor presents his Budget in a few weeks whether, as food subsidies are gradually phased out, the level of income tax is reduced.

I shall recommend my right hon. and hon. Friends to support this amendment. We are delighted that the Tories will be on their feet in an attempt to get rid of food subsidies now that not only the General Election but also their little local election is out of the way. That is to be encouraged. I was disturbed to hear the hon. Member for Cheltenham (Mr. Irving), who is not now present, say that he favoured food subsidies for the poor. I hope that we shall be given a clear statement by the Conservative Front Bench that they bitterly regret introducing food subsidies on milk and butter when they were in office— they were an evil precedent— that they have turned over a new leaf with their new Leader and that we shall hear no more of this indiscriminate and extremely wasteful benefit. We shall welcome this repentance.

There has been one food subsidy which was deliberately restricted to what might arbitrarily be described as the poor. It was the butter token arrangement which proceeded under the auspices of the European Economic Community. I cannot recollect that the hon. Gentleman was evident and prominent in opposing that.

I did not have the pleasure of being present in the House when the "Selsdon Gang" was attempting to rule the country. In supporting this amendment, which is meant to prod the undertakers to get on with the burial. we profoundly hope that there will be a declaration that the money to be saved, whether it is the money suggested by the Conservative Front Bench or the money which the Government have decided to save anyway, will later be spent on increasing pensions for the old, on improving the whole system of family allowances, including the rates, and on improving social security benefits for the sick and ailing.

The hon. Gentleman has been using the argument of universality against food subsidies. He has said that everyone is getting them when they should not be. He is now prepared to give the family allowance to the first child. In that case the children of millionaires will receive the benefit as well as the children of the less well off. That is universal in its application. He will of course say that we shall get that money back in tax. The same applies to food subsidies.

Order. That is the third speech the hon. Gentleman has made.

The hon. Member for Aberdare tempts me, but I am sure I should incur a rebuke from you, Mr. Deputy Speaker, if I were to follow him into an argument on just which taxes pay for which benefit. I cannot admit his point, but it would be unfair to the House to pursue something which should be discussed in the Tea Room afterwards, which I shall look forward to doing.

We shall support the amendment. We only wish that a firm and stern opposition to food subsidies had been manifest from the Conservative benches long ago.

I do not wish to take up the remarks of the hon. Member for Colne Valley (Mr. Wainwright) too much, but if we accept his nutritional argument the Secretary of State should have subsidised margarine rather than butter. I should have thought that soya beans, carrots and lettuces would have been much better than, perhaps, sugar. We have never advocated that type of diet, however much better it may be nutritionally. We believe in giving people a choice, even if it is to their disadvantage. That is a principle the Labour Party have stood by.

I want to persist in my argument with the hon. Member for Gloucester (Mrs. Oppenheim). She said that my visits to the Committee were fleeting. Lest that is not recorded properly, I point out that I was serving on two Bills at once. Although the hon. Lady is a much more attractive debating opponent than my hon. Friends in the Scottish Grand Committee, she was not helpful in meeting me on a point I put to her.

In a compassionate way she accepted that there was a need to help. She argued the point about an allowance for the first child, which I would not dispute. She mentioned extra social security benefits. The hon. Lady will recall that in Committee I pointed out that millions of people on low incomes— often on fixed incomes— had no children and were not on social security. She graciously accepted that point. Therefore, I ask her to tell the Government how she would cater for the large number of people who are finding it extremely difficult to make ends meet, and to have a proper balanced diet. Although the amount of subsidy may be limited, it is important.

It has been argued that help should be given in a different way. The value of subsidies must always be assessed by the percentage of take-up. No one could advocate any other form of subsidy which did not have the 100 per cent. take-up that food subsidies have.

It has been said that millionaires' sons and daughters would benefit from the subsidies. I do not want to become involved in the fiscal argument about who pays what tax and whether it should be direct or indirect taxation. I took umbrage at the introduction of butter tokens by the Labour Government. If a housewife is queueing at a grocer's shop and has to hand over a token, a stigma is placed upon her. Family dignity is involved here, and that dignity is no less important than the dignity of Members of this House.

We could devise a highly selective scheme, but that would put the "pauper" stigma on many people. There is a need for subsidies to be across the board, even though they are not selective and perhaps consume more public money than other methods. Many hon. Members will recall the stigma which, during the 1920s and 1930s attached to people like myself, who, because of family circumstances, had to wear what were called "corporation clothes ". They comprised a grey suit with a red stripe and a pair of boots which must have been made in John Brown's shipyard, because they never wore out. I still recall those days.

I do not have any prejudice against those who were the masters at that time for doing those things. They were wrongly advised. They did not realise what they were doing to people. I realise that subsidies cannot be continued for ever, but I hope that as long as they do go on they will be across-the-board subsidies. If they go to people who do not need them, that is a justifiable extravagance if at the same time their use prevents any stigma attaching to poorer families. That is why family income supplement had such a poor take-up rate. The across-the-board subsidy has a 100 per cent. take-up.

I would have accepted the political honesty of the argument advanced by Conservatives in seeking to reduce food subsidies if they had carried that argument to its normal conclusion. I have never heard Tory Members saying that the tax relief on mortgages— a subsidy which goes to people owning houses worth £25,000, £30,000 and more— should be ended.

There was another form of relief for people who had second homes. I never heard anyone criticising what seemed to me to be a wasteful expenditure of public money. A whole range of subsidies goes to the better-off. Thousands of poor families who pay income tax are helping those on large incomes to pay for their fashionable houses— houses such as poor people can never aspire to.

The hon. Member for Gloucester said that the Opposition were considering a phasing-out period of three years. I would like to hear what the hon. Member for Oswestry (Mr. Biffen) has to say about that. I am sure that he does not regard three years as a reasonable period. With his philosophy, I am sure that that is three years too long. The hon. Lady talked about a lack of resources, and said that a lack of Civil Service assistance had prevented her from making the best case. I thought that Tory Central Office was a great provider of information. Perhaps the chopping of heads that is going on there does not lend itself to efficiency.

We have heard quotations from previous Chancellors— Sir Stafford Cripps, Lord Butler, and others. The hon. Lady must accept— she was in the House at the time— that the man who did most to stoke up inflation was a Chancellor of recent times— the present Lord Barber. The hon. Member for Oswestry was a consistent and honourable critic of the Tory Government's financial policies. Indeed, he was a prophet. and foresaw the calamity which faced us just before the February General Election. He often chided the then Chancellor about his policy of money supply which was stoking up inflation and which began the trend that has led us to our present serious problems.

I accept that there is a high rate of inflation. I accept that the rate of inflation is falling in other countries, but not quickly. I do not claim to be an economics expert, but I would point out that we have a lower level of unemployment than do many other countries. As long as we have a high rate of inflation. I maintain that there is a need for subsidies of this nature.

I apologise to hon. Members, in that I shall have to leave the Chamber when 1 have finished my speech to attend an important meeting elsewhere in the House.

I assure the hon. Member for Glasgow, Queen's Park (Mr. McElhone) that I will at once acquit him of any discourtesy if he leaves the Chamber. My only regret is that it may be some time before he is able to read my remarks in Hansard. None the less, I shall be referring to him in my speech so he need not feel too neglected.

There is something of a tradition that the Report stage of a Bill sees the same band of the faithful in the rather cavernous surroundings of the Chamber conducting the controversies which were fought over in a rather more intimate fashion in Committee. This afternoon has been no exception. We are all veterans of one sort or another. The hon. Member for Colne Valley (Mr. Wainwright) carries not only the Prices Bill Ribbon but also the Prices Bill Ribbon and Star because, like me. he has seen through two of these Bills. We hope that we shall be spared another. When the hon. Member talked about the graveside rehearsal he was clearly speaking with some optimism.

I regret that there has not been a wider audience for these debates. This argument is very much about the social wage, or at the least the food subsidy component of the social wage. I see from the nods of the hon. Member for Brigg and Scunthorpe (Mr. Ellis), an Assistant Government Whip, who is doubtless sensitive to the mood of his back bench flock, that this is a topic of sonic considerable concern. I have no doubt that had they reflected more carefully on the order of business his hon. Friends would have been here to make clear their views on the subject, because this debate proceeds under the impending prospect of the Budget.

There are three points I wish to raise. The first relates to the phasing out of subsidies which, I hasten to assure you Mr. Deputy Speaker, is related specifically to the amendment. Second, I would like to take up some of the points made by the hon. Member for Aberdare (Mr. Evans) about the degree of education contained in this process. Third, I wish to make a few comments on the taxation implications, which, again, were touched on by some hon. Members.

The amendment. which seeks to delete £1,200 million and insert £1,000 million, is, as the hon. Member for Aberdare said, a re-run of an exercise in Committee when we sought to insert the figure of £900 million rather than £1,000 million. What we were trying to do was to give some reality to the aspiration of the Secretary of State when she said on 30th January :

" It still remains our intention eventually to run down the programme, but the timing of any running down of the food subsidy programme must be related closely to the introduction of appropriate social benefits."—[Official Report, 30th January 1975 ; Vol. 885, c. 636]

Since a great deal of the subsequent discussion has been about social benefits as well as the food subsidy programme I do not think there would necessarily be a great gap between the two sides on that. It will not be any refinement of social policy that will govern the rundown but other, much more sombre external restraints which inevitably befall any economy which is as heavily dependent upon overseas borrowing as we are.

We know from the Government's Public Expenditure White Paper, Cmnd. 5879, paragraph 36, that the Government

" will also aim to reduce expenditure on food subsidies during the course of the Survey period."

There is not really a great divide, I suppose, at this point in my argument, between the two sides of the House. We are seeking, through the means of a standard form of amendment, to glean a little more of the Government's thinking about their pace of rundown.

We would be excused for not being over-impressed by the public expenditure figures because we know— this is not a party point— that public expenditure forecasts are unreliable guides to the future behaviour of Governments. Probably the only column of figures which has any credence in that document is that containing the public expenditure proposals for next year. Everything thereafter is a declaration of good intent.

We naturally had our appetites whetted when we read in the Sunday Telegraph of last Sunday under the heading

" Food subsidies on way out

an article by Mr. David Steer, the agricultural correspondent, in which he said :

" The present plan under discussion inside the Department of Prices and Consumer Protection is to end all food subsidies by early 1976."

I was invited by the hon. Member for Glasgow, Queen's Park, to say how I felt about the possible liberal timescale that is envisaged by my hon. Friend's amend- ment. I am happy to support the amendment, which I thought my hon. Friend the Member for Gloucester (Mrs. Oppenheim) moved with great erudition and grace. She referred, among others, to Sir Stafford Cripps, who must have passed this life before she was born. Hers was a charming performance, and I am happy to support the amendment, but if I am to believe the Sunday Telegraph it looks as though the Government have acquired the grisly logic of my reasoning. We should like to know more about the timescale which the Government have in mind for reducing food subsidies. I could quote from the White Paper or refer to the right hon. Lady's professed objective of running down the subsidies and I should, therefore, like to know what the Government have in mind.

That takes me to my second point, which is the educational one, that all this will involve a painful process. We have to resist the temptation smugly to point out to Labour Members that we have pointed the way which they are now following. One has only to listen to this debate to realise that the right hon. Lady does not merely have the disagreeable task of following rather tardily in the wake of my right hon. Friends but is being encouraged by some to pursue exactly the opposite policy and not reduce food subsidies— which, after all, is her own professed policy— but increase them. We had that argument advanced by the hon. Member for Cannock (Mr. Roberts).

I regard also as evidence of substance, which deserves careful treatment by whoever winds up the debate, the evidence that has been presented by the TUC in its Economic Review for 1975. This says, in paragraph 103:

" In order to protect the position of family budgets in the coming year the TUC recommends that an extra £100 million should be allocated this year to food subsidies on top of the amount already being spent."

In case anyone thinks that this is an alternative to expenditure on other social policies, let me tell the House that under Table 15 entitled "Main Expenditure and Tax Changes "in its Economic Review, the TUC advocates not only the additional food subsidies of £100 million but an allocation for one-parent families and for further family allowances.

This is one of the terrifying unrealities of political debate as currently conducted. The right hon. Lady and the Government are being pressed to increase food subsidies, and also to increase other social expenditure. Indeed, perhaps the biggest villain of all— except that he is a man of such charm and, I hope, of limited political muscle ; I do not mean that unkindly— is the hon. Member for Cannock, who produced a scheme for reducing the pensionable age for men from 65 to 60 and invited the House to vote on his Ten-Minute Rule Bill.

I think that the hon. Gentleman is misrepresenting the scheme somewhat. It involves a base retiring age of 60 and provides a flexible system for retirement between the ages of 60 and 70. It does not involve an immediate financial cost, which would be rather prohibitive, with a drop to the age of 60. It is typical of the scheme that there will be no financial cost whatsoever, but if there is it will be marginal.

I have no wish to stray from order, but I congratulate the hon. Gentleman if he has devised a scheme which seemingly provides the attractiveness to the male national insurance contributor of being able to retire at 60 without any further impost on public funds.

It is not as simple as that.

I realise that, but the attractiveness of the scheme lies in its seeming simplicity.

In the educational battle that has to proceed about food subsidies I think one is entitled to refer to what was said by the hon. Member for Aberdare. He said that this amendment would reduce the figure from £1,200 million to £1,000 million, but in Committee upstairs we moved an amended figure of £900 million, and from that he sought to draw the conclusion that we were edging forward towards the Government's view about food subsidies.

That is not the area where the educational battle will take place ; it will occur between the Treasury Bench and the TUC, because the advice being proferred by the TUC is simply not capable of being put into effect by the Government in the Budget. The advice that is being proffered by the hon. Member for Can- nock is not capable of being put into effect in the prospective budget.

Painful times lie ahead for all of us, but in political terms they will be more painful for hon. Members below the Gangway than for those who sit opposite the Treasury Bench and who invite them to pursue the more stony path of economic reality.

That takes me inevitably to the third consideration— the tax proposals. For one awful moment I could visualise circumstances in which the hon. Member for Brigg and Scunthorpe (Mr. Ellis) would run hotfoot to the Treasury and say, "I have news for you. Because of what has happened at the Report stage of the Prices Bill, you will have the chance of pleasing in one Budget both the hon. Member for Cannock "— because taxes will be increased, so that his advocacy of higher taxes will be sublimated— "and also those Tories who are advocating lower rates of food subsidies "because I am certain that we, too, will eventually be placated. Indeed, we have ample evidence that it is the Government's intention to reduce the rate of subsidies, but it is unrealistic to think in terms of food subsidies without tax concomitant.

I think that there are now quite serious implications for all those who are concerned about the direction of taxation under the current economic management of this country. One has only to turn to paragraph 28 of the Public Expenditure White Paper, Cmnd. 5879, to see there all the possible rates of growth which were considered by the Government when indicating what they thought should be the range of options. It says:

" In all three cases, the rate of increase would be significantly less than the growth rate of output, and this suggests that there would be an increase in the burden of taxation."

These amendments go to the very heart of the debate over our subsidy policy, and therefore they are very important. The amendments are constructive, in that they show the clear intention of the Opposition, if these amendments are accepted, to phase out subsidies and to give the Government some latitude over the time that they would take over the phasing out.

In Committee it was generally felt by both sides that the long-term effect of subsidies would be no solution to our problems and that, in principle, they were undesirable as a long-term solution. However, there was some agreement that they could play a short-term solution to some of our economic difficulties, in that they could possibly have a short-term effect in cushioning a sudden and steep rise in the basic cost of food. This could be helpful to Government if it would enable them to persuade the people to accept a voluntary incomes policy.

It seemed to me that there was something in this argument in the period 1973–74, when many of the costs we were facing resulted from substantial increases in world commodity prices outside the control of any Government. I believe that at that time there was a limited case for food subsidies, but only as a temporary measure. Those days have gone. World commodity prices are not rising. They are tending to fall. Still in this country we have very high rates of inflation. They are domestic rates of inflation which we create ourselves. We can have as much or as little inflation in this country as we determine, from factors under our control.

Therefore, the real debate is not about whether subsidies are likely to be a long term feature of our economy, but about the rate at which we should phase them out. I do not believe that it has been entirely obvious to some of the back bench supporters of the Government, but the Government are themselves, in effect, beginning to phase out subsidies as they have to admit that they cannot match the increase in the prices of basic foods with further subsidies. They are having to weigh the realities of the situation, that the rise in prices of basic foodstuffs cannot be matched with increases in subsidies. The effect is gradually to reduce the significance of subsidies, and there is, therefore, a tendency to phase them out.

Our proposal is that subsidies should be phased out over about two years. The effect would not be anything like as dramatic as hon. Members on the Labour benches have tried to make out. The effect of reducing the subsidy bill next year by half would be about ¾per cent. on the Index of Retail Prices and this is at a time when prices are going up by 20 per cent.

I therefore believe that it is important to give serious consideration to the amendments, which are designed to give a lead to the Government on a method of phasing out subsidies, not in one year, but in two years. We suggest reducing the figures over the next two years so that we can get back to facing reality and dealing with the problems of inflation and, indeed, helping the poorer off sections of the community in a much more effective and efficient manner.

The amendment inevitably raises all the same arguments that a rose in Committee. It will profoundly relieve you to hear, Mr. Speaker, that I do not intend to return to all those arguments.

The proceedings in Committee were characterised by a great deal of amica- bility. Despite all the evidence to the contrary, there was fundamental agreement on the principal purpose of our amendment, namely, the phasing out of food subsidies. There are declarations on both sides to support that view. The difference of opinion a rose not on the principle of the phasing out but on the pace. The amendment has been tabled in an attempt to quicken the pace.

One overwhelming impression which remains is the slightness of the impact of subsidies by comparison with the weight of effort which goes into the whole administration of the food subsidy system. At the end of the day we are faced with the bare, crude arithmetical calculation that the spending of about £1,200 million. as envisaged, over two years results in an average arithmetical benefit, per person, of 25p per week. That is an astonishing exercise in the machinery of government.

Over the course of the months during which subsidies have been introduced we have seen that vast numbers of people are engaged in the administration of the subsidy system. To quote the Chancellor of the Exchequer in his Budget Statement last November. in another connection, it is like burning down the House of Commons to roast a chicken.

We are not in disagreement about the Secretary of State's proposed objective to help those who need help most. We are fundamentally divided on the method used to achieve that end.

Faced with the attempt to secure the needs of the worst off and most in need of help, we must look for other reasons. We accept the very praiseworthy reasons advanced by the Secretary of State, but we doubt their effectiveness. Inevitably we are forced to look for less praiseworthy reasons for the retention of the subsidy system.

We are beginning to believe that, perhaps in some natural sequence of events. this is a resolute defence of the Secretary of State's empire. The right hon. Lady recently gave a television interview. I must be careful here, because not only is she supported this evening by her cohort of civil servants under the Gallery ; she is flanked by her two principal lieutenants. If the hon. Member for Colne Valley (Mr. Wainwright) is right, and we are attending a funeral, perhaps they are here in the rôle of undertakers' mutes I do not know.

A remarkable reply came from the Secretary of State during that television interview. She was asked whether her Ministry actually did anything. That was an extraordinary question from an otherwise friendly interviewer. The right hon. Lady replied that the Department did something ; it administered the subsidy system, and that involved a great deal of work.

It is the raison d'être that we have a subsidy system to employ the very many people engaged in the administration of the system within the Secretary of State's Department. This has behind it a much more serious and fundamental point. It is not a criticism alone of the Secretary of State or of the Department of Prices and Consumer Protection. Over the years, under Governments of both colours—red and blue— there has been, increasingly, a trend of people moving from productive employment to nonproductive employment. Over the 10 years to 1972, the increase in the number of those engaged in local government was 48 per cent. and in the number engaged in national government 11 per cent.

If this trend continues, a serious situation will develop, in which the natural wealth of the country, from which all these social measures are to be derived, will increasingly diminish through lack of application by the people available to do the work.

Exactly that which was predicted during our de-dates on Section 1 of the Prices Act 1974 has come about. Within a period of a few months, the Government, having embarked on a policy of food subsidies, have to come back to the House of Commons and ask for more. Yet, despite the predictability of the Government's conduct this afternoon, there is an air of unreality about this debate because the Secretary of State has to walk the most terrifying tightrope which will require all her charm and skill to negotiate successfully.

What the right hon. Lady has to do is, at one and the same time, to justify to the House an increased maximum figure of £1,200 million on food subsidies and not only to convince her hon. Friends, notably her hon. Friends below the Gangway— I suppose she has some—that this sum of £1,200 million is necessary now, but to prepare them for marching in precisely the opposite direction within a very few months.

The level of food subsidies and the decision about their level is passing, if it has not already passed, from the Secretary of State and the British Government to the oriental money lenders upon whom we are becoming increasingly dependent. It is true that the right hon. Lady and other Ministers still give the appearance of exercising power, but more and more power is passing from the Government to these upon whom the Government depend for borrowing money.

I have great sympathy with the right hon. Lady, because the stronger the case which she makes for sticking to the figure of £1,200 million as the total amount of food subsidies which the Government may spend the more difficult it will be for her when the inevitable U-turn takes place later this year.

I wish to turn to a point made by my hon. Friend the Member for Oswestry (Mr. Biffen) in a characteristically excellent speech. He said that the right hon. Lady had sought to defend food subsidies partly on the ground that even though on her own admission, 52 per cent. of the total expenditure on those subsidies goes to families earning more than £50 a week, that did not matter very much because the money was levied in taxation from the rich. That just is not true. The so-called redistributive element in food subsidies is more of a myth than a reality.

The proposal to continue and, indeed, to extend food subsidies at this time is a sign that the Government are still going in the wrong direction— but at least we have the assurance that the Chancellor of the Exchequer has indicated that on all other aspects, and notably in the nationalised industries, we are moving away from subsidies. It is a great comfort to the Opposition that the right hon. Lady will at least shortly be following where her right hon. Friend has begun to lead.

I begin by dealing with some of the points raised in this interesting but repetitive debate. Virtually every argument advanced in the debate has been deployed at considerable length and in detail in Committee. It is difficult to find new arguments on either side, and I strongly suspect that we both remain highly convinced of the arguments which we have been advancing for many months.

What I find very strange are the Opposition's continual attempts to suggest that in some odd way the position of the Government has altered. In fact, the position of the Government has been consistent throughout. When we introduced the original Prices Bill in the spring of 1974 we made it clear that we believed that food subsidies have a significant transitional role to play in a state of high inflation. We made clear that we were not wedded to their perpetual continuation, but we indicated that we believed that they had a serious rôle to perform at least for some years.

The interesting thing is that the Opposition came round to agreeing with us. As recently as six months ago that is what they said in their election manifesto. It is they today who are in full retreat from their own manifesto statement, who appear to want to have nothing to do with food subsidies and who find themselves expressing a rigidly orthodox free market view. It is a remarkable conversion. It is not a view which we share, and it would be gracious of the Opposition to recognise that under new leadership, in terms of their Shadow Minister and the Leader of the Opposition, they appear to have adopted a much stronger line than they did when fighting the last election.

The hon. Lady the Member for Gloucester (Mrs. Oppenheim), in a charming admission, said "When we are in opposition we propose." But it is the Government who dispose. It is our view that food subsidies have a very important function to perform in terms of protecting the least well-off against some of the blows of inflation until such time as there can be an adequate social system to protect them.

My hon. Friend the Member for Cannock (Mr. Roberts) was right in saying that we have this frequent repetition by the Opposition of the need to phase out subsidies and to introduce social services, many more of which have been advanced while the present Government have been in office than in the previous four years when the Conservative Party was in office.

The two most substantial real increases in pensions were made by my right hon. Friend the Member for Lanark (Mrs. Hart) in 1964–65 and then by my right hon. Friend the Member for Blackburn (Mrs. Castle) in 1974–75 with a 30 per cent. increase in the pension level. The first proposal for an increase in family allowances for seven years has been made this year. There was no increase whatsoever in family allowances in the period when the present Opposition party was in power. The first serious proposals for extending family allowances to the first child was made by the present administration.

The Opposition really must come off the seesaw on which they find themselves when they constantly advocate that we should phase out food subsidies and bring in social service benefits when they did not bring in food subsidies or benefits on the right scale.

Is the right hon. Lady about to unveil a policy for dealing with the intolerably low earnings of 2 million of our citizens who are in dire need?

The hon. Gentleman has consistently argued this point. Of course, the Government accept that there are anomalies in the social contract based on low pay. Secondly, it is not least this group whom we have in mind in our food subsidy policy, a group which cannot be reached in any other way.

A number of points have been made, not least by the hon. Member for Rom-ford (Mr. Neubert) and also by the hon. Member for Pudsey (Mr. Shaw) about the colossal administrative and bureaucratic machine which I am supposed to have erected. I am supposed to spend my time admiring this Heath Robinson machine consisting of thousands of civil servants who are uselessly employed on pointless subsidies.

I am sorry to have to reiterate that food subsidies are administratively just about the most economic system devised for helping the lower income groups. The straight cost, it is worth repeating, is 1p of administration for every £7,000 worth of subsidy, compared with 1p of administration for every 4p of subsidy in the case of butter tokens. If the Opposition push me, I can be very dull on the subject of family income supplements, rent rebates, rate rebates and many other things. Virtually every means-tested benefit, in terms of useless bureaucratic expenditure and bureaucratic employment, requires incredibly more administration.

One thing that worries me is when my right hon. Friend sometimes talks about the long-term aim of phasing out food subsidies. Will she say what is her long-term argument for moving in this direction?

I hope that my hon. Friend will allow me to proceed, and I will come to that aspect of the matter in due course.

Do the Minister's expenditure figures include expenditure by local authorities for providing staff for enforcing the regulations and putting them into effect?

These are essentially central Government figures because it is impossible to allocate expenditure on the different functions of the trading standards officers. However, the hon. Lady will see that the increased expenditure in that field is lower than in the case of most means-tested benefits as a proportion of the whole.

The hon. Member for Pudsey managed to squeeze into a debate on food subsidies a speech about the Price Code. Quite a lot of the arguments that he was advancing appeared to be directed against such matters as the base date for baking, which has been one of the great causes of difficulty for the baking industry, as the hon. Member will no doubt readily admit. This is something we are gradually trying to change in the light of investment, and, although he does not believe that the investment relief and productivity deduction go far enough, I hope that the hon. Member will give credit in agreeing that this is not a doctrinal matter and that we have attempted to move to meet the real grievances, where they are real, of some of the food manufacturers.

I shall come later to what the hon. Member said about phasing out subsidies, But first I should like, greatly daring, to raise one point that was mentioned by the hon. Member for Oswestry (Mr. Biffen). I fully appreciate that our views could not be further apart, and I hope that he will also accept that there is no necessary consequence for public sector borrowing requirement of the food subsidy policy. There is only a requirement if that subsidy policy makes a net call on the public sector borrowing requirement.

Like my hon. Friends, I believe that there is a strong case in a society under great economic pressures for, if necessary, increasing taxation in order to finance this kind of policy, and I make no bones about that. We believe that in a society under stress the Government, above all, have a major responsibility to protect the least well off. The hon. Member will recognise that, in spite of his remarks about the Government's public sector borrowing requirement, the monetary supply figure. known as M3, the broader figure, has increased at only just over half the rate of the last couple of years of his party's administration.

One of the reasons for that we debated in Committee. I hesitate to repeat it, but I shall be brief. The truth is that there has never been any basic eschewing of subsidies by the Conservatives. There has been something of this basic rejection at least in recent years by the Liberal Party, though not actually in earlier years, but there has been no such approach by the Conservatives. Their figures for subsidy ran at the high level of about £800 million in the last full year of their administration. Some £500 million went to nationalised industries, about £300 million to private industry— I can now see that my original figure was incorrect— and £112 million on milk, and the same on butter. That is just short of £l.000 million in subsidies of one kind or another.

The only difference between the Conservatives and ourselves was that they preferred to subsidise nationalised industries and private companies to a greater extent and food to a less extent. It will therefore not do to pretend that we are here having a debate on principle— a principle which my party has never worried about accepting. The debate is about the choice of subsidy, not about the principle of subsidy.

The Opposition have reiterated that we should phase out subsidies, and they keep talking as though this is something new, a kind of revelation today. I stand by what I have said repeatedly, that the Government are committed to a phasing out, but a very gradual phasing out. Opposition Amendment No. I would leave a total figure of subsidies of £1.000 million. The second amendment would rule out any extension of the ceiling to £1,700 million which is implicit in subsection (3). That would have a simple effect. Expenditure this year is estimated at £550 million in money terms—in real terms the figure will be slightly below last year's £516 million, which is about £488 million in real terms. The Opposition would then say that last year's £516 million and this year's £550 million would exceed the limit and therefore the subsidies would be chopped. Alternatively, the Government could go back to the trade and tell it to halve the present subsidies, but the trade would not like that.

The hon. Member for Gloucester said she had consulted the Food and Drink Industries Council and it had suggested a phasing of three years, but the Opposition must be quite clear what they are proposing. If the amendments were made the phasing would be over one year. It would be quite impossible for the trade to adapt to that because half the outstanding amount has already been spent in the figures we have been using here, so that there would be only about another £500 million to come. We have had no representations for such a rapidly accelerating phasing out from the trade, though we have had rather different representations. Perhaps I may quote two of them.

The Milk Marketing Board's consumers' committee for England and Wales, which is concerned with the underlying source of the food which encompasses three of the subsidised products— butter, cheese and milk itself— and the largest part of the food subsidy programme, said in its report on 12th February :

"The Chairman of the Milk Marketing Board has expressed the hope, and so have the Dairy Trade Federation "—

which I believe to be a significant part of the food manufacturing and food producing sector—

" that when the time comes to remove these subsidies the process will be a gradual one to avoid violent changes in consumption and to give the industry time to adapt its policies and resources to new market conditions. On behalf of the consumer, where the household budget would be affected by any marked rise in the price of milk, we endorse this hope."

In paragraph 80 the report repeats the same advice in respect of butter and cheese.

The official representations made to us, therefore, by the Food and Drink Industries Council do not align with the Opposition amendment, which would require on any possible basis a catastrophically rapid rate of rundown.

Is the Minister going to tell us her timetable for phasing out food subsidies? The only indication so far is contained in the Public Expenditure White Paper, which makes it clear that it will be 1984 before they run down and out.

The Public Expenditure White Paper indicates figures for four to five years. It does not indicate what lies beyond that, and the hon. Member for Oswestry will only too readily say, if I do not, that it would be extremely foolish for any administration to predict what will happen in six, seven or eight years' time. So it is our intention to phase subsidies out gradually, though I cannot say exactly when. The House knows perfectly well that the power is in its hands. In the spring of 1976, if I am to go up to the ceiling of £1,700 million which is implicit in the Bill, I shall have to return to the House for an affirmative order. Anything beyond that would require a complete new Bill.

In my Department we have consistently put ourselves in the position of having to return to the House repeatedly for further legislative authority to continue. Throughout the Committee proceedings and on Second and Third Readings of the original Prices Bill no suggestion was made to the effect that the Bill would not be extended. Indeed, it was implicit in our debates that it was bound to be extended.

The right hon. Lady has repeated the welcome news of her intention to phase out these subsidies. Although there may be some dispute about the pace of the phasing, may we assume that the right hon. Lady does not accept the advice contained in the Trades Union Congress Economic Review that food subsidies should now be increased?

I think that it would be unwise to say whether I do or do not accept that fadvice. As I have made clear repeatedly in the House, the purpose of the subsidies is to try to offset the effects of inflation. At the moment we are working on the basis of there being a mild fall in commodity prices. I cannot predict what would happen if that course were to change rapidly. The hon. Member for Oswestry will have to await the decisions announced in the Budget. Of course, the TUC is not proposing a figure over a certain period which would make a sharp difference to the general intention of a gradual phasing out.

I must say to the House— if I do not do so it will reach a false conclusion— that when I talk about a gradual phasing out of food subsidies I am in no way suggesting that there is nothing effective to be done as regards the redistribution of pricing policies. I have the greatest sympathy with the remarks which have been made on that subject by a number of my hon. Friends. We have often subsidised those elements in prices which are least likely to benefit the less well off.

My hon. Friend the Member for Cannock mentioned the subsidy proposed by the right hon. Member for Finchley (Mrs. Thatcher) during the last election. The right hon. Lady proposed to increase extensively the subsidy given to owner-occupiers. There are many other examples.

In Committee I gave the example of the way in which some of the subsidies of nationalised industry prices are being phased out by the present administration. Those subsidies were of much greater benefit to the better-off sections of the community than to the less well-off. In that respect they do not compare favourably with food subsidies. That is because of the proportion of expenditure by the poor on food. The opposite is the case for the straight forward reason that in the past year the index for pensioners, the only poor group for whom we have complete statistical indices, has for the first time in five years increased less rapidly than the index for the general community.

It can also be said that the index for food has for the first time in a number of years increased less rapidly than the RPI generally. That by itself would be a sufficient reason for the corpse still being alive and walking and very far from its coffin. I say that in answer to the hon. Member for Colne Valley (Mr. Wainwright).

In anything I may say about the gradual phasing out of food subsidies in the interests of other sorts of benefit I want to make it crystal clear that one of the functions of my Department is to ensure that what I can describe only as regressive pricing policies cease to be regressive. One of the things that I have learnt in my year in this office is that it is not only in incomes where there is a considerable gap between rich and poor. That gap also exists in pricing policies.

We encounter the gap when we compare the interest rates that the poor pay to obtain credit against the interest rates that those with substantial security have to pay. Whether it is the subsidies to the large consumers of power as against the subsidies to the small consumers of power, whether it is the steady increase in the price of necessities as against the price of less essential goods, with services going up in price less rapidly than the essentials of energy and food, or whether it is in housing, where very often in the past those who had the largest mortgage gained the most from taxation, when we consider pricing policies in the same light as incomes policies it is clear that so often the poor are penalised. Any phasing out of food subsidies that takes place will take place in the light of a move towards changing the policies that I have mentioned so that they are no longer regressive in the way that they have been for so long.

This has been a useful debate. It has demonstrated, if it needed further demonstration, precisely how limited are food subsidies in their usefulness as a means of fighting inflation.

Perhaps it is unfair to judge by the results, but the events of the past year have shown conclusively that food subsidies are not a magic wand that can be waved to defeat the forces of inflation. The Secretary of State may tell us about the different movements of the retail price index, the food price index or the pensioners' index ; and she may describe the way in which all the different indices move at the same time, but whatever the difference between those indices, that pales into insignificance when we recall the increase in inflation that has taken place in the last year.

The different indices pale into insignificance when we remember that the year-on rate of inflation is 20 per cent. compared with the rate of 13 per cent. when the right hon. Lady came to power. Let us remember that the one-month figure for inflation on an annualised basis is now 35 per cent. What use, in that situation, is ½ p per person on the tea subsidy or ip per person on the flour subsidy? All that is very small beer compared with the tremendous acceleration of prices generally.

I remember once participating in a debate on social security, when one benefit had been increased by 10p. The right hon. Member for Blackburn (Mrs. Castle), the present Secretary of State for Social Services, scoffed at 10p. She said that she would not bother to bend down in the street to pick it up. I wonder what her invective would be about the sort of sums we are talking about now.

How very different, too, is the reality of inflation compared with what we were told by the Chancellor in his best 8·4 per cent. accent. It is unfair to contrast the hours of courtship with the years of possession, but the British people will not forget. We, too, cannot forget precisely what the Chancellor told us during the last election. One of his utterances which has received rather less publicity than others was the statement he made during the election, that as from next Easter there would be a steady and continuous fall in prices.

Well, I am a generous man. Leaving aside the phrase "a fall in prices ", by which I think he probably meant a fall in the rate of inflation, the Chancellor has three weeks in which to show that his prediction will come right. There is precious little evidence of that forecast even moving in the right direction. How very different were the remarks quoted in the Press recently by the hon. Member for Birmingham, Ladywood (Mr. Walden). He said that in every month of this Government the rate of inflation has not merely risen but accelerated. [Interruption.] The right hon. Lady says that is not true, but it was what the hon. Gentle- man said. That is what he chose to contrast with the Chancellor's remarks. Perhaps the Secretary of State will care to take up the matter with her hon. Friend.

I like to be fair to the Government. There have been some forecasts and some speculation as to whether the rate of inflation may not reduce a little in the second half of this year. Let us make no mistake about it, if the rate of inflation decelerates in the second half of the year that will not be because of the social contract or because of subsidies but because of the recession and the level of unemployment.

The Chancellor has talked of not using unemployment as a means of combating inflation and he has attacked the self-confessed monetarists on the Opposition benches. He talks soft and acts hard. I do not criticise the Chancellor for the action he is taking, but I do criticise those who believe him when he says that he is not using unemployment as a weapon, and I criticise the way in which he says one thing and does another.

If we jog backwards we recall that the original aim of subsidies was to persuade the trade union movement to moderate its wage demands. That manifestly has not happened in the last year. It is clear beyond a shadow of doubt that wages and earnings have outstripped the rise in prices. Prices in the last year have gone up by the staggering amount of 20 per cent. and wages have gone up by 30 per cent. Even on last month's figure, when prices are shown on an annualised basis to be going up by 35 per cent., wages went up by the skyscraping figure of 56 per cent. What a contrast with the situation in the United States, where prices are going up by 11 per cent. and wages by 9 per cent.

The astonishing thing surely is not that subsidies have not succeeded in persuading trade unions to moderate their wage demands but that anyone should ever have believed that they were likely to do so.

Another original objective of subsidies was to minimise the impact of the rise in raw material prices, but now the rise in wages has taken over as the main cause of inflation and the Government are using subsidies to pay wage increases, which is precisely the situation which subsidies were introduced to avoid.

Furthermore, for all the money that is being poured out in food subsidies— nearly £600 million a year— food prices are still rising. The prices of milk, butter, cheese. bread, sugar, sausages, bacon and pork are all going up, or have gone up.

All this massaging of the retail price index is totally irrelevant to real problem of inflation. Manipulating the retail price index does not counter inflation ; all it does is to suppress the symptoms of inflation. My hon. Friend the Member for Malden (Mr. Wakeham) argued well that although subsidies may temporarily reduce the appearance of inflation and suppress inflation they give only a temporary alleviation. One soon moves into the period when costs go up again and a decision has to be taken whether to let the costs work through or to provide more money for subsidies to peg prices at their existing level. One simply goes on deferring the evil day when the taxpayer and the consumer have to face reality.

In politics there is an old adage that when one is in difficulty one changes one's ground. Now we are told that subsidies are part of the great process of the redistribution of income and wealth. That is a blanket phrase which, like all blankets, is used to conceal a multitude of sins.

I reiterate what my hon. Friend the Member for Pudsey (Mr. Shaw) said— that food subsidise are like buckshot ; a lot misses the target. Food subsidies are a highly inefficient way of helping the poor as well as being an extremely costly one. We know that 50 per cent. of the subsidies go to households with incomes of more than £50 a week. I have no doubt that property developers, merchant bankers, Japanese tourists and Arab business men who sample Délices des Dieux on the cheese board at the newly reopened French "Caprice" restaurant are grateful for the difference which the introduction of food subsidies has made to their living standards. Perhaps when they pore over the cheese board at the "Caprice" they remember the words of the Chancellor on the radio when he said that subsidising bread helps the millionaire if he eats some bread, but if he feels guilty about it he can always send a donation. Perhaps it is not the millionaire in the "Caprice" who should feel guilty about it. Perhaps those who should feel guilty are the politicians who connive at and accept such a scandalous misuse of public funds.

The Secretary of State will no doubt think that I am being extremely selective in naming the beneficiaries of food subsidies. She would probably choose to mention pensioners, nurses, large families and low-wage earners, some of whom, no doubt, are getting tired of being mentioned in every bogus piece of social justice which she chooses to trot out. Her list is just as selective as the one I quoted, because the reality is that 52 per cent. of the population get 50 per cent. of the benefit of food subsidies.

From the article by Professor Ritson of Reading University, which featured in our debates in Committee, we know how the benefits of food subsidies break down between various income groups. He said that those who earned less than £23 a week are net beneficiaries, but he also said that those who earned between £23 and £41 a week receive over £200 million in food subsidies and pay only £100 million, and that those who earn between £41 and £70 a week receive £240 million in food subsidies and pay only £140 million. 1 do not believe that in the debates on the Bill the Secretary of State has made a convincing case on the redistributive justice of food subsidies.

We are sometimes told that food subsidies redistribute between those with families and those without families. That is undoubtedly true, and it might be a compelling argument if food subsidies were not being financed out of indirect taxation, as the Chancellor in his Budget speech specifically said they were. That is why food subsidies are nothing more than a pious fraud. They are financed to a large extent out of levies on beer, tobacco and other commodities that are paid for out of the income of those who are meant to be the beneficiaries of food subsidies.

If everything the hon. Gentleman says is true, why did the Conservative Party advocate the retention of food subsidies during the last election campaign?

What we made cleat during the last election and what is made clear in our amendment today is that we think that food subsidies, as they exist, should not be abolished overnight but should be phased out. That is the argument which was developed with such conviction and skill by my hon. Friend the Member for Gloucester (Mrs. Oppenheim).

The argument has been put forward that food subsidies are of great benefit because there is a 100 per cent. take-up, as there is not for social service benefits. That argument is supposed to make the case for food subsidies overwhelming. But there are social security benefits that are not means-tested. There are methods of improving the take-up of benefits. If that is the crux of the Government's argument, it is a great pity that they chose to ditch the tax credit scheme, by which they could have given direct help to the people who are most in need.

I come now to the argument that food subsidies are important because the lower-paid spend a larger proportion of their income on food. There is force in that argument, but it is in danger of being overstated. As Professor Ritson pointed out in his article in New Society, what is remarkable in this country is how little expenditure on food varies between different income groups. He said that in the last six months of 1974 the lowest 10 per cent. of the lowest income group consumed only 10 per cent. less meat than did the average of all householders. Even if there are differences between low income families and average families, it is not true to the same extent of pensioner households. Therefore, that is not a convincing argument.

Apart from the feeblesness of the argument put forward by Labour Members in justification of the subsidy policy, there are two weighty, and in our opinion, serious, reasons why subsidies must be phased out— and phased out more quickly that is at present envisaged. One reason was mentioned by my hon. Friend the Member for Oswestry (Mr. Biffen)— the heavy burden of public expenditure and the borrowing requirement in this country. Leaving aside all questions of seeking to find other ways in which the additional money could be spent— for example, in welfare benefits— there is a need to reduce public expenditure. There is a compelling case on that ground.

At present the Government borrowing requirement is at least £6,000 million, and some people believe that it amounts to £8,000 million. That would mean £450 for every household. There is the strongest suspicion that the control of Government expenditure is totally nonexistent. The poor Chief Secretary has done his best but has produced a White Paper in which public expenditure goes ever upwards but in which there is no room for private consumption. Labour Members do not seem to care about the public expenditure problem. They get excited about a contribution to the European budget of £120 million but when two and a half times that amount is spent on the milk subsidy, and 10 times that amount on food subsidies as a whole, they do not seem to turn a hair.

As my hon. Friend the Member for Eastbourne (Mr. Gow) said, the Government, because of their borrowing requirement. are in a most precarious situation. They want to phase out food subsidies, but the question is whether our creditors and the sheikhs will be able to wait that long. We believe that there is a strong case for moving faster than the Government envisage.

The second objection to food subsidies was embodied in the excellent speeches by my hon. Friends the Members for Pudsey (Mr. Shaw) and Romford (Mr. Neubert), and lies in the distortions caused by subsidies. These distortions lead to increases in consumption, effects on the balance of payments, like the rocketing imports of butter, and effects on production which can exacerbate shortages.

In certain cases, one may find that food subsidies will prevent some price reductions. Many major retailers in the past have been able to negotiate discounts with bakers of up to 28 per cent., but the Secretary of State takes the view that it is not right that the subsidised firms should profit in that way. Therefore, the discount has been limited to a maximum of 22½ per cent. with the result that we have had higher bread prices.

There are also the effects of the butter subsidy on margarine producers and the distorting effects in that respect. We must also consider the distorting effects of bread subsidy and the extent which it has shifted consumption from some types of bread that are not subsidised to others that are subsidised.

My hon. Friend the Member for Pudsey also referred to the milk subsidy. The right hon. Lady tried to deal with that point in Committee. She said that milk consumption had increased only a little since the subsidy was introduced. That may be so, but a small increase in total liquid milk consumption may be important for the much smaller market which uses milk for manufacturing purposes. People engaged in making manufactured products are gravely concerned about the increase in consumption caused by the milk subsidies. We believe that the case for phasing out the subsidies more rapidly than the Government envisage is a strong one. They are putting the country in a difficult precarious financial situation.

I beg to move, That this House does agree with the Lords in the said amendment.

I understand that it will be for the convenience of the House to discuss at the same time Lords Amendment No. 3.

These amendments deal with the vexed subject of the earnings rule on which we have had vigorous and controversial debates in recent weeks. I think that this evening we may have reached tranquillity, because I cannot believe that the Opposition would be able so to contort themselves as to do anything but agree with the recommendation that we should accept the amendment made in another place.

The amendment puts into proper form the relaxation of the earnings rule which was agreed to when the Bill was reported back to the House from Standing Committee. It clarifies the wording of subsection (3). We are doing nothing new. All that we are doing is to put into proper legal form the intention of the House expressed in the vote some weeks ago. I understand the difficulty of drafting amendments in proper legal language. There were serious defects in the drafting of the amendment which was made then.

The amendments arise, as the Minister said, from the proceedings in the House a short time ago when the Government suffered a notable defeat on the earnings rule. The consequence was a worthwhile relaxation in the earnings rule for retirement pensioners and the wives of invalidity pensioners.

One of the things which the Government are now doing, which we welcome, is to put right an oversight in the previous proceedings, by extending the relaxation to the wives of industrial injuries disablement pensioners who are entitled to unemployability supplement.

I accept that it is the Government's intention in Amendment No. 1 to tidy up the wording of the amendment drafted by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), which was carried against the Government. Lord Wells-Pestell said on behalf of the Government in the other place:

" I want to make it perfectly clear…that this Amendment is not designed in any way to reverse or to modify the clear intention of those who supported the relaxation."— [Official Report, House of Lords, 27th February 1975 Vol. 357, c. 998.]

I accept the Government's good faith in that they were trying to tidy up the drafting to give effect to what they believed the House intended. Unlike, for instance, the other defeat which they suffered on the question of disabled housewives, they are trying to go back on the decision of this House and in practice avoid the consequences of the defeat they suffered on that occasion. It was the genuine belief of Lord Wells-Pestell that he was simply meeting the case of what had been carried in this House.

There is certainly no need for me to go over the general case for the relaxation of the earnings rule. It was accepted in the House on a previous occasion that it was a very much resented and unfair rule in the way in which it bore on retirement pensioners and that a relaxation of it, moving towards virtual abolition, was a very important encouragement to retired people who want and need to keep themselves in some sort of worthwhile work.

However, I should like to look at the tidying up which is being carried out. because the Minister has made it clear— and the amendment makes it clear— that the amendment is designed to ease the rule to £50 a week by 1977. That, I accept, is what the House believed it had carried on the previous occasion. On that occasion we moved another amendment to abolish the earnings rule completely, which was defeated because the Labour Members who had supported the Opposition on the first Division did not support us on the second.

But what have we actually carried, and why is it that the Government are anxious to tidy up what was carried against them in the House? Lord Wells-Pestell drew attention to the most important unexpected consequence of what we had done when he said :

"The technicality to which I referred at Second Reading was in relation to what was to happen after 1977. As the clause came from the other place "—

meaning this House—

" it would have meant that the earnings rule would have finished completely at that period."

The noble Lord spelled it out even more clearly when he said:

" As drafted, the Bill provides for no earnings limit once the £50 limit has been in operation for a year. The sponsors of the Amendment to the original Bill clearly did not intend the earnings rule to disappear in 1978 ; if they bad so intended, there would have been little point in their voting for the subsequent Amendment to abolish the earnings rule by 1980 or in their resisting the later Government Amendment at Report stage in another place to delete this provision from the Bill. Nevertheless, the Bill as it stands would mean that once the £50 had applied for a year there would be no figure by reference to which the earnings rule could operate. This would not only produce a result not intended when the provision was passed in another place, but would also have a very odd effect on the retirement condition."—[Official Report, House of Lords, 27th February 1975 ; Vol. 357, c. 997–9.]

What change has taken place between the speech of the hon. Member for Wells (Mr. Boscawen) in Committee and the hon. Gentleman's speech on Report? What further change has taken place for the hon. Gentleman to undermine completely and dissent from his hon. Friend's remark? The hon. Member for Wells is on record as saying in Committee

" I could not recommend to my hon. Friends in the light of the exising economic circumstances that we go as far as Amendment No. 4 "—

that is the amendment which was eventually carried—

" We cannot ignore the effect and the cost of what is involved, virtually straight away for the first £20 and again next year with the next £35."— [Official Report, Standing Committee B, 5th December 1974 ; c. 62.]

Now the hon. Gentleman is wanting to go even further. What has changed so that he is now completely dissenting from the remarks of his hon. Friend the Member for Wells and making him look very silly?

Not at all. I am drawing the Minister into going back into the arguments that he used so unsuccessfully three or four weeks ago when he resisted this amendment. We debated those remarks then. They are taken from one portion of our Committee proceedings. It was then followed by a vote for the two amendments on the Floor of the House subsequently. The Minister will recall clearly the proceedings then, and that there was, indeed, a majority of the Committee who clearly disagreed with the Government. There was a period of delay and open discussion in the Committee before we agreed on which amendments we wanted to carry. But within half an hour of that remark being made, a clear majority of the Committee rejected the Minister's remarks about the amendments and carried both amendments. He was unable to use either that argument or any other to persuade the House to change its mind on Report. It is no good the Minister using the one debating point he had on the last occasion. He has lost that. The amendment shows the extent of what he has lost.

For our part, we are delighted to find how much we have achieved and we shall reinforce our commitment to move towards total abolition of the rule and not allow the Government to believe that they are getting away with a toning down to an easing of the rule in the coming years.

The Minister gave no indication about what the Government's intentions are. Never does he give any commitment about the abolition of the rule— except when it is hedged about with so many qualifications that it clearly comes within the dim and distant future. He is clearly trying to divert the House away from abolition and just to ease it to the lowest amount that he is able to carry in the House.

The Minister has referred to cost. We are about to attempt to reject this Lord's amendment because we prefer the consequences which flow from my hon. Friend's amendment. Therefore, I shall deal with cost because otherwise, were we to be successful on this occasion, we would risk the Chancellor of the Exchequer charging in once more, leaping to his feet in the style of a bold and somewhat over-excited rhinoceros, and ranting to us about the figures involved and the enormity of what we have done— taking his defeat with the extremely bad grace and style he did on the last occasion.

In another place it has been stated that the figures involved are: for 1975–76 £45 million, 1976–77 £85 million, 1977–78 £110 million. Those are the Government's estimates. All that cost falls on the National Insurance Fund, which is grossly in surplus at present because of the graduated contributions from ever-inflating salaries and wages. Indeed, the Exchequer contribution from the Chancellor's own revenues to the cost of this is exceeded by the tax revenue he is likely to get back. There is, of course, a net cost to public funds even against the National Insurance Fund.

We challenged the Government on those figures in Committee and in debate on Report. When the Treasury Minister defended the figures he made a pathetic attempt to explain the background to them. He was unable to justify them to the full satisfaction of hon. Members on both sides of the House. Those figures rise to £110 million in 1978.

On the last occasion we discussed this matter—when the Chancellor got excited about the £110 million— the very next day the Government brought forward the Prices Bill authorising £1,000 million to be spent on indiscriminate food subsidies. By chance, we find ourselves following the Prices Bill today. It is absolute humbug for the Government to lecture us on priorities. Their expenditure is spendthrift and indiscriminate in some directions and fairly miserly in this direction. We do not regret what we did before and we shall do it again if we get the opportunity.

We wish to persuade the House to reject the Lords Amendment so that the Bill will remain as we carried it in this House a few weeks ago.

I should like to correct the hon. Gentleman on one point. He quoted the figures of £45 million, £85 million and £110 million as being the cost to the National Insurance Fund. I hope he will accept that that is not the case and that he is incorrect. The figures he quoted are figures less tax, and the effect on the National Insurance Fund is shown by the higher figures of £60 million, £110 million and £145 million.

The £110 million is the net cost in terms of public expenditure to the National Insurance Fund less the tax returned. The final global figure is £110 million, the bulk of which will fall on the National Insurance Fund.

The £60 million, £110 million and £145 million fall on the National Insurance Fund. It is true that there will be clawback through the tax system, but that does not assist the National Insurance Fund and, therefore, we have to use the higher figure in estimating the cost on that fund.

I do not wish to speak at length, because this is a matter which has been picked over extensively.

Two points need to be made. I am rather surprised that the Minister of State has raised the cost argument again. Indeed, in his last intervention he sought to go over a lot of dry detail. I am sure that he is speaking in good faith, according to his lights ; but his lights seem to be a quivering lantern held before him by the blindest elements in the Treasury. He wants to know why my hon. Friends were convinced that they should support my amendment.

I shall put the argument to him which I am sure he will wish to use when explaining to a wider audience why the Government decided to maintain the amendment in the spirit of the Committee's amendment. It cannot cost the nation more to encourage people to go into productive work than to keep them in idleness, probably running down their savings and contributing nothing.

If the Minister will lift his eyes to the national picture and take his mind from purely departmental considerations he will realise that it is in the national interest to encourage people to continue working if they are capable of doing so after retirement. This argument is so simple that I am surprised that it has not reached the Minister. I hope that he will reflect on it in future.

Unfortunately, there has to be a future with the earnings rule because we have not had a commitment from the Government benches about the eventual abolition of the rule. The Government have had their opportunity. They have not only failed to seize it ; they have actually rejected it. This is a matter of surprise and disappointment to me. I drafted two amendments which were tabled in Committee. One was a talking point: it dealt with the timetable of gradual abolition. The other was the one I expected the Government to accept. suggesting total abolition in 1980.

That date is beyond any conceivable General Election date, and I thought that the Government's calculations would be that it would be easier to accept abolition then, when it did not oblige them to do anything in the immediate future. than a phased withdrawal of the rule beginning at once. I have had to give a great deal of thought to try to understand why the Government, and Labour Members generally, preferred the timetable which led only to raising the limit to £50 a week and did not wish to commit themselves to total abolition.

I am sorry to sound a jarring note here, but it is necessary to interpret the Government's mind. They are not sincerely dedicated to abolishing the earnings rule altogether. They prefer to leave it at a cut-off point somewhere in the neighbourhood of the national average wage, so that the better-paid and professional people will still incur the earnings rule after the age of 60 in the case of women and 65 in the case of men, as a sort of new kind of surtax.

This fits in with the thinking of Labour Members. I regret this bitterly, because it is all part of the class war mentality which is ruining the country, for which the Labour Party are largely to blame. In the way they have handled this issue we see the whole thing again in an unpleasant manifestation. The public will not realise the implications of this until the earnings rule rises to £50 ; but then if the Government have their way it will stay there. That has been made clear. This is deeply regrettable and we must protest about it.

I warn Labour Members that the campaign will go on and their thinking will have to be exposed to the public. This is not only because it is bitterly unfair and wrong but because while it remains it seems that we cannot readily move towards a unisex basis for the flat-rate pension or to the ideal of the optional retirement age, which is obviously the most humane way of dealing with the fact that not everyone is ready to retire at 60 in the case of women and 65 in the case of men.

This Procrustean bed of a fixed retirement age is something which must be

I call the hon. Member for Exeter (Mr. Hannam) to move his amendment to the Lords amendment, with which it will be convenient to discuss the two amendments in the name of the hon. Member for Radcliffe (Mr. Clarke)—

I beg to move, as an amendment to the Lords amendment, in line 1, leave out from beginning to ' have ' in line 3 and insert:

A.— (I) This section shall apply to a person entitled to an invalidity pension of a noncontributory invalidity pension who, while continuing to be incapacitated for normal full-time work, becomes capable of undertaking light work in circumstances which satisfy prescribed conditions.

(2) A person to whom this section applies shall continue to be entitled to benefit for so long as the prescribed conditions are satisfied but where his earnings '.

The amendment seeks to improve the new clause which has been added by the other place so that it can become acceptable to the Government.

We are dealing with the earnings position of invalidity pensioners, the disabled persons under retirement age, but so severely incapacitated that they qualify for the special invalidity payments to themselves and their families.

Unlike the retirement pensioner, who can earn up to £20 a week without affecting his pension and who will be able to earn by 1977 up to £50 a week, the invalidity pensioner can at present earn only £4·50 a week before he loses his entire pension. In other words, a severe and sudden wages stop takes place at £4·50 a week. This can sometimes result in the loss of four or five times that amount of earnings. I will give an example later.

This is totally unfair. in the most excellent debate which took place in the other place on 27th February, when Lord Crawshaw, who is himself disabled, moved the new clause, noble Lords from all political parties supported him in the Lobby and they secured this notable improvement for disabled people.

However, in view of the Government's reluctance to accept the clause as it stands, the Disablement Income Group, which is an all-party organisation and pressure group, has under the drafting inspiration once again of Mr. Peter Large, its parliamentary spokesman, produced a way in the amendment of overcoming the definition problem of entitlement to earnings relaxation.

The amendment which stands in my name and that of my hon. Friend the Member for Wallasey (Mrs. Chalker), who unfortunately has been struck down by the same influenza bug as is causing myself and other hon. Members some vocal problems, would add an extra sentence in subparagraph (1) defining eligibility for a person who

" while continuing to be incapacitated for normal full-time work, becomes capable of undertaking light work in circumstances which satisfy prescribed conditions."

There are many hon. Members on both sides who have the interests of the disabled at heart. The all-party Disablement Group, of which I am secretary, seeks to lift disablement above party politics. Many important concessions have thereby been won from successive Governments. Last week, on the Report stage of the Finance Bill, the Government were nearly defeated on an amendment to relieve disabled people from the disgracefully low income surcharge level which is now to operate. If more hon. Members opposite had listened to the debate and heard the details of, for example, polio victims who are now being taxed on any income they receive over £1923 per week, many more than the eight or nine would have abstained.

The Minister of State, Treasury in that debate gave as his reason— it is linked with this debate— for not giving the concession, that the Department of Health and Social Security benefits were the right way of helping the disabled rather than Revenue concessions. This is why we have the amendment before us tonight. I hope that the Department of Health and Social Security Minister will accept his responsibility and accept the amendment.

The principle then, as now, is to help disabled people to earn their own way if they wish to and if they are able to and thereby reduce their dependence on State benefits. In case the Minister intends to deploy the argument that we are imposing an increase in Government expenditure, I wish to assure him that I believe that the result of the amendment would be the opposite.

We have at present what has been termed a "sick or fit situation. Either a person is considered sick or unemployable and receives State aid— invalidity pension, supplementary benefits and so on — or he does a little part-time work and earns more than £4·50 a week and thereby loses his invalidity pension completely.

The consequence is that many disabled people, who can easily be certified under the prescribed regulations we suggest in the amendment by a doctor or an occupational therapist as being fit for light work, are now staying at home doing nothing and, in their own definition, becoming State cabbages. The alternative is that they become a kind of slave labour, with employers who restrict their wages to the wage-stop limit of £4·50.

On top of that, there are all sorts of fiddles arranged whereby such people work in little joint businesses and arrange for all payments to go through their wives. Such things are inevitable when a wage stop operates at such a ridiculously low level. This wage stop constitutes an earnings stop and prevents many disabled people from doing useful work, it is a hindrance, and it does not encourage people to return to work.

With a sickness benefit it is different. After a spell away from work, the doctor prescribes an ability to return to work. For the disabled invalid there is a transitional rehabilitation period during which part-time work helps a person to get back to full-time employment, and, therefore, away from dependence on the State, which is surely what we all want to achieve if possible.

The amendment standing in the names of my hon. Friends and myself has been grouped with that of my hon. Friend the Member for Exeter (Mr. Hannam), and both amendments are based on one carried in the House of Lords after having been moved by Lord Crawshaw, to whom the whole House is seriously indebted for having highlighted this problem. His interest in the disabled and his advocacy on their behalf is well known to us all. He succeeded in defeating the Government yet again. Once more we are debating a part of this Bill as a result of a Government defeat, and I calculate that there have been six such defeats on the Bill. That is no less than justice. There was, perhaps, room for a few more.

When the Secretary of State presented the Bill on Second Reading on 21st November last, on almost her last appearance in connection with it— I believe she has made one speech since— she described this in column 1558 as a "package of compassion ". She went away from our debates whilst the House opened that package to find just how little it contained. When we find that we have to amend the Bill in this way to eradicate its weaknesses we are convinced that the Labour Party, in government as in opposition, wears its heart on its sleeve in relation to this sort of subject. We see on closer examination, however, that the heart is not on quite straight.

The Government's genuine achievement so far in these matters is fairly limited, as, judging from the attendance in the Chamber, is their level of interest in it. I congratulate the two Labour back benchers who are in the House. It was significant that as soon as the debate about the disabled began there was no longer a solitary Labour back bencher in the House to participate. The only occupants of the Government benches were two Ministers, a Whip and a PPS. Perhaps that is a contrast with the professions of concern for the disabled by numerous Labour Members outside this House.

I come now to the amendment which deals with the non-contributory invalidity pension. This is an important new benefit which has been heralded for a long time but which was extremely disappointing when it finally appeared in the Bill. We believe the Government misled the disabled into expecting a great deal from this benefit, and then let them down. One of the difficulties we have argued about since the Bill was presented is the 100 per cent. earnings rule, which as my hon. Friend the Member for Exeter said, is probably better described as a wage stop.

How did the Government get themselves into the difficulty which led the other place to try to amend the Bill and improve it? The trouble stems from the fact that they have welded the noncontributory invalidity pension to the old invalidity pension and they therefore took the definition of "incapacity for work "as qualifying someone for the new benefit.

We spent a lot of time in the House arguing against this basis for the new benefit. We preferred that there should be an assessment of the degree of disability of individuals as the basis on which the non-contributory invalidity pension should be paid. However, the course adopted by the Government, which they say is administratively more convenient, means that the wage stop— or the 100 per cent. earnings rule— that applies to the contributory pension has been imported into the new benefit.

At present the only earnings allowed to the invalidity pensioner are the so-called therapeutic earnings of £4·50 a week, that figure having been maintained since 1972. It is available in extremely limited circumstances, which are set out in the regulations governing unemployment and sickness benefit. Therapeutic earnings are not normal earnings ; they are permitted only for limited categories of work. First, they are allowed if the work is undertaken under medical supervision as a part of treatment while the person concerned is a patient in or of the hospital institution, and if the earnings therefrom are less than the specified sum. Secondly, they are allowed for the work of a non-employed person where that work is not undertaken as a patient in hospital but is work which the person concerned has good cause for doing.

The figure is miserly. The definition of the kind of work that can be undertaken is extremely limited. To call them therapeutic earnings is something of an understatement. To many people who are disabled the earnings are therapeutic in more than a limited medical sense. Disabled people who are lucky enough to have some small occupation have a valuable way of keeping contact with the outside world and the world of work. It gives them some contact and activity outside the immediate range of what is necessarily a limited family and social life.

The injustice of the rule as it stands, as my hon. Friend the Member for Exeter has already well explained, is that it catches the very occasional and very light job. A disabled woman who does some envelope-writing for an organisation may easily find that she is earning more than £4·50 per week. It is not even like the retirement pensioner who loses some of his earnings. If more than £4·50 is earned there is a complete stop and the person concerned no longer qualifies for any benefit for the period that he or she is receiving a modest sum by way of wages.

By bringing that definition into their new benefit the Government have landed themselves with the problem which my noble Friend Lord Crawshaw has attempted to put right and which my hon. Friend the Member for Exeter is attempting to rephrase to deal with some of the practical difficulties.

One matter that needs to be highlighted, and to which we must return as we develop further the area of new benefits which is just being opened up, is the problem of the complete exclusion of the disabled who are in any kind of real work which provides an income, however modest.

I know that there are not many people who come into that category. That makes the public expenditure less if we try to do something to assist the disabled who are fortunate enough to have any kind of real sustained employment. It seems that there will have to be a new benefit in the form of some kind of wage supplement for those disabled who work. They tend to find that their earnings are lower than those with full physical and mental capacity. Their expenses are higher and their cost of living is higher, because of the extra expenses to which they are subjected because of their disability.

Given that we have embarked on the road of the non-contributory invalidity pension as it stands in the Bill, it seems that the disabled who work will have to wait for a new benefit and for new policies to be developed by the Government. We shall press the Government to develop such policies as soon as possible.

In the meanwhile, what are we to do with what we have already? We must try to avoid the full implications of the therapeutic earnings rule being applied to the non-contributory invalidity pension.

On looking at the amendment that was carried in another place, we share the Government's concern about the throwing over of the old rules for the contributory invalidity pension. It is the fact that the £4·50 that has remained for so long has always been accepted as being based on incapacity for work. It is applicable to those who receive sickness benefit for the specified time so that they move on to contributory invalidity pension. It is received so long as a person is out of work. It is not intended to be paid as any kind of wage supplement once the person concerned resumes employment. It has been accepted as a benefit based on incapacity for work, but it does not exclude capacity for some very limited work. That is why we have had the therapeutic earnings rule.

I can see difficulties for some one who has been a wage earner or salary earner who begins to receive sickness benefit and who is away from work because of an accident for long enough for him to receive an invalidity pension. The difficulty under the Lords amendment will arise if he finds that he can continue receiving his invalidity pension and at the same time have a steady little job on the side. A person may be capable of doing some gardening or some other jobs for his neighbours. The benefit would run until such time as the tribunal decided that he was capable of full-time work. This could be an encouragement to some not to go back to full-time work, and it could lead to some anomalies.

As that rule has stood for so long we are a little reluctant to throw it over, which is the effect of the Lords amendment and the amendment of my hon. Friend. We wish to explore the question whether different rules may be applied to non-contributory invalidity pensioners. They are the people who have never worked for long enough to acquire a contribution record. Can it be said that the same strict rules should apply to those who are disabled in childhood by accident, or are congenitally disabled, or are struck by a serious disease and have never been in employment? Can it be said that it would be wrong or anomalous if those people received slightly more than the therapeutic earnings rule allows for contributory invalidity pensioners who come out of employment?

My noble Friend hit upon the figure of £13. It is difficult to see why that should not be allowed when one considers the sort of people who receive the non-contributory invalidity pension. The idea needs to be explored. It is an unfortunate consequence of the Government's proposals that those people are caught by a wage stop. Our amendment seeks to remove from the Lords amendment the changes in respect of the contributory invalidity pension but to retain the Lords amendment for the non-contributory invalidity pension.

I look forward to hearing what the Minister has to say about this possible way of meeting the genuine hardship that the present arrangements will cause to some seriously disabled people.

I support the amendment moved by my hon. Friend the Member for Exeter (Mr. Hannam), which follows logically from our recent debate when we relaxed the earnings rule for pensioners. Many hon. Members believe that the relaxation of the earnings rule for invalidity pensioners should have even higher priority than the relaxation of the rule for retirement pensioners.

The argument put forward in another place for resisting the amendment was that the invalidity pension is payable to people who are incapable of work and that there is no case for continuing to pay it when they stop work. That principle does not hold up because it has been conceded by allowing them to earn £4.50. The real argument is what should be the level of the disregard rather than whether the principle should be vigorously defended.

It was clear from the debate in another place that fixing the level at £4·50 acted as a deterrent to many people to continue to do work which might be valuable for the community. An analogy was made with unemployment benefit, and the argument advanced was that those in work do not claim unemployment benefit. Therefore, invalidity pensioners earning more than £4·50 should not claim the invalidity pension.

That is not a fair analogy. There is a clear distinction between those in work and those not in work. There is not such a clear distinction between those who are eligible for an invalidity pension and those who are incapable of earning more than £4·50. It is perfectly possible for a person to be in both categories.

One argument which is put forward for resisting amendments such as these is that of cost. At no time in the other place was the cost of the amendment declared. A reference was made to the cost being a deterrent, but I should like to know what is the cost of the amendment which was carried in another place.

Will the Minister clarify what happens when an invalidity pensioner reaches the age of 65? Is the earnings rule lifted from £4·50 to the normal disregard for pensioners, which is £20? If so, as they grow older they will be able to earn more. An anomaly would be created if invalidity pensioners were treated differently from retirement pensioners as they approached retirement age.

In another place the amendment was carried by 72 votes to 36. I hope that my hon. Friend's amendment, which clarifies the position and makes the case much more justifiable, will be carried by an even larger majority.

I shall not delay the House for long. We must remember the arguments on these amendment against the background that by 1977 a pensioner will be allowed to earn £50 per week before pension is reduced. In the present Bill there is a proposal to remove the situation which now exists by which the invalidity pensioner earning £4·50 a week suffers not some reduction of pension but a total removal of pension. It is an absolute pension stop. This is unfair and will encourage people to evade the rule. This is a section of our community which should not be subjected to such emotional presures. Furthermore, I believe that the £4·50 stop creates enforced idleness. The really serious aspect is that it will create a situation in which many of our older citizens are bored to tears.

Great emphasis has been laid on the question of costs, but as the situation stands the provisions are so unfair that it is difficult to justify the continuance of the present system on the basis of cost alone. There is little doubt that in regard to the cases which would benefit from a change the savings would pay for a large proportion of the proposals.

I should like to hear how much the amendments would cost to implement. It has been said that the figure of £4·50 was fixed in 1972. I do not know what wage inflation has been since that time, but it certainly has been substantial. Therefore, the value of the £4·50 has been substantially reduced. The Liberals will vote on this amendment with the rest of the Opposition.

I intend to oppose both amendments, and I shall be inviting the House to reject them. At the same time, at a later stage, I shall be asking the House to disagree with the Lords in their amendment.

I am sure the hon. Member for Rushcliffe (Mr. Clarke) would think it remiss of me if I did not respond in some slight way to his purely political points. He suggested that the Bill was a small package. It is a little surprising that he should take that view when we see that the increased benefits provided in the Bill amount to more than £1,100 million. By no stretch of the imagination could that be regarded as a "small package ".

The hon. Gentleman chided the Government for the absence of Labour Members. That shows a slight lack of gratitude since the hon. Gentleman was able to carry his amendment on an earlier occasion with the support of Labour back benchers.

The hon. Gentleman mentioned the £4·50 therapeutic earnings limit and said that the sum had been unchanged since 1972. The Conservatives were in power in 1972–73 and we heard no suggestion then that they would seek to increase those earnings.

Having had my little bit of fun, I turn to deal with the amendments. The new clause and the amendments will change the very nature of our existing invalidity pension and non-contributory invalidity pension. There is no dispute about the need or desire to aid the disabled. It is reasonable to say that since the Bill introduces two new benefits with regard to non-contributory invalidity pension and invalid care allowance—as well as increasing existing benefits for the disabled the measure is a true indication of the fact that we accept the need and are doing something about it.

The new clause seeks to introduce into the arrangements for existing contributory invalidity pension, and for the proposed new non-contributory invalidity pension, an earnings rule similar to that which currently applies to retirement pensioners.

The existing contributory invalidity pension is payable to those who are, and have for some time been, totally incapable of doing any work for which an employer would pay them. The non- contributory invalidity pension proposed in this Bill is no more than the same benefit without the contribution conditions. Both depend on incapacity for work. The very great majority of people who get, and who will get, this benefit earn nothing at all. A small minority—most of them mental patients who have been in hospital for a long time—earn a little by doing things which are therapy rather than work but which keep them from vegetating. Few of them have earnings of anything like £4·50 a week, which is—subject to various easements concerning working expenses—the amount of the current limit. But, overall, the general concept of total incapacity and the limited approach to therapeutic earnings is one of which we have experience on which we have built in establishing the invalidity pension and the NCIP.

The hon. Gentleman is describing his experience and that of his Department. I hope that it is not thought that that indicates that the effect of the rule is as limited as he suggests. Last week I visited the South Notts Centre for the Disabled. I heard many complaints there about the therapeutic earnings rule. It limits the availability of work to disabled people. They do not earn £4·50 because there is only limited work for them. The reason is that it is known by those responsible for the centre that they will not benefit if any paid work is found for them above that limit. Nevertheless, it has the effect of putting many people out of work altogether. The hon. Gentleman is quite wrong to describe the effect of the present rule as being quite so limited. What is more, my hon. Friend the Member for Exeter (Mr. Hannam) described the extent to which the rule is "fiddled "at the moment because it is so penal.

If the hon. Gentleman will bear with me, I shall deal in a moment with the level of therapeutic earnings.

We are discussing not earnings as normal people would regard them but the earnings of people who, if they are to qualify for the invalidity pension or the NCIP, must show their incapacity for work. If anyone is doing a substantial amount of work, he is not entitled to invalidity pension—and this is true even if he is earning nothing at all. With the Bill as it stands amended in another place, the ordinary person who had to do quite a number of hours' work during a week —whether full-time or part-time—to earn even £13 would not be eligible for invalidity pension. He would be ruled out because he was working, and, as such, could not be held to be incapable of work. On the other hand, a highly-paid professional man, for example, who could get a substantial income for a minimal amount of work might be eligible for benefit. This does not seem to me a very fair result.

Quite apart from the arguments of principle which tell against the clause, the House must realise that the cost might be substantial. The hon. Member for Rushcliffe asked specifically about the cost. No one can estimate what the likely cost is. People who are at present in employment might possibly move into the invalidity benefit stakes if therapeutic earnings were increased to a level which made it more beneficial for them to do so.

Hon. Members have spoken about the need to encourage rehabilitation. The effect of replacing the therapeutic earnings limit by a full-blown earnings rule would not only be inconsistent with the fundamental basis of invalidity benefit ; its effect in terms of encouraging rehabilitation might well be exactly the opposite to what I am sure was intended by the hon. Gentleman and by the sponsors of the clause in the other place. It would mean that invalidity benefit, which is tax-free, plus earnings would amount to substantially more than earnings for disabled people in sheltered employment and substantially more than the training or rehabilitation allowances that disabled people can get while being prepared for open employment. The higher the earnings limit, the greater the likelihood that benefit plus earnings would exceed earnings in open employment.

Is it not clear from the amendment which I have tabled to the Lords amendment that we are describing clearly the undertaking of light work in circumstances carefully prescribed by regulations laid down? We have broken away from the original Lords amendment in the amendment. My amendment defines clearly the degree of light work for people who are not capable of normal full-time work. This is an important point.

I will deal with light work. My difficulty now, as I am sure the hon. Gentleman understands, is to deal with the two amendments and the new clause in one general debate rather than having three separate debates. I will deal specifically with light work because most hon. Members have already had experience of the use of the phrase "light work" which is not so easy to define as the hon. Gentleman seems to suggest.

These are some of the reasons for the announcement in my right hon. Friend's report to Parliament on "Social Security Provision for Chronically Sick and Disabled Persons ", House of Commons Paper No. 276, to which the hon. Gentleman referred. which was published in September. In that report my right hon. Friend indicated that the Government will take a good look at the problems of the disabled earner. We are in the main talking about the disabled earner rather than the person who is incapable of work. Once the mobility allowance and the other new benefits are properly launched, we shall be conducting further studies and consultations to see what further advances can be made to secure improvements in the level of income for disabled earners.

I believe that it is right to look at disabled earners as being in a different category from those in receipt of invalidity pension or non-contributory invalidity pension because the circumstances are so different. One group must show its incapacity for work whereas the other group has, to a greater or lesser extent, some capacity for work.

I want to make it clear to the House that in the meantime the Government do not propose to nullify the initiative taken in another place and to leave a void. The Government propose to bring forward a change which would otherwise have been reserved for a future occasion and to make regulations which will raise the present £4·50 therapeutic earnings limit to £7 from April this year. I am sure that that at least will be of some help in view of the criticisms that have been made of the level of therapeutic earnings. This change will apply not only to contributory and non-contributory invalidity pensions, but to sickness benefit, injury benefit and unemployability supplement under the industrial injuries scheme. Separate but corresponding provision will be made by prerogative instruments for unemployability supplement under the war pensions scheme. I should add that this matter has traditionally been dealt with in regulations, that it is not really proper to principal legislation, and that the appropriate new regulations are already in course of preparation.

To sum up, the restoration of the value of the existing therapeutic earnings limit in no way creates any great problem, but the introduction of a far more radical change would lead us into considerable difficulties in this respect.

I turn now to the two amendments. Like the hon. Member for Exeter (Mr. Hannam). I am sorry that the hon. Member for Wallasey (Mrs. Chalker) is not here. I am sure that had she been here she would have contributed to the debate with her usual enthusiasm and would no doubt have quite properly attacked me for something that I might have said. Perhaps, therefore, I should say that I am glad the hon. Lady is not here, but I do not mean it in that way.

The effect would be to change the nature of the invalidity pension and the non-contributory invalidity pension. That may be the hon. Gentleman's intention, but it is not the foundation on which our present invalidity pensions are based. The amendment would make these benefits payable not only to those incapable of work, whom we have provided for in our invalidity pensions and NCIP, but would also make the benefits payable to those who are capable of doing light work. The hon. Gentleman says that we can define that expression in regulations, but a definition is much easier talked about than implemented.

In my constituency, miners who have worked underground for many years are returned to the surface for what is called "light work ". I am sure that that definition of "light work" could not be used for what the hon. Gentleman suggests. Medical checks on people receiving sickness benefit and invalidity benefit are frequently made by doctors attached to my Department, who often say that a person is not capable of doing his normal work but is capable of doing light work. Do we say to such people "The light work which we shall prescribe and which we believe you must do is a normal, everyday job "? I do not believe that it is possible to have one definition for the cases in which the hon. Gentleman is interested and another for the ordinary category of those on sickness or invalidity pensions. We should be in impossible situations if we tried to deal with the matter in that way.

There is a worthy motive behind the amendment, which seeks some benefit from the clause but I must reject it because the result would be inconsistent with what we regard as the purpose of the invalidity pension or the non-contributory invalidity pension.

The amendment of the hon. Member for Rushcliffe would embrace the new clause inserted in another place, except that the clause would be confined to the non-contributory version of the invalidity pension. The amendment aims to import a full-blown earnings rule into the arrangements for the non-contributory invalidity pension, while retaining the therapeutic earnings limit of £4·50—soon to be £7—for contributory invalidity pension. The therapeutic earnings limit would also remain for sickness benefit, injury benefit and unemployability supplement under the industrial injuries and war pensions schemes. There would then be one rule for one benefit payable for incapacity for work—the NCIP—and another for four other benefits payable for the same contingency ; namely, incapacity for work. That sort of anomaly is hardly likely to commend itself to the hon. Gentleman when he gives it further study.

Apart from creating that glaring anomaly, the amendment is open to all the serious objections which I have already spelt out. It is impossible to reconcile a benefit which, under subsection (1) of Clause 6, can be paid only if a person is totally incapable of work, with the amendment, which would allow someone to do substantial amounts of work, even full-time under certain circumstances, and yet remain an invalidity pensioner.

We should go as far as we can to ease the restrictions on the existing incapacity benefits and on the non-contributory pension, and tackle the disabled earner problem, which is related to it, separately, but as soon and as effectively as we can. There are here, as the Government have indicated in the House of Commons paper, very real and complex problems which cannot be solved at a stroke merely by seeking to manipulate the existing benefits upon which much of our work has depended in the past.

On this basis and on the basis of the important point that the appropriate place for the therapeutic earnings limit is in a regulation, as with the present £4·50, and not an Act, I ask the House to oppose the amendments and, later, to support the disagreement on the new clause. I am sure that this is the best course and that we should deal with those who are capable of work but who need wage supplementation in a different way from the way in which we deal with those who are, by definition, incapable of work and the non-contributory invalidity pensioner.

I am grateful to the Minister for addressing himself to our two amendments. I listened with care to what he said. I see some difficulties in the amendment carried in another place and the alternative version proposed by my hon. Friend the Member for Exeter (Mr. Hannam). If one has this definition of "incapable of work ", one must be clear that one is not paying the benefit to people who are in ordinary employment. However, I think; that the Minister slightly overstates his case when he talks of people working substantial hours and being in ordinary work when he is talking of £13 a week. I could not understand his reference to the possibility of highly paid professional people being able to receive this benefit, with a £13 limit having been imposed in the amendment.

Having said that, the points that the Minister made, which we would certainly wish to contemplate, were about the possibility of people drifting in from low-paid ordinary work into even lower-paid work and receiving benefit, and the possibility of someone who has been in work getting the benefit and then facing a considerable disincentive when he contemplated trying to get back into full-time work rather than relying on the benefit that he had been getting plus a small sum within the £13 proposed.

There are these difficulties. It seems to me, however, that they do not apply quite so strongly in the case of the non,contributory invalidity pensioner. There is no question there of someone who has been in work drifting into the benefit. If he has been in work, he has a contribution record and cannot qualify for the new benefit. Similarly, again, the disincentive against drifting out is not quite the same, because the born disabled person is only too anxious to get into full-time work, if the opportunity ever presents itself.

In trying to reply, the Minister has underlined the difficulty that he has made for himself—the difficulty of using incapacity for work as the basis. There is considerable logic in what he says about the difficulties that flow if one uses incapacity for work as the basis for this new benefit as the Government have chosen to do.

The Minister said two things which are reassuring. First, as I have implied previously, the logical step from where the Government have chosen to start is to look separately at the problems of the disabled earner. These require careful study. It would be unfair to expect the Government to put forward detailed provisions now, because this is a separate problem. As the Minister has mentioned that he is commencing such study, however, which is encouraging, we shall press him for progress reports and, we trust, rapid progress. On the subject of the way in which the disabled earner can best be helped, we trust that this commitment will not be allowed to hang about for years before something is done.

I give the Minister some credit for one thing, because at least the efforts of my noble Friend in the other place have produced another look at the therapeutic earnings rule. The Minister has produced a commitment to raise it to £7. We welcome that. We congratulate him on having extracted it from his friends in the Treasury, who are more responsible, I suspect, than he is for the difficulties into which he gets on Bills of this kind, in both Houses of Parliament. As he has managed to extract some money from that source, even though the £7 will not do much more than keep in line with inflation we accept that he has done something, and that the thought that has gone into the earnings rule has had some effect.

The Opposition will return to the problem of the disabled earner whenever possible, to press the Government. We shall return to it on future uprating Bills, on the question of the level of the therapeutic earnings rule and, still, the question—which we should like to consider further—whether something may be done in relation to recipients of NCIP which would give them a slightly advantageous position, for reasons which we believe are defensible, vis-à-vis other benefits.

However, as the Minister has been able to bring some good news on this occasion, I beg to ask leave to withdraw the amendment.

Now there is a slight confusion, because I do not think the hon. Member has actually moved this amendment.