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Orders Of The Day

Volume 22: debated on Monday 26 April 1982

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Finance Bill

(Clauses 18, 22, 29, 65, 71, 75, 117 and 128 and
Schedule 10.)

Considered in Committee. [Progress 22 April.]


Clause 29

Social Security Benefits

4.13 pm

I beg to move amendment No. 13, in page 19, line 3, at end insert 'any condition contained in'

With this it will be convenient to take Government amendment No. 16.

As the Committee knows, section 27 of the Finance Act 1981 brought into tax benefits paid to the unemployed. That included supplementary benefit paid to the unemployed because a substantial proportion of the unemployed receive supplementary benefit either in place of, or in addition to, unemployment benefit Supplementary benefit that is paid to the unemployed is distinguished for this purpose from other supplementary benefit by reference to social security legislation, the distinction being that that benefit should be taxable if the person's right to it is subject to the condition that he is both registered and available for employment. That condition is set out in section 5 of the Supplementary Benefits Act 1976.

The social security legislation that is before the House of Commons makes necessary a technical change in the wording. It is for that reason that I move the amendment.

Amendment agreed to.

I beg to move amendment No. 14, in page 19, line 18, at end insert—

'(bb) at the end of subsection (5) (meaning of "relevant amount" in respect of any week) there shall be inserted the following words—
"Any reference in this subsection to an amount or rate or increase specified in any provision is a reference to the amount or rate or increase so specified for the week in question.";'
This is a highly technical amendment that follows a recent court ruling. It clarifies the law and makes it certain that it is as we thought it to be.

Amendment agreed to.

I beg to move amendment No. 15, in page 19, line 29, after `1982', insert

`provided that unemployment benefit is increased by 5 per cent.'

The purpose of the amendment is to postpone the date when unemployment benefit would come into tax, until such time as the Government restore to the unemployed the 5 per cent. in unemployment benefit that they took from them two years ago on the basis that unemployment benefit was not liable to tax. The gravamen of my remarks will therefore be addressed to the elementary justice of giving that 5 per cent. back to the unemployed so that they and they alone among the taxpaying public of Great Britain will not be left in the double jeopardy of being subject to two separate forms of taxation on the same income.

I wish also to put before the Committee a number of reasons why delay in the introduction of this measure should commend itself to the Committee. Last year, the Opposition warned the Government that they were entering into a matter of great complexity and that there was a real probability that their proposal would disappear into a morass of complexity sunk under a weight of anomalies.

The extent to which we have been proved correct in forecasting the complexity and foreseeing those complications is vividly borne out by the Bill. Only one year after last year's Finance Bill we are faced with a lengthy clause that amends the provisions that were made only last year. Since this lengthy clause was published we have for debate three further Government amendments on a clause that the Government published only last month. I challenge any member of the Committee to take the clause as drafted or, for that matter, to take the amendments that have just been agreed to and, without the advantage of notes on clauses, to make sense of the clause. That is not a rhetorical statement because if we have difficulty in grappling with the text of the Bill and comprehending it, we should reflect on the fact that to put it into practice we depend on the actions of fallible human beings who have to make sense of the dense texture of the legislation that we have passed.

I wish to turn to a press statement that was issued by the Society of Civil and Public Servants last November by Mr. David Luxton. Mr. Luxton is quoted in the press statement as saying:
"We would like the Government to postpone the scheme"—
that is the scheme for the taxation of unemployment benefit—
"until April, 1983. There is no way our staff could learn all the new procedures and run the system without a gigantic series of blunders before then, given conditions in unemployment benefit offices."
The full extent of the undertaking facing unemployment benefit offices is conveyed when Mr. Luxton rightly and properly observes that we are considering the taxation of 8 million who every year move in and out of unemployment. We are not merely considering the taxation of 3 million unemployed.

If the Government were to propose a change in taxation that affected those on the higher rate bands, or those that pay capital transfer tax, and that was likely to give rise to
"a gigantic series of blunders",
the bodies that would administer it would not be the only organisations to complain. There would be riots in constituencies, letters would be sent to The Times and the entire tax avoidance industry would hire the Dining Rooms downstairs to lobby us on the necessity to clarify the issue before it passed into law. Conservative Members would queue to intervene in the debate.

However, we are dealing not with blunders that will affect the wealthiest section of the electorate, but with those that will affect the poorest section. All that we know about unemployment tells us that those who are poor are the most likely to become unemployed, and that the effect of unemployment is likely to make them even poorer. It is those people who are now to be subject to the possibility of a
"gigantic series of blunders."
These blunders may push their income below the breadline.

There is another reason why we should be concerned about the poorest in society being liable to blunders in the assessment of their tax liability. A provision was inserted in last year's Finance Bill to the effect that this group of taxpayers, and this group alone, will have no right of appeal against assessment after 30 days have elapsed. The group that will be subjected to the possibility of a series of blunders is the same group that will have the least remedy after 30 days against the wrongful assessment of tax liability.

In response to criticisms from Inland Revenue staff, representations from the unions and representations from the Department of Employment and the Inland Revenue, the Government propose to delay the implementation of the scheme. That proposal is contained in the clause that we are debating. It is proposed to delay implementation from April 1982 to July 1982.

Can the Minister of State give the assurance that the Committee wants that the short delay of three months will be sufficient to ensure that those who are subjected to taxation as a result of this provision will not suffer the
"gigantic series of blunders"
that those involved in assessment believe is likely to occur?

I shall be grateful if the Minister tells us what has happened to the training period for the scheme. Training for the application of taxation of unemployment benefit was supposed to start in August 1981 and to continue until April 1982. It could not start in August 1981 because the Civil Service was then in dispute with the Government. It did not start until February 1982. Even with the postponement contained in the clause, there will be a training period of only five months, and not eight months. The training period will be substantially shorter than that envisaged when Ministers urged us to accept the proposal when we were debating last year's Finance Bill. Can the Minister of State give us the assurance that the truncated period of training will be sufficient?

I was considerably worried when I discovered earlier today that it will be necessary in every case where a claim for unemployment benefit is made for the unemployment benefit officer to add on to the computer code of that claim 17 items, most of which will be taken from the P45. It is the judgment of those involved that if 17 pieces of information are fed on to the computer tape it is highly probable that an error will occur in a number of instances. When that occurs the result is one for concern, for the computer will reject the application for unemployment benefit. That is even more serious than an incorrect assessment of tax liability. The applicant who is seeking unemployment benefit to which he is entitled, which previously he would have received after the first round, will have to encounter a period of delay before he receives the benefit.

If those who seek unemployment benefit will be liable to a series of blunders in the assessment of tax liability and will have to wait an additional period of delay to get their benefit, it is plain that the Government in all decency should postpone the introduction of the scheme until they can avoid these outcomes.

It would be appropriate and suitable if the Government considered delaying the introduction of the scheme until the autumn of this year. If they did that there would be two results. First, the Government would be able to retain the original training period of eight months. Secondly, the Government would be able to introduce the taxation of unemployment benefit in November in conjunction with the restoration of the 5 per cent. of unemployment benefit in the upratings in November.

Whatever date is set for the implementation of this measure, it should in all decency be the date on which the Government restore the 5 per cent. that they took away last March. We understand that the cost of restoring the 5 per cent. will be £60 million. We understand also from a parliamentary question that was answered shortly before the Easter Recess that the total revenue that the Government will receive from the taxation of unemployment benefit is £650 million. There has been a striking change in the estimate that we were given last year. Last year the estimated yield was a mere £240 million. It now stands at nearly treble that which was estimated a year ago. Given such a wide margin of error in the calculation of likely revenue, one cannot but suspect that the Government have no idea what will happen once the clause is introduced.

If the Government are to receive £650 million in additional taxation, in all honesty, fairness and justice the first charge against that sum should be to pay £60 million to the unemployed to restore the 5 per cent. that was taken from them. However, that is not what the Government propose. One cannot resist the natural temptation to go through the Red Book to ascertain where the money has gone. The Red Book makes it clear that the Government have found £160 million for higher rate thresholds, £50 million for investment income thresholds and £85 million to change the bands of capital transfer tax. By what conceivable perversion of social priorities is it considered more worth while and more just to spend the money taken in the taxation of unemployment benefit on those purposes rather than restoring the 5 per cent. abatement?

There is another factor that the Committee is entitled to bear in mind when considering the cost of restoring the 5 per cent. abatement. When the then Secretary of State for Social Services qualified earlier statements on the issue he said about the cost of restoring the 5 per cent.:
"It is a matter for judgment at the time, in relation to available resources, the general level of earnings, what the country can afford, the borrowing requirement and all other factors as to what is the appropriate level."—[Official Report, 21 May 1980; Vol. 985, c. 555–56.]
It was the Secretary of State who identified the borrowing requirement as the relevant factor when we come to consider whether we can afford to spend £60 million to restore the 5 per cent. abatement.

The Committee will be aware that the background to the debate is the discovery by the Government that the borrowing requirement for the past financial year was £2 billion less than they had predicted as recently as March. Indeed, it would have been a further £1½ billion less had not the Civil Service dispute fortuitously intervened to keep the Government nearer target on their PSBR requirement.

4.30 pm

The discovery cast an ironic light on much of the debate on last year's Budget. The sum of £2 billion would nicely have covered a 15 per cent. increase in the tax threshold.

It would have enabled the Government to avoid increasing the tax burden and widening the poverty trap, which they introduced last year by not increasing tax thresholds.

The Government were not to know at the time that their estimate was so far adrift, but they know now. They cannot avoid the fact that any decision that they take on the Finance Bill is taken in the clear knowledge of what happened to the PSBR last year. They could not have hoped for a more favourable background on the borrowing requirement for a decision on whether to restore the 5 per cent. to the unemployed. If, against the background of a much more relaxed borrowing requirement than they had anticipated, they persist in denying the 5 per cent. to the unemployed, they will demonstrate a great meanness of spirit, although I hope that at the end of the debate the Committee can acquit Treasury Ministers of that.

There are two main reasons why Treasury Ministers should respond to the concern on both sides of the House. First, at the time the 5 per cent. abatement was made, the Government established the relationship between the abatement and the taxation of unemployment benefit. Hon. Members in the Chamber will be familiar with the sacred texts on the matters. Little is to be gained by arguing whether the words as they were spoken formulated a clear, precise and legally binding commitment. Two years ago we were led to believe that the 5 per cent. abatement was a temporary measure and that it would be restored when unemployment benefit was brought into tax. That clear understanding on both sides of the House is much more significant to what we now do than the precise form of words that may have been used at the time.

The idea that the 5 per cent. was to be restored when taxation was brought in was not held simply on the Opposition Benches. In the debate on 18 March, of the nine Conservative Back Bench speakers only one supported the Government in resisting restoration of the 5 per cent. The other eight urged the Government to restore the 5 per cent.

The speech made in favour of the Government proved without a scintilla of doubt that the Government did not have a leg to stand on.

I entirely accept that. To avoid an accusation of being unfair or selective in my quotations, I propose to quote the speech of the only Back Bencher to support the Government's position. The hon. Member for Grantham (Mr. Hogg) stated:

"There is no doubt that many hon. Members, and people outside the House, believed that the abatement would be made good when unemployment benefit was brought into taxation. There is also no doubt that Ministers have made statements that gave colour to that belief."—[Official Report, 18 March 1982; Vol. 19, c. 516.]
That was the single Back-Bench speech in support of the Government's position.

The point was made with greater clarity and perhaps brutality by the Bow Group. In its pre-Budget submission it urged the Government to restore the 5 per cent.
"on the grounds … that the Conservative Party should not be seen to cheat."
At the end of the debate we shall know whether the Government—I distinguish between the Conservative Party and the Government—are seen to cheat. The present position is a cheat. It leaves the unemployed 5 per cent. worse off. They were not liable to tax and it is now proposed to tax them on what they have left.

That brings me to the second main reason why the 5 per cent. should be restored. Irrespective of whether the Government committed themselves to restoring the 5 per cent., it should be restored for the simple and basic reasons that the unemployed need the money. They have experienced a steady erosion in the value of benefits since the Government came to office. They lost the earnings-related supplement, which was worth, on average, £11 a week. They have also witnessed a change in the calculation of the child addition, which removes £3·80 a week from the pocket of a person who is unemployed with two children. They have also lost the 5 per cent., which is now worth £1·75 a week. We are considering households that are struggling to survive on £40 to £50 a week, depending on whether the family has two, one or no children.

When we debated tax thresholds last week my hon. Friends criticised Conservative Members for not understanding the problems of people on low incomes because of their own incomes. In a spirit of humility, and recognising that, to a degree, the debate is not party political, I point out that, living as we do on a comparatively comfortable salary, no hon. Member can comprehend the desperation of a family living on £50 a week or the extent to which its choice might be widened by an additional £1·75.

For those of us who meet unemployed people among our constituents it is difficult not to be moved by the extent to which simple and straightforward decisions acquire enormous significance in their lives. They have to decide whether they can afford the fare to a job interview or whether they can find the cost of a school outing to which the other children in the class are going, or the price of a pair of children's shoes. Such decisions could be made much easier by the addition of £1·75 a week.

When the Chancellor introduced the abatement two years ago he said that if we did not cut the benefit to the unemployed they would not find work. He should ponder his experience since then. The unemployed have had their benefit repeatedly cut. It is now only two-fifths of average earnings, which is the lowest since 1948. Unemployment has steadily mounted. The number of people unemployed continues to increase, not because they lead the life of Riley on unemployment benefit but because over the past three years 2 million jobs have been lost. The men are unable to find work. They require no incentive to look for it.

None of the reputable bodies that has turned over the evidence on the "Why work?" syndrome has found proof to substantiate the claim that anything remotely approaching the present level of unemployment is due to there being no incentive to go back to work. Only 3 per cent. of the unemployed get more benefit than they would in work, and even they make diligent efforts to find work.

All the authoritative bodies that have examined the question of the 5 per cent. abatement urge the Government to restore it. I pray in aid a body that the Government set up—the Social Security Advisory Committee. It was appointed by the Government in the wake of the closure of the Supplementary Benefits Commission. I expect that, to the chagrin of the Government, it has consistently criticised many aspects of their social security policy. Last October its chairman submitted a letter to the Secretary of State for Social Services. Speaking of the unemployed he stated:
"We believe that the first priority for this group must be restoration of the 5 per cent. cut as soon as possible after unemployment benefit comes into tax; otherwise there would, in effect, be double taxation for this hard-pressed group."

The Social Security Advisory Committee recommended this as a first priority. The Government have hitherto decided not to do so.

This debate and our amendment provide a last opportunity for the Government to act and to restore that 5 per cent. to the unemployed. If the Government are not prepared to take that opportunity, the Committee, in all decency, ought to deny the Government the right to tax the unemployed.

As the hon. Member for Edinburgh, Central (Mr. Cook) pointed out, this is the second time that we have discussed the question of the abatement. The last time was on 18 March, when all the speeches were in the same direction. There has been some doubt about the direction of the speech of my hon. Friend the Member for Grantham (Mr. Hogg) and which side he was on. The answer is that he was on both sides. That is why there has been confusion. Apart from his speech, there was unanimity throughout the House.

Even my hon. Friend the Minister for Social Security, who, no doubt because of Treasury bludgeoning was not able to agree to the arguments put forward, did not advance any argument as to why the Government should not do what it was obvious to the House they should. I presume that he did not advance an argument because there was not one to advance. He merely said that a line must be drawn somewhere. He did not say why the line should be drawn at that particular and rather eccentric point and why it should exclude the unemployed. Presumably he did not give that explanation, because there is no explanation to give.

Today, as the hon. Member for Edinburgh, Central has pointed out, the case is even weaker. The hon. Gentleman made a comprehensive speech on the subject, with nearly all of which I agree, and, because this is a simple matter and the facts are not in dispute, I shall not delay the Committee long. I shall go through the facts only briefly.

First, there is no doubt that the abatement of 5 per cent. was meant to be temporary and interim. That was the impression of those who attended the relevant debate. That is also borne out by common sense and elementary logic. It is common sense and elementary logic that the worst off should not be doubly penalised. If one says that one will do A because at that time it is impossible to do B, it is elementary logic that, when it is possible to do B, one should stop doing A. That is so simple that I am sure that the Minister's advisers will agree that it is incontestable. I hope that he will say something to that effect at the end of the debate.

The second fact, as the hon. Member for Edinburgh, Central pointed out, is that there are now far more unemployed persons than there were when the abatement was made. Therefore, there is far more hardship than was envisaged at that time. The idea that there should be a problem about the so-called "Why work?" syndrome is a delusion when there are 3 million unemployed.

The third point is, or should be, common ground to all hon. Members. The least well off should not be made to bear the brunt of the Government's policies. Whatever we may think of the Government's economic policies in general—and some of us have different views from others—it ought to be common ground that the unemployed—the least well off and the most unprivileged in our society—should not have to bear the major burden of those policies.

I wish that we could go even further than is envisaged this afternoon. The Minister, in a previous debate, said:
"We would like to pay the long-term rate of supplementary benefit to the unemployed, which would cost about £200 million." [Official Report, 18 March 1982; Vol. 20, c. 536.]
That is what should be done. It is wrong that the unemployed are not entitled to the long-term supplementary rate. We are not discussing that matter this afternoon, but it is incontestable that the unemployed should not be doubly taxed.

4.45 pm

The fourth question relates to cost. In the previous debate we were told that we cannot hypothecate revenue. We all accept that, but I hope that the Minister will not use that word this evening. Nevertheless, it is striking to look at the figures. The £375 million in the current year is the figure that the Government will obtain from taxing the short-term unemployment and supplementary benefits. They will receive £650 million in a full year. I do not know the exact cost of doing the right thing and uprating by 5 per cent., but it would be about one-tenth of that sum. From any view, the Government are making a handsome profit out of taxing the unemployed. Therefore, it is plain that they should do what we ask.

My final point concerns the PSBR. That is a figure to which some people pay more attention than do others. The Government pay the greatest attention to it. They specifically mentioned the PSBR when they talked about uprating or taking away the abatement, and when they imposed it. However, we now have £2 billion more, which destroys the PSBR argument.

Even before there was no reason why the unemployed should be hit. Now that we have had the new figures, there is even less reason why they should be hit. If my hon. Friend were to attempt to defend his position, he would find it indefensible. It would be sheer irrational meanness not to get rid of the abatement immediately. I cannot believe that the Government will not get rid of it. If they do not, I shall have to vote against them. In common sense and minimum justice, the amendment should be supported by the Government. I trust that that is what they will do.

The right hon. Member for Chesham and Amersham (Sir I. Gilmour) has stated his position with honesty and clarity. There are now a number of hon. Members sitting on the Conservative Benches. I may be wrong, but I believe that they are hon. Members who are likely to follow the lead given by the right hon. Member for Chesham and Amersham.

I have recently finished reading the last book by the late Lord Butler, which was brought out a few weeks after he died. He was as much a Conservative as any hon. Member on the Conservative Benches today, but I find it difficult to believe that if he were around now he would justify what the Government intend to do. I wonder whether those Conservative Members who believe that the Government are justified intend to come to the Chamber to make speeches accordingly.

Unemployment is by no means an academic question in the part of the country that I have the honour to represent. I have figures relating to the increase in unemployment in the last three years in the West Midlands. In my travel-to-work area unemployment has increased by 240·9 per cent., in Birmingham by 182 per cent., in Coventry by nearly 145 per cent. and in Dudley and Sandwell by nearly 272 per cent. We have many people who had previously been earning their living but are now in the dole queue. What is so unfortunate is that many of them will remain in the dole queue for a long time.

It is difficult to understand how anyone can justify the continuing deduction of the 5 per cent. in unemployment benefit, especially now that unemployment benefit is to be subject to income tax. If we were dealing with people with average or higher than average incomes it would not be so important, though the principle would remain important, as my hon. Friend the Member for Edinburgh, Central (Mr. Cook) said. We are, however dealing with those whose incomes are amongst the lowest in the country I remind the Committee that the present rate of unemployment benefit is £22·50 for a single person and £36·40 for a married person, plus 80p for each child. It is clear that every penny must help for anyone living on that sort of income.

It has to be borne in mind that unemployed people have been singled out by the Government for punishment in a number of ways. An example which makes the amendment all the more relevant is that earnings-related benefit was finally abolished from January of this year. When the appropriate Minister was asked in a parliamentary question the estimated sum that would have been received by unemployed people if the earnings-related supplement had not been abolished, the answer was £11·20 weekly. Here is a considerable amount of money, especially for an unemployed person, which is no longer received by an unemployed person because of Government action.

Unemployed people will no longer be able to claim a tax refund when they are made redundant. The tax will be adjusted only at the end of the financial year or when employment starts again.

In all these ways, the person who finds himself, through no fault of his own, without a job is being hit much harder than previously. I can understand the feelings of those who are unemployed, since many of them believe that they are unemployed because of Government policies, and no doubt they are correct in their thinking.

The increase in unemployment benefit this coming November will mean £25 for a single person and £40·45 for a married couple. But if the 5 per cent. were included from November 1980 it would mean a single person getting £26·10 and a married couple £42·25. When one considers the smallness of the incomes involved, one recognises the importance of the sums that have been lost to the unemployed person—that is, unless the Government decide to change their mind.

Many unemployed people will not pay income tax because, despite what the Government are doing, their incomes will remain insufficient. Yet they will remain penalised as a result of the 5 per cent. reduction.

What the Government are doing is the worst type of cheating. They are hitting out at the people who can least afford to lose a penny. Even if no other section of the community was being penalised, this would remain indefensible. But when we consider how those on the highest incomes have benefited, it becomes even more indefensible and even more difficult to understand how the Government can consider the action that they are taking against the unemployed.

We have to bear in mind all the social tension and aggravation which is bound to occur as a result of a return of mass unemployment. Unemployed people face tremendous difficulties, leaving aside even the financial aspect. They face psychological difficulties, with men in middle age finding themselves without jobs and with the fear that they may not work again. These factors create tremendous hardship for that section of the community who find themselves in the dole queue.

Our need as a House of Commons is to do all in our power to make their lives more bearable. If Government policy is that the present level of unemployment is inevitable—it is certainly not the Opposition's view—and that there is no alternative, the Government should be taking even more action to defend the people who are the victims of their policy. They are doing the very opposite.

Sometimes when I speak to unemployed people in my own constituency they say "You have to be unemployed before you realise what we have to face day in and day out." What is more, it affects not just the unemployed person. We have to remember their wives and children. My hon. Friend the Member for Edinburgh, Central spoke of the sorts of decisions that have to be made—whether shoes can be bought, or whether they should go to a jumble sale. They have to face all these difficulties.

The House of Commons has an obligation to try to alleviate the problems faced by this section of the community—our fellow citizens who are denied the opportunity to work. I hope, therefore, that the amendment will be supported by Government Back Benchers. I doubt whether at the end of the day it will succeed, but the extent to which hon. Members are prepared to back this Opposition amendment will demonstrate just how deep is their commitment to dealing with the plight of the unemployed.

With the possible exception of 3 September 1939, the Opposition could not have chosen a better day to debate this proposal.

I stand corrected by my hon. Friend the Member for Bath (Mr. Patten). But why did they do it? When they tabled the amendment, they must have known that the Falkland Islands crisis was upon us and that to produce such an amendment for debate today would be to put almost every possible obstacle in its path.

I suppose that there are two possible reasons. The first is incompetence. However, bearing in mind that the hon. Members for Edinburgh, Central (Mr. Cook) and for Blackburn (Mr. Straw) have put their names to the amendment, it is clear that it was not tabled through incompetence, whatever else it might have been. A more likely explanation is that it was designed to embarrass the Government. Probably that has more to do with it than anything else. But if it was to embarrass the Government, it rings a little hollow to hear the hon. Member for Edinburgh, Central, even when he gets his facts right—he did not about children's shoes—talk about the problems of the unemployed. If he was really keen to see the acceptance of the amendment, he would have chosen the place for his battle rather more cleverly. It does not please me and my hon. Friends who have genuine concern for the unemployed to see the tactics of the Opposition, which are either incompetent or designed to embarrass the Government.

The hon. Gentleman will be aware that today's business is chosen by the Government.

I am well aware of that, but the right hon. Gentleman is equally aware that the amendments are tabled by the Opposition. They could perfectly well have tabled this amendment for Report.

I can see no reason why it should be.

It might perhaps be worth considering for a few moments why the Government refuse to allow this 5 per cent. abatement to be reintroduced and why they have decided to abate the 5 per cent.

I do not want to go back over the debate on 18 March, but it was clear from that that the Government's earlier decision had been that the 5 per cent. was in lieu of taxation. No one argued about that. The point was whether the Government would have sufficient resources to be able to allow that 5 per cent. to be put back. As my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) and the hon. Member for Edinburgh, Central said, there can be no argument about the savings. The Government are getting £650 million now compared to an additional expenditure of £60 million. That figure is an increase since the debate on 18 March.

5 pm

The reply concerning the amount of £525 million, which was uprated to £650 million, was dated 23 March. Therefore, £125 million extra has been added to the Government's take since the debate on 18 March, whereas the cost is £60 million. Therefore, the question whether it is in lieu of taxation cannot be related to cost.

What is the reason for the Government's present position? I suspect, along with my right hon. and hon. Friends—it was referred to by the hon. Member for Edinburgh, Central—that the main reason is the "Why work?" syndrome. If the abatement is to be allowed, the difference between being in and out of work will be narrowed. But will that really be the case? The answer is "No". My hon. Friends know perfectly well that in the last few years the gap between being in and out of work has increased.

What other reason is there then? My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) asked about those in work who are now getting such small increases. What do they feel when they find that the unemployed will get larger increases than they are receiving? That may be a fair argument this year, but what about last year and the year before that, when the unemployed received much less than those in work were getting? Therefore, that reason cannot stand up.

My hon. Friend will say that there will be those scroungers who find it better to be on unemployment or supplementary benefit than to be in work. How many of the present number of unemployed does my hon. Friend suggest that applies to? Is it 100,000, 200,000, 500,000 or 1 million? What about those who live in Corby or Workington or those parts of Britain where work does not exist? The argument that less money means more work cannot apply there.

How many of those who have assisted in the loading of the task force will find themselves out of work in the not-too-distant future? How will they feel when the work that they have been doing is rewarded by a 5 per cent. decrease in their unemployment benefit and their short-term supplementary benefit when they become redundant? That brings me to one of the real problems that unemployed people face.

One of my constituents, who is a single parent with three children, came to me this week. She has been on long-term supplementary benefit because she receives no maintenance from her divorced husband. Her youngest daughter has now reached the age of 16 and she suddenly finds that she must register for work as being unemployed. Immediately she registers for work she is no longer entitled to long-term supplementary benefit. She will get only short-term supplementary benefit, which is £6·50 a week less than long-term supplementary benefit. Have her needs decreased because her daughter has reached the age of 16? Of course, they have not.

Overall, that woman is £3 a week less well off. On what grounds? I was under the mistaken impression that supplementary benefit was designed to assist people according to their needs. Now it appears that that is not so. The needs of this woman are not less on the day her daughter becomes 16 than they were on the day before. Surely the opposite is true. Why should the needs of an unemployed family be less than the needs of anybody else on long-term supplementary benefit? Why should the financial needs of the unemployed be less than those of anybody else receiving benefit? For the life of me, I cannot understand why.

If my hon. Friend cannot explain it, will he reconsider the 5 per cent.? In my view, and in the view of my right hon. and hon. Friends, restoring the 5 per cent. does not go as far as we would like it to. Will he give the House the real reason behind the Government's attitude? If he does not do so, however much we would want to support the Government at this difficult time, it will be impossible when the needs of the long-term unemployed are as great as they ever were and when the numbers of the long-term unemployed are increasing.

Never before in its history has the Conservative Party defended the position that those who cannot care for themselves should suffer. It is high time that the Government—who have got themselves into this mess—took the opportunity that they are offered today to put the matter right, regardless of the Opposition. Those who trust the Conservative Party to represent them demand that that should be done.

This is a matter of equity for the unemployed. I hope that all those who speak today, as did those who spoke in previous debates, will agree with that.

The hon. Member for Edinburgh, Central (Mr. Cook) and the right hon. Member for Chesham and Amersham (Sir I. Gilmour) covered the ground comprehensively. We have been over the ground fully in previous debates and I do not want to go over the same ground again. However, there is one point which brings out the full enormity of what the Government have done which I should like to stress.

Hon. Members support the idea of taxing unemployment benefit in this way, because the prime effect will be to equalise the taxation of those who earn a little during the year compared with those two move in and out of employment during the year and whose income is derived from both earnings and unemployment benefit. In principle, those two groups of people should be taxed equally.

However, the abatement does something different. It abates the income of all those on unemployment benefit. The income of many of those people would not come into taxation because their unemployment benefit would be below the tax threshold. Therefore, the Government are taxing people at a lower level of income than those who have been in and out of work during the course of the year. While it is true to say that there is a link in time between the idea of a 5 per cent. abatement and taxation of benefits—that the abatement was in lieu of taxation has been established to the satisfaction of the Committee—those two measures are not on all fours. The abatement has a far worse effect on those on the lowest incomes than does taxation. Therefore, although I support the amendment of the hon. Member for Edinburgh, Central, in many ways it does not go far enough. For, even if the amendment is accepted, damage will have been done to people by the abatement far worse than if they had been caught by income tax from the beginning. I refer to those who were unemployed for all that period or for long periods, and they are people at the worst extremity of poverty.

The Government must answer not only for the unemployment that they have created, but for the level of poverty. By definition, we are talking about those who are affected by both unemployment and poverty. Sometimes journalists point that out, as I represent a tough, North-East constituency with many problems and high unemployment. They ask about the effect of the recession on my constituents. My reply is that I see the effect of the recession in the number of women who break down in tears at my surgery, because they are in despair and at the end of their tether. They do not know how to meet the financial problems facing their families. In the North-East it is often the woman who has to pick up the pieces, sort out the rent, and so on. She has to bear the burden, and she cannot make ends meet. The husband may be unemployed or on short-time working.

On the whole, I hope that no partisan points will be made in the debate. The urgency and depth of our concern should be expressed by both sides of the Committee so that the Government understand it. I hope that the Government will accept the amendment.

At the moment, at least, I am bemused by the Government's attitude. Two general principles are involved.

First, I support the principle that income regardless of its source should be taxed if it is above the tax threshold. If that means that people are taxed as a result of the receipt of benefits, so be it. It is simply a matter of equity of treatment.

Secondly, we should always—as the Conservative Party has always done—treat the unemployed as generously as possible. That principle is even more important when many people are unemployed not through any fault of their own or through idleness, but simply as a result of a world recession and of a very swift change in industry. Therefore, the question of a work deterrent is not involved.

Unfortunately, it is only too clear that the Government are in breach of my second principle. It is always possible that circumstances will override any principle or consideration, but I can see no overriding circumstances relating to unemployment benefit. First, the Government believe that they will receive about £650 million from the taxation of benefits, whereas the amendment would cost only about £60 million. Secondly, the estimate of the revenue from the taxation of benefits has been vastly increased. Thirdly, as my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) pointed out, the public sector borrowing requirement is about £2 billion less than originally estimated. Fourthly, not to put it too strongly, it was at least implied that the 5 per cent. abatement would be temporary.

The needs of the long-term unemployed are as great as, or greater than, those of anyone else. The best solution would be the provision of jobs, but there are not likely to be jobs for many in the near future, and there will probably never be jobs for a great number of our people. Therefore, we must treat the unemployed as generously as we can and as generously as the Conservative Party has always done. Regrettably, the Government's proposal is far from generous. It comes much nearer to being mean. I hope that the Minister will disabuse me of that. If not, I shall support the amendment.

5.15 pm

It is a reflection of the problems of the Committee that all those who have spoken are in favour of the amendment and that most of those who are against it have not bothered to listen to the debate. No doubt the Minister will explain why the Government cannot concede the amendment, but I suspect that with the exception of the Minister those who speak will be in favour of it.

The hon. Member for Chippenham (Mr. Needham) complained that the Opposition had tabled the amendment on an inconvenient day. No doubt we could have chosen a better day, but the moral for the Committee is that we must return to the issue on every possible occasion until the Government accept the views put forward in the Committee, and not the silent views of those who do not want to come to the Chamber to explain their point of view. If we cannot persuade the Government to concede on this occasion, I hope that we shall find other opportunities to return to the issue during the passage of the Bill and, if necessary, on Report.

I understood the hon. Member for Edinburgh, Central (Mr. Cook) to say that this was the last chance that the Committee and House would have to return to the subject before July.

Perhaps I can put the record straight. I never said any such thing. Indeed, I am sorry if I conveyed that impression. When the hon. Member for Chippenham (Mr. Needham) examines Hansard tomorrow, I do not think that he will find any ground for his belief. We are likely to return to this matter on Report, just as we considered the matter in Committee and on Report during the consideration of the Finance Bill 1981.

I thank my hon. Friend for that intervention.

If we cannot get the concession from the Government now, I hope that we shall keep returning to the issue. If the Government wish to make administration simple and straightforward, the sooner they concede the point the better. It would be also be better for the time of the House if the Government conceded the point now, instead of at the end of five or six debates when more and more Conservative Members have—I hope—joined us and pressed the Government to take action. So far, the case has been made out fairly clearly. There is no financial difficulty for the Government if they concede the point. As a result of taxing the benefit they will receive far more money than is necessary to make such a concession.

I hope that the Minister will explain how an unemployed married man with two children can manage his present weekly budget. If the hon. Gentleman set out the average figure that the married man with two children receives from unemployment and child benefit and the average levels of expenditure, he would convince himself about the need to do something.

What I find most distressing and disturbing is the fact that, time after time, as I discuss my constituents' money problems, I know that I could not manage on that amount of money. The Minister should set out to the Committee the amount that must be spent on each item, such as housing, food, children—ensuring that they go to school and receive at least some of the things for which other children must pay—clothing and, most of all, a small amount that can be set aside for emergencies. It distresses most of my constituents with children that an unexpected problem may crop up and they have no spare resources to deal with it. The Minister should set out those figures and then tell the Committee why he cannot return the £1·75.

The Minister must also consider carefully the problems facing the unemployed aged over 55, who will run into increasing difficulties. He should consider the group that will lose £1·10 and the first few months of their period of benefit. Married men in that group may have got over bringing up children or, if single, may have got over some of the early expenses of life. They are at the point when they would hope to start to save for their old age. But because they are unemployed they cannot save, either by putting money in the bank or by acquiring capital goods that will see them well into old age.

Not only can they not save for their old age but they find that the pension system works against them. Although they can continue to get credits to the basic State pension, they cannot make any contributions to the new earnings-related pension. Not only will they live on a reduced income up to retirement age but, when they reach retirement age, they will be stuck with the State pension, with little added to it from the new earnings-related pension. However, those who are fortunate enough to be working until retirement not only have the extra money to be able to save for their old age but can get far more credits for the earnings-related pension, which means that they will enjoy an enhanced income when they become pensioners. That is another group that would greatly benefit if the £1·75 was returned to it.

How far has the Minister considered the interaction between the taxation of employment benefit and the entitlement to supplementary benefit? My impression is that once unemployment benefits are taxed some people will become eligible for supplementary benefit. If that is so, much administration will be involved. I am not clear about the relationship between taxation and the entitlement to supplementary benefit and I hope that the Minister will give us more information on it.

An assumption that is made by many people, both in the House and outside, is that they can fairly readily bridge shortages of money from one week to another, one month to another or even one year to another because they have a bank account or they can use plastic money—the credit card. That means that they need not worry as much about their weekly income. They can consider their income in global terms and can get over any temporary embarrassment by borrowing money from the bank or from elsewhere.

I wish to remind the Minister that for many people—many of whom will become unemployed—there is no scope or only limited scope for them to stretch their income from one week to another. What is essential to them is the amount of cash that they have in their pockets, and they must spend that cash. It does not matter to them that they may be entitled to a tax refund at the end of the year. They cannot persuade a bank manager to lend them money because they do not have a bank account. They will find it difficult to persuade a local money lender that he should lend them money on the strength of the fact that they may obtain a tax refund at the end of the year. For them, the essential thing is money in their pockets.

It is worth remembering that the supplementary benefits system was based on weekly sums of money. The tax system is based on a yearly income. We should not assume that one can transfer from working out money on a weekly basis to working it out annually unless we take into account the ability to spread one's income over that period. It is difficult for many of those who were used to a weekly wage and who must live on weekly benefits to spread their income over a longer period. The Minister should take that into account, especially because the Government are reducing the areas where people with financial difficulties can borrow.

At the moment, the vast majority of people on low incomes who must live on benefits borrow from three sources—they delay paying their gas bills, or electricity bills or the rent. One may not be happy about that, but those on low incomes can borrow from the gas board, the electricity board and the housing department. As a result of the new Social Security and Housing Benefits Bill, the ability of individuals to delay paying their rent by a fortnight or three weeks will be removed. If they receive supplementary benefit, their rent will be paid direct. If they receive rent and rate rebates, the money will be paid direct. That reduces one area in which those who receive benefits have some flexibility.

Not only must the Minister return to the family man the £1·75 which will be lost as a result of bringing unemployment benefit into tax, but he should examine ways of increasing the flexibility of those on unemployment benefit to take into account the fact that he is now removing their ability to borrow from the housing department. He is narrowing down the choices and making it a little harder for someone to bridge the gap between the week when he has no money and the future, when he may well receive a tax refund. That will not pay the current bills.

The Minister must also consider the difficult period between the introduction of the taxation of benefits in July and the coming into effect of the Social Security and Housing Benefits Bill in November and next April. It is difficult to tell an unemployed constituent whether it is better for him to ask for a rent and rate rebate plus the unemployment benefit, or whether he should ask for social security plus unemployment benefit. The purpose of the Government's combined benefit is to simplify that, but anyone who has followed the matter in Committee will realise that it is not simplified very much. As I understand the measure, unemployment benefit will be taxed. If one receives unemployment benefit, one is eligible for extra supplementary benefit, which will also be taxed. If, however, one is persuaded to ask not for supplementary benefit but for a rent and rate rebate, the rebate will not be taxed. Perhaps the Minister can tell me whether that is correct.

More importantly, will the Minister now give me a simple formula so that I can explain to my constituents whether, at least for the next nine months, they should ask for supplementary benefit in addition to unemployment benefit or for a rent and rate rebate? In which situation will they be better off? I suspect that the Minister will say "Well, it all depends." I am sure that it all depends on the individual amounts of money involved, but I want a simple formula so that I can give people the right advice. That problem adds a further complication to what is already an extremely complicated situation.

5.30 pm

I appreciate the point that the hon. Gentleman is making. I am as interested in the answer as he is. Does the restoration of the 5 per cent. deal with the problem to which he has referred?

The alternative to putting back the 5 per cent. is to put off introducing the taxation. Therefore, those two arguments should be put forward. If the Government cannot restore the 5 per cent. now, they should put off the introduction of taxation. The arguments that I have put forward are valid. If the taxation is put off until the new housing benefit is introduced, the Government will avoid the problem. I hope that the Minister will give us a little more information.

I want the Minister to give us an assurance about how the measure will operate. I understand that the individual who comes out of work will have to take a P45 from his last employer to the benefit office. I have come across many people who find it difficult to get hold of that information straight away. In some instances firms go out of business, the liquidator comes in and there are all sorts of reasons why the information is not provided.

What will happen if the P45 is not produced with regard to unemployment benefit and supplementary benefit, if necessary, being paid the week that they are due? Many of my constituents are concerned not that they receive the money some time but that they receive it when they need it to pay their bills. I hope that the Minister will assure us that, if the measure is introduced in July this year. it will be introduced in such a way that people receive the benefit when they need it and not three, four or five weeks afterwards when they are already in hopeless financial difficulties.

There is a strong case for the Government conceding the principle that they must give back what they took, otherwise most people will feel that the Government have behaved dishonestly. Not only do I believe that the Government must restore the 5 per cent. but I believe that they must convince the House that they have a practical scheme that will work for my constituents and for all the people so that they receive the money when they need it and not many weeks afterwards.

I am delighted that we have the chance to debate this issue because the Committee realises that the decision, if the Committee is to have the opportunity to take a decision that forces the Government's hand, does not come today.

The hon. Gentleman will recall that he expressed that view last time the matter was raised. On that occasion he said that he would not vote with the Opposition.

I shall leave the record to deal with the hon. Gentleman's intervention. I intend to vote the way I voted last time. It would probably be more useful if people concentrated on what I was saying rather than——

I withdraw my point unreservedly. I was referring to another debate. I apologise.

When the hon. Gentleman finds the other debate, he might tell my Whips about it. They would be delighted to see it. I abstained on that occasion.

A number of us who feel strongly on the issue have not gone round colleagues saying that they should come along and listen to the arguments and then vote in the way that their judgment suggests. As my hon. Friend the Member for Chippenham (Mr. Needham) said, given the other crisis for the time being, it would not be right for us to go into the highways and byways and bring in as many people as possible. I have appointed myself unofficial Whip of the 5 per cent. group. I have asked people not to come. The Whips have not asked them to come. If they had come, I suspect that their experience would have been the same as that of one or two other hon. Members to whom I have spoken almost by mistake. When they have asked what all this is about and I have explained, they have said "That is crazy."

I suspect that if, instead of being as admirably briefed as my right hon. and hon. Friends, I had copied my hon. Friend the Member for Essex, South-East (Sir. H. Braine), who spoke for four hours so that people started wondering about their tea and supper, more people would have listened to the issues and the Government's promised review would have been accelerated so that, by the time the Minister of State came to the end of his speech, they would have decided to put off taxation until the 5 per cent. was restored. It is a delight to have this debate as part of a Treasury debate, although I regret that my hon. Friend the Minister of State is having to reply because—

Neither of the Ministers on the Front Bench, if left to themselves instead of taking the Queen's shilling, would decide that this is the best way of saving £60 million. It is probably right to say that the deal was done before either had their present posts.

What interests me is that, if one goes back to the history of the matter, it is clear that it is the result of horse-trading between the DHSS and the Treasury. The problem is that there has not been ministerial intervention to undo the deal that was done about two years ago. If my right hon. Friend and hon. Friends wrote as many diaries as members of the Opposition when they were in power, in 18 months' time we could look forward to discovering how the deal had been put together.

I prefer to do without memoirs and to make the Government recognise that by the Report stage of the Finance Bill they should have decided that they will put off taxation. That brings me to a question that the Treasury can take as its responsibility to answer today, if that is possible. What will happen if the amendment is not passed today, but is passed on Report? I shall vote for it. When is the Report stage expected to come? If it comes on or about the time when taxation is applied to unemployment benefit, what "wet weather" procedures are the Government keeping ready for that eventuality? I suspect that, by the time we reach Report, the Government will have succumbed to total persuasion or will at least have changed their minds and will put off taxation of unemployment benefit.

In an answer to me, my hon. Friend the Under-Secretary of State for Health and Social Security said that it was not possible to restore the 5 per cent. on the benefit this year. That may be right. If that is so, the only way we can do what is right is by putting off the taxation, as the amendment suggests. I hope that the combined ingenuity of Conservative and Opposition Members will find a way in which the issue can be raised again.

Is my hon. Friend elliptically suggesting that it might be better if a decision were not taken in any form until Report?

My hon. Friend tempts me to anticipate the peroration that I was saving up for a few minutes' or a few hours' time, so I may repeat myself later. It would be sensible for the hon. Members whose names are on the amendment to withdraw it at the end of the debate so that we have a clearer opportunity of having a full debate attended by many hon. Members on Report and so that the Goverment's mind can be concentrated between now and then, rather than thinking that they would have the same sort of victory as on 18 March. At that time those of us who knew a great deal beforehand and those of us who listened to the debate were convinced about what was right or wrong in the issue.

I hope that between now and the end of the debate there will be discussions among Opposition Front Bench speakers on the amendment. I am sure that it would be for the convenience of the Committee and, when Report stage comes, for the convenience of the House, for us to have a better opportunity of applying what I gently described as total persuasion to the Government. However, before my hon. Friend the Member for Peterborough (Dr. Mawhinney) drew me down that line, I was about to say something that I have wanted to say here for some time.

I want to talk about the kinds of issues on which I believe it is right to vote against one's party. The first is on grounds of fairness. That arises on issues such as immigration rules and the distinction made there between males and females. That is an instance in which I believe that fairness overrides one's basic underlying loyalty to colleagues and the Government.

The second relates to issues of judgment, such as on the question of raising child benefit, where it is my judgment that a substantial increase in child benefit would be associated with a reduction in the levels of pay increases, and with greater fairness to parents when they have families.

5.45 pm

The third issue is where a question of principle arises, as with the 5 per cent. abatement. This is not like the debate on 18 March, when we were discussing whether the Government commitment was absolute or conditional, or whether it changed at various stages of the previous debate. It is, as my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) said, a question of whether what we are doing is wrong. It is quite clear that on this issue what we are doing is right. I do not think that has been challenged in any of the arguments put forward by Ministers.

It can be argued that it is a de minimis issue if we are talking about 6 million people who may be unemployed during the year, and where the cost of restoring the 5 per cent. abatement is £60 million. We are probably talking of about £10 per person unemployed during the year. I take the point of the hon. Member for Stockport, North (Mr. Bennett) that many of those people are the ones to whom every penny counts, but it is the principle of taking the money from them that matters, rather than the sum itself.

It can be argued that the £600 million that is being taken by taxation, which I support, is a far larger sum, and that, if we are talking about the available resources to unemployed families, it is a greater imposition to put on the taxation. I do not follow that line of argument because, in the way that taxation usually works, the money comes from those with a tax-paying capacity.

Will my hon. Friend agree that it is an abatement not only on unemployment benefit but on short-term supplementary benefit, and that it is affecting the long-term unemployed and not merely those who are on or off the register?

I appreciate my hon. Friend's contribution.

I should like to have seen the sort of advice that Ministers have been getting as the debate has continued. If I were an official with as great a knowledge as some officials may have on these issues, I suspect that, each time an hon. Member on either side put forward a point, one would be thinking of passing a note to the Minister saying "Got us again, boss—can't answer that point". The objection might be on the ground of cost, except for the fact that the Government do not defend their position so much now on the ground of cost. If it were a PSBR argument, that has been dealt with by my right hon. Friend the Member for Chesham and Amersham, who is a great expert on that subject.

Incidentally, if it is possible to give advice to those members of the press who may be commenting on the question, the position is not that those who may not vote for the Government are part of the "Gilmour gang", because it is not simply a Left-wing Tory issue. It is far broader than that. I have several respectable Right-wing friends who support monetarism perhaps even more strongly than I do, and who, when they have looked at the issues here, have said "We had better go out of the Chamber, otherwise we might be convinced by the argument". I have had great hopes in regard to my hon. Friend the Member for Croydon, South (Sir W. Clark), who has been present for most of the debate. If I had not done a deal with the Whips, I would almost be inviting him to join me later on.

The question of fairness was dealt with adequately on 18 March by the Minister for Social Security. All that is left is machismo. Are the Government stuck on trying to defend a decision which, as I have speculated, arose out of the usual horse-trading between the Treasury and the DHSS? It is not necessary for the Government—especially after the good news today about South Georgia—to feel that they have to maintain their prestige and status in front of their own parliamentary troops by defending the argument that £60 million matters so much, especially as the £60 million is a full-year cost and is divided between the PSBR and the national insurance fund. If £30 million of the cost is borne on the national insurance fund, it does not appear at all on the PSBR. It is taken into account by the Government Actuary when he makes decisions on what contributions to national insurance should be by employer and employee.

It is the Government who link the issues of the 5 per cent. abatement and taxation. It is up to the House to do what the Government would, I am sure, like it to do, and to say "We shall keep them linked and delay the taxation until the 5 per cent. has been put back". The Government have promised us a review. They have also said that, even if the result of the review were to be favourable to those who have lost their 5 per cent., the Government cannot put it back this year. There may be an answer to that and it may be in the Ministers' hands very shortly. The Committee looks forward to sharing in it.

I was one of the co-authors of the Bow Group pamphlet "The Unkindest Cut", which talked of the possibility of the Government being allowed by the House of Commons to cheat—if one may use the word in this Chamber—those who have suffered the 5 per cent. shortfall. I have described it as the unkindest cut, and if the Committee allow it to continue I think it will be a failing in its duty. What we can do is to follow the line of my hon. Friend the Member for Grantham (Mr. Hogg). Incidentally, I advised my hon. Friend that I might be quoting from him. I have in mind what Mr. Speaker said earlier today about one hon. Member quoting another.

The quotation given from my hon. Friend's speech by the hon. Member for Edinburgh, Central (Mr. Cook) was the one quotation which makes it absolutely plain that all nine Back Bench Conservative speakers in the debate on 18 March—even though one of them could not bring himself to join the rest of us in the Lobby—believed that what the Government decided on 18 March was not what ought to be decided on 26 April. Certainly the position needs to be reversed by the time we reach Report stage. I shall charitably pass over the rest of the speech made by my hon. Friend. I look forward to hearing today that he has been fully converted.

I should like now to change slightly the approach to the issue. The Sub-Committee of the Select Committee on the Treasury and Civil Service is looking into questions of incentives and I am sure that we all look forward to reading the report of its considerations. What I fear is that the Committee and the Government will not take properly into account the way in which we should look at benefits, at taxations and at incomes. It is not just a question of incentive to work; it should be a life-cycle approach.

I am associated with a body called Family Forum, which brings together a large number of national and local voluntary organisations and is trying to put forward the concept of analysing what sort of incomes people get—whether they are earned incomes or benefit incomes—over a life-cycle. Only in that way can one get a recognition that the person who is receiving unemployment benefit today is the person who was contributing a short time ago and hopes to contribute again in the future; that the families who will be getting child benefit in 20 years' time are those who are probably enjoying a higher income at the moment and ought to be willing to pay more in order to get more later on.

The people who are born today will have periods when they are unable to work, because they are below the working age or because they are sick or unemployed. Rather than promoting a battle between those in work and those out of work, those who are sick and those who are healthy and those with family dependants and those without, we should try to consider the results of the Treasury and DHSS proposals and the decisions taken by the House. We should put all those together and ask what is fair, right and appropriate. People have different income levels, family circumstances and so on and bringing the family life-cycle into account will help even on the smaller subject that we are discussing.

Perhaps I have said enough for today. I shall keep the rest of my speech for the Report stage when, as I said earlier, we shall have a greater chance to make sure that the Government are persuaded by their own common sense and compassion and by their own principles and sense of fairness, especially as put forward by most of their supporters who have been in the Chamber today.

I do not wish to undermine what was said by the hon. Member for Woolwich, West (Mr. Bottomley), but I do not entirely share his confidence that those who win the argument in the Committee necessarily win the battle.

It is appropriate that the amendment has been tabled for discussion, even if it is overshadowed by wider international problems. My hon. Friend the Member for Edinburgh, Central (Mr. Cook) was right to raise the problem of the 5 per cent. abatement and the need for the Government to restore it.

One astonishing aspect of the debate is the all-party support for the amendment. One or two of the hard-nosed Tories who insist on introducing such legislation should be here to defend their attitude. Once again we have the iniquity of an underprivileged section of the community being penalised. The Chancellor of the Exchequer appears to be acting like the Sheriff of Nottingham—he wants to take from the poor and give to the rich. My hon. Friend the Member for Edinburgh, Central categorised a number of measures that would easily add up to £60 million.

There is no way that we can budge the present level of unemployment in most parts of the country. What has not been made clear in the debate so far is that the 3 million unemployed are not spread equally over the country. There are parts of the country where high unemployment is a fact of life that will persist for the next three to five years. A growing percentage of unemployed will be out of work for a long time. There will be 1 million long-term unemployed before the year is out. That is why we should be pressing now for a restoration of the abatement.

Unemployment is, moreover, hitting many more sections of the community than hitherto. Many professional people who thought they would never be affected by unemployment are now out of work—architects, teachers and doctors. Unemployment is no longer affecting only the manual and skilled workers who, in the past, have been all too accustomed to periods of unemployment. I hope that the Government will consider the position afresh and take into account the tremendous all-party support for the amendment.

The hon. Member for Chippenham (Mr. Needham) raised a pertinent point in referring to one of the reasons that he thought might be in the minds of his hard-nosed colleagues who are not present today—the differential between those who are unemployed and those who are in low-paid jobs. The Chancellor is taking care of that differential, because the increases in employees' national insurance are reducing the extent to which take-home pay becomes a factor.

The Chancellor of the Exchequer's suggestion in the Budget that he would help to set up a number of schemes whereby unemployed people could do voluntary work without its affecting their supplementary benefit shows that even he accepts that the unemployed want to do something. Incidentally, the Chancellor is prepared to pay out £8 million or £9 million to administer that scheme, so I do not know why the Government should not concede the point made in the amendment.

Given the battery of legislation passed against the unemployed over the past 12 or 24 months, including the disappearance of earnings-related benefit and other measures to make life more difficult for the unemployed, I hope that the Committee will approve the amendment.

We have been here before, as several right hon. and hon. Gentlemen have pointed out. We circumnavigated the question on the Report stage of the Social Security and Housing Benefits Bill. On that occasion those of us who disagree with the Government on this issue won the argument.

There was no dispute about that, as the hon. Member for Birkenhead (Mr. Field) said at the time and as the hon. Member for Edinburgh, Central (Mr. Cook) said this afternoon. The speech of my hon. Friend the Member for Grantham (Mr. Hogg) also made the point on that occasion. We are not now sure of the intention of the speech of my hon. Friend, but we know that the result was to demonstrate, beyond, as my hon. Friend might say, peradventure, that the Government do not have a leg to stand on and that there is nothing to be said for the Government's case. I am sorry that my hon. Friend has chosen not to be here today. He could have made the point for us better than we are able to do ourselves.

The arguments today are virtually identical to those used on the last occasion that we discussed this issue. The only difference is the cast on the two Front Benches.

I am glad that my hon.Friend has drawn attention to the cast. I do not know whether it is any better looking than on the previous occasion. I felt that the Minister who wound up the debate last time was convinced by the arguments. At the end of the debate he said that the Government intended to do something and that they would not take too long about it. I hope that the present cast on the Government Front Bench will improve on that and will tell us that they will do something about the position in the Finance Bill.

I have so much respect for my hon. Friend the Member for Brentford and Isleworth (Mr. Hayhoe), who is to reply to the debate, that I assume that what my hon. Friend the Member for Rutland and Stamford (Mr. Lewis) just said is probably the case. Ministers have to do some pretty rum things from time to time and it is probably my hon. Friend's turn this evening. If he is putting the case for the Government, at least it should not take him long. As my hon. Friend would be the first to admit in other circumstances, the Government do not have a case. That is why they cannot produce even one supporter from the Government Back Benches to put the case for them today.

I am sorry that it is my hon. Friend the Minister of State who will put the Government's case. I do not wish to blight his career, but I cannot imagine that he has his heart or his head in what he may have to say. He comes from an honourable tradition in the Conservative Party, though it may not he too popular at the moment, represented by Rab Butler and lain Macleod. It is difficult to imagine them putting the case for what the Government are trying to do.

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As my hon. Friend the Member for Chippenham (Mr. Needham) said, this is not the best tactical time for the debate, as the Opposition will appreciate. However, as long as the Government take their present view, I wish to win the battle. I am sorry that the Opposition's lack of tactical sense makes it less likely that we shall be able to accomplish that objective, but I must say in fairness to them that they could legitimately point out that if enough Liberal or SDP Members had been here on the previous occasion there would have been no need for this debate. We could have disposed of the matter satisfactorily, particularly to the unemployed, on 18 March.

There are other reasons why it is not wholly fair to criticise the Opposition's tactical sense. The people who have got us into this pickle and who are imposing intolerable strains on their supporters' loyalty are the Government. We should not forget that the Government have themselves to blame. They have put forward a defence which is, at best, casually inadequate and, at worst, plain shifty.

If we comb the columns of Hansard for the various remarks of Ministers, we find three main arguments against the Government's proposal. I shall not go through all the quotations again or ask about the meaning of "interim" or "temporary" or "in lieu". The most distinguished of all the quotations that we have ferreted out is that which made it clear that the rationale for the abatement would end when the benefit came into tax. We shall expect to hear from the Minister of State what is the new rationale. We have failed to unearth it so far and we look forward to hearing what it is.

The second argument, and it is the strongest, is that regardless of what hon. Members have said and whether a commitment on Report is more significant than a commitment on Second Reading—a matter that was taken up by a number of hon. Members, including my hon. Friend the Member for Grantham—the Government are plain wrong. We should not be putting what amounts to a double penalty on the unemployed. The Social Security Advisory Committee stressed that in its letter to my right hon. Friend the Secretary of State for Social Services in the autumn last year and again in its recent report.

We are applying double taxation to one of the most severely disadvantaged groups in the community. Moreover, it is a group which we all agree is not responsible for the circumstances in which it finds itself. It is the rationale, if I may return to that word, for the Government's economic policies that those who have Lost their jobs are wholly innocent victims of the fight to abate inflation and the attempt to make British industry more competitive.

The Committee should do all that it can at every opportunity to look after the unemployed as well as the country can afford to look after them. Far from talking about whether we should restore the 5 per cent. cut in unemployment benefit, we should be talking about introducing a long-term unemployment rate. More than 1 million people, including 250,000 aged between 18 and 24, have been out of work for more than a year. We should certainly not be talking about mean little measures to save £60 million at the expense of the unemployed.

Another argument that may feature in the rationale, which has been absent until now, but will presumably turn up with the drinks trolley later in the evening, is the argument about the cost. My right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) and my hon. Friend the Member for Chippenham said that the £ 60 million saving is only about one-tenth of what the Government are receiving from the taxation of short-term benefits. Yet we still cannot find it in ourselves to give that money back. It is scandalous that we should behave in that way.

The position is made even more ludicrous by the public sector borrowing requirement figure for last year. The difference between the estimate and the actual figure was what my right hon. Friend the Leader of the House would describe as something that fell within the historic margin of error. There was a £2 billion difference between what my right hon. and learned Friend the Chancellor of the Exchequer spoke of in his Budget Statement—one might ask in passing whether he based his Budget judgment on a £10½ billion PSBR—and the turnout figure of L8½ billion.

Some of us who have occasionally mentioned the PSBR in our speeches may believe that the figures confirm our view that the PSBR is not the ideal totem pole for a sensible economic policy. Some may argue that the figures suggest that the Government's fiscal stance last year was more contractionary than may have been desired. Some may argue that the figure demonstrates how we could have done more to help the unemployed, not just this year, but last year, too.

But even if the figures do not demonstrate any of those views, they surely demonstrate that the Government have far more money than they need to restore the £60 million for the unemployed. The more that I develop the argument, the more I am convinced that my hon. Friend the Minister of State will tell us that the Government have at last seen sense and do not intend to be obstinate for a moment longer.

I am sure that I have already said more than is good far me, but I wish to make one other point. I hope that I do not sound too sanctimonious, but it is difficult to make the point without sounding a little priggish. The Government have behaved absurdly. Governments often behave absurdly and paint themselves into corners. The Government may think that they will demonstrate a lack of machismo if they admit that they were wrong and "Give 'em the money, Barney".

There is a more important matter. There is, as I have already suggested, a certain tradition—it is, I think, an honourable and decent tradition—in the Conservative Party. Even though this may not be the ideal moment to vote on the issue and we may have to return to it later in the summer, I think that someone, in the light of that tradition, has to go into the Lobby tonight against the Government, however embarrassing or awkward it may be, to try to encourage the Government to show sense on this issue. I intend to go into the Lobby against the Government unless they change their mind. I hope that I shall be joined by some of my hon. Friends.

On a point of order, Miss Boothroyd. During my speech, there was a slight difference between the hon. Member for Workington (Mr. Campbell-Savours) and me. I should like to clear the air. When the Government announced last year that there would be a 2 per cent. shortfall on benefits, I made a speech, but did not vote against the Government because I thought that the matter would be put right in the Budget. I hope that the Government will make it unnecessary to do the same tonight.

That is not a point of order for the Chair but the hon. Gentleman did rather well.

I have no doubt that the hon. Member for Woolwich, West (Mr. Bottomley) feels better for making those remarks. It is a pleasure to follow the hon. Member for Bath (Mr. Patten). I apologise for missing the first two or three speeches. It is clear from what I have heard both today and also on 18 March, when I was present but mainly silent, that these have been occasions when no-one can accuse us of indulging in yah-boo politics or of opposition for the sake of opposition. This is no longer a debating Chamber when it comes to the matter before us. Everyone speaks with one voice. I have not heard a single speech in favour of the Government or opposed to the amendment. Apart from the wayward path taken by the hon. Member for Grantham (Mr. Hogg), the same happened on 18 March. There were no speeches in favour of the Government's approach except that made by the Minister in winding up the debate.

The tragedy, as the hon. Member for Bath has reminded the Committee, is that if, on 18 March, all the Members of the minor parties, the SDP, the Liberal Party, the Nationalist parties and the Irish parties, had been present and had voted with the Opposition, the Government would have lost by a majority of two. If one adds up the votes on that day, the total comes nowhere near 635. Labour Members pair only with Tory Members and Tory Members only with Labour Members. We counted ourselves out. It was the minor parties, the Liberals, and the SDP, that let down the unemployed on that occasion.

I cannot be certain—I have not asked all of them—that if all the hon. Members representing minor parties had been present, they would have voted with the Opposition.

I have my doubts about one or two of the Irish Members. The fact remains that the Government's majority of 30 was the smallest in this Parliament that I can recall for a major debate involving a three-line Whip. I would not have put any money on those circumstances arising on an issue related to social security. It did, however, arise on 18 March. Plenty of lobbying is being done. I hope that the stand taken by Conservative Members and the possibility of support from SDP Members and Liberals—their Benches are empty at this moment, but there has been one speech by an SDP Member—will enable us to settle this matter tonight. It would not be resolved in the most convenient form. It would nevertheless be got out of the way.

My hon. Friend the Member for Edinburgh, Central (Mr. Cook) has given a number of quotations. I do not intend to do the same. But, whatever the words used by the former Secretary of State in Standing Committee at 1.30 am on 30 April 1980—I refer to column 526—the import was clear, regardless of what arguments occurred in Committee, on Report, on Third Reading or outside the House. The Minister for Social Security, winding up the debate on 18 March, actually went further—I do not know whether the hon. Gentleman appreciated this at the time—than any previous Minister on the issue. I do not know whether he actually intended to say
"We have said that the abatement will not be a permanent reduction."
A few sentences later, referring to the 5 per cent. abatement, he said,
"At the right time it will be made good".—[Official Report, 18 March 1982; Vol. 20, c. 536.]
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That was a much more positive statement than any previously heard from a Minister. There was, however, no means by which hon. Members could check on his remarks when he was winding up a highly contentious debate and being given a rough ride from his own side. There was no way of obtaining clarity or asking the hon. Gentleman if he knew what he had said.

The time to make up the amount is this year as the benefits are brought into tax. That is the intention of the amendment. It is easy to bandy quotes around. As many hon. Members have made clear, something much more important is at stake than mere words in Hansard expressed in Committee or in the Chamber. It is the credibility of Government measures accepted at the time by the House in good faith. We opposed the 5 per cent. abatement in 1980. Conservative Members accepted what was being done in good faith and in the belief that the 5 per cent. cut in the five separate national insurance contributory benefits in lieu of taxation would be put right as soon as the Government were able to bring the benefits into the PAYE system. Since that time, there has been pressure upon the Government in debate and through parliamentary questions to speed up the matter.

Of the five benefits that suffered the 5 per cent. cut, unemployment benefit is the first to be caught in the tax net. It is true that sickness benefit will be caught, in effect, from April next year, at the start of the financial year, as a result of measures in the Social Security and Housing Benefits Bill currently in the other place. That is the time, I would suggest, for Conservative Back Benchers to make a stand. No one can criticise Opposition Members too harshly for not making a principled stand on that measure as it progressed through the House. Nor can it be argued that the Opposition have failed to make a principled stand on the 5 per cent. cut in invalidity benefit. That is the cruellest of the cuts. There is an unqualified commitment by the Government to reinstate the 5 per cent. cut when it comes into taxation. There is not a glimmer on the horizon of measures to bring the invalidity pension into taxation. Each week that passes, long-term sick and chronically disabled couples lose about £2. It is cruel beyond belief that there should be no sign from the Government that they intend to put the matter right or to bring the invalidity pension into tax which, for the majority of people, would mean an increase in benefit because the majority will not be taxed.

Unemployment benefit, as I say, is the first of the five benefits to be caught. It is right that a stand should be made. The matter is complex. The Government have an advantage. The hon. Member for Woolwich, West suggests that hon. Members call it a day and that they do not press the amendment on the grounds that there can be a similar amendment before a full House of Commons on Report when hon. Members can listen to the arguments, weigh up the pros and cons, and vote as free hon. Members. It is beyond belief that the House will be full on that occasion. Today's debate will not raise headlines in the press tomorrow. There were a few headlines after the debate on 18 March, but that was because of a Government Back Bench revolt. But the subject does not generally raise headlines, and in present circumstances is even less likely to do so.

The same will be true on Report. This subject is not like capital punishment. In the days leading up to that debate hon. Members representing both sides of the argument will be wheeled on to the "Today" programme and the "Jimmy Young Show". The arguments will be built up for the public. The news will be that there is a big occasion down at the House of Commons. When benefits for the unemployed are being debated, there is no hope of a big set piece debate with many hon. Members listening to the arguments. The amendment, therefore, must be pressed because opportunities for such a debate are few and far between. The Opposition and Conservative Members—Conservative Members are free to table amendments such as the Opposition's—must come back again and again on the issue. That is the only way in which the Government will be forced to concede anything on the issue. It is the only way that the public and those who comment on our affairs will grasp that a major injustice is being perpetrated by the Government with the sanction of the House of Commons.

The tragedy of the issue—I do not see any of my hon. Friends who will leap on me for what I am about to say—is that if this were not a Finance Bill and the argument were to developed in great detail in the Chamber and we lost the Bill could go to the other place where the argument could again be developed in the same detail by noble Lords who are seized of the unfairness and cruelty of it. That is an example where the other place could have righted what we had done wrong.

I do not suggest that that is an argument for keeping an unelected House of Lords, or for sending the Finance Bill there, but this is the kind of issue that puts the credibility and morality of both the House of Commons and the Government's stand at stake. The Bill is seen by hon. Members on both sides of the House to be grossly unfair and cruel to the disadvantaged members of society.

Although, because of the payroll vote and patronage, the House cannot put the matter right, the other place could have done so.

There are matters, such as school transport, on which I have argued that although the other place might have been wrong to overturn the decision of an elected House of Commons, on those issues it was right. This is another example. Unfortunately, that solution is not available to us.

The Social Security (No. 2) Bill 1980 was guillotined. The former Secretary of State, in the early days of that Committee before it was guillotined, made remarks that have been quoted often. The guillotine was introduced within two days of the 1980 Budget. As a result, the Bill whistled through the House in about three weeks. Conservative Members were deceived. They believed what their Front Bench told them because of the words that they employed. Giving them the benefit of the doubt, I accept that the majority of Conservative Members did not want to listen to the arguments advanced by myself and my colleagues in Committee as the legislation was highly partisan. There were six clauses that abolished or cut six social security benefits. It was a highly partisan issue. The 5 per cent. was said to be transient and interim. It was easy for Conservative Members to accept the arguments of their Front Bench.

The chickens have come home to roost. Conservative Members have seen what the Minister said on 18 March, or the implication of what he said prior to the Budget. The matter was not referred to in the Budget. I do not know why. I cannot believe that the Chancellor of the Exchequer forgot to mention it. It was clear, however, to hon. Members who follow these matters that there would be a statement of Government intent before the year in which the benefits came into tax. That means that there should have been a statement before the Budget. There certainly should have been a statement before March or the beginning of the current financial year. No statement was made until one was forced out of the Government by the Opposition new clause on the Social Security Bill on 18 March. We have still got no further.

The social security and tax systems are highly individualistic. I still receive letters, as I suspect do Conservative Members, asking me to oppose clauses that are now part of the Social Security Act 1980. It is only now, as some of the effects of that measure come fully into force, that people grasp them. One needs only contrast the campaign being waged by the trade union movement against what it regards as an attack on its collective rights in the Employment Bill with the almost complete silence, even from the poverty lobby, about the attack on individual rights by the Social Security Act 1980. That Act cut, curtailed or abolished the benefits received by millions of people. The amendment gives us an opportunity to correct one of those injustices.

Unfortunately, there is no massive lobby or pressure group for the unemployed and the sick. The matter has been left to small numbers of hon. Members. I except the constant prodding of the Unemployment Alliance, the Child Poverty Action Group and the Low Pay Research Unit. There has been no mass movement. The Minister of State knows that the votes are in the bag. He knows also that if he had to give way he would not be here. The job would be given to a Treasury Minister if there were a good statement or announcement to be made.

I shall make one further point which underlines what has been said about the commitment of Ministers towards benefit and the restoration of the 5 per cent. We have now reached the point where, in the near future, certainly at the beginning of the next tax year, sickness benefit, which is one of the five, and industrial injury benefit will be treated likewise. In Standing Committee B on the Social Security and Housing Benefits Bill, while discussing clause 36, I asked the Minister for Social Security about the restoration of the 5 per cent. abatement of sickness and injury benefits. He said:
"The abatement will be restored as soon as the benefits are brought into taxation. That undertaking is unqualified."—[Official Report, Standing Committee B, 9 February 1982; c. 422.]
That is the first statement of its kind since the passing of the Social Security (No. 2) Act 1980. The undertaking with regard to sickness and industrial injury benefit is "unqualified". Are those weasel words? Were they just thrown away to shut up my hon. Friends and myself, and to stop us pressing the Minister? Were they intended to sweeten Back Bench Conservatives? It is an unqualified commitment.

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In two years of debate, that commitment had never before been given, either in the Chamber or in any Committee. If anything needs to be done now or on Report to reinforce Conservative doubters on the subject of unemployment benefit, it is to draw their attention to this further, total commitment in respect of the other benefits. If we lose today, I hope and expect that Conservative Members will confront the Government with the words that I have quoted and the excellent Library research note no. 68 in which, for the first time, the Library has produced a blow-by-blow account to inform hon. Members and people outside exactly what happened and all the arguments that were used in the Standing Committee on the Social Security and Housing Benefits Bill.

I hope that Conservative Members will take all that to the Minister of State, the Secretary of State and Chancellor, because they must know whether that commitment means anything. That should then dictate what happens to this Bill. If that commitment is not backed up, I expect Conservative Members who have appointed themselves unofficial Whips on this matter to bring 50 or 60 of their hon. Friends into the Lobby with us on Report. That is what I expect to happen if we fail today. Anything less would be a cruel deception of the unemployed, the sick and the industrially injured, and the House and the country should know that. Moreover, I expect the same of the SDP and Liberal Members who were missing on 18 March.

There is enough on record about the credibility of Government and the morality of the House to ensure that what happens on Report will be absolutely clear. We are here to do one thing—to be honest and to speak for our constituents. We speak and act for the underprivileged who have no pressure groups to do this for them. Because of the nature of the system, only elected Members of Parliament can defend people who are unjustly treated by the income tax and social security systems. Anything less would be unworthy of the House of Commons.

I had not intended to take part in the debate, but, having listened to it, I wish to contribute, albeit briefly. My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) said that this was not a big House of Commons occasion and that it would not receive much press coverage. To me, it is indeed a big House of Commons occasion. The standard of living of millions of men and women is being reduced by £1·75 per week for married couples and £1·10 per week for single people. If that is not a matter for great concern, I do not know what is. If Conservative Members are to retain any credibility, there should be no possibility of the amendment being defeated.

I shall not quote past references at length, but it is right and proper to test whether the Government have any credibility or whether they could be accused of cheating. In the Standing Committee on the Social Security (No. 2) Bill, the then Secretary of State for Social Services, the right hon. Member for Wanstead and Woodford (Mr. Jenkin), said:
"as the unemployment benefit comes into tax so the rationale for the 5 per cent. abatement ends. It is an interim scheme in lieu of taxation. One will give way to the other."—[Official Report, Standing Committee B, 30 April 1980; c. 526.]
During the passage of the Finance Bill 1981, the then Financial Secretary, the right hon. Member for Blaby (Mr. Lawson), said that a decision whether or not to make good the abatement in 1982 would be made in the course of the public expenditure review. The right hon. Gentleman then said:
"The results of those discussions will be put before the House and the country well before April 1982".—[Official Report, 11 May 1981; Vol. 4, c. 514.]

The Chancellor remained silent on the matter in his Budget speech. When challenged in the debate on the Social Security and Housing Benefits Bill, however, the Minister for Social Security stated
"We have said that the abatement will not be a permanent reduction. It is equally clear that the abatement cannot be made good now, but it will be made good. My right hon. Friends have the matter under review."—[Official Report, 18 March 1982; Vol. 20, c.536.]

If those statements were honestly intended, and if the Government are to retain credibility, there should be no doubt whatever about the decision on the amendment today.

In situations such as this, the function of the House of Commons becomes a myth. If debate means anything, it must mean the attempt to influence the way in which hon. Members vote. I have not heard one Conservative Member speak in favour of the Government in the past week's debates on this matter. That being so, the Conservative and, indeed, the Liberal and SDP Benches should have been full today if, as they constantly suggest, hon. Members had any real concern for the unemployed who are to suffer a reduction in their standard of living.

Very shortly, hon. Members will be trooping through the Lobby to vote against the amendment without having heard one word of the argument for it. I know that is a pattern of our procedure, but today hon. Members will be voting against an amendment to help millions of unemployed people who have no voice, no muscle and no body to protect and defend them. I respectfully put it to Conservative Members that, after all the statements and near promises made by the Government, those who vote against the amendment will be cheating the unemployed. I hope that the unemployed will realise that the crocodile tears shed by hon. Members in various parts of the Committee about their plight mean nothng to those who troop through the Lobby to vote against the amendment.

My hon. Friend the Member for Perry Barr said that this is probably not the best time to press the amendment in a Division, but I believe that it is, because I have no confidence whatever that the Government will put the matter right in future.

There are occasions when hon. Members feel angry about and disturbed by the Government's decisions. The Opposition have sought not to claim a monopoly on that feeling. Anxiety over this issue has been expressed from both sides of the Committee. I should not like my hon. Friends or, indeed, other hon. Members to feel that Labour Members are alone on this issue, because a few Conservative Members—12 or perhaps 15—have expressed support for us today. However, there are at least 280 who will blindly go into the Lobby to support the Government on what many of us feel to be a grave injustice for a particular group in society.

I can only compare my sense of anger with the feeling that one has when reading newspaper articles about vivisection or interference with children. Such matters make one seethe with anger. Perhaps I am being unfairly melodramatic, but I am trying to express the view that many hon. Members must feel about this issue.

We are seeing an injustice today. It may be that tactically we cannot win our case today, but we must pursue it on behalf of those who demand that the Government respond to their anxieties.

The right hon. Member for Chesham and Amersham (Sir I. Gilmour) and the hon. Members for Bath (Mr. Patten) and Chippenham (Mr. Needham) said that the Government's public sector borrowing target should be more flexible and that, in view of the shortfall of £2 billion on last year's Budget Statement, the money was available. If the Government are unwilling to accept that that £2 billion can be included in the argument on flexibility, they would do well to consider other ways of adjusting their budgetary, measures so that the £60 million to which we refer can be made available.

In Committee and on Report my right hon. and hon. Friends will table amendments on capital transfer tax and capital gains tax. Conservative Members would do well to consider the implications of such amendments. I am not asking them to compromise themselves politically, but if they really feel the passion that they have expressed in their speeches, they should take the opportunity to show that they believe that within the Exchequer money which is being given to the better off in society could be made available to the group covered by the amendment.

As unemployment increases, the income of the unemployed in particular communities becomes more important. When unemployment is well spread in a community, a sense of interdependence is developed. One family will help another. However, in areas of heavy concentrations of unemployment the ability to be interdependent is reduced as fewer resources are available. The amendment would help to relieve anxieties in areas where heavy pockets of unemployment exist. We all have such areas in our constituencies.

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We should also consider the escalating problem of unemployment. An interesting updating of the views of the Cambridge Economic Policy Group was published in TheGuardian today. Hon. Members on both sides of the Committee will have read of its forecasts for the coming years. The Cambridge Economic Policy Group does not confine itself to short-term forecasting. It is more inclined to consider the long-term implications of Government policy. According to its predictions, which have been particularly accurate over the years, the Prime Minister's strategy may lead to as many as 4½ million being unemployed by 1985. Even if we were to pursue the conventional reflation that has been proposed by the Social Democratic and Liberal Parties, in 1985 we would still have more unemployed than we have today. The Cambridge Economic Policy Group suggests that the Labour Party's package, which is not limited by an incomes policy, would still leave 1¾ million people unemployed in 1985. Many of us believe that there will be some form of agreement on incomes and that that figure will be substantially less. My argument is that those are significant figures of unemployment and that therefore there will be no prospect of work for many of those who now languish in unemployment.

There is a duty on the Government to consider their whole attitude to the income funding of those who and themselves in such circumstances. As the hon. Member for Bath so aptly said, it is grossly unfair for the Government to set out an economic strategy that they believe, even if I do not, will have the effect of reducing inflation and producing a more buoyant economy and, in turn, providing more jobs—that is all part of an ideological prescription—and, as part of that prescription, to impose on those who are required to take the medicine an unfair rate of pay, because that is what it is. They are being paid to remove themselves from employment to secure what the Government believe to be a more secure strategy for the future.

Some weeks ago, the Select Committee on the Treasury and Civil Service produced statistics on unemployment. It stated that the assumed rate of growth over four years of a cyclical upswing was insufficient to reduce unemployment significantly and was clearly disturbing as it suggested a trend of increasing unemployment over the cycle as a whole. That all-party Committee has unanimously supported the view that unemployment is here to stay. If so, it must be for the Government to respond and to relieve the conditions in which the unemployed find themselves.

Very few of us have experienced unemployment. Some Labour Members may have done so, but I cannot imagine what it is like. I can talk only in general terms about the impact on the family. Few Members can appreciate fully the problems of unemployment. It would be wrong for the Government and for hon. Members not to respond to this condition merely because they have not experienced it. There is a duty on every Member to recognise his responsibilities as they affect those to whom I have referred. We find it difficult to understand the despair in families where there is unemployment.

In the past, families in my constituency and in other constituencies have had two income earners, two heads of family. The wife has possibly worked on a production line in a factory, and the husband has been a skilled worker. The incomes of those families have been cut by the Government's experiment with monetarist economics. There is now great indignity. When the Minister of State replies, he will do well to address himself to the experiences of families that suffer unemployment. I hope that he will make every effort to express the Government's view, or what I hope to be their view, and will acknowledge that they are concerned. If the amendment fails to win the support of the Committee when the Division takes place, this will not be the end of the argument.

The Government have been unwilling to face their responsibilities in the funding of unemployment pay. As they have found themselves unable to cope with the problems in the economy, they have allowed themselves to be led down the path of penalising those in society who are least able to defend their own interests and to fend for themselves. As a result, they have secured a route for reinforcing their monetarist strategy that is based on damaging the interests of the unemployed by reducing the amount of money that they have available to fund their everyday needs. They are pursuing a policy on the cheap in the sense of support for the unemployed.

I do not intend to rehearse all the views that were expressed when we debated supplementary benefit about two years ago, or the statements that have been made by Treasury Ministers on this issue over the years. However, it is significant that the Bow Group, in a recent Budget submission, argued that the abatement should be made good
"on the grounds of fairness towards those in most need and political self-interest."
I am told that, additionally, it made a plea that the Conservative Party
"should not be seen to cheat."
That is fairly aggressive and emotive language.

I have read some of the literature that circulates within and outside the Conservative Party—for example, the "Conservative Case" by Quintin Hogg, as he then was, which was written shortly after the war. Its purpose was to try to establish in the mind of the reader that the Tory Party's role was to redress imbalances and what it believed to be the excesses of the great reformers. It does not seem to see itself in the ideological role that the Prime Minister has managed to adopt under this Government. Indeed, it could be said that historically there is a need for Conservative Governments at certain times. However, their purpose is to redress only what they regard as excesses in reform that have been introduced by other Governments and not to make draconian changes. It has never been suggested that a Conservative Government should be elected to pursue ideological objectives that will greatly damage the interests of the British people and, in so doing, divide the nation.

The issue that we are debating must be seen against the background of the measures that have been introduced over the past three years relating to capital transfer tax and capital gains tax. In the Budget major concessions are made yet again to the better off in society. At the same time, the Government refuse to deal with the problem of unemployment and the abatement issue. This serves to reinforce the divisions that exist between the two nations—those who are exceptionally well off and those who are exceptionally poor.

I implore the Minister of State to impress upon his right hon. and hon. Friends in the Treasury and on his officials who make recommendations to the Government that we can no longer put up with the present approach. People are suffering in a way that no one can in justice defend. The Government are under an obligation to redress the imbalance which has grown as a result of the monstrous decision that was taken about two years ago.

In November 1980 the 5 per cent. abatement issue was the subject of a great deal of argument. It was generally agreed that the abatement would be corrected when unemployment pay was taxed, which is to happen in July. It was understood that an unemployed married couple would receive a £1·75p increase when taxation took place. It now appears that may not happen.

I have told my constituents about the proposed increase on a number of occasions. I have explained that the correction would take place on the taxation of unemployment benefit. In any event, I have always considered that the unemployed should not be taxed. I have argued that we should tax the rich, not the poor. Every Bill that the Government have introduced and enacted has made the working class and the poor suffer. Since taking office in May 1979, they have not introduced a Bill with a view to taxing the rich.

The Government's approach on this issue is immoral. Issues of this sort transcend party policy. They go beyond politics and the law of the land. The great moral issues must be prominent in a free society.

Over the past two years Ministers have clearly said that the unemployed will have the 5 per cent. restored to them. I have said to my constituents "You will get the 5 per cent. when they tax you." Unless the Government change their mind, it seems that I shall have to return to my constituency and explain that the Government were not telling the truth.

That is an indictment against politicians. If I do not explain to my constituents that the Government were not telling the truth, they will accuse me of not telling the truth when, of course, I have been telling the truth throughout. I shall have to explain that an amendment, tabled by my right hon. and hon. Friends, designed to restore the 5 per cent. was resisted by the Government, notwithstanding that Conservative Back Benchers who participated in the debate agreed with the amendment.

I am working class and I know working-class people. Many Conservatives hardly ever meet such people. Working-class people are sincere and honest. They do not believe that the Government can do this to them. They do not believe that even Tories can be so dishonest. They take a man's word as his bond.

7 pm

We are talking about 3 million or 4 million people, not just a few members of Lloyd's, for instance. It is strange that the Government should turn their back on that number of people at this time. They do not know what will happen on 6 May.

A free press in a free society should keep the people informed. It is an indictment of the media that they have not informed the people about this measure and the Social Security (No. 2) Act. They have not done their duty. The Doncaster Evening Post is Conservative-controlled, but the people in my area were lucky enough to be informed by it of the measure. Other newspapers and the television have given it no publicity. It is difficult to keep the people informed in the circumstances.

We must help those unfortunate people. The Minister said that the measure will save £60 million. It will steal that money from the unemployed, and the unemployed can least afford it. They find it hard to manage. They do not go on Continental holidays or fly to other parts of the world. They are lucky to send their kiddies on an outing or to go on a day trip to Bridlington. Even this Government should help them. They should not attack the unemployed; they should provide for them. Britain has always provided for the needy. We have been proud of that. It is terrible for the Government to attack the poor.

I come from Yorkshire. I do not hesitate to say that what the Government are doing is not cricket. They are not playing the game with the right people. They do not deserve to get the measure through. We deserve to win the amendment and they deserve to lose. Goodness and right are on our side. I hope that Conservative Back Benchers will go into the Lobby with us. Let us look after the 4 million lads and lasses who cannot look after themselves because of the economic situation. I hope that as many Conservative Members as possible will find it in their hearts to support the amendment.

It is always a pleasure to follow my hon. Friend the Member for Don Valley (Mr. Welsh). He speaks from a depth of experience of the struggles of working people. His words have an authentic ring, which is often lacking in speeches from Conservative Members.

I believe that my hon. Friends' motives in penning the amendment are as pure as the driven snow. They wish to save the Government from themselves. They are in a terrible mess and we are striving to find a way out for them.

It is interesting to watch the impassive faces of Ministers as they are battered by their Back Benchers. They show not a flicker of receptiveness, emotion or humour as they reel beneath the blows. We are reluctant to intrude on the bitter family struggle. Nothing like that happens in the Labour Party. We conduct our business with brotherly love and compassion. We fall out rarely. It was interesting to observe such things. We may have learnt something.

The Government have increased unemployment to 3 million. If we count those who fail to register, we see that the number is higher. In the Financial Times and The Guardian today the Cambridge school predicts that if the present policies are continued unemployment may reach 4½ million or 5 million. More than 1 million people have been out of work for over 12 months. That is a horror story.

However, we know that the Conservatives are men of compassion. They tell us so frequently. We hear their crocodile tears splashing into their gins and tonics. They do no want to impose this horrible suffering on people, but they are doing it for their own good, just like the sadistic school master who has a glint of pleasure in his eye as he swishes his cane.

It was interesting to hear the still small, but audible, voice of Tory conscience. We were glad to hear 4. I do not know what impression it will have on the Government. I hope that many Conservatives will go into the Lobby with us, but I suspect that we shall be on the losing side when the votes are counted.

We want justice for the unemployed. My hon. Friend the Member for Workington (Mr. Campbell-Savours) said that few hon. Members have been unemployed. I had that dubious privilege. About 12 years ago I was unemployed for almost 12 months. I know the humiliation of going to the DHSS to claim a pittance of £5 a week and tramping the streets of Sunderland to look for work, because I could not even afford the bus fare. It would help if more hon. Members had a similar experience. I hope that many Tories will have the experience soon. If a general election were called, I suspect the 4 million unemployed would vote with their feet to a man to get rid of the Government who have caused the unemployment.

Much injustice has been perpetrated on the unemployed during the life of this Parliament. They can no longer claim earnings-related benefit, their benefits have been reduced and they are continually harassed by the DHSS fraud squad. Here we have another instance of how a promise given by Ministers has not been fulfilled. I do not wish to go into chapter and verse. That has been done already.

I was impressed by the speech of the hon. Member for Bath (Mr. Patten), who said that this measure represented double taxation on the most disadvantaged groups in our society. I hope that Ministers will take notice of that speech, because it is incumbent upon them to do so. Those of us who are privileged in this community—and Members of Parliament are extremely privileged people—should do what we can to ease the burden of unemployment among those who have to suffer it. The cost of redeeming this promise is a trivial amount. We are told that it would be about £60 million, which is less than one tenth of the money that the Government will gain by taxing unemployment benefit.

This £60 million is a small amount for the Government to dig in their heels over. I wonder what their reasoning is. I hope that we shall be given the rationale for maintaining this position. I look forward to the Minister's explanation of why the Government are so determined to resist the amendment. This determination is all the more puzzling when one examines the figures for the PSBR. They have been published recently and show that they are £2 billion less than was originally estimated. If I remember correctly, that was estimated only at the time of the Budget.

Why is it that with such scope for being generous the Government are digging in their heels on this issue? It makes nonsense of their claim to be compassionate about the unemployed. It would be possible to give some credence to the claim of compassion if all this were necessary. I reject the Government's economic strategy, but we must accept that the Conservative Party believes in it—believes that it is all necessary and, ultimately, is for the betterment of society and the reduction of unemployment.

The Labour Party rejects that policy, but, if the Conservative Party believes in it, it has a moral responsibility to deal compassionately with the unemployed. If it admits that because of its monetarist policies there has to be a temporary period when unemployment is high, then, in all conscience, it has a moral responsibility to provide proper income support for those unfortunates who find themselves unemployed as a result of the Government's policy, or for any reason.

My hon. Friend the Member for Workington was right when he said that whatever policies are pursued, by whichever Government, in the next five to seven year t, they will result in a long period of high unemployment. Even if the Labour Party were returned to office tomorrow and implemented with great vigour its radical strategy for reducing unemployment, and even if we were successful in bringing unemployment down to below 1 million within the lifetime of a Parliament, we are still talking about excessively high unemployment until about 1989 or 1990.

7.15 pm

What can we do about the unemployed in the interim period? We cannot just leave them abandoned or impose this suffering on them without giving them any relief. Do not Ministers believe that there is a moral responsibility to be fair and just to the unemployed? We can look at the problem by saying that the unemployed are doing us a service. If they were not unemployed, others in our society would have to be. Those others may well be hon. Members here today.

There is a moral responsibility to do something about unemployment in this interim period. There are many measures that are necessary and the amendment is only one of them. It is puzzling why the Government are digging in their heels so firmly on this small matter. The cost of implementing it would be small in relation to the money that the Government will get in taxation. I hope that there will be a detailed explanation of why they cannot agree to the amendment.

The long-term unemployed suffer most as the result of unemployment. I wonder how many people in the Chamber have any concept of how worrying and distressing it is not to know how one can pay the gas or electricity bill or the rent., or how to send the children to school properly clothed and with a proper breakfast inside them. Those are problems that people in our society wrestle with day after day. Many mothers are being driven to distraction because of these problems.

We can discuss these matters in a sophisticated way and invent a whole range of complicated and convoluted arguments on sophisticated points, but when it comes down to it there are people going through the most difficult period of suffering that they have ever experienced.

Here is an opportunity for the House to make life a little bit better for some of our people. I do not know why Conservative Members will not come into the Lobby to support the amendment and make life a little more tolerable for many of our people.

The clause to which the amendment relates is concerned with the postponement by three months of the taxation of unemployment benefit. That was a decision of the House some time ago. I congratulate the drafters of the amendment on their ingenuity in getting in order an amendment that would give an opportunity for a further debate about the 5 per cent. abatement of unemployment benefit, and a rerun of the debate of 18 March to which much reference has been made already.

A number of hon. Members on both sides of the House have referred to the timing of the debate. Some of my hon. Friends have suggested that a bad time has been chosen by the Opposition, and that it would have been better to wait. On the other hand, the hon. Member for Stockport, North (Mr. Bennett) thought that it was right to seek to achieve the amendment today and, if not today, to try again. However, the timing of the debate is not a matter for me. We have had a repetition of what has been heard before.

The hon. Member for Edinburgh, Central (Mr. Cook) at least referred to the substance of the clause when he spoke about the postponement and asked whether there would be sufficient time to introduce the taxation of unemployment benefit by July on the sensible presumption that the amendment would be defeated. I am advised that the staff will be ready to operate these new provisions by July.

The hon. Gentleman asked whether a mistake in putting the taxation information on to the unemployment benefit office computer could lead to delay in the payment of benefit to an unemployed person. I can assure him that that sort of delay will not occur.

The hon. Gentleman referred to the yield estimates—the figures associated with both the amendment and with the taxation of unemployment benefit. I can confirm to him that the yield from the taxation of unemployment and supplementary benefit in a full year will be £650 million and that the cost of restoring the 5 per cent. abatement in a full year would be £60 million.

Reference was made by the hon. Member for Edinburgh, Central and by my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) to the public sector borrowing requirement and the recent welcome news that in 1981–82 the latest figures are showing that it is £2 billion less than was estimated only some weeks ago. Right hon. and hon. Members who understand these matters will know that when we talk about the PSBR we are talking of the difference between two very substantial sums of well over £100 billion. At this stage of the succeeding financial year it is not possible to determine the results exactly. That being so, there is this difference between the two levels—there have been fewer payments out and more payments in than expected. The full explanation of the £2 billion has been given.

It is suggested that in some way this statistical exercise concerned with the figures for the past financial year could influence the decisions which are to be taken today about the taxation of unemployment benefit and the restoration of the abatement. However, they have no relation to the PSBR of last year. These decisions have been made in the context of public expenditure and revenue-raising this year.

I was asked by the hon. Member for Edinburgh, Central whether the Government were committed to making good the abatement of 5 per cent. when unemployment benefit came into taxation, and whether certain eventualities did not flow from it. He seemed to ignore whether the making of the commitment was central to the issue. I shall return to that, but first I want to deploy the argument as to whether the Government are committed to the proposal.

I felicitate the Minister on having accepted the argument about the unreliability of the PSBR which has been put forward by critics of the Government's strategy over the past three years. The statement that he has just made will be of great importance to us in future debates on economic strategy. But I return to one of the questions that I put to him earlier. The Minister has just confirmed that the expected yield from the taxation of unemployment benefit is £650 million. Will he explain how the expected yield this year is £650 million when last year the Committee on the 1981 Finance Bill was told that the expected yield was only £240 million?

I am unable to give the hon. Gentleman that information immediately, but my understanding is that, to the extent that the margins of error affect the PSBR, they are published in available texts and that anyone who follows these matters closely appreciates that these margins exist. If the hon. Gentleman thinks that I have said something new, he is singularly ill informed about the normal basis of the financial statistics provided by successive Governments.

The hon. Member for Stockport, North raised a number of matters about the effect on supplementary benefit levels. He suggested that taxing benefit might push a claimant below the supplementary benefit level and make him entitled to it. That is not so, because the method of taxing benefit is such that tax will not be deducted from the benefit as it is being paid. The benefit will continue to be paid gross. Taxation will not in any case take a person below the needs level of supplementary benefit.

At present, if someone gets a tax refund, that is taken into account in calculating supplementary benefit. Since no tax refunds will be paid until the end of the year, those amounts will not be taken into account, which should mean that more people will be entitled to supplementary benefit. Will the hon. Gentleman confirm that that is the position?

A comparison between refunds which might be made at present and those which might be made in future could have some influence. Perhaps I may be allowed to look into that aspect of the matter.

The hon. Member for Stockport, North also wanted to know whether a delay in producing a P45 form would cause any hold-up in the payment of benefit. I am advised that it will not.

My hon. Friend the Member for Chippenham (Mr. Needham) spoke of the 5 per cent. abatement applying to unemployment and supplementary benefit for the unemployed. I can assure him that the abatement does not apply to supplementary benefit. That remains available as a safety net in cases where hardship may otherwise be involved.

I was grateful to my hon. Friend the Member for Bath (Mr. Patten) for his gracious comments. I am sure that he was, as always, trying to be helpful. He referred, as did other hon. Members, to statements made by my right hon. Friend who is now the Secretary of State for Industry during the debates on the Social Security (No. 2) Bill. We heard many quotations from what was said in a very long debate, though most attention was concentrated on the remarks made by my right hon. Friend at about 1.25 in the morning of 30 April-1 May.

It distorts the sense of that debate to suggest that the words used by my right hon. Friend at that early hour of the morning changed what he had been saying throughout the rest of the debate. If my right hon. Friend had made a new and highly important statement, it is remarkable that members of the Committee, who voted only a few minutes later, did not realise that it had happened. The hon. Member for Stockport, North was present. He did not refer to it. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) is very lyrical about these matters. Why did not he refer to it? He is not the sort of hon. Member who is slow in coming forward if he thinks that he has won a victory.

I did not refer to it at the time for the very same reason that I did not refer to the unqualified commitment to restore the 5 per cent. on injury benefit given by the Minister for Social Security in Committee a few weeks ago on the Social Security and Housing Benefits Bill. I accepted it at face value, as other hon. Members did.

7.30 pm

"At face value" was in the context of all the other Minister's statements during the course of a long debate which made it perfectly clear that he was not entering into a specific commitment linking the ending of that rebate with the bringing in of the taxation of unemployment benefit. Those people who argue that case should look back over the long series of comments made by my right hon. Friend in that debate. The point was raised during the debate on the Social Security and Housing Benefits Report stage. None of my hon. Friends—whose strong feelings on these matters I appreciate—suggested that my right hon. Friend had sought to deceive the Committee. Nobody questioned his integrity. I hope that his integrity will not be questioned now. He has made it clear that he was not changing ground in the early hours of the morning. Therefore, the words that he had used consistently earlier in the day do not have the meaning which has been linked with them. Those are the words which stand.

May I try once again this evening to be helpful to my hon. Friend? For the time being, I am prepared to concede that "temporary" and "interim" mean "permanent". Will my hon. Friend turn to the nub of the question, which is whether it is right to double tax the severely disadvantaged group. That is the point mentioned by the Social Security Advisory Committee. That is the real point at issue.

There are many points at issue in the debate. Like my hon. Friend the Member for Bath, I have sat through the whole debate and listened to the many arguments that have been produced, as my hon. Friend acknowledged. He claimed that he and his colleagues had won the arguments on 18 March, but he went on to say that the arguments being made today were identical. I agree. However, on abatement, all I can do at this hour, with people looking at the clock, without repeating what was said last time, is to reiterate the point made by my hon. Friend the Minister for Social Security in winding up that debate. He said:

"My right hon. Friends on the Front Bench have promised to keep this matter under review. We have said that the abatement will not be a permanent reduction"
—that answers one of my hon. Friend's points
"It is equally clear that the abatement cannot be made good now, but it will be made good. My right hon. Friends have the matter under review. At the right time it will be made good."—[Official Report, 18 March 1982; Vol. 20, c. 536.]

On abatement, I can only be expected—by those who understand the way in which Government works—to reiterate the view of the Minister for Social Security at the Dispatch Box about a month ago.

My hon. Friend the Member for Woolwich, West (Mr. Bottomley) asked what would happen if the amendment were passed. He got it right. He said that if the amendment were passed it would mean that unemployment benefit could not be subject to taxation as from July this year. The principle of making unemployment benefit taxable has been debated and approved by the Committee. The amendment would delay that agreed taxation of unemployment benefit. If the amendment were passed, it could cost £650 million in the context of a full year. We should not seek to do that by a back door route. I hope that the Committee will reject the amendment.

We are in Committee. We are under no time constraints. The Minister has twisted the words of the amendment. If the amendment were carried unemployment benefit could be taxed from 5 July, provided that the 5 per cent. was put on from November. It is as simple as that.

It is perfectly clear, and it was made clear in the debate, that the effect of the amendment, since one would not be able to do that, would be that the taxation of unemployment benefit, which the Committee has approved of in the past, could not be achieved by the July date.

The point that I was making, as my hon. Friend appreciates, is that if we pass the amendment either now—which I doubt, because there were not enough listening to the debate—or on Report, the Government will be faced with losing £650 million in taxation or giving back the £60 million which the Committee understands should be put back on unemployment benefit.

It would be a great pity if what has been a constructive and positive debate over the last four hours were to end in a procedural wrangle on a technicality. If there is anything in the amendment that will crate technical problems for Treasury Bench Members, we offer them the honourable deal that they should accept in principle what we are trying to establish and we will happily not press our amendment to a Division. They can then bring back on Report whatever amendment is appropriate to secure the principle underlying the amendment. There is no adequate technical difficulty here to explain why the Treasury Bench is resisting the principle that is clearly supported by all hon. Members.

I was not suggesting that there was a technical difficulty. I made it clear that on the question of abatement I stood by the position that was enunciated from the Dispatch Box on 18 March by my hon. Friend the Minister for Social Security. I did not seek in any way to resile from that position. However, I also said what would be the immediate effect of the issue raised by my hon. Friend—no more than that.

That intervention was at least useful in establishing that there is not a technical difficulty to the amendment being accepted. It is a question of principle. It is not sufficient for the hon. Gentleman to say to the Committee that he rests on the reply given by the Minister for Social Security on 18 March. The Minister for Social Security did not explain why the Government are refusing to restore the 5 per cent. abatement. No explanation was provided by the Minister in that debate.

The Minister's reply was useful in one respect, in that he confirmed the figures. We now have it on record that last year the Treasury expected £240 million from the taxation of unemployment benefit. This year it expects to get £650 million from taxation. By any standard, those are generous margins of error. If the Treasury is so uncertain about the impact on its tax revenue of this measure, how can it be sure what the impact will be on the many poor households that will be called upon to pay the tax to provide that revenue? Many of them will be subject to a liability which appears to be very uncertain.

The essential point remains that the Government will receive £410 million more in tax than they expected last year. If they receive a bonus of £410 million above what they thought they would get when they brought the clause forward last year, the case for resisting giving only £60 million of that to the unemployed by the 5 per cent. is overwhelming. There are no possible grounds on which the Government can argue that they do not have the money. They will be left with £350 million more than they thought they would get in the first place.

The Minister suggested that we should not rely on any one quotation but should look at the whole, that we should add up all the quotations and find the average. If that is so, let me throw in another quotation. It is a quotation from a speech made, not late at night, but at a reasonable hour, within the Chamber. The right hon. Member for Daventry (Mr. Prentice) said
"we have a rough and ready substitute to last until 1982, when we hope to bring in proper taxation".
There is no room for equivocation. It is perfectly clear that in that right hon. Gentleman's mind—if not in the minds of his colleagues—the 5 per cent. abatement would be restored when tax was brought in in 1982.

Will the hon. Gentleman take it from me that I was in no sense saying that the 5 per cent. would be restored. That was not in my mind. Nor is it explicitly or implictly contained in anything that has been quoted.

I shall repeat those words:

"we have a rough and ready substitute to last until 1982, when we hope to bring in proper taxation."—[Official Report, 15 April 1980; Vol. 982, c. 1142.]
If that was not an indication that the right hon. Member for Daventry thought that the Government would restore the 5 per cent. abatement when taxation was introduced in 1982, he did not choose his words carefully enough to convey a lucid impression. Any objective and impartial audience would have assumed that he said that the 5 per cent. abatement would not last beyond 1982, when taxation would be introduced.

I accept criticism of my syntax, but I had no right at that time, and did not claim the right, to say what financial priorities would be announced by the Chancellor of the Exchequer two years later. The hon. Gentleman has no right to assume that I meant anything of the sort.

I entirely accept that the right hon. Gentleman could not commit a future Government, even if the Government in question are of the same colour and party as the right hon. Gentleman, and even if he is no longer a member of it. But the right hon. Gentleman must face the fact that the words that he chose—perhaps without sufficient care—conveyed the impression that the Government would restore the 5 per cent. when taxation was introduced. That impression is the vital political factor, and not what may have been in the right hon. Gentleman's mind when he chose those words.

As Conservative Back Benchers have pointed out, the Minister has failed to answer the critical question hanging over the debate. The 5 per cent. abatement was introduced on the basis that it was the rationale for the abatement. However, that is plainly not now the rationale for the abatement, because unemployment benefit will be taxed from July this year. Hon. Members will accept that the Minister offered no explanation of the new rationale for the 5 per cent. abatement. What is there to continue to justify the 5 per cent. abatement beyond July 1982?

Before the Minister replied we had had a harmonious and constructive debate. Until the hon. Gentleman spoke, not one of the 15 hon. Members who spoke had supported the Government's position. Every hon. Member criticised it. Conservative Members raised only one controversial point—whether this was the time to raise the issue. My hon. Friend the Member for Workington (Mr. Campbell-Savours) got into some difficulty when he suggested that some of those who had spoken had said on 18 March that this would be an appropriate time. I cannot remember whether the hon. Gentleman that I have in mind represents Woolwich. East or Woolwich, West. However, the more Left-wing of the Woolwich Members—I recall that it is the hon. Member for Woolwich, West—voted and spoke on that occasion. In addition, the hon. Member for Rutland and Stamford (Mr. Lewis) said:
"There is time to put the matter right in the Finance Bill."—[Official Report, 18 March 1982; Vol. 20, c. 521.]
In our innocence we attempted to do that, but we are now told that this is not the right time to put the matter right. We are told that we should have waited until Report.

We have been criticised by several Conservative Members, and therefore I wish to put it on record that we chose the clause for debate on the Floor of the House before events on the other side of the globe began, understandably, to preoccupy hon. Members. I do not suggest that our choice would have been different had our information on what would happen been more accurate and reliable than that of the official intelligence service and had we known that the Falkland Islands were about to be invaded, but we believe that the unemployed should have their 5 per cent. back. We have not discovered that conviction in the past month: we have consistently argued for it during the past two years. Nor do we think that the unemployed should be expected to wait until General Galtieri has conceded the issue of sovereignty before they get their 5 per cent.

7.45 pm

I understood what the hon. Member for Chippenham (Mr. Needham) was saying when he pointed out that events 8,000 miles away make it more difficult for him to vote for something that he believes is right. However, that is for him to decide. I do not say that glibly, because it is much more difficult to vote against one's Government when there is a real possibility of winning. I know how difficult it is, because my hon. Friends and I have done it. Indeed, I pay tribute to my hon. Friend the Member for Birmingham, Perry Ban (Mr. Rooker), because he voted against the Government in circumstances that remain spectacular. He took 10 cents off the pound, which is more than the hon. Member for Chippenham will do if he votes with us tonight. However, there are times when a choice must be made and it is not always given to us to choose that time.

I did not suggest what I might or might not do. I said that it was for Opposition Members to decide the best tactics to win. My position has been clear, as the hon. Gentleman knows. The question will be decided in the next few minutes and for all his gibes and amusement it will be seen at the end of the day that the hon. Gentleman has not helped the unemployed as he might have done if he had withdrawn the amendment earlier.

I have argued the case that I argued from the Dispatch Box during the consideration of the lash two Finance Bills. I have not invented it in the last two weeks to embarrass the Government. Like my hon. Friends, I feel strongly about it. If the Division does not reflect the balance of opinion expressed in the debate, and if, after the Division bells have rung, we are defeated by the silent majority who have not favoured us with their presence, we shall return to the matter on Report.

The Minister paid tribute to our ingenuity in drafting the amendment. I should not wish him to leave the Chamber thinking that the amendment has exhausted our ingenuity. We shall apply it yet again to the problem. However, if we left the matter until Report there would be some unsatisfactory consequences. For example, we might not reach Report until after 4 July when taxation liability is triggered for the unemployed. Indeed, we are most unlikely to reach Report until the uprating orders have been put before the House and debated, which would be the appropriate occasion to restore the 5 per cent. Nevertheless, if we are defeated tonight we shall seek to return to this matter on Report. I warn those Conservative Back Benchers who have spoken in the debate that our expectations are raised and that we shall look for great things when the matter is raised on Report.

We have had a useful and good debate. If we have to return to the issue on Report, I hope that some of those who propose to vote with the Government tonight will at least join us then and explain why they did so and why they believed that the 5 per cent. should not be restored. It is the view not only of the Opposition but of all those who have taken part in the debate—with the exception of the Minister—that the 5 per cent. should be restored. It should be restored because the unemployed need the money far more than those who pay the higher rate bands of capital transfer tax, who have received from the Bill far larger sums than is necessary to do simple justice to the unemployed. The 5 per cent. should be restored to the unemployed because the House was persuaded to vote for it on the basis that it was an interim measure in lieu of taxation.

We are now asked to accept that it should become an indefinite measure in addition to taxation. I do not believe that the Committee can, in honour, allow the Treasury Bench to juggle in this way with statements made in the Chamber. I hope that the Committee will refuse to allow it to do so.

Question put, That the amendment be made:—

The Committee divided: Ayes 207, Noes 255.

Division No. 131]

[7.49 pm


Adams,AllenBenn, Rt Hon Tony
Allaun, FrankBennett,Andrew(St'kp'tN)
Archer, Rt Hon PeterBoothroyd,MissBetty
Ashley, RtHonJackBottomley,RtHonA.(M'b'ro)
Ashton,JoeBottomley, Peter (W'wich W)
Atkinson,N (H'gey,)Bray, Dr Jeremy
Barnett, Guy (Greenwich)Brown, Hugh D. (Provan)

Brown, R. C. (N'castle W)Johnston,Russell(Inverness)
Brown, Ronald W. (H'ckn'yS)Jones, Rt Hon Alec (Rh'dda)
Brown, Ron (E'burgh, Leith)Jones, Barry (East Flint)
Buchan,NormanJones, Dan (Burnley)
Callaghan,Rt Hon J.Kaufman, Rt Hon Gerald
Callaghan, Jim (Midd't'n& P)Kerr,Russell
Campbell, IanKilroy-Silk,Robert
Cant, R. B.Lamond,James
Carter-Jones,LewisLewis,Ron (Carlisle)
Clark, Dr David (S Shields)Lofthouse,Geoffrey
Cocks, Rt Hon M. (B'stol S)Lyon,Alexander(York)
Cohen,StanleyLyons, Edward (Bradf'd' W)
Coleman,DonaldMabon, Rt Hon Dr J. Dickson
Concannon, Rt Hon J. D.McCartney,Hugh
Cook, Robin F.McDonald, Dr Oonagh
Craigen, J. M. (G'gow, M'hill)MacKenzie, Rt Hon Gregor
Cunningham,G.(Islingfon S)Magee,Bryan
Cunningham, DrJ. (W'h'n)Marks,Kenneth
Davies, Ifor (Gower)Marshall,DrEdmund (Goole)
Davis, Clinton (HackneyC)Marshall, Jim (LeicesterS)
Davis,Terry (B'ham, Stechf'd)


Deakins,EricMason, Rt Hon Roy
Dean, Joseph (Leeds West)Maxton,John
Dunnett,jackMitchell, R.C. (Soton Itchen)
Dunwoody, Hon Mrs G.Morris, Rt Hon A. (W'shawe)
Eadie,AlexMorris, Rt Hon C. (O'shaw)
Ellis,R. (NED'bysh're)Morrison, Hon C. (Devizes)
Evans, loan (Aberdare)Moyle,Rt Hon Roland
Fitch, AlanNeedham,Richard
Fletcher Ted (Darlington)Oakes, Rt Hon Gordon
Foster,DerekOrme, Rt Hon Stanley
Fraser, J. (Lamb'th, N'w'd)Park, George
Freeson, Rt Hon ReginaldParker,John
Garrett, John (NorwichS)Patten,Christopher(Bath)
George,BrucePowell, Rt Hon J.E. (S Down)
Gilbert, Rt Hon Dr JohnPrescott,John
Gilmour, Rt Hon Sir IanPrice, C. (Lewisham W)
Grant, John (IslingtonC)Rees, Rt Hon M (Leeds S)
Grimond,Rt Hon J.Richardson,Jo
Hamilton,James(Bothwell)Roberts,Allan (Bootle)
Hamilton, W. W. (C'tral Fife)Roberts, Ernest (HackneyN)
Harrison, Rt Hon WalterRoberts,Gwilym(Cannock)
Hart, Rt Hon Dame JudithRobertson,George
Haselhurst,AlanRobinson, G. (CoventryNW)
Hattersley, Rt Hon RoyRooker, J. W.
Heffer, Eric S.Roper,John
Hicks,RobertRoss, Ernest (Dundee West)
Hogg, N. (EDunb't'nshire)Rowlands,Ted
Hooley,FrankSheldon, Rt Hon R.
Horam,JohnShore, Rt Hon Peter
Hoyle,DouglasSilkin, Rt Hon J. (Deptford)
Hughes,Mark(Durham)Silkin, Rt Hon S. C. (Dulwich)
Jay, Rt Hon DouglasSkinner,Dennis
John,BrynmorSmith, Rt Hon J. (N Lanark)
Johnson, Walter (DerbyS)Snape, Peter

Soley,CliveWeetch, Ken
Spriggs,LeslieWhite, Frank R.
Stott,RogerWhite,J. (G'gowPollok)
Summerskill,HonDrShirleyWilley,Rt Hon Frederick
Taylor, Mrs Ann (Bolton W)Williams, Rt Hon A.(S'sea W)
Thomas,Dafydd (Merioneth)Wilson,William (C'try SE)
Thomas, Mike (Newcastle E)Winnick,David
Thomas,DrR. (Carmarthen)Woolmer,Kenneth
Thorne, Stan (PrestonSouth)Wright,Sheila
Varley, Rt Hon Eric G.Tellers for the Ayes:
Wainwright,R.(ColneV)Mr. Frank Haynes and Mr. Allen McKay.
Walker, Rt Hon H.(D'caster)


Adley,Robertdu Cann, Rt Hon Edward
Aitken,JonathanEden,Rt Hon Sir John
Alexander,RichardEdwards, Rt Hon N. (P'broke)
Alison,Rt Hon MichaelEggar, Tim
Amery, Rt Hon JulianElliott,SirWilliam
Ancram,MichaelEmery, Sir Peter
Arnold, TomEyre,Reginald
Aspinwall,JackFaith,Mrs Sheila
Atkins, Rt Hon H.(S'thorne,)Farr,John
Atkins,Robert(PrestonN)Fell,Sir Anthony
Baker,Kenneth(St.M'bone,)Fenner, Mrs Peggy
Baker, Nicholas (NDorset)Finsberg,Geoffrey
Bendall,VivianFookes, Miss Janet
Benyon,W. (Buckingham)Fowler, Rt Hon Norman
Bevan,DavidGilroyFraser, Peter (SouthAngus)
Biffen,Rt Hon JohnFry, Peter
Blaker, PeterGardner, Edward (S Fylde)
Bonsor,SirNicholasGlyn, Dr Alan
Brinton,TimGow, Ian
Brotherton,MichaelGriffiths, E.(B'ySt.Edm'ds)
Brown,Michael(Brigg&Sc'n,)Griffiths, Peter Portsm 'thN)
Browne,John(Winchester)Grist, Ian
Buchanan-Smith,Rt.Hon.A.Hamilton, Hon A.
Budgen,NickHampson,Dr Keith
Butler,HonAdamHavers, Rt Hon Sir Michael
Carlisle, John (Luton West)Hayhoe, Barney
Carlisle,Kenneth (Lincoln)Heddle,John
Carlisle, Rt Hon M. (R'c'n)Henderson,Barry
Channon,Rt.Hon.PaulHiggins, Rt Hon Terence L.
Clark, Hon A.(Plym'th,S'n)Hooson,Tom
Clark, Sir W.(Croydon S)Hordern,Peter
Clarke,Kenneth(Rushcliffe)Howe, Rt Hon Sir Geoffrey
Cockeram,EricHowell,Rt Hon D. (G'ldf'd)
Cope,JohnHowell,Ralph (NNorfolk)
Corrie,JohnHunt,john (Ravensbourne)
Dean, Paul (NorthSomerset)Jopling,RtHonMichael
Dickens,GeoffreyJoseph, Rt Hon Sir Keith

King, Rt Hon TomRenton,Tim
Kitson,Sir TimothyRhysWilliams,Sir Brandon
Lang, IanRifkind,Malcolm
Latham,MichaelRippon, Rt Hon Geoffrey
Lawrence,IvanRoberts, M. (Cardiff NW)
Lawson,Rt Hon NigelRoberts, Wyn (Conway)
Lloyd, Peter (Fareham)Scott,Nicholas
Loveridge,JohnShaw, Giles (Pudsey)
Lyell,NicholasShelton, William (Streatham)
Macfarlane,NeilShepherd,Colin (Hereford)
MacKay,John (Argyll)Silvester,Fred
Macmillan, Rt Hon M.Sims, Roger
McNair-Wiison, P. (NewF'st)Spicer, Jim (West Dorset)
McQuarrie,AlbertSpicer, Michael (SWorcs)
Maude, Rt Hon Sir AngusStevens,Martin
Mawby, RayStewart,A.(ERenfrewshire)
Mellor,DavidTaylor, Teddy (S'endE)
Mills,Iain(Meriden)Tebbit, Rt Hon Norman
Mills, Peter (WestDevon)Temple-Morris,Peter
Miscampbell,NormanThomas, Rt Hon Peter
Mitchell,David (Basingstoke)Thompson,Donald
Moate,RogerThorne, Neil (IlfordSouth)
Moore,JohnTownsend, Cyril D, (B'heath)
Morris, M. (N'hamptonS)Trotter,Neville
Morrison, Hon P. (Chester)Vaughan,DrGerard
Neubert,MichaelWalker, B. (Perth)
Newton,TonyWalker-Smith, RtHonSirD.
Nott, Rt Hon JohnWard, john
Oppenheim, Rt Hon Mrs S.Wells,Bowen
Page, Richard (SWHerts)Wells,John(Maidstone)
Parkinson, RtHonCecilWheeler,john
Parris,MatthewWhitelaw, RtHon William
Patten,John (Oxford)Wickenden,Keith
Pawsey, JamesWilkinson,John
Percival,Sir IanWilliams,D.(Montgomery)
Peyton, RtHonJohnWolfson,Mark
Pink, R.BonnerYoung,SirGeorge (Acton)
Pollock,AlexanderYounger, RtHonGeorge
Prentice, RtHonRegTellers for the Noes:
Price, SirDavid (Eastleigh)Mr. Robert Boscawen and Mr. David Hunt.
Proctor, K. Harvey
Raison, RtHonTimothy

Question accordingly negatived.

Amendment made: No.16, in page 19, line 32, after second "to", insert "any condition contained in".— [Mr. Hayhoe.]

Clause 29, as amended, ordered to stand part of the Bill.

Clause 117

Increase Of Petroleum Revenue Tax And Ending Of Supplementary Petroleum Duty

8 pm

I beg to move amendment No. 17, in page 84, line 37, leave out subsection (2).

It may be for the convenience of the Committee if the debate on amendment No. 17 takes in remarks that we would make on the clause stand part debate, so that there is one debate rather than two. It may also be for the convenience of the Committee if I explain that the Opposition do not intend to push amendment No. 17 to a vote. We see this as an opportunity for a debate on the matter.

The proposals that we are debating are the eighth set of major changes to the oil taxation regime that the Government have made in 30 months. The consistent feature about the eight sets of changes is that each change has provoked a chorus of disappointment and anger from the oil companies, dismay from the Government Benches and incomprehension about the Government's intentions and actions from those who wish to see an effective but fair system of taxation for North Sea oil. This set of changes is no different in that respect.

When the new proposals were announced, they were met with a chorus of complaint from the oil companies.

The Scotsman reported that
"North Sea oil company cash flow will be severely curtailed during the next two years as a result of the Budget changes in taxation".

The Daily Telegraph suggested that the tax changes would sacrifice oil self-sufficiency. The Financial Times, which may be a more impartial reporter than The Daily Telegraph or The Scotsman, stated:
"The industry is dismayed that the proposed changes will still leave a tax structure vulnerable to more revisions. Companies have told the Chancellor that repeated changes—seven in the past two years—have inhibited long-term investment decisions."
The Financial Times also stated:
"Offshore operators warned yesterday that some small North Sea oilfields might still be left underdeveloped following Budget changes in the oil taxation structure."
Therefore, from all quarters of the oil industry, there has been criticism of the proposals.

Given that criticism and the criticism that we make, too, it is necessary, before we examine the detail of the proposals, to contrast the performance of the Government against their promise. As I have explained, there have been eight major sets of changes in oil taxation in 30 months. There is the possibility of more in future. How different that is from the Government's promise.

Many of my hon. Friends will recall that throughout the period from 1974 to 1979 Conservative Members lost no time in criticising the Labour Government for what they regarded as penal and capricious measures of taxation imposed on the oil companies, although those allegedly penal and capricious measures were considerably less than they are today. We also recall the fine words of the right hon. Member for Bridgwater (Mr. King), now the Minister for Local Government and Environmental Services, who was the official spokesman on energy during the election. In a statement on energy policy on 10 April 1979, he said:
"We are still at the point where, by restoring confidence, the North Sea success story could be prolonged into the 1980s … Confidence has been shattered by frequent changes in the rules and by Labour's hostility to private enterprise."
I am glad to see that provoked a wry smile from the hon. Member for Enfield, North (Mr. Eggar). The Conservative spokesman further stated:
"We shall pursue a steady policy designed to secure the fullest advantage to the nation as a whole … We shall therefore review the Government's licensing and tax policies to achieve these benefits".
Those were the benefits for the nation. The right hon. Gentleman attacked the Labour Government for the changes that they announced in October 1978. The Government implemented almost all those changes shortly after they came to power, but in April 1979 the right hon. Gentleman suggested that those proposals
"were cobbled together in a hurry without consultation as a gimmick for the election from which they shrank in October. Any tax changes designed to increase revenue which actually prevent the development of promising small oilfields will be self-defeating."
The right hon. Gentleman went on to say that the oil industry
"needs a clear assurance that there will not be countless changes in the rules and that there will be full consultation. As a possible means of reducing the uncertainty we shall examine whether a more predictable formula could be incorporated in the tax system to take fuller account of the changes in the real price of oil and in interest rates without the need to introduce further legislation on each occasion."
That was a statement of hope after the experience of the previous Government.

Seven changes later, The Sunday Times, in a major review of oil taxation in November 1980, stated:
"In a handful of minutes last Monday Sir Geoffrey Howe replaced Tony Benn as the oil industry's No. 1 villain. The Chancellor made the seventh change in oil taxation in 18 months and in the process tore up a whole book of election promises. In order to balance his own books he took a cool billion from oil company coffers without even a thank you."

That is the promise of the Government measured alongside their performance. It was The Sunday Times which said that by November 1980 the Chancellor had become the "No. 1 villain" of the oil companies, replacing even my right hon. Friend the Member for Bristol, South-East (Mr. Benn). I dare say that it still sticks to that view, since the one thing that the Government have not done in the changes that they have introduced is to alter the total revenue that they will receive from the North Sea.

Last year, the supplementary petroleum duty was justified to the Committee and to the House as a temporary measure pending a major review of the taxation system. We supported the Government's intention to hold a major review, but we doubted whether they would complete it on time. Indeed, in Committee upstairs, we proposed that the SPD should be carried forward for a further accounting period to 31 December 1982 to give the Government further time to consult and to form a proper judgment about the future of oil taxation. Interestingly, it was our judgment about the time scale that held the day, because supplementary petroleum duty is to run until 31 December 1982.

During this time of major review the Government have received many representations from UKOOA, BRINDEXindex, the Institute for Fiscal Studies and many other bodies which are all concerned to see whether it is possible to establish a fairer and more effective system of oil taxation, even accepting, as we do, that there is an overriding need to ensure that the total take from the North Sea is not very different from what it is under the existing regime.

As a result of that review, the Government have settled on only one change of any substance. It is difficult to see why the Government, given their commitment to a major review, and given the time that they have spent on this issue and the many proposals which they have received, have not come up with something more comprehensive and lasting than the proposals that they have made.

I know that most of my hon. Friends are familiar with the changes that the Government are proposing, but I shall spell out what they are changing and how, in one important respect, it is very little different from the supplementary petroleum duty that the new scheme is proposed to replace. Supplementary petroleum duty, which was introduced last year, is charged as a tax on gross revenue, not on profit, and it is charged at 20 per cent., less an initial allowance for each taxable period. The objection to that tax was that it was a tax on turnover, that it was deducted in assessing profits but not in assessing petroleum revenue tax liabilities, and that it could be paid only if an overall loss were made on the field during the course of its operation, which in most cases was very unlikely.

The Committee will see from the Bill the SPD is being abolished and replaced by a new tax—advance petroleum revenue tax. However, it is important, particularly when talking about the cash flow of the oil companies, to recognise that the assessment for advance petroleum revenue tax is done in exactly the same way as the assessment for supplementary petroleum duty. The APRT in the initial period is supplementary petroleum duty, because the charge to advance petroleum revenue tax is assessed at 20 per cent. on gross revenue, less an oil allowance, in exactly the same way as SPD is assessed at the moment. Of course, there is an important conceptual change within the framework of the tax. APRT is offsettable against liabilities to petroleum revenue tax, whereas supplementary petroleum duty is offset only against profits.

Moreover, it will be possible for companies to offset their APRT payments against their total PRT liabilities during the course of a field's life. Where the APRT that is paid exceeds the total petroleum revenue liability, the oil company concerned can receive a rebate. Although the company would get a rebate, I understand that that would be many years later, and it would also be without any payment of interest. Therefore, the company still has the cash flow problem of paying out the cash, even though, in the event, its total petroleum tax liabilities are less than its total payment of APRT.

8.15 pm

That is the essence of what the Government have proposed. They have also, as a consequential measure, proposed that the rate of PRT which is charged, which now forms the base of the tax, should be increased from 70 per cent. to 75 per cent. The overall effect is that the marginal tax rate, taking account of all the taxes, decreases from a little over 90 per cent. to a little over 89½ per cent. The effects are marginal.

Several suggestions were put forward for replacing the existing system of taxation. Before I come to them, I wish to raise some important questions about the effect of APRT, and I shall be glad if the Minister will answer them.

How many fields does the Minister expect there will be where the total payment of APRT is likely to exceed their liability to petroleum revenue tax? According to Wood Mackenzie, in its commentary on the tax—I can find no specific reference to what is said but I am sure there must be one, otherwise it would not be said—the Chancellor, in his Budget speech,
"expressed the view that it was unlikely that any fields would be in this position".
In other words, where APRT payments exceeded their PRT liability.
"Much will depend on future oil prices, production rates and so forth. However, on the basis of our current calculations it would appear that Beatrice will at least pay considerably more APRT than the mainstream PRT liability."
Wood Mackenzie suggests that the Beatrice field, the one being developed by BNOC, may come within that category. Will the Minister give some indication of the current assessment by the Government of how many fields come within that category?

My next point also relates to the comments by Wood Mackenzie on the effect of the tax on a company's cash flow. The claims of oil companies and stockbrokers who advise them are not necessarily or by definition statements of the truth. None the less, they pose questions which need answers. The claim is that the new timings for payments of APRT will squeeze an extra £500 million out of oil companies over the period until the first quarter of 1984. I shall be glad to have the Minister's comments on that aspect.

My next point is perhaps even more important. It relates to the effect that APRT may have on the extraction policies of oil companies where they are dealing with fields approaching the end of their life. A gentleman called Martin Lovegrove—I understand that he was a senior executive with BNOC before becoming an independent oil consultant—wrote what seemed to me to be a considered piece in The Guardian on 24 March 1982. He suggested that the facility for companies to obtain a rebate on APRT, where their PRT liability was not exhausted, would act as an incentive to companies to shut up shop and to close a field before the end of its useful life. He said:
"The APRT system, however, will encourage companies to shut down platforms early. It may even be more economic for many to abandon fields before the current estimates of reserves are recovered, because when the field's life is ended not only do the companies avoid paying more APRT but they will get a 'nest-egg' of past payments returned to them by the Government—albeit not inflation proofed. This effect is nothing short of disastrous and if left unchanged will most surely mean that Britain will be a net importer of oil by the end of this decade."
That is a serious point about the, perhaps accidental, operation of APRT that would not have arisen under the supplementary petroleum duty because the companies did not stand to get back anything unless they made no profit. However, that situation is unlikely to arise. That serious point made by Martin Lovegrove requires an answer.

Having dealt with the proposed change to the oil taxation scheme, I come to whether it would have been possible to introduce a major reform in petroleum revenue tax as was suggested by some in the oil industry and by the Institute for Fiscal Studies. In addition, although I do not wish to rub in the point, during the election campaign the Conservative Party suggested that it would introduce a comprehensive and major change in the oil taxation system that would last and not need eight changes.

Many of the proposals received by the Government came straight from the oil companies. If the companies now find that their representations are falling on deafer ears than they expected, they have only themselves to blame. Their partisanship during the period of the Labour Government and the partisan manner in which they briefed the Conservative Opposition left them with few friends on the Labour Benches who are willing to take what they say at face value. Of course, they now find that the Government are far more avaricious in their desire to get their hands on the oil companies' profits than the Labour Government ever dreamt of. Therefore, to some extent the oil companies have only themselves to blame.

Is the hon. Gentleman saying that a Labour Government would have taxed the oil companies at a lower rate?

I doubt whether a Labour Government would have taxed them more. Had we sought to tax the oil companies as much as the Government have and had we made eight changes to the taxation system in 30 months, the Conservative Benches would have been packed with hon. Gentlemen well briefed by the oil companies.

It is ironic that, throughout the period of the Labour Government, Conservative Members and official Opposition spokesmen expressed great reservations about the level of oil taxation and the system. They committed themselves to introducing major and successful reforms. All they have done is to make a complicated system more complicated. They have simply added pieces to it, cobbled other pieces together on top of it and substantially increased the total take. They have justified that, as they did last year, by saying that they needed the money.

Having made those points about the partisanship of the oil companies, and although we take what they say with a pinch of salt and treat it with scepticism, we do not dismiss out of hand what they say. It is important that the Committee should not dismiss out of hand the considered report of the Institute for Fiscal Studies on the taxation of North Sea oil. That report was drawn up by a committee comprised of people with great experience in the oil companies and others who were expert and, perhaps, more detached.

I do not suggest, and nor does the institute, that its scheme is the last word in oil taxation. The institute produced a relatively slim report, and the details will have to be worked out, but it seemed to address itself to the problems in the present system, which is complicated and involves four different taxes. The Under-Secretary may say that the Government have reduced the number to three by changing SDP into APRT, but there are still four systems of computing the charge to tax, even if one of the charges is deductible against another.

My right hon. and learned Friends will remember from our discussions on last year's Finance Bill that the taxation system is fearsomely complicated and involves all sorts of problems about uplift, safeguard, separation and many other concepts that I thought that I could forget last year, and had to relearn for this debate.

The Institute for Fiscal Studies proposed a single system of taxation based on the profitability of fields. The tax rate would be brought in at varying levels as different rates of return on the fields were triggered. That seems, in principle, to be a system which deserves the greatest consideration.

I found it difficult to follow some of the institute's calculations, particularly the suggestion that the total take under its illustrative projection would be exactly the same as under the present system. I do not understand, though there may be an explanation, how £7·4 billion, which is the total take for 1983, under the present system is the same as £6·6 billion, which is the institute's proposed total take, excluding corporation tax. However, it seems that the proposed system could be used to produce more or less the same take as the present system produces.

As the Government have had so much time to consider alternatives and as they have received representations from the institute, we need a detailed explanation of why they chose not to go for a change in the system or for a system that would last, but have instead added to the present rather rickety structure, with the possibility that it will be changed in future.

The Opposition's interest is for the highest possible return to be achieved for the nation in the tax take from the North Sea, consistent with a fair return to the oil companies, the most productive use of North Sea resources and a sensible depletion policy.

We do not cavil about the Government's total revenue take, which is one reason why we will not divide the House on the amendment, but we question whether the Government's course of eight changes in 30 months is the best way forward, and there are many questions about the system that the Government need to answer.

8.30 pm

I listened to the hon. Member for Blackburn (Mr. Straw) with considerable interest as he tried to attack the Government on the one hand and yet tried to retain the purity of his Socialist soul on the other. It was an interesting example of how far the hon. Gentleman has progressed from those heady days when he had a purity of conscience as leader of the National Union of Students. I agree with the hon. Gentleman on one matter. Oil taxation is in a mess, basically because the original scheme, put forward and accepted by the then Government, was unfortunately badly thought out and designed in particular with the interests of the two major oil companies, BP and Esso, which advised the Government at the time on the structure to be adopted, in mind. I have no doubt that this is the origin of the problem.

I was also extremely attracted by the proposal put forward by the Institute for Fiscal Studies. There is a good argument for radical reform of the oil taxation system. However, the more one goes into the implications of any radical reform, the more obvious the difficulties become. On balance, I felt that the analysis by the Institute for Fiscal Studies would not carry the day and that it would not have been right for the Government to adopt it. The structure makes the oil companies into utilities. It makes them into companies that need to have a fixed rate of return. That is not a position that any sensible company, even a State oil company, should be ready to espouse. Oil companies are, after all, in the business of risk-taking. It is reasonable for them to expect a higher return if they take higher risks.

The other difficulty with the IFS proposal is that once one tries to overturn an established system of taxation like PRT one inevitably gets winners and losers among the oil companies. Even if the logic of the IFS proposal had been followed through as fairly and impartially as possible, some companies would have benefited considerably and some companies would have lost considerably. For that reason alone, a modification of the existing system was probably preferable. This means, however, that there will have to be considerable, continuing changes as there are changes in the position in the North Sea in the sizes of the fields and in technology. One of the industry's criticisms of this and the previous Government has been the frequency of oil taxation changes. That is a cost and a problem that the industry has to bear because of the origins of the tax structure set down in the original PRT proposal.

Circumstances in the North Sea are changing now. The Government's proposals are based on existing fields and make no allowance for the fields that we need to develop.

I could not agree more. I shall develop that point.

The hon. Member for Blackburn was unfair to the Government as, indeed, have been the oil companies. It was, after all, the oil companies themselves that put forward the argument against SPD and in favour of an advance PRT system. That was put forward by the United Kingdom Offshore Operators Association. The industry has been less than generous in accepting that the Government have followed the proposals that the tax subcommittee of UKOOA advanced.

The industry's major anxiety is that the Government's tax take has not fallen. A reduction in the overall Government tax take was an integral part of the industry's proposals. It argues, not unreasonably, that, just as the Government said that as oil prices increased so would the tax, when oil prices fall, and therefore companies are making less money, taxes should come down also.

It is obvious that any company and any individual would prefer to pay less rather than more tax. It must come as no surprise to the oil industry that the Government have not reduced their tax take. Those of us who talk to oil companies, including Opposition Members, gave as our considered view that, bearing in mind the state of the economy, there was no way that the Government would accept a system that involved a significant reduction in the tax take. That is the reality which the industry should have realised. I am rather surprised at the attitude that some have taken.

The Government are quite right to stress that the overwhelming criterion that they must apply is not the oil companies' but the national interest. The Government must make a judgment of what that national interest is. The Government should have considered several factors before making changes. Perhaps they have paid less attention to some than is appropriate. First is the lack of tax stability and certainty. On balance, we are landed with the present tax system, one of the unfortunate results of which is some uncertainty. I am afraid that the industry must accept that. We must welcome, as I notice the hon. Member for Blackburn did not, the Chancellor's statement that he hoped that this would be the last change and that we were going in for a period of stability.

Secondly, it must be the Governmet's intention—I recognise that this is more a matter for the Department of Energy than for the Treasury—to promote exploration for oil and to promote development of oil reserves once they have been identified and found. The Government say that there is no sign that their tax changes have had any effect on that because the level of exploration remains high as indicated by the interest in the seventh round.

The Department of Energy and the Treasury fail to recognise that it is extremely cheap, in oil company terms, to drill a well and to explore. It may cost £5 million or £10 million, which is big money to many companies, to drill a well. But compared with development costs in the North Sea which may be £500 million to £1,500 million, £5 million here or there on a well is not significant. Therefore, any Government who look to the level of exploration as an indicator of whether the industry has been put off by their policies is failing to take all the factors into account. Equally, no oil company will cease production on an existing field. That makes no economic sense. For an indicator of the effect of Government policy and other factors we must look to the level of development.

It is a sad fact that there has been remarkably little development recently. I understand that there will be no platform orders for the northern North Sea—that excludes the Morecambe Bay development—this year. It is the first year for many that there will be no major platform orders. That represents far more than a loss of profit by oil companies. It means a major loss of jobs in the United Kingdom—in the construction yards for the jackets and for the module builders. It is a considerable achievement by the Government that United Kingdom contractors win about 80 per cent. of all orders going to the North Sea. That is a lot of jobs. So it is not merely that oil companies are losing profit. It can be argued that Government oil taxation policy leads directly to a loss of jobs.

The Government also sometimes fail to appreciate that the PRT system was originally developed for very large fields producing anything up to 500,000 barrels a day and containing up to 1 billion barrels of reserves. We are now entering the second phase of development in the North Sea. There are at present 26 fields either producing or under development. The next 11 fields that have been defined as possible commercial developments are only a quarter of the size of those already in production. As the nature of the fields changes, the Government should adjust the oil taxation system to take account of that. Although the advance PRT was a significant improvement on the previous SPD—it is not just a tax on revenue, as the hon. Member for Blackburn rather mischievously suggested, as his smile now shows—it does not take account of the downgrading in the size of fields coming up for development now and in the future. Moreover, if we are honest, just as we argued that as oil prices rose, taxation must also rise, so the reverse argument should at least be taken into account.

My greatest criticism is not so much of the changes in the Bill as of the omissions from it. I had hoped that there would be specific proposals for three kinds of field. First, there are the highly marginal fields, which probably need a special taxation system of their own. Secondly, there are the so-called satellite fields, of which Claymore is an example. The North Claymore development would have required a unique platform system which would probably have been built by British Shipbuilders, but, because of the last taxation changes, it did not go ahead. It seems curious that an otherwise viable development which would have produced profits for the oil companies, extra taxation for the Government and jobs for the people producing the equipment did not proceed because of the nature of the taxation and the rules of PRT. The third area to which the Government should pay attention but, regrettably, so far have not done so is further investment to provide additional compressor stations or whatever is needed to increase recovery from existing fields.

All of those factors relate to small fields. We are not dealing with great glamour fields such as the Forties. Nevertheless, these smaller fields are important if we are to gain the maximum benefit for the country from the North Sea. As the territory matures and as additional secondary and even tertiary recovery techniques rare required, increasing attention must be paid to these factors.

The Government have some discretion to encourage developments of this kind. Two come to mind immediately. The Government can—although they never have—rebate some of the 12½ per cent. royalties normally due to them. I hope that the Minister will comment on that. The Government could give some encouragement to oil companies by saying that where there is a highly marginal field the Government will consider with an entirely open mind ceding some of the royalties that would otherwise be due to them.

8.45 pm

The other area that needs further investigation is field definition. Before the partners in the South-West Claymore field, which is another development of the Claymore field, decided that they were prepared to drill additional wells to discover what was in the field, they felt that in order to justify spending additional money they had to go to the Department of Energy and obtain a clear ruling as to whether the South-West Claymore field was separate from the main Claymore field. In that case, the Department of Energy was able to say that that was a geologically separate field and would be treated as such for PRT purposes. The Department of Energy has an element of discretion. I hope that the Minister will say that the Department of Energy will look carefully at applications for definitions of fields because the way in which a field is defined—whether it is a separate field or part of an original accumulation—can have a key effect on whether the field is to be developed.

The oil companies are not the most popular organisations to argue for. They do not have many friends on the Conservative side of the House or, obviously, on the Labour side. None the less, the North Sea and the service industries for the North Sea are the most dynamic part of our economy at the moment. They need more support than the present Government or previous Governments have given them. It would be a great tragedy if, through the need for money as dictated by the Treasury, we drove away the companies from those fields and destroyed the considerable technical and engineering expertise that has been developed in Britain. We should not be under any illusion. The oil industry is a world-wide industry. If British or American petroleum engineers feel that they have not a reasonable future and that a reasonable number of developments are not materialising in the North Sea for them to work on it will not need a decision by their companies to withdraw them from the North Sea and put them in part of their other world-wide operations. They will go of their own accord to develop their careers.

We have had considerable success in building up offshore technology in many areas. Of course, if there are no domestic orders available, companies will do their best to export, but traditionally any developing industry, particularly in high technology areas such as the North Sea, needs a sound home demand from which to build. Perhaps we are becoming a little too occupied with the immediate tax take. Perhaps we are not paying enough attention to the future and to the fact that if we allow a significant planned and phased development of our North Sea assets to continue the tax take in the long run and the tax recovery in future years will be much greater than the tax forgone in the immediate future.

I am not happy with what the Government propose. I hope they will keep the matter under close review and realise that the long-term future may dictate measures other than, perhaps, what short-term public sector borrowing requirement considerations may dictate and that we may hope for a sympathetic response from the Minister now and in Standing Committee.

The taxation system of Britain is now in such a muddle that every hon. Member is aware that even those with the simplest form of income are unable to discover what tax they should pay. It is high time that the system was overhauled.

It is particularly unfortunate that petroleum taxation, which is a fairly recent development, is constantly being changed and is already in a muddle almost equal to that of the general system. Consideration must be given to the weight of oil and petroleum taxation. There are still many applications for licences in the North Sea and a certain amount of exploration is taking place, but development has undoubtedly been slowed down.

There is a case for slowing down development. There are those who think that the oil is better kept at the bottom of the sea than constantly being exploited for temporary advantage. However, that is not the point taken by the Government. The Government assure us—or at least they were doing so until quite recently—that their taxation system is not preventing the development of the North Sea and that it is not part of Government strategy to damp down development.

The second drawback of the present taxation policy is uncertainty, because it is constantly changing. This is having an extremely serious effect not only on the oil companies, which to some extent can look after themselves, but on the whole of Scottish industry. The rig and platform builders and module builders now have no work. The problem does not end there, because it is filtering through to the whole of Scottish industry. Those who laid out large amounts of capital on the understanding that there would be steady development in the North Sea now find that they are without orders because of taxation changes.

I represent a constituency that is particularly dependent upon oil, as are other areas in the north of Scotland. In addition to the general damage that is being done to the Scottish economy by the uncertainty about taxation and the contraction of the oil companies, there are particularly serious results in the north of Scotland and in my constituency. For example, in Shetland and Orkney the local authority is liable to lose a large proportion of its income through the derating of the terminals at Sullom Voe and Flotta. There is no doubt that a few years ago the oil companies would have made good a considerable proportion of that loss. They showed every inclination to do so, and I must pay them a compliment, because they have been extremely co-operative in matters affecting the local economy. However, now that the Government have levied extra taxation upon them they are not in a position to make good the loss.

The Government are taking the extra taxation for themselves and depriving local authorities of revenue from the oil companies. The same is true of barrelage and the contributions that it makes to the charitable fund in Shetland and other causes. A large proportion of the economy of Orkney and Shetland has been geared to the steady development of oil. That is now problematical owing to the constant uncertainty about taxation as well as the high rate at which tax is levied.

If we are not careful, the companies will move their resources and skills to other places. I am informed that there is great interest in oil in the sea off China. Apparently many oil companies are investigating whether the terms offered by the Chinese Government will be easier for them than the terms offered by the British Government. There are other places in which the oil companies are beginning to feel that they might get a better deal than in the United Kingdom.

The Government must not be misled by the exploration that is taking place and the applications that will be made for licences when the next round takes place. Let them remember that development is not going ahead. Let them bear strongly in mind the effect upon the local economy and upon local authorities which, through no fault of their own, and no desire of their own, have become liable to great expenditure because of oil.

Shetland has been changed tremendously by oil, in many respects for the worse. It has had to lay out large capital sums. The oil companies are being squeezed by the Government and cannot make the contribution that was expected. Above all, the Government must not ignore the effect on the Scottish and English economies. I have in mind building and engineering and the expected benefits to industry from the development of oil.

There may be a good case to slow down development. There is a good case for conservation. But there is no case whatever for creating uncertainty throughout the oil and related industries, even as a means of pursuing conservation.

My hon. Friend the Member for Enfield, North (Mr. Eggar) put the case admirably. My purpose is to reinforce the warning that we gave in Committee last year. If the North Sea oil tax regime is not substantially altered, it will reduce the development rate of the fields.

I was glad to hear the hon. Member for Blackburn (Mr. Straw) singing a slightly different tune from last year. Special petroleum duty was introduced in 1981 because there was no time to work out a more integrated change to the tax structure. I do not particularly care for it. I do not approve of the principle of taxing companies on revenue. I much prefer the principle of taxing them on profits. It was acceptable for one year while the oil companies, through the UKOOA, worked out more acceptable alternatives.

The oil companies have cried wolf many times, and each time they have been found out. This year's Budget, with the increase from 70 to 75 per cent. PRT, and the introduction of advance PRT, will further hold back not exploration but development. I agree with the hon. Member for Blackburn that there is the danger that we could cease to be self-sufficient in oil in the tail end of the 1980s to the beginning of the 1990s and eventually become a net importer of oil. No new field has been developed since Hutton in 1980. Three days ago Shell turned down the opportunity to develop the Tern field. That confirms that exploration is going ahead but that development is coming to a stop.

I do not wish to labour the taxation point or to stray into clause 124. The new tax structure, especially with APRT and the Exchequer's natural desire to smooth tax payments, will not give an incentive to invest in satellite development. My hon. Friend the Member for Enfield, North made that point about the Claymore field. APRT will be a further restriction on the development of marginal fields. The restriction is a hangover from the Finance Act 1981.

APRT will hit hardest fields of low profitability which have low PRT liabilities. It is perhaps one of the most worrying parts of the Chancellor's approach. The UKOOA recognises that by proposing that temporary APRT could be offset against PRT or an allowance be made so that, as the field came to the end of its life and there are not the PRT liabilities, the advanced payments could be returned. At present APRT is becoming a forced loan to the Government, with no interest attached, for a period that could exceed 20 years. The effect on cash flow is obviously worrying and serious.

As a matter of principle I start to query the concept behind the tax. In short, I am sad that the new tax structure makes it difficult for North Sea oil operators to generate enough capital to finance the development of their new fields—developments that have to take place if we are to remain oil self-sufficient. I do not want to see this country held to ransom by oil producers from overseas.

9 pm

The speeches so far have been of high calibre. The hon. Member for Blackburn (Mr. Straw) asked some pertinent questions. The principal one that I should like answered tonight is that of waste. There may be a serious threat to existing fields, particularly earlier ones that might be reaching the end of their production profile. There will be a strong temptation, because of the financial structure, prematurely to shut them, leaving a great deal of oil that will never be recovered. It would be utter waste on an unforgivable scale if some of the existing fields were to suffer that way.

The Minister may not be able adequately to answer this point tonight, and I do not criticise him for that. However, he should take back to the Treasury the point that it is in serious danger, as all Treasuries are, of overtaxing the golden goose and ensuring that we do not get a full and proper return for the nation.

If we tax oil at any time, we must examine the other industries that we want to succeed. We should maximise the amount of money going to the Exchequer from profits made in the field. I am glad that the hon. Member for Blackburn conceded that the oil companies expect and ought to get a fair return on their capital. It is a question not just of justice, but of the companies going to other offshore fields in other parts of the world—a problem to which the right hon. Member for Orkney and Shetland (Mr. Grimond) referred. They could start to invest in other areas, leaving the North Sea relatively undeveloped.

I do not believe that all the best fields in the North Sea have been discovered. There may be no more large discoveries to be made, but collectively there may still be a large amount of oil to be taken out of the North Sea. That is a second warning that the Treasury must heed. The nature of the production profile, as it is called, of the North Sea province over the next 20 years is important. It would be a tragedy if Britain slipped from self-sufficiency to being a net importer of oil. It is no consolation that oil prices seem to have gone down for the present. That does not mean that we can afford to return to being a net importer of oil.

The hon. Member for Hertfordshire, South-West (Mr. Page) said that we have not had an annex B approved by the Government since August 1980. By coincidence the SPD was announced in November 1980. I am not deceived by all that the oil companies have said in the past. One does not have to be an ex-Minister of State, Department of Energy, to realise that sometimes the oil companies cry wolf. Therefore, they are not listened to when they are serious. However, they are now serious and there is a possibility that they will not go ahead with pending developments.

The Minister of State, Department of Energy has gone on record in The Oilman of 24 April 1982. He said that there were three annex Bs pending. An annex B is a submission to the Department of Energy for permission to go ahead and develop a field that has been appraised in every conceivable way by the operator company, the consortium and the Department of Energy. Everybody knows the three possibilities. It is by no means certain that they will go ahead.

However, the Minister solemnly said that he was confident
"that none of them is likely to be retracted because of the current taxation structure."
I hope that the Minister is right, but that is not my information. I hope that I am wrong and that they will go ahead.

The Minister of State said that
"the current depressed fabrication industry would significantly improve after the next 18 months as new orders came on stream."
But he added that it was dependent on these annex Bs being approved. That is absolutely true.

I have always wanted to quote from the Largs and Millport Weekly News, the paper that I was brought up on as a little boy. On the front page of the current issue of this splendid weekly newspaper there is a reference to Ayrshire Marine Constructors. From my flat in Largs, I can see the growing platform being built there at Hunsterston, but the men building this novel and remarkable platform, which is due to leave for emplacement later, have been given a 90-day notice. It means that unless another order is secured within 90 days, they will be unemployed. That, in turn, affects 800 families who live in Ayrshire, Lanarkshire and Renfrewshire and even some whose homes are in England. It would have an impact which could spread quite extensively. Incidentally, these are not the only people under 90-day notices. In the Financial Times of 21 April there is a list: Lewis Offshore, Ayrshire Marine, Charlton Leslie of Wallsend on Tyneside and William Press on Teesside. All of them either have or are about to issue 90-day notices on substantial numbers of workers. I declare an interest. I am a deputy chairman of RGC Offshore. We employ about 800 men. We are not in danger of issuing 90-day notices because at present we are building the very large Beryl B jacket. But if no further orders are secured by Christmas of 1983 or by the spring of 1984, we could be in the same position.

That brings me to the third point that I wish to make. We do not have to beware just of waste because of the failure fully to exploit fields. It is not just a matter of self-sufficiency for Great Britain. We also have to consider the immense loss of talent which, under successive Governments, we have created in the last 10 years from very little information right up through a superb learning curve so that we are now in the position of having one of the best offshore fabricating industries in the world.

The Offshore Supplies Office has done a great deal to help the industry to get 80 per cent. of the United Kingdom market, and its director general is right when he says that we ought to go out and seek more orders abroad. That was the purpose of building up the industry. It was not just to capture our own market in a protectionist way. The intention was to be able to service offshore oil fields abroad as well as in the North Sea. If we sacrifice these men at these establishments, we shall not be able to go out into the export market. Therefore, it behoves the Department of Energy to press Treasury Ministers to realise that the Government are going too far. The warning signs are clear.

I do not join in the cries of wolf made by the oil companies, but this time I believe that they are sincere. They are immensely shocked at the way in which UKOOA' s submission has, in effect, been thrown out. Never before have the companies come together through UKOOA to put a submission to the Government in a united form. In my time, during the consultations between August 1978 and the spring of 1979, I had the pleasure of being with the right hon. Member for Heywood and Royton (Mr. Barnett), then Chief Secretary, and the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), then Financial Secretary, and we had to interview each company. They did not want to be interviewed collectively or in groups. They wanted to be seen individually. It is all the more remarkable that the oil industry has come together in one submission to the Treasury and asked to be listened to.

I have no doubt that the reference made to the proposal of the Institute for Fiscal Studies is valid. I hope that the purpose of the debate is to persuade the Government—and probably their successors—to consider the revision of the system of taxation in the North Sea in order to achieve the four objectives that I have set out.

I recall the discussions when the proposals for a different form of taxation were put to the right hon. Gentleman. He did not respond on that occasion.

I wish that I had been in a sufficiently strong position to be able to respond and decide. It would have been much better if I had been listened to. Unfortunately, I was not in that supreme position. Perhaps time has not passed me by and I might yet have that opportunity, in which case I shall read this speech with immense pleasure so that I can carry out what I am advocating.

It is up to the Government—and I hope their successors—to try to review the system in order to be consistent with those four aims. I accept that, as a nation, we should expect to get a reasonable share of North Sea profits, but that is not the overriding objective of the British people. Another objective is to avoid wasting our oil and gas, either by fiscal nonsense or by inadequate procedures on the part of the Department of Energy. It is wrong that we should lose self-sufficiency at any time during this century. Only a genius of a Government could organise that. However, it is conceivable that, if the Treasury gets its way, we could see a dip in prodution before the end of the century and we would not have self-sufficieny in oil.

The offshore supplies industry has had a superb record of achievement in the past 10 years. Therefore, I plead with the Minister, apart from answering the various points that have been raised in the debate, to go back to the Treasury better informed and say that perhaps we are getting close to the point at which the law of diminished returns will apply and Britain's self-sufficiency will be prejudiced. An otherwise enterprising industry does not deserve to be penalised by heavy and awesome fiscal burdens.

I listened with great interest to the right hon. Member for Greenock and Port Glasgow (Dr. Mabon), as I did to other right hon. and hon. Members who have participated in the debate. I hope that Ministers will note the degree of anxiety that is being expressed by hon. Members. As has been put rather whimsically, there is a feeling that we are liable to kill the goose that lays the golden eggs. We should be careful how we balance the need to obtain some of the economic rent, which undoubtedly can accrue to companies in the North Sea, against the need to ensure security of supply and self-sufficiency for as far into the future as we possibly can.

As my hon. Friend the Member for Blackburn (Mr. Straw) said, there have been a remarkable number of changes in taxation. We are now into the eighth change in 30 months. We used to talk of seven changes in a shorter period of 18 months. In the development of an area as complicated as the North Sea, some stability in taxation is needed. No one can argue that we have had such stability.

9.15 pm

Given the discoveries that have been made, it may be justifiable to play about lightly with the tax regime and to expect the companies to suffer. However, the statistics alluded to by the hon. Member for Enfield, North (Mr. Eggar) show that the average size of the first 25 or 26 fields has been about 447 million barrels. The average size of the next 11 fields that may be up for development is only about 91 million barrels. There are 37 other "marginal" fields whose average size is only 62 million barrels. We are going for smaller and deeper fields and the cost of production per daily barrel is rising considerably.

In the early 1970s, when I first began to pay attention to the industry, we were talking about £1,000 per daily barrel for production costs. The range is now anything between £10,000 and £20,000 per daily barrel. The report shows that the Government's fiscal mechanism may lead to the destruction of the onshore industry that we have built up over a considerable period, particularly in Scotland and the north of England. As the right hon. Member for Greenock and Port Glasgow said, it is all very well for the director general of the Offshore Supplies Office to say that he is encouraged by the way in which companies try to find work overseas. The Government may tell us how much overseas work is going to Scottish and United Kingdom yards. In the next few weeks there will be a massive British stand at the offshore technology conference and exhibition in Houston, Texas. However, how much work do we win against overseas competitors in their own areas? For example, how much work do we get from Norway and how much offshore work do we get from the United States of America? I doubt whether we win much work there. We have some work in Brazil and we cannot forget Canada.

The right hon. Member for Orkney and Shetland (Mr. Grimond) mentioned the possible and probable development of China. Our expertise is related to what is happening in offshore China. How many orders for United Kingdom yards are we likely to get from China? I recognise that it is difficult to maintain orders without a cyclical effect. However, the Government's policy is doing nothing to damp down the cyclical effect. Indeed, the Government's policies are designed to increase the cyclical effects of depression and slump and of boom. Unfortunately, we seem to be moving into a slump.

In its quarterly bulletin, the Bank of England had an excellent article about the longer term economic effects of North Sea oil and gas. Page 63 states:
"Clearly, then, the benefits of the North Sea accrue in great measure to the Government. In 1980, tax revenues from this source amounted to more than 4% of total receipts from taxes, and by 1985 this may more than double. But even after this taxation, North Sea cash flow is not a trivial proportion of UK industrial and commercial company gross after-tax profits, and it is expected to increase sharply in the next few years. Pre-tax, North Sea licences earned about one third of all gross trading profits, net of stock appreciation, in the UK in 1980."
Perhaps the Minister can give us the projection for 1981, because these are considerable flows accruing to Britain as a whole. We wish to ensure that those flows are kept up.

If we consider an important item of depletion policy we find that, after discussing some technical aspects and other incidental developments, the article states:
"Severe though these technical difficulties are, they might prove less important than a failure to assess properly the economic consequences of a given depletion policy. One of these relates to the security of supply: it is likely to be of considerable economic and political value to the UK to be in a position to save itself, and its main economic partners, from the worst disruptive consequences of any future interruption to world oil supplies."
That is above and beyond arguments about tax revenue. We must devise a policy to ensure that we keep the security of supply as far into the future as possible.

References have been made to the UKOOA submission to the Government, and I wish to ask some direct questions about it. I should declare my interest in offshore oil in that I advise a drilling company and a diving company. I am also being sponsored in the London marathon by some oil companies, which will donate 10 barrels of oil if I complete the course. Their view of the spot market price after 9 May varies. One company puts it at about £200, another at £170 and another at £150, so I am a little worried about the spot market.

It will be donated in cash to a well-known charity.

The UKOOA view of advance petroleum revenue tax is that there should be a sliding scale of tax. Will that argument be accepted or will we have 20 per cent. until kingdom come? As the hon. Member for Enfield, North (Mr. Eggar) knows, UKOOA argued for greater consideration to be given to the definition of satellite fields and to a consideration of how one gives incentives to develop deeper fields. I know that there is great difficulty in obtaining a balance between Government revenues and incentives to explore, develop and produce to the technical optimum.

The hon. Member for Enfield, North alluded to different forms of recovery. There is no incentive in the Government's proposals to give assistance to what we loosely call tertiary recovery. There has been some experimentation in the Forties field in different forms of tertiary recovery. Fortunately, the rate of recovery has been running at over 40 per cent. However, we should give incentives to ensure that the maximum technically possible amount of oil is taken, because it will be difficult to return to those fields once the primary and secondary recoveries have been carried out. That should be related to new developments in platform construction and design. The Government are lacking in that incentive and should give greater consideration to ensuring that the maximum amount of oil is extracted from the North Sea and that we maintain self-sufficiency for the longest possible time.

I shall allude to one or two matters directly affecting my constituency in clauses that are related to clause 117. During the Budget debate in a discussion on ethane I asked the Chancellor of the Exchequer if the provisions in clause 119 might be broadened to include propane and butane, which are extremely important. I wish to ask about the definition of ethane in that clause. I am sure that my hon. Friend the Member for Clackmannan and East Stirling-shire (Mr. O'Neill), with his interest, will want to cover this point, too.

The definition of ethane is extremely slim. Clause 119(6)(a) states:
"ethane means oil consisting of ethane to a level of purity consistent with normal commercial standards."
That is an extremely slim definition, particularly as in the Oil and Gas (Enterprise) Bill we had a comprehensive definition of gas inspired by the hon. Member for Bedford (Mr. Skeet). Those are important considerations.

The right hon. Member for Orkney and Shetland (Mr. Grimond) has talked about the concern of Scottish local authorities about the derating of certain industrial aspects of petrochemical development. I do not expect the Minister to reply to that, although the right hon. Gentleman might expect it. That matter also affects my constituency.

Over a considerable number of years we have built tip an onshore industry related to the harshest and most difficult areas of offshore oil development. That expertise ought to be used internationally. The international credibility of our onshore and offshore industries will depend on the prudent use to which we put our scarce oil and gas resources. We know now that exploration is declining and that development is declining. The Government, by their taxation policy, cannot absolve themselves from their responsibility in relation to that decline.

Until my hon. Friend the Member for Dunfermline (Mr. Douglas) spoke, the emphasis in the debate had been on the offshore implications of taxation and the jitteriness that the oil companies are now experiencing. Those of us who have oil-related interests in our constituencies tend on occasions to look a little askance at the oil companies when they seem to be crying wolf. However, there is a consensus in the Committee that the plight of the oil companies is such that each of us has in his own way to look at ways of seeking to help them in this difficult time. The fact that there have been eight changes of regime in a short period has meant that a whole range of activities must be looked at with a view to saving money and to reducing the potential for loss.

British Petroleum is of considerable interest to my constituents. I am talking about Grangemouth, which abuts my constituency. My hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing), were it not for family illness, would probably have made the representations that I am making this evening.

My hon. Friend the Member for Dunfermline referred to clause 119. Difficulties have arisen because we were inclined to believe that the assumption behind the clauses was that there would be a gas-gathering pipeline and that there would be ease of access to supplies from Brent and Magnus, which at present do not exist. There are implications for the pipelines on the mainland. Those of us who have knowledge of the geography of Scotland will appreciate that there is a missing link between Moss Morran and Grangemouth.

9.30 pm

Part of the problem is that about two-thirds of the ethane that will eventually arrive at Grangemouth will be subject to a different tax regime from that enjoyed by the crackers at Moss Morran. Thus, in the context of the difficulties in which the oil companies find themselves as a result of the constant changes and jitteriness of the industry and the recession, I make a plea for special consideration to be given to the old established petrochemical complexes which, ironically, could suffer as a result of the discovery of North Sea oil.

We recognise that in the past these complexes have been the first to benefit. Before Moss Morran comes into operation, there will probably be a period of about 12 months when the Grangemouth cracker facilities will be available for use and will provide the kind of revenue which is obviously the desire of the Government in this part of the Bill.

I should like the Minister to re-examine the definition of ethane, because we feel that, in the context of the difficulties in which the oil industry finds itself now, and in the light of the many graphic descriptions we have had this evening of the problems of the supply industries, those who are downstream are experiencing equal difficulties. Certainly the narrowness of the definition in clause 119(5) will create difficulties and could jeopardise the efficiency of the Grangemouth operation.

Scottish Members and those who wish to see the old established friends of the oil industry given a chance would like to think that the Government, in reconsidering the context of this legislation, will at the same time reconsider the effects of clause 119.

It would be wrong for us to cry wolf at this time, because this type of approach by the oil companies is no longer relevant. They are in serious difficulties. There is already a facility at Grangemouth. It was built in the late 1960s. It would now cost £250 million to replace it, and to adapt it to meet the challenge which would come from the supply of ethane at realistic prices would cost about £25 million. In the context of the oil industry such sums are not large, although they seem so to mere mortals such as ourselves. Nevertheless, these sums could be expended, the facilities could be made available and the production realised within a relatively short period. Therefore, I ask the Minister to re-examine the taxation of impure ethane, because it is an area in which one group could benefit quickly. Moreover, the revenue from it could be increased, because the financial position of this enterprise could be turned round in a very short time.

I am conscious that I could be accused of special pleading, and I do not deny that, but it is not special pleading that would disadvantage anyone else in the oil industry in the United Kingdom. The main consumer of the products of the chemical works to which I am referring is a wholly owned subsidiary of British Petroleum, and I understand that it would be possible for that wholly owned subsidiary to make considerable use of those products were the scheme to go ahead.

The Government have had criticism of varying degrees of severity from both sides of the Committee. None of us wants to throw up the chance of ensuring a reasonable tax take to the Treasury, but we feel that there are areas where account should be taken of mitigating circumstances. The figure of £5 million to £10 million in tax relief, if Grangemouth could be treated in the same way as Moss Morran, would be more than justified by the opportunities for the BP chemicals exercise in Grangemouth. It would be able to make considerable profits and to contribute in other ways to the wellbeing of the community and to the provision of additional revenues to the Treasury.

I add my voice to those of hon. Members on each side of the Committee who have said that the present problems of the North Sea oil and gas industries are caused by rising taxes and falling prices. As a country, we can do very little about the second of those factors—falling prices—but as a country—and this is the nub of the debate tonight—we can do a lot about the rising taxes being proposed by the Government.

The Government, by their taxation policies, are continuing to discourage new developments as well as sacrificing the extension of oil self-sufficiency for the United Kingdom. From the investment point of view, the Government must think again and provide incentives to end the hold-up of new oil developments. The effect of the very high taxation brought in by the Government is to create an enormous amount of uncertainty in the planning of the oil companies. Indeed, it is strange that in speaking to the chairmen and managers of various international oil companies and in listening to their criticism of present Tory Government policy one hears over and over again the phrase "Bring back Tony Benn—all is forgiven."

It seems strange that the international oil companies, the multinationals, are now looking back with a certain nostalgia to the period when my right hon. Friend the Member for Bristol, South-East (Mr. Benn) was the Secretary of State for Energy and when my right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon) was the Minister of State at the Department of Energy. That shows how the confidence of the multinational oil companies, which supported the election of the Tory Government, has been shattered by the policies carried out by the Government during the last three years.

With the oil companies holding back on billions of pounds worth of North Sea development—not to say preparing to take up the battle of taxation—I believe that we are heading for a period of prolonged nervous indecision. New oilfields need to be brought on stream in the mid-1980s, because fields that have been producing since the mid-1970s will by that time start to go into decline.

A long period of uncertainty is not needed at this time. There has to be an assurance that the Government will not chop and change taxation policies every couple of years or so. The oil companies need, and are seeking, a much longer period of stability, and the Government must give it to them. Present North Sea tax changes are not in the best long-term interest of this country and of the people who work in the oil industry. In fact, last year's cancellation by the Government of the huge North Sea gas-gathering pipeline now places question marks over some of the more isolated marginal oilfields. This has created uncertainty among the companies that service the oilfields.

I wish to take up the point raised by my right hon. Friend the Member for Greenock and Port Glasgow, who dealt with the Government's changes in the oil taxation policy for the onshore industry. He quoted from the Largs and Millport Weeklyy, News. He said that he did so because he has a house in Largs. However, perhaps the reason why he quoted from that paper is that he is having difficulty in finding a seat in the Greenock or Port Glasgow area. I say that as a personal friend. If the boundary changes proposed by the Parliamentary Boundary Commission for Scotland are accepted there will be a new seat, Cunningham, North, in the centre of which will be Largs. Given my right hon. Friend's association with Largs, and being an avid reader of the Largs and Millport Weekly News, he might have the opportunity to become a prospective candidate for the new seat, but he might have to beat my son-in-law to get it.

I read in my own local newspaper, the Ardrossan and Saltcoats Herald, that there will be 900 redundancies at Ayrshire Marine Constructors at Hunterston in Ayrshire. Approximately 1,100 people work there and 90 days' notice of redundancy has been given to 900 workers. That might not be a serious problem in other areas, but, as my right hon. Friend the Member for Greenock and Port Glasgow knows, it is a serious problem in North Ayrshire where the unemployment rate is 25 per cent. Every third man is unemployed, yet one of the largest employers in the area is making 900 men redundant.

The majority of those men live in my constituency or in the neighbouring constituency of Bute and North Ayrshire. If they register at the employment exchange the ratio will be one in two men unemployed. Hon. Members on both sides of the Committee who have never experienced such high unemployment cannot realise how it can kill an area and any opportunity of development in it. Young people leaving secondary school with all their aspirations and qualifications have no opportunity or hope of getting a job. That is why I hope that the Government will change the taxation policy.

I agree with hon. Members who have spoken about the tradition among hon. Members who believe that the multinational oil companies cry wolf. The companies can shift profits and losses from one part of the world to another and the only people to benefit are the shareholders. But we have reached the stage where the Government must listen to the oil companies and to hon. Members on both sides of the House and reconsider their oil taxation policy. Perhaps we should go back to some of the policies operated by my right hon. Friend the Member for Bristol, South-East and my right hon. Friend the Member for Greenock and Port Glasgow. We have to reconsider those policies to try to get things moving again.

About 7,000 people work in the five main oil platform construction yards in Scotland, which are all at various stages of rundown. The first crisis will be at Hunterston. We must get more orders, and the only way to do that is to give oil companies the facilities and money to expand production and to search for new fields to bring in more oil and more work for our people.

9.45 pm

There are rumours throughout Ayrshire that large oil and/or gas finds have been made in the Firth of Clyde off the Isle of Arran. Every oil company denies that those finds have been made and are ready for exploitation, but we have heard in my area rumours of oil companies taking options on hotels and derelict areas of land. One area in a former local shipyard is being sought by the local authority for industrial development, but it is rumoured that the harbour company is holding on to the land for when the oil companies start developing the oil and/or gas fields off the Isle of Arran.

If those rumours are correct, we must get quick development to bring work to our people and the only way to do that is for the Government to change their taxation policy and to give oil companies money to develop fields in the Firth of Clyde.

In Norway, if an oil company undertakes exploration, it must publish the evidence and tell the Government and its competitors whether the searches have been successful. If we are to give our oil companies more money by reducing taxation, we must also ensure that we follow the Norwegian example and make companies publish details of their explorations.

I want to know whether BP has discovered oil off the Isle of Arran. Is it holding up development? If the company has discovered oil, it is the Government's duty to ensure that is has the money to develop the fields as quickly as possible.

I hope that the Government will listen to the hon. Members on both sides who have called for a change in taxation policy and that they will play fair by the oil companies, but will impose restrictions to ensure that work is given to my constituents who have been given 90 days' notice of redundancy. A new order is needed now.

This has been a wide ranging and valuable debate of high calibre. I hope that I can live up to the standard that has been set. I should like, first, to speak about the Opposition's amendment. They did not say much about it. I do not particularly mind that. I should perhaps say something about it, however, before dealing more generally with the difficult and complex problem of oil taxation together with some of the wider issues raised by hon. Members on both sides of the Committee.

I listened carefully to the hon. Member for Blackburn (Mr. Straw). I think that I am now clear about the purpose of the amendment. It was to have the valuable debate that has taken place. In legal terms, however, the amendment would have had the effect of leaving SPD to terminate at the end of June 1982 as provided by last year's Finance Act but without any replacement before 1 January 1983. This would have cost the Exchequer £460 million in lost revenue in 1982–83 or nearly three times the amount that the oil industry's proposals would have cost.

It was not a proposal that, at first glance, I would have expected to appeal to the Opposition. If, however, their intention is to retain SPD and raise the PRT to 75 per cent. as well, the effect would have been to endanger substantially future development. The revenue left in the hands of the companies, after tax at the margin, would have fallen by one-eighth and would have been substantially higher than the tax regime that existed in the days when the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) was at the Department of Energy.

The hon. Member for Blackburn made a number of complaints about the changes on taxation that have taken place since the Government came to power. At the beginning of my career on this Bench, I would not want to go to the scaffold defending the fact that there have been a number of changes or denying it. I think, however, that the hon. Gentleman did slightly over-egg the pudding. According to my reckoning, there have been five sets of changes under the government—the Finance Act 1979, the Petroleum Revenue Tax Act 1980, the Finance Act, 1980, the Finance Act 1981 and this year's Bill. The first followed the previous Government's proposals. The last is to effect, by and large, the wishes of the industry.

The hon. Gentleman did not give sufficient credit to the substantial changes that have taken place in the environment since 1979. There has been the real increase in the sterling oil price of 30 per cent. even after the latest changes. The extension of the time limit of SPD was not to give more time for thought but to give the pattern of tax take that was considered appropriate by the Government. The Committee will be aware that the background against which decisions on oil tax are taken is always volatile but that the context in which our recent decisions were made was more turbulent than usual. This has served to emphasise the need to have for the North Sea a tax structure that is robust against rising and falling prices.

After the Budget last year, which introduced supplementary petroleum duty, the oil industry was critical of the new structure. My right hon. and learned Friend the Chancellor of the Exchequer therefore invited the oil industry to submit alternative proposals on North Sea taxation before deciding on the form of more permanent arrangements. The response to the invitation from industry representatives and others has been interesting and helpful. We have studied the representations carefully before deciding which elements of the proposals could be recommended to the House in this year's Finance Bill and those which we could not accept. There were two main issues to be considered—first, the level of Government take and, secondly, the structure and fiscal regime in the North Sea.

In considering the appropriate level of Government take, we must strike a delicate balance between the needs of the companies for an adequate return on their investment and the need of the nation to secure the full benefit from a national resource. The balance is not easily achieved and we have to look very carefully at the level of profits that companies may expect to make in the North Sea to ensure that the returns are fair and attractive. We looked both at the estimated level of returns on existing fields and at probable future developments.

We did not examine just one indicator of profitability or one future economic scenario. We looked at the estimates across a wide range of possible outcomes to judge the effect of changes in oil prices, costs and production on the profitability of the fields. The detailed analysis included falls in oil prices as steep as and steeper than those of recent weeks.

The results show that even on pessimistic assumptions profitability would have remained sufficient to make exploration and development reasonably attractive.

The right hon. Member for Greenock and Port Glasgow referred to the low return on capital. The companies still make handsome returns compared with the rest of British industry. Three-fifths of them achieve returns of between 10 per cent. and 20 per cent. on capital employed, and many make a good deal more than that.

Several operators are actively discussing development applications with the Department of Energy. It would be rash to speculate on the number that will materialise, but on the figures several remain very attractive.

We therefore concluded that a reduction in take of the size proposed by UKOOA of about £160 million this year and £500 million in each of the next two years could not be justified, but that some marginal reduction in the tax burden starting next year would be reasonable.

The hon. Member for Blackburn asked about the effect on cash flow. I cannot confirm the figure of £500 million that he gave. We estimate that it is more likely to be about £110 million in 1983–84. Looked at another way, we estimate that the saving in interest costs to the PSBR from the advance take would be about £10 million in 1982–83 or £40 million in 1983–84. I think that that gives a fair indication of the level.

The Minister may not be able to answer this immediately, but if the Wood Mackenzie figure is roughly correct and if we expect, say, a 10 per cent. interest rate in 1983–84, would not £40 million represent interest on £400 million which the Government would otherwise have to borrow?

I think that it would be rather higher than that. If I borrowed £500 million from the hon. Gentleman for a year and paid interest of £40 million, I should not do too badly. As I have said, I think that the figure would be rather less than £500 million, but I will check to make sure that we are right.

Turning to the structure, the main advantage of SPD was that it enabled the Government to share in the revenue on the large, profitable fields from the start of field life. The smaller fields were protected by the oil allowances up to 500,000 tonnes per year. The smaller the field, the greater was the relative importance and value of the oil allowance.

On the other hand, we regarded as matters of some concern the industry's strong opposition to a separate tax based on gross revenues rather than gross profits and the tendency of SPD to slow the rate of return on incremental projects such as satellite fields, coupled with its general insensitivity to costs. The industry urged the abolition of SPD and favoured a system of advance PRT payments to meet the Government's requirement to secure some yield from the fields in the early years of production.

My hon. Friend the Member for Enfield, North (Mr. Eggar) asked about highly marginal fields. Here the Government are prepared to consider royalty refunds and my right hon. Friend the Secretary of State for Energy will be happy to discuss with any company the setting up of firm proposals.

My hon. Friend referred also to the definition of fields. Fields are defined according to geographical considerations. UKOOA discussed some alternatives with us before the Budget but no alternative scheme was considered to be possible.

We were unable to accede to the industry's proposal that the advance payments should be on a temporary basis only, to be phased out over a period of years, because of the cost and the loss of future flexibility. But we did feel that a move in the general direction advocated by the industry was both possible and desirable. This underlines the decison to introduce a system of advance payments of PRT on a permanent basis.

However, in order to achieve from the North Sea the overall yield that was felt to be appropriate it was decided to increase the rate of PRT from 70 to 75 per cent. at the same time. The system of advance payments of PRT—APRT—will achieve one of the Government's main objectives—that of advancing some of the take from the larger profitable fields into the period immediately after production starts. The smaller fields will continue to be protected by the oil allowance. I agree with the right hon. Member for Greenock and Port Glasgow that the profile of future developments will indicate that there will be a great many smaller fields rather than the large ones of the past.

In most cases APRT will be completely set off against ordinary PRT liabilities within four years. It will be relatively rare for APRT to exceed PRT liability over a field's life and for the excess APRT to be stranded without being set off. But if this should occur, the excess APRT would be repaid at the end of the field's life. I cannot make a detailed comment on any one field, but not more than two or three fields would be affected.

The right hon. Member for Greenock and Port Glasgow referred also to the premature close-down of fields. There is no reason to expect that APRT will lead to premature close-down. Companies would have to face abandonment costs, and to close down early would advance those costs as well as their prospective repayment of APRT. We reckon that the repayments of APRT will be a rare occurrence. In addition, the cash flow after tax in those years will be substantial. The APRT allowance will mean that the fields stop paying APRT well before the closedown becomes worth while.

The other changes will smooth the collection of PRT so that the bulk of it is received in monthly instalments.

Is there any way in which a company that is going to close down, contrary to the national interest, can consult the Treasury? Is there any mechanism, apart from royalty oil, by which the Treasury might be able to persuade the company to continue in production, perhaps, by fiscal relief of some sort?

I cannot say that such discussions would be useful, but the Treasury and the Inland Revenue would examine any problems to see whether there was any way in which they could help. As we reckon that only two or three fields are likely to have advance payments paid over and above their PRT liabilities toward the end of their lives, it is not likely to be a major problem. If it turns out to be so we must examine it.

I was about to deal with the smoothing of the collection of PRT so that the bulk of it is received in monthly instalments. It is a matter of concern to the money markets to have record-breaking cheques being paid on only two days in a year. I am sure that a smoother pattern of payments will be welcomed by everyone involved in the markets.

It has been suggested by the Select Committee on the Treasury and Civil Service that the change has been designed to bring 14½ months' revenue into 1983–84. That is a misunderstanding. The Select Committee wrongly assumed that the first instalment would be paid on 1 July 1983. There is a two-months' lag in instalments, and the first instalment will not be paid until 1 September 1983. There will be some acceleration of take, but the effect will be to increase revenues by only about 2 per cent. in 1983–84 and not 20 per cent. This will be more than outweighed by the cost of the structural changes. Even allowing for the interest costs of borrowing to pay earlier instalments, companies will be better off next year by about £70 million.

We believe that these changes should go a long way to meet the industry's understandable worries about future development. The UKOOA went further and proposed additional relief for satellite fields and the extension of oil allowance after the existing 10-year ration expires. The removal of SPD will improve the post-tax position of satellite fields as well as other forms of incremental investment so that the rate of return on such investments will be close to what it would have been if there had been no tax. We see no reason at present to give any additional relief in this area.

Moreover, the proposals would have led to considerable definition problems, and on examination did not appear to us to be practical. An extended oil allowance would be expensive in the longer term and would have little relevance in the short to medium terms. It is not clear at this stage whether the after-tax cash flow in the latter years of a field's life would be insufficient, and we did not feel able to propose a costly remedy to an unproven and remote problem.

I remind the Committee that the Chancellor announced in his Budget Statement that a consultative paper would be issued shortly with a view to legislation in 1983 on PRT relief for certain types of expenditure, especially expenditure on long-term assets, the use of which is shared, or the user of which is changed over the life of the asset, and the taxation of incidental receipts, including pipeline tariffs, accruing to the owner from the users of these assets. I hope that these will meet satisfactorily the taxation problems arising from changes that are occurring as developments take place.

The hon. Member for Blackburn and other hon. Members referred to the tax proposals which originated from the Institute for Fiscal Studies. The institute suggests that we should adopt a much more radical approach and replace some or all of the North Sea taxes with one progressive tax on return of capital. We accept that its scheme is ingenious and radical. However, it would be much more progressive than the present system on the rate of return. Of course, the rate of return is not the only indicator that companies consider. Net present values, for example, would also be significant.

The institute's scheme does not have an equivalent to the oil allowance and would therefore tax small fields, which are likely to be in the majority in future, more severely than do the Government's proposals, and so act as a disincentive to some types of needed development. It would be wrong not to apply the normal corporation tax to the oil industry. It would be hard in particular to justify exempting oilfields from all tax up to a 15 per cent. return while other industries had no such protection.

The industry made it clear to us that such a radical change in structure, with its inevitable upheaval, would not be welcomed. It was particularly concerned that a radical change would create uncertainty for investment and pose major transitional problems. Those last two points carry particular weight. Although more radical proposals are interesting, it is not desirable or sensible to implement sweeping changes of that nature at this stage with all the uncertainties that that would involve.

The right hon. Member for Orkney and Shetland (Mr. Grimond) raised a number of points. It is not realistic to suppose that local authorities will have to reduce their charges because of the recent tax increases. Of course we keep international trends in view, but they cannot be considered in isolation. Other non-fiscal matters also have to be considered. Compared with Norway, our tax regime is relatively more favourable to small fields, which is important for the future of our industry.

Several hon. Members raised the question of the definition of ethane. That will be debated under clause 119. As my right hon. and learned Friend the Chief Secretary stated, we are considering an extension to other feedstocks. Ethane was defined in simple terms of commercial purity. Any type definition will be a straitjacket for companies and the Revenue. I am not in a position to give results of the study at present.

Does the Minister expect to have a view on propane and butane before Report?

I can go no further at present. We are considering whether we can come up with a satisfactory solution. We are willing to see what we can do.

I hope that the right hon. Member for Aston-under-Lyne (Mr. Sheldon) will not press the amendment to a Division. The changes proposed in this and subsequent clauses will provide a flexible system and a firm base for companies' development plans. There are major uncertainties about the future movement of oil prices. It is a risky business, but the returns are commensurate with the risk. The Government fully share in the risk through the tax system. The new tax system is a fair balance between the interests of the Government and the industry.

I congratulate the Minister of State on his appearance at the Dispatch Box in his new capacity. I first encountered him in Committee on the 1976 Finance Bill. Through a mishap with the Whips he was placed on the Committee and was subsequently found not to be a member of it. Our relations have been cordial, and I hope that that will continue.

The amendment was designed to afford a debate on a number of important issues. We have succeeded in that, and, at the end of my remarks, I shall beg to ask leave to withdraw the amendment.

My hon. Friends the Members for Central Ayrshire (Mr. Lambie), Dunfermline (Mr. Douglas) and Clackmannan and East Stirlingshire (Mr. O' Neill) and the right hon. Members for Greenock and Port Glasgow (Dr. Mabon) and Orkney and Shetland (Mr. Grimond) have all pointed out that we are dealing not only with a major source of energy but with a major industry. We have had the advantage of the expertise and experience of those concerned in this industry.

The history of the taxation of oil started with the Public Accounts Committee in 1972, which brought out its famous report showing that we were selling our rights ridiculously cheaply to the oil companies which were there to make use of the blocks that they were taking over. The introduction of the taxation system started in 1975–76 and dealt with these tax changes, the introduction of the royalty payments, corporation tax, petroleum revenue tax, and now the supplementary petrol duty that we are disposing of. Together with that, there was a ring fence, oil allowances for small fields, an uplift for investment and safeguards. It was an absurd structure, and the Inland Revenue did not distinguish itself in providing this structure of taxation.

The hon. Member for Enfield, North (Mr. Eggar) talked about the petroleum tax being penal and capricious, but he must remember that it was introduced at a rate of 45 per cent. Under this legislation it is being increased to 75 per cent. as a reasonable response to the way in which oil prices have moved and other factors have altered over the intervening years. He also talked about the clever and ingenious oil companies. We must remember that it is not in all countries that the oil companies are regarded in this way. He said that the oil companies did not have many friends, but he must compare the United Kingdom with other countries such as the United States and the Middle East where oil companies are disliked much more intensely than they are here.

Oil companies, with their enormous turnovers as big as the revenues of many medium-sized countries, are used to, and frequently do, negotiate with countries as equal to equal. One of the surprises that I can recall was that of having oil companies dealing with Governments rather differently from the way in which other companies do. This was not necessarily in a way that was suitable or advantageous to the oil companies. They had that feeling of excessive over-confidence and power in dealing with the country with which they have to co-operate and whose laws they have to accept.

Since then we have seen further taxes. Supplementary petrol duty is now being changed to the advance petroleum revenue tax. That will be offset against PRT whereas the old supplementary petroleum duty was offset against losses. The overall effect on the Government take will be much the same. For that reason, we are not opposing the legislation in principle, although there will be a number of matters of detail to which we shall turn in Committee.

My hon. Friend the Member for Dunfermline talked about the difficulties of cyclical movements. The price of oil normally goes up and up, but for the first time there has been a decline in the price of oil. There are those who can see where the cycle will end or how these things will come to change over succeeding years. I do not make any predictions, but I point out that the change in the price of oil is an unusual event and is something that we should not take as being a normal pattern for the future. Our history in these matters is far too short to determine for us any cyclical pattern of which we can make some use.

A very important point that was made underlined the problem of oilfields reaching the ends of their working lives. I recall that the intention behind the major reform that was promised by the Government, although there is no sign of its implementation, was to deal with some of those oilfields as they reached the ends of their working lives. The Institute for Fiscal Studies talked about the system which it suggested. It was based on the progressive rate of return, and some of us thought that perhaps the taxation system should have started at the very beginning on the basis of the rate of return.

The Minister of State talks quite rightly about the way in which oil companies are being successful. What criteria does he use to assess their success? Quite rightly he assesses their success on the basis of their rate of return; and there are those who think that that might have been the basis of an oil taxation system. Instead, we have produced complication upon complication to obviate the very errors in the way in which this taxation system has developed over the years. The right hon. Member for Orkney and Shetland described it as a muddle almost as bad as the general system of taxation, but at least the general system of taxation is based upon correct principles. It has become more elaborate, complicated and tedious, but it is based on the right principles. The problem about oil taxation is that some of us doubt whether the same can be said of it. So we have to look for some changes. Unfortunately, the changes mentioned by the Minister do not go to the heart of the change of principle which might be considered essential.

My hon. Friend the Member for Dunfermline talked about the depletion policy and a Government statement on it. I am afraid that we are still without a general statement on depletion policy. It can be looked at in two ways. We have gold in the vaults of the Bank of England which costs money to maintain, which requires guarding and which occupies very expensive space on an important prime site in the centre of London. We have oil in the North Sea which does not take up expensive space. In a number of cases it may save some cost. The argument is about which one is best: is it better to have gold in the vaults of the Bank of England under the terms and conditions that it is there, or is it better to have oil in the North Sea? There is argument for both. However, currently we are using about 75 million tonnes of oil a year and we are producing in excess of 100 million tonnes, and clearly the two are out of balance.

I appreciate that it is not possible to make short-term changes to production. But we have to realise that our asset is likely to remain an asset for a very long time to come. We need to take a long view of our oil since it is not possible to turn off the tap. Because of the amortisation of capital equipment, that would produce extra costs for a company which had organised its planned production of oil on one basis, and it cannot suddenly be changed to another. However, there are aspects to this depletion policy which need to be explored. I hope that the Government will give it more attention than we have seen so far.

As for the production profile mentioned by the right hon. Member for Greenock and Port Glasgow of course we really want a tax profile that copies the profit profile and the production profile during the lifetime of a field so that at each stage an incentive is there which is sufficient but which allows the tax revenue to be maintained.

My hon. Friend the Member for Dunfermline talked about tertiary recovery. It will be essential that there is incentive at the end of the life of an oilfield when the oil rigs are still in position. Once they are removed, in most instances that oil is likely to be lost for ever. It will be important, as a number of fields near the end of their working life, to ensure that those last elements of oil are extracted and that the tax system that we have devised does not harm that. That is sheer profit for Britain and must not be forgone.

Our present tax structure does not guarantee to do all that. I look forward to more work being done by the Inland Revenue. I believe that it owes that to the oil industry and to Britain for its lack of foresight at an earlier stage. The Inland Revenue needs to rethink. It has ability, and unquestionably it has the expertise. In addition, it now has the experience. It should provide us with a taxation system better than the one that we have today.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 117 ordered to stand part of the Bill.

To report Progress and ask leave to sit again.—[ Mr. David Hunt.]

Committee report Progress; to sit again tomorrow.

Civic Government (Scotland) Bill Lords

Order for Second Reading read.


That the Bill be committed to a Scottish Standing Committee.—[ Mr. David Hunt.]

Civic Government (Scotland) Money

Queen's Recommendation having been signified—


That, for the purposes of any Act of the present Session to make provision as regards Scotland for the licensing and regulation of certain activities; as to lost and abandoned property and property in the possession of persons taken into police custody; and as to certain other functions of local authorities and their officers, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the said Act of the present Session in the sums payable out of moneys so provided under any other Act.—[Mr. David Hunt.]


Mr Barry Prosser

10.27 pm

With your permission, Mr. Deputy Speaker, I rise to exercise the sovereign and constitutional right of an hon. Member to place before the House a petition in respect of his constituents.

I do this to fulfil a personal pledge to my constituents in August 1980 to raise this matter before my fellow right hon. and hon. Members.

The petition contains four signatures. They are the signatures of the widow, brother and two close relatives. It relates to the death of my constituent, Mr. Barry Prosser, in Winson Green prison while in custody on remand for medical reports in August 1980.

I also present a similar petition in identical terms containing 4,436 signatures. The over-riding motive behind this course of action is to ensure that never again in the history of the prison service do we have such a case.

The petition states:
To the Honourable the Commons of Great Britain and Northern Ireland in Parliament assembled.
The Humble Petition of the Family of Barry Prosser sheweth that there is great concern about the circumstances surrounding the death of Barry Prosser in August 1980.
Wherefore your Petitioners pray that your Honourable House will instruct the Home Secretary to set up a Public Enquiry into the conditions at Winson Green prison which led to the death of Barry Prosser in August 1980.

And your Petitioners, as in duty bound, will ever pray etc.

I pray that this night the House will receive the petition.

To lie upon the Table.

Chronically Sick And Disabled Persons Act

Motion made, and Question proposed, That this House do now adjourn.—[ Mr. David Hunt.]

10.29 pm

I know that the Minister will agree with me that the subject of this debate is of the first importance to disabled people and their families and to the organisations that exist to represent their interests. In a recent book about the Chronically Sick and Disabled Persons Act, entitled "A Charter for the Disabled", my respected former parliamentary colleague Bryan Gould says that the late Richard Crossman, then Secretary of State for Social Services, was anything but enthusiastic about the Act's provisions when they were first proposed in 1969. On that occasion, the victory went to disabled people and to Parliament.

More than 12 years later, the Act still has opponents, including a number of some subtlety, and the House must remain vigilant to ensure that it is the claims of disabled people and the will of Parliament that prevail. The supporters of my Bill were not, at any stage, all of one political party. They were drawn from both sides of both Houses of Parliament. Beyond Westminster, we had the backing and advice of many distinguished people in local government and the voluntary sector. I believe that we succeeded in turning our precepts into law because our sole concern was to improve both the well-being and status of disabled people. That concern is now much more widely shared in Parliament and the country and those who, for whatever reason try to frustrate the Act's purpose, must be warned that they will not be allowed to succeed.

Lack of time prevents me from detailing tonight the transformation that has taken place in the lives of disabled people since 1970 when the Bill became law. Millions have been helped directly as disabled people by its provisions and millions more indirectly by the support it gives to their families. Some local authorities were slow off the mark, but the majority have attempted full and humane implementation of the Act; and many councils are continuing to do so despite the devastating effects of the Government's policies on local government. Some authorities have recently been shown to be in clear breach of the law, however, and in this regard a recent statement by the Secretary of State for the Environment was especially disquieting.

In reply to an intervention of mine on 16 February about the statutory duties of local authorities under the Chronically Sick and Disabled Persons Act, in the debate on the Rate Support Grant (Increase) Order 1982, the Secretary of State said that
"the arrangement of priorities within each authority is a matter for that authority. We have made it clear that where the cuts should come is a matter for the individual authority's choice and discretion."—[Official Report, 16 February 1982; Vol. 18, c. 153.]

That statement gave the impression that local authorities could pick and choose whether to fulfil their legal duties. As the Minister replying to the debate tonight has the advantage of being a lawyer, I hope that he will make it clear to his ministerial colleague that local authorities have no choice or discretion about whether to meet their statutory duties. To "house train" the Secretary of State for the Environment in this matter will not be easy, but it is essential that he should no longer be allowed to mislead local public representatives about their legal duties, and the hon. Gentleman should at least make the attempt.

The requirements of the law are not in dispute. In the first place, the local authority has a duty to assess the needs of any permanently and substantially disabled person in its area for any or all of the services listed in section 2 of the Act. If, after making an assessment, the local authority believes that the disabled person needs a service, it has a duty to make arrangements for provision within a reasonable time. The corollary of this duty, as I made clear more than once when I was the Minister, is that no local authority may lawfully withdraw a service from a disabled person if his need for the service has not diminished. Nor is it lawful for a local authority to plead lack of funds as an excuse for not providing a service. Again, although it may recover charges for any of the services, a local authority may not refuse or withdraw a service if the disabled person is unable to pay.

The Minister has never challenged these statements of the effect of the law; indeed, he has confirmed them on several occasions. The problem arises when a local authority fails to fulfil its duties. Following a decision of the Court of Appeal in 1978, the only recourse is to the Secretary of State for Social Services; and it is on the manner in which the Secretary of State has acted as the ultimate court of appeal that I shall be concentrating this evening.

Eighteen months ago, 15 charities, led by the Royal Association for Disability and Rehabilitation (RADAR), joined forces in a project to ensure full enforcement of the Act. The other charities were the Spastics Society, the Multiple Sclerosis Society of Great Britain and Northern Ireland, the Muscular Dystrophy Group of Great Britain, the National Society for Mentally Handicapped Children and Adults, Age Concern, Arthritis Care, the Association for Spina Bifida and Hydrocephalus, the Disabled Drivers' Motor Club Limited, Outset, the British Polio Fellowship, the Leonard Cheshire Foundation, the Royal National Institute for the Deaf, the Spinal Injuries Association and the Child Poverty Action Group.

A report of the first year's work, entitled "Putting Teeth in the Act", was published last month and I pay tribute tonight to Peter Mitchell and Mrs. Jane Cook whose work on the project has rightly been very highly praised by the all-party disablement group in the House. Mrs. Ursula Keeble preceded Mrs. Jane Cook and she, too, deserves the highest praise for her work on the enforcement project. By now, nearly 1,000 individual cases have been examined. Thirteen authorities have been referred to the Secretary of State for Social Services and two to the Secretary of State for Wales. Five of the 13 referrals were about failure to assess need, five about failure to provide a service after acceptance of need, and three about withdrawal of a service where the disabled person's need for it had not diminished.

Four of the cases relating to failure to assess need concerned a blanket refusal by the local authority to assist with holidays. These have been the least successful referrals to the Secretary of State; and I shall return to the individual cases in a moment. The fifth concerned failure to assess need for aids. A reply on this was received by RADAR earlier this month; and I shall be referring to it later in my speech.

Four of the five cases concerning failure to provide a service after acceptance of need related to the provision of telephones and one to failure to provide an adaptation to a disabled person's home. I shall be referring in detail to two of the telephone cases, in Wandsworth and Liverpool, and to the case about home adaptations in Barking, since they illustrate important facets of the use of the Secretary of State's default powers.

The third form of unlawful action was withdrawal of a service. RADAR, on behalf of the 15 charities, referred two authorities to the Secretary of State for the withdrawal of home helps and one for withdrawing assistance with telephone rentals and advising disabled people to ask for their telephone to be disconnected if they could no longer afford it. Happily, the last case was resolved by the council elections last May.

In March of last year two authorities, Richmond and Wiltshire, were referred to the Secretary of State on the grounds that they refused point blank to consider assisting disabled people with holidays. The individuals who had complained to RADAR wished to remain anonymous. Two months later, however, the DHSS replied to the effect that the Secretary of State could only initiate an inquiry into a complaint on behalf of a named disabled person. RADAR was advised by the project's lawyers that, In reaching this decision, the Secretary of State had misdirected himself as to his duties under the Act, but the Attorney-General refused the charities leave to challenge his ministerial colleague's decision in the courts. I shall also be returning to this crucial issue as I proceed.

Even when an individual was named, the Secretary of State showed little sense of urgency in ensuring that justice was done. The third referral to him was of two people in Oxfordshire who had been illegally refused assessment for a holiday on the grounds that the authority was not providing any. The case was referred on 16 March 1981 and the Secretary of State did not reply to RADAR until almost a year later, on 3 March 1982. Last November, I had already been convinced that the delay by the Secretary of State constituted gross maladministration, causing manifest injustice to the disabled people involved, and I referred the matter to the Ombudsman.

The Secretary of State's eventual reply about the Oxfordshire cases was revealing. The two relevant paragraphs read:
"We have been informed by the Chief Executive of Oxfordshire that the authority has agreed to make provision for holidays for disabled people. The Director of Social Services is now considering arrangements whereby a local voluntary organisation will undertake both the assessment of need and arrangements for the provision of such holidays on an agency basis for the local authority. We are assured that in the particular cases of Mrs. P and Mrs. C their needs will be assessed when the revised scheme is finalised.
In view of these assurances, it is apparent that Oxfordshire County Council are now fulfilling their statutory duties in this matter. The question of a default order does not, therefore, arise."

I emphasise the word "now" in the last paragraph quoted. The Secretary of State clearly accepts that, for a whole year, the council was in breach of the law. Yet there is not one word of criticism of the council or of regret for the two disabled women concerned. In my opinion, the Secretary of State was gravely failing in his duties by not making a default order last summer and so ensuring that disabled people in Oxfordshire obtained their holidays then.

The final sentence is also incorrect since the letter states only that the Director of Social Services is "considering" arrangements, not putting the Act into effect. Can the Minister give the House more information tonight? My information is that Oxfordshire is making a token gesture and providing only a very limited number of holidays for the more persistent disabled people. Will the Minister now remind the council of its duty under section 1 of the Act to inform all disabled people in Oxfordshire of their right for their need for a holiday to be assessed?

One consistent feature of the Secretary of State's inquiries has been their inordinate delay. The second consistent feature has been the efforts he has taken to do no more than he has persuaded himself is required by his minimal interpretation of the law. Take the case of West Sussex. There the council withdrew home helps from people who could not afford the charges they were imposing. Three individual cases were referred to the Secretary of State and, five months later, he replied saying that their home helps had been restored. But what about other disabled people in West Sussex? What action has the Secretary of State taken on the issues of principle and of law to protect disabled people as a whole in the county?

Three disabled people in Brent complained last year to RADAR to the effect that they had received a circular letter stating that the council was not providing assistance in response to their request for help with a holiday. The cases were sent to the Secretary of State in May 1981 and, at the end of August, he replied to the effect that the council was still running its own holiday scheme and, if the people concerned had asked to be included, they would have been considered. I remind the Secretary of State that section 1 of the 1970 Act places a clear statutory duty on local authorities to inform disabled people about the services it provides. Yet no information about the council's holiday scheme was included in the letter of refusal sent to the three disabled people who had complained. How does the Minister react to that?

In Barking, an elderly woman who had been waiting for over a year for a simple adaptation she needed to her home, was admitted by the Director of Social Services to be only one of many. Following an inquiry, the Secretary of State wrote back to RADAR to say that the adaptation had been done. The Secretary of State showed no sign of being concerned about other cases in the borough, but I am happy to say that the council has cleared the backlog.

The pattern was now becoming clear to the 15 charities. After considerable expense by them, by the Department and by the councils, the referral procedure was, except in the case of holidays, resulting in belated provision or restoration of a service for the individuals whose names were referred to the Secretary of State. That pattern was, however, broken by the London borough of Wandsworth. There the Secretary of State put pressure on the council to supply a telephone for the one person named by RADAR. But the Director of Social Services refused to allow her to jump the queue when many people in greater need had been waiting for a telephone much longer. Much to his credit, he put it to his council that it must provide money to clear the entire waiting list for telephones; and that is what was done.

Matters took a rather different turn in Liverpool, although the position there had been much the same as in Wandsworth. One individual had enlisted RADAR's help to obtain a telephone from a waiting list of several hundred. The case was that of a woman who had been discharged from hospital after a double amputation. She had been told that she was a priority case for provision of a telephone but would have to wait two years for it to be installed. She was also very urgently in need of adaptations to her home. In fact, she ws homebound because of access difficulties and was consequently at severe risk in case of fire, which should remind everyone that the Act is not about trivialities but one whose purpose is to help some of the most hard-pressed and needful people in Britain today.

Following RADAR's complaint and the Secretary of State's intervention, the disabled woman obtained her telephone, but both the council and the Secretary of State were happy to let matters rest there, notwithstanding reports, including one by Pat Healy in The Times on 24 December 1981, that many hundreds more disabled people were being herded on to Liverpool's waiting list.

Fortunately, RADAR was not prepared to let maters rest and wrote again to the Secretary of State asking for an inquiry to be made into the circumstances of the other people on the waiting list, even although their names were unknown.

This time RADAR struck gold. On 17 March the DHSS wrote again to Liverpool asking for its comments on RADAR's letter so that the Secretary of State might consider what action he should take under section 36. On the same day, the city council was writing to a number of Liverpool's Members of Parliament informing them that the council had made a further £20,000 available for the provision of telephones.

For the purposes of tonight's debate the Department's letter is of greater significance than Liverpool's belated acceptance of its legal duties, because, as I said earlier, the Secretary of State had hitherto been arguing that he could conduct inquiries only into complaints relating to named individuals. There is said to be more joy in Heaven at one sinner who repenteth than at 99 just persons, and I know that the 15 charities would want me to acknowledge tonight the importance of the Government's volte face.

I know that those charities would also like me to place on the parliamentary record the implications of the decision to act on RADAR's letter without quoting the cases of named individuals. The Minister has now accepted that he has a duty under section 36 of the National Assistance Act 1948 to institute inquiries where there is evidence submitted to him that local authorities are in breach of their statutory duties towards disabled people under section 2 of the Chronically Sick and Disabled Persons Act 1970, even if it is not possible to supply the names of all or any of the disabled people who are suffering as a result.

The Minister's acceptance of this duty is deeply important to disabled people throughout the country. What I hope he will now do—and what many people outside this House will expect him to do tonight—is to announce in clear terms that he will henceforth take all steps necessary to ensure that disabled people, irrespective of whether they are able to complain, are informed of, and in fact receive, all the services that Parliament intended them to have.

In this regard, I shall be grateful if the Minister can comment tonight on a recent reply to RADAR about inquiries by his Department into a case in Lewisham. In July 1981, RADAR referred the case to the Secretary of State because of a delay in assessing the needs of a named disabled person. In correspondence with RADAR, the council had said that several people were in a similar position because of the shortage of staff. I understand that the Department wrote to the council in August 1981 and that the chief executive replied in September. Yet the Department did not write again to RADAR until this April, following parliamentary questions by my hon. Friend the Member for Lewisham, West (Mr. Price).

There are two matters of concern to RADAR and the other charities. First, the Secretary of State declared himself happy that the needs of the complainant had been adequately assessed, although no visit was made. The charities want the Minister now to say, therefore, whether he stands by the advice given by the DHSS in 1970, when the present Secretary of State for Education and Science was Secretary of State for Social Services, that assessments should be complete and not partial and should consider all relevant needs. They also want him to explain how assessments for adaptations to somebody's home can be done from the town hall.

Equally important to the 15 charities is the fact that, in the reply that the DHSS received from Lewisham's chief executive, it was stated that 1,355 disabled people were on the waiting list for aids and adaptations of whom 542 were classified as
"priority, housebound, severely disabled or with degenerative diseases".
Yet this information was not even mentioned in the Department's reply to RADAR. It was provided by the chief executive to my hon. Friend the Member for Lewisham, West.

There is not the time now to go through all the cases investigated by RADAR, many of which are very disturbing and indeed heart-rending. As I said, my principal purpose tonight is to subject to parliamentary examination the way in which the Secretary of State has been performing his duties under the law.

The Minister should answer four questions. First, does he accept that section 2 of the 1970 Act lays a duty on local authorities to help all disabled people in need in their areas and not just the odd individual who contacts RADAR? Secondly, does he accept that Parliament has laid a duty on the Secretary of State to ensure that the law is obeyed? Thirdly, will he assure the House that from now on he will conduct urgent and comprehensive inquiries into any evidence submitted to him that local authorities are not fulfilling their statutory duties? Fourthly, will he make it pikestaff plain that he will have no hesitation in using his default powers whenever it is necessary to ensure that disabled people receive the services that Parliament intended for them?

As well as placing on the parliamentary record his answers to those four questions, I hope that the Minister will join me in paying tribute tonight to the 15 charities for their leadership in having mounted the enforcement project and for providing so much help since to so many disabled people.

10.50 pm

Firstly, may I take this opportunity of thanking the right hon. Member for Manchester, Wythenshawe (Mr. Morris) for raising this difficult matter. His concern for the well-being of disabled people is well known and appreciated.

For many years it has been the practice in this House not to regard policies for disabled people as being a matter of contention between the parties. The policies that I now pursue on behalf of disabled people, including the matters we are now discussing, do not differ markedly from those of the right hon. Gentleman when he was in office.

We all want to achieve for disabled people full and dignified lives, where possible within the community. To achieve that, many disabled people need some degree of support from the community whether in terms of financial benefits or services and facilities. Much of the progress along that road has been assisted by the Chronically Sick and Disabled Persons Act 1970 which was passed with all-party support and sponsorship and of which the right hon. Gentleman had the singular honour to be principal author. That Act was of its time. It gave legislative form to the increased awareness then of the needs, and also the rights, of our fellow citizens who happen to experience disabilities.

I think I am right in saying that that awareness which led directly to this Act has increased steadily since 1970, with the process being greatly assisted by the International Year of Disabled People, and has been matched by a continuing increase of expenditure upon personal social services by local authorities. From 1970 to now there has been a startling increase in expenditure in real terms upon services and benefits for disabled people. Yet as awareness has increased so, too, has pressure for further progress.

That brings me more specifically to the question of the enforcement of the duty imposed upon local authorities by section 2 of the 1970 Act. My answer to the right hon. Gentleman is that that is a legal duty imposed on all local authorities that have a responsibility for personal social services. In the vast majority of cases—these must be numbered annually by tens of thousands—there is no need for any enforcement. Local authorities are well aware of the duties imposed by section 2 and, in the main, they carry them out quickly, effectively and willingly.

To hear some people talk one would think that local authorities did not want to provide the necessary support for disabled people. Of course they do. It is one of their functions and they wish to carry it out to the best of their abilities. Moreover, each local authority is far better placed to know exactly what it is necessary for them to provide than I or my Department, sitting in isolation at the Elephant and Castle, possibly can.

The problem then, to the extent that there is one, is at the margins. Some disabled people, quite naturally, do not think that their local authority is doing for them what the statutory duty demands they should. In a few cases it is possible that from time to time they are right. How can the duty be enforced in those few cases?

The right hon. Gentleman has been critical of the way in which my Department has dealt with applications to my right hon. Friend the Secretary of State to exercise his powers under section 36 of the National Assistance Act 1948. He said that the Department takes too long to deal with these default applications. They do, indeed, take an inordinate length of time, but the right hon. Gentleman will know from his own experience of these cases when in office that the sensitive issues involved do not readily lend themselves to this sort of procedure.

These default applications are tremendously time consuming for both the Department and the local authorities concerned—often ludicrously out of proportion to the actual services in question. However, we think it more important to encourage a local authority to reappraise its policies where it may be mistaken, and to give it an opportunity to do so, than it is to invoke formal proceedings against it. That is my policy, and that was the right hon. Gentleman's policy. Getting an outcome favourable to a disabled client, where this is justified, is what matters most.

In view of the questions posed by the right hon. Gentleman, perhaps I should outline what I am advised is the legal position. Section 2 of the Act is about the provision of certain services by a local authority for an individual. That is all that it is about, and the duty is caught by the provisions of section 29 of National Assistance Act 1948. In consequence, the default powers in section 36 of the 1948 Act bite on that duty.

When asked to exercise his section 36 powers in the sort of cases with which we are concerned, the Secretary of State has to consider whether the local authority is performing its functions under section 2 of the 1970 Act. As I have said, that section concerns only local authority provision for individuals and, therefore, that is what the Secretary of State must look at. There is nothing else that he can properly consider.

The right hon. Gentleman and others may find that unsatisfactory. So do I, but that is what the Acts provide. A number of alternatives have been proposed in the House from time to time, but no one has come up with an alternative that is satisfactory to all.

The right hon. Gentleman referred to a number of specific cases and puts me in a difficulty, because they are all instances in which my right hon. Friend has to act in a quasi-judicial manner. It would not be proper for me to discuss how he comes to his conclusion in such cases, especially since some are before him at present. The right hon. Gentleman referred to one or two of those cases.

However, I can talk in general terms about whether the recent action of the Liverpool council demonstrates a change of policy. I must disabuse the right hon. Gentleman, because there has been no change of policy. In that case, as in all others that come before the Secretary of State, the local authority concerned has responded positively to the preliminary inquiries that are always made before the default powers can be exercised. That reinforces my basic premise that local authorities are responsible and well-intentioned.

I am prepared to reaffirm and to stress, because the right hon. Gentleman asked me to do so, that the Secretary of State will continue to consider any case put to him in which there is evidence that a local authority may be failing to meet its duty, and he will take appropriate action if necessary.

The right hon. Gentleman made much of the report by RADAR and the 14 charities which came together in a campaign for the absolute implementation of section 2. Much of the report was critical of the Department and of the Secretary of State. However, may I take the opportunity to praise the campaigners on at least part of their activities? I appreciate their intent and commend their effort. I also, of course, dispute their criticism and regret the unnecessarily antagonistic stance that they have sometimes adopted towards local authorities, but the fact remains that they have performed the function of eloquent and tireless advocates for disabled people, many of whom may tire easily or may have difficulty in expressing themselves.

RADAR and the other charities have performed the function of intermediary and trouble-shooter in many individual cases, clearing up misunderstandings. I praise them for that, as I know that many disabled people have cause to be grateful to them. The fact that that is so is in no sense a criticism of local authorities which have patently reacted constructively when approached in the same spirit.

At the end of the day, only a very small fraction of the cases that the RADAR campaign considered—the right hon. Gentleman mentioned the figure of 13 or 14—resulted in an application to the Secretary of State to exercise his default powers under section 36 of the 1948 Act. Those cases must be seen in the context of the tens of thousands of cases in which local authorities readily, quickly and effectively give help to disabled people.

Perhaps RADAR has proved itself to be the solution to the problem that it sought to solve.

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at one minute to Eleven o'clock.