Orders Of The Day

Income And Corporation Taxes Bill

Considered in Committee.

[Sir ROBERT GRANT-FERRIS in the Chair]

3.58 p.m.

Mr. John Fraser  (Norwood)
On a point of order. Can you give me some guidance on the reason as to why Amendment No. 2 has not been selected for debate? It seems extraordinary that the incidence of taxation on various sections on the community cannot be debated in detail. I understand that there are inhibitions on giving the reason for refusing Amendments. There has, however, been a very short period of time between the Second Reading of the Bill and Committee stage. In addition, I understand that Report stage will be taken tomorrow which means there has been very little time to get Amendments in order and to reserve one's position for Report if one is ruled out of order in Committee.

The Chairman
In the first place I must inform the hon. Gentleman that the Amendment in question is out of order. Mercifully I do not have to give any reasons. Secondly, there will not be a Report stage of the Bill unless Amendments are passed.

Clause 1

Charge Of Income Tax For 1971–72

Mr. John Pardoe  (Cornwall, North)
I beg to move Amendment No. 1, in page 1, line 13, leave out '38·75' and insert '25'. I am grateful for the fact that the only two Amendments which have been selected are those standing in my name. I must say that I am somewhat surprised to find that for the first time in my memory of this place, which may not go back very far, on a Bill which has anything to do with income tax the hon. Member for Worcestershire, South (Sir G. Nabarro) has not seen fit to table an Amendment to reduce income tax.

Sir Gerald Nabarro  (Worcestershire, South)
The hon. Gentleman is a little presumptuous. He should await my speech which will follow shortly—if I catch your eye, Sir Robert.

Mr. Pardoe
I would never presume to imagine that the hon. Gentleman could not speak on the subject. He could hardly be contained. I was naturally surprised that he had not tabled an Amendment. Perhaps it has something to do with the fact that there has been a change of Government. It is impossible in my view to make the kind of budget judgment that the Chancellor made in reducing income tax by 6d. more than six months before the Budget. I have yet to read one single economist in any worthy journal who would disagree with this statement. The Chancellor has received a notoriously bad Press on this point. Since it is impossible for him I see no reason why I should not join in. My Amendment would reduce the rate of income tax which the Chancellor has seen fit to reduce from next April to 38·75 per cent. to no less than 25 per cent. This may seem a considerable decrease. The Chancellor no doubt thought, and his party by its claim obviously agree with him, that he was being exceptionally generous to the hard-pressed taxpayers in taking 6d. off income tax. In doing so he was giving back £315 million in the first year and £350 million, according to his estimates, in a full year. He could have done far more. The whole purpose of this Amendment is to question why he did not. I have not taken the figure of 25 per cent. out of a bran tub. The fact is that he could have made this reduction to 25 per cent., to 5s. in the pound at the standard rate, and still have had a surplus as between Exchequer revenue and Exchequer expenditure. The question I am asking is why he did not do so. This raises the whole question of the quite incredible Budget surplus which we have been carrying over the last few years. If we go back to 1964–65 we see that we were carrying a Budget surplus on current account of £444 million. In the financial year ending 1969 we carried a Budget surplus of £2,444 million. It is something of a coincidence that it was exactly £2,000 million more than in the financial year 1964–65. It is now estimated that this year we shall have a Budget surplus of £2,600 million, unless the Treasury has come up with a different estimate in the last few days. This is many times over an all-time high for ourselves. Those words, "many times over an all-time high for ourselves" are not mine. They come from the eminent economist Sir Roy Harrod writing in The Guardian on 2nd November. He went on to say: "…or for any other country in the world." If one looks at the figures this is absolutely true. The question I am asking in this Amendment, which would at a stroke virtually wipe out the Budget surplus, just about bringing us into surplus—unless the Treasury can again recalculate my figures—is: how did we get to this extraordinary surplus and should we have such a surplus round our necks? It was done by the former Government primarily to overcome the crisis in our balance of payments. The theory was that if we taxed, taxed and taxed again we would drive sufficient of the expenditure off the products on the home market and therefore would force our products out into the export markets. Some of us had grave reservations about whether this was the right thing to do, whether it was necessary to overcome a balance of payments problem by such deflationary measures. Many of us argued at the time—I myself certainly did—that it would have been far better to have gone for the floating exchange rate, albeit with certain pegs both sides. Nevertheless, whether one believes that this was the right course to follow, as the then Chancellor of the Exchequer did, it clearly has worked. The balance of payments figures we have seen only in the last few days and the figures mentioned at Question Time this afternoon indicate that even in this year we shall have a very substantial balance of payments surplus on our hands. How long are we to maintain this massive surplus of tax over expenditure? Are we to maintain it for ever? What reasons do the Treasury adduce for not reducing income tax to 5s. in the pound? I do not say that this is the only way in which we could have reduced the Budget surplus. We could have made a start by the Government honouring their  promise to get rid of, for instance, selective employment tax. You name the tax, the Tories promised to get rid of it. What is the surplus used for? I am at a slight disadvantage here, in that on Thursday of last week I tabled some rather detailed Questions to the Chancellor of the Exchequer for Written Answer yesterday and three days, part of the intervening period being the weekend, have not elapsed. So I have not yet received those Answers.

Mr. Edmund Dell  (Birkenhead)
Surely the hon. Gentleman realises that the present practice of the Treasury is to postpone Answers to such Questions until after any debate on the substantive matter has taken place.

Mr. Pardoe
I think that that must be the case, because when I telephoned the Treasury this morning I was informed that, unfortunately, I could not expect the Answers until tomorrow. How very convenient. Nevertheless, I have no doubt that the Financial Secretary will be able to fill in the gaps in my argument should I be down on figures. First, this money is being used to a great extent to finance the nationalised industries. This was a decision which was made by the Conservative Government, I think in 1958—that the nationalised industries should be able to extract their capital needs from the money that we as taxpayers were paying. The great disadvantage of doing it in this way is that the nationalised industries do not have to compete in the market place for their capital. Therefore their raising of capital is not subject to supply and demand, the normal laws of the market place; it comes out of the taxpayer's pocket and the nationalised industries can make decisions about capital expenditure and many of them can directly compete with private industry, which must raise its capital by entirely different means. The electricity industry is an example. Electricity boards throughout the country are directly competing with the aid of the taxpayer's money. The difference between my Amendment and the Chancellor's figure would enable the electricity boards throughout the country to compete with private retailers, private wholesalers and private electrical contractors, and to compete on unfavourable terms. I do not believe that we can justify this huge surplus—I emphasise that it is a quite unparalleled surplus, not only in our history, but in the history of the western world—on the ground of balance of payments. The Chancellor knows that he will have a comfortable balance this year and next year. I suppose that the only justification for not accepting my Amendment, or for not wiping out the surplus at a stroke, is the effect that it would have on the general level of prices—the theory that it would accelerate inflation, indeed that it is possible to accelerate the present rate of inflation. I want to point out some fallacies to answer this objection which I imagine the Financial Secretary will put forward. In the past Keynesian economics have undoubtedly worked. The idea was that one could somehow reduce inflation, stem price rises, by lowering the level of demand by either monetary or fiscal means—by extracting money out of the taxpayer's pocket, £2,500 million more than the Government need to run the country. Up to 1965 many of us would probably agree that this in fact worked. There was the famous Phillips curve which showed, roughly speaking, with certain kinks on the way, admittedly, and certain reservations to be hedged around, that there could be stability of prices provided that an unemployment level of about 2·4 per cent. was maintained. It was a somewhat cynical argument, and I would not wish to go along with it. Nevertheless, from a purely mathematical and economic point of view broadly speaking it worked. In the last five years this theory seems to have totally broken down. It cannot any longer be assumed that deflationary measures will curb prices. It is very difficult to know exactly how this has happened. If the Treasury is arguing, as I believe that it will argue, that to accept my Amendment, and thereby virtually to wipe out its surplus, would increase prices, it must say how it believes that that would work, because undoubtedly the whole theory has broken down in the last five years, possibly because trade union power enables trade unions to get wage increases anyway without having to consider the general level of taxation. Since 1965 we have had high unemployment, high rises in prices, a low growth  rate, and very high increases in taxation. So the Phillips curve no longer operates—or, if it operates, it operates at a very much higher level of unemployment than 2·4 per cent. and a level which I believe that no one in the House of Commons, of whatever political complexion he may be, would regard as politically acceptable. Indeed, it would probably be a level which the country would certainly not regard as politically acceptable. Therefore, perhaps Keynesian economics can no longer be relied on to control inflation by reducing demand. If the Financial Secretary does not agree, will he say what level of demand—what level of unemployment—would be required to make this work? I do not want to make much more of this case, because I am setting out in as brief a detail as I can the broad aspect of my case. The case that I am deploying is not that I necessarily believe that a reduction in income tax is the best way of wiping out the surplus. However, I believe that there was scope to reduce the income tax by this amount and I believe that the Chancellor needs to answer us as to why he was unable to do it. When the Conservative Government came to power it was generally assumed—a large number of inspired leaks in the Press showed that this would happen—that they would reverse the policies pursued by the Labour Government and try to defeat deflation by cutting rather than by raising taxation and that they would go for an expansion in the economy. In fact, it is now clear, as a result of the fact that the 6d. off income tax and the other reductions just balance, that there will be no major tax cuts, no monetary relaxation in the near future, and that there may even be some additional squeezes. Yet on the evidence of the last five years this has been totally futile. In final support of my case I quote from the National Institute Economic Review of August. I know that the Institute's reviews have a way of being overtaken by events and that August may seem a rather long way off in economic history. Nevertheless, I believe that this passage from the Review cannot be gainsaid.  It is the Institute's central argument and it is my central argument: "Reflation in 1970 would surely make the balance of payments surplus next year smaller to a significant extent than it would otherwise be. The argument for it is simply that the balance of payments surplus allows some room to move and the offset would be a gain in output and the prevention of further rises in unemployment." This is the key phrase: "Reflation is unlikely to have any significant effect on the rate of inflation one way or the other." Does the Financial Secretary accept that opinion, or does he argue that, by accepting my Amendment or any other Amendment that might have the same net effect—namely, wiping out the surplus—he would be running grave inflationary risks? I believe that there is no way round the problem of inflation other than by acting directly on the wage push inflation which we have. I do not for one moment believe that the Government can do this simply by standing up to strikes, which on past records no Conservative Government will do, anyway, even if they ought to do so. I believe that the Government can do this only by changing the tax system so that it acts directly on rising costs, which is a very sophisticated and complicated procedure, or by indulging in a new incomes policy. However the Government do it, I do not believe that they can any longer argue that the result of my Amendment, whatever other social results it might have—I should have thought that it would be eminently desirable for a Conservative Government to reduce the rate of taxation to 5s. in the pound; I hope that the hon. Member for Worcestershire, South will back me in this when he rises—would be reflation.

[Miss HARVIE ANDERSON in the Chair]

4.15 p.m.

Sir G. Nabarro
The hon. Member for Cornwall, North (Mr. Pardoe) was a trifle presumptuous in his opening sentence when he alluded to the fact that I had not set down an originating Amendment to reduce the standard rate of income tax by a margin larger than that decided upon by my right hon. and hon. Friends at the Treasury. The facts are clear and are well known in the Committee on the Finance Bill during all of the last five years. In 1966, 1967, 1968, and again in 1969, there were originating Amendments of mine which sought to reduce the standard rate of income tax, always coupled to a reduction in the surtax rate. All of these I first moved in 1966, and they were then unsupported by my Front Opposition Bench, but in the later years they were warmly supported by my right hon. and hon. Friends. The only difference between us was as to the amount by which the standard rate of income tax and the rates of surtax should be reduced. I dislike the Amendment and will vote against it. It would be silly to suggest that we could afford in the present state of our finances, for a variety of reasons, to reduce direct taxation by an amount which I believe would cost between £900 million and £1,000 million. The standard rate of income tax reduced by 6d. costs £315 million in the first year and £350 million in a full year. If the standard rate were reduced from 8s. 3d. to 5s. it would so warp the whole of the current expenditure on consumer goods, and notably on consumer durables, if unaccompanied by a reduction in the levels of indirect taxation, as to make any worth while calculation of the total cost to the Treasury impossible. Britain has never reduced income tax by more than a few pence at a time, for the very clear reason that it distorts the whole of the economy in the year of reduction by an amount which would make far too great an impact on the pattern of consumer expenditure generally. I believe that 6d. in the pound off the standard rate, which the Treasury have proposed this year, is about the right margin of reduction for the first year of a Conservative Government. It is only a sweetener and a tonic, nothing more. It is making progress towards the levels which I have always advocated from the Opposition benches and which I will repeat: in a full Parliament, a reduction in the standard rate of income tax to 6s. 8d. in the pound and a reduction of the top level of surtax to no more than 6s. 8d. in the pound. The two should together ensure that no salary or wage earner, however much he earns, will ever be liable to assessment to direct  taxation at a level greater total than £2 for tax out of the last £3 he earns, or 13s. 4d. in the pound as a total. That compares with the American total of 14s. in the pound, which the Americans express as 70 cents out of the last dollar that a man earns. A man should always be able to retain £1 out of the last £3 he earns. Sixpence off the standard rate of income tax, as proposed in the Bill, is reasonable progress, in the Government's first year, towards that target. I would not propose any more, but I hope that it is indeed only a sweetener and that in successive years we shall embrace the principle of taxing earning less and taxing spending more and giving consumers absolute choice as to how they spend their net take-home pay. At Question Time earlier there was a cacophony from the Opposition benches, with shouts of "Shame", because I said that a Minister, a colleague of mine, should support a policy designed "to spend less in the boozer and spend more on the kids". I prefer milk to beer. I am proud of that fact, and I unbutton my jacket to display my waistline—in the interests of my farmer constituents as well. That allusion was lost on hon. Gentlemen opposite. The consumer should always be allowed to judge for himself how he spends his take-home pay. I want the take-home pay, the net income, to be as large as possible. I should always support a policy of taxing earnings less and taxing spendings more, and the Bill makes progress towards that. To overplay the hand, as the hon. Member for Cornwall, North wants to do in this particular manner of sweeping income tax down from 8s. 3d. in the pound to 5s. in the pound, which would be a reduction of 3s. 3d. in the pound and a rate of reduction 6½ times as great as the generous proposition of my right hon. Friend, seems to me cloud cuckoo-land and utterly unreasonable in the face of generous treatment by the Treasury Ministers. As regards the second part of the hon. Gentleman's speech, like most Liberal speeches, there is a grain of truth in what the hon. Gentleman expounded. Since 1945 we have grown up with these wretched policies of trying to cover the below-the-line expenditure in every  Budget by taxation surpluses. That is what the hon. Gentleman was denoting in all that he said. I sympathise with him a great deal, because it is placing an enormous burden on taxpayers. But has he stopped to consider what would be the effect of what he now proposes? If the Liberals had the power, which they will never have, to carry through the kind of policy which he was enunciating, if all the nationalised industries had to go to the market every year and raise a sum varying between £1,000 million and £2,000 million, according to circumstances year by year and the value of the currency, the rates which they would have to pay would be competitive. A public company with a London stockmarket quotation in the blue-chip category recently had to pay 10½ per cent. for Debentures, 1992–1993, and there are many examples of this kind. It follows that the nationalised industries, if without Treasury guarantee would have to pay a similar interest rate.

The Financial Secretary to the Treasury (Mr. Patrick Jenkin)
Or more.

Sir G. Nabarro
Or more. I am glad to have my hon. Friend the Financial Secretary to the Treasury correct me. I am under-stating the case deliberately. As always, I understate because I do not wish to be accused of exaggeration. But this is a serious argument. If a blue-chip company has to pay 10½ per cent. for debentures, it follows that a nationalised industry would pay as much, if not more. Their interest rates on borrowing today are very much less than that. I think I should be out of order if I went through the whole gamut and delineated what the nationalised industries are paying. But they are paying about two-thirds of that market rate, as an average. They are heavily subsidised through the Treasury in their capital structure.

An Hon. Member
Through us.

Sir G. Nabarro
I agree. It is a method of keeping prices down for basic services such as electricity, gas, coal, airlines, and a whole string of industries. It may be logically and morally wrong. But I hesitate to go as far as the hon. Gentleman the Member for Cornwall, North when he said so sweepingly that all the nationalised industries should raise their money on the open market, and presumably he meant straight away. The  immediate effect of that would be a very large increase in the price of electricity, gas, coal, transport, road building and many goods and services which are today conducted directly and indirectly, by nationalised industries. I agree that the amount of the Treasury surplus on taxation account ought to be reduced year by year by a Conservative Government and that a part of the capital requirements of nationalised industries could be raised on the open market. The airlines are one good example. Even on a Swissair basis, as the Swiss raise their money for capital requirements for their national airline, so we could raise our money for B.E.A. and B.O.A.C. on similar lines. But the huge requirements of the electricity boards, the gas boards and the coal industry would be manifestly impossible to raise on the open market without creating consumer inflation of an order that none of us would contemplate. In the limited context of this Amendment, it would be injurious to good order to go wider afield pending the further debate on Clause stand part, in which I hope many of us will participate. But I believe that 6d. in the pound is the correct amount of reduction. I hope that the 21 million taxpayers of this country will note that a Conservative Government did all this in the fourth parliamentary sitting week of office, between 2nd July and 27th October. The Government have seized the earliest opportunity to put into effect their twin policy of a reduction in public expenditure accompanied by a reduction in taxation. I commend to the Financial Secretary for the Treasury the swift reaction of the Financial Times on the morning of 28th October, the day after my right hon. Friend the Chancellor of the Exchequer's statement. The Financial Times gave an unallowed and unqualified statement of approval for the method by which this exercise had been carried out. The words of its first leader are worth repeating to the Committee: "The Government was committed to reducing the growth of public expenditure as a pre-condition of lowering taxation, and it has succeeded in doing precisely that. Large savings in expenditure cannot be made without major changes in policy and the directions in which the Conservatives were anxious to change policy were well known; Mr. Barber's package is very much what was expected and is none the worse for it. He has found economies in several different ways." 4.30 p.m. The important thing is that the best financial organ of the Press fully expected what was coming. It immediately stated, on the day after the mini-budget, that that was exactly what the Conservatives fought the General Election on, and they implemented those Election promises immediately they were returned. It is true that I sit for a constituency with a large Conservative majority and very little manufacturing industry, but I did not confine my election campaign to South Worcestershire. I spoke in many of the most heavily industrialised areas of the country further afield, and the policy that I advocated throughout was, first, a reduction in public expenditure right across the board; second, freedom for the consumer to spend the largest possible measure of take-home pay as he chose—in other words, my caption today, "Spend less in the boozer, and more on the kids" and I am proud of it; it is good advice to all those who are not so temperant as I am—and, third, the immediate measure brought in by my right hon. Friend the Chancellor of the Exchequer to reduce direct taxation consonant with the reduction in public expenditure. All that, I say is good honest policy. It is exactly what the Tories promised at the General Election, and I am proud to speak from this seat below the Gangway today and most warmly congratulate my right hon. and hon. Friends the Treasury Ministers. I call on them to reject absolutely the fiscal extravagance of the isolated Member of the Liberal Party.

Mr. John Fraser
I should like to follow the hon. Member for Worcestershire, South (Sir G. Nabarro) on this question of the interpretation of remarks made during the General Election campaign about what kind of tax reductions would be achieved and how they would affect people. There are two views that can be taken. One can take the view put forward in the revenue law review in The New Law Journal, a matter which might bring tears to the eyes of some people when one considers the operation of the present rate of income tax. I give two tear-jerking examples that must have reverberated throughout the  industrial centres of the North. Dealing with high rates of taxation, the first reads: "Mr. X had an investment income of £40,000;"— poor Mr. X!— "the only allowable deduction for surtax purposes was £3,000 interest" which he paid on a loan for the purchase of his house. The second example reads: "Mr. D is a gentleman of leisure with an investment income of £4,000 per annum. He is married with one child … That is one view of the tear-jerking, difficult situation in which some people find themselves with a high rate of standard income tax of 41·25 per cent., and clearly they want a reduction. Those are the people who support the Conservative Party in the measures proposed in the Bill, in the same way as the shareholders of a public company support the directors by proxy votes. But there is another view. It is the view of the people to whom the hon. Member for Worcestershire, South spoke during the election. They are the people who, when told that there was to be reduction in the rate of income tax, imagined that that would make a substantial difference to the amount of tax that they paid on their overtime earnings. It was the view of the investor that was mostly endorsed by the Conservative Party, not the view of the working man. Let us consider the reduction proposed in the Bill. This is a reduction in the standard rate of income tax of 2·5 new pence, or 2½ per cent. for a person with unearned or investment income, and a reduction of 1·5 per cent. or 1½, new pence for a person who works for his living. What was suggested during the election campaign in terms of reducing income tax was that the tax on someone's overtime earnings was to be very much less. The result of the proposal in the Bill will be that the person on unearned income will be comparatively better off, and there will not be a substantial difference in the amount of money that a person gets on his overtime. That is what the Clause achieves, and the Amendment moved by the hon. Member for Cornwall, North (Mr. Pardoe) would make it even worse. It would make the discrepancies much  worse than they are even under the Conservative proposals. If one is to have some kind of incentive, if one really accepts that within the limited context of the Bill tax reliefs are to be given away, surely the way to do it is to give relief to those who work for a living? Let me give one example of how this operates in my constituency. A week or two ago I appeared before the rent officer. Three years ago the executor of a deceased owner of 100 houses in my constituency sought, quite properly, to increase his rents under the Rent Act by £2 a week, thus giving him an increase in his unearned income of £10,000 a year. He recently went back to the rent officer to ask for an increase of 15s. a week, which would add £3,900 a year to his income. I cannot support a Bill which provides an extra £3,000 to people for, if I may use the expression, sitting on their arses and doing nothing, which provides very little benefit for those who pay no tax at all, and which provides no benefit for those who have to pay that rent increase. I cannot support that kind of measure, and it is for that reason that I cannot support the Amendment, either. I must not spend too much time talking about the Amendment which I should like to have had selected, but which has not been chosen for debate. My view is that if we are to change the standard rate of income tax it should be brought down for those who work for their living. At the moment the difference between the treatment of those who live on unearned income or investment income and those who have to work long hours, under arduous conditions, is not great enough. There is still not the incentive for a man to work, compared with the incentive to invest. It is worth looking at some of the comparisons in the tables provided by the Treasury to show the effect of this reduction in the standard rate of income tax. Let us consider, first, a single man with an earned income of £1,000 a year. He will be better off by £11·32. With an unearned income of £1,000 he will be £16·87 better off. There is therefore no great incentive there for someone to work harder. A married couple, with no children, and an earned income of £2,000 a year  will be £27·26 better off by this reduction. If they have two children over 11, they will not be quite so well off. They will get £22·56 extra a year. If they have unearned income of £2,000 a year, they will get an extra £38·37 a year. Again there is no switch of incentive to those who have to work for a living. One can take example after example. Married couples get only a few shillings, or nothing at all, from this proposal. The single man with an unearned income of £10,000 a year gets an extra £242. For those reasons I cannot support either the Amendment or the general proposition that there should be an across the board cut in taxation, without taking account of the differences between those who work for a living and those who do not, and the professed need for incentives for those who work overtime. They have been shabbily disillusioned by the events of the past few weeks.

Mr. Julian Ridsdale  (Harwich)
I cannot support the Amendment, but the hon. Member for Cornwall, North (Mr. Pardoe) has done a service in at least underlining a very good Liberal principle, that money should fructify in the pockets of the people rather than in the coffers of the State. He possibly moved the Amendment with his tongue in his cheek because, owing to wage inflation and demand, until we have been able to encourage saving far more we could not increase demand to the extent that the Amendment would increase it. We must apply our minds to the matter far more and not dismiss it lightly, like my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), when he said that it would put a heavy cost burden on the nationalised industries if they were forced to go to the market for their capital. There is more than a grain of wisdom in the point of the hon. Member for Cornwall, North that as far as possible the nationalised industries should go to the market for capital. But it follows that for them to do that there must be some capital there, and until we can reduce taxation it will not be there. I am sure that the Government will make further reductions in taxation, but hand in hand with them must go measures to encourage saving. I welcome the Government's measures, but I hope that in  the next Budget they will be very positive in making further reductions to encourage savings, and will bring investment and earned income on to a par, or even encourage investment income more than earned income. The country's need is to get more investment in manufacturing industry, which can be done only by saving and by encouraging investment from overseas. That is the way to help the pensioner. Therefore, whilst I shall naturally go into the Lobby against the Amendment, because it is unreal, I sympathise with the hon. Gentleman's ideals. He has done the House a service in moving the Amendment. I hope that by the time the Government have gone their full course we shall have had reasonable and big reductions in personal taxation, and that we shall encourage saving. The key reductions in taxation must be to encourage personal savings.

Mr. Robert Sheldon  (Ashton-under-Lyne)
The hon. Member for Cornwall, North (Mr. Pardoe) pointed out the omission from the Amendments to this year's Finance Bill; he said that the hon. Member for Worcestershire, South (Sir G. Nabarro) had not put down his customary Amendment to reduce income tax by his customary 3d. or 6d. Another Amendment that is lacking is the one that my hon. Friend the Member for Heywood and Royton (Mr. Barnett), now elevated to the Opposition Front Bench, and I used to put down calling for a differentiation between the rates of income tax on earned income and on unearned income. One of the things that we hope will eventually come about is a reorganisation of the income tax structure so that that reform, among many others, is carried out. It has always struck me as very peculiar that whereas most people in private life or industry take great care to make their charges appear less, in income tax we do the reverse. We tell the people of this country that they are paying 8s. 3d. in the pound when they are paying only 6s. 5d. If it had been the other way round, it would be nearer to the kind of practice frequently seen on the fringes of the commercial world, but what we are doing is absurd. If the argument about incentives and disincentives has any meaning, we should put right the misapprehension of those less-sophisticated  members of the taxpaying public who really feel that they are paying more than they are. That Amendment was an omission, but I hope that the point is still made even without it. 4.45 p.m. My hon. Friend the Member for Norwood (Mr. John Fraser) pointed out the regressive nature of the income tax changes. It is scandalous that those with high incomes obtain greater benefit than those with average incomes, and those with unearned incomes obtain the greatest benefit of all. The Minister for Trade and Industry has said that he is trying to do many things for what he called the wealth creators. I should not like to put too narrow a definition on that phrase. We have wealth creators at all levels of our society. If the right hon. Gentleman really means that he will help the wealth creators in the higher income class, which is what I think he meant, I fail to understand why those with unearned income at all levels have done better out of these measures than those with earned incomes at the same high levels. The Amendment would make the position much worse, because surtax is the slab on the top, and as the rates are brought down so that proportion of that surtax slab appears more important. If we brought down the rates to 25 per cent. the surtax payers would get far the greater proportional benefit. But we do not need to go too closely into the consequences of the Amendment. Its effect on wage claims would be absurd. The hopes of getting anything like a final settlement at levels of inflation that might be acceptable to us would have gone for a long time to come. Its fairness is obviously questionable. So I regard it as an Amendment put down simply for the purpose of discussion, and I will treat it so.

An Hon. Member
It is a Liberal luxury.

Mr. Raymond Gower  (Barry)
The hon. Member for Ashton-under-Lyne (Mr. Sheldon) is putting forward a very strange theory, that if we increase tax rates we are liable to have increased difficulty with wage claims and that if we reduce them we are also likely to have increased difficulty with wage claims. Therefore,  whether we put taxes up or down, according to the hon. Gentleman some sort of wages stability is then more difficult.

Mr. Sheldon
No. The whole point lies in the manner in which it is done. If tax rates are reduced so that all will benefit in one form or another, that is non-discriminatory. When a measure is introduced as a result of which certain sections of the community do very much better than certain others, we are bound to find the difficulties to which these measures will lead. The point I return to is that also made by the hon. Member for Cornwall, North in talking about the Phillips curve. I prefer to call it the inflation-unemployment relationship, which is perhaps a little easier for most people to understand. It used to be thought that if one increased unemployment one reduced inflation. It was becoming quite a precise system of measurement between the one and the other. The difficulty is that we must adjust to quite new circumstances. I do not think that economists have fully grasped the importance of what has been happening over the past few years. I see economic laws falling into two broad categories—one where the relationships are fixed by the very nature of money, or whatever it might be, and the other where relationships depend on people's attitudes. It is the latter kind that is now the most important. The idea that most people can be frightened into not going in for wage increases is trying to return to the situation in the pre-war years. This is what it is all about. Why did unemployment go hand in hand with little inflation? Because the people were cowed. As the threat of depression came near to them they reacted in the same way as they had done in the past. They increased their savings, saving for the rainy days to come. They did not put in their wage claims because they were more frightened of the sack than of an inadequate wage. That was the situation that had existed for hundreds and hundreds of years. It came to an end in 1940. Those people who started their working life at about the age of 15 are 45 today, and far the greater part of the working population have not had that fear of  large-scale unemployment. Instead, they have had the expectation of improvements in their standard of living year by year. The importance of this is that they will not be frightened by any talk of unemployment in the future. They will not react in the same way. Therefore, the deflationary measures that the Government may take will not have the same effect upon wages now and in the future as they did 10 or 15 years ago when those memories were much stronger than they are today. As a result, a whole host of such relationships, which were the stock-in-trade of the economists and the Treasury, will have to be rewritten and revised. The whole of our standard rate debates will eventually have to come to an end. The very existence of a standard rate is an anachronism. The standard rate is the greatest barrier to tax reform. What we need is a progressive rate of taxation from those who just come into the tax category to those at the highest levels. We try to get the curve by means of a fixed rate and to adjust it by means of allowances and so on. When we talk about the standard rate we are really trying to fit a fixed rate into what is a variable percentage of income deducted for taxation. We are trying to fit a square peg into a round hole. The time is coming when we must reform this. We must accept that the idea of a standard rate producing that curve is something of the past. We must work it on a new basis of a variable percentage. Then, and only then, will a Chancellor be able to say, "There are certain people we want to benefit and there are certain others who might be asked to pay a little more." He will be able to adjust those rates which he wants to increase and reduce those which he wants to reduce. That is a reform which I hope the Financial Secretary will bear in mind because of the flexibility he can eventually obtain, together with the ending of some of the anomalies that crop up every time we play around with the standard rate just because it is the easiest, and frequently the only, way in which we can obtain a quick reaction to events. In the past many Governments have come to office with imagination and little wealth. That was the problem of the  great reforms of the past, reforms that were never really carried through because the money was not available. Imagination was strong, but wealth was weak. The present Government are the first in recent decades to have had the means with which to carry out a number of schemes of reform. One of the saddest aspects is that so far they have lacked the imagination. Faced with having for the first time for many years no balance of payments problems, they could have made an attempt to get to the root of some of our problems to start the expansion that Macleod talked about and other Ministers used to talk about. Instead, they have shown their lack of imagination by concentrating on the most dreary, lack-lustre ideas that they had in the past—reducing public expenditure and reducing income tax. Their lack of imagination is shown up in their application of these old remedies.

[Mr. GURDEN in the Chair.]

Sir Harry Legge-Bourke  (Isle of Ely)
I apologise to the hon. Member for Cornwall, North (Mr. Pardoe) for being unavoidably absent for most of his observations. However, his Amendment is reasonably easy to understand and I wish at the outset to warn him, although I have not had the advantage of hearing his arguments, that it is always easy to outbid the Government of the day when one does not have responsibility for conducting the affairs of the nation. The hon. Gentleman wants to reduce direct taxation still further, and I have every sympathy with his aim. We must first establish that we have in office a Government who desire and intend to reduce direct taxation. The degree to which it can be done is another matter. At least we now have, after 11 years, a Government who are seeking to reduce direct taxation, and this is quite something.

Mr. Pardoe
The hon. Gentleman is now making a theological pronouncement to the effect that one can have salvation by intention.

Sir H. Legge-Bourke
We must first get the intention facing in the right direction. Then we can ensure that the intention is put into operation. We must  not overdo it and I fear that the hon. Gentleman's Amendment would overdo it in such a way that we should reverse the principles contained in the Government's present intention on direct taxation. I congratulate my right hon. Friend the Chancellor of the Exchequer on his 27th October statement and, for the first time in 11 years, on ensuring that we shall have a reduction in the standard rate of income tax. This is a major achievement. Although it is easy to make a distinction between one form of income and another, there is no quicker way of bringing home to the electorate the intentions of the Government than by ensuring that everybody is to some extent a beneficiary of the Government's declared policy. The direct form of taxation is obviously a blunt instrument. However, I particularly take issue with the hon. Member for Norwood (Mr. John Fraser) who talked about unearned income. As our thoughts on this subject have progressed, we have been trying to be somewhat more sophisticated than merely lumping all investment income together and calling it "unearned" income. We must recognise that income derived from investment is often derived from savings gathered during one's working life; put away perhaps in the form of an investment for retirement. Often this represents the financial sum of the effort made by people who have been prepared to stint themselves to a considerable extent throughout their working lives. I prefer to use the phrase "investment income" rather than "unearned income", although I accept the argument of the hon. Member for Norwood that some people inherit their money or do not have to work hard for it or otherwise derive their income purely from investment. However, a great deal of investment is capital derived through hard work, often by people who have served the nation outside the country and who have stinted themselves to put a little by so that when they retire they have a decent income on which to live in addition to any pension rights that they may have.

Mr. John Fraser
Does the hon. Gentleman concede that those who put money by in the way he has described are often helped by the considerable tax benefits  resulting from insurance policies, self-employed annuities and so on? When they draw this money during their retirement they are receiving money which, in any event, has earned income tax relief.

Sir H. Legge-Bourke
There are many refinements to this argument. Nevertheless, it is too easy to lump all unearned income together under one heading without supposing that effort has been expended to gain the capital which provides the income. I am looking forward to the day when there will be a greater equalisation of taxation on investment and earnings. Up to now the distinction has been far too great and has too frequently been based on the assumption that no work has gone into providing the capital that has been earning the interest. 5.0 p.m. I regret that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) is no longer in his place. I wanted him to know that I appreciate that the Labour Party is at last beginning to learn something about this financial issue. I recall how in my earlier years in this place I kept hearing the Labour doctrine that there was some virtue in direct as distinct from indirect taxation. The hon. Gentleman seemed to be making it clear that hon. Gentlemen opposite are moving in the direction of my hon. Friends in recognising that there may be a case for shifting away from the direct taxation of earnings to ensure that people have a bigger say in how they spend their money before the State takes it from them. This is the philosophy underlying Conservative policies to which I am fully committed and which were enunciated during the last election. It seems obvious to me that we should leave more of people's earnings in their pockets so that they may decide how to spend their money—recognising, at the same time, that they may be paying an indirect form of taxation, value-added or whatever kind it may be. At least they are then able to choose how to spend their own cash. I am convinced that there is no single element of taxation that is more bitterly resented by the working population than direct taxation on earnings, and particularly earnings derived from overtime.  At least in the Chancellor's statement of 27th October we had, for the first time in a long time, the clearly-declared intention of reducing direct taxation. This will be one of the cardinal features of a complex policy which will, I am sure, be designed to increase the individual's sense of responsibility, the reward he gets from his labours and earnings and his capacity to save. These are fundamental to any solution of the biggest problem that we have, which is inflation. I am convinced that the Chancellor is right, having inherited a Budget which he did not devise, in not overdoing it. However, it is clearly his intention to aim at a substantial reduction in direct taxation and I hope that this reduction next year will cost between £40 million and £50 million. This would be a move very much in the right direction. I congratulate my right hon. Friend on what he has achieved so far and I hope that the Amendment will be resisted because it would overstrain the economy, particularly in our first year in office.

Mr. Sydney Bidwell  (Southall)
There is a considerable element of truth in what the hon. and gallant Member for the Isle of Ely (Sir H. Legge-Bourke) said about workers resenting paying a high proportion of their overtime earnings in income tax. Every Government have found it difficult to divorce one form of earnings from another, be they overtime, bonus payments or straightforward wages and salaries. It would be an utter impossibility successfully to carry out such an exercise because of the variations in earnings which exist, including the variations in overtime. There are many earnings opportunities and often it is hard to tell what is overtime and what is not. It is, therefore, rather pointless to introduce a matter of that kind into a debate like this. When hon. Gentlemen opposite extol the virtues of the mini-budget, they should fully appreciate what 6d. off the standard rate means to ordinary workers who are not surtax payers and who do not live on investments. I am talking about the majority of those I represent, who may have a few building society shares or a bit of money in the Post Office, but most of them save for Christmas and a damned good holiday once  a year. That usually represents the sum total of their savings. Only when they rise to a higher income bracket are they able to save in the longer term. There is, therefore, a wide chasm between the various categories of earners and savers and this must always be borne in mind when we discuss what something off the standard rate of income tax means. I agree with the hon. and gallant Member for the Isle of Ely that many workers are beginning to rethink this problem. They are, however, rethinking it not for the reasons he adduces but because they are realising to the full how an equal reduction in the standard rate benefits the surtax payer far more than it benefits the ordinary worker. It must be a gigantic reduction if the ordinary worker is to benefit to any extent. In any event, I urge hon. Gentlemen opposite to remember that many of the people about whom I am speaking have attended lectures at the National Council of Labour Colleges and elsewhere and know something about the effects of inflation. They are not interested in illusory wage increases. They are struggling to sustain their standard of living and, if possible, to improve it. They want the nation to think in terms of expanding the economy because they feel that only by that means will the standard of living of the ordinary people be increased. It is not possible to think narrowly in a debate of this kind in the way that the hon. Member for Cornwall, North (Mr. Pardoe) did in proposing what is a simple Amendment. He wants to reduce the standard rate and so release a considerable amount of purchasing power by that means. If the Government considerably increased the social wage—and the Labour Governments of 1945 and 1951 increased it considerably—who knows what psychological effects that might have in a free society in terms of—

The Temporary Chairman
Order. I am not calling the hon. Member to order because he has said something that is out of order but because this might be an opportune moment to mention that as this debate has gone rather wider than the Amendment under discussion, I agree with my predecessor in the Chair that perhaps the discussion which has occurred will be sufficient to cover the Motion,  That the Clause stand part of the Bill, when that Motion is put. In other words, I hope that it will not be necessary for that Motion to be debated, though I agree that we can see what happens when we reach that stage.

Mr. Bidwell
For a moment I thought that you were calling me to order, Mr. Gurden. It seems that, on the contrary, you are commending my line of reasoning. Many ordinary working people have learned a great deal from the minibudget, and I am referring to people other than those whom the hon. Member for Worcester had in mind—

Sir G. Nabarro
rose—

Mr. Bidwell
I keep calling the hon. Gentleman "the hon. Member for Worcester" when his constituency is, of course, Worcestershire, South. I always think of Worcester sauce when I think of him.

Sir G. Nabarro
The hon. Gentleman must get it right. Worcester sauce comes from the city of Worcester. I represent the parliamentary constituency of Worcestershire, South. I hope that in future he will get it right instead of being in a permanent muddle.

Mr. Bidwell
While I agree that the whole question of the party division arises on this issue, it is obvious that a great deal of new thinking is taking place among ordinary people about the social wage. Many of them—I am referring to those at the ordinary working class level—have not valued this in the way in which it has always been valued by people of my generation and those rather older than me. We recall what life was like before the Welfare State came into being. Those without this knowledge cannot know what it is like to pay for ambulances, doctors' visits and prescription charges on the scale now proposed by the Government. They are beginning to have new thoughts about this, and I mention it only to strike a note of warning to the Government not to go too far with the policies they have been pursuing up to now. The reduction in the standard rate of income tax has been made possible by pinching the primary school milk, and  taxing the sick by imposing a waiting period of three days. The money is not coming from a growth in the wealth of the nation. This is an example of doctrinaire Toryism which has little to do with the state of the nation. The hon. Member for Cornwall, North was a little worried about budgetary surpluses. I share his worry, but I do not reach this conclusions. Like my hon. Friend the Member for Ashton-under-Lyme (Mr. Sheldon), I look forward to the day when the standard rate of income tax is graduated so that people who have hitherto not paid income tax are not suddenly plunged into paying 8s. 3d. in the £. This can be done when there is that progressive movement of the economy which Britain so desperately requires. If the hon. Member for Cornwall, North is so worried about this, I can think of dozens of ways of spending the surplus which will not have a damaging inflationary effect. I think immediately of old-age pensions and child allowances. Old-age pensions are an urgent matter. We should not talk about an increase a year or two years hence but of an immediate increase on the basic rate. The Financial Secretary might refer to figures which will show that this is too costly—

The Temporary Chairman
Order. The comments being made are even outside what I said earlier about engaging in what could be a debate on the Question, That the Clause stand part of the Bill.

Mr. Bidwell
I take note of what you say, Mr. Gurden, but the introductory speech, which you did not hear, laboured the subject of budget surpluses and this was used as an argument for the Amendment. I am grateful to the hon. Gentleman for proposing the Amendment. In my constituency there are many poorly paid workers, some of whom have come from the Commonwealth. They work quite hard for low pay, and they would be delighted if they could earn incomes on which they would have to pay more tax.

5.15 p.m.

Mr. Raymond Gower  (Barry)
There is a good deal in what the hon. Member for Southall (Mr. Bidwell) said about the virtues of caring for the persons he  described in his closing sentences, but for many years successive Chancellors of the Exchequer have imposed extra taxation, including extra direct taxation. Whereas it may be true that there has been a modest increase in what the hon. Gentleman described as the "social wage", increased taxation has not led to a dramatic increase in productivity or to a marked increase in savings. It is all very well for successive Chancellors of the Exchequer to preach the virtues of thrift and harder work, but a tax system which discourages those virtues inevitably leads to failure. It would be folly to suggest that the Government's new approach is an open sesame to a system which is certain of success, but there is a greater chance of success with the new approach than there would be if we continued along the lines which have proved to be ineffective. The psychological aspect of this may be of great importance. The hon. Member for Cornwall, North (Mr. Pardoe) wanted to go a step further in the reduction of the standard rate, but he will agree that it is a matter of judgment for the Government and the Chancellor of the Exchequer whether so much can be done at once. I do not object to the principles which he enunciated, and I feel that our approach is an earnest of our intention to move in that direction. This modest reduction in direct taxation is a notice of greater reward for those who study for extra qualifications. It is a notice to those who practise thrift that there will be a greater reward for them. It is a notice to those who work overtime that at the end of the day they will retain a little more money. This is a modest move in the right direction which, although we must not over-estimate its importance, could be of great importance psychologically.

Mr. John Golding  (Newcastle-under-Lyme)
I rise to speak on the subject of incentives to manual workers. I am not qualified to speak of incentives to business men or to those who can save but I can say something about incentives to workers to work longer or harder. I query the assumption that a reduction in tax will increase the incentive for working overtime. There is a great mythology that a reduction in tax rates will increase the willingness of men to work overtime. Every trade union official  knows that the problem is not to get men to work overtime but to prevent them from working extremely long hours. The hours of work in bakeries, of which there are many in Newcastle-under-Lyme, are very long. The report of the National Board for Prices and Incomes showed that men had to work for very long hours, and often on their rest days, to earn a wage equivalent to the average wage. Pottery workers are working on average six hours a week overtime. I could go on to describe the overtime working among bus conductors and bus drivers. From industry to industry one finds long hours of work and men working on rest days. A comprehensive study on overtime working was done by a review body for the Donovan Commission. This demonstrated that, far from overtime being an advantage to industry, it was a disadvantage. I look forward to the report on this subject to be published in a few weeks time by the N.B.P.I. I am convinced that the N.B.P.I. will arrive at the same conclusion, that overtime working in British industry is undesirable. It is undesirable for the men who have to work for such long hours away from their homes. The accident rate increases and the men suffer greater occupational ill-health. It is easy to see why it is a disadvantage for the men. Many employers oppose overtime grabbing. They know that it is an inefficient way to run industry. If a man can earn overtime his natural inclination is not to work so hard during the day. Men resort to the practice of creating overtime by working slowly in the afternoon so that they can work "policy" overtime at night or at the weekend. We should be doing a far greater service to industry, both to management and men, by pointing out that the hours worked in this country are far in excess of those worked in most countries in Europe and by directing our attention to reducing the working week and making sure that the hours worked are more productive than by trying to extend them. Frankly, I do not think any reduction in tax rates will increase the hours worked in overtime. On the question of people working harder, it is somewhat ironic to me when industry is trying to get rid of piecework  that we in this House are talking in terms of a reduction in the standard rate of tax as an incentive to work harder. What is happening in industry generally is a growing recognition that there is no direct way to reward the individual worker for effort. Looking at most situations in industry, I believe that the worker cannot earn more by working harder. Perhaps there are some situations involving piecework where he can, although many employers are trying to get rid of piecework because they realise that it leads to a situation in factories in which the organisation of work is less efficient than under a system of measured day-work or similar systems. It is not helpful to an employer to try to persuade workers to work harder under a piecework system. But if there is not that incentive, then there is no incentive at all for workpeople to work harder in the present industrial situation. This fact is being overlooked by those who talk in terms of tax incentives. They are thinking of the situation in which the business man finds himself whereby because of increased effort he can increase his earnings. The single point I wish to make is that the majority of manual workers can find no way under the present system in which to increase their earnings. The only possible way in which these tax reductions can affect the earnings of manual workers is for the employer to do what he should have done a long time ago and that is to tackle the problem of organising production. The only way to increase productivity is not by men working longer or harder, but by an improvement in the whole system of industrial organisation. I do not support the Amendment.

5.30 p.m.

Mr. A. E. Cooper  (Ilford, South)
It is very agreeable to catch the Temporary Chairman's eye this afternoon after an absence from the House of 4½ years. My hon. Friend the Member for Barry (Mr. Gower) and others have talked about giving reward to workers or to people who will benefit as a result of these reductions. But we must not overlook that this is not a reward. It is simply that the Government of the day are allowing us to keep more of the money we have earned. The truth is that the working population, whether it works by its hands or its brains, must by its efforts provide the wherewithal to educate our children, to pay pensions and so on. It is important that this category of people, who comprise about half the population, should have sufficient incentives to enable them to make a greater effort for more productivity to enable us to produce goods at a price at which they will sell readily in world markets. This is the way to provide the social services that we all wish to see developed. There is no doubt that if industry is incompetent, if there is a large measure of unemployment, and if we are unable to sell our goods abroad, none of these social services will be possible. It is therefore vital to put all workers in a situation in which they are able to earn adequate rewards for their efforts to make our nation efficient. My right hon. Friend the Chancellor of the Exchequer is making a move towards simplifying the entire tax structure. I should like to put forward some ideas which I first put forward in the columns of The Times some years ago.

Mr. Sheldon
The hon. Gentleman says that his right hon. Friend is making moves towards simplifying the tax system. Could he say what those moves are?

The Temporary Chairman
I hope that he will not pursue that point too far since I cannot find it in Clause 1 of the Bill.

Mr. Cooper
They are moves over a whole Parliament, not just things which should be done at one moment of time. There have been announcements from the Treasury Bench that such moves are in train. I should like to see two things happen: first, the complete abolition of surtax, and second that both earned income and unearned income should be regarded as the same thing. It has always seemed anomalous to me that savings, pensions, and so forth, which are rewards for work done, should be in a different category from earned income. They are moneys which are chosen to be retained until such time as we wish to use them in the future. I feel that there should be one simple system of earned income to  cover all moneys, whether pensions, savings or anything else. In an effort to get rid of surtax, which in relation to the total Budget is a very small sum of money indeed and probably costs a very great deal to recover, I wish to see the first £1,500 of income tax-free. In that figure I should like to see retained all the allowances that are payable at present; there would be no further allowances beyond that £1,500. From then on we could move up in steps of about £500 until we get to a situation where the top level of taxation is 15s. in the £. There would be no such thing as a standard rate. I believe that this would provide a sensible and simple way of reforming the tax system and would provide the necessary incentives. I hope that hon. Members opposite will not be surprised when I say that there are a large number of working men in industry whose weekly wage takes them into the range of £2,000 a year, and beyond. That applies to many of them. They will benefit considerably from these tax reliefs. Obviously, the Government cannot do everything at once, but I have been amused today to hear speeches by hon. Members opposite instancing lack of growth in the economy, the high level of taxation, and so forth. We must remember that the present Government has been in power for only four months. The lack of growth has been as a result of the policies pursued by the Labour Government over the past six years, and the high level of taxation is that which was imposed by the Labour Government. It does not lie in the mouths of hon. Members opposite to tell us to reduce taxation and to achieve growth. I feel that the policies which are being pursued by the Conservative Government are the right policies.

Mr. William Hamilton  (Fife, West)
I am not an expert on income tax, but it seems to me that a great deal of nonsense is talked about the relationship between incentives and reduced rates of tax. Such evidence as I have from my personal experience points in the opposite direction. Just after the war when I was in the teaching profession my rate of pay was low and my taxation fairly high and I had an incentive to teach at evening classes for four or five nights a week.  That is an argument in the opposite direction. A look at the tax tables shows the folly and stupidity of the argument of right hon. and hon. Gentlemen opposite that the bigger the tax concession the harder a man works. The hon. Member for Ilford, East (Mr. Cooper) put the average earnings of a worker at £20 to £30 a week. Perhaps a number of workers in the South-East and in the Midlands are in that category, but certainly not very many in Scotland. It can be seen from the tax tables that a married man with two children earning £1,500 a year, who does not get any of the free school meals for his children, will receive a tax concession of roughly £12 a year. What kind of incentive is that to him? By the time he has paid the prescription charges for his family and all the other charges for school milk, school meals, and so on, he will be worse off. When the Prime Minister, in that boring speech at the Guildhall last night, spoke about creating one nation and giving people incentives, he was not talking about people earning £30 a week, who are the people who will miss out in the deal. The reaction of ordinary workers to the Chancellor's package is quite different from that which right hon. and hon. Gentlemen opposite would have us believe. The ordinary worker is outraged by the inequity of the package because the average worker knows that he will be worse off. When the Prime Minister and the Chancellor of the Exchequer mention incentives, they mean incentives for the man earning £20,000 a year. For example, the Prime Minister himself, as can be seen from the income tax tables, with a salary of £14,000 a year, receives a tax concession of about £300. The Prime Minister in these concessions is giving himself £6 a week. Does he intend to increase his productivity in this House or by attendances at Downing Street? Does he intend to make an extra speech each year at Guildhall? Perhaps we may be told what extra productivity the country will get from him. This is the kind of nonsense we hear from the Conservative benches. The incentive to the £25,000 a year man is some £500 a year, or £10 a week,  and the incentive to the ordinary working man is a kick in the teeth. That is the difference between the people at the lower and higher ends of the scale. Of course the Tory Party can say, "This is what we were elected for. We were elected to reduce direct taxation; we were elected to reduce public expenditure". But right hon. and hon. Gentlemen did not spell out at the election that the most inequitable way of reducing direct taxation is a cut in the standard rate, as these tables demonstrate beyond argument. When my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) as Chancellor of the Exchequer introduced his Budget last April, he reduced direct taxation not by reducing the standard rate but by increasing allowances. This was and is the fairest way of reducing direct taxation if that is what we want. For the hon. Member for Cornwall, North (Mr. Pardoe) to suggest reducing it even further is to compound the injustice, the inequity, of the proposal. I do not know whether the hon. Gentleman realised that. He could not have read the tables before putting down his Amendment or he would not have put it down.

Mr. Cooper
The hon. Gentleman talked about the man earning £25,000 a year and the man earning £1,500 a year. Will he tell the Committee what proportion of his income the man earning £25,000 a year pays in tax and surtax and what proportion is paid by the man earning £30 a week?

Mr. Hamilton
The figures are in the tables.

Mr. Cooper
Will the hon. Gentleman tell the Committee?

Mr. Hamilton
The hon. Gentleman ought to have acquainted himself with these figures. If he wishes to take part in the debate he must inform himself properly before talking all the nonsense that he talked this afternoon. My point concerns the average skilled man—the skilled engineer, the skilled miner. Many skilled miners in my constituency take home less than £15 a week. The Chancellor of the Exchequer said that the £20-a-week man with two kids under 11 years of age benefits under the Bill. I direct the attention of the Financial Secretary to the Answers given to two identical Questions. One Question asked by me on 10th November was answered by the Chief Secretary. The other Question was asked by my hon. Friend the Member for Manchester, Gorton (Mr. Marks) of the Department of Education and Science on 12th November. We got completely different figures. The Department of Education and Science assumed that the rent payable by the family on £1,000 a year would be £2 4s. 6d. and rates 14s. 6d., a total of £2 19s. 0d. But the Chief Secretary to the Treasury gave a figure of £3 6s. for rent and rates—a difference of 7s. The Department of Education and Science assumed that tax and National Insurance would be £2 15s. 10d., but the Treasury assumed that it would be £2 5s.—a difference of 10s. 10d. So we get a conflict between the Answers from two Departments to identical Questions concerning the £1,000-a-year man with two kids. Based on those figures it is said that the man will break even. But above those figures every man on average earnings with two kids loses out on the whole package. That is no incentive. It creates a sense of social injustice. It divides the nation. This will make the trade unions more bloody-minded. If the Government give this kind of concession to the man earning between £25,000 and £100,000 a year and give nothing to the fellow on £30 a week, the country will be worse off. What kind of reaction do the Government think that they will get from the man earning £30 a week with that kind of social inequity? Right hon. and hon. Gentlemen opposite cannot understand the minds of the ordinary working man and woman. They should visit the industrial parts of the country to see how many millions are still struggling to make ends meet. The Government say that they are taking 6d. off the standard rate. The £20-a-week man—there are many in my constituency earning less—is getting a tax concession of £3 a year—about 1s. a week. The Government suggest that he will work harder in consequence.

Mr. Peter Rees
As the hon. Gentleman thinks that a cut in the standard rate is immoral, will he tell us whether he approved of the Amendments in the  1969 Finance Act which carried people up to the standard rate much more quickly, because they removed some of the intermediate steps? Did the hon. Gentleman regard those Amendments as immoral?

5.45 p.m.

Mr. Hamilton
We are not discussing the 1969 Act. It would be out of order to pursue that matter. We are discussing a proposed reduction of 6d. in the standard rate. I am pointing out that if that is to be a reduction in direct taxation, the Conservative Party can legitimately say that this what it was elected to do. But there are several ways of reducing direct taxation. This is the most inequitable way of doing it. The ordinary man is inteligent enough to know that it is most unfair and unjust, particularly since it is associated with a package of cuts. When we talk about a cut in direct taxation, we must remember that room has been made for it by swingeing increases in charges for social services. We are having an increased means-tested Welfare State to give these massive so-called incentives to the better-off sections of our community. This proposal will serve to divide the nation far more than anything which has been done since the war. This is the most reactionary Government that we have had since 1945, and those who voted for it and those who abstained are now beginning to see the error of their ways.

Dr. David Owen  (Plymouth, Sutton)
I rise to make a brief speech on a small Clause which I believe carries with it severe issues of principle. The Chancellor of the Exchequer, three-quarters or half-way through the tax year, has made a Budget judgment. We must examine the whole package as a whole. I ask the Committee to consider what I believe is the most serious issue: the facts on which presumably the Chancellor made this judgment. The first issue arises from the recent so-called cuts in public expenditure. This matter has been raised outside the House by many distinguished commentators, some with recent experience of the Treasury and of the way in which we present public expenditure figures. It is a tragedy that, having over the last few years progressively moved towards a lucid  description of public expenditure so that all hon. Members may take part in the discussion on a basis of fact, we should have a public expenditure review in the manner in which the Chancellor sought to present the figures. One need not be as experienced as Mr. Wynn Godley, but anybody who has read his analysis of public expenditure—I know more about defence expenditure figures—can raise fundamental questions on the whole basis on which the Budget judgment was based, on the room for manoeuvre in the years ahead, and on whether one can make a judgment on the basis of these figures. The Chancellor has taken the extraordinary step of announcing a reduction in income tax six months before it is due to take place. This is almost without precedent, and it is at a time when all economic commentators are looking at the parameters of the economy with increasing doubt and are increasingly unable to predict the future trends. Why did the Chancellor make this judgment? He made a good deal of the fact that he was bringing this tax change into effect to coincide with the increased charges which he was introducing throughout the health and social welfare field. It seemed that this would be intended to offset these charges. But this way of changing the tax is almost deliberately designed not to offset the impact of the charges on those with low incomes. Behind this strategy and these decisions lies a fundamental principle. Over the last few years, we were rightly moving towards merging the tax system with the social benefits system. We were increasingly beginning to realise that one could not consider taxation in one small compartment answerable only to the Inland Revenue, leaving aside benefits, whether social security or local authority benefits. The important thing was seeing the total effect. My major indictment of the Chancellor is that he has sought to make this change in the most inequitable way. He has gone back on the movement together of the taxation and benefits systems and has deliberately stepped right back to an age of division. Much has happened in the earlier debates, with the arguments about tax allowances and the claw-back  and the eventual room for claw-back. The Chancellor did not consider seriously using the taxation system and trying to modify it to allow claw-back of family allowances. If he were using the room which he felt, on his judgment—I have said that it is highly questionable whether he should have made the judgment at this stage, particularly on the evidence before him—there was for manoeuvre, so that he could help those on low incomes, I find extraordinary that he should have sought to do it in this way. There are ways in which one could have extended claw-back and used family allowances to channel aid where it was most needed. Examples are partially tax-free family allowances, the question of adjusting personal allowances to be married into claw-back, and the whole extension of child tax allowance and the introduction of claw-back. Any of these three would have given room for manoeuvre on claw-back on family allowances, which I admit was needed if aid were to be put where it was most needed. This is what concerns me—the reduction of the use of the tax system to channel aid to people so that it can affect everyone. The arguments against means-tested allowances and benefits are not, as hon. Gentlemen opposite seem to think, doctrinal: they are purely technical. One cannot get that high degree of uptake in using means-tested benefits that presumably hon. Members on both sides wish. It is only through the tax system that one can ensure that benefit will be given to those who most need it. My indictment of the Chancellor is that he has not considered this with an open mind. I agree that it would have meant some changes, but particularly when he was making his judgment six months ahead, it would have been easier to announce these changes now and made them operative in April. This is my major criticism. We are now seeing all the ill effects of going back to the principle whereby the Inland Revenue and the taxation system stand alone outside the benefits system. We are introducing a means-tested benefit system for the man in full employment and going back to the principle which many of us felt was long since gone—over two centuries ago. We are taking one of the most retrograde steps in overall taxation which has been taken for centuries. This is not just a small measure. Everyone in the House wants taxation reductions, but the question is what penalty you pay for them. It is how one makes them and how they affect people that counts. If one increases charges indiscriminately for everyone in society, one must, particularly if one makes great play with both taking effect in April, so adapt the tax system that it gives the maximum help to those with lowest incomes. This is what this miserable Bill fails to do. This is the central argument, and this is why we have to discuss the family income supplement. This miserable Bill stems from the Chancellor's inability to marry the taxation system with the benefits system, and rather to go back to the old system of dividing the two—at the very moment when, over the last few years, we were beginning to merge them and the Inland Revenue was at last beginning to realise that it could not stand out as a bastion, taking into account only tax changes, without looking at the whole picture. In consequence, we are giving a supplement to those on low wages, which will have a bad effect on those areas like mine, in the West Country, with a high percentage of people on low wages. For the first time ever, they will now be given a supplement while in full-time work. The long-term consequences of this action, although I can see arguments for it in the short term, will be with us for decades. The movement towards encouraging employers to pay a basic wage and towards a minimum wage will be held back because of this miserable Chancellor, who has failed to comprehend the extent to which small tax changes can be changes of principle and can make a very damaging assault not just on individual poverty but on the whole way in which we were moving in trying to eradicate poverty in our midst. We must expect from the Chancellor in the presentation of the facts on which his judgment is based a far higher degree of honesty and competence than we have had over the last few weeks. This is my most serious allegation. The right hon. Gentleman holds high office, which the House respects, but the House expects from him an honest interpretation of the facts. It expects him to present the expenditure figures particularly honestly, because the only way in which the House  can discuss the real choices on priorities which face any Government and Chancellor is to have the facts presented honestly. This was not done in the public expenditure review; there must be many officials hiding their faces in shame that that miserable document should have been produced in that way. I do not have the range of knowledge to know in detail how much those figures have been corrupted, but in defence expenditure, this is one of the most dishonest displays that I have ever seen. The Bill will divide the nation. It is inequitable. It is making a judgment six months before it should be made. It is distributing something unfairly, and in the long term it will damage the structure of our attempts to ease poverty: it deserves to be rejected.

6.0 p.m.

Mr. Dick Taverne  (Lincoln)
I want to avoid covering the same ground as that which I covered last Friday on the Second Reading. I should explain to the hon. Member for Cornwall, North (Mr. Pardoe) why there have been no Amendments moved by the Official Opposition. It would be easy to improve this Bill if we intended to cut taxation. There are many aspects of the tax system which were attacked by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and others. We on this side of the House think that the worst aspects of the present income tax system is the low threshold. If there is a case for cutting taxation, it is a case for raising the threshold as a top priority and that is the kind of Amendment we would have moved. As we have made clear, we oppose the whole package, we oppose the public expenditure cuts and the charges. Therefore, we oppose the income tax cuts which are the object of the operation. It would be inconsistent for us to seek a better way of bringing about income tax cuts to which we are in any event opposed. Since the Second Reading there have been some developments. I hope that the Financial Secretary will have a chance to explain some points which badly need explanation. Over the week-end the Government had a very critical Press. It is very hard to find a friend of theirs among any of the economic commentators here or abroad. The Financial Times on  Saturday, in a somewhat extreme article, extreme in the prescription it put forward not necessarily in its analysis, said that if there were no incomes policy the only measure was one of serious deflation with all the terrible consequences which that entailed. The Observer, the Sunday Times, the Sunday Telegraph and today's The Times have all, in their different ways and with different degrees of urgency, some of them feeling very urgent indeed in their representations, pressed for a policy to deal with the immediate problem. Last night we had the Guildhall speech of the Prime Minister. This was a much-heralded speech; heralded by rather different trumpet calls at different stages. First, we had the call which announced that here was to be a dramatic statement, the Prime Minister was to undo the harmful effects which it was clearly felt at No. 10 had occurred after his television broadcast. I was struck by the similarity with King Lear but as the cartoon in The Guardian made the point, I will not pursue it. Then the briefing changed. It told the Press that there was no need for any dramatic announcement at the Guildhall speech, that there was no need for the Prime Minister to say anything new and, indeed, he did not. He made it clear, as far as he makes things clear, that all the Government intend to do seems to be what is contained in this Bill, apart from nonintervention in industry. He said there was a new incomes policy but all that it seems to amount to is a redistribution from the poor towards the rich. He said, or seemed to imply, that that alone would change the climate, change the attitude of the nation. It is a long-term policy as he said it has nothing to contribute to the short term. This might be described as a policy of fiddling with the tax rates while Rome burns. I say to the Government that this is not good enough. We have a situation in which wage claims are rising. To start with it was, as my hon. Friend the Member for Ashton-under-Lyne pointed out, a matter of raising expectations but it has clearly become something more than that and, in some ways, something more serious than that. It is now a kind of defence mechanism whereby people are afraid of being left behind. In this short-term  situation, we shall get no help from this Clause. The majority will find them-selves worse off. There will be no help from this proclaimed doctrine of freedom of choice because it is nonsense when someone cannot choose to spend less money on food since food prices are going up, and since, in due course, the average industrial earner will not be able to have the choice of paying less rent as council house rents go up. What I would like to ask the Financial Secretary is: does he confirm that this Bill, the public expenditure cuts and charges and the shortfall which have been presented as cuts are the whole answer which the Government have to the present situation? Or can he reassure us, as the Prime Minister did not last night, that this is not the whole answer and that they will not sit back and allow increasing inflation to engulf us? There are some particular questions arising out of this Clause. The Treasury in Economic Trends seem to confirm that the balance of the income tax cuts on the one hand and the public expenditure custs, the charges and the shortfall on the other hand, have a neutral effect on demand as the Government see it; that the corporation tax cuts are not included in the balance but they do not regard them as having much effect. We can come to that on the next Clause. If this is so clearly the effect on demand of the tax cuts, much depends on what kind of increase in earnings the Government see coming about by April. If the increase in earnings gathers pace, there will be more revenue coming in and the cuts will have less effect by way of increasing demand. If earnings slow down, if there is to be more moderation, it will have the reverse effect. What were the calculations of the Treasury based upon when it came to this estimate that the overall demand effect is neutral? It is a crucial question because the effect of the package on the economy depends on the earnings rise. What can we expect? Does the Financial Secretary take a more optimistic view of a moderating rise and is that, perhaps a justification of a lack of policy to deal with the present situation? If the Government cannot even say that, then it is a case of total defeatism, total abrogation of their responsibilities. We are faced with this accelerating inflation which has  increased since June, when the comparative position of Britain has become worse. There is a serious threat to the future of the whole country. I warn the Government that if they have no policy for the short term and persist in this attitude, it can only mean that the eventual remedy will be more difficult and they will then have to throw in everything, including the kitchen sink. It can only mean that the longer they wait, the more unpleasant the consequences will be for us all.

[Miss HARVIE ANDERSON in the Chair]

Mr. Patrick Jenkin
The debate has been on a somewhat narrow but startling Amendment moved by the hon. Member for Cornwall, North (Mr. Pardoe). It has, reasonably enough, ranged widely and the Chairman indicated that we would include in the debate on the Amendment the debate on the Clause as a whole and that he would not feel disposed to allow any debate when we come to the Clause stand part. Before I come to the substance of the hon. Member's Amendment, I must make a brief reply to the very sharp and intemperate remarks of the hon. Member for Plymouth. Sutton (Dr. David Owen). I do not know whether he realised what he was saying, but the burden of his accusation, when he talked about members of my right hon. Friend's Department hanging their heads in shame, is that he is suggesting that my right hon. Friend somehow managed to achieve the suborning of officials and their agreement that figures should be put to this House and to the country which they knew to be untrue. If the hon. Member has said this, I utterly refute it and I believe that he is demeaning himself by making such allegations.

Mr. William Hamilton
That is precisely the accusation that the present Chancellor made against the previous Chancellor.

Mr. Jenkin
I was talking about the allegation by the hon. Member for Plymouth, Sutton. I hope that he will take an early opportunity of making clear that that is not what he meant, that he was not accusing officials of the dishonest presentation of figures. My right hon. Friend is  well able to take care of himself. The figures in the White Paper were entirely honest. When he talked about the limited presentation of figures, I repeat what has been said, the normal five year forecast of public expenditure will be produced to the House and no doubt debated in the usual way. Turning to the Amendment of the hon. Member for Cornwall, North, he will not be surprised when I say that I will advise hon. Members to reject it. My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) estimated the cost of reducing the standard rate of income tax to 25 per cent. as between £900 million and £1,000 million. I fear that I must disabuse him. The advice which I have had as to the effect of the Amendment is that it would be to reduce the yield of income tax by £1,735 million in the first year and £1,925 million in a full year. Of all hon. Members who have sat on the Liberal benches the hon. Member for Cornwall, North must be the most expensive. It may be that he will withdraw the Amendment before it is put to the vote. The hon. Gentleman advanced an ingenious but, I thought, unconvincing argument, that somehow this would not be inflationary, that the whole sum could be found out of the Budget surplus which the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) budgetted for at the beginning of the year and that therefore this could be well comprehended within the policy of the Government. He, however, recognised that he had somehow to lift from the public purse the obligations of providing capital for investment in the public section. He mentioned the nationalised industries but he must recognise that he would have to go much further than that. He suggested that they should be funded by an appeal to the market. He will know that the National Loans Fund forecast for the current year shows that £1,544 million was estimated as the advance from the National Loans Fund to the nationalised industries and local authorities, public corporations and even lending within central government. Even if the whole of that were to be found from the market it would not be sufficient to reduce the tax by anything like he wishes. In the short term it would be quite impracticable. My hon. Friend the Member for Harwich (Mr. Ridsdale) and my hon. and gallant Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) made the point forcibly that to the extent that we can increase the savings ratio, to the extent that people can be persuaded to save more of their income, then we will be able to make further progress in reducing taxes. It would be optimistic and irresponsible to imagine that this can be done in the short term and to the extent of this Amendment or anything like it. If we were to accept it, it would lead to massive increases in the level of demand and pile enormous demand inflation on top of what is already, and a number of hon. Members have adverted to this, a serious wage-cost inflation. This is not the occasion for an elaborate exposition of budgetary policy. I can say that the changes announced in the whole of the package put before the House on 27th October were intended as the hon. and learned Member for Lincoln (Mr. Taverne) has said, to have a broadly neutral effect. My right hon. Friend stands firmly by that assessment. The hon. and learned Member said that that was all very well but what assumptions does that make about the growth in the level of earnings over the next few months. Speaking as a former Treasury Minister he must know that I cannot answer that question. No recent Chancellor has ever included among the published forecasts any forecasts of the growth in the level of earnings and I certainly do not intend to break that tradition tonight. The package is intended to be broadly neutral. I know that it has been challenged by Mr. Wynn Godley and one or two others but the Treasury remains firmly of the view that this is the case and that my right hon. Friend has perfectly properly reserved his Budget judgment and reserved complete freedom for that Budget judgment next April. 6.15 p.m. I turn to the rather wider debate. The case against the reduction of 6d. which the Clause will effect was made in traditional Socialist terms—none the worse for that—by the hon. Member for Norwood  (Mr. John Fraser) and for Ashton-under-Lyne (Mr. Sheldon) and in tones to which we have now become accustomed by the hon. Member for Fife, West (Mr. William Hamilton), who expressed himself on this matter perhaps rather more shrilly than did his hon. Friends. The attack on the Clause and on the reduction of 6d. is based on two propositions—first, that it is unfair that a bigger tax reduction should go to those who have investment income than to those who have earned income; and, second, that it is unfair that a bigger tax reduction should go to those who have larger incomes than to those who have smaller incomes. I am glad to have the assent of the hon. Member for Fife, West to that statement, which I made in rather less colour-full language than his own, but none the less that was the burden of his complaint. Added to that complaint was the contention that this was happening simultaneously with the removal of certain subsidies which affect all but the poorest of the population. As to the point about earned and investment income, it must be recognised that when tax rates rise, and so long as there is a differential, a bigger increase will be borne by those with investment income than by those with earned income. Correspondingly, when tax rates fall the opposite must be true. I do not see how anybody can expect it to be any other way. Exactly the same applies to the higher incomes as to the lower incomes. When the standard rate of income tax rose, the increases borne by people at the top of the income scale were much greater than the increases borne by people at the bottom of the incomes scale. When the rates fall again, the opposite is true. I will repeat one point which both my hon. Friend the Chief Secretary and I made on Second Reading. If that is not accepted and it is to be argued by hon. Members opposite that there never must be a tax reduction—[An HON. MEMBER: "No."] I am glad to hear that. Perhaps I need not waste my time by going into this. The hon. Member for Fife, West is very quick and sees the point. He recognises that if he argues that there must never be a tax reduction that means more to the higher income people than it does to the lower income  people, the standard rate of income tax would never be reduced. As the hon. Gentleman and others argue, it would have been possible to have raised the threshold. However, that would have done nothing for the marginal rate of income tax. What my right hon. Friend can justly say is that he is cutting the marginal rate of income tax on overtime and on all earnings and on all savings income for every taxpayer in the country. That is a prize which is worth having. The marginal rate of income tax on earnings has been cut from 32 per cent. to 30 per cent., which represents a reduction of 6 per cent. in the weight of tax on every extra pound earned by everybody who pays income tax. If the argument is that that makes it very unfair as to the difference between those at the top end of the scale and those at the bottom, I will quote one more figure. Taking the dividing line at about £2,000 a year—after all, this is the salary of Members of Parliament leaving out of account the expense allowance—more of the total yield of personal tax is paid by those above the level than by those below the level. That proportion is the same after the reduction of 6d. as before. Yet more than half the full year cost of reducing the tax by 6d. of £350 million goes to those below the £2,000 a year level. [Interruption.] Of course there are more of them. The ratio is about five to one. The argument has been advanced that the benefit goes largely or very substantially to those at the top of the scale. I argue that more than half of the benefit goes to those earning less than £2,000.

Mr. Sheldon
True equality demands that the benefit should also be shared in the proportion of five to one.

Mr. Jenkin
I have dealt with that argument—it is totally unreal. The hon. Member for Fife, West was quick to see the point. He shook his head at once when I presented the argument starkly.

Mr. William Hamilton
The Financial Secretary must not assume that I am agreeing with him in anything he says.

Mr. Jenkin
The hon. Gentleman was quick enough to recognise, as the hon. and learned Member for Lincoln was not  on Friday, that the logic of his argument was that the standard rate of tax would never be reduced. The hon. Member for Fife, West was quick and shook his head, saying, "That is not right". I am glad that he recognises that. I have now dealt with the argument that more than half the benefit of this cut should go to people earning less than £2,000 a year, even though a minority—one-fifth of taxpayers—over that level continue to pay more than half the total level of tax. The hon. and learned Member for Lincoln told us that he opposed the whole package, including the Bill. It was slightly surprising—I do not intend this to be provocative tonight—that on Friday the Bill was given an unopposed Second Reading—I think rightly, because right hon. and hon. Members opposite know full well that if they got back they would not put back the sixpence.

Mr. Taverne
The Financial Secretary is being unrealistic. We opposed the whole package, and we made this clear. This does not mean to say that we intend to follow the obstructive tactics that the hon. Gentleman and his colleagues followed of voting against every detail.

Mr. Jenkin
The hon. and learned Gentleman may have convinced himself, but as the Bill is perhaps one of the central points of the package I doubt whether he seriously regards it as something which he should not have voted against.

Sir G. Nabarro
Has it escaped the attention of my hon. Friend that, despite the protestations of the hon. and learned Member for Lincoln (Mr. Taverne) that the Labour Party would not think of putting the 6d. back on, the very first thing that the Labour Government did in 1966 was to raise the standard rate of tax from 7s. 9d. to 8s. 3d.—in other words, they put it back?

Mr. Jenkin
Indeed. I am grateful to my hon. Friend. They did so, and that was after the right hon. Member for Huyton (Mr. Harold Wilson) had assured the electorate that his programme could be carried out without any general increase in taxation, whereas my right hon. Friend the Prime Minister declared to the  country that ours was a Government who would reduce taxation. Clause 1 fulfils that pledge and will reduce taxation. I hope that when the Question is put we shall reject the Amendment and support the Clause reducing the standard rate of income tax by 6d.

Mr. Pardoe
I will reply briefly to one or two of the excessive points which have been made during the course of the debate, particularly to some of those who replied to the speech I made in introducing the Amendment but who were not here to hear it. The hon. Member for Worcestershire, South (Sir G. Nabarro) seemed to be saying that it was right to subsidise the interest rates of the public sector, and in particular of the nationalised industries, as that kept their prices down. Presumably, it would follow that it would either be good to subsidise the interest rates of the private sector so that we could keep its prices down, or alternatively bring the whole of the private sector into public ownership, in which case it could all have subsidised interest rates. The hon. Gentleman's argument does not hold up.

Sir G. Nabarro
The hon. Gentleman perverts what I said. I said that it was utterly impossible for a sum of between £1,000 million and £2,000 million to be raised on the open market and that only certain parts of nationalised industries could go to the market for their money, very selectively.

Mr. Pardoe
I do not think that the hon. Gentleman has argued his way out of the conflict he has got himself into. I will leave it there. There are two other points to which I wish to reply apart from that point. One was raised by several hon. Members on this side, first by the hon. Member for Norwood (Mr. John Fraser). He overestimated the effect of the rates of direct taxation on social justice. This overestimation of the results of the rates of direct taxation on social justice was common to most of the speeches which were made from this side, except for my own. I ask hon. Members to consider that, because of the regressive nature of purchase tax and duties, particularly the tobacco duty, it does not make very  much difference what is done to income tax, because the poor are already paying a much higher proportion of their income in taxation than are the middle class or the upper class. The lower 15 per cent. of income groups pay substantially more than one-third of their incomes in total taxation, because much of it goes in the tobacco duty. I ask hon. Members to consider the remarkable thesis put forward by Professor Merrett of Sheffield University which shows that it would be possible to replace all the taxes—income tax and all the other taxes, except for surtax, corporation tax and death duty—by a 30 per cent. overall flat rate sales tax across the board and still leave the poorer sections of the community better off in terms of the proportion of their income paid in tax. Therefore, the argument which has come from these benches of the Labour Party—indeed, I myself have until fairly recently accepted it—that somehow there is something in common between direct taxes and social justice does not stand up. Robin Marris, reviewing Professor Merrett's proposals in the New Statesman on 30th December, 1966, said: "Professor Merrett has made a very radical suggestion indeed. It flies in the face of Socialist orthodoxy, but I am forced to confess that, despite my lifelong assumptions, I find it difficult to disagree with him." It is in fact possible to reduce income tax in this way and in the way proposed in my Amendment and still not work adversely upon social justice. In the Amendment I have not been mainly concerned with incentives. One or two hon. Members opposite took up the question of incentives and one or two hon. Members replied from this side. In moving the Amendment I did not mention incentives, because they are far too difficult to measure in relation to income tax. I have been concerned with the question of the surplus. The hon. Member for Worcestershire, South said that the cost of my proposal was £1,900 million. I am able to multiply £350 million by six, but unfortunately the hon. Member for Worcestershire, South is not. I, too, arrived at the figure of approximately £1,900 million. However, it would still leave a surplus of £700 million. If the Financial Secretary questions, as he did, where would the money come from for the nationalised industries and where would all the local authorities, the Health Service and everyone else, find their money, the answer is that a £700 million surplus would still be twice the surplus that we had in 1967–68, about the same as we had in 1966–67, and much higher than any surplus we had in the years 1958–59 and 1964–65. Where did all the nationalised industries and the rest of the public sector find their money when there was not a surplus on the current account of £2,600 million, which is what we have today? 6.30 p.m. I do not for one moment intend to press the Amendment to a vote, simply because if there were a Liberal Government and I was Chancellor of the Exchequer I would not necessarily think in terms of giving back the surplus only in this way. Unfortunately, the Bill is somewhat limited as to ways in which I could give it back. I have, therefore, to concentrate on the two sources open to me in the Bill. And so indeed it is somewhat limiting to have to do it in this way. But I find absolutely despairing the common front which we have had from the spokesmen from the two Front Benches, who, after all, presumably for the foreseeable future, will have the future of the British economy in their hands. Heaven help us. The common front which has been shown by the two hon. Gentlemen is that they support the age-old arguments in favour of deflation. They are not prepared to break into the open seas. They are not prepared to follow the policy which the Conservative Party, under the direction of the late kin Macleod, when they were in opposition, said that they would follow, that they would take risks and encourage growth in the economy by giving back a large part of those surpluses into the purchasing power to stimulate demand. Indeed, that whole policy of growth, in both parties, is dead today. I find that absolutely tragic.

Amendment, by leave, withdrawn.

The CHAIRMAN, being of the opinion that the principle of the Clause and any matters arising thereon had been adequately discussed in the course of debate on the Amendment proposed thereto, forthwith put the Question, pursuant to Standing Order No. 47 ( Debate on Clause or Schedule standing part), That the Clause stand part of the Bill.

Question agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Clause 3

Corporation Tax For Financial Year 1969

Mr. Pardoe
I beg to move Amendment No. 3, in page 2, line 6, leave out '42·5' and insert '40'. I shall be brief. In this Amendment I am endeavouring further to reduce the rate of corporation tax. I should state at the outset that I am not pinning my colours to any particular set of figures, although in the Amendment I am asking for a further reduction of 2½ per cent. I want merely to question the Government on the philosophy of the reduction they are making. Presumably the Government are asking for an increase in investment. We all know that this is what is desperately needed if we are to obtain economic growth. The creation of fixed capital in this country is appallingly low and has been so over far too long a period, and far behind our major industrial competitors. I hope, therefore, that the Government's intention in reducing corporation tax is to increase and encourage investments. I do not want to get involved in any way in an argument about exactly how best to encourage investment, in the terms of whether it should be investment allowances or investment grants. Obviously this would be without the terms in the specific Amendment. But I have before me the report of the Confederation of British Industry Industrial Trends Survey, No. 39, of October, 1970. The survey makes clear that the outlook for investment is still very gloomy and depressing. For instance, it says: "The outlook for authorisations of capital expenditure on plant and machinery has worsened since June, while that for authorisations of buildings has remained unchanged. For 1971 a decrease in manufacturing investments is indicated." The Confederation of British Industries' survey goes on: "The implication for policy is that there should be greater incentives for investment." It also says that perhaps the best of these incentives would be a reduction in corporation tax. I merely want to ask the Financial Secretary to tell us how he believes the new rate of corporation tax will affect the overall level of investments, and whether he thinks that it will overcome the gloom which the Confederation of British Industry found in its latest survey. Obviously this, I hope, will be a means of getting investment. If it is, I suspect that there will have to be a much more substantial reduction in the level of corporation tax in order to overcome this gloom, because undoubtedly the major factor weighing against industrial investment is not a question of whether we have tax allowances or grants but, frankly, whether we have those investment incentives at all. Business men will only invest if they have a confident climate in which to do so. If one follows the path of upward industrial investment over the last 20 years, one can clearly see a strict relationship between the level of investments and the level of demand in the economy. When we have a booming economy, with booming consumption and demand, then business men have felt that they were able to look forward to a period of profitability and they have been prepared to invest. Obviously interest rates affect investment, too. One would hope that one could get some international agreement on this matter. I hope the Government will make efforts to that end, to lower the disincentive to investment. At this stage, it seems primarily that the Government are putting all their money on the idea that if they can reduce the impact of taxation on industry through corporation tax, we shall leave industry with a little more to invest. It is unfortunate that we should have a level of corporation tax across the whole range of profits. It would seem far better that we should not only reduce it, as I have proposed in this Amendment, as a better incentive, but also that we should have a much lower rate of tax on companies  with small profits. I think that the growth of the economy will never come from the giant industries but that it will inevitably come from the small entrepreneurs starting in business and getting growth in the early years. These are the people who need incentive and a lower rate of tax. Even if the Government cannot accept my proposed lower rate of corporation tax across the board, it may well be that they will consider giving a lower rate of corporation tax to companies with lower turnovers and smaller profits.

Mr. Dell
The hon. Member for Cornwall, North (Mr. Pardoe) said that the main influence on investment is the expectation of profitable demand, and that that has a greater influence than systems of investment incentives. I entirely agree with him in that. It is nevertheless interesting that the Government have decided to introduce a system of investment incentives, though one different from the system which existed under the previous Government. I agree with the hon. Member for Cornwall, North that this is not an appropriate occasion to discuss the merits or demerits of the two systems, and I do not intend to do so. On the other hand, we have a Government which have proclaimed their interest in scientific management. No doubt they will therefore be very careful to assess the effects of the various measures which they take. The Government have an alternative. They could have reduced company taxation by a greater amount and eliminated any system of investment incentives at all. This would have been an alternative and one for which many of the Financial Secretary's hon. Friends, when they were on the Opposition back benches, used to argue. Nevertheless, the interesting thing is that the Government have not just reduced corporation tax but have introduced a system of investment incentives. I should like the Financial Secretary to tell the Committee how the Government intend to assess the effect of the system of investment incentives which they have introduced. We have a government of scientific management and they should, presumably, be working to set up a system for assessing the effects. After the previous Government had been operating the system of investment  grants for about two years, the Board of Trade began an assessment, in so far as this was possible, of the effectiveness of investment grants. The assessment was not completed, although I was glad to hear, in answer to a question of mine to the Parliamentary Secretary for the Department of Trade and Industry, that as much as possible of the results of that assessment will be published. I should like the Financial Secretary to tell the Committee what work the Government are doing along these lines. The first thing to notice is that what they are engaged in is a process of social engineering, which I suppose is quite contrary to their philosophy. It would have been in accordance with their philosophy simply to have reduced the level of company taxation, but by introducing a system of investment incentives they have presumably attempted to achieve certain specific effects. For example, they want to provide cash specifically for investment. They want to direct cash specifically into investment, so they encourage companies to put money into investment, as a result of which they will get a reduction in taxation. Then, presumably, they want to help capital-intensive industries, because this is the effect of the system that they have introduced. It used to be held as a serious accusation against the investment grant system that it assisted capital intensive industries. Their system does exactly the same thing and presumably it does exactly the same thing because that is the result they wish to achieve. How will the Government assess the effect of their proposals on capital-intensive industries? They say that they want to help the development areas. This is another argument for having a system of incentives. One can differentiate that system in the direction of development areas and achieve effects there. I ask the Government to tell us how they propose to assess these matters and these effects. I ask them how they intend to introduce their principles of scientific management into this matter, because the first factor of which one becomes aware is that there will be a serious reduction in the amount of information about all this that will be available. A short time ago I ask the Chancellor of the Exchequer whether there would  be published the sort of analysis of investment allowances and tax allowances under the new system that was published in respect of investment grants. The reply was that the cost of so doing would be unacceptably high, and therefore it would not be done. The Financial Secretary will remember the extensive information that used to be published about investment grants. I hope that we shall have a further report for the year up to 31st March, 1970. I hope that we shall have a detailed analysis of expenditure in particular industries, because it will help us to assess the effectiveness of that sort of investment incentive. This kind of information is not to be available in respect of investment allowances. What system are the Government setting up to achieve control over their system of investment allowances? We have been assured that differentials for the development areas will not be reduced, but the statement that they will not be reduced has not been supported by any calculations presented to the House or to the public. It is very curious that no such calculations have been presented. One would have expected such calculations to be brought before the House. I suppose that one reason why they have not been presented is that the Treasury does not want to tie itself to particular estimates which might be shot down. If that is a reason, I do not think that it is an honourable one. I think that the Treasury should present the estimates upon which this statement has been based. Another reason why the Treasury has not given us this information is that the statement depends, to a considerable extent, apparently, upon what happens to grants and loans under the Local Employment Acts, and this the Treasury cannot say because the Prime Minister said in the House a short time ago that "one never knows". If one never knows, how does one make the claim that the differential is being preserved? I ask the Financial Secretary to tell us how the Government propose to assess the effect of combining a reduction in corporation tax with investment allowances in producing the results, the social engineering results which they apparently want to achieve. How will the Government find out whether they are doing what they want to  do? What information will be available? What will they tell the House? Is it just going to be the surprising deficiency of information associated with the Chancellor's most recent pronouncements, or will it be more? Will we have information along the lines that we had for investment grants. What sort of information will the Treasury consider is worth the cost of producing it? What is the Treasury going to do about providing estimates of the likely effect of its decisions on particular industries which have a major impact on the country's export results, and economic results generally? 6.45 p.m. Let us consider a few of the vital industries that will be affected by the decisions which the Treasury has made. Let us consider the motor car industry. From reading the Press one realises that in recent months—and during last year—the motor car industry has not been notable for the profits that it has made, and therefore it will not have many profits against which to offset its capital expenditure. Presumably the Treasury has made some estimate of the effect of all this on the motor car industry, which is the major exporter in the country? It is, presumably, going to be affected. Presumably the Treasury has estimated the effects, and presumably it can tell us what they will be? The chemical industry is a highly capital intensive one. If one can believe recent reports in the Press, the Chemical Industry Association has been making representations to the Government about transitional arrangements. There have been reports of intentions to cut capital expenditure in the chemical industry. On Saturday morning we had in The Times an article about I.C.I. and its intention to cut its capital expenditure. Here is a possible effect of the decision which the Government have made. Presumably the Government have made an estimate of the effects that it will have, and presumably they can tell us about them and thereby encourage us to be less discouraged by the initial reaction of industries to this total package which, as far as one can see, has been to revise downwards their investment intentions, rather than, as was clearly necessary, to revise them upwards. Let us consider the shipping industry, which has been most outspoken in its  reactions to the Government's decision. I remember a year ago the shipping industry telling us how its recent expansion and the recovery of its position in world shipping was due exclusively to the initiative and vigour of those gentlemen who ran the industry. More recently we have seen the industry attribute this just a little to the existence of the investment grant system. The industry is really worried that it will lose that system. What is the Treasury's estimate of what will happen to the shipping industry? What will happen to the expansion of earnings from shipping, which are an important contribution to our invisible earnings? I put those questions to the Treasury in an entirely non-partisan spirit and in an attempt further to establish the Government's skill in scientific management which we know they are trying to develop. The Financial Secretary will realise that our appreciation of the Government's success in the development of methods of scientific management will depend to some extent on his ability to answer those questions.

Mr. Joel Barnett  (Heywood and Royton)
It will come as no surprise to the hon. Member for Cornwall, North (Mr. Pardoe) that I disagree with his argument as much as I disagree with the Government's argument for reducing the rate of corporation tax in the context of this year's economic situation. I hope that this will become clear when I refer later to some of his remarks. I hope that on this occasion the Financial Secretary will do my right hon. Friend the Member for Birkenhead (Mr. Dell) the courtesy of replying to the important points that he has made. Similar points have been made frequently during debates in the House over the last few weeks, and questions have been put to Ministers time and again, but those questions have been evaded and we have had no answers whatsoever on this vital issue of the estimate of the effect which the Government's policies will have on investments. I hope that on this occasion the Financial Secretary will reply to the points that have been made. If the Government have done nothing, let them at least say so. On one point I agree with the hon. Member for Cornwall, North. The important aspect of this Clause and, indeed, of the whole Government package,  is its effect on demand. Much the most important part of the package is what will be its effect, and therefore what will be the effect on investment. The impression has been given that the effect of the package as a whole will be neutral on demand. This is not quite what the Chancellor of the Exchequer said on 27th October. He then said: "The reduction in income tax and the reduction in public expenditure, taken together, will, therefore, be broadly neutral in their effect on demand in 1971–72."—[OFFICIAL REPORT, 27th October, 1970; Vol. 805, c. 51.] He did not refer to corporation tax at that time. However, realising that he had again, perhaps not deliberately, misled the House, he corrected that, or attempted to correct it, in the debate on 4th November when he said: "It was in the light of the assessment which I have just given to the House and because I wanted to preserve my freedom of action next April that I was prepared to bring in legislation now to reduce direct taxation to an extent which, taken together with the reduction in public expenditure, would be broadly neutral. …" In other words, he was now taking together both income tax and corporation tax. However, realising that he had confused the situation, he went on to say about corporation tax: "… after allowing both for the time that normally elapses before investment decisions can be translated into production and for the effects of corporate borrowing"— an interesting phrase— "the demand effect of the proposal concerning corporation tax during the financial year will be small, both absolutely and in relation to the effect of the reduction in income tax."—[OFFICIAL REPORT, 4th November, 1970; Vol. 805, c. 1089–90.] I shall be interested to hear exactly what the Chancellor meant by that statement. It seems to be the practice of the Chancellor to confuse both himself and the House, and on this occasion what he had in mind was far from clear. Is he telling us that there is so little effect on demand by a £60 million cut in corporation tax followed by a £90 million cut in corporation tax in the following year, which will be taken into account by companies whose years end after 5th April, 1970, a total of £150 million, that it will be meaningless? I understand that the normal effect of corporation tax is about 20 per cent. The Chancellor may consider that to be a very small amount, but his whole judgment of whether the package is neutral on demand has been seriously questioned by many commentators, not least by a very senior former Treasury official, Mr. Wynn Godley. The Government owe it to hon. Members to answer this serious criticism of the effect of the package on demand. It may be that the Government are being coy because they feel that once they show the makeup of the various parts of the package, it may be so open to criticism that it will be seen for the nonsense that perhaps it is, but if that is not the reason, why do they not tell us? After all, we have been told time after time that we now have an open style of government. Why can they not extend the open style of government to let hon. Members know how it is that the Chancellor disagrees on such a serious matter with so many serious commentators? If we do not get this answer and explanation, we can only assume that the Chancellor's calculation, as with so many others which he has made in the past, will not stand scrutiny. We cannot believe that he can imagine that he will somehow delude foreign observers into believing that the effect on demand is neutral simply because he happens to say so. The least he can do is to tell us just how he arrives at this conclusion. The major and most interesting comment about the cut in corporation tax is that it does nothing for the great majority of companies. There were precisely 514,826 companies on the register in 1969 and only 255,000 pay any tax. According to the 1970 Report of the Commissioners of Inland Revenue, out of those, 133,000 pay corporation tax on profits of less than £100 and 64,000 had nil profits anyway. One assumes that many did not submit returns; one has to judge from the total of companies on the register. It is clear that for the majority of close companies, about which the Conservatives said so much in the last Parliament, the corporation tax cut will do nothing. It will be interesting to know exactly what the Government have in mind to help close companies. Let us deal with the minority of companies which the cuts in corporation tax  will help. What will be the effect on the efficient part of that minority? It is said that those with profits, those able to stand on their own feet, will get enormous benefit from this £60 million reduction. I do not know, but there was an interesting article in the November issue of the Director which threw a little doubt on whether it was true that the cut in corporation tax would have a tremendous effect on the efficient directors. I quote one or two relevant extracts: "… nearly half the directors ignore tax when assessing the attractiveness of new investment …" This does not seem to coincide with what the Government have been saying about efficient companies and how those companies will be able to recognise the true benefit if they use the discounted cash flow system, for example. If they do, and, according to this report, not many do, this cut will certainly not be their main or only criterion in measuring the return which they are likely to get from their investment. Even if it were, they would be interested in the answer to two Questions put by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) on 4th November showing that those efficient companies using the discounted cash flow system under the old arrangement, with corporation tax at 45 per cent., and the old investment grants, on every £100 of investment outside the development areas would get £39 of relief and £52 inside the development areas, whereas under the Government's new system the comparable figures are £32 and £36. Therefore, efficient directors assessing the likely yield from a given piece of investment will be able to see that they need a much higher yield under the present arrangement than under the investment incentive system of the previous Government. So we will get a further inflationary boost, because companies will decide to carry on with the investment and increase their prices in order to get the yield which they would have had under the old system, or they will cut back on their investment. But whichever way they decide to do it, one thing is clear—the Government's policies certainly will not be beneficial to investment in this country. 7.0 p.m. What is the effect on that part of the minority of companies which the Government would describe as inefficient, those which cannot stand on their own feet, which have no profits, companies like Rolls-Royce, companies in the development areas where in the first year or two all too frequently there are, understandably, no profits and so no benefits? There is nothing for those companies in the Government's policies. There is nothing for the majority of companies, and very little for the minority which are using what is said to be the most efficient method of investment analysis. So whichever way we look at it, there is nothing in the Government's policies to help in any way in the vital matter of investment. There is not one jot of evidence that a cut in corporation tax of 2½ per cent., or even the 5 per cent. suggested by the Liberal Party, would go any way to help increase the appallingly low level of growth which seems likely this year and next year if the O.E.C.D. is anything to go by. There is nothing to help in these vital fields. There is nothing to help the close companies, nothing to help the efficient companies, nothing to help the progressive but loss-making companies in development areas. After five months in charge of the Government of this country, a country with serious economic problems, as the late Iain Macleod described them, it speaks volumes for this Government that we are now discussing what is at best an irrelevant Clause in an irrelevant Bill. If the Prime Minister's speech at the Mansion House means anything, it is that the Government are abdicating economic responsibility and leaving it to the people. If they have the idea that the problems will somehow go away, if they have a pious hope that they will somehow solve themselves, we can tell the Government that they certainly will not, and the Clause will not do anything to help.

Mr. Patrick Jenkin
I have some sympathy for the Opposition in the position in which they find themselves, because this Government, then the Opposition, went to the country on a programme which included cutting public expenditure and reducing taxation. The Opposition are faced with the embarrassing position of having to try to find  something on which to attack us, because we have succeeded within five months of taking office in doing just that. The hon. Member for Cornwall, North (Mr. Pardoe), whose Amendment we are discussing, is in a very honourable tradition. Looking through previous corporation tax debates, I find that Mr. Peter Bessell and Mr. Richard Wainwright—neither of them, sadly, now with us—then moved Amendments to reduce corporation tax, as I myself have done. The difference is that this time we are doing it in the Bill. We are achieving a 2½ percentage points cut, which represents a reduction of just over 5 per cent. in the tax. The hon. Gentleman's Amendment would reduce that by a further 2½ percentage points. Clearly, there is something to be said in favour of his proposal, but I cannot advise the House to accept it. We must look at the corporation tax cut in the Bill as part of the balanced judgment which my right hon. Friend the Chancellor felt it necessary to make when he was considering his policy for investment grants, tax allowances, and, indeed, the whole package which he announced on 27th October. The Government were committed to ending the system of investment grants, which was obviously warmly espoused by hon. Members opposite for reasons which we can all understand. We were committed to ending it, because we regarded it as wasteful. Huge sums of public money were being spent to try to encourage investment, and even after four or five years hon. Members opposite never produced any of the figures along the lines of those that the right hon. Member for Birkenhead (Mr. Dell) suggested I should now produce, estimates of the effect of investment grants. As my right hon. Friend the Chancellor has said, investment in the four years the grants were in force was somewhat lower than in the previous four years, when a different system had applied.

Mr. Dell
The hon. Gentleman says that we did not produce estimates of the effect of the investment grants system. We were engaged in a study of it which began at the beginning of 1969, about two years after the system came into effect. All that I asked him is what sort of assessment he will make of the effect of his system.

Mr. Jenkin
The right hon. Gentleman is anticipating what I shall say. My case is that the grants did not produce the results which right hon. and hon. Gentlemen opposite expected. We feel that they were ineffective and that the expenditure was misdirected, not least because they were not profit-related. I simply cannot believe that it is in the interests of this country that 40 per cent., as it is in the development areas, of the capital cost of major projects should never have to produce any return. That is the effect of an investment grant, which by its very nature is not related to the profitability of a particular investment. That is our case against the grants, and why they went. We have replaced them by a new and greatly simplified system of tax allowances, based on free depreciation in the development areas and accelerated depreciation outside, with a simplified form of annual allowances. This has been accompanied, as the Bill provides, by a 2½ percentage point reduction in the rate of corporation tax. This is a balanced package. It achieves what we mean to achieve, which is to improve in the medium term the liquidity of companies, many of which have complained that their tight cash position is one of the restraints on their investment programme. The figures are set out in the investment incentive White Paper of £60 million this year and £90 million next year. The hon. Member for Heywood and Royton (Mr. Barnett), by a piece of sophisticated logical juggling, managed to convince himself, even if he did not convince anyone else, that the cut in the corporation tax does not help close companies. Perhaps he meant to say that it does not help all close companies.

Mr. Barnett
The hon. Gentleman must listen. I said that it did not help the majority of close companies. Would he deny that?

Mr. Jenkin
The hon. Gentleman knows that he is playing with figures. A company may not pay corporation tax because, for instance, it is a small family company in which the whole of the profits come out in directors' remuneration. That covers a large number of companies. The hon. Gentleman was one of the foremost pressing, with us, on  the Government which he nominally supported to get rid of the limits on directors' remuneration which the previous Government imposed. That is why some close companies do not pay corporation tax. All that do—and some of them are very large—will be helped. Many tens of thousands will be helped by the cut in the corporation tax, as they will be helped by the Government's decision not to reopen the shortfall assessments or agreements that have been reached on distributions. On a strict matter of logic, we might have done this on a reduction of the rate of corporation tax on the ground that they may have more distributable profits. That, too, will help close companies. There are many tens of thousands of close companies which will very much welcome this easing of the tax burden upon them. The hon. Gentleman also mentioned the study by the Director, and quoted the article about it. I imagine that he has read the article. Does he realise that the sample was of about 83 companies, which represents such a minute fraction of the total number of companies which operate in this country that I am surprised that an hon. Member as intelligent as the hon. Gentleman put as much weight on it as he did?

Mr. Barnett
It was a sample.

Mr. Jenkin
I should want to know exactly how the sample was found. These were people who answered a questionnaire, which is a self-selected sample. I come to the questions asked by the right hon. Member for Birkenhead. The hon. Member for Heywood and Royton asked one or two as well. I understand very well the anxieties of the right hon. Gentleman about some of the points he raised. First, he asked how we intend to assess the effect of the change of investment assistance. As I am sure he appreciates, because in the previous Government he was involved in this at an earlier stage, this is a matter for my right hon. Friend the Secretary of State for Trade and Industry, which Department is concerned overall, as was the Ministry of Technology before it, with assessing the effect of the Government's various Measures on investment by manufacturing and other industries.

Mr. Dell
Surely the hon. Gentleman is under a misapprehension here? It was a matter for the Board of Trade and subsequently the Ministry of Technology in the previous Government, because there was a system of investment grants administered by those Departments. Here we shall have a system of tax allowances administered by the Inland Revenue. Therefore, it is the responsibility of the Chancellor. The Chancellor is responsible for telling us what justification he has for the very large sums of money which will be given in tax allowances as investment incentives.

Mr. Jenkin
That was not the right hon. Gentleman's question which I was answering. He asked us how we intend to assess the effect. I say with the greatest respect to him, because he knows a great deal about this from his own experience, that that is not a matter for the Inland Revenue. He knows that. It is a matter for the sponsoring Department for industry, the Department of my right hon. Friend the Secretary of State for Trade and Industry.

Mr. Barnett
Is the hon. Gentleman saying, then, that the Treasury does not know what the effect of its investment incentives will be?

Mr. Jenkin
On the contrary, I am saying that this is a decision of the Government. It has been taken by the Government and all the Departments concerned have contributed. The right hon. Gentleman's question about how the effect will be assessed is a matter for my right Friend, and I do not intend to be drawn on it this evening because it is not one which is open to me to answer. The right hon. Gentleman asked whether as much information on investment allowances would be produced as has hitherto been produced on investment grants. We shall consider this. Of course, a lot of information on investment allowances is given in the statistics produced by the Inland Revenue. The right hon. Gentleman knows that last year, for the first time, the Inland Revenue produced an entirely separate volume of statistics containing a number of entirely new charts and tables of interest to those who study these things. We shall certainly consider the right hon. Gentleman's suggestion as to how far we should go in producing further statistics on investment  allowances. I hope that he will take that as sincerely intended. The right hon. Gentleman also asked something that he has asked two or three times before about the differential between the development areas and the rest of the country. He asked me to support, with figures if possible, the assertion of my right hon. Friend the Chancellor that the package as a whole broadly maintained the existing differential. I am sorry that he has not been satisfied with the answers which my hon. Friend the Minister of State, in particular, gave him in reply to his question, and felt it necessary to launch into the columns of the Press on the matter. Perhaps I may just refer to his letter to The Times Business News. It had a sting in the tail which was not wholly deserved, suggesting that my hon. Friend the Minister of State and I had forgotten all we had ever learnt about discounted cash flow techniques and so on. I assure him emphatically that that is not the case. We are very well aware of the importance of these methods of calculation in the right place. Indeed, we are impressed by the degree of sophistication and awareness by both the Inland Revenue and the Treasury in this complex field. Perhaps the right hon. Gentleman will feel that his gibe was undeserved. I come to the question of the regional differential and the cost of the existing differential element in the investment grant. Perhaps I should apologise for addressing the House in a dark brown voice. I have a cold and I trust that hon. Members will forgive any inconvenience that this is causing. The cost of this element paid to the development areas in 1969–70 was about £100 million, and it is expected that it will be a little higher in 1970–71. Of course, the net value to industry is somewhat lower, about £80 million, because the annual writing down allowances on capital expenditure are given net of grant. But for the grant, firms would receive higher annual allowances. We estimate that the cost to the Exchequer of the regional differential incentive in 1972–73 will be about £90 million, made up in part of the residual differential grant payments and, in part, of the additional cost of free depreciation over the national rates of allowance. Obviously, as the grant is phased out that figure of differential will, to that extent, decline, but this will be matched by the growth of additional expenditure—which my right hon. Friend told the House would be up to £25 million extra by 1974–75—under the Local Employment Acts. These figures taken together—the decline as the grants are phased out, the maintenance of the margin of investment allowances and the growth of expenditure in respect of the Local Employment Acts—in my submission fully justify our assertion that the balance of advantage for the development areas will be broadly maintained.

Mr. Sheldon
Does that assume the same level of investment throughout the years concerned?

Mr. Jenkin
No. The investment is, of course, assumed to rise, for the purpose of argument, broadly in line with recent trends. This would seem to be a perfectly proper assessment, bearing in mind the fact that industry will be less burdened both with corporation tax and tax on distributed profits as a result of the cut in income tax. We anticipate, therefore, that investment will begin to rise. I was then asked about the effect of the change on the liquidity of companies. Hon. Members will realise that what one is talking about is the liquid assets of companies available for investment. It would not be right to apply discounted cash flow to these assets because one is talking about cash that is available. Here there is very little difference between the two systems. If one looks at the first three years, one sees that in the case of an asset qualifying for a 40 per cent. grant, the variation was between 49·8 per cent. and 54·8 per cent. An asset qualifying for free depreciation at the corporation tax rate of 42½ per cent. would get 42·5 per cent. With a grant of only 20 per cent., again, the figures varied—the variation would depend on the amount of the writing down allowance—between 33·1 per cent. and 39·7 per cent. Under the new system it is 32·9 per cent. In the case of an asset which did not qualify for grant, it varied between 29·7 per cent. and 31·8 per cent. The figure under the new system is 32·9 per  cent. Although if one looks at a particular asset there may have been in the case of the development areas some reduction in the minimum liquid cash amount available, one must have regard to the effects of a 2½ per cent. cut in corporation tax on the rest of a company's profits. If the right hon. Gentleman says, "What about a company that does not make any profits?", then the answer is, "Let it become efficient and it will then be able to benefit from the allowances and from the reduced rate of corporation tax being paid." If hon. Gentlemen opposite are arguing that we should continue to make substantial payments out of public funds to companies whether or not they make profits, then we on this side of the House do not agree. We feel that the system needed a change and, as part of that change, a 2½ per cent. cut in the rate of corporation tax was, we believe, appropriate. I hope that the hon. Member for Cornwall, North will not press the Amendment. If he does press it, I trust that my hon. Friends will reject it. Equally, I hope that my hon. Friends will support the Clause, if necessary on a Division.

Mr. Pardoe
In view of the Financial Secretary's remarks, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 3 ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

Bill reported, without Amendment.

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 55 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed.

Family Income Supplements Bill

Considered in Committee.

[Sir ROBERT GRANT-FERRIS in the Chair]

7.21 p.m.

Mrs. Shirley Williams  (Hitchin)
On a point of order. I wish to seek your guidance, Sir Robert, and in doing so I want at the outset to make it clear that I accept completely the decision of the Chair in regard to the selection of Amendments. I raise this point of order because we are in some difficulty in respect of the first group of Amendments selected, and I seek your guidance in an effort to overcome this difficulty. You have not seen fit to call Amendment No. 1, Sir Robert, in which we suggest that the word "include" should be replaced by the phrase "consist of". This followed from the remarks of the right hon. Gentleman the Secretary of State for Social Services when, on Second Reading, he referred to the fact that we would have to define carefully in Committee, and in the subsequent regulations, exactly what was included in a family. I was advised that the word "include" was rather broader than the phrase "consist of". Would it be possible for me to move Amendment No. 1, which stands in my name and that of some of my hon. Friends, in a way which would assume that the phrase "consist of" does not mean an exclusive list of those who are members of a family but may be taken to mean those others in the Bill as it now stands?

The Chairman
I do not think that there will be any difficulty about that.

Mr. S. C. Silkin  (Dulwich)
Further to that point of order. I, too, speak with the greatest respect to the Chair and I fully understand that it is not the province of an hon. Member to question the selection of Amendments. Anything I say is, therefore, intended simply to help you and the Committee, Sir Robert, in this matter. Clause 1 sets out to define what is meant by "a family". Indeed, unless one has a family the Bill does not bite. The Measure therefore naturally starts  with a definition of what a family is and that definition in the Bill as it stands consists of three elements, which are cumulative and which are set out in subsection (1) (a), (b) and (c). My hon. Friends will wish at the appropriate stage to move an Amendment which, if accepted, will have the effect of leaving out altogether one of those three cumulative elements. If the words remain as they are, with "consist of" left in, the effect of the acceptance of that Amendment, as we understand it, will be that, for the purposes of the Bill, a family will consist of only two of the three elements, which is either the man or the woman referred to in subsection (1)(a) and the child or children referred to in subsection (1)(c). That is not the intention, however, of any of our Amendments. On the contrary, our intention is to widen rather than narrow the definition of a family and we see no way of accomplishing that other than by removing the words "consist of", which specify precisely what a family should be, and substitute some such word as" include which is, of course, much wider.

The Chairman
I am obliged to the hon. and learned Gentleman for those comments. I do not think he need have any great difficulty about this. I am sure that we will manage to find what the hon. Lady the Member for Hitchin (Mrs. Shirley Williams) has to say in this matter in order, and I hope that we can now move on to discuss the first group of Amendments.

Mr. Brian O'Malley  (Rotherham)
Further to the point of order that has been raised, and I promise to be brief because I appreciate that the Committee is anxious to make progress with the Bill. As is usual when Amendments are selected—and I make no complaint about the selection of Amendments—both in the Chamber and in Committee upstairs, a number of Amendments are grouped together. It has been the practice on some occasions for Mr. Speaker, when we have been in the House, or for you, Sir Robert, as Chairman of Ways and Means, to be willing to accept separate Divisions on secondary Amendments which are under consideration, and on the paper which has been placed in the Lobby for the convenience of hon. Members  there is usually a star against those Amendments on which it is agreed there may be separate Divisions. My hon. Friends and I are in some difficulty, particularly in relation to two of the groups of Amendments which have been selected, in that we would like very strongly to be able to vote on certain Amendments which will be secondary in the group under discussion. Could you give some guidance on this, Sir Robert?

The Chairman
I have not considered what Amendments on which I would or would not allow Divisions, whatever may appear on the door, as it were. I am always happy to meet the convenience and wishes of hon. Members. If separate Divisions are required, I will be prepared to allow that, though we do not want to have an enormous number of Divisions from among those Amendments which are grouped together because that would be wasteful of the time of the Committee. I think that I will be able to meet the wishes of the hon. Member when the time comes.

[Sir MYER GALPERN in the Chair]

Clause 1

Family Income Supplement

7.30 p.m.

Mrs. Shirley Williams
I beg to move, Amendment No. 2, in page 1, line 7, leave out 'single'.

The Temporary Chairman
With this Amendment we can take the following Amendments:

No. 6, in page 1, line 9, leave out paragraph ( b).

No. 9, in page 1, line 16, leave out 'paragraphs' and insert 'paragraph'.

No. 64, in Clause 17, page 7, line 21, leave out from 'Act' to end of line 24.

Mrs. Williams
The purpose of this group of Amendments is to explore precisely what the Government have in mind in the way in which the Bill defines "family". The fundamental purpose is to try to express the concept of a family in a way which will as far as possible meet the practical shape of families with low incomes which are in considerable need and which the Bill is intended to help. On Second Reading the right hon. Gentleman the Secretary of State for Social Services said: "A household is one with children. A grandmother living with a son who himself has children would not be within the scope of the Bill. The son with children might be. I think that that is the position, but I would like to reserve judgment on it. We shall have to define carefully in Committee and in subsequent regulations exactly who is included."—[OFFICIAL REPORT, 10th November, 1970: Vol. 806, c. 224.] The right hon. Gentleman will appreciate that it is both one of the duties and one of the purposes of the Opposition to try to establish as many facts as they can while the Bill is passing through Committee and Report stages instead of leaving them to regulations. We therefore wish, with the right hon. Gentleman's co-operation—which I am sure we shall get—to try to find out at each stage precisely what the Government have in mind. Some of the Amendments have been put down because we genuinely believe that they will improve the Bill, little affection as we have for the Bill. I turn first to the first part of Clause 1 which deals with which members of a household a family shall consist of. For this purpose I will take the Chairman's guidance that the words "consist of" need not be exclusive of all other possible members of the family. Clause 1(1)(a) reads: "one man or single woman engaged, and normally engaged, in remunerative full-time work;" The effect of the Amendment would be to remove the word "single", so that a woman who was the main breadwinner of the household would be entitled, even if she were living with her husband or with some other man as her husband, to receive family income supplement. I will later go into the details why we think this is important and relevant to modern conditions. Before doing so, I will explore the reasons behind the Government's thought in wishing to define the woman in paragraph (b) as being either the wife or a woman living as a wife with the head of the household. This brings me to a point which was raised in Second Reading—as we call it in shorthand, "the grandmother Clause". We have in mind here impoverished families consisting of many children where female relatives may be called in to  become part of the family and may take the main responsibility for the upbringing of the children. A man who is widowed or deserted by his wife will frequently bring another female relative into the household to bring up his children. I appreciate that there is no separate allowance for the wife, and that, therefore, the grandmother replacing the wife or mother would not herself be entitled to a special allowance. But the point which we are concerned to make is that the responsibility for the children in such a family—and such families are by no means uncommon—rests with both the man and the other female relative, his mother, sister, aunt or whoever it may be. In addition, this female relative may in certain circumstances become for the purposes of the Bill and for the maintenance of the children the head of the household. We are anxious not to draw the definitions as narrowly as the Bill does. The right hon. Gentleman will know that the word "nan" or "nanny" means something different among families who are not rich enough to employ someone in that capacity. It usually means grandmother, because the grandmother is an integral part of the family. I refer to Clause 8(2) simply because it is germane to our understanding of the words "consist of". Clause 8(2), which states the requirements to be taken into account for payment of family income supplement, uses the phrase: "any person included in the family". Although there may be no intended distinction here, we are a little concerned whether Clause 8(2) goes wider than Clause 1(1) in respect of those it includes in the family. We therefore ask for a de facto definition of "family" instead of the narrow definition in the Bill. My next point, which is of considerable concern to us on this side of the Committee, is about the woman who is in practice the head of the household—by "in practice" I mean in terms of her income—even though she may be living with her husband. We have in mind a man who is unable to go out to work and who may not be able to draw full sickness or unemployment benefit—for instance, a man with a recurring illness such as asthma—where it may be in the interests of the family that the wife rather  than the husband should go out to work. We have in mind also a father who, owing to a disability, may get a small disability pension—perhaps in respect of an industrial disease—but who in practice will be able to earn less than his wife should she go out to work in his place. We do not believe that the Government would wish to produce a major disincentive to a wife going out to work if she would prefer her family to be sustained by her earnings rather than by supplementary benefit. If that is the choice the wife makes, we wish to explore further the restrictive meaning of Clause 1(1)(a) which, as defined in paragraph (b), makes it quite clear that where a woman is married and living with her husband he must be regarded in all situations as the breadwinner, so that the wife cannot draw a family income supplement. Another situation is that in which a man for a substantial period has been unable to obtain employment—that is not an unfamiliar situation in part of the North-East and Scotland—and in which his wife might well be able to get employment. In some parts of the country where basic industries are running down, collieries and steel mills, which are largely employers of men, are replaced all too frequently, and perhaps unfortunately, by industries which employ female rather than male labour. This is a situation of which we are likely to see more rather than less in the future. If it is true to say that this country does 10 years later what the United States does—I hope that that is not true—then the example I am about to give will become a still more familiar situation This is where the husband is a student and where his parents' income in sufficiently high for him not to be entitled to more than a basic grant of £50 a year, but where his parents fail to pay their share of the student grant. In that situation, the wife is frequently the main breadwinner and the husband cannot draw supplementary benefit because it is no responsibility of the Commission that the parents fail on their side of the commitment to pay the grant. Nevertheless, this type of family, where there are often children nowadays, will be excluded from the Bill even though the wife might herself be endeavouring to keep her family  by working up to 30 or more hours a week. I remind the right hon. Gentleman of what the Chancellor of the Exchequer said when he originally described the Family Income Supplements Bill, on 27th October: "This will be additional to existing family benefits, and will be paid to poor families with children where the wage earner is in full-time work, using a simple test of income."—[OFFICIAL REPORT, 27th October, 1970; Vol. 805, c. 45.] I repeat the words "the wage earner". From our point of view that would have been a more satisfactory definition than the one which appears in the Bill. We now have, because of the kindness of the then Government, the Supplementary Benefit Code which is the handbook of guidance to supplementary benefit officers. One case specifically raised in the handbook is that of a woman who is living with a man as his common law wife where the man refuses to maintain the children or some of them because he believes they are not his children. This is a sufficiently frequent situation for the supplementary benefit handbook to deal with it as a category of cases, although, fortunately, not a very common category. I am not clear from Clause 1(1) whether, if a man is living as husband with a woman and refuses to maintain the children, the wife is entitled to make a claim for those children and to draw family income supplements on the basis of the man's wage. If the man were working and living with her, it is by no means clear that she would under the present rules be entitled to draw supplementary benefit. Will the right hon. Gentleman say a little more about the point raised in Second Reading about grandparents, not themselves retired, who are standing in loco parentis to grandchildren? Would grandparents having responsibility for the children be entitled to draw family income supplement, as the children would be their responsibility and not the responsibility of their parents? It frequently happens that a young unmarried mother will place her child or children in the care of her parents. In some cases it will be even believed in the neighbourhood that the children are the children of her parents. It is important that we should establish in that situation whether the grandparents have the right to call  upon the Bill, since they may be in receipt of a very small income.

The Secretary of State for Social Services (Sir Keith Joseph)
Will the hon. Lady guide me on that hypothesis? Is she suggesting that where the children are placed with the grandparents, the mother of the children is not living in the same household but elsewhere?

Mrs. Williams
I think the right hon. Gentleman at an earlier stage dealt with the hypothesis that the mother was living with her parents. No, I am taking this a stage further to an all-too-common situation in which the grandparents have to step in as parents in respect of their daughter's children. The ease of definition is crucial here. It is most painful for a young unmarried mother to make her personal situation clear in filling in forms and then for it to become known what is the true situation.

Amendment No. 9 eliminates Clause 1(1)( b). The purpose of eliminating this paragraph was to deal with the widening of the definition of female dependants. I hope that the right hon. Gentleman in his reply to these Amendments will recognise that this was our intention. It was not our intention in removing paragraph ( b) to exclude the wife as well as all other female relatives from benefit.

7.45 p.m.

I come to the final Amendment, No. 64, which removes the definition of "single woman" used in the Bill. If we were to knock out the word "single", this definition would no longer be required. The definition is wide, unless the right hon. Gentleman has some particular limitation in mind, since it reads:
 "'single woman' means any woman other than one who is a member of the same household as a man to whom she is married or with whom she is living as his wife."

Perhaps only a lawyer could understand why the word "single" is so used. I suppose that, in common parlance, "single" is often used of a spinster or unmarried woman. Therefore, we suggest the removal of this definition because we want to widen the whole concept of the female member of the family.

I should like to raise one matter which is not related to this last Amendment and that is the question of cohabitation. The Bill deals with a woman married  to the head of the household or a woman who lives with him as his wife. I wonder whether the right hon. Gentleman has considered the extremely difficult case law that has been built up by the Supplementary Benefits Commission about what constitutes a common law marriage or a common law wife. It would be helpful if he could say a little more about whether he is to base the definition of a woman who is living with a man as his wife while not married to him on the same sort of criteria as those used by the Commission. These criteria are many and vary from sharing an income to sharing a bed, and it would be helpful if we could have some idea of what the right hon. Gentleman has in mind.

Sir K. Joseph
I am grateful that I did not have to submit to immediate written examination in regard to all the hon. Lady's technical but justified questions. First, I would make clear that the Government have no intention whatever of taking merely technical objections. If there are any technical objections to inhibit any Amendment that should be made on merit, then the Government will undertake to introduce the necessary facilitating Amendment at a later stage in the Bill. The Opposition need have no fear that we shall take merely technical Amendments to stop anything of substance. Before considering the hon. Lady's questions, we need to bear in mind the purpose of this limited piece of legislation. It is to help a family that is not entitled to supplementary benefit to improve its income where its income at the moment is below supplementary benefit level. Therefore, I shall be answering the hon. Lady, and perhaps a number of other hon. Members during the discussion, on a number of occasions with the answer that in the particular hypothesis mentioned the family or household will be entitled to draw supplementary benefit which, ipso facto, will be better than family income supplement. I will now go through the postulates of the hon. Lady and try to explain the position in regard to each. The first hypothesis was that the woman is the main breadwinner of the family. She may be in this situation for a number of reasons, either because there is no male vacancy for the man or because the man is recurrently ill and cannot maintain  a job, or because the man is sick, or because he is disabled. For any one of these reasons, the family is entitled to supplementary benefit. Where the man is not in work, his family and household are entitled to supplementary benefit. If the woman living with him, or the woman who is his wife, is contributing income from earnings, or from gifts from her own family, or from any other source of income to the household, then, under the Supplementary Benefit Rules, only £2 of that income is disregarded. Hon. Members may criticise the amount of the disregard, but that is not central to the question we are now considering. Therefore, on the first hypothesis put by the hon. Lady, the answer is, as I warned it would be on a number of occasions, that the particular family where the woman is the wage earner is entitled to supplementary benefit. We can imagine a situation in which the woman was earning so well that it was worth the while of the household not to apply for supplementary benefit, but we are not in the realms of earnings in dealing with the families covered by the Bill. The hon. Lady went on to a sub-hypothesis, namely, where the wife or woman was earning because the man was not well enough to earn adequately. Here we have to look at two alternatives: either the man is not earning adequately because, for one reason or another, he is not working full time and, in that case, the family is entitled to supplementary benefit; or he is working full time for such low earnings that he is entitled to family income supplement. I think that I have covered all the alternatives under that hypothesis.

Mrs. Shirley Williams
The right hon. Gentleman is being very helpful, but before he moves on may I put this hypothesis? Let us take the case of a woman whose husband is, to some extent, mentally handicapped and the only kind of work he can do is unskilled—

Sir K. Joseph
Full time?

Mrs. Williams
Full time. Let us take it that he could earn only £9 a week in his occupation and that the woman could earn £12 at a similar occupation. Because of the limitation of £3, if the family consisted  of several children it might well be better off if the woman went out to work, earned £12 and was able to claim the full amount of £3—the whole amount to which she was entitled—rather than that the man should go out to work for £9 a week and so be able to claim £5 but, because of the limitation, would only be entitled to £3. There are tens of thousands of people who are to some extent mentally handicapped and limited in the jobs which they can do. A number are bound to be married to a woman who might be able to earn more.

Sir K. Joseph
I think I must take time to look at that example, and I will look at it. But in the length and breadth of the country I do not think that there are many men, whatever their defects of nature, who are in what is called full-time work earning that order of gross income. I will look at the matter and, if there is a case, I will see whether anything can be done about it. The hon. Lady put a group of hypotheses connected with the presence of a grandmother or a Nan of some sort in the household. It might be a sister or aunt who is taking the place of the woman or mother in bringing up the children. We have to assume one of two alternatives: either that the replacement woman—the Nan—has an income or that she has not. If she has an income, then her income has to be taken into account in measuring family income against the make-up level. Therefore, although the hon. Lady does not mean to harm the family by taking account of that income, it would be reducing the chance of that family to qualify for family income supplement. But if the Nan does not have an income and the man is doing the earning, then the family is entitled to family income supplement. If the man is not doing the earning, then the household is entitled to supplementary benefit. So that in that group of hypotheses there has not been shown to be any need for change. To clear up any doubt, if we contemplate a household in which a Nan has children of her own and joins up her household with that of the father and his children, we might well get a situation in which the same household contained two families, each entitled on its own to family income supplement. I think that I am on sound ground there. Now we come to the much harder cases. I have only covered the easy ones the hon. Lady put to me. She asked me what would happen if a common law wife were living with a man who disowned care of the wife's children because he believed they were not his. The hon. Lady can be completely comforted that the Bill meets the point because Clause 1(1)(c) provides that family income supplement is payable to a family where the children are the responsibility of either the father or the mother. Therefore, that particular case is covered by the drafting of the Bill. I was then asked by the hon. Lady what would happen if the mother, as must often happen, placed her child or children with her parents and did not reside in the household. We then have to take three different hypotheses. One is that the parents have income of their own, in which case with or without the help of the mother—who has presumably deposited the children so that she may earn—they are assumed to be able to look after the children, or that they do not have income, or enough income, in which case they are entitled to supplementary benefit—

Mrs. Shirley Williams
May I raise the point whether they are working and have a low income?

Sir K. Joseph
Then they are not entitled to supplementary benefit because they are working full time. They are not entitled to family income supplement because they are not the parents. There the hon. Lady scores 15—love, and I will take the case away and look at it. Indeed, I undertake to look at it and, if necessary, I will put down an Amendment. If I find her case is not covered, I do not undertake necessarily to amend the Bill because we have to assume that the mother will have freed her hands in order to earn by placing the children with her parents. We may have to assume, because of considerations which have to be taken into account, that it would be right to let the mother contribute to the household. But I undertake to look at that alternative and either to account to the House for why I have not put down an Amendment, or to put down an Amendment.

Mr. Kevin McNamara  (Kingston upon Hull, North)
We are grateful for what  the right hon. Gentleman has said, but there is one other alternative, and that is where the child is deposited with the grandparents and the mother leaves the child and no more is heard of her. This could be a real cause of trouble.

8.0 p.m.

Sir K. Joseph
That is no problem if the grandparents are not working. Either they have income over and above supplementary benefit level or they are entitled to supplementary benefit. It is only if they are earning that a problem arises. I think that that case is outside the purpose, as conceived, of the Family Income Supplements Bill. However, I will look into it. I now come to the most difficult of the cases put forward by the hon. Member for Hitchin—the student. I shall have to look at this point, too. Normally, my reaction would be that the student will not be within the purposes of the Bill, because a child, within the purposes of the Bill is up to the age of 16 or over that age if still in secondary school full-time. But "student" implies that the child is over that age. However, to make sure that I am not missing a point, I will also look into that case.

Mrs. Shirley Williams
I should like to make the position a little clearer. I was not raising the point about the student as a child. I was concerned about the adult student who may have children and, because of the present arrangements of the student grant system, cannot draw supplementary benefit, but may not be in receipt of the grant which he is meant to have because it assumes a parental contribution which is not paid. This is not an attempt to split hairs. Many thousands of people come into this category. It therefore raises again the question of the earning wife.

Sir K. Joseph
I cannot undertake to do more than look at it. I know that the hon. Lady is not trying to split hairs. I cannot give an undertaking that, when I say I will look at something, there will be an Amendment. However, I will either put down an Amendment or account to the House for not putting down an Amendment. For these reasons, I do not think that the hon. Lady, for all her care in probing different alternatives, has made out a  case for a change in drafting of the Bill. I shall certainly look at the points which I have not wholly satisfactorily been able to answer. I hope that the hon. Lady has got some satisfaction from what I have said. I am advised that Amendment No. 8 meets the case of the earning grandparent where the mother is outside the household.

Mrs. Williams
That is our Amendment.

Sir K. Joseph
If that Amendment is called, I shall be able to advise the Committee that, subject to one or two points, it is wise to accept it. Therefore, I can reassure the Committee on the earning grandparent hypothesis.

Mrs. Williams
In the light of what the right hon. Gentleman has said, I beg to ask leave to withdraw the Amendment. However, I do so on the understanding that the right hon. Gentleman will look into the points which we have raised and will endeavour to meet them, if he feels it is possible to do so, by Amendments on Report.

Amendment, by leave, withdrawn.

Mr. O'Malley
I beg to move Amendment No. 3, in page 1, line 8, leave out 'full-time'.

The Temporary Chairman (Sir Myer Galpern)
With this Amendment I suggest that it will be convenient to take Amendment No. 4 in, page 1, line 8, after 'work', insert: 'or, where it can be proved that no full-time work is possible, part-time work'; Amendment No. 5, in page 1, line 8, after 'work', insert 'such as to provide the substantial support of the family'; and Amendment No. 50, in Clause 11, page 4, line 20, leave out 'full-time'.

Mr. O'Malley
I am sure that the Secretary of State will be pleased to hear that I do not think that he will be faced with the complex type of problems raised on the previous Amendment by my hon. Friend the Member for Hitchin (Mrs. Shirley Williams). As the Bill stands, a man or a single woman is entitled to claim the family income supplement only if he or she is "in remunerative full-time work". This is largely put down as a probing Amendment to inquire into the thinking of the Government on the interpretation of the words "in remunerative full-time work". We were given an explanation how the Government intended to interpret those words in a Written Answer on Friday, 13th November, when the Secretary of State said: "The general rule I propose is that a person will be treated as being in remunerative full-time work if he normally works for 30 hours or more per week."—[OFFICIAL REPORT, 13th November, 1970; Vol. 806, c. 284.] This gives some of the information for which we would otherwise have been asking during the debate on this Amendment. But a number of further questions arise which I should like to put to the right hon. Gentleman. First, I should like to consider carefully what was said in that Answer. I do not want to split hairs, but obviously we would like to be clear about the explanation given in that reply. The right hon. Gentleman began, "The general rule I propose". Will he tell us what kind of exceptions from that general rule he is already envisaging in regulations? The right hon. Gentleman goes on, "… I propose … that a person will be treated as being in remunerative full-time work if he normally works for 30 hours or more per week." Presumably that applies whether it is a man or a woman. In the face of that general definition one has to inquire about three types of person. First, casual workers. The right hon. Gentleman gave some extra information in Written Answers to Questions, again on Friday 13th November, where he explains that in the vast majority of cases one will be taking into account average earnings of persons either over five weeks or two months. The right hon. Gentleman then says something about casual earnings and seasonal work. It would be helpful if he could tell us more about the Government's thinking on that aspect. Secondly, what is the position of the woman who takes in work? I realise that the number of women who are either willing to become, or forced into becoming, for example, seamstresses in their  own homes is much lower than would be found 20 years ago, and particularly half a century ago. Nevertheless, there must be a number of women in that position whose working hours will vary according to the amount of work which is brought in on individual orders or requests. How will the 30 hours definition affect them? Thirdly, what about the man or woman, the head of a household, who does not receive a wage for a number of hours per week, but draws his or her income from fees—for example, an actor or, for that matter, a widowed actress? The right hon. Gentleman laughs. This is one of the troubles of bringing in a Bill of this kind. We are bound to get this kind of complication. There could be cases of people working probably for 30 or more hours per week for part of the year, but who, during the period on which the assessment will be made, will have been working substantially less than 30 hours per week, and yet, despite that, may have an income in tens of pounds—the kind of income of people who will be affected by the Bill. I said that the Amendment was primarily intended as a probing Amendment, but there was an additional reason. We and the right hon. Gentleman are anxious to keep the scheme as flexible as possible in the interests of the claimants. We should be concerned particularly, because of this definition, with the position of a widow, perhaps the only adult in the house, with a number of children. If it is possible, such women should be given a choice of the source of their income from the State. Under the Bill, a woman working for 20–25 hours a week with an income of £8 10s. and with children is entitled to supplementary benefit. We would not want the Amendment to produce a situation in which we would be denying a woman the more generous benefit which she can receive at present from the Supplementary Benefits Commission. If one takes into account the views of some outside organisations and our own experience in our advice bureaux in our constituencies, one realises that there are women who should, and are entitled to, apply for supplementary benefit, but who refuse to do so. One case which springs to my mind is that of one of my constituents, an unmarried mother, who was  quite unwilling to go to the local D.H.S.S. office. She did not want anyone to know about her position. Yet all she could do was part time work. The F.I.S. is singularly a means-tested benefit, and some individuals would have the same objections to applying for it as they do about supplementary benefit. But there is one substantial difference—that the F.I.S. is to be a payment from a central department rather than one from a local authority. I would not want to make too much of this. There is nothing between us here. We recognise that some people will not apply for supplementary benefit. If we can do something for them under this kind of Bill, obviously we want to do it. So the Amendment could help some people like the unmarried mother I mentioned, who might be prepared to accept an option different to supplementary benefit—the family income supplement—if it were open to them. There is a question of inducement or disincentive to work either more or less than the stipulated number of hours. Since the level of supplementary benefits, with all their disregards, is higher than the income provided under the Bill, there is every inducement for the woman who, for example, is at present working over 30 hours a week, to reduce them to 25 or even 20 hours. There is always a danger of collusive reduction of hours. The Amendment would provide more flexibility in administration. We would not be tied to the 30-hour rule, which would mean that there would be options open to these women. Of course one option is better than the other, but it does not necessarily mean that, because of the nature of the options, women would not be prepared to accept one rather than the other, even though, in many circumstances, it would be less attractive. 8.15 p.m. Therefore, I put forward the Amendment with no hard views about it. We should try to look at some of the problems raised by the scheme to see how we can help the people who can be helped and who presently will not be helped. I have also raised a number of general questions, but the important thing is that, wherever we can give an option, particularly when it affects the inclination  of women in circumstances that I have described to work or not to work, or to work one number of hours rather than another, flexibility must be considered. If the Amendment does not do it, we should consider making it more flexible than it appears to be under the 30-hour rule, to give the most help to the people we are all concerned to help.

Mr. Charles Loughlin  (Gloucestershire, West)
rose—

Mr. J. R. Kinsey  (Birmingham, Perry Barr)
rose—

The Temporary Chairman
Mr. Loughlin. Sorry—Mr. Kinsey.

Mr. Kinsey
My right hon. Friend is being very generous in the way that he led us into the debate and answered the first set of Amendments. In my maiden speech, I asked that consideration be given to widows or people in business left in this position. Going out to business is just as much work. I know that this would put a strain on my right hon. Friend in the matter of interpretation, but if he could at least consider it, I should be obliged. This is as much work as what the hon. Member for Rotherham (Mr. O'Malley) said about people who take in work. Clarification here would be very helpful.

Mr. Loughlin
Mine was rather a facetious remark, and followed naturally upon what my hon. Friend the Member for Rotherham (Mr. O'Malley) said and a couple of smiles that the Secretary of State and I exchanged. I know that he was only too eager to deal with the examples which my hon. Friend put to him and I thought of one which is bound to floor him on the question of part-time work. I thought of a struggling artist who was doing nude studies and could afford to hire the girl for only 29 hours a week. Would he come into the definition of full-time work?

The Temporary Chairman
I apologise to the hon. Gentleman if his remark misfired, but I do not think that we should go into the question of nudes here this evening.

Mr. Hugh D. Brown  (Glasgow, Provan)
That may be a bit more interesting, but we have a job of work to do tonight. Could I ask the right hon. Gentleman to give us some greater detail?  I have read his Written Answer in c. 284 about 30 hours but that does not satisfy me. On Second Reading I gave an example of the generous and sympathetic treatment extended by the S.B.C. at the moment. This applies when anything less than full-time work is regarded as part-time work. If someone is in a job for which the working hours would normally be 40 hours and it by collusion, and there is nothing wrong with that, the figure is reduced to 30 hours a week, that is accepted as part time employment. Assuming a man or woman was accepted by the S.B.C. as being in part-time work but was doing more than 30 hours a week would they still be given the favourable treatment which they would get from the S.B.C. because £2 of their earnings could be disregarded? They would be better off than under this miserable Bill. Will they get the choice or will there be further regulations imposed on the S.B.C. to create a limiting effect?

Mr. O'Malley
My hon. Friend will wish to bear in mind, and perhaps the Secretary of State would note, that in the Supplementary Benefits Commission handbook published a few months ago by the previous Government, in paragraph 2 under "Exclusions From Benefit (Persons In Full Time Work)" we are told: "A person is considered to be in remunerative full time work if he works the recognised week in his trade or employment." This is the definition given in the handbook and it gives emphasis to the question of my hon. Friend.

Mr. Brown
This is a most important part of the Bill. We certainly want to get it clear. It seems that there is a possibility of the Secretary of State having to give a directive to the S.B.C. about whether a person should have a choice. Can an individual elect for a particular category under which he shall be treated? I want a categoric assurance about that. I am extremely worried about how people will get precise information about this. Will there be a central office for assessment? What about advice and information? It is not so much the question of adjudication because that has always been remote, but rather a matter of the availability of staff to advise an applicant whether he would be better taking advantage of one procedure or  the other. There will be the possibility of many more staff being required. I hope that the right hon. Gentleman will say whether offices will remain open for at least one evening to give advice.

Mr. McNamara
When we are talking about self-employed people the definition of remunerative full time employment comes in. I am thinking of share fishermen, window cleaners, persons who take in typing and so on. How will this fit into the 30 hours?

Sir K. Joseph
I am grateful to the hon. Member for Rotherham (Mr. O'Malley) and other hon. Members who have spoken. I will try to answer the points which they raised. Hon. Members will sympathise with the intention of the Government to keep this scheme as simple as possible and my answers will have that purpose in mind. I was asked whether my reply to the Question published in HANSARD on Friday in terms of the general test I envisage, that anything over 30 hours a week would be intended as full time for the purposes of the Bill, implied that there were exceptions in my mind. The answer is that I have it in my mind at present that there will be no exceptions but I am very open to considering exceptions if during the debate or the next few months exceptions are shown to be necessary. The second question relates to the degree of sharpness of the 30-hour rule. The Government desire that this shall be a very sharp division, and that those who work for 30 hours or more in a week shall be considered to be in full-time work and therefore entitled to family income supplement while those who work for less than 30 hours a week should not be entitled to the supplement but should be entitled to supplementary benefit. That leads me to the third question put by the hon. Member for Rotherham and the hon. Member for Glasgow, Provan (Mr. Hugh D. Brown) about those who are hovering just above or below. The supplementary benefit treatment is much better than the family income supplement treatment. This is because there are disregards, rent is paid—and for various other reasons. Despite that there may be people who, because they want to work, for psychological reasons, the company or any other reason that  seems good to them, would rather have family income supplement than supplementary benefit. It is our intention that individuals shall be able to exercise their choice by adjusting their hours. It is our intention, by means of a leaflet in the first place and by means of advice if the leaflet does not suffice, to advise people what is in their best interests. The result may be that a woman who is now doing 32 hours a week may be advised to do three or four hours a week fewer and so become entitled to supplementary benefit. On the other hand, someone working for fewer than 30 hours a week may be advised to try to work, if it is available, for longer to become entitled to family income supplement. The answer to the hon. Member for Provan is that advice will be available at any of the social security offices. My hon. Friend the Member for Birmingham, Perry Barr (Mr. Kinsey) asked about widows. Widows are in themselves eligible, but such is the benefit available to those widows bringing up children that the family concerned will rarely be eligible for the family income supplement. They are eligible if their family income is less than the make-up level.

Mr. Kinsey
What if that income is from a business rather than a job?

Sir K. Joseph
That leads me to the next point, the difficult complex of people ranging from window cleaners to actors, painters or anyone in private business, including the woman mentioned by the hon. Member for Rotherham who takes in work in her own home. These people are in business; in one form or another they are private entrepreneurs. We shall need, as the Supplementary Benefits Commission needs, to define how to measure their income. There will need to be a separate set of regulations for people in private business on their own account.

Mr. Peter Archer  (Rowley Regis and Tipton)
Is it also proposed that there shall be regulations defining how the time spent by these people is to be measured? Is a lady who takes in washing to mark off on a sheet every half-hour she spends before returning to cooking the lunch?

Sir K. Joseph
I may have misled the House slightly in what I said. The test is not employment as such but work. If  someone like the window cleaner is at work on his own account for more than 30 hours a week, then he will be entitled to family income supplement. There are some forms of work the earnings from which take the form of profits rather than wages. Those forms of work where there is expenditure laid out before a person can get anything for himself from the receipts are in the form of a business and will be covered by regulations.

8.30 p.m.

Mr. McNamara
The right hon. Gentleman will appreciate that this is a very difficult line he is now trying to draw between, for example, a window cleaner and a person who takes in typing or washing and measures profit against loss. How do we measure time in this context? For example, I would imagine that a window cleaner in Lerwick in winter has very little opportunity to pursue his trade but more opportunity than most people during the summer. These are problems for these people who want to preserve their independence but who by doing so are putting themselves in a very precarious position financially.

Sir K. Joseph
We must not be too daunted, because all these problems have been successfully surmounted by the Supplementary Benefits Commission, which must make some assessment of household income for people not in full-time work. The Commission—not referred to in the Bill—is our agent and we shall seek its advice on the definition of earnings or about the business element for the purposes of working the Bill.

Mr. S. C. Silkin
Is the right hon. Gentleman saying, then, that the expression "remunerative full-time work" will be defined in different ways for different classes of people? If he is saying that, that was not how I read the regulation-making power in Clause 11. I may be wrong, but I thought that that was intended to prescribe a single test of what was meant by "remunerative full-time work". Can the right hon. Gentleman help on this?

Sir K. Joseph
I do not think that I have grasped the question. Perhaps the hon. and learned Gentleman will put it to me again. I do not see the problem.

Mr. Silkin
I am sorry that I have not made myself clear, but I am sure  that it is my fault. As I understood what the right hon. Gentleman was saying, it was that he would be taking account of the fact that different people have different systems of earning their money—the window cleaner being one, the artist being another, and the person doing what one might call an ordinary job in excess of 30 hours a week being a third, and that he would cater for all these different situations. I was asking the right hon. Gentleman how he proposed to cater for these different situations within the scope of the Bill as it stands; because, as I read it, it looks as though there is to be, and can be, only a single definition of "remunerative full-time work".

Sir K. Joseph
I am grateful to the hon. and learned Gentleman. The short answer to his question lies in Amendment No. 68, by which I shall propose: "Regulations may make different provision for different classes of case and otherwise for different circumstances." I will seek to answer the last of the questions put to me. The hon. Member for Kingston upon Hull, North (Mr. McNamara) raised a question about hours. Normally we shall rely upon a statement both for hours and earnings from the claimant. Only where we have reason to fear abuse shall we check on that statement. I understand that these are probing Amendments and are intended to test the effectiveness of the full-time work requirement. I hope that I have been able to satisfy the Committee that there is no grey area here, that more than 30 hours work a week will qualify a family that is eligible because its income is below the make-up level to family income supplement and that less than 30 hours remunerative work a week will qualify a family for supplementary benefit.

Mr. Loughlin
I took these to be probing Amendments which were of no great consequence until my hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown) raised the question of the definition of the amount of work necessary to be done by anybody to get supplementary benefits. I had a clear idea that it was 36 hours a week, but it appears from the definition quoted by my hon. Friend the Member for Rotherham (Mr. O'Malley) that it is a much looser definition. If the right hon. Gentleman introduces a definition of 30 hours a week, he will exclude a substantial number of people who are at present working more than 30 hours and receiving supplementary benefit, which is far more beneficial to them than will be the family income supplement. I do not know whether the right hon. Gentleman has considered this. If we are thinking in terms of improving the lot of the very poor, it is important not to include in the Bill a definition that worsens their lot, because some people may be excluded from Supplementary Benefits Commission benefits because of such a definition. Will the Secretary of State examine this question closely, lest in putting in the 30 hours definition in the Bill and the Regulations he excludes some people from supplementary benefits and thereby disadvantages them?

Sir K. Joseph
The Supplementary Benefits Commission has a certain flexibility because, as the hon. Member for Rotherham made clear, the test of full-time work or lack of full-time work is a question of the practice of each individual trade. There are two parallel and inter-acting tests. There is full-time or not full-time, according to the practice of the trade and there is the 30-hour rule. Some families may receive supplementary benefit, although the wage earner is working more than 30 hours a week, because it is the practice of the trade to expect many more hours per week to qualify for full-time. So there is a desirable flexibility here which I know that the hon. Gentleman would be the last to wish to disturb. A family will be able to choose supplementary benefit for family income supplement according to which suits it best. And there will be advice available. I return to the original purpose of the group of Amendments in the name of the hon. Member for Rotherham. He was trying to test the validity of the full-time work test. I hope that he will be satisfied that we have put into the Bill a test, or we propose through regulations to put in a test, which ties in well with the real-life needs of the families whom we are trying to help, by giving them their supplementary benefit alternative, while leaving a desirable flexibility. In these circumstances I hope that  the hon. Gentleman will not press that group of Amendments.

Mr. O'Malley
I am grateful to the right hon. Gentleman for the information which he has given and for the explanations he made. He said that he would look at the question of any exceptions, and that if it should prove necessary, at this time or in the coming months, he would certainly act on the matter. Secondly, the right hon. Gentleman explained that a separate set of regulations would be necessary for what I should call peculiar categories of persons. He said that they would all be treated as though they were in business, and what one would be looking at would be profits rather than gross weekly earnings. All kinds of difficulties can arise there. It may be that the right hon. Gentleman will not be able to deal with it even as simply as that. He talks about people being in business. Some of the people in the kind of category we are envisaging could well be on contract of service rather than contract for services. The right hon. Gentleman, in the rather friendly way in which he sometimes begins, smiled and said that the Government wanted to keep the Bill as simple as possible and he was sure that he had the sympathy of the Committee. I can assure him most warmly that he does not have the sympathy of this side of the Committee. If public money is being disbursed, be it through the social security or the tax system, if the degree of simplicity some believe desirable is achieved, simplicity itself is apt to produce many inequities between one person and another, and between one group and another. This is the Government's difficulty with the Bill. Increasingly and remorselessly, as the new scheme begins to operate, any Government operating it will find themselves pressed into changes leading to increasing complication. That is one of the great disadvantages of the scheme. I should like to make two other comments on the remarks of the right hon. Gentleman. First, he made it clear that if anyone were working for over 30 hours a week there would be an F.I.S. entitlement. He said that there would be no grey area. There is one question which I do not think the right hon. Gentleman answered. If he did I missed it, and I apologise. Let us take a case such as that envisaged by my hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown), where quite legitimately under the rules of the Supplementary Benefits Commission a person is working for, say, 34 or 35 hours a week and the family unit is receiving supplementary benefit. There will then be an entitlement to F.I.S. What I think the right hon. Gentleman has not made plain is whether in those circumstances the individual family will have the option to remain on supplementary benefit if it is more advantageous. May we have an assurance from the right hon. Gentleman that anything that is not part-time, for supplementary benefit purposes, will be treated as full-time for F.I.S. purposes?

Sir K. Joseph
Yes, indeed, but the hon. Gentleman will agree that it is scarcely conceivable that F.I.S. will be more financially attractive.

Mr. O'Malley
Yes, certainly. It was from the other point of view that I was primarily concerned. I do not want to see people put off supplementary benefit when under the existing rules of the Supplementary Benefits Commission they could remain on it. Can the right hon. Gentleman assure us that when a man starts work after a long period out of work, he will not be told "You are not normally in full-time work", even if it is clear that he intends to continue in work? 8.45 p.m. The right hon. Gentleman said that people would have a choice. The choice would be that of adjusting their hours of work. The right hon. Gentleman said—and this is a comment on the scheme, but I shall go no further than noting it—that people would be advised by the Government, "You should not work these hours. You should work less." That conies rather curiously from a party with a history of the kind of comments that used to be made to me about scrounging and people who did not want to work when I used to answer Questions from that Dispatch Box. In view of the assurances which the right hon. Gentleman has given so far, and bearing in mind the weaknesses inherent in the scheme—

Sir K. Joseph
I think that the hon. Gentleman is coming to the end of what he wants to say. Before he does that, I want to deal with the inference that he just drew. It is true that my Department might advise a household to reduce its hours of work by two or three, or something of that order, to qualify for supplementary benefit. The sort of household that I have in mind—and I think that the Committee will be sympathetic to this view—is where a woman is struggling desperately to bring up children by her own work. She is having a hard time of it, and does not realise that supplementary benefits would enable her to bring up those children better. In those circumstances, I am sure that hon. Members on both sides of the Committee would wish that woman to be given proper advice. That is the sort of case that I had in mind, and I am grateful to the hon. Gentleman for giving way and enabling me to explain it to the Committee.

Mr. O'Malley
I am sure that there is no difference between the two sides of the Committee when it comes to a case such as that but, without enlarging on the matter, because we have taken a long time over these Amendments, I think that it goes further than that. There is one question which the right hon. Gentleman has not answered. In view of the assurances and the information that the right hon. Gentleman has given the Committee, I shall, on receipt of a satisfactory answer to that question, ask the leave of the Committee to withdraw the Amendment.

Mr. Hugh D. Brown
Whether he appreciates it or not, the right hon. Gentleman is getting into difficulties, and we are beginning to see the folly of the usual channels having decided to take the Bill in a Committee of the whole House. Everyone is apologising for detaining the Committee. In Committee upstairs we have no such inhibitions. The right hon. Gentleman must be specific about what he means. He referred to the freedom of choice. He will have to issue regulations, and there will be a code of instructions to the staff telling them how claimants should be dealt with. Will there be advice about the  rights of claimants, and about the best way of dealing with their financial circumstances? Or will the regulations apply only to the type of woman to whom the right hon. Gentleman referred; to someone who is in financial difficulties? Is the right hon. Gentleman saying that this advice will be extended to people in whole-time work under the normal circumstances that apply today? I have in mind the low-paid wage earner. Will it be the Department's intention to say to such a man, "You would be better off in part-time work and receiving supplementary benefits"? The right hon. Gentleman must be specific about this, otherwise he will run into difficulties. The right hon. Gentleman has not told us whether local staff will be available to give guidance on the many detailed questions that will be asked. Has that been taken into account in his reckoning of the staff that will be needed?

Mr. McNamara
My hon. Friend the Member for Glasgow, Provan (Mr. Hugh D. Brown) is referring to a most important matter. There is added to it the equally important question of how the wage stop would operate in this situation. Where is the wage stop to come into operation when a person who has been working goes on to supplementary benefit? The F.I.S. is meant to meet the problem of people with low incomes, but what happens when the wage stop operates? This is one of the difficulties into which the right hon. Gentleman has brought himself by introducing such a scheme.

Sir K. Joseph
The Committee should be reminded of the minute number of very seriously poor families with whom we are dealing. The total number of families estimated by my Department to be eligible for family income supplement, on last April's earning figures—and the number will be very different by the time the Bill comes into operation—is 110,000. This number is made up of people who are struggling to bring up children and who have very low incomes. No one in the Committee or in the country would grudge them advice enabling them to increase the income with which to bring up their children. If they are on the borderline between part-time and full-time work, of course my Department will  help them to increase their income by making the right choice. Many of them have the strongest motivation to work because, as we know, they are in work despite their full earnings being less than they could get out of work if they could, as, alas, some people manage to do, contrive to appear unemployed or sick. These people are highly motivated. In most cases we do not have to worry about their motivation. They are proving in the clearest possible way their desire to work. If it is a question of enabling them to receive more from supplementary benefit by abating their work for two hours a week, who in the Committee would grudge them? We are dealing with the poorest of the poor and, mercifully, a very small number. Although we are seeking power by regulation to alter the make-up level, because of the movement of earnings and prices in the meanwhile, when the Bill comes into operation there may be substantially fewer still in this position. I give the House the categorical assurance that advice will be given to this very small number. I was asked by the hon. Member for Rotherham what would happen if a person who in the past had been doing part-time work, after a period out of employment, took on a full-time job and claimed family income supplement. The hon. Gentleman asked whether his part-time past would inhibit his full-time present.

Mr. O'Malley
I was asking not only about the man who had started full-time work after a long period of part-time work, but about the man who started work after a long period out of work altogether.

Sir K. Joseph
The test will be the number of hours he works and whether those hours exceed 30, or, if there is a practice of the trade laving down what is full-time work, exceed that trade test. That is all that the Supplementary Benefits Commission, under the regulations which we propose, will look at. It will look at the immediate past and the present, not the distant past.

Mr. O'Malley
I think that we can clear up this point. It appears to me that there is no difficulty. Let us assume that a man has been unemployed for a considerable time and has been in receipt  of supplementary benefit. He then attains a full-time job. Presumably, if he is to look after his interests and follow the advertisements by the Ministry, on the first day he starts full-time work he will be entitled to go to the Commission's office and put in an immediate claim for family income supplement, even though he did not have a record of full-time work during the previous assessment period. If that were not the case, the right hon. Gentleman will see that the man could be on a very low income for live or six weeks and by the time the payment was made he could have gone a couple of months without receiving any F.I.S.

Sir K. Joseph
The man will not be able to get it on the first day he takes a full-time job. He will probably have had to work for a week to give evidence of the hours of work in that job. But he would not have to wait for many weeks unless there were a question of the evidence of the hours of work. If they fluctuate from week to week, so that one week he works 50 hours but the next he works five, to take an extreme example, he will need evidence of a series of weeks. If he were in full-time work which produced less than the make-up level, he would be able to go to the office after one or two weeks and show evidence of his earnings and hours of work and qualify for FIS. The hon. Gentleman looks sceptically at me. We shall need evidence of the earnings and of the hours of work, and there will need to be enough evidence from the individual claimant. Only if the claimant for any reason arouses suspicion shall we check on his earnings or his hours of work. I must correct one misapprehension which I may have caused the House. I have talked of families having a choice between supplementary benefit and family income supplement where the hours of work hover around the full-time test level. I must make it plain that a male wage-earner is not entitled to supplementary benefit if he is doing part-time work unless there is no full-time work available. I take it that that is common ground on both sides of the Committee. The choice of supplementary benefit or family income supplement will be pre-eminently for the single woman bringing up children. For her F.I.S. will normally be needed, but not  for the male wage-earner, though there may be the exceptional case, where there is no full-time work available, where it may also be suitable for him. I hope that I have answered the hon. Gentleman's question.

Mr. O'Malley
We have had a fairly useful discussion. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

9.0 p.m.

Mr. Peter Archer
I beg to move Amendment No. 7, in page 1, line 10, leave out 'to whom he is married or who lives with him as his wife' and insert 'who relies upon him wholly or partly for her support'. The Amendment raises a problem akin to those raised by my hon. Friend the Member for Hitchin (Mrs. Shirley Williams) on the first Amendment. I should say at once that I am grateful to the Secretary of State for his very clear exposition of the position there. Certainly, he succeeded in dispelling some of the anxieties in my mind. The Amendment relates to an anxiety which affects perhaps only a limited number of people, but it raises an important question of principle. The right hon. Gentleman mentioned various situations when replying on the first Amendment. This Amendment concerns the situation of the man in full-time employment with a woman living with him—if I might use those words neutrally and platonically—who either has no income or is earning less than the amount he would receive in respect of her under the Bill. I see at once that whatever happens in that situation the family as such is not deprived of provision under the Bill. The danger is that it will be deprived of a payment in respect of that woman in certain circumstances, and that is why I question the right hon. Gentleman on the precise meaning he attaches to the words in the Clause "to whom he is married or who lives with him as his wife" Two quite separate problems are raised by those words. My first reaction when I read them was that as the right hon. Gentleman had chosen a framework which rests squarely on the concept of subsistence that concept brought with it,  as it inevitably does, the doctrine of the deserving poor, a doctrine with a very long ancestry. It means, as I understand it, that for the poor the penalty for immorality is deprivation: what the rich do is their own business; what the poor do is the business of their betters. I am not sure even now that my first reaction was wholly inaccurate. I am still puzzled about what exactly the phrase "as his wife" entails. Certainly the right hon. Gentleman appears to have been rather more broadminded than some of his predecessors. Apparently, the family is not required to show its marriage lines. The couple do not need to have attended before a priest. But we wonder whether the insurance officer is not invited to exercise his ingenuity. Our apprehensions are not entirely set at rest by the rather conflicting criteria which, as my hon. Friend the Member for Hitchin said, have been applied in the converse situation where it is a woman who has applied previously for supplementary benefit and the question has arisen as to whether they are cohabiting. Presumably these words impart some sort of stable union. One assumes that the woman will not be included in the family in the first week in which she begins to live at the address. One wonders whether she is expected to assume the name of the man with whom she is living. If she insists on retaining her own name, can she be said to be living with him as his wife? The first purpose of the Amendment, therefore, is to ensure that, as far as possible, the right hon. Gentleman is not setting up as a judge of morality. In my submission, he seems to have raised two converse problems at the same time, because one is further concerned with the situation where there is no question of a woman living as a man's wife; for example, the grandmother situation. Perhaps a lady has come to live under the same roof purely to help look after the children and does not want sexual relations with the man. She may not wish to use his name but prefer to refer to herself as his housekeeper, because that is what she actually is. As I understand  it, there is a danger that she will be told that she is not included in the family because she is not living in sin. I understood that the right hon. Gentleman responded earlier to the effect that there is no real problem here because she could apply for supplementary benefit, and certainly in many instances she would be entitled to do so. However, one wonders what will be the position if, for example, she is in employment but is earning less than a family would receive under the Bill in respect of her presence in the house. A more serious situation is that referred to by my hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara)—of a lady who, for some reason, just does not want to apply for supplementary benefit and who regards it as a humiliation to do so. In these circumstances it seems that the family will be subjected to two quite separate series of means tests. One can imagine a situation where the lady concerned would rather be provided for under the Bill than make a separate application for supplementary benefit, even if, financially, that means a little sacrifice. The right hon. Gentleman said that, as far as possible, his intention is to give people a choice as to which of these provisions shall apply to them. It seems that the only way a lady in this position could exercise that choice is to begin to have illicit sexual relations with the man when previously she had no intention of doing so. One is reluctant to see the right hon. Gentleman turn himself into a judge of morality. One is even more reluctant to see him offering a positive bonus for immorality. Would it not be better, for the purposes of the Bill, to eliminate the words which it is sought to delete and to substitute the words in the Amendment?

Mr. Albert Booth  (Barrow-in-Furness)
I support the Amendment which was so ably moved by my hon. Friend the Member for Rowley Regis and Tipton (Mr. Peter Archer). I not only endorse his remarks but stress that the Amendment could have a somewhat wider application when one considers the many different types of people who could be affected by this provision. As the Measure is called the Family Income Supplements Bill, it is of crucial importance that the definition of a family, for the purposes of the supplement, is not only clear to lawyers but is crystal-clear to those who will be directly affected by it. We have had experience of the reluctance of people to claim entitlement and I therefore appeal to the Minister to remove any possible doubt that might exist in people's minds about their entitlement to this benefit. It seems that as "a family" is defined in the Bill as it stands, there could be doubt in the case of a union comprising a father, his children and the man's mother; in other words, the case where the grandmother comes in to look after the children—a desirable development, one might think. The Minister will readily concede that she may be below pensionable age. She could be well able to look after the children and thereby perform a valuable rôle, not only for the children's upbringing but in enabling the man to pursue his work and not have to stay at home to look after his children and draw extra benefit from the State. The grandmother who performs this rôle should not feel that she is in any way inhibiting any claim that the family might have to this supplement. It is important, therefore, that she feels that she is of complete benefit to the family and is in no way detrimental to it. The Amendment is of the utmost importance in the context of defining "a family" because there can be many instances of women being a part of the family in a social sense, so enabling the family to remain a viable unit. I will not weary the Committee by detailing examples of this. Hon. Members will readily call to mind cases where children might have to be taken into care unless arrangements of this kind are made. Let us remember all the time that, in the vast majority of cases, the man is unable to pay the market wage for a woman to come in to look after his children. I hope, therefore, that the Amendment will be accepted.

Sir K. Joseph
I hope that I shall not be marked out of 100 for this examination. I shall try to pass this latest set of tests. I can reassure the hon. Member for Rowley Regis and Tipton (Mr. Peter  Archer). The inwardness of the Bill on this issue can be seen from Clause 2. The make-up level—that is, £15 for the family with one child and £2 more for each additional child—does not vary whether there is one parent or two parents. Whether or not the man comes within paragraphs (a) and (b) of subsection (1) makes no difference to the makeup level. If the woman is a sister or a mother with no money of her own she is entitled to supplementary benefit if she has no earnings and there is no job available. If she is eligible for work she must get work if it is available. But if she has no work because it is not available she is entitled to supplementary benefit. If she does not seek work in order to look after the children of the household she is treated financially as if she were the woman—and here I refer to subsection (1)(b)—to whom the father "is married or who lives with him as his wife" because the make-up level under Clause 2(1) is identical whether there is one parent or two parents. I hope that I have shown that there is no need for the Amendment because whether or not the woman helping the man to look after the children is living with him as his wife or is his wife, or is living with him but not as his wife, the family income supplement will be the same.

Mrs. Shirley Williams
I should like to take up two points with the right hon. Gentleman. First, he frequently uses the term "the make-up level". That can be very misleading, because it is not the make-up level which is half the difference between the prescribed amendment and the income of the family. I urge the right hon. Gentleman not to use the phrase "make-up level".

Sir K. Joseph
The hon. Lady is quite right. I shall substitute for "make-up level" the phrase "the prescribed amount". It is the prescribed amount which is the same whether one parent or two parents are concerned with the children.

Mrs. Williams
Secondly, if what the right hon. Gentleman says is true—and I accept that it is—none of us can understand why the Government have attempted in subsection (1)(b) to interpret  "woman" as being a wife or a person living with a man as his wife. If I am a mother living with my son, and if I have no other income, two problems arise. First, I do not believe that I am covered because of the way in which the Bill is drafted, and, secondly, I can be put in an embarrassing position if I am not married to the man but am living with him as housekeeper in total celibacy. This will be basic to a misunderstanding of the Bill by the people whom the right hon. Gentleman is trying to help. I am also concerned about the woman who would not, and should not for the good and welfare of the family, seek a job as under the supplementary benefit provisions it would be said that she must if she is not of pensionable age and is not ill, but should be permitted to live with the family and look after the children at a considerable saving to the State in terms of the cost of the care. I should like the right hon. Gentleman to deal with those points.

9.15 p.m.

Mr. Kinsey
If we accept the Amendment, are we not in danger of worsening the position? As the Bill stands these people can be regarded as two families. If, as is suggested, they are one part of the family, they could be in a worse position.

Mr. Peter Archer
I suspect that I must have been more than usually incoherent in introducing the Amendment. I realise the difficulty of the right hon. Gentleman who is trying to deal with several matters substantially at the same time, but the explanation which he has given is one I conceded when I introduced the Amendment. We fully understand that the lady concerned, if she places herself in that position, will probably be entitled to apply for supplementary benefit, but there are two difficulties which my hon. Friend the Member for Hitchin (Mrs. Shirley Williams) has just repeated. There is the additional difficulty which cannot be emphasised too much, that this family will now be subjected to two separate series of means tests, which is for them a real privation. It means, too, that the lady concerned, who otherwise would remain entirely clear of what she might regard as an embarrassing inquiry, has to submit to a separate inquiry and answer questions  about how much the man allows her, what she contributes and what financial arrangements pass between them. If the purpose is to provide for a family, how much better to allow the means of the family to be inquired into once, in one inquiry. Will the right hon. Gentleman direct his mind to this situation?

Sir K. Joseph
Yes, I have been persuaded that there is something to look at here in the drafting, but I hope hon. Members have been persuaded that, in substance, the family income supplement goes to the household where there is one parent or one parent plus a substitute parent. What I have to look at is the point made by hon. Members that there may be a discouragement to a household where there is not a common law wife or wife to regard itself as eligible for family income supplement. I suspect that there is no substance to deal with, but a presentational point in the drafting. I will look again at this, subject to the condition which I made earlier, that I undertake either to account for no Amendment or to put down an Amendment. With that undertaking I hope that hon. Members will be satisfied.

Mr. Booth
I am grateful for the undertaking that has been given and for what appears to be a realisation that the drafting of the Bill could defeat what has been explained as the purpose of the Bill. May I put one clear case to the Minister just to emphasise the point? A grandmother who is looking after the children of her son who is a widower may have no claim to unemployment benefit because she does not seek employment and regards herself as fully employed in looking after her son's house and children. Neither has she any claim to supplementary benefit because she is held to be a dependant of her son. This is by no means a rare case. Many women aged between 50 and 55 have no pension entitlement and do not claim unemployment or supplementary benefit.

Sir K. Joseph
I think I can satisfy the hon. Gentleman and modify something which I said earlier. If a grandmother, a sister or a relative comes into a household to enable a man to go on working by helping to look after his children, she would be entitled to claim  supplementary benefit, because the Supplementary Benefits Commission would not in such circumstances insist on her registering for work. It all depends upon the position of the man. If he can continue at work only because of the help of a sister, mother or cousin in looking after his children, the Supplementary Benefits Commission would not insist upon that substitute mother registering for outside work, and she would therefore be entitled to supplementary benefit. It is to that extent important to exclude her from the family as defined by the Bill, otherwise her supplementary benefit must be taken into account in measuring the family income and we thus would diminish the family income supplement going to the family. We are in fairly complicated waters, and I believe the Committee would be wise to let me look at the matter in the light of what has been said.

Mr. Peter Archer
I am grateful for the right hon. Gentleman's undertaking. I believe that he has grasped our points and we his. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Joel Barnett  (Heywood and Royton)
I beg to move Amendment No. 8, in line 13, to leave out 'have to be' and insert 'are'.

The Temporary Chairman (Sir Myer Galpern)
I suggest that with Amendment No. 8 it would be convenient to take Amendment No. 51, in Clause 11, page 4, line 22, to leave out 'having, or as not having, to provide' and insert 'providing', and Government Amendment No. 67.

Mr. Barnett
Yes, Sir Myer. I hope that the Government will be prepared to accept Amendment No. 8 because the Under-Secretary of State for Health and Social Security on 10th November, in column 327 of HANSARD, made clear that this Amendment, though perhaps its wording its not exactly right, seeks to do precisely what the Government seek to do. It cannot be the Government's wish to have a situation in which a child who is being cared for should be excluded. Therefore, since the Government have down Amendment 67 on this matter it  would appear to indicate that they would be prepared to accept Amendment 8.

Sir K. Joseph
I do not want to give the hon. Member for Heywood and Royton (Mr. Barnett) the impression that every time he comes to the Box on a social security Bill his Amendment will at once be accepted, but since this is a useful Amendment the Government would advise the Committee to accept it. It meets the case made earlier in which a mother arranges to leave one of her children with, for instance, its grandparents. The grandparents would then be providing for the children and should be entitled to family income supplement if they qualify in other ways. The consequential Amendment by the Opposition, Amendment 51, fails for purely technical reasons, and I hope that it will be withdrawn. Government Amendment No. 67 carries out the consequential job and will be moved later.

Amendment agreed to.

Question proposed, That Clause 1, as amended, stand part of the Bill.

Mr. S. C. Silkin
I make no apology for saying a few words on the Question, That the Clause stand part, despite the fact that we have had a series of useful and important debates on the various Amendments. This is a fundamental Clause in the Bill. It is the definition of the family around which the whole thing centres. In the course of the debate a number of points have emerged which ought to be brought out. The first point of principle, upon which the Committee ought to be clear, concerns the observations made on a number of occasions by the right hon. Gentleman—I agree that he modified them on one or two occasions as well—when he said that it would be a matter of choice for a family which may fall within the provisions of the Bill whether what I might call the breadwinner should work less and take advantage of supplementary benefit or should work more hours and take advantage of the provisions of the Bill. I use the word "he". It may be "she". However, in certain cases it may be "he". I accept that there is the kind of case, to which the right hon. Gentleman drew the attention of the Committee, of the  woman who should be at home looking after her children rather than going out to work. That is a point about which we on this side feel very strongly. But, leaving that kind of case aside, it sounds an odd philosophy coming from the benches opposite that people should be in a position to choose whether they should get more money for working less or get less money for working more. If that is the philosophy behind the Bill, it should be made absolutely clear so that the public has no doubt about it. Because of the way in which those who drafted the Clause set about their work and, indeed, probably because of the difficulties that they had in trying to bring the Clause within the series of situations which they envisage, there are all kinds of misnomers and terms which do not mean what they say. The debate has concentrated on several of these points. For example, the single woman, who is an essential element in sub-paragraph 1(a), is defined later "… any woman other than one who is a member of the same household as a man to whom she is married or with whom she is living as his wife." No ordinary person would say that that is the proper meaning of "single woman". It seems that the term has been used to fit into the drafting of the Clause, notwithstanding that it means something quite different. Again, in the same part of the Clause, we have the expression "full-time work". We now know from what the right hon. Gentleman told us that "full-time work" does not necessarily mean full-time work. Indeed, it can mean something substantially less than full-time work. Having regard to the examples which my hon. Friends have brought to the attention of the right hon. Gentleman, he tells us that there will be different regulations governing different cases and that in some of those cases "full-time work" may mean nothing like what one would regard as full-time work. 9.30 p.m. The wording in paragraph (b) has attracted a good deal of criticism. Since we are trying to cater for the situation of the wage earner, the bread winner, who is a substantial supporter of his family, why does the Clause use  totally different language? I am not seeking to make technical or semantic points, but if the right hon. Gentleman, when he considers the Clause again, as he has promised, could try to see that words mean what they say and not something different, it will not only be much easier for the ordinary man and even the lawyer to understand: it will also be an encouragement and avoid a disincentive to people to take advantage of the Bill who might otherwise feel that they could not possibly qualify. The right hon. Gentleman has more than once referred to the fact that, in a single household, there may be more than one family. That may be so, but what might be regarded as two families could exist in what ordinary people would understand as a single family. This could happen if the sister were working or on supplementary benefit and was spending part of her time looking after the children, while the wife or the woman who lives with a man as his wife is spending part of her time looking after the children. From one point of view, the sister could be considered a separate family, but to the ordinary person, she would be part of the family as a whole. I should like wording which makes it clear how this division into more than one family within the same household will be accomplished. My hon. Friend the Member for Rowley Regis and Tipton (Mr. Peter Archer) mentioned the expression "… married or who lives with him as his wife". A person may be married and living in the same household yet not living with the man as his wife, and a person who is not married may live with a man as his wife, while a woman who has been living with him as his wife might be so no longer although still a part of the same household. All of these are situations met in practice and it seems that the wording of the Clause, no doubt because of the haste with which this matter has clearly been dealt, does not clearly cater for all these distinctions. I hope that when the right hon. Gentleman gives his further attention to it he will look carefully at all these points and if necessary come back with a complete redraft of the Clause, rather than tinkering around with parts of it.

Mr. Ronald King Murray  (Edinburgh, Leith)
I should like to echo the remarks of my hon. and learned Friend the Member for Dulwich (Mr. S. C. Silkin) and to add one or two comments in the same vein. We have departed far from the ordinary English meaning of the word "family" If we look at Clause 17 where "child" and "family" are defined we see that a child is defined in terms which do not imply or connote any relationship whatever to the person defined in subsection (1)(a). Equally, "family" is defined as having the meaning assigned to it by Clause 1(1). That does not imply or connote any relationship between the persons concerned. We are far from the ordinary meaning of "family". I should like to throw out a suggestion to the right hon. Gentleman and I put it no higher than that, because the implications would have to be worked out in much more detail than I have been able to do. I would suggest that the word "household" should be substituted for the word "family". That might meet some of the difficulties. It would give the added advantage that instead of calling it F.I.S. we could call it H.I.S. I am grateful to the Government for their alacrity in accepting the Amendment relating to the words "have to be provided for". Had that Amendment not been accepted I should have pressed very strongly upon the Committee that the wording of the Clause did not take account of the difference between Scots law and English law.

The Temporary Chairman
Order. Despite the fact that that strikes a chord in my heart, I must draw the attention of the hon. and learned Member to the fact that we have accepted that Amendment.

Mr. Murray
Yes, I was merely welcoming it.

Sir K. Joseph
I ought to offer to learn by heart the entire debate that has taken place so that I may cogitate upon the statements I made and later slightly modified during this interesting discussion. I have undertaken to look at all the points made to see whether there is any lesson for us in the drafting of the Clause before the next stage of the Bill. I asked hon. Members to recognise that one of the advantages of the Bill will be that if we are successful, as we are determined  to be, in reaching the vast majority of the families on very low earnings, then we shall for the first time know very much more about them than we do now. The only comfort I can give to hon. Members after this debate is that every alternative that has been put forward, and an infinite number more, is already known to the Supplementary Benefits Commission through handling its normal work load. It will not find it nearly as daunting as some of us to decide in which category an individual family comes. I have to answer one or two points raised by the hon. and learned Member for Dulwich (Mr. S. C. Silkin) who teased me, understandably, with making a virtue of the flexibility that will in some circumstances allow a family to choose between family income supplement and supplementary benefit. I should have qualified rather more what I said. Let me put it once again to hon. Members. There will be individual families, or to adopt the suggestion of the hon. and learned Member for Edinburgh Leith (Mr. Murray), households, where a single person, generally a single woman but sometimes a man on his own, is struggling to bring up children and is perhaps, misguidedly, in full-time work when it might be better for those children if in these rare cases the number of hours were reduced and supplementary benefit drawn. That is the sort of flexibility we want, to protect the children of those low-earning households. I am therefore introducing this at a late stage to help the man very occasionally entirely on his own, without a sister, mother, friend, wife or common law wife to bring up the children. If in the other case put by the hon. and learned Gentleman a sister, or some other relative with children of her own, were to join the man's household and that person were to work, then there would be two families in the household entitled to family income supplement. There are an infinite number of possibilities, many raised in the debate, and I have undertaken to look at them. I have given two particularly firm commitments on two of the points raised and I hope that with this assurance the Committee will accept that Clause.

Question put and agreed to.

Clause 1, as amended, ordered to stand part of the Bill.

Clause 2

Prescribed Amount

Mr. John Pardoe  (Cornwall, North)
I beg to move Amendment No. 11, in page 1, leave out lines 23 to 25 and insert: an amount equal to half the officially determined national average wage plus 30 per cent. of this amount for each child'.

The Chairman
Order. With this Amendment we can discuss the following Amendments:

No. 12, in page 1, line 23, leave out £15' and insert:
 'an amount equal to 65 per cent. of national average wages as officially published';

No. 14, in page 1, line 24, leave out £15 plus £2 for each additional child' and insert:
 an amount equal to 65 per cent. of national average wages as officially published plus an amount equal to 10 per cent. of national average wages for each additional child'.

Mr. Pardoe
This Amendment seeks to remove the specific reference to the figure of £15 in the Bill and the reference to £2. It seeks not only to increase those figures, which I will show by calculation it does, but also two specific things. First, it would relate the basic amount to be paid under the Bill for the married couple to half the average national wage, in other words, giving a straight definition of what we regard in our society as the poverty line. We have various poverty lines written into various pieces of social legislation—I suppose that the supplementary benefit scale is in many ways the most convenient—but it seems to me that it would be better if at the outset we settled the amount for the married couple who are to benefit under it. I realise that no married couple without children will do so, but let us start with the basic unit. Let us accept that the poverty line is half the average national wage. I go on then to add, "plus 30 per cent. of this amount for each child", that amount being half the average national wage. 9.45 p.m. The Secretary of State said on Second Reading that the figures were already out of date, and, obviously, we face the problem  of inflation. We shall have constantly to up-date whatever figure is written into the Bill if the Government's version is followed and the figure is set at £15, £16 or whatever it may be. We shall have the same problem such as we have had in public service pensions, national insurance pensions and so on of having to bring in a Bill every two years or having Regulations enabling the Secretary of State to increase the figure, with all the accompanying argument about whether we are Increasing it by the right amount, whether we should increase it merely according to the rise in the most of living or in accordance with the average rise in wages, and so on. In my view, in trying to define a level below which people should not be allowed to sink in our Welfare State, we should do far better to relate it to wage levels than to the cost of living. My proposal, therefore, which would come in at the start, would incorporate as the basic line in respect of the married couple half the officially determined national average wage, and this would overcome the problem of continuing erosion by inflation. Also, it would give a clear definition of what is meant by the word "poverty" in this context. I come now to the second point, the factor of 30 per cent. which I seek to apply in respect of each child. This is a more controversial proposal. I developed it at some length on Second Reading, which, perhaps, was not the best time to do so, for one cannot on such an occasion expect a detailed reply from the Minister, but I hope now to engage the right hon. Gentleman in some thinking about the relationship between the cost of a child and the income of a married couple. It is an extraordinary fact that, over the years, we have never really argued this question in the House. I do not remember any debate on social security legislation in the last four years in which we have tried to define the cost of a child in our social legislation. For the presentation of my argument, I shall take £25 as the basic unit, the national average wage. I realise that it is slightly less than that at the moment, although any figure of that kind would make most of my constituents green at the gills with envy since we do not have that kind of money down in the far  South-West. However, I take £25 as a round figure—it will soon be there, even if it is not yet—and half of that is £12 10s. The addition of 30 per cent. for the first child adds £3 15s., giving a total for a married couple and one child of £16 5s. instead of the figure of £15 which the Government have written into the Bill. I do not know what new figure the Secretary of State had in mind when he said that the figure was already out of date. He may be thinking in terms of £15 10s. or, perhaps, even about £16. In any case, I hope that he will not decide the figure until we almost come to the Royal Assent, for it will be bound to be out of date, and the later the figure chosen the better will it be for the poor people who are to benefit. They will not receive all this amount in any case. Even under the Government's proposal, they will receive only half of the difference between what they earn and £15. For example, a family with one child earning £13 a week would receive £1, that is, half the difference between £13 and £15, making them up to £14 a week. Under my scheme, for such a family with one child the actual target would be £16 5s., so on £13 a week the shortfall would be £3 5s. Half of that would be £1 12s. 6d., so they would end with an income of £14 12s. 6d. That is still, I believe, not far above any level which any right hon. or hon. Member could call a poverty line. It is by no means over-generous, and it will not cost a vast sum of money. Indeed, I greatly doubt that £16 5s. as the limit will be all that different from the level which the Government will eventually have to set. I come now to the proportion of income for a child, the 30 per cent. which I have chosen. At present, in our supplementary benefit scale, we reckon the additional money given for a child to be £1 16s., which is roughly 21 per cent. of the amount allocated for a married couple, namely, £8 10s. That figure has remained more or less constant over a long period. It depends a little on the age of the child, but, to take the case of a child aged under 11, we find that in our supplementary benefit scales the ratio was 21·5 per cent. in 1968, and it has remained approximately at that level. Why has it remained at that level? There is nothing to say that 21 per cent.  of the income of a married couple is needed for a child, or that the cost of a child is 21 per cent. more than the income which we regard as required to keep a married couple at a reasonable standard of life. I do not want to deploy again the points I made during the Second Reading. I want to mention one or two figures from my speech on that occasion. I am indebted to Christopher Bagley, of the Institute of Psychiatry in London, for his report, "The Cost Of A Child", which was prepared with the aid of a grant from the Joseph Rowntree Memorial Trust. Taking England alone, he showed that in 1942 Lord Beveridge reckoned that the additional allocation over and above the income of the married couple which should be given for a child in our social security scales was, roughly speaking, 31 per cent. That was for a male aged seven. Hon. Members will be pleased to hear that the figure was the same for a female aged five. This figure has changed over the years and various people have arrived at different ratios. But it is extraordinary that back in 1942 Lord Beveridge—I think he must have been Sir William then—was saying that one needed to think in terms of the cost of a child as being 31 per cent. of that of the mother and father. If one looks abroad one finds even more extraordinary comparisons. For instance, in New York in 1966 the figure was 41 per cent. In Pennsylvania in 1955 the figure was 31 per cent. These are figures for children under 11. They rise substantially for children over 11. In Japan at present the figure is 40 per cent., as it is in West Germany. What I am trying to do in the Bill is to get back to Beveridge. Naturally, I go back to a great historic Liberal, but that is not the only reason why the figure is right. It is a reasonable figure to take in view of the foreign experience. After all, what has made the great Japanese civilisation come to the view that it costs 40 per cent. of one's income to bring up a child? We are in the business of income maintenance, after all. That is what social security is all about today, dealing not with primary poverty but secondary poverty. That is the philosophy behind it. We have to ensure that there is some relationship which is satisfactory in our  society between the cost of bringing up a child and the income of the married couple. I hope that the Minister will either seek to justify the figure of 21 per cent. or at least say that the Government have some sympathy with the advocates of an increase in the percentage. It is high time that we debated this strange gap in our social security legislation. To sum up, £15 may or may not be the correct level. I do not think it will be by the time the Bill becomes law next August, and the following year it undoubtedly will not be. It will then have to be changed perhaps every two years, involving the business of parliamentary legislation, and so on, which will waste parliamentary time. It would be very much better on this score if we tied it to the national average wage and made it clear that we had a definite ratio for each child. I have said 30 per cent. for each child, but I shall not nail myself to any mast about the figure of 30 per cent. for every child. It may well be that one would either start with a lower figure and go up or, more likely, start with 30 per cent. and perhaps come down as the size of the family increases. If one takes the large family of, say, six children, my figure would produce an amount of money which was appreciably greater than the Government's calculation. It is in a family of six children that the Government want to put the money, because in the family income surveys it is in these families that we find a great deal of poverty—I know that there are families with one child that are living in poverty—but as we go up the scale, with more and more children, the Government's scheme will not provide anything like as much money for the family as would my scheme. I accept that the cost to the Exchequer will be greater, but it will be focused on the problems of the large family. I think that the ratio of 30 per cent. is intellectually, politically and socially justified. I do not think that the Government can justify an additional £2 for each child in political, social or economic terms.

Mr. Michael Meacher  (Oldham, West)
I support the argument so ably put forward by the hon. Member for Cornwall,  North (Mr. Pardoe). I rise to confirm his arguments and to put forward some of my own in support of a very slightly different Amendment. The central aim behind both Amendments is to ensure that the value of the supplement is fully maintained in relation to the constant rise in earnings. Even in a normal year—and I submit that at this juncture in economic policy to gaze back at a slightly normal year is a slightly heady experience—the rise in the value of gross weekly earnings may well be in the region of 5 per cent. to 7 per cent. a year, and it would be an ironic quirk if the device used to supplement the earnings of the lowest-paid were geared to a system which would virtually guarantee that the rise in the value supplementation was constantly trailing behind the upward thrust of market forces acting on the level of ordinary earnings. My chief witness in support of the need for the Admendment is the Secretary of State himself. In introducing the Bill on Second Reading, he replied to my question about whether the Government would commit themselves at this stage to increasing the supplement in line with average earnings. The right hon Gentleman said: "Already the earnings on which we have based our figures in the Bill are sharply out of date.The answer to his question is that I think it highly likely that the make-up level will have to be looked at again before the Bill comes into effect."—[OFFICIAL REPORT, 13th November. 1970; Vol. 806, c. 229.] The right hon. Gentleman therefore presumably accepts the need for a constant upward revision of the amount of supplementation, and the question, therefore, is whether the technique in the Bill is necessarily the most appropriate method to achieve this end. For the reasons which I shall give, I doubt whether that is so. First, historical experience does not lend much credence to any verbal commitment of the Conservative Party to maintain the value of an important noncontributory benefit since, when hon. Gentlemen opposite were last in power, the value of an even more important noncontributory benefit aimed at the remedying of family poverty—and I refer to family allowances—was allowed to lapse drastically. The value of the benefit for  a family with three children at its inception in 1946 represented about 8 per cent. of average industrial earnings. After 1956 its value was not increased throughout the whole of the next eight years, and by 1964 its value had declined to about 5 per cent. of average national earnings. In view of that wretched fate for family allowances, and despite the absence in increasing family allowances and of any of the distorting disincentives which will inevitably accompany any major development of F.I.S., what really copper-bottomed guarantee can the Government offer that F.I.S. will not go the same way? What definite assurance will the Government give about the regularity of reviews and about the time intervals between them? Even if the Government were to engage in regular two-yearly reviews, which is the normal habit for most insurance benefits, there remains the delicate question of the amount by which F.I.S. would be raised taking into account, presumably, such moving indices as the rise in prices, the advance in average wages—

It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.

Committee report Progress.

Business Of The House

Ordered, That the Proceedings on the Family Income Supplements Bill may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[Mr. Fortescue.]

Family Income Supplements Bill

Again considered in Committee.

Question again proposed, That the Amendment be made.

Mr. Meacher
I was making the point that there still remains the delicate question of the amount by which F.I.S. will be raised, taking into account such indices, presumably, as the rise in prices, the advance in earnings, and improvements in disposable per capita income. It is a great temptation to any Government to preserve to themselves the timing of increases and the announcement of the size of any new offer of official generosity,  since a growing proliferation of benefits and nicely timed statements of largesse for all, or for certain sensitive sections of the electorate at least, puts into the hands of any Government potent pre-electoral persuasion which it might not be best for Governments to possess. The interests of the poor are not necessarily identical with the interests of the Government and it would be wrong to vest in the hands of any Government this delicate responsibility for protecting the poor against the over excessive rigours of an inflationary environment. There is far too much painful experience already that Governments will all too readily take advantage, when there are no constraints of economic pressure, of the lack of articulation, or the lack of adequate organisation, among the poor, to initiate deflationary measures at precisely that point of the community where such measures can least be borne. The only proper way in which to avoid these pressures is by establishing a definite published ratio of F.I.S. to average earnings. Once this is done, the future of the matter is taken outside the cockpit of politics, and the more the temptation to score petty advantages is reduced, the better. But there is a further crucial reason for taking the fixing of the making-up level out of the sphere of politics. It is that any major development of F.I.S. must inevitably involve the Government in a virtual open-ended commitment almost indefinitely to increase public expenditure to shore up very low wages. Is this what the Government really intend? If so how will the huge problem of disincentives be handled? I am well aware that in winding up the Second Reading debate the Under-Secretary declared: "Speenhamland started … in a very small way. We intend to keep this small."—[OFFICIAL REPORT, 10th November, 1970; Vol. 806, c. 333.] This is partly corroborated by the reply which I received a fortnight ago to a Parliamentary Question about the cost to the national wages bill of restoring partly or substantially the former differentials between skilled workers and low-paid workers following the introduction of the scheme. The Minister of State at the Department of Employment and Productivity replied: "I would not expect the family income supplement scheme to have any effect on the  national wages bill."—[OFFICIAL REPORT, 6th November, 1970; Vol. 805, c. 466.] Be that as it may, the Government cannot have it both ways. Either the F.I.S. will be increased by significant amounts at regular intervals, in which case the demoralising Speenhamland effect on incentives will be grossly aggravated, or F.I.S., while being occasionally reviewed, will be only very marginally improved, in which case the charge stands that it will not prevent the poor from being made much worse off as a direct result of other parts of the total public expenditure package simultaneously introduced. Either way the poor will lose. Faced with this logical dilemma, the Government will, I believe, be sorely tempted to keep F.I.S. at the relative level of the pittance it already is. Therefore, I ask them to save their credibility over the Bill by tying the supplement to a moving standard of living index, which alone will honourably exculpate them from any possible future suspicions that they have marked out the very low paid for prime attention as helpless pawns in any struggle against inflation. There are at least five other distinct reasons, to each of which I attach considerable importance, for requiring a cost-of-living-or standard-of-living-based relativity in determining the make-up level. I shall spell out each separately, but briefly. The first concerns the wage-stop. I fully accept that it is one of the very few agreeable features of the Bill that a certain number of claimants now subject to this notorious restriction on their so-called entitlement to supplementary allowances will have this infringement of their rights considerably eased. But, however many or however few are assisted here, the number will rapidly decline unless F.I.S. is pegged to a realistic index of the movement of earnings. The Government have already made a lot out of this diminution of the wage-stop, and very justifiably. I appeal to them to carry through the meaningfulness of the improvement by ensuring through the Amendment, as no haphazard or unpredictable review can ever achieve, that this much-vaunted object of the Bill is not uselessly dissipated in the sands of inflation. My second further reason for the Amendment concerns the smoothness in the process which it envisages. It may well be argued by the Government that the point just made about maintaining the mitigation of a wage stop could equally well be met by regular reviews and deliberate increases in F.I.S. from time to time. I doubt that this will occur as generously as might be promised, for the reasons I have given. But leaving that aside, increases in F.I.S. made at intervals, even if biennial, like most insurance benefits, would still be only haphazardly related to the needs of those assisted. Increases brought about by Government dictat must in the nature of the case involve a step-like pattern which at the outset would maximally improve the standard of living of claimants, who would then have to watch helplessly as inflation gradually but inexorably eroded their advantage until at some notional point within the interval their standard of living lost its gain relative to the standard of the rest of the community and they began to approach or even pass the point where they would be worse off relatively, and even possibly in absolute terms, than at the time of the previous rise in benefit. That is a desperate situation only too familiar in the case of retirement pensions. I believe that all the emotion and righteous anger generated by the issue on both sides of the Committee about the inadequacy of even a biennial review at times of rapid inflation are great enough and damaging enough to justify making every effort to avoid this unsatisfactory and unjust situation in the case of an entirely new benefit. Will the Government, therefore, make clear whether the Bill is intended to be closely related to the needs of the potential claimants? If so, will they accept that only a fixed, guaranteed relationship with earnings or prices, or an amalgam of the two can achieve that end? The Amendment offers the Government the opportunity to begin the desperately-needed synchronisation of benefit levels for the whole multitude of different means-tested benefits. If we include, as we must, the vast diffusion of discretionary local authority benefits, the whole bureaucratic apparatus of means-testing, involving in Britain today over 3,000 means tests, of which 1,500 are unique  and not precisely reproduced anywhere else in the system, we see that it is an utter and fantastic muddle. The party opposite has always prided itself on its management capabilities, and "rationalisation" has always been a vogue word with it. Here is an excellent opportunity to exercise those talents. I very much hope that the Government will seize the initiative by establishing a relative pegging system for this benefit, which could serve as a prototype for similiar treatment of other benefits. But rationalisation and the imprint of strategy, desperately needed though they are in the social services, are not the only advantages of accepting the Amendment and extending its logic into adjacent fields. Another major advantage is that it would establish at least the beginnings of a framework in which the standard of living of the various categories of persons accepted to be living in poverty could, because they would be immediately accessible to precise measurement, he progressively raised as an essential ingredient in any overall strategy to eliminate poverty in Britain. I do not want to raise the stakes too high, but there can be no doubt that the principle behind the Amendment is exceedingly important and has the widest ramifications. To this extent, and bearing in mind the essential principle, whilst it would diminish the full effectiveness of the Amendment to relate F.I.S. to a price index rather than publish average manual earnings, such a move would still be compatible with the underlying design of the Amendment and still mark a very definite improvement. Will not the Government accept this at the very least as a minimal concession to protect the interests of the very poor? In a year when prices are only too likely to rise by 7 or 8 per cent. or more, surely it would be very unreasonable to do otherwise? It is significant that the Secretary of State has already had to admit that the figures on which the Bill is based are already sharply out of date. I suspect, though I do not know, that the figures were based on the Family Income Survey of 1968. It is not enough for the right hon. Gentleman to say, as he has, that the make-up level will have to be reviewed before August, 1971. If we go on as we started, it is clear that the damage wrought by savage inflation is  far too great to leave it to the palpable charity of government to rescue those who are helplessly ensnared in the inflationary spiral. What makes the situation particularly disturbing is the apparent complacency—I am bound to use that word in relation to the right hon. Gentleman—of the Secretary of State when he tries to appease us with the sweeping statement that as things are, earnings are definitely rising, even for most of the very poor. Surely he must be aware that the two recent sensational reports by Incomes Data Services Limited pointed to an utterly different conclusion. They showed that for the poorest workers wage increases were not only at a significantly lower level in size but that the intervals between them were significantly greater. Not only that. They showed that for workers covered by 30 of the 53 wage councils concerned, wages had risen less over the recent period than the rise in prices. In other words, the poorest workers are not only increasingly falling behind in their standard of living compared with the rest of the community, but their standard of living is dropping in real terms. I submit that this appalling state of affairs in the wage market makes it all the more vital that any wage supplement is enabled to maintain its full value and that this can be properly done only by the Government accepting the Amendment. And having stated the case for the Amendment, I will make a few exploratory probes at some of the possible objections. 10.15 p.m. It may be said that when translated into absolute figures, the percentages given produce amounts slightly higher than those at present written into the Bill. I accept this, but it is not a serious objection. Clearly, the percentages could be reduced, though this would destroy the nicely rounded figures and give a rather unfortunate impression of pernickety exactitude over what is supposed to be a generous Measure. But the obvious need to review the rates of supplementary benefit scales so soon after they were last increased, in view of the sharply accentuating pace of inflation, means that the figures given in the Amendment are anything but high. However, I have no doubt that a much more substantial objection is likely to be that the Amendment carries with it certain inflationary implications. There are several ways of rebutting this objection, and I will give a few. First, if the market is defective as a protector of low wages, as it patently is, do the Government intend to pick out the very low paid, because of their helplessness and lack of power in retaliating, as the one section of the community which should be penalised? If low-paid manual workers are not put on a more dynamic escalator, such as the Amendment would provide, than any at present within their reach, it will be seen, and rightly so, that they are being selected to bear the brunt in the forefront of the Government's economic policy. Secondly, I refute the objection on the grounds that the inflationary consequences of implementing the Amendment, bearing in mind the tiny amount of Government expenditure involved, cannot be argued to be more than miniscule. Again, it would be the discriminatory collusion of the one-eyed to stare disapprovingly at an incomes rise for a few very low-paid workers, while turning a comparatively blind eye to some substantial price rises in both the public and private sectors which ripple devastatingly through the entire economy. Thirdly, I would counter against the objection of inflation the fact that what is sauce for the gander is sauce for the goose. If the Government can afford to give away, as they are doing, £330 million in tax relief for the well off, it is scarcely beyond argument that they can afford to give away a minute amount of far less than £10 million to the very poor. I therefore conclude that the objection about inflation is really in no sense at all sustainable, and in view of the insubstantialness of the counter arguments against the Amendment, but more particularly in view of the several solid and vitally important advantages to be derived from its acceptance, as I have outlined, I urge the Government to take this step and so transform the Bill from a relatively minor measure of alleviation into a piece of major legislation by acepting the Amendment.

The Under-Secretary of State for Health and Social Security (Mr. Paul Dean)
The hon. Member for Cornwall, North (Mr. Pardoe) appealed to us when moving the Amendment to go back to Beveridge. That was an unusual rôle for him. He is usually urging us to go forward with Pardoe.

Mr. Pardoe
It is the same thing.

Mr. Dean
I will leave that matter there. The hon. Gentleman was proposing, and the hon. Member for Oldham, West (Mr. Meacher) supported him, that there should be an automatic index for this supplement rather than what is proposed in the Bill. This undoubtedly has superficial attractions. The hon. Member for Cornwall, North urged that as there are automatic indices for a number of other social service benefits, there is no reason why an index should not apply in this case. As I say, this is admittedly a superficially attractive proposition. Having said that, I wish to make it clear that some real difficulties are involved. For example, we are introducing an entirely new benefit. To put it immediately on to an automatic index basis would be to accept a great deal in that one would, unless one got the automatic index right from the start, find it not as easy to change it as by the regulation provisions in the Bill. Thus, one of the big disadvantages to taking the step proposed by the Amendment is that there would be less flexibility to make changes in the actual figures than there would be under the proposals now in the Bill. This is an important argument against the Amendment, particularly when, as now, we are introducing a completely new benefit. That is, however, not the only argument against it. Other difficulties would arise in practice and I will give a few examples of what the effect of the Amendments would be; and the two Amendments are similar, although the figures in them are slightly different. The Amendments would mean that, if wages rose faster than prices, a higher supplement would be paid although the family's living standards had risen, but if prices rose faster than wages the real value of the supplement would fall when real  wages were also falling. The hon. Gentleman may say that it is highly unlikely that the latter situation would exist, and I accept this, but it illustrates my point that the more we write in an automatic index at this stage the less likely we are to be able to make changes if unforeseen circumstances arise. The main difficulty of this approach is in the actual figures suggested by the hon. Members for Cornwall, North and Oldham, West. I will give the Committee an indication of what the effect would be but, before doing so, I remind the Committee that in selecting the figures that are in the Bill the Government had in mind three main factors; first, the level of earnings, secondly, the supplementary benefit level and, thirdly, the tax threshold. The effect of these proposals on the tax threshold and the normal supplementary benefit requirements I will illustrate by giving a few figures. In the case of Amendment 11, for the one child family the proposed make-up level would be £16 2s., which compares with the tax threshold level of £14 7s. and the supplementary benefit level of £14 6s. In other words, the proposed make-up level even for the one child family would be higher than both the tax threshold and the supplementary benefit level. That gap widens as the number of children grows. This is partly because of the 30 per cent. which is included in the Amendment. For the two children family the proposed make-up level would be £19 16s., whereas the tax threshold level is £16 3s. and the supplementary benefit level is also £16 3s. Going to the extreme of a six children family, the proposed make-up level would be £34 12s., the tax threshold level £23 7s. and the supplementary benefit level £23 12s. The hon. Gentleman will see from those figures the substantial double disincentive effect which his proposal would have.

Mr. Pardoe
Without making the obvious point that it might have been better to use the £350 million which the Government gave away to raise the threshold of tax and thereby solve the problem, may I ask the Minister to tell us exactly what figures he is taking for rent in the figures he has quoted for the threshold of supplementary benefit?

Mr. Dean
I am taking the figures we took in the Bill. The figures I have given show clearly that the Amendments would have a substantial disincentive effect, particularly on families having a substantial number of children. The figures in every case are above, and in many cases, well above, the tax threshold and the normal supplementary benefit requirements for similar families. These are the main disincentive effects which would operate to a substantial degree in this area.

Mr. Timothy Raison  (Aylesbury)
I am not clear whether my hon. Friend in using the term make-up level is talking about the prescribed amount or the amount after the 50 per cent. has been knocked off.

Mr. Dean
I am talking about the make-up levels proposed in the Amendment.

Mr. Raison
I am sorry, but I am still not clear. There is a difference between the prescribed amount, which is what I take to be the make-up level, and what is received—which is only half the difference between income and the prescribed amount.

Mr. Dean
I am sorry, I misunderstood my hon. Friend's point. I am taking the prescribed amounts, which are the figures the hon. Gentleman has used. I turn to some of the other points which have been mentioned. The hon Member for Cornwall, North mentioned the Bagley thesis and we shall give close examination to this matter in the studies we are now conducting on the whole question of poverty, particularly family poverty. This study is concerned with relativities rather than with absolute amounts, and it is not clear whether the studies in this thesis would help his argument or not. We must await further studies to see whether that is so. The hon. Gentleman then referred to the 30 per cent. figure and asked why we had selected £2. The short answer is that it is the average rate based on supplementary benefits for children under the scale. We took that amount because we wished in the Bill to take the simplest possible figures and to make the simplest possible approach. As my right hon. Friend said on Second Reading, there is power in subsection (2)  to substitute different figures. My right hon. Friend intends to look at these figures in the light of the three indices I have mentioned, and in particular in the light of the tax thresholds and the level of earnings. I hope the Committee will feel that, although there are certain superficial attractions in the approach suggested, we are more likely to achieve the immediate objective that we have in mind and to maintain flexibility by adopting the proposals in the Bill rather than the Amendments.

Mr. Meacher
The objections put forward by the hon. Gentleman against the Amendment were not particularly strong. They were on three main grounds. The first was that if a pegging system were adopted at the outset it would not be possible to change the figures largely because it was a different arrangement. This seems to be a defensive argument and does not seem to show a great deal of confidence in the desirability of extending the new benefit. I find this approach disappointing. Secondly, the argument was used that if any unforeseen changes occurred, such as prices rising faster than earnings, this would produce problems In the first place, it would be possible to change the percentages while preserving the principle of a pegging system. It is possible to get round the point by saying that in some situations there could be an amalgam between price rises and increases in earnings to safeguard the situation. Thirdly, it was said that make-up levels might be above the supplementary benefit line and above the tax threshold. Although I admit that this is the case, we need to press the point since this does not provide a real objection to the Amendment. There could be other means of raising the tax threshold. This is not an argument against the use of a pegging system for family income supplement or for any other benefit.

Mr. Pardoe
In view of the interesting discussion which has taken place, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

10.30 p.m.

Mrs. Shirley Williams
I beg to move, Amendment No. 13, in page 1, line 23, leave out '15' and insert '£16'. I understand that it is convenient to take at the same time the following Amendments: No. 15, in page 1, line 24, leave out '£15 plus £2' and insert '£16 plus £1.50'. No. 16, in page 1, line 24, leave out: '£2 for each additional child' and insert: '£1 8s. for each additional child under the age of five years, £1 13s. for each additional child between the ages of five and 10 years, £2 1s. for each additional child between the ages of 11 and 12 years and £2 4s. for each additional child between the ages of 13 and 15 years'. No. 17, in page 1, line 25, at end insert: 'and(c) the amount by which the rent or rent and rates (as the case may be) paid or payable for the accommodation of the said family exceeds £3 per week, so however that such amount shall not exceed £2 or such higher amount as in the circumstances of the case may be approved by the Supplementary Benefits Commission'. In speaking to this group of Amendments I am conscious that we on this side of the Committee have preferred an acceptance of the Amendments moved by my hon. Friend the Member for Oldham, West (Mr. Meacher) and the hon. Member for Cornwall, North (Mr. Pardoe). There is no doubt that when the Under-Secretary spoke about the hon. Member for Cornwall, North, in effect, going forward to Beveridge, he was not so far from the point, because in the present cycle of history it would without doubt be going forward to go back to Beveridge. Because we took the view that it was unlikely that the Government would at this stage be willing to accept a complete re-casting of the Bill in the form put forward by those two hon. Members, we are suggesting a more modest Amendment which we believe puts before the Government the direct choice of moving a little closer towards the original pledge to spend £30 million on family poverty than the amount that they are at present contemplating spending. Many people took that pledge to mean that £30 million would be spent on those in poverty, not  that the Government were committed to a particular scheme. Certainly the Prime Minister, in reply to a Question put to him this afternoon by my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley), on which I asked a supplementary question, made it clear that he was committed to this scheme. But we suggest that he can spend £30 million on poor families in the way that we propose and will put forward in other Amendments. The purpose of this group of Amendments is to deal with two particular weaknesses in the Bill, which the right hon. Gentleman and his colleagues have directly admitted. The first concerns the level of the prescribed income. I should like to hear out what was said by the hon. Member for Aylesbury (Mr. Raison). We must get the term "prescribed income" used in Committee, not "makeup level", because everybody will think that they will get £15 if they are a one-child family. We do not want to start people off with a set of illusions. The right hon. Gentleman has admitted that he regards these levels as being likely to be amended. The phrase that he used on Second Reading was: "Already the earnings on which we have based our figures in the Bill are sharply out of date." So the first purpose of the Amendment is to bring those prescribed income levels up to date and, in particular, to allow for the fact that the Government will have to increase supplementary benefit next November, just as the previous Government increased it this November, to keep faith with the usual assumption that people on supplementary benefit shall be enabled to keep abreast of increases in the cost of living. The other end or purpose of this group of Amendments is to deal with the major anomaly in the Bill that nothing is done to recognise the fact that many poor families pay exceptionally high rents. With his usual frankness, the right hon. Gentleman specifically agreed that this was a weakness of the scheme when, on 10th November, he said: "People who pay large rents are not helped by the Bill."—[OFFICIAL REPORT, 10th Nov. 1970; Vol. 806, c. 227–229.] The right hon. Gentleman will appreciate that among the poor there are many  who pay exceptionally high rents. Therefore, we commend these Amendments to him. The purpose behind Amendments Nos. 13 and 15 is to establish, as far as possible, that the prescribed income and the poverty line, as set by supplementary benefit, are one and the same. It is not easy to do this, because the Supplementary Benefits Commission has wide discretionary powers to give special payments in respect of heating, clothing, and certain other needs. We are attempting to reflect what the supplementary benefit will be next November, allowing for the probable increase in the cost of living assesed by many commentators as being between 6 and 8 per cent. There is another purpose which is crucial to us. The right hon. Gentleman made it clear on Second Reading that he had not ruled out the possibility of increases in family allowances. We welcome this. However, as the F.I.S. Bill is drafted, no increases in allowances would benefit those covered by the Bill. They would simply lead to further deductions from basic income. The poorest would not be affected by an increase in family allowances on any basis, such as partial claw-back, partial tax regarding family allowances and so on, unless an Amendment like this is passed linking a disregard of family allowances with the amount in the Bill for each child and to establish the prescribed income level. This means that any future increase in family allowances would be paid across the board to these families because we are reducing the amount of prescribed income to leave room for family allowances. This is why we set our figure at £16 for the one-child family but reduced the amount for further children from the present £2 to £1 10s. The present family allowance is 18s. for a second child and £1 for the third and subsequent children. This means that, taking present family allowances, the figure would be £ 1 10s. for the first child, £2 8s. for the second and £2 10s. for subsequent children, broadly in line with the supplementary benefit figures, although not so carefully refined from the point of view of ages. It strikes broadly around the middle. We are trying to establish a single poverty line. It is important to do this for simplicity and so that we do not see  the beginning of the erosion of the line established by the S.B.C. We recognise that the Government have a problem about disincentives and need to taper off the amount given to families. The right hon. Gentleman will appreciate that this tapering needs to be between F.I.S. and other means-tested benefits such as school meals. It does not arise between F.I.S. and supplementary benefit for the reasons he gave on the Clause dealing with women earners choosing between F.I.S. and S.B.C. There is no question of poverty lines overlapping as between F.I.S. and S.B.C., since no one can claim both. Let me tell the right hon. Gentleman what we suspect will happen in the next 15 months. The Chancellor has clearly recognised the effects of inflation by increasing the income limits for means-tested national benefits, such as prescription charges and school meals, by 30s. As we know, this was done at the point at which the public statement of the Chancellor was discussed. We know that, at the beginning of October, means-tested benefit orders were being laid which did not include a 30s. increase, and that, by the end of October, there was the Chancellor's statement of the all-round 30s. increase. It is reasonable to suppose that supplementary benefit levels will probably rise in line with the increase. If they do not, there will be an unacceptable position. In consequence, supplementary benefits will reflect higher fuel and food prices and higher rents, which are bound to occur as a result of Government policy. On that basis we assume at least a £1 increase in supplementary benefits and possibly more by 1971. Therefore our figures are, broadly speaking, right to allow for that further increase. If the right hon. Gentleman does not feel able to increase the income levels even before the scheme comes in, he knows better than I do that the effect will be that many people earning less than supplementary benefit will not be covered by the scheme. They will not get F.I.S. nor will they be able to draw supplementary benefits because they will be at work. As an example, at present a family with one child will be entitled to draw F.I.S. if the man's earnings are less than £15 a week although the amount will be small unless his earnings are no  more than £12 a week. They will otherwise be of the order of only a few shillings because he gets only 50 per cent of the difference. The point is that the man on F.I.S. is paying heavily for going to work. A man with one child earning £15 a week will be paying 4s. a week income tax, 22s. a week National Insurance and, on the most conservative assumption, perhaps 5s. a week for travel. That is almost certain to be much higher. This means that his net income, after stoppages which he cannot prevent because he is working, will be £13 9s. The present level for supplementary benefit is £13 5s. Hon. Gentlemen will discover at every point that the difference between net income after stoppages of a man who is just on the prescribed income level for F.I.S. and that of the man on supplementary benefit grows further apart, and the larger his family is, the greater the gap will become. I am still thinking about November, 1970, supplementary benefit rates and August, 1971 F.I.S. rates. I make no assumption about the increase in supplementary benefits. If they are increased, as they should be, to take account of higher prices, by £1 or 30s. for a married couple between November 1970 and November 1971, this Bill will not even deal with many families getting well below supplementary benefit level. The other factor, the joker in the pack, is the question of rent. This is why we are trying to deal with the situation. The national difference between supplementary benefit and family income supplement prescribed levels widens the moment there is a rent higher than £2 19s., which is the present supplementary benefit standard assumption and the assumption in the Bill. How many families can hon. Gentlemen opposite think of whose rent is more than £2 19s.? I can think of very many, some in council houses and some in private accommodation, some in furnished accommodation. There are thousands of poor families whose rent is above that level. Yet the effect of the fair rent procedure being extended to council houses, as the Secretary of State for the Environment has said it will be shortly, and the effect of the gradual withdrawal of subsidies, however slowly it starts, will be to make this figure of £2 19s. look even less realistic than it is now.

Sir K. Joseph
The whole idea of the arrangement proposed by my right hon. Friend is to see that rent allowances are available to those who are poor, whether they live in public or private housing, except for the relatively small furnished sector.

Mrs. Williams
I should not have given way to the right hon. Gentleman because I was coming to that point. Both the fair rents procedure and the beginning of the rearrangement about subsidies, which is obviously linked with it, are likely to commence before the new scheme can come in. 10.45 p.m. The Minister said that it would be at least 18 months to two years before the scheme could come in. I therefore want to press my Amendment on the ground that this is an attempt to cover a gap of at least a year—and I am giving this the most favourable possible connotation—between the commencement of the F.I.S. scheme and the commencement of any housing scheme that will benefit people in this group. The right hon. Gentleman's concern should, I think, be greater than mine, because he is concerned about the Bill not being seen to be a mockery when it starts. We, the Opposition, are not so concerned about that. From the right hon. Gentleman's point of view we are generously offering him an Amendment which will cover a situation which will give rise to anomalies and injustices with which he will find it exceedingly difficult to cope. I hope that we can get from the right hon. Gentleman some sort of assurance about the levels at which the provisions in the Bill will commence. In the last three months—that is to say July, August and September—according to official figures, there has been an increase in the cost of living of 1·1 per cent. This assumes about 4½ per cent. over a 12-month period if nothing gets worse. We have had an increase in fares of 3s. in the pound in the London area, which makes my assumption about working expenses look extremely modest. I do not want to embarrass the right hon. Gentleman, but I must say that it is not beyond the bounds of possibility that some time between August, 1971, and August, 1972, there will be an increase in  employees' contributions for National Insurance purposes, which will mean a further deduction before we reach the figure for net income from prescribed income, so that the gap will be even wider between F.I.S. supplement and supplementary benefit supplement. In the light of all that, I suspect that the right hon. Gentleman's figures are, to put it conservatively, at least £1 out, or to put it pessimistically, more like 30s. out, and I urge him to consider accepting the Amendments, bearing in mind that one of them attempts to deal with the serious anomalies about rents which will dog the Bill for the first two years that it is in operation.

The Chairman
Order. I remind the Committee that with this Amendment we are discussing Amendments Nos. 15, 16 and 17.

Mr. McNamara
I shall be brief, because time is getting on, and some of the points made by my hon. Friend the Member for Oldham, West (Mr. Meacher) have been answered by the Under-Secretary of State. When I put down my Amendment I made an error in the scales. It refers to the scales in operation a fortnight ago, and not to those in operation now, but that is of little significance, because the right hon. Gentleman has admitted that he has been working on figures which are two years old. The purpose of my Amendment is to try to bring a little consistency and equity into the system of allowances. Earlier my hon. Friend referred to the number of means tests that are available. Yesterday I telephoned around the various departments in my locality and asked whether, without putting themselves out, they could forward to me at the House the various types of means tests that are applied in respect of school meals, rent and rate rebates, and so on. I gather that at least 14 different types of means tests can be applied without difficulty in the City of Hull. That was just scratching the surface, for these are many more. I do not know what the tests do to those who apply for benefit, but, by God, they frighten me, to paraphrase the noble Duke. The scheme introduces another means test. I should like to know why  the Government cannot use a commonly accepted means test, that used by the Supplementary Benefits Commission. In choosing the figure of £2 for children of all ages right through the scale, the Government have been completely arbitrary and have failed to recognise that the demands of children as they grow increase rather than diminish, that after parents have got over the initial expense of the first child—and on this occasion a benefit is provided in respect of the first child—expenses become greater as children grow, as they become school children and then teenagers. The Supplementary Benefits Commission recognises that by its escalating scale of benefits. Because of the lateness of the hour, my speech, which I had timed to last one-and-a-half hours, I have kept briefly to two points. I know that there are many comments which may be made about the Amendments and I was prepared to meet them, but I have confined myself to asking why the Government have not used an existing means test and why they have not used an escalating scale rising with increasing age of children rather than a fixed sum.

Mr. Michael Barnes  (Brentford and Chiswick)
A few more words need to be said about Amendment No. 17 which seeks to do something about rent. A scheme of this kind, prescribing amounts up to which benefits are paid, cannot possibly function effectively unless it takes account of rent levels. In big cities such as London it is possible for families with good wages to be living in poverty because of the rent. This is particularly so with families which have recently moved to London, or with couples who have recently married. They are not able to buy their homes because they do not have the money to do so, and they have not yet accumulated sufficient points to be rehoused by the local authorities. If there are children, such families are pushed into substandard accommodation, unhealthy, damp basements and so on, or into accommodation which is too expensive for their income, and in those circumstances rent may be a major factor in causing poverty. This can be the case even with families with average wages when there are three or four children. It is possible in London for such a family to be paying £8 or £9  a week for a private flat, or about one-third of its income. The rent and fuel bills have to be paid and it is expenditure on children's clothing and children's food which has to be cut, where the economies have to be made. I have referred to families on an average wage, but the Bill will do nothing for such families, because they will be earning too much. The scope of the Bill is such that a family with four children will need to earn only £18 a week, excluding family allowances, before it is taken out of the scheme. Earlier, the Secretary of State spoke of his scheme as helping the poorest of the poor—"and, mercifully", he said, "they are few". They are few because the Bill sets its sights so incredibly and so pathetically low. In fact, there are millions living in poverty who will continue to live in poverty and not be covered by the Bill at all. I am glad that we have now reached a point of major disagreement. It is about time such a point was reached. There has been a good deal of attempt earlier in the debate to modify and improve the Bill, and it seems to me that some of my hon. Friends feel that, if a Bill pays some money to some families who need it badly, that is a reason for not voting against it. But I believe that the Bill, with its miserable benefits under the present Clause, is not in the long-term interests of the poor. It will be looked upon in future years as a retrograde step in our social security legislation. The right hon. Gentleman and my hon. Friend the Member for Hitchin (Mrs. Shirley Williams) referred to the rent rebate scheme announced by the Secretary of State for the Environment which is to be introduced in two or three years. It will not cover families living in furnished accommodation. What estimate has the right hon. Gentleman of the numbers who will qualify for help who are living in furnished accommodation at present? I suspect that the figure is much larger than many people realise. There is a tendency for hon. Members opposite to think that furnished accommodation is not the permanent home, that the people living there must be just passing through, in some sense, passing through London, or moving between jobs. In fact, for many people, particularly in  the big cities furnished accommodation is their permanent home. The irony is that in many cases such furnished accommodation may not be furnished and would not meet the legal test of what is a furnished flat. Landlords let it as furnished or partly furnished in order to get round the Rent Acts. Unless rents are taken into account in a scheme like this, it will be absolutely useless. It is essential that, in the two or three years before the comprehensive rent rebate scheme comes in, something be done not only for tenants of private unfurnished accommodation but for tenants of furnished accommodation, too. Furnished accomodation now is the worst buy on the market for people with low incomes. Shelter did a survey recently which showed that for people living in furnished accommodation with incomes of up to £20 a week it was not uncommon for the rent to be as high as half the family income in some cases, and in no case less than a quarter. I am glad that we have now, towards the end of today's debate, reached a point of major disagreement. The miserable benefits built into this scheme, with no provision to tie them to average earnings, as my hon. Friend the Member for Oldham, West (Mr. Meacher) wanted, and its failure to make adequate provision for the amount of rent which people have to pay, will make it a useless scheme.

11.0 p.m.

The Under-Secretary of State for Health and Social Security (Mr. Paul Dean)
By moving the Amendment to increase the prescribed amount, the hon. Member for Hitchin (Mrs. Williams) is asking us to do what there is already power in the Bill to do by regulation when we have more up-to-date figures. There is very little difference between us on this. I do not dispute that the figures which she suggested may be right. But rather than write in figures now which may or may not be right in the light of the latest possible information, surely it is much better to use the power in regulations when we have the most up-to-date information on earnings and tax thresholds. I argue, not that the hon. Lady's figures may not be right, but merely that it would be better to wait until we have more up-to-date information. The hon. Member for Kingston-upon-Hull, North (Mr. McNamara) has taken out-of-date supplementary benefit figures in speaking to his Amendment with regard to different levels for children of different ages. As a result, his proposal would be less generous than the average £2 figure in the prescribed amount in the Bill. I am sure that he does not intend that.

Mr. McNamara
I am sorry that I did not command the complete attention of the Committee, because I made that specific point. But I thought that if my figures were only two weeks old and the figures the Secretary of State used to introduce the Bill were two years old he could not complain. If the hon. Gentleman will accept the principle of my Amendment, I am willing to withdraw it and we can talk about appropriate figures on Report.

Mr. Dean
I was going on to say that even if the hon. Gentleman had had up-to-date figures, although in some cases families would admittedly be better off, in others they would be worse off. I do not think that that is the effect that he wants. The main part of the debate has centred on the point made in the speeches about rents. My right hon. Friend has admitted right from the beginning that in order to have the simplest possible scheme, which can be put into operation at the earliest possible moment, we have taken an average figure; we have taken for the prescribed amount an average housing cost of £2 10s. a week. There are some below that and some above. We have never attempted to disguise from the Committee, and we do not do so now, that there will be some families whose rent costs are higher than that. This is the significance of the scheme which my right hon. Friend the Secretary of State for the Environment announced the other week. To try to introduce such a scheme into this Bill would enormously complicate the operation. It would certainly make it impossible to keep to the date of operation of

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|Allaun, Frank (Salford, E.) |Ashton, Joe     |Barnett, Joel  |
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|Archer, Peter (Rowley Regis)|Atkinson, Norman|Baxter, William|
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|Armstrong, Ernest           |Barnes, Michael |Beaney, Alan   |
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the scheme for which we are aiming—next August. That would be a serious disadvantage.

It comes a little ill from hon. Members opposite to criticise us in this regard when this is the first time that any Government have tackled this problem, particularly with regard to families in poverty. Many of them are living in privately-owned accommodation. It comes very ill from hon. Gentlemen opposite to criticise us because there are still some months to go before a scheme which will go a long way to solving this problem is introduced. My right hon. Friend the Secretary of State for the Environment has produced the scheme extremely fast in the lifetime of this Government. It will deal with this problem. To try to deal with it in the Bill would not be appropriate. That would make it immensely more complicated and threaten the starting date of next August, which I believe both sides of the Committee wish to see effective.

Mr. McNamara
Despite the fact that the Under-Secretary did not listen to what I said—he answered neither my point concerning a sliding scale nor my question about the reason for a new means test—and because, if I persisted, I might spoil voting arrangements later, I beg to ask leave to withdraw my Amendment.

The Chairman
The hon. Member's Amendment is not yet before the Committee.

Mrs. Shirley Williams
May I make it quite clear that while the Under-Secretary may feel that both the Family Income Supplements Bill and his right hon. Friend's proposals for rents solve the problem, it is the view of this side of the Committee that they would solve it in totally the wrong way. I must, therefore, advise my right hon. and hon. Friends to vote against the Government on this occasion.

Question put, That the Amendment be made:—

The Committee divided: Ayes 126, Noes 161.

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|Bennett, James (Glasgow, Bridgeton)  |Hughes, Roy (Newport)                |Palmer, Arthur                      |
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|Booth, Albert                        |Hunter, Adam                         |Pardoe, John                        |
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|Brown, Bob (N'c'tle-upon-Tyne, W.)   |Jenkins, Hugh (Putney)               |Pavitt, Laurence                    |
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|Buchan, Norman                       |John, Brynmor                        |Pendry, Tom                         |
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|Carmichael, Neil                     |Johnson, James (K'ston-on-Hull, W.)  |Pentland, Norman                    |
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|Clark, David (Colne Valley)          |Johnson, Walter (Derby, S.)          |Perry, Ernest G. (Battersea, S.)    |
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|Cocks, Michael (Bristol, S.)         |Jones, Barry (Flint, E.)             |Prescott, John                      |
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|Cohen, Stanley                       |Jones, T. Alec (Rhondda, W.)         |Rees, Merlyn (Leeds, S.)            |
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|Concannon, J. D.                     |Kaufman, Gerald                      |Rhodes, Geoffrey                    |
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|Cunningham, George (Islington, S. W.)|Kerr, Russell                        |Roberts, Rt. Hn. Goronwy (C'n'von)  |
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|Dalyell, Tam                         |Kinnock, Neil                        |Roderick, Caerwyn E.                |
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|Davies, G. Elfed (Rhondda, E.)       |Lambie, David                        |Roper, John                         |
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|Davies, Ifor (Gower)                 |Lawson, George                       |Ross, Rt. Hn. William (Kilmarnock)  |
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|Deakins, Eric                        |Leadbitter, Ted                      |Sheldon, Robert (Ashton-under-Lyne) |
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|Dempsey, James                       |Lestor, Miss Joan                    |Silkin, Hn. S. C. (Dulwich)         |
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|Douglas, Dick                        |Lomas, Kenneth                       |Sillars, James                      |
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|Duffy, A. E. P.                      |Loughlin, Charles                    |Skinner, Dennis                     |
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|Eadie, Alex                          |Lyons, Edward (Bradford, E.)         |Spearing, Nigel                     |
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|Edwards, Robert (Bilston)            |McBride, Neil                        |Spriggs, Leslie                     |
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|Edwards, William (Merioneth)         |McCann, John                         |Stallard, A. W.                     |
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|Ellis, Tom                           |McCartney, Hugh                      |Stoddart, David (Swindon)           |
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|English, Michael                     |McElhone, Frank                      |Strang, Gavin                       |
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|Evans, Fred                          |McGuire, Michael                     |Taverne, Dick                       |
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|Fisher, Mrs. Doris (B'ham, L'wood)   |Mackenzie, Gregor                    |Thomas, Jeffrey (Abertillery)       |
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|Fitch, Alan (Wigan)                  |McMillan, Tom (Glasgow, C.)          |Thomson, Rt. Hn. George (Dundee, E.)|
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|Fletcher, Ted (Darlington)           |McNamara, J. Kevin                   |Torney, Tom                         |
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|Ford, Ben                            |Mallalieu, J. P. W.(Huddersfield, E.)|Tuck, Raphael                       |
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|Fraser, John (Norwood)               |Mason, Rt. Hn. Roy                   |Urwin, T. w.                        |
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|Golding, John                        |Meacher, Michael                     |Varley, Eric G.                     |
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|                                     |Mellish, Rt. Hn. Robert              |Walker, Harold (Doncaster)          |
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|Grant, George (Morpeth)              |Mikardo, Ian                         |Watkins, David                      |
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|Grant, John D. (Islington, E.)       |Morgan, Elystan (Cardiganshire)      |Wellbeloved, James                  |
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|Griffiths, Eddie (Brightside)        |Morris, Alfred (Wythenshawe)         |White, James (Glasgow, Pollok)      |
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|Hamilton, James (Bothwell)           |Morris, Charles R. (Openshaw)        |Whitehead, Phillip                  |
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|Hamling, William                     |Moyle, Roland                        |Williams, Mrs. Shirley (Hitchin)    |
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|Hannan, William (G'gow, Maryhill)    |Murray, Ronald King                  |Wilson, Alexander (Hamilton)        |
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|Hardy, Peter                         |O'Halloran, Michael                  |                                    |
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|Harrison, Walter (Wakefield)         |O'Malley, Brian                      |TELLERS FOR THE AYES:               |
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|Heffer, Eric S.                      |Orme, Stanley                        |Mr. Joseph Harper and               |
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|Horam, John                          |Oswald, Thomas                       |Mr. Kenneth Marks.                  |
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|Hughes, Robert (Aberdeen, N.)        |Padley, Walter                       |                                    |
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 ---------------------------------------------------------------------------------------------------------------------
|Adley, Robert                         |Fisher, Nigel (Surbiton)           |King, Tom (Bridgwater)                  |
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|Alison, Michael (Barkston Ash)        |Fookes, Miss Janet                 |Kinsey, Joseph                          |
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|Atkins, Humphrey                      |Fowler, P. N.                      |Knox, David                             |
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|Baker, W. H. K. (Banff)               |Fox, J. Marcus                     |Lane, David                             |
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|Bennett, Dr. Reginald (Gosport)       |Fry, Peter                         |Legge-Bourke, Sir Harry                 |
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|Benyon, W. R.                         |Gibson-Watt, David                 |Le Marchant, Spencer                    |
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|Biffen, John                          |Gilmour, Sir John (Fife, E.)       |Loveridge, John                         |
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|Biggs-Davison, John                   |Glyn, Dr. Alan                     |MacArthur, Ian                          |
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|Blaker, Peter                         |Goodhew, Victor                    |McLaren, Martin                         |
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|Boardman, Tom (Leicester, S.W.)       |Gorst, John                        |Macmillan, Maurice (Farnham)            |
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|Boscawen, R. T.                       |Gower, Raymond                     |McNair-Wilson, Michael (W'stow, E.)     |
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|Bossom, Sir Clive                     |Grant, Anthony (Harrow, C.)        |McNair Wilson, Patrick (New Forest)     |
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|Boyd-Carpenter, Rt. Hn. John          |Gray, Hamish                       |Maddan, Martin                          |
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|Bray, Ronald                          |Green, Alan                        |Madel, David                            |
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|Brewis, John                          |Griffiths, Eldon (Bury St. Edmunds)|Mawby, Ray                              |
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|Brown, Sir Edward (Bath)              |Gummer, Selwyn                     |Maxwell-Hyslop, R. J.                   |
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|Buchanan-Smith, Alick                 |Hall, John (Wycombe)               |Meyer, Sir Anthony                      |
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|Butler, Adam (Bosworth)               |Hall-Davis, A. G. F.               |Mills, Peter (Torrington)               |
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|Chapman, Sydney                       |Hannam, John (Exeter)              |Miscampbell, Norman                     |
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|Chataway, Rt. Hn. Christopher         |Harrison, Col. Sir Harwood (Eye)   |Mitchell, Lt-Col. Colin (Aberd'sh'e, W.)|
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|Churchill, W. S.                      |Haselhurst, Alan                   |Mitchell, David (Basingstoke)           |
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|Clarke, Kenneth (Rushcliffe)          |Hawkins, Paul                      |Moate, Roger                            |
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|Clegg, Walter                         |Hayhoe, Barney                     |Molyneaux, James                        |
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|Cockerram, Eric                       |Hicks, Robert                      |Money, Ernie                            |
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|Cooke, Robert                         |Hill, James (Southampton, Test)    |Monks, Mrs. Connie                      |
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|Coombs, Derek                         |Holland, Philip                    |Monro, Hector                           |
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|Cooper, A. E.                         |Holt, Miss Mary                    |Montgomery, Fergus                      |
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|Cormack, Patrick                      |Hornsby-Smith, Rt. Hn. Dame P.     |More, Jasper                            |
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|Critchley, Julian                     |Howell, David (Guildford)          |Morgan, Geraint (Denbigh)               |
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|Crouch, David                         |Howell, Ralph (Norfolk, N.)        |Morrison, Charles (Devizes)             |
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|Curran, Charles                       |Hutchison, Michael Clark           |Mudd, David                             |
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|d'Avigdor-Goldsmid, Maj.-Gen. Jack    |James, David                       |Murton, Oscar                           |
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|Dean, Paul                            |Jenkin, Patrick (Woodford)         |Nabarro, Sir Gerald                     |
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|Deedes, Rt. Hn. W. F.                 |Jessel, Toby                       |Neave, Airey                            |
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|Drayson, G. B.                        |Jopling, Michael                   |Normanton, Tom                          |
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|Elliot, Capt. Walter (Carshalton)     |Joseph, Rt. Hn. Sir Keith          |Oppenheim, Mrs. Sally                   |
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|Elliott, R. W. (N'c'tle-upon-Tyne, N.)|Kellet, Mrs. Elaine                |Osborn, John                            |
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|Eyre, Reginald                        |Kershaw, Anthony                   |Owen, Idris (Stockport, N.)             |
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|Farr, John                            |Kilfedder, James A.                |Page, Graham (Crosby)                   |
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|Fenner, Mrs. Peggy                    |King, Evelyn (Dorset, S.)          |Pink, R. Bonner                         |
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|Pounder, Rafton                     |Spence, John                       |Waddington, David         |
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|Powell, Rt. Hn. J. Enoch            |Sproat, Iain                       |Walder, David (Clitheroe) |
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|Pym, Rt. Hn. Francis                |Stanbrook, Ivor                    |Wall, Patrick             |
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|Redmond, Robert                     |Stewart-Smith, D. G.               |Ward, Dame Irene          |
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|Reed, Laurance (Bolton, East)       |Stoddart-Scott, Col. Sir M.        |Warren, K.                |
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|Rees, Peter (Dover)                 |Stokes, John                       |Weatherill, Bernard       |
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|Rees-Davies, W. R.                  |Sutcliffe, John                    |White, Roger (Gravesend)  |
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|Rossi, Hugh (Hornsey)               |Taylor, Frank (Moss Side)          |Wiggin, Jerry             |
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|Rost, Peter (Derbyshire, S. E.)     |Tebbit, Norman                     |Wilkinson, John           |
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|Scott, Nicholas                     |Thatcher, Rt. Hn. Mrs. Margaret    |Wolrige-Gordon, Patrick   |
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|Sharples, Richard                   |Thomas, John Stradling (Monmouth)  |Woodhouse, Hn. Christopher|
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|Shaw, Michael (Sc'b'gh & Whitby)|Thompson, Sir Richard (Croydon, S.)|                          |
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|Shelton, William J. (Clapham)       |Tugendhat, Christopher             |TELLERS FOR THE NOES:     |
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|Simeons, Charles                    |Turton, Rt. Hn. R. H.              |Mr. Tim Fortescue and     |
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|Soref, Harold                       |Vaughan, Dr. Gerard                |Mr. Keith Speed.          |
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Amendment No. 17 proposed, in page 1, line 25, at end insert:
 'and (c) the amount by which the rent or rent and rates (as the case may be) paid or payable for the accommodation of the said family exceeds £3 per week, so however that such amount shall not exceed £2 or such higher amount as in the circumstances

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|Allaun, Frank (Salford, E.)        |Hardy, Peter                          |Orme, Stanley                        |
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|Archer, Peter (Rowley Regis)       |Harrison, Walter (Wakefield)          |Oswald, Thomas                       |
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|Armstrong, Ernest                  |Heffer, Eric S.                       |Padley, Walter                       |
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|Ashton, Jos                        |Horam, John                           |Palmer, Arthur                       |
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|Atkinson, Norman                   |Hughes, Robert (Aberdeen, N.)         |Pardoe, John                         |
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|Barnes, Michael                    |Hughes, Roy (Newport)                 |Pavitt, Laurence                     |
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|Barnett, Joel                      |Hunter, Adam                          |Pendry, Tom                          |
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|Baxter, William                    |Jenkins, Hugh (Putney)                |Pentland, Norman                     |
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|Beaney, Alan                       |John, Brynmor                         |Perry, Ernest G. (Battersea, S.)     |
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|Bennett, James (Glasgow, Bridgeton)|Johnson, James (K'ston-on-Hull, W.)   |Prescott, John                       |
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|Booth, Albert                      |Johnson, Walter (Derby, S.)           |Rees, Merlyn (Leeds, S.)             |
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|Brown, Bob (N'c'tle-upon-Tyne, W.) |Jones, Barry (Flint, E.)              |Rhodes, Geoffrey                     |
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|Buchan, Norman                     |Jones, T. Alec (Rhondda, W.)          |Roberts, Rt. Hn. Goronwy (Caernarvon)|
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|Carmichael, Neil                   |Kaufman, Gerald                       |Roderick, Caerwyn E.                 |
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|Clark, David (Colne Valley)        |Kerr, Russell                         |Roper, John                          |
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|Cocks, Michael (Bristol, S.)       |Kinnock, Neil                         |Ross, Rt. Hn. William (Kilmarnock)   |
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|Cohen, Stanley                     |Lambie, David                         |Sheldon, Robert (Ashton-under-Lyne)  |
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|Concannon, J. D.                   |Lawson, George                        |Silkin, Hn. S. C. (Dulwich)          |
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|Cunningham, C. (Islington, S. W.)  |Leadbitter, Ted                       |Sillars, James                       |
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|Dalyell, Tam                       |Lestor, Miss Joan                     |Skinner, Dennis                      |
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|Davies, G. Elfed (Rhondda, E.)     |Lomas, Kenneth                        |Spearing, Nigel                      |
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|Davies, Ifor (Gower)               |Loughlin, Charles                     |Spriggs, Leslie                      |
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|Deakins, Eric                      |Lyons, Edward (Bradford, E.)          |Stallard, A. W.                      |
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|Dempsey, James                     |McBride, Neil                         |Stoddart, David (Swindon)            |
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|Douglas, Dick                      |McCann, John                          |Strang, Gavin                        |
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|Duffy, A. E. P.                    |McCartney, Hugh                       |Taverne, Dick                        |
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|Eadie, Alex                        |McElhone, Frank                       |Thomas, Jeffrey (Abertillery)        |
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|Edwards, Robert (Bilston)          |McGuire, Michael                      |Thomson, Rt. Hn. George (Dundee, E.) |
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|Edwards, William (Merioneth)       |Mackenzie, Gregor                     |Torney, Tom                          |
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|Ellis, Tom                         |McMillan, Tom (Glasgow, C.)           |Tuck, Raphael                        |
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|English, Michael                   |McNamara, J. Kevin                    |Urwin, T. W.                         |
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|Evans, Fred                        |Mallalieu, J. P. W. (Huddersfield, E.)|Varley, Eric G.                      |
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|Fisher, Mrs. Doris (B'ham, L'wood) |Mason, Rt. Hn. Roy                    |Walker, Harold (Doncaster)           |
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|Fitch, Alan (Wigan)                |Meacher, Michael                      |Watkins, David                       |
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|Fletcher, Ted (Darlington)         |McIlish, Rt. Hn. Robert               |Wellbeloved, James                   |
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|Ford, Ben                          |Mikardo, Ian                          |White, James (Glasgow, Pollok)       |
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|Fraser, John (Norwood)             |Morgan, Elystan (Cardiganshire)       |Whitehead, Phillip                   |
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|Golding, John                      |Morris, Alfred (Wythenshawe)          |Williams, Mrs. Shirley (Hitchin)     |
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|Grant, George (Morpeth)            |Morris, Charles R. (Openshaw)         |Wilson, Alexander (Hamilton)         |
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|Grant, John D. (Islington, E.)     |Moyle, Roland                         |                                     |
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|Griffiths, Eddie (Brightside)      |Murray, Ronald King                   |TELLERS FOR THE AYES:                |
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|Hamilton, James (Bothwell)         |O'Halloran, Michael                   |Mr. Joseph Harper and                |
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|Hamling, William                   |O'Malley, Brian                       |Mr. Kenneth Marks.                   |
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|Hannan, William (G'gow, Maryhill)  |                                      |                                     |
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 --------------------------------------------------------------------------------------------------
|Adley, Robert                  |Bennett, Dr. Reginald (Gosport)|Boardman, Tom (Leicester, S. W.)|
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|Alison, Michael (Barkston Ash) |Benyon, W. R.                  |Boscawen, Hn. R. T.             |
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|Atkins, Humphrey               |Biffen, John                   |Bossom, Sir Clive               |
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|Baker, W. H. K. (Banff)        |Biggs-Davison, John            |Boyd-Carpenter, Rt. Hn. John    |
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|Bennett, Sir Frederic (Torquay)|Blaker, Peter                  |Bray, Ronald                    |
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of the case may be approved by the Supplementary Benefits Commission'.—[ Mrs. Shirley Williams.]

Question put. That the Amendment be made:—

The Committee divided: Ayes 126, Noes 162.

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|Brewis, John                       |Holland, Philip                         |Oppenheim, Mrs. Sally               |
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|Brown, Sir Edward (Bath)           |Holt, Miss Mary                         |Osborn, John                        |
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|Buchanan-Smith, Alick              |Hornsby-Smith, Rt. Hn. Dame P.          |Owen, Idris (Stockport, N.)         |
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|Butler, Adam (Bosworth)            |Howell, David (Guildford)               |Page Graham (Crosby)                |
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|Chapman, Sydney                    |Howell, Ralph (Norfolk, N.)             |Pink, R. Bonner                     |
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|Chataway, Rt. Hn. Christopher      |Hutchison, Michael Clark                |Pounder, Rafton                     |
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|Churchill, W. S.                   |James, David                            |Powell, Rt. Hn. J. Enoch            |
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|Clarke, Kenneth (Rushcliffe)       |Jenkin, Patrick (Woodford)              |Pym, Rt. Hn. Francis                |
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|Clegg, Walter                      |Jessel, Toby                            |Redmond, Robert                     |
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|Cockeram, Eric                     |Jopling, Michael                        |Reed, Laurance (Bolton, E.)         |
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|Cooke, Robert                      |Joseph, Rt. Hn. Sir Keith               |Rees, Peter (Dover)                 |
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|Coombs, Derek                      |Kellett, Mrs. Elaine                    |Rees-Davies, W. R.                  |
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|Cooper, A. E.                      |Kershaw, Anthony                        |Rossi, Hugh (Hornsey)               |
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|Cormack, Patrick                   |Kilfedder, James A.                     |Rost, Peter                         |
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|Critchley, Julian                  |King, Evelyn (Dorset, S.)               |Scott, Nicholas                     |
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|Crouch, David                      |King, Tom (Bridgwater)                  |Sharples, Richard                   |
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|Curran, Charles                    |Kinsey, Joseph                          |Shaw, Michael (Sc'b'gh & Whitby)|
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|d'Avigdor-Goldsmid, Maj.-Gen. Jack |Knox, David                             |Shelton, William J. (Clapham)       |
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|Dean, Paul                         |Lane, David                             |Simeons, Charles                    |
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|Deedes, Rt. Hn. W. F.              |Legge-Bourke, Sir Harry                 |Soref, Harold                       |
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|Drayson, G. B.                     |Le Marchant, Spencer                    |Spence, John                        |
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|Elliot, Capt. Walter (Carshalton)  |Loveridge, John                         |Sproat, Iain                        |
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|Elliott, R. W. (N'c'le-u-Tyne, N.) |MacArthur, Ian                          |Stanbrook, Ivor                     |
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|Eyre, Reginald                     |McLaren, Martin                         |Stewart-Smith, D. G.                |
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|Farr, John                         |Macmillan, Maurice (Farnham)            |Stoddart-Scott, Col. Sir Malcolm    |
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|Fenner, Mrs. Peggy                 |McNair-Wilson, Michael (W'th'st'w, E)   |Stokes, John                        |
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|Fisher, Nigel (Surbiton)           |McNair-Wilson, Patrick (N. Forest)      |Sutcliffe, John                     |
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|Fookes, Miss Janet                 |Maddan, Martin                          |Taylor, Frank (Moss Side)           |
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|Fowler, P. N.                      |Madel, David                            |Tebbit, Norman                      |
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|Fox, J. Marcus                     |Mawby, Ray                              |Thatcher, Rt. Hn. Mrs. Margaret     |
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|Fry, Peter                         |Maxwell-Hyslop, R. J.                   |Thomas, John Stradling (Monmouth)   |
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|Gibson-Watt, David                 |Meyer, Sir Anthony                      |Thompson, Sir Richard (Croydon, S.) |
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|Gilmour, Sir John (Fife, E.)       |Mills, Peter (Torrington)               |Tugendhat, Christopher              |
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|Glyn, Dr. Alan                     |Miscampbell, Norman                     |Turton, Rt. Hn. R. H.               |
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|Goodhew, Victor                    |Mitchell, David (Basingstoke)           |Vaughan, Dr. G. F. Gerard           |
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|Gorst, John                        |Mitcholl, Lt.-Col. Colin (Aber'sh'e, W.)|Waddington, David                   |
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|Gower, Raymond                     |Moate, Roger                            |Walder, David (Clitheroe)           |
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|Grant, Anthony (Harrow, C.)        |Molyneaux, James                        |Wall, Patrick                       |
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|Gray, Hamish                       |Money, Ernle                            |Ward, Dame Irene                    |
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|Green, Alan                        |Monks, Mrs. Connie                      |Warren, K.                          |
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|Griffiths, Eldon (Bury St. Edmunds)|Monro, Hector                           |Weatherill, Bernard                 |
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|Gummer, Selwyn                     |Montgomery, Fergus                      |White, Roger (Gravesend)            |
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|Hall, John (Wycombe)               |More, Jasper                            |Wiggin, Jerry                       |
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|Hall-Davis, A. G. F.               |Morgan, Geraint (Denbigh)               |Wilkinson, John                     |
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|Hannam, John (Exeter)              |Morrison, Charles (Devizes)             |Wolrige-Gordon, Patrick             |
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|Harrison, Col. Sir Harwood (Eye)   |Mudd, David                             |Woodhouse, Hn. Christopher          |
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|Haselhurst, Alan                   |Murton, Oscar                           |                                    |
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|Hawkins, Paul                      |Nabarro, Sir Gerald                     |TELLERS FOR THE NOES:               |
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|Hayhoe, Barney                     |Neave, Airey                            |Mr. Tim Fortescue and               |
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|Hicks, Robert                      |Normanton, Tom                          |Mr. Keith Speed.                    |
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|Hill, James (Southampton, Test)    |                                        |                                    |
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Sir K. Joseph
I beg to move, That the Chairman do report Progress and ask leave to sit again. We have had a useful four hours on the Bill and, although we have not got quite as far through it as I had hoped, we have dealt with the meat of two of the main Clauses. The Opposition have given strong evidence of having done their homework; they have been defeated a couple of times but have had one Amendment accepted by the Government. We have had a useful exchange of views on the Bill, and the Government have undertaken to look at several points which have been raised. If the Motion is accepted, I hope that we shall make even better progress tomorrow.

Question put and agreed to.

Committee report Progress; to sit again Tomorrow.

Abattoir, Manchester

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

11.25 p.m.

Mr. Charles R. Morris  (Manchester, Openshaw)
I am grateful to have the opportunity to raise tonight an issue which is giving rise to concern, even to alarm, among responsible civic leaders and citizens in the City of Manchester. It is perhaps tragic that within the short space of four years since 1966 when the new abattoir was built—I should explain that the abattoir is in my constituency of Openshaw—it should be lying like an albatross around the shoulders of Manchester's ratepayers. The full extent of the financial burden carried by the ratepayers in the City of Manchester  can be seen by examining the latest figures of capital outlay for the building of the abattoir, which was £4,160,000, and the present estimated deficit for the current year of £418,000. Disregarding the figure for capital outlay, it means that the Manchester abattoir is at present costing the ratepayers more than £1,000 per day. As for the capital outlay, one need not exercise one's imagination to realise just how much more could have been done with £4,160,000 to improve community life in the City of Manchester had they decided not to build an abattoir. Following his meeting on 2nd September with representatives of the Manchester City Council and the National Association of British Market Authorities, the Minister will be aware of just how critically Manchester's distinguished Director of Markets and the Chairman of the Manchester Corporation Markets Committee view their present plight. But it will help my presentation of the case if we first look, briefly perhaps, at some of the factors which influenced the Manchester Corporation's decision to go ahead with the building of the new abattoir and highlight the development of policies which in effect have inhibited the Manchester Markets Department in realising the throughput and financial returns on which their original plans were based. As the Parliamentary Secretary is aware, the abattoir was built to replace the Water Street Meat Market and Slaughterhouse which had been in existence since 1872. I should perhaps emphasise that there was no legal obligation on the Manchester Corporation to build the new abattoir—no obligation whatsoever; it was simply a desire to improve the slaughtering facilities and the standard of hygiene in the city's existing abattoir. The new abattoir was built in the belief that it would meet the slaughtering and meat processing needs for a sub-region covering an area of some 20 to 30 miles radius of the city. It was built with the full knowledge and approval and the positive encouragement of the Ministry of Agriculture. How well Manchester built can be gauged by the fact that it is the largest and most technologically advanced abattoir in Europe. It is the only abattoir  in this country of the standard required by the United States authorities for the export of meat to that country and one of the few abattoirs approved for the export of meat to the Common Market countries. What Manchester Corporation and the City Council did not know when they sought to provide an abattoir for the subregion of Manchester and its environs was that the same Ministry which had encouraged them to meet this need would continue to approve the establishment of new private slaughterhouses or material extensions to existing slaughterhouses. Nor were they aware that the agreement entered into with the then Government of Eire would in practice prove to be an incentive for the Irish producer to export meat to this country in carcase rather than on the hoof. The consequences of these policies pursued by the Ministry have produced a situation whereby Manchester's envisaged throughput capacity of 225,000 cattle units slumped in the year ending March, 1970, to only 95,000 cattle units, with a hoped-for slight improvement to 105,000 cattle units for the current year. That gives an indication of the extent of the under-used capacity available at the Manchester abattoir. It is time that the Ministry called a halt to the creation of additional private slaughtering capacity, at a time when there is so much under-used capacity in abattoirs such as ours in Manchester. I know that the Parliamentary Secretary realises that this problem is not peculiar to Manchester, and that Cardiff, Glasgow, Sheffield, Blackburn, Bradford, Newcastle-on-Tyne and many other cities are or will be similarly affected.

Mr. Alfred Morris  (Manchester, Wythenshawe)
My hon. Friend the Member for Manchester, Openshaw (Mr. Charles Morris) is far too modest. He referred to the fact that the abattoir is in his constituency in Manchester, but I hope that he will agree that it is necessary to emphasise that this is very much a national problem as well as a problem which seriously affects the City of Manchester.

Mr. Charles R. Morris
I am grateful for that intervention. I assure the Parliamentary Secretary that he is not the victim of a family conspiracy. I express the hope that the Parliamentary Secretary will say that the Government will not remain deaf to the pleas of the ratepayers in the cities to which I referred or to those who have made submissions on behalf of the National Association of British Market Authorities. I emphasise that they do not seek to be baled out indefinitely but ask that the financial load that they are being obliged to carry in providing for the needs of their communities should be shared by the Government at least over a period of three to five years to ease them through the critical situation that they now face as a result of policies for which they are in no way responsible. I invite the Minister to come to Manchester to see for himself the problem that exists. Will he undertake to look urgently at the question of a short-term subsidy for municipal abattoirs? I should like to impress upon the Minister that local authorities, such as Manchester, have reached crisis point concerning the financing of abattoir facilities. Our deficits are now out of all proportion to funds which can reasonably be made available to meet them, and they are escalating yearly. Action is imperative. The Government can go on ignoring this problem. The alternatives facing authorities, such as Manchester, regarding the continuance of abattoir facilities will be extremely grave not only for the corporations and city councils but for the communities which they serve. Manchester could continue to operate the abattoir as at present in the hope of ultimate improvements; it could curtail the services at the abattoir; it could close the abattoir and leave the traders to make other arrangements. Finally, it could let the abattoir to the traders at a nominal rent. Regardless of these available alternatives, I want to conclude by impressing upon the Minister the magnitude of the financial problem facing Manchester and other marketing authorities in the provision of abattoir facilities. I hope that the Minister will give this problem his close and serious attention.

11.37 p.m.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Anthony Stodart)
I thought  that the hon. Member for Manchester, Openshaw (Mr. Charles R. Morris) made the under-statement of the evening when he described his hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) as his hon. Friend. I think that he is, in fact, something closer to him. I am glad to see both hon. Gentlemen here this evening. I hope that they will accept my sincerity when I thank the hon. Member for Manchester, Openshaw for raising a subject which I agree is not a local but a national issue and which was presented generally to me with what I thought, and said at the time, was outstanding competence by a delegation which came to see me some weeks ago. Moreover, the hon. Gentleman will realise that he is raising this subject at an inconvenient hour. Those of us who attend Adjournment debates are quite sensitive about this point. I welcome the opportunity of reminding hon. Gentlemen opposite and the House of the background to this problem. The hon. Member for Manchester, Openshaw said—and I agree, because in this he is factually entirely accurate—that Manchester has run a public slaughterhouse for a very long time now; and before 1950 it became clear that the old premises at Water Street no longer met the needs of modern times. Therefore, plans went forward for a new abattoir, wholesale meat market and cold store, but building work did not start until 1961. When the corporation decided to go ahead it knew—let us be fair about this—of the change of policy which had been announced by the Government in a Paper in 1956. This made it clear that the policy of moderate concentration of slaughtering facilities by central planning, which had until then been the accepted aim, was to be dropped. Instead, the idea was that after a limited period, during which traders were to be free to provide slaughterhouses to suit the needs of their individual businesses, there should be a measure of control through the licensing of future undertakings. The Ministry did not encourage the Manchester authorities to concentrate slaughtering for this huge area in one centre. It is true—I accept this at once—that we were asked for some technical  advice, but we were not consulted upon the size of the project before the general scheme was accepted. It is important that I should make it clear that the Minister has no direct control over the provision of slaughterhouses by local authorities. Manchester decided to promote a Private Bill and the subsequent Act in 1954 made it possible for it to build a new slaughterhouse, meat market and cold store to replace its old premises, and to borrow £2·5 million for it. As I have said, building did not start for a number of years, not until 1961, and as a result of rising expenses and some misfortune the Corporation was ultimately faced with a cost of £4 million. The slaughterhouse now provides facilities sufficient to cope with the needs of 1¾ million people—the whole of the Manchester conurbation. Certainly it was recognised as being one of the best-designed and equipped slaughterhouses of its time and it still is the largest and one of the finest in the country. Of that there is no doubt.

Mr. Alfred Morris
Is it not the case that Manchester built this abbatoir at least with the expectation, if not the explicit understanding, that it would serve a much wider area than the City of Manchester? Is it not the case that instead of an abbatoir we now have an albatross?

Mr. Stodart
I will come to that point later. From the beginning it has been under-used and losses have piled up. There are some who claim that these losses have been due to Government policy. The hon. Member made some references to Irish cattle. With the greatest respect, indeed affection, for both hon. Gentleman opposite, I must remind them that the Anglo-Irish Free Trade Area Agreement was not introduced by this side of the House but by their side when in government. The responsibility for this agreement and for the side agreement on store animals and carcase meat rests firmly with the hon. Gentleman and his right hon. Friends. At the time that the agreement was signed, as the hon. Member for Manchester,  Wythenshawe, who has always taken a keen interest in agriculture, may recall, I took the view that the Government of the Irish Republic had in their ranks some very successful negotiators. That is my tactful way of saying what I have said today about the Irish Trade agreement. I do not think that this is something that can be piled on our heads. To put the losses and the use of the slaughterhouse in perspective, may I say that I understand that, even if the slaughterhouse were fully used, it would, at present rates, still run at a loss of not far short of £250,000 per year, instead of the £400,000 which the hon. Gentleman mentioned. By no stretch of imagination can Government policy be blamed for this. I can well believe that, had the final cost of £4 million been foreseen by the Manchester Corporation, there might have been considerable modification of the scheme before it ever started. I am not blaming Manchester for the rise in costs: I am merely stating the facts. There is no absolute duty upon any local authority to provide slaughtering facilities: they must do so only so far as they consider these to be necessary and expedient, and in fact only about 120 out of the 900 local authorities where meat is produced have public slaughterhouses. As a rule, local authorities seek the advice of the Ministry on projects of this kind and our officers have always tended to be cautious and to urge a very careful study of the economics of any scheme of this kind.

Mr. Charles R. Morris
Did they do so in this case?

Mr. Stodart
I am in no doubt that they did. The hon. Gentleman said that they encouraged this scheme. My information is that they did not encourage it: they were asked for their advice and they gave it. We know very well how easy it is in this field to be led astray by over-optimistic forecasts. The chief complaint against the Ministry's policy is that, in approving the issue of licences by local authorities for new or enlarged premises over the past 10 years, we have not taken enough account of the need to protect  Manchester and other authorities who have spent money on modern slaughterhouses. The Slaughterhouses Act 1958 allows the Minister to approve such a licence only where it is necessary "for the purpose of securing adequate slaughterhouse facilities or expedient for special reasons". These are the words of the Act. Before approving, the Minister must consult all local authorities he thinks may be affected. This has always been done. I want to turn to a point of some importance—the radius from which slaughterhouses draw. We consult all local authorities within at least 20 miles of any proposed development and we always take their views into account, although we could never accept that the protection of local authority investment must be the over-riding consideration.

Mr. Charles R. Morris
Is it not a fact that Manchester's objections to 15 applications have been dismissed by officials in your Department?

Mr. Speaker
Order. It is the hon. Gentleman's Department.

Mr. Stodart
I should hate to think that you have to carry the responsibility for the administration of my Department, Mr. Speaker. Since 1961 there have been 41 applications for licences within 30 miles of Manchester. Of these, 12 were refused, and only one will result in the building of a completely new slaughterhouse. The other licences issued were, in the main, for enlarging existing premises to meet the particular needs of a developing business. They often had desirable features which were very difficult to ignore, because the improvements would lead to more hygienic conditions. They were there already, but they sought to improve them, and what they sought to do would lead to these better and more hygienic conditions. There have been great developments in hygienic slaughtering and dressing techniques in the last 20 years. The pattern of slaughtering has changed so much that with modern and refrigerated transport it is becoming increasingly the  practice, both here and abroad, to slaughter near to where the meat is produced, rather than near to where it is eaten. I find this process practicable and sensible because, from my own experience, I know that the loss of weight that can take place in a live animal between the farm and the slaughterhouse is considerable. Therefore, an animal that travels only 15 miles will, generally speaking, be more economically handled than one that travels 50 miles. There is also the trend towards the wholesale preparation of cuts that is always going on. Therefore I think it right that organisations, whether they are private firms or public authorities, should not be prevented from taking account and advantage of all this. It is being said that it is unrealistic nowadays for us to consult only those local authorities within 20 miles and that we should consider the effect on public slaughterhouses up to 50 miles from any proposed development. This means that we are seeking, in effect, a return to the policy of concentration. That policy was firmly rejected when the 1958 Act was passed, and there is no better case for it now. I repeat, however, that we do not lose sight of the need to consider local authority investment. Over the last five year only ten applications have been approved in the whole of England and Wales—this is turning to the national picture—for completely new undertakings, and I am sorry to say—and I freely admit this—that Manchester is not alone in making a loss on its slaughterhouse. As both hon. Gentlemen have referred to this, I should tell them that recently I met a deputation from a number of authorities. They put their case forcefully to me and made many of the points which both hon. Friends opposite have made tonight. I promised that the question of slaughterhouse policy would be examined, and we are studying it now. As tonight's debate has shown, I believe that the problem is not simple and that we need a little time to consider it. We are treating it as a matter of urgency, and we shall deal with it as quickly as we can. I said to the delegation, and I repeat it to the two hon. Gentlemen, that there is nothing I should like more than to  visit Manchester, a city for which I have a profound love as a friend of the late John Barbirolli, the leader of the Halle Orchestra. If I could combine a visit to the City with hearing the Halle Orchestra, I should be a very happy man indeed.

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

Adjourned at five minutes to Twelve o'clock.