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Commons Chamber

Volume 643: debated on Monday 3 July 1961

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House Of Commons

Monday, 3rd July, 1961

The House met at half-past Two o'clock

Prayers

[Mr. SPEAKER in the Chair]

Private Business

Sutton Coldfield Corporation Bill Lords

As amended, considered; to be read the Third time.

Oral Answers To Questions

Agriculture, Fisheries And Food

Co-Operatives

1.

asked the Minister of Agriculture, Fisheries and Food what further proposals he has in order to encourage co-operation between competent farmers in order to promote greater efficiency.

The responsibility for promoting cooperatives falls primarily on the Agricultural Central Co-operative Association and the Welsh Agricultural Organisation Society, which are grant-aided. The Government subsidise, for example, certain expenditures by horticultural marketing co-operatives and farmers' machinery syndicates. The agricultural co-operative movement continues to expand and I have no further proposals in mind at the moment.

I congratulate the Minister on the steps he has taken this year to encourage co-operation. Would not he agree that the trend of incomes on the smaller acreage farms is a matter for concern? Would he consider further practical action which he must take to foster co-operation, thereby encouraging efficiency, and so reverse this trend?

I am sure there is a great future for increased co-operation and that there is a lot more yet to come. The fact is that over the last ten years the turnover of agricultural co-operative societies has increased from what was about £60 million a year to over £200 million a year, which is a more than threefold increase in ten years. That is a satisfactory improvement, but I repeat that there is certainly scope for more co-operation, particularly among small farmers.

Will the Minister confirm or deny his hon. Friend's statement regarding declining incomes on small farms? That is the crux of the question.

In 1959 there were declining incomes, particularly in the West Country which, I think, is what was being referred to by my hon. Friend. That was due to weather conditions and other adverse factors. But the net agriculture income did rise, as the hon. Gentleman knows, and there has been a £14 million-plus award this year.

Subsidised Imports

2.

asked the Minister of Agriculture, Fisheries and Food what consultations he is having with the President of the Board of Trade regarding trading agreements which allow large quantities of food to be imported at prices below the cost of production.

I keep in close touch with my right hon. Friend about all trade agreements affecting food and agricultural products. My right hon. Friend has powers under the Customs Duties (Dumping and Subsidies) Act, 1957, to take action against dumped or subsidised imports which are causing or threatening material injury to producers and when it is in the national interest to do so.

Is my right hon. Friend satisfied that the 1957 Customs Duties (Dumping and Subsidies) Act is working properly? Is he aware that this year we have had barley, eggs and dairy products dumped in this country? Will he consult his right hon. Friend the President of the Board of Trade again to see whether the existing legislation is strong enough to stand up to the dumping which is now going on and, if not, whether there should be fresh legislation to deal with it?

This is a major question to which a number of hon. Members referred and to which I also referred at some length during a recent debate on agriculture. Then these three products were considered. As my hon. Friend knows, there are applications before my right hon. Friend the President of the Board of Trade for the imposition of anti-dumping legislation in respect of barley and dairy products. There is another Question on the Order Paper relating to eggs.

Does the Minister recall what has been mentioned before on several occasions, that the last time the Milk Marketing Board made an application, it was considered for five months before a decision was made? Surely there will be an effort to speed up things.

The present application has certainly not been before my right hon. Friend for months. I do not know the number of days, but it is not a month.

In order to preserve the spirit of the 1947 Act, does not my right hon. Friend realise the need for speedy action to prevent Exchequer grants from becoming too high?

Yes, Sir, I quite agree that it is essential that we should be enabled to act fairly speedily. The major question for my right hon. Friend the President of the Board of Trade is that of barley, which, if I remember rightly, has been under consideration for about a fortnight. Many consultations have to take place with overseas countries, but my right hon. Friend is anxious to make an announcement as soon as possible.

Agriculture Act, 1957 (Amalgamation Schemes)

3.

asked the Minister of Agriculture, Fisheries and Food how many grants have been made, and what is the total cost of consolidation schemes, under the Agriculture Act, 1957.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food
(Mr. W. M. F. Vane)

Twelve amalgamation schemes have been formally approved at an estimated total cost in grant of £500; some £400 has been paid to date. Seventy-six further schemes which have been approved in principle carry a potential grant liability of several thousand pounds.

While welcoming the second part of my hon. Friend's answer, may I ask him if he could give more publicity to the matter of consolidation grants? Here is one matter in which we can help to make ourselves more efficient, and we hope that more farmers take advantage of it, thus enabling them to compete much better, perhaps, than at the moment.

I hardly think that publicity will make a great deal of difference here. Social and economic forces are resulting in consolidation, where it is desirable, and that has been happening for a long time. I certainly do not think that we should try to force anybody out of his home.

Butter

4.

asked the Minister of Agriculture, Fisheries and Food if he is aware that some dairies are applying the words Including Imported Butter to a product which contains no home-produced butter; and if he will take steps to stop this practice.

11.

asked the Minister of Agriculture, Fisheries and Food whether he is aware that foreign and Commonwealth-produced butter is being labelled with the words Home Produced in retail shops in the United Kingdom; and if he will take steps to stop this practice.

Under the terms of the relevant marking order the phrase "Including Imported Butter" is one of the permissible descriptions for blends and mixtures of butter which consist of or contain imported butter. An Amendment to the Order can only be made after an inquiry by the appropriate Standing Committee under the Merchandise Marks Act, 1926. A question can only be referred to the Committee after an application has been received which substantially represents one of the interests involved. No such application has been received. I have received no report that foreign and Commonwealth produced butter is at present being labelled with the words "home produced". If my hon. Friend will send me details of specific cases I will gladly look into them.

Is my right hon. Friend aware that this practice is going on at the moment, and that butter from the Commonwealth is being mixed with foreign butter and sold with a "Home Produced" label on it? I will certainly send him the details if he wishes.

Chickens And Calves (Intensive Breeding)

5 and 6.

asked the Minister of Agriculture, Fisheries and Food (1) whether he has considered the further evidence, submitted to him by the hon. Member for Oldham, West, of unnecessary cruelty used in the fattening of broiler chickens for table purposes; and what action he proposes to take;

(2) whether he has now considered all recent evidence, submitted to him by the hon. Member for Oldham, West, of unnecessary cruelty in the fattening and slaughter of young calves for table purposes; and what action he proposes to take;

The papers which the hon. Gentleman has sent me contained no facts of which I was not previously aware, and I do not consider that they call for any action on my part. It is, of course, for the courts to decide under the Protection of Animals Act, 1911, whether unnecessary suffering has been caused to any animals.

Whose business is it in this House to protect animals from cruelty? Does the right hon. Gentleman regard himself as only here to protect the farmers? Is he aware that I myself have seen the intensive rearing of chickens in admirable conditions, probably better than those outside? Is he also aware that the papers I sent to him have been supported by journalistic comments from reputable sources, which call attention to the increasing practice and the widespread cruelty? Whose business does he say it is to enforce the Protection of Animals Act, 1911? Does he not regard the Minister of Agriculture, Fisheries and Food as the person responsible for seeing that Statutes relating to animals are carried into force?

As the hon. Gentleman has said, he himself has seen animals kept in perfectly good conditions under these circumstances, and I do not believe that, in the generality of cases, that is anything but the truth. There is no reason why they should be kept in conditions which are in any way cruel, but it is not for me to enforce the Act. It is for the courts to enforce it. If anybody wishes to take action in the matter, it is open to them to do so.

Is there not evidence, both from my right hon. Friend and from the hon. Member for Oldham, West (Mr. Hale), that one cannot be unhappy and fat, and might not this also apply to calves and poultry?

The right hon. Gentleman was not looking happy a moment ago. Will he not ask his inspectors to find out whether these allegations are correct, and are not the public entitled to be informed whether such practices are prevalent, whether they are widespread and whether the law is being enforced?

My Department is perfectly content that the systems used for the rearing of these birds and calves, to which the hon. Gentleman has referred, need not necessarily create cruelty to the calves concerned.

Meat

7.

asked the Minister of Agriculture, Fisheries and Food whether he will introduce regulations to ensure that all meat sold in retail shops is accurately marked as to quality according to the schedules of the Fatstock Marketing Corporation.

The Fatstock Marketing Corporation pays producers for fatstock by grade of carcase as do some other meat traders. The assessment of quality for retail cuts, however, depends very much on local preferences and for the government to impose nation-wide statutory regulations on quality marking in retail shops would create many difficulties.

While I appreciate the difficulties, is not the Joint Parliamentary Secretary aware of the reports from local weights and measures inspectors from many pparts of the country about the misleading labelling of meat in shops? Have there not been cases of imported meat being labelled as English, Argentine beef labelled as Scotch and Dutch pork labelled as English pork, and so on? Would he not agree that some kind of schedule is needed in order that this misleading labelling can be dealt with?

The burden of that question goes a long way from the question of grade in the original Question and is a separate issue, which I should have thought deserves investigation on its own merits. It is a fact that parts of animals do not necessarily reflect the quality of the whole animal which was of a particular grade when it was passed through the market. It does not mean that all the cuts off that animal are of the same grade when they reach the butcher's slab.

Milk Bread

8.

asked the Minister of Agriculture, Fisheries and Food whether, in drawing up regulations dealing with the sale of milk bread, he will ensure that no bread shall be able to be sold under the description of milk bread unless it contains pure milk.

I have noted the hon. Member's suggestion, but I am not at present in a position to make a statement.

Is the Minister aware that there is a good deal of interest in this matter, since the ice-cream nonsense and the mock milk business, and will he look at it again? If he cannot guarantee it to contain milk, will he guarantee it to contain bread?

As the hon. Gentleman knows, we have put out our suggestions, and there have been large numbers of comments, representative of all shades of opinion. I cannot say more than that I take the point raised by the hon. Gentleman.

Will the Minister say how much longer it will be before he makes up his mind about the bread problem, because in the meantime the public are being fobbed off with all kinds of soggy stuff?

This question specifically relates to milk bread, which, ever since before the war, has been made from skimmed milk, as opposed to whole milk. The question is one of labelling—of what the labels and the nomenclature should be on bread made from skimmed milk and that made from whole milk.

River Hull (Flooding)

9.

asked the Minister of Agriculture, Fisheries and Food what steps his Department and the Hull and East Yorkshire River Board will take to ensure that all wharves on the River Hull are brought up to, and maintained at, the statutory height; and whether he will ask the river board to issue a circular letter to all wharf owners stating the requirements for their wharves to prevent flooding from both overtopping and seepage.

The Hull Corporation has powers under its Act of 1925 to require owners to raise their wharves to the level specified in the Act, and I understand that at its meeting later this month it will be considering the service of notices. While the river board has general powers to prevent flooding, these do not include any specific power to require wharves to be built up to any given height.

Is the Joint Parliamentary Secretary aware that some of these deficient wharves have been neglected for twenty or more years? Is it not high time that the river board took the problem of the River Hull seriously and impressed on all wharf owners that the flooding has to be stopped now and for all time?

There is no evidence that the river board does not take this problem seriously, any more than the Hull City Corporation, which came to this House to get special legislation some years ago. As I have said, it is taking the consequences of the recent flooding very seriously and is carrying out a detailed survey. It is having a meeting some time later this month, and I do not think I can say any more on the present occasion.

10.

asked the Minister of Agriculture, Fisheries and Food if he will state the causes of the flooding on the east side of the River Hull, between Scott Street Bridge and North Bridge, at the last equinoctial high water spring tide, the number of wharves in this section of the river which have been surveyed and reported to the Hull and East Yorkshire River Board for flood alleviation works, and the number of notices which are to be served on owners in this section requiring them to raise their wharves above flood level.

Flooding in this section of the River Hull was due to overtopping of two wharves. The survey of this length of the river has been completed and the corporation is being recommended to serve notices on eight wharf owners.

Can the hon. Gentleman tell me how much longer the river board is going to deal with the River Hull by these antiquated "Noah's Ark" methods of sandbags which rot away and wooden coping which is torn away by hawsers? When will the river board insist on permanent flood prevention work, with concrete walls or sheet steel piling, and no more nonsense about it?

I do not know about this new "Noah's Ark", but I do know that the improvement work carried out by this river board is generally subject to a grant from this Department. Whatever the method used, we satisfy ourselves that it is the best possible for the intended purpose before we pass it for grant. Noah's Ark did save the human race.

Mundon Wash Drainage Scheme

12.

asked the Minister of Agriculture, Fisheries and Food how soon his Department will be in a position to approve the Mundon Wash drainage scheme; and when he anticipates that work will commence.

This is an expensive scheme. It requires not only considerable technical examination but close consideration as to the level of expenditure justifiable in improving the drainage and tidal protection of 2,350 acres of agricultural land. We are well ahead with our examination of the river board's proposals and we hope to come to a decision shortly.

Will my hon. Friend do everything possible to expedite that decision, because it is the effectiveness of the upland drainage which has made it almost impossible for these unfortunate people in Mundon Wash area to farm at all.

We appreciate the need for urgency, but, as I have said, this is not a very easy scheme.

Forestry

14.

asked the Minister of Agriculture Fisheries and Food why the acreage in England planted with trees by the Forestry Commission during 1960 was lower than any annual planting between 1953 and 1957.

The need for planting in England is much less urgent than in the upland areas of Scotland and Wales. But the area planted in England was adequate both in relation to employment needs and the amount of suitable land available which cannot be better used in agriculture.

Is it not more a matter of finance than of the amount of land available? Certainly in the Pennines areas there seems to be a lot of land available which is not suitable for farming but which would be suitable for forestry work.

I think that the hon. Member knows, by virtue of earlier talks which he has had with my Department, the difficulties of the extreme elevation and exposure in the areas to which he has referred. But it is not a question of finance. It was decided, and announced to the House some time ago, that we should have a programme of planting for 300,000 acres in Great Britain over the next ten years, and that is going forward according to plan.

15.

asked the Minister of Agriculture, Fisheries and Food what was the acreage of pit heaps and other derelict industrial land planted by the Forestry Commission, and for which the Forestry Commission paid a planting grant, respectively, during 1960.

Is it not rather deplorable? Would it not be more satisfactory if the Forestry Commission had a section devoted to this sort of work? I know that Lancashire and Durham local authorities do very well, but would it not be 'better if the Forestry Commission undertook some responsibility for this sort of thing?

The Forestry Commission is showing an increasing interest in this work, which is not without technical difficulties. But derelict and disused spoil heaps are primarily the responsibility of the owners of the land, although such authorities as the hon. Member mentioned have shown praiseworthy interest in the matter on amenity grounds.

Common Market

18.

asked the Minister of Agriculture, Fisheries and Food what representations he has received from organisations or individuals associated with agriculture and horticulture indicating their concern about the United Kingdom joining the Common Market; and if he will make a statement.

In the talks last year between the Agricultural Departments and the farmers' unions, the unions made it clear that they would not favour unconditional entry into the Common Market. I have since received letters from some organisations and private individuals. The unions are of course aware that, as I stated in the House on 12th June, it is the Government's policy that any decision to join or adhere to the Common Market must depend on satisfactory arrangements being made for our agriculture.

Were the majority of the representations against our going into the Common Market?

Certainly not. The vast majority of the letters which we have received in the Department were in the form of queries about the affect which any adherence to the Common Market might have on the production of this or that. Only a very small number of the letters which we have received came out firmly against our joining the Common Market.

Has the right hon. Gentleman conveyed to these organisations the information which he was kind enough to give me on 12th June in a written reply, namely, that the Government feel quite unable to produce a comparative study of the cost of production in the Six and in this country and that so far, therefore, they are totally without that information? Is he aware that the Economic Commission in Brussels has had that information for the last eighteen months? Will he study it if I send it to him?

In reply to the hon. Member I referred to the fact that studies of the cost of production—as opposed to profitability—are infinitely more detailed in this country than in the countries of the Six by virtue of the fact that we have an Annual Price Review and they do not.

Will my right hon. Friend tell the House what he means by the phrase "join the Common Market"? Does he mean become a full member of the European Community, or does he mean reaching some arrangement with the members of that community but not ourselves becoming a full member? The distinction is very important.

I meant that any decision to be associated in any way with the Common Market can be only on the basis of satisfactory arrangement being made for our agriculture.

In view of the Minister's statement that the majority of the letters which he received were inquiries for information, will he tell us what information he sent to the inquirers in order to enable them to judge what kind of safeguards would be satisfactory before we conditionally joined the Common Market? Does he realise that all that information has been refused to us on the ground that nobody knows it?

All I can say is that each letter was answered in the best way possible according to our lights.

Condemned Meat

19.

asked the Minister of Agriculture, Fisheries and Food what steps he has taken to ensure that the Meat Staining and Sterilising Regulations, 1960, are being properly carried out, in order that meat condemned as unsuitable for human consumption can be clearly noticed.

The Regulations are enforced by local authorities and I am confident that they are being properly carried out.

Is the Minister aware that meat is still going into the dog meat shops unrecognisable as having been condemned as unfit for human consumption? In view of that fact, it is not possible that meat of this sort is going into other factories for the purpose of being put into commodities for human consumption?

I do not think that that can happen because the controls are very strict. As for the consumption of pet food, all meat which is not stained has been sterilised, and although it might not be to our liking and taste, it is most unlikely that it would do any harm if by chance someone got some.

In view of the number of Questions today and recently concerning the quality of food in the shops, will the Minister consider having another look in the Department at the Regulations which are designed to protect the consumer?

The hon. Member knows through correspondence that we are continually considering amendments and improvements to these regulations. But this Question deals not with human food but with pet food.

Seed Dressings

20.

asked the Minister of Agriculture, Fisheries and Food what regulations he intends to introduce to control the use of toxic chemicals in seed dressings, following his recent meeting with bird preservation societies and other interested organisations.

21.

asked the Minister of Agriculture, Fisheries and Food what conclusions he has reached about the future use of toxic cereal seed dressings, following on the survey this spring into reported cases of deaths of birds.

The Report of the survey which we have been carrying out was discussed at a meeting on 29th June with all the interested organisations. The Report shows that the widespread occurrence of deaths has been confined to springtime and that the main trouble could be obviated by not using dressings containing dieldrin, aldrin and heptachlor for spring sowings. Accordingly, it has been agreed that from 1st January next, these dressings will not be used at all for spring sown grain, and they will only be used for dressing autumn and winter wheat where there is a real danger of attack from wheat bulb fly.

These arrangements will operate under the terms of the Notification of Pesticides Scheme, and will not involve regulations. It has also been agreed that my Department will continue its survey and that a further meeting will be held in June of next year to see how the arrangements have worked.

The Government accept these recommendations which have been agreed by all the organisations concerned. I would like to thank these organisations for all the help they have given us in handling this problem in a way I hope will resolve it. I am placing a copy of the survey Report in the Library.

While welcoming the agreement for a limited control of toxic chemicals in the spring of next year, may I ask whether the Minister appreciates that there will be considerable concern because the controls suggested are to be voluntary and apparently the controls for autumn-sown dressings are not to be enforced? In view of the importance of making sure that these controls work effectively, will he consider increasing the facilities and personnel of the Pest Infestation Control laboratories in order that they can observe what happens and make recommendations urgently, if necessary?

It has been our practice that in the first instance we try to deal with matters of this kind by voluntary agreement. This has worked exceedingly well in the past. An example is the use of arsenites for spraying potatoes, which are not now used. That was done voluntarily. All the information which we have received from this survey shows that the bulk of the deaths of birds occurs in the spring and not during the autumn. There is the problem of the wheat bulb fly which cannot be properly safeguarded against except by the use of these chemicals. We believe that these arrangements will work. If they do not work, we shall have to think again whether it will be necessary to bring in some statutory provisions, because we cannot have a continuation of the state of affairs which has existed this year. But I hope and believe that it will not be necessary to do so and that the arrangement will work. I was asked about the continuance of our survey. I believe that there is sufficient staff to continue this survey, but if there is any trouble in that respect I will look at it.

My right hon. Friend is always courteous and I do not intend to be discourteous to him, but is he not aware that all evidence so far shows that his Ministry has been woefully misinformed on the extent and gravity of the situation? Have not some of the manufacturers shown a callous disregard of the preservation of wild life? Will he look once more at the question whether these voluntary inspections and regulations work? Past history seems to show that they do not. Is he further aware that the Estimates Committee has reported to the House in very strong terms on the matter and will he carefully consider its recommendations?

Yes, Sir. I will carefully consider the Committee's recommendations. On the general issue whether these voluntary schemes have or have not worked, my information is that they have worked, and the arsenites are a very good example. My belief is that these arrangements, which have been agreed by all the parties concerned, including the representatives of the manufacturers, will work.

Government Information Services

Germany

23 and 24.

asked the Chancellor of the Duchy of Lancaster (1) if, in view of the present international controversy on the status of Berlin, he will now take steps immediately to restore the number of hours of broadcast time devoted by the Overseas Service of the British Broadcasting Corporation to the Eastern zone of Germany to their former level;

(2) if, in view of the increasing interest in and importance of the United Kingdom's relationship with the European Economic Community, he will ensure that Great Britain's case is fully understood in Western Germany by now restoring the number of broadcast hours from the British Broadcasting Corporation overseas service to the Federal Republic of Germany to their former level.

The B.B.C. broadcasts the same service to all parts of Germany. It lasts four hours a day, which would seem to be adequate.

In Germany itself it is not considered adequate by those studying the position in the Communist zone of that country. In view of the present Berlin crisis, does not my right hon. Friend feel that it is necessary to restore the service to the number of hours that were being broadcast some three years ago?

The number has been four hours for some three years. Before then it was rather more than four hours, and I think that six years ago it was five hours; but it is not only a matter of the length of time devoted to broadcasting. My impression is that four hours in four different bulletins a day is sufficient.

Will the right hon. Gentleman say why he has cut these broadcasts? Is not this another instance of the Government giving this overseas broadcasting a much lower priority than it deserves?

There has been no cut for the last three years, and for the years immediately prior to that it was only just over four hours a day.

Nuclear Disarmament Campaign

25.

asked the Chancellor of the Duchy of Lancaster what steps he is taking to publicise abroad the majority view of the British people regarding the campaign for nuclear disarmament.

The reasons for our defence policy, and the support that is given to it, are effectively made known by the Overseas Information Services.

Is there not a certain amount of information that the events at Holy Loch and the Aldermaston marches are being taken rather seriously by the politically unsophisticated in the United States of America? Is there not also a certain amount of evidence that the Peace Ballot in the 'thirties and the Oxford Union debate were also taken very seriously abroad, particularly by Nazi Germany? Will my right hon. Friend consult certain right hon. Gentlemen opposite about publicising in the United States the activities of the campaign for democratic Socialism?

I think there was a time when these campaigns were seen out of perspective in certain countries overseas. I think they are now seen in correct perspective, particularly since the speech of my right hon. and noble Friend the Foreign Secretary on 16th June.

Could my right hon. Friend say on what information he bases his statement that these things are now seen in proper perspective, because that is not the information which reaches me?

I have a steady supply of information from overseas, and I am giving my opinion based on that information.

Can the right hon. Gentleman say just how many people there are in this country who are in favour of this country using nuclear weapons first?

Not without notice. I should prefer first to take the collective view of the party opposite.

Africa And Asia

26.

asked the Chancellor of the Duchy of Lancaster what action he is taking to increase the power of British Broadcasting Corporation transmitters broadcasting to Africa and Asia.

A new and powerful transmitter in Africa is now relaying B.B.C. programmes. Two new transmitters have just come into operation in this country, and eight more are on order. We are now considering, with the B.B.C., plans for improving the reception of their programmes in Central Africa and in Asia.

Will the Minister say how this situation arose? For some time now the content of these broadcasts has been good, but the quality of transmission has been very bad. Is he aware that even now the American Government have ten times our transmitting facilities?

The hon. Member should not forget that there has been recently, and there is now, a steady improvement in the power of the transmission of these programmes, and secondly, that there has now come into operation the most powerful transmitter in the world in the form of Berbera, which is transmitting Arabic, General Overseas and Swahili programmes.

Common Market

27.

asked the Chancellor of the Duchy of Lancaster to what extent official information is being issued from the Central Office of Information setting out the advantages of the United Kingdom joining the Common Market.

Has the attention of the right hon. Gentleman been drawn to the large number of articles appearing in the provincial Press supporting joining the Common Market? Have they not been inspired by his Department?

Pensions And National Insurance

Blind Persons

28.

asked the Minister of Pensions and National Insurance what reply has been made to the letter addressed by the National League for the Blind to the Chairman of the National Assistance Board urging increases in payments to blind persons.

I assume that the hon. Member is referring to a letter addressed by the secretary of the National League of the Blind to the Secretary of the National Assistance Board on 3rd February. A reply explaining the position was sent on 24th February. I sent the hon. Member a copy of this on 14th June.

Whilst I appreciated that reply, does not the right hon. Gentleman think that in this affluent society it is desirable that we should do more to assist those whose position is worse, particularly the blind persons in our community who are today very often having a difficult time to make ends meet? Does he not regard the advances of only 3s. 6d. for a single person and 5s. for a married couple as utterly inadequate with the cost of living as it is today?

On the latter part of that question, I would invite the attention of the hon. Member to the fact that the scale rates of National Assistance are now, in terms of purchasing power, higher than ever before. On the subject matter of his Question, he will be aware of the fact that these special differential rates for the tuberculous and the blind have lost a great deal of their significance and importance in view of the very wide use in comparable cases of the discretionary powers bestowed by this House on the Board.

War Disabled Pensioners

29.

asked the Minister of Pensions and National Insurance if he will state the numbers of 1914–18 war pensioners who now receive awards of pension at 40 per cent, or more, and the numbers of such pensioners who have not yet attained the age of 65 years and, in consequence, do not receive the age allowance; and whether he will state the cost of granting the age allowance to the latter group who have suffered severe disabilities for 42 years or more.

About 96,000, of whom some 30,000 have not yet reached the age of 65. To give age allowances immediately to those aged below 65 would at present cost about £500,000 a year, on the assumption that similar provision was not made for similarly dis- abled men of the same age who suffered their disabilities in the 1939–45 war.

Is the Minister aware that, while disabled ex-Service men appreciate the splendid work he has done in the whole field of disability pensions, there are certain grievances still remaining? Having conceded five years ago the principle that limblessness becomes an increasing burden with advancing age, will he not turn again to the point of view always put to him by B.L.E.S.M.A., an all-party association, and consider stepping down the age at which he makes these allowances for limblessness available to ageing ex-Service men?

It is very much a matter of judgment where one places the point of qualification for this or for any other special allowance. I think we were right to put it at 65 when we made the decision some years ago and, since then, the only change of circumstances, as my main Answer indicated, has been that a very substantial proportion of the First World War men qualified are now of an age to draw the allowance.

31.

asked the Minister of Pensions and National Insurance if he will state the pension paid to an ex-private soldier of the 1914–18 war with a leg amputation more than five inches below the knee, and the pension paid to an ex-private of the 1939–45 war with an identical amputation; whether, in normal circumstances, these pensioners are fitted with identical artificial limbs; and what are the reasons for differences in compensation for identical disabilities sustained in the Service.

Forty-eight shillings and ninepence a week for the 1914–18 pensioner, and 39s. a week for the 1939–45 pensioner. The artificial limbs provided by my right hon. Friends the Health Ministers are built to meet the medical requirements of the individual and do not, of course, vary between casualties of the two wars as such.

The reason for the difference in pension is simply that when 40 per cent. was fixed in 1940 as the proper assessment in respect of the disability mentioned in the Question it was not thought right to reduce assessments which had provided entitlement to pension at a higher rate for some time. This was, in my view a wise and humane, though arguably illogical, decision.

Will my right hon. Friend continue to do anything in his power to mitigate such inferiority as there may still be in the position of the 1914–18 war pensioner in connection with the fitting of artificial limbs? Will my right hon. Friend accept that there is reason to believe that some of these cases may be having greater difficulty in the fitting of the appropriate limbs than we would wish?

Limb fitting is the responsibility of my right hon. Friends the Minister of Health and the Secretary of State for Scotland, but I will certainly see that my hon. Friend's suggestion is conveyed to them.

War Widows

30.

asked the Minister of Pensions and National Insurance if he will state the principal considerations applied by his Department in awarding war widows' pensions; and, in particular, what regard is given to the period of nursing care and attention given by a widow to a severely disabled pensioner under circumstances which may have precluded the pensioner and his widow from making provision for their future.

My Department has to apply the provisions of the Royal Warrants and other instruments relating to war widows pensions, the principal requirement being a causal connection between the husband's service and his death. Cases where a severely disabled pensioner has been under nursing care and attention are gone into very sympathetically and with particular care to discover, if possible, evidence of such a connection, and the benefit of any reasonable doubt is of course given to the widow.

Is not there a case for looking again at the Royal Warrant as it affects widows' pensions, especially in the case of the 100 per cent. disabled man? Is the Minister aware that the widow of such a man has usually cared for him for the whole of their life together? Since he recognises the principle of my suggestion in the comfort allowance which he gives for constant attendance upon the 100 per cent. disabled man, will he not consider that, whatever may be the cause of death of such a man, his wife has a right to be considered eligible for a pension in view of the service she will have rendered during the whole of her married life in looking after her husband and the fact that she will have had no time to make any provision for her widowhood?

In the war service instruments it would be a very serious thing to break the connection between the war pension and war service. As the hon. Member knows, it is not a question of leaving such a widow without any help. The question at issue is whether a widow whose husband has died in circumstances entirely unconnected with his service should be given the priority and the preferential treatment which this House has always insisted on for war pensioners. To break that causal connection might seriously undermine that preference.

32.

asked the Minister of Pensions and National Insurance if he will state the numbers of 1914–18 war pensioners who died during the last twelve months, the numbers of their widows who applied for or who were invited to apply for war widow's pensions, and the number of such applications granted.

During the twelve months ended 31st March, 1961, the number of 1914–18 war disablement pensioners who died was 12,763, of whom 7,728 left widows. I regret that I have no figures of claims to, or invitations to claim, war widows' pension relating precisely to these deaths, but in the same period 1,983 widows of 1914–18 war disablement pensioners claimed, and 596 were awarded, a war widows' pension.

Does not the Minister agree that the number of cases in which the award has been made forms a very small proportion of the total, and that these matters ought to be more publicised and more fully investigated?

I do not think that it is a small proportion when we remember that we are talking of people who, at the least, have up to their deaths lived for about forty-three years after suffering their injury. In those circumstances, it is in the nature of things likely that in a good many cases death will come from a non-war cause, and I do not find the figures surprising.

Will the Minister go into this matter and let us have a more detailed report of the proportion in relation to the total number who died?

I will answer any Question the hon. Member puts down. I keep a very close eye on this situation, on which there is understandable feeling in many quarters, but, in reply to the hon. Member's question, I cannot do more than say that I will answer any further one.

33.

asked the Minister of Pensions and National Insurance, in view of the widespread dissatisfaction with the present pension provision for war widows, despite the increase which came into effect last April, in relation to present-day standards, what proposals he has for giving further assistance to war widows and, in particular, for eliminating the hardships which a widow suffers immediately following the death of a seriously disabled husband.

My information is that the new rates introduced in April have been very well received. They are, of course, the highest ever provided. The increase of the basic rate to 76s. a week for widows of private soldiers and equivalent ranks has raised them further above the level of widows' pensions provided under the social service schemes generally, and, in addition, there are the special allowances payable only to war widows. If, however, the hon. Member has any evidence of hardship in any particular case, I should be very glad to consider it.

Is the Minister aware that we appreciate his constant interest in these matters? Is he also aware that we will take an opportunity, in the very near future, of giving him chapter and verse for the dissatisfaction felt about the position of these war widows? I am sure that he will then desire to eliminate this dissatisfaction.

National Assistance (Personal Case)

34.

asked the Minister of Pensions and National Insurance whether he has now considered the case referred to him by the hon. Member for St. Helens; and whether the National Assistance Board will now reimburse the person responsible for maintaining Claude Kenyon, 139, Gladstone Street, St. Helens for the period during which he could not find suitable work on medical grounds.

The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance
(Miss Patricia Hornsby-Smith)

The hon. Member will have received a letter from me about this case. As I explained, Mr. Kenyon's case was considered by the appeal tribunal, whose decision was of course implemented by the Board. For the reasons that I gave in my letter, no question of reimbursement arises.

Is the hon. Lady aware that this young man received no National Assistance during a period of seven years, during which time he had no work at all, and was not able to work? Has not the Minister considered the report which I sent the National Assistance Board, a copy of which I understand was sent to him? Will not he consider whether a fresh consideration can be made of this case and whether some reimbursement can be provided to the person responsible for maintaining this young man over a period of seven years?

The hon. Member is over-simplifying this case. As he is aware, these appeals decisions are not made by the Board. Over the long period referred to in the Question the applicant took the case to the National Assistance Board appeal tribunal. At that time Mr. Kenyon was considered unwilling to work. The appeal tribunal directed him to do so, and the Board carried out its instructions that he should be offered accommodation in a re-establishment centre, which it was felt would help him. He repeatedly refused the many offers made to him to attend the centre. In those circumstances, his National Assistance was stopped. More recently he obtained part-time employment and, therefore, the present decision, when he appealed for aid to the National Assistance Board, was based on his then shown willingness and endeavour to be employed.

In view of that unsatisfactory reply, I beg to give notice that I shall raise this matter on the Adjournment at the earliest possible moment.

Widows

35.

asked the Minister of Pensions and National Insurance what provision he proposes to make to deal with the case of women whose widowed mother's allowance ends a short time before their attaining the age of 50 years, many of whom by reason of age cannot obtain employment and resort to National Assistance.

Provision is already made for widows who do not qualify for a widow's pension when their widow's allowance or widowed mother's allowance ends and who then have difficulty in finding work. Under the Family Allowances and National Insurance Act, 1956, such widows are eligible for unemployment benefit if unemployed, or sickness benefit if incapable of work.

Graduated Pensions Scheme

36.

asked the Minister of Pensions and National Insurance whether he will arrange for salesmen and others earning bonuses and commissions on a yearly basis to average these out retrospectively on a weekly basis in order that by retrospective additions to their contributions to the graduated pensions scheme, they may qualify for higher contributions under the scheme.

No, Sir. I know of no way of doing this which would give the employer a clear and workable basis for calculating the liability.

Is the right hon. Gentleman aware that it has always been the custom in the retail and distributive trade for managers and other sales staff—buyers, and so on—to receive a commission on sales, calculated at the end of the year, in addition to their weekly wage, and that this could be quite large and would affect their weekly or monthly salaries if it were calculated on a weekly or monthly basis? Is not the only drawback to the carrying out of the suggestion contained in my Question the fact that it would cause a little inconvenience to employers? Could not the convenience and well-being of the employees also be considered?

It would cause very great difficulty. If the hon. Lady pauses to consider what would be involved in making retrospective contributions in respect of people who may not at the material time be still in one's employ, I think that she will understand the practical difficulties which arise. I sympathise with her desire that people should be able to contribute more fully to the scheme. This shows a much more realistic view of it than those of her right hon. Friends who describe it as "a swindle".

Students (Contributions)

37.

asked the Minister of Pensions and National Insurance what consideration has been given to the recommendation contained in the Anderson Report that students over 18 years of age engaged in full-time study should be credited with National Insurance contributions during the period of such study; and what are his proposals in this respect.

The Anderson Committee did not, as stated in the Question, specifically recommend that students should be credited with National Insurance contributions. I would refer the hon. Member to paragraph 114 of its Report and to the reply in respect of the recommendation therein made which was given by my right hon. Friend the Minister of Education in answer to the hon. Member for Sunderland, North (Mr. Willey) on 11th May.

Does the right hon. Gentleman appreciate that students who go in for a grammar school course for A level passes are usually six or seven months over the age of 18? Since the privilege is given up to the age of 18, could it not be continued until the end of a grammar school course? Although there is a leaflet explaining the system, does the Minister appreciate that many students know nothing about this until they start work? It comes as a shock to be told that they owe for months previously. Can he devise a better method of ensuring that students know this when they become 18?

The main part in this matter, as I said in my main Answer, is for the Minister of Education, who has already answered a Question on it. From my point of view, I cannot see that it would be justifiable to give credits in this class of case at the expense of other contributors to the scheme.

Certificates Of Non-Participation

38.

asked the Minister of Pensions and National Insurance what is the present number of certificates of non-participation granted by the Registrar, and the number of employees covered by them.

Up to 30th June, 32,286 certificates of non-participation covering 4,340,826 employees had been issued by the Registrar.

Is the number still rising? What estimate does the Minister now make of the total number who will be contracted out? Does he think it will be 5 million?

There is a steady trickle of applications in respect of small schemes. I am not disposed to prophesy, but I think it will be a considerable time before the figure the hon. Gentleman mentions is likely to be reached.

What effect will these figures, which are much higher than the Minister originally calculated, have on the finances of the scheme?

As the other assumptions on which the finances of the scheme were calculated were of a cautious and prudent nature, the income of the scheme overall during the current year will be about £1 million less than anticipated at the time of the 1960 Bill.

Widows' Benefits (Report)

39.

asked the Minister of Pensions and National Insurance what decision he has reached on the recommendations of the National Insurance Advisory Committee in their recent Report, Command Paper No. 1384, on certain widows' benefits.

The Government are considering this recommendation and I have no statement to make about it at present.

Is the right hon. Gentleman aware that this matter has been hanging around now for some time? I pressed it upon him in 1959 in Committee on the National Insurance Bill. He then promised to refer it to the National Insurance Advisory Committee. The Committee, owing to other preoccupations, took a very long time to make its Report. It has now made recommendations which are not revolutionary. The Minister should have arrived at a decision by now.

As the hon. Gentleman knows, I laid the Report only at the beginning of last month. If he has studied it, he will appreciate that the complexity of the subject accounts for the Advisory Committee taking a little time which, I think, entitles me to do the same.

Is the Minister aware that he has a reputation for being a slick operator?

I am surprised that the hon. Gentleman, who has a reputation for courtesy, should decide to adopt phraseology which one associates more with some of his hon. Friends.

Coal

National Coal Board (Capital)

40.

asked the Minister of Power how much the National Coal Board borrowed from the Government in 1960 to finance capital expenditure; and how much it contemplates borrowing in 1961.

The National Coal Board's estimates of capital investment and finance are now prepared on the basis of the financial year. The recent White Paper on Government Expenditure Below the Line (Cmd. 1338) showed that net borrowing from the Exchequer was £2.2 million in 1960–61. It is expected to be £12 million in 1961–62.

Do not these figures show a marked reduction in the amount of borrowing compared with 1959–60? How far is this due to stock movements, to a reduction in stocks? Does not the picture show that certain pessimists were very wrong a year ago when this matter came before the House?

The figures indeed show a great reduction in borrowing from 1959. This is due chiefly to changes in the need for working capital of the Board, which increased very considerably in the first of the two years and decreased very considerably in the second. Many of our estimates are from time to time wrong. Mine have been generally more correct than most others.

Ministry Of Power

Power Station (Durham Coalfield)

41.

asked the Minister of Power what application has now been made to him for financial authority to proceed with the building of a new power station on or near the Durham coalfield.

I have received no application under the Electrical (Supply) Acts for consent to build a new station on or near the Durham coalfield.

This is a very disappointing reply. Is the Minister aware that a new power station on the Durham coalfield would be of tremendous importance to the economic well-being and industrial future of the county? Will he once again consult the Generating Board and impress upon it the urgency of this matter?

I know the hon. Gentleman's concern, and I know the great concern felt in the North-East of England, about this question. I told the hon. Gentleman on 1st May that the Generating Board would take great notice of the Question he then asked me, and I have no doubt that the Board is continuing its consideration of suitable sites for power stations in the whole country.

Rural Electrification, West Country

42.

asked the Minister of Power what plans he has for providing capital to assist the South Western Elec- tricity Board in speeding up electrification of rural areas in the West Country.

The Board's capital investment programme, which I approved last autumn, provides for the expenditure of £850,000 rural electrification in 1961–62 compared with £780,000 in the previous year. I am considering the estimates for the two following years which the Board has submitted to me. The pace of rural development depends not only on the capital available, but on the Board's decision as to how far its revenue is sufficient to meet outgoings chargeable to revenue account.

Does the right hon. Gentleman agree that that basis of computation under Section 13 of the 1957 Act means that the rate of rural electrification is very slow where there are very small urban receipts? Is he aware that in the South-West only 60 per cent. of farms are on mains connection, which is the lowest percentage in England and Wales, and that in the Barnstaple district it is less than 45 per cent.? Will he consider the possibility of a special injection of capital to enable the rural electrification scheme to be speeded up, possibly to be made a charge against the Annual Price Review?

I am aware of the comparatively low percentage figure in that part of the country, partly due to the fact that at vesting date the proportion of the farms connected in the South-West was lower than in other parts of the country. The injection of special finance would be inconsistent with the principles of the Electricity Act, 1957. The Board's investment expenditure proposals for last year were approved by the Government in full.

Oil And Petrol (Dollar Imports)

43.

asked the Minister of Power if he will state the amount of dollars paid for oil and petrol bought by the United Kingdom during the past year.

I would refer the right hon. Member to the reply which my hon. Friend gave to the hon. and gallant Member for Down, South (Captain Orr) on 27th June.

I am not altogether able to recollect that reply. Can the Minister tell me whether any dollars at all were used?

I think the answer to that Question is "Yes", but the point of the Answer to my hon. and gallant Friend the Member for Down, South was that since convertibility it is not possible to give the amount of dollars paid for oil compared with other currencies.

Was the President of the Board of Trade aware of that fact when he said that it was not necessary to buy any Russian oil because we had oil running out of our ears? Did he then know how much this oil running out of our ears was costing in dollars?

Order. The right hon. Gentleman will have to address that question to the President of the Board of Trade,

Mr Yuan Lau (Arrest)

(by Private Notice) asked the Secretary of State for the Home Department who was responsible for ordering the arrest of Mr. Yuan Lau, of 7, Paddington, Liverpool, on Saturday morning, who was, at the request of the hon. Member for Liverpool, Exchange, consequent upon consultations with the Home Office upon Thursday, 29th June, 1961, attending the hon. Member at her office.

From what I have so far been able to find out, it looks as though the apparent discourtesy to the hon. Member, which I sincerely regret, was due to a misunderstanding between the Immigration Service and the Liverpool City Police, who, in pursuance of the authority of an immigration officer given under Articles 8 (4) and 9 (1, b) of the Aliens Order, detained Yuen Lau pending his repatriation.

I hope that the hon. Member will accept my apologies.

Is not the Minister aware that nobody but those in his own Department knew that this gentleman was to see me on Saturday morning; and that some information must have been given by someone in his immigration department to the immigration office in Liverpool which led it to give instructions to the police to arrest this man?

Is the hon. and learned Gentleman aware that this man was arrested on the steps of my office, that I take very strong exception to it, indeed, and that I want an apology in writing both for myself as a Member of Parliament and for the man who was arrested? I may add that I got the man out, because I gave instructions that he had to come out of the cell.

I well understand the hon. Lady's feelings in this matter. I have full sympathy with her, and I have offered my apologies to her. It is true that the man was released as soon as the hon. Lady pointed out to the police that he was arrested when going to see her. Fortunately, he was released in time to see her at the session that morning when she was seeing constituents and others, and is still at large.

Kuwait

With permission, Mr. Speaker, I will now make a statement.

The House will remember that on Wednesday, 28th June, in reply to a Question from the hon. Member for Leeds, East (Mr. Healey), my right hon. Friend the Lord Privy Seal made it clear that in the situation created by the claim of Iraq to sovereignty over Kuwait Her Majesty's Government assured the Ruler of their support. At the same time, they took certain precautionary military measures in order to enable swift action to be taken should the situation deteriorate.

As the House knows, the claim by the Iraqi Government to the territory and sovereignty of Kuwait followed swiftly on the exchange of Notes of 19th June. This claim was accompanied by a violent Press and radio campaign from Baghdad.

The Iraqi forces at Basra, only about 30 miles from the Kuwait border, were clearly quite sufficient to occupy Kuwait by a rapid movement against the modest Kuwait Army. On 29th and 30th June, evidence accumulated from a number of sources that reinforcements, especially reinforcements of armour, were moving towards Basra. In these circumstances, the Ruler felt it his duty to make a formal urgent request for British assistance under the exchange of Notes. This he did on the morning of 30th June.

Her Majesty's Government, who are under a clear obligation to meet such a request under the exchange of Notes signed on 19th June, responded at once. British forces were landed in Kuwait on the morning of 1st July.

At the same time, the Ruler of Kuwait sent to the President of the Security Council a complaint in respect of the situation caused by the threat by Iraq to the territorial independence of Kuwait, which was likely to endanger peace and security, and asked for an immediate meeting of the Council to consider it. The United Kingdom representative in New York also reported our action to the Security Council in accordance with the provisions of the Charter, and supported the Ruler's request for an urgent meeting.

The Security Council met yesterday morning. They took note of the situation and adjourned until Wednesday.

Her Majesty's Government earnestly hope that counsels of moderation will prevail in Baghdad. Our forces are in Kuwait purely for defensive purposes and in accordance with our Treaty obligations. They will be withdrawn as soon as the Ruler considers that the independence of Kuwait is no longer threatened. They present no threat to Iraq, with whom we wish to maintain the friendliest possible relations.

I am convinced that it was the duty of Her Majesty's Government to act as they did. I believe that they will receive the general support of the House and the country.

I will keep the House informed of further developments.

Is the Prime Minister aware that, much as we regret the fact that British troops have had to be landed in Kuwait, most of us, I think, will feel that in view of the treaty obligations and the formal request of the Ruler following the threatening posture adopted by Iraq, Her Majesty's Government had really no option but to take the action they did? No doubt the House will wish to have an opportunity of debating this matter a little later, when the situation is rather clearer. I take it that the Prime Minister will keep us informed of any developments there may be.

In the meantime, I should like to ask the right hon. Gentleman two questions. First, in view of the unfortunate possibility that this situation may continue for some time without being properly cleared up, would it not be a good idea to propose to the United Nations that we would be willing to support the idea of a United Nations force to take responsibility for the protection of Kuwait, since this will, at any rate, do much to get rid of the misrepresentation to which we are undoubtedly being subjected at this very moment—[HON. MEMBERS: "By whom?"] By propaganda in the Middle East, and many other parts of the world.

Secondly, is it not a fact that the situation in the Middle East, and particularly the position in Kuwait, is liable to be somewhat extended and uncertain in view of the great disparity of wealth between different countries there, and would it not be a good plan to propose, through diplomatic channels, to the Arab States concerned the creation of a fund to which both the oil-producing countries and the oil companies might contribute for the benefit of the Middle East generally? Is it a fact that the Ruler of Kuwait has himself indicated his willingness to subscribe to such a fund? Would Her Majesty's Government consider putting their authority and influence behind this idea?

I am grateful for what the Leader of the Opposition has said. I feel sure that what he has said was the general view that we bad no option but to act as we did in the circumstances as they were on Friday.

We do not, of course, rule out any solution by a United Nations or other force, but first things first. The force that has been landed in response to the Ruler's request is at present the only effective method of maintaining the independence of Kuwait, and I cannot tell what will happen in the next two or three days, or two or three weeks. There are no signs at all of the threat diminishing; rather the contrary, as the attitude of the Iraqi representative in the Security Council seems to show.

There may, of course, come a later stage when it would be possible to support the independence of Kuwait by an arrangement made upon a wider basis. Meanwhile, I can assure the House that we have no desire to carry on with this considerable military and financial burden for any longer period than our obligations require.

The right hon. Gentleman's second question is, of course, a much wider one. Meanwhile, I think that, as the right hon. Gentleman said, the Ruler of Kuwait has shown himself conscious of his responsibilities in the Arab world. The Government of Kuwait have, for instance, recently agreed to employ part of their revenue in certain projects of a constructive kind in the Arab world.

Is my right hon. Friend aware that the overwhelming majority of British people warmly support the action taken by Her Majesty's Government and, in particular, the contrast it offers to what occurred ten years ago in Abadan? Would my right hon. Friend give the House some information about the American attitude? Is it not the fact that 50 per cent. of the output of oil from Kuwait is British-controlled and that 50 per cent. is American-controlled? Are the Americans proposing to participate militarily in the defence of Kuwait, or will it be a solely British responsibility?

I think that the great thing is to deal with each crisis as it occurs. My colleagues and I found this, as the House can understand, quite a difficult decision to take, and I am much supported by the general sense of the House that we could not afford to leave Kuwait hopelessly undefended against forces poised to attack them.

We have been in the closest touch throughout with all the Commonwealth countries. I have personally been in touch with the Prime Ministers and heads of the Commonwealth States, and we have had the closest co-operation with the United States. I do not think that now we ought to embark on the larger issues. Let us, first, just see if we can get through this immediate crisis.

If, as I am sure the right hon. Gentleman desires, the general support of the country is to 'be forthcoming, then it is as well not to confuse an invitation from the Ruler of a State under treaty obligations for a request by the Ruler of that State that we go to his assistance with intervention against a Government who happens to have nationalised an oil company in which we hold a large proporion of the shares. It is better to make clear the distinction between these two things if we want to have a degree of national unity on this issue.

While I entirely support what he has said about the immediate situation, would the Prime Minister not agree that there is no inconsistency between holding firm on the policy on which Her Majesty's Government have been obliged to embark and, at the same time, looking further ahead for reasons that the Prime Minister has given and seeking, as soon as possible, that wider basis for the protection of Kuwait which is so obviously desirable?

Yes, Sir, of course. One of the things which we failed to understand was the fact that only a fortnight ago—or a short time ago—the Government of Iraq appeared to recognise the independence of Kuwait and were discussing with them questions which clearly regarded them as an independent country. Now it is suddenly reversed and it is that which has caused so much anxiety.

As for the future, we must carry out our obligations. At this particular moment, only because of certain arrangements which exist—and, I am bound to say, if I am allowed to, an efficient operation on behalf of the defence services—have we been able to move so rapidly. There is always the great difficulty of trying not to move into a territory until the last moment and, at the same time, not to leave it so long that intervention would be ineffective. That has been a very delicate position to hold and I am not sure now how this will work out.

But we must look at the longer issues, because these are heavy burdens on our economy. We want to create a general state of harmony in the Arab world and we are encouraged by the degree of understanding that we have had from the Arab countries as a whole.

The Leader of the Opposition has been full of advice this afternoon. Is my right hon. Friend aware that the 'British nation recalls the advice that the Leader of the Opposition gave on the defence of British interests gave on the defence of British interests in the Middle East a few years ago? Is my right hon. Friend further aware that the British nation does not want the United Nations to meddle and muddle in Kuwait?

Gould the Prime Minister give a little more information on three points? First, what is the system of command in Kuwait? Is it a joint British and Kuwait command? Secondly, has the right hon. Gentleman any information about what is happening on the frontier? Have the Iraqis moved up, is the frontier closed, or have there been any incidents? Thirdly, as it appears that the Arab neighbours are willing to defend the independence of Kuwait, have they taken any further steps in this direction, or are consultations going on?

The nearest Arab neighbours are quite a long way off. This is some of the most difficult country in the world. The only possible means of approach are the resources of the kind which we have utilised. I am happy to see that the Saudi Arabian Government have expressed their support and have sent some token of it.

The forces are under the command of a British officer, Air Marshal Ellworthy, and the Kuwaiti forces are working in close co-operation with him.

There is—happily or not I do not know—quite a heavy sandstorm at the moment and visibility is bad. It is hard to get accurate reconnaissance, but there are a number of methods by which we can obtain information. It is true that the forces now at Basra, recently reinforced, would constitute, effectively managed, a serious menace, even with the forces now under our command.

In view of the risk of possible incidents in the present situation, would the Prime Minister consider proposing, through our representative on the Security Council, that a contingent of United Nations observers be stationed on the Iraq-Kuwait border?

I do not know whether the right hon. and learned Gentleman knows the territory well, but there is 40 to 60 miles of desert. It is quite easy for the frontier to be crossed. That is what we were afraid of, without any Kuwait opportunity of making effective defences.

I would like to consider a little more whether it would be a good thing to station observers on the frontier in the desert. All that will develop. What we had to do on Friday was to decide whether to take certain action which, I hope, will lead to the Government of Iraq having second thoughts. That was the first thing. We have to see how we have to develop and the best way of getting out of this very tangled situation in such a way as to maintain the independent life of a State when we recognise as an independent State.

As British forces are living under well-nigh impossible conditions in the desert, will my right hon. Friend see that everything is done to give these men reasonable amenities, even to the laying on of additional transport aircraft to do so?

I think that the Service Ministers have been told that everything should be done for the corn-fort of the men. I should like, once more, to congratulate them and the spirit of all those concerned, who, I think, are quite prepared and ready to do their duty in the way that British people would expect.

Who is to pay the bill for this adventure? Is it to be the wealthy, fabulous Ruler of Kuwait, or the British taxpayer?

I do not think that we can debate this now without a Question before the House.

Business Of The House

Ordered,

That the Finance Bill, as amended, may be considered immediately after the recommittal of the Bill and report thereof, notwithstanding the practice of this House as to the interval between the stages of such a Bill.—[Mr. Selwyn Lloyd.]

Orders Of The Day

Finance Bill

Order for consideration, as amended, read.

Motion made, and Question proposed,

That the Bill be recommitted to a Committee of the whole House in respect of the Amendments to Clause 24, page 19, lines 2, 6, 9, 10, 13, 14, 15 and 24, and the new Clause (Cars: provisions as to hire-purchase, etc), standing on the Notice Paper in the name of the Chancellor of the Exchequer.—[Mr. Selwyn Lloyd.]

Question amended, by adding, at the end:

"and in respect of the Amendments to Clause 24, page 19, lines 13 and 14, standing on the Notice Paper in the name of Mr. Harold Wilson".—[Mr. H. Wilson.]

and, as amended, agreed to.

Bill immediately considered Committee.

[Sir GORDON TOUCHE in the Chair]

Clause 24—(Supplementary Provisions Relating To Three Foregoing Sections)

3.51 p.m.

I beg to move in page 19, line 2, to leave out "the three foregoing sections" and to insert:

"sections twenty-one to twenty-three and section (Cars: provisions as to hire-purchase, etc.) of this Act"

I think that it might be convenient to the Committee to discuss with this Amendment the other Amendments to this Clause and the proposed new Clause—(Cars: provisions as to hire-purchase, etc.).

Do I take it, Sir Gordon, that you suggest that we should discuss all the Amendments to Clause 24 together?

I take it, Sir Gordon, that you are referring not only to the Amendments in page 19, line 6, to leave out "The three foregoing sections" and to insert:

"Sections twenty-one to twenty-three and subsections (2) and (3) of section (Cars: provisions as to hire-purchase, etc.) of this Act".
In line 14, at the end to insert:
(3) None of the provisions of sections twenty-one and twenty-two and subsections (2) and (3) of section (Cars: provisions as to hire-purchase, etc.) of this Act shall apply in relation to a vehicle provided by a person who is a manufacturer of such vehicles as are mentioned in subsection (1) of this section, or of parts or accessories for such vehicles, if he shows that it was provided solely for the purpose of testing the vehicle or parts or accessories for such vehicles:
Provided that if during the period of five years beginning with the time when the vehicle was provided he puts it, to any substantial extent, to a use which does not serve that purpose and that purpose only, this subsection shall be deemed not, to have had effect in relation to the vehicle.
(4) Paragraph 4 of the Third Schedule to the Finance Act, 1957 (additional assessments and adjustments of assessments) shall have effect as if references therein to that Schedule included references to subsections (2) and (3) of section (Cars: provisions as to hire-purchase, etc.) of this Act and the foregoing subsection.
In line 10, to leave out "the three foregoing sections" and to insert:
"Sections twenty-one to twenty-three of this Act".
In line 13, to leave out "(on or after that day)" and to insert "to expenditure incurred".

In line 14, at the end to insert:
"where either—
  • (a) the expenditure is incurred within twelve months after that day, or
  • (b) the contract is one of hire-purchase or for purchase by instalments,
  • and subsections (2) or (3) of section (Cars: provisions as to hire-purchase, etc.) of this Act shall not apply where the contract was entered into before that day".
    In line 15, to leave out "the three foregoing sections" and to insert:
    "sections twenty-one to twenty-three and section (Cars: provisions as to hire-purchase, etc.) of this Act".
    In line 24, to leave out "and the three foregoing sections" and to insert:
    "section and sections twenty-one to twenty-three and (Cars: provisions as to hire-purchase, etc.) of this Act".
    but also the new Clause to which you have referred? Is that understood?

    And the Amendments in page 19, lines 9, 10, 13 and 14, to which the right hon. Member for Huyton (Mr. H. Wilson) has just referred?

    I was not quite clear, Sir Gordon. As well as the Amendment in line 14, would it not also be convenient to take the Amendments in line 13, at the end to insert:

    "but not after the seventeenth day of October, nineteen hundred and sixty-one".
    and in line 14 to leave out "that day" and to insert:
    "the said seventeenth day of April".
    standing in the names of myself and of my hon. Friends? That would then cover the whole lot.

    Although all these Amendments deal with Clause 24 and most of them are consequential on the new Clause—(Cars; provisions as to hire-purchase, etc.)—some of the Amendments deal with aspects which are not related to the general body of the Amendments, and I think that it would probably be convenient to the Committee if, first, I were to deal with the new Clause and with the Amendments in page 19, line 2, line 6, line 10, line 15, and line 24, which are consequential upon the new Clause.

    The new Clause, at first sight, seems to be somewhat complex, and, while I will be as brief as I can, I think that it is necessary to explain just why it has been necessary to table the Clause. It is designed to remedy certain defects which have emerged in connection with the proposals in Clauses 21 to 24 which, as the Committee knows, restrict the tax allowances for those motor cars costing more than £2,000. The defects are concerned mainly with hire-purchase contracts and with collusive arrangements which are dressed up as hire-purchase contracts.

    Clause 23, the Committee will remember, imposes restrictions on the amount which may be deducted in computing trading profits for the hire of these more expensive motor cars, and the amount to be allowed is restricted in the proportion which £2,000 bears to the price of the motor car. Clause 23 as at present drafted expressly excludes from its operation hire-purchase contracts. The reason for this exclusion was that amounts paid under hire-purchase contracts are divisible into two parts. One part represents the capital element and the other represents the interest element. Capital allowances, of course, are given on the capital element, and the interest element is allowed in full as a deduction for tax purposes.

    It was not necessary to deal, in Clause 23, with hire-purchase contracts, because the capital allowances on a car bought in this way would already be restricted by the provisions of Clause 21. As regards the interest element, a restriction would have been out of place because the trader, instead of buying the car by hire purchase, could have borrowed the necessary money from a bank or from some other lender.

    The interest payable on such a loan would, in any event, have been allowable for tax purposes as a deduction under the general provisions of the law, and it would obviously have been impracticable to attempt to disallow any part of that, because one could not distingush it from any other interest which might be payable in respect of loans. In short, as the capital element is already restricted by Clause 21 and the interest element should not be restricted, we consider it to be proper to exclude hire-purchase agreements altogether from the Clause in question.

    While, in general, the position so far as hire-purchase contracts are concerned is satisfactory, since we considered this matter in Committee two defects have emerged. The first defect concerns the allocation of the consideration under a hire-purchase contract as between the capital element and the interest element. I am told that the present practice is to take as the capital element the ordinary price of the car at the time that the agreement was made. If one supposes that the retail price of a car is £6,000 and that the total instalments payable under a hire-purchase contract amount to £7,000, there is, in fact, no express provision in the Income Tax Acts to show how the allocation as between capital and interest of the £7,000 is to be made; but, in practice, the capital element has been taken as £6,000, which is the purchase price of the car at the time that the contract is entered into, and the interest element as the remaining £1,000.

    This is obviously a reasonable way of making the allocation. In fact, in most cases it does not matter very much to the purchaser of the car how the allocation is made, because, sooner or later, he gets tax relief by reference to the whole of the instalments and the division as between the two elements mainly affects the time of the tax relief which he gets.

    But under the Bill as drafted without this proposed new Clause and the consequential Amendments, it would be open to a taxpayer to claim that the capital element of the total payments was not the price of the car when it was first bought, but some other price. It might be suggested that it should be calculated by reference to its value at the date, say, three years later, when the property in the car passed to the person. It is impossible to say whether such a claim on the part of the hire purchaser would, in fact, succeed.

    It is obviously undesirable to leave this uncertainty, and consequently subsection (4) of the new Clause provides that the capital element shall be equal to what it would have cost to buy the car outright at the time when the agreement was entered into. I think that the Committee will agree that that provision, which follows the practice which has hitherto been adopted, is both fair and reasonable, and will prevent the avoidance by a hire purchaser of the intention which lies behind these Clauses and particularly Clause 23.

    I said that there were two defects which had come to our notice since we considered this matter earlier. The second defect which has emerged in the Clause as drafted concerns cases where there is a hire-purchase agreement or some other kind of agreement under which the property in the car does not immediately pass, and where, before the end of the period laid down in the agreement, it is brought to an end without the property in the car passing.

    In other words, to take the normal case of a hire-purchase agreement, something intervenes, there is a deliberate decision or agreement between the two parties, or there may be some form of collusive agreement so that in the end the property in the car never passes. Suggestions have been made in the technical Press, in particular, in an article in the Accountant of 10th June, arguing that there was here a loophole. We have looked into the matter and, while I do not think that the position is quite as was suggested in that article, there is undoubtedly a defect.

    4.0 p.m.

    As many hon. Members will know, there are already provisions in the existing law which deal with capital allowances which are given in respect of plant and machinery where hire-purchase or other agreements are terminated prematurely. These provisions were introduced to prevent the possibility that in certain circumstances double initial or investment allowances might have to be given on the same piece of plant.

    These provisions, which are contained in Section 16 and the Third Schedule to the Finance Act, 1957, proceed on the basis that, where an agreement is brought to an end without the property in the plant or machinery passing, the liability for the years in question is in certain circumstances to be reopened. Any allowances which, in the light of events as they actually have turned out, ought not to have been given are to be withdrawn. In effect, the new Clause applies the same principle to the treatment of cars affected by Clauses 21 to 23.

    The effect of subsection's (2) and (3) of the new Clause—the Committee will recall that I dealt with subsection (4) in connection with the earlier point in this debate—is, briefly, that as the property in the car never passes to the trader the payments are to be treated as what they are in reality, that is, pure hire payments, and restricted accordingly.

    Those observations cover the new Clause and the series of Amendments to which I referred. The Government Amendment in page 19, line 9, to insert two new subsections, and the two further Government Amendments, in page 19, line 33, and in page 19, line 14, which can be taken together with the two Amendments in the name of the right hon. Member for Huyton (Mr. H. Wilson) and some of his hon. Friends—in page 19, line 13, and in page 19, line 14—raise rather different points.

    I will take, first, the Amendment in page 19, line 9. This Amendment proposes two new subsections the object of which is to give full tax allowances for cars costing over £2,000 if they are provided solely for the purpose of the testing by manufacturers of cars, car parts or car accessories, and are not used substantially for any other purpose. This provision deals with matters raised by same of my hon. Friends when we last considered this group of Clauses, and I hope that they will now consider that it reasonably meets the points which they made. The second subsection of this Amendment, the new subsection (4), contains machinery which applies not only to cars provided for testing, but also to the new Clause dealing with hire-purchase contracts to which I have already referred.

    The effect of the proposed new subsection (3) in the Amendment is that the manufacturer will not have his allowances restricted if the car is provided solely for the purpose of testing either the car itself or car parts or accessories. To qualify for the full allowance it is not necessary that the products to be tested should be those made by the manufacturer himself; they can be made by rival manufacturers. I hope that that covers the points which certain of my hon. Friends raised.

    I come now to the Amendments in page 19, line 13, and in page 19, line 14, which raise much the same point as that raised by the two Amendments tabled by the right hon. Member for Huyton. The object of the two Government Amendments is to restrict the allowances for expenditure under pre-Budget contracts for the purchase or hire of cars costing more than £2,000 unless either the expenditure was incurred within one year of the date of the Budget or the contract was by way of hire purchase or sale by instalments. The two Opposition Amendments have broadly the same effect except that, first, they propose that only six months' grace should be given instead of one year and, secondly, they make no exception for contracts of hire purchase or sale by instalments.

    My right hon. and learned Friend has given this matter very careful consideration since the point was first raised. I am sure that it is right that there should be some limitation, but I hope the Committee will take the view that six months would really be too short and that, while inevitably, whatever period one chooses must be a matter of judgment, the year proposed by my right hon. and learned Friend is about right.

    There is the further distinction between the Government Amendments and the Opposition Amendments in this respect in that the Government Amendments make the exception for hire-purchase and credit sale agreements made before Budget day. I think that it would be wrong to restrict agreements of this kind where the taxpayer has already got possession of the car. In such cases the allowances will be given in full without restriction whenever the expenditure was incurred. I hope that the Opposition will, on reflection, regard this as the right approach.

    The last two lines of paragraph (b) in the Government Amendment to page 19, line 14, are consequential on subsections (2) and (3) of the new Clause, under which expenditure on hire purchase of cars costing more than £2,000 is restricted for all years if the contract is not completed. These last two lines ensure that the provision in the new Clause will not apply to such contracts made before Budget day. As subsections (2) and (3) of the new Clause are mainly intended to meet artificial arrangements which may be made to get round the restrictions in connection with cars costing more than £2,000, I hope that the Committee will agree that it is neither right nor necessary to apply them to pre-Budget contracts.

    I commend the new Clause and the series of Amendments to the Committee.

    I am sure that we ought to start the afternoon in a courteous way, and I thank the hon. Gentleman for having explained with great clarity the various Amendments and the new Clause. Hon. Members opposite will wish with us to thank the Government for having listened, at all events up to a point, to some of the arguments and objections which were raised earlier and for having met them, as I say, up to a point.

    I suggest, however, that the Government have not sufficiently met our objections. We are grateful to them for having looked into the matter and coming forward with some suggestions after we drew attention earlier to the possibility of what the Economic Secretary called artificial arrangements or collusive arrangements, but we do not think that their suggestions go far enough, for the reason that I shall endeavour to explain.

    I preface my remarks by saying that the Economic Secretary said that timing is largely a matter of judgment. Although I was listening most carefully, I failed to hear any argument to support his judgment that twelve months is the right period. Not one word was said as to why nine, six or three months should not be chosen. Although we recognise that the hon. Gentleman has considerable judgment, we do not deny that quality to ourselves. We think that our judgment is as worthy of consideration as the Government's judgment, particularly in view of the arguments which I propose to put forward.

    There are two aspects to the Amendments why my right hon. Friend the Member for Huyton (Mr. H. Wilson) proposes. The first is the generality of extending the period for twelve months and the second is the exception which the Government have included and which we have omitted in respect of hire-purchase and credit sales. The Government recognise that, notwithstanding that they are always most anxious not to have anything which savours of the slightest degree of retrospection and, therefore, want to be most careful to exclude any taxpayer from his inability to foresee Budget Resolutions months and possibly quarters ahead, it is obviously necessary, as the Government have recognized, that where a taxpayer is given notice under the Clause in its present form he is liable to take steps to protect himself.

    These collusive or artificial arrangements are such that they are not likely to be easily discerned, not likely to be difficult to carry out and not likely to be brought to the attention of the inspector of taxes. If they are brought to his attention, they are not likely to be worth considerable argument because the amounts involved, although numerous in number, may be very small in each case. It is doubtful whether the inspector will argue about a transaction affecting a £3,000 car and spend time wondering whether it is worth bringing it to appeal and going through the rigmarole possibly of going to the Law Courts as well as to the Commissioners to decide whether it was as an artificial transaction and should be limited to an allowance of £2,000 instead of £3,000. These artificial transactions may not be worth the Inland Revenue's time and, therefore, there ought to be an overall restriction to protect the ratepayers.

    I strongly suggest that six months is ample time for such an overall restriction. If anything, it errs on the side of generosity. No subject expects to be protected against a sudden Budget increase in Purchase Tax. If a person decides to buy something on 16th April, but postpones it until the 17th April when the Budget comes out and increases the price of the article that he wished to buy through an increase in Purchase Tax, he regards it as bad luck, but he does not complain about it. He recognises that the Government have a right to alter legislation which affects future financial relationships between the taxpayer and others. Everybody recognises that.

    There are many transactions and contracts entered into which cover a period of years—nothing to do with motor cars—which are affected by subsequent Budget Resolutions and Finance Acts altering the liability of the taxpayer. No Government can possibly deny themselves the right to alter our taxation laws once a year, or more often, as the case may require. There is no fundamental right on the side of the taxpayer saying that he should be given considerable notice of these changes.

    4.15 p.m.

    As the Government are not prepared to meet us and to say that any purchase which is made or any contract entered into prior to Budget day but which is not executed until after Budget day shall not escape the provisions of this Clause, we have to be reasonable, as usual, and to attempt to find a compromise. I should have thought that a reasonable compromise was the period of six months. This gives the taxpayer a full six months' warning of what is to happen in six months' time. It discourages artificial transactions, because they are not worth entering into for a period of six months other than in very exceptional cases, and it enables the Inland Revenue to get on with its business without having to decide in case after case whether each transaction involving a motor car is caught by this Clause or not. We think that six months is a much better period than twelve months and that it errs on the side of generosity.

    Where hire-purchase and credit sales are entered into prior to Budget day, and are continuing after six months, under the Government's proposed alterations the payments made after six months will be liable for tax purposes, whereas under my right hon. Friend's Amendments they will not be liable for tax purposes. I admit that this is not as clear-cut a case as the other one. Hire-purchase and credit sale transactions are in a slightly different category from a straightforward transaction under which a taxpayer contracts to buy a car before Budget day, but buys it a few days after Budget day.

    However, I do not see that the nature of these transactions is sufficiently different so as to give the taxpayer that freedom from being caught for taxation purposes which every taxpayer expects and regards as normal, right and fair, namely, that after any Budget his tax position may be altered, and that the transactions into which he has entered may not be as advantageous as he expected because the law will be altered as from Budget day.

    That is why, in our Amendments, we thought it right to keep to a period of six months, suggested by my hon. Friend the Member for Glasgow, Craigton (Mr. Milian) as a compromise. I am sure that if he were here he would be grateful to the Economic Secretary, who undertook to look into the matter and has done so with sympathy. We have not thought fit to exclude hire-purchase or credit sales, because the difference in the nature of the transactions is not of a sufficient degree as to take them out of the scope of the restrictions.

    I hope that the Government will consider our suggestion of six months. If they do not undertake to do so, I hope that there will be an opportunity of showing how strongly we feel that this is a very sensible way of meeting the views of both sides of the Committee.

    I wish to make one or two comments on the Amendment in page 19, line 9, allowing the full tax allowance for experimental motor cars owned by manufacturers. I am sure that companies like Rolls-Royce will be grateful to the Chancellor of the Exchequer for tabling this Amendment and for going some way to meeting their own special cases, but I am wondering whether the Clause as it stands goes far enough.

    There are three types of experimental prototype cars. The first is the car made by the manufacturer with a view to putting it on the market in two or three years' time. Then there is the experimental car which the manufacturer buys from abroad, perhaps even from a competitor, so that he can test it. A company like Rolls-Royce would probably buy some very expensive cars from the United States and Germany to test them over a period of years to see how they compared with the company's own models. The third type is not a fully prototype car. It may be a standard car in which a manufacturer will put a prototype component, such as a gearbox, for testing purposes.

    While these cars are used solely for testing purposes they would be covered by the Clause. But it is the practice for a manufacturer to test a foreign car for a year or eighteen months by putting it into his transport fleet. Observation is kept on the vehicle and weekly calculations are made, and a long-term test may extend over three or four years. I am wondering whether that will be covered by the Clause, or whether the proviso:
    "… if during the period of five years beginning with the time when the vehicle was provided he puts it, to any substantial extent, to a use which does not serve that purpose and that purpose only, this subsection, shall be served not to have had effect …"
    will apply.

    My point is that these foreign experimental cars can be tested only under laboratory conditions or fully tested over a period of two or three years, and during some part of that time the vehicle may be in the company's transport fleet. It would be a pity if a manufacturer lost the advantage of the provisions of this Clause merely because the vehicle became one of the cars running round on his business. There is also the semi-prototype car which is perhaps used for demonstration purposes. This vehicle may be put in the manufacturers' fleet for a period for testing purposes.

    I hope, therefore, that the Clause will be administered tolerantly. If it were administered too strictly, manufacturers would be discouraged from buying foreign cars or making alterations to standard cars or conducting research and testing. I hope that my hon. Friend will be able to say something on this subject.

    I am grateful to my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) for raising this point. There is another matter which is in the same category and about which we should be grateful if my hon. Friend the Economic Secretary would say a word. I refer to the question of tyres. I am not sure whether the testing of tyres is included and I think that it would be helpful were my hon. Friend to say a word about that.

    I am grateful to the Economic Secretary for giving us a clear exposition of what is becoming a rather intricate argument. On the other hand, in my opinion there may he rather more between us than would appear at first sight. There is a good deal of revenue involved in the question of initial allowances for business cars, even in the case of the particularly expensive cars which we are now discussing.

    The Government have come some way to meet us, but I agree with my hon. Friend the Member for Gloucester (Mr. Diamond). I do not think that they have come as far as they should. I realise that Ministers are anxious not to do anything which might appear to be imposing taxation retrospectively on people who have already entered into contracts. But surely this is not the only case in which a taxpayer may find that, because of a change in taxation as a result of the Budget proposals, he has to pay more tax in respect of some contract into which he had previously entered.

    I suppose that a taxpayer might enter into a contract to accept an appointment in which he would be paid a certain salary, and at a later date, as a result of the Budget proposals, Income Tax or Surtax might be increased. I do not think that anyone could argue reasonably that such a person ought to be exempt from paying the extra tax for six months or a year. The same situation might also arise in respect of Purchase Tax.

    We read in the Press almost daily that the Chancellor is to use his regulator to raise the whole range of Purchase Tax in the course of this month. Someone might enter into a contract to furnish, say, a block of offices, a hotel, or a house and, before the contract had been carried out, he might have to pay more Purchase Tax on the furniture. Most of us would not sympathise with an argument that this person should pay less Purchase Tax than anyone else. I do not think that the principle of exempting people who enter into contracts before the Budget is so morally defensible as the hon. Gentleman appeared to imply.

    Admittedly, a little latitude is necessary and the latitude which would be allowed by my hon. Friend might be permitted. But I do not understand why the Economic Secretary should think that six months is too short a period. He categorically asserted that he thought six months was too short, but he gave no reason. I do not think that my hon. Friends are satisfied with such a sweeping assertion.

    The difficulties with which we are faced this afternoon, and the intricacies of this argument, illustrate the trouble we encounter from adopting what we have always thought the mistaken policy of applying this initial allowance to motor cars at all. I will not argue that in principle again today, because we did so at an earlier stage. Since that discussion I have received a letter from the Financial Secretary—who now seems to have handed over this argument to the Economic Secretary—in which he attempted to argue that the initial allowance on motor cars was not a substantial concession to the taxpayer at all because it merely slightly lengthened the period over which he had to meet his liability.

    I think that the Financial Secretary would agree, taking taxpayers as a whole, and assuming that the great number of them in the cases we are considering buy new cars regularly—perhaps every two or three years—that if an initial allowance is granted on a car instead of the ordinary depreciation allowance, taxpayers as a whole are better off and the Exchequer is not.

    I see that the Solicitor-General is shaking his head. But we all know—I do not think that the Financial Secretary would dispute this— that when the initial allowance is introduced there is in the early years a loss of revenue to the Exchequer. If the allowance were withdrawn, it would result in a gain to the Exchequer, and that must apply in respect of motor cars as well as other things. If the hon. Gentleman would care to look up the matter, he could probably tell us exactly what is the figure. If the initial allowance on motor cars is anything less than a concession to the taxpayer I do not know what we are arguing about. We could merely withdraw it and the taxpayer would not be the loser.

    I think, therefore, that this argument illustrates that the whole policy of granting this allowance in respect of passenger cars is mistaken, as the Government realise when they declined to apply the investment allowance to passenger cars. But having gone into the difficulties, for the purpose of argument we still fear that the hon. Gentleman has not come far enough to meet us. Will he tell us why he thinks that six months is too short a period and will he not carry too far the argument about contracts entered into before the Budget, in view of the fact that that argument is not applied to other kinds of taxpayers?

    4.30 p.m.

    Before my hon. Friend replies, may I add just two sentences to what has been said by the right hon. Gentleman the Member for Battersea, North (Mr. Jay)?

    I would not like the Chancellor of the Exchequer, who is listening intently to this debate, to imagine that the case for the abolition of initial allowances on passenger motor cars bought by business firms or partnerships is confined only to the pleas made by the Opposition.

    I am a very strong supporter of outright abolition of initial allowances on passenger motor vehicles, and I want to ask my hon. Friend the Economic Secretary, in order to put his arguments on this group of Amendments into the correct perspective, whether he does not realise that in the present state of the financial legislation a business firm buying motor cars receives in the year of purchase not only 38 per cent. initial allowance but in addition 25 per cent. depreciation allowance. So there is a quite ridiculous situation that a busi- ness firm charges 55 per cent. of the capital cost of a passenger car against Income Tax and Profits Tax in the year of purchase.

    That does not apply to any other business asset. It is wholly out of proportion and ought to be considered by the Chancellor of the Exchequer sympathetically with a view to the abolition of the initial allowances—for reasons which I will explain, I hope, if I catch your eye, Mr. Williams, on the Purchase Tax Clauses to follow—on motor cars next year.

    I do not intend to take up the time of the Committee for more than about 30 seconds, but I feel that I must support my hon. Friend the Member for Shipley (Mr. Hirst) and my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) in the speeches they have made.

    Of course, this does not apply only to Rolls-Royce, but to all cars costing more than £2,000. We all know that all the time companies are learning from one another, and it is obviously quite unfair—and I am sure that it cannot be the intention of my right hon. and learned Friend the Chancellor—that those companies should be penalised in this way. They must be allowed to use these motor cars for demonstration purposes and for experimentation without being penalised, and I hope very much that my right hon. and learned Friend will note carefully what my hon. Friends have said and see what concession he can give.

    The right hon. Gentleman the Member for Battersea, North (Mr. Jay) and the hon. Gentleman the Member for Gloucester (Mr. Diamond) both spent some time considering whether the period referred to in the Government Amendments, in page 19, line 13, and page 19, line 14, should be six months or one year. It is true, as I think I said at the outset, when I dealt with these Amendments, that that must inevitably be a matter of judgment.

    Originally, the hon. Gentleman the Member for Gloucester and the hon. Gentleman the Member for Glasgow, Craigton (Mr. Millan) wished to restrict the allowances to all expenditure incurred after Budget day, and that, indeed, was, I think the purpose of the Amendments which appeared on the Notice Paper when we last considered this matter but which were not called at that time. However they have suggested six months and my right hon. and learned Friend has suggested a period of one year. I was asked to say why it was that we reached the conclusion that a year was about right. I will put two points to the Committee, which should be borne in mind.

    First, I would have thought that six months after Budget day was really a rather short period when one bears in mind that these Clauses cannot be considered to be in their final form till the Report stage of the Bill has been completed, and, after all, about two months have now passed since Budget day. Consequently, I think that six months is really on the short side.

    While it is not directly relevant and I do not want to make too much of it—that is why I did not mention it at the outset, when dealing with this matter—perhaps I may remind the right hon. Gentleman the Member for Battersea, North that when the Leader of the Opposition was Chancellor of the Exchequer, in 1951, and suspended initial allowances, he decided, on that occasion to give a year's notice of his intention. I did not mention this because I did not want to make too much of it and one can always find analogies either way.

    Would the hon. Gentleman not agree that that change applied to the whole plant and equipment for industry and, therefore, was really a very different matter?

    I agree that it was different in certain respects, but I would have thought that there was no difference in principle, for the reason which the right hon. Gentleman gave, just because this applies only to motor cars and the Leader of the Opposition's proposals applied right across the board. I would not have thought that a reason not to choose one year as provided in present circumstances.

    Does not the hon. Gentleman see that in the case of an industrial establishment embarking on a major capital investment a sudden charge in initial allowances dislocates the investment programme of that firm? What we are arguing about now is only one car. Surely the Chancellor of the Exchequer made it quite clear on Budget day that he was introducing this provision and people had plenty of time to adjust themselves? It sounds quite extraordinary to think that contracts made for cars, Daimlers and Rolls-Royces, are running on as much as a year after Budget day. This is very different from what happened in 1951.

    With respect, I do not think that it is so. Again, I do not want to weary the Committee by going into details, but I think that there are a number of cases of contracts for the purchase of cars which would extend for as much as a year, or perhaps beyond. Consequently, we do not believe it to be unreasonable that this exemption should be made in respect of pre-Budget contracts. I would have thought that six months from 17th April, bearing in mind that only now are we dealing with this matter in its final form, would be a little short; but I quite agree, of course, that the plant and machinery, which the Leader of the Opposition had in mind in 1951, was of a very different nature from the motor cars which we are considering now.

    The hon. Gentleman is basing his case on the fact that there is not a great deal of notice to the taxpayer inasmuch as it is not till Report is concluded that the taxpayer will consider carefully and decide what he should do, but is the hon. Gentleman not aware that three days after his right hon. and learned Friend's speech—within three days—there appeared a very large advertisement in The Times, which advertise-tisement, presumably, must have been put in not later than two days after his right hon. and learned Friend's speech, drawing attention to the advantage not any longer of buying Rolls-Royces and Daimlers and Aston Martins and all the rest, but of hiring, and giving the telephone number and a contract and everything, indicating that the public react very quickly indeed to, and read very carefully, everything that his right hon. and learned Friend says? Surely they have had very full warning indeed.

    With respect, I cannot see the relevance of that, because here we are not considering the reactions of people to announcements made by my right hon. and learned Friend on 17th April; here we are considering the tax consequences in respect of contracts entered into before my right hon. and learned Friend announced his Budget, and these are the cases which my right hon. and learned Friend is trying to cover in this proposal.

    But if I may get on, the right hon. Gentleman the Member for Battersea, North also thought that this would occasion difficulty with the Revenue, would waste its time, and so on, in dealing with these cases. Again, I can only say that this will apply only to pre-Budget contracts, and, consequently, I really do not think—and, certainly, in my discussions with the Revenue, I have not been led to believe—there will be any difficulty in operating this provision.

    Thirdly, the right hon. Gentleman said he doubted whether it was wise to deal with hire-purchase contracts in the way that is suggested in these Amendments. That is what I understood him to say. Is it not so?

    I am so sorry. Yes, it was the hon. Gentleman the Member for Gloucester who took that view. I can only say to him that subsections (2) and (3) in the new Clause are meant, in the main, to deal with artificial arrangements and, consequently, I do not think that it would be right to include in the category of artificial arrangements contracts entered into before my right hon. Friend made his announcement on Budget day. This was one of the primary reasons why we chose to deal with hire-purchase contracts in this way.

    My right hon. Friends the Members for Twickenham (Mr. Gresham Cooke), Shipley (Mr. Hirst) and Solihull (Mr. Lindsay)—

    Yes, my hon. Friends.

    My hon. Friends raised certain very important matters in connection with the Amendment in page 19, line 9, to insert the new subsections which concern the tax allowance which may be claimed in respect of cars used solely for the purpose of testing. My hon. Friend the Member for Twickenham raised three particular types of circumstances and asked how the Clause would cover them. The first set of circumstances concerned the case where a manufacturer used as a prototype his own car, which he had manufactured. Here, I would have thought that as long as he uses it solely for the purposes of testing there would be no difficulty at all, though in a moment I will come to the meaning of the proviso to subsection (3) of the Amendment.

    The second case to which my hon. Friend referred was that of a manufacturer in this country purchasing a car from abroad for experimental purposes. Here again, there will be no difficulty because it is not necessary, in order to secure the benefit of the Amendment, that a car used for the purposes of testing should have been manufactured by the person doing the testing.

    The third case that my hon. Friend mentioned was that of a company purchasing a standard model of a car for the purpose of testing a piece of machinery or apparatus such as a gearbox. It is here that the proviso to subsection (3) of the Amendment becomes relevant, because to qualify for the full allowance the manufacturer must show that the car has been provided solely for testing purposes. As long as he uses it only for testing purposes, obviously there will be no difficulty and the full allowance will continue with no restriction on expenditure over £2,000.

    But the effect of the proviso is that if, within five years of providing the vehicle, the person uses it substantially for other purposes, for example, for ordinary travel, the exemption will cease to apply and the allowances, including the allowances for past years, will he accordingly restricted. We came to the conclusion that this proviso was necessary to prevent any abuse. Without it there is the possibility that a car might be bought ostensibly for testing and then, within a short time, be diverted for private use. The wording is also designed to prevent the full allowance being obtained by combining testing with some other use. Without the proviso, directors might possibly use same test cars almost as much like their own private cars.

    My hon. Friend spoke about a manufacturer of gearboxes purchasing a standard motor car to test them. It might well be said, however, that a car radio needed testing by so many miles running, and a director or an employee could do the testing while using the car for what were otherwise private purposes. Consequently, in order that the full allowance may be given, the proviso requires that the purpose shall be for testing only.

    4.45 p m.

    There is, 'however, one very important let-out in the Amendment. My hon. Friend the Member for Twickenham asked that the Inland Revenue should exercise some toleration in the way it administered the Clause, but I think that he will see that toleration is built into the Clause itself, because there is the let-out for occasional use for purposes other than testing. The car will still qualify for the full allowance unless the non-testing use is to any substantial extent—and the words "to any substantial extent" are embodied in the proviso to subsection (3) of the Amendment in page 19, line 9. I think that that goes a long way to ensure that this relaxation which my right hon. and learned Friend has provided is not of a too restrictive nature. But I hope that my hon. Friends, on their part, will appreciate that we would have been leaving the door wide open for a considerable amount of abuse if we had not drafted these provisions as we have.

    Why does the hon. Gentleman think it necessary to give more than three months' notice of change of tax from the Report stage to the purchasers of expensive cars whereas in the case of the ordinary purchaser of the ordinary motor car it is provided under Clause 5 of the Bill that the rise in the Excise duty on vehicles applies to licences taken out after 17th April? In other words, they receive no notice at all and have to pay a higher tax even before the Finance Bill is presented.

    When I referred to what the right hon. Gentleman the Leader of the Opposition did in 1951 I said that one cannot refer to one case and say that it must be a precedent for another and different case. I am not saying that because the Excise duty on vehicles is treated in one way it is necessarily right and proper for another change of taxation to be dealt with in the same way. I ask the Committee to consider the proposal which my right hon. and learned Friend has made and say whether they think it fair and reasonable in all the circumstances, as I would have thought it was.

    Amendment agreed to.

    Further Amendments made: In page 19, line 6, leave out "The three foregoing sections" and insert:

    "Sections twenty-one to twenty-three and subsections (2) and (3) of section (Cars: provisions, as to hire-purchase, etc.) of this Act".

    In line 9, at end insert:

    (3) None of the provisions of sections twenty-one and twenty-two and subsections (2) and (3) of section (Oars: provisions as to hire-purchase, etc.) of this Act shall apply in relation, to a vehicle provided by a person who is a manufacturer of such vehicles as are mentioned in subsection (1) of this section, or of pats or accessories for such vehicles, if he shows that it was provided solely for the purpose of testing the vehicle or parts or accessories for such vehicles:
    Provided that if during the period of five years beginning with the time when the vehicle was provided he puts it, to any substantial extent, to a use which does not serve that purpose and that purpose only, this subsection shall be deemed not to have had effect in relation to the vehicle.
    (4) Paragraph 4 of the Third Schedule to the Finance Act, 1957 (additional assessments and adjustments of assessments) shall have effect as if references therein to that Schedule included references to subsections (2) and (3) of section (Cars: provisions as to hire-purchase, etc.) of this Act and the foregoing subsection.

    In line 10, have out "the three foregoing sections and insert:

    "sections twenty-one to twenty-three of this Act".

    In line 13, leave out "(on or after that day)" and insert "to expenditure incurred".—[ Mr. Barber.]

    Amendment proposed: In page 19, line 13, at end insert:

    "but not after the seventeenth day of October, nineteen hundred and sixty-one".[Mr. Diamond.]

    Question put, That those words be there inserted:—

    Division No. 234.]

    AYES

    [4.52 p.m

    Ainsley, WilliamHenderson, Rt. Hn. Arthur (Rwly Regis)Panned, Charles (Leeds, W.)
    Albu, AustenHilton, A. V.Pavitt, Laurence
    Allen, Scholefield (Crewe)Holman, PercyPearson, Arthur (Pontypridd)
    Awbery, StanHoughton, DouglasPeart, Frederick
    Bacon, Miss AliceHowell, Charles A. (Perry Barr)Pentland, Norman
    Benson, Sir GeorgeHowell, Denis (Small Heath)Popplewell, Ernest
    Blyton, WilliamHoy, James H.Prentice, R. E.
    Bowden, Herbert W. (Leics, S.W.)Hughes, Emrys (S. Ayrshire)Price, J, T. (Westhoughton)
    Bowles, FrankHughes, Hector (Aberdeen, N.)Probert, Arthur
    Boyden, JamesHunter, A. E.Pursey, Cmdr, Harry
    Braddock, Mrs. E. M.Hynd, H. (Accrington)Randall, Harry
    Brockway, A. FennerHynd, John (Attercliffe)Rankin, John
    Broughton, Dr. A. D. D.Irvine, A. J. (Edge Hill)Redhead, E. C.
    Brown, Alan (Tottenham)Irving, Sydney (Dartford)Reynolds, G. W.
    Brown, Rt. Hon. George (Belper)Janner, Sir BarnettRobertson, John (Paisley)
    Butler, Herbert (Hackney, C.)Jay, Rt. Hon. DouglasRobinson, Kenneth (St. Pancras, N.)
    Butler, Mrs. Joyce (Wood Green)Jeger, GeorgeRoss, William
    Callaghan, JamesJenkins, Roy (Stechford)Shinwell, Rt. Hon. E.
    Castle, Mrs. BarbaraJohnson, Carol (Lewisham, S.)Short, Edward
    Chapman, DonaldJones, Rt. Hn. A. Creech(Wakefield)Silverman, Julius (Aston)
    Chetwynd, GeorgeKelley, RichardSlater, Mrs. Harriet (Stoke, N.)
    Cliffe, MichaelKey, Rt. Hon. C. W.Slater, Joseph (Sedgefield)
    Cronin, JohnKing, Dr. HoraceSnow, Julian
    Crossman, B. H. S.Lee, Frederick (Newton)Sorensen, R. w.
    Cullen, Mrs. AliceLever, L. M. (Ardwick)Soskice, Rt. Hon. Sir Frank
    Darling, GeorgeLewis, Arthur (West Ham, N.)Spriggs, Leslie
    Davies, G. Elfed (Rhondda, E.)Lipton, MarcusStewart, Michael (Fulham)
    Davies, Harold (Leek)Loughlin, CharlesStones, William
    Deer, GeorgeMabon, Dr. J. DicksonStrachey, Rt. Hon. John
    de Freitas, GeoffreyMcCann, JohnStrauss, Rt. Hon. G. R. (Vauxhall)
    Delargy, HughMacColl, JamesStross, Dr. Barnett (Stoke-on-Trent, C.)
    Diamond, JohnMcInnes, JamesSwain, Thomas
    Dodds, NormanMcKay, John (Wallsend)Swingler, Stephen
    Driberg, TomMackie. John (Enfield, East)Symonds, J. B.
    Dugdale, Rt. Hon. JohnMcLeavy, FrankTaylor, John (West Lothian)
    Ede, Rt. Hon. C.Mallalieu, E. L. (Brigs)Thompson, Dr. Alan (Dunfermline)
    Edwards, Robert (Bilston)Manuel, A. C.Tomney, Frank
    Edwards, Walter (Stepney)Marsh, RichardWainwright, Edwin
    Evans, AlbertMayhew, ChristopherWarbey, William
    Foot, Dingle (Ipswich)Mellish, R.J.Wells, William (Walsall, N.)
    Foot, Michael (Ebbw Vale)Mendelson, J. J.White, Mrs. Eirene
    Gaitskell, Rt. Hon, HughMilne, Edward J.Whitlock, William
    Ginsburg, DavidMitchison, G. R.Wigg, George
    Cordon Walker, Rt. Hon. P. C.Monslow, WalterWilkins, W. A.
    Gourlay, HarryMort, D. L.Willey, Frederick
    Grev, CharlesMoyle, ArthurWilliams, W. T. (Warrington)
    Griffiths, W. (Exchange)Mulley, FrederickWillis, E. C. (Edinburgh, E.)
    Hale, Leslie (Oldham, W.)Neal, HaroldWilson, Rt. Hon. Harold (Huyton)
    Hall, Rt. Hn. Gleovil (Colne Valley)Noel-Baker, Rt. Hn. Philip (Derby, S.)Woof, Robert
    Hamilton, William (West Fife)Oliver, G. H.Zilliacus, K.
    Harman, WilliamOram, A. E.
    Hayman, F. H.Paget, R. T.TELLERS FOR THE AYES:
    Mr. Rogers and Mr. Lawson.

    NOES

    Agnew, Sir PeterBoyle, Sir EdwardCraddock, Sir Beresforo
    Altken, W. T.Braine, BernardCritchley, Julian
    Allason, JamesBrewis, JohnCrowder, F. P.
    Arbuthnot, JohnBromley-Davenport, Lt.-Col. Sir WalterCunningham, Knox
    Atkins, HumphreyBrowne, Percy (Torrington)Curran, Charles
    Barber, AnthonyBryan, PaulDalkeith, Earl of
    Barlow, Sir JohnBuck, AntonyDance, James
    Barter, JohnBullus, Wing Commander EricDavies, Rt. Hn. Clement (Montgomery)
    Baxter, Sir Beverley (Southgate)Burden, F. A.d'Avigdor-Gotdemid, Sir Henry
    Beamish, Col. Sir TuftonButcher, Sir Herbertde Ferranti, Basil
    Bell, RonaldCampbell, Sir David (Belfast, S.)Digby, Simon Wingfield
    Bennett, F. M. (Torquay)Campbell, Gordon (Moray & Nairn)Donaldson, Cmdr. C. E. M.
    Berkeley, HumphryCarr, Compton (Barons Court)Duncan, Sir James
    Bevins, Rt. Hon. ReginaldCarr, Robert (Mitcham)Eccles, Rt. Hon. Sir David
    Bidgood, John C.Channon, H. P. G.Elliot, Capt. Walter (Carshalton)
    Biggs, Davison, JohnChataway, ChristopherElliott, R.W. (Nwcastle-upon-Tyne, N.)
    Birch, Rt. Hon. NigelClark, Henry (Antrim, N.)Emery, Peter
    Bishop, F. P.Clark, William (Nottingham, S.)Errington, Sir Erio
    Black, Sir CyrilCooke, RobertErroll, Rt. Hon. F. J.
    Bossom, CliveCooper, A. E.Farey-Jones, F. W.
    Bourne-Arton, A.Cordeaux, Lt.-Col. J. K.Farr, John
    Box, DonaldCostain, A. P.Fell, Anthony
    Boyd-Carpenter, Rt. Hon. JohnCourtney, Cdr. AnthonyFinlay, Graeme

    The Committee divided: Ayes 154, Noes 233.

    Fisher, NigelLinstead, Sir HughRussell, Ronald
    Fletcher-Cooke, CharlesLitchfield, Capt. JohnScott-Hopkins, James
    Fraser, Ian (Plymouth, Sutton)Lloyd, Rt. Hon. Selwyn (Wirrall)Seymour, Leslie
    Gammans, LadyLongbottom, CharlesSharpies, Richard
    Gardner, EdwardLongden, GilbertShaw, M.
    Gibson-Watt, DavidLoveys, Walter H.Simon, Rt. Hon. Sir Jocelyn
    Glover, Sir DouglasLucas-Tooth, Sir HughSkeet, T. H. H.
    Glyn, Dr. Alan (Clapham)McAdden, StephenSmith, Dudley (Br'ntf'rd & Chiswick)
    Glyn, Sir Richard (Dorset, N.)Mac Arthur, IanSpearman, Sir Alexander
    Goodhart, PhilipMcLaren, MartinSpeir, Rupert
    Goodhew, VictorMcLaughlin, Mrs. PatriciaStevens, Geoffrey
    Gower, RaymondMaclean, SirFitzroy (But & N. Ayrs.)Storey, Sir Samuel
    Grant, Rt. Hon. WilliamMacmillan, Rt. Hn. Harold (Bromley)Studholme, Sir Henry
    Green, AlanMacmiilan, Maurice (Halifax)Summers, Sir Spencer (Aylesbury)
    Gresham Cooke, R.Macpherson, Niall (Dumfries)Sumner, Donald (Orpington)
    Grimond, J.Maddan, MartinTapsell, Peter
    Grimston, Sir RobertMaitland, Sir JohnTaylor, Sir Charles (Eastbourne)
    Gurden, HaroldManningham-Buller, Rt. Hn. Sir R.Taylor, Edwin (Bolton, E.)
    Hall, John (Wycombe)Marshall, DouglasTeeling, William
    Hamilton, Michael (Wellingborough)Marten, NeilTemple, John M.
    Harris, Frederic (Croydon, N. W.)Mathew, Robert (Honlton)Thatcher, Mrs. Margaret
    Harrison, Brian (Maldon)Matthews, Gordon (Meriden)Thomas, Leslie (Canterbury)
    Harvey, Sir Arthur Vere (Macolesf'd)Mawby, RayThompson, Richard (Croydon, S.)
    Harvey, John (Walthamstow, E.)Maxwell-Hyslop, R. J.Thornton-Kemsley, Sir Colin
    Harvie Anderson, MissMaydon, Lt.-Cmdr. S. L. C.Thorpe, Jeremy
    Hay, JohnMills, StrattonTurner, Colin
    Heald, Rt. Hon. Sir LionelMontgomery, FergusTurton, Rt. Hon. R. H.
    Henderson-Stewart, Sir JamesMore, Jasper (Ludlow)van Straubenzee, W. R.
    Hicks Beach, Maj. W.Morrison, JohnVane, W. M. F.
    Hill, Dr. Rt. Hon. Charles (Luton)Nabarro, GeraldVaughan-Morgan, Rt. Hon. Sir John
    Hill, Mrs. Eveline (Wythenshawe)Nicholson, Sir GodfreyVickers, Miss Joan
    Hill, J. E. B. (S. Norfolk)Nugent, Sir RichardVesper, Rt. Hon. Dennis
    Hirst, GeoffreyOakshott, Sir HendrieWakefield, Edward (Derbyshire, W.)
    Holland, PhilipOrr-Ewing, C. IanWalder, David
    Hopkins, AlanPage, John (Harrow, West)Walker, Peter
    Hornsby Smith, Rt. Hon. PatriciaPage, Graham (Crosby)Walker-Smith, Rt. Hon. Sir Derek
    Howard, Hon. G. R. (St. Ives)Pannell, Norman (Kirkdale)Wall, Patrick
    Howard, John (Southampton, Test)Pearson, Frank (Clitheroe)Ward, Dame Irene
    Hughes-Young, MichaelPeel, JohnWatkinson, Rt. Hon. Harold
    Hutchison, Michael ClarkPickthorn, Sir KennethWells, John (Maidstone)
    Iremonger, T. L.Pitt, Miss EdithWhitelaw, William
    James, DavidPowell, Rt. Hon. J. EnochWilliams, Dudley (Exeter)
    Johnson, Dr. Donald (Carlisle)Price, David (Eastleigh)Williams, Paul (Sunderland, S.)
    Johnson, Eric (Blackley)Prior, J. M. L.Wills, Sir Gerald (Bridgwater)
    Johnson Smith, GeoffreyProudfoot, WilfredWilson, Geoffrey (Truro)
    Kerans, Cdr. J. S.Quennell, Miss J. M.Wise, A. R.
    Kerby, Capt. HenryRawlinson, PeterWolrige-Gordon, Patrick
    Kerr, Sir HamiltonRedmayne, Rt. Hon. MartinWood, Rt. Hon. Richard
    Kershaw, AnthonyRees-Davies, W. R.Woodhouse, C. M.
    Lancaster, Col. C. G.Renton, DavidWoodnutt, Mark
    Langford-Holt. J.Ridsdale, JulianWorsley, Marcus
    Leavey, J. A.Robinson, Sir Roland (Blackpool, S.)Yates, William (The Wrekin)
    Leburn, GilmourRobson Brown, Sir William
    Legge-Bourke, Sir HarryRoots, WilliamTELLERS FOR THE NOES:
    Lewis, Kenneth (Rutland)Ropner, Col. Sir LeonardColonel Sir Harwood Harrison and
    Lindsay, MartinRoyle, Anthony (Richmond, Surrey)Mr. Noble.

    Amendments made: In page 19, line 14, at end insert:

    "where either—
  • (a) the expenditure is incurred within twelve months after that day, or
  • (b) the contract is one of hire-purchase or for purchase by instalments,
  • and subsections (2) or (3) of section (Cars: provisions as to hire-purchase, etc.) of this Act shall not apply where the contract was entered into before that day".

    In line 15, leave out "the three foregoing sections" and insert:

    "sections twenty-one to twenty-three and section (Cars: provisions as to hire-purchase. etc.) of this Act".

    In line 24, leave out "and the three foregoing sections" and insert:

    "section and sections twenty-one to twenty-three and (Cars: provisions as to hire-purchase, etc.) of this Act".—[Mr. Barber.]

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

    New Clause—(Cars: Provisions As To Hire-Purchase, Etc)

    (1) In the case of a vehicle to which this section applies, being a vehicle of which the retail price at the time of the contract in question exceeds two thousands pounds, the following provisions shall have effect.

    (2) Sub-paragraph (1) of paragraph 1 of the Third Schedule to the Finance Act, 1957 (provision of machinery or plant where the provider ceases to be entitled to the benefit of the contract without becoming the owner of the machinery or plant) shall apply in a case not falling within sub-paragraph (1) ( b) or subparagraph (2) ( b) of that paragraph if it would apply if the case fell within either of those sub-paragraphs; and the said sub-paragraph (1) shall have effect as if at the end there were added "or in determining what amount tit any) is allowable as mentioned in section twenty-two of the Finance Act, 1961".

    (3) Where the said sub-paragraph (1) has effect (whether by virtue of the foregoing subsection or otherwise) all payments made under the contract shall be treated for income tax purposes (including in particular the purposes of section twenty-three of this Act) as expenditure incurred on the hiring of the vehicle otherwise than by way of hire-purchase.

    (4) Where the person providing the vehicle takes it under a hire-purchase contract, then in apportioning the payments under the contract between capital expenditure incurred on the provision of the vehicle and other expenditure so much of those payments shall be treated as such capital expenditure as is equal to the price which would be chargeable, at the time the contract is entered into, to the person providing the vehicle if he were acquiring it on a sale outright.—[ Mr. Barber.]

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

    Bill reported, with Amendments; as amended (in Committee and on recommittal), considered.

    New Clause—(Relief From Duty On Heavy Oils Use') By Horticultural Producers)

    (1) If, on an application made for the purposes of this section by a horticultural producer in such manner as the Commissioners of Customs and Excise may direct, it is shown to the satisfaction of the Commissioners that within the period for which the application is made any quantity of heavy oils has been used by the applicant as mentioned in the following subsection, then subject to the provisions of this Act the applicant shall be entitled to obtain from the Commissioners repayment of the amount of any duty which has been paid in respect of the quantity so used (including any sum paid under subsection (2) of section two of this Act), unless that amount is less than fifty shillings.

    (2) A horticultural producer shall be entitled to repayment under the foregoing subsection in respect of oil used by him—

  • (a) in the heating, for the growth of horticultural produce primarily with a view to the production of horticultural produce for sale, of any building or structure, or of the earth or other growing medium in it; or
  • (b) in the sterilisation of the earth or other growing medium to be used for the growth of horticultural produce as aforesaid in any building or structure.
  • (3) Where any quantity of oil is used partly for any such purpose as aforesaid and partly for another purpose, such part of that quantity shall be treated as used for each purpose as may be determined by the Commissioners.

    (4) An application under this section shall be made for a period of six months ending with June or December and within the three months following that period, unless the Commissioners otherwise allow:

    Provided that for the year nineteen hundred and sixty-one applications may be made for the period beginning with the seventeenth day of April and ending with December.

    (5) The Commissioners may require an applicant for a repayment under this section to state such facts concerning the hydrocarbon owls delivered to or used by him or concerning the production of horticultural produce by him as they may think necessary to deal with the application, and to furnish them in such form as they may require with proof of any statements so made, and may require him to permit an officer to inspect any premises or plant used by him for the production of horticultural produce or in or for which any such oil was used; and if such proof is not furnished to their satisfaction, or if the required facts are not stated, or if he fails to permit any such inspection, the facts shall be deemed for the purposes of this section to be such as the Commissioners may determine.

    (6) In this section—

    "horticultural produce" has the meaning assigned to that expression by subsection (1) of section eight of the Horticulture Act, 1960; and
    "horticultural producer" means a person growing horticultural produce primarily for sale.—[Mr. Selwyn Lloyd.]

    Brought up, and read the First time.

    I beg to move, That the Clause be read a Second time.

    The purpose of this new Clause is to provide for repayments of duty on heavy hydrocarbon oils used by horticultural producers for specified purposes connected with the growth of horticultural produce. As the House will remember, during the Committee stage of the Bill, my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) moved an Amendment to relieve from the heavy oil duty oils used for heating glasshouses growing horticultural produce in commercial quantities. I conceded on that occasion that there were special arguments which seemed to me to apply to horticulture alone.

    In the first place, the yield of the duty on horticulture would have been comparatively small. The estimates vary, but about £250,000 has been mentioned by my advisers. Perhaps the more substantial reason is that horticulture and agriculture as well have been treated by successive Governments as being in a special position in our economy, and horticulture does not enjoy the protection which agriculture enjoys under the Annual Price Review. In these circumstances, I thought it right to consider what could be done to meet the representations of hon. Members from both sides of the Committee.

    The scheme proposed in the Clause provides for horticultural producers to continue buying duty-paid oil, but to make periodic claims for repayment. Similar schemes are already in operation for oils used in fishing boats under Section 205 of the Customs and Excise Act, 1952, and for oils used in coastal ships under Section 204 of the same Act. In the latter case, the shipowners also have an alternative of duty-free delivery direct from the bonded warehouses or refineries.

    Unfortunately, it is not practicable to allow horticultural producers to receive heavy oils without paying duty in the first instance. To do that would involve either physically distinguishing the oil by a marking system, which I am advised would be uneconomic for the small quantities involved, or placing the oil and the horticultural producers' premises under bonded customs control, which would also be uneconomic and expensive in terms of Customs staff.

    There is no parallel between the delivery of oil direct from a bonded vehicle into the storage tank of a horticulture producer who may be using oil both for domestic central heating and for the growth of produce. I am sure that the House will agree that control is a great deal more difficult in the latter case. Therefore, I have adopted the system which is suggested in this new Clause.

    The Clause defines horticultural producers as persons growing horticultural produce primarily for sale, that is, those carrying on a business. It allows repayment claims in respect of heavy oils used in heating glasshouse premises, frames, and so on, for the growth of horticultural produce and also heavy oils used for sterilizing soil for that purpose. Its scope is wider than that put down in the Amendment by my right hon. and learned Friend, which was confined to heavy oils used for heating glasshouses.

    I found it necessary to widen the Clause to avoid anomalies, but this widening does not go beyond the spirit of the case that I was asked to meet. Oils used for drying or processing horticultural produce after its growth is completed are excluded from the Clause. I had to restrict the concession to growth in order to confine it to the horticultural industry proper. If I had not done so, the concession would spread to the field of distribution.

    I have tried to meet the case urged on me by both sides of the Committee, I hope that this new Clause meets the legitimate anxieties that the horicultural industry had as a result of the Bill originally presented to the House and that the House will give it a sympathetic Second Reading.

    I do not want to detain the House for more than a few moments, but I think that I should be lacking in courtesy if I did not express appreciation of my right hon. and learned Friend the Chancellor of the Exchequer for implementing the undertaking that he was good enough to give in Committee in respect of the duty on heavy oils for horticultural installations.

    I think that the right hon. Member for Huyton (Mr. H. Wilson) observed in the course of our proceedings that this was the only material concession which the Chancellor had found himself able to make in the course of our protracted deliberations oh the Bill. While that in itself may be a matter for regret, I naturally take the view that, if my right hon. and learned Friend felt that he was limited to one concession, it is both gratifying and appropriate that his choice should have alighted on this particular one, which was moved by myself, and which, I think, is in a very good cause.

    I am sure that this concession will be very warmly welcomed by horticulturists in all parts of the country and that it will be a material help to them in grappling with the very difficult problems which notoriously affect their important industry.

    In welcoming this new Clause, I wish to ask my right hon. and learned Friend three short questions about it. First, in defining horticultural produce, I should like to know whether that includes the growing of plants for sale as well as the actual fruit or vegetables which may be sold for consumption. A very important section of the horticultural industry grows young plants in conditions very similar to those which it is obviously intended should be covered by the Clause. I hope that we can have an assurance from my right hon. and learned Friend on that point.

    My second question is whether mushroom growers are also covered by the Clause. It is rather a fine distinction, but the question of heating soil is certainly very relevant to mushroom growers, because they suffer as much from the import problems as the growers of any other horticultural commodity.

    Thirdly, I notice that in the proviso to subsection (4) of the new Clause there is a date from which the Clause becomes operative. May I take it from that proviso that those who had considerable oil stocks in hand when the Chancellor made his Budget statement will not now have to pay duty on that oil?

    Finally, one further observation. Of course, I welcome the new Clause very much indeed, but I hope that my right hon. and learned Friend will appreciate that what has made it necessary for the horticultural industry to put the pressure upon us that it has is not cured by the new Clause, and I hope that the Government will bear in mind that they can expect no relief from the pressure exercised by the industry to have the import policy looked at.

    I do not propose to detain the House very long in welcoming the new Clause and in thanking my right hon. and learned Friend for introducing it. I share with my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) the hope that my right hon. and learned Friend will make it clear that the growing of young plants is covered by the Clause. I am glad he pointed out that he recognised the difficulty of the horticultural industry in not being covered by the Annual Price Review. That, of course, in itself shows the strength of the Review.

    Worcestershire is a major horticultural producing county and it would be churlish of me not to add my thanks to those of my right hon. and hon. Friends for this minor though very important concession, which has much pleased the horticultural growers in my constituency and in the adjoining constituency.

    We in Scotland are not entirely dissatisfied with this new Clause. The point so very well made by the hon. Member for the Isle of Ely (Sir H. Legge-Bourke) is one to which I should like to address myself. We are concerned whether that part of the horticultural industry dealing with plants and the growing of plants is covered by the Clause. I hope that we shall get a satisfactory answer from the Chancellor on that point.

    I should like to have an explanation of the last part of subsection (5) of the Clause. It states that the grower has to make application for the concession, and it is laid down, more or less, the form which that application has to take. There have to be facts and reasonable proof of the facts. They have to be provided in a particular way and form and there has to be scope for an inspection in order to justify the facts.

    What concerns me is that the last part of the subsection reads:
    "If such proof is not furnished … if the required facts are not stated, or if he fails to permit any such inspection"—
    and then we get—
    "the facts shall be deemed for the purpose of this section to be as the Commissioners may determine".
    I should have thought that if a person did not comply with these requirements he would be entirely disqualified from receiving the concession. Therefore, I want to know why this form of words was used and, indeed, what it means.

    5.15 p.m.

    It would be wrong, in so far as this concession was urged upon the Chancellor in Committee by both sides in support of the very powerful case made by the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) if we were not to welcome the new Clause. A very strong case has been made out for the concession and we are very grateful to the right hon. and learned Gentleman for meeting it. May I say, in passing, that we regret that he has not been so forthcoming in meeting other claims for concessions, but that does not minimise the welcome which we extend to this concession.

    I, too, wish to raise the point referred to by my hon. Friend the Member for Kilmarnock (Mr. Ross) as to the exact meaning and effect of subsection (5). It would appear to suggest that though the Commissioner may require an applicant to furnish information and proof in respect of his claim and to allow an inspection of his premises, nevertheless, if he fails to provide the information or proof or to permit inspection, he may still secure some degree of repayment on the basis of some facts determined by the Commissioners.

    I should have thought that it would be appropriate in such circumstances, as, indeed I think, is covered in other cases of repayment of duty of a similar character, to disallow the claim. I cannot understand why words to that effect were not incorporated in the Clause. The Chancellor referred to similar concessions made in the principal Act of 1952, under Sections 204 and 205, in respect of vessels in home waters and fishing vessels. I have studied those Sections without finding any comparability in the provisions therein with this subsection in respect of this concession. On the contrary, there are provisions against the abuse of those other concessions, penalties for abuse and for contravention of the regulation. I can find no suggestion whatsoever in this Clause of any penalties that may arise as a result of a false claim.

    It seems a little incongruous that a claimant may still hope to get something out of his claim even if he does not satisfy the Commissioners of Customs and Excise as to the facts and even though he may make a false claim. Apparently, he suffers no penalty by so doing. I hope that the Chancellor will clarify the matter, although I readily appreciate that the administrative machinery which he proposes in order to give this relief by way of repayment is, in the circumstances, the best system to adopt.

    May I thank my right hon. and learned Friend for introducing this new Clause and also my hon. Friends who were present when this matter was debated earlier in Committee? I should like to have been present during the debate but, unfortunately, I was prevented from being here. I was on a delegation abroad.

    I am sure that the horticultural industry welcomed this concession. I agree with my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) that the horticultural industry is going through a very bad time as a result of the present import policy. Indeed, it is going through as bad a time as any industry in the country. Many of those in the industry are very small people and they need the help of this House to fight their battles for them.

    I must warn my right hon. and learned Friend that, although this is a very valuable concession, the whole import policy for horticultural produce is one which is causing a great deal of disturbance in those parts of the country where horticulture is of such great importance.

    I hope that my right hon. and learned Friend will resist the objections of hon. Members apposite to subsection (5). It is drawn deliberately widely because many growers are in a small way of business. It means, I understand, that even if they do not correctly complete their forms and the like, the Commissioners of Customs and Excise will decide what they consider to be a reasonable amount for them. Perhaps, however, it would be a good thing if my right hon. and learned Friend would clarify subsection (5) before we part with the Clause.

    In reply to my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke), plants are covered. The mushroom growers, also, are covered. With regard to oil in stock at the time that this provision comes into effect, if the amount held in stock is under 200,000 gallons, it is not affected. If it is over 200,000 gallons—I rather doubt that anyone concerned with horticulture would have such a quantity—it will be covered by an Amendment to be moved later to another Clause.

    In response to the undertaking which I gave to my hon. Friend the Member for Preston, South (Mr. Green) to deal with the retrospective element, an Amendment has been put down to cover that. In either case, therefore, the horticulturists will not be caught by this provision. Penalties are covered by the main Customs and Excise Act. Therefore, it is not necessary to include them in the Clause.

    In reply to the point raised by the hon. Member for Kilmarnock (Mr. Ross), my hon. Friend the Member for Ormskirk (Sir D. Glover) was quite right. The reason for framing the subsection in this way was to help, not to hinder. There are cases in which the proper records may not be kept. In that event, if the Commissioners of Customs and Excise were to act on evidence submitted to them, they would be bound to say that the case had not been made; they would not be able to guess at an equitable amount that the grower should receive. The subsection is drawn so that if somebody produces inadequate evidence but the Commissioners are certain that he has ground for some sort of claim, they should be able to pass part of the claim. Without this kind of drafting, the Commissioners would be in difficulty.

    The subsection goes much wider than that. It uses, for example, the words

    "fails to permit any such inspection".
    The question of inspection is surely within anyone's competence, no matter how inadequate the books may be.

    I am not certain whether the hon. Gentleman is suggesting that I should stiffen the provisions of the subsection or relax them.

    We can only take the subsection for what it says. It is a clear and remarkable provision. It is supposed to help the applicant who cannot fill in his form fully. Perhaps he does not have the information, or perhaps he is not very good at it. We all understand that and sympathise with it, within reason. Subsection (5) states, however:

    "if such proof is not furnished to their satisfaction, or if the required facts are not stated, or if he fails to permit any such inspection".
    That is to say, the poor, innocent man, who is bad at filling up forms, has refused to allow anybody to go and see for himself that which a complete and correct filling up of the form would reveal.

    The conclusion is that if any of those things happen,
    "the facts shall be deemed for the purposes of this section to be such as the Commissioners may determine."
    Suppose that the Commissioners have good ground for believing that it is not begonias or strawberries which are being grown, but something else. How are the Commissioners to decide which of the numerous varieties of horticultural products are to be deemed for the purposes of the Clause to be grown by the small man who finds difficulty in filling in a form?

    It is a small matter, we all know, but this is an outrageous way of doing it. If the Chancellor cannot think of any better way of dealing with a man who finds difficulty in filling up a form, or who fills it incompletely, he ought to think again. Nobody supposes the Commissioners to be tyrannical, idiotic, or anything of that sort. Surely, the simplest and the right plan would be to say, "If you make your case, you can have the relief. If you do not make your case, you do not get the relief", and to give the Commissioners, as one does in cases of this kind, a certain amount of discretion about what "making a case" means.

    It is an absurd way of doing a simple thing to go on from that to say, "If you deliberately do not allow any Customs representative to come and see the facts for himself, you not having stated them correctly or sufficiently on your form, the Commissioners still have complete discretion to invent, if they so choose, an entirely imaginary set of facts which may or may not entitle you to get relief under the Clause." The Commissioners should be given discretion, but if the grower does not make his case, why should he get the relief?

    There are many other people besides horticultural producers who are concerned with making small claims. We have all had to sign lots of them on behalf of people like old-age pensioners. They are treated reasonably and fairly. Those who administer these things know how to give way and how to give a little ground in this kind of case. There is no need to put in such absurd and fantastic provisions as the Chancellor has chosen for this purpose.

    I am still not certain whether I am being bullied on the ground that I have given away too much, or reproved because I have not given away enough, From the speech of the hon. and learned Member for Kettering (Mr. Mitchison), I gather that I am being reproved for giving away too much. This concession is not an easy one to administer. We have had to give a great deal of thought to whether it was practicable for the sums involved to be repaid. It will put a heavy burden upon the Commissioners of Customs and Excise to do it.

    It may be said that that is no excuse for a form of words which do not make much sense. But the subsection cuts both ways. The proposed arrangement is reasonably fair to both sides. The Commissioners must be able to come to a determination. It may be said, "If the grower fails to permit any such inspection, why should the Commissioners come to a determination in his favour?" I have no doubt that if the grower refuses inspection for reasons which give ground for suspicion, the Commissioners will decide against him. They will assume from the facts that the man is not entitled to anything. I ask the House to accept the new Clause. We have done our best to meet the case which was put forward in Committee.

    When the Clause was drawn up, I wonder whether the Chancellor had in mind the point raised by one of his hon. Friends about mushroom growers.

    I agree. I am only pointing out that mushrooms can be grown in a cellar. Suppose that somebody says, "I have a cellar in which I grow mushrooms." The Commissioners may say that they would like to look at the cellar. The grower might reply, "Oh, no, you will not. You are not coming on to my premises." Are we, in those circumstances, to say that the grower, having refused to allow the Commissioners to see whether he has mushrooms in his cellar, will still get any relief that the Commissioners may determine? Was that sort of possibility in the Chancellor's mind when drawing up the Clause?

    That would be a case in which the Clause would operate to protect the Commissioners, because in that case, without doubt, they would say that there was no claim. The man cannot come afterwards to try to reopen the matter and say, "I had a claim after all, but you would not accept it." There must be a means of finality about it. I am grateful to the hon. Member for giving me the chance to reply to such an example.

    Question put and agreed to.

    Clause read a Second time and added to the Bill.

    New Clause—(Temporary Continuation Of Commonwealth Preference For Goods From Southern Cameroons)

    (1) On the Southern Cameroons ceasing to be administered by Her Majesty's Government under the trusteeship system of the United Nations, section two of the Import Duties Act, 1958 (Commonwealth preference) shall have effect as if the Southern Cameroons were a country named in subsection (4) of that section (independent countries entitled to Commonwealth preference):

    Provided that the Southern Cameroons shall not by virtue of this section be treated as continuing to be so named after the end of September, nineteen hundred and sixty-two.

    (2) In this section "the Southern Cameroons" means the area comprised at the passing of this Act in the territory then known as the Southern Cameroons.—[ Mr. Erroll.]

    Brought up, and read the First time.

    5.30 p.m.

    I beg to move, That the Clause be read a Second time.

    The purpose of this new Clause is simple. It arises from the decision by the voters of the Southern Cameroons at a plebiscite held in February this year to join the Cameroun Republic rather than to join Nigeria. As the House will know, the Southern Cameroons is at present administered by Her Majesty's Government under the trusteeship system of the United Nations. This trusteeship will terminate on 1st October this year, when the Southern Cameroons joins the Cameroun Republic.

    As the law stands, the Southern Cameroons would automatically cease to be part of the Commonwealth preference area when the trusteeship ends.

    The sudden loss of entitlement to Commonwealth preference would be a serious blow to the economy of the territory, which is based on the cultivation of a variety of tropical produce, most of which is sold on the United Kingdom market. Of these various tropical products, easily the most important crop in the Southern Cameroons is bananas. Bananas enter the United Kingdom duty free from countries in the Commonwealth preference area, but the duty on bananas from other countries is at the rate of £7 10s. per ton. This represents a very substantial margin of protection for Commonwealth producers in the United Kingdom.

    As we import annually about 70,000 tons of bananas from the Southern Cameroons—about one-fifth of our total supplies of bananas—I am sure that the House will appreciate that the value of our preferences to the economy of the Southern Cameroons is very considerable, and there is incidentally, a considerable British investment in the Southern Cameroons banana plantations. We are satisfied that other markets could not readily absorb immediately such a large quantity of bananas.

    In the longer term, the position may change. As part of the Cameroun Republic the Southern Cameroons may gain the advantage of preferential entry into the French market and of association with the European Economic Community, but whatever benefits may accrue to its economy as a result of factors such as these, it seems reasonably certain that they will not immediately offset the loss of entitlement to Commonwealth preferences.

    The right hon. Gentleman has been learning.

    I am always learning.

    Her Majesty's Government have decided, therefore, subject to the approval of the House, that we ought to maintain our preferences for the Southern Cameroons for up to a year. This will give us time, in consultation with the other parties involved, to consider how the trading arrangements of the Southern Cameroons should be adjusted to accord with the new international position of the territory.

    The Clause before the House will, if enacted, allow products of the Southern Cameroons to continue to be eligible for Commonwealth preference until the end of September, 1962. Incidentally, there is already provision in the Import Duties Act for removing countries from the Commonwealth preference area by Order in Council. We shall have the power, therefore, subject to the approval of Parliament, to end the preference before the end of September, 1962, if this should for any reason seem desirable.

    I hope that this explanation will enable the House to accept this short but useful new Clause.

    We should not pass this new Clause without saying "Thank you" to my right hon. and learned Friend the Chancellor and to the Government for this concession, which will help the Southern Cameroons very considerably.

    As my right hon. Friend has pointed out, the main help will go to the growers of bananas, and, with the Southern Cameroons going out of the Commonwealth by joining the Cameroun Republic, it will mean that those people who are growing bananas in Southern Cameroons will find considerable difficulty in securing alternative markets. Therefore, I think that this new Clause is extremely valuable.

    There is just one question which I should like to ask my right hon. Friend. The operation of the new Clause finishes in September, 1962. Is it in mind that if new arrangements have not been able to be made for the Southern Cameroons producers of bananas to find alternative markets, it might be continued in operation beyond that date?

    I should also like to ask a question about this new Clause. I fully understand that if a country remains in the Commonwealth it is fully entitled to have the benefit of Commonwealth preference, but are there any other examples of this being done for a country which is leaving the Commonwealth, when the preference has been continued for countries leaving the Commonwealth in this way? After all, it is a little hard on, for instance, the West Indian producers of bananas if, in fact, a country can leave the Commonwealth and still have Commonwealth preferences.

    I know that this is a generous gesture, and I would not wish it to be withdrawn, but I should like to know what limit the Government propose to their generosity to a country outside the Commonwealth, in the interests of Commonwealth countries.

    Perhaps I can answer the two Points together. In reply to my hon. Friend the Member for Dover (Mr. Arbuthnot), the intention is that the arrangement should come to an end in September, 1962, and we would not like to give a commitment beyond that point, because there are a number of factors which could arise during next year, one of which might well be the attitude of other Commonwealth countries which are banana suppliers to this country. We must remember that we are not giving a new preference, but that what we are doing is to maintain the status quo for a further year of banana growing.

    There are substantial precedents for having preference arrangements for countries that have left the Commonwealth. I need only mention in that connection Burma, Ireland and South Africa. I think that other Commonwealth countries will see the reasonableness of what we propose. I hope that my hon. Friend will be reassured, but I would rather not give any undertaking about its continuation beyond that mentioned in the new Clause.

    Question put and agreed to.

    Clause read a Second time and added to the Bill.

    New Clause—(Sweets Used For Making Wine Vinegar)

    Paragraph ( f) of subsection (1) of section one hundred and forty of the Customs and Excise Act, 1952 (which provides for the relief of certain sweets from duty), shall have effect as if there were inserted, at the end thereof, the words "or sweets delivered to any person licensed under section two hundred and twenty-five of this Act for the purpose of manufacturing wine vinegar for sale".)—[ Mr. Snow.]

    Brought up, and read the First time.

    I beg to move, That the Clause be read a Second time.

    This is a modest new Clause, the intention of which is to facilitate the manufacture of wine vinegar. At present, vinegar in this country is exclusively vinegar made from malt, spirits, cider and distillation. Wine vinegar, though not so well known, is, of course, the more normal type of vinegar used in countries which, perhaps, have a better gastronomic reputation than ours. However, in view of the increasing foreign travel and the development of taste in other foods, it is considered that there is a profitable market in wine vinegar, not only in the domestic market, but in exports and in the prevention of needless imports. Hon. Members may not have realised that this vinegar stems from the original form of vinegar, which came from grapes or wine. There is little doubt that the rather more sophisticated type of vinegar is now enjoying an increasing demand.

    The Clause is submitted with a view to reducing the duty payable on the so-called "sweets" that are employed in the manufacture of this product. Perhaps the House will permit me to quote the definition of the term "sweets" from the Customs and Excise Act, 1952:
    "'Sweets' means any liquor which is made from fruit and sugar or from fruit and sugar mixed with any other material and which has undergone a process of fermentation in the manufacture thereof,"
    At present, the manufacturers of vinegar are entitled to have in their factories 95 per cent. proof spirit, and they can use cider up to but not exceeding 15 per cent. proof, if I understand correctly a letter which the Economic Secretary sent me earlier in the year. We suggest that the facility which is given in respect to cider, which costs the Government very little, should be extended to wine employed for this purpose. Under their existing licences vinegar manufacturers can buy their own grape concentrate, ferment it, and use it for this purpose. What they want to do to save that production stage is to buy the wine duty-free up to 90 per cent. proof and employ it for this purpose.

    Countries make vinegar according to the material closest at hand. America normally uses cider; Scandinavian countries and ourselves use malt, and Latin countries use wine. Although it is argued that the facility extended in respect of the 95 per cent. proof spirit is given because that same spirit is used in other manufactures and only coincidentally for vinegar manufacture, it is felt that that in itself is no excuse for not granting this slight extension. It would not cost the Government very much and it would stimulate a manufacture which deserves to be encouraged.

    I have three reasons for putting the Clause forward. First, in my constituency there is a growing industry in the parish of Burntwood. I mention that because during the last few years we have had the sorry experience of having to close a pit, and the need for diversifying our local industry has been pointed out to us very strongly. This factory does not absorb much labour, but it all helps in the diversification process.

    Secondly, all wine vinegar is now imported. The Economic Secretary will know more than one reason why it might be a good thing to have our own production. It would prevent imports, and we should be able to enter a potential export field. Thirdly, it is a very civilised form of improving dishes. For that reason, civilising as it is, the Government ought to feel able to agree to this small concession.

    I support my hon. Friend the Member for Lichfield and Tamworth (Mr. Snow). He has referred to what seems to be an incomprehensible and illogical anomaly, even if it is a minor one. I do not pretend that there are as many votes in vinegar as there are in horticulture, but we now have an opportunity to clear up this anomaly. I understand that the purpose of the Clause is to enable manufacturers of wine vinegar to use wine which has been processed by other people. If they process it themselves they are exempt from duty, but if they purchase it after it has been processed by other people they have to pay duty. It seems stupid to make them pay duty if the processing is done by somebody else. I hope that the anomaly will be cleared up.

    I entirely support the Clause on culinary grounds. I am a reasonably good cook, and I would not dream of using malt vinegar to make sauces. It may go very well with chips, for persons with that kind of taste, and it is reasonably good for pickling herrings, but I would never dream of using it to make the more delicate sauces which some of us like to make as a hobby at weekends. I hope that we shall be able to have wine vinegar manufactured at home more cheaply.

    5.45 p.m.

    I, too, support the Clause, and I hope that the Government will be able to accept it. I hope that we shall have no acid comments from hon. Members opposite after the sweetness and light that have come from this side of the Committee. The fact that an anomaly exists has been mentioned by both my hon. Friends, and that is the kind of point which the Chancellor should take into consideration. Material with a high degree of alcoholic content is duty-free, but that with a lower alcoholic content has to pay duty.

    We are influenced in this matter not only by the epicurean point of view, or the view of those who, like my hon. Friend the Member for Flint, East (Mrs. White), delight in making sauces. We also have to consider the manufacturing aspect, and here I stress the point made by my hon. Friend the Member for. Lichfield and Tamworth (Mr. Snow) about imports and exports. In my constituency there is a large manufacturing concern which makes 57 varieties of well-known commodities, including the kind of baked beans with which we are regularly served, day in and day out, at the cafeteria downstairs. The 57 varieties have grown. They now total well over 160, and one of the newest is wine vinegar.

    In our previous debates on the Bill the Chancellor has made a great deal of play about the need to encourage exports; indeed, we have had £83 million worth of incentives for exporters. Last week, as a result of the excellent efforts of the Heinz factory, I was concerned in going along there to congratulate its board on raising the firm's exports. In 1950, those exports amounted to £400,000; in ten years they have risen to £1,600,000. We all went along at the request of the President of the Board of Trade to congratulate the firm on its efforts, and we were told not only that it was very anxious to export wine vinegar, but, also, that at the moment everybody using wine vinegar has to import it.

    If the new Clause were accepted we should not only increase our exports, but should save some of the costs which arise as a result of the import of this vinegar, which is on an increasing scale as a result of the demand by people with a civilised taste. In view of the modesty of the Clause I hope that the Chancellor will be able to accept it.

    The hon. Member for Lichfield and Tamworth (Mr. Snow) described this as a modest Clause. He moved it with his customary modesty and courtesy, and other hon. Members who have spoken on it have also done so with moderation. Its effect would be to authorise licensed vinegar makers to receive British wine known as sweets free of duty for the purpose of manufacturing wine vinegar. In February of this year the hon. Member for Lichfield and Tamworth wrote to my hon. Friend the Financial Secretary on behalf of the licensed vinegar maker in his constituency, asking that that company should be allowed to receive British wine duty free in the same way as it receives spirits free of duty for the purpose of manufacturing vinegar.

    As far as we can ascertain this was the first time such a request had been made, either to a Treasury Minister or to Her Majesty's Board of Customs and Excise. As the hon. Member pointed out, the law makes provision for the use of spirits duty free for industrial purposes, and it is under this more general provision that licensed vinegar makers are allowed to receive spirits. This legal provision concerning spirits is absolutely essential, because spirits are widely used in industry for a great variety of purposes.

    I was surprised to learn that the duty-free use of spirits in industry exceeds their use as beverage spirits. About 32 million proof gallon of spirits passed into industrial use in 1959–60.

    As the hon. Member pointed out, there is no similar provision in respect of British wine. I think he will agree that there is no general demand—I say no general demand—for such a provision, whatever may be the feelings of the vinegar manufacturer on whose behalf he spoke, or of the other company to which the hon. Member for Willesden, West (Mr. Pavitt) referred. The provision dealing with spirits is of a very wide and general application throughout industry. British wine, whatever its strength, can be received at present duty free only by licensed makers of British wine if they wish to receive it for bottling and ultimate payment of duty, or for subsequent exportation.

    As the hon. Member for Lichfield and Tamworth pointed out, cider other than that exceeding 15 degrees proof, which is treated as British wine, is not chargeable with any duty and can be used freely for making vinegar. Vinegar makers who want to use British wines in their pro- cesses can make it themselves—I have looked into this with care—with very little trouble. Grape juice or grape must needs only to be fermented by the addition of sugar, and in some cases of yeast. They do not need a wine maker's licence. It can be made into vinegar without the payment of duty, because the duty is not chargeable unless the wine is sent out for sale by a maker of British wine. Furthermore, they can obtain spoilt wine duty free for the manufacture of vinegar.

    I quite appreciate what the hon. Member has been saying and what vinegar manufacturers may say, that it may be that they can manufacture vinegar by these other methods involving very little additional trouble, but nevertheless they wish to manufacture their own vinegar in this particular way. They may say that they are precluded from doing so because of the law as it stands at present, but I must ask the House to consider this aspect. In view of the facilities which I have mentioned and of the very limited demand for British wine for use in industrial processes, should we be justified in setting up not only a special provision in the Finance Act, which is not a matter of great importance, but also new machinery which would be necessary to administer what is required in this new Clause, machinery which would be comparable, if not in size at any rate in the way it would work, to that necessary for dealing with duty-free spirits?

    I am bound to advise the House that I do not think, at any rate at this stage, that we should be justified in doing that. I think that there will be general agreement in the House that we should not make detailed provisions and set up new machinery to cover every particular circumstance where taxable commodities are concerned. In this case I think it is clear that at present there is no significant detriment to vinegar makers arising from the law as it stands because, for reasons I have given, alternative methods of manufacture are open to them. Until February this year when the hon. Member got in touch with us, there was no similar request. We looked into the matter and the Customs and Excise made careful inquiries as a result of the approach made by the hon. Member, but I cannot advise the House that we should be justified in making this special provision in these circumstances.

    Will the hon. Gentleman explain what new machinery would be necessary? I understand that the vinegar manufacturers are already subject to full inspection by the officers of Customs and Excis.

    I used the word "machinery", but there would have to be new control extended to British wines which has not been the case hitherto. There is no general demand at present, although I appreciate that these particular manufacturers would like to see machinery of this kind set up which undoubtedly would be of some limited assistance to them. If they were precluded by the law as it stands from manufacturing wine vinegar without the payment of duty on British wines there would be an entirely different situation, but, because they have the alternative methods of manufacture open to them, although they do not consider them to be 100 per cent. as good as the system they wish to adopt, I do not think we should be justified in accepting this new Clause.

    I listened with amazement to the Economic Secretary making terribly heavy weather of a subject which I thought was amenable to a simple concession. The approach revealed an obvious anomaly which I think has been clearly demonstrated by my hon. Friends who have spoken on this new Clause and which could be coped with without great administrative difficulty.

    The Economic Secretary has not denied that mere is an anomaly in the situation. Everything he has said has reinforced the case on those grounds. He admitted that vinegar manufacturers can obtain spirits for the purpose of manufacture duty free, but they cannot obtain these sweets. The only argument I heard the hon. Gentleman adduce—and it is a terribly Weak one—was that, while acknowledging that there is an anomaly, nevertheless we should not do much about it because there is no general demand that we should do so. That was the weakest possible argument. I have not noticed a tendency in other quarters and in other respects to dismiss a case because there was no general demand for it. The test should be, is it equitable to do this?

    I submit that the case has been made and that there is reasonable ground for making what after all would be a minor concession. It is not good enough to say that the manufacturers need not pay duty because they can do what they want to do in another way by manufacturing the wines themselves and so escaping the duty. Manufacturers are perfectly entitled to say that they do not care to do it in that way. There might be a good reason why they do not want to do it in that way. There is no reason why they should be compelled to do it in the way the hon. Gentleman suggests because the Government refuse to make a reasonable modification.

    I am not impressed by the statement that this would mean setting up cumbersome administrative machinery. One has only to look at Customs codes and Excise regulations to realise that one little addition of this character would not break the back of the Board of Customs and Excise. This alteration could be done without much worry over a simple requirement and a modest concession.

    I ask the Economic Secretary to consider this matter again and to offer a better reason than he has given so far for resisting the proposal.

    6.0 p.m.

    I thought that after the appeal made by my hon. Friend the Member for Walthamstow, West (Mr. Redhead) the Economic Secretary would have given some reason why the Clause cannot be accepted, because so far he has not done that.

    I have listened over the past few weeks to some strange speeches made from the Government Front Bench and I have heard some feeble reasons for failing to accept Clauses moved from either side of the House, but, although this is a very minor matter, I think that the Economic Secretary reached an all-time low in his answer. One thing in his speech was plain—the only reason why this perfectly fair proposal, which he accepts as being fair and reasonable, cannot be accepted is bureaucracy. This is a bureaucratic rejection of a simple, small Clause which would cost the Revenue nothing but which would remove an anomaly which the Economic Secretary has admitted exists. I do not know what his inspectors think about this. It is clear that the Minister thinks that the proposal ought to go through, and obviously he had a long tussle with Customs and Excise over it.

    We had better have it clearly understood just who the Ministers are. Are the Ministers sitting on the Front Bench there, or are they in Customs and Excise? If a Minister feels that there is a clear case in equity for the acceptance of an Amendment then, unless the officials can produce absolutely paralysing reasons based on matters of machinery and the like, the Minister's view should prevail. If the Economic Secretary will say that there is no anomaly here and, therefore, that there is no necessity to clear it up, that is one thing, but for him to say, "Of course there is an anomaly but, even so, we cannot do anything" is not good enough, and I still hope that he will think again.

    What is the argument? It is admitted that there is no desire on the part of the Customs and Excise as such to get revenue from this process of making vinegar. After all, if the Department wanted to get revenue it would get it when spirits were used, so we can dismiss that. Here, the manufacturer wants to use a different raw material. He is told that he cannot use it or, at any rate, that the Treasury will not make the very minor change necessary in its procedure to enable him to do so.

    Here is the Board of Customs and Excise telling a vinegar manufacturer the best way for him to make his vinegar. We have heard from hon. Members opposite about free enterprise. Admittedly, this is a small case but it does not affect the principle, and for the Government to tell a free-enterprise manufacturer that just because they will not take the trouble to amend their own stupid, bureaucratic regulations he must manufacture his product in some way other than that which he thinks is the best is intolerable, and I am surprised that the Economic Secretary does not realise this, or admit it. It is admitted that if the manufacturer uses spirits, the spirits are duty free, but this manufacturer wants to use British-made wine, and we have been given no reason why he should not do so.

    What is the next argument? It is that there is no general demand for it; that this is the only case. Does it reduce the justice of the case because only one person suffers from the injustice? Is the hon. Gentleman really trying to say that although he admits that there is an anomaly the thing has not been heard enough of in the Treasury; that if the F.B.I. had backed it, or had given orders to the Treasury, there might have been a different approach; or if a trade association had put it forward, or if three manufacturers had wanted to use British wines the Treasury might have conceded the case?

    Is it a crime for a manufacturer to ask, through his Member of Parliament, for the removal of an obvious anomaly? That is the argument that the Economic Secretary puts forward, but this House, even in so small and, by every other test, insignificant case as this is concerned with equity and justice, and this present position is patently inequitable and unjust. I do not want to overstress the case. I know that only one manufacturer and a small amount of material—perhaps only a small amount of money—is involved, but this House, when dealing with the Report stage of the Finance Bill, is concerned with equity and justice, and this we are not getting.

    What is the next argument? The manufacturer wants to use this wine for his product and, apparently, the hon. Gentleman is not exactly saying that he must not, but that he must distil the wine himself, or make it himself. Why should the hon. Gentleman tell the manufacturer that? If the man had thought it desirable to do that he would have done it long before now. The Economic Secretary has only one reason for saying that. He wants the manufacturer to go to all the trouble of making this material himself, to set up the plant and to learn the "know-how" and technique instead of buying from his own perfectly regular suppliers, for one reason only—because the hon. Gentleman will not spend a ha'porth of trouble to put it right.

    My hon. Friend the Member for Walthamstow, West (Mr. Redhead) has had a great deal of experience of Customs and Excise operation, and knows a very great deal more, not just than I know but than the Economic Secretary knows about these things. He is probably the only individual Member of the House with the necessary knowledge, and he tells us that he thinks that acceptance of this principle would not require any fundamental change in the code of the Customs and Excise.

    This, after all, is chicken-feed when compared with the volumes of changes we need when we are discussing Purchase Tax, uplift and so on, as we have done in previous Finance Bills. As my hon. Friend the Member for Flint, East (Mrs. White) has pointed out, inspectors of the Customs and Excise regularly visit this firm. What kind of bureaucracy is it that cannot show a little elasticity, alter the rules and deal with this wine as if it were spirits? What is the problem in this?

    The Economic Secretary has given no justification for his case whatsoever. It is quite clear that there is some bumble-dom in the Board of Customs and Excise. I am sorry to say this, because most of us have very high regard for that Department as an operational unit, but, somewhere down the line in the Board of Customs and Excise, there is this bumbling bureaucracy which, on this occasion, and despite his acceptance of the fact that there is an anomaly here, has convinced the hon. Gentleman that this change cannot he made.

    He then comes gaily and airily to the Dispatch Box—if I might use those words to describe his demeanour—and says, "No, the Customs and Excise will not make this change and the Ministers will not tell the Department to make the change. Let the manufacturer make all the changes." I can only say that if anyone from this side had made such a suggestion hon. Members opposite would have been in uproar—

    —and none more uproarious, I am sure, than the hon. and gallant Member for Knutsford (Sir W. Bromley-Davenport), whom we are always glad to see helping us out with the Finance Bill.

    I am sure that by this time hon. Members opposite will have seen the strength of my hon. Friends' argument, and I hope that the Economic Secretary will now either say that he will accept the new Clause, which costs him nothing, or will give us a very much better reason than we have had so far. I know that the on. Gentleman has already exhausted his right to speak but I am sure that the whole House would wish to give him a second opportunity for either of the purposes I have mentioned.

    I am sure that the first purpose would be more acceptable to hon. Members in all parts of the House. There must be many hon. Members opposite who feel that here is a small case involving a point of principle, and who are as sick to death as we are of hearing arguments from the Treasury Bench that have no inspiration except a bureaucratic inspiration. I am sure that those hon. Gentlemen will not find it exactly in accordance with their wishes to have to tramp through the Division Lobby in support of the speech that we have just heard from the Economic Secretary.

    It is not an argument to say that there is only one manufacturer involved. It is not an argument to say that this is the only case that has been heard of. We have seen whole Finance Bills turned inside out because of the opposition of one manufacturer or interest, and that in recent years. I am sure that my hon. Friends would be able to think of quite a number of examples—[Interruption.] Yes, the House was kept up for two hours listening to complaints about Rolls-Royce. I do not complain—that is what the House exists for when discussing a Finance Bill.

    Here, because it concerns a small manufacturer, perhaps a remote manufacturer, who may not have an office in London or have expensive dining arrangements for the purpose of influencing a trade association or the F.B.I. or anyone else, we are told, however strong the case, that it cannot be done, simply because the Board of Customs and Excise cannot bestir itself.

    I am quite convinced that in the time that I have been speaking—about ten minutes—the export officials who are no doubt able to consider these matters—I will not say where they are to be found because to do so would be out of order on my part—could have drafted the necessary changes in the Regulations, and could have passed a slip to the Economic Secretary enabling him to accept the new Clause. I am quite sure that if the hon. Gentleman were to say, "I will not have this attitude" the officials could put the matter right in their Regulations.

    I would remind him that when Lord Dalton was Chancellor and the Tobacco Duty was increased by 1s., strong feeling was expressed in the Budget debate that this would create very great anomalies for the old-age pensioners. Lord Dalton was told by the Board of Customs and Excise that it was not possible to make any special concession for old-age pensioners. Heaven know that was a very difficult procedure to work out. It created problems and difficulties for the Customs and Excise all over the country, affecting every tobacconist's shop, requiring vouchers, and so on. Lord Dalton said, "Either you do this or we shall not go on with this change in the tax" The Customs and Excise went away sorrowing, but they came back with a scheme.

    That is what the Economic Secretary should have done in this case. He should not tell us that it is only a small, remote case. Let him stand up now and say that he accepts these arguments, as I am sure that most of his hon. Friends do. Let him say that he accepts the Clause. He can fight it out with the Customs and Excise tomorrow. Let us hear who really is the Minister.

    With the permission of the House, perhaps I may say a few brief words. First, I should like to say without any disrespect to the right hon. Member for Huyton (Mr. H. Wilson) that it is perfectly obvious that the relationship between the Customs and Excise and Treasury Ministers has greatly changed since the days when Dr. Dalton was in charge. I am sure that my hon. Friend the Financial Secretary will bear me out in saying that in dealing with both the Customs and Excise and the Inland Revenue we do not proceed on the basis to which the right hon. Gentleman referred.

    This is not a case of saying, "This is a small concern. Because it is a small concern we shall not do something which otherwise we consider to be equitable". That is a travesty of what I said. The position is that British wine is liable to duty. Anybody who purchases British wine purchases it duty paid. Consequently, the duty is taken into account in the purchase price. What these one or two companies—I have heard only of this one company, but there may well be others and I want to be fair—are saying is that they would like a concession. They would like to purchase wine duty free. In other words, they are asking for an exception.

    It may be that they are right, considered in isolation, in making that request. I am not at the moment concerned with merits, because I tried to deal with them in explaining to the House that there were other methods of manufacturing wine vinegar. But the House should be under no illusion that what these people are asking for is a concession. They want a concession of the same nature as the concession applied in respect of spirits.

    The right hon. Gentleman referred to the Customs and Excise bumbling along and convincing the Treasury that this was administratively impossible. This is not true. I have never suggested for one moment that this is administratively impossible. I ask the House to consider whether in a case of this kind, on the information we have before us, we should make a concession which will mean nothing in terms of money—I do not doubt that—but will involve some additional work. It is no good passing this off as mere bureaucracy. It will involve some additional work. I ask the House to bear in mind that none of us had heard of this until February of this year. What is being asked is that we should make specific provision so that British wines used for industrial purposes would be duty free, just as spirits used for industrial purposes, which involve about 32 million proof gallons of spirit a year, are duty free.

    The Economic Secretary keeps on mentioning spirits. That is right, but what about cyder? That is allowed up to 15 per cent.

    This is because cyder up to 15 per cent. is not dutiable at all. It is only strengthened cyder which bears duty. Therefore, no special provision is made for vinegar manufacturers who use cyder as their raw material.

    The hon. Member for Lichfield and Tamworth (Mr. Snow) says that the difference is 4 per cent. proof. That is quite irrelevant to the question I have posed to the House, which is whether we ought to set up the new method of control which would be necessary if we were to allow British wines to be used duty free for these purposes. Cyder is not dutiable anyway, and, therefore, this question does not arise.

    6.15 p.m.

    I must make one further point clear, in view of something which has been said. In the hon. Gentleman's letter to the Financial Secretary he said:
    "I am given to understand that the Customs and Excise have expressed the view that this is probably an anomaly which would justify examination by you and only requires a departmental authority to regularise the position."
    I made inquiries about that only this morning and I can only say that the hon. Gentleman has completely misunderstood the situation. There is no anomaly here. What we have to decide is whether we would be justified in making an exception, which would have to be a general exception for British wines analogous to the exception which is made for spirits used for industrial purposes.

    The Economic Secretary is now putting it in terms of a concession which would have to be a general one. We see that point. There is a general concession for spirits used for industrial purposes. There is no concession for wines. Since this is the only case which has come to his attention regarding vinegar, will he tell us in how many other cases there are proposals—how many other industries; how many other types of manufacturer—to use British wine as raw material? In other words, would this concession, as far as he knows, start off a large number of demands for similar concessions in other industries? Will he say in any case whether that would be serious? If the concession is granted for spirits, why should it not be granted for wines? Would it create precedents?

    I said earlier on that, on the information I had, I did not think that this would involve any significant cost to the Exchequer. I hoped that it was clear by implication from that that this would be widely used. I have given my reasons to the House for believing that we would not be wise to accept the Clause at this stage. I want to say this in all sincerity to the House. I am sure that my right hon. and learned Friend would be prepared to look at this again during the course of the year. [Laughter.] The hon. Lady the Member for Flint, East (Mrs. White) laughs. I hope I have made it clear that these are not meaningless words. My right hon. and learned Friend would be prepared to look at this again to see whether we should be justified in making similar provisions in respect of British wines as those which are made in respect of duty free spirits.

    I hope that the House will accept what I said earlier on. We should not make detailed provisions to cover every circumstance where taxable commodities are concerned. It is entirely different when we are considering the case of an individual small taxpayer—be it a company or group of individuals—if there is something inequitable about it—in other words, if somebody is paying tax by virtue of an anomaly but his fellow men are not paying it. Then, even if it concerns only one person, it is worth including a Clause in the Finance Bill to put it right. That is not the position in this case. I thought the right hon. Gentleman suggested that this was so. I must make it clear that it is not so.

    The Economic Secretary is saying that he, a representative of the Conservative Party, is just not prepared to help in the prevention of unnecessary imports or the stimulation of British exports. This is a small company and, typically, the Government are not prepared to make an exception.

    That is not so. If the hon. Gentleman will read what I said earlier, he will see that I stated that, while I certainly had no intention of dictating to this company or any other vinegar manufacturer how it should manufacture its products, it is admitted in the trade that it is perfectly possible to make wine vinegar by other means, which I mentioned. I am not suggesting for one moment that the company would not prefer to manufacture its wine vinegar by using British wine in its finished state. I am merely saying to the House that it cannot be right in every case where an industry asks for a concession to be made, as is being sought in this case, that it should get this concession given to it merely because it prefers to manufacture in a particular way. We must consider whether the general demand is warranted.

    I repeat—it is important that this should be appreciated—that this is not a case of an anomaly in which a small company is being unduly penalised compared with other companies in a somewhat similar position. A concession is being sought which as far as I know—I may be wrong—would not cost a significant amount of revenue.

    I hope that the House considers that I have been forthcoming in saying that my right hon. and learned Friend will see whether we should be justified in adopting for British wines a system such as exists for spirits which are used for industrial purposes, but I am afraid that I cannot go further than that.

    Is the hon. Member saying that the Chancellor is prepared to look at the matter between now and the next Budget? The Government have had this proposal before them for five months. Does he say that it is such a complicated subject that they could not handle it in five months but that there

    Division No. 235.]

    AYES

    16.22 p.m.

    Ainsley, WilliamHale, Leslie (Oldham, W.)McLeavy, Frank
    Albu, AustenHall, Rt. Hn. Glenvil (Come valley)Manuel, A. C.
    Allen, Scholefield (Crewe)Hamilton. William (West Fife)Mapp, Charles
    Awbery, StanHannan, WilliamMarsh, Richard
    Bacon, Miss AliceHayman, F. H.Mellish, R. J.
    Benson, Sir GeorgeHenderson, Rt. Hn. Arthur (Rwly Regis)Mendeison, J. J.
    Bryton, WilliamHilton, A V.Milne, Edward J.
    Boardman, H.Holman, PercyMitchison, G. R.
    Bowles, FrankHoughton, DouglasMonslow, Walter
    Boyden, JamesHowell, Charles A. (Perry Barr)Moody, A. S.
    Braddock, Mrs. E. M.Howell, Denis (Small Heath)Mort, D. L.
    Brockway, A. FennerHoy, James H.Moyle, Arthur
    Brown, Rt. Hon. George (Belper)Hughes, Emrys (S. Ayrshire)Mulley, Frederick
    Butler, Herbert (Hackney, C.)Hughes, Hector (Aberdeen, N.)Neal, Harold
    Callaghan, JamesHunter, A. E.Noel-Baker, Francis (Swindon)
    Castle, Mrs. BarbaraHynd, H. (Accorington)Noel-Baker, Rt. Hn. Philip (Derby, S.)
    Chapman, DonaldHynd, John (Atteroliffe)Oliver, G. H.
    Chetwynd, GeorgeIrving, Sydney (Dartford)Oram, A. E.
    Cllffe, MichaelJanner, Sir BarnettOwen, Will
    Corbet, Mrs. FredaJay, Rt. Hon. DouglasPaget, R. T.
    Crossman, R. H. S,Jeger, GeorgePannell, Charles (Leeds, W.)
    Culler), Mrs. AliceJenkins, Roy (Stechford)Pavitt, Laurence
    Darling, GeorgeJohnson, Carol (Lewisham, S.)Pearson, Arthur (Pontypridd)
    Davies, G. Elfed (Rnondda, E.)Jones, Rt. Hn. A. Creech(Wakefield)Peart, Frederick
    Deer, GeorgeJones, Elwyn (West Ham, s.)Pentland, Norman
    de Freitas, GeoffreyJones, J. Idwal (Wrexham)Popplewell, Ernest
    Diamond, JohnJones, T. W. (Merioneth)Price, J. T. (Westhoughton)
    Dodds, NormanKelley. RichardProbert, Arthur
    Driberg, TomKey, Rt. Hon, C. W.Pursey, Cmdr. Harry
    Dugdale, Rt. Hon. JohnLawson, GeorgeRandall, Harry
    Ede, Rt. Hon. C.Lee, Frederick (Newton)Redhead, E, C.
    Edelman, MauriceLewis, Arthur (West Ham, N.)Reynolds, G. W.
    Edwards, Robert (Bilston)Lipton, MarcusRobertson, John (Paisley)
    Edwards, Walter (Stepney)Loughlin, CharlesRobinson, Kenneth (St. Pancras, N.)
    Evans, AlbertMabon, Dr. J, DicksonRogers G. H. R. (Kensington, N.)
    Foot, Michael (Ebbw Vale)McCann, JohnRoss, William
    Ginsburg, DavidMacColl, JamesSeymour, Leslie
    Gourlay, HarryMclnnes, JamesShinwell, Rt. Hon. E.
    Grey, CharlesMcKay, John (Wall-send)Short, Edward
    Griffiths, W. (Exchange)Mackie, John (Enfield, East)Silverman, Julius (Aston)

    is a chance that in twelve months we shall be given a decision? Or does he intend to stick now and next year to the proposition that the gentleman in Whitehall knows best? The hon. Member's answer will influence whether we shall vote on this new Clause.

    The right hon. Gentleman well knows that we have reached a conclusion as a result of the inquiries which we have made following the hon. Member's letter of five months ago. We have looked into the matter in the meantime. As a result of our inquiries we have reached a conclusion that on the information now before us we should not be justified in accepting the new Clause. I repeat—and as this is for the third time I hope that I have made it clear—that my right hon. Friend is prepared to look at this during the year to see whether there are new facts or new developments which justify us in doing what is asked.

    Question put, That the Clause be read a Second time:—

    The House divided: Ayes 150, Noes 220.

    Silverman, Sydney (Nelson)Swain, ThomasWhitlock, William
    Slater, Mrs. Harriet (Stoke, N.)Swingler, StephenWilcock, Group Capt. C. A. B.
    Slater, Joseph (Sedgefield)Taylor, John (West Lothian)Wilkins, W. A.
    Smith, Ellis (Stoke, S.)Thompson, Dr. Alan (Dunfermllne)Willey, Frederick
    Snow, JulianThornton, ErnestWilliams, W. T. (Warrington)
    Sorensen, R. W.Tomney, FrankWillis, E. G. (Edinburgh, E.)
    Soskice, Bt. Hon. Sir FrankUngoed-Thomas, Sir LynnWilson, Rt. Hon. Harold (Huyton)
    Spriggs, LeslieWainwright, EdwinWoof, Robert
    Stewart, Michael (Fulham)Warbey, William
    Stones, WilliamWeitzman, DavidTELLERS FOR THE AYES:
    Strachey, Rt. Hon. JohnWhite, Mrs. EireneDr. Broughton and Mr. Cronin.

    NOES

    Aitken, W. T.Glover, Sir DouglasMore, Jasper (Ludlow)
    Allason, JamesGlyn, Dr. Alan (Clapham)Morrison, John
    Atkins, HumphreyGlyn, Sir Richard (Dorset, N.)Mott-Radclyffe, Sir Charles
    Barber, AnthonyGoodhart, PhilipNabarro, Gerald
    Barlow, sir JohnGoodhew, VictorNoble, Michael
    Barter, JohnGower, RaymondNugent, Sir Richard
    Baxter, Sir Beverley (Southgate)Grant, Rt. Hon. WilliamOakshott, Sir Hendrie
    Beamish, Col. Sir TuftonGreen, AlanOrr-Ewing, c. Ian
    Bell, RonaldGresham Cooke, R.Page, John (Harrow, West)
    Bennett, F. M. (Torquay)Grimston, Sir RobertPannel, Norman (Kirkdale)
    Berkeley, HumphryGurden, HaroldPartridge, E.
    Bevine, Rt. Hon. ReginaldHall, John (Wycombe)Pearson, Frank (Clitheroe)
    Bidgood, John C.Hamilton, Michael (Welling-borough)Peel, John
    Bingham, R. M.Harris, Frederic (Croydon, N.w.)Pickthorn, Sir Kenneth
    Birch, Rt. Hon. NigelHarrison, Brian (Maldon)Pilklngton, Sir Richard
    Bishop, F. P.Harrison, Col. Sir Harwood (Eye)Pitman, Sir James
    Black, Sir CyrilHarvey, John (Walthamstow, E.)Pitt, Mist Edith
    Bossom, CliveHarvie Anderson, MissPrice, David (Eastleigh)
    Bourne-Arton, A.Hay, JohnPrior, J. M. L.
    Box, DonaldHeald, Rt. Hon. Sir LionelProudfoot, Wilfred
    Boyle, Sir EdwardHicks Beach, Maj. W.Quennell, Miss J. M.
    Braine, BernardHill, Dr. Rt. Hon. Charles (Luton)Rawlinson, Peter
    Brewis, JohnHill, Mrs. Eveline (Wythenshawe)Rees-Davies, W. R.
    Bromley-Davenport, Lt.-Col. Sir WalterHirst, GeoffreyRenton, David
    Brown, Alan (Tottenham)Hocking, Philip N.Ridsdale, Julian
    Browne, Percy (Torrington)Holland, PhilipRippon, Geoffrey
    Bullus, Wing Commander EricHopkins, AlanRobinson, Sir Roland (Blackpool, S.)
    Burden, F. A.Hornsby-Smith, Rt. Hon. PatriciaRoots, William
    Butcher, Sir HerbertHoward, Hon. G. R. (St. Ives)Ropner, Col. Sir Leonard
    Campbell, Gordon (Moray & Nairn)Howard, John (Southampton, Test)Royle, Anthony (Richmond, Surrey)
    Carr, Robert (Mitcham)Hughes-Young, MichaelRussell, Ronald
    Channon, H. P. G.Hutchison, Michael ClarkScott-Hopkins, James
    Chataway, ChristopherIremonger, T. L.Sharples, Richard
    Chichester-Clark, R.Irvine, Bryant Godman (Rye)Shaw, M.
    Clark, William (Nottingham, S.)Jackson, JohnSkeet, T. H. H.
    Clarke, Brig. Terence (Portsmth, W.)James, DavidSpearman, Sir Alexander
    Cole, NormanJohnson, Dr. Donald (Carlisle)Speir, Rupert
    Cooke, RobertJohnson, Eric (Blackley)Stanley, Hon. Richard
    Cooper-Key, Sir NeillKerans. Cdr. J. S.Stevens, Geoffrey
    Cordeaux, Lt-Col. J. K.Kerby, Capt. HenryStorey, Sir Samuel
    Costain, A. P.Kershaw, AnthonyStudholme, Sir Henry
    Courtney, Cdr. AnthonyLancaster, Col. C. G.Summers, Sir Spencer (Aylesbury)
    Craddock, Sir BeresfordLeavey, J. A.Sumner, Donald (Orpington)
    Critchley, JulianLeburn, GilmourTapsell, Peter
    Crowder, F. P.Legge-Bourke, Sir HarryTaylor, Edwin (Bolton, E.)
    Cunningham, KnoxLewis, Kenneth (Rutland)Temple, John M.
    Curran, CharlesLindsay, MartinThatcher, Mrs. Margaret
    Dalkeith, Earl ofLinstead, Sir HughThomas, Leslie (Canterbury)
    Dance, JamesLitchfield, Capt. JohnThompson, Kenneth (Walton)
    Davies, Rt. Hn. Clement (Montgomery)Longden, GilbertThompson, Richard (Croydon, S.)
    d'Avigdor-Goldsmid, Sir HenryLoveys, Walter H.Thornton-Kemsley, Sir Colin
    Deedes, W. F.Low, Rt. Hon. Sir TobyThorpe, Jeremy
    de Ferranti, BasilLucas, Sir JocelynTiley, Arthur (Bradford, W.)
    Digby, Simon Wing-fieldLucas-Tooth, Sir HughTurner, Colin
    Donaldson, Cmdr. C. E. M.McAdden, StephenTurton, Rt. Hon. R. H.
    Doughty, CharlesMacArthur, Ianvan Straubenzee, W. R.
    Duncan, Sir JamesMcLaren, MartinVane, W. M. F.
    Elliot, Capt. Walter (Carshalton)McLaughlin, Mrs. PatriciaVaughan-Morgan, Rt. Hon. Sir John
    Elliott, R. W. (Nwcstle-upon-Tyne, N.)Maclean, Sir Fitzroy(Bute & N. Ayrs.)Vickers, Miss Joan
    Emery, PeterMcMaster, Stanley R.Vosper, Rt. Hon. Dennis
    Errirrgton, Sir EricMaddan, MartinWakefield, Edward (Derbyshire, W.)
    Erroll, Rt. Hon. F. J.Maitland, Sir JohnWalder, David
    Farey-Jones, F. W.Marshall, DouglasWalker, Peter
    Farr, JohnMarten, NellWalker-Smith, Rt. Hon. Sir Derek
    Fell, AnthonyMathew, Robert (Honiton)Ward, Dame Irene
    Finlay, GraemeMatthews, Gordon (Meriden)Wells, John (Maidstone)
    Fletcher-Cooke, ChariesMawby, RayWhitelaw, William
    Forrest, GeorgeMaxwell-Hyslop, R. J.Williams, Dudley (Exeter)
    Fraser, Ian (Plymouth, Sutton)Maydon, Lt.-Cmdr. S. L. C.Williams, Paul (Sunderland, S.)
    Gammans, LadyMills, StrattonWills, Sir Gerald (Bridgwater)
    Gardner, EdwardMontgomery. FergusWilson. Geoffrey (Truro)

    Wise, A. R.Woodnutt, Mark
    Wolrige-Gordon, PatrickWooliam, JohnTELLERS FOR THE NOES:
    Wood, Rt. Hon. RichardWorsley, MarcusMr. Gibson-Watt and
    Woodhouse, C. M.Mr. J. E. B. Hill.

    6.30 p m.

    New Clause—(Non-Ferrous Metal Mines In United Kingdom: Relief From Income Tax)

    (1) Profits of a trade commenced after the passing of this Act and consisting of or including the working of a non-ferrous metal mine situated within the United Kingdom, being profits arising from the working of the mine and so arising during a period of thirty-six months beginning with the day on which the mine is first brought into commercial operation, shall be exempt from income tax.

    (2) For the purposes of this section a mine shall be deemed to be brought into commercial operation as soon as substantial quantities of ore are extracted from the mine for any treatment and for disposal; and such substantial quantities shall not be taken to include ore extracted in the case of searching for, discovering or testing mineral deposits or winning access thereto.—[ Mr. Houghton.]

    Brought up, and read the First time.

    I think it will be for the convenience of the House also to discuss the new Clause in the name of the hon. Member for Huyton (Mr. Wilson)—"Non-ferrous metal mines in United Kingdom: relief from profits tax"—and the two new Clauses standing in the name of the hon. Member for Bodmin (Mr. Marshall)—"Income tax: non-ferrous metal mines in United Kingdom" and "Profits tax: nonferrous metal mines in United Kingdom."

    I beg to move, That the Clause be read a Second time.

    This Clause is in exactly the same terms as that moved by my right hon. Friend the Member for Huyton (Mr. Wilson) in Committee and hon. and right hon. Gentlemen will find the report of the debate in the OFFICIAL REPORT of 21st June, 1961. On that occasion my right hon. Friend the Member for Huyton made a very long and powerful speech. In fact, there was only one longer speech made during the course of the Committee stage, and I look back on that with a certain amount of self reproach.

    The hon. Gentleman is doing a slight injustice to my hon. Friend the Member for Kidderminster (Mr. Nabarro), which I am sure the hon. Gentleman would not wish to do.

    If I failed in stating correctly who made the longest speech, then I am sure that the hon. Member for Kidderminster to acquit me of any discourtesy.

    I was about to say that the Chancellor, in one of the shortest speeches during the Committee stage, said something about this new Clause which was a distinct encouragement to my right hon. Friend the Member for Huyton and other hon. Members on both sides who were looking to the Chancellor to give sympathetic consideration to the case that had been put to him. Indeed, the Chancellor gave a great deal of encouragement in that short speech. He began by saying:
    "I am not at all unsympathetic to the purposes behind the new Clauses."
    A little later on he expressed the fear that if he gave a special concession to this industry would he not have to give a similar concession to other extractive industries. In that respect, the Chancellor was merely referring to the well known twin gargoyles that gaze down upon him from the Treasury building—reactions and repercussions—which Chancellors are always conscious and afraid of and can usually turn down many deserving proposals on the ground of reaction elsewhere. The Chancellor continued:
    "I am impressed, however, by the arguments used in this debate. Strong opinions have been expressed on both sides. I can make no promise, but I undertake to look at this again between now and Report to see whether there is any way in which I can help by some further kind of tax concession."
    Finally, the Chancellor said:
    "There are special circumstances in connection with this commodity at the present time. I do not want to be misunderstood. I cannot make any promise, but I will look at this again between now and Report."—[OFFICIAL REPORT, 21st June, 1961; Vol. 642. c. 1537.]
    On the strength of that, the Committee did not divide on the proposed new Clause. There was sufficient comfort and assurance in what the Chancellor had said to enable the Committee to leave the matter where it stood in the hope that the Chancellor would have something very favourable to say on this occasion.

    The Chancellor will judge of our disappointment that we have searched the Order Paper in vain for the concession for which we were hoping. It is, therefore, necessary to press this matter on the right hon. Gentleman again. What is even more disappointing still is that the right hon. Gentleman is not present himself to give judgment, so to speak, following the hope that he held out during the Committee stage.

    I shall not waste the time of the Committee by deploying or repeating the arguments that were advanced on that occasion. They occupied a good deal of the time of the Committee on 21st June, and it seems now as if the needs of the situation will be met if we ask the Government now to say what difficulties they have found in making this concession. Have the reactions and repercussions proved too formidable for the Chancellor to make the special concession that was sought the other week? In view of what the Chancellor said, he must have encountered some very difficult obstacles in the way of making this concession for him to have nothing to propose to the Committee today.

    So I am now going to resume my seat because I think my remarks have brought us up to date. All hon. Members know what it is all about and remember when the matter was last raised. We also recall the assurances given by the Chancellor and we await, with interest, the explanation that we shall get as to what is the trouble; why has the Chancellor not been able to come forward with this concession?

    In following the hon. Member for Sowerby (Mr. Houghton) I recall that you said, Mr. Speaker, that we should also discuss the two proposed new Clauses standing in the names of my hon. Friends and myself.

    As I stated in Committee, the fundamental difference between the Clauses standing in the names of my hon. Friends and myself and those in the names of the right hon. Member for Huyton (Mr. H. Wilson) and his hon. Friends is very slight indeed. If the former are accepted, they will become law in April, and the others would become law in July.

    One must come to the conclusion that as no Government new Clauses have been tabled, my right hon. Friend the Chancellor has decided not to accept the suggestion. It is quite inconceivable that the Clause, as now drafted, is so perfect that my right hon. Friend is likely to say that he will accept the Clause as it now appears on the Paper. Consequently one assumes that the Chancellor is not going to accept the Clause. What is he going to say? We can be pretty certain of some things that he will say in excuse. So far as I can remember, they have been repeated for at least the last fifteen years. One of the arguments that he may advance is part of the argument that he used in Committee on 21st June when, according to column 1537 of the OFFICIAL REPORT, he pointed out that there were already a number of concessions for anyone who started to engage in metaliferous mining. He totalled them up and said that as a result there was a form of tax-free holiday for a certain period. He went on to say that he realised that this apparently had not been sufficient. That remark is borne out by the fact that no one has seen fit to take the risk of commencing these operations under the present system of taxation.

    He used an argument which the hon. Member for Sowerby, has already suggested might be used on the Government Front Bench today. He said:
    "My difficulty is that if I were to put forward any sort of concession which was held to be a precedent for all extractive industries, then I could not entertain the idea …"
    and then he added these words:
    "… but this is a special case."—[OFFICIAL REPORT, 21st June. 1961; Vol. 642, c. 1537.]
    It cannot be impossible for the Treasury to find a method of adopting this proposal, for it is incredible that Australia, Canada, Eire and South Africa all manage to have such legislation while it is impossible for the British Treasury to do likewise.

    I fear that once again the Treasury has dug its heels in. I fear that the Chancellor has had very little time between the Committee and Report stages to take any stand in the matter, and that, what with the time factor and the argument factor, the only answer we are likely to get tonight is "No" based on the reasons which I have already given. I can only say that I think it is both regrettable and sad. It is regrettable because once again a mistake has been made in the Treasury, and it is sad for a reason which I should think all Members share if they believe what I believe to be true, namely, that it is very likely that there is great wealth still lying under our soil.

    6.45 p.m.

    It is no good the Financial Secretary arguing that the mines which are now in operation are doing better than usual. This Clause does not deal with mines which are already in operation, so that argument carries no weight. But it is indeed regrettable, in view of our present precarious position, that the wealth should not be disclosed and used to the nation's weal. That would be most regrettable, but it seems likely to be the case. If the Chancellor comes to the conclusion that a concession to this industry will lead to other extractive industries expecting a similar concession and that this is more important than new wealth, I think he is wrong, and I shall have to go against him in the Lobby tonight.

    I do not wish to repeat all the arguments which were made on the Clause in Committee—arguments which have been repeataed on many occasions in previous years—but I should like to make two observations on the reply that was made to me by my right hon. and learned Friend the Chancellor of the Exchequer, which has already been mentioned by my hon. Friend the Member for Bodmin (Mr. Marshall).

    I pointed out in Committee that there were six aspects of Cornish tin mining which were quite distinctive and different from anything else in any other extractive industry. I pointed out that the fact that the tin was not being mined was not due to the supply having run out. It was because cheaper methods of extraction had been discovered elsewhere. I said that, in fact, a shortage of tin in the world was becoming apparent, that the price was consequently high and that we were importing large quantities from other countries so that it would not be a bad thing if we were to import less and produce more of our own. Finally, I said that Cornwall tended to be an area of unemployment. None of those conditions really applies to any other extractive industry.

    For my right hon. and learned Friend to say that anything done on behalf of the tin industry might be regarded as a precedent for other industries, therefore, did not seem a proper argument, because, as he himself said, tin is an exceptional case and arguments that might apply to tin could not apply to other cases. Nor am I impressed with the argument which is so often put forward, that there is already a form of tax holiday in respect of non-ferrous metal mining, because the fact is that existing forms of taxation have not helped. If the present system of taxation is regarded as a holiday, it is not doing what the industry wants, because it does not work.

    If, on the other hand, it is argued that the proposals in this Clause would not work, I would still say that we should try them, because, as I have pointed out on previous occasions, although the Revenue at present receives nothing from mining development and if the new Clause were accepted it would still receive nothing, in the long run it might be better off. I cannot understand why this proposal has been refused for so long, and I hope that on this occasion we shall make some progress.

    I endorse what has been said by my hon. Friends the Members for Bodmin (Mr. Marshall) and for Truro (Mr. G. Wilson) and by the hon. Member for Sowerby (Mr. Houghton). When we discussed this matter in Committee, I drew attention to the strategic importance of tin. I drew attention also to the importance of the separation of wolfram and tungsten from tin. I shall not detain the House further. For those reasons, if for no other, I very much hope that we shall not receive quite the gloomy reply which seems to be expected.

    I express to the House the apologies of my right hon. and learned Friend the Chancellor that he is not able to reply himself to the debate because of an important meeting which he felt he must attend at six o'clock. He fully realises that his first responsibility, of course, is to the Committee and the House during our consideration of the Finance Bill. I think it can be said—I am sure that this is seen to be true when one considers the records of Chancellors of the Exchequer in this matter—that he has attended a fairly high proportion of all our debates.

    I assure the House that my right hon. and learned Friend, in accordance with the promise he gave in Committee on 21st June, has considered very carefully whether there is anything more he could do to help non-ferrous metal mines in this country and the Cornish tin mines in particular. Even if hon. and right hon. Members are unable to agree with my right hon. and learned Friend's conclusion, I assure them that there is no question of his not having devoted time to the subject, as I know from my own experience.

    In Committee, the right hon. Member for Huyton (Mr. H. Wilson) put forward a very carefully argued case for some relief. If I may say so, I hope without offence, we know very well the fluency and ability of the right hon. Gentleman throughout all stages of the Finance Bill to make a speech from the Opposition Front Bench without many notes and without very much apparent preparation. On this side, we all noted that, when speaking on this matter in Committee, he spoke from fairly full notes and had obviously devoted more time to the preparation of his remarks than he usually does. The right hon. Gentleman was supported by hon. Members on both sides, in particular by my hon. Friend the Member for Bodmin (Mr. Marshall) who has raised this matter with very great pertinacity on previous occasions ever since he first became a Member of the House in 1945.

    In Committee, the case for special treatment was put on two broad grounds: first, that with a world shortage of tin it was only common sense for us to develop to the utmost of our capacity our own resources of tin; second, that, owing to the disposition of the metal in nature and the expense of proving its existence, there was a special case for a special kind of tax relief. The right hon. Member for Huyton claimed no special merit for his own new Clause at that time and invited the Government to put forward their own proposals, if they wished. He said that one possibility
    "might be that the unrecouped losses of operators, both as regards prospecting and the first few years of production, should be carried forward against subsequent profits, making full allowance for exploration and sinking. If the Chancellor cannot accept these proposals, I hope that he will say that he is prepared to look at that as an alternative."—[OFFICIAL REPORT, 21st June, 1961; Vol. 642, c. 1521–2.]
    At the end of his speech, the right hon. Gentleman advanced the case for a further mineral survey.

    My right hon. and learned Friend has looked at the matter very carefully and with a good deal of sympathy. He is in full agreement with the thesis that we should make the fullest practical use of such mineral resources as we possess. However, he feels that it is important, when considering this matter, to comprehend the full extent of the existing tax position. Perhaps the House will forgive me if I go briefly over the ground which my right hon. and learned Friend covered in Committee.

    A mining company enjoys a 20 per cent. investment allowance and a 20 per cent. initial allowance in addition, making 40 per cent. in all on all capital expenditure primarily connected with the extraction of ore. As my right hon. and learned Friend pointed out in Committee, if a new tin mine costs £500,000, profits would have to reach about £140,000 for any tax to be paid. Of course, this figure of £140,000 includes a tax-free bonus of £80,000 from the investment allowance. It is, therefore, true to say that mines already enjoy a tax holiday likely in practice to extend for several years.

    But this is not the end of it. Capital expenditure on exploration and development, and on mineworkers' dwelling-houses having a useful life coterminous with that of the mine, can be written off over its life. Since 1952, abortive exploration expenditure has been allowed as a trading expense at the time when the search is abandoned. What is more, to deal specifically with the point raised by the hon. Member for Huyton to which I referred, trading losses can be carried forward indefinitely. Furthermore, costs of prospecting, exploration and sinking also can be carried forward indefinitely just like any other trading losses. I say quite frankly to the House that, if my right hon. and learned Friend were to substitute for these existing arrangements a tax holiday for three years only, the mines would on balance be worse off.

    When reference is made to other countries which have tax holidays similar to those requested in the new Clauses we are discussing, it is often forgotten that they have not the very generous system of investment and initial allowances to which I have referred. If my hon. Friend the Member for Bodmin will allow me to say so, I have myself supported him in the past as a back bencher on this question of allowances for the mining industry. It is fair to remember that our present system of investment allowances came in for the first time in only 1954, and I believe that, between 1954 and 1956, and again since the investment allowance was restored in 1959, the position regarding capital allowances has been completely transformed and is very much more generous than the provisions which prevail in a good many other countries to which reference has been made.

    On reflection, my right hon. and learned Friend has not felt it possible, in the light of the present situation and consistent with his responsibility to see that comparable industries are fairly treated, to improve on these very special allowances affecting tin mining.

    The hon. Gentleman referred to improving "on these special allowances affecting tin mining". Is he suggesting that these special allowances apply to tin mining only?

    No. I do not wish to mislead the House. I was merely pointing out what seems to me to be, when compared with the position in other countries, the decidedly favourable condition of capital allowances for mining in this country today. I shall not in my speech now traverse the whole range of capital allowances, investment and initial allowances, but I think that the right hon. Gentleman will agree that mining under our present system of capital allowances is treated fairly favourably compared with the great majority of industries in this country.

    There are in addition one or two theoretical arguments about a tax holiday which should not be overlooked. A tax holiday benefits a profitable mine but, of course, gives nothing to a mine which is just making both ends meet. Any legislation for a tax holiday, which would, I must say, represent a fairly major depar- ture in our tax arrangements, would have to be both long and complicated. It would have to deal with the treatment of dividends and avoidance devices and the problems of the definition of a new mine, quite apart from the question of pressure from other industries or, indeed from other areas in the United Kingdom.

    In our discussion in Committee, reference was made to the Westwood Committee. My right hon. and learned Friend has gone into this matter since we last considered the subject. Its recommendations on the carry-forward of losses have been law since 1952, and so has its implied recommendation on abortive exploration; but in other respects we have gone beyond the conclusions of the Westwood Committee, which were that
    "preferential tax concessions to encourage mineral development and production would not he the correct long-term remedy."
    Looking back on the recommendations of the Westwood Committee, and the devolpment of our system of capital allowances since that date, I think that we have gone beyond its recommendations.

    The Financial Secretary is forgetting that the most important recommendations of that Committee, of which I happened to be a member, were never put into operation. If they had been, that would have taken the cost of exploration and development completely out of the hands of private people and would have placed responsibility for them on the State.

    7.0 p.m.

    I do not think that you, Mr. Speaker, or the House would be too pleased if I enlarged on that matter and gave the pros and cons of that Committee's recommendations. We all remember the hon. Member's distinguished service on the Committee.

    My right hon. and learned Friend knew that this matter would be raised again today. He has taken note of the point about a further survey of our resources. I am told that there was a detailed geological survey of Devon and Cornwall in 1956. The view hitherto has been that this 1956 survey gave sufficient indication of the location of the tin lodes and that further work would not be justified. But my right hon. and learned Friend has authorised me to say that he is prepared to reconsider the matter with my noble Friend the Minister for Science.

    Would the Financial Secretary say whether the survey which was carried out was an aerial survey?

    It was not just an aerial survey. It was a detailed geological survey.

    As I have said, without making any promises, my right hon. and learned Friend is prepared further to consider the matter. He hopes that the House will believe me when I say that it has been very carefully reconsidered between the two stages of the Bill. He further hopes that the House will accept the validity of the arguments which I have put forward and that, with my explanation, the new Clause will not be pressed to a Division.

    To describe the Financial Secretary's speech as disappointing would be a grave understatement.

    I have no complaint about the spirit in which he spoke and the manner in which he put forward his arguments. However, I think that all hon. Members felt that, after the debate we had in Committee, there was no doubt in the mind of the Chancellor of the Exchequer that he had to make a pretty sweeping concession if this problem was to be solved. I think that it is a matter of grave disappointment that the right hon. and learned Gentleman, having clearly left the Committee with a form of words which enabled us to drop our intention of voting against the Government and with the clear intention of doing something, has somehow been pushed off it. All that we have now is the Financial Secretary's negative statement on the problem.

    I do not propose to repeat the arguments which were deployed in Committee. I spoke at some length on that occasion. The Financial Secretary was good enough just now to imply that I had done my homework. I claim no credit for this, but no one who heard the speeches from both sides of the Committee could have been left in doubt about the strength of the case that we put forward. Not one hon. Member even attempted to shake our case or to produce an argument against it. Everyone who spoke fully supported it. Nor did the Chancellor of the Exchequer produce an argument to suggest that our case should be rejected. As I say, I thought that he had the clear intention at that time of accepting what we were putting forward. As I say, I do not propose to repeat those arguments. I hope they are still reasonably fresh in the minds of hon. Members.

    The Chancellor of the Exchequer said in Committee:

    "I am impressed, however, by the arguments used in this debate."—[OFFICIAL REPORT, 21st June, 1961; Vol. 642, c. 1537.]
    He was reinforcing what the right hon. Member for Huyton (Mr. H. Wilson) said.

    Looking back on that debate, it was clear that the Chancellor and the Financial Secretary came in with the idea of turning down the new Clause. I asked the Financial Secretary if he proposed to speak. He said, "Yes". In the end, the Chancellor got up, obviously to make a different speech. It was clearly the weight of the arguments which were used in the debate which caused the right hon. and learned Gentleman to take that attitude. I do not think there is any doubt about that.

    I think that it was the obvious sincerity felt by hon. Members on both sides on this subject which prompted my right hon. and learned Friend to speak rather than his mistrust of what I should have said if I had spoken.

    I was not in the least suggesting that the Chancellor had any mistrust of what the Financial Secretary would say, but when a junior Minister is due to make a speech, as the senior Minister previously agreed—they acted in concert—and after the debate has taken a certain turn so that the Committee feels that there is a very strong case, it is not inappropriate for the Chancellor of the Exchequer to say that he will reconsider it and privately whisper in the ear of the Financial Secretary that he had better tear up his brief. He probably said, "Roll up that brief. It will not be wanted for ten years." However, the Financial Secretary was too fly. He put it in his pocket. He knew that it might be wanted in ten days' time; and therefore we have had it today. The Chancellor of the Exchequer and the Financial Secretary felt that we had produced arguments sufficiently strong to shake the faith which they had reposed in the brief with which they had been armed.

    I wish to remind the House that there were two main arguments which, I think, were accepted by everyone as proving the very special and peculiar nature of this case. One was the world tin shortage. It has been said that we have debated this matter in past years. That is true, but I do not think that there has been a time when it has been debated when it was so clear to everyone that we are facing a prolonged problem of shortage of this metal. In the past the arguments have been strong and powerful, but I think that they are much stronger and more powerful today because of the calculation, which should be clear to most hon. Members, that, unless there is a miraculous break in the situation which none of us can forsee, we face a remarkable shortage confined, in the main, to this metal. I do not think that there is another metal about which one can say that there is a likely and continuing shortage.

    The House may remember the figures which I gave showing the prospective demand for tin, which is out of all proportion with present consumption, as industrialisation develops, not only in the Soviet Union, but in China. No hon. Member now the Financial Secretary has attempted to rebut the argument about the prospective long-term shortage of tin. I take it that there is no disagreement about this. No doubt, if any hon. Member wishes to disagree, he will seek to catch your eye, Mr. Speaker.

    Many of us felt that, although this country's contribution to dealing with the tin shortage could, at best, be only marginal—I have not attempted to overstate this—nevertheless we have a duty, not only to ourselves, but to the world to ensure that whatever tin can be produced is produced. I mentioned in particular the very special danger that, if there were a shortage of tin, some of the tin-producing countries which are now erecting their own smelters in their own countries will tend to ensure that they are well supplied with tin first. If that means no tin for us in this country, that will be a regrettable result. This is something that we must face. Not only shall we be paying higher prices for tin, but we shall have to bring in the finished product for our own smelters, which means a still heavier charge, and, in our view, an unnecessary charge, on our balance of payments. I think that all hon. Members agree that, if we have resources of tin which can be worked economically, then they should be worked. There is no argument about that.

    The second main point which I, like other hon. Members, sought to make in Committee concerned the very special mining conditions of tin. Again, I do not propose to repeat the arguments which I used. My hon. Friend the Member for Falmouth and Camborne (Mr. Hayman) indicated the peculiar difficulty of locating lodes of tin, some of them, as he said, very narrow and thin and very hard to find. There can certainly be no suggestion that the geological survey to which the Financial Secretary referred could have located tin for immediate mining. That is fantasy. On this occasion, he must have received his brief from the noble Lord the Minister for Science, because no one could for a moment think that the quite cursory geological investigation in 1956 could have located tin in quantities to be mined. I am sure that every hon. Member who represents a Cornish constituency will agree, with me about that.

    There is costly exploration to be done before the tin can be located and before there can be any security about the continuance of the yield from day to day, week to week or month to month. Other minerals are very often insecure and uncertain. In the case of faults in coal mining and with other materials, one may imagine that there is a continuous supply of the material, but suddenly it may be lost because of faulting. Even so, by means of bore holes and other methods, with practically every other mineral one can expect to have an idea of where to mine once the borehole has been done and, apart from the bad accidental fault, to have some degree of security about continued yield. That is not true in the case of tin, however. It cannot be done by bore holes. If the Financial Secretary stands on the 1956 Survey, he must tell us how it was done in relation to tin. Those are the two main reasons: the special mining conditions of tin and the world shortage. So far, I trust, I carry the House with me.

    There is one other argument. The Chancellor may argue that he accepts the problem of shortage and the problem of the unique mining characteristics involved, but that there is danger of a precedent being created. At the beginning of my speech in Committee, I accepted the obligation on me and on other hon. Members who spoke of proving that here was a special and unique case. We proved that. The Chancellor admitted—it has been quoted here tonight—that here is a special case. That should have made his task a great deal easier.

    I can understand two possible reasons why the Treasury might say "No". One might be revenue considerations. As the Financial Secretary has admitted, however, no cost is involved. It would cost the Chancellor nothing to accept the new Clause. The Treasury, therefore, is not standing on the argument of cost. The only other leg on which the Inland Revenue ever stands if it is not cost is whether a precedent will be created and whether other people will ask for concessions. If the House accepts my argument that in the case of tin we have a unique example, both on grounds of shortage of metal and of mining characteristics, that should give the Chancellor all he needs to stand up to any interests who might say, "You have given it to tin. Why not give it to us?"

    The Financial Secretary started by telling us about all the tax advantages that the tin mines already enjoy. They enjoyed the same advantages on 21st June. They obviously were not sufficient then to convince the Chancellor. If he was so sure that those tax advantages provided the answer, he should have been sure on 21st June. I do not complain about the Chancellor's courtesy in looking at the case, but I thought that his offer on 21st June was not merely courtesy but that he was genuinely moved by our arguments and that he intended to do something.

    The Financial Secretary went on to say that the tin mines enjoy the investment allowances as well as this, that and the other. Everything that was mentioned by the Financial Secretary applies over a wide range of industry and not simply to tin. The investment allowances were introduced by the Home Secretary in 1954, scrapped by the Prime Minister on 17th February, 1956, and restored by the noble Lord, Lord Amory, in 1959. The investment allowances apply to every industry and it cannot be said that they meet the special case of tin mining. The provisions to which the hon. Gentleman referred relating to underground exploration, the sinking of shafts, and so on, apply throughout mining and not only to tin.

    7.15 p.m.

    The Financial Secretary fell a little below his high standard when he quoted the Westwood Committee, because, as we were told by my hon. Friend the Member for Edinburgh, East (Mr. Willis), with his special knowledge and his long service on that historic Committee—it was one of the best Committees ever to report—it made the proposal about help for private enterprise in exploration and all the rest against a background that there would be a State mineral resources survey, as I said in the earlier debate.

    The Financial Secretary has not provided a convincing reason. He has merely said that the tin mines have certain advantages in some of these directions and they are better now than they were in 1945, 1947 or 1950, but he has not met the arguments put forward in the debate in Committee. The Financial Secretary looked very unhappy about this. He put the best possible face on it, quite unlike the performance of his colleague the Economic Secretary on malt vinegar a few minutes earlier. It would be out of order if I were to go back on that argument, but in both cases the argument was the same. This, however, is a much more important one, as, I am sure, my hon. Friend the Member for Lichfield and Tamworth (Mr. Snow), if he were here, would not disagree. In both cases, the truth is that Treasury Ministers, convinced of the justice of the case, are like putty in the hands of their officials when they come to argue it.

    I have never thought of accusing the Chancellor of the Exchequer of lack of courage, He has shown great courage on occasions, sometimes for an entirely wrong and unjust cause. I do not think that many right hon. Members have had to stand up to the Parliamentary rows that he had to face on Suez. Although we felt that the right hon. and learned Gentleman was wrong, nobody felt that he lacked courage in doing it.

    The Chancellor has been courageous on a number of other things. He has stood up to the Schedule A lobby in the Conservative Party on the Bill. It would be out of order for me to indicate all the things in which he has shown courage. He does not lack courage in this House. He stands up to the Opposition even when he is completely wrong, as is usual in such cases. He stands up to his own back benchers when he is sometimes wrong and when he is sometimes right. Parliamentarily, the right hon. and learned Gentleman is a tiger, but let him get into a room with a handful of officials and he is a rabbit. That is what happened about malt vinegar, and it has happened in this case, too.

    The Financial Secretary has a responsibility to protect the Chancellor. We know that Chancellors are busy people. They attend Cabinet meetings and do things far outside their Department. They have to deal with many important issues. The Chancellor goes round the country making speeches. He has not had a fortnight to prepare the case for the Clause or a similar Clause. The Inland Revenue has had more than a fortnight to prepare its case. It is a formidable organisation, to which I and many others pay tribute on so many occasions. We admire the work, the thoroughness and the knowledge of the Inland Revenue, but it is not always right.

    There is a heavy responsibility on junior Ministers in such cases to protect their Ministers, to give them rather stronger arguments and not to come along and produce the stuff that the Financial Secretary has produced today. My view is that the Chancellor had decided that something should be done in the national interest in relation to our balance of payments and in relation to relieving the world metal shortage. One ought not to be able to speak of the Chancellor being turned down by the Board of Inland Revenue, but that is what has happened. He was turned down, not on important arguments, but on arguments much less significant in the last resort than the powerful national arguments which have been used in support of the Clause.

    One can see the kind of thing which would be uppermost in the minds of the Board of Inland Revenue. In my view, the Chancellor should have taken the broader line. He should have looked it the broad problem of the national interest and said, "I am very sorry, but this has got to be done", or he should have asked for some other way of doing it.

    It is entirely regrettable that we have had this reply. I am not going to say that in this case as in the last one we were debating it was simply a question of bureaucracy gone mad. I think it was the case with vinegar. It may have been that the Economic Secretary put a had case but it may have been that the Financial Secretary, as we would expect, could have put a bad case better; but on this one, tin mining, which is a major problem, it would appear that, in a narrow, not unimportant, Departmental Inland Revenue consideration, some distinguished civil servants in that organisation thought that this proposal would create a precedent, and it would appear that they were powerful enough to override what should have been the Chancellor's first regard, that is, regard for the national interest and what I believe to be the united will of this House—because I have not yet heard a single Member, in Committee or today, really rebut the case which has been put forward.

    As I have said, this is very, very disappointing. We have had a half promise, for what it is worth, that the Chancellor will look again at a mineral resources survey, but in Committee I said that we wanted these Clauses and the mineral resources survey, too. Now we are not getting this Clause, and we are very doubtful about what we shall get from the mineral resources survey. I am afraid that the Financial Secretary's argument was very disappointing.

    He will be in no doubt at all, because I made it very clear in Committee, that we regard it as sufficiently important as to take our hon. Friends and, I am sure, quite a number of hon. Gentlemen opposite into the Division Lobby. I would have hoped that this would not have been necessary. I do not want to score any cheap debating or party success from taking a number of hon. Gentlemen opposite into our Division Lobby, although we always welcome them. We do not see them very often, and we tend to get different ones at different parts of the Finance Bill. I for one would not think it remarkable if we found the hon. Gentleman the Member for Bodmin (Mr. Marshall) in our Lobby. We should be glad to see him, of course. That would be entirely consistent with the line he has taken upon this matter throughout the last few years. However, I would far rather feel, as I thought in Committee, that there would be no need for anyone to go into the Lobby. We hoped that if not this Clause an alternative suitable one could have been put into the Bill, and we are very disappointed to find that that is not in fact the case.

    The speech of the Financial Secretary will cause deep disappointment in Cornwall, because there were high hopes after the Chancellor's speech of 21st June that there was really a chance of this special concession for which we are asking in this Clause being granted so as to enable new mines to be started. The Financial Secretary mentioned a figure of £500,000 for setting a new tin mine going in Cornwall. It might cost very much more even than that. It is really a speculation. We are not asking the Government to speculate money, although they might well be justified in doing so, because, after all, tin is indigenous in Cornwall and experts are agreed that great quantities of it are still there; but setting a new mine going, with the necessary exploration, mostly through granite, is extremely costly.

    I feel that the Financial Secretary tonight was delivering in the main the speech which he was prepared to give

    Division No. 236.]

    AYES

    [7.26 p.m.

    Ainsley, WilliamChetwynd, GeorgeFletcher, Eric
    Alien, Scholefield (Crewe)Corbet, Mrs. FredaFoot, Michael (Ebbw Vale)
    Awbery, StanCrossman, R. H. S.Gaitskell, Rt. Hon. Hugh
    Bacon, Miss AliceCullen, Mrs. AliceGinsburg, David
    Benson, Sir GeorgeDarting, GeorgeGourlay, Harry
    Blyton, WilliamDavies, G. Elfed (Rnondda, E.)Grey, Charles
    Boardman, H.Deer, GeorgeGriffiths, W. (Exchange)
    Bowden, Herbert W. (Leics, S.W.)Diamond, JohnGrimond, J.
    Bowles, FrankDodds, NormanHale, Leslie (Oldham, W.)
    Boyden, JamesDriberg, TomHall, Rt. Hn. Glenvil (Colne Valley)
    Braddock, Mrs. E. M.Ede, Rt. Hon. C.Hamilton, William (West Fife)
    Broughton, Dr. A. D. D.Edelman, MauriceHannan, William
    Butler, Herbert (Hackney, C.)Edwards, Robert (Bilston)Hayman, F. H.
    Castle, Mrs. BarbaraEdwards, Walter (Stepney)Henderson, Rt. Hn. Arthur (Rwly Regis)
    Chapman, DonaldEvans, AlbertHilton, A. V.

    us on 21st June. One cannot but feel that the Chancellor himself realised that the Financial Secretary was going to put a damper on our Clauses and, therefore, replied himself. He spoke with great fervour and sincerity, too, in his speech, saying that he was deeply impressed by the arguments of my right hon. Friend the Member for Huyton (Mr. H. Wilson) and of hon. Members on both sides.

    My constituency used to be known as the mining constituency of Cornwall, and most of our older people still regard tin mining as the fundamental industry of Cornwall. Not only the people employed in sinking a mine, working a mine, developing a mine, are involved, but all sorts of ancillary industries are drawn into the orbit. I mentioned in my speech on 21st June that we were a local employment area, but we have not got many benefits from the Local Employment Act, and the Town Council of Penryn only last week expressed its great disappointment at the lack of help which has come from the Board of Trade.

    I do not want to prolong this debate, but I tell the Financial Secretary that when tomorrow the mining and financial experts in Cornwall read his speech and find that he has told us—and told them, in effect—that they are probably better off under existing conditions than they would be if this Clause were added to the Bill, they will be extremely shocked. I can tell him that they are great supporters of his. I hope that in future they will support my party as being the party of sincerity, a party which would carry out a proper mineral resources survey—and will do it when we get power.

    Question put, That the Clause be read a Second time:—

    The House divided: Ayes 147, Noes 201.

    Holman, PercyMarshall, DouglasSkeffington, Arthur
    Houghton, DouglasMaxwell-Hyslop, R. J.Slater, Mrs. Harriet (Stoke, N.)
    Howell, Charles A, (Perry Barr)Mellish, R. J.Slater, Joseph (Sedgefield)
    Howell, Denis (Small Heath)Mendelson, J. J.Smith, Ellis (Stoke, S.)
    Hoy, James H.Milne, Edward J.Soskice, Rt. Hon. Sir Frank
    Hughes, Emrys (S. Ayrshire)Mitchison, G, R.Spriggs, Leslie
    Hughes, Hector (Aberdeen, N.)Monslow, WalterStewart, Michael (Fulham)
    Hunter, A. E.Moody, A. S.Stones, William
    Hynd, H. (Accrington)Mort, D. L.Strachey, Rt. Hon. John
    Hynd, John (Attercliffe)Moyle, ArthurStross, Dr. Barnett(Stoke-on-Trent, C.)
    Jay, Rt, Hon. DouglasMulley, FrederickSwain, Thomas
    Johnson, Carol (Lewisham, S.)Neal, HaroldSwingler, Stephen
    Jones, Rt. Hn. A. Creech(Wakefield)Noel-Baker, Francis (Swindon)Symonds, J. B.
    Jones, Dan (Burnley)Oliver, G. H.Taylor, John (West Lothian)
    Jones, Elwyn (West Ham, S.)Owen, WillThompson, Dr, Alan (Dunfermline)
    Jones, J. Idwal (Wrexham)Padley, W. E.Thornton, Ernest
    Jones, T. W. (Merioneth)Paget, R. T.Tomney, Frank
    Keiley, RichardPavitt, LaurenceUngoed-Thomas, Sir Lynn
    Key, Rt. Hon. C. W.Pearson, Arthur (Pontypridd)Wainwright, Edwin
    King, Dr. HoracePeart, FrederickWarbey, William
    Lawson, GeorgePentland, NormanWeitzman, David
    Lewis, Arthur (West Ham, N.)Popplewell, ErnestWhite, Mrs. Eirene
    Lipton, MarcusPrice, J. T. (Westhoughton)Whitlock, William
    Logan, DavidProbert, ArthurWilcock, Group Capt. C. A. B.
    Loughlin, CharlesPursey, Cmdr. HarryWilkins, w. A.
    Mabon, Dr. J. DicksonRandall, HarryWilley, Frederick
    McCann, JohnRoberts, Goronwy (Caernarvon)Williams, W. T. (Warrington)
    MacColl, JamesRobertson, John (Paisley)Willis, E. G. Edinburgh, E.)
    Mclnnes, JamesRobinson, Kenneth (St. Pancras, N.)Wilson, Geoffrey (Truro)
    McKay, John (Wallsend)Rogers, G. H. R. (Kensington, N.)Wilson, Rt. Hon. Harold (Huyton)
    Mackie, John (Enfield, East)Ross, WilliamWinter-bottom, R. E.
    McLeavy, PrankScott-Hopkins, JamesWoof, Robert
    Manuel, A. C.Short, Edward
    Mapp, CharlesSilverman, Julius (Aston)TELLERS FOR THE AYES:
    Marsh, RichardSilverman, Sydney (Nelson)Mr. Redhead and Mr. Irving.

    NOES

    Allason, JamesDonaldson, Cdr. C. E. M.Hutchison, Michael Clark
    Arbuthnot, JohnDoughty, CharlesIremonger, T. L.
    Ashton, Sir HubertDuncan, Sir JamesJackson, John
    Barber, AnthonyElliot, Capt. Walter (Carshalton)James, David
    Barlow, Sir JohnElliott, R.W.(Nwcstle-upon-Tyne, N.)Jenkins, Robert (Dulwich)
    Barter, JohnEmery, PeterJohnson, Dr. Donald (Carlisle)
    Baxter, Sir Beverley (Southgate)Errington, Sir EricJohnson, Eric (Blackley)
    Beamish, Col. Sir TuftonFarey-Jones, F. W.Kerans, Cdr, J. S.
    Bell, RonaldFarr, JohnKerby, Capt. Henry
    Bennett, F. M. (Torquay)Fell, AnthonyKershaw, Anthony
    Bevins, Rt. Hon. ReginaldFinlay, GraemeLeavey, J. A.
    Biggs-Davison, JohnFisher, NigelLeburn, Gilmour
    Bingham, R. M.Fletcher-Cooke, CharlesLegge-Bourke, Sir Harry
    Bishop, F. P.Fraser, Ian (Plymouth, Sutton)Lewis, Kenneth (Rutland)
    Black, Sir CyrilGammans, LadyLindsay, Martin
    Bossom, CliveGardner, EdwardLinstead, Sir Hugh
    Bourne-Arton, A.Glover, Sir DouglasLitchfield, Capt. John
    Box, DonaldGood-hart, PhilipLong-bottom, Charles
    Boyle, Sir EdwardGower, RaymondLoveys, Walter H,
    Brewis, JohnGrant, Rt. Hon. WilliamLow, Rt. Hon. Sir Toby
    Brown, Alan (Tottenham)Green, AlanLucas-Tooth, Sir Hugh
    Browne, Percy (Torrington)Gresham Cooke, R.McAdden, Stephen
    Bullard, DenysGrimston, Sir RobertMacArthur, Ian
    Bullus, Wing Commander EricGrosvenor, Lt.-Col. R. G.McLaren, Martin
    Burden, F, A.Gurden, HaroldMcLaughlin, Mrs. Patricia
    Butcher, Sir HerbertHall, John (Wycombe)Maclean, Sir Fitzroy (Bute & N. Ayrs.)
    Campbell, Gordon (Moray & Nairn)Hamilton, Michael (Welling-borough)McMaster, Stanley R.
    Carr, Robert (Mitcham)Harris, Frederic (Croydon, N. W.)Maddan, Martin
    Channon, H. P. G.Harrison, Brian (Maldon)Maitland, Sir John
    Chataway, ChristopherHarrison, Col. Sir Harwood (Eye)Manningham-Buller, Rt. Hn. Sir R.
    Chichester-Clark, R.Harvey, John (Waltham-stow, E.)Markham, Major Sir Frank
    Clark, William (Nottingham, S.)Harvie Anderson, MissMarten, Neil
    Clarke, Brig. Terence (Portsmth, W.)Hay, JohnMathew, Robert (Honiton)
    Cole, NormanHeald, Rt. Hon. Sir LionelMatthews, Gordon (Meriden)
    Cooke, RobertHicks Beach, Maj. W.Mawby, Ray
    Cooper-Key, Sir NeillHill, Dr. Rt. Hon. Charles (Luton)Maydon, Lt.-Comdr. S. L. C.
    Cordeaux, Lt.-Col, J. K.Hill, Mrs. Eveline (Wythenshawe)Mills, Stratton
    Costain, A. P.Hill, J. E. B. (S. Norfolk)Montgomery, Fergus
    Courtney, Cdr. AnthonyHirst, GeoffreyMore, Jasper (Ludlow)
    Craddock, Sir BeresfordHobson, JohnMorrison, John
    Cunningham, KnoxHocking, Philip N.Mott-Radclyffe, Sir Charles
    Curran, CharlesHolland, PhilipNabarro, Gerald
    Dance, JamesHopkins, AlanNugent, Sir Richard
    d'Avigdor-Goldsmid, Sir HenryHornby, R. P.Oakshott, Sir Hendrie
    Deedes, W. F.Hornsby-Smith, Rt. Hon. PatriciaOsborn, John (Hallam)
    de Ferranti, BasilHoward, John (Southampton, Test)Page, John (Harrow, West)
    Digby, Simon Wing-fieldHughes-Young, MichaelPage, Graham (Crosby)

    Partridge, E.Sharples, RichardVaughan-Morgan, Rt. Hon. Sir John
    Pearson, Frank (Clitheroe)Shaw, M.Vosper, Rt, Hon. Dennis
    Peel, JohnShepherd, WilliamWakefield, Edward (Derbyshire, W.)
    Pickthorn, Sir KennethSkeet, T. H. H.Walder, David
    Pilkington, Sir RichardSpearman, Sir AlexanderWalker, Peter
    Pitt, Miss EdithSpeir, RupertWalker-Smith, Rt. Hon. Sir Derek
    Pott, PercivallStanley, Hon. RichardWard, Dame Irene
    Powell, Rt. Hon. J. EnochStevens, GeoffreyWells, John (Maidstone)
    Price, David (Eastleigh)Storey, Sir SamuelWhitelaw, William
    Prior, J. M. L.Studholme, Sir HenryWilliams, Dudley (Exeter)
    Proudfoot, WilfredSumner, Donald (Orpington)Williams, Paul (Sunderland, S.)
    Quennell, Miss J. M.Taylor, Edwin (Bolton, E.)Wills, Sir Gerald (Bridgwater)
    Rawlinson, PeterTemple, John M.Wise, A. R.
    Redmayne, Rt. Hon. MartinThomas, Leslie (Canterbury)Wolrige-Gordon, Patrick
    Rees-Davies, W. R.Thompson, Kenneth (Walton)Wood, Rt. Hon. Richard
    Renton, DavidThompson, Richard (Croydon, S.)Woodhouse, C. M.
    Rippon, GeoffreyTiley, Arthur (Bradford, W.)Woodnutt, Mark
    Roots, WilliamTurner, ColinWoollam, John
    Ropner, Col. Sir LeonardTurton, Rt. Hon. R. H.
    Royle, Anthony (Richmond, Surrey)van Straubenzee, W. R.TELLERS FOR THE NOES:
    Seymour, LeslieVane, W. M. F.Mr. Gibson-Watt and Mr. Noble

    New Clause—(Licences To Sell Tobacco From Vehicles)

    On and after the first day of October, nineteen hundred and sixty-one, section one hundred and eighty-seven of the Customs and Excise Act. 1952 (Licences to deal in and sell tobacco), shall have effect with the addition immediately after subsection (3) of the said section of the following subsection:—

    "(3A) Notwithstanding anything in the said subsection (2), a licence under this section may be granted in Great Britain, subject to such conditions as the Commissioners think fit to impose, so as to authorise the sale of tobacco by retail from a registered goods vehicle specified in the licence and being the property of and plying from the premises of the person authorised to sell tobacco at those premises; and this Act shall have effect accordingly as if the vehicle specified in a licence so granted were premises of the person authorised to sell tobacco there."—[Mr. H. Wilson.]

    Brought up, and read the First time.

    I beg to move, That the Clause be read a Second time.

    I move the Clause formally. I would have been prepared to speak on it, but I know that my hon. Friends have rather more powerful arguments than I could deploy at the moment.

    I thank my right hon. Friend the Member for Huyton (Mr. H. Wilson) for formally moving the Second Reading of the Clause. My task is to try to persuade the Chancellor of the Exchequer and the Government to accept this very reasonable proposal. What we are seeking is to get the Government to move a little with the times in the matter of retail distribution. They seem to ignore the fact that year after year, when we discuss matters arising from the Finance Bill, people's shopping habits change as do also the services which are rendered to consumers.

    In recent years there have been changes in shopping habits because more and more women have been going out to work. It is necessary to provide some facilities to enable people to shop more effectively at times and in places convenient to themselves. The Clause seeks to change the situation regarding the sale of tobacco which has prevailed since 1825. In that year the first Excise Licences Act covering this matter definitely provided that licences could be granted only where the premises were fixed. This procedure seems to have been followed in all subsequent changes of legislation. The only move away from it was made in 1951 when the slight concession was granted that when a shop was being erected and temporary arrangements were made in the interim for selling from a vehicle it was permissible to obtain a licence to enable tobacco and cigarettes to be sold from that vehicle.

    This provision inevitably meant that whenever such a licence was granted one had to be sure that eventually a shop would be erected on the site in question. The technique of selling from mobile shops has grown up since the war on sites which are not at all temporary. The vehicles function, as it were, in their own right as a means of retail distribution. As to mobility, we had the anomalous provision made abundantly clear last year that as long as the owner was prepared to take the wheels off or chain a coffee stall to the ground it was possible to regard it as a fixed site for licensing purposes. In 1952 the law was changed and licences were granted to coaches, buses, trains and other means of travel. This means, therefore, that mobile shops, which are a legitimate means of trading, are now singled out to be discriminated against in this matter of licensing.

    I have an interest in the co-operative movement and I should like the Economic Secretary to address himself particularly to that aspect of this problem. In the co-operative movement, each society of which is registered under the Industrial and Provident Society Acts, there are 4,063 mobile shops. Each of these is part and parcel of a chain of retail distribution, covered by 573 separate organisations, each being owned and controlled by the members shopping with it. What we are asking is that the members should retain their freedom of choice to purchase cigarettes in the shop which they partly own in that it belongs to the society of which they are members. A member is not forced to join a co-operative society; he chooses to join. It is a voluntary association which a person joins in the same way as he might choose to join any other association. We claim that, having chosen to become a member and trade mutually with his fellow members, he should have freedom of choice to shop with the society and not be forced to shop elsewhere.

    There is a limited amount of shopping that goes on for cigarettes and tobacco. This is a kind of service which is applicable mostly to rural areas. Too often in this House we are London-minded, Manchester-minded, or Glasgow-minded and do not give sufficient consideration to the people who work on the land away from the towns. These people are able to take in an order once or twice a week from a mobile shop. Just as they are able to buy their bread, sugar, milk and tea from a mobile shop from their own co-operative society so they should be able to purchase the packet of cigarettes or tobacco that they require.

    Looking back over the history of this matter, one of the things that worry us is whether the Government are discriminating against the co-operative movement. I am in favour of the normal retail distributive outlets, the small tobacconists—

    My hon. Friend will appreciate that I have an interest in distribution. Will he tell me whether the Clause would apply, as I think it would, to private trade mobile shops just as it would to co-operative society mobile shops?

    Yes, most certainly. I am referring to only one sector of retail distribution. Any firm enterprising enough to emulate the co-operative movement by providing such a service to the people ought naturally to receive precisely the same benefits. I am talking about the whole business of seeking to serve consumers; in the case of the co-operative society, the purpose is to give service to consumers who are also its own members.

    A ground of resistance sometimes put forward from the Treasury Bench is that there is already an adequate coverage. We are told that there is one licensed retail outlet for every forty smokers. We were told last year that there were 420,000 retail outlets. Yet in spite of the terrific coverage, an amazing thing is that in the last two or three years there has been a growth in the number of home cabinets in use. These are provided by manufacturers in peoples homes so that those people, their friends and their neighbours can obtain a supply of cigarettes.

    I want to make it clear that this is not a matter of granting tobacco licences to mobile hawkers, sellers going from door to door selling cigarettes and tobacco. A mobile shop is clearly defined by the Customs and Excise authorities. They have agreed on eight points which show clearly what a mobile shop is. The points include the following: a mobile shop must be clearly distinguishable from a delivery van; it must have a well-lit interior and have certain windows, either in the roof or in the sides; the access and entry has to be well safeguarded; there must be adequate space for salesmen and customers to move about within the shop; if it is a self-service store, there must be a separate counter for wrapping the purchases; there must be adequate selection facilities, the goods being on display, so that they are not just brought out from a box, but the purchaser can see them and choose for himself. Other points are clearly laid down. Thus, there is no difficulty in defining the difference between a mobile shop and a delivery van. Even the height of the step into the mobile shop is laid down by the Customs and Excise authorities; it must not be more than 1 foot 5 inches high.

    If it is possible to have such a definition so that a mobile shop can be clearly recognised, why is it impossible for this concession to be granted so that folk can purchase tobacco and cigarettes from it just as they can from any other shop?

    I speak in this debate as a non-smoker. From my experience in the Medical Practitioners Union before I come into this House I am convinced that in the main smoking and lung cancer are linked. Therefore, I am not necessarily anxious to persuade people to dash out and buy more and more cigarettes. I am well aware that the granting of these licences might mean that more people will smoke and that this may lead to more lung cancer. In 1935 there were only 1,800 deaths from lung cancer but last year there were 20,000, and that might be thought to be a reason why I should speak against the Clause. But I am concerned very much about the principle of equity. I do not believe that we can alter people's habits, certainly not their smoking habits, by prohibition. Whenever prohibition has been tried, it has had an effect opposite to that intended.

    7.45 p.m.

    Therefore, although I am not anxious to see a growth which would benefit tobacco interests, and although I consider that the way in which T.V. advertising is aimed at teen-agers to persuade more and more of them to form the smoking habit is pernicious and horrible, I recognise that at the same time, in all fairness, and equity, if people wish to smoke they should have as much freedom as people who do not wish to smoke, and for those who live in rural areas this means the right to be able to ask for what they want at the mobile store.

    I hope that this year the Economic Secretary will be able to accept the Clause and that the House will accordingly finally see Measures taken along the lines proposed in the Clause.

    I ask the Economic Secretary to accept the Clause in the interests of people who live on new housing estates or in rural areas. Very often the houses on housing estates are built before the shops, and then the only opportunity the people have of being served is by means of a mobile shop. It seems ridiculous that mobile shops should be able to sell the other things the people require but cannot sell tobacco and cigarettes to them merely because the Treasury will not accept this Clause.

    As my hon. Friend the Member for Willesden, West (Mr. Pavitt) has mentioned, many houses are in remote areas where it is impossible for the occupants to get service unless they are visited by a mobile shop. Therefore, from the point of view of the consumers, and the point of view of the concern, whether a cooperative shop or otherwise, which seeks to serve the consumers, I suggest that it is stupid that such mobile shops should not be allowed to give a complete service in the commodities which a normal shop would be able to supply.

    As has already been pointed out, the provisions in respect of mobile shops are fairly well laid down by the Customs and Excise authority. Also, mobile shops are supposed to conform—I am not saying that every one of them does—to the regulations laid down under our public health legislation

    Because of that, and because mobile shops provide an essential service to people living in remote areas and on housing estates in the early stages, we ask the Economic Secretary to look at our proposal in the light of modern conditions and from the point of view of giving a complete service, as a normal shop would do, to people who have no other alternative unless they travel long distances and spend a great deal of money on bus or rail fares.

    I think that I was one of the earliest people in this country to start the modern travelling shop. That was many years ago. I think that it was one of the first in the co-operative movement. I want, however, to make it quite clear that the modern travelling shop is not confined to the co-operative movement. The problem of selling cigarettes under licence is not restricted to the co-operative travelling shop; it is also the problem of many other travelling shopkeepers who supply out of the way villages with the goods that they require.

    A few weeks ago, when I had been ill, I was recuperating in a caravan in a quiet little village. I went to watch the grocer of the village pack his travelling shop to take goods around other villages in that locality. That showed that travelling shops are not restricted to the co-operative society. In that case, a private trader was doing most of his trade by this kind of venture. We have always had this difficulty about the selling of cigarettes. There has also been the difficulty—a point not yet brought out in the debate—with regard to certain kinds of drugs which cannot be sold in travelling shops. For a long period this agitation has continued not only to be allowed to sell the kind of drugs that are prepacked but also cigarettes.

    A paradoxical situation is that if a salesman on a travelling shop takes an order for goods in the same way as his counterpart in the fixed shop and prepares those goods in the warehouse of that travelling shop he is allowed to prepack cigarettes, put them in the mobile shop and deliver them to customers and accept the money at that time. This is an anomaly that should be corrected. It is an anomaly which is liable to create misuse and abuse in respect of travelling shops. A problem with the mobile travelling shop is, within a given number of working hours, say a working week of 44 hours, to keep it on the road and selling goods for as many hours as possible. That is a scientific problem of approach for the travelling shop salesman. They have therefore to prepack in warehouses licensed for tobacco and cigarettes. They cannot be put on the van and sold at the request of customers.

    Travelling shops are not just a means of delivery to customers. They are more than that. They are satisfying the requirements of the customer. In these days of supermarkets and tremendous multiple establishments it is rather gratifying to know that some of the smaller establishments, the little shopkeepers close to the customer are surviving better than some of the supermarkets. This is because of their close proximity to the customer. The mobile travelling shop supplies that need. Many people living in out of the way villages have jobs to do which may sometimes make it difficult for them to get to a shop. In some of the new villages, the only way for people to be served is by mobile travelling shops.

    These travelling shops can be packed from top to bottom with all kinds of requisites for people who cannot get to the shops, not only to grocery establishments but in some cases to suppliers of dry goods as well. They supply the needs of people in the villages, especially the new villages where it has not been possible to put up shopping centres. Even in cities like Sheffield where new estates have been created, some of them with thousands of houses, it is sometimes a considerable time before the necessary shopping centres are provided to satisfy the needs of the people. These travelling shops satisfy those needs.

    Many of the old type small shops have gone. There was a time in Manchester when there was one shop to every fifty of the population. The mobile travelling shop doing its job properly in the villages or in the new estates in the cities or towns is providing in some cases for thousands of customers, giving them first-class service on their doorsteps, and satisfying all their needs, with the exception of certain drugs and cigarettes.

    I ask the Economic Secretary to face this issue fairly and squarely to see that the private traders or the co-operative traders who have to resort to the business of travelling shops to satisfy their customers are given an opportunity to sell cigarettes. A few days ago I was concerned with a relative of mine in the purchase of a garage. He said, "I am going to get a licence to sell cigarettes in the garage." But for the travelling shop there is no opportunity to sell cigarettes unless customers have previously given an order for them. It is only by a prepacked order that cigarettes can be supplied in that way. That is an anomaly which ought to be corrected speedily and for all time by the acceptance of this new Clause. I hope that the Government will not dodge this issue—which affects the private trader as well as the co-operative trader—but will face it fairly and squarely.

    8.0 p.m.

    I support the new Clause which has been so ably spoken to by my hon. Friend the Member for Willesden, West (Mr. Pavitt). I do not often discuss the problems about which hon. Members opposite should be adequately informed but of which they are so frequently painfully ignorant. Most of these mobile shops form part of a more economic method of distribution. They have come to stay. Their numbers are growing. The Cooperative movement has over 4,000 engaged in all types of retail distribution—about half of them being in the grocery trade. Private traders are also adopting them on an increasing scale. They serve the remote regions, not only of Wales and Scotland but of Kent and Surrey, even within 30 and 40 miles of London—in villages which cannot be adequately provided with local shops upon an economic basis because the turnover would be so small in relation to the cost.

    The mobile shop is a valuable asset to sparsely populated areas, and I include in those areas certain villages in the green belt round London. The people in those villages know that the mobile butcher or the mobile grocer will arrive at a certain time. There is probably no hardware shop in the village and a mobile one is very useful. I have telephoned through an order for cigarettes and those cigarettes have been delivered to me on the same day by a mobile shop which is also selling other goods. The cigarettes having been ordered and pre-packed, the mobile shop can deliver and receive payment for them.

    The situation of these mobile shops in relation to the sale of tobacco and cigarettes is as foolish as that which existed before the recent Betting and Gaming Act, when a bet which was telephoned was legal but one which was made with a street bookmaker was not. This situation is just as stupid, and it seems to have grown up as a result of the consideration of the same interests—in other words, to make it easy for those who have telephones and difficult for those who have not. It is a question of class interest.

    The mobile shop is now an economic factor in our life—a factor which, combined with the permanent shop from which it operates, will be of ever-growing value to this country in enabling the population to spread out, thereby reducing the densities of our great towns and allowing the development, under automation, and electricity, of village industries. The concentration of agricultural workers in relatively small villages will mean the use of the mobile shop if they are to be adequately served.

    Many of us may think that the tobacco industry is too large. It provides the Treasury with its biggest source of revenue. Slot machines are allowed in private houses, in hotels and even in the streets, provided they are locked and chained to a permanent establishment. They can serve cigarettes for the whole 24 hours of the day. But the sale of cigarettes is still prohibited in mobile shops. How illogical, foolish, unintelligible and mid-Victorian. In my fifty years of business in the public life of this country I have repeatedly discovered that it takes generations to get sensible ideas into the heads of the typically conservatively-minded elements in this country.

    The mid-Victorian idea that mobile shops are wrong is now thoroughly out of date. Many ideas have spread gradually when once they have been propagated and have suddenly been taken up by conservative-minded persons who adopt them as new ideas, not realising that they are expressing something which others have been advocating for forty or fifty years. I hope that the same thing will happen in the case of the mobile shops and the sale of tobacco and cigarettes. I hope that the Conservatives will give way on this point.

    Incidentally, the Treasury is likely to gain if the new Clause is accepted. I therefore ask the Government to consider the point afresh and to make it possible for these shops to sell cigarettes and tobacco. They are quite distinct from delivery vans. I ask the Treasury to reconsider its antiquated, Conservative, unprogressive stand, and to accept the new Clause.

    I also support the Clause, and I rise to express an opinion on a different aspect of the question. So far the emphasis has been on the service which mobile shops can render to people in isolated areas and villages. My hon. Friend got as near as 30 or 40 miles to London, but I can show hon. Members built-up areas—not isolated places—only five, 10 or 15 miles from this House, where the mobile shop renders a great service. I am speaking of the great housing estates, which all too often have been provider1 with only a limited number of shops.

    On those housing estates there are many elderly people, with very poor ous services, no motor cars, and no ability to ride bicycles. On those estates the mobile shop is doing a tremendous job. It is most inconvenient for the elderly people who live on those estates not to be able to obtain cigarettes and tobacco. For several years a good case has been made out on this point, but as the years have gone by it has seemed that a good case is not enough for the Treasury. It is not enough to ask for a sensible service to be provided for the people on the new housing estates in north-west Kent. It seems that unless a case can he made out that a certain provision will be to the advantage of the Surtax payer, the Government Front Bench will express no understanding of it. I ask the Treasury what case it has to deny this service to old and young on housing estates within a few miles of this House, never mind about towns and villages.

    I am also in favour of the new Clause. I shall repeat to some extent what I endeavoured to say last year, when I moved a similar provision. I want to go into the argument before the Economic Secretary indicates what his present intentions are, because I want to try to anticipate his primary consideration in approaching the matter.

    He will no doubt tell us, quite correctly, that the tobacco dealer's licence is not a revenue raiser but a revenue safeguard. I agree that that is the purpose of the tobacco licence. That provision is now more than 100 years old. It was introduced to enable the Customs and Excise officer to identify outlets for tobacco in order that there should be a check on any possibility of illicit trafficking in stolen or uncustomed tobacco. It was to safeguard that very substantial revenue raiser, the Tobacco Duty itself, that it was first conceived to be necessary to have this licence duty, not for revenue but as a form of limitation. It was laid down and has been insisted upon that such a licence should be issued only for fixed premises.

    We must take into account the fact that whatever the necessity for that originally—when admittedly there was a very considerable risk of dodging the main tobacco duty and trafficking and hawking of tobacco which was fairly widespread in those days—it must be recognised that such risks are today exceedingly small. After all, the trade itself exercises a rigid control on the sources of supply. I cannot imagine that today there is any widespread abuse in this connection. Although last year the Economic Secretary said there was still a degree of trafficking in uncustomed tobacco, he did not say to what extent that existed or what evidence there was of any large scale difficulty of that kind.

    In any event, the necessity for the licence to identify even the fixed premises no longer has the validity it originally had, for now it is palpably clear to everybody by the display of tobacco and cigarettes from whence they are being sold. I should be interested to know in the process of checking on these outlets how many visits Customs and Excise officers make today to the ordinary retail tobacconists' premises where licences are granted. I suggest that a rigid adherence to this old limitation is completely out of date. It has produced some entirely absurd situations.

    What is argued for here is not for a great expansion of the tobacco industry, not even for an advantage to that industry, but to serve a simple consumer need. When the habits of shopping have changed and the needs of people are met in other ways, not only by the mobile shop, in many cases the housewife today finds her opportunities for shopping very limited. Delivery at the household is a very considerable advantage. We have the absurd position that tobacco and cigarettes can be delivered, not merely by a mobile shop but by a van, tricycle, bicycle or by foot if need be, provided an order has been placed at licensed premises beforehand.

    Yet a casual sale, made without an order, from a van which is taking quantities of other goods and household necessities to the buyers constitutes an offence even though there is no suggestion whatever that the tobacco sold has not borne duty in the ordinary way. In fact it will have been drawn from licensed premises to which the vanman will be accounting.

    There are all kinds of potentialities for getting round this provision. Let us be honest about it. I am not pinpointing any one in particular. I am sure the Economic Secretary realises that a considerable degree of evasion goes on. He may say that there is no need to make this extension but to try to go on enforcing a rigid adherence to this old provision, which can be readily and easily evaded, only brings these regulations into contempt. We ought to recognise the obvious and legitimise this procedure in a way which reputable traders can follow and can derive the same advantages as those who get round the existing regulations.

    8.15 p.m.

    I remind the hon. Gentleman of the perfectly absurd and ludicrous devices to which even the Customs and Excise have had to resort in trying to meet this problem. We have had the example of a coffee stall which, if it is on wheels and theoretically mobile, cannot have a licence, but, if the wheels are removed or sunk into the ground or lashed to stakes, a licence can be granted. One can travel on a train or bus or other licensed public transport vehicle and buy tobacco and cigarettes, but they cannot be bought from a van or mobile shop which is pursuing legitimate business by delivering to households. On a railway station I can buy tobacco and cigarettes which are taken on a trolley pushed around acres of ground. Because the station is regarded as fixed premises, the licence can be obtained for the trolley. Yet in similar circumstances it cannot be provided for the mobile shop.

    Last year the Economic Secretary referred to the fact that the Treasury had had some consultations with the Cooperative Union. I emphasise that this new Clause is not drawn exclusively for the benefit of the "co-ops". There are many other establishments which would quite sensibly take advantage of the provision we seek to introduce. The Economic Secretary said that there had been consultations with the National Union of Retail Tobacconists, but he did not tell us what views had been received from that body. There was a little suspicion on this side of the House that probably same vested interests came into the picture and urged him to resist tile proposal last year.

    It is no business of the Customs and Excise to determine in the issue of tobacco dealers' licences whether it is appropriate to allow anyone to have such a licence on grounds of competition or existing facilities for obtaining tobacco. Such a licence should be granted where the regulations are complied with to whoever may apply for them on payment of the appropriate trifling licence duty. This new Clause does not contemplate the introduction of vast new sources of supply. All it seeks to do is to ensure that those who are already licence holders for fixed premises shall have the sensible facility of being able to deliver to customers along with other goods they may sell in that fashion.

    As has been mentioned, this would have the double advantage from the Treasury point of view—unlike so many proposals made in these debates—that it would add a little to the revenue to the extent that additional licences were taken out. I again emphasise that this new Clause is drafted with the due regard for what might be the legitimate purpose behind the tobacco dealers' licence, namely, the purpose of safeguarding the major revenue on tobacco itself. It is not for a moment suggested that such licences should be issued to vehicles willy-nilly without any sort of regulation. On the contrary, it is proposed that the licences should be
    "subject to such conditions as the Commissioners think fit to impose"
    for the purpose of safeguarding the major revenue, that it should be in respect of
    "a registered goods vehicle specified in the licence and being the property of and plying from the premises of the person authorised to sell tobacco at those premises"
    I suggest that these provisions provide all the reasonable safeguards that we could require for the purpose of protecting the major revenue. I hope that the Economic Secretary will not once more reject this proposal but will recognise that here is a legitimate consumer need and an opportunity to tidy up what has become an anachronism and in the minds of the public very much a piece of fussy red tape.

    May I remind the Economic Secretary of the words which he used last year when this matter was debated? He said:
    "We have, as I have said, considered this again, and we have reached the conclusion that, although in particular cases it would be a limited advantage to a number of consumers, the need for a general extension in present circumstances is not made out."
    I interpose here the comment that I think that my hon. Friends today have demonstrated, coming as they do from a variety of constituencies, that there is a consumer need for this concession. The hon. Member continued:
    "However, I must tell the House that, in my view, this is not a conclusion which must stand for all time. We made a thorough investigation as a result of the approach made to my predecessor as Economic Secretary not long ago, and we have considered the matter again. As I say, this is not a conclusion which must stand for all time. Circumstances may change and we will certainly keep the matter under review. However, I could not at this time advise the House to accept the Amendment."—[OFFICIAL. REPORT, 6th July, 1961; Vol. 626, c. 525.]
    Having kept the matter under review; having, I hope, taken the further opportunity of obtaining evidence about the demand and the need for this simple extension; and realising that the new Clause is adequately drawn from the point of view of safeguarding the revenue, the Economic Secretary will, I hope, give us a more favourable reply than he has on previous occasions.

    The effect of the new Clause is to authorise the issue of licences for the sale of tobacco from a registered goods vehicle owned by, and plying from the premises of, a person already licensed to sell tobacco at those premises.

    There is one minor point on which I correct the hon. Member for Waltham-stow, West (Mr. Redhead). He must have misunderstood something which I said last year. If my recollection serves me right, the National Union of Retail Tobacconists did not approach me last year or this year. Probably the misunderstanding arises because my predecessor, now Minister of State to the Board of Trade, caused an inquiry to be made in 1959, before I went to the Treasury, and in the course of that inquiry the Customs and Excise consulted the National Union of Retail Tobacconists.

    If I misinterpreted what the hon. Gentleman said last year, I apologise. All that was in my mind was that at some stage or other there had been official consultations with that body.

    On the other hand, I was pleased to hear the hon. Member and some of his hon. Friends point out that this new Clause would affect not only the mobile shops owned by the cooperative societies but any mobile shop and that, consequently, we are considering the matter at large. I was sorry that the hon. Member for Bethnal Green (Mr. Holman), in what was otherwise an interesting speech by an hon. Member who obviously knows a great deal about the matter, said that there was some form of class interest in this proposal. I do not know where I stand in that; I live in a village in Yorkshire which is very well served by a first-class mobile shop, and I am not prejudiced about the benefits of this mode of sale.

    The hon. Member for Willesden, West (Mr. Pavitt) referred to the history of the matter and pointed out that it was considered by the Labour Government in 1951 and that it was then decided to make an extension of the law to allow sales of tobacco from mobile shops but only in certain very limited circumstances. Those circumstances were to meet an exceptional and temporary need. The Labour Government at that time took the view that it was not right to go further than that. The law remains as it was after that change was made in 1951.

    As far as I know, the Co-operative Union Ltd. has ever since then sought a further extension of the law in order to permit mobile shops to sell tobacco without first having to establish an exceptional and temporary need. In 1959 the Co-operative Union approached my right hon. Friend, the present Minister of State, Board of Trade, who was then Economic Secretary, with a request that the law should be amended. I remind those hon. Members who were not here when the matter was considered previously that my right hon. Friend asked the Customs and Excise to inquire into the proposal and, as I said a moment ago, discussions were held with the Co-operative Union and the National Union of Retail Tobacconists. At that time our conclusion was that no change should be made. The matter was raised again on Report and in Committee of the Finance Bill last year. I then said, as the hon. Member rightly quoted, that circumstances can change and that we should keep the matter under review.

    In January of this year the Co-operative Union wrote to me and asked whether it could send a deputation to see me in order to state its case. As hon. Members appreciate, at that time of the year Treasury Ministers are inundated with requests to receive deputations. I replied explaining the position, and the Co-operative Union, I thought very generously, did not press its request to see me. In view of what I had said last year I concluded my reply to the Union with this short paragraph, which I think I should read:
    "If there are any further facts which are not in your memorandum of October, 1959, and were not brought up during the course of last year's Finance Bill, perhaps you would write to me again and let me have them. I want to be sure I have not overlooked any new developments."
    Mr. Wood, the secretary, replied on this aspect that his committee in the circumstances
    "are content to rely upon the submissions which were made to your predecessor and which are embodied in the memorandum of October, 1959. There has not been any fresh development …"
    He went on,
    "We continue to receive inquiries from cooperative societies about the matter, and towards the end of last year some difficulties were experienced at Worcester where the local Customs and Excise officer did not appear to be aware that mobile shops could deliver parcels of tobacco and cigarettes which had been expressly ordered by customers.
    That is another point which has not been mentioned. The letter continued:
    "It is still of sufficient concern to co-operative societies for one of them to have placed a Motion on the Agenda for the Co-operative Party conference at Easter."
    This does not finally decide the matter, but it is clear that there have been no fresh developments over the past year.

    Precisely what does the Economic Secretary mean by "fresh developments" in this context? The only real fresh development that can take place is an extension of deliveries from travelling shops. Is he suggesting that there has been no extension of travelling shops since the last small departure from the rigidity of the law in 1951? I was concerned with this before I entered the House. From my knowledge of distribution, there has been an enormous extension of the use of travelling shops in sales of all kinds of goods.

    Does not the hon. Gentleman's own Department take an interest in the changing habits of the people? Does not the hon. Gentleman appreciate that slum areas have been cleared? In those areas there were selling points at the corner of almost every street. The people who formerly inhabited those areas have been moved out into new housing areas where there is a very limited number of selling points. The new areas contain many elderly people. There is now a better case than there was a year ago.

    I am sorry, but both the hon. Member for Gloucestershire, West (Mr. Loughlin) and the hon. Member for Erith and Crayford (Mr. Dodds) have misunderstood what I was saying. I was quoting from a letter which was sent to me by the secretary of the Co-operative Union.

    8.30 p.m.

    No, I will not give way until I have made this point. Then I will give way again. In that letter the Secretary said that there had not been any fresh developments. The letter went on with the words which I quoted to the House fairly and accurately. This was in reply to a request I made. I said:

    "I want to be quite sure that I have not overlooked any new developments."
    I am making no more of this than the quotations I read to the House. I have made a fair extract from the letter.

    To be perfectly fair, the Economic Secretary asked whether there had been any fresh developments. It may well be that his request was read in the context of his reference to the previous year's memorandum. In that sense there may well not have been any fresh developments. He is using the term "fresh developments". The only fresh development that can arise is either a diminution or an extension of services with travelling shops.

    The Economic Secretary said that I misunderstood him. I do not misunderstand him. I heard what was said. Does not the Treasury make its own inquiries? I pointed out to the Economic Secretary the change which had taken place consequent upon slum clearance. Does he rest his case purely on the letter, or does the Treasury take any interest in the changing habits of the public?

    If the hon. Gentleman will allow me to continue with what I have to say, he will find that I have a considerable amount more to say to him. He may not be satisfied at the end of it, but we cannot carry on with this story if I am interrupted all the time.

    There is no question of misquoting. The letter I received was a very fair and frank reply from the Secretary of the Co-operative Union to my request. I said in my letter:

    "If there are any further facts which are not in your memorandum of October, 1959, and were not brought out during the course of last year's Finance Bill, perhaps you would write to me again and let me have them."
    That is all that I am saying. It was a very relevant factor to consider when carrying out the undertaking I gave last year to keep this matter under review.

    From the point of view of the public, whom we in the House must consider very seriously, I do not say that there is not the occasional case in which a mobile shop selling tobacco, other than one which can be licensed under the existing law, would not be advantageous. It would be advantageous to me in my circumstances in the Yorkshire village of which I spoke.

    No, I will not give way. On the other hand, as the hon. Member for Willesden, West said, there are now about 420,000 licensed tobacconists, to take his figure. He said that that worked out at about one licence for every forty smokers. The provision introduced in 1951 has substantially achieved its main object of meeting the demands for tobacco at new housing estates. Both the hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater) and the hon. Member for Sheffield, Brightside (Mr. Winterbottom) referred to new housing estates and the position which arose where houses were built before shops were built. My understanding of the 1951 legislation is that that was just the sort of case which it was designed to cover. If the hon. Lady or the hon. Gentleman knows of any cases where it does not seem to be working properly and will write to me, I shall be very happy to ask the Customs to look into it, because it is just that sort of case which the 1951 legislation was designed to cover. The 1951 legislation, while covering that case, is of very limited application. That is so because it is necessary to establish that the need is of a temporary nature.

    From the point of view of the Revenue there is, as the hon. Member for Walthamstow, West pointed out, obviously an interest in knowing and controlling the points of sale of tobacco or, at least, in preserving the right of access which licensing confers. The present new Clause attempts to meet this point by restricting sales to registered goods vehicles operated by persons who are licensed to sell tobacco at their premises, but that would establish only the base from which the vehicle operated, and would not impose any limitation on its freedom to sell tobacco away from the base. In particular, it would not limit sales at particular points or on particular routes, and there would be no satisfactory Revenue control over a vehicle free to travel wherever the driver thought that business might be found.

    I mention that because if anything were to be done on the lines wanted by hon. Members opposite, I am not sure—in fact, I doubt very much—whether it would be appropriate to do it in the way that has been suggested. It is perfectly true that the new Clause contains the words
    "… subject to such conditions as the Commissioners think fit to impose …"
    but, of course, if one tried to impose some limits for better control by prescribing routes or the like for particular vehicles, the Customs would inevitably be drawn into conflict as between one trader and another which, quite frankly, I do not think would be desirable, and which this House would not want.

    Therefore the important point I am making is that if we were able to meet the wishes of hon. Members opposite, I do not think that it should be done in the way that they suggest in this Clause—

    Perhaps I may just continue for the moment.

    The other point is that the limitation proposed is virtually meaningless because anybody can, with very little difficulty, find premises from which he can take out a licence even if he is not intending to sell tobacco there, and anyone who had a vehicle and did not have a licence for premises as is required in the new Clause would simply apply for two licences together for a total cost of £2 for four years. I therefore think that hon. Members will agree that what is said to be the safeguard in the new Clause would not be any safeguard at all.

    The position is that as there has been no change in the circumstances over the past year—and this, I think, is admitted on all sides—there is prima facie no case for a change, so I came to the conclusion that no action was called for. This new Clause was not put down during the Committee stage and, having been put down first on Report, there has been no opportunity to consult other trade interests. I am quite sure that the hon. Member for Willesden, West, who referred to equity, will agree that it is relevant to consider other trade interests, and I would mention only one reason why I think that this is so.

    The hon. Member for Brightside said that in his experience the object of anyone operating a mobile shop was to keep it on the road for as many hours as possible. A mobile shop is not a shop as defined for the purposes of the shops closing hours, and it follows that a mobile shop can operate at times when the law requires other shops to close. Obviously an aspect like that requires very careful consideration. What I therefore propose is that, even though there have not been any fresh developments in the past year, during the course of the next year we should again consult with the trade interests concerned—both interests like the Co-operative Union and the other retail tobacconists—which we could not have done in the short time since this proposed new Clause was put down.

    But since there has been no change in the situation since last year it would be quite wrong for the House to take a decision now, before these consultations have taken place and, with these assurances, I hope that hon. Gentlemen will not press this proposed new Clause.

    I feel very sorry sometimes for junior Treasury Ministers who have to defend what is obviously indefensible on grounds that are obviously illogical and for reasons which can hardly appeal to any sane person. I am sorry to say that this is just a case in point.

    May I remind the Economic Secretary that the proposed new Clause is not put forward on behalf of any trade interest or of the co-operative movement in particular, but in the interests of the general public, or, at any rate, that part of the general public—a considerable part—which likes occasionally to smoke. These are the people about whom we are concerned. If the co-operative movement is so interested, it is because that movement has been serving that public particularly well. That is the ground of their interest in the matter.

    I must turn to a few facts of life in this country. One of the obvious things is that the number of shops varies largely in apparently similar cases. The shopping pattern in one big town is different from that of another, and so also with other habits. For example, the amount of mushrooms eaten in one big town is considerably less, for some absurd reason, than the quantity eaten in another. Accordingly, the number of shops varies.

    But there are, especially in the country, at present two types of places where the shopping position considerably affects the proposed new Clause. The first of them is the Economic Secretary's Yorkshire village. The hon. Gentleman seems to have left it well behind, but I can inform him that I live in a village up in Scotland where we are about one mile—either way—from the shops. This is not a particularly remote place, but like our neighbour, we do most of our shopping from travelling vans. Just to show that there is no discrimination, some of these are co-operative vans and some are private traders. They go all round from the co-operative store or the trader's centre, not only to the village about which I am speaking but to a great many others. And, of course, this happens in a great many parts of the country.

    The other is the widespread new town or similar development under the Town Development Act, where the number of shops always tends to be rather small and, because of the better provision of gardens, the distances from the shops are considerable. A great deal of van shopping is done in these places, and a good deal of it is done by the Cooperative movement and, equally, by private traders.

    This is a matter of the convenience of the public at large, and the practical point is this—and this is the absurdity of the business—there is nothing at present to prevent someone from ringing up one of these centres and saying, "I want this or that" in the way of cigarettes or tobacco, and then those goods are delivered by a mobile van. It is like saying, "You can deal with the customs on a minicab basis, but you cannot have a taxi arrangement." It is ridiculous to say, in these circumstances, that there will be a large leakage or that such and such may happen. I am sure that the Economic Secretary will know that I am not referring to him personally when I say that it is wrong for him to talk all this rubbish.

    8.45 p.m.

    It is really quite off the mark when the real difference is simply whether a person orders in advance or whether the van comes round and one is able to choose between this or that packet of cigarettes or this kind of tobacco or the other. That is all there is to it. There is the party opposite, the party of the consumer's choice and all the rest of it, obliging the consumer to order by telephone. It must be some secret opposition by the Postmaster-General who does not want his telephone revenue interfered with. There can be no conceivable objection from any other point of view.

    Then we get into ridiculous positions. Think of a coffee stall having its wheels taken off or being tied to a stake. Really, if the law is quite as silly as that, surely it is about time one changed it. Surely it is a good enough reason to change it when it is obvious that people—not traders nor Co-operative stores but just ordinary people—want this very simple facility.

    Then the hon. Gentleman says, "This is not a decision for ever." But that was what he said last year. He says, "There may always be a change in circumstances." What sort of change does he expect? Does he only deal with changes which have the character of earthquakes and which take place suddenly? Suppose that there is a continuously rising demand, as there is bound to be with these new towns growing up. At what point does he take official notice of it? Exactly how many million people have to be slightly inconvenienced by a proposed change before the hon. Gentleman can attend to it? As for all this correspondence with the secretary of the Co-operative Union, this was put to the hon. Gentleman last year and he gave the answer that I have just indicated. What is the use of putting it to him again?

    How does one persuade the Government in matters of this sort? What degree of public inconvenience has to be shown to them before they will do anything about it? What is at the bottom of the Customs' objection to this proposal? It is nothing to do with uncustomed tobacco, or we would not have the difficulty that I have just indicated. Are the Government really suffering from a form of acute inertia, a sort of new "Excisitis" which is apparently growing over them, a kind of creeping paralysis, an objection to any change, a complete blindness to the public inconvenience, unless the public inconvenience is loud enough to make the Government feel some inconvenience? After all, the business of the Government, and even of Customs and Excise so far as possible, is to adapt their arrangements to what the public want. I should have thought that was an elementary matter.

    Then the hon. Gentleman says, "There may be a change of circumstances". After all, he is not talking about a change in the administrative difficulties, such as they are. How pleased he must have been to see the same Clause that he saw last year. He could repeat, as he did, all the somewhat inconclusive arguments which he used against it last year. If it is, in fact, the form of the Clause to which he objects, is it really right to deny the public an advantage because the Customs think that there might be some other and better way of doing it? Could we not be let into the secret for a change? Could we not be told, if it is needed to be done and can be done, how to do it? Would it be too much for the hon. Gentleman to take the initiative and propose a change himself?

    I am very sorry when the hon. Gentleman asks us to wait another year in case there is a change in circumstances. He asked us last year to do something like that and we think that the moment has come to stir him up a little. We shall divide the House. We shall, of course, lose the Division and the hon. Gentleman and his supporters will have made one more contribution to the inefficiency of bureaucracy and the disconvenience of the public. I hope they will be happy about it.

    I should like the Economic Secretary to the Treasury to tell us precisely what he means when he says that there have been no new developments and that if there are any new developments in the next year he will change his mind. I would take him back to the point that he was making—

    I may not speak again on Report, but I wish to correct one error. If the hon. Gentleman had listened to me, he would have heard that I did not say that no action would be taken if there were no further developments. I said that, despite the fact that there had been no further developments, I proposed some action which would be taken during the coming year.

    May I correct that? Later in his speech, the Economic Secretary said that, because there had been no developments, there was no prima facie case for doing anything. What does he want?

    I thank my hon. Friend for coming to my assistance, but I wish to go back to the point which the Economic Secretary persistently made in his reply, that the reason why he is not sympathetic to the new Clause is that there has been no new development.

    The hon. Gentleman shakes his head. He quoted a letter sent to him by Mr. Wood. He claimed that Mr. Wood, representing the Cooperative Union, had admitted that there had been no new developments for some time. Mr. Wood did not say that, and that is precisely the point that I wish to take up with the hon. Gentleman. Mr. Wood submitted a memorandum in which, no doubt, he detailed what he regarded as the reasons why the change should be made. He received from the Economic Secretary a letter saying that, while the hon. Gentleman could not possibly afford Mr. Wood an interview, if he cared to submit any further facts or information about new developments which had arisen, they would be taken into consideration.

    Mr. Wood submitted his memorandum—the Economic Secretary will correct me if I am wrong—pointing out that there had been a considerable development in the use of travelling shops. Thereafter, Mr. Wood received a letter from the Treasury asking him whether there had been any new developments since he wrote the letter. His memorandum was dated 1959, was it not? What was the point of the Economic Secretary asking if there had been any new developments since 1959? Mr. Wood had already explained the situation and described the extension of this type of trading, and there was no point in his reiterating what he had said. After the Economic Secretary's speech today, one wonders what sort of new developments he wants.

    We are dealing here with the requirements of the shopping public. There has been a tremendous increase in trading by travelling shops in both built-up areas and rural areas. The only new development which can take place in this context is a further extension of the use of travelling shops. The question for the Government is whether that development has gone sufficiently far to justify a change in the law to enable travelling shops to sell cigarettes and tobacco.

    If the hon. Gentleman consults the trade next year, all that it can tell him is the degree of increase in this type of trading. From my experience in distribution prior to coming into this House, I believe that the increase year by year in this type of trading justifies a change in the law. We all know that the law is now in disrepute. If the driver of a travelling shop likes to assume that Mrs. Jones wants 40 cigarettes, and if he puts in an order for 40 cigarettes or, for that matter, 4,000 cigarettes, he can sell them from the van. If my wife decides to put her order in writing a week in advance, the travelling salesman can deliver to my house as many cigarettes as are wanted.

    While I do not wish to attach blame to a particular sector of the distributing world, because here we are dealing with area multiples, private traders, small village shops and with the co-operative movement, I was surprised to hear my hon. Friends lay so much emphasis on the co-operative societies. I do not expect sympathy for the co-operative movement from the Economic Secretary, but. although he emphasised participation in this type of trading by co-operative societies, what he did not emphasise was that this is often the most uneconomic trading done by them. In trying to secure amendment of the law, they are motivated solely by the desire to give a service to their membership, since the profit on cigarettes and tobacco is often less than the dividend paid per pound's worth of purchases.

    As I have said, the law on this matter is in disrepute, and it can be abused often and by all sorts of devious methods. All that we have to establish is whether the degree of travelling shop distribution justifies a change in the law. There can be no developments in the next twelve months different from those of the past ten years. This is not the first occasion that the Economic Secretary, in trying to find a method of staving off ultimate defeat, has said that the Government will have a look at this problem to see what can be done about it. The case advanced by the hon. Gentleman flies in the face of experience in every sector of distribution. If the hon. Gentleman rejects the wording of the new Clause and believes that it may well not be tight enough, there is no reason why, if he accepts the principle of it, he cannot so frame a proposal in another place—

    Division No. 237.]

    AYES

    [9.02 p.m.

    Ainsley, WilliamBoardman, H.Brockway, A. Fenner
    Awbery, StanBowden, Herbert W. (Leics, S.W.)Broughton, Dr. A. D. D.
    Bacon, Miss AliceBowles, FrankBrown, Alan (Tottenham)
    Benson, Sir GeorgeBoyden, JamesButler, Herbert (Hackney, C.)
    Blyton, WilliamBraddock, Mrs. E. M.Castle, Mrs. Barbara

    9.0 p.m.

    I should like to refer to two brief points and particularly to part of the Economic Secretary's argument concerning the speech of my hon. Friend the Member for Sheffield, Brightside (Mr. Winterbottom). The Economic Secretary remarked that my hon. Friend had suggested that the travelling shops needed, and should be allowed, to work for as many hours as they wished. My hon. Friend spoke also, however, about the question of the 44-hour week and the fact that over a large section of distribution the actual working hours are 42 a week.

    I listened with interest to the speech of the Economic Secretary and to some of the background history of this legislation. It appears to me that it is not the Chancellor of the Exchequer or the Economic Secretary whom we have to convince, but that the hon. Gentleman rested his case upon the National Association of Retail Tobacconists. Obviously, that is the pressure group which has to be considered in this matter. The retail tobacconists do not, however, operate mobile shops and the hon. Gentleman is not likely to have pressure applied from that direction.

    I have no wish to add to the already formidable arguments presented by my hon. Friends on this side of the House about allowing traders who already sell tobacco from their main retail points to extend that service to the travelling shops operated from those retail points. To wait a year or even ten years in the hope that the retail tobacconists will do something about this is a vain hope and the House can only divide on the issue.

    Question put, That the Clause be read a Second time:—

    The House divided: Ayes 144, Noes 215.

    Chapman, DonaldJones, Dan (Burnley)Rankin, John
    Chetwynd, GeorgeJones, Elwyn (West Ham, s.)Redhead, E. C.
    Cronin JohnJones, J. Idwal (Wrexham)Roberts, Goronwy (Caernarvon)
    Crosland, AnthonyJones, T. w. (Merioneth)Robertson, John (Paisley)
    Crossman, R. H. S.Kelley, RichardRobinson, Kenneth (St. Pancras, N.)
    Cullen, Mrs. AliceKey, Rt. Hon. C. W.Rogers G. H. R. (Kensington, N.)
    Darling, GeorgeKing, Dr. HoraceRoss, William
    Davies, G. Elfed (Rhondda, E.)Lawson, GeorgeShort, Edward
    Deer, GeorgeLee, Miss Jennie (Cannock)Silverman, Julius (Aston)
    Delargy, HughLewis, Arthur (West Ham, N.)Silverman, Sydney (Nelson)
    Diamond, JohnLipton, MarcusSkeffington, Arthur
    Dodds, NormanLogan, DavidSlater, Mrs. Harriet (Stoke, N.)
    Driberg, TomLoughlin, CharlesSlater, Joseph (Sedgefield)
    Dugdale, Rt. Hon. JohnMabon, Dr. J. DicksonSmith, Ellis (Stoke, S.)
    Ede, Rt. Hon. C.MacColl, JamesSoskice, Rt. Hon. sir Frank
    Edelman, MauriceMcInnes, JamesSpriggs, Leslie
    Edwards, Robert (Bilston)McKay, John (Wallsend)Stonehouse, John
    Evans, AlbertMackie, John (Enfield, East)Stones, William
    Fletcher, EricMcLeavy, FrankStrachey, Rt. Hon. John
    Gaitskell, Rt. Hon. HughManuel, A. C.Stross, Dr. Barnett (Stoke-on-Trent, C.)
    Ginsburg, DavidMapp, CharlesSwain, Thomas
    Gordon Walker, Rt. Hon. P. CMarsh, RichardSwingler, Stephen
    Gourlay, HarryMendelson, J. J.Symonds, J. B.
    Grey, CharlesMilne, Edward J.Taylor, John (West Lothian)
    Griffiths, W. (Exchange)Mitchison, G. R.Thompson, Dr. Alan (Dunfermline)
    Hale, Leslie (Oldham, w.)Monslow, WalterThornton, Ernest
    Hall, Rt. Hn. Glenvil (Colne Valley)Moody, A. S.Tomney, Frank
    Hamilton, William (West Fife)Mort, D. L.Ungoed-Thomas, Sir Lynn
    Hannan, WilliamMoyle, ArthurWainwright, Edwin
    Hayman, F. H.Mulley, FrederickWarbey, William
    Henderson, Rt. Hn-Arthur (RwlyRegis)Neal, HaroldWeitzman, David
    Hilton, A. V.Noel-Baker, Francis (Swindon)White, Mrs. Eirene
    Holman, PercyOliver, G. H.Whitlock, William
    Houghton, DouglasOwen, WillWilkins, W. A.
    Howell, Denis (Small Heath)Padley, W. E.Willey, Frederick
    Hoy, James H.Panned, Charles (Leeds, W.)Williams, W. T. (Warrington)
    Hughes, Emrys (S. Ayrshire)Pavitt, LaurenceWillis, E. G. (Edinburgh, E.)
    Hughes, Hector (Aberdeen, N.)Pearson, Arthur (Pontypridd)Wilson, Rt. Hon. Harold (Huyton)
    Hunter, A. E.Pentland, NormanWinterbottom, R. E.
    Hynd, H. (Accrington)Popplewell, ErnestWoof, Robert
    Hynd, John (Attercliffe)Price, J. T. (Westhoughton)
    Janner, Sir BarnettProbert, ArthurTELLERS FOR THE AYES:
    Jay, Rt. Hon. DouglasPursey, Cmdr. HarryMr. Charles A. Howell and
    Jeger, GeorgeRandall, HarryMr. McCann.
    Johnson, Carol (Lewisham, s.)

    NOES

    Agnew, Sir PeterCraddock, Sir BeresfordHamilton, Michael (Wellingborough)
    Allason, JamesCritchley JulianHarris, Frederic (Croydon, N.W.)
    Arbuthnot, JohnCrowder, F. P.Harris, Reader (Heston)
    Ashton, Sir HubertCunningham, KnoxHarrison, Brian (Maldon)
    Atkins, HumphreyCurran, CharlesHarrison, Col. Sir Harwood (Eye)
    Barber, AnthonyCurrie, G. B. H.Harvey, John (Walthamstow, E.)
    Barlow, Sir JohnDance, JamesHarvie Anderson, Miss
    Barter, Johnd'Avigdor-Goldsmid, Sir HenryHeald, Rt. Hon. Sir Lionel
    Baxter, Sir Beverley (Southgate)Deedes, W. F.Hicks Beach, Maj. W.
    Beamish, Col. Sir Tuftonde Ferranti, BasilHiley, Joseph
    Bevins, Rt. Hon. ReginaldDonaldson, Cmdr. C, E. M.Hill, Dr. Rt. Hon. Charles (Luton)
    Biggs-Davison, JohnDoughty, CharlesHill, Mrs. Eveline (Wythenshawe)
    Bingham, R. M.Duncan, Sir JamesHill, J. E. B. (S. Norfolk)
    Bishop, F. P.Elliot, Capt. Walter (Carshalton)Hirst, Geoffrey
    Black, Sir CyrilElliott, R.W.(N'wcstle-upon-Tyne, N.)Hobson, John
    Bossom, OliveEmery, PeterHocking, Philip N.
    Bourne-Arton, A.Errington, Sir EricHolland, Philip
    Box, DonaldFarey-Jones, F. W.Hopkins, Alan
    Boyle, Sir EdwardFarr, JohnHornby, R. P.
    Brewis, JohnFinlay, GraemeHornsby-Smith, Rt. Hon. Patricia
    Browne, Percy (Torrington)Fisher, NigelHoward, John (Southampton, Test)
    Bryan, PaulForrest, GeorgeHughes-Young, Michael
    Bullard, DenysFraser, Ian (Plymouth, Sutton)Hutchison, Michael Clark
    Bullus, Wing Commander EricGammans, LadyIremonger, T. L.
    Burden, F. A.George, J. C. (Pollok)Jackson, John
    Butcher, Sir HerbertGibson-Watt, DavidJames, David
    Butler, Rt. Hn. R. A. (Saffron Walden)Glover, Sir DouglasJenkins, Robert (Dulwich)
    Campbell, Gordon (Moray & Nairn)Glyn, Dr. Alan (Clapham)Johnson, Dr. Donald (Carlisle)
    Chataway, ChristopherGoodhart, PhilipJohnson, Eric (Blackley)
    Clark, Henry (Antrim, N.)Gower, RaymondJohnson Smith, Geoffrey
    Clark, William (Nottingham, S.)Grant, Rt. Hon. WilliamKerans, Cdr. J. s.
    Clarke, Brig. Terence (Portsmth, W.)Green, AlanKerby, Capt. Henry
    Cole, NormanGresham Cooke, R.Kerr, Sir Hamilton
    Cooper-Key, Sir NeillGrimond, J.Kershaw, Anthony
    Cordeaux, Lt.-Coi. J. K.Grimston, Sir RobertLebum, Gilmour
    Cordle, JohnGrosvenor, Lt.-Col. R. G.Legge-Bourke, Sir Harry
    Costain, A. P.Gurden, HaroldLewis, Kenneth (Rutland)
    Courtney, Gdr. AnthonyHall, John (Wycombe)Linstead, Sir Hugh

    Litchfield, Capt. JohnPartridge, E.Thomas, Peter (Conway)
    Lloyd, Rt. Hon. Seiwyn (Wirral)Peel, JohnThompson, Kenneth (Walton)
    Longbottom, CharlesPickthorn, Sir KennethThompson, Richard (Croydon, S.)
    Longden, GilbertPilkington, Sir RichardThornton-Kemsley, Sir Colin
    Loveys, Walter H.Pitt, Miss EdithTiley, Arthur (Bradford, W.)
    McAdden, StephenPott, PercivallTurner, Colin
    MacArthur, IanPowell, Rt. Hon. J. EnochTurton, Rt. Hon. R. H.
    McLaren, MartinPrice, David (Eastleigh)van Straubenzee, Donald
    McLaughlin, Mrs. PatriciaPrior, J. M. L.Vaughan-Morgan, Rt. Hon. Sir John
    Maclean, SirFitzroy (Bute & N. Ayrs.)Quennell, Miss J. M.Vickers, Miss Joan
    McMaster, Stanley R.Rawlinson, PeterVosper, Rt. Hon. Dennis
    Macmillan, Rt. Hn. Harold (Bromley)Redmayne, Rt. Hon. MartinWade, Donald
    Maddon, MartinRees, HughWakefield, Edward (Derbyshire, W.)
    Mamningham-Buller, Rt. Hn. Sir R.Rees-Davies, W. RWalder, David
    Markham, Major Sir FrankRenton, DavidWalker, Peter
    Marshall, DouglasRoots, WilliamWalker-Smith, Rt. Hon. Sir Derek
    Marten, NeilRopner, Col. Sir LeonardWall, Patrick
    Mathew, Robert (Honiton)Royle, Anthony (Richmond, Surrey)Ward, Dame Irene
    Matthews, Gordon (Meriden)Russell, RonaldWells, John (Maidstone)
    Mawby. RayScott-Hopkins, JamesWhitelaw, William
    Maxweil-Hyslop, R. J.Seymour, LeslieWilliams, Dudley (Exeter)
    Maydon, Lt.-Cmdr. S. L. C.Sharples, RichardWilliams, Paul (Sunderland, S.)
    Mills, StrattonShaw, M.Wills, Sir Gerald (Bridgwater)
    Montgomery, FergusShepherd, WilliamWilson, Geoffrey (Truro)
    More, Jasper (Ludlow)Skeet, T. H. H.Wise, A. R.
    MOtt-Radclyffe, Sir CharlesSpearman, Sir AlexanderWolrige-Gordon, Patrick
    Nabarro, GeraldSpeir, RupertWood, Rt. Hon. Richard
    Noble, MichaelStanley, Hon. RichardWoodhouse, CM.
    Nugent, Sir RichardStevens, GeoffreyWoodnutt, Mark
    Oakshott, Sir HendrieStorey, Sir SamuelWoollam, John
    Orr-Ewing, c. IanStudholme, Sir HenryWorsley, Marcus
    Osborn, John (Hallam)Taylor, Edwin (Bolton, E.)
    Page, John (Harrow, West)Temple, John M.TELLERS FOR THE NOES:
    Page, Graham (Crosby)Thatcher, Mrs. MargaretMr. Chichester-Clark and
    Pannell, Norman (Kirkdale)Thomas, Leslie (Canterbury)Mr. Frank Pearson.

    New Clause—(Ships: No Balancing Charge On Sale For Scrap)

    (1) No balancing charge shall be made on the occurrence of the event of sale of a ship for scrap.

    (2) This section shall not apply to an event of sale occurring before the sixth day of April, nineteen hundred and sixty-one.—[ Sir L. Ropner.]

    Brought up, and read the First time.

    I beg to move, That the Clause he now read a Second time.

    When a ship is sold the taxation value may be less than the price obtained for it. In that case, a balancing charge is payable. The price which is obtainable for a ship varies considerably. A large number of factors enter into the calculation, but generally speaking a ship owner wishing to sell will receive in present conditions about twice as much from another British owner or a foreign owner if the purpose of the purchaser is that the ship should continue trading than if the ship should be sold for scrap.

    As the House will be well aware, there is a large amount of surplus tonnage in the world, particularly in tramps and tankers. Hon. Members may argue that if this is the case no United Kingdom owner should sell his ship for anything other than scrap, but individual owners cannot be excepted, indeed they cannot afford, to refuse the higher price merely for the sake of benefiting shipping throughout the world and themselves only to a microscopic extent.

    The abolition of the balancing charge, only in respect of the sale of ships for breaking up would probably mean that the net proceeds from the sale would be about equal in both cases. If that were so, and if the proposed new Clause were accepted, British owners would prefer to sell a ship for scrap and get the ship off the markets of the world.

    I would point out to the House that the new Clause is not a "scrap and build" scheme. The sales which I have in mind are already determined. The owner has decided to sell. I hope that the Economic Secretary and, indeed, the Minister of Transport if a proposal of this sort comes their way will shun any scheme by which British owners are encouraged to build on condition that they scrap a ship. The logical conclusion of that argument would be that if it is good to build one and scrap one it would be still better to scrap one hundred and build one. That might please very much our foreign competitors—the Americans, the Greeks, the Panamanians, the Liberians, the Norwegians, the French and so on—but it would be at the expense of the British Mercantile Marine.

    9.15 p.m.

    This is only a slight Amendment. It would not mean much either to shipowners or to the Treasury. But the House does not need me to remind it that the shipping industry is going through very difficult times and that this is something which the Chancellor can do in this very difficult case.

    I support the modest Clause moved by my hon. and gallant Friend the Member for Barkston Ash (Sir L. Ropner). The Clause certainly is modest in relation to the problems of the shipping industry, especially if we look at it in relation to the international sphere. Difficulties at present are occasioned by flag discrimination, flags of convenience and building and operational subsidies.

    The Clause gives the Chancellor an opportunity by fiscal means of affording some help to the shipping industry. In the case of the shipowner there will be the opportunity to remove from the market surplus and elderly tonnage which tends to depress freight rates, and in the case of the shipbuilder there should, as a result of scrapping the elderly tonnage, be an opportunity for more new ships to be built in our yards.

    As my hon. and gallant Friend has indicated, the main purpose of the Clause is to encourage United Kingdom shipowners to scrap old vessels rather than sell them. The reason lies in our present taxation law and also in the market conditions at present ruling. Market prices at present for war-built standard type dry cargo ships are roughly twice what an owner could obtain by selling the vessels for scrap. Therefore, ships which are now reaching the end of their useful life tend to be sold for trading because the owner is unable to afford the wide discrepancy between the price which he can obtain for scrapping the vessel and the price which he can perhaps obtain when he sells the ship to, maybe, a foreign shipowner, thus enabling that shipowner to compete with British shipping. The Clause will bridge the gap.

    At the present moment a balancing charge is levied on the excess of the price realised in the market over the written down value for tax purposes. The Clause seeks to do away with the balancing charge, and thus no tax would be payable on the sale price of a ship when it is sold specifically for scrap. When one takes the tax into account, the shipowner will be placed in roughly the same position financially if he takes advantage of the terms of the Clause, and at the same time British shipping will be assisted by the withdrawal of surplus tonnage.

    Consequently, I ask the Financial Secretary to examine the Clause and see whether he can devise words which will have the effect of encouraging the scrapping of obsolescent tonnage to the advantage of both our shipping industry and our shipbuilding industry.

    I support the new Clause in the name of the British shipbuilding industry. It represents a small way in which the Chancellor of the Exchequer can help the industry.

    There is no need for me to remind the House of the depressed state of the industry at the moment. There is no doubt that if this Clause were accepted by my right hon. and learned Friend it would help not only the Mercantile Marine but the shipbuilding industry, because it would, in a minor way, encourage shipowners to scrap boats rather than sell them for use and thereby help to create a better market and new orders for new boats. For this reason, I commend the Clause to the attention of the Chancellor.

    I should like in a few words to support my hon. Friends and to ask the Financial Secretary to look sympathetically at the purpose of this new Clause, which is fairly obvious. We are living in a time of intense shipping competition that must be a matter of anxiety for an island nation. We know that a large number of ships are laid up. When we come to look at the incentive to owners to sell one for scrap, we are at once struck by the fact that we are creating additional competition to ourselves in foreign countries. These ships may well be bought by countries where the costs of operation are lower and add to the difficulties of our shipping industry.

    The House will know quite well that although we have now just under 21 million tons of merchant shipping, the percentage of the world total has fallen somewhat alarmingly for a nation like ours. It has fallen to 16·6 per cent. against 41·6 per cent. in 1914 and no less than 21·6 per cent. even in 1939, so although world trade has been expanding and world shipping has been expanding very fast indeed our share of it has been reduced.

    We are now seeing the same story repeated in the shipbuilding industry where we used to be the primary builders in the world. We are now being displaced and have to occupy a less prominent role. This Clause would probably help the shipbuilding industry as well.

    I am convinced that, in the present phase of competition, anything that can be done to give an average younger age to our fleet will be very helpful indeed. At the moment, the average age of the merchant fleet is comparatively young, which is a good competitive factor, but I see a very real danger in selling our older ships to people who can operate them more cheaply than we can.

    I hope that the Financial Secretary will see whether in this kind of way he cannot give some help to the shipping industry that is so vital to us from the point of view of invisible exports, which have fallen alarmingly, and when it is not easy to find methods of helping it.

    This is an admirable new Clause for the Financial Secretary to accept. I shall not go into all the technical details because they have been admirably expressed by my hon. Friends, but I want to lay emphasis on the fact that by listening to the approach of the Financial Secretary to the new Clause I shall be able to judge the sincerity of the Government's oft-repeated assurances that they want to help shipping and the shipbuilding industry.

    I try to be a realist in political life and I am getting a little tired of words. My hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) has pointed out that the shipping industry is very difficult indeed to help, and several distinguished right hon. Members who are Members of the Government have said to those who are really interested in shipping and shipbuilding, "Tell us what you want." The implication is that when we have told them action will follow.

    I am not certain whether my right hon. and learned Friend wonders whether there is anything which can be put forward to help the industry, but there are two points that I want to make. First, I emphasise the importance of this proposal to our invisible exports. It is obvious that if old ships are sold to foreign countries they become trading competitors with our ships and they can therefore reduce our invisible exports. This provision offers a very small way of helping to redress the very disastrous fall in our invisible export earnings.

    Secondly, if one is logical—and I try to be logical; I may not always succeed, but I make supreme efforts—one must take the view that the Government have done a great deal of boasting about the high rate of investment allowance. It has always been put forward by the Ministers concerned that the Government have acknowledged the difficult position of shipping by offering a very high rate of investment allowance. That being the case, there seems no logical reason why they should reject this Clause.

    I do not wish to say anything further, except to hope that the Financial Secretary will prove that the views of the Government, so often expressed in different ways, are based on a desire to help the industry. This is a very modest request, which cannot possibly upset the structure of my right hon. and learned Friend's Budget. In a small way it would help the industry through a difficult period, and I hope that it would also help the shipbuilding industry.

    Quite apart from that, it would give confidence to those engaged in shipping if the Government, by means of the Bill sought to give as much assurance and help to shipping as they were ready to give to horticulture. I am all for giving confidence to those who are fighting for the interests of British trade, and I look forward to the Financial Secretary's reply. It always seems a little unfortunate that on these most important problems of shipping and shipbuilding the Chancellor never answers. However, it does not really matter who accepts the Clause, so long as it is accepted, and I look forward with confidence to my hon. Friend, in his most charming and eloquent phrases, doing so.

    9.30 p.m.

    I rather think that the hon. and gallant Member for Barkston Ash (Sir L. Ropner), who moved this new Clause, failed to explain the proposal as fully as he should have done to the House. We on these benches are very sympathetic indeed to the difficulties of the shipping and shipbuilding industries at present, but I understand that the new Clause does not relate so much to the matter of taxation as to economic policy. It is a proposal to use taxation as an instrument to further certain economic aims.

    We on these benches do not dissent from using taxation as an instrument of economic policy. We are sometimes criticised from the benches opposite when we make proposals of that kind. As I see it, the argument is that it is undesirable for the shipping industry to sell its old ships to other countries which will then operate them and compete with the British shipping industry. The aim is to keep our old ships out of the hands of possible competitors.

    There is nothing to prevent the shipping companies from scrapping their ships now instead of selling them to possible competitors. If to sell ships to possible competitors is such a bad thing for the shipping industry of this country then, very simply, the shipping companies can decline to sell them and scrap them instead. What is it that is stopping the shipping companies from following that simply policy of scrapping rather than selling? What is stopping them is that they will get a better price for the ships if they sell them than if they scrap them.

    The shipping companies will perhaps have to weigh in the balance the advantage of selling and getting a better price and facing ensuing competition, or of scrapping and getting a lower price but being relieved of the consequent competition. I do not know how the balance of that would lie and the hon. and gallant Member did not explain to the House just what that balance was.

    I thought that it was in the most general terms. The shipping companies say that, notwithstanding the possible competition from those to whom they sell their ships, they must still go on selling them, however bad it is, because they cannot afford to scrap them at a lower price. The shipping companies, in order to make it economic for them to scrap the ships, say will the Government please relieve them of the balancing charge so that their net proceeds from scrapping can just about balance their net proceeds if they sell? If they sell and pay the balancing charge and relate that to scrapping without the balancing charge, they probably strike even. Therefore, on that basis, they can afford to scrap.

    I think that the House has first to be satisfied that the Chancellor must give up the amount of taxation involved in order to enable the shipping companies to pursue this policy—that it is in the national interest that he should do so—and, secondly, the shipping companies have to explain why they cannot scrap already. Do they want the best of both worlds, so to speak? Do they want to be relieved of possible competition but at the same time to suffer no loss by scrapping as against selling? We are entitled to know a little more about this before we are asked to assent to this new Clause.

    What is the balancing charge? The hon. Member for Southampton, Test (Mr. J. Howard) explained that the balancing charge is the amount of tax charged on the proceeds from the sale of something which already has a written-down value for taxation purposes because depreciation—which has ranked for tax relief—has reduced the value of that asset in the books of the company to a certain figure. If the company sells that asset at more than the written-down value, quite naturally the Revenue says that it must have tax on the balance, the excess between the written-down value and the selling price.

    The hon. and gallant Member for Barkston Ash has argued for the shipping companies to be relieved of tax on the excess between the written-down value and the selling price for scrap. That is the substance of the new Clause, and the hon. Member pleads that that is desirable because they can afford to scrap only if that is done.

    What he has not explained to the House is where the balance of advantage to the shipping companies lies. Will it be better for them to sell at the higher price, possibly bringing foreign currency here and helping our balance of payments? Will it be better for the nation for them to do so and to face the ensuing competition? Or is it to the national advantage not to sell but to scrap and to deprive our possible competitors of the advantage of the ships? Should we say, "Let them go elsewhere or buy new ships"? Perhaps we should rather do that, and in that way indirectly help the shipbuilding industry. But how we can discover where the balance of advantages lies in these conditions, because the shipping companies have not said that they want one concession or the other; they have said that they want the best of both.

    The House must be concerned to see whether there is a strong case for us to give up a very important principle of taxation which applies to all other industries. It must be borne in mind that this will be another special case—and the Chancellor was in great difficulty a short time ago in treating the tin mining industry as a special case. The shipping industry is already a special case in several directions for tax purposes. This is another concession which it wants.

    I think that we need a grand inquest of the shipping industry, in respect of both taxation and economic policies, before we are asked to give one concession after another and to breach one principle of taxation after another on the ground that the shipping industry is in a bad way and that unless we do this it will be in a worse way. I do not think that we have had all the cards laid on the table.

    I always listen to my hon. and gallant Friend the Member for Barkston Ash (Sir L. Ropner) with the respect due to one who was first elected to the House in the year in which I was born. I should like to congratulate him and some of my hon. Friends on the way in which they have spoken, concisely and persuasively. One must admit that this is one of the more difficult Clauses with which we shall deal this evening. I see that my hon. Friend the Member for Kidderminster (Mr. Nabarro) is in his place. He told us the other day that at an early age his son had learned the word "circumlocution". I think that had he been present tonight he would have regarded the discussion of this Clause as somewhat esoteric.

    It is a difficult subject, and I will try to explain the point as clearly as I can and to explain why my right hon. and learned Friend, while sympathetic to the difficulties of the shipping industry, is unable to accept the Clause. The new Clause seeks to exempt ship owners from liability to a balancing charge when they sell a ship for scrap. As I understand it, where an asset which has ranked for capital allowances is sold for more than its written-down value for tax purposes, after initial and annual allowances have been calculated, any excess of the sale price over the written-down value is charged to tax by what is called a balancing charge.

    The General Council of British Shipping has suggested to my right hon. and learned Friend that, in order to encourage some scrapping and rebuilding of ships, no balancing charge should be imposed when the proceeds of ships sold for breaking up exceed the written-down value for the purpose of taxation. The Council's argument is that while the balancing charge applies to sales of ships for scrap as well as to sales for further use, a sale for further use will normally produce more, after deducting the tax on the balancing charge, than a sale for scrap, and there is therefore no inducement to sell for scrap. The argument is that if a sale for scrap does not attract a balancing charge, there will be an inducement to sell for scrap instead of selling for further use.

    There are three difficulties about this suggestion. My hon. Friend the Member for Tynemouth (Dame Irene Ward) made an eloquent speech but, although I respect her desire always for logic, I am not clear how this Clause can logically be derived from the fact that we have a 40 per cent. investment allowance. Since my hon. Friend said that she did not just want comforting, I will tell her that there are three reasons why there would be difficulties about accepting the Clause.

    First, the inducement would be very much less, perhaps, than the General Council of British Shipping realises. It would often be virtually non-existent. For example, if one of the older postwar ships with a written-down value of, say, £30,000 were sold for scrap at £60,000, with no balancing charge, the net cash receipt would then be £60,000. If it could be sold for use at £95,000, the net cash receipt would also be roughly £60,000; that is, £95,000, less tax at 10s. 9d. in the pound on a balancing charge of £65,000. It produces the same result—£60,000 in each case. Therefore, there would be no inducement to sell for scrap, even if we were to accept the principle of the Clause. With any value for use higher than £95,000, to sell for use would still pay better than to sell for scrap. If one considers the figures and the exact consequences of accepting a Clause on these lines, I do not believe that the result would be as favourable as some people have supposed.

    The second objection is that this proposal would involve rather complicated legislation. Unless the concession were to have a different value according to the basis on which the ship had been written down in the past, there would have to be involved and complicated provisions for rewriting past depreciation allowances on a uniform basis in all cases of sales for scrap. I do not say that this could not be done, but I do not believe that we should ever embark on rather complicated legislation cutting across the general run of our tax law unless we are absolutely certain that the results would be worth while. It is very difficult to feel that in this case.

    The third and most important objection is that, quite apart from these practical questions, there are serious objections of principle to my hon. and gallant Friend's proposal. Our whole system of initial, annual and balancing allowances, coupled with balancing charges, is intended to secure that over the period for which a trader uses plant and machinery he is allowed to write off its net cost to him; that is to say, what it cost, less what he got for it when he disposed of it by sale or scrapping, or however it may be. If what he gets for it on sale or scrapping is less than its written down value for tax purposes after granting initial and annual allowances, there is a balancing allowance for the difference. If what he gets is more than the written down value for tax purposes, the natural corollary is that there should be a balancing charge in respect of the difference. On principle this is a perfectly reasonable provision of our tax law.

    Further, the proposal of my hon. and gallant Friend would single out just one type of transaction, namely the sale of a ship for scrap, to give an aggregate tax allowance, through the ordinary system of capital allowances, in excess of the net cost of the plant to the taxpayer. It is quite true that the investment allowance does this. This is the whole point, in a sense, of investment allowances. However, we should remember that the investment allowance is given only for capital expenditure on the acquisition of new industrial assets. The most serious objection to the Clause is that it would in effect introduce a sort of backstairs indirect method of giving a new type of investment allowance in certain special circumstances which would depend, not on the taxpayer investing in new assets, but merely on the scrapping of old assets.

    For those reasons, my right hon. and learned Friend does not feel able to recommend the House to accept the new Clause. We certainly recognise the special problems of the shipping industry, but we must not forget that the industry not only now enjoys the privilege of a 40 per cent. investment allowance for new ships but was almost the only body which retained the investment allowances during the years when they were suspended. I thought that the right hon. Member for Huyton (Mr. H. Wilson) was a little less than his usual accurate self when he talked of the investment allowance having been scrapped altogether in 1956; it was suspended, except only for shipping and fuel saving. In essence, I think that the present suggestion is tantamount to seeking an improved investment allowance un certain cases, and an investment allowance not limited to new ships

    9.45 p.m.

    While my right hon. and learned Friend will continue to look at the special problems of the shipping industry, I must say, on reflection, that I cannot feel that this is the right way to proceed. I quite agree that it merited serious consideration, which is why I have taken some of the time of the House this evening to explain just why my right hon. and learned Friend cannot accept the proposal but, for the reasons I have given—partly practical, partly reasons of principle—I could not advise the House to accept the new Clause, and now that I have given that explanation I hope that my hon. Friends will not feel that they need press it.

    The whole of this new Clause seems to raise highly complicated considerations, perhaps rather more complicated than I thought, and in view of what my hon. Friend the Financial Secretary has said, I beg to ask leave to withdraw the Motion.

    Motion and Clause, by leave, withdrawn.

    New Clause—(Purchase Tax Reduction Of Rate From 12½ Per Cent To 5 Per Cent)

    Subject to any order made by the Treasury under section twenty-one of the Finance Act, 1948, Part I of the Second Schedule to the Finance Act, 1958 (as amended by the Finance Act. 1959), shall be amended by the substitution in the percentage rates of tax specified throughout that Schedule of the figure 5 for the figure 12½.—[ Mrs. Slater.

    Brought up, and read the First time.

    On a point of order, Mr. Speaker. I understand that this new Clause is to be taken in conjunction with the new Clause "Purchase tax: reduction of rate from 50 to 37½ per cent." in the name of the hon. Member for Kidderminster (Mr. Nabarro), myself, and several other hon. Members?

    I am greatly obliged to the hon. Member for refreshing my memory. That is right. I am sure that it would be convenient to the House to discuss both together.

    Further to that point of order, Mr. Speaker. I apologise to you for intervening now, and to the hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater), but I understand that your Ruling is that these new Clauses may be discussed together but not voted on separately. Is that correct, Sir, or can we have separate votes, if necessary?

    The only Clause which is selected for the purpose of decision in any form is the one that the hon. Lady has just moved. The hon. Gentleman's Clause is not selected but may be discussed with this one.

    Perhaps I may put a further point. That Ruling puts in very great difficulties some of us who are opposed to the Clause moved by the hon. Lady but who are supporting the Clause referred to by the hon. Member for Coventry, North (Mr. Edelman), and who have no opportunity of registering that contrast in views between two aspects of the same matter.

    I do seriously appreciate the difficulty. It arises from a difficulty which attaches to the Chair, that there was not time to call both, but I hope that should the hon. Member and other hon. Gentlemen have the good fortune to catch my eye they will be able by their speeches to indicate both their dilemma and the view they put forward. Mrs. Slater.

    I very much regret that the hon. Member for Kidderminster (Mr. Nabarro) will not be able to support us in the Division Lobby in spite of the fact that frequently during the year, between Budgets, he strongly attacks Purchase Tax in principle and goes to a great deal of trouble to work out how much the Chancellor is robbing the people by the various forms of this taxation.

    This new Clause relates mainly to household commodities. Ever since the "pots-and-pans" Budget of the present Home Secretary, most of us have been opposed to this part of Purchase Tax which in this case puts a special tax of 12½ per cent. on the things that affect the housewife and the home. It is a relic of that "pots-and-pans" Budget.

    I urge hon. Members to look at some of the commodities that are affected by the proposed new Clause. On reflection, hon. Members will clearly see how the housewife in affected by the 12½ per cent. tax. In ironmongery there are shovels, fireplace tongs, ashpans, dustbins, kneeling mats and ordinary mats—all are subject to the 12½ per cent. tax. Thus it can be seen that the housewife, in any event, well and truly comes under this taxation—and in mentioning those goods it can be seen that some husbands, those who use them, are equally affected.

    We can move on to cutlery, in which category all forms of goods are affected except those used for industrial purposes, catering and in butchers shops and in some grocery shops if the cutlery is of a certain size. In cookery, pastry trays are affected, and mixers, vegetable racks, baking tins, bread bins, can openers and pastry boards. They all pay 12½ per cent. Purchase Tax. In the home, wallpaper—but not paint—is subject to the tax. Floor coverings are affected; I would have thought that the hon. Member the Member for Kidderminster would have been interested in this from a constituency point of view.

    I was going to mention such varied items in the home as trophy cups, but not shields, all of which things are subject to the 12½ per cent. tax.

    I am especially interested in one aspect of Purchase Tax, and that is the part which affects tableware. As hon. Members know, several of my hon. Friends and I represent constituencies involved mainly in pottery and the manufacture of it. We feel that this 12½ per cent. Purchase Tax continues to be levied on this industry year after year and that no amount of pleading on its behalf seems to affect the Treasury. There are special reasons why the claims of this industry should be heard. Firstly, hardly any of the commodities used in the pottery industry are imported and, thus, there are no dollar worries with which the Government need be concerned. The industry uses home-produced clay and coal and only the smallest percentage of raw material is imported.

    For that reason alone—that it is a self-contained industry using home-produced raw materials—its claims should be heeded. Further, this industry is an extremely important section of the export drive. It sells to countries throughout the world and it rightly claims to be included among the major exporting industries. We urge that, on the home market, the 12½ per cent. tax should be dropped to at least 5½ per cent.

    It should be remembered that in an industry such as pottery certain designs must be tried out on the home market— not merely design of shape, but design of decoration—before any item is put on the export market. It is far better to discover the likes and dislikes of the home market before attempting to export any of these commodities.

    This is an industry in which craftsmen are so very important. Of recent years there has been some development in the mechanisation of the pottery industry, but there still remains a lot of hand craft in it and it is important that we do not lose the craftsmen and women who have been trained and who have grown up within the industry. Therefore, I make this plea that, on tableware, in particular, Purchase Tax shall be reduced from 12½ per cent. to 5 per cent.

    I want to make a final plea on behalf of the housewife. Most Purchase Tax remissions have been made on those commodities used in industry. Here there is an important section of the community—the housewife, who is important even to the hon. Member for Kidderminster—and it is not right that the articles which are used in the home should be taxed. It is logical that things used in the home shall not bear a heavy rate of Purchase Tax. The present situation is unfair and illogical and we ask the Chancellor to consider once more the advisability of reducing Purchase Tax on pots and pans and ordinary things which are used in the home.

    Today we have had another example of the Treasury finding excuses for doing nothing and going to great lengths to explain why nothing should be done, but we hope that on this occasion the Chancellor, who can give away millions in Surtax to a very small section of the community, will give a little to the housewives on whom the nation depends so much.

    I am grateful to you, Mr. Speaker, for allowing the new Clause in the name of several of my hon. Friends, hon. Members opposite and myself, to be debated with the new Clause which has just been moved. The contrast between the two new Clauses is that my Clause calls for a reduction in the 50 per cent. rate of Purchase Tax, the highest level of Purchase Tax, to 37½ per cent.

    It is significant from a study of the names of hon. Members supporting my Clause that the majority of them represent the great motor car manufacturing constituencies of this country, For example there is the hon. Member for Coventry, North (Mr. Edelman) and my hon. Friend the Member for Coventry, South (Mr. Hocking). Their names both appear. Then there is the hon. Member for Birmingham, Northfield (Mr. Chapman) and also the hon. Member for Dagenham (Mr. Parker). My constituency, of course, is intimately concerned with the motor car industry, not only because many thousands of workers who reside in my constituency work in the motor car factories of Birmingham and Coventry, and also because my constituency is largely responsible for the production of floor coverings for motor cars.

    The 50 per cent. level of Purchase Tax will this year, it is assessed, raise a sum of £247 million—the Chancellor has not yet published that figure; I am delighted to see that he has made a note of it. He should make a careful note of the following figure—out of which £172·3 million will be raised from Purchase Tax on motor cars taxed at the rate of 50 per cent. It follows, therefore, that approximately two-thirds of the yield of the 50 per cent. rate of Purchase Tax is derived from Purchase Tax on motor cars.

    10.0 p.m.

    There are only four classes of goods which attract Purchase Tax at the highest rate of 50 per cent They are, first, motor cars; second, radio and television sets; third, cosmetics and toilet waters; fourth, gramophones and gramophone records. [Laughter]. I am sorry to have caused so much hilarity below me. Of those, overwhelmingly the most important consideration is that of the motor industry. I believe, as do the leaders of the motor industry on both sides, the employers and the trade union leaders, that there is an intimate association between the export performance of the motor car industry and the penal level of Purchase Tax currently applied to the sale of motor cars in this country.

    It is, of course, impossible—I address this comment particularly to the Chancellor—to prove that proposition. It is hardly more possible to prove that export endeavour is stimulated by reliefs of executives' Surtax.

    I believe it. [HON. MEMBERS: "Oh."] I do not think that hon. Members opposite could have heard my right hon. and learned Friend's intervention. He asked me whether I believed it. Having raised my top hat to him on Budget day as a token of my respect and sympathy for the Surtax reductions he made, I say again now, that I ardently believe it—

    —but I equally ardently believe—this is where my right hon. and learned Friend gets into trouble by nodding too much—that it is a sensible proposition to say that there is a relationship between the level of Purchase Tax on motor cars sold in this country and their export performance.

    The motor vehicle industry is probably the largest exporting industry in Great Britain. In 1960, it contributed no less than £617 million worth of exports, or approximately 17 per cent. of our total national export trade. I do not wish to deceive the House. Not all that £617 million was in respect of motor cars. Of course it was not. In fact, £224 million was in respect of motor car exports. There was another £86 million of tractor exports. There was £104 million of commercial vehicle exports, and approximately £200 million worth of sundry exports from the motor manufacturing industry comprising tyres, components, accessories, spare parts and the rest. Of all that huge volume of export trade, the £617 million worth, the only sector concerned in the Purchase Tax argument is the motor car sector, that is, £224 million of export trade.

    It gives me no pleasure at all to compare the export performance of the motor car industry of this country during the past few years, with the export performance of Western Germany. The figures are significant. They have not recently been quoted in the House. They should be quoted tonight because there is, in my judgment and in the view of the leaders of both sides of the industry, an intimate association between the two conditions.

    In 1955, the United Kingdom exported 391,000 motor cars. In 1955, Western Germany exported 344,000. In 1956, Britain exported 337,000. Western Germany exported 413,000. In 1960, we exported from Britain 570,000 motor cars. The West Germans exported 865,000 motor cars, more than 50 per cent. more motor cars than we exported from Britain. That position of supremacy which Western Germany occupies is projected still further into the results for the first quarter of 1961. These figures are even more alarming. I use the word "alarming" advisedly. In the first three months of 1961, the United Kingdom exported only 85,000 motor cars. Western Germany exported almost treble that number, 243,000 motor cars. For every motor car exported by Britain, West Germany was exporting three motor cars. We were almost caught up by France. In the first quarter of this year, as I have said, we exported 85,000 cars. France exported 83,000 cars. Five years ago France was a very long way behind us.

    My proposition to the Chancellor of the Exchequer is that, while it is perfectly true that Purchase Tax applies only to motor cars sold on the home market, it is undoubtedly true that the cost of production of a motor car must depend on the volume of through-put which dominates the cost of the vehicle. That is a proposition argued with great success by my right hon. and hon. Friends when we were sitting on the benches opposite, pleading with Sir Stafford Cripps and his predecessors about the incidence of Purchase Tax and associated matters. A view which, as far as I am aware, has not been contradicted in this House or within the industry is that the larger the volume of output of a great industry such as the motor vehicle industry, with a very high level of capital investment and tooling costs, the lower the unit cost of the vehicle and the greaater the competitiveness of that vehicle when sold in overseas markets.

    I now come to the critical point in my argument concerning motor cars. We in this country are taxing our cars at a far higher rate than any of our competitors. Our level of 50 per cent. Purchase Tax on the wholesale price of a motor car is equal to 42 per cent. tax on the retail price of the car. That is not my figure. It is supplied by the Society of Motor Manufacturers and Traders. France taxes her vehicles sold on the home market at only 24 per cent. The Germans tax their vehicles on the home market at only 13 per cent., or just under one-third of the level of our domestic taxation. Italy taxes her vehicles at only 10 per cent. I believe that these figures should be of great significance to the Chancellor of the Exchequer. How can we in this country continue to compete with the three great West European motor car manufacturing countries if we insist on taxing our home market at such a level as to cause the export vehicles to be uncompetitive when meeting the products of these other nations?

    I pass now to what would be the cast of this new Clause. Of course, my right hon. and learned Friend, by process of mental arithmetic and without the benefit of a Treasury brief, can easily work out what it would cost. Because the 50 per cent. rate of Purchase Tax this year raises £247 million, it follows that the cost of reducing that rate to 37½ per cent. would be £62 million, out of which £43 million would be the cost attributable to reduction of Purchase Tax on motor cars. My right hon. and learned Friend would be perfectly correct in saying to me, "Yes, but my hon. Friend the Member for Kidderminster has announced in speeches that he broadly supports my Budget and the overall surplus of £506 million at which I aim. How can he therefore in all honesty move a new Clause which entails my giving away revenue of the order of £62 million?" That would be a perfectly fair argument.

    I reply at once to my right hon. and learned Friend. I never make a proposition to him unless I have thought out the answer in advance. Were I the Chancellor of the Exchequer, I would immediately proceed on two parallel lines to recover the £62 million in a fashion which would not derogate from or inflict any harm on Britain's export trade.

    First, I would abolish the 30 per cent. initial allowance on motor cars bought by business firms. Unfortunately, I could not attend the Committee stage of the Bill when the Rolls-Royce controversy—the initial allowance with a limit of £2,000—was debated, but I said earlier this afternoon in an intervention that in my judgment it is iniquitous that a business firm may buy any kind of motor car up to £2,000 for an executive and in the year of purchase attract, not only an initial allowance of 30 per cent., but a depreciation allowance as well of another 25 per cent., so that 55 per cent. of the cost of such a car goes against Income Tax and Profits Tax in the year of purchase.

    That encourages extravagance. It is totally wasteful. I have always been opposed to it. I have not had an opportunity for years to express my views on this, but I say to my right hon. and learned Friend the Chancellor that without any detailed knowledge—and he has no detailed knowledge either—it is no good him nodding his head at me. He does not have any detailed knowledge. [Interruption.] I am not sure what the Chancellor's head movement was. I thought that, in the words of the OFFICIAL REPORT, he was indicating dissent.

    My right hon. and learned Friend does not know in respect of the year 1961–62 how many cars will be bought for business purposes. Therefore, he cannot estimate what the initial allowance of 30 per cent. on business cars would cost. I hazard an estimate, however, that it will be between £25 and £30 million in the year 1961–62. That is the Income Tax relief in the form of initial allowances which my right hon. and learned Friend will have to give in respect of this 30 per cent. allowance. I would scrap that at once in pursuit of the policy of reducing Purchase Tax on cars from 50 per cent. to 37½ per cent., because the giving of an initial allowance on business executives' cars on the home market does not help our export trade one iota. That is the first thing.

    The second and parallel plan which I recommend to my right hon. and learned Friend is simply this, There are three great sectors of consumer expenditure which are not subject to Purchase Tax and which ought to be subject to Purchase Tax. The first is advertising—

    Order. It may be quite true, but I do not succeed in relating it to either of the two new Clauses.

    I am sorry, Mr. Speaker, if I have gone into too much detail, but I was informed that the rules of order permitted me to say how the revenue would be replaced were the new Clause to be accepted.

    No. The proposition to be discussed is aye or no, should the reduction be made and the Clause be read a Second time.

    Very well, Mr. Speaker. I have dealt with the initial allowance. I make this statement only as a passing reference, which, I hope, you will consider to be in order. I would bring the whole of general advertising, the whole of soft drinks and the whole of confectionery and sweets into the ambit of Purchase Tax on one of the lower scales. That is a proposition which should be acceptable to the Chancellor and would not be unreasonable or inequitable in respect of the industries concerned Above all, it would not inflict any harm whatever upon the nation's exporting industries.

    The Chancellor must surely face the fact that Britain's motor car exports are continuing to decline and the exports of our principal competitors are continuing to increase. I quote the words put out by the motor industry itself in the last bulletin of the motor industry, issued by the Society of Motor Manufacturers and Traders, when it said that
    "a substantial reduction in Purchase Tax or its removal at an early date is quite essential to enable the British motor industry to have the fullest opportunities in export markets."
    In final support of my words, I quote the views expressed by the heads of all the principal motor firms in Coventry to Mr. Nigel Lawson, the City Editor of the Sunday Telegraph, who published these views on 18th June, 1961, just a fortnight ago. He said:
    "Car makers ready to join Europe. But Coventry's top men say ' We must have fair play over Purchase Tax first…
    A principal executive, Mr. Geoffrey Rootes, used these words:
    "I am convinced, for example, that if our Purchase Tax were halved—which would bring it roughly to the average level on the Continent, whilst still leaving it higher on most other goods here—we could increase our home sales and our exports by 20 per cent."
    10.15 p.m.

    The article by Mr. Lawson is the consensus of opinion derived from the advice received in the motor trade and he concludes with these words:
    "The other important point is the matter of Purchase Tax. In the past, Governments have been understandably reluctant to yield to the industry, for fear that easier home sales far from boosting exports, would be achieved only at their expense. I can't help feeling that this was a justifiable fear, so long as the industry were working flat out. But this situation is rapidly changing, new plant is coming into commission at a rate far exceeding the growth in demand, and looking ahead there seems no reason why an expansion in home sales should have any deleterious effect on exports. … Other industries besides Coventry may be in a similar position."
    I conclude with these words to the Chancellor. He must deal with this excessive level of Purchase Tax on our principal exporting industries such as the motor car industry. I cannot support in present circumstances that there should be any substantial change in the lower levels of Purchase Tax. I believe in a single lower level of Purchase Tax on all manufactured goods subject to the enlargement of the ambit of the tax by the three sectors which I named to the Chancellor, general advertising, soft drinks, and sweets and confectionery. I would bring them in, but then I would bring all the top levels of Purchase Tax down to a single flat rate level at about 15 per cent. after also eliminating the initial allowances on business motor cars.

    The hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater) twitted me about my native constituency manufacturing interest in the form of carpets. Of course, Kidderminster and carpets are synonymous. Successive Conservative Chancellors of the Exchequer have yielded to my continuous blandishments during the last decade—I think my right hon. and learned Friend looked a little anxious at my choice of words—his predecessors have yielded to my blandishments during the last decade and reduced progressively the Purchase Tax on carpets from the level of 33½ per cent. where it was ten years ago down to 12½ per cent. today. I have told all the carpet manufacturing interests in Kidderminster that they should not expect a further reduction from 12½ per cent. I have said it to the glass industry. I believe the same should be said to the pottery industry. I believe that all manufactured goods in this country with those I have denoted should pay a flat rate of Purchase Tax at about 15 per cent. in order to facilitate those industries paying so heavily today at a rate of 50 per cent such as the motor car industry, to be brought down to the lower level. All manufactured goods paying Purchase Tax should be brought into the net and the flat-rate system I have denoted should be applied.

    I hope that my right hon. and learned Friend will not reply by taxing me that I should provide indications of alternative revenue to pay for the cost of the £62 million resulting from this Clause. He would be wrong in doing so. I have told him specifically how to do it. I shall not be very pleased with him tonight—I ask my hon. Friend the Member for Exeter (Mr. Dudley Williams) to stop laughing—unless he deals with those alternative sources of revenue which I have suggested to him so specifically, and in such cogent terms.

    I rise to support the request of the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) for a reduction in the Purchase Tax on motor cars—and I hasten to add, for none of the reasons which he himself offered. Indeed, there is no one like the hon. Member for making a brief his very own, and tonight, of course, he has spoken to the brief of the motor manufacturers, who together with the maladministration of the Government have combined to leave the motor industry in the condition of malaise in which it finds itself today.

    The hon. Gentleman said that I spoke to the brief of the motor manufacturers. Let me tell him straight away that the motor manufacturers are entirely opposed to my suggestion that the initial allowance on motor cars should be withdrawn.

    I am glad that the hon. Member has qualified the brief by that exception. Nevertheless, the main theme of what he said and the quotations which he invoked in support of his demand for a reduction of Purchase Tax all derive from one source, and that is the Society of Motor Manufacturers and Traders which has circulated a number of us with that particular brief urging us to support the Clause today.

    I support the Clause for one reason alone, although last year when the matter was under discussion I opposed a reduction in Purchase Tax. I did so then because I believed that if the production of cars for the home market could be controlled by this fiscal method the motor manufacturers would be obliged to go out into the export markets and increase their exports. But as the year went on that did not happen and many of us recall the motor workers who came to Westminster and milled about in the Central Lobby urging their claim to work. Last year thousands of men were under-employed and many were redundant, and the Chancellor of the Exchequer, with the President of the Board of Trade, dreamed up the idea of a payroll tax in order to push people out of the motor industry into other industries.

    I can foresee already at the present stage that when winter comes, and there are already signs of this, there will be grave difficulties inside the motor industry. I have always believed that the home market should be reserved as a kind of cushion against the threat of unemployment. I can see already the threat of unemployment rising inside the motor industry, a threat demonstrated by figures quoted by the hon. Member for Kidderminster, who indicated how Britain's share of world production of motor cars is declining and especially how her share of the export markets is declining.

    I believe with many of my hon. Friends that we should already have constituted a working party of the motor industry to try to see what structural changes are necessary to make the British industry competitive with the French, German and Italian motor industries. Our manufacturers have always claimed that to reduce the unit cost of a motor car it is necessary to cut the Purchase Tax on the home market in order to have an enlarged home market and in that way reduce their final cost. They have always called in aid the argument that if that were done they somehow or other would automatically increase their exports. But I would ask the hon. Member for Kidderminster whether it is not the case that the extraordinary success of German and French motors on the export markets has not been due to the fact that they have had a relatively low rate of Purchase Tax on their domestic markets, because the Germans have had something like 13 per cent. and the French 24 per cent.

    It is not that at all. The reason for the extraordinary success of French and German cars in the export markets of the world, and particularly in the United States, goes much deeper than that. It arises from the fact that they have simplified models and greater standardisation than we have. They do not go in for fashionable cars which change every season. They go in for cars which can be kept by the owners from one season to another without any kind of social derogation, which in the United States, particularly, is certainly important. That is why the British motor industry finds itself in such difficulties in the export markets.

    I do not believe that the incidence of Purchase Tax has anything to do with it, but I want the Chancellor to reduce the Purchase Tax on motor cars because I think that in the absence of an export market, which certainly will not be enlarged by Christmas time, there is great need on the home market for an expansion and for a sustained level of production which will enable the workers in Coventry, Birmingham and Oxford to remain in work.

    In Coventry there is already a threat to the workers engaged in one of the largest motor companies, a threat that by Christmas time they will be unemployed because a model is to be dropped. That may be merely, so to speak, a sport in the configuration of the motor industry, but I believe it goes very much deeper than that. I believe that the British motor industry will run into serious trouble in the export markets simply because it has not put itself into a posture to provide the type of car at the kind of price which the foreign markets demand.

    The hon. Member for Kidderminster referred to the European market and to European competitors. But he said nothing at all about our potential American competitors. Certainly the threat from the United States, not only the threat of their compact cars but, even more than that, the threat of their incursion into the European market, is something which we have to face and to which we must give very serious thought, particularly at a time when we are ourselves expanding—some people, myself among them, think "over-expanding"—our own capacity for production.

    The hon. Member for Kidderminster quoted from an article in the Sunday Telegraph in which a leader of the motor industry mentioned almost as if an aside that the industry had perhaps over-expanded in relation to the demand. I always find it extraordinary how motor manufacturers can one day throw off a sanguine announcement which bolsters up the hopes of all, including the workers in the industry, and next day turn their backs on it and seem to forget about it.

    When they talk about competition, the need for the Government to provide further help, how ready they are to meet competition and how eager they are to enter the Common Market, it seems to me that they just drop those factors which are uncongenial to themselves and, in a kind of wishful thinking, accept those which promote their immediate short-term purpose.

    In Coventry, certainly, there are men with very keen and lively memories of the days of the 20's before the McKenna duties were introduced, which prevented the established unemployment in Coventry from continuing into the 30's in the very bitter form in which it existed in the 20's.

    Today the motor manufacturers say in one breath that they want Purchase Tax to be reduced so that they may enter into competition with their competitors in Western Europe, and yet in another breath they say how confident they are that they can face the complete blast of competition from the Common Market countries.

    It is very hard to obtain comparable figures of rates of pay among the engineering workers in the countries of Western Europe and compare them, like for like, with our own rates of pay. However, some time ago I made a comparison taking into account the social wage of workers in Western Europe. I do not say that this is necessarily an ultimate argument against the Common Market, but it is true that the workers in Western Europe—Germany, France and Italy—even taking into account their social wage, are certainly worse paid than workers in the key centres of motor car production in Great Britain.

    If one adds to that the re-equipment of the French motor industry, which I know fairly well—as demonstrated by the factory where Renault make the Dauphine, the extraordinary electronic transfer machinery which they have introduced, the fact that they have modernised their equipment to a very high degree and are capable of mass-production in a way which enables them to send out their single models into world markets—I think it ought to be clear even to the hon. Member for Kidderminster that it is not the marginal difference in Purchase Tax on the home market which is preventing the British motor car industry from exporting. There must be certain fundamental structural alterations throughout the British motor industry, in terms of standardisation of components and the simplification of design—both major matters. This must be done if we are to comtemplate facing the competition of our Western competitors, let alone our American ones.

    10.30 p.m.

    The British motor industry today is in a very dangerous condition. I appeal to the Chancellor to give some non-partisan attention to the proposal made by my hon. Friends that a working party should be set up for it—not just an advisory committee of the Board of Trade which reports hugger-mugger to the Minister, but a working party composed of those on both sides of the industry, which would work in public and whose findings would be published; a working party which would really go to the root of what is wrong inside the structure of the industry.

    We have recently seen some further symptoms of the malaise inside the industry which is directly relevant to the issue of reducing Purchase Tax. That malaise, as demonstrated by strikes, shows that there is something inherent in the structure of the industry which should be attended to, and I suggest to the Chancellor that what is wrong is the general and long-standing sense of insecurity—and I do not say that one side or the other is more to blame—inside the industry.

    There is the feeling among the workers that unemployment may come and they may be thrown out of work at any moment by a slump in trade, and there is the over-optimism on the part of the manufacturers—like some over-excited housewife who cries "Bingo" before the game is over—as illustrated by their cries of delight after the success of one British car at the New York Motor Show. I agree that the new Jaguar's success, extraordinary as it was, was well-deserved, but after the show there were all sorts of over-optimistic statements by the manufacturers to the effect that the industry was in such a wholesome condition that nothing had to be done about Purchase Tax, or anything connected with it, in order to guarantee its future well-being.

    I believe that we are facing several months of difficulty for motor car workers—right through the winter. I am in favour of a reduction in Purchase Tax, but I am only in favour of it in certain conditions as a poultice for a sick industry.

    Does the hon. Member really think the industry is as sick as he makes out? With all the expansion that has gone on during the last twelve months, can it really be as sick as he says it is?

    The fact that the Society of Motor Manufacturers has sent out to Members a brief circular pointing out the weaknesses and difficulties of the industry and its inability to face competition under present circumstances shows that certain fundamental weaknesses do exist inside the industry.

    The British worker in the motor industry is capable of vying with the best in the world, but, under present conditions, if the industry is allowed just to drift along without any plan we are heading for trouble. The industry requires a plan, not just the alleviation of a reduction in Purchase Tax.

    The hon. Member must realise that we are discussing a reduction in Purchase Tax.

    That is precisely my theme. The reduction in Purchase Tax may save the industry from some of the worst dangers which threaten unemployment between now and the end of the year. What is necessary, ultimately, is a radical reform of the structure of the industry, and, as a preliminary, the Chancellor ought to accept the proposal that as soon as possible a working party should be organised to study the whole question.

    I want to make a few observations on behalf of those engaged in the pottery industry, the workers in particular and the industry generally.

    When my hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) was moving this new Clause, I was pleased to see the interest which the Chancellor was taking in her speech. I thought that he listened in a respectful manner. I hope that if the Chancellor is influenced by the reasonableness of the case we present he will again set an example of how the House of Commons can function on the basis of democratic discussion and take action in the interests of our industries. The Chancellor is constantly making appeals—and on this most of us are in agreement—for an increased effort for the export trade. Yet at the same time the Treasury is responsible for this tax which is discouraging exports.

    I was in at the birth of this tax. Our party in particular was fundamentally opposed to it. It took Lord Dalton a long time to persuade us to agree to it. We acquiesced only because we put the winning of the war before everything else. It is now admitted by Treasury officials that this tax has become a revenue-raising tax. I have a suggestion to make to the Chancellor. Before making it I qualify my suggestion by admitting that it is easy to talk, but it is when one has responsibility that one is put to the test. Therefore, before making the suggestion I admit that while present policy is pursued revenue has to be found from somewhere.

    I suggest that Britain's economic situation is so serious that we have not only to maintain our export trade, but, if we are to hold our own in the world, we must increase it. That means that the Government should assist the export industries to the maximum extent. One of the essential early steps to take is to remove Purchase Tax from all products of manufactured industry catering for the export trade. I remember that before the last Budget there were many articles in the financial Press suggesting that the export trade should he given incentives. When reading those articles I realised how difficult it was to do that.

    Here we have an opportunity to take off a tax which is discouraging the export trade. My hon. Friends and I have received a letter from people who do not support us politically—in fact they do all they can to prevent us being elected, though not very successfully. The letter is headed, "British Pottery Manufacturers Federation," and dated 28th June. It begins: "Dear Mr. Chancellor." I will not read the letter, because of the time, but I will give one or two extracts from it to reinforce what I said were the opinions of people who hold different political views from myself.

    The letter states:
    "We have now collated details of the position in the industry at 5th May, 1961, in respect of labour force, number of weeks' orders on books and increases in stocks."
    I will not give the figures, but the summing up is that they are getting very concerned about the position, that the stocks are building up, and that the number of people in the industry is nowhere near as high as they would like. The letter concludes:
    "There was little change in the stock position which showed that members' stocks amounted to 136 weeks' holdings over the October, 1955, figures."
    I contend that if given the encouragement which it should have the pottery industry could increase its exports. It is acknowledged throughout the world that it produces the finest pottery in the world. If a number of countries which were with us in the war were playing the game with us as they should, instead of encouraging others with subsidies and finance in their own market, things would be better. Some countries talk about imperialism. I am entitled to be critical of our imperialism, but they are not. They have embarked on the greatest imperialism and exploitation of all time—financial penetration. Now they are using their own markets to subsidise their export trade. But that is another story and I will not go far with it except to say that millions of pounds of orders are at stake.

    Nearly all Americans and Canadians are great admirers of our pottery. The time has arrived when the Chancellor ought to begin an experiment. It could start tonight. If he thinks that we are making a reasonable case, and if the industry gives an undertaking that it will start a new drive to increase exports and will reduce prices in proportion to the amount involved in removing Purchase Tax, will he undertake to take this step tonight?

    The industry obtains most of its raw material in our own country; very little is imported. At least 40 per cent. of the pottery produced in North Staffordshire is exported. That is another reason why Purchase Tax should be taken off. The main reason that I oppose Purchase Tax altogether is that I was brought up in large-scale competitive industry. I spent years engaged in the most severe competition that this country has ever faced. We had to reduce our production costs to a minimum and to save every penny possible by scientific methods. Overhead charges were reduced to a minimum. We even had to negotiate with our fellow workers to reduce piece-work prices, in spite of the national agreement that these prices should not be changed unless the method of production or the design was changed. So concerned were we to retain full employment or even short-time work that we were almost on our hands and knees seeking to hold our own against foreign competition. It is because of that experience—and I do not want the country to go through it again—that I am pleading once more that the Government should recognise the reasonable case which we are making and should encourage those engaged in the export trade more than they have been encouraged in the past.

    10.45 p.m.

    During the past fifteen years those engaged in export trades in this country have made efforts greater than have ever been made, except in war time. The export industry expends more effort per day in the service of this country, leads a busier life, and takes a greater interest in the service it renders than those working in Government Departments, municipal offices, or elsewhere. That is why we have done so well, relatively speaking. It is because there is a great drive inside the exporting industries. All engaged in the industries realise that our very future is at stake, because we are all living on our exports now. All those people who boast of their greatness in doing this, that or the other are living on the export trades. The position will become more acute as time passes. Hence the need for the Chancellor to take an elementary step tonight and agree to remove the tax.

    I am a regular reader of the Board of Trade Journal. It is an excellent journal. It is improving. Those who produce it deserve great credit. I constantly read the Chancellor's speeeches reported in the Journal. He constantly exhorts people to increase our exports. The President of the Board of Trade does the same. He has been to Moscow and Warsaw and made a number of other visits for the purpose of increasing exports. The time has come for the Chancellor to act. He should accept the Clause. We ask the Chancellor to live up to the exhortations he has made.

    The hon. Member for Kidderminster (Mr. Nabarro) said that Purchase Tax affects the export trade. The same point has been made by every hon. Member who has taken part in the debate. Most industries are dependent to a greater or lesser extent on the home market. It is true that Purchase Tax does not apply to articles exported, but indirectly a high tax on articles for the home market is bound to make it more difficult for manufacturers to sell overseas. This fact has often been debated in this Chamber. It has been established that the general effect of Purchase Tax is to put obstacles in the way of exporting industries.

    In theory it can be argued that the reverse is true and that manufacturers, when faced with a stiff Purchase Tax on goods for the home market, will tend to put greater endeavours into selling overseas. However, experience shows that it is only when manufacturers have a complementary home market to maintain that they can sell and compete successfully in overseas markets.

    This debate has turned largely on the problems of the motor manufacturing industry, but I hope that it will not be limited to that. Whether or not we go into the Common Market, I believe that competition with the Western European countries will be keen. If we do not go into the Common Market, there is little doubt that motor manufacturers will open new plants in Europe and it may well be that our workers will suffer more as a result of our being cut off the Common Market than in it—but I must not embark on that topic now.

    I support the new Clause moved by the hon. Member for Stoke-on-Trent, North (Mrs. Slater). I should be content with a reduction to 10 per cent. rather than to 5 per cent., but I do not want to belittle the hon. Lady's case. I am, however, a little concerned at the prospect of frequent changes in Purchase Tax. It may very soon be increased as a result of the Chancellor's new regulator and that, in turn, will create considerable uncertainty.

    I am not sure that the right hon. and learned Gentleman sufficiently appreciates the harmful effect of uncertainty created by the possibility of frequent changes in Purchase Tax—

    Order. I am afraid that does not come within the scope of the new Clause before the House.

    I bow to your Ruling, Mr. Deputy-Speaker. I wanted to say in passing that I recognise that a reduction from 12½ per cent. to 5 per cent. would, if followed by frequent changes, create a state of uncertainty in industry which would have a harmful effect on manufacturers, wholesalers and retailers, and affect the flow of goods in a way that would create great difficulties for manufacturers in planning ahead.

    That being so, I hope that the Chancellor will accept two propositions. He should accept the view put forward by the hon. Member for Kidderminster and other hon. Members that Purchase Tax does not lead to an increase in exports. The indirect effect of the tax is to make great difficulty for the manufacturers to maintain their flow of goods at competitive figures, and it is the very effort that the right hon. and learned Gentleman wishes to encourage that is damaged by its continuance. I shall be interested to learn whether or not he accepts that proposition.

    The other proposition is that the uncertainty created by frequent changes in the level of the tax has its effect on the wholesaler and the retailer, and makes it more difficult for the manufacturer to maintain a steady flow and to plan ahead. While supporting the reduction from 12½ per cent. to 5 per cent., I make it quite clear that I should prefer a reduction to 10 per cent. steadily maintained for a number of years. That would be the best solution, but if the Chancellor is willing to reduce the level in this case to 5 per cent. I welcome it. I support the new Clause.

    The hon. Gentleman the Member for Kidderminster (Mr. Nabarro) said that the situation in the motor industry was alarming. I agree with the hon. Gentleman and I wish merely to say in a few words why I agree and what I consider are the prospects for the industry in the coming autumn and winter.

    Let me make it clear at the outset that I am not a prophet of gloom and that I do not believe that the industry is overoptimistic in the long run, at any rate. In the last ten years—as I have pointed out until I am blue in the face—the motor industry has increased its production threefold. I admit that I once joined the chorus of people who said that the industry was too optimistic, but I have tried to learn, as a result of the history of this trade, that one cannot go on making the same mistake, in view of the rapid growth and the increase in production, sales and exports.

    At this stage, I will not cross swords on this issue with my hon. Friend the Member for Coventry, North (Mr. Edelman). While he may be correct that certain things are wrong, I think that the situation is alarming enough not to cross swords with him. I simply wish to welcome him this year as a convert among those who have been trying to get a reduction in Purchase Tax.

    The hon. Member for Kidderminster did not make it clear in his speech that this is not something new that we are saying. After all, we made these sort of speeches about the dangers facing the motor industry in 1958, 1959 and 1960, and we are now making them again in 1961. If nothing impresses the Economic Secretary in other respects, I hope that the fact that we have proved to be consistently right in what we have said about the developing dangers will at least make him think that it is time that some regard was paid to this problem.

    My hon. Friend the Member for Coventry, North is partly right. The industry needs more drive in exports and it is true, of course, that a reduction in the incidence of Purchase Tax would greatly help. The history of the last few years has consistently proved the correctness of the case that has been made out in four Budgets by the hon. Member for Kidderminster and myself.

    Each year we have said that the alarming feature is that whereas our exports are going up—by one-third or one-half, from whatever base year is taken—the exports of the Germans, French and Italians have been going up by 75 per cent., 100 per cent., 125 per cent. and even 200 per cent. It is no good saying that this was Europe recovering. That excuse is out of date. Even after having recovered, Germany, France and Italy are licking us in the motor markets of the world.

    How alarming is this situation at this stage of 1961? We have had a reduction of something like one-half in our exports in the first quarter of this year—a half of one of our major export earners. This trend, projected for the remainder of the year—since there is no sign of recovery—indicates that our production of motor cars this year may be something like only two-thirds or three-fifths of that of last year. There faces the industry a crisis even worse than the last one in 1956. We have never taken such a tumble in recent years and, therefore, the Government must realise that there must be something in the case that the industry needs help to meet the competition from its European competitors.

    11.0 p.m.

    Do not the hon. Gentleman's impressive figures suggest one thing, and that is that it is not merely some fiscal piece of prestidigitation which is necessary in order to restore the position but some fundamental change in the structure of the industry?

    I am not going to argue that. I simply say that the situation is so alarming that all possible help is needed. My hon. Friend is partly right, that greater drive and perhaps greater energy of all kinds in the industry are needed to overcome a real crisis, but I ask him to go part of the way with us. This crippling tax, which is so damaging to our efforts in the continental markets, must also be reduced so that we and our competitors can be on equal terms.

    I said that the situation that we are likely to face this year will be worse than the last crisis in 1956. But things have got worse in the last two months. We have been exporting from 70,000 to 90,000 cars a year to Canada, and within the last two weeks enormous barriers have been put up in Canada against British cars. That makes the prospect even worse than it would otherwise be. But even more important is to look at our difficulties in 1961, as the hon. Member for Kidderminster partly did, compared with what is happening to our competitors on the continent.

    Look at what is happening. Germany is not suffering any setback this year. In the first three months of this year Germany has produced half a million cars compared with an annual rate of 1·8 million last year. If she goes on at that rate she will not be having a reduction of two-thirds on last year's production. She will be having an increase. Take France, with 280,000 in the first quarter compared with an annual rate of 1·2 million last year. France, is not going to have a tumble this year like that we are going to have. Italy, which was not a competitor of ours in world markets, is now rising to become one of our major competitors. Italy has produced and sold 161,000 cars in the first quarter of this year compared with 596,000 in the whole of last year. She is going to have an actual physical increase in production this year.

    If ever there was a time when something should be done about Purchase Tax, now is the time. There is example after example of the way in which our continental competitors face much lower taxes at home, and they are beating us in their sales record and in their prices in overseas markets. We have got to do something about it.

    What we get is an alternating theme from the Treasury. When there are pleas for relief in taxation we get from the Treasury the story—and we had it last year—that if we were to reduce taxes this year a lot of cars would be sold on the home market and this would eat into the number of cars which ought to be exported. We had it from the Economic Secretary last year:
    "I put this consideration to the Committee. If we were to reduce Purchase Tax by the extent suggested in the new Clause, would it not stimulate home demand still further beyond what the industry already cannot meet without encroaching on our supplies for the export market?"—OFFICIAL REPORT, 22nd June, 1960; Vol. 625, c. 497.]
    When things are going well and the boom is being stoked up we are told that it is dangerous to let any more on to the home market. But once the boom has got out of hand, as it does with sickening regularity in our economy, and we switch from stoking up to damping down, we get the other story from the Treasury, which is, "We could not reduce it this year. We could not help the motor industry this year because we could not afford to release purchasing power which the reduction in Purchase Tax would involve."

    I said last year:
    "If one looks ahead, the prospects for 1961, based on today, are that we shall not be in for an easy Budget. The boom is only just getting under way, the curb has just started, and there are rumours of more curbs to come. Presumably, if the position does not right itself, they will come in the autumn …"—
    as they certainly did after I made that speech.
    "If they do, next April will be too early for a sudden lightening of the burden of taxation."—[OFFICIAL REPORT, 22nd June, 1960; Vol. 625, c. 481.]
    We have this rhythm: when we are stoking up the boom, we cannot let the Purchase Tax off, and when we are damping down, we cannot let it off. It must come to an end some time.

    If things continue as they are now in the Midlands, we shall have redundancy and short-time working on a scale much worse than last year. If we could look ahead and foresee it last year when we spoke on the Budget and warned the Government of what might happen, how much more can we be certain on the evidence of the first quarter of this year. It will be too late to play about in the autumn when the worst has happened. We must break out of the vicious circle of argument we have year after year and do something to lighten the burden of taxation and help the industry forward. I warn the Economic Secretary that, if he does nothing, things will be very tough indeed in the Midlands this winter, and he ought to make his reply tonight in the certainty of that, knowing that he will be held to account to some extent if he promises no help.

    I promise to be very brief. I ardently support my hon. Friends from Stoke-on-Trent who have spoken to the new Clause and I add only one further argument. As a result of its research in the whole general field of ceramics, the pottery industry not only helps itself but helps almost every industry which depends on modern scientific effort. The Ceramic Research Association, which is supported by employers and partly subsidised by Government money, is so concerned with the safety and welfare of the workers that I would do anything to encourage the industry as a whole to prosper, quite apart from my desire to give the consumer the opportunity to buy cheaper goods. I want the manufacturers to have such profits that they can continue at all costs to support the research which is done and which is yielding such successful results in saving life and preserving health.

    On the new Clause spoken to by the hon. Member for Kidderminster (Mr. Nabarro)—(Purchase tax: reduction of rate from 50 to 37½ per cent.)—I shall say nothing about motor cars. I know very little about them. Not for the first time, however, I shall speak about music recorded on gramophone records. I am delighted that it is the Economic Secretary who is to answer, because I know that he feels personally as deeply about the undesirability of this tax as I do and as, I believe, hundreds of hon. Members do.

    The Purchase Tax on gramophone records is a tax on culture and on education. It is undesirable from every point of view. It brings in about £6 million of revenue at the moment. Fifty per cent. is a higher rate of taxation on gramophone records than is levied anywhere else in the world. We have very serious competition from the United States, and there the tax is, I think, 4 per cent. The whole basis and success of the industry depends on keeping the greatest artists of the world assigned to the recording companies.

    The two great companies in this country have three out of four of the greatest conductors and artists of the musical world attached to them. If those artists are lost to them because the companies cannot afford to continue classical recordings, they will have to go and earn their living elsewhere. If they earn their living elsewhere we all of us will be the losers spiritually and culturally, and the Treasury will lose money, too. If the Economic Secretary cannot see his way to finding the small amount of money which he would have to lose if he gave way to me tonight, at least let him say to us, "I will consider next year, if not this year, freeing entirely classical recordings." Let him say, "I did not know how to do it in the past. I have not wanted to distinguish between popular and classical records, but I know there is a way in which it can be done. I will at least do that." That is my plea to him tonight. I hope I have succeeded in moving him.

    This debate is about Purchase Tax rather than about motor cars, and I think that perhaps it is a pity, since we have had no other time this year to debate Purchase Tax, that we have had so little time to cover such wide ground tonight. This has, after all, become a very formidable tax by which the Chancellor raises £525 million a year. That is more than £200 million more than he raised ten years ago, and, indeed, it is remarkable that ten years ago we were raising about £200 million in Surtax, rather less than £200 million in Purchase Tax, and this year we are raising £525 million by Purchase Tax and about £100 million in Surtax—about five times as much by Purchase Tax. The Government have entirely failed to make any simplification of this tax, despite all the efforts of the hon. Member for Kidderminster (Mr. Nabarro).

    That is entirely untrue. My noble Friend Lord Amory reduced the number of rates from seven to four in 1958. In 1959 he reduced each of the rates again. All the rates are much lower and the tax much simpler as the result of my continuous endeavours in that regard.

    In 1948 we had three rates of tax we still have four rates today. That was the simple point I was making.

    If we are to have reductions I am not sure that I should give first priority to a reduction in tax on motor cars. I am not absolutely satisfied that a reduction of Purchase Tax on motor cars would be of immediate assistance to exports. However, I agree with the hon. Member for Kidderminster to this extent, that if the industry might be chronically under-employed, if capacity were in the future to be less than fully used, as it has been in the past year, then the case that applying a reduction of Purchase Tax would be of assistance to exports would be very much stronger now than it has been in the past.

    I would also frankly agree with the hon. Member in that I would much rather abolish the initial allowances and lower Purchase Tax. This extraordinary system by which the Chancellor attempts to push motor car exports and motor car production by means of Purchase Tax, and then sucks them back with initial allowances is, I think, an extremely foolish proceeding.

    However, our debate is essentially on a Clause which seeks to reduce the 12· per cent. rate to 5 per cent. The 12· per cent. rate, as several of my hon. Friends have pointed out, covers a very large number of important articles of household equipment including wallpaper, carpets and other floor coverings, kitchen utensils, cutlery, pottery and so on. One argument in favour of this Clause which has been little emphasised tonight is that it would assist in making some reduction in the cost of living. In the past year we have again had a very considerable rise in the cost of living of about four points, and the Chancellor has again been making veiled threats, and appeals to wage earners to exercise restraint, and he has been alarmed by the rising spiral of wages and prices. If that is so, I should have thought that he ought to consider seriously making some tax reductions which would contribute to keeping the cost of living down, and to provide some substantial argument for some sort of restraint of this kind. If, on the other hand, as we constantly read, we are to find that he increases indirect taxation in a few weeks' time, then his appeals for restraint will be met with contempt and derision.

    The Chancellor's record this year has been very repressive. First he raised the cost of living by raising the health charges. Then he went further and makes an enormous reduction in Surtax. Is he now going to be unfavourable to our proposal for a reduction of Purchase Tax for the sake of lightening the cost of living? Then apparently he will raise indirect taxes all round and afterwards ask for wage restraint. I assure the Chancellor that if that is the economic policy which he has in mind it is likely to have little success either economically or politically. Therefore, I hope that the right hon. and learned Gentleman may pause a moment and reflect whether he might not do a little better and accept something on the lines of this Clause.

    11.15 p.m.

    The right hon. Member for Battersea, North (Mr. Jay) rightly pointed out that the estimated yield from Purchase Tax this year is £525 million, and no debate on the Finance Bill would be complete without some consideration of the present levels of Purchase Tax. Perhaps I might say also that no consideration would ever be complete without the views of my hon. Friend the Member for Kidderminster (Mr. Nabarro).

    Criticisms of Purchase Tax fall into three broad categories. The first criticism comes from those who consider that the revenue could be better raised in some other way, because the present system involves different rates of tax for different categories of articles and this inevitably produces anomalies and yet when one attempts to deal with the anomalies the consequences of reform seem almost more anomalous. The proposal of my hon. Friend the Member for Kidderminster to avoid these disadvantages in the present scheme is to have a single flat-rate of tax which would mean, of course, an increased rate of tax for many classes of articles. But at least my hon. Friend is prepared to face that fact.

    The second criticism made concerns the structure of the tax, and one consequence of the Clause in the name of the right hon. Member for Huyton (Mr. H. Wilson) and others, moved by the hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater) would be to reduce the number of rates from four to three. The present structure, as my hon. Friend the Member for Kidderminster said, was introduced in 1958 and comprises four rates which are well-known to the House. The hon. Lady's proposal is that there should be only one reduced rate of 5 per cent. instead of two, as now, of 12½ per cent. and 5 per cent.

    The third criticism which was embodied both in the Opposition Clause and in the Clause to which my hon. Friend the Member for Kidderminster has referred is that the rates, or particular rates, of tax are too high. My hon. Friend is concerned with the top rate of 50 per cent, and wishes to reduce it to 37· per cent., whereas the Opposition Clause is concerned with the lower rate. I was surprised to hear the hon. Member for Birmingham, Northfield (Mr. Chapman) who is not now in his place, talking of Conservative Chancellors year after year making one excuse after another for not reducing taxation, but there certainly has been a reduction since a Conservative Government came into office in the tax on motor cars to which the hon. Member referred.

    Before I outline the more general considerations which I know the House will wish to face in considering these proposals, I should like to refer to certain specific classes of goods which have been mentioned by various speakers in the course of the debate. In view of the fact that three hon. Members representing Stoke-on-Trent have spoken with deep feeling about the position in the pottery industry, I think that the House would wish me to say a few words on that subject. In 1955, as hon. Members know—and I do not want to make any political point of it—the tax was 30 per cent. It was reduced to 15 per cent. in April, 1957, and to the present 12½ per cent. in April, 1959. The tax applies equally to tableware, with which I think the hon. Lady and her hon. Friends were principally concerned, and to kitchenware of whatever material it is made.

    Again, I think that the hon. Members who represent Stoke-on-Trent will agree that in this field pottery, glass, metal and plastic are all directly competitive and that it would not be defensible to discriminate in favour of one material despite the fact, as I recognise, that there are immense and unique skills involved in the production of the products made in their city.

    Having said that, I think one must consider tableware and kitchenware as a whole. While I do not dispute much of what was said by the hon. Lady and her hon. Friends, I think I should point out that, whereas the pottery industry experienced something approaching a recession in 1955–56, it has recovered subsequently and home market sales have been pretty good and have, in fact, improved steadily each year. In terms of value, as the hon. Members well know, home market sales for 1960 were the highest ever. I have other figures here but I will not trouble the House with them except just to mention, because the question of pottery has loomed large in the debate, that the total production for both home and export in the first three months of this year is 4·1 per cent. up on the same period last year.

    Reference was made also by the hon. Lady to carpets, linoleum and wallpaper. In that context she was pleading not so much for a particular craft industry but on behalf of the housewife and the householder who has to purchase the articles. Again, on this point I think it is fair to bear in mind that, for example, the tax represents 1s. 9d. in the pound on the retail price of a carpet, which amounts to about three guineas on a carpet costing £36. On a square yard of good linoleum, I am told, the tax is about 1s. 4d., which represents about £1 6s. 8d. for a medium sized room. I should not have thought that these amounts of tax were really excessive. The tax on wallpaper represents only about one-seventeenth of the retail price, or an average addition of about 3s. on the cost of papering an ordinary sized room. If one of the cheaper papers were used, the tax element would be as low as 1s. 6d.

    I am not saying that the present level of tax at 12½ per cent. does not have any effect in these cases, but I think it can be exaggerated, especially if one fails to look at the end effect, the proportion of tax in relation to the retail price.

    While it can be exaggerated, cannot it also be understated by mentioning one item at a time? Surely it is the cumulative effect of the prices that makes the cost of living extremely difficult for young couples.

    The difficulty that I am in is that I cannot mention them all at once. I was trying to refer seriatim to all the items mentioned by hon. Members opposite.

    My hon. Friend the Member for Kidderminster made some important observations about the motor car industry, and they were followed up by other hon. Members, in particular by the hon. Member for Birmingham, Northfield and the hon. Member for Coventry, North (Mr. Edelman). I hope that I shall be forgiven if I do not at this stage, in considering Clauses which are concerned solely with Purchase Tax, comment upon some of the wider and more basic suggestions which have been made by hon. Members about the state of the motor industry.

    Before I come to the specific proposals made by my hon. Friend the Member for Kidderminster I must remind the House that last year the motor industry enjoyed a record year. But it is equally true to say that if we simply look at the statistics for the year as a whole they can be very misleading, because exports fell away considerably in the third quarter, mainly due to difficulties we had in selling our motor cars to the United States. There was also a decline in home sales in the fourth quarter, probably due to the delayed effect of the hire-purchase restrictions imposed in April. But the relaxation of the hire-purchase restrictions in January of this year has been followed by a recovery on the home market. Registrations of new cars for March of this year were the highest ever recorded, although in fairness I must say that the April figures—because of the early Easter—have shown some falling away. At all events, the home trade is recovering, and once again, as my hon. Friend will know, there are waiting lists for some of the more popular cars.

    My hon. Friend spent some time in dealing with the inter-relation between home sales and exports, and this aspect was touched upon by the hon. Member for Huddersfield, West (Mr. Wade). I agree with much of what he said, and certainly with his argument that there is an inter-relation, but I do not think that one can always draw the same conclusion. With some commodities it is true that the firmer the home market base the better the prospects for exports, but with other commodities it is equally true that a high level of home demand may act as a brake on exports. It is very difficult to draw any firm conclusion on this matter—certainly one firm enough to affect my right hon. and learned Friend's decision on Purchase Tax.

    I am not satisfied that the present level is a serious deterrent to exports. In 1959 Purchase Tax was at 60 per cent. until the Budget of that year, when it was reduced to 50 per cent., but in that year exports rose by 17·6 per cent., and they rose again last year. Making full allowances for the way in which they tailed off, or fell seriously towards the end of the year, exports for the year as a whole, with the rate of Purchase Tax at 50 per cent., were up.

    I do not want to be dogmatic, or to lay down principles which may not be applicable in future years, but with the best will in the world I cannot accept unconditionally the point of view expressed by my hon. Friend.

    Would my hon. Friend deal wth two points? He may not accept my proposition, but in refusing to do so, does not he recognise that it is unanimously subscribed to by all those engaged in the our motor manufacturing industry? Secondly, does not be agree that although our exports of cars have been decreasing progressively in the last twelve months—and did not show a particularly healthy rate of increase for three years before that—the West Germans, the French and the Italians have benefited in their home markets by the rate of domestic taxation being only one-third of our level? Would my hon. Friend comment on those striking facts?

    11.30 p.m.

    On the second point made by my hon. Friend, I do not think that it necessarily follows that the better performance in exports of motor cars by some of our competitors overseas is due to a difficult level of Purchase Tax. It may or may not be so. I do not think anything my hon. Friend said in his speech shows that is necessarily so. On the second point he made, I should be very surprised indeed if the motor manufacturers without any exception did not support my hon. Friend in advocating a reduction in Purchase Tax on motor cars.

    I hope that the hon. Member for Stoke-on-Trent, Central (Dr. Stross) will forgive me if I do not deal with the points he made about gramaphone records. I should remind him, as I think he knows, that about 80 per cent. of all home market sales are of the "pop" type of record. Despite the plea he made, I think that it would be extremely difficult and impracticable to make any distinction for tax purposes between classical and popular music records. I have discussed this with the hon. Member and I received a deputation led by him on it. He knows my views and I am afraid that, certainly this year, nothing can be done to meet the points he made.

    I turn finally to more general considerations. Of course, considered in isolation, any reduction in taxation is desirable, but the fact is that nobody in a position of responsibility can consider particular proposals for reductions in taxation in isolation. In the first place, it is necessary to consider in general whether the balance between direct and indirect taxation is right. Some of my hon. Friends take the view that in the United Kingdom we have not got that balance right and that the first essential in the general interests of the economy is to reduce direct taxation and not indirect taxation.

    My hon. Friend the Member for Kidderminster was at any rate constructive in suggesting alternative means of raising indirect taxation, but there is an even more fundamental consideration. It is universally accepted that the Government have a responsibility to act to avoid excess demand on the one hand and deflation on the other. The Budget remains one of the primary instruments for achieving that. My right hon. and learned Friend gave his analysis of the situation on 17th April and it was generally approved by the Committee. I shall content myself with quoting ony one passage from his speech. He said:
    "Bearing all this in mind, what should be the purpose of this year's Budget? The rise in personal consumption must be restrained. I would hope that as in 1960 increased saving would be an important part in this. Nevertheless, I am sure that the broad effect of the Budget must be counter-inflationary; there must be a larger surplus above-the-line than last year and a smaller overall deficit."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638. c. 801.]
    My right hon. and learned Friend therefore provided for a net increase in taxation this year of £68 million. My hon. Friend the Member for Kidderminster says that we should raise taxation in various other ways—

    —alternative ways. Some may agree with him and some may not, but the fact is that these two Clauses would involve a considerable reduction in taxation this year. Nothing that has happened since the Budget could lead one to the conclusion that it is any less necessary now than at the time of the Budget to take the action that my right hon. and learned Friend then advocated.

    My hon. Friend the Member for Kidderminster would certainly not expect me or my right hon. and learned Friend to accept off the cuff the proposals he made for increasing taxation—

    Division No. 238.]

    AYES

    [11.35 p.m.

    Ainsley, WilliamHowell, Denis (Small Heath)Randall, Harry
    Awbery, StanHoy, James H.Redhead, E. C.
    Bowden, Herbert W. (Leics, S.W.)Hughes, Hector (Aberdeen, N.)Reynolds, G. W.
    Boyden, JamesHynd, John (Attercliffe)Roberts, Goronwy (Caernarvon)
    Broughton, Dr. A. D. 0.Janner, Sir BarnettRoss, William
    Brown, Alan (Tottenham)Jay, Rt. Hon. DouglasSlater, Mrs. Harriet (Stoke, N.)
    Castle, Mrs. BarbaraJeger, GeorgeSlater, Joseph (Sedgefield)
    Cliffe, MichaelJenkins, Roy (Stechford)Smith, Ellis (Stoke, S.)
    Crosland, AnthonyJohnson, Carol (Lewisham, S.)Soskice, Rt. Hon. Sir Frank
    Cullen, Mrs. AliceJones, Dan (Burnley)Spriggs, Leslie
    Darling, GeorgeJones, Elwyn (West Ham, S.)Stonehouse, John
    Davies, G. Elfed (Rhondda, E.)Kelley, RichardStones, William
    Delargy, HughKing, Dr. HoraceStrachey, Rt. Hon. John
    Diamond, JohnLee, Miss Jennie (Cannock)Stross,Dr.Barnett(Stoke-on-Trerrt,C.)
    Dodds, NormanLewis, Arthur (West Ham, N.)Symonds, J. B.
    Driberg, TomLogan, DavidThompson, Dr. Alan (Dunfermline)
    Edelman, MauriceLoughiin, CharlesThornton, Ernest
    Evans, AlbertMacColl, James
    Gaitskell, Rt. Hon. HughMclnnes, JamesWade, Donald
    Ginsburg, DavidMackie, John (Enfield, East)Wainwright, Edwin
    Gordon Walker, Rt. Hon. P. C.Manuel, A. C.Warbey, William
    Gourlay, HarryMendelson, J. J.Weitzman, David
    Grey, CharlesMilne, Edward J.White, Mrs. Eirene
    Griffiths, W. (Exchange)Mitchison, G. R.Whitlock, William
    Grimond, J.Mulley, FrederickWilkins, W. A.
    Hale, Leslie (Oldham, W.)Neal, HaroldWillis, E. G. (Edinburgh, E.)
    Hannan, WilliamNoel-Baker, Francis (Swindon)Wilson, Rt. Hon. Harold (Huyton)
    Hayman, F. H.Oram, A. E.Winterbottom, R. E.
    Henderson, Rt.Hn.Arthur(RwlyRegis)Owen, Will
    Holman, PercyPavitt, LaurenceTELLERS FOR THE AYES:
    Houghton, DouglasPentland, NormanMr. Short and Mr. Lawson.
    Howell, Charles A. (Perry Barr)Probert, Arthur

    NOES

    Agnew, Sir PeterChichester-Clark, R.Fraser, Hn. Hugh (Stafford & Stone)
    Allason, JamesClark, Henry (Antrim, N.)Fraser, tan (Plymouth, Sutton)
    Ashton, Sir HubertClark, William (Nottingham, S.)Gammans, Lady
    Barber, AnthonyCordeaux, Lt.-Col. J. K.George, J. C. (Pollok)
    Barter, JohnCorfield, F. V.Gibson-Watt, David
    Beamish, Col. Sir TuftonCos tain, A. P.Glover, Sir Douglas
    Bennett, F. M. (Torquay)Courtney, Cdr. AnthonyGlyn, Dr. Alan (Clapham)
    Biggs-Davison, JohnCritchiey, JulianGlyn, Sir Richard (Dorset, N.)
    Bingham, R. M.Crowder, F. P.Coodhart, Philip
    Bishop, F. P.Curran, CharlesGoodhew, Victor
    Black, Sir CyrilCurrie, G. B. H.Cower, Raymond
    Bossom, Clived'Avigdor-Goldsmld, Sir HenryGresham Cooke, R.
    Bourne-Arton, A.Deedes, W. F.Grimston, Sir Robert
    Box, Donaldde Ferranti, BasilGrosvenor, Lt.-Col. R. G.
    Boyle, Sir EdwardDonaldson, Cmdr. C. E. M.Gurden, Harold
    Brewis, JohnDoughty, CharlesHall, John (Wycombe)
    Browne, Percy (Torrington)Duncan, Sir JamesHamilton, Michael (Wellingborough)
    Bryan, PaulElliot, Capt. Walter (Carshalton)Harris, Frederic (Croydon, N.W.)
    Bullard, DenysEmery, PeterHarris, Reader (Heston)
    Campbell, Gordon (Moray & Nairn)Farr, JohnHarrison, Brian (Maldon)
    Chataway, ChristopherFinlay, GraemeHarrison, Col. Sir Harwood (Eye)

    —as an alternative, but to accept either of these two Clauses would run counter to the basic counter-inflationary purposes of this Budget. Without quarrelling with some of the arguments which have been adduced in favour of these reductions, considered in isolation, I hope that the House will take the view that, whatever their intrinsic merits may be, it would not be in the general interest at this time to accept either of these two Clauses.

    Question put, That the Clause be read a Second time:—

    The House divided: Ayes 91, Noes 167.

    Harvey, John (Walthamstow, E.)Markham, Major Sir FrankSharpies, Richard
    Heald, Rt. Hon, Sir LionelMarten, NellShaw, M.
    Hiley, JosephMathew, Robert (Honiton)Shepherd, William
    Hill, J. E. B. (S. Norfolk)Matthews, Gordon (Meriden)Skeet, T. H. H.
    Hinchingbrooke, ViscountMawby, RayStevens, Geoffrey
    Hirst, GeoffreyMaxwell-Hystop, R. J.Storey, Sir Samuel
    Hobson, JohnMaydon, Lt.-Cmdr. S. L. C.Taylor, Edwin (Bolton, E.)
    Hocking, Philip N.Mills, StrattonThomas, Leslie (Canterbury)
    Holland, PhilipMore, Jasper (Ludlow)Thomas, Peter (Conway)
    Hopkins, AlanNabarro, GeraldThompson, Richard (Croydon, S.)
    Hornby, R. P.Noble, MichaelThornton-Kemsley, Sir Colin
    Hornsby-Smith, Rt. Hon. PatriciaOakshott, Sir HendrieTiley, Arthur (Bradford, W.)
    Hughes-Young, MichaelOsborn, John (Hallam)Turner, Colin
    Hutchison, Michael ClarkPage, John (Harrow, West)Turton, Rt. Hon. R. H.
    Iremonger, T. L.Page, Graham (Crosby)van Straubenzee, W. R.
    Johnson, Dr. Donald (Carlisle)Pannell, Norman (Kirkdale)Vickers, Miss Joan
    Johnson, Eric (Blackley)Peel, JohnWalker, Peter
    Johnson Smith, GeoffreyPickthorn, Sir KennethWalker-Smith, Rt. Hon. Sir Derek
    Kaberry, Sir DonaldPilkington, Sir RichardWall, Patrick
    Kerans, Cdr. J. S.Pitt, Miss EdithWard, Dame Irene
    Kershaw, AnthonyPott, PercivallWells, John (Maidstone)
    Lancaster, Col. C. G.Powell, Rt. Hon. J. EnochWhitelaw, William
    Legge-Bourke, Sir HarryPrice, David (Eastleigh)Williams, Dudley (Exeter)
    Lewis, Kenneth (Rutland)Prior, J. M. L.Williams, Paul (Sunderland, S.)
    Lloyd, Rt. Hon. Selwyn (Wirral)Proudfoot, WilfredWilson, Geoffrey (Truro)
    Longbottom, CharlesQuennell, Miss J. M.Wise, A. R.
    Longden, GilbertRawlinson, PeterWolrige-Gordon, Patrick
    Loveys, Walter H.Redmayne, Rt. Hon. MartinWood, Rt. Hon. Richard
    Lucas-Tooth, Sir HughRees, HughWoodhouse, C. M.
    MacArthur, IanRees-Davies, W. R.Woodnutt, Mark
    McLaren, MartinRonton, DavidWoollam, John
    McLaughlin, Mrs. PatriciaRidsdale, JulianWorsley, Marcus
    Maclean, SirFitzroy(Bute&N. Ayrs.)Roots, William
    McMaster, Stanley R.Ropner, Col. Sir LeonardTELLERS FOR THE NOES:
    Macmillan, Rt. Hn. Harold(Bromley)Scott-Hopkins, JamesMr. Edward Wakefield and
    Maddan, MartinSeymour, LeslieMr. Frank Pearson.

    New Clause—(Savings (Pay As You Earn))

    (1) From the fiscal year 1961–62 any employed person shall have the right so to alter his code number that more tax can be deducted each week under section one hundred and fifty-seven (pay as you earn) of the Act of 1952 than would be so deducted if the code number had not been altered. At any time during the fiscal year such employee would have the right to revert to his actual code number.

    (2) As soon as possible after the fifth day of April in any year the Commissioners of Inland Revenue shall issue to each taxpayer a certificate showing the amount of any overpayment in the preceding year. Such certificates shall be immediately encashable at any post office.

    (3) If such certificate is deposited in the Post Office Savings Bank, interest at the rate current for deposits in the Post Office Savings Bank per annum shall be allowed on the amount thereof from the preceding sixth day of April.

    (4) The maximum amount that may be saved by each employee in any one year shall not exceed ten per cent. of gross earned income in that year, or hundred pounds whichever is the less.

    (5) The first twenty-five pounds of interest on such savings shall be exempted from income tax.

    (6) At the conclusion of each month the Commissioners of Inland Revenue shall transfer to the Post Office Savings Bank such an amount which in the opinion of the Treasury is

    the equivalent of the savings for the preceding month.—[ Mr. W. Clark.]

    Brought up, and read the First time.

    I beg to move, That the Clause be read a Second time.

    I think that the House will agree that one of the weaknesses of our economy today is the high amount of consumer spending. I do not want to embark on an argument about exports. We must have a good home market in order to assist exports, but in the case of some commodities if there is a booming market it can activate against exports. Last year consumer spending in this country was about £17,000 million. Savings last year were extremely good, as they have been for successive years. I am sure that everyone in the House would like to pay tribute to the work of Lord Mackintosh and his National Savings Committee. They have done a tremendous amount of work. Even so, this country must save more and more money. If we could cut consumer spending by only 1 per cent. it would result in a saving of about £170 million. One very simple example is that if every member of the working population were to smoke only one cigarette less per day it would mean a saving of some £72 million a year.

    When we speak in such terms, it indicates that with a working population of 24 million a small saving per head could do the economy a tremendous amount of good—

    Will the hon. Gentleman tell the House what calculation he has made of the loss to the Treasury caused by this act of self-abnegation?

    Yes. The loss to the Treasury in Customs Duty as a result of this cut in cigarette smoking would be about £6 million a year, but that still does not kill my point. It would still mean a saving of over £60 million, which is a considerable sum.

    11.45 p.m.

    The House should pay attention to individual saving. Many people want to save, and could save, but find that the present method is far too inconvenient. Those hon. Members who have tried to transact business at a post office after the pay day, particularly a Saturday, know that it is absolutely impossible to get near the counter. So many people are buying their postal orders and so on for the various things in which they invest their money that it is almost impossible for people to save regularly through the Post Office.

    The method outlined in the new Clause would make regular saving much easier. The pay-as-you-earn system covers about 20 million employees, each of whom has a code number on which each week the Revenue, through the employers, deducts a certain amount of Income Tax, after various allowances and so on have been taken into account. For example, if one has £15 a week and a code number 35, the weekly tax taken is about £2 4s. a week.

    Each month, the employer, having deducted the tax from the employees, sends a cheque for the total to the Revenue, and at the end of each fiscal year he is under a statutory obligation to render to the Inland Revenue an annual return giving a complete summary of the tax he has deducted from each of his employees. The total shown in that return must agree with the amount the employer has paid over to the Revenue.

    The P.A.Y.E. method has worked extremely well for the last nineteen or twenty years, and would be an admirable means of channelling savings. I might add, in parentheses, that I advocated this scheme at a Conservative Party conference in 1955, and I hope that some notice will be taken of it this evening. The suggested system would be quite simple to operate. As I have said, each employee has a code number, and if he wanted to save an extra 5s., 10s. or £1 a week, according to his personal circumstances—and I emphasise that this would be a voluntary act by the employee—all he would have to do would be to ask his employer to change his code number.

    Let us take the previous example of the man in a code No. 35 and an income of £15. As I have said, his weekly tax is about £2 4s. If he wanted to save £1 weekly, he would go on to code No. 9 and his employer would deduct £3 4s. per week, which would show a saving of about £1 a week.

    The beauty of this scheme and one of the conveniences of it is that there is no extra work for the employer and, as I shall prove later, this is extremely important when we are trying to use the P.A.Y.E. machinery in order to help the economy. The Revenue, of course, would receive this money monthly and at any time during the year the employee could opt to return to his original code number. One of the essential elements of savings is that the saver must at all times have control of the money he has saved.

    Under the P.A.Y.E. machinery if an employee wished to go from code No. 35 to code No. 9—which would mean a saving for him of about £1 per week—and if he found during the fiscal year that, for one reason or another, he did not want to continue saving that £1, he would merely have to ask his employer to place him back on his original code number the following day and, from then on, he would pay the normal amount.

    Would the hon. Gentleman place any restraint on the chopping and changing about of code numbers too frequently? I am sure that he would wish to put some reasonable brake on a worker who might be just messing about with his code number from week to week. In most deduction schemes there is a minimum duration during which the deductions are to be made in order to discourage too frequent changes of mind.

    That is a valid point. I am not trying to avoid answering it, but I shall cover it later. I do not entirely agree that one should restrict the saver, for, as I have pointed out, there is no extra work for the employer. The hon. Gentleman the Member for Sowerby (Mr. Houghton) realises, I am sure, that it is easy to work out an employee's tax whether the code number be 35 or 9. If it is agreed that the employee should have control over his savings, it must also be agreed that he should have the right to revert to his original code number during the fiscal year.

    At the end of the year the annual return is sent to the Revenue and the Revenue checks all the calculations and if, as in the example I have given, it is found that an employee whose code number is 35 has, with an income of £15 per week, been using code number 9 for savings purposes, he will have saved about £1 per week. That is £52 in a year and, at the end of the year, when the Revenue has made its calculations from the annual return submitted by the employer and it is found that the man had overpaid by £52, the Revenue will issue a certificate of overpayment to the employee and that certificate must be encashable at any Post Office in the country.

    That action will convince the employee that at any time he can get the money he has saved, and no Government—and I am not suggesting that my right hon. Friend or any Chancellor would do otherwise—would take action to prevent the certificates from being encashable. I will not develop this part of my argument further because I am sure that hon. Members will remember that certain Inland Revenue issues are not always encashable.

    As for the criticism of this scheme, I have discussed this with employers, employees and various people who are interested in the savings movement. The employers have no criticism because, as I have explained, no extra work is placed on their shoulders and it is just as easy for them to work on the basis of a code No. 35 as a code No. 25. The employees have no criticism because during the fiscal year they can at any time return to their original code numbers. Where there may be criticism is in the delay that occurs at the end of the fiscal year, at 5th April, when the employees receive their encashable certificates from the Inland Revenue.

    As for criticism from the Inland Revenue that there would be extra administrative work involved by the necessity to issue encashable certificates to as many employees as took part in the scheme, I come back to the tremendous work that Lord Mackintosh has done with the National Savings Movement. The National Savings Movement at the moment runs a very good industrial savings scheme. I believe there are about 53,000 industrial savings groups throughout the country. They cover 3¼ million employees who save about £100 million a year.

    Here I come to the point that was made by the hon. Member for Sowerby about the possibility of employees chopping and changing about. Many of the industrial savings schemes are operated by means of deduction from wages, but the employee has the right at any time to get his money out. Of the £100 million saved in these industrial savings schemes, £80 million represents short-time savings. These may be for holidays, insurance policies—in fact, for a variety of reasons. Only 20 per cent., £20 million, represents what is known as long-term savings. It does not matter whether it is long-term or short-term savings; the fact that these savers have abstained from spending all of their income must help the economy of this country.

    I do not think that the industrial savings schemes can be maintained at their previous level. I say that because so many firms are so conscious of the organisation and methods approach, in which firms are exhorted and encouraged to be more efficient, that they feel that they cannot afford to have unproductive labour. I think there will come a time—indeed, I think that time has already come—when some firms will say, "We cannot afford to keep one, two or three people on the staff looking after the industrial savings group in our factory."

    We should also remember—and I trust that my right hon. and learned Friend will take note of this point—that the last graduated pensions scheme has put additional work on the employer. If there is to be any reduction in the clerical work done by employers, I am certain that the first to suffer will be the industrial savings groups. It is interesting to note that the figure of £100 million which is saved by the 53,000 industrial savings groups has not increased proportionately to the increase in incomes over the past few years. These industrial savings groups cover only 3¼ million workers in the country, whereas P.A.Y.E. affects 20 million workers. We should also remember that it is not an economic proposition for any employer to run an industrial savings scheme unless he has at least 200 employees. Hon. Members will agree that the bulk of the working population is employed in units of under 200, and consequently there is a whole field of potential savers who slip through this industrial savings scheme.

    As to the question of the delay in administration, the return which is made on 5th April by all employers is checked, and in the Inland Revenue offices, with 20 million returns to deal with, 20 million calculations are made. I cannot understand why the Inland Revenue does not use some sort of calculating machine to make these very simple calculations.

    Need we maintain collection districts for dealing with P.A.Y.E. analogous with the districts of inspectors of taxes? Why cannot we do for the collection of P.A.Y.E. taxes what we do for the National Insurance Fund and centralise the arrangements? If we centralised P.A.Y.E., we could then, perhaps, use computers to make all these calculations. The Treasury may say that computers cost a great deal of money—where should we find the money? If the scheme which I propose were a success, the money could easily be found.

    12 m.

    Let us assume that the scheme were successful and, over twelve months, there was a saving of £200 million more than there is now. The Revenue would be receiving this money month by month, by instalments, and £200 million accumulated over twelve months represents about £100 million from the point of view of interest. Under the scheme I advocate, the employee, the saver, does not receive any interest in the first saving year, but the Revenue will have had £100 million for one year interest free. This will mean that the Treasury will not have had recourse to the discount market for that amount. Treasury bills cost 4½ per cent., roughly, and 4½ per cent. of £100 million would represent a saving of £4½ million. I should have thought that a saving of interest of that kind would mean that computers could be introduced to make all the P.A.Y.E. calculations each year, and make them so that there would not be the delay between the end of the fiscal year and the issue of the encashable certificate.

    Why does the hon. Member propose that the saver, whom he wishes to encourage, should not have any interest? Why should it be an encouragement to the employee to save to be told that he will not have interest until the following year?

    I have the point covered, and I shall came to it in order, if I may. There is no interest for the first year, but on the deposit of the encashable certificate, under this scheme, the interest is back-dated to the previous 5th April. If the tax year ends on 5th April, even if we have computers to calculate P.A.Y.E. on a centralised basis, there is bound to be a delay of three or four weeks before the encashable certificate is issued to the employee. It would be unfair if, for that one month—it might be five weeks—the employee did not receive interest. I suggest in the new Clause that the interest should be back dated to the previous 5th April. That means that for one whole year the taxpayer does not have any interest on the £1 a week or whatever it may be that he has been saving each week. There must be some compensation for that.

    I hope I shall not be ruled out of order on this occasion. The new Clause I put down in Committee was ruled out of order because it would have made a charge on some fund or other, and, therefore, although I consider that the Post Office Savings Bank rate of interest should be 4 per cent., I have accepted the current rate of Post Office interest for the purpose of my new Clause on this occasion and I provide that the rate of interest should be that ruling at the time for Post Office savings.

    I entirely take the point that Post Office interest at 2½ per cent, is too low to be attractive. Because savers would not receive any interest for the first year, I suggest that, in order to give some compensation to them, the rate should be increased from 2½ per cent. I realise that the 2½ per cent. on a Post Office Savings Bank deposit is not merely a rate of interest. The Post Office says that it gives banking facilities. One can go to a post office in any town in the country and draw out £3, and, in a sense, one is getting banking facilities. If one banks with a trustee savings bank one can not only draw money out but can buy cheques and pay one's bills that way. In a sense, I suppose that the Post Office offers banking facilities, but it is stretching the argument to say so, because the facilities given to the general public are extremely meagre, except the convenience of being able to draw out £3 at any post office.

    I hope that the Government have in mind—I am sure they have—the advent of paying wages by cheque. I am sure that will come. Every Friday's payroll robbery adds weight to the necessity for paying wages by cheque. The Act recently passed will mean that people will come out of the Post Office; they will not be using the Post Office facilities, valuable as they may be. I would agree with the hon. Member for Gloucester (Mr. Diamond) when he says that we must have some extra fiscal incentive. I am sorry to put words in his mouth, for he did not actually say that; but I am sure that that is what he meant.

    I suggest a £24 exemption from taxation. My reason for that exemption was that the original Post Office Savings Bank interest of 2½ per cent. in six years gave an exemption of £15, and if the Post Office rate of interest went up to 4 per cent. it would give up to £24 exemption.

    It has been suggested to me that this would activate against other savings schemes. I do not take this point, because the scheme I am advocating is not at all in the position of any other savings scheme, because if it were successful, every April or May in any year we should have millions of savings in encashable certificates in people's hands. Then it would be for private enterprise to advertise suitably to attract those savings, whether wider share ownership—and I am glad that my hon. Friend the Member for Halifax (Mr. Maurice Macmillan) supports my Clause—or life assurance—I am glad that my hon. Friend the Member for Bradford, West (Mr. Tiley) supports my Clause—or unit trusts. It does not matter what sort of private enterprise savings it may be. Private enterprise must then make the approach to the employees in the April or May of any year. It is much easier to persuade a man to invest if he has money in his hand, than it is to persuade him to invest by mortgaging a future part of his income.

    I hope that the House and Ministers will agree with me that it is absolutely true to say that it is necessary for this country to save more and more money. P.A.Y.E. is a channel of savings, a regulating machinery. We must, of course, eradicate the manual work involved. It has been said that the psychological effect on the employee would be bad. I do not think so. If that were so, so many of the industrial savings schemes we have today would not be so successful as they are. I think, though, that the Government must give a lead in savings. It is essential to tell the population how desperately urgent it is for us to cut down on consumer demand. I think that this scheme would certainly increase the credit-worthiness of this country.

    I am sure that I should be ruled out of order if I were to talk about other methods of achieving credit-worthiness, but I hope that the Chancellor will look at this proposal sympathetically, and that he will modernise the Revenue through machines, computers and so on.

    It is said, and in some parts of the House it is said quite facetiously, that we have never had it so good. We have not, and in some cases we have had it too good. It is essential that we should save now and have it better in the future. If we could save and take £300 million, £400 million or £500 million out of consumer demand, it would transform our whole economy. This is an admirable way to channel savings and make saving convenient. Although quite obviously my right hon. and learned Friend could not introduce it this year, I should like him to set his experts to work on this. I am sure, despite what Treasury officials may say, that the Administrative difficulties are not insuperable. We must increase our savings. Even if the difficulties are there, we can overcome them and make sure that the Government give a lead towards new prosperity.

    The House owes it to the hon. Member for Nottingham, South (Mr. W. Clark) to say that the scheme which he has put forward seems on the face of it most interesting and to congratulate him on the clarity with which he has explained it and the interest which he has secured in the House for this suggestion. As far as I can see, nobody would disagree with the desire to encourage savings and particularly to make it easier to save regularly for those who have not necessarily a large amount to save. In that sense I could not agree more with the hon. Member that this would not conflict with existing schemes but rather, as he says, appeal to those potential savers who are not at the moment saving in industrial schemes because the machinery involved is too cumbersome for the small sums concerned.

    I find these all attractive propositions. There is the fact that the saver can feel that he is completely free to save if he wants to—and good luck to him if he does—and if he does not is free to change his mind. Administratively, the scheme could be worked extraordinarily economically. The hon. Member is concerned to save the Inland Revenue work, but he must not forget that when P.A.Y.E. was introduced all employers objected strongly because the work was put on the employers to do the business of collecting tax. As far as I am concerned, whether it is a civil servant or not a civil servant who does the work does not matter a great deal as long as no additional work is involved.

    I should have thought that with this method, whether it is put on the Inland Revenue or the employer, the work involved in collecting savings is less than under the present industrial schemes. Therefore this seems to me something to which the Government should give a sympathetic hearing. If a saver decides to change his mind and wants to have himself put back on his ordinary code, then automatically that very week he gets back from the firm all the savings accumulated in his name. There is no trouble of any kind. I should have thought that that was a great point in favour of the scheme.

    I should have thought that the hon. Member would not stick precisely to every detail. There might be opportunity to discuss, for example, the rate of interest and what part of the interest should escape taxation. At present it is £15 and one can see reasons for keeping it at that figure notwithstanding the logic of the hon. Member's argument for £24 or, as on the Order Paper, £25. I also imagine that some care would have to be given to the question of the security of the savings of the employee while they are in the hands of the employer and before they have been transmitted to the Revenue. That matter of security would require some attention. Subject to those minor points, I should have thought that the scheme ought to receive very sympathetic consideration indeed.

    12.15 a.m.

    I should be very pleased if at the end of this the Government were able to tack on an arrangement whereby the Post Office could operate a Post Office unit trust. Having agreed with the hon. Gentleman so far, I do not want to find a bone of contention with him, but he has been concentrating on a private enterprise savings scheme. I should be pleased if the Post Office could devise a unit trust scheme so that a saver could come along and say "I have £50. I do not know what to invest it in or how to go about it, but I understand that you have a unit trust in which this investment could be usefully and satisfactorily spread. Here is the £50. Please give me a unit certificate for that amount." That would be a satisfactory corollary to the scheme suggested by the hon. Gentleman which in itself is well worth considering.

    I support my hon. Friend the Member for Nottingham, South (Mr. W. Clark). The scheme commends itself to me for three main reasons.

    The first reason is that the whole plan is so simple and understandable to the ordinary person. Two or three times last week people came to me in my constituency and spoke about it. They were ordinary people, and they understood it. In a scheme of this nature simplicity is absolutely essential if we are to command the confidence of the ordinary men and women whose savings we hope to attract by the scheme.

    The second reason is that it is not only easy to understand but easy to operate. It makes saving very easy indeed, and far simpler than it is at the moment. If we want savings to flourish these days when people's time is so short and there are so many preoccupations, we must make it easier to save. The average person in his precious leisure has to keep up to date with his hire-purchase payments, and get his various licences—for dogs, radio and television sets, cars or motor cycles—and if we can make it easier for him to save by simply having his code number adjusted I think we shall go a long way in promoting national savings. If we adopt the scheme it will exchange the weekly visit to the Post Office when a person wants to buy two or three savings stamps for perhaps an annual visit when the annual savings certificate received from the P.A.Y.E. office is exchanged.

    Another reason is that putting the scheme over to the public will not entail a vast crescendo of publicity, which has been the case with so many of our savings schemes in the past. National savings schemes have had to be advertised considerably. Much of the savings achieved through premium bonds has had to be spent on advertising. There will be no need to invest in "Ernies". I understand that a slip will be put in everybody's pay packet once a year, and it will explain briefly and simply what has to be done to S.A.Y.E.—save-as-you-earn—and perhaps an annual reminder will also be put in pay packets.

    Whether this is a point which will lead to harmony in the home I do not know, because when the husband comes home at the end of each week and hands over the kitty to his wife, she may say, "Surely you are earning more than this," and he will only be able to pass over to her his pay slip, with the appropriate code number shown thereon. My right hon. and learned Friend may therefore think it necessary to introduce a simple guide to the understanding of code numbers for housewives in the home.

    The only possible objection which I have heard about this scheme when talking about it to several people outside the House, particularly one or two employed by the Inland Revenue Office, is that it is not the duty of that office to encourage people to save. We all know that only too well; that office carries out only too efficiently its present duty of extracting money from those who have been able to save, and I consider that the extra work of adjusting code numbers appropriately would be carried out most efficiently by the authorities. It may be outside the scope of their duties, but it is also outside the scope of my duties when, every weekend, I have to go home and act as an unpaid tax collector for the Inland Revenue Office.

    I conclude by emphasising what my hon. Friend has said: against the sombre picture of our national economy today it is more important than ever that every method of saving should be explored, even if it adds only a few million, and does not reach the total of £170 million annually that my hon. Friend envisages. I ask my right hon. and learned Friend not merely to say that he will look at the matter later and probably consider it in two or three years' time, but to agree to act now, in view of the essential difference that a few extra million pounds saved annually could make to our economy.

    What a pity it is that some of the most interesting debates come in the middle of the night. When I think of the time we spent earlier on on the question of wine vinegar it makes me realise how much more interesting it would have been to have discussed this ingenious scheme for voluntary deductions from pay—for that is what this Clause is. It is a proposal to require employers to operate a scheme of voluntary savings by deductions from pay, and the hon. Member for Nottingham, South (Mr. W. Clark) has outlined his idea how it could be done, both in principle and as to the machinery which should be employed.

    Of the value of deductions from pay there can be no question. Indeed, pay-as-you-earn rests upon the facility, the efficiency and the acceptance of deductions from pay. I am sure that no hon. Member would deny that without pay-as-you-earn our system of direct taxation of wages and salaries would have broken down long ago. It simply would have been impossible to collect the money in the old way, by two instalments, or even four—as there used to be years ago, in respect of manual wage earners. I venture to suggest that the courts of summary jurisdiction would be choked with cases awaiting a hearing if we were collecting money payable under Schedule E under the old method of direct payment to the Collector of Taxes.

    The Chancellor will be the very last person to underrate the value of deductions from pay as a means of collecting money which would otherwise be in amonnts too large to make it easy for people to pay all at once.

    This method of deductions from pay has proved most attractive to insurance companies, sports associations and National Savings societies. Some bodies are prepared to pay quite substantially for the privilege of having premiums and other payments deducted from the pay packets so valuable a method is it of collecting payments of that kind. I should think that the public service has probably got the longest catalogue of deductions from pay covering Income Tax, National Savings, Civil Service Sports Association, insurance premiums and so on.

    We on this side of the House were always grateful to Mr. Speaker Morrison for agreeing to deductions from pay of the contributions to the Parliamentary Labour Party Benevolent Fund, the contributions to which are £5 a year. When Mr. Speaker Morrison gave permission for deductions from pay we knew that we should never look back. That has proved a most efficient way of collecting money and made it possible to collect almost 100 per cent. from hon. Members on this side of the House. We on these benches appreciate the value of deductions from pay.—I think there is no reason to doubt that.

    The next question is, how shall it be done? What agency shall be employed? Here opinions may differ and there may be other ideas. The hon. Member for Nottingham, South is to be congratulated on being so full of ideas and working out many of them so carefully. He suggested that the pay-as-you-earn method should be used. I was pleased to hear the hon. Member for Harborough (Mr. Farr) say that Inland Revenue officials had told him that they felt it their duty to help people to save.

    I beg the hon. Member's pardon. I was listening carefully and I thought he said that they considered it their duty to assist people to save. I should not have disagreed with him if he had said that. It would show a high sense of duty and most of them have got that, but, since the hon. Member did not say that, I shall not pursue the point. I apologise for having misheard him.

    The hon. Member for Nottingham, South wishes the whole apparatus of pay-as-you-earn to be employed. I shall not take up the time of the House at this hour in going into the administrative detail and the administrative difficulties of that. I fear that they are far greater than the hon. Member suggested, even greater, I regret to say, than my hon. Friend the Member for Gloucester (Mr. Diamond) appeared to suggest. It would be absolutely necessary for the Inland Revenue to inform the employer of any change of code number. The contract between the taxpayer or saver and the pay-as-you-earn system would have to be a contract between him and the Inland Revenue because the Inland Revenue must supervise the employer in the deductions he makes or the repayments of the deductions he makes. It would not be fixed up privately between the saver and his employer if it were to be taken into the system of Income Tax deductions under pay-as-you-earn.

    That is an important point. It would not be possible for a saver to get his money back merely by notifying his employer that he was to change his code number; it would have to be done through the agency of the Inland Revenue so that it would know at the end of the year exactly what he was accountable for.

    12.30 a.m.

    I do not want to become too heavily involved in the detail but I wanted to give an illustration of some of the difficulties which we are bound to encounter. It is no good pretending that it would not mean more work for the employer. If an employer with 10,000 workers had 5,000 changes of code number a week he would soon state whether there was more work. Every time a change of code number is notified, some clerical or other operations are involved. This proposal would therefore have to be discussed with the employers' organisations. I do not think that it would be quite necessary to discuss it with the trade unions, although obviously consultations with them would be desirable, because the extra burden would fall on the employers, and already we hear a great deal from them about their unpaid labour as tax collectors and collectors of the graduated National Insurance contributions.

    The staff of the Inland Revenue would not like the proposal a bit. They never do; if there is any extra work to fall on them, there is usually a good deal said about it in the Inland Revenue. As hon. Members know, they are already overworked. They are the most harassed body of civil servants in the land, and they want no more of it than they can possibly help. All these things have to be accommodated within the scope of the resources of administration, and if the House decided that it should be done in this way, it would make the necessary provision for it to be done.

    I do not wish to pour cold water on this idea. When I was first asked about it and when the hon. Member first put the new Clause on the Order Paper, I said that I was attracted to the idea, and we on these benches give it our general blessing and hope that the Chancellor will consider a scheme of this kind.

    Whether it is desirable to get it mixed up with Income Tax is a matter for considerable argument. Would it prejudice the scheme to have it mixed up with Income Tax deductions, which are not all that popular? Employees might think that there was some catch in it. They might ask, "Is there to be another postwar credit at the end of the story? Will the Chancellor hang on to the money and say that we cannot have it until the economic situation permits?" The hon. Member made it crystal clear, as far as he could, that there would be no such thing. All I say is that we must not overlook the possible disadvantage to the scheme if we mix it up with Income Tax.

    It could be that a scheme for voluntary deductions from pay for saving could be operated apart from Income Tax. In some respects it might be simpler, because at least it would enable a worker to specify in terms of money how much he would like deducted from his pay packet, whereas by having to use this P.A.Y.E. system he has this little involved calculation: if he reduces his code number by two or three points, how much money will that mean, or if he wants to contribute so much money, what does that mean in terms of code number? The hon. Member is assuming that the workers understand this as clearly as he does, but there is much confusion and difficulty about these deductions from pay under P.A.Y.E. We must be careful not to prejudice both systems by bringing them together.

    I raise these points in a constructive way, at the same time giving general encouragement to the idea. There is no doubt—and this clinches the matter from our point of view on the Opposition benches—that if this system could be applied in some form or another, more savings would result. I am convinced of that. It is possible to persuade people to sign an authority for deductions for worthy causes of this kind and they will stick to them, whereas if people go round week by week trying to collect it is by no means so easy. We do not necessarily commit ourselves to the use of pay-as-you-earn or, if pay-as-you-earn is used, to the precise type of scheme which the hon. Gentleman has in mind, but we are certainly of opinion that, having regard to the need for facilitating personal savings, we should encourage the Chancellor to consider any idea which offers possibilities of an efficient and acceptable scheme, which we are sure would bring him much more in savings than all the efforts which have been made so far.

    I want to give my hon. Friend the Member for Nottingham, South (Mr. W. Clark) vocal as well as moral support. It is refreshing and a great thrill for a Member on either side of the House to launch a new idea, even at 12.30 a.m. My hon. Friend must sustain himself over the next few years by the example of the hon. Member for Sowerby (Mr. Houghton), who told us recently that for fifteen years he had proposed ideas at the Dispatch Box and was yet hopeful of being successful. I hope that it will not be fifteen years before this idea is adopted.

    We are grateful for the massive amount of time my hon. Friend has also grateful to him for the clear way in which he expressed it to us. Successive Tory Chancellors have been able to compliment the savings movement year by year on the greater savings which have been made. Then the Front Bench leaves it there. In these days when great pressures are being made on people to spend their earnings in so many ways, it is essential that the saving movement should be revived each year, just as many methods of saving in private enterprise are revived by new ideas. We should not leave it to stew in its own juice and just hope for the best. This could revolutionise savings.

    When this scheme was first mentioned in the Press, it caused a good deal of comment in the West Riding. Many young people were interested in it. We should make an especial effort to encourage saving amongst young people. They are invariably left out of pension schemes in their firms until they are aged 21. Whatever may be said about the present wage levels, they have vastly increased since I was 18. A greater attack is being made on the earnings of the young than is being made on the earnings of people of mature age.

    This scheme would attract many young people into the savings movement for the first time. We should benefit for the rest of the century. As the hon. Member for Sowerby said, it must be made clear to whoever comes into the scheme that they control the money. People resent all the deductions which are made from their wages, whether they are by way of contributions to private schemes or for tax purposes. A good deal of propaganda would be necessary at the inception of the scheme so that people knew that they controlled the money. I hope that my right hon. and learned Friend will consider this scheme. I hope that we shall be able to launch a scheme of this sort next year, because my hon. Friend the Member for Nottingham, South does not deserve to be fobbed off with some sympathetic soft noises from the Front Bench.

    I join in the congratulations which have been expressed to my hon. Friend the Member for Nottingham, South (Mr. W. Clark) on his extremely thoughtful speech on a subject to which he had obviously given a very great deal of attention. I first heard that speech in a somewhat shorter form nearly six years ago at the party conference. I was very glad to hear it again tonight. The whole House will particularly have welcomed hearing a new subject in these debates, because it is no offence to anybody to say that the same repertory of topics—tin mining; personal allowances; Easter offerings, until this year—tend to occur again and again.

    We have had plenty of that. We therefore have all the more reason to welcome the imaginative and interesting approach of my hon. Friend. My hon. Friend is absolutely right in the importance which he and his hon. Friends have attached to the subject of encouraging savings. It is absolutely true that while on the one hand, in the out-turn, as Lord Keynes said a quarter of a century ago, savings and investment must balance, on the other hand it is also true that unless decisions to save match decisions to invest, we are faced with the twin problems of excess demand, a balance of payments problem and a fall in the value of money.

    As my hon. Friend said, quite rightly, it is no paradox to say that on the one hand we believe in prosperity but, equally, we attach real importance to savings. If we could save a slightly bigger proportion of income and plough it back, as it were, into investment at home—and investment abroad—in the long run the improvement in the living standards of people would be very considerable.

    I would make only one or two more very general comments. I think that my hon. Friend's example of tobacco was not the very best that he could have chosen. I think I am right in saying that if one looks back to the days of 1947, when the tobacco duty was drastically increased, it was then advocated by Ministers, partly on the ground that it would directly save imports and help the balance of payments. I do not think that it had those effects, but the disinflationary effect of a really sharp increase in the duty was very great. However, I certainly agree with a good deal of what my hon. Friend said.

    This interesting Clause would allow any employee from the current tax year onwards to have his P.A.Y.E. code number reduced so as to increase the tax deducted from his earnings. As I understand my hon. Friend's proposal, the employee could at any time revert to his true code number. After the end of the year, the Revenue would issue a certificate of the tax overpaid, which would be encashable at any post office, but if instead of being drawn it was deposited in the Post Office Savings Bank it would earn the current rate of interest from the preceding April, and the first £25 of interest would be free of tax. The maximum saving in any one year would be 10 per cent. of the gross income, or £100, whichever was the less.

    The hon. Member for Sowerby (Mr. Houghton) said, quite rightly, that the intent of the scheme was to encourage direct, voluntary savings from earnings. I rather agree with him that it is a matter for consideration. It is one on which this House should not take too easy a view; namely, whether it is a good thing for this voluntary deduction from earnings to be directly connected with the tax machine. I will not add to what the hon. Gentleman said—he put his remarks fairly and moderately—but we must all ponder the point whether, psychologically, that is a good thing.

    I must say to my hon. Friend that the more direct point is that the purely administrative difficulties of what he proposes would be very considerable, whether one considers employers, employees or the Inland Revenue. I do not want to speak at length, but I will say a word about each of those three categories of people in turn.

    Do not ever let us forget that the employers already carry a pretty substantial burden through the operation of P.A.Y.E., and, more recently, through the new graduated National Insurance Scheme, and I think that they would almost certainly be very reluctant to take on extra work. I shall not develop that point, but one is bound to admit that a time when we have just brought in a graduated insurance scheme would be a very difficult time for employers to taken on quite considerable new administrative work. Nor must we think too much just in terms of the big companies. There are, of course, many big companies that could manage the extra work without difficulty. It would be a very different thing for a good many of the smaller ones.

    12.45 a.m.

    Let us look now at the position from the point of view of the employee. I am not quite sure whether, in practice, this scheme would be easy from his point of view. He would often be unable to predict the amount to be saved by a given change of coding, because it would depend on the level of earnings and marginal rate of tax. Only the more sophisticated workers would, perhaps, understand how it works. There might also be difficulties and confusion for the employee when his code number changes in the normal course of the year for taxation reasons. I think that to these difficulties of predicting in advance the effects of coding changes might be added the difficulties of enforcing the limits that my hon. Friend the Member for Nottingham, South has in mind.

    Further, I have a feeling that to introduce a scheme in any way like that proposed by my hon. Friend would cost the Exchequer a certain amount of money. I will not dogmatise about that, but I think that that would be so at the end of the day. The hon. Gentleman the Member for Sowerby made the point that the scheme would result in extra work for the Inland Revenue. I am being only realistic in saying that it would require as much as several thousand extra staff.

    Income tax is an annual tax and the P.A.Y.E. system runs on an annual basis. Employers send in their returns to the Revenue at the end of each tax year and then, of course, as quickly as possible, assessments are made. Since over 22 million persons are coming within the P.A.Y.E. machine, the sorting out of information after the end of the year and the checking of liabilities is already a big job and in some cases it is not completed for some time after the end of the year.

    As I understand the intention of the proposed new Clause, it is that before the annual returns have been processed for tax purposes, a calculation would have to be done in each case to ascertain the tax that would have been deducted under the code number given to an employee by the Revenue. All that, of course, would involve a good deal of extra work.

    The hon. Gentleman seems to be approaching this matter from one side only and is not considering the benefit of the savings. Can he give an idea of a comparable number of man-hours—never mind which men—for a saving of the sort of money possible under this scheme and the savings possible from any other scheme?

    I could not make such a calculation on the spur of the moment. Any such calculation would not have very much value. I do not in any way want to pour cold water on the proposal under discussion, because my hon. Friend the Member for Nottingham, South has put before the House tonight a thoughtful scheme, and whenever that happens it is, I am sure, the wish of hon. Members that it should be acknowledged.

    Before the Government could commit themselves to this principle we should think carefully indeed about the administrative implications involved. We should have to consider the possibility of getting considerable extra savings and not just getting a switch of savings. We should have to consider exactly how the scheme appears in the eyes of both employers and employees, for whom the scheme is principally devised.

    I can assure hon. Members that my right hon. Friend the Chancellor fully agrees with the importance of trying to find new ways of encouraging voluntary saving in such a manner as not to put a great burden on the Exchequer. The Budget of my right hon. Friend the Prime Minister in 1956 devised a number of new ideas—not only premium bonds—and the present Chancellor would certainly wish to respond to the initiative of my hon. Friend the Member for Nottingham, South by giving an undertaking to have a good look, between now and his next Budget, at all the possibilities that present themselves in this field.

    I would not wish to say any more about my hon. Friend's proposal, but I hope that following the general undertaking that I have given he might be ready to withdraw his Clause.

    May I put a question arising out of some words that the Financial Secretary used, which might give rise to misunderstanding? I think it was an ambiguity and possibly a slip on his part. Since the Chancellor is going to look at this matter between now and next year, it is desirable that the Financial Secretary should clear up what he said lest there be a considerable number of hopes raised unjustifiably. As I heard the hon. Gentleman, he said that part of such a scheme would involve at the end of the Income Tax year, early in April, a certificate being issued showing the total amount deducted in the course of the year, that certificate then being paid into the Post Office Savings Bank and attracting interest at whatever is the standard rate—at present it is 2½ per cent.—retrospectively to the preceding 5th April.

    It will be clear, I think, that if that were done literally in those terms it would be a very generous rate of interest indeed, because the amount of money accumulated by the end of the year, on the assumption of equal deductions over a period of time, would not justify the payment of the whole rate of 2½ per cent. on all of them back to the previous 5th April.

    I take it that the hon. Gentleman meant—and certainly I think the hon. Member for Nottingham, South (Mr. W. Clark) made this clear—that it would not be the whole amount that would carry this rate of interest.

    If the right hon. Gentleman reads the proposed Clause he will see that at the end of the fiscal year the Commissioners of Inland Revenue will issue an encashable certificate. Then the Clause goes on to say that interest accumulates from the preceding 6th April. But the certificate cannot be issued until after the end of the fiscal year, which is 5th April. So if it is issued seven days later—that is. 12th April—interest is back-dated to 5th April and the certificate will earn only seven days' interest.

    I am grateful to the hon. Gentleman. Interest, in fact, proceeds only from the date of the end of the financial year and not from the beginning of the previous financial year, if I understand the hon. Gentleman correctly. I am glad that the hon. Gentleman cleared the point up because I think there might have been that misunderstanding.

    If I may have the leave of the House to speak again, since the right hon. Gentleman mentioned me, I was simply endeavouring to give what I hope was an accurate account of my hon. Friend's intention, and I am very glad that my hon. Friend has further cleared the matter up by giving in his own words what he intended by this Clause.

    In view of the undertaking given by my hon. Friend, I beg to ask leave to withdraw the Motion.

    Motion and Clause, by leave, withdrawn.

    Clause 1—(Television Advertisement Duty)

    I beg to move in page 2, line 13. at the end to insert:

    "and any amount recoverable under the foregoing subsection by the person providing the programme from the other shall (subject to any agreement to the contrary) be recoverable by the other from any person liable to him' in respect of that payment."
    This Amendment meets a small point which was made in Committee by my hon. Friend the Member for Crosby (Mr. Graham Page). The House will remember that, as drafted, Clause 1 permitted the programme contractor to recover the amount of duty from the person, who is usually the advertising agent, who places with the programme contractor the order for the broadcasting of the advertisement, but it did not allow the advertising agent in his turn to recover the duty from the advertiser.

    I undertook to look into this matter, and we found that, despite his name, an advertising agent is not in law the agent of the advertiser who employs him, and consequently he could not legally recover from the advertiser an unexpected increase in the amount of duty.

    The Amendment accordingly gives an agent the formal legal right to pass on to his customer any variation in the amount of the duty. This puts him in the same position as any merchant who has on hand an uncompleted contract for goods subject to Excise Duty or Purchase Tax at the time there is a change in the rate.

    Amendment agreed to.

    Clause 2—(Rebate On Heavy Oils)

    I beg to move, in page 4, line 12, at the end to insert:

    (8) Subsection (2) of this section shall not apply to any oils if the Commissioners are satisfied by such evidence as they see fit to require that the following conditions are fulfilled, that is to say—
  • (a) that at the time of the removal of the oils from the site referred to in that subsection, the site was in the sole occupation of a person using it wholly or mainly for the storage of hydrocarbon oils for himself as a user of such oils (companies of which one controls the other, or which are under common control, being regarded as one person for the purposes of this and the two following paragraphs, if they together occupied the site); and
  • (b) that the oils in question have been or are to be applied by him to his own purposes as such a user; and
  • (c) that not more than one-quarter of the heavy oils delivered to him in the twelve months preceding the relevant time has been or will be applied otherwise than as aforesaid:
  • Provided that where the oils in question have not been applied as aforesaid before the time when the repayment of rebate would fall to be made, rebate shall be repayable in respect of them unless the person liable for the repayment undertakes, if so required by the Commissioners, to satisfy the Commissioners of their being so applied or, in default, to pay the amount for which he would have been liable in respect of those oils apart from this subsection, and gives such security in that behalf as the Commissioners require.
    This Amendment exempts certain holders of stocks of heavy oils who are primarily users of oils and not dealers in oils, from the liability to pay, in effect, the new duty of 2d. per gallon on oils which they had in unbonded storage on Budget day. When the matter was considered in Committee, my hon. Friend the Member for Preston, South (Mr. Green) moved a series of Amendments to omit altogether the provisions of Clause 2 so far as they related to the repayment of rebate on stocks of heavy oil. My right hon. and learned Friend, while not accepting my hon. Friend's case for complete exemption of all stocks, agreed that there was merit in the case so far as it related to stocks purchased by and delivered to consumers for their own use, and undertook to re-examine the matter before Report.

    I think that the Amendment is self-explanatory. There are three conditions and a proviso. I do not think that any words of mine could better explain the matter than those that appear on the Notice Paper.

    Were he able to do so, my hon. Friend the Member for Preston, South (Mr. Green) would wish to express his thanks to my hon. Friend for the concession he has made on this important point. I extend thanks to the Economic Secretary on my hon. Friend's behalf.

    This seems to relate to a person who is a user of oils for his own purposes. I do not understand paragraph (c). Why should there be an exception if up to one-quarter of the

    "oils delivered to him in the twelve months preceding the relevant time has been or will be applied otherwise than as aforesaid"?
    There appears to include not only the type of oil which the hon. Gentleman referred to in moving the Amendment but also what can be a quite considerable quantity of oil—we are dealing with fairly large quantities here, as I understand it—which would not fall within the intention of the Amendment. Perhaps, with the leave of the House, the hon. Gentleman could explain why paragraph (c) is required.

    If I may, by leave of the House, speak again, the explanation is this. We did not want to put to the House a provision which would be too restrictive and too rigid. As the hon. and learned Member will note from paragraph (c), the Amendment does not require the user to use for his own purposes 100 per cent. of the oils which he holds in stock. It requires that evidence should be given to the Commissioners of Customs and Excise relating to the year preceding Budget day that the person concerned is mainly a user and not a dealer. When I say "mainly", I mean to the extent of 75 per cent. This is really to cover the case where a person is obviously, in normal parlance, a user of oil, not a dealer, but he may not, in fact, use part of the oil himself.

    1.0 a.m.

    I think that the important point is that the Amendment is so worded that it relieves the user of the repayment liability only on such oils as he does use himself. In other words, paragraph (c) prescribes a criterion which, if satisfied, brings the person within the ambit of the Amendment; but, that having happened, the person concerned is relieved of liability only in respect of such oils as are in the end used by himself.

    Amendment agreed to.

    Clause 8—(Surcharges Or Rebates Of Amounts Due For Revenue Duties)

    Amendment proposed: In page 6, line 8, after "subsection" insert:

    "shall not be made before the end of a period of three months commencing on the date of the passing of this Act and".—[Mr. Houghton.]

    For reasons which I do not think it is necessary for me to explain in great detail, I beg to move,

    That the debate be now adjourned.

    Question put and agreed to.

    Debate to be resumed this day.

    Railways (Barnard Castle-Penrith Line)

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

    1.2 a.m.

    I rise to represent to the Minister of Transport the very strong feelings in the North of England against the proposal to close the Barnard Castle-Penrith railway line. So persistent and vocal has been the opposition to the proposal that, although the British Transport Commission brought its recommendations to the North-East and North-West Consultative Committees in the early days of 1960, it has not yet been able to gain a favourable decision from all the Committees, but by a process of attrition—not argument—the B.T.C. is wearing down opposition. Even before the Central Committee considers the recommendations of the North-East Committee at its meeting on 11th July the B.T.C. has proposed the closure of a connecting line, West Auckland to Barnard Castle, and I understand that it is having staff discussions with the object of closing the Middleton-Barnard Castle branch.

    This is the sort of piecemeal approach to a major social and economic problem to which four county authorities, eight district councils, five amenity interests, trade unions, chambers of trade, one of the principal freight customers, and many members of the public, including most of my constituents, strongly object. The objections are in no way party political. I have the support of the hon. Member for Richmond, Yorks (Mr. Kitson), the hon. Member for Darlington (Mr. Bourne-Arton), the Liberal candidate for Bishop Auckland, and most of the northern Members of Parliament. I hope that the Parliamentary Secretary will find time for a conversation on this subject with his hon. Friend the Member for Westmorland (Mr. Vane).

    That my constituency has taken the lead in resisting the closure is perfectly natural. The closure of the main line—this is not a branch line—will lead inevitably to the closure of two branches in the constituency, will cause unemployment and social distress, and will adversely affect the measures being taken by the Board of Trade to bring industry to the area. Parts of Westmorland, Cumberland, the North Riding and parts of Durham will suffer as well.

    What is so regrettable is the inadequacy of the consultative machinery to decide an issue so complicated and with such widespread ramifications as the closing of this main line. How can, to quote the consultative committee's handbook,
    "busy people who will give their unpaid services only so long as they feel they are doing useful public work"
    find the time to unravel the profit and loss account of a section of the railway system? Perhaps some of them have doubts as to how far closing down railways is "useful public work."

    In any case, the Select Committee on Nationalised Industries dealing with British Railways has criticised severely the imprecise accounting methods used by the B.T.C. Even if the profit and loss account were capable of greater precision, two factors are unknown, namely, the loss to railway revenue through customers ceasing to use the more awkward services left, and that element in the more profitable main lines which has originated in the line to be closed and which will in future no longer use the railway at all. It is probable, for example, in this case that one of the prin- ciple limestone transporters will ultimately put all his traffic on the road. Certainly there are thousands of more potential summer passengers over this most scenic line if the B.T.C. would only go after the traffic.

    Considering the inconvenience of the timetable the service is well patronised in the summer. Instead of encouraging passenger traffic, as the North-East and North-West Consultative Committees' meeting jointly at Carlisle recommended in March, 1960, the administration has been unenterprising and pessimistic. What is certain is that consultative committees not the staff or the machinery either to discuss the profitability of a line or adequately to examine the railway's financial case. At the meeting on 16th January the consultative committee thought that the line was probably operating at a profit, and several important witnesses, notably the Clerk to Cumberland County Council, felt that this might be so, but the central committee prevented all possibility of a period of enterprise on the line showing a profit by recommending the diversion of the freight traffic via Carlisle and Newcastle and asking that closure should be considered as soon as the diversion arrangements were satisfactory. Once that happened the meetings of the consultative committee to consider the passenger service were dealing with only one side of the problem and naturally a line built to deal with freight and passengers is hardly likely to pay if the freight is cut off.

    I understand that the North-East Consultative Committee offered valuable advice to the British Transport Commission on economies in running the line. It was originally unconvinced that the 60 extra miles of the freight diversion was an economic proposition and it thought that the withdrawal of the passenger service could not fail to create hardship. I believe that the committee initially supported my view that the retention of the railway service was a matter of importance to those who were seeking with Government aid to revitalise the industrial life of South-West Durham.

    It is at this point that I ask the Minister of Transport to offer the British Transport Commission a subsidy for the line. The Report of the Select Committee on Nationalised Industries states the principles clearly in paragraphs 421 to 425 as follows:
    "… the consideration of direct profitability is not tie only one which applies in this case. Because of the cost of the roads, and of the congestion on them, the national interest may require railway services which do not in fact directly pay for themselves, but which may cost the nation less than the alternatives.
    In some cases, there may be a third and different consideration—one of social need. A service may be justified on other than economic grounds, because for example the less populous parts of Britain might otherwise be left without a railway service. Account may, in other words, need to be taken of social considerations.
    … if decisions are to be taken on grounds of the national economy or of social needs, then they must be taken by the Minister, and submitted by him for the approval of Parliament.
    Furthermore, if Parliament is to specify that certain services should be undertaken, despite the fact that the Commission cannot profitably undertake them, then the additional cost of them should be provided, in advance, out of public funds."—
    "In advance" in this case could hardly apply—
    "If subsidies of this kind are to be paid to the Commission, then they should be paid for specific purposes, and they should be paid openly."
    The Minister should state tonight that the maintenance of this line should for the time being come out of the general subsidy given to the Transport Commission and that he will at once discuss with the Commission what amount of subsidy would be necessary to run the line in future.

    The Commission says that in the last year before the freight was diverted the revenue was £378,000 and the expenditure £418,000. That was a particularly bad year for traffic. Moreover, evidence from many reliable quarters to the North-East Consultative Committee convinced it at one time that the Commission had not made all the economies it could. Therefore, given economies, enterprise, and better steel and coal trade, the £40,000 deficit could be considerably reduced. Indeed, the cost to the Ministry of Transport would be much less than the indirect losses caused to private individuals and the direct costs which will be borne by other Government Departments arising from the closure.

    The Transport Commission maintains that it must now spend some capital sums on this line. It seems most unfair to us in the North that this part of England should continue to be starved of capital expenditure while millions of pounds are spent on electrifying London suburban lines where, even before, there was a reasonable service. I give as one example the Bishop Stortford-Liverpool Street electrification. I understand that the capital expended on that electrification has caused a land boom. Are the Government content to let land speculators take most of the profit that an improved nationalised industry brings to Hertfordshire and Essex whilst, for lack of a much smaller sum of money, there would be damage to the livelihoods of the hardworking farmers, hotel-keepers, miners and quarrymen of the North of England? Neither the local nor the central consultative committee can decide on this first priority. It is a matter for the Government.

    I should be surprised if any of the West of England services, west of Exeter for example, are run at the Commission's conception of a profit. Is it proposed to leave Cornwall and Devon without a railway at all? If profit is the sole criterion, these lines are as disadvantageous to British Railways as the Stain-more line. Certainly the North of England feels that it has as much right to see the Pennine line maintained as any other region has to see its lines maintained.

    If the line is closed, irreparable damage will be done to the economy of South-West Durham and parts of Cumberland and Westmorland. In emergencies—such as prolonged snowstorms or military evacuation—avoidable hardship and loss of life will be inflicted on the Pennine farming communities and the Tees-side urban population. Emergencies apart, more heavy traffic will use the dangerous A.66 road, and more damage, injuries and deaths will result. In 1958 and 1959 15 people were killed and 92 wore seriously injured in 440 accidents on this road.

    Thousands of city dwellers in South Durham and North Yorkshire will be deprived of excursions into the Pennines and Lake District, and damage will be done to the tourist trade of Teesdale, Weardale, Kirkby Stephen and the Lakes. This is particularly irritating when the Barnard Castle Urban District Council and Rural District Council, encouraged by the North Eastern Industrial Development Association, are making special efforts to attract more visitors. This is very commendable from the point of view of local government cooperation in doing something for the area. The Friends of the Lake District regard the closure as an unjustified diminuation of the accessibility of the National Park to Tees-side.

    The North-East Consultative Committee must have had a bad conscience about the difficulties which would be caused by the proposed alternative bus service when making the recommendation that the buses should have trailers attached to carry perambulators, hikers' baggage, etc. The local people complain now about the inadequacy of the existing bus services. One trouble about the offer of an alternative bus service—as the Parliamentary Secretary well knows—is that if the bus company decides after a while to cut and then later to close the service, it cannot really be stopped from so doing.

    I cannot help contrasting the difference in procedure when the Commission operates through the medium of its annual Private Bill Committee with that of the consultative committees. At the second meeting I attended of the North-East and North-West Consultative Committee, the witnesses were heard in a most haphazard fashion. Objectors were bundled through their evidence in a most unseemly fashion. Commission witnesses hurled bus time tables and financial data verbally at the Committee in a way that effectively prevented any counter-argument or cross-examination. Moreover, as one member of the consultative committee remarked to me in the corridor, "You never know where the B.T.C. men are. They seem to be on the committee and witnesses as well." It is true that the central committee gave the deputation from the objectors a most patient and courteous hearing, and did much to erase from their minds the haphazard methods adopted by the North-East and North-West Committees earlier.

    But compare the procedure before the Commons Private Bill Committee. I was a member of the Committee that considered, among other matters, the Commission's proposal to close the Tilbury-Gravesend Ferry when the Dartford Tunnel was finished. Not only did the Commons Committee compel the Commission to keep the vehicular ferry open an appreciable time after the completion of the tunnel, but it also insisted on the Commission making adequate arrangements on the passenger ferries for a wide variety of travel apparatus—mopeds, perambulators, etc. What is sauce for the Kent and Essex goose ought to be sauce for the Durham and Westmorland gander. If it is necessary to maintain a ferry for the convenience of Kent and Essex long after a tunnel is available, surely the people of Durham and Westmorland are not to be deprived permanently of such a vital route as this?

    I appeal to the Minister to use his power not just to maintain this passenger line but to instruct the Commission to run this line—freight and passenger—as one efficient working unit. The Government are spending millions on subsidising the Cunard liner; surely they can invest a few thousands on maintaining and improving a main line railway which the North of England regards as essential to its well-being.

    1.15 a.m.

    I am most obliged to the hon. Member for Bishop Auckland (Mr. Boyden) not only for having been kind enough to give me advance notice of some of the points he proposed to raise tonight but also of putting his case in a very moderate form. I will try to give him what answers I can to the points he raised, but I must begin by saying that I appreciate the feeling aroused in the North and North-West by the proposals of the British Transport Commission for this railway line. The details of these proposals are somewhat complicated, and at this late hour I hope that I may be forgiven if I do not try restate them. I am sure that all hon. Members in that part of the world know what they are.

    I know that they have led to a great deal of local feeling, but, whatever may be the views held as to their merits, I do not think that anyone can deny that they have been under the most searching examination by the consultative committee machinery, and a very thoroughgoing review over a period of eighteen months. At this point I want to make it clear that at the present stage I can express no opinion whatever on the merits of the Commission's proposals to close this line. The current position is that in January last a joint session of the Transport Users' Consultative Committees for the North-Western and the North-Eastern areas recommended by a majority that the Commission's proposals for the withdrawal of passenger services should be approved. Freight services had already been diverted to other lines to see if these could handle the traffic satisfactorily.

    Under Section 6 of the Transport Act, 1947, the area committees are required to send their minutes and conclusions to the Central Transport Consultative Committee. The central committee reviewed the conclusions of the area committees on this case last March and referred the matter back to the area committees for consideration of certain matters and for further recommendations to be made. I understand that the area committees have already considered this reference back. On receiving their further report the central committee may make a recommendation to the Minister of Transport, and it is not until then—and only then—that under the provisions of the Transport Act my right hon. Friend is put in a position where he could exercise his powers to issue a direction to the Commission. That is the legal position. For these reasons, therefore, these proposals of the Commission must be considered by my right hon. Friend as still within the consultative machinery which Parliament has laid down. The House will therefore appreciate that it would not be proper for me to comment on the merits of these proposals one way or another.

    In arriving at any decision to exercise his powers my right hon. Friend would take into account the views expressed by everybody, both in this House and outside. I cannot enter into a detailed discussion of the merits of a case which is still going through the statutory consultative procedure, but there are some general comments that I should like to make in relation to branch line closures and which I think are relevant in this case. I can put them in a somewhat interrogative form.

    The first question, which is often asked, is whether the economic and strategic importance of railway lines is properly considered before they are closed. This is a matter which the hon. Member himself raised in the House on 3rd February, 1960, in a Question to my right hon. Friend, and I should like to repeat what my right hon. Friend then said:
    "Proposals to close lines are widely publicised and the Consultative Committee procedure permits full account to be taken of the value of a line to trade and industryֵIndustrial and commercial undertakingsֵmay make representations to the B.T.C. or to the appropriate Transport Users' Consultative Committee."—[OFFICIAL REPORT, 3rd February, 1960: Vol. 616, c. 990–1.]
    Government Departments are of course informed and can raise objections if they wish, and any potential defence interest to which the hon. Member referred in this case would of course be taken into account by the Departments concerned.

    Another question which might be asked can be phrased in some such way as this: "It is said that you are modernising the railways. You hope to regain traffic and make the system pay. Is not it possible that the lines which you are now proposing to close will ultimately carry enough traffic again? Even if they never become sufficiently profitable on their own account, is it not at least possible that when the railway system has been modernised, profits on the main routes will be sufficient to make up for the secondary and branch lines?" If I understood him aright, the hon. Member asked that question again tonight. The answer is twofold. First, before it proposes to close a line, the Commission seeks every possible way of making it yield a proper return. In suitable cases it tries out modern equipment such as diesel trains in place of steam. The Commission not only looks at the results to be expected from using improved equipment under present conditions: it tries to assess the future trends of traffic as well.

    That is the first leg of the answer. The second leg is this: we in the Ministry of Transport have to look at these problems in the light of the present financial position of the railways and the targets of viability which are being set for the future. The House knows that the present position is extremely serious. Losses are continually accumulating. British Railways cannot just sit tight and do nothing in the hope that somehow, somewhere, some traffic will turn up. Recently its Report for 1960 was published. It shows a revenue deficit last year of over £100 million. Those are the losses which the taxpayer has to bear out of taxes. A state of viability will be hard enough to reach even without the burden of uneconomic services that have no prospect of ever being anything else.

    The hon. Member made the suggestion again tonight that we should consider a subsidy for this particular line. I shall not break my self-imposed rule and discuss the merits. I beg him to look at this request for subsidy, which I assure him would be repeated many times over in practically every part of the Kingdom, against the background of the fact that the taxpayer is already subsidising the railways to the tune of £100 million a year. I should not like the hon. Member or anyone to imagine that I am leading some kind of crusade against branch lines. It is no matter for anyone to rejoice over when a railway line has to be closed. Least of all does it give any satisfaction to railwaymen who have operated and managed it and taken a pride in it. No one likes to have to bow to the inevitable or to admit defeat. I realise how local people may feel who, besides a natural sentiment of regret at the passing of an era, may be genuinely put to trouble or inconvenience by the need to find other means of transport, but I must stress that at a time when the resources of the nation are so fully stretched it is nothing short of folly to try to keep in being uneconomic and inessential services for the benefit of a few who can be or are already being adequately provided for in other ways.

    I remind the House of what the Prime Minister said on 10th March last year. He said:
    "The life and trade of the nation require a railway system, but it must not be allowed to become an intolerable burden on the national economy."
    He said in the same statement:
    "… the public must accept the need for changes in the size and pattern of the industry This will involve certain sacrifices of convenience, for example, in the reduction of uneconomic services."—[OFFICIAL REPORT, 10th March 1960; Vol. 619, c. 644–5.]
    The House will remember that in paragraph 4 of the White Paper on the Reorganisation of the Nationalised Transport Industries we have restated these principles. It is our duty to go on bringing home to the public the gravity of the financial position. In the circumstances, I suggest that it is up to all of us to weigh very carefully the consequences of anything we do which may add to the difficulties of those who are doing their best to cut down costs in any direction.

    I have said this much because I do not want to hold out to the hon. Member or anyone else any false hopes. But I recognise the force of some of the points which he made about the working of the consultative committee machinery. One aspect which certainly requires consideration is whether plans for a particular closure should be related more closely to the needs and prospects of the area as a whole. We are giving thought, in the context of the legislation proposed for the reorganisation of the Commission's undertakings, to this and other facets of the present consultative procedure. We are seeing whether any improvements are necessary in that machinery. But I must emphasise that whatever may be the final outcome of that consideration, current proposals in that machinery for the rationalisation of various parts of the railway system cannot and will not be affected, for the reasons which I have given.

    I appreciate that the hon. Member may have wished me to say more about the details of this case, but I have explained to him that I am not in a position to do so. We are bound by the fact that the proposals are still in the machinery. But I thank him personally for the suggestions and advice which he so moderately and carefully put before us. I will take note of the points which he raised and see that they are reported to my right hon. Friend.

    May I draw attention to the fact that the North-East and North-West Joint Committee, at one of its very first meetings, did not think that British Railways had done its best to make the lines pay? The meeting criticised the general publicity and advertising and thought that the Commission had taken the line that the traffic would turn up. The committee's recommendation was sent to the central committee and was that the Commission should make the attempt for an experimental period of eighteen months. On that basis the committee would consider the matter. The central committee turned this recommendation down and thus frustrated the original intention of the regional committee.

    The hon. Member spoke of revising the machinery. This is almost a test case, not of a branch line but of a main line, with two other branch lines dependent on it. It seems hard that it should be exempted from this procedure of looking at the machinery again, since it is one of the clearest of the cases in which the machinery has been inadequate.

    It may well be that the area committees reached certain conclusions and reported these, as they were obliged to do, to the central committee. But because no final recommendation has been sent by the central committee to my right hon. Friend, I cannot comment in detail, even indirectly, on what may have happened at lower levels in the machinery at the earlier stage. Unless and until the central committee makes a recommendation to my right hon Friend, there is no further information which I can give the hon. Member or the House and no observation that I can make.

    It is true that this series of lines with which these proposals are concerned resemble main lines very much more than branch lines. If I may say so without giving offence, they are something of a hybrid between the two. The considerations of finance which I sought to underline in my earlier remarks were intended to apply not only to the smaller branch line, which is quite easy to single out, but also to even greater complexes of lines in other parts of the country. The criterion which the Commission applies is whether a line is now paying or can be made to pay. If that cannot be done, it normally puts forward these proposals.

    Question put and agreed to.

    Adjourned accordingly at twenty-nine minutes to Two o'clock.